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MITH, BELL & CO., LTD VS.

VICENTE SOTELO MATTI

G.R. No. L-16570 March 9, 1922

FACTS:

Smith Bell and Co. entered into contract with Mr. Vicente Sotelo in August 1918. Two
steel tanks were to be sold to Sotelo in the amount of P21,000.00; two expellers at
P25,000.00 each and two electric motors at P2,000.00 each. The steel tanks are to be
delivered within 3 or 4 months; the expellers to be delivered in September 1918 or as
soon as possible; electric motors approximate delivery within 90 days and is not
guaranteed. The tanks arrived at Manila on the 27th of April, 1919: the expellers on the
26th of October, 1918; and the motors on the 27th of February, 1919. The plaintiff
corporation notified the defendant, Mr. Sotelo, of the arrival of these goods, but Mr.
Sotelo refused to receive them and to pay the prices stipulated.

The plaintiff brought suit against the defendant, based on four separate causes
of action, 1.) alleging, among other facts, that it 2.) immediately notified the defendant of
the arrival of the goods, and 3.) asked instructions from him as to the delivery thereof,
and that the defendant 4.) refused to receive any of them and to pay their price. The
plaintiff, further, alleged that the expellers and the motors were in good condition.

In their answer, the defendant, Mr. Sotelo, and the intervenor, the Manila Oil
Refining and By-Products Co., Inc., denied the plaintiff's allegations as to the shipment
of these goods and their arrival at Manila, the notification to the defendant, Mr. Sotelo,
the latter's refusal to receive them and pay their price, and the good condition of the
expellers and the motors, alleging as special defense that Mr. Sotelo had made the
contracts in question as manager of the intervenor, the Manila Oil Refining and By-
Products Co., Inc which fact was known to the plaintiff, and that "it was only in May,
1919, that it notified the intervenor that said tanks had arrived, the motors and the
expellers having arrived incomplete and long after the date stipulated." As a
counterclaim or set-off, they also allege that, as a consequence of the plaintiff's delay in
making delivery of the goods, which the intervenor intended to use in the manufacture
of cocoanut oil, the intervenor suffered damages in the sums of one hundred sixteen
thousand seven hundred eighty-three pesos and ninety-one centavos (P116,783.91) for
the nondelivery of the tanks, and twenty-one thousand two hundred and fifty pesos
(P21,250) on account of the expellers and the motors not having arrived in due time.
ISSUE:

Was the condition dependent upon chance or upon will of third persons?

RULING:

Yes. And as the export of the machinery in question was, as stated in the
contract, contingent upon the sellers obtaining certificate of priority and permission of
the United States Government, subject to the rules and regulations, as well as to
railroad embargoes, then the delivery was subject to a condition the fulfillment of which
depended not only upon the effort of the herein plaintiff, but upon the will of third
persons who could in no way be compelled to fulfill the condition. In cases like this,
which are not expressly provided for, but impliedly covered, by the Civil Code, the
obligor will be deemed to have sufficiently performed his part of the obligation, if he has
done all that was in his power, even if the condition has not been fulfilled in reality.

In such cases, the decisions prior to the Civil Code have held that the obligee having
done all that was in his power, was entitled to enforce performance of the obligation.
This performance, which is fictitious � not real � is not expressly authorized by the
Code, which limits itself only to declare valid those conditions and the obligation thereby
affected; but it is neither disallowed, and the Code being thus silent, the old view can be
maintained as a doctrine.
SOLER V CHESLEY

43 PHIL 529ROMUALDEZ; June 20, 1922

NATURE

Appeal

FACTS

- S o l e r h a d a g r e e d w i t h W m . H . A n d e r s o n a n d C o . , f o r t h e purchase of
certain machinery agreement.- T

erms and conditions of their agreement

: T h e f o r e g o i n g machinery is to be invoiced at manufacturers' price, plus


