Sales Digests Block 2b 2016

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BLOCK B
2016
Compiled by: Gil Arandia
Pucha nasa board pa talaga yung procurator in rem suan
(Photo is for those people na may crush kay maam hahaha)
BLOCK B 2016
SALES DIGESTS BLOCK 2B 2016

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez,
Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap
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Table of Contents
Chapter 1: Nature of a Sale ...........................................................4
GAITE v. FONACIER ...................................................................4
CELESTINO CO & COMPANY vs. COLLECTOR OF INTERNAL
REVENUE..................................................................................4
COMMISSIONER OF INTERNAL REVENUE v ENGINEERING
EQUIPMENT & SUPPLY CO. ........................................................5
QUIROGA V PARSONS ...............................................................7
Puyat v Arco .............................................................................8
KER & CO. LTD. vs. Jose B. LINGAD. ............................................9
Lo v. KJS.................................................................................11
Chapter 2: Parties to a Contract of Sale ........................................12
DOMINGO v CA.......................................................................12
PARAGAS v. HEIRS of BALACANO .............................................14
CALIMLIM-CANULLAS v. FORTUN .............................................15
MATABUENA v CERVANTES .....................................................16
PHILIPPINE TRUST CO. V ROLDAN ............................................17
Macariola v Asuncion ..............................................................18
DOMINGO D.RUBIAS vs. ISAIAS BATILLER ................................20
DAROY V ABECIA.....................................................................21
Chapter 3: Subject Matter of a Contract of Sale ............................22
SIBAL Vs VALDEZ .....................................................................22
PICHEL V. ALONZO ..................................................................23
MANANSALA VS COURT OF APPEALS........................................24
Pio Sian Melliza vs. City of Iloilo, University of the Philippines and
the Court of Appeals (1968).....................................................25
Atilano vs. Atilano (May 21, 1969)............................................27
Yu Tek & Co vs. Basilio Gonzales ..............................................29
NATIONAL GRAINS AUTHORITY and WILLLAM CABAL vs. THE
INTERMEDIATE APPELLATE COURT and LEON SORIANO, ...........30
JOHANNES SCHUBACK & SONS PHILIPPINE TRADING
CORPORATION vs. THE HON. COURT OF APPEALS ....................31
CONCHITA NOOL and GAUDENCIO ALMOJERA vs. COURT OF
APPEALS, ANACLETO NOOL and EMILIA NEBRE .........................32
Chapter 4: Price and Other Consideration. ...................................33
Mitsui Bussan Kaisha vs. Manila Electric Railroad and Light
Company ................................................................................33
VILLANUEVA V. CA ..................................................................35
JOSE R. MORENO, JR. vs Private Management Office ................36
Navarra v. Planters Development Bank ....................................39
Mapalo v. Mapalo ...................................................................40
Rongavilla v. CA ......................................................................42
Mate v. CA..............................................................................44
Yu Bun Guan vs Elvira Ong .......................................................45
Vda Catindig v Heirs of Catalina Roque .....................................46
Ong v. Ong .............................................................................47
Bagnas v. CA ...........................................................................49

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Republic v Phil. Resources Development ..................................52
Chapter 5: Formation of a Contract of Sale...................................53
Manila Metal Container Corporation vs Philippine National Bank
..............................................................................................53
United Muslim and Christian Urban Poor Association v. BRYC....55
Carceller v. Court of Appeals....................................................58
Tayag vs Lacson ......................................................................60
Sanchez v. Rigos......................................................................61
Diamante v. CA .......................................................................62
Vazquez v. CA .........................................................................66
Nietes vs. CA...........................................................................67
Ang Yu Asuncion vs. Court of Appeals.......................................69
Equatorial Realty v. Mayfair Theater ........................................71
Paranaque Kings vs Court of Appeals........................................73
Vazquez v. Ayala Corporation ..................................................74
RIVIERA FILIPINA vs. CA ...........................................................75
Macion v. Guiani .....................................................................80
Uraca v. CA .............................................................................82
Villonco v. Bormaheco.............................................................83
Oesmer v. Paraiso ...................................................................86
ADELFA PROPERTIES, INC vs CA................................................88
Fule v. CA ...............................................................................92
Dalion v. CA ............................................................................95
Secuya v. Selma ......................................................................96
YUVIENCO vs Dacuycuy ...........................................................97
Limketkai Sons Milling Inc. v CA ...............................................99
Limketkai v. CA (MR- 1996) .................................................... 100
Ortega v. Leonardo ............................................................... 101
Claudel vs CA ........................................................................ 102
Alfredo v. Borras ................................................................... 103
Toyota Shaw Inc. v. CA .......................................................... 106
Chapter 6- Obligations of the Seller ........................................... 107
Santos v. Santos.................................................................... 107
Dy Jr. v. CA ........................................................................... 108
Addison v. Felix..................................................................... 110
Danguilan v. IAC.................................................................... 111
Pasagui v. Villablanca ............................................................ 112
Power Commercial and Industrial Corp. v. CA ......................... 113
Chua v CA ............................................................................. 115
Vive Eagle Land Inc v CA ........................................................ 117
Behn, Meyer Co. v Yangco ..................................................... 119
General Foods Corp v. NACOCO ............................................. 120
Rudolf Leitz Inc v. CA ............................................................. 121


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Chapter 1: Nature of a Sale
GAITE v. FONACIER
Facts:
Fonacier, owner/holder of 11 iron lode mineral claims
executed a deed of assignment appointing Gaiter as his attorney-in-
fact. In light of the appointment, Gaite executed a general
assignment conveying the use and development of Fonaciers
mining claims into Larap iron mines owned by Gaite himself.
Thereafter, Gaite developed and used the mining claim. In time, he
extracted 24,000 metric tons of iron ore.
Fonacier then revoked the authority granted to Gaite. Gaite
assented, but with the condition that he receive royalties and
P75,000 for the iron ores already extracted. Fonacier then issued 2
sureties good for 1 year to answer for the P65,000 balance. The
sureties expired and Fonacier defaulted. Fonacier alleged that he is
to pay the balance only when the suspensive condition has been
fulfilled.
Issue(s):
1. W/N the payment is subject to a suspensive condition
Held:
There was no suspensive condition, only a suspensive
period. The sale or shipment is not a condition for the payment of
the balance; it was merely to fix the future date of payment.
According to the SC, a contract of sale is normally commutative and
onerous, and that the parties thereto assume a correlative
obligation. By virtue of the sale being onerous, the favored
interpretation of its terms favor the greater reciprocity of interests.
Hence, the buyers obligation exists, only its due date is postponed.

CELESTINO CO & COMPANY vs. COLLECTOR OF INTERNAL
REVENUE
Facts:
Celestino Co & Company, registered under the trade name Oriental
Sash Factory, markets itself as Manufacturers of all kinds of doors,
windows, sashes, furniture, etc. used season-dried and kiln-dried
lumber, of the best quality workmanships. From 1946 to 1951, it
paid taxes equivalent to 7% on the gross receipts under Sec. 186 of
the NIRC(National Internal Revenue Code), which is a tax on the
original sales of articles by manufacturer, producer or importer.
However, in 1952 it began to pay only 3% tax under Sec. 191, which
is a tax on sales of services. Petitioner claims that it does not
manufacture ready-made doors, sash and windows for the public,
but only upon special orders from the customers, hence, it is not
engaged in manufacturing, but only in sales of services.
Issue: Whether the petitioners claim is correct, that it is merely a
special service provider NO.
Held:
1. As a general rule, factories receive orders for doors and
windows of special design only in particular cases but the
bulk of their sales is derived from a ready-made doors and
windows of standard sizes for the average home. Celestino

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Co & Company habitually makes sash, windows and doors,
as it has represented in its stationery and advertisements to
the public. That it "manufactures" the same is practically
admitted by appellant itself. The fact that windows and
doors are made only when customers place their orders
does not alter the nature of the establishment.
2. It is not true that it serves special customers only. Citing one
of its clients, Don Toribio Teodoro & Sons Inc, the court
ruled that anyone who sees, and likes, the doors ordered by
it, may identically purchase it provided he pays the price.
The appellant will not refuse, for it can easily duplicate or
even mass-produce the same doors.
3. The nature of the work they do does not fall within the
definition of a construction work contractor enumerated in
section 191 of the NIRC
4. Appellant invokes Article 1467
1
of the New Civil Code to
bolster its contention that in filing orders for windows and
doors according to specifications, it did not sell, but merely
contracted for particular pieces of work or "merely sold its
services". HOWEVER, Oriental Sash Factory did not merely
sell its services to Don Toribio Teodoro & Co. because it also

1
A contract for the deli very at a certain price of an article which the
vendor in the ordinary course of his business manufactures or
procures for the general market, whether the same is on hand at the
time or not, is a contract of sale, but if the goods are to be
manufactured specially for the customer and upon his special order,
and not for the general market, it is contract for a piece of work.
sold the materials. Also, the orders herein exhibited were
not shown to be special as the article expressed. They
were merely orders for work.
COMMISSIONER OF INTERNAL REVENUE v ENGINEERING
EQUIPMENT & SUPPLY CO.
FACTS:
Engineering Equipment & Supply (EES) was engaged in the business
of designing and installing central air-conditioning systems. On July
27, 1956, certain Juan de la Cruz wrote to the CIR denouncing EES
for tax evasion. Pursuant to Section 185
2
of the Tax Code, EES was
assessed by the CIR for 30% advanced sales tax plus surcharges (of
25% and 50%) for misdeclaring its importation of air conditioning
units and parts and accessories. EES appealed to Court of Tax
Appeals (CTA), arguing that they are contractors and not
manufacturers, and thus, should only be liable for the 3% tax on
sales of services or pieces of work. The Court of Tax Appeals
reversed the order of the CIR, declaring that EES is a contractor.
Hence, this appeal.

ISSUE: W/N EES is a manufacturer of air conditioning units under
Section 185 of the Code or a contractor (piece of work) under
Section 191.

2
Sec 185. Ther e shall be l evi ed, assessed and col l ected once onl y on every
ori gi nal sal e, barter, exchange, or si milar transacti on i ntended to transfer
ownershi p ofa tax equi val ent to 30% of the gross selli ng pri ce.

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HELD:. EES is a contractor, subject to tax stated in Section 191 of
the Code.

There is a distinction between a contract of sale
(manufacturer) and a contract for furnishing services, labor
and materials. Such difference is tested by the inquiry of
whether the thing transferred is one not in existence and
which never would have existed but for the order of the
party desiring to acquire it, or a thing which would have
existed and has been the subject of sale to some other
persons even if the order had not been given.
o Art 1467 (Civil Code) a contract for the delivery
at a certain price of an article which the vendor in
the ordinary course of his business manufactures
or procures for the general market, whether the
same is on hand at the time or not, is a contract of
sale, but if the goods are to be manufactured
specially for the customer and upon his special
order and not for the general market, it is a
contract for a piece of work.
o A contractor is a person who, in pursuit of
independent business undertakes to do a specific
job or piece of work for other persons, using his
own means and methods without submitting
himself to control as to the petty details
Though EES imported such items, they were NOT for sale to
the general public and were used as mere components for
the design of the centralized air-conditioning system,
wherein its designs and specifications are different for
every client. Various technical factors must be considered
and it can be argued that no 2 plants are the same; all are
engineered separately and distinctly. Each project requires
careful planning and meticulous layout. Such central air-
conditioning systems and their designs would not have
existed were it not for the special order of the party desiring
to acquire it. This implies that EES did not intend to sell the
said aircon units to the general public. Thus, EES is not liable
for the sales tax of 30%.
.EES should be held liable to pay the taxes prescribed in
Section 190 of the Code. This compensating tax is not a tax
on the importation of goods but a tax on the use of
imported goods not subject to sales tax. Hence, it should
be held liable to the payment of 30% compensating tax in
accordance with Sec 190, but without the 50% mark up
provided in Section 183 (b) (I think 50% is removed because
its for contract of sale!?!?).
Also, EES should be subjected to 25% surcharge for
delinquency in the payment of the said tax, as provided in
Section 190:
o Sec 190 If any article withdraen from the
customhouse or the post office without payment of
the compensating tax is subsequently used by the
importer for other purposes, corresponding entry
should be made in the books of accounts if any are
kept or a written notice thereof sent to the

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Collector and payment of the corresponding
compensating tax made within 30 days from the
date of entry or notice, and if tax is not paid within
such period the amount of tax shall be increased by
25%....
MINOR ISSUES
1. W/N EES is guilty of fraud (tax evasion)
Held: Yes, as proven by correspondences of EES with foreign
companies wherein EES requested that words of airconditioning
equipment should not be mentioned in shipping documents.
The CTA absolved EES from paying the 50%
surcharge prescribed in Sec 183 (a) because the
surcharge Section 190 of the tax Code (where EES is
subjected to as a contractor) does not provide it.
According to CTA, where a particular provision of
the tax code does not impose a 50% surcharge as
fraud penalty, it cannot be enforced.
BUT, because the fraud is too glaring, it was held
that EES could not be absolved from the 50% fraud
surcharge. Otherwise, it would give premium to an
intolerable act of tax evasion.
2. W/N the tax assessment has prescribed
Held: no
EES contends that the prescriptive period is 5 yrs.
from importation. But the SC held that Sec 332 of
the code provides for the exceptions as to the
period of limitation of assessment and collection of
taxes :
o Sec 332 in case of a false and fraudulent
return with intent to evade tax, the tax
may be assessed, or a proceeding in court
for the collection of such tax may be begun
without assessment at any time within 10
years after the discovery of the falsity, fraud
or omission.

QUIROGA V PARSONS
FACTS:
On January 24, 1911, herein plaintiff-appellant
AndressQuiroga and J. Parsons, both merchants, enteredinto a
contract, for the exclusive sale of "Quiroga" Beds in the Visayan
Islands. It was agreed, among others, that Andres Quiroga grants
the exclusive right to sell his beds in the Visayan Islands to
J.Parsons, subject to some conditions provided in the contract.
Likewise, it was agreed that. Incompensation for the expenses of
advertisement which, for the benefit of both contracting parties,
Mr.Parsons may find himself obliged to make, Mr.Quiroga assumes
the obligation to offer and give thep reference to Mr. Parsons in
case anyone should apply for the exclusive agency for any island
notcomprised with the Visayan group; and that, Mr. Parsons may
sell, or establish branches of his agency forthe sale of "Quiroga"
beds in all the towns of the Archipelago where there are no

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exclusive agents, and shall immediately report such action to
Mr. Quiroga for his approval.
The defendant violated the following obligations: not to sell
the beds at higher prices than those of the invoices; to have an
open establishment in Iloilo; itself to conduct the agency; to keep
the beds on public exhibition, and to pay for the advertisement
expenses for the same; and to order the beds by the dozen and in
no other manner

He alleged that the defendant washis agent for the sale of his beds
in Iloilo, and that said obligations are implied in a contract
of commercial agency.
ISSUE:
1. Whether or not the defendant, by reason of the contract
hereinbefore transcribed, was an agent of theplaintiff for
the sale of his beds.
HELD:
No.
In order to classify a contract, due regard must be given to
its essential clauses. In the contract in question, there was the
obligation on the part of the plaintiff to supply the beds, and, on the
part of thedefendant, to pay their price.
That the contract by and between the defendant and the
plaintiff is one of purchase and sale, in order to show that it was not
one made on the basis of a commission on sales, as the plaintiff
claims it was, for these contracts are incompatible with each other.
But, besides, examining the clauses of this contract, none of them is
found that substantially supports the plaintiff's contention. Not a
single one of these clauses necessarily conveys the idea of an
agency.
These features exclude the legal conception of an agency or
order to sellwhereby the mandatory or agent received the thing to
sell it, and does not pay its price, but delivers tothe principal the
price he obtains from the sale of the thing to a third person, and if
he does not succeedin selling it, he returns it. By virtue of the
contract between the plaintiff and the defendant, the latter,
onreceiving the beds, was necessarily obliged to pay their price
within the term fixed, without any otherconsideration and
regardless as to whether he had or had not sold the beds. In respect
to the defendant's obligation to order by the dozen, the only one
expressly imposed by the contract, the effect of its breach would
only entitle the plaintiff to disregard the orders which the
defendant might place under other conditions; but if the plaintiff
consents to fill them, he waives his right and cannot complain for
having acted thus at his own free will.
Puyat v Arco
Facts:
Arco Amusement Company and Gonzalo Puyat & Sons Inc,
entered into an agreement that the latter would order sound
reproduing equipment from Starr Piano Company (which was based
in the US). Gonzalo Puyat & Sons Inc is the exclusive agent of Starr
Piano. The first and second order of the said equipment all arrived

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in due time. They were charged the price of the equipment, 10%
commission and other charges (freight, insurance, banking, etc.).
Some time later, in a civil case filed by another company against
Puyat, Arco found out that Puyat charged them with the list price
and not the net price of the equipment and that Puyat had received
discounts for the order of said equipments. By reason of said
events, Arco brought a suit to the CFI of Manila, seeking
reimbursement from Puyat. Trial Court ruled that the contract was
that of outright purchase and sale and absolved Puyat. The CA
reversed the decision by holding that the relationship between
petitioner and respondent was that of agency.
Issues:
W/N there was the contract was that of an agency or an
outright purchase and sale.
W/N there was fraud when petitioner obtained the consent
of the Arco on the price of the sound reproducing equipment.
Held:
SC sustained the theory of the trial court that the contract
between petitioner and respondent was that of purchase and sale.
The contract entered into was clear in their terms and admit no
other interpretation. The agreement between them was for Puyat
to sell to Arco the sound reproducing equipment. The 10%
commission does not necessarily make the petitioner an agent of
the respondent, as this provision is only an additional price which
the respondent bound itself to pay, and which stipulation is not
incompatible with the contract of purchase and sale. Also, SC noted
that Puyat was the exclusive agent of Starr Piano and that it is out of
the ordinary to be the agent of BOTH the vendor and purchaser
There was no fraud. It is to be observed that the twenty-five
per cent (25%) discount granted by the Starr Piano Company to the
petitioner is available only to the latter as the former's exclusive
agent in the Philippines. The respondent could not have secured
this discount from the Starr Piano Company and neither was the
petitioner willing to waive that discount in favor of the respondent.
Respondent willingly paid the price quoted and it received the
equipment and machinery as represented. It is well known that
local dealers acting as agents of foreign manufacturers, aside from
obtaining a discount from the home office, sometimes add to the
list price when they resell to local purchasers. Not every
concealment is fraud, in this issue SC said that, business acumen
permit of the loosening of the sleeves and of the sharpening of the
intellect of men and women in the business world.
KER & CO. LTD. vs. Jose B. LINGAD.
FACTS:
Petitioner Ker & Co. was held liable as a commercial broker
under Section 194(t) of the National Internal Revenue and
was assessed to be liable for P20,272.33 as commercial
brokers percentage tax.
o This liability arose when petitioner (Ker & Co. as
distributor) entered to a contract with United
States Rubber International (referred to as
Company).
o The stipulations of their contract states that:

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That the Company will from time to time
consign the specified products to the
Distributor as the Company would judge to
be necessary.
All goods consigned will remain the
property of the Company until sold by the
Distributor and all sales made by the
Distributor shall be made in his name.
However, it was also stipulated that the
contract does not constitute the Distributor
the agent or legal representative of the
Company for any purpose whatsoever.
The Commissioner of Internal Revenue therefore assessed
Ker & Co. to be a commercial broker under such agreement
and that the Court of Tax Appeals upheld such finding.
Hence, the petition to the Supreme Court
ISSUE(s):
1. W/N the relationship between Ker & Co. LTD. and United
States Rubber International is one of vendor and vendee or
broker and principal.
HELD/RATIO:
The Supreme Court affirmed the decision of the Court
of Tax Appeals finding that Ker & Co. LTD. is a
commercial broker of United States Rubber
International.
o The National Internal Revenue Code defines a
commercial broker as, all persons, other than
importers, manufacturers, producers or bona
fide employees, who, for compensation or
profit, sell or bring about sales or purchasers of
merchandise for other persons or bring
proposed buyers and sellers together.
o The Court reiterated the controlling test to be
followed as to who falls under the definition of
a commercial broker in Commissioner of
Internal Revenue v. Constantino which states
that:
Since the company retained ownership
of the goods, even as it delivered
possession unto the dealer for resale to
customers, the price and terms of
which were subject to the companys
control, the relationship between the
company and the dealer was of
agency.
o Salisbury v. Brooks supports such view:
o The transaction is a sale if such
transfer puts the transferee in the
position of an owner and makes
him liable to the transferor as a
debtor for the agreed price.
o The transaction is one of agency to
sell if the ownership of the property
delivered to the agent remained
with principal and has the right to
fix the price, control sales and

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receive the proceed less the agents
commission upon sales made.

Lo v. KJS
[G.R. No. 149420. October 8, 2003]
Facts:
Lo bought from KJS scaffolding equipment worth P540k. He
paid a downpayment of P150k, the balance to be payable in ten
monthly installments.
Upon default on the installments, both parties consented to
a dacion en pago to satisfy the debt. A deed of assignment was
executed in favor of KJS, assigning Los credit from Jomero Realty
Corp. (JRC), a company who owes him money.
The deed contained, among others, a warranty that Lo
(assignor) shall and will at times hereafter, at the request of said
ASSIGNEE, execute and do all such further acts and deeds as shall be
reasonably necessary to effectually enable said ASSIGNEE to recover
whatever collectibles said ASSIGNOR has in accordance with the true
intent and meaning of these presents.
However, when KJS tried to collect from JRC, the latter
refused on the ground that Lo was also indebted to him (JRC). So,
KJS demanded payment from Lo who however contends that his
obligation has been extinguished when they executed the deed of
assignment.
Issue:
W/N THE EXECUTED DEED OF ASSIGNMENT, A FORM OF DACION EN
PAGO, EXTINGUISHED LOS OBLIGATION TO KJS No.
Held:
1.) No. The deed of assignment served to be a dacion en pago, a
special mode of payment where the debtor offers another thing to
the creditor who accepts it as equivalent of payment of an
outstanding debt. In order that there be a valid dation in payment,
the following are the requisites:
(1) There must be the performance of the prestation in lieu
of payment (animo solvendi) which may consist in the delivery of a
corporeal thing or a real right or a credit against the third person;
(2) There must be some difference between the prestation
due and that which is given in substitution (aliud pro alio);
(3) There must be an agreement between the creditor and
debtor that the obligation is immediately extinguished by reason of
the performance of a prestation different from that due.
2.) However, although there is a dacion en pago which may
extinguish an obligation, such dacion is, by express provision of law
(Art. 1245), governed by the Law on Sales. Being governed by the
Law on Sales, Art. 1628 applies:
The vendor i n good faith shall be responsible for the existence and
legali ty of the credit at the time of the sale, unless it should have been sold as
doubtful ; but not for the sol vency of the debtor, unless i t has been so expressly
stipulated or unless the insol vency was prior to the sale and of common
knowledge.

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Accordingly, Lo, being the vendor of his credit, is bound by
law and the stipulation on the deed to warrant the existence and
legality of the credit at the time of the sale or assignment. This he
failed to do because, as it appears, compensation had already taken
place between him and JRC. In other words, at the time he assigned
his credit to KJS, the credit was already non-existent because of
compensation had already taken place by operation of law.
Chapter 2: Parties to a Contract of Sale
DOMINGO v CA
(sorry for the long digest and dahil hindi paragraph form! heavy to
sa facts dahil 2 different versions kaya hiniwalay ko na parang
bullet form para mas malinaw. magulo din pagkasulat sa case eh)
Facts:
Paulina Rigonan owned 3 parcels of land in Ilocos. She
allegedly sold them to spouses Felipe and Concepcion Rigonan
(private respondents) who claim to be her relatives. Respondents
filed a complaint for revindication against Petitioners Eugenio
Domingo and 2 others, who claim to be Paulina's closest surviving
relatives, who allegedly took possession of the properties and
refused to vacate the same.
RESPONDENT's VERSION
-they are the owners of the three parcels of land through a deed of
sale executed by Paulina in 1965
-since then, they had been in continuous possession and had
introduced permanent provisions
-that petitioners entered the properties illegally and refused to
leave when asked to do so
PETITIONER's VERSION
-alleged deed of absolute sale is void for being spurious and for
lacking consideration
-Paulina did not sell her properties to anyone
-as Paulina's nearest surviving kin withi n the 5th degree of
consanguinity, they inherited the three lots upon her death in 1966
-they had been in possession of the properties for more than 10
years
- the alleged consideration for the parcels of land which was for the
price of P850 only indicates a fictitious sale
TESTIMONY FOR RESPONDENTS
1. Juan Franco testified that he was a witness to the questionned
deed. However when cross-examined and shown the deed, he
stated that the deed was not the document he signed as a witness
2. Atty Tagatag (Notary) testified that he personally prepared the
deed, that he saw Paulina affix her thumbprint, and that he signed
as both witness and notary. He also testified to notarizing Paulina's
last will and testament in 1965. The will mentioned the same lots
sold to respondents and he could not explain why.

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3. Felipe Rigonan claimed to be Paulina's close relative, that their
fathers were first cousins. But he could not remember the name of
Paulina's grandfather. His claim was disputed by defendants who
lived withh Paulina as their close kin.
TESTIMONY FOR PETITIONERS
1. Jose Flores, owner of the adjacent lot and who lived there with
Paulina since he could remember and til her death, said thathe did
not receive any notice nor offer to sell the lots. This is contrary to
the deed of sale which mentioned that all adjacent owners were
notified of the sale. He doesnt have any knowledge of any sale
2. Ruben Blanco, Refistrar of Deeds, testified that only a carbon
copy of the deed was filed in his office
3. Zosima Domingo, wife ofEugenio, testified that her husband was
Paulina's nephew ( Eugenio's father and Paulina were first
cousins) and that they lived with Paulina since 1956. They took care
of her daily needs even whenl she was hospitalized and until she
died.
RULINGS OF LOWER COURTS
1. RTC favored herein petitioners and declared them the lawful
owners and possessors by virtue of intestate succession. The deed
was found to be "fake", being a carbon copy with no original
presented, and that the document's execution was tainted with
alterations, defects, tamperings, and irregularities which render it
void ab initio. Testimonies for respondents were also rebutted as
Franco retracted his testimony, Tagatag's testimony was not
credible as he is a witness and notary to both the deed and will AND
ALSO a paid witness to the case. Also, Zosima Domingo, Paulina's
housekeeper, testified that he did not seeTagatag and the other
parties in Paulina's house on the alleged date of the deed's
execution.
2. CA reversed and ordered herein petiti oners to vacate the
property.
Issue
W/N the existence and due execution of the deed of sale was
established. --NO.

Ruling
1. Respondents only presented a carbon copy of the deed. Although
CA calls it a "duplicate original", it contained filled in blanks and
alterations.It also did not bear Paulina's signature but only her
alleged thumbprint. Franco, also testified that said deed was not the
one he signed as witness. The only testimony available for them is
Atty Tagatag's, which is uncorroborated and self-serving
2. Irregularities abound regarding the execution and registration of
the alleged deed of sale. The carbon copy had intercalations and
discrepancies allegedly due to blanks left unfilled by Tagatag during
its registration. The alleged other copies al so bore different dates of
entry and the deed was registered long after its date of execution
and after Paulina's death. Paulina, the alleged vendor, was not given
a copy.

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Also, Paulina was never asked to vacate the premises she
purportedly sold, allegedly because Felipe agreed to let Paulina to
stay in the house until her death. In one case, The buyer's
immediate possession and occupation of the property was
deemed corroborative of truthfulness and authenticity of the deed
of sale. The alleged vendor's continued possession in this case
throws an inverse implication, a serious doubt on the due
execution of the deed of sale.
It is also noteworthy that the same parcels of land involved
here were still included in he will subsequently executed by Paulina.

3. The price of P850 allegedly paid by respondents for 9 parcels of
land, including 3 parcels in dispute, a house, and a warehouse,
raises further questions. Consideration is the why of the contract,
the essential reason which moves the contracting parties to enter
into the contract. Since Paulina is well-off, we see no compelling
reason for her to sell the subject properties at a meager price of
P850. (Fictitious and grossly and shockingly inadequate
consideration -- sale is void ab initio)
4.The general rule is that a person is not incompetent to contract
merely because of advanced years or by reason of physical
infirmities. However, when such age or infirmities have impaired
the mental faculties so as to prevent the person from properly,
intelligently, and firmly protecting her property rights, then she is
undeniably incapacitated.At the time of the execution of the
alleged contract, Paulina was already of advanced age and senile.
Zosima he housekeeper testified that at the time of the alleged
execution of thhe deed, Paulina was already incapacitated physically
and mentally (she was 80 y/o.Zosima narrated that at that time,
Paulina plays with her waste and urinates in bed). These raise doubt
that she consented to the sale of and the price of the properties.
There is also no receipt.
IF EVER ASKED: Procedural Issues raised by Respondents
1. Factual determination by the trial court lacks credibility for itwas
made by trial judge who presided only in one hearing of the case
COURT RULED: A judge may validly render a decision although he
has only partly heard the tertimony of the witnesses since he could
rely on the records of the case
2. The Petition lacks a certification against forum shopping
COURT RULED: Petitiones averred that they attached one in the
copy intended for this Court. This is substantial compliance
3. Petition must be deniedbecause it does not present
anybsubstantial legal issue, but factual or evidentiary ones which
were already firmly resolved by the CA
COURT RULED: This petition is properly given due course though
mainly factual because of the contradictory findings of the trial
court and the CA. The latter court apparenlty overlooked certain
relevant factswhich justify a different conclusion.

PARAGAS v. HEIRS of BALACANO
G.R. No. 168220 August 31, 2005

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Facts:
Gregorio Balacano was the registered land owner of Lots
1175-E and 1175-F in Santiago City, Isabela. He was hospitalized for
suffering from liver cirrhosis on June 28, 1996 at the Veterans
Hospital in Nueva Viscaya, and was later on transferred to Veterans
Memorial Hospital in Quezon City. He died on July 28, 1996.
On July 22, 1996, or barely a week before his death,
Gregorio purportedly sold Lot 1175-F and a portion of 1175-E to
spouses Rudy and Corazon Paragas for P500,000. On October 17,
1996, the spouses sold a portion of Lot 1175-E to Catalino, one of
the children of Gregorio.
On October 22, 1996, the grandchildren of Gregorio then
filed a complaint for annulment of sale and partition. They allege
that their grandfather could not have sold the subject lots because
at the time of the execution of the deed of sale, their grandfather
was seriously ill and dying at that time, which vitiated his consent to
the disposition of the property.
Issue:
1. W/N the sale of the lots are valid
Held:
No. In Domingo v. Court of Appeals, the Court declared as
null and void the deed of sale therein inasmuch as the seller, at the
time of the execution of the alleged contract, was already of
advanced age and senile. The general rule is that a person is not
incompetent to contract merely because of advanced years or by
reason of physical infirmities. However, when such age or
infirmities have impaired the mental faculties so as to prevent the
person from properly, intelligently, and firmly protecting her
property rights, then she is undeniably incapacitated.
In the case at bar, the deed of sale was allegedly signed by
Gregorio on his death bed in the hospital. Gregorio was an
octogenarian and was suffering an illness at that time
circumstances which raise grave doubts on his physical and mental
capacity to freely consent to the contract.

CALIMLIM-CANULLAS v. FORTUN
FACTS
Mercedes and Fernando were married in 1962 and had 5
children. They lived in a small house on the residential land in
question. Fernando inherited such land after the death of his father
in 1965. In 1978, Fernando left his family to live w/ his concubine
Corazon. He then sold said lot w/ the house in favor of Corazon for
P2,000.00. Corazon, unable to take possession of the house and lot,
filed a complaint for quieting of title. Mercedes objected alleging
that the the sale of the land together with the house and
improvements to Corazon was null and void because they are
conjugal properties and she had not given her consent to the sale.
The trial court at first ruled in favor of Corazon as the lawful
owner of the land as well as of the house erected on the land.
However, lower court later modified the judgment by declaring that
Corazon is the lawful owner of the land but the sale of the conjugal
house was null and void.

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ISSUES
(1) W/N the construction of a conjugal house on the exclusive
property of the husband ipso facto gave the land the character of
conjugal property; and
(2) W/N the sale of the lot together with the house and
improvements thereon was valid under the circumstances
surrounding the transaction.

HELD
(1) YES. According to Article 158 of the Civil Code, buildings
constructed at the expense of the partnership during the marriage
on land belonging to one of the spouses also pertain to the
partnership, but the value of the land shall be reimbursed to the
spouse who owns the same. Therefore, Fernando could not have
alienated the house and lot to Corazon since Mercedes had not
given her consent to said sale.
(2) NO. The sale was null and void for being contrary to morals and
public policy. The law generally prohibits spouses from selling or
donating properties to each other; the same prohibitions apply to a
couple living as husband and wife w/o the benefit of marriage. To
rule otherwise would be to put the persons in guilt at a better
position than those legally married. This is dictated by the public
interest.
MATABUENA v CERVANTES
Facts:
On February 20, 1956 Felix Matabuena executed a deed of
donation inter vivos in favor of Petronila Cervantes, his common-
law spouse. They married on March 28, 1962. Unfortunately, on
Sept. 13 1962, Felix died intestate (um... it means: Having made no
legal will). Cornelia Matabuena, Felix only sister and nearest
relative to him, questioned the validity of the donation. She claimed
that the ban on donations between spouses should also apply to
common-law marriages. She had the land declared in her name by
virtue of an affidavit on self-adjudication, paying the estate and
inheritance taxes as well. On November 23, 1965, the lower court
upheld the validity of the donation saying that it was done while the
spouses werent married yet, hence the prohibition on art. 133 does
not apply. Cornelia then appealed to the supreme court

Issue:

W/N the ban on a donation between the spouses during a marriage
applies to common-law relationship

Held:
The supreme court reversed the decision of the lower court.

While Article 133 of the Civil Code considers as void a donation
between the spouses during marriage, policy consideration of the
most exigent character as well as the dictates of morality requires
that the same prohibition should apply to a common-law
relationship, as it is contrary to public policy (JBL Reyes,
Buenaventura v. Bautista 1954). The law prohibits donations to the

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other consort because of fear of undue pressure and influence upon
the donor. So long as marriage remains the cornerstone of family
law, reason and morality alike demand that the disabilities
attached to marriage should likewise attach to concubinage.

