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1) DIGNOS vs.

CA
G.R. No. L-59266 February 29, 1988
SILVESTRE
DIGNOS
and
ISABEL
LUMUNGSOD, petitioners,
vs.
HON. COURT OF APPEALS and ATILANO G.
JABIL, respondents.
BIDIN, J.:
FACTS:
1) The Dignos spouses were owners of a parcel of land,
known as Lot No. 3453. On June 7, 1965, Dignos
spouses sold the said parcel of land to Atilano J. Jabil
for the sum of P28,000.00, payable in two
installments, with an assumption of indebtedness
with the First Insular Bank of Cebu in the sum of
P12,000.00, which was paid and acknowledged by
the vendors (Dignos spouses) in the deed of sale
executed in favor of Jabil, and the next installment in
the sum of P4,000.00 to be paid on or before
September 15, 1965.
2) On November 25, 1965, the Dignos spouses sold the
same land in favor of Luciano Cabigas and Jovita L.
De Cabigas, who were then U.S. citizens, for the
price of P35,000.00. A deed of absolute sale was
executed by the Dignos spouses in favor of the
Cabigas spouses, and which was registered in the
Office of the Register of Deeds pursuant to the
provisions of Act No. 3344.
3) As the Dignos spouses refused to accept from Jabil
the balance of the purchase price of the land, and as
Jabil discovered the second sale made by Dignos
spouses to the Cabigas spouses, Jabil brought the
present suit.
4) The lower court, CFI Cebu, declared the deed of sale
executed on November 25, 1965 by defendant Isabela
L. de Dignos in favor of defendant Luciano Cabigas,
a citizen of the United States of America, null and
void ab initio, and the deed of sale executed by
defendants Silvestre T. Dignos and Isabela
Lumungsod de Dignos not rescinded.
The plaintiff Atilano G. Jabil is ordered to reimburse the
defendants Luciano Cabigas and Jovita L. de Cabigas, through
their attorney-in-fact, Panfilo Jabalde, reasonable amount
corresponding to the expenses or costs of the hollow block
fence, so far constructed.
It is further ordered that defendants-spouses Silvestre T.
Dignos and Isabela Lumungsod de Dignos should return to
defendants-spouses Luciano Cabigas and Jovita L. de Cabigas
the sum of P35,000.00, as equity demands that nobody shall
enrich himself at the expense of another.
5) With this decision, Jabil and the Dignos spouses
appealed to CA. The Court of Appeals affirmed the
decision of the lower court except as to the portion
ordering Jabil to pay for the expenses incurred by the
Cabigas spouses for the building of a fence upon the
land in question.

A motion for reconsideration of said decision was filed by the


defendants- appellants (petitioners) Dignos spouses, but on
December 16, 1981, a resolution was issued by the Court of
Appeals denying the motion for lack of merit. Hence, this
petition.
ISSUE:
1) Whether or not subject contract is a deed of absolute
sale and not a contract to sell?
2) Whether or not there was a valid rescission thereof?
HELD:
1) YES, the contract in question is a Deed of Sale, with
the following conditions:
a. That Atilano G. Jabil is to pay the amount of
P12,000.00 Phil. Philippine Currency as advance
payment;
b. That Atilano G. Jabil is to assume the balance of
P12,000.00, Loan from the First Insular Bank of
Cebu;
c. That Atilano G. Jabil is to pay the said spouses the
balance of P4,000.00 on or before September
15,1965;
d. That the said spouses agrees to defend the said
Atilano G. Jabil from other claims on the said
property;
e. That the spouses agrees to sign a final deed of
absolute sale in favor of Atilano G. Jabil over the
above-mentioned property upon the payment of the
balance of Four Thousand Pesos.
*Thus, it has been held that a deed of sale is absolute in
nature although denominated as a "Deed of Conditional
Sale" where nowhere in the contract in question is a proviso
or stipulation to the effect that title to the property sold is
reserved in the vendor until full payment of the purchase price,
nor is there a stipulation giving the vendor the right to
unilaterally rescind the contract the moment the vendee fails to
pay within a fixed period. (Taguba v. Vda. de Leon)
2) NO, there was no valid rescission of the contract. It has
been ruled, however, that "where time is not of the essence
of the agreement, a slight delay on the part of one party in
the performance of his obligation is not a sufficient ground
for the rescission of the agreement" (Taguba v. Vda. de
Leon, supra). Considering that private respondent has only a
balance of P4,000.00 and was delayed in payment only for one
month, equity and justice mandate as in the aforecited case
that Jabil be given an additional period within which to
complete payment of the purchase price.
2) ARTATES vs. URBI
LINO ARTATES AND MANUELA POJAS VS. DANIEL
URBI, CRISANTO SOLIVEN, ASSISTED BY HIS
GUARDIAN 'AD LITEM,' MARCELA B. SOLIVEN,
REMEGIO BUTACAN AND NEMESIO OATE, IN
THEIR PRIVATE CAPACITIES AND/OR AS EX-OFICIO
PROVINCIAL SHERIFF AND DEPUTY SHERIFF OF
CAGAYAN, RESPECTIVELY, AND BIENVENIDO

CACATIAN, AS DEPUTY REGISTER OF DEEDS OF


CAGAYAN
G.R. No. L-29421
January 30, 1971
Subject: Appeal from the decision of CFI of Cagayan
involving the sale of a homestead to satisfy a civil judgment
against the grantee (plaintiff)
*dates are material
FACTS:
Plaintiff sought annulment of the execution of a
homestead issued to them by the proper land authorities on
September 23, 1952. The public sale was conducted by the
Provincial Sheriff of Cagayan on June 2, 1962 to satisfy a
judgment against Lino Artates in the amount of P1,476.35 and
awarded against Daniel Urbi for physical injuries inflicted by
the former against the latter on October 21, 1955. In the
execution sale, the property was sold to the judgment creditor
(Daniel Urbi), the only bidder.
In their complaint, plaintiff sought the public sale of
the land to be declared null and void. They contend that: 1)
The sale of the homestead to satisfy an indebtedness of Lino
Artates that accrued on October 21, 1955, violated the
provision of the Public Land law exempting said property
from execution for any debt contracted within five years from
the date of the issuance of the patent; 2) Defendant Urbi, with
the intention of defrauding the plaintiffs, executed on June 26,
1961 a deed for the sale of the same parcel of land to
defendant Crisanto Soliven, a minor and that as a result of the
aforementioned transactions, defendants Urbi and Soliven
entered into the possession of the land and deprived plaintiffs
of the owners' share in the rice crops harvested during the
agricultural year 1961-1962.
The CFI upheld the regularity and validity of the
execution sale. On the other hand, it held that the sale of the
lands by Urbi to minor Soliven was simulated. The court
ordered Urbi to reconvey the property to the plaintiffs upon
the latters payment of P1,476.35(yung damages sa physical
injuries) plus plus the sheriffs fee and interests. Hence, this
appeal.
ISSUE: Whether or not the public execution sale of the
homestead is valid
HELD:
No. Section 118 of the Public Land law (Commonwealth Act
141) provides as follows:
Except in favor of the Government or any of its branches,
units, or institution, or legally constituted banking
corporations, lands acquired under free patent or
homestead provisions shall not be subject to encumbrance
or alienation from the date of the approval of the
application and for a term of five years from and after the
date of issuance of the patent or grant, nor shall they
become liable to the satisfaction of any debt contracted
prior to the expiration of said period, but the improvements
or crops on the land may be mortgaged or pledged to qualified
persons, associations or corporations.

As thus prescribed by law, for a period of five years


from the date of the government grant, lands acquired by free
or homestead patent shall not only be incapable of being
encumbered or alienated except in favor of the government
itself or any of its institutions or of duly constituted banking
corporations, but also, they shall not be liable to the
satisfaction of any debt contracted within the said period,
whether or not the indebtedness shall mature during or after
the prohibited time. This provision against the alienation or
encumbrance of public lands granted within five years from
the issuance of the patent, it has been held, is mandatory; a
sale made in violation thereof is null and void 6 and produces
no effect whatsoever.
In the case at bar, the homestead patent covering the
land in question was issued to appellants on September 23,
1952, and it was sold at public auction to satisfy the civil
liability of appellant Lino Artates to Daniel Urbi, adjudged on
March 14, 1956. There can be no doubt that the award of
damages to Urbi created for Artates a civil obligation, an
indebtedness, that commenced from the date such obligation
was decreed on March 14, 1956. Consequently, it is evident
that it cannot be enforced against, or satisfied out of, the sale
of the homestead lot acquired by appellants less than 5 years
before the obligation accrued.
Doubts have been expressed as to whether the words
"debt contracted prior to the expiration of said period" (of 5
years from and after the grant) would include the civil liability
arising from a crime committed by the homesteader. While
there is no direct Philippine precedent on this point, there are
various reasons why the non-liability of the homestead grant
should be extended to extra-contractual obligations. First and
foremost, whether it be viewed as an exemption or as a
condition attached to the grant to encourage people to settle
and cultivate public land, the immunity in question is in
consonance with the definite public policy underlying these
grants, which is to "preserve and keep in the family of the
homesteader that portion of public land which the State has
given to him" so he may have a place to live with his family
and become a happy citizen and a useful member of society,
10 and the exemption should not be given restrictive
application.
Hence, the execution sale in this case being null and
void, the possession of the land should be returned to the
owners, the herein appellants but Lino Artates shall continue
to be under obligation to satisfy the judgment debt to Daniel
Urbi in the sum of P1,476.35, with legal interest thereon.
3) QUIROGA vs. PARSONS HARDWARE
4) CONCRETE AGGREGATES vs. CTA
CONCRETE
AGGREGATES
vs.
CA
COMMISSIONER OF INTERNAL REVENUE

and

Petitioner (Concrete Aggregates, Inc.) domestic


corporation with business address at Longos, Quezon City and
has aggregate plant in Montalban, Rizal which processes rock
aggregates mined by it from private lands and is engaged in

