Case Digests by: Joeie Domingo Sales (Atty. Jazzie Sarona SY2011-2012) I. BASIC CONCEPTS I.

.1 Contract of Sale (Art.1458) 1) Roberts vs. Papio 2) Acap vs. CA FACTS: the Cadastral Survey of Hinigaran, Negros Occidental was evidenced by OCT The title was issued and is registered in the name of spouses Santiago Vasquez and Lorenza Oruma. After both spouses died, their only son Felixberto inherited the lot. In 1975, Felixberto executed a duly notarized document entitled "Declaration of Heirship and Deed of Absolute Sale" in favor of Cosme Pido. since 1960, petitioner Teodoro Acap had been the tenant of a portion of the said land, covering an area of nine thousand five hundred (9,500) square meters. When ownership was transferred in 1975 by Felixberto to Cosme Pido, Acap continued to be the registered tenant thereof and religiously paid his leasehold rentals to Pido and thereafter, upon Pido's death, to his widow Laurenciana. The controversy began when Pido died intestate and his surviving heirs executed a notarized document denominated as "Declaration of Heirship and Waiver of Rights of Lot No. 1130 Hinigaran Cadastre," to Edy Delos Reyes he and petitioner entered into an oral lease agreement wherein petitioner agreed to pay ten (10) cavans of palay per annum as lease rental. In 1982, petitioner allegedly complied with said obligation. In 1983, however, petitioner refused to pay any further lease rentals on the land, prompting private respondent to seek the assistance of the then Ministry of Agrarian Reform (MAR) in Hinigaran, Negros Occidental. Petitioner did not attend the conference but sent his wife instead to the conference. she stated that she and her husband (Teodoro) did not recognize private respondent's claim of ownership over the land. On 28 April 1988, after the lapse of four (4) years, private respondent field a complaint for recovery of possession and damages against petitioner, alleging in the main that as his leasehold tenant, petitioner refused and failed to pay the agreed annual rental of ten (10) cavans of palay despite repeated demands. petitioner reiterated his refusal to recognize private respondent's ownership over the subject land. Petitioner further claimed before the trial court that he had no knowledge about any transfer or sale of the lot to private respondent in 1981 and even the following year after Laurenciana's departure for abroad. He denied having entered into a verbal lease tenancy contract with private respondent and that assuming that the said lot was indeed sold to private respondent without his knowledge, R.A. 3844, as amended, grants him the right to redeem the same at a reasonable price.

ISSUE: WON "Declaration of Heirship and Waiver of Rights is a recognized mode of acquiring ownership. WON such Declaration of Heirship and Waiver of Rights can be considered a Deed of Sale. HELD: ownership and real rights are acquired only pursuant to a legal mode or process. While title is the juridical justification, mode is the actual process of acquisition transfer of ownership over a thing in question. Under Article 712 of the Civil Code, the modes of acquiring ownership are generally classified into two (2) classes, namely, the original mode (i.e, through occupation, acquisitive prescription, law or intellectual creation) and the derivative mode (i.e., through succession mortis causa or tradition as a result of certain contracts, such as sale, barter, donation, assignment or mutuum). In the case at bench, the trial court was obviously confused as to the nature and effect of the Declaration of Heirship and Waiver of Rights, equating the same with a contract (deed) of sale. They are not the same. In a Contract of Sale, one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other party to pay a price certain in money or its equivalent.

Upon the other hand, a declaration of heirship and waiver of rights operates as a public instrument when filed with the Registry of Deeds whereby the intestate heirs adjudicate and divide the estate left by the decedent among themselves as they see fit. It is in effect an extrajudicial settlement between the heirs under Rule 74 of the Rules of Court. Hence, there is a marked difference between a sale of hereditary rights and a waiver of hereditary rights. The first presumes the existence of a contract or deed of sale between the parties. The second is, technically speaking, a mode of extinction of ownership where there is an abdication or intentional relinquishment of a known right with knowledge of its existence and intention to relinquish it, in favor of other persons who are co-heirs in the succession. Private respondent, being then a stranger to the succession of Cosme Pido, cannot conclusively claim ownership over the subject lot on the sole basis of the waiver document which neither recites the elements of either a sale, or a donation or any other derivative mode of acquiring ownership. the "Declaration of Heirship and Waiver of Rights" was excluded by the trial court because the document was neither registered with the Registry of Deeds nor identified by the heirs of Cosme Pido. There is no showing that private respondent had the same document attached to or made part of the record. What the trial court admitted was a notice of adverse claim filed with Registry of Deeds which contained the Declaration of Heirship with Waiver of rights and was annotated at the back of the Original Certificate of Title to the land in question. A notice of adverse claim, by its nature, does not however prove private respondent's ownership over the tenanted lot. "A notice of adverse claim is nothing but a notice of a claim adverse to the registered owner, the validity of which is yet to be established in court at some future date, and is no better than a notice of lis pendens which is a notice of a case already pending in court." It is to be noted that while the existence of said adverse claim was duly proven, there is no evidence whatsoever that a deed of sale was executed between Cosme Pido's heirs and private respondent transferring the rights of Pido's heirs to the land in favor of private respondent. Private respondent's right or interest therefore in the tenanted lot remains an adverse claim which cannot by itself be sufficient to cancel the OCT to the land and title the same in private respondent's name. Consequently, while the transaction between Pido's heirs and private respondent may be binding on both parties, the right of petitioner as a registered tenant to the land cannot be perfunctorily forfeited on a mere allegation of private respondent's ownership without the corresponding proof thereof.

3) PUP vs. CA FACTS: In the early sixties, petitioner National Development Corporation (NDC), a government owned and controlled corporation created under CA 182 as amended by CA 311 and PD No. 668, had in its disposal a ten (10)-hectare property located along Pureza St., Sta. Mesa, Manila. The estate was popularly known a the NDC compound. Sometime in May 1965 private respondent Firestone Ceramics Inc. (FIRESTONE) manifested its desire to lease a portion of the property for its ceramic manufacturing business. Consequently NDC and FIRESTONE entered into renewable contracts of lease In consequence of the agreements, FIRESTONE constructed on the leased premises several warehouses and other improvements needed for the fabrication of ceramic products. The controversy began when upon extending the term of the lease, subject to several conditions among which was that in the event NDC "with the approval of higher authorities, decide to dispose and sell these properties including the lot, priority should be given to the LESSEE(Firestone) In pursuance of the resolution, the parties entered into a new agreement for a ten-year lease of the property, renewable for another ten (10) years, expressly granting FIRESTONE the first option to purchase the leased premises in the event that it decided "to dispose and sell these properties including the lot In early 1988 when FIRESTONE, cognizant of the impending expiration of their lease agreement with NDC, informed the latter through several letters and telephone calls that it was renewing its lease over the property. While its letter of 17 March 1988 was answered by Antonio A. Henson, General Manager of NDC, who promised immediate action on the matter, the rest of its communications remained unacknowledged. FIRESTONE's predicament worsened when rumors of NDC's supposed plans to dispose of the subject property in favor of Polytechnic University of the Philippines (PUP) came to its knowledge. Forthwith, FIRESTONE served notice on NDC conveying its desire to purchase the property in the exercise of its contractual right of first refusal. Apprehensive that its interest in the property would be disregarded, FIRESTONE instituted an action for specific performance to compel NDC to sell the leased property in its favor. F

IRESTONE averred that it was pre-empting the impending sale of the NDC compound to petitioner PUP in violation of its leasehold rights over the 2.60-hectare property and the warehouses thereon which would expire in 1999. FIRESTONE likewise prayed for the issuance of a writ of preliminary injunction to enjoin NDC from disposing of the property pending the settlement of the controversy PUP moved to intervene and asserted its interest in the subject property PUP referred to Memorandum Order No. 214 issued by then President Aquino ordering the transfer of the whole NDC compound to the National Government, which in turn would convey the aforementioned property in favor of PUP at acquisition cost. The issuance was supposedly made in recognition of PUP's status as the "Poor Man's University" as well as its serious need to extend its campus in order to accommodate the growing student population. The order of conveyance of the 10.31-hectare property would automatically result in the cancellation of NDC's total obligation in favor of the National Government in the amount of P57,193,201.64. RTC granted PUPs motion to intervene, CA affirmed after Firestone filed for a motion for a reconsideration. Likewise, SC upheld the decision of CA to include PUP in the proceedings FIRESTONE amended its complaint to include PUP and Executive Secretary Catalino Macaraeg, Jr., as party-defendants

