Complete Digests - 2D

8/20/2019 Complete Digests - 2D

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ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA 1

THE NATURE OF SALE

1. GAITE v FONACIER

FACTS: Fonacier was the holder of 11 iron lode mineralclaims. By a Deed of Assignment, he appointed Gaite ashis attorney-in-fact for the purpose of operating the

same. Gaite then executed a general assignmentconveying the right to develop and exploit the miningclaim to Larap Iron Mines, owned by him, and thenstarted to develop the same. Fonacier then decided torevoke the authority granted to Gaite; the latteracceded and transferred the claims back to Fonacier butfor consideration—royalties and a sum of P75,000,P10,000 of which was already paid. A balance of P65,000remained for which Fonacier issued 2 sureties, good fora year. There was a stipulation that the P65,000 balancewill be paid from the 1st shipment of ores and its localsale. Eventually, the sureties expired and Fonacierdefaulted in settling his debt. He now alleges that thepayment of the balance was subject to a suspensivecondition—being the 1st shipment and sale of iron ores.

ISSUE: W/N the 1st shipment and sale of iron ores areconsidered suspensive condition

HELD: NO. It was only a SUSPENSIVE TERM. What tookplace between Gaite and Fonacier, regarding thetransfer of the mining rights, was a sale. A contract ofsale is normally ONEROUS and COMMUTATIVE. Eachparty anticipates performance form the very start. Sincea sale is essentially onerous, any doubts must be settledin favor of the greatest reciprocity of rights—in thiscase, that a period, and not a condition, wascontemplated. Had it been a suspensive condition,Fonacier would have been able to postpone paymentindefinitely.

2. BUENAVENTURA v CA

FACTS: Joaquin spouses sold 6 subdivision lots to someof their 9 children evidenced by corresponding Deeds ofSale. The other children, interested in protecting theirinheritance, sought to have the deeds of sale declarednull and void for prejudicing their legitimes, lack ofconsideration, and gross inadequacy of price.

ISSUE: W/N the contract of sale is valid

HELD: YES. At the onset, their rights to the legitimes are

merely inchoate and vest only upon the death of theirparents; thus they have no legal interest thereof.Payment of the price has nothing to do with theperfection of the contract of sale; it was perfected bymere consent. Failure to pay consideration cannot beequated with lack of consideration, which prevents theexistence of a valid contract. The former only results inthe right to demand payment or rescission. There wasalready a meeting of the minds as to the price whichwas reflected in the Deed of Sale—and that wassufficient. In fact, evidence suggests that the purchaseprocess have indeed been paid. The sales are thus valid.

Gross inadequacy of price does NOT affect the validityof sale, unless it indicates either (1) a vice of consent or(2) that the parties intended a donation or some othercontract. No evidence suggests such circumstances. Theprice need not be the exact value of the property. In

fact, all the parties to the sale believed that theyreceived the commutative value of what they paid for.

3. CELESTINO & CO. v COLLECTOR

FACTS: Celestino & Co. (Oriental Sash Factory) waspaying 7% taxes based on gross receipts for themanufacture and sale of sash products. It now seeks topay only the 3% tax imposable upon contracts for pieceof work—as opposed to the 7% tax on sales—claimingthat they do not manufacture ready-made doors for thepublic but only upon special order of the customers.

ISSUE: W/N Celestino & Co. is a contractor (piece of

work)

HELD: NO. The fact that the sash products are madeonly upon the order of the customers does NOT changethe nature of the establishment. Timing is not thecontrolling factor but the nature of the work done. Theyhabitually make sash products and can easily duplicateand mass-produce the same. The bulk of their salescome from standard ready-made products—specialorders are the exception and come only occasionally. Ifthe goods are manufactured specifically upon specialorder of the customer and requires extraordinaryservice, then that would be the time when it can beclassified as piece of work. But such is not the case

here. Oriental Sash is clearly a manufacturer and mass-producer of doors.

4.

COMMISSIONER OF INTERNAL REVENUE vENGINEERING EQUIPMENT & SUPPLY CO.

FACTS: Engineering Equipment & Supply (EES) wasengaged in the business of designing and installingcentral air-conditioning systems. It was assessed by theCIR for 30% advanced sales tax, among other penaltiespursuant to an anonymous complaint filed before theBIR. EES vehemently objected and argued that they arecontractors and not manufacturers, and thus, shouldonly be liable for the 3% tax on sales of services or

pieces of work.

ISSUE: W/N EES is a contractor (piece of work)

HELD: YES. EES was NOT a manufacturer of air-conditioning units. While it imported such items, theywere NOT for sale to the general public and were usedas mere components for the design of the centralizedair-conditioning system, wherein its designs andspecifications are different for every client. Varioustechnical factors must be considered and it can beargued that no 2 plants are the same; all are engineered



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separately and distinctly. Each project requires carefulplanning and meticulous layout. Such central air-conditioning systems and their designs would not haveexisted were it not for the special order of the partydesiring to acquire it. Thus, EES is not liable for thesales tax of 30%.

5.

QUIROGA v PARSONS

FACTS: Quiroga and Parsons Hardware entered into acontract where the former granted the latter theexclusive right to sell Quiroga Beds in the Visayas. Itprovided for a discount of 25% as commission for thesales, among other conditions. Quiroga alleged thatParsons breached its contractual obligations by sellingthe beds at a higher price, not having an openestablishment in Iloilo, not maintaining a publicexhibition, and for not ordering beds by the dozen. Onlythe last imputation was provided for by the contract,the others were never stipulated. Quiroga argued thatsince there was a contract of agency between them,

such obligations were necessarily implied.

ISSUE: W/N the contract between them was one ofagency, not sale

HELD: NO. The agreement between Quiroga and Parsonswas that of a simple purchase and sale—not an agency.Quiroga supplied beds, while Parsons had the obligationto pay their purchase price. These are characteristics ofa purchase and sale. In a contract of agency (or order tosell), the agent does not pay its price yet, and sells theproducts, remitting to the principal its proceeds. Unsoldproducts must also be returned to the principal. Theprovisions on commission and the use of the word“agency” in the contract as well as the testimonies in

court do not affect its nature. Contracts are what thelaw defines it to be, not what the parties call it.

6.

PUYAT v ARCO AMUSEMENT CO.

FACTS: Arco Amusement was engaged in the business ofoperating cinematopgraphs. Gonzalo Puyat & Sons Inc(GPS) was the exclusive agent in the Philippines for theStarr Piano Company. Desiring to equip itscinematograph with sound reproducing devices, Arcoapproached GPS, through its president, GIl Puyat, andan employee named Santos. After some negotiations, itwas agreed between the parties that GPS would order

sound reproducing equipment from Starr Piano Companyand that Arco would pay GPS, in addition to the price ofthe equipment, a 10% commission, plus all expensessuch as freight, insurance, etc. When GPS inquired StarrPiano the price (without discount) of the equipment, thelatter quoted such at $1,700 FOB Indiana. Beingagreeable to the price (plus 10% commission plus allother expenses), Arco formally authorized the order.

The following year, both parties agreed for anotherorder of sound reproducing equipment on the sameterms as the first at $1,600 plus 10% plus all otherexpenses.

Three years later, Arco discovered that the pricesquoted to them by GPS with regard to their first 2 ordersmentioned were not the net prices, but rather the listprice, and that it had obtained a discount from StarrPiano. Moreover, Arco alleged that the equipment wereoverpriced. Thus, being its agent, GPS had to reimbursethe excess amount it received from Arco.

ISSUE: W/N there was a contract of agency, not of sale

HELD: NO. The letters containing Arco's acceptance ofthe prices for the equipment are clear in their termsand admit no other interpretation that the prices arefixed and determinate. While the letters state that GPSwas to receive a 10% commission, this does notnecessarily mean that it is an agent of Arco, as thisprovision is only an additional price which it bound itselfto pay, and which stipulation is not incompatible withthe contract of sale.

It is GPS that is the exclusive agent of Starr Piano inthe Philippines, not the agent of Arco. it is out of theordinary for one to be the agent of both the seller and

the buyer. The facts and circumstances show that Arcoentered into a contract of sale with GPS, the exclusiveagent of Starr Piano. As such, it is not duty bound toreveal the private arrangement it had with Starr Pianorelative to the 25% discount.

Thus, GPS is not bound to reimburse Arco for anydifference between the cost price and the sales price,which represents the profit realized by GPS out of thetransaction.

7.

LO v KJS ECO-FORMWORK SYSTEM PHIL., INC.

FACTS: KJS Inc was engaged in the sale of steelscaffolding. Sonny Lo, a contractor, purchased

scaffolding equipment worth P540,000. He made adeposit of P150,000, the balance payable within 10months. Due to financial difficulties, Lo defaulted afterpaying only 2 installments. A debt of some P335,000remained. Thus, Lo assigned in favor of KJS all hisreceivables from Jomero Realty Corp. which refused topay and raised the defense of compensation—claimingthat Lo also had debts in its favor. KJS thus again soughtto collect from Lo who them averred that his debts havealready been extinguished by the said assignment.

ISSUE: W/N the assignment of credit extinguished thedebts

HELD: NO. The assignment of credit made by Lo in favorof KJS was in the nature of dacion en pago, which isgoverned by the law on sales. It is as if KJS bought thecredit from Lo, the payment of which is to be chargedupon the latter’s debt. Lo, as vendor not good faith,shall be liable for the existence and legality of thecredit at the time of the sale (but not for the solvencyof the debtor). He is bound by certain warranties. In thiscase, since the assignment he made in favor of KJS hasalready been compensated, he should still be liable topay KJS for his indebtedness. He should make good thewarranty and pay the obligation.



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PARTIES TO A CONTRACT OF SALE 1.

PARAGAS v HEIRS OF DOMINADOR BALACANO

FACTS: Balancano, married to Lorenza, owned 2 parcelsof land. He was already 81 years old, very weak, could

barely talk, and had been battling with liver disease forover a month. On his deathbed, barely a week before hedied, he allegedly signed a Deed of Absolute Sale overthe lots in favor of Paragas Spouses, accompanied byAtty. De Guzman who proceeded to notarize the same,alleging that it was a mere confirmation of a previoussale and that Gregorio had already paid P50,000 asdeposit. The Paragas’ driver was also there to take apicture of Gregorio signing said deed with a ballpen inhis hand. There was nothing to show that the contentsof the deed were explained to Balacano. Paragas thensold a portion of the disputed lot to Catalino. Thegrandson of Gregorio, Domingo, sought to annul the saleand the partition. There was no sufficient evidence tosupport any prior agreement or its partial execution.

ISSUE: W/N Balacano is incapacitated to enter into acontract of sale

HELD: YES. A person is not rendered incompetent merelybecause of old age; however, when such age hasimpaired the mental faculties as to prevent a personfrom protecting his rights, then he is undeniablyincapacitated. He is clearly at a disadvantage, and thecourts must be vigilant for his protection. In this case,Balacano’s consent was clearly absent—hence the salewas null and void. The circumstances raise seriousdoubts on his capacity to render consent. Consideringthat the Paragas spouses are not owners of the saidproperties, it only follows that the subsequent sale toCatalino—who was not in good faith—is likewise void.Furthermore, the lots pertained to the conjugalpartnership—having been inherited by Balacano duringhis marriage to Lorenza. Thus, it cannot be sold withoutthe latter’s consent.

2.

CALIMLIM-CANULLAS v FORTUN

FACTS: Mercedes and Fernando were married and had 5children. Fernando inherited the land upon which theirhouse was built. Fernando left his family to live withhis concubine Corazon. He then sold the said lot withthe house in favor of Corazon for P2,000. Corazon,

unable to take possession of the house and lot, filed acomplaint for quieting of title. Mercedes objectedalleging that the properties pertained to their conjugalpartnership.

ISSUE: W/N the sale to Corazon was valid

HELD: NO. The properties pertained to the conjugalpartnership of Mercedes and Fernando, thus the sale isnull and void for lack of Mercedes’ consent and forbeing contrary to morals and public policy. The lawgenerally prohibits spouses from selling or donating

properties to each other; the same prohibitions applyto a couple living in as husband and wife without thebenefit of marriage. As public interests dictate, to ruleotherwise would put the persons in guilt at better

position than those legally married.

3. RUBIAS v BATILLER

FACTS: Militante claimed ownership over a parcel ofland and applied for the registration of the same withthe CFI; his counsel was his son-in-law, Atty. Rubias. Hisclaim was dismissed by the trial court, thus heappealed. Pending appeal, he sold the lot to Atty.Rubias for P2,000. Batiller, on the other hand, claimedto have inherited the same lot from his ancestors whohave been in open, public, peaceful, and actualpossession thereof under a claim of title. Atty. Rubiasfiled an ejectment suit against Batiller who assailed the

validity of the sale to Rubias. Given the dismissal ofMilitante’s application, he had thus no right over thesaid land that he may have validly transferred to Atty.Rubias.

ISSUE: W/N the sale to Atty. Rubias is valid

HELD: NO. Even assuming he had title thereto, the saleof the lot to Atty. Rubias would be null and void forbeing expressly prohibited by the Civil Code. Lawyerscannot acquire by purchase the property or rights underlitigation over which they take part by virtue of theirprofession. The same rule applies to judges, clerks ofcourt, and other judicial officers with respect to the

same. The purchase in violation of the above provision isnot merely voidable as Atty. Rubias contends; it is VOIDand INEXISTENT from the very beginning. The right toset up the defense of its illegality cannot be waived—and, unlike cases involving agents, guardians, oradministrators with respect to the properties undertheir charge, it is not susceptible to compromise orratification. It is likewise contrary to public policy

4.

PHIL. TRUST CO. v ROLDAN

FACTS: Mariano Bernardo, a minor, inherited amongothers 17 parcels of land from his deceased father.Soccoro Roldan was appointed as his guardian. Soccoro

sought and was granted authority to sell the lots to herbrother-in-law Ramos for P14,700. Very shortly after,Ramos sold back to Soccoro the same properties forP15,000. She then sold 4 parcels to Emilio Cruz. Phil.Trust Co. replaced Soccoro as guardian and sought toannul all the aforesaid sales.

ISSUE: W/N the sale to Ramos was valid

HELD: NO. Guardianship is the trust of the highest order.In this case, for all intents and purposes, it was as if



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Soccoro herself purchased the properties of her ward. This falls within the prohibition under Art. 1459 of theCivil Code. She indirectly sold the properties to herself.The same applies even though there was no actualmalice or collusion proven. Since the sale to Soccorowas null and void, it only follows that the sales made bySoccoro to Cruz were likewise void. One cannot sellwhat is not his property.

Soccoro tried to correct the problem by allowing

Mariano to re-purchase the said properties for P15,000.However, the child would still be at a losing endbecause it would not entitle him to the fruits of theproperty during the time when he was not in possessionthereof. The SC annulled the sale.

CLV: Bad ruling because W/N ward is benefited isIMMATERIAL. Advantage to ward can easily be forged.

5.

FABILLO v IAC

FACTS: Florencio Fabillo contracted the services of Atty.Murillo to revive a lost case over his inheritance from his

deceased sister Justinia. He sought to acquire the SanSalvador and Pugahanay Properties that his sister leftbehind against the latter’s husband. They entered into acontract where a contingent fee in favor of Atty. Murilloin case the case won was agreed upon. The fee was 40%of the value of whatever benefit Florencio may derivefrom the suit—such as if the properties were sold,rented, or mortgaged. It was vague, however, regardingthe fee in case Florencio or his heirs decide to occupy

the house—allowing Atty. Murillo the option to occupy orlease 40% of the said house and lot. A compromiseagreement was entered into where Florencio acquiredboth properties. Atty. Murillo installed a tenant in thePugahanay Property; later on, Florencio claimedexclusive rights over the properties invoking Art. 1491 ofthe CC. Florencio and Atty. Murillo both died and were

succeeded by their respective heirs.

ISSUE: W/N contingent fees agreed upon are valid

HELD: YES. Contingent fees are not contemplated by theprohibition in Art. 1491 disallowing lawyers to purchaseproperties of their clients under litigation. The saidprohibition applies only during the pendency of thelitigation. Payment of the contingent fee is made afterthe litigation, and is thus not covered by theprohibition. For as long as there is no fraud or undueinfluence, or as long as the fees are not exorbitant, thesame as valid and enforceable. It is even recognized bythe Canons of Professional Ethics.

However, considering that the contract is vague onthe matter of division of the shares if Florencio occupiesthe property; the ambiguity is to be construed againstAtty. Murillo being the one who drafted the contract andbeing a lawyer more knowledgeable about the law. TheCourt thus invoking the time-honored principle that alawyer shall uphold the dignity of the legal profession,ordered only a contingent fee of P3,000 as reasonableattorney’s fees.

SUBJECT MATTER OF SALE

1. POLYTECHNIC UNIVERSITY v CA

FACTS: The National Development Corp. (NDC) ownedthe NDC Compound, a portion of which was leased toFirestone Ceramics, which built several warehouses andfacilities therein. Since business between NDC andFirestone went smooth, the lease was twice renewedthis time conferring upon Firestone a right of firstrefusal should NDC decide to dispose of the property.Also, under the contract, Firestone was obliged tointroduce considerable improvements thereon.Eventually though, Memo Order No. 214 was issuedordering the transfer of NDC Compound to thegovernment in consideration of the cancellation ofNDC’s P57M debt. Pursuant thereto, NDC transferred theproperty to Polytechnic University (PUP). Firestone sued

for specific performance invoking its right of firstrefusal, and sought to enjoin NDC and PUP fromproceeding with the sale. Both PUP and NDC aver thatthere was no sale involved since ownership of theproperty remained with the government—bothcompanies being GOCCs.

ISSUE: W/N there was a sale

HELD: YES. The argument of PUP and NDC wasuntenable. GOCCs have personalities separate anddistinct from the government. “Sale” brings within its

grasp the whole gamut of transfers where ownership of

a thing is ceded for consideration. Further, judging fromthe conduct of the parties in this case, all the elementsof a valid sale attend. Consent is manifested by theMemo Order No. 214, the cancellation of liabilitiesconstituted consideration; the subject matter was ofcourse the property subject of the dispute.

Since a sale was involved, the right of first refusal infavor of Firestone must be respected. It forms anintegral part of the lease and is supported byconsideration—Firestone having made substantialinvestments therein. Only when Firestone fails toexercise such right may the sale to PUP proceed.

2.

ATILANO v ATILANO

FACTS: Eulogio Atilano I purchased Lot 535 and had itsubdivided into 5 parts (A to E). He occupied Lot A; hisbrother, Eulogio II, occupied Lot E. He then sold lots B,C, and D to other persons. He then sold Lot E to hisbrother Eulogio II. Both brothers died and their heirsfound out after a survey that Eulogio I actually occupiedLot E and Eulogio II occupied Lot A. Thus, the heirs ofEulogio II offered to exchange the properties. However,the heirs of Eulogio I refused because Lot E was biggerthan Lot A.



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ISSUE: W/N an exchange of the properties was proper

HELD: NO. What took place was a simple mistake indrafting the instrument evidencing the agreementbetween the brothers. One sells or buys property as hesees it in actual setting and not by the mere lot numberin the certificate of title. The brothers remained inpossession of their respective portions throughout their

lives unaware of the mistake in the designation of thelots. In this case, the instrument simply failed to reflectthe true intention of the parties; thus, an exchange ofthe properties is unnecessary. All the heirs should do isto execute mutual deeds of conveyance.

3. MELLIZA v CITY OF ILOILO

FACTS: Meliza owned Lot 1214, 9,000 sqm of which shedonated to the Mun. of Iloilo for the use of the site ofthe Mun. Hall. However, the donation was revokedbecause it was inadequate to meet the requirements ofthe “Arellano Plan.” Lot 1214 was later divided into 4

lots. Meliza then sold Lots C and D to the Municipality;Lot B was not mentioned in the sale. However, thecontract stipulated that the area to be sold to theMunicipality would include such areas needed for theconstruction of the City Hall according the ArellanoPlan. She then sold the remaining portions of the lots toVillanueva, who then sold the same to Pio. The sale wasfor such lots not included in the sale to the Mun. ofIloilo. The City of Iloilo, assuming that Lot B has beensold in its favor pursuant to the Arellano Plan, thendonated Lot B to UP. Pio objected and sought to recoverthe lots stating that Lot B was not included in the initialsale made by Meliza to the Municipality—and that thesubject matter of sale should be a determinate thing.

ISSUE: W/N there was a determinate/determinablesubject matter

HELD: YES. The requirement for the subject matter tobe determinate is satisfied in this case. Simplereference to the “Arellano Plan” would indicate that itcould determine what portions of the contiguous land(lot B) were needed for the construction of the CityHall. There was no need for a further agreement toestablish the lots covered by the sale; thus, the sale isvalid. Besides, the portions of Lot B covered by the salewere practically at the heart of the City Hall site.

4.

YU TEK & CO. v GONZALES

FACTS: Gonzales received P3,000 from Yu Tek andobligated himself in favor of the latter to deliver 600piculs of sugar of the 1st and 2nd grade within 3 months.He failed to deliver the sugar and refused to return themoney—thus Yu Tek sued him. Gonzales, in seeking toevade liability, invokes fortuitous event, alleging thetotal failure of his crop.

ISSUE: W/N there was perfected contract of sale

HELD: NO. The subject matter was not yet determinate.The sugar agreed upon has yet to be segregated from allother articles. That being the case, there was merely anexecutory agreement—a promise of sale, and not acontract of sale itself.

Moreover, there was no stipulation that the sugar wasto be derived from his crop; he was at liberty to get itfrom whatever source he could find. The obligation he

incurred was for the delivery of the generic thing. Thus,he cannot invoke force majeure under the maxim genusnever perishes. His obligation to deliver the sugar is notextinguished.

Yu Tek is thus entitled to rescind the contract andrecover the money in addition to the stipulated P1,200as indemnity for losses.DD: This rule no longer holds true. Generic things maynow be the subject matter of a contract of sale providedthat they have the quality of being DETERMINABLE atthe perfection of the contract.

5.

NGA v IAC

FACTS: National Grains Authority (now National FoodAuthority, NFA) is a government agency created underPD 4. One of its incidental functions is the buying ofpalay grains from qualified farmers. In 1979, LeonSoriano offered to sell palay grains to the NFA, throughits Provincial Manager, William Cabal. He submitted thedocuments required by the NFA for pre-qualifying as aseller, which were processed and accordingly, he wasgiven a quota of 2,640 cavans of palay. The quota notedin the Farmer’s Information Sheet represented themaximum number of cavans of palay that Soriano maysell to the NFA. On 23 and 24 August 1979, Sorianodelivered 630 cavans of palay. The palay delivered werenot rebagged, classified and weighed. When Soriano

demanded payment of the 630 cavans of palay, he wasinformed that its payment will be held in abeyance sinceMr. Cabal was still investigating on an information hereceived that Soriano was not a bona fide farmer andthe palay delivered by him was not produced from hisfarmland but was taken from the warehouse of a ricetrader, Ben de Guzman. On 28 August 1979, Cabal wroteSoriano advising him to withdraw from the NFAwarehouse the 630 cavans stating that NFA cannotlegally accept the said delivery on the basis of thesubsequent certification of the BAEX technician(Napoleon Callangan) that Soriano is not a bona fidefarmer.

Instead of withdrawing the 630 cavans of palay,

Soriano insisted that the palay grains delivered be paid.He then filed a complaint for specific performanceand/or collection of money with damages against theNFA and William Cabal. Meanwhile, by agreement of theparties and upon order of the trial court, the 630 cavansof palay in question were withdrawn from thewarehouse of NFA. In 1982, RTC ruled in favor of Sorianoand in 1986, CA affirmed decision of RTC.

ISSUE: W/N there was a perfected contract of sale

HELD: YES. In the present case, Soriano initially offered



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to sell palay grains produced in his farmland to NFA.When the latter accepted the offer by noting inSoriano’s Farmer’s Information Sheet a quota of 2,640cavans, there was already a meeting of the mindsbetween the parties. The object of the contract, beingthe palay grains produced in Soriano’s farmland and theNFA was to pay the same depending upon its quality.The contention that – since the delivery were not

rebagged, classified and weighed in accordance with thepalay procurement program of NFA, there was noacceptance of the offer thus – this is a clear case ofpolicitation or an unaccepted offer to sell, is untenable.

The fact that the exact number of cavans of palay tobe delivered has not been determined does not affectthe perfection of the contract. Article 1349 of the NewCivil Code provides that “the fact that the quantity isnot determinate shall not be an obstacle to theexistence of the contract, provided it is possible todetermine the same, without the need of a newcontract between the parties.” In the present case,there was no need for NFA and Soriano to enter into anew contract to determine the exact number of cavans

of palay to be sold. Soriano can deliver so much of hisproduce as long as it does not exceed 2,640 cavans.

6. JOHANNES SCHUBACK & SONS PHIL. TRADINGCORP. v CA

FACTS: SJ Industrial, through Ramon San Jose,approached Schuback & Sons Phil. Trading (SSPT) topurchase bus spare parts. He submitted the list of partshe wanted and SSPT coordinated with its GermanyOffice to quote the prices, and forwarded its formaloffer to SJ Industrial, containing the prices, itemnumbers, descriptions, etc. SJ informed SSPT of hisdesire to purchase such items and promised to submit

the quantity per unit. SJ then submitted such quantitiesneeded to SSPT’s GM, Mr. Reichert. San Jose indicatedthe same in the Purchase Order with the inscription“this will serve as our initial purchase order. PO willinclude 3% discount.” SSPT immediately ordered theproducts from Germany to avail of the old prices—partial deliveries of which were made. Then, for hisfailure to secure letters of credit, SJ failed to purchasethe same and alleged that there was no perfectedcontract of sale. Thus, SSPT sought damages.


HELD: YES. Quantity is immaterial in the perfection of a

contract of sale. What is important is the meeting of theminds as to the object and cause of the sale. There wasalready a meeting of the minds in this case from themoment SJ manifested that he will order the parts,although he will communicate quantities later on. Infact, he indeed communicated such needed quantities—this goes to the execution of the contract of salealready. By ordering the parts, SJ acceded to the pricesoffered by SSPT. On the other hand, SSPT acceded toSJ’s request for discount by immediately ordering theparts. SJ Industrial is thus liable for damages

7.

NOOL v CA

FACTS: One lot formerly owned by Victorio Nool has anarea of 1 hectare. Another lot previously owned byFrancisco Nool has an area of 3.0880 hectares. Bothparcels are situated in San Manuel, Isabela. SpousesConchita Nool and Gaudencio Almojera (plaintiffs)alleged that they are the owners of the subject land as

they bought the same from Victorio and Francisco Nool,and that as they are in dire need of money, theyobtained a loan from DBP, secured by a real estatemortgage on said parcels of land, which were stillregistered in the names of Victorino and Francisco Nool,at the time, and for the failure of the plaintiffs to paythe said loan, including interest and surcharges, totalingP56,000.00, the mortgage was foreclosed; that withinthe period of redemption, the plaintiffs contactedAnacleto Nool for the latter to redeem the foreclosedproperties from DBP, which the latter did; and as aresult, the titles of the 2 parcels of land in questionwere transferred to Anacleto; that as part of theirarrangement or understanding, Anacleto agreed to buy

from Conchita the 2 parcels of land under controversy,for a total price of P100,000.00, P30,000.00 of whichprice was paid to Conchita, and upon payment of thebalance of P14,000.00, the plaintiffs were to regainpossession of the 2 hectares of land, which amountsspouses Anacleto Nool and Emilia Nebre (defendants)failed to pay, and the same day the said arrangementwas made; another covenant was entered into by theparties, whereby the defendants agreed to return toplaintiffs the lands in question, at anytime the latterhave the necessary amount; that latter asked thedefendants to return the same but despite theintervention of the Barangay Captain of their place,defendants refused to return the said parcels of land toplaintiffs; thereby impelling the plaintiffs to come to

court for relief. On the other hand, defendantstheorized that they acquired the lands in question fromthe DBP, through negotiated sale, and were misled byplaintiffs when defendant Anacleto Nool signed theprivate writing, agreeing to return subject lands whenplaintiffs have the money to redeem the same;defendant Anacleto having been made to believe, then,that his sister, Conchita, still had the right to redeemthe said properties.

It should be stressed that Manuel S. Mallorca,authorized officer of DBP, certified that the 1-yearredemption period and that the mortgagors’ right ofredemption was not exercised within this period. Hence,DBP became the absolute owner of said parcels of landfor which it was issued new certificates of title. About 2years thereafter, DBP entered into a Deed of ConditionalSale involving the same parcels of land with AnacletoNool as vendee. Subsequently, the latter was issued newcertificates of title in 1988.

RTC ruled in favor of Anacleto Nool. CA affirmed.

