SALES FACTS: Petitioner was the owner of a 8,015 square meter parcel of
land located in Mandaluyong (now a City), Metro Manila. The property
Chapter 1
Nature and Form of Contracts
Art. 1458
Art. 1458. By the contract of sale one of the contracting parties obligates
himself to transfer the ownership 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.
I. Nature and Characteristics
A. Definition
Sale is a contract where one party (seller or vendor) obligates himself to
transfer the ownership of and to deliver a determinate thing, while the
other party (buyer or vendee) obligates himself to pay for said thing a
price certain in money or its equivalent.
Note that in harmony with Art. 1164, ownership of the thing sold does
not pass to the buyer until delivery. See Arts. 1475, 1477, 1496.
Essential requisites are consent, object and price. No special form is
required. (Art. 1483)
a. Cases
1. Effect of offer and counter-offer
Manila Metal Container Corporation vs. PNB, G.R. No. 166862, December
20, 2006
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 Philippine National Bank (PNB), petitioner executed a real
estate mortgage over the lot. Respondent PNB later granted petitioner a
new credit accommodation of P1,000,000.00; and, petitioner executed an
Amendment of Real Estate Mortgage over its property. The petitioner was
unable to pay its obligation to the said respondent. In turn, the respondent
filed for a petition for extrajudicial foreclosure of the real estate mortgage
and sought to have the property sold at public auction. The petitioner was
given a period (expiration--Feb. 17, 1984) to redeem the property, but,
failed to do so. It caused the petitioner to ask for a one year extension to
redeem the said property. The respondent referred the matter to Pasay
City Branch for appropriate action and recommendation. Some PNB Pasay
City Branch personnel informed petitioner that as a matter of policy, the
bank does not accept partial redemption. A new title in favor of PNB was
issued for petitioners failure to redeem the property.
Meanwhile, the Special Assets Management Department (SAMD)
had prepared a statement of account, and as of June 25, 1984
petitioners obligation amounted to P1,574,560.47. When apprised
of the statement of account, petitioner remitted P725,000.00 to
respondent PNB as deposit to repurchase,.
Petitioner declared that it had already agreed to the SAMDs offer to
purchase the property for P1,574,560.47, and that was why it had
paid P725,000.00.
Respondent PNB informed petitioner that the PNB Board of Directors
had accepted petitioners offer to purchase the property, but for
P1,931,389.53 in cash less the P725,000.00 already deposited with it.
Both trial court and CA ruled that there was no perfected contract of sale
between the parties; hence, petitioner had no cause of action for specific
performance against respondent. Both declared that respondent had
rejected petitioners offer to repurchase the property.
SALES REVIEWER 1 | P age
 ISSUE: whether or not petitioner and respondent PNB had entered
into a perfected contract for petitioner to repurchase the property from
respondent.
SC RULED that there was NO perfected contract of sale between the
parties.
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.
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.
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.
Stages of a contract of sale:
(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.
1. Effect of document denominated Agreement between Mr. Sosa &
Popong Bernardo of Toyota Shaw, Inc.
Toyota Shaw, Inc. vs. CA, L-11650, May 23, 1995
FACTS: Luna L. Sosa, respondent, wanted to purchase a Toyota Lite Ace.
He transacted business with Popong Bernardo, sales representative of
Toyota. A Vehicle Sales Proposal (VSP) was accomplished and Mr. Sosa
paid a down payment of P100,000. On the scheduled date and time for
the delivery of the car, Toyota refused to release the car because the
financing company, B.A. Finance Corporation, refused to finance the
outstanding balance. Mr. Sosa demanded the return of the down
payment, which Toyota honored, without prejudice to future claim for
damages.
ISSUE: Was this document, executed and signed by the petitioner's sales
representative, a perfected contract of sale, binding upon the petitioner,
breach of which would entitle the private respondent to damages and
attorney's fees?
SC RULED that it is not a contract of sale. No obligation on the part of
Toyota to transfer ownership of a determinate thing to Sosa and no
correlative obligation on the part of the latter to pay therefor a price
certain appears therein.
This Court had already ruled that a definite agreement on the
manner of payment of the price is an essential element in the formation of
a binding and enforceable contract of sale. This is so because the
agreement as to the manner of payment goes into the price such that a
disagreement on the manner of payment is tantamount to a failure to
SALES REVIEWER 2 | P age
 agree on the price. Definiteness as to the price is an essential element of a
binding agreement to sell personal property.
At the most, Exhibit "A" may be considered as part of the initial
phase of the generation or negotiation stage of a contract of sale.
B. Elements
a. Essential Elements (without which there can be no valid of sale)
1. Consent or meeting of the mindsconsent to transfer ownership in
exchange for the price.
2. Determinate subject matter includes generic objects that are least
determinable
*segregated/separated of the same class
3. Price certain in money or its equivalent
b. Natural Elements (those which are inherent in the contract, and which in
the absence of any contrary provision, are deemed to exist in the contract)
1. warranty against eviction (deprivation of the property bought)
2. warranty against hidden defects
c. Accidental Elements (those which may be present or absent in the
stipulation, such as the place or time of payment, or the presence of
conditions)
Effects of Presence, absence, incomplete elements
-when all 3 elements are present - Perfected Contract
-if not present, there is no perfected contract
-if all the elements are present but there is a defect/illegal, the contract is
voidable/void
C. Characteristics
a. Consensualperfected by mere consent.
b. Bilateral (reciprocal)both parties are bound by obligations dependent
upon each other. The power to rescind is implied, neither party incurs delay
if the party does not comply, from the moment one of the parties fulfills his
obligation, the default by the other begins w/out need of prior demand.
c. Onerousvaluable consideration must be given in order to acquire rights.
d. Nominatethe Code refers to it by special designation or name, that is,
the contract of sale.
e. Principalfor the contract of sale to validly exist, there is no necessity for
it to depend upon the existence of another contract.
f. Commutativethe values exchanged are almost equivalent to each other
(general rule). By way of exception, some contracts of sale are aleatory, that
is, one receives may in time be greater or smaller that what he has given, i.e.
sale of genuine sweepstakes ticket.
g. delivery transfers ownership ownership does not pass until delivery.
C. Sale vs. Agency to sell (1466)
Art. 1466. In construing a contract containing provisions characteristic of
both the contract of sale and of the contract of agency to sell, the essential
clauses of the whole instrument shall be considered. (n)
Cases:
1) effect of agreement for exclusive sale of beds where the other party is
entitled to commission, among others
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Quiroga vs. Parsons Hardware co.
Facts:
The defendant was granted by the plaintiff of the exclusive right to sell as an
agent Quiroga beds in the Visayas at the invoice price in Manila. The
agreement was for the defendant to pay for the beds at a discount from 20%
to 25% as commission on the sales. The defendant shall pay the plaintiff
claims that the defendant is his agent while defendant says he was merely
a purchaser.
Issue:
Is this a contract of sale or agency?
Held:
The Supreme Court declared that the contract by and between the plaintiff
and the defendant was one of purchase and sale, and that the obligations the
breach of which is alleged as a cause of action are not imposed upon the
defendant, either by agreement or by law.
In order to classify a contract, due regard must be given to its essential
clauses. In the contract in question, what was essential, as constituting its
cause and subject matter, is that the plaintiff was to furnish the defendant
with the beds which the latter might order, at the price stipulated, and that
the defendant was to pay the price in the manner stipulated. There was the
obligation on the part of the plaintiff to supply the beds, and, on the part of
the defendant, to pay their price. These features exclude the legal
conception of an agency or order to sell whereby the mandatory or agent
received the thing to sell it, and does not pay its price, but delivers to the
principal the price he obtains from the sale of the thing to a third person, and
if he does not succeed in selling it, he returns it.
Sale vs. Lease of service or contract for a piece of work (1467)
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. (n)
Cases:
1) Nature of transactions of company engaged in the design, supply
and installation of certain type of air conditioning system.
Commissioner of Internal Revenue v. Engineering Equipment and Supply
Co.
Facts: Engineering Equipment and Supply Co., a domestic corporation, is
engaged in the design and installation of central type air conditioning system,
pumping plants and steel fabrications. CIR now denounced Engineering for
tax evasion by misdeclaring its imports and failing to pay the correct
percentage taxes due thereon in connivance with its foreign suppliers. The
Commissioner contends that Engineering is a manufacturer and seller of air
conditioning units and parts or accessories thereof and, therefore, it is
subject to the 30% advance sales tax. Engineering is a contractor this subject
only to the 3% tax imposed on contractors.
Contract of Sale v. Contract of Services; Test. The distinction
between a contract of sale and one for work, labor and materials is
tested by the inquiry whether the thing transferred is one not in
existence and which never would have existed but for the order of
the party desiring to acquire it, or a thing which would have existed
but has been the subject of sale to some other persons even if the
order had not been given. If the article ordered by the purchaser is
exactly such as the seller makes and keeps on hand for sale to
anyone, and no change or modification of it is made at purchaser's
request, it is a contract of sale even though it may be entirely made
after, and in consequence of the purchaser's order for it.
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 Engineering is a contractor rather than a manufacturer. Supply of air
conditioning units to Engineer's various customers, whether the said
machineries were in hand or not, was especially made for each
customer and installed in his building upon his special order. The air
conditioning units installed in a central type of air conditioning
system would not have existed but for the order of the party desiring
to acquire it and if it existed without the special order of
Engineering's customer, the said air conditioning units were not
intended for sale to the general public. Moreover, it advertises itself
as a contractor and pays the contractor's tax for design and
construction of central type air conditioning systems, and does not
have ready-made air-conditioning units for sale, but must design and
construct each unit to meet the particular requirements of its
customers, said taxpayer is considered a contractor rather than a
manufacturer for purposes of the Tax Code. Thus, such taxpayer is
not a manufacturer subject to the 30% advance sales tax prescribed
in Section 185 (m) in relation to Section 194 of the Tax Code, but is a
contractor subject to the 3% tax imposed by Section 191 of the same
Code.
A taxpayer is required by law to truly declare his importation in the
import entries and internal revenue declarations before it is
released. Thus, by requiring its foreign supplier to change the
nomenclature of air conditioning parts and accessories, and
misdeclaring its importation so as to make them subject to the lower
rate of 7% percentage tax under Section 186 of the Tax Code,
thereby evading the payment of the 30% tax under Section 185(m)
thereof, said taxpayer is subject to the payment of the 50% fraud
surcharge prescribed by Section 183(a).
c. sales vs. Barter (1468)
Art. 1468. If the consideration of the contract consists partly in money, and
partly in another thing, the transaction shall be characterized by the manifest
intention of the parties. If such intention does not clearly appear, it shall be
considered a barter if the value of the thing given as a part of the
consideration exceeds the amount of the money or its equivalent; otherwise,
it is a sale.
-if the value of the thing is more than the value of the money or its
equivalent, the contract is a barter. If the value of the thing is less than the
value of the money, then the contract is a sale.
d. sale vs. dation in payment
-dation in payment implies that there is an existing obligation whereas
contract of sale, there is no prior obligation.
e. lease of things - in that delivery in this latter contract does not involve a
transfer of ownership
f. donation- in that this latter contract is gratuitous and requires special
formalities
E. Promise to sell: when binding (Art. 1479)
--a bilateral promise to buy and sell requires NO CONSIDERATION
distinct from the selling price
--only the accepted unilateral promise to buy or sell that needs
consideration distinct from the selling price
a. If bilateral
--a bilateral promise to buy or to sell a certain thing for a
price certain gives to the contracting parties personal rights
in that each has the right to demand from the other the
fulfillment of the obligation.
b. If unilateral
--the acceptance of a unilateral promise to sell must be plain, clear and
unconditional. Therefore, if there is qualified acceptance with terms different
from the offer there is no acceptance, that there is no promise to buy and
there is no perfected sale.
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 Cases:
1. Option defined
Eulogio vs. Apeles, G.R. No. 167884, January 20, 2009
Contract of Lease with an Option
An option is a contract by which the owner of the property agrees
with another person that the latter shall have the right to buy the formers
property at a fixed price within a certain time. It is a condition offered or
contract by which the owner stipulates with another that the latter shall
have the right to buy the property at a fixed price within a certain time, or
under, or in compliance with certain terms and conditions; or which gives to
the owner of the property the right to sell or demand a sale.
An option is not of itself a purchase, but merely secures the privilege to buy.
It is not a sale of property but a sale of the right to purchase. It is simply a
contract by which the owner of the property agrees with another person that
he shall have the right to buy his property at a fixed price within a certain
time. He does not sell his land; he does not then agree to sell it; but he does
sell something, i.e., the right or privilege to buy at the election or option of
the other party. Its distinguishing characteristic is that it imposes no binding
obligation on the person holding the option, aside from the consideration for
the offer.
"An accepted unilateral promise" can only have a binding effect if supported
by a consideration, which means that the option can still be withdrawn, even
if accepted, if the same is not supported by any consideration.
ii) Remedy of optionee
-Specific performance.
2. Right of First Refusal
-Right on the part of the owner that if he decides to sell the property in the
future, he would first negotiate its sale to the one he promised.
Ang Yu Asuncion vs. CA
Facts:
On July 29, 1987 a Second Amended Complaint for Specific Performance was
filed by Ann Yu Asuncion and Keh Tiong, et al., against Bobby Cu Unjieng,
Rose Cu Unjieng and Jose Tan before the Regional Trial Court, Branch 31,
Manila in Civil Case No. 87-41058, alleging, among others, that plaintiffs are
tenants or lessees of residential and commercial spaces owned by
defendants described as Nos. 630-638 Ongpin Street, Binondo, Manila; that
they have occupied said spaces since 1935 and have been religiously paying
the rental and complying with all the conditions of the lease contract; that on
several occasions before October 9, 1986, defendants informed plaintiffs that
they are offering to sell the premises and are giving them priority to acquire
the same; that during the negotiations, Bobby Cu Unjieng offered a price of
P6-million while plaintiffs made a counter offer of P5-million; that plaintiffs
thereafter asked the defendants to put their offer in writing to which request
defendants acceded; that in reply to defendant's letter, plaintiffs wrote them
on October 24, 1986 asking that they specify the terms and conditions of the
offer to sell; that when plaintiffs did not receive any reply, they sent another
letter dated January 28, 1987 with the same request; that since defendants
failed to specify the terms and conditions of the offer to sell and because of
information received that defendants were about to sell the property,
plaintiffs were compelled to file the complaint to compel defendants to sell
the property to them.
"After the issues were joined, defendants filed a motion for summary
judgment which was granted by the lower court. The trial court found that
defendants' offer to sell was never accepted by the plaintiffs for the reason
that the parties did not agree upon the terms and conditions of the proposed
sale, hence, there was no contract of sale at all. Nonetheless, the lower court
ruled that should the defendants subsequently offer their property for sale at
a price of P11-million or below, plaintiffs will have the right of first refusal.
SALES REVIEWER 6 | P age
Issue: Note: right of first refusal cannot be deemed a perfected sale because it
merely pertains to a specific property w/out containing an agreement as to
Whether or not there is perfected contract of sale the price.

Held: E. The Contract of Sale may be-

In the law on sales, the so-called "right of first refusal" is an innovative a. Absolute; or
juridical relation. Needless to point out, it cannot be deemed a perfected
contract of sale under Article 1458 of the Civil Code. Neither can the right of Ramos vs. Heruela, G.R. No. 145330, Oct. 14, 2005
first refusal, understood in its normal concept, per sebe brought within the
purview of an option under the second paragraph of Article 1479,
aforequoted, or possibly of an offer under Article 1319 9 of the same Code. Absolute Sale Conditional Sale
An option or an offer would require, among other things, 10 a clear certainty when title to the ownership remains
on both the object and the cause or consideration of the envisioned contract. property passes to the with the vendor and
In a right of first refusal, while the object might be made determinate, the vendee upon delivery of does not pass to the
exercise of the right, however, would be dependent not only on the grantor's the thing sold vendee until full
eventual intention to enter into a binding juridical relation with another but payment of the
also on terms, including the price, that obviously are yet to be later firmed purchase price.
up. Prior thereto, it can at best be so described as merely belonging to a class when there is no The full payment of
of preparatory juridical relations governed not by contracts (since the stipulation in the the purchase price
essential elements to establish the vinculum juris would still be indefinite and contract that title to the partakes of a
inconclusive) but by, among other laws of general application, the pertinent property remains with suspensive condition,
scattered provisions of the Civil Code on human conduct. the seller until full and non-fulfillment of
payment of the the condition
Even on the premise that such right of first refusal has been decreed under a purchase price prevents the
final judgment, like here, its breach cannot justify correspondingly an obligation to sell
issuance of a writ of execution under a judgment that merely recognizes its from arising.
existence, nor would it sanction an action for specific performance without if there is no stipulation
thereby negating the indispensable element of consensuality in the giving the vendor the
perfection of contracts. 11 It is not to say, however, that the right of first right to cancel
refusal would be inconsequential for, such as already intimated above, an unilaterally the contract
unjustified disregard thereof, given, for instance, the circumstances the moment the vendee
expressed in Article 19 12 of the Civil Code, can warrant a recovery for fails to pay within a
damages. fixed period

