NATURE'OF'THE'CONTRACT'CASES'–'CHARACTERISTICS'OF'SALES'' NATURE'OF'THE'CONTRACT'CASES'–'CHARACTERISTICS'OF'SALES''

CASE'DIGEST' CASE'DIGEST'
! !
• RTC' DECISION:' judgment' for' specific' performance' is' hereby' rendered' ordering' defendant' to'
CORONEL'VS'CA'
execute'in'favor'of'plaintiffs'a'deed'of'absolute'sale''
PETITIONERS:'ROMULO'A.'CORONEL,'ALARICO'A.'CORONEL,'ANNETTE'A.'CORONEL,'ANNABELLE'C.'
GONZALES'(for'herself'and'on'behalf'of'Floraida'C.'Tupper,'as'attorneyIinIfact),'CIELITO'A.'CORONEL,' • A'MR'was'filed'by'petitioners'before'RTC'but'the'same'was'denied''
FLORAIDA'A.'ALMONTE,'and'CATALINA'BALAIS'MABANAG' • A'MR'was'filed'again'which'now'pertains'to'the'undersigned'Presiding'Judge,'after'a'meticulous'
RESPONDENTS:'THE'COURT'OF'APPEALS,'CONCEPCION'D.'ALCARAZ'and'RAMONA'PATRICIA'ALCARAZ,' examination' of' the' documentary' evidence' presented' by' the' parties,' she' is' convinced' that' the'
assisted'by'GLORIA'F.'NOEL'as'attorneyIinIfact' Decision'of'March'1,'1989'is'supported'by'evidence'and,'therefore,'should'not'be'disturbed.'
DATE'OF'PROMULGATION:'October'7,'1996' • MR' and/or' to' Annul' Decision' and' Render' Anew' Decision' by' the' Incumbent' Presiding' Judge' is'
DENIED.'
PONENTE:'MELO,'J.:' • CA'rendered'its'decision'fully'agreeing'with'the'trial'court.'
ISSUE:'WON'there'is'a'perfected'contract'of'sale'
FACTS:'' HELD:'YES'
• Backstory:'may'complaint'for'specific'performance'to'compel'herein'petitioners'(except'Catalina'
Balais'Mabanag)'to'consummate'the'sale'of'a'parcel'of'land'with'its'improvements'located'along' Art.'1305.'A'contract'is'a'meeting'of'minds'between'two'persons'whereby'one'binds'himself,'with'
Roosevelt' Avenue' in' Quezon' City' entered' into' by' the' parties' sometime' in' January' 1985' for' the' respect'to'the'other,'to'give'something'or'to'render'some'service.'
price'of'P1,240,000.00.' Art.'1458.'By'the'contract'of'sale'one'of'the'contracting'parties'obligates'himself'to'transfer'the'
• On''1985,'Romulo'Coronel,''executed'a'document'entitled'Receipt'of'Down'Payment''in'favor'of' ownership'of'and'to'deliver'a'determinate'thing,'and'the'other'to'pay'therefor'a'price'certain'in'money'or'
plaintiff'Ramona'Patricia'Alcaraz'('RECEIPT(OF(DOWN(PAYMENT)(' its'equivalent.'

P1,240,000.00(8(Total(amount' the'name'of'their'deceased'father'upon'receipt'of' SALE' by' its' very' nature,' is' a' consensual' contract' because' it' is' perfected' by' mere' consent.'The'
50,000.00(8(Down(payment' the'Fifty'Thousand'(P50,000.00)'Pesos'down' essential'elements'of'a'contract'of'sale'are'the'following:'
888888888888888888888888888888888888888888' payment;'
P1,190,000.00(8(Balance' 3.'Upon'the'transfer'in'their'names'of'the'subject' a)'Consent'or'meeting'of'the'minds,'that'is,'consent'to'transfer'ownership'in'exchange'for'the'price;'
b)'Determinate'subject'matter;'and'
property,'the'Coronels'will'execute'the'deed'of'
We(bind(ourselves(to(effect(the(transfer(in(our( absolute'sale'in'favor'of'Ramona'and'the'latter' c)'Price'certain'in'money'or'its'equivalent.'
names(from(our(deceased(father,(Constancio(P.( will'pay'the'former'the'whole'balance'of'One'
Coronel,(the(transfer(certificate(of(title( Million'One'Hundred'Ninety'Thousand' Under'this'definition,'a'Contract'to'Sell'may'not'be'considered'as'a'Contract'of'Sale'because'the'
immediately(upon(receipt(of(the(down(payment( (P1,190,000.00)'Pesos.' first' essential' element' is' lacking.'In' a' contract' to' sell,' the' prospective' seller' explicitly' reserves' the'
above8stated.' transfer'of'title'to'the'prospective'buyer,'meaning,'the'prospective'seller'does'not'as'yet'agree'or'consent'
On'the'same'date'(January'15,'1985),'plaintiffI
On(our(presentation(of(the(TCT(already(in(or( appellee'Concepcion'D.'Alcaraz'(hereinafter' to'transfer'ownership'of'the'property'subject'of'the'contract'to'sell'until'the'happening'of'an'event,'which'
name,(We(will(immediately(execute(the(deed(of( referred'to'as'Concepcion),'mother'of'Ramona,' for'present'purposes'we'shall'take'as'the'full'payment'of'the'purchase'price.'What'the'seller'agrees'or'
absolute(sale(of(said(property(and(Miss(Ramona( paid'the'down'payment'of'Fifty'Thousand' obliges'himself'to'do'is'to'fulfill'his'promise'to'sell'the'subject'property'when'the'entire'amount'of'the'
Patricia(Alcaraz(shall(immediately(pay(the( (P50,000.00)'Pesos'The'Coronels'sold'the' purchase'price'is'delivered'to'him.'In'other'words'the'full'payment'of'the'purchase'price'partakes'of'a'
suspensive'condition,'the'nonIfulfillment'of'which'prevents'the'obligation'to'sell'from'arising'and'thus,'
balance(of(the(P1,190,000.00.' property'covered'by'TCT'No.'327043'to'Catalina'
Clearly,'the'conditions'appurtenant'to'the'sale' B.'Mabanag'for'P1,580,000.00'Pesos'after'the' ownership' is' retained' by' the' prospective' seller' without' further' remedies' by' the' prospective'
are'the'following:' latter'has'paid'P300,000.00.'For'this'reason,' buyer.'In'Roque(vs.(Lapuz((96(SCRA(741([1980]),'this'Court'had'occasion'to'rule:'
1.'Ramona'will'make'a'down'payment'of'Fifty' Coronels'canceled'and'rescinded'the'contract'
Hence,'We'hold'that'the'contract'between'the'petitioner'and'the'respondent'was'a'contract'to'sell'
Thousand'(P50,000.00)'pesos'upon'execution'of' with'Ramona'by'depositing'the'down'payment'
where'the'ownership'or'title'is'retained'by'the'seller'and'is'not'to'pass'until'the'full'payment'of'the'price,'
the'document'aforestated;' paid'by'Concepcion'in'the'bank'in'trust'for'
such'payment'being'a'positive'suspensive'condition'and'failure'of'which'is'not'a'breach,'casual'or'
2.'The'Coronels'will'cause'the'transfer'in'their' Ramona'Patricia'Alcaraz.'
serious,'but'simply'an'event'that'prevented'the'obligation'of'the'vendor'to'convey'title'from'acquiring'
names'of'the'title'of'the'property'registered'in'
binding'force.'
• Concepcion,'et.(al.,'filed'a'complaint'for'a'specific'performance'against'the'Coronels'and'caused'the'
annotation'of'a'notice'of'lis(pendens'at'the'back'of'TCT'No.'327403''
Stated' positively,' upon' the' fulfillment' of' the' suspensive' condition' which' is' the' full' payment' of' the'
• Catalina'caused'the'annotation'of'a'notice'of'adverse'claim'covering'the'same'property'with'the'
purchase'price,'the'prospective'sellers'obligation'to'sell'the'subject'property'by'entering'into'a'contract'
Registry'of'Deeds'of'Quezon'City''
of' sale' with' the' prospective' buyer' becomes' demandable' as' provided' in' Article' 1479' of' the' Civil' Code'
• The'Coronels'executed'a'Deed'of'Absolute'Sale'over'the'subject'property'in'favor'of'Catalina'' which'states:'
• A'new'title'over'the'subject'property'was'issued'in'the'name'of'Catalina'under'TCT'No.'351582''
! 1! ! 2!
 NATURE'OF'THE'CONTRACT'CASES'–'CHARACTERISTICS'OF'SALES''
CASE'DIGEST'
! !
Art.'1479.'A'promise'to'buy'and'sell'a'determinate'thing'for'a'price'certain'is'reciprocally'demandable.'
An'accepted'unilateral'promise'to'buy'or'to'sell'a'determinate'thing'for'a'price'certain'is'binding'upon'
the'promissor'of'the'promise'is'supported'by'a'consideration'distinct'from'the'price.'
A'contract'to'sell'may'thus'be'defined'as'a'bilateral'contract'whereby'the'prospective'seller,'while'
expressly' reserving' the' ownership' of' the' subject' property' despite' delivery' thereof' to' the' prospective'
buyer,'binds'himself'to'sell'the'said'property'exclusively'to'the'prospective'buyer'upon'fulfillment'of'the'
condition'agreed'upon,'that'is,'full'payment'of'the'purchase'price.'
A'contract'to'sell'as'defined'hereinabove,'may'not'even'be'considered'as'a'conditional'contract'of'
sale'where'the'seller'may'likewise'reserve'title'to'the'property'subject'of'the'sale'until'the'fulfillment'of'a'
suspensive' condition,' because' in' a' conditional' contract' of' sale,' the' first' element' of' consent' is' present,'
although'it'is'conditioned'upon'the'happening'of'a'contingent'event'which'may'or'may'not'occur.'If'the'
suspensive' condition' is' not' fulfilled,' the' perfection' of' the' contract' of' sale' is' completely' abated'
(cf.'Homesite( and( Housing( Corp.( vs.( Court( of( Appeals,( 133( SCRA( 777( [1984]).'However,' if' the' suspensive'
condition'is'fulfilled,'the'contract'of'sale'is'thereby'perfected,'such'that'if'there'had'already'been'previous'
delivery'of'the'property'subject'of'the'sale'to'the'buyer,'ownership'thereto'automatically'transfers'to'the'
buyer'by'operation'of'law'without'any'further'act'having'to'be'performed'by'the'seller.'
In'a'contract'to'sell,'upon'the'fulfillment'of'the'suspensive'condition'which'is'the'full'payment'of'the'
purchase'price,'ownership'will'not'automatically'transfer'to'the'buyer'although'the'property'may'have'
been'previously'delivered'to'him.'The'prospective'seller'still'has'to'convey'title'to'the'prospective'buyer'
by'entering'into'a'contract'of'absolute'sale.'
It'is'essential'to'distinguish'between'a'contract'to'sell'and'a'conditional'contract'of'sale'specially'in'
cases'where'the'subject'property'is'sold'by'the'owner'not'to'the'party'the'seller'contracted'with,'but'to'a'
third'person,'as'in'the'case'at'bench.'In'a'contract'to'sell,'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'the'purchase'price,'for'instance,'cannot'be'deemed'a'buyer'in'bad'faith'and'the'prospective'
buyer'cannot'seek'the'relief'of'reconveyance'of'the'property.'There'is'no'double'sale'in'such'case.'Title'to'
the'property'will'transfer'to'the'buyer'after'registration'because'there'is'no'defect'in'the'ownerIsellers'
title'per(se,'but'the'latter,'of'course,'may'be'sued'for'damages'by'the'intending'buyer.'
In'a'conditional'contract'of'sale,'however,'upon'the'fulfillment'of'the'suspensive'condition,'the'sale'
becomes'absolute'and'this'will'definitely'affect'the'sellers'title'thereto.'In'fact,'if'there'had'been'previous'
delivery'of'the'subject'property,'the'sellers'ownership'or'title'to'the'property'is'automatically'transferred'
to' the' buyer' such' that,' the' seller' will' no' longer' have' any' title' to' transfer' to' any' third' person.'Applying'
Article' 1544' of' the' Civil' Code,' such' second' buyer' of' the' property' who' may' have' had' actual' or'
constructive'knowledge'of'such'defect'in'the'sellers'title,'or'at'least'was'charged'with'the'obligation'to'
discover' such' defect,' cannot' be' a' registrant' in' good' faith.'Such' second' buyer' cannot' defeat' the' first'
buyers' title.'In' case' a' title' is' issued' to' the' second' buyer,' the' first' buyer' may' seek' reconveyance' of' the'
property'subject'of'the'sale.'
With'the'above'postulates'as'guidelines,'we'now'proceed'to'the'task'of'deciphering'the'real'nature'of'
the'contract'entered'into'by'petitioners'and'private'respondents.'
The' agreement' could' not' have' been' a' contract' to' sell' because' the' sellers' herein' made'no' express'
reservation' of' ownership' or' title' to' the' subject' parcel' of' land.'Furthermore,' the' circumstance' which'
prevented'the'parties'from'entering'into'an'absolute'contract'of'sale'pertained'to'the'sellers'themselves'
(the'certificate'of'title'was'not'in'their'names)'and'not'the'full'payment'of'the'purchase'price.'Under'the'
established'facts'and'circumstances'of'the'case,'the'Court'may'safely'presume'that,'had'the'certificate'of'
! 3!
NATURE'OF'THE'CONTRACT'CASES'–'CHARACTERISTICS'OF'SALES''
CASE'DIGEST'
title' been' in' the' names' of' petitionersIsellers' at' that' time,' there' would' have' been' no' reason' why' an'
absolute'contract'of'sale'could'not'have'been'executed'and'consummated'right'there'and'then.'
Moreover,'unlike'in'a'contract'to'sell,'petitioners'in'the'case'at'bar'did'not'merely'promise'to'sell'the'
property'to'private'respondent'upon'the'fulfillment'of'the'suspensive'condition.'On'the'contrary,'having'
already'agreed'to'sell'the'subject'property,'they'undertook'to'have'the'certificate'of'title'change'to'their'
names'and'immediately'thereafter,'to'execute'the'written'deed'of'absolute'sale.'
Thus,'the'parties'did'not'merely'enter'into'a'contract'to'sell'where'the'sellers,'after'compliance'by'
the' buyer' with' certain' terms' and' conditions,' promised' to' sell' the' property' to' the' latter.'What' may' be'
perceived'from'the'respective'undertakings'of'the'parties'to'the'contract'is'that'petitioners'had'already'
agreed'to'sell'the'house'and'lot'they'inherited'from'their'father,'completely'willing'to'transfer'ownership'
of' the' subject' house' and' lot' to' the' buyer' if' the' documents' were' then' in' order.'It' just' so' happened,'
however,' that' the' transfer' certificate' of' title' was' then' still' in' the' name' of' their' father.'It' was' more'
expedient'to'first'effect'the'change'in'the'certificate'of'title'so'as'to'bear'their'names.'That'is'why'they'
undertook'to'cause'the'issuance'of'a'new'transfer'of'the'certificate'of'title'in'their'names'upon'receipt'of'
the'down'payment'in'the'amount'of'P50,000.00.'As'soon'as'the'new'certificate'of'title'is'issued'in'their'
names,'petitioners'were'committed'to'immediately'execute'the'deed'of'absolute'sale.'Only'then'will'the'
obligation'of'the'buyer'to'pay'the'remainder'of'the'purchase'price'arise.'
There' is' no' doubt' that' unlike' in' a' contract' to' sell' which' is' most' commonly' entered' into' so' as' to'
protect' the' seller' against' a' buyer' who' intends' to' buy' the' property' in' installment' by' withholding'
ownership'over'the'property'until'the'buyer'effects'full'payment'therefor,'in'the'contract'entered'into'in'
the' case' at' bar,' the' sellers' were' the' ones' who' were' unable' to' enter' into' a' contract' of' absolute' sale' by'
reason'of'the'fact'that'the'certificate'of'title'to'the'property'was'still'in'the'name'of'their'father.'It'was'the'
sellers'in'this'case'who,'as'it'were,'had'the'impediment'which'prevented,'so'to'speak,'the'execution'of'an'
contract'of'absolute'sale.'
Thus,'the'sale'of'the'subject'parcel'of'land'between'petitioners'and'Ramona'P.'Alcaraz,'perfected'on'
February'6,'1985,'prior'to'that'between'petitioners'and'Catalina'B.'Mabanag'on'February'18,'1985,'was'
correctly'upheld'by'both'the'courts'below.'
WHEREFORE,' premises' considered,' the' instant' petition' is' hereby' DISMISSED' and' the' appealed'
judgment'AFFIRMED.'
JOVAN'LAND'VS'CA'
PETITIONER:'JOVAN'LAND'
RESPONDENTS:'COURT'OF'APPEALS'and'EUGENIO'QUESADA,'INC.,.'
PONENTE:'HERMOSISIMA,'JR.'J.'
FACTS:'
• This'is'a'petition'for'review'on'certiorari'to'reverse'and'set'aside'the'decision'of'the'CA'
• Jovan'Land,'Inc.'is'a'corporation'engaged'in'the'real'estate'business.'Its'President'and'Chairman'of'
the'Board'of'Directors'is'one'Joseph'Sy.'
• Eugenio'Quesada'is'the'owner'of'the'Q'Building''
• Petitioner'learned'from'coIpetitioner'Consolacion'P.'Mendoza'that'private'respondent'was'selling'
the' aforesaid' Mayhaligue' property.'Thus,' petitioner' through' Joseph' Sy' made' a' written' offer,'
for'P10.25'million.''
• Firts' offer' was' not' accepted' by' Conrado' Quesada,' the' General' Manager' of' private'
respondent.'Joseph' Sy' sent' a' second' written' offer' for' the' same' price' but' inclusive' of' an'
undertaking'to'pay'the'documentary'stamp'tax,'transfer'tax,'registration'fees'and'notarial'charges,'
! 4!
 NATURE'OF'THE'CONTRACT'CASES'–'CHARACTERISTICS'OF'SALES''
CASE'DIGEST'
! !
for' one' million' pesos' drawn' against' the' Philippine' Commercial' and' Industrial' Bank' (PCIB)' was'
enclosed'therewith'as'earnest'money.''
• This' second' offer,' with' earnest' money,' was' again' rejected' by' Conrado.'' Joseph' Sy' sent' a' third'
written'offer'for'12M'with'a'similar'check'for'one'million'pesos'as'earnest'money.''
• Annotated' on' this' third' letterIoffer' was' the' phrase' "Received' original,' 9I4I89"' beside' which'
appears'the'signature'of'Conrado'Quesada.'
• On' the' basis' of' this' annotation' which' petitioner' insists' is' the' proof' that' there' already' exists' a'
valid,'perfected'agreement'to'sell'the'Mayhaligue'property'
• 'Jovan' Land' filed' with' the' RTC,' a' complaint' for' specific' performance' and' collection' of' sum' of'
money'with'damages.''
• 'RTC'Dismissed=''there'is'nothing'in'the'record'to'point'that'a'contract'was'ever'perfected.'In'fact,'
there'is'nothing'in'writing'which'is'indispensably'necessary'in'order'that'the'perfected'contract'
could'be'enforced'under'the'Statute'of'Frauds.''
• petitioner'appealed'to'CA'before'which'it'assigned'the'following'errors:'
"1.'The'Court'a(quo'failed'to'appreciate'that'there'was'already'a'perfected'contract'of'sale'
between'Jovan'Land,'Inc.'and'the'private'respondent];'
2.'The'Court'a(quo'erred'in'its'conclusion'that'there'was'no'implied'acceptance'of'the'offer'by'
appellants'to'appellee'[private'respondent];'
3.'The'Court'a(quo'was'in'error'where'it'concluded'that'the'contract'of'sale'was'unenforceable;'
4.The'Court'a(quo(failed'to'rule'that'appellant'[petitioner]'Mendoza'is'entitled'to'her'broker's'
commission."''
• CA'concluded'that'not'any'of'them'justifies'a'reversal'of'the'trial'court'decision.'
ISSUE:'WON'there'is'a'perfected'contract'of'sale'
HELD:'NO'
' •
Ang'Yu'Asuncion'v.'Court'of'Appeals,'
"xxx'[A]'contract'(Art.'1157,'Civil'Code),'x'x'x'is'a'meeting'of'minds'between'two'persons'
whereby'one'binds'himself,'with'respect'to'the'other,'to'give'something'or'to'render'some'
service'xxx.'A'contract'undergoes'various'stages'that'include'its'negotiation'or'preparation,'its'
perfection'and,'finally,'its'consummation.'Negotiation'covers'the'period'from'the'time'the'
prospective'contracting'parties'indicate'interest'in'the'contract'to'the'time'the'contract'is'
concluded'xxx.'The'perfection'of'the'contract'takes'place'upon'the'concurrence'of'the'essential'
elements'thereof."'
It' is' a' fundamental' principle' that' before' contract' of' sale' can' be' valid,' the' following' elements' must' be'
present,'viz:'(a)' consent' or' meeting' of' the' minds;' (b)' determinate' subject' matter;' (3)' price' certain' in'
money' or' its' equivalent.'Until' the' contract' of' sale' is' perfected,' it' cannot,' as' an' independent' source' of'
obligation,'serve'as'a'binding'juridical'relation'between'the'parties.'
In'the'case'at'bench,'petitioner,'anchors'its'main'argument'on'the'annotation'on'its'third'letterIoffer'
of'the'phrase'"Received'original,'9I4I89,"'beside'which'appears'the'signature'of'Conrado'Quesada.'It'also'
contends'that'the'said'annotation'is'evidence'to'show'that'there'was'already'a'perfected'agreement'to'
sell'as'respondent'can'be'said'to'have'accepted'petitioner's'payment'in'the'form'of'a'check'which'was'
enclosed'in'the'third'letter.'A'punctilious'examination'of'the'receipt'reveals'that'the'same'can'neither'be'
regarded'as'a'contract'of'sale'nor'a'promise'to'sell.Such'an'annotation'by'Conrado'Quesada'amounts'to'
neither'a'written'nor'an'implied'acceptance'of'the'offer'of'Joseph'Sy.'It'is'merely'a'memorandum'of'the'
! 5!
NATURE'OF'THE'CONTRACT'CASES'–'CHARACTERISTICS'OF'SALES''
CASE'DIGEST'
receipt' by' the' former' of' the' latter's' offer.'The' requisites' of' a' valid' contract' of' sale' are' lacking' in' said'
receipt'and'therefore'the'"sale"'is'neither'valid'nor'enforceable.'
Although'there'was'a'series'of'communications'through'letterIoffers'and'rejections'as'evident'from'
the'facts'of'this'case,'still'it'is'undeniable'that'no'written'agreement'was'reached'between'petitioner'and'
private'respondent'with'regard'to'the'sale'of'the'realty.'Hence,'the'alleged'transaction'is'unenforceable'
as'the'requirements'under'the'Statute'of'Frauds'have'not'been'complied'with.'Under'the'said'provision,'
an'agreement'for'the'sale'of'real'property'or'of'an'interest'therein,'to'be'enforceable,'must'be'in'writing'
and'subscribed'by'the'party'charged'or'by'an'agent'thereof'
WHEREFORE,'premises'considered,'this'petition'is'DENIED.'
QUIJADA'VS'CA'
PETITIONERS:'ALFONSO'QUIJADA,'CRESENTE'QUIJADA,'REYNELDA'QUIJADA,'DEMETRIO'QUIJADA,'
ELIUTERIA'QUIJADA,'EULALIO'QUIJADA,'and'WARLITO'QUIJADA(#
RESPONDENTS:'COURT'OF'APPEALS,'REGALADO'MONDEJAR,'RODULFO'GOLORAN,'ALBERTO'ASIS,'
SEGUNDINO'RAS,'ERNESTO'GOLORAN,'CELSO'ABISO,'FERNANDO'BAUTISTA,'ANTONIO'MACASERO,'and'
NESTOR'MAGUINSAY,''
PONENTE:'MARTINEZ,'J.'
FACTS:''
• Petitioners,'as'heirs'of'the'late'Trinidad'Quijada,'filed'a'complaint'against'private'respondents'
for' quieting' of' title,' recovery' of' possession' and' ownership' of' parcels' of' land' with' claim' for'
attorney's'fees'and'damages.'The'suit'was'premised'on'the'following'facts'found'by'the'Court'
of'Appeals,'which'is'materially'the'same'as'that'found'by'the'trial'court:'
• Trinidad'was'one'of'the'heirs'of'the'late'Pedro'Corvera'and'inherited'from'the'latter'the'2I
hectare'parcel'of'land'subject'of'the'case'
Trinidad'Quijada'together'with'her'sisters'Leonila'Corvera'Vda.'de'Sequea'and'Paz'Corvera'
Cabiltes'and'brother'Epapiadito'Corvera'executed'a'conditional'deed'of'donation'of'the'twoI
hectare'parcel'of'land'subject'of'the'case'in'favor'of'the'Municipality'of'Talacogon,'the'
condition'being'that'the'parcel'of'land'shall'be'used'solely'and'exclusively'as'part'of'the'
campus'of'the'proposed'provincial'high'school'in'Talacogon.'
• Trinidad'remained'in'possession'of'the'parcel'of'land'despite'the'donation.''
• Trinidad'sold'one'(1)'hectare'of'the'subject'parcel'of'land'to'Regalado'Mondejar.'Trinidad'
verbally'sold'the'remaining'one'(1)'hectare'to'Regalado'Mondejar'without'the'benefit'of'a'
written'deed'of'sale'and'evidenced'solely'by'receipts'of'payment.''
• the'heirs'of'Trinidad,'who'at'that'time'was'already'dead,'filed'a'complaint'for'forcible'entry'
against'Regalado'Mondejar,'which'complaint'was,'however,'dismissed'for'failure'to'prosecute'
• the'proposed'provincial'high'school'having'failed'to'materialize,'the'Sangguniang'Bayan'of'the'
municipality'of'Talacogon'enacted'a'resolution'reverting'the'two'(2)'hectares'of'land'donated'
back'to'the'donors''
• In'the'meantime,'Regalado'Mondejar'sold'portions'of'the'land'to'Fernando'Bautista'Rodolfo'
Goloran'Efren'Guden'and'Ernesto'Goloran.''
• In'the'complaint,'the'heir'alleged'that'their'deceased'mother'never'sold,'conveyed,'
transferred'or'disposed'of'the'property'in'question'to'any'person'or'entity'much'less'to'
Regalado'Mondejar'save'the'donation'made'to'the'Municipality'of'Talacogon'in'1956;'that'at'
the'time'of'the'alleged'sale'to'Regalado'Mondejar'by'Trinidad'Quijada,'the'land'still'belongs'to'
the'Municipality'of'Talacogon,'hence,'the'supposed'sale'is'null'and'void.'
! 6!
 NATURE'OF'THE'CONTRACT'CASES'–'CHARACTERISTICS'OF'SALES''
CASE'DIGEST'
! !
•in'their'answer,'defendants'claimed'that'the'land'in'dispute'was'sold'to'Regalado'Mondejar,'
the'one'(1)'hectare'on'July'29,'1962,'and'the'remaining'one'(1)'hectare'on'installment'basis'
until'fully'paid.'As'affirmative'and/or'special'defense,'defendantsIappellants'(respondents)'
alleged'that'plaintiffs''action'is'barred'by'laches'or'has'prescribed.'
• RTC' rendered' judgment' in' favor' of' petitionersThe' dispositive' portion' of' the' trial' court's'
decision'reads'
• CA' reversed' and' set' aside' the' judgment''ruling' that' the' sale' made' by' Trinidad' Quijada' to'
respondent' Mondejar' was' valid' as' the' former' retained' an' inchoate' interest' on' the' lots' by'
virtue'of'the'automatic'reversion'clause'in'the'deed'of'donation.[4]'Thereafter,'petitioners'filed'
a' motion' for' reconsideration.'When' the' CA' denied' their' motion,[5]'petitioners' instituted' a'
petition'for'review'to'this'Court'arguing'principally'that'the'sale'of'the'subject'property'made'
by'Trinidad'Quijada'to'respondent'Mondejar'is'void,'considering'that'at'that'time,'ownership'
was' already' transferred' to' the' Municipality' of' Talacogon.'On' the' contrary,' private'
respondents' contend' that' the' sale' was' valid,' that' they' are' buyers' in' good' faith,' and' that'
petitioners''case'is'barred'by'laches.[6]'
ISSUE:'WON'the'sale'was'valid'
HELD:'Yes.'When'the'property'was'donated'to'the'Municipality,'the'ownership'was'transferred'to'them'
but'wait'there’s'more,'there'was'a'condition.'A'RESOLUTORY'CONDITION,'though'it'was'not'stated'in'
the'condition'on'how'long'the'condition'was,'it'was'evident'that'the'Municipality'had'intended'to'build'
the'school.'Again,'though'not'stated'how'long,'the'Municipality'still'gave'back'the'property'to'the'donors'
thus'the'ownership'was'transferred.'Making'the'sale'valid'since'ownership'was'returned.'
The'donation'made'Trinidad'Quijada'and'her'brother'and'sisters'was'subject'to'the'condition'that'the'
donated'property'shall'be'"used'solely'and'exclusively'as'a'part'of'the'campus'of'the'proposed'Provincial'
High'School'in'Talacogon."The'donation'further'provides'that'should'"the'proposed'Provincial'High'
School'be'discontinued'or'if'the'same'shall'be'opened'but'for'some'reason'or'another,'the'same'may'in'
the'future'be'closed"'the'donated'property'shall'automatically'revert'to'the'donor.[9]'Such'condition,'not'
being'contrary'to'law,'morals,'good'customs,'public'order'or'public'policy'was'validly'imposed'in'the'
donation.''
When' the' Municipality's' acceptance' of' the' donation' was' made' known' to' the' donor,' the' former'
became'the'new'owner'of'the'donated'property'II'donation'being'a'mode'of'acquiring'and'transmitting'
ownership[11]'I'notwithstanding'the'condition'imposed'by'the'donee.'The'donation'is'perfected'once'the'
acceptance' by' the' donee' is' made' known' to' the' donor.[12]'Accordingly,' ownership' is' immediately'
transferred'to'the'latter'and'that'ownership'will'only'revert'to'the'donor'if'the'resolutory'condition'is'not'
fulfilled.'
In'this'case,'that'resolutory'condition'is'the'construction'of'the'school.'It'has'been'ruled'that'when'a'
person'donates'land'to'another'on'the'condition'that'the'latter'would'build'upon'the'land'a'school,'the'
condition'imposed'is'not'a'condition'precedent'or'a'suspensive'condition'but'a'resolutory'one.'Thus,'at'
the'time'of'the'sales'made'in'1962'towards'1968,'the'alleged'seller'(Trinidad)'could'not'have'sold'the'
lots'since'she'had'earlier'transferred'ownership'thereof'by'virtue'of'the'deed'of'donation.'So'long'as'the'
resolutory'condition'subsists'and'is'capable'of'fulfillment,'the'donation'remains'effective'and'the'donee'
continues'to'be'the'owner'subject'only'to'the'rights'of'the'donor'or'his'successorsIinIinterest'under'the'
deed'of'donation.'Since'no'period'was'imposed'by'the'donor'on'when'must'the'donee'comply'with'the'
condition,' the' latter' remains' the' owner' so' long' as' he' has' tried' to' comply' with' the' condition' within' a'
reasonable' period.'Such' period,' however,' became' irrelevant' herein' when' the' doneeIMunicipality'
manifested' through' a' resolution' that' it' cannot' comply' with' the' condition' of' building' a' school' and' the'
! 7!
NATURE'OF'THE'CONTRACT'CASES'–'CHARACTERISTICS'OF'SALES''
CASE'DIGEST'
same'was'made'known'to'the'donor.'Only'then'I'when'the'nonIfulfillment'of'the'resolutory'condition'was'
brought' to' the' donor's' knowledge' I' that' ownership' of' the' donated' property' reverted' to' the' donor' as'
provided'in'the'automatic'reversion'clause'of'the'deed'of'donation.'
WHEREFORE,'by'virtue'of'the'foregoing,'the'assailed'decision'of'the'Court'of'Appeals'is'AFFIRMED.'
HEIRS'OF'SAN'ANDRES'VS.'RODRIGUEZ'
PETITIONERS:'HEIRS'OF'JUAN'SAN'ANDRES'(VICTOR'S.'ZIGA)'and'SALVACION'S.'TRIA'
RESPONDENT:'VICENTE'RODRIGUEZ,''
PONENTE:'MENDOZA,'J.'
FACTS:'
• Juan'andres'was'the'owner'of'the'lot'situated'in'liboton,'naga'city.'The'sale'was'evidenced'by'a'
deed'of'sale.'Upon'the'death'of'juan'andres,'ramon'san'andres'was'appointed'as'administrator'of'
the' estate,' and' hired' geodetic' engineer.' Jose' panero' ' prepared' a' consolidated' plan' of' the' estate'
and' also' prepared' a' sketch' plan' of' the' lot' sold' to' respondent.' It' was' found' out' that' respondent'
had' enlarged' the' area' which' he' purchased' from' juan.' The' administrator' sent' a' letter' to' the'
respoindent'to'vacate'the'said'portion'in'which'the'latter'refused'to'do.'
• Respondent'alleged'that'apart'from'the'original'lot,'which'had'been'sold'to'him,'the'latter'likewise'
sold' to' him' the' following' day' the' remaining' portion' of' the' lot.' He' alleged' that' the' payment' for'
such' would' be' affected' in' 5' years' from' the' eecution' of' the' formal' deed' of' sale' after' a' survey' is'
conducted.' He' also' alleged' that' under' the' consent' of' juan,' he' took' possession' of' the' same' and'
introduced'improvements'thereon.''
• Respondent'deposited'in'court'the'balance'of'the'purchase'price'amounting'to'P7,035.00'for'the'
aforesaid'509Isquare'meter'lot.'
• RTC'='rendered'judgment'in'favor'of'petitioner.'It'ruled'that'there'was'no'contract'of'sale'to'speak'
of' for' lack' of' a' valid' object' because' there' was' no' sufficient' indication' ' to' identify' the' property'
subject'of'the'sale,'hence,'the'need'to'execute'a'new'contract.'
• CA'='held'that'the'object'of'the'contract'was'determinable,'and'that'there'was'a'conditional'sale'
with'the'balance'of'the'purchase'price'payable'within'five'years'from'the'execution'of'the'deed'of'
sale.''
ISSUE:''WON'there'was'a'valid'sale.'
HELD:'YES'
Civil'Code'provides'that'By'the'contract'of'sale'one'of'the'contracting'parties'obligates'himself'to'transfer'
the' ownership' of' and' to' deliver' a' determinate' thing,' and' the' other' to' pay' therefor' a' price' certain' in'
money'or'its'equivalent.'
A'contract'of'sale'may'be'absolute'or'conditional.'
As'thus'defined,'the'essential'elements'of'sale'are'the'following:'
a)'Consent'or'meeting'of'the'minds,'that'is,'consent'to'transfer'ownership'in'exchange'for'the'price;'
b)'Determinate'subject'matter;'and,'
c)'Price'certain'in'money'or'its'equivalent.'12' '
As' shown' in' the' receipt,' dated' September' 29,' 1964,' the' late' Juan' San' Andres' received' P500.00' from'
respondent'as'"advance'payment'for'the'residential'lot'adjoining'his'previously'paid'lot'on'three'sides'
excepting'on'the'frontage;'the'agreed'purchase'price'was'P15.00'per'square'meter;'and'the'full'amount'
of'the'purchase'price'was'to'be'based'on'the'results'of'a'survey'and'would'be'due'and'payable'in'five'(5)'
years'from'the'execution'of'a'deed'of'sale.'
! 8!
 NATURE'OF'THE'CONTRACT'CASES'–'CHARACTERISTICS'OF'SALES''
CASE'DIGEST'
! !
Petitioner's'contention'is'without'merit.'There'is'no'dispute'that'respondent'purchased'a'portion'of'Lot'
1914IBI2'consisting'of'345'square'meters.'This'portion'is'located'in'the'middle'of'Lot'1914IBI2,'which'
has'a'total'area'of'854'square'meters,'and'is'clearly'what'was'referred'to'in'the'receipt'as'the'"previously'
paid'lot."'Since'the'lot'subsequently'sold'to'respondent'is'said'to'adjoin'the'"previously'paid'lot"'on'three'
sides'thereof,'the'subject'lot'is'capable'of'being'determined'without'the'need'of'any'new'contract.'The'
fact' that' the' exact' area' of' these' adjoining' residential' lots' is' subject' to' the' result' of' a' survey' does' not'
detract'from'the'fact'that'they'are'determinate'or'determinable.'As'the'Court'of'Appeals'explained:'15'
Concomitantly,'the'object'of'the'sale'is'certain'and'determinate.'Under'Article'1460'of'the'New'Civil'Code,'
a' thing' sold' is' determinate' if' at' the' time' the' contract' is' entered' into,' the' thing' is' capable' of' being'
determinate'without'necessity'of'a'new'or'further'agreement'between'the'parties.'Here,'this'definition'
finds'realization.'
Thus,'all'of'the'essential'elements'of'a'contract'of'sale'are'present,'i.e.,'that'there'was'a'meeting'of'the'
minds'between'the'parties,'by'virtue'of'which'the'late'Juan'San'Andres'undertook'to'transfer'ownership'
of'and'to'deliver'a'determinate'thing'for'a'price'certain'in'money.'As'Art.'1475'of'the'Civil'Code'provides:'
The'contract'of'sale'is'perfected'at'the'moment'there'is'a'meeting'of'minds'upon'the'thing'which'is'the'
object'of'the'contract'and'upon'the'price.'.'.'.That'the'contract'of'sale'is'perfected'was'confirmed'by'the'
former'administrator'of'the'estates,'Ramon'San'Andres,'who'wrote'a'letter'to'respondent'on'March'30,'
1966'asking'for'P300.00'as'partial'payment'for'the'subject'lot.'As'the'Court'of'Appeals'observed:'
Without' any' doubt,' the' receipt' profoundly' speaks' of' a' meeting' of' the' mind' between' San' Andres' and'
Rodriguez' for' the' sale.' Evidently,' this' is' a' perfected' contract' of' sale' on' a' deferred' payment' of' the'
purchase'price.'All'the'preIrequisite'elements'for'a'valid'purchase'transaction'are'present.''
There' is' a' need,' however,' to' clarify' what' the' Court' of' Appeals' said' is' a' conditional' contract' of' sale.'
Apparently,' the' appellate' court' considered' as' a' "condition"' the' stipulation' of' the' parties' that' the' full'
consideration,' based' on' a' survey' of' the' lot,' would' be' due' and' payable' within' five' (5)' years' from' the'
execution'of'a'formal'deed'of'sale.'It'is'evident'from'the'stipulations'in'the'receipt'that'the'vendor'Juan'
San' Andres' sold' the' residential' lot' in' question' to' respondent' and' undertook' to' transfer' the' ownership'
thereof'to'respondent'without'any'qualification,'reservation'or'condition.''
