SAN MIGUEL PROPERTIES PHILS., INC.

v SPOUSES ALFREDO and GRACE

HUANG, G. R. No. 137290, 31 July 2000

Mendoza, J. delivered the decision of the Court.

Nature of the Case: A petition for review for a decision of the Court of Appeals which
reversed the decision of the RTC dismissing the complaint brought by the Huangs
against San Miguel Properties for enforcement of a contract of sale.

Facts: San Miguel Properties offered two parcels of land for sale and the offer was
made to an agent of the respondents. An “earnest-deposit” of P1 million was offered by
the respondents and was accepted by the petitioner’s authorized officer subject to
certain terms.

Petitioner, through its executive officer, wrote the respondent’s lawyer that because
ethe parties failed to agree on the terms and conditions of the sale despite the
extension granted by the petitioner, the latter was returning the “earnest-deposit”.

The respondents demanded execution of a deed of sale covering the properties and
attempted to return the “earnest-deposit” but petitioner refused on the ground that the
option to purchase had already expired.

A complaint for specific performance was filed against the petitioner and the latter filed a
motion to dismiss the complaint because the alleged “exclusive option” of the
respondents lacked a consideration separate and distinct from the purchase price and
was thus unenforceable; the complaint did not allege a cause of action because there
was no “meeting of the mind” between the parties and therefore the contact of sale was
not perfected.

The trial court granted the petitioner’s motion and dismissed the action. The
respondents filed a motion for reconsideration but were denied by the trial court. The
respondents elevated the matter to the Court of Appeals and the latter reversed the
decision of the trial court and held that a valid contract of sale had been complied with.

Petitioner filed a motion for reconsideration but was denied.

Issue: WON there was a perfected contract of sale between the parties

Ruling: The decision of the appellate court was reversed and the respondents’
complaint was dismissed.
Ratio Decidendi: It is not the giving of earnest money , but the proof of the
concurrence of all the essential elements of the contract of sale which establishes the
existence of a perfected sale.

The P1 million “earnest-deposit” could not have been given as earnest money because
at the time when petitioner accepted the terms of respondents’ offer, their contract had
not yet been perfected. This is evident from the following conditions attached by
respondents to their letter.
The first condition for an option period of 30 days sufficiently shows that a sale was
never perfected. As petitioner correctly points out, acceptance of this condition did not
give rise to a perfected sale but merely to an option or an accepted unilateral promise
on the part of respondents to buy the subject properties within 30 days from the date of
acceptance of the offer. Such option giving respondents the exclusive right to buy the
properties within the period agreed upon is separate and distinct from the contract of
sale which the parties may enter. All that respondents had was just the option to buy the
properties which privilege was not, however, exercised by them because there was a
failure to agree on the terms of payment. No contract of sale may thus be enforced by
respondents.

Even the option secured by respondents from petitioner was fatally defective. Under the
second paragraph of Art. 1479, an accepted unilateral promise to buy or sell a
determinate thing for a price certain is binding upon the promisor only if the promise is
supported by a distinct consideration. Consideration in an option contract may be
anything of value, unlike in sale where it must be the price certain in money or its
equivalent. There is no showing here of any consideration for the option. Lacking any
proof of such consideration, the option is unenforceable.

Equally compelling as proof of the absence of a perfected sale is the second condition
that, during the option period, the parties would negotiate the terms and conditions of
the purchase. The stages of a contract of sale are as follows: (1) negotiation, 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.
In the present case, the parties never got past the negotiation stage. The alleged
“indubitable evidence” of a perfected sale cited by the appellate court was nothing more
than offers and counter-offers which did not amount to any final arrangement containing
the essential elements of a contract of sale. While the parties already agreed on the real
properties which were the objects of the sale and on the purchase price, the fact
remains that they failed to arrive at mutually acceptable terms of payment, despite the
45-day extension given by petitioner.
Pichel v. Alonzo

Facts:

Respondent Prudencio Alonzo was awarded by the Government that parcel of land in
Basilan City in accordance with Republic Act No. 477. The award was cancelled by the
Board of Liquidators on January 27, 1965 on the ground that, previous thereto, plaintiff
was proved to have alienated the land to another, in violation of law. In 1972, plaintiff's
rights to the land were reinstated.

