Definition and Elements of a Contract of
Sale
The records indubitably show that there was
no consent on the part of the Spouses Firme.
1.
Spouses
Firme
vs.
Bukal
Enterprises, G.R. No. 146608, October 23,
2003
Consent is one of the important elements of a
valid contract.
Art. 1318. There is no contract unless the
following requisites concur:
Facts:
This case involves an alleged contract of sale
between the spouses Constante and Azucena
Firme and Bukal Enterprises who allegedly
authorized Teodoro Aviles to negotiate with
the spouses. Bukal Enterprises filed a
complaint for specific performance and
damages with the trial court, alleging that the
Spouses Firme reneged on their agreement to
sell the Property. However, Dr. Firme
testified that they did not sell the property as
they were reserving it for their child.
The trial court held there was no perfected
contract of sale as Bukal Enterprises failed to
establish that the Spouses Firme gave their
consent to the sale of the Property; and that
Aviles had no valid authority to bind Bukal
Enterprises in the sale transaction. Bukal
Enterprises appealed to the Court of Appeals,
which reversed and set aside the decision of
the trial court.
Issue:
1.
Whether there was a perfected
contract between the Spouses Firme and
Bukal Enterprises, the latter allegedly being
represented by Aviles.
2.
Whether or not Statute of Frauds may
apply?
Held:
1.
There is no perfected contract.
1. Consent of the contracting parties;
2. Object certain which is the subject matter
of the contract;
3. Cause of the obligation which is
established.
The absence of any of these essential
elements will negate the existence of a
perfected contract of sale. Thus, where there
is want of consent, the contract is nonexistent.
In this case, the Spouses Firme flatly rejected
the offer of Aviles to buy the Property on
behalf of Bukal Enterprises. There was
therefore no concurrence of the offer and the
acceptance on the subject matter,
consideration and terms of payment as would
result in a perfected contract of sale. Under
Article 1475 of the Civil Code, the contract
of sale is perfected at the moment there is a
meeting of minds on the thing which is the
object of the contract and on the price.
2. There is no basis for the application of
Statute of Frauds.
The Court of Appeals held that partial
performance of the contract of sale takes the
oral contract out of the scope of the Statute of
Frauds. This conclusion arose from the
appellate court’s erroneous finding that there
was a perfected contract of sale. The records
show that there was no perfected contract of
sale. There is therefore no basis for the
application of the Statute of Frauds. The
application of the Statute of Frauds
presupposes the existence of a perfected
contract.
Art. 1403. The following contracts are
unenforceable, unless they are ratified:
(1) Those entered into in the name of another
person by one who has been given no
authority or legal representation, or who has
acted beyond his powers;
(2) Those that do not comply with the Statute
of Frauds as set forth in this number. In the
following cases an agreement hereafter made
shall be unenforceable by action, unless the
same, or some note or memorandum thereof,
be in writing and subscribed by the party
charged or by his agent; evidence, therefore,
of the agreement cannot be received without
the writing, or a secondary evidence of its
contents:
(e) An agreement for the leasing for a longer
period than one year, or for the sale of real
property or of an interest therein;
Respondent’s children filed with the RTC a
complaint for annulment of the land titles
against the petitioners, alleging that the Deed
of Absolute Sale is void ab initio considering
that Claudia did not give her consent to the
sale as she was then seriously ill, weak and
unable to talk.
The trial court rendered a Decision
dismissing respondents’ complaint and
sustaining the validity of the Deed of
Conditional Sale and the Deed of Absolute
Sale.
Initially, the CA affirmed the trial court’s
ruling but upon respondents’ motion for
reconsideration, the CA reconsidered its
decision, declaring the Deed of Absolute Sale
void.
Issue:
Whether the Deed of Absolute Sale is void
for lack of consent as Claudia was
incapacitated to enter a contract due to
advanced years and physical infirmities.
Held:
Ruling:
a. CA ruling set aside
b. Declared there was not perfected contract
2. Yason vs. Arciaga, G.R. No. 145017,
January 28, 2005
Facts:
Spouses Arciaga executed a Deed of
Conditional Sale to spouses Yason. Upon
payment of the balance on April 19, 1983,
they executed a Deed of Absolute Sale. On
that same evening, Claudi Arciaga died.
The SC held that Deed of Absolute Sale is
valid. Claudia freely exercised consent.
While it is true that Claudia was sick and
bedridden, respondents failed to prove that
she could no longer understand the terms of
the contract and that she did not affix her
thumbmark thereon. Mere weakness of mind
alone, without imposition of fraud, is not a
ground for vacating a contract.
A person is not incapacitated to enter into a
contract merely because of advanced years or
by reason of physical infirmities, unless such
age and infirmities impair his mental faculties
to the extent that he is unable to properly,
intelligently and fairly understand the
provisions of said contract. Respondents
failed to show that Claudia was deprived of
reason or that her condition hindered her
from freely exercising her own will at the
time of the execution of the Deed of
Conditional Sale.
Ruling: CA ruling is REVERSED. RTC
ruling is AFFIRMED
3. Sps. Ramos vs. Spouses Heruela, G.R.
No. 145330, October 14, 2005
Facts:
Spouses Ramos made an agreement to sell a
portion of their land to spouses Heruela.
According to the spouses Ramos, the
agreement is a contract of conditional sale.
The spouses Heruela allege that the contract
is a sale on installment basis.
The spouses Ramos filed a complaint for
Recovery of Ownership with Damages
against the spouses Heruel, alleging that out
of the ₱15,3004 consideration for the sale of
the land, the spouses Heruela paid only
₱4,000.
Spouses Ramos assert that the spouses
Heruela’s unjust refusal to pay the balance of
the purchase price caused the cancellation of
the Deed of Conditional Sale.
Spouses Ramos later found out that the
spouses Heruela and their daughter and sonin-law were already occupying the said land.
The spouses Heruela and the spouses Pallori
refused to vacate the land despite demand by
the spouses Ramos.
The trial court ruled in favor of spouses
Heruela stating that the contract is a sale by
installment.
Issue:
Whether the spouses Ramos have a right to
cancel the sale.
Held:
No. The contract is a contract to sell.
Ownership remains with the spouses Ramos
and is not passed to the spouses Heruela until
full payment of the purchase price.
Applying RA 6552, spouses Heruela are
given a grace period of not less than 60 days
from the date the installment becomes due. If
the buyer fails to pay the installments due at
the expiration of the grace period, the seller
may cancel the contract after thirty days from
receipt by the buyer of the notice of
cancellation or the demand for rescission of
the contract by a notarial act. However, there
was neither a notice of cancellation nor
demand for rescission by notarial act to the
spouses Heruela .
There being no valid rescission of the
contract to sell, the action for reconveyance
is premature. Hence, the spouses Heruela
have not lost the statutory grace period within
which to pay.
The spouses Heruela were ordered to pay
P11,300 as balance of the purchase price plus
interest at 6%. Upon payment, the spouses
Ramos shall execute a deed of absolute sale
of the land and deliver the certificate of title
in favor of the spouses Heruela. In case of
failure to thus pay within 60 days from
finality of the court’s decision, the spouses
Heruela and the spouses Pallori shall
immediately vacate the premises without
need of further demand, and the down
payment and installment payments of P4,000
paid by the spouses Heruela shall constitute
rental for the land.
4. Sps. Cruz vs. Sps. Fernando, G.R. No.
145470, December 9, 2005
Facts:
Petitioners are the current occupants of the
land. Respondents filed to the RTC a
complaint against petitioners, demanding the
latter to vacate the premises and pay the
rentals
Respondents allege that prior to their
acquisition of the property, the original
owners offered to sell the property to
petitioners but the latter failed to purchase
price, hence, the respondents were the ones
who bought it.
the price, the same is needed, otherwise there
is no sale.
The noncompliance of the suspensive
condition prevented the Gloriosos from
proceeding with the sale and ultimately
transferring title to petitioners.
Ruling: Petition DENIED. CA decision
AFFIRMED.
5. Cabrera vs. Isaac, G.R. No. 166790,
November 19, 2014
Facts:
Petitioners filed a motion to dismiss,
asserting that the Kasunduan is a perfected
contract of sale, hence, the respondents are
buyers in bad faith having bought the
property despite the knowldege of the prior
sale. The RTC dismissed it for lack of merit.
RTC ruled in favor of the respondents. On
appeal before the CA the appellate court
affirmed the decision of the RTC.
Issue: Whether the Kasunduan is a contract
of sale or a contract to sell.
Held:
It is a contract to sell. The terms and
conditions in the Kasunduan show that it is a
contract to sell and not a contract of sale.
For one, the absence of a definite manner of
payment of the purchase price in the
agreement confirms the conclusion that it is a
contract to sell. This is because the manner of
payment of the purchase price is an essential
element before a valid and binding contract
of sale can exist.
Although the Civil Code does not expressly
state that the minds of the parties must also
meet on the terms or manner of payment of
Henry Ysaac offered to sell to Juan Cabrera a
portion of the leased property on the
condition that the two other lesees of the land
consent to the sale, to which Cabrera agreed.
According to Cabrera, the two other lessees
consented to the sale. Subsequently, Ysaac
through his counsel informed Cabrera that he
is formally rescinding the contract because
Cabrera failed to pay the balance of the
purchase price.
Issue: Whether there was a valid contract of
sale between the parties.
Held:
No. The contract between the parties is void
ab initio. A "contract of sale is perfected at
the moment there is a meeting of minds upon
the thing which is the object of the contract
and upon the price." The seller and buyer
must agree as to the certain thing that will be
subject of the sale as well as the price in
which the thing will be sold. The thing to be
sold is the object of the contract, while the
price is the cause or consideration.
If the alienation precedes the partition, the coowner cannot sell a definite portion of the
land without consent from his or her coowners. He or she could only sell the
undivided interest of the co-owned property.
There was no showing that respondent was
authorized by his co-owners to sell the
portion of land occupied by Juan Cabrera, the
Espiritu family, or the Borbe family. Without
the consent of his co-owners, respondent
could not sell a definite portion of the coowned property.
Ruling: The contract between petitioner and
respondent is DECLARED invalid and,
therefore, cannot be subject to specific
performance.
6. Ursal vs. Court of Appeals, G.R. No.
142411, October 14, 2005
Facts:
Cristitia Moneset, owner of a certain land in
Sitio Laguna, Basak, Cebu City, entered into
a contract to sell with Winifreda Ursal.
Wherein it was stipulated that on the date of
the final payment by the VENDEE to the
VENDOR, the latter shall execute a deed of
absolute sale.
After Ursal made the downpayment, she took
possession of the property. After 6 months,
Ursal stopped paying the Monesets for the
latter failed to give her the TCT. In November
1985, the Monesets executed an absolute
deed of sale with one Dr. Canora. Also, the
Monesets mortgaged the same property to the
Rural Bank of Larena for P100, 000.00.
Unfortunately, the Monesets failed to pay the
P100, 000; hence, the bank filed for
foreclosure.
Ursal filed a petition for declaration of noneffectivity of mortgage and damages from
Moneset, Bundalo and the bank, claiming
that the the Monesests committed fraud for
mortgaging a property she earlier bought
from the Monesets, and that the bank acted in
bad faith for granting the mortgage despite
their knowledge that the property was in her
possession.
The RTC dismissed the complaint against the
bank for lack of merit, and the spouses
Moneset were ordered to reimburse Ursal.
CA affirmed the decision.
Issue: Whether Ursal should be declared as
the owner of the property in question.
Held:
No. A contract to sell is a bilateral contract
where the seller expressly binds himself to
sell the property exclusively to the buyer
upon fulfillment of the condition agreed
upon, namely, full payment of the purchase
price.
The contract between the Monesets and Ursal
is merely a contract to sell. Ursal never
acquired ownership of the property as she did
not pay in full the equal price of the contract
to sell. Further, the Monesets’ breach did not
entitle petitioner to any preferential treatment
over the property especially when such
property has been sold to other persons.
Ruling: Petition DENIED.
7. Ace Foods vs. Micro Pacific, G.R. No.
200602, December 11, 2013
Facts:
Micro Pacific Technologies sent a letterproposal to ACE Foods Inc. for the sale and
delivery of subject products to be installed in
various offices at ACE Foods. ACE Foods
accepted the proposal and issued a purchase
order amounting to P646,464.
