Coronel v.

CA
Facts:

The case arose from a complaint for specific performance filed by private
respondent Alcaraz against petitioners to consummate the sale of a parcel of
land in Quezon City.

On January 19, 1985, petitioners executed a “Receipt of Down Payment” of

P50,000 in favor of plaintiff Ramona Alcaraz, binding themselves to transfer
the ownership of the land in their name from their deceased father, afterwhich
the balance of P1,190,000 shall be paid in full by Alcaraz. On February 6,
1985, the property was transferred to petitioners. On February 18, 1985,
petitioners sold the property to Mabanag. For this reason, Concepcion,
Ramona’s mother, filed an action for specific performance.

Issue:

Whether the contract between petitioners and private respondent was that of a
conditional sale or a mere contract to sell

Held:

Sale, by its very nature, is a consensual contract because it is perfected by

mere consent. The essential elements of a contract of sale are the following: a)
Consent or meeting of the minds, that is, consent to transfer ownership in
exchange for the price; b) Determinate subject matter; and c) Price certain in
money or its equivalent.

Under this definition, a Contract to Sell may not be considered as a

Contract of Sale because the first essential element is lacking. In a contract to
sell, the prospective seller explicity reserves the transfer of title to the
prospective buyer, meaning, the prospective seller does not as yet agree or
consent to transfer ownership of the property subject of the contract to sell
until the happening of an event, which for present purposes we shall take as
the full payment of the purchase price. What the seller agrees or obliges
himself to do is to fulfill his promise to sell the subject property when the
entire amount of the purchase price is delivered to him. In other words the full
payment of the purchase price partakes of a suspensive condition, the non-
fulfillment of which prevents the obligation to sell from arising and thus,
ownership is retained by the prospective seller without further remedies by
the prospective buyer. A contract to sell may thus be defined as a bilateral
contract whereby the prospective seller, while expressly reserving the
ownership of the subject property despite delivery thereof to the prospective
buyer, binds himself to sell the said property exclusively to the prospective
buyer upon fulfillment of the condition agreed upon, that is, full payment of
the purchase price.

A contract to sell 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 delivered to him. The
prospective seller still has to convey title to the prospective buyer by entering
into a contract of absolute sale.

It is essential to distinguish between a contract to sell and a conditional

contract of sale specially in cases where the subject property is sold by the
owner not to the party the seller contracted with, but to a third person, as in
the case at bench. In a contract to sell, there being no previous sale of the
property, a third person buying such property despite the fulfillment of the
suspensive condition such as the full payment of the purchase price, for
instance, cannot be deemed a buyer in bad faith and the prospective buyer
cannot seek the relief of reconveyance of the property. There is no double sale
in such case. Title to the property will transfer to the buyer after registration
because there is no defect in the owner-seller's title per se, but the latter, of
course, may be used for damages by the intending buyer.
In a conditional contract of sale, however, upon the fulfillment of the
suspensive condition, the sale becomes absolute and this will definitely affect
the seller's title thereto. In fact, if there had been previous delivery of the
subject property, the seller's ownership or title to the property is automatically
transferred to the buyer such that, the seller will no longer have any title to
transfer to any third person. Such second buyer of the property who may have
had actual or constructive knowledge of such defect in the seller's title, or at
least was charged with the obligation to discover such defect, cannot be a
registrant in good faith. Such second buyer cannot defeat the first buyer's title.
In case a title is issued to the second buyer, the first buyer may seek
reconveyance of the property subject of the sale.
The agreement could not have been a contract to sell because the sellers
herein made no express reservation of ownership or title to the subject parcel
of land. Furthermore, the circumstance which prevented the parties from
entering into an absolute contract of sale pertained to the sellers themselves
(the certificate of title was not in their names) and not the full payment of the
purchase price. Under the established facts and circumstances of the case, the
Court may safely presume that, had the certificate of title been in the names of
petitioners-sellers at that time, there would have been no reason why an
absolute contract of sale could not have been executed and consummated right
there and then.

What is clearly established by the plain language of the subject document is

that when the said "Receipt of Down Payment" was prepared and signed by
petitioners Romeo A. Coronel, et al., the parties had agreed to a conditional
contract of sale, consummation of which is subject only to the successful
transfer of the certificate of title from the name of petitioners' father,
Constancio P. Coronel, to their names.

The provision on double sale presumes title or ownership to pass to the first
buyer, the exceptions being: (a) when the second buyer, in good faith, registers
the sale ahead of the first buyer, and (b) should there be no inscription by
either of the two buyers, when the second buyer, in good faith, acquires
possession of the property ahead of the first buyer. Unless, the second buyer
satisfies these requirements, title or ownership will not transfer to him to the
prejudice of the first buyer. In a case of double sale, what finds relevance and
materiality is not whether or not the second buyer was a buyer in good faith
but whether or not said second buyer registers such second sale in good faith,
that is, without knowledge of any defect in the title of the property sold. If a
vendee in a double sale registers that sale after he has acquired knowledge that
there was a previous sale of the same property to a third party or that another
person claims said property in a pervious sale, the registration will constitute a
registration in bad faith and will not confer upon him any right.
Romeo Co. v CA GR No. 93687, May 6, 1991
Double Sale of Immovable Property

Facts:

Petitioner Marcelita Co brought two parcels of land. She sold one of the lots and the other lot was
titled in the name of her brother Ruperto Padonan as a trustee of the property and a house was
constructed thereon. In furtherance of their trust agreement, Ruperto executed a deed of absolute
sale in favor of Marcelita who took possession of the house and lot. The deed of sale however was
not registered. More than a year later, Ruperto executed another deed of sale of the house and lot
registered in his name in favor of the respondent Eduardo Memije who was unable to take
possession of the properties because the petitioners are occupying the same. Respondent now sued
for recovery of possession and quieting of title but it was dismissed. Thereafter they filed petition for
writ of possession in the original land registration proceeding, which the lower court issued but was
set aside by the appellate court. Petitioner now filed an action to annul the deed of sale and title
against the respondents before the RTC of Caloocan City. This was dismissed on ground of
improper venue. Respondents filed for the recovery of possession of the property and the petitioner
raised the affirmative defense of fraud on their ownership of the property and interposed the same
as compulsory counterclaim instead of re-filing a separate action for annulment of the deed of sale
executed in favor of the respondents.

