Pulumbarit Sr. vs Court of Appeals That Pascual et al.
That Pascual et al. really intended to sell SJMPPI is further shown by the document earlier issued to Atty. De Jesus
G.R. NOS. 153745-46, October 14, 2015
Facts: Sometime in 1982, San Juan Macias Memorial Park, Inc. (SJMMPI), through its President Lourdes S.
Pascual, authorized Atty. Soledad de Jesus to look for a buyer for the San Juan Memorial Park (Memorial Park) for
P1,500,000.00. Thereafter, Lourdes Pascual, Leonila F. Acasio, and the other officers of SJMMPI (Pascual et al.)
were introduced to Nemencio Pulumbarit (Pulumbarit). The parties eventually came to an agreement, with
Pulumbarit issuing eighteen (18) checks in the name of SJMMPI Secretary-Treasurer Leonila Acasio. Pulumbarit
and/or his lawyer took charge of reducing the agreement into writing and securing the signatures of all
concerned parties. On June 13, 1983, Pascual et al. sent a letter to Pulumbarit requesting for a copy of their
written agreement. In another letter of even date, they also asked Pulumbarit to reissue new checks to replace
the ones he previously issued. Failing to get a favorable response, Pascual et al. filed a Complaint for Rescission of
Contract, Damages and Accounting with Prayer for Preliminary Injunction or Receivership against Pulumbarit
Issue: Whether the agreement between the parties was one for sale or management of the memorial park.
Ruling: Agreement between the parties was a contract to sell the shares of SJMMPI and not a contract of sale or
a management contract with option to buy.
Pascual et al. do not dispute that they entered into an agreement with Pulumbarit. What they take issue with are
the terms and conditions in the MOA which allegedly do not reflect the terms and conditions actually agreed
upon by the parties.
We affirm the findings of the CA insofar as it ruled that the parties did not contemplate a management contract
with option to buy. We nevertheless rule that the agreement entered into by the parties was not a contract of
sale, but rather, a contract to sell the shares of SJMMPI.
The text of the MOA between the parties shows that their agreement was a contract to sell SJMMPI shares. The
pertinent portion of page three of the MO A reads:
4. The shares of stocks stated above and subject matter of this Agreement will only be transferred in the name of
the PARTY OF THE SECOND PART, its heirs, successors and assigns upon full payment and/or full satisfaction
thereon of the consideration of this agreement.
While Pascual et al. are technically correct in arguing that they did not enter into a contract of sale with
Pulumbarit, they cannot deny the existence of the stipulation in page three of the MOA evidencing a contract to
sell and negating their claim of a management contract with option to buy. Notably, page three bears the
signatures of Pulumbarit, Pascual, and the other SJMMPI stockholders. [85] We further note that Pascual did not
dispute the authenticity of her signature appearing on page three of the MOA.
This is significant as page one, which we have now established to not have been substituted, clearly sets forth, in
the preambular clauses, the parties' positive intent to enter into a contract to sell:
WHEREAS, THE PARTY OK THE FIRST PART have offered to sell all their rights, interest and participations with San
Juan Macias Memorial Park, Inc., to the extent indicated above to the PARTY OP THE SECOND PART and the
PARTY OF THE SECOND PART has accepted the offer of the PARTY OF THE FIRST PART.
authorizing her to look for a buyer tor the Memorial Park and negotiate the sale of the corporation. It is
immaterial that the authorization given to Atty. De Jesus had already expired by the time the MOA between the
parties was signed as this does not diminish the intention of Pascual et al. to sell the Memorial Park at or about
the time they entered into the agreement with Pulumbarit. That there are as yet no SJMMPI stock certificates in
Pulumbarit's name and possession, does not negate the character of the contract to sell between the parties.
ALI AKANG vs. MUNICIPALITY OF ISULAN, SULTAN KUDARAT PROVINCE
FACTS: Ali Akang (petitioner) sold a two-hectare portion of his property to the Municipality of Isulan, Province of
Sultan Kudarat (respondent) through then Mayor Datu Ampatuan under a Deed of Sale on July 2, 1962 for a value
of Php 3,000.
Respondent immediately took possession of said property.
39 years later (October 26, 2001), the petitioner together with his wife filed a civil action for Recovery of
Possession of Subject Property and/or Quieting of Title thereon and Damages against the respondent.
Petitioner alleged, among others, that the agreement was a contract to sell (as opposed to a contract of sale).
Respondent denied the petitioner’s allegations, claiming among others, that the petitioner’s cause of action was
already barred by laches, that the Deed of Sale was valid, and that it has been in an open, continuous and
exclusive possession of the property for forty (40) years.
RTC rendered the judgement in favor of the petitioner. The RTC interpreted:
The Deed of Sale as a contract to sell
The Deed of Sale as not approved pursuant to Sec. 145 of the Administrative Code of Mindanao and Sulu or
Section 120 of the Public Land Act
Payment was not made by the respondent
Laches cannot be a valid defense for claiming ownership of the property which has been registered in the
petitioner’s name under the Torrens System
Respondent appealed to the CA which reversed its decision, now in favor of the respondent.
Petitioner sought for reconsideration which was denied by the CA back in 2008. Hence, this petition.
WON The Deed of Sale is a Valid Contract of Sale
YES.
The petitioner alleges that the Deed of Sale is merely an agreement to sell, which was not perfected due to non-
payment of the stipulated consideration.3 The respondent, meanwhile, claims that the Deed of Sale is a valid and
perfected contract of absolute sale.
A contract of sale is defined under Article 1458 of the Civil Code:
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 therefore a price certain in money or its equivalent.
The elements of a contract of sale are: (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.
A contract to sell, on the other hand, is defined by Article 1479 of the Civil Code:
[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.
In a contract of sale, the title to the property passes to the buyer upon the delivery of the thing sold, whereas in a
contract to sell, the ownership is, by agreement, retained by the seller and is not to pass to the vendee until full
payment of the purchase price
Quiroga vs Parsons
G.R. No. L-11491
Subject: Sales
Doctrine: Contract of Agency to Sell vs Contract of Sale
Facts: On Jan 24, 1911, plaintiff and the respondent entered into a contract making the latter an “agent” of the
former. The contract stipulates that Don Andres Quiroga, here in petitioner, grants exclusive rights to sell his beds
in the Visayan region to J. Parsons. The contract only stipulates that J.Parsons should pay Quiroga within 6
months upon the delivery of beds.
Quiroga files a case against Parsons for allegedly violating the following stipulations: not to sell the beds at higher
prices than those of the invoices; to have an open establishment in Iloilo; itself to conduct the agency; to keep
the beds on public exhibition, and to pay for the advertisement expenses for the same; and to order the beds by
the dozen and in no other manner. With the exception of the obligation on the part of the defendant to order the
beds by the dozen and in no other manner, none of the obligations imputed to the defendant in the two causes
of action are expressly set forth in the contract. But the plaintiff alleged that the defendant was his agent for the
sale of his beds in Iloilo, and that said obligations are implied in a contract of commercial agency. The whole
question, therefore, reduced itself to a determination as to whether the defendant, by reason of the contract
hereinbefore transcribed, was a purchaser or an agent of the plaintiff for the sale of his beds.
Issue: Whether the contract is a contract of agency or of sale.
Held: In order to classify a contract, due attention must be given to its essential clauses. In the contract in
question, what was essential, as constituting its cause and subject matter, is that the plaintiff was to furnish the
defendant with the beds which the latter might order, at the price stipulated, and that the defendant was to pay
the price in the manner stipulated. Payment was to be made at the end of sixty days, or before, at the plaintiff’s
request, or in cash, if the defendant so preferred, and in these last two cases an additional discount was to be
allowed for prompt payment. These are precisely the essential features of a contract of purchase and sale. There
was the obligation on the part of the plaintiff to supply the beds, and, on the part of the defendant, to pay their
price. These features exclude the legal conception of an agency or order to sell whereby the mandatory or agent
received the thing to sell it, and does not pay its price, but delivers to the principal the price he obtains from the
sale of the thing to a third person, and if he does not succeed in selling it, he returns it. By virtue of the contract
between the plaintiff and the defendant, the latter, on receiving the beds, was necessarily obliged to pay their
price within the term fixed, without any other consideration and regardless as to whether he had or had not sold
the beds.
In respect to the defendant’s obligation to order by the dozen, the only one expressly imposed by the contract,
the effect of its breach would only entitle the plaintiff to disregard the orders which the defendant might place
under other conditions; but if the plaintiff consents to fill them, he waives his right and cannot complain for
having acted thus at his own free will.
For the foregoing reasons, we are of opinion that the contract by and between the plaintiff and the defendant
was one of purchase and sale, and that the obligations the breach of which is alleged as a cause of action are not
imposed upon the defendant, either by agreement or by law.
CIR v. Arnoldus Carpentry
G.R. No. 71122; 25 March 1988
FACTS:
Arnoldus Carpentry Shop is a domestic corporation whose second purpose is the “preparing, processing, buying,
selling, exporting, importing, manufacturing, trading and dealing in cabinet shop products, wood and metal home
and office furniture, cabinets, doors, windows, etc., including their component parts and materials.” Thus,
furniture, cabinets, and other woodwork were sold locally and exported abroad. Examiners of the Commissioner
of Internal Revenue (CIR) conducted an investigation of the business tax liabilities of Arnoldus Carpentry. Based
on such examination, a report was made to the Commissioner classifying such as an “other independent
contractor” under Section 205 (16) [now Section 169 (9)] of the Tax Code. The corporation renders service in the
course of an independent occupation representing the will of his employer only as to the result of his work, and
not as to the means by which it is accomplished. Hence, it is recommended that 3% contractor’s tax be imposed.
A protest letter was made maintaining that the carpentry shop is a manufacturer and thus entitled to 7% tax
exemption on export sales.
ISSUE:
Is Arnoldus Carpentry a manufacturer?
HELD:
Yes. “Manufacturer” includes every person who by physical or chemical process alters the exterior texture or
form or inner substance of any raw material or manufactured or partially manufactured product in such manner
as to prepare it for a special use. Based on Article 1467, what determines whether the contract is one of work or
sale is whether the thing has been manufactured specially for the customer and “upon his special order.” Thus, if
the thing is specially done at the order of another, this is a contract for a piece of work. If, on the other hand, the
thing is manufactured or procured for the general market in the ordinary course of one’s business, it is a contract
of sale. The one who has ready for the sale to the general public finished furniture is a manufacturer, and the
mere fact that he did not have on hand a particular piece or pieces of furniture ordered does not make him a
contractor only. The facts show that the company had a ready stock of its shop products for sale to its foreign and
local buyers. As a matter of fact, the purchase orders from its foreign buyers showed that they ordered by
referring to the models designated by petitioner. Even purchases by local buyers for television cabinets were by
orders for existing models except only for some adjustments in sizes and accessories utilized.