ISSUE: W/N there was a valid contract of sale betweenAnacleto and Conchita

HELD: NO. Article 1459 of the Civil Code provides that“the vendor must have a right to transfer the ownership



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thereof [object of the sale] at the time it is delivered.”Here, delivery of ownership is no longer possible. Thesellers can no longer deliver the object of the sale tothe buyers, as the buyers themselves have alreadyacquired title and delivery thereof from the rightfulowner, the DBP. Thus, such contract may be deemed tobe inoperative and may thus fall, by analogy, under item5 of Article 1409 of the Civil Code: “Those which

contemplate an impossible service.”Article 1505 of the Civil Code provides that “where

goods are sold by a person who is not the owner thereof,and who does not sell them under authority or withconsent of the owner, the buyer acquires no better title

to the goods than the seller had, unless the owner of thegoods is by his conduct precluded from denying theseller’s authority to sell.” In the present case, there isno allegation at all that petitioners were authorized byDBP to sell the property to the private respondents.Further, the contract of repurchase that the partiesentered into presupposes that petitioners couldrepurchase the property that they “sold” to private

respondents. As petitioners “sold” nothing, it followsthat they can also “repurchase” nothing. In this light,the contract of repurchase is also inoperative and by thesame analogy, void.

PRICE AND OTHER CONSIDERATION

1.

MAPALO v MAPALO

FACTS: Miguel and Candida Mapalo were illiteratefarmers and owned a parcel of land. Since MaximoMapalo was to be married, they donated to him theeastern half of the land. Maximo, however, deceived

them by making them sign an instrument donating theentire lot. There was a consideration for P5,000 statedin the deed, but the spouses never received anything.Miguel built a fence to divide the lot and continued tooccupy the western part. Maximo then registered theentire lot and 13 year after, sold the same to theNarcisos who took possession only of the eastern half.Later on, the Narcisos sought to be declared owners ofthe entire land; the spouses claimed that the sale to theNarcisos was void for lack of consideration. The CAdeclared that the sale was merely voidable and theaction by the spouses was barred by prescription, beingfiled after 4 years from the discovery of the fraud.

ISSUE: W/N there was a valid contract of sale

HELD: Consideration was totally absent; the P5,000price stipulated was never received/delivered to thespouses. Thus, the sale to the Narcisos was VOID abinitio for want of consideration. The inexistence of thecontract is permanent and cannot be the subject ofprescription. The Narcisos are also in bad faith—theyhad knowledge of the true nature and extent ofMaximo’s right over the land.

2. RONGAVILLA v CA

FACTS: Both spinsters and unschooled in English,

Mercedes and Florencia dela Cruz are the aunts ofRongavilla. Dela Cruz co-owned a parcel of land (1/2pro-indiviso) in Las Pinas with another niece namedJuanita Jimenez (elder sister of Rongavilla), who keptthe OCT, as well as the TCT after it was subdivided.

In 1976, Dela Cruz borrowed P2,000 from Rongavillafor the repair of their dilapidated rooftop. A monthlater, Rongavilla and Jimenez visited their aunts' homeand brought with them a document for the signature oftheir aunts. While the document was in English and uponinquiry by Dela Cruz what it was about, Rongavillaanswered that it was merely evidencing the P2,000

debt. Apparently, it was a Deed of Sale.In 1980, Rongavilla went to Dela Cruz' place and asked

them to vacate the lot. Suprised by this, Dela Cruzdiscovered the misrepresentation her niece made whenshe signed the document. She the filed an action withthe RTC to have the purported Deed of Sale declared

null and inexistent for lack of consent andconsideration.

ISSUE: W/N there was a valid sale

HELD: NO. Rongavilla and Jimenez were able to securethe signature of Dela Cruz in the Deed of Absolute Salethrough fraud and there was no considerationwhatsoever for the alleged sale. The consent was notonly vitiated, but it was not given at all. Since there wasno consent, the deed of absolute sale is null and void abinitio.

3.

MATE v CA

FACTS: Josefina approached Fernando asking for help.Her family was to be sued by Tan for issuing rubberchecks; thus she asked him to cede his 3 lots to Tan andit will be Josefina who will repurchase them for him. Heinitially rejected her offer. Then, Josefina issued him 2checks, one for P1.4M, pertaining to the value of thelot, and another for P420,000 corresponding to 6months’ interests. He agreed, drafted the instrumenthimself, and ceded his properties to Tan. Later, bothchecks bounced; he sued Tan for annulment of the salefor lack of consideration since he never receivedanything. He also sued Josefina criminally, butabsconded.


HELD: YES. There was consideration in the form of thecheck for P420,000. It was his fee for executing thesale. It was not only kindness that impelled him to cedehis property, it was also his interest for profit.

That he never received money is of no moment; a saleis a consensual contract. He also tacitly admitted to thesale when he filed criminal charges against Josefina.Fernando, being a lawyer, has no one else to blame but



!"#$! & '$"( )#* & +' +,-+


himself for the loss. He acted negligently our of desirefor profit.

4.

YU BUN GUAN v CA

FACTS: Yu Bun Guan and Ong are married since 1961 andlived together until she and her children wereabandoned by him in 1992, because of his incurablepromiscuity, volcanic temper, and other vicious vices.

In 1968, out of her personal funds, Ong purchased aparcel of land (Rizal Property) from Aurora Seneris.Also, during their marriage, they purchased a house andlot out of their conjugal funds.

Before their separation in 1992, she reluctantly agreedto execute a Deed of Sale of the Rizal Property on thepromise that Yu Bun Guan would construct a commericalbuilding for the benefit of the children. He suggestedthat the property should be in his name alone so thatshe would not be involved in any obligation. Theconsideration for the sale was the execution of a Deedof Absolute Sale in favor their children and the payment

of the loan he obtained from Allied Bank.However, when the Deed of Sale was executed in

favor of Yu Bun Guan, he did not pay the considerationof P200K, supposedly the "ostensible" valuableconsideration. Because of this, the new TCT issued in hisname was not delivered to him by Ong.

Yu Bun Guan then filed for a Petition for Replacementof the TCT, with an Affidavit of Loss attached. Ong, onthe other hand, executed an Affidavit of Adverse Claimand asked that the sale be declared null and void .

RTC ruled in favor of Ong. CA affirmed.


HELD: NO. It is clear from the findings of the lower

courts that the Deed of Sale was completely simulatedand thus, VOID without effect. No portion of theP200,000 consideration stated in the Deed was everpaid. And, from the facts of the case, it is clear thatneither party had any intention whatsoever to pay thatamount. Instead, the Deed of Sale was executed merelyto facilitate the transfer of the property to petitionerpursuant to an agreement between them to enable himto construct a commercial building and to sell the Junoproperty to their children. Being merely a subterfuge,that agreement cannot be taken as a consideration forthe sale.

5.

ONG v ONG

FACTS: For an in consideration of P1 and other valuableconsiderations, Imelda Ong transferred through a Deedof Quitclaim her rights over a ! portion of a parcel ofland to Sandra. Later on, she revoked the Deed anddonated the whole property to her son, Rex. Sanda,through her guardian, sought to recover ownership andpossession thereof. Imelda alleged that the sale wasvoid for lack of consideration.


HELD: YES. There was consideration. Its apparentinadequacy is of no moment since the usual practice indeeds of conveyance is to place a nominal amountalthough there is more valuable consideration given.Consideration is presumed to exist. He who allegesotherwise assumes the burden of proof. The one pesowas not the consideration, but rather the other valuable

considerations.

6. BAGNAS v CA

FACTS: Hilario died with no will and was survived onlyby collateral relatives. Bagnas (et al) were the nearestkin. Retonil (et al) were also relatives but to a fartherextent. They claimed ownership over 10 lots from theestate of Hilario presenting notarized and registeredDeeds of Sale (in Tagalog) where the consideration forthe lands was P1 and services rendered, being rendered,and to be rendered. Bagnas argued that the sales werefictitious, while Retonil claimed to have done many

things for Hilario—such as nursing him on his deathbed.


HELD: NO. At the onset, if a contract has noconsideration, it is not merely voidable, but VOID—andeven collateral heirs may assail the contract. In thiscase, there was no consideration. Price must be inmoney or its equivalent; services are not the equivalentof money insofar as the requirement of price isconcerned. A contract is not one for sale if theconsideration consists of services. Not only are theyvague, they are unknown and not susceptible ofdetermination without a new agreement between theparties.

7.

REPUBLIC v PHIL. RESOURCES DEV. CORP.

FACTS: The Republic brought an action against Apostolfor the collection of sums owing to it for his purchase ofPalawan Almaciga and other logs. His total debtamounted to some P34,000. PRDC intervened claimingthat Apostol, as President of the company, without priorauthority, took goods (steel sheets, pipes, bars, etc)from PRDC warehouse and appropriated them to settlehis personal debts in favor of the government. TheRepublic opposed the intervention of PRDC, arguing thatprice is always paid in money and that payment in kind

is no payment at all; hence, money and not the goods ofPRDC are under dispute.

ISSUE: W/N payment in kind is equivalent to price paidin money

HELD: YES. Price may be paid in money or ITSEQUIVALENT—in this case, the goods. Payment need notbe in the form of money. The prices for the goods have,in fact, been assessed and determined. PRDC thus has asubstantial interest in the case and must be permitted



!"#$! & '$"( )#* & +' +,-+


to intervene—its goods paid out without authority beingunder dispute in this case.

8.

NAVARRA v PLANTERS DEV. BANK

FACTS: Navarra spouses are the owners of 5 parcels ofland in BF Homes, Paranque. In 1982, they obtained aloan of P1.2M from Planters Bank, secured by amortgage over these parcels of land. Unfortunately,they defaulted to pay their obligation and thus, PlantersBank foreclosed the property. They were not able toredeem the property as well.

On the other hand, RRRC Dev. Corp. is a real estatecompany owned by the parents of Carmelita Navarra. Itobtained a loan from Planters Bank secured by a

mortgage over another set of properties of RRRC.Likewise, it defaulted and the properties wereforeclosed. However, RRRC was able to negotiate withthe Bank for the redemption of the properties by was ofa concession whereby the Bank allowed RRRC to refer toit would-be buyers of the properties who would remittheir payments directly to the Bank, which would thenbe considered as redemption price for RRRC. Eventually,

these were sold and payments made directly to the Bankwere in excess by P300K for the redemption price.

In the meantime, Jorge Navarra requested that theyrepurchase their house and lot for P300K, which theBank agreed. Accordingly, Jorge Navarra requestedfurther that the excess payment of RRRC be applied asdown payment for their repurchase. For his failure to

submit a board resolution from RRRC authorizing such,the Bank refused to apply the excess to his repurchase.In 1988, a portion of the lots was sold to GatchalianRealty. Navarra spouses filed for specific performanceagainst Planters Bank, alleging that there was aperfected contract of sale (P1.8M, with P300K

downpayment).RTC ruled in favor of Navarra spouses. CA reversed.

ISSUE: W/N there was a valid contract of sale (considerthe repurchase as a sale)

HELD: NO. While the letters indicate the amount ofP300K as downpayment, they are completely silent as tohow the succeeding installment payment shall be made.At most, the letters merely acknowledge that thedownpayment was agreed upon by the parties. However,

this fact cannot lead to the conclusion that a contract ofsale had been perfected. Before a valid and bindingcontract of sale can exist, the manner of payment of thepurchase price must first be established since theagreement on the manner of the payment goes into theprice such that a disagreement on the manner of

payment is tantamount to a failure to agree on theprice.

Moreover, the letter/offer failed to specify a definiteamount of the purchase price for the sale/repurchase ofthe properties. It merely stated that it will be based onthe redemption value plus accrued interest at theprevailing rate up to the date of the sales contract.

Clearly, the lack of a definite offer on the part of theNavarra spouses could not possibly serve as the basis oftheir claim that the sale was perfected.

FORMATION OF CONTRACT OF SALE

1.

MANILA METAL CONTAINER CORP. v PNB

FACTS: Manila Metal was the owner of a parcel of land inMnadaluyong. To secure a P900K loan it obtained fromPNB, Manila Metal executed a real estate mortgage overthe lot. PNB later granted Manila Metal a new creditaccommodation of P1M. Manila Metal secured anotherloan of P653K from PNB.

In 1982, PNB sought to have the property foreclosedand sold at a public auction. PNB was the highestbidder. Manila Metal requested an extension of time toredeem the property and to repurchase such oninstallment.

The Special Assets Management Department (SAMD)prepared a statement of account and as of 1984, Manila

Metal's obligation amounted to P1.6M, which includesthe bid price, interests, advances of insurancepremiums, advances on realty taxes, etc. When apprisedof the statement of account, Manila Metal remittedP725K to PNB as deposit to repurchase.

In the meantime, SAMD recommended that ManilaMetal be allowed to repurchase for P1.6M. PNB,however, rejected the recommendation and offered theproperty at P2.66M, its minimum market value. ManilaMetal refused and reiterated that it already acceded toSAMD's offer, to which it remitted P725K.

In 1985, PNB accepted the offer but for P1.9M cash

less the P725K deposit. Manila Metal, again, rejectedthis offer and filed a complaint against PNB for theannulment of foreclosure or specific performance,contending that there was a valid contract of salebetween Manila Metal and SAMD.

In 1993, while the case was pending, Manila Metaloffered to repurchase at P3.5M, but PNB rejectedbecause the market value of the property was at P30M.Manila Metal offered again at P4.25M but was rejectedagain.


HELD: NO. There was no perfected contract of salebetween PNB and Manila Metal because there was no

agreement as to the price certain. The Statement ofAccount prepared by SAMD cannot be classified as acounter-offer. It is simply a recital of its total monetaryclaims against Manila Metal. The amount stated thereincould not be considered as a counter-offer since it wasonly a recommendation subject to PNB's Board ofDirectors' approval. Neither can the receipt of P725K bySAMD be regarded as evidence of a perfected contractof sale. The amount is merely an acknowledgment of thereceipt of P725K as deposit to repurchase the property.It was accepted by respondent on the condition that thepurchase price will still be approved by the Board of




Directors. Pending such approval, Manila Metal cannotlegally claim that PNB is already bound by any contractof sale with it.

2. CARCELLER v CA

FACTS: Carceller leased 2 parcels of land owned by

State Investment Houses (SIHI), the period being 18months at P10,000/month rent. Under the lease, SIHIguaranteed Carceller the exclusive right and option topurchase the said lots within the lease period for theaggregate amount of P1.8M. Around 3 weeks before theend of the lease period, SIHI informed Carceller of theimpending termination of the lease and the short periodleft for him to purchase. He begged for an extension,but SIHI refused. Nevertheless, SIHI offered the propertyto him for lease for another year, but this time, it alsooffered it for sale to the public. Carceller thus sued SIHIfor specific performance to compel SIHI to execute aDeed of Sale in his favor.

ISSUE: W/N Carceller may still exercise the option to

purchase the property

HELD: YES. Even if Carceller failed to purchase theproperty within the said period, still equity mustintervene. He had introduced substantial improvementsthereon; to rule against him would cause damage tohim—and SIHI does not stand to gain much therefrom.SIHI clearly intended to sell the lot to him consideringthat it was under financial distress, that is constantlyreminded him of the option and the impending deadline.The delay of 18 days is not substantial. Carceller’s letterto SIHI expressing his intent to purchase the lot is fairnotice of intent to exercise the option despite therequest for extension. Carceller should thus be allowedto buy the lots.

3.

TAYAG v LACSON

FACTS: Angelica Lacson and her children were registeredowners of agricultural lands. Tiamzon and others weretheir farmer-tenants. The tenants executed a Deed ofAssignment in favor of Tayag—assigning to the lattertheir rights to purchase the lands as tenant-tillers of thelandholdings possessed by them at P50.00 per sqm. Thiswas subject to the conditions that (1) Lacson, thelandowner, would agree to sell the same parels and (2)that there are no more legal impediments to theassignment. Tayag invited the tenants to a meeting to

discuss the agreement, but the latter did not attend andwrote Tayag that they have decided to sell their rightsto the Lacsons instead because he allegedly betrayedtheir trust by filing a certain lawsuit. Tayag thus filed aComplaint before the RTC asking that the court fix theperiod for the payment; he also asked for a Writ ofPreliminary Injunction against Lacson and the tenants toenjoin them from accepting any offers for sale made bythe tenants.

ISSUE: W/N the assignment was in the form of an optioncontract

HELD: NO. The Deeds of Assignment were not optioncontracts, which may be enforced by Tayag. Not beingthe legal owners of the property, the tenants had noright to confer upon Tayag the option, more so, theexclusive right to buy the property.

4.

VILLAMOR v CA

FACTS: The Villamors purchased from Macaria ! of thelatter’s land for a price considerably higher than theprevailing market price. They then executed a Deed ofOption stating that the only reason why the Villamorsagreed to purchase the said lot is because Macariaagreed to confer upon them the exclusive right topurchase the other half of the land. Such sale under thedeed may be imposed whenever the need for the salearises on the part of either party. Macaria sought torepurchase the land, but the Villamors refused. Instead,the Villamors exercised their option to purchase theother half of the property. Macaria refused, thus theVillamors filed a case for specific performance. Macaria

averred that the option is void for lack of consideration.

ISSUE: W/N the option contract is void for lack ofconsideration

HELD: NO. The Option Contract is supported by aconsideration—that being the difference of the agreedprice and the market price of the other half of the land,which was sold to the Villamors. Thus, it is valid andmay be enforced by the Villamors. The considerationmay consist of anything of value.

The option was, in fact, the only reason why theypurchased the other half for an expensive price. Sincethe Villamors exercised their option, this is tantamountto an acceptance of the offer—a valid and obligatorycontract of sale was thus perfected.

5.

SANCHEZ v RIGOS

FACTS: Sanchez and Rigos executed an Option toPurchase where Rigos agreed, promised, and committedto sell to Sanchez a parcel of land in Nueva Ecija forP1,510. In spite of the repeated tenders made bySanchez, Rigos refused to sell the same. Thus, Sanchezconsigned the amounts and filed a case for specificperformance. Rigos alleged that the contract betweenthem was a unilateral promise to sell, which is notsupported by any consideration, hence, it is not binding.

ISSUE: W/N there was a valid option contract

HELD: NO. The promisee (Sanchez) cannot compel thepromissor (Rigos) to comply with the promise unless theformer can establish that the promise was for aconsideration. The burden of proof to establish theexistence of the consideration lies with Sanchez.Therefore, there was no valid option contract in thiscase. However, an option without consideration is amere offer, which is not binding until accepted. Butfrom the moment it is accepted before it is withdrawn,




a valid contract of sale arises. In this case, even thoughthere was no option contract, there was nevertheless anoffer and acceptance enough to constitute a validcontract of sale.

6.

VASQUEZ v CA

FACTS: The Vallejera spouses sought to recover fromVasquez an agricultural lot, which they previously soldto him. Along with the previous execution of a Deed ofSale, the parties also executed a Right of Repurchaseallowing Vallejera to repurchase the said estate.Vasquez resisted the redemption arguing that the optionto buy was not supported by any consideration—and thusnot binding upon him.

ISSUE: W/N there was a valid option contract

HELD: NO. It is apparent that the Right to Repurchasewas not supported by any consideration. Thus, in orderfor the doctrine under Sanchez v Rigos to apply, givingrise to a valid contract of sale, it must be shown that

the promissee (Vallejera) accepted the right ofrepurchase before it was withdrawn by Vasquez. In thiscase, no such acceptance was made. The vendor a retro(Vallejera) must make actual and simultaneous tenderof payment and consignation. Mere expressions ofreadiness and willingness to repurchase are insufficient.Their ineffectual acceptance allowed Vasquez towithdraw the offer through his refusal to sell the lot.Vasquez thus cannot be compelled to sell the lot.

7. NIETES v CA

FACTS: Nietes leased from Dr. Garcia the Angeles

Educational Institute; the contract contained an Optionto Buy the land and school buildings within the period ofthe lease. It also stipulated that the unused paymentwill be applied to the purchase price of the school.Nietes paid Garcia certain sums in excess of the rent,which Garcia acknowledged as forming partial paymentof the purchase price of the property. Later on, Garcia,through counsel, wrote Nietes informing him of hisdecision to rescind the contract due to certain violationsof the contract—such as poor maintenance, lack ofinventory of school equipment, and the use of anothername for the said school. Nietes replied by informingGarcia that he decided to exercise his Option to Buy,but Garcia refused to sell. Nietes thereafter depositedthe balance of the price to Agro-Industrial Bank, but he

later withdrew the said amounts. CA ruled in favor ofGarcia stating that the full purchase price must be paidbefore the Option to Buy may be exercised. Thus, Nietesbrought the matter to the SC.

ISSUE: W/N actual payment is needed before one mayexercise the option to buy

HELD: NO. There is nothing in the contract that requiredNietes to pay the full price before he could exercise theoption. It was sufficient that he informed Garcia of hischoice and that he was at that time ready to pay. The

exercise of the option need not be coupled with actualpayment so long as such payment is made upon thefulfillment of the owner’s undertaking to deliver theproperty. This is based on the principle that such optioncontracts involve reciprocal obligations—and one doesnot incur delay if the other party fails or refuses tocomply with his respective obligation. That being thecase, there was no need for Nietes to deposit the saidamounts—and his withdrawal thereof does not affect hisright.

8. ANG YU ASUNCION v CA

FACTS: The Unijeng spouses owned certain residentialand commercial spaces leased by Ang Yu. They offeredto sell the said units to Ang Yu on several occasions andfor P6M. Ang Yu made a counter offer for P5M. TheUnijeng spouses asked Ang Yu to specify his terms inwriting but the latter failed to do so. They failed toarrive at any definite agreement. When Ang Yudiscovered that the spouses were planning to sell theproperty to others, he sued them for specific

performance. While the case was pending, the spousessold the units to Buen Realty for P15M.

ISSUE: W/N there was a perfected contract of salebetween Unijeng and Ang Yu

HELD: NO. There was no perfected contract of sale yetsince there was yet any meeting of the minds. Thus,there is no ground for specific performance. During thenegotiation stage, any party may withdraw the offermade—especially if it was not supported by anyconsideration.

An Option Contract of a Right of First Refusal isseparate and distinct from the actual contract of sale—which is the basis for specific performance. The remedyavailable to Any Yu, in case the withdrawal was madecapriciously and arbitrarily, would be to sue on the basisof abuse of right. In case there was an option contract,timely acceptance would create an obligation to sell onthe part of the vendor; but no such circumstanceattends in this case.

9. EQUATORIAL REALTY DEV. INC. v MAYFAIRTHEATER INC.

FACTS: For its theaters, Mayfair was leasing a portion ofthe property in CM Recto, which Carmelo owns. Underthe lease agreement, “if Carmelo should decide to sell

the leased premises, Mayfair shall be given 30 daysexclusive option to purchase the same.” Carmelo,through Henry Yang, informed the president of Mayfairthat the former is interested in selling the whole CMRecto property—and that Araneta offered to purchasethe same for $1.2M. Mayfair twice replied through aletter of its intention to exercise its right torepurchase—but Carmelo never replied. Thereafter,Carmelo sold the entire property to Equatorial Realtyfor some P11M. Thus, Mayfair instituted an action forspecific performance and annulment of the sale.




Carmelo alleges that the right, being an option contract,is void for lack of consideration.

ISSUE: W/N the right to repurchase is an option contractand void for lack of consideration

HELD: NO. The clause in the lease agreement was NOTan option contract, but a RIGHT OF FIRST REFUSAL. Itwas premised on Carmelo’s decision to sell the saidproperty. It also did not contain a stipulation as to theprice of said property. The requirement of separateconsideration does not apply to a right of 1 st refusalbecause consideration is already an integral part of thelease. Carmelo violated such right by not affordingMayfair a fair chance to negotiate. It abandoned thenegotiations arbitrarily.

Equatorial was likewise in bad faith; it was well awareof the right conferred upon Mayfair because its lawyershad ample time to review the contract. That being thecase, the contract between Carmelo and Equatorial isrescissible. Mayfair should be allowed to purchase theentire property for the price offered by Equatorial.Rights of First Refusal are also governed by the law on

contracts, not the amorphous principles on humanrelations.

10. PARANAQUE KINGS ENTERPRISES INC v CA

FACTS: Catalina owned 8 parcels of land leased to Chua,who assigned its rights thereto to Lee Ching Bing, who,in turn, assigned said rights to Paranaque KingEnterprises, which introduced significant improvementson the premises. Under the lease agreement, “in case ofsale, the lessee shall have the option or priority to buythe said properties.” Catalina, in violation of the saidstipulation, sold the lot to Raymundo for P5M.Paranaque King notified her of the said breach, and sheimmediately had the lots reconveyed. She then offeredthe lot to Paranaque King for P15M; but the latterrefused claiming that the offer was “ridiculous.”Catalina thereafter sold it again to Raymundo for P9M.

ISSUE: W/N there was compliance with the Right of FirstRefusal assigned to Paranaque King

HELD: NO. In a Right of First Refusal, the seller cannotoffer the property to another for a lower price or underterms more favorable. It must be offered under thesame terms & conditions to Paranaque King; otherwise,the right of first refusal becomes illusory. Only ifParanaque King fails to meet the offer may the property

be offered for sale to another buyer—and under thesame terms and conditions as well. The Right of FirstRefusal may also be validly transferred or assigned—as inthis case.

11.

VASQUEZ v AYALA CORP.

FACTS: In 1984, Ayala Corp. entered into a Memorandumof Agreement with Dr. Vasquez buying the latter’sshares with Conduit Development—which constitutesome 50 hectares of the land in Ayala Alabang. Under

the MOA, Ayala was to undertake the development ofthe lands except the “retained area.” Under Par. 5.15 ofthe MOA, “Ayala agreed to give Vasquez a first option topurchase the 4 adjacent lots to the retained area at theprevailing market price at the time of the purchase.” Acase was filed by one of the former sub-contractors ofConduit against Ayala causing a 6-year delay in thedevelopment of the project. Now, Vasquez comesforward invoking Par. 5.15 claiming that it was a validoption contract, and that Ayala should sell to him thesaid property at the 1984 prevailing price. Ayala offeredto sell the said properties to Vasquez at the prevailingprices (1990); but the latter refused to accept. Ayaladiscounted the price from P6,500/sqm to P5,000/sqm,but still, Vasquez refused.

ISSUE: W/N there was a valid option contract given toVasquez

HELD: NO. Par. 5.15 was NOT an option contract, but aRIGHT OF FIRST REFUSAL. It was predicated uponAyala’s decision to sell the said properties. The pricewas also not specified. It was also not supported by any

independent consideration. By twice refusing to acceptAyala’s offers, Vasquez lost his right to repurchase.Ayala did not breach its obligation.

12. RIVERA FILIPINA INC v CA

FACTS: In 1982, Reyes executed a 10-year (renewable)Contract of Lease with Riivera Filipina over a parcel ofland in EDSA. Under such contract, the lessee is given aright of first refusal should the lessor decide to sell theproperty during the terms of the lease.

Such property was subject of a mortgage executed byReyes in favor of Prudential Bank. Since Reyes failed topay the loan with the bank, it foreclosed the mortgageand it emerged as the highest bidder in the auction sale.Realizing that he could not redeem the property, Reyesdecided to sell it and offered it to Riviera Filipina forP5,000/sqm. However, it bargained for P3,500/sqm.Reyes rejected such offer. After 7 months, it againbargained for P4,000/sqm, which again was rejected byReyes who asked for P6,000/sqm price. After 2 months,it again bargained for P5,000/sqm, but since Reyesinsisted on P6,000/sqm price, he rejected Riviera'soffer.

Nearing the expiry of the redemption period, Reyesand Traballo (his friend) agreed that the latter wouldbuy the same for P5,300. But such deal was not yetformally concluded and negotiations with Riviera Filipina

once again transpired but to no avail.In 1989, Cypress and Cornhill Trading were able tocome up with the amount sufficient to cover theredemption money, with which Reyes paid to PrudentialBank to redeem the property. Subsequently, a Deed ofAbsolute Sale was executed in favor of Cypress andCornhill for P5.4M. Cypress and Cornhill mortgaged theproperty in favor of Urban Dev. Bank for P3M.

Riviera Filipina filed a suit against Reyes, Cypress andCornhill on the ground that they violated its right of firstrefusal under the lease contract. RTC ruled in favor of




Reyes, Cypress, and Cornhill. On appeal, CA affirmedthe decision of the RTC.

ISSUE: W/N Riviera Filipina lost its right of first refusal

HELD: YES. As clearly shown by the records andtranscripts of the case, the actions of the parties to thecontract of lease, Reyes and Riviera, shaped theirunderstanding and interpretation of the lease provision"right of first refusal" to mean simply that should thelessor Reyes decide to sell the leased property duringthe term of the lease, such sale should first be offeredto the lessee Riviera. And that is what exactly ensuedbetween Reyes and Riviera, a series of negotiations onthe price per square meter of the subject property withneither party, especially Riviera, unwilling to budgefrom his offer, as evidenced by the exchange of lettersbetween the two contenders.

It can clearly be discerned from Riviera’s letters thatRiviera was so intractable in its position and tookobvious advantage of the knowledge of the timeelement in its negotiations with Reyes as theredemption period of the subject foreclosed property

drew near. Riviera strongly exhibited a "take-it or leave-it" attitude in its negotiations with Reyes. It quoted its"fixed and final" price as Five Thousand Pesos(P5,000.00) and not any peso more. It voiced out that ithad other properties to consider so Reyes should decideand make known its decision "within fifteen days."Riviera even downgraded its offer when Reyes offeredanew the property to it, such that whatever amountReyes initially receives from Riviera would absolutely beinsufficient to pay off the redemption price of thesubject property. Naturally, Reyes had to disagree withRiviera’s highly disadvantageous offer.

