Celestino Co vs Collector

Facts:

Celestino Co doing business under the name of “Oriental Sash Factory”. From 1956-
1951 it paid percentage tax of 7% (National Revenue Code sec. 186) on the gross
receipts of its sash, door, and window factory. However on 1952 it began to claim
liability only to contractor’s 3% tax (Instead of 7%) under sec. 191.

Celestino claims that they do not manufacture ready made doors, sah, and windows for
the public. He claims hat they only do Special Orders for customers, thus, contending
they are not manufacturers. This did not convince the BIR and the Court of Tax
Appeals.

CTA said that their tradename gives an impression they do engage in manufacturing
and their records suggest that their huge earnings (P188, 754.69) cannot be from
special orders from ther few customers, but because it was from ready made
products. They also offered themselves as a “factory” to the public.

Issue: W/ON Petitioner is in engaged in manufacturing

Held: Yes. The company habitualy makes Sash, windows, and doors as it has been
represented to the public. The fact that the windows and doors are made only when
customers place their orders, does not alter the nature of the establishment, for it is
obvious that they accept special orders other than making ready made products. The
factory does nothing more than sell the goods that it mass produces or habitually
makes.

CIR vs ENGINEERING EQUIPMENT AND SUPPLY CO

FACTS: Engineering Equipment and Supply Co., a domestic corporation, is an

engineering and machinery firm. As operator of an integrated engineering shop, it is
engaged, among others, in the design and installation of central type air conditioning
system, pumping plants and steel fabrications. One Juan de la Cruz, wrote the then
Collector, now Commissioner, of Internal Revenue denouncing Engineering for tax
evasion by misdeclaring its imported articles and failing to pay the correct percentage
taxes due thereon in connivance with its foreign suppliers. The Commissioner assessed
against, and demanded upon, Engineering payment of the increased amount and
suggested that P10,000 be paid as compromise in extrajudicial settlement of
Engineering's penal liability for violation of the Tax Code

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

a contractor.
CTA RULING: Engineering is a contract and thus declared exempt from the deficiency
manufacturers sales tax.

SC RULING:

The distinction between a contract of sale and one for work, labor and materials is
tested by the inquiry whether the thing transferred is one not in existence and which
never would have existed but for the order of the party desiring to acquire it, or a thing
which would have existed and has been the subject of sale to some other persons even
if the order had not been given. If the article ordered by the purchaser is exactly such as
the plaintiff makes and keeps on hand for sale to anyone, and no change or
modification of it is made at defendant's request, it is a contract of sale, even though it
may be entirely made after, and in consequence of, the defendants order for it.

The word "contractor" has come to be used with special reference to a person who, in
the pursuit of the independent business, undertakes to do a specific job or piece of work
for other persons, using his own means and methods without submitting himself to
control as to the petty details. Presented is the testimony of one Carlos Navarro, a
licensed Mechanical and Electrical Engineer, who was once the Chairman of the Board
of Examiners for Mechanical Engineers and who was allegedly responsible for the
preparation of the refrigeration and air conditioning code of the City of Manila, who said
that "the central type air conditioning system is an engineering job that requires planning
and meticulous layout due to the fact that usually architects assign definite space and
usually the spaces they assign are very small and of various sizes.

Applying the facts of the aforementioned case to the present case, We see that the
supply of air conditioning units to Engineer's various customers, whether the said
machineries were in hand or not, was especially made for each customer and installed
in his building upon his special order. The air conditioning units installed in a central
type of air conditioning system would not have existed but for the order of the party
desiring to acquire it and if it existed without the special order of Engineering's
customer, the said air conditioning units were not intended for sale to the general public.

QUIROGA vs PARSONS HARDWARE CO.

Facts: A contract denominated as “CONTRACT EXECUTED BY AND BETWEEN

ANDRES QUIROGA AND J. PARSONS, BOTH MERCHANTS ESTABLISHED IN
MANILA, FOR THE EXCLUSIVE SALE OF "QUIROGA" BEDS IN THE VISAYAN
ISLANDS” was entered into by the parties. The plaintiff alleged that the defendant was
his agent for the sale of his beds in Iloilo, and that said obligations are implied in a
contract of commercial agency. The plaintiff also endeavored to prove that the
defendant had returned beds that it could not sell; that, without previous notice, it
forwarded to the defendant the beds that it wanted; and that the defendant received its
commission for the beds sold by the plaintiff directly to persons in Iloilo
ISSUE: Whether or not the contract entered into by the parties was a contract of sale.

RULING:

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. The price agreed upon was the one determined by the plaintiff for the sale of
these beds in Manila. The essential features of a contract of purchase and sale were
evidently present in the case. There was the obligation on the part of the plaintiff to
supply the beds, and, on the part of the defendant, to pay their price. These features
exclude the legal conception of an agency or order to sell whereby the mandatory or
agent received the thing to sell it, and does not pay its price, but delivers to the principal
the price he obtains from the sale of the thing to a third person, and if he does not
succeed in selling it, he returns it. By virtue of the contract between the plaintiff and the
defendant, the latter, on receiving the beds, was necessarily obliged to pay their price
within the term fixed, without any other consideration and regardless as to whether he
had or had not sold the beds.

