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CASE DIGEST IN SALES JUNE 25, 2010 BUTOY TAU KAPPA PHI FRATERNITY 2010

DEFINITION AND ELEMENTS OF since respondents violated the property rights of


petitioner. (Article 2221 & 2222)
A CONTRACT OF SALE
Art. 449. He who builds, plants or sows in
CONSENT: PERFECTED CONTRACT bad faith on the land of another, loses
what is built, planted or sown without
right of indemnity.
1. SPOUSES CONSTANTE & AZUCENA FIRME vs.
BUKAL ENTERPRISES
Art. 450. The owner of the land on which
G.R. No. 146608, October 23, 2003, J. Carpio anything has been built, planted or sown
in bad faith may demand the demolition
Respondent, through his broker, negotiated with of the work, or that the planting or sowing
petitioner for the purchase of the latters property. be removed, in order to replace things in
their former condition at the expense of
The respondent rejected the first draft of the DoAS
the person who built, planted or sowed;
(Deed of Absolute Sale) because of several or he may compel the builder or planter
objectionable conditions (i.e., relocation of squatters, to pay the price of the land, and the
payment of capital gains tax). A second draft was owner the proper rent.
issued by the respondent which was allegedly
Under these provisions the Spouses Firme have the
accepted by petitioner in view of the deletion of the following options: (1) to appropriate what Bukal Enterprises
previous conditions. After furnishing all necessary has built without any obligation to pay indemnity; (2) to ask
conditions, and paying the squatters Php60k/family; Bukal Enterprises to remove what it has built; or (3) to
the respondent fenced the area and covered it with compel Bukal Enterprises to pay the value of the land.
filling materials (approx. spent Php300k for these
improvements). CONSENT: VALIDITY OF A SALE

2. Dr. JOSE and AIDA YASON vs. ARCIAGA


However, according to the petitioners, the broker of G.R. No. 145017, January 28, 2005, J. Sandoval-
respondent (Teodoro Aviles) offered to buy the Gutierrez
property at Php2,500/sqm instead of the agreed
Php4,000/sqm; and that they are also reserving the In 1983, respondents (Emilio and Claudia) sold a
property for their children. Finally, a third draft was parcel of land to herein petitioner worth Php265K,
presented by respondent but was again rejected by hence, a DoAS was executed. Petitioners had the
DoAS registered in Makati and entrusted its
petitioner for being one-sided (mortgaging the
registration to Jesus Medina (Php15K Capital Gains
property to the bank and use the proceeds to pay for Tax). However, without their knowledge, Medina
its amortization). Meantime, the petitioner one day falsified the document and made it appear that the
visited their property and discovered that there are sale took place 4 years ago with the land having a
bunkers in the property, which the respondents market value of only Php25K. As a result, the land
workers occupy. Petitioner demanded immediate was then divided into 23 titles, 10 of which were
removal and vacation of occupants. On trial, the already sold to third parties. Sometime in 1989, the
children of respondent discovered the falsification
complaint for specific performance and damages,
and therefore filed a complaint with the provincial
which was filed by respondent, had failed because prosecutor in Makati. However, the complaint was
the RTC ruled in favor of petitioners. On appeal, the dismissed for lack of probable cause. Undaunted,
decision was reversed. they again filed complaint for annulment of the 13
land titles. The RTC dismissed their complaint. On
Whether or not there was a perfected contract of appeal, the 13 land titles were declared null and void
being a forged document. The reason for this is that,
sale. No. According to the SC, the records
appellants claimed that their mother (Claudia
indubitably show that there was no consent on the Arciaga) never gave her consent to the sale,
part of the Spouses Firme, evidenced by their evidenced by her ill condition and only a thumb mark
consistent manifestation that they rejected the was present in the DoAS at the time of its execution
provisions of the 3rd draft presented by Aviles. Also, (same date, 13 April 1983 when Claudia died).
the first 2 drafts presented by respondent show that Whether or not the sale was valid. Yes. A person is
both contain exactly the same provisions. Obviously, not incapacitated to enter into a contract merely
because of advanced years or by reason of physical
the respondent is a builder in bad faith; hence, an
infirmities, unless such age and infirmities impair his
award for nominal damages (Php30k) is warranted mental faculties to the extent that he is unable to

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properly, intelligently and fairly understand the effectivity of a contract. [Check other digest, and add
provisions of said contract. Respondents failed to more supporting doctrines]
show clear and convincing evidence that Claudia was
deprived of reason or that her condition hindered her VALID CONSIDERATION
from freely exercising her own will at the time of the
execution of the Deed of Conditional Sale. 4. SPS BUENAVENTURA vs. COURT OF
APPEALS
OBJECT OF SALE G.R. No. 126376, May 20, 2003, J. Carpio

