SALES SC RULED that there was NO perfected contract of sale between the

Atty. Adviento parties.

CHAPTER 1 NATURE AND FORM OF CONTRACTS
Art. 1458 CONCEPT OF A CONTRACT OF SALE
Art. 1458. By the contract of sale one of the contracting parties
obligates himself to transfer the ownership and to deliver a determinate
thing, and the other to pay therefor a price certain in money or its
equivalent. A contract of sale may be absolute or conditional.
DEFINITION
Sale is a contract where one party (seller or vendor) obligates himself to
transfer the ownership of and to deliver a determinate thing, while the
other party (buyer or vendee) obligates himself to pay for said thing a
price certain in money or its equivalent.
Note that in harmony with Art. 1164, ownership of the thing sold does
not pass to the buyer until delivery. See Arts. 1475, 1477, 1496.
Essential requisites are consent, object and price. No special form is
required. (Art. 1483)
Cases
1. Effect of offer and counter-offer
Manila Metal Container Corporation vs. PNB, G.R. No. 166862, December
20, 2006
A contract of sale is consensual in nature and is perfected upon mere
meeting of the minds. When there is merely an offer by one party
without acceptance of the other, there is no contract. When the contract
of sale is not perfected, it cannot, as an independent source of
obligation, serve as a binding juridical relation between the parties.
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. Consequently,
when something is desired which is not exactly what is proposed in the
offer, such acceptance is not sufficient to guarantee consent because
any modification or variation from the terms of the offer annuls the offer.
The acceptance must be identical in all respects with that of the offer so
as to produce consent or meeting of the minds.
Stages of a contract of sale:
(1) Negotiation, covering the period from the time the prospective
contracting parties indicate interest in the contract to the time the
contract is perfected;

FACTS: Petitioner was the owner of a 8,015 square meter parcel of land
located in Mandaluyong (now a City), Metro Manila. The property was
covered by Transfer Certificate of Title (TCT) No. 332098 of the Registry
of Deeds of Rizal. To secure a P900,000.00 loan it had obtained from
respondent Philippine National Bank (PNB), petitioner executed a real
estate mortgage over the lot. Respondent PNB later granted petitioner
a new credit accommodation of P1,000,000.00; and, petitioner executed
an Amendment of Real Estate Mortgage over its property. The petitioner
was unable to pay its obligation to the said respondent. In turn, the
respondent filed for a petition for extrajudicial foreclosure of the real
estate mortgage and sought to have the property sold at public auction.
(2) Perfection, which takes place upon the concurrence of the essential
elements of the sale which are the meeting of the minds of the parties
as to the object of the contract and upon the price; and
(3) Consummation, which begins when the parties perform their
respective undertakings under the contract of sale, culminating in the
extinguishment thereof.
2. Effect of document denominated Agreement between Mr.
Sosa & Bernardo of Toyota Shaw, Inc.
Toyota Shaw, Inc. vs. CA, L-11650, May 23, 1995

The petitioner was given a period (expiration--Feb. 17, 1984) to redeem

FACTS: Luna L. Sosa, respondent, wanted to purchase a Toyota Lite Ace.
the property, but, failed to do so. It caused the petitioner to ask for a
He transacted business with Popong Bernardo, sales representative of
one year extension to redeem the said property. The respondent
Toyota. A Vehicle Sales Proposal (VSP) was accomplished and Mr. Sosa
referred the matter to Pasay City Branch for appropriate action and
paid a down payment of P100,000. On the scheduled date and time for
recommendation. Some PNB Pasay City Branch personnel informed
the delivery of the car, Toyota refused to release the car because the
petitioner that as a matter of policy, the bank does not accept partial
financing company, B.A. Finance Corporation, refused to finance the
redemption. A new title in favor of PNB was issued for petitioners
outstanding balance. Mr. Sosa demanded the return of the down
failure to redeem the property.
payment, which Toyota honored, without prejudice to future claim for
damages.
Meanwhile, the Special Assets Management Department (SAMD) had
prepared a statement of account, and as of June 25, 1984 petitioners
ISSUE: Was this document, executed and signed by the petitioner's sales
obligation amounted to P1,574,560.47. When apprised of the statement
representative, a perfected contract of sale, binding upon the petitioner,
of account, petitioner remitted P725,000.00 to respondent PNB as
breach of which would entitle the private respondent to damages and
deposit to repurchase,.
attorney's fees?
Petitioner declared that it had already agreed to the SAMDs offer to
SC RULED that it is not a contract of sale. No obligation on the part of
purchase the property for P1,574,560.47, and that was why it had paid
Toyota to transfer ownership of a determinate thing to Sosa and no
P725,000.00.
correlative obligation on the part of the latter to pay therefor a price
certain appears therein.
Respondent PNB informed petitioner that the PNB Board of Directors had
accepted petitioners offer to purchase the property, but for
This Court had already ruled that a definite agreement on the manner of
P1,931,389.53 in cash less the P725,000.00 already deposited with it.
payment of the price is an essential element in the formation of a
binding and enforceable contract of sale. This is so because the
Both trial court and CA ruled that there was no perfected contract of sale
agreement as to the manner of payment goes into the price such that a
between the parties; hence, petitioner had no cause of action for specific
disagreement on the manner of payment is tantamount to a failure to
performance against respondent. Both declared that respondent had
agree on the price. Definiteness as to the price is an essential element of
rejected petitioners offer to repurchase the property.
a binding agreement to sell personal property.
ISSUE: whether or not petitioner and respondent PNB had entered into a
At the most, Exhibit "A" may be considered as part of the initial phase of
perfected contract for petitioner to repurchase the property from
the generation or negotiation stage of a contract of sale.
respondent.
ELEMENTS
A. Essential Elements (without which there can be no valid of sale)
1. Consent or meeting of the mindsconsent to transfer
ownership in exchange for the price.
2. Determinate subject matter includes generic objects that are
least determinable (segregated/separated of the same class)
3. Price certain in money or its equivalent
B. Natural Elements (those which are inherent in the contract, and
which in the absence of any contrary provision, are deemed to exist in
the contract)
1. Warranty against eviction (deprivation of the property bought)
2. Warranty against hidden defects
C. Accidental Elements (those which may be present or absent in the
stipulation, such as the place or time of payment, or the presence of
conditions)
EFFECTS OF PRESENCE, ABSENCE, INCOMPLETE ELEMENTS
When all 3 elements are present Perfected Contract
If not present no perfected contract
If all the elements are present but there is a defect/illegal
contract is voidable/void
CHARACTERISTICS
A. Consensualperfected by mere consent.
B. Bilateral (reciprocal)both parties are bound by obligations
dependent upon each other. The power to rescind is implied,
neither party incurs delay if the party does not comply, from
the moment one of the parties fulfills his obligation, the
default by the other begins w/out need of prior demand.
C. Onerousvaluable consideration must be given in order to
acquire rights.
D. Nominatethe Code refers to it by special designation or
name, that is, the contract of sale.
E. Principalfor the contract of sale to validly exist, there is no
necessity for it to depend upon the existence of another
contract.
F. Commutativethe values exchanged are almost equivalent
to each other (general rule). By way of exception, some
contracts of sale are aleatory, that is, one receives may in time
be greater or smaller than what he has given, i.e. sale of
genuine sweepstakes ticket.
G. Delivery transfers ownership ownership does not pass
until delivery.
CONTRACT OF SALE DISTINGUISHED FROM OTHER CONTRACTS
A. Agency to Sell
B. Lease of service or contract for a piece of work
C. Barter
D. Dation in payment
E. Lease of things
F. Donation
A. Sale vs. Agency to Sell
Art. 1466. In construing a contract containing provisions characteristic of
both the contract of sale and of the contract of agency to sell, the
essential clauses of the whole instrument shall be considered. (n)
Cases:
1. Effect of agreement for exclusive sale of beds where the other
party is entitled to commission, among others
Quiroga vs. Parsons Hardware co.
Facts: The defendant was granted by the plaintiff of the exclusive right
to sell as an agent Quiroga beds in the Visayas at the invoice price in
Manila. The agreement was for the defendant to pay for the beds at a
discount from 20% to 25% as commission on the sales. The defendant
shall pay the plaintiff claims that the defendant is his agent while
defendant says he was merely a purchaser.
Issue: Is this a contract of sale or agency?
Held: The Supreme Court declared that the contract by and between the
plaintiff and the defendant was one of purchase and sale, and that the
obligations the breach of which is alleged as a cause of action are not
imposed upon the defendant, either by agreement or by law.
In order to classify a contract, due regard must be given to its essential
clauses. In the contract in question, what was essential, as constituting
its cause and subject matter, is that the plaintiff was to furnish the
defendant with the beds which the latter might order, at the price
stipulated, and that the defendant was to pay the price in the manner
stipulated. There was the obligation on the part of the plaintiff to supply
the beds, and, on the part of the defendant, to pay their price. These
features exclude the legal conception of an agency or order to sell
whereby the mandatory or agent received the thing to sell it, and does
not pay its price, but delivers to the principal the price he obtains from
the sale of the thing to a third person, and if he does not succeed in
selling it, he returns it.
B. Sale vs. Lease of Service or Contract for a piece of work
Art. 1467. A contract for the delivery at a certain price of an article which
the vendor in the ordinary course of his business manufactures or
procures for the general market, whether the same is on hand at the
time or not, is a contract of sale, but if the goods are to be
manufactured specially for the customer and upon his special order, and
not for the general market, it is a contract for a piece of work.
Cases:
1. Nature of transactions of company engaged in the design,
supply and installation of certain type of air conditioning
system.
Commissioner of Internal Revenue v. Engineering Equipment and
Supply Co.
Facts: Engineering Equipment and Supply Co., a domestic corporation, is
engaged in the design and installation of central type air conditioning
system, pumping plants and steel fabrications. CIR now denounced
Engineering for tax evasion by misdeclaring its imports and failing to pay
the correct percentage taxes due thereon in connivance with its foreign
suppliers. The Commissioner contends that Engineering is a
manufacturer and seller of air conditioning units and parts or accessories
thereof and, therefore, it is subject to the 30% advance sales tax.
Engineering is a contractor this subject only to the 3% tax imposed on
contractors.
Contract of Sale v. Contract of Services; Test. The distinction between
a contract of sale and one for work, labor and materials is tested by the
inquiry 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 but has been the subject
of sale to some other persons even if the order had not been given. If
the article ordered by the purchaser is exactly such as the seller makes
and keeps on hand for sale to anyone, and no change or modification of
it is made at purchaser's request, it is a contract of sale even though it
may be entirely made after, and in consequence of the purchaser's order
for it.
Engineering is a contractor rather than a manufacturer. Supply of air
conditioning units to Engineer's various customers, whether the said
machineries were in hand or not, was especially made for each customer
and installed in his building upon his special order. The air conditioning
units installed in a central type of air conditioning system would not have
existed but for the order of the party desiring to acquire it and if it
existed without the special order of Engineering's customer, the said air
conditioning units were not intended for sale to the general public.
Moreover, it advertises itself as a contractor and pays the contractor's
tax for design and construction of central type air conditioning systems,
and does not have ready-made air-conditioning units for sale, but must
design and construct each unit to meet the particular requirements of its
customers, said taxpayer is considered a contractor rather than a
manufacturer for purposes of the Tax Code. Thus, such taxpayer is not a
manufacturer subject to the 30% advance sales tax prescribed in Section
185 (m) in relation to Section 194 of the Tax Code, but is a contractor
subject to the 3% tax imposed by Section 191 of the same Code.
A taxpayer is required by law to truly declare his importation in the
import entries and internal revenue declarations before it is released.
Thus, by requiring its foreign supplier to change the nomenclature of air
conditioning parts and accessories, and misdeclaring its importation so
as to make them subject to the lower rate of 7% percentage tax under
Section 186 of the Tax Code, thereby evading the payment of the 30%
tax under Section 185(m) thereof, said taxpayer is subject to the
payment of the 50% fraud surcharge prescribed by Section 183(a).
C. Sale vs. Barter
Art. 1468. If the consideration of the contract consists partly in money,
and partly in another thing, the transaction shall be characterized by the
manifest intention of the parties. If such intention does not clearly
appear, it shall be considered a barter if the value of the thing given as a
part of the consideration exceeds the amount of the money or its
equivalent; otherwise, it is a sale.
If the value of the thing is more than the value of the money or its
equivalent, the contract is a barter. If the value of the thing is less than
the value of the money, then the contract is a sale.
D. Sale vs. Dation in payment
Dation in payment implies that there is an existing obligation whereas
contract of sale, there is no prior obligation.
E. Sale vs. Lease of Service of Contract
Delivery in this latter contract does not involve a transfer of ownership.
F. Sale vs. Donation
Donation in that this latter contract is gratuitous and requires special
formalities.
Art. 1479 PROMISE TO SELL: WHEN BINDING
Art. 1479. A promise to buy and sell and determinate thing for a price
certain is reciprocally demandable. 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.
IF BILATERAL
A bilateral promise to buy and sell requires NO CONSIDERATION
distinct from the selling price - a bilateral promise to buy or to sell a
certain thing for a price certain gives to the contracting parties personal
rights in that each has the right to demand from the other the fulfillment
of the obligation.
IF UNILATERAL
Only the accepted unilateral promise to buy or sell that needs
consideration distinct from the selling price - the acceptance of a
unilateral promise to sell must be plain, clear and unconditional.
Therefore, if there is qualified acceptance with terms different from the
offer there is no acceptance, that there is no promise to buy and there is
no perfected sale.
Cases:
1. Option defined
Eulogio vs. Apeles, G.R. No. 167884, January 20, 2009
Contract of Lease with an Option
An option is a contract by which the owner of the property agrees with
another person that the latter shall have the right to buy the formers
property at a fixed price within a certain time. It is a condition offered 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,
or 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.
An option is not of itself a purchase, but merely secures the privilege to
buy. It is not a sale of property but a sale of the right to purchase. It is
simply 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. He does not sell his land; he does not then
agree to sell it; but he does sell something, i.e., the right or privilege to
buy at the election or option of the other party. Its distinguishing
characteristic is that it imposes no binding obligation on the person
holding the option, aside from the consideration for the offer.
"An accepted unilateral promise" can only have a binding effect if
supported by a consideration, which means that the option can still be
withdrawn, even if accepted, if the same is not supported by any
consideration.
ii) Remedy of optionee for breach specific performance
2. Right of First Refusal right on the part of the owner that if
he decides to sell the property in the future, he would first
negotiate its sale to the one he promised.
Ang Yu Asuncion vs. CA
Facts: On July 29, 1987 a Second Amended Complaint for Specific
Performance was filed by Ann Yu Asuncion and Keh Tiong, et al., against
Bobby Cu Unjieng, Rose Cu Unjieng and Jose Tan before the Regional
Trial Court, Branch 31, Manila in Civil Case No. 87-41058, alleging,
among others, that plaintiffs are tenants or lessees of residential and
commercial spaces owned by defendants described as Nos. 630-638
Ongpin Street, Binondo, Manila; that they have occupied said spaces
since 1935 and have been religiously paying the rental and complying
with all the conditions of the lease contract; that on several occasions
before October 9, 1986, defendants informed plaintiffs that they are
offering to sell the premises and are giving them priority to acquire the
same; that during the negotiations, Bobby Cu Unjieng offered a price of
P6-million while plaintiffs made a counter offer of P5-million; that
plaintiffs thereafter asked the defendants to put their offer in writing to
which request defendants acceded; that in reply to defendant's letter,
plaintiffs wrote them on October 24, 1986 asking that they specify the
terms and conditions of the offer to sell; that when plaintiffs did not
receive any reply, they sent another letter dated January 28, 1987 with
the same request; that since defendants failed to specify the terms and
conditions of the offer to sell and because of information received that
defendants were about to sell the property, plaintiffs were compelled to
file the complaint to compel defendants to sell the property to them.
"After the issues were joined, defendants filed a motion for summary
judgment which was granted by the lower court. The trial court found
that defendants' offer to sell was never accepted by the plaintiffs for the
reason that the parties did not agree upon the terms and conditions of
the proposed sale, hence, there was no contract of sale at all.
Nonetheless, the lower court ruled that should the defendants
subsequently offer their property for sale at a price of P11-million or
below, plaintiffs will have the right of first refusal.
Issue: Whether or not there is perfected contract of sale
Held: 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. Neither
can the right of first refusal, understood in its normal concept, per sebe
brought within the purview of an option under the second paragraph of
Article 1479, aforequoted, or possibly of an offer under Article 1319 9 of
the same Code. An option or an offer would require, among other
things, 10 a clear certainty on both the object and the cause or
consideration of the envisioned contract. 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 grantor's 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 general
application, the pertinent scattered provisions of the Civil Code on
human conduct.
Even on the premise that such right of first refusal has been decreed
under a final judgment, like here, its breach cannot justify
correspondingly an issuance of a writ of execution under a judgment
that merely recognizes its existence, nor would it sanction an action for
specific performance without thereby negating the indispensable
element of consensuality in the perfection of contracts. 11 It is not to
say, however, that the right of first refusal would be inconsequential for,
such as already intimated above, an unjustified disregard thereof, given,
for instance, the circumstances expressed in Article 19 12 of the Civil
Code, can warrant a recovery for damages.
Note: right of first refusal cannot be deemed a perfected sale because it
merely pertains to a specific property w/out containing an agreement as
to the price.
THE CONTRACT OF SALE MAY BE:
1. Absolute
2. Conditional
A. Executed contract
B. Executory contract
A. Absolute
Ramos vs. Heruela, G.R. No. 145330, Oct. 14, 2005
Absolute sale Conditional sale
Ownership remains with the
When title to the property passes vendor and does not pass to the
to the vendee upon delivery of vendee until full payment of the
the thing sold purchase price.
When there is no stipulation in The full payment of the purchase
the contract that title to the price partakes of a suspensive
property remains with the seller condition, and non-fulfillment of
until full payment of the purchase the condition prevents the
price obligation to sell from arising.
If there is no stipulation giving
the vendor the right to cancel
unilaterally the contract the
moment the vendee fails to pay
within a fixed period
Heirs of Mascunana vs. CA, G.R. No. 158646, June 23, 2005
Facts: It is settled that a perfected contract of sale cannot be challenged
on the ground of the non-transfer of ownership of the property sold at
that time of the perfection of the contract, since it is consummated upon
delivery of the property to the vendee. It is through tradition or delivery
that the buyer acquires ownership of the property sold. As provided in
Article 1458 of the New Civil Code, when the sale is made through a
public instrument, the execution thereof is equivalent to the delivery of
the thing which is the object of the contract, unless the contrary appears
or can be inferred. The record of the sale with the Register of Deeds
and the issuance of the certificate of title in the name of the buyer over
the property merely bind third parties to the sale. As between the seller
and the buyer, the transfer of ownership takes effect upon the execution
of a public instrument covering the real property. Long before the
petitioners secured a Torrens title over the property, the respondents
had been in actual possession of the property and had designated Barte
as their overseer.
Although denominated a Deed of Conditional Sale, a sale is still
absolute where the contract is devoid of any proviso that title is reserved
or the right to unilaterally rescind is stipulated, e.g., until or unless the
price is paid. Ownership will then be transferred to the buyer upon
actual or constructive delivery (e.g. by the execution of a public
document) of the property sold. Where the condition is imposed upon
the perfection of the contract itself, the failure of the condition would
prevent such perfection. If the condition is imposed on the obligation of
a party which is not fulfilled, the other party may either waive the
condition or refuse to proceed with the sale. (Art. 1545, Civil Code)
A deed of sale is considered absolute in nature where there is neither a
stipulation in the deed that title to the property sold is reserved in the
seller until full payment of the price, nor one giving the vendor the right
to unilaterally resolve the contract the moment the buyer fails to pay
within a fixed period.
B. Conditional, which may in turn be
A. An executed contract which property (ownership) in the
thing is transferred from seller to buyer, and nonpayment of
the price is a negative resolutory condition.
B. An executory contract- ownership does not pass until some
future time (the fulfillment of some condition, such as full
payment of the purchase price)
DISTINCTIONS
Executed Contract Executory Contract
Property ownership is conveyed No property is conveyed