the production of ready-mixed concrete and plant-mixed hot


asphalt.
FACTS: Sometime in 1968, the agents of respondent
commissioner conducted an investigation of petitioner's tax
liabilities. As a consequence thereof, in a letter dated
December 14, 1970 said respondent assessed and demanded
payment from petitioner of the amount of P244,002.76 as sales
and ad valorem (tax based on the value of real estate or
personal property) taxes for the first semester of 1968,
inclusive of surcharges. Petitioner disputed the said
assessment in its letter dated February 2, 1971 without,
however, contesting the portion pertaining to the ad valorem
tax. Instead of paying, petitioner appealed to respondent court.
The respondent court handed down judgment adverse to
petitioner where upon he came to the SC on a petition for
review. SC denied petition for review and the motion for
reconsideration. SC granted the petitioners second motion for
reconsideration.
ISSUE: Whether or not the petitioner is a contractor subject to
the 3% contractor's tax under Section 191 of the 1968 National
Internal Revenue Code or a manufacturer subject to the 7%
sales tax under Section 186 of the same Code.
Petitioners contention: Petitioner disclaims liability on the
ground that it is a contractor within the meaning of Section
191 of the 1968 Tax Code, the pertinent portion of which
reads:
Sec. 191. Percentage tax on road, building, irrigation,
artesian well, waterworks, and other construction work
contractors, proprietors or operators of dockyards, and
others. Road, building, irrigation, artesian well,
waterworks, and other construction work contractors; . . . and
other independent contractors, . . . shall pay a. tax equivalent
to three per centum of their gross receipts.
Petitioner contends that its business falls under "other
construction work contractors" or "other independent
contractors" and, as such, it was a holder of a license under
Republic Act No. 4566, otherwise known as the "Contractors
Licensing Law" and was classified thereunder as a "general
engineering contractor" and "specialty asphalt and concrete
contractor. It advances the theory that it produced asphalt and
concrete mix only upon previous orders, without which it
would not do so considering the highly perishable nature of
the product.
HELD: Court held that the petitioner is a manufacturer
subject to the 7% sales tax under Section 186 of the National
Internal Revenue Code.
The word "contractor" has come to be used with special
reference to a person who, in the pursuit of the independent
business, undertakes to do a specific job or piece of work for
other persons, using his own means and methods without
submitting himself to control as to the petty details.
Percentage tax imposed in Section 191 is generally a tax on
the sale of services or labor.
On the other hand, 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 or uses to which it could not have been put
in its original condition for the purpose of their sale or
distribution to others and not for his own use or consumption.
Petitioner relies heavily on the case of The Commissioner of
Internal Revenue vs. Engineering Equipment and Supply Co.,
et al. 18 and on the basis thereof posits that it has passed the
test of a contractor under Article 1467 of the Civil Code which
provides:
Art. 1467. A contract for the delivery at a certain price of an
article which the vendor in the ordinary course of his business
manufactures or procures for the general market, whether the
same is on hand at the time or not, is a contract of sale but if
the goods are to be manufactured specially for the customer
and upon his special order, and not for the general market, it is
a contract for a piece of work.
According to SC, contract to make is a contract of sale if the
article is already substantially in existence at the time of the
order and merely requires some alteration, modification or
adaptation to the buyer's wishes or purposes.
The petitioner argues that would produce asphalt or concrete
mix only upon orders only. But according to the SC, the
reason that prevents the petitioner from mass production is the
nature of asphalt and concrete mix which is highly perishable.
5) COMMISSIONER OF INTERNAL REVENUE
vs. CA
COMM OR INT. REVENUE v CA (G.R. No. 115349 April
18, 1997)
PARTIES:
COMMISSIONER OF INTERNAL REVENUE
petitioner
THE COURT OF APPEALS, THE COURT OF TAX
APPEALS and ATENEO DE MANILA UNIVERSITY
respondents
(AdMU is a non-stock, non-profit educational institution with
auxiliary units and branches all over the Philippines. One such
auxiliary unit is the Institute of Philippine Culture (IPC),
which has no legal personality separate and distinct from that
of private respondent. The IPC is a Philippine unit engaged in
social science studies of Philippine society and culture.
Occasionally, it accepts sponsorships for its research activities
from international organizations, private foundations and
government agencies.)
PONENTE: PANGANIBAN, J.:
FACTS:
July 8, 1983 AdMU (private respondent) received from
Commissioner of Internal Revenue (petitioner) a demand letter
dated June 3, 1983, assessing private respondent the sum of
P174,043.97 for alleged deficiency contractor's tax, and an
assessment dated June 27, 1983 in the sum of P1,141,837 for
alleged deficiency income tax, both for the fiscal year ended
March 31, 1978. Denying said tax liabilities, private
respondent sent petitioner a letter-protest and subsequently
filed with the latter a memorandum contesting the validity of
the assessments.

March 17, 1988 Petitioner rendered a letter-decision


cancelling the assessment for deficiency income tax but
modifying the assessment for deficiency contractor's tax by
increasing due to P193,475.55. Unsatisfied, private respondent
requested for a reconsideration or reinvestigation of the
modified assessment. At the same time, it filed in the
respondent court a petition for review of the said letterdecision of the petitioner. While the petition was pending
before the respondent court (Court of Appeals), petitioner
issued a final decision dated August 3, 1988 reducing the
assessment for deficiency contractor's tax from P193,475.55 to
P46,516.41, exclusive of surcharge and interest.
July 12, 1993 Respondent court rendered the decision of
setting aside respondent's decision and cancelling the
deficiency contractor's tax assessment in the amount of
P46,516.41 exclusive of surcharge and interest for the fiscal
year ended March 31, 1978.
ISSUE:
Whether or not Ateneo de Manila University, through its
auxiliary unit or branch the Institute of Philippine Culture
performs the work of an independent contractor and, thus,
subject to the three percent contractor's tax levied by then
Section 205 of the National Internal Revenue Code?
Sec. 205. Contractor, proprietors or operators of dockyards,
and others. A contractor's tax of threeper centum of the
gross receipts is hereby imposed on the following:
xxx xxx xxx
(16) Business agents and other independent contractors except
persons, associations and corporations under contract for
embroidery and apparel for export, as well as their agents and
contractors and except gross receipts of or from a pioneer
industry registered with the Board of Investments under
Republic Act No. 5186:
xxx xxx xxx
The term "independent contractors" include persons (juridical
or natural) not enumerated above (but not including
individuals subject to the occupation tax under Section 12 of
the Local Tax Code) whose activity consists essentially of the
sale of all kinds of services for a fee regardless of whether or
not the performance of the service calls for the exercise or use
of the physical or mental faculties of such contractors or their
employees.
PETITIONERS CONTENTION:
- Respondent court erred in holding that private
respondent is not an "independent contractor" within
the purview of Section 205 of the Tax Code. To
petitioner, the term "independent contractor", as
defined by the Code, encompasses all kinds of
services rendered for a fee and that the only
exceptions are the following:
a. Persons, association and corporations under
contract for embroidery and apparel for export
and gross receipts of or from pioneer industry
registered with the Board of Investment under
R.A. No. 5186;
b. Individuals occupation tax under Section 12 of
the Local Tax Code (under the old Section 182
[b] of the Tax Code); and
c. Regional or area headquarters established in the
Philippines by multinational corporations,

including their alien executives, and which


headquarters do not earn or derive income from
the Philippines and which act as supervisory,
communication and coordinating centers for their
affiliates, subsidiaries or branches in the Asia
Pacific Region (Section 205 of the Tax Code).
-

Since private respondent falls under the definition of


an "independent contractor" and is not among the
aforementioned exceptions, private respondent is
therefore subject to the 3% contractor's tax imposed
under the same Code.

RULING:
Petitioner erred in applying the principles of tax exemption
without first applying the well-settled doctrine of strict
interpretation in the imposition of taxes. The Commissioner
should have determined first if private respondent was covered
by Section 205, applying the rule of strict interpretation of
laws imposing taxes and other burdens on the populace, before
asking Ateneo to prove its exemption therefrom (to fall under
its coverage, Section 205 of the National Internal Revenue
Code requires that the independent contractor be engaged in
the business of selling its services). The Court takes this
occasion to reiterate the hornbook doctrine in the
interpretation of tax laws that "(a) statute will not be construed
as imposing a tax unless it does so clearly, expressly, and
unambiguously . . . (A) tax cannot be imposed without clear
and express words for that purpose. Accordingly, the general
rule of requiring adherence to the letter in construing statutes
applies with peculiar strictness to tax laws and the provisions
of
a
taxing
act
are not
to
be extended
by
implication." Parenthetically, in answering the question of who
is subject to tax statutes, it is basic that "in case of doubt, such
statutes are to be construed most strongly against the
government and in favor of the subjects or citizens because
burdens are not to be imposed nor presumed to be imposed
beyond what statutes expressly and clearly import."
The Court find no evidence that Ateneo's Institute of
Philippine Culture ever sold its services for a fee to anyone or
was ever engaged in a business apart from and independently
of the academic purposes of the university. The records do not
show that Ateneo's IPC in fact contracted to sell its research
services for a fee. Moreover, the Court of Tax Appeals
accurately and correctly declared that the "funds received by
the Ateneo de Manila University are technically not a fee.
They may however fall as gifts or donations which are taxexempt" as shown by private respondent's compliance with the
requirement of Section 123 of the National Internal Revenue
Code providing for the exemption of such gifts to an
educational institution.
Funds received by Ateneo's Institute of Philippine Culture are
not given in the concept of a fee or price in exchange for the
performance of a service or delivery of an object but rather,
the amounts are in the nature of an endowment or donation
given by IPC's benefactors solely for the purpose of
sponsoring or funding the research with no strings attached.
Such sponsorships are subject to IPC's terms and conditions.
No proprietary or commercial research is done, and IPC
retains the ownership of the results of the research, including
the absolute right to publish the same. The copyrights over the
results of the research are owned by Ateneo and, consequently,