Lower court: ruled against petitioner

CA: affirmed lower court decision with modification citing that an action to recover possession of
realty attacking the transfer certificate of title by way of affirmative defense on ground of fraud
committed by Ruperto when he sold the property to respondent is an improper procedure as this
constitutes an attack to the indefeasibility of the Torrens Title. Petitioner should have pursued their
original complaint for the annulment of deed of sale which was dismissed without prejudice of re-
filing it again before the proper court at Malabon. Moreover, the respondents have the right to
possession being the registered owners of the property.

Issue:

Who has the better right of possession over the property between the petitioner and respondent?

Ruling:

The petitioner filed an affirmative defense on attacking the validity of the deed of absolute sale
executed by Ruperto to the respondents and at the same time attacking the Transfer of Certificate of
Title of the respondents over the property issued by the Register of Deeds of Rizal by virtue of the
same deed. Attacking the TCT of the respondents by way of affirmative defense is an improper
procedure. The petitioner should have pursued its case filed at the RTC of Caloocan annulling the
deed of sale and title with damages before the RTC of Malabon as the proper venue for the action.

The affirmative defense by the petitioner alleging fraudulent connivance between Ruperto and
respondents cannot overcome the evidence of the respondent’s ownership over the title covered by
the Torrens Title. It was held that the respondents were in good faith with no attendance of fraud
when they acquired title over the property because they already paid and registered the property
before they know of the adverse claim of the petitioner. Respondent paid for the mortgage over the
property and thereafter Ruperto executed the deed of sale. By virtue of such deed, the Register of
Deeds released the mortgage over said property and issued a Transfer of Certificate of Title in the
name of the respondents. The keys of the house were given to them by Ruperto however they were
not able to possess the property because petitioners prevented them from doing so. Although having
reported the matter to Ruperto, no further action was taken thus the respondents sought to take
judicial recourse.

Petitioner asserts that no double sale took place because the sale made by Ruperto to them is by
virtue of their trust agreement. However the court held that the respondents are not privy of such
agreement, the conflict of which is only between the petitioner and Ruperto. Respondents mainly
relied on the clean transfer of certificate of title in the name of Ruperto, the title of which does not
contain annotation of such trust agreement. The Civil Code provides that on the question of
double sale of immovable property, the ownership shall belong to the person acquiring it who
in good faith first recorded it to the Registry of Property. Therefore the respondents were held
as the rightful owner of the property in dispute.
Velarde vs. Court of Appeals (361 SCRA 57)

14

JAN

FACTS:

The private respondent executed a Deed of Sale with Assumption of Mortgage, with a balance of P1.8
million, in favor of the petitioners. Pursuant to said agreements, plaintiffs paid the bank (BPI) for three
(3) months until they were advised that the Application for Assumption of Mortgage was denied. This
prompted the plaintiffs not to make any further payment. Private respondent wrote the petitioners
informing the non-fulfillment of the obligations. Petitioners, thru counsel responded that they are
willing to pay in cash the balance subject to several conditions. Private respondents sent a notarial
notice of cancellation/rescission of the Deed of Sale. Petitioners filed a complaint which was
consequently dismissed by an outgoing judge but was reversed by the assuming judge in their Motion
for Reconsideration. The Court of Appeals reinstated the decision to dismiss.

ISSUE:

Whether or not there is a substantial breach of contract that would entitle its rescission.

RULING:

YES. Article 1191 of the New Civil Code applies. The breach committed did not merely consist of a slight
delay in payment or an irregularity; such breach would not normally defeat the intention of the parties
to the contract. Here, petitioners not only failed to pay the P1.8 million balance, but they also imposed
upon private respondents new obligations as preconditions to the performance of their own obligation.
In effect, the qualified offer to pay was a repudiation of an existing obligation, which was legally due and
demandable under the contract of sale. Hence, private respondents were left with the legal option of
seeking rescission to protect their own interest.
Acap v. CA
Facts:

Felixberto Oruma sold his inherited land to Cosme Pido, which land is rented
by petitioner Teodoro Acap. When Cosme died intestate, his heirs executed a
“Declaration of Heirship and Waiver of Rights” in favor of private respondent
Edy delos Reyes. Respondent informed petitioner of his claim over the land,
and petitioner paid the rental to him in 1982. However in subsequent years,
petitioner refused to pay the rental, which prompted respondent to file a
complaint for the recovery of possession and damages. Petitioner averred that
he continues to recognize Pido as the owner of the land, and that he will pay
the accumulated rentals to Pido’s widow upon her return from abroad. The
lower court ruled in favor of private respondent.