If buyer defaults, seller may sue
for the price
Risk of loss is generally borne by
the buyer
Transfer of ownership
Absolute upon delivery
Conditional ownership is reserved by the owner
CONTRACT TO SELL VS. CONTRACT OF SALE
If buyer defaults, seller is only
entitled to damages
Risk of loss is generally borne by
the seller
to do so brought about a situation which prevented the obligation of
Spouses Robles, respondents in the case at bar bound themselves to
deliver a deed of absolute sale and clean title covering the two parcels of
land upon full payment by the buyer of the purchase price of
P2,000,000.00. This promise to sell was subject to the fulfillment of the
suspensive condition of full payment of the purchase price by the
petitioner. Petitioner, however, failed to complete payment of the
purchase price. The non-fulfillment of the condition of full payment
rendered the contract to sell ineffective and without force and effect. It
must be stressed that the breach contemplated in Article 1191 of the
New Civil Code is the obligor's failure to comply with an obligation.
Failure to pay, in this instance, is not even a breach but merely an event
which prevents the vendor's obligation to convey title from acquiring
binding force. Hence, the agreement of the parties in the case at bench
may be set aside, but not because of a breach on the part of petitioner
for failure to complete payment of the purchase price. Rather, his failure
respondent spouses to convey title from acquiring an obligatory force.
2. Interpretation of document denominated Receipt of Partial
Payment

Coronel vs. CA, G.R. No. 103577, Oct. 7, 1996

Contract to sell Contract of sale

The payment in full of the price is
a positive suspensive condition.
Hence, if the price is not paid, it
is as if the obligation of the seller
t o d e l i v e r a n d t o t ra n s f e r
ownership never became effective
and binding.
The non-payment of the price is a
RESOLUTORY condition, i.e. the
contract of sale may by such
occurrence put an end to a
transaction that once upon a time
existed
FACTS: Defendants Coronels issued a document, receipt of down
payment, in favor of Ramona. In the said document, it was stipulated
that the Coronels, upon receipt of the down payment in the amount of
50k (1.24M total price) for their inherited house and lot, bind themselves
to the effect that they will transfer, from their father, the transfer
certificate title to their names. After the TCT is under their name, they
will execute immediately a deed of absolute sale in favor of Ramona and
she will pay the balance of 1.19M. The mother of Ramona, Concepcion,
paid the 50k as down payment. Thereafter, the Coronels transferred the
said property in their names.

Ownership is retained by the
seller, regardless of delivery and
is not pass until fill payment of
the price
Title over the property generally
passes to the buyer upon delivery
Coronels sold the property to Catalina for the amount of 1.58M after the
latter paid a down payment of 300k. For this reason, Coronels canceled
and rescinded the contract with Ramona by depositing the down
payment paid by Concepcion in the bank in trust for Ramona Patricia
Alcaraz.

Concepcion et al. filed a case against specific performance. A notice of

Since the seller retains
ownership, despite delivery, he is
enforcing not rescinding the
contract if he seeks to oust the
buyer for failure to pay.
After delivery has been made, the
seller has lost ownership and
cannot recover it unless the
contract is resolved or rescinded
lis pendens was annotated at the back of the title. An adverse claim by
Catalina was also annotated. The Coronels executed a deed of absolute
sale in favor of Catalina. Thus, a new title was issued in the name of
Catalina.

Both trial court and CA ruled in favor of Concepcion. It ordered the

specific performance of the agreement.