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Heirs of Mascunana vs. CA, G.R. No. 158646, June 23, 2005 1. An executed contract, or which property (ownership) in the thing is
transferred from seller to buyer, and nonpayment of the price is a
Facts: It is settled that a perfected contract of sale cannot be challenged on negative resolutory condition.
the ground of the non-transfer of ownership of the property sold at that 2. An executory contract- ownership does not pass until some future time
time of the perfection of the contract, since it is consummated upon
delivery of the property to the vendee. It is through tradition or delivery -the fulfillment of some condition, such as full payment of the
that the buyer acquires ownership of the property sold. As provided in purchase price.
Article 1458 of the New Civil Code, when the sale is made through a public
instrument, the execution thereof is equivalent to the delivery of the thing c. Distinctions
which is the object of the contract, unless the contrary appears or can be Executed Contract Executory Contract
inferred. The record of the sale with the Register of Deeds and the issuance Property ownership is No property is conveyed
of the certificate of title in the name of the buyer over the property merely conveyed
bind third parties to the sale. As between the seller and the buyer, the If buyer defaults, seller may If buyer defaults, seller is
transfer of ownership takes effect upon the execution of a public sue for the price only entitled to damages
instrument covering the real property. Long before the petitioners secured Risk of loss is generally borne Risk of loss is generally borne
a Torrens title over the property, the respondents had been in actual by the buyer by the seller
possession of the property and had designated Barte as their overseer.
Transfer of ownership
Although denominated a Deed of Conditional Sale, a sale is still absolute
where the contract is devoid of any proviso that title is reserved or the right Absolute upon delivery
to unilaterally rescind is stipulated, e.g., until or unless the price is paid.
Ownership will then be transferred to the buyer upon actual or constructive Conditional ownership is reserved by the owner.
delivery (e.g. by the execution of a public document) of the property sold.
Where the condition is imposed upon the perfection of the contract itself, d. CasesContract to sell vs. Contract of Sale
the failure of the condition would prevent such perfection. If the condition is
imposed on the obligation of a party which is not fulfilled, the other party
may either waive the condition or refuse to proceed with the sale. (Art.
Contract to Sell Contract of Sale
1545, Civil Code)
The payment in full of the The non-payment of the price
price is a positive suspensive is a RESOLUTORY condition,
A deed of sale is considered absolute in nature where there is neither a
condition. Hence, if the price i.e. the contract of sale may
stipulation in the deed that title to the property sold is reserved in the seller
is not paid, it is as if the by such occurrence put an
until full payment of the price, nor one giving the vendor the right to
obligation of the seller to end to a transaction that
unilaterally resolve the contract the moment the buyer fails to pay within a
deliver and to transfer once upon a time existed
fixed period.
ownership never became
effective and binding.
b. Conditional, which may in turn be
Ownership is retained by the Title over the property
seller, regardless of delivery generally passes to the buyer