(Spirit of the Law: StatCon: Whatever omission may be apparent in
an interpretation purely literal of the language used must be
remedied by an adherence to its avowed objective)

However, the lack of validity of the donation by the deceased to
appellee does not necessarily result in appellant having exclusive
right to the disputed property. As a widow, Cervantes is entitled to
one-half of the inheritance, and the plaintiff, the surviving sister to
the other half.
PHILIPPINE TRUST CO. V ROLDAN
Facts:
Mariano Bernardo inherited 17 parcels of land from his
deceased father. Since Mariano was a minor, guardianship
proceedings were instituted and her step-mother, Socorro Roldan
was appointed as his guardian. Roldan filed in said guardianship
proceedings a motion asking for authority to sell as guardian the 17
parcels for the sum of P14,700 to Dr. Fidel C. Ramos, her brother-in-
law, the purpose of the sale being allegedly to invest the money in a
residential house in Tindalo Street Manila, which the minor desired
to have. The motion was granted and she sold the land with judicial
confirmation of the sale. After a week, Dr. Ramos sold to her the
same lands for P15,000. Later on, Roldan sold 4 parcels out of the
17 to Emilio Cruz. Philippine Trust Company subsequently replaced
Roldan as guardian and sought to declare as null and void the three
sales that occurred stating that the first two (between Roldan and
Dr. Ramos and vice versa) was against Article 1459 of the Civil Code
and that the third sale was also ineffectual because Roldan had
acquired no valid title to convey to Cruz.
Issue:
1. w/n the sale of the 17 parcels of land was null and void for
violation of Article 1459 of the Civil Code which prohibits a
guardian from purchasing either in person or through the
mediation of another the property of her ward.
Held:
The Supreme Court annulled the 3 contracts of sale in
question; declared the minor as the owner of the 17 parcels of land
along with its fruits, with the obligation to return to Roldan the
price of P14,700 with legal interest.
Guardianship is a trust of the highest order, and the trustee
cannot be allowed to have any inducement to neglect his wards
interest and in line with the courts suspicion whenever the
guardian acquires the wards property, the Court has no hesitation
to declare that in this case, in the eyes of the law, Socorro Roldan
took by purchase her wards parcels thru her brother-in-law, and
that Article 1459 ofthe Civil Code applies.
Even if no collusion is proved or that the guardian may have
acted without malice, the fact remains that she acquired the
properties of her protg through her brother-in-law.. Due to the
very short time between the two sales (a week), it may be deduced
that she planned to acquire the properties for herself at the time of

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selling them to Dr. Ramos. The sale between Roldan and Cruz is
likewise void because Roldan never acquired title to the parcels of
land.
More Information:
The Philippine Trust Company filed the case against Roldan
before the CFI Manila which held that there was no proof that Dr.
Ramos was a mere intermediary or that the latter had an agreement
with Socorro to buy the parcels for her benefit. The trial court
upheld the contracts but allowing the minor to repurchase all the
parcels by paying P15, 000, within 1 year. The CA affirmed the
judgment. Hence, the appeal to the SC which reversed the decision.
The defense sought by Roldan through Rodriguez v. Mactal
does not apply because in that case the guardian sold the property
of her ward in 1926 and repurchased it two years after which is
enough to dispel the natural suspicion of the guardians motives or
actions. In the present case, only 1 week had elapsed between the
first two sales.
Minor on losing end in the transaction. The calculation, that
the investment in the Tindalo Street house produces to the minor
the rentals of P2,400 yearly while the parcels of land yield for the
stepmother an average of P1,522 yearly, does not include the price
of the lot on which the house was erected. Estimating such lot at
P14,700 only, the result is that the price paid for the 17 parcels gave
the minor an income of only P1,200 a year, whereas the harvest
from the seventeen parcels netted his step-mother a yearly profit of
P1,522.00. The minor was on the losing end.
Macariola v Asuncion
Who were the petitioners/respondents?
Macariola: A civil case for partition of property was decided after
her father died. She was unhappy with her share. Apparently it
was the smallest and least valuable. So naturally she sued to
annul.
Judge Asuncion: The Judge who decided Civil Case 3010. He later
purchased a lot which was part of that involved in the partition of
that case.
Facts:
Both the petitioner and the respondents in the antecedent civil case
are the children of a certain recently deceased Francisco Reyes. The
two contending parties in this case were Macariola, child of Reyes
by his first wife, and the remaining Reyeses, Franciscos children
with his second wife. The case stemmed from a dispute regarding
how to divide the estate of the late Francisco among his various
heirs, and for this purpose a civil case had been filed previously
which resulted in a project of partition among the properties as
between the Macariolas and the Reyeses, duly approved by both.
The problem emerged when one of the properties solely owned by
Francisco Reyes, Lot Number 1184, was subdivided after the Project
of Partition. It was divided into 5 lots, Lot 1184-A through E.
Lot 1184-E (2,172 sqm) was thereafter reconveyed (sold) to Dr.
Arcadio Galapon and wife, in 1964. On 1965, Galapon thereafter
sold a portion of this lot to Judge Asuncion (he was the judge that
handled the previous Civil Case regarding partition) and wife. The
year after (1966), The spouses Galapon and Asuncion sold their

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collective shares and interests in Lot 1184-E to Traders
Manufacturing and Fishing Industries, Inc. of which the spouses
Asuncion were shareholders.
On 1968, Macariola, filed a complaint to annul the partition of the
property. It was only then that Macariola discovered that a lot was
already owned by the Judge. Learning of what transpired, Macariola
filed a complaint against Judge Asuncion with four causes of action:
1) Violation of Article 1491 of the Civil Code by
purchasing a lot which was the subject of decision by
him in a judicial proceeding.
2) Violation of Anti-Graft and Corrupt Practices Act by
associating with Traders Manufacturing and being a
stockholder therein while at the same time a presiding
judge.
3) That he willingly associated with an impostor lawyer
who was a stockholder at Traders.
4) That he lacked judicial ethics.
Issue Important to Sales:
I) Whether or not Judge Asuncion Violated Article 1491 of
the Civil Code: No
Article 1491 states that:
Article 1491. The following persons cannot acquire by purchase,
even at a public or judicial action, either in person or
through the mediation of another:
"(5) Justices, judges, prosecuting attorneys, clerks of superior and
inferior courts, and other officers and employees connected with
the administration of justice, the property and rights in litigation or
levied upon an execution before the court within whose jurisdiction
or territory they exercise their respective functions; thi s prohibition
includes the act of acquiring by assignment and shall apply to
lawyers, with respect to the property and rights which may be the
object of any litigation in which they may take part by virtue of their
profession".

Ruling:
The prohibition regarding the purchase of the subject property
under article 1491 only applies to property under litigation. By
under litigation, we mean literally that there is still a case pending.
By the time Judge Asuncion had acquired the property, there has
been a long time had already transpired, there was no appeal filed
or perfected in due course, In short, it was already final and
executor. Note that his decision was made in 1963, while he
purchased the land in 1965. Hence, it was no longer subject of
litigation. The subsequent case filed to annul the partition on 1968
did not change the character of the property and the fact that, by
then, it was already owned by Asuncion. Hence, there was no
violation. Further, the property was purchased not from the parties
in litigation, but from an innocent third party afterwards (Galapon).
<However>, the Court did say it was improper (not illegal) for the
judge to purchase a property previously subject to his judicial

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decision, because judges should avoid the appearance of
impropriety. Nevertheless, as to the charges of possessing
prohibited interest, the Court took notice of the fact that a few days
after the incorporation of Traders, the Asuncions sold their share,
implies that they were aware of the appearance of impropriety. This
is according to Canon 25, Canons of Judicial Ethics.
"A judge should abstain from making personal investments in
enterprises which are apt to be involved in litigation in his court;
and, after his accession to the bench, he should not retain such
investments previously made, longer than a period sufficient to
enable him to dispose of them without serious loss. It is desirable
that he should, so far as reasonably possible, refrain from all
relations which would normally tend to arouse the suspicion that
such relations warp or bias his judgment, or prevent his impartial
attitude of mind in the administration of his judicial duties. . . ."
Judge Asuncin was Aquitted
Also, he got promoted to Court of Appeals Justice in the end.
DOMINGO D.RUBIAS vs. ISAIAS BATILLER
FACTS:
On August 31, 1964, plaintiff Domingo D. Rubias filed a suit
to recover the ownership and possession of certain portions of lot
under Psu-99791 located in Barrio General Luna, Barotac Viejo,
Iloilo which he bought from his father-in-law, Francisco Militante in
1956 against its present occupant defendant, Isaias Batiller,
Before the war, Militante claimed ownership of a parcel of
land located in the Barrio of General Luna, municipality of Barotac
Viejo province of Iloilo, which he caused to be surveyed on,
whereby he was issued a plan Psu-99791. During the war, the
record of the case was lost before it was heard, so Militante
petitioned to reconstitute the case. The CFI of Iloilo dismissed his
application. Militante appealed to the CA. Pending appeal, Militante
sold the land to plaintiff. However, the CA affirmed the CFIs
decision dismissing Militantes application for registration.
ISSUES:

1. WON the contract of sale between appellant and his father-
in-law, the late Francisco Militante over the property
subject of Plan Psu-99791 was void because it was made
when plaintiff was counsel of his father-in-law in a land
registration case involving the property in dispute (relevant
to Sales)
HELD:
1. Yes. Plaintiff lacks cause of action that calls for the dismissal
of the complaint. No right or title was passed on/sold by
Militante to plaintiff because Militantes application for
registration was dismissed. Also, even assuming that
Militante had the right to sell to plaintiff, their deed of
sale/contract is null and void according to the Civil Code:
Art. 1409. The following contracts are inexistent and void from the
beginning: xxx
(7) Those expressly prohibited by law.

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ART. 1491. The following persons cannot acquire any purchase,
even at a public auction, either in person of through the mediation
of another: xxx
(5) Justices, judges, prosecuting attorneys, clerks of superior and
inferior courts, and other officers and employees connected with the
administration of justice, the property and rights of in litigation or
or territory they exercise their respective functions; this prohibition
includes the act of acquiring an assignment and shall apply to
profession.
DAROY V ABECIA
Nature: Complaint for malpractice filed by Regalado Daroy (now
deceased) against Atty. Esteban Abecia, a member of the Bar.
Facts:
Abecia was the counsel for Daroy in a forcible entry case. He
hired Abecia as his lawyer and won. To satisfy the award for
damages, a parcel of land of the defendant was sold to Daroy at an
execution sale. . Upon failure of the defendants to redeem the l and,
its ownership was consolidated in complainant Daroy. The land was
then sold to Daroys relative, who then sold it to Abecias wife.
Complainant Daroy claimed that respondent Abecia forged his
signature in a deed of absolute sale, dated March 31, 1971,
transferring the subject parcel of land to Jose Gangay purportedly
for the sum of P1,250.00 and that in a fictitious deed of absolute
sale, dated April 17, 1971, it was made to appear that Gangay in
turn conveyed the land to Nena Abecia, wife of respondent Abecia,
for the sum of P1,350.00. Two weeks thereafter, under date of April
17, 1971, the said Jose Gangay executed a Deed of Sale of the same
property in favor of Mrs. Nena Abecia, the wife of the respondent,
by virtue of which TCT No. T-15926 was issued in the name of Nena
Abecia, married to Atty. Esteban Abecia, the respondent.
Sometime in the year 1984, the complainant discovered
that his said property was already in the name of Mrs. Nena Abecia
and Atty. Esteban Abecia.
He now claims that these sales are void because Abecia
forged his signature on the deeds of sale. IBP disbarred Abecia.
Issue:
1. Did the IBP erred in dismissing Abecia?
2. Is the sale of the property void?
Held:
1. The IBP erred in dismissing Abecia. (see reason in no. 2)
2. Daroy had knowledge of the sale. Complainant very well
knew of the execution of the deed of sale as shown in the
Sheriffs Return of Service. The evidence shows that Daroy
was a party to the sale at the time it was made and did not
discover it 9 years later as he claimed. He was not
defrauded. The parties thought that because the land had
been acquired at a public sale to satisfy a judgment in a case
in which respondent was complainants counsel, the latter
could not acquire the land. The parties made this

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arrangement to circumvent Art. 1491 of the Civil Code
which prevents lawyers from acquiring property and rights
that may be the object of any litigation in which they may
take by virtue of their profession.
ART. 1491. The following persons cannot acquire by purchase, even
at a public or judicial auction, either in person or through the
mediation of another:
. . . .
(5) Justices, judges, prosecuting attorneys, clerks of superior and
inferior courts, and other officers and employees connected with
the administration of justice, the property and rights in litigation or
or territory they exercise their respective functions; this prohibition
includes the act of acquiring by assignment and shall apply to
profession.
The prohibition in Art. 1491 does not apply to the sale of a
parcel of land acquired by a client to satisfy a judgment in his favor,
to his attorney was not the subject of the litigation.
While judges, prosecuting attorneys, and others connected
with the administration of justice are prohibited from acquiring
property or rights in litigation or levied upon in execution the
prohibition with respect to attorneys in the case extends only to
property and rights that may be the object of any litigation in
which they may take part by virtue of their profession.

Chapter 3: Subject Matter of a Contract of Sale
SIBAL Vs VALDEZ
Facts:
On 1923, Macondray & Co., Inc. bought 8 parcels of land at
the auction held by the sheriff of the Province of Tarlac. On the
same year, Leon Sibal, the judgment debtor, paid Macondray
2000php as the redemption price of said parcels of land, without
specifying the particular parcels to which it was to apply.
On 1924, Emilio J. Valdez bought parcels of land, where the
sugar cane in question is planted, at the auction held by the sheriff
of Province of Tarlac. He bought all of Macondray's rights and
interest in the eight parcels of land it acquired. He also paid
Macondray another 2000php for the redemption price Sibal paid.
Sibal alleged two causes of action (1) that Valdez has
refused to accept Sibal's offer to redeem the sugar cane the latter
planted and (2) that Valdez has harvested and attempted to further
harvest palay that belongs to Sibal. So Sibal prayed for a writ of
injuction against Valdez to prevent the latter from possessing the
subject property and from further possessing or harvesting the
sugar cane and palay in said parcels of land. He also prayed to order
Valdez to consent with the redemption of the sugar cane. However,
Valdez argued that the sugar cane is his personal property and
cannot be subject to redemption.
Issue:

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WON the sugar cane in question is a personal property?
WON the sugar cane in question is subject to sale?
Held:
Yes, sugar cane is classified under personal property so it
cannot be subject of redemption. Art. 334 of the Civil Code provides
that trees, plants, and ungathered products, while they are annexed
to the land are real property. However, it has been modified by the
Code of Civil Procedure and by Act No. 1508, in the sense that, for
the purpose of attachment and execution, and for the purposes of
the Chattel Mortgage Law, "ungathered products" have the nature
of personal property.
Yes, a man may sell something which he potentially but not
actually possesses. It is valid to sell a thing, which though not yet
actually in existence, is reasonably certain to come into existence as
the natural increment or usual incident of something already in
existence, provided that the thing can be specified and identified.
The thing sold must also belong to the vendor to begin with. The
buyer's title to the thing will vest upon its existence. Moreover,
crops, whether growing or standing in the field ready to be
harvested, when produced by annual cultivation, are not part of the
realty. They can be sold.
Note:
The immovability of growing crops are "only in abstracto and
without reference to rights on or to the crop acquired by others
than the owners of the property to which the crop is attached" but
jurisprudence recognizes the possible mobilization of the growing
crop." [point is crops can be immovable first but then they mature
and become movable. Yan pagkagets ko]
SC decided that since the Sibal, in good faith, planted the palay in
said parcels he is entitled to half of it.

PICHEL V. ALONZO
Facts:
Prudencio Alonzo was awarded a parcel of land by the
PHHC. He leased it to Sua. The board of liquidators cancelled the
award to Alonzo on Jan 27, 1965 because the land was leased to
someone, which is not allowed by RA 477. It was later reinstated in
1972. Alonzo executed a deed of sale for the coconut fruits (from
Sept 15, 1968 to Jan 1, 1976) of the parcel of land awarded to him
by PHHC by reason of RA 477. He executed this in favor of Luis
Pichel in exchange for payment amounting to 4,200.00.
According to RA 477, the grantee is prohibited to sell, lease
or encumber the land and the improvements therein within 10
years from the issuance of the title, if he does, the transfer shall be
considered null and void. The trial court held that the deed of sale
was a contract of lease of the land itself and that it is null and void
by virtue of RA 477. It ordered Alonzo to pay back the 4,200 that
Pichel paid.
Issue:

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1. WON Alonzo has the right to execute such deed of sale
considering that the award was, at the time, cancelled by the Board
of Liquidators
2. WON the Deed of sale is the prohibi ted encumbrance
contemplated in RA 477
Held:
1. Yes. Cancellation of the award granted pursuant to RA 477 does
not automatically divest the awardee of his rights to the land. No
immediate reversion to the state. There should be an appropriate
proceeding for reversion.
2. No.
a. The terms of the contract are controlling when there is no
ambiguity. No need to resort to statutory construction.
b. It is for the SALE of the FRUITS of the land and not lease of the
land. The subject matter of the sale is the fruits of the land.
Possession and use of Fruits is different from possession and use of
land. Different rights. The first one is of the accessories, the second
of the principal. Right over the accessories does not vest right over
principal. The accessory merely follows the principal and not vice
versa.
c. A valid sale may be made of a thing, which, though not yet in
existence, is reasonably certain to come into existence as natural
increment of something in existence and the title will vest on the
buyer when it comes into existence. These are called things of
potential existence.
d. A lease is where one party binds himself to give to another the
enjoyment or use of a thing for a price certain for a period which
may be definite or indefinite and a sale is one where there is
transfer of ownership upon delivery.
e. The purpose of the law is fulfilled, not violated when the fruits
are sold.
The grantee can be self sufficient and not fully reliant on the
government.

MANANSALA VS COURT OF APPEALS
Facts:
1. Fidela Manansala is the registered owner of a parcel of land in
QC. She has been in possession of the land since 1955 by virtue of
conditional sale made in her favour by PHHC (now NHA). In 1960,
however, the PHHC awarded the land to the spouses Mercado who
took possession of the land also in that year.
2. Manansala was able to successfully retrieve the land from the
Mercado spouses by claiming precedence not only in actual
possession but also in the application for its purchase. In 1984,
Manansala paid the full price of the land and thereafter a deed of
sale was executed in her favour in 1985.
3. Aranez brought this action for specific performance against
Manansala to enforce a deed of sale covering the same lot entered
into by her and Manansala in 1960. The contract stipulated that the
land shall be transferred to Aranez within 30 days after full payment

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of the purchase price by Manansala to the PHHC. The deed was
notarized by Atty. Lopez who was also her counsel against the
Mercado spouses.
4. Manansala denies selling the land; alleging further that the deed
was a forgery and that her signature was secured through fraud.
She also averred that the selling of the land was void because it was
made in violation of the prohibition of the PHHC against subsequent
disposition of the land within one year after the issuance of the
title.
5. The RTC held the signature to be genuine but there was no
perfected contract since there was no intention to sell the land and
because at the time of the sale, the petitioner was not yet the
owner thereof.
6. The CA reversed the decision holding that there was meeting of
the minds between the party evidence by the signature of the
petitioner in the deed of sale which the NBI found to be genuine.
Further, the CA held that the sale was valid in accordance with ART
1461of the Civil Code which provides that things having potential
existence may be the object of a contract of sale.
Issues:
1. W/N the CA erred in validating a contract in violation of law and
public policy?
2. W/N the challenged notarial document, apart from being
contrary to law and public policy, does not serve the presumption of
regularity?
Held:
1. No, there was no evidence that the sale of the lot was made in
violation of any rules of the PHHC. Further, this contention although
raised in the trial court was not pursued by Manansala. In her
appeal to the CA, she also never argued this point as she simply
considered the issues raised by the RTC. Hence this point is
considered waived and cant be urged as a ground to reverse the
decision of the CA. (Conclusion of fact by a trial judge --- as affirmed
by the CA--- is conclusive upon the SC.)
2. The signature was found out to be genuine as per the report of
the NBI. Further,
Manasalas claim that her signature on the deed had been procured
through fraud is contradicted by her allegation that the signature on
the deed was not hers.

Pio Sian Melliza vs. City of Iloilo, University of the Philippines
and the Court of Appeals (1968)
FACTS:
Juliana Melliza owned Lot 2, Lot 5 and Lot 1214. She
donated a part of Lot 1214 to the Municipality of Iloilo to serve as
the municipal hall. The donation was revoked by the parties since
the area donated was found inadequate to meet the requirements
of the municipality development plan called the Arellano Plan.


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Lot 1214 was divided by into several lots, namely: 1214-A, 1214-B,
1214-C and 1214-D. (See illustration below for reference)
Juliana executed an instrument which states that she
assigns and transfers certain parts of Lot 1214 to the Municipal Govt
of Iloilo. Juliana sold her remaining interest in Lot 1214 to Remedios
Sian Villanueva who in turn transferred her rights to said portion of
land to petitioner Pio Sian Melliza. The City of Iloilo donated the city
hall site together with the building thereon to UP Iloilo, which
consisted of Lots Nos 1214-B, 1214-C and 1214-D. Pio Sian Melliza
asked city authorities for payment of value of Lot 1214-B. No
recovery was obtained because the City did not have funds. Pio Sian
Melliza filed in the CFI of Manila an action for recovery of Lot 1214-
B or its value against Iloilo City and UP.
Defendants answered claiming that Lot 1214-B was included
in the public instrument executed by Juliana Melliza in favor of Iloilo
municipality. Pio Sian Melliza claims that the public instrument is
clear that only 1214-C and 1214-D is included and that the 2nd
paragraph of said instrument was only to better identify the lots
sold. Petitioner further claims that to hold that 1214-B is included in
the sale would render the contract invalid because the law requires
as an essential element of sale a determinate object.
CFI: dismissed the complaint, saying that instrument by Juliana
included Lot 1214-B.
CA: affirmed CFI decision, and that the portion sold by Juliana
necessarily included whatever was needed for construction of
avenues, parks, city hall site.

ISSUES:
1. W/N the conveyance by Juliana Melliza to Iloilo municipality
included Lot 1214-B
2. W/N the description of other lots in the 2nd paragraph of the
instrument would be legally insufficient, because the object would
not be determinate as required by law (SALES issue)
HELD:
1. YES. Accdg to the SC, the public instrument describes four parcels
of land, Lot 2, Lot 5, Lot 1214-C and Lot 1214-
D and further describes not only those but also lots needed for the
construction of the city hall site, avenues, parks, according to the
Arellano Plan. If the parties merely intended to cover the specified
lots, there would have been no need for the 2nd paragraph which
describes other portions of land contiguous to the four lots needed
for the said Arellano Plan.
2. NO. The requirement of the law that a sale must have for its
object a determinate thing, is fulfilled as long as, at the time the
contract is entered into, the object of the sale is capable of being
made determinate without the necessity of a new or further
agreement between the parties. (Art 1460 NCC.) The specific
mention of some lots plus the statement that the lots object of the
sale are the ones needed for the Arellano Plan sufficiently provides
a basis, as of the time of the execution of the contract, for rendering
determinate said lots without the need of a new and further
agreement of the parties.

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The SC also noted that Pio Sian Melliza is the notary public of the
public instrument executed by Juliana. As such, he was aware of its
terms. Said instrument was also registered with the Register of
Deeds and such registration was annotated at the back of the Title
Certificate of Juliana. From these facts, Pio Sian Melliza knew of the
terms or is chargeable with knowledge of them and should have
raised the proper objections with Iloilo City and UPs possession of
Lot 1214-B. He is barred by the principles of civil law, as well as
laches, estoppel and equity.Lot 1214
Lot 1214 A
Lot 1214 B
Lot 1214- B
Lot 1214-C
Lot 1214-D
NOTE: Sorry the digest is long. Kailangan specific sa lot numbers eh.
**For reference, this is how Lot 1214 was divided:

Atilano vs. Atilano (May 21, 1969)
Petitioners, plaintiffs- appelees: Heirs of Atilano II
Respondents, defendants- appellants: Ladislao Atilano and Gregorio
Atilano

Facts:
municipality of Zamboanga.
The lot was thereafter subdivided into 5 parts (LOT 535-A, LOT 535-
B, LOT 535-C, LOT 535-D, LOT 535-E).
OT 535-E
was executed in the name of his brother, Eulogio Atilano II for
P150.00 The other three lots was sold as well. The only one left for
Atilano I was presumably covered by the title to LOT 535-A.
ano, the
defendant.
obtained title as to lot 535-E and became co- owners. Years later, in
order to end the co-ownership and to properly subdivide the said
lot, they had the lot resurveyed. It was here that they discovered
that the lot they were occupying was identified as LOT 535-A and
not LOT 535-E referred to in the deed of sale.
Instance alleging that they offered to surrender the possession of
lot A and demanded in return the possession of lot E.
The defendants refused to exchange.
understandable for the said lot has greater area compared to lot A
they were occupying. (lot E = 2612 m2, lot A=1808 m2)

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o Reference to lot E in the Deed of Sale is an involuntary error
o Intention of the parties to the sale covers lot A
o Since 1916, Atilano I had been in possession. He even bought
adjoining lot to increase area
that the lot E was registered under Land Registration Act. They
cannot acquire the property through prescription.
Issue:
1. Whether or not the object of the sale is lot 535-E thus,
allowing such exchange of possession.
Held:
No.
he sees it, in its actual setting
and by its physical metes and bounds and not by the mere lot
number assigned to it in the certificate of title.
o Atilano II constructed his resident therein even before sale in his
favour identified as lot
A.
o Atilano I on the other hand had his house on lot E and even
purchased adjoining lot.
but the intention of the
parties at the time of sale.
intended by the parties is lot A where
Atilano II resided , reconstructed his house at the end of the war
and where the heirs continued to
designation of lot E in the deed of sale was a simple mistake in the
drafting. The mistake did not vitiate the consent of the parties nor
affected the validity and binding effect of the contract.
no longer needed for the parties
have already retained possession in conformity with the real
intention of the parties.

_______________________________________________________
Shorter narration of facts:
parts. What was left for him was
presumably covered by title to lot 535-A.
deed of sale executed covered lot 535-E.
Years later, when Atilano II and his children had the lot E
resurveyed, they discovered that the lot was
identified as lot 535-A.

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exchange of the lot E occupied by Ladislao
Atilano, successor of Atilano I after he died. (Apparently, lot A has
greater area than lot B). However,
Ladislao refused.

o Reference to lot E in the Deed of Sale is an involuntary error
o Intention of the parties to the sale covers lot A
o Since 1916, Atilano I had been in possession. He even bought
adjoining lot to increase area.

Yu Tek & Co vs. Basilio Gonzales
Facts:
Yu Tek and Co obliged Mr. Basilio Gonzales to deliver 600
piculs of sugar of the 1st and 2nd grade. For this service, he will
receive compensation of P3, 000, as evidence in a receipt. He will
deliver the 600 piculs of sugar at any place in Santa Rosa. The
service contract also has a 3-month period stipulation. The contract
also states that Mr. Gonzales shall return the P3, 000 and give
P1,200 by way of indemnity in case the contract is rescinded. Mr.
Gonzales failed to deliver. He was also unable to return the P3000
and payP1200 indemnity. For his defense, Mr. Gonzales contends
that the contract was limited to sugar he might raise upon his own
plantation; that the contract represented a perfected sale; and that
by failure of his crop he was relieved from complying with his
undertaking by the loss of the thing due (i.e dry season in his
hacienda, he could not produce and deliver any sugar).
Issue:
1. Whether or not there was perfected contract of sale?
Held:
No, there is no perfected contract of sale. The SC ruled that
there is a perfected sale with regard to the thing whenever the
article of sale has been physically segregated from all the other
articles. In the case at bar, there was no appropriation of any
particular lot of sugar. Thus, there was only an executor agreement
and a promise of a sale. It is clear that Art. 1452, 1096 and 1182 are
not applicable. Yu Tek and Co is entitled to receive P3,000.
Ratio:
1. Requisites of a Contract. Consideration. A contract of sale is not
perfected until the parties have agreed upon the price and the thing
sold. A contract whereby a party obligates himself to sell for a price
a certain specified quantity of sugar of a given quality, without
designating any particular lot of sugar, is not perfected until the
quantity agreed upon has been selected and i s capable of being
physically designated and distinguished from all the other sugar.


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NATIONAL GRAINS AUTHORITY and WILLLAM CABAL vs. THE
INTERMEDIATE APPELLATE COURT and LEON SORIANO,
FACTS:
- In 1979, private respondent Leon Soriano offered to sell pal ay
grains to the NFA
(National Food Authority, which was previously called the National
Grains Authority), through one of its provincial managers, William
Cabal.
- Private respondent Soriano eventually submitted to the NFA
several documents required for the sale of palay. In the Farmer's
Information Sheet, the maximum number of cavans of palay that
Soriano may sell to the NFA was indicated 2640 cavans.
- A day after submitting the required documents, Soriano delivered
630 cavans of palay to the NFA warehouse. The palay delivered
during these two days were not rebagged, classified and weighed.
- Soriano demanded payment of the 630 cavans of palay. However,
Cabal wrote to Soriano stating that NFA cannot legally accept the
said delivery because a certain Napoleon Callangan certified that
Soriano is not a bona fide farmer. Asserting that there was no valid
contract of sale, Cabal advised Soriano to withdraw from the NFA
warehouse the 630 cavans previously delivered.
- Instead of withdrawing the 630 cavans of palay, private
respondent Soriano insisted that the palay grains delivered be paid.
He then filed a complaint for specific performance and/or collection
of money with damages against the NFA and Mr. William Cabal.
Both the RTC and the Intermediate Appellate Court decided in favor
of private respondent Soriano.
ISSUE:
1. W/N there was a contract of sale in the case at bar?
HELD:
YES, there was a contract of sale.
- In the case at bar, when the NFA accepted the offer by noting in
Soriano's Farmer's Information Sheet a quota of 2,640 cavans, there
was already a meeting of the minds between the parties. Sale is a
consensual contract wherein the mutual consent of the parties shall
lead to the perfection of the contract.
- Regarding the validity of the subject matter of the contract, the
fact that the exact number of cavans of palay to be delivered was
not specified does not affect the perfection of the contract.
o Because Article 1349 states that: The fact that the quantity is not
determinate shall not be an obstacle to the existence of the
contract, provided it is possible to determine the same, without the
need of a new contract between the parties."
o In this case, there was no need for NFA and Soriano to enter into a
new contract to determine the exact number of cavans of palay to
be sold. Soriano can deliver so much of his produce as long as it
does not exceed 2,640 cavans.

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- The reason why NFA initially refused acceptance of the 630 cavans
of palay delivered by Soriano is that NFA alleges that Soriano is not
a bona fide farmer.
The trial court and the appellate court found that Soriano was a
bona fide farmer and therefore, he was qualified to sell palay grains
to NFA.

JOHANNES SCHUBACK & SONS PHILIPPINE TRADING
CORPORATION vs. THE HON. COURT OF APPEALS
Facts:
In 1981, SJ industrial contacted with Schuback to purchase bus
spare parts from Germany.
SJ Industrial also gave a list of bus spare parts that it would like to
purchase.
Schuback then communicated with its German office to provide
an estimate of costs.
After this, Shuback provided SJ Industrial its formal offer,
containing a list of prices, item number, quantity, part number and
description to SJ industrial.
SJ Industrial then informed Schuback of its desire to purchase and
submitted a purchase order containing the item number, part
number and description.
It also promised to follow up in the purchase order the quantity of
units it would like to purchase.
SJ Industrial eventually submitted the quantity of units it would
like to purchase, along with the inscription this will serve as our
initial purchase order.
Schuback then ordered the parts from its German Office.
Schuback issued an invoice so that SJ Industrial can apply for a
letter of credit in favour of Shuback
After some time, Schuback reminded SJ of its obligation to open a
letter of credit,SJ responded by stating that it I encountering
difficulties in doing so
Schuback then wrote again, demanding that SJ either open a letter
of credit and proceed with the order or pay the cancellation fee.
SJ Industrial failed to do either. Schuback sued for damages
Issue:
1. W/N there was a perfected contract of sale?
Held:
Yes
- Contract of sale is perfected at the moment there is a meeting of
minds upon the thing which is the object of the contract and upon
the price.
- Article 1319 of the Civil Code states: "Consent is manifested by the
meeting of the offer and acceptance upon the thing and the cause
which are to constitute the contract. The offer must be certain and
the acceptance absolute. A qualified acceptance constitutes a

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counter offer." The facts indicate that consent on both sides has
been manifested
- The act of SJ Industrial in informing Schuback of its desire to
purchase after receiving a formal offer constitutes a meeting of the
minds.
- The inscription this will serve as our initial purchase order proves
further the acceptance of the offer.
- The Trial Court is correct in stating that there was a perfected
contract of sale. It erred however, when it said that the perfection
only occurred when the quantity to be purchased was submitted by
SJ Industrial.
- Perfection occurred when the initial purchase order was issued
even if the quantity to be purchased was not yet available as
quantity is not a material to perfection
- What is of importance is the meeting of the minds as to the object
and cause
- The omission to open a letter of credit does not prevent the
perfection of the contract between the parties, for the opening of
the letter of credit is not to be deemed a suspensive condition.
- Schuback, in its dealings with SJ Industrial, did not incorporate any
provision declaring their contract of sale without effect until after
the fulfillment of the act of opening a letterof credit.

