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CASE DOCTRINES: SALES AND LEASE (MIDTERMS)

1. DIGNOS VS. COURT OF APPEALS


-A deed of sale is absolute in nature although denominated as Deed of Conditional Sale
absent a proviso that:
a) the title to the property sold is reserved in the vendor until full payment of the
purchase price;
b) stipulation giving the vendor the right to unilaterally rescind the contract the
moment the vendee fails to pay within a fixed period.

2. TAN VS. BENORILAO


The very essence of a contract of sale is the transfer of ownership in exchange for a
price paid or promised.
A contact to sell is defined as a bilateral contract whereby a prospective seller, while
expressly reserving the ownership of the property despite delivery thereof to the
prospective buyer, binds himself to sell the property to the prospective buyer upon
fulfillment of the condition agreed.
Jurisprudence has established that where the seller promises to execute a Deed of
Absolute Sale upon the completion by the buyer of the payment price, the contract is
only a contract to sell.

3. ARTATES VS URBI
As prescribed by law, for a period of five years from the date of government grant, lands
acquired by free or homestead patent shall be incapable of being encumbered or
alienated except
a) in favor of the government itself or any of its institutions;
b) in favor of duly constituted banking corporations.
They shall not be liable to the satisfaction of any debt contracted within the same
period, whether or not the indebtedness shall mature during or after the prohibited
time.
A sale made thereof is null and void and produces no effect and applies even in
involuntary sale. Thus, the requisite of a licit object in a contract of sale is not present as
prohibited by law.

4. HEIRS OF ZAMBALES VS COURT OF APPEALS


A Compromise agreement approved by the court wherein the grantee of a public land
promised to sell the same where executed within the 5-year prohibitory period is null
and void ab initio.
As the contract is void from the beginning, for being expressly prohibited by law, the
action for the declaration of its inexistence does not prescribe.
Object is ilicit, thus, the contract of sale is void.
5. QUIROGA VS PARSONS
For the classification of contracts, due regard must be paid to their essential clauses.
Plaintiff: to furnish the defendant with the beds that the latter may order at the
stipulated price; Defendant: to pay in the manner agreed upon
The contract is one of purchase and sale.

6. CONCRETE AGGREGATES, INC VS COURT OF APPEALS


It is still good law that a contract to make is a contract of sale, if the article is already
substantially in existence at the time of the order and merely requires some alteration,
modification or adaptation to the buyers wishes and purposes.
A contract for the sale of an article which the vendor in the ordinary course of his
business, manufactures or procures for the general market, whether the same is on
hand at the time or not is a contract of sale of goods.

7. PEOPLES HOMESITE AND HOUSING CORP. VS COURT OF APPEALS


There is no perfected sale of a subdivision lot where the amount thereof was expressly
made subject to the approval by higher authorities and there was no acceptance
manifested by the support awardee.

8. TOYOTA SHAW, INC VS COURT OF APPEALS


A definite agreement on the manner of payment is an essential element in the
formation of a binding and enforceable contract of sale.
This is so because the agreement as to the manner of payment goes into the price such
that a disagreement on the manner of payment is tantamount to a failure to agree on
the purchase price.
Definiteness as to the price is an essential element of a binding agreement to sell
personal property.

9. SAMPAGUITA PICTURES VS JALWINDOR


Non-payment of purchase price is not essential if there is already delivery of the thing
sold. This is true even in purchases in credit.
Ownership of the object passes on by the fact of delivery of the vendor to the vendee.

10. SOUTHERN SUGAR & MOLLASES VS ATLANTIC GULF


An accepted unilateral promise can only have a binding effect if supported by a
consideration, which means offer can be withdrawn even if accepted, if not supported
by such.
ART 1324 of the Civil Code, which states that:
When the offer or gives the offeree a certain period to accept, the offer may be
withdrawn at any time before acceptance, except when the option is founded upon
consideration.
must be interpreted with ART 1479, in a sense that the latter only applies to a promise
to buy and sell
This rule requires that a promise to sell to be valid must be supported by a consideration
distinct from the price, which means that the option can still be withdrawn even if
accepted, if the same is not supported by a consideration.

11. ATKINS, KNOLL AND CO VS CUA HIAN TEK


In a unilateral promise, the holder of the option is not bound to buy after his acceptance
of the option and before he exercises his right to buy.
The acceptance of an offer to sell a determinate thing for a price certain creates a
bilateral contract to sell.
The offeree, upon acceptance, ipso facto assumes the obligations of the purchaser.
On the other hand, the offeror would be liable for damages if he fails to deliver the thing
he had offered for sale.
If an option is given without a consideration, it is a mere offer of a contract of sale,
which is not binding until accepted.
If however, acceptance is made before withdrawal, it constitutes as a valid contract of
sale even though the option was not supported by a consideration.