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 and is not pass until fill upon delivery
payment of the price
Since the seller retains After delivery has been made,
ownership, despite delivery, the seller has lost ownership
he is enforcing not and cannot recover it unless
rescinding the contract if he the contract is resolved or
seeks to oust the buyer for rescinded
failure to pay.
Contract to sell a bilateral contract whereby the prospective seller, while
expressly reserving the ownership of the subject property despite delivery
thereof to the prospective buyer, binds himself to sell the said property
exclusively to the prospective buyer upon payment of full purchase price.
Contract of Sale- no reservation of ownership where the owner can
unilaterally rescind the contract if one of the party fails to fulfill its duty.
1. Interpretation of document denominated Agreement of Purchase and
Sale
Ong vs. CA, G.R. No. 97347, July6, 1999
It is in the nature of a contract to sell.
In a contract of sale, the title to the property passes to the vendee
upon the delivery of the thing sold; while in a contract to sell, ownership is,
by agreement, reserved in the vendor and is not to pass to the vendee until
full payment of the purchase price. In a contract to sell, the payment of
the purchase price is a positive suspensive condition, the failure of which is
not a breach, casual or serious, but a situation that prevents the obligation
of the vendor to convey title from acquiring an obligatory force.
Spouses Robles, respondents in the case at bar bound themselves
to deliver a deed of absolute sale and clean title covering the two parcels
of land upon full payment by the buyer of the purchase price of
P2,000,000.00. This promise to sell was subject to the fulfillment of the
suspensive condition of full payment of the purchase price by the
petitioner. Petitioner, however, failed to complete payment of the
purchase price. The non-fulfillment of the condition of full payment
rendered the contract to sell ineffective and without force and effect. It
must be stressed that the breach contemplated in Article 1191 of the New
Civil Code is the obligor's failure to comply with an obligation. Failure to
pay, in this instance, is not even a breach but merely an event which
prevents the vendor's obligation to convey title from acquiring binding
force. Hence, the agreement of the parties in the case at bench may be set
aside, but not because of a breach on the part of petitioner for failure to
complete payment of the purchase price. Rather, his failure to do so
brought about a situation which prevented the obligation of respondent
spouses to convey title from acquiring an obligatory force.
2. Interpretation of document denominated Receipt of Partial Payment
Coronel vs. CA, G.R. No. 103577, Oct. 7, 1996
FACTS: Defendants Coronels issued a document, receipt of down payment,
in favor of Ramona. In the said document, it was stipulated that the
Coronels, upon receipt of the down payment in the amount of 50k (1.24M
total price) for their inherited house and lot, bind themselves to the effect
that they will transfer, from their father, the transfer certificate title to
their names. After the TCT is under their name, they will execute
immediately a deed of absolute sale in favor of Ramona and she will pay
the balance of 1.19M. The mother of Ramona, Concepcion, paid the 50k as
down payment. Thereafter, the Coronels transferred the said property in
their names.
Coronels sold the property to Catalina for the amount of 1.58M after the
latter paid a down payment of 300k. For this reason, Coronels canceled
and rescinded the contract with Ramona by depositing the down payment
paid by Concepcion in the bank in trust for Ramona Patricia Alcaraz.
Concepcion et al. filed a case against specific performance. A notice of lis
pendens was annotated at the back of the title. An adverse claim by
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 Catalina was also annotated. The Coronels executed a deed of absolute
sale in favor of Catalina. Thus, a new title was issued in the name of
Catalina.
Both trial court and CA ruled in favor of Concepcion. It ordered the specific
performance of the agreement.
ISSUE: legal determination of the document, Receipt of Downpayment
SC RULED that when the "Receipt of Down Payment" is considered in its
entirety, it becomes more manifest that there was a clear intent on the part
of petitioners to transfer title to the buyer, but since the transfer certificate
of title was still in the name of petitioner's father, they could not fully effect
such transfer although the buyer was then willing and able to immediately
pay the purchase price. This is a contract OF sale, SC affirmed the decision of
CA.
In a contract of sale, the title passes to the vendee upon the delivery of the
thing sold; whereas in a contract to sell, ownership is not transferred upon
delivery of the property but upon full payment of the purchase price. In the
former, the vendor has lost and cannot recover ownership until and unless
the contract is resolved or rescinded; whereas in the latter, title is retained
by the vendor until the full payment of the price, such payment being a
positive suspensive condition and failure of which is not a breach but an
event that prevents the obligation of the vendor to convey title from
becoming effective.
H. Contract to sell vs. Conditional sale
Conditional Sale upon happening of the condition, title is transferred. Seller
cannot sell to another person.
Compared to Contract to sell
-ownership is transferred upon creation of necessary documents.
Coronel vs CA
A contract to sell as defined hereinabove, may not even be considered as a
conditional contract of sale where the seller may likewise reserve title to the
property subject of the sale until the fulfillment of a suspensive condition,
because in a conditional contract of sale, the first element of consent is
present, although it is conditioned upon the happening of a contingent event
which may or may not occur. If the suspensive condition is not fulfilled, the
perfection of the contract of sale is completely abated (cf. Homesite and
Housing Corp. vs. Court of Appeals, 133 SCRA 777 [1984]). However, if the
suspensive condition is fulfilled, the contract of sale is thereby perfected,
such that if there had already been previous delivery of the property subject
of the sale to the buyer, ownership thereto automatically transfers to the
buyer by operation of law without any further act having to be performed by
the seller.
Nabus vs. Pacson
Facts:
The spouses Bate and Julie Nabus were the owners of parcels of land with a
total area of 1,665 square meters, situated in Pico, La Trinidad, Benguet, duly
registered in their names under TCT No. T-9697 of the Register of Deeds of
the Province of Benguet. The property was mortgaged by the Spouses Nabus
to the Philippine National Bank (PNB), La Trinidad Branch, to secure a loan in
the amount of P30,000.00.
On February 19, 1977, the Spouses Nabus executed a Deed of Conditional
Sale 4 covering 1,000 square meters of the 1,665 square meters of land in
favor of respondents Spouses Pacson for a consideration of P170,000.00,
which was duly notarized on February 21, 1977. Their contract had the
following condition:
THAT, as soon as the full consideration of this sale has been paid by the
VENDEE, the corresponding transfer documents shall be executed by the
VENDOR to the VENDEE for the portion sold;
THAT, it is mutually understood that in as much as there is a claim by other
persons of the entire property of which the portion subject of this
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Instrument is only a part, and that this claim is now the subject of a civil case
now pending before Branch III of the Court of First Instance of Baguio and
Benguet, should the VENDOR herein be defeated in the said civil action to
the end that he is divested of title over the area subject of this Instrument,
then he hereby warrants that he shall return any and all monies paid by the
VENDEE herein whether paid to the PNB, La Trinidad, Benguet Branch, or
directly received by herein VENDOR, all such monies to be returned upon
demand by the VENDEE;
THAT, [a] portion of the parcel of land subject of this instrument is presently
in the possession of Mr. Marcos Tacloy, and the VENDOR agrees to cooperate
and assist in any manner possible in the ouster of said Mr. Marcos Tacloy
from said possession and occupation to the end that the VENDEE herein shall
make use of said portion as soon as is practicable;
Thereafter, respondents took possession of the subject property. They
constructed an 80 by 32-feet building and a steel-matting fence around the
property to house their truck body-building shop which they called the
"Emiliano Trucking Body Builder and Auto Repair Shop."
On December 24, 1977, before the payment of the balance of the mortgage
amount with PNB, Bate Nabus died. On August 17, 1978, his surviving
spouse, Julie Nabus, and their minor daughter, Michelle Nabus, executed a
Deed of Extra Judicial Settlement over the registered land covered by TCT
No. 9697. On the basis of the said document, TCT No. T-17718 8 was issued
on February 17, 1984 in the names of Julie Nabus and Michelle Nabus.
During the last week of January 1984, Julie Nabus, accompanied by her
second husband, approached Joaquin Pacson to ask for the full payment of
the lot. Joaquin Pacson agreed to pay, but told her to return after four days
as his daughter, Catalina Pacson, would have to go over the numerous
receipts to determine the balance to be paid. When Julie Nabus returned
after four days, Joaquin sent her and his daughter, Catalina, to Atty. Elizabeth
Rillera for the execution of the deed of absolute sale. Since Julie was a widow
with a minor daughter, Atty. Rillera required Julie Nabus to return in four
days with the necessary documents, such as the deed of extrajudicial
settlement, the transfer certificate of title in the names of Julie Nabus and
minor Michelle Nabus, and the guardianship papers of Michelle. However,
Julie Nabus did not return.
Getting suspicious, Catalina Pacson went to the Register of Deeds of the
Province of Benguet and asked for a copy of the title of the land. She found
that it was still in the name of Julie and Michelle Nabus
After a week, Catalina Pacson heard a rumor that the lot was already sold to
petitioner Betty Tolero. Catalina Pacson and Atty. Rillera went to the Register
of Deeds of the Province of Benguet, and found that Julie Nabus and her
minor daughter, Michelle Nabus, represented by the former's mother as
appointed guardian by a court order dated October 29, 1982, had executed a
Deed of Absolute Sale in favor of Betty Tolero on March 5, 1984.
Issue:
2)Whether the Deed of Conditional Sale was a contract to sell or a contract
of sale.
Held:
A contract to sell as defined hereinabove, may not even be considered as a
conditional contract of sale where the seller may likewise reserve title to the
property subject of the sale until the fulfillment of a suspensive condition,
because in a conditional contract of sale, the first element of consent is
present, although it is conditioned upon the happening of a contingent event
which may or may not occur. If the suspensive condition is not fulfilled, the
perfection of the contract of sale is completely abated. However, if the
suspensive condition is fulfilled, the contract of sale is thereby perfected,
such that if there had already been previous delivery of the property subject
of the sale to the buyer, ownership thereto automatically transfers to the
buyer by operation of law without any further act having to be performed by
the seller.
In a contract to sell, upon the fulfillment of the suspensive condition which is
the full payment of the purchase price, ownership will not automatically
transfer to the buyer although the property may have been previously
SALES REVIEWER 11 | P age
delivered to him. The prospective seller still has to convey title to the
prospective buyer by entering into a contract of absolute sale.
It is not the title of the contract, but its express terms or stipulations that
determine the kind of contract entered into by the parties. In this case, the
contract entitled "Deed of Conditional Sale" is actually a contract to sell. The
contract stipulated that "as soon as the full consideration of the sale has
been paid by the vendee, the corresponding transfer documents shall be
executed by the vendor to the vendee for the portion sold." 41 Where the
vendor promises to execute a deed of absolute sale upon the completion by
the vendee of the payment of the price, the contract is only a contract to
sell." 42 The aforecited stipulation shows that the vendors reserved title to
the subject property until full payment of the purchase price.
As vendees given possession of the subject property, the ownership of which
was still with the vendors, the Pacsons should have protected their interest
and inquired from Julie Nabus why she did not return and then followed
through with full payment of the purchase price and the execution of the
deed of absolute sale. The Spouses Pacson had the legal remedy of
consigning their payment to the court; however, they did not do so. A rumor
that the property had been sold to Betty Tolero prompted them to check the
veracity of the sale with the Register of Deeds of the Province of Benguet.
They found out that on March 5, 1984, Julie Nabus sold the same property to
Betty Tolero through a Deed of Absolute Sale, and new transfer certificates
of title to the property were issued to Tolero.
Unfortunately for the Spouses Pacson, since the Deed of Conditional Sale
executed in their favor was merely a contract to sell, the obligation of the
seller to sell becomes demandable only upon the happening of the
suspensive condition. 43 The full payment of the purchase price is the
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. 44 Thus, for its non-fulfilment, there is no
contract to speak of, the obligor having failed to perform the suspensive
condition which enforces a juridical relation. 45 With this circumstance,
there can be no rescission or fulfilment of an obligation that is still non-
existent, the suspensive condition not having occurred as yet.
Arts. 1459-1465
Art. 1459. The thing must be licit and the vendor must have a right to
transfer the ownership thereof at the time it is delivered. (n)
Art. 1460. A thing is determinate when it is particularly designated or
physical segregated from all other of the same class.
The requisite that a thing be determinate is satisfied if at the time the
contract is entered into, the thing is capable of being made determinate
without the necessity of a new or further agreement between the parties. (n)
Art. 1461. Things having a potential existence may be the object of the
contract of sale.
The efficacy of the sale of a mere hope or expectancy is deemed subject to
the condition that the thing will come into existence.
The sale of a vain hope or expectancy is void. (n)
Art. 1462. The goods which form the subject of a contract of sale may be
either existing goods, owned or possessed by the seller, or goods to be
manufactured, raised, or acquired by the seller after the perfection of the
contract of sale, in this Title called "future goods."
There may be a contract of sale of goods, whose acquisition by the seller
depends upon a contingency which may or may not happen. (n)
Art. 1463. The sole owner of a thing may sell an undivided interest therein.
(n)
Art. 1464. In the case of fungible goods, there may be a sale of an undivided
share of a specific mass, though the seller purports to sell and the buyer to
buy a definite number, weight or measure of the goods in the mass, and
though the number, weight or measure of the goods in the mass is
SALES REVIEWER 12 | P age
undetermined. By such a sale the buyer becomes owner in common of such a
share of the mass as the number, weight or measure bought bears to the
number, weight or measure of the mass. If the mass contains less than the
number, weight or measure bought, the buyer becomes the owner of the
whole mass and the seller is bound to make good the deficiency from goods
of the same kind and quality, unless a contrary intent appears. (n)
Art. 1465. Things subject to a resolutory condition may be the object of the
contract of sale. (n)
Arts. 1459-1465
I. OBJECT
Licit not contrary to law, morals, good customs, public order or
public policy, within the commerce of man; if illicit, contract is void
All rights which are not intransmissible or personal may also be the
object of sale (i.e. right of usufruct)
Services cannot be the object of a contract of sale
Test of Determinability
a. Capacity to Segregate
b. No further agreement
A. Qualities The object must be:
a. Lawful (1459)
Art. 1459. The thing must be licit and the vendor must have a right to
transfer the ownership thereof at the time it is delivered. (n)
Object must be licit
Vendor must have the right to transfer ownership at the time the
object is delivered
Unlawful object:
i. Future inheritance
ii. Homestead (sale within 5 year prohibitory period)
Manalapat v. CA
Facts: In 1976, a free patent was issued in Manlapats name. In 1954, before
the subject lot was titled, he sold a portion to Ricardo evidenced by a deed of
sale. He conveyed another portion to Ricardo in 1981. Leon Banaag (son-in-
law of Manlapat) executed a mortgaged with the subject lot as the collateral.
Heirs of Ricardo sought to obtain the title from petitioners which was in the
custody of RBSP, earlier surrendered as a consequence of the mortgage.
SC: Five-year prohibition against alienation or encumbrances under the
Public Land Act. Eduardo was issued a title in 1976 on the basis of his free
patent application. Such application implies the recognition of the public
dominion character of the land and, hence, the 5-year prohibition imposed
by the PLA against alienation or encumbrance of the land covered by a free
patent or homestead should have been considered.
The deed of sale which was executed in 1981 is obviously covered by
the proscription, the free patent having been issued in 1976. However,
petitioners may recover the portion sold since the prohibition was imposed
in favor of the free patent holder.
The sale executed 1954 was before the issuance of the patent in
1976. Apparently, Eduardo disposed of the portion even before he thought
of applying for a free patent. Where the sale or transfer took place before
the filing of the free patent application, whether by the vendor or the
vendee, the prohibition should not be applied. In such a situation, neither
the prohibition nor the rationale therefore which is to keep in the family of
the patentee that portion of the public land which the government has
gratuitously given him, by shielding him from the temptation to dispose of
his landholding, could be relevant. Precisely, he had disposed of his rights to
the lot even before the government could give the title to him.
The mortgage executed in favor of RBSP is also beyond the pale of
the prohibition, as it was forged in December 1981 a few months past the
period of prohibition.
b. determinate or Determinable
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- undivided interest can be subject to sale. The buyer will become a co-
owner.
a. before partition
b. in a mass of fungible goods.
Cases:
1) sale by co-heir of undivided portion of estate
Vagilidad v. Vagilidad
Facts:
4,280 sqm of lot was owned by Zoilo. In 1931, ZOILO died. Subsequently son
of Zolio, Loreto sold to Gabino Vagilidad a portion of said lot as evidenced by
the Deed of Absolute Sale executed by Loreto on 1986. After, Zoilos children
executed an Extrajudicial Settlement of Estate adjudicating the entire lot to
Loreto in 1987. Gabino filed petition of surrender of lot against Loreto,
claiming that he is owner pursuant to deed of Sale issued before the extra
judicial settlement.
However, there seemed to be an amicable settlement between them, and
the case was sent to archives.
Gabino paid real estate taxes on the land he bought from Loreto which he
later sold to Wilfredo Vagilidad. Likewise, a Deed of Absolute Sale was also
made by Loreto in favor of Wilfredo for the same portion of lot. Wlfredo
mortgaged this property to obtain a loan. Gabino and his wife filed petition
for reconveyance.
The requisite that a thing be determinate is satisfied if at the time
the contract is entered into, the thing is capable of being made determinate
without the necessity of a new or further agreement between the parties.
Art. 1349 states that the object of every contract must be determinate, as to
its kind. The fact that the quantity is not determinate shall not be an obstacle
to the existence of the contract, provided it is possible to determine the
same, without the need of a new contract between the parties. Art. 1460
defines that a thing is determinate when it is particularly designated or
physically segregated from all others of the same class. The property sold by
Loreto to Gabino was determinable.
A co-owner has full ownership of his pro-indiviso share and has the
right to alienate, assign or mortgage it, and substitute another person for its
enjoyment. The subject parcel, being an inherited property, is subject to the
rules of co-ownership under the Civil Code. Co-ownership is the right of
common dominion which two or more persons have in a spiritual part of a
thing, not materially or physically divided. Before the partition of the
property held in common, no individual or co-owner can claim title to any
definite portion thereof. All that the co-owner has is an ideal or abstract
quota or proportionate share in the entire property. LORETO sold the subject
property to GABINO as a co-owner. LORETO had a right, even before the
partition to transfer in whole or in part his undivided interest in the lot even
without the consent of his co-heirs. This right is absolute. Thus, what GABINO
obtained by virtue of the sale on were the same rights as the vendor LORETO
had as co-owner, in an ideal share equivalent to the consideration given
under their transaction. Consequently, when LORETO purportedly sold to
WILFREDO the same portion of the lot, he was no longer the owner said lot.
Based on the principle that "no one can give what he does not have,"
LORETO could not have validly sold to WILFREDO what he no longer had.
2) Effect of agreement where the exact number of palay to be sold was
not fixed.
National Grains Authority v. IAC
Facts: Leon Soriano submitted the documents required by the NFA for pre-
qualifying as a seller. These were processed and he was given a quota of
2,640 cavans of palay. On August 1979, Soriano delivered 630 cavans of
palay. The palay delivered were not rebagged, classified and weighed. When
Soriano demanded payment, he was informed that it was held in abeyance
since Mr. Cabal was still investigating on an information that Soriano was not
a bona fide farmer and the palay delivered was not produced from his
farmland but was taken from the warehouse of a rice trader, Ben de
Guzman. Petitioner wrote Soriano advising him to withdraw the 630 cavans.
Instead of withdrawing, Soriano insisted that the palay grains delivered be
paid. NFA was ordered to pay Soriano.
SALES REVIEWER 14 | P age
 Present case involves a perfected contract of sale. Soriano initially
offered to sell palay grains produced in his farmland to NFA. When the latter
accepted the offer by noting in Sorianos Farmers Information Sheet a quota
of 2,640 cavans, there was already a meeting of the minds between the
parties. The object of the contract, being the palay grains produced in
Sorianos farmland and the NFA was to pay the same depending upon its
quality. The contention that since the delivery were not rebagged,
classified and weighed in accordance with the palay procurement program of
NFA, there was no acceptance of the offer thus this is a clear case of an
unaccepted offer to sell, is untenable.
Quantity being indeterminate does not affect perfection of contract;
No need to create new contract. The fact that the exact number of cavans of
palay to be delivered has not been determined does not affect the perfection
of the contract. In the present case, there was no need for NFA and Soriano
to enter into a new contract to determine the exact number of cavans of
palay to be sold. Soriano can deliver so much of his produce as long as it does
not exceed 2,640 cavans. (It did not need a new contract to make 630 cavans
a determinate thing).
Sale a consensual contract; Acceptance is on the offer and not the
goods delivered. Sale is a consensual contract, there is perfection when
there is consent upon the subject matter and price, even if neither is
delivered. (Obana vs. C.A., L-36249, March 29, 1985, 135 SCRA 557, 560).
The acceptance referred to which determines consent is the acceptance of
the offer of one party by the other and not of the goods delivered.
Compliance of mutual obligations once a contract of sale is
perfected. From the moment the contract of sale is perfected, it is
incumbent upon the parties to comply with their mutual obligations or the
parties may reciprocally demand performance thereof. (Article 1475, Civil
Code, 2nd par.)
c. Existing, Future, or contingent (1462)
Case:
1) Sale of Future Inheritance
Tanedo vs Ca
Facts:
On October 20, 1962, Lazaro Taedo executed a notarized deed of absolute
sale in favor of his eldest brother, Ricardo Taedo, and the latters wife,
Teresita Barera, private respondents herein, whereby he conveyed to the
latter in consideration of P1,500.00, one hectare of whatever share I shall
have over Lot No. 191 of the cadastral survey of Gerona, Province of Tarlac
and covered by Title T-l3829 of the Register of Deeds of Tarlac, the said
property being his future inheritance from his parents (Exh. 1). Upon the
death of his father Matias, Lazaro executed an Affidavit of Conformity
dated February 28, 1980 (Exh. 3) to re-affirm, respect. acknowledge and
validate the sale I made in 1962. On January 13, 1981, Lazaro executed
another notarized deed of sale in favor of private respondents covering his
undivided ONE TWELVE (1/12) of a parcel of land known as Lot 191 x x (Exh.
4). He acknowledged therein his receipt of P 10,000.00 as consideration
therefor. In February 1981, Ricardo learned that Lazaro sold the same
property to his children, petitioners herein, through a deed of sale dated
December 29, 1980 (Exh. E). On June 7, 1982, private respondents recorded
the Deed of Sale (Exh. 4) in their favor in the Registry of Deeds and the
corresponding entry was made in Transfer Certificate of Title No. 166451
(Exh. 5).
Petitioners on July 16, 1982 filed a complaint for rescission (plus damages) of
the deeds of sale executed by Lazaro in favor of private respondents covering
the property inherited by Lazaro from his father.
Issue:
Is a sale of future inheritance valid?
Held:
(n)o contract may be entered into upon a future inheritance except in cases
expressly authorized by law.
SALES REVIEWER 15 | P age
Consequently, said contract made in 1962 is not valid and cannot be the
source of any right nor the creator of any obligation between the parties.