no portion thereof may be reproduced without its


permission. The amounts given to IPC, therefore, may not be
deemed, it bears stressing as fees or gross receipts that can be
subjected to the three percent contractor's tax.
Questioned transactions of Ateneo's Institute of Philippine
Culture cannot be deemed either as a contract of sale or a
contract of a piece of work. "By the contract of sale, one of the
contracting parties obligates himself to transfer the ownership
of and to deliver a determinate thing, and the other to pay
therefor a price certain in money or its equivalent." By its very
nature, a contract of sale requires a transfer of ownership.
Thus, Article 1458 of the Civil Code "expressly makes the
obligation to transfer ownership as an essential element of the
contract of sale, following modern codes (German and Swiss).
Transfer of title or an agreement to transfer it for a price paid
or promised to be paid is the essence of sale." In the case of a
contract for a piece of work, "the contractor binds himself to
execute a piece of work for the employer, in consideration of a
certain price or compensation. . . . If the contractor agrees to
produce the work from materials furnished by him, he shall
deliver the thing produced to the employer and transfer
dominion over the thing, . . ." Ineludably, whether the contract
be one of sale or one for a piece of work, a transfer of
ownership is involved and a party necessarily walks away with
an object. In the case at bench, it is clear from the evidence on
record that there was no sale either of objects or services
because there was no transfer of ownership over the research
data obtained or the results of research projects undertaken by
the Institute of Philippine Culture.
Furthermore, it is clear that the research activity of the
Institute of Philippine Culture is done in pursuance of
maintaining Ateneo's university status and not in the course of
an independent business of selling such research with profit in
mind.
6) TOYOTA SHAW, INC. vs. CA
*G.R. No. L-116650 May 23, 1995
TOYOTA
SHAW,
INC., petitioner,
vs.
COURT OF APPEALS and LUNA L. SOSA, respondents.
DAVIDE, JR., J.:
FACTS:
1) Sometime in June of 1989, Luna L. Sosa wanted to
purchase a Toyota Lite Ace. It was then a seller's
market and Sosa had difficulty finding a dealer with
an available unit for sale. But upon contacting Toyota
Shaw, Inc., he was told that there was an available
unit. So on 14 June 1989, Sosa and his son, Gilbert,
went to the Toyota office at Shaw Boulevard, Pasig,
Metro Manila. There they met Popong Bernardo, a
sales representative of Toyota.
2) Sosa emphasized to Bernardo that he needed the Lite
Ace not later than 17 June 1989. Bernardo assured
Sosa that a unit would be ready for pick up at 10:00
a.m. on 17 June 1989. Bernardo then signed the
"Agreements Between Mr. Sosa & Popong Bernardo
of Toyota Shaw, Inc." It was also agreed upon by the

parties that the balance of the purchase price would


be paid by credit financing through B.A. Finance, and
for this Gilbert, on behalf of his father, signed the
documents of Toyota and B.A. Finance pertaining to
the application for financing.
AGREEMENTS BETWEEN MR. SOSA & POPONG
BERNARDO OF TOYOTA SHAW, INC.
1. all necessary documents will be submitted to TOYOTA
SHAW, INC. (POPONG BERNARDO) a week after, upon
arrival of Mr. Sosa from the Province (Marinduque) where the
unit will be used on the 19th of June.
2. the downpayment of P100,000.00 will be paid by Mr. Sosa
on June 15, 1989.
3. the TOYOTA SHAW, INC. LITE ACE yellow, will be pickup [sic] and released by TOYOTA SHAW, INC. on the 17th of
June at 10 a.m.
Very truly yours,
(Sgd.) POPONG BERNARDO.
3) On 15 June 1989, Sosa and Gilbert went to Toyota to
deliver the downpayment of P100,000.00. They met
Bernardo who then accomplished a printed Vehicle
Sales Proposal (VSP) No. 928, on which Gilbert
signed under the subheading CONFORME.
4) On 17 June 1989, Bernardo informed Sosa that the
vehicle cannot be delivered because nalusot ang unit
ng ibang malakas. Toyota however contends that the
Lite Ace was not delivered to Sosa because of the
disapproval by B.A. Finance of the credit financing
application of Sosa. It further alleged that a particular
unit had already been reserved and earmarked for
Sosa but could not be released due to the uncertainty
of payment of the balance of the purchase price.
Toyota then gave Sosa the option to purchase the unit
by paying the full purchase price in cash but Sosa
refused.
5) Sosa sent two letters to Toyota demanding the refund
of the P100,000 down payment plus interest and
damages. In its answer, Toyota alleged that no sale
was entered into between it and Sosa.
ISSUE:
1) Whether or not the standard VSP or VEHICLE
SLAES PROPOSAL was the true and documented
understanding of the parties which would have led to
the ultimate contract of sale?
HELD:
1) NO, VSP is not a contract of sale. Neither logic nor
recourse to one's imagination can lead to the
conclusion that VSP is a perfected contract of sale.
Art. 1458. By the contract of sale one of the contracting
parties obligates himself to transfer the ownership of and to
deliver a determinate thing, and the other to pay therefor a
price certain in money or its equivalent.

A contract of sale may be absolute or conditional.


Art. 1475. The contract of sale is perfected at the moment
there is a meeting of minds upon the thing which is the object
of the contract and upon the price.
From that moment, the parties may reciprocally demand
performance, subject to the provisions of the law governing
the form of contracts.
*No obligation on the part of Toyota to transfer ownership of a
determinate thing to Sosa and no correlative obligation on the
part of the latter to pay therefor a price certain appears therein.
The provision on the downpayment of P100,000.00 made no
specific reference to a sale of a vehicle. If it was intended for a
contract of sale, it could only refer to a sale on installment
basis, as the VSP executed the following day confirmed. But
nothing was mentioned about the full purchase price and the
manner the installments were to be paid.
*Moreover, VSP shows the absence of a meeting of minds
between Toyota and Sosa. For one thing, Sosa did not even
sign it. For another, Sosa was well aware from its title, written
in bold letters, viz.,
AGREEMENTS BETWEEN MR. SOSA & POPONG
BERNARDO OF TOYOTA SHAW, INC.
that he was not dealing with Toyota but with Popong Bernardo
and that the latter did not misrepresent that he had the
authority to sell any Toyota vehicle. He knew that Bernardo
was only a sales representative of Toyota and hence a mere
agent of the latter. It was incumbent upon Sosa to act with
ordinary prudence and reasonable diligence to know the extent
of Bernardo's authority as an agent in respect of contracts to
sell Toyota's vehicles. A person dealing with an agent is put
upon inquiry and must discover upon his peril the authority of
the agent.
*Accordingly, in a sale on installment basis which is financed
by a financing company, three parties are thus involved: the
buyer who executes a note or notes for the unpaid balance of
the price of the thing purchased on installment, the seller who
assigns the notes or discounts them with a financing company,
and the financing company which is subrogated in the place
of the seller, as the creditor of the installment buyer. Since
B.A. Finance did not approve Sosa's application, there was
then no meeting of minds on the sale on installment basis.
7) LIMKETKAI SONS MILLING, INC. vs. CA
LIMKETKAI SONS MILLING, INC. vs. COURT OF
APPEALS, BANK OF THE PHILIPPINE ISLANDS and
NATIONAL BOOK STORE, respondents.
G.R. No. 118509 December 1, 1995
FACTS:
Philippine Remnants Co., Inc. constituted BPI as its
trustee to manage, administer, and sell its real estate property.
One such piece of property placed under trust was the disputed
lot, a 33,056-square meter lot at Barrio Bagong Ilog, Pasig,
Metro Manila. Pedro Revilla, Jr., a licensed real estate broker

was given formal authority by BPI to sell a lot for P1,000.00


per square meter. Broker Revilla contacted Alfonso Lim of
Limketkai Sons Milling, Inc. who agreed to buy the land. On
July 9, 1988, Revilla informed BPI that he had procured a
buyer. On July 11, 1988, petitioner's officials, Alfonso Lim
and Albino Limketkai, went to BPI to confirm the sale. VicePresident Merlin Albano and Asst. Vice-President Aromin
entertained them. The parties agreed that the lot would be sold
at P1,000.00 per square meter to be paid in cash. The authority
to sell was on a first come, first served and non-exclusive
basis; there is no dispute over petitioner's being the first comer
and the buyer to be first served. Alfonso Lim then asked if it
was possible to pay on terms. The bank officials stated that
there was no harm in trying to ask for payment on terms
because in previous transactions, the same had been allowed.
It was the understanding, however, that should the term
payment be disapproved, then the price shall be paid in cash.
Two or three days later, petitioner learned that its offer to pay
on terms had been frozen. Alfonso Lim went to BPI on July
18, 1988 and tendered the full payment of P33,056,000.00 to
Albano. The payment was refused because Albano stated that
the authority to sell that particular piece of property in Pasig
had been withdrawn from his unit. The same check was
tendered to BPI Vice-President Nelson Bona who also refused
to receive payment. An action for specific performance with
damages was filed by petitioner against BPI. In the course of
the trial, BPI informed the trial court that it had sold the
property under litigation to National Bookstore on July 14,
1989.
The RTC ruled that there was a perfected contract of
sale between petitioner and BPI. It stated that there was
mutual consent between the parties; the subject matter is
definite; and the consideration was determined. It concluded
that all the elements of a consensual contract are attendant. It
ordered the cancellation of a sale effected by BPI to
respondent National Book Store (NBS) while the case was
pending and the nullification of a title issued in favor of said
respondent NBS.
The CA reversed the decision of the RTC. Hence, the
appeal.
ISSUE: Whether or not there was a perfected contract
between petitioner and respondent
HELD:
Yes. The negotiation or preparation stage started with
the authority given by Philippine Remnants to BPI to sell the
lot, followed by (a) the authority given by BPI and confirmed
by Philippine Remnants to broker Revilla to sell the property,
(b) the offer to sell to Limketkai, (c) the inspection of the
property and finally (d) the negotiations with Aromin and
Albano at the BPI offices. The perfection of the contract took
place when Aromin and Albano, acting for BPI, agreed to sell
and Alfonso Lim with Albino Limketkai, acting for petitioner
Limketkai, agreed to buy the disputed lot at P1,000.00 per
square meter. Aside from this there was the earlier agreement
between petitioner and the authorized broker. There was a
concurrence of offer and acceptance, on the object, and on the
cause thereof.

