Sps.
Bernardo Buenaventura and binding and valid contract upon the meeting
Consolacion Joaquin vs. Court of Appeals
November 20, 2003 GR No. 126376
First Division
Ponente: Carpio, J.
Facts: Defendant spouses Leonardo Joaquin
and Feliciana Landrito are the parents of
plaintiffs Consolacion, Nora, Emma and
Natividad as well as of defendants Fidel,
Tomas, Artemio, Clarita, Felicitas, Fe, and
Gavino, all surnamed Joaquin. Leonardo and
Feliciana executed several deeds of sale in
favour of their co-defendant children.
Petitioners then filed an action the Regional
Trial Court (RTC) of Makati seeking to
declare as null and void ab initio the deeds of
sale executed by Leonardo and Feliciana
claiming that: (1) here was no actual valid
consideration for the deeds of sale, (2)
assuming that there was consideration in the
sums reflected in the questioned deeds, the
properties are more than three-fold times
more valuable than the measly
sums appearing therein, and (3) the deeds of
sale do not reflect and express the true intent
of the parties.
Defendants, on the other hand aver
(1) that the sales were with sufficient
considerations and made by defendants
parents voluntarily, in good faith, and with
full knowledge of the consequences of their
deeds of sale; and (2) that the certificates of
title were issued with sufficient factual and
legal basis. The RTC dismissed the case,
declaring that the deeds of sale were all
executed for valuable consideration. On
appeal, the Court of Appeals affirmed the
decision of the RTC.
Issues:
(1) Whether there the deeds of sale are void
for lack of consideration
(2) Whether the deeds of sale are void for
gross inadequacy of price
Held: The petition is without merit. (1) A
contract of sale is not a real contract, but a
consensual contract. As a consensual
contract, a contract of sale becomes a
of the minds as to price. If there is a meeting
of the minds of the parties as to the price, the
contract of sale is valid, despite the manner
of payment, or even the breach of that
manner of payment. If the real price is not
stated in the contract, then the contract of
sale is valid but subject to reformation. If
there is no meeting of the minds
of the parties as to the price, because the
price stipulated in the contract is simulated,
then the contract is void.
Article 1471 of the Civil Code states
that if the price in a contract of sale is
simulated, the sale is void. 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.
Petitioners failed to show that the prices in
the Deeds of Sale were absolutely simulated.
To prove simulation, petitioners presented
Emma Joaquin Valdoz’s testimony stating
that their father, respondent Leonardo
Joaquin, told her that he would transfer a lot
to her through a deed of sale without need
for her payment of the purchase price. The
trial court did not find the allegation of
absolute simulation of price credible.
Petitioners failure to prove absolute
simulation of price is magnified by their lack
of knowledge of their respondent siblings
financial capacity to buy the questioned lots.
On the other hand, the Deeds of Sale which
petitioners presented as evidence plainly
showed the cost of each lot sold. Not only did
respondents’ minds meet as to the purchase
price, but the real price was also stated in the
Deeds of Sale. As of the filing of the
complaint, respondent siblings have also
fully paid the price to their respondent
father.
(2) Articles 1355 of the Civil Code states:
Art. 1355. Except in cases specified
by law, lesion or inadequacy of cause shall
not invalidate a contract, unless there has
been fraud, mistake or undue influence.
Article 1470 of the Civil Code further
provides: Art. 1470. Gross inadequacy of
price does not affect a contract of sale, except
as may
indicate a defect in the consent, or that the
parties really intended a donation or some
other act or contract. Petitioners failed to
prove any of the instances mentioned in
Articles 1355 and 1470 of the Civil
Code which would invalidate, or even affect,
the Deeds of Sale. Indeed, there is no
requirement that the price be equal to the
exact value of the subject matter of sale. All
the respondents believed that they received
the commutative value of what they gave.
LO v KJS ECO-FORMWORK SYSTEM
PHIL., INC.
FACTS: KJS Inc was engaged in the sale of
steel scaffolding. Sonny Lo, a contractor,
purchased scaffolding equipment worth
P540,000. He made a deposit of P150,000,
the balance payable within 10 months. Due
to financial difficulties, Lo defaulted after
paying only 2 installments. A debt of some
P335,000 remained. Thus, Lo assigned in
favor of KJS all his receivables from Jomero
Realty Corp. which refused to pay and raised
the defense of compensation—claiming that
Lo also had debts in its favor. KJS thus again
sought to collect from Lo who them averred
that his debts have already been
extinguished by the said assignment.
ISSUE: W/N the assignment of credit
extinguished the debts
HELD: NO. The assignment of credit made
by Lo in favor of KJS was in the nature of
dacion en pago, which is governed by the law
on sales. It is as if KJS bought the credit from
Lo, the payment of which is to be charged
upon the latter’s debt. Lo, as vendor not good
faith, shall be liable for the existence and
legality of the credit at the time of the sale
(but not for the solvency of the debtor). He is
bound by certain warranties. In this case,
since the assignment he made in favor of KJS
has already been compensated, he should
still be liable to pay KJS for his indebtedness.
He should make good the warranty and pay
the obligation.
JOHANNES SCHUBACK & SONS PHIL.
TRADING CORP. v CA
FACTS: SJ Industrial, through Ramon San
Jose, approached Schuback & Sons Phil.
Trading (SSPT) to purchase bus spare parts.
He submitted the list of parts he wanted and
SSPT coordinated with its Germany Office to
quote the prices, and forwarded its formal
offer to SJ Industrial, containing the prices,
item numbers, descriptions, etc. SJ informed
SSPT of his desire to purchase such items
and promised to submit the quantity per
unit. SJ then submitted such quantities
needed to SSPT’s GM, Mr. Reichert. San Jose
indicated the same in the Purchase Order
with the inscription “this will serve as our
initial purchase order. PO will include 3%
discount.” SSPT immediately ordered the
products from Germany to avail of the old
prices— partial deliveries of which were
made. Then, for his failure to secure letters
of credit, SJ failed to purchase the same and
alleged that there was no perfected contract
of sale. Thus, SSPT sought damages.
ISSUE: W/N there was a perfected contract
of sale
HELD: YES. Quantity is immaterial in the
perfection of a contract of sale. What is
important is the meeting of the minds as to
the object and cause of the sale. There was
already a meeting of the minds in this case
from the moment SJ manifested that he will
order the parts, although he will
communicate quantities later on. In fact, he
indeed communicated such needed
quantities— this goes to the execution of the
contract of sale already. By ordering the
parts, SJ acceded to the prices offered by
SSPT. On the other hand, SSPT acceded to SJ’s
request for discount by immediately
ordering the parts. SJ Industrial is thus liable
for damages
POLYTECHNIC UNIVERSITY v CA
FACTS: The National Development Corp.
(NDC) owned the NDC Compound, a portion
of which was leased to Firestone Ceramics,
which built several warehouses and facilities
therein. Since business between NDC and
Firestone went smooth, the lease was twice
renewed this time conferring upon Firestone
a right of first refusal should NDC decide to
dispose of the property. Also, under the
contract, Firestone was obliged to introduce
considerable improvements thereon.
Eventually though, Memo Order No. 214 was
issued ordering the transfer of NDC
Compound to the government in
consideration of the cancellation of NDC’s
P57M debt. Pursuant thereto, NDC
transferred the property to Polytechnic
University (PUP). Firestone sued for specific
performance invoking its right of first
refusal, and sought to enjoin NDC and PUP
from proceeding with the sale. Both PUP and
NDC aver that there was no sale involved
since ownership of the property remained
with the government—both companies
being GOCCs.