Hence, the affidavit of conformity dated February 28, 1980, insofar as it
sought to validate or ratify the 1962 sale, is also useless and, in the words of
the respondent Court, suffers from the same infirmity. Even private
respondents in their memorandum concede this.
d. Transferability of Ownership
Ownership
1. It need not exist at the perfection of the contract. Required at the
time of delivery
2. Subsequent acquisition of title by a vendor w/out title validates the
sale
3. Acquisition of title by the vendee may depend upon a contingency
(right of redemption)
The seller must have the right to transfer the ownership of the thing or
right sold to the buyer at the time of delivery and not at the time of the
making of the contract.
Nemo dat quod non habet, as an ancient Latin maxim says. One cannot give
what does not have.
Note: When ownership is required At the time of sale but ownership may
not be w/ the seller in case of future things.
Cases:
1. Sale by mortgagee of land not proper subject of mortgage
Cavite Development Bank v. Lim, 324 scra 346
Facts: Rodolfo Guansing obtained a fraudulent title by executing an Extra-
Judicial Settlement of the Estate With Waiver where he made it appear that
he and Perfecto Guansing were the only surviving heirs entitled to the
property, and that Perfecto had waived all his rights thereto. Consequently
he acquired title and used this to acquire a loan. CDB foreclosed the
mortgage and granted him the period of redemption, which he did not
exercise.
It is not required that, at the perfection stage, the seller be the
owner of the thing sold or even that such subject matter of the sale exists at
that point in time. Thus, under Art. 1434 of the Civil Code, when a person
sells or alienates a thing which, at that time, was not his, but later acquires
title thereto, such title passes by operation of law to the buyer or grantee.
This is the same principle behind the sale of "future goods" under Art. 1462
of the Civil Code. However, under Art. 1459, at the time of delivery or
consummation stage of the sale, it is required that the seller be the owner of
the thing sold. Otherwise, he will not be able to comply with his obligation to
transfer ownership to the buyer. It is the consummation stage where the
principle of nemo dat quod non habet applies. In this case, the sale by CDB to
Lim of the property mortgaged in 1983 by Rodolgo Guansing must, therefore,
be deemed a nullity for CDB did not have a valid title to the said property. To
be sure, CDB never acquired a valid title to the property because the
foreclosure sale, by virtue of which the property had awarded to CDB as
highest bidder, is likewise void since the mortgagor was not the owner of the
property foreclosed.
CDB cannot be considered a mortgagee in good faith. While
petitioners are not expected to conduct an exhaustive investigation on the
history of the mortgagor's title, CDB cannot be excused from the duty of
exercising the due diligence required of banking institutions in ascertaining
the validity of the title.
That after the payment of the 10% option money, the Offer to
Purchase provides for the payment only of the balance of the purchase price,
implying that the "option money" forms part of the purchase price. This is
precisely the result of paying earnest money under Art. 1482 of the Civil
Code. It is clear then that the parties in this case actually entered into a
contract of sale, partially consummated as to the payment of the price.
SALES REVIEWER 16 | P age
2. Conveyance of privilege to purchase land before it is awarded to the
tenant or occupant.
Hermosilla v. Remoquillo
Facts: Apolinario Hermosilla was occupying a lot in San Pedro Tunasan
Homesite, a land of the Republic. He divided the lot into 2. The 1st portion
was given to his son Salvador and the other(questioned lot) to his grandson
Jaime Remoquillo through a Deed of Assignment. A law was passed
prohibiting the transfer of ownership of the said lot. Salvador and Jaime after
made a Kasunduan ng Paglipat Ng Karapatan sa Isang Lagay na Lupang Solar
(Kasunduan) whereby Jaime transferred ownership of the 65 square meters
(the questioned property) in favor of Salvador. NHA awarded Jaime title.
Salvador and his heirs questioned the title stating they have their house and
in actual possession of the questioned lot.
When the Kasunduan was executed in 1972 by Jaime in favor of
Salvador petitioners' predecessor-in-interest Lot 19, of which the
questioned property forms part, was still owned by the Republic. Nemo dat
quod non habet. Nobody can give what he does not possess. Jaime could not
thus have transferred anything to Salvador via the Kasunduan.
The transfer became one in violation of law and therefore void ab
initio. Hence, petitioners acquired no right over the lot from a Void
Kasunduan, for no rights are created. It is generally considered that as
between the parties to a contract, validity cannot be given to it by estoppel if
it is prohibited by law or is against public policy.
Since the property was previously a public land, petitioners have no
personality to impute violation of the law. If the title was in fact fraudulently
obtained, it is the State which should file the suit to recover the property
through the Office of the Solicitor General. Consequently, Jaimes ownership
was valid not being contrary to any law and since there was no pending other
application yet. That at the time he applied for title, he was recogned as the
actual applicant / occupant.
Heirs of Arturo Reyes v. Beltran G.R. No. 176474
Facts: A big parcel of lot was originally owned by Spouses Laquian. When the
Spouses died, the property was left with the wifes siblings. Through an
"Extrajudicial Settlement of the Estate of the Deceased Constancia R. Socco
(wife)," the parcel of land was partitioned into 3 lots. Before the partition,
Miguel Socco, 1 of the heirs sold his share to Arturo Reyes as evidenced by
the Contract to Sell stating that he is to inherit a particular portion. But upon
partition, the said portion sold was adjudicated to respondent, Elena Socco
Beltran, and not to Miguel Socco.
SC: Article 1459 of the Civil Code on contracts of sale, The thing must be
licit and the vendor must have a right to transfer ownership thereof at the
time it is delivered. The law specifically requires that the vendor must have
ownership of the property at the time it is delivered. Petitioners claim that
the property was constructively delivered to them in 1954 by virtue of the
Contract to Sell. However, as already pointed out by this Court, it was
explicit in the Contract itself that, at the time it was executed, Miguel R.
Socco was not yet the owner of the property and was only expecting to
inherit it. Hence, there was no valid sale from which ownership of the
subject property could have transferred from Miguel Socco to Arturo Reyes.
Without acquiring ownership of the subject property, Arturo Reyes also
could not have conveyed the same to his heirs, herein petitioners.
The law specifically requires that the vendor must have ownership of the
property at the time it is delivered. Petitioners cannot derive title to the
subject property by virtue of the Contract to Sell. It was stated in the
Contract that the vendor was not yet the owner of the subject property and
was merely expecting to inherit the same. It was also declared that
conveyance of the subject to the buyer was a conditional sale. It is, therefore,
apparent that the sale of the subject property in favor of Arturo Reyes was
conditioned upon the event that Miguel Socco would actually inherit and
become the owner of the said property. Absent such occurrence, Miguel R.
Socco never acquired ownership of the subject property which he could
validly transfer to Arturo Reyes. Without acquiring ownership of the subject
property, Arturo Reyes also could not have conveyed the same to his heirs,
herein petitioners.
-assignment was done prior to the application.
SALES REVIEWER 17 | P age
ARTICLES 1469-1474
Art. 1469. In order that the price may be considered certain, it shall be
sufficient that it be so with reference to another thing certain, or that the
determination thereof be left to the judgment of a special person or persons.
Should such person or persons be unable or unwilling to fix it, the contract
shall be inefficacious, unless the parties subsequently agree upon the price.
If the third person or persons acted in bad faith or by mistake, the courts
may fix the price.
Where such third person or persons are prevented from fixing the price or
terms by fault of the seller or the buyer, the party not in fault may have such
remedies against the party in fault as are allowed the seller or the buyer, as
the case may be. (1447a)
Art. 1470. Gross inadequacy of price does not affect a contract of sale, except
as it may indicate a defect in the consent, or that the parties really intended
a donation or some other act or contract. (n)
Art. 1471. If the price is simulated, the sale is void, but the act may be shown
to have been in reality a donation, or some other act or contract. (n)
Art. 1472. The price of securities, grain, liquids, and other things shall also be
considered certain, when the price fixed is that which the thing sold would
have on a definite day, or in a particular exchange or market, or when an
amount is fixed above or below the price on such day, or in such exchange or
market, provided said amount be certain. (1448)
Art. 1473. The fixing of the price can never be left to the discretion of one of
the contracting parties. However, if the price fixed by one of the parties is
accepted by the other, the sale is perfected. (1449a)
Art. 1474. Where the price cannot be determined in accordance with the
preceding articles, or in any other manner, the contract is inefficacious.
However, if the thing or any part thereof has been delivered to and
appropriated by the buyer he must pay a reasonable price therefor. What is a
reasonable price is a question of fact dependent on the circumstances of
each particular case. (n)
I. Price sum certain in money or its equivalent.
Case: General principles in the agreement as to price
Boston Bank of the Philippines v. Manalo, G. R. No. 158149, February 9,
2006
FACTS: Boston Bank, now petitioner, filed the instant petition for review on
certiorari assailing the CA rulings. It maintains that, as held by the CA, the
records do not reflect any schedule of payment of the 80% balance of the
purchase price, or P278,448.00. Petitioner insists that unless the parties had
agreed on the manner of payment of the principal amount, including the
other terms and conditions of the contract, there would be no existing
contract of sale or contract to sell.47
WON: Petitioner, as seller, forged a perfect contract to sell over a real
property to respondents, as buyer.
HELD: We agree with petitioners contention that, for a perfected contract
of sale or contract to sell to exist in law, there must be an agreement of the
parties, not only on the price of the property sold, but also on the manner
the price is to be paid by the vendee.
A definite agreement as to the price is an essential element of a binding
agreement to sell personal or real property because it seriously affects the
rights and obligations of the parties. Price is an essential element in the
formation of a binding and enforceable contract of sale. The fixing of the
price can never be left to the decision of one of the contracting parties. But a
price fixed by one of the contracting parties, if accepted by the other, gives
rise to a perfected sale.57
SALES REVIEWER 18 | P age
It is not enough for the parties to agree on the price of the property. The
parties must also agree on the manner of payment of the price of the
property to give rise to a binding and enforceable contract of sale or contract
to sell. This is so because the agreement as to the manner of payment goes
into the price, such that a disagreement on the manner of payment is
tantamount to a failure to agree on the price.58
In a contract to sell property by installments, it is not enough that the parties
agree on the price as well as the amount of downpayment. The parties must,
likewise, agree on the manner of payment of the balance of the purchase
price and on the other terms and conditions relative to the sale. Even if the
buyer makes a downpayment or portion thereof, such payment cannot be
considered as sufficient proof of the perfection of any purchase and sale
between the parties.
We agree with the contention of the petitioner that, as held by the CA, there
is no showing, in the records, of the schedule of payment of the balance of
the purchase price on the property amounting to P278,448.00
A. Requisites:
1. The price must be real (1471)
Art. 1471. If the price is simulated, the sale is void, but the act may be shown
to have been in reality a donation, or some other act or contract.
-price is real- when at the perfection of the sale, there is legal intention on
the part of the buyer to pay the price and the legal expectation on the part of
the seller to receive such price as the value of the subject matter he obligates
himself to deliver.
-price is false- the contract is valid but subject to reformation to indicate the
real price upon which the minds of the parties have met.
a.) Effect if price is simulated- produces no effect.
Cruzado v. Bustos, G. R. No. 10244, February 29, 1916s
FACTS: Counsel for the plaintiff Santiago Cruzado filed a written complaint
on October 8, 1910, amended on September 25, 1913, in which he alleged
that plaintiff was the owner of certain rural property situated in the barrio of
Dolores, formerly San Isidro, of the municipality of Bacolor, Pampanga,
containing an area of 65 balitas and bounded as set forth in the complaint;
that Estafania Bustos, during her lifetime, and now the administrator of her
estate, together with the other defendant, Manuel Escaler, had, since the
year 1906 up to the present, been detaining the said parcel of land, and had
refused to deliver the possession thereof to plaintiff and to recognize his
ownership of the same, notwithstanding the repeated demands made upon
them; that by such detention, the plaintiff had suffered losses and damages
to the amount of P3,500. He therefore asked for judgment declaring plaintiff
to be the owner of the said parcel of land and ordering defendants to return
it to plaintiff and to pay the latter P3,500 for losses and damages, and the
costs.
WON: The deed of sale of 65 balitas of land situated in the municipality of
Bacolor, Pampanga, executed by Estefania Bustos, with the assistance of her
husband Bernardino Dizon, in favor of Agapito Geronimo Cruzado, for the
sum of P2,200, was simulated.
HELD: The simulation of the said sale was effected by making a pretended
contract which bore the appearance of truth, when really and truly there was
no contract, because the contracting parties did not in fact intend to execute
one, but only to formulate a sale in such a manner that, for the particular
purposes sought by Bustos and Cruzado, it would appear to have been
celebrated solely that Cruzado might hold his office of procurador on the
strength of the security afforded by the value of the land feignedly sold.
This action is of course improper, not only because the sale was simulated,
but also because it was not consummated. The price of the land was not paid
nor did the vendee take possession of the property from the 7th of
September, 1875, when the said sale was feigned, until the time of his death;
nor did any of his successors, nor the plaintiff himself until the date of his
claim, enter into possession of the land.
SALES REVIEWER 19 | P age
That the contract of purchase and sale, as consensual, is perfected by
consent as to the price and the thing and is consummated by the reciprocal
delivery of the one and the other, the full ownership of the thing sold being
conveyed to the vendee, from which moment the rights of action derived
from this right may be exercised.
It is, then, of the utmost importance to examine whether in the said sale the
purchase price was paid and whether the vendee took possession of the land
supposed to have been sold.
b.) Effect if there is no consideration null and void (non-existence of
the contract).
Doles v. Angeles, G. R. No. 149353, June 26, 2006
FACTS: On April 1, 1997, Ma. Aura Tina Angeles (respondent) filed with the
RTC a complaint for Specific Performance with Damages against Jocelyn B.
Doles (petitioner), docketed as Civil Case No. 97-82716. Respondent alleged
that petitioner was indebted to the former in the concept of a personal loan
amounting to P405,430.00 representing the principal amount and interest;
that on October 5, 1996, by virtue of a "Deed of Absolute Sale", petitioner, as
seller, ceded to respondent, as buyer, a parcel of land, as well as the
improvements thereon, with an area of 42 square meters, covered by
Transfer Certificate of Title No. 382532,4 and located at a subdivision project
known as Camella Townhomes Sorrente in Bacoor, Cavite, in order to satisfy
her personal loan with respondent; that this property was mortgaged to
National Home Mortgage Finance Corporation (NHMFC) to secure
petitioners loan in the sum of P337,050.00 with that entity.
WON: The contract of sale on the parcel of land was executed for a cause.
HELD: Since the sale is predicated on that loan, then the sale is void for lack
of consideration.
In view of these anomalies, the Court cannot entertain the possibility that
respondent agreed to assume the balance of the mortgage loan which
petitioner allegedly owed to the NHMFC, especially since the record is bereft
of any factual finding that petitioner was, in the first place, endowed with
any ownership rights to validly mortgage and convey the property. As the
complainant who initiated the case, respondent bears the burden of proving
the basis of her complaint. Having failed to discharge such burden, the Court
has no choice but to declare the sale void for lack of cause. And since the sale
is void, the Court finds it unnecessary to dwell on the issue of whether duress
or intimidation had been foisted upon petitioner upon the execution of the
sale.
b. In money or its equivalent (1458)
Torres vs CA
Facts:
Petitioners and respondent entered into a joint venture agreement for the
development of a parcel land located at Lapu-Lapu City island of Mactan into
a subdivision. Pursuant to the contract, petitioners executed a deed of sale
covering the said parcel of land in favor of the respondent, who then had it
registered in his name. Thereafter, respondent mortgaged the property in
the bank, and according to the joint agreement, the money obtained
amounting to P40,000.00 was to be used for the development of the
subdivision. However, the project did not push through, and the land was
subsequently foreclosed by the bank. Because of this, petitioners filed a civil
case before the Regional Trial Court of Cebu City, which was later dismissed
by the trial court. On appeal, the Court of Appeals affirmed the decision of
the trial court. The appellate court held that the petitioner and respondent
had formed a partnership for the development of the subdivision. Thus, they
must bear the loss suffered by the partnership in the same proportion as
their share in the profits stipulated in the contract. Aggrieved by the
decision, petitioner filed the instant petition contending that the Court of
Appeals erred in concluding that the transaction between the petitioners and
respondent was that of a joint venture/partnership.
SC: The Joint Venture Agreement clearly states that the consideration for the
sale was the expectation of profits from the subdivision project. Its first
stipulation states that petitioners did not actually receive payment for the
SALES REVIEWER 20 | P age
parcel of land sold to respondent. Consideration, more properly
denominated as cause, can take different forms, such as the prestation or
promise of a thing or service by another. In this case, the cause of the
contract of sale consisted not in the stated peso value of the land, but in the
expectation of profits from the subdivision project, for which the land was
intended to be used. As explained by the trial court, "the land was in effect
given to the partnership as [petitioner's] participation therein. . . . There was
therefore a consideration for the sale, the [petitioners] acting in the
expectation that, should the venture come into fruition, they [would] get
sixty percent of the net profits."
-expectations of profits from the subdivision projects is a valid form of
consideration.
-it is sufficient if it can be determined by the stipulations of the contract
made by the parties thereto/ by reference to an agreement incorporated in
the contract.
3. Certain or ascertainable (determinable)
a.) How determined
i. By a third person (1469, pars. 1, 2, 4)
aa) If the third person is unable or unwilling to fix the price, the
contract is inefficacious unless the parties come to an agreement
Barreto v. Sta. Marina, G. R. No. L-8169, December 29, 1913
(***CAVEAT EMPTOR: PLS READ THE FULL TEXT. CASE DOCTRINE RELATED
TO SALES NOT CLEARLY ESTABLISHED IN THE CASE)
FACTS: The La Insular cigar and cigarette factory is a joint account association
with a nominal capital of P865,000, the plaintiffs share being P20,000, or
4/173 of the whole. On March 14, 1910, the plaintiffs attorneys wrote the
defendants local representative a letter offering to sell to the defendant
plaintiffs participation in the factory. The result of the correspondence
between the parties and their representatives was that Exhibit G was duly
executed on May 3, 1910. In accordance with the terms of this exhibit a
committee of appraisers was appointed to ascertain and fix the actual value
of La Insular. The committee rendered its report on November 14, 1910,
fixing the net value at P4,428,194.44. Of this amount 4/173 part represented
the plaintiffss share on his P20,000 of the nominal capital. In Exhibit J which
was executed on November 22, 1910, the plaintiff acknowledged to have
received from the defendant that amount.
Subsequently to the execution of Exhibit J, demand was made by the plaintiff
upon the defendant for his share of the profits from June 30, 1909, to
November 22, 1910. This demand was refused and thereupon this action was
instituted to recover said profits. Upon the evidence submitted at the
hearing, the court below held: (1) That the agreement of May 3, 1910, was
by its terms a contract to sell in the future and did not pass title and (2) that
the sale of plaintiffs interest did not include the profits in question.
Judgment was rendered accordingly, with interest and cost. The defendant
appealed.
SC: It was the appraisers who were appointed to ascertain and fix the total
net value of the factory for the purpose of determining the true present
value of the interest.
- The appraiser was the one who determined the total net value of the shares
of the company and thereafter that of Baretos share.
ii. By the Courts (1469, par. 3) if there is bad faith or mistake of the
third party fixing the price
iii) By reference to a definite day, a particular exchange or market
(1472)
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iv) By reference to invoices
McCulough v. Aenlle & Co.,G. R. No. 1300, February 3, 1904
FACTS: For the purpose of carrying into effect the said contract of sale
entered into with the other party hereto, said Francisco Gonzalez y de la
Fuente and Don Antonio la Puente y Arce, in the name and on behalf of the
mercantile partnership denominated R. Aenlle & Co., by virtue of the powers
conferred upon them and in compliance with the instructions given them by
Don Matias Saenz de Vizmanos y Lecaros, the manager of the said
partnership, solemnly declare that they sell, absolutely and in fee simple, to
E. C. McCullough, the tobacco and cigarette factory known as "La Maria
Cristina," located at No. 36 Calle Echague, Plaza de Goiti, Santa Cruz district,
this city, said sale including the trade-mark "La Maria Cristina," which was
been duly registered, the stock of tobacco in leaf and manufacture,
machinery, labels, wrappers, furniture, fixtures, and everything else
belonging to the said factory, as shown in the inventory to be drawn up for
the purpose of making formal delivery of the said property.
This sum is subject to modification, in accordance with the result shown by
the inventory to be drawn up. In this inventory the value of each individual
piece of furniture will be fixed at 10 per cent below the price shown in the
partnership inventory. The machinery and cost of installing the same will also
be fixed at 10 per cent below its invoice price. The value of the tobacco, both
in leaf and in process of manufacture, boxes, labels, wrappers, cigars,
cigarettes, and paper mouthpieces for cigarettes will be fixed at the invoice
price. The value of tobacco made up into cigars will be fixed in accordance
with the price list of the partnership, less 20 per cent discount. The cigars will
be inventoried at the prices in the same list, less a discount of 35 per cent.
The P20,000 mentioned as the value of the trade-mark will, however, remain
unchanged.
In December, 1901, the plaintiff, with others, organized a company,
to which the plaintiff sold all the tobacco bought by him from the defendant.
The purchaser, the new company, on examining these two lots, rejected
them because the tobacco was not of the quality indicated in the inventory.
Thereupon the plaintiff, claiming that the tobacco in these two lots was
worthless, brought this action against the defendant to recover what he paid.
WON: There was a perfected contract of sale entered into by the parties on
August 27,1901.
HELD: The document of August 27 was a completed contract of sale. The
articles which were the subject of the sale were definitely and finally agreed
upon. The appellee agreed to buy, among other things, all of the leaf tobacco
in the factory. This was sufficient description of the thing sold. The price for
each article was fixed. It is true that the price of this tobacco, for example,
was not stated in dollars and cents in the contract. But by its terms the
appellee agreed to pay therefor the amount named in the invoices then in
existence. The price could be made certain by a mere reference to those
invoices. By the instrument of August 27 the contract was perfected and
thereafter each party could compel the other to fulfill it. By its terms the
appellee was bound to take all the leaf tobacco then belonging to the factory
and to pay therefor the prices named in the invoices. This obligation was
absolute and did not depend at all upon the quality of the tobacco or its
value. The appellee did not, in this contract, reserve the right to reject the
tobacco if it were not of a specific crop. He did not buy tobacco of a
particular kind, class, or quality. He bought all the tobacco which the
appellant owned and agreed to pay for it what the defendant had paid for it.
The plaintiff testified that this was the express agreement.
v) By reference to the application of known factors, e.g. in proportion to
variations in calories and ash content of coal2.)
