acquired title to the property.
Further the Court held that Modina is a
PRICE
Price must Be Real – Price Simulated
Mapalo v Mapalo
Miguel Mapalo and Candida Quiba illiterate farmers donated the
eastern portion of their lot out of love and affection for Maximo
Mapalo—a brother of Miguel who was about to get married. However,
they were deceived to sign the conveyance of their entire lot including
the western portion for allegedly P500.00. Not known to them,
meanwhile, Maximo Mapalo sold the entire lot to the Narcisos. Upon
discovery the Mapalo Spouses filed before the Court.
Whether or not there is a false consideration warranting a void sale as
to the Western Portion of the land
HELD: as in this case, there was in fact no consideration, the statement
of one in the deed will not suffice to bring it under the rule of Article
1276 of the Old Civil Code Hence, the sale is void. Furthermore Narciso,
who is a neighbor of the Mapalo spouses is a buyer in bad faith for
having knowledge of the Spouses occupation and Maximo’s rights over
the property. //
General rule as to ABSENCE of Consideration:
The rule under the Civil Code, again be it the old or the new, is that
contracts without a cause or consideration produce no effect whatsoever
a contract of purchase and sale is null and void and produces no effect
whatsoever where the same is without cause or consideration in that the
purchase price which appears thereon as paid has in fact never been
paid by the purchaser to the vendor. inexistence of a contract is
permanent and incurable and cannot be the subject of prescription
Rule as to False Consideration
the statement of a false consideration renders the contract voidable,
unless it is proven that it is supported by another real and licit
consideration; Further, an action for annulment of a contract on the
ground of falsity of consideration shall last four years, the term to run
from the date of the consummation of the contract.
What is a Contract that states a False Consideration?
a false consideration is one that has in fact a real consideration but the
same is not the one stated in the document;
Modina v Court of Appeals
Ramon Chiang fraudulently sold the lot of his wife Merlinda Chiang to
him; and then he subsequently sold the lot to Modina. Modina then filed
an action for recovery from the lessees in the property, and that was
when Merlinda discovered the fraudulent sale of her property; The
property here was from the estate of Merlinda’s ex-husband Nelson , to
which Merlinda was appointed as Administratrix.
Merlinda sought for the declaration of nullity of the deed of sale
between her husband and Modina. Modina maintains that there is an
application of the principle of in pari delicto hence Merlina should not
be entitled to recover the property.
(1) whether the sale of subject lots should be nullified, (yes)
(2) whether petitioner was not a purchaser in good faith, (no)
(3) whether the decision of the trial court was tainted with excess of
jurisdiction, and (4) whether or not only three-fourths of subject lots should be
returned to the private respondent.
HELD: The principle of in pari delicto is not applicable in a case where
there is no contract for it is applicable only to one where there is illegal
consideration. In this case there was no consideration hence the sale is
void and Merlinda can recover the property from Modina who never
buyer in BAD Faith since she knew of circumstances which are indicia
of bad faith such as when she asked her nephew to investigate the lot;
when she knew that there was a sale between husband and wife; and
when she asked the lessees on the subject property. Note Bene: The last 2
issues I find are no longer important.//
Characteristics of a void contract (void for absence of price)
Under Article 1409 of the New Civil Code, enumerating void contracts,
a contract without consideration is one such void contract. One of the
characteristics of a void or inexistent contract is that it produces no
effect. So also, inexistent contracts can be invoked by any person
whenever juridical effects founded thereon are asserted against him. A
transferor can recover the object of such contract by accion
reivindicatoria and any possessor may refuse to deliver it to the
transferee, who cannot enforce the transfer.
In Pari Delicto applies only to contracts with illegal consideration
In pari delicto doctrine applies only to contracts with illegal
consideration or subject matter, whether the attendant facts constitute
an offense or misdemeanor or whether the consideration involved is
merely rendered illegal
Vda de Catindig v Heirs of Roque
Here we have a co-owned fishpond; the Co-owners (Heirs of roque).
Mrs. Catindig is a lessee of the said fishpond. The Heirs of Roque
executed simulated sales of their shares in favor of Mrs. Catindig so that
she can obtain a loan and the proceeds of which were to be used to pay
the price of 52,000.00.
Whether or not there was a consideration and a valid sale
HELD: The Court held that the alleged sale of the shares of the heirs of
roque are simulated, fictitious or inexistent hence void ab initio. The
Court upheld the finding that the price was not paid or that the
statement in the supposed contracts of sale as to the payment of the price
was simulated fortifies the view that the alleged sales were void. For
settled is the rule that if the price is simulated, the sale is void. //
A contract of sale is void and produces no effect whatsoever where the
price, which appears thereon as paid, has in fact never been paid by the
purchaser to the vendor Such a sale is nonexistent or cannot be
considered consummated.
Art. 1346. An absolutely simulated or fictitious contract is void. A
relative simulation, when it does not prejudice a third person and is not
intended for any purpose contrary to law, morals, good customs, public
order or public policy binds the parties to their real agreement.
Art. 1409. The following contracts are inexistent and void from the
beginning: (2) Those which are absolutely simulated or fictitious;
Art. 1471. If the price is simulated, the sale is void, but the act may be
shown to have been in reality a donation, or some other act or contract.
Lequin v Vizconde
Lequin bought a lot from De Leon and such sale was negotiated by
Vizconde his brother in law; Vizconde then misrepresented to Lequin
that they had also bought 1,012 square meter portion from De Leon.
Because the house of Lequin stood on the alleged portion of Vizonde,
Lequin’s lawyer advised him to execute a simulated contract making it
appear that he was selling 512 square meters to Vizconde for the price
of 15,000 pesos. In reality, however, the 15,000 pesos was never paid by
Vizconde and instead it was Lequin who paid 50,000 pesos for the 500
Square meter lot. Later when Lequin wanted to develop a dried up canal
in the property, Vizconde refused prompting Lequin to inquire about
said property. Only then did Lequin find out that the property was in
fact owned by him!
whether or not the covering the 512 square meter lot is a valid contract
of sale ; and who is the legal owner of the other 512 square meter lot
HELD: The sale covering the 512 square meter lot is VOID. The Court
held that there was deception on the part of Vizconde when he
misrepresented to Lequin that that the 512 square meter lot he bought
from de Leon is a separate and distinct lot from the ,square meter lot the
petitioners bought from de Leon. Had Lequin known he would not have
entered into the contract of sale much less paid 50,000.00 pesos. In the
eyes of the law, petitioners are the rightful and legal owners of the
subject 512 square meter lot anchored on their purchase thereof from de
Leon. This right must be upheld and protected.
Further the Court held that although the sale on its face appears to have
a valid consideration of 15,000 pesos it was in fact found out that the
sale was simulated and the consideration stipulated therein was never
paid. Finally, the Court held that the payment of 50,000 by Lequin to
Vizconde should be returned to Lequin in view of the principle of unjust
enrichment. //
Where a deed of sale stipulates a price but the same is not paid – VOID
It is a well-entrenched rule that where the deed of sale states that the
purchase price has been paid but in fact has never been paid, the deed
of sale is null and void for lack of consideration. Moreover, Art. 1471 of
the Civil Code, which provides that if the price is simulated, the sale is
void,” also applies to the instant case, since the price purportedly paid
as indicated in the contract of sale was simulated for no payment was
actually made.
Fraud
Tolentino defines fraud as every kind of deception whether in the form
of insidious machinations, manipulations, concealments or
misrepresentations, for the purpose of leading another party into error
and thus execute a particular act.” Fraud has a determining influence”
on the consent of the prejudiced party, as he is misled by a false
appearance of facts, thereby producing error on his part in deciding
whether or not to agree to the offer.
Insidious words and machinations
Under Art. 1338 of the Civil Code, there is fraud when, through
insidious words or machinations of one of the contracting parties, the