ISSUE: W/N there was a sale
HELD: YES. The argument of PUP and NDC
was untenable. GOCCs have personalities
separate and distinct from the government.
“Sale” brings within its grasp the whole
gamut of transfers where ownership of a
thing is ceded for consideration. Further,
judging from the conduct of the parties in
this case, all the elements of a valid sale
attend. Consent is manifested by the Memo
Order No. 214, the cancellation of liabilities
constituted consideration; the subject
matter was of course the property subject of
the dispute. Since a sale was involved, the
right of first refusal in favor of Firestone
must be respected. It forms an integral part
of the lease and is supported by
consideration—Firestone having made
substantial investments therein. Only when
Firestone fails to exercise such right may the
sale to PUP proceed.
Celestino Co vs Collector of Internal
Revenue (Contract for a piece of work)
FACTS: Celestino Co & Company is a duly
registered general copartnership doing
business under the trade name of "Oriental
Sash Factory". From 1946 to 1951 it paid
percentage taxes of 7 per cent on the gross
receipts of its sash, door and window factory,
in accordance with section one hundred
eighty-six of the National Revenue Code
imposing taxes on sale of manufactured
articles. However in 1952 it began to claim
liability only to the contractor's 3 per cent
tax (instead of 7 per cent) under section 191
of the same Code; and having failed to
convince the Bureau of Internal Revenue, it
brought the matter to the Court of Tax
Appeals, where it also failed. CTA, in its
decision, holds that “one ill note that
petitioner has chosen for its trade name and
has offered itself to the public as a "Factory",
which means it is out to do business, in its
chosen lines on a big scale.” As a general rule,
sash factories receive orders for doors and
windows of special design only in particular
cases but the bulk of their sales is derived
from a ready-made doors and windows of
standard sizes for the average home. Even if
we were to believe petitioner’s claim that it
does not manufacture ready-made sash,
doors and windows for the public and that it
makes these articles only special order of its
customers, that does not make it a contractor
within the purview of section 191 of the
National Internal Revenue Code, there are no
less than fifty occupations enumerated in the
aforesaid section and after reading carefully
each and every one of them, we cannot find
under which the business of manufacturing
sash, doors and windows upon special order
of customers fall under the category
mentioned under Sec 191.
ISSUE: Whether or not Celestino & Co. is a
contractor (piece of work).
HELD: NO. The fact that the sash products
are made only upon the order of the
customers does NOT change the nature of
the establishment. The important thing to
remember is that Celestino Co & Company
habitually makes sash, windows and doors,
as it has represented in its stationery and
advertisements to the public. That it
“manufactures” the same is practically
admitted by appellant itself. The fact that
windows and doors are made by it only
when customers place their orders, does not
alter the nature of the establishment, for it is
obvious that it only accepted such orders as
called for the employment of such material-
moulding, frames, panels-as it ordinarily
manufactured or was in a position habitually
to manufacture. The Oriental Sash Factory
does nothing more than sell the goods that it
mass-produces or habitually makes; sash,
panels, mouldings, frames, cutting them to
such sizes and combining them in such forms
as its customers may desire.
Appellant invokes Article 1467 of the
New Civil Code to bolster its contention that
in filing orders for windows and doors
according to specifications, it did not sell, but
merely contracted for particular pieces of
work or “merely sold its services”. In our
opinion when this Factory accepts a job that
requires the use of extraordinary or
additional equipment, or involves services
not generally performed by it-it thereby
contracts for a piece of work — filing special
orders within the meaning of Article 1467.
The orders herein exhibited were not shown
to be special. They were merely orders for
work — nothing is shown to call them
special requiring extraordinary service of
the factory. The thought occurs to us that if,
as alleged-all the work of appellant is only to
fill orders previously made, such orders
should not be called special work, but
regular work. The Supreme Court affirms the
assailed decision by the CTA.
Paragas vs Heirs of Dominador Balacano
(Parties to a sale)
FACTS: Gregorio Balacano, married to
Lorenza Sumigcay, was the registered owner
of Lot 1175-E and Lot 1175-F of the Subd.
Plan Psd-38042. Gregorio and Lorenza had
three children, namely: Domingo, Catalino
and Alfredo, all surnamed Balacano. Lorenza
died on December 11, 1991. Gregorio, on the
other hand, died on July 28, 1996. Prior
to his death, Gregorio was admitted on
June 28, 1996, transferred hospital in the
afternoon of July 19, 1996 until his death.
Gregorio purportedly sold on July 22, 1996,
or barely a week prior to his death, a portion
of Lot1175-E (15,925 square meters out of
total area of 22,341 square meters) and the
whole Lot 1175-F to Spouses Paragas for the
total consideration of P500,000.00. This sale
appeared in a deed of absolute sale and was
notarized by Atty. De Guzman. Gregorios
certificates of title were consequently
cancelled and new certificates of title were
issued in favor of the Spouses Paragas. The
Spouses Paragas then sold on October 17,
1996 a portion of Lot 1175-E consisting of
6,416square meters to Catalino for the total
consideration of P60, 000.00. Domingo’s
children filed on October 22, 1996 a
complaint for annulment of sale and
partition against Catalino and the Spouses
Paragas. They essentially alleged in asking
for the nullification of the deed of sale that:
(1) their grandfather Gregorio could not
have appeared before the notary public on
July 22, 1996 at Santiago City because he was
then confined at the Veterans Memorial
Hospital in Quezon City; (2) at the time of the
alleged execution of the deed of sale,
Gregorio was seriously ill, in fact dying at
that time, which vitiated his consent to
the disposal of the property; and (3) not at the time Gregorio signed the deed of
Catalino manipulated the execution of the sale on July 18, 1996, but at the time when he
deed and prevailed upon the dying Gregorio agreed to sell the property in June 1996 or a
to sign his name on a paper the contents of month prior to the deeds signing; and in June
which he never understood because of his 1996, Gregorio was of sound and disposing
serious condition. mind and his consent to the sale was in no
wise vitiated at that time. They presented as
Alternatively, they alleged that
witnesses Notary Public de Guzman and
assuming Gregorio was of sound and
instrumental witness Antonio to prove
disposing mind, he could only transfer a half
Gregorio’s execution of the sale and the
portion of Lots 1175-E and 1175-F as the
circumstances under the deed was executed.
other half belongs to their grandmother
They uniformly declared that: (1) on July 18,
Lorenza who predeceased Gregorio they
1996, they went to the hospital in
claimed that Lots 1175-E and 1175-F form
Bayombong, Nueva Vizcaya where
part of the conjugal partnership properties
Gregorio was confined with Rudy; (2) Atty.