12. NATINO VS IAC


An accepted unilateral promise to buy or sell a determinate thing for a price certain is
binding upon the promissor if it is supported by a consideration distinct from the price.
The bank was not bound by the promise not only because it was not approved by the
board but also because it was a promise unsupported by a consideration distinct from
purchase price.
The right to redeem becomes functus officio on the date of is expiry, and its exercise
after the period is not really a redemption but a repurchase. After expiry, the purchaser
may or may not re-sell the property but no law shall compel him to do so.

13. SERRA VS COURT OF APPEALS


In a unilateral promise to sell, when the debtor fails to withdraw the offer before its
acceptance by the promissee, it ensues a bilateral contract to sell and buy. There was
already meeting of the minds and may reciprocally demand performance.
The promise was supported by a consideration, thus binding upon the offeror. In this
case, it was the transfer of the building on the property to the petitioner should the
lessee fails to exercise his right of first refusal.
14. ROMAN VS GRIMALT
A sale is only binding upon the agreement to the object and the price though neither
was delivered.
Ownership is not transmitted until the property is actually delivered and the purchaser
took possession of it.
Absence of a contract of sale means that the loss should be bourne by the seller and not
by the intended buyer. With this, the latter has no obligation to pay.

15. EQUITORIAL REALTY DEVELOPMENT VS MAYFAIR THEATER INC.


ART 1479 of the Civil Code contemplates an offer. An offer should be certain in its
object, price and other essential requisites of a contract.
In the case, the stipulation that imposes an implicit obligation on the lesor to offer to
sell the leased premises to the lessee before to third persons, is a right of first refusal.
Right of first refusal is a part of the consideration of the lease.
An offer to sell requires consideration in the sense that the vendor sells the option, right
or privilege to buy at the option or election of the other party.

16. NORKIS DISTRIBUTORS VS COURT OF APPEALS


Issuance of sale invoice does not prove transfer of ownership.
It is necessary that the act of delivery must carry with it the intention to transfer
ownership. It is the actual intention of the vendor to deliver, and its acceptance by the
vendee, which gives legal effect.
The thing sold must be placed in the control of the vendee, and the risk of loss must be
with the seller until ownership is passed on to the buyer.
ART 1496 of the Civil Code provides that in the absence of an express assumption of
risk by the buyer, the thing sold shall remain at the sellers risk until the ownership
thereof is transferred to the buyer
Applies in this case because there was neither active nor constructive delivery of the
thing sold, hence, the risk of loss shall be bourne by the seller. (RES PERIT DOMINO)

17. SOUTHERN MOTORS, INC VS MOSCOSO


In sale on installments, where the action instituted is for specific performance and the
mortgaged property is subsequently attached and sold, the sale thereof does not
amount to a foreclosure of the mortgage, hence, the seller-creditor is entitled to
deficiency judgment.
In choosing exacting fulfillment of the obligation, the plaintiff may enforce execution of
the judgment that may be favorably rendered thereon, on all personal and real
properties not exempt from execution sufficient to satisfy such judgment.

18. PASCUAL VS UNIVERSAL MOTORS CORPORATION


With regard to the contention that ART 1484 only prohibits the right to recover any
deficiency from the purchaser after the foreclosure of the chattel mortgage, and not a
recourse to the additional security put up by a third part to guarantee the purchasers
performance of obligation, the SC held:
To sustain such is to overlook the fact that if the guarantor should be compelled to
pay the balance of the purchase price, he will in turn, be entitled to recover what he has
paid from the debtor vendee, so that ultimately, the latter is made to bear the payment
of the purchase price despite of the earlier foreclosure of the chattel mortgage given by
him.
Thus, the protection given by 1484 would be indirectly subverted, and public policy
overturned.

19. FILINVEST CREDIT CORPORATION VS COURT OF APPEALS


It is basic that a contract is what the law defines it and the parties intend it to be, not
what it is called by the parties. The intent of the parties to the subject contract is for the
so-called rentals to be the installment payments. Upon the completion of the payments,
the subject matter would become the property of the lessee. This form of agreement is
in reality, a sale of personal property in installments. (Contract of lease with an option
to buy)
This type of agreement is resorted to as a circumvention of 1484, particularly par. 3.
This is because through this set-up, the vendor, by retaining ownership over the
property in the guise of being the lessor, retains the right to repossess the same without
the need to go through the process of foreclosure in case of the default of the vendee.
More important, the vendor, after repossessing the property and in effect cancelling the
contract of sale, gets to keep the installments-cum-rentals already paid.