After the delivery and installment of the
product, MTCL demanded for the payment of
the purchase price. However, ACE foods
never heeded. Instead of paying, ACE foods
stated that it has been returning the subject
products
Ruling: Petition DENIED, CA ruling
AFFIRMED.
8. Ventura vs. Endaya, G.R. No. 190016,
October 2, 2013
Facts:
ACE foods claimed that the products
delivered to them were defective and that
MTCL breached the contract by not
complying to the “after delivery services”.
On the other hand, MTCL alleged that their
products are in good condition and they
conducted a training course to the employees
even though they have no “after delivery
services”agreement. The RTC ruled in favor
and ACE foods and directed MTCL to
remove the products and shoulder the
necessary payments while it was reversed at
CA, where ACE Foods should pay the
purchase price with 6% interest per annum
and legal fees. ACE food then present this
petition.
Issue: Whether ACE Foods should pay
MTCL for the purchase price of the subject
product.
Held:
YES. The contract is a contract of sale. Art.
1475. The contract of sale is perfected at the
moment there is a meeting of minds upon the
thing which is the object of the contract and
upon the price.
A contract of sale had been perfected at the
precise moment ACE Foods accepted
MTCL's proposal to sell the subject products
in consideration of the purchase price. From
that point in time, the reciprocal obligations
of the parties already arose and consequently
may be demanded.
Dolores Ventura entered into a contract to
sell with spouses Endaya for the purchase of
two parcels of land owned by the latter.
The contract stipulated that Dolores would
initially pay a down payment of ₱103,284
upon the execution of the contract and pay the
balance of ₱244,476.00 within an 15-year
period with 12% interest p.a. on the
outstanding balance, plus a 12% interest p.a.
on the arrears, and also the obligation to pay
the real property taxes over the subject
properties.
Dolores was placed in possession of the
subject properties and allowed to erect a
building thereon. However, before the
payment period expired, Dolores passed
away.
Dolores' children filed to the RTC a
complaint for specific performance, seeking
to compel Sps. Endaya to execute a deed of
sale over the subject properties. The
petitioners claim that the total payments
made by Dolores and petitioners amounted to
₱952,152.00, which is more than the agreed
purchase price of ₱347,760.00, including the
12%interest p.a. thereon computed on the
outstanding balance.
Sps. Endaya aver that prior to the death of
Dolores, several restructuring of the contract
were agreed upon by the parties fixing the
obligation to P3,000,000.
The RTC ruled in favor of the petitioners
stating that the full payment of the purchase
price of the property was proven, but this was
reversed by the CA which found that the
petitioners were not able to fully comply with
their obligations.
1. Was there a perfected contract of
sale?
2. Whether the sale between CDB and
Lim
is
valid.
Object of Sale
Held:
Cases:
1. Cavite Development Bank vs. Lim, G.R.
No. 131679, February 1, 2000
Facts:
Rodolfo Guansing obtained a loan from
Cavite Development Bank (CDB; seller)
secured by a mortgage on the former’s land.
Guansing failed to pay and the security was
foreclosed; CDB was the highest bidder at the
auction sale. Guansing failed to redeem. One
Lolita Chan Lim (buyer) then offered to
purchase the subject property from CDB for
P300k, payable 10% “Option Money,”
balance in cash. However, the prospective
buyer found out that Rodolfo’s title had been
cancelled for being fraudulent.
The buyer and her husband then filed an
action against CDB for specific performance
and damages arguing that the latter
committed serious misrepresentation. CDB
contended, among others, that there was no
perfected contract of sale yet as the buyer’s
offer was still subject to approval.
The RTC ruled in favor of the buyers holding,
among others, that there was already a
perfected contract of sale and that the sellers
failed to exercise due diligence for failure to
discover the defect on Rodolfo’s title. The
CA affirmed.
Issue:
1. Yes. After the payment of the 10% option
money, the Offer to Purchase provides for the
payment only of the balance of the purchase
price, implying that the "option money"
forms part of the purchase price. This is
precisely the result of paying earnest money
under Art. 1482 of the Civil Code. It is clear
then that the parties in this case actually
entered into a contract of sale, partially
consummated as to the payment of the price.
Given CDB's acceptance of Lim's offer to
purchase, it appears that a contract of sale was
perfected and, indeed, partially executed
because of the partial payment of the
purchase price.
2. No. The sale by CDB to Lim of the
property mortgaged in 1983 by Rodolfo
Guansing is null for CDB did not have a valid
title to the said property. To be sure, CDB
never acquired a valid title to the property
because the foreclosure sale, by virtue of
which, the property had been awarded to
CDB as highest bidder, is likewise void since
the mortgagor was not the owner of the
property foreclosed.
Petitioners claim, under the doctrine of
mortgage in good faith, that it is not required
to make a detailed investigation of the history
of the title of the property. However, the SC
disagrees as it noted in Tomas v. Tomas that
banks are expected to exercise more care and
prudence than private individuals in their
dealings, even those involving registered
lands, for their business is affected with
public interest.
Both the trial court and the appellate court
found petitioners guilty of fraud, because on
June 16, 1988, when Lim was asked by CDB
to pay the 10% option money, CDB already
knew that it was no longer the owner of the
said property, its title having been cancelled.
proof of ownership of the said title, but the
heirs of Severina countered the arguments of
Dominador stating that the latter admitted
the in the kasunduan that they owned the
parcel of land, hence there is no need to
produce an actual proof of title over it.
Ruling:
The Trial Court and the CA ruled in favor the
Heirs of Dominador.
Decision of the Court of Appeals is
AFFIRMED with the MODIFICATION as to
the award of damages
2. Heirs of San Miguel vs. Court of
Appeals, G.R. No. 136054, September 5,
2001
Facts:
A portion of land owned by Severina San
Miguel was divided and registered by
Dominador San Miguel without the former's
knowledge. It was the declared null and void
after Severina filed a petition for review and
a new registration was made in the names of
Severina and her heirs . The Trial Court
issued a writ of possession in favor of the
Severins but was unsatisfied, and a later writ
of demolition was also unsatisfied.
Severina decided not to pursue the writs and
enter into a compromise with the
Dominador to sell the lots for 1.5 million
pesos conditioned upon the purchase of
another lot which was not yet titled at an
additional sum of 300,000 pesos.
Thereafter, Dominador filed a motion to
deliver a copy of the certificate of title to
them, but it was opposed by Severina stating
that Dominador did not pay the 300,000
pesos, to which Dominador admitted for the
reason that Severinas heirs have not
presented any proof of ownership over the
untitled parcel of land. Apparently, it was
owned by a certain Emiliano Eugenio.
Dominador prayed for the deed of sale be
deferred until Severinas heirs could produce
Issue:
Whether Domindaro may be compelled to
pay the amount of 300,000 pesos as agreed
upon in the kasunduan despite the Severinas
lack of evidence of ownership of the parcel of
land.
Held:
No. Under Article 1459 and 1495 of the Civil
Code, the vendor must have a right to
transfer the ownership of and to deliver a
determinate thing. While the vendor need
not possess title to the thing sold at the
perfection of the contract, the vendor must
possess title and must be able to transfer at
the time of the delivery of the thing sold.
Under the facts of the case, Severinas heirs
are not in a position to transfer title. The SC
noted that there is no evidence of ownership
of the parcel of land by the Severinas heirs.
In fact, it is a certain Emiliano Eugenio, who
holds a tax declaration over the said land in
his name. Though tax declarations do not
prove ownership of the property, it is a
strong evidence of ownership of land when
accompanied by a sufficient period of
prescription.
Therefore, to insist that Dominador, et al.
pay the price under such circumstances
would result in Severinas heirs unjust
enrichment. As the SC held in the case of
Nool v. CA, if the sellers cannot deliver the
object of the sale to the buyers, such contract
may be deemed to be inoperative. By
analogy, such a contract may fall under
Article 1405, No. 5 of the Civil Code, a
contract that contemplates an impossible
service is inexistent and void from the
beginning.
Ruling: Petition is DENIED and the decision
of the CA is AFFIRMED.
3. PNB vs. Court of Appeals, G.R. No.
118357, May 6, 1997
Facts:
Marinduque
Mining
and
Industrial
Corporation (MMIC) was founded by Jesus
S. Cabarrus. In 1953, Cabarrus established J.
Cabarrus, Inc. which was renamed Industrial
Enterprises, Inc. (IEI). Cabarrus was the
President of both companies.
IEI entered into a coal operating contract
with the Bureau of Energy Development
(BED), with Cabarrus and then Minister of
Energy Geronimo Velasco as signatories.
The contract covered two coal blocks in
Barrio Carbon, Magsaysay, Eastern Samar.
IEI filed an application for another coal
operating contract with these 3 newly
discovered coal blocks adjacent to the first
two. All of these coal blocks were collectively
known as the Giporlos Coal Project. Minister
Velasco informed Cabarrus that IEI's
application for exploration of the three coal
blocks had been disapproved and that,
instead, the contract would be awarded to
MMIC. Thereafter, MMIC and IEI
respectively, entered into a Memorandum of
Agreement (MOA) whereby IEI assigned to
MMIC all its rights and interests under the
coal operating contract. The MOA also said
that MMIC would reimburse IEI for the
expenses they had incurred on the project
before it assigned its rights to MMIC.
MMIC took over possession and control of
the coal blocks even before the MOA was
finalized. However, instead of continuing
the exploration and development work,
MMIC completely stopped all works and
dismissed the work force thereon, leaving
only a caretaker crew. Consequently, IEI
made written demands to MMIC, pursuant
to the MOA, for the reimbursement of all
costs and expenses amounting to P31.66
million as audited.
In view of MMIC's failure to comply with its
obligations under the MOA, IEI filed a
complaint against MMIC for rescission of the
MOA and damages. Meanwhile, for various
credit accommodations secured from the
Philippine National Bank (PNB), as well as
from the DBP, MMIC entered into a
Mortgage Trust Agreement (MTA) whereby
it constituted a mortgage of its assets in favor
of PNB and DBP.
MMIC defaulted in the payment of its loan
obligation with PNB and DBP. As a
consequence thereof, PNB and DBP
simultaneously filed in the provinces of
Rizal, Samar, Negros and Surigao, joint
petitions for sale on foreclosure of the MMIC
assets including those in the Bagacay and
Giporlos Coal Projects in Samar. IEI then
advised PNB and DBP that the purchase
price of the Giporlos Coal Project that it had
assigned to MMIC per the MOA, was still
unpaid. However, despite said notice, the
foreclosure sale proceeded as scheduled and
the various machineries and equipment of
MMIC were sold to PNB as the sole bidder
for P33,940,940.00.
In its letter to PNB and DBP, IEI requested
that the movable properties in the Giporlos
Coal Project, be excluded from the foreclosed
assets of MMIC as the purchase price thereof
under the MOA had remained unpaid. IEI
further informed PNB and DBP that a suit for
rescission of the assignment of the Giporlos
Coal Project to MMIC (and damages) had
been filed before the Regional Trial Court of
Makati. Because PNB and DBP refused to
return MMIC’s foreclosed assets that were
unpaid, IEI included PNB as a defendant in
the complaint. The lower court rendered the
decision of November 27, 1992 finding
MMIC and PNB jointly and severally liable
to IEI for damages and declaring null and
void the extrajudicial foreclosure sale in
Catbalogan, Samar.
Issue:
1. Whether or not MMIC owned the
chattels involved at the time of the
foreclosure?
2. Whether the foreclosure proceedings
were
null.
Held:
1. Yes. Whether or not a transfer of a
particular right or interest is an assignment
or some other transactions depends, not on
the name by which it calls itself, but on the
legal effect of its provisions.
The assignment of private respondent's
"rights and interests on the Coal Operating
Contract described in the first whereas
clause in the MOA is a sale. The MOA
conveyed to MMIC more than the title to or
rights over the coal operating contract but
also the "things" covered thereby, is manifest
in the manner by which the parties,
particularly
private
respondent
IEI,
implemented the MOA. It disclosed the
intention to include in the MOA the
equipment and machineries used in coal
exploration.