allc h a r g e s s u c h a s f r e i g h t , i n s u r a n c e , i n t e r e s t a n d e x c h a n g e , arrastre,
landing charges, delivery, internal revenue, etc., plus abuying commission of 5 per
cent.- Their terms of payment:- 50% deposit to be made upon arrival of the
machinery,and the balance 90 days after delivery of the machinery.-And in he event
that Soler shall fail to live up to the terms of this agreement, such failure by him
will be sufficient cause toterminate the contract, and any payments made by him
underand by virtue of the contract shall be and remain the exclusiveproperty of Wm. H.
Anderson and Co.- T h e t i t l e o f t h e m a c h i n e r y i n q u e s t i o n i s t o r e m a i n i n
t h e n a m e o f W m . H . A n d e r s o n a n d C o . u n t i l p a y m e n t i n f u l l h a s been
made, at which time transfer of all right and title to the above mentioned
machinery will be made to the Soler.-Their agreement is contingent upon strikes,
fire,
accidents,e x t r a o r d i n a r y s h i p p i n g a n d o t h e r c o n d i t i o n s i m p o s e d o n acco
unt of war and other causes unavoidable or beyond the control of the party of the
first part.- It is strictly understood that the quotations mad e to
Mr. AndresSoler under date of February 27, 1919, were approximated
andwere subject to change without notice TF there is no guarantee asto prices and
delivery, it being understood that prices charged
willb e t h o s e s h o w n o n t h e i n v o i c e s o f t h e m a n u f a c t u r e r s , a n d shi
pment will be made by first possible opportunity.- Nov 16, 1918: Soler sold to the
Chesley all his rights and interestin a contract of sale.- At that time, a part of the
aforesaid machinery was on the way,t h e o t h e r p a r t b e i n g a l r e a d y i n t h e c i t y
o f M a n i l a , t h e p r i c e o f which has not as yet been paid by Mr. Soler to
Messrs. Wm. H.Anderson and Co.- It was said too in the contract that Chesley
made Mr. Soler aproposition whereby the latter should transfer it(the machineries)to
him, and he would assume the obligation to pay Messrs. Wm. H. Anderson and
Co. the amount of the invoices thereof, and thatMr. Soler was to be relieved from his
contract with Messrs. Wm. H.Anderson and Co. (and that the Co. has actual
knowledge of thissale of the machinery, as well as of Mr. Chesley being subrogatedto
the rights and obligations created by the agreement)- A l s o , i t w a s s t a t e d t h a t
M r . C h e s l e y s h a l l p a y M r . S o l e r t h e difference which may be found to
exist between the amount
of t h e i n v o i c e s o f t h e m a c h i n e r y a n d t h e s u m o f 1 0 0 l p h p i
m m e d i a t e l y u p o n t h e a r r i v a l o f s a i d m a c h i n e r y a t t h i s c i t y o f Manila;
provided that if any part of the machinery not affectingthe expellers is found
lacking, a proportional deduction shall bemade from the amount which
Mr. Soler may have received fromMr. Chesley.- Of the parts of the machinery
covered by these contracts, onlythe "filter press," the "cooker" and the "chains"
were in Manila onNovember 16, 1918, but the most important parts, such as the
"oilexpellers" and the "grinding mills" were not then yet in this city.- T h e s e " o i l
e x p e l l e r s " w e r e s h i p p e d f o r M a n i l a o n t h e 1 2 t h o f December, 1918, the
motors on the 8th of January, 1919, the machinery on the 16th of January 1919
and the grinding mills ont h e 2 1 s t o f F e b r u a r y , 1 9 1 9 , a l l o f w h i c h a r r i v e d a t
M a n i l a o n February 13, March 8, April 27, and August 23, 1919, respectively.-
T h e s e e f f e c t s w e r e r e c e i v e d a n d p a i d f o r b y C h e s l e y u n d e r protest, on
account of the fact that they were not delivered withinthe period stipulates in the
contract.- Soler was then advised by Chesley’ s lawyer that their contractto
was rescinded, it appearing that the parts of the machinery,which
the Soler asserted in said contract were on the way, werenot at the time and
it was only several days later that they wereshipped for Manila.- Solder
commenced this action asking that Chesley be sentencedto pay him the sum of
P30,546.03 with interest thereon, which sum was the difference between the
P100,000, the considerationof the contract, and the price of the aforesaid
machinery whichhad been paid by the Chesley, plus the incidental expenses,
asstipulated in the said contract.- The defendant answered, denying generally and
specifically theallegations of the complaint and setting up a special defense anda
counterclaim.- In his special defense, Chesley alleges that he had accepted andsigned
the contract on the assertion therein contained that of themachinery, which was the
subject matter of the said contract, apart was already in Manila, and the
other part on the way, andalso on the promises, assertions, and contemporary and
previousacts of the plaintiff to the same effect, by means of which the latter
succeeded in inducing the defendant to make and sign theaforesaid contract; that the
parts of the machinery which, on thedate of the contract, were said to be