ISSUES: (a) whether the courts a quo erred when they "conjectured" that the transfer of the leased property from NDC to PUP amounted to a sale; and, (b) whether FIRESTONE can rightfully invoke its right of first refusal. HELD: Paradoxically, our paramount interest in education does not license us, or any party for that matter, to destroy the sanctity of binding obligations. Education may be prioritized for legislative or budgetary purposes, but we doubt if such importance can be used to confiscate private property such as FIRESTONE's right of first refusal. that NDC itself sold the whole 10.31-hectare property to PUP at only P57,193,201.64 which represents NDC's obligation to the national government that was, in exchange, written off. The price offered per square meter of the property was pegged at P554.74. FIRESTONE's leased premises would therefore be worth only P14,423,240.00 the conveyance of the property from NDC to PUP was one of absolute sale, for a valuable consideration, and not a mere paper transfer as argued by petitioners. A contract of sale, as defined in the Civil Code, is a contract where one of the parties obligates himself to transfer the ownership of and to deliver a determinate thing to the other or others who shall pay therefore a sum certain in money or its equivalent. 32 It is therefore a general requisite for the existence of a valid and enforceable contract of sale that it be mutually obligatory, i.e., there should be a concurrence of the promise of the vendor to sell a determinate thing and the promise of the vendee to receive and pay for the property so delivered and transferred. The preponderance of evidence shows that NDC sold to PUP the whole NDC compound, including the leased premises, without the knowledge much less consent of private respondent FIRESTONE which had a valid and existing right of first refusal. All three (3) essential elements of a valid sale, without which there can be no sale, were attendant in the "disposition" and "transfer" of the property from NDC to PUP consent of the parties, determinate subject matter, and consideration therefor. Furthermore, the cancellation of NDC's liabilities in favor of the National Government in the amount of P57,193,201.64 constituted the "consideration" for the sale. It is a settled principle in civil law that when a lease contract contains a right of first refusal, the lessor is under a legal duty to the lessee not to sell to anybody at any price until after he has made an offer to sell to the latter at a certain price and the lessee has failed to accept it. 39 The lessee has a right that the lessor's first offer shall be in his favor. Manila Container vs. PNB Cruz vs. Fernando Delpher Trades Corp vs. IAC Toyota Shaw vs. CA Nabus vs. Pacson Joseph & Sons vs. CA

4) 5) 6) 7) 8) 9)

I.2 Stages in the Life of a Contract of Sale 10) San Miguel Properties vs. Spouses Huang

II.

ESSENTIAL CHARACTERISTICS OF A CONTRACT OF SALE

II.1 Nominate and Principal II.2 Consensual 11) Quijada vs. CA FACTS: Trinidad Quijada together with her siblings executed a conditional deed of donation of the two-hectare parcel of land subject of the case in favor of the Municipality of Talacogon, subject to the condition of the construction of the provincial high school in Talacogon. Apparently, Trinidad remained in possession of the parcel of land despite the donation. On July 29, 1962, Trinidad sold one (1) hectare of the subject parcel of land to defendant-appellant Regalado Mondejar and verbally sold the remaining another (1) hectare without the benefit of a written deed of sale and evidenced solely by receipts of payment. In 1980, the heirs of Trinidad, who at that time was already dead, filed a complaint for forcible entry against Mondejar. In 1987, the proposed provincial high school having failed to materialize, the Sangguniang Bayan of the municipality of Talacogon enacted a resolution reverting the two (2) hectares of land donated back to the donors.In the meantime, Mondejar sold portions of the land to defendants-appellants (respondents) Fernando Bautista, Rodolfo Goloran, Efren Guden and Ernesto Goloran. Petitioners filed this action against defendants-appellants (respondents) alleging that their deceased mother never sold, conveyed, transferred or disposed of the property in question to any person or entity much less to Regalado Mondejar save the donation made to the Municipality of Talacogon in 1956; that at the time of the alleged sale to Mondejar by Quijada, the land still belongs to the Municipality of Talacogon, hence, the supposed sale is null and void. ISSUE: WON there was a valid Contract of Sale between Quijada and the respondents with respect to the absence of ownership at the time of the institution of the contract. HELD: The donation made by Trinidad Quijada and her siblings was subject to the condition that the donated property shall be "used solely and exclusively as a part of the campus of the proposed Provincial High School in Talacogon." The donation further provides that should "the proposed Provincial High School be discontinued or if the same shall be opened but for some reason or another, the same may in the future be closed" the donated property shall automatically revert to the donor. Such condition, not being contrary to law, morals, good customs, public order or public policy was validly imposed in the donation. When the Municipality's acceptance of the donation was made known to the donor, the former became the new owner of the donated property donation being a mode of acquiring and transmitting ownership notwithstanding the condition imposed by the donee. The donation is perfected once the acceptance by the donee is made known to the donor. Accordingly, ownership is immediately transferred to the latter and that ownership will only revert to the donor if the resolutory condition is not fulfilled. In this case, that resolutory condition is the construction of the school. It has been ruled that when a person donates land to another on the condition that the latter would build upon the land a school, the condition imposed is not a condition precedent or a suspensive condition but a resolutory one. Thus, at the time of the sales made in 1962 towards 1968, the alleged seller (Trinidad) could not have sold the lots since she had earlier transferred ownership thereof by virtue of the deed of donation. So long as the resolutory condition subsists and is capable of fulfillment, the donation remains effective and the donee continues to be the owner subject only to the rights of the donor or his successors-in-interest under the deed of donation. Since no period was imposed by the donor on when must the donee comply with the condition, the latter remains the owner so long as he has tried to comply with the condition within a reasonable period. Such period, however, became irrelevant herein when the donee-Municipality manifested through a resolution that it cannot comply with the condition of building a school and the same was made known to the donor. Only then when the non-fulfillment of the resolutory condition was brought to the donor's knowledge that ownership of the donated property reverted to the donor as provided in the automatic reversion clause of the deed of donation. The donor may have an inchoate interest in the donated property during the time that ownership of the land has not reverted to her. Such inchoate interest may be the subject of contracts including a contract of sale. Sale, being a consensual contract, is perfected by mere consent, which is manifested the moment there is a meeting of the minds as to the offer and acceptance thereof on three (3) elements: subject matter, price and terms of payment of the price. Ownership by the seller on the thing sold at the time of the perfection of the contract of sale is not an element for its perfection. What the law requires is that the seller has the right to transfer ownership at the time the thing sold is delivered. Perfection per se does not transfer ownership which occurs upon the actual or constructive delivery of the thing sold.

A perfected contract of sale cannot be challenged on the ground of non-ownership on the part of the seller at the time of its perfection; hence, the sale is still valid. The consummation, however, of the perfected contract is another matter. It occurs upon the constructive or actual delivery of the subject matter to the buyer when the seller or her successors-in-interest subsequently acquires ownership thereof. Such circumstance happened in this case when petitioners who are Quijada's heirs and successors-ininterest became the owners of the subject property upon the reversion of the ownership of the land to them. Consequently, ownership is transferred to respondent Mondejar and those who claim their right from him. Article 1434 of the New Civil Code supports the ruling that the seller's "title passes by operation of law to the buyer." This rule applies not only when the subject matter of the contract of sale is goods, but also to other kinds of property, including real property.

12) Laforteza vs. Machuca FACTS: The property involved consists of a house and lot located at Sherwood Street, Marcelo Green Village, Paraaque, Metro ManilaThe subject property is registered in the name of the late Francisco Q. Laforteza. Defendant Lea Zulueta-Laforteza executed a Special Power of Attorney in favor of defendants Roberto Z. Laforteza and Gonzalo Z. Laforteza, Jr., appointing both as her Attorney-in-fact authorizing them jointly to sell the subject property and sign any document for the settlement of the estate of the late Laforteza. In the exercise of the above authority, the heirs of the late Laforteza represented by their attorneys in fact entered into a Memorandum of Agreement (Contract to Sell) with the plaintiff over the subject property for the sum P630,000.00 payable as follows: (a). P30,000.00 as earnest money, to be forfeited in favor of the defendants if the sale is not effected due to the fault of the plaintiff; (b). P600,000.00 upon issuance of the new certificate of title in the name of the late Francisco Q. Laforteza and upon execution of an extra-judicial settlement of the decedent's estate with sale in favor of the plaintiff. Significantly, the fourth paragraph of the Memorandum of Agreement (Contract to Sell) dated January 20, 1989 contained a provision as follows: ' . . . Upon issuance by the proper Court of the new title, the BUYER- LESSEE shall be notified in writing and said BUYER-LESSEE shall have thirty (30) days to produce the balance of P600,000.00 which shall be paid to the SELLER-LESSORS upon the execution of the Extra-judicial Settlement with sale.' Plaintiff paid the earnest money of P30,000.00, plus rentals for the subject property.

