GAITE vs FONACIER

Posted on April 4, 2016 by jamperez

Standard
GAITE vs FONACIER | G.R. No. L-11827
FACTS
Fonacier, owner of mining claims, constituted Gaite as his attorney-in-fact. Gaite was
authorized to enter into a contract with other persons with respect to the mining claims.
Gaite then entered into a contract with Larap Iron Mines, a company Gaite solely
owned, to develop the mining claims. Later, Fonacier abruptly decided to revoke Gaites
authority as attorney-in-fact.

Afterwards, Gaite sold the developments his company made in the mining claims areas
and the ore already mined for a sum of money to Fonacier. Fonacier secured the sale
with a surety company. Part of the money was paid upon sale while the other part was
payable out of the first loan of credit covering the first shipment of iron ore and the first
amount derived from the local sale of the iron ore.

After the surety expired, Gaite demanded payment of the remainder of the purchase
price but Fonacier refused arguing no sale of iron ore had yet taken place.

ISSUE
WHETHER OR NOT THE SELLING OF THE IRON ORES IS A SUSPENSIVE
CONDITION FOR PAYING GAITE

HELD: NO.
The sale isnt a suspensive condition but is only a suspensive period or term. This
interpretation is supported by:
1. The contract expresses no contingency in the buyers obligation to pay. The contract
recognizes the existence of an obligation to pay and only the maturity is deferred

2. Gaite never desired or assumed to run the risk of losing his right over the ore without
getting paid for it as shown by his insistence on a surety

3. Treating the condition as a suspensive condition would leave payment at the

debtors
discretion because the ore will be sold only when the debtor wants it to be sold.
4. In onerous contracts the rules of interpretation favor the greater reciprocity of interest
and because sale is onerous this rule applies. Greater reciprocity is obtained if the
buyers
obligation to pay is deemed existing compared to such obligation non-existing until the
ore was sold.

JAN
 4

Gaite vs. Fonacier

Gaite vs. Fonacier

GR. No. L-11827

FACTS:

1. FONACIER: OWNER OF DAWAHAN GROUP (11 iron lode mineral claims)

1. Appointed GAITE (attorney-in-fact) to enter to contract with any individual/juridical person for
development of mining claims in a royalty basis of not less than P.50/ton.
2. GAITE: executed general assignment conveying development and exploitation of mining claims
into LARAP IRON MINES (single proprietorship owned by him)
1. Paved roads, development and facilities
2. Extracted 24,000 metric tons of iron ore
3. FONACIER: revoked GAITE authority
1. Revocation of Power of Attorney and Contract
2. GAITE assented subject to certain conditions:
i. Consideration of P20,000.00, plus 10% of the royalties that Fonacier would receive from
the mining claims

ii. All his rights and interests on all the roads, improvements, and facilities in or outside said
claims,

iii. Right to use the business name "Larap Iron Mines" and its goodwill, and all the records
and documents relative to the mines.

iv. Gaite transferred to Fonacier all his rights and interests over the "24,000 tons of iron ore,
more or less" that the former had already extracted from the mineral claims

1. In consideration of the sum of P75,000.00, P10,000.00 of which was paid upon the signing of the
agreement

2. P65,000 will be paid from and out of the first letter of credit covering the first shipment of iron
ores and of the first amount derived from the local sale of iron ore made by the Larap Mines &
Smelting Co. Inc.

3. To secure P65,000, Fonacier promised to execute in favor of Gaite a surety bond with himself
(Fonacier) as principal and the Larap Mines and Smelting Co. and its stockholders George
Krakower, Segundina Vivas, Pacifico Escandor, Francisco Dante, and Fernando Ty as sureties
(Exhibit "A-1").
 i. GAITE REFUSED TO SIGN REVOCATION unless another bond under written by a
bonding company was put up by defendants to secure the payment of the P65,000 balance.

1. Hence, a second bond with Far Eastern Surety and Insurance Co. as additional surety

a. Provided liability of the surety company would attach only when there had been an actual sale of
iron ore by the Larap Mines & Smelting Co. for an amount of not less then P65,000.00

b. Liability of said surety company would automatically expire on December 8, 1955.

c. Both bonds were attached to the "Revocation of Power of Attorney and Contract", Exhibit "A",
and made integral parts thereof.