other is induced to enter into a contract which without them he would
not have agreed to. Insidious words or machinations constituting deceit
are those that ensnare, entrap, trick, or mislead the other party who was
induced to give consent which he or she would not otherwise have
given.
Deceit is present when
Deceit is also present when one party, by means of concealing or
omitting to state material facts, with intent to deceive, obtains consent
of the other party without which, consent could not have been given.
Art. 1339 of the Civil Code is explicit that failure to disclose facts when
there is a duty to reveal them, as when the parties are bound by
confidential relations, constitutes fraud.
Heirs of Intac v Court of Appeals
Ireneo and Salvacion executed a simulated deed of sale in favor of their
niece Angelina and her spouse Mario (Spouses Intac) in order for the
latter to secure a loan. That when both spouses died, their heirs found
out that Spouses Intac had registered the sale and the properties in their
name. Hence, the heirs of Ireneo and Salvacion file before the Court for
the cancellation of the Deed of sale claiming that it was simulated and
there was no consideration. Angelina claims that there was a valid sale
and that such was executed because Ireneo was in deep financial need.
Whether or not the deed of sale between Ireneo and Sps. Intac was
valid.
HELD: no valid sale of the subject property actually took place between
the alleged vendors, Ireneo and Salvacion; and the alleged vendees,
Spouses Intac. There was simply no consideration and no intent to sell
it. The Court upheld the testimony of Marietto a witness to the execution
of the deed of absolute sale that the same was only made because Sps.
Intac needed to borrow the property to use it as a collateral for their loan
application.
Anent the contention that Ireneo was in deep financial need:
1. Sps Intac cannot adduce proof that they lent money to Ireneo
nor that Ireneo would be benefited by their loan
2. Further if Sps Intac secured the loan to build a hospital surely
they would not be in a position to lend money.
3. Further, if Ireneo was in deep financial need why would he
lend the property to Sps Intac when he himself could use the
property to borrow money.
Anent the contention that their efforts of taking care of Ireneo can be
considered as consideration, the Court held that their took place
between the alleged vendors, Ireneo and Salvacion; and the alleged
vendees, Spouses Intac. There was simply no consideration and no
intent to sell it.
Further the Court noted that if Sps Intac were truly the owners why did
they not assert ownership when Ireneo and Salvacion were still alive;
and further, why did they fail to pay taxes on the said property – these
are held by the Court as clear badges of an absolutely simulated
contract.
Therefore; the questioned contract of sale was only for the purpose of
lending the title of the property to Spouses Intac to enable them to secure
a loan. Their arrangement was only temporary and could not give rise
to a valid sale. here there is no consideration, the sale is null and void ab
initio. //
Art. 1345. Simulation of a contract may be absolute or relative. The
former takes place when the parties do not intend to be bound at all; the
latter, when the parties conceal their true agreement.
Art. 1346. An absolutely simulated or fictitious contract is void. A
relative simulation, when it does not prejudice a third person and is not
intended for any purpose contrary to law, morals, good customs, public
order or public policy binds the parties to their real agreement
2 Simulated contracts
If the parties state a false cause in the contract to conceal their real
agreement, the contract is only relatively simulated and the parties are
still bound by their real agreement. Hence, where the essential requisites
of a contract are present and the simulation refers only to the content or
terms of the contract, the agreement is absolutely binding and
enforceable between the parties and their successors in interest
In absolute simulation, there is a colorable contract but it has no
substance as the parties have no intention to be bound by it. The main
characteristic of an absolute simulation is that the apparent contract is
not really desired or intended to produce legal effect or in any way alter
the juridical situation of the parties.” As a result, an absolutely
simulated or fictitious contract is void, and the parties may recover from
each other what they may have given under the contract.
Price must Be Real - Price is “False”
3 | SALES – 2nd EXAMINATION| 2018 | Louis Palma Gil
Price must Be Real – Non Payment of Price
Balatbat v CA
Aurelio Roque sold his 6/10 share from the estate of the deceased Maria
Mesina to Sps. Repuyan. Subequently, because the Sps. Repuyan failed
to pay Roque filed for the recission of the contract; meanwhile he sold
the lot to Balatbat. Hence, here we have a case of double sale.
Whether or not Ownership is immediately revested to Roque for
failure of Sps. Repuyan to pay the price (no)
HELD: The Court held that there has been delivery the moment that
Roque delivered the owner’s certificate of title to Repuyan. The Failure
of Sps. Repuyan to pay does not automatically revest the ownership
back to Roque but merely gives right to his right to demand fulfillment
or seek rescission before the Court. Finally, Anent the issue on Double
sales the Court held that since Sps. Repuyan were the first to cause an
annotation of adverse claim on the title of the property they have the
better right over Balatbat. //
Rule as to non-payment
The failure of the buyer to make good the price does not, in la, cause the
ownership to revest to the seller unless the bilateral contract of sale is
first rescinded or resolved pursuant to Article 1191 of the New Civil
Code.27 Non-payment only creates a right to demand the fulfillment of
the obligation or to rescind the contract.
Price must be monetary or its Equivalent
Art. 1458. By the contract of sale one of the contracting parties obligates
himself to transfer the ownership and to deliver a determinate thing,
and the other to pay therefor a price certain in money or its equivalent.
A contract of sale may be absolute or conditional.
Baganas v CA
Hilario Mateum died without any heirs; Nambayan et al claim that
Hilario had sold 10 parcels of land to them for 1 Peso. Further, they claim
that they had had done many good things for him, nursing him in his
last illness, which services constituted the bulk of the consideration of
the sales; Baganas, as collateral relatives claim that the said deeds of sale
were void for want or spuriousness of consideration; Baganas claims
that: The price be adequate, prescribes that it must be real, not fictitious.
Further he claims by citing Manresa that services are not the equivalent
of money to serve as price in a contract of sale.
Whether or not the Deeds of Sale by Hilario in favor of Nambayan et
al for 1 peso over properties worth about 10,500 was void.
HELD: That the consideration of 1 peso plus unspecified and
unquantified services is apparently gross enormous and
disproportionate to the actual worth of the land which is at least 10,500
pesos. These notoriously low indicators of actual value— plainly and
unquestionably demonstrates that they state a false and fictitious
consideration, and no other true and lawful cause having been shown,
the Court finds both said deeds, insofar as they purport to be sales, not
merely voidable but VOID AB INITIO. Further there can be no donation
since the formalities of donation have not been complied with in this
case//
Manresa’s definition of price
that true price, which is essential to the validity of a sale, means existent,
real and effective price, that which does not consist in an insignificant
amount as, say, P.20 for a house; that it is not the same as the concept of
a just price which entails weighing and measuring, for economic
equivalence, the amount of price against all the factors that determine
the value of the thing sold; but that there is no need of such a close
examination when the immense disproportion between such economic
values is patent—a case of insignificant or ridiculous price, the
unbelievable amount of which at once points out its inexistence;
Art. 1458 of the Civil Code, in prescribing that a sale be for a “x x x price
certain in money or its equivalent x x x,” requires that “equivalent” be
something representative of money
that services are not the equivalent of money insofar as said
requirement is concerned and that a contract is not a true sale where the
price consists of services or prestations;
Ong v Ong
Imelda Ong executed a Quitclaim deed in favor of Sandra Maruzzo for
1 peso and other valuable consideration. She later revoked the same in
order to donate the property to her son Rex Ong Jimenez. Sandra
maruzzo, through her guardian ad litem Alfred Ong filed before the
Court. Imelda Ong claims that the Quitclaim deed is void in asmuch as
it is equivalent to a donation and there was no acceptance on the part of
Sandra Maruzzo.
Whether or not the Quitclaim deed is VOID. (no)
HELD: The Court cited and upheld the ruling of the Apellate Court that