Later, defendant heirs, wrote a letter to the plaintiff furnishing the latter a copy of the reconstituted title

Defendants, however, insisted on the rescission of the Memorandum of Agreement.

to the subject property, advising him that he had (30) days to produce the balance P600,000.00 under the Memorandum of Agreement which plaintiff received on the same date. Plaintiff sent the defendant heirs a letter requesting for an extension of the (30) DAYS deadline within which to produce the balance of P600,000.00. Thereafter, plaintiff informed the defendant heirs, that he already had the balance of P600,000.00 covered by United Coconut Planters Bank Manager's Check. However, the defendants, refused to accept the balance. Defendant Roberto Z. Laforteza had told him that the subject property was no longer for sale. Defendants then informed the plaintiff that they were canceling the Memorandum of Agreement (Contract to Sell) in view of the plaintiff's failure to comply with his contractual obligations. Plaintiff reiterated his request to tender payment of the balance of P600,000.00. Thereafter, plaintiff filed the instant action for specific performance. The lower court rendered judgment in favor of the plaintiff. The petitioners contend that the Memorandum of Agreement is merely a lease agreement with "option to purchase". As it was merely an option, it only gave the respondent a right to purchase the subject property within a limited period without imposing upon them any obligation to purchase it. Since the respondent's tender of payment was made after the lapse of the option agreement, his tender did not give rise to the perfection of a contract of sale. It is further maintained by the petitioners that rescission of the contract was already out of the question. Rescission implies that a contract of sale was perfected unlike the Memorandum of Agreement in question which as previously stated is allegedly only an option contract.

The obligation of the petitioners to sell the property to the respondent was conditioned upon the issuance of a new certificate of title and the execution of the extrajudicial partition with sale and payment of the P600,000.00. This is why possession of the subject property was not delivered to the respondent as the owner of the property but only as the lessee thereof. And the failure of the respondent to pay the purchase price in full prevented the petitioners' obligation to convey title from acquiring obligatory force.

ISSUE: WON the contract entered into was a Contract of Sale or a Contract to Sell? Contract of Sale. HELD: A contract of sale is a consensual contract and is perfected at the moment there is a meeting of the minds upon the thing which is the object of the contract and upon the price. From that moment the parties may reciprocally demand performance subject to the provisions of the law governing the form of contracts. The elements of a valid contract of sale under Article 1458 of the Civil Code are (1) consent or meeting of the minds; (2) determinate subject matter and (3) price certain in money or its equivalent. In the case at bench, there was a perfected agreement between the petitioners and the respondent whereby the petitioners obligated themselves to transfer the ownership of and deliver the house and lot and the respondent to pay the price amounting to P600,000.00. All the elements of a contract of sale were thus present. However, the balance of the purchase price was to be paid only upon the issuance of the new certificate of title in lieu of the one in the name of the late Laforteza and upon the execution of an extrajudicial settlement of his estate. Although the memorandum agreement was also denominated as a "Contract to Sell", we hold that the parties contemplated a contract of sale. A deed of sale is absolute in nature although denominated a conditional sale in the absence of a stipulation reserving title in the petitioners until full payment of the purchase price. In such cases, ownership of the thing sold passes to the vendee upon actual or constructive delivery thereof. The mere fact that the obligation of the respondent to pay the balance of the purchase price was made subject to the condition that the petitioners first deliver the reconstituted title of the house and lot does not make the contract a contract to sell for such condition is not inconsistent with a contract of sale. An option is a contract granting a privilege to buy or sell within an agreed time and at a determined price. An option contract is a separate and distinct contract from that which the parties may enter into upon the consummation of the option. An option must be supported by consideration. The petitioners fail to distinguish between a condition imposed upon the perfection of the contract and a condition imposed on the performance of an obligation. Failure to comply with the first condition results in the failure of a contract, while the failure to comply with the second condition only gives the other party the option either to refuse to proceed with the sale or to waive the condition. Art. 1545. Where the obligation of either party to a contract of sale is subject to any condition which is not performed, such party may refuse to proceed with the contract or he may waive performance of the condition. If the other party has promised that the condition should happen or be performed, such first mentioned party may also treat the nonperformance of the condition as a breach of warranty. Where the ownership in the things has not passed, the buyer may treat the fulfillment by the seller of his obligation to deliver the same as described and as warranted expressly or by implication in the contract of sale as a condition of the obligation of the buyer to perform his promise to accept and pay for the thing. In the case at bar, there was already a perfected contract. The condition was imposed only on the performance of the obligations contained therein. Considering however that the title was eventually "reconstituted" and that the petitioners admit their ability to execute the extrajudicial settlement of their father's estate, the respondent had a right to demand fulfillment of the petitioners' obligation to deliver and transfer ownership of the house and lot. Earnest money is something of value to show that the buyer was really in earnest, and given to the seller to bind the bargain. Whenever earnest money is given in a contract of sale, it is considered as part of the purchase price and proof of the perfection of the contract. A contract to sell, is one whereby the prospective seller would explicitly reserve 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 full payment of the price, such payment being a positive suspensive condition, the failure of which is not considered a breach, casual or serious, but simply an event which prevented the obligation from acquiring any obligatory force. The respondent could not therefore be considered in delay for in reciprocal obligations, neither party incurs in delay if the other party does not comply or is not ready to comply in a proper manner with what was incumbent upon him.

A seller cannot unilaterally and extrajudicially rescind a contract of sale where there is no express stipulation authorizing him to extrajudicially rescind. Neither was there a judicial demand for the rescission thereof.

13) Villanueva vs. PNB FACTS: The Special Assets Management Department (SAMD) of the Philippine National Bank (PNB) issued an advertisement for the sale thru bidding of certain PNB properties in Calumpang, General Santos City, including this lots with advertised floor prices of P1,409,000.00 and P2,268,000.00. Bidding was subject to the following conditions: 1) that cash bids be submitted not later than April 27, 1989; 2) that said bids be accompanied by a 10% deposit in manager's or cashier's check; and 3) that all acceptable bids be subject to approval by PNB authorities. Villanueva offered to purchase lots for P3,677,000.00. He also manifested that he was depositing P400,000.00 to show his good faith but with the understanding that said amount may be treated as part of the payment of the purchase price only when his offer is accepted by PNB. At the bottom of said letter there appears an unsigned marginal note stating that P400,000.00 was deposited into Villanueva's account with PNB-General Santos Branch. PNB forwarded the letter of Villanueva to Ramon Guevara, Vice President, SAMD. Guevara informed Villanueva that only Lot No. 19 is available and that the asking price therefor is P2,883,300.00.Guevara further wrote: If our quoted price is acceptable to you, please submit a revised offer to purchase. Sale shall be subject to our Board of Director's approval and to other terms and conditions imposed by the Bank on sale of acquired assets. Instead of submitting a revised offer, Villanueva merely inserted at the bottom of Guevara's letter a marginal note, which reads: CONFORME: PRICE OF P2,883,300.00 (downpayment of P600,000.00 and the balance payable in two (2) years at quarterly amortizations.) Villanueva paid P200,000.00 to PNB which issued O.R. No. 16997 to acknowledge receipt of the "partial payment deposit on offer to purchase." On the dorsal portion of Official Receipt No. 16997, Villanueva signed a typewritten note, stating: This is a deposit made to show the sincerity of my purchase offer with the understanding that it shall be returned without interest if my offer is not favorably considered or be forfeited if my offer is approved but I fail/refuse to push through the purchase. Also, P380,000.00 was debited from Villanueva's Savings Account No. 43612 and credited to SAMD. Thereafter, however, Guevara wrote Villanueva that, upon orders of the PNB Board of Directors to conduct another appraisal and public bidding of Lot No. 19, SAMD is deferring negotiations with him over said property and returning his deposit of P580,000.00. Undaunted, Villanueva attempted to deliver postdated checks covering the balance of the purchase price but PNB refused the same. The RTC granted the Complaint, thus judgment is rendered in favor of the plaintiff and against the defendant directing it to execute a deed of sale in favor of the plaintiff over the lot in dispute after payment of the balance in cash in the amount of P2,303,300.00 PNB appealed to the CA which reversed and set aside the decision, stating that In the case at bench, consent, in respect to the price and manner of its payment, is lacking. The record shows that appellant, thru Guevara's July 6, 1990 letter, made a qualified acceptance of appellee's letter-offer dated June 28, 1990 by imposing an asking price of P2,883,300.00 in cash for Lot 19. The letter dated July 6, 1990 constituted a counter-offer (Art. 1319, Civil Code), to which appellee made a new proposal, i.e., to pay the amount of P2,883,300.00 in staggered amounts, that is, P600,000.00 as downpayment and the balance within two years in quarterly amortizations. CA held that a qualified acceptance, or one that involves a new proposal, constitutes a counter-offer and a rejection of the original offer (Art. 1319). Consequently, when something is desired which is not exactly what is proposed in the offer, such acceptance is not sufficient to generate consent because any modification or variation from the terms of the offer annuls the offer. ISSUE: WON there was a perfected Contract of Sale between respondents PNB and herein petitioner Villanueva HELD: Contracts of sale are perfected by mutual consent whereby the seller obligates himself, for a price certain, to deliver and transfer ownership of a specified thing or right to the buyer over which the latter agrees.