4. On same day Fonacier revoked the power of attorney and entered into a "Contract of Mining
Operation", ceding, transferring, and conveying unto the Larap Mines and Smelting Co., Inc. the
right to develop, exploit, and explore the mining claims, together with "Larap Iron Mines"
i. Also transferred 24,000 tons of iron ore from Gaite, to the Larap & Smelting Co

4. 2nd BOND EXPIRED, no sale of the approximately 24,000 tons of iron ore had been made by the
Larap Mines & Smelting Co., Inc., nor had the P65,000.00 balance of the price of said ore been
paid to Gaite by Fonacier.
1. GAITE filed the present complaint.
2. DEFENSE: obligation sued upon by Gaite was subject to condition that P65,000 would be
payable out of the first letter of credit covering the first shipment of iron ore and/or the first
amount derived from the local sale of the iron ore by the Larap Mines & Smelting Co., Inc.;
i. No sale of the iron ore had been made

1. Hence the condition had not yet been fulfilled

2. Obligation was not yet due and demandable.

ii. FONACIER: only 7,573 of 24,000 tons of iron ore sold to him by Gaite was actually
delivered

5. ISSUES WITH LOWER COURT:

1. WON obligation of P65,000 is due and demandable.
i. LOWER COURT HELD obligation was held WITH TERM: It would be paid upon sale
of sufficient iron ore by defendants within one year, obligation became due and demandable
under Article 1198 of the New Civil Code.

2. WON 24,000 metric tons is existing.

3. LOWER COURT SIDED WITH GAITE.
 ISSUES:

WON lower court erred in holding that the obligation of appellant Fonacier to pay appellee Gaite
the P65,000.00 IS ONE WITH PERIOD/TERM OR A SUSPENSIVE CONDITION (term
expired on December 8, 1955)

WON lower court erred in not holding that there were only 10,954.5 tons in the stockpiles of iron
ore sold by appellee Gaite to appellant Fonacier.

HELD:

NO ERROR in the decision appealed from, we hereby affirm the same, with costs against
appellants.

1. WON lower court erred in holding that the obligation of appellant Fonacier to pay appellee Gaite
the P65,000.00 IS ONE WITH PERIOD/TERM OR A SUSPENSIVE CONDITION (term
expired on December 8, 1955)LOWER COURT CORRECT THAT LOCAL SALE OF IRON
IS NOT A SUSPENSIVE CONDITION TO PAYMENT OF P65,000 BUT ONLY A
SUSPENSIVE PERIOD OR TERM.
1. CONDITIONAL OBLIGATION: obligatory force (as distinguished from its demandability) is
subordinated to the happening of a future and uncertain event
i. If the suspensive condition does not take place, the parties would stand as if the
conditional obligation had never existed.

ii. NO UNCERTAINTY THAT PAYMENT WILL BE MADE, ONLY THING

UNCERTAIN IS THE EXACT DATE.

1. THEREFORE existence of the obligation to pay is recognized; only

its maturity or demandability is deferred.

2. CONTRACT OF SALE: commutative and onerous: not only does each one of the parties assume
a correlative obligation (the seller to deliver and transfer ownership of the thing sold and the
buyer to pay the price)
i. But each party anticipates performance by the other from the very start.

ii. While in a sale the obligation of one party can be lawfully subordinated to an uncertain
event, so that the other understands that he assumes the risk of receiving nothing for what he
gives (as in the case of a sale of hopes or expectations, emptio spei)

iii. Not in the usual course of business to do so; h

1. ence, the contingent character of the obligation must clearly appear.

 iv. Nothing is found in t evidence that Gaite desired or assumed to run the risk of losing his
right over the ore without getting paid for it, or that Fonacier understood that Gaite assumed any
such risk.

3. To subordinate the obligation to pay tremaining P65,000.00 TO SALE OR SHIPMENT OF ORE

AS A CONDITION PRECENDENT = Leaving the payment at the discretion of the debtor, for
the sale or shipment could not be made unless the appellants took steps to sell the ore.
4. ONLY RATIONAL VIEW IS SALE OR ORE TO FONACIER WAS A SALE ON CREDIT
AND NOT an aleatory (random) contract where the transferor, Gaite, would assume the risk of
not being paid at all

2. WON Fonacier and his sureties, still have the right to insist that Gaite should wait for the sale or
shipment of the ore before receiving payment; ARE THEY ENTITLED TO MAKE FULL
ADVANTAGE OF PERIOD GRANTED FOR MAKING PAYMENT?FORFEITED RIGHT
COURT THE RIGHT TO COMPEL GAITE TO WAIT FOR THE SALE BEFORE
RECEIVING PAYMENT, BECAUSE THEY WERE NOT ABLE TO RENEW BOND WITH
FAR EASTERN SURETY COMPANY
1. ART. 1198:
i. When he does not furnish to the creditor the guaranties or securities which he has
promised.

ii. When by his own acts he has impaired said guaranties or securities after their
establishment

iii. AND When through fortuitous event they disappear, unless he immediately gives new
ones equally satisfactory.