Contract to sell 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 payment of full
purchase price.
Contract of Sale no reservation of ownership where the owner can
unilaterally rescind the contract if one of the party fails to fulfill its duty.
1. Interpretation of document denominated Agreement of
Purchase and Sale
Ong vs. CA, G.R. No. 97347, July6, 1999
It is in the nature of a contract to sell.
In a contract of sale, the title to the property passes to the vendee upon
the delivery of the thing sold; while in a contract to sell, ownership is, by
agreement, reserved in the vendor and is not to pass to the vendee until
full payment of the purchase price. In a contract to sell, the payment of
the purchase price is a positive suspensive condition, the failure of which
is not a breach, casual or serious, but a situation that prevents the
obligation of the vendor to convey title from acquiring an obligatory
force.
ISSUE: legal determination of the document, Receipt of Downpayment
SC RULED that when the "Receipt of Down Payment" is considered in its
entirety, it becomes more manifest that there was a clear intent on the
part of petitioners to transfer title to the buyer, but since the transfer
certificate of title was still in the name of petitioner's father, they could
not fully effect such transfer although the buyer was then willing and
able to immediately pay the purchase price. This is a contract OF sale,
SC affirmed the decision of CA.
In a contract of sale, the title passes to the vendee upon the delivery of
the thing sold; whereas in a contract to sell, ownership is not transferred
upon delivery of the property but upon full payment of the purchase
price. In the former, the vendor has lost and cannot recover ownership
until and unless the contract is resolved or rescinded; whereas in the
latter, title is retained by the vendor until the full payment of the price,
such payment being a positive suspensive condition and failure of which
is not a breach but an event that prevents the obligation of the vendor
to convey title from becoming effective.
CONTRACT TO SELL VS. CONDITIONAL SALE
Conditional Sale upon happening of the condition, title is
transferred. Seller cannot sell to another person.
Contract to sell ownership is transferred upon creation of necessary
documents.
Coronel vs CA
A contract to sell as defined hereinabove, may not even be considered
as a conditional contract of sale where the seller may likewise reserve
title to the property subject of the sale until the fulfillment of a
suspensive condition, because in a conditional contract of sale, the first
element of consent is present, although it is conditioned upon the
happening of a contingent event which may or may not occur. If the
suspensive condition is not fulfilled, the perfection of the contract of sale
is completely abated (cf. Homesite and Housing Corp. vs. Court of
Appeals, 133 SCRA 777 [1984]). However, if the suspensive condition is
fulfilled, the contract of sale is thereby perfected, such that if there had
already been previous delivery of the property subject of the sale to the
buyer, ownership thereto automatically transfers to the buyer by
operation of law without any further act having to be performed by the
seller.
Nabus vs. Pacson
Facts: The spouses Bate and Julie Nabus were the owners of parcels of
land with a total area of 1,665 square meters, situated in Pico, La
Trinidad, Benguet, duly registered in their names under TCT No. T-9697
of the Register of Deeds of the Province of Benguet. The property was
mortgaged by the Spouses Nabus to the Philippine National Bank (PNB),
La Trinidad Branch, to secure a loan in the amount of P30,000.00.
On February 19, 1977, the Spouses Nabus executed a Deed of
Conditional Sale 4 covering 1,000 square meters of the 1,665 square
meters of land in favor of respondents Spouses Pacson for a
consideration of P170,000.00, which was duly notarized on February 21,
1977. Their contract had the following condition:
THAT, as soon as the full consideration of this sale has been paid by the
VENDEE, the corresponding transfer documents shall be executed by the
VENDOR to the VENDEE for the portion sold;
THAT, it is mutually understood that in as much as there is a claim by
other persons of the entire property of which the portion subject of this
Instrument is only a part, and that this claim is now the subject of a civil
case now pending before Branch III of the Court of First Instance of
Baguio and Benguet, should the VENDOR herein be defeated in the said
civil action to the end that he is divested of title over the area subject of
this Instrument, then he hereby warrants that he shall return any and all
monies paid by the VENDEE herein whether paid to the PNB, La Trinidad,
Benguet Branch, or directly received by herein VENDOR, all such monies
to be returned upon demand by the VENDEE;
THAT, a portion of the parcel of land subject of this instrument is
presently in the possession of Mr. Marcos Tacloy, and the VENDOR
agrees to cooperate and assist in any manner possible in the ouster of
said Mr. Marcos Tacloy from said possession and occupation to the end
that the VENDEE herein shall make use of said portion as soon as is
practicable;
Thereafter, respondents took possession of the subject property. They
constructed an 80 by 32-feet building and a steel-matting fence around
the property to house their truck body-building shop which they called
the "Emiliano Trucking Body Builder and Auto Repair Shop."
On December 24, 1977, before the payment of the balance of the
mortgage amount with PNB, Bate Nabus died. On August 17, 1978, his
surviving spouse, Julie Nabus, and their minor daughter, Michelle Nabus,
executed a Deed of Extra Judicial Settlement over the registered land
covered by TCT No. 9697. On the basis of the said document, TCT No.
T-17718 8 was issued on February 17, 1984 in the names of Julie Nabus
and Michelle Nabus.
During the last week of January 1984, Julie Nabus, accompanied by her
second husband, approached Joaquin Pacson to ask for the full payment
of the lot. Joaquin Pacson agreed to pay, but told her to return after four
days as his daughter, Catalina Pacson, would have to go over the
numerous receipts to determine the balance to be paid. When Julie
Nabus returned after four days, Joaquin sent her and his daughter,
Catalina, to Atty. Elizabeth Rillera for the execution of the deed of
absolute sale. Since Julie was a widow with a minor daughter, Atty.
Rillera required Julie Nabus to return in four days with the necessary
documents, such as the deed of extrajudicial settlement, the transfer
certificate of title in the names of Julie Nabus and minor Michelle Nabus,
and the guardianship papers of Michelle. However, Julie Nabus did not
return.
Getting suspicious, Catalina Pacson went to the Register of Deeds of the
Province of Benguet and asked for a copy of the title of the land. She
found that it was still in the name of Julie and Michelle Nabus
After a week, Catalina Pacson heard a rumor that the lot was already
sold to petitioner Betty Tolero. Catalina Pacson and Atty. Rillera went to
the Register of Deeds of the Province of Benguet, and found that Julie
Nabus and her minor daughter, Michelle Nabus, represented by the
former's mother as appointed guardian by a court order dated October
29, 1982, had executed a Deed of Absolute Sale in favor of Betty Tolero
on March 5, 1984.
Issue: Whether the Deed of Conditional Sale was a contract to sell or a
contract of sale.
Held: A contract to sell as defined hereinabove, may not even be
considered as a conditional contract of sale where the seller may
likewise reserve title to the property subject of the sale until the
fulfillment of a suspensive condition, because in a conditional contract of
sale, the first element of consent is present, although it is conditioned
upon the happening of a contingent event which may or may not occur.
If the suspensive condition is not fulfilled, the perfection of the contract
of sale is completely abated. However, if the suspensive condition is
fulfilled, the contract of sale is thereby perfected, such that if there had
already been previous delivery of the property subject of the sale to the
buyer, ownership thereto automatically transfers to the buyer by
operation of law without any further act having to be performed by the
seller.
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.
It is not the title of the contract, but its express terms or stipulations
that determine the kind of contract entered into by the parties. In this
case, the contract entitled "Deed of Conditional Sale" is actually a
contract to sell. The contract stipulated that "as soon as the full
consideration of the sale has been paid by the vendee, the
corresponding transfer documents shall be executed by the vendor to
the vendee for the portion sold." 41 Where the vendor promises to
execute a deed of absolute sale upon the completion by the vendee of
the payment of the price, the contract is only a contract to sell." 42 The
aforecited stipulation shows that the vendors reserved title to the
subject property until full payment of the purchase price.
As vendees given possession of the subject property, the ownership of
which was still with the vendors, the Pacsons should have protected
their interest and inquired from Julie Nabus why she did not return and
then followed through with full payment of the purchase price and the
execution of the deed of absolute sale. The Spouses Pacson had the
legal remedy of consigning their payment to the court; however, they did
not do so. A rumor that the property had been sold to Betty Tolero
prompted them to check the veracity of the sale with the Register of
Deeds of the Province of Benguet. They found out that on March 5,
1984, Julie Nabus sold the same property to Betty Tolero through a Deed
of Absolute Sale, and new transfer certificates of title to the property
were issued to Tolero.
Unfortunately for the Spouses Pacson, since the Deed of Conditional Sale
executed in their favor was merely a contract to sell, the obligation of
the seller to sell becomes demandable only upon the happening of the
suspensive condition. 43 The full payment of the purchase price is the
positive suspensive condition, the failure of which is not a breach of
contract, but simply an event that prevented the obligation of the vendor
to convey title from acquiring binding force. 44 Thus, for its non-
fulfilment, there is no contract to speak of, the obligor having failed to
perform the suspensive condition which enforces a juridical relation. 45
With this circumstance, there can be no rescission or fulfilment of an
obligation that is still non-existent, the suspensive condition not having
occurred as yet.
Arts. 1459 to 1465 OBJECT
Art. 1459. The thing must be licit and the vendor must have a right to
transfer the ownership thereof at the time it is delivered.
Art. 1460. A thing is determinate when it is particularly designated or
physical segregated from all other of the same class. The requisite that a
thing be determinate is satisfied if at the time the contract is entered
into, the thing is capable of being made determinate without the
necessity of a new or further agreement between the parties.
Art. 1461. Things having a potential existence may be the object of the
contract of sale. The efficacy of the sale of a mere hope or expectancy is
deemed subject to the condition that the thing will come into existence.
The sale of a vain hope or expectancy is void.
Art. 1462. The goods which form the subject of a contract of sale may
be either existing goods, owned or possessed by the seller, or goods to
be manufactured, raised, or acquired by the seller after the perfection of
the contract of sale, in this Title called "future goods." There may be a
contract of sale of goods, whose acquisition by the seller depends upon
a contingency which may or may not happen.
Art. 1463. The sole owner of a thing may sell an undivided interest
therein.
Art. 1464. In the case of fungible goods, there may be a sale of an
undivided share of a specific mass, though the seller purports to sell and
the buyer to buy a definite number, weight or measure of the goods in
the mass, and though the number, weight or measure of the goods in
the mass is undetermined. By such a sale the buyer becomes owner in
common of such a share of the mass as the number, weight or measure
bought bears to the number, weight or measure of the mass. If the mass
contains less than the number, weight or measure bought, the buyer
becomes the owner of the whole mass and the seller is bound to make
good the deficiency from goods of the same kind and quality, unless a
contrary intent appears. (n)
Art. 1465. Things subject to a resolutory condition may be the object of
the contract of sale. (n)
OBJECT
The object must be licit not contrary to law, morals, good
customs, public order or public policy, within the commerce of
man. If illicit, contract is void
All rights which are not intransmissible or personal may also be
the object of sale (i.e. right of usufruct)
Services cannot be the object of a contract of sale
Test of Determinability
1. Capacity to Segregate
2. No further agreement
QUALITIES OF AN OBJECT
1. Lawful
2. Determinate or determinable
3. Existing, future or contingent
4. Transferability of ownership
A. Lawful
The thing must be licit and the vendor must have a right to transfer the
ownership thereof at the time it is delivered. (n)
Object must be licit
Vendor must have the right to transfer ownership at the time
the object is delivered
Unlawful object:
Future inheritance
Homestead (sale within 5 year prohibitory period)
Manalapat v. CA
Facts: In 1976, a free patent was issued in Manlapats name. In 1954,
before the subject lot was titled, he sold a portion to Ricardo evidenced
by a deed of sale. He conveyed another portion to Ricardo in 1981. Leon
Banaag (son-in-law of Manlapat) executed a mortgaged with the subject
lot as the collateral. Heirs of Ricardo sought to obtain the title from
petitioners which was in the custody of RBSP, earlier surrendered as a
consequence of the mortgage.
SC: Five-year prohibition against alienation or encumbrances under the
Public Land Act. Eduardo was issued a title in 1976 on the basis of his
free patent application. Such application implies the recognition of the
public dominion character of the land and, hence, the 5-year prohibition
imposed by the PLA against alienation or encumbrance of the land
covered by a free patent or homestead should have been considered.
The deed of sale which was executed in 1981 is obviously covered by
the proscription, the free patent having been issued in 1976. However,
petitioners may recover the portion sold since the prohibition was
imposed in favor of the free patent holder.
The sale executed 1954 was before the issuance of the patent in 1976.
Apparently, Eduardo disposed of the portion even before he thought of
applying for a free patent. Where the sale or transfer took place before
the filing of the free patent application, whether by the vendor or the
vendee, the prohibition should not be applied. In such a situation,
neither the prohibition nor the rationale therefore which is to keep in the
family of the patentee that portion of the public land which the
government has gratuitously given him, by shielding him from the
temptation to dispose of his landholding, could be relevant. Precisely, he
had disposed of his rights to the lot even before the government could
give the title to him.
The mortgage executed in favor of RBSP is also beyond the pale of the
prohibition, as it was forged in December 1981 a few months past the
period of prohibition.
B. Determinate or Determinable - Undivided interest can be subject
to sale. The buyer will become a co-owner.
a) Before partition
b) In a mass of fungible goods.
Cases:
1. Sale by co-heir of undivided portion of estate
Vagilidad v. Vagilidad
Facts:
4,280 sqm of lot was owned by Zoilo. In 1931, ZOILO died.
Subsequently son of Zolio, Loreto sold to Gabino Vagilidad a portion of
said lot as evidenced by the Deed of Absolute Sale executed by Loreto
on 1986. After, Zoilos children executed an Extrajudicial Settlement of
Estate adjudicating the entire lot to Loreto in 1987. Gabino filed petition
of surrender of lot against Loreto, claiming that he is owner pursuant to
deed of Sale issued before the extra judicial settlement.
However, there seemed to be an amicable settlement between them,
and the case was sent to archives.
Gabino paid real estate taxes on the land he bought from Loreto which
he later sold to Wilfredo Vagilidad. Likewise, a Deed of Absolute Sale
was also made by Loreto in favor of Wilfredo for the same portion of lot.
Wlfredo mortgaged this property to obtain a loan. Gabino and his wife
filed petition for reconveyance.
The requisite that a thing be determinate is satisfied if at the time the
contract is entered into, the thing is capable of being made determinate
without the necessity of a new or further agreement between the
parties. Art. 1349 states that the object of every contract must be
determinate, as to its kind. 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. Art. 1460 defines that a thing is determinate when
it is particularly designated or physically segregated from all others of
the same class. The property sold by Loreto to Gabino was
determinable.
A co-owner has full ownership of his pro-indiviso share and has the right
to alienate, assign or mortgage it, and substitute another person for its
enjoyment. The subject parcel, being an inherited property, is subject to
the rules of co-ownership under the Civil Code. Co-ownership is the right
of common dominion which two or more persons have in a spiritual part
of a thing, not materially or physically divided. Before the partition of the
property held in common, no individual or co-owner can claim title to
any definite portion thereof. All that the co-owner has is an ideal or
abstract quota or proportionate share in the entire property. LORETO
sold the subject property to GABINO as a co-owner. LORETO had a right,
even before the partition to transfer in whole or in part his undivided
interest in the lot even without the consent of his co-heirs. This right is
absolute. Thus, what GABINO obtained by virtue of the sale on were the
same rights as the vendor LORETO had as co-owner, in an ideal share
equivalent to the consideration given under their transaction.
Consequently, when LORETO purportedly sold to WILFREDO the same
portion of the lot, he was no longer the owner said lot. Based on the
principle that "no one can give what he does not have," LORETO could
not have validly sold to WILFREDO what he no longer had.
2. Effect of agreement where the exact number of palay to be
sold was not fixed.
National Grains Authority v. IAC
Facts: Leon Soriano submitted the documents required by the NFA for
pre-qualifying as a seller. These were processed and he was given a
quota of 2,640 cavans of palay. On August 1979, Soriano delivered 630
cavans of palay. The palay delivered were not rebagged, classified and
weighed. When Soriano demanded payment, he was informed that it
was held in abeyance since Mr. Cabal was still investigating on an
information that Soriano was not a bona fide farmer and the palay
delivered was not produced from his farmland but was taken from the
warehouse of a rice trader, Ben de Guzman. Petitioner wrote Soriano
advising him to withdraw the 630 cavans. Instead of withdrawing,
Soriano insisted that the palay grains delivered be paid. NFA was
ordered to pay Soriano.
Present case involves a perfected contract of sale. Soriano initially
offered to sell palay grains produced in his farmland to NFA. When the
latter accepted the offer by noting in Sorianos Farmers Information
Sheet a quota of 2,640 cavans, there was already a meeting of the
minds between the parties. The object of the contract, being the palay
grains produced in Sorianos farmland and the NFA was to pay the same
depending upon its quality. The contention that since the delivery were
not rebagged, classified and weighed in accordance with the palay
procurement program of NFA, there was no acceptance of the offer thus
this is a clear case of an unaccepted offer to sell, is untenable.
Quantity being indeterminate does not affect perfection of contract; No
need to create new contract. The fact that the exact number of cavans
of palay to be delivered has not been determined does not affect the
perfection of the contract. In the present case, there was no need for
NFA and Soriano to enter into a new contract to determine the exact
number of cavans of palay to be sold. Soriano can deliver so much of his
produce as long as it does not exceed 2,640 cavans. (It did not need a
new contract to make 630 cavans a determinate thing).
Sale a consensual contract; Acceptance is on the offer and not the goods
delivered. Sale is a consensual contract, there is perfection when there
is consent upon the subject matter and price, even if neither is
delivered. (Obana vs. C.A., L-36249, March 29, 1985, 135 SCRA 557,
560). The acceptance referred to which determines consent is the
acceptance of the offer of one party by the other and not of the goods
delivered.
Compliance of mutual obligations once a contract of sale is perfected.
From the moment the contract of sale is perfected, it is incumbent upon
the parties to comply with their mutual obligations or the parties may
reciprocally demand performance thereof. (Article 1475, Civil Code, 2nd
par.)
C. Existing, Future, or contingent
Case:
1. Sale of Future Inheritance
Tanedo vs Ca
Facts: On October 20, 1962, Lazaro Taedo executed a notarized deed
of absolute sale in favor of his eldest brother, Ricardo Taedo, and the
latters wife, Teresita Barera, private respondents herein, whereby he
conveyed to the latter in consideration of P1,500.00, one hectare of
whatever share I shall have over Lot No. 191 of the cadastral survey of
Gerona, Province of Tarlac and covered by Title T-l3829 of the Register
of Deeds of Tarlac, the said property being his future inheritance from
his parents (Exh. 1). Upon the death of his father Matias, Lazaro
executed an Affidavit of Conformity dated February 28, 1980 (Exh. 3)
to re-affirm, respect. acknowledge and validate the sale I made in
1962. On January 13, 1981, Lazaro executed another notarized deed of
sale in favor of private respondents covering his undivided ONE
TWELVE (1/12) of a parcel of land known as Lot 191 x x (Exh. 4). He
acknowledged therein his receipt of P 10,000.00 as consideration
therefor. In February 1981, Ricardo learned that Lazaro sold the same
property to his children, petitioners herein, through a deed of sale dated
December 29, 1980 (Exh. E). On June 7, 1982, private respondents
recorded the Deed of Sale (Exh. 4) in their favor in the Registry of Deeds
and the corresponding entry was made in Transfer Certificate of Title No.
166451 (Exh. 5).
Petitioners on July 16, 1982 filed a complaint for rescission (plus
damages) of the deeds of sale executed by Lazaro in favor of private
respondents covering the property inherited by Lazaro from his father.
Issue: Is a sale of future inheritance valid?
Held: No contract may be entered into upon a future inheritance except
in cases expressly authorized by law.
Consequently, said contract made in 1962 is not valid and cannot be the
source of any right nor the creator of any obligation between the parties.
Hence, the affidavit of conformity dated February 28, 1980, insofar as
it sought to validate or ratify the 1962 sale, is also useless and, in the
words of the respondent Court, suffers from the same infirmity. Even
private respondents in their memorandum concede this.
D. Transferability of Ownership
Ownership
1. It need not exist at the perfection of the contract. Required at
the time of delivery
2. Subsequent acquisition of title by a vendor w/out title validates
the sale
3. Acquisition of title by the vendee may depend upon a
contingency (right of redemption)
Notes:
The seller must have the right to transfer the ownership of the
thing or right sold to the buyer at the time of delivery and not at
the time of the making of the contract.
Nemo dat quod non habet, as an ancient Latin maxim says. One
cannot give what does not have.
When ownership is required At the time of sale but ownership
may not be w/ the seller in case of future things.
Cases:
1. Sale by mortgagee of land not proper subject of mortgage
Cavite Development Bank v. Lim, 324 scra 346
Facts: Rodolfo Guansing obtained a fraudulent title by executing an
Extra-Judicial Settlement of the Estate With Waiver where he made it
appear that he and Perfecto Guansing were the only surviving heirs
entitled to the property, and that Perfecto had waived all his rights
thereto. Consequently he acquired title and used this to acquire a loan.
CDB foreclosed the mortgage and granted him the period of redemption,
which he did not exercise.
It is not required that, at the perfection stage, the seller be the owner of
the thing sold or even that such subject matter of the sale exists at that
point in time. Thus, under Art. 1434 of the Civil Code, when a person
sells or alienates a thing which, at that time, was not his, but later
acquires title thereto, such title passes by operation of law to the buyer
or grantee. This is the same principle behind the sale of "future goods"
under Art. 1462 of the Civil Code. However, under Art. 1459, at the time
of delivery or consummation stage of the sale, it is required that the
seller be the owner of the thing sold. Otherwise, he will not be able to
comply with his obligation to transfer ownership to the buyer. It is the
consummation stage where the principle of nemo dat quod non habet
applies. In this case, the sale by CDB to Lim of the property mortgaged
in 1983 by Rodolgo Guansing must, therefore, be deemed a nullity for
CDB did not have a valid title to the said property. To be sure, CDB never
acquired a valid title to the property because the foreclosure sale, by
virtue of which the property had awarded to CDB as highest bidder, is
likewise void since the mortgagor was not the owner of the property
foreclosed.
CDB cannot be considered a mortgagee in good faith. While petitioners
are not expected to conduct an exhaustive investigation on the history of
the mortgagor's title, CDB cannot be excused from the duty of exercising
the due diligence required of banking institutions in ascertaining the
validity of the title.
That after the payment of the 10% option money, the Offer to
Purchase provides for the payment only of the balance of the purchase
price, implying that the "option money" forms part of the purchase price.
This is precisely the result of paying earnest money under Art. 1482 of
the Civil Code. It is clear then that the parties in this case actually
entered into a contract of sale, partially consummated as to the payment
of the price.
2. Conveyance of privilege to purchase land before it is awarded
to the tenant or occupant.
Hermosilla v. Remoquillo
Facts: Apolinario Hermosilla was occupying a lot in San Pedro Tunasan
Homesite, a land of the Republic. He divided the lot into 2. The 1st
portion was given to his son Salvador and the other(questioned lot) to
his grandson Jaime Remoquillo through a Deed of Assignment. A law
was passed prohibiting the transfer of ownership of the said lot.
Salvador and Jaime after made a Kasunduan ng Paglipat Ng Karapatan
sa Isang Lagay na Lupang Solar (Kasunduan) whereby Jaime transferred
ownership of the 65 square meters (the questioned property) in favor of
Salvador. NHA awarded Jaime title. Salvador and his heirs questioned the
title stating they have their house and in actual possession of the
questioned lot.
When the Kasunduan was executed in 1972 by Jaime in favor of
Salvador petitioners' predecessor-in-interest Lot 19, of which the
questioned property forms part, was still owned by the Republic. Nemo
dat quod non habet. Nobody can give what he does not possess. Jaime
could not thus have transferred anything to Salvador via the Kasunduan.
The transfer became one in violation of law and therefore void ab initio.
Hence, petitioners acquired no right over the lot from a Void Kasunduan,
for no rights are created. It is generally considered that as between the
parties to a contract, validity cannot be given to it by estoppel if it is
prohibited by law or is against public policy.
Since the property was previously a public land, petitioners have no
personality to impute violation of the law. If the title was in fact
fraudulently obtained, it is the State which should file the suit to recover