CONCHITA NOOL and GAUDENCIO ALMOJERA vs. COURT OF
APPEALS, ANACLETO NOOL and EMILIA NEBRE
FACTS:
Two (2) parcels of land are in dispute and litigated upon
here. The plaintiff spouses, Conchita Nool and Gaudencio Almojera,
now the appellants, seek recovery of the aforementioned parcels of
land from the defendants, Anacleto Nool (Conchitas younger
brother) and Emilia Nebre, now the appellees.
Conchita and her husband bought the two parcels of land
from her two brothers Victorino Nool (1 hectare) and Francisco Nool
(3 hectares). As they were in dire need of money, they obtained a
loan from the Ilagan Branch of the DBP, in Ilagan, Isabela, secured
by a real estate mortgage on said parcels of land, which were still
registered in the names of Victorino Nool and Francisco Nool, at the
time, and for the failure of plaintiffs to pay the said loan, including
interest and surcharges, totaling P56,000.00, the mortgage was
foreclosed.
The one year redemption period for the foreclosed parcels
of land was from March 16, 1982 to March 15, 1983 but the
mortgagors right of redemption was not exercised by the plaintiff
spouses.
Because they were unable to redeem the property,
Conchita asked her brother Anacleto Nool to redeem the foreclosed
properties from DBP, which the latter did; and as a result, the titles
of the two (2) parcels of land in question were transferred to
Anacleto Nool.

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Defendant Anacleto having been made to believe, then,
that his sister, Conchita, still had the right to redeem the said
properties had agreement with Conchita to purchase the two (2)
parcels of land for a total price of P100,000.00, P30,000.00 of which
price was paid to Conchita, and upon payment of the balance of
P14,000. 00, plaintiffs (Conchita) were to regain possession of the
two (2) hectares of land, which amounts defendants (Anacleto)
failed to pay, and the same day the said arrangement was made;
another covenant was entered into by the parties, whereby
Anacleto agreed to return to Conchita the lands in question, at
anytime the latter have the necessary amount (the repurchase
agreement); that Conchita asked the Anacleto to return the same
but despite the intervention of the Barangay Captain of their place,
Anacleto refused to return the said parcels of land to Conchita.
Anacleto theorized that they acquired the lands in question from
the Development Bank of the Philippines, through negotiated sale,
and were misled by Conchita when defendant Anacleto Nool signed
the private writing, agreeing to return subject lands when plaintiffs
have the money to redeem the same.
ISSUES and HELD:
1.) Was the sale of Conchita to Anacleto valid?
NO. At the time Conchita offered to Anacleto the purchase
of the parcels of land she no longer had ownership of them as they
were already foreclosed and she did not exercise the mortgagors
right to redeem them within a year. DBP was already the absolute
owner of the parcels of the land at that time, thus Conchita had no
object to sell. The sale was UTTERLY VOID AND INEXISTENT.
2.) Does Conchita have a right to enforce the repurchase
agreement?
NO. One repurchases only what one has previously sold.
In other words, the right to repurchase presupposes a valid contract
of sale between the same parties. Undisputedly, respondents
(Anacleto) acquired title to the property from DBP and not from
petitioners (Conchita).
Note:
if this is hard to understand try reading the actual case kasi
mas magulo. Basta in short, Conchita was selling to her brother
Anacleto land that she no longer owns because she was beyond the
1 year redemption period and had no chance to redeem her land
from DBP. And because Anacleto was made to believe that Conchita
still had the right to redeem the properties from DBP he agreed to
her offer of selling him the land. Kumbaga maloko din to si Conchita
na binebenta nya pa kay Anacleto ang lupa na nabili na mismo ni

Chapter 4: Price and Other Consideration.

Mitsui Bussan Kaisha vs. Manila Electric Railroad and Light
Company
GR No. 13753, February 15, 1919, J. Street.
Petitioner, Mitsui Bussan Kaisha
Respondent, Manila Electric Railroad and Light Company

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Summary/ Memory Aid:
Mitsui & Manila Electric Railroad and Light Company
Contract of Sale of Coal
Act 2432 & Act 2445, additional tax of P1/ metric ton
Facts:
Mitsui Bussan Kaisha, a Japanese company, had a contract
of sale of coal to Manila Electric Railroad and Light Company. The
price agreed upon was P9.45 per long ton of coal but it was subject
to modification in variations in calories, ash content and not
otherwise.
On December 23, 1914, Act No 2432 was passed which
imposed a specific tax of P1 per metric unit on coal. This act was
amended in Act No. 2445, which stated that the burden of said
tax or increased rate of tax shall be borne by the person to whom
said article is furnished pursuant to such contract, unless the parties
have agreed otherwise.
From March to October 1915, Mitsui delivered to Manila
Electric 11,874 metric tons of coal. The tax imposed by Act 2432 and
2445 when applied to this delivery is P11,874.75. Mitsui paid the
taxes and asked for reimbursement from Manila Electric; however,
Manila Electric refused. Thus, Mitsui files this present action to
recover the amount paid. The lower court ruled in favor of Mitsui.
Issue:
Whether or not Mitsui or Manila Electric is liable to pay the
additional taxes
Held/Ratio:
The SC held that by the express terms of Act 2445, the
burden of the tax should be borne by Manila Electric Company
unless the parties have agreed otherwise. The original contract
contained no express provision on this point and the parties made
no contract with reference thereto after Act 2445 was passed. The
seller is relieved of the burden of the tax. Act 2445 specifically
applies to contracts with fixed prices. This is since the seller who
had made deliveries in stated quantities at the current market price
and not at a fixed price needed no relief since their prices would
immediately increase and automatically apply upon imposition of
said Act.
The buyers defense in stating that the exception clause in
the original contract is to be interpreted in favor of them (i.e. they
are not entitled to pay taxes) must fail. This exceptional clause of
subject to modification in variations in calories, ash content and
not otherwise pertains only to the quality of coal and ascertaining
the value of coal by determining its combustion. It has no bearing
upon liability for internal revenue tax. Thus, Manila Electric is liable
to pay reimbursement of P11,874.45 to Mitsui by express provision
of Act 2445. This is also in accordance with the law of Obligation
and Contracts that anyone who pays for another may demand
reimbursement at least to the extent that payment may have been
beneficial to the debtor.


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VILLANUEVA V. CA
G.R No. 107624 January 28, 1997
Panganiban, J.
Petitioners: Spouses Villanueva
Respondents: Spouses Dela Cruz, Spouses Pile
SUMMARY/MEMORY AID:
Spouses Villanueva assert that there was a perfected
contract of sale between them and the defendants, the Spouses
Dela Cruz. Their allegation is based on the P10,000.00 they gave to
the defendants. However, the evidence shows that the actual price
of the leased land was not fixed. Price must be certain; it must be
real, not fictitious. It is not necessary that the certainty of the price
be actual or determined at the time of executing the contract, as
long as the contract furnishes a basis or measure for ascertaining
the amount agreed upon. Since there was no meeting of the minds
between the petitioners and the defendants, there was no
perfected contract of sale.
FACTS:
Petitioner Gamaliel Villanueva has been a tenant-occupant
of a unit in the 3-door apartment building erected on a parcel of
land owned by the private respondents, Sps. Dela Cruz.
About February of 1986, respondent Jose Dela Cruz offered
said parcel of land with the 3-door apartment building for sale and
the petitioners, the Sps. Villanueva, showed interest in buying the
property.
Jose dela Cruz asked petitioner Irene Villanueva for a certain
amount to pay for the taxes so that the property would be cleared
of any encumbrance. Villanueva agreed and gave P10,000.00 on two
occasions. Allegedly, it was agreed by them that said P10,000.00
would form part of the sale price of P550,000.00 for the parcel of
land.
Sometime in March 1987, defendants Dela Cruz executed in
favor of their co-defendants, the Sps. Pile, a Deed of Assignment of
the other one-half portion of the parcel of land wherein petitioner
Gamaliel Villanueva's apartment unit is situated. The petitioners
objected to Dela Cruz sale to the Sps. Pile because they assert that
a contract of sale over the parcel of land had already been
perfected between themselves and the Sps. Dela Cruz. The
petitioner eventually elevated their complaint to the trial court.
Petitioners contend that the P10,000 they gave was partial
or advance payment of the property. Necessarily then, there must
have been an agreement as to price. They cite Article 1482 of the
Civil Code which provides that "whenever earnest money is given in
a contract of sale, it shall be considered as part of the price and as
proof of the perfection of the contract."
However, private respondents contradict this claim with the
argument that the P10,000.00 was only payment for realty tax was
going to form part of the consideration of the sale if and when the
transaction would finally be consummated. Private respondents
insist that there "was no clear agreement as to the true amount of
consideration."

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The trial court rendered its decision in favor of respondents.
An appeal was duly brought to the CA which affirmed the said
decision.
ISSUE:
W/N there was a perfected contract of sale of subject property
between the petitioners (Sps. Villanueva) and respondents (Sps.
Dela Cruz)
HELD/RATIO:
NO, THERE WAS NO PERFECTED CONTRACT OF SALE BECAUSE A
MEETING OF THE MINDS REGARDING THE PRICE WAS LACKING.
1. According to the testimony of respondent Dela Cruz, he or his
spouse had never agreed to a definite price for the subject
property. In fact, his testimony during the cross-examination firmly
negated any price agreement with petitioners because he and his
wife was adamant on the price of P575,000. 00 and did not agree to
reduce it to P550,000.00, the price preferred by petitioner.
2. Petitioners allege that an unsigned deed of sale was prepared by
private respondent Jose Dela Cruz. Unfortunately, such was not
presented in evidence.
3. However, petitioners aver that even if the unsigned deed of sale
was not produced, private respondent Jose dela Cruz admitted in
court that he prepared said deed in accordance with their
agreement." This judicial admission" is allegedly the "best proof of
its existence." This argument is unmeritorious because even if such
draft deed existed, it does not necessarily follow that there was
already a definite agreement as to the price. And it would not
have commanded any probative value as it was not signed.
4. The price of the leased land not having been fixed, one of the
essential elements which give life to the contract of sale was
lacking. Price must be certain, it must be real, not fictitious. It is not
necessary that the certainty of the price be actual or determined at
the time of executing the contract, as long as the contract furnishes
a basis or measure for ascertaining the amount agreed upon. A
contract of sale is not void for uncertainty when the price can be
made certain by reference to existing invoices identified in the
agreement. In this respect, the contract of sale is perfected. The
price must be certain, otherwise there is no true consent between
the parties. There can be no sale without a price. In the instant
case, however, what is dramatically clear from the evidence is that
there was no meeting of mind as to the price, expressly or
impliedly, directly or indirectly.

JOSE R. MORENO, JR. vs Private Management Office
G.R. No. 159373 November 16, 2006
Memory Aid:
1. A contract of sale is perfected at the moment there is a
meeting of minds upon the thing which is the object of the
contract and upon the price. Consent is manifested by the
meeting of the offer and the acceptance upon the thing and
the cause which are to constitute the contract. The offer
must be certain and the acceptance absolute.

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2. To reach that moment of perfection, the parties must agree
on the same thing in the same sense, so that their minds
meet as to all the terms. The minds of parties must meet at
every point; nothing can be left open for further
arrangement. So long as there is any uncertainty or
indefiniteness, or future negotiations or considerations to
be had between the parties, there is not a completed
contract, and in fact, there is no contract at all.
3. Contract formation undergoes three distinct stages
preparation or negotiation, perfection or birth, and
consummation. Negotiation begins from the time the
prospective contracting parties manifest their interest in the
contract and ends at the moment of agreement of the
parties. The perfection or birth of the contract takes place
when the parties agree upon all the essential elements
thereof. The last stage is the consummation of the contract
wherein the parties fulfill or perform the terms agreed
upon, culminating in its extinguishment. Once there is
concurrence of the offer and acceptance of the object and
cause, the stage of negotiation is finished.

Facts:
-Moreno owns several floors of the J.Moreno Bldg as well as the lot
where it stands
-PMO, on the other hand,is a government agency that owns the
other floors of the J.Moreno Bldg
-PMO called for a conference with Moreno, because it wants to sell
the floors it owns in the building, over which Moreno has a right of
refusal. At the meeting, PMO stated that the price is 21 Million
Pesos
- A few days later, PMO, in a letter signed by its trustee, informed
Moreno that the Board is in agreement that Mr. Jose Moreno, Jr.
has the right of first refusal" and requested Moreno to deposit 10%
of the "suggested indicative price" of P21.0 million on or before
February 26, 1993
- Moreno paid the P2.1 million on February 26, 1993 for which
PMO issued a receipt.
- Subsequently however, PMO sent a letter saying that its legal
department has questioned the basis for the computation of the
indicative price for the said floors
- PMO also wrote that its Board has "tentatively agreed on a
settlement price of P42,274,702. 17" for the said floors.
-Moreno questions the actions of PMO, claiming that they already
agreed and perfected a contract of sale over the said floors for the
amount ofP21.0 million
Issue:
W/N there was a perfected contract of sale for the price of 21
Million pesos?
Held: No

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4. A contract of sale is perfected at the moment there is a
contract and upon the price. Consent is manifested by the
meeting of the offer and the acceptance upon the thing and
the cause which are to constitute the contract. The offer
must be certain and the acceptance absolute.
5. To reach that moment of perfection, the parties must agree
on the same thing in the same sense, so that their minds
meet as to all the terms. The minds of parties must meet at
every point; nothing can be left open for further
arrangement. So long as there is any uncertainty or
indefiniteness, or future negotiations or considerations to
be had between the parties, there is not a completed
contract, and in fact, there is no contract at all.
6. Contract formation undergoes three distinct stages
preparation or negotiation, perfection or birth, and
consummation. Negotiation begins from the time the
prospective contracting parties manifest their interest in the
contract and ends at the moment of agreement of the
parties. The perfection or birth of the contract takes place
when the parties agree upon all the essential elements
thereof. The last stage is the consummation of the contract
wherein the parties fulfill or perform the terms agreed
upon, culminating in its extinguishment. Once there is
concurrence of the offer and acceptance of the object and
cause, the stage of negotiation is finished.
7. In this case, it is clear that the parties are not past the
negotiation stage.
8. The letter sent by PMO is merely a suggestive indicative
price of the subject floors as it was yet to be approved by
the Board of Trustees. Furthemore. The law governing the
PMO, a government agency, imposes an additional
suspensive condition that sales of government assets must
be approve by the Committee on Privatization
9. Suggestive Indicative Price cannot be interpreted as a price
certain. Under the objective theory of contract,
understandings and beliefs are effective only
if shared. Based on the objective manifestations of the
parties in the case at bar, there was no meeting of the
minds
10. The letter constituted a definite, complete and certain offer
is the subjective belief of petitioner alone. The letter in
question is a mere evidence of a memorialization of
inconclusive negotiations, or a mere agreement to agree, in
which material term is left for future negotiations.
11. It is a mere evidence of the parties preliminary transactions
which did not crystallize into a perfected contract.
Preliminary negotiations or an agreement still involving
future negotiations is not the functional equivalent of a
valid, subsisting agreement.. For a valid contract to have
been created, the parties must have progressed beyond this
stage of imperfect negotiation. But as the records would
show, the parties are yet undergoing the preliminary steps
towards the formation of a valid contract.


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Navarra v. Planters Development Bank
G.R. 172674 July 12, 2007
Sps. Jorge Navarra and Carmelita Bernardo Navarra and RRRC
Development Corporation Petitioner
Planters Development Bank and Roberto Gatchalian Realty Inc. -
Respondent
Petition to set aside the assailed decision of the CA reversing the
decision of the RTC ruling that there was a perfected contract of
sale.
Facts:
The spouses Jorge and Carmelita Navarra are the owners of
5 parcels of land located at B.F. Homes, Paraaque. When the
spouses obtained a loan of P1,200,000.00 from Planters Bank, they
executed a deed of mortgage over the 5 parcels of land. When the
couple failed to pay, the bank foreclosed on the mortgage and
mortgaged assets were sold to it for P1,341,850, it being the highest
bidder in the auction sale. The spouses Navarra did not redeem
their properties in the one-year redemption period.
On the other hand, co-petitioner RRRC Development
Corporation (RRRC) is a real estate company owned by the parents
of Carmelita Bernardo Navarra. RRRC obtained a loan from Planters
Bank secured by a mortgage over another set of properties owned
by RRRC. The loan having been likewise unpaid, Planters Bank
similarly foreclosed the mortgaged assets of RRRC. Unlike the
Navarras, however, RRRC was able to negotiate with the Bank for
the redemption of its foreclosed properties. The Bank allowed RRRC
to refer to it would-be buyers of the foreclosed RRRC properties
who would remit their payments directly to the Bank, which
payments would then be considered as redemption price for RRRC.
The foreclosed properties of RRRC were sold to third persons and
the payments to the bank even exceeded the redemption price by
P300,000.00.
The Navarras then wrote the bank proposing to repurchase
the 5 lots earlier foreclosed for P1,800,000.00, with a request that
he be given until August 31, 1985 to pay the down payment of
P300,000.00. Unable to pay when the time came, Jorge asked the
bank if the P300,000.00 excess of RRRC can be applied in the
meantime as down payment for their lots. The bank agreed but
required the submission of a board resolution from RRRC allowing
the application of the excess as down payment by the spouses.
Because the bank was never given a copy of the board resolution, it
sent a letter to Jorge Navarra informing him that it could not
proceed with the documentation of the proposed repurchase of the
foreclosed properties. The Navarras then filed a complaint for
Specific Performance with Injuction as a portion of the lot was by
Planters Bank to herein co-respondent Roberto Gatchalian Realty,
Inc. (Gatchalian Realty).
Issue: Was the repurchase agreement between the spouses
Navarra and the bank perfected? Was the offer certain and the
acceptance absolute enough so as to engender a meeting of the
minds between the parties?
DEFINITELY NOT.

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The element of a price certain was missing. Although
P300,000.00 was stated as down payment, the letter
was completely silent as to how the succeeding
installment payments shall be made.
At most, the letters merely acknowledge that the down
payment of P300,000.00 was agreed upon by the
parties.
The Navarras letter/offer failed to specify a definite
amount of the purchase price for the sale/repurchase of
the subject properties. It merely stated that the
purchase price will be based on the redemption value
plus accrued interest at the prevailing rate up to the
date of the sales contract. The ambiguity of this
statement only bolsters the uncertainty of the Navarras
so-called offer for it leaves much rooms for such
questions, as: what is the redemption value? what
prevailing rate of interest shall be followed: is it the rate
stipulated in the loan agreement or the legal rate? When
will the date of the contract of sale be based, shall it be
upon the time of the execution of the deed of sale or
upon the time when the last installment payment shall
have been made? To our mind, these questions need
first to be addressed, discussed and negotiated upon by
the parties before a definite purchase price can be
arrived at.

Mapalo v. Mapalo
G.R. No. L-21489 and L-21628 May 19, 1966
Memory Aid / Doctrine:
With the intention of donating, illiterate Mapalo spouses
were tricked into selling an entire parcel of land instead of half of
the land in consideration of 500php which they never received. ||
A contract of purchase and sale is null and void and produces no
effect whatsoever where the same is without cause or
consideration in the purchase price which appears thereon as paid
has in fact never been paid by the purchaser to the vendor.
FACTS:
Spouses Miguel Mapalo and Candida Quiba, simple illiterate
farmers, were registered owners, with Torrens title certificate O.C.T.
No. 46503, of a 1,635-square-meter residential land in Manaoag,
Pangasinan. Out of love and affection for Maximo Mapalo a
brother of Miguel who was about to get married the spouses
decided to donate the eastern half of the land to him. O.C.T. No.
46503 was delivered in 1936, but they were deceived into signing a
deed of absolute sale over the entire land in his favor. Maximo and
his attorney led the illiterate spouses to believe that what they
signed was a deed of donation in Maximo's favor covering only one-
half (the eastern half) of their land. Although the document of sale
stated a consideration of Five Hundred (P500.00) Pesos, the spouses
did not receive anything of value for the land.
Subsequently the Mapalo spouse built a fence in the middle
of their land segregating the eastern portion from its western
portion. Said fence still exists. The spouses have always been in

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continued possession over the western half of the land up to the
present.
Meanwhile, Maximo registered the deed of sale in his favor
and obtained in his name TCT No. 12829 over the entire land.
Thirteen years later in 1951, he sold the entire land for 2500php in
favor of the Narcisos. The sale to the Narcisos was in turn registered
in 1951 and Transfer Certificate of Title No. 11350 was issued for
the whole land in their names. The Narcisos took possession only of
the eastern portion of the land in 1951, after the sale in their favor
was made.
CFI decision:
In 1952 the Narcisos filed a suit in the CFI to be declared
owners of the entire land, for damages, and for rentals. The Mapalo
spouses filed their answer with a counterclaim in1965, seeking
cancellation of the TCT of the Narcisos as to the western half of the
land, on the grounds that their (Mapalos) signatures to the deed of
sale of 1936 was procured by fraud and that the Narcisos were
buyers in bad faith. They asked for reconveyance to them of the
western portion of the land and issuance of a Transfer Certificate of
Title in their names as to said portion. The Mapalo spouses also filed
in 1957 their own complaint in the CFI of Pangasinan against the
Narcisos and Maximo Mapalo. They asked that the deeds of sale of
1936 and of 1951 over the land in question be declared null and
void as to the western half of said land.
Judge Santiago of the CFI of Pangasinan tried the two cases
jointly. The CFI rendered judgment on January 18, 1961, ruling in
favor of the Mapalos. The court said that the donation was null and
void as to the western half of the land.
CA decision:
The Narcisos appealed to the Court of Appeals. CA reversed
the judgment of the CFI, solely on the ground that the consent of
the Mapalo spouses to the deed of sale of 1936 having been
obtained by fraud, the same was voidable, not void ab initio, and,
therefore, the action to annul the same, within four years from
notice of the fraud, had long prescribed. It reckoned said notice of
the fraud from the date of registration of the sale on March 15,
1938. The Court of First Instance and the Court of Appeals are
therefore unanimous that the spouses Mapalo and Quiba were
definitely the victims of fraud. It was only on prescription that they
lost in the Court of Appeals.
ISSUES:
1. W/N, under the Old Civil Code which was in effect at the
time of the execution of the sale, the sale to Maximo is void
or merely voidable;
2. W/N the Narcisos are purchasers in good faith
HELD:
1. The sale is VOID.
Under the Civil Code, either the old or the new, for a contract to
exist at all, three essential requisites must concur: (1) consent, (2)
object, and (3) cause or consideration.
1
In the case at hand, the first

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and second elements are present, but the third is lacking (and on
that point the CA was completely silent).
Was there a cause or consideration to support the existence
of a contract of sale? Since the deed of sale was governed by the
Old Civil Code, it should be asked if in this case there is no
consideration, or one with a statement of false consideration. If the
former, it is void and inexistent. If the latter, it is only voidable
under the Old Civil Code. The deed of sale of 1936 stated that it had
for its consideration P500.00 when in fact said consideration was
totally absent. The problem, therefore, is whether a deed which
states a consideration that in fact did not exist, is a contract without
consideration, and therefore void ab initio, or a contract with a false
consideration, and therefore, at least under the Old Civil Code,
voidable.
According to Manresa, what is meant by a contract that
states a false consideration is one that has in fact a real
consideration but the same is not the one stated in the document. A
contract of purchase and sale is null and void and produces no effect
whatsoever where the same is without cause or consideration in
that the purchase price which appears thereon as paid has never
been paid by the purchaser to the vendor.
There was no contract of sale in this case. The inexistence of a
contract is permanent and incurable and cannot be the subject of
prescription.
2. Narcisos are purchasers in bad faith.
SC quoted the CFI:
It has been positively shown by the undisputed testimony
of Candida Quiba that Pacifico Narciso and Evaristo Narciso stayed
for some days on the western side (the portion in question) of the
above-described land until their house was removed in 1940 by the
spouses Mapalo and Quiba; secondly, Pacifica Narciso admitted in
his testimony in chief that when they bought the property, Miguel
Mapalo was still in the premises in question (western part) which he
is occupying and his house is still standing thereon; and thirdly, said
Pacifico Narciso when presented as a rebuttal and sub-rebuttal
witness categorically declared that before buying the land in
question he went to the house of Miguel Mapalo and Candida
Quiba and asked them if they will permit their elder brother
Maximo to sell the property.
The SC reversed and set aside the decision of the CA and
rendered another reaffirming in toto the judgment of the CFI, with
attorneys fees on appeal in favor of the Mapalo spouses in the
amount of 1,000.00 Php plus costs, against both Maximo and the
Narcisos.

Rongavilla v. CA
G.R. No. 83974 August 17, 1998
*fact heavy case!
Memory Aid:
In all contractual, property or other relations, when one of the
parties is at a disadvantage on account of his moral dependence,
ignorance, indigence, mental weakness, tender age, or other

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handicap, the courts must be vigilant for his protection. (Art. 24,
Civil Code)
Facts:
Mercedes dela Cruz and Florencia dela Cruz are spinsters
who own 1/2 of a parcel of land located in Manuyo, Las
Pinas. They are dressmakers who can read and write in
Tagalog but unschooled in English. Their nieces are: Juanita
Jimenez and petitioner Dolores Rongavilla. (whole land was
subdivided beforehand, property under contestion here is
the half that belongs to the dela Cruz sisters)
Sometime in May 1976, private respondents borrowed
P200 from the petitioners to have their roof repaired.
Petitioner Rongavilla made the respondents sign a
document written in English, claiming that it was only a
document to evidence their debt of P2000.
After four years, Rongavilla went back to respondents place
asking them to vacate the premises, that she and her
husband were now the owners of the land.
Respondents went to the Register of Deeds to verify the
matter and found out that what they have signed was a
deed of sale. Their Certificate of Title had been cancelled
and a new one issued to the petitioners. The land now has
even been mortgaged by petitioners with the Cavite
Development Bank.
Respondents filed with the RTC of Pasay to have the deed of
sale declared void and inexistent for 2 grounds: (1) lack of
consent and (2) want of consideration.
Petitioners defense: (1) prescription had set in already and
(2) deed of sale was valid as it contains all the requisites of a
contract.

Trial court (RTC Pasay) deed of sale void, reconvey property to
private respondents
CA- affirm RTC decision (plaintiff respondents did not know that
what they were signing was a deed of absolute sale. This means that
their consent was not only vitiated, there was no consent at all)
Issue:
Did the Court of Appeals err when it upheld the trial court's
judgment that the disputed Deed of Sale is void and inexistent?
Held: No.
Petitioners defense that the deed of sale was valid and that
they were the ones paying taxes cannot stand because they
admitted in court that they changed the price in the deed of
sale.
o Petitioners said that the real amount they paid to
respondents was P7,800 but only put P2,000 in the
Deed of Sale to save taxes.

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o In the deed of sale, the original price printed therein
was actually P3000, then petitioners changed it to
P2000 by writing over it. (gulo nila diba? Well
naguluhan din ung court, kaya nawala ung
confidence nila on the validity of the instrument)
Petitioners defense, invoking Art. 1391 of the Civil Code
also cannot stand.
o The Civil Code provides in Article 1391 that an
action to annul a contract on the ground of vitiated
consent must be filed within four years from the
discovery of the vice of consent. In the instant case,
however, we are dealing not with a voidable
contract tainted with fraud, mistake, undue
influence, violence or intimidation that can justify
its nullification, but with a contract that is null and
void ab initio. (baranda v baranda)
Mate v. CA
GR. 120724-25 May 21, 1998
Memory Aid:
Facts:
Josie Rey, along with the private respondent Tan, went to
the petitioner Mates house in Tacloban City. Threatened with the
criminal prosecution of B.P 22 because of the bad checks Josie Rey
issued to Tan, Josie then sought the help of the petitioner Mate
whose wife was her cousin. Josie requested Mate to sell his three
lots in Tacloban City with a right to repurchase. Initially, Mate
refused since he did not owe Tan anything and was under no
obligation to covey to Tan his properties. After a long discussion,
Josie succeeded in convincing Mate to execute a fictitious deed of
sale with right to repurchase subject to the following conditions
that first, Josie would provide the funds for the repurchase which
amounted to P1.4m and would give Mate P420k as interest for 6
months. Checks were then subsequently issued by Josie with the
aforesaid amounts.
When Mate tried to deposit the two checks in his accounts
in preparation for the repurchase, the checks were dishonored for
being drawn against a closed account. Realizing that he was
swindled, Mate sent a telegram to Josie and even went to Manila to
look for her but to no avail. Mate was then constrained to file a
criminal case of estafa against Josie but the case was archived since
Josie could not be found. Mate also filed a civil case for the
reconveyance of the lots he sold under the pacto de retro.
The RTC and the CA ruled in favor of Tan hence, the petition
for review.
Issue(s):
1. W/N the Deed of Sale with right to purchase was valid.
Held:
YES, all the elements of a contract were present and it is
valid and binding between the parties. The SC denied Mates claim
that the sale was null and void for lack of consideration because no
money changed hands when he signed the contract. The Court
found that there was indeed consideration in the form of the P420k

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he got for accommodating Josies pleas for help. Other than Mates
kindness to Josefina, his receipt of the P420k impelled him to
execute the pacto de retro. Mate was also estopped from assailing
the nullity of the contract for lack of consideration because when he
filed the criminal case against Josie he tacitly admitted that there
was consideration Petitioner Mate has no one else to blame but
himself for his misfortune and thus the Court can only sympathi ze
with him and is constrained to rule against him.
Yu Bun Guan vs Elvira Ong
G.R. No. 144735. October 18, 2001
Summary: A simulated deed of sale has no legal effect, and the
transfer certificate of title issued in consequence thereof should be
cancelled. Pari delicto does not apply to simulated sales.
Facts:
Respondent Elvira Ong alleges that she and Petitioner Yu
Bun Guan are married according to Chinese Rites on April 30, 1961.
There are two testimonies:
I) According to respondent:
On March 20,1968, with her own personal funds, she
purchased a parcel of land referred to as the Rizal property from
Aurora Seneris supported by Title no. 26795 which she registered
on April 17,1968 under her own name.
In 1983, using their conjugal fund, petitioner and
respondent purchased a house and lot registered in their name
under Title No. 118884.
Before their separation in 1992, respondent executed a
simulated Deed of Sale of the J.P. Rizal property in her husbands
favor, but on the promise that he would construct a commercial
building for the benefit of the children. The consideration for the
simulated sale was that, after its execution in which he would
represent himself as single, a Deed of Absolute Sale would be
executed in favor of the three (3) children and that he would pay
the Allied Bank, Inc. the loan he obtained. Petitioner did not deliver
to respondent the 200,000 peso consideration. Because of the sale,
a new title (TCT No. 181033) was issued in his name, but to insure
that he would comply with his commitment, she did not deliver the
owners copy of the title to him.
In the meantime, Petitioner on the other hand, filed with
the RTC, Makati, a Petition for Replacement of an owners
duplicate title. Petitioner falsely made it appear that the owners
copy of the title was lost or misplaced. On September 17, 1993, a
new owners copy of the title was issued to petitioner.
Later on, failing to perform his promise and gaining
knowledge of petitioners fraudulent acts, respondent executed an
Affidavit of Adverse Claim.
Respondent claims that the sale be declared null and void;
for the title to be cancelled; payment of actual, moral and
exemplary damages; and attorneys fees.
II) On the other hand, Petitioner claims that:
Sometime in 1968 or before he became a Filipino, through
naturalization, the JP Rizal property was being offered to him for
sale. Because he was not a Filipino, he utilized respondent as his

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dummy and agreed to have the sale executed in the name of
respondent although the consideration was his own and from his
personal funds.
When he finally acquired a Filipino citizenship in 1972, he
purchased another property being referred to as the Juno lot out
of his own funds. If only to reflect the true ownership of the JP Rizal
property, a Deed of Sale was then executed in 1972. Believing in
good faith that his owners copy of the title was lost and not
knowing that the same was surreptitiously concealed by
respondent, he filed in 1993 a petition for replacement of the
owners copy of the title, in court.
Petitioner added that respondent could not have purchased
the property because she had no financial capacity to do so; on the
other hand, he was financially capable although he was disqualified
to acquire the property by reason of his nationality. Respondent
was in pari delicto being privy to the simulated sale.
Issue:
1) Is the deed of sale valid?
2) Does Pari delicto apply?
Held :
1) No
2) No
Ratio:
1) In Ocejo, Perez & Co. vs. Flores, we ruled that a contract of
purchase and sale is null and null and void and produces no effect
whatsoever where the same is without cause or consideration in
that the purchase price which appears thereon as paid has in fact
never been paid by the purchaser to vendor.
In the present case, it is clear from the factual findings of
both lower courts that the Deed of Sale was completely simulated
and, hence, void and without effect. No portion of the P200,000
consideration stated in the Deed was ever paid. And, from the facts
of the case, it is clear that neither party had any intention
whatsoever to pay that amount.
Instead, the Deed of Sale was executed merely to facilitate
the transfer of the property to petitioner pursuant to an agreement
between the parties to enable him to construct a commercial
building and to sell the Juno property to their children. Being
merely a subterfuge, that agreement cannot be taken as the
consideration for the sale.
2) The principle of in pari delicto provides that when two parties are
equally at fault, the law leaves them as they are and denies
recovery by either one of them. However, this principle does not
apply with respect to inexistent and void contracts. ( Modina v.
Court of Appeals)

Vda Catindig v Heirs of Catalina Roque
G.R. No. L-25777 J. Aquino
Petitioners: Asuncion Catindig

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Respondents: Heirs of Catalina Roque
Summary/mem aid: fishpond, if the price is simulated the sale is
VOID
FACTS:
The Heirs of Catalina Roque are co-owners of a fishpond,
which has an area of more than 13 hectares. On Oct. 1, 1941, the
co-owners leased the fishpond to Catindig for 10 years for P6000.
When the lease was terminated, Catindig was still in possession of
the fishpond because she was negotiating with the co-owners for its
purchase. She wanted to buy it for P52000. On Oct. 18, 1960,
German Ramirez, one of the co-owners, sold his share for P6500.
The sale was annotated in the title. Paolo Villanueva, also one of the
co-owners, learned of the sale by German Ramirez. On Nov. 18,
1960, the rest of the co-owners filed an action against Catindig to
compel her to allow them to redeem that portion of the fishpond
sold by German Ramirez. The Court of Appeals found out that
Catindig did not pay the purchase price because she was not able to
obtain a loan. Hence, CA said that the sale was VOID because the
sale was a simulated one.
ISSUE: w/n the sale of the fishpond was void.
HELD:
YES. The SC said that the sale was simulated. According to
Art 1471 of the NCC: If the price is simulated, the sale is void, but
the act may be shown to have been in reality a donation, or some
other act or contract. A contract of sale is void and produces no
effect whatsoever where the price, which appears thereon as paid,
has in fact never been paid by the purchaser to the vendor. Such a
sale is non-existent. It cannot be considered consummated. The
CAs finding that the price was not paid or that the statement in the
supposed contracts of sale as to the payment of the price was
simulated, fortifies the view that the alleged sales were void