In the case at bench, the allegation of NBS that there


was no concurrence of the offer and acceptance upon the cause
of the contract is belied by the testimony of the very BPI
official with whom the contract was perfected. Aromin and
Albano concluded the sale for BPI. The fact that the deed of
sale still had to be signed and notarized does not mean that no
contract had already been perfected. A sale of land is valid
regardless of the form it may have been entered into. The
requisite form under Article 1458 of the Civil Code is merely
for greater efficacy or convenience and the failure to comply
therewith does not affect the validity and binding effect of the
act between the parties. If the law requires a document or
other special form, as in the sale of real property, the
contracting parties may compel each other to observe that
form, once the contract has been perfected. Their right may be
exercised simultaneously with action upon the contract
(Article 1359, Civil Code).
MOTION FOR RECONSIDERATION (na reverse yung
abovementioned decision)
G.R. No. 118509. March 29, 1996
In this motion for reconsideration, the Court is called
upon to take a second hard look on its December 1, 1995
decision reversing and setting aside respondent Court of
Appeals judgment of August 12, 1994 that dismissed
petitioner Limketkai Sons Milling Inc.s complaint for specific
performance and damages against private respondents Bank of
the Philippine Islands (BPI) and National Book Store (NBS).

Moreover, petitioners case failed to hurdle the strict


requirements of the Statute of Frauds. Article 1403 states:
ART. 1403. - The following contracts are unenforceable,
unless they are ratified:
(1) xxx
xxx
xxx
(2) Those that do not comply with the Statute of Frauds as set
forth in this number. In the following cases an agreement
hereafter made shall be unenforceable by action, unless the
same, or some note or memorandum, thereof, be in writing,
and subscribed by the party charged, or by his agent; evidence,
therefore, of the agreement cannot be received without the
writing, or a secondary evidence of its contents:
xxx xxx xxx
(e) An agreement for the leasing for a long period than one
year, or for the sale of real property or of an interest therein.
In this case there is a patent absence of any deed of
sale categorically conveying the subject property from
respondent BPI to petitioner. Exhibits E, 1G, 2I 3which
petitioner claims as proof of perfected contract of sale between
it and respondent BPI were not subscribed by the party
charged, i.e., BPI, and did not constitute the memoranda or
notes that the law speaks of. To consider them sufficient
compliance with the Statute of Frauds is to betray the avowed
purpose of the law to prevent fraud and perjury in the
enforcement of obligations.
WHEREFORE, in view of the foregoing premises,
the Court hereby GRANTS the motion for reconsideration,
and SETS ASIDE its December 1, 1995 decision.

HELD:
The Court in Toyota Shaw, Inc. v. Court of
Appeals[14] had already ruled that a definite agreement on the
manner of payment of the price is an essential element in the
formation of a binding and enforceable contract of sale.
Petitioners exhibits did not establish any definitive agreement
or meeting of the minds between the concerned parties as
regards the price or term of payment. Instead, what merely
appears therefrom is respondent BPIs repeated rejection of
the petitioners proposal to buy the property at P1,000/ sq.m.
On the subject of consent as an essential element of
contracts, Article 1319 of the Civil Code has this to say:
ART. 1319. Consent is manifested by the meeting of the offer
and the acceptance upon the thing and the cause which are to
constitute the contract. The offer must be certain and the
acceptance absolute. A qualified acceptance constitutes a
counter-offer.
Respondent BPI offered to sell the disputed property
for P1,000/sq. m. However, petitioners acceptance of the offer
is conditioned upon or qualified by its proposed terms[16] to
which respondent BPI must first agree with. The acceptance of
an offer must therefore be unqualified and absolute. In other
words, it must be identical in all respects with that of the offer
so as to produce consent or meeting of the minds. This was
not the case herein considering that petitioners acceptance of
the offer was qualified, which amounts to a rejection of the
original offer.

8) TRADERS ROYAL
LUMBER CO., INC
9) REPUBLIC OF
FLORENDO

BANK

THE

vs.

CUISON

PHILIPPINES

vs.

REPUBLIC OF THE PHILIPPINES, represented by the


Philippine Economic Zone Authority (PEZA), petitioner,
vs. ANTONIO and LILI FLORENDO, respondents.
FACTS: Export Processing Zone Authority (predecessor of
PEZA) initiated an expropriation proceeding of seven parcels
of land located at Barrio Ibo, Lapu-Lapu City, Cebu, owned by
respondents. The purpose of the expropriation was to establish
and develop an export processing zone or a part thereof on
those real properties. RTC rendered the decision ordering the
expropriation of the 7 parcels of land with the aggregate area
of 17,967sq.m. for a total of P26,951,250. RTC ordered the
payment of P1,500 per sq.m. with 12% interest per annum
from the time petitioner took possession on March 12, 1992
1

Exhibit E is the written proposal submitted by Alfonso Y. Lim


in behalf of petitioner Limketkai Sons Milling, Inc., offering to
buy the subject property at P1,000.00/sq. m
2
Exhibit G is petitioners letter dated July 22, 1988 reiterating
its offer to buy the subject property at P1,000/sq. m. but now on
cash basis
3
Letter by petitioner addressed to respondent BPI claiming the
existence of a perfected contract of sale of the subject property
between them

until the full payment thereof. Petitioner filed an appeal in the


CA questioning the correctness of P1,500 per sq. m. as just
compensation. While the appeal was pending, the parties
reached an amicable settlement (compromise agreement):
1. P1,500 per sq. m. valuation fixed by the RTC;
2. waiver by respondents of the payment of the court-awarded
12% interest and
3. presentation by respondents of clean titles of all the subject
properties before payment by petitioner.
The parties executed a deed of absolute sale for one of the
seven parcels of land for the transfer of ownership from
respondent to petitioner. They have agreed that a deed of
absolute sale will be executed for the remaining six parcels of
land as soon as the respondents could settle or clear the
encumbrances or other problems affecting them.
The petitioner prepared a joint motion to dismiss the
expropriation proceedings but the respondent Antonio
Florendo refused to sign because there are still three lots
which had not yet been paid. Respondents proposed that a
partial compromise agreement be executed to cover the four
lots that had already been sold and transferred to PEZA.
Petitioner did not agree because it is contrary to their
compromise agreement.
While they were still trying to decide, CA rendered the
decision affirming the decision of the RTC but modified the
market value from P1,500 to P1,000. No appeal was taken and
the decision attained finality.
On October 28, 2002, respondents filed a motion for execution
of the final judgment of the CA with respect to the three
parcels of land which the RTC granted. Notices of
garnishment were served on the Land Bank of the Philippines,
Lapu-Lapu City (depository bank of the petitioner) for the
amount of P6,108,300.
Petitioner filed a motion to quash the writ of execution and an
urgent ex-parte motion to lift the garnishment but were denied
by RTC. Petitioner filed a petition for certiorari and
prohibition in the CA but was dismissed for lack of merit.
ISSUE: Whether or not the compromise agreement of the
parties constituted res judicata and therefore the June 25, 2002
decision of the CA could not have superseded it.
Petitioners contention: parties' compromise agreement
became res judicata and was implemented upon the payment
of the four lots. Accordingly, respondents are estopped from
repudiating this agreement by insisting on the execution of the
June 25, 2002 CA decision.
Respondents contention: there was no perfected
compromise agreement over the three remaining lots as they
were not taken out of the judgment of the appealed case in the
CA which became final.
HELD: Yes, there was a perfected compromise agreement. A
compromise agreement is a contract whereby the parties make
reciprocal concessions in order to resolve their differences and

thus avoid litigation or to put an end to one already


commenced When it complies with the requisites and
principles of contracts, it becomes a valid agreement which
has the force of law between the parties. It has the effect and
authority of res judicata once entered into, even without
judicial approval. It is a simple contract perfected by mere
agreement. However, it needs judicial approval for its
execution.
The compromise agreement the parties executed was in the
form of a contract of sale. The elements of a valid contract of
sale are: (a) consent or meeting of the minds; (b) determinate
subject matter and (c) price certain in money or its equivalent.
All the elements are present here. The parties agreed on the
sale of a determinate object (the seven lots) and the price
certain (P26,951,250).
The delivery of clean titles was not a condition imposed on the
perfection of the contract of sale but a condition imposed on
petitioner's obligation to pay the purchase price of these lots.
The compromise agreement reached by the parties while the
appeal was pending in the CA is valid. It is valid even if there
is already a final and executor judgment. Parties are bound to
abide by them in good faith and may not be discarded
unilaterally. Petition for certiorari was granted.
10) MANILA
METAL
CORPORATION vs. PNB

CONTAINER

MANILA METAL CONTAINER CORP. V PNB (G.R. No.


166862 December 20, 2006)
- Petition for review on certiorari of the Decision of
the Court of Appeals which affirmed the decision of
RTC Pasig and its Resolution denying the motion for
reconsideration filed by petitioner Manila Metal
Container Corporation (MMCC)
PARTIES:
MANILA METAL CONTAINER CORPORATION
(MMCC) petitioner
REYNALDO C. TOLENTINO intervenor
PHILIPPINE NATIONAL BANK (PNB) respondent
DMCI-PROJECT DEVELOPERS, INC. intervenor
PONENTE: CALLEJO, SR., J.:
FACTS:
Petitioner (MMCC) was the owner of a 8,015 m 2 parcel of
land located in Mandaluyong , Metro Manila. The property
was covered by Transfer Certificate of Title (TCT) No.
332098 of the Registry of Deeds of Rizal. To secure
a P900,000.00 loan it had obtained from respondent PNB,
petitioner executed a real estate mortgage over the lot.
Respondent PNB later granted petitioner a new credit
accommodation of P1,000,000.00; and, on November 16,
1973, petitioner executed an Amendment of Real Estate
Mortgage over its property. On March 31, 1981, petitioner
secured another loan of P653,000.00 from respondent PNB,
payable in quarterly installments of P32,650.00, plus interests
and other charges.
August 5, 1982 - respondent PNB filed a petition for
extrajudicial foreclosure of the real estate mortgage and