Effect of indeterminability contract is inefficacious
Robles v. Lizarraga Hermanos, G. R. No. L-26173, July 13, 1927
(Sale of Improvements introduced in Hacienda)
FACTS: This action was instituted in the Court of First Instance of Occidental
Negros by Zacarias Robles against Lizarraga Hermanos, a mercantile
partnership organized under the laws of the Philippine Islands, for the
SALES REVIEWER 22 | P age
purpose of recovering compensation for improvements made by the plaintiff
upon the hacienda "Nahalinan" and the value of implements and farming
equipment supplied to the hacienda by the plaintiff, as well as damages for
breach of contract. Upon hearing the cause the trial court gave judgment for
the plaintiff to recover of the defendant the sum of P14,194.42, with costs.
From this judgment the defendant appealed.
WON: The petitioner is allowed to recover the value of the improvements.
HELD: In the case before us the deed of conveyance purports to transfer to
the defendant only such interests in certain properties as had come to the
conveyors by inheritance. Nothing is said concerning the rights in the
hacienda which the plaintiff had acquired by lease or concerning the things
that he had placed thereon by way of improvement or had acquired by
purchase. The verbal contract which the plaintiff has established in this case
is therefore clearly independent of the main contract of conveyance, and
evidence of such verbal contract is admissible under the doctrine above
stated. The rule that a preliminary or contemporaneous oral agreement is
not admissible to vary a written contract appears to have more particular
reference to the obligation expressed in the written agreement, and the rule
had never been interpreted as being applicable to matters of consideration
or inducement. In the case before us the written contract is complete in
itself; the oral agreement is also complete in itself, and it is a collateral to the
written contract, notwithstanding the fact that it deals with related matters.
A contract for the sale of goods, chattels or things in action, at a price of not
less than P100, shall be unenforceable unless the contract, or some note or
memorandum thereof shall be in writing and subscribed by the party
charged, or by his agent; and it is insisted that the court erred in admitting
proof of a verbal contract over the objection of the defendant's attorney. But
it will be noted that the same subsection contains a qualification, which is
stated in these words, "unless the buyer accept and receive part of such
goods and chattels." In the case before us the trial court found that the
personal property, consisting of farming implements and other movables
placed on the farm by the plaintiff, have been utilized by the defendant in
the cultivation of the hacienda, and that the defendant is benefiting by those
things.
We are of the opinion that the stipulation with respect to the appraisal of the
property did not create a suspensive condition. The true sense of the
contract evidently was that the defendant would take over the movables and
the improvements at an appraised valuation, and the defendant obligated
itself to promote the appraisal in good faith. As the defendant partially
frustrated the appraisal, it violated a term of the contract and made itself
liable for the true value of the things contracted about, as such value may be
established in the usual course of proof. Furthermore, it must occur to any
one, as the trial judge pointed out, that an unjust enrichment of the
defendant would result from allowing it to appropriate the movables without
compensating the plaintiff thereof.
The fourth assignment of error is concerned with the improvements.
Attention is here directed to the fact that the improvements placed on the
hacienda by the plaintiff became a part of the realty and as such passed to
the defendant by virtue of the transfer effected by the three owner in the
deed of conveyance (Exhibit B.). It is therefore insisted that, the defendant
having thus acquired the improvements, the plaintiff should not be
permitted to recover their value again from the defendant. This criticism
misses the point. There can be no doubt that the defendant acquired the
fixed improvements when it acquired the land, but the question is whether
the defendant is obligated to indemnify the plaintiff for his outlay in making
the improvements. It was upon the consideration of the defendant's promise
so to indemnify the plaintiff that the latter agreed to surrender the lease
nearly two no doubt as to the validity of the promise made under these
circumstances to the plaintiff.
3) Effect of inadequacy of price (1470) does not affect the contract, but
may show vice of consent (1470). Refer to inadequacy of cause in
general, Art. 1355.
Art. 1470. Gross inadequacy of price does not affect a contract of sale, except
as it may indicate a defect in the consent, or that the parties really intended
a donation or some other act or contract.
-it does not affect the contract but may show vice of consent.
SALES REVIEWER 23 | P age
-the offended party may invoke Art. 19 of the NCC ( Abuse of Right Principle)
Askay v. Cosolan
Facts: Askay obtained a title to the Mineral Claim which he allegedly sold to
Cosalan. It was alleged that there is inadequacy of the consideration for
transfer which, according to the deed of conveyance, and to the oral
testimony, consisted of P107.00 in cash, a bill fold, one sheet, one cow and
two carabaos.
Issue: WON the sale is valid.
Held: YES
The fact that the bargain is a hard one, coupled with mere inadequacy of
price when both parties are in a position to form an independent judgment
concerning the transaction, is not sufficient ground for the cancellation of a
contract.
Aguilar v. Rubiato
Facts: Rubiato was the owner of parcels of land and was desirous of
obtaining a loan. He thereafter signed a power of attorney in favor of a
certain Vila to secure a loan and to execute any writing for the mortgage of
land. Vila pursuant to the power of attorney then sold the land to Aguilar,
with the right of repurchase within one year and Rubiato was to remain in
possession of the land as lessee. One year expired and Aguilar filed a case to
consolidate ownership over the lands.
Issue :Whether the contract was of sale or loan.
Held: LOAN
In addition to the evidence, there is one very cogent reason which impels us
to the conclusion that Rubiato is only responsible to the plaintiff for a loan. It
is that the inadequacy of the price which Vila obtained for the eight
parcels of land belonging to Rubiato is so great that the minds revolts at it.
Xxx The members of this court after most particular and cautious
consideration, having in view all the facts and all the naturals tendencies of
mankind, consider that Rubiato is only responsible to the plaintiff for the
loan of P800.
4) Effect of Failure of Consideration
Sps. Buenaventura v. CA
Facts: Sps Leonardo Joaquin & Feliciano Landrito are the parents of
petitioners. Petitioners assail the sale of several lands by their parents to
their other siblings (see p. 265 for complete list of sales made) for being void
ab initio based on the ff grounds:
1. no actual valid consideration
2. properties are more than 3x more valuable than the measly purchase price
(purchase price was grossly inadequate)
3. deeds of sale do not reflect & express the true intent of the parties
4. deliberate conspiracy designed to unjustly deprive the rest of the
compulsory heirs of their legitime.
Defense of the respondents:
1. no cause of action, requisite standing & interest
2. sales were w/sufficient considerations & made by their parents voluntarily
in good faith & w/full knowledge of the consequences
3. certificates of title were issued w/factual & legal basis.
Trial court dismissed the case WRT Gavino Joaquin & Lea Asis. Ruled in favor
of the respondents & dismissed the complaint.
SALES REVIEWER 24 | P age
1. The right of the compulsory heirs to a legitime is contingent & it only
commences from the moment of the death of the decedent (CC Art. 777).
The value of the property left at the death of the testator is the basis for
determining the legitime (Art. 908). Plaintiffs cannot claim an impairment of
their legitime since their parents are still alive.
2. Deeds of Sale were executed for valuable consideration.
CA affirmed Trial Court decision. In addition to the grounds stated by the trial
court, CA also mentioned that:
1. While still alive, parents are free to dispose of their properties provided
such is not done in fraud of creditors.
2. Petitioners are not parties in interest since theyre not parties to the deeds
of sale nor are they creditors of their parents.
Issues :
1.WON petitioners have a legal interest over the properties subject of the
Deeds of Sale. NO.
The complaint betrays their motive for filing the case. They are interested in
obtaining the properties by hereditary succession but they have failed to
show any legal right to these properties.
Real party-in-interest is one who is either benefited or injured by the
judgment of the party entitled to the avails of the suit. This includes parties
to the agreement or are bound either principally/subsidiarily. Parties must
have a present substantial interest & not merely expectancy/future
contingent subordinate or consequential interest.
In this case, the petitioners only have an inchoate rt w/c vests only upon the
death of their parents. Besides, sale of the lots to their siblings does not
affect the value of their parents estate since the lots are replaced with cash
of equivalent value.
2. WON the deeds of sale are void for lack of consideration. NO.
A contract of sale is not a real contract but a consensual contract. Its binding
& valid upon the meeting of the minds as to the price regardless of the
manner of payment or breach of such. Its still valid even if the real price is
not stated in the contract, making it subject to reformation. But if the price is
simulated, there is no meeting of the minds, thus the contract is void (CC Art.
1471).
Act of payment of the price does not determine the validity of a contract of
sale. Failure to pay the consideration is different from lack of consideration.
The former results in a rt to demand fulfillment or cancellation of the
contract while the latter prevents the existence of a valid contract.
Petitioners failed to show that the prices in the deeds of sale were simulated.
They dont even know the financial capacity of their siblings to buy these lots.
Respondents minds met as to the purchase price w/c was stated in the
deeds of sale & the buyer siblings have paid the price to their parents.
3. WON the Deeds of Sale are void for gross inadequacy of the price. NO.
CC Art. 1355: Except in cases specified by law, lesion/ INADEQUACY OF
CAUSE shall not invalidate a contract, unless there has been fraud, mistake or
undue influence.
CC Art. 1470: Gross inadequacy of price doesnt affect a contract of sale,
except as may indicate a defect in the consent or that the parties really
intended a donation or some other act or contract.
Petitioners failed to prove any instance in the aforementioned provisions
that would invalidate the deeds of sale. There is no requirement that the
price be equal to the exact value of the property on sale. It only matters that
all respondents believed that they received the commutative value of what
they gave.
Vales vs. Villa: Courts cannot be guardians of people who are not legally
incompetent. Courts operate not because a person has been
SALES REVIEWER 25 | P age
defeated/overcome by another, but because he has been defeated or
overcome ILEGALLY. There should be a violation of the law, commission of
what the law knows as an actionable wrong, before the courts are authorized
to lay hold of the situation & remedy it.
Note: Failure of consideration is different from the lack of consideration,
the former results in a right to demand the fulfillment/ cancellation of the
obligation under the existing valid contract. This is different from lack of
consideration w/c prevents the existence of a valid contract.
B. Effect of earnest money (1482)
Art. 1482. Whenever earnest money is given in a contract of sale, it shall be
considered as part of the price and as proof of the perfection of the contract
a. It is considered part of the price, unless the contract is otherwise
b. It is proof of perfection of the contract
Earnest money- it is something of value that the buyer was really in earnest
and given after the perfection of the contract.
-part of the purchase price.
Option money- distinct consideration.
Oesmer v. Paraiso Devt Corp
Facts: Petitioners in this case are brothers and sisters and the co-owners of
undivided shared is parcels of land originally owned by their parents. One the
petitioners, Ernesto, met with the President of Paraiso for purpose of
brokering the sale of petitioners properties to respondent corp. A contract
to sell was the executed, signed by the siblings except Adolfo and Jesus. An
amount of P100,000 was also given as option money. Later however,
petitioners informed PAraiso of their intention to rescind the Contract to sell
and to return the amount of P100,000 paid by the corporation. Their
contention was that the contract to sell was void because the signatures
made by the siblings were not for consent to sell the property, assuming the
signatures indicate consent, the contract was subject to a suspensive
condition which is the approval of the sale by all the co-owners which did not
occur because two of the siblings did not approve of the sale; lastly, that it is
void for it is a unilateral promise to sell without consideration distinct from
price.
Held: As to the last contention, the court ruled that the contract to sell is not
a unilateral promise to sell:
In the instant case, the consideration of P100,000.00 paid by respondent to
petitioners was referred to as "option money." However, a careful
examination of the words used in the contract indicates that the money is
not option money but earnest money. "Earnest money" and "option money"
are not the same but distinguished thus: (a) earnest money is part of the
purchase price, while option money is the money given as a distinct
consideration for an option contract; (b) earnest money is given only where
there is already a sale, while option money applies to a sale not yet
perfected; and, (c) when earnest money is given, the buyer is bound to pay
the balance, while when the would-be buyer gives option money, he is not
required to buy, but may even forfeit it depending on the terms of the
option.20
The sum of P100,000.00 was part of the purchase price. Although the same
was denominated as "option money," it is actually in the nature of earnest
money or down payment when considered with the other terms of the
contract. Doubtless, the agreement is not a mere unilateral promise to sell,
but, indeed, it is a Contract to Sell as both the trial court and the appellate
court declared in their Decisions.
Manila Metal Container Corporation v. PNB
Facts: Petitioner was the owner of a parcel of land and to be able to secure a
loan from PNB, petitioner executed a real party mortgage over the land. For
its failure to pay, PNB foreclose the mortgaged and sold at public auction for
which PNB was the winning bidder, with a one year period of redemption by
the petitioner. Petitioner requested that there be an extension of time to
redeem the property and it allowed to repurchase the property on
SALES REVIEWER 26 | P age
installment. Meanwhile,the Special Assets Management Department had
prepared a statement of accountof the petitioners obligation to which
amounted to 1.5M. petitioner thereafter remitted thte amount of 800,000 as
deposit to repurchase the property. When SAMD recommended to the
management of the PNB that petitioner be allowed to repurchase the
property at 1.5M, the management rejected and suggested that the property
be purchased at 2.7M which was later reduced to 1.9M. But petitioner
refused.
Petitioner now filed a case for delivery of title, annulment of mortgage and
specific performance with damages. It was its contention that it already
accepted the offer of SAMD to sell the property at 1.5M, hence, PNB could
no longer unilaterally withdraw its offer to sell the property. Its acceptance
of the offer resulted in a perfected contract of sale.
Respondent contended that the parties never graduated for the negotiation
stage all that transpires was an exchange of proposal and counter-
proposals and nothing more. There was still no agreement as to the amount
and the manner of payment. The account made by SAMD cannot be
classified as counter-offer because it was merely recital of facts of the
obligations of petitioners.
Issue: WON the P800,000 deposited is an earnest money.
Held -NO
The P800,000 could not be considered as an earnest money because an
earnest money forms part of the purchase price. In this case, it did not. The
P800,000 was merely a deposit that was accepted by PNB on the condition
that the purchase price is subject to the approval of the PNB Board.
Note: absence of 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.
Serrano v Caguiat G.R. No. 139173
Facts: Caguiat offered to buy the lot owned by spouses Serrano. Respondent
gave P100K as partial payment, in turn, petitioners gave a receipt with a
statement that respondent promised to pay the balance of the purchase
price. Respondents were leaving for abroad and sought to cancel the
transaction. Petitioners contend that there is no perfected contract as there
was no clear agreement between the parties as to the amount of
consideration.
SC: In holding that there is a perfected contract of sale, both courts mainly
relied on the earnest money given by respondent to petitioners (Art. 1482).
We are not convinced.
It is true that Article 1482 of the Civil Code provides that Whenever earnest
money is given in a contract of sale, it shall be considered as part of the price
and proof of the perfection of the contract. However, this article speaks of
earnest money given in a contract of sale. In this case, the earnest money
was given in a contract to sell. The earnest money forms part of the
consideration only if the sale is consummated upon full payment of the
purchase price. Now, since the earnest money was given in a contract to
sell, Article 1482, which speaks of a contract of sale, does not apply.
As previously discussed, the suspensive condition (payment of the balance by
respondent) did not take place. Clearly, respondent cannot compel
petitioners to transfer ownership of the property to him.
ARTICLES 1475-1488
I. RULES IN ORDINARY SALES
A. Form
a. General Rule (1483)
Art. 1483. Subject to the provisions of the Statute of Frauds and of any other
applicable statute, a contract of sale may be made in writing, or by word of
mouth, or partly in writing and partly by word of mouth, or may be inferred
from the conduct of the parties. (n)
SALES REVIEWER 27 | P age
-written agreement is not essential
-sale is consensual contract
1. Verbal agreement of sale
Caoili v. CA
FACTS: Caoili was a lessee in the property of respondent. Respondent
borrowed money from Caoili in the amount of Php 30,000 which they
stipulated would form part of their rentals. When rentals was paid off, they
entered into a not formal or written contract on the sale of the property.
They executed a "Receipt" denominated as an "Addendum to Agreement
dated August 8, 1990". It was stated they received from petitioners the sum
of P140,000.00, in addition to the partial payment of P60,000.00, the
"balance payable when the good title in the name of herein vendor is
delivered to the spouses." Yet respondent refused to execute document.
Respondent says that the Php 140,000 was for improvements and the Php
60,000 served as rental on the period they havent paying their rentals
(amounts were claimed as partial payments by Caoili. RTC and CA both
decided in favor of Caoili yet CA reduced the amount awarded.
Held:
1. (Not made in writing) The absence of a formal deed of sale does
not render the agreement null and void or without any effect. The provision
of Article 1358 of the Civil Code on the necessity of a public document is only
for convenience, not for validity or enforceability. It does not mean that no
contract has been perfected so long as the essential requisites of consent of
the contracting parties, object, and cause of the obligation concur. Under the
agreement, private respondent was obligated to deliver a good title to
petitioners and this condition is the operative act which would give rise to
the corresponding obligation of petitioners to pay the balance of the
purchase price. Since it is not disputed that private respondent has not
delivered a good title, petitioners have by law the right to either refuse to
proceed with the agreement or to waive that condition pursuant to Article
1545 of the Civil Code.
2. The Addendum being notarized is a prima facie evidence of the
facts stated therein.
2. Effect of lack of technical description in the contract
Naranja v. CA
Facts: Roque Naranja was the registered owner of a parcel of land,
denominated as Lot No. 4 in Consolidation-Subdivision Plan (LRC) Pcs-886,
Bacolod Cadastre, with an area of 136 square meters and covered by
Transfer Certificate of Title (TCT) No. T-18764. Roque was also a co-owner of
an adjacent lot, Lot No. 2, of the same subdivision plan, which he co-owned
with his brothers, Gabino and Placido Naranja. When Placido died, his one-
third share was inherited by his children, Nenita, Nazareto, Nilda, Naida and
Neolanda, all surnamed Naranja, herein petitioners. Lot No. 2 is covered by
TCT No. T-18762 in the names of Roque, Gabino and the said children of
Placido. TCT No. T-18762 remained even after Gabino died. The other
petitioners Serafin Naranja, Raul Naranja, and Amelia Naranja-Rubinos
are the children of Gabino.
Roque had no other source of income except for the P200.00 monthly rental
of his two properties. To show his gratitude to Belardo, Roque sold Lot No. 4
and his one-third share in Lot No. 2 to Belardo on August 21, 1981, through a
Deed of Sale of Real Property which was duly notarized by Atty. Eugenio
Sanicas. The Deed of Sale reads:
I, ROQUE NARANJA, of legal age, single, Filipino and a resident of Bacolod
City, do hereby declare that I am the registered owner of Lot No. 4 of the
Cadastral Survey of the City of Bacolod, consisting of 136 square meters,
more or less, covered by Transfer Certificate of Title No. T-18764 and a co-
owner of Lot No. 2, situated at the City of Bacolod, consisting of 151 square
meters, more or less, covered by Transfer Certificate of Title No. T-18762 and
my share in the aforesaid Lot No. 2 is one-third share.
Issue:
SALES REVIEWER 28 | P age
W/N the sale was valid.
Held:
To be valid, a contract of sale need not contain a technical
description of the subject property. Contracts of sale of real property have no
prescribed form for their validity; they follow the general rule on contracts
that they may be entered into in whatever form, provided all the essential
requisites for their validity are present. The failure of the parties to specify
with absolute clarity the object of a contract by including its technical
description is of no moment. What is important is that there is, in fact, an
object that is determinate or at least determinable, as subject of the contract
of sale. The deed of sale clearly identifies the subject properties by indicating
their respective lot numbers, lot areas, and the certificate of title covering
them.
One who alleges any defect, or the lack of consent to a contract by
reason of fraud or undue influence, must establish by full, clear and
convincing evidence, such specific acts that vitiated the partys consent.
Petitioners adduced no proof that Roque had lost control of his mental
faculties at the time of the sale. Undue influence is not to be inferred from
age, sickness, or debility of body, if sufficient intelligence remains.
The Deed of Sale which states receipt of which in full I hereby
acknowledge to my entire satisfaction is an acknowledgment receipt in
itself. Moreover, the presumption that a contract has sufficient consideration
cannot be overthrown by a mere assertion that it has no consideration.
Heirs are bound by contracts entered into by their predecessors-in-
interest. Having been sold already to Belardo, the two properties no longer
formed part of Roques estate which petitioners could have inherited.
b) Statute of Frauds applied
Statute of Frauds applies only in cases for
a) Specific performance, and
b) For damages based on breach of contract
Where the contract of sale has already been consummated, its enforcement
cannot be barred by the Statute of Frauds, which applies on executory
agreement .
c) When form is essential
1)Under the Statute of Frauds
Realty- a sale of real property orally is valid. The buyer may compel
the seller to execute a formal deed of sale to be enforceable.
Goods and chattels at a price of not less than P 500.
2) Sale of land through an Agent (1874) authority shall be in writing.
B. Perfection of a contract of sale (Art. 1475)
- At the moment there is a meeting of the minds (consensual)
- The parties may reciprocally demand performance, subject to the
provisions of law governing the form of contracts
Requirements for perfection:
a. When parties are face to face when an offer is accepted without
conditions nor qualifications
b. Thru correspondence or telegram when the offeror has knowledge of
the acceptance
c. When sale is subject to a suspensive condition from the moment the
condition is fulfilled
Mere perfection of the contract does not necessarily transfer ownership.
SALES REVIEWER 29 | P age
Romulo Coronel, et al vs. CA and Alcaraz G.R. No. 103577, October 7, 1996
FACTS: The Coronels sold their inherited house and lot to Ramona Patricia
Alcaraz, with the conditions that they will effect the transfer of the title
from their deceased father to their names upon receipt of the down
payment, and after the transfer they will execute a Deed of Sale in favor of
Alcaraz. The conditions were embodied in a document labeled Receipt of
Down Payment. Alcaraz paid, and the title was transferred in the Coronels
name. However, the Coronels sold the property to Catalina Mabanag,
rescinded the contract with Alcaraz, and eventually executed a Deed of Sale
in favor of Mabanag. In the complaint for specific performance filed against
them, the Coronels contended that theirs was merely an executory contract
to sell, hence there was no perfected contract of sale.
received them thereby having no consent, their contract could not have
been perfected.
HELD: The purchase orders constituted accepted offers when Tan supplied
the electrical materials to MMC. Hence, petitioner cannot evade its
obligation to pay by claiming lack of consent to the perfected contracts of
sale. The invoices furnished the details of the transactions.
Note: the purchase orders constituted accepted offers when Tan supplied
electrical materials to MMC.
1) The buyer has the right to a reasonable opportunity for examination
before acceptance (1584) except when a carrier delivers C.O.D.