On August 14, 1968, plaintiff and his wife sold to defendant Luis Pichel all the fruits of the
coconut trees which may be harvested in the land in question for the period, September
15, 1968 to January 1, 1976, in consideration of P4,200.00. Even as of the date of sale,
however, the land was still under lease to one, Ramon Sua, and it was the agreement
that part of the consideration of the sale, in the sum of P3,650.00, was to be paid by
defendant directly to Ramon Sua so as to release the land from the clutches of the latter.
Pending said payment plaintiff refused to allow the defendant to make any harvest. In
July 1972, defendant for the first time since the execution of the deed of sale in his favor,
caused the harvest of the fruit of the coconut trees in the land.

Alonzo filed for the annulment of the contract on the ground that it violated the provisions
of R.A. 477, which states that lands awarded under the said law shall not be subject to
encumbrance or alienation, otherwise the awardee shall no longer be entitled to apply for
another piece of land. The lower court ruled that the contract, which it held as a contract
of lease, is null and void.

Issues:

(1) Whether the respondent had the right or authority to execute the "Deed of Sale" in
1968, his award having been cancelled previously by the Board of Liquidators on January
27, 1965

(2) Whether the contract is one for lease of the land, or for sale of coconut fruits

(3) Whether the contract is an encumbrance as contemplated by R.A. 477

Held:

(1) Until and unless an appropriate proceeding for reversion is instituted by the State, and
its reacquisition of the ownership and possession of the land decreed by a competent
court, the grantee cannot be said to have been divested of whatever right that he may
have over the same property. Herein respondent is not deemed to have lost any of his
rights as grantee during the period material to the case at bar, i.e., from the cancellation
of the award in 1965 to its reinstatement in 1972. Within said period, respondent could
exercise all the rights pertaining to a grantee.
(2) A perusal of the deed fails to disclose any ambiguity or obscurity in its provisions, nor
is there doubt as to the real intention of the contracting parties. The terms of the
agreement are clear and unequivocal, hence the literal and plain meaning thereof should
be observed. The document in question expresses a valid contract of sale. It has the
essential elements of a contract of sale. The subject matter of the contract of sale in
question are the fruits of the coconut trees on the land during the years from September
15, 1968 up to January 1, 1976, which subject matter is a determinate thing. Under Article
1461 of the New Civil Code, things having a potential existence may be the object of the
contract of sale. Pending crops which have potential existence may be the subject matter
of sale. The essential difference between a contract of sale and a lease of things is that
the delivery of the thing sold transfers ownership, while in lease no such transfer of
ownership results as the rights of the lessee are limited to the use and enjoyment of the
thing leased.

The contract was clearly a "sale of the coconut fruits." The vendor sold, transferred and
conveyed "by way of absolute sale, all the coconut fruits of his land," thereby divesting
himself of all ownership or dominion over the fruits during the seven-year period. The
possession and enjoyment of the coconut trees cannot be said to be the possession and
enjoyment of the land itself because these rights are distinct and separate from each
other, the first pertaining to the accessory or improvements (coconut trees) while the
second, to the principal (the land). A transfer of the accessory or improvement is not a
transfer of the principal. It is the other way around, the accessory follows the principal.
Hence, the sale of the nuts cannot be interpreted nor construed to be a lease of the trees,
much less extended further to include the lease of the land itself.

The grantee of a parcel of land under R.A. No. 477 is not prohibited from alienating or
disposing of the natural and/or industrial fruits of the land awarded to him. What the law
expressly disallows is the encumbrance or alienation of the land itself or any of the
permanent improvements thereon. Permanent improvements on a parcel of land are
things incorporated or attached to the property in a fixed manner, naturally or artificially.
They include whatever is built, planted or sown on the land which is characterized by
fixity, immutability or immovability. Houses, buildings, machinery, animal houses, trees
and plants would fall under the category of permanent improvements, the alienation or
encumbrance of which is prohibited. The purpose of the law is not violated when a grantee
sells the produce or fruits of his land. On the contrary, the aim of the law is thereby
achieved, for the grantee is encouraged and induced to be more industrious and
productive, thus making it possible for him and his family to be economically self-sufficient
and to lead a respectable life. At the same time, the Government is assured of payment
on the annual installments on the land. We agree with herein petitioner that it could not
have been the intention of the legislature to prohibit the grantee from selling the natural
and industrial fruits of his land, for otherwise, it would lead to an absurd situation wherein
the grantee would not be able to receive and enjoy the fruits of the property in the real
and complete sense.
CASE DIGEST: MILA A. REYES v. VICTORIA T. TUPARAN