The fact that the defendant had returned beds that it could not sell; that, without
previous notice, it forwarded to the defendant the beds that it wanted; and that the
defendant received its commission for the beds sold by the plaintiff directly to persons in
Iloilo, are at the most only proofs that, on the part of both of them, there was mutual
tolerance in the performance of the contract in disregard of its terms; and it gives no
right to have the contract considered, not as the parties stipulated it, but as they
performed it.

Only the acts of the contracting parties, subsequent to, and in connection with, the
execution of the contract, must be considered for the purpose of interpreting the
contract, when such interpretation is necessary, but not when, as in the instant case, its
essential agreements are clearly set forth and plainly show that the contract belongs to
a certain kind and not to another.

Puyat and Sons Co. v. Arco Amusement Company

Facts:

Respondent is engaged in operating cinematographs, while petitioner is acting as an

agent for Starr Piano Company of Richmond. Respondent negotiated with petitioner and
agreed that petitioner would order sound reproducing equipment on its behalf, and
respondent would pay 10% commission and out-of-pocket expenses in addition to the
selling price. Transactions for 2 orders transpired. After 3 years, respondent discovered
that that price quoted to them by petitioner was not the net price but the list price. They
sought to obtain reimbursement from the petitioner, and failing on this, filed the instant
case.

Issue:

Whether the contract between petitioner and respondent is that of agency where agent
is bound to indemnify the principal for damages, or a mere contract of sales

Held:

The letters, by which the respondent accepted the prices for the sound reproducing
equipment subject of its contract with the petitioner, are clear in their terms and admit
no other interpretation that the respondent in question at the prices indicated which are
fixed and determinate. The respondent admitted in its complaint filed with the Court of
First Instance of Manila that the petitioner agreed to sell to it the first sound reproducing
equipment and machinery.

We agree with the trial judge that "whatever unforseen events might have taken place
unfavorable to the defendant (petitioner), such as change in prices, mistake in their
quotation, loss of the goods not covered by insurance or failure of the Starr Piano
Company to properly fill the orders as per specifications, the plaintiff (respondent) might
still legally hold the defendant (petitioner) to the prices fixed of $1,700 and $1,600." This
is incompatible with the pretended relation of agency between the petitioner and the
respondent, because in agency, the agent is exempted from all liability in the discharge
of his commission provided he acts in accordance with the instructions received from
his principal (section 254, Code of Commerce), and the principal must indemnify the
agent for all damages which the latter may incur in carrying out the agency without fault
or imprudence on his part (article 1729, Civil Code).

While the letters state that the petitioner was to receive ten per cent (10%) commission,
this does not necessarily make the petitioner an agent of the respondent, as this
provision is only an additional price which the respondent bound itself to pay, and which
stipulation is not incompatible with the contract of purchase and sale.

In the second place, to hold the petitioner an agent of the respondent in the purchase of
equipment and machinery from the Starr Piano Company of Richmond, Indiana, is
incompatible with the admitted fact that the petitioner is the exclusive agent of the same
company in the Philippines. It is out of the ordinary for one to be the agent of both the
vendor and the purchaser. The facts and circumstances indicated do not point to
anything but plain ordinary transaction where the respondent enters into a contract of
purchase and sale with the petitioner, the latter as exclusive agent of the Starr Piano
Company in the United States.

It follows that the petitioner as vendor is not bound to reimburse the respondent as
vendee for any difference between the cost price and the sales price which represents
the profit realized by the vendor out of the transaction. This is the very essence of
commerce without which merchants or middleman would not exist.

Luzon Brokerage v. Maritime Building

FACTS:

On April 30, 1949, the defendant Myers Building Co. entered into a Deed of Conditional
Sale, in favor of Maritime Building Co. over 3 parcels of land with improvements in
Manila City for P1M. Maritime paid P50, 000.00 upon execution. The balance was to be
paid in monthly instalments of P10, 000.00 at 5% interest per annum (later lowered to
P5, 000.00 at 5.5% interest per annum). The parties further agreed that: a. If Maritime
defaults, the contract would be annulled at Myers’ option; b. All payments already made
shall be forfeited; and c. Myers shall have the right to re-enter the property and take
possession. Moreover, if Maritime refuses to peacefully deliver the possession of the
properties subject of this contract to the Myers in case of rescission, a suit should be
brought in court by the Myers to seek judicial declaration of rescission.

Unfortunately, Maritime failed to pay the installment for March 1961, for which the Vice-
President, George Schedler,of the Maritime Building Co., Inc., wrote a letter to the
President of Myers, Mr. C. Parsons, requesting for a moratorium on the monthly
payment of the installments until the end of the year 1961, for the reason that the said
company was encountering difficulties in connection with the operation of the
warehouse business. Consequently, on May 1961, Myers made a demand upon
Maritime for the unpaid installments; also, Myers advised Maritime of the cancellation of
the Deed of Conditional Sale and demanded the return of the property, holding Maritime
liable for rentals at P10, 000.00 monthly. Myers thereafter demanded from its lessee,
Luzon Brokerage, to avoid paying to the wrong party, filed an action for interpleader.
After the filing of this action, the Myers Building Co., Inc. in its answer filed a cross-claim
against the Maritime Building Co., Inc. praying for the confirmation of its right to cancel
the said contract.