Nary a howl of protest or shout of defiance spewedforth from Riviera’s lips, as it were, but a seeminglywhimper of acceptance when the counsel of Reyes

strongly expressed in a letter dated December 5, 1989that Riviera had lost its right of first refusal. Rivieracannot now be heard that had it been informed of theoffer of Five Thousand Three Hundred Pesos (P5,300.00)of Cypress and Cornhill it would have matched saidprice. Its stubborn approach in its negotiations withReyes showed crystal-clear that there was never anyneed to disclose such information and doing so would bejust a futile effort on the part of Reyes. Reyes wasunder no obligation to disclose the same. Pursuant toArticle 1339 of the New Civil Code, silence orconcealment, by itself, does not constitute fraud, unlessthere is a special duty to disclose certain facts, or unlessaccording to good faith and the usages of commerce the

communication should be made. The general rule isapplicable in the case at bar since Riviera failed toconvincingly show that either of the exceptions arerelevant to the case at bar.

13. MACION v GUIANI

FACTS: Macion and Dela Vida Institute entered into acontract to sell, where the latter assured the formerthat it will buy the 2 parcels of land in Cotabato City onor before July 31, 1991 at P1.75M. In the meantime,

Dela Vida took possession of it and promptly built anedifice worth P800,000. However, on the said date, thesale did not materialize. Consequently, Macion filed acomplaint for unlawful detainer against Dela Vida, whileDela Vida countered with a complaint for reformation ofthe contract to sell. These differences were eventuallysettled.

In 1992, both parties entered into a compromiseagreement where Macion will give Dela Vida 5 months toraise P2.06M and in case of failure to do so, Dela Vidawould vacate the premises. After 2 months, Dela Vidaalleged that they had negotiated a loan from BPI andrequested Macion to execute the contract to sell in itsfavor. However, Macion refused, which prompted DelaVida to file an urgent motion for an order to directMacion to execute the contract to sell. In return, Macionfiled a motion for execution of judgment alleging thatafter 5 months, Dela Vida was not able to settle theirobligations with Macion. RTC ruled in favor of Dela Vida.

ISSUE: W/N it was proper to execute a contract to sell infavor of Dela Vida

HELD: YES. Although the compromise agreement (par. 7)does NOT give Dela Vida the right to demand fromMacion the execution of the contract to sell in its favor.From this paragraph, it is clear that Macion is obliged toexecute a Deed of Sale and not a Contract to Sell uponpayment of the full price of P2.06M. Thereafter, Macionwill turn over to Dela Vida the TCT.

HOWEVER, a review of the facts reveals that evenprior to the signing of the compromise agreement, bothparties had entered into a contract to sell, which wassuperseded by a compromise agreement. Thiscompromise agreement must be interpreted asbestowing upon Dela Vida the power to demand acontract to sell from Macion. Where Macion promised toexecute a deed of absolute sale upon completing

payment of the price, it is a contract to sell. In the caseat bar, the sale is still in the executory stage since thepassing of title is subject to a suspensive condition--thatif Dela Vida is able to secure the needed funds topurchase the properties from Macion. A mere executorysale, one where the sellers merely promise to transferthe property at some future date, or where someconditions have to be fulfilled before the contract isconverted from an executory to an executed one, doesnot pass ownership over the real estate being sold. Itcannot be denied that the compromise agreement,having been signed by both parties, is tantamount to abilateral promise to buy and sell a certain thing for aprice certain. Hence, this gives the contracting parties

rights in personam, such that each has the right todemand from the other the fulfillment of theirrespective undertakings. Demandability may beexercised at any time after the execution of the Deed.

14. VILLONCO v BORMAHECO

FACTS: Cervantes and his wife owned 3 parcels of landalong Buendia where he buildings of Bormaheco Incwere situated. Beside their property were lots owned byVillonco Realty. Cervantes entered into several




negotiations with Villonco for sale of the Buendiaproperty. Cervantes made a written offer of P400/sqmwith a downpayment of P100,000 to serve as earnestmoney. The offer also made the consummation of thesale dependent upon the acquisition by Bormaheco of aSta. Ana property. Villonco made a counter-offer statingthat the earnest money was to earn 10% interest p.a.The check was enclosed with the reply letter. Cervantesaccepted and cashed the check. The Sta. Ana Propertywas awarded to Bormaheco; the transfer was also dulyapproved. However, Cervantes sent the check back toVillonco with the interest thereon—stating that he wasno longer interested in selling the property. He alsoclaims that no contract was perfected; Villonco sues forspecific performance.


HELD: YES. There was a perfected contract of sale. Thealleged changes made in the counter-offer areimmaterial and are mere clarifications. The changes ofthe words “Sta. Ana property” to another property aswell as the insertion of the number “12” in the date,

and the words “per annum” in the interest are trivial.There is no incompatibility in the offer and counter-offer. Cervantes assented to the interest and he, infact, paid the same. Also, earnest money constitutesprood of the perfection of the contract of sale andforms part of the consideration. The condition regardingthe acquisition of the Sta. Ana property was likewisefulfilled; there is thus no ground for the refusal ofCervantes to consummate the sale.

15.

OESMER v PARAISO DEV CORP.

FACTS: Oesmers are co-owners of undivided shares of 2parcels of agricultural and tenanted land in Cavite,which are unregistered and originally owned by theirparents. When their parents died, they acquired the lotsas heirs by right of succession.

In 1989, Paular, a resident and former Mun. Sec. ofCarmona Cavite, brought Ernesto Oesmer (one of theheirs) to meet with Lee, President of ParaisoDevelopment Corp, in Manila for the purpose ofbrokering the sale of Ernesto's properties to Paraiso Dev.Corp. A contract to sell was entered into betweenParaiso Dev. Corp and Ernesto as well as Enriqueta. Acheck in the amount of P100,000 payable to Ernesto wasgiven as option money. Eventually, Rizalino, Leonora,Bibiano Jr, and Librado also signed the Contract to Sell.However, 2 of their brothers, Adolfo and Jesus, refused

to sign the document.A couple of months after, the Oesmers informedParaiso (through a letter) that it is rescinding theContract to Sell and returning the option money.However, Paraiso did not respond and thus, Oesmersfiled a complaint for declaration of nullity of theContract to Sell with the RTC, which ruled in favor ofParaiso Dev. Corp. On appeal, CA modified by declaringthat the Contract to Sell is valid and binding as to theundivided shares of the six signatories of the document.

ISSUE: W/N the Contract to Sell is valid as to all

signatories

HELD: NO. It is true that the signatures of the 5 siblingsdid not confer authority on Ernesto as agent to sell theirrespective shares in the properties, because suchauthority to sell an immovable is required to be inwriting. However, those signatures signify their act ofdirectly (not through an agent) selling their personalshares to Paraiso Dev. Corp.

In the case at bar, the Contract to Sell was perfectedwhen the petitioners consented to the sale to therespondent of their shares in the subject parcels of landby affixing their signatures on the said contract. Suchsignatures show their acceptance of what has beenstipulated in the Contract to Sell and such acceptancewas made known to respondent corporation when theduplicate copy of the Contract to Sell was returned tothe latter bearing petitioners’ signatures.

As to petitioner Enriqueta’s claim that she merelysigned as a witness to the said contract, the contractitself does not say so. There was no single indication inthe said contract that she signed the same merely as awitness. The fact that her signature appears on the

right-hand margin of the Contract to Sell isinsignificant. The contract indisputably referred to the“Heirs of Bibiano and Encarnacion Oesmer,” and sincethere is no showing that Enriqueta signed the documentin some other capacity, it can be safely assumed thatshe did so as one of the parties to the sale.

In the instant case, the consideration of P100,000.00paid by respondent to petitioners was referred to as“option money.” However, a careful examination of thewords used in the contract indicates that the money isnot option money but earnest money . “Earnest money”and “option money” are not the same but distinguishedthus: (a) earnest money is part of the purchase price,while option money is the money given as a distinctconsideration for an option contract; (b) earnest money

is given only where there is already a sale, while optionmoney applies to a sale not yet perfected; and, (c)when earnest money is given, the buyer is bound to paythe balance, while when the would-be buyer givesoption money, he is not required to buy, but may evenforfeit it depending on the terms of the option.

16. FULE v CA

FACTS: Fule, a banker and a jeweler, acquired a 10-hectare property in Rizal (Tanay Property), which usedto be under the name of Fr. Antonio Jacobe, whomortgaged it to Rural Bank of Alaminos to secure a loan

of P10,000. However, the mortgage was foreclosed.In 1984, Fule asked Dichoso and Mendoza to look for abuyer of the Tanay property. They found one in theperson of Cruz, who owns a pair of diamond earrings.Fule was interested to buy these earrings, but Cruzrefused to sell them to him for the price he offered.Subsequently, negotiations for the barter between theearrings and the property ensued. But it turned out thatthe redemption period for the property has not yetexpired. Thus, Fule executed a deed of redemption onbehalf of Fr. Jacobe in the amount of P16,000, and oneven date, Fr. Jacobe sold the property to Fule for




P75,000. The Deed of Sale was notarized ahead of theDeed of Redemption.

Subsequently, a Deed of Sale over the earrings wasexecuted and when it was delivered, Fule contends thatthe earrings were fake, even using a tester to provesuch allegation. Thereafter, they decided to Dimayuga,a jeweler, to have the earrings tested. After a glance,Dimayuga declared them fake.

Fule filed a complaint with the RTC against Cruz andher lawyer, Belarmino, praying that the contract of saleover the Tanay property be declared null and void onthe ground of fraud and deceit. RTC ruled in favor ofCruz and Belarmino.

ISSUE: W/N the Deed of Sale over the Tanay Property isvalid

HELD: YES. It is evident from the facts of the case thatthere was a meeting of the minds between petitionerand Dr. Cruz. As such, they are bound by the contractunless there are reasons or circumstances that warrantits nullification. The records, however, are bare of anyevidence manifesting that private respondents employed

such insidious words or machinations to enticepetitioner into entering the contract of barter. Neitheris there any evidence showing that Dr. Cruz inducedpetitioner to sell his Tanay property or that she cajoledhim to take the earrings in exchange for said property.On the contrary, Dr. Cruz did not initially accede topetitioner's proposal to buy the said jewelry. Rather, itappears that it was petitioner, through his agents, wholed Dr. Cruz to believe that the Tanay property wasworth exchanging for her jewelry as he represented thatits value was P400,000.00 or more than double that ofthe jewelry which was valued only at P160,000.00. Ifindeed petitioner's property was truly worth that much,it was certainly contrary to the nature of a businessman-banker like him to have parted with his real estate for

half its price. In short, it was in fact petitioner whoresorted to machinations to convince Dr. Cruz toexchange her jewelry for the Tanay property.

Furthermore, petitioner was afforded the reasonableopportunity required in Article 1584 of the Civil Codewithin which to examine the jewelry as he in factaccepted them when asked by Dr. Cruz if he wassatisfied with the same. By taking the jewelry outsidethe bank, petitioner executed an act which was moreconsistent with his exercise of ownership over it. Thisgains credence when it is borne in mind that he himselfhad earlier delivered the Tanay property to Dr. Cruz byaffixing his signature to the contract of sale. That aftertwo hours he later claimed that the jewelry was not the

one he intended in exchange for his Tanay property,could not sever the juridical tie that now bound him andDr. Cruz. The nature and value of the thing he had takenpreclude its return after that supervening period withinwhich anything could have happened, not excluding thealteration of the jewelry or its being switched with aninferior kind.

17.

DAILON v CA

FACTS: Sabesaje sues to recover ownership of a parcelof land based on a private document of absolute saleexecuted by Dailon. Dailon denies the fact of the salealleging that the same being embodied in a privateinstrument, the same cannot convey title under Art.1358 of the Civil Code which requires that contractswhich have for their object the creation, transmission,modification, or extinction of real rights over immovableproperty must appear in a public instrument.

ISSUE: W/N there was a valid/perfected contract of sale

HELD: YES. The necessity of a public instrument is onlyfor convenience—not for validity and enforceability.Such is not a requirement for the validity of a contractof sale, which is perfected by mere consent. Dailonshould thus be compelled to execute the correspondingdeed of conveyance in a public instrument in favor ofSabesaje. If the sale is made through a publicinstrument, it amounts to constructive delivery.

18.

SECUYA v VDA DE SELMA

FACTS: Caballero owned certain friar lands. She enteredinto an Agreement of Partition where she parted with1/3 of the said property in favor of Sabellona. Sabellonatook possession thereof and sold a portion to DalmacioSecuya through a private instrument that is already lost.Secuya, along with his many relatives took possession ofthe said land. Later on, Selma bought a portion of thesaid land, including that occupied by Secuya; she boughtit from Caesaria Caballero. She presented a Deed ofAbsolute Sale and a TCT. Secuya filed a case for quietingof title. CA upheld Selma’s title considering that she hada TCT and a Deed of Sale.

ISSUE: Who has a better right, Secuya or Selma?

HELD: The Secuyas have nothing to support theirsupposed ownership over the parcel of land. The bestevidence they could have had was the privateinstrument indicating the sale to their predecessor-in-interest. But the instrument is lost. Even so, it is onlybinding as between the parties and cannot prejudice 3rd persons since it is not embodied in the public document.Selma, on the other hand, has all the supportingdocuments necessary; she also acted in good faith andthought that the Secuyas were merely tenants. They didnot even pay realty taxes and did not have their claim

annotated to the certificate of sale.

19.

YUVIENGCO v DACUYCUY

FACTS: Yuvienco entered into a contract with Yao KingOng and the other occupants, wherein the former willsell to the latter the Sotto property in Tacloban City forP6.5M provided that the latter made known theirdecision to buy it or not later than July 31, 1978. WhenYuvienco's representative went to Cebu with a preparedand duly signed contract for the purpose of perfecting




and consummating the transaction, Yao King Ong andother occupants found variance between the terms ofpayment stipulated in the document and what they hadin mind. Thus, it was returned unsigned. Thus, theaction for specific performance.

ISSUE: W/N the claim for specific performance of YaoKing Ong is enforceable under the Statute of Frauds

HELD: YES. It is nowhere alleged in the complaint thatthere is any writing or memorandum, much less a dulysigned agreement to the effect, that the price ofP6,500,000 fixed by petitioners for the real propertyherein involved was agreed to be paid not in cash but ininstallments as alleged by Yao King Ong. The onlydocumented indication of the non-wholly-cash paymentextant in the record is the deeds already signed byYuvienco and taken to Tacloban by Atty. Gamboa for thesignatures of the respondents. In other words, the 90-day term for the balance of P4.5 M insisted upon byrespondents choices not appear in any note, writing ormemorandum signed by either the petitioners or any ofthem, not even by Atty. Gamboa. Hence, looking at the

pose of respondents that there was a perfectedagreement of purchase and sale between them andpetitioners under which they would pay in installmentsof P2 M down and P4.5 M within ninety 90) daysafterwards it is evident that such oral contract involvingthe "sale of real property" comes squarely under theStatute of Frauds (Article 1403, No. 2(e), Civil Code.)

In any sale of real property on installments, theStatute of Frauds read together with the perfectionrequirements of Article 1475 of the Civil Code must beunderstood and applied in the sense that the idea ofpayment on installments must be in the requisite of anote or memorandum therein contemplated. While suchnote or memorandum need not be in one singledocument or writing and it can be in just sufficiently

implicit tenor, imperatively the separate notes must,when put together', contain all the requisites of aperfected contract of sale. To put it the other way,under the Statute of Frauds, the contents of the note ormemorandum, whether in one writing or in separateones merely indicative for an adequate understanding ofall the essential elements of the entire agreement, maybe said to be the contract itself, except as to the form.

20.

LIMKETKAI SONS MILLING INC v CA

FACTS: In 1976, Philippine Remnants Co., Inc.constituted the Bank of the Philippine Islands (BPI) as its

trustee to manage, administer, and sell its real estateproperty, one of which was the disputed lot in Pasig. In1988, Pedro Revilla, Jr., a licensed real estate broker,was given formal authority by BPI to sell the lot forP1,000/sqm. Broker Revilla contacted Alfonso Lim ofLimketkai Sons Milling (LSM) who agreed to buy the land.LSM asked that the price of P1,000/sqm. be reduced toP900.00 while Albano stated the price is to beP1,100.00. The parties finally agreed that the lot wouldbe sold at P1,000/sqm. to be paid in cash.Notwithstanding the final agreement to payP1,000/sqm. on a cash basis, Alfonso Lim (LSM official)

asked if it was possible to pay on terms. The bankofficials stated that there was no harm in trying to askfor payment on terms because in previous transactions,the same had been allowed. It was the understanding,however, that should the term payment be disapproved,then the price shall be paid in cash. It was Albano whodictated the terms under which the installment paymentmay be approved, and acting thereon, Alfonso Limwrote BPI through Merlin Albano embodying thepayment initially of 10% and the remaining 90% within aperiod of 90 days. 2 or 3 days later, LSM learned that itsoffer to pay on terms had been frozen. Alfonso Lim wentto BPI and tendered the full payment of P33,056,000.00to Albano. The payment was refused because Albanostated that the authority to sell that particular piece ofproperty in Pasig had been withdrawn from his unit. Thesame check was tendered to BPI Vice-President NelsonBona who also refused to receive payment.

LSM filed an action for specific performance withdamages against BPI. In the course of the trial, BPIinformed the trial court that it had sold the propertyunder litigation to National Book Store (NBS) in 1989.The complaint was thus amended to include NBS. RTC

ruled in favor of LSM, holding that there was a perfectedcontract of sale between LSM and BPI. CA reversed,holding that no contract of sale was perfected becausethere was no concurrence of the three requisitesenumerated in Article 1318 of the Civil Code.


HELD: YES. There was a meeting of the minds betweenthe buyer and the bank in respect to the price ofP1,000/sqm. The requirements in the payment of thepurchase price on terms instead of cash were suggestedby BPI Vice-President Albano. Since the authority givento broker Revilla specified cash payment, the possibilityof paying on terms was referred to the Trust Committee

but with the mutual agreement that “if the proposedpayment on terms will not be approved by our TrustCommittee, Limketkai should pay in cash, the amountwas no longer subject to the approval or disapproval ofthe Committee, it is only on the terms.” The recordshows that if payment was in cash, either broker Revillaor Aromin had full authority. But because LSM tookadvantage of the suggestion of Vice-President Albano,the matter was sent to higher officials. Immediatelyupon learning that payment on terms was frozen and/ordenied, Limketkai exercised his right within the periodgiven to him and tendered payment in full, thuscomplying with their agreement.

The negotiation or preparation stage started with the

authority given by Philippine Remnants to BPI to sell thelot, followed by the authority given by BPI andconfirmed by Philippine Remnants to broker Revilla tosell the property, the offer to sell to Limketkai, theinspection of the property and the negotiations withAromin and Albano at the BPI offices. The perfection ofthe contract took place when Aromin and Albano, actingfor BPI, agreed to sell and Alfonso Lim with AlbinoLimketkai, acting for LSM, agreed to buy the disputedlot at P1,000/sqm. Aside from this there was the earlieragreement between LSM and the authorized broker.




There was a concurrence of offer and acceptance, onthe object, and on the cause thereof.

21. ORTEGA v LEONARDO

FACTS: Ortega occupied a parcel of land. After theliberation, the government assigned the lot to the Rural

Progress Admin. She asserted her right thereto; but wasdisputed by Leonardo. Ortega and Leonardo agreed to acompromise. The agreement was for Ortega to desistfrom pressing her claim, and Leonardo, upon getting thelot, would sell to her a portion thereof provided shepaid for the surveying of the lot. If he acquired title, shecould stay as tenant. Ortega thus desisted from herclaim, paid for the surveying of the lot and thepreparation of the plan, and regularly paid him amonthly rental. When she remodeled her son’s housebeside the lot, it extended over the subject lot. WhenLeonardo acquired title, he refused to sell the portionagreed upon. He claims that the contract isunenforceable based on the Statute of Frauds.

ISSUE: W/N the contract is unenforceable

HELD: NO. The contract is enforceable because therewas partial performance. Ortega made substantialimprovements on the lot, desisted from her claim,continued possession, and paid for the surveying, andalso paid the rentals. All these put together amount to

partial performance, which takes the verbal agreementout of the operation of the Statute of Frauds.

22. CLAUDEL v CA

FACTS: Cecilio Claudel acquired a lot from the Bureau ofLands. He occupied the same, declared it in his name

and dutifully paid his taxes. After his death, his heirsand siblings contested each other claiming ownershipthereof. It was his heirs who were in possession of theproperty. They partitioned it amongst themselves,registered each portion under the Torrens System, andeach paid their respective taxes. The siblings filed acase for cancellation of titles and reconveyance arguingthat there was a verbal sale between Cecilio and theirparents over the lot. As evidence, they presented asubdivision plan. CA ordered the cancellation of theTCTs in favor of the heirs.

ISSUE: W/N there was a valid sale between Cecilio andhis siblings

HELD: NO. As a rule, a sale of land is valid regardless ofthe form it may have been entered into. However, inthe event that a 3rd party disputes the ownership, thereis no such proof in support of the ownership. As such, itcannot prejudice 3rd persons—such as the heirs in thiscase. Also, the heirs had a right to rely upon theirTorrens titles, which, as opposed to the subdivisionplans, are definitely more credible.

23. ALFREDO v BORRAS

FACTS: Godofredo & Carmen mortgaged their land toDBP for P7,000. To pay their debt, they sold the land to

Armando & Adelia for P15,000. The latter also assumedto pay the loan. Carmen issued Armando & Adelia areceipt for the sale. They also delivered to Armando &Adelia the Original Certificate of Title, tax declarations,and tax receipts. They also introduced Armando &Adelia to the Natanawans, the tenants of the saidproperty as the new lessors. They thereafter tookpossession of the said land. Later, they found out thatGodofredo & Carmen sold the land again to other buyersby securing duplicate copies of the OCTs upon petitionwith the court. Thus, they filed for specificperformance. Godofredo & Carmen claimed that thesale, not being in writing, is unenforceable under theStatute of Frauds.

ISSUE: W/N the contract of sale is unenforceable underthe Statute of Frauds.

HELD: NO. The Statute of Frauds is applicable only toexecutory contracts, not those that have already beenpartially or completely consummated. In this case, thesale of the land to Armando & Adelia had already beenconsummated. The ownership of the land was alsotransferred to Armando & Adelia when they wereintroduced to the Natanawans and took possessionthereof. Therefore, when Godofredo & Carmen sold theland to other buyers, it was no longer theirs to sell.

Further, the subsequent buyers were in bad faithbecause Armando & Adelia registered their adverseclaim—this amounts to constructive notice, whichnegates good faith.

The Statute of Frauds likewise does not applyconsidering that Godofredo & Carmen had alreadyderived the benefits from the sale—such as the money topay for the loan. The receipt also suffices to constitutethe memorandum required by the Statute of Frauds.Assuming that the sale was voidable because it wasconjugal property, the same was ratified by Godofredoby introducing Armando & Adelia to the Natanawans asthe new lessors. Also, even though titled as SpecificPerformance, the complaint was one for reconveyance—and prescription does not lie of one who is in actualpossession of the property.

23. TOYOTA SHAW INC v CA

FACTS: Luna Sosa wanted to buy a Toyota Lite Ace. He

went to Toyota Shaw where he met Popong Bernardo, asales rep. Sosa explained that he needed the Lite Ace byJune 17, otherwise, he would become a laughing stock.Bernardo guaranteed that the vehicle would bedelivered. They executed a document entitledAgreements between Sosa & Popong Bernardo of ToyotaShaw” where a P100K downpayment was stipulated andthat the Lite Ace would be available at a given date.When the day of reckoning arrived, the Lite Ace wasunavailable—the explanation of Bernardo being “nasulotng ibang malakas.” However, according to Toyota, thetrue reason was that BA Finance, which was supposed to




answer for the balance of the purchase price, did notapprove Sosa’s application. Toyota also returned thedownpayment. Thus, Sosa sued for damages amountingto P1.2M due to his humiliation, hurt feelings, sleeplessnights, and so on.


HELD: NO. Toyota Shaw should NOT be held liable fordamages because there was no perfected contract ofsale in the first place. There was no agreement as to theprice and the manner of payment—which are both

essential to the perfection of the sale. It was also clearthat Bernardo signed the document in his personalcapacity and it was up to Sosa to inquire as to theextent of the former’s capacity. Sosa did not even signit. It was nothing but a mere proposal, which did notmature into a perfected contract of sale in lieu of thesubsequent events. In fact, it made no specificreference to the sale of a vehicle. No obligations couldthus arise therefrom. Sosa has no one else to blame buthimself for his humiliation for bragging about somethinghe does not own yet.

CONSUMMATION/PERFECTION OF CONTRACT

1.

SANTOS v SANTOS

FACTS: Jesus and Rosalia owned a lot with a 4-doorapartment. They sold through a public instrument thesaid property to their children, Salvador and Rosa—whosold her share to Salvador as well. Nonetheless, in spite

of the sale, Rosalia remained in possession and controlover the property. Jesus, Rosalia and Salvador died.Zenaida, claiming to be Salvador’s heir, demanded rentfrom the tenants. The other children of Jesus andRosalia filed a case for reconveyance averring that thesale to Salvador was fictitious and done merely toaccommodate him.

ISSUE: W/N the sale to Salvador was fictitious

HELD: YES. While it is true that sale through a publicinstrument is equivalent to delivery of the things soldwhich has the effect of transferring ownership, thedelivery can be rebutted by clear and convincingevidence. The vendor’s continuous possession makes the

sale dubious. Salvador never took possession of theproperty. He surrendered the titles to his mother afterhaving registered the lots in his name, he nevercollected rentals, neither has he paid the taxes thereon.Thus, there was no real transfer of ownership. Thatbeing the case, the action for reconveyance wasimprescriptible.

2.

DY JR v CA

FACTS: Perfecto and Wilfredo Dy are brothers. Wilfredopurchased a truck and a tractor, both of which weremortgaged to Libra Financing as security for a loan.

Perfecto wanted to purchase the tractor, he convincedhis sister to purchase the truck. Perfecto executed apublic document to evidence the sale. Libra acceded tothe sale and agreed that upon the issuance andencashment of the check that they issued for thepurpose, the chattels can be released. However, in acase against Wilfredo filed by Gelac Trading, the sheriffseized the tractor on levy and sold the same on publicauction, with Gelac as the highest bidder. Perfecto thussought to recover the truck from Gelac.

ISSUE: W/N Wilfredo, as mortgagor, can sell the tractorsubject of a mortgage

HELD: YES. The mortgagor (Wilfredo) had every right tosell the property subject to mortgage—even without theconsent of the mortgagee as long as the purchaser

assumes the liability of the mortgagor.In this case, there was constructive delivery alreadyupon the execution of the public instrument—even if thetractor could not yet be delivered. Execution of thepublic instrument and mutual consent of the parties wasequivalent to constructive delivery. Therefore, at thetime when the sheriff levied upon the tractor, it was nolonger the property of Wilfredo. Also the clearing of thecheck was not a condition for the consummation of thesale but only upon the extinguishment of the mortgage.

3.

ADDISON v FELIX

FACTS: Addison owned 4 parcels of land, which he soldto Felix, through public instrument. The down paymentwas made; the final installment to be paid after theissuance of the certificate of title. Addison sued Felix tocompel the latter to pay the last installment—but Felixrefused and sought to rescind the contract due to theabsolute failure of Addison to deliver the thing sold.

ISSUE: W/N there was delivery

HELD: NO. While it is true that execution of a publicinstrument is tantamount to delivery of the thing sold,in order for such symbolic delivery to have the effect oftradition, the vendor should have had control over thething and at the moment of the sale, its delivery could

have been made. In this case, the ownership wasdisputed by the Villafuertes, who were in possession ofthe land. Addison even failed to show the land to Felixdue to the hostile opposition; he also failed to have itsurveyed. The legal fiction of delivery thus yields toreality—no delivery was ever made. Felix had every righttherefore to rescind the contract. Had there been anagreement that Felix would have to undertake to evictthe Villafuertes, the result may have been different, butthere is no such agreement.




4.

DANGUILAN v IAC

FACTS: Domingo owned 2 lots, which he donatedthrough a private instrument to Danguilan for theconsideration that the latter must take care of him forthe remainder of his life and manage his burial.Domingo’s daughter, Apolonia, laid claim to the land,presenting a public document allegedly executed in herfavor, the purchase price being paid for by her mother.She however failed to take possession of the saidproperty after the execution of the deed. In fact, shemoved out of the farm when Danguilan started tocultivate the same for as long as she was given a sharefrom the harvests. She decided to file a case only afterthe deliveries of farm produce have ceased.

ISSUE: Who has a better title over the land, Danguilan orApolonia?

HELD: DANGUILAN. At the onset, the donation in favorof Danguilan was valid even though embodied in aprivate instrument, because it was an onerous donation.The deed of sale presented by Apolonia was also

suspicious. It was only 3 years old and the considerationwas paid for by her mother. Assuming that it was valid,still the presumptive delivery is overcome by the factthat she failed to take possession of the property.Ownership, after all, is not transferred by merestipulation butby actual and adverse possession. Sheeven transferred the same to Danguilan possession ofthe same. She cannot have a better right in this casethan Danguilan.