on the way

, w e r e n o t i n fact in, and did not arrive at, Manila but long thereafter; that
if h e s i g n e d t h e c o n t r a c t , i t w a s b e c a u s e h e w a s d e s i r o u s o f having
the machinery, and the defendant assured him that itwould be delivered to him,
immediately or within a short time- TC sentenced Chesley to pay the Soler P30,546.03,
with legali n t e r e s t t h e r e o n f r o m O c t o b e r 1 6 , 1 9 1 9 , a n d t h e c o s t s ,
a n d absolved the plaintiff from the set-off and the counterclaim.

ISSUES

1 . W O N T C e r r e d i n n o t h o l d i n g t h a t t i m e w a s a n e s s e n t i a l element of
the contract2. WON TC erred in giving judgment in favor of the
plaintiff 3 . W O N T C e r r e d i n d i s m i s s i n g t h e c o u n t e r c l a i m o f
t h e defendant

HELD

1. YES- The arrival of the machinery within a reaso nable time was
anessential element of the contract, such time to be determinedby taking into
account the fact that is was then on the way to Manila.- It appears sufficiently
established in the record that if the Solergave his consent to this contract, it wa s
because he expectedthat said machinery would arrive within a short time, — the
timereasonably necessary for such machinery to reach Manila fromAmerica, — as the
plaintiff asserted in the document itself thatsaid machinery was then on the way.
The act of the defendantin insisting that this guaranty as to the arrival of the
machinerybe stated in the contract, his repeated complaints and protestswhen he
afterwards made payments as the parts arrived, andhis letter of April 25,
1919, leave no room for doubt that thearrival of said machinery within a
reasonably short time was oneof the determining elements of his consent.- These acts
of the defendant disclose the fact that he intentedthe arrival of the machinery to be
an essential element of thecontract (art. 1282, Civil Code).-
The fact that the plaintiff had no control
o f t h e p r o m p t transportation of the said machinery to Manila, does not relievet h e
p l a i n t i f f f r o m m a k i n g g o o d t h e g u a r a n t y i n s e r t e d i n t h e contract that said
machinery was already on the way to Manila.- The plaintiff elected to bind himself
in that way, although heknew, as he ought to have known that, had his rights not
beentransferred to the defendant, he could not have charged Messrs.Anderson and
Co. so much, who in the (first) contract did not guarantee the delivery nor the
amount of the price.- The plaintiff having bound himself in favor of the defendant
form o r e t h a n w h a t M e s s r s . A n d e r s o n a n d C o . h a d b o u n d the
mselves for in favor, we entertain no doubt that he acted ingood faith, encouraged by
the information of Messrs. Andersona n d C o . ( a l t h o u g h t h e m o s t t h a t t h e
e x p e l l e r s , — o n l y t h e expellers, — had been sent out by the factory), but it
was he,not Messrs. Anderson and Co., who contracted the
obligation,a n d , t h e r e f o r e , h e i s t h e o n l y o n e t o b e r e s p o n s i b l e
f o r t h e o b l i g a t i o n a r i s i n g f r o m t h e c o n t r a c t . H e w h o c o n t r a c t s a n d assu
mes an obligation is presumed to know the circumstancesunder which said
obligation can be complied with (Ferrer

vs.

Ignacio, 39 Phil., 446).- True, the plaintiff id not specify the date or time of the arrivalof
said mechanical devices; but he did assert that they were onthe way on the date of
the contract. But it did not happen asasserted2. YES- T h e p l a i n t i f f h a s
f a i l e d t o c a r r y o u t h i s o b l i g a t i o n i n c u r r e d under the contract and has,
therefore, no right to compel thedefendant to comply with his obligation
to pay the plaintiff thesum claimed in the complaint (art. 1124, Civil Code).3. NO-
I t a p p e a r s f r o m t h e r e c o r d t h a t h e s o l d t h e a f o r e s a i d mac
hinery to a third person, the Philippine Refining Co. In caseslike this, the rescission
of the contract does not lie (art. 1295, Civil Code).- As to the damages claimed by
the defendant: Evidence adducedis insufficient to fix the true amount thereof.