ISSUE:

Whether or not Myers Company is entitled to extra-judicially rescind the Deed of

Conditional Sale.

RULING:

YES. The Court held in Lopez v. Commissioner of Customs that a judicial action for the
rescission of a contract is not necessary where the contract provides that it may be
revoked and cancelled for violation of any of its terms. As further explained in UP v. de
los Angeles, the party who deems the contract violated may consider it resolved or
rescinded without previous court action, but it proceeds at its own risk. For it is only the
final judgment of the corresponding court that will conclusively and finally settle whether
the action taken was or was not correct in law. But the law definitely does not require
that the contracting party who believes itself injured must first file suit and wait for a
judgment before taking extrajudicial steps to protect its interest.

Neither can Maritime invoke Civil Code Art. 1592 (where vendee in default can continue
to make payments as long as no judicial/notarial demand for rescission has been made)
because the cross-claim filed by Myers constitutes a judicial demand for rescission that
satisfies the said article.

DIGNOS YS. COURT OF APPEALS

FACTS:

The spouses Silvestre and Isabel Dignos were. owners of a parcel of land in Opon,
Lapu-Lapu City. OnJune 7, 1965, appellants, herein petitioners Dignos spouses sold the
said parcel of land to respondentAtilano J. Jabil for the sum of P28,000.00, payable in
two installments, with an assumption of indebtedness with the First Insular Bank of
Cebu in the sum of PI 2,000.00, which was paid andacknowledged by the vendors in
the deed of sale executed in favor of plaintiff-appellant, and the nextinstallment in the
sum of P4,000.00 to be paid on or before September 15, 1965.On November 25, 1965,
the Dignos spouses sold the same land in favor of defendants spouses,
LucianoCabigas and Jovita L. De Cabigas, who were then U.S. citizens, for the price of
P35,000.00. A deed of absolute sale was executed by the Dignos spouses in favor of
the Cabigas spouses, and which wasregistered in the Office of the Register of Deeds
pursuant to the provisions of Act No. 3344.As the Dignos spouses refused to accept
from plaintiff-appellant the balance of the purchase price of theland, and as plaintiff-
appellant discovered the second sale made by defendants-appellants to the
Cabigasspouses, plaintiff-appellant brought the present suit.

ISSUE:

Whether or not there was an absolute contract of sale.2. Whether or not the contract
of sale was already rescinded when the Digros spouses sold the land toCabigas

HELD:

Yes. That a deed of sale is absolute in nature although denominated as a "Deed of

Conditional Sale"where nowhere in the contract in question is a proviso or stipulation to
the effect that title to theproperty sold is reserved in the vendor until full payment of the
purchase price, nor is there astipulation giving the vendor the right to unilaterally rescind
the contract the moment the vendeefails to pay within a fixed period.

A careful examination of the contract shows that there is no such stipulation reserving
the title of the property on the vendors nor does it give them the right to unilaterally
rescind the contract uponnon-payment of the balance thereof within a fixed period.
On the contrary, all the elements of a valid contract of sale under Article 1458 of the
Civil Code, arepresent, such as: (1) consent or meeting of the minds; (2) determinate
subject matter; and (3) price certain in money or its equivalent. In addition, Article 1477
of the same Code provides that"The ownership of the thing sold shall be transferred to
the vendee upon actual or constructive delivery thereof." While it may be conceded that
there was no constructive delivery of the land sold in the case at bar, as subject Deed of
Sale is a private instrument, it is beyond question that there was actual delivery thereof.
As found by the trial court, the Dignos spouses delivered the possession of the land in
question to Jabil as early as March 27,1965 so that the latter constructed thereon Sally's
Beach Resort also known as Jabil's Beach Resort in March, 1965; Mactan White Beach
Resorton January 15, J 966 and Bevirlyn's Beach Resort on September 1, 1965. Such
facts were admittedby petitioner spouses.

2. No. The contract of sale being absolute in nature is governed by Article 1592 of the
Civil Code. It is undisputed that petitioners never notified private respondents Jabil by
notarial act that they were rescinding the contract, and neither did they file a suit in court
to rescind the sale. There is no showing that Amistad was properly authorized by Jabil
to make such extra-judicial rescission for the latter who, on the contrary, vigorously
denied having sent Amistad to tell petitioners that he was already waiving his rights to
the land in question. Under Article 1358 of the Civil Code, it is required that acts and
contracts which have for their object extinguishment of real rights over
immovableproperty must appear in a public document.Petitioners laid considerable
emphasis on the fact that private respondent Jabil had no money on the stipulated date
of payment on September 15,1965 and was able to raise the necessary amount only by
mid-October 1965.