3. WON there were really 24,000 tons of iron ore in the stockpiles sold by appellee Gaite to
appellant Fonacier and whether, if there had been a short-delivery as claimed by appellants, they
are entitled to the payment of damages.
1. This is case of a sale of a specific mass of fungible goods for a single price or a lump sum, the
quantity of "24,000 tons of iron ore, more or less," stated in the contract being a mere estimate
by the parties of the total tonnage weight of the mass
2. Evidence shows that neither of the parties had actually measured of weighed the mass, so that
they both tried to arrive at the total quantity by making an estimate of the volume thereof in
cubic meters and then multiplying it by the estimated weight per ton of each cubic meter.
3. Subject matter of the sale is, therefore, a determinate object, the mass, and not the actual number
of units or tons contained therein, so that all that was required of the seller Gaite was to deliver in
good faith to his buyer all of the ore found in the mass,
i. Gaite had, therefore, complied with his promise to deliver, and appellants in turn are
bound to pay the lump price.

4. In the face of the conflict of evidence, we take as the most reliable estimate of the tonnage factor
of iron ore in this case to be that made by Leopoldo F. Abad, chief of the Mines and
Metallurgical Division of the Bureau of Mines
1. This witness placed the tonnage factor of every cubic meter of iron ore at between 3 metric tons
as minimum to 5 metric tons as maximum. This estimate, in turn, closely corresponds to the
average tonnage factor of 3.3 adopted in his corrected report (Exhibits "FF" and FF-1") by
engineer Nemesio Gamatero, who was sent by the Bureau of Mines to the mining claims
involved at the request of appellant Krakower, precisely to make an official estimate of the
amount of iron ore in Gaite's stockpiles after the dispute arose.

Gaite v. Fonacier
Facts:

Gaite was appointed by Fonacier as attorney-in-fact to contract any party for

the exploration and development of mining claims. Gaite executed a deed of
assignment in favor of a single proprietorship owned by him. For some
reasons, Fonacier revoked the agency, which was acceded to by Gaite, subject
to certain conditions, one of which being the transfer of ores extracted from
the mineral claims for P75,000, of which P10,000 has already been paid upon
signing of the agreement and the balance to be paid from the first letter of
credit for the first local sale of the iron ores. To secure payment, Fonacier
delivered a surety agreement with Larap Mines and some of its stockholders,
and another one with Far Eastern Insurance. When the second surety
agreement expired with no sale being made on the ores, Gaite demanded the
P65,000 balance. Defendants contended that the payment was subject to the
condition that the ores will be sold.

Issue:

(1) Whether the sale is conditional or one with a period

(2) Whether there were insufficient tons of ores

Held:

(1) The shipment or local sale of the iron ore is not a condition precedent (or
suspensive) to the payment of the balance of P65,000.00, but was only a
suspensive period or term. What characterizes a conditional obligation is the
fact that its efficacy or obligatory force (as distinguished from its
demandability) is subordinated to the happening of a future and uncertain
event; so that if the suspensive condition does not take place, the parties
would stand as if the conditional obligation had never existed.

A contract of sale is normally commutative and onerous: not only does each
one of the parties assume a correlative obligation (the seller to deliver and
transfer ownership of the thing sold and the buyer to pay the price),but each
party anticipates performance by the other from the very start. While in a sale
the obligation of one party can be lawfully subordinated to an uncertain event,
so that the other understands that he assumes the risk of receiving nothing for
what he gives (as in the case of a sale of hopes or expectations,emptio spei), it
is not in the usual course of business to do so; hence, the contingent character
of the obligation must clearly appear. Nothing is found in the record to
evidence that Gaite desired or assumed to run the risk of losing his right over
the ore without getting paid for it, or that Fonacier understood that Gaite
assumed any such risk. This is proved by the fact that Gaite insisted on a bond
a to guarantee payment of the P65,000.00, an not only upon a bond by
Fonacier, the Larap Mines & Smelting Co., and the company's stockholders,
but also on one by a surety company; and the fact that appellants did put up
such bonds indicates that they admitted the definite existence of their
obligation to pay the balance of P65,000.00.