FACTS: Mila A. Reyes (petitioner) filed a complaint for Rescission of Contract with
Damages against Victoria T. Tuparan (respondent) before the RTC.In her Complaint,
petitioner alleged, among others, that she was the registered owner of a 1,274 square
meter residential and commercial lot located in Karuhatan, Valenzuela City, and
covered by TCT No. V-4130.

Petitioner mortgaged the subject real properties to the Farmers Savings Bank and Loan
Bank, Inc. (FSL Bank) to secure a loan. Petitioner then decided to sell her real
properties so she could liquidate her bank loan and finance her businesses. As a
gesture of friendship, respondent verbally offered to conditionally buy petitioner's real
properties.

The parties and FSL Bank executed the corresponding Deed of Conditional Sale of
Real Properties with Assumption of Mortgage. Due to their close personal friendship
and business relationship, both parties chose not to reduce into writing the other terms
of their agreement mentioned in paragraph 11 of the complaint.

Respondent, however, defaulted in the payment of her obligations on their due dates.
Instead of paying the amounts due in lump sum on their respective maturity dates,
respondent paid petitioner in small amounts from time to time.

Respondent countered, among others, that the tripartite agreement erroneously

designated by the petitioner as a Deed of Conditional Sale of Real Property with
Assumption of Mortgage was actually a pure and absolute contract of sale with a term
period. It could not be considered a conditional sale because the acquisition of
contractual rights and the performance of the obligation therein did not depend upon a
future and uncertain event.

Respondent further averred that she successfully rescued the properties from a definite
foreclosure by paying the assumed mortgage plus interest and other finance charges.

The RTC handed down its decision finding that respondent failed to pay in full the total
purchase price of the subject real properties. It stated that the checks and receipts
presented by respondent refer to her payments of the mortgage obligation with FSL
Bank. The RTC also considered the Deed of Conditional Sale of Real Property with
Assumption of Mortgage executed by and among the two parties and FSL Bank a
contract to sell, and not a contract of sale.

The CA rendered its decision affirming with modification the RTC Decision.The CA
agreed with the RTC that the contract entered into by the parties is a contract to sell but
ruled that the remedy of rescission could not apply because the respondent's failure to
pay the petitioner the balance of the purchase was not a breach of contract, but merely
an event that prevented the seller (petitioner) from conveying title to the purchaser
(respondent).
ISSUE:

Was the agreement a contract to sell and not a contract of sale?

HELD: The Court agrees with the ruling of the courts below that the subject Deed of
Conditional Sale with Assumption of Mortgage entered into by and among the two
parties and FSL Bank on November 26, 1990 is a contract to sell and not a contract of
sale.

The title and ownership of the subject properties remains with the petitioner until the
respondent fully pays the balance of the purchase price and the assumed mortgage
obligation. Thereafter, FSL Bank shall then issue the corresponding deed of
cancellation of mortgage and the petitioner shall execute the corresponding deed of
absolute sale in favor of the respondent.

Accordingly, the petitioner's obligation to sell the subject properties becomes

demandable only upon the happening of the positive suspensive condition, which is the
respondent's full payment of the purchase price. Without respondent's full payment,
there can be no breach of contract to speak of because petitioner has no obligation yet
to turn over the title. Respondent's failure to pay in full the purchase price is not the
breach of contract contemplated under Article 1191 of the New Civil Code but rather just
an event that prevents the petitioner from being bound to convey title to the respondent.