 Mutual consent being a state of mind, its existence may only be inferred from the confluence of two acts

of the parties: an offer certain as to the object of the contract and its consideration, and an acceptance of the offer which is absolute in that it refers to the exact object and consideration embodied in said offer. While it is impossible to expect the acceptance to echo every nuance of the offer, it is imperative that it assents to those points in the offer which, under the operative facts of each contract, are not only material but motivating as well. Anything short of that level of mutuality produces not a contract but a mere counter-offer awaiting acceptance. More particularly on the matter of the consideration of the contract, the offer and its acceptance must be unanimous both on the rate of the payment and on its term. An acceptance of an offer which agrees to the rate but varies the term is ineffective. In sum, the amounts paid by petitioner were not in the nature of downpayment or earnest money but were mere deposits or proof of his interest in the purchase of Lot No. 19. Acceptance of said amounts by respondent does not presuppose perfection of any contract.

14) Fule vs. CA FACTS: Petitioner acquired a 10-hectare property in Tanay, Rizal. He exchanged his Tanay property for a pair of emerald-cut diamond earrings owned by Dr. Ninevetch Cruz. Atty. Belarmino prepared the deed of absolute sale while petitioner and Dr. Cruz attended to the safekeeping of the jewelry. Petitioner signed the deed. Claiming that the jewelry was a counterfeit, petitioner filed a complaint with the RTC praying that the contract of sale over the Tanay property be declared null and void on the ground of fraud and deceit. The lower court ruled that the contract was valid. Petitioner elevated the matter to the Court of Appeals, which affirmed in toto the lower court's decision ISSUE: WON the contract can be voided in accordance with law so as to compel the parties to restore to each other the things that have been the subject of the contract with their fruits, and the price with interest. HELD: The Civil Code provides that contracts are perfected by mere consent. From this moment, the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all the consequences which, according to their nature, may be in keeping with good faith, usage and law. A contract of sale is perfected at the moment there is a meeting of the minds upon the thing which is the object of the contract and upon the price. Being consensual, a contract of sale has the force of law between the contracting parties and they are expected to abide in good faith by their respective contractual commitments. Article 1358 of the Civil Code which requires the embodiment of certain contracts in a public instrument, is only for convenience and registration of the instrument only adversely affects third parties. Formal requirements are, therefore, for the benefit of third parties. Non-compliance therewith does not adversely affect the validity of the contract nor the contractual rights and obligations of the parties thereunder. ". . . Verily, plaintiff is already estopped to come back after the lapse of considerable length of time to claim that what he got was fake. He is a Business Management graduate of La Salle University, a professional banker as well as a jeweler in his own right. Two hours is more than enough time to make a switch of a Russian diamond with the real diamond. It must be remembered that in July 1984 plaintiff made a sketch of the subject jewelries at the Prudential Bank. Plaintiff had a tester at 8:00 p.m. at the residence of Atty. Belarmino. Why then did he not bring it out when he was examining the subject jewelries (sic) at about 6:00 p.m. in the bank's lobby? Obviously, he had no need for it after being satisfied of the genuineness of the subject jewelries. When Dra. Cruz and plaintiff left the bank both of them had fully performed their respective prestations. Once a contract is shown to have been consummated or fully performed by the parties thereto, its existence and binding effect can no longer be disputed. It is irrelevant and immaterial to dispute the due execution of a contract if both of them have in fact performed their obligations thereunder and their respective signatures and those of their witnesses appear upon the face of the document.

It is evident from the facts of the case that there was a meeting of the minds between petitioner and Dr. Cruz. Contracts that are voidable or annullable, even though there may have been no damage to the contracting parties are: (1) those where one of the parties is incapable of giving consent to a contract, and (2) those where the consent is vitiated by mistake, violence, intimidation, undue influence or fraud. The records are bare of any evidence manifesting that private respondents employed such insidious words or machinations to entice petitioner into entering the contract of barter. Neither did Dr. Cruz cajole petitioner to sell his Tanay property in exchange for the earrings. In fact, Dr. Cruz did not initially accede to petitioner's proposal to buy the jewelry. It was petitioner, through his agents, who led Dr. Cruz to believe that the Tanay property was worth exchanging for her jewelry. Both the trial and appellate courts correctly ruled that there were no legal bases for the nullification of the contract of sale.

15) Vda De Ape vs. CA FACTS: Generosa Cawit de Lumayno joined by her husband, Braulio, instituted a case for "Specific Performance of a Deed of Sale with Damages" against Fortunato and his wife Perpetua. It was alleged in the complaint that private respondent and Fortunato entered into a contract of sale of land under which for a consideration of P5,000.00, Fortunato agreed to sell his share to private respondent. The agreement was contained in a receipt prepared by private respondent's son-in-law, Andres Flores, at her behest. The receipt states: April 11, 1971 TO WHOM IT MAY CONCERN: This date received from Mrs. Generosa Cawit de Lumayno the sum of THIRTY PESOS ONLY as Advance Payment of my share in Land Purchased, for FIVE THOUSAND PESOS LOT #2319. (Signed) FORTUNATO APE P30.00 WITNESS: (Illegible) As private respondent wanted to register the claimed sale transaction, she supposedly demanded that Fortunato execute the corresponding deed of sale and to receive the balance of the consideration. However, Fortunato unjustifiably refused to heed her demands. Private respondent, therefore, prayed that Fortunato be ordered to execute and deliver to her "a sufficient and registrable deed of sale involving his one-eleventh (1/11) share or participation in Lot of the Escalante Cadastre. Fortunato and petitioner denied the allegations of the complaint and claimed that Fortunato never sold his share to private respondent and that his signature appearing on the purported receipt was forged. The defendants below maintained having entered into a contract of lease with respondent involving Fortunato's portion of Lot. This purported lease contract commenced in 1960 and was supposed to last until 1965 with an option for another five (5) years. The annual lease rental was P100.00 which private respondent and her husband allegedly paid on installment basis. That on 11 April 1971 she and her husband went to private respondent's house to collect past rentals for their land then leased by the former, however, they managed to collect only thirty pesos; that private respondent made her husband sign a receipt acknowledging the receipt of said amount of money; and that the contents of said receipt were never explained to them. She also stated in her testimony that her husband was an illiterate and only learned how to write his name in order to be employed in a sugar central. ISSUE: WON the receipt signed by Fortunato proves the existence of a contract of sale between him and private respondent. HELD: A contract of sale is a consensual contract, thus, it is perfected by mere consent of the parties. It is born from the moment there is a meeting of minds upon the thing which is the object of the sale and upon the price. Upon its perfection, the parties may reciprocally demand performance, that is, the vendee may compel the transfer of the ownership and to deliver the object of the sale while the vendor may demand the vendee to pay the thing sold. For there to be a perfected contract of sale, however, the following elements must be present: consent, object, and price in money or its equivalent. In the case of Leonardo v. Court of Appeals, et al., 54 we explained the element of consent, to wit:

The essence of consent is the agreement of the parties on the terms of the contract, the acceptance by one of the offer made by the other. It is the concurrence of the minds of the parties on the object and the cause which constitutes the contract. The area of agreement must extend to all points that the parties deem material or there is no consent at all. To be valid, consent must meet the following requisites: (a) it should be intelligent, or with an exact notion of the matter to which it refers; (b) it should be free and (c) it should be spontaneous. Intelligence in consent is vitiated by error; freedom by violence, intimidation or undue influence; spontaneity by fraud. In this jurisdiction, the general rule is that he who alleges fraud or mistake in a transaction must substantiate his allegation as the presumption is that a person takes ordinary care for his concerns and that private dealings have been entered into fairly and regularly. The exception to this rule is provided for under Article 1332 of the Civil Code which provides that "When one of the parties is unable to read, or if the contract is in a language not understood by him, and mistake or fraud is alleged, the person enforcing the contract must show that the terms thereof have been fully explained to the former." In this case, as private respondent is the one seeking to enforce the claimed contract of sale, she bears the burden of proving that the terms of the agreement were fully explained to Fortunato Ape who was an illiterate. This she failed to do. (In this case, the records are bereft of any indication that Fortunato was given any written notice of prospective or consummated sale of the portions of Lot No. 2319 by the vendors or would-be vendors. The thirty (30)-day redemption period under the law, therefore, has not commenced to run. Despite this, however, we still rule that petitioner could no longer invoke her right to redeem from private respondent for the exercise of this right "presupposes the existence of a co-ownership at the time the conveyance is made by a co-owner and when it is demanded by the other co-owner or co-owners." The regime of co-ownership exists when ownership of an undivided thing or right belongs to different persons. By the nature of a co-ownership, a co-owner cannot point to specific portion of the property owned in common as his own because his share therein remains intangible. As legal redemption is intended to minimize co-ownership, once the property is subdivided and distributed among the co-owners, the community ceases to exist and there is no more reason to sustain any right of legal redemption. In this case, records reveal that although Lot No. 2319 has not yet been formally subdivided, still, the particular portions belonging to the heirs of Cleopas Ape had already been ascertained and they in fact took possession of their respective parts.) II.3 Bilateral and Reciprocal 16) Agro Conglomerate vs. CA FACTS: Petitioner Agro Conglomerates, Inc. sold two parcels of farmland to Wonderland Food Industries, Inc. The parties executed a Memorandum of Agreement which provides that the P5 million as purchase price shall be paid as follows: P1million shall be paid in cash upon the signing of the agreement, P2 million worth of common shares of stock of Wonderland Food Industries, Inc., and the remaining P2 million shall be paid in four equal installments. Thereafter, Agro Conglomerate, Inc. as vendor, Wonderland Food Industries as vendee, and the herein respondent Regent Savings and Loan Bank executed as Addendum to the previous Memorandum of Agreement to the effect that the Wonderland Food Industrees(vendee) authorized the Agro Conglomerate (vendor) to obtain a loan from the respondent bank for the total amount of the initial payments and that Wonderland undertook to assume the settlement of the said loan. Petitioner Mario Soriano signed several promissory notes and received the proceeds in behalf of Agro Conglomerates, Inc. However, the sale of the said farmland did not materialize which resulted to a rescission of contract of sale between the Agro Conglomerates, Inc. and Wonderland Food Industries, Inc. Subsequently, petitioners Agro Conglomerates, Inc. and Mario Soriano failed to meet their obligations to respondent bank as they fell due. Thus, after several opportunities given to petitioner to settle their accounts, the respondent bank filed three separate complaints for Collection of Sums of Money before the Regional Trial Court of Manila against the petitioners. In their answer, petitioners interposed the defense of novation and insisted that there was a valid substitution of debtor based on the executed addendum. After trial, the trial court rendered judgment in favor of the respondent bank. The Court of Appeals affirmed in toto the said judgment. ISSUE:

WON Novation or Substitution is a proper defense for herein petitioner for the nonpayment of their obligation to the respondent bank. HELD: A contract of sale is a reciprocal transaction. The obligation or promise of each party is the cause or consideration for the obligation or promise by the other. The vendee is obliged to pay the price, while the vendor must deliver actual possession of the land. In the instant case the original plan was that the initial payments would be paid in cash. Subsequently, the parties (with the participation of respondent bank) executed an addendum providing instead, that the petitioners would secure a loan in the name of Agro Conglomerates Inc. for the total amount of the initial payments, while the settlement of said loan would be assumed by Wonderland. Thereafter, petitioner Soriano signed several promissory notes and received the proceeds in behalf of petitioner-company. By this time, we note a subsidiary contract of suretyship had taken effect since petitioners signed the promissory notes as maker and accommodation party for the benefit of Wonderland. Petitioners became liable as accommodation party. Suretyship is defined as the relation which exists where one person has undertaken an obligation and another person is also under the obligation or other duty to the obligee, who is entitled to but one performance, and as between the two who are bound, one rather than the other should perform. The surety's liability to the creditor or promise of the principal is said to be direct, primary and absolute; in other words, he is directly and equally bound with the principal. And the creditor may proceed against any one of the solidary debtors. Suretyship is defined as the relation which exists where one person has undertaken an obligation and another person is also under the obligation or other duty to the obligee, who is entitled to but one performance, and as between the two who are bound, one rather than the other should perform. The surety's liability to the creditor or promise of the principal is said to be direct, primary and absolute; in other words, he is directly and equally bound with the principal. And the creditor may proceed against any one of the solidary debtors. Novation is the extinguishment of an obligation by the substitution or change of the obligation by a subsequent one which extinguishes or modifies the first, either by changing the object or principal conditions, or by substituting another in place of the debtor, or by subrogating a third person in the rights of the creditor. In order that a novation can take place, the concurrence of the following requisites are indispensable: 1) There must be a previous valid obligation; 2) There must be an agreement of the parties concerned to a new contract; 3) There must be the extinguishment of the old contract; and 4) There must be the validity of the new contract. In the instant case, the first requisite for a valid novation is lacking. This Court ruled that there was no novation by "substitution" of debtor because there was no prior obligation which was substituted by a new contract. It will be noted that the promissory notes, which bound the petitioners to pay, were executed after the addendum. The addendum modified the contract of sale, not the stipulations in the promissory notes which pertain to the surety contract. At this instance, Wonderland apparently assured the payment of future debts to be incurred by the petitioners. Consequently, only a contract of surety arose. It was wrong for petitioners to presume a novation had taken place. The well-settled rule is that novation is never presumed, it must be clearly and unequivocally shown. As it turned out, the contract of surety between Wonderland and the petitioners was extinguished by the rescission of the contract of sale of the farmland. With the rescission, there was confusion or merger in the persons of the principal obligor and the surety, namely, the petitioners herein. The addendum which was dependent thereon likewise lost its efficacy. It is true that the basic and fundamental rule in the interpretation of contract is that, if the terms thereof are clear and leave no doubt as to the intention of the contracting parties, the literal meaning shall control. However, in order to judge the intention of the parties, their contemporaneous and subsequent acts should be considered. The contract of sale between Wonderland and petitioners did not materialize. But it was admitted that petitioners received the proceeds of the promissory notes obtained from respondent bank. Sec. 22 of the Civil Code provides: Every person who through an act of performance by another, or any other means, acquires or comes into possession of something at the expense of the latter without just or legal ground, shall return the same to him. Petitioners had no legal or just ground to retain the proceeds of the loan at the expense of private respondent. Neither could petitioners excuse themselves and hold Wonderland still liable to pay the loan upon the rescission of their sales contract. If petitioners sustained damages as a result of the rescission, they should have impleaded Wonderland and asked damages. The non-inclusion of a necessary party does not prevent the court from proceeding in the action, and the judgment rendered therein shall be without prejudice to the rights of such necessary party. But respondent appellate court did not err in holding that petitioners are duty-bound under the law to pay the claims of respondent bank from whom they had obtained the loan proceeds.