the mere execution of the deed to convey ownership gives rise to the
presumption of the existence of a valuable consideration. For failure to
prove otherwise, the presumption stands. Further, even assuming that
this involves a donation – the claim that there was no acceptance by
Sandra is misplaced; since acceptance over a donation is only required
when such donation imposes an obligation or condition to the done;
Where there is a simple or pure donation as in this case acceptance is
not required. / /
Presumption of sufficient cause of the contract is brought by execution
of deed to convey ownership
although the cause is not stated in the contract it is presumed that it is
existing unless the debtor proves the contrary (Article 1354 of the Civil
Code). One of the disputable presumptions is that there is a sufficient
cause of the contract. It is a legal presumption of sufficient cause or
consideration supporting a contract even if such cause is not stated
therein.
This presumption cannot be overcome by a simple assertion of lack of
consideration especially when the contract itself states that
consideration was given, and the same has been reduced into a public
instrument with all due formalities and solemnities. To overcome the
presumption of consideration the alleged lack of consideration must be
shown by preponderance of evidence in a proper action.
The execution of a deed purporting to convey ownership of a realty is in
itself prima facie evidence of the existence of a valuable consideration,
the party alleging lack of consideration has the burden of proving such
allegation.
Republic v PRDC
Macario Apostol has a 34,015. 08 balance in favor of the Republic of the
Philippines as represented by the Bureau of Prisons. Hence, the republic
filed a complaint against Apostol before the Court. Apostol claims that
he made payment through the delivery of G.I. sheets, black sheets, M.S.
plates, round bars and G.I. pipes (owned by PRDC) to the Buereu of
Prisons. The Government argues that Price is always paid in terms of
money and the supposed payment being in kind, it is no payment at all
citing article 1458 of the new Civil Code.
Whether the G.I. sheets, black sheets, M.S. plates, round bars and G.I.
pipes claimed by the respondent corporation to belong to it and
delivered to the Bureau of Prisons by Macario Apostol in payment of
his account is sufficient payment
4 | SALES – 2nd EXAMINATION| 2018 | Louis Palma Gil
HELD: The Court However held that Article 1458 also provides that the
purchaser may pay "a price certain in money or its equivalent, which
means that payment of the price need not be in money. Hence, the
determination as to Whether the G.I. sheets, black sheets, M.S. plates,
round bars and G.I. pipes claimed by the respondent corporation to
belong to it and delivered to the Bureau of Prisons by Macario Apostol
in payment of his account is sufficient payment therefor, is for the Court
to pass upon and decide after hearing all the parties in the case.
Price must be Certain or Ascertainable at
Perfection
Villanueva v CA
Villanueva was a tenant-occupant of a unit of a 3 door apartment-
building owned by Jose Dela Cruz. Villanueva claims that Dela Cruz
executed a Deed of Sale to him of ½ portion of the lot (the other hald
would be sold to another tenant Sabio) and that the agreed price would
be for 550,000 pesos. Villanueva adds that in 2 separate occasions he
paid 10,000 pesos as earnest money. However, subsequently Dela Cruz
had sold and transferred ownership of the same portion allegedly sold
to Villanueva to Sps. Pili. Hence Villanueva files a case; Dela Cruz on
the other hand contends that the 10,000 given to him was agreed to be
payment for the realty taxes in arrears and that he never signed the deed
of sale for there is no perfected contract between him and Villanueva.
Whether or not there was a perfected contract (no)
HELD: There is no perfected contract of sale; the 10,000 given by
Villanueva did not form part of the purchase price but only constituted
payment of the realty taxes. Dela Cruz in his testimony provides that he
wanted to sell the property for 575,000.00 but Villanueva wanted to buy
it for 550,000 pesos hence there was no agreement between the parties.
Anent the contention that there had been an executed deed of sale, the
same was not signed by Dela Cruz indicating that there was no definite
agreement as to the price. Even so, the same deed of sale was not
presented by Villanueve to the Court. Here, there is clearly no meeting
of the mind as to the price expressly or impliedly, directly or indirectly.
Anent the application of the Statute of Fraud and the rules on double
sale; the Court held that the Statute of Fraud as well as rules on double
sale cannot be applied in this case for there is no perfected contract of
sale.//
As to Price
price of the leased land not having been fixed, the essential elements
which give life to the contract were lacking. lt follows that the lessee
cannot compel the lessor to sell the leased land to him.21 The price must
be certain, it must be real, not fictitious.22 It is not necessary that the
certainty of the price be actual or determined at the time of executing
the contract
The fact that the exact amount to be paid therefor is not precisely fixed,
is no bar to an action to recover such compensation, provided the
contract, by its terms, furnishes a basis or measure for ascertaining the
amount agreed upon.
Example: The price could be made certain by the application of known
factors; where, in a sale of coal, a basic price was fixed, but subject to
modification “in proportion to variations in calories and ash content,
and not otherwise,” the price was held certain
A contract of sale is not void for uncertainty when the price, though not
directly stated in terms of pesos and centavos, can be made certain by
reference to existing invoices identified in the agreement. In this respect,
the contract of sale is perfected. The price must be certain, otherwise
there is no true consent between the parties. There can be no sale
without a price.
Guison v Heirs of Terry (2017)
Terry and Angeles Vargas (father of herein petitioner Guison) entered
into a Deed of Absolute sale over 1. 3894 hectares of land. There was an
acknowledged receipt of the payment for the lot in the amount of
5,557.60. Subsequently, they entered into a Revocation Agreement that
Vargas had erroneously sold the entire property and they enforced their
true intention to convey only 3000 square meter portion of the said land.
When Angels Vargas died, his heirs including Guison entered into and
signed a Partition Agreement to transfer to Terry the said 3000 square
meter portion. Terry then sold some portions of his land to several third
parties including Sarmiento and Alberto . After 6 years Guison files
before the court seeking for the annulment of the original deed of
absolute sale, revocation agreement, partition agreement, and deed of
absolute sales executed by Terry to third persons. Guison claims that
there was no perfected contract of sale since no price was agreed upon
in the original deed of sale.
Terry claims that he is the true owner of the land; that the land was
incorrectly registered under Vargas’ name and Vargas’ only intended to
transfer back to Terry what he really owned. Sarmiento and Alberto
buyer from Terry claim good faith.
Whether or not there was a perfected contract of sale (no)
Whether or not Guison is barred by laches (no)
Whether or not Guison is estopped (YES)
HELD: The Court held that the Revocation agreement and the partition
agreement are not 2 separate contracts but are component contracts of
the same sale transaction evidenced by the deed of absolute sale. Further
the Court held that the deed of sale was never perfected since not all the
elements of a perfected contract of sale were present. There is no
evidence that the parties agreed on a specific purchase price for the
property.
Anent the contention for the payment of 5,557.60 pesos and 3,000.00 by
Terry the same was not given credence by the Court. The amounts were
not indicated in the deed of sale; further Terry did not assert the claim
that he had paid the consideration rather he asserts that the Deed of Sale
was executed by Vargas because he was the true owner of the land;
Further during the execution of the revocation agreement he says that
no consideration was given to him in exchange for his consent since they
were supposedly close with the Vargas family. Clearly, the lack of
consent prevented the perfection of the sale.
However the Court held that Guison, although he is not barred by
laches, he is estopped from assailing the validity of the sale and the
partition agreement for he himself had signed the same partition
agreement and for him to adopt a contraty position would cause the
respondents undue injury and prejudice. Further Sarmiento, and
Alberto are held to be in good faith.
Finally, the Court ordered the Heir of Terry to remit to Guison all the
payments received from Sarmiento and Alberto in connection to the sale
of the property. Since Terry never paid any consideration and the
property was never validly conveyed to him, he and his heirs should
not be allowed to benefit from the sale thereof. Moreover, while