3. HEIRS OF JUAN SAN ANDRES vs. VICENTE Petitioners, seek the declaration of nullity of certain
RODRIGUEZ deeds of sale and certificates of titles executed by
G.R. No. 135634, May 31, 2000, J. Mendoza their parents on behalf of their co-defendant children
based on the allegations that - a. no actual valid
In 1964, petitioner, after selling a property to consideration; b. under pricing of property; c. sale do
respondent worth Php2,415, executed a Deed of not reflect true intention of party and; d. deprivation of
Sale. Upon petitioners death, his judicial petitioners legitime.
administrator sent a letter to respondent and
demanded the latter to vacate the portion allegedly The case was dismissed by the RTC holding that
encroached by him. On his answer, respondent under Article 777 of the NCC, compulsory heirs have
alleged that apart from the 345sqm land sold to him the right to a legitime but such right is contingent
by petitioner, the latter likewise sold to him the since said right commences only from the moment of
following day the remaining portion of the property death of the decedent. There is no legitime to speak
consisting of 509sqm; and that the full amount of of because the parents (defendant) are still alive. On
purchase price was to be based on the result of the appeal, the CA affirmed the decision.
survey and would be due and payable in 5 years from
its execution. While the proceeding was pending, Whether or not appellants has cause of action
both the administrator and respondent died and were against the appellees. No. Under the law, any person
substituted by their heirs. On 1994, the RTC is free to dispose their properties, provided that such
rendered a decision in favor of petitioners since there dispositions are not made in fraud of creditors. In the
was no sufficient indication to identify the property case at bench, as held by the SC in Velarde, et al. vs.
subject of the sale. On appeal, the CA ruled in favor Paez: The plaintiffs are not parties to the alleged
of respondents, reversing the decision of RTC. The deed of sale and are not principally or subsidiarily
appellate court held that the object of the contract bound thereby; hence, they have no legal capacity to
was determinable, and that there was a conditional challenge their validity.
sale with the balance of the purchase price payable
within five years from the execution of the deed of CONTRACT TO SELL
sale.
5. SPS RAMOS vs. SPS HERUELA
Whether or not there was a valid sale. Yes. Under G.R. No. 145330, October 14, 2005, J. Carpio
Article 1460 of the New Civil Code, a thing sold is
determinate if at the time the contract is entered into, In 1980, a contract of conditional sale was executed
the thing is capable of being determinate without by petitioner, for a sale of land, with respondents. In
necessity of a new or further agreement between the spite of this, 18 years after, petitioner filed a
parties. Article 1458 - By the contract of sale one of complaint for Recovery of Ownership with Damages
the contracting parties obligates himself to transfer against respondent alleging that respondents only
the ownership of and to deliver a determinate thing, paid P4,000 out of the P15,300 consideration. Way
and the other to pay therefore a price certain in back 1982, the petitioners discovered that the
money or its equivalent. respondents, together with spouses Pallori (daughter
and son in law), erected another house on the land
In the case at bench, all the essential elements of a and refused to vacate the said property. According to
contract: consent, subject matter and consideration; the respondents, they already made down payment
were all present. However, the CA is incorrect in and monthly payment since March 1980. In 1982,
saying that the sale was conditional. The payment of they expressed their willingness to pay the remaining
full consideration based on survey shall be due and P11,300 but the petitioners refused their offer. The
payable in 5 years from the execution of the formal RTC ruled in favor of defendants and declared that
deed of sale is only a manner by which the full the petitioners failed to comply with Sec. 4 of RA
consideration is to be computed and the time with in 6552:
which the same is to be paid. Also, the absence of a
formal deed of sale does not affect in any manner the SEC. 4. In case where less than two
years of installments were paid, the seller
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shall give the buyer a grace period of not square meter; . that petitioners will definitely
less than sixty days from the date the relocate their house to the portion they bought or will
installment became due. If the buyer buy by January 31, 1984. Hence, it is evident that
fails to pay the installments due at the the Kasunduan did not establish a definite agreement
expiration of the grace period, the seller
may cancel the contract after thirty days
between the parties concerning the terms of
from receipt by the buyer of the notice of payment. As held in the case of Toyota Shaw, Inc.
cancellation or the demand for rescission vs. CA a definite agreement on the manner of
of the contract by a notarial act. payment of the price is an essential element in the
formation of a binding and enforceable contract of
The issues involve are whether or not the a. RA 6552 sale.
is applicable in the case (absolute sale); b. 1191 and
1592 of the NCC are applicable in the case; c. Also, there is another suspensive condition yet to be
petitioners has the right to cancel the sale; d. consummated, as indicated in the relocation of the
respondents have a right to damages. house of petitioner upon payment of the desired
amount by January 1984. Hence, petitioners have no
According to the SC, the sale is not absolute. As held superior right of ownership or possession to speak
in the case of Alfonso vs. CA: It was held that the of. Their occupation of the property was merely
contract should not be considered as a written but an through the tolerance of the owners. The evidence on
oral one; not a sale but a promise to sell; and that record shows that petitioners were able to live and
the absence of a formal deed of conveyance was a build their house on the property through the
strong indication that the parties did not intend permission and kindness of Teresita Glorioso, who
immediate transfer of title, but only a transfer after full was their relative. Considering that petitioners
payment of the price. Article 1191 and 1592 are continued possession of the property has already
inapplicable in the case because rescission cannot been rendered unlawful, they are bound to pay
take place since there is no written contract to speak reasonable rental for the use and occupation thereof,
of. The applicable law is RA 6552, as stated above which in this case was appropriately pegged by the
in Sec. 4, which should have been respected by RTC at P500.00 per month beginning October 21,
the petitioners. However, respondents are required 1994 when respondents filed the case against them
to pay 6% per annum on the balance of the purchase until they vacate the premises.
price in consonance with their breach of contract as
stipulated in Article 2209 of the NCC. Lastly, the CONTRACT TO SELL
petitioners have no right to cancel the sale and at the
same time the respondents have no right to 7. URSAL vs. COURT OF APPEALS
damages. G.R. No. 142411, October 14, 2005, J. Austria-
Martinez
CONTRACT TO SELL
In 1985, the respondents (Spouses Moneset)
6. CRUZ vs. SPS FERNANDO executed a Contract to Sell House and Lot in favor
G.R. No. 145470, December 9, 2005, J. Austria- of Winifreda Ursal with a consideration of P130K as
Martinez its purchase price. After paying the down payment
and six monthly installments, petitioner stopped
In 1994, Respondents filed a complaint for accion paying due to Monesets failure to deliver to her the
publiciana against petitioner demanding the latter to TCT of the property as agreed upon. Unknown to
vacate the premises and to pay the amount of P500 Ursal, the property was again sold by respondent to
as a reasonable rental. According to respondents, Dr. Canora; and again for the third time to Bundalo
they bought the land from spouses Glorioso in 1987. (pacto de retro) who later mortgaged the land with a
Prior to their acquisition, the same rear portion of the Rural Bank. The property was then forclosed upon
land was also offered to the petitioner through a default of the Monesets, hence, Ursal filed an action
Kasunduan but the latter refused to buy, hence, the for declaration of non-effectivity of mortgage and
whole property was bought by respondents. The RTC damages against the respondents. The RTC
rendered a decision in favor of the respondents. On rendered a decision in favor of the bank dismissing
appeal, the lower courts decision was affirmed by the the complaint against it but ordered the Monesets to
CA. reimburse the petitioner, including damages and the
preferential right to redeem the subject house1. On
Whether or not the Kasunduan executed by the appeal, the CA affirmed in toto the decision of the
petitioner with the Gloriosos is a perfected contract of RTC.
sale. In the case at bench, the 1983 Kasunduan
indicated the following conditions: that the Gloriosos The main issue in the case is whether or not the real
agreed to sell to petitioners a portion of the property estate mortgage should have been declared non-
with an area of 213 meters at the price of P40.00 per effective and non-enforceable. No. In the case at bar,
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what is involve here is mortgage and not a sale. However, 4 days before the said period, a fire hit the
Although it was held in the case of Cruz vs. Bancom, Quezon City hall and all the documents, including
the bank, unlike private individuals, is expected to respondents title, went into ashes. Petitioners failed
exercise greater care and prudence in its dealings, to pay the purchase price of P120K on June 15,
including those involving registered lands. A banking 1988; hence the land was sold to a different buyer
institution is expected to exercise due diligence (Acebo) for P145K by Encarnacion. The Acebos sent
before entering into a mortgage contract. The a notice to the petitioners to vacate the property.
contract between petitioner and respondent is only a Petitioners then filed a complaint for alleged violation
contract to sell; hence the petitioner never acquired of the tenants right to purchase. The court ruled in
ownership over the property. favor of respondents and dismissed the complaint.
On appeal, the decision of the lower court was
Under the law, A contract to sell is a bilateral contract affirmed.
whereby the prospective seller, while expressly
reserving the ownership of the subject property In the case at bar, the question of law is whether or
despite delivery thereof to the prospective buyer, not petitioners, on the basis of a verbal contract to
binds himself to sell the said property exclusively to sell by Encarnacion, obtained an enforceable right to
the prospective buyer upon fulfillment of the condition buy Encarnacion's property superior to that of the
agreed upon, that is, full payment of the purchase Acebos.
price. What the seller agrees or obligates himself to
do is to fulfill his promise to sell the subject property No. It is well established that where the seller
when the entire amount of the purchase price is
promised to execute a deed of absolute sale upon
delivered to him.
completion of payment of the purchase price by the
buyer, the agreement is a contract to sell. In
In contracts of sale the vendor loses
contracts to sell, where ownership is retained by the
ownership over the property and cannot recover it
seller until payment of the price in full, such payment
unless and until the contract is resolved or rescinded,
is a positive suspensive condition, failure of which is
while in contracts to sell, title is retained by the
not really a breach but an event that prevents the
vendor until full payment of the price. As explained in
obligation of the vendor to convey title in accordance
Coronel vs. Court of Appeals In a contract to sell, with Article 1184 of the Civil Code.
there being no previous sale of the property, a third
person buying such property despite the fulfillment of
the suspensive condition such as the full payment of Article 1545 of the Civil Code also
the purchase price, for instance, cannot be deemed a provides that "where the obligation of
buyer in bad faith and the prospective buyer cannot either party to a contract of sale is
seek the relief of reconveyance of the property. subject to any condition which is not
There is no double sale in such case. Title to the performed, such party may refuse to
property will transfer to the buyer after registration proceed with the contract or he may
because there is no defect in the sellers title per se, waive performance of the condition."
but the latter, of course, may be sued for damages
(Article 1170) by the intending buyer.
1
It cannot be denied however that petitioner is also
not without fault. She sat on her rights and never OBJECT OF SALE
consigned the full amount of the property. She
therefore cannot ask to be declared the owner of the PERFECTED CONTRACT OF SALE
property especially since the same has already
passed to another person by virtue of a deed of 1. CAVITE DEVT. BANK vs. LIM
absolute sale. G.R. No. 131679, February 1, 2000, J. Mendoza