the property through the Office of the Solicitor General. Consequently,
Jaimes ownership was valid not being contrary to any law and since
there was no pending other application yet. That at the time he applied
for title, he was recogned as the actual applicant / occupant.
Heirs of Arturo Reyes v. Beltran G.R. No. 176474
Facts: A big parcel of lot was originally owned by Spouses Laquian.
When the Spouses died, the property was left with the wifes siblings.
Through an "Extrajudicial Settlement of the Estate of the Deceased
Constancia R. Socco (wife)," the parcel of land was partitioned into 3
lots. Before the partition, Miguel Socco, 1 of the heirs sold his share to
Arturo Reyes as evidenced by the Contract to Sell stating that he is to
inherit a particular portion. But upon partition, the said portion sold was
adjudicated to respondent, Elena Socco Beltran, and not to Miguel
Socco.
SC: Article 1459 of the Civil Code on contracts of sale, The thing must
be licit and the vendor must have a right to transfer ownership thereof
at the time it is delivered. The law specifically requires that the vendor
must have ownership of the property at the time it is delivered.
Petitioners claim that the property was constructively delivered to them
in 1954 by virtue of the Contract to Sell. However, as already pointed
out by this Court, it was explicit in the Contract itself that, at the time it
was executed, Miguel R. Socco was not yet the owner of the property
and was only expecting to inherit it. Hence, there was no valid sale from
which ownership of the subject property could have transferred from
Miguel Socco to Arturo Reyes. Without acquiring ownership of the
subject property, Arturo Reyes also could not have conveyed the same to
his heirs, herein petitioners.
The law specifically requires that the vendor must have ownership of the
property at the time it is delivered. Petitioners cannot derive title to the
subject property by virtue of the Contract to Sell. It was stated in the
Contract that the vendor was not yet the owner of the subject property
and was merely expecting to inherit the same. It was also declared that
conveyance of the subject to the buyer was a conditional sale. It is,
therefore, apparent that the sale of the subject property in favor of
Arturo Reyes was conditioned upon the event that Miguel Socco would
actually inherit and become the owner of the said property. Absent such
occurrence, Miguel R. Socco never acquired ownership of the subject
property which he could validly transfer to Arturo Reyes. Without
acquiring ownership of the subject property, Arturo Reyes also could not
have conveyed the same to his heirs, herein petitioners.
Assignment was done prior to the application.
Arts. 1469 to 1474 PRICE
Art. 1469. In order that the price may be considered certain, it shall be
sufficient that it be so with reference to another thing certain, or that
the determination thereof be left to the judgment of a special person or
persons. Should such person or persons be unable or unwilling to fix it,
the contract shall be inefficacious, unless the parties subsequently agree
upon the price.
If the third person or persons acted in bad faith or by mistake, the
courts may fix the price.
Where such third person or persons are prevented from fixing the price
or terms by fault of the seller or the buyer, the party not in fault may
have such remedies against the party in fault as are allowed the seller or
the buyer, as the case may be. (1447a)
Art. 1470. Gross inadequacy of price does not affect a contract of sale,
except as it may indicate a defect in the consent, or that the parties
really intended a donation or some other act or contract. (n)
Art. 1471. 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.
(n)
Art. 1472. The price of securities, grain, liquids, and other things shall
also be considered certain, when the price fixed is that which the thing
sold would have on a definite day, or in a particular exchange or market,
or when an amount is fixed above or below the price on such day, or in
such exchange or market, provided said amount be certain. (1448)
Art. 1473. The fixing of the price can never be left to the discretion of
one of the contracting parties. However, if the price fixed by one of the
parties is accepted by the other, the sale is perfected. (1449a)
Art. 1474. Where the price cannot be determined in accordance with
the preceding articles, or in any other manner, the contract is
inefficacious. However, if the thing or any part thereof has been
delivered to and appropriated by the buyer he must pay a reasonable
price therefor. What is a reasonable price is a question of fact dependent
on the circumstances of each particular case. (n)
PRICE
Price sum certain in money or its equivalent.
Case:
1. General principles in the agreement as to price
Boston Bank of the Philippines v. Manalo, G. R. No. 158149, February 9,
2006
FACTS: Boston Bank, now petitioner, filed the instant petition for
review on certiorari assailing the CA rulings. It maintains that, as held by
the CA, the records do not reflect any schedule of payment of the 80%
balance of the purchase price, or P278,448.00. Petitioner insists that
unless the parties had agreed on the manner of payment of the principal
amount, including the other terms and conditions of the contract, there
would be no existing contract of sale or contract to sell.47
Issue: Whether petitioner, as seller, forged a perfect contract to sell over
a real property to respondents, as buyer.
HELD: We agree with petitioners contention that, for a perfected
contract of sale or contract to sell to exist in law, there must be an
agreement of the parties, not only on the price of the property sold, but
also on the manner the price is to be paid by the vendee.
A definite agreement as to the price is an essential element of a binding
agreement to sell personal or real property because it seriously affects
the rights and obligations of the parties. Price is an essential element in
the formation of a binding and enforceable contract of sale. The fixing of
the price can never be left to the decision of one of the contracting
parties. But a price fixed by one of the contracting parties, if accepted by
the other, gives rise to a perfected sale.57
It is not enough for the parties to agree on the price of the property.
The parties must also agree on the manner of payment of the price of
the property to give rise to a binding and enforceable contract of sale or
contract to sell. This is so because the agreement as to the manner of
payment goes into the price, such that a disagreement on the manner of
payment is tantamount to a failure to agree on the price.58
In a contract to sell property by installments, it is not enough that the
parties agree on the price as well as the amount of downpayment. The
parties must, likewise, agree on the manner of payment of the balance
of the purchase price and on the other terms and conditions relative to
the sale. Even if the buyer makes a downpayment or portion thereof,
such payment cannot be considered as sufficient proof of the perfection
of any purchase and sale between the parties.
We agree with the contention of the petitioner that, as held by the CA,
there is no showing, in the records, of the schedule of payment of the
balance of the purchase price on the property amounting to P278,448.00
REQUISITES OF PRICE
1. The price must be real
2. In money or its equivalent
3. Certain or ascertainable (determinable)
1. The price must be real (1471)
Art. 1471. 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.
Price is real when at the perfection of the sale, there is legal
intention on the part of the buyer to pay the price and the
legal expectation on the part of the seller to receive such price
as the value of the subject matter he obligates himself to
deliver.
Price is false the contract is valid but subject to reformation
to indicate the real price upon which the minds of the parties
have met.
Cases:
1. Effect if price is simulated- produces no effect.
Cruzado v. Bustos, G. R. No. 10244, February 29, 1916
FACTS: Counsel for the plaintiff Santiago Cruzado filed a written
complaint on October 8, 1910, amended on September 25, 1913, in
which he alleged that plaintiff was the owner of certain rural property
situated in the barrio of Dolores, formerly San Isidro, of the municipality
of Bacolor, Pampanga, containing an area of 65 balitas and bounded as
set forth in the complaint; that Estafania Bustos, during her lifetime, and
now the administrator of her estate, together with the other defendant,
Manuel Escaler, had, since the year 1906 up to the present, been
detaining the said parcel of land, and had refused to deliver the
possession thereof to plaintiff and to recognize his ownership of the
same, notwithstanding the repeated demands made upon them; that by
such detention, the plaintiff had suffered losses and damages to the
amount of P3,500. He therefore asked for judgment declaring plaintiff to
be the owner of the said parcel of land and ordering defendants to
return it to plaintiff and to pay the latter P3,500 for losses and damages,
and the costs.
Issue: W/N the deed of sale of 65 balitas of land situated in the
municipality of Bacolor, Pampanga, executed by Estefania Bustos, with
the assistance of her husband Bernardino Dizon, in favor of Agapito
Geronimo Cruzado, for the sum of P2,200, was simulated.
HELD: The simulation of the said sale was effected by making a
pretended contract which bore the appearance of truth, when really and
truly there was no contract, because the contracting parties did not in
fact intend to execute one, but only to formulate a sale in such a
manner that, for the particular purposes sought by Bustos and Cruzado,
it would appear to have been celebrated solely that Cruzado might hold
his office of procurador on the strength of the security afforded by the
value of the land feignedly sold.
This action is of course improper, not only because the sale was
simulated, but also because it was not consummated. The price of the
land was not paid nor did the vendee take possession of the property
from the 7th of September, 1875, when the said sale was feigned, until
the time of his death; nor did any of his successors, nor the plaintiff
himself until the date of his claim, enter into possession of the land.
That the contract of purchase and sale, as consensual, is perfected by
consent as to the price and the thing and is consummated by the
reciprocal delivery of the one and the other, the full ownership of the
thing sold being conveyed to the vendee, from which moment the rights
of action derived from this right may be exercised.
It is, then, of the utmost importance to examine whether in the said sale
the purchase price was paid and whether the vendee took possession of
the land supposed to have been sold.
2. Effect if there is no consideration null and void (non-
existence of the contract)
Doles v. Angeles, G. R. No. 149353, June 26, 2006
FACTS: On April 1, 1997, Ma. Aura Tina Angeles (respondent) filed with
the RTC a complaint for Specific Performance with Damages against
Jocelyn B. Doles (petitioner), docketed as Civil Case No. 97-82716.
Respondent alleged that petitioner was indebted to the former in the
concept of a personal loan amounting to P405,430.00 representing the
principal amount and interest; that on October 5, 1996, by virtue of a
"Deed of Absolute Sale", petitioner, as seller, ceded to respondent, as
buyer, a parcel of land, as well as the improvements thereon, with an
area of 42 square meters, covered by Transfer Certificate of Title No.
382532,4 and located at a subdivision project known as Camella
Townhomes Sorrente in Bacoor, Cavite, in order to satisfy her personal
loan with respondent; that this property was mortgaged to National
Home Mortgage Finance Corporation (NHMFC) to secure petitioners loan
in the sum of P337,050.00 with that entity.
WON: The contract of sale on the parcel of land was executed for a
cause.
HELD: Since the sale is predicated on that loan, then the sale is void for
lack of consideration.
In view of these anomalies, the Court cannot entertain the possibility
that respondent agreed to assume the balance of the mortgage loan
which petitioner allegedly owed to the NHMFC, especially since the
record is bereft of any factual finding that petitioner was, in the first
place, endowed with any ownership rights to validly mortgage and
convey the property. As the complainant who initiated the case,
respondent bears the burden of proving the basis of her complaint.
Having failed to discharge such burden, the Court has no choice but to
declare the sale void for lack of cause. And since the sale is void, the
Court finds it unnecessary to dwell on the issue of whether duress or
intimidation had been foisted upon petitioner upon the execution of the
sale.2
2. In money or its equivalent (1458)
Torres vs CA
Facts: Petitioners and respondent entered into a joint venture agreement
for the development of a parcel land located at Lapu-Lapu City island of
Mactan into a subdivision. Pursuant to the contract, petitioners executed
a deed of sale covering the said parcel of land in favor of the
respondent, who then had it registered in his name. Thereafter,
respondent mortgaged the property in the bank, and according to the
joint agreement, the money obtained amounting to P40,000.00 was to
be used for the development of the subdivision. However, the project did
not push through, and the land was subsequently foreclosed by the
bank. Because of this, petitioners filed a civil case before the Regional
Trial Court of Cebu City, which was later dismissed by the trial court. On
appeal, the Court of Appeals affirmed the decision of the trial court. The
appellate court held that the petitioner and respondent had formed a
partnership for the development of the subdivision. Thus, they must
bear the loss suffered by the partnership in the same proportion as their
share in the profits stipulated in the contract. Aggrieved by the decision,
petitioner filed the instant petition contending that the Court of Appeals
erred in concluding that the transaction between the petitioners and
respondent was that of a joint venture/partnership.
SC: The Joint Venture Agreement clearly states that the consideration for
the sale was the expectation of profits from the subdivision project. Its
first stipulation states that petitioners did not actually receive payment
for the parcel of land sold to respondent. Consideration, more properly
denominated as cause, can take different forms, such as the prestation
or promise of a thing or service by another. In this case, the cause of the
contract of sale consisted not in the stated peso value of the land, but in
the expectation of profits from the subdivision project, for which the
land was intended to be used. As explained by the trial court, "the land
was in effect given to the partnership as [petitioner's] participation
therein. . . . There was therefore a consideration for the sale, the
[petitioners] acting in the expectation that, should the venture come into
fruition, they [would] get sixty percent of the net profits."
-expectations of profits from the subdivision projects is a valid form of
consideration.
-it is sufficient if it can be determined by the stipulations of the contract
made by the parties thereto/ by reference to an agreement incorporated
in the contract.
3. Certain or ascertainable (determinable)
A. How determined?
By a third person
By the courts
By reference to a definite day, etc.
By reference to invoices
By application of known facts
1. By a third person If the third person is unable or unwilling to
fix the price, the contract is inefficacious unless the parties
come to an agreement
Barreto v. Sta. Marina, G. R. No. L-8169, December 29, 1913
(CAVEAT EMPTOR: PLS READ THE FULL TEXT. CASE DOCTRINE
RELATED TO SALES NOT CLEARLY ESTABLISHED IN THE CASE)
FACTS: The La Insular cigar and cigarette factory is a joint account
association with a nominal capital of P865,000, the plaintiffs share being
P20,000, or 4/173 of the whole. On March 14, 1910, the plaintiffs
attorneys wrote the defendants local representative a letter offering to
sell to the defendant plaintiffs participation in the factory. The result of
the correspondence between the parties and their representatives was
that Exhibit G was duly executed on May 3, 1910. In accordance with
the terms of this exhibit a committee of appraisers was appointed to
ascertain and fix the actual value of La Insular. The committee rendered
its report on November 14, 1910, fixing the net value at P4,428,194.44.
Of this amount 4/173 part represented the plaintiffss share on his
P20,000 of the nominal capital. In Exhibit J which was executed on
November 22, 1910, the plaintiff acknowledged to have received from
the defendant that amount.
Subsequently to the execution of Exhibit J, demand was made by the
plaintiff upon the defendant for his share of the profits from June 30,
1909, to November 22, 1910. This demand was refused and thereupon
this action was instituted to recover said profits. Upon the evidence
submitted at the hearing, the court below held: (1) That the agreement
of May 3, 1910, was by its terms a contract to sell in the future and did
not pass title and (2) that the sale of plaintiffs interest did not include
the profits in question. Judgment was rendered accordingly, with interest
and cost. The defendant appealed.
SC: It was the appraisers who were appointed to ascertain and fix the
total net value of the factory for the purpose of determining the true
present value of the interest. The appraiser was the one who determined
the total net value of the shares of the company and thereafter that of
Baretos share.
2. By the Courts (1469, par. 3) if there is bad faith or mistake of
the third party fixing the price
3. By reference to a definite day, a particular exchange or market
(1472)
4. By reference to invoices
McCulough v. Aenlle & Co.,G. R. No. 1300, February 3, 1904
FACTS: For the purpose of carrying into effect the said contract of sale
entered into with the other party hereto, said Francisco Gonzalez y de la
Fuente and Don Antonio la Puente y Arce, in the name and on behalf of
the mercantile partnership denominated R. Aenlle & Co., by virtue of the
powers conferred upon them and in compliance with the instructions
given them by Don Matias Saenz de Vizmanos y Lecaros, the manager of
the said partnership, solemnly declare that they sell, absolutely and in
fee simple, to E. C. McCullough, the tobacco and cigarette factory known
as "La Maria Cristina," located at No. 36 Calle Echague, Plaza de Goiti,
Santa Cruz district, this city, said sale including the trade-mark "La Maria
Cristina," which was been duly registered, the stock of tobacco in leaf
and manufacture, machinery, labels, wrappers, furniture, fixtures, and
everything else belonging to the said factory, as shown in the inventory
to be drawn up for the purpose of making formal delivery of the said
property.
This sum is subject to modification, in accordance with the result shown
by the inventory to be drawn up. In this inventory the value of each
individual piece of furniture will be fixed at 10 per cent below the price
shown in the partnership inventory. The machinery and cost of installing
the same will also be fixed at 10 per cent below its invoice price. The
value of the tobacco, both in leaf and in process of manufacture, boxes,
labels, wrappers, cigars, cigarettes, and paper mouthpieces for
cigarettes will be fixed at the invoice price. The value of tobacco made
up into cigars will be fixed in accordance with the price list of the
partnership, less 20 per cent discount. The cigars will be inventoried at
the prices in the same list, less a discount of 35 per cent. The P20,000
mentioned as the value of the trade-mark will, however, remain
unchanged.
In December, 1901, the plaintiff, with others, organized a company, to
which the plaintiff sold all the tobacco bought by him from the
defendant. The purchaser, the new company, on examining these two
lots, rejected them because the tobacco was not of the quality indicated
in the inventory. Thereupon the plaintiff, claiming that the tobacco in
these two lots was worthless, brought this action against the defendant
to recover what he paid.
WON: There was a perfected contract of sale entered into by the parties
on August 27,1901.
HELD: The document of August 27 was a completed contract of sale.
The articles which were the subject of the sale were definitely and finally
agreed upon. The appellee agreed to buy, among other things, all of the
leaf tobacco in the factory. This was sufficient description of the thing
sold. The price for each article was fixed. It is true that the price of this
tobacco, for example, was not stated in dollars and cents in the contract.
But by its terms the appellee agreed to pay therefor the amount named
in the invoices then in existence. The price could be made certain by a
mere reference to those invoices. By the instrument of August 27 the
contract was perfected and thereafter each party could compel the other
to fulfill it. By its terms the appellee was bound to take all the leaf
tobacco then belonging to the factory and to pay therefor the prices
named in the invoices. This obligation was absolute and did not depend
at all upon the quality of the tobacco or its value. The appellee did not,
in this contract, reserve the right to reject the tobacco if it were not of a
specific crop. He did not buy tobacco of a particular kind, class, or
quality. He bought all the tobacco which the appellant owned and
agreed to pay for it what the defendant had paid for it. The plaintiff
testified that this was the express agreement.
5. By reference to the application of known factors, e.g. in
proportion to variations in calories and ash content of coal2.)
B. Effect of indeterminability contract is inefficacious
Robles v. Lizarraga Hermanos, G. R. No. L-26173, July 13, 1927
(Sale of Improvements introduced in Hacienda)
FACTS: This action was instituted in the Court of First Instance of
Occidental Negros by Zacarias Robles against Lizarraga Hermanos, a
mercantile partnership organized under the laws of the Philippine
Islands, for the purpose of recovering compensation for improvements
made by the plaintiff upon the hacienda "Nahalinan" and the value of
implements and farming equipment supplied to the hacienda by the
plaintiff, as well as damages for breach of contract. Upon hearing the
cause the trial court gave judgment for the plaintiff to recover of the
defendant the sum of P14,194.42, with costs. From this judgment the
defendant appealed.
WON: The petitioner is allowed to recover the value of the
improvements.
HELD: In the case before us the deed of conveyance purports to transfer
to the defendant only such interests in certain properties as had come to
the conveyors by inheritance. Nothing is said concerning the rights in the
hacienda which the plaintiff had acquired by lease or concerning the
things that he had placed thereon by way of improvement or had
acquired by purchase. The verbal contract which the plaintiff has
established in this case is therefore clearly independent of the main
contract of conveyance, and evidence of such verbal contract is
admissible under the doctrine above stated. The rule that a preliminary independent judgment concerning the transaction, is not sufficient
or contemporaneous oral agreement is not admissible to vary a written ground for the cancellation of a contract.
contract appears to have more particular reference to the obligation
expressed in the written agreement, and the rule had never been Aguilar v. Rubiato
interpreted as being applicable to matters of consideration or
inducement. In the case before us the written contract is complete in Facts: Rubiato was the owner of parcels of land and was desirous of
itself; the oral agreement is also complete in itself, and it is a collateral obtaining a loan. He thereafter signed a power of attorney in favor of a
to the written contract, notwithstanding the fact that it deals with certain Vila to secure a loan and to execute any writing for the mortgage
related matters. of land. Vila pursuant to the power of attorney then sold the land to
Aguilar, with the right of repurchase within one year and Rubiato was to
A contract for the sale of goods, chattels or things in action, at a price of remain in possession of the land as lessee. One year expired and Aguilar
not less than P100, shall be unenforceable unless the contract, or some filed a case to consolidate ownership over the lands.
note or memorandum thereof shall be in writing and subscribed by the
party charged, or by his agent; and it is insisted that the court erred in Issue: Whether the contract was of sale or loan.
admitting proof of a verbal contract over the objection of the defendant's
Held: It was a contract of loan. In addition to the evidence, there is one
attorney. But it will be noted that the same subsection contains a
very cogent reason which impels us to the conclusion that Rubiato is
qualification, which is stated in these words, "unless the buyer accept
only responsible to the plaintiff for a loan. It is that the inadequacy of
and receive part of such goods and chattels." In the case before us the
the price which Vila obtained for the eight parcels of land belonging to
trial court found that the personal property, consisting of farming
Rubiato is so great that the minds revolts at it.
implements and other movables placed on the farm by the plaintiff, have
been utilized by the defendant in the cultivation of the hacienda, and
Xxx The members of this court after most particular and cautious
that the defendant is benefiting by those things.
consideration, having in view all the facts and all the naturals tendencies
of mankind, consider that Rubiato is only responsible to the plaintiff for
We are of the opinion that the stipulation with respect to the appraisal of
the loan of P800.
the property did not create a suspensive condition. The true sense of the
contract evidently was that the defendant would take over the movables
D. Effect of Failure of Consideration
and the improvements at an appraised valuation, and the defendant
obligated itself to promote the appraisal in good faith. As the defendant Sps. Buenaventura v. CA
partially frustrated the appraisal, it violated a term of the contract and
made itself liable for the true value of the things contracted about, as Facts: Sps Leonardo Joaquin & Feliciano Landrito are the parents of
such value may be established in the usual course of proof. Furthermore, petitioners. Petitioners assail the sale of several lands by their parents to
it must occur to any one, as the trial judge pointed out, that an unjust their other siblings (see p. 265 for complete list of sales made) for being
enrichment of the defendant would result from allowing it to appropriate void ab initio based on the following grounds:
the movables without compensating the plaintiff thereof.
1. No actual valid consideration
The fourth assignment of error is concerned with the improvements.
Attention is here directed to the fact that the improvements placed on 2. Properties are more than 3x more valuable than the measly
the hacienda by the plaintiff became a part of the realty and as such purchase price (purchase price was grossly inadequate)
passed to the defendant by virtue of the transfer effected by the three
owner in the deed of conveyance (Exhibit B.). It is therefore insisted 3. Deeds of sale do not reflect & express the true intent of the
that, the defendant having thus acquired the improvements, the plaintiff parties
should not be permitted to recover their value again from the defendant.
This criticism misses the point. There can be no doubt that the 4. Deliberate conspiracy designed to unjustly deprive the rest of
defendant acquired the fixed improvements when it acquired the land, the compulsory heirs of their legitime.
but the question is whether the defendant is obligated to indemnify the
plaintiff for his outlay in making the improvements. It was upon the Defense of the respondents:
consideration of the defendant's promise so to indemnify the plaintiff
1. No cause of action, requisite standing & interest
that the latter agreed to surrender the lease nearly two no doubt as to
the validity of the promise made under these circumstances to the
2. Sales were w/sufficient considerations & made by their
plaintiff.
parents voluntarily in good faith & w/full knowledge of the
consequences
C. Effect of inadequacy of price