While the MOA was expressly a contract for
the assignment of rights and interests, it is in
fact a contract of sale. Under Art. 1458 of the
Civil Code, by the contract of sale, one of the
contracting parties obligates himself to
transfer the ownership of and to deliver a
determinate thing, and the other to pay
therefor a price certain in money or its
equivalent.
By the MOA, private respondent obligated
itself to transfer ownership of the coal
operating contract and the properties found
therein. Private respondent delivered the
properties subject of the contract to MMIC,
which immediately gained control and
possession of the Giporlos Project. This was
made evident in the demand letter made by
the petitioner for payment of the purchase
price considering that all details necessary to
determine the final purchase price are in
place and that the property has already been
transferred in the name of MMIC.
2. Yes. Following provisions of Act No. 3135,
"sale cannot be made legally outside the
province in which the property sold is
situated", the Giporlos Project is situated in
Eastern Samar, a province separate and
distinct from Samar where the foreclosure
sale took place. Hence, the foreclosure sale is
null
and
void.
Ordinarily, by the nullification of the
foreclosure sale, the properties involved
would revert to their original status of being
mortgaged. However, the situation in this
case is an exception to that rule. The MOA,
the source of MMIC's right of ownership
over the properties sold at the foreclosure
sale, has been rescinded. Consequently,
petitioner should exclude said properties
from the MMIC's properties which were
mortgaged pari passu to the petitioner and
DBP through the MTA. However, since the
foreclosed properties had been turned over
to the Asset Privatization Trust, petitioner
must reimburse private respondent the
value thereof at the time of the foreclosure
sale.
Ruling:
The Decision of the Court of Appeals is
hereby REVERSED and SET ASIDE insofar
as it renders petitioner solidarily liable with
Marinduque
Mining
and
Industrial
Corporation for damages and AFFIRMED
insofar as it nullifies the foreclosure sale of
August 31, 1984.
4. Heirs of Juan San Andres vs. Vicente
Rodriguez, G.R. No. 135634, May 31, 2000
A contract of sale may be absolute or
conditional.
Facts:
Juan San Andres sold a portion of his lot,
consisting of 345 square meteres, to Vicente
Rodridguez for P2,415 as evidenced in a
Deed of Sale. After the death of Juan San
Andres, Ramon San Andres was appointed
judicial administrator of the decedent's
estate. Ramon hired the services of Jose
Peñero, a geodetic engineer, to prepare a
consolidated plan of the estate. The engineer
also prepared a sketch of the plan of the 345
square meter lot which was sold to
respondent. It was found out that
respondent had enlarged the area which he
purchased from the late Juan San Andres.
As shown in the receipt, dated September 29,
1964, the late Juan San Andres received
P500.00 from respondent as "advance payment
for the residential lot adjoining his previously
paid lot on three sides excepting on the frontage;
the agreed purchase price was P15.00 per
square meter; and the full amount of the
purchase price was to be based on the results
of a survey and would be due and payable in
five (5) years from the execution of a deed of
sale.
The administrator sent a letter to respondent
ordering him to vacate the said portion
which respondent refused to do. Respondent
claim that apart from the 345 square meter
lot that was sold to him Juan San Andres sold
to him the following day a remaining portion
of lot consisting of 509 square meters. He
presented a receipt signed by the late Juan
Andres as proof of the subsequent sale.
The RTC ruled in favor of petitioners stating
that there was no contract of sale to speak of
for lack of a valid object because there was
no sufficient indication to identify the
property of the subject sale. The CA reversed
the RTC ruling, stating that the object of sale
was determinable.
Issue: Whether there was a contract of sale.
Held:
Yes. Art. 1458 of the Civil Code provides:
By the contract of sale one of the contracting
parties obligates himself to transfer the
ownership of and to deliver a determinate
thing, and the other to pay therefor a price
certain in money or its equivalent.
Petitioner contends that the "property
subject of the sale was not described with
sufficient certainty such that there is a
necessity of another agreement between the
parties to finally ascertain the identity; size
and purchase price of the property which is
the object of the alleged sale."
The contention is without merit. The
previously purchased portion of Lot 1914-B2 consisting of 345 square meters was located
in the middle of the said lot, which has a total
area of 854 square meters, and is clearly what
was referred to in the receipt as the
"previously paid lot." Since the lot
subsequently sold to respondent is said to
adjoin the "previously paid lot" on three
sides thereof, the subject lot is capable of
being determined without the need of any
new contract. The fact that the exact area of
these adjoining residential lots is subject to
the result of a survey does not detract from
the fact that they are determinate or
determinable.
Concomitantly, the object of the sale is
certain and determinate. Under Article 1460
of the New Civil Code, a thing sold is
determinate if at the time the contract is
entered into, the thing is capable of being
determinate without necessity of a new or
further agreement between the parties. Here,
this definition finds realization.
All of the essential elements of a contract of
sale are present, i.e., that there was a meeting
of the minds between the parties, by virtue
of which the late Juan San Andres undertook
to transfer ownership of and to deliver a
determinate thing for a price certain in
money.
Ruling:
WHEREFORE, the decision of the Court of
Appeals is AFFIRMED with the modification
that respondent is ORDERED to reimburse
petitioners for the expenses of the survey.
5. Naranja vs. Court of Appeals, G.R. No.
160132, April 17, 2009
Facts:
Roque sold Lot No. 4 and his one-third share
in Lot No. 2 to Belardo on August 21, 1981,
through a Deed of Sale of Real Property
which was duly notarized by Atty. Eugenio
Sanicas.
Unknown to Belardo, petitioners, the
children of Placido and Gabino Naranja,
executed an Extrajudicial Settlement Among
Heirs on October 11, 1985, adjudicating
among themselves Lot No. 4. With Roques
copy of TCT No. T-18764 in their possession,
they succeeded in having it cancelled and a
new certificate of title, TCT No. T-140184,
issued in their names.
Roques filed for annulment of sale and
quieting of title with damages, praying,
among others, that judgment be rendered
nullifying the Deed of Sale
The trial court noted that the Deed of Sale
was defective in form since it did not contain
a technical description of the subject
properties but merely indicated that they
were Lot No. 4, covered by TCT No. T-18764
consisting of 136 square meters, and onethird portion of Lot No. 2 covered by TCT
No. T-18762. The trial court held that, being
defective in form, the Deed of Sale did not
vest title in private respondent. Full and
absolute ownership did not pass to private
respondent because she failed to register the
Deed of Sale. She was not a purchaser in
good faith since she acted as a witness to the
second sale of the property knowing that she
had already purchased the property from
Roque.
Issue:
1. Whether the deed of sale which does
not comply with the requirements of
Act. No. 496 is not valid.
2. Whether the deed of sale is valid
considering that the consent of the
late Roque Naranja is vitiated.
Held:
1. No. Petitioners anchor their theory on
Section 127 of Act No. 496, which provides a
sample form of a deed of sale that includes,
in particular, a technical description of the
subject property.
To be valid, a contract of sale need not
contain a technical description of the subject
property. Contracts of sale of real property
have no prescribed form for their validity;
they follow the general rule on contracts that
they may be entered into in whatever form,
provided all the essential requisites for their
validity are present.
The failure of the parties to specify with
absolute clarity the object of a contract by
including its technical description is of no
moment. What is important is that there is, in
fact, an object that is determinate or at least
determinable, as subject of the contract of
sale. The form of a deed of sale provided in
Section 127 of Act No. 496 is only a suggested
form. It is not a mandatory form that must be
strictly followed by the parties to a contract.
In the instant case, the deed of sale clearly
identifies the subject properties by indicating
their respective lot numbers, lot areas, and
the certificate of title covering them. Resort
can always be made to the technical
description as stated in the certificates of title
covering the two properties.
2. Yes. The deed of sale is valid. Petitioners
adduced no proof that Roque had lost
control of his mental faculties at the time of
the sale. Undue influence is not to be inferred
from age, sickness, or debility of body, if
sufficient intelligence remains. The evidence
presented pertained more to Roque’s
physical condition rather than his mental
condition. On the contrary, Atty. Sanicas, the
notary public, attested that Roque was very
healthy and mentally sound and sharp at the
time of the execution of the deed of sale.
Atty. Sanicas said that Roque also told him
that he was a Law graduate
The Deed of Sale which states "receipt of
which in full I hereby acknowledge to my
entire satisfaction" is an acknowledgment
receipt in itself. Moreover, the presumption
that a contract has sufficient consideration
cannot be overthrown by a mere assertion
that it has no consideration.
Heirs are bound by contracts entered into by
their predecessors-in-interest. As heirs of
Roque, petitioners are bound by the contract
of sale that Roque executed in favor of
Belardo. Having been sold already to
Belardo, the two properties no longer formed
part of Roque’s estate which petitioners
could have inherited. The deed of
extrajudicial settlement that petitioners
executed over Lot No. 4 is, therefore, void,
since the property subject thereof did not
become part of Roque’s estate.
Ruling:
WHEREFORE, premises considered, the
petition is DENIED. The Court of Appeals
Decision dated September 13, 2002 and
Resolution dated September 24, 2003 are
AFFIRMED.
6. Samson vs. Court of Appeals, G.R. No.
108245,
November
25,
1994
Facts:
Angel Santos leased a commercial unit in a
building owned by Susana Realty
Corporation for almost 20 years on a yearly
basis. Thus, the lease contract in force
between the parties in the year 1983
provided that the term of the lease shall be
one (1) year, starting on August 1, 1983 until
July 31, 1984.
The lessor informed the respondents that its
lease contract which will expire on July 31,
1984 would not be renewed, but the lease
contract extended until December 31, 1984.
Respondent also continued to leased
premises beyond the extended term.
On February 5, 1985, private respondent
received a letter from the lessor informing
him of the increase in rentals, retroactive to
January 1985, pending renewal of his
contract until the arrival of Ms. Ma. Rosa
Madrigal
Manolo Samson offered to buy the store of
Santos & Sons and his right to lease the
subject premises. The parties came to an
agreement that the consideration for the sale
of the store and leasehold right of Santos &
Sons, Inc. shall be P300,000.00. Respondent
also informed petitioner that his lease
contract with Madrigal was impliedly
renewed and will formally be renewed when
Tanya Madrigal arrives.
Petitioner paid 150,000 pesos representing
the value of existing improvements in the
store. The parties agreed that the balance of
P150,000.00 shall be paid upon the formal
renewal of the lease contract between private
respondent and Susana Realty. It was also a
condition precedent to the transfer of the
leasehold right of private respondent to
petitioner.
After a few months of petitioner occupying
the store for the sale of his own goods, he
received a notice from Susana Realty,
addressed to Santos & Sons, Inc., directing
the latter to vacate the leased premises on or
before July 15, 1985. Private respondent
failed to renew his lease over the premises
and petitioner was forced to vacate the same
on July 16, 1985.
Petitioner filed an action for damages against
private Respondent, imputing fraud and bad
faith against private respondent when the
latter stated in his letter-proposal that his
lease contract with Susana Realty has been
impliedly renewed. Petitioner claimed that
this misrepresentation induced him to
purchase the store of Santos & Sons and the
leasehold right of private Respondent.
RTC ruled in favor of petitioner, but was
modified by the CA after finding that private
respondent did not exercise fraud or bad
faith in its dealings with petitioner.
Issue:
Whether or not private respondent Angel
Santos committed fraud or bad faith in
representing to petitioner that his contract of
lease over the subject premises has been
impliedly renewed by Susana Realty.
Held:
No. After carefully examining the records,
the SC sustained the finding of public
respondent Court of Appeals that private
respondent was neither guilty of fraud nor
bad faith in claiming that there was implied
renewal of his contract of lease with Susana
Realty. The lease contract between lessor
Susana Realty and lessee Angel Santos was
for a period of 1 year, commencing in August
1, 1983 until July 31, 1984. However, it was
extended until December 31, 1984. It was
clear that the lessor had no intention to
renew the lease contract of private
respondent for another year.
However, the wording of the letter
subsequently sent by the lessor led private
respondent to believe and conclude that his
lease contract was impliedly renewed and
that formal renewal thereof would be made
upon the arrival of Tanya Madrigal. This
was also admitted by petitioner.