Ong v. Ong
G.R. No. L-67888 October 8, 1985 J. Relova
Petitioners - Imelda Ong
Respondents Alfredo Ong
Private Respondents - Faustino Y Bautista and Fernando M.
Mangubat
Memory Aid/Doctrine
- Quitclaim is equivalent to Deed of Sale
- It is not unusual in deeds of conveyance of stating that the
consideration given is the sum of P1.00, although the actual
consideration may have been much more (Anglo-Saxon
practice). Moreover, assuming that said consideration of
P1.00 is suspicious, this does not necessarily mean the
purchase was not made in good faith and for valid
consideration and that the sale is void.
- The execution of a deed purporting to convey ownership of
a realty is in itself prima facie evidence of the existence of a
valuable consideration, the party alleging lack of
consideration has the burden of proving such allegation

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Facts
- Imelda Ong for and in consideration of P1.00 and other
valuable consideration executed a Quitclaim Deed and
transferred, released, assigned and forever quit claimed to
Sandra Maruzzo (a MINOR) her heirs and assigns, all her
rights, title, interest and participation in the ONE-HALF
undivided portion of the parcel of land
- 4 years later, Imelda revoked the Deed of Quitclaim
- 2 years after the revocation, she DONATED the WHOLE
property to her son
- Maruzzos guardian then filed with RTC action for the
recovery of ownership of the said lot and the nullification of
the Deed of Donation
o In response, Imelda contended the Quitclaim Deed
is void as it is equivalent to a Deed of Donation
which requires ACCEPTANCE. As Maruzzo was a
minor, she had no legal personality to accept.
o RTC ruled in favor of Maruzzo and said the
Quitclaim Deed is equivalent to a Deed of Sale.
- Imelda appealed to the CA
o Imelda added the P1.00 consideration is not a
consideration at all to sustain the ruling that the
Deed of Quitclaim is equivalent to a sale.
o CA affirmed and held Quitclaim Deed is a
conveyance of property with a valid cause or
consideration; the consideration is the P1.00 Peso;
the apparent inadequacy is of no moment since it
is the usual practice in deeds of conveyance to
place a nominal amount although there is a more
valuable consideration given.
Issue: W/N the Quitclaim Deed (equivalent to a Deed of Sale) is
void for lack of consideration
Held: No. CA ruling affirmed.
- Quitclaim Deed provides property was for and in
consideration of the One (P 1.00) Peso and the other
valuable considerations
o Thus, the cause or consideration is not the One
(P1.00) Peso alone but also the other valuable
considerations.
o Morales Development Co., Inc. vs. CA: It is not
unusual in deeds of conveyance of stating that the
consideration given is the sum of P1.00, although
the actual consideration may have been much
more (Anglo-Saxon practice). Moreover, assuming
that said consideration of P1.00 is suspicious, this
does not necessarily mean the purchase was not
made in good faith and for valid consideration and
that the sale is void. Indeed, bad faith and
inadequacy of the monetary consideration do not
render a conveyance inexistent, for the assignor's

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liberality may be sufficient cause for a valid
contract (Article 1350, Civil Code), whereas fraud
or bad faith may render either rescissible or
voidable, although valid until annulled, a contract
concerning an object certain entered into with a
cause and with the consent of the contracting
parties, as in the case at bar.
- Failed to overcome the burden that consideration is
presumed:
o Although the cause is not stated in the contract it is
presumed that it is existing unless the debtor
proves the contrary (Article 1354 of the Civil Code).
o One of the disputable presumptions is that there is
a sufficient cause of the contract (Section 5, (r),
Rule 131, Rules of Court).
o It is a legal presumption of sufficient cause or
consideration supporting a contract even if such
cause is not stated therein (Article 1354, New Civil
Code)
o This presumption cannot be overcome by a simple
assertion of lack of consideration especially when
the contract itself states that consideration was
given, and the same has been reduced into a public
instrument with all due formalities and solemnities.
To overcome the presumption of consideration the
alleged lack of consideration must be shown by
preponderance of evidence in a proper action.
(Samanilla vs, Cajucom, et al., 107 Phil. 432).
o The execution of a deed purporting to convey
ownership of a realty is in itself prima facie
evidence of the existence of a valuable
consideration, the party alleging lack of
consideration has the burden of proving such
allegation. (Caballero, et al. vs. Caballero, et al.,
(CA), 45 O.G. 2536).
- Even assuming the Quitclaim Deed is a donation,
acceptance by minors is only required if it is onerous or
conditional (Article 726, Civil Code)

Bagnas v. CA
GR L-38498 August 10, 1989
PETITIONERS: Isaac Bagnas, Encarnacion Bagnas, Silvestre Bagnas
Maximina Bagnas, Sixto Bagnas and Agatona Encarnacion (first
cousins of Mateum)
RESPONDENTS: Hon. Court Of Appeals, Rosa L. Retonil Teofilo
Encarnacion, and Jose B. Nambayan (collateral relatives of Mateum
though more remote in degree)
Memory Aid: Petitioners want to recover land that was allegedly
sold by Mateum, their deceased relative, to the respondents for a
consideration of P 1.00. The assessed value of the property is at
least P 10,500. Petitioners alleged that the deeds of sale were

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fictitious, fraudulent, or valid, alternatively, as donations void for
want of acceptance embodied in a public instrument. Respondents
denied this, asserting that said sales were made for good and
valuable consideration - which are services that they gave to
Mateum such as nursing him. Supreme Court said that no transfer
occurred. It was void ab initio because there was no consideration
(gross disproportion between the stipulated price and the assessed
value + evidence that there was no real intention to pay any
indicated valuable consideration). Also, Art. 1458 requires that
"equivalent" be something representative of money to the effect
that services are not equivalent of money insofar as said
requirement is concerned and that a contract is not a true sale
where the price consists of services or prestations. There was also
no valid donation because it was not in a public document.
Facts:
Hilario Mateum died single, without ascendants or descendants,
and survived only by collateral relatives, of whom petitioners were
the nearest. He left no will, no debts, and an estate consisting of 29
parcels of land in Kawit and Imus, Cavite, 10 of which are involved in
this appeal.
Respondents registered with the Registry of Deeds for the
Province of Cavite two deeds of sale (mostly written in
Filipino) purportedly executed by Mateum in their favor
covering ten parcels of land.
o Both deeds recited the consideration of the sale to
be "... halagang ISANG PISO (Pl.00), salaping
Pilipino, at mga naipaglingkod, ipinaglilingkod sa
aking kapakanan ..." (In English: the sum of one
peso, and services rendered, being rendered, and to
be rendered for my sellers benefit)
o One deed was dated February 6, 1963 and covered
five parcels of land, and the other was dated March
4, 1963, covering five other parcels, both, therefore,
antedating Mateum's death by more than a year.
o Petitioners assert that despite said sales, Mateum
continued to be in possession of the lands, he
remained the owner and that the tax payments
continued to be paid in his name.
Petitioners filed in the RTC for the annulment of the deeds
of sale as fictitious, fraudulent or falsified, or, alternatively,
as donations void for want of acceptance embodied in a
public instrument. They claim ownership pro indiviso of the
lands subject of the deeds by virtue of being intestate heirs
of Hilario Mateum.
o Citing Art. 1458 (CC), in prescribing that a sale be
for a ... price certain in money or its equivalent ...
requires that "equivalent" be something
representative of money, e.g., a check or draft,
citing Manresa to the effect that services are not
the equivalent of money insofar as said
requirement is concerned and that a contract is
not a true sale where the price consists of services
or prestations.

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Respondent's denied allegations, asserting that said sales
were made for good and valuable consideration. They also
said that as collateral relatives of Hilario Mateum , they
have done many good things for him, nursing him, which
services constituted the bulk of the consideration of the
sales. And they also set up the defense that petitioners
could not question or seek the annulment of the sales
because they were mere collateral relatives and were not
bound principally or subsidiarily.
Trial Court: Granted the motion to dismiss.
o Petitioners are mere collateral relatives and not
forced heirs. They could not legally question the
disposition made by Mateum (as in the case of
Armentia v. Patriarca). Their evidence of alleged
fraud was also insufficient. The fact that the deeds
of sale each a stated a consideration of only P1.00
was not in itself evidence of fraud or simulation.
CA: affirmed.
ISSUE:
Whether, in view of the fact that, for properties with assessed
valuation of more than P10,000.00, the questioned deeds of sale
stating a price of only P1.00 plus unspecified past, present and
future services to which no value is assigned, said deeds were void
or inexistent from the beginning or merely voidable.
HELD/RATIO: Transfers were void because there was no valid
consideration.
False and fictitious consideration
o Apparent gross disproportion between the
stipulated price (P 1.00) and the assessed real
estate value (at least P 10,500) plainly and
unquestionably demonstrates that they state a false
and fictitious consideration.
No other true and lawful cause having been
shown, the Court finds both said deeds,
insofar as they purport to be sales, not
merely voidable, but void ab initio.
Note: the essence of this ruling was that
evidence was adduced to indicate that
there was no real intention to pay any
indicated valuable consideration.
Manresa citations:
o Services are not the equivalent of money insofar as
said requirement is concerned and that a contract is
not a true sale where the price consists of services
or prestations.
o True price, which is essential to the validity of a
sale, means existent, real and effective price, that
which does not consist in an insignificant amount
as, say, P.20 for a house.
That it is not the same as the concept of a
just price which entails weighing and

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measuring, for economic equivalence, the
amount of price against all the factors that
determine the value of the thing sold
But that there is no need of such a close
examination when the immense
disproportion between such economic
values is patent a case of insignificant or
ridiculous price, the unbelievable amount of
which at once points out its inexistence.
"Services" mentioned in the questioned
deeds of sale are not only vague and
uncertain, but are unknown and not
susceptible of determination without the
necessity of a new agreement between the
parties to said deeds.
Not a donation
o the law prescribes that donations of immovable
property, to be valid, must be made and accepted in
a public instrument and it is not denied by the
respondents that there has been no such
acceptance which they claim is not required.

Republic v Phil. Resources Development
GR No. L-10141 / 31 January 1958 / J. Padilla
Summary/Memory Aid:
- Apostol used company items (logs, steel plates) to pay for
his personal debt with the Bureau of Prisons
Facts:
Republic of the Philippines filed a case against Macario
Apostol and Empire Insurance Co. in the CFI. Demand for money
was p34,015.06 with legal interest.
Macario Apostol won bids with the Bureau of Prisons for
100 tons of Palawan Almaciga and 3M board feet of logs and
contract was executed between Apostol and Bureau of Prisons.
Apostol only paid part of what he owed for the items he won in the
bid. Empire Insurance Co. was impleaded because it issued a
performance bond in favor of Apostol.
Phil. Resources Development Corporation filed a petition to
intervene in the CFI alleging that Apostol, who was its President,
used materials belonging to the company to pay for the debts he
owed to Bureau of Prisons. Facts show he incurred such liabili ty in
his personal capacity. Phil. Resources alleged that it would lose
rights over items it rightfully owned if Court considers such items as
payment for Apostols debt, when in fact Phil. Resources has
nothing to do with the transaction. Phil. Resources tried to have
goods returned to them, but Bureau of Prisons did not accede.
CFI denies petition to intervene, however, CA reverses
decision and orders CFI to allow Phil. Resources to intervene
because it stands to be adversely affected if such payment using its
goods is validated by the Court as payment of Apostols personal
debt. In CA, Republic of the Phils. alleges that since suit is for

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recovery of sum of money, and not the goods turned over by
Apostol previously.
ISSUE/S:
W/N Phil. Resources should be allowed to intervene in the case.
HELD/RATIO:
YES.
We find no reason for disturbing the foregoing
pronouncements. The Government argues that "Price . . . is always
paid in terms of money and the supposed payment being in kind, it
is no payment at all, "citing Article 1458 of the new Civil Code.
However, the same Article provides that the purschaser may pay "a
price certain in money or its equivalent," which means that they
meant of the price need not be in money. Whether the G.I. sheets,
black sheets, M. S. Plates, round bars and G. I. pipes claimed by the
respondent corporation to belong to it and delivered to the Bureau
of Prison by Macario Apostol in payment of his account is sufficient
payment therefore, is for the court to pass upon and decide after
hearing all the parties in the case. Should the trial court hold that it
is as to credit Apostol with the value or price of the materials
delivered by him, certainly the herein respondent corporation
would be affected adversely if its claim of ownership of such sheets,
plates, bars and pipes is true.

Chapter 5: Formation of a Contract of Sale

Manila Metal Container Corporation vs Philippine National
Bank
GR no 166862 December 20, 2006
Petitioner MMCC; Intervenor Tolentino; Respondent PNB;
Intervenor DMCI
Memory aid: Series of offers and counter offers ;)
Ponente: Callejo
FACTS:
1. MMCC, to secure a loan it had obtained from PNB,
executed a real estate mortgage over a parcel of land.
2. In 1982, PNB filed a petition for extrajudicial foreclosure of
the real estate mortgage and sought to have the property
sold at public auction for P911,532.21, MMCCs outstanding
obligation to PNB.
3. The property was sold at public auction where PNB was
declared the winning bidder for P1M. The period to redeem
the property was to expire on February 17, 1984.
4. Since petitioner failed to redeem the property, a new title
was issued to PNB.

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5. Meanwhile, the Special Assets Management Department
(SAMD) had prepared a statement of account, and as of
June 25, 1984 MMCC's obligation amounted
to P1,574,560.47. When apprised of the statement of
account, MMCC remitted P725,000.00 to PNB as "deposit to
repurchase," and an official receipt was issued to it.
6. In the meantime, the SAMD recommended to the
management of PNB that MMCC be allowed to repurchase
the property for P1,574,560. 00. However, the PNB
management informed MMCC that it is rejecting its offer
and SAMDs proposal. It was suggested that MMCC
purchase the property for P2,660,000.00, its minimum
market value.
7. MMCC did not agree to PNB's proposal. Instead, it wrote
another letter requesting for a reconsideration. PNB replied
in a letter, wherein it reiterated its proposal that MMCC
purchase the property for P2,660,000.00. MMCC declared
that it had already agreed to the SAMD's offer to purchase
the property for P1,574,560. 47, and that was why it had
paid P725thou.
8. On June 4, 1985, PNB informed MMCC that the PNB Board
of Directors had accepted MMCCs offer to purchase the
property, but for P1,931,389. 53 in cash less the P725,000.00
already deposited with it.
9. MMCC rejected PNB's proposal. It maintained that PNB had
agreed to sell the property for P1,574,560.47, and that since
its P725,000.00 downpayment had been accepted, PNB was
proscribed from increasing the purchase price of the
property.
10. MMCC then filed a complaint against PNB for "Annulment
of Mortgage and Mortgage Foreclosure, Delivery of Title, or
Specific Performance with Damages." To support its cause
of action for specific performance, it alleged that there was
already a perfected contract of sale between them which
the PNB refuted.
11. A series of negotiation ensued after the complaint. MMCC
offered P3.5M which PNB rejected asking for its market
value of P30M. MMCC then offered P4.5M which the PNB
again refused.
RTC held that there was no contract of sale but merely an
exchange of offers and counteroffers and that the P725thou was a
deposit and not a downpayment or earnest money.
CA affirmed the RTCs decision saying that there was no
meeting of the minds between MMCC and PNB hence there was no
contract of sale, and as such, there was no contract to rescind.

ISSUE:
1. WON MMCC and PNB had entered into a perfected contract for
MMCC to repurchase the property from PNB?
HELD:

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There was no perfected contract of sale between the
parties on June 4, 1985. A definite agreement as to the price is an
essential element of a binding agreement to sell personal or real
property. When there is merely an offer by one party without
acceptance of the other, there is no contract.
A negotiation is formally initiated by an offer, which,
however, must be certain. To convert the offer into a contract, the
acceptance must be absolute and must not qualify the terms of the
offer; it must be plain, unequivocal, unconditional and without
variance of any sort from the proposal.
A qualified acceptance or one that involves a new proposal
constitutes a counter-offer and a rejection of the original offer. A
counter-offer is considered in law, a rejection of the original offer
and an attempt to end the negotiation between the parties on a
different basis. The acceptance must be identical in all respects with
that of the offer so as to produce consent or meeting of the minds.
The statement of account prepared by the SAMD cannot be
considered an unqualified acceptance to MMCC's offer to purchase
the property. The statement is but a computation of the amount
which MMCC was obliged to pay in case respondent would later
agree to sell the property.
There is no evidence that the SAMD was authorized by
PNB's Board of Directors to accept MMCC's offer and sell the
property. Any acceptance by the SAMD of MMCC's offer would not
bind PNB.
The P725,000.00 it had remitted to PNB was "earnest
money" which could be considered as proof of the perfection of a
contract of sale. This contention is likewise negated by the
stipulation of facts which the parties entered into in the trial court:
9. On June 25, 1984, MMCC paid P725,000.00 to PNB as deposit to
repurchase the property. The deposit of P725,000 was accepted by
PNB on the condition that the purchase price is still subject to the
approval of the PNB Board.
Unless and until PNB accepted the offer on these terms, no
perfected contract of sale would arise. Absent proof of the
concurrence of all the essential elements of a contract of sale, the
giving of earnest money cannot establish the existence of a
It appears that, per its letter to MMCC dated June 4, 1985,
the PNB had decided to accept the offer to purchase the property.
However, this amounted to an amendment of PNB's qualified
acceptance, or an amended counter-offer, because while the PNB
lowered the purchase price, it still declared that its acceptance was
subject to the new lowered price.
United Muslim and Christian Urban Poor Association v. BRYC
G.R. No. 179653 | July 31, 2009 | Ponente: NACHURA, J.
FACTS:
Respondent Sea Foods Corporation (SFC) is the registered
owner of Lot No. 300 located in Lower
Calainan, Zamboanga City and covered by Transfer Certificate of
Title (TCT) No. 3182 (T-576).
Sometime in 1991, petitioner United Muslim and Christian
Urban Poor Association, Inc. (UMCUPAI), an organization of

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squatters occupying Lot No. 300, through its President, Carmen T.
Diola, initiated negotiations with SFC for the purchase thereof.
UMCUPAI expressed its intention to buy the subject property using
the proceeds of its pending loan application with National Home
Mortgage Finance Corporation (NHMF). Thereafter, the parties
executed a Letter of Intent to Sell by [SFC] and Letter of Intent to
Purchase by UMCUPAI.
However, the intended sale was derailed due to UMCUPAIs
inability to secure the loan from NHMF as not all its members
occupying Lot No. 300 were willing to join the undertaking. Intent
on buying the subject property, UMCUPAI, in a series of conferences
with SFC, proposed the subdivision of Lot No. 300 to allow the
squatter-occupants to purchase a smaller portion thereof.
Consequently, sometime in December 1994, Lot No. 300
was subdivided into three (3) parts covered by separate titles. On
January 11, 1995, UMCUPAI purchased Lot No. 300-A. In turn, Lot
No. 300-B was constituted as road right of way and donated by SFC
to the local government.
UMCUPAI failed to acquire Lot No. 300-C for lack of funds.
On March 5, 1995, UMCUPAI negotiated anew with SFC and was
given by the latter another three months to purchase Lot No. 300-C.
However, despite the extension, the three-month period lapsed
with the sale not consummated because UMCUPAI still failed to
obtain a loan from NHMF. Thus, on July 20, 1995, SFC sold Lot No.
300-C to respondent BRYC-V Development Corporation (BRYC).
A year later, UMCUPAI filed with the RTC a complaint
against respondents SFC and BRYC seeking to annul the sale of Lot
No. 300-C, and the cancellation of TCT No. T-121,523. UMCUPAI
alleged that the sale between the respondents violated its valid and
subsisting agreement with SFC embodied in the Letter of Intent.
According to UMCUPAI, the Letter of Intent granted it a prior,
better, and preferred right over BRYC in the purchase of Lot No.
300-C.
In refutation, BRYC said that UMCUPAIs complaint did not
state a cause of action since UMCUPAI had unequivocally
recognized its ownership of Lot No. 300-C when UMCUPAI likewise
sent BRYC a Letter of Intent dated August 18, 1995 imploring BRYC
to re-sell the subject lot.
In a separate Answer, SFC countered that the Letter of
Intent dated October 4, 1991 is not, and cannot be considered, a
valid and subsisting contract of sale. On the contrary, SFC averred
that the document was drawn and executed merely to
accommodate UMCUPAI and enable it to comply with the loan
documentation requirements of NHMF. In all, SFC maintained that
the Letter of Intent dated October 4, 1991 was subject to a
condition i.e., payment of the acquisition price, which UMCUPAI
failed to do when it did not obtain the loan from NHMF.

After trial, the RTC dismissed UMCUPAIs complaint. The
lower court found that the Letter of Intent was executed to
facilitate the approval of UMCUPAIs loan from NHMF for its
intended purchase of Lot No. 300. According to the RTC, the Letter
of Intent was simply SFCs declaration of intention to sell, and not
a promise to sell, the subject lot. On the whole, the RTC concluded

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that the Letter of Intent was neither a promise, nor an option
contract, nor an offer contemplated under Article 1319 of the Civil
Code, or a bilateral contract to sell and buy. The CA, on appeal,
affirmed in toto the RTCs ruling.
ISSUE:
1. IS THE LETTER OF INTENT TO SELL AND LETTER OF INTENT TO BUY
A BILATERAL RECIPROCAL CONTRACT WITHIN THE MEANING OR
CONTEMPLATION OF ARTICLE 1479, FIRST PARAGRAPH, CIVIL CODE
OF THE PHILIPPINES?
HELD/RATIO:
Although not stated plainly, UMCUPAI claims that the Letter
of Intent is equivalent to a conditional contract of sale subject only
to the suspensive condition of payment of the purchase price.
A contract to sell is a bilateral contract whereby the
prospective seller, while expressly reserving the ownership of the
subject property despite delivery thereof to the prospective buyer,
binds himself to sell the said property exclusively to the
prospective buyer upon fulfillment of the condition agreed upon,
that is, full payment of the purchase price.
In a contract to sell, upon the fulfillment of the suspensive
condition which is the full payment of the purchase price,
ownership will not automatically transfer to the buyer although
the property may have been previously delivered to him. The
prospective seller still has to convey title to the prospective buyer
by entering into a contract of absolute sale.
In the instant case, however, the parties executed a Letter
of Intent, which is neither a contract to sell nor a conditional
contract of sale. As found by the RTC, and upheld by the CA, the
Letter of Intent was executed to accommodate UMCUPAI and
facilitate its loan application with NHMF.
Nowhere in the Letter of Intent does it state that SFC
relinquishes its title over the subject property, subject only to the
condition of complete payment of the purchase price; nor, at the
least, that SFC, although expressly retaining ownership thereof,
binds itself to sell the property exclusively to UMCUPAI. The Letter
of Intent to Buy and Sell is just that a manifestation of SFCs
intention to sell the property and UMCUPAIs intention to acquire
the same.
In their Agreement, SFC expressly declared its intention to
sell and UMCUPAI expressly declared its intention to buy subject
property. An intention is a mere idea, goal, or plan. It simply
signifies a course of action that one proposes to follow. It simply
indicates what one proposes to do or accomplish. A mere
intention cannot give rise to an obligation to give, to do or not
to do (Article 1156, Civil Code). One cannot be bound by what he
proposes or plans to do or accomplish. A Letter of Intent is not a
contract between the parties thereto because it does not bind one
party, with respect to the other, to give something, or to render
some service (Art. 1305, Civil Code).
The Letter of Intent/Agreement between SFC and
UMCUPAI is merely a written preliminary understanding of the
parties wherein they declared their intention to enter into a
contract of sale. It is subject to the condition that UMCUPAI will

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apply with the Home Mortgage and Finance Corporation for a loan
to pay the acquisition price of said land. One of the requirements
for such loan is a formal manifestation of Intent to Sell from SFC.
Thus, the Letter of Intent to Sell fell short of an offer
contemplated in Article 1319 of the Civil Code because it is not a
certain and definite proposal to make a contract but merely a
declaration of SFCs intention to enter into a contract. UMCUPAIs
declaration of intention to buy is also not certain and definite as it
is subject to the condition that UMCUPAI shall endeavor to raise
funds to acquire subject land. The acceptance of the offer must be
absolute; it must be plain and unconditional. Moreover, the Letter
of Intent/Agreement does not contain a promise or commitment to
enter into a contract of sale as it merely declared the intention of
the parties to enter into a contract of sale upon fulfillment of a
condition that UMCUPAI could secure a loan to pay for the price of
a land.
The Letter of Intent/Agreement is not an option contract
because aside from the fact that it is merely a declaration of
intention to sell and to buy subject to the condition that UMCUPAI
shall raise the necessary funds to pay the price of the land, and does
not contain a binding promise to sell and buy, it is not supported by
a distinct consideration distinct from the price of the land intended
to be sold and to be bought. No option was granted to UMCUPAI
under the Letter of Intent/Agreement to buy subject land to the
exclusion of all others within a fixed period nor was SFC bound
under said Agreement to Sell exclusively to UMCUPAI only the said
land within the fixed period.
Neither can the Letter of Intent/Agreement be considered a
bilateral reciprocal contract to sell and to buy contemplated under
Article 1479 of the Civil Code which is reciprocally demandable. The
Letter of Intent/Agreement does not contain a PROMISE to sell and
to buy subject property. There was no promise or commitment on
the part of SFC to sell subject land to UMCUPAI, but merely a
declaration of its intention to buy the land, subject to the condition
that UMCUPAI could raise the necessary funds to acquire the same.
Carceller v. Court of Appeals
GR No. 124791 February 10, 1999
Quisumbing, J.
Petitioners: Jose Ramon Carceller
Respondents: Court of Appeals and State Investment Houses, Inc.
(SIHI)
Memory Aid: lease contract with option to purchase, 6-month
extension to exercise option, SIHI with financial problems,
Carcellers improvements on the land, obtained a loan
Facts:
SIHI is the registered owner of 2 parcels of land including all
the improvements thereon. Petitioner and SIHI entered into a lease
contract with option to purchase over said two parcels of land, for
18 months at a rate of P10k/month, from Aug 1 1984 until January
30, 1986. The lease contract also states that the option to purchase
shall be exercised by written notice to the lessor (SIHI) at anytime
within the option period and the document of sale has to be
consummated within the month immediately following the month
when the lessee exercised his option under the contract.

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On Jan 7, 1986 or 3 weeks before expiration of the lease
contract, SIHI notified Carceller of the termination of the lease
agreement and the time left to exercise the option to purchase.
In a letter dated Jan 15, which was received by SIHI on Jan
29, Carceller requested for a 6-month extension of the lease
contract, alleging that he needs time to raise funds.
On Feb 14, SIHI told Carceller that his request was
disapproved, but SIHI offered to lease the property to Carceller at a
rate of P30k/month for a period of 1 year. SIHI also told Carceller
that it decided to offer for sale the subject property to the public.
On Feb 18, Carceller notified SIHI of his decision to exercise
the option to purchase and made arrangements for the payment of
downpayment thereon.
On Feb 20, SIHI sent a letter to Carceller stating that the
period within which the option period should have been exercised
had already lapsed and asked Carceller to vacate the property
within 10 days.
Carceller filed a complaint for specific performance and damages
with the RTC to compel SIHI to execute the deed of sale.
RTC: Ordered SIHI to execute a deed of sale in favor of Carcel ler
CA: Affirmed RTCs decision
Issue:
1. W/N Carceller should be allowed to exercise the option to
purchase the leased property despite the alleged delay in giving the
required notice to SIHI
Held:
YES. Carcellers letter dated Jan 15 was fair notice of his
request for the extension of the lease contract for 6 months to
allow him to generate funds to exercise the option to buy.
The SC ruled that Carcellers letter of Jan 15 and his formal
exercise of the option on Feb 18 were within a reasonable time-
frame consistent with the periods given and the known intent of the
parties to the agreement.
The SC took into account the primary intent of the parties in
entering into the lease contract with option to purchase, as well as
their subsequent and contemporaneous acts. SIHI, prior to its
negotiation with Carceller, was already beset with financial
problems. SIHI was compelled to dispose some of its assets to
generate sufficient funds. SIHIs agreement to enter first into a lease
contract with option to purchase is clear proof its intent to promptly
dispose of the property. Its letter dated Jan 7 reminding Carceller of
the time left to exercise the option to buy, as well as the letter
informing Carceller of the decision to sell the property to the
general public, clearly showed its desire to sell the property.
Carceller manifested his determination to buy the property. He
introduced permanent improvements on it and secured an P8M
loan to increase his chances of acquiring the property.
The SC cited a case wherein it ruled that if a lessee fails to
exercise his option to buy within the period agreed upon, the lessee

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loses the right to buy the property later on based on the same
terms and conditions SET IN THE OFFER. Carceller could not,
therefore, insist on buying the property based on the price agreed
upon in the lease agreement. SIHI, on the other hand, could not
take advantage of the situation to increase the selling price of the
said property by nearly 90% because such leap in the price quoted
would show an opportunistic intent to exploit as SIHI knew that
Carceller needed the property for his business and he could afford
to pay such higher price since Carceller was able to obtain an P8M
loan. If the Courts were to allow SIHI to take advantage of the
situation, there would be an injustice to Carceller because SIHI
would be unjustly enriched at Carcellers expense.
NOTE: Option is defined as a preparatory contract in which one
party grants to the other, for a fixed period and under specified
conditions, the power to decide, whether or not to enter into a
principal contract. It is a separate agreement distinct from the
contract which the parties may enter into upon consummation of
the option.

Tayag vs Lacson
GR No. 134971 March 25, 2004
Petitioner: Herminio Tayag
Respondents: Amancia, Rosendo, Antonio, Juan (all surnamed
Lacson), Teodisia Lacson-Espinosa, CA
Additional characters: Tiamson et. al = tenants/tillers/group of
farmers
Memory Aid: Famers/tenants; deeds of assignments; option
contracts
Facts:
The respondents are the registered owners of three parcels
of land located in Mabalacat, Pampanga. The properties are
tenanted agricultural lands.
A group of farmers, Julio Tiamson et. al, individually
executed a deed of assignment transferring their respective
rights as tenants/tillers of the landholdings possessed in
consideration of P50.00 per m
2
to Herminio Tayag.
Said amount was made payable when legal impediments to
the sale of the property no longer existed.
Exclusive right to buy the property was granted if the
Lacsons agreed to sell the property with the concurrence of
the tenants.
Tayag gave varied sums of money to Tiamson et. al as
partial payments and received in return receipts.
Tayag wrote Tiamson et. al invited them for a meeting
regarding the negotiations/implementations of the terms of
deeds of assignments.
Thereafter, Tiamson et. al replied through a letter that they
decided to sell all their rights and interest to the Lacsons.

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The petitioner filed a complaint against Tiamson et. al and
the Lacsons before the RTC for the court to fix the period
within which to pay the purchase price.
One of the arguments of the petitioner is that deed of
assignment executed by Tiamson et. al are perfected option
contracts.
Issues:
1) WON the respondents agreed to sell the property
2) WON there were perfected option contracts
Held:
1. NO.
No showing that they agreed to sell the property.
1. Tayag and Tiamson et. al have yet to submit deeds
of assignment to DAR, which can approve or
disapprove the same.
2. Tayag even alleged that he was yet to meet
Tiamson et. al.
2. NO.
Tiamson et. al are were merely tenants and not the registered
owners of the property.
3. Not being the owners of the property, the tenants
could not legally grant the petitioner the option,
much less the exclusive right to buy the property.
Nemo dat quod non habet.
An option is a contract by which the owner of the property
agrees with another person that he shall have the right to
buy his property at a fixed price within a certain time, or
under, in compliance with certain terms and conditions, or
which gives to the owner of the property the right to sell or
demand a sale.
Imposes no binding obligation on the person holding an
option aside from the consideration of the offer.
The second party gets in praesenti, not lands, not an
agreement that he shall have the lands but the right to call
for and receive lands if he elects.
An option contract is separate and distinct contract from
which the parties may enter into upon the conjunction of
the option.