sought to have the property sold at public auction


for P911,532.21 (petitioner's outstanding obligation to
respondent PNB as of June 30, 1982, plus interests and
attorney's fees). The property was then sold at public auction
(September 28, 1982) where respondent PNB was declared the
winning bidder for P1,000,000.00. The Certificate of
Sale issued in its favor was registered with the Office of the
Register of Deeds (Rizal), and was annotated at the dorsal
portion of the title on February 17, 1983. Thus, the period to
redeem the property was to expire on February 17, 1984.
Petitioner then requested that it be granted an extension of
time to redeem/repurchase the property but PNB informed
petitioner that the request had been referred to its Pasay City
Branch for appropriate action and recommendation. Also,
petitioner reiterated its request for a one year extension from
February 17, 1984 within which to redeem/repurchase the
property on installment basis. Meanwhile, some PNB Pasay
City Branch personnel informed petitioner that as a matter of
policy, the bank does not accept "partial redemption." Since
petitioner failed to redeem the property, the Register of Deeds
cancelled TCT No. 32098 on June 1, 1984, and issued a new
title in favor of PNB. Petitioner's offers had not yet been acted
upon by respondent PNB.
Meanwhile, the Special Assets Management Department
(SAMD) had prepared a statement of account, and as of June
25, 1984 petitioner's obligation amounted to P1,574,560.47
(Bid Price of P1,056,924.50, interest, advances of insurance
premiums, advances on realty taxes, registration expenses,
miscellaneous expenses and publication cost). When apprised
of the statement of account, petitioner remitted P725,000.00 to
respondent PNB as "deposit to repurchase," and Official
Receipt No. 978191 was issue.
SAMD then recommended to the management of PNB that
petitioner be allowed to repurchase the property
for P1,574,560.00. In a letter (November 14, 1984), PNB
management informed petitioner that it was rejecting the offer
and the recommendation of the SAMD. It was suggested that
petitioner purchase the property for P2,660,000.00, its
minimum market value. PNB gave petitioner until December
15, 1984 to act on the proposal; otherwise, its P725,000.00
deposit would be returned and the property would be sold to
other interested buyers.
Petitioner, however, did not agree to respondent PNB's
proposal. Instead, it wrote another letter (December 12, 1984)
requesting for reconsideration. PNB replied in a letter
(December 28, 1984), wherein it reiterated its proposal that
petitioner purchase the property for P2,660,000.00. PNB again
informed petitioner that it would return the deposit should
petitioner desire to withdraw its offer to purchase the property.
On February 25, 1985, petitioner requested that PNB
reconsider its letter dated December 28, 1984. Petitioner
declared that it had already agreed to the SAMD's offer to
purchase the property forP1,574,560.47, and that was why it
had paid P725,000.00. Petitioner warned PNB that it would
seek judicial recourse should PNB insist on the position.
On June 4, 1985, respondent PNB informed petitioner that the
PNB BoD had accepted petitioner's offer to purchase the
property, but for P1,931,389.53 in cash less the P725,000.00

already deposited with it. Name of petitioner's President,


Pablo Gabriel, on page two of the letter has to affix his
signature. However, he did not conform but merely indicated
that he had received it. Petitioner did not respond, so PNB
requested petitioner in a letter dated June 30, 1988 to submit
an amended offer to repurchase. But petitioner rejected
respondent's proposal in a letter (July 14, 1988). It maintained
that PNB had agreed to sell the property for P1,574,560.47,
and that since its P725,000.00 downpayment had been
accepted, PNB was proscribed from increasing the purchase
price of the property. Petitioner averred that it had a net
balance payable in the amount of P643,452.34. PNB, however,
rejected petitioner's offer to pay the balance (P643,452.34) in a
letter (August 1, 1989).
August 28, 1989 petitioner filed a complaint against PNB for
"Annulment of Mortgage and Mortgage Foreclosure, Delivery
of Title, or Specific Performance with Damages." Petitioner
later filed an amended complaint. In its Answer to the
complaint, PNB averred, as a special and affirmative defense,
that it had acquired ownership over the property after the
period to redeem had elapsed. It claimed that no contract of
sale was perfected between it and petitioner after the period to
redeem the property had expired.
While the case was pending, PNB demanded (September 20,
1989), that petitioner vacate the property within 15 days from
notice, but petitioners refused.
March 18, 1993 petitioner offered to repurchase the property
for P3,500,000.00. The offer was rejected by PNB (letter dated
April 13, 1993). The prevailing MV of the property was
approximately P30,000,000.00, and as a matter of policy, it
could not sell the property for less than its market value. June
21, 1993, petitioner offered to purchase the property
for P4,250,000.00 in cash. The offer was again rejected by
PNB.
May 31, 1994 - the trial court rendered judgment dismissing
the amended complaint and PNB's counterclaim. Ordered
PNB to refund the P725,000.00 deposit petitioner had
made. The trial court ruled that there was no perfected contract
of sale between the parties; hence, petitioner had no cause of
action for specific performance against respondent. The trial
court declared that respondent had rejected petitioner's offer to
repurchase the property. Petitioner, in turn, rejected the terms
and conditions contained in the June 4, 1985 letter of the
SAMD. While petitioner had offered to repurchase the
property per its letter of July 14, 1988, the amount
of P643,422.34 was way below the P1,206,389.53 which
respondent PNB had demanded. It further declared that
the P725,000.00 remitted by petitioner to PNB on June 4,
1985 was a "deposit," and not a downpayment or earnest
money.
June 17, 1993 - petitioner's Board of Directors approved
Resolution No. 3-004, where it waived, assigned and
transferred its rights over the property covered by TCT Nos.
33099 and 37025 in favor of Bayani Gabriel, one of its
Directors. Thereafter, Gabriel executed a Deed of Assignment
over 51% of the ownership and management of the property in
favor of Reynaldo Tolentino, who later moved for leave to

intervene as plaintiff-appellant. On July 14, 1993, the CA


issued a resolution granting the motion, and likewise granted
the motion of Tolentino substituting petitioner MMCC, as
plaintiff-appellant, and his motion to withdraw as intervenor.
CA rendered judgment (May 11, 2000) affirming the decision
of the RTC. It declared that petitioner obviously never agreed
to the selling price proposed by respondent PNB
(P1,931,389.53) since petitioner had kept on insisting that the
selling price should be lowered to P1,574,560.47. Clearly
therefore, there was no meeting of the minds between the
parties as to the price or consideration of the sale. CA
ratiocinated that petitioner's original offer to purchase the
subject property had not been accepted by respondent PNB. In
fact, it made a counter-offer through its June 4, 1985 letter
specifically on the selling price; petitioner did not agree to the
counter-offer; and the negotiations did not prosper. Moreover,
petitioner did not pay the balance of the purchase price within
the sixty-day period set in the June 4, 1985 letter of
respondent PNB. Consequently, there was no perfected
contract of sale, and as such, there was no contract to rescind.
PNB's letter (June 30, 1988) cannot revive the failed
negotiations between the parties. PNB merely asked petitioner
to submit an amended offer to repurchase. While petitioner
reiterated its request for a lower selling price and that the
balance of the repurchase be reduced, however, PNB rejected
the proposal. Petitioner filed a motion for reconsideration,
which the CA likewise denied.
ISSUE:
Whether or not there was no perfected contract of sale
between parties
PETITIONERS CONTENTION:
1. It had accepted respondent's offer made through the
SAMD, to sell the property for P1,574,560.00. Then
deposited P725,000.00 with the SAMD as partial
payment, evidenced by Receipt No. 978194 which
respondent issued.
2. PNB Board of Directors had approved petitioner's
offer to purchase the property. It claims that this was
the suspensive condition, the fulfillment of which
gave rise to the contract. Respondent could no longer
unilaterally withdraw its offer to sell the property
for P1,574,560.47, since the acceptance of the offer
resulted in a perfected contract of sale; it was obliged
to remit to respondent the balance of the original
purchase price of P1,574,560.47, while respondent
was obliged to transfer ownership and deliver the
property to petitioner (Article 1159)
3. Respondent was proscribed from increasing the
interest rate after it had accepted respondent's offer to
sell the property for P1,574,560.00. Consequently,
respondent could no longer validly make a counteroffer of P1,931,789.88 for the purchase of the
property.
4. Although theP725,000.00 was considered as "deposit
for the repurchase of the property" in the receipt
issued by the SAMD, the amount constitutes earnest
money (Article 1482).

5.

6.

Petitioners failure to append its conformity to the


June 4, 1984 letter of respondent and its failure to pay
the balance of the price as fixed by respondent within
the 60-day period from notice was to protest
respondent's breach of its obligation to petitioner. It
did not amount to a rejection of respondent's offer to
sell the property since respondent was merely seeking
to enforce its right to pay the balance
of P1,570,564.47. In any event, respondent had the
option either to accept the balance of the offered
price or to cause the rescission of the contract.
Petitioner's letters dated March 18, 1993 and June 21,
1993 to respondent during the pendency of the case
in the RTC were merely to compromise the pending
lawsuit, they did not constitute separate offers to
repurchase the property.

RESPONDENTS CONTENTION:
1. Parties never graduated from the "negotiation stage"
as they could not agree on the amount of the
repurchase price of the property. All that transpired
was an exchange of proposals and counter-proposals,
nothing more. It insists that definite agreement on the
amount and on the manner of payment of the price
are essential elements in the formation of a binding
and enforceable contract of sale. There was no such
agreement in this case.
2. The concept of "suspensive condition" signifies a
future and uncertain event upon the fulfillment of
which the obligation becomes effective. It clearly
presupposes the existence of a valid and binding
agreement, the effectivity of which is subordinated to
its fulfillment. Since there is no perfected contract in
the first place, there is no basis for the application of
the principles governing "suspensive conditions."
3. Statement of Account prepared by SAMD as of June
25, 1984 cannot be classified as a counter-offer; it is
simply a recital of its total monetary claims against
petitioner. Moreover, the amount stated therein could
not likewise be considered as the counter-offer since
as admitted by petitioner, it was only
recommendation which was subject to approval of
the PNB Board of Directors.
4. Neither can the receipt by the SAMD of P725,000.00
be regarded as evidence of a perfected sale contract.
The amount is merely an acknowledgment of the
receipt of P725,000.00 as deposit to repurchase the
property. The deposit of P725,000.00 was accepted
by respondent on the condition that the purchase
price would still be approved by its Board of
Directors. Pending such approval, it cannot be legally
claimed that respondent is already bound by any
contract of sale with petitioner.
5. The SAMD does not have the power to sell,
encumber, dispose of, or otherwise alienate the
assets, since the power to do so must emanate from
its Board of Directors. The SAMD was not
authorized by respondent's Board to enter into
contracts of sale with third persons involving
corporate assets. There is absolutely nothing on
record that respondent authorized the SAMD, or

6.

made it appear to petitioner that it represented itself


as having such authority.
While respondent's Board of Directors accepted
petitioner's offer to repurchase the property, the
acceptance was qualified, in that it required a higher
sale price and subject to specified terms and
conditions enumerated therein. This qualified
acceptance was in effect a counter-offer, necessitating
petitioner's acceptance in return.

