Sales Reviewer 12345

SALES FACTS: Petitioner was the owner of a 8,015 square meter parcel of
land located in Mandaluyong (now a City), Metro Manila. The property

Chapter 1 was covered by Transfer Certificate of Title (TCT) No. 332098 of the
Registry of Deeds of Rizal. To secure a P900,000.00 loan it had obtained
Nature and Form of Contracts
from respondent Philippine National Bank (PNB), petitioner executed a real
estate mortgage over the lot. Respondent PNB later granted petitioner a
Art. 1458 new credit accommodation of P1,000,000.00; and, petitioner executed an
Art. 1458. By the contract of sale one of the contracting parties obligates Amendment of Real Estate Mortgage over its property. The petitioner was
himself to transfer the ownership and to deliver a determinate thing, and the unable to pay its obligation to the said respondent. In turn, the respondent
other to pay therefor a price certain in money or its equivalent. filed for a petition for extrajudicial foreclosure of the real estate mortgage
A contract of sale may be absolute or conditional. and sought to have the property sold at public auction. The petitioner was
given a period (expiration--Feb. 17, 1984) to redeem the property, but,
I. Nature and Characteristics
failed to do so. It caused the petitioner to ask for a one year extension to
redeem the said property. The respondent referred the matter to Pasay
A. Definition City Branch for appropriate action and recommendation. Some PNB Pasay
City Branch personnel informed petitioner that as a matter of policy, the
Sale is a contract where one party (seller or vendor) obligates himself to bank does not accept partial redemption. A new title in favor of PNB was
transfer the ownership of and to deliver a determinate thing, while the issued for petitioners failure to redeem the property.
other party (buyer or vendee) obligates himself to pay for said thing a
Meanwhile, the Special Assets Management Department (SAMD)
price certain in money or its equivalent.
had prepared a statement of account, and as of June 25, 1984
petitioners obligation amounted to P1,574,560.47. When apprised
Note that in harmony with Art. 1164, ownership of the thing sold does of the statement of account, petitioner remitted P725,000.00 to
not pass to the buyer until delivery. See Arts. 1475, 1477, 1496. respondent PNB as deposit to repurchase,.
Essential requisites are consent, object and price. No special form is
required. (Art. 1483) Petitioner declared that it had already agreed to the SAMDs offer to
purchase the property for P1,574,560.47, and that was why it had
paid P725,000.00.
a. Cases
Respondent PNB informed petitioner that the PNB Board of Directors
1. Effect of offer and counter-offer had accepted petitioners offer to purchase the property, but for
P1,931,389.53 in cash less the P725,000.00 already deposited with it.
Manila Metal Container Corporation vs. PNB, G.R. No. 166862, December
20, 2006 Both trial court and CA ruled that there was no perfected contract of sale
between the parties; hence, petitioner had no cause of action for specific
performance against respondent. Both declared that respondent had
rejected petitioners offer to repurchase the property.
SALES REVIEWER 1 | P age

ISSUE: whether or not petitioner and respondent PNB had entered (3) consummation, which begins when the parties perform their
into a perfected contract for petitioner to repurchase the property from respective undertakings under the contract of sale, culminating in the
respondent. extinguishment thereof.
SC RULED that there was NO perfected contract of sale between the 1. Effect of document denominated Agreement between Mr. Sosa &
parties. Popong Bernardo of Toyota Shaw, Inc.
A contract of sale is consensual in nature and is perfected upon mere

Toyota Shaw, Inc. vs. CA, L-11650, May 23, 1995
meeting of the minds. When there is merely an offer by one party without
acceptance of the other, there is no contract. When the contract of sale is
not perfected, it cannot, as an independent source of obligation, serve as a FACTS: Luna L. Sosa, respondent, wanted to purchase a Toyota Lite Ace.
binding juridical relation between the parties. He transacted business with Popong Bernardo, sales representative of
Toyota. A Vehicle Sales Proposal (VSP) was accomplished and Mr. Sosa
To convert the offer into a contract, the acceptance must be paid a down payment of P100,000. On the scheduled date and time for
absolute and must not qualify the terms of the offer; it must be plain, the delivery of the car, Toyota refused to release the car because the
unequivocal, unconditional and without variance of any sort from the
financing company, B.A. Finance Corporation, refused to finance the
proposal.
outstanding balance. Mr. Sosa demanded the return of the down
A qualified acceptance or one that involves a new proposal payment, which Toyota honored, without prejudice to future claim for
constitutes a counter-offer and a rejection of the original offer. A counter- damages.
offer is considered in law, a rejection of the original offer and an attempt to
end the negotiation between the parties on a different basis. Consequently, ISSUE: Was this document, executed and signed by the petitioner's sales
when something is desired which is not exactly what is proposed in the offer,
representative, a perfected contract of sale, binding upon the petitioner,
such acceptance is not sufficient to guarantee consent because any
breach of which would entitle the private respondent to damages and
modification or variation from the terms of the offer annuls the offer. The
acceptance must be identical in all respects with that of the offer so as to attorney's fees?
produce consent or meeting of the minds.
SC RULED that it is not a contract of sale. No obligation on the part of
Stages of a contract of sale: Toyota to transfer ownership of a determinate thing to Sosa and no
correlative obligation on the part of the latter to pay therefor a price
(1) negotiation, covering the period from the time the prospective certain appears therein.
contracting parties indicate interest in the contract to the time the
contract is perfected;
This Court had already ruled that a definite agreement on the
manner of payment of the price is an essential element in the formation of
(2) perfection, which takes place upon the concurrence of the essential
a binding and enforceable contract of sale. This is so because the
elements of the sale which are the meeting of the minds of the parties as
agreement as to the manner of payment goes into the price such that a
to the object of the contract and upon the price; and
disagreement on the manner of payment is tantamount to a failure to

agree on the price. Definiteness as to the price is an essential element of a -if all the elements are present but there is a defect/illegal, the contract is
binding agreement to sell personal property. voidable/void
At the most, Exhibit "A" may be considered as part of the initial C. Characteristics
phase of the generation or negotiation stage of a contract of sale.
a. Consensualperfected by mere consent.
B. Elements b. Bilateral (reciprocal)both parties are bound by obligations dependent

upon each other. The power to rescind is implied, neither party incurs delay
a. Essential Elements (without which there can be no valid of sale) if the party does not comply, from the moment one of the parties fulfills his
obligation, the default by the other begins w/out need of prior demand.
1. Consent or meeting of the mindsconsent to transfer ownership in
exchange for the price. c. Onerousvaluable consideration must be given in order to acquire rights.
2. Determinate subject matter includes generic objects that are least d. Nominatethe Code refers to it by special designation or name, that is,
determinable the contract of sale.
*segregated/separated of the same class e. Principalfor the contract of sale to validly exist, there is no necessity for
it to depend upon the existence of another contract.
3. Price certain in money or its equivalent
f. Commutativethe values exchanged are almost equivalent to each other
b. Natural Elements (those which are inherent in the contract, and which in (general rule). By way of exception, some contracts of sale are aleatory, that
the absence of any contrary provision, are deemed to exist in the contract) is, one receives may in time be greater or smaller that what he has given, i.e.
sale of genuine sweepstakes ticket.
1. warranty against eviction (deprivation of the property bought)
g. delivery transfers ownership ownership does not pass until delivery.
2. warranty against hidden defects
C. Sale vs. Agency to sell (1466)
c. Accidental Elements (those which may be present or absent in the
stipulation, such as the place or time of payment, or the presence of Art. 1466. In construing a contract containing provisions characteristic of
conditions) both the contract of sale and of the contract of agency to sell, the essential
clauses of the whole instrument shall be considered. (n)
Effects of Presence, absence, incomplete elements
Cases:
-when all 3 elements are present - Perfected Contract
1) effect of agreement for exclusive sale of beds where the other party is
-if not present, there is no perfected contract entitled to commission, among others

Quiroga vs. Parsons Hardware co. Art. 1467. A contract for the delivery at a certain price of an article which the
vendor in the ordinary course of his business manufactures or procures for
Facts: the general market, whether the same is on hand at the time or not, is a
contract of sale, but if the goods are to be manufactured specially for the
The defendant was granted by the plaintiff of the exclusive right to sell as an customer and upon his special order, and not for the general market, it is a
agent Quiroga beds in the Visayas at the invoice price in Manila. The contract for a piece of work. (n)
agreement was for the defendant to pay for the beds at a discount from 20%
to 25% as commission on the sales. The defendant shall pay the plaintiff Cases:
claims that the defendant is his agent while defendant says he was merely
a purchaser. 1) Nature of transactions of company engaged in the design, supply
and installation of certain type of air conditioning system.
Issue:
Commissioner of Internal Revenue v. Engineering Equipment and Supply
Is this a contract of sale or agency? Co.
Held: Facts: Engineering Equipment and Supply Co., a domestic corporation, is

engaged in the design and installation of central type air conditioning system,
The Supreme Court declared that the contract by and between the plaintiff pumping plants and steel fabrications. CIR now denounced Engineering for
and the defendant was one of purchase and sale, and that the obligations the tax evasion by misdeclaring its imports and failing to pay the correct
breach of which is alleged as a cause of action are not imposed upon the percentage taxes due thereon in connivance with its foreign suppliers. The
defendant, either by agreement or by law. Commissioner contends that Engineering is a manufacturer and seller of air
conditioning units and parts or accessories thereof and, therefore, it is
subject to the 30% advance sales tax. Engineering is a contractor this subject
only to the 3% tax imposed on contractors.
In order to classify a contract, due regard must be given to its essential
clauses. In the contract in question, what was essential, as constituting its Contract of Sale v. Contract of Services; Test. The distinction
cause and subject matter, is that the plaintiff was to furnish the defendant between a contract of sale and one for work, labor and materials is
with the beds which the latter might order, at the price stipulated, and that tested by the inquiry whether the thing transferred is one not in
the defendant was to pay the price in the manner stipulated. There was the existence and which never would have existed but for the order of
obligation on the part of the plaintiff to supply the beds, and, on the part of the party desiring to acquire it, or a thing which would have existed
the defendant, to pay their price. These features exclude the legal but has been the subject of sale to some other persons even if the
conception of an agency or order to sell whereby the mandatory or agent order had not been given. If the article ordered by the purchaser is
received the thing to sell it, and does not pay its price, but delivers to the exactly such as the seller makes and keeps on hand for sale to
principal the price he obtains from the sale of the thing to a third person, and anyone, and no change or modification of it is made at purchaser's
if he does not succeed in selling it, he returns it. request, it is a contract of sale even though it may be entirely made
after, and in consequence of the purchaser's order for it.
Sale vs. Lease of service or contract for a piece of work (1467)

Engineering is a contractor rather than a manufacturer. Supply of air -if the value of the thing is more than the value of the money or its
conditioning units to Engineer's various customers, whether the said equivalent, the contract is a barter. If the value of the thing is less than the
machineries were in hand or not, was especially made for each value of the money, then the contract is a sale.
customer and installed in his building upon his special order. The air
conditioning units installed in a central type of air conditioning d. sale vs. dation in payment
system would not have existed but for the order of the party desiring
to acquire it and if it existed without the special order of -dation in payment implies that there is an existing obligation whereas
Engineering's customer, the said air conditioning units were not contract of sale, there is no prior obligation.
intended for sale to the general public. Moreover, it advertises itself
as a contractor and pays the contractor's tax for design and e. lease of things - in that delivery in this latter contract does not involve a
construction of central type air conditioning systems, and does not transfer of ownership
have ready-made air-conditioning units for sale, but must design and
construct each unit to meet the particular requirements of its f. donation- in that this latter contract is gratuitous and requires special
customers, said taxpayer is considered a contractor rather than a formalities
manufacturer for purposes of the Tax Code. Thus, such taxpayer is
not a manufacturer subject to the 30% advance sales tax prescribed E. Promise to sell: when binding (Art. 1479)
in Section 185 (m) in relation to Section 194 of the Tax Code, but is a
contractor subject to the 3% tax imposed by Section 191 of the same --a bilateral promise to buy and sell requires NO CONSIDERATION
Code. distinct from the selling price
A taxpayer is required by law to truly declare his importation in the
import entries and internal revenue declarations before it is --only the accepted unilateral promise to buy or sell that needs
released. Thus, by requiring its foreign supplier to change the consideration distinct from the selling price
nomenclature of air conditioning parts and accessories, and
misdeclaring its importation so as to make them subject to the lower a. If bilateral
rate of 7% percentage tax under Section 186 of the Tax Code,
thereby evading the payment of the 30% tax under Section 185(m) --a bilateral promise to buy or to sell a certain thing for a
thereof, said taxpayer is subject to the payment of the 50% fraud price certain gives to the contracting parties personal rights
surcharge prescribed by Section 183(a). in that each has the right to demand from the other the
fulfillment of the obligation.
c. sales vs. Barter (1468)
b. If unilateral
Art. 1468. If the consideration of the contract consists partly in money, and
partly in another thing, the transaction shall be characterized by the manifest --the acceptance of a unilateral promise to sell must be plain, clear and
intention of the parties. If such intention does not clearly appear, it shall be unconditional. Therefore, if there is qualified acceptance with terms different
considered a barter if the value of the thing given as a part of the from the offer there is no acceptance, that there is no promise to buy and
consideration exceeds the amount of the money or its equivalent; otherwise, there is no perfected sale.
it is a sale.

Cases: -Right on the part of the owner that if he decides to sell the property in the
future, he would first negotiate its sale to the one he promised.
1. Option defined
Ang Yu Asuncion vs. CA
Eulogio vs. Apeles, G.R. No. 167884, January 20, 2009
Facts:
Contract of Lease with an Option
On July 29, 1987 a Second Amended Complaint for Specific Performance was
An option is a contract by which the owner of the property agrees filed by Ann Yu Asuncion and Keh Tiong, et al., against Bobby Cu Unjieng,
with another person that the latter shall have the right to buy the formers Rose Cu Unjieng and Jose Tan before the Regional Trial Court, Branch 31,
property at a fixed price within a certain time. It is a condition offered or Manila in Civil Case No. 87-41058, alleging, among others, that plaintiffs are
contract by which the owner stipulates with another that the latter shall tenants or lessees of residential and commercial spaces owned by
have the right to buy the property at a fixed price within a certain time, or defendants described as Nos. 630-638 Ongpin Street, Binondo, Manila; that
under, or in compliance with certain terms and conditions; or which gives to they have occupied said spaces since 1935 and have been religiously paying
the owner of the property the right to sell or demand a sale. the rental and complying with all the conditions of the lease contract; that on
several occasions before October 9, 1986, defendants informed plaintiffs that
An option is not of itself a purchase, but merely secures the privilege to buy. they are offering to sell the premises and are giving them priority to acquire
It is not a sale of property but a sale of the right to purchase. It is simply a the same; that during the negotiations, Bobby Cu Unjieng offered a price of
contract by which the owner of the property agrees with another person that P6-million while plaintiffs made a counter offer of P5-million; that plaintiffs
he shall have the right to buy his property at a fixed price within a certain thereafter asked the defendants to put their offer in writing to which request
time. He does not sell his land; he does not then agree to sell it; but he does defendants acceded; that in reply to defendant's letter, plaintiffs wrote them
sell something, i.e., the right or privilege to buy at the election or option of on October 24, 1986 asking that they specify the terms and conditions of the
the other party. Its distinguishing characteristic is that it imposes no binding offer to sell; that when plaintiffs did not receive any reply, they sent another
obligation on the person holding the option, aside from the consideration for letter dated January 28, 1987 with the same request; that since defendants
the offer. failed to specify the terms and conditions of the offer to sell and because of
information received that defendants were about to sell the property,
"An accepted unilateral promise" can only have a binding effect if supported plaintiffs were compelled to file the complaint to compel defendants to sell
by a consideration, which means that the option can still be withdrawn, even the property to them.
if accepted, if the same is not supported by any consideration.
"After the issues were joined, defendants filed a motion for summary
ii) Remedy of optionee judgment which was granted by the lower court. The trial court found that
defendants' offer to sell was never accepted by the plaintiffs for the reason
-Specific performance. 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
2. Right of First Refusal 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.