petitioner is barred by estoppel from recovering the lot from Sarmiento
and Alberto, her right to enforce claims against Terry remained
unaffected. Under the circumstances, it is only fair and reasonable to
allow her to recover the payments received by Terry for the lot.//
Discussion on Price
law requires a definite agreement as to a "price certain"; otherwise there
is no true meeting of the minds between the parties
In Villanueva v. Court of Appeals, this Court stated:
The price must be certain, otherwise there is no true consent between
the parties. There can be no sale without a price. In the instant case,
5 | SALES – 2nd EXAMINATION| 2018 | Louis Palma Gil
however, what is dramatically clear from the evidence is that there was
no meeting of mind as to the price, expressly or impliedly, directly or
indirectly.
Contract of Sale, defined, Elements
Article 1458 of the Civil Code describes a contract of sale as a transaction
by which "one of the contracting parties obligates himself to transfer the
ownership of and to deliver a determinate thing, and the other to pay
therefore a price certain in money or its equivalent." The elements of a
perfected contract of sale are the following:
(1) the meeting of the minds of the parties or their consent to a
transfer of ownership in exchange for a price;
(2) the determinate object or subject matter of the contract; and
(3) the price certain in money or its equivalent as consideration
for the sale.
The absence of any of these elements renders a contract void.
Moreno Jr v Private Management Office
Moreno is the owner of the ground floor, 7th floor and the penthouse of
the J. Moreno Building and Private Management Office is the owner of
the 2nd 3rd 4th 5th and 6th floors of the building. Private Management
Office sent a letter to Moreno regarding his right of first refusal over the
floors of the building owned by Private Management office, A pertinent
part of the said letter provides:
We are pleased to inform you that the Board is in agreement that Mr. Jose
Moreno, Jr. has the right of first refusal. This will be confirmed by our Board
during the next board meeting on February 26, 1993. In the meantime, please
advise Mr. Moreno that the suggested indicative price for APT’s five (5)
floors of the building in question is P21 Million.
Moreno paid the 2.1 Million, but subsequently Private Management
Office wrote to Moreno that its Legal Deparment has tentatively agreed
on a settlement price of 42,274,702.17 pesos for the said floors. Hence
Moreno filed before the Court claiming that there was already a contract
of sale with respect to the 21M pesos agreed purchase price.
Whether or not there was a perfected contract of sale because there
was an agreed price of 21M (no)
HELD: The letter and the surrounding circumstances clearly show that
the parties are not past the stage of negotiation, hence there could not
have been a perfected contract of sale. The letter clearly states that
P21,000,000.00 is merely a “suggested indicative price” of the subject
floors as it was yet to be approved by the Board of Trustees.
Before the Board could confirm the suggested indicative price, the
Committee on Privatization must first approve the terms of the sale or
disposition. This is by virtue of Section 12 of Proclamation 50; Anent the
contention that there must be approval before sale the same was not
given credence by the Court for it will render the power to approve or
disapprove under Section 5 of the same Proclamation nugatory.
Anent the contention that the approval by the committee may be
dispensed with the same is only true with respect to ministerial acts that
need approval; here Moreno had failed to show proof as to why the act
of approving a sale is ministerial.
Further the Court gave no credence to Moreno’s subjective
interpretation of the phrase “Suggested indicative price” for in
interpreting words and phrases it is the objective standard that must be
used. Clearly, the price of 21M was only a suggested price and not a
final price which perfects the contract.
Offer must be certain and acceptance absolute.
Consent is manifested by the meeting of the offer and the acceptance
upon the thing and the cause which are to constitute the contract. The
offer must be certain and the acceptance absolute.
To reach that moment of perfection, the parties must agree on the same
thing in the same sense,1 so that their minds meet as to all the terms.
They must have a distinct intention common to both and without doubt
or difference; until all understand alike, there can be no assent, and
therefore no contract. The minds of parties must meet at every point;
nothing can be left open for further arrangement. So long as there is any
uncertainty or indefiniteness, or future negotiations or considerations to
be had between the parties, there is not a completed contract, and in fact,
there is no contract at all.
3 Stages of a Contract
Contract formation undergoes three distinct stages— preparation or
negotiation, perfection or birth, and consummation.
(1) Negotiation begins from the time the prospective contracting
parties manifest their interest in the contract and ends at the
moment of agreement of the parties.
(2) The perfection or birth of the contract takes place when the
parties agree upon all the essential elements thereof.
(3) The last stage is the consummation of the contract wherein the
parties fulfill or perform the terms agreed upon, culminating
in its extinguishment.
Once there is concurrence of the offer and acceptance of the object and
cause, the stage of negotiation is finished.
Navarra v Planters Development Bank
The Navarras are owners of 5 parcels of land which were foreclosed by
Planters Development Bank for failure of the Navarras to pay their loan;
They failed to repurchase their property during the redemption period.
Meanwhile, RRRC Development Corporation (RRRC) a real estate
company owned by Carmelita Navarra also defaulted in the payment of
its loan to Planters Development bank and its mortgaged properties
were redeemed on time leaving an excess of 300,000.00.
In the mean time Jorge Navarra sent a letter to the Planters’
development bank requesting purchase of the 5 lots earlier auctioned by
the bank. The letter is reproduced below
“This will formalize my request for your kind consideration in allowing my brother and
me to buy back my house and lot and my restaurant building and lot together with the
adjacent road lot.
Since my brother, who is working in Saudi Arabia, has accepted this arrangement only
recently as a result of my urgent offer to him, perhaps it will be safe for us to set August
31, 1985 as the last day for the payment of a P300,000.00 downpayment. I hope you
will grant us the opportunity to raise the funds within this period, which includes an
allowance for delays.
The purchase price, I understand, will be based on the redemption value
plus accrued interest at the prevailing rate up to the date of our sales
contract. Maybe you can give us a long term payment scheme on the basis of my
brother’s annual savings of roughly US$30,000.00 everytime he comes home for his home
leave.
I realize that this is not a regular transaction but I am seeking your favor to give me a
chance to reserve whatever values I can still recover from the properties and to avoid any
legal complications that may arise as a consequence of the total loss of the Balangay lot. I
hope that you will extend to me your favorable action on this grave matter.”
Planters Development Bank granted their request ordering them to see
Mr. Rene Castillo to settle the details of the transaction and work on the
necessary documentation; Planter Development Bank’s reply is
reproduced as below:
“Regarding your letter dated July 18, 1985, requesting that we give up to August 31, 1985
to buy back your house and lot and restaurant and building subject to a P300,000.00
downpayment on the purchase price, please be advised that the Collection Committee has
agreed to your request.
Please see Mr. Rene Castillo, Head, Acquired Assets Unit, as soon as
possible for the details of the transaction so that they may work on the
necessary documentation.”
6 | SALES – 2nd EXAMINATION| 2018 | Louis Palma Gil
Navarra went to the office of Planters Development bank and requested
that the excess 300,00.00 from the payment of RCCC be applied as down
payment by the Navarra’s but the Planters Dev Bank requested an
RCCC Board Resolution before the same can be made;
Since no compliance was made by the Navarras they were requested to
vacate for failure to redeem; The Navarras then filed before the Court
claiming that there was already a perfected contract of sale by virtue of
the acceptance by the Planter’s Development Bank of its offer as
evidence by their series of correspondence as reproduced above. That
the repurchase price would be for 1,800,000.00 with a downpayment of
300,000.00.
Whether or not there was a perfected contract of sale (no)
HELD: While the foregoing letters indicate the amount of P300,000.00
as down payment, they are, however, completely silent as to how the
succeeding installment payments shall be made. At most, the letters
merely acknowledge that the down payment of P300,000.00 was agreed
