ANG YU ASUNCION, et al. v.
RULING
THE HON. COURT OF APPEALS and BUEN REALTY
DEVELOPMENT CORPORATION
G.R. No. 109125, 2 December 1994, EN BANC, (VITUG, J.)
FACTS
Ang Yu Asuncion, Arthur Go and Keh Tiong are lessees of residential
and commercial spaces owned by Bobby Cu Unjieng, Rose Cu Unjieng and
Jose Tan. Bobby Cu Unjieng, et al. informed Ang Yu, et al. that they are
offering to sell the premises and are giving them the priority to acquire the
same. However, Bobby Cu Unjieng, et al. failed to specify the terms and
conditions of the offer to sell and because of information received that they
were about to sell the property, Ang Yu, et al. filed a complaint to compel the
selling of property to them.
The trial court found that Bobby Cu Unjieng, et al.’s offer to sell was
never accepted by Ang Yu, et al. the for the reason that the parties did not
agree upon the terms and conditions of the proposed sale, hence, there was no
contract of sale at all. Nonetheless, the lower court ruled that should the
defendants subsequently offer their property for sale at a price of P11-million
or below, plaintiffs will have the right of first refusal. On appeal, the Court of
Appeals affirmed with modification the lower court's judgment, to grant the
same right of first refusal to Ang Yu, et al. in the event that the subject
property is sold for a price in excess of Eleven Million pesos.
While the case was pending consideration by the Court in the
abovementioned ruling, the Cu Unjieng spouses executed a Deed of Sale
transferring the property in question to Buen Realty and Development
Corporation. The lessees then filed a Motion for Execution of the lower court’s
decision as modified by the Court of Appeals. The Judge issued a Writ of
Execution and ordered the execution of necessary Deed of Sale of the property
in litigation in favor of Ang Yu, et al. for the consideration of P15,000,000.00
and ordering the Register of Deeds of the City of Manila, to cancel and set
aside the title already issued in favor of Buen Realty Corporation which was
previously executed and to register the new title in favor of Ang Yu Asuncion,
Keh Tiong and Arthur Go.
On appeal of Buen Realty Development Corporation, the Court of
Appeals set aside and declared without force and effect the orders of the lower
court. Hence, this petition.
ISSUE
Is the writ of execution proper to enforce the right of first refusal?
No.
In the law on sales, the so-called "right of first refusal" is an innovative
juridical relation. Needless to point out, it cannot be deemed a perfected
contract of sale under Article 1458 of the Civil Code. Neither can the right of
first refusal, understood in its normal concept, per se be brought within the
purview of an option under the second paragraph of Article 1479 or possibly of
an offer under Article 1319 of the same Code. An option or an offer would
require, among other things, a clear certainty on both the object and the cause
or consideration of the envisioned contract. In a right of first refusal, while the
object might be made determinate, the exercise of the right, however, would be
dependent not only on the grantor's eventual intention to enter into a binding
juridical relation with another but also on terms, including the price, that
obviously are yet to be later firmed up. Prior thereto, it can at best be so
described as merely belonging to a class of preparatory juridical relations
governed not by contracts (since the essential elements to establish
the vinculum juris would still be indefinite and inconclusive) but by, among
other laws of general application, the pertinent scattered provisions of the Civil
Code on human conduct.
Even on the premise that such right of first refusal has been decreed
under a final judgment, like here, its breach cannot justify correspondingly an
issuance of a writ of execution under a judgment that merely recognizes its
existence, nor would it sanction an action for specific performance without
thereby negating the indispensable element of consensuality in the perfection of
contracts. It is not to say, however, that the right of first refusal would be
inconsequential for, such as already intimated above, an unjustified disregard
thereof, given, for instance, the circumstances expressed in Article 19 of the
Civil Code, can warrant a recovery for damages.
In this case, the Court also discussed in detail option contract, the
pertinent portion of which are as follows:
Where a period is given to the offeree within which to accept the offer,
the following rules generally govern:
(1) If the period is not itself founded upon or supported by a
consideration, the offeror is still free and has the right to withdraw the offer
before its acceptance, or, if an acceptance has been made, before the offeror's
coming to know of such fact, by communicating that withdrawal to the offeree
(see Art. 1324, Civil Code; see also Atkins, Kroll & Co. vs. Cua, 102 Phil. 948,
holding that this rule is applicable to a unilateral promise to sell under Art.
1479, modifying the previous decision in South Western Sugar vs. Atlantic
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Gulf, 97 Phil. 249; see also Art. 1319, Civil Code; Rural Bank of Parañaque,
Inc., vs. Remolado, 135 SCRA 409; Sanchez vs. Rigos, 45 SCRA 368). The
right to withdraw, however, must not be exercised whimsically or arbitrarily;
otherwise, it could give rise to a damage claim under Article 19 of the Civil
Code which ordains that "every person must, in the exercise of his rights and in
the performance of his duties, act with justice, give everyone his due, and
observe honesty and good faith."
(2) If the period has a separate consideration, a contract of "option" is
deemed perfected, and it would be a breach of that contract to withdraw the
offer during the agreed period. The option, however, is an independent contract
by itself, and it is to be distinguished from the projected main agreement
(subject matter of the option) which is obviously yet to be concluded. If, in
fact, the optioner-offeror withdraws the offer before its acceptance (exercise of
the option) by the optionee-offeree, the latter may not sue for specific
performance on the proposed contract ("object" of the option) since it has
failed to reach its own stage of perfection. The optioner-offeror, however,
renders himself liable for damages for breach of the option. In these cases, care
should be taken of the real nature of the consideration given, for if, in fact, it
has been intended to be part of the consideration for the main contract with a
right of withdrawal on the part of the optionee, the main contract could be
deemed perfected; a similar instance would be an "earnest money" in a contract
of sale that can evidence its perfection (Art. 1482, Civil Code).
G.R. No. 205879 April 23, 2014
SKUNAC CORPORATION and ALFONSO F. ENRIQUEZ, Petitioners,
vs.
ROBERTO S. SYLIANTENG and CAESAR S. SYLIANTENG,
Respondents.
PERALTA, J.:
ART. 1458
Indeed, not being an heir of Luis, Romeo never acquired any right whatsoever
over the subject lots even if he was able to subsequently obtain a title in his
name. It is a well-settled principle that no one can give what one does not have,
nemo dat quod non habet. One can sell only what one owns or is authorized to
sell, and the buyer can acquire no more right than what the seller can transfer
legally.
FACTS:
This case involves two parcels of land identified as Lot 1 and Lot 2 both
located in Block 2 of the Pujalte Subdivision in Greenhills, San Juan City. The
subject lots are portions of a parcel of land previously registered in the name of
Luis A. Pujalte on October 29, 1945 and covered by a Transfer Certificate of
Title and a Mother Title of the Register of Deeds for the City of Manila.
Respondents base their claim of ownership over the subject lots a Deed of
Absolute Sale executed in their favor by their mother, Emerenciana Sylianteng
on June 27, 1983. They further allege that Emerenciana acquired the lots from
the late Luis Pujalte through a Deed of Sale by virtue of which she was issued a
TCT.
Petitioners on the other hand, claim that a certain Romeo Pujalte who was
declared by the RTC of Pasig City as the sole heir of Luis Pujalte, caused the
reconstitution of the Mother Title resulting to its cancellation and the issuance
of a new TCT in his favor.
Romeo Pujalte then allegedly sold the lots to Skunac and Enriquez in 1992.
Thus, Lot 1 and Lot 2 were issued in the name of Skunac and Enriquez
respectively.
Respondents contend that they have a better right to the lots in question
because the transactions conveying the same to them preceded those claimed
by petitioners. Respondents further assert that petitioners could not be
considered as innocent purchasers in good faith and for value because they had
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prior notice of the previous transactions as stated in the memorandum of
encumbrances annotated on the titles covering the subject lots.
RTC ruled in favor of the petitioners.
CA reversed the decision of the RTC and ruled in favor of the respondents.
CA denied the MR filed by the petitioners. Hence, the instant petition.
ISSUE: WON Respondents’ predecessor-in-interest, Emeranciana validy
acquired the subject lots from Luis
RULING: Yes.
Emerenciana’s acquisition of the subject lots from Luis and subsequent sale to
the respondents is valid and lawful.
In the instant case, what is being questioned is the authencity and due execution
of the subject deed of sale. There is no real issue as to its contents.
It is settled that a signed carbon copy of the or duplicate of a document
executed at the same time as the original is known as a duplicate original and
maybe introduced in evidence without accounting for the non-production of the
original. In addition, evidence of the authenticity and due execution of the
subject deed is the fact that it was notarized. A notarized instrument is
admissible in evidence without further proof of its due execution.
In the present case, petitioners failed to present sufficient evidence to contradict
the presumption of regularity in the performance of the duties of then Acting
Register of Deeds of San Juan.
Petitioners insist that they have valid title over the subject properties. They
trace their respective titles from that of Romeo. Romeo, derives his ownership
of and title over the subject lots from his claim that is the sole heir of the estate
of Luis Pujalte. Evidence shows that Romeo never became the owner of the
subject properties.
Romeo’s sale of the disputed lots to petitioners was not affirmed by the estate
court because the subject parcels of land were not among those included in the
said estate at the time that Romeo was appointed as the administrator thereof.
RTC denied Romeo’s motion for approval of sale because the properties were
already sold to respondents.
Prior to Romeo’s appointment as an administrator of the estate of Luis, Paz, the
mother of Luis submitted an inventory and appraisal of the estate to the court.
In the project partition, Paz did not include the disputed lots as parts of the
residual estate. Hence, Romeo’s sale of the subject lots to petitions is invalid as
it is settled that any unauthorized disposition of property under administration
is null and void and title does not pass to the purchasers.
Moreover, in a separate criminal case, it was proven that Romeo is not an heir
of Luis. Romeo’s claim of heirship was spurious.
Indeed, not being an heir of Luis, Romeo never acquired any right whatsoever
over the subject lots even if he was able to subsequently obtain a title in his
name. It is a well-settled principle that no one can give what one does not have,
nemo dat quod non habet. One can sell only what one owns or is authorized to
sell, and the buyer can acquire no more right than what the seller can transfer
legally.
Since Romeo has no right to the subject lots, petitioners have acquired no
rights to the same.
In the instant case, The Torrens Certificate of Title (TCT No. 5760-R) in the
name of Romeo, also contained Entry No. P.E. 4023, which essentially informs
petitioners that the lots which they were about to buy and which they in fact
bought, were already sold to Emerenciana; such entry should have alerted
petitioners and should have prodded them to conduct further investigation.
HEIRS OR REYNALDO DELA ROSA v BATONGBACAL
FACTS: The subject property consists of a denominated as Lot No. 1,
and is registered under the names of, and co-owned by Reynaldo Dela Rosa
and his siblings. Sometime in 1984, Reynaldo offered to sell his share (3,750
sq/m) in the subject property to Guillermo and Mario Batongbacal for P 50.00
per sq/m, or for a total of P l87,500.00. Pursuant to the agreement, Reynaldo
received an advance payment of P31, 500.00 leaving a balance of P156,
000.00. As shown in the document denominated as Resibo and signed by
3
Reynaldo in 1987, the parties agreed that the amount of P 20,000.00 as part of
the advance payment shall be paid upon the delivery of the SPA, which would
authorize Reynaldo to alienate the subject property on behalf of his co-owners
and that the balance thereon shall be paid in P10,000.00 monthly instalments
until the purchase price is fully settled.
Subsequent to the execution of the said agreement, Mario and
Guillermo initiated a survey to segregate the area of 3,750 square meters from
the whole area. As a result, they came up with a subdivision plan specifically
designating the subject property signed by a Geodetic Engineer. Then they
made several demands from Reynaldo to deliver the SPA as agreed upon, but
such demands all went unheeded so they filed an action for Specific
Performance or Rescission and Damages before the RTC of seeking to enforce
their Contract to Sell and alleged that the subsequent sale thereof effected by
Reynaldo to third persons is void as it was done in bad faith. Reynaldo, in his
Answer, countered that the purported Contract to Sell is void, because he never
gave his consent thereto. Reynaldo insisted that he was made to understand that
the contract between him and the Batongbacals was merely an equitable
mortgage whereby it was agreed that the latter will loan to him the amount of
P31, 500.00 payable once he receives his share in the proceeds of the sale of
the land.
RTC dismissed the case but ordered Reynaldo to return to the former
the sum of P28,000.00 with 12% annual interest. Reynaldo failed to convince
the court a quo that the contract he entered into with Mario was an equitable
mortgage. It was held by the trial court, however, that the supposed Contract to
Sell denominated as Resibo is unenforceable under Article 1403, NCC because
Reynaldo cannot bind his co-owners into such contract without an SPA
authorizing him to do so. On appeal, the CA brushed aside the claim of
equitable mortgage and held that the sale effected by Reynaldo of his undivided
share in the property is valid and enforceable; that no SPA is necessary for
Reynaldo's disposition of his undivided share as it is limited to the portion that
may be allotted to him upon the termination of the co-ownership; and that the
Batongbacals could have validly demanded from Reynaldo to deliver the
subject property pursuant to the Contract to Sell, but such option is no longer
feasible because the entire property has already been sold to third persons to
whom a new title was issued. The appellate court thus proceeded to rescind the
contract, with damages. In seeking modification, Mario and Guillermo pointed
out that the title of the subject property has not yet been transferred to third
persons, and thus, Reynaldo can still be compelled to execute a deed of
conveyance over his undivided share of the entire property. This was granted
by the CA. Thereafter, Reynaldo died and was substituted by his heirs.
ISSUE: Was the contract entered into by Dela Rosa and the Batongbacals a
Contract To Sell or an Equitable Mortgage?
RULING: It was a Contract to Sell. Petitioners are unflinching in their
stand that the disputed contract purporting to be an absolute deed of sale was an
equitable mortgage with the subject property as security for a loan obligation.
To prove their point, petitioners asserted that the consideration in the amount of
P187,500.00 for a property consisting of 15,001 square meters is grossly
inadequate because the land valuation in their area at the time the transaction
was entered into by the parties in 1984, was already P80.00 to P110.00 per
square meter. This, they argued, is telling of the intention of the parties to
mortgage and not to sell the property with the end view of affording the
mortgagor an easy opportunity to redeem the property should his means permit
him to do so. However, a perusal of the contract denominated as Resibo
reveals that nothing therein suggests that the subject property was given to
secure a monetary obligation. The terms of the contract set forth in certain
terms that the instrument was executed with the intention of transferring the
ownership or the subject property to the buyer in exchange for the price. The
document clearly indicates, through the statement “xxx Ang bahaging aking
ipinagbibili ay ang Lot No. 1, may sukat na 3,750 sq.m. na makikita sa
nakalakip na sketch plan na aking ding nilagdaan sa ikaliliwanag ng
kasulatang ito xxx”, the intent of Reynaldo to sell his share in the property. It
should be noted that the primary consideration in determining the true nature
of a contract is the intention of the parties. If the words of a contract appear to
contravene the evident intention of the parties, the latter shall prevail. Such
intention is determined not only from the express terms of their agreement, but
also from the contemporaneous and subsequent acts of the parties.
It must be underscored at this point that the subject of the Contract to
Sell was limited only to 1/4 pro-indiviso share of Reynaldo consisting an area
of 3,750 square meter and not the entire 15,001-square meter parcel of land.
Moreover, it is settled that the mere inadequacy of the price does not affect its
validity when both parties are in a position to form an independent judgment
concerning the transaction, unless fraud, mistake or undue influence indicative
of a defect in consent is present. Lastly, as a co-owner of the subject property,
Reynaldo's right to sell the property held in common is sanctioned by law. And
since the previous sale is valid, the subsequent conveyance effected by the
4
Reynaldo is null and void pursuant to the principle that "no one can give what
he does not have," nemo dat quod non habet. PETITION DENIED.
Juan P. Cabrera vs. Henry Ysaac
G.R. No. 166790. November 19, 2014. Second Division. Leonen, J.
Facts:
The heirs of Luis and Matilde Ysaac co-owned parcel of land located in Naga
City. One of the co-owners is Henry Ysaac. Henry Ysaac leased out portions of
the property to several lessees among them is Juan Cabrera whom he leased a
95-square-meter portion of the land.
On May 6, 1990, Henry Ysaac needed money and offered to sell the 95-square-
meter piece of land to Juan Cabrera but Cabrera told him that the land is too
small for his need. Consequently, Ysaac expanded his offer to include the two
adjoining lands he was leasing to the Borbe family and the Espiritu family but
Ysaac warned Cabrera that the sale of the added portion will only proceed if
the two families agree to it.
Cabrera accepted the offer but stated that he could only pay in full after his
retirement on June 15, 1992. Henry Ysaac agreed but demanded for an initial
payment of P1,500.00, which Juan Cabrera paid.
Cabrera paid an amount of 10,000 to Ysaac upon the information from the
latter that two families were no longer interested in buying the property as they
originally planned. Payment was made to the wife of Ysaac, but the latter
refused to accept such.
On September 21, 1994, Cabrera was informed that his Ysaac is formally
rescinding the contract of sale because of Cabrera’s failure to pay the balance
of the purchase price. Ysaac told Cabrera that he could no longer sell the
property because the new administrator of the property was his brother,
Franklin Ysaac.
Due to Juan Cabrera’s inability to enforce the contract of sale between him and
Henry Ysaac, he decided to file a civil case for specific performance.
Before the Regional Trial Court decided the case, the heirs of Luis and Matilde
Ysaac, under the administration of Franklin Ysaac, sold their property to the
local government of Naga City
The Regional Trial Court ruled that there was a valid contract of sale, although
it found that there was no evidence to support petitioner’s claim that he was
able to secure the consent of the Espiritu family and the Borbe family to the
sale of the land. There was a valid contract of sale subject to a suspensive
condition, but the suspensive condition was not complied with. It further ruled
that the contract of sale between Juan Cabrera and Henry Ysaac was duly
rescinded when the former failed to pay the balance of the purchase price in the
period agreed upon.
For the Court of Appeals, there was a valid contract of sale. The Court of
Appeals’ ruling was based on the idea that a co-owner could sell a definite
portion of the land owned in common, and not because the suspensive
conditions of the contract were complied with.
Issues: 1. WON, there is a valid contract of sale between Ysaac and Cabrera.
2. WON, the contract, if there is any, can be validly enforced by an
action for Specific Performance.
Ruling on the 1st Issue: There was no valid contract of sale between Cabrera
and Ysaac.
The Court found that there was no contract of sale. It was null ab initio.
Sale is a special contract. The object of a valid sales contract must be owned by
the seller. If the seller is not the owner, the seller must be authorized by the
owner to sell the object.