Issue: Note: right of first refusal cannot be deemed a perfected sale because it
merely pertains to a specific property w/out containing an agreement as to
Whether or not there is perfected contract of sale the price.
Held: E. The Contract of Sale may be-
In the law on sales, the so-called "right of first refusal" is an innovative a. Absolute; or
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 Ramos vs. Heruela, G.R. No. 145330, Oct. 14, 2005
first refusal, understood in its normal concept, per sebe brought within the
purview of an option under the second paragraph of Article 1479,
aforequoted, or possibly of an offer under Article 1319 9 of the same Code. Absolute Sale Conditional Sale
An option or an offer would require, among other things, 10 a clear certainty when title to the ownership remains
on both the object and the cause or consideration of the envisioned contract. property passes to the with the vendor and
In a right of first refusal, while the object might be made determinate, the vendee upon delivery of does not pass to the
exercise of the right, however, would be dependent not only on the grantor's the thing sold vendee until full
eventual intention to enter into a binding juridical relation with another but payment of the
also on terms, including the price, that obviously are yet to be later firmed purchase price.
up. Prior thereto, it can at best be so described as merely belonging to a class when there is no The full payment of
of preparatory juridical relations governed not by contracts (since the stipulation in the the purchase price
essential elements to establish the vinculum juris would still be indefinite and contract that title to the partakes of a
inconclusive) but by, among other laws of general application, the pertinent property remains with suspensive condition,
scattered provisions of the Civil Code on human conduct. the seller until full and non-fulfillment of
payment of the the condition
Even on the premise that such right of first refusal has been decreed under a purchase price prevents the
final judgment, like here, its breach cannot justify correspondingly an obligation to sell
issuance of a writ of execution under a judgment that merely recognizes its from arising.
existence, nor would it sanction an action for specific performance without if there is no stipulation
thereby negating the indispensable element of consensuality in the giving the vendor the
perfection of contracts. 11 It is not to say, however, that the right of first right to cancel
refusal would be inconsequential for, such as already intimated above, an unilaterally the contract
unjustified disregard thereof, given, for instance, the circumstances the moment the vendee
expressed in Article 19 12 of the Civil Code, can warrant a recovery for fails to pay within a
damages. fixed period

Heirs of Mascunana vs. CA, G.R. No. 158646, June 23, 2005 1. An executed contract, or which property (ownership) in the thing is
transferred from seller to buyer, and nonpayment of the price is a
Facts: It is settled that a perfected contract of sale cannot be challenged on negative resolutory condition.
the ground of the non-transfer of ownership of the property sold at that 2. An executory contract- ownership does not pass until some future time
time of the perfection of the contract, since it is consummated upon
delivery of the property to the vendee. It is through tradition or delivery -the fulfillment of some condition, such as full payment of the
that the buyer acquires ownership of the property sold. As provided in purchase price.
Article 1458 of the New Civil Code, when the sale is made through a public
instrument, the execution thereof is equivalent to the delivery of the thing c. Distinctions
which is the object of the contract, unless the contrary appears or can be Executed Contract Executory Contract
inferred. The record of the sale with the Register of Deeds and the issuance Property ownership is No property is conveyed
of the certificate of title in the name of the buyer over the property merely conveyed
bind third parties to the sale. As between the seller and the buyer, the If buyer defaults, seller may If buyer defaults, seller is
transfer of ownership takes effect upon the execution of a public sue for the price only entitled to damages
instrument covering the real property. Long before the petitioners secured Risk of loss is generally borne Risk of loss is generally borne
a Torrens title over the property, the respondents had been in actual by the buyer by the seller
possession of the property and had designated Barte as their overseer.
Transfer of ownership
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 Absolute upon delivery
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 Conditional ownership is reserved by the owner.
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, d. CasesContract to sell vs. Contract of Sale
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.
Contract to Sell Contract of Sale
1545, Civil Code)
The payment in full of the The non-payment of the price
price is a positive suspensive is a RESOLUTORY condition,
A deed of sale is considered absolute in nature where there is neither a
condition. Hence, if the price i.e. the contract of sale may
stipulation in the deed that title to the property sold is reserved in the seller
is not paid, it is as if the by such occurrence put an
until full payment of the price, nor one giving the vendor the right to
obligation of the seller to end to a transaction that
unilaterally resolve the contract the moment the buyer fails to pay within a
deliver and to transfer once upon a time existed
fixed period.
ownership never became
effective and binding.
b. Conditional, which may in turn be
Ownership is retained by the Title over the property
seller, regardless of delivery generally passes to the buyer

and is not pass until fill upon delivery petitioner. Petitioner, however, failed to complete payment of the
payment of the price purchase price. The non-fulfillment of the condition of full payment
Since the seller retains After delivery has been made, rendered the contract to sell ineffective and without force and effect. It
ownership, despite delivery, the seller has lost ownership must be stressed that the breach contemplated in Article 1191 of the New
he is enforcing not and cannot recover it unless Civil Code is the obligor's failure to comply with an obligation. Failure to
rescinding the contract if he the contract is resolved or pay, in this instance, is not even a breach but merely an event which
seeks to oust the buyer for rescinded prevents the vendor's obligation to convey title from acquiring binding
failure to pay. force. Hence, the agreement of the parties in the case at bench may be set
aside, but not because of a breach on the part of petitioner for failure to
Contract to sell a bilateral contract whereby the prospective seller, while complete payment of the purchase price. Rather, his failure to do so
expressly reserving the ownership of the subject property despite delivery brought about a situation which prevented the obligation of respondent
thereof to the prospective buyer, binds himself to sell the said property spouses to convey title from acquiring an obligatory force.
exclusively to the prospective buyer upon payment of full purchase price.
Contract of Sale- no reservation of ownership where the owner can

unilaterally rescind the contract if one of the party fails to fulfill its duty. 2. Interpretation of document denominated Receipt of Partial Payment
1. Interpretation of document denominated Agreement of Purchase and Coronel vs. CA, G.R. No. 103577, Oct. 7, 1996
Sale
FACTS: Defendants Coronels issued a document, receipt of down payment,
Ong vs. CA, G.R. No. 97347, July6, 1999 in favor of Ramona. In the said document, it was stipulated that the
Coronels, upon receipt of the down payment in the amount of 50k (1.24M
It is in the nature of a contract to sell. total price) for their inherited house and lot, bind themselves to the effect
that they will transfer, from their father, the transfer certificate title to
In a contract of sale, the title to the property passes to the vendee their names. After the TCT is under their name, they will execute
upon the delivery of the thing sold; while in a contract to sell, ownership is, immediately a deed of absolute sale in favor of Ramona and she will pay
by agreement, reserved in the vendor and is not to pass to the vendee until the balance of 1.19M. The mother of Ramona, Concepcion, paid the 50k as
full payment of the purchase price. In a contract to sell, the payment of down payment. Thereafter, the Coronels transferred the said property in
the purchase price is a positive suspensive condition, the failure of which is their names.
not a breach, casual or serious, but a situation that prevents the obligation
of the vendor to convey title from acquiring an obligatory force. Coronels sold the property to Catalina for the amount of 1.58M after the
latter paid a down payment of 300k. For this reason, Coronels canceled
Spouses Robles, respondents in the case at bar bound themselves and rescinded the contract with Ramona by depositing the down payment
to deliver a deed of absolute sale and clean title covering the two parcels paid by Concepcion in the bank in trust for Ramona Patricia Alcaraz.
of land upon full payment by the buyer of the purchase price of
P2,000,000.00. This promise to sell was subject to the fulfillment of the Concepcion et al. filed a case against specific performance. A notice of lis
suspensive condition of full payment of the purchase price by the pendens was annotated at the back of the title. An adverse claim by

Catalina was also annotated. The Coronels executed a deed of absolute A contract to sell as defined hereinabove, may not even be considered as a
sale in favor of Catalina. Thus, a new title was issued in the name of conditional contract of sale where the seller may likewise reserve title to the
Catalina. property subject of the sale until the fulfillment of a suspensive condition,
because in a conditional contract of sale, the first element of consent is
Both trial court and CA ruled in favor of Concepcion. It ordered the specific present, although it is conditioned upon the happening of a contingent event
performance of the agreement. which may or may not occur. If the suspensive condition is not fulfilled, the
perfection of the contract of sale is completely abated (cf. Homesite and
ISSUE: legal determination of the document, Receipt of Downpayment Housing Corp. vs. Court of Appeals, 133 SCRA 777 [1984]). However, if the
suspensive condition is fulfilled, the contract of sale is thereby perfected,
SC RULED that when the "Receipt of Down Payment" is considered in its such that if there had already been previous delivery of the property subject
entirety, it becomes more manifest that there was a clear intent on the part of the sale to the buyer, ownership thereto automatically transfers to the
of petitioners to transfer title to the buyer, but since the transfer certificate buyer by operation of law without any further act having to be performed by
of title was still in the name of petitioner's father, they could not fully effect the seller.
such transfer although the buyer was then willing and able to immediately
pay the purchase price. This is a contract OF sale, SC affirmed the decision of Nabus vs. Pacson
CA.
Facts:
In a contract of sale, the title passes to the vendee upon the delivery of the
thing sold; whereas in a contract to sell, ownership is not transferred upon The spouses Bate and Julie Nabus were the owners of parcels of land with a
delivery of the property but upon full payment of the purchase price. In the total area of 1,665 square meters, situated in Pico, La Trinidad, Benguet, duly
former, the vendor has lost and cannot recover ownership until and unless registered in their names under TCT No. T-9697 of the Register of Deeds of
the contract is resolved or rescinded; whereas in the latter, title is retained the Province of Benguet. The property was mortgaged by the Spouses Nabus
by the vendor until the full payment of the price, such payment being a to the Philippine National Bank (PNB), La Trinidad Branch, to secure a loan in
positive suspensive condition and failure of which is not a breach but an the amount of P30,000.00.
event that prevents the obligation of the vendor to convey title from
becoming effective. On February 19, 1977, the Spouses Nabus executed a Deed of Conditional
Sale 4 covering 1,000 square meters of the 1,665 square meters of land in
H. Contract to sell vs. Conditional sale favor of respondents Spouses Pacson for a consideration of P170,000.00,
which was duly notarized on February 21, 1977. Their contract had the
Conditional Sale upon happening of the condition, title is transferred. Seller following condition:
cannot sell to another person.
THAT, as soon as the full consideration of this sale has been paid by the
Compared to Contract to sell VENDEE, the corresponding transfer documents shall be executed by the
VENDOR to the VENDEE for the portion sold;
-ownership is transferred upon creation of necessary documents.
THAT, it is mutually understood that in as much as there is a claim by other
Coronel vs CA persons of the entire property of which the portion subject of this

Instrument is only a part, and that this claim is now the subject of a civil case minor Michelle Nabus, and the guardianship papers of Michelle. However,
now pending before Branch III of the Court of First Instance of Baguio and Julie Nabus did not return.
Benguet, should the VENDOR herein be defeated in the said civil action to
the end that he is divested of title over the area subject of this Instrument, Getting suspicious, Catalina Pacson went to the Register of Deeds of the
then he hereby warrants that he shall return any and all monies paid by the Province of Benguet and asked for a copy of the title of the land. She found
VENDEE herein whether paid to the PNB, La Trinidad, Benguet Branch, or that it was still in the name of Julie and Michelle Nabus
directly received by herein VENDOR, all such monies to be returned upon
demand by the VENDEE; After a week, Catalina Pacson heard a rumor that the lot was already sold to
petitioner Betty Tolero. Catalina Pacson and Atty. Rillera went to the Register
THAT, [a] portion of the parcel of land subject of this instrument is presently of Deeds of the Province of Benguet, and found that Julie Nabus and her
in the possession of Mr. Marcos Tacloy, and the VENDOR agrees to cooperate minor daughter, Michelle Nabus, represented by the former's mother as
and assist in any manner possible in the ouster of said Mr. Marcos Tacloy appointed guardian by a court order dated October 29, 1982, had executed a
from said possession and occupation to the end that the VENDEE herein shall Deed of Absolute Sale in favor of Betty Tolero on March 5, 1984.
make use of said portion as soon as is practicable;
Issue:
Thereafter, respondents took possession of the subject property. They
constructed an 80 by 32-feet building and a steel-matting fence around the 2)Whether the Deed of Conditional Sale was a contract to sell or a contract
property to house their truck body-building shop which they called the of sale.
"Emiliano Trucking Body Builder and Auto Repair Shop."
Held:
On December 24, 1977, before the payment of the balance of the mortgage
amount with PNB, Bate Nabus died. On August 17, 1978, his surviving A contract to sell as defined hereinabove, may not even be considered as a
spouse, Julie Nabus, and their minor daughter, Michelle Nabus, executed a conditional contract of sale where the seller may likewise reserve title to the
Deed of Extra Judicial Settlement over the registered land covered by TCT property subject of the sale until the fulfillment of a suspensive condition,
No. 9697. On the basis of the said document, TCT No. T-17718 8 was issued because in a conditional contract of sale, the first element of consent is
on February 17, 1984 in the names of Julie Nabus and Michelle Nabus. present, although it is conditioned upon the happening of a contingent event
which may or may not occur. If the suspensive condition is not fulfilled, the
During the last week of January 1984, Julie Nabus, accompanied by her perfection of the contract of sale is completely abated. However, if the
second husband, approached Joaquin Pacson to ask for the full payment of suspensive condition is fulfilled, the contract of sale is thereby perfected,
the lot. Joaquin Pacson agreed to pay, but told her to return after four days such that if there had already been previous delivery of the property subject
as his daughter, Catalina Pacson, would have to go over the numerous of the sale to the buyer, ownership thereto automatically transfers to the
receipts to determine the balance to be paid. When Julie Nabus returned buyer by operation of law without any further act having to be performed by
after four days, Joaquin sent her and his daughter, Catalina, to Atty. Elizabeth the seller.
Rillera for the execution of the deed of absolute sale. Since Julie was a widow
with a minor daughter, Atty. Rillera required Julie Nabus to return in four In a contract to sell, upon the fulfillment of the suspensive condition which is
days with the necessary documents, such as the deed of extrajudicial the full payment of the purchase price, ownership will not automatically
settlement, the transfer certificate of title in the names of Julie Nabus and transfer to the buyer although the property may have been previously