3. Certificates of title were issued w/factual & legal basis.

Inadequacy does not affect the contract, but may show vice of consent
(1470). Refer to inadequacy of cause in general, Art. 1355.
Trial court dismissed the case WRT Gavino Joaquin & Lea Asis. Ruled in
favor of the respondents & dismissed the complaint.
Art. 1470. Gross inadequacy of price does not affect a contract of sale,
except as it may indicate a defect in the consent, or that the parties
1. The right of the compulsory heirs to a legitime is contingent &
really intended a donation or some other act or contract. (The offended
it only commences from the moment of the death of the
party may invoke Art. 19 of the NCC abuse of rights principle)
decedent (CC Art. 777). The value of the property left at the
death of the testator is the basis for determining the legitime
Askay v. Cosolan
(Art. 908). Plaintiffs cannot claim an impairment of their
legitime since their parents are still alive.
Facts: Askay obtained a title to the Mineral Claim which he allegedly sold
to Cosalan. It was alleged that there is inadequacy of the consideration
2. Deeds of Sale were executed for valuable consideration.
for transfer which, according to the deed of conveyance, and to the oral
testimony, consisted of P107.00 in cash, a bill fold, one sheet, one cow
CA affirmed Trial Court decision. In addition to the grounds stated by the
and two carabaos.
trial court, CA also mentioned that:

Issue: WON the sale is valid.