Issues:

(1) Whether the “Declaration of Heirship and Waiver of Rights” is a recognized

mode of acquiring ownership by private respondent

(2) Whether the said document can be considered a deed of sale in favor of
private respondent

Held:

An asserted right or claim to ownership or a real right over a thing arising

from a juridical act, however justified, is not per sesufficient to give rise to
ownership over the res. That right or title must be completed by fulfilling
certain conditions imposed by law. Hence, ownership and real rights are
acquired only pursuant to a legal mode or process. While title is the juridical
justification, mode is the actual process of acquisition or transfer of ownership
over a thing in question.

In a Contract of Sale, one of the contracting parties obligates himself to

transfer the ownership of and to deliver a determinate thing, and the other
party to pay a price certain in money or its equivalent. Upon the other hand, a
declaration of heirship and waiver of rights operates as a public instrument
when filed with the Registry of Deeds whereby the intestate heirs adjudicate
and divide the estate left by the decedent among themselves as they see fit. It
is in effect an extrajudicial settlement between the heirs under Rule 74 of the
Rules of Court. Hence, there is a marked difference between a sale of
hereditary rights and a waiver of hereditary rights. The first presumes the
existence of a contract or deed of sale between the parties. The second is,
technically speaking, a mode of extinction of ownership where there is an
abdication or intentional relinquishment of a known right with knowledge of
its existence and intention to relinquish it, in favor of other persons who are
co-heirs in the succession. Private respondent, being then a stranger to the
succession of Cosme Pido, cannot conclusively claim ownership over the
subject lot on the sole basis of the waiver document which neither recites the
elements of either a sale, or a donation, or any other derivative mode of
acquiring ownership.
A notice of adverse claim is nothing but a notice of a claim adverse to the
registered owner, the validity of which is yet to be established in court at some
future date, and is no better than a notice of lis pendens which is a notice of a
case already pending in court. It is to be noted that while the existence of said
adverse claim was duly proven, there is no evidence whatsoever that a deed of
sale was executed between Cosme Pido's heirs and private respondent
transferring the rights of Pido's heirs to the land in favor of private
respondent. Private respondent's right or interest therefore in the tenanted lot
remains an adverse claim which cannot by itself be sufficient to cancel the
OCT to the land and title the same in private respondent's name.
Consequently, while the transaction between Pido's heirs and private
respondent may be binding on both parties, the right of petitioner as a
registered tenant to the land cannot be perfunctorily forfeited on a mere
allegation of private respondent's ownership without the corresponding proof
thereof.
 CASE DIGEST: Alfonso Quijada vs CA, Regalado Mondejar
G.R. No. 126444. December 4, 1998(299 SCRA 695) (Yellow
Pad Digest)
Alfonso Quijada vs CA, Regalado Mondejar (299 SCRA 695)

Facts:
 Petitioners are heirs of the late Trinidad Quijada. Trinidad inherited a 2 hectare land. April 5,1956,
Trininad along with her siblings, executed a DEED OF DONATION in favor of the Municipality of
Talacogon, with condition that the land shall be used exclusively as part of the campus of
the PROPOSED Provincial High School in Talacogon.
 Despite the donation, Trininad still has possession of the land and sold 1 hectare to Regalado.
Subsequently, Trinidad sold the remaining 1 hectare to Regalado but this time verbally, no Deed of
Sale but it evidenced by receipts of payment.
 Regalado sold portions of the land to respondents.
 The Municipality was not able to finish the school thus returning the ownership of the property to the
donors.
 July 5,1988. Petitioners (heirs) filed against the respondents stating that their late mother did sell the
property. If it was true that she (Trinidad) sold the property, it would be null and void since it was
already donated to the Municipality thus the ownership is with the Municipality.
 RTC ruled in favor of the heirs, ruling that Trinidad had no capacity to sell because the ownership of the
land was already with the Municipality. CA reversed.

Issue: W/ON the sale is valid

Held: Yes. When the property was donated to the Municipality, the ownership was transferred to them
but wait there’s more, there was a condition. A RESOLUTORY CONDITION, tho it was not stated in the
condition on how long the condition was, it was evident that the Municipality had intended to build the
school. Again, tho not stated how long, the Municipality still gave back the property to the donors thus
the ownership was transferred. Making the sale valid since ownership was returned.
 CASE DIGEST: Gregorio Fule vs CA, Cruz and Belarmino G.R.
No. 112212. March 2, 1998 (286 SCRA 698) (Yellow Pad
digest)
Gregorio Fule vs CA, Cruz and Belarmino (286 SCRA 698)

Facts:
 Gregorio Fule, a banker and jeweler, acquired a 10 hectare of property in Rizal which used to be under
the name of Fr. Jacobe on which (Jacobe) mortgaged the land to the Bank of Alaminos to secure a loan
of P10,000. The mortgage was forclosed and the property later offered for public auction.
 1984, Gregorio asked Remilia and Oliva to look for a buyer (property), the found Dr. Cruz, just so
happens that Gregorio wants the 2.5 carat EMERALD CUT EARRINGS of Dr. Ninevetch Cruz (MD),
Gregorio offered to buy the jewelry for P100,000, was refused, he then offered $6000 in the exchange
rate of $1 is to P25, was still refused. They agreed, however, on the land of Fule for the jewelry.
 Dr. Cruz asked her counsel, Atty. Belarmino to check the land for any impediments. There was.
Gregorio then executed to a DEED OF REDEMPTION to cut through the legal impediment. Land is now
A-Okay 
 Dr. Cruz went to the bank with Gregorio to show the jewelry and said (non-verbatim “Oy bobo check
this shit out, tapat mo sa ilaw to see if it’s fake or not. ICE ba?”. Gregorio checked it and was happy.
Gregorio and the counsel executed a DEED OF ABSOLUTE SALE. The Property was for P200,000 and the
Jewelry for P160,000, both agreed that Dr. Cruz will pay the remaining P40,000 by cash.
 Gregorio happy with his jewelry, went straight to a appraiser named *wait for it* DIMAYUGAhahahahaha
but anyway, Dimayuga said that the jewel is fake.
 Gregorio then filed a complaint before the RTC, praying for the CONTRACT OF SALE be deemed null
and void.
 RTC ruled in favor of Cruz stating that Gerggy boy was in badfaith. CA affirmed.
Issue: W/ON CA erred in upholding the validity of the Contract of Sale