Thus, from the start, it was known to both
parties that, as far as the agreement of the
transfer of the leasehold right from
respondent to petitioner was concerned, the
object thereof relates to a future right. It is a
conditional contract recognized in civil law,
the efficacy of which depends upon an
expectancy — the formal renewal of the lease
contract between private respondent and
Susana Realty.
Petitioner had every opportunity to verify
the status of the lease contract of private
respondent
with
Susana
Realty.
Nonetheless, no effort was exerted by
petitioner to confirm the status of the subject
lease right. He cannot now claim that he has
been deceived.
Ruling:
IN VIEW WHEREOF, the appealed decision
is
hereby
AFFIRMED
in
toto
7. Javier vs. Court of Appeals, G.R. No.
48194,
March
15,
1990
Facts:
Leonardo Tiro, owner of an ordinary timber
license issued by the Bureau of Forestry in
the town of Medina, Misamis Oriental,
entered into a Deed of Assignment to assign,
transfer and convey his shares of stocks in
the TIMBERWEALTH CORPORATION
with Jose and Estrella Javier in the total
amount of P120,000 in which P20, 000.00
shall be paid upon signing of the contract
and the balance of P100, 000.00 shall be paid
in P10, 000.00 every shipment of export logs
actually produced from the forest
concession.
At the time the said deed of assignment was
executed, private respondent had a pending
application for an additional forest
concession southwest of and adjoining the
area of the concession subject of the deed of
assignment. Hence, on February 28, 1966,
private respondent and petitioners entered
into another "Agreement" which stipulates
that in the event of the approval of the
additional concession, the former’s rights
shall be transferred to the latter in
consideration for the sum of P30, 000.00.
On November 18, 1966, the private
respondent’s forest concession was renewed
up to May 12, 1967, but since the concession
consisted of only 2,535 hectares, he was
therein informed that he is given until May
12, 1967 to form an organization such as a
cooperative, partnership or corporation with
other adjoining licensees so as to have a total
holding area of 20,000.00
On April 10, 1967, the petitioners, now acting
as timber license holders by virtue of the
deed of assignment, entered into a Forest
Consolidation Agreement with other
ordinary timber license holders.
On July 16, 1968, for failure of petitioners to
pay the balance due under the two deeds of
assignment, private respondent filed an
action against petitioners. The petitioners
contend that private respondent failed his
contractual obligations and the conditions
for the enforceability of the obligations did
not materialize. Private respondent then
replied that the deed of assignment did not
only transfer his shares of stocks but his
rights and interest in the logging concession.
The trial court rendered judgment for the
petitioners, however the Court of Appeals
reversed the decision.
Hence, this petition.
Issue:
Whether the deed of assignment dated
February 15, 1966 and the agreement of
February 28, 1966 are null and void, the
former for total absence of consideration and
the latter for non-fulfillment of the
conditions
stated
therein.
Held:
No. Petitioners contend that since said
corporation never came into existence, no
share of stocks was ever transferred to them,
hence the said deed is null and void for lack
of cause or consideration. The SC does not
agree. As found by the Court of Appeals, the
true cause or consideration of said deed was
the transfer of the forest concession of
private respondent to petitioners for
P120,000.00.
The deed of assignment of February 15, 1966
is a relatively simulated contract which
states a false cause or consideration, or one
where the parties conceal their true
agreement. A contract with a false
consideration is not null and void per se.
Under Article 1346 of the Civil Code, a
relatively simulated contract, when it does
not prejudice a third person and is not
intended for any purpose contrary to law,
morals, good customs, public order or public
policy binds the parties to their real
agreement.
As to the alleged nullity of the agreement
dated February 28, 1966, we agree with
petitioners that they cannot be held liable
thereon. The efficacy of said deed of
assignment is subject to the condition that
the application of private respondent for an
additional area for forest concession be
approved by the Bureau of Forestry. Since
private respondent did not obtain that
approval, said deed produces no effect.
The said agreement is a bilateral contract
which gave rise to reciprocal obligations,
that is, the obligation of private respondent
to transfer his rights in the forest concession
over the additional area and, on the other
hand, the obligation of petitioners to pay
P30,000.00. The demandability of the
obligation of one party depends upon the
fulfillment of the obligation of the other. In
this case, the failure of private respondent to
comply with his obligation negates his right
to demand performance from petitioners.
Ruling:
WHEREFORE, the decision of respondent
Court of Appeals is hereby MODIFIED. The
agreement of the parties dated February 28,
1966 is declared without force and effect and
the amount of P30,000.00 is hereby ordered
to be deducted from the sum awarded by
respondent court to private respondent. In
all other respects, said decision of
respondent court is affirmed.
8. Vda. De Rigonan vs. Derecho, G.R. No.
159571,
July
15,
2005
Facts:
A parcel of land was owned by the late
Hilarion Derecho which was subsequently
owned by his eight children by intestate
succession. Five of the co-owners sold the
inherited property to Francisco Lacambra,
subject to a five-year redemption clause.
Three of the Derecho heirs were not parties
to the pacto de retro sale.
Two years after the expiration of the
redemption period, Dolores -- together with
her husband, Leandro Rigonan -- purchased
the land from Lacambra and immediately
occupied it.
Compostela of Cebu. Fearing foreclosure, he
settled his obligations with the bank by
securing the aid of Sps. Laude. Subsequently,
Teodoro executed the assailed Deed of
Absolute Sale of Unregistered Land in favor
of Valerio Laude.
Respondents brought an action to recover
the property and to annul the Deed of Sale in
favor of Laude and the Affidavit of
Adjudication,
whose
validity
and
authenticity they assailed on the ground of
fraud. They likewise maintained that the
subject property had not been partitioned
among the heirs; thus, it was still co-owned
at the time it was conveyed to Petitioner
Laude.
Petitioners argued that the document had no
bearing on their claim of ownership. They
theorized that the co-ownership over the
property ended when the period of
redemption lapsed without any action on the
party of the co-owners. Therefore, the
Rigonan spouses bought the property as
legitimate vendees for value and in good
faith, no in the capacity of redeeming coowners.
Petitioners likewise argues that their
predecessors has continuously owned and
possessed the subject property or 72 years.
Accordingly acquisitive prescription had
allegedly set in, in their favor, when the case
was filed.
More that five decades passed without
controversy, Leandro Rigonan executed the
assailed Affidavit of Adjudication in favor of
his son, Teodoro Rigonan. Under the said
instrument, Leandro declared himself to be
the sole heir of Hilarion. Teodoro obtained a
Tax Declaration of the property.
CA held that the Affidavit of Adjudication
and the Deed of Absolute Sale were both
void. The Affidavit was deemed fraudulent
because of the undisputed factual finding
that some of the heirs of Hilarion were still
alive at the time of its execution. The Deed of
Sale was held void because the vendor,
Teodoro, had no legal right to dispose of the
entire co-owned property.
During the same year, Teodoro mortgaged
the subject property to the Rural Bank of
As the Contracts
of prescription
were void, the defense
was inapplicable. Article 1410 of the
Civil
Code states that actions for the declaration of
the inexistence of a contract do not prescribe.
Issue:
1. Whether at the time of the purchase
in 1928, co-ownership still subsisted
among the heirs of Hilarion Derecho.
2. Whether the subject property can be
recovered.
Held:
1. No. Following the Court's ruling in
Adiarte and Umale that after the expiration
of the period for redemption, the parties
could either (1) enter into an entirely new
contract involving the same property, or (2)
if there is no express period stipulated, the
period of redemption may be extended,
provided the extension did not exceed the
maximum period of 10 years allowed by the
Spanish Civil Code.
In the present case, Lacambra and the heirs
stipulated a five-year redemption period.
When it lapsed, the vendee acquired
absolute title, while the five co-ownerssellers were stripped of their co-ownership
of the property.
Therefore, when Dolores repurchased the
property in 1928, she did so in her personal
capacity, no longer as a co-owner-seller.
Following the ruling in Adiarte, she is
deemed to have entered into an entirely new
contract, independent of the 1921 pacto de
retro sale.
2. No. There is no question that the said
action does not prescribe, but the principal
question in this case is the recovery of the
subject property, which is the ultimate goal
of respondents. They seek the nullification of
the Contracts, merely as a means or prelude
to the recovery of the property.
Unfortunately
for
them,
acquisitive
prescription has already set in to bar the
recovery.
The imprescriptibility of an action to annul a
contract does not mean that the present
respondents are perpetually allowed to
recover the property, the subject of the void
contract. They may file the action to annul,
but their right to recover based on ownership
is contingent on the premise that
they still own the property.
In the present case, we hold that respondents
can no longer recover the property despite
the nullity of the assailed contracts, because
they have lost their ownership by reason of
prescription.
Price or consideration of the contract of
sale
1. Spouses Buenaventura vs. Court of
Appeals, G.R. No. 126376, November 20,
2003
Facts:
Petitioners sought to be declared null and
void ab initio certain deeds of sale of real
property executed by defendant parents
Leonardo Joaquin and Feliciana Landrito in
favor of their co-defendant children and the
corresponding certificates of title issued in
their names. In seeking the declaration of
nullity of the deeds of sale plaintiffs, who
are also children of the defendants parents,
aver the sale was simulated because the
sums reflected in the questioned deeds, the
properties are more than three-fold times
more valuable than the measly sums
appearing therein; and that it is a deliberate
conspiracy designed to unjustly deprive the
rest of the complusory heirs, herein
plaintiffs, of their legitime.
The RTC ordered the dismissal of the case
against defendant spouses stating that the
Deeds of Sale were all executed for valuable
consideration. The CA affirmed the decision
of the trial court.
Issue:
1. Whether the deeds of sale are void
for lack of consideration.
2. Whether the deeds of sale are void
for gross inadequacy of price.
absolute simulation of price is magnified by
their lack of knowledge of their respondent
siblings financial capacity to buy the
questioned lots. On the other hand, the
Deeds of Sale which petitioners presented
as evidence plainly showed the cost of each
lot sold. Not only did respondents minds
meet as to the purchase price, but the real
price was also stated in the Deeds of Sale.
Held:
1. No. A contract of sale is not a real
contract, but a consensual contract. As a
consensual contract, a contract of sale
becomes a binding and valid contract upon
the meeting of the minds as to price. If there
is a meeting of the minds of the parties as to
the price, the contract of sale is valid,
despite the manner of payment, or even the
breach of that manner of payment. If the
real price is not stated in the contract, then
the contract of sale is valid but subject to
reformation. If there is no meeting of the
minds of the parties as to the price, because
the price stipulated in the contract is
simulated, then the contract is void. Article
1471 of the Civil Code states that if the price
in a contract of sale is simulated, the sale is
void.
2. No. Petitioners ask that assuming that
there is consideration, the same is grossly
inadequate as to invalidate the Deeds of
Sale. Article 1355 and 1470 of the Civil Code
states that inadequacy of cause shall not
invalidate a contract, unless there has been
fraud, mistake, defect in the consent, or it
was intended as a donation or some other
act.
It is not the act of payment of price that
determines the validity of a contract of sale.
Payment of the price has nothing to do with
the perfection of the contract. Payment of
the price goes into the performance of the
contract. Failure to pay the consideration is
different from lack of consideration. The
former results in a right to demand the
fulfillment or cancellation of the obligation
under an existing valid contract while the
latter prevents the existence of a valid
contract.
Ruling:
WHEREFORE, we AFFIRM the decision of
the Court of Appeals in toto.
Petitioners failed to show that the prices in
the Deeds of Sale were absolutely
simulated. The trial court did not find the
allegation of absolute simulation of price
credible. Petitioners failure to prove
Petitioners failed to prove any of the
instances mentioned in Articles 1355 and
1470 of the Civil Code which would
invalidate, or even affect, the Deeds of Sale.
Indeed, there is no requirement that the
price be equal to the exact value of the
subject matter of sale. All the respondents
believed that they received the commutative
value of what they gave.
2. Boston Bank vs. Manalo, G.R. No.
158149, February 9, 2006
Facts:
Xavierville Estate, Inc. (XEI) sold to OBM
(initial bank-buyer) some residential lots in
Xavierville subdivision. XEI became agent
of the bank, and continued selling the
residential lots.