Sanchez v. Rigos
No. L-25494 June 14,1972
C.J. Concepcion
Petitoner: Nicolas Sanchez (buyer)
Respondent: Severina Rigos (seller)
Memory Aid: Option to Purchase

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Doctrine: Art. 1479 - An accepted unilateral promise to buy or to sell
a determinate thing for a price certain is binding upon the promissor
if the promise is supported by a consideration distinct from the price.
Without a consideration separate from the purchase price, an
option contract would be void, as a contract, but would still
constitute a valid offer; so that if the option is exercised prior to its
withdrawal, it is equivalent to an offer being accepted giving rise
to a valid and binding sale.
FACTS:
Nicolas Sanchez and Severina Rigos executed an instrument
entitled Option to Purchase," whereby Mrs. Rigos agreed,
promised and committed to sell" to Sanchez, for P 1,510.00, a
parcel of land in Nueva Ecija within two (2) year. Such option shall
be deemed terminated and elapsed," if Sanchez shall fail to
exercise his right to buy the property" within the stipulated period.
Since the several tenders of payment of Sanchez were rejected by
Rigos, Sanchez just deposited the amount with the CFI of Nueva
Ecija and filed an action for specific performance and damages.
Rigos contended that the contract between the parties is a
unilateral promise to sell, and the same being unsupported by any
valuable consideration, is null and void." Still, the lower court
rendered judgment in favor of Sanchez and ordered Rigos to accept
the sum Sanchez judicially consigned, and to execute in his favor the
requisite deed of conveyance.
ISSUE:
1. Was there a contract to buy and sell between the parties or only
a unilateral promise to sell?
HELD/RATIO:
The instrument was a mere unilateral promise to sell. It was
not reciprocally demandable because although Rigos agreed,
promise and committed herself to sell the land, Sanchez has NOT
agreed and committed himself to buy. As indicated by its own
title, it was a mere "Option to Purchase," so Sanchez had no
obligation to purchase the property. Although the sum of P1, 510
was expressly stipulated, there is nothing in the contract to indicate
that the promise and undertaking is supported by a consideration
"distinct from the price" as required by Art. 1479.
In an accepted promise to sell, since there may be no valid
contract without a cause or consideration, the promisor is not
bound by his promise and may, accordingly, withdraw it. Pending
notice of its withdrawal, his accepted promise partakes, however, of
the nature of an offer to sell, which, if accepted, results in a
SC affirmed the lower courts decision

Diamante v. CA
G.R. No. L-51824
Petitioner: PERCELINO DIAMANTE
Respondents: CA and GERARDO DEYPALUBUS

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Summary / Memory Aid:Option to Repurchase, Fishpond
License/Lease Agreement, DANR Secretary, Bureau of Fishery
The effects of a right of repurchase contained in the original
document of sale and an option to repurchase subsequent and
separate from the original document of sale differ. The latter is a
separate contract from the contract of sale; it is merely a unilateral
promise to sell, which is a mere offer. For it to be binding on both
parties, it must be shown that the there is acceptance and that
there is a consideration distinct from the price. In this case, with
regard to the document entitled OPTION TO REPURCHASE
executed by the parties over the property in controversy, it was not
conclusively shown that there was acceptance and a separate
consideration; thus it was not bonding at all. In conclusion, this
OPTION TO REPURCHASE cannot be asserted by the petitioner as
a ground for the revocation of the respondents Fishpond License /
Lease Agreement over the subject property.
The Facts:
- A fishery lot (with an area of 9.4 hectares and covered by
Fishpond Permit No. F-2021) was in the name of Dionio.
Upon Dionos death, her heirs, petitioner Diamante and
Dafeliz, inherited the property which they divided among
themselves. The petitioner Diamantes share of the fishery
lot is the subject of this case.
- In 1960, petitioner, as evidenced by a deed of sale, sold all
his remaining rights over his portion of the fishery lot to
the private respondent because of dire financial need.
- After several days, Deypalubus executed in favor of the
petitioner Diamante another document entitled: Option
to Repurchase, wherein the property in question can be
repurchased by the petitioner within 10 years from said
date, with a 10 grace period.
VERY IMPT. FACT: This option to repurchase
was a separate agreement from the
contract of sale of the subject fishery lot.
- In applying for a Fishpond Permit and a Fishpond Lease
Agreement, private respondent submitted to the Bureau
of Fisheries (BOF) the deed of sale of his transaction with
petitioner. But he did not include the Option to
Repurchase in his application.
- Eventually, the BOF issued in favor of private respondent a
Fishpond Permit and a Fishpond Lease Agreement
(Fishpond Permit No. 4953-Q and FLA No. 1372,
respectively).
- In December 1963, petitioner requested the BOF to nullify
the FLA granted to respondent because the former is
entitled to a valid twenty-year option to repurchase (in
accordance with the Option to Repurchase they
executed).
- This request was dismissed. Petitioner then sought a
reconsideration of the dismissal which was denied.
- Petitioner sought again for a reconsideration with the DANR
Secretary. This time, he was successful. The DANR Secretary

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granted his motion in an Order cancelling FLA No. 1372.
The Secretary stated that there was a misrepresentation of
an essential or material fact committed by the respondent
Deypalubos in his application for the permit and the lease
agreement when the Option to Repurchase was not
submitted.
o Based his ruling on Section 20 of Fisheries Admin.
Order No. 60: any false statements, or any
alteration, change or modification of any or all
terms and conditions made in the application shall
cause the cancellation of the permit or lease.
- Because of the Secretarys denial of his appeal, private
respondent filed with the CFI of Iloilo seeking to annul the
Secretary's order on the ground that the Secretary gravely
abused his discretion in not giving him the opportunity to
prove that the Option to Repurchase was forged.
o Basically, Deypalubus was asserting that the
Option to Repurchase was forged, and thus, the
Secretary of DANR shouldnt have relied on such
document in junking his Fishpond Permit/Lease
Agreement.
- The CFI decided in favor of the private respondent, stating
that: (1) the DANR Secretary abused his discretion and (2)
petitioner cannot repurchase the fishpond as the Option to
Repurchase is of doubtful validity.
- Petitioner appealed to the CA. It reversed the decision of
the trial court on the ground that no grave abuse of
discretion was committed by respondent Secretary
inasmuch as private respondent was given ample
opportunity to be heard on his claim re. the invalidity of the
Option to Repurchase.
- Subsequently, acting on the Motion of Reconsideration filed
by respondent, the CA reversed its own decision and
affirmed the previous CFI ruling.
o The CAs reasoning: The DANR Secretary had gone
beyond his statutory authority and had clearly
acted in abuse of discretion in giving due weight to
the Option to Repurchase whose genuineness
and due execution had been successfully
impugned and denied by Deypalubus.
- Petitioner Diamante goes to the SC: contends that the
findings of fact of administrative bodies should be accorded
respect, absent a showing of arbitrariness.
The Issue:
1. W/N the decision of the DANR Secretary (which in essence
recognized the Option of Repurchase and thus revoked the
respondents fishpond license) should be set aside?
Held / Ratio:
YES, THE DECISION OF THE SECRETARY SHOULD BE SET ASIDE
AND THUS, THE FISHPOND LICENSE/LEASE AGREEMENT OF
RESPONDENT SHOULD BE REINSTATED.

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1. The Secretary did not gravely abuse of discretion in so far as
he sufficiently gave ample opportunity to the respondents
in alleging the forgery of the Option to Repurchase.
2. HOWEVER: the SC held that the respondent Secretary
gravely erred in holding that private respondent's non-
disclosure of the Option to Repurchase in his application
for a fishpond license constituted a falsehood or a
misrepresentation of an essential or material fact. The
Secretary misunderstood the effects of a right to
repurchase which was granted subsequently and
separately from the original document of sale.
3. As indicated by Article 1601 of the Civil Code, the right of
repurchase (per se) is not a right granted the vendor by the
vendee in a subsequent or separate instrument, but is a
right reserved by the vendor in the same instrument of
sale as one of the stipulations of the contract.
4. Once the deed of absolute sale is executed, the vendor can
no longer reserve the right to repurchase. Any right
thereafter granted to vendor by the vendee in a separate
instrument cannot be considered a right of repurchase, but
some other right like an option to buy in the instant case.
5. An agreement to repurchase, when made separately from
the contract of sale, becomes a promise to sell, meaning: if
the contract of sale does not contain the right of
repurchase within it, the buyer acquires the thing
completely.
6. If the buyer subsequently grants the seller the right to
repurchase, which is subsequent and independent from the
contract of sale, it is a NEW CONTRACT entered into by the
buyer as an absolute owner of the object. In this case the
seller (Diamante) has not reserved to himself the right to
repurchase
7. Hence, the Option to Repurchase executed by private
respondent in the present case, was merely a promise to
sell, which must be governed by Article 1479 of the Civil
Code which basically states that:
A unilateral promise to sell (which is the Option to
Repurchase in this case) was a mere offer which
cannot be converted into a contract except when
there is acceptance. Acceptance is the act that gives
life to a juridical obligation. Furthermore, the
acceptance can only be binding if this is supported
by a consideration distinct from the price.
8. A copy of the so-called Option to Repurchase is neither
attached to the records nor quoted in any of the pleadings
of the parties. The SC, therefore, could not properly rule on
whether or not the promise was accepted and a
consideration distinct from the price was given.
Undoubtedly, in the absence of either or both acceptance
and separate consideration, the promise to sell is not
binding upon respondent Deypalubus. Thus, the absence of
the Option to Repurchase in respondents application for
a fishpond license with the BOF did not warrant the
revocation of the said granted license.

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Vazquez v. CA
G.R. No. 83759 July 12, 1991
SPOUSES CIPRIANO VASQUEZ and VALERIANA
GAYANELO, petitioners,
vs.
HONORABLE COURT OF APPEALS and SPOUSES MARTIN
VALLEJERA and APOLONIA OLEA, respondents.
Doctrine: Right to repurchase must be stipulated as a condition in
the same document, not in a subsequent document.
Facts:
- Respondent Spouses Martin Vallejera and Apolonia Olea sold his
land in Negros Occidental to .Petitioner Vasquez
-The Deed of Sale was duly ratified and notarized. On the same day
and along with the execution of the Deed of Sale, a separate
instrument, denominated as Right to Repurchase was executed by
the parties.
-This instrument granted the spouses a right to repurchase the lot
-When the spouses seek to repurchase the lot,however, Vasquez
refused.
-Vasquez claims that the right to repurchase document is just an
option to buy, and since it has no consideration distinct from the
purchase price, it is not binding upon him
- Spouses filed a case against Vasquez
Issue: W/N Spouses has the right to repurchase under the contract.
Held:
- Sanchez v Rigos doctrine does not apply. In that case, it was
shown that even if the option was not supported by a
consideration and hence not binding, Sanchez was able to
show that he accepted the same before Rigos withdrew the
the option(which in reality is just an offer to enter into a
contract of sale since it is not supported by a consideration)
- -In this case, it was clear that there was no consideration for
the option. The burden to prove it lies on the spouses,
which they were not able to do.
- It is also clear that the spouses never accepted the
option(which just like in the Sanchez case, is in reality just
an offer since it has no consideration)
- - Signature of Vasquez on the right to repurchase document
is not enough since it is lacking the signature of the real
beneficiary of such document, the Spouses
- -Even assuming that there was really a right to repurchase,
To effectively exercise the right, the Spouses must make an
actual and simultaneous tender of payment or consignation.
This they did not do.
- For there to be a valid reservation of the right to
repurchase, the right must be reserved by the vendor in the
same instrument of sale as one of the stipulations of the
contract and not in a subsequent document

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- Otherwise, it is just an option to to buy or a mere promise
to resell.

Nietes vs. CA
August 18, 1972 Concepcion
PETITIONER: Aquilino Nietes
RESPONDENT: Hon. Court of Appeals & Dr. Pablo Garcia
Maya: sorry this is a bit long, but I could not shorten it even more
without compromising the important details. Please pay attention to
the highlighted dates.
FACTS:
In 1959, Dr. Pablo Garcia who is the owner of the Angeles
Educational Institute leased his property to Aquilino Nietes for
P5,000 a year for a period 5 years with the option to buy the
property from June 1960 to June 1965. Pertinent portion of which
states:
4. That the LESSOR agrees to give the LESSEE
an option to buy the land and the school building,
for a price of ONE HUNDRED THOUSAND PESOS
(P100,000) within the period of the Contract of
Lease;
5. That should the LESSEE buy the lot, land
and the school building within the stipulated
period, the unused payment for the Contract of
Lease will be considered as part payment for the
sale of the land and school;
6. That an inventory of all properties in the
school will be made on March 31, 1960;
The terms of the contract also stated that on or before
March 30, 1960 that the full balance of P25,000.00 be paid, but
Nietes had only paid up P24,757.00 as of August 4, 1961 which was
P347.00 short.
On September 4, 1961, Nietes paid Garcia the additional
sum of P3,000, for which Garcia issued the following receipt:
Received the amount of (P3,000.00) Three Thousand
Pesos from Mrs. Nietes as per advance pay for the
school, the contract of lease being paid.
(Sgd.) PABLO GARCIA (Exh. B)
And on December 13, 1962, Nietes paid Garcia another additional
sum of P2,200 for which Garcia issued the following receipt:
To Whom it May Concern:
This is to certify that I received the sum of Two
Thousand Two Hundred Pesos, Philippine Currency,
from Mrs. Catherine R. Nietes as the partial payment
on the purchase of the property as specified on the
original contract of "Contract of Lease with the First
Option to Buy" originally contracted and duly signed.
(Sgd.) DR. PABLO GARCIA (Exh. C)

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However, on July 1964 before the 5 year-lease has expired, Dr.
Garcias counsel wrote to rescind the contract for the following
reasons:
1. That you had not maintained the building, subject of the
lease contract in good condition.
2. That you had not been using the original name of the school
Angeles Institute, thereby extinguishing its existence in the eyes
of the public and injuring its prestige.
3. That through your fault, no inventory has been made of all
properties of the school.
4. That up to this time, you had not collected or much less
helped in the collection of back accounts of former students.
the foregoing obligations had been one, if not, the principal
moving factors which had induced the lessor in agreeing with the
terms embodied in your contract of lease, without which fulfillment,
said contract could not have come into existence.
Nietes then responded through his counsel that he will
exercise his option to buy the land and building subject matter of
the lease and the he is ready to pay the balance of the purchase
price in accordance with the contract.
On July 26, 1965, Nietes deposited with the branch office of
the Agro-Industrial Bank in Angeles City checks amounting to
P84,860. 50, as balance of the purchase price of the property, but he
withdrew said sum of P84,860.50 on August 12, 1965, after the
checks had been cleared. On August 2, 1965, he commenced the
present action, in the Court of First Instance of Pampanga, for
specific performance of Dr. Garcia's alleged obligation to execute in
his (Nietes') favor a deed of absolute sale of the leased property,
free from any lien or encumbrance whatsoever, he having
meanwhile mortgaged it to the People's Bank and Trust Company,
and to compel him (Garcia) to accept whatever balance of the
purchase price is due him, as well as to recover from him the
aggregate sum of P90,000 by way of damages, apart from attorney's
fees and the costs.
The trial court ruled in favor of Nietes, but the Court of Appeals
overturned it.
ISSUES:
1. Must the full purchase price be paid before the option could
be exercised?
NO. The SC did not agree with the CAs that the full price must
be paid before the option could be exercised. The contract does not
say that Nietes had to pay the stipulated price of P100,000 before
exercising his option to buy the property in question. Accordingly,
said option is governed by the general principles on obligations,
pursuants to which:
In reciprocal obligations, neither party incurs in delay if the
other does not comply or is not ready to comply in a proper manner
with what is incumbent upon him. From the moment one of the
parties fulfills his obligation, delay by the other begins.
In the case of an option to buy, the creditor may validly and
effectively exercise his right by merely advising the debtor of the

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former's decision to buy and expressing his readiness to pay the
stipulated price, provided that the same is available and actually
delivered to the debtor upon execution and delivery by him of the
corresponding deed of sale. Unless and until the debtor shall have
done this the creditor is not and cannot be in default in the
discharge of his obligation to pay.
Nietes need not have deposited, therefore, with the Agro-
Industrial Bank checks amounting altogether to P84,860.50 on July
26, 1965, and the withdrawal thereof soon after does not and
cannot affect his cause of action in the present case. In making such
deposit, he may have had the intent to show his ability to pay the
balance of the sum due to Dr. Garcia as the sale price of his
property. In short, said deposit and its subsequent withdrawal
cannot affect the result of the present case.
2. When did Nietes INFORM Garcia of exercise his option to buy?
On September 4, 1961, which is well within the period of
lease Nietes has already informed Dr. Garcia of his intent to exercise
the option by paying the sum of P3,000.00 as per advance pay for
the school, the contract of lease being paid.
3. When was the option validly EXERCISED?
On December 13, 1962, where it was indicated by Dr. Garcia in
the receipt as the partial payment on the purchase of the property
as specified on the original contract of "Contract of Lease with the
First Option to Buy."
4. Did the non-compliance of Nietes of the installment payment
affect his option to buy?
NO. The SC ruled that there was substantial compliance as
Nietes was only P343.00 short. Besides as of September 4, 1961,
Nietes had already paid P27,757.00 which was in excess of
P25,000. 00

Ang Yu Asuncion vs. Court of Appeals
December 2, 1994
Petitioner: Ang Yu Asuncion
Respondents: Bobby Cu Unjieng
Doctrine:
The right of first refusal belongs to a class of preparatory
relations bound not by the laws on contracts but by various
provisions of the Civil Code and by human conduct. The remedy for
an aggrieved party who has been denied the right of first refusal is
an action for damages.
Facts:
On July 29, 1987, a Second Amended Complaint for Specific
Performance was filed by Ang Yu Asuncion and Keh Tiong, et al.,
against Bobby Cu Unjieng and Jose Tan before the RTC of Manila.
The plaintiffs were tenants or lessees of residential and commercial
spaces owned by defendants in Binondo. On several conditions
defendants informed the plaintiffs that they were offering to sell
the premises and were giving them priority to acquire the same.
During negotiations, Bobby Cu Unjieng offered a price of P6 million
while plaintiffs made a counter of offer of P5 million. Plaintiff then

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asked the defendants to put their offer in writing to which the
defendants acceded. In reply to defendants letter, plaintiffs wrote,
asking that they specify the terms and conditions of the offer to sell.
When the plaintiffs did not receive any reply, they sent another
letter with the same request.
Since defendants failed to specify the terms and conditions
of the offer to sell and because of information received that the
defendants were about to sell the property, plaintiffs filed a
complaint to compel defendants to sell the property to them. The
RTC dismissed the complaint on the ground that the parties did not
agree upon the terms and conditions of the proposed sale; hence,
there was no contact of sale at all. However the court also ruled
that should the Cu Unjiengs subsequently offer the property for sale
at a price of 11 million or below, the Asuncions would have the right
of first refusal.
On November 15, 1990, the Cu Unjieng spouses executed a
Deed of Sale transferring the property in question to Buen Realty
and Development Corporation in consideration of 15 million pesos.
Buen Realty, as the new owner of the subject property, wrote to the
lessees demanding that they vacate the premises.
The Asuncions said that Buen Realty and Development
Corporation bought the property subject to the notice of lis
pendens. filed a Motion for Execution.
On August 30, 1991, the RTC ordered the Cu Unjiengs to
execute the necessary Deed of Sale of the property in litigation in
favor of plaintiffs Ang Yu Asuncion, Keh Tiong and Arthur Go for the
consideration of P15 Million pesos in recognition of petitioners
right of first refusal and that a new Transfer Certificate of Title be
issued in favor of the buyer. The court also set aside the title issued
to Buen Realty Corporation for having been executed in bad faith.
On September 22, 1991, the Judge issued a writ of execution.
On December 4 1991, the appellate court, on appeal by
private respondent, set aside and declared without force and effect
the above questioned orders of the court a quo.
Issue:
1.W/N Buen Realty was bound by the writ of execution by virtue of
the notice of lis pendens. NO
Held:
The SC affirms the CAs decision.
In the law on sales, the so-called right of first refusal is an
innovative juridical relation. Needless to point out, it cannot be
deemed a perfected contract of sale under Article 1458 of the Civil
Code.
In a right of first refusal, while the object might be made
determinate, the exercise of the right, however, would be
dependent not only on the grantors eventual intention to enter
into a binding juridical relation with another but also on terms,
including the price, that obviously are yet to be later firmed up.
Prior thereto, it can at best be so described as merely belonging to a
class of preparatory juridical relations governed not by contracts
(since the essential elements to establish the vinculum juris would
still be indefinite and inconclusive) but by, among other laws of

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general application, the pertinent scattered provisions of the Civil
Code on human conduct.
The final judgment of the lower court, it must be stressed,
has merely accorded a right of first refusal in favor of petitioners.
The consequence of such a declaration entails no more than what
has heretofore been said. If petitioners are aggrieved by the failure
of private respondents to honor the right of first refusal, the remedy
is not a writ of execution on the judgment, since there is none to
execute, but an action for damages in a proper forum for the
purpose.
Furthermore, Buen Realty, not having been impleaded in
Civil Case No. 87-41058, cannot be held subject to the writ of
execution issued by respondent Judge, let alone ousted from the
ownership and possession of the property, without first being duly
afforded its day in court.
Equatorial Realty v. Mayfair Theater
G.R. No. 106063 November 21, 1996
EQUATORIAL REALTY DEVELOPMENT, INC. & CARMELO &
BAUERMANN, INC., petitioners,
vs.
MAYFAIR THEATER, INC., respondent.
Facts:
Carmelo & Bauermann, Inc. (Carmelo) a parcel of land,
together with two 2-storey buildings, located at Claro M
Recto Avenue, Manila, and covered by TCT No. 18529.
On June 1967, It leased a part of its property to respondent
Mayfair. (a portion of the 2
nd
floor and the 2
nd
floor and
mezzanine) for 20 years. Two years after, another contract
of lease was entered into by the parties for 20 years also
(this time, another portion of the 2
nd
floor and two store
spaces at the ground floor) *extra: naging Movie Houses to,
Maxim Theatre and Miramax Theatre.
Each of their contracts contained a clause stating: That if
the LESSOR should desire to sell the leased premises, the
LESSEE shall be given 30-days exclusive option to purchase
the same. (right of first refusal)
Some time later, Carmelo asked Mayfair if it wanted to buy.
Mayfair tried to negotiate but Carmelo suddenly didnt
reply. It became silent on the issue and then Carmelo sold
the entire property to Equatorial on July 30, 1978 for
P11.3M. (within the 20-year lease period)
Mayfair sued for (1) specific performance and (2)
annulment of the sale
RTC: sale was valid. pay rent till the end of the lease to
Equatorial as it is the new owner. clauses in Carmelo and Mayfairs
contracts are an option clause. However, the option contract
wasnt valid as it did not contain a separate consideration. Mayfair
cannot compel Carmelo to sell.
CA: Reverse RTC. Clauses in contracts were actually Rights of
First Refusal.

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it is evident that the provision granting Mayfair "30-days
exclusive option to purchase" the leased premises is NOT AN
OPTION in the context of Arts. 1324 and 1479, second paragraph, of
the Civil Code. Although the provision is certain as to the object (the
sale of the leased premises) the price for which the object is to be
sold is not stated in the provision Otherwise stated, the questioned
stipulation is not by itself, an "option" or the "offer to sell" because
the clause does not specify the price for the subject property.
ISSUES:
1. Is it a right of first refusal or an option contract?
2. Is the sale valid?
HELD: 1. CONTRACT OF RIGHT OF FIRST REFUSAL
2. Yes, but it is rescissible. (Art 1380-1381(3): rescission by injured
third parties, like creditors) Petitioners acted in bad faith to render
the right of first refusal clause inutile.
Carmelo may have initially recognized Mayfairs right, but it
violated Mayfairs right when it abandoned the negotiations
without giving Mayfair an opportunity to come up with a
definite offer within the 30-day period. (Carmelo didnt sell
naman kaagad, he laid low then biglang sold it to
Equatorial)
Carmelo sets up the defense of impossible performance
because the leased properties do not constitute the whole
property itself and that the property is INDVISIBLE.
However, the SC holds that instead of nullifying the
agreement, it should be construed as to mean that the
whole property, including those not leased by Mayfair,
should be included when it exercises its right to buy.
Contract of sale deemed rescinded, Carmelo returns to
Equatorial the purchase price, and should allow Mayfair to
buy the property for the same price (P11.3M)
Notes:
Dissent by Justice Vitug
He agrees that the clause in the contract is a right of first
refusal. However, he disagrees that the right warrants for a
rescission of the sale between Carmelo and Equatorial. Right of first
refusal is a simple juridical relation, and a breach of this right gives
rise to damages according to Art. 19 of the Civil Code (HUMAN
RELATIONS part) and not rescission under OBLICON.
Concur/Dissent by Justice Romero
He agrees also its a right of first refusal. However, he
disagrees that the sale should be rescinded as there is no specific
provision in the Civil Code allowing the offerree (Mayfair) to rescind
a contract between the offerror (Carmelo) and a subsequent buyer
(Equatorial). He also doesnt agree that Mayfair be made to buy the
property for the same price Equatorial bought it (P11.3M) because
there was no consideration yet in the right of first refusal aka
Mayfair and Carmelo havent agreed on a price yet should Mayfair
exercise his right.


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Paranaque Kings vs Court of Appeals
[G.R. No. 111538. February 26, 1997]
Summary: Right of first refusal enforceable by an action for specific
performance.
Facts:
Catalina Santos, respondent, is the owner of 8 parcles of
land in Paranaque City. On 1977, she leased the property to Fredrick
Chua. On February 12, 1979, Fredrick Chua assigned all his rights to
the lease to Lee Ching Bing. On August 6, 1979, Lee Ching Bing
assigned all his rights to Paranaque Kings, petitioner.
In the lease contract, Par 9 provides that the lessee shall
have the first option or priority to buy the properties subject to the
lease. All of the terms above were duly registered.
The conflict arose in 1988 when Santos sold the 8 lots to
Raymundo, respondent as well, for 5m. This was in contravention of
the above right of first refusal. Santos repurchased the property
from Raymundo and subsequently offered to sell the properties to
Petitioner for 15m pesos, giving them 10 days to reply, but
petitioner counter-offered 5m. Meanwhile, 1989, Santos executed
another deed of sale to Raymundo, this time, for 9m- violating the
right of first refusal again. It was only 2 days after she sold her
properties that Santos responded to petitioner saying the period
has lapsed and petitioner is no longer privy to the contract claiming
that Raymundo is now the rightful owner. The facts show that there
is collusion between the two respondents to make the petitioners
buy the property for more than its actual value of 5m. Considerable
improvements were made by petitioner worth 3m in the belief that
his right of first refusal would let him buy the property. Petitioner
prayed for 15m worth of damages.
RTC dismissed saying that the refusal of petitioner to buy
the property at 15m amounted to a refusal which absolves Santos
of any responsibility.
CA affirmed saying that par 9 provided no real basis for
computing the price of the properties therefore it would be crazy to
allow a buyer to dicated his own price and force it upon santos.
Hence, this petition.
Issue:
1.Whether or not the breach of contractual option to buy states a
valid cause of action.
Held: Yes, it is a valid cause of action.
Ratio:
a) A cause of action exists when: (1) a right in favor of the plaintiff
exists; (2) an obligation of defendant to uphold such right, and (3)
an act or omission on the part of such defendant constituting a
breach- allowing the plaintiff to recover damages.
A careful examination of the complaint reveals that it
sufficiently alleges an actionable contractual breach on the part of
private respondents. Under paragraph 9 of the contract of lease
between respondent Santos and petitioner, the latter was granted
the first option or priority to purchase the leased properties in
case Santos decided to sell. If Santos never decided to sell at all,

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there can never be a breach, much less an enforcement of such
right. But on September 21, 1988, Santos sold said properties to
Respondent Raymundo without first offering these to
petitioner. Santos indeed realized her error, since she repurchased
the properties after petitioner complained. Thereafter, she offered
to sell the properties to petitioner for P15 million, which petitioner,
however, rejected because of the ridiculous price. But Santos
again appeared to have violated the same provision of the lease
contract when she finally resold the properties to respondent
Raymundo for only P9 million without first offering them to
petitioner at such price. Whether there was actual breach which
entitled petitioner to damages and/or other just or equitable relief,
is a question which can better be resolved after trial on the merits
where each party can present evidence to prove their respective
allegations and defenses.
The basic rule is that the basis of the right of the first
refusal
*
must be the current offer to sell of the seller or offer to
purchase of any prospective buyer. Only after the grantee
**
fails to
exercise its right of first priority under the same terms and within
the period contemplated, could the owner validly offer to sell the
property to a third person, again, under the same terms as offered
to the grantee

Vazquez v. Ayala Corporation
G.R. No. 149734. November 19, 2004
Ponente: Justice Tinga
Petitioner Spouses Vazquez
Respondent Ayala Corp.
Mem. Aid: Ayala Alabang, option contract vs. right of first refusal
FACTS:
Spouses Vazquez owns Conduit Development Inc. in 1981,
the Spouses entered into an MOA with Ayala. The MOA stipulates
that Ayala will buy the Spouses shares in Conduit. Conduit
Development owns a 49.9 hectare property in Ayala Alabang. Under
the MOA, Ayala will develop the 49.9 hectare property EXCEPT the
retained area (18000 sq.m). The retained area shall be remain
with the Spouses. The land to be developed will be called the
remaining area (Remaining area land to be developed by
Ayala, retained area land to owned by the Spouses; which is
18000 sq.m of the 49.9 hectares). In the Remaining Area, there are 4
lots, which are adjacent to the Retained Area of the Spouses. Under
the Par 5.15 of the MOA:
5.15. The BUYER (AYALA) agrees to give the SELLERS
(Vasquez) a first option to purchase four developed lots next to the
Retained Area at the prevailing market price at the time of the
purchase.
In 1990, after AYALA was able to develop the said lots,
AYALA offered to sell the 4 parcels of land to Vasquez at
P6.5k/sq.m

, which was the market price in 1990. Vasquez refused
the offer. Vasquez contended that the purchase price should be
P460/ sq.m

, which was the market price in 1981 (time of
purchase). AYALA then lowered the purchase price to P5k/ sq m

but
Vasquez refused again. Instead he made a counter offer to buy the
lots at P2k/ sq m.

This time, AYALA refused. The Spouses contend

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that Par. 5.15 is an Option contract. Ayala contends that it is a right
of first refusal.
ISSUE:
1. w/n Par. 5.15 is an Option contract or right of first refusal.
HELD:
Option contract is a preparatory contract in which one
party grants to another, for a fixed period and at a determined
price, the privilege to buy or sell, or to decide whether or not to
enter into a principal contract. It binds the party who has given the
option not to enter into the principal contract with any other person
during the period designated, and within that period, to enter into
such contract with the one to whom the option was granted, if the
latter should decide to use the option. It is a separate and distinct
contract from that which the parties may enter into upon the
consummation of the option. It must be supported by consideration
Right of First Refusal while the object might be made
determinate, the exercise of the right would be dependent not only
on the grantors eventual intention to enter into a binding juridical
relation with another but also on terms, including the price, that are
yet to be firmed up.
In the instant case, paragraph 5.15 is obviously a mere
right of first refusal and not an option contract. Although the
paragraph has a definite object such as the sale of the 4 lots, the
period within which they will be offered for sale to Vasquez and,
necessarily, the price for which the subject lots will be sold are not
specified. The phrase at the prevailing market price at the time of
the purchase connotes that there is no definite period within
which AYALA is bound to reserve the subject lots for Vasquez to
exercise his privilege to purchase. Neither is there a fixed or
determinable price at which the subject lots will be offered for sale.
The price is considered certain if it may be determined with
reference to another thing certain or if the determination thereof is
left to the judgment of a specified person or persons.
Further, paragraph 5.15 was inserted into the MOA to give
Vasquez the first crack to buy the subject lots at the price that
AYALA would be willing to accept when it offers the subject lots for
sale. It is not supported by an independent consideration.

RIVIERA FILIPINA vs. CA
RIVIERA FILIPINA, INC., petitioner,
vs.
COURT OF APPEALS, JUAN L. REYES, PHILIPPINE CYPRESS
CONSTRUCTION & DEVELOPMENT CORPORATION, CORNHILL
TRADING CORPORATION AND URBAN DEVELOPMENT BANK,
respondents.
FACTS:
o Reyes (lessor) executed a 10 year renewable Contract of
Lease with Riviera (lessee) re property on EDSA
- Parcel was subject of a Real Estate Mortgage and
was extra judicially foreclosed subject to the 1 year
redemption period

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o Since Reyes did not have the money to redeem the
property, he decided to sell it
- The lease contract expressly provided that the
LESSEE shall have the right of first refusal should
the LESSOR decide to sell the property during the
term of the lease
- There were negotiations on the price between
Reyes and Riviera but the parties did not agree on
the price
o In a letter, Reyes counsel informed Riviera that they were
selling the property for 6K/sqm and that conformably to
the provisions stipulated in CONTRACT OF LEASE, notice is
served upon your goodselves for you to exercise the right
of first refusal in the sale of said property, for which
purpose you are hereby given a period of ten (10) days
from your receipt hereof within which to thus purchase
the same under the terms and conditions aforestated, and
failing which you shall be deemed to have thereby waived
such pre-emptive right and my client shall thereafter be
absolutely free to sell the subject property to interested
buyers.
- Riviera sent a letter in response to notice indicating
Rivieras interest to purchase the subject property
and increased its offer to 5K/sqm which was not
accepted
o Riviera then wrote Reyes confirming Rivieras intent to
purchase the subject property for the fixed price of
5K/sqm, complete payment within sixty (60) to ninety (90)
days which they felt was the market price of the property
- Offer was not accepted
- He further expressed, let it be made clear that,
much as it is the earnest desire of my client to
really give you the preference to purchase the
subject property, you have unfortunately failed to
take advantage of such opportunity and thus lost
your right of first refusal in sale of said property
o After, Reyes offered the property to his his close family
friend, the president of Cypress for 6K/sqm
- Eventually, they agreed on the sale price of
5.3K/sqm
- Cypress did not have the amount with which to pay
so he said hed look for a partner for that purpose.
- Reyes told Cypress that he had already afforded
Riviera its right of first refusal but they cannot agree
because Rivieras final offer was for 5K/sqm
o Apprehensive of the impending expiration of the
redemption period of and as the deal between Reyes and
Traballo was not yet formally concluded, Reyes through his
nephew, Atty. Alinea, again offered the property to Riviera
but asked them to raise their offer for the purchase of the
said property a little higher.