Held: No. The NCC provides that the Contract of Sale is consensual, and is perfected when the minds
met. Contract may be rendered void if (1) Party has no capacity to give consent, and (2) if consent was
gained because of VIMFU (Violence, Intimidation, Mistake, Fraud, and Undue Influence). Dr. Cruz was
not Fraudulent. SC said that Greggy Boy was also a jeweler, he was given time to inspect the jewel
before perfecting the contract.
 Polytechnic University of the Philippines vs Court of Appeals and Firestone Ceramics
National Development Corporation vs Firestone Ceramics Inc.
[GR No. 143513 and 143590. November 14, 2001]

Bellosilo, J.:
Facts:
Petitioner National Development Corp., a government owned and controlled corporation, had in its
disposal a 10 hectares property. Sometime in May 1965, private respondent Firestone Corporation
manifested its desire to lease a portion of it for ceramic manufacturing business. On August 24, 1965,
both parties entered into a contract of lease for a term of 10 years renewable for another 10 years. Prior
to the expiration of the aforementioned contract, Firestone wrote NDC requesting for an extension of their
lease agreement. It was renewed with an express grant to Firestone of the first option to purchase the
leased premise in the event that it was decided "to dispose and sell the properties including the lot..."
Cognizant of the impending expiration of the leased agreement, Firestone informed NDC through letters
and calls that it was renewing its lease. No answer was given. Firestone's predicament worsened when it
learned of NDC's supposed plans to dispose the subject property in favor of petitioner Polytechnic
University of the Philippines. PUP referred to Memorandum Order No. 214 issued by then President
Aquino ordering the transfer of the whole NDC compound to the National Government. The order of
conveyance would automatically result in the cancellation of NDC's total obligation in favor of the National
Government.
Firestone instituted an action for specific performance to compel NDC to sell the leased property in its
favor.

Issue:
1. Whether or not there is a valid sale between NDC and PUP.

Ruling
A contract of sale, as defined in the Civil Code, is a contract where one of the parties obligates himself to
transfer the ownership of and to deliver a determinate thing to the other or others who shall pay therefore
a sum certain in money or its equivalent. It is therefore a general requisite for the existence of a valid and
enforceable contract of sale that it be mutually obligatory, i.e., there should be a concurrence of the
promise of the vendor to sell a determinate thing and the promise of the vendee to receive and pay for the
property so delivered and transferred. The Civil Code provision is, in effect, a "catch-all" provision which
effectively brings within its grasp a whole gamut of transfers whereby ownership of a thing is ceded for a
consideration.
All three (3) essential elements of a valid sale, without which there can be no sale, were attendant in the
"disposition" and "transfer" of the property from NDC to PUP - consent of the parties, determinate subject
matter, and consideration therefor.
Consent to the sale is obvious from the prefatory clauses of Memorandum Order No. 214 which explicitly
states the acquiescence of the parties to the sale of the property. Furthermore, the cancellation of NDC's
liabilities in favor of the National Government constituted the "consideration" for the sal
Gaite v. Fonacier
Facts:

Gaite was appointed by Fonacier as attorney-in-fact to contract any party for

the exploration and development of mining claims. Gaite executed a deed of
assignment in favor of a single proprietorship owned by him. For some
reasons, Fonacier revoked the agency, which was acceded to by Gaite, subject
to certain conditions, one of which being the transfer of ores extracted from
the mineral claims for P75,000, of which P10,000 has already been paid upon
signing of the agreement and the balance to be paid from the first letter of
credit for the first local sale of the iron ores. To secure payment, Fonacier
delivered a surety agreement with Larap Mines and some of its stockholders,
and another one with Far Eastern Insurance. When the second surety
agreement expired with no sale being made on the ores, Gaite demanded the
P65,000 balance. Defendants contended that the payment was subject to the
condition that the ores will be sold.

Issue:

(1) Whether the sale is conditional or one with a period

(2) Whether there were insufficient tons of ores

Held:

(1) The shipment or local sale of the iron ore is not a condition precedent (or
suspensive) to the payment of the balance of P65,000.00, but was only a
suspensive period or term. What characterizes a conditional obligation is the
fact that its efficacy or obligatory force (as distinguished from its
demandability) is subordinated to the happening of a future and uncertain
event; so that if the suspensive condition does not take place, the parties
would stand as if the conditional obligation had never existed.

A contract of sale is normally commutative and onerous: not only does each
one of the parties assume a correlative obligation (the seller to deliver and
transfer ownership of the thing sold and the buyer to pay the price),but each
party anticipates performance by the other from the very start. While in a sale
the obligation of one party can be lawfully subordinated to an uncertain event,
so that the other understands that he assumes the risk of receiving nothing for
what he gives (as in the case of a sale of hopes or expectations,emptio spei), it
is not in the usual course of business to do so; hence, the contingent character
of the obligation must clearly appear. Nothing is found in the record to
evidence that Gaite desired or assumed to run the risk of losing his right over
the ore without getting paid for it, or that Fonacier understood that Gaite
assumed any such risk. This is proved by the fact that Gaite insisted on a bond
a to guarantee payment of the P65,000.00, an not only upon a bond by
Fonacier, the Larap Mines & Smelting Co., and the company's stockholders,
but also on one by a surety company; and the fact that appellants did put up
such bonds indicates that they admitted the definite existence of their
obligation to pay the balance of P65,000.00.