Carlos Manalo, Jr. proposed to XEI, through
its President Emerito Ramos(Ramos), that
he will purchase two lots in the subdivision
and offered as part of the downpayment the
P34,887.66 that Ramos owed him.
XEI,through Ramos, agreed.
In a letter-agreement dated August 22, 1972
to Perla Manalo (Carlos’ wife), Ramos
confirmed the reservation of the lots. In the
letter he also pegged the price of the lots at
P348,060 with a 20% down payment of the
purchase price amounting to P69,612.00
(less the P34,887.66 owing from Ramos),
payable as soon as XEI resumes its selling
operations; the corresponding Contract of
Conditional Sale would then be signed on
or before the same date. Perla Manalo
conformed to the letter agreement.
The spouses constructed a house on the
property. They were notified of XEI’s
resumption of selling operations but they
did not pay the balance of the
downpayment because XEI failed to give
them a contract of conditional sale.
XEI turned over its selling operations to
OBM. Then, CBM (later renamed as Boston
Bank) acquired the Xavierville Estate from
OBM.
CBM/Boston Bank requested Perla Manalo
to stop any on-going construction on the
property since she had no permission for
such construction. Perla informed them that
her husband had a contract with OBM,
through XEI, to purchase the property. She
promised to send CBM the documents but
she failed to do so. 6. The spouses filed a
complaint for damages and specific
performance against bank to obtain
contract. The spouses alleged that upon
their partial payment of the downpayment,
they were entitled to the execution and
delivery of a Deed of Absolute Sale
covering the subject lots.
RTC ruled in favor of spouses and ordered
delivery of Deed of Sale of lots, stating that
letter agreement was a valid CTS. CA
upheld ruling of RTC
Issue:
Whether there was a perfected contract to
sell.
Held:
No. Contract is unenforceable because
manner of payment of 80% balance has yet
to be agreed upon.
For a perfected contract of sale or contract to
sell to exist in law, there must be an
agreement of the parties, not only on the
price of the property sold, but also on the
manner the price is to be paid by the
vendee.
Price is an essential element in the
formation of a binding and enforceable
contract of sale. In a contract to sell property
by installments, it is not enough that the
parties agree on the price as well as the
amount of downpayment. The parties must,
likewise, agree on the manner of payment
of the balance of the purchase price and on
the other terms and conditions relative to
the sale. Even if the buyer makes a
downpayment or portion thereof, such
payment cannot be considered as sufficient
proof of the perfection of any purchase and
sale between the parties.
In this case, there is no showing that there
was a schedule of payment of the balance of
the purchase price. In the letter agreements,
parties confined themselves to agreeing on
the price of the property, the 20%
downpayment, and credited respondents
for the amount owned by Ramos as part of
the 20% downpayment. However, the
determination of the terms of payment of
the 80% BALANCE had yet to be agreed upon
on or before December 31, 1972, or even
afterwards, when the parties sign the
corresponding contract of conditional sale.
Jurisprudence has ruled that if a material
element of a contemplated contract is left
for future negotiations, the same is too
indefinite to be enforceable. And when an
essential element of a contract is reserved
for future agreement of the parties, no legal
obligation arises until such future
agreement is concluded.
Respondents failed and refused to pay the
balance of the downpayment and of the
purchase price of the property amounting to
P278,448.00 despite notice to them of the
resumption by XEI of its selling operations.
On the other hand, XEI and OBM failed and
refused to transmit a contract of conditional
sale to the respondents. The respondentspouses could have at least consigned the
balance of the downpayment after notice of
the resumption of the selling operations of
XEI and filed an action to compel XEI or
OBM to transmit to them the said contract;
however, they failed to do so.
As a consequence, respondents and XEI (or
OBM for that matter) failed to forge a
perfected contract to sell the two lots; hence,
respondents have no cause of action for
specific performance against petitioner.
Republic Act No. 6552 applies only to a
perfected contract to sell and not to a contract
with no binding and enforceable effect.
Ruling:
IN LIGHT OF ALL THE FOREGOING, the
petition is GRANTED.
3. Serra vs. Court of Appeals, G.R. No.
103338, January 4, 1994
Facts:
Petitioner is the owner of a 374 square meter
parcel of land located at Quezon St.,
Masbate, Masbate. Sometime in 1975,
respondent bank, in its desire to put up a
branch in Masbate, Masbate, negotiated
with petitioner for the purchase of the then
unregistered property. On May 20, 1975, a
contract of LEASE WITH OPTION TO BUY
was instead forged by the parties.
Pursuant to said contract, a building and
other improvements were constructed on
the land which housed the branch office of
RCBC in Masbate, Masbate. Within three
years from the signing of the contract,
petitioner complied with his part of the
agreement by having the property
registered and placed under the TORRENS
SYSTEM, for which Original Certificate of
Title No. 0-232 was issued by the Register of
Deeds of the Province of Masbate.
Petitioner alleges that as soon as he had the
property registered, he kept on pursuing
the manager of the branch to effect the sale
of the lot as per their agreement. It was not
until September 4, 1984, however, when the
respondent bank decided to exercise its
option and informed petitioner, through a
letter, of its intention to buy the property at
the agreed price of not greater than P210.00
per square meter or a total of P78,430.00.
But much to the surprise of the respondent,
petitioner replied that he is no longer selling
the property.
Hence, on March 14, 1985, a complaint for
specific performance and damages was filed
by respondent against petitioner. In the
complaint, respondent alleged that during
the negotiations it made clear to petitioner
that it intends to stay permanently on the
property once its branch office is opened
unless the exigencies of the business
requires otherwise. Aside from its prayer
for specific performance, it likewise asked
for an award of P50,000.00 for attorney’s
fees P100,000.00 as exemplary damages and
the cost of the suit.
Issue:
1. Whether the contract was a contract of
adhesion.
2. Whether there was a consideration to
support the option, distinct from the price,
hence the option cannot be exercised.
Held:
1. No. A contract of adhesion is one
wherein a party, usually a corporation,
prepares the stipulations in the contract,
while the other party merely affixes his
signature or his "adhesion" thereto. These
types of contracts are as binding as ordinary
contracts because in reality, the party who
adheres to the contract is free to reject it
entirely.
sometime in 1979, without the slightest hint
of wanting to abandon his offer to sell the
property at the agreed price of P210 per
square meter.
In the case at bar, the Supreme Court did
not find the situation to be inequitable
because petitioner is a highly educated man,
who, at the time of the trial was already a
CPA-Lawyer. It is evident that a man of his
stature should have been more cautious in
transactions he enters into, particularly
where it concerns valuable properties.
4. Abapo vs. Court of Appeals, G.R. No.
128677, March 2, 2000
2. Yes. In the present case, the consideration
is even more onerous on the part of the
lessee since it entails transferring of the
building and/or improvements on the
property to petitioner, should respondent
bank fail to exercise its option within the
period stipulated.
A price is considered certain if it is so with
reference to another thing certain or when
the determination thereof is left to the
judgment of a specified person or persons.
And generally, gross inadequacy of price
does not affect a contract of sale.
Contracts are to be construed according to
the sense and meaning of the terms which
the parties themselves have used. In the
present dispute, there is evidence to show
that the intention of the parties is to peg the
price at P210 per square meter.
Moreover, by his subsequent acts of having
the land titled under the Torrens System,
and in pursuing the bank manager to effect
the sale immediately, means that he
understood perfectly well the terms of the
contract. He even had the same property
mortgaged to the respondent bank
Ruling:
WHEREFORE, this petition is hereby
DISMISSED, and the decision of the
appellate court is hereby AFFIRMED.
Facts:
In 1967, petitioner siblings Santiago and
Crispula Abapo executed a contract; a Deed
of Sale under Pacto de Retro sold for P500
with right to repurchase after 5 years, with
Teodolfo Quimada. More than 7 years after,
Quimada sold the land back to Crispula and
her husband Pedro Bacalso. The spouses
Bacalso had possession, enjoyed the fruits of
the land and paid the corresponding real
estate taxes thereon to the exclusion of
Santiago Abapo. In 1990, Santiago instituted
a petition for reconstitution of title which
was later granted. Upon discovery by
Crispula, she instituted a complaint for
“Quieting of Title with Damages”. The trial
court ruled in favor of respondents,
declaring her as the absolute owner of the
property. On appeal, the challenged
decision was affirmed by the CA. The SC
denied the petition.
Issue:
Whether the contract entered in 1967 may
be considered only as an “equitable
mortgage” in view of the unusually
inadequate consideration pursuant to
Article 1602 of the NCC.
Held:
No. The price of P500 is not unusually
inadequate. The extant record reveals that
the assessed value of the land in dispute in
1970 was only P400. Thus, at the time of sale
in 1967 the price of P500 is indisputably
over and above the assessed value of P400.
Besides, the mere fact that the price is
inadequate does not per se support the
conclusion that the contract was a loan or
that the property was not at all sold to
Teodulfo Quimada. The price fixed in a sale
with right to repurchase is not necessarily
the true value of the land sold. The rationale
is that the vendor has the right to
repurchase the land. It is the practice to fix a
relatively reduced price, although not a
grossly inadequate one, in order to afford
the vendor a retro every facility to redeem
the land. Thus, inadequacy of price is not
sufficient to set aside a sale unless it is
grossly inadequate or purely shocking to
the conscience.
5. Bravo-Guerrero vs. Bravo, G.R. No.
152658, July 29, 2005
Facts:
Spouses Mauricio and Simona Bravo owned
a parcel of land along Evangelista Street,
Makati City, Metro Manila. Simona
executed a General Power of Attorney
(GPA) appointing Mauricio as his attorneyin-fact. Simona authorized Mauricio to
"mortgage or otherwise hypothecate, sell,
assign and dispose of any and all of my
property, real, personal or mixed, of any
kind whatsoever and wheresoever situated,
or any interest therein xxx."
Mauricio subsequently mortgaged the
properties to PNB and DBP, then in 1970,
sold the properties for P1,000 to his
children, Roland, Ofelia and Elizabeth. Part
of the agreement was for the buyers to
assume the mortgage on the property. The
Deed of Sale was not annotated on the TCTs
nor presented to PNB and/or DBP. The
mortgage loans continued to be in
Mauricio’s name even after his death in
1973. Simona died in 1977.
In 1997, Edward filed an action for judicial
partition of the properties asserting his right
as co-owner of the same. However,
petitioners refused to share with him
possession and rental income of the
properties.
Edward later amended his complaint to
include a prayer to annul the Deed of Sale.
He argued that it was VOID due to the ff:
1. Mauricio executed the Deed of Sale
without Simona’s consent
2. Sale was merely simulated, as
shown by the grossly inadequate
consideration, to prejudice the other
heirs.
The trial court upheld Mauricio’s sale of the
Properties to the vendees. The trial court
ruled that the sale did not prejudice the
compulsory heirs, as the Properties were
conveyed for valuable consideration.
CA reversed the RTC ruling citing Article
166 of the Civil Code ("Article 166"),
declaring the Deed of Sale void for lack of
consent. It held that the GPA executed by
Simona was not sufficient to authorize
Mauricio to sell the Properties because it
requires a special power of attorney for
such transactions and that there was
insufficient proof that the vendees made the
mortgage payments on the Properties, since
the PNB and DBP receipts were issued in
Mauricio’s name.
Issue: Whether the deed of sale was valid.
Held: Yes.
1. As to consent, alienating a conjugal
property without the consent of the wife is
merely voidable.
The CA erred in applying Article 166
requiring consent of the wife in selling a
conjugal property. This article does not
apply to conjugal properties acquired before
the effectivity of the Civil Code, which came
to force on Aug. 30, 1950. The records do
not show when the property was acquired.
Under Article 1413 of the old Spanish Civil
Code, the husband could alienate conjugal
partnership property for valuable
consideration without the wife’s consent.
Even under the present Civil Code,
however, the Deed of Sale is not void. It is
well-settled that contracts alienating
conjugal real property without the wife’s
consent are merely voidable under the Civil
Code – that is, binding on the parties unless
annulled by a competent court – and not
void ab initio
2. As to the validity, a sale is not simulated
despite the inadequacy of the price.