Disposition

Judgment Reversed, and the defendant absolvedfrom the complaint, and the
plaintiff from the counterclaim and other claims of the defendant

REPUBLIC V LITTON

94 Phil 52PARAS; November 28, 1953

NATURE

Appeal from a decision of the CFI holding Litton liable

FACTS

- The Government sent out a proposal for bids for the delivery of padlocks
and stationeries for election purposes to be delivered not later than March 1,
1946.- Litton Co. bound itself to deliver the said articles on or before March 1- It
is stipulated that should Litton fail to deliver, the
Governmenti s a l l o w e d t o i m p o s e a p e n a l t y , a n d t o m a k e o p e n -
m a r k e t purchases as needed.- Litton only made partial delivery. As a result,
the Governmentneeded to make open-market purchases, much higher than
therates stipulated with Litton, thereby the Government incurredlosses
equivalent to the difference.- Litton argues that on-time delivery is contingent on
the releaseo f t h e e x p o r t p e r m i t f r o m t h e U . S . , t h e r e l e a s e o f w h i c h i s
a condition to be fulfilled by the Government

ISSUE

WON Litton can be held liable for not being able to deliver in timefor the elections,
considering the contingency of release of the export permit

HELD

YES

Ratio

It is clear that Litton undertook to deliver the articles not later than March 1

- The purpose of delivery (for elections) and the latest time


of delivery (March 1) appear unequivocally in the Government’sproposal for
bids. It is then preposterous to suppose that deliveryafter the elections would ever be
contemplated or accepted.- Litton's contract with the plaintiff was unconditional.- Litton
filed 2 performance bonds warranting that the articles would be delivered on
time.

Disposition

Judgment appealed from is affirmed


STA.ANA V. HERNANDEZ (January 17, 1966)
FACTS:

Spouses Jose Santa Ana, Jr. and Lourdes Sto. Domingo sold a land in Bulacan to respondent Rosa
Hernandez for P11,000 lump sum. (there were two other previous sales to different vendees of other
portions of the land)

The boundaries of the land were stated in the deed of sale and its approximate land area.

Petitioners-spouses caused the preparation of the subdivision plan but Hernandez didn’t agree to the
partition. As such, petitioners-spouses filed a case alleging that Hernandez is occupying in excess of
17000 square meter of the land sold. Hernandez claims that the excess area is part of the land she
bought.

ISSUE:

WON the excess area occupied by Hernandez is part of the land sold.

HELD:

The sale involves a definite and identified tract, a corpus certum, that obligated the vendors to deliver to
the buyer all the land within the boundaries, irrespective of whether its real area should be greater or
smaller than what is recited in the deed.

To hold the buyer to no more than the area recited on the deed, it must be made clear therein that the
sale was made by unit of measure at a definite price for each unit. The sale in this case only involves the
definite boundaries but only approximate land areas. As such, Art 1542 concerning the sale for lump sum
must be considered.
FELICIANO ESGUERRA, et al. v. VIRGINIA TRINIDAD, et al.

518 SCRA 186 (2007)

What really defines a piece of ground is not the area, calculated with more or less
certainty, mentioned in its description, but the boundaries therein laid down, as
enclosing the land and indicating its limits.

Felipe Esguerra and Praxedes de Vera (Esguerra spouses) owned several parcels of land
half of which they sold to their grandchildren Feliciano, Canuto, Justa, Angel, Fidela,
Clara and Pedro, all surnamed Esguerra. The spouses sold half the remaining land were
sold their other grandchildren, the brothers Eulalio and Julian Trinidad.. Subsequentlly,
the Esguerra spouses executed the necessary Deeds of Sale before a notary public. They
also executed a deed of partitioning of the lots , all were about 5,000 square meteres
each.

Eulalio Trinidad (Trinidad) later sold his share of the land to his daughters. During a
cadastral survey conducted in the late 1960s, it was discovered that the 5,000-square
meter portion of Esguerra‘s parcel of land sold to Trinidad actually measured 6,268
square meters.