It has been ruled, however, that where time is not of the essence of the agreement, a
slight delay on the part of one party in the performance of his obligation is not a
sufficient ground for the rescission of the agreement. Considering that private
respondent has only a balance of P4,OOO.00 and was delayed in payment only for one
month, equity and justice mandateas in the aforecited case that Jabil be given an
additional period within which to complete paymentof the purchase price.

Canullas vs Fortun

Facts:

Fernando and Mercedes Canullas got married & had 5kids. They built a conjugal home
in fernando’s inherited property. Fernando abandoned his home and lived with Corazon
Daguines, his lover. Fernando sold the house and lot to his concubine for only P2000
stating that the house and lot were inherited by him. Fernando and Daguines, the lover
were convicted of concubinage. RTC of Pangasinan ruled in favor of the concubine
granting lot and half of house to her. Legal wife Mercedes appealed.

Issue:
Whether or not the property sold to daguines is considered to be a conjugal property

Held:

The contract of sale was null and void for being contrary to morals and public policy.
The sale was made by the 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 whence
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 216, Civil Code).
Article 1409 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 1352 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."

Additionally, the law emphatically prohibits the spouses from selling property to each
other subject to certain exceptions. Similarly, donations between spouses during
marriage are prohibited. And this is so because if transfers or conveyances between
spouses were allowed during marriage, that would destroy the system of conjugal
partnership, a basic policy in civil law. It was also designed to prevent the exercise of
undue influence by one spouse over the other, as well as to protect the institution of
marriage, which is the cornerstone of family law. The prohibitions apply to a couple
living as husband and wife without benefit of marriage, otherwise, "the condition of
those who incurred guilt would turn out to be better than those in legal union." Those
provisions are dictated by public interest and their criterion must be imposed upon the
will of the parties. That was the ruling in Buenaventura vs. Bautista, also penned by
Justice JBL Reyes (CA) 50 O.G. 3679, and cited in Matabuena vs. Cervantes, 38 SCRA
284 (1971)

Cruz v. CA

Facts:

Petitioner, out of love and affection for private respondent Suzara, executed a deed of
absolute sale over her Lot in favor of the latter without any monetary consideration.
Suzara registered the document in his favor and used the property as collateral for a
bank loan. For failure to pay the loan the mortgage was foreclosed. Gloria paid the bank
to restructure the loan and extend the period for redemption. However, without her
knowledge, before the expiration of the extended period, Suzara redeemed the
property. To protect her interest, she executed an A;davit of Adverse Claim, but not
before Suzara sold the property to Vizconde. Petitioner led a complaint against Suzara
for quieting of title, declaration of nullity of documents and damages with prayer for writ
of preliminary injunction. Later she led an ex-parte motion to admit her amended
complaint impleading respondent Vizconde as additional defendant. Vizconde answered
the amended complaint alleging that he (Vizconde) was a purchaser for value in good
faith, the sale between him and Suzara was executed long before the execution of the
a davit of Adverse claim. The trial court found that Vizconde was an innocent purchaser
for value because at the time he purchased the property he was unaware of the adverse
claim of petitioner. On appeal the Court of Appeals affirmed the judgment of the Court a
quo.

Although under Art. 1490 the husband and wife cannot sell property to one another as a
rule which, for policy consideration and the dictates of morality require that the
prohibition apply to common-law relationships, petitioner can no longer seek
reconveyance of the property to her as it has already been acquired by respondent
Vizconde in good faith and for value from her own transferee

Ruling:

The real purpose of the Torrens system of registration is to quiet title to land and to put
a stop to any question of legality of the title except claims which have been recorded in
the certi cate of title at the time of registration or which may arise subsequent thereto.
Every registered owner and every subsequent purchaser for value in good faith holds
the title to the property free from all encumbrances except those noted in the certi cate.
Hence, a purchaser is not required to explore further what the Torrens title on its face
indicates in quest for any hidden defect or inchoate right that may subsequently defeat
his right thereto. Where innocent third persons, relying on the correctness of the
certi cate of title thus issued, acquire rights over the property the court cannot disregard
such rights and order the total cancellation of the certi cate. The effect of such an
outright cancellation would be to impair public con dence in the certi cate of title, for
everyone dealing with property registered under the Torrens system would have to
inquire in every instance whether the title has been regularly or irregularly issued. This
is contrary to the evident purpose of the law. Every person dealing with registered land
may safely rely on the correctness of the certi cate of title issued therefor and the law
will in no way oblige him to go behind the certificate to determine the condition of the
property. Even if a decree in a registration proceeding is infected with nullity, still an
innocent purchaser for value relying on a Torrens title issued in pursuance thereof is
protected. A purchaser in good faith is one who buys the property to another without
notice that some other person has a right to or interest in such property and pays a full
and fair price for the same at the time of such purchase or before he has notice of the
claim of another person. A contract of sale is consensual and is perfected once
agreement is reached between the parties on the subject matter and the consideration
therefor.