1. While still alive, parents are free to dispose of their properties
provided such is not done in fraud of creditors.
Held: YES. The fact that the bargain is a hard one, coupled with mere
inadequacy of price when both parties are in a position to form an
 2. Petitioners are not parties in interest since theyre not parties
to the deeds of sale nor are they creditors of their parents.
Issues:
1. WON petitioners have a legal interest over the properties
subject of the Deeds of Sale. NO.
The complaint betrays their motive for filing the case. They are
interested in obtaining the properties by hereditary succession but they
have failed to show any legal right to these properties.
Real party-in-interest is one who is either benefited or injured by the
judgment of the party entitled to the avails of the suit. This includes
parties to the agreement or are bound either principally/subsidiarily.
Parties must have a present substantial interest & not merely
expectancy/future contingent subordinate or consequential interest.
In this case, the petitioners only have an inchoate rt w/c vests only upon
the death of their parents. Besides, sale of the lots to their siblings does
not affect the value of their parents estate since the lots are replaced
with cash of equivalent value.
2. WON the deeds of sale are void for lack of consideration.
NO.
A contract of sale is not a real contract but a consensual contract. Its
binding & valid upon the meeting of the minds as to the price regardless
of the manner of payment or breach of such. Its still valid even if the
real price is not stated in the contract, making it subject to reformation.
But if the price is simulated, there is no meeting of the minds, thus the
contract is void (CC Art. 1471).
Act of payment of the price does not determine the validity of a contract
of sale. Failure to pay the consideration is different from lack of
consideration. The former results in a rt to demand fulfillment or
cancellation of the contract while the latter prevents the existence of a
valid contract.
Petitioners failed to show that the prices in the deeds of sale were
simulated. They dont even know the financial capacity of their siblings
to buy these lots. Respondents minds met as to the purchase price w/c
was stated in the deeds of sale & the buyer siblings have paid the price
to their parents.
3. WON the Deeds of Sale are void for gross inadequacy of the
price. NO.
CC Art. 1355: Except in cases specified by law, lesion/ INADEQUACY OF
CAUSE shall not invalidate a contract, unless there has been fraud,
mistake or undue influence.
CC Art. 1470: Gross inadequacy of price doesnt affect a contract of sale,
except as may indicate a defect in the consent or that the parties really
intended a donation or some other act or contract.
Petitioners failed to prove any instance in the aforementioned provisions
that would invalidate the deeds of sale. There is no requirement that the
price be equal to the exact value of the property on sale. It only matters
that all respondents believed that they received the commutative value
of what they gave.
Vales vs. Villa: Courts cannot be guardians of people who are not legally
incompetent. Courts operate not because a person has been defeated/
overcome by another, but because he has been defeated or overcome
ILEGALLY. There should be a violation of the law, commission of what
the law knows as an actionable wrong, before the courts are authorized
to lay hold of the situation & remedy it.
Effect of failure of consideration
Failure of consideration is different from the lack of consideration, the
former results in a right to demand the fulfillment/ cancellation of the
obligation under the existing valid contract. This is different from lack of
consideration w/c prevents the existence of a valid contract.
EARNEST MONEY
Art. 1482. 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
a. It is considered part of the price, unless the contract is
otherwise
b. It is proof of perfection of the contract
Earnest money it is something of value that the buyer was really in
earnest and given after the perfection of the contract. It is part of the
purchase price.
Option money- distinct consideration.
Oesmer v. Paraiso Devt Corp
Facts: Petitioners in this case are brothers and sisters and the co-owners
of undivided shared is parcels of land originally owned by their parents.
One the petitioners, Ernesto, met with the President of Paraiso for
purpose of brokering the sale of petitioners properties to respondent
corp. A contract to sell was the executed, signed by the siblings except
Adolfo and Jesus. An amount of P100,000 was also given as option
money. Later however, petitioners informed PAraiso of their intention to
rescind the Contract to sell and to return the amount of P100,000 paid
by the corporation. Their contention was that the contract to sell was
void because the signatures made by the siblings were not for consent
to sell the property, assuming the signatures indicate consent, the
contract was subject to a suspensive condition which is the approval of
the sale by all the co-owners which did not occur because two of the
siblings did not approve of the sale; lastly, that it is void for it is a
unilateral promise to sell without consideration distinct from price.
Held: As to the last contention, the court ruled that the contract to sell is
not a unilateral promise to sell:
In the instant case, the consideration of P100,000.00 paid by respondent
to petitioners was referred to as "option money." However, a careful
examination of the words used in the contract indicates that the money
is not option money but earnest money. "Earnest money" and "option
money" are not the same but distinguished thus: (a) earnest money is
part of the purchase price, while option money is the money given as a
distinct consideration for an option contract; (b) earnest money is given
only where there is already a sale, while option money applies to a sale
not yet perfected; and, (c) when earnest money is given, the buyer is
bound to pay the balance, while when the would-be buyer gives option
money, he is not required to buy, but may even forfeit it depending on
the terms of the option.20
The sum of P100,000.00 was part of the purchase price. Although the
same was denominated as "option money," it is actually in the nature of
earnest money or down payment when considered with the other terms
of the contract. Doubtless, the agreement is not a mere unilateral
promise to sell, but, indeed, it is a Contract to Sell as both the trial court
and the appellate court declared in their Decisions.
Manila Metal Container Corporation v. PNB
Facts: Petitioner was the owner of a parcel of land and to be able to
secure a loan from PNB, petitioner executed a real party mortgage over
the land. For its failure to pay, PNB foreclose the mortgaged and sold at
public auction for which PNB was the winning bidder, with a one year
period of redemption by the petitioner. Petitioner requested that there be
an extension of time to redeem the property and it allowed to
repurchase the property on installment. Meanwhile, the Special Assets
Management Department had prepared a statement of account of the
petitioners obligation to which amounted to 1.5M. petitioner thereafter
remitted thte amount of 800,000 as deposit to repurchase the property.
When SAMD recommended to the management of the PNB that
petitioner be allowed to repurchase the property at 1.5M, the
management rejected and suggested that the property be purchased at
2.7M which was later reduced to 1.9M. But petitioner refused.
Petitioner now filed a case for delivery of title, annulment of mortgage
and specific performance with damages. It was its contention that it
already accepted the offer of SAMD to sell the property at 1.5M, hence,
PNB could no longer unilaterally withdraw its offer to sell the property.
Its acceptance of the offer resulted in a perfected contract of sale.
Respondent contended that the parties never graduated for the
negotiation stage all that transpires was an exchange of proposal and
counter-proposals and nothing more. There was still no agreement as to
the amount and the manner of payment. The account made by SAMD
cannot be classified as counter-offer because it was merely recital of
facts of the obligations of petitioners.
Issue: WON the P800,000 deposited is an earnest money.
Held: NO. The P800,000 could not be considered as an earnest money
because an earnest money forms part of the purchase price. In this
case, it did not. The P800,000 was merely a deposit that was accepted
by PNB on the condition that the purchase price is subject to the
approval of the PNB Board.
Note: absence of 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 perfected contract of sale.
Serrano v Caguiat G.R. No. 139173
Facts: Caguiat offered to buy the lot owned by spouses Serrano.
Respondent gave P100K as partial payment, in turn, petitioners gave a
receipt with a statement that respondent promised to pay the balance of
the purchase price. Respondents were leaving for abroad and sought to
cancel the transaction. Petitioners contend that there is no perfected
contract as there was no clear agreement between the parties as to the
amount of consideration.
SC: In holding that there is a perfected contract of sale, both courts
mainly relied on the earnest money given by respondent to petitioners
(Art. 1482). We are not convinced.
It is true that Article 1482 of the Civil Code provides that Whenever
earnest money is given in a contract of sale, it shall be considered as
part of the price and proof of the perfection of the contract. However,
this article speaks of earnest money given in a contract of sale. In this
case, the earnest money was given in a contract to sell. The earnest
money forms part of the consideration only if the sale is consummated
upon full payment of the purchase price. Now, since the earnest money
was given in a contract to sell, Article 1482, which speaks of a contract
of sale, does not apply.
As previously discussed, the suspensive condition (payment of the
balance by respondent) did not take place. Clearly, respondent cannot
compel petitioners to transfer ownership of the property to him.
Arts. 1475 to 1488 RULES
I. RULES IN ORDINARY SALES
A. Form
B. Perfection
C. Expenses
FORM
General Rule: Art. 1483. Subject to the provisions of the Statute of
Frauds and of any other applicable statute, a contract of sale may be
made in writing, or by word of mouth, or partly in writing and partly by
word of mouth, or may be inferred from the conduct of the parties.
C. Written agreement is not essential
D. Sale is consensual contract
Cases:
1. Verbal agreement of sale
Caoili v. CA
FACTS: Caoili was a lessee in the property of respondent. Respondent
borrowed money from Caoili in the amount of Php 30,000 which they
stipulated would form part of their rentals. When rentals was paid off,
they entered into a not formal or written contract on the sale of the
property. They executed a "Receipt" denominated as an "Addendum to
Agreement dated August 8, 1990". It was stated they received from
petitioners the sum of P140,000.00, in addition to the partial payment of
P60,000.00, the "balance payable when the good title in the name of
herein vendor is delivered to the spouses." Yet respondent refused to
execute document. Respondent says that the Php 140,000 was for
improvements and the Php 60,000 served as rental on the period they
havent paying their rentals (amounts were claimed as partial payments
by Caoili. RTC and CA both decided in favor of Caoili yet CA reduced the
amount awarded.
Held:
1. (Not made in writing) The absence of a formal deed of sale does not
render the agreement null and void or without any effect. The provision
of Article 1358 of the Civil Code on the necessity of a public document is
only for convenience, not for validity or enforceability. It does not mean
that no contract has been perfected so long as the essential requisites of
consent of the contracting parties, object, and cause of the obligation
concur. Under the agreement, private respondent was obligated to
deliver a good title to petitioners and this condition is the operative act
which would give rise to the corresponding obligation of petitioners to
pay the balance of the purchase price. Since it is not disputed that
private respondent has not delivered a good title, petitioners have by
law the right to either refuse to proceed with the agreement or to waive
that condition pursuant to Article 1545 of the Civil Code.
2. The Addendum being notarized is a prima facie evidence of the facts
stated therein.
2. Effect of lack of technical description in the contract
Naranja v. CA
Facts: Roque Naranja was the registered owner of a parcel of land,
denominated as Lot No. 4 in Consolidation-Subdivision Plan (LRC)
Pcs-886, Bacolod Cadastre, with an area of 136 square meters and
covered by Transfer Certificate of Title (TCT) No. T-18764. Roque was
also a co-owner of an adjacent lot, Lot No. 2, of the same subdivision
plan, which he co-owned with his brothers, Gabino and Placido Naranja.
When Placido died, his one-third share was inherited by his children,
Nenita, Nazareto, Nilda, Naida and Neolanda, all surnamed Naranja,
herein petitioners. Lot No. 2 is covered by TCT No. T-18762 in the
names of Roque, Gabino and the said children of Placido. TCT No.
T-18762 remained even after Gabino died. The other petitioners
Serafin Naranja, Raul Naranja, and Amelia Naranja-Rubinos are the
children of Gabino.
Roque had no other source of income except for the P200.00 monthly
rental of his two properties. To show his gratitude to Belardo, Roque sold
Lot No. 4 and his one-third share in Lot No. 2 to Belardo on August 21,
1981, through a Deed of Sale of Real Property which was duly notarized
by Atty. Eugenio Sanicas. The Deed of Sale reads:
I, ROQUE NARANJA, of legal age, single, Filipino and a resident of
Bacolod City, do hereby declare that I am the registered owner of Lot
No. 4 of the Cadastral Survey of the City of Bacolod, consisting of 136
square meters, more or less, covered by Transfer Certificate of Title No.
T-18764 and a co-owner of Lot No. 2, situated at the City of Bacolod,
consisting of 151 square meters, more or less, covered by Transfer
Certificate of Title No. T-18762 and my share in the aforesaid Lot No. 2
is one-third share.
Issue: W/N the sale was valid.
Held: To be valid, a contract of sale need not contain a technical
description of the subject property. Contracts of sale of real property
have no prescribed form for their validity; they follow the general rule on
contracts that they may be entered into in whatever form, provided all
the essential requisites for their validity are present. The failure of the
parties to specify with absolute clarity the object of a contract by
including its technical description is of no moment. What is important is
that there is, in fact, an object that is determinate or at least
determinable, as subject of the contract of sale. The deed of sale clearly
identifies the subject properties by indicating their respective lot
numbers, lot areas, and the certificate of title covering them.
One who alleges any defect, or the lack of consent to a contract by
reason of fraud or undue influence, must establish by full, clear and
convincing evidence, such specific acts that vitiated the partys consent.
Petitioners adduced no proof that Roque had lost control of his mental
faculties at the time of the sale. Undue influence is not to be inferred
from age, sickness, or debility of body, if sufficient intelligence remains.
The Deed of Sale which states receipt of which in full I hereby
acknowledge to my entire satisfaction is an acknowledgment receipt in
itself. Moreover, the presumption that a contract has sufficient
consideration cannot be overthrown by a mere assertion that it has no
consideration.
Heirs are bound by contracts entered into by their predecessors-in-
interest. Having been sold already to Belardo, the two properties no
longer formed part of Roques estate which petitioners could have
inherited.
Statute of Frauds applied
Statute of Frauds applies only in cases for
a. Specific performance, and
b. For damages based on breach of contract
Where the contract of sale has already been consummated, its
enforcement cannot be barred by the Statute of Frauds, which applies
on executory agreement .
When form is essential
1. Under the Statute of Frauds
Realty- a sale of real property orally is valid. The buyer
may compel the seller to execute a formal deed of sale
to be enforceable.
Goods and chattels at a price of not less than P 500.
2. Sale of land through an Agent (1874) authority shall be in
writing.
B. PERFECTION OF A CONTRACT OF SALE (Art. 1475)
At the moment there is a meeting of the minds (consensual)
The parties may reciprocally demand performance, subject to
the provisions of law governing the form of contracts
Requirements for perfection:
a. When parties are face to face when an offer is accepted
without conditions nor qualifications
b. Thru correspondence or telegram when the offeror has
knowledge of the acceptance
c. When sale is subject to a suspensive condition from the
moment the condition is fulfilled
Take note: Mere perfection of the contract does not necessarily transfer
ownership.
Romulo Coronel, et al vs. CA and Alcaraz G.R. No. 103577, October 7,
1996
FACTS: The Coronels sold their inherited house and lot to Ramona
Patricia Alcaraz, with the conditions that they will effect the transfer of
the title from their deceased father to their names upon receipt of the
down payment, and after the transfer they will execute a Deed of Sale in
favor of Alcaraz. The conditions were embodied in a document labeled
Receipt of Down Payment. Alcaraz paid, and the title was transferred in
the Coronels name. However, the Coronels sold the property to Catalina
Mabanag, rescinded the contract with Alcaraz, and eventually executed a
Deed of Sale in favor of Mabanag. In the complaint for specific
performance filed against them, the Coronels contended that theirs was
merely an executory contract to sell, hence there was no perfected
contract of sale.
HELD: The parties had agreed to a conditional contract of sale,
consummation of which is subject only to the successful transfer of the
certificate of title from the name of the petitioners father to their
names.
Since the condition contemplated by the parties which is the issuance of
a certificate of title in petitioners names was fulfilled on February 6,
1985, the respective obligations of the parties under the contract of sale
became mutually demandable.
Note: even if document was denominated Receipt of down payment
from that moment on, there was a perfected contract of sale albeit
conditional (i.e. transfer of title to heirs and payment of balance of
purchase price)
Manila Mining Corporation (MMC) vs. Miguel Tan G.R. No. 171702,
February 12, 2009
FACTS: MMC ordered and received various electrical materials from
Miguel Tan, and upon failure to pay the full amount despite several
demands, Tan filed a collection suit. MMC contended that the absence of
stamp marks on the original invoices and purchase orders negated the
receipt of said documents by MMCs representatives, a requisite for
payment. Having not received them thereby having no consent, their
contract could not have been perfected.
HELD: The purchase orders constituted accepted offers when Tan
supplied the electrical materials to MMC. Hence, petitioner cannot evade
its obligation to pay by claiming lack of consent to the perfected
contracts of sale. The invoices furnished the details of the transactions.
Take note: The purchase orders constituted accepted offers when Tan
supplied electrical materials to MMC.
1) The buyer has the right to a reasonable opportunity for
examination before acceptance (1584) except when a carrier
delivers C.O.D.
2) Sale by description and/or sample (1481): The bulk of the
goods must correspond to either or both.
Place of Perfection
 1. Where there was meeting of the minds Considering that the auction sale has been perfected, a supplemental
sale with higher consideration at the instance of only one party(herein
2. In case of acceptance through letter or telegram, in the place petitioner) could no longer be validly executed)
where the offer was made.
Before the hammer falls:
EXPENSES
The bidder may retract his bid. The reason behind this is that
A. Expenses of execution and Registration of the sale (1487) are every bidder is merely an offer and therefore, before it is
borne by the seller accepted, it may be withdrawn

B. Expenses of putting the goods in a deliverable state (1521, The auctioneer may also withdraw the goods from the sale
last par.) are also borne by the seller. EXCEPT if the auction has been announced to be WITHOUT
RESERVE.
II. RULES IN SPECIAL SALES

A. Sales at Auction

B. Sales by Sample and/or Description

2. Auction Sale where the seller reserved the right to reject any
C. Sale of Personalty payable by Installments (Recto Law) and all the bids

D. Leases of Personalty with Option to Buy Case: Leoquinco vs. Postal Savings Bank

E. Sale of Real Property on Instalment Because of the expressed stipulation that PSB reserved to themselves
the right to reject any and all bids, the bid of petitioner may be rejected.
F. PD No. 957
Petitioners participation in the auction means submission or being
bounded to the rules of auction whether the purchaser knew the rules or
A. SALES AT AUCTION
not
Rules:
Limitations of the seller:
1. Sales of separate lots are separate contracts of sale
The seller himself cannot bid
2. When perfected when the auctioneer announces its perfection
He cannot employ or induce any person to bid on his behalf
by the fall of the hammer, or in other customary manner
(people who bid for the seller, but are not themselves bound,
are called by-bidders or puffers)
3. Before the fall of the hammer

EXCEPTION: if right to bid has been expressly reserved and

The bidder may retract his bid
that notice of such was given
The auctioneer may withdraw the goods from the sale
Limitations of the auctioneer (if he is not the seller)
Exception: If the auction has been announced to be
The auctioneer cannot bid
without reserve

He cannot employ or induce to bid on behalf of the seller

He cannot knowingly take any bid from the seller or any

4. Limitations of the seller:
person employed by him
The seller himself cannot bid
In an execution sale:
He cannot employ or induce any person to bid on his
Judgment Creditor will have a writ to garnish or attach the
behalf
property of the debtor and sheriff sells it in a public sale
Exception: If right to bid has been expressly reserved
Judgment debtor has the right to redeem the property within
1 year

5. Limitations of the auctioneer (if he is not the seller); Take Note: The owner of the property offered for sale at auction has the
right to prescribe the manner, condition and terms of sale and where
The auctioneer cannot bid these are reasonable and are made known to the buyer, they are binding
upon them.
He cannot employ or induce to bid on behalf of the
seller Q: Why cant the seller participate in the bidding?