The appellant have forfeited the right court below that the appellants have
forfeited the right to compel Gaite to wait for the sale of the ore before
receiving payment of the balance of P65,000.00, because of their failure to
renew the bond of the Far Eastern Surety Company or else replace it with an
equivalent guarantee. The expiration of the bonding company's undertaking
on December 8, 1955 substantially reduced the security of the vendor's rights
as creditor for the unpaid P65,000.00, a security that Gaite considered
essential and upon which he had insisted when he executed the deed of sale of
the ore to Fonacier.

(2) The sale between the parties is a sale of a specific mass or iron ore because
no provision was made in their contract for the measuring or weighing of the
ore sold in order to complete or perfect the sale, nor was the price of
P75,000,00 agreed upon by the parties based upon any such
measurement.(see Art. 1480, second par., New Civil Code). The subject matter
of the sale is, therefore, a determinate object, the mass, and not the actual
number of units or tons contained therein, so that all that was required of the
seller Gaite was to deliver in good faith to his buyer all of the ore found in the
mass, notwithstanding that the quantity delivered is less than the amount
estimated by them.
Facts:

The ADMU Institute of Philippine Culture is engaged in social science studies of Philippine
society and culture. It acceps scholarships for its research activities from international
organizations and private foundations. CIR assessed IPC’s tax liability for unpaid contractor’s
tax, claiming that IPC is an independent contractor and therefore, subject to 3% tax.

Issues:

W/N IPC is a contractor?

W/N the research project is considered a contract of sale/contract for a piece of work?

Held:

IPC is not a contractor, it never contracted to sell its research projects for a fee. The funds
received by ADMU are not payments but donations which are tax exempt. Furthermore, the
research activities conducted by IPC are not focused on business but on social science
projects/studies. Regarding sponsored projects, IPC requires that the topic must be consistent
with IPC’s academic agenda, that there was no proprietary/commercial purpose for research, and
that IPC retains ownership/right to publish results.

Contract of sale requires a transfer of ownership of a determinate thing while a contract for a
piece of work requires execution of a piece of work for the employer. In the present case, tehre
was no sale or contract for a piece of work since there was no transfer of ownership over
research data obtained or results of results of research projects undertaken by IPC.
Inchausti vs Cromwell
20 Phil. 345 October 16, 1911

Facts:
Inchausti is engaged in the business of buying and selling wholesale hemp on commission. It is customary to sell
hemp in bales which are made by compressing the loose fiber by means of presses, covering two sides of the bale
with matting, and fastening it by means of strips of rattan; that the operation of bailing hemp is designated among
merchants by the word “prensaje.” In all sales of hemp by Inchausti, the price is quoted to the buyer at so much
per picul, no mention being made of bailing. It is with the tacit understanding that the hemp will be delivered in
bales. The amount depends under the denomination of “prensaje” or the baled hemp. CIR made demand in writing
upon Inchausti for the payment of the sum of P1,370.68 as a tax of one third of one per cent on the sums of money
mentioned as aggreagate sum collected as prensaje or the baled hemp. Inchausti paid upon protest, contending
that the collected amount is illegal upon the ground that the said charge does not constitute a part of the selling
price of the hemp, but is a charge made for the service of baling the hemp.