Specific rules attach when the seller co-owns the object of the contract. Sale of
a portion of the property is considered an alteration of the thing owned in
common. Under the Civil Code, such disposition requires the unanimous
consent of the other co-owners. However, the rules also allow a co-owner to
alienate his or her part in the co-ownership.
These two rules are reconciled through jurisprudence.
If the alienation precedes the partition, the co-owner cannot sell a definite
portion of the land without consent from his or her co-owners. He or she could
only sell the undivided interest or the "ideal or abstract quota" or
5
"proportionate share" of the co-owned property. As summarized in Lopez v.
Ilustre, " if he is the owner of an undivided half of a tract of land, he has a right
to sell and convey an undivided half, but he has no right to divide the lot into
two parts, and convey the whole of one part by metes and bounds."
Prior to partition, a sale of a definite portion of common property requires the
consent of all co-owners because it operates to partition the land with respect to
the co-owner selling his or her share. The co-owner or seller is already marking
which portion should redound to his or her autonomous ownership upon future
partition.
The object of the sales contract between petitioner and respondent was a
definite portion of a co-owned parcel of land. At the time of the alleged sale
between petitioner and respondent, the entire property was still held in
common.
The rules allow respondent to sell his undivided interest in the co-ownership.
However, this was not the object of the sale between him and petitioner. The
object of the sale was a definite portion. Even if it was respondent who was
benefiting from the fruits of the lease contract to petitioner, respondent has "no
right to sell or alienate a concrete, specific or determinate part of the thing
owned in common, because his right over the thing is represented by quota or
ideal portion without any physical adjudication.
There was no showing that respondent was authorized by his co-owners to sell
the portion of land occupied by Juan Cabrera, the Espiritu family, or the Borbe
family. Without the consent of his co-owners, respondent could not sell a
definite portion of the co-owned property.
Respondent had no right to define a 95-square-meter parcel of land, a 439-
square-meter parcel of land, or a 321-square-meter parcel of land for purposes
of selling to petitioner. The determination of those metes and bounds are not
binding to the co-ownership and, hence, cannot be subject to sale, unless
consented to by all the co-owners.
At best, the agreement between petitioner and respondent is a contract to sell,
not a contract of sale.
Ruling on the 2nd Issue: NO. A non-existent contract cannot be a source of
obligations, and it cannot be enforced by the courts. The absence of a contract
of sale means that there is no source of obligations for respondent, as seller, or
petitioner, as buyer. Rescission is impossible because there is no contract to
rescind. The rule in Article 1592 that requires a judicial or notarial act to
formalize rescission of a contract of sale of an immovable property does not
apply.
For the sale of immovable property, Article 1592 governs rescission. This
provision contemplates (1) a contract of sale of an immovable property and (2)
a stipulation in the contract that failure to pay the price at the time agreed upon
will cause the rescission of the contract.
Hence, this provision does not apply if it is not a contract of sale of an
immovable property and merely a contract to sell an immovable property. A
contract to sell is "where the ownership or title is retained by the seller and is
not to pass until the full payment of the price, such payment being a positive
suspensive condition and failure of which is not a breach, casual or serious, but
simply an event that prevented the obligation of the vendor to convey title from
acquiring binding force."
Therefore, even assuming that the contract between petitioner and respondents
were perfected, the strict requisites in Article 1592 did not apply because the
only perfected contract was a contract to sell, not a contract of sale.
AQUILES RIOSA V. TABACO LA SUERTE CORPORATION
FACTS: Aquiles (petitioner) alleged that he was the owner and in actual
possession of a 52-square meter commercial lot situated in Barangay Quinale,
Tabaco City, Albay (which he acquired from his parents upon execution of a
deed of cession and quitclaim). On 3 occasions, he obtained loans from Sia Ko
Pio (CEO of respondent company) in the total amount of P50,000.00; that as a
security for the payment of loans, Sia Ko Pio requested from him a photocopy
of the deed of cession and quitclaim. Consequently, Sia Ko Pio asked him to
sign a document purportedly a receipt for the loan. Without reading the
document, Aquiles affixed his signature thereon. To his surprise, he received a
letter from La Suerte informing him that the subject lot was already registered
in its name. Subsequently, Aquiles received a letter from La Suerte informing
him that the subject lot was already registered in its name. Because of this, he
filed a complaint against the respondent for the annulment/declaration of
nullity of the deed of absolute sale, certificate of title in the name of La Suerte
Corp. and reconveyance of property to him contending that by means of fraud,
misrepresentation and deceit employed by Sia Ko Pio, he was made to sign the
6
document which he thought was a receipt and undertaking of the loan, only to
find out later that it was a document of sale.
In its Answer, La Suerte averred that that it was the actual and lawful
owner of the commercial property, after purchasing it from Aquiles; that it
allowed Aquiles to remain in possession of the property subject to his
obligation to vacate the premises anytime upon demand; that it repeatedly
asked Aquiles to vacate the premises but to no avail.
ISSUE: WON there was a valid and perfected sale between Aquiles and La
Suerte, through its CEO, Sia Ko Pio
HELD: There was no perfected contract of sale. The elements of a contract of
sale are: a] consent or meeting of the minds, that is, consent to transfer
ownership in exchange for the price; b] determinate subject matter; and c] price
certain in money or its equivalent.
There was no clear and convincing evidence that Aquiles definitely sold the
subject property to La Suerte, nor was there evidence that La Suerte authorized
its chief executive officer, Sia Ko Pio, to negotiate and conclude a purchase of
the property. Aquiles’ narration in open court is clear that he did not intend to
transfer ownership of his property. As the first element is wanting, Aquiles
correctly argued that there was no contract of sale.
Under Article 1475 of the Civil Code, the contract of sale is perfected at the
moment there is a meeting of minds on the thing which is the object of the
contract and on the price. Aquiles acknowledged that he signed the receipt.
There is, however, no proof that it came from La Suerte as the consideration of
the sale. Accordingly, there is no basis for a holding that the personal loan of
Aquiles from Sia Ko Pio was the consideration for the sale of his property in
favor of La Suerte. Had Aquiles known that the document presented to him was
an instrument of sale, he would not have affixed his signature on the document.
It has been held that the existence of a signed document purporting to be a
contract of sale does not preclude a finding that the contract is invalid when the
evidence shows that there was no meeting of the minds between the seller and
buyer. Indeed, if Aquiles sold the property in favor of La Suerte, he would not
have religiously and continuously paid the real property taxes. Also of note is
the fact that his daughter spent ₱ 300,000.00 for the renovation of
improvements. More important, La Suerte did not earlier ask him to transfer the
possession thereof to the company. These uncontroverted attendant
circumstances bolster Aquiles’ positive testimony that he did not sell the
property.
N.B. (side issue)
There were material discrepancies on the dates appearing in the purported deed
of absolute sale notarized by the municipal judge. Besides, the latter was not
authorized to notarize a deed of conveyance; hence, it cannot be considered a
valid registrable document in favor of La Suerte. Although it is true that the
absence of notarization of the deed of sale would not invalidate the transaction
evidenced therein, yet an irregular notarization reduces the evidentiary value of
a document to that of a private document, which requires proof of its due
execution and authenticity to be admissible as evidence. It should be noted that
the deed of sale was offered in evidence as authentic by La Suerte, hence, the
burden was upon it to prove its authenticity and due execution. La Suerte
unfortunately failed to discharge this burden. Accordingly, the preponderance
of evidence is in favor of Aquiles.
Peñalosa vs Santos GR No. 133749 August 23, 2001
Facts:
Severino sold his property to Henry. Henry applied for a loan with philam life.
As It was already approved pending the submission of certain documents such
as the owners duplicate of transfer certificate of title which is in possession of
severino.
Henry already took possession of the property in question after ejectment of the
lessees. He also paid an ernest money of 300,000 under the premise that it shall
be forfeited in favor of severino in case of nonpayment.
Severino now claims ownership over the property claiming that henry did not
pay for the property, therefore there was no sale to speak of.
ISSUE: Whether or not there is a contract of sale perfected in this case.
HELD:
There was a perfected contract of sale due to the second deed of sale.
The basic characteristic of an absolutely simulated or fictitious contract is that
7
the apparent contract is not really desired or intended to produce legal effects
or alter the juridical situation of the parties in any way. However, in this case,
the parties already undertook certain acts which were directed towards
fulfillment of their respective covenants under the second deed, indicating that
they intended to give effect to their agreement.
Further, the fact that Severino executed the two deeds in question, primarily so
that petitioner could eject the tenant and enter into a loan/mortgage contract
with Philam Life, is to our mind, a strong indication that he intended to transfer
ownership of the property to petitioner. For why else would he authorize the
latter to sue the tenant for ejectment under a claim of ownership, if he truly did
not intend to sell the property to petitioner in the first place? Needless to state,
it does not make sense for Severino to allow petitioner to pursue the ejectment
case, in petitioner's own name, with petitioner arguing that he had bought the
property from Severino and thus entitled to possession thereof, if petitioner did
not have any right to the property.
Also worth noting is the fact that in the case filed by Severino's tenant against
Severino and petitioner in 1989, assailing the validity of the sale made to
petitioner, Severino explicitly asserted in his sworn answer to the complaint
that the sale was a legitimate transaction. He further alleged that the ejectment
case filed by petitioner against the tenant was a legitimate action by an owner
against one who refuses to turn over possession of his property.
Respondent insist that the second deed is a complete nullity because a) the
consideration stated in the deed was not paid; b)seller was not present when the
deed was notarized; c) seller did not surrender a copy of the title; d)real estate
taxes were not paid. The elements of a valid contract of sale are: (1) consent or
meeting of the minds; (2) determinate subject matter; and (3) price certain in
money or its equivalent which are present in the second Deed of Sale hence
there is already a perfected contract of sale. In the instant case, the second deed
reflects the presence of all these elements and as such, there is already a
perfected contract of sale.
The non-payment of the contract price merely results in a breach of contract for
non-performance and warrants an action for rescission or specific performance
under Article 1191 of the Civil Code.
Ownership of the property has been transferred to petitioner. Article 1477 of
the Civil Code states that ownership of the thing sold shall be transferred to the
vendee upon the actual or constructive delivery thereof. It is undisputed that the
property was placed in the control and possession of petitioner when he came
into material possession thereof after judgment in the ejectment case. Not only
was the contract of sale perfected, but also actual delivery of the property
effectively consummated the sale. Non-payment of the purchase price is not
among the instances where the law declares a contract to be null and void.
Although the law allows rescission as a remedy for breach of contract, the same
may not be availed of by respondents in this case. To begin with, it was
Severino who prevented full payment of the stipulated price when he refused to
deliver the owner’s original duplicate title to Philam Life. His refusal to
cooperate was unjustified, because as Severino himself admitted, he signed the
deed precisely to enable petitioner to acquire the loan. It should be emphasized
that the non-appearance of the parties before the notary public who notarized
the deed does not necessarily nullify nor render the parties’ transaction void ab
initio. Article 1358 of the New Civil Code on the necessity of a public
document is only for convenience, not for validity or enforceability.
In sum, the only conclusion which can be deduced from the aforesaid
circumstances is that ownership of the property has been transferred to
petitioner.
WHEREFORE, the petition is GRANTED.
TAN vs. BENOLIRAO
G.R. No. 153820
October 16, 2009
FACTS:
Spouses Lamberto and Erlinda Benolirao and the Spouses Reynaldo and
Norma Taningco were the co-owners of a parcel of land located in Tagaytay
City. The co-owners executed a Deed of Conditional Sale over the property in
favor of Tan for the price of P1,378,000.00. Tan issued and delivered to the co-
owners/vendors check for P200,000 as down payment for the property,
respective receipt issued by vendors.
Lamberto Benolirao died intestate. The heirs of the deceased executed
an extrajudicial settlement of Lamberto’s estate.
8
A new certificate of title over the property was issued in the names of the
Spouses Reynaldo and Norma Taningco and Erlinda Benolirao and her
children.
As stated in the Deed of Conditional Sale, Tan had to pay the balance of the
purchase price. Tan failed to pay and another extension was granted by the
vendors. The vendors demanded payment of the balance of the purchase price
within five (5) days from notice; otherwise, they would declare the rescission
of the conditional sale and the forfeiture of his down payment based on the
terms of the contract.
Tan refused to comply with the vendors’ demand and instead wrote them a
letter claiming that the annotation on the title constituted an encumbrance on
the property that
would prevent the vendors from delivering a clean title to him.
Thus, he alleged that he could no longer be required to pay the balance of the
purchase price and demanded the return of his down payment.
The vendors refused to refund the down payment, Tan, through counsel, sent
another demand
letter to the vendors. vendors still refused to heed Tan’s demand prompting Tan
to file a complaint with the RTC for specific performance against the vendors.
Tan alleged that there was a novation of the Deed of Conditional Sale done
without his consent since the annotation on the title created an encumbrance
over the property.
Tan prayed for the refund of the down payment and the rescission of the
contract.
Tan amended his Complaint, contending that if the respondents insist on
forfeiting the down payment, he would be willing to pay the balance of the
purchase price
provided there is reformation of the Deed of Conditional Sale. In the meantime,
Tan caused the
annotation on the title of a notice of lis pendens.
The respondents the property to Hector de Guzman (de Guzman) for P689,000.
The respondents moved for the cancellation of the notice of lis pendens on the
ground that it
was inappropriate since the case that Tan filed was a personal action which did
not involve
either title to, or possession of, real property.
The RTC issued an order granting the respondents’ motion to cancel the lis
pendens annotation on the title.
Meanwhile, based on the Deed of Absolute Sale in his favor, de Guzman
registered the property
RTC rendered judgment ruling that the respondents’ forfeiture of Tan’s down
payment was proper in accordance with the terms and conditions of the
contract between the parties.
The RTC ordered Tan to pay the respondents.
On appeal, the CA dismissed the petition
Hence, the petition.
ISSUE:
Whether or not the contract between the parties is a contract of sale or a
contract to sell
RULING:
The petition is granted. The contract between the parties was merely a contract
to sell where the vendors retained title and ownership to the property until Tan
had fully paid the purchase price.
Since Tan had no claim of ownership or title to the property yet, he obviously
had no right to ask for the annotation of a lis pendens notice on the title of the
property.The very essence of a contract of sale is the transfer of ownership in
exchange for a price paid or promised. In contrast, a contract to sell is defined
as a bilateral contract whereby the prospective seller, while expressly reserving
the ownership of the property despite delivery thereof to the prospective buyer,
binds himself to sell the property exclusively to the prospective buyer upon
Contract to sell is not
rescinded but terminated
The remedy of rescission under Article 1191 cannot apply to mere contracts to
sell. In a contract to sell, the payment of the purchase price is a positive
suspensive condition. Failure to pay the price agreed upon is not a mere
breach, casual or serious, but a situation that prevents the obligation of the
vendor to convey title from acquiring an obligatory force.
In a contract of sale, the vendor has lost ownership of the thing sold and cannot
recover it, unless the contract of sale is rescinded and set aside. In a contract
to sell, however, the vendor remains the owner for as long as the vendee
has not complied fully with the condition of paying the purchase price. If
the vendor should eject the vendee for failure to meet the condition precedent,
he is enforcing the contract and not rescinding it.
9

We, therefore, hold that the contract to sell was terminated when the
vendors could no longer legally compel Tan to pay the balance of the purchase
price as a result of the legal encumbrance which attached to the title of the
property. Since Tans refusal to pay was due to the supervening event of a legal
encumbrance on the property and not through his own fault or negligence, we
find and so hold that the forfeiture of Tans down payment was clearly
unwarranted.
Sps. Roque v. Aguado
-On July 21, 1977, petitioners-spouses Jose C. Roque and Beatriz dela Cruz
Roque (Sps. Roque) and the original owners (Rivero) of the then unregistered
Lot 18089 executed a Deed of Conditional Sale of Real Property over a 1,231-
sq. m. portion of Lot 18089 (subject portion) for a consideration of 30,775.00.
-The parties agreed that Sps. Roque shall make an initial payment of 15,387.50
upon signing, while the remaining balance of the purchase price shall be
payable upon the registration of Lot 18089
-After the deeds execution, Sps. Roque took possession and introduced
improvements on the subject portion which they utilized as a balut factory.
-On August 12, 1991, Fructuoso Sabug, Jr., applied for a free patent over the
entire Lot 18089 and was eventually issued (OCT) No. M-5955 in his name on
October 21, 1991.
-On June 24, 1993, Sabug, Jr. and Rivero, in her personal capacity and in
representation of Rivero, et al., executed a Joint Affidavit, acknowledging that
the subject portion belongs to Sps. Roque and expressed their willingness to
segregate the same from the entire area of Lot 18089.
-however, Sabug, Jr., through a Deed of Absolute Sale (1999 Deed of Absolute
Sale), sold Lot 18089 to one Ma. Pamela P. Aguado for 2,500,000.00. caused
the cancellation of OCT No. M-5955 and the issuance of Transfer Certificate of
Title (TCT) No. M-96692 dated December 17, 1999 in her name.
-Aguado obtained an 8,000,000.00 loan from Land Bank secured by a
mortgage over Lot 18089. When she failed to pay her loan obligation, Land
Bank commenced extra-judicial foreclosure proceedings and eventually
tendered the highest bid in the auction sale.
-Sps. Roque filed a complaint for reconveyance, annulment of sale, deed of real
estate mortgage, foreclosure, and certificate of sale, and damages before the
RTC against Aguado, Sahug, Landbank, Registry of deeds of Morong and
Sheriff.
In defense, Sabug, Jr. denied any knowledge of the 1977 Deed of Conditional
Sale through which the subject portion had been purportedly conveyed to Sps.
Roque. Aguado raised the defense of an innocent purchaser for value as she
alleged that certificate of title at the time of sale was free from any lien and/or
encumbrances. Land Bank averred that it had no knowledge of Sps. Roques
claim relative to the subject portion,
Issue: w/n sps. roque is the rightful owner of the subj. property hence can claim
action for reconveyance.
Held: Petition lacks merit
The Court finds that the stipulation above-highlighted shows that the 1977
Deed of Conditional Sale is actually in the nature of a contract to sell and not
one of sale contrary to Sps. Roques belief.
In this relation, it has been consistently ruled that where the seller promises to
execute a deed of absolute sale upon the completion by the buyer of the
payment of the purchase price, the contract is only a contract to sell even if
their agreement is denominated as a Deed of Conditional Sale, as in this case.
Elsewise stated, in a contract to sell, ownership is retained by the vendor and is
not to pass to the vendee until full payment of the purchase price.