CONDITIONAL SALE OF PROPERTY In 1988, Respondent offered to purchase the


property of CDB, which the latter acquired through a
8. LACANILAO vs. COURT OF APPEALS foreclosure sale from one of its mortgagee, Mr.
G.R. No. 121200, September 26, 1996, J. Padilla Rodolfo Guansing. After paying the option money of
P30K by the respondent, Lim discovered that the
Eusebio Encarnacion, herein respondent, is the property was originally registered to Perfecto
owner of the land which was the subject of lease by Guansing, father of Rodolfo. Petitioner failed to
petitioners. From 1960s to 1988, the petitioners had discover that Rodolfo fraudulently secured the TCT
religiously paying the monthly rental of said land. he submitted to the bank for his loan, hence, the land
Eventually it was sold to them by Encarnacion and was awarded back to the father. Aggrieved, the
agreed to execute a DoAS on June 15, 1988. respondent filed an action for specific performance
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against the bank. On March 1993, the RTC ruled in be deemed inoperative. [Art. 1405, void contracts
favor of Lim. On appeal, the CA affirmed the RTCs par. (5)]
decision.
Article 1183 also provides that, Impossible
Whether or not there was a perfected contract of conditions, those contrary to good customs or public
sale. Yes. In the case at bar, there was an option policy and those prohibited by law shall annul the
contract entered by petitioner bank and respondent. obligation which depends upon them. If the obligation
A perfected option contract does not consummate the is divisible, that part thereof which is not affected by
sale, however, if the option is exercised, the sale may the impossible or unlawful condition shall be valid.
be perfected. Under Article 1482, it is clear then that Hence, the non-payment of the three hundred
the parties in this case actually entered into a thousand pesos (P300,000.00) is not a valid
contract of sale, partially consummated as to the justification for refusal to deliver the certificate of title.
payment of the price. The decision was then affirmed Besides, the P1.5M payment was for the land in
by the SC with modifications as to the award of dispute, not including the untitled one. Therefore,
damages for being excessive. Severina's heirs are bound to deliver the certificate of
title covering the lots.
VOID STIPULATIONS IN CONTRACTS