Heirs of Ignacio vs. Home Bankers Savings and Trust Co. | G.R. No. 177783 | January 23, 2013

Facts: The case sprang from a real estate mortgage of two parcels of land in August 1981. Fausto C. Ignacio
mortgaged the properties to Home Bankers Savings and Trust Company (Bank) as security for a loan extended by
the Bank. After Ignacio defaulted in the payment of the loan, the property was foreclosed and subsequently sold
to the Bank in a public auction.Ignacio offered to repurchase the property. Universal Properties Inc. (UPI), the
bank’s collecting agent sent Ignacio a letter on March 22, 1984 which contained the terms of the repurchase.
However, Ignacio annotated in the letter new terms and conditions. He claimed that these were verbal
agreements between himself and the Bank’s collection agent, UPI.No repurchase agreement was finalized
between Ignacio and the Bank. Thereafter the Bank sold the property to third parties. Ignacio then filed an action
for specific performance against the Bank for the reconveyance of the properties after payment of the balance of
the purchase price. He argued that there was implied acceptance of the counter-offer of the sale through the
receipt of the terms by representatives of UPI. The Bank denied that it gave its consent to the counter-offer of
Ignacio. It countered that it did not approve the unilateral amendments placed by Ignacio.

Issue: Whether or not the negotiations between Ignacio and UPI is binding on the Bank.

Held: A contract of sale is perfected only when there is consent validly given. There is no consent when a party
merely negotiates a qualified acceptance or a counter-offer. An acceptance must reflect all aspects of the offer to
amount to a meeting of the minds between the parties.In this case, while it is apparent that Ignacio proposed
new terms and conditions to the repurchase agreement, there was no showing that the Bank approved the
modified offer.

The negotiations between Ignacio and UPI, the collection agent, were merely preparatory to the repurchase
agreement and, therefore, was not binding on the Bank. Ignacio could not compel the Bank to accede to the
repurchase of the property.

A corporation may only give valid acceptance of an offer of sale through its authorized officers or agents.
Specifically, a counter-offer to repurchase a property will not bind a corporation by mere acceptance of an agent
in the absence of evidence of authority from the corporation’s board of directors.

Far East Bank and Trust Company vs. Philippine Deposit Insurance Corporation

DAR vs. Carriedo

Payongayong v. CA

G.R. No. 144576; 28 May 2004

Carpio Morales, J.
PRICE | Effect where price is simulated
FACTS:
Eduardo Mendoza was the registered owner of a parcel of land situated in Barrio San Bartolome, Caloocan. He
mortgaged the land to Meralco Employees Savings and Loan Association (MESALA) to secure a loan of
₱81,700.00. Mendoza executed a Deed of Absolute Sale with Assumption of Mortgage in favor of Spouses
Isabelo and Erlinda Payongayong and bound themselves to pay the mortgage indebtedness and consideration of
₱50,000.00. Without knowledge of petitioners, the same property was mortgaged for a 2nd time to secure a loan
of ₱758,000.00. Meanwhile, the subject property was sold to Spouses Clemente and Rosalinda Salvador. Thus,
complaint for annulment of deed of absolute sale was filed by Spouses Payongayong. They contend that Spouses
Mendoza meticulously sold to respondents the property which was priorly sold to them and that respondents
acted in bad faith in acquiring it, having absolute knowledge of the Deed of Absolute Sale with Assumption of
Mortgage between petitioners and Mendoza. Further, the deed of sale was simulated and therefore, null and
void. Respondents claim that they are entitled to the protection accorded to purchasers in good faith for they did
not rely upon Mendoza’s title. Rosalia personally inspected the property and verified with Registry of Deeds of
Quezon City if Mendoza was indeed the registered owner.
ISSUE:
Was the sale between Mendoza and Spouses Salvador simulated?
HELD:
No. Simulation occurs when an apparent contract is a declaration of a fictitious will, deliberately made by the
agreement of the parties, in order to produce, for the purpose of deception, the appearance of a juridical act
which does not exist or is different from that which is executed. Its requisites are: a) an outward declaration of
will different from the will of the parties; b) the false appearance must have been by mutual agreement; and c)
the purpose is to deceive third persons. The claim of simulation does not lie. The cancellation of Mendoza’s
certificate of title over the property and procurement of one in its stead in the name of respondents, which acts
were directed towards the fulfillment of the purpose of the contract unmistakably show the parties intention to
give effect to their agreement. However, the Court cannot come to petitioners’ succor at the expense of
respondents who are innocent purchasers in good faith.
Mapalo v. Mapalo
G.R. Nos. L-21489 & L-21628; 19 May 1966
Bengzo, JP, J.
PRICE | Meeting of minds as to price
FACTS:
Spouses Miguel Mapalo and Candida Quiba, simple illiterate farmers, were registered owners of a residential land
in Manaoag, Pangasinan. Said spouses out of love for Maximo Mapalo — Miguel’s brother who was about to get
married — decided to donate the eastern half of the land to him. As a result, in 1936, they were deceived into
signing a deed of absolute sale over the entire land in Maximo’s favor. The document of sale stated a
consideration of P500.00 which Spouses Mapalo did not receive anything. Following the execution of document,
Miguel and Candida built a fence of permanent structure in the middle of the land segregating the eastern
portion from its western portion. 13 years later, Maximo sold for P2,500.00 the entire land in favor of the
Narcicos and they registered the same. Narcisos filed to be declared owners of the entire land with possession of
its western portion. Spouses Mapalo contend that the deed of sale of 1936 was procured with fraud and the
Narcicos were buyers in bad faith. Also, it was invoked that the deeds of sale be declared null and void as to the
western half of said land for being fictitious. In reversing the ruling of the CFI, the CA averred that having
obtained the deed of sale by fraud, the same was voidable, not void ab initio and the action to annul the same
had already prescribed which was within 4 years of notice of fraud. While they are definitely victims, they lost
their right by prescription.
ISSUE:
Does the contract involve ‘no consideration’ or ‘false consideration’?
HELD:
The rule under the Civil Code, be it the old or the new, is that contracts without a cause or consideration produce
no effect whatsoever. Nonetheless, under the Old Civil Code, the statement of a false consideration renders the
contract voidable, unless it is proven that it is supported by another real and licit consideration. And it is further
provided by the Old Civil Code that the action for annulment of a contract on the ground of falsity of
consideration shall last 4 years, the term to run from the date of the consummation of the contract. In the
present case, the contract of sale has no consideration and therefore it is void and inexistent for the said
consideration of P500.00 was totally absent. Purchase price which appears thereon as paid has in fact never been
paid by the purchaser to vendor. This is contrary to what is meant by a contract that states a false consideration is
one that has in fact a real consideration but the same is not the one stated in the document. Needless to add, the
inexistence of a contract is permanent and incurable and cannot be the subject of prescription.
Swedish Match v. CA
G.R. No. 128120; 20 October 2004
Tinga, J.
PRICE | Meeting of minds as to price
FACTS:
Swedish Match AB (SMAB) had 3 subsidiary corporations in the Philippines, all organized under Philippine laws, to
wit: Phimco Industries (Phimco), Provident Tree Farms (PTF), and OTT/Louie. STORA, the parent company of
SMAB, decided to sell SMAB of Sweden and its worldwide match, lighter, and shaving products operation to
Swedish Match NV (SMNV).
Ed Enriquez, VP of Swedish Match Sociedad Anonimas (SMSA) which is SMAB’s management company, was held
under strict instructions that the sale of Phimco shares should be executed on or before 30 June 1990 in view of
the tight loan covenants of SMNV. He came to the Philippines and informed the Philippine financial and business
circles that the Phimco shares were for sale. Several interested parties tendered offers to acquire the Phimco
shares one of which was private respondent, Antonio Litonjua, the president and general manager of ALS
Management & Development Corporation.
On November 1989, Litonjua submitted to SMAB a firm offer to buy all of the latter’s shares in Phimco and all of
Phimco’s shares in PTF and OTT for P750,000,000.00. However, CEO Massimo Rossi informed respondents that
their price offer was below their expectations. Again, on May 1990, Litonjua offered to buy the disputed shares,
excluding the lighter division for US$36M. Rossi wrote that ALS should undertake a due diligence process or pre-
acquisition audit and review of the draft contract for the Match and Forestry activities of Phimco at ALS
convenience. 2 days prior to the deadline for submission of the final bid, Litonjua told Rossi that they would be
unable to submit the final offer by 30 June 1990, considering that the acquisition audit of Phimco and the review
of the draft agreements had not yet been completed. Thus, Enriquez sent notice to Litonjua that they would be
constrained to entertain bids from other parties in view of Litonjua’s failure to make a firm commitment for the
shares of Swedish Match. In his letter, Litonjua asserted that they submitted the best bid and that they were
already finalizing the terms of the sale.
More than 2 months from receipt of Litonjua’s last letter, Enriquez advised the former that the proposed sale of
SMAB’s shares in Phimco with local buyers did not materialize. Enriquez then invited Litonjua to resume
negotiations with SMAB for the sale of Phimco shares. He indicated that SMAB would be prepared to negotiate
with ALS on an exclusive basis for a period of 15 days from 26 September 1990 subject to the terms contained in
the letter. Additionally, Enriquez clarified that if the sale would not be completed at the end of the 15-day period,
SMAB would enter into negotiations with other buyers. Litonjua emphasized that the new offer constituted an
attempt to reopen the already perfected contract of sale of the shares in his favor. CA ruled that the series of
written communications between petitioners and respondents collectively constitute a sufficient memorandum
of their agreement under Article 1403 of the Civil Code. Thus, letters exchanged by and between the parties,
taken together, were sufficient to establish that an agreement to sell the disputed shares to respondents was