Here, it is undisputed that Sps. Roque have not paid the final installment of the
purchase price. As such, the condition which would have triggered the parties
obligation to enter into and thereby perfect a contract of sale in order to
effectively transfer the ownership of the subject portion from
the sellers (i.e., Rivero et al.) to the buyers (Sps. Roque) cannot be deemed to
have been fulfilled.
Consequently, the latter cannot validly claim ownership over the subject
portion even if they had made an initial payment and even took possession of
the same. As applied in the case of Coronel v. CA:
It is essential to distinguish between a contract to sell and a conditional contract
of sale specially in cases where the subject property is sold by the owner not to
the party the seller contracted with, but to a third person, as in the case at
bench. In a contract to sell, there being no previous sale of the property, a third
person buying such property despite the fulfilment of the suspensive condition
such as the full payment of the purchase price, for instance, cannot be deemed a
buyer in bad faith and
the prospective buyer cannot seek the relief of reconveyance of the property.
There is no double sale in such case. Title to the property will transfer to the
buyer after registration because there is no defect in the owner-sellers title per
se, but the latter, of course, may be sued for damages by the intending buyer.
10
HELEN E. CABLING vs. LUMAPAS
The petitioner was the highest bidder in an extrajudicial foreclosure
sale over a parcel of land situated in the Barrio of Sta. Rita, Olongapo City and
covered by Transfer Certificate of Title (TCT) No. T-14852 .
The Final Deed of Sale was issued by the Sheriff of Olongapo City on
February 14, 2009 and the title to the property was duly transferred. TCT No.
T-14853 was issued to the petitioner on March 23, 2009.7
In 2009, the petitioner filed an Application for the Issuance of a Writ of
Possession with the RTC. The RTC then granted the petitioner’s application,
and subsequently issued a Writ of Possession and a Notice to Vacate.
Respondent Lumapas, through counsel, filed a Motion for Leave of
Court for Intervention, being a third party in actual possession of the foreclosed
property. She claimed that the property had previously been sold to her by Aida
Ibabao, the property’s registered owner and the judgment debtor/mortgagor in
the extrajudicial foreclosure sale, pursuant to a Deed of Conditional Sale.
The RTC recalled and rendered ineffective the writ of possession
issued to the petitioner, stating that "an ex-parte writ of possession issued
cannot be enforced against a third person who is in actual possession of the
foreclosed property and who is not in privity with the debtor/mortgagor. On
appeal, the CA affirmed in toto the RTC’s assailed orders.
The petitioner now argues before the SC that the present case is not an
exception to the ministerial issuance of a writ of possession.
While recognizing the respondent’s actual possession of the subject
property, the petitioner contends that such possession is not adverse to that of
the judgment debtor/mortgagor. Neither is possession in the concept of an
owner because in a conditional sale, ownership is retained by the seller until the
fulfillment of a positive suspensive condition, that is, the full payment of the
purchase price.
Held:
We find merit in the petitioner’s arguments.
In the present case, the respondent cannot be said to possess the subject
property by adverse title or right as her possession is merely premised on the
alleged conditional sale of the property to her by the judgment
debtor/mortgagor.
The execution of a contract of conditional sale does not immediately
transfer title to the property to be sold from seller to buyer. In such contract,
ownership or title to the property is retained by the seller until the fulfillment of
a positive suspensive condition which is normally
It likewise appears from the records that no deed of absolute sale over
the subject property has been executed in the respondent's favor.
Thus, the respondent's possession from the time the subject property
was "delivered" to her by the seller cannot be claimed as possession in the
concept of an owner, as the ownership and title to the subject property still then
remained with the seller until the title to the property was transferred to the
petitioner. In order for the respondent not to be ousted by the ex parte issuance
of a writ of possession, her possession of the property must be adverse in that
she must prove a right independent of and even superior to that of the judgment
debtor/mortgagor.
Under these circumstances, the general rule, and not the exception,
applies.
OLIVAREZ REALTY CORP. VS. CASTILLO
G.R. No. 196251, July 9, 2014
 Petition for review on certiorari of the Court of Appeals' decision
 Benjamin Castillo was the registered owner of a 346,918-squaremeter
parcel of land located in Laurel, Batangas, covered by Transfer
Certificate of Title No. T-19972.
 Philippine Tourism Authority allegedly claimed ownership of the same
parcel of land based on Transfer Certificate of Title No. T-18493.
 April 5, 2000 - Castillo and Olivarez Realty Corporation, represented
by Dr. Pablo R. Olivarez, entered into a contract of conditional sale
over the property.
11
 Under the deed of conditional sale, Castillo agreed to sell his property
to Olivarez Realty Corporation for P19,080,490.00. Olivarez Realty
Corporation agreed to a down payment of P5,000,000.00, to be paid
from April – November 2000.
 As to the balance of P14,080,490.00, Olivarez Realty Corporation
agreed to pay in 30 equal monthly installments every eighth day of the
month beginning in the month that the parties would receive a decision
voiding the Philippine Tourism Authority’s title to the property.
 The Deed of Conditional Sale provides the following:
1. Olivarez Realty Corporation shall file the action against the
Philippine Tourism Authority "with the full assistance of Castillo."
Paragraph C of the deed of conditional sale provides:
C. Olivarez Realty Corporation assumes the responsibility of
taking necessary legal action thru Court to have the claim/title TCT T-
18493 of Philippine Tourism Authority over the above-described
property be nullified and voided; with the full assistance of Castillo.
2. Should the action against the Philippine Tourism Authority be
denied, Castillo agreed to reimburse all the amounts paid by Olivarez
Realty Corporation. Paragraph D of the deed of conditional sale
provides:
D. In the event that the Court denies the petition against the
Philippine Tourism Authority, all sums received by Castillo shall be
reimbursed to Olivarez Realty Corporation without interest.
3. As to the "legitimate tenants" occupying the property, Olivarez
Realty Corporation undertook to pay them "disturbance
compensation," while Castillo undertook to clear the land of the tenants
within six months from the signing of the deed of conditional sale.
Should Castillo fail to clear the land within six months, Olivarez Realty
Corporation may suspend its monthly down payment until the tenants
vacate the property. Paragraphs E and F of the deed of conditional sale
provide:
E. That Olivarez Realty Corporation shall pay the disturbance
compensation to legitimate agricultural tenants and fishermen
occupants which in no case shall exceed ONE MILLION FIVE
HUNDRED THOUSAND (P1,500,000.00) PESOS. Said amount shall
not form part of the purchase price. In excess of this amount, all claims
shall be for the account of Castillo.
F. That Castillo shall clear the land of the legitimate tenants
within a period of six (6) months upon signing of this Contract, and in
case Castillo fails, Olivarez Realty Corporation shall have the right to
suspend the monthly down payment until such time that the tenants
move out of the land.
4. The parties agreed that Olivarez Realty Corporation may
immediately occupy the property upon signing of the deed of
conditional sale. Should the contract be cancelled, Olivarez Realty
Corporation agreed to return the property’s possession to Castillo and
forfeit all the improvements it may have introduced on the property.
Paragraph I of the deed of conditional sale states:
I. Immediately upon signing this Contract, Olivarez Realty
Corporation shall be entitled to occupy, possess and develop the
subject property. In case this Contract is canceled, any improvement
introduced by the corporation on the property shall be forfeited in favor
of Castillo.
 September 2, 2004 - Castillo filed a complaint against Olivarez Realty
Corporation and Dr. Olivarez with the Regional Trial Court of Tanauan
City, Batangas

 Castillo’s contention:
 Dr. Olivarez convinced him into selling his property to
Olivarez Realty Corporation on the representation that the
corporation shall be responsible in clearing the property of the
tenants and in paying them disturbance compensation
 Dr. Olivarez solely prepared the deed of conditional sale and
that he was made to sign the contract with its terms "not
adequately explained to him in Tagalog."
 After the parties had signed the deed of conditional sale,
Olivarez Realty Corporation immediately took possession of
the property. However, the corporation only paid
2,500,000.00 of the purchase price. Contrary to the
12
 agreement, the corporation did not file any action against
the Philippine Tourism Authority to void the latter’s title
to the property. Also, the corporation neither cleared the
land of the tenants nor paid them disturbance
compensation. Despite demand, Olivarez Realty
Corporation refused to fully pay the purchase price.
 Castillo prayed for rescission of contract under Article 1191 of
the NCC for substantial breach of the contract of conditional
sale and that the deed of conditional sale was a contract of
adhesion
 Castillo also prayed that Dr. Olivarez be made solidarily liable
for moral damages, exemplary damages, attorney’s fees, and
costs of suit.
 Answer and defense of Olivarez Realty Corporation and Dr.
Olivarez:
 Olivarez Realty Corporation and Dr. Olivarez admitted that
the corporation only paid P2,500,000.00 of the purchase
price
 Defendants alleged that Castillo failed to "fully assist" the
corporation in filing an action against the Philippine Tourism
Authority.
 Neither did Castillo clear the property of the tenants within six
months from the signing of the deed of conditional sale.
 Because of the abovementioned, the corporation had "all the
legal right to withhold the subsequent payments to fully pay
the purchase price."
 There was "an obvious ambiguity" as to which should occur
first — the payment of disturbance compensation to the tenants
or the clearing of the property of the tenants.
 March 8, 2006 - Castillo filed a motion for summary judgment and/or
judgment on the pleadings. He argued that Olivarez Realty Corporation
and Dr. Olivarez "substantially admitted the material allegations of his
complaint." Castillo attached to his motion for summary judgment
and/or judgment on the pleadings his affidavit and the affidavit of
Marissa Magsino attesting to the truth of the material allegations of his
complaint. The trial court granted the motion.

 Ruling of the trial court
 The corporation was responsible for suing the Philippine
Tourism Authority and for paying the tenants disturbance
compensation. Since defendant corporation neither filed any
case nor paid the tenants disturbance compensation, the trial
court ruled that defendant corporation had no right to withhold
payments from Castillo.
 As to the alleged ambiguity of paragraphs E and F of the deed
of conditional sale, the trial court ruled that Castillo and his
witness, Marissa Magsino, "clearly established" in their
affidavits that the deed of conditional sale was a contract of
adhesion. The true agreement between the parties was that the
corporation would both clear the land of the tenants and pay
them disturbance compensation.
 With these findings, the trial court ruled that Olivarez Realty
Corporation breached the contract of conditional
sale.1âwphi1 The trial court ordered the deed of conditional
sale rescinded and theP2,500,000.00 forfeited in favor of
Castillo "as damages under Article 1191 of the Civil Code."
 CA affirmed the decision of the trial court in toto
 Ruling of the Supreme Court
 Petitioner corporation refused to fully pay the purchase price
because no court case was filed to void the Philippine Tourism
Authority’s title on the property. However, paragraph C of the
deed of conditional sale is clear that petitioner Olivarez Realty
Corporation is responsible for initiating court action against the
Philippine Tourism Authority:
C. Olivarez Realty Corporation assumes the responsibility
of taking necessary legal action thru Court to have the claim/title
TCT T-18493 of Philippine Tourism Authority over the above-
described property be nullified and voided; with the full assistance
of Castillo.
 Castillo’s alleged failure to "fully assist" the corporation in
filing the case is not a defense. As the trial court said, "how
13
 can [Castillo] assist [the corporation] when [the latter] did not
file the action in the first place?"
 Neither can Olivarez Realty Corporation argue that it refused
to fully pay the purchase price due to the Philippine Tourism
Authority’s adverse claim on the property. The corporation
knew of this adverse claim when it entered into a contract of
conditional sale. It even obligated itself under paragraph C of
the deed of conditional sale to sue the Philippine Tourism
Authority. This defense, therefore, is sham.
 Contrary to petitioners’ claim, there is no "obvious
ambiguity" as to which should occur first — the payment
of the disturbance compensation or the clearing of the land
within six months from the signing of the deed of
conditional sale. The obligations must be performed
simultaneously. In this case, the parties should have
coordinated to ensure that tenants on the property were paid
disturbance compensation and were made to vacate the
property six months after the signing of the deed of conditional
sale.
 On one hand, pure obligations, or obligations whose
performance do not depend upon a future or uncertain event, or
upon a past event unknown to the parties, are demandable at
once. On the other hand, obligations with a resolutory period
also take effect at once but terminate upon arrival of the day
certain. Olivarez Realty Corporation’s obligation to pay
disturbance compensation is a pure obligation. The
performance of the obligation to pay disturbance compensation
did not depend on any condition. Moreover, the deed of
conditional sale did not give the corporation a period to
perform the obligation. As such, the obligation to pay
disturbance compensation was demandable at once. Olivarez
Realty Corporation should have paid the tenants disturbance
compensation upon execution of the deed of conditional sale.
 With respect to Castillo’s obligation to clear the land of the
tenants within six months from the signing of the contract, his
obligation was an obligation with a resolutory period. The
obligation to clear the land of the tenants took effect at once,
specifically, upon the parties’ signing of the deed of
conditional sale. Castillo had until October 2, 2000, six months
from April 5, 2000 when the parties signed the deed of
conditional sale, to clear the land of the tenants.
 Olivarez Realty Corporation, therefore, had no right to
withhold payments of the purchase price. As the trial court
ruled, Olivarez Realty Corporation "can only claim non-
compliance of the obligation to clear the land of the tenants in
October 2000."
 Since Olivarez Realty Corporation illegally withheld payments
of the purchase price, Castillo is entitled to cancel his
contract with petitioner corporation. However, we properly
characterize the parties’ contract as a contract to sell, not a
contract of conditional sale.
 In both contracts to sell and contracts of conditional sale, title
to the property remains with the seller until the buyer fully
pays the purchase price. Both contracts are subject to the
positive suspensive condition of the buyer’s full payment of
the purchase price.
 In a contract of conditional sale, the buyer automatically
acquires title to the property upon full payment of the purchase
price. This transfer of title is "by operation of law without any
further act having to be performed by the seller." In a contract
to sell, transfer of title to the prospective buyer is not
automatic. "The prospective seller must convey title to the
property through a deed of conditional sale."
 The distinction is important to determine the applicable laws
and remedies in case a party does not fulfill his or her
obligations under the contract. In contracts of conditional
sale, our laws on sales under the Civil Code of the
Philippines apply. On the other hand, contracts to sell are
not governed by our law on sales but by the Civil Code
provisions on conditional obligations.
 Article 1191 of the Civil Code on the right to rescind
reciprocal obligations does not apply to contracts to sell. As
this court explained in Ong v. Court of Appeals, failure to fully
pay the purchase price in contracts to sell is not the breach of
contract under Article 1191. Failure to fully pay the purchase
price is "merely an event which prevents the seller’s obligation
to convey title from acquiring binding force." This is because
"there can be no rescission of an obligation that is still
nonexistent, the suspensive condition not having happened."
 In this case, Castillo reserved his title to the property and
undertook to execute a deed of absolute sale upon Olivarez
Realty Corporation’s full payment of the purchase price. Since
14
 Castillo still has to execute a deed of absolute sale to
Olivarez Realty Corporation upon full payment of the
purchase price, the transfer of title is not automatic. The
contract in this case is a contract to sell and Article 1191 of
the Civil Code of the Philippines does not apply. The
contract to sell is instead cancelled, and the parties shall
stand as if the obligation to sell never existed.
 Olivarez Realty Corporation shall return the possession of the
property to Castillo. Any improvement that Olivarez Realty
Corporation may have introduced on the property shall be
forfeited in favor of Castillo per paragraph I of the deed of
conditional sale:
I. Immediately upon signing this Contract, Olivarez
Realty Corporation shall be entitled to occupy, possess and
develop the subject property. In case this Contract is cancelled,
any improvement introduced by Olivarez Realty Corporation
on the property shall be forfeited in favor of Castillo.
 Olivarez Realty Corporation failed to fully pay the purchase
price for the property. It only paidP2,500,000.00 out of
the P19,080,490.00 agreed purchase price. Worse, petitioner
corporation has been in possession of Castillo’s property for 14
years since May 5, 2000 and has not paid for its use of the
property.
 The P2,500,000.00 shall be forfeited in favor of Castillo as
reasonable compensation for Olivarez Realty Corporation’s
use of the property.
WHEREFORE, the petition for review on certiorari is DENIED. The Court of
Appeals’ decision dated July 20, 2010 and in CA-G.R. CV No. 91244 is
AFFIRMED with MODIFICATION.
The deed of conditional sale dated April 5, 2000 is declared CANCELLED.
Petitioner Olivarez Realty Corporation shall RETURN to respondent Benjamin
Castillo the possession of the property covered by Transfer Certificate of Title
No. T-19972 together with all the improvements that petitioner corporation
introduced on the property. The amount of P2,500,000.00 is FORFEITED in
favor of respondent Benjamin Castillo as reasonable compensation for the use
of petitioner Olivarez Realty Corporation of the property.
P.S. Sorry mahaba. Importante kasi yung facts at yung distinctions sa ruling.
Philippine Telephone Corporation (Piltel) v Radiomarine Network
(Smartnet) Philippines Inc. (G.R. No. 160322) August 24, 2011
Facts: Piltel expressed its willingness to buy 300,000 units of various cellular
phones and accessories from Smartnet. On the following day, Piltel entered
into a contract to sell involving its Valgoson Property to Smartnet for PHP
560M.
Contract to sell provides:
(1) Smartnet agreed to pay PHP 180M as down payment on or before
December 29, 1996
(2) The balance of PHP 380M to be partly set off against the outstanding
payables of Piltel with Smartnet in consideration of the Cellular phone
units and accessories ordered and to be delivered between December
28, 1996 and April 30, 1997.
(3) The remaining balance, shall be paid on or about April 30, 1997. Piltel
shall submit to Smartnet a Statement of Account of its outstanding
balance on or about April 20, 1996. Should Piltel be delayed in sending
such Statement, the date of payment of remaining balance shall be
automatically adjusted for a period equivalent to the number of days
delayed.
Such contract also provided for a rescission and forfeiture clause. That if
Smartnet fails to pay the full price of the land within the period and within 5
days after receipt of notice of delinquency, it would automatically forfeit to
Piltel 10% of its down payment (PHP 18M) and the contract shall be without
force and effect.
Smartnet failed to pay the PHP 380M balance. Piltel on the other hand returned
PHP 50M (a portion of the down payment) to them. Smartnet later requested
for the return of the other PHP 130M, but Piltel failed to do so.
Smartnet filed a complaint against Piltel for rescission of their contract to sell
involving the Valgoson property or its partial specific performance. They
alleged that it withheld the payment of the balance of the purchase price
because Piltel reneged on its commitment to purchase from Smartnet 300,000
units of cellular phones and accessories.