2. HEIRS OF SAN MIGUEL vs. COURT OF ASSIGNMENT OF CREDITS or INCORPOREAL


APPEALS RIGHTS
G.R. No. 136054, September 5, 2001, J. Pardo
3. PNB vs. COURT OF APPEALS, IEI
G.R. No. 118357, May 6, 1997, J. Romero
In 1974, Respondent, Dominador San Miguel, filed a
petition with the CFI to issue title over lots in dispute.
However, it was declared null and void upon petition Check Articles 1624 and 1625 of the NCC. Industrial
of Severina San Miguel (petitioner). In 1987, the TCT Enterprises, Inc. entered a coal operating contract
with BED (Bureau of Energy Devt.) pursuant to Coal
for the land was issued in the names of petitioner.
Development Act of 1976.
From 1990-1991, several writs were returned
unsatisfied. Hence, the heirs of Severina did not
pursue the writs of possession and demolition, and
instead entered into a compromise with Dominador.
According to the compromise, the heirs were to sell
the land for P1.5M with the TCT conditioned upon the
purchase of another lot, which was not yet titled, at 4. HEIRS OF JUAN SAN ANDRES vs. VICENTE
an additional sum of P300K. It was agreed that the RODRIGUEZ
300K shall be fulfilled by Dominador (2) months from G.R. No. 135634, May 31, 2000, J. Mendoza
the date of the execution of sale, which is August (SUPRA)
1993. 3 months after, Dominador filed a complaint
with the trial court a motion to deliver the owners FRAUD and BAD FAITH
copy of TCT, and admitted that he did not pay the
P300K for the reason that the petitioner failed to 5. SAMSON vs. COURT OF APPEALS
adduced proof of ownership. In time, petitioners G.R. No. 108245, November 25, 1994, J. Romero
opposed stressing the condition in the Kasunduan.
The trial court and CA both ruled in favor of the Respondent is the owner of Santos and Sons, Inc., a
respondent. haberdashery store, which occupied the subject
premises of a commercial unit building, for 20 years.
In 1984, the owner of the building, Susana Realty
Whether or not respondent shall be compelled to pay Corp., informed respondents that the lease contract
the P300K despite the petitioners lack of evidence of will expire on July. Nonetheless, the lease contract of
ownership. No. Under Article 1306. The contracting respondent was extended until December 1984. In
parties may establish such stipulations, clauses, Feb 1985, respondent was informed, through a letter,
terms and conditions as they may deem convenient of the increase in rentals pending renewal of his
provided they are not contrary to law, morals, good contract until the arrival of Ms. Madrigal (Owner of
customs, public order or public policy. To insist that Susana Realty). A few days later, petitioner offered to
Dominador pay the price of the untitled lot, would purchase the said store. The same month, the
result in Severinas Heirs unjust enrichment. The petitioner paid half of the agreed price of P300K and
essence of a sale is the transfer of title or an agreed that the balance shall be paid upon renewal
agreement to transfer it for a price actually paid or of the contract. All went well for the petitioner for a
promised. In Nool vs. CA, if the sellers cant deliver few months. In July, however, he was ordered to
the object of the sale to the buyer, such contract may vacate the premises due to respondents failure in
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renewing his lease. Petitioner then filed an action for of 20,000 hectares. Thus, along with de Lara, Oca
damages against respondent for fraud and bad faith. and the Sanggaya Logging Comp. the spouses
The RTC ruled in favor of the petitioner. On appeal, consolidated their licenses, which created a
the CA modified the judgment of the RTC finding that consolidation agreement approved by the BOF. The
the respondent did not exercised fraud, hence, working unit was thereafter called the North
deleting the damages and attorneys fees. Mindanao Timber Corporation. The spouses failed to
pay the balance of the two assignment deeds, and
Whether or not Angel Santos committed fraud or bad thus, Tiro filed action in the lower court for the
faith in representing petitioner that his contract of balances due. The lower court dismissed the
lease over the subject premises has been impliedly complaint, and ordered Tiro to pay 33K to the
renewed by Susana Realty. No. Under the facts spouses. The CA reversed and ordered the spouses
proven, private respondent cannot be held guilty of to pay Tiro 79K as the remaining balance.
fraud or bad faith when he entered into the subject
contract with petitioner. The letter sent to him in Feb Whether or not the deed of assignment dated
1985 made respondent believed that his lease February 15, 1966 and the agreement of February
contract was impliedly renewed and that formal 28, 1966 are null and void, the former for total
renewal would be made upon the arrival of Ms. absence of consideration and the latter for non-
Madrigal. fulfillment of the conditions stated therein.