reached. On the other hand, petitioners stress that Litonjua made it clear in his letters that the quoted prices
were merely tentative and still subject to further negotiations between him and the seller. They point out that
there was no meeting of the minds on the essential terms and conditions of the sale because SMAB did not
accept respondent’s offer that consideration would be paid in Philippine pesos. They argued as well that the
foregoing circumstances prove that they failed to reach an agreement on the sale of the Phimco shares.
ISSUE:
Was there a perfected contract of sale with respect to Phimco shares?
HELD:
No. There was no perfected contract of sale since Litonjua’s letter of proposing acquisition of the Phimco shares
for US$36M was merely an offer. Consent in a contract of sale should be manifested by the meeting of the offer
and acceptance upon the thing and the cause which are to constitute the contract. The lack of a definite offer on
the part of respondents could not possibly serve as the basis of their claim that the sale of the Phimco shares in
their favor was perfected, for one essential element of a contract of sale was obviously wanting the price certain
in money or its equivalent. The price must be certain, otherwise there is no true consent between the parties.
Respondents’ failure to submit their final bid on the deadline set by petitioners prevented the perfection of the
contract of sale. It was not perfected due to the absence of one essential element which was the price certain in
money or its equivalent.
Limson vs. CA
Facts: Petitioner Lourdes Ong Limson alleged that in July 1978 respondent spouses Lorenzo de Vera and Asuncion
Santos-de Vera, through their agent Marcosa Sanchez, offered to sell to petitioner a parcel of land situated in
Barrio San Dionisio, Parañaque, Metro Manila; that respondent spouses informed her that they were the owners
of the subject property; that on 31 July 1978 she agreed to buy the property at the price of P34.00 per square
meter and gave the sum of P20,000.00 to respondent spouses as "earnest money;" that respondent spouses
signed a receipt therefor and gave her a 10-day option period to purchase the property; that respondent Lorenzo
de Vera then informed her that the subject property was mortgaged to Emilio Ramos and Isidro Ramos; that
respondent Lorenzo de Vera asked her to pay the balance of the purchase price to enable him and his wife to
settle their obligation with the Ramoses.
Petitioner also averred that she agreed to meet respondent spouses and the Ramoses on 5 August 1978 at the
Office of the Registry of deeds of Makati, Metro Manila, to consummate the transaction but due to the failure of
respondent Asuncion Santos-de Vera and the Ramoses to appear, no transaction was formalized. In a second
meeting scheduled on 11 August 1978 she claimed that she was willing and ready to pay the balance of the
purchase price but the transaction again did not materialize as respondent spouses failed to pay the back taxes of
subject property. Subsequently, on 23 August 1978 petitioner allegedly gave respondent Lorenzo de Vera three
(3) checks in the total amount of P36, 170.00 for the settlement of the back taxes of the property and for the
payment of the quitclaims of the three (3) tenants of subject land. The amount was purportedly considered part
of purchase price and respondent Lorenzo de Vera signed the receipts therefore.
Petitioner alleged that on 5 September 1978 she was surprised to learn from the agent of respondent spouses
that the property was the subject of a negotiation for the sale to respondent Sunvar Realty Development
Corporation (SUNVAR). Respondent spouses prayed for actual damages for the unjustified filling of the Cross-
Claim, moral damages for the mental anguish and similar injuries they suffered by reason thereof, exemplary
damages "to prevent others from emulation the bad example" of respondents SUNVAR and Cuenca, plus
attorney’s fees. The Regional Trial Court rendered its decision in favor of petitioner. On appeal, the Court of
Appeals completely reversed the decision of the trial court.
Issue: WON there was an earnest money given.
Held: The Court ruled that the consideration of P20,000.00 paid by petitioner to respondent spouses was
referred to as "earnest money" was not an earnest money but option money.
A scrutiny of the facts as well as the evidence of the parties overwhelmingly leads to the conclusion that the
agreement between the parties was a contract of option and not a contract to sell.
"Earnest money" and "option money" are not the same but distinguished thus:
(a) Earnest money is part of the purchase price, while option money is the money given as a distinct
consideration for an option contract;
(b) Earnest money given only where there is already a sale, while option money applies to a sale not yet
perfected; and,
(c) When earnest money is given, the buyer is bound to pay the balance, while when the would-be buyer gives
option money, he is not required to buy, but may even forfeit it depending on the terms of the option.
There is nothing in the Receipt which indicates that the P20,000.00 was part of the purchase price.
G.R. No. 137290, 31 July 2000
San Miguel Properties vs. Huang
Facts: Petitioner San Miguel Properties Philippines, Inc. is a domestic corporation engaged in the purchase and
sale of real properties. Part of its inventory are two parcels of land were offered for sale for P52,140,000.00 in
cash. The offer was made to Atty. Helena M. Dauz who was acting for respondent spouses as undisclosed
principals. In a letter dated March 24, 1994, Atty. Dauz signified her clients’ interest in purchasing the properties
for the amount for which they were offered by petitioner, under the following terms: the sum of P500,000.00
would be given as earnest money and the balance would be paid in eight equal monthly installments from May
to December, 1994. However, petitioner refused the counter-offer.
On March 29, 1994, Atty. Dauz wrote another letter proposing the following terms for the purchase of the
properties.
Atty. Helena M. Dauz who was acting for respondent spouses as undisclosed principals. In a letter dated March
24, 1994, Atty. Dauz signified her clients’ interest in purchasing the properties for the amount for which they
were offered by petitioner, under the following terms: the sum of P500,000.00 would be given as earnest money
and the balance would be paid in eight equal monthly installments from May to December, 1994. However,
petitioner refused the counter-offer.
On March 29, 1994, Atty. Dauz wrote another letter proposing the following terms for the purchase of the
properties.
Isidro A. Sobrecarey, petitioner’s vice-president and operations manager for corporate real estate, indicated his
conformity to the offer by affixing his signature to the letter and accepted the "earnest-deposit" of P1 million.
Upon request of respondent spouses, Sobrecarey ordered the removal of the "FOR SALE" sign from the
properties. On April 25, 1994, Atty. Dauz asked for an extension of 45 days from April 29, 1994 to June 13, 1994
within which to exercise her option to purchase the property, adding that within that period, "[we] hope to
finalize [our] agreement on the matter." Her request was granted. On July 7, 1994, petitioner, through its
president and chief executive officer, Federico Gonzales, wrote Atty. Dauz informing her that because the parties
failed to agree on the terms and conditions of the sale despite the extension granted by petitioner, the latter was
returning the amount of P1 million given as "earnest-deposit."
On July 20, 1994, respondent spouses, through counsel, wrote petitioner demanding the execution within five
days of a deed of sale covering the properties. Respondents attempted to return the "earnest-deposit" but
petitioner refused on the ground that respondents’ option to purchase had already expired.
On August 16, 1994, respondent spouses filed a complaint for specific performance against petitioner before the
RTC of Pasig City.
Petitioner filed a motion to dismiss the complaint alleging that (1) the alleged "exclusive option" of respondent
spouses lacked a consideration separate and distinct from the purchase price and was thus unenforceable and (2)
the complaint did not allege a cause of action because there was no "meeting of the minds" between the parties
and, therefore, no perfected contract of sale.
The trial court granted petitioner’s motion and dismissed the action. Respondents filed a motion for
reconsideration, but it was denied by the trial court. They then appealed to the Court of Appeals which, on April
8, 1997, rendered a decision reversing the judgment of the trial court.
Held: In the present case, the P1 million "earnest-deposit" could not have been given as earnest money as
contemplated in Art. 1482 because, at the time when petitioner accepted the terms of respondents’ offer of
March 29, 1994, their contract had not yet been perfected. This is evident from the following conditions attached
by respondents to their letter, to wit:
(1) that they be given the exclusive option to purchase the property within 30 days from acceptance of
the offer;
(2) that during the option period, the parties would negotiate the terms and conditions of the
purchase; and
(3) petitioner would secure the necessary approvals while respondents would handle the
documentation.
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. Such option giving respondents the exclusive right to buy the properties
within the period agreed upon is separate and distinct from the contract of sale which the parties may enter. 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, even the option secured by respondents from petitioner was fatally defective.
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.
It is not the giving of earnest money, but the proof of the concurrence of all the essential elements of the
contract of sale which establishes the existence of a perfected sale.
-------------------------------------------
Atkins Kroll & Co. sent a letter to B. Cu HianTek on September 13, 1951, offering cartons of Luneta brand
Sardines subject to reply by September 23, 1951. HianTek unconditionally accepted the said offer through a letter
delivered on September 21, 1951, but Atkins failed to deliver the commodities due to the shortage of catch of
sardines by the packers in California.
HianTek, therefore, filed an action for damages in the CFI of Manila which granted the same in his favor.
Atkins herein contends that there was no such contract of sale but only an option to buy, which was not
enforceable for lack of consideration because it is provided under the 2nd paragraph of Article 1479 of the New
Civil Code that "an accepted unilatateral promise to buy or to sell a determinate thing for a price certain is
binding upon the promisor if the promise is supported by a consideration distinct from the price.” Atkins also
insisted that the offer was a mere offer of option, because the "firm offer" was a continuing offer to sell until
September 23.