Issue:
Whether or not the baled hemp constitutes a contract of sale

Ruling:
Yes, the baled hemp constitutes a contract of sale. In the case at bar, the baled form before the agreement of sale
were made and would have been in existence even if none of the individual sales in question had been
consummated. The hemp, even if sold to someone else, will be sold in bales. When a person stipulates for the
future sale of articles which he is habitually making, and which at the time are not made or finished, it is essentially
a contract of sale and not a contract for piece of work. It is otherwise when the article is made pursuant to
agreement. If the article ordered by the purchaser is exactly such as the plaintiff makes and keeps on hand for sale
to anyone, and no change or modification of it is made at the defendant’s request, it is a contract of sale, even
though it may be entirely made after, and in consequence of, the defendant’s order for it.
Celestino Co vs CIR (G.R. No. L-8506)
Subject: Sales
Doctrine: Contract for Piece-of-work
Facts: Celestino Co & Company is a duly registered general co-partnership doing business under
the trade name of “Oriental Sash Factory”. From 1946 to 1951 it paid percentage taxes of 7% on
the gross receipts of its sash, door and window factory, in accordance with sec. 186 of the
National Internal Revenue Code which is a tax on the original sales of articles by manufacturer,
producer or importer. However, in 1952 it began to claim only 3% tax under Sec. 191, which is a
tax on sales of services. Petitioner claims that it does not manufacture ready-made doors, sash
and windows for the public, but only upon special orders from the customers, hence, it is not
engaged in manufacturing under sec 186, but only in sales of services covered by sec 191.
Having failed to convince BIR, petitioner went to the Court of Tax Appeal where it also failed.
CTA, in its decision, holds that the “petitioner has chosen for its tradename and has offered itself
to the public as a “Factory”, which means it is out to do business, in its chosen lines on a big
scale. As a general rule, sash factories receive orders for doors and windows of special design
only in particular cases but the bulk of their sales is derived from a ready-made doors and
windows of standard sizes for the average home.. Even if we were to believe petitioner’s claim
that it does not manufacture ready-made sash, doors and windows for the public and that it
makes these articles only special order of its customers, that does not make it a contractor within
the purview of section 191 of the national Internal Revenue Code… there are no less than fifty
occupations enumerated in the aforesaid section…and after reading carefully each and every one
of them, we cannot find under which the business of manufacturing sash, doors and windows
upon special order of customers fall under the category” mentioned under Sec 191.
Issue: Whether the petitioner company provides special services or is engaged in manufacturing.
Held: The important thing to remember is that Celestino Co & Company habitually makes sash,
windows and doors, as it has represented in its stationery and advertisements to the public. That
it “manufactures” the same is practically admitted by appellant itself. The fact that windows and
doors are made by it only when customers place their orders, does not alter the nature of the
establishment, for it is obvious that it only accepted such orders as called for the employment of
such material-moulding, frames, panels-as it ordinarily manufactured or was in a position
habitually to manufacture. The Oriental Sash Factory does nothing more than sell the goods that
it mass-produces or habitually makes; sash, panels, mouldings, frames, cutting them to such sizes
and combining them in such forms as its customers may desire.
Appellant invokes Article 1467 of the New Civil Code to bolster its contention that in filing
orders for windows and doors according to specifications, it did not sell, but merely contracted
for particular pieces of work or “merely sold its services”. In our opinion when this Factory
accepts a job that requires the use of extraordinary or additional equipment, or involves services
not generally performed by it-it thereby contracts for a piece of work — filing special orders
within the meaning of Article 1467. The orders herein exhibited were not shown to be special.
They were merely orders for work — nothing is shown to call them special requiring
extraordinary service of the factory. The thought occurs to us that if, as alleged-all the work of
appellant is only to fill orders previously made, such orders should not be called special work,
but regular work. The Supreme Court affirms the assailed decision by the CTA.
Engineering Equipment and Supply
Company v. CIR and CTA
Facts:

Engineering Equipment and Supply Company is engaged in the design and

installation of central type air conditioning system, pumping plants and steel
fabrications. Upon a letter from a certain Juan dela Cruz denouncing the
company for tax evasion and fraud in obtaining its dollar allocations, BIR, CB
and NBI conducted a raid and confiscated voluminous documents from the
firm. 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 prescribed by Section 185(m) of the
Tax Code, in relation to Section 194 of the same. Engineering claims that it is
not a manufacturer and setter of air-conditioning units and spare parts or
accessories thereof subject to tax under Section 185(m) of the Tax Code, but a
contractor engaged in the design, supply and installation of the central type of
air-conditioning system subject to the 3% tax imposed by Section 191 of the
same Code, which is essentially a tax on the sale of services or labor of a
contractor rather than on the sale of articles subject to the tax referred to in
Sections 184, 185 and 186 of the Code.

Issue:

Whether or not Engineering is a manufacturer of air conditioning units under

Section 185(m), supra, in relation to Sections 183(b) and 194 of the Code, or a
contractor under Section 191 of the same Code

Held:

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 and 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 plaintiff makes and
keeps on hand for sale to anyone, and no change or modification of it is made
at defendant's request, it is a contract of sale, even though it may be entirely
made after, and in consequence of, the defendants order for it.
The word "contractor" has come to be used with special reference to a person
who, in the pursuit of the independent business, undertakes to do a specific
job or piece of work for other persons, using his own means and methods
without submitting himself to control as to the petty details. The true test of a
contractor would seem to be that he renders service in the course of an
independent occupation, representing the will of his employer only as to the
result of his work, and not as to the means by which it is accomplished.