Thus, the Court fully agrees with the CA when it resolved: "Considering, however, that
the Deed of Conditional Sale was not cancelled by Vendor Reyes (petitioner) and that
out of the total purchase price of the subject property in the amount of ?4,200,000.00,
the remaining unpaid balance of Tuparan (respondent) is only ?805,000.00, a
substantial amount of the purchase price has already been paid.It is only right and just
to allow Tuparan to pay the said unpaid balance of the purchase price to Reyes."

Granting that a rescission can be permitted under Article 1191, the Court still cannot
allow it for the reason that, considering the circumstances, there was only a slight or
casual breach in the fulfillment of the obligation.

Out of the P1,200,000.00 remaining balance, respondent paid on several dates the first
and second installments of P200,000.00 each. She, however, failed to pay the third and
last installment of P800,000.00 due on December 31, 1991. Nevertheless, on August
31, 1992, respondent, through counsel, offered to pay the amount of P751,000.00,
which was rejected by petitioner for the reason that the actual balance was P805,000.00
excluding the interest charges.

Considering that out of the total purchase price of P4,200,000.00, respondent has
already paid the substantial amount of P3,400,000.00, more or less, leaving an unpaid
balance of only P805,000.00, it is right and just to allow her to settle, within a
reasonable period of time, the balance of the unpaid purchase price. The Court agrees
with the courts below that the respondent showed her sincerity and willingness to
comply with her obligation when she offered to pay the petitioner the amount of
P751,000.00.

DENIED

D. SPOUSES JOSE T. VALENZUELA and GLORIA VALENZUELA, Petitioners,

vs. KALAYAAN DEVELOPMENT & INDUSTRIAL CORPORATION,
Respondent.

G.R. No. 163244 June 22, 2009

Ponente: Peralta, J.

Facts: Kalayaan Development & Industrial Corporation discovered that Spouses

Jose and Gloria Valenzuela had occupied and built a house on a parcel of land it
owned, and demanded that they vacate said property. Upon negotiation,
however, petitioners and Kalayaan entered a Contract to Sell wherein the
petitioners would purchase 236 square meters of the subject property for
P1,416,000 in twelve equal monthly installments. The contract further stated that
upon failure to pay any of said installments, petitioners would be liable for
liquidated penalty at 3% a month compounded monthly until fully paid. Kalayaan
would also execute the deed of absolute sale only upon full payment.
Petitioners were only able to pay monthly installments amounting to a total of
P208, 000.00. They then requested Kalayaan to issue a deed of sale for 118
square meters of the lot where their house stood, arguing that since they had
paid half the purchase price, or a total of P708,000.00 representing 118 square
meters of the property. Kalayaan, on the other hand, sent two demand letters
asking petitioners to pay their outstanding obligation including agreed penalties.
Gloria Valenzuela’s sister, Juliet Giron, assumed the remaining balance for the
118 square meters of the subject property at P10,000.00 per month to Kalayaan,
which the latter accepted for and in behalf of Gloria. Thereafter, Kalayaan
demanded that petitioners pay their outstanding obligation, but were unheeded.
Kalyaan then filed a Complaint fot the Rescission of Contract and Damages
against petitioners. The RTC of Caloocan rendered a Decision in favor of
Kalayaan, rescinding the contract between the parties and ordering petitioners to
vacate the premises.

Petitioners sought recourse from the CA. They aver that the CA failed to see that
the original contract between petitioners and Kalayaan was altered, changed,
modified and restricted as a consequence of the change in the person of the
principal debtor (Sps. Valenzuela to Juliet). When Kalayaan agreed to a monthly
amortization of P10,000.00 per month the original contract was changed, and
that the same recognized Juliet’s capacity to pay and her designation as the new
debtor. Nevertheless, the CA affirmed the RTC ruling.

Issue: If the original contract was novated and the principal obligation to pay for
the remaining half of the subject property was transferred from petitioners to Juliet.
Held: No. Novation is never presumed. Novation is the extinguishment of an
obligation by the substitution or change of the obligation by a subsequent one
which extinguishes or modifies the first, either by changing the object or principal
conditions, or by substituting another in place of the debtor, or by subrogating a
third person in the rights of the creditor. Parties to a contract must expressly
agree that they are abrogating their old contract in favor of a new one. In
absence of an express agreement, novation takes place only when the old and
new obligations are incompatible on every point.