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- Riviera however said that his offer is 5K/sqm
payment of which would be fifty percent (50%)
down within thirty (30) days upon submission of
certain documents in three (3) days, the balance
payable in five (5) years in equal monthly
installments at twelve percent (12%) interest in
diminishing balance (second offer downgraded the
previous offer)
- Reyes did not agree to the price so he nephew
asked Riviera again to increase his price but Riviera
refused
- Reyes did not expressly offer his subject property
to Riviera at the price 5.3K/sqm
o Cypress found a partner, Cornhill, and were able to come up
with the redemption money which Reyes paid to the Bank
to redeem the subject property
- A Deed of Absolute Sale covering the subject
property was executed by Reyes in favor of Cypress
and Cornhill 5.3M
- On the same date, Cypress and Cornhill mortgaged
the subject property to Urban Development Bank
for 3M
o Thereafter, Riviera sought from Reyes, Cypress and
Cornhill a resale of the subject property to it claiming that
its right of first refusal under the lease contract was
violated
- Riviera filed the suit to compel Reyes, Cypress,
Cornhill and Urban Development Bank to transfer
the disputed title to the land in favor of Riviera
upon its payment of the price paid by Cypress and
Cornhill
- Contends that the right of first refusal principally
amounts to a right to match in the sense that it
needs another offer for the right to be exercised
- Contends it would have upped its offer had it
known of Cypress offer of 5.3K/sqm
o RTC dismissed and held that there was no violation of the
right of first refusal
o CA affirmed
- Riviera was uncompromising in its counter offer of
only P5K/sqm
- Deemed estopped belatedly asserting that it would
have been willing to pay a price higher than 5K/sqm
- Situtation would be different had REYES non-
disclosure of counter-offer to RIVIERA resulted in
the sale of the subject property at equal or less
than Rivieras offer; in which case, REYES would
have been rightly accused of cunningly
circumventing Rivieras right of first refusal.
- Riviera was well-aware of Reyes financial needs at
that time and took advantage of Reyes

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- RIVIERA exercised its right whimsically to the
prejudice of REYES who had commendably given
RIVIERA extra leeway in exercising it.
- No longer necessary for the defendant Reyes to
expressly and categorically offer to the plaintiff the
subject property at 5.3K/sqm to comply his
obligation to give first refusal to the plaintiff as
stipulated in the Contract of Lease as to do so
would be a useless ceremony and would only be an
exercise in futility, considering the firm and
unbending position of the plaintiff, which defendant
Reyes already knew, that the plaintiff, at any event,
was not amenable to increasing its price at over
P5,000.00, per square meter.
- Reyes fundamental and intrinsic right of
ownership which necessarily carries with it the
exclusive right to dispose of it to whoever he
pleases, must ultimately prevail over RIVIERAs
right of first refusal which it unscrupulously tried
to exercise.
ISSUE:
W/N Riviera lost its right of first refusal - YES
HELD: Decision of CA affirmed.
General Rule: The prevailing doctrine is that a right of first
refusal means identity of terms and conditions to be offered to the
lessee and all other prospective buyers and a contract of sale
entered into in violation of a right of first refusal of another
person, while valid, is rescissible.
o Doctrine of Right of First Refusal
- 1992: Guzman, Bocaling & Co. v. Bonnevie: a lease
with a proviso granting the lessee the right of first
priority all things and conditions being equal meant
that there should be identity of the terms and
conditions to be offered to the lessee and all other
prospective buyers, with the lessee to enjoy the right
of first priority. A deed of sale executed in favor of a
third party who cannot be deemed a purchaser in
good faith, and which is in violation of a right of first
refusal granted to the lessee is not voidable under the
Statute of Frauds but rescissible under Articles 1380
to 1381 (3) of the New Civil Code.
- 1994: Ang Yu Asuncion v. Court of Appeals: departed
from the doctrine (above) and refused to rescind a
contract of sale which violated the right of first
refusal. The Court held that the so-called right of
first refusal cannot be deemed a perfected contract
of sale under Article 1458 of the New Civil Code and,
as such, a breach thereof decreed under a final
judgment does not entitle the aggrieved party to a
writ of execution of the judgment but to an action for
damages in a proper forum for the purpose.
- 1996: Equatorial Realty Development, Inc. v. Mayfair
Theater, Inc: reverted back to the doctrine in Guzman

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Bocaling & Co. v. Bonnevie stating that rescission is a
relief allowed for the protection of one of the
contracting parties and even third persons from all
injury and damage the contract may cause or to
protect some incompatible and preferred right by the
contract.
- 1997: Paraaque Kings Enterprises, Inc. v. Court of
Appeals: affirmed the nature of and the concomitant
rights and obligations of parties under a right of first
refusal. The Court, summarizing the rulings in
Guzman, Bocaling & Co. v. Bonnevie and Equatorial
Realty Development, Inc. v. Mayfair Theater, Inc.,
held that in order to have full compliance with the
contractual right granting petitioner the first option to
purchase, the sale of the properties for the price for
which they were finally sold to a third person should
have likewise been first offered to the former.
Further, there should be identity of terms and
conditions to be offered to the buyer holding a right
of first refusal if such right is not to be rendered
illusory. Lastly, the basis of the right of first refusal
must be the current offer to sell of the seller or offer
to purchase of any prospective buyer.
Exception: Courts cannot rewrite the contract between
parties. The intention of the parties should be given primary
consideration, which will be gauged by their contemporary and
subsequent acts
o In the case at bar, the Court finds relevant and significant the
cardinal rule in the interpretation of contracts that the intention
of the parties shall be accorded primordial consideration and in
case of doubt, their contemporaneous and subsequent acts
shall be principally considered
o The Supreme Court, has no right to make new contracts for the
parties or ignore those already made by them, simply to avoid
seeming hardships
- In the interpretation of the right of first refusal as
understood by the parties, the question as to what is
to be included therein or what is meant by the same,
as in all other provisions of the contract, is for the
parties and not for the court to determine, and this
question may not be resolved by what the parties
might have provided had they thought about it, which
is evident from Riviera claims, or by what the court
might conclude regarding abstract fairness (this part
is worded weirdly)
o An examination of the attendant particulars of the case do not
persuade us to uphold Rivieras view (that it would have
matched the offer). The records and transcripts of the case
show the actions of the parties to the contract of lease, Reyes
and Riviera, shaped their understanding and interpretation of
the lease provision right of first refusal to mean simply that
should the lessor Reyes decide to sell the leased property
during the term of the lease, such sale should first be offered
to the lessee Riviera

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- A series of negotiations on the price per sqm ensued
- Riviera was so intractable in its position and took
obvious advantage of the knowledge of the time
element in its negotiations with Reyes as the
redemption period of the subject foreclosed property
drew near
- Riviera strongly exhibited a take-it or leave-it
attitude in its negotiations with Reyes
- It quoted its fixed and final price as 5K/sqm not any
peso more.
- No express protest when informed by Reyes that
Riviera had lost its right of first refusal; Riviera cannot
now be heard that had it been informed of the offer
5.3K/sqm of Cypress and Cornhill it would have
matched said price
- Reyes was under no obligation to disclose Cypress
offer; Pursuant to Article 1339 of the New Civil Code,
silence or concealment, by itself, does not constitute
fraud, unless there is a special duty to disclose certain
facts, or unless according to good faith and the usages
of commerce the communication should be made.
We apply the general rule in the case at bar since
Riviera failed to convincingly show that either of the
exceptions are relevant to the case at bar.
- Its stubborn approach in its negotiations with Reyes
showed crystal-clear that there was never any need to
disclose such information and doing so would be just
a futile effort on the part of Reyes.

Macion v. Guiani
G.R. No. 106837 || August 4, 1993
J. Romero
Petitioner: Henry and Angeles Macion
Respondents: Hon. Guiani (RTC Judge) & DE LA VIDA Institute
Facts:
This case revolves around two parcels of adjoining lots
owned by petitioners which are the proposed extension sites of the
De La Vida Institute, an educational institution in Cotabato City.
They entered into a contract to sell where the president of
De La Vida assured the Macions that they will buy the property for
P1,750,000 on or before July 31, 1991. So, the Macions surrendered
the physical possession of the land to De La Vida. De La Vida then
built an edifice worth P800k.
When the said date arrived, the sale did not materialize.
Petitioners filed a case of unlawful detainer against De La Vida. De
La Vida filed a complaint for reformation of contract. What they did
was enter into a compromise agreement
3
which stipulated that the

3
The compromi se agreement provi ded:
6. that upon the executi on of thi s agreement, the defendant wi ll
furnish the pl ai nti ff wi th xerox copy of the l and ti tl e for each l ot

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Macions will give De La Vida 5 months to raise the amount of
P2,060,000 and that in case of failure to pay, they will immediately
vacate the property. After 2 months, De La Vida alleged that they
had negotiated a loan from BPI and requested Macion to execute a
contract to sell in their favor. However, Macion refused, which led
De La Vida to file an urgent motion for order to direct Macion to
execute the contract. In return, Macion filed a motion for execution
of judgment alleging that after 5 months, De La Vida was not able to
settle their obligation.
RTC: Ruled in favor of De La Vida. Ruled that the proximate
cause of De La Vida's failure to comply with the compromise
agreement was Macions refusal to execute a contract to
sell as required under the agreement. RTC added that
petitioners should have executed the contract to sell
because anyway they would not be prejudiced since there
was no transfer of ownership involved in a contract to sell.
Issue/Held:

whi ch the l atter may use for the purpose of provi di ng i nformati on
i n securi ng a l oan from any fi nanci ng or banki ng i nsti tuti on of
thei r choice.
7. that if within the period of five (5) months from and after
February 6, 1992, the plaintiff succeeds in obtaining funds for
the purpose of settling their obligations with defendants in the
total sum of P2,060,000.00 the latter shall oblige themselves to
execute, sign and deliver to the former the corresponding Deed
of Sale for the two (2) lots which is the subject of this case and
turn-over to said plaintiff the owner's duplicate copy of TCT Nos.
T-22004 and T-22005 of the Registry of Deeds for the City of
Cotabato.

1. Did the RTC judge commit grave abuse of discretion when
he ordered Macion to execute the contract to sell? NO.
2. Whether the compromise agreement gives private
respondent-buyer the right to demand from petitioner-
sellers the execution of a contract to sell in favor of the
former.
Ratio:
Although the compromise agreement (par. 7) does NOT give
De La Vida the right to demand from Macion the execution of the
contract to sell in its favor. From this paragraph, it is clear that
Macion is obliged to execute a Deed of Sale and not a Contract to
Sell upon payment of full price. After that, Macion will turn over the
TCT. However, in the interpretation of the compromise agreement,
the Court must delve in the contemporaneous and subsequent acts
of the parties to fathom the real intention of the parties.
A review of the facts reveal that even before the signing of
the agreement, both parties had entered into a contract to sell,
which was superseded by a compromise agreement. This
agreement must be interpreted as giving De La Vida the power to
demand a contract to sell from Macion. Where the seller promised
to execute a deed of absolute sale upon completing payment of the
price, it is a contract to sell. In this case, the sale is still in the
executory stage since the passing of title is subject to a suspensive
condition, namely, that if De La Vida is able to secure the needed
funds to be used in the purchase of the 2 lots. A mere executory
sale, one where the sellers merely promise to transfer the property
at some future date, or where some conditions have to be fulfilled

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before the contract is converted from an executory to an executed
one, does not pass ownership over the real estate being sold.
In our jurisdiction, it has been that an accepted bilateral
promise to buy and sell is in a sense similar to, but not exactly the
same, as a perfected contract of sale because there is already a
contract and upon the price. But a contract of sale is consummated
only upon the delivery and payment. It cannot be denied that the
compromise agreement, having been signed by both parti es, is
tantamount to a bilateral promise to buy and sell a thing certain for
a certain price. Hence, this gives the contracting parties rights in
personam, such that each has the right to demand from the other
the fulfillment of their respective undertakings. Demandability may
be exercised at any time after the execution of the Deed.
Note: Court also said that the order of respondent judge directing
petitioners to issue a contract to sell does not place petitioners in
any danger of losing their property without consideration. In
contracts to sell, payment is a positive suspensive condition, failure
of which does not constitute a breach but an event that prevents
the obligation of the vendor to convey title from materializing, in
accordance with Article 1184 of the Civil Code. Petitioners as
promisors were never obliged to convey title before the happening
of the suspensive condition. In fact, nothing stood in the way of
their selling the property to another after an unsuccessful demand
for said price upon the expiration of the time agreed upon.
WHEREFORE, the instant petition is DISMISSED. Petitioners
are hereby ordered to EXECUTE a contract to sell in favor of private
respondents. On the other hand, private respondent is ordered to
DEPOSIT with the trial court current rentals pending consummation
of the transaction between the parties. The trial court is ordered to
FIX anew the period within which private respondents may be given
the opportunity to raise funds for the purchase of the two (2)
adjoining lots owned by petitioners

Uraca v. CA
G.R. No. 115158. 5 Sept. 1997 J. Panganiban
Emilia M. Uraca, Concordia D. Ching And Ong Seng, Represented By
Enedino H. Ferrer, Petitioners,
v.
Court Of Appeals, Jacinto Velez, Jr., Carmen Velez Ting, Avenue
Merchandising, Inc., Felix Ting And Alfredo Go, Respondents.
Summary / Memory Aid:
- Purchase of building in Cebu City, sold by Velezes to Uraca
et. al; question on novation to extinguish contract of sale
FACTS:
Velezes (respondents) were owners of a lot and commerci al
building in Cebu. Uraca, et. al (petitioners) were lessees. Velez
through Carmen Ting sent a letter offering to sell the property to
Uraca, et. al for P1.5M. Uraca et. al, through Atty. Daitol sent a
letter of reply accepting the offer to sell. Uraca then went to see
Carmen but Carmen told Uraca that the price was changed to
P1.4M. Uraca changed terms of payment by offering to pay P1M in

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downpayment and remaining P400K in installment within 30 days.
Carmen Ting refused. Afterwards, Velezes sold property to Avenue
Merhandising, Inc. for P1.5M.
Uraca filed petition with RTC to nullify sale to Avenue. Uraca
also annotated lis pendens on Certificate of Title. Avenue filed for
ejectment against Uraca. RTC ruled in favor of Uraca by stating that
there was a perfected contract of sale on first offer (P1.5M) and
that the change to P1.4M was only modificatory novation which did
not extinguish the first contract.
Velez appealed to CA and won. CA held that second
contract for P1.4M novated the first contract for P1.5M. Also, since
price of P1.4M was not agreed upon, there was no meeting of the
minds.
ISSUE/S:
W/N there was novation between two contracts
W/N there was a double sale (first to Uraca, second to Avenue)
HELD:
NO novation, and YES, there was a double sale. Extinctive
novation requires: (1) the existence of a previous valid
obligation; (2) the agreement of all the parties to the new
contract; (3) the extinguishment of the old obligation or
contract; and (4) the validity of the new one. The foregoing clearly
show that novation is effected only when a new contract has
extinguished an earlier contract between the same parties. In this
light, novation is never presumed; it must be proven as a fact either
by express stipulation of the parties or by implication derived from
an irreconcilable incompatibility between old and new obligations
or contracts. After a thorough review of the records, we find this
element lacking in the case at bar. Uraca et. al and the Velezes
clearly did not perfect a new contract because the essential
requisite of consent was absent, the parties having failed to agree
on the terms of the payment. Counter-offer on terms of payment
was not accepted. There was no unqualified, absolute acceptance.
There was double sale to Uraca and Avenue. However,
Avenue was in bad faith as it knew that Uraca was offered to buy
the property and that Uraca et. al did intend to purchase the lot and
building. Avenues store was close to the building and they knew
Uraca et. al. Also, Felix Ting from Avenue spoke with Uraca and
Uraca declared intention to purchase property.
RTC decision revived, but with modification Contract price is
P1.5M and not P1.4M.
Villonco v. Bormaheco
G.R. L-26872 // July 25, 1975 // Aquino
VILLONCO REALTY COMPANY and Edith Perez de Tagle
v.
BORMAHECO INC, Francisco N. Cervantes and Rosario N.
Cervantes
FACTS
Parties to the Case:

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(P) Villonco Realty Company (with brothers Romeo and Teofilo
Villongco)
Edith Perez de Tagle: intervened as a Real Estate Broker
(R) Bormaheco Inc: a dealer and importer of industrial and
agricultural machinery
Francisco N. Cervantes: President
Rosario N. Cervantes: Wife
- owners of three lots located at Buendia Ave, Makati, Rizal
- lots were mortgaged to DPB as security for a loan. The debt
was fully paid on July 10, 1969
Narration of Facts:
Feb 1964
- negotiations were undertaken between the two parties for
the sale of the two lots and the improvements thereon. The
brothers Villongco conferred with Francisco Cervantes on
his office to discuss the price and terms of the sale.
- During negotiations, Villongco assumed that the lots
belonged to Bormaheco, Inc, and that Cervantes was duly
authorized to sell the same. Cervantes did not disclose to
the (P)s that a) the lots were conjugal properties of himself
and his wife, and b) that they were mortgaged to the DBP.
- On a letter from Cervantes to (P), Cervantes offered the sale
of the property for P400 per sq.m, with a deposit of
P100,000 as earnest money. Also stated was that the sale
would only be consummated only after he had
consummated the purchase of another property located in
Sta.Ana, Manila. (final negotiations would be known after
45 days.)
- (P) Villonco made a counter-offer which stated that, should
the Sta.Ana deal of Cervantes not become consummated,
the deposit of P100,000 as earnest money will be returned
with 10% interest.
- The contract was received and signed by Cervantes.
Feb 14, 1964
- Bormahecos bid for the Punta property was already
accepted. What was only necessary was the approval of the
sale, which was already pending in the office of the
functionary on March 4.
March 30,1964
- Francisco Cervantes returned the earnest money with the
interest of P694.20 (at 10% per annum).
- His reason: Despite the lapse of 45 days from Febuary 12,
1964, there is no certainty yet for the acquisition of the
Punta Property
- Villongco refused to receive the letter/checks. When the
contracts was rescinded, he was already aware that the
Punta (Sta.Ana) lot had been awarded to Bormaheco.

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- Cervantes said that the 45-day period had already expired
and the sale to Bormaheco of the Punta property had not
been consummated. He already said that this letter was his
manifestation that they are no longer interested to sell the
property.
- Villonco countered that the condition for the cancellation of
the contract had not arisen, and at the same time,
announced that an action for breach of contract would be
filed against Bormaheco.
RTC Ruling: Ruled in favor of (P) Villongco. They ordered the
Cervantes spouses (who were found out to own the land
themselves) to execute in favor of Bormaheco, then directed
Bormaheco to convey the same lots to Villonco.
CA Ruling: None. The SC took cognizance of the appeal because the
amount involved is more than P200,000 and the appeal was
perfected before RA 5440 which took effect on September 9, 1968.
ISSUE
1) W/N a contract of sale was perfected. YES
RULING
Contention of (R) Cervantes:
The contract of sale was not perfected because Cervantes
made a supposedly qualified acceptance of the revised offer, which
acceptance amounted to a counter-offer, and because the condition
that Bormaheco, Inc. would acquire the Punta land within the 45-
day period was not fulfilled.
(P) also claim that the contract does not bind (R) Paraiso
because the latter did not sign the said contract as to indicate its
consent to be bound by its terms.
They maintain that the contract is a unilateral promise to
sell and the option money does not bind them for lack of cause or
consideration distinct from the purchase price.
Ratio of the Supreme Court:
Bormahecos acceptance of Villoncos offer to purchase the
Buendia Avenue property, as shown in Villoncos letter (March
4,1964), proves that there was a meeting of minds upon the subject
matter and consideration of the sale. On the date of that letter, the
sale was perfected.
There was no evidence as to what changes were made by
Cervantes in Villoncos revised offer. And, there was no evidence
that Villonco did not assent to the supposed changes, the assent if
ever not being made known to Cervantes.
The crucial fact that Villonco paid the P100,000 earnest
money/down payment, and Bormaheco accepted, implies that
Cervantes was aware that Villono had accepted the modifications
which he had made in the counter-offer. The SC said that alleged
changes/qualifications in the offer are not material and are merely
clarifications.
(Some of the changes:)
Nasscos property in Sta.Ana became Another property in
Sta.Ana

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Interest became Interest PA (Per annum)
The controlling fact in this case is that there was an
agreement between the parties on the subject matter, the price,
and the mode of payment, and that part of the price was paid. Ar.
1482 of the CC states that Whenever earnest money is given in a
contract of sale, it shall be considered as part of the price and as
proof of the perfection of the contract.
(R) Cervantes contention that the contract was not
perfected because of the 45-day condition was not sustained by the
SC. The SC said that the 45-day period was merely an estimate or
forecast of how long it would take Bormaheco to acquire the Nassco
(Sta.Ana) property, and that it wasnt a condition or a deadline set
for the defendant corporation to decide whether or not to go
through with the sale of its Bendia property.
In fact, par.5 of the same offer stated that final
negotiations on both properties can be definitely known after 45
days. This showed that it didnt mean that Bormaheco should
acquire the Nassco property within 45 days. It meant that, within
that period, it would be known if Bormaheco would be able to
acquire the Nassco property AND whether it would be able to sell
the Buendia property.
Oesmer v. Paraiso
G.R. 157493 // February 5, 2007 // Chico-Nazario
Rizalino, Josefina, Rolando and Fernando, Ernesto, Leonora,
Bibiano jr., Librado, and Enriqueta OESMER
v.
PARAISO DEVELOPMENT CORP.
FACTS
Parties to the Case:
(P) Rizalino, Ernesto, Leonora, Bibiano jr., Librado, Enriqueta
Oesmer
Adolfo Oesmer and Jesus Oesmer
- brothers and sisters
- co-owners of undivided shares of two parcels of agricultural
and tenanted land situated in Barangay Ulong Tubig,
Carmona, Cavite
- when parents passed away, they acquired the lots as heirs
of the former by right of succession.
(R) Paraiso Development Corporation: known to be engaged in the
Real Estate Business
Narration of Facts:
March 1989
- Rogelio Paular brought along (p) Ernesto to meet with
Sotero Lee, President of (R) Paraiso Development
Corporation, at Otani Hotel in Manila.
- The reason for the meeting was to broker the sale of (P)s
properties to (R) Paraiso.
April 1989

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- A Contract to Sell was prepared, then signed by Enriqueta,
Rizalino, Leonora, Bibiano, Jr., and Librado. Ernesto, who
also signed, was given a check in the amount of P100,000,
given as option money. However, Adolfo and Jesus DID NOT
SIGN.
November 1989
- (P) informed (R) corporation through a letter addressed to
the latter that they intended to rescind the Contract to Sell
and to return the amount of P100,000 given as option
money.
- (R) Corporation did not respond to the aforesaid letter.
May 1991
- (P) together with Adolfo and Jesus filed a complaint for Declaration
of Nullity / Annulment of Option Agreement or Contract to Sell with
Damages before the RTC of Bacoor, Cavite
RTC Ruling: Ruled in favor of (R) Corporation. The assailed Contract
to Sell is valid and binding only to the undivided proportionate share
of the signatory of this document and recipient of the check, which
was (P) co-owner Ernesto Oesmer.
CA Ruling: Ruled in favor of (R) Corporation. However, modified
decision by declaring that The assailed Contract to Sell is valid and
binding with respect to the undivided proportionate share of the six
(6) signatories of this document, which were Ernesto, Enriqueta,
Librado, Rizalino, Bibiano jr, and Leonora Oesmer.
ISSUES
1) W/N the CA erred in not holding that the supposed Contract to
Sell is not binding upon (P) Ernesto Oesmers co-owners. NO
2) W/N the CA erred in not holding that the supposed Contract to
Sell is void altogether considering that (R) Paraiso did not sign it as
to indicate its consent to be bound by its terms, and that the
Contract is really a unilateral promise to sell without consideration
distinct from the price, and hence, void. NO
RULING
Contention of (P):
The signatures of the five on the margins of the supposed
Contract to Sell did not confer authority on (P) Ernesto as agent to
sell their respective shares. Without written authority, the contract
should be void as to them.
Even assuming the signatures indicated consent, such
consent was merely conditional. In other words, the effectivity of
the contract was subject to a suspensive condition, which is the
approval of the sale by all the co-owners.
(P) also claim that the contract does not bind (R) Paraiso
because the latter did not sign the said contract as to indicate its
consent to be bound by its terms.
They maintain that the contract is a unilateral promise to
sell and the option money does not bind them for lack of cause or
consideration distinct from the purchase price.
Ratio of the Supreme Court:

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While it is true that the signatures of the five (5) did not
confer authority on (P) Ernesto as agent (needs a written authority
to sell an immovable, etc), the Contract to Sell remains valid and
binding upon them because they had also affixed their signatures on
the contract. With this, a written authority was never necessary
because, through their own signatures, the five were not selling
their shares through an agent, but selling them directly and in their
own right.
The SC ruled that the Contract to Sell was perfected when
the (P) consented to the sale to (R) Paraiso of their shares by
affixing their signatures on the contract. The signatures show their
acceptance of whatever was stipulated in the Contract to Sell, and
such acceptance was made known to (R) Paraiso.
On the matter of the (P)s contention that the consent was
conditional, the SC ruled that the terms of the contract were clear
and mentioned nothing about the presence of a suspensive
condition.
On the matter of the defense that the contract is void
because it didnt bear the signature of (R) Paraiso, the SC ruled that
(R)s consent to be bound is shown by their partial performance of
the obligation when it tendered the P100,000 to form part of the
purchase price. By force of law, (R) Paraiso is required to complete
the payment to enforce the terms of the contract.
On the final defense that the contract is a unilateral promise
to sell because it used the word Option Money to describe the
P100,000, the SC ruled that the cash is actually Earnest Money, or
Down payment. The RTC and CA were correct in stating that there
indeed existed a Contract to Sell.
Differences:
Earnest Money is PART of the purchase price; Option
Money is the money given as a direct consideration for an option
contract.
Earnest Money is only given when there is already a sale;
Option Money applies to a sale not perfected.
Earnest Money, when given, binds the buyer to pay the
balance; Option Money, when given, does not require the would-be
buyer to buy.

ADELFA PROPERTIES, INC vs CA
GR No.
Petitioners : Adelfa Properties
Respondent: Rosario Jimenez-Castaneda and Salud Jimenez, CA
Memory Aid:
Contract of Sell
Facts:
The respondents and brothers (Jose and Dominador
Jimenez) are registered co-owners of a parcel of land with
area of 17,710 sqm in Las Pinas.

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Jose and Dominador sold their share (1/2 of the parcel of
land, eastern portion) to Adelfa properties pursuant to a
Kasulatan sa Bilihan ng Lupa. Subsequently, a
Confirmatory Extrajudicial Partition Agreement executed
by the Jimenezes. The eastern portion of the lot, with an
area of 8,555 sqm was adjudicated to Jose and Dominador
while the western portion to Rosario and Salud.
Adelfa properties expressed interest in buying the western
portion of the property from Rosario and Salud.
An exclusive option to purchase was executed between
Adelfa and Rosario and Salud with the ff. conditions:
o Selling price Php 2.856M
o Option Money Php 50K from Adelfa, credited as
partial payment upon consummation of sale
o Balance to be paid on or before Nov 30, 1989
o In case of default by Adelfa, the option will be
cancelled and 50% of the option money to be
forfeited and the other 50% will be refunded upon
the sale of property to third person
o All expenses, capital gains tax and doc stamps are
for the account of the vendors and expenses for
registration of the deed of sale for the account of
Adelfa
Owners copy of certificate of title issued to Salud was lost
so petition for the re-issuance of a new owners copy of
certificate of title was filed in court through Atty. Bernardo.
A new copy of certificate of title was eventually issued but
remained in possession of Atty. Bernardo who turned it
over to Adelfa.
Before Adelfa could pay, it received summons with a copy
of a complaint filed by the nephews and nieces of Rosario
and Salud against Jose and Dominador and Adelfa in RTC of
Makati for annulment of the deed of sale in favor of
Household Corp and recovery of ownership of the property.
Adelfa then wrote to Rosario and Salud stating that they will
hold payment of the full purchase price until the case
between them and the nieces and nephews would be
settled. Adelfa sent another letter to Jose and Dominador.
Salud refused to heed the suggestion of Adelfa and
attributed suspension of payment of the purchase price to
lack of word of honor.
Adelfa annotated on the title of the lot its option contract
with Salud and Rosario and the contract of sale with Jose
and Dominador. Rosario and Salud sent Francisca Jimenez
to see Atty. Bernardo, Adelfas counsel, to inform him that
they were cancelling the transaction. Atty. Bernardo offered
to pay the purchase price provided that Php 500K be
deducted from settlement of civil case. This was rejected by
Rosario and Salud. Atty. Bernardo wrote again, reducing the
amount from Php 500K to Php 300K, but was rejected by
Rosario and Salud.
RTC dismissed case filed by nephews and nieces.

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Adelfa caused to be annotated again the exclusive option to
purchase. On the same day, Rosario and Salud executed a
Deed of Conditional Sale in favor of Emylene Chua over the
same parcel of land. (Php1.5M was paid as downpayment)
Atty. Bernardo wrote Rosario and Salud that Adelfa is willing
to pay the purchase price and execute a deed of absolute
sale. Rosario and Salud ignored this. Jimenez counsel sent a
letter to Adelfa with a check for Php 25K (refund of 5% of
option money). Rosario and Salud requested Adelfa to
return the copy of the certificate of Title of Salud. However,
Adelfa failed to give such.
Rosario and Salud filed a civil case for annulment of contract
with damages.
Issue:
1. W/N the exclusive option to purchase executed between
Adelfa and the Rosario and Salud is an option contract
2. W/N there was a valid suspension of payment of the
purchase price by Adelfa
Held/Ratio:
1. NO. The agreement is a contract of sell and not an option
contract nor a contract of sale.
A deed of sale is absolute in nature where neither
stipulation in deed that title to property sold is reserved
in seller until full payment of price nor giving the vendor
right to unilaterally resolve contract the moment buyer
fails to pay within the fixed period.
SC held that parties never intended to transfer
ownership except upon full payment of purchase price
because of the ff:
o Exclusive option to purchase does not mention
that Adelfa is obliged to return possession or
ownership of the property as a consequence of
non-payment
o There was no stipulation on reconveyance in
the event that Adelfa does not comply with its
obligation.
The parties never intended to transfer ownership prior
to complete payment of purchase price. In effect, there
was an implied agreement that ownership shall not pass
until the price is fully paid. This kind of stipulation
constitutes a Contract to Sell.
It was not shown that there was a delivery (actual or
constructive) of the property to Adelfa. The option to
purchase was not in a public instrument and Adelfa did
not take actual physical possession. Rosario and Salud
claimed that the only reason that Atty.Bernardo had the
title was because he was their counsel in the petition
for reconstitution.
The document should be legally considered as a
perfected contract to sell from subsequent acts of the

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parties. The fact that the document was entitled
Exclusive option to purchase was not controlling
when the text actually shows that it was a contract to
sell.
Option, in law on sales, is a continuing offer or contract
by which the owner stipulates with another that the
latter shall have the right to buy the property at a fixed
price within a certain time under, or in compliance with,
certain terms and conditions or which gives to the
owner of the property the right to sell or demand a sale.
It is also called an unaccepted offer.
The option is not a purchase but merely secures the
privilege to buy. It is not a sale of property but a sale of
the right to purchase.
The distinction between an option and a contract of
sale is that an option is an unaccepted offer. It states
the terms and conditions on which the owner is willing
to sell his land, if the holder elects to accept them
within the time limited. If the holder does so elect he
must give notice to the other party, and the accepted
offer becomes a valid and binding contract. If an
acceptance is not made within the time fixed, the
owner is no longer bound by his offer, and the option is
at an end. A contract of sale fixes rights and obligations
of both parties at the time of its execution. The offer
and the acceptance are concurrent as minds of
contracting parties meet in terms of agreement.
In the case at bar, there was concurrence of Adelfas
offer to buy and Rosario and Saluds acceptance. Where
formal acceptance is required, acceptance may be
shown by acts, conduct, or words of a party recognizing
the existence of the contract of sale.
Adelfa was supposed to pay but later offered a
downpayment of Php 50K. Rosario and Salud agreed to
the counter-offer and later signed an exclusive option
to purchase, creating a perfected contract to sell. The
agreement as to the object, price of the property, and
the terms of payment was clear and well-defined.
Nothing was left to be done except the performance of
the respective obligations of the parties.
Adelfas offer to deduct Php500K from purchase price
for settlement of the civil case was not a counter-offer.
The perfected contract between the parties already
existed at the time the alleged counter-offer was made.
The test in determining whether a contract is a contract
of sale or purchase or a mere option is whether or not
the agreement could be specifically enforced.
An agreement is only an option when no obligation
rests on the party to make any payment except such as
may be agreed on between the parties as consideration
to support the option until he has made up his mind
within the time specified.

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The parties were already contemplating payment of the
balance of the purchase price and were not merely
quoting the agreed value for the property. Balance
connotes a remainder or something remaining from the
original total sum already agreed upon. The Php 500K is
earnest money intended to form part of the purchase
price, not distinct from the consideration for the sale of
the property and is considered proof of the perfection
of the contract. It constitutes an advance payent and
must, therefore, be deducted from the total price.
Distinctions between earnest and option money:
o Earnest money part of the purchase price;
given only where there is already a sale; when
given buyer is bound to pay the balance
o Option money money given as a distinct
consideration for an option contract; money
applies to a sale not yet perfected; buyer is not
bound to buy
2. Yes, there was a valid suspension
Art 1590 applies because the agreement is a
contract to sell and not an option contract
Although the complaint prayed for the annulment
only of the contract of sale executed between
Adelfa and the Jimenez brothers, the same prayed
for the recovery of Adelfas share in that parcel of
land. Adelfa is justified in suspending payment of
the balance of the purchase price by reason of the
aforesaid vindicatory action filed against it.
Even with a valid suspension, Rosario and Salud
may no longer be compelled to sell and deliver the
subject property to Adelfa as there was no proper
payment (only a letter was sent by Adelfa
expressing the intent to pay- not a valid tender of
payment). Consignation is essential aside from
tender of payment, if there is refusal to accept the
payment. This is different from an option contract
where consignation is not necessary because it
involves exercise of right or privilege rather than
discharge of obligation; therefore, tender of
payment is sufficient.
With Adelfas failure to comply with its obligation,
Rosario and Salud announced rescission in a letter
to Adelfa. The written notice of rescission was
deemed sufficient.
Adelfas failure to reply to the letter regarding the
rescission suggested an admission of the veracity
and validity of the claim of Rosario and Salud.