A'deed'of'sale'is'considered'absolute'in'nature'where'there'is'neither'a'stipulation'in'the'deed'that'title'to'
the'property'sold'is'reserved'in'the'seller'until'full'payment'of'the'price,'nor'one'giving'the'vendor'the'
right'to'unilaterally'resolve'the'contract'the'moment'the'buyer'fails'to'pay'within'a'fixed'period.'
Applying'these'principles'to'this'case,'it'cannot'be'gainsaid'that'the'contract'of'sale'between'the'parties'is'
absolute,'not'conditional.'There'is'no'reservation'of'ownership'nor'a'stipulation'providing'for'a'unilateral'
rescission'by'either'party.'In'fact,'the'sale'was'consummated'upon'the'delivery'of'the'lot'to'respondent.'20'
Thus,'Art.'1477'provides'that'the'ownership'of'the'thing'sold'shall'be'transferred'to'the'vendee'upon'the'
actual'or'constructive'delivery'thereof.'
The'stipulation'that'the'"payment'of'the'full'consideration'based'on'a'survey'shall'be'due'and'payable'in'
five'(5)'years'from'the'execution'of'a'formal'deed'of'sale"'is'not'a'condition'which'affects'the'efficacy'of'
the'contract'of'sale.'It'merely'provides'the'manner'by'which'the'full'consideration'is'to'be'computed'and'
the'time'within'which'the'same'is'to'be'paid.'But'it'does'not'affect'in'any'manner'the'effectivity'of'the'
contract.'Consequently,'the'contention'that'the'absence'of'a'formal'deed'of'sale'stipulated'in'the'receipt'
prevents'the'happening'of'a'sale'has'no'merit.'
The'claim'of'petitioners'that'the'price'of'P7,035.00'is'iniquitous'is'untenable.'The'amount'is'based'on'the'
agreement'of'the'parties'as'evidenced'by'the'receipt'(Exh.'2).'Time'and'again,'we'have'stressed'the'rule'
that'a'contract'is'the'law'between'the'parties,'and'courts'have'no'choice'but'to'enforce'such'contract'so'
long'as'they'are'not'contrary'to'law,'morals,'good'customs'or'public'policy.'Otherwise,'court'would'be'
interfering'with'the'freedom'of'contract'of'the'parties.'Simply'put,'courts'cannot'stipulate'for'the'parties'
! 9!
NATURE'OF'THE'CONTRACT'CASES'–'CHARACTERISTICS'OF'SALES''
CASE'DIGEST'
nor' amend' the' latter's' agreement,' for' to' do' so' would' be' to' alter' the' real' intentions' of' the' contracting'
parties'when'the'contrary'function'of'courts'is'to'give'force'and'effect'to'the'intentions'of'the'parties.'
The'decision'of'the'Court'of'Appeals'is'AFFIRMED'with'the'modification'that'respondent'is'ORDERED'to'
reimburse'petitioners'for'the'expenses'of'the'survey.'
PEALOSA'VS'SANTOS'
PETITIONER:'HERNANDO'R.'PEALOSA'alias'HENRY'PEALOSA'
RESPONDENTS:'SEVERINO'C.'SANTOS'(deceased),'Substituted'by'his'heirs:'OLIVER'SANTOS'and'ADYLL'
M.'SANTOS,'and'ADELA'DURAN'MENDEZ'SANTOS,.'
PONENTE:'QUISUMBING,'J.:'
FACTS:''
• Severino'sold'his'property'to'henry.'Henry'applied'for'a'loan'with'philam'life.'As'It'was'already'
approved'pending'the'submission'of'certain'documents'such'as'the'owners'duplicate'of'transfer'
certificate'of'title'which'is'in'possession'of'severino.''
• Henry'already'took'possession'of'the'property'in'question'after'ejectment'of'the'lessees.'He'also'
paid'an'ernest'money'of'300,000'under'the'premise'that'it'shall'be'forfeited'in'favor'of'severino'in'
case'of'nonpayment.'
• Severino' now' claims' ownership' over' the' property' claiming' that' henry' did' not' pay' for' the'
property,'therefore'there'was'no'sale'to'speak'of.'
ISSUE:'WON'there'is'a'contract'of'sale'perfected'
HELD:'YES''
The'basic'characteristic'of'an'absolutely'simulated'or'fictitious'contract'is'that'the'apparent'contract'is'
not'really'desired'or'intended'to'produce'legal'effects'or'alter'the'juridical'situation'of'the'parties'in'any'
way.30' However,' in' this' case,' the' parties' already' undertook' certain' acts' which' were' directed' towards'
fulfillment' of' their' respective' covenants' under' the' second' deed,' indicating' that' they' intended' to' give'
effect'to'their'agreement.'
Further,'the'fact'that'Severino'executed'the'two'deeds'in'question,'primarily'so'that'petitioner'could'eject'
the'tenant'and'enter'into'a'loan/mortgage'contract'with'Philam'Life,'is'to'our'mind,'a'strong'indication'
that'he'intended'to'transfer'ownership'of'the'property'to'petitioner.'For'why'else'would'he'authorize'the'
latter' to' sue' the' tenant' for' ejectment' under' a' claim' of' ownership,' if' he' truly' did' not' intend' to' sell' the'
property'to'petitioner'in'the'first'place?'Needless'to'state,'it'does'not'make'sense'for'Severino'to'allow'
petitioner' to' pursue' the' ejectment' case,' in' petitioner's' own' name,' with' petitioner' arguing' that' he' had'
bought'the'property'from'Severino'and'thus'entitled'to'possession'thereof,'if'petitioner'did'not'have'any'
right'to'the'property.'
Also'worth'noting'is'the'fact'that'in'the'case'filed'by'Severino's'tenant'against'Severino'and'petitioner'in'
1989,' assailing' the' validity' of' the' sale' made' to' petitioner,' Severino' explicitly' asserted' in' his' sworn'
answer'to'the'complaint'that'the'sale'was'a'legitimate'transaction.'He'further'alleged'that'the'ejectment'
case'filed'by'petitioner'against'the'tenant'was'a'legitimate'action'by'an'owner'against'one'who'refuses'to'
turn'over'possession'of'his'property.'
It'should'be'emphasized'that'the'nonIappearance'of'the'parties'before'the'notary'public'who'notarized'
the' deed' does' not' necessarily' nullify' nor' render' the' parties'' transaction' void' ab' initio.' We' have' held'
previously'that'the'provision'of'Article'1358'of'the'New'Civil'Code'on'the'necessity'of'a'public'document'
is' only' for' convenience,' not' for' validity' or' enforceability.' Failure' to' follow' the' proper' form' does' not'
invalidate' a' contract.' Where' a' contract' is' not' in' the' form' prescribed' by' law,' the' parties' can' merely'
compel'each'other'to'observe'that'form,'once'the'contract'has'been'perfected.35'This'is'consistent'with'
! 10!
 NATURE'OF'THE'CONTRACT'CASES'–'CHARACTERISTICS'OF'SALES''
CASE'DIGEST'
! !
the' basic' principle' that' contracts' are' obligatory' in' whatever' form' they' may' have' been' entered' into,'
provided'all'essential'requisites'are'present.3'
The'elements'of'a'valid'contract'of'sale'under'Art.'1458'of'the'Civil'Code'are:'(1)'consent'or'meeting'of'
the' minds;' (2)' determinate' subject' matter;' and' (3)' price' certain' in' money' or' its' equivalent.37' In' the'
instant'case,'the'second'deed'reflects'the'presence'of'all'these'elements'and'as'such,'there'is'already'a'
perfected'contract'of'sale.'
The'nonIpayment'of'the'contract'price'merely'results'in'a'breach'of'contract'for'nonIperformance'and'
warrants'an'action'for'rescission'or'specific'performance'under'Article'1191'of'the'Civil'Code.'
Be'that'as'it'may,'we'agree'with'petitioner'that'although'the'law'allows'rescission'as'a'remedy'for'breach'
of'contract,'the'same'may'not'be'availed'of'by'respondents'in'this'case.'To'begin'with,'it'was'Severino'
who' prevented' full' payment' of' the' stipulated' price' when' he' refused' to' deliver' the' owner's' original'
duplicate' title' to' Philam' Life.' His' refusal' to' cooperate' was' unjustified,' because' as' Severino' himself'
admitted,' he' signed' the' deed' precisely' to' enable' petitioner' to' acquire' the' loan.' He' also' knew' that' the'
property' was' to' be' given' as' security' therefor.' Thus,' it' cannot' be' said' that' petitioner' breached' his'
obligation'towards'Severino'since'the'former'has'always'been'willing'to'and'could'comply'with'what'was'
incumbent'upon'him.'
In'sum,'the'only'conclusion'which'can'be'deduced'from'the'aforesaid'circumstances'is'that'ownership'of'
the'property'has'been'transferred'to'petitioner.''
WHEREFORE,'the'petition'is'GRANTED.''
PUP'VS'CA'
PETITIONER:'POLYTECHNIC'UNIVERSITY'OF'THE'PHILIPPINE'
RESPONDENTS:'COURT'OF'APPEALS'and'FIRESTONE'CERAMICS,'INC.,''
'
FACTS:''
• National'Development'Corporation,'a'GOCC''had'in'its'disposal'a'ten'(10)Ihectare'property'located'
along'Pureza'St.,'Sta.'Mesa,'Manila'known'as'the'NDC'compound.''
• Firestone'Ceramics'Inc.'(FIRESTONE)'manifested'its'desire'to'lease'a'portion'of'the'property'for'
its'ceramic'manufacturing'business.''
• NDC'and'FIRESTONE'entered'into'a'contract'of'lease'covering'a'portion'of'the'property'2.90118'
hectares'for'use'as'a'manufacturing'plant'for'a'term'of'10'years,'renewable'for'another'ten.''Years'
later,'FIRESTONE'entered'into'a'second'contract'of'lease'over'NDC’s'four'(4)Iunit'preIfabricated'
reparation'steel'warehouse'stored'in'Daliao,'Davao.'The'second'contract,'was'for'similar'use'&'
was'agreed'expressly'to'be'"coIextensive'with'the'lease'of'LESSEE'with'LESSOR'on'the'said'lot.''
• The'parties'signed'a'similar'contract'concerning'a'six'(6)Iunit'preIfabricated'steel'warehouse'
which,'would'expire'on'2'December'1978.'Prior'to'the'expiration','FIRESTONE'wrote'NDC'
requesting'for'an'extension'of'their'lease'agreement.'NDC'adopted'Resolution'extending'the'term'
of'the'lease,'subject'to'several'conditions'among'which'was'that'in'the'event'NDC'"with'the'
approval'of'higher'authorities,'decide'to'dispose'and'sell'these'properties'including(the(lot,(priority(
should(be(given(to(the(LESSEE"''So.'in'pursuance'of'the'resolution,'the'parties'entered'into'a'new'
agreement'for'a'tenIyear'lease'of'the'property,'renewable'for'another'ten'(10)'years,'expressly'
granting'FIRESTONE'the'first'option'to'purchase'the'leased'premises.''
• FIRESTONE,'informed'the'latter'through'several'letters'and'telephone'calls'that'it'was'renewing'
its'lease'over'the'property.'The'rest'of'its'communications'remained'unacknowledged.'There'were'
rumors'of'NDC's'supposed'plans'to'dispose'of'the'subject'property'in'favor'of'petitioner'PUP.'So,'
! 11!
NATURE'OF'THE'CONTRACT'CASES'–'CHARACTERISTICS'OF'SALES''
CASE'DIGEST'
FIRESTONE'served'notice'on'NDC'conveying'its'desire'to'purchase'the'property'in'the'exercise'of'
its'contractual'right'of'first'refusal.'
• FIRESTONE'instituted'an'action'for'specific'performance'to'compel'NDC'to'sell'the'leased'
property'in'its'favor.'It'was'preIempting'the'impending'sale'of'the'NDC'compound'to'petitioner'
PUP'in'violation'of'its'leasehold'rights.'It'also'prayed'for'issuance'of'a'writ'of'preliminary'
injunction'to'enjoin'NDC'from'disposing'of'the'property.''
• PUP'argued'that'a'"purchaser'pendente(lite'of'property'which'is'subject'of'a'litigation'is'entitled'to'
intervene'in'the'proceedings.'It'referred'Memorandum(Order(No.(214'issued'by'then'President'
Aquino'ordering'the'transfer'of'the'whole'NDC'compound'to'the'National'Government,'which'in'
turn'would'convey'the'aforementioned'property'in'favor'of'PUP'at'acquisition'cost.'This'was'made'
in'recognition'of'PUP's'status'as'the'"Poor'Man's'University"'as'well'as'its'serious'need'to'extend'
its'campus'in'order'to'accommodate'the'growing'student'population.'The'order'of'conveyance'
would'result'in'the'cancellation'of'NDC's'total'obligation'in'favor'of'the'National'Government'in'
the'amount'of'P57,193,201.64.'
• RTC'='granted'PUP's'motion'to'intervene.'FIRESTONE'moved'for'reconsideration'but'was'denied.'
On'certiorari,'the'Court'of'Appeals'affirmed'the'order'of'the'trial'court.'the'SC'upheld'PUP's'
inclusion'as'partyIdefendant'in'the'present'controversy.'
• AS'A'RESULT'OF'THE'RULING'OF'THE'LOWER'COURT:'FIRESTONE'amended'its'complaint'and'
sought'the'annulment'of'Memorandum(Order(No.(214.'It'alleged'that'PUP'disregarded'and'violated'
its'existing'lease'by'increasing'the'rental'rate'atP200,000.00'a'month'while'demanding'that'it'
vacated'the'premises'immediately.FIRESTONE'prayed'that'he'property'should'be'sold'in'its'favor'
at'the'price'for'which'it'was'sold'to'PUP'I'P554.74'per'square'meter'or'for'a'total'purchase'price'
ofP14,423,240.00.15'
• PUP’s'contentions:'PUP'argued'that'the'lease'contract'covering'the'property'had'expired'long'
before'the'institution'of'the'complaint,'and'that'further,'the'right'of'first'refusal'invoked'by'
FIRESTONE'applied'solely'to'the'sixIunit'preIfabricated'warehouse'and'not'the'lot'upon'which'it'
stood.'
• CA'='Judgment'was'rendered'PUP'was'ordered'and'directed'to'sell'to'FIRESTONE'the'"2.6'hectare'
leased'premises'at'P1,500.00'per'square'meter.'CA'observed'that'as'there'was'a'sale'of'the'subject'
property,'NDC'could'not'excuse'itself'from'its'obligation'TO'OFFER'THE'PROPERTY'FOR'SALE'
FIRST'TO'FIRESTONE'BEFORE'IT'COULD'TO'OTHER'PARTIES.''
• PUP'moved'for'reconsideration,'it'argued'that'the'"court'cannot'substitute'or'decree'its'mind'or'
consent'for'that'of'the'parties'in'determining'whether'or'not'a'contract'(has'been)'perfected'
between'PUP'and'NDC.'PUP'also'advanced'the'theory'that'the'enactment'of'Memorandum(Order(
No.(214'amounted'to'a'withdrawal'of'the'option'to'purchase'the'property'granted'to'FIRESTONE.'
NDC,'for'its'part,'vigorously'contended'that'the'contracts'of'lease'executed'between'the'parties'
had'expired.''
ISSUES:'(a)'Whether'the'courts'a(quo'erred'when'they'"conjectured"'that'the'transfer'of'the'leased'
property'from'NDC'to'PUP'amounted'to'a'sale;'and,'(b)'whether'FIRESTONE'can'rightfully'invoke'its'
right'of'first'refusal.'
HELD:'
(a)'No,'the'lower'courts'were'right'that'that'the'conveyance'of'the'property'from'NDC'to'PUP'was'one'of'
absolute'sale,'for'a'valuable'consideration,'and'not'a'mere'paper'transfer'as'argued'by'petitioners.'
A'contract'of'sale,'as'defined'in'the'Civil'Code,'is'a'contract'where'one'of'the'parties'obligates'himself'to'
transfer'the'ownership'of'and'to'deliver'a'determinate'thing'to'the'other'or'others'who'shall'pay'
! 12!
 NATURE'OF'THE'CONTRACT'CASES'–'CHARACTERISTICS'OF'SALES''
CASE'DIGEST'
! !
therefore'a'sum'certain'in'money'or'its'equivalent.'It'is'therefore'a'general'requisite'for'the'existence'of'a'
valid'and'enforceable'contract'of'sale'that'it'be'mutually'obligatory,'i.e.,'there'should'be'a'concurrence'of'
the'promise'of'the'vendor'to'sell'a'determinate'thing'and'the'promise'of'the'vendee'to'receive'and'pay'
for'the'property'so'delivered'and'transferred.'The'Civil'Code'provision'is,'in'effect,'a'"catchIall"'provision'
which'effectively'brings'within'its'grasp'a'whole'gamut'of'transfers'whereby'ownership'of'a'thing'is'
ceded'for'a'consideration.'
The'preponderance'of'evidence'shows'that'NDC'sold'to'PUP'the'whole'NDC'compound,'including'the'
leased'premises,'without'the'knowledge'much'less'consent'of'private'respondent'FIRESTONE'which'had'
a'valid'and'existing'right'of'first'refusal.'
All'three'(3)'essential'elements'of'a'valid'sale,'without'which'there'can'be'no'sale,'were'attendant'in'the'
"disposition"'and'"transfer"'of'the'property'from'NDC'to'PUP'I'consent(of(the(parties,(determinate(subject(
matter,and(consideration'therefor.'
Consent'to'the'sale'is'obvious'from'the'prefatory'clauses'of'Memorandum(Order(No.(214'which'explicitly'
states'the'acquiescence'of'the'parties'to'the'sale'of'the'property'I'
Furthermore,'the'cancellation'of'NDC's'liabilities'in'favor'of'the'National'Government'in'the'amount'
ofP57,193,201.64'constituted'the'"consideration"'for'the'sale.'As'correctly'observed'by'the'Court'of'
AppealsI'
The'defendantsIappellants''interpretation'that'there'was'a'mere'transfer,'and'not'a'sale,'
apart'from'being'specious'sophistry'and'a'mere'play'of'words,'is'too'strained'and'
hairsplitting.'For'it'is'axiomatic'that'every'sale'imposes'upon'the'vendor'the'obligation'to'
transfer'ownership'as'an'essential'element'of'the'contract.'Transfer'of'title'or'an'
agreement'to'transfer'title'for'a'price'paid,'or'promised'to'be'paid,'is'the'very'essence'of'
sale'(Kerr(&(Co.(v.(Lingad,'38'SCRA'524;'Schmid(&(Oberly,(Inc.,(v.(RJL(Martinez(Fishing(Corp.,'
166'SCRA'493).''
(b)'Whether'or'not'FIRESTONE'should'be'allowed'to'exercise'its'right'of'first'refusal'over'the'property.'
Such'right'was'expressly'stated'by'NDC'and'FIRESTONE'in'par.'XV'of'their'third'contract,'as'found,'was'
interrelated'to'and'inseparable'from'their'first''
Should'the'LESSOR'desire'to'sell'the'leased'premises'during'the'term'of'this'Agreement,'or'any'extension'
thereof,'the'LESSOR'shall'first'give'to'the'LESSEE,'which'shall'have'the'right(of(first(option'to(purchase'the'
leased'premises'subject'to'mutual'agreement'of'both'parties.'
In'the'instant'case,'the'right'of'first'refusal'is'an'integral'and'indivisible'part'of'the'contract'of'lease'and'is'
inseparable'from'the'whole'contract.'The'consideration'for'the'right'is'built'into'the'reciprocal'
obligations'of'the'parties.'Thus,'it'is'not'correct'for'petitioners'to'insist'that'there'was'no'consideration'
paid'by'FIRESTONE'to'entitle'it'to'the'exercise'of'the'right,'inasmuch'as'the'stipulation'is'part'and'parcel'
of'the'contract'of'lease'making'the'consideration'for'the'lease'the'same'as'that'for'the'option.'
It'is'a'settled'principle'in'civil'law'that'when'a'lease'contract'contains'a'right'of'first'refusal,'the'lessor'is'
under'a'legal'duty'to'the'lessee'not'to'sell'to'anybody'at'any'price'until'after'he'has'made'an'offer'to'sell'
to'the'latter'at'a'certain'price'and'the'lessee'has'failed'to'accept'it.39'The'lessee'has'a'right'that'the'
lessor's'first'offer'shall'be'in'his'favor.'
The'option'in'this'case'was'incorporated'in'the'contracts'of'lease'by'NDC'for'the'benefit'of'FIRESTONE'
which,'in'view'of'the'total'amount'of'its'investments'in'the'property,'wanted'to'be'assured'that'it'would'
be'given'the'first'opportunity'to'buy'the'property'at'a'price'for'which'it'would'be'offered.'Consistent'with'
their'agreement,'it'was'then'implicit'for'NDC'to'have'first'offered'the'leased'premises'of'2.60'hectares'to'
FIRESTONE''
It'now'becomes'apropos'to'ask'whether'the'courts'a#quo#were'correct'in'fixing'the'proper'
consideration'of'the'sale'at'P1,500.00'per'square'meter.'In(contracts(of(sale,(the(basis(of(the(right(of(
! 13!
NATURE'OF'THE'CONTRACT'CASES'–'CHARACTERISTICS'OF'SALES''
CASE'DIGEST'
first(refusal(must(be(the(current(offer(of(the(seller(to(sell(or(the(offer(to(purchase(of(the(prospective(buyer.(
Only(after(the(lessee8grantee(fails(to(exercise(its(right(under(the(same(terms(and(within(the(period(
contemplated(can(the(owner(validly(offer(to(sell(the(property(to(a(third(person,(again,(under(the(same(terms(
as(offered(to(the(grantee.''Emphatically,'we'held'that'"(a'right'of'first'priority)'should'be'enforced'
according'to'the'law'on'contracts'instead'of'the'panoramic'and'indefinite'rule'on'human'relations.'
WHEREFORE,'the' petitions' in' G.R.' No.' 143513' and' G.R.' No.' 143590' are' DENIED.'Inasmuch' as' the'
first'contract'of'lease'fixed'the'area'of'the'leased'premises'at'2.90118'hectares'while'the'second'contract'
placed'it'at'2.60'hectares,'let'a'ground'survey'of'the'leased'premises'be'immediately'conducted'by'a'duly'
licensed,' registered' surveyor' at' the' expense' of' private' respondent' FIRESTONE' CERAMICS,' INC.,' within'
two' (2)' months' from' finality' of' the' judgment' in' this' case.Thereafter,' private' respondent' FIRESTONE'
CERAMICS,'INC.,'shall'have'six'(6)'months'from'receipt'of'the'approved'survey'within'which'to'exercise'
its' right' to' purchase' the' leased' property' at'P1,500.00' per' square' meter,' and' petitioner' Polytechnic'
University'of'the'Philippines'is'ordered'to'reconvey'the'property'to'FIRESTONE'CERAMICS,'INC.,'in'the'
exercise'of'its'right'of'first'refusal'upon'payment'of'the'purchase'price'thereof.'
KATIPUNAN'VS'KATIPUNAN'
'PETITIONERS:'MIGUEL'KATIPUNAN,'INOCENCIO'VALDEZ,'EDGARDO'BALGUMA'and'LEOPOLDO'
BALGUMA,'JR.#
RESPONDENT:#BRAULIO'KATIPUNAN,'JR'
PONENTE:'SANDOVALIGUTIERREZ,'J.:'
Petition:'petition'for'review'on'certiorari(assailing'the'Decision'of'the'CA'dated'July'31,'1997'in'Braulio'
Katipunan,'Jr.'vs.'Miguel'Katipunan,'Inocencio'Valdez,'Atty.'Leopoldo'Balguma,'Sr.,'Edgardo'Balguma'and'
Leopoldo'Balguma,'Jr.'which'set'aside'the'Decision'of'RTC'Manila,'for'annulment'of'a'Deed'of'Absolute'
Sale.'
FACTS:''
• Respondent'Braulio'Katipunan,'Jr.'is'the'owner'of'a'203Isq.'m.'lot'and'a'fiveIdoor'apartment'
located'at'San'Miguel'Manila.'The'lot'is'registered'in'his'name'under'TCT'No.'109193'of'the'
Registry'of'Deeds'of'Manila.'The'apartment'units'are'occupied'by'lessees.''
• Braulio'assisted'by'his'brother,'petitioner'Miguel'Katipunan,'entered'into'a'Deed'of'Absolute'
Sale'with'brothers'Edgardo'Balguma'and'Leopoldo'Balguma,'Jr.'(coIpetitioners),'represented'by'
their'father'Atty.'Leopoldo'Balguma,'Sr.,'involving'the'subject'property'for'a'consideration'of'
P187,000.00''
• Consequently,'respondent’s'title'to'the'property'was'cancelled'and'in'lieu'thereof,'TCT'No.'168394'
was'registered'and'issued'in'the'names'of'the'Balguma'brothers.'In'January,'1986,'Atty.'Balguma,'
then'still'alive,'started'collecting'rentals'from'the'lessees'of'the'apartments.''
• On'March'10,'1987,'respondent'filed'with'the'RTC'of'Manila'a'complaint'for'annulment'of'the'
Deed'of'Absolute'Sale,'docketed'as'Civil'Case'No.'87I39891.'
Respondent’s#(Braulio)#version:##
• Braulio'averred'that'his'brother'Miguel,'Atty.'Balguma'and'Inocencio'Valdez'convinced'him'to'
work'abroad.'They'even'brought'him'to'the'NBI'and'other'government'offices'for'the'purpose'of'
securing'clearances'and'other'documents'which'later'turned'out'to'be'falsified.'Through'insidious'
words'and'machinations,'they'made'him'sign'a'document'purportedly'a'contract'of'employment,'
which'document'turned'out'to'be'a'Deed'of'Absolute'Sale.'#
! 14!
 NATURE'OF'THE'CONTRACT'CASES'–'CHARACTERISTICS'OF'SALES''
CASE'DIGEST'
! !
• By'virtue'of'the'said'sale,'brothers'Edgardo'and'Leopoldo,'Jr.'(coIdefendants),'were'able'to'
register'the'title'to'the'property'in'their'names.'Respondent'further'alleged'that'he'did'not'receive'
the'consideration'stated'in'the'contract.'#
• He'was'shocked'when'his'sister'Agueda'KatipunanISavellano'told'him'that'the'Balguma'brothers'
sent'a'letter'to'the'lessees'of'the'apartment'informing'them'that'they'are'the'new'owners.'Finally,'
he'claimed'that'the'defendants,'now'petitioners,'with'evident'bad'faith,'conspired'with'one'
another'in'taking'advantage'of'his'ignorance,'he'being'only'a'third'grader.'#
Petitioners’#version:#
• Denied'the'allegations:'They'say'that'respondent'was'aware'of'the'contents'of'the'Deed'of'
Absolute'Sale'and'that'he'received'the'consideration'involved;'that'he'also'knew'that'the'
Balguma'brothers'have'been'collecting'the'rentals'since'December,'1985'but'that'he'has'not'
objected'or'confronted'them;'and'that'he'filed'the'complaint'because'his'sister,'Agueda'
Savellano,'urged'him'to'do'so'#
' parties'in'entering'into'the'contract'respecting'the'subject'matter'and'the'consideration'thereof.'
• Twice'respondent'moved'to'dismiss'his'complaint'(which'were'granted)'on'the'grounds'that'he'
was'actually'instigated'by'his'sister'to'file'the'same;'and'that'the'parties'have'reached'an'amicable'
settlement'after'Atty.'Balguma,'Sr.'paid'him'2,500'as'full'satisfaction'of'his'claim.''
• In'granting'the'MR,'the'TC'was'convinced'that'respondent'did'not'sign'the'motion'to'dismiss'
because'of'his'poor'comprehension,'as'shown'by'the'medical'report'of'Dr.'Revilla,'a'PGH'
psychiatrist.'Besides,'the'RTC'noted'that''respondent'was'not'assisted'by'counsel'in'signing'said'
motions,'thus'it'is'possible'that'he'did'not'understand'the'consequences'of'his'action.'
• RTC'='set'the'case'for'preItrial'and'appointed'Savellano'as'his'guardian'ad'litem.'
• RTC=''dismissed'the'complaint,'holding'that'the'respondent'failed'to'prove'his'causes'of'action'
since'he'admitted'that:'(1)'he'obtained'loans'from'the'Balgumas;'(2)'he'signed'the'Deed'of'
Absolute'Sale;'and'(3)'he'acknowledged'selling'the'property'and'that'he'stopped'collecting'the'
rentals.''
• CA'='assailed'Decision'which'reversed'and'set'aside'the'TC'judgment,'and'directed'the'Register'of'
Deeds'to'cancel'the'same'and'restore'TCT'No.'109193'in'the'name'of'Braulio'Katipunan.'
• In'reversing'the'RTC'decision,'the'Court'of'Appeals'ruled'the'ff:'
o The'appellant’s'contention'finds'support'in'the'certification'of'Dr.'Revilla'that'the'Braulio'
was'slow'in'comprehension'and'has'a'very'low'IQ'
o Art'1332'of'the'Civil'Code:'When'one'the'parties'is'unable'to'read,'or'if'the'contract'is'in'a'
language'not'understood'by'him'and'mistake'or'fraud'os'alleged,'the'person'enforcing'the'
contract'must'show'that'the'terms'thereof'have'been'fully'explained'to'the'former.'
o Braulio'has'a'mental'state'of'a'6Iy.o'child,'he'cannot'be'considered'fully'capactitated.'He'
falls'under'the'category'of'“incompetent”'as'defined'in'Sec'2,'Rule'92'of'the'Rules'of'Court.'
o Miguel'aalso'admitted'that'he'and'Braulio'received'the'considerations'of'the'sale,'although'
he'did'not'explain'what'portion'went'to'each'of'them.'There'is'nor'eason'why'Miguel'
should'receive'part'of'the'consideration,'since'he'is'not'a'coIoqner'of'the'property.'
Everything'should'have'gone'to'Braulio.'Yet,'Miguel'did'not'refute'he'was'giving'him'only'
small'amounts'
o As'to'the'scheme'utilized'in'defrauding'Braulio,'neither'Miguel'nor'Artty.'Balguma'refuted'
the'staement'that'he'was'being'enticed'to'go'abroad'–'which'was'the'alleged'reason'for'the'
purpoted'sale.'It'is'then'most'probable'that'it'was'Miguel'who'wanted'to'go'abroad'and'
needed'the'money'for'it.'
! 15!
NATURE'OF'THE'CONTRACT'CASES'–'CHARACTERISTICS'OF'SALES''
CASE'DIGEST'
o The'contract'entered'ino'by'Braulio'and'Atty.'Balguma'is'voidable,'pursuant'to'Art'1390'of'
the'Civil'Code.'
Art.'1390.''The'following'contracts'are'voidable'or'annullable,'even'though'there'may'have'
been'no'damage'to'the'contracting'parties:''
(1) Those'where'one'of'the'parties'is'incapable'of'giving'consent'to'a'contract;'
(2) Those'where'the'consent'is'vitiated'by'mistake,'violence,'intimidation,'undue'
influence'or'fraud.'
These'contracts'are'binding,'unless'they'are'annulled'by'a'proper'action'in'court,'they'are'
susceptible'of'ratification.'
ISSUE:'WON'the'consent'of'Braulio'Katipunan,'Jr.,'in'the'sale'of'his'property'was'vitiated'rendering'the'
Deed'of'Absolute'sale'voidable'''
HELD:'YES'
• A'contract'of'sale'is'born'from'the'moment'there'is'a'meeting'of'minds'upon'the'thing'which'is'the'
object'of'the'contract'and'upon'the'price.'This'meeting'of'the'minds'speaks'of'the'intent'of'the'
Thus,'the'elements'of'a'contract'of'sale'are'consent,'object,'and'price'in'money'or'its'equivalent.'
Under'Article'1330'of'the'Civil'Code,'consent'may'be'vitiated'by'any'of'the'following:'(a)'
mistake,'(2)'violence,'(3)'intimidation,'(4)'undue'influence,'and'(5)'fraud.'The'presence'of'any'of'
these'vices'renders'the'contract'voidable.''
• The'facts'show'that'Braulio'signed'the'deed'withoit'the'remotest'idea'of'what'it'was'(based'on'the'
transcript'of'the'Court).'The'circumstances'surrounding'the'execution'of'the'contract'manifest'a'
vitiated'consent'on'the'part'of'respondent.'Undue'influence'was'exerted'upon'him'by'brother'
Miguel'and'Inocencio'Valdez'(petitioners)'and'Atty.'Balguma.'However,'they'did'not'explain'to'
him'the'nature'and'contents'of'the'document.'Worse,'they'deprived'him'of'a'reasonable'freedom'
of'choice.''
• Respondent'signed'the'deed'without'the'remotest'idea'of'what'it'was.'The'circumstances'
surrounding'the'execution'of'the'contract'manifest'a'vitiated'consent'on'the'part'of'respondent.'
Undue'influence'was'exerted'upon'him'by'his'brother'Miguel'and'Inocencio'Valdez'and'Atty.'
Balguma.'It'was'his'brother'Miguel'who'negotiated'with'Atty.'Balguma.'However,'they'did'not'
explain'to'him'the'nature'and'contents'of'the'document.'Worse,'they'deprived'him'of'a'reasonable'
freedom'of'choice.'It'bears'stressing'that'he'reached'only'grade'three.'Thus,'it'was'impossible'for'
him'to'understand'the'contents'of'the'contract'written'in'English'and'embellished'in'legal'jargon.'
His'lack'of'education,'coupled'with'his'mental'affliction,'placed'him'not'only'at'a'hopelessly'
disadvantageous'position'visI'àIvis'petitioners'to'enter'into'a'contract,'but'virtually'rendered'him'
incapable'of'giving'rational'consent.'To'be'sure,'his'ignorance'and'weakness'made'him'most'
vulnerable'to'the'deceitful'cajoling'and'intimidation'of'petitioners.'
• Braulio'did'not'receive'the'purchase'price.'His'testimony'was'not'controverted'by'Miguel.'
Moreover,'Atty.'Balguma'admitted'that'it'was'Miguel'who'received'the'money'from'him.'What'
Miguel'gave'respondentwas'merely'loose'change'or'“baryaIbarya,”'grossly'disproportionate'to'the'
value'of'his'property.''
• A'contract'where'one'of'the'parties'is'incapable'of'giving'consent'or'where'consent'is'vitiated'by'
mistake,'fraud,'or'intimidation'is'not'void'ab'initio'but'only'voidable'and'is'binding'upon'the'
parties'unless'annulled'by'proper'Court'action.'The'effect'of'annulment'is'to'restore'the'parties'to'
the'status'quo'ante'insofar'as'legally'and'equitably'possibleII'this'much'is'dictated'by'Article'1398'
of'the'Civil'Code.'As'an'exception'however'to'the'principle'of'mutual'restitution,'Article'1399'
provides'that'when'the'defect'of'the'contract'consists'in'the'incapacity'of'one'of'the'parties,'the'
! 16!
 NATURE'OF'THE'CONTRACT'CASES'–'CHARACTERISTICS'OF'SALES''
CASE'DIGEST'
! !
incapacitated'person'is'not'obliged'to'make'any'restitution,'except'when'he'has'been'benefited'by'
the'things'or'price'received'by'him.'Thus,'since'the'Deed'of'Absolute'Sale'between'respondent'and'
the'Balguma'brothers'is'voidable'and'hereby'annulled,'then'the'restitution'of'the'property'and'its'
fruits'to'respondent'is'just'and'proper.'Petitioners'should'turn'over'to'respondent'all'the'amounts'
they'received'starting'January,'1986'up'to'the'time'the'property'shall'have'been'returned'to'the'
latter.'
• Article'24'of'the'Civil'Code'enjoins'courts'to'be'vigilant'for'the'protection'of'a'party'to'a'contract'
who'is'placed'at'a'disadvantage'on'account'of'his'ignorance,'mental'weakness'or'other'handicap,'
like'respondent'herein.''
WHEREFORE,'the'petition'is'DENIED.'The'assailed'Decision'of'the'Court'of'Appeals'dated'July'3,'1997'in'
CAI'G.R.'CV'No.'45928'is'AFFIRMED'with'MODIFICATION'in'the'sense'that'petitioners'Edgardo'Balguma'
and'Leopoldo'Balguma,'Jr.,'are'ordered'to'turn'over'to'respondent'Braulio'Katipunan,'Jr.'the'rentals'they'
received'for'the'fiveIdoor'apartment'corresponding'to'the'period'from'January,'1986'up'to'the'time'the'
property'shall'have'been'returned'to'him,'with'interest'at'the'legal'rate.'Costs'against'petitioners.''
' prepared'for'her'signature'when'she'arrived'in'Manila.'
Jimenez'vs.'Jordana'
' directing' the' Register' of' Deeds' of' Makati' to' immediately' annotate' the' Notice' of' Lis' Pendens' on'
Petitioners:'Ramon'R.'Jimenez'Jr.'and'Annabelle'L.'Jimenez'
Respondent:'Juan'Jose'Jordana'
Date'of'Promulgation:'November'25,'2004'
Ponente:'Panganiban'
' •
FACTS:'
• Madeliene'S.'Bunye:'was'the'owner'of'a'parcel'of'residential'land'located'in'Muntinlupa'covered'
by'TCT'No.'17133.''
• On'December'27,'1993,'Juan'Jose'Jordana:''wrote'a'letter'to'Bunye'offering'to'purchase'the'said'
property'for'the'price'of'P12,300,000.00'and'to'remit'to'her,'by'way'of'earnest'money,'the'amount'
of'P500,000.00'within'five'(5)'days'from'his'receipt'of'her'acceptance'of'said'offer.'''
• On'December'28,'1993,'Bunye:'wrote'a'letter'to'Jordana'informing'the'latter'that'she'accepted'
his'offer'and'requesting'him'to'remit'the'earnest'money'within'five'(5)'days'from'his'receipt'of'
said'letter.'''
• Jordana:'did'remit'the'P500,000.00'earnest'money'but'Bunye'refused'to'receive'the'money.'''
• On' January' 3,' 1994,' Bunye:' wrote' a' letter' to' Jordana' confirming' her' rejection' of' the' earnest'
money'and'that'she'can'no'longer'accept'his'offer'of'P12,300,000.00'as'her'property'was'worth'
much'more.''She'added'that'she'would'be'willing'to'sell'her'property'to'him'for'P16,000,000.00.'
• Bunye:'executed'a'Special'Power'of'Attorney'on'December'29,'1993,'or'a'day'after'she'accepted'
his' offer' to' purchase' the' property,' authorizing' Lourdes' Cuerva' to' sell' the' said' property' and' to'
execute'the'appropriate'contract'therefor.'''
• Cuerva:' offered' to' sell' the' said' property' to' the' petitioners' Spouses' Ramon' R.' Jimenez,' Jr.' and'
Annabelle'L.'Jimenez,'for'the'price'of'P14,350,000.00,'and'the'couple'agreed.''
• On' August' 5,' 1994,' Bunye' through' her' attorneybinbfact,' Lourdes' Cuerva,' and' petitioner'
spouses:''executed'a'Contract'to'Sell'over'the'said'property'for'said'price.'