15
Piltel claimed that the agreement to purchase cellular phones and accessories
was not part of its contract for the sale of the property. That it committed to
buy the equipment only on a best effort basis. That Smartnet did not have the
power to rescind the contract to sell and cannot invoke the contract’s rescission
and forfeiture clause.
ISSUE: (1) WON Smartnet has the power to rescind the contract to sell.
(2) WON Piltel’s failure to purchase the cellular phones and
accessories can be a ground
for a breach of contract as alleged by Smartnet.
HELD: Smartnet’s allegations respecting fraud and breach of contract referred
to what appears to be Piltel’s non-binding promise to buy cellular phones and
accessories from Smartnet. The contract to sell of such property was not legally
linked or made dependent on the aborted cellular phone deal between the
parties. Such matters are independent from their contract to sell.
All that matters is that since Smartnet failed to pay the balance of the purchase
price, automatic rescission set in and this placed Piltel under an obligation to
return the down payment it received, less the portion that it forfeited due to
Smartnet’s default. Consequently, it is but proper for Piltel to fully abide by
such obligation. By returning part of the down payment, it is clear that Piltel
recognized that the contract to sell the Valgoson Property had reached the point
of automatic rescission. Piltel is, therefore, in estoppel to deny rescission based
on a claim that it had not yet sent a statement of account or a notice of
delinquency to Smartnet regarding the latter’s default. Such statement of
account and notice of delinquency had become academic.
As the Court said in Heirs of Cayetano Pangan and Consuelo Pangan v.
Perreras,the payment of the purchase price in a contract to sell is a positive
suspensive condition, the failure of which is not a breach but a situation that
results in the cancellation of the contract. Strictly speaking, therefore, there can
be no rescission or resolution of an obligation that is still non-existent due to
the non-happening of the suspensive condition.
HEIRS OF AMPARO DEL ROSARIO v. AURORA SANTOS
G.R. No. L-46892 September 30, 1981
GUERRERO, J.:
Facts:
Amparo Del Rosario entered into a contract with Attorney Andres
Santos and his wife Aurora Santos whereby the latter sold to the former a
20,000 sq. m. of land which is to be segregated from Lot 1. Said lot forms part
of the several lots belonging to a certain Teofilo Custodio, of which lots,
Attorney Santos, by agreement with the latter, as his attorney’s fees, owns ½
interest thereof.
Parties agreed that spouses Andres shall thereafter execute a Deed of
Confirmation of Sale in favor of Del Rosario as soon as the title has been
released and the subdivision plan of said Lot 1 has been approved by the Land
Registration Commissioner.
Due to the failure of spouses Andres to execute the deed after the
fulfillment of the condition, Del Rosario claims malicious breach of a Deed of
Sale.
Defendant thereafter filed a motion to dismiss setting up the defenses
of lack of jurisdiction of the court over the subject of the action and lack of
cause of action as well as the defense of prescription.
They further alleged that the deed of sale was only an accommodation
graciously extended, out of close friendship between the defendants and the
plaintiff, hence, tantamount to waiver, abandonment or otherwise
extinguishment of the demand set forth in the complaint.
Finally, defendants alleged that the claim on which the action or suit is
founded is unenforceable under the statute of frauds and that the cause or
object of the contract did not exist at the time of the transaction.
The lower court resolved to deny the motion to dismiss.
After actions by respective parties, the lower court ordered the
defendants to execute and convey to plaintiff the 20,000 sq. m. of land to be
taken either from Lot 4 or from Lot 5-A of Custodio’s lots, which defendants
own ½ interest thereof.
Aggrieved by the aforesaid decision, the defendants filed an appeal
with the Court of Appeals which certified the records of the case to the
Supreme Court for final determination.
Issue:
Whether the sale is valid as to the cause or object of the contract.
Decision:
The judgment appealed from is hereby affirmed in toto, with costs
against the appellants.
Supreme Court held that the execution of the deed of sale is valid
notwithstanding the lack of any title to the lot by appellants at the time of
16
execution f the deed of sale in favor of appellee as there can be a sale of an
expected thing in accordance with Article 1461 of the New Civil Code:
Art. 1461. Things having a potential existence may be the object of
the contract of sale.
The efficacy of the sale of a mere hope or expectancy is deemed
subject to the condition that the thing will come into existence.
The sale of a vain hope or expectancy is void.
The case at bar is not a case of a vain hope or expectancy which is void
under the law. The expectant right came into existence or materialized for the
appellants actually derived titles from Lot I which subsequently became the
object of subdivision.
Javier v. CA
Facts:
1. Leonardo Tiro executed a "Deed of Assignment" in favor of Sps.
Javier for and in the consideration of the sum of P120,000 in which
P20,000 shall be paid upon signing of the contract and the remaining
balance shall be paid for every shipment of export logs actually
produced from the concession of Timberwealth Corp.
2. At the time the said deed of assignment was executed, Tiro had a
pending application, dated October 21, 1965, for an additional forest
concession covering an area of 2,000 hectares adjoining the area of the
concession subject of the deed of assignment.
3. Hence, Tiro and Sps. Javier entered into another "Agreement". Such
agreement contains that once the additional area is approved and
transferred to Timberwealth Corporation by the Bureau of Forestry ,
Tiro should transfer, cede, and convey it to Sps. Javier for the
consideration of P30,000.
4. The Acting Director of Forestry wrote Tiro that his forest concession
was renewed up to May 12, 1967. However, he was only given until
May 12, 1967 to form an organization with other adjoining licensees so
as to have a total holding area of not less than 20,000 hectares of
contiguous and compact territory and an aggregate allowable annual
cut of not less than 25,000 cubic meters. Otherwise, his license will not
be further renewed.
5. Sps. Javier now acting as timber license holders by virtue of the deed
of assignment executed by Tiro in their favor, entered into a Forest
Consolidation Agreement with other ordinary timber license holders in
Misamis Oriental, namely, Vicente L. De Lara, Jr., Salustiano R. Oca
and Sanggaya Logging Company. Under this consolidation agreement,
they all agreed to pool together and merge their respective forest
concessions into a working unit, as envisioned by the aforementioned
directives.
6. On July 16, 1968, for failure of the Sps. to pay the balance due under
the two deeds of assignment, Tiro filed an action against the sps. based
on the said contracts, for the payment of the amount of remaining
balance with interest at 6% per annum.
7. Sps. Javier interposed the special defense of nullity thereof since Tiro
failed to comply with his contractual obligations and, further, that the
conditions of the obligations of the parties failed to materialize. They
also sought the return of what they had paid to Tiro.
*RTC- Dismissed the case
*CA- Reversed the decision of RTC.
Issue: 1. WON the 1st deed of assignment is null and void for total absence of
consideration.
2. WON the 2nd agreement is null and void for non-fulfillment of the conditions
stated therein.
Held:
1. No. The SC did not agree to the contentions of Sps. Javier. The true cause or
consideration of said deed was the transfer of the forest concession of Tiro to
the sps. for P120,000.00. Both parties, at the time of the execution of the deed
of assignment knew that the Timberwealth Corporation stated therein was non-
existent. Such contract is a relatively simulated contract which states a false
cause or consideration, or one where the parties conceal their true agreement. It
is not null and void per se. Under Article 1346 of the Civil Code, a relatively
simulated contract, when it does not prejudice a third person and is not
intended for any purpose contrary to law, morals, good customs, public order
or public policy binds the parties to their real agreement. 7
2. Yes. As to the 2nd agreement, SC agreed with the contention of the sps. that
they cannot be held liable. The efficacy of said deed of assignment is subject to
the condition that the application of Tiro for an additional area for forest
concession be approved by the Bureau of Forestry. Since Tiro did not obtain
17
that approval, said deed produces no effect. When a contract is subject to a
suspensive condition, its birth or effectivity can take place only if and when the
event which constitutes the condition happens or is fulfilled. If the suspensive
condition does not take place, the parties would stand as if the conditional
obligation had never existed.
In this case, the failure of Tiro comply with his obligation negates his right to
demand performance from the sps.
Moreover, under the second paragraph of Article 1461 of the Civil Code, the
efficacy of the sale of a mere hope or expectancy is deemed subject to the
condition that the thing will come into existence. In this case, since Tiro never
acquired any right over the additional area for failure to secure the approval of
the Bureau of Forestry, the agreement executed therefor, which had for its
object the transfer of said right to the Sps. never became effective or
enforceable.
Danguilan vs IAC
G.R. No. L-69970 November 28, 1988
Petitioner: FELIX DANGUILAN
Respondent: INTERMEDIATE APPELLATE COURT, APOLONIA
MELAD
Ponente: Cruz
Facts: Apolonia Melad filed a complaint against Felix Daguilan with CFI
Cagayan for recovery of a farm lot and a residential lot which she claimed she
had purchased from Domingo Melad in 1943 and were now being unlawfully
withheld by the Danguilan. She claimed to be the illegitimate daughter of
Domingo and presented a deed of sale purportedly signed by the latter. She
only moved out in 1946 because Danguilan approached her and asked
permission to cultivate the land and to stay therein. She had agreed on
condition that he would deliver part of the harvest from the farm to her, which
he did from that year to 1958. Deliveries later stopped thus the complaint.
Danguilan, on the other hand, is the husband of Isidra Melad, Domingo's niece.
He presented a private instrument which Domingo Melad also purportedly
signed, giving to him the farm in 1943 another private instrument in which
Domigo also gave him the residential lot, on the understanding that the
Danguilan would take care of the grantor and would bury him upon his death.
Lower court ruled in favor of Danguilan. Upon appeal, the IAC modified the
deicision and ruled that the conveyance of the real properties in question were
null and void, as they were donations of real property and as such should have
been effected through a public instrument.
Apolonia Melad alleges that the deed of sale was allegedly executed when the
respondent was only three years old and the consideration was supposedly paid
by her mother, Maria Yedan from her earnings as a wage worker in a factory.
Danguilan, on the other hand, avers that this contract was simulated and
prepared after Domingo's death.
Issue: Whether or not Apolonia Melad can be considered as the owner of the
disputed properties
Held: Decision of trial court reinstated.
Based on the evidence adduced, it is clear that Domingo did intend to donate
the properties to Danguilan. The fact that the donation was executed in a
private document is not material because the donation was onerous- the
properties were given to the Danguilan in exchange for his obligation to take
care of the donee for the rest of his life and provide for his burial. Hence, it
could not come under the operation of Article 749 requiring donations of real
properties to be effected through a public instrument.
As to the deed of sale executed between Domingo and Apolonia, the record
shows that the Apolonia Melad did not take possession of the disputed
properties and indeed waited until 1962 to file this action for recovery of the
lands from the Danguilan. If she did have possession, she transferred the same
to the petitioner in 1946, by her own sworn admission, and moved out to
another lot belonging to her step-brother. She thus failed to show that she
consummated the contract of sale by actual delivery of the properties to her
and her actual possession thereof in concept of purchaser-owner.
As consistently held by jurisprudence, ownership does not pass by mere
stipulation but only by delivery. That symbolic delivery was effected through
the deed of sale, which was a public instrument, Addison vs Felix controls:
"in order that this symbolic delivery may produce the effect of
tradition, it is necessary that the vendor shall have had such control
over the thing sold that, at the moment of the sale, its material delivery
could have been made. It is not enough to confer upon the purchaser
18
 the ownership and the right of possession. The thing sold must be
placed in his control. When there is no impediment whatever to prevent
the thing sold passing into the tenancy of the purchaser by the sole will
of the vendor, symbolic delivery through the execution of a public
instrument is sufficient. But if, notwithstanding the execution of the
instrument, the purchaser cannot have the enjoyment and material
tenancy of the thing and make use of it himself or through another in
his name, because such tenancy and enjoyment are opposed by the
interposition of another will, then fiction yields to reality—the delivery
has not been effected."
There is no dispute that it is the petitioner and not the private
respondent who is in actual possession of the litigated properties. Even if the
respective claims of the parties were both to be discarded as being inherently
weak, the decision should still incline in favor of the petitioner pursuant to the
doctrine announced in Santos & Espinosa v. Estejada where the Court
announced:
If the claim of both the plaintiff and the defendant are weak, judgment must be
for the defendant, for the latter being in possession is presumed to be the
owner, and cannot be obliged to show or prove a better right.
Padilla vs Paredes
Topic: Contract to sell
Facts:
On October 20, 1988, petitioner Albert R. Padilla and private
respondents Floresco and Adelina Paredes entered into a contract to
sell involving a parcel of land in San Juan, La Union. At that time, the land was
untitled although private respondents were paying taxes thereon. Under the
contract, petitioner undertook to secure title to the property in private
respondents' names. Of the P312,840.00 purchase price, petitioner was to pay a
down payment of P50,000.00 upon signing of the contract, and the balance was
to be paid within ten days from the issuance of a court order directing issuance
of a decree of registration for the property.
On December 27, 1989, the court ordered the issuance of a decree of land
registration for the subject property. The property was titled in the name of
private respondent Adelina Paredes. Private respondents then demanded
payment of the balance of the purchase price, per the second paragraph of the
contract to sell, which reads as follows:
"VENDEE agrees to pay the balance of the purchase price of subject property
in the amount of TWO HUNDRED SIXTY TWO THOUSAND EIGHT
HUNDRED FORTY (P262,840.00) PESOS, within ten (10) days counted from
issuance of the Order of the Court for the issuance of a decree pursuant to an
application for registration and confirmation of title of said subject property, of
which the VENDEE is under obligation to secure the title of subject property at
his own expense."
The petitioner defaulted on his obligation to pay the balance. After several
demands left unheeded, private respondent ask for the rescission.
Trial court- favors petitioner= no rescission
CA- reversed trial court declared rescission based on Art. 1191
Issue:
W/N the contract can be rescinded?
Ruling:
We Affirm but modify the CA. art. 1191 does not apply. First we must consider
the type of the contract. In this case based from the stipulations of the parties it
is clearly a contract to sell. Inferable from the following provisions thereof:
"xxx
That the VENDORS hereby agree and bind themselves not to alienate,
encumber, or in any manner modify the right of title to said property.
xxx
That the VENDORS agree to pay real estate taxes of said subject property until
the same will have been transferred to the VENDEE.
That on payment of the full purchase price of the above-mentioned property the
VENDORS will execute and deliver a deed conveying to the VENDEE the
title in fee simple of said property free from all lien and
encumbrances..."(Underscoring supplied.)
19
These provisions signify that title to the property remains in the vendors until
the vendee should have fully paid the purchase price, which is a typical
characteristic of a contract to sell.
We sustain the decision of the Court of Appeals, to the effect that private
respondents may validly cancel the contract to sell their land to petitioner.
However, the reason for this is not that private respondents have the power
to rescind such contract, but because their obligation thereunder did not arise.
Article 1191 speaks of obligations already existing, which may be rescinded in
case one of the obligors fails to comply with what is incumbent upon him.
However, in the present case, there is still no obligation to convey title of the
land on the part of private respondents. There can be no rescission of an
obligation that is non-existent, considering that the suspensive condition
therefor has not yet happened
In Rillo v. Court of Appeals, we ruled:
"The respondent court did not err when it did not apply Articles 1191 and 1592
of the Civil Code on rescission to the case at bar. The contract between the
parties is not an absolute conveyance of real property but a contract to sell. In a
contract to sell real property on installments, the full payment of the purchase
price is a positive suspensive condition, the failure of which is not considered a
breach, casual or serious, but simply an event which prevented the obligation of
the vendor to convey title from acquiring any obligatory force. The transfer of
ownership and title would occur after full payment of the purchase price."
The Court of Appeals is correct in ordering the return to petitioner of the
amounts received from him by private respondents, on the principle that no one
may unjustly enrich himself at the expense of another.
WHEREFORE, the petition is DENIED, for lack of merit. Costs against
petitioner.
Spouses Buenaventura vs. Court of Appeals
FACTS:
Defendant spouses Leonardo Joaquin and Feliciana Landrito are parents of co-
defendantsFidel, Tomas, Artemio, Clarita, Felicitas, Fe, and Gavino. They are
also the parents of plaintiffs Consolacion, Nora, Emma, and Natividad. A deed
of sale was executed by the defendant spouses in favor of their co-defendant
children. However, such deed of sale is sought to be declared null and void by
the plaintiffs. Plaintiffs argue that:
1. There was no actual consideration
2. Even assuming there was consideration, the properties are more than 3-
foldtimes more valuable than the measly sums appearing therein.
3. The sale was the result of a deliberate conspiracy to unjustly deprive
the rest of the compulsory heirs of their legitime.
RTC: ruled in favor of the defendants and dismissed the complaint. On the
grounds that:
1. Plaintiffs do not have a valid cause of action against defendants since
there can be no legitime to speak of prior to the death of their parents.
2. Legitime is computed as of the time of the death of the decedent.
CA: affirmed the decision of the RTC
ISSUE:
Whether or not the Deeds of Sale are void for lack of consideration
HELD:
DEED OF SALE VALID.
1. A contract of sale is not a real contract, but a consensual contract.
2. As a consensual contract, a contract of sale becomes a binding and
valid contract upon the meeting of the minds as to price.
3. 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.
4. It is not the act of payment of price that determines the validity of a
contract of sale.
5. Payment of the price has nothing to do with the perfection of the
contract.
6. Failure to pay the consideration is different from lack of consideration.
20
 7. Petitioners do not have any legal interest over the properties. Their
rights over the properties are merely inchoate and vests only upon their
parents’ death.
ARTICLE 1471
FELIX TING HO, JR., MERLA TING HO BRADEN, JUANA TING HO
& LYDIA TING HO BELENZO
vs
VICENTE TENG GUI
FACTS:
Petitioners Felix Ting Ho, Jr., Merla Ting Ho Braden, Juana Ting Ho
and Lydia Ting Ho Belenzo filed an action for partition claiming that the
subject parcel of land and the improvements established thereon should form
part of the estate of their deceased father, Felix Ting Ho, and should be
partitioned equally among each of the siblings.
The estate consists of the following:
a) A commercial land consisting of 774 square meters, more or less,
located at Nos. 16 and 18 Afable St., East Bajac-Bajac, Olongapo City,
covered by Original Certificate of Title No. P-1064 and Tax
Declaration No. 002-2451;
b) A two-storey residential house on the aforesaid lot;
c) A two-storey commercial building, the first floor rented to different
persons and the second floor, Bonanza Hotel, operated by the
defendant also located on the above described lot; and
d) A sari-sari store (formerly a bakery) also located on the above
described lot
After a serious consideration of the testimonies given by both one of
the plaintiffs and the defendant as well as the documentary exhibits presented
in the case, the Trial Court was inclined to believe that Felix Ting Ho, the
father of the plaintiffs and the defendant, and the husband of Leonila Cabasal
thought of preserving the properties in question by transferring the said
properties to his eldest son as he thought that he cannot acquire the properties
as he was a Chinese citizen. To transfer the improvements on the land to his
eldest son the defendant Vicente Teng Gui, Felix Ting Ho first executed a
simulated Deeds of Sale in favor of the sister and brother-in-law of his wife in
1958 and after three (3) years it was made to appear that these vendees had sold
the improvements to the defendant Vicente Teng Gui who was then 18 years
old. The Court finds that these transactions were simulated and that no
consideration was ever paid by the vendees.