Engineering, in a nutshell, fabricates, assembles, supplies and installs in the

buildings of its various customers the central type air conditioning system;
prepares the plans and specifications therefor which are distinct and different
from each other; the air conditioning units and spare parts or accessories
thereof used by petitioner are not the window type of air conditioner which are
manufactured, assembled and produced locally for sale to the general market;
and the imported air conditioning units and spare parts or accessories thereof
are supplied and installed by petitioner upon previous orders of its customers
conformably with their needs and requirements. The facts and circumstances
aforequoted support the theory that Engineering is a contractor rather than a
manufacturer.
uiroga vs Parsons
G.R. No. L-11491
Subject: Sales
Doctrine: Contract of Agency to Sell vs Contract of Sale
Facts: On Jan 24, 1911, plaintiff and the respondent entered into a contract making the latter an
“agent” of the former. The contract stipulates that Don Andres Quiroga, here in petitioner, grants
exclusive rights to sell his beds in the Visayan region to J. Parsons. The contract only stipulates
that J.Parsons should pay Quiroga within 6 months upon the delivery of beds.
Quiroga files a case against Parsons for allegedly violating the following stipulations: not to sell
the beds at higher prices than those of the invoices; to have an open establishment in Iloilo; itself
to conduct the agency; to keep the beds on public exhibition, and to pay for the advertisement
expenses for the same; and to order the beds by the dozen and in no other manner. With the
exception of the obligation on the part of the defendant to order the beds by the dozen and in no
other manner, none of the obligations imputed to the defendant in the two causes of action are
expressly set forth in the contract. But the plaintiff alleged that the defendant was his agent for
the sale of his beds in Iloilo, and that said obligations are implied in a contract of commercial
agency. The whole question, therefore, reduced itself to a determination as to whether the
defendant, by reason of the contract hereinbefore transcribed, was a purchaser or an agent of the
plaintiff for the sale of his beds.
Issue: Whether the contract is a contract of agency or of sale.
Held: In order to classify a contract, due attention must be given to its essential clauses. In the
contract in question, what was essential, as constituting its cause and subject matter, is that the
plaintiff was to furnish the defendant with the beds which the latter might order, at the price
stipulated, and that the defendant was to pay the price in the manner stipulated. Payment was to
be made at the end of sixty days, or before, at the plaintiff’s request, or in cash, if the defendant
so preferred, and in these last two cases an additional discount was to be allowed for prompt
payment. These are precisely the essential features of a contract of purchase and sale. There was
the obligation on the part of the plaintiff to supply the beds, and, on the part of the defendant, to
pay their price. These features exclude the legal conception of an agency or order to sell whereby
the mandatory or agent received the thing to sell it, and does not pay its price, but delivers to the
principal the price he obtains from the sale of the thing to a third person, and if he does not
succeed in selling it, he returns it. By virtue of the contract between the plaintiff and the
defendant, the latter, on receiving the beds, was necessarily obliged to pay their price within the
term fixed, without any other consideration and regardless as to whether he had or had not sold
the beds.
In respect to the defendant’s obligation to order by the dozen, the only one expressly imposed by
the contract, the effect of its breach would only entitle the plaintiff to disregard the orders which
the defendant might place under other conditions; but if the plaintiff consents to fill them, he
waives his right and cannot complain for having acted thus at his own free will.
For the foregoing reasons, we are of opinion that the contract by and between the plaintiff and
the defendant was one of purchase and sale, and that the obligations the breach of which is
alleged as a cause of action are not imposed upon the defendant, either by agreement or by law.
 G.R. No. L-47538 June 20, 1941
GONZALO PUYAT & SONS, INC., petitioner,
vs.
ARCO AMUSEMENT COMPANY (formerly known as Teatro
Arco), respondent.
Facts:
Arco Amusement Company is a business engaged in operating
cinematographs. Gonzalo Puyat & Sons, Inc, was acting as exclusive agents
in the Philippines for Starr Piano Company of Indiana, USA, and dealt with
cinematographer equipment and company.
Arco Amusement approached Gonzalo Puyat & Sons entered into an
agreement wherein Gonzalo Puyat will, on behalf of Arco Amusement, order
sound reproducing equipment from Starr Piano Company and that Arco
Amusement will pay Gonzalo Puyat, in addition to the price of equipment, a
10% commission plus all expenses. Starr Piano quoted the list price of
equipment as $1700 without discount to Gonzalo Puyat, which then told Arco
Amusement about it. Being agreeable, the two formalized the transaction and
Arco Amusement duly paid $1700 to Gonzalo Puyat.

Subsequently, Arco Amusement made another order again to Gonzalo Puyat

for the equipment on the same terms as the first order. The order stated that
Gonzalo Puyat would pay for the equipment the amount of $1600 which was
supposed to be the exact price quoted by Starr Piano plus 10% commission
and expenses. Arco Amusement duly paid $1600 plus 10% commission plus
$160 for the expenses; the $160 does not represent actual out-of-pocket
expenses but a mere flat charge and rough estimate made by Arco
Amusement equivalent to 10% of the $1,600 price.

Arco Amusement subsequently discovered that the price quoted to them with
regard to their previous orders were not the net price but rather the list price,
and that the Gonzalo Puyat had obtained a discount from the Starr Piano
Company. Moreover, by reading reviews and literature on prices of machinery
and cinematograph equipment, Arco Amusement was convinced that the
prices charged them were much too high. For these reasons, they sought to
obtain a reduction from Gonzalo Puyat rather than a reimbursement, and
failing in this they filed the complaint.

RTC: Contract between Arco Amusement and Gonzalo Puyat was one of
outright purchase and sale.
CA: Reversed RTC’s ruling; the relation between the two was that of agent
and principal, Gonzalo Puyat acting as agent of Arco Amusement, and
sentenced Gonzalo Puyat to pay the alleged overpayments.

Issue:
Whether or not the contract between Arco Amusement and Gonzalo Puyat
was one of purchase and sale, and not agency.

Held:
Yes. There was a contract of sale between the two.

In the first place, the contract is the law between the parties and should
include all the things they are supposed to have been agreed upon. What
does not appear on the face of the contract should be regarded merely as
“dealer’s” or “trader’s talk”, which can not bind either party. The letters
showing that Arco Amusement accepted the prices of $1700 and $1600 for
the sound reproducing equipment subject of its contract with the petitioner,
are clear in their terms and admit no other interpretation that the respondent in
question at the prices indicated which are fixed and determinate.

Whatever unforseen events might have taken place unfavorable to Arco

Amusement, such as change in prices, mistake in their quotation, loss of the
goods not covered by insurance or failure of the Starr Piano Company to
properly fill the orders as per specifications, Gonzalo Puyat might still legally
hold Arco Amusement to the prices fixed. This is incompatible with the
pretended relation of agency between the petitioner and the respondent,
because in agency, the agent is exempted from all liability in the discharge of his
commission provided he acts in accordance with the instructions received from
his principal (section 254, Code of Commerce), and the principal must
indemnify the agent for all damages which the latter may incur in carrying out
the agency without fault or imprudence on his part (article 1729, Civil Code).
The orders which state that the petitioner was to receive ten per cent (10%)
commission does not necessarily make Gonzalo Puyat an agent of Arco
Amusement as this provision is only an additional price which Arco
Amusement bound itself to pay, and which stipulation is not incompatible with
the contract of purchase and sale
Dacion en Pago

Philippine Lawin Bus Co. (Lawin) vs CA

Doctrine:

Nature:

RTC- Suit to claim for a sum of money against Lawin, case was dismissed

CA- Reversed RTC and ruled that Lawin has to pay ACC

SC- Affirmed CA’s decision and ordered

Facts:

Lawin initially loaned from Advance Capital Corp. (ACC) Php 8M payable w/in 1 yr and

guaranteed by a chattel mortgage of Lawin’s 9 buses. Lawin was in default in its payments and

was able to pay only Php 1.8M.