of Gregorio and Lorenza. Finally, they
De Guzman read and explained the contents
alleged that the sale to the Spouses
of the deed to Gregorio; (3) Gregorio signed
Paragas covers only a 5-hectare portion of
the deed after receiving the money from
Lots 1175-E and 1175-F leaving a portion of
Rudy; (4) Julia and Antonio signed the deed
6,416 square meters that Catalino is
as witnesses. Additionally, Atty. De Guzman
threatening to dispose. They asked for
explained that the execution of the deed was
the nullification of the deed of sale
merely a confirmation of a previous
executed by Gregorio and the partition of
agreement between the Spouses Paragas
Lots 1175-E and 1175-F. They likewise
and Gregorio that was concluded at least a
asked for damages. Plaintiff-appellant
month prior to Gregorio’s death; that, in fact,
Nanette Balacano testified to prove the
Gregorio had previously asked him to
material allegations of their complaint. On
prepare a deed that Gregorio eventually
Gregorios medical condition, she declared
signed on July 18, 1996. He also explained
that: (1) Gregorio, who was then 81 years
that the deed, which appeared to have been
old, weak and sick, was brought to the
executed on July 22, 1996, was actually
hospital in Bayombong, Nueva Vizcaya on
executed on July 18, 1996; he notarized the
June 28, 1996 and stayed there until
deed and entered it in his register only on
the afternoon on July 19, 1996; (2)
July 22, 1996. He claimed that he did not find
thereafter, Gregorio, who by then was
it necessary to state the precise date and
weak and could no longer talk and whose
place of execution (Bayombong, Nueva
condition had worsened, was transferred in
Vizcaya, instead of Santiago City) of the deed
the afternoon of July 19, 1996 to the
of sale because the deed is merely a
Veterans Memorial Hospital in Quezon City
confirmation of a previously agreed contract
where Gregorio died. She claimed that
between Gregorio and the Spouses Paragas.
Gregorio could not have signed a deed of sale
He likewise stated that of the stated
on July 19, 1996 because she stayed at the
P500,000.00 consideration in the deed, Rudy
hospital the whole of that day and saw no
paid Gregorio P450,000.00 in the hospital
visitors. She likewise testified on their
because Rudy had previously paid Gregorio
agreement for attorneys’ fees with their
P50,000.00. For his part, Antonio added that
counsel and the litigation expenses they
he was asked by Rudy to take pictures of
incurred. Defendants posit that Gregorio’s
Gregorio signing the deed. He also claimed
consent to the sale should be determined,
that there was no entry on the date when he
signed; nor did he remember reading
Santiago City as the place of execution of the
deed. He described Gregorio as still strong
but sickly, who got up from the bed with
Julia’s help. The lower court, after trial,
rendered the decision declaring null and
void the deed of sale purportedly
executed by Gregorio Balacano in favor of
the spouses Paragas, noting that at the time
Gregorio executed the deed, Gregorio was ill.
Because of the seriousness of his illness, it is
not expected that Gregorio Balacano would
be negotiating a contract of sale. The lower
court also ruled that Lots 1175-E and 1175-
F were Gregorios and Lorenza’s conjugal
partnership properties. The Court of Appeals
affirmed the Decision of the trial court, with
the modification that Lots 1175-E and 1175-
F were adjudged as belonging to the estate of
Gregorio Balacano.
ISSUE: Whether or not Gregorio gave an
intelligent consent to the sale of Lots 1175-E
and 1175-F when he signed the deed of sale.
HELD: NO, it is not disputed that when
Gregorio signed the deed of sale, Gregorio
was seriously ill, as he in fact died a week
after the deeds signing. Gregorio died of
complications caused by cirrhosis of the
liver. Gregorio’s death was neither sudden
nor immediate; he fought at least a month-
long battle against the disease until he
succumbed to death on July 22, 1996. Given
that Gregorio purportedly executed a deed
during the last stages of his battle against his
disease, the Court seriously doubt whether
Gregorio could have read, or fully
understood, the contents of the documents
he signed or of the consequences of his act.
There was no conclusive evidence that the
contents of the deed were sufficiently
explained to Gregorio before he affixed his
signature. The evidence the defendants-
appellants offered to prove Gregorio’s
consent to the sale consists of the
testimonies of Atty. de Guzman and Antonio
which the Court did not find credible.
Additionally, the irregular and invalid
notarization of the deed is a falsity that
raises doubts on the regularity of the
transaction itself. While the deed was indeed
signed on July 18, 1996 at Bayombong,
Nueva Vizcaya, the deed states otherwise, as
it shows that the deed was executed on July
22, 1996 at Santiago City. Article 24 of the
Civil Code tells us that in all contractual,
property or other relations, when one of the
parties is at a disadvantage on account of
his moral dependence, ignorance,
indigence, mental weakness, tender age or
other handicap, the courts must be vigilant
for his protection. Gregorio’s consent to the
sale of the lots was absent, making the
contract null and void. Consequently, the
spouses Paragas could not have made a
subsequent transfer of the property to
Catalino Balacano. In the case at bar, the
Deed of Sale was allegedly signed by
Gregorio on his death bed in the hospital.
Gregorio was an octogenarian at the time of
the alleged execution of the contract and
suffering from liver cirrhosis at that
circumstances which raise grave doubts on
his physical and mental capacity to freely
consent to the contract. Adding to the
dubiety of the purported sale and
further bolstering respondents claim that
their uncle Catalino, one of the children
of the decedent, had a hand in the execution
of the deed is the fact that on 17 October
1996, petitioners sold a portion of Lot
1175-Econsisting of 6,416 square meters to
Catalino for P60,000.00. One need not
stretch his imagination to surmise that
Catalino was in cahoots with petitioners in
maneuvering the alleged sale.
Atilano vs Atilano (Must be “Determinable”
or At Least Determinable)
FACTS: In 1916, Eulogio Atilano I owned lot
No. 535 in the municipality of Zamboanga
cadaster which he divided into give (5) parts.
Namely as lots Nos. 535-A, 535-B, 535-C,
535-D, and 535-E. Lot. No.535-E was sold to
Eulogio Atilano II, Eulogio Atilano I’s
brother, while 535-B to 535-D were sold to
other persons. Upon the death of Eulogio
Atilano I, the remaining portion of land
which is presumably lot no. 535-A, was
passed down to defendant Ladislao Atilano.
When Eulogio Atilano II died, his wife Luisa
Bautista and his children sought the land to
be subdivided. It was then discovered that
the land they were occupying was lot No.
535-A and not lot No. 535-E which was
covered in the transfer certificate of title.
And that the land occupied by Ladislao
Atilano was lot No. 535-E. Lot No. 535-E has
an area of 2,612 square meters area while lot
No. 535-A covered 1,808 square-meter.
Heirs of Eulogio Atilano II filed in the Court
of First Instance of Zamboanga demanding
the return of lot No. 535-E while
surrendering their possession of lot No. 535-
A. Defendants refused to accept the
exchange and contended that the reference
to lot No. 535-E in the deed of sale of May 18,
1920 was an involuntary error and that the
intention of the parties in the contract of sale
was lot No. 535-A. And that it was evident
since Eulogio Atilano even purchased a
portion from an adjoining lot which
increases the area of his property. It was also
found that Eulogio Atilano II has constructed
his residence therein even before the sale
was constituted.
The trial court ruled in favor of the
plaintiffs saying that the property was
registered under the Land Registration Act
and that the defendants could not acquire it
through prescription.
ISSUE: Whether or not an exchange of the
properties was proper. (About real intention
of the parties to that sale)
HELD: NO, what took place was a simple
mistake in drafting the instrument
evidencing the agreement between the
brothers. One sells or buys property as he
sees it in actual setting and not by the mere
lot number in the certificate of title. The
brothers remained in possession of their
respective portions throughout their lives
unaware of the mistake in the designation of
the lots. In this case, the instrument simply
failed to reflect the true intention of the
parties; thus, an exchange of the properties
is unnecessary. All the heirs should do is to
execute mutual deeds of conveyance.