The trial court held that although the sales were simulated, pursuant to
Article 1471 of the New Civil Code it can be assumed that the intention of
Felix Ting Ho in such transaction was to give and donate such properties to the
respondent. As a result, it awarded the entire conjugal share of Felix Ting Ho in
the subject lot and properties to the respondent and divided only the conjugal
share of his wife among the siblings. Upon the death of Felix Ting Ho, the
respondent took possession of the same for his own exclusive use and benefit
to their exclusion and prejudice.
On appeal, the CA reversed and set aside the decision of the RTC. The
appellate court held that the deceased Felix Ting Ho was never the owner and
never claimed ownership of the subject lot since he is disqualified under
Philippine laws from owning public lands, and that respondent Vicente Teng
Gui was the rightful owner.
ISSUE:
WON Lot No. 418, Ts-308 and the properties erected thereon should
be included in the estate of the deceased Felix Ting Ho.
RULING:
YES. The series of transactions resorted to by the deceased were
simulated in order to preserve the properties in the hands of the family. The
records show that during all the time that the properties were allegedly sold to
the spouses Victoria Cabasal and Gregorio Fontela in 1958 and the subsequent
sale of the same to respondent in 1961, the petitioners and respondent, along
with their parents, remained in possession and continued to live in said
properties.
However, the reliance of the trial court on the provisions of Article
1471 of the Civil Code to conclude that the simulated sales were a valid
donation to the respondent is misplaced because its finding was based on a
21
mere assumption when the law requires positive proof. The respondent was
unable to show, and the records are bereft of any evidence, that the simulated
sales of the properties were intended by the deceased to be a donation to him.
Hyatt Elevators and Escalators Corporation vs. Cathedral Heights
Building Complex Association
Facts:
Hyatte Elevators and Escalators Corp entered into a Service agreement with
Cathedral Heights Building Complex Association where the former contracted
to maintain four passenger elevators installed in respondent’s building. It
included monthly inspection, adjustment and lubrication of machinery, motors,
control parts and accessory equipment, including switches and electrical
wirings. Sec D (2) of the agreement provides that respondent shall pay for the
additional charges incurred in connection with the repair and supply of parts.
Petitioner, through letters, demanded the payment of 1,161, 933.47 as incurred
expenses for the maintenance and repair of the elevators from April 1997 to
July 1998. Respondent refused to pay the amount. Petitioner filed a complaint
for sum of money with the RTC.
RTC: rendered in favor of Hyatt.
A contract of sale of goods was entered into by parties. Since the
petitioner was able to fulfil its obligation, it was incumbent on the respondent
to pay for the services rendered.
CA: Reversed and set aside the decision of RTC.
Respondent did not give its consent to the purchase of the spare parts
allegedly installed. No perfected contract of sale because there was no meeting
of the minds upon the price.
Issue: WON THERE WAS A PERFECTED CONTRACT OF SALE.
Held:
There was no perfected contract of sale, because there was no consent. There
was no meeting of minds upon the price. The fixing of the price can never be
left to the discretion of one of the contracting parties. In this case, the absence
of agreement as to the price is evidenced by the lack of purchase orders issued
by CHBCAI where the quantity, quality and price of the spare parts needed for
the repair of the elevators are stated. In these purchase orders, it would show
that the quotation of the cost of the spare parts earlier informed by Hyatt is
acceptable to CHBCAI. However, as revealed by the records, it was only Hyatt
who determined the price, without the acceptance or conformity of CHBCAI.
From the moment the determination of the price is left to the judgment of one
of the contracting parties, it cannot be said that there has been an arrangement
on the price since it is not possible for the other contracting party to agree on
something of which he does not know beforehand. Based on the evidence
presented in the RTC, it is clear to this Court that petitioner had failed to secure
the necessary purchase orders from respondent's Board of Directors, or Finance
Manager, to signify their assent to the price of the parts to be used in the repair
of the elevators. In Boston Bank of the Philippines v. Manalo,31 this Court
explained that the fixing of the price can never be left to the decision of one of
the contracting parties, to wit: A definite agreement as to the price is an
essential element of a binding agreement to sell personal or real property
because it seriously affects the rights and obligations of the parties. Price is an
essential element in the formation of a binding and enforceable contract of sale.
The fixing of the price can never be left to the decision of one of the
contracting parties. But a price fixed by one of the contracting parties, if
accepted by the other, gives rise to a perfected sale. There would have been a
perfected contract of sale had respondent accepted the price dictated by
petitioner even if such assent was given after the services were rendered. There
is, however, no proof of such acceptance on the part of respondent.
CHUA v. CA, G.R. No. 119255, April 9, 2003
Valdez-Choy advertised for sale her paraphernal house and lot in
Makati City. The property is covererd by a TCT in Valdez-Choy’s name. Chua
responded to the advertisement. After several meetings, Chua and Valdez-Choy
agreed on a purchase price of P10.8M payable in cash. On June 30 1989,
Valdez-Choy received from Valdez a check for P100,000. The receipt
evidencing the transaction provided that: The balance of P10,700,000 is
payable on or before July 15 1989. Failure to pay balance on or before July 15
1989 forfeits the earnest money.
On July 13 1989, Chua secured from PBCom a managers check for
P480,000 however, after receiving the managers check, Chua gave PBCom a
verbal stop payment order claiming that the managers check was
lost/misplaced. Hence, PBCom stop payment order. In the afternoon of July 13
1989, Chua and Valdez-Choy signed two deeds of Absolute sale. The first
22
deed covered the house and lot for a purchase price of P8M. The second deed
of sale covered the furnishings, fixtures and movable properties contained in
the house for the purchase price of P2.8M and they computed the capital gains
tax to P485,000. On July 14, they met again and Chua handed to Valdez-Choy
the PBCom managers check for P485,000 to pay the tax because she did not
have sufficient funds to pay the tax. Valdez-Choy issued a receipt showing that
Chua had a remaining balance of P10,215.00M after deducting the advances
made by Chua. The receipt showed that earnest money paid is P100,000 while
partial payment is P485,000.
On the same day, Valdez Choy accompanied by Chua, deposited the
P485,000 managers check to her account with Traders Royal Bank. Chua then
showed to Valdez-Choy a PBCom managers check for P10,215,000
representing the balance of purchase price. However he did not give this
PBCom managers check to Valdez-Choy because the TCT was still registered
in the name of Valdez-Choy. Chua required that the property be registered in
his name before he turn over the check to Valdez-Choy. This angered the latter
as this was not part of their agreement and she tore the deeds of sale. Chua
confirmed his stop payment order by submitting to PBCom an affidavit of loss.
However the check was still honored because Chua verbally advised the bank
that he was lifting the stop-payment order due to this special arrangement with
the bank.
On July 15 1989, the deadline for payment of balance of purchase
price, Valdez-Choy told her counsel that to break the impasse, Chua should
deposit in escrow the P10,215,00 balance, upon such deposit, she was willing
to cause the issuance of a new TCT even without receiving the balance of
purchase price. However, nothing came out of it.
Chua filed a complaint for specific performance against Valdez-
Choy. He re-filed his complaint for specific performance with damages.
The trial court rendered judgment in favor of Chua. It ordered Valdez-
Choy to deliver the duplicate copy of the TCT, tax declaration, two deeds of
sale. The CA reversed the decision of the trial court stating that Chua’s
stance to pay the full consideration only after the property is registered in his
name was not the agreement of the parties.
HELD: Valdez-Choy is the absolute owner of the property. She was ready
and willing to deliver to Chua the owner’s duplicate copy of the TCT, tax
declarations, signed deed of sales and latest realty tax receipt. She also received
the earnest money of P100,000. There was no controversy to their agreement
that the balance of P10,215,000 is payable on or before July 15 1989. However,
this balance was not paid on the agreed date. Even if he did show the managers
check amounting to P10,215,000, Chua refused to give this check until a new
TCT covering the property is registered in his name.
The agreement between the two is a Contract to Sell. Ownership
over the property is retained by Valdez-Choy until full payment of the purchase
price. It is stipulated that earnest money is to be forfeited in case the buyer fails
to pay the balance. There is a right reserved in favor of Valdez-Choy not to
push through with the sale upon Chua’s failure to remit the balance. The
agreement was embodied in a receipt rather than a deed of sale, ownership not
having passed between them. The signing of the deeds of sale later came when
Valdez-Choy was under the impression that Chua was about to pay the balance.
Valdez-Choy refused to turn over the documents, hence there was no transfer
of ownership. The payment of the purchase price is a suspensive condition, the
non-fulfilment prevents the obligation to sell.
Valdez-Choy was in a position to fulfill her obligation as she already
signed the deeds of sale in the presence of Chua and was prepared to turn over
the property, however Chua refused to give the check for payment of balance
of purchase price. Hence he was not ready to fulfill his obligation, hence he
cannot compel Valdez-Choy to consummate the sale of the property. There is
also no obligation on the part of Valdez-Choy to cause the issuance of a new
title in the name of Chua as this was not expressly stipulated.
G.R. No. 135634 May 31, 2000
HEIRS OF SAN ANDRES VS RODRIGUEZ
MENDOZA, J.:
FACTS:
Juan San Andres sold a portion of his lot to respondent Vicente S. Rodriguez
for P2,415.00. The sale is evidenced by a Deed of Sale.
Upon the death of Juan San Andres on May 5, 1965, Ramon San Andres was
appointed judicial administrator of the decedent's estate. Ramon engaged the
services of a geodetic engineer, Jose Peñero to prepare a consolidated plan of
the estate. From the result of the survey, it was found that respondent had
enlarged the area which he purchased from the late Juan San Andres by 509
square meters.
23
Accordingly, the judicial administrator sent a letter to respondent demanding
that the latter vacate the portion allegedly encroached by him. However,
respondent refused to do so, claiming he had purchased the same from the late
Juan San Andres. Thereafter, on November 24, 1987, the judicial administrator
brought an action, in behalf of the estate of Juan San Andres, for recovery of
possession of the 509-square meter lot.
Respondent alleged that apart from the 345-square meter lot which had been
sold to him by Juan San Andres on September 28, 1964, the latter likewise sold
to him the following day the remaining portion of the lot consisting of 509
square meters, with both parties treating the two lots as one whole parcel with a
total area of 854 square meters. Respondent alleged that the full payment of the
509-square meter lot would be effected within five (5) years from the execution
of a formal deed of sale after a survey is conducted over said property. He
further alleged that with the consent of the former owner, Juan San Andres, he
took possession of the same and introduced improvements thereon as early as
1964.
Respondent deposited in court the balance of the purchase price amounting to
P7,035.00 for the aforesaid 509-square meter lot.
While the proceedings were pending, judicial administrator Ramon San Andres
died and was substituted by his son Ricardo San Andres.
The trial court rendered judgment in favor of petitioner. It ruled that there was
no contract of sale to speak of for lack of a valid object because there was no
sufficient indication in Exhibit 2 to identify the property subject of the sale,
hence, the need to execute a new contract.
Respondent appealed to the Court of Appeals, which on April 21, 1998
rendered a decision reversing the decision of the trial court. The appellate court
held that the object of the contract was determinable, and that there was a
conditional sale with the balance of the purchase price payable within five
years from the execution of the deed of sale.
Hence, this petition.
ISSUE:
Whether or not the contract of sale herein is conditional
RULING:
NO.
There is a need, however, to clarify what the Court of Appeals said is a
conditional contract of sale. Apparently, the appellate court considered as a
"condition" the stipulation of the parties that the full consideration, based on a
survey of the lot, would be due and payable within five (5) years from the
execution of a formal deed of sale. It is evident from the stipulations in the
receipt that the vendor Juan San Andres sold the residential lot in question to
respondent and undertook to transfer the ownership thereof to respondent
without any qualification, reservation or condition. In Ang Yu Asuncion v.
Court of Appeals, 17 we held:
In Dignos v. Court of Appeals (158 SCRA 375), we have said
that, although denominated a "Deed of Conditional Sale," a
sale is still absolute where the contract is devoid of any proviso
that title is reserved or the right to unilaterally rescind is
stipulated, e.g., until or unless the price is paid. Ownership will
then be transferred to the buyer upon actual or constructive
delivery (e.g., by the execution of a public document) of the
property sold. Where the condition is imposed upon the
perfection of the contract itself, the failure of the condition
would prevent such perfection. If the condition is imposed on
the obligation of a party which is not fulfilled, the other party
may either waive the condition or refuse to proceed with the
sale. (Art. 1545, Civil Code).
Thus, in. one case, when the sellers declared in a "Receipt of Down Payment"
that they received an amount as purchase price for a house and lot without any
reservation of title until full payment of the entire purchase price, the
implication was that they sold their property. 18 In People's Industrial
Commercial Corporation v. Court of Appeals, 19 it was stated:
A deed of sale is considered absolute in nature where there is
neither a stipulation in the deed that title to the property sold is
reserved in the seller until full payment of the price, nor one
giving the vendor the right to unilaterally resolve the contract
the moment the buyer fails to pay within a fixed period.
24
Applying these principles to this case, it cannot be gainsaid that the contract of
sale between the parties is absolute, not conditional. There is no reservation of
ownership nor a stipulation providing for a unilateral rescission by either party.
In fact, the sale was consummated upon the delivery of the lot to respondent. 20
Thus, Art. 1477 provides that the ownership of the thing sold shall be
transferred to the vendee upon the actual or constructive delivery thereof.
The stipulation that the "payment of the full consideration based on a survey
shall be due and payable in five (5) years from the execution of a formal deed
of sale" is not a condition which affects the efficacy of the contract of sale. It
merely provides the manner by which the full consideration is to be computed
and the time within which the same is to be paid. But it does not affect in any
manner the effectivity of the contract. Consequently, the contention that the
absence of a formal deed of sale stipulated in the receipt prevents the
happening of a sale has no merit.
22 SPOUSES REYES V SALVADOR
Art. 1478 – The parties may stipulate that the ownership in the thing shall not
pass to the purchaser until he has fully paid the price.
FACTS: Nicomedes (heir of Domingo and Graciana) sold his paraphernal
parcel of land to the following: (1) Emma Reyes – Deed of Conditional Sale
– stipulating that in case of failure of payment, the contract shall be null and
void. Vendor reserves the right to sell it to another person upon his return to the
vendee’s of her payments, without interest. Emma failed to pay the full
purchase price; (2) Rosario Bondoc – Agreement of Purchase and Sale –
with a clause that mere non-payment renders the contract automatically
cancelled. This was registered. Rosario failed to pay the full purchase price and
no title was delivered to her; (3) Maria Cristobal – Deed of Absolute Sale of
Unregistered Land – there is no qualification. Nicomedes dies after 3 yrs and
his heirs executed a Deed of Extrajudicial Settlement of the Estate of the Late
Nicomedes J. Lozada with Ratification of a Certain Deed of Absolute Sale of
Unregistered Land, which ratified the sale to Maria; (4) Dulos Realty and
Development Corp. – Deed of Absolute Sale of Unregistered Land –
Nicomedes’ heirs facilitated this sale but it was not registered.
The above vendees therefore filed for registration of said parcel of lot. RTC
declared Maria and Dulos Realty to have a registrable title. The CA confirmed
the Rosario’s title. Emma, Maria and Dulos Realy filed to SC their Petition for
Review on Certiorari.
ISSUE: In consideration of all the contracts executed by Nicomedes and/or his
heirs involving the subject property, which party acquired valid and registrable
title to the same.
Emma contended that their contract did not bar the transfer of title and that
there was a contructive delivery as the contract was registered, thus a public
instrument; Maria and Dulos contend that Emma and Rosario’s conveyances
were not absolute and that they have a superior right as they have notarized
documents of sale in their favor, which constituted symbolic and constructive
delivery of the subject property to them.
HELD: Maria and Dulos Realty have valid and registrable title.
The Deed of Conditional Sale between Nicomedes and Emma and the
Agreement of Purchase and Sale between Nicomedes and Rosario were both
mere contracts to sell and did not transfer ownership or title to either of the
buyers in light of their failure to fully pay for the purchase price of the subject
property. While the Deed of Conditional Sale with Emma was indeed contained
in a public instrument, it did not constitute constructive delivery of the subject
property as the ownership over the subject property was reserved by
Nicomedes.
Thus, the Deeds of Absolute Sale in favor of Maria and Dulos Realty were the
only conveyances of the subject property in this case that can be the source of a
valid and registrable title. Both contracts were designated as absolute sales and
the provisions thereof leave no doubt that the same were true contracts of sale.
The total considerations for the respective portions of the subject property were
fully paid by the buyers and no conditions whatsoever were stipulated upon by
the parties as regards the transmission of the ownership of the said property to
the said buyers.
Note:
Sale, by its very nature, is a consensual contract because it is perfected by mere
consent. The essential elements of a contract of sale are the following: a)
Consent or meeting of the minds, that is, consent to transfer ownership in
exchange for the price; b) Determinate subject matter; and c) Price certain in
money or its equivalent.
Under this definition, a Contract to Sell may not be considered as a Contract of
Sale because the first essential element is lacking. In a contract to sell, the
25
prospective seller explicitly reserves the transfer of title to the prospective
buyer, meaning, the prospective seller does not as yet agree or consent to
transfer ownership of the property subject of the contract to sell until the
happening of an event, which for present purposes we shall take as the full
payment of the purchase price. What the seller agrees or obliges himself to do
is to fulfill his promise to sell the subject property when the entire amount of
the purchase price is delivered to him. In other words the full payment of the
purchase price partakes of a suspensive condition, the non-fulfillment of which
prevents the obligation to sell from arising and thus, ownership is retained by
the prospective seller without further remedies by the prospective buyer.
[G.R. No. 125088. April 14, 2004]
LAGRIMAS A. BOY, petitioner, vs. COURT OF APPEALS, ISAGANI P.
RAMOS and ERLINDA GASINGAN RAMOS, respondents.
FACTS: Spouses Isagani P. Ramos and Erlinda Gasingan Ramos, private
respondents herein, filed an action for ejectment against Lagrimas A. Boy
(Lagrimas), petitioner herein, with the Metropolitan Trial Court of Manila.