RULING:
A contract is a meeting of minds between two persons
whereby one binds himself, with respect to the other, to give
something or to render some service. Under Article 1318 of
the New Civil Code, contracts are perfected by mere consent
which is manifested by the meeting of the offer and the
acceptance upon the thing and the cause which are to
constitute the contract. Once perfected, they bind other
contracting parties and the obligations arising therefrom have
the form of law between the parties and should be complied
with in good faith. The parties are bound not only to the
fulfillment of what has been expressly stipulated but also to
the consequences which, according to their nature, may be in
keeping with good faith, usage and law.
By the contract of sale, one of the contracting parties obligates
himself to transfer the ownership of and deliver a determinate
thing, and the other to pay therefor a price certain in money or
its equivalent. The absence of any of the essential elements
will negate the existence of a perfected contract of sale
(Boston Bank of the Philippines v. Manalo).
A contract of sale is consensual in nature and is perfected upon
mere meeting of the minds. When there is merely an offer by
one party without acceptance of the other, there is no contract.
When the contract of sale is not perfected, it cannot, as an
independent source of obligation, serve as a binding juridical
relation between the parties.
The stages of a contract of sale are as follows (San Miguel
Properties Philippines, Inc. v. Huang): (1) negotiation,
covering the period from the time the prospective contracting
parties indicate interest in the contract to the time the contract
is perfected; (2) perfection, which takes place upon the
concurrence of the essential elements of the sale which are the
meeting of the minds of the parties as to the object of the
contract and upon the price; and (3) consummation, which
begins when the parties perform their respective undertakings
under the contract of sale, culminating in the extinguishment
thereof.
A negotiation is formally initiated by an offer, which,
however, must be certain. At any time prior to the perfection
of the contract, either negotiating party may stop the
negotiation. At this stage, the offer may be withdrawn; the
withdrawal is effective immediately after its manifestation. To
convert the offer into a contract, the acceptance must be
absolute and must not qualify the terms of the offer; it must be
plain, unequivocal, unconditional and without variance of any
sort from the proposal (Adelfa Properties, Inc. v. Court of
Appeals).

A qualified acceptance or one that involves a new proposal


constitutes a counter-offer and a rejection of the original offer.
A counter-offer is considered in law, a rejection of the original
offer and an attempt to end the negotiation between the parties
on a different basis. Consequently, when something is desired
which is not exactly what is proposed in the offer, such
acceptance is not sufficient to guarantee consent because any
modification or variation from the terms of the offer annuls the
offer. The acceptance must be identical in all respects with that
of the offer so as to produce consent or meeting of the minds.
There was no perfected contract of sale between the parties on
June 4, 1985 on the ff grounds:
1) Petitioner had until February 17, 1984
within which to redeem the property.
However, since it lacked the resources, it
requested
for
more
time
to
redeem/repurchase the property under such
terms and conditions agreed upon by the
parties. The request, which was made
through a letter dated August 25, 1983, was
referred to the respondent's main branch for
appropriate action. When the petitioner was
told that respondent did not allow "partial
redemption," it sent a letter to respondent's
President reiterating its offer to purchase the
property. There was no response to
petitioner's letters dated February 10 and 15,
1984.
2) The statement of account prepared by the
SAMD stating that the net claim of
respondent as of June 25, 1984
wasP1,574,560.47 cannot be considered an
unqualified acceptance to petitioner's offer
to purchase the property. The statement is
but a computation of the amount which
petitioner was obliged to pay in case
respondent would later agree to sell the
property, including interests, advances on
insurance premium, advances on realty
taxes, publication cost, registration expenses
and miscellaneous expenses.
3) There is no evidence that the SAMD was
authorized by respondent's Board of
Directors to accept petitioner's offer and sell
the property for P1,574,560.47. Any
acceptance by the SAMD of petitioner's
offer would not bind respondent (AF Realty
Development, Inc. vs. Diesehuan Freight
Services, Inc.). Thus, a corporation can only
execute its powers and transact its business
through its Board of Directors and through
its officers and agents when authorized by a
board resolution or its by-laws.
4) It appears that the SAMD had prepared a
recommendation for respondent to accept
petitioner's offer to repurchase the property
even beyond the one-year period; it
recommended that petitioner be allowed to

redeem the property and pay P1,574,560.00


as the purchase price. Respondent later
approved the recommendation that the
property be sold to petitioner. But
respondent set the purchase price
at P2,660,000.00. In fine, respondent's
acceptance of petitioner's offer was
qualified, hence can be at most considered
as a counter-offer. If petitioner had accepted
this counter-offer, a perfected contract of
sale would have arisen; as it turns out,
however, petitioner merely sought to have
the counter-offer reconsidered. This request
for reconsideration would later be rejected
by respondent.

Gregorios death in 1971, his wife, Generosa Martinez and


children (Rodolfo, Carmen, Leonardo and Fredisminda) were
adjudged as heirs by representation to Victorianas estate.
Leonardo passed away, leaving his widow, Nelly Chua vda. de
Cari-an and minor Leonell as his heirs. 2 parcels of land,
denominated by Lot 1616 and 1617, formed part of the estate
of Guillermo Nombre and Victoriana Cari-an.

5) It appears that, per its letter to petitioner


dated June 4, 1985, the respondent had
decided to accept the offer to purchase the
property for P1,931,389.53. However, this
amounted to an amendment of respondent's
qualified acceptance, or an amended
counter-offer, because while the respondent
lowered the purchase price, it still declared
that its acceptance was subject to the terms
and conditions:

The vendees of the said sale are Escanlar and


Holgado who were also the lessees of the subject property. In
a deed of agreement executed by both parties confirming and
affirming the contract of sale, they stipulated the following: (a)
That the balance of the purchase price (P225,000) shall be
paid on or before May 1979; (b) Pending complete payment
thereof, the vendees shall not assign, sell, lease or mortgage
the rights, interests and participation thereof; (c) In the event
of nonpayment of the balance of said purchase price, the sum
of P50,000 (down payment) shall be deemed as damages;
Escanlar and Holgado were unable to pay the individual shares
of the Cari-an heirs, amounting to P55,000 each, on the due
date. However, said heirs received at least 12 installment
payments from Escanlar and Holgado after May 1979.
Rodolfo was fully paid by June 1979, Generosa Martinez,
Carmen and Fredisminda were likewise fully compensated for
their individual shares. The minors share was deposited with
the RTC in September 1982. Being former lessees, Escanlar
and Holgado continued in possession of Lots 1616 and Lots
1617. Interestingly, they continued to pay rent based on their
lease contract.

It appears that although respondent requested petitioner to


conform to its amended counter-offer, petitioner refused and
instead requested respondent to reconsider its amended
counter-offer. Petitioner's request was ultimately rejected and
respondent offered to refund its P725,000.00 deposit.
6) The P725,000.00 remitted to respondent is
not "earnest money" which could be
considered as proof of the perfection of a
contract of sale under Article 1482 of the
New Civil Code. This contention is likewise
negated by the stipulation of facts which the
parties entered into in the trial court.
The P725,000.00 was merely a deposit to be applied as part of
the purchase price of the property, in the event that respondent
would approve the recommendation of SAMD for respondent
to accept petitioner's offer to purchase the property
for P1,574,560.47. Unless and until the respondent accepted
the offer on these terms, no perfected contract of sale would
arise. Absent proof of the concurrence of all the essential
elements of a contract of sale, the giving of earnest money
cannot establish the existence of a perfected contract of sale.
Petition is DENIED.
11) HEIRS
OF
SPOUSES
SANDEJAS vs. LINA

REMEDIOS

R.

12) HEIRS OF PEDRO ESCANLAR vs. CA


Facts: Spouses Guillermo Nombre and Victoriana Cari-an
died without issue in 1924 and 1938, respectively. Nombres
heirs include his nephews and grandnephews. Victoriana was
succeeded by her late brothers son, Gregorio Cari-an. After

In 1978, Gregorios heirs executed a deed of sale of


rights, interests and participation in favor of Pedro Escanlar
and Francisco Holgado over the undivided share of
Victoriana (P225,000) to be paid to the heirs, except the share
of the minor Leonell Cari-an which shall be deposited to the
Municipal Treasurer. Such contract of sale will be effective
only upon approval of CFI.

The Cari-ans instituted a case for cancellation of sale


against Escanlar and Holgado alleging the latters failure to
pay the balance of the purchase price on the stipulated date
and that they only received a total of P132,551 in cash and
goods. Thereafter, the Cari-ans, sold their shares in 8 parcels
of land including lots 1616 and 1617 to spouses Chua for
P1.85 million.
Escanlar and Holgado contend that the Cari-ans,
having been paid, had no right to resell the subject lots and
that the spouses Chua were purchasers in bad faith.
The RTC ruled in favor of the heirs of Cari-an citing
that the sale between the Cari-ans and Escanlar is void as it
was not approved by the probate court which was required in
the deed of sale. The CA affirmed the decision and cited that
the questioned deed of sale of rights is a contract to sell
because it shall become effective only upon approval by the
probate court and upon full payment of the purchase price.