• Spouses' Jimenez:' remitted' to' Cuerva' the' amount' of'P4,500,000.00' as' downpayment' for' the'
property' and' to' protect' their' rights' over' the' property,' they' executed' an'Affidavit' of' Adverse'
Claim'over'the'property'and'had'the'same'annotated'at'the'dorsal'portion'of'TCT'No.'171333.'
! 17!
NATURE'OF'THE'CONTRACT'CASES'–'CHARACTERISTICS'OF'SALES''
CASE'DIGEST'
• On'March'7,'1995,'Spouses'Jimenez:'received'a'letter'from'Cuerva'informing'them'that'she'was'
no' longer' the' attorneyIinIfact' of' Bunye,' who' was' then' in' the' United' States' of' America' and'
suggested'that'they'communicate'with'her'at'her'address'in'the'United'States'stated'in'the'letter.'
• On'March'10,'1995,'the'Register'of'Deeds:'cancelled'the'Adverse'Claim'of'petitioners'annotated'
at'the'dorsal'portion'of'TCT'No.'171333.'
• On'March'15,'1995,'or'more'than'one'(1)'year'from'the'rejection'by'Bunye'of'his'proferred'
earnest' money,' Jordana:' filed' a' complaint' against' Bunye,' with' the' RTC' of' Makati' City,' for'
Specific' Performance' and' Damages' claiming' that' he' and' Bunye' had' already' entered' into' a'
perfected'contract'over'the'property'but'the'latter'refused'to'execute'a'Deed'of'Absolute'Sale'over'
the'property'despite'his'offer'to'remit'the'earnest'money'and'his'readiness'to'pay'the'balance'of'
the'purchase'price'of'the'property.'
• On'March'15,'1995,'The'Register'of'Deeds:'rejected'the'notice'of'lis'pendens'filed'by'Jordana'
and'claimed'that'there'was'no'formal'deed'of'sale'has'been'executed'between'Jordana'and'Bunye'
over'the'property.'
• Bunye:' requested' the' spouses' Jimenez' to' have' the' Deed' of' Absolute' Sale' over' the' property'
• Jordana:' filed' a' Very' Urgent' ExIParte' Motion,' praying' that' an' Order' be' immediately' issued'
TCT'No.'171333.'
• Spouses' Jimenez:' filed' a' Motion' for' Leave' to' Intervene' and' opposed' the' motion' of' Jordana' to'
compel'the'Register'of'Deeds'to'annotate'the'Notice'of'Lis'Pendens'at'the'dorsal'portion'of'said'
Certificate'of'Title.'
The'appellate'court'held'that'respondent'and'Bunye'had'entered'into'a'Contract'of'Sale'II'not'a'
Contract'to'Sell'II'which'was'perfected'by'their'mere'consent'thereto.''Thus,'Bunye'was'deemed'to'
have'relinquished'ownership'of'the'property'to'Jordana.'
'
ISSUE:''
Whether'or'not'Jordana'and'Bunye'executed'a'contract'of'sale'to'the'subject'property.'
HELD:'Yes.'Being'consensual,'a'contract'of'sale'is'perefected'upon'the'meeting'of'minds'of'the'buyer'and'
the'seller'as'to'the'object'of'the'ale'and'the'cause'of'consideration.'In'the'case'at'bar,'a'definite'offer'and'
unqualified' acceptance' as' to' the' object' of' the' ale' and' the' cause' or' consideration' transpired' between'
Jordana'and'Bunye.'Therefore,'a'contract'of'sale'was'deemed'perfected'as'of'December'29,'1993,'the'day'
he'received'Bunyes'letter'of'unqualified'acceptance.''
Moreover,'it'is'a'settled'rule'that'a'purchaser'of'real'estate'with'knowledge'of'any'defect'or'lack'of'title'of'
the'vendor'cannot'claim'that'he'has'acquired'title'thereto'in'good'faith'as'against'the'true'owner'of'the'
land' or' interest' therein.' By' intervening' in' Civil' Case' for' Specific' Performance' and' Damages,' spouses'
Jimenez'made'of'record'the'essential'factual'allegation'that'they'had'actual'notice'and'knowledge'of'the'
claim' of' respondent' against' Bunye,' but' that,' just' the' same,' they' proceeded' to' purchase' the' subject'
property.' Therefore,' spouses' Jimenez' are' no' longer' buyer' in' good' faith.' WHEREFORE,' the' Petition'
is'DENIED'and'the'assailed'Decision'AFFIRMED.'Costs'against'petitioners.'
Dantis'vs.'Maghinang'
Petitioner:'Rogelio'Dantis'
Respondent:'Julio'Maghinang'
Date'of'Promulation:'April'10,'2013''
Ponente:'Mendoza'
'
! 18!
 NATURE'OF'THE'CONTRACT'CASES'–'CHARACTERISTICS'OF'SALES''
CASE'DIGEST'
! !
FACTS:'
• Dantis:'alleged'that'he'was'the'registered'owner'of'a'parcel'of'land'covered'by'TCT'No.'TI125918'
with'an'area'of'5,657'square'meters'located'in'Bulacan;'that'he'acquired'the'same'through'a'deed'
of' extrajudicial' partition' of' the' estate' of' his' deceased' father,' Emilio' Dantis;' that' he' had' been'
paying'the'realty'taxes'on'the'said'property;'that'Julio'Maghinang,'Jr.'occupied'and'built'a'house'
on'a'portion'of'his'property'without'any'right'at'all.'
• Dantis:'filed'a'civil'case'for'quieting'of'title'and'recovery'of'possession'with'damages'against'Julio'
Maghinang' and' prayed' that' he' be' declared' as' the' true' and' real' owner' of' the' parcel' of' landand'
ordered'Julio'to'deliver'the'possession'of'that'portion'of'the'land'he'was'occupying.'
• Maghinang:'alleged'he'was'the'actual'owner'of'the'said'property'where'he'was'living;'that'he'had'
been'in'open'and'continuous'possession'of'the'property'for'almost'thirty'(30)'years;'the'subject'
lot'was'once'tenanted'by'his'ancestral'relatives'until'it'was'sold'by'Rogelio'Dantis’'father,'Emilio,'
to' his' father,' Julio' Maghinang,' Sr.' (Julio,' Sr.);' that' later,' he' succeeded' to' the' ownership' of' the'
subject'lot'after'his'father'died'on'March'10,'1968.''
• Maghinang:'testified'that'he'has'no'title'over'the'property'he'is'occupying'and'has'not'paid'realty'
taxes' thereon.' He' presented' an' affidavit' executed' on' September' 3,' 1953' by' Ignacio' Dantis,'
grandfather'of'Rogelio'Dantis'and'the'father'of'Emilio'Dantis.''
• The' affidavit:' shows' that' Emilio' Dantis' (father' of' Rogelio' Dantis)' agreed' to' sell' 352' square'
meters'of'the'lot'to'Julio'Maghinang'Sr.'on'installment.'The'affidavit'was'not'signed'by'the'alleged'
Emilio'(alleged'vendor).'The'receipt'that'Maghinang'presented'was'admittedly'a'mere'photocopy.''
• RTC:'rendered'its'decision'declaring'Rogelio'as'the'true'owner'of'the'said'property'as'evidenced'
by' his' TCT' over' the' same.' The' court' claimed' that' the' documents' presented' by' Maghinang' were'
not'adjudged'as'competent'evidence'and'would'only'serve'as'proofs'that'the'purchase'price'for'
the'subject'lot'had'not'yet'been'completely'paid.'
• CA:' declared' Maghinang' as' the' true' owner' of' the' said' property' and' that' the' photocopy' of' the'
receipt'was'an'indubitable'proof'of'the'sale'of'the'352Isquare'meter'lot'between'Emilio'and'Julio,'
Sr.'It'also'ruled'that'the'partial'payment'of'the'purchase'price,'coupled'with'the'delivery'of'the'res,'
gave'efficacy'to'the'oral'sale'and'brought'it'outside'the'operation'of'the'statute'of'frauds.''
' the'heirs'of' Guevarra.' Guevarra' had' six'children,' one' of' them' is' Vicente' Lopez,' the' father' of'
ISSUE:'
' Whether'or'not'there'is'a'perfected'contract'of'sale'between'Emilio'and'Julio,'Sr.'
' actually' sold' to' them' by' Justina' Navarro' prior' to'her' death.' The' respondents' presented'deed' of'
HELD:'
' No.''There' was' no' valid' and' perfected' oral' contract' for' failure' of' Maghinang' to' prove' the'
concurrence' of' the' essential' requisites' of' a' contract' of' sale' by' adequate' and' competent' evidence.'
Maghinang' wanted' to' prove' the' sale' by' a' receipt' when' it' should' be' the' receipt' that' should' further'
corroborate'the'existence'of'the'sale.'He'miserably'failed'to'establish'by'preponderance'of'evidence'that'
there' was' a' meeting' of' the' minds' of' the' parties' as' to' the' subject' matter' and' the' purchase' price.' The'
photocopy' of' the' receipt' did' not' specify' a' determinate' subject' matter.' Nowhere' does' it' provide' a'
description'of'the'property'subject'of'the'sale,'including'its'metes'and'bounds,'as'well'as'its'total'area.'
The'Court'notes'that'while'Maghinang'testified'that'the'land'subject'of'the'sale'consisted'of'352'square'
meters,'the'receipt,"'however,'states'that'it’s'more'than'400'square'meters.'Moreover,'Exhibit'"4"'does'
not' categorically' declare' the' price' certain' in' money.' Neither' does' it' state' the' mode' of' payment' of' the'
purchase'price'and'the'period'for'its'payment.'
' The'Court'ruled'that'the'manner'of'payment'of'the'purchase'price'was'an'essential'element'
before' a' valid' and' binding' contract' of' sale' could' exist.' Although' the' Civil' Code' does' not' explicitly'
! 19!
NATURE'OF'THE'CONTRACT'CASES'–'CHARACTERISTICS'OF'SALES''
CASE'DIGEST'
provide'that'the'minds'of'the'contracting'parties'must'also'meet'on'the'terms'or'manner'of'payment'of'
the'price,'the'same'is'needed,'otherwise,'there'is'no'sale.'An'agreement'as'to'the'manner'of'payment'goes'
into' the' price' so' much' so' that' a' disagreement' on' the' manner' of' payment' is' tantamount' to' a' failure' to'
agree'on'the'price.''
Dantis' was' able' to' establish' a' prima' facie' case' in' his' favor' tending' to' show' his' exclusive'
ownership' of' the' parcel' of' land' under' TCT' No.' TI125918' with' an' area' of' 5,657' square' meters,' which'
included' the' 352Isquare' meter' subject' lot.'Maghinang’s' evidence,' the' unsigned' affidavit' and' the'
photocopy' of' the' receipt,' cannot' prevail' over' the' array' of' documentary' and' testimonial' evidence' that'
were'adduced'by'Rogelio'Dantis.'''
The' CA' held' that' partial' performance' of' the' contract' of' saleI' giving' of' a' downpayment' coupled'
with' the' delivery' of' the' res' I' took' the' oral' contract' out' of' the' scope' of' the' Statute' of' Frauds.' This'
conclusion' arose' from' its' erroneous' finding' that' there' was' a' perfected' contract' of' sale.' The' above'
disquisition,'however,'shows'that'there'was'none.'There'is,'therefore,'no'basis'for'the'application'of'the'
Statute' of' Frauds.' The' application' of' the' Statute' of' Frauds' presupposes' the' existence' of' a' perfected'
contract.'
WHEREFORE,'the'petition'is'GRANTED.'The'assailed'Decision'of'the'Court'Appeals'is'REVERSED'
and'SET'ASIDE.'The'Decision'of'the'Regional'Trial'Court'is'REINSTATED.'
'
MANONGSONG'VS.'ESTIMO'
PETITIONERS:'Milagros'Mangongsong'and'Carlito'Manonsong'
RESPONDENTS:''Felomena'Jumaquio'Estimo,'Emiliana'Jumaquio,'Narciso'Ortiz,'Celestino'Ortiz,'Rodolfo'
Ortiz,'Erlinda'O.'Ocampo,'Pastor'Ortiz,'Jr.,'Romeo'Ortiz'Benjamin'Dela'Cruz,'Sr.,'Benjamin'Dela'Cruz,'Jr.,'
Aurora'Nicolas,'Gloria'Racadio,'Roberto'Dela'Cruz,'Joselito'Dela'Cruz'And'Leoncia'S.'Lopez.'
DATE'OF'PROMULGATION:'June'25,'2003'
PONENTE:'Carpio'
'
FACTS:''
• Agatona'Guevarra:'inherited'a'property'from'Justina'Navarro,'which'is'now'under'possession'of'
petitioner'Milagros'Lopez'Manongsong'(“Manongsong”).''
• The' respondents,' the' Jumaquio' sisters' and' Leoncia'Lopez:' claimed' that' the' property' was'
sale'dated'October'11,'1957.''
• Milagros'and' Carlito' Manongsong' (“petitioners”)' filed' a' Complaint' praying' for'the' partition'
and'award'to'them'of'an'area'equivalent'to'oneIfifth'(1/5),'by'right'of'representation.''
• Jumaquio'sisters'invoked'the'defense'of'acquisitive'prescription'against'petitioners,'and'charged'
that'petitioners'were'guilty'of'laches,'because'they'were'in'peaceful'possession'of'their'portion'of'
the' Property' for' more' than' thirty' years.' They' argued' that' the' present' action' should' have' been'
filed'years'earlier,'either'by'Vicente'Lopez'when'he'was'alive'or'by'Manongsong'when'the'latter'
reached' legal' age.' Instead,' petitioners' filed' this' action' for' partition' only' in' 1992' when'
Manongsong'was'already'33'years'old.'
• Manongsong:' alleged' that' Guevarra' was' the' original' owner' of' the' Property' and' that' upon'
Guevarra’s'death,'her'children'inherited'the'Property.''
• RTC' ruled' that' the' conveyance' made' by' Justina' Navarro' was' subject' to' nullity' because' the'
property'conveyed'had'a'conjugal'character.'No'positive'evidence'had'been'introduced'that'it'was'
solely'a'paraphernal'property.'The'name'of'Justina'Navarro’s'spouse/husband'was'not'mentioned'
! 20!
 NATURE'OF'THE'CONTRACT'CASES'–'CHARACTERISTICS'OF'SALES''
CASE'DIGEST'
! !
and/or' whether' the' husband' was' still' alive' at' the' time' the' conveyance' was' made' to' Justina'
Navarro.'Agatona'Guevarra'as'her'compulsory'heir'should'have'the'legal'right'to'participate'with'
the'distribution'of'the'estate.'The'Deed'of'Sale'did'not'at'all'provide'for'the'reserved'legitime'or'
the' heirs,' and,' therefore' it' has' no' force' and' effect' against' Agatona' Guevarra' and' her' six' (6)'
legitimate'children''
• CA' ruling:' The'records' show' that' in' 1949' the' subject' property' was' declared,' for' taxation'
purposes'under'the'name'of'Justina'Navarro'alone.'This'indicates'that'the'land'is'the'paraphernal'
property'of'Justina'Navarro.'
' of'April'19,'1983'when'Claudia'was'still'alive.'It'was'in'the'evening'of'the'same'day'when'she'died.'
ISSUE:'
Whether'or'not'the'alleged'sale'is'valid.' ''
' •
HELD:'
' Yes.'Under'Article'1458'of'the'Civil'Code,'the'elements'of'a'valid'contract'of'sale'are:'(1)'consent'
or'meeting'of'the'minds;'(2)'determinate'subject'matter'and'(3)'price'certain'in'money'or'its'equivalent.'
The'presence'of'these'elements'is'apparent'on'the'face'of'the'Kasulatan'itself.'The'Property'was'sold'in'
1957'for'₱250.00.''
The' Court' also' found' no' basis' for' the' trial' court’s' declaration' that' the' sale' embodied' in' the'
Kasulatan'deprived'the'compulsory'heirs'of'Guevarra'of'their'legitimes.'As'opposed'to'a'disposition'inter'
vivos'by'lucrative'or'gratuitous'title,'a'valid'sale'for'valuable'consideration'does'not'diminish'the'estate'
of'the'seller.'When'the'disposition'is'for'valuable'consideration,'there'is'no'diminution'of'the'estate'but'
merely' a' substitution' of' values,'that' is,' the' property' sold' is' replaced' by' the' equivalent' monetary'
consideration.' Since' the' notarized' Kasulatan' is' evidence' of' greater' weight' which' petitioners' failed' to'
refute' by' clear' and' convincing' evidence,' this' Court' holds' that' petitioners' were' not' able' to' prove' by'
preponderance'of'evidence'that'the'Property'belonged'to'Guevarra’s'estate.'There'is'therefore'no'legal'
basis'for'petitioners’'complaint'for'partition'of'the'Property.'
' No.'In'determining'whether'the'Deed'of'Absolute'Sale'dated'April'19,'1983'is'valid,'it'must'contain'the'
YASON'VS.'ARCIAGA'
PETITIONERS:'Dr.'Jose'and'Aida'Yason'
RESPONDENTS:'Faustino'Arciaga,'Felipe'Neri'Arciaga,'Domingo'Arciaga'and'Rogelio'Arciaga''
DATE'OF'PROMULGATION:'January'28,'2005'
PONENTE:'SandovalIGutierrez'
FACTS:'
• Spouses'Emilio'and'Claudia'Arciaga'were'owners'of'Lot'situated'in'Muntinlupa'City.'On'March'28,'
1983,'they'executed'a'Deed'of'Conditional'Sale'whereby'they'sold'the'said'lot'for'₱265,000.00'to'
spouses'Dr.'Jose'and'Aida'Yason,'petitioners.'They'tendered'an'initial'payment'of'₱150,000.00.''
• On' April' 19,' 1983,' upon' payment' of' the' balance' of' ₱115,000.00,' spouses' Emilio' and' Claudia'
Arciaga'executed'a'Deed'of'Absolute'Sale.'That'day,'Claudia'died.''
• Spouses'Yason:'had'the'Deed'of'Absolute'Sale'registered'in'the'Registry'of'Deeds.'They'entrusted'
its'registration'to'Jesus'Medina'to'whom'they'delivered'the'document'of'sale'and'the'amount'of'
₱15,000.00'as'payment'for'the'capital'gains'tax.''
• Without'their'knowledge,'Medina'falsified'the'Deed'of'Absolute'Sale'ane'made'it'appear'that'the'
sale' took' place' on' July' 2,' 1979,' instead' of' April' 19,' 1983,' and' that' the' price' of' the' lot' was' only'
₱25,000.00,'instead'of'₱265,000.00.'
• Spouses' Arciaga’s' children' (the' respondents)' learned' of' the' falsified' document' of' sale' and'
caused' the' filing' with' the' Office' of' the' Provincial' Prosecutor' of' Makati' City' a' complaint' for'
! 21!
NATURE'OF'THE'CONTRACT'CASES'–'CHARACTERISTICS'OF'SALES''
CASE'DIGEST'
falsification' of' documents' against' petitioners.' However,' the' Provincial' Prosecutor' dismissed' the'
complaint'for'falsification'for'lack'of'probable'cause.'
• The'respondents:''filed'with'a'complaint'for'annulment'of'the'land'titles'against'petitioners'and'
claimed' that' that' the' Deed' of' Absolute' Sale' is' void'ab( initio'considering' that' (1)' Claudia' Arciaga'
did'not'give'her'consent'to'the'sale'as'she'was'then'seriously'ill,'weak,'and'unable'to'talk'and'(2)'
Jesus'Medina'falsified'the'Deed'of'Absolute'Sale;'and'that'the'land'titles'are'also'void'because'a'
forged'deed'conveys'no'title.'
• Petitioners:'claimed'that'the'Deed'of'Absolute'Sale'was'duly'signed'by'the'parties'in'the'morning'
Hence,'the'contract'of'sale'is'valid.'Furthermore,'they'have'no'participation'in'the'falsification'of'
the'Deed'of'Absolute'Sale'by'Medina.'In'fact,'they'exerted'efforts'to'locate'him'but'to'no'avail.'
The' Trial' court:' rendered' a' Decision' dismissing' respondents’' complaint' and' sustaining' the'
validity'of'the'Deed'of'Conditional'Sale'and'the'Deed'of'Absolute'Sale.'
• CA' Ruling:' 'It' turned' out' that' Medina' did' not' use' the' Deed' of' Sale' dated' April' 19,' 1983' but'
fabricated'a'Deed'of'Absolute'Sale'dated'July'2,'1979'with'a'reduced'consideration'of'₱25,000.00.'
Being' a' forged' document,' the' July' 2,' 1979' Deed' of' Absolute' Sale' is' indeed' null' and' void.' The'
curious'part'about'the'controversial'deeds'is'the'date'of'their'supposed'execution,'especially'the'
date'of'the'Absolute'Deed'of'Sale'which'coincides'with'the'date'of'the'death'of'Claudia'Arciaga'and'
that'only'a'thumbmark'and'not'a'signature'of'Claudia'Arciaga'was'affixed'on'the'supposed'deeds,'
when'in'fact'she'could'definitely'read'and'write.'
'
ISSUE:'
Whether'or'not'the'Deed'of'Absolute'Sale'was'void'for'lack'of'consent'on'the'part'of'Claudia'Arciaga'and'
because'the'same'document'was'forged'by'Medina.'
'
HELD:'
essential'requisites'of'contracts,'viz:'(1)'consent'of'the'contracting'parties;'(2)'object'certain'which'is'the'
subject'matter'of'the'contract;'and'(3)'cause'of'the'obligation'which'is'established.5'A'contract'of'sale'is'
perfected'at'the'moment'there'is'a'meeting'of'the'minds.'Consent'is'manifested'by'the'meeting'of'the'
offer'and'the'acceptance'upon'the'thing'and'the'cause'which'are'to'constitute'the'contract.''
To'enter'into'a'valid'legal'agreement,'the'parties'must'have'the'capacity'to'do'so.'The'law'presumes'that'
every' person' is' fully' competent' to' enter' into' a' contract' until' satisfactory' proof' to' the' contrary' is'
presented.'''
While'it'is'true'that'Claudia'was'sick'and'bedridden,'respondents'failed'to'prove'that'she'could'no'longer'
understand'the'terms'of'the'contract'and'that'she'did'not'affix'her'thumbmark'thereon.'Unfortunately,'
they'did'not'present'the'doctor'or'the'nurse'who'attended'to'her'to'confirm'that'indeed'she'was'mentally'
and'physically'incapable'of'entering'into'a'contract.'Mere'weakness'of'mind'alone,'without'imposition'of'
fraud,'is'not'a'ground'for'vacating'a'contract.'
Only'if'there'is'unfairness'in'the'transaction,'such'as'gross'inadequacy'of'consideration,'the'low'degree'of'
intellectual'capacity'of'the'party,'may'be'taken'into'consideration'for'the'purpose'of'showing'such'fraud'
as'will'afford'a'ground'for'annulling'a'contract.'
Respondents'failed'to'show'that'Claudia'was'deprived'of'reason'or'that'her'condition'hindered'her'from'
freely'exercising'her'own'will'at'the'time'of'the'execution'of'the'Deed'of'Conditional'Sale.'
It'is'of'no'moment'that'Claudia'merely'affixed'her'thumbmark'on'the'document.'The'signature'may'be'
made'by'a'person’s'cross'or'mark'even'though'he'is'able'to'read'and'write'and'is'valid'if'the'deed'is'in'all'
! 22!
 NATURE'OF'THE'CONTRACT'CASES'–'CHARACTERISTICS'OF'SALES'' NATURE'OF'THE'CONTRACT'CASES'–'CHARACTERISTICS'OF'SALES''
CASE'DIGEST' CASE'DIGEST'
! !
other'respects'a'valid'one.'Significantly,'there'is'no'evidence'showing'that'Claudia'was'forced'or'coerced' Issue:'Whether'or'not'there'was'a'perfected'compromise'agreement'with'respect'to'the'remaining'three'
in'affixing'her'thumbmark'on'the'Deed'of'Conditional'Sale.' lots'which'have'not'been'paid'by'petitioner'because'respondents'could'not'deliver'clean'titles'thereto.'
Respondents'insisted'that'their'mother'died'in'the'morning'of'April'19,'1983,'hence,'she'could'no'longer' '
affix'her'thumbmark'on'the'Deed'of'Absolute'Sale.'Petitioners'maintained'that'she'died'in'the'evening'of' Ruling:'
that'day'and'that'she'affixed'her'thumbmark'on'the'deed'in'the'morning'of'that'same'day.'Respondents' Yes.'The'compromise'agreement'the'parties'executed'was'in'the'form'of'a'contract'of'sale.'The'elements'
should'have'offered'in'evidence'the'Certificate'of'Death'of'Claudia'to'show'the'exact'date'and'time'of'her' of'a'valid'contract'of'sale'are:'(a)'consent'or'meeting'of'the'minds;'(b)'determinate'subject'matter'and'(c)'
death.'Again,'they'should'have'presented'the'attending'physician'to'testify'whether'or'not'Claudia'could' price'certain'in'money'or'its'equivalent.'All'the'elements'are'present'here.'The'parties'agreed'on'the'sale'
still'affix'her'thumbmark'then.' of'a'determinate'object'and'the'price'certain.''
Therefore,'there'was'consent'on'the'part'of'Claudia'Arciaga'when'she'executed'the'Conditional'Deed'of' The'contention'of'the'respondent'that'there'was'no'meeting'of'mind'because'the'condition'relating'to'the'
Sale'and'the'Deed'of'Absolute'Sale'being'assailed'by'respondents.'These'documents,'therefore,were'valid.' delivery'of'clean'titles'was'not'fulfilled'is'wrong.'The'delivery'of'clean'titles'was'not'a'condition'imposed'
REPUBLIC'VS.'FLORENDO' on' the' perfection' of' the' contract' of' sale' but' a' condition' imposed' on' petitioner's' obligation' to' pay' the'
PETITIONER:' REPUBLIC' OF' THE' PHILIPPINES,' REPRESENTED' BY' THE' PHILIPPINE' ECONOMIC' ZONE' purchase' price' of' these' lots.' As' ruled' in' the' case' of' Jardine' Davies' Inc.' vs' CA,' the' court' distinguished'
AUTHORITY'(PEZA)'THROUGH'ITS'DIRECTOR'GENERAL,'LILIA'B.'DE'LIMA' between' a' condition' imposed' on' the' perfection' of' a' contract' and' a' condition' imposed' merely' on' the'
RESPONDENTS:'ANTONIO'AND'LILI'FLORENDO' performance'of'an'obligation.'While'failure'to'comply'with'the'first'condition'results'in'the'failure'of'a'
DATE'OF'PROMULGATION:'March'27,'2008' contract,' nonIcompliance' with' the' second' merely' gives' the' other' party' options' and/or' remedies' to'
PONENTE:'CORONA.' protect'its'interest.'
FACTS:' MAPALO'V.'MAPALO'
Petitioner' Republic' of' the' Philippines' is' represented' in' this' case' by' the' Philippine' Economic' Zone' '
Authority'(PEZA),'a'government'corporation.'' PETITIONER:'Miguel'Mapalo'
' RESPONDENT:'Maximo'Mapalo'
The' Export' Processing' Zone' Authority,' ,predecessor' of' PEZA,' filed' a' complaint' for' the' expropriation' of' DATE'OF'PROMULGATION:'May'19,'1966'
seven'parcels'of'land'located'at'Cebu,'owned'by'respondents.'The'purpose'of'the'expropriation'was'to' PONENTE:'Bengzon'
establish'and'develop'an'export'processing'zone'or'a'part'thereof'on'those'real'properties.'' FACTS:''
' The'spouses'Miguel'Mapalo'and'Candida'Quiba'were'the'registered'owners'of'a'residential'land'located'
RTC' rendered' a' decision' ordering' the' expropriation' of' the' seven' parcels' of' land' and' payment' of' just' in'Pangasinan.'(1,635'sq.'m.)'
compensation' of' P1,500' per' sq.' m.' with' 12%' interest' per' annum' from' the' time' petitioner' took' '
possession.' The'spouses'donated'the'eastern'half'of'the'land'to'Miguel’s'brother'–'Maximo'Mapalo'who'was'about'to'
' get'married.'
Both' parties' reached' an' amicable' settlement' and' agreed' for' the' payment' as' fixed' by' RTC;' as' well' as' '
presentation'by'respondents'of'clean'titles'of'all'the'subject'properties'before'payment'by'petitioner.' However,'they'were'deceived'into'signing,'on'October'15,'1936,'a'deed'of'absolute'sale'over'the'entire'
' land'in'Maximo’s'favor.'Their'signatures'were'procured'by'fraud'because'they'were'made'to'believe'by'
Accordingly,'the'parties'executed'a'deed'of'absolute'sale'dated'June'25,'2001'which'set'out'the'terms'and' Maximo'and'the'lawyer'who'acted'as'notary'public'who'"translated"'the'document,'that'the'same'was'a'
conditions' of' their' settlement,' the' transfer' of' ownership' from' respondents' to' petitioner' and' the' deed'of'donation'in'Maximo's'favor'covering'oneIhalf'of'their'land.'(It'must'be'noted'that'the'spouses'are'
execution'by'the'parties'of'the'corresponding'deed'of'absolute'sale'for'the'remaining'six'lots'as'soon'as' illiterate'farmers).'
respondents'could'settle'or'clear'the'encumbrances'or'other'problems'affecting'them.'' '
' Although' the' document' of' sale' stated' a' consideration' of' Five' Hundred' (P500.00)' Pesos,' the' aforesaid'
Petitioner' prepared' a' joint' motion' to' dismiss' the' expropriation' case' but' respondent' Antonio' Florendo' spouses'did'not'receive'anything'of'value'for'the'land.''
refused'to'sign'because'there'were'still'three'lots'which'had'not'yet'been'paid.'' In'1938,'Maximo'Mapalo,'without'the'consent'of'the'spouse,'registered'the'sale'in'his'favor.'
' '
Respondents' could' not' clear' these' properties' of' their' encumbrances' and' liens' as' there' were' pending' After' thirteen' years' (1951),' he' sold' the' land' to' the' Narcisos.' ' (Evaristo,' Petronila' Pacifico' and' Miguel)'
cases'filed'by'third'party'claimants'over'them.'' who'thereafter'registered'the'sale'and'obtained'a'title'in'their'favor.''
' '
Instead,'they'proposed'that'a'partial'compromise'agreement'be'executed'to'cover'the'four'lots'that'had' In' 1952,' the' Narcisos' filed' a' complaint' with' the' CFI' to' be' declared' owners' of' the' entire' land,' for'
already' been' sold' and' transferred' to' PEZA.' Petitioner,' however,' found' the' proposal' unacceptable' and' possession'of'its'western'portion;'for'damages;'and'for'rentals.''
contrary'to'their'compromise'agreement.' '
'

! 23! ! 24!
 NATURE'OF'THE'CONTRACT'CASES'–'CHARACTERISTICS'OF'SALES''
CASE'DIGEST'
! !
The'Mapalo'spouses'filed'a'counterclaim'seeking'cancellation'of'the'the'Narcisos’'titles'as'to'the'western'
half'of'the'land.'They'said'that'their''signatures'to'the'deed'of'sale'of'1936'was'procured'by'fraud'and'
that'the'Narcisos'were'buyers'in'bad'faith.'
' Pudunan'for'the'price'of'P2,000.00.'Also'stated'therein'that'part'of'the'money'was'remitted'to'
They'also'filed'another'complaint'wherein'they'asked'the'court'to'declare'deeds'of'sale'of'1936'and'of'
1951'over'the'land'in'question'be'declared'null'and'void'as'to'the'western'half'of'said'land.'
CFI'ruled'in'favor'of'the'Mapalo'spouses.''
' • Subsequently,'it'was'made'to'appear'in'the'original'copy'of'the'said'deed'that'both'Lots'1'and'2'
Upon'appeal'filed'by'Narcisos,'CA'reversed'the'lower'court’s'ruling'solely'on'the'ground'that'the'consent'
of'the'Mapalo'spouses'to'the'deed'of'sale'of'1936'having'been'obtained'by'fraud,'the'same'was'voidable,'
not'void'ab'initio,'and,'therefore,'the'action'to'annul'the'same,'within'four'years'from'notice'of'the'fraud,'
had'long'prescribed.'(From'March'15,'1938).''Hence,'this'appeal.'
' • After'19'years'or'so,'petitioners'filed'a'complaint'with'the'RTC'of'Bayombong,'Nueva'Vizcaya'
Issue:''Whether'or'not'the'deed'of'sale'executed'in'1936'was'null'and'void.'
' and'2'covered'by'TCT'No.'TI1657.''
Held:'Yes.'A'contract'of'purchase'and'sale'is'null'and'void'and'produces'no'effect'whatsoever'where'the'
same'is'without'cause'or'consideration'in'that'the'purchase'price'which'appears'thereon'as'paid'has'in'
fact'never'been'paid'by'the'purchaser'to'the'vendor.'
The'Narcisos'were'purchaserIinIvalue'but'not'purchasers'in'good'faith'
What'was'the'necessity,'purpose'and'reason'of'Pacifico'Narciso'in'still'going'to'the'spouses'Mapalo'and'
asked'them'to'permit'their'brother'Maximo'to'dispose'of'the'aboveIdescribed'land?'To'this'question'it'is'
safe'to'state'that'this'act'of'Pacifico'Narciso'is'a'conclusive'manifestation'that'they'(the'Narcisos)'did'not'
only'have'prior'knowledge'of'the'ownership'of'said'spouses'over'the'western'half'portion'in'question'but'
that' they' also' have' recognized' said' ownership.' It' also' conclusively' shows' their' prior' knowledge' of' the'
want'of'dominion'on'the'part'of'their'vendor'Maximo'Mapalo'over'the'whole'land'and'also'of'the'flaw'of'
his'title'thereto'
' of'the'petitioners'actual'or'presumptive'knowledge'thereof.''
CABOTAJE'v.'PUDUNAN'(GR.'No.'134712)'
Petitioner:'MARIA'CABOTAJE,'AGUSTIN'CABOTAJE,'AMELIA'TOMAS'and'DANIEL'PUGAYAN'
Respondent:'SPOUSES'SOTERO'PUDUNAN'and'MARIA'RIVERA'
Date'of'Promugation:'August'13,'2004'
Ponente:'CALLEJO,'SR.'
Facts:''
• Bonifacia'LangIew'was'the'owner'of'2'parcels'of'land'(Lot'1'&'2)'which'are'located'in'Lamut,'
Indiana,'Bambang,'Nueva'Vizcaya,'and'were'covered'by'Transfer'Certificate'of'Title'(TCT'No.'TI
1657).'She'died'intestate'on'November'23,'1965'and'was'survived'by'her'grandchildren'Maria'
Cabotaje,'Agustin'Cabotaje,'Amelia'Tomas,'and'Daniel'Pugayan.'
• Maria'Cabotaje,'Daniel'Pugayan'and'their'close'relatives'Remicio'Marques'and'Amelia'Tomas'
borrowed'P1,000'from'the'Spouses'Sotero'Pudunan'and'Maria'Rivera.'They'signed'a'private'
document'prepared'by'Juan'Anungos,'which'stated'inter'alia'that'the'payment'of'the'said'amount'
was'secured'by'a'mortgage'over'Lot'1'covered'by'TCT'No.'TI1657,'and'that'the'property'was'
redeemable'within'one'year,'extendible'for'another'year,'until'the'full'amount'of'the'loan'was'
paid.'
• The'owners'duplicate'copy'of'TCT'No.'TI1657'was'then'delivered'to'the'mortgagees.'The'Spouses'
Pudunan'took'possession'of'the'property,'although'under'the'document,'the'mortgagors'had'the'
right'to'remain'in'possession'thereof.'
! 25!
NATURE'OF'THE'CONTRACT'CASES'–'CHARACTERISTICS'OF'SALES''
CASE'DIGEST'
• On'the'same'date'(January'4,'1966)'Maria'Cabotaje,'Agustin'Cabotaje,'Daniel'Pugayan,'Amelia'
Tomas'and'her'husband'Pedro'Tomas'affixed'their'signatures'over'a'deed'entitled'“Confirmatory'
Deed'of'Sale”,'in'which'they'undertook'to'sell'Lot'2'covered'by'TCT'No.'TI1657'to'the'Spouses'
Bonifacia'LangIew'and'was'spent'by'her'during'her'illness,'and'to'her'heirs'which'was'used'for'
burial'expenses.'The'document'was'notarized'by'Judge'Tomas'P.'Maddela.'However,'the'deed'was'
not'filed'with'the'Registry'of'Deeds'of'Nueva'Vizcaya.''
were'sold'to'the'Spouses'Pudunan.'Such'was'filed'with'the'Register'of'Deeds.'On'the'same'day,'
TCT'No.'TI20808'was'issued'by'the'RD'in'favor'of'the'Spouses'Pudunan.'
'
RTC:'
against'the'respondents,'the'Spouses'Pudunan,'for'recovery'of'ownership'and'possession'of'Lots'1'
• The'petitioners'alleged'that'in'a'private'document'they'signed'on'January'4,'1966,'it'appears'that'
they'mortgaged'Lot'1'to'secure'the'payment'of'a'P1,000Iloan'from'the'respondents'but'they'only'
received'P660.00'and'that'the'respondents'thereafter'took'possession'of'the'property.''
• In'their'answer'to'the'complaint,'the'respondents'interposed'the'defense'of'prescription'of'action.'
The'RTC'granted'the'motion'but'reinstated'the'case'on'the'petitioners'MR.'After'trial,'the'court'
rendered'judgment'in'favor'of'the'petitioners.'
'
CA:'
• On'appeal'petitioner’s'did'not'file'their'brief.'The'CA,'thereafter,'rendered'judgment'reversing'the'
decision'of'the'RTC,'holding'that'the'original'copy'of'the'Confirmatory'Deed'of'Sale'was'voidable'
and'not'void'ab'initio;'hence,'the'action'to'annul'the'said'deed'prescribed'four'years'from'the'time'
• The'CA'held'that'the'cause'of'action'of'the'petitioners'to'nullify'the'deed'accrued'on'July'18,'1966'
when'the'Confirmatory'Deed'of'Sale'was'filed'with'the'RD,'as'the'petitioners'had'presumptive'
knowledge'of'the'existence'of'the'altered'Confirmatory'Deed'of'Sale.'Hence,'the'petitioners'should'
have'filed'their'complaint'within'four'years'from'July'18,'1966'or,'on'or'before'July'19,'1970.'Since'
the'appellees'filed'their'complaint'only'on'February'26,'
• Petitioners'filed'an'MR'wherein'they'alleged'that'the'respondents'altered'the'original'copy'of'the'
Confirmatory'Deed'of'Sale'after'the'said'deed'was'executed'by'the'parties;'as'such,'the'deed'was'
null'and'void,'not'merely'voidable.'However,'the'CA'denied'the'said'motion.'
'
'
Issue:'WON'the'original'copy'of'the'Confirmatory'Deed'of'Sale,'wherein'it'appears'that'the'petitioners'
also'sold'Lot'1'of'their'property'to'the'respondents,'is'null'and'void.'