HELD: The parties had agreed to a conditional contract of sale, 2)Sale by description and/or sample (1481): The bulk of the goods must
consummation of which is subject only to the successful transfer of the correspond to either or both.
certificate of title from the name of the petitioners father to their names.
b. Place of Perfection
Since the condition contemplated by the parties which is the issuance of a
certificate of title in petitioners names was fulfilled on February 6, 1985, 1) where there was meeting of the minds
the respective obligations of the parties under the contract of sale became
mutually demandable. 2) in case of acceptance through letter or telegram, in the place where the
offer was made.
Note: even if document was denominated Receipt of down payment from
that moment on, there was a perfected contract of sale albeit conditional C. Expenses
(i.e. transfer of title to heirs and payment of balance of purchase price)
a. Of Execution and Registration of the sale (1487) are borne by the Seller

b. Of putting the goods in a deliverable state (1521, last par.) are also borne
Manila Mining Corporation (MMC) vs. Miguel Tan G.R. No. 171702, by the Seller.
February 12, 2009
II Rules on Special Sales
FACTS: MMC ordered and received various electrical materials from Miguel
Tan, and upon failure to pay the full amount despite several demands, Tan A. Sales at Auction
filed a collection suit. MMC contended that the absence of stamp marks on
the original invoices and purchase orders negated the receipt of said a. Rules
documents by MMCs representatives, a requisite for payment. Having not

SALES REVIEWER 30 | P age

 a. Sales of separate lots are separate contracts of sale supplemental sale with higher consideration at the instance of only one
party(herein petitioner) could no longer be validly executed)
b. When perfected when the auctioneer announces its
perfection by the fall of the hammer, or in other customary manner - Before the hammer falls:

c. Before the fall of the hammer o The bidder may retract his bid. The reason behind this is that every bidder
is merely an offer and therefore, before it is accepted, it may be withdrawn
The bidder may retract his bid
o The auctioneer may also withdraw the goods from the sale EXCEPT if the
The auctioneer may withdraw the goods from the sale auction has been announced to be WITHOUT RESERVE.