5.

PASAGUI v VILLABLANCA

FACTS: Pasagui purchased a parcel of land form theBocar Spouses for P2,800, which was embodied in apublic instrument. They failed to take possession of theproperty because the Villablancas illegally tookpossession of the property and harvested the coconutstherein. Thus, Pasagui filed a case for ejectment beforethe CFI. The Bocar spouses were likewise impleaded.The latter contested that the case should be dismissedbecause the CFI did not have jurisdiction over forcibleentry cases.

ISSUE: W/N this is a case of forcible entry

HELD: NO. The case was not for forcible entry becausethere was no allegation that Pasagui was in priorphysical possession of the land and that the

Villablancas, through force, stealth, or threat, deprivedthem thereof. While the sale was made through a publicdocument is equivalent to delivery, this presumptiononly holds true if there is no impediment to thepossession of the purchaser. Such is not the case here.Since Pasagui had not yet acquired physical possessionof the land, the case was not one for forcible entry andthe CFI (not municipal courts) has jurisdiction.

6.

POWER COMMERCIAL AND INDUSTRIAL CORP. v CA

FACTS: Power Commercial Corp. entered into a contractof sale with the Quiambao spouses. It agreed to assumethe mortgages thereon. A Deed of Absolute Sale withAssumption of Mortgage was executed. PowerCommercial failed to settle the mortgage debtcontracted by the spouses, thus it could not undertakethe proper action to evict the lessees on the lot. PowerCommercial thereafter sought to rescind the contract ofthe sale alleging that it failed to take actual andphysical possession of the lot—which allegedly negatedconstructive delivery.

ISSUE: W/N there was delivery

HELD: YES. First, such a condition that the Quiambaospouses would evict the lessees therein was notstipulated in the contract. In fact, Power Commercialwas well aware of the presence of the tenants therein.Also in this case, Power Commercial was given controlover the said lot and it endeavored to terminate theoccupation of the actual tenants.

Control cannot be equated with actual possession.Power Commercial, as purchaser, agreed voluntarily toassume the risks involved. The public instrumentexecuted amounted to symbolic delivery of the propertysold and authorized the buyer to use the document asproof of ownership. Power Commercial was deprived ofownership only after it failed to remit theamortizations, but not due to failure of delivery.

7. CHUA v CA

FACTS: Valdes-Choy is the owner of the subject matter,when she advertised the property for sale. Chuaresponded to the advertisement, and met up withValdes-Choy. They agreed for the purchase price ofP10,800,000, to be paid on July 15, 1989. This wasevidenced by an earnest money for P100,000, which wasput on a receipt, stating that the money will beforfeited upon failure to pay on the dat stipulated. OnJuly 13, Valdes-Choy executed two deeds of absolutesale, first, pertaining to the house and lot, valued atP8,000,000, and second, pertaining to the movableproperties therein. The next day, Chua issued a checkworth P485,000 for the purpose paying the capital gainstax. The value was deducted from the balance, with anoutstanding value of P10,295,000 (additional P80,000 forthe documentary stamp tax). Chua also showed a checkworth P10,215,00 to Valdes-Choy, however, he

demanded that the TCT should first be transferred to hisname before paying the check. Out of anger, Valdes-Choy tore the deed of absolute sale. On the reckoningdate, Valdes-Choy tried to make a compromise withChua, but she did not get any response. Two days later,Chua filed an action for specific performance, which thetrial court dismissed. A week later, he filed anotheraction for specific performance, where the court ruledin favor of him. On appeal, CA reversed.




ISSUE:

1. Whether the agreement was a contract of saleor contract to sell

2. Whether registration is needed to transferownership

RULING: It is a contract to sell. First, when theagreement was made, the earnest money is forfeited infavor of Valdes-Choy who may then sell the land toother interested parties. This is the nature of reservingthe ownership of the property, subject to the fullpayment of the purchase price. Second, absent of aformal deed of conveyance of the property in favor ofthe buyer shows that there was no intention to transferownership immediately. The non-fulfillment of thesuspensive condition, which is payment of the fullpurchase price prevents the obligation to sell fromarising, where the owner retains the ownership over theproperty. Art 1482 speaks of earnest money as anevidence of a perfected contract of sale. However, inthis case, the earnest money was paid in partconsideration of a contract to sell, and therefore, art

1482 does not apply.Delivery is effected upon execution of the sale in apublic instrument. However, registration is not neededin order to complete the deed of sale. Delivery is whattransfers ownership, and not registration in the Registryof Property. Registration is only necessary to bind thirdpersons; it is not a mode of acquiring ownership.

8. VIVE EAGLE LAND INC v CA

FACTS: In 1987, Spouses Flores, as owners, sold 2parcels of land in Cubao to Tatic Square InternationalCorp for P5.7M. Tatic applied for a loan with CapitalRual Bank of Makati to finance its purchase of the saidlots, which the bank granted provided that the torrenstitle over the lots would be registered under its name ascollateral for the payment of the loan.

In 1988, Tatic sold these parcels of land to Vive EagleLand Inc (VELI) for P6.3M, although the torrens titlesover the lots were still in the custody of the bank.During the same year, VELI sold one of these parcels ofland to Genuino Ice Co. Inc. for P4M. Also, a deed ofassignment of rights in which VELI assigned in favor ofGenuino Ice all rights and interests under the Deed ofSale executed by spouses Flores and the other Deed ofSale executed by Tatic in VELI's favor, in so far as thatlot is concerned.

Flores!Tatic (2 lots)!VELI (2 lots)!Genuino Ice (1 lot)

Genuino Ice demanded that VELI pay its capital gainstax amounting to P285,000. However, VELI refusedsaying that the Spouses Flores and Tobias (broker of thesale) are responsible to pay the tax. Genuino Ice filed anaction for specific performance against VELI, contendingthat VELI failed to transfer title to and in the name ofGenuino Ice, to cause the eviction of the occupants, andto pay the tax and other dues to effectuate the transferof the title of the property. RTC ruled in favor ofGenuino Ice, CA affirmed.

ISSUE: W/N VELI is obliged to pay for the expenses totransfer the title of the property to Genuino Ice

HELD: YES. Under Art. 1487 of the CC, the expenses forthe registration of the sale should be shouldered by thevendor (VELI) unless there is a stipulation to thecontrary. In the absence of the stipulation of the partiesrelating to the expenses for the registration of the saleand the transfer of the title to the vendee (GenuinoIce), Art. 1487 shall be applied in a supplementarymanner.

Under Art. 1495 of the CC, VELI, as vendor, is obligedto transfer title over the property and deliver the sameto the vendee (Genuino Ice). While Art. 1498 of the CCprovides that the execution of a notarized deed ofabsolute sale shall be equivalent to the delivery of theproperty, the same shall not apply if from the deed thecontrary does not appear or cannot clearly be inferred.In this case, Genuino Ice and VELI agreed that the latterwould cause the eviction of the tenants and deliverpossession of the property. It is clear that at the timethe petitioner executed the deed of sale in favor of

Genuino Ice, there were tenants in the property. Itcannot be concluded that the property was therebydelivered to Genuino Ice.

9. BHEN MEYER & CO. v YANGCO

FACTS: Yangco ordered 80 drums of caustic soda“Carabao Brand” from Bhen & Meyer. The instrumentevidencing the agreement made use of the terms “FOB”and “CIF.” The goods were detained by the Britishauthorities in Penang. Bhen & Meyer alleges that Yangcohad already acquired ownership of the said goods andshould thus pay for the purchase price. However,Yangco refused to accept the same alleging that thegoods were not “Carabao Brand” and that the samewere adulterated.

ISSUE: W/N ownership is transferred/delivery is effectedwith FOB and CIF from seller to buyer

HELD: NO. The terms FOB and CIF mean that the costsof delivery are for the seller. This means that it is theseller’s duty to make sure that the goods are dulydelivered. Until then, ownership of the goods had notyet passed. Had the expenses been for the buyer, thegoods are deemed delivered upon delivery to thecommon carrier. In this case, the delivery has not beeneffected to the buyer, thus, the latter had every right to

rescind the contract of sale.

10.

GENERAL FOODS v NACOCO

FACTS:• General Foods is a foreign corporation licensed to dobusiness in the Philippines.• National Coconut Corporation (NACOCO) sold toGeneral Foods 1500 tons of long copra under the terms:

a. Quantity: Seller could deliver 5% more or less thanthe contracted quantity, and the




surplus/deficiency shall be paid on the basis ofthe delivered weight.

b. Price: CIF New York.c. Payment: Buyers to open an Irrevocable Letter of

Credit for 95% of invoice value based on shippingweight.

d. Balance of the price was to be ascertained on thebasis of outturn weights and quality of the cargoat the port of discharge.

e. Weights: Net landed weights.• In the Philippines, the net cargo was weighed at 1054tons, the alleged weight delivered by NACOCO. NACOCOthen withdrew 95% (or $136,000) of the amount in theLetter of Credit in favor of NACOCO.• In New York, the net cargo was reweighed and foundto weigh only 898 short tons. General Foods demandedthe refund of the amount of $24000.• NACOCO’s officer’s-in-charge acknowledged in a letterliability the deficiency and promised payment as soon asfunds were available.• However, NACOCO was abolished and went intoliquidation. The Board of Liquidators refused to pay theclaim of General Foods.

• General Foods then filed to recover $24,000 and 17%exchange tax plus attorney’s fees and costs.• General Foods alleges that although the sale quotedCIF New York, the agreement contemplated thepayment of the price according to the weight andquality of the cargo upon arrival in New York (port ofdestination). Therefore, the risk of shipment was uponthe seller.• NACOCO alleges that the contract is an ordinary CIF,which means that delivery to the carrier is delivery tothe buyer. Therefore, the shipment having beendelivered to the buyer and the buyer having paid theprice, the sale was consummated.

ISSUES:

1. Whether the weight in New York should be the basisupon payment of the price of copra should be made. –Yes. The weight in New York should be the basis.2. Whether what is to be ascertained based upon theoutturn weights and quality at port of discharge wasonly the balance due to be paid. – No. The balance dueto be paid is not the only basis.

HELD:• Under an ordinary CIF agreement, delivery to thebuyer is complete upon delivery of the goods to thecarrier and tender of the shipping and other documentsrequired by the contract and the insurance policy aretaken in the buyer’s behalf. However, the parties may,

by express stipulation, modify a CIF contract and throwthe risk upon the seller until the arrival in the port ofdestinations.• In this case, the terms of the contract indicate andintention that the precise amount to be paid by thebuyer depended upon the ascertainment of the exactnet weight of the cargo at the point of destination:

a. Net landed weights were to govern.b. The balance of the price was to be ascertained on

the basis of outturn weights and quality of thecargo at the port of discharge.

c. The seller could deliver 5% more or less than the

contracted quantity, and the surplus/deficiencyshall be paid on the basis of the deliveredweight.

• While the risk of loss was apparently placed onGeneral Foods after the delivery of the cargo to thecarrier, it was agreed that the payment of the price wasto be according to the “net landed weight” which is 898(weighed in New York) and not 1054 (weighed in thePhilippines).• NACOCO had the burden to prove that the shortagewas due to risks of voyage and not the natural drying upof copra. In other words, if the weight deficiency wasdue to the risks of the voyage, General Food would nothave been entitled to any claim in the deficiency.• The provision on the “balance of the price was to beascertained on the basis of outturn weights and qualityof the cargo at the port of discharge” should not beconstrued separately from the provision that the “netlanded weight” was to control.• The manifest intention of the parties was for the totalprice to be finally ascertained only upon determiningthe net weight and quality of the goods upon arrival inNew York, most likely because the nature of copra is

that it dries up and diminishes weight during thevoyage.• In fact, this intention was shown by the letter of theofficer-in-charge of NACOCO acknowledging NACOCO’sliability to General Foods. Though this letter ofacknowledgement should not be construed as anadmission of liability of NACOCO, it is neverthelesscompetent evidence of NACOCO’s intention to be boundby the net landed weight or outturn weight of the copraat the port of discharge.

11.

PACIFIC VEGETABLE OIL CORP v SINGZON

FACTS:• Petitioner and respondent entered into a contract inthe US whereby Singzon agreed to ship 500 tons ofcopra, with the agreement CIF, Pacific Coast• Singzon failed to deliver, but the parties entered intoa settlement, whereby Singzon would deliver 300 tons atthe same terms the contract provided that shouldSingzon again default, he would pay $10,000 fordamages and the original contract would be revived• Singzon again failed to ship the copra, and he did notpay the fine or ship the 500 tons as originally agreed• Pacific filed an action to recover damages• Singzon claims that Pacific had no legal personality tosue because it is a foreign corporation

HELD:• The contract was perfected in the US by a broker andrepresentatives of the parties payment was made to abank in California and delivery undertaken through CIF,Pacific Coast• Under that arrangement, the vendor is to pay not onlythe cost of goods, but also the freight and insuranceexpenses, and this is taken to indicate that the deliveryis to be made at the port of destination• Since CIF includes both insurance and freight expensesto be paid by the seller, ordinarily, before the vesselarrives at the point of destination the risk of loss be for




the account of the seller.

12. RUDOLF LIETZ INC v CA

FACTS: Buriol previously owned a parcel of unregisteredland in Palawan. In 1986, he entered into a leaseagreement with Flaviano and Tiziana Turatello and Sani

(Italians) involving a hectare of his property. Thisagreement was for a period of 25 years, renewable foranother 25 years. After the paying P10,000downpayment, Turatello and Sani took possession of theland. However, this agreement was only reduced intowriting in 1987.

After 11 months, Buriol sold the same parcel of land (5hec) to Rudolf Lietz Inc for P30,000. Later on, RudolfLietz Inc discovered that Buriol owned only 4 hectareswith one hectare covered by the lease; thus, only 3hectares were delivered to it. Rudolf Lietz Inc instituteda complaint for the annulment of the lease againstBuriol, Sani and the Turatellos before the RTC. RTC andCA ruled in favor of Buriol, Sani and Turatellos.

ISSUE: Whether the sale between Buriol and Rudolf LietzInc is a lump sum or unit price sale

HELD: LUMP SUM SALE. The Deed of Absolute Sale showsthat the parties agreed on the purchase price on apredetermined area of 5 hectares within the specifiedboundaries and not based on a particular rate per area.In accordance with Art. 1542, there shall be noreduction in the purchase price even if the areadelivered to Rudolf Lietz Inc is less than that states inthe contract. In the instant case, the area within theboundaries as stated in the contract shall control overthe area agreed upon in the contract.

13. NAAWAN COMMUNITY RURAL BANK INC v CA

FACTS: Comayas offered to sell to the Lumo Spouses ahouse and lot. The property was already registeredunder the Torrens System that time and they madeappropriate inquiries with the RD; they found out that itwas mortgaged for P8,000, paid Comayas to settle themortgage, and the release of the adverse claim wasannotated in the title. Thereafter, they executed anAbsolute Deed of Sale over the subject property andregistered the same. However, it turns out that it wasalready previously sold to Naawan Community RuralBank; it was then unregistered. The Bank foreclosed onthe property, purchased the same, and registered it

under Act 3344. Thus, the Bank sought to eject thespouses. However, the latter countered with an actionfor quieting of title.

ISSUE: Who has a better title, Naawan or Lumo spouses?

HELD: LUMO SPOUSES. Where a person claims to havesuperior property rights by virtue of a sheriff’s sale, thebenefit of Art. 1544 applies favorably only if theproperty is registered under the Torrens System—notunder Act 3344. Registration under the Torrens Systemis the operative act that gives validity to the transfer

and creates lien upon the land. The spouses acquiredtheir titles under the Torrens System and they acted ingood faith by exercising due diligence; thus, they have abetter right to the said property.

14.

NAVAL v CA

FACTS: In 1969, Ildefonso Naval sold a parcel of land toGregorio; the sale was recorded under Act 3344. Also in1969, Gregorio sold portions thereof to Balilla, Camallaand the Moya Spouses, who thereafter took possession oftheir respective portions. Juanita, a greatgranddaughter of Ildefonso, surfaced and claimed thatthe land was sold to her by the latter in the year 1972;she also presented an OCT as evidence. It must be notedthat the property was not yet registered under theTorrens System when it was sold to Juanita andGregorio.

ISSUE: W/N Juanita has a better title (since it isregistered) than Balilla, Camalla and Moya spouses

HELD: NO. Art. 1544 is not applicable because the landwas unregistered under the Torrens System at the timeof the 1st sale. The applicable law is Act 3344. Undersaid law, registration by the 1st buyer is constructivenotice to the 2nd buyer—and as such, the latter cannotbe deemed to be in good faith. Applying the principle ofpriority in time, priority in rights, Juanita cannot claimto have a better right. The fact that Juanita was able tosecure a title in her name does not operate to vestownership. The Torrens System cannot be used as ameans to protect usurpers.

15. CARILLO v CA

FACTS: Gonzales purchased from Priscilla, acting asagent of Aristotle, the latter’s land. For failure toexecute the Deed of Sale, she filed a case for specificperformance and impleaded Priscilla (not Aristotle). Thelatter defaulted and judgment was rendered against herordering the nullification of the OCT of Aristotle and theissuance of a new certificate of title in favor ofGonzales. The Dabons thereafter surfaced and sought toannul the judgment of the trial court averring that theypurchased the property from Aristotle himself and theywere not impleaded as the real parties in interest.

ISSUE: Who has better title, Gonzales or Dabon?

HELD: DABON. The decision of the lower court in favorof Gonzales was void due to extrinsic fraud. The Dabonswere deprived of their day in court and throughquestionable means at that—such as the failure to givethem appropriate notice of the proceedings, and nothaving them impleaded even though they are the partiesto be adversely affected. Instead, it was the agent whowas impleaded—not the principal or the subsequentpurchasers. The court never acquired jurisdiction.

It must be noted that the property was sold toGonzales in 1988, while the same was sold to the Dabonsin 1989; nonetheless, the requirements of double-sale




are two-fold: acquisition in good faith and registrationin good faith. Based on the foregoing, the case isremanded to the lower court for further proceeding.

16. CARBONELL v CA

FACTS: Poncio, a Batanes native, owned a parcel of

land, which he offered to sell to Carbonell and Infante.The land was mortgaged to Republic Bank. Poncio andCarbonell agreed to the sale of the land, and the latterassumed to pay the mortgage in favor of the bank.Poncio and Carbonell executed an instrument where thelatter allowed the former to remain in the premises inspite of the sale for a period of 1 year. Later on, whenthe Formal Deed of Sale was to be executed, Poncio toldCarbonell that he could no longer proceed with the saleas he had already sold the same to Infante for a betterprice. Carbonell immediately sought to register adverseclaim; 4 days later, Infante registered the sale with theadverse claim annotated thereto. Infante thereafterintroduced significant improvements on the property.They now dispute ownership over the said land.

ISSUE: Who has a better title, Carbonell or Infante?

HELD: CARBONELL. In order to claim the benefit of Art.1544, the buyer of realty must register the property ingood faith. It is a pre-condition to a superior title. Inthis case, Infante was not in good faith, thus the priorsale to Carbonell must prevail. Infante registered herclaim 4 days after the adverse claim was registered, shehad notice that Carbonell paid off the mortgage debt asthe mortgage passbook was already in his possession.She likewise ignored Carbonell and refused to talk tohere. These are badges of bad faith that taint herregistration.

17. SAN LORENZO DEV CORP v CA

FACTS: Spouses Lu owned 2 parcels of land, which theypurportedly sold to Babasanta. He demanded theexecution of a Final Deed of Sale in his favor so he mayeffect full payment of the purchase price; however, thespouses declined to push through with the sale. Theyclaimed that when he requested for a discount and theyrefused, he rescinded the agreement. Thus, Babasantafiled a case for Specific Performance. San LorenzoDevelopment Corp. (SLDC) intervened claiming that thelots have been sold to it by virtue of a Deed of AbsoluteSale with Mortgage and that it was a purchaser in good

faith. Both sales were not registered.

ISSUE: Who has a better title, Babasanta or SLDC?

HELD: SLDC. There was no double sale in this casebecause the contract in favor of Babasanta was a merecontract to sell; hence, Art. 1544 is not applicable. Theownership of the property was not to be transmitted inhis favor until the full payment of the purchase price.There was neither actual nor constructive delivery as histitle is based on a mere receipt. Based on this alone, theright of SLDC must be preferred.

18. MENDOZA v KALAW

FACTS: In 1919, Federico Canet sold to Kalaw a parcel ofland under a Conditional Sale. 2 months after, Canetsold to Mendoza the same parcel of land under anAbsolute Sale. Mendoza took possession thereof, cleaned

and fenced it, and sought to have the same registeredbut Kalaw opposed. When Kalaw first tried to registerthe same, he was denied but an anotacion preventiva was annotated in the title.

ISSUE: Who has a better title, Canet or Kalaw?

HELD: CANET. While a conditional sale came before theabsolute sale, still the latter must prevail. A conditionalsale, before the happening of the condition, is hardly asale especially if the condition has yet to be compliedwith. The anotacion preventiva obtained by Kalawcannot create an advantage in his favor as the same wasgood for only 30 days. The court ruled in favor ofMendoza.

19. ADALIN v CA

FACTS: Elena Kado and her siblings owned a lot with a 5-door commercial building fronting Imperial Hotel. Theunits were leased. Elena contracted the services ofBautista, who brought Yu and Lim to her for the purposeof buying the premises. During the meeting, it wasagreed that the Yu and Lim would buy the said unitsexcept for the 5th which is to be bought by Adalin. Theyentered into a Conditional Sale where Elena wasobligated to evict the tenants before the full paymentof the purchase price. Elena offered the same for sale to

the lessees but they refused claiming that they couldnot afford; thus, she filed a case for ejectment againstthem. Thereafter, the lessees decided to exercise theirright to buy the units—Kalaw ruled that since the sale toYu and Lim was conditional, the subsequent sale to thelessees must be preferred.

ISSUE: Who has a better title, Yu and Lim or the lessees?

HELD: YU AND LIM. While it is true that the Deed was forConditional Sale, examination of the contents thereofwould show that it was one for the actual sale. Duringthe meeting, the property was already sold; the onlyconditions were that Elena would evict the lesseesbefore the full payment of the price. The choice of to

whom to sell the property had already been decided.That being the case, since the sale in favor of Yu andLim was the prior sale, it must be preferred.

Besides, Elena was guilty of double-dealing, whichcannot be sanctioned in law. It was, after all, herobligation to evict the lessees. The lessees were in badfaith as well for having knowledge of the supposed salein favor of Yu and Lim. Their subsequent registration ofthe sale cannot shield them in their fraud.

Mendoza




20.

CHENG v GENATO

FACTS: Genato owned 2 parcels of land in ParadiseFarms. He agreed with the Da Jose spouses to enter intoa contract to sell over the said parcels; it was embodiedin a public instrument annotated to the certificates oftitle. They asked for and were granted an extension forthe payment of the purchase price. Unknown to them,Genato dealt with Cheng regarding the lot, executed anAffidavit to annul the Contract to Sell, appraised thelatter of his decision to rescind the sale, and received adown payment from Cheng upon the guarantee that thesaid contract to sell will be annulled. By chance, Genatoand the spouses met at the RD, where he again agreedto continue the contract with them. He advised Chengof his decision; the latter countered that the sale hadalready been perfected. Cheng executed an Affidavit ofAdverse Claim and had it annotated to the TCTs andsued for specific performance.

ISSUE: Who has a better title, Cheng or the Da Josespouses?

HELD: DA JOSE SPOUSES. Both agreements involve acontract to sell, which makes Art. 1544 inapplicablesince neither a transfer of ownership nor a salestransaction took place. A contract to sell is premisedupon a suspensive condition—the full payment of thepurchase price. That being the case, the elementaryprinciple of first in time, priority in right should apply.As such, the contract in favor of the Da Jose spousesmust prevail considering that the same had not beenvalidly rescinded. Besides, Cheng cannot be consideredto have acted in good faith as he had knowledge of theprior transaction in favor of the spouses.

21.

CONSOLIDATED RURAL BANK INC v CA

FACTS: The Madrid Brothers owned a parcel of land,which was later subdivided. Rizal Madrid sold his shareto Gamaio and Dayag; the other brothers offered noobjection. The sale was not registered under theTorrens System. Gamaio and Dayag sold the southernhalf to Teodoro, and the northern half to Hernandez,who thereafter donated the same to his daughter. Theyall maintained possession of the properties. Later on,the brothers all sold their shared to Marquez whofurther subdivided the same, registered the lands, andmortgaged portions thereof to Consolidated Bank andBank of Cauayan. For failure to settle his debt, CBforeclosed the property. The successors-in-interest of

Gamiao and Dayag sought reconveyance. CB interposedthat the mortgage must be respected.

ISSUE: Who has a better title, Marquez or thesuccessors-in-interest of Gamiao and Dayag

HELD: The successors-in-interest of Gamiao and Dayag.While Marquez was the 1st to register the lands underthe Torrens System, Art. 1544 does not apply as thedouble-multiple sales were not done by the singlevendor—in this case by the brothers on the one side andGamiao and Dayag on the other. That being the case,

the simple rule on priority in time, priority in rightwould apply. As such, the successors-in-interest ofGamiao and Dayag would have a better right as the salein their favor came ahead of time. Further, Marquez wasnot in good faith. He knew that the property was beingclaimed by other parties who were in possession thereofinstead, he willfully closed his eyes to the possibility ofthe flaws.

22.

ESTATE OF LINO OLAGUER v ONGJOCO

FACTS: (Super detailed, with lots of unimportant facts,so I'll only state whatever is related to the case at hand)Petitioners are the children of Lino Olaguer and OliviaOlaguer. When Lino died, Olivia became theadministrator and Eduardo Olaguer as co-administratorof his estate. Olivia then got married to Jose Olaguer. Asadministrators, Olivia and Eduardo sold 12 parcels ofland owned by Lino to Pastor Bacani, including Lot 76which is the lot in question. A day later, it was sold backto them, splitting to them the portion of which 6/13went to Olivia, while 7/13 went to Eduardo. She then

made a special power of attorney in favor of Jose, givinghim the power to sell, mortgage, transfer, assignendorse and deliver with respect to her share over Lot76. The lot was sudivided, having Lots 76-B to 76-G inthe name of Olivia. As attorney-in-fact, Jose sold the sixparcels of land in favor of his son, Virgilio Olaguer. Lots76-B and 76-C was consolidated and further subdividedinto a proportional share, making them Lots 1 and 2.Jose, claiming to be the attorney-in-fact of his son, soldLots 1 and 2 to Emiliano Ongjoco. He further sold Lots76-D to 76-G to Ongjoco twice on different dates, thistime evidenced by a notarized general power ofattorney. Petitioners moved for the sale made bySpouses Olivia and Jose Olaguer to be null and void. RTCruled in favor of petitioners (on the subject lots), but CAreversed.

ISSUE: Whether Ongjoco was a buyer in good faith

RULING: With respect to Lots 1 and 2, he cannot beconsidered a buyer in good faith since there was noproof that the sale on both lots was evidenced by awritten power of attorney. According to Agency Law, asale of a piece of land must be coupled with a writtenauthority of such agent, else the sale is void. Since therespondent was not able to show proof that there reallywas an existing written authority, the sale over such lotscannot be considered valid, and must be returned to theEstate of Lino Olaguer.

With respect to Lots 76-D to 76-G, there was a notarizedgeneral power of attorney to show evidence thatauthority had been given by Virgilio to his father todispose the subject lots. Since petitioners was not ableto show any proof that the lots being sold twice torespondent show bad faith, good faith must bepresumed. Being notarized, the regularity of suchgeneral power of attorney must also be presumed.




23.

ABRIGO v DE VERA

FACTS: By virtue of a compromise agreement judiciallyapproved, Villafania sold to Rosenda and Rosita a houseand lot. Unknown to them, Villafania obtained a freepatent over the said land and sold it to De Vera. On theother hand, Rosenda and Rosita sold the property to thespouses Abrigo. Now De Vera and Abrigo disputeownership over the property—the former filing anejectment suit against the latter.

ISSUE: Who has a better title, Abrigo or De Vera?

HELD: DE VERA. Abrigo registered the property underAct 3344, while De Vera registered the same under theTorrens System. Naturally, De Vera’s right prevails.Registration must be done in the proper registry to bindthe land. It was also proven that De Vera acted in goodfaith considering that there was nothing in thecertificate of title or the circumstances, which wouldhave aroused suspicion and mandated her to make aninquiry. Registration under Act 3344 does not suffice toconstitute constructive notice in order to negate the

good faith of the registrant under the Torrens System.De Vera’s right must be upheld.

24. DAGUPAN TRADING CO v MACAM

FACTS: Sammy Maron and his 7 brothers were co-ownersof a parcel of land for which they applied forregistration. Pending the proceedings, they sold thesame to Macam, who thereafter introduced substantialimprovements thereon. Later on, the property waslevied upon and sold in favor of Dagupan Trading, whichthereafter registered the Sheriff’s Final Certificate ofSale

ISSUE: Who has a better right, Macam or Dagupan?