When one sells or buys real property
- a piece of land, for example - one sells or
buys the property as he sees it, in its actual
setting and by its physical metes and bounds,
and not by the mere lot number assigned to
it in the certificate of title. In the particular
case before us, the portion correctly referred
to as lot No. 535-A was already in the
possession of the vendee, Eulogio Atilano II,
who had constructed his residence therein,
even before the sale in his favor; indeed,
even before the subdivision of the entire lot
No. 535 at the instance of its owner, Eulogio
Atilano I.
The real issue here is not adverse
possession, but the real intention of the
parties to that sale. From all the facts and
circumstances we are convinced that the
object thereof, as intended and understood
by the parties, was that specific portion
where the vendee was then already residing,
where he reconstructed his house at the end
of the war, and where his heirs, the plaintiffs
herein, continued to reside thereafter:
namely, lot No. 535-A; and that its
designation as lot No. 535-E in the deed of
sale was a simple mistake in the drafting of
the document. The mistake did not vitiate
the consent of the parties, or affect the
validity and binding effect of the contract
between them. The new Civil Code provides
a remedy for such a situation by means of
reformation of the instrument. This remedy
is available when, there having been a
meeting of the minds of the parties to a
contract, their true intention is not
expressed in the instrument purporting to
embody the agreement by reason of mistake,
fraud, inequitable conduct or accident (Art.
1359, et seq.). In this case, the deed of sale
executed in 1920 need no longer be
reformed. The parties have retained
possession of their respective properties
conformably to the real intention of the
parties to that sale, and all they should do is
to execute mutual deed of conveyance.
When there is difference between
the lot number stated in a certificate of title
and the intention of the contracting parties
the latter must be followed. In the case at
bar, it was found that lot No. 535- A was the
intended subject of the contract of sale
rather than lot No. 535-E.
Therefore, the judgement appealed
from is reversed. Plaintiffs are to execute a
deed of conveyance of lot No. 535-E in favor
of defendants and that defendant are to
execute a similar document of lot No. 535-A
in favor of plaintiffs.
Rongavilla vs Court of Appeals (When
price is simulated)
FACTS: The property subject of this
controversy is a parcel of land owned by
sisters Mercedes and Florencia Dela Cruzin
the proportion of ½ with Juanita Jimenez,
their niece and sister of Dolores Rongavilla
(petitioner herein). After theland was
subdivided, the Original Certificate of Title
and Transfer Certificate of Title was kept in
the possession of Juanita Jimenez. In May
1976, the Dela Cruz sisters borrowed
P2000.00 from the Spouses Rongavilla for
the purpose of having their (Dela Cruzes)
rooftop repaired. A month later, Rongavilla
and Jimenez went to their aunts’ home,
bringing with them a document typewritten
in English for signature of their aunts. When
Mercedes asked in Tagalog what it was
about, Rongavilla answered that it was just a
document evidencing the P2000.00 loan. On
account of that representation, the Dela
Cruzes signed said document. After 4 years
(September 1980), Rongavilla went to the
house of Dela Cruz and asked them to vacate
the land in question, claiming that she and
her husband were already its new owners.
Upon checking with the Office of the Register
of Deeds, they discovered that their
Certificate of Title had been cancelled and a
new one indeed had been issued in favour of
the Rongavillas. They further discovered
that said land had been mortgaged with the
Cavite Development Bank, and only then did
they realize that what they had previously
been asked to sign was a deed of sale. The
Dela Cruzes filed a complaint before the
Pasay RTC to have the deed of sale declared
void and inexistent. They contended that
they did not sell the property, they did not
receive any consideration on the supposed
sale, that their title to the property was
cancelled to their damage and prejudice.
They also claimed moral and exemplary
damages. On the other hand, the Rongavillas
allege that the land had been voluntarily
sold, that there was consent to the sale, there
was sufficient consideration, that the Dela
Cruz sisters had been fully apprised by the
Notary Public as to what the document was
about, that prescription had set in, and that
the deed of sale contained all the requisites
of a contract.
ISSUE: Whether or not there was a valid sale.
HELD: NO, as found by the trial court, the
Dela Cruz sisters were misled by Rongavilla
into believing that what they signed was a
document acknowledging a loan. The
consent was not merely vitiated, it did not
exist at all. The sale of the property was far
from their minds. As to the issue of
consideration, the court notes that the deed
makes mention of a consideration of
P2000.00. However, when the property was
mortgaged, its value was P40000.00. The
gross inadequacy of the consideration deters
the Court from believing that the property
was actually sold. It is more reasonable to
assume that the amount of P2000.00 in the
deed refers to the loan extended by
Rongavilla to her aunts. There was no
consideration in the supported transaction.
Moreover, Jimenez and her layer repeatedly
declared that the true consideration paid
was P7800.00 and not theP2000.00 that was
stated in the deed of sale. It is also evident in
the deed of sale that the consideration
originally typed therein (P3000.00) was
later on substituted by the handwritten
amount (P2000.00). The Rongavilla’s may
have many possible motives for these
alterations, but these testimonies only
establish one thing: the non-sanctity of the
deed as a public instrument. On the issue of
prescription, the Court ruled that the
document having been declared void, the
statute of limitations cannot apply. In this
case, lack of consent and consideration made
the deeds of sale void altogether and
rendered them subject to attack at any time.
Rongavilla and Jimenez were able to secure
the signature of Dela Cruz in the Deed of
Absolute Sale through fraud and there was
no consideration whatsoever for the alleged
sale. The consent was not only vitiated, but it
was not given at all. Since there was no
consent, the deed of absolute sale is null and
void ab initio. Proper remedy: reconveyance.
COMMISSIONER OF INTERNAL REVENUE
vs. ENGINEERING EQUIPMENT AND
SUPPLY COMPANY
FACTS: Engineering Equipment & Supply
(EES) was engaged in the business of
designing and installing central air-
conditioning systems. It was assessed by the
Commissioner of Internal Revenue for 30%
advanced sales tax, among other penalties
pursuant to an anonymous complaint filed
before the BIR. EES vehemently objected and
argued that they are contractors and not
manufacturers and should be liable only for
the 3% tax on sales of services or pieces of
work. The commissioner demanded upon
Engineering the payment of the assessed tax
and suggested that EES pay P1 0k as
compromise for its penal liability for
violation of the Tax Code. Engineering
appealed the case to the Court of Tax Appeal,
which rendered the decision of exempting
them from the deficiency manufacturers
sales tax covering the period from June 1 , 1
948. to September 2, 1 956. However,
petitioner is ordered to pay respondent, or
his duly authorized collection agent, the sum
of P1 74,1 41 .62 as compensating tax and
25% surcharge for the period from 1 953 to
September 1 956. Commissioner unsatisfied
of this decision appealed the same to this
court contending that EES is a manufacturer
and seller of air conditioning units and parts
or accessories thereof and, therefore, it is
subject to the 30% advance sales tax
pursuant to the Tax Code.