Lawin obtained its second loan of 2M payable in one month under a promissory note. Lawin was

in default again hence it asked ACC for a restructuring of the loan despite this Lawin was still

not able to pay. The buses for foreclosed and it was sold for 2M.

ACC sent Lawin demand letters to settle its indebtedness amounting to hp 16,484,992.42 then

subsequently filed a suit for sum of money against Lawin. Lawin in its defense said that there

was already an arrangement to settle the obligation

o A. Sale of 9 buses and its proceeds will cover for the full payment; OR

o B. ACC will shoulder the rehabilitation of the buses and the earnings of the operation

will be then applied to the loan

Issue/Held: W/N there was a dacion en pago bet. the parties? NO

Ratio:
 Dacion en Pago is a special mode of payment, the debtor offers another thing to the creditor

who accepts it as equivalent of payment of the outstanding obligation. It partakes the nature of

a sale whose essential elements are a) consent b)object certain and c) cause and the contract is

perfected at the moment of the meeting of the minds of the parties.

In this case there was no meeting of the minds between Lawin and ACC that the obligation

would be extinguished by dacion en pago. The receipts shows that the delivery of the 2 buses to

ACC didn’t transfer the ownership of the bus to ACC rather they were deemed to be only as

Lawin’s agent in the sale of the bus whereby the proceeds are then to be applied as payment for

the loan.
FILINVEST CREDIT CORPORATION vs. COURT OF
APPEALS G.R. No. 82508 September 29, 1989
FILINVEST CREDIT CORPORATION vs. COURT OF APPEALS
G.R. No. 82508 September 29, 1989

Facts:

Spouses Sy Bang were engaged in the sale of gravel produced from crushed rocks and used for
construction purposes. In order to increase their production, they looked for a rock crusher which Rizal
Consolidated Corporation then had for sale. A brother of Sy Bang, went to inspect the machine at the
Rizal Consolidated’s plant site. Apparently satisfied with the machine, the private respondents signified
their intent to purchase the same.

Since he does not have the financing capability, Sy Bang applied for financial assistance from Filinvest
Credit Corporation. Filinvest agreed to extend financial aid on the following conditions: (1) that the
machinery be purchased in the petitioner’s name; (2) that it be leased with option to purchase upon the
termination of the lease period; and (3) that Sy Bang execute a real estate mortgage as security for the
amount advanced by Filinvest. A contract of lease of machinery (with option to purchase) was entered
into by the parties whereby they to lease from the petitioner the rock crusher for two years. The contract
likewise stipulated that at the end of the two-year period, the machine would be owned by Sy Bang.

3 months from the date of delivery, Sy Bang claiming that they had only tested the machine that month,
sent a letter-complaint to the petitioner, alleging that contrary to the 20 to 40 tons per hour capacity of the
machine as stated in the lease contract, the machine could only process 5 tons of rocks and stones per
hour. They then demanded that the petitioner make good the stipulation in the lease contract. Sy Bang
stopped payment on the remaining checks they had issued to the petitioner.

As a consequence of the non-payment, Filinvest extrajudicially foreclosed the real estate mortgage.

Issue:

WON the real transaction was lease or sale? SALE ON INSTALLMENTS.

Held:

The real intention of the parties should prevail. The nomenclature of the agreement cannot change its
true essence, i.e., a sale on installments. It is basic that a contract is what the law defines it and the
parties intend it to be, not what it is called by the parties. It is apparent here that the intent of the parties to
the subject contract is for the so-called rentals to be the installment payments. Upon the completion of the
payments, then the rock crusher, subject matter of the contract, would become the property of the private
respondents. This form of agreement has been criticized as a lease only in name.

Sellers desirous of making conditional sales of their goods, but who do not wish openly to make a bargain
in that form, for one reason or another, have frequently resorted to the device of making contracts in the
form of leases either with options to the buyer to purchase for a small consideration at the end of term,
provided the so-called rent has been duly paid, or with stipulations that if the rent throughout the term is
paid, title shall thereupon vest in the lessee. It is obvious that such transactions are leases only in name.
The so-called rent must necessarily be regarded as payment of the price in installments since the due
payment of the agreed amount results, by the terms of bargain, in the transfer of title to the lessee.

Indubitably, the device contract of lease with option to buy is at times resorted to as a means to
circumvent Article 1484, particularly paragraph (3) thereof.Through the set-up, the vendor, by retaining
ownership over the property in the guise of being the lessor, retains, likewise, the right to repossess the
same, without going through the process of foreclosure, in the event the vendee-lessee defaults in the
payment of the installments. There arises therefore no need to constitute a chattel mortgage over the
movable sold. More important, the vendor, after repossessing the property and, in effect, canceling the
contract of sale, gets to keep all the installments-cum-rentals already paid.

Even if there was a contract of sale, Filinvest is still not liable because Sy Bang is presumed to be more
knowledgeable, if not experts, on the machinery subject of the contract, they should not therefore be
heard now to complain of any alleged deficiency of the said machinery. It was Sy Bang who was
negligent, not Filinvest. Further, Sy Bang is precluded to complain because he signed a Waiver of
Warranty