ISSUE:
Whether a contract of sale was constituted between the parties or only a unilateral promise to buy.
COURT RULING:
SC held that there was a contract of sale between the parties. ATKIN’s argument assumed that only a unilateral
promise arose when the respondent accepted the offer is incorrect because a bilateral contract to sell and to buy
was created upon HIAN TEK’s acceptance.
B. CuaHianTek’s letter-reply to Atkins indicated that he accepted "the firm offer for the sale. After accepting the
promise and before he exercises his option, the holder of the option is not bound to buy. In this case at bar,
however, upon TEK’s acceptance of herein ATKIN's offer, a bilateral promise to sell and to buy ensued, and the
respondent had immediately assumed the obligations of a purchaser.
SANCHEZ V RIGOS
The significance of this ruling is that it shows that the only importance of a consideration for an option is that the
option cannot be withdrawn by the grantor during the stipulated period
Sanchez vs. Rigos
Facts: Mrs. Rigos offered to sell her land to Sanchez for a certain price. Rigos gave Sanchez 2 years within which to
decide. (Note: The optionee or promisee or offeree is not bound to purchase but he has the option to buy or
purchase). In this case, Sanchez has the option. Before the lapse of 2 years, Sanchez told Rigos that he is buying
and offered the price agreed upon but Rigos refused claiming that she was not bound by the written option
agreement because no option money (consideration) was given by Sanchez. According to Rigos, the option
contract is void.
Held: Since Sanchez accepted the offer and decided to buy within the period before the offer was withdrawn, a
perfected COS was created even without option money. In this case, there was no option contract because it was
merely an option agreement. Therefore, there was merely an offer on the part of Rigos and once the offer was
accepted before it was withdrawn, regardless of whether option money was given and in this case no option
money was given, a perfected COS was created.
G.R. No. 109125, 2 December 1994
Ang Yu Ascuncion vs CA
Petitioners are tenants or lessees of residential and commercial spaces owned by Bobby Co Unjieng. On several
occasions, Unjieng informed petitioner 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 P6-million while petitioner made
a counter offer of P5-million. Petitioners thereafter asked Unjieng to put their offer in writing to which request
Unjieng acceded; that in reply to Unjieng’s letter, petitioner wrote them asking that they specify the terms and
conditions of the offer to sell; that when petitioner did not receive any reply, they sent another letter with the
same request; that since Unjieng failed to specify the terms and conditions of the offer to sell and because of
information received that Unjieng were about to sell the property, Petitioner were compelled to file the
complaint to compel Unjieng to sell the property to them.
The court found that offer to sell was never accepted by the petitioner for the reason that the parties did not
agree upon the terms and conditions of the proposed sale, hence, there was no contract of sale at all.
Nonetheless, the court ruled that should the property is subsequently offered for sale, petitioners will have the
right of first refusal.
The Cu Unjieng spouses executed a Deed of Sale transferring the property in question to herein private
respondent, Buen Realty. As the new owner, they wrote a letter to the lessees demanding that the latter vacate
the premises. Lessees wrote a reply stating that private respondent brought the property subject to the notice of
lis pendens.
RULING: An accepted unilateral promise which specifies the thing to be sold and the price to be paid, when
coupled with a valuable consideration distinct and separate from the price, is what may properly be termed a
perfected contract of option. This contract is legally binding, and in sales, it conforms with the second paragraph
of Article 1479 of the Civil Code, viz:
An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon
the promissor if the promise is supported by a consideration distinct from the price.
Observe, however, that the option is not the contract of sale itself. The optionee has the right, but not the
obligation, to buy. Once the option is exercised timely, i.e., the offer is accepted before a breach of the option, a
bilateral promise to sell and to buy ensues and both parties are then reciprocally bound to comply with their
respective undertakings.
A negotiation is formally initiated by an offer. An imperfect promise (policitacion) is merely an offer. Public
advertisements or solicitations and the like are ordinarily construed as mere invitations to make offers or only as
proposals. These relations, until a contract is perfected, are not considered binding commitments. Thus, at any
time prior to the perfection of the contract, either negotiating party may stop the negotiation. The offer, at this
stage, may be withdrawn; the withdrawal is effective immediately after its manifestation, such as by its mailing
and not necessarily when the offeree learns of the withdrawal.
G.R. No. 126454, 26 November 2004
Bible Baptist Church vs. CA
On June 7, 1985, petitioner Bible Baptist Church entered into a contract of lease with respondents Mr. & Mrs.
Elmer Tito Medina Villanueva who own the subject property located at No. 2436 Leon Guinto St., Malate, Manila.
The pertinent stipulations in the lease contract were:
2. That the lease shall take effect on June 7, 1985 and shall be for the period of Fifteen (15)
years.
4. That upon signing of the LEASE AGREEMENT, the LESSEE shall pay the sum of
Eighty Four Thousand Pesos (P84,000.00) Philippine Currency. Said sum is to be
paid directly to the Rural Bank, Valenzuela, Bulacan for the purpose of redemption of
said property which is mortgaged by the LESSOR.
8. That the LESSEE has the option to buy the leased premises during the Fifteen (15) years of the lease. If the
LESSEE decides to purchase the premises the terms will be:
A) A selling Price of One Million Eight Hundred Thousand Pesos (P1.8 million),
Philippine Currency. B) A down payment agreed upon by both parties. C) The
balance of the selling price may be paid at the rate of One Hundred Twenty
Thousand Pesos (P120,000.00), Philippine Currency, per year.
Petitioner seeks to buy the leased premises from the spouses Villanueva, under the option given to them.
Petitioners claim that they (Baptist Church) agreed to advance the large amount needed for the rescue of the
property but, in exchange, it asked the Villanuevas to grant it a long term lease and an option to buy the property
for P1.8 million. However, the respondents did not agree saying that there is no separate consideration.
In this hand, the petitioners argue that there is a consideration — the consideration supporting the option was
their agreement to pay off the Villanuevas P84,000 loan with the bank, thereby freeing the subject property from
the mortgage encumbrance. That they would not have agreed to advance such a large amount as it did to rescue
the property from bank foreclosure had it not been given an enforceable option to buy that went with the lease
agreement.
The Baptist Church states that [t]rue, the Baptist Church did not pay a separate and specific sum of money to
cover the option alone. But the P84,000 it paid the Villanuevas in advance should be deemed consideration for
the one contract they entered into the lease with option to buy. Petitioners further insist that a consideration
need not be a separate sum of money. They posit that their act of advancing the money to rescue the property
from mortgage and impending foreclosure, should be enough consideration to support the option.
On the other hand, Respondents argue that the amount of P84,000 has been fully exhausted and utilized by their
occupation of the premises and there is no separate consideration to speak of which could support the option.
The RTC and CA agree with the respondent.
An option contract, to be valid and binding, needs to be supported by a separate consideration. The
consideration need not be monetary but could consist of other things or undertakings. However, if the
consideration is not monetary, these must be things or undertakings of value, in view of the onerous nature of
the contract of option. Furthermore, when a consideration for an option contract is not monetary, said
consideration must be clearly specified as such in the option contract or clause.
Petitioners cannot insist that the P84,000 they paid in order to release the Villanuevas property from the
mortgage should be deemed the separate consideration to support the contract of option. It must be pointed out
that said amount was in fact apportioned into monthly rentals spread over a period of one year, at P7,000 per
month. Thus, for the entire period of June 1985 to May 1986, petitioner Baptist Churchs monthly rent had
already been paid for, such that it only again commenced paying the rentals in June 1986. This is shown by the
testimony of petitioner Pastor Belmonte where he states that the P84,000 was advance rental equivalent to
monthly rent of P7,000 for one year, such that for the entire year from 1985 to 1986 the Baptist Church did not
pay monthly rent.
First, this Court cannot find that petitioner Baptist Church parted with anything of value, aside from the amount
of P84,000 which was in fact eventually utilized as rental payments. Second, there is no document that contains
an agreement between the parties that petitioner Baptist Churchs supposed rescue of the mortgaged property
was the consideration which the parties contemplated in support of the option clause in the contract. As
previously stated, the amount advanced had been fully utilized as rental payments over a period of one year.
While the Villanuevas may have them to thank for extending the payment at a time of need, this is not the
separate consideration contemplated by law.
Osmena v. PSALM
The power sector assets and liabilities management corp (psalm) conducted bidding for the sale of nppc power
plant. Bidders were therma power visayas inc and spc power corp. Therma power won. Psalm issued notice of
award to therma power but subject to the condition that spc will not exercise its right of first refusal. Then spc
exercised its right of first refusal by proposing to psalm that it will execute lease agreement and purchase
agreement over the npcc power plant. Psalm and spc executed said agreements and psalm cancelled the notice
of award. In its previous decision sc ruled that the provision in the bidding guidelines re right of first refusal of spc
was illegal and the lease and purchase agreements were also illegal. But it was silent on the effect of the decision
on the notice of award. Therma power then asked for clarification with prayer to reinstate the notice of award. Sc
in this resolution reinstated the notice of award.
Issue: WON SPC legally exercised their right to top
Ruling: SPC did not legally and validly exercise its Right to Top
Regardless of whether or not the Right to Top was nullified, however, the award of the purchase contracts to TPVI
would still be in order, for it appears that SPC did not validly exercise its erstwhile advantage.
The exercise of the Right to Top is no different from the manner of perfecting any other sales contract. 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.[18]
In the case at bar, PSALM Chief Emmanuel R. Ledesma, Jr., on April 29, 2014, wrote to SPC informing the latter
that it has the right to top the winning bid of TPVI for a 10-year lease on NPPC that will expire on January 29,
2020. The letter likewise directed SPC to pay within thirty (30) days should it exercise the said right. This is
constitutive of a definite offer.
It is clear from the tenor of SPC's letter that its acceptance of PSALM's offer can never be categorized as
unqualified. Instead, what SPC communicated was its counter-offer for a longer lease period. As applied, it can
readily be seen that there is no identity between what was offered and what was accepted. There is a glaring
difference not only in the term of the lease but also in its reckoning period. Thus, when the 30-day period to
exercise the Right to Top was about to lapse, the standing offer to SPC was for a lease expiring on January 29,
2020. Without SPC communicating its unqualified acceptance of such offer before the Right to Top expired, the
award of the purchase contracts to TPVI became due.
Although the Department of Justice eventually found for SPC on June 23, 2014,[23] the 30-day period to exercise
the Right to Top has already elapsed, and the said right, by then, could no longer be validly or legally
consummated. It was incumbent upon SPC to seek judicial intervention to toll the running of the 30-day period
pending the resolution of the issue. No recourse, however, was interposed by SPC.
Fullido vs. Grilli
Grilli financially assisted Fullido in procuring a lot from her parents which was registered in her name On the said
property, they constructed a house, which was funded by Grilli. Upon completion, they maintained a common-
law relationship and lived there whenever Grilli was on vacation in the Philippines twice a year. In 1998, Grilli and
Fullido executed a contract of lease, to define their respective rights over the house and lot. The lease contract
stipulated, among others, that Grilli as the lessee, would rent the lot, registered in the name of Fullido, for a
period of fifty (50) years, to be automatically renewed for another fifty (50) years upon its expiration in the
amount of P10,000.00 for the whole term of the lease contract; and that Fullido as the lessor, was prohibited
from selling, donating, or encumbering the said lot without the written consent of Grilli. Their harmonious
relationship turned sour after 16 years of living together. Both charged each other with infidelity. They could not
agree who should leave the common property, and Grilli sent formal letters to Fullido demanding that she vacate
the property, but these were unheeded. On September 8, 2010, Grilli filed a complaint for unlawful detainer with
prayer for issuance of preliminary injunction against Fullido before the MCTC Fullido argues that she could not be
ejected from her own lot based on the contract of lease and the MOA because those documents were null and
void for being contrary to the Constitution, the law, public policy, morals and customs; that the MOA prevented
her from disposing or selling her own land, while the contract of lease favoring Grilli, a foreigner, was contrary to
the Constitution as it was a for a period of fifty (50) years, and, upon termination, was automatically renewable
for another fifty (50) years. Grilli, on the other hand, contends that Fullido could not question the validity of the
said contracts in the present ejectment suit unless she instituted a separate action for annulment of contracts.
Thus, the Court is confronted with the issue of whether a contract could be declared void in a summary action of
unlawful detainer. The MCTC dismissed the case after finding that Fullido could not be ejected from their house
and lot. The MCTC opined that she was a co-owner of the house as she contributed to it by supervising its
construction. The RTC reversed and set aside the MCTC decision. The RTC was of the view that Grilli had the
exclusive right to use and possess the house and lot by virtue of the contract of lease executed by the parties.
The CA upheld the decision of the RTC emphasizing that in an ejectment case, the only issue to be resolved
would be the physical possession of the property. The CA was also of the view that as Fullido executed both the
MOA and the contract of lease, which gave Grilli the possession and use of the house and lot, the same
constituted as a judicial admission that it was Grilli who had the better right of physical possession.