upon by the parties. However, this fact cannot lead to the conclusion
that a contract of sale had been perfected.
1. the Navarras’ letter/offer failed to specify a definite amount
of the purchase price for the sale/repurchase of the subject
properties. There was ambiguity as to the “purchase price”
It merely stated that the “purchase price will be based on the
redemption value plus accrued interest at the prevailing rate
up to the date of the sales contract.” The ambiguity of this
statement only bolsters the uncertainty of the Navarras’ so-
called “offer” for it leaves much rooms for such questions, as:
what is the redemption value? what prevailing rate of interest
shall be followed? Further, the offer was not clear insofar as
concerned the exact number of years that will comprise the
long-term payment scheme. As we see it, the absence of a
stipulated period within which the repurchase price shall be
paid all the more adds to the indefiniteness of the Navarras’
offer. Here, what is dramatically clear is that there was no
meeting of minds vis-à-vis the price, expressly or impliedly,
directly or indirectly
2. the tenor of Planters Bank’s letter-reply negates the
contention of the Navarras that the Bank fully accepted
their offer. The letter specifically stated that there is a need to
negotiate on the other details of the transaction before the sale
may be formalized. Such statement in the Bank’s letter clearly
manifests lack of agreement between the parties as to the
terms of the purported contract of sale/repurchase,
particularly the mode of payment of the purchase price and
the period for its payment. The law requires acceptance to be
absolute and unqualified. As it is, the Bank’s letter is not the
kind which would constitute acceptance as contemplated by
law for it does not evince any categorical and unequivocal
undertaking on the part of the Bank to sell the subject
properties to the Navarras.
3. there was in the first place no acceptance of their offer. It
should be noted that aside from their first letter the Navarras
wrote another letter this time requesting the Bank that the
down payment of P300,000.00 be instead taken from the
excess payment made by the RRRC in redeeming its own
foreclosed properties. The very circumstance that the
Navarras had to make this new request is a clear indication
that no definite agreement has yet been reached at that point.
As we see it, this request constitutes a new offer on the part of
the Navarras, which offer was again conditionally accepted
by the Bank as in fact it even required the Navarras to submit
a board resolution of RRRC before it could proceed with the
proposed sale/repurchase. The eventual failure of the
spouses to submit the required board resolution precludes the
perfection of a contract of sale/repurchase between the
parties.
Evidently, what transpired between the parties was only a prolonged
negotiation to buy and to sell, and, at the most, an offer and a counter-
offer with no definite agreement having been reached by them.//
Stages in a Contract
In general, contracts undergo three distinct stages, to wit: negotiation,
perfection or birth, and consummation.
1. Negotiation begins from the time the prospective contracting
parties manifest their interest in the contract and ends at the
moment of their agreement.
2. Perfection or birth of the contract takes place when the parties
agree upon the essential elements of the contract, i.e., consent,
object and price.
3. Consummation occurs when the parties fulfill or perform the
terms agreed upon in the contract, culminating in the
extinguishment thereof.
Negotiation Stage Explained; Offer and Absolute Acceptance
A negotiation is formally initiated by an offer which should be certain
with respect to both the object and the cause or consideration of the
envisioned contract. In order to produce a contract, there must be
acceptance, which may be express or implied, but it must not qualify the
terms of the offer. The acceptance of an offer must be unqualified and
absolute to perfect the contract. In other words, it must be identical in
all respects with that of the offer so as to produce consent or meeting of
the minds.
Manner of Payment of price must first be established
Quite recently, this Court held that before a valid and binding contract
of sale can exist, the manner of payment of the purchase price must first
be established since the agreement on the manner of payment goes into
the price such that a disagreement on the manner of payment is
tantamount to a failure to agree on the price.
Elements of a Contract of Sale
one essential element of a contract of sale is wanting: the price certain.
There can be no contract of sale unless the following elements concur:
(a) consent or meeting of the minds;
(b) determinate subject matter; and
(c) price certain in money or its equivalent.
Such contract is born or perfected from the moment there is a meeting
of minds upon the thing which is the object of the contract and upon the
price.
Amado v Salvador
Salvador alleges here that Judge Amado agreed to sell to Salvador a
subject property for 66,360.00 payable in cash or construction materials;
The terms of the payment however such as the period within which the
payment was supposed to be completed, or how much of the payment
should be made in cash was not stated. Amado now claims that he had
already advanced P30,310.93 and delivered construction materials
amounting to P36,904.45. On the other hand, the heirs of Salvador claims
that there was no perfected contract of sale, and that the various receipts
and invoices presented by Salvador do not prove payment of any sale,
but are rather in connection with a loan agreement with Judge Amado.
Whether or not there was a perfected contract of sale (no)
HELDSalvador fails to allege the manner of payment of the purchase
price on which the parties should have agreed.
(1) No period was set within which the payment must be made.
(2) Of the purchase price of P66,360.00, which the parties
purportedly agreed upon, the amount which should be paid
in cash and the amount for construction materials was not
determined.
(3) serious doubts became apparent as to whether cash advances
and deliveries of construction materials evidenced by
numerous statements of accounts and delivery receipts were
actually intended as payment for the land.
a. First of all, the statements of accounts and the
delivery receipts do not indicate that the
construction materials or the cash advances were
7 | SALES – 2nd EXAMINATION| 2018 | Louis Palma Gil
 made in connection with the sale of the subject A contract of sale is perfected by mere consent, upon a meeting of the
property. It should have been noted in the statement minds in the offer and the acceptance thereof based on subject matter,
of accounts, or even in another document, that the price and terms of payment. Until the contract of sale is perfected, it
cash advances and deliveries of construction cannot, as an independent source of obligation, serve as a binding
materials were made in connection with a juridical relation between the parties.
transaction as important as a sale of land. As they
are, the statements of accounts and especially the Consent
straightforward delivery receipts are insufficient Consent is essential for the existence of a contract, and where it is absent,
proof that Judge Amado sold his property to the contract is non-existent. Consent in contracts presupposes the
Salvador. following requisites: (1) it should be intelligent or with an exact notion
b. one of the delivery receipts presented by Salvador of the matter to which it refers; (2) it should be free; and (3) it should be
was partially paid. If Judge Amado had already spontaneous.
agreed that the construction materials delivered to
him and his family constituted the payment for the Manner of Payment
subject property, the act of partially paying for Moreover, a definite agreement on the manner of payment of the price
construction materials would be incongruous to is an essential element in the formation of a binding and enforceable
such intention. contract of sale. This is so because the agreement as to the manner of
c. Salvador himself gave conflicting statements on payment goes into the price such that a disagreement on the manner of
whether he has completed payment. In the MTC he payment is tantamount to a failure to agree on the price or
says that he paid Judge Amado P62,319.38 in cash consideration.
and construction materials for the subject property,
and a balance of P4,040.62 was left unpaid due to the
failure of Judge Amado to execute and deliver the
deed of sale. But in the RTC he claimed that he paid
Judge Amado P67,215.38 in cash and construction
materials, which was more than the purchase price
of P66,360.00 upon which they agreed.
d. Salvador again contradicts himself as to the date he
supposedly completed the payments for the subject
property. n his Complaint in Civil Case No. 1252, he
alleges that by October 1980, he had already fully
paid Judge Amado P67,215.38 in cash and
construction materials. Yet in the same pleading, he
included 11 separate deliveries of construction
materials made from 8 December 1980 to 6 January
1981 as evidence of payment.