ISSUE: W/N EES is a contractor for a piece of
work thus only liable for 3% tax
HELD: Manufacturer – includes every
person who by physical or chemical process
alters the exterior texture or form or inner
substance of any raw material or
manufactured or partially manufactured
products in such manner as to prepare it for
a special use or uses to which it could not
have been put in its original condition, or
who by any such process alters the quality of
any such material or manufactured or
partially manufactured product so as to
reduce it to marketable shape, or prepare it It also paid the contractors tax on all the
for any of the uses of industry. Contractor – contracts for design and construction of
a person who, in the pursuit of the central system unlike Oriental who did not
independent business, undertakes to do a pay contractors tax. Engineering did not
specific job or have ready-made air conditioning units for
piece of work for other persons, using his sale unlike oriental whose bulk of their sale
own means and methods without submitting came from ready-made doors and windows
himself to control as to the petty details. As for their liability for violation of Tax Code,
they should pay the whole amount not the
Our New Civil Code, likewise distinguishes a
one suggested by the commissioner.
contract of sale from a contract for a piece of
work thus: Art. 1 467. A contract for the
delivery at a certain price of an article which MERCEDES CALIMLIM- CANULLAS v HON.
the vendor in the ordinary course of his WILLELMO FORTUN
business manufactures or procures for the
FACTS: Petitioner Mercedes Calimlim-
general market, whether the same is on hand
Canullas was married to Fernando Canullas.
at the time or not, is a contract of sale, but if
They have children and lived in the
the goods are to be manufactured specially
residential land in question which Fernando
for the customer and upon his special order
inherited the land after his father died. Years
and not for the general market, it is a
after, Fernando abandoned his family and
contract for a piece of work.
was living with private respondent Corazon.
True test of contractor – he renders service (Both were convicted of concubinage in a
in the course of an independent occupation judgment rendered the Court of First
representing the will of his employer only as Instance which has become final during the
to the result of his work, and not as to the pendency of this petition.) Fernado sold the
means by which it is accomplished. said inherited land with the house thereon to
Corazon. Unable to take possession of the
The SC found that EES was NOT a
said property, Corazon filed a complaint for
manufacturer of air-conditioning units.
quieting of title and damages against
While it imported such items, they were not
Mercedes. However, Mercedes claimed that
for sale to the general public and were used
the sale of the land, with the house and
as mere components for the design of the
improvements, was null and void because
centralized air-conditioning system, the
they are conjugal properties and she had not
designs and specifications of w/c are
given her consent. Respondent Court
different for every client. Various technical
(Fortun as judge) principally declared
factors must be considered and it can be
Corazon as the lawful owner of the land in
argued that no two plants are the same; all
question and 1 /2 of the house erected on
are engineered separately and distinctly.
said land. Upon reconsideration prayed for
Each project requires careful planning and
by Mercedes, respondent Court amended its
meticulous layout. Such central air-
decision and resolved that indeed Corazon
conditioning systems and their designs
was the true and lawful owner of the land but
would not have existed were it not for the
declared the sale of the conjugal house and
special order of the party desiring to acquire
improvements null and void.
it. EES is thus not liable for the sales tax.
ISSUE: WON the sale of the lot together with
In comparison with Celestino case:
the house and improvements thereon was
Engineering advertised itself as Engineering
valid.
Equipment and Supply Company, Machinery
RULING: We find that the contract of sale
Mechanical Supplies, Engineers, Contractors
was null and void for being contrary to
while Oriental used “Oriental Sash Factory”.
morals and public policy. The sale was made
by a husband in favor of a concubine after he
had abandoned his family and left the
conjugal home where his wife and children
lived and from hence, they derived their
support. That sale was subversive of the
stability of the family, a basic social
institution which public policy cherishes and
protects. Article 1 409 of the Civil Code states
inter alia that: contracts whose cause, object,
or purpose is contrary to law, morals, good
customs, public order, or public policy are
void and inexistent from the very beginning.
Article 1 352 also provides that: "Contracts
without cause, or with unlawful cause,
produce no effect whatsoever. The cause is
unlawful if it is contrary to law, morals, good
customs, public order, or public policy. While
Art. 1 33 of the Civil Code considers as void a
donation between the spouses during the
marriage, policy
considerations of the most exigent character
as wen as the dictates of morality require
that
the same prohibition should apply to a
common-law relationship.
Justice J.B.L. Reyes of that Court, 'to
prohibit donations in favor of the other
consort and his descendants because of fear
of undue influence and improper pressure
upon the donor, a prejudice deeply rooted in
our ancient law, then there is every reason to
apply the same prohibitive policy to persons
living together as husband and wife without
benefit of nuptials. So long as marriage
remains the cornerstone of our family law,
reason and morality alike demand that the
disabilities attached to marriage should
likewise attach to concubinage.
MELLIZA v. CITY OF ILOILO
FACTS: Juliana Melliza during her lifetime
owned, among other properties, three
parcels of residential land of about 29, 073
sqm in Iloilo City registered in her name.
Said parcels of land was known as Lots Nos.
2, 5 and 1214. She donated about 9,000 sqm
of Lot 1214 to the Municipality of Iloilo to
serve as site for the municipal hall. The
donation was however revoked by the
parties for the reason that the area donated
was found inadequate to meet the
requirements of the development plan of the
municipality, the so-called "Arellano Plan”.
Subsequently, Lot No. 1214 was divided by
Certeza Surveying Co., Inc. to 1214-A and
1214-B. 1214-B was thereafter subdivided
into 3: 1214 B-1, 1214 B-2, and 1214 B-3. As
approved by the Bureau of Lands, Lt 1214 B-
1 became known as Lt 1214-B, Lt. 1214 B-2
into Lt. 1214-C, and 1214 B-3 into 1214-D.
Few days before the donation, Juliana
executed an instrument describing 1214-C
and D and that they were needed for the
construction of the city hall according to the
Arellano Plan. Juliana Melliza later on sold
her remaining interest in Lot 1214 to
Remedios Sian Villanueva who thereafter
and later transferred her rights to said
portion of land to Pio Sian Melliza, who
obtained Transfer Certificate of Title
thereover in his name. City of Iloilo later
acquired B, C and D through a sale and
donated them to University of the
Philippines Iloilo which later enclosed the
site with a wire fence. When Pio discovered
this, he filed a money claim for the value of
lot “B” because only lots “C” and “D” were
donated. He was not paid because the City
allegedly did not have funds. Meanwhile, UP
obtained TCTs for B, C, and D. Again, Pio filed
and action in the CFI against City of Iloilo and
UP for the recovery of lot “B” or its value
which the CFI dismissed because according
to the second paragraph of the instrument
Juliana executed, lots “C” and “D” were NOT
THE ONLY ONES she donated. Other
portions of 1214 were also included as was
necessary for the municipal hall site, such as
lot “B.” The CA affirmed the CFI’s
interpretation saying that what was donated
was not limited to those two lots but
included whatever was needed for the
construction of avenues, parks, city hall site.
It ordered the remand of the case to
determine the actual area taken by Iloilo
City. Pio appealed saying that the second
paragraph was only to identified which lots
were subject of the instrument. He argued
that following the CFI and CA’s
interpretation of the phrasing “whatever
was needed” was invalid because the law
requires as an essential element of sale, a
determinate object. The appellees argued
that it was the parties’ intent to include lot
“B” which was further strengthened by the
vendor’s silence after Iloilo had occupied
and exercised ownership over the lots. They
also argued that that it was absurd not to
include “B” since it was contiguous to “C” and
“D.” Finally, they averred that the sale’s
object was determinate because it could be
gleaned from the contract that the lots were
needed by Iloilo City for various projects
based on the Arellano Plan.