Issue: Whether or not the questioned deed of sale of rights is


a contract to sell

Held:
No. In the case at bar, the sale of rights, interests and
participation as to portion pro indiviso of the 2 subject lots
is a contract of sale for the reasons that (1) the sellers did not
reserve unto themselves the ownership of the property until
full payment of the unpaid balance of P225,000.00; (2) there is
no stipulation giving the sellers the right to unilaterally rescind
the contract the moment the buyer fails to pay within the fixed
period.
In contracts to sell, ownership is retained by the seller
and is not to pass until the full payment of the price. Such
payment is a positive suspensive condition, the failure of
which is not a breach of contract but simply an event that
prevented the obligation of the vendor to convey title from
acquiring binding force. To illustrate, although a deed of
conditional sale is denominated as such, absent a proviso that
title to the property sold is reserved in the vendor until full
payment of the purchase price nor a stipulation giving the
vendor the right to unilaterally rescind the contract the
moment the vendee fails to pay within a fixed period, by its
nature, it shall be declared a deed of absolute sale.
In a contract of sale, the non-payment of the price is a
resolutory condition which extinguishes the transaction that,
for a time, existed and discharges the obligations created
thereunder. The remedy of an unpaid seller in a contract of
sale is to seek either specific performance or rescission.
Moreover, as a general rule, the pertinent contractual
stipulation (requiring court approval) should be considered as
the law between the parties. However, the presence of two
factors militate against this conclusion: (1) the evident
intention of the parties appears to be contrary to the mandatory
character of said stipulation. Whoever crafted the document of
conveyance, must have been of the belief that the
controversial stipulation was a legal requirement for the
validity of the sale. But the contemporaneous and subsequent
acts of the parties reveal that the original objective of the
parties was to give effect to the deed of sale even without
court approval.
Receipt and acceptance of the numerous installments
on the balance of the purchase price by the Cari-ans, although
the period to pay the balance of the purchase price expired in
May 1979, and leaving Escanlar and Holgado in possession of
Lots 1616 and 1617 reveal their intention to effect the mutual
transmission of rights and obligations. The Cari-ans did not
seek judicial relief until late 1982 or three years later; (2) the
requisite approval was virtually rendered impossible by the
Cari-ans because they opposed the motion for approval of the
sale filed by Escanlar and Holgado, and sued the latter for the
cancellation of that sale. Having provided the obstacle and the
justification for the stipulated approval not to be granted, the
Cari-ans should not be allowed to cancel their first transaction
with Escanlar and Holgado because of lack of approval by the
probate court, which lack is of their own making.
WHEREFORE, the decision of the CA is reversed
and set aside.

13) CAMACHO vs. CA

14) YU TEK AND CO vs. GONZALES


YU TEK AND CO. vs. BASILIO GONZALES
FACTS: A written contract was executed between Yu Tek and
Co and Gonzales. In the contract, Gonzales acknowledges
receipt of the sum of P3,000 Philippine currency from Messrs.
Yu Tek and Co., and that in consideration of said sum be
obligates himself to deliver to the said Yu Tek and Co., 600
piculs of sugar of the first and second grade, within 3 months,
from January 1, 1912 to March 31, 1912. There is a stipulation
providing for rescission with P1,200 penalty by way of
indemnity for loss and damages in case of failure to deliver.
No sugar had been delivered. Plaintiff prayed for judgment for
the P3,000 and for the P1,200 as agree upon in the contract.
Judgment was rendered for P3,000 only, and from this
judgment both parties appealed.
Defendants contention: alleges that the court erred in refusing
to permit parol evidence showing that the parties intended that
the sugar was to be secured from the crop which the defendant
raised and the failure of his crops relieves him from any
responsibility.
ISSUES: 1) Whether compliance of the obligation to deliver
depends upon the production in defendants plantation
2) Whether there is a perfected sale
3) Whether liquidated damages of P1,200 should be awarded
to the plaintiff
HELD:
1)

2)

No. The contract placed no restriction upon the


defendant in the matter of obtaining the sugar. It may
be true that defendant owned a plantation and
expected to raise the sugar himself, but he did not
limit his obligation to his own crop of sugar. The
parol evidence cannot be considered. The rights of
the parties are determined by the writing itself.
No. Article 1450 defines a perfected sale as:

The sale shall be perfected between vendor and vendee and


shall be binding on both of them, if they have agreed upon the
thing which is the object of the contract and upon the price,
even when neither has been delivered
According to SC, there is a perfected sale with regard to the
thing whenever the article of sale has been physically
segregated from all other articles. In the case at bar, there has
been no appropriation of any particular lot of sugar and the
use of the word sugar remains to be generic. SC concludes that
there has been no perfected sale because the contract in the
case at bar was merely an executory agreement; a promise of
sale and not a sale.

3)

Yes. The contract plainly states that if the defendant


fails to deliver the 600 piculs of sugar within the time
agreed on, the contract will be rescinded and he will
be obliged to return the P3,000 and pay the sum of
P1,200 by way of indemnity for loss and damages.

15) ONG JANG CHUAN vs. WISE AND CO.


ONG JANG CHUAN v WISE & CO. (LTD) (G.R. No. L10907 January 29, 1916)
- An appeal from a judgment of the Court of First
Instance of Manila condemning the defendant to pay
the plaintiff the sum of P1,237.50, together with
interest and costs, as damages for a breach of
contract.
PARTIES:
ONG JANG CHUAN - plaintiff-appellee
WISE & CO. (LTD) - defendant-appellant
PONENTE: TRENT, J.:
*The contract:
Between Messrs. Wise & Co. (Ltd.), Manila, and Mr. Ong
Jang Chuan, Manila.
We Wise & Co. (Ltd.), have sold to Mr. Ong Jang Chuan the
following goods, on this 29th day of July, 1914:
One thousand (1,000) sacks of flour, "Mano" brand, at the net
price of P11.05 (eleven pesos and five centavos) per barrel, the
expenses of transportation from the Binondo Canal to be borne
by the purchaser, 500 sacks to be delivered in September and
500 in October, which we bind ourselves to deliver ... for
which we shall receive a commission of ... per cent of the total
amount. Payment of the goods mentioned shall be made
within 30 days counted from the date of delivery, and interest
at rate of ... per annum on any unpaid amount that may still be
due after the ... days mentioned.
FACTS:
Wise & Co. was not able to fulfil its obligation as stated in the
contract. The reason for the said nonfulfillment, on the part of
Wise & Co., of the contract made with the plaintiff, was that
the "Mano" brand of flour which the defendant bound itself to
deliver during the months of September and October had to
come from Australia, and at the time the contract was executed
Wise & Co. did not have a sufficient stock of the said brand of
flour; and that, as the government of Australia prohibited the
exportation of flour, because of the scarcity of grain in that
country, due to the war that had been declared between Great
Britain, of which Australia is an integral part and the German
Empire, it was impossible for the importers to supply Wise &
Co. with a sufficient quantity of flour to enable the latter, in
turn, to serve its customers.
ISSUE:
Whether or not the contract and the facts found show a
perfected sale
RULING:

In the case under consideration, the undertaking of the


defendant was to sell to the plaintiff 1,000 sacks of "Mano"
flour at P11.05 per barrel, 500 sacks to be delivered in
September and 500 in October. There was no delivery at all
under the contract. If called upon to designate the article sold,
the defendant could only say that it was "Mano" flour. There
was no appropriation of any particular lot of flour. The flour
mentioned in the contract was not "physically segregated from
all other articles.' In fact, the defendant did not have in its
possession in Manila, at the time the contract was entered into,
the 1,000 sacks of flour which it agreed to deliver in
September and October. It is therefore clear that under the rule
laid down in the case of Yu Tek & Co. (that there is a perfected
sale with regard to the "thing" whenever the article of sale has
been physically segregated from all other articles), supra, and
the case cited in that opinion, the sale here in question was not
a perfected one.
Judgment appealed from is affirmed.
Separate Opinions - MORELAND, J., concurring:
The contract was a perfect contract. The essentials of a
contract are found in article 1261 of the Civil Code. It reads:
There is no contract unless the following requisites exists: (1)
The consent of the contracting parties. (2) A definite object
which may be the subject of the contract. (3) The
consideration for the obligation which may be established.
Article 1254 provides that:
A contract exists from the moment one or more persons
consent to bind himself or themselves, with regard to another
or others, to give something or to render some service;" while
article 1258 declares when contracts are perfected. It provides:
Contracts are perfected by mere consent, and from that time
they are binding, not only with regard to the fulfillment of
what has been expressly stipulated, but also with regard to all
the consequences which, according to their character, are in
accordance with good faith, use, and law.
Article 1451 provides this in express terms. It says:
A promise to sell or buy, there being an agreement as to the
thing and price, gives a right to the contracting parties to
mutually demand the fulfillment of the contract.
The statement of the syllabus that "a contract of sale is not
perfected where the parties have agreed upon the price and the
thing sold, unless the latter has been selected and is capable of
being physically designated or distinguished from all others of
the same class," is not a correct statement of what the court
decided or of the law on the subject. There is nowhere in the
Civil Code a requirement that, in order that a contract, of
whatever kind, shall be perfect, that is, binding on the parties,
the subject-matter thereof must be segregated or set apart by
itself, or be "capable of being physically designated and
distinguished from all others of the same class." There is no
such requirement even with respect to a contract of sale. This
contract is perfected in the same manner as all other contracts
by mere consent; and the essentials thereof are those of all
other contracts, consent, subject-matter, and consideration:
a contract of sale is perfected and binding "there having been
an agreement as to the thing and price."