'
Held:''YES.'The'petitioners'assert'that'they'did'not'sell'Lot'1'to'the'respondents,'much'less'receive'from'
them'the'P2,000.00'purchase'price'which'appears'in'the'original'copy'of'the'Confirmatory'Deed'of'Sale.'
Absent'their'consent'to'the'sale'and'the'price'or'consideration'for'their'property,'such'deed'is'null'and'
void;'hence,'they'contend'that'their'action'is'imprescriptible'as'provided'for'in'Article'1410'of'the'New'
Civil'Code.''
! 26!
 NATURE'OF'THE'CONTRACT'CASES'–'CHARACTERISTICS'OF'SALES''
CASE'DIGEST'
! !
The'SC'was'convinced'that'the'respondents,'either'by'themselves'or'at'their'behest'and'without'the'
knowledge'of'the'petitioners,'caused'the'alterations'in'the'assailed'copy'of'the'Confirmatory'Deed'of'Sale'
by'making'it'appear'therein'that'the'petitioners'sold'Lot'1'as'well'as'Lot'2'with'a'total'area'of'15,333'
square'meters'for'only'P2,000.00.'
First.'Respondent'Maria'Rivera'admitted'in'court'that'the'alteration'occurred'after'the'execution'of'the'
Confirmatory'Deed'of'Sale.'
Second.'The'petitioners'did'not'authenticate'the'alterations'in'the'assailed'deed'by'affixing'their'initials'
or'signatures'thereon.'
Third.'Neither'did'ExIOfficio'Notary'Public,'Judge'Tomas'Maddela'authenticate'the'said'alterations'when'
he'notarized'the'Confirmatory'Deed'of'Sale.'
Fourth.'Under'the'Confirmatory'Deed'of'Sale,'the'petitioners'sold'Lot'2'for'P2,000.00.'In'the'assailed'
deed,'the'petitioners'purportedly'also'sold'Lot'1'to'the'respondents,'but'the'purchase'price'thereof'
remained'unchanged.'Thus,'under'the'assailed'deed,'the'respondents'paid'P2,000.00'for'the'two'lots.'The'
respondents'failed'to'give'a'satisfactory'explanation'why'the'price'of'the'property'remained'at'P2,000.00'
Evidently,'there'was'no'price'or'consideration'for'the'sale'of'Lot'1,'as'it'is'incredible'that'the'petitioners'
would'sell'the'property'to'the'respondents'without'any'price'or'consideration'therefor.'
Fifth.'The'respondents'claim'that'they'told'Judge'Maddela'that'they'were'also'buying'Lot'1'from'the'
petitioners,'but'since'the'judge'was'in'a'hurry'to'leave,'he'merely'instructed'his'clerk'of'court'to'make'the'
necessary'alterations'in'his'copies'of'the'deed'of'sale.'The'respondents'also'claim'that'the'parties'to'the'
deed'left'without'seeing'to'it'that'the'clerk'of'court'had'made'the'alterations'in'the'copies'of'Judge'
Maddela.'
All'told'then,'we'find'and'so'hold'that'the'petitioners'did'not'consent'to'the'sale'of'Lot'1'to'the'
respondents.'One'of'the'essential'requirements'of'a'valid'contract,'including'a'contract'of'sale,'is'the'
consent'of'the'owner'of'the'property.'Absent'such'consent,'the'contract'is'null'and'void'ab'initio.'A'void'
contract'is'absolutely'wanting'in'civil'effects;'it'is'equivalent'to'nothing.'It'produces'no'effects'
whatsoever'either'against'or'in'favor'of'anyone;'hence,'it'does'not'create,'modify,'or'extinguish'the'
judicial'relation'to'which'it'refers.''In'fine,'the'petitioners,'not'the'respondents,'are'the'rightful'owners'of'
Lot'1.'
Under'Article'1410'of'the'New'Civil'Code,'the'action'for'the'declaration'of'the'nonIexistence'of'a'contract'
does'not'prescribe.'Thus,'the'action'of'the'petitioners'for'the'declaration'of'the'nonIexistence'of'the'
assailed'deed'is'imprescriptible.'
The'petition'is'GRANTED.'The'decision'of'the'CA'is'REVERSED'and'SET'ASIDE.'The'decision'of'the'RTC'is'
REINSTATED.'
' allegedly'sold'worth'at'least'P10,500.00,'which'are'notoriously'low'indicators'of'actual'value'plainly'and'
' unquestionably'demonstrates'that'they'state'a'false'and'fictitious'consideration,'and'no'other'true'and'
BAGNAS'v.'CA'(G.R.'No.'LI38498)''
Petitioner:'ISAAC'BAGNAS,'ENCARNACION'BAGNAS,'SILVESTRE'BAGNAS'MAXIMINA'BAGNAS,'SIXTO'
BAGNAS'and'AGATONA'ENCARNACION'
Respondents:'CA,'ROSA'L.'RETONIL'TEOFILO'ENCARNACION,'and'JOSE'B.'NAMBAYAN'
Date:'August'10,'1989'
Ponente:'Narvasa'
' claim'is'not'required.'
Facts:'
• Hilario'Mateum'died'and'was'survived'only'by'his'first'cousins.'He'left'an'estate'consisting'of'
twentyInine'parcels'of'land'in'Kawit'and'Imus,'Cavite,'ten'of'which'are'involved'in'this'appeal.'
! 27!
NATURE'OF'THE'CONTRACT'CASES'–'CHARACTERISTICS'OF'SALES''
CASE'DIGEST'
• The'private'respondents,'themselves'collateral'relatives'of'Mateum'registered'with'the'Registry'of'
Deeds'2'deeds'of'sale'purportedly'executed'by'Mateum'in'their'(respondents')'favor'covering'ten'
parcels'of'land.''
• The'respondents'were'able'to'secure'title'in'their'favor'over'3'of'the'10'parcels'of'land'conveyed'
thereby.'
RTC:''
• Petitioners'commenced'suit'against'the'respondents'in'trial'court,'seeking'annulment'of'the'deeds'
of'sale'as'fictitious,'fraudulent'or'falsified,'or,'alternatively,'as'donations'void'for'want'of'
acceptance'embodied'in'a'public'instrument.'The'petitioners'prayed'for'recovery'of'ownership'
and'possession'of'said'lands,'accounting'of'the'fruits'thereof'and'damages.''
• Respondents'denied'the'alleged'fictitious'or'fraudulent'character'of'the'sales'in'their'favor,'
asserting'that'said'sales'were'made'for'good'and'valuable'consideration;'that'defendants'were'
collateral'relatives'of'Hilario'Mateum'and'had'done'many'good'things'for'him,'nursing'him'in'his'
last'illness,'which'services'constituted'the'bulk'of'the'consideration'of'the'sales.'
• After'presentation'of'evidence,'respondent'filed'a'motion'for'dismissal'and'it'was'granted'by'the'
RTC'for'the'following'reasons:'(a)'the'plaintiffs,'as'mere'collateral'relatives,'not'forced'heirs,'of'
Hilario'Mateum,'could'not'legally'question'the'disposition'made'by'said'deceased'during'his'
lifetime,'regardless'of'whether,'as'a'matter'of'objective'reality,'said'dispositions'were'valid'or'not;'
and'(b)'that'the'plaintiffs'evidence'of'alleged'fraud'was'insufficient,'the'fact'that'the'deeds'of'sale'
each'stated'a'consideration'of'only'Pl.00'not'being'in'itself'evidence'of'fraud'or'simulation.'
CA:'
• On'appeal,'that'court'affirmed,'adverting'with'approval'to'the'Trial'Court's'reliance'on'the'
Armentia'ruling'which,'it'would'appear,'both'courts'saw'as'denying,'without'exception,'to'
collaterals,'of'a'decedent,'not'forced'heirs,'the'right'to'impugn'the'latter's'dispositions'inter'vivos'
of'his'property.''
'
Issue:'WON'the'deed'is'void.'
'
Held:'YES.'Upon'the'consideration'alone'that'the'apparent'disproportion'between'the'stipulated'price'(in'
each'deed)'of'P'1.00'plus'unspecified'and'unquantified'services'and'the'undisputably'valuable'real'estate,'
lawful'cause'having'been'shown,'the'Court'finds'both'said'deeds,'insofar'as'they'purport'to'be'sales,'not'
merely'voidable,'but'void'ab'initio.'
Neither'can'the'validity'of'said'conveyances'be'defended'on'the'theory'that'their'true'causa'is'the'
liberality'of'the'transferor'and'they'may'be'considered'in'reality'donations'because'the'law'also'
prescribes'that'donations'of'immovable'property,'to'be'valid,'must'be'made'and'accepted'in'a'public'
instrument,'and'it'is'not'denied'by'the'respondents'that'there'has'been'no'such'acceptance'which'they'
The'private'respondents'have'only'themselves'to'blame'for'the'lack'of'proof'that'might'have'saved'the'
questioned'transfers'from'the'taint'of'invalidity'as'being'fictitious'and'without'ilicit'cause;'proof,'to'be'
brief,'of'the'character'and'value'of'the'services,'past,'present,'and'future,'constituting'according'to'the'
very'terms'of'said'transfers'the'principal'consideration'therefor.'
! 28!
 NATURE'OF'THE'CONTRACT'CASES'–'CHARACTERISTICS'OF'SALES''
CASE'DIGEST'
! !
The'onus,'therefore,'of'showing'the'existence'of'valid'and'illicit'consideration'for'the'questioned'
conveyances'rested'on'the'private'respondents.'But'even'on'a'contrary'assumption,'and'positing'that'the'
petitioners'initially'had'the'burden'of'showing'that'the'transfers'lacked'such'consideration'as'they'
alleged'in'their'complaint,'that'burden'was'shifted'to'the'private'respondents'when'the'petitioners'
presented'the'deeds'which'they'claimed'showed'that'defect'on'their'face'and'it'became'the'duty'of'said'
respondents'to'offer'evidence'of'existent'lawful'consideration.'
As'the'record'clearly'demonstrates,'the'respondents'not'only'failed'to'offer'any'proof'whatsoever,'opting'
to'rely'on'a'demurrer'to'the'petitioner's'evidence'and'upon'the'thesis,'which'they'have'maintained'all'the'
way'to'this'Court,'that'petitioners,'being'mere'collateral'relatives'of'the'deceased'transferor,'were'
without'right'to'the'conveyances'in'question.''
The'Decision'of'the'Court'of'Appeals'is'reversed.'The'questioned'transfers'are'declared'void'and'of'no'
force'or'effect.'Such'certificates'of'title'as'the'private'respondents'may'have'obtained'over'the'properties'
subject'of'said'transfers'are'hereby'annulled,'and'said'respondents'are'ordered'to'return'to'the'
petitioners'possession'of'the'properties'involved'in'this'action,'to'account'to'the'petitioners'for'the'fruits'
thereof'during'the'period'of'their'possession,'and'to'pay'the'costs.'No'damages,'attorney's'fees'or'
litigation'expenses'are'awarded,'there'being'no'evidence'thereof'before'the'Court.'
' '
DIZON'v.'CA'(G.R.'No.'122544'&'124741)'
Petitioners:'REGINA'P.'DIZON,'AMPARO'D.'BARTOLOME,'FIDELINA'D.'BALZA,'ESTER'ABAD'DIZON'and'
JOSEPH'ANTHONY'DIZON,'RAYMUND'A.'DIZON,'GERARD'A.'DIZON,'and'JOSE'A.'DIZON,'JR.'
Respondents:'CA,'HON.'MAXIMIANO'C.'ASUNCION,'and'OVERLAND'EXPRESS'LINES,'INC.'
Date:'January'28,'1999'
Ponente:'Martinez'
' •
Facts:'
G.'R.'NO.'122544:'
• Private'respondent'Overland'Express'Lines,'Inc.'(lessee)'entered'into'a'Contract'of'Lease'with'
Option'to'Buy'with'petitioners'(lessors)'parcel'of'land'in'Quezon'City.'The'term'of'the'lease'was'
for'one'(1)'year'commencing'from'May'16,'1974'up'to'May'15,'1975.'During'this'period,'private'
respondent'was'granted'an'option'to'purchase'for'the'amount'of'P3,000.00'per'square'meter.'
Thereafter,'the'lease'shall'be'on'a'per'month'basis'with'a'monthly'rental'of'P3,000.00.'
MTC:'(petitioner)'
• For'failure'of'private'respondent'to'pay'the'increased'rental'of'P8,000.00'per'month'effective'June'
1976,'petitioners'filed'an'action'for'ejectment'before'the'MTC'of'QC.'It'rendered'judgment'
ordering'private'respondent'to'vacate'the'leased'premises'and'to'pay'the'sum'of'P624,000.00'
representing'rentals'in'arrears'and/or'as'damages'in'the'form'of'reasonable'compensation'for'the'
use'and'occupation'of'the'premises'during'the'period'of'illegal'detainer'from'June'1976'to'
November'1982.'
CA:'
• Private'respondent'filed'a'certiorari'petition'praying'for'the'issuance'of'a'restraining'order'
enjoining'the'enforcement'of'said'judgment'and'dismissal'of'the'case'for'lack'of'jurisdiction'of'the'
MTC.'
! 29!
NATURE'OF'THE'CONTRACT'CASES'–'CHARACTERISTICS'OF'SALES''
CASE'DIGEST'
• The'CA'ruled'that'the'unlawful'detainer'case'is'within'the'jurisdiction'of'respondent'court.'The'
MR'was'denied.''
'
RTC:'(respondent)'
• Private'respondent'filed'before'the'RTC'of'QC'an'action'for'Specific'Performance'and'Fixing'of'
Period'for'Obligation'with'prayer'for'the'issuance'of'a'restraining'order'pending'hearing'on'the'
prayer'for'a'writ'of'preliminary'injunction.'It'sought'to'compel'the'execution'of'a'deed'of'sale'
pursuant'to'the'option'to'purchase'and'the'receipt'of'the'partial'payment,'and'to'fix'the'period'to'
pay'the'balance.''
• The'RTC'denied'the'issuance'of'a'writ'of'preliminary'injunction'on'the'ground'that'the'decision'of'
the'MTC'for'the'ejectment'of'the'private'respondent,'having'been'affirmed'by'the'CA'and'the'SC,'
has'become'final'and'executory.'
• Private'respondent'also'filed'before'the'RTC'of'Quezon'City'a'complaint'for'Annulment'of'and'
Relief'from'Judgment'with'injunction'and'damages.'The'RTC'dismissed'the'complaint'for'
annulment'on'the'ground'of'res'judicata,'and'the'writ'of'preliminary'injunction'previously'issued'
was'dissolved.'
• Private'respondent'filed'an'MR.'The'preliminary'injunction'was'reinstated,'thereby'restraining'
the'execution'of'the'MTC’s'judgment'on'the'ejectment'case.'
'
RTC'(consolidated'cases)'
The'two'cases'were'thereafter'consolidated'before'the'RTC.'Thereafter,'a'decision'was'rendered'
dismissing'private'respondent's'complaint'in'Civil'Case'No.'QI45541'(specific'performance'case)'
and'denying'its'MR'in'Civil'Case'No.'46487'(annulment'of'the'ejectment'case).'The'MR'of'said'
decision'was'likewise'denied.'
CA:'
• On'appeal,'respondent'CA'rendered'a'decision'upholding'the'jurisdiction'of'MTC'in'the'ejectment'
case.'It'also'concluded'that'there'was'a'perfected'contract'of'sale'between'the'parties'on'the'
leased'premises'and'that'pursuant'to'the'option'to'buy'agreement,'private'respondent'had'
acquired'the'rights'of'a'vendee'in'a'contract'of'sale.'It'stated'that'what'was'entered'into'was'a'
"conditional'contract'of'sale"'wherein'ownership'over'the'leased'property'shall'not'pass'to'the'
private'respondent'until'it'has'fully'paid'the'purchase'price.'Since'private'respondent'did'not'
consign'to'the'court'the'balance'of'the'purchase'price'and'continued'to'occupy'the'subject'
premises,'it'had'the'obligation'to'pay'the'amount'of'P1,700.00'in'monthly'rentals'until'full'
payment'of'the'purchase'price.'
• Petitioners'elevated'the'case'via'petition'for'certiorari'questioning'the'authority'of'Alice'A.'Dizon'
as'agent'of'petitioners'in'receiving'private'respondent's'partial'payment'amounting'to'
P300,000.00'pursuant'to'the'Contract'of'Lease'with'Option'to'Buy.'Petitioners'also'assail'the'
propriety'of'private'respondent's'exercise'of'the'option'when'it'tendered'the'said'amount'on'June'
20,'1975'which'purportedly'resulted'in'a'perfected'contract'of'sale.'
'
G.'R.'NO.'124741:'
CA:'(petitioner)'
! 30!
 NATURE'OF'THE'CONTRACT'CASES'–'CHARACTERISTICS'OF'SALES''
CASE'DIGEST'
! !
• Petitioners'filed'with'respondent'CA'a'motion'to'remand'the'records'of'Civil'Case'No.'38I29155'
(ejectment'case)'to'the'MTC'for'execution'of'the'judgment'and'it'was'granted.'Private'respondent'
filed'a'motion'to'reconsider'said'resolution'which'was'denied.'
SC:'(respondent)'
• Aggrieved,'private'respondent'filed'a'petition'for'certiorari,'prohibition'with'preliminary'
injunction'and/or'restraining'order'with'the'SC'but'ir'was'dismissed'on'the'ground'that'the'same'
was'a'refiled'case'previously'dismissed'for'lack'of'merit.''
MTC:'(petitioner)'
• Petitioners'filed'an'urgent'exIparte'motion'for'execution'of'the'decision'in'Civil'Case'No.'38I29155'
(ejectment'case)'with'the'MTC.'The'RTC'ordered'the'issuance'of'a'third'alias'writ'of'execution.'In'
denying'private'respondent's'MR,'it'ordered'the'immediate'implementation'of'the'third'writ'of'
execution'without'delay.'
RTC:'(respondent)'
• Private'respondent'filed'with'the'RTC'a'petition'for'certiorari'and'prohibition'with'preliminary'
injunction/restraining'order'challenging'the'enforceability'and'validity'of'the'MTC'judgment'as'
well'as'the'order'for'its'execution.'It'granted'the'issuance'of'a'writ'of'preliminary'injunction'upon'
private'respondent's'posting'of'an'injunction'bond'of'P50,000.00.'
CA:'
• Petitioners'filed'a'petition'for'certiorari'and'prohibition'with'a'prayer'for'a'temporary'restraining'
order'and/or'preliminary'injunction'with'the'CA'but'it'dismissed'the'petition.'The'Petitioners''MR'
was'denied.'Hence,'this'instant'petition.'
' '
Issue/s:'(1)'WON'private'respondent'can'enforce'its'option'to'purchase'
' (2)'WON'a'contract'of'sale'was'perfected'between'the'parties'
' Certificate'of'Title'(TCT)'No.'332098'of'the'Registry'of'Deeds'of'Rizal.''
Held:''
(1)'NO.'Having'failed'to'exercise'the'option'within'the'stipulated'oneIyear'period,'private'respondent'
cannot'enforce'its'option'to'purchase'anymore.'The'contract'of'lease'expired'without'the'private'
respondent,'as'lessee,'purchasing'the'property'but'remained'in'possession'thereof.'Hence,'there'was'an'
implicit'renewal'of'the'contract'of'lease'on'a'monthly'basis.'The'other'terms'of'the'original'contract'of'
lease'which'are'revived'in'the'implied'new'lease'under'Article'1670'of'the'New'Civil'Code'are'only'those'
terms'which'are'germane'to'the'lessees'right'of'continued'enjoyment'of'the'property'leased.'
Therefore,'an'implied'new'lease'does'not'ipso'facto'carry'with'it'any'implied'revival'of'private'
respondent's'option'to'purchase'(as'lessee'thereof)'the'leased'premises.'The'provision'entitling'the'
lessee'the'option'to'purchase'the'leased'premises'is'not'deemed'incorporated'in'the'impliedly'renewed'
contract'because'it'is'alien'to'the'possession'of'the'lessee.'Private'respondents'right'to'exercise'the'
option'to'purchase'expired'with'the'termination'of'the'original'contract'of'lease'for'one'year.''
(2)'NO.'Under'Article'1475'of'the'New'Civil'Code,'the'contract'of'sale'is'perfected'at'the'moment'there'is'
a'meeting'of'minds'upon'the'thing'which'is'the'object'of'the'contract'and'upon'the'price.'From'that'
moment,'the'parties'may'reciprocally'demand'performance,'subject'to'the'provisions'of'the'law'
! 31!
NATURE'OF'THE'CONTRACT'CASES'–'CHARACTERISTICS'OF'SALES''
CASE'DIGEST'
governing'the'form'of'contracts.'Thus,'the'elements'of'a'contract'of'sale'are'consent,'object,'and'price'in'
money'or'its'equivalent.'It'bears'stressing'that'the'absence'of'any'of'these'essential'elements'negates'the'
existence'of'a'perfected'contract'of'sale.'Sale'is'a'consensual'contract'and'he'who'alleges'it'must'show'its'
existence'by'competent'proof.'
In'an'attempt'to'resurrect'the'lapsed'option,'private'respondent'gave'P300,000.00'to'petitioners'(thru'
Alice'A.'Dizon)'on'the'erroneous'presumption'that'the'said'amount'tendered'would'constitute'a'
perfected'contract'of'sale'pursuant'to'the'contract'of'lease'with'option'to'buy.'There'was'no'valid'consent'
by'the'petitioners'on'the'supposed'sale'entered'into'by'Alice'A.'Dizon,'as'petitioners'alleged'agent,'and'
private'respondent.'The'basis'for'agency'is'representation'and'a'person'dealing'with'an'agent'is'put'upon'
inquiry'and'must'discover'upon'his'peril'the'authority'of'the'agent.''
'As'provided'in'Article'1868'of'the'NCC,'there'was'no'showing'that'petitioners'consented'to'the'act'of'
Alice'A.'Dizon'nor'authorized'her'to'act'on'their'behalf'with'regard'to'her'transaction'with'private'
respondent.'The'most'prudent'thing'private'respondent'should'have'done'was'to'ascertain'the'extent'of'
the'authority'of'Alice'A.'Dizon.'Being'negligent'in'this'regard,'private'respondent'cannot'seek'relief'on'the'
basis'of'a'supposed'agency.'
Both'petitions'are'GRANTED.'The'records'of'the'case'were'remanded'to'the'trial'court'for'the'immediate'
execution'of'the'judgment'of'the'MTC'as'affirmed'in'the'CA.'
However,'petitioners'are'ordered'to'REFUND'to'private'respondent'the'amount'of'P300,000.00'which'
they'received'through'Alice'A.'Dizon'on'June'20,'1975.'
'
MANILA'METAL'CONTAINER'CORP'v.'PNB'(G.R.'No.'166862)'
Petitioner:'MANILA'METAL'CONTAINER'CORP.'
Respondent:'CALLEJO,'SR.,'and'CHICOINAZARIO,'JJ.'PHILIPPINE'NATIONAL'BANK,'DMCIIPROJECT'
DEVELOPERS,'INC.,'
Date:'December'20,'2006'
Ponente:'Callejo,'Sr.'
Facts:'
• Petitioner'was'the'owner'of'a'parcel'of'land'located'in'Mandaluyong'covered'by'Transfer'
• To'secure'a'P900,000.00'loan'it'had'obtained'from'respondent'Philippine'National'Bank'(PNB),'
petitioner'executed'a'real'estate'mortgage'over'the'lot.'Respondent'PNB'later'granted'petitioner'a'
new'credit'accommodation'of'P1,000,000.00;'and,'petitioner'executed'an'Amendment'of'Real'
Estate'Mortgage'over'its'property.'Then,'petitioner'secured'another'loan'of'P653,000.00'from'
respondent'PNB,'payable'in'quarterly'installments'of'P32,650.00,'plus'interests'and'other'charges.'
• Respondent'PNB'filed'a'petition'for'extrajudicial'foreclosure'of'the'real'estate'mortgage'and'
sought'to'have'the'property'sold'at'public'auction'for'P911,532.21,'petitioners'outstanding'
obligation'to'respondent'PNB'plus'interests'and'attorneys'fees.'
• The'property'was'sold'at'public'auction'where'respondent'PNB'was'declared'the'winning'bidder'
for'P1,000,000.00.'The'Certificate'of'Sale'issued'in'its'favor'was'registered'with'RD.'Thus,'the'
period'to'redeem'the'property'was'to'expire'on'February'17,'1984'(a'year'after).'
• Petitioner'sent'a'letter'to'respondent'PNB,'requesting'that'it'be'granted'an'extension'of'time'to'
redeem/repurchase'the'property.'In'its'reply'dated'August'30,'1983,'respondent'PNB'informed'
petitioner'that'the'request'had'been'referred'to'its'Pasay'City'Branch'for'appropriate'action'and'
recommendation.'In'a'letter,'petitioner'reiterated'its'request'for'a'one'year'extension'from'
! 32!
 NATURE'OF'THE'CONTRACT'CASES'–'CHARACTERISTICS'OF'SALES''
CASE'DIGEST'
! !
February'17,'1984'within'which'to'redeem/repurchase'the'property'on'installment'basis.'
Meanwhile,'some'PNB'Pasay'City'Branch'personnel'informed'petitioner'that'as'a'matter'of'policy,'
the'bank'does'not'accept'partial'redemption.'
• Since'petitioner'failed'to'redeem'the'property,'the'RD'cancelled'TCT'No.'32098'and'issued'a'new'
title'in'favor'of'respondent'PNB.'
• Meanwhile,'the'Special'Assets'Management'Department'(SAMD)'had'prepared'a'statement'of'
account,'and'as'of'June'25,'1984'petitioners'obligation'amounted'to'P1,574,560.47.'When'
apprised'of'the'statement'of'account,'petitioner'remitted'P725,000.00'to'respondent'PNB'as'
deposit'to'repurchase,'and'Official'Receipt'No.'978191'was'issued'to'it.'
• The'SAMD'recommended'to'the'management'of'respondent'PNB'that'petitioner'be'allowed'to'
repurchase'the'property'for'P1,574,560.00'but'it'was'rejected.''
• On'the'contrary,'it'was'suggested'that'petitioner'purchase'the'property'for'P2,660,000.00,'its'
minimum'market'value.'Respondent'PNB'gave'petitioner'until'December'15,'1984'to'act'on'the'
proposal;'otherwise,'its'P725,000.00'deposit'would'be'returned'and'the'property'would'be'sold'to'
other'interested'buyers.'Petitioner,'however,'did'not'agree'to'respondent'PNBs'proposal.'Instead,'
it'wrote'another'letter'requesting'for'a'reconsideration.''
• PNB'informed'petitioner'that'the'PNB'Board'of'Directors'had'accepted'petitioners'offer'to'
purchase'the'property,'but'for'P1,931,389.53'in'cash'less'the'P725,000.00'already'deposited'with'
it.'Petitioner'rejected'respondents'proposal'in'a'letter.'It'maintained'that'respondent'PNB'had'
agreed'to'sell'the'property'for'P1,574,560.47,'and'that'since'its'P725,000.00'downpayment'had'
been'accepted,'respondent'PNB'was'proscribed'from'increasing'the'purchase'price'of'the'
property.'
RTC:'
• Petitioner'filed'a'complaint'against'respondent'PNB'for'Annulment'of'Mortgage'and'Mortgage'
Foreclosure,'Delivery'of'Title,'or'Specific'Performance'with'Damages.''
• In'its'Answer,'respondent'PNB'averred'that'it'had'acquired'ownership'over'the'property'after'the'
period'to'redeem'had'elapsed.'It'claimed'that'no'contract'of'sale'was'perfected'between'it'and'
petitioner'after'the'period'to'redeem'the'property'had'expired.'
• While'the'case'was'pending,'respondent'PNB'demanded'that'petitioner'vacate'the'property'but'
petitioners'refused'to'do'so.'
• Petitioner'offered'to'repurchase'the'property'for'P3,500,000.00.'The'offer'was'however'rejected'
by'respondent'PNB.'Then'the'former'offered'to'purchase'the'property'for'P4,250,000.00'in'cash.'
The'offer'was'again'rejected'by'respondent'PNB.'
• The'RTC'rendered'judgment'dismissing'the'amended'complaint'and'respondent'PNBs'
counterclaim.'The'RTC'ruled'that'there'was'no'perfected'contract'of'sale'between'the'parties;'
hence,'petitioner'had'no'cause'of'action'for'specific'performance'against'respondent.''
CA:'
• Meanwhile,'petitioners'Board'of'Directors'approved'Resolution'No.'3I004,'where'it'waived,'
assigned'and'transferred'its'rights'over'the'property'covered'by'TCT'No.'33099'and'TCT'No.'
37025'in'favor'of'Bayani'Gabriel.'Thereafter,'Bayani'Gabriel'executed'a'Deed'of'Assignment'over'
51%'of'the'ownership'and'management'of'the'property'in'favor'of'Reynaldo'Tolentino,'who'later'
moved'for'leave'to'intervene'as'plaintiffIappellant.'The'CA'granted'the'motion'of'Reynaldo'
Tolentino'substituting'petitioner'MMCC,'as'plaintiffIappellant.'
! 33!
NATURE'OF'THE'CONTRACT'CASES'–'CHARACTERISTICS'OF'SALES''
CASE'DIGEST'
• The'CA'rendered'judgment'affirming'the'decision'of'the'RTC.'It'declared'that'petitioner'obviously'
never'agreed'to'the'selling'price'proposed'by'respondent'PNB'(P1,931,389.53)'since'petitioner'
had'kept'on'insisting'that'the'selling'price'should'be'lowered'to'P1,574,560.47.'Clearly'therefore,'
there'was'no'meeting'of'the'minds'between'the'parties'as'to'the'price'or'consideration'of'the'sale.'
• Petitioner'filed'a'motion'for'reconsideration,'which'the'CA'likewise'denied.'Hence,'this'petition.'
'
Issue:'WON'the'petitioner'and'respondent'PNB'had'entered'into'a'perfected'contract'for'petitioner'to'
repurchase'the'property'from'respondent.'
''
Held:'NO.'By'the'contract'of'sale,'one'of'the'contracting'parties'obligates'himself'to'transfer'the'
ownership'of'and'deliver'a'determinate'thing,'and'the'other'to'pay'therefor'a'price'certain'in'money'or'
its'equivalent.'The'absence'of'any'of'the'essential'elements'will'negate'the'existence'of'a'perfected'
contract'of'sale.'As'the'Court'ruled'in'Boston'Bank'of'the'Philippines'v.'Manalo:'
“A'definite'agreement'as'to'the'price'is'an'essential'element'of'a'binding'agreement'to'sell'personal'or'
real'property'because'it'seriously'affects'the'rights'and'obligations'of'the'parties.'Price'is'an'essential'
element'in'the'formation'of'a'binding'and'enforceable'contract'of'sale.'The'fixing'of'the'price'can'never'be'
left'to'the'decision'of'one'of'the'contracting'parties.'But'a'price'fixed'by'one'of'the'contracting'parties,'if'
accepted'by'the'other,'gives'rise'to'a'perfected'sale.”'
A'contract'of'sale'is'consensual'in'nature'and'is'perfected'upon'mere'meeting'of'the'minds.'When'there'is'
merely'an'offer'by'one'party'without'acceptance'of'the'other,'there'is'no'contract.'
The'statement'of'account'prepared'by'the'SAMD'stating'that'the'net'claim'of'respondent'as'of'June'25,'
1984'was'P1,574,560.47'cannot'be'considered'an'unqualified'acceptance'to'petitioners'offer'to'purchase'
the'property.'The'statement'is'but'a'computation'of'the'amount'which'petitioner'was'obliged'to'pay'in'
case'respondent'would'later'agree'to'sell'the'property,'including'interests,'advances'on'insurance'
premium,'advances'on'realty'taxes,'publication'cost,'registration'expenses'and'miscellaneous'expenses.'
There'is'no'evidence'that'the'SAMD'was'authorized'by'respondents'Board'of'Directors'to'accept'
petitioners'offer'and'sell'the'property'for'P1,574,560.47.'Any'acceptance'by'the'SAMD'of'petitioners'offer'
would'not'bind'respondent.''
We'do'not'agree'with'petitioners'contention'that'the'P725,000.00'it'had'remitted'to'respondent'was'
earnest'money'which'could'be'considered'as'proof'of'the'perfection'of'a'contract'of'sale'under'Article'
1482'of'the'New'Civil'Code.'The'provision'reads:'
ART.'1482.'Whenever'earnest'money'is'given'in'a'contract'of'sale,'it'shall'be'considered'as'part'of'
the'price'and'as'proof'of'the'perfection'of'the'contract.'
The'P725,000.00'was'merely'a'deposit'to'be'applied'as'part'of'the'purchase'price'of'the'property,'in'the'
event'that'respondent'would'approve'the'recommendation'of'SAMD'for'respondent'to'accept'petitioners'
offer'to'purchase'the'property'for'P1,574,560.47.'Unless'and'until'the'respondent'accepted'the'offer'on'
these'terms,'no'perfected'contract'of'sale'would'arise.'Absent'proof'of'the'concurrence'of'all'the'essential'
elements'of'a'contract'of'sale,'the'giving'of'earnest'money'cannot'establish'the'existence'of'a'perfected'
contract'of'sale.'
The'petition'is'DENIED'and'the'decision'is'AFFIRMED.'
ANG'YU'ASUNCION'v.'CA'(G.R.'No.'109125)''
Petitioners:'ANG'YU'ASUNCION,'ARTHUR'GO'AND'KEH'TIONG'
Respondents:'CA'and'BUEN'REALTY'DEVELOPMENT'CORPORATION'
Date:'December'2,'1994'
Ponente:'Vitug'
'
! 34!
 NATURE'OF'THE'CONTRACT'CASES'–'CHARACTERISTICS'OF'SALES''
CASE'DIGEST'
! !
Facts:'
RTC:'
• A'Second'Amended'Complaint'for'Specific'Performance'was'filed'by'Ang'Yu'Asuncion'and'Keh'
Tiong,'et'al.,'against'Bobby'Cu'Unjieng,'Rose'Cu'Unjieng'and'Jose'Tan'before'the'RTC'alleging,'
among'others,'that'plaintiffs'are'tenants'or'lessees'of'residential'and'commercial'spaces'owned'by'
defendants.'
• Petitioners'alleged'that'on'several'occasions,'defendants'informed'plaintiffs'that'they'are'offering'
to'sell'the'premises'and'are'giving'them'priority'to'acquire'the'same.'
• During'the'negotiations,'Bobby'Cu'Unjieng'offered'a'price'of'P6Imillion'while'plaintiffs'made'a'
counter'offer'of'P5Imillion.'
• Plaintiffs'thereafter'asked'the'defendants'to'put'their'offer'in'writing'to'which'request'defendants'
acceded.'
• In'reply'to'defendant's'letter,'plaintiffs'asked'that'they'specify'the'terms'and'conditions'of'the'
offer'to'sell.'There'was'no'reply'so'they'sent'another'letter'with'the'same'request.'
• Since'defendants'failed'to'specify'the'terms'and'conditions'of'the'offer'to'sell'and'because'of'
information'received'that'defendants'were'about'to'sell'the'property,'plaintiffs'were'compelled'to'
file'the'complaint'to'compel'defendants'to'sell'the'property'to'them.'
• Defendants'filed'their'answer'denying'the'material'allegations'of'the'complaint'and'interposing'a'
special'defense'of'lack'of'cause'of'action.'
• Then,'defendants'filed'a'motion'for'summary'judgment'which'was'granted'by'the'lower'court.''
• The'RTC'found'that'defendants''offer'to'sell'was'never'accepted'by'the'plaintiffs'for'the'reason'
that'the'parties'did'not'agree'upon'the'terms'and'conditions'of'the'proposed'sale,'hence,'there'
was'no'contract'of'sale'at'all.'
CA:'
• Plaintiff'appealed'to'the'CA'and'it'affirmed'with'modification'the'lower'court's'judgment,'stating'
that'“the'court'a'quo'in'the'aforestated'decision'gave'the'plaintiffsIappellants'the'right'of'first'
refusal'only'if'the'property'is'sold'for'a'purchase'price'of'Eleven'Million'pesos'or'lower;'however,'
considering'the'mercurial'and'uncertain'forces'in'our'market'economy'today.'We'find'no'reason'
not'to'grant'the'same'right'of'first'refusal'to'herein'appellants'in'the'event'that'the'subject'
property'is'sold'for'a'price'in'excess'of'Eleven'Million'pesos.'No'pronouncement'as'to'costs.''
SC:'
• The'SC'denied'the'appeal'"for'insufficiency'in'form'and'substances".'
• While'the'case'was'pending'in'the'SC,'the'Cu'Unjieng'spouses'executed'a'Deed'of'Sale'transferring'
the'property'in'question'to'herein'petitioner'Buen'Realty'and'Development'Corporation,'with'
terms'and'conditions.'
• As'a'consequence'of'the'sale,'TCT'No.'105254/TI881'in'the'name'of'the'Cu'Unjieng'spouses'was'
cancelled'and,'in'lieu'thereof,'TCT'No.'195816'was'issued'in'the'name'of'petitioner.'
• Petitioner'as'the'new'owner'of'the'subject'property'wrote'a'letter'to'the'lessees'demanding'that'
the'latter'vacate'the'premises.'
• The'lessees'replied'that'petitioner'brought'the'property'subject'to'the'notice'of'lis'pendens'
regarding'Civil'Case'No.'87I41058'annotated'on'TCT'No.'105254/TI881'in'the'name'of'the'Cu'
Unjiengs.'
! 35!
NATURE'OF'THE'CONTRACT'CASES'–'CHARACTERISTICS'OF'SALES''
CASE'DIGEST'
RTC:'
• The'lessees'filed'a'Motion'for'Execution'of'the'decision'of'the'RTC'as'modified'by'the'CA.'
Respondent'Judge'then'granted'it'and'ordered'the'defendants'to'execute'the'necessary'Deed'of'
Sale'of'the'property'in'litigation'in'favor'of'plaintiffs'Ang'Yu'Asuncion,'Keh'Tiong'and'Arthur'Go'
for'the'consideration'of'P15'Million'pesos'in'recognition'of'plaintiffs''right'of'first'refusal'and'that'
a'new'Transfer'Certificate'of'Title'be'issued'in'favor'of'the'buyer.'All'previous'transactions'
involving'the'same'property'notwithstanding'the'issuance'of'another'title'to'Buen'Realty'
Corporation,'was'set'aside'as'having'been'executed'in'bad'faith.'
CA:'
• The'CA,'on'appeal'to'it'by'private'respondent,'set'aside'and'declared'without'force'and'effect'the'
above'questioned'orders'of'the'court'a'quo.'
SC:'
• In'this'petition'for'review'on'certiorari,'petitioners'contend'that'Buen'Realty'can'be'held'bound'by'
the'writ'of'execution'by'virtue'of'the'notice'of'lis'pendens,'carried'over'on'TCT'No.'195816'issued'
in'the'name'of'Buen'Realty,'at'the'time'of'the'latter's'purchase'of'the'property'from'the'Cu'
Unjiengs.'