CHING vs GOYANKO

FACTS: Goyanko and Epifania were married and out of the union were born the
respondents. The latter claim that their parents acquired a property and because they
were Chinese citizens at the time, the property was registered in the name of their aunt,
Sulpicia. The aunt then sold the same property to respondents’ father, Goyanko, who in
turn sold it to his common-law-wife, herein petitioner. After Goyanko’s death,
respondents discovered that ownership of the property had already been transferred in
the name of petitioner. Respondents thereupon had the purported signature of their
father in the deed of sale verified by the Philippine National Police Crime Laboratory
which found the same to be a forgery. Respondents thus filed with the Regional Trial
Court a complaint for recovery of property and damages against petitioner, praying for
the nullification of the deed of sale and of the transfer certificate of title issued to
petitioner and the issuance of a new one in favor of their father, Goyanko.

ISSUE: Whether or not the sale between Goyanko and petitioner is valid.

SC RULING:

The contract of sale was null and void for being contrary to 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 whence they
derived their support. The sale was subversive of the stability of the family, a basic
social institution which public policy cherishes and protects. Additionally, the law
emphatically prohibits the spouses from selling property to each other subject to certain
exceptions. Similarly, donations between spouses during marriage are prohibited. And
this is so because if transfers or conveyances between spouses were allowed during
marriage, that would destroy the system of conjugal partnership, a basic policy in civil
law. It was also designed to prevent the exercise of undue influence by one spouse over
the other, as well as to protect the institution of marriage, which is the cornerstone of
family law. The prohibitions apply to a couple living as husband and wife without benefit
of marriage, otherwise, the condition of those who incurred guilt would turn out to be
better than those in legal union.

PHILIPPINE TRUST CO vs ROLDAN

FACTS: The 17 parcels of land in the case at hand were part of the properties inherited
by Mariano L. Bernardo from his father, Marcelo Bernardo, deceased. In view of his
minority, guardianship proceedings were instituted, wherein Socorro Roldan was
appointed his guardian. She was the surviving spouse of Marcelo Bernardo, and the
stepmother of said Mariano L. Bernardo. Socorro Roldan filed in said guardianship
proceedings a motion asking for authority to sell as guardian the 17 parcels to one Fidel
Ramos, the purpose of the sale being allegedly to invest the money in a residential
house, which the minor desired to have. The motion was granted. As a result, Roldan
then executed a deed of sale in favor of Ramos. However, just a day after the sale,
Ramos sold the same to Roldan, who in turn sold 4 out of the 17 parcels to Emilio Cruz,
reserving to herself the right to repurchase. The Philippine Trust Company replaced
Socorro Roldan as guardian. And this litigation seeks to undo what the previous
guardian had done. The plaintiff contended that the step-mother in effect, sold to
herself, the properties of her ward and the sale should be annulled because it violates
Article 1459 of the Civil Code prohibiting the guardian from purchasing 'either in person
or through meditation of another' the property of her ward

ISSUE: Whether or not the three contracts of sale should be annulled.

SC RULING: In Rodriguez vs. Mactal, 60 Phil. p. 13 wherein the guardian Mactal sold in
January 1926 the property of her ward to Silverio Chioco, and in March 1928 she
bought it from Chioco, this Court said: “In order to bring the sale in this case within the
part of Article 1459, quoted above, it is essential that the proof submitted establish
some agreement between Silverio Chioco and Trinidad Mactal to the effect that Chioco
should buy the property for the benefit of Mactal. If there was no such agreement, either
express or implied, then the sale cannot be set aside.”

However, the underlined portion was not intended to establish a general principle of law
applicable to all subsequent litigations. It merely meant that the subsequent purchase
by Mactal could not be annulled in that particular case because there was no proof of a
previous agreement between Chioco and her. The court then considered such proof
necessary to establish that the two sales were actually part of one scheme — guardian
getting the ward’s property through another person — because two years had elapsed
between the sales. Such period of time was sufficient to dispel the natural suspicion of
the guardian’s motives or actions. In the case at bar, however, only one week had
elapsed. And if we were technical, we could say, only one day had elapsed from the
judicial approval of the sale to the purchase by the guardian.

In addition, the respondent failed to prove that the transaction was beneficial to the
minor. In fact, it was found that the latter was on the losing end. Thus, the three
contracts of sale in question should be annulled.

Rubias v. Batiller

Facts:

Before the war with Japan, Francisco Militante filed an application for registration of the
parcel of land in question. After the war, the petition was heard and denied. Pending
appeal, Militante sold the land to petitioner, his son-in-law. Plaintiff filed an action for
forcible entry against respondent. Defendant claims the complaint of the plaintiff does
not state a cause of action, the truth of the matter being that he and his predecessors-
in-interest have always been in actual, open and continuous possession since time
immemorial under claim of ownership of the portions of the lot in question.

Issue:

Whether or not the contract of sale between appellant and his father-in-law was void
because it was made when plaintiff was counsel of his father-in-law in a land
registration case involving the property in dispute
Held:

The stipulated facts and exhibits of record indisputably established plaintiff's lack of
cause of action and justified the outright dismissal of the complaint. Plaintiff's claim of
ownership to the land in question was predicated on the sale thereof made by his
father-in- law in his favor, at a time when Militante's application for registration thereof
had already been dismissed by the Iloilo land registration court and was pending appeal
in the Court of Appeals.