ISSUE: May patently null and void contracts be a basis of an ejectment order?

HELD: No. A void or inexistent contract may be defined as one which lacks, absolutely either in fact or in law, one
or some of the elements which are essential for its validity. It is one which has no force and effect from the very
beginning, as if it had never been entered into; it produces no effect whatsoever either against or in favor of
anyone. 21Quod nullum est nullum producit effectum. Article 1409 of the New Civil Code explicitly states that
void contracts also cannot be ratified; neither can the right to set up the defense of illegality be waived.
Accordingly, there is no need for an action to set aside a void or inexistent contract. A review of the relevant
jurisprudence reveals that the Court did not hesitate to set aside a void contract even in an action for unlawful
detainer. In Spouses Alcantara v. Nido, which involves an action for unlawful detainer, the petitioners therein
raised a defense that the subject land was already sold to them by the agent of the owner. The Court rejected
their defense and held that the contract of sale was void because the agent did not have the written authority of
the owner to sell the subject land. Clearly, contracts may be declared void even in a summary action for unlawful
detainer because, precisely, void contracts do not produce legal effect and cannot be the source of any rights. To
emphasize, void contracts may not be invoked as a valid action or defense in any court proceeding, including an
ejectment suit. The next issue that must be resolved by the Court is whether the assailed lease contract and MOA
are null and void.
Banzon v. Cruz
Facts of the Case:
Sometime in the year 1952, Maximo R. Sta. Maria obtained several crop loans from PNB. For these loans,
Associated acted as surety for Sta. Maria by filing surety bonds in favor of PNB to guarantee and answer for the
prompt and faithful repayment of said loans. In turn, plaintiff Antonio R. Banzon and one Emilio R. Naval acted as
indemnitors of Associated in the indemnity agreements, obligating themselves to indemnify and hold it harmless
from any liabilities. However, Sta. Maria failed to pay his crop loan obligations in favor of PNB when the same fell
due, and accordingly, the bank demanded payment from Associated as surety. Instead of paying the bank,
Associated filed a complaint against Maximo R. Sta. Maria and indemnitors Banzon and Naval. A writ of execution
was issued and the properties of Banzon were levied and later on sold in execution. In 1965, the spouses Pedro
Cardenas and Leonila Baluyot were able to execute upon and buy one of the properties of Banzon to satisfy the
judgment debt of Associated in favor of the Cardenas spouses. The Banzons however refused to vacate the
premises and to remove the improvements thereon. Petitioner spouses Antonio Banzon and Rosa Balmaceda
filed a complaint against Maximo and Valeriana Sta. Maria for actual and moral damages in the total amount of
P251,750.00 allegedly arising from the deprivation of their property due to the Sta. Marias’ failure and refusal to
pay their plain, valid and just obligations with the PNB. The Court of First Instance ordered the Sta Marias to pay
damages. Upon appeal, the Court of Appeals reversed the decision.
Issue:
Whether or not respondent Maximo and Valeriana Sta. Maria were liable to the petitioners for the
prejudice and damages the latter suffered.
Ruling of the Court:
NO. The Court held that it was the trial court that erred when it arrived at the conclusion that the Sta
Marias were responsible for the prejudice caused petitioners. The Court ruled that it is a settled principle that
moral damages may be recovered if they are the proximate result of the defendant’s wrongful act or
omission. While ideally such debacle could have been avoided by Sta Marias’ payment of their obligations to
PNB, such fact of non-payment alone, without Associated’s premature action and subsequent fraudulent acts,
could not possibly have resulted in the prejudice and damage complained of. While private respondents’ non-
payment was admittedly the remote cause or the factor which set in motion the ensuing events, Associated’s
premature action and execution were the immediate and direct causes of the damage and prejudice suffered by
petitioners. Active supervening events consisting of said premature and fraudulent acts of the Associated
Insurance and Surety, Inc. had broken the causal connection between the fact of non-payment and the damage
suffered by petitioners, so that their claim should be directed not against the Sta Marias but against Associated.
The Court was convinced as well that the failure of the Sta Marias to pay their obligations with the PNB was not
attended by bad faith or willful intent to cause injury to petitioners. Under the Civil Code, the damages for which
a defendant may be held liable are those which are the natural and probable consequences of the act or
omission complained of. The prejudice caused petitioners cannot be said to be the natural and probable
consequence of the Sta. Marias’ mere failure to pay their crop loans as such prejudice arose due to active
supervening forces or events.
The petition was denied.
EDCA Publishing v. Santos
FACTS:
The movable property in this case consists of books, which were bought from EDCA by an impostor who sold it to
SANTOS. EDCA Publishing sold to a person identifying himself as Professor Jose Cruz who placed an order by
telephone with the former for 406 books, payable on delivery. EDCA prepared the corresponding invoice and
delivered the books as ordered, for which Cruz issued a personal check. On October 7, 1981, Cruz then sold the
120 of the books to Leonor Santos who asked for verification, and was then showed the invoice for the books.
Meanwhile, EDCA having become suspicious over a second order placed by Cruz even before clearing of his first
check, made inquiries with the De la Salle College where he had claimed to be a dean and was informed that
there was no such person in its employ. Further verification revealed that Cruz had no more account or deposit
with the Philippine Amanah Bank, against which he had drawn the payment check. EDCA then went to the police,
which set a trap and arrested Cruz. Investigation disclosed his real name as Tomas de la Peña and his sale of 120
of the books he had ordered from EDCA to the private respondents.
ISSUE:
Whether or not EDCA PUBLISHINGAND DISTRIBUTING CORP was unlawfully deprived of the property?
HELD:
NO
Santos was a good faith buyer after taking steps to verify the identity of the seller. When she was showed the
invoice, she reasonably believed that he was a legitimate seller. With regard to unlawful deprivation, EDCA was
not unlawfully deprived of the property by mere failure of consideration. There was already a perfected contract
of sale. Proof was even substantiated when EDCA gave the invoice as proof of payment upon delivery of the
books. This did not amount to unlawful taking, because by the delivery of EDCA to Cruz, ownership of the books
already transferred to him.
It would certainly be unfair now to make the SANTOSES bear the prejudice sustained by EDCA as a result of its
own negligence. We cannot see the justice in transferring EDCA's loss to the SANTOSES who had acted in good
faith, and with proper care, when they bought the books from Cruz.
Philippine Suburban Devt. Corp Vs. Auditor General
Facts:
On June 8, 1960, at a meeting with the Cabinet, the President of the Philippines, acting on the reports of the
Committee created to survey suitable lots for relocating squatters in Manila and suburbs, approved in principle
the acquisition by the People’s Homesite and Housing Corporation of the unoccupied portion of the Sapang Palay
Estate in Sta. Maria, Bulacan and of another area either in Las Piñas or Parañaque, Rizal, or Bacoor, Cavite for
those who desire to settle south of Manila. On June 10, 1960, the Board of Directors of the PHHC passed
Resolution No. 700 (Annex “C”) authorizing the purchase of the unoccupied portion of the Sapang Palay Estate at
P0.45 per square meter “subject to the following conditions precedent:
3. That the President of the Philippines shall first provide the PHHC with the necessary funds to effect the
purchase and development of this property from the proposed P4.5 million bond issue to be absorbed by the
GSIS.
4. That the contract of sale shall first be approved by the Auditor General pursuant to Executive Order dated
February 3, 1959.
On July 13, 1960, the President authorized the floating of bonds under Republic Act Nos. 1000 and 1322 in the price, did not preclude the transmission of ownership. In the absence of an express stipulation to the contrary,
amount of P7,500,000.00 to be absorbed by the GSIS, in order to finance the acquisition by the PHHC of the the payment of the purchase price of the good is not a condition, precedent to the transfer of title to the buyer,
entire Sapang Palay Estate at a price not to exceed P0.45 per sq. meter. but title passes by the delivery of the goods.
On December 29,1960, Petitioner Philippine Suburban Development Corporation, as owner of the unoccupied
portion of the Sapang Palay Estate and the People’s Homesite and Housing Corporation, entered into a contract
embodied in a public instrument entitled “Deed of Absolute Sale” whereby the former conveyed unto the latter
the two parcels of land abovementioned. This was not registered in the Office of the Register of Deeds until
March 14, 1961, due to the fact, petitioner claims, that the PHHC could not at once advance the money needed
for registration expenses.
In the meantime, the Auditor General, to whom a copy of the contract had been submitted for approval in
conformity with Executive Order No. 290, expressed objections thereto and requested a re-examination of the
contract, in view of the fact that from 1948 to December 20, 1960, the entire hacienda was assessed at
P131,590.00, and reassessed beginning December 21, 1960 in the greatly increased amount of P4,898,110.00.
It appears that as early as the first week of June, 1960, prior to the signing of the deed by the parties, the PHHC
acquired possession of the property, with the consent of petitioner, to enable the said PHHC to proceed
immediately with the construction of roads in the new settlement and to resettle the squatters and flood victims
in Manila who were rendered homeless by the floods or ejected from the lots which they were then occupying.
On April 12, 1961, the Provincial Treasurer of Bulacan requested the PHHC to withhold the amount of P30,099.79
from the purchase price to be paid by it to the Philippine Suburban Development Corporation. Said amount
represented the realty tax due on the property involved for the calendar year 1961. Petitioner, through the PHHC,
paid under protest the abovementioned amount to the Provincial Treasurer of Bulacan and thereafter, or on June
13, 1961, by letter, requested then Secretary of Finance Dominador Aytona to order a refund of the amount so
paid. Upon recommendation of the Provincial Treasurer of Bulacan, said request was denied by the Secretary of
Finance in a letter-decision dated August 22, 1961.