The appellant have forfeited the right court below that the appellants have
forfeited the right to compel Gaite to wait for the sale of the ore before
receiving payment of the balance of P65,000.00, because of their failure to
renew the bond of the Far Eastern Surety Company or else replace it with an
equivalent guarantee. The expiration of the bonding company's undertaking
on December 8, 1955 substantially reduced the security of the vendor's rights
as creditor for the unpaid P65,000.00, a security that Gaite considered
essential and upon which he had insisted when he executed the deed of sale of
the ore to Fonacier.

(2) The sale between the parties is a sale of a specific mass or iron ore because
no provision was made in their contract for the measuring or weighing of the
ore sold in order to complete or perfect the sale, nor was the price of
P75,000,00 agreed upon by the parties based upon any such
measurement.(see Art. 1480, second par., New Civil Code). The subject matter
of the sale is, therefore, a determinate object, the mass, and not the actual
number of units or tons contained therein, so that all that was required of the
seller Gaite was to deliver in good faith to his buyer all of the ore found in the
mass, notwithstanding that the quantity delivered is less than the amount
estimated by them.

14. KER & CO LTD. Vs LINGAD

Topic: F. Distinguished from or compared with other relations: 6. Sale (Art 1458)Nature:
Petition to reverse a decision of the Court of Tax AppealsFacts: The then Commissioner of
Internal Revenue Domingo assessed the petitioner to payPhp20,272 as commercial brokers
percentage tax. The petitioner requested for itscancellation but was denied and deemed liable as an
agent of United States RubberInternational, referred here as the Company. The petitioner was the
Companys distributor. Their contract provides that thepetitioner, as distributor, cannot
dispose of the products for shipment elsewhere thanthe designated places. But the crucial stipulations
state that 1) the consignmentremains property of the Company until sold by the distributor and 2) the
distributor isnot constituted as an agent of the Company by this contract for any
purposewhatsoever.Issue:WON the petitioner should be liable for the commercial brokers
percentage tax as theagent of the company given the stipulation in their
contractHeld: YESRationale: The Court of Tax Appeals was correct in deciding that the
petitioner Ker & Co., Ltd is,by contractual stipulation, an agent of the Company as all the
circumstances areantagonistic to the idea of an independent merchant.According to the National
Internal Revenue Code, a commercial broker includes allpersons who, for compensation or profit,
sell or bring about the sales or purchase of merchandise for other persons, or bring proposed buyers
together The test to seewho falls under this definition was penned by Justice JBL Reyes in CIR vs
Constantinostating since the company retained ownership of the goods, the price and the
termssubject to it, the relationship of the company and the dealer is one of agency.Salisbury vs
Brooks support this view stating that if the transfer of title puts thetransferee in the attitude or position of
an owner and makes him liable to thetransferor as a debtor for the agreed price, and not merely as an
agent who mustaccount for the proceeds of a resale, it is a sale; while the essence of an agency to
sellis the delivery to an agent, not as his property, but as the property of the principal,who remains the
owner and has the right to control sales, fix the price and terms,demand and receive the proceeds less
the agents commission upon sales made.

Ker and Co., LTD vs Lingad

GR No. L-20871 April 30, 1971

Facts:

CIR assessed the sum of P20,272.33 as the commercial brokers percentage tax, surcharge, and compromise
penalty against Ker & Co. Ker and Co. requested for the cancellation of the assessment and filed a petition for
review with the Court of Tax Appeals. The CTA ruled that Ker and Co is liable as a commercial broker. Ker has a
contract with US rubber. Ker is the distributor of the said company. Ker was precluded from disposing the products
elsewhere unless there has been a written consent from the company. The prices, discounts, terms of payment,
terms of delivery and other conditions of sale were subject to change in the discretion of the Company.

Issue:

Whether the relationship of Ker and Co and US rubber was that of a vendor- vendee or principal-broker

Ruling:

The relationship of Ker and Co and US rubber was that of a principal-broker/ agency. Ker and Co is only an agent of
the US rubber because it can dispose of the products of the Company only to certain persons or entities and within
stipulated limits, unless excepted by the contract or by the Rubber Company, it merely receives, accepts and/or
holds upon consignment the products, which remain properties of the latter company, every effort shall be made
by petitioner to promote in every way the sale of the products and that sales made by petitioner are subject to
approval by the company. Since the company retained ownership of the goods, even as it delivered possession
unto the dealer for resale to customers, the price and terms of which were subject to the companys control, the
relationship between the company and the dealer is one of agency.