Spouses Ramos alleged that they are the owners of a parcel of land with an area
of 55.75 square meters, and the house existing thereon, situated at 1151
Florentino Torres St., Singalong, Manila. They acquired the said properties
from Lagrimas who sold the same to them by virtue of a Deed of Absolute
Sale. Lagrimas requested for time to vacate the premises, and they agreed
thereto, because they were not in immediate need of the premises. Time came
when they needed the said house as they were only renting their own residence.
They then demanded that Lagrimas vacate the subject premises, but she refused
to do so.
Lagrimas alleged that in order to accommodate her brothers need for a
placement fee to
work abroad, she borrowed P15,000 from the spouses Ramos, who asked for
the subject property as collateral. The spouses Ramos caused her to sign a Deed
of Absolute Sale purporting to show that she sold the property in question to
them for the sum of P31,000. The balance of P16,000 was promised to be paid
on that date, but the promise was never fulfilled. Then, Erlinda Ramos and
Lagrimas executed an agreement (Kasunduan) acknowledging that the subject
parcel of land, together with the upper portion of the house thereon, had been
sold by Lagrimas to the spouses Ramos for P31,000; that of the said price, the
sum of P22,500 (representing P15,000 cash loan plus P7,500 as interest) had
been paid; that the balance of P8,500 would be paid later on; and that
possession of the property would be transferred to the spouses Ramos only
upon full payment of the purchase price. Lagrimas admitted that the counsel of
the spouses Ramos sent her a letter demanding that she vacate the premises.
Lagrimas alleged that the demand for her to pay the sum of P6,000 per month
has no legal basis. Lagrimas was summoned by the Punong Barangay for
conciliation, but no settlement was reached.
The MeTC noted the existence of a Deed of Absolute Sale executed by
the spouses
Ramos and Lagrimas. The Deed was duly acknowledged before a Notary
Public and the parties therein did not deny its due execution. The MeTC
observed that Lagrimas defense that the spouses Ramos still had to pay the
amount of P16,000 to complete the full consideration of P31,000 was nowhere
to be found in the Deed of Absolute Sale. The MeTC held that the Kasunduan,
which Lagrimas attached to her Answer, cannot be given binding effect. The
MeTC stated that while Erlinda Ramos admitted the existence of said
document, she thought that Lagrimas was only asking for an additional amount.
Erlinda Ramos claimed that after signing and reading the document, she
realized that it did not contain the true facts of the situation since they had
already purchased the subject property and were, therefore, the owners thereof.
Erlinda Ramos, thereafter, refused to give her residence certificate and asked
the notary public not to notarize the document. Said incident was attested to by
way of affidavit by Lutgarda Reyes, the friend and companion of Lagrimas.
Moreover, it was held that the continued occupation by Lagrimas of said
property after the sale, without payment of rent, was by mere tolerance.
MeTC - Private Respondents
The RTC held that the Kasunduan was binding between the parties and
was the true
agreement between them. It ruled that pending the determination of the
question of ownership, it cannot deprive the party in actual possession of the
right to continue peacefully with said possession. Since the question of
ownership was inextricably woven with that of possession, the RTC held that
the MeTC should have dismissed the case because jurisdiction pertains to
another tribunal.
RTC - Petitioner
Marianita C. Valera was originally one of the tenants/residents of 669 square
meters of land owned by the PNB. She constructed a house on a 55.75 square
meter portion of the said land. In 1984, she sold the house and only her rights
26
as tenant of the land to private respondent, because the PNB had not yet sold
the land to the residents. The following year, the sale of the land to the
residents had already been accomplished. Hence, she sold the house and her
rights and interests to the land to the private respondent. Eventually, the private
respondent executed a deed of absolute sale in which she sold the same
property acquired from Marianita C. Valera to the petitioners, for the price of
P31,000.00. The Court of Appeals did not give credence to the statement in the
Kasunduan that private respondents paid only P22,500 to petitioner since her
indebtedness already reached P26,200. Also, the Court of Appeals stated that
the fact that petitioner has remained in possession of the property sold, and paid
its real estate taxes, would have made out a case for equitable mortgage.
However, it noted that petitioner did not raise this defense, but admitted having
sold the property to private respondents, alleging only that they have not paid
the purchase price in full. It, therefore, ruled that the preponderance of
evidence is against petitioner.
CA - Private Respondents
ISSUE: Whether or not the private respondents have no right to material
possession since they have not paid the property in full.
RULING: The only issue for resolution in an unlawful detainer case is
physical or material possession of the property involved, independent of any
claim of ownership by any of the party litigants. Thus, in forcible entry and
unlawful detainer cases, if the defendant raises the question of ownership in his
pleadings and the question of possession cannot be resolved without deciding
the issue of ownership, the inferior courts have the undoubted competence
provisionally to resolve the issue of ownership for the sole purpose of
determining the issue of possession.
It has been established that petitioner sold the subject property to
private respondents for
the price of P31,000, as evidenced by the Deed of Absolute Sale, the due
execution of which was not controverted by petitioner. The contract is absolute
in nature, without any provision that title to the property is reserved in the
vendor until full payment of the purchase price. By the contract of sale,
petitioner (as vendor), obligated herself to transfer the ownership of, and to
deliver, the subject property to private respondents (as vendees) after they paid
the price of P31,000. Under Article 1477 of the Civil Code, the ownership of
the thing sold shall be transferred to the vendee upon the actual or constructive
delivery thereof. In addition, Article 1498 of the Civil Code provides that when
the sale is made through a public instrument, as in this case, the execution
thereof shall be equivalent to the delivery of the thing which is the object of the
contract, if from the deed the contrary does not appear or cannot clearly be
inferred. In this case, the Deed of Absolute Sale does not contain any
stipulation against the constructive delivery of the property to private
respondents. In the absence of stipulation to the contrary, the ownership of the
property sold passes to the vendee upon the actual or constructive delivery
thereof. The Deed of Absolute Sale, therefore, supports private respondents
right of material possession over the subject property.
The finding of the MeTC, sustained by the Court of Appeals, is that the
continued
occupation by petitioner of said property after the sale, without payment of
rent, was by mere tolerance. Private respondents claimed that petitioner
requested for time to vacate the premises and they agreed thereto because they
did not need the property at that time. However, when private respondents were
asked to vacate their rented residence, they demanded that petitioner vacate the
subject property, but petitioner refused to do so. A person who occupies the
land of another at the latter's tolerance or permission, without any contract
between them, is bound by an implied promise that he will vacate the same
upon demand, failing which a summary action for ejectment is the proper
remedy against him.
WHEREFORE, the assailed decision of the Court of Appeals, which reversed
and set aside the decision of the Regional Trial Court, and reinstated the
decision of the Metropolitan Trial Court, is hereby AFFIRMED.
ROBERTO D. TUAZON vs.LOURDES Q. DEL ROSARIO-SUAREZ,
CATALINA R. SUAREZ-DE LEON, WILFREDO DE LEON, MIGUEL
LUIS S. DE LEON, ROMMEL LEE S. DE LEON, and GUILLERMA L.
SANDICO-SILVA, as attorney-in-fact of the defendants, except Lourdes
Q. Del Rosario-Suarez
G.R No. 168325 December 8, 2010
Facts:
Respondent Lourdes Q. Del Rosario-Suarez (Lourdes) was the owner of a
parcel of land, containing more or less an area of 1,211 square meters located
along Tandang Sora Street, Barangay Old Balara, Quezon City and previously
27
covered by Transfer Certificate of Title (TCT) No. RT-56118 issued by the
Registry of Deeds of Quezon City.
On June 24, 1994, petitioner Roberto D. Tuazon (Roberto) and Lourdes
executed a Contract of Lease over the abovementioned parcel of land for a
period of three years. The lease commenced in March 1994 and ended in
February 1997. During the effectivity of the lease, Lourdes sent a letter dated
January 2, 1995 to Roberto where she offered to sell to the latter subject parcel
of land. She pegged the price at P37,541,000.00 and gave him two years from
January 2, 1995 to decide on the said offer.
On June 19, 1997, or more than four months after the expiration of the Contract
of Lease, Lourdes sold subject parcel of land to her only child, Catalina Suarez-
De Leon, her son-in-law Wilfredo De Leon, and her two grandsons, Miguel
Luis S. De Leon and Rommel S. De Leon (the De Leons), for a total
consideration of onlyP2,750,000.00 as evidenced by a Deed of Absolute
Sale executed by the parties. TCT No. 177986 was then issued by the Registry
of Deeds of Quezon City in the name of the De Leons.
The new owners through their attorney-in-fact, Guillerma S. Silva, notified
Roberto to vacate the premises. Roberto refused hence, the De Leons filed a
complaint for Unlawful Detainer before the Metropolitan Trial Court (MeTC)
of Quezon City against him. On August 30, 2000, the MeTC rendered a
Decision ordering Roberto to vacate the property for non-payment of rentals
and expiration of the contract.
Issue:
Whether or not Lourdes violated Roberto’s right to buy the subject property
under the principle of right of first refusal by not giving him notice and the
opportunity to buy the property under the same terms and conditions.
Held:
No. This case involves an option contract and not a contract of a right of
first refusal.
From the foregoing, it is thus clear that an option contract is entirely different
and distinct from a right of first refusal in that in the former, the option granted
to the offeree is for a fixed period and at a determined price. Lacking these
two essential requisites, what is involved is only a right of first refusal.
In this case, the controversy is whether the letter of Lourdes to Roberto dated
January 2, 1995 involved an option contract or a contract of a right of first
refusal.
It is clear that the letter embodies an option contract as it grants Roberto a fixed
period of only two years to buy the subject property at a price certain
of P37,541,000.00. It being an option contract, the rules applicable are found in
Articles 1324 and 1479 of the Civil Code which provide:
Art. 1324. When the offerer has allowed the offeree a certain period to accept,
the offer may be withdrawn at any time before acceptance by communicating
such withdrawal, except when the option is founded upon a consideration, as
something paid or promised.
Art. 1479. A promise to buy and sell a determinate thing for a price certain is
reciprocally demandable.
An accepted unilateral promise to buy or to sell a determinate thing for a price
certain is binding upon the promissor if the promise is supported by a
consideration distinct from the price.
In a situation where the lessor makes an offer to sell to the lessee a certain
property at a fixed price within a certain period, and the lessee fails to accept
the offer or to purchase on time, then the lessee loses his right to buy the
property and the owner can validly offer it to another.
FEDERICO SERRA vs.
CA AND RIZAL COMMERCIAL BANKING CORPORATION
G.R. No. 103338 January 4, 1994
FACTS:
Disputed in the present case is the efficacy of a "Contract of Lease with Option
to Buy", entered into between petitioner Federico Serra and private respondent
28
Rizal Commercial Banking Corporation. (RCBC). Petitioner is the owner of a
374 square meter parcel of land located at Quezon St., Masbate, Masbate.
Sometime in 1975, respondent bank, in its desire to put up a branch in Masbate,
Masbate, negotiated with petitioner for the purchase of the then unregistered
property. On May 20, 1975, a contract of LEASE WITH OPTION TO BUY
was instead forged by the parties which provided that Serra will lease the
subject land to RCBC for a period of 25 years from June 1, 1975 to June 1,
2000, that the RCBC has the option to purchase the same at P210.00 per square
meter within a period of 10 years from May 25, 1975, the date of the signing of
the Contract, and that Serra will have to register said land under the Torrens
System to the Register of Deeds of Province of Masbate within the same 10-
year option period. Pursuant to said contract, RCBC constructed improvements
on the subject land to house its branch office, while the petitioner had the
property, within 3 years from 1975, duly registered with OCT No. 0-232 under
the Torrens System. Later, petitioner alleged that as soon as he had the property
registered, he kept on pursuing the branch manager for the sale of the lot as per
their agreement, but it was not until September 4, 1984, that RCBC decided to
exercise the option. RCBC informed petitioner, through a letter, of its intention
to buy the property at the agreed price of not greater than P210.00 per square
meter or a total of P78,430.00, but petitioner replied that he is no longer selling
the property. RCBC then filed an action for specific performance and damages
against Serra in March 1985 alleging that during the negotiations it made clear
to petitioner that it intends to stay permanently on property once its branch
office is opened unless the exigencies of the business requires otherwise.
RTC- dismissed the complaint. Although it found the contract to be valid, the
court nonetheless ruled that the option to buy in unenforceable because it
lacked a consideration distinct from the price and RCBC did not exercise its
option within reasonable time. The prayer for readjustment of rental was
denied, as well as that for moral and exemplary damages.
RTC- Motion for reconsideration by RCBC was granted on January 9, 1989,
the court reversed itself, the dispositive portion reads:
The defendant is hereby ordered to execute and deliver the proper deed of sale
in favor of plaintiff selling, transferring and conveying the property covered by
and described in the OCT 0-232 of the Registry of Deeds of Masbate for the
sum of P78,540,00. …
CA-affirmed the findings of the trial court that:
1. The contract is valid and that the parties perfectly understood the contents
thereof;
2. The option is supported by a distinct and separate consideration as embodied
in the agreement;
3. There is no basis in granting an adjustment in rental.
ISSUES:
 WON the disputed contract is a contract of adhesion.
 WON the OPTION cannot exercised because there was no
consideration to support the option, distinct from the price
 WON the respondent court gravely abused its discretion in not granting
currency adjustment on the already eroded value of the stipulated
rentals for twenty-five years.
RULING:
There is no dispute that the contract is valid and existing between the parties, as
found by both the trial court and the appellate court. Neither do we find the
terms of the contract unfairly lopsided to have it ignored.
 YES. A contract of adhesion is one wherein a party, usually a corporation,
prepares the stipulations in the contract, while the other party merely
affixes his signature or his "adhesion" thereto. These types of contracts are
as binding as ordinary contracts. Because in reality, the party who adheres
to the contract is free to reject it entirely. Although, this Court will not
hesitate to rule out blind adherence to terms where facts and
circumstances will show that it is basically one-sided. Petitioner is a CPA-
Lawyer. It is evident that a man of his stature should have been more
cautious in transactions he enters into, particularly where it concerns
valuable properties. He is amply equipped to drive a hard bargain if he
would be so minded to.
 NO. In the present case, the consideration is even more onerous on the
part of the lessee since it entails transferring of the building and/or
improvements on the property to petitioner, should respondent bank fail to
exercise its option within the period stipulated.
29
 In a unilateral promise to sell, where the debtor fails to withdraw the
promise before the acceptance by the creditor, the transaction becomes a
bilateral contract to sell and to buy, because upon acceptance by the
creditor of the offer to sell by the debtor, there is already a meeting of the
minds of the parties as to the thing which is determinate and the price
which is certain. 1In which case, the parties may then reciprocally demand
performance.
Jurisprudence has taught us that an optional contract is a privilege existing
only in one party — the buyer. For a separate consideration paid, he is
given the right to decide to purchase or not, a certain merchandise or
property, at any time within the agreed period, at a fixed price. This being
his prerogative, he may not be compelled to exercise the option to buy
before the time expires.
On the other hand, what may be regarded as a consideration separate from
the price is discussed in the case of Vda. de Quirino v. Palarca. The case
also involved a lease contract with option to buy where we had occasion
to say that "the consideration for the lessor's obligation to sell the leased
premises to the lessee, should he choose to exercise his option to purchase
the same, is the obligation of the lessee to sell to the lessor the building
and/or improvements constructed and/or made by the former, if he fails to
exercise his option to buy leased premises."
 NO. Contracts are to be construed according to the sense and meaning of
the terms which the parties themselves have used. In the present dispute,
there is evidence to show that the intention of the parties is to peg the price
at P210 per square meter. Moreover, by his subsequent acts of having the
land titled under the Torrens System, and in pursuing the bank manager to
effect the sale immediately, means that he understood perfectly the terms
of the contract. He even had the same property mortgaged to the
respondent bank sometime in 1979, without the slightest hint of wanting to
abandon his offer to sell the property at the agreed price of P210 per square
meter.
The contract is the law between the parties and if there is indeed reason to
adjust the rent, the parties could by themselves negotiate for the
amendment of the contract. Neither could we consider the decline of the
purchasing power of the Philippine peso from 1983 to the time of the
commencement of the present case in 1985, to be so great as to result in an
extraordinary inflation.
SC- We find that the contract of "LEASE WITH OPTION TO BUY" between
petitioner and respondent bank is valid, effective and enforceable, the price
being certain and that there was consideration distinct from the price to support
the option given to the lessee. Dismissed.
ARTICLE 1482
SPOUSES SERRANO VS. CAGUIAT
Facts:
Spouses Onnie and Amparo Herrera are the registered owners of a lot located
in Las Pinas, Metro Manila. Sometime in March 1990, Godofredo Caguiat
offered to buy the lot. Petitioners agreed to sell it at P1,500 per square meter.
Respondent then gave petitioners P100,000 as partial payment. In turn,
petitioners gave respondent the corresponding receipt, entitled Receipt for
Partial Payment, stating that respondent promised to pay the balance of the
purchase price on or before March 23, 1990.
On March 28, 1990, respondent wrote petitioners informing them of his
readiness to pay the balance of the contract price and requesting them to
prepare the final deed of sale. Petitioners then replied that petitioner Amparo
Herrera is leaving for abroad on or before April 15, 1990 and that they are
cancelling the transaction. Petitioners also informed respondent that he can
recover the earnest money of P100,000 anytime.
In view of the cancellation of the contract by the petitioners, respondent filed a
complaint against them for specific performance and damages. RTC ruled that
there was a perfected contract of sale between the parties, as P100, 000 was
paid, whether as downpayment or earnest money and ordered petitioners to
execute a final deed of sale in favor of respondent. CA affirmed the judgment
of RTC.
Issue/s:
Main: WON the document entitled Receipt for Partial Payment signed by both
parties is a contract to sell or a contract of sale
Ancillary: WON the earnest money of P100, 000 given by respondent is a
proof of a perfected contract of sale
Held:
30
The Receipt for Partial Payment shows that the true agreement between
the parties is a contract to sell. First, ownership over the property was
retained by the petitioners and was not to pass to respondent until full payment
of the purchase price. Petitioners have the right to rescind the contract
unilaterally the moment respondent fails to pay within the fixed period.
Second, the agreement between the parties was not embodied in a deed of sale.
Third, petitioners retained possession of the certificate of title of the lot, thus,
there is neither actual nor constructive delivery of ownership of the property.
Article 1482 does not apply in this case. It is true that Article 1482 provides
that whenever earnest money is given in a contract of sale, it shall be
considered as part of the price and proof of the perfection of the contract.