20. RIDAD VS FILIPINAS INVESTMENTS


The third remedy under 1484, that is, the foreclosure of chattel mortgage, bars the
vendor from bringing any action against the vendee for the purpose of recovering
whatever balance of the debt secure not satisfied by the foreclosure sale.
The precise purpose of the law is to prevent mortgagees from seizing the mortgaged
property, buying it at a foreclosure sale for a low price and then bringing suit against the
mortgagor for deficiency judgment, otherwise, the mortgagor-buyer would find himself
without the property and still owing practically the full amount of his indebtedness.
1484 also prohibits recourse against the security put up as guaranty to the obligation of
the vendee. (PASCUAL CASE)

21. SPS. DE LA CRUZ VS COURT OF APPEALS


Under the law, the delivery of possession of the mortgaged property to the mortgagee
can only operate to extinguish the vendees liability if the former had actually caused
the foreclosure sale of the mortgaged property when it recovered possession thereof.
It is the fact of foreclosure and actual sale of the mortgaged chattel that bar recovery by
the vendor of any balance not satisfied by the sale.
With this, the desistance of the mortgagee can still allow for specific performance.

22. AGUSTIN VS COURT OF APPEALS


Where the mortgagor plainly refuses to deliver the chattel subject of the mortgage upon
his failure to pay two or more installments, or if he conceals the chattel to place it
beyond the reach of the mortgagee, it is logical that the necessary expenses incurred in
the prosecution by the mortgagee of the action for replevin so that he can gain
possession of the chattel, should be bourne by the mortgagor.

23. FIESTAN VS COURT OF APPEALS


Prohibition of ART 1491 (2) in relation to ART 1409 does not apply in the case where the
sale of the property in dispute was made under a special power inserted in or attached
to the real estate mortgage pursuant to Act no. 3135.
Sec. 5 thereof is designed to create an exception to the general rule that a mortgagee or
trustee in a mortgage of deed of trust which contains a power of sale on default may
not become the purchaser, either directly or through a third person, at a sale which he
himself makes under the power.

24. BOURBON VS SERVICEWIDE SPECIALISTS, INC.


When the seller assigns his credit to another person, the latter is likewise bound by the
same law. Accordingly, when the assignee forecloses on the mortgage, there can be no
further recovery of the deficiency, and the seller-mortgagee is deemed to have
renounced any right thereto.
A mere demand to surrender the object which is not heeded by the mortgagor will not
amount to a foreclosure, but the repossession thereof by the vendor-mortgagee would
have the effect of foreclosure.

25. DIZON VS SUNTAY


The possession of movable property acquired in good faith is equivalent to title.
Nevertheless, one who has lost any movable or has been unlawfully deprived thereof
may recover it from the person in possession of the same.
If the possessor of a movable lost of which the owner was unlawfully deprived, has
acquired it in good faith at a public sale, the owner cannot obtain its return without
reimbursing the price paid therefor.

26. EDCA PUBLISHING & DISTRIBUTING CORP VS SANTOS


Ownership of the thing sold shall not pass to the buyer until full payment only if there is
a stipulation to that effect. Otherwise, the rule is that such ownership shall pass from
the vendor to the vendee upon the actual or constructive delivery of the thing sold even
if the purchase price has not yet been paid. Absent such stipulation, delivery of the thing
sold will effectively transfer ownership to the buyer who can in turn transfer it to
another.
Non-payment only creates a right to demand payment or to rescind the contract.

27. LAYUG VS IAC


The failure to make payment in the grace period provided for in the Maceda Law
(equivalent to one month for every year of installment paid, for parties who have paid
for a minimum of two years of installment) only leaves the right to a refund of the cash
surrender value of the payments on the property equivalent to fifty percent of the total
payments made.
Such refund will be the operative act to make effective the cancellation of the contract,
and the additional formality of a demand by notarial act, would appear to be merely
circuitous and consequently superfluous.

28. POWER COMMERCIAL VS CA


Symbolic delivery, as a species of constructive delivery, effects the transfer of ownership
through the execution of a public document. Its efficacy can, however, be prevented if
the vendor does not possess the control over the thing sold.
In order that this symbolic delivery may produce the effect of tradition, it is necessary
that the vendor shall have had such control of the thing sold that is material delivery
could have been made. The thing sold must be placed in his control.
If notwithstanding the execution if the instrument, the purchaser cannot have the
enjoyment and material tenancy of the thing, the delivery has not been effected.

29. ADDISON VS FELIX


Symbolic delivery through the execution of a public instrument is sufficient when there
is no impediment to prevent the thing sold passing into the tenancy of the purchaser by
the sole will of the vendor.
While it is true that the execution of a public instrument is equivalent to the thing sold
which is the object of the contract, in order that symbolic tradition may produce the
effect of tradition, it is necessary that the vendor shall have had such control over the
thing sold.
It is not enough to confer upon the purchaser the ownership and the right of possession.

30. TEN FORTY REALTY AND DEVELOPMENT CORP VS CRUZ


With respect to incorporeal property, the general rule is that the execution of a public
instrument shall be equivalent to the delivery of the thing that is the object of the
contract, if, from the deed, the contrary does not appear or cannot be clearly inferred.
However, ownership is transferred not by contract but by tradition or delivery. Nowhere
in the Civil Code is it provided that the execution of a deed of sale is a conclusive
presumption of delivery of possession of a piece of real estate.
The execution of a public instrument gives rise only to a prima facie presumption of
delivery.