SCHMID & OBERLY, INC. vs. RJL MARTINEZ FISHING CORPORATION

G.R. No. 75198 October 18, 1988Cortes, J.Facts:RJL Martinez Fishing Corporation is engaged in deep-sea fishing.
In the course of its business, it needed electricalgenerators for the operation of its business. Schmid and Oberly sells
electrical generators with the brand of Nagata, aJapanese product. D. Nagata Co. Ltd. of Japan was Schmids
supplier. Schmid advertised the 12 Nagata generators for sale and RJL purchased 12 brand new generators. Through
an irrevocable line of credit, Nagata shipped to the Schmid thegenerators and RJL paid the amount of the purchase
price. (First sale = 3 generators; Second sale = 12 generators).Later, the generators were found to be factory
defective. RJL informed the Schmid that it shall return the 12 generators. 3were returned. Schmid replaced the 3
generators subject of the first sale with generators of a different brand. As to thesecond sale, 3 were shipped to Japan
and the remaining 9 were not replaced.RJL sued the defendant on the warranty, asking for rescission of the contract
and that Schmid be ordered to accept thegenerators and be ordered to pay back the purchase money as well as be
liable for damages. Schmid opposes such liabilityaverring that it was merely the indentor in the sale between Nagata
Co., the exporter and RJL Martinez, the importer. Asmere indentor, it avers that is not liable for the sellers implied
warranty against hidden defects, Schmid not having personally assumed any such warranty.Issue:1) WON the
second transaction between the parties was a sale or an indent transaction?2) Even is Schmid is merely an indentor,
may it still be liable for the warranty?Held:As to the first issue, the SC held it to be an indent transaction. An
indentor is a middlemen in the same class ascommercial brokers and commission merchants. A broker is generally
defined as one who is engaged, for others, on acommission, negotiating contracts relative to property with the
custody of which he has no concern; the negotiator between other parties, never acting in his own name but in the
name of those who employed him; he is strictly amiddleman and for some purpose the agent of both parties. There
are 3 parties to an indent transaction, (1) buyer, (2)indentor, and (3) supplier who is usually a non-resident
manufacturer residing in the country where the goods are to be bought. The chief feature of a commercial broker and
a commercial merchant is that in effecting a sale, they are merelyintermediaries or middle-men, and act in a certain
sense as the agent of both parties to the transaction.RJL MARTINEZ admitted that the generators were purchased
through indent order. RJL admitted in its demand letter previously sent to SCHMID that 12 of 15 generators
were purchased through your company, by indent order and three(3) by direct purchase. The evidence also show
that RJL MARTINEZ paid directly NAGATA CO, for the generators,and that the latter company itself invoiced the
sale and shipped the generators directly to the former. The only participation of Schmid was to act as an
intermediary or middleman between Nagata and RJL, by procuring an order fromRJL and forwarding the same
to Nagata for which the company received a commission from Nagata.Even as SCHMID was merely an indentor,
there was nothing to prevent it from voluntarily warranting that twelve (12)generators subject of the second
transaction are free from any hidden defects. In other words, SCHMID may be heldanswerable for some other
contractual obligation, if indeed it had so bound itself. As stated above, an indentor is to someextent an agent of both
the vendor and the vendee. As such agent, therefore, he may expressly obligate himself toundertake the obligations
of his principal.

Luzon Brokerage Co. v. Maritime Building Co. (1972)Plaintiff-appellee: Luzon Brokerage Co.Defendants:
Maritime Building Co and Myers Building CoPonente: Reyes, J.B.L., J.Doctrine: The distinction between
contracts of sale and contract to sell with reserved title has been recognized by this Court in
repeateddecisions

upholding the power of promisors under contracts to sell in case of failure of the other party to complete
payment, to extrajudicially terminatethe operation of the contract, refuse conveyance and retain the sums
or installments already received, where such rights are expressly provided for, asin this case.Short
version: Myers corp sold land to Maritime. In the agreement, they agreed on an installment plan and that
if Maritime missed a payment, thecontract will be annulled and the payments already made will be
forfeited. Maritime failed to pay so Myers annulled the contract and did not returnpayments. SC says
Myers can do this because under contracts to sell, promisors, in case of failure of the other party to
complete payment, canextrajudicially terminate the contract, refuse conveyance, and retain installments
already received, where such rights are provided.

In Manila, Myers owned 3 parcels of land w/ improvements. Myers then

entered into a contract called a Deed of Conditional Sale with
Maritime Building.
o
Myers sold the land for P1million.
o
They agreed on the manner of payment (instalment, initial payment upon execution of contract, interest
rate)
o
In the contract it was stipulated that in case of failure of buyer to pay any of the instalments, the contract
will be annulled at theoption of the seller and all payments made by the buyer is forfeited.