delivered to him. The prospective seller still has to convey title to the
prospective buyer by entering into a contract of absolute sale.
Arts. 1459-1465
It is not the title of the contract, but its express terms or stipulations that
determine the kind of contract entered into by the parties. In this case, the Art. 1459. The thing must be licit and the vendor must have a right to
contract entitled "Deed of Conditional Sale" is actually a contract to sell. The transfer the ownership thereof at the time it is delivered. (n)
contract stipulated that "as soon as the full consideration of the sale has
been paid by the vendee, the corresponding transfer documents shall be Art. 1460. A thing is determinate when it is particularly designated or
executed by the vendor to the vendee for the portion sold." 41 Where the physical segregated from all other of the same class.
vendor promises to execute a deed of absolute sale upon the completion by
the vendee of the payment of the price, the contract is only a contract to The requisite that a thing be determinate is satisfied if at the time the
sell." 42 The aforecited stipulation shows that the vendors reserved title to contract is entered into, the thing is capable of being made determinate
the subject property until full payment of the purchase price. without the necessity of a new or further agreement between the parties. (n)
As vendees given possession of the subject property, the ownership of which Art. 1461. Things having a potential existence may be the object of the
was still with the vendors, the Pacsons should have protected their interest contract of sale.
and inquired from Julie Nabus why she did not return and then followed
through with full payment of the purchase price and the execution of the The efficacy of the sale of a mere hope or expectancy is deemed subject to
deed of absolute sale. The Spouses Pacson had the legal remedy of the condition that the thing will come into existence.
consigning their payment to the court; however, they did not do so. A rumor
that the property had been sold to Betty Tolero prompted them to check the The sale of a vain hope or expectancy is void. (n)
veracity of the sale with the Register of Deeds of the Province of Benguet.
They found out that on March 5, 1984, Julie Nabus sold the same property to Art. 1462. The goods which form the subject of a contract of sale may be
Betty Tolero through a Deed of Absolute Sale, and new transfer certificates either existing goods, owned or possessed by the seller, or goods to be
of title to the property were issued to Tolero. manufactured, raised, or acquired by the seller after the perfection of the
contract of sale, in this Title called "future goods."
Unfortunately for the Spouses Pacson, since the Deed of Conditional Sale
executed in their favor was merely a contract to sell, the obligation of the There may be a contract of sale of goods, whose acquisition by the seller
seller to sell becomes demandable only upon the happening of the depends upon a contingency which may or may not happen. (n)
suspensive condition. 43 The full payment of the purchase price is the
positive suspensive condition, the failure of which is not a breach of contract, Art. 1463. The sole owner of a thing may sell an undivided interest therein.
but simply an event that prevented the obligation of the vendor to convey (n)
title from acquiring binding force. 44 Thus, for its non-fulfilment, there is no
contract to speak of, the obligor having failed to perform the suspensive Art. 1464. In the case of fungible goods, there may be a sale of an undivided
condition which enforces a juridical relation. 45 With this circumstance, share of a specific mass, though the seller purports to sell and the buyer to
there can be no rescission or fulfilment of an obligation that is still non- buy a definite number, weight or measure of the goods in the mass, and
existent, the suspensive condition not having occurred as yet. though the number, weight or measure of the goods in the mass is

undetermined. By such a sale the buyer becomes owner in common of such a Manalapat v. CA
share of the mass as the number, weight or measure bought bears to the
number, weight or measure of the mass. If the mass contains less than the Facts: In 1976, a free patent was issued in Manlapats name. In 1954, before
number, weight or measure bought, the buyer becomes the owner of the the subject lot was titled, he sold a portion to Ricardo evidenced by a deed of
whole mass and the seller is bound to make good the deficiency from goods sale. He conveyed another portion to Ricardo in 1981. Leon Banaag (son-in-
of the same kind and quality, unless a contrary intent appears. (n) law of Manlapat) executed a mortgaged with the subject lot as the collateral.
Heirs of Ricardo sought to obtain the title from petitioners which was in the
Art. 1465. Things subject to a resolutory condition may be the object of the custody of RBSP, earlier surrendered as a consequence of the mortgage.
contract of sale. (n)
Arts. 1459-1465 SC: Five-year prohibition against alienation or encumbrances under the
I. OBJECT Public Land Act. Eduardo was issued a title in 1976 on the basis of his free
Licit not contrary to law, morals, good customs, public order or patent application. Such application implies the recognition of the public
public policy, within the commerce of man; if illicit, contract is void dominion character of the land and, hence, the 5-year prohibition imposed
All rights which are not intransmissible or personal may also be the by the PLA against alienation or encumbrance of the land covered by a free
object of sale (i.e. right of usufruct) patent or homestead should have been considered.
Services cannot be the object of a contract of sale
The deed of sale which was executed in 1981 is obviously covered by
Test of Determinability the proscription, the free patent having been issued in 1976. However,
a. Capacity to Segregate petitioners may recover the portion sold since the prohibition was imposed
b. No further agreement in favor of the free patent holder.
The sale executed 1954 was before the issuance of the patent in
A. Qualities The object must be: 1976. Apparently, Eduardo disposed of the portion even before he thought
of applying for a free patent. Where the sale or transfer took place before
a. Lawful (1459) the filing of the free patent application, whether by the vendor or the
vendee, the prohibition should not be applied. In such a situation, neither
Art. 1459. The thing must be licit and the vendor must have a right to the prohibition nor the rationale therefore which is to keep in the family of
transfer the ownership thereof at the time it is delivered. (n) the patentee that portion of the public land which the government has
gratuitously given him, by shielding him from the temptation to dispose of
Object must be licit his landholding, could be relevant. Precisely, he had disposed of his rights to
Vendor must have the right to transfer ownership at the time the the lot even before the government could give the title to him.
object is delivered The mortgage executed in favor of RBSP is also beyond the pale of
the prohibition, as it was forged in December 1981 a few months past the
Unlawful object: period of prohibition.
i. Future inheritance
ii. Homestead (sale within 5 year prohibitory period) b. determinate or Determinable

- undivided interest can be subject to sale. The buyer will become a co- defines that a thing is determinate when it is particularly designated or
owner. physically segregated from all others of the same class. The property sold by
a. before partition Loreto to Gabino was determinable.
b. in a mass of fungible goods. A co-owner has full ownership of his pro-indiviso share and has the
right to alienate, assign or mortgage it, and substitute another person for its
Cases: enjoyment. The subject parcel, being an inherited property, is subject to the
1) sale by co-heir of undivided portion of estate rules of co-ownership under the Civil Code. Co-ownership is the right of
common dominion which two or more persons have in a spiritual part of a
thing, not materially or physically divided. Before the partition of the
Vagilidad v. Vagilidad property held in common, no individual or co-owner can claim title to any
definite portion thereof. All that the co-owner has is an ideal or abstract
Facts: quota or proportionate share in the entire property. LORETO sold the subject
property to GABINO as a co-owner. LORETO had a right, even before the
4,280 sqm of lot was owned by Zoilo. In 1931, ZOILO died. Subsequently son partition to transfer in whole or in part his undivided interest in the lot even
of Zolio, Loreto sold to Gabino Vagilidad a portion of said lot as evidenced by without the consent of his co-heirs. This right is absolute. Thus, what GABINO
the Deed of Absolute Sale executed by Loreto on 1986. After, Zoilos children obtained by virtue of the sale on were the same rights as the vendor LORETO
executed an Extrajudicial Settlement of Estate adjudicating the entire lot to had as co-owner, in an ideal share equivalent to the consideration given
Loreto in 1987. Gabino filed petition of surrender of lot against Loreto, under their transaction. Consequently, when LORETO purportedly sold to
claiming that he is owner pursuant to deed of Sale issued before the extra WILFREDO the same portion of the lot, he was no longer the owner said lot.
judicial settlement. Based on the principle that "no one can give what he does not have,"
LORETO could not have validly sold to WILFREDO what he no longer had.
However, there seemed to be an amicable settlement between them, and
the case was sent to archives. 2) Effect of agreement where the exact number of palay to be sold was
not fixed.
Gabino paid real estate taxes on the land he bought from Loreto which he
later sold to Wilfredo Vagilidad. Likewise, a Deed of Absolute Sale was also National Grains Authority v. IAC
made by Loreto in favor of Wilfredo for the same portion of lot. Wlfredo
mortgaged this property to obtain a loan. Gabino and his wife filed petition Facts: Leon Soriano submitted the documents required by the NFA for pre-
for reconveyance. qualifying as a seller. These were processed and he was given a quota of
2,640 cavans of palay. On August 1979, Soriano delivered 630 cavans of
The requisite that a thing be determinate is satisfied if at the time palay. The palay delivered were not rebagged, classified and weighed. When
the contract is entered into, the thing is capable of being made determinate Soriano demanded payment, he was informed that it was held in abeyance
without the necessity of a new or further agreement between the parties. since Mr. Cabal was still investigating on an information that Soriano was not
Art. 1349 states that the object of every contract must be determinate, as to a bona fide farmer and the palay delivered was not produced from his
its kind. The fact that the quantity is not determinate shall not be an obstacle farmland but was taken from the warehouse of a rice trader, Ben de
to the existence of the contract, provided it is possible to determine the Guzman. Petitioner wrote Soriano advising him to withdraw the 630 cavans.
same, without the need of a new contract between the parties. Art. 1460 Instead of withdrawing, Soriano insisted that the palay grains delivered be
paid. NFA was ordered to pay Soriano.

Present case involves a perfected contract of sale. Soriano initially Tanedo vs Ca
offered to sell palay grains produced in his farmland to NFA. When the latter
accepted the offer by noting in Sorianos Farmers Information Sheet a quota Facts:
of 2,640 cavans, there was already a meeting of the minds between the
parties. The object of the contract, being the palay grains produced in
Sorianos farmland and the NFA was to pay the same depending upon its On October 20, 1962, Lazaro Taedo executed a notarized deed of absolute
quality. The contention that since the delivery were not rebagged, sale in favor of his eldest brother, Ricardo Taedo, and the latters wife,
classified and weighed in accordance with the palay procurement program of Teresita Barera, private respondents herein, whereby he conveyed to the
NFA, there was no acceptance of the offer thus this is a clear case of an latter in consideration of P1,500.00, one hectare of whatever share I shall
unaccepted offer to sell, is untenable. have over Lot No. 191 of the cadastral survey of Gerona, Province of Tarlac
and covered by Title T-l3829 of the Register of Deeds of Tarlac, the said
Quantity being indeterminate does not affect perfection of contract; property being his future inheritance from his parents (Exh. 1). Upon the
No need to create new contract. The fact that the exact number of cavans of death of his father Matias, Lazaro executed an Affidavit of Conformity
palay to be delivered has not been determined does not affect the perfection dated February 28, 1980 (Exh. 3) to re-affirm, respect. acknowledge and
of the contract. In the present case, there was no need for NFA and Soriano validate the sale I made in 1962. On January 13, 1981, Lazaro executed
to enter into a new contract to determine the exact number of cavans of another notarized deed of sale in favor of private respondents covering his
palay to be sold. Soriano can deliver so much of his produce as long as it does undivided ONE TWELVE (1/12) of a parcel of land known as Lot 191 x x (Exh.
not exceed 2,640 cavans. (It did not need a new contract to make 630 cavans 4). He acknowledged therein his receipt of P 10,000.00 as consideration
a determinate thing). therefor. In February 1981, Ricardo learned that Lazaro sold the same
property to his children, petitioners herein, through a deed of sale dated
Sale a consensual contract; Acceptance is on the offer and not the December 29, 1980 (Exh. E). On June 7, 1982, private respondents recorded
goods delivered. Sale is a consensual contract, there is perfection when the Deed of Sale (Exh. 4) in their favor in the Registry of Deeds and the
there is consent upon the subject matter and price, even if neither is corresponding entry was made in Transfer Certificate of Title No. 166451
delivered. (Obana vs. C.A., L-36249, March 29, 1985, 135 SCRA 557, 560). (Exh. 5).
The acceptance referred to which determines consent is the acceptance of Petitioners on July 16, 1982 filed a complaint for rescission (plus damages) of
the offer of one party by the other and not of the goods delivered. the deeds of sale executed by Lazaro in favor of private respondents covering
Compliance of mutual obligations once a contract of sale is the property inherited by Lazaro from his father.
perfected. From the moment the contract of sale is perfected, it is
Issue:
incumbent upon the parties to comply with their mutual obligations or the Is a sale of future inheritance valid?
parties may reciprocally demand performance thereof. (Article 1475, Civil
Code, 2nd par.) Held:
c. Existing, Future, or contingent (1462) (n)o contract may be entered into upon a future inheritance except in cases
Case: expressly authorized by law.
1) Sale of Future Inheritance

Consequently, said contract made in 1962 is not valid and cannot be the he and Perfecto Guansing were the only surviving heirs entitled to the
source of any right nor the creator of any obligation between the parties. property, and that Perfecto had waived all his rights thereto. Consequently
Hence, the affidavit of conformity dated February 28, 1980, insofar as it he acquired title and used this to acquire a loan. CDB foreclosed the
sought to validate or ratify the 1962 sale, is also useless and, in the words of mortgage and granted him the period of redemption, which he did not
the respondent Court, suffers from the same infirmity. Even private exercise.
respondents in their memorandum concede this.
It is not required that, at the perfection stage, the seller be the
owner of the thing sold or even that such subject matter of the sale exists at
d. Transferability of Ownership that point in time. Thus, under Art. 1434 of the Civil Code, when a person
sells or alienates a thing which, at that time, was not his, but later acquires
Ownership title thereto, such title passes by operation of law to the buyer or grantee.
This is the same principle behind the sale of "future goods" under Art. 1462
1. It need not exist at the perfection of the contract. Required at the of the Civil Code. However, under Art. 1459, at the time of delivery or
time of delivery consummation stage of the sale, it is required that the seller be the owner of
2. Subsequent acquisition of title by a vendor w/out title validates the the thing sold. Otherwise, he will not be able to comply with his obligation to
sale transfer ownership to the buyer. It is the consummation stage where the
3. Acquisition of title by the vendee may depend upon a contingency principle of nemo dat quod non habet applies. In this case, the sale by CDB to
(right of redemption) Lim of the property mortgaged in 1983 by Rodolgo Guansing must, therefore,
be deemed a nullity for CDB did not have a valid title to the said property. To
The seller must have the right to transfer the ownership of the thing or be sure, CDB never acquired a valid title to the property because the
right sold to the buyer at the time of delivery and not at the time of the foreclosure sale, by virtue of which the property had awarded to CDB as
making of the contract. highest bidder, is likewise void since the mortgagor was not the owner of the
property foreclosed.
Nemo dat quod non habet, as an ancient Latin maxim says. One cannot give
what does not have. CDB cannot be considered a mortgagee in good faith. While
petitioners are not expected to conduct an exhaustive investigation on the
Note: When ownership is required At the time of sale but ownership may history of the mortgagor's title, CDB cannot be excused from the duty of
not be w/ the seller in case of future things. exercising the due diligence required of banking institutions in ascertaining
the validity of the title.
Cases:
That after the payment of the 10% option money, the Offer to
1. Sale by mortgagee of land not proper subject of mortgage Purchase provides for the payment only of the balance of the purchase price,
implying that the "option money" forms part of the purchase price. This is
Cavite Development Bank v. Lim, 324 scra 346 precisely the result of paying earnest money under Art. 1482 of the Civil
Code. It is clear then that the parties in this case actually entered into a
Facts: Rodolfo Guansing obtained a fraudulent title by executing an Extra- contract of sale, partially consummated as to the payment of the price.
Judicial Settlement of the Estate With Waiver where he made it appear that