EXCEPTION: If the auction has been announced to be without 2) Auction Sale where the seller reserved the right to reject any and all the
reserve bids

d. Limitations of the seller: Case: Leoquinco vs. Postal Savings Bank

1. The seller himself cannot bid - Because of the expressed stipulation that PSB reserved to themselves the
right to reject any and all bids, the bid of petitioner may be rejected.
2. He cannot employ or induce any person to bid on his behalf Petitioners participation in the auction means submission or being bounded
to the rules of auction whether the purchaser knew the rules or not
EXCEPTION: If right to bid has been expressly reserved
- Limitations of the seller:
e. Limitations of the auctioneer (if he is not the seller);
o The seller himself cannot bid
1. The auctioneer cannot bid
o He cannot employ or induce any person to bid on his behalf (people who
2. He cannot employ or induce to bid on behalf of the seller bid for the seller, but are not themselves bound, are called by-bidders or
puffers)
3. He cannot knowingly take any bid from the seller or any
person employed by him. o EXCEPTION: if right to bid has been expressly reserved and that notice of
such was given
Cases:
- Limitations of the auctioneer (if he is not the seller)
The sale by auction is perfected when the auctioneer announces its
perfection by the fall of the hammer or in other customary manner (Case: o The auctioneer cannot bid
Dizon vs. Dizon Considering that the auction sale has been perfected, a
o He cannot employ or induce to bid on behalf of the seller

SALES REVIEWER 31 | P age

o He cannot knowingly take any bid from the seller or any person employed
by him
In an execution sale:
Judgment Creditor will have a writ to garnish or attach the property of the
debtor and sheriff sells it in a public sale
Judgment debtor has the right to redeem the property within 1 year
Note: The owner of the property offered for sale at auction has the right to
prescribed the manner, condition and terms of sale and where these are
reasonable and are made known to the buyer, they are binding upon them.
Q: Why cant the seller participate in the bidding?
A: He cannot bid because in doing such he can manipulate the biddings of
other participants
Note: it is the seller who will set the terms and condition of the sale. If the
seller will bid in the auction without reserving such right and informing the
public, the sales will be considered as fraudulent.
Q: Will such fraud affect the perfection of the contract?
A: Yes, the contract will be VOID with NO force and effect
B. Sales by sample and/ or description (1481)
Sales by Sample and/or Description (1481)
a. The bulk of the goods must correspond to either or both
b. The buyer must have an opportunity to compare
c. Effect: the contract may be rescinded at the option of the buyer
PACIFIC COMMERCIAL COMPAN vs. ERMITA MARKET & COLD STORES, INC.
Plaintiff contracted to sell to defendant an automatic refrigerating machine
as per description stated in the sales contract. The machine was delivered
and by mutual agreement the vendor installed the machine. The machine did
not give the results expected from it, and the defendant refused to pay the
balance of its purchase price and the cost of the installation of the machine.
Thereupon plaintiff brought this action.
Held: The fact that the defendant could not use the machine satisfactorily in
the three cold stores divisions cannot be attributed to plaintiff's fault; the
machine was strictly in accordance with the written contract between the
parties, and the defendant can hardly honestly say that there was any
deception by the plaintiff.
Sale of Personalty payable by Installments (Recto Law)
a. Alternative remedies in case of non-payment (1484)
1) To exact fulfillment of the obligation
2) Cancel the sale should the vendee fail to pay two or more
installments
i) This is an exception to 1191
3) Foreclose the chattel mortgage (if one was constituted)
should the vendee fail to pay two or more installments. But
there may be no further action to recover the unpaid
balance. A contrary stipulation is void.
Cases:
1) Promissory note with chattel mortgage
MACONDRAY V DE SANTOS
SALES REVIEWER 32 | P age
Granting that there was a contract between the parties for the sale of
personal property payable in installments, which does not clearly appear in
the record before this court, the complaint does not allege nor does it appear
in the record that there was a failure to pay twoor more installments. On the
contrary the promissory note, copied in the complaint, was executed January
11, 1934, and, according to the complaint, on or about January 21, 1934,the
automobile, while in the possession of the defendant, was wrecked and by
reason of the failure of the defendant to replace said automobile or to pay
the value thereof the plaintiff foreclosed the mortgage on what remained of
the wrecked automobile and brought this suit to recover the balance due on
the promissory note executed in its favor.
In order to apply the provisions of article 1454-A of the Civil Code it must
appear that there was a contract for the sale of personal property payable in
installments and that there has been a failure to pay two or more
installments.
2) Sale of car on straight term
LEVY HERMANOS V GERVACIO
In Macondray & Co. vs. De Santos (33 OG 2170), it was held that in order to
apply the provisions of article 1454-A of the Civil Code it must appear that
there was a contract for the sale of personal property payable in installments
and that there has been a failure to pay two or more installments. The
contract, in the present case, while a sale of personal property, is not,
however, one on installments, but on straight term, in which the balance,
after payment of the initial sum, should be paid in its totality at the time
specified in the promissory note.
The transaction is not, therefore, the one contemplated in Act 4122 and
accordingly the mortgagee is not bound by the prohibition therein contained
as to its right to the recovery of the unpaid balance.
Theoretically, there is no difference between paying the price in two
installments and paying the same partly in cash and partly in one installment,
in so far as the size of each partial payment is concerned; but in actual
practice the difference exists, for, according to the regular course of
business, in contracts providing for payment of the price in two installments,
there is generally a provision for initial payment.
A cash payment cannot be considered as a payment by installment, and even
if it can be so considered, still the law does not apply, for it requires non-
payment of two or more installments in order that its provisions may be
invoked. In the present case, only one installment was unpaid.
3) Sale of Truck on installment where foreclosure was not pursued
SPOUSES ROMULO DE LA CRUZ and DELIA DE LA CRUZ, and DANIEL
FAJARDO vs. ASIAN CONSUMER AND INDUSTRIAL FINANCE CORPORATION
and the HONORABLE COURT OF APPEALS,
Facts:
On 22 September 1982, the spouses Romulo de la Cruz and Delia de la Cruz,
and one Daniel Fajardo, petitioners herein, purchased on installment basis
one (1) unit Hino truck from Benter Motor Sales Corporation (BENTER for
brevity). To secure payment, they executed in favor of BENTER a chattel
mortgage over the vehicle 1 and a promissory note for P282,360.00 payable
in thirty (30) monthly installments of P9,412.00. 2 On the same date, BENTER
assigned its rights and interest over the vehicle in favor of private respondent
Asian Consumer and Industrial Finance Corporation (ASIAN for brevity). 3
Although petitioners initially paid some installments they subsequently
defaulted on more than two (2) installments. Thereafter, notwithstanding
the demand letter of ASIAN, 4 petitioners failed to settle their obligation.
On 26 September 1984, by virtue of a petition for extrajudicial foreclosure of
chattel mortgage, the sheriff attempted to repossess the vehicle but was
unsuccessful because of the refusal of the son of petitioner, Rolando de la
Cruz to surrender the same. Hence, the return of the sheriff that the service
was not satisfied. LLpr
On 10 October 1984, petitioner Romulo de la Cruz brought the vehicle to the
office of ASIAN and left it there where it was inventoried and inspected. 5
SALES REVIEWER 33 | P age
On 27 November 1984, ASIAN filed an ordinary action with the court a quo
for collection of the balance of P196,152.99 of the purchase price, plus
liquidated damages and attorney's fees.
Petitioners take exception. They nevertheless insist that he should not later
be allowed to change course midway in the process, abandon the foreclosure
and shift to other remedies such as collection of the balance, especially after
having recovered the mortgaged chattel from them and while retaining
possession thereof.
HELD:
The instant case is covered by the so-called "Recto Law", now Art. 1484 of
the New Civil Code, which provides: "In a contract of sale of personal
property the price of which is payable in installments, the vendor may
exercise any of the following remedies: (1) Exact fulfillment of the obligation,
should the vendee fail to pay; (2) Cancel the sale, should the vendee's failure
to pay cover two or more installments; (3) Foreclose the chattel mortgage on
the thing sold, if one has been constituted, should the vendee's failure to pay
cover two or more installments. In this case, he shall have no further action
against the purchaser to recover any unpaid balance of the price. Any
agreement to the contrary shall be void." In this jurisdiction, the three (3)
remedies provided for in the "Recto Law" are alternative and not cumulative;
the exercise of one would preclude the other remedies. Consequently,
should the vendee-mortgagor default in the payment of two or more of the
agreed installments, the vendor-mortgagee has the option to avail of any of
these three (3) remedies: either to exact fulfillment of the obligation, to
cancel the sale, or to foreclose the mortgage on the purchased chattel, if one
was constituted. (Pacific Commercial Co. vs. De la Rama)
It is thus clear that while ASIAN eventually succeeded in taking possession of
the mortgaged vehicle, it did not pursue the foreclosure of the mortgage as
shown by the fact that no auction sale of the vehicle was ever conducted.
"Under the law, the delivery of possession of the mortgaged property to the
mortgagee, the herein appellee, can only operate to extinguish appellant's
liability if the appellee had actually caused the foreclosure sale of the
mortgaged property when it recovered possession thereof. Consequently, in
the case before Us, there being no actual foreclosure of the mortgaged
property, ASIAN is correct in resorting to an ordinary action for collection of
the unpaid balance of the purchase price.
4) MAGNA VS COLARINA
Undoubtedly the principal object of the above amendment (referring to Act
4122 amending
Art. 1454, Civil Code of 1889) was to remedy the abuses committed in
connection with the foreclosure of chattel mortgages. This amendment
prevents mortgagees from seizing the mortgaged property, buying it at
foreclosure sale for a low price and then bringing the suit against the
mortgagor for a deficiency judgment. The almost invariable result of this
procedure was that the mortgagor found himself minus the property and still
owing practically the full amount of his original indebtedness.
In its Memorandum before us, petitioner resolutely declared that it has
opted for the remedy provided under Article 1484(3) of the Civil Code, that
is, to foreclose the chattel mortgage.
It is, however, unmistakable from the Complaint that petitioner preferred to
avail itself of the first and third remedies under Article 1484, at the same
time suing for replevin. For this reason, the Court of Appeals justifiably set
aside the decision of the RTC. Perusing the
Complaint, the petitioner, under its prayer number 1, sought for the
payment of the unpaid amortizations which is a remedy that is provided
under Article 1484(1) of the Civil Code, allowing an unpaid vendee to exact
fulfillment of the obligation. At the same time, petitioner prayed that
Colarina be ordered to surrender possession of the vehicle so that it may
ultimately be sold at public auction, which remedy is contained under Article
1484(3). Such a scheme is not only irregular but is a flagrant circumvention of
the prohibition of the law. By praying for the foreclosure of the chattel,
Magna Financial Services Group, Inc. renounced whatever claim it may have
under the promissory note.
SALES REVIEWER 34 | P age
Article 1484, paragraph 3, provides that if the vendor has availed himself of be leases of personal property with option to buy by virtue of Art. 1485. The
the right to foreclose the chattel mortgage, he shall have no further action condition that the lessor has deprived the lessee of possession or enjoyment of the
thing for the purpose of applying Art. 1485 was fulfilled in this case by the filing by
against the purchaser to recover any unpaid balance of the purchase price. petitioner of the complaint for replevin to recover possession of movable property.
Any agreement to the contrary shall be void. In other words, in all By virtue of the writ of seizure issued by the trial court, the deputy sheriff seized the
proceedings for the foreclosure of chattel mortgages executed on chattels vehicle on August 6, 1986 and thereby deprived private respondents of its use. The
which have been sold on the installment plan, the mortgagee is limited to the car was not returned to private respondent until April 16, 1989, after two (2) years
and eight (8) months, upon issuance by the Court of Appeals of a writ of execution.
property included in the mortgage.
The employee having found to have paid more than the value of the thing P60,000
should be considered as payment of the full purchase price. It further petitioner to
D. Leases of personalty with option to buy. pay private respondents the amount of P431.94 as excess payment, as well as
rentals at the rate of P1,000 a month for depriving private respondents of the use of
their car.
Cases:
Elisco Tool and Manufacturing Corp. vs. CA
PCI Leasing and finance vs. Giraffe X
Rolando Lantan was employed at the Elisco Tool Manufacturing Corporation as head of its
Giraffe entered into an agreement with PCI leasing over 2 machines worth P8,000,000. Giraffe
cash department. On January 9, 1980, he entered into an agreement with the company, called
agreed to pay P116,878.21 monthly and P181,362 for the other machine. It has also remitted
lease with option to buy car within 5 years. That owner ship shall retain with the company
the amount of P3,120,000 as goodwill. A year into the life of the lease agreement, respondent
until full payment and all necessary expenses for maintenance shall be borne by the
defaulted in paying the monthly rentals. PCI Sued Giraffe for possession of the machineries
employee. Subsequently the company has ceased operation and the employee was laid off. It
and for payment of the remaining term.
took the company 2 years to institute proceedings.
Issue: Whether the underlying lease agreement are covered between 1484 and 1485 of the
Sellers desirous of making conditional sales of their goods, but who do not wish
New Civil Code?
openly to make a bargain in that form, for one reason or another, have frequently
SC: Yes they are. Evidently the contract above is in reality an option to purchase the
resorted to the device of making contracts in the form of leases either with options
equipment.
to the buyer to purchase for a small consideration at the end of term, provided the
The Recto Law
so-called rent has been duly paid, or with stipulations that if the rent throughout the
Art. 1484. In a contract of sale of personal property the price of which is payable in
term is paid, title shall thereupon vest in the lessee. It is obvious that such
installments, the vendor may exercise any of the following
transactions are leases only in name. The so-called rent must necessarily be
3.) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the
regarded as payment of the price in installments since the due payment of the
vendees failure to pay cover two or more installments. In this case he shall have no further
agreed amount results, by the terms of the bargain, in the transfer of title to the
action against the purchaser to recover any unpaid balance of the price. Any agreement
lessee.
contrary shall be void.
The so-called monthly rentals are in truth form monthly amortization on the price of Art. 1485. The preceding article shall be applied to contract purporting to be leases of
the car. The contract being one of sale on installment, the Court of Appeals correctly personal property with the option to buy, when the leasor deprived the lesee of the
applied to it the following provisions of the Civil Code: possession or enjoyment of the thing.
Art. 1484. In a contract of sale of personal property the price of which is payable in
Therefore Giraffe is not liable to pay for the remaining term since the machineries
installments, the vendor may exercise any of the following remedies:
has been foreclosed.
(1) Exact fulfillment of the obligation, should the vendee fail to pay;
PCI LEASING- GIRAFFE lease agreement is in reality a lease with an option to
(2) Cancel the sale, should the vendee's failure to pay cover two or more
purchase the equipment. This has been made manifest by the actions of the
installments;
petitioner itself, foremost of which is the declarations made in its demand letter to
(3) Foreclose the chattel mortgage on the thing sold, if one has been
the respondent. There could be no other explanation than that if the respondent
constituted, should the vendee's failure to pay cover two or more
paid the balance, then it could keep the equipment for its own; if not, then it should
installments. In this case, he shall have no further action against the
return them. This is clearly an option to purchase given to the respondent. Being so,
purchaser to recover any unpaid balance of the price. Any agreement to
Article 1485 of the Civil Code should apply.
the contrary shall be void.
The remedies provided for in Art. 1484 are alternative, not cumulative. The exercise
of one bars the exercise of the others. limitation applies to contracts purporting to