Later on, the stipulated instalment of P10k with 5%interest was amended to the P5k with 5.5% per
annum.
o
Maritime paid the monthly instalments but failed to pay the monthly instalment of March.

VP of Maritime wrote to Pres of Myers requesting for a moratorium on the monthly payment of the
instalments because the company wasundergoing financial problems.
o
Myers refused.
o
For the months of March, April, and May, Maritime failed to pay and did not heed the demand of Myers.

Myers wrote Maritime cancelling the Deed of Conditional Sale

o
Myers demanded return of possession of properties
o
Held Maritime liable for use and occupation amounting to P10k per month
In the meantime, Luzon Brokerage was leasing the property from Maritime.
o
Myers demanded from Luzon the payment of monthly rentals of P10k
o
Myers also demanded surrender of property.

While actions and crossclaims between Myers and Maritime were happening, the contract between
Maritime and Luzon was extended for 4more years.

Turns out, Maritimes suspension of its payments to Myers corp arose from a previous event: An award of
backwages made
by the Court of Industrial Relations in favor of Luzon Labor Union (employees employed by Luzon).
o
FH Myers was a major stockholder of Luzon Brokerage. FH Myers promised to
indemnify
Schedler (who controlled Maritime) whenShedler
purchased FH Myerss stock in Luzon Brokerage company. (This
indemnification
is for the award of backwages by the CIR)
o
Schedler claims that after FH Myers estates closed, he was notified that the indemnity on the Labor Union
case will not be honoredanymore.
o
And so, Schedler advised Myers corp that Maritime is withholding payments to Myers corp in order to
offset the liability when Myersheirs failed to honor the indemnity agreement.

TC ruled Maritime in breach of contract.Issue:

Has there been a breach of contract?

Can Myers extrajudicially terminate the contract?Held:

Yes.

Yes.Ratio:

Failure to pay monthly installments constitute a breach of contract. Default was not made in good faith.

The letter to Myers corp means that the non-payment of installments was deliberately made to coerce
Myers crp into answering for an allegedpromise of the dead FH Myers.

Whatever obligation FH Myers had assumed is not an obligation of Myers corp. No proof that board of
Nyers corp agreed to assumeresponsibility to debts of FH Myers and heirs.

Schaedler allowed the estate proceedings of FH Myers to close without providing liability.

By the balance (of payment) in the Deed of Conditional Sale, Maritime wasattempting to burden the
Myers corp with an uncollectible debt,since enforcement against FH Myers estate was already barred.

Maritime acted in bad faith.

Maritimes contract with Myers is not the ordinary sale contemplated in NCC 1592 (transferring ownership
simultaneously with
delivery).
The distinction between contracts of sale and contract to sell with reserved title has been recognized by
this Court in repeateddecisions

upholding the power of promisors under contracts to sell in case of failure of the other party to complete
payment, to extrajudiciallyterminate the operation of the contract, refuse conveyance and retain the sums
or installments already received, where such rights areexpressly provided for, as in this case.Decision
affirmed

Dignos vs. Court of Appeals, and Jabil

158 SCRA 378
February 1988

FACTS:

In July 1965, herein petitioners Silvestre T. Dignos and Isabela Lumungsod de Dignos (spouses Dignos)
sold their parcel of land in Opon, LapuLapu to herein private respondent Antonio Jabil for the sum of
P28,000 payable for two installments, with an assumption of indebtedness with the First Insular Bank of
Cebu in the sum of P12,000 and the next installment of P4,000 to be paid in September 1965. In
November 1965, the spouses Dignos sold the same parcel of land for P35,000 to defendants Luciano
Cabigas and Jovita L. de Cabigas (spouses Cabigas) who were then US citizens, and executed in their
favor an Absolute Deed of Sale duly registered in the Office of the Register of Deeds.

Upon discovery of the 2nd sale of the subject land, Jabil filed the case at bar in the CFI of Cebu which
rendered its Decision in August 1975 declaring the 2nd sale to the spouses Cabigas null and void ab
initio and the 1st sale to Jabil not rescinded. The CFI of Cebu also ordered Jabil to pay the remaining
P16,000 to the spouses Dignos and to reimburse the spouses Cabigas a reasonable amount
corresponding the expenses in the construction of hollow block fences in the said parcel of land. The
spouses Dignos were also ordered to return the P35,000 to the spouses Cabigas.