Art 1338. In contracts, the kind of fraud that will Yes. As found by the Court of Appeals, the true
vitiate consent is one where, through insidious words cause or consideration of said deed was the transfer
or machinations of one of the contracting parties, the of the forest concession of private respondent to
other is induced to enter into a contract which, petitioners for P120,000.00. The aforesaid
without them, he would not have agreed to. (dolo contemporaneous and subsequent acts of petitioners
causante) It is quite obvious that the respondent did and private respondent reveal that the cause stated
not act in Bad Faith and that there was an honest in the questioned deed of assignment is false. It is
mistake on the part of Angel Santos. settled that the previous and simultaneous and
subsequent acts of the parties are properly
Also, the petitioner is also at fault for failing to cognizable indica of their true intention. The deed of
exercise sufficient diligence in verifying first the status assignment of February 15, 1966 is a relatively
of private respondents lease. As held by this Court in simulated contract which states a false cause or
the case of Caram, Jr. v. Laureta, the rule caveat consideration, or one where the parties conceal their
emptor requires the purchaser to be aware of the true agreement. A contract with a false consideration
supposed title of the vendor and he who buys without is not null and void per se. Under Article 1346 of the
checking the vendor's title takes all the risks and Civil Code, a relatively simulated contract, when it
losses consequent to such failure. does not prejudice a third person and is not intended
for any purpose contrary to law, morals, good
CONSIDERATIONS and FULFILLMENT OF customs, public order or public policy binds the
OBLIGATIONS parties to their real agreement. As to the 2nd
agreement or assignment, the spouses are not liable
6. JAVIER vs. COURT OF APPEALS under such, as the suspensive condition, which is the
G.R. No. 48194, March 15, 1990, J. Regalado approval of the additional license, did not take place.
Thus, it did not give rise to any obligation. The said
Tiro was a holder of an ordinary timber license which agreement is a bilateral contract which gave rise to
he had assigned to the Javier spouses in a Deed of reciprocal obligations, that is, the obligation of private
Assignment for 120K, 20K of which was paid upon respondent to transfer his rights in the forest
execution of the contract and 100K to be paid in concession over the additional area and, on the other
installments of 10K per shipment of logs from the hand, the obligation of petitioners to pay P30,000.00.
forest concession. Tiro had filed an application for The demandability of the obligation of one party
another timber license to cover 2,000 hectares of the depends upon the fulfillment of the obligation of the
adjoining land. During the pendency of the other. In this case, the failure of private respondent to
application with the Bureau of Forestry, he executed comply with his obligation negates his right to
another deed of assignment in favor of the spouses; demand performance from petitioners. Delivery and
payment would be of 30,000.00php, subject to the payment in a contract of sale, are so interrelated
condition that the transfer shall be executed upon and intertwined with each other that without
approval of the application. Upon assumption of the delivery of the goods there is no corresponding
timber license, the spouses were informed that the obligation to pay. The two complement each other.
license was renewed, but would not be renewed Moreover, under the second paragraph of Article
again until they are able to create an organization 1461 of the Civil Code, the efficacy of the sale of a
with other adjoining timber license holders for a total mere hope or expectancy is deemed subject to the
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condition that the thing will come into existence. In stock is entered into with the intention that the
this case, since private respondent never acquired difference between the price stipulated and the
any right over the additional area for failure to secure exchange or market price at the time of the
the approval of the Bureau of Forestry, the pretended delivery shall be paid by the loser to the
agreement executed therefore, which had for its winner, the transaction is null and void. The loser
object the transfer of said right to petitioners, never may recover what he has paid.
became effective or enforceable.
ACQUISITIVE PRESCRIPTION
COMMODITY FUTURES CONTRACT
8. VDA. DE RIGONAN vs. DERECHO
7. ONAPAL PHIL COMMODITIES vs. COURT OF G.R. No. 159571, July 15, 2005, J. Panganiban
APPEALS
G.R. No. 90707, February 1, 1993, J. Campos In 1921, 5 out of the 8 heirs of Hilarion Derecho sold
the subject property to Francisco Lacambra under a
Petitioner is engaged in commodity futures trading in pacto de retro sale, subject to a five year redemption
Cebu City. Every time a customer enters into a clause. 7 years after, one of the heirs, Dolores,
trading transaction with petitioner as broker, the order purchased the lot and immediately occupied it. In
is communicated by telex to its principal in 1980, more than 5 decades after, an Affidavit of
Hongkong. The transaction either buying or selling, Adjudication in favor of petitioner, Teodoro Rigonan,
once consummated the petitioner will issue a (Dolores Son) was executed, declaring the
document as Confirmation of Contract and Balance petitioners father (Leandro Rigonan) to be the sole
Sheet. The order would then be sent from Cebu to heir of Hilarion. During the same year, the land was
Manila to Hongkong and finally to Commodity mortgaged by petitioner to a bank in Cebu. Dreading
Futures Exchange in Japan. In 1983, private foreclosure, he sold the land in favor of Valerio Laude
respondent, Susan Chua, was invited to invest in the (also a petitioner in the case) and executed a DoAS.
commodity futures trading by depositing P500K. She In 1993, respondents, as the alleged heirs of Hilarion
was then made to sign the Trading Contract and (3 heirs, not party to the sale in 1921), brought an
other documents without making her action with the RTC to recover the property, annul the
aware/understand the risks involved. 2 months after, deed and affidavit of adjudication, whose validity was
she was informed by the Account Executive to assailed on the ground of fraud. RTC ruled in favor of
deposit an additional P300K, otherwise she would the respondents and was affirmed by CA upon
lose her original P500K deposit. Around September, appeal. (case was reversed by sc)
the respondent was able to get only P470K out of the
P800K, she realized that she was engaged in Whether or not the affidavit of adjudication and deed
gambling, hence, she filed a case to recover the loss were both void; and co-ownership still subsists
of P330K. The trial court and CA rendered a decision among the heirs of Hilarion in 1928. No. When the
in favor of the respondent. Rigonan bought the land from Lacambra in 1928, it
was already a conveyance to the spouses in their
The issue here is whether or not the respondent is personal capacities, not as co-owners. The parties to
entitled to recover the loss of P330K. Yes. Although it the contract stipulated a five-year redemption period,
may be evident in the case that the contract signed which expired on July 16, 1926. The failure of the
by the respondent was valid, because it complies sellers to redeem the property within the stipulated
with the Rules and Regulations on Commodity period indubitably vested absolute title and ownership
Futures Trading as prescribed by the SEC, such in the vendee, Lacambra.
contract if entered into without the intention of having
any goods/commodity pass from one party to Under a pacto de retro sale, title to and ownership of
another, but with an understanding that at the property are immediately vested in the vendee a
appointed time, the purchaser is merely to receive or retro, subject only to the resolutory condition that the
pay the difference between the contract and the vendor repurchases it within the stipulated period.
market prices, is a transaction which the law will not Also, petitioners acquired title of the land by
sanction, for being illegal. Another point to discuss is acquisitive prescription; hence they cannot recover
whether the money of respondent was actually the property despite the nullity of contracts pursuant
remitted in Hongkong and that there is an to Article 1410 of the NCC. Even if the action does
arrangement between the petitioner and the Central not prescribe, LACHES would bar respondents from
Bank for the purpose of remitting money abroad. It asserting their claim. Laches is defined as the failure
was discovered by the court that petitioner failed to to assert a right for an unreasonable and unexplained
prove this point. length of time, warranting a presumption that the
party entitled to assert it has either abandoned or
Under Article 2018, If a contract which purports to declined to assert it. This equitable defense is based
be for the delivery of goods, securities or shares of upon grounds of public policy, which requires the
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discouragement of stale claims for the peace of