Feliciano Esguerra (Feliciano), who inhabits the lot bordering Trinidad, subsequently
filed a motion for nullification of sale between the Esguerra spouses and Trinidad on the
ground that they were procured through fraud or misrepresentation. Feliciano
contended that the stipulations in the deed of sale was that Trinidad was sold a 5,000
square meter lot. The boundaries stipulated in the contract of sale which extend the lot‘s
area

Both cases were consolidated and tried before the RTC which, after trial, dismissed the
cases. On appeal, the appellate court also dismissed the cases; and subsequently, the
motion for reconsideration was also denied.

ISSUES:

Whether or not the Appellate Court erred in holding that the description and boundaries
of the lot override the stated area of the lot in the deed of sale

HELD:

Where both the area and the boundaries of the immovable are declared, the area
covered within the boundaries of the immovable prevails over the stated area. In
cases of conflict between areas and boundaries, it is the latter which should prevail.

What really defines a piece of ground is not the area, calculated with more or less
certainty, mentioned in its description, but the boundaries therein laid down, as
enclosing the land and indicating its limits. In a contract of sale of land in a mass, it is
well established that the specific boundaries stated in the contract must control over any
statement with respect to the area contained within its boundaries. It is not of vital
consequence that a deed or contract of sale of land should disclose the area with
mathematical accuracy. It is sufficient if its extent is objectively indicated with sufficient
precision to enable one to identify it. An error as to the superficial area is immaterial.
Thus, the obligation of the vendor is to deliver everything within the boundaries,
inasmuch as it is the entirety thereof that distinguishes the determinate object.

Under the Torrens System, an OCT enjoys a presumption of validity, which correlatively
carries a strong presumption that the provisions of the law governing the registration of
land which led to its issuance have been duly followed. Fraud being a serious charge, it
must be supported by clear and convincing proof. Petitioners failed to discharge the
burden of proof, however.

The same rule shall be applied when two or more immovables are sold for a single price;
but if, besides mentioning the boundaries, which is indispensable in every conveyance of
real estate, its area or number should be designated in the contract, the vendor shall be
bound to deliver all that is included within said boundaries, even when it exceeds the
area or number specified in the contract; and, should he not be able to do so, he shall
suffer a reduction in the price, in proportion to what is lacking in the area or number,
unless the contract is rescinded because the vendee does not accede to the failure to
deliver what has been stipulated.

In fine, under Article 1542, what is controlling is the entire land included within the
boundaries, regardless of whether the real area should be greater or smaller than that
recited in the deed. This is particularly true since the area of the land in OCT No. 0-6498
was described in the deed as “humigit kumulang,” that is, more or less.

A caveat is in order, however. The use of “more or less” or similar words in designating
quantity covers only a reasonable excess or deficiency. A vendee of land sold in gross or
with the description “more or less” with reference to its area does not thereby ipso facto
take all risk of quantity in the land.
Philippine Suburban Dev Corp vs Auditor General
G.R. No. L-19545

Subject: Sales
Doctrine: Constructive or legal delivery

Facts:
On June 8, 1960, at a meeting with the Cabinet, the President of the Philippines, acting
on the reports of the Committee created to survey suitable lots for relocating squatters
in Manila and suburbs, approved in principle the acquisition by the People’s Homesite
and Housing Corporation of the unoccupied portion of the Sapang Palay Estate in Sta.
Maria, Bulacan and of another area either in Las Piñas or Parañaque, Rizal, or Bacoor,
Cavite for those who desire to settle south of Manila. On June 10, 1960, the Board of
Directors of the PHHC passed Resolution No. 700 (Annex “C”) authorizing the purchase
of the unoccupied portion of the Sapang Palay Estate at P0.45 per square meter
“subject to the following conditions precedent:

3. That the President of the Philippines shall first provide the PHHC with the necessary
funds to effect the purchase and development of this property from the proposed P4.5
million bond issue to be absorbed by the GSIS.
4. That the contract of sale shall first be approved by the Auditor General pursuant to
Executive Order dated February 3, 1959.

On July 13, 1960, the President authorized the floating of bonds under Republic Act
Nos. 1000 and 1322 in the amount of P7,500,000.00 to be absorbed by the GSIS, in
order to finance the acquisition by the PHHC of the entire Sapang Palay Estate at a
price not to exceed P0.45 per sq. meter.