Both Jabil and the spouses Dignos appealed to the Court of Appeals, which affirmed in July 1981 the
CFI of Cebus Decision except for the part of Jabil paying the expenses of the spouses Cabigas for
building a fence. The spouses Dignos contested that the contract between them and Jabil was merely a
contract to sell and not a deed of sale.

ISSUE:

Is the contract between the parties a contract of sale or a contract to sell?

COURT RULING:

The Supreme Court affirmed the Decision of the Court of Appeals saying stated that all the elements of
a valid contract of sale are present in the document and that the spouses Dignos had no right to sell
the land in question because an actual delivery of its possession has already been made in favor of
Jabil as early as March 1965. It was also found that the spouses Dignos never notified Jabil by notarial
act that they were rescinding the contract, and neither did they file a suit in court to rescind the sale.
There is no showing that Jabil properly authorized a certain Cipriano Amistad to tell petitioners that he
was already waiving his rights to the land in question.

DIGNOS YS. COURT OF APPEALS158 SCRA 378

FACTS:
The spouses Silvestre and Isabel Dignos were. owners of a parcel of land in Opon, Lapu-Lapu
City. OnJune 7, 1965, appellants, herein petitioners Dignos spouses sold the said parcel of land
to respondentAtilano J. Jabil for the sum of P28,000.00, payable in two installments, with an
assumption of indebtedness with the First Insular Bank of Cebu in the sum of PI 2,000.00, which
was paid andacknowledged by the vendors in the deed of sale executed in favor of plaintiff-
appellant, and the nextinstallment in the sum of P4,000.00 to be paid on or before September 15,
1965.On November 25, 1965, the Dignos spouses sold the same land in favor of defendants
spouses, LucianoCabigas and Jovita L. De Cabigas, who were then U.S. citizens, for the price of
P35,000.00. A deed of absolute sale was executed by the Dignos spouses in favor of the Cabigas
spouses, and which wasregistered in the Office of the Register of Deeds pursuant to the
provisions of Act No. 3344.As the Dignos spouses refused to accept from plaintiff-appellant the
balance of the purchase price of theland, and as plaintiff- appellant discovered the second
sale made by defendants-appellants to the Cabigasspouses, plaintiff-appellant brought the
present suit.

ISSUE:
Whether or not there was an absolute contract of sale.2. Whether or not the contract of sale
was already rescinded when the Digros spouses sold the land toCabigas

HELD:
Yes. That a deed of sale is absolute in nature although denominated as a "Deed of Conditional
Sale"where nowhere in the contract in question is a proviso or stipulation to the effect that title
to theproperty sold is reserved in the vendor until full payment of the purchase price, nor is
there astipulation giving the vendor the right to unilaterally rescind the contract the moment
the vendeefails to pay within a fixed period.A careful examination of the contract shows that
there is no such stipulation reserving the title of the property on the vendors nor does it give
them the right to unilaterally rescind the contract uponnon-payment of the balance thereof
within a fixed period.On the contrary, all the elements of a valid contract of sale under Article
1458 of the Civil Code, arepresent, such as: (1) consent or meeting of the minds; (2) determinate
subject matter; and (3)price certain in money or its equivalent. In addition, Article 1477 of the
same Code provides that"The ownership of the thing sold shall be transferred to the vendee
upon actual or constructive delivery thereof." While it may be conceded that there was no
constructive delivery of the land soldin the case at bar, as subject Deed of Sale is a private
instrument, it is beyond question that therewas actual delivery thereof. As found by the trial
court, the Dignos spouses delivered the possessionof the land in question to Jabil as early as
March 27,1965 so that the latter constructed thereonSally's Beach Resort also known as Jabil's
Beach Resort in March, 1965; Mactan White Beach Resorton January 15, J 966 and Bevirlyn's
Beach Resort on September 1, 1965. Such facts were admittedby petitioner spouses.2. No.
The contract of sale being absolute in nature is governed by Article 1592 of the Civil Code.
It isundisputed that petitioners never notified private respondents Jabil by notarial act that they
wererescinding the contract, and neither did they file a suit in court to rescind the sale. There is
noshowing that Amistad was properly authorized by Jabil to make such extra-judicial rescission
for thelatter who, on the contrary, vigorously denied having sent Amistad to tell petitioners that
he wasalready waiving his rights to the land in question. Under Article 1358 of the Civil Code, it
is requiredthat acts and contracts which have for their object extinguishment of real rights over
immovableproperty must appear in a public document.Petitioners laid considerable emphasis
on the fact that private respondent Jabil had no money onthe stipulated date of payment on
September 15,1965 and was able to raise the necessary amountonly by mid-October 1965. It has
been ruled, however, that where time is not of the essence of theagreement, a slight delay on the
part of one party in the performance of his obligation is not asufficient ground for the rescission
of the agreement. Considering that private respondent has only abalance of P4,OOO.00 and was
delayed in payment only for one month, equity and justice mandateas in the aforecited case that
Jabil be given an additional period within which to complete paymentof the purchase price.