society. 1. ROSA LIM vs. COURT OF APPEALS
G.R. No. 102784, April 7, 1997, J. Hermosisima
Elements present in order to use laches as a
defense: (1) complaint against defendant and a In 1987, petitioner was introduced by her friend
remedy sought; (2) delay in the assertion of rights; (3) Aurelia Nadera with herein respondent. They entered
lack of knowledge and notice to the defendant into an agreement with respondent (Victoria Suarez)
regarding the suit; (4) injury or prejudice to the in selling 2 pieces of jewelry worth P339K.
defendant. Subsequently, Lim became uninterested with the
agreement, hence returned the jewelry to Nadera as
agreed upon by the parties. Suarez filed a complaint
CONTRACT OF SALE1458 against Lim for estafa against petitioner. The RTC
and CA ruled in favor of Suarez, convicting the
petitioner for estafa. However, it was later proven that
Agency to Sell (Art. 1466) The delivery by a Suarez received the bracelet (P170K) from Nadera,
principal to an agent of his property, the former being and the later sold the ring (P169K) to another, but
an owner, has the right to control the sale, fix the the check she issued in favor of Suarez had bounced
price, and terms, demand and receive the proceeds due to non-payment of her buyer.
less the agents commission upon sales made. Ker &
Co., Ltd. V. Lingad (1971) Whether or not the petitioner is liable for estafa under
the RPC. No. Generally, the delivery to a third person
Contract for Piece of Work (Arts. 1467, 1713 of the thing held in trust is not a defense in estafa.
to 1715) - Under Art. 1467, what determines whether However, this rule has already been modified in
the contract is one of work or of sale is whether the subsequent cases. In People vs. Nepomuceno and
thing has been manufactured specially for the People vs. Trinidad In cases of estafa the profit or
customer and upon his special order. If the thing is gain must be obtained by the accused personally,
specially done at the order of another, this is a through his own acts, and his mere negligence in
contract for a piece of work. If the thing is permitting another to take advantage or benefit from
manufactured or procured for the general market in the entrusted chattel cannot constitute estafa under
the ordinary course of business, it is a contract of Article 315 paragraph 1-b, of the Revised Penal
sale. Code; unless there is conspiracy with the one who
carried out the misappropriation. If there is no such
To Tolentino, the distinction depends on the intention evidence, direct or circumstantial, and if the proof is
of parties: if parties intended that at some future date clear that the accused herself was the innocent victim
an object has to be delivered, without considering the of her sub-agent's faithlessness, her acquittal is in
work or labor of the party bound to deliver, the order. Moreover, Lim is only civilly liable with respect
contract is one of sale. But if one of the parties to the ring in the amount of P169K plus 6% legal
accepts the undertaking on the basis of some plan, interest.
taking into account the work he will employ
personally or through another, there is a contract for CONTRACT OF AGENCY
a piece of work.
2. LOURDES LIM vs. PEOPLE
Barter or Exchange (Arts. 1468, 1638 to 1641) G.R. No. L-34338, November 21, 1984, J. Relova
it shall be considered a barter if the value of the
thing given as a part of the consideration exceeds the In 1966, petitioner offered to sell respondents
amount of the money or its equivalent.; By a contract tobacco (Maria Ayroso), and they agreed to the
of barter or exchange, one of the parties binds proposition to sell tobacco consisting of 615kg at
himself to give one thing in consideration of the P1.30/kg. The petitioner was to receive the overprice
others promise to give another thing. Failure of one for which she could sell the tobacco. The total value
party to prove ownership of the thing promised, or was P799.50 and P240 was paid by petitioner to
one who loses the thing through eviction is entitled to Ayroso. Demands for the payment of the balance of
recover what he has given and has the right to the value of the tobacco were made upon the
damages. appellant by Ayroso, and particularly by her sister,
Salud Bantug. As no further amount was paid, the
Article 1458. Sale is a contract by which one of the contracting complainant filed a complaint against the appellant
parties obligates himself to transfer the ownership, and to deliver for estafa. The RTC and CA ruled in favor of the
possession, of a determinate thing, and the other to pay therefor a
price certain in money or its equivalent. respondent, convicting Lim for estafa.

Whether there exists a contract of agency to sell or a


MISSAPPROPRIATION IN SALE contract of sale. As defined under contract of agency,
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see ibid. there was no transfer of ownership of the In 1962, Engineering and Machinery Corporation (the
goods to the petitioner. The agreement constituted Corporation) entered a contract with Almeda, the
her as an agent with the obligation to give something former to fabricate, furnish and install the air-
to Ayroso upon sale of the tobacco or return the conditioning system in the latters building along
tobacco if the same was not sold. Therefore, the Buendia Avenue, Makati in consideration of
courts ruling in convicting Lim for estafa is not to be P12,000.00. The Corporation was to furnish the
contested. materials, labor, tools and all services required in
order to so fabricate and install said system. The
CONTRACT OF AGENCY system was completed in 1963 and accepted by
Almeda, who paid in full the contract price. In 1965,
3. CIR vs. CTA and CONSTANTINO Almeda sold the building to the National Investment
G.R. No. L-25926, February 27, 1970, J. Reyes and Development Corporation (NIDC). The latter took
possession of the building but on account of NIDCs
Respondent, Cirilio D. Constantino, is engaged in the noncompliance with the terms and conditions of the
business of selling trucks, machineries, equipment deed of sale, Almeda was able to secure judicial
and spare parts shipped to him by IHM (Intl. rescission thereof. The ownership of the building
Harvester, Macleod Inc.) He is designated as the having been decreed back to Almeda, he re-acquired
exclusive dealer of the company. After an possession sometime in 1971. It was then that he
assessment conducted by CIR against respondent, learned from some NIDC employees of the defects of
the latter protested the assessment on the ground the air-conditioning system of the building. Almeda
that he is not a commercial broker. Upon his reversal discovered the defects of the system and concluded
by the Tax Court, the CIR Commissioner interposed that it was not capable of maintaining the desired
the present appeal. room temperature of 76F 2F.