However, this article speaks of earnest money given in a contract of sale. In
this case, the earnest money was given in a contract to sell. The earnest money
forms part of the consideration only if the sale is consummated upon full
payment of the purchase price. Now, since the earnest money was given in a
contract to sell, Article 1482, which speaks of a contract of sale, does not
apply.
SAN MIGUEL PROPERTIES PHILS., INC. v SPOUSES ALFREDO and
GRACE HUANG, G. R. No. 137290, July 31, 2000
Facts: Petitioner San Miguel Properties is a domestic corporation engaged in
the purchase and sale of real properties. Part of its inventory is two parcels of
land and the properties were offered for sale for P52, 140,000.00 in cash. The
offer was made to Atty.. Dauz who was acting for respondent spouses as
undisclosed principals. In a letter, Atty. Dauz signified her clients’ interest in
purchasing the properties for the amount for which they were offered by
petitioner, under the following terms: the sum of P500, 000.00 would be given
as earnest money and the balance would be paid in eight equal monthly
installments from May to December, 1994. However, petitioner refused the
counter-offer.
Subsequently Petitioner San Miguel Properties offered two parcels of land for
sale and the offer was made to the agent of the respondents. An “earnest-
deposit” of P1 million was offered by the respondents and was accepted by the
petitioner’s authorized officer subject to certain terms.
Petitioner, through its executive officer, wrote the respondent’s lawyer that
because the parties failed to agree on the terms and conditions of the sale
despite the extension granted by the petitioner, the latter was returning the
“earnest-deposit”.
The respondents demanded execution of a deed of sale covering the properties
and attempted to return the “earnest-deposit” but petitioner refused on the
ground that the option to purchase had already expired.
A complaint for specific performance was filed against the petitioner and the
latter filed a motion to dismiss the complaint because the alleged “exclusive
option” of the respondents lacked a consideration separate and distinct from the
purchase price and was thus unenforceable; the complaint did not allege a
cause of action because there was no “meeting of the mind” between the parties
and therefore the contact of sale was not perfected.
The trial court granted the petitioner’s motion and dismissed the action. The
respondents filed a motion for reconsideration but were denied by the trial
court. The respondents elevated the matter to the Court of Appeals and the
latter reversed the decision of the trial court and held that a valid contract of
sale had been complied with. Petitioner filed a motion for reconsideration but
was denied.
Issue: Whether or not there was a perfected contract of sale between the
parties
Ruling: In the present case, the P1 million "earnest-deposit" could not have
been given as earnest money as contemplated in Art. 1482 because, at the time
when petitioner accepted the terms of respondents offer of March 29, 1994,
their contract had not yet been perfected. This is evident from the following
conditions attached by respondents to their letter, to wit: (1) that they be given
the exclusive option to purchase the property within 30 days from acceptance
of the offer; (2) that during the option period, the parties would negotiate the
terms and conditions of the purchase; and (3) petitioner would secure the
necessary approvals while respondents would handle the documentation.
The first condition for an option period of 30 days sufficiently shows that a sale
was never perfected. As petitioner correctly points out, acceptance of this
condition did not give rise to a perfected sale but merely to an option or an
accepted unilateral promise on the part of respondents to buy the subject
properties within 30 days from the date of acceptance of the offer. Such option
giving respondents the exclusive right to buy the properties within the period
agreed upon is separate and distinct from the contract of sale which the parties
may enter. All that respondents had was just the option to buy the properties
which privilege was not, however, exercised by them because there was a
failure to agree on the terms of payment. No contract of sale may thus be
enforced by respondents.
31
Furthermore, even the option secured by respondents from petitioner was
fatally defective. Under the second paragraph of Art. 1479, an accepted
unilateral promise to buy or sell a determinate thing for a price certain is
binding upon the promisor only if the promise is supported by a distinct
consideration. There is no showing here of any consideration for the option.
Lacking any proof of such consideration, the option is unenforceable.
Equally compelling as proof of the absence of a perfected sale is the second
condition that, during the option period, the parties would negotiate the terms
and conditions of the purchase. The stages of a contract of sale are as follows:
(1) negotiation, covering the period from the time the prospective contracting
parties indicate interest in the contract to the time the contract is perfected;
(2) perfection, which takes place upon the concurrence of the essential
elements of the sale which are the meeting of the minds of the parties as to the
object of the contract and upon the price; and (3) consummation, which begins
when the parties perform their respective undertakings under the contract of
sale, culminating in the extinguishment thereof. In the present case, the parties
never got past the negotiation stage. While the parties already agreed on the
real properties which were the objects of the sale and on the purchase price, the
fact remains that they failed to arrive at mutually acceptable terms of payment,
despite the 45-day extension given by petitioner.
It is not the giving of earnest money, but the proof of the concurrence of
all the essential elements of the contract of sale which establishes the
existence of a perfected sale. In the absence of a perfected contract of sale,
it is immaterial whether Isidro A. Sobrecarey had the authority to enter
into a contract of sale in behalf of petitioner. This issue, therefore, needs
no further discussion.
WHEREFORE, the decision of the Court of Appeals is REVERSED and
respondents complaint is DISMISSED.
G.R. No. 199648 January 28, 2015
FIRST OPTIMA REALTY CORPORATION, Petitioner, vs.
SECURITRON SECURITY SERVICES, INC., Respondent.
Doctrine: In a potential sale transaction, the prior payment of earnest money
even before the property owner can agree to sell his property is irregular, and
cannot be used to bind the owner to the obligations of a seller under an
otherwise perfected contract of sale; to cite a well-worn cliche, the carriage
cannot be placed before the horse. Respondent’s subsequent sending of the
February 4, 2005 letter and check to petitioner – without awaiting the approval
of petitioner’s board of directors and Young’s decision, or without making a
new offer – constitutes a mere reiteration of its original offer which was
already rejected previously; thus, petitioner was under no obligation to reply to
the February 4, 2005 letter. Petitioner can never be made to push through with
the sale which they never agreed in the first place.
Facts:
1) Respondent Securitron’s office is located beside the property owned (“the
subject property) by the petitioner (or FORC). Looking to expand its
business and add to its existing offices, the general manager (“Eleazar”) of
the respondent sent a letter dated December 9, 2004 addressed to petitioner
- through its Executive Vice-President (“Young”) an offer to purchase the
subject property at P6,000.00 per square meter. Eleazar was unable to
personally negotiate with Young or the petitioner’s BOD. His negotiations
are confined with telephone calls with Young’s secretary and a certain
Remoso.
2) Eleazar personally went to petitioner’s office offering to pay for the
subject property in cash, which he already brought with him. However,
Young declined to accept payment, saying that she still needed to secure
her sister’s advice on the matter. She likewise informed Eleazar that prior
approval of petitioner’s Board of Directors was required for the transaction,
to which remark Eleazar replied that respondent shall instead await such
approval.
3) On February 4, 2005, respondent sent a Letter to the petitioner which
indicate among others the payment of earnest money in the amount of
P100,000.00. A check with the same amount accompanied such letter. The
letter and check was coursed through the petitioner’s receptionist who then
issued a provisional receipt. The check was eventually deposited with and
credited to petitioner’s bank account.
4) Thereafter, respondent through counsel demanded in writing that
petitioner proceed with the sale of the property. In a March 3, 2006 Letter
addressed to respondent’s counsel, petitioner wrote back, which indicate,
32
 among others, that the BOD failed to pass a resolution to date whether it
agrees to sell the property and that FORC will not accept the offer to buy.
It also includes the request to coordinate with FORC for the refund of the
amount received.
5) RTC: respondent filed a civil case against petitioner for specific
performance with damages to compel the latter to consummate the
supposed sale of the subject property. Respondent claimed that there was a
perfected contract of sale. It ruled for the respondent, thus, the petitioner
was directed to receive the reaming balance and to execute the
corresponding deed of sale to the respondent.
6) CA: the appeal made out a case that no earnest money can be considered
to have been paid to petitioner as the supposed payment was received by a
mere receiving clerk, who was not authorized to accept the same; that the
required board of directors resolution authorizing the sale of corporate
assets cannot be dispensed with in the case of petitioner; that whatever
negotiations were held between the parties only concerned the possible
sale, not the sale itself, of the subject property; that without the written
authority of petitioner’s board of directors, Young cannot enter into a sale
of its corporate property; and finally, that there was no meeting of the
minds between the parties in the first place. CA affirmed the RTC. CA
cited Article 1482 of the Civil Code which provides that whenever earnest
money is given in a contract of sale, it shall be considered as part of the
price and proof of the perfection of the contract. Although the presumption
is not conclusive, as the parties may treat the earnest money differently,
there is nothing alleged in the present case that would give rise to a
contrary presumption.
Hence, this petition.
Issue: WON the receipt of earnest money is indicative of a perfected sale
between the parties
Held: No. The earnest money in this case is not conclusive of the perfection of
the sale.
In the present case, the parties never got past the negotiation stage. Nothing
shows that the parties had agreed on any final arrangement containing the
essential elements of a contract of sale, namely, (1) consent or the meeting of
the minds of the parties; (2) object or subject matter of the contract; and (3)
price or consideration of the sale.
Respondent’s subsequent sending of the February 4, 2005 letter and check to
petitioner – without awaiting the approval of petitioner’s board of directors and
Young’s decision, or without making a new offer – constitutes a mere
reiteration of its original offer which was already rejected previously; thus,
petitioner was under no obligation to reply to the February 4, 2005 letter. It
would be absurd to require a party to reject the very same offer each and every
time it is made; otherwise, a perfected contract of sale could simply arise from
the failure to reject the same offer made for the hundredth time. Thus, said
letter cannot be considered as evidence of a perfected sale, which does not exist
in the first place; no binding obligation on the part of the petitioner to sell its
property arose as a consequence. The letter made no new offer replacing the
first which was rejected.
Since there is no perfected sale between the parties, respondent had no
obligation to make payment through the check; nor did it possess the right to
deliver earnest money to petitioner in order to bind the latter to a sale. As
contemplated under Art. 1482 of the Civil Code, "there must first be a
perfected contract of sale before we can speak of earnest money." "Where the
parties merely exchanged offers and counter-offers, no contract is perfected
since they did not yet give their consent to such offers. Earnest money applies
to a perfected sale. This Court is inclined to accept petitioner’s explanation that
since the check was mixed up with all other checks and correspondence sent to
and received by the corporation during the course of its daily operations,
Young could not have timely discovered respondent’s check payment;
petitioner’s failure to return the purported earnest money cannot mean that it
agreed to respondent’s offer. By coursing the February 4, 2005 letter and check
through petitioner’s mere receiving clerk or receptionist instead of directly with
Young’s office, respondent placed itself under grave suspicion of putting into
effect a premeditated plan to unduly bind petitioner to its rejected offer, in a
manner which it could not achieve through negotiation and employing normal
business practices. It impresses the Court that respondent attempted to secure
the consent needed for the sale by depositing part of the purchase price and
under the false pretense that an agreement was already arrived at, even though
there was none. Respondent achieved the desired effect up to this point, but the
Court will not be fooled.
33
In a potential sale transaction, the prior payment of earnest money even before
the property owner can agree to sell his property is irregular, and cannot be
used to bind the owner to the obligations of a seller under an otherwise
perfected contract of sale; to cite a well-worn cliché, the carriage cannot be
placed before the horse. The property owner-prospective seller may not be
legally obliged to enter into a sale with a prospective buyer through the latter’s
employment of questionable practices which prevent the owner from freely
giving his consent to the transaction; this constitutes a palpable transgression of
the prospective seller’s rights of ownership over his property, an anomaly
which the Court will certainly not condone. An agreement where the prior free
consent of one party thereto is withheld or suppressed will be struck down, and
the Court shall always endeavor to protect a property owner’s rights against
devious practices that put his property in danger of being lost or unduly
disposed without his prior knowledge or consent. As this ponente has held
before, "[t]his Court cannot presume the existence of a sale of land, absent any
direct proof of it.
Nor will respondent's supposed payment be 'treated as a deposit or guarantee;
its actions will not be dignified and must be called for what they are: they were
done irregularly and with a view to acquiring the subject property against
petitioner's consent.
Wherefore, petition is granted. Petitioner First Optima Realty Corporation is
ordered to REFUND the amount of P100,000.00 to respondent Securitron
Security Services, Inc. without interest, unless petitioner has done so during the
course of the proceedings.
PCI Leasing v Giraffe-X Imaging
FACTS: PCI LEASING and GIRAFFE entered into a Lease Agreement, the
former leased out to the latter one set of Silicon High Impact Graphics and one
unit of Oxberry Cinescan 6400-10. A year into the Agreement, GIRAFFE
defaulted in its monthly rental-payment. PCI sent a demand letter to GIRAFFE,
which did not comply. PCI filed a case against GIRAFFE, praying for the
issuance of a Writ of Replevin for the recovery of the leased property. PCI
posted a Replevin bond and the trial court issued the writ, paving the way for
PCI to secure the seizure and delivery of the equipment. GIRAFFE filed a
Motion to Dismiss, arguing that the seizing of the 2 leased equipment stripped
PCI of its cause of action. Giraffe argues that pursuant to Art. 1484 on
installment sales of personal property, PCI is barred from pursuing any claim
arising from the lease agreement, adding that the agreement is really a lease of
movables with option to buy. GIRAFFE asserts that the civil complaint filed by
PCI is proscribed by the application of Arts. 1484 and 1485. PCI counters that
the contract is a straight lease without option to buy and is covered by RA5980,
as amended by RA8556 (Financing Company Act of 1998), and is outside the
coverage of the Recto Law.
ISSUE: Whether the agreement is covered by Arts. 1484 and 1485.
HELD: The Lease Agreement is in reality a LEASE WITH AN OPTION TO
PURCHASE THE EQUIPMENT. This has been made manifest by the PCI’s
actions, like the declarations made in its demand letters. There could be no
other explanation than that if GIRAFFE paid the balance, then it could keep the
equipment for its own; if not, then it should return them. This is clearly an
option to purchase given to GIRAFFE. Art. 1485 should apply.
The is a situation where the financing company can withhold and conceal up to
the last moment, its intention to sell the property subject of the finance lease, in
order to circumvent the Recto Law. PCI pointed out that the basic “lease
agreement” does not contain a “purchase option” clause. The absence,
however, does not argue against the idea that the parties entered into a lease
with option to purchase. The Court has been aware of the practice of vendors of
personal property of denominating a contract of sale on installment as one of
lease to prevent the owenership of the object of the sale from passing to the
vendee until full payment of purchase price.
Being leases of personal property with option to purchase, the contracts are
subject to the provision that when a lessor in such case “has chosen to deprive
the lessee of the enjoyment of such personal property,” “he shall have no
further action” against the lessee “for the recovery of any unpaid balance”
owing by the latter, “any agreement to the contrary shall be void.”
In choosing , through Replevin, to deprive GIRAFFE of possession of the
leased equipment, PCI waived its right to rbing an action to recover unpaid
rentals on the said leased items. Paragraph 3, Art. 1484 in relation to Art. 1485,
cannot be any clearer.
The remedies provided for in Art. 1484 are alternative, not cumulative. The
exercise of one bars the exercise of the others. This limitation applies to
contracts purporting to be leases of personal property with option to buy by
virtue of Art. 1485. The condition that the lessor has deprived the lessee of
possession or enjoyment of the thing for the purpose of applying Art. 1484 was
34
fulfilled in this case by the filing of PCI of the complaint for a sum of money
with prayer for replevin to recover possession of the office equipment. By
virtue of the writ of seizure issued by the trial court, PCI has effectively
deprived GIRAFFE of their use, precluding the former from maintaining an
action for recovery of tha balance of the purchase price plus interest.
The imperatives of honest dealings in the Civil Code under Human Relations
dmeand us to hold PCI to its word in the demand letter. Otherwise, even if
GIRAFFE surrendered the equipment, PCI can still sue upon its claim. The use
of the word “or” in the letter conveys the intention not to claim both the unpaid
balance and the equipment. If we add up amounts paid by GIRAFFE (value of
property and amount claimed), it would amount to P21,779,029.47. The Recti
Law was precisely enacted to prevent this kind of situation.
BANK OF THE PHILIPPINES vs. SANCHEZ (November 2014)
FACTS
Vicente Victor C. Sanchez (Vicente), Kenneth Nereo Sanchez and
Imelda C. V da De Sanchez owned a parcel of land located at Panay Avenue,
Quezon City consisting of 900 sq.m. The property was registered under TCT
No. 156254 of the Registry of Deeds of QC. On October 10, 1988, Garcia,
doing business under the name TransAmerican Sales and Exposition, Inc.
(TSEI), offered to buy the subject Property for P1.8M with terms and
conditions and the offer was good for only (7) days. The period elapsed with
the parties failing to come to an agreement. On the third week of October 1988,
Felisa Yap, widow of Kenneth Sanchez, and Garcia met at the QC Sports Club
wherein they agreed to the sale of the subject property with terms and
conditions.
Pursuant to this agreement, Yap turned over to Garcia the original
owner’s copy of TCT 156254, etc., while Garcia paid Yap 50,000 as earnest
money. Afterwards, Yap required the occupants of the subject property to
vacate the same. Immediately after it was vacated, Garcia, took possession of
the lot, installed his own caretaker, and demolished the house on the property.
Morever, he advertised the construction and sale of "Trans American
Townhouse V" thereon. Despite numerous demands, Garcia failed to pay the
balance of the purchase price as agreed upon. On December 8, 1988, Vicente
came to Manila from Laguna and proceeded to Garcia’s office to get the
checks. However, out of the six (6) checks that were presented to them, four (4)
of them were post-dated, further delaying their overdue payment. In order to
properly document such check payments, the parties executed an agreement.
Subsequently, the first (4) checks were deposited without issue but the
last (2) checks were dishonored because of insufficiency of funds. On January
1989, Yap informed Garcia that she and Vicente were rescinding the agreement
while demanding the return of the original owner’s copy of TCT 156254.
On February 15, 1990, Yap and Vicente filed before the RTC of QC,
Branch 89 a Complaint or the rescission of contract, restitution and damages
with prayer for TRO/preliminary injunction against TSEI and Garcia.
The RTC and CA ruled in favor of the Sanchezes hence, this petition
for certiorari.
ISSUE WON the Sanchezes were entitled to rescind the agreement?
RULING
Article 1191. The power to rescind obligations is implied in reciprocal
ones, in case one of the obligors should not comply with what is
incumbent upon him.
The injured party may choose between the fulfillment and the
rescission of the obligation, with the payment of damages in either case.
He may also seek rescission, even after he has chosen fulfillment, if the
latter should become impossible.
The court shall decree the rescission claimed, unless there be just
cause authorizing the fixing of a period.