HELD: MACAM. In this case, the sale in favor of Macamwas executed before the land was registered, while thesale in favor of Dagupan was made after theregistration. In such a case, the Rules of Court will applysuch that the delivery of the Sheriff’s Final Certificateof Sale in favor of Dagupan merely substitutes the latterinto the shoes of the seller Maron and acquires allrights, interests, and claims of the latter. Consideringthat at the time of the levy, Maron was no longer theowner of the land, then no title can thereafter pass infavor of Dagupan. Macam’s title is thus sustained.

25.

CARUMBA v CA

FACTS: Canuto sold a parcel of land to Carumba byvirtue of a Deed of Sale of Unregistered Land. The salewas never registered. Thereafter, Canuto was sued forcollection of money, and the said land was levied uponand sold to Balbuena, who registered it.

ISSUE: Who has a better right, Carumba or Balbuena?

HELD: CARUMBA. Art. 1544 does not apply in this case.Instead, the Rules of Court are applicable. Balbuena,the later vendee, merely steps into the shoes of thejudgment debtor and acquires all the rights andinterests of the latter. By the time the lot was soldthrough the foreclosure proceedings, it was no longerowned by Canuto by virtue of a prior sale to Carumba—who has a better right.

26.

ACABAL v ACABAL

FACTS: Sps. Acabal sold their lot to their son Villaner

Acabal who in turn transferred it to his godson-nephewLeonardo Acabal. This was later on sold to Leonardo andRamon Nicolas hence a complaint was filed by Villaneragainst them and his nephew arguing that what hesigned was a Lease contract and not a sales contract.The RTC ruled in favor of Nicolas which was reversed bythe CA thus the case at bar.

ISSUE: W/N there was a valid sale

HELD: YESIt is valid only insofar as 5/9 of the land is concerned.

This is so because the property in question was boughtduring the pendency of the marriage of Villanertherefore it is presumed to belong to the conjugalpartnership. Leonarda failed to prove otherwise.Nevertheless, when Justiniana (wife) died, her sharevested on her 8 children, and her husband vesting himwith 5/9 share on the property. Since it is not yetpartitioned, he cannot yet claim title to any definiteportion of the property but only to his ideal, abstract orspiritual share. He may still dispose of the same forevery co-owner has absolute ownership over hisundivided interest in the co-owned property. However,he cannot dispose of the shares of his co-owners basedon nemo dat qui non habet. Since he sold it without theconsent of the other co-owners, the sale is still validonly insofar as his shares are concerned.

And the finding that both Leonardo and Villaner were

in pari delicto, the same is irrelevant because theproperty concerned is unregistered.




SALE BY NON-OWNER/BY ONE HAVING VOIDABLE TITLE:LIFE OF A CONTRACT OF SALE

1.

PAULMITAN v CA

FACTS: When Agatona died, she was succeeded by 2sons: Pascual and Donato. She left 2 parcels of land.

Pascual died leaving 7 heirs. The titles remained in thename of Agatona and the lots were never partitioned.Donato, thereafter, executed an affidavit of Declarationof Heirship—unilaterally adjudicating one of the lots tohimself. He thereafter sold the entire lot to his daughterJuliana. For the failure to pay taxes, the lot wasforfeited and sold at a public auction, but Juliana laterredeemed the property. The Heirs of Pascual thensurfaced and sought to partition the property.

ISSUE: W/N Juliana became the owner of the entire lotupon her redemption of the property

HELD: NO.From the moment of Agatona’s death, herheirs, Pascual and Donato, became co-owners of theundivided lot. When Donato died, his pro-indiviso sharetransferred to his heirs. That being the case, whenDonato sold the entire property to his daughter, he wasmerely co-owner thereof and transferred only hisundivided share.

If a co-owner alienates the entire property withoutthe consent of the other co-owners, the sale will affectonly his share. Thus, only ! undivided share passed onto Juliana. The fact that Juliana redeemed the propertydoes not operate to terminate the co-ownership. Itmerely entitles her to reimbursement from the other co-owners—redemption being a necessary expense. Untilreimbursement, Juliana holds a lien upon the lot for theamount due to her. However, a partition is in order.

2.

MINDANAO v YAP

FACTS: Rosenda and Sotero were among co-owners of 3parcels of land, which they sold to Ildefonso Yap forsome P100K without the consent of the other co-owners.They included in the sale certain buildings andlaboratory and other educational equipment within thesaid properties, which were actually owned by MindanaoAcademy. Mindanao Academy and the other co-ownersassailed the validity of the sale. The trial court declaredthe sale null and void. Yap contends that Erlinda, one ofthe co-owners owning 5/12 share of the co-ownership,does not have the standing to challenge the sale forbeing in bad faith.

ISSUE: W/N the sale is null and void as to its entirety

HELD: YES. Although the general rule is that if a co-owner alienates the entire property without the consentof the other co-owners, the sale will affect only hisshare, such rule does not apply if the property cannotbe partitioned/subdivided. In this case, aside from thefact that Rosenda and Sotero cannot sell the entireproperty including the school equipment, they cannot

also sell their undivided share in the co-ownership.Otherwise, the properties sold would be subject to apartition, which cannot happen to the properties in thiscase. School equipment, as well as the buildings, are

indivisible. Thus, they cannot be subject to partition.

3.

BUCTON v GABAR

FACTS: Josefina bought a parcel of land from Villarin. Byverbal agreement, Josefina sold a ! portion thereof toNicanora for P3,000. Nicanora paid P1,000 then P400—allevidence by receipts—then she loaned Josefina P1,000and thereafter along with her spouse, took possession ofthe lot and built their house as well as apartmentsthereon. Villarin then issued a Deed of Sale to Josefina,but the latter refused to execute the correspondingDeed of Sale to Nicanora. Josefina claimed that the

amounts paid by Nicanora were in the concept of loans.Thus, Nicanora filed a case for specific performance.

ISSUE: W/N there was a sale between Josefina andNicanora

HELD: YES. Assuming that at the time when Josefinasold the lot to Nicanora, she was not yet the ownerthereof. When Villarin executed the Deed of Sale in herfavor, title passed to Nicanora by operation of law.

Although the sale between Josefina and Nicanora wasverbal, it was as between them. Considering thatNicanora has paid the purchase price, she becameowner of ! of the lot. Likewise, although the complaintwas titled “specific performance” it was actually one for

quieting of title, which is imprescriptible so long as theplaintiff is in possession of the lot.

4. CITY OF MANILA v BUGSUK LUMBER

FACTS: Bugsuk Lumber had an office in Manila. The CityTreasurer assessed it for license fees and mayor’spermit—alleging that Bugsuk sold at wholesale and retailto different lumber dealers in Manila. Bugsuk refused topay alleging that the lumber it produced were delivereddirectly from the shipper to the buyer, that they paidthe appropriate Timber License Fees and that theirManila Office only received orders and accepted

payments. Bugsuk alleges that it is not a dealer and itsoffice is not a store to warrant the imposition of theadditional taxes.

ISSUE: W/N Bugsuk is liable for the additional taxes

HELD: NO. A dealer buys to sell again; Bugsuk producedits own lumber from Palawan. Thus, it is not a dealer.Its Manila office is not a store as well. A store is a placewhere goods are kept for sale—whether for retail orwholesale. The Manila office only processed the ordersand payments; it did not keep goods therein or act as a




dealer or intermediary between the field office and thecustomers. Thus, it is not liable for the said taxes.

5. SUN BROS. & CO. v VELASCO

FACTS: Sun Brothers sold an Admiral Refrigerator toLopez upon the agreement that ownership will only pass

to the latter upon payment of the full purchase price.Lopez paid only the downpayment and sold the same toJV Trading (owned by Velasco) and was displayed in thelatter’s store. It was thereafter bought by CO Kang Chiufrom JV Trading. Sun Brothers sought to recover therefrigerator.

ISSUE: W/N Sun Brothers may recover the thing

HELD: NO. It is true that where a person who is not theowner of a thing sells the same, the buyer acquires nobetter title than the seller has. In this case. Lopezobviously had no title to the goods for having failed topay the full price. It only follows that JV Trading had notitle thereto as Velasco was not in good faith. He should

have inquired if Lopez had good title to it—the same notbeing engaged in the business of selling appliances.

HOWEVER, when the refrigerator passed to Co KangChiu, the latter acquired valid title thereto. Theexception to the foregoing rule is the purchase in goodfaith in a merchant store or a fair or a market. This rulefosters stability to commerce and business transactions.Co Kang Chiu purchased the refrigerator in a merchantstore—and for value and in good faith. Thus, he isprotected by the law. Sun Brothers would not beentitled to recover the refrigerator—not even if they payits value—since they were not deprived of the sameunlawfully. Lopez is the one who should be liable to SunBrothers for the full purchase price of the ref.

6. TAGATAC v JIMENEZ

FACTS: Tagatac bought a car abroad and brought it tothe Philippines. Warner Feist deceived her into believingthat he was very rich and purchased her car. Shedelivered possession thereof. Levy (another name ofFeist) issued her a postdated check, which wasdishonored. Feist then disappeared with the car. Feistwas able to register the car in his name and eventuallysold the car to Sanchez, who then sold the same toJimenez. Jimenez even labored to verify the car’srecords with Motor Vehicle Office. Jimenez thendelivered the car to California Car Exchange for display.

Tagatac, upon finding out, sought to recover the car,but Jimenez refused.

ISSUE: W/N Jimenez may refuse to give the car back

HELD: YES. Jimenez was a buyer in good faith of thecar—he had no knowledge of any defect in the title ofthe seller. It is true that one who has lost any movableor has been unlawfully deprived thereof may recoverthe same from the possessor. However, in this case,

Tagatac was NOT unlawfully deprived within the contextof the Civil Code.

The sale between Feist and Tagatac was merelyvoidable—valid until annulled. There was a validtransmission of ownership. The fact that Feist did notpay only gives rise to an action to resolve the contractor demand payment. When Feist sold the car toSanchez, the sale between him and Tagatac was stillvalid; therefore, good title passed to Sanchez. Asbetween 2 innocent parties, the one who made possiblethe injury must bear the loss.

7. EDCA PUBLISHING v SANTOS

FACTS: EDCA sold books to Tomas dela Pena whofraudulently represented himself to be Prof. Jose Cruz,a Dean of DLSU. EDCA delivered him the books, thecheck Tomas issued was dishonored because he did nothave an account at all. Tomas thereafter sold the booksat a discount to Leonor Santos. EDCA, with the aid ofthe police, stormed the Santos Bookstore to retrieve thebooks.

ISSUE: W/N EDCA may retrieve the books from Santos

HELD: NO. Ownership of the books passed to Tomasupon the delivery thereof. He had the right to transferthe same to Santos. The fact that he did not pay for thebooks only warrants rescission or an action for payment.EDCA cannot be considered to have been unlawfullydeprived under the CC as to warrant recovery of thebooks from Santos. Possession of movable propertyacquired in good faith is equivalent to title. Santos wasa buyer in good faith, thus he is protected by the law.

8.

AZNAR v YAPDIANGCO

FACTS: Teodoro advertised for sale his Ford Fairlanecar. De Dios approached them purporting to be anephew of Marella. Teodoro transacted with Marellawho agreed to buy the car, agreeing to pay the sameonly after the car has been registered in his name. TheDeed was registered in his name, but Marella has yet topay so the documents were not delivered to him, hepleaded with Ireneo, Teodoro’s son, that they proceedto Marella’s sister to secure the shortage of cash. Ireneoagreed. They proceeded thereto, Ireneo wasaccompanied by De Dios and an anonymous person. DeDios was able to induce Ireneo to hand over thedocuments under the pretext that he will show them to

his lawyer, Ireneo agreed. De Dios made Ireneo wait andthereafter escaped with the car and the deed. Marellawas then able to sell the car to Aznar. The policethereafter seized the car in Aznar’s possession. Aznarcountered with a complaint for Replevin.

ISSUE: W/N Teodoro may recover the car from Aznar

HELD: YES. Teodoro was clearly unlawfully deprived ofthe car. There was no valid delivery to Marella, hencethe latter acquired no title to the car. Delivery must be




coupled with intent. That being the case, Teodoro hasthe right to claim the car not only from the thief, butalso from 3rd persons who may have acquired it in goodfaith. The buyer would only be entitled toreimbursement if he purchased the same in good faithfrom a public sale.

9.

CRUZ v PAHATI

FACTS: Jose Cruz delivered his car to Belizo for thelatter to sell the same. Belizo forged the letter of Cruzto the Motor Section of the Bureau of Public Works andconverted the same into a Deed of Sale. Using theforged deed, he had the car registered in his name.Thereafter, Belizo sold the car to Bulahan, who in turnsold the same to Pahati. However, the car wasimpounded by the police, and the sale to Pahati wascancelled. Bulahan now contends that between 2innocent parties (Bulahan and Cruz), the person whomade possible the injury must bear the loss—in thiscase, supposedly Cruz.

ISSUE: W/N Cruz may recover the car from Bulahan

HELD: YES. It is true that both Bulahan and Cruz acted ingood faith. One who has lost a movable or had beendeprived of the same may recover it from the possessor.This rule applies squarely to this case. Thus, since Cruzwas unlawfully deprived by Belizo through the latter’sartifice, he is entitled to recover the same even againsta subsequent purchaser in good faith. The onlyexception to this rule is if the purchaser acquired thesame from a public sale—in which case, reimbursementis in order. It was, in fact, Bulahan who actednegligently in failing to detect the forged Deed of Sale.

10. DIZON v SUNTAY

FACTS: Lourdes Suntay is the owner of a 3-caratdiamond ring valued at P5,500. She and Clarita Sisonentered into a transaction wherein the ring would besold on commission. Clarita received the ring and issueda receipt. After some time, Lourdes made demands forthe return of the ring but the latter refused to comply.When Lourdes insisted on the return, Clarita gave herthe pawnshop ticket which is the receipt of the pledgeand she found out that 3 days after the ring wasreceived by Clarita, it was pledged by Melia Sison, theniece of Clarita’s husband in connivance with Claritawith the pawnshop of Dominador Dizon for P2,600.

Lourdes then filed an estafa case. She then asked

Dominador Dizon for the return of the ring pledged butrefused to return the ring thus the case filed by Lourdes.

The CFI issued a writ of replevin so Lourdes was ableto have possession of the ring during the pendency ofthe case. The CFI also ruled in her favor which wasaffirmed by the CA on appeal. Thus the case at bar.

ISSUE: W/N the CA erred in ruling that Lourdes has aright to possession of the ring

HELD: NOIt reiterated the ruling in de Garcia v. CA, that the

controlling provision is Art. 559 of the CC which statesthat the possession ofmovable property acquired in

good faith is equivalent to a title. Nevertheless, onewho has lost any movable or has been unlawfully

deprived thereof may recover it from the person in possession of the same. If the possessor of a movable

lost of which the owner has been unlawfully deprived,has acquired it in good faith at a public sale, the ownercannot obtain its return without reimbursing the price

paid therefor .Lourdes, being unlawfully deprived of her ring thus

she has a right to recover it from the current possessor.Dizon is engaged in a business where presumablyordinary prudence would require him to inquire whetheror not an individual who is offering the jewelry bypledge is entitled to do so. The principle of estoppelcannot help him at all. Since there was no precautionavailed of, perhaps because of the difficulty of resistingopportunity for profit, he only has himself to blame andshould be the last to complain if the right of the trueowner of the jewelry should be recognized.

Other issues raised:1. Principle of estoppel = has its roots in equity, moral

right and natural justice." For estoppel to exist, there must be a

declaration, act or omission by the party who issought to be bound.

" A party should not be permitted to go against hisown acts to the prejudice of another.

Concurring opinion by J. Teehankee:" Interpretation of the “unlawfully deprived” in Art. 559

of the CC. It is understood to include all cases wherethere has been no valid transmission of ownership. Ifour legislature intended interpretation to be that ofthe French Code, it certainly would have adopted andused a narrower term than the broad language of Art.559 (formerly 464) and the accepted meaning inaccordance with our jurisprudence.




LOSS, DETERIORATION, FRUITS AND OTHER BENEFITS

1. ROMAN v GRIMALT

FACTS: Grimalt transacted with Roman for the purchaseof a “schooner” called the Santa Marina. The sale waspredicted upon the condition that it was seaworthy and

that Roman would perfect his title thereto—the samebeing registered to Paulina Giron. Only of the saidconditions were complied with will Grimalt purchase thesame. The terms of payment were likewise agreed upon.Roman did nothing to perfect his title; then due to asevere storm, the vessel sank. Roman now sues Grimaltfor the purchase price of the vessel.

ISSUE: W/N Grimalt is liable for the loss

HELD: NO. There was yet to be a perfected contractbetween them for the failure of Roman to perfect histitle. That being the case, the loss is for the account ofRoman as the owner thereof.

2. LAWYERS COOPERATIVE PUBLISHING v TABORA

FACTS: Tabora purchased volumes of AmJur fromLawyers Coop. The agreement was for ownership toremain with Lawyers Coop until payment of the full

price. “Loss or damage to the goods after delivery tothe buyer is for the account of the latter.” The bookswere delivered to his office; that same night, his officewas razed by fire. Tabora failed to pay the full purchaseprice. Now Lawyers Coop sues him for the balance.Tabora invokes force majeure.

ISSUE: Who bears the loss?

HELD: TABORA. While it is true that generally, loss is forthe account of the owner, the same does not apply herebecause the parties themselves have expresslystipulated that loss, after delivery to the buyer, are forthe account of the latter. Besides, the stipulationretaining ownership to the seller is intended merely to

secure payment by the buyer. Likewise, the obligationof Tabora consists of the delivery not a determinatething, but a generic thing—money. Thus, he is notabsolved from liability.

REMEDIES FOR BREACH OF CONTRACT OF SALE

1.

LEVY v GERVACIO

FACTS: Levy Hermanos sold a Packard car to LazaroGervacio. Gervacio made an initial payment andexecuted a promissory note for the balance of P2,400.He failed to pay the note at maturity date so Levy

Hermanos foreclosed the mortgage and bought it at thepublic auction for P800. Levy Hermanos then filed acomplaint for the collection of the remaining balanceand interest.

CFI ruled in favor of Gervacio finding that Levy can nolonger recover the unpaid balance once he has chosenforeclosure. Thus the case at bar.

ISSUE: W/N Levy Hermanos can still collect the balance

HELD: YESIn order to apply Art. 1454-A of the CC, there must be

(1) a contract of sale of personal property payable ininstallments and (2) there has been a failure to pay 2 ormore installments.

In the case at bar, although it is a sale of personalproperty, it is not payable in installments. It is payablein a straight term in which the balance should be paid inits totality at maturity date of the PN, therefore theprohibition does not apply.

2. DELTA MOTOR SALES CORP. v NIU KIM DUAN

FACTS: Niu Kim Duan purchased from Delta Motors 3 airconditioning units. Niu paid the downpayment, the

balance payable in 24 installments. Title to the propertyremained with Delta until the payment of the fullpurchase price. Under the agreement, failure to pay 2monthly installments makes the obligation entirely dueand demandable. The units were delivered, Niu failed topay. Thus, Delta filed a complaint for Replevin and

applied the installments paid by Niu as rentals; Niucontends that the contractual stipulations areunconscionable.

ISSUE: W/N the remedy Delta availed of wasunconscionable

HELD: NO. A stipulation in the contract treatinginstallments as rentals in case of failure to pay isVALID—so long as they are not unconscionable. Theprovision in this case is reasonable.

An unpaid seller has 3 alternative (not cumulative)remedies: (1) exact fulfillment of the obligation, (2)cancel the sale for default in 2 installments, and (3)foreclose the chattel mortgage (if any) but the seller

cannot anymore claim the unpaid balance of the price.Delta chose the 2nd remedy. Having done so, it is nowbarred from claiming the balance of the purchase price.

3. TAJANLANGIT v SOUTHERN MOTORS

FACTS: Tajanlangit bought 2 tractors and a thresherfrom Southern Motors. They executed a promissory notein payment thereof; it contained an acceleration clause.Tajanlangit failed to pay any of the stipulated




installments. Thus, Southern Motors sued him on the PN.The sheriff levied upon the properties of Tajanlangit(same machineries) and sold them at a public auction tosatisfy the debt. Southern Motors now prayed forexecution. Tajanlangit sought to annul the writ ofexecution—claiming that since Southern Motorsrepossessed the machineries (mortgaged), he wastherefore relieved from liability on the balance of thepurchase price.

ISSUE: W/N Tajanlangit is relieved from his obligation topay

HELD: NO. While it is true that the foreclosure on thechattel mortgage on the thing sold bars further actionfor the recovery of the balance of the purchase price,this does not apply in this case since Southern did notforeclose on the mortgage but insteas sued based on thePNs exclusively. That being the case, it is not limited tothe proceeds of the sale on execution of the mortgagedgoods and may claim the balance from Tajanlangit.

4.

NONATO v IAC

FACTS: Nonato spouses purchased from People’s Car aVolkwagen car. They issued a PN with chattel mortgage.People’s Car thereafter assigned its rights to the note toInvestors Finance. The Nonatos defaulted, thus InvestorsFinance repossessed the car and demanded the paymentof the balance of the purchase price.

ISSUE: W/N Investors Finance may still demand for thepayment of the balance when it repossessed the car

HELD: NO. The remedies contemplated under Art. 1484are ALTERNATIVE—not cumulative. Investors Finance ineffect cancelled the sale and it cannot now claim thebalance of the purchase price. When it took possessionof the car, it gave the spouses 15 days to redeem thecar. This could mean that their failure to do so wouldconstrain the company to retain the permanentpossession of the car. There was no attempt at all thereturn the car—thus, it is untrue that the same wasretained merely for appraisal.

5.

RIDAD v FILIPINAS INVESTMENT (Filinvest)

FACTS: Ridad purchased from Supreme Sales 2 FordConsul Sedans, payable in 24 installments, for which heexecuted a PN with chattel mortgage over the said

property. Another chattel mortgage was executed thistime upon a separate Chevy car, and another one uponthe franchise to operate taxi cabs. Supreme Salesthereafter assigned its rights under the PN to Filinvest.Ridad defaulted and Filinvest foreclosed on themortgage. It was the highest bidder for the foreclosuresale of the sedans. But unable to fully satisfy the debt,it also foreclosed the Chevy and the franchise.

ISSUE: W/N Filinvest may still foreclose the Chevy andthe franchise to fully satisfy the debt

HELD: NO. When the unpaid seller forecloses on themortgage, the law precludes him from bringing furtheractions against the vendee for whatever balance, whichwas not satisfied by the first foreclosure. By choosing toforeclose on the Ford sedans, Filinvest renounced allother rights which it might have had under the PN; itmust content itself with the proceeds of the sale of thesedans at the public auction.

6.

ZAYAS v LUNETA MOTORS

FACTS: Zayas purchased a Ford Thames Freighter fromEscano Enterprises, the dealer of Luneta Motor Co. Theunit was delivered and Zayas issued a PN payable in 26installments secured by a chattel mortgage over thesubject motor vehicle. Zayas failed to pay, thus Lunetaextra-judicially foreclosed on the mortgage and was thehighest bidder. However, considering that the proceedsof the sale was insufficient to cover the debt, Lunetafiled a case for the recovery of the balance of thepurchase price. Zayas refused to pay.

ISSUE: W/N Luneta may still recover the balance

HELD: NO. When the unpaid seller forecloses on themortgage, the law precludes him from bringing furtheractions against the vendee for whatever balance, whichwas not satisfied from the foreclosure. Luneta contendsthat Escano Enterprises is a different and distinct entityand maintains that its contract with Zayas was a loan.This is unsubstantiated as the agency relationshipbetween Luneta and Escano is clear.

Nevertheless, assuming that they were distinctentities, the nature of the transaction remains thesame. If Escano assigned its right to Luneta, the lattermerely acquires the rights of the formers—hence, Art.1484 of the CC would likewise be inapplicable.

7.

NORTHERN MOTORS v SAPINOSO

FACTS:• Respondent Casiano Sapinoso purchased frompetitioner Northern Motors an Opel Kadett car forP12,171 making a downpayment and executing apromissory note for the balance of P10,540 payable ininstallments• To secure the payment of the note, Sapinoso executedin favor of Northern Motors a chattel mortgage on thecar; the mortgage provided among others that uponSapinoso’s default in payment of any part of the

principal or interest, Northern Motors may elect any ofthe ff. remedies (a) sale of the car by Northern (b)cancellation of the sale to Sapinoso (c) extrajudicialforeclosure (d) ordinary civil action for fulfillment of themortgage contract; additionally, whichever remedy ischosen, Sapinoso waives his right to reimbursement ofany and all amounts on the principal and interestalready paid• Sapinoso failed to pay the first 5 installments due fromAugust-November 1965; he made payments though onNovember and December and on April the next year butfailed to make subsequent payments




• Northern Motors filed a complaint stating that it wasavailing of the option of extrajudically foreclosing themortgage and prayed that (a) a writ of replevin beissued upon its filing of a bond (b) it be declared to havethe rightful possession of the car (c) in default ofdelivery, Sapinoso be ordered to pay the balance withinterest• Subsequent to the commencement of the action butbefore filing of his answer, Sapinoso made 2 paymentsamounting to P1,250 on the promissory note; in themeantime, a writ of replevin was issued and the car wasturned over to Northern Motors• Sapinoso claimed that he withheld payments becausethe car was defective and Northern Motors failed to fixit despite his repeated demands

TRIAL COURT RULING• Northern Motors had the right to foreclose the chattelmortgage with Sapinoso failing to pay more than 2installments• However, the foreclosure and the recovery of unpaidbalance are alternative remedies which may not bepursued conjunctively; Northern Motors thereby

renounced whatever claim it had on the promissory note• Ordered Northern Motors to return of the P1,250 whichit had received from Sapinoso after filing the case andelecting to foreclose

ISSUE: W/N as under Article 1484 of the Civil Code,21plaintiff Northern Motors is barred from recoveringunpaid balance of the debt having elected to forecloseon the chattel mortgage. – NO.

HELD:• In issuing the writ of replevin and upholding after trialthe right to possession of the car by Northern Motors,the court below correctly considered the action as oneof replevin to secure possession of the car as preliminary

step to a foreclosure sale• The court below however erred in concluding that thelegal effect of the action was to bar Northern Motorsfrom accepting further payments on the promissory note• It is the fact of foreclosure and actual sale of themortgaged chattel that bars further recovery by thevendor of any balance on the vendee’s outstandingobligation not satisfied by the sale• In the present case, there is no occasion to apply therestrictive provision of Article 1484 as there has not yetbeen a foreclosure sale resulting in a deficiency• A mortgage creditor before the actual foreclosure saleis not precluded from recovering the unpaid balancealthough he has filed for replevin for the purpose of

extrajudicial foreclosure• Also, a mortgage creditor who has elected to foreclosebut subsequently desists from proceeding with theauction sale without gaining any advantage and withoutcausing any disadvantage to the mortgagor is not barredfrom suing on the unpaid account• And as applicable here, a mortgage creditor is notbarred from accepting before a foreclosure salepayments voluntarily tendered by the debtor-mortgagorwho admits indebtedness.

8.

CRUZ v FILIPINAS INVESTMENT & FINANCE CORP.

FACTS: Ruperto Cruz bought a bus from Far East MotorCorp which was payable on installments ofP1,487.20/month for 30 months with 12% interest. Cruzexecuted a PN in the sum of the purchase price. Tosecure the paypent of the PN, Cruz executed a chattelmortgage on the bus. Since no downpayment was made,Far East required Cruz to execute another security andfor the a REM was executed on the land and building ofMrs. Reyes which at that time was mortgaged to DBP.

Far East then assigned all its rights and indorsed thePN to Filipinas Investment and Financing Corp. Cruzdefaulted in payment of the PN with only P500 beingever paid. Filipinas had the chattel mortgage foreclosedand it was the highest bidder at the foreclosure sale.However, the proceeds were not sufficient to cover thebalance so it paid the indebtedness of Mrs. Reyes andrequested that it be sold at foreclosure sale as well.Thus Cruz and Mrs. Reyes filed an action with the CFI tohave the REM constituted on her land cancelled.

The CFI ruled in favor of Cruz and Reyes finding thatthe extrajudicial foreclosure barred further action for

recovery thus the case at bar.

ISSUE: W/N recovery from an additional security isincluded in the prohibition thus allowing Filipinas torecover the balance

HELD: NOArt. 1484 provides that when in a (1) a sale of

personal property and (2) payable on installments therewas default in payment of 2 or more installments, theremedies of the seller are:

1. To exact fulfillment of the obligation, shouldthe vendor fail to pay

2. Cancel the sale,3. Foreclose the chattel mortgage on the thing

sold, if one has been constituted, should thevendee’s failure to pay cover 2 or moreinstallments. In this case, he shall have nofurther action against the purchaser to recoverany unpaid balance of the price. x x x

It has been held that these remedies are alternativethus the exercise of one bars the exercise of the others.This is so to prevent he abuses committed in connectionwith foreclosure mortgages wherein the mortgageeswould seize the mortgaged property and buying them ata very low price at the sale and then bringing suit forcollection of the unpaid balance resulting in themortgagor still liable to pay his original debt plus losing

the property.To allow Filipinas to recover thru the additionalsecurity would result in a circumvention of the law.Should the guarantor be compelled to pay the balancethen the guarantor would be entitled to recover fromthe debtor-vendee. In the end, it would still be thedebtor-vendee who would bear the payment of thepurchase price.