The issue here is whether the relationship between On the basis of this report, Almeda filed on 8 May
IHM and the respondent is one of principal and 1971 an action for damages against the Corporation
agent, as maintained by the Commissioner, or one of with the then CFI Rizal (Civil Case 14712). The
vendor and vendee, as maintained by the respondent complaint alleged that the air-conditioning system
taxpayer. A casual examination of respondent's installed by the Corporation did not comply with the
evidence may give the impression that this agreed plans and specifications, hence, Almeda
relationship with the company is that of vendor and prayed for the amount of P210,000.00 representing
vendee, but a closer look into the actual legal effect the rectification cost, P100,000.00 as damages and
of the terms and conditions embodied, rather than the P15,000.00 as attorneys fees. The Corporation
names of the contracts used or the terminologies moved to dismissed the case, alleging prescription,
employed, in the chain of documents shows that the but which was denied by the Court. The trial court
relation between the company and the respondent is rendered a decision, which ordered the Corporation
one of principal and agent. to pay Almeda the amount needed to rectify the faults
and deficiencies of the air-conditioning system
It is proven that the dealer (respondent) merely installed by the Corporation in Almedas building, plus
collects and holds the proceeds in trust, and title to damages, attorneys fees and costs). Petitioner
goods still belongs to IHM and not the dealer. Also, appealed to the Court of Appeals, which affirmed the
the effect of the arrangement in the so called Retail decision of the trial court.
Financing Agreement of the dealer is that it is the
very customer who buys on credit because the The Supreme Court denied the petition and affirmed
purchase money comes from him, not the dealer, and the decision assailed; without costs. Under the law, A
the credit that is financed is the credit of the contract for a piece of work, labor and materials may
customer, not that of the dealer. Although it is be distinguished from a contract of sale by the inquiry
expressly provided in the agreement between the as to whether the thing transferred is one not in
respondent and IHM that the former is not the existence and which would never have existed but for
companys agent, it is evident in the case that the the order of the person desiring it . The contract in
function of respondent is one of a dealer. question is one for a piece of work. It is not the
Corporations line of business to manufacture air-
PIECE OF WORK and WARRANTY AGAINST conditioning systems to be sold off-the-shelf.
HIDDEN DEFECTS Check Article 1715 of the NCC.

4. ENGINEERING and MACHINERY CORP. vs. CA The remedy against violations of the warranty against
G.R. No. 52267, January 24, 1996, J. Panganiban hidden defects is either to withdraw from the contract
(rehibitory action) or to demand a proportionate
reduction of the price (accion quanti minoris), with

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damages in either case. While it is true that Article Velasco v. CA, a constructive vinculum or contractual
1571 of the Civil Code provides for a prescriptive privity was created between petitioner and Aragones,
period of six months for a rehibitory action, said rule by way of exception underlying the principle of non-
may be applied only in case of implied warranties; transmissible rights in contracts (Art 1311).
and where there is an express warranty in the
contract, the prescriptive period is the one specified BARTER AGREEMENT
in the express warranty, and in the absence of such
period, the general rule on rescission of contract, 6. TAN QUETO vs. COURT OF APPEALS
which is four years (Article 1389, Civil Code) shall G.R. No. L-35648, May 16, 1983, J. Abad Santos
apply.

CONTRACT of PIECE OF WORK

5. DEL MONTE vs. ARAGONES 7. TAN QUETO vs. COURT OF APPEALS


G.R. No. 153033, June 23, 2005, J. Carpio-Morales G.R. No. L-35648, February 27, 1987, J. Paras