The decision, however, is correct in saying that a sale (not


a contract of sale) is not perfected unless the subject-matter
thereof "has been physically segregated from all other
articles." But the objection is that, while the statement, as a
statement, is correct, it has nothing to do with and bears no
relation to the case before the court or the question raised or to
be decided therein. The action is for a breach of contract of
sale. The legality and validity of the contract are admitted, as
is also the breach thereof. The only question before the court,
indeed, the only question raised by anybody, is whether the
breach has been excused. What has the question whether the
sale was perfected or not to do with this case? The parties are
not concerned with a perfected sale or any other kind of sale,
but with a contract of sale only. Indeed, the action is expressly
brought for a breach of a contract of sale without regard to the
ownership of the property or the rights of the parties therein.
Whether or not the sale was a "perfected" sale is of no
consequence in the resolution of this case. That question can
be material only when it is to be determined who must suffer if
the thing sold is lost, destroyed, or damaged, or who shall be
entitled to the increase thereof or the profit produced by it
before actual delivery. Except for this purpose the question
whether a sale is "perfected" or not is immaterial indeed, it
cannot arise in any way in any case. To determine who shall
run the risk of loss or have the opportunity to claim the profits
produced by the thing sold before actual delivery thereof has
been made, the Civil Code contains various cogent provisions.
The action is one for simple breach of contract. There is no
question here as to plaintiff's or defendant's interest in the
flour itself. The plaintiff claims no interest therein. The
defendant claims none. Both parties admit that defendant
never obtained delivery of the flour; that its delivery was
prevented by the action of the Australian government as a war
measure. Not being able to secure delivery itself the defendant
could not deliver it to plaintiff in pursuance of the contract.
This being so no question arose or could arise as to who must
assume the responsibility for loss of or damage to the flour or
who take the increase of or the profits produced by it.
Therefore, no question arose or could arise as to whether the
sale was perfected or not, as that question presents itself only
when it must be determined at whose risk the property is, or
questions involving an interest in the property.
The contract in the case at bar is one for the sale and delivery
of a thing which in all probability did not exist at the time the
parties contracted. Certainly the parties did not know whether
it existed or not. It seems that the flour had to be manufactured
in Australia before the delivery agreed upon could be made.
The whole trouble was caused by the failure of the
manufacturers in Australia to deliver to the defendant. To this
kind of contract articles 1450, 1452, 1096, and 1182 do not
apply; there can be no perfected sale when the thing sold is not
yet in existence and, consequently, there can be no question
over the loss or injury to the thing or the profits which it
produces before delivery. The flour never had an existence and
the relations between the contracting parties never proceeded
further than the mere words which formed the contract. There
was, therefore, never a moment when the question as to
whether it was a perfected contract could arise. The only
articles applicable or claimed to be applicable were 1445 and
1105, to which I see no reference in the decision.

Article 1450 states:


The sale (not contract) shall be perfected between vendor and
vendee and shall be binding on both of them, if they have
agreed upon the thing which is the object of the contract and
upon the price, even when neither has been delivered.
Article 1452 declares what law shall govern the rights which
accrue by virtue of article 1450. It is as follows:
The injury to or the profit of the thing sold shall, after the
contract has been perfected, be governed by the provisions of
articles 1096 and 1182.
Article 1096 defines the rights of the parties to the sale under
other conditions:
Should the thing to be delivered be a specified one the
creditor, independently of the right granted him by article
1101, may compel the debtor to make the delivery. Should the
thing be undetermined or generic he may ask that the
obligation be fulfilled at the expense of the debtor. Should the
person obligated be in default, or be bound to deliver the same
thing to two or more different persons, he shall be liable
therefor with regard to unforeseen events until the delivery is
made.
Article 1182:
ART. 1182. An obligation, consisting in the delivery of a
specified thing, shall be extinguished when said thing should
be lost or destroyed without fault of the debtor and before he
should be in default.
11) SANDEJAS v. LINA
G.R. No. 141634

February 5, 2001

Heirs of Spouses REMEDIOS R. SANDEJAS


and ELIODORO P. SANDEJAS SR. -- ROBERTO
R. SANDEJAS, ANTONIO R. SANDEJAS,
CRISTINA SANDEJAS MORELAND, BENJAMIN
R. SANDEJAS, REMEDIOS R. SANDEJAS, and
heirs of SIXTO S. SANDEJAS II, RAMON R.
SANDEJAS, TERESITA R. SANDEJAS, and
ELIODORO R. SANDEJAS JR., all represented
by ROBERTO R. SANDEJAS, petitioners,
vs.
ALEX A. LINA, respondent.
PANGANIBAN, J.:
FACTS:
1) On February 17, 1981, Eliodoro Sandejas, Sr.
filed a petition, in the lower court praying that
letters of administration be issued in his favor for
the settlement of the estate of his wife, Remedios
Sandejas, who died on April 17, 1955.
2) On July 1, 1981, Letters of Administration were
issued by the lower court appointing Eliodoro
Sandejas, Sr. as administrator of the estate of the
late Remedios Sandejas. Likewise on the same

date, Eliodoro Sandejas, Sr. took his oath as


administrator.
3) On November 19, 1981, the 4th floor of Manila
City Hall was burned and among the records
burned were the records of Branch XI of the Court
of First Instance of Manila. As a result, he filed a
Motion for Reconstitution of the records of the
case on February 9, 1983. On February 16, 1983,
the lower court in its Order granted the said
motion.
4) On April 19, 1983, an Omnibus Pleading for
motion to intervene and petition-in-intervention
was filed by Movant Alex A. Lina alleging among
others that on June 7, 1982, movant and
administrator Eliodoro P. Sandejas, in his capacity
as seller, bound and obligated himself, his heirs,
administrators, and assigns, to sell forever and
absolutely and in their entirety the following
parcels of land which formed part of the estate of
the late Remedios R. Sandejas.
It showed that there was receipt of money with
promise to sell and to buy with the sum of
P100,000.00
ISSUES:
a) Whether or not Eliodoro P. Sandejas Sr. is
legally obligated to convey title to the property
referred to in the subject document which was
found to be in the nature of a contract to sell
where court approval was not complied with?
b) Whether or not he was guilty of bad faith
despite the conclusion of the CA that he [bore]
the burden of proving that a motion for authority
to sell had been filed in court?
c) Whether or not undivided shares of Eliodoro in
the subject property is (3/5) and the
administrator of the latter should execute deeds
of conveyance within thirty days from receipt of
the balance of the purchase price from the
respondent?
d)Whether or not the respondent's petition-inintervention was converted to a money claim and
whether the [trial court] acting as a probate court
could approve the sale and compel the
petitioners to execute [a] deed of conveyance
even for the share alone of Eliodoro P. Sandejas
Sr.?
HELD:
The Petition is partially meritorious.
Obligation With a Suspensive Condition
The agreement between Eliodoro Sr. and
respondent is subject to a suspensive condition -the procurement of a court approval, not full
payment. There was no reservation of ownership
in the agreement. In accordance with paragraph
1 of the Receipt, petitioners were supposed to
deed the disputed lots over to respondent. This
they could do upon the court's approval, even
before full payment. Hence, their contract was a
conditional sale, rather than a contract to sell as
determined by the CA.

When a contract is subject to a suspensive


condition, its birth or effectivity can take place
only if and when the condition happens or is
fulfilled. Thus, the intestate court's grant of the
Motion for Approval of the sale filed by
respondent resulted in petitioners' obligation to
execute the Deed of Sale of the disputed lots in
his favor. The condition having been satisfied, the
contract was perfected. Henceforth, the parties
were bound to fulfill what they had expressly
agreed upon.
First
Collateral
Issue:
Jurisdiction
of
Settlement Court
In the present case, the Motion for Approval was
meant to settle the decedent's obligation to
respondent; hence, that obligation clearly falls
under the jurisdiction of the settlement court. To
require respondent to file a separate action -- on
whether petitioners should convey the title to
Eliodoro Sr.'s share of the disputed realty -- will
unnecessarily prolong the settlement of the
intestate estates of the deceased spouses.
Second
Collateral
Issue:
Intervenor's
Standing
Petitioners contend that under said Rule 89, only
the executor or administrator is authorized to
apply for the approval of a sale of realty under
administration. Hence, the settlement court
allegedly erred in entertaining and granting
respondent's Motion for Approval.
Section 8, Rule 89 of the Rules of Court, provides:
"SEC. 8. When court may authorize conveyance
of realty which deceased contracted to convey.
Notice. Effect of deed. -- Where the deceased was
in his lifetime under contract, binding in law, to
deed real property, or an interest therein, the
court having jurisdiction of the estate may, on
application for that purpose, authorize the
executor or administrator to convey such
property according to such contract, or with such
modifications as are agreed upon by the parties
and approved by the court; and if the contract is
to convey real property to the executor or
administrator, the clerk of the court shall execute
the deed. x x x."
Third Collateral Issue: Bad Faith
Eliodoro Sr. did not misrepresent these lots to
respondent as his own properties to which he
alone had a title in fee simple. The fact that he
failed to obtain the approval of the conditional
sale did not automatically imply bad faith on his
part. The CA held him in bad faith only for the
purpose of binding him to the conditional sale.
This was unnecessary because his being bound to
it is, as already shown, beyond cavil.
Fourth Collateral Issue: Computation of
Eliodoro's Share

Petitioners aver that the CA's computation of


Eliodoro Sr.'s share in the disputed parcels of land
was erroneous because, as the conjugal partner
of Remedios, he owned one half of these lots plus
a further one tenth of the remaining half, in his
capacity as a one of her legal heirs. Hence,
Eliodoro's share should be 11/20 of the entire
property. Respondent poses no objection to this
computation.
On the other hand, the CA held that, at the very
least, the conditional sale should cover the one
half (1/2) pro indiviso conjugal share of Eliodoro
plus his one tenth (1/10) hereditary share as one
of the ten legal heirs of the decedent, or a total of
three fifths (3/5) of the lots in administration.
Petitioners' correct. The CA computed Eliodoro's
share as an heir based on one tenth of the entire
disputed property. It should be based only on the
remaining half, after deducting the conjugal
share.
**The proper determination of the seller-heir's
shares requires further explanation. Succession
laws and jurisprudence require that when a
marriage is dissolved by the death of the
husband or the wife, the decedent's entire estate
- under the concept of conjugal properties of
gains -- must be divided equally, with one half
going to the surviving spouse and the other half
to the heirs of the deceased. After the settlement
of the debts and obligations, the remaining half of
the estate is then distributed to the legal heirs,
legatees and devices. We assume, however, that
this preliminary determination of the decedent's
estate has already been taken into account by
the parties, since the only issue raised in this
case is whether Eliodoro's share is 11/20 or 3/5 of
the disputed lots.
WHEREFORE, The Petition is hereby PARTIALLY
GRANTED. The appealed Decision and Resolution
are AFFIRMED with the MODIFICATION that
respondent is entitled to only a pro-indiviso share
equivalent to 11/20 of the disputed lots. SO
ORDERED.