Fule v. CA
G.R. 12212 // March 2, 1998 // Romero
FACTS

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Individuals in the Case:
Gregorio Fule banker by profession (corporate secretary of the
Rural Bank of Alaminos), as well as a jeweler.
Remelia Dichoso and Oliva Mendoza commissioned by Fule to look
for a purchaser
Dr. Ninevetch Cruz owner of the jewelry
Atty. Juan Bellarmino
Macario Dimayuga - tester
Narration of Facts:
1984
- (P) Gregorio Fule is the owner of a 10-hectare property in
Tanay, Rizal.
- Fule asked Dichoso and Mendoza to look for an interested
buyer. The two found one in (pR) Dr. Ninevetch Cruz.
- The gods of fortune must have been smiling on Fule,
because it just so happened that Dr. Cruz was the owner of
a pair of emerald-cut diamond earrings that Fule had been
eyeing since January of the same year.
- It is important to note that Fules mother had examined the
earrings and appraised them as genuine. Also, Fule himself
during the period when he had made another offer, had
inspected the jewelry at the lobby of another bank, and
made a sketch thereof, before giving the jewelry back to
Cruz.
- Cruz had declined Fules initial offer to buy the earrings, as
well the aforementioned other offer. However, due to his
interest in the Tanay property, negotiations for the barter of
the jewelry and the property ensued. Cruz requested (pR)
Atty. Juan Belarmino to check on the property, and
ultimately cause the preparation of a deed of absolute sale,
which was signed by petitioner, who also gave the
necessary expenses for the transfer of title.
- Oct 24: At 8pm in the evening, the same day the valuables
were exchanged, Fule arrived at the residence of Atty.
Bellarmino complaining that the jewelry given was fake. The
former used a tester to prove the alleged fakery.
- The group (including Dichoso and Mendoza) decided to go
to the house of a certain Macario Dimayuga, a jeweler, to
have the earrings tested. Dimayuga took one look and
declared them counterfeit.
- October 26: Fule filed a complaint before the RTC of San
Pablo City against private respondents praying that the
contract of sale over the Tanay property be declared null
and void on the ground of fraud and deceit.
Ruling of the Trial Court
The trial court said that the sale was valid, that all the
elements of a valid contract under Ar.1458 (first provision of the
Law on Sales), were present. Dr. Cruz delivered the subject

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jewelries to Fule. Fule took the items, and manifested his
satisfaction by not questioning the order and by failing to protest,
complain, or even ask for additional time to examine the jewelries.
There was consent/meeting of the minds, a determinate subject
matter, and a price certain in money or its equivalent present in
the events, despite the fact that the contract was principally one
of barter.
The trial court also said that the plaintiff is estopped from
claiming that the item he received was fake. They emphasized that
Fule was a Business Management graduate of La Salle University, a
professional banker, and a jeweler in his own right. According to the
court, once a contract is shown to have been consummated or fully
performed by the parties thereto, its existence and binding effect
can no longer be disputed.
Ruling of the Court of Appeals
Court of Appeals affirmed the ruling of the trial court.
ISSUE
W/N the Court of Appeals erred in upholding the validity of the
contract of barter or sale under the circumstances of the case.
NO. They did not.
RULING
The Supreme Court reiterated that contracts are perfected
by mere consent (Ar.1315), and that a contract of sale is perfected
at the moment there is a meeting of the minds upon the thing
which is the object of the contract and upon the price. (Ar.1475) For
the court, it was evident from the case facts that there was a
meeting of the minds between Fule and Dr. Cruz.
The SC found that (P) Fules argument that there was fraud
present which would make the contract voidable, because he was
made to believe that the earrings were genuine (and thus, his
consent was vitiated), untenable. The court stated that there was
no evidence manifesting that the private respondents employed
insidious words or machinations to entice Fule into entering the
contract of barter. Neither was there evidence that Dr. Cruz
induced Fule to part with the property, or take the earrings in
exchange. In fact, it was Fule who suspiciously made Cruz believe
that the formers property was valued more than it really is.
Even assuming that Fule alleged mistake as a ground for the
nullification (which he didnt), the court said that, to invalidate a
contract, mistake must refer to either:
1) the substance of the thing that is object of the contract, or
2) those conditions which have principally moved one or both
of the parties to enter into the contract.
Mistake was not present in the case. Fule had numerous
opportunities to examine the jewelry for himself, which he did. The
Civil Code provides that there is no mistake if the party alleging it
knew the doubt, contingency, or risk affecting the object of the
contract. (Ar. 1333)
To finalize, the SC affirmed in toto the decision of the Court of
Appeals. I guess you can say that petitioner, he acted the fule.

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TERMS:
Fraud when, through insidious words or machinations of one of
the contracting parties, the other is induced to enter into a contract
which, without them, he would not have agreed.
Insidious treacherous, crafty / proceeding in a gradual, subtle
way, but with harmful effects.

Dalion v. CA
G.R. 78903. February 28, 1990.
FACTS:
Ruperto Sabesaje sued to recover ownership of a parcel of
land, based on a private document of absolute sale, dated July 1,
1965, allegedly executed by Segundo Dalion, who denied the fact of
sale, contending that the document sued upon is fictitious, that his
signature was forged, and that the subject land is conjugal property,
which he and his wife acquired in 1960. The Dalions acquired the
property from Saturnina Sabesaje. Saturnina claims that the Dalions
begged her to let them administer the land because Dalion had no
means of livelihood. The Dalions likewise denied this, but they
admitted to administering 5 other parcels of land in Leyte, which
belonged to Sabesajes grandfather. They were supposed to receive
10% and 15% commission for sales of copra and abaca, respectively,
but they were never paid. Sabesajes suit, they claim, is an attempt
to harass the Dalions and keep them from suing for the unpaid
commissions.
The RTC and ruled in favor of Sabesaje, upholding the
validity of the sale. The CA likewise ruled in favor of Sabesaje,
reiterating the findings of the RTC that the authenticity of the
subject deed was proven by testimony of witnesses to the
execution. Against Dalions mere denial that he signed the
documens, the positive testimonies of the witnesses, aside from the
testimony of Sebasaje, must prevail. Dalion affirmatively alleged
forgery, but he never presented any witness or evidence to prove it.
Mere denial of having signed does not suffice to show forgery
there is need of clear and convincing evidence. In addition, Dailons
two signatures on the document were very similar to the specimen
signatures. The court also commented that a forger would not
typically sign twice, for fear that he might commit a revealing error.
Assuming authenticity of his signature and the genuineness
of the document, Dalion still impugns the validity of the sale on the
ground that it is embodied in a private document, and thus did not
convey title or right to the lot.
AT ISSUE:
1. Validity of the contract of sale settled upon
2. The necessity of a public document for transfer of
ownership
HELD:
The provision of Art. 1358 on the necessity of a public
document is for convenience, not enforceability. It is not a
requirement for the validity of a contract of sale of a parcel of land
that it be embodied in a public instrument.

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A contract of sale is a consensual contract, which means
that the sale is perfected by mere consent. No particular form is
required for its validity. Upon perfection, the parties may
reciprocally demand performance. The trial court thus rightly and
legally ordered Dalion to deliver to Sebaje the parcel of land and to
execute the corresponding formal deed of conveyance in a public
document.

Secuya v. Selma
G.R. No. 136021 February 22, 2000
BENIGNA SECUYA, MIGUEL SECUYA, MARCELINO SECUYA,
CORAZON SECUYA, RUFINA SECUYA, BERNARDINO SECUYA,
NATIVIDAD SECUYA, GLICERIA SECUYA and PURITA
SECUYA, petitioners,
vs.
GERARDA M. VDA. DE SELMA, respondent
Memory Aid:
Dalmacio Secuya is the predecessor-in-interest of the
petitioners. Dalmacio died single and his heirs are the petitioners
(brothers, sisters, nephews, and nieces).
In action for quieting of title, the plaintiffs must show not
only that there is a cloud or contrary interest over the subject real
property, but that they have a valid title to it. In the present case,
the action must fail, because petitioners failed to show the requisite
title.
A sale of land needs to be registered in the Registry of
Property in order to bind third persons. An unregistered sale of land
(private document) is still valid but will bind only the contracting
parties.
Facts:

Maxima Caballero owned a piece of land. She entered into
an Agreement for Partition with a Sabellona wherein Maxima bound
herself to sell 1/3 of the land. Sabellona then took possession of
that portion of the land and later sold another portion thereof
(3000 sq.m) to one Dalmacio Secuya. Dalmacio and the other
Secuyas occupied and cultivated that land.
Petitioners claim: (Maxima-Sabellona-Dalmacio-petitioners)
Sometime later, respondent Salma contested their
possession. Salma says that she bought the land from a widow
Cesaria Caballero. Cesaria Caballero inherited the land from her
husband, Silverio Aro, who bought the land from Maxima
Caballeros heirs.
Salmas claim: (Maxima-Maximas heirs-Silverio Aro-Cesaria
Caballero-respondent)
The Secuyas filed an action to quiet title. RTC ruled in favor
of Salma. CA affirmed.
Issues:
Who is entitled to the land?

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Held:
Salma owns the land.
1. Validity of Agreement of Partition between Maxima
Caballero and Sabellona
Caballero and Sabellona werent co-owners, hence, there was
nothing to partition/divide. Caballero bound herself to sell the land
to Sabellona but failed to do so. The agreement was actually one of
an express trust, governed by Art. 1444 of the Civil Code, as
Sabellona was granted the right to enjoy the property. This trust
was then repudiated when Maximas heirs did not deliver/transfer
the property to her after Maximas death. They did not also attach
the agreement in the title. The heirs then sold the land to Silverio
Aro.
2. Validity of Sale to Dalmacio Secuya
Even arguing that the express trust wasnt repudiated, the sale
to Dalmacio Secuya cannot be upheld. The deed of sale wasnt
embodied in a public instrument and registered at the Registry of
Property; hence, it cannot bind third parties. The deed of sale
wasnt also presented in court as it was already destroyed/lost.
Petitioners also did not prove that they exercise owners rights to
the property; they werent even paying land taxes over the piece of
land.
3. Validity of Salmas title
Salmas title is valid. She wasnt bound by the deed of sale to
Secuya as it wasnt registered in the Registry of Property. She was a
purchaser in good faith even if she did know the petitioners. Salma
relied on her sellers claim that the Secuyas didnt own the lot.

YUVIENCO vs Dacuycuy
G.R. No. L-55048 May 27, 1981
Facts:
On July 12, 1978, Petitioners Pedro C.Gamboa offered to
property ( in Tacloban City) to respondent Mr. Yao King Ong for 6.5
million pesos provided that the latter made known their decision to
buy the subject property not later than July 21 1978. This was
provided in a letter sent by Gamboa to Yao. Defendant responded
favorably to the sale. However, upon meeting up with Gamboa on
Aug 1,1978, Yao was surprised that the mode of payment was
changed. From the orginal agreement of having 90 days to pay for
the 4.5m, it was reduced to 30 days.
Issue: Was there a contract of sale?
Whether or not the claim for specific performance of respondents is
enforceable under the Statute of Frauds?
Held:
No. They are still at negotiation. There is no perfected sale.
Ratio:
A) ART. 1319. Consent is manifested by the meeting of the
offer and the acceptance upon the thing and the cause which are

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constitute the contract. The offer must be certain the acceptance
absolute. A qualified acceptance constitute a counter-offer.
Acceptance made by letter or telegram does not bind
offerer except from the time it came to his knowledge. The
contract, in a case, is presumed to have been entered into in the
place where the offer was made.
In the instant case, We can lay aside, for the moment,
petitioners' contention that the letter of July 12, 1978 of Atty. Pedro
C. Gamboa to respondents Yao King Ong and his companions
constitute an offer that is "certain", although the petitioners claim
that it was a mere expression of willingness to sell the subject
property and not a direct offer of sale to said respondents. What
We consider as more important and truly decisive is what is the
correct juridical significance of the telegram of respondents
instructing Atty. Gamboa to "proceed to Tacloban
to negotiate details." We underline the word "negotiate" advisedly
because to Our mind it is the key word that negates and makes it
legally impossible for Us to hold that respondents' acceptance of
petitioners' offer, assuming that it was a "certain" offer indeed, was
the "absolute" one that Article 1319 above-quoted requires.
Respondents now maintain that what the telegram refers to
as "details" to be "negotiated" are mere "accidental elements", not
the essential elements of the contract. They even invite attention to
the fact that they have alleged in their complaint that it was as early
as "in the month of October, 1977 (that) negotiations between
plaintiffs and defendants for the purchase and sale (in question)
were made, thus resulting to offers of same defendants and
counter-offer of plaintiffs". But to Our mind such alleged facts
precisely indicate the failure of any meeting of the minds of the
parties, and it is only from the letter and telegrams above-quoted
that one can determine whether or not such meeting of the minds
did materialize. As We see it, what such allegations bring out in bold
relief is that it was precisely because of their past failure to arrive at
an agreement that petitioners had to put an end to the uncertainty
by writing the letter of July 12, 1978. On the other hand, that
respondents were all the time agreeable to buy the property may
be conceded, but what impresses Us is that instead of "absolutely"
accepting the "certain" offer if there was one of the
petitioners, they still insisted on further negotiation of details. For
anyone to read in the telegram of Yao that they accepted the price
of P6,500,000. 00 would be an inference not necessarily warranted
by the words "we agree to buy" and "proceed Tacloban to negotiate
details". If indeed the details being left by them for further
negotiations were merely accidental or formal ones, what need was
there to say in the telegram that they had still "to negotiate (such)
details", when, being unessential per their contention, they could
have been just easily clarified and agreed upon when Atty. Gamboa
would reach Tacloban?
B) whether or not the claim for specific performance of
respondents is enforceable under the Statute of Frauds?
It is nowhere alleged in said paragraphs 8 to 12 of the
complaint that there is any writing or memorandum, much less a
duly signed agreement to the effect that the price of P6,500,000
fixed by petitioners for the real property herein involved was agreed
to be paid not in cash but in installments as alleged by respondents.
The only documented indication of the non-wholly-cash payment
extant in the record is that stipulated in Annexes 9 and 10 above-

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referred to, the deeds already signed by the petitioners and taken
to Tacloban by Atty. Gamboa for the signatures of the respondents.
In other words, the 90-day term for the balance of P4.5 M insisted
upon by respondents choices not appear in any note, writing or
memorandum signed by either the petitioners or any of them, not
even by Atty. Gamboa. Hence, looking at the pose of respondents
that there was a perfected agreement of purchase and sale
between them and petitioners under which they would pay in
installments of P2 M down and P4.5 M within ninety 90) days
afterwards it is evident that such oral contract involving the "sale of
real property" comes squarely under the Statute of Frauds
Limketkai Sons Milling Inc. v CA

GR 118509 // December 1, 1995 // Melo, J.
Summary/Memory Aid:
Facts:
Philippine Remnants Co. constituted BPI as its trustee to sell
real property it owns. BPI was given the task of selling the disputed
lot located in Bagong Ilog, Pasig City. BPI then authorized a real
estate broker, Revilla Jr. to sell the lot @ P1k p/sq. m. Remnants
(trustor) concurred to this arrangement
Revilla Jr. then found a buyer, Alfonso Lim who is employed
by petitioner Limketkai. Roberto Aromin, the Assistant Vice-
President of BPI then gave the officials of Limketkai and Revilla
permission to enter and inspect the said lot. Satisfied with said lot,
Limketkai agreed to purchase said lot and Revilla formally informed
BPI that he procured a buyer. BPI Vice Pres Albano and Asst. VP
Aromin negotiated with Limketkai officials for the price and
subsequently agreed that the lot would be bought at P1k per sq./m
in CASH. (Note: was there a perfected contract at this point?)
Petitioner, however, subsequently asked if they could pay
on terms. BPI officials stated that there would be no harm in asking
the BPI board but it was understood that if such arrangement was
denied, the price shall be paid in CASH.
Couple days after, Limketkai found out that its offer to pay
on terms had been FROZEN. Limketkai then immediately went to
BPI and tendered full payment in CASH but was refused by BPI
officials.
Limketkai then filed for Specific Performance agai nst BPI on
the ground that they already had a perfected contract. However BPI
already sold the disputed lot under litigation to National Book Store.
RTC ruled in favor of Limketkai voiding the sale to NBS and ordered
the cancellation of the TCT issued to NBS. CA however, reversed the
RTC dismissing the action for specific performance.
Issue:
W/N there was a perfected contract of sale between Limketkai and
BPI
Ratio/Held:
Authority of Aromin and Revilla to sell the lot.

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It is not disputed that Revilla had authority to sell the
disputed lot since this is evidenced by a letter (think of this as an
SPA) authorizing Revilla TO SELL the said property and not merely to
look for a buyer.
However, Aromins authority to sell is a bit more tricky. The
SC reasoned that since Revilla had authority to sell the property
they had no reason to doubt the authority of the two BPI VPs
(Aromin and Albano) whose job was to manage and administer real
estate. The SC held that Aromin did not act outside the scope of his
authority during the time the transaction was made
Was there a perfected contract of sale?
The SC said YES, the contract was perfected when Aromin
and Albano, acting for BPI agreed to sell to Limketkai @ P1k p/sq.
m. At this point there was a concurrence of offer and acceptance,
on the object and on the cause thereof.
A sale of land is VALID regardless of the form it may have
been entered into. The requisite form under Art. 1458 is only for
convenience and greater efficacy and non-compliance therewith
would NOT affect its validity
Also, in the case at bar, BPI crossed examined Limketkais
witnesses, the SC held that such act was deemed to be a waiver of
the defense of the Statute of frauds. The SC also gave credence to
the existence of memoranda evidencing the elements of a perfected
contract, thus taking it out of the SoF.
Is NBS an innocent purchaser for value?
The SC said NO, because NBS ignored the notice of lis
pendens annotated on the title when they purchased the lot.
Limketkai impugned upon NBS several badges of fraud, namely:
Sale was supposed to be through a broker, but top BPI
officials took over the sale when a close friend (someone in
NBS) of theirs became interested (Note: wont list the others
nalang, basta bad faith talaga si NBS)
The SC reversed the CA and REINSTATED the RTC decision.

You thought this case was over?!? Hell no, here come round 2
since BPI filed an MR to a SC decision.
Limketkai v. CA (MR- 1996)

Same facts as above. The MR reproduced in full all the supposed
memoranda exchanged by BPI and Limketkai see full text!
In this MR, the SC reversed itself and said that the
memoranda, when scrutinized, do not reveal a perfection of the
purported contract of sale. The court said that what the
memoranda establishes are the repeated refusals of BPI to sell the
lot at P1k p/sq.m to Limketkai. Thus, it did not establish a meeting
of the minds between the parties hence, no perfection.
Furthermore, the SC now says that ACCEPTANCE of the OFFER
MUST BE ABSOLUTE and in the case at bar, there was no showing of
such acceptance.

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The SC held that Limketkai failed to comply with the
requirements of the Statute of Frauds, categorically stating that, to
consider such memoranda (between BPI and Limketkai) as sufficient
compliance with the SOF is to betray the avowed purpose of the
law. Oral testimony may not be also used to establish the alleged
perfected contract of sale as theis would violate the parol evidence
rule. It was wrong of the RTC to have admitted testimony to
evidence despite the objection of BPIs lawyers.
Melo, J. Dissenting
Well guys, medyo tinatamad nako i-digest pa ung dissenting
opinion.. pero basically inulit lang niya ung sinabi sa 1995 case kasi
siya ung ponente doon.
Ortega v. Leonardo
L-11311. May 28, 1958.
Ponente: Bengzon.
Petitioner: Ortega
Defendant: Leonardo
Memory aid: partial performance, combination of acts
FACTS
Long before and until her house had been completely
destroyed during the liberation of the City of Manila, plaintiff
(Ortega) occupied a parcel of land, designated as Lot I, Block 3
located at San Andres Street, Malate, Manila. After liberation she
re-occupied it. When the administration and disposition of the said
lot was assigned by the government to Rural Progress
Administration, defendant (Leonardo) asserted the same ri ght.
During the investigation of this conflicting interest,
defendant asked plaintiff to desist from pressing her claim and
promised that if he would succeed in getting the title to Lot I, he
would sell to her a portion (55.60 sqm at P25 per sqm). His other
conditions included that she paid for the surveying and subdivision
and that she continue as tenant with a monthly rental of P10 until
said portion shall have been segregated and the purchase price fully
paid. Plaintiff accepted the offer and desisted from the claim.
After the plans of subdivision and segregation had been
approved by the Bureau of Lands, plaintiff tendered to defendant
the purchase price which the other refused without reason. Ortega
had already caused a survey and segregation of the portion of the
land they agreed upon, and in fact extended a portion of her sons
house into the segregated portion. The court explained that an oral
agreement to sell a piece of land is not enforceable. Plaintiff argued
that it is partially fulfilled as she desisted from claiming by reason
of the promise of the defendant. The court says that the desistance
is not part of the sale. Only upon payment will the contract be
enforced.
ISSUE
Whether or not there was an enforceable contract
HELD
There was an enforceable contract because there was
partial performance. The CFI ruling that partial performance occurs

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only when part of the purchase when part of the purchase is made
cannot be accepted.
Ortega made substantial improvements on the lot, desisted
from the claim, continued possession, paid for surveying and paid
for the rentals. It is enough to hold that the combination of all of
these acts amounted to partial performance. It would be a fraud
upon the plaintiff if the defendant were permitted to oppose
performance of his part after he has allowed or induced the former
to perform in reliance upon the agreement. And since there was
partial performance, it takes it out of the Statute of Frauds.

Claudel vs CA || Ponente: Sarmiento
G.R. No. 85240 || July 12, 1991
Facts:
As early as 1922 Basilio Claudel acquired from the Bureau of
Lands, a lot on the Muntinlupa Estate Subdivision. He secured a TCT
and declared the lots in his name in his tax declarations. He paid the
taxes thereon until his death. His widow and thereafter his son paid
the taxes. This lot is now the subject of this litigation. On one side
the Heirs of Cecilio and on the other hand, the Siblings of Cecilio. In
1972, the heirs of cecilio partitioned the lot among themselves. The
siblings of cecilio filed a case contesting the partition by claiming
that in 1930, their parents had purchased from the late Cecilio
several portions of the lot. They admit that the transaction was
verbal and submitted a subdivision plan of the said land as proof of
the sale.
CFI dismissed the complaint by saying that since the subject matter
is a real property, the absence of any document evidencing the sale
would preclude the admission of oral testimony (Statute of Frauds).
CFI also said that such sale would have already prescribed anyways
because it was filed more than 30 years after the cause of action
had arisen. CA reversed the decision of the CFI noting that the
Statute of Frauds applies only to executory contracts and not to
consummated sales as in the case at bar and that given the nature
of their relationship with one another it is not unusual that no
document to evidence the sale was executed. Also, the defense of
prescription cannot be set up against petitioners because the action
was not for recovery of possession but for cancellation of titles
issued to the heirs of Cecilio in 1973. The siblings of Cecilio
commenced their complaint for the cancellation of titles 4 years
after the partition. There is no prescription of action yet. CA then
ordered the cancellation of the TCTs issued for the partition.
Issue:
W/N a contract of sale of land may be proven orally in this
case. No.
Held:
The rule of thumb is that a sale of land, once consummated,
is valid regardless of the form it may have been entered into.
Nowhere does law or jurisprudence prescribe that the contract of
sale be put in writing. However, in the event that a third party, as in
this case, disputes the ownership of the property, the person
against whom that claim is brought cannot present any proof of
such sale and hence has no means to enforce the contract. Thus the

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Statute of Frauds was precisely devised to protect the parties in a
contract of sale of real property so that no such contract is
enforceable unless certain requisites, for purposes of proof, are
met. Therefore, the existence of the contract of sale made by Cecilio
with his siblings cannot be proved because there were no
documents to evidence that a sale did indeed take place. As to
prescription, an oral contract prescribes in 6 years. The law
recognizes the superiority of the torrens title and carries more
weight as proof of ownership than the survey or subdivision plan of
a parcel of land in the name of the siblings of Cecilio.
Certain facts of the case also belie the claim of ownership of
the siblings of Cecilio. First, they regularly paid money to the heirs
for taxes, why would you pay taxes to the heirs and not directly to
the Government? Also, two of the respondents who derive their
right from the siblings of Claudel bought a portion of the lot from
the heirs of cecilio. Why would you buy a portion of the lot that you
claim to own? These facts taken together with the lack of evidence
to prove the contract of sale indicate that the heirs of Cecilio are the
rightful owners of the lot in question.

Alfredo v. Borras

G.R. No. 144225
June 17, 2003
Petitioners, SPOUSES GODOFREDO ALFREDO and CARMEN LIMON
ALFREDO, SPOUSES ARNULFO SAVELLANO and EDITHA B.
SAVELLANO, DANTON D. MATAWARAN, SPOUSES DELFIN F.
ESPIRITU, JR. and ESTELA S. ESPIRITU and ELIZABETH TUAZON
Respondents, SPOUSES ARMANDO BORRAS and ADELIA LOBATON
BORRAS
Memory Aid:
Double sale, first sale enforceable although was voidable
and ratified because applicable law at that time was not family code
but civil code, second sale void
Facts:
Spouses Godofredo and Carmen owned a parcel of land
which was mortgaged to Development Bank of the Philippines
(DBP). To pay their debt, they sold the said land to spouses
Armando and Adelia for P15,000.
Armando and Adelia Borras gave Godofredo and Carmen
Alfredo the money to pay the loan to DBP which signed the release
of mortgage and returned the owners duplicate copy of the OCT to
Godofredo and Carmen. Godofredo and Carmen then delivered to
Adelia the owners duplicate copy of the OCT, with the document of
cancellation of mortgage, official receipts of realty tax payments,
and tax declaration in the name of Godofredo. Godofredo and
Carmen introduced Armando and Adelia, as the new owners of the
Subject Land, to the Natanawans, the old tenants of the Subject
Land. Armando and Adelia then took possession of the Subject
Land.

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Sometime later, Armando and Adelia learned that
Godofredo and Carmen resold the same land to Savellano et al
(Subsequent Buyers).
Hence, this suit was filed to compel Godofredo and Carmen
to issue a Deed of Absolute Sale to Armando and Adelia, and to
declare the sale to the Subsequent Buyers void.
Godofredo and Carmen allege
(1) That the action is unenforceable under the Statute of
Frauds. They point out that there is no written instrument
evidencing the alleged contract of sale over the Subject
Land in favor of Armando and Adelia. They object to
whatever parole evidence Armando and Adelia introduced
or offered on the alleged sale unless the same was in
writing and subscribed by Godofredo.
(2) That if not unenforceable, it is void pursuant to the Family
Code because Carmen sold the land without the consent of
Godofredo (raised in CA) and because the sale was made
during the 25-year period that the law prohibits the
alienation of land grants without the approval of the
Secretary of Agriculture and Natural Resources (raised only
in SC).
(3) Petitioners asserted that the Subsequent Buyers were
buyers in good faith and for value.
RTC Decision
RTC ruled in favor of Armando and Adelia. It held that there
was a perfected contract of sale between the parties which is
evidenced by the following:
(1) Godofredo and Carmen delivered to Armando and Adelia the
Subject Land;
(2) Armando and Adelia treated as their own tenants the tenants of
Godofredo and Carmen;
(3) Godofredo and Carmen turned over to Armando and Adelia
documents such as the owners duplicate copy of the title of the
Subject Land, tax declaration, and the receipts of realty tax
payments in the name of Godofredo; and
(4) the DBP cancelled the mortgage on the Subject Property upon
payment of the loan of Godofredo and Carmen.
Moreover, the receipt of payment issued by Carmen served
as an acknowledgment, if not a ratification, of the verbal sale
between the sellers and the buyers. The trial court ruled that the
Statute of Frauds is not applicable because in this case the sale was
perfected.
CA affirmed in toto
Issue:
(1) w/n the sale in favor of Armando and Adelia is valid and
enforceable Yes.
(2) w/n the sale in favor of the Subsequent Buyers is vali d
because they are purchasers in good faith No.

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Held:
(1) Yes.
Enforceable
There is a perfected contract of sale between them. All the
elements of a sale are present: Consent, Subject matter - the
subject land, and the price of P15,000. The sale has been
consummate because the the sellers and buyers have performed
their respective obligations under the contract.
In a contract of sale, the seller obligates himself to transfer
the ownership of the determinate thing sold, and to deliver the
same, to the buyer who obligates himself to pay a price certain to
the seller. In this case, Godofredo and Carmen delivered the Subject
Land to Armando and Adelia, placing the latter in actual physical
possession of the Subject Land. This physical delivery of the Subject
Land also constituted a transfer of ownership of the Subject Land to
Armando and Adelia. Ownership of the thing sold is transferred to
the vendee upon its actual or constructive delivery. Godofredo and
Carmen also turned over to Armando and Adelia the documents of
ownership to the Subject Land, namely the owners duplicate copy
of the OCT, the tax declaration and the receipts of realty tax
payments.
On the other hand, Armando and Adelia paid the full
purchase price as evidenced by the receipt issued by
Carmen. Armando and Adelia fulfilled their obligation to pay the
price agreed upon. Indeed, upon payment to DBP, the DBP
cancelled the mortgage on the Subject Land and returned the
owners duplicate copy of OCT No. 284 to Godofredo and Carmen.
The RTC and CA are correct in not applying the Statute of
Frauds because this only applies to executory contracts. The
existence of the receipt for payment, which is a memorandum of
the sale, removes the transaction from the provisions of the Statute
of Frauds. The Statute of Frauds applies only to executory contracts
and not to contracts either partially or totally performed. In
addition, a contract that violates the Statute of Frauds is ratified by
the acceptance of benefits under the contract. Godofredo and
Carmen benefited from the contract because they paid their DBP
loan and secured the cancellation of their mortgage using the
money given by Armando and Adelia. Godofredo and Carmen also
accepted payment of the balance of the purchase price.
Voidable but now ratified
With regard to their defense of nullity on the ground of lack
of husbands consent and on the ground that the sale was made
during the 25-year prohibitive period, the contention is untenable.
The sale was made in 1970, before the Family Code took
effect. Therefore, the applicable law at that time is the Old Civil
Code which only makes the sale by the wife without the husbands
consent voidable. However, Godofredo cannot anymore seek the
contracts annulment because he has already ratified the same by
introducing Armando and Adelia as the new owners to the tenants
of the land, and by accepting the using the purchase price to pay
their debt to DBP.
(2) No.
The Subsequent Buyers are not in good faith. Armando and
Adelia registered their adverse claim on the land on February 8,

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1994, while the Subequent Buyers bought the lands on February 22,
1994. They cannot be held to be in good faith because the
registration in the Register of Deeds served as constructive notice to
them of the defect in the title of the sellers.

Toyota Shaw Inc. v. CA
GR. 116650 May 23, 1995
Memory Aid:
Facts:
The private respondent, Sosa wanted to buy a Toyota Lite
Ace but experienced difficulty in finding a dealer with available units
for sale because of the prevailing market conditions at the time
(there was a shortage in supply). When they contacted the Toyota
Shaw Inc (Toyota) he was told that they had an available unit and so
Sosa met with Popong Bernardo, a sales representative of Toyota.
Sosa emphatically emphasized to Bernardo that he needs
the car no later than June 17, 1989 because he needs it for a trip to
Marinduque. Bernardo then assured Sosa that the unit would be
available for pick up at 10am June 17, 1989 and signed an
agreement entitled, AGREEMENTS BETWEEN MR. SOSA & POPONG
BERNARDO OF TOYOTA SHAW, INC. wherein it was stipulated that
the unit will be picked0up and released on the 17
th
of June. (Note:
the agreement was not signed by Sosa)
Sosa then made a downpayment of P100k and the parties
also agreed that the balance of the purchasing price would be paid
by BA Financing. Sosa then met with Bernardo to accomplish a
Vehicle Sales Proposal (VSP) however, the spaces for Delivery
Terms were not filled up. Quirante, the sales supervisor of
Bernardo, checked and approved the VSP.
The day of reckoning came when Bernardo called Sosa that
the vehicle would not be available for pick-up at the
aforementioned time but rather at 2pm the same day. When Sosa
went to Toyota Shaw at 2pm and after waiting for an hour,
Bernardo informed them that the vehicle could not be delivered
because nasulot ang unit ng ibang malakas.
Toyota contends however, that the Lite Ace was not
delivered because BA Finance disapproved Sosas application for
credit. Toyota further alleged that the vehicle was already
earmarked for Sosa but could not release it since BA rejected the
credit application.
Sosa then demanded the refund of his downpayment which
Toyota complied with. Sosa, however, made a reservation that his
acceptance of the refund is, without reservation for future claims
for damages. Sosa then filed a complaint against Toyota under
Articles 19 and 21 of the Civil Code. RTC ruled in favor of Sosa which
the CA, in turn, affirmed.
Issue(s):
1. W/N the agreement between Sosa and Bernardo was a
perfected contract of sale binding upon Toyota Shaw, Inc.
Held/Ratio:

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NO, the agreement between Sosa and Bernardo cannot be
construed as a perfected contract of sale binding upon Toyota
because there was no obligation on the part of Toyota to transfer
ownership of the vehicle to Sosa and no correlative obligation on
the part of the latter to pay a price certain. The downpayment
cannot be considered as the price because it made no reference to
the sale of the vehicle and nothing was mentioned about the full
purchase price and the manner the installments were to be paid.
Moreover, the VSP was merely a proposal which was subsequently
aborted since BA Finance denied Sosas credit application. Thus it
follows that, the aborted VSP created no demandable right in favor
of Sosa for the delivery of the vehicle and its non-delivery created
no legally indemnifiable injury.
The agreement between Bernardo and Sosa did not
constitute as a meeting of the minds because for one thing, Sosa
never signed it and that from the title of the agreement clearly
shows that Sosa was NOT dealing with Toyota but with Popong
Bernardo. Sosa knew that Bernardo was merely a sales
representative of Toyota and hence an agent of the latter. It was
incumbent upon Sosa to act with prudence to know the extent of
Bernardos authority as an agent. Therefore, Sosa must discover
upon his own peril the extent of Bernardos authority as an agent.

Chapter 6- Obligations of the Seller

Santos v. Santos

Facts:
Petitioner Zenaida Santos was the widow of Salvador Santos
and the brother of the respondents Calixto, Alberto, Antonio and
Rosa. Their parents (respondents), Jesus and Rosalia, owned a
parcel of land located in Sta. Cruz Manila and on it was a 4-door
apartment. This apartment was being administeredby their mother
Rosalia. The parents, Jesus and Rosalia then executed a deed of sale
in favor of their children Salvador and Rosa. Subsequently, Rosa sold
her share to Salvador but despite of the sale, Rosalia (mother)
continued to receive the rentals from the apartment units.
Sometime in 1979, Jesus died but unfortunately did not
resurrect and was followed by his son Salvador and wife a few
months after. Salvadors widow, petitioner Zenaida, then demanded
rentals from the tenants of the apartment uni ts. However, the
tenants refused to pay and Zenaida filed an ejectment suit against
the former which the MTC of Manila granted.
10 years after, the brothers of Salvador filed an action for
reconveyance against Zenaida alleging that the two deeds of sale
executed in favor of Salvador were SIMULATED for lack of
consideration. The respondent siblings allege that the deeds of sale
were executed to accommodate Salvador to generate funds for his
business ventures. Zenaida denied these allegations.