Absent any tangible connection with the sale of land, these transactions
stand by themselves as loans and purchases of construction materials.

Anent the other pieces of evidence offered by Salvador the same was not
given credence by the Court.
(1) The handwritten note by Judge Amado requesting 500.00; In
the same note, Judge Amado informed Salvador that he had
not yet signed an unidentified document, which he promised
to sign after his plan to divide a certain parcel of land was
completed. This note is not conclusive proof of the existence
of a perfected sale. What this note proves is that Judge Amado
was hesitant to sign the unidentified document and was still
waiting for the completion of his plan to divide the land
referred to in the note.
(2) The Testimony of Ismael Angeles was not given credence
because according to him “I was inside the house, but I did
not hear their conversation because I was far from them.”
Even assuming his testimony is credible; His testimony that
Judge Amado ordered the preparation of the deed of sale only
proves that Judge Amado and Salvador were in the process
of negotiating the sale of the subject property, not that they
had already set and agreed to the terms and conditions of the
sale.
(3) Finally, Salvador’s act of relocating the squatter families
formerly residing on the subject property47 is not substantial
proof of ownership. Such act is only consistent with the
petitioners’ allegations that Salvador was allowed to use the
subject property for his business, and it would
(4) redound to his benefit to relocate the squatters previously
occupying it.