ISSUE: 1) W/N the conveyance by Juliana
Melliza to Iloilo municipality included lot B
2) W/N the description of the lots in the
document was insufficient so that they are
not determinate as required by law
HELD: (1) Yes. The sale to Remedios
Villanueva did not specifically designate lot
B but only portions that were not included in
the sale to City of Iloilo. Therefore, it was
excluded from the sale to Villanueva and
later to Pio. The paramount intention of the
parties was to provide lots to the
municipality for the
construction of the city hall. The public
instrument executed by Juliana described
the lots sold to the city. They were
specifically described according to their lot
numbers and area and stated that they were
ones needed for the construction. If the
parties had intended to specify C and D there
would not be any need to describe the lot
number and LAND AREA. (3) It is therefore
reasonable to view it in reference to the
Arellano plan which development area
needed more space than lots C and D
combined. (2) No. The specific description of
the lots plus the statement that they were the
ones needed for the city hall site, avenues
and parks should be read in relation to how
much space was needed to execute the
Arellano plan. This sufficiently provides a
basis for making determinate said lots
without the need for a new agreement.
Although the Arellano plan was only
finalized a few years after the sale, it already
existed as early as 1 928. The area was
already needed was already determined so
when the sale was executed, the specific
mention of the lots fixed the corresponding
location of the city hall site.
One should match the lots sold according to
the area needed for development to
determine which and how much of the land
was needed. There is no question that lot B is
contiguous to lots C and D which sits at the
heart of the municipality. Furthermore, Pio
actually notarized the instrument himself
which was registered with the R of Deeds Pio
knew of the terms of the instrument so he
should have examined it in relation to the
Arellano Plan and realized that the
municipality had already taken possession of
those lots. He should have raised proper
objections from the very beginning but
remained silent for 20 years. The principles
of laches, estoppels and equity demand that
lot B is deemed included in the conveyance
in favor of Iloilo City.
Held Decision appealed from affirmed.
YU BUN GUAN v CA
FACTS: Yu Bun Guan and Ong are married
since 1 961 and lived together until she and
her children were abandoned by him in 1
992, because of his incurable promiscuity,
volcanic temper, and other vicious vices. In 1
968, out of her personal funds, Ong
purchased a parcel of land (Rizal Property)
from Aurora Seneris. Also, during their
marriage, they purchased a house and lot out
of their conjugal funds. Before their
separation in 1 992, she reluctantly agreed
to execute a Deed of Sale of the Rizal
Property on the promise that Yu Bun Guan
would construct a commercial building for
the benefit of the children. He suggested that
the property should be in his name alone so
that she would not be involved in any
obligation. The consideration for the sale
was the execution of a Deed
of Absolute Sale in favor their children and
the payment of the loan he obtained from
Allied Bank. However, when the Deed of Sale
was executed in favor of Yu Bun Guan, he did
not pay the consideration of P200K,
supposedly the "ostensible" valuable
consideration. Because of this, the new TCT
issued in his name was not delivered to him
by Ong. Yu Bun Guan then filed for a Petition
for Replacement of the TCT, with an Affidavit
of Loss attached. Ong, on the other hand,
executed an Affidavit of Adverse Claim and
asked that the sale be declared null and void.
RTC ruled in favor of Ong. CA affirmed.
ISSUE: W/N there was a valid contract of
sale
HELD: NO. It is clear from the findings of the
lower courts that the Deed of Sale was
completely simulated and thus, VOID
without effect. No portion of the P200,000
consideration stated in the Deed was ever
paid. And, from the facts of the case, it is clear
that neither party had any intention
whatsoever to pay that amount. Instead, the
Deed of Sale was executed merely to
facilitate the transfer of the property to
petitioner
pursuant to an agreement between them to
enable him to construct a commercial
building and to sell the Juno property to their
children. Being merely a subterfuge, that
agreement cannot be taken as a
consideration for the sale.
Quiroga v. Parsons
38 Phil 501
FACTS: On January 24, 1911, plaintiff
Andres Quiroga and J. Parsons (to whose
rights and obligations the present defendant
Parsons Hardware Co. later subrogated
itself) entered into a contract, where it was
stated among others that Quiroga grants in
favor of Parsons the exclusive rights to sell
his beds in the Visayan Islands under some
conditions. One of the said conditions
provided that “Mr. Parsons may sell, or
establish branches of his agency for the sale
of "Quiroga" beds in all the towns of the
Archipelago where there are no exclusive
agents, and shall immediately report such
action to Mr. Quiroga for his approval” while
another one passed on to Parsons the
obligation to order by the dozen and in no
other manner the beds from Quiroga.
Alleging that the Parsons was his agent for
the sale of his beds in Iloilo, Quiroga filed a
complaint against the former for violating
the following obligations implied in what he
contended to be a contract of commercial
agency: not to sell the beds at higher prices
than those of the invoices; to have an open
establishment in Iloilo; itself to conduct the
agency; to keep the beds on public
exhibition, and to pay for the advertisement
expenses for the same; and to order the beds
by the dozen and in no other manner.
ISSUE: Is the defendant, by reason of the
contract, a purchaser or an agent of the
plaintiff for the sale of the latter’s beds in
Iloilo?
COURT RULING: The Supreme Court
declared that the contract by and between
the plaintiff and the defendant was one of
purchase and sale, and that the obligations
the breach of which is alleged as a cause of
action are not imposed upon the defendant,
either by agreement or by law.
In order to classify a contract, due regard
must be given to its essential clauses. In the
contract in question, what was essential, as
constituting its cause and subject matter, is
that the plaintiff was to furnish the
defendant with the beds which the latter
might order, at the price stipulated, and that
the defendant was to pay the price in the
manner stipulated. There was the obligation
on the part of the plaintiff to supply the beds,
and, on the part of the defendant, to pay their
price. These features exclude the legal
conception of an agency or order to sell
whereby the mandatory or agent received
the thing to sell it, and does not pay its price,
but delivers to the principal the price he
obtains from the sale of the thing to a third
person, and if he does not succeed in selling
it, he returns it.
 Philippine Trust Co. v. Roldan
Facts: Mariano Bernardo, a minor, inherited
17 parcels of land from his deceased father.
Respondent, Mariano’s step-mother, was
appointed his guardian. As guardian, she
sold the 17 parcels to Dr. Ramos, her
brother-in-law, for P14,700. After a week,
Dr. Ramos sold the lands to her for P15,000.
Subsequently, she sold 4 out of 17 parcels to
Emilio Cruz. Petitioner replaced Roldan as
guardian, and two months thereafter, this
litigation sought to declare as null and void
the sale to Dr. Ramos, and the sale to Emilio
Cruz.
Issue: Whether the sale of the land by the
guardian is null and void for being violative
of the prohibition for a guardian to purchase
either in person or through the mediation of
another the property of her ward
Held: Remembering the general doctrine
that guardianship is a trust of the highest
order, and the trustee cannot be allowed to
have any inducement to neglect his ward’s
interest, and in line with the court’s
suspicion whenever the guardian acquires
ward’s property we have no hesitation to
declare that in this case, in the eyes of the
law, Socorro Roldan took by purchase her
ward’s parcels thru Dr. Ramos, and that
Article 1459 of the Civil Code applies.