He cannot knowingly take any bid from the seller or any A: He cannot bid because in doing such he can manipulate the biddings
person employed by him. of other participants

Cases: Note: it is the seller who will set the terms and condition of the sale. If
the seller will bid in the auction without reserving such right and
1. The sale by auction is perfected when the auctioneer informing the public, the sales will be considered as fraudulent.
announces its perfection by the fall of the hammer or in other
customary manner Q: Will such fraud affect the perfection of the contract?

Dizon vs. Dizon A: Yes, the contract will be VOID with NO force and effect
B. SALES BY SAMPLE AND/ OR DESCRIPTION
a. The bulk of the goods must correspond to either or both
b. The buyer must have an opportunity to compare
c. Effect: the contract may be rescinded at the option of the buyer
Pacific Commercial Compan Vs. Ermita Market & Cold Stores, Inc.
Plaintiff contracted to sell to defendant an automatic refrigerating
machine as per description stated in the sales contract. The machine
was delivered and by mutual agreement the vendor installed the
machine. The machine did not give the results expected from it, and the
defendant refused to pay the balance of its purchase price and the cost
of the installation of the machine. Thereupon plaintiff brought this
action.
Held: The fact that the defendant could not use the machine
satisfactorily in the three cold stores divisions cannot be attributed to
plaintiff's fault; the machine was strictly in accordance with the written
contract between the parties, and the defendant can hardly honestly say
that there was any deception by the plaintiff.
C. SALE OF PERSONALTY PAYABLE BY INSTALLMENTS (RECTO
LAW)
Alternative remedies in case of non-payment (1484)
1. To exact fulfillment of the obligation
2. Cancel the sale should the vendee fail to pay two or more
installments
This is an exception to 1191
3. Foreclose the chattel mortgage (if one was constituted) should
the vendee fail to pay two or more installments. But there may
be no further action to recover the unpaid balance. A contrary
stipulation is void.
Cases:
1. Promissory note with chattel mortgage
Macondray vs. De Santos
Granting that there was a contract between the parties for the sale of
personal property payable in installments, which does not clearly appear
in the record before this court, the complaint does not allege nor does it
appear in the record that there was a failure to pay twoor more
installments. On the contrary the promissory note, copied in the
complaint, was executed January 11, 1934, and, according to the
complaint, on or about January 21, 1934,the automobile, while in the
possession of the defendant, was wrecked and by reason of the failure
of the defendant to replace said automobile or to pay the value thereof
the plaintiff foreclosed the mortgage on what remained of the wrecked
automobile and brought this suit to recover the balance due on the
promissory note executed in its favor.
In order to apply the provisions of article 1454-A of the Civil Code it
must appear that there was a contract for the sale of personal property
payable in installments and that there has been a failure to pay two or
more installments.
2. Sale of car on straight term
Levy Hermanos vs. Gervacio
In Macondray & Co. vs. De Santos (33 OG 2170), it was held that in
order to apply the provisions of article 1454-A of the Civil Code it must
appear that there was a contract for the sale of personal property
payable in installments and that there has been a failure to pay two or
more installments. The contract, in the present case, while a sale of
personal property, is not, however, one on installments, but on straight
term, in which the balance, after payment of the initial sum, should be
paid in its totality at the time specified in the promissory note.
The transaction is not, therefore, the one contemplated in Act 4122 and
accordingly the mortgagee is not bound by the prohibition therein
contained as to its right to the recovery of the unpaid balance.
Theoretically, there is no difference between paying the price in two
installments and paying the same partly in cash and partly in one
installment, in so far as the size of each partial payment is concerned;
but in actual practice the difference exists, for, according to the regular
course of business, in contracts providing for payment of the price in two
installments, there is generally a provision for initial payment.
A cash payment cannot be considered as a payment by installment, and
even if it can be so considered, still the law does not apply, for it
requires non-payment of two or more installments in order that its
provisions may be invoked. In the present case, only one installment
was unpaid.
3. Sale of Truck on installment where foreclosure was not
pursued
Spouses De La Cruz vs. Asian Consumer And Industrial Finance
Corporation
Facts: On 22 September 1982, the spouses Romulo de la Cruz and Delia
de la Cruz, and one Daniel Fajardo, petitioners herein, purchased on
installment basis one (1) unit Hino truck from Benter Motor Sales
Corporation (BENTER for brevity). To secure payment, they executed in
favor of BENTER a chattel mortgage over the vehicle 1 and a promissory
note for P282,360.00 payable in thirty (30) monthly installments of
P9,412.00. 2 On the same date, BENTER assigned its rights and interest
over the vehicle in favor of private respondent Asian Consumer and
Industrial Finance Corporation (ASIAN for brevity). 3 Although
petitioners initially paid some installments they subsequently defaulted
on more than two (2) installments. Thereafter, notwithstanding the
demand letter of ASIAN, 4 petitioners failed to settle their obligation.
On 26 September 1984, by virtue of a petition for extrajudicial
foreclosure of chattel mortgage, the sheriff attempted to repossess the
vehicle but was unsuccessful because of the refusal of the son of
petitioner, Rolando de la Cruz to surrender the same. Hence, the return
of the sheriff that the service was not satisfied. LLpr
On 10 October 1984, petitioner Romulo de la Cruz brought the vehicle to
the office of ASIAN and left it there where it was inventoried and
inspected. 5
On 27 November 1984, ASIAN filed an ordinary action with the court a
quo for collection of the balance of P196,152.99 of the purchase price,
plus liquidated damages and attorney's fees.
Petitioners take exception. They nevertheless insist that he should not
later be allowed to change course midway in the process, abandon the
foreclosure and shift to other remedies such as collection of the balance,
especially after having recovered the mortgaged chattel from them and
while retaining possession thereof.
HELD: The instant case is covered by the so-called "Recto Law", now
Art. 1484 of the New Civil Code, which provides: "In a contract of sale of
personal property the price of which is payable in installments, the
vendor may exercise any of the following remedies: (1) Exact fulfillment
of the obligation, should the vendee fail to pay; (2) Cancel the sale,
should the vendee's failure to pay cover two or more installments; (3)
Foreclose the chattel mortgage on the thing sold, if one has been
constituted, should the vendee's failure to pay cover two or more
installments. In this case, he shall have no further action against the
purchaser to recover any unpaid balance of the price. Any agreement to
the contrary shall be void." In this jurisdiction, the three (3) remedies
provided for in the "Recto Law" are alternative and not cumulative; the
exercise of one would preclude the other remedies. Consequently,
should the vendee-mortgagor default in the payment of two or more of
the agreed installments, the vendor-mortgagee has the option to avail of
any of these three (3) remedies: either to exact fulfillment of the
obligation, to cancel the sale, or to foreclose the mortgage on the
purchased chattel, if one was constituted. (Pacific Commercial Co. vs. De
la Rama)
It is thus clear that while ASIAN eventually succeeded in taking
possession of the mortgaged vehicle, it did not pursue the foreclosure of
the mortgage as shown by the fact that no auction sale of the vehicle
was ever conducted. "Under the law, the delivery of possession of the
mortgaged property to the mortgagee, the herein appellee, can only
operate to extinguish appellant's liability if the appellee had actually
caused the foreclosure sale of the mortgaged property when it recovered
possession thereof. Consequently, in the case before Us, there being no
actual foreclosure of the mortgaged property, ASIAN is correct in
resorting to an ordinary action for collection of the unpaid balance of the
purchase price.
4. Magna vs. Colarina
Undoubtedly the principal object of the above amendment (referring to
Act 4122 amending
Art. 1454, Civil Code of 1889) was to remedy the abuses committed in
connection with the foreclosure of chattel mortgages. This amendment
prevents mortgagees from seizing the mortgaged property, buying it at
foreclosure sale for a low price and then bringing the suit against the
mortgagor for a deficiency judgment. The almost invariable result of this
procedure was that the mortgagor found himself minus the property and
still owing practically the full amount of his original indebtedness.
In its Memorandum before us, petitioner resolutely declared that it has
opted for the remedy provided under Article 1484(3) of the Civil Code,
that is, to foreclose the chattel mortgage.
It is, however, unmistakable from the Complaint that petitioner preferred
to avail itself of the first and third remedies under Article 1484, at the
same time suing for replevin. For this reason, the Court of Appeals
justifiably set aside the decision of the RTC. Perusing the
Complaint, the petitioner, under its prayer number 1, sought for the
payment of the unpaid amortizations which is a remedy that is provided
under Article 1484(1) of the Civil Code, allowing an unpaid vendee to
exact fulfillment of the obligation. At the same time, petitioner prayed
that Colarina be ordered to surrender possession of the vehicle so that it
may ultimately be sold at public auction, which remedy is contained
under Article 1484(3). Such a scheme is not only irregular but is a
flagrant circumvention of the prohibition of the law. By praying for the
foreclosure of the chattel, Magna Financial Services Group, Inc.
renounced whatever claim it may have under the promissory note.
Article 1484, paragraph 3, provides that if the vendor has availed himself
of the right to foreclose the chattel mortgage, he shall have no further
action against the purchaser to recover any unpaid balance of the
purchase price. Any agreement to the contrary shall be void. In other
words, in all proceedings for the foreclosure of chattel mortgages
executed on chattels which have been sold on the installment plan, the
mortgagee is limited to the property included in the mortgage.
D. LEASES OF PERSONALTY WITH OPTION TO BUY
Cases:
Elisco Tool and Manufacturing Corp. vs. CA
Rolando Lantan was employed at the Elisco Tool Manufacturing
Corporation as head of its cash department. On January 9, 1980, he
entered into an agreement with the company, called lease with option to
buy car within 5 years. That owner ship shall retain with the company
until full payment and all necessary expenses for maintenance shall be
borne by the employee. Subsequently the company has ceased
operation and the employee was laid off. It took the company 2 years to
institute proceedings.
Sellers desirous of making conditional sales of their goods, but who do
not wish openly to make a bargain in that form, for one reason or
another, have frequently resorted to the device of making contracts in
the form of leases either with options to the buyer to purchase for a
small consideration at the end of term, provided the so-called rent has
been duly paid, or with stipulations that if the rent throughout the term
is paid, title shall thereupon vest in the lessee. It is obvious that such
transactions are leases only in name. The so-called rent must
necessarily be regarded as payment of the price in installments since the
due payment of the agreed amount results, by the terms of the bargain,
in the transfer of title to the lessee.
The so-called monthly rentals are in truth form monthly amortization on
the price of the car. The contract being one of sale on installment, the
Court of Appeals correctly applied to it the following provisions of the
Civil Code:
Art. 1484. In a contract of sale of personal property the price of which is
payable in installments, the vendor may exercise any of the following
remedies:
1. Exact fulfillment of the obligation, should the vendee fail to
pay;
2. Cancel the sale, should the vendee's failure to pay cover two
or more installments;
3. Foreclose the chattel mortgage on the thing sold, if one has
been constituted, should the vendee's failure to pay cover two
or more installments. In this case, he shall have no further
action against the purchaser to recover any unpaid balance of
the price. Any agreement to the contrary shall be void.
The remedies provided for in Art. 1484 are alternative, not cumulative.
The exercise of one bars the exercise of the others. limitation applies to
contracts purporting to be leases of personal property with option to buy
by virtue of Art. 1485. The condition that the lessor has deprived the
lessee of possession or enjoyment of the thing for the purpose of
applying Art. 1485 was fulfilled in this case by the filing by petitioner of
the complaint for replevin to recover possession of movable property.
By virtue of the writ of seizure issued by the trial court, the deputy
sheriff seized the vehicle on August 6, 1986 and thereby deprived
private respondents of its use. The car was not returned to private
respondent until April 16, 1989, after two (2) years and eight (8)
months, upon issuance by the Court of Appeals of a writ of execution.
The employee having found to have paid more than the value of the
thing P60,000 should be considered as payment of the full purchase
price. It further petitioner to pay private respondents the amount of
P431.94 as excess payment, as well as rentals at the rate of P1,000 a
month for depriving private respondents of the use of their car.
PCI Leasing and finance vs. Giraffe X
Giraffe entered into an agreement with PCI leasing over 2 machines
worth P8,000,000. Giraffe agreed to pay P116,878.21 monthly and
P181,362 for the other machine. It has also remitted the amount of
P3,120,000 as goodwill. A year into the life of the lease agreement,
respondent defaulted in paying the monthly rentals. PCI Sued Giraffe for
possession of the machineries and for payment of the remaining term.
Issue: Whether the underlying lease agreement are covered between
1484 and 1485 of the New Civil Code?
SC: Yes they are. Evidently the contract above is in reality an option to
purchase the equipment.
1. To pay without additional interest the unpaid
The Recto Law installments (cash surrender value) within the grace
period
Art. 1484. In a contract of sale of personal property the price of which is
payable in installments, the vendor may exercise any of the following 2. Grace period is 1 month for every year of installment
payments made
3.) Foreclose the chattel mortgage on the thing sold, if one has been
constituted, should the vendees failure to pay cover two or more
installments. In this case he shall have no further action against the
purchaser to recover any unpaid balance of the price. Any agreement Limitation: The right can be exercised only every 5
contrary shall be void. years

Art. 1485. The preceding article shall be applied to contract purporting

to be leases of personal property with the option to buy, when the leasor
deprived the lesee of the possession or enjoyment of the thing.
In case of cancellation of contract of sale

Therefore Giraffe is not liable to pay for the remaining term since the
machineries has been foreclosed.
1. The seller shall refund to the buyer the cash surrender
PCI LEASING- GIRAFFE lease agreement is in reality a lease with an value of the payments on the property equivalent to
option to purchase the equipment. This has been made manifest by the 50% of the total payments made.
actions of the petitioner itself, foremost of which is the declarations
2. After 5 years of installments, additional 5% per year,
made in its demand letter to the respondent. There could be no other
but shall not exceed 90% of total payments made
explanation than that if the respondent paid the balance, then it could
keep the equipment for its own; if not, then it should return them. This
is clearly an option to purchase given to the respondent. Being so,
Article 1485 of the Civil Code should apply. Provided:

E. SALE OF REAL PROPERTY ON INSTALLMENTS (MACEDA LAW) The actual cancellation of the contract shall take
place after 30 days from receipt by the buyer of
RA 6552) Realty Installment Buyer Protection Act.
the notice of cancellation or the demand for
rescission of the contract by a notarial act
Applicability Real estate bought on installment basis.

Upon full payment of the cash surrender value to

Transactions covered: sale/ financing of real estate on installment
the buyer.
payments, including residential condominium apartments, EXCEPT:

Case:
1. Industrial lots

1. When cancellation takes effect

2. Commercial building

Pagtalunan vs. De Manzano

3. Sales to tenants under RA 3844

Facts: Patricio, petitioners stepfather and predecessor-in-interest,

entered into a Contract to Sell with respondent, wife of Patricios former
mechanic, Teodoro Manzano, whereby the former agreed to sell, and the
latter to buy, a house and lot which formed half of a parcel of land. The
consideration of P17,800 was agreed to be paid in the following manner:
P1,500 as downpayment upon execution of the Contract to Sell, and the
Rules when the buyer has paid at least 2 years of installments balance to be paid in equal monthly installments of P150 on or before
the last day of each month until fully paid.
A. Rights of Buyers
It was also stipulated in the contract that respondent could immediately
occupy the house and lot; that in case of default in the payment of any
of the installments for 90 days after its due date, the contract would be
1. Right to update payments automatically rescinded without need of judicial declaration, and that all
payments made and all improvements done on the premises by
Right to sell or assign his rights to another person (must be
respondent would be considered as rentals for the use and occupation of
done by notarial act) the property or payment for damages suffered, and respondent was
obliged to peacefully vacate the premises and deliver the possession
2. Right to reinstate the contract by updating the account during
thereof to the vendor.
the grace period and before actual cancellation of the
contract.
Petitioner claimed that respondent paid only P12,950. She allegedly
stopped paying after December 1979 due to personal problems with the
3. Right to advance payment without interest
petitioner. Petitioner asserted that when respondent ceased paying her
installments, her status of buyer was automatically transformed to that
4. Right to be refunded of the cash surrender value of his
of a lessee. Therefore, she continued to possess the property by mere
payments if the contract is cancelled
tolerance of Patricio.