Article 1491 of our Civil Code (like Article 1459 of the Spanish Civil Code) prohibits in its
six paragraphs certain persons, by reason of the relation of trust or their peculiar control
over the property, from acquiring such property in their trust or control either directly or
indirectly and "even at a public or judicial auction," as follows: (1) guardians; (2) agents;
(3) administrators; (4) public officers and employees; judicial officers and employees,
prosecuting attorneys, and lawyers; and (6) others especially disqualified by law.

Fundamental consideration of public policy render void and inexistent such expressly
prohibited purchase (e.g. by public officers and employees of government property
intrusted to them and by justices, judges, fiscals and lawyers of property and rights in
litigation and submitted to or handled by them, under Article 1491, paragraphs (4) and
(5) of our Civil Code) has been adopted in a new article of our Civil Code, viz, Article
1409 declaring such prohibited contracts as "inexistent and void from the beginning."

Indeed, the nullity of such prohibited contracts is definite and permanent and cannot be
cured by ratification. The public interest and public policy remain paramount and do not
permit of compromise or ratification. In his aspect, the permanent disqualification of
public and judicial officers and lawyers grounded on public policy differs from the first
three cases of guardians, agents and administrators (Article 1491, Civil Code), as to
whose transactions it had been opined that they may be "ratified" by means of and in
"the form of a new contact, in which cases its validity shall be determined only by the
circumstances at the time the execution of such new contract. The causes of nullity
which have ceased to exist cannot impair the validity of the new contract. Thus, the
object which was illegal at the time of the first contract, may have already become lawful
at the time of the ratification or second contract; or the service which was impossible
may have become possible; or the intention which could not be ascertained may have
been clarified by the parties. The ratification or second contract would then be valid from
its execution; however, it does not retroact to the date of the first contract."

Judges Macariola v Asuncion

Facts:

On June 8, 1963, respondent Judge Elias Asuncion rendered a decision in Civil Case
3010 final for lack of an appeal.
On October 16, 1963, a project of partition was submitted to Judge Asuncion. The
project of partition of lots was not signed by the parties themselves but only by the
respective counsel of plaintiffs and petitioner Bernardita R. Macariola. The Judge
approved it in his order dated October 23, 1963.

One of the lots in the project of partition was Lot 1184, which was subdivided into 5 lots
denominated as Lot 1184 A – E. Dr. Arcadio Galapon bought Lot 1184-E on July 31,
1964, who was issued transfer of certificate of Title No, 2338 of the Register of Deeds of
Tacloban City. On March 6, 1965, Galapon sold a portion of the lot to Judge Asuncion
and his wife.

On August 31, 1966, spouses Asuncion and Galapon conveyed their respective shares
and interest inn Lot 1184-E to the Traders Manufacturing & Fishing Industries Inc.
Judge Asuncion was the President and his wife Victoria was the Secretary. The
Asuncions and Galapons were also the stockholder of the corporation.

Respondent Macariola charged Judge Asuncion with "Acts unbecoming a Judge" for
violating the following provisions: Article 1491, par. 5 of the New Civil Code, Article 14,
par. 1 & 5 of the Code of Commerce, Sec. 3 par H of RA 3019 also known as the Anti-
Graft & Corrupt Practice Act., Sec. 12, Rule XVIII of the Civil Service Rules and Canon
25 of the Canons of Judicial Ethics.

On November 2, 1970 a certain Judge Jose D. Nepomuceno dismissed the complaints

filed against Asuncion.

Issue:

Whether or Not the respondent Judge violated the mentioned provisions.

Ruling:

No. Judge Asuncion did not violate the mentioned provisions constituting of "Acts
unbecoming a Judge" but was reminded to be more discreet in his private and business
activities.

Respondent Judge did not buy the lot 1184-E directly on the plaintiffs in Civil Case No.
3010 but from Dr. Galapon who earlier purchased the lot from 3 of the plaintiffs. When
the Asuncion bought the lot on March 6, 1965 from Dr. Galapon after the finality of the
decision which he rendered on June 8, 1963 in Civil Case No 3010 and his two orders
dated October and November, 1963. The said property was no longer the subject of
litigation.

In the case at bar, Article 14 of Code of Commerce has no legal and binding effect and
cannot apply to the respondent. Upon the sovereignty from the Spain to the US and to
the Republic of the Philippines, Art. 14 of this Code of Commerce, which sourced from
the Spanish Code of Commerce, appears to have been abrogated because whenever
there is a change in the sovereignty, political laws of the former sovereign are
automatically abrogated, unless they are reenacted by Affirmative Act of the New
Sovereign.