'
Issue:'WON'the'right'of'first'refusal'can'be'deemed'a'perfected'contract'of'sale'
'
Held:'NO.'In'the'law'on'sales,'the'soIcalled'"right'of'first'refusal"'is'an'innovative'juridical'relation.'
Needless'to'point'out,'it'cannot'be'deemed'a'perfected'contract'of'sale'under'Article'1458'of'the'Civil'
Code.'Neither'can'the'right'of'first'refusal,'understood'in'its'normal'concept,'per'se'be'brought'within'the'
purview'of'an'option'under'the'second'paragraph'of'Article'1479,'aforequoted,'or'possibly'of'an'offer'
under'Article'13199'of'the'same'Code.''
An'option'or'an'offer'would'require,'among'other'things,'a'clear'certainty'on'both'the'object'and'the'
cause'or'consideration'of'the'envisioned'contract.'In'a'right'of'first'refusal,'while'the'object'might'be'
made'determinate,'the'exercise'of'the'right,'however,'would'be'dependent'not'only'on'the'
grantor's'eventual'intention'to'enter'into'a'binding'juridical'relation'with'another'but'also'on'
terms,'including'the'price,'that'obviously'are'yet'to'be'later'firmed'up.'Prior'thereto,'it'can'at'best'be'
so'described'as'merely'belonging'to'a'class'of'preparatory'juridical'relations'governed'not'by'contracts'
(since'the'essential'elements'to'establish'the'vinculum'juris'would'still'be'indefinite'and'inconclusive)'
but'by,'among'other'laws'of'general'application,'the'pertinent'scattered'provisions'of'the'Civil'Code'on'
human'conduct.'
Even'on'the'premise'that'such'right'of'first'refusal'has'been'decreed'under'a'final'judgment,'like'here,'its'
breach'cannot'justify'correspondingly'an'issuance'of'a'writ'of'execution'under'a'judgment'that'merely'
recognizes'its'existence,'nor'would'it'sanction'an'action'for'specific'performance'without'thereby'
negating'the'indispensable'element'of'consensuality'in'the'perfection'of'contracts.''
The'final'judgment'in'Civil'Case'No.'87I41058,'it'must'be'stressed,'has'merely'accorded'a'"right'of'first'
refusal"'in'favor'of'petitioners.'The'consequence'of'such'a'declaration'entails'no'more'than'what'has'
heretofore'been'said.'In'fine,'if,'as'it'is'here'so'conveyed'to'us,'petitioners'are'aggrieved'by'the'failure'
of'private'respondents'to'honor'the'right'of'first'refusal,'the'remedy'is'not'a'writ'of'execution'on'
the'judgment,'since'there'is'none'to'execute,'but'an'action'for'damages'in'a'proper'forum'for'the'
purpose.'
! 36!
 NATURE'OF'THE'CONTRACT'CASES'–'CHARACTERISTICS'OF'SALES''
CASE'DIGEST'
! !
The'questioned'writ'of'execution'is'different'with'the'decision'of'RTC'as'modified'by'this'Court.'As'
already'stated,'there'was'nothing'in'said'decision'that'decreed'the'execution'of'a'deed'of'sale'between'
the'Cu'Unjiengs'and'respondent'lessees,'or'the'fixing'of'the'price'of'the'sale,'or'the'cancellation'of'title'in'
the'name'of'petitioner.'
It'is'likewise'quite'obvious'to'the'Court'that'the'decision'in'Civil'Case'No.'87I41058'could'not'have'
decreed'at'the'time'the'execution'of'any'deed'of'sale'between'the'Cu'Unjiengs'and'petitioners.'
' '
' days'from'receipt,'of'the'downpayment'of'P100,000.00'plus'interest'from'the'time'he'paid'it'and'
TOYOTA'SHAW'v.'CA'(G.R.'No.'LI116650)''
Petitioner:'TOYOTA'SHAW,'INC.'
Respondents:'CA'and'LUNA'L.'SOSA'
Date:'May'23,'1995'
Ponente:'Davide,'Jr.'
'
Facts:'
• Luna'L.'Sosa'wanted'to'purchase'a'Toyota'Lite'Ace.'Sosa'and'his'son,'Gilbert,'went'to'the'Toyota'
office'at'Shaw'Boulevard,'Pasig,'Metro'Manila.'There'they'met'Popong'Bernardo,'a'sales'
representative'of'Toyota.'
• Sosa'emphasized'to'Bernardo'that'he'needed'the'Lite'Ace'not'later'than'17'June'1989'because'he,'
his'family,'and'a'balikbayan'guest'would'use'it'on'18'June'1989'to'go'to'Marinduque,'his'home'
province,'where'he'would'celebrate'his'birthday'on'the'19th'of'June.''
• Bernardo'assured'Sosa'that'a'unit'would'be'ready'for'pick'up'at'10:00'a.m.'on'17'June'1989.'
Bernardo'then'signed'the'document'entitiled'"Agreements'Between'Mr.'Sosa'&'Popong'Bernardo'
of'Toyota'Shaw,'Inc."'It'was'also'agreed'upon'by'the'parties'that'the'balance'of'the'purchase'price'
would'be'paid'by'credit'financing'through'B.A.'Finance,'and'for'this'Gilbert,'on'behalf'of'his'father,'
signed'the'documents'of'Toyota'and'B.A.'Finance'pertaining'to'the'application'for'financing.'
• The'next'day,'Sosa'and'Gilbert'went'to'Toyota'to'deliver'the'downpayment'of'P100,000.00.'They'
met'Bernardo'who'then'accomplished'a'printed'Vehicle'Sales'Proposal'(VSP)'No.'928,2'on'which'
Gilbert'signed'under'the'subheading'CONFORME.''
• The'document'shows'that'the'customer's'name'is'"MR.'LUNA'SOSA"'with'home'address'at'No.'
2316'Guijo'Street,'United'Parañaque'II;'that'the'model'series'of'the'vehicle'is'a'"Lite'Ace'1500"'
described'as'"4'Dr'minibus";'that'payment'is'by'"installment,"'to'be'financed'by'"B.A.,"'with'the'
initial'cash'outlay'and'that'the'"BALANCE'TO'BE'FINANCED"'is'"P274,137.00."'The'spaces'
provided'for'"Delivery'Terms"'were'not'filledIup.'It'also'contains'the'conditions.'
• Rodrigo'Quirante,'the'Sales'Supervisor'of'Bernardo,'checked'and'approved'the'VSP.'
• On'17'June'1989,'at'around'9:30'a.m.,'Bernardo'called'Gilbert'to'inform'him'that'the'vehicle'would'
not'be'ready'for'pick'up'at'10:00'a.m.'as'previously'agreed'upon'but'at'2:00'p.m.'that'same'day.''
• At'2:00'p.m.,'Sosa'and'Gilbert'met'Bernardo'at'the'latter's'office.'According'to'Sosa,'Bernardo'
informed'them'that'the'Lite'Ace'was'being'readied'for'delivery.''
• But'after'waiting'for'about'an'hour,'Bernardo'told'them'that'the'car'could'not'be'delivered'
because'"nasulot'ang'unit'ng'ibang'malakas."'
• Toyota'contends,'however,'that'the'Lite'Ace'was'not'delivered'to'Sosa'because'of'the'disapproval'
by'B.A.'Finance'of'the'credit'financing'application'of'Sosa.'It'further'alleged'that'a'particular'unit'
had'already'been'reserved'and'earmarked'for'Sosa'but'could'not'be'released'due'to'the'
! 37!
NATURE'OF'THE'CONTRACT'CASES'–'CHARACTERISTICS'OF'SALES''
CASE'DIGEST'
uncertainty'of'payment'of'the'balance'of'the'purchase'price.'Toyota'then'gave'Sosa'the'option'to'
purchase'the'unit'by'paying'the'full'purchase'price'in'cash'but'Sosa'refused.'
• Sosa'asked'that'his'downpayment'be'refunded.'Toyota'did'so'on'the'very'same'day'by'issuing'a'
Far'East'Bank'check'for'the'full'amount'of'P100,000.00,'the'receipt'of'which'was'shown'by'a'check'
voucher'of'Toyota,'which'Sosa'signed'with'the'reservation,'"without'prejudice'to'our'future'claims'
for'damages."'
• Thereafter,'Sosa'sent'two'letters'to'Toyota.'In'the'first'letter,'he'demanded'the'refund,'within'five'
the'payment'of'damages'with'a'warning'that'in'case'of'Toyota's'failure'to'do'so'he'would'be'
constrained'to'take'legal'action.'The'second,'signed'by'M.'O.'Caballes,'Sosa's'counsel,'demanded'
1M'representing'interest'and'damages,'again,'with'a'warning'that'legal'action'would'be'taken'if'
payment'was'not'made'within'three'days.''
• Toyota's'counsel'answered'through'a'letter'refusing'to'accede'to'the'demands'of'Sosa.''
RTC:'
• But'even'before'this'answer'was'made'and'received'by'Sosa,'the'latter'filed'the'RTC'a'complaint'
against'Toyota'for'damages'under'Articles'19'and'21'of'the'Civil'Code'in'the'total'amount'of'
P1,230,000.00.''As'a'result'of'defendant's'failure'and/or'refusal'to'deliver'the'vehicle'to'plaintiff,'
plaintiff'suffered'embarrassment,'humiliation,'ridicule,'mental'anguish'and'sleepless'nights.'
• In'its'answer'to'the'complaint,'Toyota'alleged'that'no'sale'was'entered'into'between'it'and'Sosa,'
that'Bernardo'had'no'authority'to'sign'Exhibit'"A"'for'and'in'its'behalf,'and'that'Bernardo'signed'
Exhibit'"A"'in'his'personal'capacity.'
• After'trial,'the'RTC'rendered'a'decision'in'favor'of'Sosa.'It'ruled'that'there'was'a'valid'perfected'
contract'of'sale'between'Sosa'and'Toyota'which'bound'Toyota'to'deliver'the'vehicle'to'Sosa,'and'
further'agreed'with'Sosa'that'Toyota'acted'in'bad'faith'in'selling'to'another'the'unit'already'
reserved'for'him.'
CA:'
• Toyota'appealed'to'the'CA'but'it'affirmed'in'toto'the'lower'court’s'decision.'
• Hence,'this'petition.'
'
Issue/s:'(1)'WON'the'standard'VSP'was'the'true'and'documented'understanding'of'the'parties'which'
would'have'led'to'the'ultimate'contract'of'sale'
(2)'WON'Sosa'has'any'legal'and'demandable'right'to'the'delivery'of'the'vehicle'despite'the'nonIpayment'
of'the'consideration'and'the'nonIapproval'of'his'credit'application'by'B.A.'Finance'
(2)'WON'Toyota'may'be'held'liable'for'damages.'
'
Held:'(1)'NO.'Article'1458'of'the'Civil'Code'defines'a'contract'of'sale'as'follows:'
Art.'1458.'By'the'contract'of'sale'one'of'the'contracting'parties'obligates'himself'to'transfer'
the'ownership'of'and'to'deliver'a'determinate'thing,'and'the'other'to'pay'therefor'a'price'
certain'in'money'or'its'equivalent.'
A'contract'of'sale'may'be'absolute'or'conditional.'
and'Article'1475'specifically'provides'when'it'is'deemed'perfected:'
Art.'1475.'The'contract'of'sale'is'perfected'at'the'moment'there'is'a'meeting'of'minds'upon'
the'thing'which'is'the'object'of'the'contract'and'upon'the'price.'
! 38!
 NATURE'OF'THE'CONTRACT'CASES'–'CHARACTERISTICS'OF'SALES''
CASE'DIGEST'
! !
From'that'moment,'the'parties'may'reciprocally'demand'performance,'subject'to'the'provisions'of'the'
law'governing'the'form'of'contracts.'
It'is'not'a'contract'of'sale.'No'obligation'on'the'part'of'Toyota'to'transfer'ownership'of'a'determinate'
thing'to'Sosa'and'no'correlative'obligation'on'the'part'of'the'latter'to'pay'therefor'a'price'certain'appears'
therein.'The'provision'on'the'downpayment'of'P100,000.00'made'no'specific'reference'to'a'sale'of'
a'vehicle.'If'it'was'intended'for'a'contract'of'sale,'it'could'only'refer'to'a'sale'on'installment'basis,'as'the'
VSP'executed'the'following'day'confirmed.'But'nothing'was'mentioned'about'the'full'purchase'price'and'
the'manner'the'installments'were'to'be'paid.'
This'Court'had'already'ruled'that'a'definite'agreement'on'the'manner'of'payment'of'the'price'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'price.'Definiteness'as'to'the'price'is'an'
essential'element'of'a'binding'agreement'to'sell'personal'property.''
Moreover,'Exhibit'"A"'shows'the'absence'of'a'meeting'of'minds'between'Toyota'and'Sosa.'For'one'
thing,'Sosa'did'not'even'sign'it.'For'another,'Sosa'was'well'aware'from'its'title,'written'in'bold'letters,'
viz.'“AGREEMENTS'BETWEEN'MR.'SOSA'&'POPONG'BERNARDO'OF'TOYOTA'SHAW,'INC.”'that'he'was'
not'dealing'with'Toyota'but'with'Popong'Bernardo'and'that'the'latter'did'not'misrepresent'that'he'had'
the'authority'to'sell'any'Toyota'vehicle.'He'knew'that'Bernardo'was'only'a'sales'representative'of'Toyota'
and'hence'a'mere'agent'of'the'latter.'It'was'incumbent'upon'Sosa'to'act'with'ordinary'prudence'and'
reasonable'diligence'to'know'the'extent'of'Bernardo's'authority'as'an'agent'in'respect'of'contracts'to'sell'
Toyota's'vehicles.'A'person'dealing'with'an'agent'is'put'upon'inquiry'and'must'discover'upon'his'peril'
the'authority'of'the'agent.'
At'the'most,'Exhibit'"A"'may'be'considered'as'part'of'the'initial'phase'of'the'generation'or'negotiation'
stage'of'a'contract'of'sale.''
(2)'NO.'Accordingly,'in'a'sale'on'installment'basis'which'is'financed'by'a'financing'company,'three'parties'
are'thus'involved:'the'buyer'who'executes'a'note'or'notes'for'the'unpaid'balance'of'the'price'of'the'thing'
purchased'on'installment,'the'seller'who'assigns'the'notes'or'discounts'them'with'a'financing'company,'
and'the'financing'company'which'is'subrogated'in'the'place'of'the'seller,'as'the'creditor'of'the'
installment'buyer.'Since'B.A.'Finance'did'not'approve'Sosa's'application,'there'was'then'no'meeting'of'
minds'on'the'sale'on'installment'basis.'
(3)'The'award'then'of'moral'and'exemplary'damages'and'attorney's'fees'and'costs'of'suit'is'without'legal'
basis.'Besides,'the'only'ground'upon'which'Sosa'claimed'moral'damages'is'that'since'it'was'known'to'his'
friends,'townmates,'and'relatives'that'he'was'buying'a'Toyota'Lite'Ace'which'they'expected'to'see'on'his'
birthday,'he'suffered'humiliation,'shame,'and'sleepless'nights'when'the'van'was'not'delivered.'The'van'
became'the'subject'matter'of'talks'during'his'celebration'that'he'may'not'have'paid'for'it,'and'this'
created'an'impression'against'his'business'standing'and'reputation.'At'the'bottom'of'this'claim'is'nothing'
but'misplaced'pride'and'ego.'
Since'Sosa'is'not'entitled'to'moral'damages'and'there'being'no'award'for'temperate,'liquidated,'or'
compensatory'damages,'he'is'likewise'not'entitled'to'exemplary'damages.'
The'petition'is'GRANTED.'The'challenged'decision'of'the'CA'and'the'RTC'are'REVERSED'and'SET'ASIDE'
and'the'complaint'in'Civil'Case'No.'89I14'is'DISMISSED.'The'counterclaim'therein'is'likewise'DISMISSED.' '
' Under'Article'712'of'the'Civil'Code,'the'modes'of'acquiring'ownership'are'generally'classified'into'two'
ACAP'vs.'COURT'OF'APPEALS'
Petitioner:'Teodoro'Acap'
Respondent:'Court'of'Appeals'and'Edy'Delos'Reyes'(private'respondent)'
! 39!
NATURE'OF'THE'CONTRACT'CASES'–'CHARACTERISTICS'OF'SALES''
CASE'DIGEST'
Date'of'Promugation:'December'7,'1995'
Ponente:'Padilla,'J.'
Facts:''
• Lot'No.'1130'was'issued'a'title'and'registered'in'the'name'of'spouses'Santiago'Vasquez'and'
Lorenza'Oruma.'After'both'spouses'died,'their'only'son'Felixberto'inherited'the'lot.'
• In'1975,'Felixberto'executed'a'duly'notarized'document'entitled'"Declaration'of'Heirship'and'
Deed'of'Absolute'Sale"'in'favor'of'Cosme'Pido.'
• Prior'to'this,'since'1960,'petitioner'Teodoro'Acap'had'been'the'tenant'of'a'portion'of'the'said'land.'
When'ownership'was'transferred'by'Felixberto'to'Cosme'Pido,'Acap'continued'to'be'the'
registered'tenant'and'religiously'paid'his'leasehold'rentals'to'Pido'and'thereafter,'upon'Pido's'
death,'to'his'widow'Laurenciana.'
• Controversy'began'when'Pido'died'intestate.'Pido’s'surviving'heirs'executed'a'signed'and'
notarized'document:'"Declaration'of'Heirship'and'Waiver'of'Rights'of'Lot'No.'1130"'
o Where'the'heirs'“waive,'quitclaim'all'our'rights,'interests'and'participation'over'the'said'
parcel'of'land'in'favor'of'EDY'DE'LOS'REYES.”'
• Private'respondent'Edy'de'los'Reyes'filed'the'said'document'with'the'Registry'of'Deeds'as'part'of'
a'notice(of(an(adverse(claim'against'the'original'certificate'of'title.'(Title'still'named'under'Vasquez'
spouses)'
• Private'respondent'Edy'de'los'Reyes'informed'petitioner'Acap'that'he'is'the'new'owner'and'
payments'should'be'made'to'him.'De'los'Reyes'also'alleged'that'he'and'Acap'had'an'oral'
agreement'where'10'cavans'of'palay'will'be'delivered'to'him'per'anum'as'payment.''
o 1982:'Acap'complied'
o 1983'and'succeeding'years:'Acap'did'not'comply'
! Reason:'He'does'not'recognize'Private'respondent’s'ownership'over'the'land.''
• Private'respondent'De'los'Reyes'filed'a'complaint'for'recovery'of'possession'and'damages.'
• Lower'court:'In'favor'of'private'respondent'De'los'Reyes.'
o Evidence'had'established'that'the'subject'land'was'"sold"'by'the'heirs'of'Cosme'Pido'to'
private'respondent'de'los'Reyes.'
• CA:'Concurred'–'private'respondent'acquired'ownership'of'the'lot'and'payments'should'be'made'
to'him.'
o Declaration'of'Heirship'and'Waiver'of'Rights'having'been'notarized,'stands'as'prima'facie'
proof'of'private'respondent's'ownership'of'the'land'in'dispute.'
Issue:''W/N'the'subject'Declaration'of'Heirship'and'Waiver'of'Rights'is'a'recognized'mode'of'acquiring'
ownership'and'can'be'considered'a'deed'of'sale'in'favor'of'private'respondent.'
Held:' No.'An'asserted'right'or'claim'to'ownership'or'a'real'right'over'a'thing'arising'from'a'juridical'act,'
however'justified,'is'not'per'se'sufficient'to'give'rise'to'ownership'over'the'res.'That'right'or'title'must'be'
completed'by'fulfilling'certain'conditions'imposed'by'law.'Hence,'ownership(and(real(rights(are(acquired(
only(pursuant(to(a(legal(mode(or(process.(While(title(is(the(juridical(justification,(mode(is(the(actual(process(
of(acquisition(or(transfer(of(ownership(over(a(thing(in(question.(
(2)'classes,'namely,'the'original'mode'(i.e.,'through'occupation,'acquisitive'prescription,'law'or'
intellectual'creation)'and'the'derivative'mode'(i.e.,'through'succession'mortis'causa'or'tradition'as'a'
result'of'certain'contracts,'such'as'sale,'barter,'donation,'assignment'or'mutuum).'
In'the'case'at'bar,'the'trial'court'was'obviously'confused'as'to'the'nature'and'effect'of'the'Declaration'of'
Heirship'and'Waiver'of'Rights,'equating'the'same'with'a'contract'(deed)'of'sale.'They'are'not'the'same.'
! 40!
 NATURE'OF'THE'CONTRACT'CASES'–'CHARACTERISTICS'OF'SALES''
CASE'DIGEST'
! !
In'a'Contract'of'Sale,'one'of'the'contracting'parties'obligates'himself'to'transfer'the'ownership'of'and'to'
deliver'a'determinate'thing,'and'the'other'party'to'pay'a'price'certain'in'money'or'its'equivalent.'Upon'
the'other'hand,'a'declaration'of'heirship'and'waiver'of'rights'operates'as'a'public'instrument'when'filed'
with'the'Registry'of'Deeds'whereby'the'intestate'heirs'adjudicate'and'divide'the'estate'left'by'the'
decedent'among'themselves'as'they'see'fit.'It'is'in'effect'an'extrajudicial'settlement'between'the'heirs.'
Hence,'there'is'a'marked'difference'between'a'sale(of'hereditary'rights'and'a'waiver(of'hereditary'rights.'
The(sale(of'hereditary'rights'presumes'the'existence'of'a'contract'or'deed'of'sale'between'the'parties.'A'
waiver(of'hereditary'rights'is'a'mode'of'extinction'of'ownership'where'there'is'an'abdication'or'
intentional'relinquishment'of'a'known'right'with'knowledge'of'its'existence'and'intention'to'relinquish'it,'
in'favor'of'other'persons'who'are'coIheirs'in'the'succession.'Private'respondent,'being'then'a'stranger'to'
the'succession'of'Cosme'Pido,'cannot'conclusively'claim'ownership'over'the'subject'lot'on'the'sole'basis'
of'the'waiver'document'which'neither'recites'the'elements'of'either'a'sale,'or'a'donation,'or'any'other'
derivative'mode'of'acquiring'ownership.'
x'x'x'
A'notice'of'adverse'claim,'by'its'nature,'does'not'however'prove'private'respondent's'ownership'over'the'
tenanted'lot.'"A'notice'of'adverse'claim'is'nothing'but'a'notice'of'a'claim'adverse'to'the'registered'owner,'
the'validity'of'which'is'yet'to'be'established'in'court'at'some'future'date,'and'is'no'better'than'a'notice'of'
lis'pendens'which'is'a'notice'of'a'case'already'pending'in'court."'
It'is'to'be'noted'that'while'the'existence'of'said'adverse'claim'was'duly'proven,'there'is'no'evidence'
whatsoever'that'a'deed'of'sale'was'executed'between'Cosme'Pido's'heirs'and'private'respondent'
transferring'the'rights'of'Pido's'heirs'to'the'land'in'favor'of'private'respondent.'Private'respondent's'
right'or'interest'therefore'in'the'tenanted'lot'remains'an'adverse'claim'which'cannot'by'itself'be'
sufficient'to'cancel'the'OCT'to'the'land'and'title'the'same'in'private'respondent's'name.'
' '
' established'before'it'may'be'admitted'in'evidence.'Notarial'documents,'however,'may'be'presented'in'
' evidence'without'further'proof'of'their'authenticity,'since'the'certificate'of'acknowledgment'is'prima'
ALCANTARAbDAUS'vs.'DE'LEON'
Petitioner:'Aurora'AlcantaraIDaus'
Respondent:'Spouses'Hermoso'and'Socorro'De'Leon'
Date'of'Promugation:'June'16,'2003'
Ponente:'Panganiban,'J.'
Facts:''
• Respondent'Spouses'De'Leon'alleged'that'they'are'the'owners'of'a'parcel'of'land'in'San'Manuel,'
Pangasinan.'
o Land'was'inherited'by'Respondent'Hermoso'De'Leon'from'his'father'by'virtue'of'Deed'of'
ExtraIJudicial'Partition.'
• Respondent'spouses'De'Leon'engaged'the'services'of'the'late'Atty.'Florencio'Juan'to'take'care'of'
the'documents'of'the'properties'of'his'parents.'Atty.'Juan'let'them'sign'documents.'
• After'the'death'of'Atty.'Juan,'some'documents'surfaced'and'revealed'that'their'properties'had'
been'conveyed'by'sale'or'quitclaim'to'Hermoso’s'brothers'and'sisters,'and'to'Atty.'Juan'and'his'
sisters,'when'in'fact,'no'such'conveyances'were'ever'intended'by'them.'
o Respondent'Hermoso'De'Leon’s'signature'was'forged'in'the'Deed'of'ExtraIjudicial'Partition'
with'Quitclaim'made'in'favor'of'Rodolfo'de'Leon.''
• Later,'respondent'spouses'discovered'that'the'land'in'question'was'sold'by'Rodolfo'de'Leon'to'
Petitioner'Aurora'Alcantara.'
! 41!
NATURE'OF'THE'CONTRACT'CASES'–'CHARACTERISTICS'OF'SALES''
CASE'DIGEST'
• Respondent'spouses'demanded'annulment'of'the'document'and'reconveyance.'
• Petitioner'Alcantara'refused.'
o Reason:'she'bought'the'land'in'question'in'good'faith;'and'has'been'in'continuous,'public,'
peaceful,'open'possession'over'the'same'and'has'been'appropriating'the'produce'thereof'
without'objection'from'anyone'since'Dec.'1975.'
• RTC:'In'favor'of'Petitioner'AlcantaraIDaus'
o Reason:'Laches.'Because'more'than'18'years'had'passed'since'the'land'was'sold.'
o Also,'because'the'Deed'of'Extrajudicial'Partition'was'notarized,'thereby'presumed'
authentic.'
• CA:'Reversed'RTC.'
o Reason:'Laches'do'not'apply.'Defense'of'good'faith'is'invalid'as'respondent’s'signature'was'
forged'and'Rodolfo'De'Leon'was'not'the'real'owner'at'the'time'of'sale.'
Issue:' (1)'W/N'the'evidentiary'weight'of'the'Deed'of'Extrajudicial'Partition'with'Quitclaim,'executed'by'
Respondent'Hermoso'de'Leon'in'favor'of'Rodolfo'de'Leon'was'overcome'by'more'than'a'preponderance'
of'evidence'of'respondents.'
' (2)'W/N'the'Deed'of'Absolute'Sale'executed'by'Rodolfo'de'Leon'in'favor'of'petitioner'AlcantaraI
Daus'was'perfected'and'binding'upon'the'parties'therein.' '
' (3)'W/N'the'possession'of'Petitioner'AlcantaraIDaus'including'her'predecessorIinIinterest'
Rodolfo'de'Leon'over'the'land'in'question'was'in'good'faith.'
' (4)'W/N'the'case'initiated'and'filed'by'respondent'spouses'on'February'24,'1993'before'the'trial'
court'has'prescribed'and'respondents'are'guilty'of'laches.'
Held:''
(1)'No.'As'a'general'rule,'the'due'execution'and'authenticity'of'a'document'must'be'reasonably'
facie'evidence'of'the'execution'of'the'instrument'or'document'involved.'To'contradict'facts'in'a'notarial'
document'and'the'presumption'of'regularity'in'its'favor,'the'evidence'must'be'clear,'convincing'and'more'
than'merely'preponderant.'
'A'comparison'of'the'genuine'signatures'of'Hermoso'de'Leon'with'his'purported'signature'on'the'Deed'of'
Extrajudicial'Partition'with'Quitclaim'will'readily'reveal'that'the'latter'is'a'forgery.'Without'the'
corroborative'testimony'of'the'attesting'witnesses,'the'lone'account'of'the'notary'regarding'the'due'
execution'of'the'Deed'is'insufficient'to'sustain'the'authenticity'of'this'document.'He'can'hardly'be'
expected'to'dispute'the'authenticity'of'the'very'Deed'he'notarized.'For'this'reason,'his'testimony'was'II'
as'it'should'be'IIminutely'scrutinized'by'the'appellate'court,'and'was'found'wanting.'
'
' (2)'No,'it'is'not'binding'upon'the'parties.'A'contract'of'sale'is'consensual.'It'is'perfected'by'
mere'consent,'upon'a'meeting'of'the'minds'on'the'offer'and'the'acceptance'thereof'based'on'subject'
matter,'price'and'terms'of'payment.'At'this'stage,'the'seller’s'ownership'of'the'thing'sold'is'not'an'
element'in'the'perfection'of'the'contract'of'sale.'
The'contract,'however,'creates'an'obligation'on'the'part'of'the'seller'to'transfer'ownership'and'to'deliver'
the'subject'matter'of'the'contract.'It(is(during(the(delivery(that(the(law(requires(the(seller(to(have(the(right(
to(transfer(ownership(of(the(thing(sold.'In'general,'a'perfected'contract'of'sale'cannot'be'challenged'on'the'
ground'of'the'seller’s'nonIownership'of'the'thing'sold'at'the'time'of'the'perfection'of'the'contract.'
Further,'even'after'the'contract'of'sale'has'been'perfected'between'the'parties,'its'consummation'by'
delivery'is'yet'another'matter.'It'is'through'tradition'or'delivery'that'the'buyer'acquires'the'real'right'of'
ownership'over'the'thing'sold.'
! 42!
 NATURE'OF'THE'CONTRACT'CASES'–'CHARACTERISTICS'OF'SALES''
CASE'DIGEST'
! !
Undisputed'is'the'fact'that'at'the'time'of'the'sale,'Rodolfo'de'Leon'was'not'the'owner'of'the'land'he'
delivered'to'petitioner.'Thus,'the'consummation'of'the'contract'and'the'consequent'transfer'of'
ownership'would'depend'on'whether'he'subsequently'acquired'ownership'of'the'land'in'accordance'
with'Article'1434'of'the'Civil'Code.''
IN'SHORT:'Extrajudicial'Partition'and'Quitclaim'='forged'and'inauthentic;'the'consummation'of'the'
contract'and'consequent'transfer'of'ownership'AKA'delivery'='also'invalid'and'not'binding.'(Dahil'hindi'
sya'[Rodolfo'De'Leon]'ang'mayIari'AT'THE'TIME'of'transfer)'
' o MR'filed'by'Respondent'spouses:'Denied'
' (3)'No,'acquisition'was'not'in'good'faith.'It'is'wellIsettled'that'no'title'to'registered'land'in'
derogation'of'that'of'the'registered'owner'shall'be'acquired'by'prescription'or'adverse'possession.'
Neither'can'prescription'be'allowed'against'the'hereditary'successors'of'the'registered'owner,'because'
they'merely'step'into'the'shoes'of'the'decedent'and'are'merely'the'continuation'of'the'personality'of'
their'predecessor'in'interest.'Consequently,'since'a'certificate'of'registration'covers'it,'the'disputed'land'
cannot'be'acquired'by'prescription'regardless'of'petitioner’s'good'faith.'
' Issue:'W/N'acceptance'of'earnest'money'constitutes'perfected'contract'of'sale.'
' (4)'No,'not'guilty'of'laches.'NCC'Article'1141'provides'that'real'actions'over'immovable'
properties'prescribe'after'30'years.'This'period'for'filing'an'action'is'interrupted'when'a'complaint'is'
filed'in'court.'Rodolfo'de'Leon'alleged'that'the'land'had'been'allocated'to'him'by'his'brother'Hermoso'de'
Leon'in'March'1963,'but'that'the'Deed'of'Extrajudicial'Partition'assigning'the'contested'land'to'the'latter'
was'executed'only'on'September'16,'1963.'In'any'case,'the'Complaint'to'recover'the'land'from'petitioner'
was'filed'on'February'24,'1993,'which'was'within'the'30Iyear'prescriptive'period.'
SAN'MIGUEL'PROPERTIES'PHILIPPINES'vs.'HUANG'
Petitioner:'San'Miguel'Properties'Philippines,'Inc.'
Respondent:'Spouses'Alfredo'and'Grace'Huang'
Date'of'Promugation:'July'31,'2000'
Ponente:'Mendoza,'J.'
Facts:'
• Petitioner'San'Miguel'Properties'Philippines,'Inc.'is'a'domestic'corporation'engaged'in'the'
purchase'and'sale'of'real'properties.'It'offered'two'parcels'of'land'for'sale.''
• Offer'was'made'to'Atty.'Helena'Dauz,'acting'for'respondent'spouses'Huang.'She'signified'her'
client’s'interest'in'purchasing'the'properties.'
• Atty.'Dauz'wrote'a'letter'proposing'the'terms'for'the'purchase'of'the'properties,'enclosing'
P1,000,000.00'representing''as'earnestIdeposit'money,'subject'to'the'conditions.'
o Respondent'spouse'would'be'given'the'exclusive'option'to'purchase'within'the'30'days'
from'date'of'your'acceptance'of'this'offer.'
o During'said'period'is'when'parties'negotiate'on'the'terms'and'conditions'of'the'purchase;'
and'parties'initiate'the'documentation'if'there'is'mutual'agreement.'
o When'parties'don’t'come'to'an'agreement,'P1,000,000.00'shall'be'refundable'in'full'upon'
demand.'
• Isidro'A.'Sobrecarey,'San'Miguel’s'viceIpresident'and'operations'manager,'indicated'his'
conformity'to'the'offer'by'affixing'his'signature'to'the'letter'and'accepted'the'"earnestIdeposit"'of'
P1'million.'
• Atty.'Dauz'and'Sobrecarey'then'commenced'negotiations.'
o Parties'failed'to'agree'on'the'period'of'amortization'upon'expiration'of'30'days.'
o Atty.'Dauz'asked'extension'of'45'days.'Request'was'granted.'
! 43!
NATURE'OF'THE'CONTRACT'CASES'–'CHARACTERISTICS'OF'SALES''
CASE'DIGEST'
• Petitioner,'informed'Atty.'Dauz'that'because'the'parties'failed'to'agree'on'the'terms'and'
conditions'of'the'sale'despite'the'extension,'the'petitioner'San'Miguel'was'returning'the'amount'of'
P1'million'given'as'"earnestIdeposit.'
• Respondent'spouses,'through'counsel,'demanded'deed'of'sale.'Filed'a'complaint'for'specific'
performance.'
• Petitioner'San'Miguel'filed'motion'to'dismiss.'
• RTC:'In'favor'of'Petitioner.'Granted'MTD.'
• CA:'Reversed'RTC'decision.'(In'favor'of'Respondent'spouses)'
o Reason:'All'the'requisites'of'a'perfected'contract'of'sale'had'been'complied'with;'and'
earnest'money'was'accepted'by'petitioner'San'Miguel'through'its'viceIpresident'and'
operations'manager,'Isidro'A.'Sobrecarey.'
o MR'filed'by'Petitioner'San'Miguel:'Denied'
Held:' No.'Court'holds'that'respondent'spouses'did'not'give'the'P1'million'as'"earnest'money"'as'
provided'by'Art.'1482'of'the'Civil'Code.'They'presented'the'amount'merely'as'a'deposit'of'what'would'
eventually'become'the'earnest'money'or'downpayment'should'a'contract'of'sale'be'made'by'them.'The'
amount'was'thus'given'not'as'a'part'of'the'purchase'price'and'as'proof'of'the'perfection'of'the'contract'of'
sale'but'only(as(a(guarantee(that(respondents(would(not(back(out(of(the(sale.'Respondents'in'fact'described'
the'amount'as'an'"earnestIdeposit."'
In'the'present'case,'the'P1'million'"earnestIdeposit"'could'not'have'been'given'as'earnest'money'as'
contemplated'in'Art.'1482'because,'at'the'time'when'petitioner'San'Miguel'accepted'the'terms'of'
respondents'offer,'their'contract'had'not'yet'been'perfected'as'evident'from'the'conditions'indicated'in'
the'letter.'
The'first'condition'for'an'option'period'of'30'days'sufficiently'shows'that'a'sale'was'never'perfected.'As'
petitioner'correctly'points'out,'acceptance'of'this'condition'did'not'give'rise'to'a'perfected'sale'but'merely(
to(an(option(or(an(accepted(unilateral(promise'on'the'part'of'respondents'to'buy'the'subject'properties'
within'30'days'from'the'date'of'acceptance'of'the'offer.'All'that'respondents'had'was'just'the'option'to'
buy'the'properties'which'privilege'was'not,'however,'exercised'by'them'because'there'was'a'failure'to'
agree'on'the'terms'of'payment.'No'contract'of'sale'may'thus'be'enforced'by'respondents.'
Furthermore,'under'the'second'paragraph'of'Art.'1479,'an'accepted'unilateral'promise'to'buy'or'sell'a'
determinate'thing'for'a'price'certain'is'binding'upon'the'promisor'only'if'the'promise'is'supported'by'a'
distinct'consideration.'Consideration'in'an'option'contract'may'be'anything'of'value,'unlike'in'sale'where'
it'must'be'the'price'certain'in'money'or'its'equivalent.'There'is'no'showing'here'of'any'consideration'for'
the'option.'Lacking'any'proof'of'such'consideration,'the'option'is'unenforceable.'
Equally'compelling'as'proof'of'the'absence'of'a'perfected'sale'is'the'second'condition'that,'during'the'
option'period,'the'parties'would'negotiate'the'terms'and'conditions'of'the'purchase.'The'stages'of'a'
contract'of'sale'are'as'follows:'(1)'negotiation,'from'the'time'the'prospective'contracting'parties'indicate'
interest'in'the'contract'to'the'time'the'contract'is'perfected;'(2)'perfection,'upon'the'concurrence'of'the'
essential'elements'of'the'sale'which'are'the'meeting'of'the'minds'of'the'parties'as'to'the'object'of'the'
contract'and'upon'the'price;'and'(3)'consummation,'which'begins'when'the'parties'perform'their'
respective'undertakings'under'the'contract'of'sale,'culminating'in'the'extinguishment'thereof.'
In'the'present'case,'the'parties'never'got'past'the'negotiation'stage.'What'happened'was'nothing'more'
than'offers'and'counterIoffers'which'did'not'amount'to'any'final'arrangement'containing'the'essential'
elements'of'a'contract'of'sale.'While'the'parties'already'agreed'on'the'real'properties'which'were'the'
! 44!
 NATURE'OF'THE'CONTRACT'CASES'–'CHARACTERISTICS'OF'SALES''
CASE'DIGEST'
! !
objects'of'the'sale'and'on'the'purchase'price,'the'fact'remains'that'they'failed'to'arrive'at'mutually'
acceptable'terms'of'payment,'despite'the'45Iday'extension'given'by'petitioner.'
Also,'the'Court'laid'down'the'rule'that'the'manner(of(payment(of(the(purchase(price(is(an(essential(element(
before(a(valid(and(binding(contract(of(sale(can(exist.'Although'the'Civil'Code'does'not'expressly'state'that'
the'minds'of'the'parties'must'also'meet'on'the'terms'or'manner'of'payment'of'the'price,'the'same'is'
needed,'otherwise'there'is'no'sale.'As'held'in'Toyota'Shaw,'Inc.'v.'Court'of'Appeals,'agreement'on'the'
manner'of'payment'goes'into'the'price'such'that'a'disagreement'on'the'manner'of'payment'is'
tantamount'to'a'failure'to'agree'on'the'price.'