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The RTC ruled in favor of the respondent siblings on the
ground that although there was a deed of sale in favor of Salvador,
the seller, parent-spouses Jesus and Rosalia continued to possess
the property and exercised rights of ownership over the said
property.
The CA affirmed the RTC and held that in order for the
execution of a public instrument to effect TRADITION/DELIVERY, the
vendor shall have CONTROL over the thing sold at the moment of
the sale. It is not enough to confer upon the buyer ownership and
right of possession but must place the thing sold under the buyers
CONTROL. This did not happen in the case at bar since the parent-
spouses Jesus and Rosalia remained in dominion, control and
possession of the thing allegedly sold.
Issues:
W/N payment of taxes and retention of possession are indication of
continued ownership by the sellers
W/N a sale through a public instrument is equivalent to delivery
W/N Rosalias cause of action prescribed
Ratio/Held
On the first issue YES, although it is true that tax receipts
do not constitute sufficient proof of ownership, the continued
possession and administration over the property vested upon
Rosalia ownership over the disputed property. Even though
Salvador already registered the property in his name, he
subsequently surrendered such title to his mother. The
aforementioned circumstances are clear indications that ownership
remained with the original owners, namely Rosalia. The vendors
continued possession of the property makes dubious the contract of
sale between the property.
On the second issue, NO, nowhere in the Civil Code does it
say that the execution of a deed of sale is a conclusive
presumption of delivery of possession. The Code merely states
that execution shall be equivalent to delivery and this
presumption MAY BE REBUTTED by clear and convincing evidence.
Presumptive delivery CAN BE NEGATED by the failure of the vendee
to take actual possession of the thing sold. Applying the doctrine
found in Norkis where it is said that the critical factor which gives
legal effect to the mode of delivery used is the ACTUAL INTENTION
of the vendor to deliver and its acceptance by the vendee. In the
case at bar, there was no actual intention to deliver the property on
the part of the parent-spouses Jesus and Rosalia to their child
Salvador because it was only made to accommodate Salvador.
On the issue of prescription, the court held NO, the
complaint filed by the respondent-sibling was an action for
reconveyance on the ground that the deed of sales were fictitious
and simulated. The complaint amounts to a declaration of nullity
of a void contract, which is IMPRECRIPTIBLE. Neither can their
action be barred by laches.

Dy Jr. v. CA

Facts:

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The petitioner, Perfecto Dy and Wilfredo Dy are brothers. In
1979, Wilfredo purchased a truck and tractor through the financing
extended by LIBRA. The truck and tractor were both mortgaged to
LIBRA as security of the loan. Perfecto wanted to buy the tractor
from his brother Wilfredo so he wrote a letter to LIBRA requesting
that he be allowed to purchase the tractor and assume the
mortgage in place of Wilfredo. LIBRA, thru its manager Ares
APPROVED such request. Hence, Wilfredo executed a deed of
absolute sale in favor of Perfecto. However, possession of the
subject tractor was with LIBRA due to Wilfredos failure to pay the
mortgage.
LIBRA refused to release the said tractor to Perfecto despite
the offer of full payment because the financing covered BOTH the
truck AND tractor so LIBRA was insisting on payment for both truck
and tractor. Perfecto was able to convince his sister Carol to
purchase the truck and then offered payment to LIBRA for both
truck and tractor. LIBRA being a cunt, insisted that since the
payment was thru an out-of-town check, it MUST BE CLEARED FIRST
before they can release the chattels.
Meanwhile, another civil case for collection was filed by
GELAC against Wilfredo. In this case, a writ of execution was issued
against the properties of Wilfredo and on the strength of such writ,
the provincial sheriff was able to seize the tractor and sold it to
GELAC in a public auction where it was the lone bidder.
Subsequently, GELAC sold said tractor to Gonzales, their
stockholder.
The check cleared but Perfecto could not take possession of
the tractor since GELAC already took custody of said tractor. Hence,
Perfecto filed an action to recover the subject tractor in the RTC of
Cebu City.
The RTC ruled in favor of Perfecto but this was however
reversed by the CA on the ground that Wilfredo was still the owner
of the tractor when the alias writ of execution was issued.
Issues:
W/N Perfecto was the owner of the tractor when the writ of
execution was issued
W/N the sale of the tractor to Perfecto was done in fraud of
creditors
Ratio/Held:
YES, Perfecto was already the owner of the said tractor by
virtue of constructive delivery when the deed of sale was executed
in his favor. It is well-settled that the mortgagor remains the owner
of the mortgaged property and has the absolute right to sell such
property on the condition that he/she obtain consent from the
mortgagee under pain of criminal prosecution (Art 319 par. 2 of
RPC). Even if no consent was obtained from the mortgagee, the
validity of the sale would not be affected. In the case at bar, it was
proven that LIBRA allowed Perfecto to purchase the tractor and
assume the debt of his brother.
In the instant case, actual delivery of the subject tractor
could not be made because possession of the tractor was with
LIBRA due to Wilfredos failure to pay the amortization. The law
supports LIBRAs possession of the tractor because it is a necessary

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step for it to be able to sell the property. Although Wilfredo was not
in actual possession and control of the tractor, his right of
ownership was not divested from him upon his default. Neither can
LIBRA claim that it is the owner of the mortgaged property because
the mortgagee cannot become the owner of the property
mortgaged and the only remedy of the mortgagee is to foreclose on
the property and sell it at a public auction. In the case at bar, there
is no showing that LIBRA foreclosed on the property.
When a third person assumes a mortgage he steps into the
shoes of the original mortgagor. Perfectos payment of the check
was intended to extinguish the mortgage and was not intended to
be considered as payment of the purchase price since the
relationship between LIBRA and Perfecto was not one of sale but
still a MORTGAGE. The clearing or encashment of the check was not
determinative of the consummation of sale, therefore the
contention of LIBRA that the consummation of the sale depended
upon encashment of the check is UNTENABLE.
The sale of the subject tractor was consummated upon the
EXECUTION of the public instrument between Perfecto and Wilfredo
and at this time, constructive delivery was already effected.
Wilfredo was not the owner of the tractor anymore when the writ
of execution was issued and hence the sheriff could not levy upon
said tractor.
Anent the second issue, the SC found no reason that the
sale was done in fraud of creditors, there being no sufficient
evidence to show such fraud. Wilfredo and Perfecto being brothers
do not mean that the sale they entered into was fraudulent.
Addison v. Felix

Facts
Addison sold to Felix with the consent of her husband
Balbino Tioco four parcels of land. It was agreed upon that Felix will
pay at the execution of the deed the sum of P3k and bound herself
to pay the remainder in installments, P2k on July 15, 1914 and P5k
30 days after the issuance of a certificate of title in her name. It was
also agreed upon that within 10 year after the issuance of title in
Felixs name, Felix will pay P10 for each coconut tree in bearing and
P5 for each tree not bearing that might be growing in the parcels of
land sold. It was also stipulated that Felix will deliver to Addison
25% of the value of the products she might obtain from the parcels
of land from the time she takes possession until the Torrens title be
issued in Felixs favor.
It was also stipulated that Felix may rescind the contract, in
which case Felix would be obliged to return to Addison the net
value of all the products of the products sold and Addison would be
obliged to return to Felix the sums the latter paid at 10% interest
per annum.
Addison then filed a suit to compel Felix to pay the first
installment of P2k. Felix and her husband alleged that Addison
failed to deliver to them the said land notwithstanding their
demands to make such delivery. Felix then asked to be absolved
from the complaint and to rescind the contract and for Addison to
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Evidence adduced during trial showed that only two out of
four parcels of lands were available for immediate possession. The
other two parcels, 2/3 of which were found to be in the possession
of Juan Villafierte who claimed to be the owner of the parcels of
land occupied by him. They found that they would have to file a suit
to be able to possess such land.
The RTC rendered judgment in favor of Felix and ordered
the contract rescinded on the ground that the land sold was not
registered in accordance with the Torrens system and on the
stipulation of the contract that within one year from the date of
the certificate of title in favor of Felix, the latter may rescind the
present contract of purchase and sale
Issue:
W/N Addison made effective delivery to Felix
Ratio/Held:
NO, the record shows that Addison did not deliver the
thing sold because with respect to the two parcels of land,
Addison was not able to show them to the purchaser and as
regards to the other two, more than 2/3 of its area was in the
hostile and adverse possession of a third person.
It is true that the execution of a public instrument is
equivalent to the delivery of the thing sold, but in order to produce
the legal effect of delivery, it is NECESSARY that the vendor shall
have control over the thing sold that, at the moment of the slae, its
material delivery could be made. Even though a public instrument
may have been executed, the purchaser cannot make use of the
thing sold because of the interposition of another will, then fiction
will yield to reality and therefore, no effective delivery has been
made.
It is evident in the case at bar, that mere execution of a
public instrument did not constitue as fulfillment of the obligation
of the seller to deliver the thing sold and from such non-fulfillment
the buyer can demand rescission.

Danguilan v. IAC

Facts
The respondent, Apolonia Melad filed a complaint against
the petitioner, Danguilan for the recovery of a farm and residential
lot which she claims she purchased from Domingo Melad. Danguilan
answered that he had been in open, continuous and adverse
possession of the said land having acquired them from Domingo
Melad. Case was dismissed for failure to prosecute but was
subsequently re-filed.
At the trial, Apolonia presented a notarized deed of sale
signed by Domingo Melad which conveyed the properties to her for
the sum of P80. She claims that the sum was paid by her mother
who worked at the Tabacalera factory. Apolonia claimed to be the
illegitimate daughter of Domingo Melad. She moved out of the farm
only when Danguilan asked her permission to cultivate the land and
to stay therein. Apolonia agreed on the condition that Danguilan

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would deliver to her part of the harvest from the farm. This was
corroborated only by her mother.
Danguilan on the other hand, claims that he was the
husband of Isidra Melad, Domingos niece whom he had taken as his
ward since Domingo and his wife had no children of their own. He
claims that in 1941 and 1943, Domingo signed a private instrument
which conveyed to Danguilan the disputed lots on the condition
that the latter would take care of the grantor and would bury him
upon his death. This was corroborated by three witnesses, two of
them declared that neither Apolonia nor her mother ever lived in
land with Domingo Melad.
The RTC ruled in favor of Danguilan, finding Apolonias
evidence to be unpersuasive and unconvincing. They held that
Apolonias claim that she moved out of the property and left it in
the possession of Danguilan was contradictory to her claim of
ownership. The decision concluded that where there was doubt as
to the ownership of the property, presumption was in favor of the
one actually occupying the property.
The CA however reversed, on the ground that the private
instruments executed by Domingo Melad in favor of Danguilan was
null and void as it was a donation of real property and should have
been effected through a public instrument.
Issues:
W/N Apolonia Melad is the lawful owner of the disputed property.
Ratio/Held:
The Court held that even assuming the validity of the deed
of sale executed by Domingo Melad in favor of Apolonia was valid,
the record shows that Apolonia did not take possession of the
property and waited until 1962 to file the action for recovery
against Danguilan. If she ever did have possession of the disputed
lots, she transferred it to Danguilan when she moved out to another
lot belonging to her step-brother. In other words she failed to show
that she consummated the contract of sale by actual delivery of the
properties to her and her actual possession thereof in the concept
of purchaser-owner.
There is no dispute that it is Danguilan and not Apolonia
who is in actual possession of the disputed properties. Even if the
respective claims of the parties were both to be discarded as being
in herently weak, the decision should still be in Danguilans favor
since, ..being in possession is presumed to be the owner and
cannot be obliged to show or prove a better right.

Pasagui v. Villablanca

Facts:
Calixta Pasagui and Fausta Mosar filed a complaint against
the defendants spouses Bocar alleging that the parcel of agricultural
land they bought for the consideration of P2.8k was being illegally
occupied by the defendants spouses Villablanca depriving the
petitioner possession thereof. Pasagui was suing the spouse Bocar
by virtue of the warranty clause contained in the deed of sale they
executed.

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The appellees, Villablanca moved to dismiss the case
alleging that the CFI does not have jurisdiction since it is an action of
forcible entry. The Pasaguis on the other hand, opposed the
dismissal claiming that it was not an action for forcible entry since it
was not alleged that the deprivation was through force, stealth,
intimidation etc.
The CFI however dismissed, holding that the action was one
of forcible entry and hence jurisdiction belonged to the Justice of
the Peace and not with the trial court.
Issues:
W/N the Pasaguis action was one of forcible entry
Ratio/Held:
NO, it is well settled that what determines jurisdiction of
the municipal court in forcible entry cases are the allegations
found in the complaint and the character of relief sought. In the
case at bar, the complaint did not allege that Pasagui were in
physical possession of the land and have been deprived of such
possession through force, intimidation, threat etc.
The complaint simply alleges that Pasagui bought the parcel
of land from Bocar for P2.8k through a deed of sale which was
notarized and registered and that the Villablanca took possessi on of
the said lot, depriving Pasagui of possession.
The execution of the deed of absolute sale in a public
instrument is equivalent to delivery of the land subject of the sale.
Such constructive delivery would only have effect if no
IMPEDIMENT exists that would prevent the passing of property
from the seller to the buyer. In the case at bar, however, Pasagui
could not take possession of the land since it is being occupied by
Villablanca hence; the action is not one of Forcible Entry since there
was no prior possession of the land by Pasagui and the depravation
of possession was not through FITSS granting jurisdiction to the CFI.

Power Commercial and Industrial Corp. v. CA

Facts:
Petitioner Power Commercial and Industrial Corp (PCIC)
needed a bigger office space and warehouse for its products. For
this purpose it entered into a contract of sale with the respondent-
spouses Quiambao for a parcel of land located in San Antonio
Village, Makati City. The parties agreed that PCIC would pay the
Quiambaos P108k as downpayment and the balance of P295k
would be paid once the deed of transfer of the title has been
executed. It was also agreed upon that, PCIC would assume the
mortgage of the Quiambaos with PNB amounting to around P80k.
The Quiambaos however, mortgaged the said land again to
guarantee a loan of P145k, P80k of which was already paid to the
spouses. PCIC also agreed to assume the second mortgage.
On June 26, 1979 the PCIC and the Quiambaos executed a
Deed of Absolute Sale with Assumption of Mortgage which
stipulated the following:
Price=P295k to be paid in cash

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Said land is not covered by the Land Reform Code
Warrants that the Quiambaos are the lawful owners of the
land described, free from any lien/encumberance
Warrants peaceful possession of the land to PCIC
States that the property is mortgaged to PNB for P145k
which PCIC would assume to pay
Constantino, the General Manager of PCIC, submitted to the
PNB the deed of sale along with the formal application for
assumption of mortgage.
PNB however, informed the Quiambaos that PCIC failed to
submit the papers necessary for the assumption of mortgage.
PNB also told the Quiambaos that the application was deemed
withdrawn and that the mortgage of P145k was deemed fully
due and demandable and be paid within 15 days from notice.
It turns out however, that PCIC paid PNB P41k and P20k on
various dates which were to be applied to the outstanding loan.
It was also found that, PCIC sent letters to PNB requesting that,
PCICs application for assumption of mortgage be approved
and that the title be transferred to PCICs name because it was
found that tenants occupied the land. PNB however replied
saying that PCIC needs to pay the remaining balance plus
interest. This led PCIC to file a case against the Quiambaos for
recission plus damages before the RTC of Pasig. PCIC then
replied to PNB demanding the return of the payments they
made since the application for mortgage was never approved.
During the pendency of the trial, the property was foreclosed
upon and was bought by PNB at the public auction.
The RTC ruled in favor of PCIC on the ground that the
Quiambaos failed to deliver actual possession of the land to PCIC,
entitling the latter to for rescission and ordering PNB to return to
PCIC the payments made by the latter. This was however reversed
by the CA, on the ground that the deed of sale did not obligate the
Quiambaos to eject the lessees from the land as a pre-condition of
the sale nor was the lessees occupation a breach of warranty.
Hence, there was no substantial breach that would justify recission.
Issues:
W/N there was substantial breach to justify rescission, because of
nonejectment of the tenants and failure to deliver the lot sold
W/N solution indebitii applies, obligating PNB to return to PCIC the
payments they made
Ratio/Held:
NO, the alleged failure of the Quiambaos to eject the
lessees and to deliver actual physical possession of the land did
not constitute substantial breach to justify rescission, because:
(1) such failure to eject was NOT STIPULATED as a
condition
(2) its effects and consequences were also not specified
The stipulations found in the deed of sale that warrants the land
is free from any lien/encumberance, warrants peaceful possession
in favor of PCIC etc etc pertains to the usual warranty against
eviction and NOT TO A CONDITION that was not met.

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Powers, the General Manager of PCIC, admitted to the fact
that he did not ask PCICs lawyers to stipulate in the contract the
guarantee to eject tenants, this proved to be fatal since it caused
obscurity and therefore must be taken against PCIC.
If the parties intended to impose upon the Quiambaos the
obligations to ejects the tenants from the lot sold, they should have
included a provision saying so. Absent a stipulation therefor, the
nonfullfilment of ejectment cannot be a ground for rescission.
Furthermore, it was found that PCIC was aware that tenants did
occupy the said lot, and even tasked its lawyers to eject such
tenants.
On the issue of delivery, the SC held that there was indeed
delivery through the execution of the deed of sale. The lot in
question was placed in the control of PCIC which enabled them to
file the ejectment suit. Considering that deed of sale did not
stipulate ejectment as a pre-condition, the SC held that execution
of the deed of sale was sufficient delivery. Prior physical delivery is
not legally required and the execution of the deed of sale is deemed
equivalent to delivery. (Note: is this contradictory to what the SC
has been saying in the prior cases? Isnt the presence of tenants
here a impediment to PCIC from taking possession of the land?
Ewan haha)
The court held that there was no breach of warranty against
eviction can be appreciated because the facts of the case do not
show that the requirements for breach was satisfied. The presence
of lessees did not constitute as an encumberance nor does it
deprive PCIC from control over the lot. PCICs deprivation of the lot
was due to its own fault, by its failure to pay the amortizations
causing the lot to be foreclosed.
On the issue of solution indebitii, the SC held that PCIC was
under the obligation to pay the amortizations under the contract
of sale and the deed of real estate of mortgage. Therefore it
cannot be said that PCIC did not have any duty to pay PNB
amortization, hence, there can be no mistake in payment.

Chua v CA

Facts
Valdes-Choy advertised for sale her paraphernal house and
lot located in San Lorenzo Village, Makati City. Petitioner Chua
responded to the ad and they two agreed on a purchase price of
P10.8M payable in cash. Chua then paid Valdes-Choy P100k in
earnest money stipulating that failure to pay the remaining balance
of P10.7M would result to forfeiture of the earnest money.
Chua then secured from PBCom a managers check worth
P480k. However, Chua immediately issued a stop-payment order on
the managers check claiming that it was lost/misplaced. On the
same day, PBCom Asst. VP Pe, notified the PBCom Operation group
of Chuas stop-payment order. On the same day, Chua and Valdes-
Choy met with their respective counsels to execute the necessary
documents and to arrange the payments. The first Deed of Sale
covered the house and lot at the purchase price of P8M. The second

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Deed of Sale covered the movable properties in the house at the
price of P2.8M. The capital gains tax was pegged at P485k.
The next day, Chua handed to Valdes-Choy the alleged
lost PBCom check for P480k so Valdes-Choy could pay the capital
gains tax since the latter did not have enough funds to pay such
taxes. On the same day, Chua accompanied Valdes-Choy to Traders
Royal Bank where she deposited the managers check and
subsequently purchased a Traders Royal Bank check payable to the
Commissioner of Internal Revenue for the capital gains tax. Valdes-
Choy gave the TRB check to her counsel who undertook to pay the
CGT.
It was at this moment that Chua showed to Valdes-Choy a
PBCom check for P10.215M representing the remaining balance of
the purchase price. However, Chua refused to give it Valdes-Choy
since the former required that the property be registered first in his
name before he would turn the check over. This caused Valdes-Choy
to rage on Chua tearing up the deeds of sale in the process claiming
that it wasnt part of their agreement.
The transaction was at an impasse and neither side were
budging until Valdes-Choy suggested to her counsel that Chua
should place the check in escrow and then she would cause the
issuance of the TCT in Chuas name. However, this fell on deaf ears.
Chua then filed with the RTC a complaint for specific
performance against Valdes-Choy but which was subsequently
dismissed. Chua however, refilled the case for specific performance
plus damages and the trial court gave due course to the complaint.
The RTC ruled in favor of Chua, however the CA reversed and set
aside the RTC decision dismissing the complaint.
The RTC ruling
Parties entered into a contract to sell evidenced by the
receipt of P100k as earnest money
Chua complied with the terms of the contract to sell since
he was prepared pay the balance on the condition that all
papers must be in proper order before full payment is
made
Valdes-Choy did not perform her obligations under the
contract since the capital gains tax was still not paid.
The CA ruling
In reversing the RTC, they said that Chuas refusal to pay
until the Certificate was issued in his name was not part of
their agreement.
The CA found that all papers were in proper order hence
Chua had no valid reason not to pay on the agreed date.
Valdes-Choy was in a position to deliver the disputed
property to Chua
Chuas capacity to pay could not be equated with actual
payment since he actually refused to do so
Non-payment of the CGT has no bearing on the validity of
the Deed of Sale since it is only after the deeds are signed
and notarized can the final computation and payment of
the CGT be made.
Issues:

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W/N there was a perfected contract of sale or a mere contract to
sell
W/N Chua can compel Valdes-Choy to cause the issuance of a new
TCT in Chuas name before payment of the full price
Ratio/Held:
The court held that the agreement by Chua and Valdes-
Choy, as evidenced by the Receipt, IS A CONTRACT TO SELL and
not a contract of sale.
In a contract of sale, title passes to the vendee upon
delivery of the thing sold
In a contract to sell, ownership remains with vendor and is
not to pass to the vendee until full payment of the purchase
price
In the case at bar, the stipulation allowing Valdes-Choy to forfeit the
earnest money in case of Chuas failure to pay the balance is in the
nature of a stipulation reserving ownership in the seller until full
payment of the purchase price. The agreement between Chua and
Valdes-Choy was embodied in a receipt rather than in a deed of
sale, since ownership not having passed between them. It was also
shown that Valdes-Choy retained possession of the certificate of
title and all other documents relative to the sale. These are proof
that the agreement did not transfer to Chua either by actual or
constructive delivery, ownership of the property.
Since the agreement between Valdes-Choy and Chua is one
of contract to sell, the full payment of the purchase price is a
suspensive condition, non-fulfillment of which prevents the
obligation to sell from arising and ownership is retained by the
seller without further remedies by the buyer.
It is only once the buyer pays the full purchase price would
the seller be obligated to transfer ownership to the buyer. In the
sale of real property, the seller is not obligated to transfer in the
name of the a new certificate of title but rather to transfer
ownership of the real property. There is a difference because a
buyer may become the owner of the real property even though the
title is still registered in the name of the seller. As between the
seller and buyer, ownership is transferred not by issuance of a new
certificate of title, but by the execution of the instrument of sale in
a public document. When the deed of absolute sale is signed by the
parties and notarized then the delivery is deemed made by the
seller to the buyer.
In the case at bar it was found that Valdes-Choy was in a
position to comply with her obligations as a seller
She signed the deeds of sale in the presence of Chua
She was prepared to turn over the owners duplicate of the
TCT, along with the tax declarations and latest realty tax
receipt to Chua
Chuas refusal to pay the balance price put himself in default and
has only himself to blame for the rescission by Valdes-Choy.

Vive Eagle Land Inc v CA


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Facts:
The spouses Flores were the owners of two parcels of land
located in Cubao, Quezon City. The spouses Flores and TATIC
executed an agreement to sell which bound the spouses to sell such
properties to TATIC. TATIC then applied for a loan with Capital Rural
Bank of Makati to finance the purchase of the lots. The bank agreed
to grant the application of TATIC on the condition that the
properties be registered in TATICs name as it would be used as
collateral for the loan.
The spouses Flores, TATIC, Tobias, and the Bank entered
into a memorandum of agreement where it was stipulated that:
Warrants that the properties are free from any
liens/encumberances
Tobias, the broker, will undertake the payment of all taxes
and assessment imposed over the lots, including the
payment of the capital gains tax
Tobias would also undertake the ejectment of tenants on
the lots with the assistance of the spouses Flores
The expenses incurred by TATIC and Tobias would be
deducted from the purchase price of the property
Pursuant to their MOA, the spouses Flores executed a deed of
absolute sale in favor of TATIC for the price of P5.7m and turned
over the custody of the titles to the Bank.
TATIC subsequently caused the sale of the said lots to
petitioner Vive Eagle Land Inc (VELI) for the price of P6.3m and
warranted that:
There were valid titles to the property and that TATIC would
deliver to VELI possession thereof to the latter
Warrants that the land is free from any
liens/encumberances except the mortgage subsisting in
favor of the Bank
TATIC would undertake to remove the occupants/tenants,
otherwise VELI may may withhold payment of the balance
of the purchase price
TATIC would cause the registration of the titles covering the
lots in its name
VELI would assume the mortgage
Subsequently, VELI sold to its president, petitioner Cervantes and
Genuino Ice Co. Inc (GICI) for the price of P4m. They executed a
deed of assignment of rights to this effect.
The respondent GICI wrote a letter to letter to VELI
demanding VELI to pay the capital gains taxes but this was rejected
by VELI. Respondent GICI then filed a complaint against VELI and its
president Cervantes for specific performance plus damages,
claiming that VELI failed to deliver the properties to GICI, to cause
the ejectment of the occupants of properties and to pay the capital
gains taxes. VELI answered, stating that it is exempt from payment
of the CGT and that is the spouses Flores and Tobias who are liable
for the payment of such taxes and that is also the spouses Flores
and Tobias who are responsible for the ejectment of occupants.
The RTC ruled in favor GICI that it should be VELI who is
liable to pay the GCT since the latter was not privy to the agreement
between the spouses Flores, TATIC and VELI and as such is not

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bound by those deeds. VELI then appealed to the CA which affirmed
the CA decision.
Issues:
W/N VELI is obliged to pay the expenses for the transfer of property
in favor of GICI
W/N VELI is liable for the capital gains tax
W/N VELI is obliged to evict the remaining occupants on the
property
Ratio/Held:
YES, VELI is liable for the said expenses because under Art
1487 of the Civil Code, the expenses for the registration of sale
should be shouldered by the vendor unless there is a stipulation to
the contrary.
While Art. 1498 of the Civil Code provides that the
execution of a notarized deed of sale shall be equivalent to delivery
of the property, this would not apply if, from the deed, the contrary
does not appear or cannot clearly be inferred. In the case at bar, the
GICI and VELI agreed that the latter would cause the eviction of the
occupants and deliver possession of the property to GICI. By virtue
of this stipulation, VELI is obliged to cause the eviction of occupants
unless there is a contrary stipulation.
VELI is not liable for the payment of the CGT because it is a
corporation and are exempt from such taxes for any sale or
exchange or disposition of property. The CGT is only imposed upon
individual taxpayers and not on corporations. However, petitioner
VELI should include the income from such sale in its ordinary
income tax returns, whatever gains or losses it incurred in the sale
of such property.

Behn, Meyer Co. v Yangco

Facts
The contract between Behn, Meyer Co. and Yangco was for
the delivery 80 drums of Caustic Soda, 76% Carabao Brand for the
sum of $9.75 per 100lbs C.I.F Manila.
The merchandise mentioned was shipped originally from NY
aboard the steamship Chinese Prince. However, the steamship was
detained by the British authorities at Penang, where 71 drums were
confiscated. When the ship reached Manila, Yangco refused to
accept the delivery since the remaining 9 drums were in bad shape.
Yangco refused Behn, Meyers offer that the former wait until the
other 71 drums were delivered or to accept the substitution of 71
drums of caustic soda of similar grade.
Behn, Meyer sold the 80 drums of caustic soda which was
supposed to be delivered to Yangco. The sale amounted to around
P6k but the 80 drums costs around P10k and this was the amount
claimed by Yangco for damages for the alleged breach of contract.
Issues:
W/N Behn Meyer Co is liable to Yangco for non-delivery

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Ratio/Held
YES, Behn Meyer is liable to Yangco for damages for its
breach of contract. The contract provides for C.I.F Manila which
stands for costs, insurance and freight must mean that the delivery
will be made in Manila. In the case at bar, the contract providing for
C.I.F Manila means that Behn, Meyer was still the owner of the
goods when it was confiscated in Penang since the delivery was to
be made at Manila. Hence, Behn Meyer is liable to Yangco for
breach of contract.
However, the determination of the place of the delivery is
always a question of fact. If the contract be silent as to this point,
delivery by the seller to a common carrier would signify transfer of
the property to the buyer. A couple of presumptions to this regard
is made:
If the buyer pays for the freight, it is presumed that
property is transferred at the point of shipment
If the seller pays for the freight, it is presumed that the
property is transferred when it reaches its destination
If it is C.I.F, as explained above, the seller pays for the costs,
insurance and freight of the goods
If its F.O.B or Free on Board, it means that seller covers ALL
expenses until the goods are delivered to the buyer.
These are all presumptions and would ordinarily yield to proof of
the contrary.

General Foods Corp v. NACOCO

Facts
NACOCO sold to General Foods Corp 1,500 (later reduced to
1,000) long tons of copra at $164 per ton of 2,000 pounds. NACOCO
shipped 1054.6 short tons of copra to General Foods on board the
S.S Mindoro. The weighing of the copra was done by Luzon
Brokerage. By virtue of the weighing done by Luzon Brokerage,
NACOCO prepared the corresponding bills of lading and withdrew
from General Foods letter of credit the amount of P136k.
When the goods reached NY, General Foods found that
there was a deficiency since the copra only weighed at around 900
short tons so General Foods demanded from NACOCO a refund
amounting to around $24k. Jose Nieva, Sr., an officer in charge in
NACOCO acknowledged the deficiency in the outturn weights of the
copra and promised payment as soon as funds were available.
Since NACOCO was abolished sometime after this, General
Foods filed a claim with the Board of Liquidators for the sum of $24k
which the latter refused. General Foods then went to the CFI of
Manila which also dismissed the complaint. Not giving up, General
Foods appealed to the CA who also dismissed their complaint. Being
the persistent bastards they are, General Foods appealed to the SC.
Issue:
W/N the weight in New York should be the basis for the payment of
copra

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Ratio/Held:
YES, the terms of the contract between NACOCO and
General Foods provided that the amount to be paid depends on
the weight of the cargo when it reached the point of destination,
which in this case is New York. It was the manifest intention of the
parties the total price to be paid was to be ascertained upon
determining the net weight and quality of the goods upon arrival in
New York. This intention was proven by the fact that the officer in
charge of NACOCO, Nieves Sr., acknowledged NACOCOs intention
to be bound by the outturn weight at the port of destination.
While the risk of loss was apparently placed on General
Foods after the delivery of the cargo to the carrier, NACOCO failed
to overcome the burden of proof that the loss was due to voyage
risks (i.e drying up of the copra).
Rudolf Leitz Inc v. CA

Facts:
Agapito Buriol owned a parcel of unregistered land in
Palawan. On 15 Aug 1986, Buriol entered into a lease agreement
with Flavia Turatello, TizianaTuratello, and Paola Sani, all Italians,
involving 1 hectare of the property. The lease agreement was for 25
years, renewable for another 25 years. The Italians then took
possession of the land after paying a down payment of 10,000. The
lease agreement was subsequently reduced into writing in Jan 1987.
On 17 Nov 1986, Buriol sold the land to Rudolf Lietz, Inc. for the
amount of 30,000. The Deed of Absolute Sale states that the land
measured 5 hectares, more or less. It also described the
boundaries of the land.
Lietz later discovered that Buriol owned only 4 hectares,
with 1 more covered by the lease agreement. Hence, only 3
hectares were actually delivered
Lietz then filed a complaint for Annulment of Lease with
Recovery of Possession against Buriol and the Italians. He alleged
that Buriol sold to him the lot in evident bad faith and malice
knowing that he owned only 4 hectares, not 5. The trial court
dismissed the complaint and the counterclaim of the Italians for
damages. The CA affirmed the dismissal. It held that under Article
1542, Lietz is no longer entitled to a reduction in price. Lietz
appealed contending that he is entitled to reduction under Article
1539.
Issue:
W/N Lietz entitled to a reduction in the purchase price of the lot
because of the reduced area of the property delivered to him
Held:
No. Under Article 1542, there shall be no reduction in the
purchase price even if the area delivered is less than that stated in
the contract. Article 1539 governs a sale of immovable by the unit,
that is, at a stated price per unit area. In a unit price contract, the
statement of area of immovable is not conclusive and the price
maybe reduced or increased depending on the area actually
delivered.

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In some instances, a sale of an immovable may be made for
a lump sum and not at a rate per unit. In the case where the area of
the immovable is stated in the contract based on an estimate, the
actual area delivered may not measure up exactly with the area
stated in the contract. A vendee of land, when sold in gross or with
the description more or less with reference to its area, does not
thereby ipso facto take all risk of quantity in the land. The use of
more or less or similar words in designating quantity covers only a
reasonable excess or deficiency.
What really defines a piece of ground is not the area
mentioned in its description, but the boundaries therein laid down,
as enclosing the land and indicating its limits. In a contract of sale
of land in a mass, it is well established that the specific boundaries
stated in the contract must control over any statement with respect
to the area contained within its boundaries.
In this case, the sale is one made for a lump sum. The Deed
of Absolute Sale shows that the parties agreed on the purchase
price on a predetermined area of 5 hectares within the specified
boundaries and not based on a particular rate per area. In
accordance with Article 1542, there shall be no reduction in the
purchase price even if the area delivered to Lietz is less than that
stated in the contract. The area within the boundaries as stated in
the contract shall control over the area agreed upon.
Lietz had an ocular inspection prior to the perfection of the
contract. Thus, he gained a fair estimate of the area of the property
sold to him. Also, his subscription to the Deed of Absolute Sale
indicates his assent to the correct description of the boundaries of
the property

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