17) Cortes vs. CA FACTS:

 For the purchase price of P3,700,000.00, the Corporation as buyer, and Cortes as seller, entered into a

contract of sale over the lots located at Baclaran, Paraaque, Metro Manila. On various dates in 1983, the Corporation advanced to Cortes the total sum of P1,213,000.00. Sometime in September 1983, the parties executed a deed of absolute sale. Said Deed was retained by Cortes for notarization. On January 14, 1985, the Corporation filed the instant case for specific performance seeking to compel Cortes to deliver the TCTs and the original copy of the Deed of Absolute Sale. According to the Corporation, despite its readiness and ability to pay the purchase price, Cortes refused delivery of the sought documents. Cortes claimed that the owner's duplicate copy of the three TCTs were surrendered to the Corporation and it is the latter which refused to pay in full the agreed down payment. He added that portion of the subject property is occupied by his lessee who agreed to vacate the premises upon payment of disturbance fee. However, due to the Corporation's failure to pay in full the sum of P2,200,000.00, he in turn failed to fully pay the disturbance fee of the lessee who now refused to pay monthly rentals. He thus prayed that the Corporation be ordered to pay the outstanding balance plus interest and in the alternative, to cancel the sale and forfeit the P1,213,000.00 partial down payment, with damages in either case. RTC ruled in favour of Cortes and ordered for rescission, averring inter alia that the Corporation failed to pay despite Cortes delivery of TCTs. CA reversed the decision and directed Cortes to execute a Deed of Absolute Sale conveying the properties and to deliver the same to the Corporation together with the TCTs, simultaneous with the Corporation's payment of the balance of the purchase price of P2,487,000.00. It found that the parties agreed that the Corporation will fully pay the balance of the down payment upon Cortes' delivery of the three TCTs to the Corporation. The records show that no such delivery was made, hence, the Corporation was not remiss in the performance of its obligation and therefore justified in not paying the balance. ISSUE: WON there is delay in the performance of the parties' obligation that would justify the rescission of the contract of sale HELD: There is no doubt that the contract of sale in question gave rise to a reciprocal obligation of the parties. Reciprocal obligations are those which arise from the same cause, and which each party is a debtor and a creditor of the other, such that the obligation of one is dependent upon the obligation of the other. They are to be performed simultaneously, so that the performance of one is conditioned upon the simultaneous fulfillment of the other. Article 1191 of the Civil Code, states: 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. As to when said failure or delay in performance arise, Article 1169 of the same Code provides: In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him. From the moment one of the parties fulfills his obligation, delay by the other begins. The settled rule is that the decisive factor in evaluating an agreement is the intention of the parties, as shown not necessarily by the terminology used in the contract but by their conduct, words, actions and deeds prior to, during and immediately after executing the agreement. As such, therefore, documentary and parol evidence may be submitted and admitted to prove such intention. In the case at bar, the stipulation in the Deed of Absolute Sale was that the Corporation shall pay in full the P2,200,000.00 down payment upon execution of the contract. However, as correctly noted by the Court of Appeals, the transcript of stenographic notes reveal Cortes' admission that he agreed that the Corporation's full payment of the sum of P2,200,000.00 would depend upon his delivery of the TCTs of the three lots. In fact, his main defense in the Answer is that, he performed what is incumbent upon him by delivering to the Corporation the TCTs and the carbon duplicate of the Deed of Absolute Sale, but the latter refused to pay in full the down payment. The court found truth in the contrary. What further strengthened the findings of the Court of Appeals that Cortes did not surrender the subject documents was the offer of Cortes' counsel at the pre-trial to deliver the TCTs and the Deed of Absolute Sale if the Corporation will pay the balance of the down payment.

 Indeed, if the said documents were already in the hands of the Corporation, there was no need for Cortes'

counsel to make such offer. Since Cortes did not perform his obligation to have the Deed notarized and to surrender the same together with the TCTs, the trial court erred in concluding that he performed his part in the contract of sale and that it is the Corporation alone that was remiss in the performance of its obligation. Actually, both parties were in delay. Considering that their obligation was reciprocal, performance thereof must be simultaneous. The mutual inaction of Cortes and the Corporation therefore gave rise to a compensation * morae or default on the part of both parties because neither has completed their part in their reciprocal obligation. Cortes is yet to deliver the original copy of the notarized Deed and the TCTs, while the Corporation is yet to pay in full the agreed down payment of P2,200,000.00. This mutual delay of the parties cancels out the effects of default, such that it is as if no one is guilty of delay. Under Article 1169 of the Civil Code, from the moment one of the parties fulfills his obligation, delay by the other begins. Since Cortes did not perform his part, the provision of the contract requiring the Corporation to pay in full the down payment never acquired obligatory force. The Court of Appeals therefore correctly ordered the parties to perform their respective obligation in the contract of sale, i.e., for Cortes to, among others, deliver the necessary documents to the Corporation and for the latter to pay in full, not only the down payment, but the entire purchase price.

18) Almocera vs. Ong FACTS: Plaintiff Johnny Ong tried to acquire from the defendants a "townhome" described as Unit No. 4 of Atrium Townhomes in Cebu City. As reflected in a Contract to Sell, the selling price of the unit was P3,400,000.00 pesos, for a lot area of eighty-eight (88) square meters with a three-storey building. Out of the purchase price, plaintiff was able to pay the amount of P1,060,000.00. Prior to the full payment of this amount, plaintiff claims that defendants Andre Almocera and First Builders fraudulently concealed the fact that before and at the time of the perfection of the aforesaid contract to sell, the property was already mortgaged to and encumbered with the Land Bank of the Philippines (LBP). In addition, the construction of the house has long been delayed and remains unfinished. On March 13, 1999, Lot 4-a covered by TCT No. 148818, covering the unit was advertised in a local tabloid for public auction for foreclosure of mortgage. It is the assertion of the plaintiff that had it not for the fraudulent concealment of the mortgage and encumbrance by defendants, he would have not entered into the contract to sell. On the other hand, defendants assert that on March 20, 1995, First Builders Multipurpose Coop. Inc., borrowed money in the amount of P500,000.00 from Tommy Ong, plaintiff's brother. This amount was used to finance the documentation requirements of the LBP for the funding of the Atrium Town Homes. This loan will be applied in payment of one (1) town house unit which Tommy Ong may eventually purchase from the project. When the project was under way, Tommy Ong wanted to buy another townhouse for his brother, Johnny Ong, plaintiff herein, which then, the amount of P150,000.00 was given as additional partial payment. However, the particular unit was not yet identified. It was only on January 10, 1997 that Tommy Ong identified Unit No. 4 plaintiff's chosen unit and again tendered P350,000.00 as his third partial payment. When the contract to sell for Unit 4 was being drafted, Tommy Ong requested that another contract to sell covering Unit 5 be made so as to give Johnny Ong another option to choose whichever unit he might decide to have. When the construction was already in full blast, defendants were informed by Tommy Ong that their final choice was Unit 5. It was only upon knowing that the defendants will be selling Unit 4 to some other persons for P4million that plaintiff changed his choice from Unit 5 to Unit 4. In trying to recover the amount he paid as down payment for the townhouse unit, respondent Johnny Ong filed a complaint for Damages before the RTC of Cebu City, against defendants Andre T. Almocera and FBMC alleging that defendants were guilty of fraudulent concealment and breach of contract when they sold to him a townhouse unit without divulging that the same, at the time of the perfection of their contract, was already mortgaged with the Land Bank of the Philippines (LBP), with the latter causing the foreclosure of the mortgage and the eventual sale of the townhouse unit to a third person. In their Answer, defendants denied liability claiming that the foreclosure of the mortgage on the townhouse unit was caused by the failure of complainant Johnny Ong to pay the balance of the price of said townhouse unit. The trial court ruled against defendants for not acting in good faith and for not complying with their obligations under their contract with respondent.