Issue: Whether the respondent has the right to occupy the premises?
In case of default in payment
Ruling: Yes, According to Republic Act No. 6552 -- "The Realty
Installment Buyer Protection Act," or more popularly known as the
Maceda Law.
(b) If the contract is cancelled, the seller shall refund to the buyer the
cash surrender value of the payments on the property equivalent to fifty
percent of the total payments made and, after five years of installments,
an additional five percent every year but not to exceed ninety percent of
the total payments made: Provided, That the actual cancellation of the
contract shall take place after thirty days from receipt by the buyer of
the notice of cancellation or the demand for rescission of the contract by
a notarial act and upon full payment of the cash surrender value to the
buyer.9
The Court agrees with petitioner that the cancellation of the Contract to
Sell may be done outside the court particularly when the buyer agrees to
such cancellation.
However, the cancellation of the contract by the seller must be in
accordance with Sec. 3.
Firstly the demand letter made by the petitioner to vacate the premises
does not constitute notice of cancellation. Second petitioner cannot insist
on compliance with the requirement by assuming that the cash
surrender value payable to the buyer had been applied to rentals of the
property after respondent failed to pay the installments due.
Therefore a deed of absolute sale shall be made after payment of
purchase price.
Rules when buyer has paid less than 2 years installments
1. The buyer has at least 60 days grace period within which to pay
the installment due
2. After the grace period, contract may be cancelled.
(If the buyer fails to pay the installments due at the expiration of
the grace period, the seller may cancel the contract after thirty
days from receipt by the buyer of the notice of cancellation or
the demand for rescission of the contract by a notarial act.)
Cases:
1. Where the buyer has paid less than 2 years installments
Ramos vs Heruela
Down payments, deposits or options on the contract shall be included in
the computation of the total number of installments made.
Sec. 4. In case where less than two years of installments were paid, the
seller shall give the buyer a grace period of not less than sixty days from
the date the installment became due. If the buyer fails to pay the
installments due at the expiration of the grace period, the seller may
cancel the contract after thirty days from receipt by the buyer of the
notice of cancellation or the demand for rescission of the contract by a
notarial act.
In this case, the spouses Heruela paid less than two years of
installments. Thus, Section 4 of RA 6552 applies. However, there was
neither a notice of cancellation nor demand for rescission by notarial act
to the spouses Heruela. In Olympia Housing, Inc. v. Panasiatic Travel
Corp., 22 the Court ruled that the vendor could go to court to demand
judicial rescission in lieu of a notarial act of rescission. However, an
action for reconveyance is not an action for rescission. The Court
explained in Olympia:
The action for reconveyance filed by petitioner was predicated on an
assumption that its contract to sell executed in favor of respondent
buyer had been validly cancelled or rescinded. The records would show
that, indeed, no such cancellation took place at any time prior to the
institution of the action for reconveyance.
Not only is an action for reconveyance conceptually different from an
action for rescission but that, also, the effects that flow from an
affirmative judgment in either case would be materially dissimilar in
various respects. The judicial resolution of a contract gives rise to mutual
restitution which is not necessarily the situation that can arise in an
action for reconveyance. Additionally, in an action for rescission (also
often termed as resolution), unlike in an action for reconveyance
predicated on an extrajudicial rescission (rescission by notarial act), the
Court, instead of decreeing rescission, may authorize for a just cause the
fixing of a period. 23
In the present case, there being no valid rescission of the contract to
sell, the action for reconveyance is premature. Hence, the spouses
Heruela have not lost the statutory grace period within which to pay. The
trial court should have fixed the grace period to sixty days conformably
with Section 4 of RA 6552.
1. Sale of subdivision lot on installments where the buyer
defaulted.
Active Realty Corporation vs. Daroya
ACTIVE REALTY & DEVELOPMENT CORPORATION entered into a
Contract to Sell1 with respondent NECITA DAROYA whereby the latter
agreed to buy a 515 sq. m. lot for P224,025.00 in petitioners subdivision
to be paid in amortization within 5 years, valued at P346,367.00, a figure
higher than that stated as the contract price. The buyer defaulted in
three (3) monthly amortizations. Petitioner sent respondent a notice of
cancellation2 of their contract to sell. When respondent offered to pay
for the balance of the contract price, petitioner refused as it has
allegedly sold the lot to another buyer. The respondent has already paid
4 years. already more than the contract price.
Issue: Whether or not the petitioner can be compelled to refund to the
respondent the value of the lot or to deliver a substitute lot at
respondents option?
SC: Yes, According to Republic Act No. 6552 -- "The Realty Installment
Buyer Protection Act," or more popularly known as the Maceda Law
More specifically, Section 3 of R.A. No. 6552 provided for the rights of
the buyer in case of default in the payment of succeeding installments,
where he has already paid at least two (2) years of installments, thus:
"(a) To pay, without additional interest, the unpaid installments due
within the total grace period earned by him, which is hereby fixed at the
rate of one month grace period for every one year of installment
payments made; x x x
(b) If the contract is cancelled, the seller shall refund to the buyer the
cash surrender value of the payments on the property equivalent to fifty
per cent of the total payments made; provided, that the actual
cancellation of the contract shall take place after thirty days from receipt
by the buyer of the notice of cancellation or the demand for rescission of
the contract by a notarial act and upon full payment of the cash
surrender value to the buyer."
We hold that the contract to sell between the parties remains valid and
subsisting. Following Section 3(a) of R.A. No. 6552, respondent has the
right to offer to pay for the balance of the purchase price, without
interest, which she did in this case. However since the lot has been sold
to another party it is only just and equitable that the petitioner be
ordered to refund to respondent the actual value of the lot resold, i.e.,
P875,000.00, with 12% interest per annum.
PD NO. 957
Important provisions
Secs. 4, 5, 7, 18, 23, 24, 25
Section 4. Registration of Projects. The registered owner of a parcel of
land who wishes to convert the same into a subdivision project shall
submit his subdivision plan to the Authority which shall act upon and
approve the same, upon a finding that the plan complies with the
Subdivision Standards' and Regulations enforceable at the time the plan
is submitted. The same procedure shall be followed in the case of a plan
for a condominium project except that, in addition, said Authority shall
act upon and approve the plan with respect to the building or buildings
included in the condominium project in accordance with the National
Building Code (R.A. No. 6541).
The subdivision plan, as so approved, shall then be submitted to the
Director of Lands for approval in accordance with the procedure
prescribed in Section 44 of the Land Registration Act (Act No. 496, as
amended by R.A. No. 440): Provided, that it case of complex subdivision
plans, court approval shall no longer be required. The condominium plan
as likewise so approved, shall be submitted to the Register of Deeds of
the province or city in which the property lies and the same shall be
acted upon subject to the conditions and in accordance with the
procedure prescribed in Section 4 of the Condominium Act (R.A. No.
4726).
The owner or the real estate dealer interested in the sale of lots or units,
respectively, in such subdivision project or condominium project shall
register the project with the Authority by filing therewith a sworn
registration statement containing the following information:
a. Name of the owner;
b. The location of the owner's principal business office, and if the
owner is a non-resident Filipino, the name and address of his
agent or representative in the Philippines is authorized to
receive notice;
c. The names and addresses of all the directors and officers of the
business firm, if the owner be a corporation, association, trust,
or other entity, and of all the partners, if it be a partnership;
d. The general character of the business actually transacted or to
be transacted by the owner; and
e. A statement of the capitalization of the owner, including the
authorized and outstanding amounts of its capital stock and the
proportion thereof which is paid-up.
The following documents shall be attached to the registration statement:
a. A copy of the subdivision plan or condominium plan as
approved in accordance with the first and second paragraphs of
this section.
b. A copy of any circular, prospectus, brochure, advertisement,
letter, or communication to be used for the public offering of
the subdivision lots or condominium units;
c. In case of a business firm, a balance sheet showing the amount
and general character of its assets and liabilities and a copy of
its articles of incorporation or articles of partnership or
association, as the case may be, with all the amendments
thereof and existing by-laws or instruments corresponding
thereto.
d. A title to the property which is free from all liens and
encumbrances: Provided, however, that in case any subdivision
lot or condominium unit is mortgaged, it is sufficient if the
instrument of mortgage contains a stipulation that the
mortgagee shall release the mortgage on any subdivision lot or
condominium unit as soon as the full purchase price for the
same is paid by the buyer.
The person filing the registration statement shall pay the registration
fees prescribed therefor by the Authority.
Thereupon, the Authority shall immediately cause to be published a
notice of the filing of the registration statement at the expense of the
applicant-owner or dealer, in two newspapers general circulation, one
published in English and another in Pilipino, once a week for two
consecutive weeks, reciting that a registration statement for the sale of
subdivision lots or condominium units has been filed in the National
Housing Authority; that the aforesaid registration statement, as well as
the papers attached thereto, are open to inspection during business
hours by interested parties, under such regulations as the Authority may
impose; and that copies thereof shall be furnished to any party upon
payment of the proper fees.
The subdivision project of the condominium project shall be deemed
registered upon completion of the above publication requirement. The
fact of such registration shall be evidenced by a registration certificate to
be issued to the applicant-owner or dealer.
Section 5. License to sell. Such owner or dealer to whom has been
issued a registration certificate shall not, however, be authorized to sell
any subdivision lot or condominium unit in the registered project unless
he shall have first obtained a license to sell the project within two weeks
from the registration of such project.
The Authority, upon proper application therefor, shall issue to such
owner or dealer of a registered project a license to sell the project if,
after an examination of the registration statement filed by said owner or
dealer and all the pertinent documents attached thereto, he is convinced
that the owner or dealer is of good repute, that his business is financially
stable, and that the proposed sale of the subdivision lots or
condominium units to the public would not be fraudulent.
Section 7. Exempt transactions. A license to sell and performance bond
shall not be required in any of the following transactions:
a. Sale of a subdivision lot resulting from the partition of land
among co-owners and co-heirs.
b. Sale or transfer of a subdivision lot by the original purchaser
thereof and any subsequent sale of the same lot.
c. Sale of a subdivision lot or a condominium unit by or for the
account of a mortgagee in the ordinary course of business when
necessary to liquidate a bona fide debt.
Section 18. Mortgages. No mortgage on any unit or lot shall be made
by the owner or developer without prior written approval of the
Authority. Such approval shall not be granted unless it is shown that the
proceeds of the mortgage loan shall be used for the development of the
condominium or subdivision project and effective measures have been
provided to ensure such utilization. The loan value of each lot or unit
covered by the mortgage shall be determined and the buyer thereof, if
any, shall be notified before the release of the loan. The buyer may, at
his option, pay his installment for the lot or unit directly to the
mortgagee who shall apply the payments to the corresponding mortgage
indebtedness secured by the particular lot or unit being paid for, with a
view to enabling said buyer to obtain title over the lot or unit promptly
after full payment thereto;
Section 23. Non-Forfeiture of Payments. No installment payment made
by a buyer in a subdivision or condominium project for the lot or unit he
contracted to buy shall be forfeited in favor of the owner or developer
when the buyer, after due notice to the owner or developer, desists from
further payment due to the failure of the owner or developer to develop
the subdivision or condominium project according to the approved plans
and within the time limit for complying with the same. Such buyer may,
at his option, be reimbursed the total amount paid including
amortization interests but excluding delinquency interests, with interest
thereon at the legal rate.
Section 24. Failure to pay installments. The rights of the buyer in the
event of this failure to pay the installments due for reasons other than
the failure of the owner or developer to develop the project shall be
governed by Republic Act No. 6552.
Where the transaction or contract was entered into prior to the
effectivity of Republic Act No. 6552 on August 26, 1972, the defaulting
buyer shall be entitled to the corresponding refund based on the
installments paid after the effectivity of the law in the absence of any
provision in the contract to the contrary.
Section 25. Issuance of Title. The owner or developer shall deliver the
title of the lot or unit to the buyer upon full payment of the lot or unit.
No fee, except those required for the registration of the deed of sale in
the Registry of Deeds, shall be collected for the issuance of such title. In
the event a mortgage over the lot or unit is outstanding at the time of
the issuance of the title to the buyer, the owner or developer shall
redeem the mortgage or the corresponding portion thereof within six
months from such issuance in order that the title over any fully paid lot
or unit may be secured and delivered to the buyer in accordance
herewith.
Cases:
Far East Bank & Trust Co vs. Marquez
Marquez entered into a contract to sell with TSE involving a 52.5 sqm lot
and a three storey townhouse for P800,000. Later respondent was able
to pay a total of P600,000. TSE then mortgaged the whole property to
Far East Bank. TSE was unable to pay and the property was foreclosed
and sold in favor of Far East Bank.
Issues:
1) Whether or not the mortgage contract violated Section 18 of PD.957,
hence void insofar as third persons are concerned.
2) Who has a higher right the new buyer or the respondent?
Supreme Court ruling:
1) Yes violated Sec. 18. as provides as follows.
Sec. 18. Mortgages- No mortgage on any unit or lot shall be made by
the owner or developer without prior written approval of the authority.
Such approval shall not be granted unless it is shown that the proceeds
of the mortgage loan shall be used for the development of the
condominium or subdivision project and effective measures have been
provided to ensure such utilization. The loan value of each lot or unit
covered by the mortgage shall be determined and the buyer thereof, if
any, shall be notified before the release of the loan. The buyer may, at
his option, pay his installment for the lot or unit directly to the
mortgagee who shall apply the payments to the corresponding mortgage
indebtness secured by the particular lot or unit being paid for , with a
view to enabling said buyer to obtain title over the lot or unit promptly
after full payment thereof.
Since TSE did not obtain prior approval from the NHA the mortgage is
void as regarding to the property to the respondent as he has no
standing to question the validity of the other property.
2) Respondent has a higher right over the property. Petitioner cannot be
considered as a buyer in good faith. He should have considered that it
was a town house that was already in progress. The conversion of status
from mortgagee to buyer will not lessen the importance of such
knowledge.
Tamayo vs. Huang
Respondents Huang registered owners of four parcels of land located in
Barangay Matina, Davao City executed a contract of "Indenture" with
EAP Development Corporation (EAP) under which EAP undertook to
manage and develop said parcels of land into a first class subdivision
and sell the lots therein in, Doa Luisa Village (the subdivision).
Carlos R. Tamayo (petitioner) entered into a contract to sell with
respondents through EAP for a certain lot. Under the contract, petitioner
was to pay upon execution P35,749.60 and the balance, including
interest at the rate of 14% per annum, in 60 monthly installments of
P4,791.40, without necessity of demand; and if petitioner failed to pay
the installments, respondents were given the right to demand interest
thereon at the rate of 14% per annum, to be computed on the same day
of the month the installments became due. Later on the development of
the subdivision was put to stop by EAP, in effect petitioner stopped
paying the monthly amortization. The respondents sent the petitioner a
demand letter, but after the reply of the petitioner with an explanation of
stop payment the respondent was unheard of.. After 5 years the
development was soon in progress and petitioner offered to pay the full
purchase price which was already rejected by the respondent. Later on
the property was sold by the respondent to another person.
Issues: 1) Did the petitioner have any legal basis for stop payment? 2)
Is the contract to sell between the parties rescinded?
SC: 1) Yes. According Section 23 of PD 957 requires only due notice to
the owner or developer for stopping further payments by reason of the
latters failure to develop the subdivision according to the approved plans
and within the time limit.
Therefore the buyer had the right to stop payment due to the failure of
the developer to comply with the contract. He only needed to give due
notice to the owner (Huangs) or Developer to give it effect.
2) Yes. Respondents sent no notarized notice or any notice of
cancellation at all. In fact, it was only after petitioner filed on July 24,
1997 the complaint before the HLURB that respondents offered to
reimburse petitioner of the total amount he had already paid.
The contract not having been cancelled in accordance with law, it has
remained valid and subsisting. It was, therefore, within petitioners right
to maintain his option to await the completion of the development of
and introduction of improvements in the subdivision and thereafter, upon
full payment of the purchase price, without interest, compel respondents
to execute a deed of absolute sale, but since the property was sold to a
buyer in good faith. The respondents should refund the petitioner for the
value of the property when it was sold.
Cantemperante vs CRS realty
Facts: Herein petitioners were among those who filed before the HLURB
a complaint 6 for the delivery of certificates of title against respondents
CRS Realty Development Corporation (CRS Realty), Crisanta Salvador
and Cesar Casal.
Petitioners averred that they had bought on an installment basis
subdivision lots from respondent CRS Realty and had paid in full the
agreed purchase prices; but notwithstanding the full payment and
despite demands, respondents failed and refused to deliver the
corresponding certificates of title to petitioners. The complaint prayed
that respondents be ordered to deliver the certificates of title
corresponding to the lots petitioners had purchased and paid in full and
to pay petitioners damages.
In his answer, respondent Casal averred that despite his willingness to
deliver them, petitioners refused to accept the certificates of title with
notice of lis pendens covering the subdivision lots.
Respondents Ang and Cuason claimed in their answer with counterclaim
16 that respondent Casal remained the registered owner of the
subdivided lots when they were transferred to them and that the failure
by petitioners to annotate their claims on the title indicated that they
were unfounded. Respondent CRS Realty and the Heirs of Laudiza were
declared in default for failure to file their respective answers.
Issues: (1) Whether or not the absence of a license to sell has rendered
the sales void; (2) whether or not the subsequent sale to respondent
Cuason and Ang constitutes double sale;
Held:
Petitioners assail the Court of Appeals' ruling that the lack of the
requisite license to sell on the part of respondent CRS Realty rendered
the sales void; hence, neither party could compel performance of each
other's contractual obligations.
The only requisite for a contract of sale or contract to sell to exist in law
is the meeting of minds upon the thing which is the object of the
contract and the price, including the manner the price is to be paid by
the vendee. Under Article 1458 of the New Civil Code, in a contract of
sale, whether absolute or conditional, one of the contracting parties
obliges himself to transfer the ownership of and deliver a determinate
thing, and the other to pay therefor a price certain in money or its
equivalent.
In the instant case, the failure by respondent CRS Realty to obtain a
license to sell the subdivision lots does not render the sales void on that
ground alone especially that the parties have impliedly admitted that
there was already a meeting of the minds as to the subject of the sale
and price of the contract. The absence of the license to sell only subjects
respondent CRS Realty and its officers civilly and criminally liable for the
said violation under Presidential Decree (P.D.) No. 957 30 and related
rules and regulations. The absence of the license to sell does not affect
the validity of the already perfected contract of sale between petitioners
and respondent CRS Realty.
As found by the Court of Appeals, in the case at bar, the requirements of
Sections 4 and 5 of P.D. [No.] 957 do not go into the validity of the
contract, such that the absence thereof would automatically render the
contract null and void. It is rather more of an administrative convenience
in order to allow a more effective regulation of the industry.
CHAPTER 2 CAPACITY TO BUY OR SELL
Arts. 1489 to 1492 PARTIES AND THEIR CONSENT
CAPACITY IN GENERAL
Art. 1489. All persons who are authorized in this Code to obligate
themselves, may enter into a contract of sale, saving the modifications
contained in the following articles.
Where necessaries are sold and delivered to a minor or other person
without capacity to act, he must pay a reasonable price therefor.
Necessaries are those referred to in article 290.
Note: A person who has both juridical capacity and capacity to act is said
to have full civil capacity. It is understood that he is of legal age and
suffers no restriction on his capacity to act, such person may enter into
any contract including sale.
SPECIAL DISQUALIFICATIONS
Between spouses
By a spouse without consent of the other spouses
Persons in trust relations
a) Between Spouses
Case:
1. Effect of sale of land to ones own spouse
Uy Siu Pin vs. Cantollas, G.R. No. 46850, June 20, 1940
Facts: There was a contract entered into between Uy Siu Pin and
Casimira and Blas, which the latter agreed to deliver the mortgaged land
and to enjoy the same with its improvements to the during the period of
15 years on condition that Uy Siu Pin would pay El Hogar Filipino the
unpaid balance of the indebtedness of casimira and Blas, together with
all other expenses including realty taxes.
When the mortgage debtors, Casimira and Blas, failed to redeem the
land within the statutory period, a final deed of sale was issued in favor
of the mortgagee, El Hogar Filipino. The latter sold the land to Uy Siu
Pin and in turn sold the land to his wife Chua Hue.
Issues: Is the sale valid between Uy Siu Pin and Chua Hue?
Held: SC said No. The sale from Uy Siu Pin to his wife Chua Hue is null
and void not only because theformer had no right to dispose of the land
in contorversy but because the sale comes within the prohibition of
Article 1458 of the Civil Code.
Note: The case did not extensively explicate the reason why the sale
between spouses are prohibited. However, Art 1490 provides that the
husband and wife cannot sell property to each other, except: (1) when a
separation of property was agreed upon in the marriage settlements; or
(2) when there has been a judicial separation of property under articel
191.
Rationale behind the prohibiton: (a) to prevent the stronger spouse from
exploiting the weaker spouse; (b) prevent donations disguised as sales;
(c) protect third persons, specially creditors, against fraud through the
transfer of the properties of one spouse to the other to evade payment
of obligations.
2. Transfer in common law relationship
Ching vs. Goyanko, G.R. No. 165879, November 10, 2006
FACTS: Respondents claim that their parents (Goyanko and Epifania)
acquired a 661 square meter property but they (the parents) were
Chinese citizens at the time, the property was registered in the name of
their aunt, Sulpicia Ventura. Sulpicia executed a deed of sale over the
property in favor of reespondents father Goyanko that in turn executed
a deed of sale over the same property in favor of his common-law-wife-
herein petitioner Maria B. Ching. It was only after Goyankos death that
they discovered the transfer of the said property to Ching. Respondents
thus filed with the RTC of Cebu City a complaint for recovery of the
property and the nullification of the deed of sale.
ISSUE: Whether or not the sale of the property by Goyanko to Ching is
valid.
HELD: The conveyance of Goyanko in favor of his common-law-wife-
herein petitioner, was null and void. Article 1409 of the Civil Code states
inter alia that contracts whose cause, object, or purpose is contrary to
law, morals, good customs, public order, or public policy are void and
inexistent from the very beginning. Article 1352 also provides that:
Contracts without cause, or with unlawful cause, produce no effect
whatsoever. The cause is unlawful if it is contrary to law, morals, good
customs. Public order, or public policy. Additionally, the law emphatically
prohibits the spouses from selling property to each other subject to
certain exceptions. Similarly, donations between spouses during
marriage are prohibited. And this is so because if transfers or
conveyances between spouses were allowed during marriage, that would
destroy the system of conjugal partnership, a basic policy in civil law. It
was also designed to prevent the exercise of undue influence by one
spouse over the other, as well as to protect the institution of marriage,
which is the cornerstone of family law. The prohibitions apply to a
couple living as husband and wife without benefit of marriage,
otherwise, the condition of those who incurred guild would turn out to
be better that those in legal union.
b) By Spouse without consent of the other spouse Void
c) Persons in Trust Relations
Cases:
 1. Sale to agent: Exception to prohibition against sale by
principal in favor of his agent.
Pelayo vs. Perez, G.R. No. 141323, June 8, 2005
FACTS: David Pelayo, by a Deed of Absolute Sale, conveyed to Melki
Perez two parcels of agricultural land. Loreza, wife of David Pelayo,k and
another one whose signature is illegible witnessed the execution of the
deed. Loreza, however, signed only the third page. Perez asked Loreza
to sign on the first and second pages of the deed but refused, hence, he
instituted the instant complaint for specific performance against the
spouses. Petitioners, in adopting the trial courts narration of antecedent
facts in their petition, admitted that they authorized respondent to
represent them in negotiations with the squatters occupying the
disputed property and, in consideration of respondents services, they
executed the subject deed of sale. Defendant Pelayo claimed that the
deed was without his wifes consent, hence, it is null and void.
ISSUE: Whether or not the deed of sale was null and void.
HELD: Petitioner Lorenza, by affixing her signature to the Deed of Sale
on the space provided for witnesses, is deemed to have given her
implied consent to the contract of sale. Sale is a consensual contract that
is perfected by mere consent, which may either be express or implied. A
wifes consent to the husbands disposition of conjugal property does not
always have to be explicit or set forth in any particular document, so
long as it is shown by acts of the wife that such consent or approval was
indeed given. In the present case, although it appears on the face of the
deed of sale that Lorenza signed only as an instrumental witness,
circumstances leading to the execution of said document point to the
fact that Lorenza was fully aware of the sale of their conjugal property
and consented to the sale.
Under Article 173, in relation to Article 166, both of the New Civil Code,
when the deed in question was executed, the lack of marital consent to
the disposition of conjugal property does not make the contract void ab
initio but merely voidable. It has been held that the contract is valid until
the court annuls the same and only upon an action brought by the wife
whose consent was not obtained. In the present case, despite
respondents repeated demands for Lorenza to affix her signature on all
the pages of the deed of sale, showing respondents insistence on
enforcing said contract, Lorenza still did not fle a case for annulment of
the deed of sale. Thus, if the transaction was indeed entered into
without Lorenzas consent, we find it quite puzzling why for more than
three and a half years, Lorenza did nothing to seek the nullification of
the assailed contract.
With regards to petitioners asservation that the deed of sale is invalid
under Article 1491 (2) of the New Civil Code, we find such argument
unmeritorious. Petitioners, by signing the Deed of Sale in favor of
respondent, are also deemed to have given their consent to the sale of
the subject property in favor of respondent, thereby making the
transaction an exception to the general rule that agents are prohibited
from purchasing the property of their principals.
2. Sale to guardians
Philippine Trust Co. vs Roldan
Facts: Parcels located in Guiguinto, Bulacan, were part of the properties
inherited by Mariano L. Bernardo from his father, Marcelo Bernardo,
deceased. In view of his minority, guardianship proceedings were
instituted, wherein Socorro Roldan was appointed his guardian. She was
the surviving spouse of Marcelo Bernardo, and the stepmother of said
Mariano L. Bernardo.
On July 27, 1947, Socorro Roldan filed in said guardianship proceedings
(Special Proceeding 2485, Manila), a motion asking for authority to sell
as guardian the 17 parcels for the sum of P14,700 to Dr. Fidel C. Ramos,
the purpose of the sale being allegedly to invest the money in a
residential house, which the minor desired to have on Tindalo Street,
Manila. The motion was granted.
Socorro Roldan, as guardian, executed the proper deed of sale in favor
of her brother-in-law Dr. Fidel C. Ramos. Dr. Fidel C. Ramos executed in
favor of Socorro Roldan, personally, a deed of conveyance covering the
same seventeen parcels, for the sum of P15,000.
The Philippine Trust Company replaced Socorro Roldan as guardian, on
August 10, 1948. And this litigation, started two months later, seeks to
undo what the previous guardian had done. The step-mother in effect,
sold to herself, the properties of her ward, contends the plaintiff, and the
sale should be annulled because it violates Article 1459 of the Civil Code
prohibiting the guardian from purchasing "either in person or through
the mediation of another" the property of her ward.
ISSUE: Whether or not the sale was valid.
HELD: As Guardianship is a trust of the highest order, the trustee cannot
be allowed to have any inducement to neglect his ward's interest; and
whenever the guardian acquires the ward's property through an
intermediary, he violates the provision of Article 1459 of the Civil Code
and such transaction and subsequent ones emanating therefrom shall be
annulled.
Even without proof that she had connived with Dr. Ramos. Remembering
the general doctrine that guardianship is a trust of the highest order, and
the trustee cannot be allowed to have any inducement to neglect his
ward's interest and in line with the court's suspicion whenever the
guardian acquires the ward's property 1 we have no hesitation to declare
that in this case, in the eyes of the law, Socorro Roldan took by
purchase her ward's parcels thru Dr. Ramos, and that Article 1459 of the
Civil Code applies.
3. Sale to public officers
Maharlika Broadcasting Corp. vs. Tagle
FACTS: The GSIS was the registered owner of a parcel of land that was
sold to petitioner Maharlika Publishing Corporation together with the
building thereon as well as the printing machinery and equipment
therein. Among the conditions of the sale are that petitioner shall pay to
the GSIS monthly installments until the total purchase price shall be fully
paid and that failure to pay any monthly installment within 90 days from
due date, the contract shall be deemed automatically cancelled.
Maharlika failed to pay the installments for several months. This
resulted to a public bidding of this particular property. Petitioner
submitted a letter-proposal that reads: I bid to match the highest
bidder. The bidding committee rejected petitioners bid and accepted
the private respondent Luz Tagles bid. After approval and confirmation
of the sale, the GSIS executed a Deed of Conditional Sale in favor of
Tagles. Luz Tagle is the wife of Edilberto Tagle. Edilberto Tagle was the
Chief, Retirment Division, GSIS, from 1970 to 1978. He worked for the
GSIS since 1952.
ISSUE: Whether or not the sale is valid.
HELD: In providing the prohibitions under Article 1491, the Code tends
to prevent fraud, or more precisely, tends not give occasion for fraud,
which is what can and must be done.
The point is that he is a public officer and his wife acts for and in his
name in any transaction with the GSIS. If he is allowed to participate in
the public bidding of properties foreclosed or confiscated by the GSIS,
there will always be the suspicion among other bidders and the general
public that the insider official had access to information and connection
with his fellow GSIS official as to allow him to eventually acquire the
property. It is precisely the need to forestall such suspicions and to
restore confidence in the public service that the Civil Code now declares
such transactions to be void from the beginning and not merely
voidable.
4. Sale/transfer to attorney
Gurrea vs. Suplico, G.R. No. 144320, April 26, 2006
FACTS: Adelina Gurrea continued to be the owner of the lot (TCT No.
58253) until her death. Thereafter, a special proceeding was instituted to
settle her estate. Under her will, the San Juan lot was bequeathed to
Pilar and Luis Gurrea, while 700,000 pesetas, of the lot in Baguio and
1-hectare piece of land in Negros Occidental were given to Ricardo
Gurrea. Ricardo Gurrea, represented by and through his counsel Atty.
Enrique Suplico filed an Opposition in Special Proceeding No. 7185. In
consideration of said representation, Ricardo Gurrea agreed to pay Atty.
Suplico a contigent fee of twenty (20%) of whatever is due me, either
real or personal property. Later on, Ricardo withdrew his Opposition.
The properties adjudicated to Ricardo based on the project of partition
were the Baguio lot, San Juan lot, and a parcel of land in Negros
Occidental. As payment of his attorneys fees, Ricarod Gurrea offered the
San Juan lot to Atty. Suplico who was hesitant to accept as the property
was occupied by squatters. However, in order not to antagonize his
client, Atty. Suplico agreed to Ricardos proposal with the further
understanding that he will receive an additional commission of 5% if he
sells the Baguio property. Thereafter, Atty. Suplico registered the deed of
Transfer of Rights and Interest and obtained the title to the San Juan
property under his name.
ISSUE: Whether or not the subject property is still the object of
litigation; If affirmative, whether or not the sale is void for being
violative of the provisions of Article 1491 (5) of the Civil Code.
HELD: The sale to Atty. Suplico is null and void.
A thing is said to be in litigation only if there is some contest or litigation
over it in court, but also from the moment that it becomes subject to the
judicial action of the judge. In the present case, there is no proof to
show that at the time the deed of Transfer of Rights and Interest was
executed, the probate court issued an order granting the Motion for
Termination of Proceeding and Discharge of the Executor and Bond.
Since the judge has yet to act on the above-mentioned motion, if follows
that the subject property which is the subject matter of the deed of
Transfer of Rights and Interest, is still the object of litigation.
Having been established that the subject property was still the object of
litigation at the time the subject deed of Transfer of Rights and Interest
was executed, the assignment of rights and interest over the subject
property in favor of respondent is null and void for being violative of the
provisions of Article 1491 of the Civil Code which expressly prohibits
lawyers from acquiring property or rights which may be the object of any
litigation in which they may take party by virtue of their profession.
INCAPACITY TO SELL
Homesteaders
Cases:
1. Sale of portions of a parcel of land (1) prior to issuance and
(2) within 5 years from issuance of free patent
Manlapat vs. CA, G.R. No. 125585, June 8, 2005
FACTS: The controversy involves Lot No. 2204 that had been originally in
the possession of Jose Alvarez, Eduardos grandfather, until his demise in
1916. It remained unregistered until October 8, 1976 when OCT No.
P-153 was issued in the name of Eduardo pursuant to a free patent
issued in Eduardos name that was entered in the Registry of Deed.
Before the subject lot was titled, Eduardo sold 533 sq.m. of the land to
Ricardo on December 19, 1954. The sale is evidence by a deed of sale
entitled Kasulatan ng Bilihang Tuluyan ng Lupang Walang Titulo which
was signed by Eduardo himself as vendor and his wife Engracia Ancieto
with a certain Santiago Enriquez signing as witness. The Kasulatan was
registered with the Register of Deeds. On March 18, 1981, another Deed
of Sale conveyed another portion of the subject lot as right of way was
executed by Eduardo in favor of Ricardo. The deed was notarized. Leon
Banaag, as attorney-in-fact of his father-in-law (Eduardo) mortgage with
the Rural Bank for P100,000.00 with the subject lot as collateral. Banaag
deposited the owners duplicate certificate of OCT No. P-153 with the
bank. Ricardo and Eduardo died.
The Cruzes, upon learning their right to the subject lot immediately tried
to confront petitioners mortgage and obtain the surrender of the OCT.
Having failed to physically obtain the title from petitioners, the Cruzes
went to RBSP which had custody of the owners duplicate certificate of
the OCT. They were able to secure a clearance to borrow the title and
was able to have the Register of Deeds cancel the OCT and issue two
separate titles in the name of Ricardo andEduardo.
ISSUE: Whether or not the sale of the land is prohibited or not.
HELD: Free patent application implies the recognition of the public
dominion character of the land and, hence, the five year prohibition
imposed by the Public land Act against alienation or encumbrance of the
land covered by a free patent or homestead should have been
considered.
The deed of sale covering the 50 sq.m. right of way executed on March
18, 1981 is obviously covered by proscription, the free patent having
been issued on October 8, 1979. However, petitioners may recover the
portion sold since the prohibition was imposed in favor of the free patent
holder. Under the Public Land Act, the prohibition to alienate is
predicated on the fundamental policy of the State to preserve and keep
in the family of the homesteader that portion of public land which the
State has gratuitously given to him, and recovery is allowed even where
the land acquired under the Public Land Act was sold and not merely
encumbered, within the prohibited period.
The sale of the 533 sq.m. was executed 22 years before the issuance of
the patent in 1976. Where the sale or transfer took place before the
filing of the free patent application, whether by the vendor or the
vendee, the prohibition should not be applied. In such situation, neither
the prohibition not the rationale therefor which is to keep in the family of
the patentee that portion of the public land which the government has
gratuitously given him, by shielding him from the temptation to dispose
of his landholdings, could be relevant. Precisely, he had disposed of his
rights to the lot even before the government could give the title to him.
2. Effect of verbal sale within 5-year prohibitory period
Manzano vs. Ocampo, L-46850, June 20, 1940
Facts: Victoriano Manzano, now deceased, was granted a homestead
patent on June 25, 1934, and the land was registered in his name on
July 25, 1934 under Original Certificate of Title No. 4590. On January 4,
1938, he and respondent Rufino Ocampo agreed on the sale of said
homestead for the amount of P1,900.00, P1,100.00 of which was paid
by Ocampo to Manzano on the same day, and for the balance, he
executed a promissory note. Knowing, however, that any sale of the
homestead at that time was prohibited and void, the parties likewise
agreed that the deed of sale was to be made only after the lapse of five
years from the date of Manzano's patent. And to protect the buyer
Ocampo's rights in the agreed sale, Manzano executed in his favor a
"Mortgage of Improvements" over the homestead to secure the amount
of P1,100.00 already received as down payment on the price.
It is clear that a perfected contract of sale had already been entered into
by the parties within the period of prohibition. There was nothing
"futuristic" in this agreement, except that, being fully aware of the
prohibition, Manzano's title has not ripened into absolute ownership.
This execution of the formal deed after the expiration of the prohibitory
period did not and could not legalize a contract that was void from its
inception. Nor was this formal deed of sale "a totally distinct transaction
from the promissory note and the deed of mortgagee for it was executed
only in compliance and fulfillment of the vendor's previous promise,
under the perfected sale to execute in favor of his vendee the formal act
of conveyance after the lapse of the period of inhibition of five years
from the date of the homestead patent.
Sale in question is illegal and void for having been made within five
years from the date of Manzano's patent, in violation of section 118 of
the Public Land Law. Being void from its inception, the approval thereof
by the Undersecretary of Agriculture and Natural Resources after the
lapse of five years from Manzano's patent did not legalize the sale. The
result is that the homestead in question must be returned to Manzano's
heirs, who are, in turn, bound to restore to Ocampo the, sum of
P3,000.00 received by Manzano as the price thereof.

WHEN INCOMPETENT BUYS

He must pay a reasonable price for necessaries delivered to him. The

resulting sale is valid.

The above rule seems to be founded on quasi-contract

EFFECT OF FORBIDDEN SALES

1. Between husband and wife under the community regime sale

is void

Take note: But strangers cannot assail the transfer

2. Between persons in trust relations sale is void

a. Those based on public trust

Public officers, employees, government experts

Judges, justices, prosecutors, clerks of court,

lawyers

b. Those based on private trust

Guardians

Agents

Executors and administrators