Gross inadequacy of price by itself will not
result in a void contract. Gross inadequacy
of price does not even affect the validity of a
contract of sale, unless it signifies a defect in
the consent or that the parties actually
intended a donation or some other contract.
Inadequacy of cause will not invalidate a
contract unless there has been fraud,
mistake or undue influence. In this case,
respondents have not proved any of the
instances that would invalidate the Deed of
Sale.
Ruling:
The decision of the CA is REVERSED. The
decision of the RTC is REINSTATED,
declaring VALID the Deed of Sale with
Assumption of Mortgage .
6. Ramos vs. Heirs of Ramos, G.R. No.
14048, April 25, 2002
Facts:
During the lifetime of spouses Lucio Ramos
and Salud Abejuela, they acquired real
properties situated in Macasanding,
Cagayan De Oro City. Sometime is
September 1972, the children of the spouses
and Lucio himself executed an Extrajudicial
Settlement of the estate of the deceased
Salud Abejuela.
Juan Ramos and Josefa Ramos Reyes filed in
the then Court of First Instance of Misamis
Oriental, a complaint for partition and
annulment of confirmatory deeds of sale
against Ramon A. Ramos and Honorio
Ramos. Subsequently, they entered into a
compromise agreement stating that [Juan
Ramos and Josefa Ramos Reyes] forever
waive, quitclaim, relinquish, and renounce
whatever rights and interests they may have
over the parcel of land.
However, it was discovered that very much
earlier prior to the compromise, Salud
Abejuela executed a Deed of Absolute Sale
in favor of Ramon Ramon married to Nena
Villamil and resident of Cagayan de Oro
City.
Respondents filed with the Regional Trial
Court (RTC) of Cagayan de Oro City
(Branch 20), a suit against petitioner for the
conveyance of title and partition of the
disputed parcel of land, contending that the
sale was simulated and fictitious.
RTC ruled in favor of petitioners, stating
that the Deed of Sale was not simulated,
because a clear intention to sell it was
evident.
There was no evidence to support the
existence of a contra documento.
CA reversed the RTC decision.
Issue: Whether the Deed of Sale executed
by Salud in favor of petitioner was
simulated.
Held:
No. The primary consideration in
determining the true nature of a contract is
the intention of the parties. Such intention is
determined from the express terms of their
agreement as well as from their
contemporaneous and subsequent acts.
When they have no intention to be bound at
all, the purported contract is absolutely
simulated and void. When they conceal
their true agreement, it is not completely
void and they are bound to their real
agreement, provided it is not prejudicial to
a third person and is not intended for any
purpose that is contrary to law, morals,
good customs, public order or public policy.
A duly executed contract carries with it the
presumption of validity. The party who
impugns its regularity has the burden of
proving its simulation.
In the case at bar, we opine that
respondents failed to show simulation.
First, both the trial and the appellate courts
agree that respondents failed to prove the
existence of a contra documento. The
evidentiary weight of Anastacio Gaylo’s
testimony that the contra documento was
shown to him by Salud herself is weak,
considering that there was no explanation
why parol evidence had been resorted to,
when the best evidence would have been
the contra documento itself.
Second, mere mother-son relationship
between the vendor and the vendee does
not prove their lack of intention to be bound
by the 1954 Deed of Absolute Sale. Not all
contracts between family members are
fictitious because, by itself, consanguinity is
not proof of simulation.
Ruling:
WHEREFORE, the Petition is GRANTED.
The assailed Decision is REVERSED and
SET ASIDE, and the RTC Decision dated
May 6, 1994, REINSTATED.
7. Heirs of Pangan vs. Spouses Perreras,
G.R. No. 157374, August 27, 2009
Facts:
Spouses Pangan owned the subject
properties located at Casañas St., Sampaloc,
Manila. Consuelo Pangan agreed to sell to
respondents the subject properties for the
price of ₱540,000.00. On the same day,
Consuelo received ₱20,000.00 from the
respondents as earnest money, evidenced
by a receipt that also included the terms of
the parties’ agreement. Later, the parties
agreed to increase the price to P540,000.
In compliance with the agreement, the
respondents issued two Far East Bank and
Trust Company checks payable to Consuelo
in the amounts of ₱200,000.00 and
₱250,000.00, but the latter refused to accept
the checks saying that her children (the
petitioners-heirs) – co-owners of the subject
properties – did not want to sell the subject
properties. For the same reason, Consuelo
offered to return the ₱20,000.00 earnest
money she received from the respondents,
but the latter rejected it. Thus, Consuelo
filed a complaint for consignation against
the respondents.
On the other hand, the respondents
instituted an action for specific performance
against Consuelo before the same court to
compel petitioners to execute a Deed of
Absolute Sale over the subject properties.
Consuelo claimed that she was justified in
backing out from the agreement on the
ground that the sale was subject to the
consent of the petitioners-heirs who became
co-owners of the property upon the death of
her husband, Cayetano. Since the
petitioners-heirs disapproved of the sale,
Consuelo claimed that the contract became
ineffective for lack of the requisite consent.
The RTC ruled in the respondents’ favor; it
upheld the existence of a perfected contract
of sale, at least insofar as the sale involved
Consuelo’s conjugal and hereditary shares
in the subject properties. The trial court
found that Consuelo’s receipt of the
₱20,000.00 earnest money was an "eloquent
manifestation of the perfection of the
contract." CA affirmed the RTC decision.
In sum, the case contains no element, factual
or legal, that negates the existence of a
perfected contract between the parties.
Issue:
Was there as perfected contract between the
parties?
Perfection and Form of a contract of sale
Held:
Yes. There was a perfected contract between the
parties since all the essential requisites of a
contract were present
1. Toyota Shaw vs. Court of Appeals,
G.R. No. 116650, May 23, 1995
Article 1318 of the Civil Code declares that
no contract exists unless the following
requisites concur: (1) consent of the
contracting parties; (2) object certain which
is the subject matter of the contract; and (3)
cause of the obligation established. Since the
object of the parties’ agreement involves
properties co-owned by Consuelo and her
children, the petitioners-heirs insist that
their approval of the sale initiated by their
mother, Consuelo, was essential to its
perfection. Accordingly, their refusal
amounted to the absence of the required
element of consent.
That a thing is sold without the consent of
all the co-owners does not invalidate the
sale or render it void. Article 493 of the Civil
Code recognizes the absolute right of a coowner to freely dispose of his pro
indiviso share as well as the fruits and other
benefits arising from that share,
independently of the other co-owners. Thus,
when Consuelo agreed to sell to the
respondents the subject properties, what she
in fact sold was her undivided interest.
There was no indication in the agreement
that the contract depended upon the
children's consent of the sale.
Ruling:
Petition DENIED. CA decision AFFIRMED.
Cases:
Facts:
Luna Sosa entered into an agreement with
Popong Bernardo, a Toyota sales
representative, to buy a Toyota Lite Ace.
Bernardo signed a document, "Agreements
Between Mr. Sosa & Popong Bernardo of
Toyota Shaw, Inc." (Exhibit A). It was also
agreed upon by the parties that the balance
of the purchase price would be paid by
credit financing through B.A. Finance, and
for this Gilbert, on behalf of his father,
signed the documents of Toyota and B.A.
Finance pertaining to the application for
financing.
The next day, a Vehicle Sales Proposal
(VSP) was accomplished by Bernardo in lieu
of the delivery of the P 100,000
downpayment containing the
aforementioned manner of payment and
was approved by the sales supervisor. On
17 June 1898, the private vehicle was not
delivered as agreed upon because, as
Bernardo told private respondent, “nasulot
ang unit ng ibang malakas.”
Toyota contends, however, that the Lite Ace
was not delivered to Sosa because of the
disapproval by B.A. Finance of the credit
financing application of Sosa. It further
alleged that a particular unit had already
been reserved and earmarked for Sosa but
could not be released due to the uncertainty
of payment of the balance of the purchase
price. Toyota then gave Sosa the option to
purchase the unit by paying the full
purchase price in cash but Sosa refused.
Private respondent then asked for the
refund of his P 100,000 downpayment
which the petitioner did so on the same day
by issuing a check then signed by the
former with reservation as to future claims
for damages. Thereafter, petitioner made
demands for interests and damages
amounting to P1M. Petitioner refused to
accede to the demands, contending that no
sale was entered into between it and Sosa,
that Bernardo had no authority to sign
Exhibit "A" for and in its behalf, and that
Bernardo signed Exhibit "A" in his personal
capacity.
Trial court rendered a decision in favor of
Sosa, ruling that Exhibit A was a valid
perfected contract of sale between Sosa and
Toyota which bound Toyota to deliver the
vehicle to Sosa, and further agreed with
Sosa that Toyota acted in bad faith in selling
to another the unit already reserved for him.
CA affirmed the RTC decision.
Issue: Whether the document executed and
signed by the petitioner's sales
representative a perfected contract of sale
binding upon petitioner, breach of which
would entitle the private respondent to
damages and attorney's fees.
Held:
No. The provision on the downpayment of
P100,000.00 made no specific reference to a
sale of a vehicle. If it was intended for a
contract of sale, it could only refer to a sale
on installment basis, as the VSP executed
the following day confirmed. But nothing
was mentioned about the full purchase
price and the manner the installments were
to be paid.
This Court had already ruled that a definite
agreement on the manner of payment of the
price is an essential element in the
formation of a binding and enforceable
contract of sale. This is so because the
agreement as to the manner of payment
goes into the price such that a disagreement
on the manner of payment is tantamount to
a failure to agree on the price. Definiteness
as to the price is an essential element of a
binding agreement to sell personal
property.
Moreover, Exhibit "A" shows the absence of
a meeting of minds between Toyota and
Sosa. For one thing, Sosa did not even sign
it. For another, Sosa was well aware that he
was not dealing with Toyota but with
Popong Bernardo and that the latter did not
misrepresent that he had the authority to
sell any Toyota vehicle.
At the most, Exhibit "A" may be considered
as part of the initial phase of the generation
or negotiation stage of a contract of sale.
The VSP was a mere proposal which was
aborted in lieu of subsequent events. It
follows that the VSP created no demandable
right in favor of Sosa for the delivery of the
vehicle to him, and its non-delivery did not
cause any legally indemnifiable injury.
Ruling:
The instant petition is GRANTED. The
decision of the RTC and the CA are
REVERSED and SET ASIDE.
2. Estate of Gonzales vs. Heirs of Perez,
G.R. No. 169681, November 5, 2009
Facts:
The former Municipality of Marikina sold a
parcel of land located in Barrio Concepcion
through a public bidding wherein Pedro
Gonzales was the highest bidder.
Thereafter, a deed of sale was executed in
favor of the latter which was later
forwarded to the Provincial Governor of
Rizal for his approval. The Governor,
however, did not act upon the said deed.
Sometime later, Pedro sold to Marcos Perez
a portion of Lot C, denominated as Lot C-3,
which contains an area of 375 square
meters. The contract of sale was embodied
in a Deed of Sale which, however, was not
notarized. To segregate the subject property
from the remaining portions of Lot C,
Marcos had the same surveyed wherein a
technical description of the subject lot was
prepared by a surveyor.
The Marikina City Mayor executed a Deed
of Absolute Transfer of Real Property over
Lots A and C in favor of the Estate of Pedro
C. Gonzales. Subsequently, herein
petitioners executed an extra-judicial
partition wherein Lot C was subdivided
into three lots.
Herein respondents sent a demand letter to
one of herein petitioners asking for the
reconveyance of the subject property.
However, petitioners refused to reconvey
the said lot. As a consequence, respondents
filed an action for "Annulment and/or
Rescission of Deed of Absolute Transfer of
Real Property x x x and for Reconveyance
with Damages."
The RTC rendered a decision in favor of
petitioners ruling that since the Deed of Sale
executed between Pedro and Marcos was
not notarized, the same is considered void
and of no effect, and that Pedro became the
owner of the subject lot only at a later date;
as such, he could not have lawfully
transferred ownership thereof to Marcos in
1966.