In 1988, petitioner (DMPI) entered into an agreement


with MEGA-WAFF for the installation of modular PRICE OR
pavement that shall be completed 60 days from
signing of the agreement. To supply the concrete CONSIDERATION of THE
blocks needed by the company, MEGA-WAFF CONTRACT OF SALE
(contractor) executed Supply Agreement with
respondent, represented by Napoleon Aragones
(supplier). The supplier shall provide the contractor MANNER OF PAYMENT OF PRICE
with all labor, materials, equipment etc. costing at
P7.00 per unit piece of hollow blocks. However, the 1. BOSTON BANK (fr. Bank of Commerece) vs.
obligations was not met by MEGA-WAFF, hence the MANALO
respondent got wind up in the dispute between DMPI G.R. No. 158149, February 9, 2006, J.
and MEGA. Aragones failed to collect from MEGA
the full payments of concrete blocks, therefore, went In 1967, the Xavierville Estates, Inc. (XEI) executed a
directly to DMPI and advising it to pay to him directly Deed of Sale of Real Estate with The Overseas
the unpaid obligation of MEGA. However, the Bank of Manila (OBM), subject to the approval of its
petitioner, instead of following Aragones advice, sent Board of Directors, and was covered by real estate
a check to MEGA representing its balance to the mortgage in favor of PNB and Central Bank. In 1972,
latter. Respondent was prompted to file a case for the president of XEI, Emerito Ramos, Jr. contracted
sum of money with damages against petitioners the service of respondent, Engr. Carlos Manalo, Jr.,
contending that it was liable to him, who put labor who was in the business of drilling deep water wells
upon and furnished materials for a piece of work. The and installing pumps under the business name
RTC and CA ruled in favor of respondent. The SC Hurricane Commercial, Inc. After installing a water
also denied the petition. pump at Ramos residence, respondent proposed to
XEI, through Ramos, to purchase lot in Xavierville
Whether or not the Supply Agreement between and offered as down payment the P34K Ramos owed
MEGA and Aragones was a contract of sale. No. The him. The spouses Manalo, after choosing lots 1 and 2
contract was decidedly a Piece of Work, under of block 2 then constructed a house and installed
Article 1467., A contract for the delivery at a certain fence around the perimeter of their chosen lot. After
price of an article which the vendor in the ordinary resumption of office by XEI, respondent refused to
course of his business manufactures or procures for pay the balance of the down payment because
the general market, whether the same is on hand at Ramos failed to prepare the Contract of Conditional
the time or not, is a contract of sale, but if the goods Sale. On August 1973, the respondent received a
are to be manufactured specially for the customer statement of account showing their balances and
and upon his special order, and not for the general plus interest.
market, it is a contract for a piece of work. Also, ART.
1729 states that: Those who put their labor upon or On January 1974, another SOA was received by the
furnish materials for a piece of work undertaken by respondent, inclusive of interest of the purchase price
the contractor have an action against the owner up to of the lots. In 1976, Manalo constructed a business
the amount owing from the latter to the contractor at sign in the sidewalk near his house but was ordered
the time the claim is made. In addition, ACT 3959, to remove said sign on the ground the the sidewalk
requires contractor to file bonds guaranteeing was not part of the land. Subsequently, XEI turned its
payment to laborers. Lastly, as held in the case of selling operation to OBM which was later acquired by
Central Bank of Manila (CBM). In 1986, CBM
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requested the respondent (Perla Manalo) to stop any Contract, and that Serra will have to register said
construction on the property since it was the owner of land under the Torrens System to the Register of
the lot and respondent had no permission for Deeds of Province of Masbate within the same 10-
construction. After a conference meeting, it was year option period.
agreed that respondent will furnish, as proof of
ownership, the corresponding documents with CBM, Pursuant to said contract, RCBC constructed
however, she failed to do so. The respondent offered improvements on the subject land to house its branch
an amicable settlement with CBM, now Boston Bank, office, while the petitioner had the property, within 3
to abide by the purchase price of the property. years from 1975, duly registered with OCT No. 0-232
However, petitioner bank proposed that the price of under the Torrens System. RCBC informed petitioner
P1,500 per sqm was a reasonable starting point for of its intention to buy the property but petitioner
negotiation of the settlement. The respondent filed a replied that he is no longer selling the property.
complaint for specific performance and damages RCBC then filed an action for specific performance
against the bank and subsequently won the case, and damages against Serra in March 1985 alleging
ordering the later to execute a DoAS after payment of that during the negotiations it made clear to petitioner
the sum of P900K plus damages+. On appeal, the that it intends to stay permanently on property once
CA modified the decision of the RTC changing the its branch office is opened unless the exigencies of
price of the lot to the original price agreed upon in the business requires otherwise. Although finding that
1972 plus interest of 12% per annum from the contract was valid, the lower court ruled that the
September 1972, deleting the award for damages. option to buy is unenforceable because it lacked a
SC reversed the decision and ordered the RTC to consideration distinct from the price (lower than
dismiss the complaint. P210/sqm) and RCBC did not exercise its option
within the reasonable time. Upon motion for
Whether there was a perfected contract of sale or reconsideration, however, the lower court reversed
contract to sell between the parties. No. According itself on the 2nd issue, declared the contract as valid,
the the SC, if a material element of a contemplated and ordered Serra to deliver the proper deed of sale
contract is left for future negotiations, the same is too to RCBC. The Court of Appeals likewise affirmed said
indefinite to be enforceable. And when an essential decision. The Supreme Court affirmed the appellate
element of a contract is reserved for future courts decision.
agreement of the parties, no legal obligation arises
until such future agreement is concluded. For a
Whether or not there was a valid contract of lease
perfected contract of sale or contract to sell to exist in
with option to buy between the parties. Was there a
law, there must be an agreement of the parties, not
consideration distinct from the price to support the
only on the price of the property sold, but also on the option given to RCBC? Yes. The contract of "LEASE
manner the price to be paid by the vendee. It is not WITH OPTION TO BUY" between petitioner and
enough for the parties to agree on the price of the
respondent bank is valid, effective and enforceable;
property. The parties must also agree on the
the price being certain and that there was
manner of payment of the price of the property to
consideration distinct from the price to support the
give rise to a binding and enforceable contract of
option given to the lessee. Accordingly, a contract of
sale or contract to sell. This is so because the
adhesion is one wherein a party, usually a
agreement as to the manner of payment goes into corporation, prepares the stipulations in the contract,
the price, such that a disagreement on the manner of
while the other party merely affixes his signature or
payment is tantamount to a failure to agree on the
his "adhesion" thereto. These types of contracts are
price.
as binding as ordinary contracts because in reality,
the party who adheres to the contract is free to reject
it entirely.
CONTRACT OF ADHESION
In the case at bar, the Supreme Court did not find the
2. SERRA vs. COURT OF APPEALS
situation to be inequitable because petitioner is a
G.R. No. 103338, January 4, 1994, J.
highly educated man, who, at the time of the trial was
already a CPA-Lawyer. It is evident that a man of his
Petitioner Federico Serra, owner of a lot, and private
stature should have been more cautious in
respondent Rizal Commercial Banking Corporation
transactions he enters into, particularly where it
(RCBC) entered into a "Contract of Lease with Option
concerns valuable properties. Also, in the present
to Buy" in May 25, 1975 which provided that Serra
case, the consideration is even more heavy on the
will lease the subject land to RCBC for a period of 25
part of the lessee since it entails transferring of the
years from June 1, 1975 to June 1, 2000, that the
building and/or improvements on the property to
RCBC has the option to purchase the same at
petitioner, should respondent bank fail to exercise its
P210.00 per square meter within a period of 10 years
option within the period stipulated.
from May 25, 1975, the date of the signing of the
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CONVENTIONAL REDEMPTION 5. RAMOS vs. HEIRS OF RAMOS


G.R. No. 14048, April 25, 2002, J.
3. ABAPO vs. COURT OF APPEALS
G.R. No. 128677, March 2, 2000, J. De Leon

In 1967, petitioner siblings Santiago and Crispula


Abapo executed a contract; a Deed of Sale under
Pacto de Retro sold for P500 with right to repurchase
after 5 years, with Teodolfo Quimada. More than 7
years after, Quimado sold the land back to Crispula
and her husband Pedro Bacalso. The spouses
Bacalso had possession, enjoyed the fruits of the
land and paid the corresponding real estate taxes
thereon to the exclusion of Santiago Abapo. In 1990,
Santiago instituted a petition for reconstitution of title
which was later granted. Upon discovery by Crispula,
she instituted a complaint for Quieting of Title with 6. MODINA vs. COURT OF APPEALS
Damages. The trial court ruled in favor of G.R. No. 10935, October 29, 1999, J.
respondents, declaring her as the absolute owner of
the property. On appeal, the challenged decision was
affirmed by the CA. The SC denied the petition.

Whether or not the contract entered in 1967 may be


considered as an equitable mortgage in view of the
unusually inadequate consideration pursuant to
Article 1602 of the NCC. No. In the case at bench,
the price of P500 is not unusually inadequate. The
extant record reveals that the assessed value of the
land in dispute in 1970 was only P400. Thus, at the
time of sale in 1967 the price of P500 is indisputably
over and above the assessed value of P400.

Besides, the mere fact that the price is inadequate


does not per se support the conclusion that the
contract was a loan or that the property was not at all
sold to Teodulfo Quimada. The price fixed in a sale
with right to repurchase is not necessarily the
true value of the land sold. The rationale is that
the vendor has the right to repurchase the land. It
is the practice to fix a relatively reduced price,
although not a grossly inadequate one, in order
to afford the vendor a retro every facility to
redeem the land. Thus, inadequacy of price is not
sufficient to set aside a sale unless it is grossly
inadequate or purely shocking to the conscience.

4. BRAVO-GUERRERO vs. BRAVO


G.R. No. 152658, July 9, 2005, J.

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