DIGNOS YS. COURT OF APPEALS

158 SCRA 378
FACTS:
The spouses Silvestre and Isabel Dignos were. owners of a parcel of land in Opon, Lapu-Lapu City. On
June 7, 1965, appellants, herein petitioners Dignos spouses sold the said parcel of land to respondent
Atilano J. Jabil for the sum of P28,000.00, payable in two installments, with an assumption of
indebtedness with the First Insular Bank of Cebu in the sum of PI 2,000.00, which was paid and
acknowledged by the vendors in the deed of sale executed in favor of plaintiff-appellimt, and the next
installment in the sum of P4,000.00 to be paid on or before September 15, 1965.
On November 25, 1965, the Dignos spouses sold the same land in favor of defendants spouses, Luciano
Cabigas and Jovita L. De Cabigas, who were then U.S. citizens, for the price of P35,000.00. A deed of
absolute sale was executed by the Dignos spouses in favor of the Cabigas spouses, and which was
registered in the Office of the Register of Deeds pursuant to the provisions of Act No. 3344.
As the Dignos spouses refused to accept from plaintiff-appellant the balance of the purchase price of the
land, and as plaintiff- appellant discovered the second sale made by defendants-appellants to the Cabigas
spouses, plaintiff-appellant brought the present suit.
ISSUE:
1 . Whether or not there was an absolute contract of sale.
2. Whether or not the contract of sale was already rescinded when the Digros spouses sold the land to
Cabigas
HELD:
1. Yes. That a deed of sale is absolute in nature although denominated as a "Deed of Conditional Sale"
where nowhere in the contract in question is a proviso or stipulation to the effect that title to the property
sold is reserved in the vendor until full payment of the purchase price, nor is there a stipulation giving the
vendor the right to unilaterally rescind the contract the moment the vendee fails to pay within a fixed
period.

A careful examination of the contract shows that there is no such stipulation reserving the title of the
property on the vendors nor does it give them the right to unilaterally rescind the contract upon non-
payment of the balance thereof within a fixed period.
On the contrary, all the elements of a valid contract of sale under Article 1458 of the Civil Code, are
present, such as: (1) consent or meeting of the minds; (2) determinate subject matter; and (3) price
certain in money or its equivalent. In addition, Article 1477 of the same Code provides that "The
ownership of the thing sold shall be transferred to the vendee upon actual or constructive delivery
thereof." While it may be conceded that there was no constructive delivery of the land sold in the case at
bar, as subject Deed of Sale is a private instrument, it is beyond question that there was actual delivery
thereof. As found by the trial court, the Dignos spouses delivered the possession of the land in question
to Jabil as early as March 27,1965 so that the latter constructed thereon CASE DIGESTS IN SALES
Leng J. Page 2
Sally's Beach Resort also known as Jabil's Beach Resort in March, 1965; Mactan White Beach Resort on
January 15, J 966 and Bevirlyn's Beach Resort on September 1, 1965. Such facts were admitted by
petitioner spouses.
2. No. The contract of sale being absolute in nature is governed by Article 1592 of the Civil Code. It is
undisputed that petitioners never notified private respondents Jabil by notarial act that they were
rescinding the contract, and neither did they file a suit in court to rescind the sale. There is no showing
that Amistad was properly authorized by Jabil to make such extra-judicial rescission for the latter who, on
the contrary, vigorously denied having sent Amistad to tell petitioners that he was already waiving his
rights to the land in question. Under Article 1358 of the Civil Code, it is required that acts and contracts
which have for their object extinguishment of real rights over immovable property must appear in a
public document.
Petitioners laid considerable emphasis on the fact that private respondent Jabil had no money on the stipulated
date of payment on September 15,1965 and was able to raise the necessary amount only by mid-October 1965. It
has been ruled, however, that where time is not of the essence of the agreement, a slight delay on the part of one
party in the performance of his obligation is not a sufficient ground for the rescission of the agreement.
Considering that private respondent has only a balance of P4,OOO.00 and was delayed in payment only for one
month, equity and justice mandate as in the aforecited case that Jabil be given an additional period within which
to complete payment of the purchase price.