The Court of Appeals ruled that the defendants incurred delay when they failed to deliver the townhouse unit to the respondent within six months from the signing of the contract to sell. It agreed with the finding of the trial court that the nonpayment of the balance of P2.4M by respondent to defendants was proper in light of such delay and the fact that the property subject of the case was foreclosed and auctioned. It added that the trial court did not err in giving credence to respondent's assertion that had he known beforehand that the unit was used as collateral with the LBP, he would not have proceeded in buying the townhouse. Like the trial court, the Court of Appeals gave no weight to defendants' argument that had respondent paid the balance of the purchase price of the townhouse, the mortgage could have been released. ISSUE: HELD: It cannot be disputed that the contract entered into by the parties was a contract to sell. The contract was denominated as such and it contained the provision that the unit shall be conveyed by way of an Absolute Deed of Sale, together with the attendant documents of Ownership the Transfer Certificate of Title and Certificate of Occupancy and that the balance of the contract price shall be paid upon the completion and delivery of the unit, as well as the acceptance thereof by respondent. All these clearly indicate that ownership of the townhouse has not passed to respondent. In Serrano v. Caguiat, 11 we explained: A contract to sell is akin to a conditional sale where the efficacy or obligatory force of the vendor's obligation to transfer title is subordinated to the happening of a future and uncertain event, so that if the suspensive condition does not take place, the parties would stand as if the conditional obligation had never existed. The suspensive condition is commonly full payment of the purchase price. The differences between a contract to sell and a contract of sale are well-settled in jurisprudence. As early as 1951, in Sing Yee v. Santos [47 O.G. 6372 (1951)], we held that: DHEaTS " . . . [a] distinction must be made between a contract of sale in which title passes to the buyer upon delivery of the thing sold and a contract to sell . . . where by agreement the ownership is reserved in the seller and is not to pass until the full payment of the purchase price is made. In the first case, non-payment of the price is a negative resolutory condition; in the second case, full payment is a positive suspensive condition. Being contraries, their effect in law cannot be identical. In the first case, the vendor has lost and cannot recover the ownership of the land sold until and unless the contract of sale is itself resolved and set aside. In the second case, however, the title remains in the vendor if the vendee does not comply with the condition precedent of making payment at the time specified in the contract." In other words, in a contract to sell, ownership is retained by the seller and is not to pass to the buyer until full payment of the price. From the foregoing provisions, it is clear that petitioner and FBMC had the obligation to complete the townhouse unit within six months from the signing of the contract. Upon compliance therewith, the obligation of respondent to pay the balance of P2,400,000.00 arises. Upon payment thereof, the townhouse shall be delivered and conveyed to respondent upon the execution of the Absolute Deed of Sale and other relevant documents. The evidence adduced shows that petitioner and FBMC failed to fulfill their obligation to complete and deliver the townhouse within the six-month period. With petitioner and FBMC's non-fulfillment of their obligation, respondent refused to pay the balance of the contract price. Respondent does not ask that ownership of the townhouse be transferred to him, but merely asks that the amount or down payment he had made be returned to him. Article 1169 of the Civil Code reads: Art. 1169. Those obliged to deliver or to do something incur in delay from the time the obligee judicially or extrajudicially demands from them the fulfillment of their obligation. However, the demand by the creditor shall not be necessary in order that delay may exist: TIaCAc (1) When the obligation or the law expressly so declares; or (2) When from the nature and the circumstances of the obligation it appears that the designation of the time when the thing is to be delivered or the service is to be rendered was a controlling motive for the establishment of the contract; or (3) When demand would be useless, as when the obligor has rendered it beyond his power to perform. In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him.

From the moment one of the parties fulfills his obligation, delay by the other begins. The contract subject of this case contains reciprocal obligations which were to be fulfilled by the parties, i.e., to complete and deliver the townhouse within six months from the execution of the contract to sell on the part of petitioner and FBMC, and to pay the balance of the contract price upon completion and delivery of the townhouse on the part of the respondent. cIHDaE In the case at bar, the obligation of petitioner and FBMC which is to complete and deliver the townhouse unit within the prescribed period, is determinative of the respondent's obligation to pay the balance of the contract price. With their failure to fulfill their obligation as stipulated in the contract, they incurred delay and are liable for damages. 13 They cannot insist that respondent comply with his obligation. Where one of the parties to a contract did not perform the undertaking to which he was bound by the terms of the agreement to perform, he is not entitled to insist upon the performance of the other party. 14 Under the circumstances obtaining in this case, we find that respondent is justified in refusing to pay the balance of the contract price. He was never in possession of the townhouse unit and he can no longer be its owner since ownership thereof has been transferred to a third person who was not a party to the proceedings below. It would simply be the height of inequity if we are to require respondent to pay the balance of the contract price. To allow this would result in the unjust enrichment of petitioner and FBMC. The fundamental doctrine of unjust enrichment is the transfer of value without just cause or consideration. The elements of this doctrine which are present in this case are: enrichment on the part of the defendant; impoverishment on the part of the plaintiff; and lack of cause. The main objective is to prevent one to enrich himself at the expense of another. It is commonly accepted that this doctrine simply means a person shall not be allowed to profit or enrich himself inequitably at another's expense. 16 Hence, to allow petitioner and FBMC keep the down payment made by respondent amounting to P1,060,000.00 would result in their unjust enrichment at the expense of the respondent. Thus, said amount should be returned. What is worse is the fact that petitioner and FBMC intentionally failed to inform respondent that the subject townhouse which he was going to purchase was already mortgaged to LBP at the time of the perfection of their contract. This deliberate withholding by petitioner and FBMC of the mortgage constitutes fraud and bad faith. the defendants are guilty of fraud in dealing with the plaintiff. They performed voluntary and willful acts which prevent the normal realization of the prestation, knowing the effects which naturally and necessarily arise from such acts. Their acts import a dishonest purpose or some moral obliquity and conscious doing of a wrong. The said acts certainly give rise to liability for damages Article 1170 of the New Civil Code of the Philippines provides expressly that "those who in the performance of their obligations are guilty of fraud and those who in any manner contravene the tenor thereof are liable for damages. II.4 Onerous 19) Gaite vs. Fonacier FACTS: By a "Deed of Assignment", Fonacier constituted and appointed plaintiff-appellee Fernando A. Gaite as his true and lawful attorney-in-fact to enter into a contract with any individual or juridical person for the exploration and development of the mining claims aforementioned on a royalty basis of not less than P0.50 per ton of ore that might be extracted therefrom. Gaite in turn executed a general assignment conveying the development and exploitation of said mining claims unto the Larap Iron Mines, a single proprietorship owned solely by and belonging to him, on the same royalty basis provided. Thereafter Gaite embarked upon the development and exploitation of the mining claims in question, opening and paving roads within and outside their boundaries, making other improvements and installing facilities therein for use in the development of the mines, and in time extracted therefrom what he claimed and estimated to be approximately 24,000 metric tons of iron ore. For some reason or another, Isabelo Fonacier decided to revoke the authority granted by him to Gaite to exploit and develop the mining claims in question, and Gaite assented thereto subject to certain conditions. As a result, a document entitled "Revocation of Power of Attorney and Contract" was executed wherein Gaite transferred to Fonacier, for the consideration of P20,000, plus 10% of the royalties that Fonacier would receive from the mining claims, all his rights and interests on all the roads, improvements, and facilities in or outside said claims, the right to use the business name "Larap Iron Mines" and its goodwill, and all the records and documents relative to the mines.

In the same document, Gaite transferred to Fonacier all his rights and interests over the "24,000 tons of iron ore, more or less" that the former had already extracted from the mineral claims, in consideration of the sum of P75,000, P10,000, of which was paid upon the signing of the agreement, and "b. The balance of SIXTY-FIVE "THOUSAND PESOS (P65,000) will be paid from and out of the first letter of credit covering the first shipment of iron ores and or the first amount derived from the local sale of iron ore made by the Larap Mines & Smelting Co., Inc., its assigns, administrators, or successors in interests." To secure the payment of the said balance of P65,000.00, Fonacier promised to execute in favor of Gaite a surety bond; and pursuant to the promise, Fonacier delivered to Gaite a surety bond with himself (Fonacier) as principal and the Larap Mines and Smelting Co. and its stockholders George Krakower, Segundina Vivas, Pacifico Escandor, Francisco Dante, and Fernando Ty as sureties. Gaite testified, however, that when this bond was presented to him by Fonacier together with the "Revocation of Power of Attorney and Contract", he refused to sign unless another bond underwritten by a bonding company was put up by defendants to secure the payment of the P65,000 balance of the price of the iron ore in the stockpiles in the mining claims. Hence, a second bond was executed by the same parties to the first bond with the Far Eastern Surety and Insurance Co. as additional surety, but it provided that the liability of the surety company would attach only when there had been an actual sale of iron ore by the Larap Mines & Smelting Co. for an amount of not less than P65,000, and that, furthermore, the liability of said surety company would automatically expire on December 8, 1955. Both bonds were attached to the "Revocation of Power of Attorney and Contract and made integral parts thereof. On the same day that Fonacier revoked the power of attorney he gave to Gaite and the two executed and signed the "Revocation of Power of Attorney and Contract", Fonacier entered into a "Contract of Mining Operation", ceding, transferring, and conveying unto the Larap Mines and Smelting Co., Inc. the right to develop, exploit, and explore the mining claims in question, together with the improvements therein and the use of the name "Larap Iron Mines" and its goodwill, in consideration of certain royalties. Fonacier likewise transferred, in the same document, the complete title to the approximately 24,000 tons of iron ore which he acquired from Gaite, to the Larap Mines & Smelting Co., in consideration for the signing by the company and its stockholders of the surety bonds delivered by Fonacier to Gaite. Up to December 8, 1955, when the bond expired with respect to the Far Eastern Surety and Insurance Company, no sale of the approximately 24,000 tons of iron ore had been made by the Larap Mines & Smelting Co., Inc., nor had the 65,000 balance of the price of said ore been paid to Gaite by Fonacier and his sureties. Whereupon, Gaite demanded from Fonacier and his sureties payment of said amount, on the theory that they had lost every right to make use of the period given them when their bond, automatically expired. And when Fonacier and his sureties failed to pay as demanded by Gaite, the latter filed the present complaint against them in the Court of First Instance of Manila for the payment of the P65,000 balance of the price of the ore, consequential damages, and attorney's fees. Judgment was, accordingly, rendered in favor of plaintiff Gaite ordering defendants to pay him, jointly and severally, P65,000 with interest at 6% per annum from December 9, 1965 until full payment, plus costs. From this judgment, defendants jointly appealed to this Court.