Also, the word “action” in Art. 1484 covers all types oflegal demand of one’s right whether judicial orextrajudicial thus the barring effect applies to anextrajudicial foreclosure.




9. BORBON II v SERVICEWIDE SPECIALISTS INC.

FACTS: Daniel and Francisco Borbon issued a PN in favorof Pangasinan Auto Mart for the purchase of certainchattels. It was secured by a chattel mortgage. Therights under the note were assigned to Filinvest, which

later assigned said rights to Servicewide. The Borbonsfailed to pay, thus the mortgages were foreclosed. TheBorbons aver that the seller delivered chattels notstrictly in accord with their instructions; nonetheless,they cannot evade liability because the notes havepassed to holders for value and in good faith. The trialcourt sustained the foreclosure but awarded liquidateddamages and attorney’s fees in addition to the proceedsof the auction sale.

ISSUE: W/N it was proper for the trial court to awardliquidated damages and attorney’s fees in addition tothe proceeds of the auction sale

HELD: NO. First, when a person assigns credits to

another, the latter is bound under the same law; thus,Art. 1484 is equally applicable. In case of foreclosure,the legislative intent is not merely to limit theproscription to collecting the unpaid balance of the debtbut also to other claims including costs of litigation andattorney’s fees. That being the case, the SC struck downthe award of liquidated damages, but considering thefacts of the case, the award of attorney’s fees isreasonable and sustained.

10. MACONDRAY & CO v EUSTAQUIO

FACTS: Eustaquio bought a De Soto car from Macondray

for which he executed a PN, payable in installments,with a stipulation of attorney’s fees, expenses forcollection, and other costs. It was secured by a chattelmortgage over the said car. As usual Eustaquio failed topay, and Macondray foreclosed on the mortgage.However, there remained a balance of some P340 forwhich Macondray sues Eustaquio. Macondray alsocontends that at least the stipulated interests andattorney’s fees must be claimable.

ISSUE: W/N Macondray may still claim the interests andattorney’s fees stipulated

HELD: NO. If the seller avails of his right to foreclose onthe mortgage, he can no longer bring an action against

the buyer for the unpaid balance—this includes all theobligations such as attorney’s fees, stipulated interests,expenses of collection and other costs.

11. FILIPINAS INVESTMENT & FINANCE CORP v RIDAD

FACTS:• The RIDAD SPOUSES purchased a Ford Consul Sedanfrom Supreme Sales and Dev’t. Corp. Supreme Sales wasthe assignor-in-interest of FILIPINAS Investment andFinance, appellees herein.

• The car was worth 13,371 of which 1,160 was paidupon delivery, and the remaining balance to be paid in24 monthly installments. A promissory note and chattelmortgage were executed by the Ridad’s to ensurefulfillment of their obligation.• The Ridad Spouses failed to pay the last 5installments, which prompted Filipinas to file a replevinsuit in the city court of Manila, or in the alternative, torecover the unpaid balance if delivery could not beeffected.• The complaint of Filipinas stated that there was anunjustifiable failure and refusal of the Ridad Spouses tosurrender the car for foreclosure. The sheriff was ableto seize the car and sell it in a public auction.• The Ridad Spouses were declared in default duringthese proceedings due to their alleged non-receipt ofsummons; and the order of default included an order topay Filipinas 500 for attorney’s fees and 163 forexpenses incurred in seizing the car. (this is what thecase is about)• Their motion to set aside the order of default wasdenied by the city court of Manila, thus the Ridad’sappealed to the CFI Manila. The CFI said that the only

issue to be resolved was with regard to the atty’s feesand the expenses incurred due to the seizure of the car.It ruled that Filipinas was entitled to recover bothamounts; for the seizure of the car, and the lowered theattys fees of 300.• This decision was appealed to the SC

RIDAD SPOUSES’ CONTENTIONS• Pursuant to Art 148422 (specifically #3) Filipinas, byopting to foreclose the chattel mortgage renounced allrights it had under the promissory note, as well aspayment for the unpaid balance, including any amountit would be entitled to under this action, such as atty’sfees and costs of suit.

FILIPINAS’ CONTENTIONS:• They are entitled to an award for atty’s fees and costsof suit by virtue of the unjustifiable failure and refusalof the Ridad Spouses to comply with their obligations.• What 1484 prohibit is the recovery of the unpaidbalance by means of another replevin suit.

ISSUE: Whether under Art 1484 (the Recto Law) Fiipinasis entitled to the award for attorneys fees and expensesincurred due to the seizure of the car. – Yes, but withcertain qualifications.

HELD: Art 1484 is called the Recto Law, and was createdto protect mortgagors from mortgagees who wanted to

unjustly enrich themselves. No. 3 of Art 1484, discussingthe right to foreclose, means that if the vendor opts forthis remedy he shall have no further action to recoverany unpaid balance of the same.

The decided case of Macondray & Co. v Estaquio hasalmost the exact facts and deals with the same issue ofthis case. In Macondray, it was ruled that “the words‘unpaid balance’ in no. 3 of art 1848 refer to thedeficiency judgement which the mortgagee may beentitled to, when after the public auction of themortgaged chattel, the proceeds are insufficient tocover the full amount of the secured obligation, which




include… attorneys fees and costs of suit. Were it theintention of legislature to limit its meaning to theunpaid balance of the principal, it would have sostated.” In other words, the mortgagee is limited to theproperty mortgaged and is not entitled to attys fees andcosts of suit.

Such doctrine prevents the circumvention of the RectoLaw. Prior to its enactment, sellers unjustly enrichedthemselves at the expense of their buyers; by recoveringthe goods sold upon default of installment payers, byretaining the amounts already paid, and by claiming fordamages. Looking at the doctrine of Macondray, itappears that in no instance may the mortgagee recoverany sum from the mortgagor after the foreclosure of themortgage.

But although the court agrees with the above stateddoctrine, it seems that the mortgagees are notprotected against perverse mortgagors. Examples ofperverse mortgagors are those who deceitfully hide theirmortgaged movables, or upon default of payment,refuse to give up its possession for foreclosure. Whenthe mortgagor does these acts, the mortgagee has nochoice but to institute a suit for replevin to recover

possession of the chattel and enforce his rights oversuch. It logically follows that the necessary expensesincurred by the mortgagee to regain possession of whathe had a right to possess should be borne by themortgagor. Such recoverable expenses include attysfees, and expenses incurred in seizing the chattel. Inthis case, the court found that the amounts awarded bythe lower court were reasonable.

The ruling in this case, in so far as it conflicts withpreviously established doctrines, is pro tanto qualified.

12.

PCI LEASING AND FINANCE INC v GIRAFFE-XCREATIVE IMAGING INC

FACTS: PCI Leasing and Giraffe entered into a LeaseAgreement whereby PCI Leasing leased severalmachineries for a rent of P116, 878. 21/month for 36months and P181, 362/month for 36 months for a totalof P10, 736, 647.56. Giraffe paid the amount of P3, 120,000 as guaranty deposit. However, after 1 year, Giraffedefaulted in its monthly-rental payment obligations.After a 3-month default, PCI demanded a formal pay-or-surrender-equipment type but the demand wentunheeded thus PCI instituted the instant case andprayed for the issuance for the writ of replevin. Thetrial court issued a writ of replevin. Giraffe filed amotion to dismiss arguing that PCI was barred frompursuing any other claim since the seizure of the 2

leased equipments because the contract was in reality alease with option to buy. The RTC granted the motion todismiss ruling that it was akin to a contract covered byart. 1485 hence can no longer pursue its claim. Hencethe case at bar.

ISSUE: W/N the contract was covered by Art. 1485 and1484 hence barred PCI from recovering

HELD: YESA financial lease is one where a financing company

would, in effect, initially purchase a mobile equipment

and turn around to lease it to a client who gets, inaddition, an option to purchase the property at theexpiry of the lease period.

In the case at bar, PCI acquired the office equipmentsfor their subsequent lease to Giraffe, with the latterundertaking to pay a monthly fixed rental for the whole36 months. Giraffe made a guaranty deposit. Theiragreement was that in case Giraffe fails to pay anyrental due, PCI will have cumulative remedies, such as,to recover all rentals for the remaining term of thelease and recover all amounts advanced for Giraffe’saccount.When PCI demanded for payment of the balance, itmade a demand for either of the choices. Either to paythe balance hence Giraffe can keep the equipment orsurrender them if he cannot. The so-called monthlyrentals were in fact monthly amortizations of the priceof the leased office equipment.

The imperatives of equity, the contractual stipulationsand the actuations of the parties, the SC has treated apurported financial lease as actually a sale of movableproperty on installments and prevented recovery. TheLease Agreement is in reality a lease with an option to

purchase the equipment. This has been made manifestby the actions of PCI itself.In choosing replevin, PCI waived its right to bring an

action to recover unpaid rentals.

13.

LEGARDA v SALDANA

FACTS: Saldana entered into a contract with LegardaHermanos. Legarda agreed to sell 2 equal lots for P1,500each, payable in 120 equal installments over a period of10 years at 10% per annum. Saldana paid 95 of the 120installments over 8 years, which was recorded in hisaccount with Legarda, but without stating as to whichlots the payments were made. The said account statedthat Saldana still owed 1,311.72 for the 2 lots, althoughhe had already pain more the P1,500, the value of onelot.

After 5 years, Saldana contacted Legardo Hermanosstating that he was interested in building a house on thelots, however, he was prevented from doing suchbecause Hermanos failed to introduce the stipulatedimprovements on the subdivision (roads to his lots). Hefurther indicated his intentions to continue hispayments.

In his reply, Legarda Hermanos said that since Saldanafailed to complete the 120 payments in time, as theyhave previously stipulated, all the amounts paid,together with the improvements on the premises have

been considered as rents paid and as payment fordamages. Furthermore, the sale was cancelled.Saldana then filed an action demanding the delivery of

the 2 lots and for the execution of the correspondingdeed of conveyance after payment of the outstandingbalance.

Subsequently, Legarda Hermanos partitioned thesubdivision among the brothers and sisters, and the twolots were among those allotted to Jose Legarda (co-respondent).

The lower court sustained Legarda Hermanos’cancellation of the contracts and dismissed Saldana’s




complaint. The CA eventually reversed this.The CA ordered Legarda Hermanos to deliver to

Saldana one of the two lots, at his option. Furthermore,Hermanos was told to execute the deed of conveyance.

ISSUE: Should the claim of Hermanos Legarda be upheld?He claims that the payment should be considered asrent and that the sale should be cancelled? – No.

HELD: The SC applied the principles of equity andjustice, as correctly held by the CA. considering thatSaldana had already paid the total sum of P3,582.06including interests, which is even more than the value ofthe two lots.

And even if the sum applied to the principal alonewere to be considered, which was of the total ofP1,682.28, the same was already more than the value ofone lot, which is P1,500.00. The only balance due onboth lots was P1,317.72, which was even less than thevalue of one lot. By this, the court ruled that Saldanahad already paid for at least one lot. And he is given thechoice as to which one.

Even considering that Saldana as having defaulted

after February 1956, when he suspended payments afterthe 95th installment, he had as of the already paid byway of principal (P1,682.28) more than the full value ofone lot (P1,500.00). Furthermore, regardless of thepropriety of applying Article 1592 thereto, LegardaHermanos was not denied substantial justice. Accordingto ART. 1234, “If the obligation has been substantiallyperformed in good faith, the obligor may recover asthough there had been a strict and complete fulfillment,less damages suffered by the obligee,” and “that in theinterest of justice and equity, the decision appealedfrom may be upheld upon the authority of ART. 1234.”

14.

JESTRA DEV AND MANAGEMENT CORP v PACIFICO

FACTS: Daniel Pacifico signed a Reservation applicationwith Fil-Estate Marketing Assn for the purchase of ahouse nad lot and paid the reservation fee. TheReservation application contained the amounts to bepaid in installments with interests. Unable to complywith the schedule of payments, Pacifico requestedJestra to allow him to make periodic payments whichthe latter granted. They later on executed a contract tosell when the remaining balance was only P260K.Pacifico requested twice for a restructuring of hisunsettled obligation which Jestra granted subject tocertain conditions of additional penalties et al. Ascompliance to the condition, Pacifico issued 12 post-

dated checks however he is unable to pay so herequested that he be allowed to dispose the property torecover his interest and he could recover the 12 postdated checks, which was this time was denied by Jestra.Jestra then sent a notarial notice of cancellation thatthey are giving him until a certain date to pay or elsethe contract will be automatically cancelled.

Pacifico then filed a complaint before the HLURBclaiming that despite his full payment of thedownpayment, Jestra failed to deliver to him theproperty and instead sold it to another buyer. HRLURBArbiter decided in Pacifico’s favor finding Jestra liable.

The Board of Commissioners of the HLURB only modifiedthe award. The Office of the President adopted thefindings of facts and conclusions of law by the Boardthus was elevated to the CA which likewise affirmed thedecision of the OP. Hence, the case at bar.

ISSUE: W/N Pacifico has paid at least 2 years ofinstallments

HELD: NOThe total payments made by Pacifico amounted to

P846, 600. What should be used as divisor is the amountof the installment in the downpayment. The P750, 000downpayment was to be paid in 6 monthly installmentstherefore deducting it from what he paid, the remainingbalance is P96,600. Pacifico was able to pay thedownpayment in 11 months after the last monthlyinstallment was due. But he failed to pay at least 2years of installments therefore he is not entitled to arefund of the cash surrender value of his paymentsunder Sec. 3 of RA 6552. What is applicable is Sec 4which provides that the buyer should be given a graceperiod of not less than 60 days and if he should still fail

to do so, the seller may cancel the contract after 30days from receipt of the buyer of the notice ofcancellation.

Pacifico admitted that the under the restructuredscheme, the 1st installment on the 70% balance of thepurchase was due on Jan 5, 1998. Although he issuedchecks to cover for them, the 1st 2 were dishonored.When he was notified of the dishonor, he took no actionhence the 60 day grace period lapsed. Hence thecancellation was justified.

15.

MCLAUGHLIN v CA

FACTS: Petitioner Luisa McLaughlin (seller) and privaterespondent Ramon Flores (buyer) entered into acontract of conditional sale of real property. The totalpurchase price is P140,000. P26,550 should be paid uponexecution of the deed and the balance not later thanMay 31, 1977 with an interest of 1% per month until fullypaid.

Flores failed to pay and hence petitioner filed acomplaint for the rescission of the deed of conditionalsale. Eventually, the parties entered into a compromiseagreement, which was accepted by the court.

The parties agreed that Flores shall pay P50,000 uponsigning of the agreement and the balance in 2 equalinstallments payable on June 30, 1980 and December31, 1980. Flores also agreed to pay P1,000 monthly

rental until the obligation is fully paid for the use of thesubject matter of the deed of conditional sale. Theyalso agreed that in the event Flores fails to comply withhis obligations, the petitioner will be entitled to theissuance of a writ of execution rescinding the deed ofconditional sale and all the payments made will beforfeited in favor of the plaintiff.

On October 15, 1980, petitioner wrote to Floresdemanding payment of the balance on or before October31. This demand included the installment due on June30 and December 31, 1980. On October 30, Flores sent aletter signifying his willingness and intention to pay the




full balance.On November 7, petitioner filed a motion for writ of

execution alleging that Flores failed to pay theinstallment due on June 1980 and also failed to pay themonthly rentals from that date. She prayed that thedeed of conditional sale be rescinded with forfeiture ofall payments and payment of the monthly rentals andeviction of Flores. The trial court granted the motion.

On November 17, Flores filed a motion forreconsideration tendering at the same time a certifiedmanager’s check payable to petitioner and covering theentire obligation including the December 1980installment. The trial court denied the motion.

On appeal, the CA ruled in favor of Flores holding thatthe delay in payment was not a violation of an essentialcondition which would warrant a rescission since OnNovember 17 or just 17 days from the October 31deadline set by petitioner, Flores tendered the certifiedmanager’s check and that it was inequitable for Floresto forfeit all the payments made (P101,550).

ISSUE: WHETHER it is inequitable to cancel the contractand to have the amount paid by Flores be forfeited to

petitioner particularly after Flores had tendered thecertified manager’s check in full payment of theobligation. – YES.

HELD: There is already substantial compliance by Floreswith the compromise agreement. More importantly, theMaceda law recognizes the vendor’s right to cancel thecontract to sell upon the breach and nonpayment of thestipulated installments but requires a grace period after

at least 2 years of regular installment payments.But in cases where less than 2 years of installments

were paid, the seller shall give the buyer a grace periodof not less than 60 days from the date the installmentbecame due. If the buyer fails to pay the installmentsdue at the expiration of the grace period, the seller maycancel the contract after thirty days from the receipt bythe buyer of the notice of the cancellation or thedemand for rescission of the contract by a notarial act.

Assuming that under the terms of agreement theDecember 31 installment was due when on October 15petitioner demanded payment of the balance on orbefore October 31, petitioner could cancel the contractafter 30 days from the receipt by Flores of the notice ofcancellation.

Considering petitioner’s motion for execution filed onNovember 7 as a notice of cancellation, petitioner couldcancel the contract after 30 days from the receipt byFlores of said motion.

Flores’ tender of payment together with his motionfor reconsideration on November 17 was well within the30 day period granted by law.

The tender made by Flores of a certified bank

manager’s check was a valid tender of payment. Itcovered the full amount of the obligation. However,although he had made a valid tender of payment whichpreserved his rights as a vendee, he did not follow itwith consignation or deposit of the sum due with thecourt. Hence he remains liable for the payment of hisobligation because of his failure to deposit the amountdue with the court.

REMEDY OF RESCISSION IN SALES CONTRACT COVERING IMMOVABLES:CONTRACT OF SALE VS. CONTRACT TO SELL

1.

ADELFA PROPERTIES INC v CA

FACTS: Rosario Jimenez-Castaneda, Salud Jimenez andtheir brothers, Jose and Dominador Jimenez, were theregistered co-owners of a parcel of land in Las Piñas. In1988, Jose and Dominador sold their share consisting of1/2 of said parcel of land, specifically the easternportion thereof, to Adelfa Properties. Subsequently, a“Confirmatory Extrajudicial Partition Agreement” wasexecuted by the Jimenezes, wherein the eastern portionof the subject lot, was adjudicated to Jose andDominador Jimenez, while the western portion wasallocated to Rosario and Salud Jimenez. Thereafter,Adelfa Properties expressed interest in buying thewestern portion of the property from Rosario and Salud.

Accordingly, in 1989, an “Exclusive Option to Purchase”was executed between the parties, with the conditionthat the selling price shall be P2.86M, that the optionmoney of P50,000 shall be credited as partial paymentupon the consummation of sale, that the balance is tobe paid on or before 30 November 1989, and that in caseof default by Adelfa Properties to pay the balance, theoption is cancelled and 50% of the option money shall beforfeited and the other 50% refunded upon the sale ofthe property to a third party.

Meanwhile, a complaint was filed by the nephews andnieces of Rosario and Salud against Jose and Dominador

for annulment of the deed of sale in favor of Household

Corporation and recovery of ownership of the property.As a consequence, Adelfa Properties held payment ofthe full purchase price and suggested that they settlethe case with their nephews and nieces.

In 1990, Adelfa Properties caused to be annotated onthe TCT the exclusive option to purchase. On the sameday, Rosario and Salud executed a Deed of ConditionalSale in favor of Emylene Chua over the same parcel ofland for P3M, of which P1.5M was paid to the former onsaid date, with the balance to be paid upon the transferof title to the specified 1/2 portion. Atty. Bernardowrote Rosario and Salud informing the latter that inview of the dismissal of the case against them, AdelfaProperties was willing to pay the purchase price, and herequested that the corresponding deed of absolute sale

be executed. This was ignored by Rosario and Salud.Jimenez’ counsel sent a letter to Adelfa Propertiesenclosing therein a check for P25,000.00 representingthe refund of 50% of the option money paid under theexclusive option to purchase. Rosario and Salud thenrequested Adelfa Properties to return the owner’sduplicate copy of the certificate of title of SaludJimenez. Adelfa Properties failed to surrender thecertificate of title.

Rosario and Salud Jimenez filed a petition for theannulment of contract, while Emylene Chua, thesubsequent purchaser of the lot, filed a complaint in




intervention. RTC ruled in favor of the Jimenezes andCA affirmed.

ISSUE: W/N the contract between the Jimenezes andAdelfa Properties is an option contract

HELD: NO. The alleged option contract is a contract tosell, rather than a contract of sale. The distinctionbetween the two is important for in contract of sale,the title passes to the vendee upon the delivery of thething sold; whereas in a contract to sell, by agreementthe ownership is reserved in the vendor and is not topass until the full payment of the price. In a contract ofsale, the vendor has lost and cannot recover ownershipuntil and unless the contract is resolved or rescinded;whereas in a contract to sell, title is retained by thevendor until the full payment of the price, suchpayment being a positive suspensive condition andfailure of which is not a breach but an event thatprevents the obligation of the vendor to convey titlefrom becoming effective. Thus, a deed of sale isconsidered absolute in nature where there is neither astipulation in the deed that title to the property sold is

reserved in the seller until the full payment of theprice, nor one giving the vendor the right to unilaterallyresolve the contract the moment the buyer fails to paywithin a fixed period.

The parties never intended to transfer ownership toAdelfa Properties to completion of payment of thepurchase price, this is inferred by the fact that theexclusive option to purchase, although it provided forautomatic rescission of the contract and partialforfeiture of the amount already paid in case of default,does not mention that Adelfa Properties is obliged toreturn possession or ownership of the property as aconsequence of non-payment. There is no stipulationanent reversion or reconveyance of the property in theevent that petitioner does not comply with its

obligation. With the absence of such a stipulation, itmay legally be inferred that there was an impliedagreement that ownership shall not pass to thepurchaser until he had fully paid the price. Article 1478of the Civil Code does not require that such a stipulationbe expressly made. Consequently, an implied stipulationto that effect is considered valid and binding andenforceable between the parties. A contract whichcontains this kind of stipulation is considered a contractto sell. Moreover, that the parties really intended toexecute a contract to sell is bolstered by the fact thatthe deed of absolute sale would have been issued onlyupon the payment of the balance of the purchase price,as may be gleaned from Adelfa Properties’ letter dated

16 April 1990 wherein it informed the vendors that it “isnow ready and willing to pay you simultaneously withthe execution of the corresponding deed of absolutesale.”

2. CORONEL v CA

FACTS: In 1985, Coronel executed a document entitled"Receipt of Down Payment" in favor of Alcaraz forP50,000 dp of P1.24M as purchase price for an inheritedhouse and lot promising to execute a deed of absolute

sale as soon as it has been transferred in their name.The balance of P1.19M is due upon the execution of thedeed. When title to the property was finally transferredto their names, the Coronels sold the property toMabanag for P1.58M after she paid P300K dp. Because ofthis, they cancelled and rescinded the contract withAlcaraz by returning the P50,00 dp.

Alcaraz filed a complaint for specific performanceagainst the Coronels and cause the annotation of anotice of lis pendens on the TCT. Mabanag, on the otherhand, caused the annotation of a notice of adverseclaim with the RD. However, the Coronels executed aDeed of Absolute Sale in favor Mabanag. RTC ruled infavor of Alcaraz. CA affirmed.

ISSUE: Whether the “receipt of downpayment” serves acontract to sell or a conditional contract of sale

HELD: NO. The agreement could not have been acontract to sell because the sellers made no expressreservation of ownership or title to the subject parcel ofland. Furthermore, the circumstance, which preventedthe parties from entering into an absolute contract of

sale, pertained to the sellers themselves (the certificateof title was not in their names) and not the full paymentof the purchase price. Under the established facts andcircumstances of the case, had the certificate of titlebeen in the names of petitioners-sellers at that time,there would have been no reason why an absolutecontract of sale could not have been executed andconsummated right there and then. Moreover, unlike ina contract to sell, petitioners did not merely promise tosell the property to private respondent upon thefulfillment of the suspensive condition. On the contrary,having already agreed to sell the subject property, theyundertook to have the certificate of title changed totheir names and immediately thereafter, to execute thewritten deed of absolute sale. What is clearly

established by the plain language of the subjectdocument is that when the said “Receipt of DownPayment” was prepared and signed by petitioners, theparties had agreed to a conditional contract of sale,consummation of which is subject only to the successfultransfer of the certificate of title from the name ofpetitioners’ father to their names. The suspensivecondition was fulfilled on 6 February 1985 and thus, theconditional contract of sale between the parties becameobligatory, the only act required for the consummationthereof being the delivery of the property by means ofthe execution of the deed of absolute sale in a publicinstrument, which petitioners unequivocally committedthemselves to do as evidenced by the “Receipt of Down

Payment.”

3. PNB v CA

FACTS:• PNB owned a parcel of land which Lapaz Kaw Ngooffered to buy. Events under the first letter-agreement• PNB accepted Lapaz’s offer subject to certainstipulations. The important ones are the following:1. The selling price shall be P5.4million. Lapaz hadalready paid P100,000 as deposit.




2. Upon failure to pay the additional deposit worthP970,000, the P100,000 shall be forfeited and PNB shallbe authorized to sell the property to another.3. The property shall be cleared of its present tenants atthe expense of Lapaz.4. Sale was subject to other terms and conditions to beimposed.• Lapaz agreed, so she proceeded to clear the lot of itstenants at her own expense.• However, due to difficulties in money, she requestedfor adjustment of payment proposals, which the bankdenied. PNB also reminded her that she had not yet senther letter of conformity to the agreement reached andtold her to pay the full price of P5.4million. If not, thelot will be sold to other parties.• Lapaz requested for a reduction of the price as thesize of the land was substantially reduced. PNB agreed.• PNB still did not receive payment from Lapaz, andgave the latter the last chance to pay the balance of thedown payment. If she failed to pay, the sale shall becancelled and the P100,000 payment shall be forfeited.• Lapaz failed to pay, so P100,000 was forfeited and thesale never materialized. PNB leased the premises to a

certain Rivera.• Lapaz requested for a refund of her deposit in thetotal amount of P660,000 and asked that the forfeitedP100,000 be reduced to P30,000. PNB agreed. Eventsunder the second letter-agreement• Lapaz requested for a revival of the previouslyapproved offer to PNB. PNB approved.• All conditions as in the first agreement were the same,except for the purchase price and deposit. The pricewas P5.1million, the deposit was P200,000.• Lapaz refused, however, to conform to the conditionof vacating the premises at her expense as she hadalready done so under the first agreement. (Sheapparently considered this second letter-agreement as acontinuation of the first so she said that she was no

longer required to evict the tenants as she had alreadydone so.) Besides, according to her, the occupants ofthe property were tenants of PNB. PNB refused thisoffer.•To prevent the forfeiture of her P200,000 deposit, shesigned the letter-agreement. She told PNB that she waswilling to pay the remaining deposit of P800K as long asit was PNB who would clear the property. PNB refused,and forfeited the P200,000 of Lapaz.• PNB informed Lapaz that they had already decided tosell the property for not less than P7M.

ISSUES:1. Whether or not there was a perfected contract of

sale. – No. There was no perfected contract of sale.2. Whether or not the P100,000 or the P200,000 wasearnest money. – No. They were not earnest money.

HELD:• It is important to note that the first letter-agreementwas cancelled and thereafter no longer existed. Thesecond letter-agreement is not a contract of sale but acontract to sell whose conditions were not fulfilled,which prevented the obligations therein from obtainingobligatory force.• A contract to sell is one where the obligatory force of

the vendor’s obligation to transfer title is subordinatedto a happening of a future and uncertain event. So thatif the suspensive condition does not take place, theparties would stand as if the conditional obligationnever existed.• In the instant case, the second letter-agreement wasreplete with conditions that Lapaz had to fulfill beforethe sale could be executed. The sale was dependentupon Lapaz’s compliance with certain conditions (i.e.,payment, eviction of occupants). It was stipulated inthe contract that her failure to pay the additionaldeposit would allow PNB to forfeit the price and allowthem to sell the property to other parties.• This stipulation took the nature of a reservation oftitle in the vendor until full payment of the purchaseprice, or giving the vendor the right to unilaterallyrescind the contract the moment the buyer fails to paywithin the fixed period.• In addition, Lapaz’s refusal to evict the occupants onthe ground that she had already done so under the firstagreement was not justified as the two letter-agreements were different transactions all together.Her fulfillment of the conditions in the first one did not

carry over to the second one despite the identity of thestipulation.•The P100,000 and the P200,000 were not also earnestmoney. Article 1482, which defines earnest money,gives only a disputable presumption that prevails in theabsence of rebuttal evidence. In the instant case, theletter-agreements themselves were the evidence thatproved the intention of the parties to enter intonegotiations leading to a contract of sale mutuallyacceptable to both as to absolutely bind them. TheP100,000 and the P200,000 could not have been proof ofthe perfection of the sale as the letter-agreements werefull of condition precedents before the sale could beexecuted. The money thus given could be considered aspart of the consideration of PNB’s promise to reserve

the property for Lapaz.