' payments'made'by'Carmen'Caseda'to'the'bank'were'in'the'name'of'Rosalinda'Santos.'We'likewise'find'
SANTOS'vs.'CA'
Petitioner:'Spouses'Fortunato'and'Rosalinda'Santos'
Respondent:'Court'of'Appeals;'and'Spouses'Mariano'and'Carmen'Caseda'
Date'of'Promugation:'August'1,'2000'
Ponente:'Quisumbing,'J.'
Facts:'
• Spouses'Fortunato'and'Rosalinda'Santos'owned'a'house'and'lot.'
• Said'house'and'lot'was'mortgaged'with'the'Rural'Bank'of'Salinas,'Inc.,'to'secure'a'loan.'
• Rural'bank'sent'Rosalinda'Santos'a'letter'demanding'payment.'Since'petitioner'spouses'Santos'
had'no'money'for'payment,'they'sold'the'house'and'lot'to'her'Rosalinda’s'friend,'respondent'
Carmen'Caseda.'
o Caseda'made'intial'partial'payment,'took'possession'of'property,'which'they'then'leased'
out.'
o Parties'agreed'that'Respondent'Caseda'spouses'would'pay:'
! balance'of'the'mortgage'loan'with'the'Rural'bank'
! real'estate'taxes,'electricity'and'water'bills'
! balance'of'the'cash'price'
• Respondent'Caseda'settled'mortagaged'loan'and'bills,'all'in'the'name'of'Petitioner'Rosalinda'
Santos.'
• The'Petitioner'Santos'spouses,'seeing'that'the'Casedas'lacked'the'means'to'pay'the'remaining'
installments'and/or'amortization'of'the'loan,'repossessed'the'property.'The'Santoses'then'
collected'the'rentals'from'the'tenants.'
• Respondent'Caseda'eventually'had'the'means'to'pay'the'balance'of'the'purchase'price'but'parties'
could'not'agree'and'the'deal'could'not'push'through'because'the'Santoses'wanted'a'higher'price.'
• Respondent'Caseda'filed'a'case'to'have'the'Santoses'execute'the'final'deed'of'conveyance'over'the'
property;'or'in'default'thereof,'to'reimburse'all'amount'paid.'
• RTC:'In'favor'of'Petitioner'Santos'spouses.'
o Ordered'to'dismiss'the'complaint'and'Respondent'Caseda'spouses'not'entitled'of'
reimbursement.'
• CA:'Reversed'RTC.'(In'favor'of'Respondent'Caseda'spouses)'
o Reason:'Rescission'was'not'justified.'Caseda'spouses'should'be'allowed'a'period'of'90'days'
within'which'to'pay'the'balance'of'the'agreed'purchase'price.'
Issue:'W/N'the'transaction'is'not'a'contract'of'absolute'sale'but'an'oral'contract'to'sell,'in'which'case'
judicial'demand'for'rescission'is'not'applicable.'
Held:'' Yes,'it'was'a'contract'to'sell'and'as'such,'judicial'demand'for'rescission'is'not'applicable.'It'
must'be'emphasized'from'the'outset'that'a'contract'is'what'the'law'defines'it'to'be,'taking'into'
! 45!
NATURE'OF'THE'CONTRACT'CASES'–'CHARACTERISTICS'OF'SALES''
CASE'DIGEST'
consideration'its'essential'elements,'and'not'what'the'contracting'parties'call'it.'NCC'Article'1458'defines'
a'contract(of(sale.'Said'article'expressly'obliges(the(vendor(to(transfer(ownership(of(the(thing(sold(as(an(
essential(element(of(a(contract(of(sale.'This'is'because'the'transfer'of'ownership'in'exchange'for'a'price'
paid'or'promised'is'the'very'essence'of'a'contract'of'sale.'The'Court'is'far'from'persuaded'that'there'was'
a'transfer'of'ownership'simultaneously'with'the'delivery'of'the'property'purportedly'sold.'The'records'
clearly'show'that,'notwithstanding'the'fact'that'the'Casedas'first'took'then'lost'possession'of'the'disputed'
house'and'lot,'the'title'to'the'property'has'remained'always'in'the'name'of'Rosalinda'Santos.'Note'further'
that'although'the'parties'had'agreed'that'the'Casedas'would'assume'the'mortgage,'all'amortization'
that'the'bank's'cancellation'and'discharge'of'mortgage'was'made'in'favor'of'Rosalinda'Santos.'The'
foregoing'circumstances'categorically'and'clearly'show'that'no(valid(transfer(of(ownership'was'made'by'
the'Santoses'to'the'Casedas.'Absent'this'essential'element,'their'agreement(cannot(be(deemed(a(contract(
of(sale.'We'agree'with'petitioners''averment'that'the'agreement'between'Rosalinda'Santos'and'Carmen'
Caseda'is'a'contract'to'sell.'In'contracts(to(sell,(ownership(is(reserved(by(the(vendor(and(is(not(to(pass(until(
full(payment(of(the(purchase(price.'This'we'find'fully'applicable'and'understandable'in'this'case,'given'that'
the'property'involved'is'a'titled'realty'under'mortgage'to'a'bank'and'would'require'notarial'and'other'
formalities'of'law'before'transfer'thereof'could'be'validly'effected.'
In'view'of'our'finding'in'the'present'case'that'the'agreement'between'the'parties'is'a'contract'to'sell,'it'
follows'that'the'CA'erred'when'it'decreed'that'a'judicial'rescission,'as'there'was'no'rescission'to'speak'of'
in'the'first'place.'In'a'contract'to'sell,'title'remains'with'the'vendor'and'does'not'pass'on'to'the'vendee'
until'the'purchase'price'is'paid'in'full.'Thus,'in'a'contract'to'sell,'the'payment'of'the'purchase'price'is'a'
positive'suspensive'condition.'Failure'to'pay'the'price'agreed'upon'is'not'a'mere'breach,'casual'or'
serious,'but'a'situation'that'prevents'the'obligation'of'the'vendor'to'convey'title'from'acquiring'an'
obligatory'force.'This'is'entirely'different'from'the'situation'in'a'contract'of'sale,'where'nonIpayment'of'
the'price'is'a'negative'resolutory'condition.'The'effects'in'law'are'not'identical.'In'a'contract'of'sale,'the'
vendor'has'lost'ownership'of'the'thing'sold'and'cannot'recover'it,'unless'the'contract'of'sale'is'rescinded'
and'set'aside.'In'a'contract'to'sell,'however,'the'vendor'remains'the'owner'for'as'long'as'the'vendee'has'
not'complied'fully'with'the'condition'of'paying'the'purchase'price.'If'the'vendor'should'eject'the'vendee'
for'failure'to'meet'the'condition'precedent,'he'is'enforcing'the'contract'and'not'rescinding'it.'When'the'
petitioners'in'the'instant'case'repossessed'the'disputed'house'and'lot'for'failure'of'private'respondents'
to'pay'the'purchase'price'in'full,'they'were'merely'enforcing'the'contract'and'not'rescinding'it.'As'
petitioners'correctly'point'out,'the'CA'erred'when'it'ruled'that'petitioners'should'have'judicially'
rescinded'the'contract'pursuant'to'Articles'1592'and'1191'of'the'Civil'Code.'Article'1592'speaks'of'nonI
payment'of'the'purchase'price'as'a'resolutory'condition.'It'does'not'apply'to'a'contract'to'sell.'As'to'
Article'1191,'it'is'subordinated'to'the'provisions'of'Article'1592'when'applied'to'sales'of'immovable'
property.'Neither'provision'is'applicable'in'the'present'case.'
'
LAO'vs.'CA'
Petitioner:'Manuel'Lao'
Respondent:'Court'of'Appeals'and'Better'Homes'Realty'Housing'Corporation'(private'respondent)'
Date'of'Promugation:'July'8,'1997'
Ponente:'Panganiban,'J.'
Facts:'
• Private'Respondent'Better'Homes'Realty'and'Housing'Corporation'filed'complaint'for'unlawful'
detainer'against'Petitioner'Manuel'Lao'in'MTC.'
! 46!
 NATURE'OF'THE'CONTRACT'CASES'–'CHARACTERISTICS'OF'SALES''
CASE'DIGEST'
! !
o Alleging:'Petitioner'Lao'occupied'the'property'w/o'rent'but'on'pure'liberality'and'would'
vacate'it'upon'demand.'Private'respondent'Better'Homes'demanded'Lao'to'vacate,'Lao'
refused.'
• Petitioner'Lao'claimed'he'is'the'owner'of'the'property'and'private'respondent'Better'Homes'
purchased'the'same'from'N.'Domingo'Realty'and'Development'Corporation'but'the'agreement'
was'actually'a'loan'secured'by'mortgage;'and'that'the'cause'of'action'is'for'accion'publiciana,'
outside'the'jurisdiction'of'an'inferior'court.'
• MTC:'In'favor'of'Private'Respondent'Better'Homes.''
o Petitioner'Lao'to'vacate'the'premises'and'pay'reasonable'rent'
• RTC:'Reversed'MTC'decision.'(In'favor'of'Petitioner'Lao)'
o Order'dismissal'of'complaint.'
o Reason:'Petitioner'Lao'is'the'beneficial'owner'of'the'property'because'the'real'transaction'
over'the'subject'property'was'not'a'sale'but'a'loan'secured'by'a'mortgage.'
• CA:'Reversed'RTC'Decision.'(In'favor'of'Private'Respondent'Better'Homes)'
o MR'filed'by'Petitioner'Lao:'Denied'
Issue:' W/N'private'respondent'acquired'ownership'of'the'property'in'question'through'sale.'
Held:' No,'it'was'an'equitable'mortgage.'In'determining'the'nature'of'a'contract,'the'Court'looks'at'the'
intent'of'the'parties'and'not'at'the'nomenclature'used'to'describe'it.'Pivotal'to'deciding'this'issue'is'the'
true'aim'and'purpose'of'the'contracting'parties'as'shown'by'the'terminology'used'in'the'covenant,'as'
well'as'by'their'conduct,'words,'actions'and'deeds'prior'to,'during'and'immediately'after'executing'the'
agreement.'In'this'regard,'parole'evidence'becomes'admissible'to'prove'the'true'intent'and'agreement'of'
the'parties'which'the'Court'will'enforce'even'if'the'title'of'the'property'in'question'has'already'been'
registered'and'a'new'transfer'certificate'of'title'issued'in'the'name'of'the'transferee.'The'court'held'that'a'
conveyance'in'the'form'of'a'contract'of'sale'with'pacto'de'retro'will'be'treated'as'a'mere'mortgage,'if'
really'executed'as'security'for'a'debt,'and'that'this'fact'can'be'shown'by'oral'evidence'apart'from'the'
instrument'of'conveyance.'
In'the'first'place,'it'must'be'borne'in'mind'that'the'equitable'doctrine'which'has'been'so'fully'stated'
above,'to'the'effect'that'any'conveyance'intended'as'security'for'a'debt'will'be'held'in'effect'to'be'a'
mortgage,'whether'so'actually'expressed'in'the'instrument'or'not,'operates'regardless'of'the'form'of'the'
agreement'chosen'by'the'contracting'parties'as'the'repository'of'their'will.'Equity'looks'through'the'form'
and'considers'the'substance;'and'no'kind'of'engagement'can'be'adopted'which'will'enable'the'parties'to'
escape'from'the'equitable'doctrine'to'which'reference'is'made.'In'other'words,'a'conveyance'of'land,'
accompanied'by'registration'in'the'name'of'the'transferee'and'the'issuance'of'a'new'certificate,'is'no'
more'secured'from'the'operation'of'this'equitable'doctrine'than'the'most'informal'conveyance'that'could'
be'devised.'
The'law'enumerates'when'a'contract'may'be'presumed'to'be'an'equitable'mortgage:'
(1)'When'the'price'of'a'sale'with'right'to'repurchase'is'unusually'inadequate;'
(2)'When'the'vendor'remains'in'possession'as'lessee'or'otherwise;'
(3)'When'upon'or'after'the'expiration'of'the'right'to'repurchase'another'instrument'extending'the'period'
of'redemption'or'granting'a'new'period'is'executed;'
(4)'When'the'purchaser'retains'for'himself'a'part'of'the'purchase'price;'
(5)'When'the'vendor'binds'himself'to'pay'the'taxes'on'the'thing'sold;'
(6)'In'any'other'case'where'it'may'be'fairly'inferred'that'the'real'intention'of'the'parties'is'that'the'
transaction'shall'secure'the'payment'of'a'debt'or'the'performance'of'any'other'obligation.'
The'foregoing'presumption'applies'also'to'a'contract'purporting'to'be'an'absolute'sale.'
! 47!
NATURE'OF'THE'CONTRACT'CASES'–'CHARACTERISTICS'OF'SALES''
CASE'DIGEST'
Applying'the'preceding'principles'to'the'factual'milieu'of'this'case,'Court'find'the'agreement'between'the'
private'respondent'and'N.'Domingo'Realty'&'Housing'Corporation,'as'represented'by'petitioner,'
manifestly'one'of'equitable'mortgage.'First,'possession'of'the'property'in'the'controversy'remained'with'
Petitioner'Manuel'Lao'who'was'the'beneficial'owner'of'the'property,'before,'during'and'after'the'alleged'
sale.'It'is'settled'that'a'pacto'de'retro'sale'should'be'treated'as'a'mortgage'where'the'(property)'sold'
never'left'the'possession'of'the'vendors.'Second,'the'option'given'to'Manuel'Lao'to'purchase'the'property'
in'controversy'had'been'extended'twice'through'documents'executed'by'Mr.'Tan'Bun'Uy,'President'and'
Chairman'of'the'Board'of'Better'Homes'Realty'&'Housing'Corporation.'The'wording'of'the'first'extension'
is'a'refreshing'revelation'that'indeed'the'parties'really'intended'to'be'bound'by'a'loan'with'mortgage,'not'
by'a'pacto'de'retro.'Third,'Manuel'Lao'and'his'brother'were'in'such'dire'need'of'money'that'they'
mortgaged'their'townhouse'units'registered'under'the'name'of'N.'Domingo'Realty'Corporation,'the'
family'corporation'put'up'by'their'parents,'to'Private'Respondent'Better'Homes'Realty'&'Housing'
Corporation.'In'retrospect,'it'is'easy'to'blame'Petitioner'Manuel'Lao'for'not'demanding'a'reformation'of'
the'contract'to'reflect'the'true'intent'of'the'parties.'But'this'seeming'inaction'is'sufficiently'explained'by'
the'Lao'brothers'desperate'need'for'money,'compelling'them'to'sign'the'document'purporting'to'be'a'
sale'after'they'were'told'that'the'same'was'just'for'formality.''
Moreover,'since'the'borrower’s'urgent'need'for'money'places'the'latter'at'a'disadvantage'visIaIvis'the'
lender'who'can'thus'dictate'the'terms'of'their'contract,'the'Court,'in'case'of'an'ambiguity,'deems'the'
contract'to'be'one'which'involves'the'lesser'transmission'of'rights'and'interest'over'the'property'in'
controversy.'
'
BUENAVENTURA'vs.'CA'
Petitioner:'Spouses'Bernardo'Buenaventura'and'Consolacion'Joaquin;'Spouses'Juanito'Edra'and'Nora'
Joaquin;'Spouses'Rufino'Valdoz'and'Emma'Joaquin;'and'Natividad'Joaquin'
Respondent:'Court'of'Appeals;'Spouses'Leonardo'Joaquin'And'Feliciana'Landrito;''Spouses'Fidel'Joaquin'
and'Conchita'Bernardo;'Spouses'Tomas'Joaquin'and'Soledad'Alcoran;'Spouses'Artemio'Joaquin'and'
Socorro'Angeles;'Spouses'Alexander'Mendoza'and'Clarita'Joaquin;'Spouses'Telesforo'Carreon'and'
Felicitas'Joaquin;'Spouses'Danilo'Valdoz'and'Fe'Joaquin;'and'Spouses'Gavino'Joaquin'and'Lea'Asis'
Date'of'Promugation:'November'20,'2003'
Ponente:'Carpio,'J.'
Facts:'
• Defendant'spouses'Leonardo'Joaquin'and'Feliciana'Landrito'are'the'parents'of'plaintiffs'
Consolacion,'Nora,'Emma'and'Natividad'as'well'as'of'defendants'Fidel,'Tomas,'Artemio,'Clarita,'
Felicitas,'Fe,'and'Gavino,'all'surnamed'JOAQUIN.'The'married'Joaquin'children'are'joined'in'this'
action'by'their'respective'spouses.'
• Sought'to'be'declared'null'and'void'ab'initio'are'(6)'deeds'of'sale'of'real'property'executed'by'
defendant'parents'Leonardo'Joaquin'and'Feliciana'Landrito'in'favor'of'their'coIdefendant'children'
and'the'corresponding'certificates'of'title'issued'in'their'names'
• In'seeking'for'declaration'of'nullity,'plaintiffs'aver:'
o no'actual'valid'consideration'for'the'deeds'of'sale;'
o assuming'that'there'was'consideration,'the'properties'are'more'than'threeIfold'times'more'
valuable'than'the'measly'sums'appearing'therein;'
o deeds'of'sale'do'not'reflect'and'express'the'true'intent'of'the'parties;'
o sale'of'the'properties'was'the'result'of'a'deliberate'conspiracy'to'unjustly'deprive'the'rest'
of'the'compulsory'heirs'(plaintiffs'herein)'of'their'legitime.'
! 48!
 NATURE'OF'THE'CONTRACT'CASES'–'CHARACTERISTICS'OF'SALES''
CASE'DIGEST'
! !
• Defendants'argument:''
o Plaintiff'has'no'cause'of'action;'
o There’s'sufficient'consideration'and'sale'was'voluntarily,'in'good'faith,'and'with'full'
knowledge'of'the'consequences'of'their'deeds'of'sale'
o Certificates'of'title'were'issued'with'sufficient'factual'and'legal'basis.'
• RTC:'In'favor'of'defendants'and'dismissed'complaint.'
• CA:'Affirmed'decision'of'RTC.'
Issue:''(1)'W/N'deeds'of'Sale'are'void'for'lack'of'consideration.'
' (2)'W/N'deeds'of'sale'void'for'gross'inadequacy'of'price.'
Held:' (1)'No.'A'contract(of(sale(is'not'a'real'contract,'but'a'consensual(contract.'As'a'consensual'contract,'
a'contract'of'sale'becomes'a'binding(and(valid(contract(upon(the(meeting(of(the(minds(as(to(price.'If'there'is'
a'meeting'of'the'minds'of'the'parties'as'to'the'price,'the'contract'of'sale'is'valid,'despite'the'manner'of'
payment,'or'even'the'breach'of'that'manner'of'payment.'If'the'real'price'is'not'stated'in'the'contract,'then'
the'contract'of'sale'is'valid'but'subject'to'reformation.'If'there'is'no'meeting'of'the'minds'of'the'parties'as'
to'the'price,'because'the'price'stipulated'in'the'contract'is'simulated,'then'the'contract'is'void.'(NCC'
Article'1471)'
It'is'not'the'act'of'payment'of'price'that'determines'the'validity'of'a'contract'of'sale.'Payment'of'the'price'
has'nothing'to'do'with'the'perfection'of'the'contract.'Payment'of'the'price'goes'into'the'performance'of'
the'contract.'Failure'to'pay'the'consideration'is'different'from'lack'of'consideration.'The'former'results'in'
a'right'to'demand'the'fulfillment'or'cancellation'of'the'obligation'under'an'existing'valid'contract'while'
the'latter'prevents'the'existence'of'a'valid'contract.'
Petitioners'failed'to'show'that'the'prices'in'the'Deeds'of'Sale'were'absolutely'simulated.'To'prove'
simulation,'petitioners'presented'Emma'Joaquin'Valdozs'testimony'stating'that'their'father,'respondent'
Leonardo'Joaquin,'told'her'that'he'would'transfer'a'lot'to'her'through'a'deed'of'sale'without'need'for'her'
payment'of'the'purchase'price.'The'trial'court'did'not'find'the'allegation'of'absolute'simulation'of'price'
credible.'Petitioners’'failure'to'prove'absolute'simulation'of'price'is'magnified'by'their'lack'of'knowledge'
of'their'respondent'siblings'financial'capacity'to'buy'the'questioned'lots.'On'the'other'hand,'the'Deeds'of'
Sale'which'petitioners'presented'as'evidence'plainly'showed'the'cost'of'each'lot'sold.'Not'only'did'
respondents’'minds'meet'as'to'the'purchase'price,'but'the'real'price'was'also'stated'in'the'Deeds'of'Sale.'
As'of'the'filing'of'the'complaint,'respondent'siblings'have'also'fully'paid'the'price'to'their'respondent'
father.'
' (2)'No.'Articles'1355'of'NCC'states:'Except'in'cases'specified'by'law,'lesion'or'inadequacy'of'cause'
shall'not'invalidate'a'contract,'unless'there'has'been'fraud,'mistake'or'undue'influence.'
Article'1470'of'the'NCC'further'provides:'Gross'inadequacy'of'price'does'not'affect'a'contract'of'sale,'
except'as'may'indicate'a'defect'in'the'consent,'or'that'the'parties'really'intended'a'donation'or'some'
other'act'or'contract.''
Petitioners'failed'to'prove'any'of'the'instances'mentioned'in'Articles'1355'and'1470'of'the'Civil'Code'
which'would'invalidate,'or'even'affect,'the'Deeds'of'Sale.'Indeed,'there'is'no'requirement'that'the'price'be'
equal'to'the'exact'value'of'the'subject'matter'of'sale.'All'the'respondents'believed'that'they'received'the'
commutative'value'of'what'they'gave.'
In'the'instant'case,'the'trial'court'found'that'the'lots'were'sold'for'a'valid'consideration,'and'that'the'
defendant'children'actually'paid'the'purchase'price'stipulated'in'their'respective'Deeds'of'Sale.'Actual'
payment'of'the'purchase'price'by'the'buyer'to'the'seller'is'a'factual'finding'that'is'now'conclusive'upon'
us.'
Case'Title:'Fule'vs.'CA'286'SCRA'698'
! 49!
NATURE'OF'THE'CONTRACT'CASES'–'CHARACTERISTICS'OF'SALES''
CASE'DIGEST'
Petitioner:'Gregorio'Fule'
Respondent:'Ninivetch'Cruz'(Dr'Cruz)'and'Atty.'Juan'Belarmino'
Promulgated:'May'2,'1998'
Ponente:'Romero,'J.'
FACTS:'Petitioner,'as'corporate'secretary'of'the'bank,'asked'Remelia'Dichoso'and'Oliva'Mendoza'to'look'
for' a' buyer' who' might' be' interested' in' the' Tanay' property.' The' two' found' the' private' respondent' Dr.'
Ninevetch' Cruz.' It' so' happened' that' at' the' time,' petitioner' had' shown' interest' in' buying' a' pair' of'
emeraldIcut'diamond'earrings'owned'by'Dr.'Cruz'which'he'had'seen'in'January'of'the'same'year'when'
his'mother'examined'and'appraised'them'as'genuine.''
'
Dr.'Cruz'declined'petitioner’s'offer'to'buy'the'jewelry'for'P100,000.00.'Petitioner'then'made'another'bid'
to'buy'them'for'US$6,000.00'at'the'exchange'rate'of'$1.00'to'P25.00.'At'this'point,'petitioner'inspected'
said'jewelry'at'the'lobby'of'the'Prudential'Bank'branch'in'San'Pablo'City'and'then'made'a'sketch'thereof.'
Having' sketched' the' jewelry' for' twenty' to' thirty' minutes,' petitioner' gave' them' back' to' Dr.' Cruz' who'
again' refused' to' sell' them' since' the' exchange' rate' of' the' peso' at' the' time' appreciated' to' P19.00' to' a'
dollar.'
'
Subsequently,' however,' negotiations' for' the' barter' of' the' jewelry' and' the' Tanay' property' ensued.' Dr.'
Cruz'requested'herein'private'respondent'Atty.'Juan'Belarmino'to'check'the'property'who,'in'turn,'found'
out'that'no'sale'or'barter'was'feasible'because'the'oneIyear'period'for'redemption'of'the'said'property'
had'not'yet'expired'at'the'time.'
'
The' petitioner' executed' a' deed' of' redemption' on' behalf' of' Fr.' Jacobe' purportedly' in' the' amount' of'
P15,987.78,'and'on'even'date,'Fr.'Jacobe'sold'the'property'to'petitioner'for'P75,000.00.'As'Dr.'Cruz'had'
already'agreed'to'the'proposed'barter,'petitioner'went'to'Prudential'Bank'once'again'to'take'a'look'at'the'
jewelry.'
'
The' petitioner' met' Atty.' Belarmino' at' the' latter’s' residence' to' prepare' the' documents' of' sale.' Dr.' Cruz'
herself'was'not'around'but'Atty.'Belarmino'was'aware'that'she'and'petitioner'had'previously'agreed'to'
exchange' a' pair' of' emeraldIcut' diamond' earrings' for' the' Tanay' property.' Atty.' Belarmino' accordingly'
caused' the' preparation' of' a' deed' of' absolute' sale' while' petitioner' and' Dr.' Cruz' attended' to' the'
safekeeping'of'the'jewelry.'
'
The' following' day,' petitioner,' together' with' Dichoso' and' Mendoza,' arrived' at' the' residence' of' Atty.'
Belarmino'to'finally'execute'a'deed'of'absolute'sale.'Petitioner'signed'the'deed'and'gave'Atty.'Belarmino'
the' amount' of' P13,700.00' for' necessary' expenses' in' the' transfer' of' title' over' the' Tanay' property.'
Petitioner' also' issued' a' certification' to' the' effect' that' the' actual' consideration' of' the' sale' was'
P200,000.00' and' not' P80,000.00' as' indicated' in' the' deed' of' absolute' sale.' The' disparity' between' the'
actual' contract' price' and' the' one' indicated' on' the' deed' of' absolute' sale' was' purportedly' aimed' at'
minimizing'the'amount'of'the'capital'gains'tax'that'petitioner'would'have'to'shoulder.''
'
Since'the'jewelry'was'appraised'only'at'P160,000.00,'the'parties'agreed'that'the'balance'of'P40,000.00'
would'just'be'paid'later'in'cash.'
'
As' preIarranged,' petitioner' left' Atty.' Belarmino’s' residence' with' Dichoso' and' Mendoza' and' headed' for'
the'bank,'arriving'there'at'past'5:00'p.m.'Dr.'Cruz'and'the'cashier'then'opened'the'safety'deposit'box,'the'
! 50!
 NATURE'OF'THE'CONTRACT'CASES'–'CHARACTERISTICS'OF'SALES'' NATURE'OF'THE'CONTRACT'CASES'–'CHARACTERISTICS'OF'SALES''
CASE'DIGEST' CASE'DIGEST'
! !
former'retrieving'a'transparent'plastic'or'cellophane'bag'with'the'jewelry'inside'and'handing'over'the' Code.'Plaintiff'took'delivery'of'the'subject'jewelries'(sic)'before'6:00'p.m.'of'October'24,'1984.'When'he'
same' to' petitioner.' The' latter' took' the' jewelry' from' the' bag,' went' near' the' electric' light' at' the' bank’s' went' at' 8:00' p.m.' that' same' day' to' the' residence' of' Atty.' Belarmino' already' with' a' tester' complaining'
lobby,'held'the'jewelry'against'the'light'and'examined'it'for'ten'to'fifteen'minutes.'After'a'while,'Dr.'Cruz' about' some' fake' jewelries' (sic),' there' was' already' undue' delay' because' of' the' lapse' of' a' considerable'
asked,'“Okay'na'ba'iyan?”'Petitioner'expressed'his'satisfaction'by'nodding'his'head.' length'of'time'since'he'got'hold'of'subject'jewelries'(sic).'The'lapse'of'two'(2)'hours'more'or'less'before'
' plaintiff'complained'is'considered'by'the'Court'as'unreasonable'delay.”'
For' services' rendered,' petitioner' paid' the' agents,' Dichoso' and' Mendoza,' the' amount' of' US$300.00' and' '
some'pieces'of'jewelry.'He'did'not,'however,'give'them'half'of'the'pair'of'earrings'in'question'which'he' The'lower'court'further'ruled'that'all'the'elements'of'a'valid'contract'under'Article'1458'of'the'Civil'Code'
had'earlier'promised.' were'present,'namely:'(a)'consent'or'meeting'of'the'minds;'(b)'determinate'subject'matter,'and'(c)'price'
' certain'in'money'or'its'equivalent.'The'same'elements,'according'to'the'lower'court,'were'present'despite'
Thereafter,'the'petitioner'arrived'at'the'residence'of'Atty.'Belarmino'complaining'that'the'jewelry'given' the'fact'that'the'agreement'between'petitioner'and'Dr.'Cruz'was'principally'a'barter'contract.''
to'him'was'fake.'He'then'used'a'tester'to'prove'the'alleged'fakery.'Meanwhile,'at'8:30'p.m.,'Dichoso'and' '
Mendoza' went' to' the' residence' of' Dr.' Cruz' to' borrow' her' car' so' that,' with' Atty.' Belarmino,' they' could' The'Plaintiff’s'ownership'over'the'Tanay'property'passed'unto'Dra.'Cruz'upon'the'constructive'delivery'
register'the'Tanay'property.'After'Dr.'Cruz'had'agreed'to'lend'her'car,'Dichoso'called'up'Atty.'Belarmino.' thereof' by' virtue' of' the' Deed' of' Absolute' Sale.' On' the' other' hand,' the' ownership' of' Dra.' Cruz' over' the'
The'latter,'however,'instructed'Dichoso'to'proceed'immediately'to'his'residence'because'petitioner'was' subject'jewelries'transferred'to'the'plaintiff'upon'her'actual'personal'delivery'to'him'at'the'lobby'of'the'
there.'Believing'that'petitioner'had'finally'agreed'to'give'them'half'of'the'pair'of'earrings,'Dichoso'went' Prudential' Bank.' It' is' expressly' provided' by' law' that' the' thing' sold' shall' be' understood' as' delivered,'
posthaste'to'the'residence'of'Atty.'Belarmino'only'to'find'petitioner'already'demonstrating'with'a'tester' when'it'is'placed'in'the'control'and'possession'of'the'vendee'(Art.'1497,'Civil'Code;'Kuenzle'&'Straff'vs.'
that'the'earrings'were'fake.'Petitioner'then'accused'Dichoso'and'Mendoza'of'deceiving'him'which'they,' Watson'&'Co.'13'Phil.'26).''
however,' denied.' They' countered' that' petitioner' could' not' have' been' fooled' because' he' had' vast' '
experience'regarding'jewelry.'Petitioner'nonetheless'took'back'the'US$300.00'and'jewelry'he'had'given' The'ownership'and/or'title'over'the'jewelries'was'transmitted'immediately'before'6:00'p.m.'of'October'
them.' 24,'1984.'Plaintiff'signified'his'approval'by'nodding'his'head.'Delivery'or'tradition,'is'one'of'the'modes'of'
' acquiring'ownership'(Art.'712,'Civil'Code).'
Thereafter,' the' group' decided' to' go' to' the' house' of' a' certain' Macario' Dimayuga,' a' jeweler,' to' have' the' '
earrings'tested.'Dimayuga,'after'taking'one'look'at'the'earrings,'immediately'declared'them'counterfeit.' Similarly,' when' Deed' of' Sale' was' executed,' it' was' equivalent' to' the' delivery' of' the' Tanay' property' in'
At'around'9:30'p.m.,'petitioner'went'to'one'Atty.'Reynaldo'Alcantara'residing'at'Lakeside'Subdivision'in' favor'of'Dra.'Cruz.'The'execution'of'the'public'instrument'operates'as'a'formal'or'symbolic'delivery'of'the'
San'Pablo'City,'complaining'about'the'fake' Tanay'property'and'authorizes'the'buyer,'Dra.'Cruz'to'use'the'document'as'proof'of'ownership.''
jewelry.' Upon' being' advised' by' the' latter,' petitioner' reported' the' matter' to' the' police' station' where' '
Dichoso'and'Mendoza'likewise'executed'sworn'statements.' More'so,'since'the'Deed'of'Sale'does'not'contain'any'proviso'or'stipulation'to'the'effect'that'title'to'the'
' property'is'reserved'with'the'vendor'until'full'payment'of'the'purchase'price,'nor'is'there'a'stipulation'
On'October'26,'1984,'petitioner'filed'a'complaint'before'the'Regional'Trial'Court'of'San'Pablo'City'against' giving'the'vendor'the'right'to'unilaterally'rescind'the'contract'the'moment'the'vendee'fails'to'pay'within'
private' respondents' praying,' among' other' things,' that' the' contract' of' sale' over' the' Tanay' property' be' a'fixed'period''
declared'null'and'void'on'the'ground'of'fraud'and'deceit.' '
' Aside'from'concluding'that'the'contract'of'barter'or'sale'had'in'fact'been'consummated'when'petitioner'
RTC' then' issued' a' TRO' directing' the' Register' of' Deeds' of' Rizal' to' refrain' from' acting' on' the' pertinent' and'Dr.'Cruz'parted'ways'at'the'bank,'the'trial'court'likewise'dwelt'on'the'unexplained'delay'with'which'
documents' involved' in' the' transaction.' On' November' 20,' 1984,' however,' the' same' court' lifted' its' petitioner'complained'about'the'alleged'fakery.''
previous'order'and'denied'the'prayer'for'a'writ'of'preliminary'injunction.' '
' “The'Court'finds'that'plaintiff'acted'in'wanton'bad'faith.'Exhibit'2IBelarmino'purports'to'show'that'the'
RTC'RULING:'After'trial,'the'lower'court'rendered'its'decision'confronting'the'issue'of'whether'or'not' Tanay' property' is' worth' P25,000.00.' However,' also' on' that' same' day' it' was' executed,' the' property’s'
the' genuine' pair' of' earrings' used' as' consideration' for' the' sale' was' delivered' by' Dr.' Cruz' to' petitioner,' worth'was'magnified'at'P75,000.00.'How'could'in'less'than'a'day'(Oct.'19,'1984)'the'value'would'(sic)'
and'it'ruled'in'the'affirmative.'Indeed,'Dra.'Cruz'delivered'(the)'subject'jewelries'(sic)'into'the'hands'of' triple'under'normal'circumstances?''
plaintiff'who'even'raised'the'same'nearer'to'the'lights'of'the'lobby'of'the'bank'near'the'door.'When'asked' '
by'Dra.'Cruz'if'everything'was'in'order,'plaintiff'even'nodded'his'satisfaction'(Hearing'of'Feb.'24,'1988).'' Plaintiff,' with' the' assistance' of' his' agents,' was' able' to' exchange' the' Tanay' property' which' his' bank'
' valued' only' at' P25,000.00' in' exchange' for' a' genuine' pair' of' emerald' cut' diamond' worth' P200,000.00'
At' that' instance,' plaintiff' did' not' protest,' complain' or' beg' for' additional' time' to' examine' further' the' belonging'to'Dra.'Cruz.'He'also'retrieved'the'US$300.00'and'jewelries'(sic)'from'his'agents.'But'he'was'
jewelries' (sic).' Being' a' professional' banker' and' engaged' in' the' jewelry' business' plaintiff' is' conversant' not'satisfied'in'being'able'to'get'subject'jewelries'for'a'song.'He'had'to'file'a'malicious'and'unfounded'
and'competent'to'detect'a'fake'diamond'from'the'real'thing.'Plaintiff'was'accorded'the'reasonable'time' case'against'Dra.'Cruz'and'Atty.'Belarmino'who'are'well'known,'respected'and'held'in'high'esteem'in'San'
and'opportunity'to'ascertain'and'inspect'the'jewelries'(sic)'in'accordance'with'Article'1584'of'the'Civil' Pablo'City'where'everybody'practically'knows'everybody.''

! 51! ! 52!
 NATURE'OF'THE'CONTRACT'CASES'–'CHARACTERISTICS'OF'SALES'' NATURE'OF'THE'CONTRACT'CASES'–'CHARACTERISTICS'OF'SALES''
CASE'DIGEST' CASE'DIGEST'
! !
' '
CA:'Affirmed'the'decision'of'RTC' Moreover,' petitioner' did' not' clearly' allege' mistake' as' a' ground' for' nullification' of' the' contract' of' sale.'