There is no perfected contract of sale.//

A Contract of Sale
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9 | SALES – 2nd EXAMINATION| 2018 | Louis Palma Gil

Inadequacy of Price does not affect
Ordinary Sale
Bravo-Guerrero v Bravo
Here we have Mauricio Bravo and Simona Bravo Spouses. Simona
executed a General power of Attorney appointing Mauricio Bravo
herein petitioner as her attorney-in-fact to “mortgage or otherwise
hypothecate, sell, assign, and dispose of any and all of my property, real,
personal, or mixed, of any kind whatsoever and wheresoever situated
or any interest therein” Hence Mauricio mortgaged the lots to PNB.
Mauricio then executed a Deed of Sale with Assumption of Real Estate
Mortgage conditioned on the payment of 1,000 pesos and on the
assumption of the vendees of the PNB and DBP mortgages over the
properties in favor of other grandchildren: Roland, Ofelia, and
Elizabeth.
One of the grandsons Edward then filed for a partition of the property.
However Roland, et al refused. Edward then filed to annul the Deed of
Sale executed on the ground that it was simulated to prejudice the other
heirs and that the price in said deeds of sale are inadequate; to prove his
claim he presented the following:
(1) Tax declaration for 1979 which placed the assessed value of
the Properties at P70,020 and their approximate market value
at P244,290;
(2) (2) a certified copy of the Department of Finance’s
Department Order No. 62-9736 which established the zonal
value of the properties along Evangelista Street at P15,000 per
square meter.
WON the deed of sale was simulated due to inadequacy of price (1,000
pesos and assumption of mortgage) (no)
HELD: The General Power of Attorney was sufficient proof of the wife’s
consent to the sale of the conjugal property. Nonetheless, if the same
was insufficient the sale would still be valid because Edward here filed
after the subsistence of the marriage and after the lapse of 10 years
(Article 173 of the Civil Code)
Further, anent the allegation of inadequate consideration; the Court held
that Edward Bravo failed to show sufficient proof that indeed the
consideration was inadequate; The evidence presented by Edward was
of no relevance since the property was sold on 1970 nd the evidence
presented was on 1997 Certainly, there is nothing surprising in the sharp
increase in the value of the Properties nine or twenty-seven years after
the sale, particularly when we consider that the Properties are located
in the City of Makati. Rather here the Court took judicial notice of the
tax declarations issued on 1967 which showed the value of the lot to be
16,160 which is compared to the price of the lot then at 16,000 not grossly
inadequate and shocking to the conscience as to justify the setting aside
of the deed of sale.
Anent their contention as to the nonpayment of the mortgage by herein
petitioners this is without merit since partial failure in the act of
payment does not render the sale void. In addition, the petitioners
Rodolfo et al argued that they had the financial capacity to pay the
property and the same was not rebutted by Edward. Thus, the
presumption as to the regularity of the issuance and execution of the
notarized deed of sale prevails. Hence, here there is a perfected contract
to sell.
Finally, the Court ordered that Edward has the right to ask for partition
since Edward is a compulsory heir of Roland Bravo Sr. and is entitled to
a share along with his brother and sisters as to their father’s portion of
the properties. //
Sale and Legitime
We point out that the law on legitime does not bar the disposition of
property for valuable consideration to descendants or compulsory heirs.
In a sale, cash of equivalent value replaces the property taken from the
estate. There is no diminution of the estate but merely a substitution in
values. Donations and other dispositions by gratuitous title, on the other
hand, must be included in the computation of legitimes.
Simulation and Gross inadequacy of price are distinct concepts
Simulation of contract and gross inadequacy of price are distinct legal
concepts, with different effects.
When the parties to an alleged contract do not really intend to be bound
by it, the contract is simulated and void. A simulated or fictitious
contract has no legal effect whatsoever because there is no real
agreement between the parties.
In contrast, a contract with inadequate consideration may nevertheless
embody a true agreement between the parties. A contract of sale is a
consensual contract, which becomes valid and binding upon the
meeting of minds of the parties on the price and the object of the sale.
The concept of a simulated sale is thus incompatible with inadequacy of
price. When the parties agree on a price as the actual consideration, the
sale is not simulated despite the inadequacy of the price
Gross inadequacy of price will not result to a void contract
Gross inadequacy of price by itself will not result in a void contract.
Gross inadequacy of price does not even affect the validity of a contract
of sale, unless it signifies a defect in the consent or that the parties
actually intended a donation or some other contract.32 Inadequacy of
cause will not invalidate a contract unless there has been fraud, mistake
or undue influence.33 In this case, respondents have not proved any of
the instances that would invalidate the Deed of Sale.
Rule as to Payment
If there is a meeting of the minds of the parties as to the price, the
contract of sale is alid, despite the manner of payment, or even the
breach of that manner of payment. x x x It is not the act of payment of
price that determines the validity of a contract of sale. Payment of the
price has nothing to do with the perfection of the contract. Payment of
the price goes into the performance of the contract. Failure to pay the
consideration is different from lack of consideration. The former results
in a right to demand the fulfillment or cancellation of the obligation
under an existing valid contract while the latter prevents the existence
of a valid contract
Director of Lands v Abarca
Sarenas and Braganza were the Attorneys of Datu Bualan and Ciriaco
Lizada in one case. The lawyers took possession of the property now in
question as payment for their services. The Bagobos Datu Bualan and
CIraco Lizada filed a case before the Court and judgement was rendered
therein that the Bagobos pay the attorneys 6,000 pesos. Subsequently the
Bagobos paid 5,126.13 pesos to the attorneys and 1, 035.87 was paid to
the municipal Treasurer of Davao in the name of the attorneys.
Subsequently the attorneys claim that the amount paid to them is not
enough hence caused the clerk of court to issue a writ of execution on
the said judgement and the attorneys were able to obtain the lots herein
questioned from such judicial sale in the amount of 877.25 pesos.
The Bagobos now claim that such judicial sale is void for inadequacy of
price.
WON judicial sale is void for inadequacy of price (YES)
HELD: The Court held that the judicial sale is void for inadequacy of
price. It appears that in 1927 the assessed value of the contested property
was more than P60,000. A judicial sale of real property will be set aside
when the price is so inadequate as to shock the conscience of the court.
Further the Court held that the amount paid by Datu Bualan and his co-
claimants for taxes and penalties due on the contested property should
10 | SALES – 2nd EXAMINATION| 2018 | Louis Palma Gil
be credited on the judgment obtained by Sarenas and Braganza. Such
taxes and penalties accrued while the property was in their possession
under a claim of ownership.