2. Conveyance of privilege to purchase land before it is awarded to the Facts: A big parcel of lot was originally owned by Spouses Laquian. When the
tenant or occupant. Spouses died, the property was left with the wifes siblings. Through an
"Extrajudicial Settlement of the Estate of the Deceased Constancia R. Socco
Hermosilla v. Remoquillo (wife)," the parcel of land was partitioned into 3 lots. Before the partition,
Miguel Socco, 1 of the heirs sold his share to Arturo Reyes as evidenced by
Facts: Apolinario Hermosilla was occupying a lot in San Pedro Tunasan the Contract to Sell stating that he is to inherit a particular portion. But upon
Homesite, a land of the Republic. He divided the lot into 2. The 1st portion partition, the said portion sold was adjudicated to respondent, Elena Socco
was given to his son Salvador and the other(questioned lot) to his grandson Beltran, and not to Miguel Socco.
Jaime Remoquillo through a Deed of Assignment. A law was passed
prohibiting the transfer of ownership of the said lot. Salvador and Jaime after SC: Article 1459 of the Civil Code on contracts of sale, The thing must be
made a Kasunduan ng Paglipat Ng Karapatan sa Isang Lagay na Lupang Solar licit and the vendor must have a right to transfer ownership thereof at the
(Kasunduan) whereby Jaime transferred ownership of the 65 square meters time it is delivered. The law specifically requires that the vendor must have
(the questioned property) in favor of Salvador. NHA awarded Jaime title. ownership of the property at the time it is delivered. Petitioners claim that
Salvador and his heirs questioned the title stating they have their house and the property was constructively delivered to them in 1954 by virtue of the
in actual possession of the questioned lot. Contract to Sell. However, as already pointed out by this Court, it was
explicit in the Contract itself that, at the time it was executed, Miguel R.
When the Kasunduan was executed in 1972 by Jaime in favor of Socco was not yet the owner of the property and was only expecting to
Salvador petitioners' predecessor-in-interest Lot 19, of which the inherit it. Hence, there was no valid sale from which ownership of the
questioned property forms part, was still owned by the Republic. Nemo dat subject property could have transferred from Miguel Socco to Arturo Reyes.
quod non habet. Nobody can give what he does not possess. Jaime could not Without acquiring ownership of the subject property, Arturo Reyes also
thus have transferred anything to Salvador via the Kasunduan. could not have conveyed the same to his heirs, herein petitioners.
The transfer became one in violation of law and therefore void ab The law specifically requires that the vendor must have ownership of the
initio. Hence, petitioners acquired no right over the lot from a Void property at the time it is delivered. Petitioners cannot derive title to the
Kasunduan, for no rights are created. It is generally considered that as subject property by virtue of the Contract to Sell. It was stated in the
between the parties to a contract, validity cannot be given to it by estoppel if Contract that the vendor was not yet the owner of the subject property and
it is prohibited by law or is against public policy. was merely expecting to inherit the same. It was also declared that
Since the property was previously a public land, petitioners have no conveyance of the subject to the buyer was a conditional sale. It is, therefore,
personality to impute violation of the law. If the title was in fact fraudulently apparent that the sale of the subject property in favor of Arturo Reyes was
obtained, it is the State which should file the suit to recover the property conditioned upon the event that Miguel Socco would actually inherit and
through the Office of the Solicitor General. Consequently, Jaimes ownership become the owner of the said property. Absent such occurrence, Miguel R.
was valid not being contrary to any law and since there was no pending other Socco never acquired ownership of the subject property which he could
application yet. That at the time he applied for title, he was recogned as the validly transfer to Arturo Reyes. Without acquiring ownership of the subject
actual applicant / occupant. property, Arturo Reyes also could not have conveyed the same to his heirs,
herein petitioners.
Heirs of Arturo Reyes v. Beltran G.R. No. 176474 -assignment was done prior to the application.

ARTICLES 1469-1474 appropriated by the buyer he must pay a reasonable price therefor. What is a
reasonable price is a question of fact dependent on the circumstances of
Art. 1469. In order that the price may be considered certain, it shall be each particular case. (n)
sufficient that it be so with reference to another thing certain, or that the
determination thereof be left to the judgment of a special person or persons. I. Price sum certain in money or its equivalent.
Should such person or persons be unable or unwilling to fix it, the contract Case: General principles in the agreement as to price
shall be inefficacious, unless the parties subsequently agree upon the price.
Boston Bank of the Philippines v. Manalo, G. R. No. 158149, February 9,
If the third person or persons acted in bad faith or by mistake, the courts 2006
may fix the price.
FACTS: Boston Bank, now petitioner, filed the instant petition for review on
Where such third person or persons are prevented from fixing the price or certiorari assailing the CA rulings. It maintains that, as held by the CA, the
terms by fault of the seller or the buyer, the party not in fault may have such records do not reflect any schedule of payment of the 80% balance of the
remedies against the party in fault as are allowed the seller or the buyer, as purchase price, or P278,448.00. Petitioner insists that unless the parties had
the case may be. (1447a) agreed on the manner of payment of the principal amount, including the
other terms and conditions of the contract, there would be no existing
Art. 1470. Gross inadequacy of price does not affect a contract of sale, except contract of sale or contract to sell.47
as it may indicate a defect in the consent, or that the parties really intended
a donation or some other act or contract. (n)
Art. 1471. If the price is simulated, the sale is void, but the act may be shown WON: Petitioner, as seller, forged a perfect contract to sell over a real
to have been in reality a donation, or some other act or contract. (n) property to respondents, as buyer.
Art. 1472. The price of securities, grain, liquids, and other things shall also be HELD: We agree with petitioners contention that, for a perfected contract
considered certain, when the price fixed is that which the thing sold would of sale or contract to sell to exist in law, there must be an agreement of the
have on a definite day, or in a particular exchange or market, or when an parties, not only on the price of the property sold, but also on the manner
amount is fixed above or below the price on such day, or in such exchange or the price is to be paid by the vendee.
market, provided said amount be certain. (1448)
A definite agreement as to the price is an essential element of a binding
Art. 1473. The fixing of the price can never be left to the discretion of one of agreement to sell personal or real property because it seriously affects the
the contracting parties. However, if the price fixed by one of the parties is rights and obligations of the parties. Price is an essential element in the
accepted by the other, the sale is perfected. (1449a) 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
Art. 1474. Where the price cannot be determined in accordance with the price fixed by one of the contracting parties, if accepted by the other, gives
preceding articles, or in any other manner, the contract is inefficacious. rise to a perfected sale.57
However, if the thing or any part thereof has been delivered to and

It is not enough for the parties to agree on the price of the property. The FACTS: Counsel for the plaintiff Santiago Cruzado filed a written complaint
parties must also agree on the manner of payment of the price of the on October 8, 1910, amended on September 25, 1913, in which he alleged
property to give rise to a binding and enforceable contract of sale or contract that plaintiff was the owner of certain rural property situated in the barrio of
to sell. This is so because the agreement as to the manner of payment goes Dolores, formerly San Isidro, of the municipality of Bacolor, Pampanga,
into the price, such that a disagreement on the manner of payment is containing an area of 65 balitas and bounded as set forth in the complaint;
tantamount to a failure to agree on the price.58 that Estafania Bustos, during her lifetime, and now the administrator of her
estate, together with the other defendant, Manuel Escaler, had, since the
In a contract to sell property by installments, it is not enough that the parties year 1906 up to the present, been detaining the said parcel of land, and had
agree on the price as well as the amount of downpayment. The parties must, refused to deliver the possession thereof to plaintiff and to recognize his
likewise, agree on the manner of payment of the balance of the purchase ownership of the same, notwithstanding the repeated demands made upon
price and on the other terms and conditions relative to the sale. Even if the them; that by such detention, the plaintiff had suffered losses and damages
buyer makes a downpayment or portion thereof, such payment cannot be to the amount of P3,500. He therefore asked for judgment declaring plaintiff
considered as sufficient proof of the perfection of any purchase and sale to be the owner of the said parcel of land and ordering defendants to return
between the parties. it to plaintiff and to pay the latter P3,500 for losses and damages, and the
costs.
We agree with the contention of the petitioner that, as held by the CA, there
is no showing, in the records, of the schedule of payment of the balance of WON: The deed of sale of 65 balitas of land situated in the municipality of
the purchase price on the property amounting to P278,448.00 Bacolor, Pampanga, executed by Estefania Bustos, with the assistance of her
husband Bernardino Dizon, in favor of Agapito Geronimo Cruzado, for the
A. Requisites: sum of P2,200, was simulated.
1. The price must be real (1471) HELD: The simulation of the said sale was effected by making a pretended
contract which bore the appearance of truth, when really and truly there was
Art. 1471. If the price is simulated, the sale is void, but the act may be shown no contract, because the contracting parties did not in fact intend to execute
to have been in reality a donation, or some other act or contract. one, but only to formulate a sale in such a manner that, for the particular
purposes sought by Bustos and Cruzado, it would appear to have been
-price is real- when at the perfection of the sale, there is legal intention on celebrated solely that Cruzado might hold his office of procurador on the
the part of the buyer to pay the price and the legal expectation on the part of strength of the security afforded by the value of the land feignedly sold.
the seller to receive such price as the value of the subject matter he obligates
himself to deliver. This action is of course improper, not only because the sale was simulated,
but also because it was not consummated. The price of the land was not paid
-price is false- the contract is valid but subject to reformation to indicate the nor did the vendee take possession of the property from the 7th of
real price upon which the minds of the parties have met. September, 1875, when the said sale was feigned, until the time of his death;
nor did any of his successors, nor the plaintiff himself until the date of his
a.) Effect if price is simulated- produces no effect. claim, enter into possession of the land.
Cruzado v. Bustos, G. R. No. 10244, February 29, 1916s

That the contract of purchase and sale, as consensual, is perfected by of any factual finding that petitioner was, in the first place, endowed with
consent as to the price and the thing and is consummated by the reciprocal any ownership rights to validly mortgage and convey the property. As the
delivery of the one and the other, the full ownership of the thing sold being complainant who initiated the case, respondent bears the burden of proving
conveyed to the vendee, from which moment the rights of action derived the basis of her complaint. Having failed to discharge such burden, the Court
from this right may be exercised. has no choice but to declare the sale void for lack of cause. And since the sale
is void, the Court finds it unnecessary to dwell on the issue of whether duress
It is, then, of the utmost importance to examine whether in the said sale the or intimidation had been foisted upon petitioner upon the execution of the
purchase price was paid and whether the vendee took possession of the land sale.
supposed to have been sold.
b. In money or its equivalent (1458)
b.) Effect if there is no consideration null and void (non-existence of
the contract). Torres vs CA
Doles v. Angeles, G. R. No. 149353, June 26, 2006 Facts:
FACTS: On April 1, 1997, Ma. Aura Tina Angeles (respondent) filed with the Petitioners and respondent entered into a joint venture agreement for the
RTC a complaint for Specific Performance with Damages against Jocelyn B. development of a parcel land located at Lapu-Lapu City island of Mactan into
Doles (petitioner), docketed as Civil Case No. 97-82716. Respondent alleged a subdivision. Pursuant to the contract, petitioners executed a deed of sale
that petitioner was indebted to the former in the concept of a personal loan covering the said parcel of land in favor of the respondent, who then had it
amounting to P405,430.00 representing the principal amount and interest; registered in his name. Thereafter, respondent mortgaged the property in
that on October 5, 1996, by virtue of a "Deed of Absolute Sale", petitioner, as the bank, and according to the joint agreement, the money obtained
seller, ceded to respondent, as buyer, a parcel of land, as well as the amounting to P40,000.00 was to be used for the development of the
improvements thereon, with an area of 42 square meters, covered by subdivision. However, the project did not push through, and the land was
Transfer Certificate of Title No. 382532,4 and located at a subdivision project subsequently foreclosed by the bank. Because of this, petitioners filed a civil
known as Camella Townhomes Sorrente in Bacoor, Cavite, in order to satisfy case before the Regional Trial Court of Cebu City, which was later dismissed
her personal loan with respondent; that this property was mortgaged to by the trial court. On appeal, the Court of Appeals affirmed the decision of
National Home Mortgage Finance Corporation (NHMFC) to secure the trial court. The appellate court held that the petitioner and respondent
petitioners loan in the sum of P337,050.00 with that entity. had formed a partnership for the development of the subdivision. Thus, they
must bear the loss suffered by the partnership in the same proportion as
WON: The contract of sale on the parcel of land was executed for a cause. their share in the profits stipulated in the contract. Aggrieved by the
decision, petitioner filed the instant petition contending that the Court of
HELD: Since the sale is predicated on that loan, then the sale is void for lack Appeals erred in concluding that the transaction between the petitioners and
of consideration. respondent was that of a joint venture/partnership.
In view of these anomalies, the Court cannot entertain the possibility that SC: The Joint Venture Agreement clearly states that the consideration for the
respondent agreed to assume the balance of the mortgage loan which sale was the expectation of profits from the subdivision project. Its first
petitioner allegedly owed to the NHMFC, especially since the record is bereft stipulation states that petitioners did not actually receive payment for the