' Even' assuming' that' he' did,' petitioner' cannot' successfully' invoke' the' same.' To' invalidate' a' contract,'
ISSUE:'W/N'there'was'a'valid'contract'of'sale'between'the'petitioner'and'Dr.'Cruz' mistake'must'“refer'to'the'substance'of'the'thing'that'is'the'object'of'the'contract,'or'to'those'conditions'
' which'have'principally'moved'one'or'both'parties'to'enter'into'the'contract.”'An'example'of'mistake'as'to'
RULING:'YES.'The'Civil'Code'provides'that'contracts'are'perfected'by'mere'consent.'From'this'moment,' the'object'of'the'contract'is'the'substitution'of'a'specific'thing'contemplated'by'the'parties'with'another.''
the'parties'are'bound'not'only'to'the'fulfillment'of'what'has'been'expressly'stipulated'but'also'to'all'the' '
consequences'which,'according'to'their'nature,'may'be'in'keeping'with'good'faith,'usage'and'law.'' In'his'allegations'in'the'complaint,'petitioner'insinuated'that'an'inferior'one'or'one'that'had'only'Russian'
' diamonds'was'substituted'for'the'jewelry'he'wanted'to'exchange'with'his'10Ihectare'land.'He,'however,'
A'contract'of'sale'is'perfected'at'the'moment'there'is'a'meeting'of'the'minds'upon'the'thing'which'is'the' failed'to'prove'the'fact'that'prior'to'the'delivery'of'the'jewelry'to'him,'private'respondents'endeavored'to'
object' of' the' contract' and' upon' the' price.18' Being' consensual,' a' contract' of' sale' has' the' force' of' law' make'such'substitution.'
between' the' contracting' parties' and' they' are' expected' to' abide' in' good' faith' by' their' respective' '
contractual' commitments.' Article' 1358' of' the' Civil' Code' which' requires' the' embodiment' of' certain' Likewise,'the'facts'as'proven'do'not'support'the'allegation'that'petitioner'himself'could'be'excused'for'
contracts' in' a' public' instrument,' is' only' for' convenience,' and' registration' of' the' instrument' only' the' “mistake.”' On' account' of' his' work' as' a' bankerIjeweler,' it' can' be' rightfully' assumed' that' he' was' an'
adversely'affects'third'parties.'Formal'requirements'are,'therefore,'for'the'benefit'of'third'parties.'NonI expert'on'matters'regarding'gems.'He'had'the'intellectual'capacity'and'the'business'acumen'as'a'banker'
compliance'therewith'does'not'adversely'affect'the'validity'of'the'contract'nor'the'contractual'rights'and' to'take'precautionary'measures'to'avert'such'a'mistake,'considering'the'value'of'both'the'jewelry'and'his'
obligations'of'the'parties'thereunder.' land.'The'fact'that'he'had'seen'the'jewelry'before'October'24,'1984'should'not'have'precluded'him'from'
' having' its' genuineness' tested' in' the' presence' of' Dr.' Cruz.' Had' he' done' so,' he' could' have' avoided' the'
It'is'evident'from'the'facts'of'the'case'that'there'was'a'meeting'of'the'minds'between'petitioner'and'Dr.' present'situation'that'he'himself'brought'about.'Indeed,'the'finger'of'suspicion'of'switching'the'genuine'
Cruz.'As'such,'they'are'bound'by'the'contract'unless'there'are'reasons'or'circumstances'that'warrant'its' jewelry' for' a' fake' inevitably' points' to' him.' Such' a' mistake' caused' by' manifest' negligence' cannot'
nullification.'Hence,'the'problem'that'should'be'addressed'in'this'case'is'whether'or'not'under'the'facts' invalidate'a'juridical'act.27'As'the'Civil'Code'provides,'“(t)here'is'no'mistake'if'the'party'alleging'it'knew'
duly'established'herein,'the'contract'can'be'voided'in'accordance'with'law'so'as'to'compel'the'parties'to' the'doubt,'contingency'or'risk'affecting'the'object'of'the'contract.”28'
restore'to'each'other'the'things'that'have'been'the'subject'of'the'contract'with'their'fruits,'and'the'price' '
with'interest.' Furthermore,' petitioner' was' afforded' the' reasonable' opportunity' required' in' Article' 1584' of' the' Civil'
' Code'within'which'to'examine'the'jewelry'as'he'in'fact'accepted'them'when'asked'by'Dr.'Cruz'if'he'was'
Contracts'that'are'voidable'or'annullable,'even'though'there'may'have'been'no'damage'to'the'contracting' satisfied' with' the' same.' By' taking' the' jewelry' outside' the' bank,' petitioner' executed' an' act' which' was'
parties'are:'(1)'those'where'one'of'the'parties'is'incapable'of'giving'consent'to'a'contract;'and'(2)'those' more'consistent'with'his'exercise'of'ownership'over'it.'This'gains'credence'when'it'is'borne'in'mind'that'
where' the' consent' is' vitiated' by' mistake,' violence,' intimidation,' undue' influence' or' fraud.' Accordingly,' he'himself'had'earlier'delivered'the'Tanay'property'to'Dr.'Cruz'by'affixing'his'signature'to'the'contract'of'
petitioner'now'stresses'before'this'Court'that'he'entered'into'the'contract'in'the'belief'that'the'pair'of' sale.'That'after'two'hours'he'later'claimed'that'the'jewelry'was'not'the'one'he'intended'in'exchange'for'
emeraldIcut'diamond'earrings'was'genuine.'On'the'pretext'that'those'pieces'of'jewelry'turned'out'to'be' his' Tanay' property,' could' not' sever' the' juridical' tie' that' now' bound' him' and' Dr.' Cruz.' The' nature' and'
counterfeit,'however,'petitioner'subsequently'sought'the'nullification'of'said' value'of'the'thing'he'had'taken'preclude'its'return'after'that'supervening'period'within'which'anything'
contract'on'the'ground'that'it'was,'in'fact,'“tainted'with'fraud”'such'that'his'consent'was'vitiated.' could' have' happened,' not' excluding' the' alteration' of' the' jewelry' or' its' being' switched' with' an' inferior'
' kind.'
There'is'fraud'when,'through'the'insidious'words'or'machinations'of'one'of'the'contracting'parties,'the' '
other' is' induced' to' enter' into' a' contract' which,' without' them,' he' would' not' have' agreed' to.24' The' Both' the' trial' and' appellate' courts,' therefore,' correctly' ruled' that' there' were' no' legal' bases' for' the'
records,' however,' are' bare' of' any' evidence' manifesting' that' private' respondents' employed' such' nullification' of' the' contract' of' sale.' Ownership' over' the' parcel' of' land' and' the' pair' of' emeraldIcut'
insidious'words'or'machinations'to'entice'petitioner'into'entering'the'contract'of'barter.'Neither'is'there' diamond' earrings' had' been' transferred' to' Dr.' Cruz' and' petitioner,' respectively,' upon' the' actual' and'
any'evidence'showing'that'Dr.'Cruz'induced'petitioner'to'sell'his'Tanay'property'or'that'she'cajoled'him' constructive' delivery' thereof.' Said' contract' of' sale' being' absolute' in' nature,' title' passed' to' the' vendee'
to' take' the' earrings' in' exchange' for' said' property.' On' the' contrary,' Dr.' Cruz' did' not' initially' accede' to' upon' delivery' of' the' thing' sold' since' there' was' no' stipulation' in' the' contract' that' title' to' the' property'
petitioner’s'proposal'to'buy'the'said'jewelry.'Rather,'it'appears'that'it'was'petitioner,'through'his'agents,' sold' has' been' reserved' in' the' seller' until' full' payment' of' the' price' or' that' the' vendor' has' the' right' to'
who' led' Dr.' Cruz' to' believe' that' the' Tanay' property' was' worth' exchanging' for' her' jewelry' as' he' unilaterally' resolve' the' contract' the' moment' the' buyer' fails' to' pay' within' a' fixed' period.' Such'
represented' that' its' value' was' P400,000.00' or' more' than' double' that' of' the' jewelry' which' was' valued' stipulations'are'not'manifest'in'the'contract'of'sale.'
only'at'P160,000.00.'If'indeed'petitioner’s'property'was'truly'worth'that'much,'it'was'certainly'contrary' '
to' the' nature' of' a' businessmanIbanker' like' him' to' have' parted' with' his' real' estate' for' half' its' price.' In' While' it' is' true' that' the' amount' of' P40,000.00' forming' part' of' the' consideration' was' still' payable' to'
short,'it'was'in'fact'petitioner'who'resorted'to'machinations'to'convince'Dr.'Cruz'to'exchange'her'jewelry' petitioner,' its' nonIpayment' by' Dr.' Cruz' is' not' a' sufficient' cause' to' invalidate' the' contract' or' bar' the'
for'the'Tanay'property.'

! 53! ! 54!
 NATURE'OF'THE'CONTRACT'CASES'–'CHARACTERISTICS'OF'SALES'' NATURE'OF'THE'CONTRACT'CASES'–'CHARACTERISTICS'OF'SALES''
CASE'DIGEST' CASE'DIGEST'
! !
transfer'of'ownership'and'possession'of'the'things'exchanged'considering'the'fact'that'their'contract'is' '
silent'as'to'when'it'becomes'due'and'demandable.' Meanwhile,'on'February'18,'1999,'in'view'of'the'dismissal'of'their'complaintIinIintervention,'the'Garcias'
' filed'an'action'against'BSC,'sheriff'Manuelito'P.'Viloria,'the'Register'of'Deeds'of'Quezon'City'and'FEBTC'
' (now' BPI)' for' cancellation' of' the' notice' of' levy' annotated' on' TCT' No.' 194226' before' Branch' 98' of' the'
' Regional'Trial'Court'of'Quezon'City,5'docketed'as'Civil'Case'No.'99I36804.'The'Garcias'claimed'that'they'
Case'Title:'Binan'Steel'Corp.'vs.'CA'391'SCRA'90' were' the' registered' owners' of' the' property' in' dispute,' having' acquired' the' same' on' June' 29,' 1998' by'
Petitioner:'Binan'Steel'Corporation' means'of'a'deed'of'sale'with'assumption'of'mortgage'from'spouses'Ng'Ley'Huat'and'Leticia'Dy'Ng.'
Respondent:'MYLENE'C.'GARCIA'and'MYLA'C.'GARCIA' '
Promulgated:'October'16,'2002' In' said' case' in' the' Quezon' City' RTC,' the' Garcias' were' able' to' secure' a' TRO' enjoining' sheriff' Rufo' J.'
Ponente:'Corona,'J.' Bernardo'or'any'person'acting'in'his'behalf'from'continuing'with'the'public'auction'sale'of'the'subject'
' property'initially'scheduled'on'July'7,'1999.'This'TRO'was'disregarded'by'the'Manila'RTC.'
FACTS:'On'July'22,'1998,'Biñan'Steel'Corporation'(BSC)'filed'with'the''RTC'Manila'a'complaint'against' '
Joenas'Metal'Corporation'and'spouses'Ng'Ley'Huat'and'Leticia'Dy'Ng'(the'spouses'Ng)'for'collection'of'a' The' Judge' Lanzanas' of' RTC' of' Manila' directed' the' public' auction' of' the' attached' property,' unless'
sum'of'money'with'damages,'docketed'as'Civil'Case'No.'98I89831.' otherwise'enjoined'by'the'Court'of'Appeals'or'this'Court.'Thereafter,'the'public'auction'was'rescheduled'
' from'July'7,'1999'to'August'6,'1999.'
The' trial' court' then' issued' a' Writ' of' Preliminary' Attachment' after' BSC' filed' an' attachment' bond.' '
Pursuant'thereto,'the'sheriff'of'Branch'7'of'the'RTC'of'Manila,'Manuelito'P.'Viloria,'levied'on'the'property' The' Garcias' filed' another' case' with' the' Court' of' Appeals' for' the' issuance' of' a' writ' of' preliminary'
registered' in' the' names' of' the' spouses' Ng' and' covered' by' TCT' No.' 11387' of' the' Registry' of' Deeds' of' injunction' with' prayer' for' temporary' restraining' order' which' sought' to' perpetually' enjoin' Judge'
Quezon'City.'This'property'under'preliminary'attachment'was'in'fact'mortgaged'to'the'Far'East'Bank'and' Lanzanas'and'sheriff'Bernardo'from'proceeding'with'the'public'auction'on'August'6,'1999.'Their'petition'
Trust'Company'(FEBTC),'now'Bank'of'the'Philippine'Islands'(BPI),'and'consisted'of'a'268IsquareImeter' did'not'implead'BSC'as'private'respondent.'
lot' located' at' 14' Tulip' Road,' Gardenville' Town' and' Country' Homes,' Congressional' Avenue,' Project' 8,' '
Quezon'City.' CA:' The' CA' temporarily' restrained' public' respondents' Judge' Lanzanas' and' Bernardo' from' proceeding'
' with'the'public'auction'of'the'subject'property.'Hence,'the'scheduled'public'sale'on'August'6,'1999'did'
On'August'5,'1998,'a'sheriff’s'return'was'filed'by'Viloria,'stating'that,'as'of'that'date,'summons'was'not' not'transpire.'This'prompted'petitioner'BSC'to'file'a'motion'for'intervention'on'August'16,'1999,'praying'
served' upon' the' defendant' spouses' Ng' because' they' could' not' be' located.' BSC' caused' the' filing' of' a' that' it' be' allowed' to' intervene' and' be' heard' in' the' case' as' private' respondent,' and' to' comment' and'
motion' to' serve' the' summons' by' publication' which' was' granted.' Summons' by' publication' thereafter' oppose' the' petition' filed' by' the' Garcias.' Likewise,' said' motion' sought' to' oppose' the' prayer' for'
ensued.' preliminary' injunction' with' urgent' request' for' the' issuance' of' the' temporary' restraining' order.' Hence,'
' this'petition.''
In' the' meantime,' defendantIspouses' Ng' sold' the' property' to' petitioners' Mylene' and' Myla' Garcia' by' '
means'of'a'deed'of'sale'dated'June'29,'1998.'Said'transaction'was'registered'only'about'a'monthIandIaI ISSUE:'W/N'the'Garcias'are'the'real'owners'of'the'property'when'bought'it'from'the'spouses'Ng'
half' later,' on' August' 12,' 1998,' after' the' mortgagee' FEBTC' gave' its' approval' to' the' sale.' On' August' 19,' '
1998,'TCT'No.'11387'in'the'name'of'the'spouses'Ng'was'cancelled'and,'in'lieu'thereof,'TCT'No.'194226'in' RULING:' NO.' This' Court' has' always' held' that' attachment' is' a' proceeding' in' rem.' It' is' against' the'
the' names' of' Mylene' and' Myla' Garcia' was' issued.' The' annotation' of' the' preliminary' attachment' made' particular'property,'enforceable'against'the'whole'world.'The'attaching'creditor'acquires'a'specific'lien'
earlier' on' July' 27,' 1998' by' sheriff' Viloria' on' the' old' title,' TCT' No.' 11387,' was' transferred' to' TCT' No.' on'the'attached'property'which'ripens'into'a'judgment'against'the'res'when'the'order'of'sale'is'made.'
194226.' Such' a' proceeding' in' effect' means' that' the' property' attached' is' an' indebted' thing' and' a' virtual'
' condemnation'of'it'to'pay'the'owner’s'debt.'
On'August'28,'1998,'the'Garcias'filed'a'complaintIinIintervention'in'Civil'Case'No.'98I89831'pending'at' '
Branch'7'of'the'Manila'RTC,'alleging'that'they'were'the'registered'owners'of'the'property'covered'by'TCT' The' Garcias' claim' they' acquired' the' subject' property' by' means' of' a' deed' of' sale' with' assumption' of'
No.' 194226' which' was' the' subject' of' BSC’s' writ' of' preliminary' attachment.' Said' complaintIinI mortgage'dated'June'29,'1998,'meaning,'they'purchased'the'property'ahead'of'the'inscription'of'the'levy'
intervention'was'denied'by'the'trial'court'for'lack'of'merit.' on' attachment' thereon' on' July' 27,' 1998.' But,' even' if' consensual,' not' all' contracts' of' sale' become'
' automatically'and'immediately'effective.''
RTC:'In'favor'Biñan'Steel'Corporation,'and'against'defendants'Joenas'Metal'Corporation,'Ng'Ley'Huat'and' '
Leticia'Dy'Ng' In'sales'with'assumption'of'mortgage,'the'assumption'of'mortgage'is'a'condition'precedent'to'the'seller’s'
' consent' and' therefore,' without' approval' of' the' mortgagee,' the' sale' is' not' perfected.' Apart' therefrom,'
On'June'14,'1999,'a'Notice'of'Sale'of'Execution'on'Real'Property'was'issued'by'respondent'sheriff'Rufo'J.' notwithstanding' the' approval' of' the' sale' by' mortgagee' FEBTC' (BPI),' there' was' yet' another' step' the'
Bernardo.'It'scheduled'the'public'auction'of'the'property'on'July'7,'1999.' Garcias'had'to'take'and'it'was'the'registration'of'the'sale'from'the'Ngs'to'them.'Insofar'as'third'persons'

! 55! ! 56!
 NATURE'OF'THE'CONTRACT'CASES'–'CHARACTERISTICS'OF'SALES'' NATURE'OF'THE'CONTRACT'CASES'–'CHARACTERISTICS'OF'SALES''
CASE'DIGEST' CASE'DIGEST'
! !
are'concerned,'what'validly'transfers'or'conveys'a'person’s'interest'in'real'property'is'the'registration'of' ownership' shall' belong' to' the' person' acquiring' it' who' in' good' faith' first' recorded' it' in' the' Registry' of'
the'deed.' Property.' x' x' x' Because' of' the' principle' of' constructive' notice' to' the' whole' world,' one' who' deals' with'
' registered'property'which'is'the'subject'of'an'annotated'levy'on'attachment'cannot'invoke'the'rights'of'a'
When' the' Garcias' bought' the' property' on' June' 29,' 1998,' it' was,' at' that' point,' no' more' than' a' private' purchaser' in' good' faith.' As' between' two' purchasers,' the' one' who' registers' the' sale' in' his' favor' has' a'
transaction'between'them'and'the'Ngs.'It'needed'to'be'registered'before'it'could'become'binding'on'all' preferred'right'over'the'other'who'has'not'registered'his'title'even'if'the'latter'is'in'actual'possession'of'
third' parties,' including' BSC.' It' turned' out' that' the' Garcias' registered' it' only' on' August' 12,' 1998,' after' the' immovable' property.' And,' as' between' two' purchasers' who' both' registered' the' respective' sales' in'
FEBTC'(now'BPI)'approved'the'sale.'It'was'too'late'by'then'because,'on'July'27,'1998,'the'levy'in'favor'of' their' favor,' the' one' who' registered' his' sale' ahead' of' the' other' would' have' better' rights' than' the' other'
BSC,'pursuant'to'the'preliminary'attachment'ordered'by'the'Manila'RTC,'had'already'been'annotated'on' who'registered'later.'
the'original'title'on'file'with'the'Registry'of'Deeds.'This'registration'of'levy'or'notice'now'became'binding' '
on'the'whole'world,'including'the'Garcias.'The'rights'which'had'already'accrued'in'favor'of'BSC'by'virtue' The' purchaser' of' a' property' subject' to' an' attachment' legally' and' validly' levied' thereon' is' merely'
of'the'levy'on'attachment'over'the'property'were'never'adversely'affected'by'the'unregistered'transfer' subrogated'to'the'rights'of'the'vendor'and'acquires'the'property'subject'to'the'rights'of'the'attachment'
from'the'spouses'Ng'to'the'Garcias.'' creditor.'All'told,'the'purchaser'of'a'property'subject'to'an'attachment'legally'and'validly'levied'thereon'
' is' merely' subrogated' to' the' rights' of' the' vendor' and' acquires' the' property' subject' to' the' rights' of' the'
We'sympathize'with'the'Garcias'but,'had'they'only'bothered'to'check'first'with'the'Register'of'Deeds'of' attachment'creditor.'An'attaching'creditor'who'registers'the'order'of'attachment'and'the'sale'by'public'
Quezon'City'before'buying'the'property—as'a'prudent'buyer'would'have'done—they'would'have'seen' auction'of'the'property'to'him'as'the'highest'bidder'acquires'a'superior'title'to'the'property'as'against'a'
the'warning'about'BSC’s'superior'rights'over'it.'This'alone'should'have'been'sufficient'reason'for'them'to' vendee' who' previously' bought' the' same' property' from' the' registered' owner' but' failed' to' register' his'
back'out'of'the'deal.' deed'of'sale.'
' '
It' is' doctrinal' that' a' levy' on' attachment,' duly' registered,' has' preference' over' a' prior' unregistered' sale' Case'Title:'National'Housing'Authority'vs.'Grace'Baptist'Church'424'SCRA'147'
and,'even'if'the'prior'unregistered'sale'is'subsequently'registered'before'the'sale'on'execution'but'after' Petitioner:'NHA''
the' levy' is' made,' the' validity' of' the' execution' sale' should' be' upheld' because' it' retroacts' to' the' date' of' Respondent:'Grace'Baptist'Church'
levy.—It'is'doctrinal'that'a'levy'on'attachment,'duly'registered,'has'preference'over'a'prior'unregistered' Promulgated:'March'1,'2004'
sale'and,'even'if'the'prior'unregistered'sale'is'subsequently'registered'before'the'sale'on'execution'but' Ponente:'Ynares'I'Santiago'
after'the'levy'is'made,'the'validity'of'the'execution'sale'should'be'upheld'because'it'retroacts'to'the'date' FACTS:' On' June' 13,' 1986,' respondent' Grace' Baptist' Church' (hereinafter,' the' Church)' wrote' a' letter' to'
of'levy.'The'priority'enjoyed'by'the'levy'on'attachment'extends,'with'full'force'and'effect,'to'the'buyer'at' petitioner' National' Housing' Authority' (NHA),' manifesting' its' interest' in' acquiring' Lots' 4' and' 17' of' the'
the'auction'sale'conducted'by'virtue'of'such'levy.'The'sale'between'the'spouses'Ng'and'the'Garcias'was' General'Mariano'Alvarez'Resettlement'Project'in'Cavite.4'In'its'letterIreply'dated'July'9,'1986,'petitioner'
undoubtedly'a'valid'transaction'between'them.'However,'in'view'of'the'prior'levy'on'attachment'on'the' informed'respondent'that'the'latter'advise'the'respondent'that'prior'to'approval'of'such'application'and'
same'property,'the'Garcias'took'the'property'subject'to'the'attachment.'The'Garcias,'in'buying'registered' in'accordance'with'the'petitioners’'existing'policies'and'guidelines,'the'respondent’s'other'accounts'shall'
land,'stood'exactly'in'the'shoes'of'their'vendors,'the'Ngs,'and'their'title'ipso'facto'became'subject'to'the' be'maintained'in'good'standing.'
incidents'or'results'of'the'pending'litigation'between'the'Ngs'and'BSC.' '
' Respondent'entered'into'possession'of'the'lots'and'introduced'improvements'thereon.'
When'a'conveyance'has'been'properly'recorded,'such'record'is'constructive'notice'of'its'contents'and'all' '
interests,'legal'and'equitable,'included'therein.—When' a' conveyance' has' been' properly' recorded,' such' On'February'22,'1991,'the'NHA’s'Board'of'Directors'passed'Resolution'No.'2126,'approving'the'sale'of'
record'is'constructive'notice'of'its'contents'and'all'interests,'legal'and'equitable,'included'therein.'Under' the' subject' lots' to' respondent' Church' at' the' price' of' P700.00' per' square' meter,' or' a' total' price' of'
the'rule'on'notice,'it'is'presumed'that'the'purchaser'has'examined'every'instrument'on'record'affecting' P430,500.00.'The'Church'was'duly'informed'of'this'Resolution'through'a'letter'sent'by'the'NHA.'
the'title.'Such'presumption'is'irrefutable'and'cannot'be'overcome'by'any'claim'of'innocence'or'good'faith.' '
Therefore,'such'presumption'cannot'be'defeated'by'proof'of'lack'of'knowledge'of'what'the'public'record' On' April' 8,' 1991,' the' Church' tendered' to' the' NHA' a' manager’s' check' in' the' amount' of' P55,350.00,'
contains'any'more'than'one'may'be'permitted'to'show'that'he'was'ignorant'of'the'provisions'of'the'law.' purportedly'in'full'payment'of'the'subject'properties.'The'Church'insisted'that'this'was'the'price'quoted'
The'rule'that'all'persons'must'take'notice'of'the'facts'which'the'public'record'contains'is'a'rule'of'law.' to'them'by'the'NHA'Field'Office,'as'shown'by'an'unsigned'piece'of'paper'with'a'handwritten'computation'
The' rule' must' be' absolute.' Any' variation' would' lead' to' endless' confusion' and' useless' litigation.' scribbled' thereon.' Petitioner' NHA' returned' the' check,' stating' that' the' amount' was' insufficient'
Otherwise,'the'very'purpose'and'object'of'the'law'requiring'public'registration'would'be'for'naught.' considering'that'the'price'of'the'properties'have'changed.'The'Church'made'several'demands'on'the'NHA'
' to' accept' their' tender' of' payment,' but' the' latter' refused.' Thus,' the' Church' instituted' a' complaint' for'
Because' of' the' principle' of' constructive' notice' to' the' whole' world,' one' who' deals' with' registered' specific'performance'and'damages'against'the'NHA'with'the'Regional'Trial'Court'of'Quezon'City,'where'it'
property'which'is'the'subject'of'an'annotated'levy'on'attachment'cannot'invoke'the'rights'of'a'purchaser' was'docketed'as'Civil'Case'No.'QI91I9148.'
in'good'faith.'Pertinent'to'the'matter'at'hand'is'Article'1544'of'the'New'Civil'Code'which'provides:'If'the' '
same' thing' should' have' been' sold' to' different' vendees,' x' x' x' should' it' be' immovable' property,' the'

! 57! ! 58!
 NATURE'OF'THE'CONTRACT'CASES'–'CHARACTERISTICS'OF'SALES'' NATURE'OF'THE'CONTRACT'CASES'–'CHARACTERISTICS'OF'SALES''
CASE'DIGEST' CASE'DIGEST'
! !
RTC:' Ordered' the' NHA' to' reimburse' to' the' Church' the' amount' of' P4,290.00' representing' the' It' appearing' that' there' is' no' dispute' that' this' case' involves' an' unperfected' contract,' the' Civil' Law'
overpayment'made'for'Lots'1,'2,'3,'18,'19'and'20'and'declared'that'there'was'no'perfected'contract'of' principles'governing'contracts'should'apply.''
sale'with'respect'to'Lots'4'and'17' '
' In' Vda.' de' Urbano' v.Government' Service' Insurance' System,' it' was' ruled' that' a' qualified' acceptance'
CA:'Affirmed'the'RTC.'It'ruled'that'the'NHA’s'Resolution'No.'2126,'which'earlier'approved'the'sale'of'the' constitutes'a'counterIoffer'as'expressly'stated'by'Article'1319'of'the'Civil'Code.'In'said'case,'petitioners'
subject'lots'to'Grace'Baptist'Church'at'the'price'of'P700.00'per'square'meter,'has'not'been'revoked'at'any' offered' to' redeem' mortgaged' property' and' requested' for' an' extension' of' the' period' of' redemption.'
time'and'was'therefore'still'in'effect.'As'a'result,'the'NHA'was'estopped'from'fixing'a'different'price'for' However,'the'offer'was'not'accepted'by'the'GSIS.'Instead,'it'made'a'counterIoffer,'which'petitioners'did'
the'subject'properties.'Considering'further'that'the'Church'had'been'occupying'the'subject'lots'and'even' not'accept.'Petitioners'again'offer'to'pay'the'redemption'price'on'staggered'basis.'In'deciding'said'case,'it'
introduced' improvements' thereon,' the' CA' ruled' that,' in' the' interest' of' equity,' it' should' be' allowed' to' was'held'that'when'there'is'absolutely'no'acceptance'of'an'offer'or'if'the'offer'is'expressly'rejected,'there'
purchase'the'subject'properties.' is'no'meeting'of'the'minds.'Since'petitioners’'offer'was'denied'twice'by'GSIS,'it'was'held'that'there'was'
' clearly' no' meeting' of' the' minds' and,' thus,' no' perfected' contract.' All' that' is' established' was' a' counterI
Petitioner' submits' that' the' Court' cannot' compel' it' to' sell' the' subject' property' to' Grace' Baptist' Church' offer.'
without'violating'its'freedom'to'contract.'Moreover,'it'contends'that'equity'should'be'applied'only'in'the' '
absence'of'any'law'governing'the'relationship'between'the'parties,'and'that'the'law'on'sales'and'the'law' In'the'case'at'bar,'the'offer'of'the'NHA'to'sell'the'subject'property,'as'embodied'in'Resolution'No.'2126,'
on'contracts'in'general'apply'to'the'present'case.' was'similarly'not'accepted'by'the'respondent.'Thus,'the'alleged'contract'involved'in'this'case'should'be'
' more' accurately' denominated' as' inexistent.' There' being' no' concurrence' of' the' offer' and' acceptance,' it'
ISSUE:'W/N'the'NHA'can'be'compelled'to'sell'the'subject'lots'to'Grace'Baptist'Church'in'the'absence'of' did'not'pass'the'stage'of'generation'to'the'point'of'perfection.'As'such,'it'is'without'force'and'effect'from'
any'perfected'contract'of'sale'between'the'parties' the' very' beginning' or' from' its' incipiency,' as' if' it' had' never' been' entered' into,' and' hence,' cannot' be'
' validated'either'by'lapse'of'time'or'ratification.'Equity'can'not'give'validity'to'a'void'contract,'and'this'
RULING:' NO.' Petitioner' NHA' is' not' estopped' from' selling' the' subject' lots' at' a' price' equal' to' their' fair' rule'should'apply'with'equal'force'to'inexistent'contracts.'
market'value,'even'if'it'failed'to'expressly'revoke'Resolution'No.'2126.'It'is,'after'all,'hornbook'law'that' '
the'principle'of'estoppel'does'not'operate'against'the'Government'for'the'act'of'its'agents,17or,'as'in'this' We'note'from'the'records,'however,'that'the'Church,'despite'knowledge'that'its'intended'contract'of'sale'
case,'their'inaction.' with'the'NHA'had'not'been'perfected,'proceeded'to'introduce'improvements'on'the'disputed'land.'On'the'
' other'hand,'the'NHA'knowingly'granted'the'Church'temporary'use'of'the'subject'properties'and'did'not'
On'the'application'of'equity,'it'appears'that'the'crux'of'the'controversy'involves'the'characterization'of' prevent'the'Church'from'making'improvements'thereon.'Thus,'the'Church'and'the'NHA,'who'both'acted'
equity'in'the'context'of'contract'law.'Preliminarily,'we'reiterate'that'this'Court,'while'aware'of'its'equity' in'bad'faith,'shall'be'treated'as'if'they'were'both'in'good'faith.28'In'this'connection,'Article'448'of'the'
jurisdiction,'is'first'and'foremost,'a'court'of'law.'While'equity'might'tilt'on'the'side'of'one'party,'the'same' Civil'Code'provides:'
cannot'be'enforced'so'as'to'overrule'positive'provisions'of'law'in'favor'of'the'other.'Thus,'before'we'can' '
pass' upon' the' propriety' of' an' application' of' equitable' principles' in' the' case' at' bar,' we' must' first' The' owner' of' the' land' on' which' anything' has' been' built,' sown' or' planted' in' good' faith,' shall' have' the'
determine'whether'or'not'positive'provisions'of'law'govern.' right'to'appropriate'as'his'own'the'works,'sowing'or'planting,'after'payment'of'the'indemnity'provided'
' for'in'articles'546'and'548,'or'to'oblige'the'one'who'built'or'planted'to'pay'the'price'of'the'land,'and'the'
It' is' a' fundamental' rule' that' contracts,' once' perfected,' bind' both' contracting' parties,' and' obligations' one'who'sowed,'the'proper'rent.'However,'the'builder'or'planter'cannot'be'obliged'to'buy'the'land'and'if'
arising'therefrom'have'the'force'of'law'between'the'parties'and'should'be'complied'with'in'good'faith.' its'value'is'considerably'more'than'that'of'the'building'or'trees.'In'such'case,'he'shall'pay'reasonable'rent,'
However,'it'must'be'understood'that'contracts'are'not'the'only'source'of'law'that'govern'the'rights'and' if'the'owner'of'the'land'does'not'choose'to'appropriate'the'building'or'trees'after'proper'indemnity.'The'
obligations'between'the'parties.'More'specifically,'no'contractual'stipulation'may'contradict'law,'morals,' parties'shall'agree'upon'the'terms'of'the'lease'and'in'case'of'disagreement,'the'court'shall'fix'the'terms'
good' customs,' public' order' or' public' policy.' ' Verily,' the' mere' inexistence' of' a' contract,' which' would' thereof.'
ordinarily' serve' as' the' law' between' the' parties,' does' not' automatically' authorize' disposing' of' a' '
controversy' based' on' equitable' principles' alone.' Notwithstanding' the' absence' of' a' perfected' contract' Case'Title:'Congregation'of'the'Religious'of'the'Virgin'Mary'vs.'Orola'553'SCRA'578'
between'the'parties,'their'relationship'may'be'governed'by'other'existing'laws'which'provide'for'their' Petitioner:'Congregation'of'the'Religious'of'the'Virgin'Mary'represented'by'Mother'Balleque'(RVM)'
reciprocal'rights'and'obligations.' Respondent:'Emilio'Orola'
' Promulgated:'April'30,'2008'
It'must'be'remembered'that'contracts'in'which'the'Government'is'a'party'are'subject'to'the'same'rules'of' Ponente:'Nachura'
contract'law'which'govern'the'validity'and'sufficiency'of'contract'between'individuals.'All'the'essential' FACTS:'Sometime'in'April'1999,'[petitioner]'Religious'of'the'Virgin'Mary'(RVM),'acting'through'its'local'
elements' and' characteristics' of' a' contract' in' general' must' be' present' in' order' to' create' a' binding' and' unit' and' specifically' through' Sr.' Fe' Enhenco,' local' Superior' of' the' St.' Mary’s' Academy' of' Capiz' and'
enforceable'Government'contract.' [respondents]' met' to' discuss' the' sale' of' the' latter’s' property' adjacent' to' St.' Mary’s' Academy.' Said'
'

! 59! ! 60!
 NATURE'OF'THE'CONTRACT'CASES'–'CHARACTERISTICS'OF'SALES''
CASE'DIGEST'
! !
property' is' denominated' as' Lot' 159IBI2' and' was' still' registered' in' the' name' of' [respondents’]'
predecessorIinIinterest,'Manuel'Laserna.'
' the'latter'should'become'impossible.'
The' respondent' Josephine' Orola' went' to' Manila' to' see' the' Mother' Superior' General' of' the' RVM,' in' the'
person'of'Very'Reverend'Mother'Ma.'Clarita'Balleque'[VRM'Balleque]'regarding'the'sale'of'the'property'
subject'of'this'instant'case.'
A' contract' to' sell' dated' June' 2,' 1999' made' out' in' the' names' of' herein' petitioner' and' respondents' as'
parties' to' the' agreement' was' presented' in' evidence' pegging' the' total' consideration' of' the' property'
at'P5,555,000.00'with'10%'of'the'total'consideration'payable'upon'the'execution'of'the'contract'
Respondents'Josephine'Orola'and'Antonio'Orola'acknowledged'receipt'of'RCBC'Check'No.'0005188'dated'
June'7,'1999'bearing'the'amount'of'P555,500.00'as'10%'down'payment'for'Lot'159IBI2'from'the'RVM'
Congregation' (St.' Mary’s' Academy' of' Cadiz' [SMAC])' with' the' "conforme"' signed' by' Sister' Fe' Enginco'
(sic),'Mother'Superior,'SMAC.'
Respondents'executed'an'extrajudicial'settlement'of'the'estate'of'Trinidad'Andrada'Laserna'dated'June'
21,'1999'adjudicating'unto'themselves,'in'pro(indiviso'shares,'Lot'159IBI2,'and'which'paved'the'transfer'
of'said'lot'into'their'names'under'Transfer'Certificate'of'Title'No.'TI39194'with'an'entry'date'of'August'
13,'1999.4'
Thereafter,'respondents,'armed'with'an'undated'Deed'of'Absolute'Sale'which'they'had'signed,'forthwith'
scheduled' a' meeting' with' VRM' Balleque' at' the' RVM' Headquarters' in' Quezon' City' to' finalize' the' sale,'
specifically,' to' obtain' payment' of' the' remaining' balance' of' the' purchase' price' in' the' amount'
of'P4,999,500.00.' However,' VRM' Balleque' did' not' meet' with' respondents.' Succeeding' attempts' by'
respondents'to'schedule'an'appointment'with'VRM'Balleque'in'order'to'conclude'the'sale'were'likewise'
rebuffed.'
In' an' exchange' of' correspondence' between' the' parties’' respective' counsels,' RVM' denied' respondents’'
demand'for'payment'because:''
• the' purported' Contract' to' Sell' was' merely' signed' by' Sr.' Enhenco' as' witness,' and' not' by' VRM'
Balleque,'head'of'the'corporation'sole;'
• RVM'will'only'be'in'a'financial'position'to'pay'the'balance'of'the'purchase'price'in'two'years'time.'
Thus,' respondents' filed' with' the' RTC' a' complaint' with' alternative' causes' of' action' of' specific'
performance'or'rescission.'
RTC:' It' ruled' that' there' is' a' perfected' contract' of' sale' between' the' parties,' and' granted' respondents’'
prayer'for'rescission'thereof.'
CA:'Reversed'the'ruling'of'RTC'and'ordered'petitioner'RVM'to'pay'respondents'immediately'the'balance'
of'the'total'consideration'for'the'subject'property'in'the'amount'of'P4,999,500.00'with'interest'of'6%'per'
annum' computed' from' June' 7,' 2000' or' one' year' from' the' downpayment' of' the' 10%' of' the' total'
consideration'until'such'time'when'the'whole'obligation'has'been'fully'satisfied.'It'sustained'the'ruling'of'
RTC'that'there'is'a'perfected'contract'of'sale'between'them.'
In' the' same' way,' respondents' are' ordered' to' immediately' deliver' the' title' of' the' property' Parties' are'
further'ordered'to'abide'by'their'reciprocal'obligations'in'good'faith.'
ISSUE:'W/N'the'RVM'is'liable'for'interest'on'the'balance'of'the'purchase'price.'
RULING:' YES.' At' the' outset,' we' must' distinguish' between' an' action' for' rescission' as' mapped' out' in'
Article'1191'of'the'Civil'Code'and'that'provided'by'Article'1381'of'the'same'Code.'The'articles'read:'
Art.' 1191.' The' power' to' rescind' obligations' is' impled' in' reciprocal' ones,' in' case' one' of' the' obligors'
should'not'comply'with'what'is'incumbent'upon'him.'
! 61!
NATURE'OF'THE'CONTRACT'CASES'–'CHARACTERISTICS'OF'SALES''
CASE'DIGEST'
The' injured' party' may' choose' between' the' fulfillment' and' the' rescission' of' the' obligation,' with' the'
payment'of'damages'in'either'case.'He'may'also'seek'rescission,'even'after'he'has'chosen'fulfillment,'if'
The'court'shall'decree'the'rescission'claimed,'unless'there'be'just'cause'authorizing'the'fixing'of'a'period.'
This'is'understood'to'be'without'prejudice'to'the'rights'of'third'persons'who'have'acquired'the'thing,'in'
accordance'with'articles'1385'and'1388'and'the'Mortgage'Law.'
Art.'1381.'The'following'contracts'are'rescissible:'
(1)'Those'which'are'entered'into'by'guardians'whenever'the'wards'whom'they'represent'suffer'lesion'by'
more'than'one'fourth'of'the'value'of'the'things'which'are'the'object'thereof;'
(2)'Those'agreed'upon'in'representation'of'absentees,'if'the'latter'suffer'the'lesion'state'in'the'preceding'
number;'
(3)'Those'undertaken'in'fraud'of'creditors'when'the'latter'cannot'in'any'other'manner'collect'the'claims'
due'them;'
(4)'Those'which'refer'to'things'under'litigation'if'they'have'been'entered'into'by'the'defendant'without'
the'knowledge'and'approval'of'the'litigants'or'of'competent'judicial'authority;'
(5)'All'other'contracts'specially'declared'by'law'to'be'subject'to'rescission.'
Article'1191,'as'presently'worded,'speaks'of'the'remedy'of'rescission'in'reciprocal'obligations'within'the'
context'of'Article'1124'of'the'Old'Civil'Code'which'uses'the'term'"resolution."'The'remedy'of'resolution'
applies' only' to' reciprocal' obligations'such' that' a' party’s' breach' thereof' partakes' of' a' tacit' resolutory'
condition' which' entitles' the' injured' party' to' rescission.' The' present' article,' as' in' the' Old' Civil' Code,'
contemplates'alternative'remedies'for'the'injured'party'who'is'granted'the'option'to'pursue,'as'principal'
actions,' either' a' rescission' or' specific' performance' of' the' obligation,' with' payment' of' damages' in' each'
case.'On'the'other'hand,'rescission'under'Article'1381'of'the'Civil'Code,'taken'from'Article'1291'of'the'
Old'Civil'Code,'is'a'subsidiary'action,'and'is'not'based'on'a'party’s'breach'of'obligation.'