ISSUE: WON there was already a valid transfer of ownership between the parties.
HELD:
Considering the aforementioned approval and authorization by the President of the Philippines of the specific
transaction in question, the prior approval by the Auditor General envisioned by Administrative Order would
therefore, not be necessary.
Under the civil law, delivery (tradition) as a mode of transmission of ownership maybe actual (real tradition) or
constructive (constructive tradition). 2 When the sale of real property is made in a public instrument, the
execution thereof is equivalent to the delivery of the thing object of the contract, if from the deed the contrary
does not appear or cannot clearly be inferred.
In other words, there is symbolic delivery of the property subject of the sale by the execution of the public
instrument, unless from the express terms of the instrument, or by clear inference therefrom, this was not the
intention of the parties. Such would be the case, for instance, when a certain date is fixed for the purchaser to
take possession of the property subject of the conveyance, or where, in case of sale by installments, it is
stipulated that until the last installment is made, the title to the property should remain with the vendor, or when
the vendor reserves the right to use and enjoy the properties until the gathering of the pending crops, or where
the vendor has no control over the thing sold at the moment of the sale, and, therefore, its material delivery
could not have been made.
In the case at bar, there is no question that the vendor had actually placed the vendee in possession and control
over the thing sold, even before the date of the sale. The condition that petitioner should first register the deed
of sale and secure a new title in the name of the vendee before the latter shall pay the balance of the purchase
Skunac Corporation v. Sylianteng FACTS: On November 6, 1992, Cattleya entered into a Contract of Conditional Sale with the
Tecson spouses covering nine parcels of land, including the subject property.
FACTS: The subject of controversy are two (2) parcels of land identified as Lot 1, with an area of
1,250 square meters and Lot 2, with an area of 990 square meters, both found in Block 2 of the However, while following up the registration of the August 30, 1993 Deed of
Pujalte Subdivision which are portions of a parcel of land previously registered in the name of Absolute Sale at the Office of the Register of Deeds, Cattleya learned that the
Luis A. Pujalte and covered by TCTNo. (-78865) (-2668) -93165 ("Mother Title") of the Register of owner’s copy of the title to the land in question was with Taina.
Deeds for the City of Manila.
Respondents Roberto and Caesar Sylianteng claim ownership over the subject lots based on a The subject land had apparently been sold to Taina’s common-law husband, Michael
Deed of Absolute Sale executed in their favor by their mother, Emerenciana Sylianteng on June Stone, by Spouses Tecson in 1985, but the title was placed in Taina’s name as
27, 1983. They further allege that Emerenciana acquired the lots from the late Luis Pujalte Stone was a foreigner.
through a Deed of Sale dated June 20, 1958 as reflected in Entry No. P.E. 4023, annotated on the
covering TCT, by virtue of which she was issued TCT No. 42369. Then, when she sold the lots to Cattleya instituted a civil action for quieting of title and/or recovery of
appellants, TCT No. 39488, covering the same, was issued in their names. ownership and cancellation of title.
Petitioners Skunac Corporation and Alfonso F. Enriquez, on the other hand, claim that a certain
Romeo Pujalte who was declared by the RTC of Pasig City, Branch 151 as the sole heir of Luis Taina posits that while Michael’s legal capacity to own or acquire real property
Pujalte, caused the reconstitution of the Mother Title resulting to its cancellation and the in the Philippines was not entirely unassailable, there was nevertheless no actual
issuance of TCT No. 5760-R in his favor. Romeo Pujalte then allegedly sold the lots to Skunac violation of the constitutional prohibition, because in this case no real transfer of
and Enriquez in 1992. Thus, from TCT No. 5760-R, TCT No. 5888-R, for Lot 1 was issued in the ownership had been effected in favor of Michael from Col. Tecson. Taina claimed
name of Skunac, while TCT No. 5889-R for Lot 2 was issued in the name of Enriquez. that she was not exactly dummy Michael’s dummy at all but his active partner.
Respondents contend that they have a better right to the lots in question because the
transactions conveying the same to them preceded those claimed by petitioners as source of the Cattleya counters that the sale between Col. Tecson and Michael was absolutely
latter's titles. They further assert that petitioners could not be considered as innocent purchasers null and void, as this was a flagrant violation of the constitutional provision
in good faith and for value because they had prior notice of the previous transactions as stated barring or prohibiting aliens or foreigners from acquiring or purchasing land in the
in the memorandum of encumbrances annotated on the titles covering the subject lots. Philippines.
Petitioners, for their part, maintain that respondents acquired the lots under questionable
circumstances it appearing that there was no copy of the Deed of Sale, between Emerenciana ISSUE
and Luis Pujalte, on file with the Office of the Register of Deeds.
Whether the sale of land by Spouses Tecson to Michael Stone, a foreigner
Issue: although ostensibly made in Taina’s name, was valid, despite the constitutional
Is the provision of the Civil Code on Double Sale of registered land (Art. 1544) prohibition against the sale of lands in the Philippines to foreigners.
applicable in the present case?
Ruling: RULING
NO. Reliance by the trial and appellate courts on Article 1544 of the Civil Code is
NO, the sale is null and void by reason of the constitutional prohibition against
misplaced. The requisites that must concur for Article 1544 to apply are:
the sale of lands in the Philippines to foreigners or aliens.
(a) The two (or more sales) transactions must constitute valid sales;
(b) The two (or more) sales transactions must pertain to exactly the same subject matter;
Section 7, Article XII of the 1987 Constitution states that “Save in cases of
(c) The two (or more) buyers at odds over the rightful ownership of the subject matter
hereditary succession, no private lands shall be transferred or conveyed except to
must each represent conflicting interests; and
individuals, corporations or associations qualified to acquire or hold lands of the
(d) The two (or more) buyers at odds over the rightful ownership of the subject matter
public domain.”
must each have bought from the very same seller.
Obviously, said provision has no application in cases where the sales involved were
Given the plain and explicit language of this constitutional mandate, it has been
initiated not by just one but two vendors. In the present case, the subject lots were sold to
held that “aliens, whether individual or corporations, are disqualified from acquiring
petitioners and respondents by two different vendors – Emerenciana and Romeo Pujalte. Hence,
lands of public domain. Hence, they are also disqualified from acquiring private
Article 1544 of the Civil Code is not applicable.
lands. The primary purpose of the constitutional provision is the conservation of the
national patrimony.
TAINA MANIGQUE – STONE vs. CATTLEYA LAND, INC.
G.R. No. 195975, September 5, 2016, 802 SCRA 173
In the case at bench, Taina admitted that it was Michael who paid with his
own funds the subject lot, hence, Michael Stone was its real purchaser or buyer.
More than that, it bears stressing that if the deed of sale proclaimed that she
was the purchaser or buyer of the subject property and this subject property was
placed under her name, it was simply because she and Michael wanted to
skirt or circumvent the constitutional prohibition barring or outlawing foreigners or
aliens from acquiring or purchasing lands in the Philippines.
Spring Homes v. Sps. Tablada
FACTS:
On October 12, 1992, petitioners, Spouses Pedro L. Lumbres and Rebecca T. Roaring, entered into a Joint
Venture Agreement with Spring Homes Subdivision Co., Inc., through its chairman, the late Mr. Rolando B. Pasic,
for the development of several parcels of land consisting of an area of 28,378 square meters.
January 9, 1995, Spring Homes entered into a Contract to Sell with respondents, Spouses Pedro Tablada,
Jr. and Zenaida Tablada, for the sale of a parcel of land located at Lot No. 8, Block 3, Spring Homes Subdivision.
Subsequently, the Spouses Tablada discovered that the subject property was mortgaged as a security for
a loan in the amount of over P4,000,000.00 with Premiere Development Bank as mortgagee and Spring Homes as
mortgagor. In fact, since the loan remained unpaid, extrajudicial proceedings were instituted.
The Spouses Tablada filed a complaint for Nullification of Title, Reconveyance and Damages against
Spring Homes and the Spouses Lumbres praying for the nullification of the second Deed of Absolute Sale
executed in favor of the Spouses Lumbres, as well as the title issued as a consequence thereof, the declaration of
the validity of the first Deed of Absolute Sale executed in their favor, and the issuance of a new title in their
name.
Spouses Lumbres filed a Motion to Dismiss the case against them raising as grounds the non-compliance
with a condition precedent and lack of jurisdiction of the RTC over the subject matter. They alleged that the
Spouses Tablada failed to avail of conciliatory proceedings, and that the RTC has no jurisdiction since the parties,
as well as property in question, are all located at Calamba City, and that the action instituted by the Spouses
Tablada praying for the nullification of the Compromise Agreement actually corresponds to a nullification of a
judgement issued by a co-equal trial court.
ISSUE:
Whether or not spouses Tablada were purchased a parcel of land in Spring Homes Subdivision in bad faith
HELD:
Yes. Knowledge gained by the first buyer of the second sale cannot defeat the first buyer's rights except only as
provided by law, as in cases where the second buyer first registers in good faith the second sale ahead of the first.
Such knowledge of the first buyer does bar her from availing of her rights under the law, among them, first her
purchase as against the second buyer. But conversely, knowledge gained by the second buyer of the first sale
defeats his rights even if he is first to register the second sale, since such knowledge taints his prior registration
with bad faith.
Accordingly, in order for the Spouses Lumbres to obtain priority over the Spouses Tablada, the law
requires a continuing good faith and innocence or lack of knowledge of the first sale that would enable their
contract to ripen into full ownership through prior registration. But from the very beginning, the Spouses
Lumbres had already known of the fact that the subject property had previously been sold to the Spouses
Tablada, by virtue of a valid Deed of Absolute Sale.
Edu vs Gomez
FACTS:
The 1968 model Volkswagen, bantam car, allegedly owned by Lt. Walter A. Bala under whose name it was
originally registered, was reported to the Office of the Commission on Land Transportation as stolen on June 29,
1970 from the residence of Lt. Bala. Upon receipt of such information the agents of Anti-Carnapping Unit
(ANCAR) of the Philippine Constabulary, on detail with the Land Transportation Commission recognized subject
car on 2 February 1971 in the possession of LUCILA ABELLO and immediately seized and impounded the car as
stolen property.
Romeo F. Edu, then Commissioner of Land Transportation, seized the car pursuant to Section 60 of Republic Act
4136 which empowers him to seize the motor vehicle for delinquent registration aside from his implicit power
deducible from Sec. 4(5), Sec. 5 and 31 of said Code, "to seize motor vehicles fraudulently or otherwise not
properly registered.”
Lucia Abello filed a complaint for replevin with damages in the Court of First Instance of Manila. CFI ruled in facor
of ABELLO. CFI found that the car was acquired by ABELLO by purchase from its registered owner Marcelino
Guansing for P9,000 and that she has been in possession thereof since then until when the car was seized from
her by ANCAR who acted in belief that the car was stolen from Lt. Bala.
ISSUE:
Whether or not the seizure of the car by the officials are valid.
RULING:
NO.
There is no merit in the petition considering that the acquirer or the purchaser in good faith of a chattel of
movable property is entitled to be respected and protected in his possession as if he were the true owner thereof
until a competent court rules otherwise. In the meantime, as the true owner, the possessor in good faith cannot
be compelled to surrender possession nor to be required to institute an action for the recovery of the chattel,
whether or not an indemnity bond is issued in his favor. The filing of an information charging that the chattel was
illegally obtained through estafa from its true owner by the transferor of the bona fide possessor does not
warrant disturbing the possession of the chattel against the will of the possessor.
Duran v. IAC
Facts:
Petitioner Duran owned 2 parcels of land. She left the Philippines in June 1954 and returned in May 1966. On
1963, a Deed of Sale was made in favor of the petitioner’s mother. On December 1965, Duran’s mother
mortgaged the same property to private respondent Erlinda Marcelo-Tiangco. When Duran came to know about
the mortgage made by her mother, she wrote the Register of Deeds informing the latter that she had not given
her mother any authority to sell or mortgage any of her properties in the Philippines. Meanwhile, foreclosure
proceedings were initiated by Tiangco upon the failure of Duran’s mother to redeem the mortgaged properties.
Duran claims that the Deed of Sale is a forgery, saying that at the time of its execution in 1963 she was in the
United States. Respondent Court ruled that there is a presumption of regularity in the case of a public document.
Issue:
Whether private respondent was a buyer in good faith and for value
Held:
Yes. Good faith consists in the possessor’s belief that the person from who he received the thing was the owner
of the same and could convey his title (Arriola v. Gomez Dela Serna, 14 Phil. 627). Good faith, while it is always to
be presumed in the absence of proof to the contrary, requires a well-founded belief that the person from whom
title was received was himself the owner of the land, with the right to convey it (Santiago v. Cruz, 19 Phil. 148).
The mortgagee has the right to rely on what appears in the certificate of title and, in the absence of anything to Escaler v. CA
excite suspicion, he is under no obligation to look beyond the certificate and investigate the title of the mortgagor
appearing on the face of the said certificate. Every person dealing with registered land may safely rely on the
correctness of the certificate of title issued therefore and the law will in no way oblige him to go behind the Facts:
certificate to determine the condition of the property. If the rule were otherwise, the efficacy and conclusiveness
of the Torrens Certificate of Titles would be futile and nugatory. Thus the rule is simple: the fraudulent and forged
On March 7, 1958, the spouses Africa V. Reynoso and Jose L. Reynoso sold to petitioners several others, a parcel
document of sale may become the root of a valid title if the certificate has already been transferred from the
of land, situated in Antipolo, Rizal with an area of 239,479 square meters
name of the true owner to the name indicated by the forger.
While it is true that under Article 2085 of the Civil Code, it is essential that the mortgagor be the absolute owner
of the property mortgaged, and while as between the daughter and her mother, it was the daughter who still On April 21, 1961, the Register of Deeds of Rizal and A. Doronilla Resources Development, Inc. filed Case No.
owns the lots, STILL insofar as innocent third persons are concerned the owner was already the mother inasmuch 4252 before the Court of First Instance of Rizal for the cancellation of OCT No. 1526 issued in the name of
as she had already become the registered owner. Angelina C. Reynoso (predecessor-in-interest of private... respondents-vendors) on February 26, 1958 under
Decree No. 62373, LRC Record No. N-13783, on the ground that the property covered by said title is already pre-
viously registered under Transfer Certificate of Title No. 42999 issued in the name of A. Doronilla Development,...
JM Tuazon & Co., Inc. vs CA Inc. Petitioners as vendees filed their opposition to the said petition.