parcel of land sold to respondent. Consideration, more properly FACTS: The La Insular cigar and cigarette factory is a joint account association
denominated as cause, can take different forms, such as the prestation or with a nominal capital of P865,000, the plaintiffs share being P20,000, or
promise of a thing or service by another. In this case, the cause of the 4/173 of the whole. On March 14, 1910, the plaintiffs attorneys wrote the
contract of sale consisted not in the stated peso value of the land, but in the defendants local representative a letter offering to sell to the defendant
expectation of profits from the subdivision project, for which the land was plaintiffs participation in the factory. The result of the correspondence
intended to be used. As explained by the trial court, "the land was in effect between the parties and their representatives was that Exhibit G was duly
given to the partnership as [petitioner's] participation therein. . . . There was executed on May 3, 1910. In accordance with the terms of this exhibit a
therefore a consideration for the sale, the [petitioners] acting in the committee of appraisers was appointed to ascertain and fix the actual value
expectation that, should the venture come into fruition, they [would] get of La Insular. The committee rendered its report on November 14, 1910,
sixty percent of the net profits." fixing the net value at P4,428,194.44. Of this amount 4/173 part represented
the plaintiffss share on his P20,000 of the nominal capital. In Exhibit J which
-expectations of profits from the subdivision projects is a valid form of was executed on November 22, 1910, the plaintiff acknowledged to have
consideration. received from the defendant that amount.
-it is sufficient if it can be determined by the stipulations of the contract Subsequently to the execution of Exhibit J, demand was made by the plaintiff
made by the parties thereto/ by reference to an agreement incorporated in upon the defendant for his share of the profits from June 30, 1909, to
the contract. November 22, 1910. This demand was refused and thereupon this action was
instituted to recover said profits. Upon the evidence submitted at the
3. Certain or ascertainable (determinable) hearing, the court below held: (1) That the agreement of May 3, 1910, was
by its terms a contract to sell in the future and did not pass title and (2) that
a.) How determined the sale of plaintiffs interest did not include the profits in question.
Judgment was rendered accordingly, with interest and cost. The defendant
i. By a third person (1469, pars. 1, 2, 4) appealed.
aa) If the third person is unable or unwilling to fix the price, the SC: It was the appraisers who were appointed to ascertain and fix the total
contract is inefficacious unless the parties come to an agreement net value of the factory for the purpose of determining the true present
value of the interest.
- The appraiser was the one who determined the total net value of the shares
of the company and thereafter that of Baretos share.
Barreto v. Sta. Marina, G. R. No. L-8169, December 29, 1913 ii. By the Courts (1469, par. 3) if there is bad faith or mistake of the
third party fixing the price
(***CAVEAT EMPTOR: PLS READ THE FULL TEXT. CASE DOCTRINE RELATED
TO SALES NOT CLEARLY ESTABLISHED IN THE CASE) iii) By reference to a definite day, a particular exchange or market
(1472)

iv) By reference to invoices Thereupon the plaintiff, claiming that the tobacco in these two lots was
worthless, brought this action against the defendant to recover what he paid.
McCulough v. Aenlle & Co.,G. R. No. 1300, February 3, 1904
WON: There was a perfected contract of sale entered into by the parties on
FACTS: For the purpose of carrying into effect the said contract of sale August 27,1901.
entered into with the other party hereto, said Francisco Gonzalez y de la
Fuente and Don Antonio la Puente y Arce, in the name and on behalf of the HELD: The document of August 27 was a completed contract of sale. The
mercantile partnership denominated R. Aenlle & Co., by virtue of the powers articles which were the subject of the sale were definitely and finally agreed
conferred upon them and in compliance with the instructions given them by upon. The appellee agreed to buy, among other things, all of the leaf tobacco
Don Matias Saenz de Vizmanos y Lecaros, the manager of the said in the factory. This was sufficient description of the thing sold. The price for
partnership, solemnly declare that they sell, absolutely and in fee simple, to each article was fixed. It is true that the price of this tobacco, for example,
E. C. McCullough, the tobacco and cigarette factory known as "La Maria was not stated in dollars and cents in the contract. But by its terms the
Cristina," located at No. 36 Calle Echague, Plaza de Goiti, Santa Cruz district, appellee agreed to pay therefor the amount named in the invoices then in
this city, said sale including the trade-mark "La Maria Cristina," which was existence. The price could be made certain by a mere reference to those
been duly registered, the stock of tobacco in leaf and manufacture, invoices. By the instrument of August 27 the contract was perfected and
machinery, labels, wrappers, furniture, fixtures, and everything else thereafter each party could compel the other to fulfill it. By its terms the
belonging to the said factory, as shown in the inventory to be drawn up for appellee was bound to take all the leaf tobacco then belonging to the factory
the purpose of making formal delivery of the said property. and to pay therefor the prices named in the invoices. This obligation was
absolute and did not depend at all upon the quality of the tobacco or its
This sum is subject to modification, in accordance with the result shown by value. The appellee did not, in this contract, reserve the right to reject the
the inventory to be drawn up. In this inventory the value of each individual tobacco if it were not of a specific crop. He did not buy tobacco of a
piece of furniture will be fixed at 10 per cent below the price shown in the particular kind, class, or quality. He bought all the tobacco which the
partnership inventory. The machinery and cost of installing the same will also appellant owned and agreed to pay for it what the defendant had paid for it.
be fixed at 10 per cent below its invoice price. The value of the tobacco, both The plaintiff testified that this was the express agreement.
in leaf and in process of manufacture, boxes, labels, wrappers, cigars,
cigarettes, and paper mouthpieces for cigarettes will be fixed at the invoice v) By reference to the application of known factors, e.g. in proportion to
price. The value of tobacco made up into cigars will be fixed in accordance variations in calories and ash content of coal2.)
with the price list of the partnership, less 20 per cent discount. The cigars will
be inventoried at the prices in the same list, less a discount of 35 per cent. Effect of indeterminability contract is inefficacious
The P20,000 mentioned as the value of the trade-mark will, however, remain
unchanged. Robles v. Lizarraga Hermanos, G. R. No. L-26173, July 13, 1927
In December, 1901, the plaintiff, with others, organized a company, (Sale of Improvements introduced in Hacienda)
to which the plaintiff sold all the tobacco bought by him from the defendant.
The purchaser, the new company, on examining these two lots, rejected FACTS: This action was instituted in the Court of First Instance of Occidental
them because the tobacco was not of the quality indicated in the inventory. Negros by Zacarias Robles against Lizarraga Hermanos, a mercantile
partnership organized under the laws of the Philippine Islands, for the

purpose of recovering compensation for improvements made by the plaintiff We are of the opinion that the stipulation with respect to the appraisal of the
upon the hacienda "Nahalinan" and the value of implements and farming property did not create a suspensive condition. The true sense of the
equipment supplied to the hacienda by the plaintiff, as well as damages for contract evidently was that the defendant would take over the movables and
breach of contract. Upon hearing the cause the trial court gave judgment for the improvements at an appraised valuation, and the defendant obligated
the plaintiff to recover of the defendant the sum of P14,194.42, with costs. itself to promote the appraisal in good faith. As the defendant partially
From this judgment the defendant appealed. frustrated the appraisal, it violated a term of the contract and made itself
liable for the true value of the things contracted about, as such value may be
WON: The petitioner is allowed to recover the value of the improvements. established in the usual course of proof. Furthermore, it must occur to any
one, as the trial judge pointed out, that an unjust enrichment of the
HELD: In the case before us the deed of conveyance purports to transfer to defendant would result from allowing it to appropriate the movables without
the defendant only such interests in certain properties as had come to the compensating the plaintiff thereof.
conveyors by inheritance. Nothing is said concerning the rights in the
hacienda which the plaintiff had acquired by lease or concerning the things The fourth assignment of error is concerned with the improvements.
that he had placed thereon by way of improvement or had acquired by Attention is here directed to the fact that the improvements placed on the
purchase. The verbal contract which the plaintiff has established in this case hacienda by the plaintiff became a part of the realty and as such passed to
is therefore clearly independent of the main contract of conveyance, and the defendant by virtue of the transfer effected by the three owner in the
evidence of such verbal contract is admissible under the doctrine above deed of conveyance (Exhibit B.). It is therefore insisted that, the defendant
stated. The rule that a preliminary or contemporaneous oral agreement is having thus acquired the improvements, the plaintiff should not be
not admissible to vary a written contract appears to have more particular permitted to recover their value again from the defendant. This criticism
reference to the obligation expressed in the written agreement, and the rule misses the point. There can be no doubt that the defendant acquired the
had never been interpreted as being applicable to matters of consideration fixed improvements when it acquired the land, but the question is whether
or inducement. In the case before us the written contract is complete in the defendant is obligated to indemnify the plaintiff for his outlay in making
itself; the oral agreement is also complete in itself, and it is a collateral to the the improvements. It was upon the consideration of the defendant's promise
written contract, notwithstanding the fact that it deals with related matters. so to indemnify the plaintiff that the latter agreed to surrender the lease
nearly two no doubt as to the validity of the promise made under these
A contract for the sale of goods, chattels or things in action, at a price of not circumstances to the plaintiff.
less than P100, shall be unenforceable unless the contract, or some note or
memorandum thereof shall be in writing and subscribed by the party 3) Effect of inadequacy of price (1470) does not affect the contract, but
charged, or by his agent; and it is insisted that the court erred in admitting may show vice of consent (1470). Refer to inadequacy of cause in
proof of a verbal contract over the objection of the defendant's attorney. But general, Art. 1355.
it will be noted that the same subsection contains a qualification, which is
stated in these words, "unless the buyer accept and receive part of such Art. 1470. Gross inadequacy of price does not affect a contract of sale, except
goods and chattels." In the case before us the trial court found that the as it may indicate a defect in the consent, or that the parties really intended
personal property, consisting of farming implements and other movables a donation or some other act or contract.
placed on the farm by the plaintiff, have been utilized by the defendant in
the cultivation of the hacienda, and that the defendant is benefiting by those -it does not affect the contract but may show vice of consent.
things.

-the offended party may invoke Art. 19 of the NCC ( Abuse of Right Principle) Xxx The members of this court after most particular and cautious
consideration, having in view all the facts and all the naturals tendencies of
Askay v. Cosolan mankind, consider that Rubiato is only responsible to the plaintiff for the
loan of P800.
Facts: Askay obtained a title to the Mineral Claim which he allegedly sold to
Cosalan. It was alleged that there is inadequacy of the consideration for 4) Effect of Failure of Consideration
transfer which, according to the deed of conveyance, and to the oral
testimony, consisted of P107.00 in cash, a bill fold, one sheet, one cow and
two carabaos. Sps. Buenaventura v. CA
Issue: WON the sale is valid. Facts: Sps Leonardo Joaquin & Feliciano Landrito are the parents of
petitioners. Petitioners assail the sale of several lands by their parents to
Held: YES their other siblings (see p. 265 for complete list of sales made) for being void
The fact that the bargain is a hard one, coupled with mere inadequacy of ab initio based on the ff grounds:
price when both parties are in a position to form an independent judgment
concerning the transaction, is not sufficient ground for the cancellation of a 1. no actual valid consideration
contract.
2. properties are more than 3x more valuable than the measly purchase price
(purchase price was grossly inadequate)
Aguilar v. Rubiato
3. deeds of sale do not reflect & express the true intent of the parties
Facts: Rubiato was the owner of parcels of land and was desirous of
obtaining a loan. He thereafter signed a power of attorney in favor of a 4. deliberate conspiracy designed to unjustly deprive the rest of the
certain Vila to secure a loan and to execute any writing for the mortgage of compulsory heirs of their legitime.
land. Vila pursuant to the power of attorney then sold the land to Aguilar,
with the right of repurchase within one year and Rubiato was to remain in Defense of the respondents:
possession of the land as lessee. One year expired and Aguilar filed a case to
consolidate ownership over the lands. 1. no cause of action, requisite standing & interest
Issue :Whether the contract was of sale or loan. 2. sales were w/sufficient considerations & made by their parents voluntarily
in good faith & w/full knowledge of the consequences
Held: LOAN
3. certificates of title were issued w/factual & legal basis.
In addition to the evidence, there is one very cogent reason which impels us
to the conclusion that Rubiato is only responsible to the plaintiff for a loan. It Trial court dismissed the case WRT Gavino Joaquin & Lea Asis. Ruled in favor
is that the inadequacy of the price which Vila obtained for the eight of the respondents & dismissed the complaint.
parcels of land belonging to Rubiato is so great that the minds revolts at it.

1. The right of the compulsory heirs to a legitime is contingent & it only 2. WON the deeds of sale are void for lack of consideration. NO.
commences from the moment of the death of the decedent (CC Art. 777).
The value of the property left at the death of the testator is the basis for A contract of sale is not a real contract but a consensual contract. Its binding
determining the legitime (Art. 908). Plaintiffs cannot claim an impairment of & valid upon the meeting of the minds as to the price regardless of the
their legitime since their parents are still alive. manner of payment or breach of such. Its still valid even if the real price is
not stated in the contract, making it subject to reformation. But if the price is
2. Deeds of Sale were executed for valuable consideration. simulated, there is no meeting of the minds, thus the contract is void (CC Art.
1471).
CA affirmed Trial Court decision. In addition to the grounds stated by the trial
court, CA also mentioned that: Act of payment of the price does not determine the validity of a contract of
sale. Failure to pay the consideration is different from lack of consideration.
1. While still alive, parents are free to dispose of their properties provided The former results in a rt to demand fulfillment or cancellation of the
such is not done in fraud of creditors. contract while the latter prevents the existence of a valid contract.
2. Petitioners are not parties in interest since theyre not parties to the deeds Petitioners failed to show that the prices in the deeds of sale were simulated.
of sale nor are they creditors of their parents. They dont even know the financial capacity of their siblings to buy these lots.
Respondents minds met as to the purchase price w/c was stated in the
Issues : deeds of sale & the buyer siblings have paid the price to their parents.
1.WON petitioners have a legal interest over the properties subject of the 3. WON the Deeds of Sale are void for gross inadequacy of the price. NO.
Deeds of Sale. NO.
CC Art. 1355: Except in cases specified by law, lesion/ INADEQUACY OF
The complaint betrays their motive for filing the case. They are interested in CAUSE shall not invalidate a contract, unless there has been fraud, mistake or
obtaining the properties by hereditary succession but they have failed to undue influence.
show any legal right to these properties.
CC Art. 1470: Gross inadequacy of price doesnt affect a contract of sale,
Real party-in-interest is one who is either benefited or injured by the except as may indicate a defect in the consent or that the parties really
judgment of the party entitled to the avails of the suit. This includes parties intended a donation or some other act or contract.
to the agreement or are bound either principally/subsidiarily. Parties must
have a present substantial interest & not merely expectancy/future Petitioners failed to prove any instance in the aforementioned provisions
contingent subordinate or consequential interest. that would invalidate the deeds of sale. There is no requirement that the
price be equal to the exact value of the property on sale. It only matters that
In this case, the petitioners only have an inchoate rt w/c vests only upon the all respondents believed that they received the commutative value of what
death of their parents. Besides, sale of the lots to their siblings does not they gave.
affect the value of their parents estate since the lots are replaced with cash
of equivalent value. Vales vs. Villa: Courts cannot be guardians of people who are not legally
incompetent. Courts operate not because a person has been