SALES REVIEWER 35 | P age

E. Sale of Real Property on Installments ( Maceda Law, RA 6552) Reality
Installment Buyer Protection Act.
a. Applicability- Real estate bought on installment basis.
Transactions covered: sale/ financing of real estate on installment payments,
including residential condominium apartments but:
1. industrial lots
2. commercial bldg..
3. sales to tenants under RA 3844
b. Rules when the buyer has paid at least 2 years of installments.
1.) Rights of Buyers
I. In case of default in payment Section 3 of R.A. No. 6552 provided for the
rights of the buyer in case of default in the payment of succeeding
installments, where he has already paid at least two (2) years of installments,
thus:
(b) If the contract is cancelled, the seller shall refund to the buyer the cash
surrender value of the payments on the property equivalent to fifty per cent
of the total payments made; provided, that the actual cancellation of the
contract shall take place after thirty days from receipt by the buyer of the
notice of cancellation or the demand for rescission of the contract by a
notarial act and upon full payment of the cash surrender value to the buyer."
Right to update payments
Right to assign/ reinstate contract (must be in Public document)
Section 5. Under Section 3 and 4, the buyer shall have the right to sell his
rights or assign the same to another person or to reinstate the contract by
updating the account during the grace period and before actual cancellation
of the contract. The deed of sale or assignment shall be done by notarial act.
1. The buyer has the right to sell/assign his right to another person
(must be done by notarial act)
2. The buyer has the right to reinstate the contract by upgrading the
account during the grace period and before actual cancellation of the
contract.
Right to advance payment w/out interest
"(a) To pay, without additional interest, the unpaid installments due
within the total grace period earned by him, which is hereby fixed at
the rate of one month grace period for every one year of installment
payments made; x x x
1. The buyer has the right to pay in advance any installment/ the full
balance of the purchase price anytime w/out interest and to have
such full payment annotated in the certificate of title.
Section 6. The buyer shall have the right to pay in advance any installment or
the full unpaid balance of the purchase price any time without interest and
to have such full payment of the purchase price annotated in the certificate
of title covering the property.
NOTE: to be refunded of the cash surrender value of his payments if the
contract is cancelled.
i) Actual cancellation takes place:
1)after 30 days from receipt of notice of cancellation by notarial act.
2) upon full payment of cash surrender value.
Sale of real property on installments (Maceda Law [RA 6552])
a.When the buyer has paid at least two years of installments
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 1)Rights of buyer:
ii) Default in payment
aa) To pay without additional interest, the unpaid installments (cash
surrender value) within the grace period
bb) Grace period is one month for every year of installment payments made
Limitation: The right can be exercised only once every 5 years
ii) Cancellation of sale
aa) Up to 5 years installments, refund of 50% of payments
bb) After 5 years of installments, additional 5%/year but shall not
exceed 90% of total payments made
When cancellation takes effect:
aa) After 30 days from receipt by the buyer of (notarized) notice of
cancellation; or
bb) After 30 days from receipt by the buyer of notarial demand for rescission
*In both cases after full payment of cash surrender value
c. When the buyer has paid less than two years installments
1) The buyer has at least 60 days grace period within which to pay the
installment due
2) After the grace period, contract may be cancelled as in B above
(If the buyer fails to pay the installments due at the expiration of the grace
period, the seller may cancel the contract after thirty days from receipt by
the buyer of the notice of cancellation or the demand for rescission of the
contract by a notarial act.)
Pagtalunan vs. De Manzano
(Patricio), petitioners stepfather and predecessor-in-interest, entered into a
Contract to Sell with respondent, wife of Patricios former mechanic,
Teodoro Manzano, whereby the former agreed to sell, and the latter to buy,
a house and lot which formed half of a parcel of land. The consideration of
P17,800 was agreed to be paid in the following manner: P1,500 as
downpayment upon execution of the Contract to Sell, and the balance to be
paid in equal monthly installments of P150 on or before the last day of each
month until fully paid.
It was also stipulated in the contract that respondent could immediately
occupy the house and lot; that in case of default in the payment of any of the
installments for 90 days after its due date, the contract would be
automatically rescinded without need of judicial declaration, and that all
payments made and all improvements done on the premises by respondent
would be considered as rentals for the use and occupation of the property or
payment for damages suffered, and respondent was obliged to peacefully
vacate the premises and deliver the possession thereof to the vendor.
Petitioner claimed that respondent paid only P12,950. She allegedly stopped
paying after December 1979 due to personal problems with the petitioner.
Petitioner asserted that when respondent ceased paying her installments,
her status of buyer was automatically transformed to that of a lessee.
Therefore, she continued to possess the property by mere tolerance of
Patricio.
Issue: Whether the respondent has the right to occupy the premises?
SC: Yes, According to Republic Act No. 6552 -- "The Realty Installment Buyer
Protection Act," or more popularly known as the Maceda Law
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(b) If the contract is cancelled, the seller shall refund to the buyer the cash
surrender value of the payments on the property equivalent to fifty percent
of the total payments made and, after five years of installments, an
additional five percent every year but not to exceed ninety percent of the
total payments made: Provided, That the actual cancellation of the contract
shall take place after thirty days from receipt by the buyer of the notice of
cancellation or the demand for rescission of the contract by a notarial act
and upon full payment of the cash surrender value to the buyer.9
The Court agrees with petitioner that the cancellation of the Contract to Sell
may be done outside the court particularly when the buyer agrees to such
cancellation.
However, the cancellation of the contract by the seller must be in accordance
with Sec. 3.
Firstly the demand letter made by the petitioner to vacate the premises does
not constitute notice of cancellation. Second petitioner cannot insist on
compliance with the requirement by assuming that the cash surrender value
payable to the buyer had been applied to rentals of the property after
respondent failed to pay the installments due.
Therefore a deed of absolute sale shall be made after payment of purchase
price.
c. Rules when the buyer has paid less than 2 years of installments ( Refer to
case below)
1) where the buyer paid less than 2 years installments
Ramos vs Heruela
Down payments, deposits or options on the contract shall be included in the
computation of the total number of installments made.
Sec. 4.In case where less than two years of installments were paid, the seller
shall give the buyer a grace period of not less than sixty days from the date
the installment became due. If the buyer fails to pay the installments due at
the expiration of the grace period, the seller may cancel the contract after
thirty days from receipt by the buyer of the notice of cancellation or the
demand for rescission of the contract by a notarial act.
In this case, the spouses Heruela paid less than two years of installments.
Thus, Section 4 of RA 6552 applies. However, there was neither a notice of
cancellation nor demand for rescission by notarial act to the spouses
Heruela. In Olympia Housing, Inc. v. Panasiatic Travel Corp., 22 the Court
ruled that the vendor could go to court to demand judicial rescission in lieu
of a notarial act of rescission. However, an action for reconveyance is not an
action for rescission. The Court explained in Olympia:
The action for reconveyance filed by petitioner was predicated on an
assumption that its contract to sell executed in favor of respondent buyer
had been validly cancelled or rescinded. The records would show that,
indeed, no such cancellation took place at any time prior to the institution of
the action for reconveyance. . . .
xxx xxx xxx
. . . Not only is an action for reconveyance conceptually different from an
action for rescission but that, also, the effects that flow from an affirmative
judgment in either case would be materially dissimilar in various respects.
The judicial resolution of a contract gives rise to mutual restitution which is
not necessarily the situation that can arise in an action for reconveyance.
Additionally, in an action for rescission (also often termed as resolution),
unlike in an action for reconveyance predicated on an extrajudicial rescission
(rescission by notarial act), the Court, instead of decreeing rescission, may
authorize for a just cause the fixing of a period. 23
In the present case, there being no valid rescission of the contract to sell, the
action for reconveyance is premature. Hence, the spouses Heruela have not
lost the statutory grace period within which to pay. The trial court should
have fixed the grace period to sixty days conformably with Section 4 of RA
6552.
2) Sale of subdivision lot on installments where the buyer defaulted.
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Active Realty Corporation vs. Daroya
ACTIVE REALTY & DEVELOPMENT CORPORATION entered into a Contract to
Sell1 with respondent NECITA DAROYA whereby the latter agreed to buy a
515 sq. m. lot for P224,025.00 in petitioners subdivision to be paid in
amortization within 5 years, valued at P346,367.00, a figure higher than that
stated as the contract price. The buyer defaulted in three (3) monthly
amortizations. Petitioner sent respondent a notice of cancellation2 of their
contract to sell. When respondent offered to pay for the balance of the
contract price, petitioner refused as it has allegedly sold the lot to another
buyer. The respondent has already paid 4 years. already more than the
contract price.
Issue: Whether or not the petitioner can be compelled to refund to the
respondent the value of the lot or to deliver a substitute lot at respondents
option?
SC: Yes, According to Republic Act No. 6552 -- "The Realty Installment Buyer
Protection Act," or more popularly known as the Maceda Law
More specifically, Section 3 of R.A. No. 6552 provided for the rights of the
buyer in case of default in the payment of succeeding installments, where he
has already paid at least two (2) years of installments, thus:
"(a) To pay, without additional interest, the unpaid installments due within
the total grace period earned by him, which is hereby fixed at the rate of one
month grace period for every one year of installment payments made; x x x
(b) If the contract is cancelled, the seller shall refund to the buyer the cash
surrender value of the payments on the property equivalent to fifty per cent
of the total payments made; provided, that the actual cancellation of the
contract shall take place after thirty days from receipt by the buyer of the
notice of cancellation or the demand for rescission of the contract by a
notarial act and upon full payment of the cash surrender value to the buyer."
We hold that the contract to sell between the parties remains valid and
subsisting. Following Section 3(a) of R.A. No. 6552, respondent has the right
to offer to pay for the balance of the purchase price, without interest, which
she did in this case. However since the lot has been sold to another party it is
only just and equitable that the petitioner be ordered to refund to
respondent the actual value of the lot resold, i.e., P875,000.00, with 12%
interest per annum.
F. PD No. 957
a. Important provisions
Sec. 4, 5, 7,18,23 ,24 ,25
Section 4. Registration of Projects The registered owner of a parcel of land
who wishes to convert the same into a subdivision project shall submit his
subdivision plan to the Authority which shall act upon and approve the same,
upon a finding that the plan complies with the Subdivision Standards' and
Regulations enforceable at the time the plan is submitted. The same
procedure shall be followed in the case of a plan for a condominium project
except that, in addition, said Authority shall act upon and approve the plan
with respect to the building or buildings included in the condominium project
in accordance with the National Building Code (R.A. No. 6541).
The subdivision plan, as so approved, shall then be submitted to the Director
of Lands for approval in accordance with the procedure prescribed in Section
44 of the Land Registration Act (Act No. 496, as amended by R.A. No. 440):
Provided, that it case of complex subdivision plans, court approval shall no
longer be required. The condominium plan as likewise so approved, shall be
submitted to the Register of Deeds of the province or city in which the
property lies and the same shall be acted upon subject to the conditions and
in accordance with the procedure prescribed in Section 4 of the
Condominium Act (R.A. No. 4726).
The owner or the real estate dealer interested in the sale of lots or units,
respectively, in such subdivision project or condominium project shall
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register the project with the Authority by filing therewith a sworn
registration statement containing the following information:
(a) Name of the owner;
(b) The location of the owner's principal business office, and if the owner is a
non-resident Filipino, the name and address of his agent or representative in
the Philippines is authorized to receive notice;
(c) The names and addresses of all the directors and officers of the business
firm, if the owner be a corporation, association, trust, or other entity, and of
all the partners, if it be a partnership;
(d) The general character of the business actually transacted or to be
transacted by the owner; and
(e) A statement of the capitalization of the owner, including the authorized
and outstanding amounts of its capital stock and the proportion thereof
which is paid-up.
The following documents shall be attached to the registration statement:
(a) A copy of the subdivision plan or condominium plan as approved in
accordance with the first and second paragraphs of this section.
(b) A copy of any circular, prospectus, brochure, advertisement, letter, or
communication to be used for the public offering of the subdivision lots or
condominium units;
(c) In case of a business firm, a balance sheet showing the amount and
general character of its assets and liabilities and a copy of its articles of
incorporation or articles of partnership or association, as the case may be,
with all the amendments thereof and existing by-laws or instruments
corresponding thereto.
(d) A title to the property which is free from all liens and encumbrances:
Provided, however, that in case any subdivision lot or condominium unit is
mortgaged, it is sufficient if the instrument of mortgage contains a
stipulation that the mortgagee shall release the mortgage on any subdivision
lot or condominium unit as soon as the full purchase price for the same is
paid by the buyer.
The person filing the registration statement shall pay the registration fees
prescribed therefor by the Authority.
Thereupon, the Authority shall immediately cause to be published a notice of
the filing of the registration statement at the expense of the applicant-owner
or dealer, in two newspapers general circulation, one published in English
and another in Pilipino, once a week for two consecutive weeks, reciting that
a registration statement for the sale of subdivision lots or condominium units
has been filed in the National Housing Authority; that the aforesaid
registration statement, as well as the papers attached thereto, are open to
inspection during business hours by interested parties, under such
regulations as the Authority may impose; and that copies thereof shall be
furnished to any party upon payment of the proper fees.
The subdivision project of the condominium project shall be deemed
registered upon completion of the above publication requirement. The fact
of such registration shall be evidenced by a registration certificate to be
issued to the applicant-owner or dealer.
Section 5. License to sell. Such owner or dealer to whom has been issued a
registration certificate shall not, however, be authorized to sell any
subdivision lot or condominium unit in the registered project unless he shall
have first obtained a license to sell the project within two weeks from the
registration of such project.
The Authority, upon proper application therefor, shall issue to such owner or
dealer of a registered project a license to sell the project if, after an
examination of the registration statement filed by said owner or dealer and
all the pertinent documents attached thereto, he is convinced that the owner
or dealer is of good repute, that his business is financially stable, and that the
proposed sale of the subdivision lots or condominium units to the public
would not be fraudulent.
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Section 7. Exempt transactions. A license to sell and performance bond shall
not be required in any of the following transactions:
(a) Sale of a subdivision lot resulting from the partition of land among co-
owners and co-heirs.
(b) Sale or transfer of a subdivision lot by the original purchaser thereof and
any subsequent sale of the same lot.
(c) Sale of a subdivision lot or a condominium unit by or for the account of a
mortgagee in the ordinary course of business when necessary to liquidate a
bona fide debt.
Section 18. Mortgages. No mortgage on any unit or lot shall be made by the
owner or developer without prior written approval of the Authority. Such
approval shall not be granted unless it is shown that the proceeds of the
mortgage loan shall be used for the development of the condominium or
subdivision project and effective measures have been provided to ensure
such utilization. The loan value of each lot or unit covered by the mortgage
shall be determined and the buyer thereof, if any, shall be notified before the
release of the loan. The buyer may, at his option, pay his installment for the
lot or unit directly to the mortgagee who shall apply the payments to the
corresponding mortgage indebtedness secured by the particular lot or unit
being paid for, with a view to enabling said buyer to obtain title over the lot
or unit promptly after full payment thereto;
Section 23. Non-Forfeiture of Payments. No installment payment made by a
buyer in a subdivision or condominium project for the lot or unit he
contracted to buy shall be forfeited in favor of the owner or developer when
the buyer, after due notice to the owner or developer, desists from further
payment due to the failure of the owner or developer to develop the
subdivision or condominium project according to the approved plans and
within the time limit for complying with the same. Such buyer may, at his
option, be reimbursed the total amount paid including amortization interests
but excluding delinquency interests, with interest thereon at the legal rate.
Section 24. Failure to pay installments. The rights of the buyer in the event of
this failure to pay the installments due for reasons other than the failure of
the owner or developer to develop the project shall be governed by Republic
Act No. 6552.
Where the transaction or contract was entered into prior to the effectivity of
Republic Act No. 6552 on August 26, 1972, the defaulting buyer shall be
entitled to the corresponding refund based on the installments paid after the
effectivity of the law in the absence of any provision in the contract to the
contrary.
Section 25. Issuance of Title. The owner or developer shall deliver the title of
the lot or unit to the buyer upon full payment of the lot or unit. No fee,
except those required for the registration of the deed of sale in the Registry
of Deeds, shall be collected for the issuance of such title. In the event a
mortgage over the lot or unit is outstanding at the time of the issuance of the
title to the buyer, the owner or developer shall redeem the mortgage or the
corresponding portion thereof within six months from such issuance in order
that the title over any fully paid lot or unit may be secured and delivered to
the buyer in accordance herewith.
Cases:
Far East Bank & Trust Co vs. Marquez
Marquez entered into a contract to sell with TSE involving a 52.5 sqm lot and
a three storey townhouse for P800,000. Later respondent was able to pay a
total of P600,000. TSE then mortgaged the whole property to Far East Bank.
TSE was unable to pay and the property was foreclosed and sold in favor of
Far East Bank.
Issue: 1.)Whether or not the mortgage contract violated Section 18 of
PD.957, hence void insofar as third persons are concerned.
2.)Who has a higher right the new buyer or the respondent?
SC: Yes violated Sec. 18. as provides as follows.
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Sec. 18. Mortgages- No mortgage on any unit or lot shall be made by the
owner or developer without prior written approval of the authority. Such
approval shall not be granted unless it is shown that the proceeds of the
mortgage loan shall be used for the development of the condominium or
subdivision project and effective measures have been provided to ensure
such utilization. The loan value of each lot or unit covered by the mortgage
shall be determined and the buyer thereof, if any, shall be notified before the
release of the loan. The buyer may, at his option, pay his installment for the
lot or unit directly to the mortgagee who shall apply the payments to the
corresponding mortgage indebtness secured by the particular lot or unit
being paid for , with a view to enabling said buyer to obtain title over the lot
or unit promptly after full payment thereof.
Since TSE did not obtain prior approval from the NHA the mortgage is void as
regarding to the property to the respondent as he has no standing to
question the validity of the other property.
2.) Respondent has a higher right over the property. Petitioner cannot be
considered as a buyer in good faith. He should have considered that it was a
town house that was already in progress. The conversion of status from
mortgagee to buyer will not lessen the importance of such knowledge.
Tamayo vs. Huang
Respondents Huang registered owners of four parcels of land located in
Barangay Matina, Davao City executed a contract of "Indenture" with EAP
Development Corporation (EAP) under which EAP undertook to manage and
develop said parcels of land into a first class subdivision and sell the lots
therein in, Doa Luisa Village (the subdivision).
Carlos R. Tamayo (petitioner) entered into a contract to sell with respondents
through EAP for a certain lot. Under the contract, petitioner was to pay upon
execution P35,749.60 and the balance, including interest at the rate of 14%
per annum, in 60 monthly installments of P4,791.40, without necessity of
demand; and if petitioner failed to pay the installments, respondents were
given the right to demand interest thereon at the rate of 14% per annum, to
be computed on the same day of the month the installments became due.
Later on the development of the subdivision was put to stop by EAP, in effect
petitioner stopped paying the monthly amortization. The respondents sent
the petitioner a demand letter, but after the reply of the petitioner with an
explanation of stop payment the respondent was unheard of.. After 5 years
the development was soon in progress and petitioner offered to pay the full
purchase price which was already rejected by the respondent. Later on the
property was sold by the respondent to another person.
Issue: 1.)Did the petitioner have any legal basis for stop payment? 2.)Is the
contract to sell between the parties rescinded?
SC: 1.) Yes.According Section 23 of PD 957
requires only due notice to the owner or developer for stopping further
payments by reason of the latters failure to develop the subdivision
according to the approved plans and within the time limit.
Therefore the buyer had the right to stop payment due to the failure of the
developer to comply with the contract. He only needed to give due notice to
the owner(Huangs) or Developer to give it effect.
2.) Yes. Respondents sent no notarized notice or any notice of cancellation
at all. In fact, it was only after petitioner filed on July 24, 1997 the complaint
before the HLURB that respondents offered to reimburse petitioner of the
total amount he had already paid.
The contract not having been cancelled in accordance with law, it has
remained valid and subsisting. It was, therefore, within petitioners right to
maintain his option to await the completion of the development of and
introduction of improvements in the subdivision and thereafter, upon full
payment of the purchase price, without interest, compel respondents to
execute a deed of absolute sale, but since the property was sold to a buyer in
good faith. The respondents should refund the petitioner for the value of the
property when it was sold.
Cantemperante vs CRS realty
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Facts:
Herein petitioners were among those who filed before the HLURB a
complaint 6 for the delivery of certificates of title against respondents CRS
Realty Development Corporation (CRS Realty), Crisanta Salvador and Cesar
Casal.
Petitioners averred that they had bought on an installment basis subdivision
lots from respondent CRS Realty and had paid in full the agreed purchase
prices; but notwithstanding the full payment and despite demands,
respondents failed and refused to deliver the corresponding certificates of
title to petitioners. The complaint prayed that respondents be ordered to
deliver the certificates of title corresponding to the lots petitioners had
purchased and paid in full and to pay petitioners damages.
In his answer, respondent Casal averred that despite his willingness to deliver
them, petitioners refused to accept the certificates of title with notice of lis
pendens covering the subdivision lots.
Respondents Ang and Cuason claimed in their answer with counterclaim 16
that respondent Casal remained the registered owner of the subdivided lots
when they were transferred to them and that the failure by petitioners to
annotate their claims on the title indicated that they were unfounded.
Respondent CRS Realty and the Heirs of Laudiza were declared in default for
failure to file their respective answers.
Issues:
Whether or not the absence of a license to sell has rendered the sales void;
(2) whether or not the subsequent sale to respondent Cuason and Ang
constitutes double sale;
Held:
Petitioners assail the Court of Appeals' ruling that the lack of the requisite
license to sell on the part of respondent CRS Realty rendered the sales void;
hence, neither party could compel performance of each other's contractual
obligations.
The only requisite for a contract of sale or contract to sell to exist in law is
the meeting of minds upon the thing which is the object of the contract and
the price, including the manner the price is to be paid by the vendee. Under
Article 1458 of the New Civil Code, in a contract of sale, whether absolute or
conditional, one of the contracting parties obliges 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.
In the instant case, the failure by respondent CRS Realty to obtain a license
to sell the subdivision lots does not render the sales void on that ground
alone especially that the parties have impliedly admitted that there was
already a meeting of the minds as to the subject of the sale and price of the
contract. The absence of the license to sell only subjects respondent CRS
Realty and its officers civilly and criminally liable for the said violation under
Presidential Decree (P.D.) No. 957 30 and related rules and regulations. The
absence of the license to sell does not affect the validity of the already
perfected contract of sale between petitioners and respondent CRS Realty.
As found by the Court of Appeals, in the case at bar, the requirements of
Sections 4 and 5 of P.D. [No.] 957 do not go into the validity of the contract,
such that the absence thereof would automatically render the contract null
and void. It is rather more of an administrative convenience in order to allow
a more effective regulation of the industry.
Chapter 2
Capacity to Buy or Sell
Arts. 1489 1492
I. Parties and their Consent
A. Capacity in general (1489)
Art. 1489. All persons who are authorized in this Code to obligate
themselves, may enter into a contract of sale, saving the modifications
contained in the following articles.
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 Where necessaries are sold and delivered to a minor or other person
without capacity to act, he must pay a reasonable price therefor. Necessaries
are those referred to in article 290.
Note: A person who has both juridical capacity and capacity to act is said to
have full civil capacity. It is understood that he is of legal age and suffers no
restriction on his capacity to act, such person may enter into any contract
including sale.
B. Special Disqualifications to Buy
a. Between Spouses
Case:
1) Effect of sale of land to ones own spouse
Uy Siu Pin vs. Cantollas, G.R. No. 46850, June 20, 1940
Facts: There was a contract entered into between Uy Siu Pin and Casimira
and Blas, which the latter agreed to deliver the mortgaged land and to enjoy
the same with its improvements to the during the period of 15 years on
condition that Uy Siu Pin would pay El Hogar Filipino the unpaid balance of
the indebtedness of casimira and Blas, together with all other expenses
including realty taxes.
When the mortgage debtors, Casimira and Blas, failed to redeem the land
within the statutory period, a final deed of sale was issued in favor of the
mortgagee, El Hogar Filipino. The latter sold the land to Uy Siu Pin and in turn
sold the land to his wife Chua Hue.
Issues: Is the sale valid between Uy Siu Pin and Chua Hue?
Held: SC said No. The sale from Uy Siu Pin to his wife Chua Hue is null and
void not only because theformer had no right to dispose of the land in
contorversy but because the sale comes within the prohibition of Article
1458 of the Civil Code.
Note: The case did not extensively explicate the reason why the sale
between spouses are prohibited. However, Art 1490 provides that the
husband and wife cannot sell property to each other, except: (1) when a
separation of property was agreed upon in the marriage settlements; or (2)
when there has been a judicial separation of property under articel 191.
Rationale behind the prohibiton: (a) to prevent the stronger spouse from
exploiting the weaker spouse; (b) prevent donations disguised as sales; (c)
protect third persons, specially creditors, against fraud through the transfer
of the properties of one spouse to the other to evade payment of
obligations.
2) Transfer in common law relationship
Ching vs. Goyanko, G.R. No. 165879, November 10, 2006
FACTS: Respondents claim that their parents (Goyanko and Epifania)
acquired a 661 square meter property but they (the parents) were Chinese
citizens at the time, the property was registered in the name of their aunt,
Sulpicia Ventura. Sulpicia executed a deed of sale over the property in favor
of reespondents father Goyanko that in turn executed a deed of sale over
the same property in favor of his common-law-wife-herein petitioner Maria
B. Ching. It was only after Goyankos death that they discovered the transfer
of the said property to Ching. Respondents thus filed with the RTC of Cebu
City a complaint for recovery of the property and the nullification of the deed
of sale.
ISSUE: Whether or not the sale of the property by Goyanko to Ching is valid.
HELD:
The conveyance of Goyanko in favor of his common-law-wife-herein
petitioner, was null and void. Article 1409 of the Civil Code states inter alia
that contracts whose cause, object, or purpose is contrary to law, morals,
good customs, public order, or public policy are void and inexistent from the
very beginning. Article 1352 also provides that: Contracts without cause, or
with unlawful cause, produce no effect whatsoever. The cause is unlawful if
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it is contrary to law, morals, good customs. Public order, or public policy.
Additionally, the law emphatically prohibits the spouses from selling property
to each other subject to certain exceptions. Similarly, donations between
spouses during marriage are prohibited. And this is so because if transfers or
conveyances between spouses were allowed during marriage, that would
destroy the system of conjugal partnership, a basic policy in civil law. It was
also designed to prevent the exercise of undue influence by one spouse over
the other, as well as to protect the institution of marriage, which is the
cornerstone of family law. The prohibitions apply to a couple living as
husband and wife without benefit of marriage, otherwise, the condition of
those who incurred guild would turn out to be better that those in legal
union.
b. By Spouse without consent of the other spouse - Void
C. Persons in Trust Relations
2. Sale to agent: Exception to prohibition against sale by principal in
favor of his agent.
Pelayo vs. Perez, G.R. No. 141323, June 8, 2005
FACTS: David Pelayo, by a Deed of Absolute Sale, conveyed to Melki Perez
two parcels of agricultural land. Loreza, wife of David Pelayo,k and another
one whose signature is illegible witnessed the execution of the deed. Loreza,
however, signed only the third page. Perez asked Loreza to sign on the first
and second pages of the deed but refused, hence, he instituted the instant
complaint for specific performance against the spouses. Petitioners, in
adopting the trial courts narration of antecedent facts in their petition,
admitted that they authorized respondent to represent them in negotiations
with the squatters occupying the disputed property and, in consideration
of respondents services, they executed the subject deed of sale. Defendant
Pelayo claimed that the deed was without his wifes consent, hence, it is null
and void.
ISSUE: Whether or not the deed of sale was null and void.
HELD: Petitioner Lorenza, by affixing her signature to the Deed of Sale on the
space provided for witnesses, is deemed to have given her implied consent
to the contract of sale. Sale is a consensual contract that is perfected by
mere consent, which may either be express or implied. A wifes consent to
the husbands disposition of conjugal property does not always have to be
explicit or set forth in any particular document, so long as it is shown by acts
of the wife that such consent or approval was indeed given. In the present
case, although it appears on the face of the deed of sale that Lorenza signed
only as an instrumental witness, circumstances leading to the execution of
said document point to the fact that Lorenza was fully aware of the sale of
their conjugal property and consented to the sale.
Under Article 173, in relation to Article 166, both of the New Civil Code,
when the deed in question was executed, the lack of marital consent to the
disposition of conjugal property does not make the contract void ab initio but
merely voidable. It has been held that the contract is valid until the court
annuls the same and only upon an action brought by the wife whose consent
was not obtained. In the present case, despite respondents repeated
demands for Lorenza to affix her signature on all the pages of the deed of
sale, showing respondents insistence on enforcing said contract, Lorenza still
did not fle a case for annulment of the deed of sale. Thus, if the transaction
was indeed entered into without Lorenzas consent, we find it quite puzzling
why for more than three and a half years, Lorenza did nothing to seek the
nullification of the assailed contract.
With regards to petitioners asservation that the deed of sale is invalid under
Article 1491 (2) of the New Civil Code, we find such argument unmeritorious.
Petitioners, by signing the Deed of Sale in favor of respondent, are also
deemed to have given their consent to the sale of the subject property in
favor of respondent, thereby making the transaction an exception to the
general rule that agents are prohibited from purchasing the property of their
principals.
2) Sale to guardians
Philippine Trust Co. vs Roldan
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Facts: Parcels located in Guiguinto, Bulacan, were part of the properties
inherited by Mariano L. Bernardo from his father, Marcelo Bernardo,
deceased. In view of his minority, guardianship proceedings were instituted,
wherein Socorro Roldan was appointed his guardian. She was the surviving
spouse of Marcelo Bernardo, and the stepmother of said Mariano L.
Bernardo.
On July 27, 1947, Socorro Roldan filed in said guardianship proceedings
(Special Proceeding 2485, Manila), a motion asking for authority to sell as
guardian the 17 parcels for the sum of P14,700 to Dr. Fidel C. Ramos, the
purpose of the sale being allegedly to invest the money in a residential
house, which the minor desired to have on Tindalo Street, Manila. The
motion was granted.
Socorro Roldan, as guardian, executed the proper deed of sale in favor of her
brother-in-law Dr. Fidel C. Ramos. Dr. Fidel C. Ramos executed in favor of
Socorro Roldan, personally, a deed of conveyance covering the same
seventeen parcels, for the sum of P15,000.
The Philippine Trust Company replaced Socorro Roldan as guardian, on
August 10, 1948. And this litigation, started two months later, seeks to undo
what the previous guardian had done. The step-mother in effect, sold to
herself, the properties of her ward, contends the plaintiff, and the sale
should be annulled because it violates Article 1459 of the Civil Code
prohibiting the guardian from purchasing "either in person or through the
mediation of another" the property of her ward.
ISSUE:
Whether or not the sale was valid.
HELD:
As Guardianship is a trust of the highest order, the trustee cannot be allowed
to have any inducement to neglect his ward's interest; and whenever the
guardian acquires the ward's property through an intermediary, he violates
the provision of Article 1459 of the Civil Code and such transaction and
subsequent ones emanating therefrom shall be annulled.
Even without proof that she had connived with Dr. Ramos. Remembering the
general doctrine that guardianship is a trust of the highest order, and the
trustee cannot be allowed to have any inducement to neglect his ward's
interest and in line with the court's suspicion whenever the guardian
acquires the ward's property 1 we have no hesitation to declare that in this
case, in the eyes of the law, Socorro Roldan took by purchase her ward's
parcels thru Dr. Ramos, and that Article 1459 of the Civil Code applies.
3. Sale to public officers
Maharlika Broadcasting Corp. vs. Tagle
FACTS: The GSIS was the registered owner of a parcel of land that was sold to
petitioner Maharlika Publishing Corporation together with the building
thereon as well as the printing machinery and equipment therein. Among the
conditions of the sale are that petitioner shall pay to the GSIS monthly
installments until the total purchase price shall be fully paid and that failure
to pay any monthly installment within 90 days from due date, the contract
shall be deemed automatically cancelled. Maharlika failed to pay the
installments for several months. This resulted to a public bidding of this
particular property. Petitioner submitted a letter-proposal that reads: I bid
to match the highest bidder. The bidding committee rejected petitioners
bid and accepted the private respondent Luz Tagles bid. After approval and
confirmation of the sale, the GSIS executed a Deed of Conditional Sale in
favor of Tagles. Luz Tagle is the wife of Edilberto Tagle. Edilberto Tagle was
the Chief, Retirment Division, GSIS, from 1970 to 1978. He worked for the
GSIS since 1952.
ISSUE: Whether or not the sale is valid.
HELD: In providing the prohibitions under Article 1491, the Code tends to
prevent fraud, or more precisely, tends not give occasion for fraud, which is
what can and must be done.
The point is that he is a public officer and his wife acts for and in his name in
any transaction with the GSIS. If he is allowed to participate in the public
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bidding of properties foreclosed or confiscated by the GSIS, there will always
be the suspicion among other bidders and the general public that the insider
official had access to information and connection with his fellow GSIS official
as to allow him to eventually acquire the property. It is precisely the need to
forestall such suspicions and to restore confidence in the public service that
the Civil Code now declares such transactions to be void from the beginning
and not merely voidable.
4. Sale/transfer to attorney
Gurrea vs. Suplico, G.R. No. 144320, April 26, 2006
FACTS: Adelina Gurrea continued to be the owner of the lot (TCT No. 58253)
until her death. Thereafter, a special proceeding was instituted to settle her
estate. Under her will, the San Juan lot was bequeathed to Pilar and Luis
Gurrea, while 700,000 pesetas, of the lot in Baguio and 1-hectare piece of
land in Negros Occidental were given to Ricardo Gurrea. Ricardo Gurrea,
represented by and through his counsel Atty. Enrique Suplico filed an
Opposition in Special Proceeding No. 7185. In consideration of said
representation, Ricardo Gurrea agreed to pay Atty. Suplico a contigent fee
of twenty (20%) of whatever is due me, either real or personal property.
Later on, Ricardo withdrew his Opposition. The properties adjudicated to
Ricardo based on the project of partition were the Baguio lot, San Juan lot,
and a parcel of land in Negros Occidental. As payment of his attorneys fees,
Ricarod Gurrea offered the San Juan lot to Atty. Suplico who was hesitant to
accept as the property was occupied by squatters. However, in order not to
antagonize his client, Atty. Suplico agreed to Ricardos proposal with the
further understanding that he will receive an additional commission of 5% if
he sells the Baguio property. Thereafter, Atty. Suplico registered the deed of
Transfer of Rights and Interest and obtained the title to the San Juan
property under his name.
ISSUE: Whether or not the subject property is still the object of litigation; If
affirmative, whether or not the sale is void for being violative of the
provisions of Article 1491 (5) of the Civil Code.
HELD: The sale to Atty. Suplico is null and void.
A thing is said to be in litigation only if there is some contest or litigation over
it in court, but also from the moment that it becomes subject to the judicial
action of the judge. In the present case, there is no proof to show that at the
time the deed of Transfer of Rights and Interest was executed, the probate
court issued an order granting the Motion for Termination of Proceeding and
Discharge of the Executor and Bond. Since the judge has yet to act on the
above-mentioned motion, if follows that the subject property which is the
subject matter of the deed of Transfer of Rights and Interest, is still the
object of litigation.
Having been established that the subject property was still the object of
litigation at the time the subject deed of Transfer of Rights and Interest was
executed, the assignment of rights and interest over the subject property in
favor of respondent is null and void for being violative of the provisions of
Article 1491 of the Civil Code which expressly prohibits lawyers from
acquiring property or rights which may be the object of any litigation in
which they may take party by virtue of their profession.
C. Incapacity to sell
a. Homesteaders
Cases
1. Sale of portions of a parcel of land (1) prior to issuance and (2) within 5
years from issuance of free patent
Manlapat vs. CA, G.R. No. 125585, June 8, 2005
FACTS: The controversy involves Lot No. 2204 that had been originally in the
possession of Jose Alvarez, Eduardos grandfather, until his demise in 1916.
It remained unregistered until October 8, 1976 when OCT No. P-153 was
issued in the name of Eduardo pursuant to a free patent issued in Eduardos
name that was entered in the Registry of Deed. Before the subject lot was
titled, Eduardo sold 533 sq.m. of the land to Ricardo on December 19, 1954.
The sale is evidence by a deed of sale entitled Kasulatan ng Bilihang
Tuluyan ng Lupang Walang Titulo which was signed by Eduardo himself as
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vendor and his wife Engracia Ancieto with a certain Santiago Enriquez
signing as witness. The Kasulatan was registered with the Register of Deeds.
On March 18, 1981, another Deed of Sale conveyed another portion of the
subject lot as right of way was executed by Eduardo in favor of Ricardo. The
deed was notarized. Leon Banaag, as attorney-in-fact of his father-in-law
(Eduardo) mortgage with the Rural Bank for P100,000.00 with the subject
lot as collateral. Banaag deposited the owners duplicate certificate of OCT
No. P-153 with the bank. Ricardo and Eduardo died.
The Cruzes, upon learning their right to the subject lot immediately tried to
confront petitioners mortgage and obtain the surrender of the OCT. Having
failed to physically obtain the title from petitioners, the Cruzes went to
RBSP which had custody of the owners duplicate certificate of the OCT.
They were able to secure a clearance to borrow the title and was able to
have the Register of Deeds cancel the OCT and issue two separate titles in
the name of Ricardo andEduardo.
ISSUE: Whether or not the sale of the land is prohibited or not.
HELD: Free patent application implies the recognition of the public
dominion character of the land and, hence, the five year prohibition
imposed by the Public land Act against alienation or encumbrance of the
land covered by a free patent or homestead should have been considered.
The deed of sale covering the 50 sq.m. right of way executed on March 18,
1981 is obviously covered by proscription, the free patent having been
issued on October 8, 1979. However, petitioners may recover the portion
sold since the prohibition was imposed in favor of the free patent holder.
Under the Public Land Act, the prohibition to alienate is predicated on the
fundamental policy of the State to preserve and keep in the family of the
homesteader that portion of public land which the State has gratuitously
given to him, and recovery is allowed even where the land acquired under
the Public Land Act was sold and not merely encumbered, within the
prohibited period.
The sale of the 533 sq.m. was executed 22 years before the issuance of the
patent in 1976. Where the sale or transfer took place before the filing of the
free patent application, whether by the vendor or the vendee, the
prohibition should not be applied. In such situation, neither the prohibition
not the rationale therefor which is to keep in the family of the patentee that
portion of the public land which the government has gratuitously given him,
by shielding him from the temptation to dispose of his landholdings, could
be relevant. Precisely, he had disposed of his rights to the lot even before
the government could give the title to him.
2. Effect of verbal sale within 5-year prohibitory period
Manzano vs. Ocampo, L-46850, June 20, 1940
Facts: Victoriano Manzano, now deceased, was granted a homestead patent
on June 25, 1934, and the land was registered in his name on July 25, 1934
under Original Certificate of Title No. 4590. On January 4, 1938, he and
respondent Rufino Ocampo agreed on the sale of said homestead for the
amount of P1,900.00, P1,100.00 of which was paid by Ocampo to Manzano
on the same day, and for the balance, he executed a promissory note.
Knowing, however, that any sale of the homestead at that time was
prohibited and void, the parties likewise agreed that the deed of sale was to
be made only after the lapse of five years from the date of Manzano's
patent. And to protect the buyer Ocampo's rights in the agreed sale,
Manzano executed in his favor a "Mortgage of Improvements" over the
homestead to secure the amount of P1,100.00 already received as down
payment on the price.
It is clear that a perfected contract of sale had already been entered
into by the parties within the period of prohibition. There was nothing
"futuristic" in this agreement, except that, being fully aware of the
prohibition, Manzano's title has not ripened into absolute ownership.
This execution of the formal deed after the expiration of the
prohibitory period did not and could not legalize a contract that was void
from its inception. Nor was this formal deed of sale "a totally distinct
transaction from the promissory note and the deed of mortgagee for it was
executed only in compliance and fulfillment of the vendor's previous
promise, under the perfected sale to execute in favor of his vendee the
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formal act of conveyance after the lapse of the period of inhibition of five
years from the date of the homestead patent.

Sale in question is illegal and void for having been made within five
years from the date of Manzano's patent, in violation of section 118 of the
Public Land Law. Being void from its inception, the approval thereof by the
Undersecretary of Agriculture and Natural Resources after the lapse of five
years from Manzano's patent did not legalize the sale. The result is that the
homestead in question must be returned to Manzano's heirs, who are, in
turn, bound to restore to Ocampo the, sum of P3,000.00 received by
Manzano as the price thereof.

D. When incompetent buys he must pay a reasonable price for

necessaries delivered to him. The resulting sale is valid.

The above rule seems to be founded on quasi-contract

E. Effect of forbidden sales

a. Between husband and wife under the community regime, the sale is void
1) But strangers cannot assail the transfer
b. Between persons in trust relations, as regards
1) Those based on public trust
i) Public officers, employees, government experts (1491, par. 4), and
ii) Judges, Justices, Prosecutors, Clerks of Court, lawyers (1491, par. 5) -
such sales are void (1409, No. 7)
2) Those based on private trust -
i) Guardians (1491, par. 1)
ii) Agents (1491, par. 2)

ii) Executors and administrators (1491, par. 3) - such sales are voidable,
not void

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