Yu Tek & Co. v. Gonzales
29 phil 384
Facts: A contract was executed between the
herein parties, whereby Mr. Basilio Gonzales
acknowledges the receipt of P3,000 from Yu
Tek & Co., and that in consideration of which
he obligates himself to deliver to the latter
600 piculs of sugar of the first and second
grade, according to the result of polarization,
within 3 months. There is a stipulation
providing for rescission with P1,200 penalty
in case of failure to deliver. No sugar was
delivered, so plaintiff filed a case praying for
the judgment of P3,000 plus P1,200. P3,000
was awarded, thus, both parties appealed.
Issues: (1) Whether compliance of the
obligation to deliver depends upon the
production in defendant’s plantation
(2) Whether there is a perfected sale
(3) Whether liquidated damages of P1,200
should be awarded to the plaintiff
Held: (1) There is not the slightest
intimation in the contract that the sugar was
to be raised by the defendant. Parties are
presumed to have reduced to writing all the
essential conditions of their contract. While
parol evidence is admissible in a variety of
ways to explain the meaning of written
contracts, it cannot serve the purpose of
incorporating into the contract additional
contemporaneous conditions which are not
mentioned at all in the writing, unless there
has been fraud or mistake. It may be true
that defendant owned a plantation and
expected to raise the sugar himself, but he
did not limit his obligation to his own crop of
sugar. Our conclusion is that the condition
which the defendant seeks to add to the
contract by parol evidence cannot be
considered. The rights of the parties must be
determined by the writing itself.
(2) We conclude that the contract in the case
at bar was merely an executory agreement; a
promise of sale and not a sale. At there was
no perfected sale, it is clear that articles
1452, 1096, and 1182 are not applicable. The
defendant having defaulted in his
engagement, the plaintiff is entitled to
recover the P3,000 which it advanced to the
defendant, and this portion of the judgment
appealed from must therefore be affirmed.
(3) The contract plainly states that if the
defendant fails to deliver the 600 piculs of
sugar within the time agreed on, the contract
will be rescinded and he will be obliged to
return the P3,000 and pay the sum of P1,200
by way of indemnity for loss and damages.
There cannot be the slightest doubt about
the meaning of this language or the intention
of the parties. There is no room for either
interpretation or construction. Under the
provisions of article 1255 of the Civil Code
contracting parties are free to execute the
contracts that they may consider suitable,
provided they are not in contravention of
law, morals, or public order. In our opinion
there is nothing in the contract under
consideration which is opposed to any of
these principles.
 Ong v. Ong
139 SCRA 133
Facts: On February 25, 1976, Imelda Ong, for
and in consideration of P1.00 and other
valuable considerations, executed a
quitclaim over a parcel of land in Makati in
favor of Sandra Maruzzo, then a minor. On
November 19, 1980, Imelda revoked the
quitclaim and donated the property to her
son Rex. On June 20, 1983, Sandra, through
her guardial ad litem Alfredo Ong, filed an
action to recover the land and to declare the
donation to Rex null and void. In their
responsive pleading, petitioners claimed
that the quitclaim is equivalent to a donation
which requires acceptance by the donee, and
since Sandra was a minor, there was no valid
acceptance. The trial court ruled that the
quitclaim is equivalent to a sale. The
Intermediate Appellate Court affirmed the
decision.
Issue: Whether the quitclaim is equivalent
to a deed of sale or to a deed of donation
Held: 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. Even granting that
the Quitclaim deed in question is a donation,
Article 741 of the Civil Code provides that
the requirement of the acceptance of the
donation in favor of minor by parents of legal
representatives applies only to onerous and
conditional donations where the donation
may have to assume certain charges or
burdens. Donation to an incapacitated donee
does not need the acceptance by the lawful
representative if said donation does not
contain any condition. In simple and pure
donation, the formal acceptance is not
important for the donor requires no right to
be protected and the donee neither
undertakes to do anything nor assumes any
obligation. The Quitclaim now in question
does not impose any condition.
REPUBLIC OF THE PHILIPPINES vs.
PHILIPPINE RESOURCES DEVELOPMENT
CORPORATION and the COURT OF
APPEALS
Facts: Apostol, allegedly acting for the
Philippine Resources Development Corp.
(PRDC), contracted with the Bureau of
Prison for the purchase of 100 tons of
designated logs, but only a small payment of
the purchase price was made. In lieu of the
balance of the purchase price, he caused to
be delivered goods of the PRDC to the
Bureau of Prison as payment for the
outstanding price. The Republic brought an
action against Apostol for the collection of
sums owing to it for his purchase of Palawan
Almaciga and other logs. His total debt
amounted to some P34,000. PRDC
intervened claiming that Apostol, as
President of the company, without prior
authority, took goods (steel sheets, pipes,
bars, etc) from PRDC warehouse and
appropriated them to settle his personal
debts in favor of the government. The
Republic opposed the intervention of PRDC,
arguing that price is always paid in money
and that payment in kind is no payment at
all; hence, money and not the goods of PRDC
are under dispute.
The Government asserted that the subject
matter of its litigation with Apostol was a
sum of money allegedly due to the Bureau of
Prison from Apostol and not the goods
reportedly turned over by Apostol in
payment of his private debt to the Bureau of
Prison and the recovery of which was sought
by PRDC; and for this reason, PRDC had no
legal interest in the very subject matter in
litigation as to entitle it to intervene. The
Government argued that the goods which
belonged to PRDC were not connected with
the sale because “Price … is always paid in
terms of money and the supposed payment
being in kind, it is no payment at all.”
Issues:
(1) Whether or not payment in kind is
equivalent to price paid in money.
(2) Whether PRDC had the right to intervene
in the sales transaction executed between
Apostol and the Bureau of Prisons and in the
suit brought by the Government to enforce
such sale.
Held: (1) YES. Price may be paid in money or
ITS EQUIVALENT—in this case, the goods.
Payment need not be in the form of money.
The prices for the goods have, in fact, been
assessed and determined.
Republic is not at all authority to say that
under Article 1458, as it defines a contract of
sale and the obligation of the buyer to “pay
the price certain in money or its equivalent”,
the term “equivalent” of price can cover
other than money or other media of
exchange, since Republic covers not the
perfection stage of a contract of sale, but
rather the consummation stage where the
price agreed upon (which ideally should be
in money or its equivalent) can be paid
under the mutual arrangements agreed
upon by the parties to the contract of sale,
even by dation in payment.
(2) Yes, PRDC thus has a substantial interest
in the case and must be permitted to
intervene—its goods paid out without
authority being under dispute in this case.
The Court held that the Government’s
contentions were untenable, ruling that
Article 1458 provides that the purchaser
may pay “a price certain in money or its
equivalent,” which means payment of the
price need not be in money. Whether the
goods claimed by PRDC belong to it and
delivered to the Bureau of Prison by 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. PRDC therefore had a positive
right to intervene in the case because should
the trial court credit Apostol with the value
price of the materials delivered by him,
certainly PRDC would be affected adversely
if its claim of ownership to such goods were
upheld.
FABILLO v IAC
FACTS: Florencio Fabillo contracted the
services of Atty. Murillo to revive a lost case
over his inheritance from his deceased sister
Justinia. He sought to acquire the San
Salvador and Pugahanay Properties that his
sister left behind against the latter’s
husband. They entered into a contract where
a contingent fee in favor of Atty. Murillo in
case the case won was agreed upon. The fee
was 40% of the value of whatever benefit
Florencio may derive from the suit—such as
if the properties were sold, rented, or
mortgaged. It was vague, however, regarding
the fee in case Florencio or his heirs decide
to occupy the house—allowing Atty. Murillo
the option to occupy or lease 40% of the said
house and lot. A compromise agreement was
entered into where Florencio acquired both
properties. Atty. Murillo installed a tenant in
the Pugahanay Property; later on, Florencio
claimed exclusive rights over the properties
invoking Art. 1 491 of the CC. Florencio and
Atty. Murillo both died and were succeeded
by their respective heirs.