defeated/overcome by another, but because he has been defeated or signatures indicate consent, the contract was subject to a suspensive
overcome ILEGALLY. There should be a violation of the law, commission of condition which is the approval of the sale by all the co-owners which did not
what the law knows as an actionable wrong, before the courts are authorized occur because two of the siblings did not approve of the sale; lastly, that it is
to lay hold of the situation & remedy it. void for it is a unilateral promise to sell without consideration distinct from
price.
Note: Failure of consideration is different from the lack of consideration,
the former results in a right to demand the fulfillment/ cancellation of the Held: As to the last contention, the court ruled that the contract to sell is not
obligation under the existing valid contract. This is different from lack of a unilateral promise to sell:
consideration w/c prevents the existence of a valid contract.
In the instant case, the consideration of P100,000.00 paid by respondent to
B. Effect of earnest money (1482) petitioners was referred to as "option money." However, a careful
examination of the words used in the contract indicates that the money is
Art. 1482. Whenever earnest money is given in a contract of sale, it shall be not option money but earnest money. "Earnest money" and "option money"
considered as part of the price and as proof of the perfection of the contract are not the same but distinguished thus: (a) earnest money is part of the
purchase price, while option money is the money given as a distinct
a. It is considered part of the price, unless the contract is otherwise consideration for an option contract; (b) earnest money is given only where
b. It is proof of perfection of the contract there is already a sale, while option money applies to a sale not yet
perfected; and, (c) when earnest money is given, the buyer is bound to pay
Earnest money- it is something of value that the buyer was really in earnest the balance, while when the would-be buyer gives option money, he is not
and given after the perfection of the contract. required to buy, but may even forfeit it depending on the terms of the
-part of the purchase price. option.20
The sum of P100,000.00 was part of the purchase price. Although the same
Option money- distinct consideration. was denominated as "option money," it is actually in the nature of earnest
money or down payment when considered with the other terms of the
contract. Doubtless, the agreement is not a mere unilateral promise to sell,
Oesmer v. Paraiso Devt Corp but, indeed, it is a Contract to Sell as both the trial court and the appellate
court declared in their Decisions.
Facts: Petitioners in this case are brothers and sisters and the co-owners of
undivided shared is parcels of land originally owned by their parents. One the
petitioners, Ernesto, met with the President of Paraiso for purpose of Manila Metal Container Corporation v. PNB
brokering the sale of petitioners properties to respondent corp. A contract
to sell was the executed, signed by the siblings except Adolfo and Jesus. An Facts: Petitioner was the owner of a parcel of land and to be able to secure a
amount of P100,000 was also given as option money. Later however, loan from PNB, petitioner executed a real party mortgage over the land. For
petitioners informed PAraiso of their intention to rescind the Contract to sell its failure to pay, PNB foreclose the mortgaged and sold at public auction for
and to return the amount of P100,000 paid by the corporation. Their which PNB was the winning bidder, with a one year period of redemption by
contention was that the contract to sell was void because the signatures the petitioner. Petitioner requested that there be an extension of time to
made by the siblings were not for consent to sell the property, assuming the redeem the property and it allowed to repurchase the property on

installment. Meanwhile,the Special Assets Management Department had Facts: Caguiat offered to buy the lot owned by spouses Serrano. Respondent
prepared a statement of accountof the petitioners obligation to which gave P100K as partial payment, in turn, petitioners gave a receipt with a
amounted to 1.5M. petitioner thereafter remitted thte amount of 800,000 as statement that respondent promised to pay the balance of the purchase
deposit to repurchase the property. When SAMD recommended to the price. Respondents were leaving for abroad and sought to cancel the
management of the PNB that petitioner be allowed to repurchase the transaction. Petitioners contend that there is no perfected contract as there
property at 1.5M, the management rejected and suggested that the property was no clear agreement between the parties as to the amount of
be purchased at 2.7M which was later reduced to 1.9M. But petitioner consideration.
refused. SC: In holding that there is a perfected contract of sale, both courts mainly
relied on the earnest money given by respondent to petitioners (Art. 1482).
Petitioner now filed a case for delivery of title, annulment of mortgage and We are not convinced.
specific performance with damages. It was its contention that it already
accepted the offer of SAMD to sell the property at 1.5M, hence, PNB could
no longer unilaterally withdraw its offer to sell the property. Its acceptance It is true that Article 1482 of the Civil Code provides that Whenever earnest
of the offer resulted in a perfected contract of sale. 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
Respondent contended that the parties never graduated for the negotiation earnest money given in a contract of sale. In this case, the earnest money
stage all that transpires was an exchange of proposal and counter- was given in a contract to sell. The earnest money forms part of the
proposals and nothing more. There was still no agreement as to the amount consideration only if the sale is consummated upon full payment of the
and the manner of payment. The account made by SAMD cannot be purchase price. Now, since the earnest money was given in a contract to
classified as counter-offer because it was merely recital of facts of the sell, Article 1482, which speaks of a contract of sale, does not apply.
obligations of petitioners. As previously discussed, the suspensive condition (payment of the balance by
respondent) did not take place. Clearly, respondent cannot compel
Issue: WON the P800,000 deposited is an earnest money. petitioners to transfer ownership of the property to him.
Held -NO
The P800,000 could not be considered as an earnest money because an ARTICLES 1475-1488
earnest money forms part of the purchase price. In this case, it did not. The
P800,000 was merely a deposit that was accepted by PNB on the condition I. RULES IN ORDINARY SALES
that the purchase price is subject to the approval of the PNB Board.
A. Form
Note: absence of proof of the concurrence of all the essential elements of a
contract of sale, the giving of earnest money cannot establish the existence a. General Rule (1483)
of a perfected contract of sale.
Art. 1483. Subject to the provisions of the Statute of Frauds and of any other
applicable statute, a contract of sale may be made in writing, or by word of
mouth, or partly in writing and partly by word of mouth, or may be inferred
Serrano v Caguiat G.R. No. 139173 from the conduct of the parties. (n)

-written agreement is not essential 2. The Addendum being notarized is a prima facie evidence of the
facts stated therein.
-sale is consensual contract
1. Verbal agreement of sale

2. Effect of lack of technical description in the contract
Caoili v. CA
Naranja v. CA
FACTS: Caoili was a lessee in the property of respondent. Respondent
borrowed money from Caoili in the amount of Php 30,000 which they Facts: Roque Naranja was the registered owner of a parcel of land,
stipulated would form part of their rentals. When rentals was paid off, they denominated as Lot No. 4 in Consolidation-Subdivision Plan (LRC) Pcs-886,
entered into a not formal or written contract on the sale of the property. Bacolod Cadastre, with an area of 136 square meters and covered by
They executed a "Receipt" denominated as an "Addendum to Agreement Transfer Certificate of Title (TCT) No. T-18764. Roque was also a co-owner of
dated August 8, 1990". It was stated they received from petitioners the sum an adjacent lot, Lot No. 2, of the same subdivision plan, which he co-owned
of P140,000.00, in addition to the partial payment of P60,000.00, the with his brothers, Gabino and Placido Naranja. When Placido died, his one-
"balance payable when the good title in the name of herein vendor is third share was inherited by his children, Nenita, Nazareto, Nilda, Naida and
delivered to the spouses." Yet respondent refused to execute document. Neolanda, all surnamed Naranja, herein petitioners. Lot No. 2 is covered by
Respondent says that the Php 140,000 was for improvements and the Php TCT No. T-18762 in the names of Roque, Gabino and the said children of
60,000 served as rental on the period they havent paying their rentals Placido. TCT No. T-18762 remained even after Gabino died. The other
(amounts were claimed as partial payments by Caoili. RTC and CA both petitioners Serafin Naranja, Raul Naranja, and Amelia Naranja-Rubinos
decided in favor of Caoili yet CA reduced the amount awarded. are the children of Gabino.
Held: Roque had no other source of income except for the P200.00 monthly rental
of his two properties. To show his gratitude to Belardo, Roque sold Lot No. 4
1. (Not made in writing) The absence of a formal deed of sale does and his one-third share in Lot No. 2 to Belardo on August 21, 1981, through a
not render the agreement null and void or without any effect. The provision Deed of Sale of Real Property which was duly notarized by Atty. Eugenio
of Article 1358 of the Civil Code on the necessity of a public document is only Sanicas. The Deed of Sale reads:
for convenience, not for validity or enforceability. It does not mean that no
contract has been perfected so long as the essential requisites of consent of I, ROQUE NARANJA, of legal age, single, Filipino and a resident of Bacolod
the contracting parties, object, and cause of the obligation concur. Under the City, do hereby declare that I am the registered owner of Lot No. 4 of the
agreement, private respondent was obligated to deliver a good title to Cadastral Survey of the City of Bacolod, consisting of 136 square meters,
petitioners and this condition is the operative act which would give rise to more or less, covered by Transfer Certificate of Title No. T-18764 and a co-
the corresponding obligation of petitioners to pay the balance of the owner of Lot No. 2, situated at the City of Bacolod, consisting of 151 square
purchase price. Since it is not disputed that private respondent has not meters, more or less, covered by Transfer Certificate of Title No. T-18762 and
delivered a good title, petitioners have by law the right to either refuse to my share in the aforesaid Lot No. 2 is one-third share.
proceed with the agreement or to waive that condition pursuant to Article
1545 of the Civil Code. Issue:

W/N the sale was valid. b) For damages based on breach of contract
Held: Where the contract of sale has already been consummated, its enforcement
cannot be barred by the Statute of Frauds, which applies on executory
To be valid, a contract of sale need not contain a technical agreement .
description of the subject property. Contracts of sale of real property have no
prescribed form for their validity; they follow the general rule on contracts c) When form is essential
that they may be entered into in whatever form, provided all the essential
requisites for their validity are present. The failure of the parties to specify 1)Under the Statute of Frauds
with absolute clarity the object of a contract by including its technical
description is of no moment. What is important is that there is, in fact, an Realty- a sale of real property orally is valid. The buyer may compel
object that is determinate or at least determinable, as subject of the contract the seller to execute a formal deed of sale to be enforceable.
of sale. The deed of sale clearly identifies the subject properties by indicating Goods and chattels at a price of not less than P 500.
their respective lot numbers, lot areas, and the certificate of title covering
them. 2) Sale of land through an Agent (1874) authority shall be in writing.
One who alleges any defect, or the lack of consent to a contract by B. Perfection of a contract of sale (Art. 1475)
reason of fraud or undue influence, must establish by full, clear and
convincing evidence, such specific acts that vitiated the partys consent. - At the moment there is a meeting of the minds (consensual)
Petitioners adduced no proof that Roque had lost control of his mental
faculties at the time of the sale. Undue influence is not to be inferred from - The parties may reciprocally demand performance, subject to the
age, sickness, or debility of body, if sufficient intelligence remains. provisions of law governing the form of contracts
The Deed of Sale which states receipt of which in full I hereby Requirements for perfection:
acknowledge to my entire satisfaction is an acknowledgment receipt in
itself. Moreover, the presumption that a contract has sufficient consideration a. When parties are face to face when an offer is accepted without
cannot be overthrown by a mere assertion that it has no consideration. conditions nor qualifications
Heirs are bound by contracts entered into by their predecessors-in- b. Thru correspondence or telegram when the offeror has knowledge of
interest. Having been sold already to Belardo, the two properties no longer the acceptance
formed part of Roques estate which petitioners could have inherited.
c. When sale is subject to a suspensive condition from the moment the
b) Statute of Frauds applied condition is fulfilled
Statute of Frauds applies only in cases for Mere perfection of the contract does not necessarily transfer ownership.
a) Specific performance, and

Romulo Coronel, et al vs. CA and Alcaraz G.R. No. 103577, October 7, 1996 received them thereby having no consent, their contract could not have
been perfected.
FACTS: The Coronels sold their inherited house and lot to Ramona Patricia
Alcaraz, with the conditions that they will effect the transfer of the title HELD: The purchase orders constituted accepted offers when Tan supplied
from their deceased father to their names upon receipt of the down the electrical materials to MMC. Hence, petitioner cannot evade its
payment, and after the transfer they will execute a Deed of Sale in favor of obligation to pay by claiming lack of consent to the perfected contracts of
Alcaraz. The conditions were embodied in a document labeled Receipt of sale. The invoices furnished the details of the transactions.
Down Payment. Alcaraz paid, and the title was transferred in the Coronels
name. However, the Coronels sold the property to Catalina Mabanag, Note: the purchase orders constituted accepted offers when Tan supplied
rescinded the contract with Alcaraz, and eventually executed a Deed of Sale electrical materials to MMC.
in favor of Mabanag. In the complaint for specific performance filed against
them, the Coronels contended that theirs was merely an executory contract 1) The buyer has the right to a reasonable opportunity for examination
to sell, hence there was no perfected contract of sale. before acceptance (1584) except when a carrier delivers C.O.D.
HELD: The parties had agreed to a conditional contract of sale, 2)Sale by description and/or sample (1481): The bulk of the goods must
consummation of which is subject only to the successful transfer of the correspond to either or both.
certificate of title from the name of the petitioners father to their names.
b. Place of Perfection
Since the condition contemplated by the parties which is the issuance of a
certificate of title in petitioners names was fulfilled on February 6, 1985, 1) where there was meeting of the minds
the respective obligations of the parties under the contract of sale became
mutually demandable. 2) in case of acceptance through letter or telegram, in the place where the
offer was made.
Note: even if document was denominated Receipt of down payment from
that moment on, there was a perfected contract of sale albeit conditional C. Expenses
(i.e. transfer of title to heirs and payment of balance of purchase price)
a. Of Execution and Registration of the sale (1487) are borne by the Seller
b. Of putting the goods in a deliverable state (1521, last par.) are also borne
Manila Mining Corporation (MMC) vs. Miguel Tan G.R. No. 171702, by the Seller.
February 12, 2009
II Rules on Special Sales
FACTS: MMC ordered and received various electrical materials from Miguel
Tan, and upon failure to pay the full amount despite several demands, Tan A. Sales at Auction
filed a collection suit. MMC contended that the absence of stamp marks on
the original invoices and purchase orders negated the receipt of said a. Rules
documents by MMCs representatives, a requisite for payment. Having not

a. Sales of separate lots are separate contracts of sale supplemental sale with higher consideration at the instance of only one
party(herein petitioner) could no longer be validly executed)
b. When perfected when the auctioneer announces its
perfection by the fall of the hammer, or in other customary manner - Before the hammer falls:
c. Before the fall of the hammer o The bidder may retract his bid. The reason behind this is that every bidder
is merely an offer and therefore, before it is accepted, it may be withdrawn
The bidder may retract his bid
o The auctioneer may also withdraw the goods from the sale EXCEPT if the
The auctioneer may withdraw the goods from the sale auction has been announced to be WITHOUT RESERVE.
EXCEPTION: If the auction has been announced to be without 2) Auction Sale where the seller reserved the right to reject any and all the
reserve bids
d. Limitations of the seller: Case: Leoquinco vs. Postal Savings Bank
1. The seller himself cannot bid - Because of the expressed stipulation that PSB reserved to themselves the
right to reject any and all bids, the bid of petitioner may be rejected.
2. He cannot employ or induce any person to bid on his behalf Petitioners participation in the auction means submission or being bounded
to the rules of auction whether the purchaser knew the rules or not
EXCEPTION: If right to bid has been expressly reserved
- Limitations of the seller:
e. Limitations of the auctioneer (if he is not the seller);
o The seller himself cannot bid
1. The auctioneer cannot bid
o He cannot employ or induce any person to bid on his behalf (people who
2. He cannot employ or induce to bid on behalf of the seller bid for the seller, but are not themselves bound, are called by-bidders or
puffers)
3. He cannot knowingly take any bid from the seller or any
person employed by him. o EXCEPTION: if right to bid has been expressly reserved and that notice of
such was given
Cases:
- Limitations of the auctioneer (if he is not the seller)
The sale by auction is perfected when the auctioneer announces its
perfection by the fall of the hammer or in other customary manner (Case: o The auctioneer cannot bid
Dizon vs. Dizon Considering that the auction sale has been perfected, a
o He cannot employ or induce to bid on behalf of the seller

o He cannot knowingly take any bid from the seller or any person employed PACIFIC COMMERCIAL COMPAN vs. ERMITA MARKET & COLD STORES, INC.
by him
Plaintiff contracted to sell to defendant an automatic refrigerating machine
In an execution sale: as per description stated in the sales contract. The machine was delivered
and by mutual agreement the vendor installed the machine. The machine did
Judgment Creditor will have a writ to garnish or attach the property of the not give the results expected from it, and the defendant refused to pay the
debtor and sheriff sells it in a public sale balance of its purchase price and the cost of the installation of the machine.
Thereupon plaintiff brought this action.
Judgment debtor has the right to redeem the property within 1 year
Held: The fact that the defendant could not use the machine satisfactorily in
Note: The owner of the property offered for sale at auction has the right to the three cold stores divisions cannot be attributed to plaintiff's fault; the
prescribed the manner, condition and terms of sale and where these are machine was strictly in accordance with the written contract between the
reasonable and are made known to the buyer, they are binding upon them. parties, and the defendant can hardly honestly say that there was any
deception by the plaintiff.
Q: Why cant the seller participate in the bidding?
Sale of Personalty payable by Installments (Recto Law)
A: He cannot bid because in doing such he can manipulate the biddings of
other participants a. Alternative remedies in case of non-payment (1484)
Note: it is the seller who will set the terms and condition of the sale. If the 1) To exact fulfillment of the obligation
seller will bid in the auction without reserving such right and informing the
public, the sales will be considered as fraudulent. 2) Cancel the sale should the vendee fail to pay two or more
installments
Q: Will such fraud affect the perfection of the contract?
i) This is an exception to 1191
A: Yes, the contract will be VOID with NO force and effect
3) Foreclose the chattel mortgage (if one was constituted)
B. Sales by sample and/ or description (1481) should the vendee fail to pay two or more installments. But
there may be no further action to recover the unpaid
Sales by Sample and/or Description (1481) balance. A contrary stipulation is void.
a. The bulk of the goods must correspond to either or both Cases:
b. The buyer must have an opportunity to compare 1) Promissory note with chattel mortgage
c. Effect: the contract may be rescinded at the option of the buyer MACONDRAY V DE SANTOS