Asuncion cannot also be held liable under the par. H, Sec. 3 of RA 3019, citing that the
public officers cannot partake in any business in connection with this office, or
intervened or take part in his official capacity. The Judge and his wife had withdrawn on
January 31, 1967 from the corporation and sold their respective shares to 3rd parties,
and it appears that the corporation did not benefit in any case filed by or against it in
court as there was no case filed in the different branches of the Court of First Instance
from the time of the drafting of the Articles of Incorporation of the corporation on March
12, 1966 up to its incorporation on January 9, 1967. The Judge realized early that their
interest in the corporation contravenes against Canon 25.

Yu Tek & Co. v. Gonzales

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.

Pichel v. Alonzo

Facts:

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

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

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

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

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

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

Held:

(1) Until and unless an appropriate proceeding for reversion is instituted by the State,
and its reacquisition of the ownership and possession of the land decreed by a
competent court, the grantee cannot be said to have been divested of whatever right
that he may have over the same property. Herein respondent is not deemed to have lost
any of his rights as grantee during the period material to the case at bar, i.e., from the
cancellation of the award in 1965 to its reinstatement in 1972. Within said period,
respondent could exercise all the rights pertaining to a grantee.

(2) A perusal of the deed fails to disclose any ambiguity or obscurity in its provisions,
nor is there doubt as to the real intention of the contracting parties. The terms of the
agreement are clear and unequivocal, hence the literal and plain meaning thereof
should be observed. The document in question expresses a valid contract of sale. It has
the essential elements of a contract of sale. The subject matter of the contract of sale in
question are the fruits of the coconut trees on the land during the years from September
15, 1968 up to January 1, 1976, which subject matter is a determinate thing. Under
Article 1461 of the New Civil Code, things having a potential existence may be the
object of the contract of sale. Pending crops which have potential existence may be the
subject matter of sale. The essential difference between a contract of sale and a lease
of things is that the delivery of the thing sold transfers ownership, while in lease no such
transfer of ownership results as the rights of the lessee are limited to the use and
enjoyment of the thing leased.

The contract was clearly a "sale of the coconut fruits." The vendor sold, transferred and
conveyed "by way of absolute sale, all the coconut fruits of his land," thereby divesting
himself of all ownership or dominion over the fruits during the seven-year period. The
possession and enjoyment of the coconut trees cannot be said to be the possession
and enjoyment of the land itself because these rights are distinct and separate from
each other, the first pertaining to the accessory or improvements (coconut trees) while
the second, to the principal (the land). A transfer of the accessory or improvement is not
a transfer of the principal. It is the other way around, the accessory follows the principal.
Hence, the sale of the nuts cannot be interpreted nor construed to be a lease of the
trees, much less extended further to include the lease of the land itself.
The grantee of a parcel of land under R.A. No. 477 is not prohibited from alienating or
disposing of the natural and/or industrial fruits of the land awarded to him. What the law
expressly disallows is the encumbrance or alienation of the land itself or any of the
permanent improvements thereon. Permanent improvements on a parcel of land are
things incorporated or attached to the property in a fixed manner, naturally or artificially.
They include whatever is built, planted or sown on the land which is characterized by
fixity, immutability or immovability. Houses, buildings, machinery, animal houses, trees
and plants would fall under the category of permanent improvements, the alienation or
encumbrance of which is prohibited. The purpose of the law is not violated when a
grantee sells the produce or fruits of his land. On the contrary, the aim of the law is
thereby achieved, for the grantee is encouraged and induced to be more industrious
and productive, thus making it possible for him and his family to be economically self-
sufficient and to lead a respectable life. At the same time, the Government is assured of
payment on the annual installments on the land. We agree with herein petitioner that it
could not have been the intention of the legislature to prohibit the grantee from selling
the natural and industrial fruits of his land, for otherwise, it would lead to an absurd
situation wherein the grantee would not be able to receive and enjoy the fruits of the
property in the real and complete sense.

Borromeo v Borromeo

1. HUSBAND AND WIFE; CONJUGAL PROPERTY. — May a husband validly agree

that upon his death certain conjugal money deposited in a bank shall to his brother, and
thereby deprive his wife of her share in the conjugal partnership? Quaere.

2. EXECUTOR AND ADMINISTRATOR; REMOVAL; GROUNDS THEREFOR. —

Conflict between the interest of the executor and the interest of the deceased is ground
for removal or resignation of the former, who has thereby become unsuitable to
discharge the trust.

3. ID.; ID.; ID.; An appellate court is disinclined to interfere with the action taken by the
probate court in the matter of the removal of an executor or administrator unless
positive error or gross abuse of discretion is shown.

4. APPEALS; FRIVOLOUS APPEALS; DOUBLE COSTS. — If an appeal is without any

utility (except to delay) as where an executor, removed from his trust, begged to be
permitted to sign, was granted his request, and now appeals, — double costs may be
imposed upon the appellant.

5. ID.; REVERSIBLE. — Granting that the modified order was not literally what he
desired, still the error, if any, did not affect his substantial rights and could not justify
reversal.

Majarabas v. Leonardo
CONTRACT FOR SERVICES; FIXED COMPENSATION. — In a contract for the hire of
services, 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 that the contract, by its terms,
furnishes a basis or measure for ascertaining the amount agreed upon. Id certum est,
quod certum reddi potest. (Art. 1447, Civil Code.)