4. BABASA v CA

FACTS: In 1981, a contract of “Conditional Sale ofRegistered Lands” was executed between the spousesVivencio and Elena Babasa as vendors and TabangaoRealty Inc. (Tabangao) as vendee over 3 parcels of landin Batangas. Since the certificates of title over the lotswere in the name of third persons who had alreadyexecuted deeds of reconveyance and disclaimer in favorof the Babasas, it was agreed that the total purchaseprice of P2,121,920.00 would be paid in the following

manner: P300,000.00 upon signing of the contract, andP1,821,920.00 upon presentation by the Babasas oftransfer certificates of titles in their name, free from allliens and encumbrances, and delivery of registerabledocuments of sale in favor of Tabangao within 20months from the signing of the contract. In themeantime, the retained balance of the purchase pricewould earn interest at 17% per annum or P20,648.43monthly payable to the Babasas until 31 December 1982.It was expressly stipulated that Tabangao would havethe absolute and unconditional right to take immediatepossession of the lots as well as introduce any




improvements thereon. On 18 May 1981 Tabangaoleased the lots to Shell Gas Philippines, Inc. (SHELL),which immediately started the construction thereon of aLiquefied Petroleum Gas Terminal Project, an approvedzone export enterprise of the Export Processing Zone.Tabangao is the real estate arm of SHELL. The partiessubstantially complied with the terms of the contract.Tabangao paid the first installment of P300,000.00 tothe Babasas while the latter delivered actual possessionof the lots to the former. In addition, Tabangao paidP379,625.00 to the tenants of the lots as disturbancecompensation and as payment for existing crops as wellas P334,700.00 to the owners of the houses standingthereon in addition to granting them residential lotswith the total area of 2,800 square meters. Tabangaolikewise paid the stipulated monthly interest for the 20-month period amounting to P408,580.80. Meanwhile, theBabasas filed Civil Case 519 and Petition 373 for thetransfer of titles of the lots in their name. However, 2days prior to the expiration of the 20-month period,specifically on 31 December 1982, the Babasas askedTabangao for an indefinite extension within which todeliver clean titles over the lots. They asked that

Tabangao continue paying the monthly interest ofP20,648.43 starting January 1983 on the ground thatCivil Case 519 and Petition 373 had not yet beenresolved with finality in their favor. Tabangao refusedthe request. In retaliation the Babasas executed anotarized unilateral rescission dated 28 February 1983to which Tabangao responded by reminding the Babasasthat they were the ones who did not comply with theircontractual obligation to deliver clean titles within thestipulated 20-month period, hence, had no right torescind their contract. The Babasas insisted on theunilateral rescission and demanded that SHELL vacatethe lots.

On 19 July 1983 Tabangao instituted an action forspecific performance with damages in the RTC Batangas

City to compel the spouses to comply with theirobligation to deliver clean titles over the properties.The Babasas moved to dismiss the complaint on theground that their contract with Tabangao became nulland void with the expiration of the 20-month periodgiven them within which to deliver clean certificates oftitle. SHELL entered the dispute as intervenor prayingthat its lease over the premises be respected by theBabasas. RTC ruled in favor of Tabangao and Shell. CAaffirmed.

ISSUE: W/N there was a contract of absolute salebetween the Babasa and Tabagao

HELD: YES. Although denominated “Conditional Sale ofRegistered Lands,” the contract between the spousesand Tabangao is one of absolute sale. Aside from theterms and stipulations used therein indicating such kindof sale, there is absolutely no proviso reserving title inthe Babasas until full payment of the purchase price,nor any stipulation giving them the right to unilaterallyrescind the contract in case of non-payment. A deed ofsale is absolute in nature although denominated aconditional sale” absent such stipulations. In such cases,ownership of the thing sold passes to the vendee uponthe constructive or actual delivery thereof. In the

instant case, ownership over Lots 17827-A, 17827-B and17827-C passed to Tabangao both by constructive andactual delivery. Constructive delivery was accomplishedupon the execution of the contract of 11 April 1981without any reservation of title on the part of theBabasas while actual delivery was made when Tabangaotook unconditional possession of the lots and leasedthem to its associate company SHELL which constructedits multi-million peso LPG Project thereon.

In Romero v. Court of Appeals and Lim v. Court ofAppeals, the Court distinguished between a conditionimposed on the perfection of a contract and a conditionimposed merely on the performance of an obligation.While failure to comply with the first condition results inthe failure of a contract, failure to comply with thesecond merely gives the other party the option to eitherrefuse to proceed with the sale or to waive thecondition. In the present case, the spouses’ contractwith Tabangao did not lose its efficacy when the 20-month period stipulated therein expired without thespouses being able to deliver clean certificates of titlesuch that Tabangao may no longer demand performanceof their obligation.

5. VALDEZ v CA

FACTS: Carlos Valdez Sr. and Josefina Valdez wereowners of a parcel of land. When Carlos Sr. died,Josefina subdivided the property into eight lots. On May1, 1979, she executed a special power attorney,authorizing her son Carlos Jr, who was a practicinglawyer, to sell a portion thereof (lots 3-C and 3-D) toJose Lagon for P80,000. Part of consideration was alsofor Lagon to transfer the Rural Bank of Isulan to thesubject property, and to construct a commercialbuilding beside the bank. Without knowledge ofJosefina, Carlos Jr. entered into a different agreement,selling the property for P40/square meter, and it wasindicated in the deed that the P80,000 had already beenpaid in cash. A downpayment of P20,000 was paid by thewife of Lagon, to which Josefina issued a receipt. CarlosJr. prepared an affidavit, signed by Lagon, the transferof the bank and the construction of commercial buildingas part of the condition, else the deed of absolute saleshall be null and void without need of demand. Lagonfailed to comply with the considerations stated in thedeed, to which the Valdez refused to deliver the torrenstitle. Lagon had Lot 3-C to be subdivided into threeseparate lots, to which he paid the professionalservices. Josefina used the subdivision survey, and soldLot 3-C-2 to PCIB, evidenced by a deed of absolute sale,

exectued a real mortgage over Lot 3-C-3 to DBP, andexecuted a deed of absolute sale in favor of Carlos Jr.over Lot 3-C-1. She also sold lot 3-D to Engr. RodolfoDelfin. Lagon filed a complaint against Josefina andCarlos Jr for specific performance and damages. TrialCourt ruled in favor of Lagon. CA reversed, but reverseditself, ruling in favor or Lagon.

ISSUE: Whether the agreement was a contract of sale orcontract to sell / Whether the contract was ratified

RULING: It is a contract of sale. The nature of the




contract must be inferred from the express terms andagreement and from the contemporaneous andsubsequent acts of the parties thereto. When Josefina,through her son acting a an attorney-in-fact, executed adeed of absolute sale in favor of Lagon, she did notreserve the ownership of the property, subject to thecompletion of payment of the consideration. However,Carlos Jr. exceeded his authority when he entered into adifferent agreement with Lagon, making the contractunenforceable, unless ratified. In this case, it wasratified when Josefina accepted the downpayment ofP20,000 and issued a receipt as a consequence ofratifying the contract. It must be noted, however, thatan affidavit was signed by Lagon as part of theconsideration, to transfer the Rural Bank of Isulan aswell as constructing a commercial bank beside the bank,both failed to perform by Lagon, making the deed ofabsolute sale null and void. It cannot be considered asan afterthought contrived by Carlos Jr. since Lagonadmitted in court the authenticity of the affidavit, andits binding effect against him. There was no need torescind the contract because it was clearly stipulatedthat failure to comply with such obligation makes the

deed null and void, though petitioners are obliged torefund the respondent's partial payment of the subjectproperty.

6. DIGNOS v CA

FACTS: Dignos is the owner of a parcel of land in Lapu-Lapu City, which they sold to Jabil for P28,000, payablein 2 installments and with an assumption ofindebtedness with First Insular Bank of Cebu forP12,000. However, Dignos also sold the same land infavor of Cabigas, who were US citizens, for P35,000. ADeed of Absolute Sale was executed in favor of theCabigas spouses.

Jabil filed a suit against Dignos with CFI of Cebu. RTCruled in favor of Jabil and declared the sale to Cabigasnull and void. On appeal, CA affirmed RTC decision withmodification.

ISSUE: W/N the contract between Dignos and Jabil is acontract of sale (as opposed to a contract to sale)

HELD: YES. A deed of sale is absolute in nature althoughdenominated as a “Deed of Conditional Sale” wherenowhere in the contract in question is a proviso orstipulation to the effect that title to the property sold isreserved in the vendor until full payment of thepurchase price, nor is there a stipulation giving the

vendor the right to unilaterally rescind the contract themoment the vendee fails to pay within a fixed period. Inthe present case, there is no stipulation reserving thetitle of the property on the vendors nor does it givethem the right to unilaterally rescind the contract uponnon-payment of the balance thereof within a fixedperiod.

While there was no constructive delivery of the landsold in the present case, as subject Deed of Sale is aprivate instrument, it is beyond question that there wasactual delivery thereof. As found by the trial court, theDignos spouses delivered the possession of the land in

question to Jabil as early as 27 March 1965 so that thelatter constructed thereon Sally’s Beach Resort alsoknown as Jabil’s Beach Resort in March, 1965; MactanWhite Beach Resort on 15 January 1966 and Bevirlyn’sBeach Resort on 1 September 1965. Such facts wereadmitted by the Dignos spouses.

7.

UNIVERSITY OF THE PHILIPPINES v DELOS ANGELES

FACTS:• UP was given a land grant which shall be developed toobtain additional income for its support.• UP and ALUMCO entered into a logging agreementwhere ALUMCO was granted the exclusive authority foran extendible period of 5 years (by mutual agreement),to cut and remove timber from the land grantinconsideration of royalties and fees to be paid to UP.• ALUMCO incurred an unpaid amount of P219,363. UPdemanded payment but it failed to pay. ALUMCOreceived a letter that UP would rescind or terminatetheir logging agreement. They executed an instrument“Acknowledgement of Debt & Proposed Manner of

Payment” which the UP President approved. ALUMCOagreed to give their creditor (UP) the right to considerthe logging agreement as rescinded without necessity ofany judicial suit and creditor will be entitled to P50,000for liquidated damages.• ALUMCO continued logging but still incurred unpaidaccounts. UP then informed them that as of that date,they considered rescinded the agreement and of nofurther legal effect. UP then filed for collection of theunpaid accounts and the trial court gave thempreliminary injunction to prevent ALUMCO fromcontinuing their logging.• Through a public bidding, the concession was awardedto Sta. Clara Lumber Company and a new agreementwas entered into between them and UP.• ALUMCO tried to enjoin the bidding but the contractwas already concluded and Sta. Clara started itsoperation.• Upon motion by ALUMCO, UP was declared incontempt of court for violating the writ of injunctionagainst them.• ALUMCO’s contentions are the following:

a. It blamed its former general manager for theirfailure to pay their account.

b. Logs cut were rotten; thus, they were unable tosell them.

c. UP’s unilateral rescission was invalid without acourt order.

ISSUE: W/N UP can validly rescind its agreement withALUMCO even without court order. –Yes. UP canunilaterally rescind the agreement.

HELD:• UP and ALUMCO expressly stipulated in their“Acknowledgement of Debt” that upon default ofpayment, creditor UP has the right and power to rescindtheir Logging Agreement without the necessity of ajudicial suit.• There is nothing in the law that prohibits the partiesfrom entering into agreements that violation of terms of




the contract would cause its cancellation even withoutcourt intervention.• Act of a party in treating a contract as cancelled onaccount of any infraction by the other party must bemade known to the other and is always provisional,being subject to scrutiny and review by the propercourt.

If the other party deems the rescission unjustified, hefree to resort to judicial action. The court shall, afterdue hearing, decide if the rescission was proper, inwhich case it will be affirmed and if not proper, theresponsible party will be liable for damages.• A party who deems the contract violated may considerit rescinded and act accordingly, even without courtaction but it proceeds at its own risk. Only the finaljudgment of the court will conclusively settle whetherthe action taken was proper or not. But the law does notprohibit the parties from exercising due diligence tominimize their own damages.• UP was able to show a prima facie case of breach ofcontract and default in payment by ALUMCO. Excuses byALUMCO are not proper for them to suspend theirpayments.

• Thus, the Supreme Court lifted the injunction.

8. PALAY INC v CLAVE

FACTS: In 1965, Palay Inc., through its PresidentOnstott, executed in favor of Dumpit (respondent) aContract to Sell a parcel of land in Antipolo, RIzal. Thesale was for P23,300 with 9% interest p.a., payable witha downpayment of P4,660 and monthly installments of

P246.42 until fully paid. Par. 6 of the contract providedfor automatic extrajudicial rescission upon default inpayment of any monthly installment after the lapse of90 days from the expiration of the grace period of amonth, without need of notice and forfeiture of allinstallments paid.

Dumpit was able to pay the dp and severalinstallments amounting to P13,722.50, with the lastpayment made on Dec. 5, 1967 for installments up toSept. 1967.

In 1973, Dumpit requested Palay Inc to update hisoverdue accounts and sought its permission to assign hisrights to Dizon. However, Palay informed him that hisContract to Sell had long been rescinded pursuant toPar. 6 and that the lot had already been resold.

Dumpit filed a complaint with the NHA forreconveyance with an alternative prayer for refund.NHA ruled in favor of Dumpit, stating that the rescissionis void for lack of either judicial or notarial demand.Office of the President affirmed.

ISSUE:1. W/N notice or demand may be dispensed with by

stipulation in a contract to sell2. W/N Palay should be liable for the refund of theinstallment payments made by Dumpit

HELD:1. NO. Although a judicial action for rescission of acontract is not necessary where the contract providesfor its revocation and cancellation for violation of any ofits terms and condition, jurisprudence has shown that at

least, there was a written notice sent to the defaulterinforming him of the rescission. Par. 6 cannot beconsidered a waiver of Dumpit's right to be notifiedbecause it was a contract of adhesion. A waiver must becertain and unequivocal and intelligently made; suchwaiver follows only where the liberty of choice has beenfully accorded.

Moreover, the indispensability of notice ofcancellation to the buyer is protected under RA 6551. Itis a matter of public policy to protect the buyers of realestate on installment payments against onerous andoppressive conditions. Waiver of notice is one suchonerous and oppressive condition to buyers of realestate on installment payments.

2. YES. As a consequence of the rescission of thecontract, right to the lot should be restored to Dumpitor the same should be replaced by another acceptablelot. However, considering that the lot had been resold

to a third person, Dumpit is entitled to refund of theinstallments paid plus legal interest of 12%.

9.

LIM v CA

FACTS: In 1965, Orlinos (3 co-owners) mortgaged aparcel of land in Diliman, QC to Progressive CommercialBank as security for a P100K loan. They failed to pay theloan and the mortgage was foreclosed, where the bankacquired the property as the highest bidder at theauction sale. The bank transferred all its assets,

including the said land, to Pacifico Banking Corp. (PBC).In 1975, the Orlinos, who remained in possession of theland, made a written offer to PBC to redeem theproperty. In response, the bank agreed provided thatP160K should be paid in full upon signing of the Deed ofAbsolute Sale and that as additional consideration,Orlinos' share on a property in Caloocan City should beconveyed to the bank.

After a year, PBC advised the Orlinos that if thetransaction will not be finalized in 30 days, it would beoffered to other buyers. However, negotiations ensuedbetween them until 2 years after, PBC sold the land tospouses Lim for P300K.

The Orlinos filed a complaint against PBC and Lim forthe annulment of the deed of sale on the ground thatthe subject land had bee earlier sold to them. RTC heldthat PBC and Lim acted in bad faith knowing that therewas a cloud in the status of the property. CA affirmed.

ISSUE: Whether the transaction between PBC and theOrlinos is a contract to sell or a contract of sale

HELD: CONTRACT TO SELL. There was no immediatetransfer of title to the Orlinos as what would havehappened if there had been a sale. The supposed salewas never registered and there was no new TCT in favorof the Orlinos. They also acknowledged that the title tothe property would remain with the bank until theirtransaction shall be finalized. Moreover, theconsideration agreed upon was never paid to convertthe agreement into a contract of sale. As payment of




the consideration was a positive suspensive condition,title to the property never passed to the privaterespondents. Thus, the property was legallyunencumbered and still belonged to PBC when it wassold to Lim.

On RESCISSION: Although a contract to sell imposesreciprocal obligations and cannot be terminatedunilaterally by either party, judicial rescission isrequired under Art. 1911 of the CC. However, this rule isnot absolute. Jurisprudence has shown that a party maytake it upon itself to consider the contract rescindedand act accordingly albeit subject to judicialconfirmation, which may or may not be given. It is truethat the rescinding party takes a risk that its action maynot be approved by the court. The Orlinos obligatedthemselves to deliver to PBC P160K and their share onthe property in Caloocan City. However, the Orlinos didnot act on their obligations. PBC could not be requiredto wait for them forever. Thus, PBC had the right toconsider the contract to sell between them terminatedfor non-payment of the stipulated consideration.

10.

AFP MUTUAL BENEFIT ASSN INC v CA

FACTS: This case involved Solid Homes Inc's MR of the

SC's decision reversing the CA's decision and ordering theRD to cancel the notice of lis pendens on the titlesissued to AFPMBAI, declaring it as buyer in good faithand for value.

Investco Inc and Solid Homes Inc entered into acontract to sell. During this time, the titles to theQuezon City and Marikina properties had not beentransferred in the name of Investco Inc as asignee of theowners, Angela Perez Staley and Antonio Perez. Thus,Investco Inc merely agreed to sell and Solid Homes tobuy the former's rights and interest in the properties.However, Solid Homes Inc. reneged or defaulted on itsobligation. Thus, Investco Inc rescinded extra-judiciallysuch contract to sell. After such event, AFPMBAI andInvestco Inc entered into a contract of absolute sale,wherein the former paid in full, causing the transfer oftitles in its name.

ISSUE: W/N Investco Inc properly rescinded its contractto sell and buy with Solid Homes Inc

HELD: YES. Upon Solid Homes Inc's failure to complywith its obligation under the contract, there was no

need to judicially rescind the contract. Failure by one ofthe parties to abide by the conditions in a contract tosell resulted in the rescission of the contract.

CONDITIONS AND WARRANTIES

1. LA FORTEZA v MACHUCA

FACTS:* The disputed property in this case consists of a houseand lot located at Marcelo Green Village, Paranaque,which is registered in the name of the late FranciscoLaforteza, although it is conjugal in nature

* Lea Zulueta-Laforteza executed a Special Power ofAttorney in favor of Robert and Gonzalo Laforteza,appointing both as her attorney-in-fact authorizing themjointly to sell the subject property and sign anydocument for the settlement of the estate of the lateFrancisco Laforteza* Michael Laforteza also executed a Special Power ofAttorney in favor of Robert and Gonzalo Lafortezagranting them the same authority. Both agencyinstruments contained a provision that in any documentor paper to exercise authority granted, the signature ofboth attorneys-in-fact must be affixed* Dennis Laforteza executed an SPA in favor of Robert L.for the purpose of selling the subject property. A yearlater, he executed another SPA in favor of Robert andGonzalo L. naming both attorneys-in-fact for thepurpose of selling the subject property and signing anydocument for the settlement of the estate of the lateFrancisco LAforteza. Both agency instruments containedsame provisions as that mentioned above.* In the exercise of the above authority, the heirs of thelate Franciso L. represented by Robert and Gonzalo Lentered into a Memorandum of Agreement (Contract toSell) with Machuca over the subject property for thesum of 630,000 payable as follows:

-30,000 –earnest money, to be forfeited in favor ofLafortezas if the sale is not effected due to the fault ofMachuca

-600,000 – upon issuance of the new certificate oftitle in the name of late Francisco Laforteza and uponexecution of an extra judicial settlement of thedecedent’s estate with sale in favor of Machuca

* Paragraph 4 of the Memorandum contained a provisionthat: upon issuance of the new title, the Machuca shallbe notified in writing and he shall have 30 days toproduce the balance of 600k which shall be paid toLaforteza upon execution of the extrajudicialsettlement* Machuca paid earnest money of 30k plus rentals forsubject property*Upon failure of Machuca to comply with the payment ofthe balance, Lafortezas informed the formed that theywere canceling the contract* Machuca requested that he intends to tender paymentof the balance which was refused by the Lafortezas whoinsisted for the rescission of the memorandum.* Machuca filed an action for specific performance* TC: ruled in favor of Machuca which the CA affirmed

ISSUES: W/N THE CONTRACT EXECUTED BY THE PARTIESIS A CONTRACT OF SALE OR A CONTRACT TO SELL

RULING: CONTRACT OF SALE AND LEASEThe Memorandum of Agreement shows that the

transaction between the petitioners and respondent wasone of sale and lease

A contract of sale is a consensual contract and isperfected at the moment there is a meeting of the




minds upon the thing which is the object of the contractand upon the price. From that moment the parties mayreciprocally demand performance subject to theprovisions of the law governing the form of contracts.

In this case, there was a perfected agreementbetween the petitioners and respondent wherebyLafortezas obligated themselves to transfer theownership of and deliver the house and lot and Machucato pay the price amounting to 630k.

All the elements of a contract of sale were thuspresent. However, the balance of the purchase pricewas to be paid only upon the issuance of the newcertificate of title in lieu of the one in the name of thelate Francisco Laforteza and upon the execution of anextrajudicial settlement of his estate.

Prior to the issuance of the “reconstituted” title,Machuca was already placed in possession of the houseand lot as lessee thereof for 6 months at a monthly rateof 3,500k. It was stipulated that should the issuance ofthe new title and execution of the extrajudicialsettlement be completed prior to expiration of 6monthperiod, Machuca would be liable only for the rentalspertaining to the period commencing from the date of

the execution of the agreement up to the executon ofthe extrajudicial settlement.It was also expressly stipulated that if after the

expiration of the 6 month period, the lost title was notyet replaced and the extrajudicial partition was not yetexecuted, Machuca would no longer be required to payrentals and would continue to occupy and use thepremises until the subject condition was complied withby Lafortezas.

The 6-month period during which Machuca would be inpossession of the property as lessee, was clearly not aperiod within which to exercise such option. An option isa contract granting a privilege to buy or sell within anagreed time and at a determined price.

In this case, the 6-month period merely delayed the

demandability of the contract of sale and did notdetermine perfection for after the expiration of the 6month period, there was a absolute obligation on thepart of Lafortezas and Machuca to comply with theterms of the sale.

The fact that after the expiration of the 6-monthperiod, Machuca would retain possession of the houseand lot without need of paying rentals for the usetherefore, clearly indicated that the partiescontemplated that ownership over the property wouldalready be transferred by that time.

What further indicated that this was a contract of salewas the payment of earnest money. Earnest money issomething of value to show that buyer was really in

earnest, and given to the seller to bind the bargain.Whenever earnest money is given in a contract of sale,it is considered as part of the purchase price and proofof the perfection of the contract.

2. HEIRS OF PEDRO ESCANLAR v CA

FACTS: The Heirs of Cari-an executed a Deed of Sale ofRights, Interests, and Participation over a parcel ofundivided land in favor of the Heirs of Escanlar. It wasstipulated that “the contract shall become effectiveonly upon approval of the CFI of Negros Occidental.”

The Heirs of Escanlar failed to pay the balance of thepurchase price, but the Heirs of Cari-an neverdemanded payment and continued to accept belatedpayments. They later on sold their interests over thesame land to the Chuas and assailed the validity of theDeed of Sale they executed with the Heirs of Escanlar.The lower courts annulled the contract for not havingthe approval of the court as stipulated.

ISSUE: W/N the Deed of Sale to the Heirs of Escanlar isvalid

HELD: YES. There is a distinction between the validityand effectivity. Only the effectivity was made subject tothe condition. So long as all the requisites (consent,subject matter, and price) are present, as in this case,the contract is already perfected. Nonetheless, theintent of the parties clearly manifests their intention togive efficacy to the contract. In fact, the vendorscontinued to accept payments. That being the case, thesale in favor of the Heirs of Escanlar must be preferredas it is a valid and subsisting one.

3.

POWER COMMERCIAL AND INDUSTRIAL CORP. v CA

FACTS: Power Commercial Corp entered into a contractof sale with the Quiambao spouses. It agreed to assumethe mortgages thereon. A Deed of Absolute Sale withAssumption of Mortgage was executed. PowerCommercial Corp failed to settle the mortgage debtcontracted by the spouses, thus it could not undertakethe proper action to evict the lessees on the lot. PowerCommercial Corp thereafter sought to rescind thecontract of sale alleging that it failed to take actual andphysical possession of the lot.

ISSUE: W/N there was a breach of warranty on the partof the spouses that it would evict the lessees

HELD: NO. First, such condition that the Quiambaospouses would have to evict the lessees was notstipulated in the contract. Thus, it cannot be considereda condition imposed upon its perfection. In fact, PowerCommercial Corp. was well aware of the presence of thetenants therein. It was also given control over the saidlot and it endeavored to terminate the occupation of itsactual tenants. Also, since it was Power Commercialthat knowingly undertook the risk of evicting thelessees, it cannot now claim that there was a breach ofwarranty on the part of the vendor.

4.

GUINHAWA v PEOPLE

FACTS:* Jaime Guinhawa was engaged in the business of sellingbrand new motor vehicles, including Mitsubishi vans,under the business name of Guinrox Motor Sales. Hisoffice and display room for cars were located alongPanganiban Avenue, Naga City. He employed Gil Azoteaas his sales manager.




* Guinhawa purchased a brand new Mitsubishi L-300Versa Van from the Union Motors Corporation (UMC) inPaco, Manila.* The van bore Plate no. DLK 406. Guinhawa’s driver,Olayan, drove the van from Manila to Naga City.* However, while the van was traveling along thehighway in Daet, Camarines Norte, Olayan suffered aheart attack. The van went out of control, traversed thehighway onto the opposite lane, and was ditched intothe canal parallel to the highway. The van wasdamaged, and the left front tire had to be replaced.* The van was repaired and later offered for sale inGuinhawa’s showroom.* Spouses Ralph and Josephine Silo wanted to buy a newvan for their garment business; they purchased items inManila and sold them in Naga City.* Unaware that the van had been damaged and repairedon account of the accident in Daet, the couple decidedto purchase the van for 591k. Azotea, sales manager,suggested that the couple make a downpayment of118,200, and pay the balance of the purchase price byinstallments via a loan from the United Coconut PlantersBank (UCPB), with the van as collateral.

* Azotea offered to make the necessary arrangementswith UCPB for the consummation of the loan transactionwherein the couple agreed.* The spouses executed a Promissory Note for theamount of 692,676 as payment of the balance on thepurchase price, and as evidence of the chattel mortgageover the van in favor of UCPB.* The couple arrived in Guinhawa’s office to takedelivery of the van. The latter executed the deed ofsale, and the couple paid the 161,470 downpayment, forthey were issued a receipt. They were furnished aService Manual which contained the warranty terms andconditions.* Azotea instructed the couple on how to start the vanand to operate its radio. Ralph Silo no longer conducted

a test drive; he and his wife assumed that there were nodefects in the van as it was brand new.* Josephine Silo, accompanied by Glenda Pingol, went toManila on board the van, with Glenda’s husband as thedriver. On their return trip to Naga from Manila, thedriver heard a squeaking sound, which seemed to becoming from underneath the van. The squeaking soundpersisted and upon examination at the Shell gasolinestation, it was found out that some parts underneaththe van had been welded.* Guinhawa insisted that the defects were mere factorydefects. As the defects persisted, the spouses requestedthat Guinhawa replace the van with 2 Charade-Daihatsuvehicles within a week or two, with the additional costs

to be taken from their downpayment.* The spouses brought the car to Rx Auto Clinic forexamination wherein the mechanic discovered that itwas the left front stabilizer that was producing theannoying sound, and that it had been repaired.* Josephine Silo filed for rescission of the sale andrefund of their money.* They instituted also a criminal complaint for otherdeceits made by Guinhawa by making fraudulentrepresentations about the car being brand new and thatit never encountered an accident.

ISSUE: W/N THERE WERE FRAUDULENTREPRESENTATIONS MADE BY THE SELLER, GUINHAWA BYVIRTUE OF THE CONTRACT OF SALE EXECUTED BETWEENHIM AND THE COUPLE

RULING: YESArticle 1389 of NCC provides that failure to disclose

facts when there is a duty to reveal them constitutesfraud. In a contract of sale, a buyer and seller do notdeal from equal bargaining positions when the latter hasknowledge, a material fact which, if communicated tothe buyer, would render the grouns unacceptable or, atleast, substantially less desirable.

If, in a contract of sale, the vendor knowingly allowedthe vendee to be deceived as to the thing sold in amaterial matter by failing to disclose an intrinsiccircumstance that it vital to the contract, knowing thatthe vendee is acting upon the presumption that no suchfact exists, deceit is accomplished by the suppression ofthe truth.

In this case, Guinhawa and Azotea knew that the vanhad figured in an accident, was damaged and had to berepaired. Nevertheless, the van was placed in the

showroom, thus making it appear to the public that itwas a brand new unit. Guinhawa was mandated toreveal the foregoing facts to Silos but they evenobdurately declared when they testified that the courtdid not figure in an accident, nor had it been repaired.

Even when Guinhawa was apprised that Silos haddiscovered the van’s defects, the former agreed toreplace the van, but changed his mind and insisted thatit must be first sold.