These are the indispensable requisites of novation:

1) There must be a previous valid obligation;
2) There must be an agreement of the parties concerned to a new contract;
3) There must be the extinguishment of the old contract; and
4) There must be the validity of the new contract.

In the instant case, none of the aforementioned requisites are present, as

Kalayaan never agreed to the creation of a new contract between them or Juliet.
Kalayaan’s acceptance of the late payments made by Juliet is, at best, an act of
tolerance on part of Kalayaan that could not have modified the contract.

The non-fulfillment by petitioners of their obligation to pay, which is a suspensive

condition for the obligation of Kalayaan to sell and deliver the title to the
property, rendered the Contract to Sell ineffective and without force and effect.
The parties stand as if the conditional obligation had never existed; Kalayaan
cannot be compelled to transfer ownership of the property to petitioners.
SPS. CIPRIANO PAMPLONA AND BIBIANA INTAC v. SPS. LILIA I. CUETO AND
VEDASTO CUETO, GR No. 204735, 2018-02-19
Facts:
Issues:
The petitioners now assail the decision of the CA by stressing that the admissions of
Lilia's son, Roilan, and of her husband, petitioner Vedasto, to the effect that the
petitioners were the true owners of the property were contrary to the conclusions of the
CA; that the CA's finding that there had been a partially executed contract to sell was
unwarranted because nothing in the records established the same; that the decision of
the MTCC of Batangas City against Roilan in the unlawful detainer case indicated that
they were the true owners of the property; that the CA should not have nullified the deed
of transfer of rights between Redima and the petitioners on the strength of Article 1491
of the Civil Code because it was Redima, the corporation, that acquired the property
instead of Atty. Dimayacyac; and that there was no violation of Article 1491 because of
the separate juridical personalities between the corporation and its shareholders.
Ruling:
Generally, the Court cannot delve into questions of fact on appeal because it is not a
trier of facts. Yet, this rule has not been iron-clad and rigid in view of several
jurisprudentially recognized instances wherein the Court has opted to settle factual
disputes duly raised by the parties. These instances include situations: (a) when the
inference made is manifestly mistaken, absurd or impossible; (b) when there is grave
abuse of discretion; (c) when the finding is grounded entirely on speculations, surmises
or conjectures; (d) when the judgment of the CA is based on misapprehension of facts;
(e) when the findings of fact are conflicting; (f) when the CA, in making its findings, went
beyond the issues of the case, and the same is contrary to the admissions of both
appellant and appellee; (g) when the findings of the CA are contrary to those of the trial
court; (h) when the findings of fact are conclusions without citation of specific evidence
on which they are based; (i) when the CA manifestly overlooked certain relevant facts
not disputed by the parties and which, if properly considered, would justify a different
conclusion; and (j) when the findings of fact of the CA are premised on the absence of
evidence but the premise is contradicted by the evidence on record.[6]
Principles:
Generally, the Court cannot delve into questions of fact on appeal because it is not a
trier of facts. Yet, this rule has not been iron-clad and rigid in view of several
jurisprudentially recognized instances wherein the Court has opted to settle factual
disputes duly raised by the parties. These instances include situations: (a) when the
inference made is manifestly mistaken, absurd or impossible; (b) when there is grave
abuse of discretion; (c) when the finding is grounded entirely on speculations, surmises
or conjectures; (d) when the judgment of the CA is based on misapprehension of facts;
(e) when the findings of fact are conflicting; (f) when the CA, in making its findings, went
beyond the issues of the case, and the same is contrary to the admissions of both
appellant and appellee; (g) when the findings of the CA are contrary to those of the trial
court; (h) when the findings of fact are conclusions without citation of specific evidence
on which they are based; (i) when the CA manifestly overlooked certain relevant facts
not disputed by the parties and which, if properly considered, would justify a different
conclusion; and (j) when the findings of fact of the CA are premised on the absence of
evidence but the premise is contradicted by the evidence on record.