BARRETO vs STA MARINA

FACTS:

Plaintiff executed a document whereby he agreed to transfer to the defendant "the

whole of the right, title, and interest" he had in a joint stock association, at the same
time agreeing that the ascertainment of the price of his share should depend
unreservedly upon the appraisement made by three appraisers of the total value of the
association’s property. The appraisers occupied about six months in making the
appraisement and in their report there was no indication that any attempt had been
made to segregate accumulated profits from other assets of the association. Plaintiff
had participated in the last distribution of profits made by the association prior to the
time he accepted payment for his share. Upon the completion of the defendant’s report
plaintiff executed a document whereby he acknowledged receipt of the price arrived at
by the appraisers, and further stated that he relinquished from that date all intervention,
claim, right or action that he had in said business. Held, that plaintiff sold his share of
the accumulated profits.

ISSUE: Whether or not the agreement between the parties was a perfected contract of
sale.

RULING:

Under article 1450, supra there are two indispensable requisites in a perfected sale: (1)
There must be an agreement upon the thing which is the object of the contract; and (2)
the contracting parties must agree upon the price. The object of the contract in the case
at bar was the whole of the plaintiff’s right, title, and interest in La Insular.

The fixing of such net value was unreservedly left to the judgment of the appraisers. As
to the thing and the price the minds of the contracting parties met, and all questions
relating thereto were settled. Nothing was left unfinished in so far as the contracting
parties were concerned. Neither party could withdraw from the contract without the
consent of the other. The result is that the two essential requisites necessary to
constitute a perfected sale were present.

The total value of the business as fixed by the appraisers was final and conclusive and
binding upon each of the parties. Neither could question the correctness of such value
when once thus fixed. The only thing which either could then do was the one to tender
and the other accept the cash.
Heirs of Ureta v Heirs of Ureta

It is well-settled in a long line of cases that where a 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.28 Thus, although the contract states that the
purchase price of P2,000.00 was paid by Policronio to Alfonso for the subject
properties, it has been proven that such was never in fact paid as there was no money
involved. It must, therefore, follow that the Deed of Sale is void for lack of consideration.

Given that the Deed of Sale is void, it is unnecessary to discuss the issue on the
inadequacy of consideration.

Lequin v Vizconde

On its face, the above contract of sale appears to be supported by a valuable

consideration. We, however, agree with the trial court's finding that this is a simulated
sale and unsupported by any consideration, for respondents never paid the PhP15,000
purported purchase price.

There can be no doubt that the contract of sale or Kasulatan lacked the essential
element of consideration. 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 ab initio for lack of consideration. 18 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.

SPS BUENAVENTURA vs CA

FACTS: Plaintiff spouses are parents of the defendants and the other petitioners.
Sought to be declared null and void ab initioare certain deeds of sale of real property
executed by plaintiff parents in favor of their co-plaintiff children and the corresponding
certificates of title issued in their names. The defendants averred that: (a) there was no
actual valid consideration for the deeds of sale; (b) 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 (c)
the deeds of sale do not reflect and express the true intent of the parties (vendors and
vendees).

ISSUE: Whether or not the contract of sale executed between the petitioners are void
for lack of consideration and gross inadequacy of price

RTC RULING: The trial court ruled in favor of the petitioners. In the first place, the
testimony of the defendants, particularly that of the father will show that the Deeds of
Sale were all executed for valuable consideration.This assertion must prevail over the
negative allegation of plaintiffs

CA RULING: The appellate court affirmed the decision of the trial court.

SC RULING:

A contract of sale is not a real contract, but a consensual contract. As a consensual

contract, a contract of sale becomes a binding and valid contract upon the meeting 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. Defendants failed to
show that the prices in the Deeds of Sale were absolutely simulated. To prove
simulation, defendants presented co-plaintiff’s testimony stating that their father, 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. Defendants’ 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 plaintiffs’ 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, plaintiff siblings have also fully paid the price to their respondent
father

Petitioners ask that assuming that there is consideration, the same is grossly
inadequate as to invalidate the Deeds of Sale. Articles 1355 of the Civil Code states:
Except in cases specified by law, lesion or inadequacy of cause shall not invalidate a
contract, unless there mistake or undue supplied) has been fraud, influence. (Emphasis)

Article 1470 of the Civil Code further provides: 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. (Emphasis supplied)

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.

Jalbuena v. Lizarraga

1. ESTOPPEL; JUDICIAL SALE; SILENCE OF OWNER. — The owner of property who

knowingly permits his property to be sold at a judicial sale as the property of the
judgment debtor without asserting his title or right or making known to the bidders ,
cannot afterwards set up his claim.

2. ID.; ID.; ID.; PRESENCE NOT NECESSARY. — Actual presence of the owner at the
sale is not necessary in order that he may be estopped from afterwards setting up his
title to the property. It is only necessary that the owner be chargeable with knowledge of
the impending sale under circumstances that render it his duty to assert his title.