On December 29,1960, Petitioner Philippine Suburban Development Corporation, as


owner of the unoccupied portion of the Sapang Palay Estate and the People’s Homesite
and Housing Corporation, entered into a contract embodied in a public instrument
entitled “Deed of Absolute Sale” whereby the former conveyed unto the latter the two
parcels of land abovementioned. This was not registered in the Office of the Register of
Deeds until March 14, 1961, due to the fact, petitioner claims, that the PHHC could not
at once advance the money needed for registration expenses.

In the meantime, the Auditor General, to whom a copy of the contract had been
submitted for approval in conformity with Executive Order No. 290, expressed
objections thereto and requested a re-examination of the contract, in view of the fact
that from 1948 to December 20, 1960, the entire hacienda was assessed at
P131,590.00, and reassessed beginning December 21, 1960 in the greatly increased
amount of P4,898,110.00.
It appears that as early as the first week of June, 1960, prior to the signing of the deed
by the parties, the PHHC acquired possession of the property, with the consent of
petitioner, to enable the said PHHC to proceed immediately with the construction of
roads in the new settlement and to resettle the squatters and flood victims in Manila
who were rendered homeless by the floods or ejected from the lots which they were
then occupying.
On April 12, 1961, the Provincial Treasurer of Bulacan requested the PHHC to withhold
the amount of P30,099.79 from the purchase price to be paid by it to the Philippine
Suburban Development Corporation. Said amount represented the realty tax due on the
property involved for the calendar year 1961. Petitioner, through the PHHC, paid under
protest the abovementioned amount to the Provincial Treasurer of Bulacan and
thereafter, or on June 13, 1961, by letter, requested then Secretary of Finance
Dominador Aytona to order a refund of the amount so paid. Upon recommendation of
the Provincial Treasurer of Bulacan, said request was denied by the Secretary of
Finance in a letter-decision dated August 22, 1961.
**Petitioner claimed that it ceased to be the owner of the land in question upon the
execution of the Deed of Absolute Sale on December 29, 1960. It is now claimed in this
appeal that the Auditor General erred in disallowing the refund of the real estate tax in
the amount of P30,460.90 because aside from the presumptive delivery of the property
by the execution of the deed of sale on December 29, 1960, the possession of the
property was actually delivered to the vendee prior to the sale, and, therefore, by the
transmission of ownership to the vendee, petitioner has ceased to be the owner of the
property involved, and, consequently, under no obligation to pay the real property tax for
the year 1961.
**Respondent, however, argues that the presumptive delivery of the property under
Article 1498 of the Civil Code does not apply because of the requirement in the contract
that the sale shall first be approved by the Auditor General, pursuant to the Executive
Order.

ISSUE: WON there was already a valid transfer of ownership between the parties.

HELD:
Considering the aforementioned approval and authorization by the President of the
Philippines of the specific transaction in question, the prior approval by the Auditor
General envisioned by Administrative Order would therefore, not be necessary.
Under the civil law, delivery (tradition) as a mode of transmission of ownership maybe
actual (real tradition) or constructive (constructive tradition). 2 When the sale of real
property is made in a public instrument, the execution thereof is equivalent to the
delivery of the thing object of the contract, if from the deed the contrary does not appear
or cannot clearly be inferred. 3
In other words, there is symbolic delivery of the property subject of the sale by the
execution of the public instrument, unless from the express terms of the instrument, or
by clear inference therefrom, this was not the intention of the parties. Such would be the
case, for instance, when a certain date is fixed for the purchaser to take possession of
the property subject of the conveyance, or where, in case of sale by installments, it is
stipulated that until the last installment is made, the title to the property should remain
with the vendor, or when the vendor reserves the right to use and enjoy the properties
until the gathering of the pending crops, or where the vendor has no control over the
thing sold at the moment of the sale, and, therefore, its material delivery could not have
been made.
In the case at bar, there is no question that the vendor had actually placed the vendee
in possession and control over the thing sold, even before the date of the sale. The
condition that petitioner should first register the deed of sale and secure a new title in
the name of the vendee before the latter shall pay the balance of the purchase price, did
not preclude the transmission of ownership. In the absence of an express stipulation to
the contrary, the payment of the purchase price of the good is not a condition,
precedent to the transfer of title to the buyer, but title passes by the delivery of the
goods.
WHEREFORE, the appealed decision is hereby reversed, and the real property tax paid
under protest to the Provincial Treasurer of Bulacan by petitioner Philippine Suburban
Development Corporation, in the amount of P30,460,90, is hereby ordered refunded.
Without any pronouncement as to costs.
THE HEIRS OF PEDRO ESCANLAR ET AL V. CA 281 SCRA 176 (1997)