On August 31, 1965, herein petitioners, spouses Maria de Leon Escaler and Ernesto Escaler and spouses Cecilia J.
Roxas and Pedro Roxas, filed Civil Case No. 9014 before the Court of First Instance of Rizal against their vendors,
herein private respondents spouses Jose L. Reynoso... and Africa Reynoso for the recovery of the value of the
property sold to them, plus damages on the ground that the latter have violated the vendors' "warranty against
eviction."

Issues:

1) that the Court of Appeals erred in applying strictly to the instant case the provisions of Articles 1558 and 1559
of the New Civil Code;

Ruling:

Art. 1558. The vendor shall not be obliged to make good the proper warranty, unless he is summoned in the suit
for eviction at the instance of the vendee.

In order that a vendor's liability for eviction may be enforced, the following requisites must concur a) there must
be a final judgment; b) the purchaser has been deprived of the whole or part of the thing sold; c) said deprivation
was by virtue of a right prior to the sale made... by the vendor; and d) the vendor has been summoned and made
co-defendant in the suit for eviction at the instance of the vendee.

In the case at bar, the fourth requisite - that of being summoned in the suit for eviction (Case No. 4252) at the
instance of the vendee is not present. All that the petitioners did, per their very admission, was to furnish
respondents, by registered mail, with a copy of... the opposition they (petitioners) filed in the eviction suit.