CA reversed the RTC ruling, and held that a
sale of real property, though not consigned
in a public instrument, is nevertheless valid
and binding among the parties and that the
form required in Article 1358 of the Civil
Code is not essential to the validity or
enforceability of the transactions but only
for convenience.
Issue: Whether the Deed of Sale failed to
meet the solemnity requirements provided
under the law for its validity.
Held:
No. Petitioners also argue that even
assuming that Pedro actually executed the
subject Deed of Sale, the same is not valid
because it was not notarized as required
under the provisions of Articles 1403 and
1358 of the Civil Code.
Under Article 1403(2), the sale of real
property should be in writing and
subscribed by the party charged for it to be
enforceable. In the case before the Court, the
Deed of Sale between Pedro and Marcos is
in writing and subscribed by Pedro and his
wife Francisca; hence, it is enforceable
under the Statute of Frauds.
However, not having been subscribed and
sworn to before a notary public, the Deed of
Sale is not a public document and,
therefore, does not comply with Article 1358
of the Civil Code.
Nonetheless, it is a settled rule that the
failure to observe the proper form
prescribed by Article 1358 does not render
the acts or contracts enumerated therein
invalid. It has been uniformly held that the
form required under the said Article is not
essential to the validity or enforceability
of the transaction, but merely for
convenience.
Article 1358 does not require the
accomplishment of the acts or contracts in a
public instrument in order to validate the
act or contract but only to insure its efficacy.
Ruling:
The instant petition is DENIED. The
assailed decision of the CA is AFFIRMED
3. Orduña vs. Fuentebella, G.R. No.
176841, June 29, 2010
Facts:
Sometime in 1996, Gabriel Sr. sold the
subject residential lot with an area of 74
square meters located at Fairview
Subdivision, Baguio City, to petitioner
Antonita Orduna BUT no formal deed was
executed to document the sale.
The contract price was apparently payable
in installments as Antonita remitted from
time to time and Gabriel Sr. accepted
PARTIAL PAYMENTS.
One of the Ordunas would later testify that
Gabriel Sr. agreed to execute a final deed of
sale upon full payment of the purchase
price.
As early as 1979, however, Antonita and her
sons, Dennis and Anthony Orduna, were
already occupying the subject lot on the
basis of some arrangement undisclosed in
the records and even constructed their
house thereon.
They also paid real property taxes for the
house and declared it for tax purposes, as
evidenced by a Tax Declaration.
Despite all those payments made for the
subject lot, Gabriel, Jr. would later SELL it
to BERNARD BANTA obviously
WITHOUT the knowledge of petitioners, as
later developments would show.
RTC ruled in favor of respondents, and
affirmed by the CA.
Issue:
Whether the sale of the subject lot by
Gabriel Sr. to Antonita was unenforceable
under the Statute of Frauds.
Held:
No. The Statute of Frauds expressed in
Article 1403, par. (2), of the Civil Code
applies only to executory contracts, i.e.,
those where no performance has yet been
made. Statute of Frauds do not apply to
completed, executed, or partially
consummated contracts.
The Statute of Frauds, in context, provides
that a contract for the sale of real property
or of an interest therein shall be
unenforceable unless the sale or some note
or memorandum thereof is in writing and
subscribed by the party or his agent.
However, where the verbal contract of sale
has been partially executed through the
partial payments made by one party duly
received by the vendor, as in the present
case, the contract is taken out of the scope of
the Statute.
Since contracts are generally obligatory in
whatever form they may have been entered
into, provided all the essential requisites for
their validity are present, the Statute simply
provides the method by which the contracts
enumerated in Art. 1403 (2) may be proved
but does not declare them invalid because
they are not reduced to writing. In fine, the
form required under the Statute is for
convenience or evidentiary purposes only.
4. First Optima vs. Securitron, G.R. No.
199648, January 28, 2015
Facts:
Petitioner First Optima Realty Corporation
is a domestic corporation engaged in the
real estate business. It is the registered
owner of a parcel of land with
improvements located in Pasay City,
covered by Transfer Certificate of Title (the
subject property). Respondent Securitron
Security Services, Inc., a domestic
corporation with offices located beside the
subject property, claimed that the said
parcel of land is subject of the alleged
perfected contract of sale through the
latter’s payment of an earnest money, to
which the petitioner argued that it never
agreed to sell the subject property; that its
board of directors did not authorize the sale
thereof to respondent, as no corresponding
board resolution to such effect was issued.
The RTC and CA ruled in favor of
respondent.
Issue:
Whether the money delivered by
respondent to petitioner was earnest money
thereby providing a perfected contract of
sale.
Held:
No. The stages of a contract of sale are: (1)
negotiation, starting from the time the
prospective contracting parties indicate
interest in the contract to the time the
contract is perfected; (2) perfection, which
takes place upon the concurrence of the
essential elements of the sale; and (3)
consummation, which commences when the
parties perform their respective
undertakings under the contract of sale,
culminating in the extinguishment of the
contract.
In the present case, the parties never got
past the negotiation stage. Nothing shows
that the parties had agreed on any final
arrangement containing the essential
elements of a contract of sale, namely, (1)
consent or the meeting of the minds of the
parties; (2) object or subject matter of the
contract; and (3) price or consideration of
the sale.
In a potential sale transaction, the prior
payment of earnest money even before the
property owner can agree to sell his
property is irregular, and cannot be used to
bind the owner to the obligations of a seller
under an otherwise perfected contract of
sale; to cite a well-worn cliché, the carriage
cannot be placed before the horse.
The property owner-prospective seller may
not be legally obliged to enter into a sale
with a prospective buyer through the
latter’s employment of questionable
practices which prevent the owner from
freely giving his consent to the transaction;
this constitutes a palpable transgression of
the prospective seller’s rights of ownership
over his property, an anomaly which the
Court will certainly not condone. An
agreement where the prior free consent of
one party thereto is withheld or suppressed
will be struck down, and the Court shall
always endeavor to protect a property
owner’s rights against devious practices
that put his property in danger of being lost
or unduly disposed without his prior
knowledge or consent.
Ruling:
Petition GRANTED. RTC and CA decision
REVERSED and SET ASIDE.
Contract of sale differentiated with:
- agency to sell
- contract for a piece of work
- barter or exchange
1. Rosa Lim vs. Court of Appeals, G.R.
No. 102784, February 28, 1996
Facts:
Petitioner Rosa Lim received from private
respondent Victoria Suarez the following
two pieces of jewelry: one (l) 3.35 carat
diamond ring worth P169,000.00 and one (1)
bracelet worth P170,000.00, to be sold on
commission basis. The agreement was
reflected in a receipt marked as Exhibit "A"
for the prosecution. The transaction took
place at the Sir Williams Apartelle in Timog
Avenue, Quezon City, where Rosa Lim was
temporarily billeted.
Subsequently, petitioner returned the
bracelet to Vicky Suarez, but failed to return
the diamond ring or to turn over the
proceeds thereof if sold. As a result, private
complainant, aside from making verbal
demands, wrote a demand letter to
petitioner asking for the return of said ring
or the proceeds of the sale thereof In
response, Petitioner, thru counsel, wrote a
letter to private respondent’s counsel
alleging that Rosa Lim had returned both
ring and bracelet to Vicky Suarez sometime
in September, 1987, for which reason,
petitioner had no longer any liability to Mrs.
Suarez insofar as the pieces of jewelry were
concerned. Irked, Vicky Suarez filed a
complaint for estafa under Article 315, of
the Revised Penal Code.
Petitioner maintains that she cannot be
liable for estafa since she never received the
jewelries in trust or on commission basis
from Vicky Suarez. The real agreement
between her and the private respondent
was a sale on credit with Mrs. Suarez as the
owner-seller and petitioner as the buyer, as
indicated by the fact that petitioner did not
sign on the blank space provided for the
signature of the person receiving the
jewelry but at the upper portion thereof
immediately below the description of the
items taken.
Issue: Whether the transaction was an
agency to sell or a sale on credit.
Held: It is an agency to sell. The receipt
marked as signed by Rosa Lim establishes a
contract of agency to sell on commission
basis between Vicky Suarez and Rosa Lim.
A contract of agency to sell on commission
basis is valid and enforceable in whatever
form it may be entered into.
Furthermore, there is only one type of legal
instrument where the law strictly prescribes
the location of the signature of the parties
thereto. This is in the case of notarial wills
found in Article 805 of the Civil Code, to
wit:
"Every will, other than a holographic will,
must be subscribed at the end thereof by the
testator himself . . .
The testator or the person requested by him
to write his name and the instrumental
witnesses of the will, shall also sign, as
aforesaid, each and every page thereof,
except the last, on the left margin . . ."
In the case before us, the parties did not
execute a notarial will but a simple contract
of agency to sell on commission basis, thus
making the position of petitioner’s
signature thereto immaterial.
Ruling:
The petition is DENIED and the Decision of
the Court of Appeals is hereby AFFIRMED.
2. Lourdes Lim vs. People, G.R. No. L34338, November 21, 1984
Facts:
The appellant is a businesswoman. On
January 10, 1966, the appellant went to the
house of Maria Ayroso and proposed to sell
Ayroso’s tobacco. Ayroso agreed to the
proposition of the appellant to sell her
tobacco consisting of 615 kilos at P1.30 a
kilo. The appellant was to receive the
overprice for which she could sell the
tobacco. This agreement was made in the
presence of plaintiff’s sister, Salud G.
Bantug. Salvador Bantug drew the
document
Issue:
Whether the contract is an agency to sell or
a contract of sale.
Held:
It is an agency to sell. The fact that appellant
received the tobacco to be sold at P1.30 per
kilo and the proceeds to be given to
complainant as soon as it was sold, strongly
negates transfer of ownership of the goods
to the petitioner. The agreement (Exhibit
"A") constituted her as an agent with the
obligation to return the tobacco if the same
was not sold.
3. Commissioner of Internal Revenue vs.
Constantino, G.R. No. L-25926, February
27, 1970
Facts:
Petitioner Commissioner of Internal
Revenue (CIR) assessed against and
demanded from respondent Constantino
the commercial broker’s percentage tax of
6% on his gross compensation for 1956, as
dealer or distributor of the products of
International Harvester, Macleod, Inc.
(IHM).
Respondent is designated as the exclusive
dealer of the products IHM within a
prescribed territory. In classifying himself
as an independent merchant instead of a
commercial broker, respondent Constantino
cites that he may buy IHM products for
Resale to his customers; that he is granted
trade discounts and a cash discount under
certain conditions; that he may purchase
service parts on open credit account or on a
30-day term; and that he sold service parts
to his customers on cash basis. Constantino
also cited the fact that his purchases are
covered by IHM’s sales invoices, and when
he re-sells he issues his own sales invoice.
Constantino protested the assessment on
the ground that he is not a commercial
broker. On his protest being overruled, he
filed a petition for review with the Court of
Tax Appeals, which, after trial, found for
him. Upon his reversal by the tax court, the
CIR interposed the present appeal.
Issue: Whether the relationship between
IHM and the respondent is one of principal
and agent, or vendor and vendee.
Held:
It is one of principal and agent. A casual
examination of respondent's evidence may
give the impression that this relationship
with the company is that of vendor and
vendee, but a closer look into the actual
legal effect of the terms and conditions
embodied, rather than the names of the
contracts used or the terminologies
employed, in the chain of documents shows
that the relation between the company and
the respondent is one of principal and
agent.
Respondent failed to state or notice,
however, the condition in his agreement
with IHM, which is in small print, that the
title of the goods delivered under this order
shall remain in IHM until the full purchase
price shall have been paid in cash or
acceptable security. That the dealer should
issue his own sales invoice to the customer
is neither a means of acquiring ownership
nor is it proof of ownership.
Since the company retained ownership of
the goods, even as it delivered possession
unto the dealer for resale to customers, the
price and terms of which were subject to the
company's control, the relationship between
the company and the dealer is one of
agency.
4. Engineering and Machinery Corp. vs.
Court of Appeals, G.R. No. 52267,
January 24, 1996
Facts:
Pursuant to the contract dated September
10, 1962 between petitioner and private
respondent, the former undertook to
fabricate, furnish and install the airconditioning system in the latter’s building
along Buendia Avenue, Makati in
consideration of P12,000.00. Petitioner was
to furnish the materials, labor, tools and all
services required in order to so fabricate
and install said system. The system was
completed in 1963 and accepted by private
respondent, who paid in full the contract
price.