FACTS: Spouses Guillermo Nombre and Victoriana Cari-an died without issue in 1924
and 1938, respectively. Nombre’s heirs include his nephews and grandnephews.
Victoriana was succeeded by her late brother’s son, Gregorio Cari-an.

1. After Gregorio’s death in 1971, his wife, Generosa Martinez and children (Rodolfo,
Carmen, Leonardo and Fredisminda) were adjudged as heirs by representation to
Victoriana’s estate. Leonardo passed away, leaving his widow, Nelly Chua vda. de Cari-
an and minor Leonell as his heirs

2. 2 parcels of land, denominated by Lot 1616 and 1617, formed part of the estate of
Guillermo Nombre and Victoriana Cari-an.

3. In 1978, Gregorio’s heirs executed a deed of sale of rights, interests and


participation in favor of Pedro Escanlar and Francisco Holgado over the ½ undivided
share of Victoriana for P275,000 to be paid to the heirs, except the share of the minor
Leonell Cari-an which shall be deposited to the Municipal Treasurer. Said contract of
sale will be effective only upon approval of CFI

4. Escanlar and Holgado, the vendees, were concurrently the lessees of the subject
property. In a deed of agreement executed by both parties confirming and affirming the
contract of sale, they stipulated the following:

a. That the balance of the purchase price (P225,000) shall be paid on or before May
1979

b. Pending complete payment thereof, the vendees shall not assign, sell, lease or
mortgage the rights, interests and participation thereof

c. In the event of nonpayment of the balance of said purchase price, the sum of
P50,000 (down payment) shall be deemed as damages

5. Escanlar and Holgado were unable to pay the individual shares of the Cari-an heirs,
amounting to P55,000 each, on the due date. However, said heirs received at least 12
installment payments from Escanlar and Holgado after May 1979. Rodolfo was fully
paid by June 1979, Generosa Martinez, Carmen and Fredisminda were likewise fully
compensated for their individual shares. The minor’s share was deposited with the RTC
in September 1982.

6. Being former lessees, Escanlar and Holgado continued in possession of Lots 1616
and Lots 1617. Interestingly, they continued to pay rent based on their lease contract.
7. Subsequently, Escanlar and Holgado sought to intervene in the probate proceedings
of Guillermo and Victoriana as buyers of Victoriana’s share. In 1982, the probate court
approved the motion filed by the heirs of Guillermo and Victoriana to sell their respective
shares in the estate. Thereafter, the Cari-ans, sold their shares in 8 parcels of land
including lots 1616 and 1617 to spouses Chua for P1.85 million.

8. The Cari-ans instituted a case for cancellation of sale against Escanlar and Holgado
alleging the latter’s failure to pay the balance of the purchase price on the stipulated
date and that they only received a total of P132,551 in cash and goods.

9. Escanlar and Holgado averred that the Cari-ans, having been paid, had no right to
resell the subject lots and that the spouses Chua were purchasers in bad faith.

10. The trial court held in favor of the heirs of Cari-an citing that the sale between
the Cari-ans and Escanlar is void as it was not approved by the probate court
which was required in the deed of sale.

11. CA affirmed the same and cited that the questioned deed of sale of rights is a
contract to sell because it shall become effective only upon approval by the probate
court and upon full payment of the purchase price.

ISSUE: WON the non-happening of a condition affects the validity of the contract itself

HELD: No, the non-happening of a condition only affects the effectivity and not the
validity of the contract.

Under Art 1318 Civil Code, the essential requisites of a contract are: consent of the
contracting parties; object certain which is the subject matter of the contract and
cause of the obligation which is established. Absent one of the above, no
contract can arise. Conversely, where all are present, the result is a valid
contract. However, some parties introduce various kinds of restrictions or
modalities, the lack of which will not, however, affect the validity of the contract.