The'esteemed'Mr.'Justice'J.B.L.'Reyes,'ingeniously'cuts'through'the'distinction'in'his'concurring'opinion'
in'Universal(Food(Corporation(v.(CA:9'
“The' rescission' demanded' by' the' respondentIappellee,' Magdalo' Francisco,' should' be' denied' because'
under'Article'1383'of'the'Civil'Code'of'the'Philippines,'rescission'can'not'be'demanded'except'when'the'
party' suffering' damage' has' no' other' legal' means' to' obtain' reparation,' is' predicated' on' a' failure' to'
distinguish' between' a' rescission' for' breach' of' contract' under' Article' 1191' of' the' Civil' Code' and' a'
rescission'by'reason'of'lesión'or'economic'prejudice,'under'Article'1381,'et'seq.'The'rescission'on'account'
of'breach'of'stipulations'is'not'predicated'on'injury'to'economic'interests'of'the'party'plaintiff'but'on'the'
breach'of'faith'by'the'defendant,'that'violates'the'reciprocity'between'the'parties.'It'is'not'a'subsidiary'
action,' and' Article' 1191' may' be' scanned' without' disclosing' anywhere' that' the' action' for' rescission'
thereunder' is' subordinated' to' anything' other' than' the' culpable' breach' of' his' obligations' by' the'
defendant.'This'rescission'is'a'principal'action'retaliatory'in'character,'it'being'unjust'that'a'party'be'held'
bound'to'fulfill'his'promises'when'the'other'violates'his.'Hence,'the'reparation'of'damages'for'the'breach'
is'purely'secondary.”'
On' the' contrary,' in' the' rescission' by' reason' of'lesión'or' economic' prejudice,' the' cause' of' action' is'
subordinated'to'the'existence'of'that'prejudice,'because'it'is'the'raison(d’(etre'as'well'as'the'measure'of'
the'right'to'rescind.'Hence,'where'the'defendant'makes'good'the'damages'caused,'the'action'cannot'be'
maintained'or'continued,'as'expressly'provided'in'Articles'1383'and'1384.'But'the'operation'of'these'two'
articles'is'limited'to'the'cases'of'rescission'for'lesión'enumerated'in'Article'1381'of'the'Civil'Code'of'the'
Philippines,'and'does'not'apply'to'cases'under'Article'1191.'
It' is' probable' that' the' petitioner’s' confusion' arose' from' the' defective' technique' of' the' new' Code' that'
terms'both'instances'as'"rescission"'without'distinctions'between'them;'unlike'the'previous'Spanish'Civil'
! 62!
 NATURE'OF'THE'CONTRACT'CASES'–'CHARACTERISTICS'OF'SALES''
CASE'DIGEST'
! !
Code' of' 1889,' that' differentiated' "resolution"' for' breach' of' stipulations' from' "rescission"' by' reason'
of'lesión(or(damage.'But'the'terminological'vagueness'does'not'justify'confusing'one'case'with'the'other,'
considering'the'patent'difference'in'causes'and'results'of'either'action.'
In'the'case'at'bench,'although'the'CA'upheld'the'RTC’s'finding'of'a'perfected'contract'of'sale'between'the'
parties,' the' CA' disagreed' with' the' RTC' that' fraud' and' bad' faith' were' attendant' in' the' sale' transaction.'
The'appellate'court,'after'failing'to'ascertain'the'parties’'actual'intention'on'the'terms'of'payment'for'the'
sale,' proceeded' to' apply' Articles' 1383' and' 1384' of' the' Civil' Code' declaring' rescission' as' a' subsidiary'
remedy'that'may'be'availed'of'only'when'the'injured'party'has'no'other'legal'means'to'obtain'reparation'
for'the'damage'caused.'In'addition,'considering'the'absence'of'fraud'and'bad'faith,'the'CA'felt'compelled'
to' arrive' at' a' resolution' most' equitable' for' the' parties.' The' CA’s' most' equitable' resolution' granted'
respondents’'prayer'for'specific'performance'of'the'sale'and'ordered'RVM'to'pay'the'remaining'balance'
of'the'purchase'price,'plus'interest.'It'set'aside'and'deleted'the'RTC’s'order'forfeiting'the'downpayment'
of'P555,500.00' in' favor' of,' and' payment' of' exemplary' damages,' attorney’s' fees' and' costs' of' suit' to,'
respondents.'
Nonetheless,'RVM'is'displeased.'It'strenuously'objects'to'the'CA’s'imposition'of'interest.'RVM'latches'on'
to' the' CA’s' characterization' of' its' resolution' as' most' equitable' which,' allegedly,' is' not' embodied' in' the'
dispositive'portion'of'the'decision'ordering'the'payment'of'interest.'RVM'is'of'the'view'that'since'the'CA'
decreed' specific' performance' of' the' contract' without' a' finding' of' bad' faith' by' either' party,' and'
respondents'retained'possession'of'the'subject'property'for'the'duration'of'the'litigation,'the'imposition'
of' interest' is' not' keeping' with' equity' without' simultaneously' requiring' respondents' to' pay' rentals' for'
their'continued'and'uninterrupted'stay'thereon.'In'all,'RVM'phrases'the'issue'in'metaphysical'terms,'i.e.,'
the'most'equitable'solution.'
We'completely'disagree.'The'law,'as'applied'to'this'factual'milieu,'leaves'no'room'for'equivocation.'Thus,'
we'are'not'wont'to'apply'equity'in'this'instance.'
As' uniformly' found' by' the' lower' courts,' we' likewise' find' that' there' was' a' perfected' contract' of' sale'
between' the' parties.' A' contract' of' sale' carries' the' correlative' duty' of' the' seller' to' deliver' the' property'
and'the'obligation'of'the'buyer'to'pay'the'agreed'price.10'As'there'was'already'a'binding'contract'of'sale'
between'the'parties,'RVM'had'the'corresponding'obligation'to'pay'the'remaining'balance'of'the'purchase'
price'upon'the'issuance'of'the'title'in'the'name'of'respondents.'The'supposed'2Iyear'period'within'which'
to'pay'the'balance'did'not'affect'the'nature'of'the'agreement'as'a'perfected'contract'of'sale.11'In'fact,'we'
note' that' this' 2Iyear' period' is' neither' reflected' in' any' of' the' drafts' to' the' contract,12'nor' in' the'
acknowledgment'receipt'of'the'downpayment'executed'by'respondents'Josephine'and'Antonio'with'the'
conformity' of' Sr.' Enhenco.' In' any' event,' we' agree' with' the' CA’s' observation' that' the' 2Iyear' period' to'
effect'payment'has'been'mooted'by'the'lapse'of'time.'
However,' the' CA' mistakenly' applied' Articles' 1383' and' 1384' of' the' Civil' Code' to' this' case' because'
respondents’'cause'of'action'against'RVM'is'predicated'on'Article'1191'of'the'same'code'for'breach'of'the'
reciprocal'obligation.'It'is'evident'from'the'allegations'in'respondents’'Complaint14'that'the'instant'case'
does'not'fall'within'the'enumerated'instances'in'Article'1381'of'the'Civil'Code.'Certainly,'the'Complaint'
did'not'pray'for'rescission'of'the'contract'based'on'economic'prejudice.'
The' absence' of' fraud' and' bad' faith' by' RVM' notwithstanding,' it' is' liable' to' respondents' for' interest.' In'
ruling' out' fraud' and' bad' faith,' the' CA' correspondingly' ordered' the' fulfillment' of' the' obligation' and'
deleted' the' RTC’s' order' of' forfeiture' of' the' downpayment' along' with' payment' of' exemplary' damages,'
attorney’s' fees' and' costs' of' suit.' But' RVM’s' contention' disregards' the' common' finding' by' the' lower'
courts'of'a'perfected'contract'of'sale.''
As' previously' adverted' to,' RVM' breached' this' contract' of' sale' by' refusing' to' pay' the' balance' of' the'
purchase'price'despite'the'transfer'to'respondents’'names'of'the'title'to'the'property.'The'2Iyear'period'
! 63!
NATURE'OF'THE'CONTRACT'CASES'–'CHARACTERISTICS'OF'SALES''
CASE'DIGEST'
RVM' relies' on' had' long' passed' and' expired,' yet,' it' still' failed' to' pay.' It' did' not' even' attempt' to' pay'
respondents'the'balance'of'the'purchase'price'after'the'case'was'filed,'to'amicably'end'this'litigation.'In'
fine,'despite'a'clear'cut'equitable'decision'by'the'CA,'RVM'refused'to'lay'the'matter'to'rest'by'complying'
with'its'obligation'and'paying'the'balance'of'the'agreed'price'for'the'property.'
To' obviate' confusion,' the' clear' language' of' Article' 1191' mandates' that' damages' shall' be' awarded' in'
either'case'of'fulfillment'or'rescission'of'the'obligation.17'In'this'regard,'Article'2210'of'the'Civil'Code'is'
explicit'that'"interest'may,'in'the'discretion'of'the'court,'be'allowed'upon'damages'awarded'for'breach'of'
contract."'The'ineluctable'conclusion'is'that'the'CA'correctly'imposed'interest'on'the'remaining'balance'
of'the'purchase'price'to'cover'the'damages'caused'the'respondents'by'RVM’s'breach.'
'
Case'Title:'Carrascoso'vs.'CA,'477'SCRA'666'
Petitioner:'Fernando'Carrascoso/PLDT'Company'
Respondent:'El'Dorado'Plantation'represented'by'Lauro'Leviste'
Promulgated:'December'15,'2005'
Ponente:'Carpio'I'Morales'
FACTS:'El'Dorado'Plantation,'Inc.'(El'Dorado)'was'the'registered'owner'of'a'parcel'of'land'(the'property)'
with' an' area' of' approximately' 1,825' hectares' covered' by' Transfer' Certificate' of' Title' (TCT)' No.' TI931'
situated'in'Sablayan,'Occidental'Mindoro.'On'February'1972,'El'Dorado'through'Leviste'sold'the'property'
to'Carrascoso'
'
It'was'agreed'on'a'Deed'of'Sale'that'the'consideration'is'P1,800,000.00,'and'P290,000.00'shall'be'paid'
and'the'remaining'balance'of'P1,300,000.00'plus'10%'interest'per'annum'shall'be'paid'within'3'years,'
and' that' the' title' of' the' property' shall' be' transferred' to' the' VENDEE' who' shall' have' full' authority' to'
register'the'same'and'obtain'the'corresponding'transfer'certificate'of'title'in'his'name.''
'
Likewise,'they'agreed'that'THE'VENDOR'certifies'and'warrants'that'the'property'aboveIdescribed'is'not'
being'cultivated'by'any'tenant'and'is'therefore'not'covered'by'the'provisions'of'the'Land'Reform'Code.'If,'
therefore,'the'VENDEE'becomes'liable'under'the'said'law,'the'VENDOR'shall'reimburse'the'VENDEE'for'
all'expenses'and'damages'he'may'incur'thereon.'
'
From' the' aboveIquoted' provisions' of' the' Deed' of' Sale,' Carrascoso' was' to' pay' the' full' amount' of' the'
purchase'price'on'March'23,'1975.'
'
On'even'date,'the'Board'of'Directors'of'El'Dorado'passed'a'Resolution'reading:'
'
“RESOLVED'that'by'reason'of'the'sale'of'that'parcel'of'land'covered'by'TCT'No.'TI93'to'Dr.'FERNANDO'O.'
CARRASCOSO,' JR.,' the' corporation' interposes' no' objection' to' the' property' being' mortgage' (sic)' by' Dr.'
FERNANDO'O.'CARRASCOSO,'JR.'to'any'bank'of'his'choice'as'long'as'the'balance'on'the'Deed'of'Sale'shall'
be'recognized'by'Dr.'FERNANDO'O.'CARRASCOSO,'JR.;'
'
“RESOLVED,' FURTHER,' that' the' corporation' authorizes' the' prefered' (sic)' claim' on' the' property' to' be'
subordinated'to'any'mortgage'that'may'be'constituted'by'Dr.'FERNANDO'O.'CARRASCOSO,'JR.;'
'
“RESOLVED,' FINALLY,' that' in' case' of' any' mortgage' on' the' property,' the' corporation' waives' the'
preference'of'any'vendor’s'lien'on'the'property.”'
'
! 64!
 NATURE'OF'THE'CONTRACT'CASES'–'CHARACTERISTICS'OF'SALES'' NATURE'OF'THE'CONTRACT'CASES'–'CHARACTERISTICS'OF'SALES''
CASE'DIGEST' CASE'DIGEST'
! !
On'the'same'day,'Leviste'made'an'affidavit'to'the'effect'that'will'execute'the'resolution' 23,'1972'up'to'the'return'of'possession'of'the'land'to'El'Dorado,'(4)'turn'over'said'fruits'or'the'equivalent'
' value'thereof'to'El'Dorado'and'(5)'pay'the'amount'of'P100,000.00'for'attorney’s'fees'and'other'damages.'
On'the'following'day,'Carrascoso'and'his'wife'Marlene'executed'a'Real'Estate'Mortgage'over'the'property' '
in' favor' of' Home' Savings' Bank' (HSB)' to' secure' a' loan' in' the' amount' of' P1,000,000.00.' Of' this' amount,' Also'on'March'15,'1977,'Lauro'and'El'Dorado'caused'to'be'annotated'on'TCT'No.'TI6055'a'Notice'of'Lis'
P290,000.00' was' paid' to' Philippine' National' Bank' to' release' the' mortgage' priorly' constituted' on' the' Pendens,'inscribed'as'Entry'No.'39737.'
property'and'P210,000.00'was'paid'to'El'Dorado'pursuant'to'aboveIquoted'paragraph'Nos.'1'and'2'of'the' '
terms'and'conditions'of'the'Deed'of'Sale.' In'the'meantime,'Carrascoso,'as'vendor'and'PLDT,'as'vendee'forged'on'April'6,'1977'a'Deed'of'Absolute'
' Sale'over'the'1,000'hectare'portion'of'the'property'subject'of'their'July'11,'1975'Agreement'to'Buy'and'
Subsequently,'the'Deed'of'Sale'of'Real'Property'was'registered'and'annotated'on'El'Dorado’s'TCT'No.'TI Sell.'
93'as'Entry'No.'152409'on'April'5,'1972.'On'even'date,'TCT'No.'TI93'covering'the'property'was'cancelled' '
and'TCT'No.'TI605510'was'in'its'stead'issued'by'the'Registry'of'Deeds'of'Occidental'Mindoro'in'the'name' In'turn,'PLDT,'by'Deed'of'Absolute'Sale'conveyed'the'aforesaid'1,000'hectare'portion'of'the'property'to'
of'Carrascoso'on'which'the'real'estate'mortgage'in'favor'of'HSB'was'annotated'as'Entry'No.'15242.' its' subsidiary,' PLDT' Agricultural' Corporation' (PLDTAC),' for' a' consideration' of' P3,000,000.00,' the'
' amount'of'P2,620,000.00'of'which'was'payable'to'PLDT'upon'signing'of'said'Deed,'and'P380,000.00'to'
On'May'18,'1972,'the'real'estate'mortgage'in'favor'of'HSB'was'amended'to'include'an'additional'three' Carrascoso'upon'issuance'of'title'to'PLDTAC.'
year' loan' of' P70,000.00' as' requested' by' the' spouses' Carrascoso.' The' Amendment' of' Real' Estate' '
Mortgage'was'also'annotated'on'TCT'No.'TI6055'as'Entry'No.'15486'on'May'24,'1972.' On'July'31,'1978,'PLDT'and'PLDTAC'filed'an'Urgent'Motion'for'Intervention'which'was'granted'by'the'
' trial'court'by'Order'of'September'7,'1978.'
The' 3Iyear' period' for' Carrascoso' to' fully' pay' for' the' property' on' March' 23,' 1975' passed' without' him' '
having'complied'therewith.' PLDT' and' PLDTAC' thereupon' filed' their' Answer' In' Intervention' with' Compulsory' Counterclaim' and'
' Crossclaim'against'Carrascoso'on'November'13,'1978,'alleging'that:''
In' the' meantime,' on' July' 11,' 1975,' Carrascoso' and' the' Philippine' Long' Distance' Telephone' Company' '
(PLDT),' through' its' President' Ramon' Cojuangco,' executed' an' Agreement' to' Buy' and' Sell' whereby' the' (1) when' Carrascoso' executed' the' April' 6,' 1977' Deed' of' Absolute' Sale' in' favor' of' PLDT,' PLDT' was' not'
former' agreed' to' sell' 1,000' hectares' of' the' property' to' the' latter' at' a' consideration' of' P3,000.00' per' aware'of'any'litigation'involving'the'1,000'hectare'portion'of'the'property'or'of'any'flaw'in'his'title'
hectare'or'a'total'of'P3,000,000.00.' '
' (2) PLDT'is'a'purchaser'in'good'faith'and'for'value;''
The'July'11,'1975'Agreement'to'Buy'and'Sell'was'not'registered'and'annotated'on'Carrascoso’s'TCT'No.' '
TI6055.''Lauro'Leviste'called'the'attention'of'the'Board'to'Carrascoso’s'failure'to'pay'the'balance'of'the' (3) When' PLDT' executed' the' May' 30,' 1977' Deed' of' Absolute' Sale' in' favor' of' PLDTAC,' they' had' no'
purchase'price'of'the'property'amounting'to'P1,300,000.00.'' knowledge'of'any'pending'litigation'over'the'property'and'neither'were'they'aware'that'a'notice'of'lis'
' pendens'had'been'annotated'on'Carrascoso’s'title;''
Because'of'the'default'for'a'long'time'of'Mr.'Carrascoso'to'pay'the'balance'of'the'consideration'of'the'sale,' '
Don' Lauro' Leviste' wanted' a' rescission' of' the' sale' made' by' the' El' Dorado' Plantation,' Inc.' to' Mr.' (4) Lauro' and' El' Dorado' knew' of' the' sale' by' Carrascoso' to' PLDT' and' PLDT’s' actual' possession' of' the'
Carrascoso.' 1,000' hectare' portion' of' the' property' since' June' 30,' 1975' and' of' its' exercise' of' exclusive' rights' of'
' ownership'thereon'through'agricultural'development.'
Jose'P.'Leviste,'as'President'of'El'Dorado,'later'sent'a'letter'to'Carrascoso'informing'him'that'in'view'of' '
his'failure'to'pay'the'balance'of'the'purchase'price'of'the'property,'El'Dorado'was'seeking'the'rescission' RTC:'Dismissed'the'complaint'of'the'respondent'on'the'ground'of'prematurity'of'the'sale'
of'the'March'23,'1972'Deed'of'Sale'of'Real'Property.' '
' CA:' Reversed' the' RTC.' Dismissed' the' complaint' of' the' PLDT' and' ordered' the' latter' and' Carrasosco' to'
Hence,'Lauro'and'El'Dorado'finally'filed'a'complaint'for'rescission'of'the'March'23,'1972'Deed'of'Sale'of' surrender'the'property'
Real'Property'between'El'Dorado'and'Carrascoso'with'damages'before'the'Court'of'First'Instance'(CFI)'of' '
Occidental'Mindoro.'Lauro'and'El'Dorado'also'sought'the'cancellation'of'TCT'No.'TI6055'in'the'name'of' ISSUE:'W/N'the'the'respondent'has'the'right'to'rescind'the'contract'of'sale'with'Carrasosco'
Carrascoso' and' the' revival' of' TCT' No.' TI93' in' the' name' of' El' Dorado,' free' from' any' liens' and' '
encumbrances.'' RULING:'YES.'Article'1191'of'the'Civil'Code'provides:'
' '
Furthermore,'the'two'prayed'for'the'issuance'of'an'order'for'Carrascoso'to:'(1)'reconvey'the'property'to' Art.' 1191.' The' power' to' rescind' obligations' is' implied' in' reciprocal' ones,' in' case' one' of' the' obligors'
El' Dorado' upon' return' to' him' of' P500,000.00,' (2)' secure' a' discharge' of' the' real' estate' mortgage' should'not'comply'with'what'is'incumbent'upon'him.'
constituted'on'the'property'from'HSB,'(3)'submit'an'accounting'of'the'fruits'of'the'property'from'March' '

! 65! ! 66!
 NATURE'OF'THE'CONTRACT'CASES'–'CHARACTERISTICS'OF'SALES'' NATURE'OF'THE'CONTRACT'CASES'–'CHARACTERISTICS'OF'SALES''
CASE'DIGEST' CASE'DIGEST'
! !
The' injured' party' may' choose' between' the' fulfillment' and' the' rescission' of' the' obligation,' with' the' Also,'El'Dorado’s'subordinating'its'“preferred'claim”'or'waiving'its'superior'“vendor’s'lien”'over'the'land'
payment'of'damages'in'either'case.'He'may'also'seek'rescission,'even'after'he'has'chosen'fulfillment,'if' in'favor'of'the'mortgagee'of'said'property'only'means'that'in'a'situation'where'the'unpaid'price'of'the'
the'latter'should'become'impossible.' Land'and'loan'secured'by'the'mortgage'over'the'Land'both'become'due'and'demandable,'the'mortgagee'
' shall'have'precedence'in'going'after'the'Land'for'the'satisfaction'of'the'loan.'Such'accommodations'do'
The'court'shall'decree'the'rescission'claimed,'unless'there'be'just'cause'authorizing'the'fixing'of'a'period.' not' necessarily' imply' the' modification' of' the' period' fixed' in' the' contract' of' sale' for' the' payment' by'
' Carrascoso'of'the'balance.'
This'is'understood'to'be'without'prejudice'to'the'rights'of'third'persons'who'have'acquired'the'thing,'in' '
accordance'with'Articles'1385'and'1388'and'the'Mortgage'Law.' The'palpable'purpose'of'El'Dorado'in'not'raising'any'objection'to'Carrascoso’s'mortgaging'the'land'was'
' to' eliminate' any' legal' impediment' to' such' a' contract.' That' was' so' succinctly' expressed' in' the' Affidavit'
Reciprocal'obligations'are'those'which'arise'from'the'same'cause,'and'in'which'each'party'is'a'debtor'and' (Exhibit'“2IA”)'of'President'Feleciano'(sic)'Leviste.'El'Dorado’s'yielding'its'“superior'lien”'over'the'land'in'
a'creditor'of'the'other,'such'that'the'obligation'of'one'is'dependent'upon'the'obligation'of'the'other.60' favor'of'the'mortgagee'was'plainly'intended'to'overcome'the'natural'reluctance'of'lending'institutions'to'
They' are' to' be' performed' simultaneously' such' that' the' performance' of' one' is' conditioned' upon' the' accept'a'land'whose'price'has'not'yet'been'fully'paid'as'collateral'of'a'loan.”66'(Italics'supplied)'
simultaneous'fulfillment'of'the'other.' '
' Respecting'Carrascoso’s'insistence'that'he'was'granted'verbal'extensions'within'which'to'pay'the'balance'
The'right'of'rescission'of'a'party'to'an'obligation'under'Article'1191'is'predicated'on'a'breach'of'faith'by' of' the' purchase' price' of' the' property' by' El' Dorado’s' directors' and' officers' Jose' and' Angel' Leviste,' this'
the'other'party'who'violates'the'reciprocity'between'them.' Court'finds'the'same'unsubstantiated'by'the'evidence'on'record.'
' '
A' contract' of' sale' is' a' reciprocal' obligation.' The' seller' obligates' itself' to' transfer' the' ownership' of' and' It'bears'recalling'that'Jose'Leviste'wrote'Carrascoso,'by'letter'of'February'21,'1977,'calling'his'attention'
deliver'a'determinate'thing,'and'the'buyer'obligates'itself'to'pay'therefor'a'price'certain'in'money'or'its' to' his' failure' to' comply,' despite' “numerous”' requests,' with' his' obligation' to' pay' the' amount' of'
equivalent.63'The'nonIpayment'of'the'price'by'the'buyer'is'a'resolutory'condition'which'extinguishes'the' P1,300,000.00' and' 10%' annual' interest' thereon,' and' advising' him' that' “we' would' like' to' rescind' the'
transaction'that'for'a'time'existed,'and'discharges'the'obligations'created'thereunder.64'Such'failure'to' contract'of'sale.”'This'letter'reiterated'the'term'of'payment'agreed'upon'in'the'March'23,'1972'Deed'of'
pay' the' price' in' the' manner' prescribed' by' the' contract' of' sale' entitles' the' unpaid' seller' to' sue' for' Sale'of'Real'Property'and'Carrascosos’s'nonIcompliance'therewith.'
collection'or'to'rescind'the'contract.65' '
' Carrascoso,'harping'on'Jose'Leviste’s'March'10,'1977'letter'to'Lauro’s'counsel'wherein'he'(Jose'Leviste)'
In' the' case' at' bar,' El' Dorado' already' performed' its' obligation' through' the' execution' of' the' March' 23,' stated'that'“some'of'the'Directors'of'the'corporation'could'not'see'their'way'clear'in'complying'with'the'
1972' Deed' of' Sale' of' Real' Property' which' effectively' transferred' ownership' of' the' property' to' demands'of'[Lauro]'and'have'failed'to'reach'a'consensus'to'bring'the'corresponding'action'for'rescission'
Carrascoso.'The'latter,'on'the'other'hand,'failed'to'perform'his'correlative'obligation'of'paying'in'full'the' of' the' contract' against' Dr.' Fernando' Carrascoso,”' argues' that' the' extensions' priorly' given' to' him' “no'
contract'price'in'the'manner'and'within'the'period'agreed'upon.' doubt'lead'to'the'logical'conclusion'on'some'of'the'directors’'inability'to'file'suit'against'him.”'
' '
The'terms'of'the'Deed'are'clear'and'unequivocal:'Carrascoso'was'to'pay'the'balance'of'the'purchase'price' The'argument'is'specious.'As'the'CA'found,'even'if'some'officers'of'El'Dorado'were'initially'reluctant'to'
of'the'property'amounting'to'P1,300,000.00'plus'interest'thereon'at'the'rate'of'10%'per'annum'within'a' file'suit'against'him,'the'same'should'not'be'interpreted'to'mean'that'this'was'brought'about'by'a'prior'
period'of'three'(3)'years'from'the'signing'of'the'contract'on'March'23,'1972.'When'Jose'Leviste'informed' extension'of'the'period'to'pay'the'balance'of'the'purchase'price'of'the'property'as'such'reluctance'could'
him'that'El'Dorado'was'seeking'rescission'of'the'contract'by'letter'of'February'21,'1977,'the'period'given' have'been'due'to'a'myriad'of'reasons'totally'unrelated'to'the'period'of'payment'of'the'balance.'
to'him'within'which'to'fully'satisfy'his'obligation'had'long'lapsed.' '
' “The'bottomline'however'is,'if'El'Dorado'really'intended'to'extend'the'period'of'payment'of'the'balance'
The'El'Dorado'Board'Resolution'and'the'Affidavit'of'Jose'Leviste'interposing'no'objection'to'Carrascoso’s' there'was'absolutely'no'reason'why'it'did'not'do'it'in'writing'in'clear'and'unmistakable'terms.'That'there'
mortgaging'of'the'property'to'any'bank'did'not'have'the'effect'of'suspending'the'period'to'fully'pay'the' is'no'such'writing'negates'all'the'speculations'of'the'court'a'quo'and'pretensions'of'Carrascoso.'
purchase'price,'as'expressly'stipulated'in'the'Deed,'pending'full'payment'of'any'mortgage'obligation'of' '
Carrascoso.' The' unalterable' fact' here' remains' that' on' March' 23,' 1973,' with' or' without' demand,' the' obligation' of'
' Carrascoso' to' pay' P519,933.33' became' due.' The' same' was' true' on' March' 23,' 1974' and' on' March' 23,'
A'partially'unpaid'seller'can'agree'to'the'buyer’s'mortgaging'the'subject'of'the'sale'without'changing'the' 1975'for'equal'amounts.'Since'he'did'not'perform'his'obligation'under'the'contract'of'sale,'he,'therefore,'
time' fixed' for' the' payment' of' the' balance' of' the' price.' The' two' agreements' are' not' incompatible' with' breached' it.' Having' breached' the' contract,' El' Dorado’s' cause' of' action' for' rescission' of' that' contract'
each'other'such'that'when'one'is'to'be'implemented,'the'other'has'to'be'suspended.'In'the'case'at'bench,' arose.”'
there'was'no'impediment'for'Carrascoso'to'pay'the'balance'of'the'price'after'mortgaging'the'land.' '
' '
Case'Title:'Gaite'vs.'Fonacier'2'SCRA'8386'

! 67! ! 68!
 NATURE'OF'THE'CONTRACT'CASES'–'CHARACTERISTICS'OF'SALES''
CASE'DIGEST'
! !
Petitioner:'Fernando'Gaite'
Respondent:'Isabelo'Fonacier'et'al.'
Promulgated:'July'31,1961'
Ponente:'Reyes,'JBL'
FACTS:' DefendantIappellant' Isabelo' Fonacier' was' the' owner' and/or' holder,' of' 11' iron' lode' mineral'
claims,' known' as' the' Dawahan' Group,' situated' in' the' municipality' of' Jose' Panganiban,' province' of'
Camarines'Norte.'
' more'than'P200,000.00'damages.'
By'a'"Deed'of'Assignment”,'Fonacier'constituted'and'appointed'plaintiffIappellee'Fernando'A.'Gaite'as'his'
true' and' lawful' attorneyIinIfact' to' enter' into' a' contract' with' any' individual' or' juridical' person' for' the'
exploration' and' development' of' the' mining' claims' aforementioned' on' a' royalty' basis' of' not' less' than'
P0.50'per'ton'of'ore'that'might'be'extracted'therefrom.''
Gaite'in'turn'executed'a'general'assignment'conveying'the'development'and'exploitation'of'said'mining'
claims'into'the'Larap'Iron'Mines,'a'single'proprietorship'owned'solely'by'and'belonging'to'him,'on'the'
same'royalty'basis'provided'for'in'Deed'of'Assignment.''
Thereafter,' Gaite' embarked' upon' the' development' and' exploitation' of' the' mining' claims' in' question,'
opening' and' paving' roads' within' and' outside' their' boundaries,' making' other' improvements' and'
installing'facilities'therein'for'use'in'the'development'of'the'mines,'and'in'time'extracted'therefrom'what'
he'claim'and'estimated'to'be'approximately'24,000'metric'tons'of'iron'ore.'
For'some'reason'or'another,'Isabelo'Fonacier'decided'to'revoke'the'authority'granted'by'him'to'Gaite'to'
exploit' and' develop' the' mining' claims' in' question,' and' Gaite' assented' thereto' subject' to' certain'
conditions.'As'a'result,'a'document'entitled'"Revocation'of'Power'of'Attorney'and'Contract"'was'executed'
on' December' 8,' 1954' wherein' Gaite' transferred' to' Fonacier,' for' the' consideration' of' P20,000.00,' plus'
10%'of'the'royalties'that'Fonacier'would'receive'from'the'mining'claims,'all'his'rights'and'interests'on'all'
the' roads,' improvements,' and' facilities' in' or' outside' said' claims,' the' right' to' use' the' business' name'
"Larap'Iron'Mines"'and'its'goodwill,'and'all'the'records'and'documents'relative'to'the'mines.''
In'the'same'document,'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,'in'consideration'of'
the'sum'of'P75,000.00,'P10,000.00'of'which'was'paid'upon'the'signing'of'the'agreement.''
On'the'same'day'that'Fonacier'revoked'the'power'of'attorney'he'gave'to'Gaite'and'the'two'executed'and'
signed'the'"Revocation'of'Power'of'Attorney'and'Contract",'Fonacier'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'in'question,'together'with'the'improvements'therein'and'
the'use'of'the'name'"Larap'Iron'Mines"'and'its'good'will,'in'consideration'of'certain'royalties.'Fonacier'
likewise'transferred,'in'the'same'document,'the'complete'title'to'the'approximately'24,000'tons'of'iron'
ore' which' he' acquired' from' Gaite,' to' the' Larap' &' Smelting' Co.,' in' consideration' for' the' signing' by' the'
company'and'its'stockholders'of'the'surety'bonds'delivered'by'Fonacier'to'Gaite.'
Up' to' December' 8,' 1955,' when' the' bond' expired' with' respect' to' the' Far' Eastern' Surety' and' Insurance'
Company,' 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'
and'his'sureties'payment'of'said'amount,'on'the'theory'that'they'had'lost'right'to'make'use'of'the'period'
given'them'when'their'bond,'automatically'expired.'And'when'Fonacier'and'his'sureties'failed'to'pay'as'
demanded'by'Gaite,'the'latter'filed'the'present'complaint'against'them'in'the'Court'of'First'Instance'of'
Manila' for' the' payment' of' the' P65,000.00' balance' of' the' price' of' the' ore,' consequential' damages,' and'
attorney's'fees.'
! 69!
NATURE'OF'THE'CONTRACT'CASES'–'CHARACTERISTICS'OF'SALES''
CASE'DIGEST'
All'the'defendants'except'Francisco'Dante'set'up'the'uniform'defense'that'the'obligation'sued'upon'by'
Gaite'was'subject'to'a'condition'that'the'amount'of'P65,000.00'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.;'that'up'to'the'time'of'the'filing'of'the'complaint,'no'sale'
of'the'iron'ore'had'been'made,'hence'the'condition'had'not'yet'been'fulfilled;'and'that'consequently,'the'
obligation'was'not'yet'due'and'demandable.'Defendant'Fonacier'also'contended'that'only'7,573'tons'of'
the'estimated'24,000'tons'of'iron'ore'sold'to'him'by'Gaite'was'actually'delivered,'and'counterclaimed'for'
ISSUE:'W/N'the'obligation'of'Fonacier'to'pay'Gaite'the'balance'money'is'one'with'a'period'or'term'and'
not'one'with'a'suspensive'condition,'and'that'the'term'expired'on'December'8,'1955;'
RULING:''NO.'We'find'the'court'below'to'be'legally'correct'in'holding'that'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.'That'the'parties'to'the'contract'Exhibit'"A"'did'not'intend'any'such'state'of'
things'to'prevail'is'supported'by'several'circumstances:'
1)' The' words' of' the' contract' express' no' contingency' in' the' buyer's' obligation' to' pay:' "The' balance' of'
SixtyIFive' Thousand' Pesos' (P65,000.00)'will' be' paid'out' of' the' first' letter' of' credit' covering' the' first'
shipment'of'iron'ores'.'.'."'etc.'There'is'no'uncertainty'that'the'payment'will'have'to'be'made'sooner'or'
later;' what' is' undetermined' is' merely' the'exact' date'at' which' it' will' be' made.' By' the' very' terms' of' the'
contract,' therefore,' the' existence' of' the' obligation' to' pay' is' recognized;' only'
its'maturity'or'demandability'is'deferred.'
2)'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.'
3)'To'subordinate'the'obligation'to'pay'the'remaining'P65,000.00'to'the'sale'or'shipment'of'the'ore'as'a'
condition'precedent,'would'be'tantamount'to'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.'Appellants'would'thus'
be'able'to'postpone'payment'indefinitely.'The'desireability'of'avoiding'such'a'construction'of'the'contract'
Exhibit'"A"'needs'no'stressing.'
4)' Assuming' that' there' could' be' doubt' whether' by' the' wording' of' the' contract' the' parties' indented' a'
suspensive'condition'or'a'suspensive'period'(dies'ad'quem)'for'the'payment'of'the'P65,000.00,'the'rules'
of' interpretation' would' incline' the' scales' in' favor' of' "the' greater' reciprocity' of' interests",' since' sale' is'
essentially'onerous.'The'Civil'Code'of'the'Philippines,'Article'1378,'paragraph'1,'in'fine,'provides:'
! 70!
 NATURE'OF'THE'CONTRACT'CASES'–'CHARACTERISTICS'OF'SALES''
CASE'DIGEST'
!
If'the'contract'is'onerous,'the'doubt'shall'be'settled'in'favor'of'the'greatest'reciprocity'of'interests,'and'
there'can'be'no'question'that'greater'reciprocity'obtains'if'the'buyer''obligation'is'deemed'to'be'actually'
existing,'with'only'its'maturity'(due'date)'postponed'or'deferred,'that'if'such'obligation'were'viewed'as'
nonIexistent'or'not'binding'until'the'ore'was'sold.'
The'only'rational'view'that'can'be'taken'is'that'the'sale'of'the'ore'to'Fonacier'was'a'sale'on'credit,'and'
not'an'aleatory'contract'where'the'transferor,'Gaite,'would'assume'the'risk'of'not'being'paid'at'all;'and'
that' the' previous' sale' or' shipment' of' the' ore' was' not' a' suspensive' condition' for' the' payment' of' the'
balance'of'the'agreed'price,'but'was'intended'merely'to'fix'the'future'date'of'the'payment.'
This'issue'settled,'the'next'point'of'inquiry'is'whether'appellants,'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;'or,'in'
other' words,' whether' or' not' they' are' entitled' to' take' full' advantage' of' the' period' granted' them' for'
making'the'payment.'
We'agree'with'the'court'below'that'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'(Exhibit'"A").'The'case'squarely'comes'under'paragraphs'2'and'3'of'
Article'1198'of'the'Civil'Code'of'the'Philippines:'
"ART.'1198.'The'debtor'shall'lose'every'right'to'make'use'of'the'period:'
(1)'.'.'.'
(2)'When'he'does'not'furnish'to'the'creditor'the'guaranties'or'securities'which'he'has'promised.'
(3)' When' by' his' own' acts' he' has' impaired' said' guaranties' or' securities' after' their' establishment,' and'
when' through' fortuitous' event' they' disappear,' unless' he' immediately' gives' new' ones' equally'
satisfactory.'
Appellants'' failure' to' renew' or' extend' the' surety' company's' bond' upon' its' expiration' plainly' impaired'
the'securities'given'to'the'creditor'(appellee'Gaite),'unless'immediately'renewed'or'replaced.'
There'is'no'merit'in'appellants''argument'that'Gaite's'acceptance'of'the'surety'company's'bond'with'full'
knowledge'that'on'its'face'it'would'automatically'expire'within'one'year'was'a'waiver'of'its'renewal'after'
the'expiration'date.'No'such'waiver'could'have'been'intended,'for'Gaite'stood'to'lose'and'had'nothing'to'
gain'barely;'and'if'there'was'any,'it'could'be'rationally'explained'only'if'the'appellants'had'agreed'to'sell'
the'ore'and'pay'Gaite'before'the'surety'company's'bond'expired'on'December'8,'1955.'But'in'the'latter'
case'the'defendantsIappellants''obligation'to'pay'became'absolute'after'one'year'from'the'transfer'of'the'
ore'to'Fonacier'by'virtue'of'the'deed'Exhibit'"A.".'
All' the' alternatives,' therefore,' lead' to' the' same' result:' that' Gaite' acted' within' his' rights' in' demanding'
payment' and' instituting' this' action' one' year' from' and' after' the' contract' (Exhibit' "A")' was' executed,'
either' because' the' appellant' debtors' had' impaired' the' securities' originally' given' and' thereby' forfeited'
any'further'time'within'which'to'pay;'or'because'the'term'of'payment'was'originally'of'no'more'than'one'
year,'and'the'balance'of'P65,000.00'became'due'and'payable'thereafter.'
'

'

! 71!