After selling the building to NIDC in 1965,
respondent subsequently re-acquired it in
1971, some NIDC employees made
mentioned defects of the air-conditioning
system of the building.
Acting on this information, private
respondent commissioned Engineer David
R. Sapico to render a technical evaluation of
the system in relation to the contract with
petitioner. In his report, Sapico enumerated
the defects of the system and concluded that
it was “not capable of maintaining the
desired room temperature of 76ºF – 2ºF.
Private respondent filed an action for
damages against petitioner with the then
CFI. The complaint alleged that the airconditioning system installed by petitioner
did not comply with the agreed plans and
specifications.
Petitioner moved to dismiss the complaint,
alleging that the prescriptive period of six
months had set in pursuant to Articles 1566
and 1567, in relation to Article 1571 of the
Civil Code, regarding the responsibility of a
vendor for any hidden faults or defects in
the thing sold.
Petitioner moved to dismiss the complaint,
alleging that the prescriptive period of six
months had set in pursuant to Articles 1566
and 1567, in relation to Article 1571 of the
Civil Code, regarding the responsibility of a
vendor for any hidden faults or defects in
the thing sold.
Private respondent countered that the
contract dated September 10, 1962 was not a
contract of sale but a contract for a piece of
work under Article 1713 of the Civil Code.
Thus, in accordance with Article 1144 (1) of
the same Code, the complaint was timely
brought within the ten-year prescriptive
period.
In its reply, petitioner argued that Article
1571 of the Civil Code providing for a sixmonth prescriptive period is applicable to a
contract for a piece of work by virtue of
Article 1714, which provides that such a
contract shall be governed by the pertinent
provisions on warranty of title and against
hidden defects and the payment of price in
a contract of sale
Trial court ruled in favor of respondent
stating that the complaint was filed within
the ten-year prescriptive period although
the contract was one for a piece of work,
because it involved the "installation of an
air-conditioning system which the
defendant itself manufactured, fabricated,
designed and installed." CA affirmed in
toto.
Issue: Whether the contract was for a piece
of work or a contract of sale.
Held:
The contract is for a piece of work. Article
1713 of the Civil Code defines a contract for
a piece of work. A contract for a piece of
work, labor and materials may be
distinguished from a contract of sale by the
inquiry as to whether the thing transferred
is one not in existence and which would
never have existed but for the order of the
person desiring it. In such case, the contract
is one for a piece of work, not a sale. On the
other hand, if the thing subject of the
contract would have existed and been the
subject of a sale to some other person even
if the order had not been given, then the
contract is one of sale. If the parties
intended that at some future date an object
has to be delivered, without considering the
work or labor of the party bound to deliver,
the contract is one of sale. But if one of the
parties accepts the undertaking on the basis
of some plan, taking into account the work
he will employ personally or through
another, there is a contract for a piece of
work.
Clearly, the contract in question is one for
a piece of work. It is not petitioner’s line
of business to manufacture airconditioning systems to be sold “off-theshelf.” Its business and particular field of
expertise is the fabrication and installation
of such systems as ordered by customers
and in accordance with the particular plans
and specifications provided by the
customers. Naturally, the price or
compensation for the system
manufactured and installed will depend
greatly on the particular plans and
specifications agreed upon with the
customers.
A close scrutiny of the complaint filed in the
trial court reveals that the original action is
not really for enforcement of the warranties
against hidden defects, but one for breach of
the contract itself. It alleged that the
petitioner, “in the installation of the air
conditioning system did not comply with
the specifications provided” in the written
agreement between the parties
5. Del Monte vs. Aragones, G.R. No.
153033, June 23, 2005
Facts:
Petitioner Del Monte Philippines Inc.
(DMPI) entered into an "Agreement" with
MEGA-WAFF, represented by "Managing
Principal" Edilberto Garcia (Garcia). The
agreement states that Garcia will supply the
installation of modular pavement in DMPI’s
warehouse. Following this, Garcia entered
into a supply agreement with Dynablock
Enterprises represented by Napoleon
Aragones, to supply the labor, materials,
and equipment for the modular pavement.
From there, Aragones started doing his
obligations but he did not meet the
deadlines. After the installation, Aragones
was not able to collect payment from
Garcia. Aragones then sent a letter to DMPI,
saying that instead of paying Garcia, they
should pay him directly. DMPI did not pay
Aragones. Aragones then filed a complaint
for a sum of money with damages against
Garcia and DMPI.
Trial court and CA ruled in favor of
respondent ruling that the Supply
Agreement was for a piece of work.
Issue:
Whether the Supply Agreement was a
contract of sale.
Held:
No. Contrary to petitioner’s claim that
"save for the shape, there was no
consideration of any special needs or
requirements of DMPI taken into account in
the design or manufacture of the concrete
paving blocks," the "Supply Agreement" is
replete with specifications, terms or
conditions showing that it was one for a
piece of work.
As reflected in the highlighted and
underscored above-quoted provisions of
the "Supply Agreement," as well as other
evidence on record, the machines Aragones
was obliged to fabricate were those for
casting the concrete blocks specified by
Garcia. Aragones did not have those kind of
machines in his usual business, hence, the
special order.
In the case at bench, the modular paving
blocks are not exactly what the plaintiffappellee makes and keeps on hand for sale
to anyone, but with a modification that the
same be S in shape. Hence, the agreement
falls within the ambit of Article 1467
making Article 1729 likewise applicable in
the instant case. As can be clearly seen from
the wordings of Art. 1467, what determines
whether the contract is one of work or of
sale is whether the thing has been
manufactured specially for the customer
and upon his special order. Thus, if the
thing is specially done on the order of
another, this is a contract for a piece of
work. If, on the other hand, the thing is
manufactured or procured for the general
market in the ordinary course of ones
business, it is a contract of sale. The
authorities petitioner cited in fact show that
the nature of the Supply Agreement
between Aragones and MEGA-WAFF was
one for a piece of work.
6. Tan Queto vs. Court of Appeals, G.R.
No. L-35648, May 16, 1983
Facts:
The plaintiff, as owner leased portion of Lot
304-B to the defendant, Pershing Tan Queto
on September 22, 1949. During the existence
of the lease contract the defendant-lessee,
Pershing Tan Queto, persuaded the plaintiff
to sell or barter the property to him but the
plaintiff flatly told the said defendant and
his emissaries that she was not selling or
bartering the property because it is her only
paraphernal property which she inherited
from her deceased parents and she wants to
preserve the integrity of the property in
order to cherish and keep the memories of
her late parents;
that persuasion having failed, Tan Queto
employed the more clever and subtle
strategy by allowing the defendant Juan
Pombuena and some of plaintiff's children
to obtain credit in his store; that defendant
Tan Queto also loaned money to Pombuena
and plaintiff's children, entrapping
defendant, Juan Pombuena in many debts
which grew to an amount which was quite
difficult for the plaintiff and her husband,
Juan Pombuena, to pay, so that at the time
the lease contract expired, the defendant
Pershing Tan Queto refused to surrender
and return the property to the plaintiff; that
in order to recover possession of said
property, the plaintiff filed an unlawful
detainer case in the Municipal Court of
Ozamiz City, which was decided against
defendant Pershing Tan Queto; that
meanwhile defendant Pershing Tan Queto
continued to cajole the plaintiff into selling
or bartering the said property to him and
the plaintiff stood firmly on her conviction
never to sell or barter Lot 304-B
After the illegal detainer case was decided
by the City Court of Ozamiz, both appealed
to the Court of First Instance of Misamis
Occidental;
that meanwhile an agreement of barter was
reached by both defendants hereto whereby
the land in question would be exchanged
for a land with an already standing house
thereon which the plaintiff and her husband
and children are, and have long been,
occupying and in addition thereto the
plaintiff and her defendant-husband were
given P4,000.00 and the indebtedness
adjudged against them by the City Court of
Ozamiz was condoned; that the plaintiff
and her defendant-husband, as well as their
children, knew and impliedly, assented to
this transaction of barter because they are
still making use of the house and land
bartered to them as absolute owners and
possessors;
Issue:
The core issue in the trial court, the Court of
Appeals and this Court is the ownership of
Lot No. 304-B (Cadastral Lot No. 5944)
which is covered by. O.C.T.
No. 0-1160 of the Registry of Property of
Ozamiz City.
Held:
Since the lot in question is the paraphernal
property of Restituta, the order to register it
in her name as her paraphernal property is
well-taken. Also well-taken is the order
annulling the barter agreement and
directing the mutual restitution of the
objects bartered because of failure of
consideration.
The other question relates to the forfeiture
of the building which Tan Queto built on
the land in question. The Court of Appeals
found as a fact that Tan Queto was a builder
in bad faith because he knew that the land
was the paraphernal property of Restituta
and it was not for Juan Pombuena to barter
it.
The factual conclusion that Tan Queto is a
builder in bad faith is well-taken. He knew
that he acquired no title to the lot in
question because of the barter and when he
built on it he did so in bad faith As a builder
in bad faith he has no right to be refunded
the value of the building for Article 449 of
the Civil Code stipulates:
Art. 449. He who builds, plants or sows in
bad faith on the land of another, loses what
is built, planted or sown without right to
indemnity.
7. Tan Queto vs. Court of Appeals, G.R.
No. L-35648, February 27, 1987
(Resolution on Motion for Reconsideration)
Restituta Tagalinar Guangco de Pombuena
received the questioned lot (Lot 304-B of the
Cadastre Survey of the Municipality of
Centro, Misamis Occidental) either as a
purported donation or by way of purchase
on 11 February 1927 for P50.00 as the
alleged consideration thereof. The
transaction took place during her mother’s
lifetime (her father having predeceased the
mother) and consummated while Restituta
was already married to her husband Juan
Pombuena. On 22 January 1935, Juan filed
an application of Torrens title over the land
for himself and his supposed co-owner
Restituta. On 22 November 1938, a decision
was promulgated (GLRC 1638, Cadastral
Case 12) pronouncing Juan (married to
Restituto) as the owner of the land. On 22
September 1949 a contract of lease over the
lot was entered into between Pershing Tan
Queto and Restituta (with the consent of her
husband) for a period of 10 years.
Meanwhile, On 27 December 1960 Restituta
sued Tan Queto for unlawful detainer (the
lease contract having expired) before the
Municipal Court of Ozamis City.
On 22 April 1962, as a consequence of the
cadastral case, an OCT was issued in Juan’s
name. On 10 October 1962, Tan Queto and
Juan entered into a barter agreement
whereby Tan Queto became the owner of
the disputed lot, and the spouses in turn
became the owners of a parcel of land with
the house constructed thereon previously
owned (that is, before the barter) by Tan
Queto. Thereafter, Tan Queto constructed
on the disputed land a concrete building,
without any objection on the part of
Restituta.
The Municipal court ruled in favor of the
spouses in the unlawful detainer case; but
on appeal in the CFI, the entire case was
dismissed because of an understanding
(barter) entered into by Juan and Tan
Queto.
Restituta sued both Juan and Tan Queto for
reconveyance of the title over the registered
but disputed lot, for annulment of the
barter, and for recovery of the land with
damages. The CFI and the Court of Appeals
found the disputed lot as paraphernal and
that Tan Queto was a builder in bad faith.
Issue:
Was Tan Queto a possessor and builder in
good faith or in bad faith?
Held:
No. Tan Queto having bartered his own lot
and small house with the questioned lot
with Juan (who has been adverted to by a
court decision and by the OCT a conjugal
owner) may be said to be the ownerpossessor of the lot. Certainly he is not
merely a possessor or builder in good faith
(this phrase presupposes ownership in
another); much less is he a builder in bad
faith. He is a builder-possessor (jus
possidendi) because he is the owner
himself.
Ruling:
WHEREFORE, Our decision promulgated
on May 16,1983 is hereby SET ASIDE, and a
new one is hereby rendered declaring the
questioned lot together with the building
thereone, as TAN QUETO's exclusive
property.