Decidedly, this is not the kind of notice prescribed by the afore-quoted Articles 1558 and 1559 of the New Civil
Code
 The term "unless he is summoned in the suit for eviction at the instance of the... vendee" means that the
respondents as vendor/s should be made parties to the suit at the instance of petitioners-vendees, either by way
of asking that the former be made a co-defendant or by the filing of a third-party complaint against said vendors.
Nothing of that sort... appeared to have been done by the petitioners in the instant case.
Moles v. IAC
FACTS:
Jerry Moles(petitioner) bought from Mariano Diolosa owner of Diolosa Publishing House a linotype printing
machine(secondhand machine). Moles promised Diolosa that will pay the full amount after the loan from DBP
worth P50,000.00 will be released. Private respondent on return issued a certification wherein he warrated that
the machine was in A-1 condition, together with other express warranties. After the release of the of the money
from DBP, Petitioner required the Respondent to accomplish some of the requirements. On which the dependant
complied the requirements on the same day.
On November 29, 1977, petitioner wrote private respondent that the machine was not functioning properly. The
petitioner found out that the said machine was not in good condition as experts advised and it was worth lesser
than the purchase price. After several telephone calls regarding the defects in the machine, private respondent
sent two technicians to make necessary repairs but they failed to put the machine in running condition and since
then the petitioner wan unable to use the machine anymore.
ISSUE/S:
1. Whether there is an implied warranty of its quality or fitness.
2. Whether the hidden defects in the machine is sufficient to warrant a rescission of the contract between the
parties.
RULING:
1. It is generally held that in the sale of a designated and specific article sold as secondhand, there is no implied
warranty as to its quality or fitness for the purpose intended, at least where it is subject to inspection at the time
of the sale. On the other hand, there is also authority to the effect that in a sale of secondhand articles there
may be, under some circumstances, an implied warranty of fitness for the ordinary purpose of the article sold or
for the particular purpose of the buyer.
2. We have to consider the rule on redhibitory defects contemplated in Article 1561 of the Civil Code. A redhibitory
defect must be an imperfection or defect of such nature as to engender a certain degree of importance. An
imperfection or defect of little consequence does not come within the category of being redhibitory.
As already narrated, an expert witness for the petitioner categorically established that the machine required
major repairs before it could be used. This, plus the fact that petitioner never made appropriate use of the
machine from the time of purchase until an action was filed, attest to the major defects in said machine, by
reason of which the rescission of the contract of sale is sought. The factual finding, therefore, of the trial court
that the machine is not reasonably fit for the particular purpose for which it was intended must be upheld, there
being ample evidence to sustain the same.
At a belated stage of this appeal, private respondent came up for the first time with the contention that the
action for rescission is barred by prescription. While it is true that Article 1571 of the Civil Code provides for a
prescriptive period of six months for a redhibitory action, a cursory reading of the ten preceding articles to which
it refers will reveal that said rule may be applied only in case of implied warranties. The present case involves
one with an express warranty. Consequently, the general rule on rescission of contract, which is four years shall
apply. Considering that the original case for rescission was filed only one year after the delivery of the subject
machine, the same is well within the prescriptive period. This is aside from the doctrinal rule that the defense of
prescription is waived and cannot be considered on appeal if not raised in the trial court, and this case does not
have the features for an exception to said rule.
Nutrimix Feeds Corp. v. CA
FACTS: Evangelista spouses purchased feeds from Nutrimix. They refused to pay their unsettled debt claiming
that thousands of their livestock were poisoned by the Nutrimix feeds. Nutrimix sued them for collection of
money. The spouses countered with a suit for damages. Various expert witnesses were presented during the trial.
ISSUE: W/N Nutrimix should be held liable for the death of the livestock
HELD: NO. In alleging that there was a violation of warranty against hidden defects, the spouses assumed the
burden of proof. However, this they failed to overcome. Under the law, the defect must exist at the time the sale
was made and at the time the product left the hands of the seller, which the spouses failed to prove. The feeds
were belatedly tested—3 months after the death of the broilers and hogs. This means that at that time, they may
have already been contaminated.
They failed to prove that the feeds delivered to be tested were the same feeds that allegedly poisoned the
animals. It is also common practice for them to mix different kinds of feeds. The mere death of the animals does
not raise a prima facie case of breach of warranty. In this case, the evidence presented by the spouses are only
circumstantial.
The remedies of breach of warranty against hidden defects are either withdrawal from the contract or to
demand a proportionate reduction of the price plus damages in either case. In this case, though the spouses
failed to make out their case, hence they should be liable for their debt.
Arra Realty Corp., et. al. vs. Guarantee Dev’t. Corp.
Facts: Arra Realty Corporation (ARC) was the owner of a parcel of land. Through its president, the ARC decided to
construct a five-story building on its property and engaged the services of Engineer Erlinda Peñaloza as project
and structural engineer. In the process, Peñaloza and the ARC, agreed on November 18, 1982 that Peñaloza
would share the purchase price of one floor of the building, payable within sixty (60) days and the balance
payable in twenty (20) equal quarterly installments of P110,205. The parties further agreed that the payments of
Peñaloza would be credited to her account in partial payment of her stock subscription in the ARC’s capital stock.
Peñaloza took possession of the one-half portion of the second floor, where she put up her office and operated
the St. Michael International Institute of Technology. Unknown to her, ARC had executed a real estate mortgage
over the lot and the entire building in favor of the China Banking Corporation as security for a loan. Peñaloza paid
for the portion of the second floor of the building she had purchased from the ARC. She learned that the
property had been mortgaged to the China Banking Corporation sometime in July 1984. Thereafter, she stopped
paying the installments due on the purchase price of the property. When the ARC failed to pay its loan to China
Banking Corporation, the subject property was foreclosed extrajudicially, and, thereafter, sold at public auction to
China Banking Corporation. The ARC and the Guarantee Development Corporation and Insurance Agency (GDCIA)
executed a deed of conditional sale covering the building and the lot. The petitioner executed a deed of absolute
sale over the lot and building in favor of the GDCIA for P22,000,000. The ARC obliged itself under the deed to
deliver possession of the property without any occupants therein.
Peñaloza filed a complaint against the ARC, the GDCIA, and the Spouses Arguelles, with the RTC of Makati. The
trial court rendered judgment in favor of Peñaloza and the GDCIA, and against the ARC and the Spouses
Arguelles. On appeal, the CA rendered judgment affirming with modification the appealed decision.
Issue: WON Peñaloza has the right to suspend payments.
Held: The Court ruled against the petitioners.
The parties had agreed on the three elements of subject matter, price, and terms of payment. Hence, the
contract of sale was perfected, it being consensual in nature, perfected by mere consent, which, in turn, was
manifested the moment there was a meeting of the minds as to the offer and the acceptance thereof. The
perfection of the sale is not negated by the fact that the property subject of the sale was not yet in existence.
This is so because the ownership by the seller of the thing sold at the time of the perfection of the contract of
sale is not an element of its perfection. A perfected contract of sale cannot be challenged on the ground of non-
ownership on the part of the seller at the time of its perfection. What the law requires is that the seller has the
right to transfer ownership at the time the thing is delivered. Perfection per se does not transfer ownership which
occurs upon the actual or constructive delivery of the thing sold.
ROBERTO Z. LAFORTEZA vs. ALONZO MACHUCA
G.R. No. 137552. June 16, 2000 (333SCRA643)
Third Division
Facts: On August 2, 1988, defendants Lea Zulueta-Laforteza and Michael Z. Laforteza both executed a Special
Power of Attorney (SPA) in favor of defendants Roberto and Gonzalo Z. Laforteza, Jr., appointing both as her
Attorney-in-fact authorizing them jointly to sell the subject property and sign any document for the settlement of
the estate of the late Francisco Q. Laforteza.
Both agency instruments contained a provision that in any document or paper to exercise authority granted, the
signature of both attorneys-in-fact must be affixed.
On October 27, 1988, defendant Dennis Z. Laforteza executed an SPA in favor of defendant Roberto Z. Laforteza
for the purpose of selling the subject property. A year later, Dennis Z. Laforteza executed another SPA in favor of
defendants Roberto and Gonzalo Laforteza, Jr. naming both attorneys-in-fact for the purpose of selling the
subject property and signing any document for the settlement of the estate of the late Francisco Q. Laforteza.
On January 20, 1989, the heirs of the late Francisco Q. Laforteza represented by Roberto Z. Laforteza and Gonzalo
Z. Laforteza, Jr. entered into a Memorandum of Agreement (MOA[Contract to Sell]) with the plaintiff over the
subject property for the sum of P630,000.00.
On January 20, 1989, plaintiff paid the earnest money of P30,000.00, plus rentals for the subject property.
On September 18, 1998 , defendant heirs, through their counsel wrote a letter to the plaintiff furnishing the latter
a copy of the reconstituted title to the subject property, advising him that he had 30 days to produce the balance
of P600,000.00 under the Memorandum of Agreement which plaintiff received on the same date.
On October 18, 1989, plaintiff sent the defendant heirs a letter requesting for an extension of the 30 DAYS.
On November 15, 1989, plaintiff informed the defendant heirs, through defendant Roberto Z. Laforteza, that he
already had the balance P600,000.00 covered by United Coconut Planters Bank Managers Check. However, the
defendants, refused to accept the balance Defendant Roberto Z. Laforteza had told him that the subject property
was no longer for sale.
On November 20, 1998, defendants informed the plaintiff that they were canceling the MOA in view of the
plaintiffs failure to comply with his contractual obligations.
Thereafter, plaintiff reiterated his request to tender payment of the balance. Defendants, however, insisted on
the rescission of the MOA. Plaintiff filed the instant action for specific performance. The lower court rendered
judgment in favor of the plaintiff.
Petitioners appealed to the Court of Appeals, which affirmed with modification the decision of the lower court.
Motion for Reconsideration was denied but the Decision was modified so as to absolve Gonzalo Z. Laforteza, Jr.
from liability for the payment of moral damages. Hence this petition.
Issues: W the Memorandum of Agreement is a mere contract to sell, as indicated in its title.
Ruling: CA decision is AFFIRMED and the instant petition is hereby DENIED.
A perusal of the MOA shows that the transaction between the petitioners and the respondent was one of sale
and lease.
A contract of sale is a consensual contract and is perfected at the moment there is a meeting of the 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 governing the form of contracts. The elements of a
valid contract of sale under Article 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.
In the case at bench, there was a perfected agreement between the petitioners and the respondent whereby the
petitioners obligated themselves to transfer the ownership of and deliver the house and lot and the respondent
to pay the price amounting to P600,000.00. All the elements of a contract of sale were thus present. However,
the balance of the purchase price was to be paid only upon the issuance of the new certificate of title in lieu of
the one in the name of the late Francisco Laforteza and upon the execution of an extrajudicial settlement of his
estate. Prior to the issuance of the "reconstituted" title, the respondent was already placed in possession of the
house and lot as lessee thereof for six months at a monthly rate of P3,500.00.
The six-month period during which the respondent would be in possession of the property as lessee, was clearly
not a period within which to exercise an option. An option is a contract granting a privilege to buy or sell within
an agreed time and at a determined price. An option contract is a separate and distinct contract from that which
the parties may enter into upon the consummation of the option. An option must be supported by consideration.
An option contract is governed by the second paragraph of Article 1479 of the Civil Code.
“An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the
promissor if the promise is supported by a consideration distinct from the price."
In the present case, the six-month period merely delayed the demandability of the contract of sale and did not
determine its perfection for after the expiration of the six-month period, there was an absolute obligation on the
part of the petitioners and the respondent to comply with the terms of the sale.
 to pay the deficiency. The non-specification of the amounts of damages does not immediately divest the trial
court of its jurisdiction over the case, provided there is no bad faith or intent to defraud the Government on the
Vda. De Mistica vs. Naguiat part of the plaintiff.
418 SCRA 73 The non-payment of the prescribed filing fees at the time of the filing of the complaint or other initiatory
pleading fails to vest jurisdiction over the case in the trial court. Yet, where the plaintiff has paid the amount of
Issue/Scope filing fees assessed by the clerk of court, and the amount paid turns out to be deficient, the trial court still
Potestative Condition under Art. 1182 in relation to Art. 1191 of Civil Code acquires jurisdiction over the case, subject to the payment by the plaintiff of the deficiency assessment.
In Rivera v. Del Rosario,1[29] the Court, resolving the issue of the failure to pay the correct amount of docket fees
Facts due to the inadequate assessment by the clerk of court, ruled that jurisdiction over the complaint was still validly
Predecessor-in-interest of Petitioner and herein Defendants entered into a contract to sell in which the latter acquired upon the full payment of the docket fees assessed by the Clerk of Court. Relying on Sun Insurance
prayed the initial payment and undertake to pay the remaining by installment within 10 years subject to 12% Office, Ltd., (SIOL) v. Asuncion,2[30] the Court opined that the filing of the complaint or appropriate initiatory
interest per annum pleading and the payment of the prescribed docket fees vested a trial court with jurisdiction over the claim, and
although the docket fees paid were insufficient in relation to the amount of the claim, the clerk of court or his
Petitioner filed a complaint for rescission alleging failure and refusal of Defendants to pay the balance constitutes duly authorized deputy retained the responsibility of making a deficiency assessment, and the party filing the
a violation of the contract which entitles her to rescind the same action could be required to pay the deficiency, without jurisdiction being automatically lost.
Petitioner argues that period for performance of obligation cannot be extended to 10 years because to do so
would convert the obligation to purely potestative
Levy Hermanos Inc. vs. Gervacio
Held
FACTS OF THE CASE:
Plaintiff Levy Hermanos, Inc. sold a car to defendant Lazaro Blas Gervacio.
Under Art. 1191 of Civil Code, the right to rescind an obligation is predicated on violation between parties
Gervacio made a down payment for the car and then executed a promissory note for the balance in favor of Levy
brought about by breach of faith by one of them. Rescission, however, is allowed only when the breach is
Hermanos, Inc.
substantial and fundamental to the fulfillment of the obligation
In order to secure payment of the note for the balance of P2,400.00, the former (Gervacio) mortgaged the car to
the latter (Levy Hermanos).
In this case, no substantial breach – in the Kasulatan, it was stipulated that payment could be made even after 10
After Gervacio failed to pay the note upon its maturity, Levy Hermanos foreclosed the mortgage.
years from execution of contract, provided they will pay the 12% interest
The car was sold at a public auction where it was bought for P1,800.00 by Levy Hermanos for being the highest
bidder.
Civil Code prohibits purely potestative, suspensive, conditional obligation that depend on the whims of the
Despite having already bought the car at the public auction, plaintiff instituted an action before the CFI of Manila
debtor. Nowhere in the deed that payment of purchase price is dependent whether respondents want to pay it or
against defendant for the collection of the balance of the P1,600.00 and interest.
not, the fact that they already made partial payment shows that parties intended to be bound by the Kasulatan
The CFI, applying the provisions of Act No. 4122, inserted as Article 1454-A of Civil Code, rendered judgment in
favor of Gervacio.
FEDMAN DEVELOPMENT CORPORATION, vs agcaoili G.R. No. 165025 August 31, 2011
Levy Hermanos, Inc. appealed the judgment.
Facts:
On October 10, 1980, Interchem, with FDC’s consent, transferred all its rights in Unit 411 to respondent Federico
ISSUE: Whether plaintiff is entitled to the collection of the balance of P1,600.00 and interest.
Agcaoili (Agcaoili), As consideration for the transfer, Agcaoili agreed: (a) to pay Interchem ₱150,000.00 upon
signing of the deed of transfer; (b) to update the account by paying to FDC the amount of ₱15,473.17 through a
HELD:
90 day-postdated check; and (c) to deliver to FDC the balance of ₱137,286.83 in 135 equal monthly installments
The Supreme Court says YES.Judgment of the CFI reversed.
of ₱1,857.24 effective October 1980, inclusive of 12% interest per annum on the diminishing balance. The
The contract, in the instant case, while a sale of personal property, is not, however, one on installments, but on
obligations Agcaoili assumed totaled ₱302,760.00. In December 1983, the centralized air-conditioning unit of
straight term, in which the balance, after payment of the initial sum, should be paid in its totality at the time
FSB’s fourth floor broke down. He then informed FDC and FSCC that he was suspending the payment of his
specified in the promissory note. The transaction is not is not, therefore, the one contemplated in Act No. 4122
condominium dues and monthly amortizations. FDC cancelled the contract to sell. Agcaoili was thus prompted to
and accordingly the mortgagee is not bound by the prohibition therein contained as to the right to the recovery
sue FDC and FSCC in the RTC, Makati City, Branch 144 for injunction and damages. The parties later executed a
of the unpaid balance. Undoubtedly, the law is aimed at those sales where the price is payable in several
compromise agreement that the RTC approved through its decision of August 26, 1985. RTC rendered judgment
installments, for, generally, it is in these cases that partial payments consist in relatively small amounts,
in favor of Agcaoili, FDC appealed, but the CA affirmed the RTC.
constituting thus a great temptation for improvident purchasers to buy beyond their means. There is no such
Issue:
WON RTC did not acquire jurisdiction over this case for failure to pay the correct amount of docket fee
Held: 1
If the amount of docket fees paid is insufficient in relation to the amounts being sought, the clerk of court or his
duly authorized deputy has the responsibility of making a deficiency assessment, and the plaintiff will be required 2
temptation where the price is to be paid in cash, or, as in the instant case, partly in cash and partly in one term,
for, in the latter case, the partial payments are not so small as to place purchasers off their guard and delude
them to a miscalculation of their ability to pay. Theoretically, perhaps, there is no difference between paying the
price in two installments, in so far as the size of each partial payment is concerned; but in actual practice the
difference exists, for, according to the regular course of business, in contracts providing for payment of the price
in two installments, there is generally a provision for initial payment. But all these considerations are immaterial,
the language of the law being so clear as to require no construction at all.
phi1.nêt
The suggestion that the cash payment made in this case should be considered as an installment in order to bring
the contract sued upon under the operation of the law, is completely untenable. A cash payment cannot be
considered as a payment by installment, and even if it can be so considered, still the law does not apply, for it
requires non-payment of two or more installments in order that its provisions may be invoked. Here, only one
installment was unpaid