Granting that there was a contract between the parties for the sale of practice the difference exists, for, according to the regular course of
personal property payable in installments, which does not clearly appear in business, in contracts providing for payment of the price in two installments,
the record before this court, the complaint does not allege nor does it appear there is generally a provision for initial payment.
in the record that there was a failure to pay twoor more installments. On the
contrary the promissory note, copied in the complaint, was executed January A cash payment cannot be considered as a payment by installment, and even
11, 1934, and, according to the complaint, on or about January 21, 1934,the if it can be so considered, still the law does not apply, for it requires non-
automobile, while in the possession of the defendant, was wrecked and by payment of two or more installments in order that its provisions may be
reason of the failure of the defendant to replace said automobile or to pay invoked. In the present case, only one installment was unpaid.
the value thereof the plaintiff foreclosed the mortgage on what remained of
the wrecked automobile and brought this suit to recover the balance due on 3) Sale of Truck on installment where foreclosure was not pursued
the promissory note executed in its favor.
SPOUSES ROMULO DE LA CRUZ and DELIA DE LA CRUZ, and DANIEL
In order to apply the provisions of article 1454-A of the Civil Code it must FAJARDO vs. ASIAN CONSUMER AND INDUSTRIAL FINANCE CORPORATION
appear that there was a contract for the sale of personal property payable in and the HONORABLE COURT OF APPEALS,
installments and that there has been a failure to pay two or more
installments. Facts:
2) Sale of car on straight term On 22 September 1982, the spouses Romulo de la Cruz and Delia de la Cruz,
and one Daniel Fajardo, petitioners herein, purchased on installment basis
LEVY HERMANOS V GERVACIO one (1) unit Hino truck from Benter Motor Sales Corporation (BENTER for
brevity). To secure payment, they executed in favor of BENTER a chattel
In Macondray & Co. vs. De Santos (33 OG 2170), it was held that in order to mortgage over the vehicle 1 and a promissory note for P282,360.00 payable
apply the provisions of article 1454-A of the Civil Code it must appear that in thirty (30) monthly installments of P9,412.00. 2 On the same date, BENTER
there was a contract for the sale of personal property payable in installments assigned its rights and interest over the vehicle in favor of private respondent
and that there has been a failure to pay two or more installments. The Asian Consumer and Industrial Finance Corporation (ASIAN for brevity). 3
contract, in the present case, while a sale of personal property, is not, Although petitioners initially paid some installments they subsequently
however, one on installments, but on straight term, in which the balance, defaulted on more than two (2) installments. Thereafter, notwithstanding
after payment of the initial sum, should be paid in its totality at the time the demand letter of ASIAN, 4 petitioners failed to settle their obligation.
specified in the promissory note.
On 26 September 1984, by virtue of a petition for extrajudicial foreclosure of
The transaction is not, therefore, the one contemplated in Act 4122 and chattel mortgage, the sheriff attempted to repossess the vehicle but was
accordingly the mortgagee is not bound by the prohibition therein contained unsuccessful because of the refusal of the son of petitioner, Rolando de la
as to its right to the recovery of the unpaid balance. Cruz to surrender the same. Hence, the return of the sheriff that the service
was not satisfied. LLpr
Theoretically, there is no difference between paying the price in two
installments and paying the same partly in cash and partly in one installment, On 10 October 1984, petitioner Romulo de la Cruz brought the vehicle to the
in so far as the size of each partial payment is concerned; but in actual office of ASIAN and left it there where it was inventoried and inspected. 5

On 27 November 1984, ASIAN filed an ordinary action with the court a quo the case before Us, there being no actual foreclosure of the mortgaged
for collection of the balance of P196,152.99 of the purchase price, plus property, ASIAN is correct in resorting to an ordinary action for collection of
liquidated damages and attorney's fees. the unpaid balance of the purchase price.
Petitioners take exception. They nevertheless insist that he should not later 4) MAGNA VS COLARINA
be allowed to change course midway in the process, abandon the foreclosure
and shift to other remedies such as collection of the balance, especially after Undoubtedly the principal object of the above amendment (referring to Act
having recovered the mortgaged chattel from them and while retaining 4122 amending
possession thereof.
Art. 1454, Civil Code of 1889) was to remedy the abuses committed in
HELD: connection with the foreclosure of chattel mortgages. This amendment
prevents mortgagees from seizing the mortgaged property, buying it at
The instant case is covered by the so-called "Recto Law", now Art. 1484 of foreclosure sale for a low price and then bringing the suit against the
the New Civil Code, which provides: "In a contract of sale of personal mortgagor for a deficiency judgment. The almost invariable result of this
property the price of which is payable in installments, the vendor may procedure was that the mortgagor found himself minus the property and still
exercise any of the following remedies: (1) Exact fulfillment of the obligation, owing practically the full amount of his original indebtedness.
should the vendee fail to pay; (2) Cancel the sale, should the vendee's failure
to pay cover two or more installments; (3) Foreclose the chattel mortgage on In its Memorandum before us, petitioner resolutely declared that it has
the thing sold, if one has been constituted, should the vendee's failure to pay opted for the remedy provided under Article 1484(3) of the Civil Code, that
cover two or more installments. In this case, he shall have no further action is, to foreclose the chattel mortgage.
against the purchaser to recover any unpaid balance of the price. Any
agreement to the contrary shall be void." In this jurisdiction, the three (3) It is, however, unmistakable from the Complaint that petitioner preferred to
remedies provided for in the "Recto Law" are alternative and not cumulative; avail itself of the first and third remedies under Article 1484, at the same
the exercise of one would preclude the other remedies. Consequently, time suing for replevin. For this reason, the Court of Appeals justifiably set
should the vendee-mortgagor default in the payment of two or more of the aside the decision of the RTC. Perusing the
agreed installments, the vendor-mortgagee has the option to avail of any of
these three (3) remedies: either to exact fulfillment of the obligation, to Complaint, the petitioner, under its prayer number 1, sought for the
cancel the sale, or to foreclose the mortgage on the purchased chattel, if one payment of the unpaid amortizations which is a remedy that is provided
was constituted. (Pacific Commercial Co. vs. De la Rama) under Article 1484(1) of the Civil Code, allowing an unpaid vendee to exact
fulfillment of the obligation. At the same time, petitioner prayed that
It is thus clear that while ASIAN eventually succeeded in taking possession of Colarina be ordered to surrender possession of the vehicle so that it may
the mortgaged vehicle, it did not pursue the foreclosure of the mortgage as ultimately be sold at public auction, which remedy is contained under Article
shown by the fact that no auction sale of the vehicle was ever conducted. 1484(3). Such a scheme is not only irregular but is a flagrant circumvention of
"Under the law, the delivery of possession of the mortgaged property to the the prohibition of the law. By praying for the foreclosure of the chattel,
mortgagee, the herein appellee, can only operate to extinguish appellant's Magna Financial Services Group, Inc. renounced whatever claim it may have
liability if the appellee had actually caused the foreclosure sale of the under the promissory note.
mortgaged property when it recovered possession thereof. Consequently, in

Article 1484, paragraph 3, provides that if the vendor has availed himself of be leases of personal property with option to buy by virtue of Art. 1485. The
the right to foreclose the chattel mortgage, he shall have no further action condition that the lessor has deprived the lessee of possession or enjoyment of the
thing for the purpose of applying Art. 1485 was fulfilled in this case by the filing by
against the purchaser to recover any unpaid balance of the purchase price. petitioner of the complaint for replevin to recover possession of movable property.
Any agreement to the contrary shall be void. In other words, in all By virtue of the writ of seizure issued by the trial court, the deputy sheriff seized the
proceedings for the foreclosure of chattel mortgages executed on chattels vehicle on August 6, 1986 and thereby deprived private respondents of its use. The
which have been sold on the installment plan, the mortgagee is limited to the car was not returned to private respondent until April 16, 1989, after two (2) years
and eight (8) months, upon issuance by the Court of Appeals of a writ of execution.
property included in the mortgage.
The employee having found to have paid more than the value of the thing P60,000
should be considered as payment of the full purchase price. It further petitioner to
D. Leases of personalty with option to buy. pay private respondents the amount of P431.94 as excess payment, as well as
rentals at the rate of P1,000 a month for depriving private respondents of the use of
their car.
Cases:
Elisco Tool and Manufacturing Corp. vs. CA
PCI Leasing and finance vs. Giraffe X
Rolando Lantan was employed at the Elisco Tool Manufacturing Corporation as head of its
Giraffe entered into an agreement with PCI leasing over 2 machines worth P8,000,000. Giraffe
cash department. On January 9, 1980, he entered into an agreement with the company, called
agreed to pay P116,878.21 monthly and P181,362 for the other machine. It has also remitted
lease with option to buy car within 5 years. That owner ship shall retain with the company
the amount of P3,120,000 as goodwill. A year into the life of the lease agreement, respondent
until full payment and all necessary expenses for maintenance shall be borne by the
defaulted in paying the monthly rentals. PCI Sued Giraffe for possession of the machineries
employee. Subsequently the company has ceased operation and the employee was laid off. It
and for payment of the remaining term.
took the company 2 years to institute proceedings.
Issue: Whether the underlying lease agreement are covered between 1484 and 1485 of the
Sellers desirous of making conditional sales of their goods, but who do not wish
New Civil Code?
openly to make a bargain in that form, for one reason or another, have frequently
SC: Yes they are. Evidently the contract above is in reality an option to purchase the
resorted to the device of making contracts in the form of leases either with options
equipment.
to the buyer to purchase for a small consideration at the end of term, provided the
The Recto Law
so-called rent has been duly paid, or with stipulations that if the rent throughout the
Art. 1484. In a contract of sale of personal property the price of which is payable in
term is paid, title shall thereupon vest in the lessee. It is obvious that such
installments, the vendor may exercise any of the following
transactions are leases only in name. The so-called rent must necessarily be
3.) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the
regarded as payment of the price in installments since the due payment of the
vendees failure to pay cover two or more installments. In this case he shall have no further
agreed amount results, by the terms of the bargain, in the transfer of title to the
action against the purchaser to recover any unpaid balance of the price. Any agreement
lessee.
contrary shall be void.
The so-called monthly rentals are in truth form monthly amortization on the price of Art. 1485. The preceding article shall be applied to contract purporting to be leases of
the car. The contract being one of sale on installment, the Court of Appeals correctly personal property with the option to buy, when the leasor deprived the lesee of the
applied to it the following provisions of the Civil Code: possession or enjoyment of the thing.
Art. 1484. In a contract of sale of personal property the price of which is payable in
Therefore Giraffe is not liable to pay for the remaining term since the machineries
installments, the vendor may exercise any of the following remedies:
has been foreclosed.
(1) Exact fulfillment of the obligation, should the vendee fail to pay;
PCI LEASING- GIRAFFE lease agreement is in reality a lease with an option to
(2) Cancel the sale, should the vendee's failure to pay cover two or more
purchase the equipment. This has been made manifest by the actions of the
installments;
petitioner itself, foremost of which is the declarations made in its demand letter to
(3) Foreclose the chattel mortgage on the thing sold, if one has been
the respondent. There could be no other explanation than that if the respondent
constituted, should the vendee's failure to pay cover two or more
paid the balance, then it could keep the equipment for its own; if not, then it should
installments. In this case, he shall have no further action against the
return them. This is clearly an option to purchase given to the respondent. Being so,
purchaser to recover any unpaid balance of the price. Any agreement to
Article 1485 of the Civil Code should apply.
the contrary shall be void.
The remedies provided for in Art. 1484 are alternative, not cumulative. The exercise
of one bars the exercise of the others. limitation applies to contracts purporting to

E. Sale of Real Property on Installments ( Maceda Law, RA 6552) Reality updating the account during the grace period and before actual cancellation
Installment Buyer Protection Act. of the contract. The deed of sale or assignment shall be done by notarial act.
a. Applicability- Real estate bought on installment basis. 1. The buyer has the right to sell/assign his right to another person
(must be done by notarial act)
Transactions covered: sale/ financing of real estate on installment payments, 2. The buyer has the right to reinstate the contract by upgrading the
including residential condominium apartments but: account during the grace period and before actual cancellation of the
contract.
1. industrial lots
2. commercial bldg.. Right to advance payment w/out interest
3. sales to tenants under RA 3844
"(a) To pay, without additional interest, the unpaid installments due
b. Rules when the buyer has paid at least 2 years of installments. within the total grace period earned by him, which is hereby fixed at
the rate of one month grace period for every one year of installment
1.) Rights of Buyers payments made; x x x
I. In case of default in payment Section 3 of R.A. No. 6552 provided for the 1. The buyer has the right to pay in advance any installment/ the full
rights of the buyer in case of default in the payment of succeeding balance of the purchase price anytime w/out interest and to have
installments, where he has already paid at least two (2) years of installments, such full payment annotated in the certificate of title.
thus:
Section 6. The buyer shall have the right to pay in advance any installment or
(b) If the contract is cancelled, the seller shall refund to the buyer the cash the full unpaid balance of the purchase price any time without interest and
surrender value of the payments on the property equivalent to fifty per cent to have such full payment of the purchase price annotated in the certificate
of the total payments made; provided, that the actual cancellation of the of title covering the property.
contract shall take place after thirty days from receipt by the buyer of the
notice of cancellation or the demand for rescission of the contract by a NOTE: to be refunded of the cash surrender value of his payments if the
notarial act and upon full payment of the cash surrender value to the buyer." contract is cancelled.
Right to update payments i) Actual cancellation takes place:
1)after 30 days from receipt of notice of cancellation by notarial act.
Right to assign/ reinstate contract (must be in Public document) 2) upon full payment of cash surrender value.
Section 5. Under Section 3 and 4, the buyer shall have the right to sell his Sale of real property on installments (Maceda Law [RA 6552])
rights or assign the same to another person or to reinstate the contract by
a.When the buyer has paid at least two years of installments