ISSUE: WON the shipment or local sale of the iron ore is one with a suspensive condition or merely a suspensive period. HELD: We find the court below to be legally correct in holding that the shipment or local sale of the iron ore is not a condition precedent (or suspensive) to the payment of the balance of P65,000, but was only a suspensive period or term. What characterizes a conditional obligation is the fact that its efficacy or obligatory force (as distinguished from its demandability) is subordinated to the happening of a future and uncertain event; so that if the suspensive condition does not take place, the parties would stand as if the conditional obligation had never existed. That the parties to the contract did not intend any such state of things to prevail. The words of the contract express no contingency in the buyer's obligation to pay: "The balance of SixtyFive Thousand Pesos (P65,000) will be paid out of the first letter of credit covering the first shipment of iron ore . . ." etc. There is no uncertainty that the payment will have to be made sooner or later; what is undetermined is merely the exact date at which it will be made. By the very terms of the contract, therefore, the existence of the obligation to pay is recognized; only its maturity or demandability is deferred. A contract of sale is normally commutative and onerous: not only does each one of the parties assume a correlative obligation (the seller to deliver and transfer ownership of the thing sold and the buyer to pay the price), but each party anticipates performance by the other from the very start.

While in a sale the obligation of one party can be lawfully subordinated to an uncertain event, so that the other understands that he assumes the risk of receiving nothing for what he gives (as in the case of a sale of hopes or expectations, emptio spei), it is not in the usual course of business to do so; hence, the contingent character of the obligation must clearly appear. Nothing is found in the record to evidence that Gaite desired or assumed to run the risk of losing his rights over the ore without getting paid for it, or that Fonacier understood that Gaite assumed any such risk. This is proved by the fact that Gaite insisted on a bond to guarantee payment of the P65,000, and not only upon a bond by Fonacier, the Larap Mines & Smelting Co., and the company's stockholders, but also on one by a surety company; and the fact that appellants did put up such bonds indicates that they admitted the definite existence of their obligation to pay the balance of P65,000. There is no merit in appellants' argument that Gaite's acceptance of the surety company's bond with full knowledge that on its face it would automatically expire within one year was a waiver of its renewal after the expiration date. No such waiver could have been intended, for Gaite stood to lose and had nothing to gain thereby; and if there was any, it could be rationally explained only if the appellants had agreed to sell the ore and pay Gaite before the surety company's bond expired on December 8, 1955. The only rational view that can be taken is that the sale of the ore to Fonacier was a sale on credit, and not an aleatory contract where the transferor, Gaite, would assume the risk of not being paid at all; and that the previous sale or shipment of the ore was not a suspensive condition for the payment of the balance of the agreed price, but was intended merely to fix the future date of the payment. But in the latter case the defendants- appellants' obligation to pay became absolute after one year from the transfer of the ore to Fonacier by virtue of the deed Exhibit "A." All the alternatives, therefore, lead to the same result: that Gaite acted within his rights in demanding payment and instituting this action one year from and after the contract (Exhibit "A") was executed, either because the appellant debtors had impaired the securities originally given and thereby forfeited any further time within which to pay; or because the term of payment was originally of no more than one year, and the balance of P65,000 became due and payable thereafter. "if the contract is onerous, the doubt shall be settled in favor of the greatest reciprocity of interests." and there can be no question that greater reciprocity obtains if the buyer's obligation is deemed to be actually existing, with only its maturity (due date) postponed or deferred, than if such obligation were viewed as non-existent or not binding until the ore was sold. We agree with the court below that the appellants have forfeited the right to compel Gaite to wait for the sale of the ore before receiving payment of the balance of P65,000, because of their failure to renew the bond of the Far Eastern Surety Company or else replace it with an equivalent guarantee. The expiration of the bonding company's undertaking on December 8, 1955 substantially reduced the security of the vendor's rights as creditor for the unpaid P65,000, a security that Gaite considered essential and upon which he had insisted when he executed the deed of sale of the ore to Fonacier. The case squarely comes under paragraphs 2 and 3 of Article 1198 of the Civil Code of the Philippines: (1) ... (2) When he does not furnish to the creditor the guaranties or securities which he has promised. (3) When by his own acts he has impaired said guaranties or securities after their establishment, and when through fortuitous event they disappear, unless he immediately gives new ones equally satisfactory." Sale is essentially onerous, and if there is doubt whether the parties intended a suspensive condition or a suspensive period for the payment of the agreed price, the doubt shall be settled in favor of the greatest reciprocity of interests, which will obtain if the buyer's obligation is deemed to be actually existing, with only its maturity postponed or deferred.

II.5 Commutative 20) Buenaventura vs. CA FACTS: Defendant spouses Leonardo Joaquin and Feliciana Landrito are the parents of plaintiffs Consolacion, Nora, Emma and Natividad as well as of defendants Fidel, Tomas, Artemio, Clarita, Felicitas, Fe, and Gavino, all surnamed JOAQUIN. Sought to be declared null and void ab initio, are certain deeds of sale of real property executed by defendant parents Leonardo Joaquin and Feliciana Landrito in favor of their co-defendant children and the corresponding certificates of title issued in their names. Herein petitioners alleged that the sale of the subject properties impaired their legitime and that there was no actual valid consideration for the deeds of sale, and even assuming that there was indeed consideration, the price was grossly inadequate.

The trial court ruled in favor of the respondents and dismissed the complaint. The trial court ruled that petitioners had no valid cause of action against respondents since there can be no legitime to speak of prior to the death of their parents. On appeal, the Court of Appeals affirmed the decision of the trial court. The appellate court ruled that petitioners have no legal capacity to challenge the validity of the subject deeds since they are not parties thereto and are not principally or subsidiarily bound thereby.

ISSUE: WON there was a valid Contract of Sale between defendant spouses and the defendant children. HELD: A contract of sale is not a real contract, but a consensual contract. As a consensual contract, a contract of sale becomes a binding and valid contract upon the meeting of the minds as to price. If there is a meeting of the minds of the parties as to the price, the contract of sale is valid, despite the manner of payment, or even the breach of that manner of payment. If the real price is not stated in the contract, then the contract of sale is valid but subject to reformation. If there is no meeting of the minds of the parties as to the price, because the price stipulated in the contract is simulated, then the contract is void. Article 1471 of the Civil Code states that if the price in a contract of sale is simulated, the sale is void. It is not the act of payment of price that determines the validity of a contract of sale. Payment of the price has nothing to do with the perfection of the contract. Payment of the price goes into the performance of the contract. Failure to pay the consideration is different from lack of consideration. The former results in a right to demand the fulfillment or cancellation of the obligation under an existing valid contract while the latter prevents the existence of a valid contract. Article 1355 of the Civil Code states: Except in cases specified by law, lesion or inadequacy of cause shall not invalidate a contract, unless there has been fraud, mistake or undue influence. Article 1470 of the Civil Code further provides: Gross inadequacy of price does not affect a contract of sale, except as may indicate a defect in the consent, or that the parties really intended a donation or some other act or contract. Petitioners failed to prove any of the instances mentioned in Articles 1355 and 1470 of the Civil Code which would invalidate, or even affect, the Deeds of Sale. Indeed, there is no requirement that the price be equal to the exact value of the subject matter of sale. All the respondents believed that they received the commutative value of what they gave.

III.6 Sales Title and not Mode 21) Equitoral Realty vs. Mayfair 22) San Lorenzo Devt vs. CA 23) Norkis Distributors vs. CA 24) Aznar vs. Yapdiangco III. DISTINGUISHED FROM OTHER TRANSACTIONS/CONTRACTS