This is understood to be without prejudice to the rights of third persons who
have acquired the thing, in accordance with Articles 1385 and 1388 and the
Mortgage Law.
Article 1385. Rescission creates the obligation to return the things,
which were the object of the contract, together with their fruits, and the
price with its interest; consequently, it can be carried out only when he
who demands rescission can return whatever he may be obliged to
restore. Neither shall rescission take place when the things, which are
the object of the contract, are legally in the possession of third persons
who did not act in bad faith.
In this case, indemnity for damages may be demanded from the person causing
the loss.
In the extant case, the failure of TSEI to pay the consideration for the sale
of the subject property entitled the Sanchezes to rescind the Agreement.
And in view of the finding that the intervenors acted in bad faith in purchasing
35
the property, the subsequent transfer in their favor did not and cannot bar
rescission.x
G.R. No. 179594 September 11, 2013
MANUEL UY & SONS, INC., Petitioner, vs.
VALBUECO, INCORPORATED, Respondent.
Doctrine: R.A. No. 6552 recognizes in conditional sales of all kinds of real
estate (industrial, commercial and residential) the right of the seller to cancel
the contract upon non-payment by the buyer, which is simply an event that
prevents the obligation of the vendor to convey title from acquiring binding
force.
Facts:
1) Petitioner is the owner of the subject lots. In 1973, two Conditional
Deeds of Sale were executed by petitioner in favor of the respondent. The
Deeds of Conditional Sale provided, among others, that the purchase price
shall be paid in 3 installments with interest, that the vendee be granted a
grace period of 30 days from date of installment and that ownership of the
properties shall not pass to the vendee until after full payment of the
purchase price.
2) Respondent was able to pay petitioner the amount of P275,055.558 as
partial payment for the two properties corresponding to the initial payments
and the first installments of the said properties. However, respondent
suspended further payment as it was not satisfied with the manner
petitioner complied with its obligations under the conditional deeds of sale.
Consequently, in 1978, petitioner sent respondent a letter informing
respondent of its intention to rescind the conditional deeds of sale and
attaching therewith the original copy of the respective notarial rescission.
3) In 1994, respondent filed a Complaint for specific performance and
damages against petitioner with the RTC. Such was dismissed without
prejudice for lack of interest, as respondent's counsel failed to attend the
pre-trial conference.
4) In 2001, respondent again filed with the RTC a complaint for specific
performance and damages, seeking to compel petitioner to accept the
balance of the purchase price for the two conditional deeds of sale and to
execute the corresponding deeds of absolute sale. Respondent contended
that its non-payment of the installments was due to the following
reasons:(1) Petitioner refused to receive the balance of the purchase price
as the properties were mortgaged and had to be redeemed first before a
deed of absolute sale could be executed; (2) Petitioner assured that the
existing mortgages on the properties would be discharged on or before May
20,1974, or that petitioner did not inform it (respondent) that the mortgages
on the properties were already released; and (3) Petitioner failed to fully
eject the unlawful occupants in the area. On the other hand, Petitioner
claimed that it gave respondent a notice of notarial rescission of both
conditional deeds of sale that would take effect 30 days from receipt
thereof. The notice of notarial rescission was allegedly received by
respondent in 1978. Petitioner asserted that since respondent failed to pay
the full purchase price of the subject lots, both conditional deeds of sale
were rescinded as of April 16, 1978; hence, respondent had no cause of
action against it.
5) RTC: Dismissed the complaint.
6) CA: reversed and set aside the RTC decision. It reinstated the complaint
of respondent, and directed petitioner to execute deeds of absolute sale in
favor of respondent after payment of the balance of the purchase price of
the subject lots. The CA held that the two conditional deeds of sale in this
case are contracts to sell. It stated that the law applicable to the said
contracts to sell on installments is R.A. No. 6552, specifically Section
4thereof, as respondent paid less than two years in installments. It held that
upon repeated defaults in payment by respondent, petitioner had the right
to cancel the said contracts, but subject to the proper receipt of respondent
of the notice of cancellation or the demand for the rescission of the
contracts by notarial act. However, the CA found that petitioner sent the
notice of notarial rescission to the wrong address. The business address of
respondent, as used in all its transactions with petitioner, was the 7th Floor,
Bank of the Philippine Islands Building, Ayala Avenue, Makati City, but
the notice of notarial rescission was sent to the wrong address at the 6th
Floor, SGC Building, Salcedo Street, Legaspi Village, Makati, Metro
Manila.
Hence, this petition.
Issue: WON the contracts to sell were validly rescinded.
36
Held:
Ramos v. Heruela held that Articles 1191 and 1592 of the Civil Code are
applicable to contracts of sale, while R.A. No. 6552or the Realty Installment
Buyer Act applies to contracts to sell. R.A. No. 6552 recognizes in conditional
sales of all kinds of real estate (industrial, commercial, residential) the right of
the seller to cancel the contract upon non-payment of an installment by the
buyer, which is simply an event that prevents the obligation of the vendor to
convey title from acquiring binding force. It is noteworthy that upon review of
the records of this case, the Court finds that respondent had been served a
notice of the notarial rescission of the conditional deeds of sale when it was
furnished with the petitioner's Answer, dated February 16, 1995, to its first
Complaint filed on November 28, 1994 with the RTC but the complaint was
later dismissed without prejudice xxx. Five years after the dismissal of the first
Complaint, respondent again filed this case for specific performance in which it
received the petitioner’s answer containing the notarial rescission of the
conditional sale. Since respondent already received notices of the notarial
rescission of the conditional deeds of sale, together with petitioner’s Answer to
the first Complaint five years before it filed this case, it can no longer deny
having received notices of the notarial rescission in this case, as respondent
admitted the same when it attached the notices of notarial rescission to its
Reply in this case. Consequently, respondent is not entitled to the relief granted
by the Court of Appeals.
Wherefore, petition is granted.
PEOPLES INDUSTRIAL AND COMMERCIAL CORPORATION,
petitioner, vs.
COURT OF APPEALS AND MAR-ICK INVESTMENT
CORPORATION, respondents.
[G.R. No. 112733. October 24, 1997]
FACTS:
Mar-ick Investment Corporation (Mar-ick) is the owner of Mar-ick
Subdivision. On May 29, 1961, it entered into 6 agreements with People's
Industrial Commercial Corporation whereby it agreed to sell PICC 6
subdivision lots. Also, the agreement contains the following provisions:
9. Should the PURCHASER fail to make the payment of any of the
monthly installments as agreed herein, within One Hundred Twenty
(120) days from its due date, this contract shall, by the mere fact of
nonpayment, expire by it self and become null and void without
necessity of notice to the PURCHASER or of any judicial declaration
to the effect, and any and all sums of money paid under this contract
shall be considered and become rentals on the property, and in this
event, the PURCHASER should he/she be in possession of the
property shall become a mere intruder or unlawful detainer of the same
and may be ejected therefrom by means provided by law for
trespassers or unlawful detainers. Immediately after the expiration of
the 120 days provided for in this clause, the OWNER shall be at liberty
to dispose of and sell said parcel of land to any other person in the
same manner as if this contract had never been executed or entered
into.
The breach by the PURCHASER of any of the conditions considered
herein shall have the same effect as non-payment of the installments of
the purchase price.
xxx
After the lapse of 10 years, PICC still had not fully paid the full purchase price;
it had only paid the down payment and 8 installments with a remaining balance
of P214,418.00. Because of this, a letter was sent to PICC demanding PICC to
remove the wall that they have constructed in the lots otherwise Mar-ick will
resort to court action and a charge of P1.00/sqm per month will be charged for
reasonable rentals for the use of the lands.
After a series of negotiations, a new contract to sell was entered into involving
7 lots with total area of 1,693 sqm. This contract states that the old contract
shall be cancelled and this new contract entered is to avoid litigation. The new
contract price would be P423,250.00 with a down payment of P42,325.00 and
the balance of P380,250.00 be paid in 48 equal monthly amortization
payments. This contract bears the date of October 11, 1983 but neither parties
signed it. 5 checks were issued to Mar-ick amounting to P37,642.72 but PICC
did not encash said checks and instead filed a complaint for accion publiciana
de posesion against PICC.
RTC: rendered a decision finding that original agreements of parties were
validly cancelled in accordance with provision no. 9 and that the parties did not
enter into a new agreement because it did not sign the draft contract. The
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receipt of the 5 checks did not amount to perfection because it was not
encashed and no benefit was derived from it by Mar-ick. Also, there was no
meeting of the minds because it was not in a note or memorandum as under the
Statue of Frauds. The court ruled that reasonable rentals of P1.00/sqm per
month (May 29, 1961 up to the date they will vacate the lots), attorneys fees,
and costs of suit shall be paid to Mar-ick.
CA: affirmed in toto RTC's decision
ISSUE/S:
1. WON 1961 agreements were validly rescinded
2. WON there was a perfected and enforceable contract of sale (sic) on October
11, 1983 which modified the earlier contracts to sell
HELD:
1. The contracts to sell of 1961 were cancelled in virtue of provision No. 9
thereof to which the parties voluntarily bound themselves when PICC failed to
abide by its obligation to pay the installments in accordance with the contracts
to sell, provision No. 9 automatically took effect. That Mar-ick failed to
observe Section 4 of Republic Act No. 6552, the Realty installment Buyer
Protection Act, is if no moment. Republic Act No. 6552 was approved on
August 26, 1972, long after provision No.9 of the contracts to sell had become
automatically operational; nothing in its provisions state that it has retroactive
effect and, therefore, it could not have encompassed the cancellation of the
contracts to sell in this case. The following provisions prove that such are
contracts to sell:
3. Title to said parcel of land shall remain in the name of the OWNER
until complete payment by the PURCHASER of all obligations herein
stipulated, at which time the OWNER agrees to execute a final deed of
sale in favor of the PURCHASER and cause the issuance of a
certificate of title in the name of the latter, free from liens and
encumbrances except those provided in the Land Registration Act,
those imposed by the authorities, and those contained in Clauses Nos.
Five (5) and Six (6) of this agreement.
x x x x x x x x x.
4. The PURCHASER shall be deemed for all purpose to take
possession of the parcel of land upon payment of the down or first
payment; provided, however, that his/her possession under this section
shall be only of the that of a tenant or lessee and subject to ejectment
proceeding during all the period of this agreement.
5.The parcel of land subject of this agreement shall be used by the
PURCHASER exclusively for legal purposes, and he shall not be
entitled to take or remove soil, stones, or gravel from it or any other
lots belonging to the owner.
Being contracts to sell, article 592 of the Civil Code which requires rescission
either by judicial action or notarial act is not applicable.
Moreover, the letters adequately satisfied the notice requirement stipulated in
provision No.9 of the contracts to sell. If PICC had not agreed to the automatic
and extrajudicial cancellation of the contracts, it could have gone to court to
impugn the same but it did not. Instead, it sought to enter into a new contract to
sell, thereby confirming its veracity and validity of the extrajudicial rescission.
Extrajudicial rescission, after all, has legal effect where the other party does not
oppose it.
2. The fact that the contract was not signed by PICC because under the new
agreement, it covered 7 lots while their agreement was only for 6 lots.
According to PICC, Mar-ick had conceded that Lot No. 2 was meant for
PICC’s right of way and, therefore, it could not have been part of the properties
it wanted to buy. It is on record, moreover, that the only agreement that the
parties arrived at in a conference at the Silahis Hotel was the price indicated in
the draft contract.
The number of lots to be sold is a material component of the contract to sell.
Without an agreement on the matter, the parties may not in any way be
considered as having arrived at a contract under the law. The parties failure to
agree on a fundamental provision of the contract was aggravated by PICC's
failure to deposit the installments agreed upon. This Courts disquisition on the
matter in the Adelfa Properties case is relevant. Thus:
The mere sending of a letter by the vendee expressing the intention to
pay, without the accompanying payment, is not considered a valid
tender of payment. Besides, a mere tender of payment is not sufficient
to compel private respondents to deliver the property and execute the
deed of absolute sale. It is consignation which is essential in order to
extinguish petitioners obligation to pay the balance of the purchase
price. The rule is different in case of an option contract or in legal
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 redemption or in a sale with right to repurchase, wherein consignation
is not necessary because this cases involves an exercise of a right
privilege (to buy, redeem, or repurchase) rather than the discharge of
the obligation, hence tender of payment would be sufficient to preserve
the right or privilege. This is because the provision on consignation are
not applicable when there is no obligation to pay. A contract to sell, as
in the case before us, involves the performance of an obligation, not
merely the exercise of the privilege or a right. Consequently,
performance or payment may be effected not by tender of payment
alone but by both tender and consignation.
PICC only made the tender of down payment. There is no record that it made
tender of payment of the installments or to amend the contract to reflect the
true intention of the parties as regards the number of lots to be sold. Indeed, by
PICC’s inaction, Mar-ick may not be judicially enjoined to validate a contract
that the former appeared to have taken for granted.
SWEDISH MATCH V CA
FACTS:
Swedish Match, AB is a corporation organized under the laws of
Sweden with three subsidiary corporations in the
Philippines: Phimco Industries, Inc., Provident Tree Farms, Inc., and
OTT/Louie (Phils.), Inc. In 1988, STORA, the then parent company of SMAB,
decided to sell SMAB of Sweden. Ed Enriquez, Vice-President of Swedish
Match Sociedad Anonimas, informed the Philippine financial and business
circles that the Phimco shares were for sale under strict instructions that the
sale of such should be executed on or before 30 June 1990.
The AFP Retirement and Separation Benefits System, Antonio Litonjua, the
president and general manager of ALS, through a letter, submitted a firm offer
to buy all of the latter’s shares in Phimco and all of Phimco’s shares in
Provident Tree Farm, Inc. and OTT/Louie (Phils.), Inc. for the sum
of P750,000,000.00. Through its Chief Executive Officer, Massimo Rossi,
SMAB, in its letter, informed respondents that their price offer was below their
expectations but urged them to review and analyze the value and profit
potentials of the Phimco shares, with the assurance that respondents would
enjoy a certain priority.
Thereafter, an exchange of correspondence ensued between petitioners and
respondents. In his letter, Litonjua offered to buy the disputed shares
for US$36 million. Further trade of information took place. Litonjua informed
that they may not be able to submit their final bid on the given deadline
considering that the acquisition audit (Requested on the JUNE 11- LETTER
made by Rossi; subject to reimbursement by SMAB up to the amount of
US$20,000 if things don’t go ALS’s way) of Phimco and the review of the
draft agreements have not been completed. In a letter dated July 3, 1990, Rossi
informed Litonjua that on July 2, SMAB signed a conditional contract with a
local group for the disposal of Phimco and that the latter’s bid would no longer
be considered unless the local group would fail to consummate the transaction
on or before September 15, 1990. Irked by SMAB’s decision to junk his
bid, Litonjua asserted that the US$36 million bid was final, thus finalizing the
terms of the sale. After 2 months from receipt of Litonjua’s letter, Enriquez
informed the former that the proposed sale with the local buyers did not
materialize and invited to resume negotiations for the sale of Phimco shares
based on a new set of conditions, as to reducing the period of sale from 30-day
to 15, to which Litonjua expressed objections and emphasized that the new
offer constituted an attempt to reopen the already perfected contract of sale.
ALS filed before the RTC a complaint for specific performance with
damages against SMAB. SMAB alleged that ALS have no cause of
action, contending that no perfected contract existed. There was no written
instrument or document evidencing the alleged sale of the Phimco shares to
respondents. RTC dismissed the complaint. It ruled that there was no
perfected contract of sale between petitioners and respondents. SMAB did not
accept the bid offer of respondents as the letter was a mere invitation for
respondents to conduct a due diligence process or pre-acquisition audit.
Assuming that respondents bid was favored by an oral acceptance made in
private by officers of SMAB, such acceptance was merely preparatory to a
formal acceptance by the SMAB
CA reversed the RTC’s decision. It ruled that the series of written
communications between petitioners and respondents collectively constitute a
sufficient memorandum of their agreement under Article 1403, NCC. The
letters exchanged between the parties were sufficient to establish that an
agreement to sell the disputed shares to respondents was reached. It ordered the
remand of the case to the trial court for further proceedings.
ALS then argued that there was partial performance of the perfected contract
on their part based on the conduct of the acquisition audit. They averred that
39
petitioners agreed to be bound by the results of the audit and offered to
reimburse the costs thereof.
ISSUES:
WON there was a perfected contract of sale between petitioners and
respondents with respect to the Phimco shares.
RULING:
NO. The exchange of correspondence between the parties hardly constitutes
the note or memorandum within the context of Article 1403 of the Civil Code.
Rossi’s letter dated 11 June 1990 is not complete in itself. First, it does not
indicate at what price the shares were being sold. Respondents were supposed
to submit their final offer after the completion of the due diligence process but
they weren’t able to. This undoubtedly proves that there was as yet no definite
agreement as to the price. Second, the letter does not state the mode of
payment of the price which is an essential element such that a disagreement on
the manner of payment is tantamount to a failure to agree on the price.
CONCEPT OF A CONTRACT
CONCEPT OF A CONTRACT OF SALE
STAGES OF A CONTRACT
***A negotiation is formally initiated by an offer. A perfected promise merely
tends to insure and pave the way for the celebration of a future contract. An
imperfect promise (policitacion), on the other hand, is a mere unaccepted
offer. Public advertisements or solicitations and the like are ordinarily
construed as mere invitations to make offers or only as proposals. At any time
prior to the perfection of the contract, either negotiating party may stop the
negotiation. The offer, at this stage, may be withdrawn; the withdrawal is
effective immediately after its manifestation, such as by its mailing and not
necessarily when the offeree learns of the withdrawal.

Litonjua’s proposal of the acquisition of the Phimco shares for US$36 million
was merely an offer. The statement that they would not be able to submit their
final bid by 30 June 1990 is inconsistent with their declaration that the US$36
million was their final bid. The lack of a definite offer on the part of
respondents could not possibly serve as the basis of their claim that the sale of
the Phimco shares in their favor was perfected, for one essential element of a
contract of sale was obviously wanting, the price certain in money or its
equivalent.

Granting arguendo, that the amount of US$36 million was a definite offer, it

would remain as a mere offer in the absence of evidence of its acceptance. The
acceptance must be identical in all respects with that of the offer so as to
produce consent or meeting of the minds. Respondent’s attempt to prove the
alleged verbal acceptance of their US$36 million bid becomes futile for there
was in the first place no meeting of the minds with respect to the price. Its plea
of partial performance should likewise fail. The acquisition
audit was conducted as part of the due diligence process to help them arrive at
and make their final offer.

NOTE: STATUTE OF FRAUDS Articles 1403 and 1405

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