11 | SALES – 2nd EXAMINATION| 2018 | Louis Palma Gil

 Formation of a Contract of Sale
Policitacion – Option Contract

Tayag v Lacson

A parcel of land was owned by Lacson (herein respondent); the said

property is a tenated agricultural land. The original farmers and tillers
of the said property executed a Deed of Assignment in favor of tayag
assigning to him their respective rights as tenants/tillers of the
landholdings possessed and tilled by them for and in consideration of
P50.00 per square meter. The said amount was made payable “when the
legal impediments to the sale of the property to the petitioner no longer
existed.” Tayag was also granted the exclusive right to buy the property
if and when the respondents, with the concurrence of the defendants
tenants, agreed to sell the property. In the interim, the petitioner gave
varied sums of money to the tenants as partial payments, and the latter
issued receipts for the said amounts.

Subsequently, the farmers sent a letter to Tayag expressing their

collective decision not to pursue with the said sale with him since they
were selling their rights to Lacson. Hence, Tayag filed before the Court.

WON there was a valid option contract (no)

HELD: At the onset the Court held that there was no perfected
agreement to sell. There is no showing in the petitioner’s complaint that
the respondents had agreed to sell their property, and that the legal
impediments to the agreement no longer existed. The petitioner and the
defendants-tenants had yet to submit the Deeds of Assignment to the
Department of Agrarian Reform which, in turn, had to act on and
approve or disapprove the same. In fact, as alleged by the petitioner in
his complaint, he was yet to meet with the defendantstenants to discuss
the implementation of the deeds of assignment. Unless and until the
Department of Agrarian Reform approved the said deeds, if at all the
petitioner had no right to enforce the same in a court of law by asking
the trial court to fix a period within which to pay the balance of the
purchase price and praying for injunctive relief.

Further, the Court held that there was no perfected option contract since
the grantors were not the owners of the property but merely defendant-
tenants. In this case, the defendants-tenants-subtenants, under the
deeds of assignment, granted to the petitioner not only an option but the
exclusive right to buy the landholding. But the grantors were merely the
defendants-tenants, and not the respondents, the registered owners of
the property. Not being the registered owners of the property, the
defendants-tenants could not legally grant to the petitioner the option,
much less the “exclusive right” to buy the property. As the Latin saying
goes, “NEMO DAT QUOD NON HABET.”

Option Contract – Discussion

An option is a contract by which the owner of the property agrees with
another person that he shall have the right to buy his property at a fixed
price within a certain time. It is a condition offered or contract by which
the owner stipulates with another that the latter shall have the right to
buy the property at a fixed price within a certain time, or under, or in
compliance with certain terms and conditions, or which gives to the
owner of the property the right to sell or demand a sale. It imposes no
binding obligation on the person holding the option, aside from the
consideration for the offer. Until accepted, it is not, properly speaking,
treated as a contract.

The second party gets in praesenti, not lands, not an agreement that he
shall have the lands, but the right to call for and receive lands if he elects.
An option contract is a separate and distinct contract from which the
parties may enter into upon the conjunction of the option

12 | SALES – 2nd EXAMINATION| 2018 | Louis Palma Gil