ISSUE: W/N contingent fees agreed upon are
valid.
HELD: YES. Contingent fees are not
contemplated by the prohibition in Art. 1
491 disallowing lawyers to purchase
properties of the client under litigation The
said prohibition applies only during the
pendency of the said litigation. Payment of
the contingent fee is made after the
litigation, and is thus not covered by the
prohibition. For as long as there is no fraud
or undue influence, or as long as the fees are
not exorbitant, the same as valid and
enforceable. It is even recognized by the
Canons of Professional Ethics. However,
considering that the contract is vague on the
matter of division of the shares if Florencio
occupies the property; the ambiguity is to be
construed against Atty. Murillo being the one
who drafted the contract and being a lawyer
more knowledgeable about the law. The
Court thus invoking the time-honored
principle that a lawyer shall uphold the
dignity of the legal profession, ordered only
a contingent fee of P3,000 as reasonable
attorney’s fees.
 PUYAT v ARCO AMUSEMENT CO.
FACTS: Arco Amusement was engaged in the
business of operating cinematopgraphs.
Gonzalo Puyat & Sons Inc (GPS) was the
exclusive agent in the Philippines for the
Starr Piano Company. Desiring to equip its
cinematograph with sound reproducing
devices, Arco approached GPS, through its
president, GIl Puyat, and an employee named
Santos. After some negotiations, it was
agreed between the parties that GPS would
order sound reproducing equipment from
Starr Piano Company and that Arco would
pay GPS, in addition to the price of the
equipment, a 1 0% commission, plus all
expenses such as freight, insurance, etc.
When GPS inquired Starr Piano the price
(without discount) of the equipment, the
latter quoted such at 1,700 for Indiana being
agreeable to the price plus 10% commission
plus all other expenses). Arco formally
authorized the order. The following year,
both parties agreed for another order of
sound reproducing equipment on the same
terms as the first at $1 ,600 plus 1 0% plus
all other expenses. Three years later, Arco
discovered that the prices quoted to them by
GPS with regard to their first 2 orders
mentioned were not the net prices, but
rather the list price, and that it had obtained
a discount from Starr Piano. Moreover, Arco
alleged that the equipment were overpriced.
Thus, being its agent, GPS had to reimburse
the excess amount it received from Arco.
ISSUE: W/N there was a contract of agency,
not of sale
HELD: NO. The letters containing Arco's
acceptance of the prices for the equipment
are clear in their terms and admit no other
interpretation that the prices are fixed and
determinate. While the letters state that GPS
was to receive a 10% commission, this
doesn’t necessarily mean that it is an agent
of Arco as this provision is only an additional
price which it bound itself to pay, and which
stipulation is not incompatible with the
contract of sale. It is GPS that is the exclusive
agent of Starr Piano in the Philippines, not
the agent of Arco. it is out of the ordinary for
one to be the agent of both the seller and the
buyer. The facts and circumstances show
that Arco entered into a contract of sale with
GPS, the exclusive agent of Starr Piano. As
such, it is not duty bound to reveal the
private arrangement it had with Starr Piano
relative to the 25% discount. Thus, GPS is not
bound to reimburse Arco for any difference
between the cost price and the sales price,
which represents the profit realized by GPS
out of the transaction
NGA v IAC
FACTS: National Grains Authority (now
National Food Authority, NFA) is a
government agency created under PD 4. One
of its incidental functions is the buying of
palay grains from qualified farmers. In 1 979,
Leon Soriano offered to sell palay grains to
the NFA, through its Provincial Manager,
William Cabal. He submitted the documents
required by the NFA for pre-qualifying as a
seller, which were processed and
accordingly, he was given a quota of 2,640
cavans of palay. The quota noted in the
Farmer’s Information Sheet represented the
maximum number of cavans of palay that
Soriano may sell to the NFA. On 23 and 24
August 1979, Soriano delivered 630 cavans
of palay. The palay delivered were not
rebagged, classified and weighed.
When Soriano demanded payment of
the 630 cavans of palay, he was informed
that its payment will be held in abeyance
since Mr. Cabal was still investigating on an
information he received that Soriano was
not a bona fide farmer and the palay
delivered by him was not produced from his
farmland but was taken from the warehouse
of a rice trader, Ben de Guzman. On 28
August 1 979, Cabal wrote Soriano advising
him to withdraw from the NFA warehouse
the 630 cavans stating that NFA cannot
legally accept the said delivery on the basis
of the subsequent certification of the BAEX
technician (Napoleon Callangan) that
Soriano is not a bona fide farmer. Instead of BAGNAS v CA
withdrawing the 630 cavans of palay,
FACTS: Hilario died with no will and was
Soriano insisted that the palay grains
survived only by collateral relatives. Bagnas
delivered be paid. He then filed a complaint
(et al) were the nearest kin. Retonil (et al)
for specific performance and/or collection of
were also relatives but to a farther extent.
money with damages against the NFA and
They claimed ownership over 1 0 lots from
William Cabal. Meanwhile, by agreement of
the estate of Hilario presenting notarized
the parties and upon order of the trial court,
and registered Deeds of Sale (in Tagalog)
the 630 cavans of palay in question were
where the consideration for the lands was P1
withdrawn from the warehouse of NFA. In 1
and services rendered, being rendered, and
982, RTC ruled in favor of Soriano and in 1
to be rendered. Bagnas argued that the sales
986, CA affirmed decision of RTC.
were fictitious, while Retonil claimed to have
ISSUE: W/N there was a perfected contract done many things for Hilario—such as
of sale. nursing him on his deathbed.
HELD: YES. In the present case, Soriano ISSUE: W/N there was a valid contract of
initially offered to sell palay grains produced sale.
in his farmland to NFA. When the latter
HELD: NO. At the onset, if a contract has no
accepted the offer by noting in Soriano’s
consideration, it is not merely voidable, but
Farmer’s Information Sheet a quota of 2,640
VOID—and even collateral heirs may assail
cavans, there was already a meeting of the
the contract. In this case, there was no
minds between the parties. The object of the
consideration. Price must be in money or its
contract, being the palay grains produced in
equivalent; services are not the equivalent of
Soriano’s farmland and the NFA was to pay
money insofar as the requirement of price is
the same depending upon its quality. The
concerned. A contract is not one for sale if
contention that – since the delivery were not
the consideration consists of services. Not
rebagged, classified and weighed in
only are they vague, they are unknown and
accordance with the palay procurement
not susceptible of determination without a
program of NFA, there was no acceptance of
new agreement by the parties.
the offer thus – this is a clear case of
policitation or an unaccepted offer to sell, is
untenable. The fact that the exact number of
cavans of palay to be delivered has not been
determined does not the perfection of the
contract. Art 1340 of the New Civil Code
provides that the fact that the quantity is not
determinate shall not be an obstacle to the
existence of the contract, provided it is
possible to determine the same, without the
need of a new contract between the parties.”
In the present case, there was no need for
NFA and Soriano to enter into a new contract
to determine the exact number of cavans of
palay to be sold. Soriano can deliver so much
of his produce as long as it does not exceed
2,640 cavans.