Guinhawa is not relieved of his criminal liability fordeceitful concealment of material facts, even if Silosmade a visual inspection of the van’s interior andexterior before she agreed to buy and failed to inspectsits under chassis.

5. ANG v CA

FACTS:* Under a car-swapping scheme, Bruno Soledad sold hisMitsubishi GSR sedan 1982 model to Jaime Ang by aDeed of Absolute Sale* For his part, Ang conveyed to Soledad his MitsubishiLancer model 1988 also by a Deed of Absolute Sale* As Ang’s car was of a later model, Soledad paid him anadditional 55,000* Ang, a buyer and seller of used vehicles, later offeredthe Mitsubishi GSR for sale through Far Eastern Motors, asecond hand auto display center. The car was even sold

to a certain Paul Bugash for 225k.* Before the Deed could be registered in Bugash’s name,however, the vehicle was seized by virtue of a writ ofreplevin on account of the alleged failure of RonaldoPanes, the owner of the car prior to Soledad, to pay themortgage debt constituted thereon.* To secure the release of the vehicle, Ang paid BAFinance the amount of 62,038.47. Soledad refused toreimburse the said amount, despite repeated demands,drawing Ang to charge him for estafa with abuse ofconfidence.




ISSUE: W/N THE COMPLAINT HAD PRESCRIBED HINGES ONA DETERMINATION OF WHAT KIND OF WARRANTY ISPROVIDED IN THE DEED OF ABSOLUTE SALE

RULING: YESA warranty is a statement or representation made by

the seller of goods, contemporaneously and as part ofthe contract of sale, having reference to the character,quality or title of the goods, and by which he promisesor undertakes to insure that certain facts are or shall beas he then represents them.

Warranties by the seller may be express or implied.In declaring that Soledad owned and had clean title to

the vehicle at the time of the deed of absolute sale wasforged, he gave an implied warranty of title. In pledgingthat he “will defend the same from all claims or anyclaim whatsoever and will save the vendee from any suitby the government of the Republic of the Phils, Soledadgave a warranty against eviction.

Given Ang’s business of buying and selling usedvehicles, he could not have merely relied on Soledad’saffirmation that the car was free from liens andencumbrances. He was expected to have thoroughly

verified the car’s registration and related documents.Since what Soledad, as seller, gave was an impliedwarranty, the prescriptive period to file a breachthereof is 6 months after the delivery of the vehicle,following Art. 1571. But even if the date of filing of the

action is reckoned from the date, Ang instituted his firstcomplaint for damages and not when filed the complaintsubject of this case, the action just the same hadprescribed, it having been filed 16 months after thedate of delivery of the vehicle.

On the basis of breach of warranty against eviction,essential requisites thereof were not met. For one,there is no judgment, which deprived Ang of thevehicle. For another, there was no suit for evictionwhich Soledad as seller was impleaded as co-defendantat the instance of the vendee.

Even under the principle of solutio indebiti, Angcannot recover from Soledad the amount he paid BAFinance. For, Ang settled the mortgage debt on his ownvolition under the supposition that he would resell thecar. It turned out that he did pay BA Finance in order toavoid returning the payment made by the ultimatebuyer Bugash.

6.

NUTRIMIX FEEDS CORP v CA

FACTS: Evangelista spouses purchased feeds from

Nutrimix. They refused to pay their unsettled debtclaiming that thousands of their livestock were poisonedby the Nutrimix feeds. Nutrimix sued them for collectionof money. The spouses countered with a suit for

damages. Various expert witnesses were presentedduring the trial.

ISSUE: W/N Nutrimix should be held liable for the deathof the livestock

HELD: NO. In alleging that there was a violation ofwarranty against hidden defects, the spouses assumedthe burden of proof. However, this they failed toovercome. Under the law, the defect must exist at the

time the sale was made and at the time the product leftthe hands of the seller, which the spouses failed toprove. The feeds were belatedly tested—3 months afterthe death of the broilers and hogs. This means that at

that time, they may have already been contaminated.They failed to prove that the feeds delivered to betested were the same feeds that allegedly poisoned theanimals. It is also common practice for them to mixdifferent kinds of feeds. The mere death of the animalsdoes not raise a prima facie case of breach of warranty.In this case, the evidence presented by the spouses areonly circumstantial.

The remedies of breach of warranty against hiddendefects are either withdrawal from the contract or to

demand a proportionate reduction of the price plusdamages in either case. In this case, though the spousesfailed to make out their case, hence they should beliable for their debt.

EXTINGUISHMENT OF SALE

1. ROBERTS v PAPIO

FACTS:* The Spouses Papio were the owners of a 274 sqmresidential lot located in Makati. In order to secure a59k loan from the Amparo Investments Corp, they

executed a real estate mortgage on the property. UponPapio’s failure to pay the loan, the corporation filed apetition for the extrajudicial foreclosure of themortgage.* Since the couple needed money to redeem theproperty and to prevent the foreclosure of the realestate mortgage, they executed a Deed of Absolute Saleover the property in favor of Martin Papio’s cousin,Amelia Roberts.* Of the 95k purchase price, 59k was paid to the AmparoInvestments Corp, while the 26k difference was retainedby the spouses. As soon as the spouses had settled their

obligation, the corporation returned the owner’sduplicate TCT which was then delivered to AmeliaRoberts.* The parties (A. Roberts as lessor and Martin Papio aslessee) executed a 2-year contract of lease. Thecontract was subject to renewal or extension for a like

period at the option of the lessor, the lessee waivingthereby the benefits of an implied new lease. The lesseewas obliged to pay monthly rentals of 800 to bedeposited in the lessor’s account.* A new TCT was issued in the name of Amelia Robertsas owner. Martin Papio paid the rentals and thereafterfor another year. He then failed to pay rentals, but heand his family nevertheless remained in possession ofthe property for almost 13 years.* A. Roberts reminded Papio that he failed to paymonthly rentals amounting to a total liability of 410k.She demanded that Papio vacate the property within 15




days from receipt of the letter in case he failed to settlethe amount.* A. Roberts filed a complaint for unlawful detainer anddamages against Martin Papio

ISSUE: W/N THE DEED OF ABSOLUTE SALE ANDCONTRACT OF LEASE EXECUTED BY THE PARTIES IS ANEQUITABLE MORTGAGE OVER THE PROPERTY

RULING: NOAn equitable mortgage is one that, although lacking in

some formality, form or words, or other requisitesdemanded by a statute, nevertheless reveals theintention of the parties to charge a real property assecurity for a debt and contain nothing impossible orcontrary to law. A contract between the parties is anequitable mortgage if the following requisites arepresent: a. the parties entered into a contractdenominated as a contract of sale and b. the intentionwas to secure an existing debt by way of mortgage. Thedecisive factor is the intention of the parties.

In an equitable mortgage, the mortgagor retainsownership over the property but subject to foreclosure

and sale at public auction upon failure of the mortgagorto pay his obligation.In contrast, in a pacto de retro sale, ownership of the

property sold is immediately transferred to the vendee aretro subject only to the right of the vendor a retro torepurchase the property upon compliance with legalrequirements for the repurchase. The failure of thevendor a retro to exercise the right to repurchase withinthe agreed time vests upon the vendee a retro, byoperation of law, absolute title over the property.

One repurchases only what one has previously sold.The right to repurchase presupposes a valid contract ofsale between same parties. By insisting that he hadrepurchased the property, Papio thereby admitted thatthe deed of absolute sale executed by him and Roberts

was in fact and in law a deed of absolute sale and not anequitable mortgage; he had acquired ownership over theproperty based on said deed.

Respondent, is thus estopped from asserting that thecontract under the deed of absolute sale is an equitablemortgage unless there is an allegation and evidence ofpalpable mistake on the part of respondent, or a fraudon the part of Roberts.

2.

MISTERIO v CEBU STATE COLLEGE OF SCIENCE ANDTECHNOLOGY

FACTS: Asuncion sold to Sudlon Agricultural High School

(SAHS) a parcel of land, reserving the right torepurchase the same in case (1) the school ceases toexist, or (2) the school transfers location. She had herright annotated. She died. By virtue of BP 412, SAHS wasmerged with the Cebu State College, effective June1983. In 1990, the heirs of Asuncion sought to exercisetheir right to redeem, claiming that school has ceased toexist.

ISSUE: W/N the heirs of Asuncion may still exercise theirright to redeem the property

HELD: NO. Their right has already prescribed.Considering that no period for redemption was agreedupon, the law imposes a 4-year limitation. This meansthat from the time the school was merged to Cebu StateCollege, they had 4 years, or until June 1987 to redeemthe property. However, they failed to do so within theperiod. Failure to redeem automatically consolidatesownership in favor of the vendee. The fact that the rightto redeem was annotated does not make itimprescriptible, it only serves to notify third persons.

3. SOLID HOMES INC v CA

FACTS:* Solid Homes executed in favor of State Financing

Center a Real Estate Mortgage on its propertiesembraced in the TCT, in order to secure the payment ofa loan of 10M which the former obtained from thelatter.

* A year later, Solid Homes applied for and wasgranted an additional loan of 1, 511,270.03 by StateFinancing, and to secure its payment, Solid executed an

amendment to real estate mortgage whereby the creditssecured by the first mortgage on the abovementionedproperties were increased from 10M to 11,511,270.03.

* Solid homes obtained additional credits andfinancing facilities from State Financing in the sum of1,499,811.97 and to secure its payment, the formerexecuted the amendment to real estate mortgagewhereby the mortgage executed on its properties wasagain amended so that the loans or credits securedthereby were further increased from 11,511, 270.03 to13,011,082.00

* When the obligations became due and payable, StateFinancing made repeated demands upon Solid homes forthe payment thereof, but the latter failed to do so.

* State Financing filed a petition for extrajudicialforeclosure of the mortgages who in pursuance of thepetition, issued a notice of sheriff’s sale whereby themortgaged properties of Solid homes and theimprovements existing thereon, including the V.V.Soliven Towers II Building were set for public auctionsale in order to satisfy the full amount of Solid homes’mortgage indebtedness, the interest thereon, and thefees and expenses incidental to the foreclosureproceedings.

* Before the scheduled public auction sale, themortgagor Solid homes made representations andinduced State Financing to forego with the foreclosureof the real estate mortgage. By reason thereof, StateFinancing agreed to suspend the foreclosure of

mortgaged properties, subject to the terms andconditions they agreed upon, and in pursuance of thesaid agreement, they executed a document entitledMEMORANDUM OF AGREEMENT/DACION EN PAGO.

ISSUE:

1. W/N THE MEMORANDUM OF AGREEMENT/DACION EN PAGO EXECUTED BY THE PARTIES ISVALID AND BINDING

2. W/N SOLID HOMES CAN CLAIM DAMAGESARISING FROM THE NON-ANNOTATION OF ITS




RIGHT OF REPURCHASE IN THE CONSOLIDATEDTITLES

RULING: 1. YES | 2. NOThe Memorandum of Agreement/Dacion En Pago was

valid and binding, and that the registration of saidinstrument in the Register of Deeds was in accordancewith law and the agreement of the parties.

Solid homes utterly failed to prove that respondentcorporation had maliciously and in bad faith caused thenon-annotation of petitioner’s right of repurchase so asto prevent the latter from exercising such right.

On the contrary, it is admitted by both parties thatState Financing informed Solid homes of the registrationwith the register of deeds of their memorandum ofagreement/dacion en pago and the issuance of the newcertificates of title in the name of State Financing.

Clearly, petitioner was not prejudiced by the non-annotation of such right in the certificates of title issuedin the name of State Financing. Also, it was not thefunction of the corporation to cause said annotation. Itwas equally the responsibility of petitioner to protect itsown rights by making sure that its right of repurchase

was indeed annotated in the consolidated titles of StateFinancing.The only legal transgression of State was its failure to

observe the proper procedure in effecting theconsolidation of the titles in its name. But this does notautomatically entitle the petitioner to damages absentconvincing proof of malice and bad faith on the part ofprivate respondent-corporation

4. A. FRANCISCO REALTY v CA

FACTS: A. Francisco Realty and Development Corp.granted a loan worth P7.5M in favor of spousesJavillonar, to which the latter executed threedocuments: a) a promissory note containing the interestcharge of 4% monthly, b) a deed of mortgage over thesubject property, c) an undated deed of sale of themortgaged property. Since the spouses allegedly failedto comply with the payments, petitioner registered thesale in its favor, getting a TCT issued in its namewithout knowledge by the spouses. Subsequently, thespouses obtained another loan worth P2.5M, signinganother promissory note in favor of petitioner.Petitioner demanded the possession of the property, aswell as the interest payments, to which the spousesrefused to comply. Petitioner filed an action forpossession in the RTC. RTC ruled in favor of petitioner,but CA reversed.

ISSUE:

1. Whether the RTC had jurisdiction over the case(property issue)

2. Whether the sale was considered as anequitable mortgage

RULING: Even though the case was filed less than oneyear after the demand to vacate, making it an action ofunlawful detainer, there were other issues to beconsidered such as: a) the validity of the transfer of

ownership, b) the alleged new liability of the spouses c)the alleged continuing liability of the spouses. It is clearthat the petitioners had other issues which involve morethan just a simple claim of of immediate possession, andthus the RTC had jurisdiction over the case.

However, the transfer was in the nature of pactumcommissorium, since the sale was really considered asan equitable mortgage. It was really intended by thespouses to make such undated deed of sale a security.Also, when petitioners transferred the title in its name,the spouses was never informed of such action. Suchtransfer was therefore void, making the TCT held bypetitioners null and void as well.

5. ABILLA v GOBONSENG

FACTS: Spouses Abilla instituted against SpousesGobonseng an action for specific performance, recoveryof sum of money and damages, seeking thereimbursement of the expenses they incurred in thepreparation and registration of 2 public instruments--Deed of Sale and Option to Buy. As a defense, Spouses

Gobonseng contended that the transaction covered bythese instruments was a mortgage. RTC ruled in favor ofSpouses Abilla, stating that it was a sale giving SpousesGobonseng until Aug. 31, 1983 within which to buy backthe 17 lots subject of the sale. CA affirmed and heldthat the transaction was a pacto de retro sale, and notan equitable mortgage.

In 1999, Spouses Gobonseng filed with the RTC anurgent motion to repuchase the lots with tender ofpayment, which was denied. However, after the judgeinhibited himself from the case, it was reraffled to adifferent branch, which granted the motion torepurchase.

ISSUE: W/N Spouses Gobonseng may exercise the rightto repurchase, as stipulated in Art. 1606 (3)

HELD: NO. Sellers in a sale judicially-declared as pactode retro may NOT exercise the right to repurchasewithin the 30-day period provided under Art. 1606,although they have taken the position that the same wasan equitable mortgage, if it shown that there was nohonest belief thereof since: (a) none of thecircumstances under Art. 1602 were shown to exist towarrant a conclusion that the transaction was anequitable mortgage; and (b) that if they truly believedthe sale to be an equitable mortgage, as a sign of goodfaith, they should have consigned with the trial courtthe amount representing their alleged loan, on or before

the expiration of the right to repurchase.

6.

FRANCISCO v BOISER

FACTS:• Petitioner Adalia Francisco and three of her sisters,Ester, Elizabeth, and Adeluisa, were co-owners of fourparcels of registered land in Caloocan City• On August 1979, they sold 1/5 of their undivided shareto their mother, Adela Blas, for PhP10,000, making her aco-owner of the real property to that extent




• 7 years later, in 1986, however, Adela sold her 1/5share for PhP10,000 to respondent Zenaida Boiser,another sister of petitioner• In 1992 or 6 years after the sale, Adalia receivedsummons with a copy of a complaint by Zenaidademanding her share in the rentals being collected fromthe tenants of the Ten Commandments Building, whichstands on the co-owned property• Adalia then informs Zenaida that she was exercisingher right of redemption as co-owner of the subjectproperty, depositing for that purpose PhP10,000 withthe Clerk of Court• The case was however dismissed after Zenaida wasdeclared non-suited, and Adalia’s counterclaim was thusdismissed as well• 3 years after, Adalia institutes a complaint demandingthe redemption of the property, contending that the 30-day period for redemption under Art. 1623 had notbegun to run against her or any of the other co-owners,since the vendor Adela did not inform them about thesale, which fact they only came to know of when Adaliareceived the summons in 1992• Zenaida on the other hand contends that Adalia

already knew of the sale even before she received thesummons since Zenaida had informed Adalia by letter ofthe sale with a demand for her share of the rentalsthree months before filing suit, attaching to it a copy ofthe deed of sale• Adalia’s receipt of the said letter is proven by the factthat within a week, she advised the tenants of thebuilding to disregard Zenaida’s letter-demand• The trial court dismissed the complaint for legalredemption, holding that Art. 1623 does not prescribeany particular form of notifying co-owners on appeal,the CA affirmed

ISSUE: Whether the letter-demand by Zenaida to Adalia,to which the deed of sale was attached, can be

considered as sufficient compliance with the noticerequirement of Art. 1623 for the purpose of legalredemption

HELD:• The petitioner points out that the case does notconcern the particular form in which such notice mustbe given, but rather the sufficiency of notice given by avendee in lieu of the required notice to be given by thevendor or prospective vendor• The text of Art. 1623 clearly and expressly prescribesthat the 30 days for making the redemption shall becounted from notice in writing by the vendor it makessense to require that notice be given by the vendor and

nobody else, since the vendor of an undivided interest isin the best position to know who are his co-owners, who

under the law must be notified of the sale• Notice by the co-owner likewise removes all doubt asto the fact of the sale, its perfection, and its validity bynot immediately notifying, or not notifying at all, a co-owner, the vendor can delay or even effectively preventthe meaningful exercise of the right of redemption• However, it would be unjust in the case at bar torequire the vendor Adela to serve notice of the sale,when the fact has already been established in bothlower courts Adalia has effectively exercised her rightwhen she deposited the PhP10,000 redemption price 7days after receiving the summons

Fallo• Petition granted, decision of the CA reversed• The decision in Etcuban v. CA is abandoned, and theone in Butte v. Manuel Uy and Sons, Inc., as affirmed inSalatandol v. Retes, upheld

NOTE• The Court failed to negate or possibly appreciate thefact of Adalia’s knowledge of the sale prior to thesummons, as proven her letter-advise to the tenants of

the building• The period given by the Court to Adalia was 30 daysafter the receipt of the summons on 5 August 1992,which is 4 September 1992

7. SORIANO v BAUTISTA

FACTS: Bautista spouses mortgaged their lot to Soriano,who took possession thereof and cultivated the same.Pursuant to Par. 5 of their agreement, Soriano decidedto buy the lot. Bautista refused to sell claiming thatbeing mortgagors, they cannot be deprived of their rightto redeem the property.

ISSUE: W/N Soriano may buy the mortgaged property ofBautista

HELD: YES. True that the transaction is a mortgage,which carried with it a customary right of redemption.However, the mortgagor’s right to redeem was rendereddefeasible at the election of the mortgagees by virtue ofPar. 5, allowing them the option to purchase the saidlot. There is nothing immoral or illegal about suchstipulation. It was supported by the same considerationas the mortgage contract and constituted an irrevocablecontinuing offer within the time stipulated. That beingthe case, Bautista spouses must be compelled to honorthe sale.




ASSIGNMENT

1. NYCO SALES CORP v BA FINANCE

FACTS: NYCO Sales Corp extended a creditaccommodation to the Fernandez Brothers. Thebrothers, acting in behalf of Sanshell Corp, discounted a

BPI check for P60,000 with NYCO, which then indorsedthe said check to BA Finance accompanied by a Deed ofAssignment. BA Finance, in turn, released the funds,which were used by the brothers. The BPI check wasdishonored. The brothers issued a substitute check,which was also dishonored. Now BA Finance goes afterNYCO, which disclaims liability.

ISSUE: W/N NYCO, as the assignor, is liable for breach ofwarranties

HELD: YES. The assignor (NYCO) warrants both theexistence and legality of the credit, as well as thesolvency of the debtor. If there is a breach of any of the2 warranties, the assignor is liable to the assignee. That

being the case, NYCO cannot evade liability. So long asthe credit remains unpaid, the assignor remains liablenotwithstanding failure to give notice of dishonor that isbecause the liability of NYCO stems form theassignment, not on the checks alone.

2.

LICAROS v GATMAITAN

FACTS: Abelardo Licaros invested his money worth$150,000 with Anglo-Asean Bank, a money marketplacement by way of deposit, based in the Republic ofVenatu. Unexpectedly, he had a hard time getting backhis investments as well as the interest earned. He then

sought the counsel of Antonio Gatmaitan, a reputablebanker and investor. They entered into an agreement,where a non-negotiable promissory note was to beexecuted in favor of Licaros worth $150,000, and thatGatmaitan would take over the value of the investment

made by Licaros with the Anglo-Asean Bank at theformer's expense. When Gatmaitan contacted theforeign bank, it said they will look into it, but it didn'tprospered. Because of the inability to collect,Gatmaitan did not bother to pay Licaros the value of the

promissory note. Licaros, however, believing that he hada right to collect from Gatmaitan regardless of theoutcome, demanded payment, but was ignore. Licarosfiled a complaint against Gatmaitan for the collection ofthe note. The trial court ruled in favor of Licaros, butCA reversed.

ISSUE: Whether the memorandum of agreementbetween petitioner and respondent is one of assignmentof credit or one of conventional subrogation

RULING: It is a conventional subrogation. An assignmentof credit has been defined as the process of transferringthe right of the assignor to the assignee who would thenhave a right to proceed against the debtor. Consent of

the debtor is not required is not necessary to product itslegal effects, since notice of the assignment would beenough. On the other hand, subrogation of credit hasbeen defined as the transfer of all the rights of thecreditor to a third person, who substitutes him in all hisrights. It requires that all the related parties thereto,the original creditor, the new creditor and the debtor,enter into a new agreement, requiring the consent ofthe debtor of such transfer of rights. In the case athand, it was clearly stipulated by the parties in thememorandum of agreement that the express conformityof the third party (debtor) is needed. The memorandumcontains a space for the signature of the Anglo-AseanBank written therein "with our conforme". Without suchsignature, there was no transfer of rights. The usage ofthe word "Assignment" was used as a general term, sinceGatmaitan was not a lawyer, and therefore was notwell-versed with the language of the law.

BULK SALES LAW

1. CHIN v UY: CA case contained in O.G.

DOCTRINE: A sale made of all the effects in the vendor'sstore without the buyer being furnished a sworn list ofcreditors as required by Sec 3, is null and voidirrespective of the good or bad faith of the buyer, andjudgment creditors may treat such sale as never havingbeen made and proceed to have execution levied on theproperties thus sold.

2. DBP v HON JUDGE OF RTC OF MANILA

FACTS: In 1978, Pioneer Glass ManufacturingCorp.purchased from Yu (under Ancar Equipment Partsand Tonicar) equipment parts worth P7,000. However,Pioneer failed or refused to pay upon demand. Withoutinforming Yu, Pioneer Glass transferred all its assets to

DBP in a "deed of cession of property in payment ofobligation" or dacion en pago. In turn, DBP sold theseassets to Union Glass that same year.

In 1983, Yu instituted an action against Pioneer Glass,DBP, and Union Glass, asserting that the transfer of theassets to DBP was void by reason of fraud.

•

Pioneer Glass: denied liability to Yu on theground that by virtue of the dacion en pago infavor of DBP, the bank assumed liability to itscreditors including Yu under a paymentscheme, which is under pendingimplementation

• DBP: denied liability to Yu on the ground thatthere being no proof that the unpaidmerchandise purchased by Pioneer Glass wereamong those transferred to it

• Union Glass: denied liability to Yu on the




ground that there was no privity of contractbetween them, or assuming applicability of theBulk Sales Law, no liability attached to UnionGlass.

MTC denied the motions to dismiss filed by UnionGlass and DBP and ruled in favor of Yu. RTC affirmedMTC's decision.

ISSUE: W/N the Bulk Sales Law covers the conveyance inquestion (its violation would make DBP, Union Glass, andPioneer Glass liable to Yu)

HELD: NO. Under the Bulk Sales Law, the terms "goods"and "merchandise," having acquired a fixed meaning,refer to things and articles, which are kept for sale by amerchant. Likewise, the term "fixtures" has beeninterpreted to mean the chattels, which the merchantsusually possess and annex to the premises occupied by

them in order to store, handle and display their goodsand wares. The technicality of these terms conveys theintention of the law to apply it to merchants who are inthe business of selling goods and wares and similarmerchandise.

In this case, Pioneer Glass manufactured glass only onspecific orders and it did not sell directly to consumersbut manufactured its products only for particularclients. Thus, Pioneer Glass was NOT a merchandiser.Moreover, the dacion en pago between Pioneer and DBPtransferred and conveyed the bulk of its corporateassets to extinguish its outstanding debts to DBP. Thus,the subject matter of the deed of cession was theassets, not stock-in-trade. Such conveyance was clearlyoutside the ambit of the Bulk Sales Law.

SC ordered Pioneer Glass, not DBP and Union Glass, topay Yu the price of the equipment purchased plusinterest.

RETAIL TRADE LIBERALIZATION ACT OF 2000

AND RELATED PROVISIONS OF THE ANTI-DUMMY LAW1.

KING v HERNAEZ

FACTS: Macario King, a naturalized Filipino, owned thegrocery store Import Meat & Produce. He employed 3Chinamen, one as purchaser and 2 others as salesmen.He sought the permission of the President to retain theservices of the 3, but was denied based on the RetailTrade Law and the Anti-Dummy Law, which prohibitaliens from interfering in the management andoperation of retail establishments. King contends thatthe 3 aliens are employed in non-control positions anddo not participate in the management, thus, they arenot covered by the Anti-Dummy Law.

ISSUE: W/N the employment of the 3 Chinamen iscovered under the Anti-Dummy Law

HELD: YES. The prohibition covers the entire range ofemployment, regardless of whether they are control ornon-control positions. Thus, employment of aliens forevening clerical positions is prohibited. The reason isobvious: to plug any loopholes that unscrupulous aliensmay exploit for the purpose of circumventing the law.

2.

BALMACEDA v UNION CARBIDE PHILIPPINES INC

FACTS: Union Carbide was a manufacturer having 2divisions: the Consumer Products Division and theIndustrial Products Division.

ISSUE: W/N the Industrial Products Division is engaged inthe retail business

HELD: NO. “Retail” pertains to the direct selling to thegeneral public of merchandise of goods for consumption.They pertain to goods for personal, family andhousehold consumption. The products sold under thisdivision are clearly not covered by the term

“consumption goods.” They are sold to manufacturersand industries as raw materials. They are intermediategoods, not consumption goods.

3. GOODYEAR TIRE v REYES SR

FACTS: Goodyear, a corporation not wholly owned byFilipinos, was engaged in the manufacturing and sale ofrubber products such as tires, batteries, conveyor belts,soles of shoes, etc.

ISSUE: W/N Goodyear is covered by the Retail Trade Lawinsofar as the prohibition against aliens from engaging inretail trade is concerned.

HELD: NO. “Retail” pertains to the direct selling to thegeneral public of merchandise of goods for consumption.They pertain to goods for personal, family andhousehold consumption. A manufacturer who sells hisproducts to industrial and commercial users so that thelatter may use the same to render some general serviceto the public is clearly not covered by the prohibition.The enterprise of Goodyear clearly falls within thiscategory. The sale to proprietary planters and personsengaged in the exploration of natural resources is alsoincluded in the said classification and cannot be

considered “retail” as to come within the ambit of theprohibition. But insofar as sale to employees andofficers is concerned, this may be considered “retail”and comes under the prohibition.

4.

DBP v HON JUDGE OF RTC OF MANILA

FACTS: In 1978, Pioneer Glass ManufacturingCorp.purchased from Yu (under Ancar Equipment Partsand Tonicar) equipment parts worth P7,000. However,Pioneer failed or refused to pay upon demand. Without



informing Yu, Pioneer Glass transferred all its assets toDBP in a "deed of cession of property in payment ofobligation" or dacion en pago. In turn, DBP sold theseassets to Union Glass that same year.

In 1983, Yu instituted an action against Pioneer Glass,DBP, and Union Glass, asserting that the transfer of theassets to DBP was void by reason of fraud.

Pioneer Glass: denied liability to Yu on the ground thatby virtue of the dacion en pago in favor of DBP, thebank assumed liability to its creditors including Yu undera payment scheme, which is under pendingimplementationDBP: denied liability to Yu on the ground that therebeing no proof that the unpaid merchandise purchasedby Pioneer Glass were among those transferred to itUnion Glass: denied liability to Yu on the ground thatthere was no privity of contract between them, or

assuming applicability of the Bulk Sales Law, no liabilityattached to Union Glass.

MTC denied the motions to dismiss filed by UnionGlass and DBP and ruled in favor of Yu. RTC affirmedMTC's decision.

ISSUE: W/N the Pioneer Glass is a merchandiser, coveredunder the Retail Trade Act

HELD: NO. There was an undisputed evidence thatPioneer Glass manufactures glass only on specific ordersand does not sell directly to consumers butmanufactures its products only for particular clients. Assuch, it cannot be said the Pioneer Glass is amerchandiser within the meaning of the Retail TradeAct.

Documents

Complete Digests - 2D