In the instant case, the Deed of Sale, complying as it does with the essential
requisites, is a valid one. However, it did not bear the stamp of approval of the
court. The contract’s validity was not affected for in the words of the stipulation, “ …this
Contract of Sale of rights, interests and participations shall become effective only upon
the approval by the Honorable Court…” In other words, only the effectivity and not
the validity of the contract is affected.
CONTRACT TO SELL VS. CONTRACT TO SALE

In contracts to sell, ownership is retained by the seller and is not to pass until the full
payment of the price. Such payment is a positive suspensive condition, the failure of
which is not a breach of contract but simply an event that prevented the obligation of the
vendor to convey title from acquiring binding force. To illustrate, although a deed of
conditional sale is denominated as such, absent a proviso that title to the property sold
is reserved in the vendor until full payment of the purchase price nor a stipulation giving
the vendor the right to unilaterally rescind the contract the moment the vendee fails to
pay within a fixed period, by its nature, it shall be declared a deed of absolute sale.

In a contract of sale, the non-payment of the price is a resolutory condition which


extinguishes the transaction that, for a time, existed and discharges the obligations
created thereunder. The remedy of an unpaid seller in a contract of sale is to seek
either specific performance or rescission.

In the case at bar, the sale of rights, interests and participation as to ½ portion
pro indiviso of the 2 subject lots is a contract of sale for the reasons that (1) the
sellers did not reserve unto themselves the ownership of the property until full
payment of the unpaid balanceof P225,000.00; (2) there is no stipulation giving
the sellers the right to unilaterally rescind the contract the moment the buyer fails
to pay within the fixed period.

NEED OF PROBATE COURT’S APPROVAL EXISTS WHERE SPECIFIC


PROPERTIES OF THE ESTATE ARE SOLD AND NOT WHEN IDEAL AND
INDIVISIBLE SHARES OF AN HEIR ARE DISPOSED OF

The need for approval by the probate court exists only where specific properties of the
estate are sold and not when only ideal and indivisible shares of an heir are disposed
of. In Dillena v. Court of Appeals, the Court declared that it is within the jurisdiction of
the probate court to approve the sale of properties of a deceased person by his
prospective heirs before final adjudication. The probate court’s approval is necessary for
the validity of any disposition of the decedent’s estate. However, reference to judicial
approval cannot adversely affect the substantive rights of the heirs to dispose of their
ideal share in the co-heirship and/or co-ownership among the heirs. It must be recalled
that during the period of indivision of a decedent’s estate, each heir, being a co-owner,
has full ownership of his part and may therefore alienate it. But the effect of the
alienation with respect to the co-owners shall be limited to the portion which may be
allotted to him in the division upon the termination of the co-ownership.

CONTRACTUAL STIPULATIONS CONSIDERED LAW BETWEEN PARTIES;


EXCEPTION: CONTEMPORANEOUS ACTS OF PARTIES

As a general rule, the pertinent contractual stipulation (requiring court approval) should
be considered as the law between the parties. However, the presence of two factors
militates against this conclusion: (1) the evident intention of the parties appears to
be contrary to the mandatory character of said stipulation. Whoever crafted the
document of conveyance, must have been of the belief that the controversial
stipulation was a legal requirement for the validity of the sale. But the
contemporaneous and subsequent acts of the parties reveal that the original objective
of the parties was to give effect to the deed of sale even without court approval.

Receipt and acceptance of the numerous installments on the balance of the purchase
price by the Cari-ans, although the period to pay the balance of the purchase price
expired in May 1979, and leaving Escanlar and Holgado in possession of Lots 1616 and
1617 reveal their intention to effect the mutual transmission of rights and obligations.
The Cari-ans did not seek judicial relief until late 1982 or three years later; (2) the
requisite approval was virtually rendered impossible by the Cari-ans because
they opposed the motion for approval of the sale filed by Escanlar and Holgado,
and sued the latter for the cancellation of that sale. Having provided the obstacle
and the justification for the stipulated approval not to be granted, the Cari-ans should
not be allowed to cancel their first transaction with Escanlar and Holgado because of
lack of approval by the probate court, the lack of which is of their own making.