1)Rights of buyer: (If the buyer fails to pay the installments due at the expiration of the grace
period, the seller may cancel the contract after thirty days from receipt by
ii) Default in payment the buyer of the notice of cancellation or the demand for rescission of the
contract by a notarial act.)
aa) To pay without additional interest, the unpaid installments (cash
surrender value) within the grace period Pagtalunan vs. De Manzano
bb) Grace period is one month for every year of installment payments made (Patricio), petitioners stepfather and predecessor-in-interest, entered into a
Contract to Sell with respondent, wife of Patricios former mechanic,
Limitation: The right can be exercised only once every 5 years Teodoro Manzano, whereby the former agreed to sell, and the latter to buy,
a house and lot which formed half of a parcel of land. The consideration of
ii) Cancellation of sale P17,800 was agreed to be paid in the following manner: P1,500 as
downpayment upon execution of the Contract to Sell, and the balance to be
aa) Up to 5 years installments, refund of 50% of payments paid in equal monthly installments of P150 on or before the last day of each
month until fully paid.
bb) After 5 years of installments, additional 5%/year but shall not
exceed 90% of total payments made It was also stipulated in the contract that respondent could immediately
occupy the house and lot; that in case of default in the payment of any of the
installments for 90 days after its due date, the contract would be
automatically rescinded without need of judicial declaration, and that all
When cancellation takes effect: payments made and all improvements done on the premises by respondent
would be considered as rentals for the use and occupation of the property or
aa) After 30 days from receipt by the buyer of (notarized) notice of payment for damages suffered, and respondent was obliged to peacefully
cancellation; or vacate the premises and deliver the possession thereof to the vendor.
bb) After 30 days from receipt by the buyer of notarial demand for rescission Petitioner claimed that respondent paid only P12,950. She allegedly stopped
paying after December 1979 due to personal problems with the petitioner.
*In both cases after full payment of cash surrender value Petitioner asserted that when respondent ceased paying her installments,
her status of buyer was automatically transformed to that of a lessee.
c. When the buyer has paid less than two years installments Therefore, she continued to possess the property by mere tolerance of
Patricio.
1) The buyer has at least 60 days grace period within which to pay the
installment due Issue: Whether the respondent has the right to occupy the premises?
2) After the grace period, contract may be cancelled as in B above SC: Yes, According to Republic Act No. 6552 -- "The Realty Installment Buyer
Protection Act," or more popularly known as the Maceda Law

(b) If the contract is cancelled, the seller shall refund to the buyer the cash the installment became due. If the buyer fails to pay the installments due at
surrender value of the payments on the property equivalent to fifty percent the expiration of the grace period, the seller may cancel the contract after
of the total payments made and, after five years of installments, an thirty days from receipt by the buyer of the notice of cancellation or the
additional five percent every year but not to exceed ninety percent of the demand for rescission of the contract by a notarial act.
total payments made: Provided, That the actual cancellation of the contract
shall take place after thirty days from receipt by the buyer of the notice of In this case, the spouses Heruela paid less than two years of installments.
cancellation or the demand for rescission of the contract by a notarial act Thus, Section 4 of RA 6552 applies. However, there was neither a notice of
and upon full payment of the cash surrender value to the buyer.9 cancellation nor demand for rescission by notarial act to the spouses
Heruela. In Olympia Housing, Inc. v. Panasiatic Travel Corp., 22 the Court
The Court agrees with petitioner that the cancellation of the Contract to Sell ruled that the vendor could go to court to demand judicial rescission in lieu
may be done outside the court particularly when the buyer agrees to such of a notarial act of rescission. However, an action for reconveyance is not an
cancellation. action for rescission. The Court explained in Olympia:
However, the cancellation of the contract by the seller must be in accordance The action for reconveyance filed by petitioner was predicated on an
with Sec. 3. assumption that its contract to sell executed in favor of respondent buyer
had been validly cancelled or rescinded. The records would show that,
Firstly the demand letter made by the petitioner to vacate the premises does indeed, no such cancellation took place at any time prior to the institution of
not constitute notice of cancellation. Second petitioner cannot insist on the action for reconveyance. . . .
compliance with the requirement by assuming that the cash surrender value
payable to the buyer had been applied to rentals of the property after xxx xxx xxx
respondent failed to pay the installments due.
. . . Not only is an action for reconveyance conceptually different from an
Therefore a deed of absolute sale shall be made after payment of purchase action for rescission but that, also, the effects that flow from an affirmative
price. judgment in either case would be materially dissimilar in various respects.
The judicial resolution of a contract gives rise to mutual restitution which is
c. Rules when the buyer has paid less than 2 years of installments ( Refer to not necessarily the situation that can arise in an action for reconveyance.
case below) Additionally, in an action for rescission (also often termed as resolution),
unlike in an action for reconveyance predicated on an extrajudicial rescission
1) where the buyer paid less than 2 years installments (rescission by notarial act), the Court, instead of decreeing rescission, may
authorize for a just cause the fixing of a period. 23
Ramos vs Heruela In the present case, there being no valid rescission of the contract to sell, the
action for reconveyance is premature. Hence, the spouses Heruela have not
Down payments, deposits or options on the contract shall be included in the lost the statutory grace period within which to pay. The trial court should
computation of the total number of installments made. have fixed the grace period to sixty days conformably with Section 4 of RA
6552.
Sec. 4.In case where less than two years of installments were paid, the seller
shall give the buyer a grace period of not less than sixty days from the date 2) Sale of subdivision lot on installments where the buyer defaulted.

We hold that the contract to sell between the parties remains valid and
subsisting. Following Section 3(a) of R.A. No. 6552, respondent has the right
Active Realty Corporation vs. Daroya to offer to pay for the balance of the purchase price, without interest, which
she did in this case. However since the lot has been sold to another party it is
ACTIVE REALTY & DEVELOPMENT CORPORATION entered into a Contract to only just and equitable that the petitioner be ordered to refund to
Sell1 with respondent NECITA DAROYA whereby the latter agreed to buy a respondent the actual value of the lot resold, i.e., P875,000.00, with 12%
515 sq. m. lot for P224,025.00 in petitioners subdivision to be paid in interest per annum.
amortization within 5 years, valued at P346,367.00, a figure higher than that
stated as the contract price. The buyer defaulted in three (3) monthly
amortizations. Petitioner sent respondent a notice of cancellation2 of their F. PD No. 957
contract to sell. When respondent offered to pay for the balance of the
contract price, petitioner refused as it has allegedly sold the lot to another a. Important provisions
buyer. The respondent has already paid 4 years. already more than the
contract price. Sec. 4, 5, 7,18,23 ,24 ,25
Issue: Whether or not the petitioner can be compelled to refund to the Section 4. Registration of Projects The registered owner of a parcel of land
respondent the value of the lot or to deliver a substitute lot at respondents who wishes to convert the same into a subdivision project shall submit his
option? subdivision plan to the Authority which shall act upon and approve the same,
upon a finding that the plan complies with the Subdivision Standards' and
SC: Yes, According to Republic Act No. 6552 -- "The Realty Installment Buyer Regulations enforceable at the time the plan is submitted. The same
Protection Act," or more popularly known as the Maceda Law procedure shall be followed in the case of a plan for a condominium project
except that, in addition, said Authority shall act upon and approve the plan
More specifically, Section 3 of R.A. No. 6552 provided for the rights of the with respect to the building or buildings included in the condominium project
buyer in case of default in the payment of succeeding installments, where he in accordance with the National Building Code (R.A. No. 6541).
has already paid at least two (2) years of installments, thus:
The subdivision plan, as so approved, shall then be submitted to the Director
"(a) To pay, without additional interest, the unpaid installments due within of Lands for approval in accordance with the procedure prescribed in Section
the total grace period earned by him, which is hereby fixed at the rate of one 44 of the Land Registration Act (Act No. 496, as amended by R.A. No. 440):
month grace period for every one year of installment payments made; x x x Provided, that it case of complex subdivision plans, court approval shall no
longer be required. The condominium plan as likewise so approved, shall be
(b) If the contract is cancelled, the seller shall refund to the buyer the cash submitted to the Register of Deeds of the province or city in which the
surrender value of the payments on the property equivalent to fifty per cent property lies and the same shall be acted upon subject to the conditions and
of the total payments made; provided, that the actual cancellation of the in accordance with the procedure prescribed in Section 4 of the
contract shall take place after thirty days from receipt by the buyer of the Condominium Act (R.A. No. 4726).
notice of cancellation or the demand for rescission of the contract by a
notarial act and upon full payment of the cash surrender value to the buyer." The owner or the real estate dealer interested in the sale of lots or units,
respectively, in such subdivision project or condominium project shall

register the project with the Authority by filing therewith a sworn mortgaged, it is sufficient if the instrument of mortgage contains a
registration statement containing the following information: stipulation that the mortgagee shall release the mortgage on any subdivision
lot or condominium unit as soon as the full purchase price for the same is
(a) Name of the owner; paid by the buyer.
(b) The location of the owner's principal business office, and if the owner is a The person filing the registration statement shall pay the registration fees
non-resident Filipino, the name and address of his agent or representative in prescribed therefor by the Authority.
the Philippines is authorized to receive notice;
Thereupon, the Authority shall immediately cause to be published a notice of
(c) The names and addresses of all the directors and officers of the business the filing of the registration statement at the expense of the applicant-owner
firm, if the owner be a corporation, association, trust, or other entity, and of or dealer, in two newspapers general circulation, one published in English
all the partners, if it be a partnership; and another in Pilipino, once a week for two consecutive weeks, reciting that
a registration statement for the sale of subdivision lots or condominium units
(d) The general character of the business actually transacted or to be has been filed in the National Housing Authority; that the aforesaid
transacted by the owner; and registration statement, as well as the papers attached thereto, are open to
inspection during business hours by interested parties, under such
(e) A statement of the capitalization of the owner, including the authorized regulations as the Authority may impose; and that copies thereof shall be
and outstanding amounts of its capital stock and the proportion thereof furnished to any party upon payment of the proper fees.
which is paid-up.
The subdivision project of the condominium project shall be deemed
The following documents shall be attached to the registration statement: registered upon completion of the above publication requirement. The fact
of such registration shall be evidenced by a registration certificate to be
(a) A copy of the subdivision plan or condominium plan as approved in issued to the applicant-owner or dealer.
accordance with the first and second paragraphs of this section.
Section 5. License to sell. Such owner or dealer to whom has been issued a
(b) A copy of any circular, prospectus, brochure, advertisement, letter, or registration certificate shall not, however, be authorized to sell any
communication to be used for the public offering of the subdivision lots or subdivision lot or condominium unit in the registered project unless he shall
condominium units; have first obtained a license to sell the project within two weeks from the
registration of such project.
(c) In case of a business firm, a balance sheet showing the amount and
general character of its assets and liabilities and a copy of its articles of The Authority, upon proper application therefor, shall issue to such owner or
incorporation or articles of partnership or association, as the case may be, dealer of a registered project a license to sell the project if, after an
with all the amendments thereof and existing by-laws or instruments examination of the registration statement filed by said owner or dealer and
corresponding thereto. all the pertinent documents attached thereto, he is convinced that the owner
or dealer is of good repute, that his business is financially stable, and that the
(d) A title to the property which is free from all liens and encumbrances: proposed sale of the subdivision lots or condominium units to the public
Provided, however, that in case any subdivision lot or condominium unit is would not be fraudulent.

Section 7. Exempt transactions. A license to sell and performance bond shall Section 24. Failure to pay installments. The rights of the buyer in the event of
not be required in any of the following transactions: this failure to pay the installments due for reasons other than the failure of
the owner or developer to develop the project shall be governed by Republic
(a) Sale of a subdivision lot resulting from the partition of land among co- Act No. 6552.
owners and co-heirs.
Where the transaction or contract was entered into prior to the effectivity of
(b) Sale or transfer of a subdivision lot by the original purchaser thereof and Republic Act No. 6552 on August 26, 1972, the defaulting buyer shall be
any subsequent sale of the same lot. entitled to the corresponding refund based on the installments paid after the
effectivity of the law in the absence of any provision in the contract to the
(c) Sale of a subdivision lot or a condominium unit by or for the account of a contrary.
mortgagee in the ordinary course of business when necessary to liquidate a Section 25. Issuance of Title. The owner or developer shall deliver the title of
bona fide debt. the lot or unit to the buyer upon full payment of the lot or unit. No fee,
except those required for the registration of the deed of sale in the Registry
Section 18. Mortgages. No mortgage on any unit or lot shall be made by the of Deeds, shall be collected for the issuance of such title. In the event a
owner or developer without prior written approval of the Authority. Such mortgage over the lot or unit is outstanding at the time of the issuance of the
approval shall not be granted unless it is shown that the proceeds of the title to the buyer, the owner or developer shall redeem the mortgage or the
mortgage loan shall be used for the development of the condominium or corresponding portion thereof within six months from such issuance in order
subdivision project and effective measures have been provided to ensure that the title over any fully paid lot or unit may be secured and delivered to
such utilization. The loan value of each lot or unit covered by the mortgage the buyer in accordance herewith.
shall be determined and the buyer thereof, if any, shall be notified before the
release of the loan. The buyer may, at his option, pay his installment for the Cases:
lot or unit directly to the mortgagee who shall apply the payments to the
corresponding mortgage indebtedness secured by the particular lot or unit
being paid for, with a view to enabling said buyer to obtain title over the lot Far East Bank & Trust Co vs. Marquez
or unit promptly after full payment thereto;
Marquez entered into a contract to sell with TSE involving a 52.5 sqm lot and
Section 23. Non-Forfeiture of Payments. No installment payment made by a a three storey townhouse for P800,000. Later respondent was able to pay a
buyer in a subdivision or condominium project for the lot or unit he total of P600,000. TSE then mortgaged the whole property to Far East Bank.
contracted to buy shall be forfeited in favor of the owner or developer when TSE was unable to pay and the property was foreclosed and sold in favor of
the buyer, after due notice to the owner or developer, desists from further Far East Bank.
payment due to the failure of the owner or developer to develop the
subdivision or condominium project according to the approved plans and Issue: 1.)Whether or not the mortgage contract violated Section 18 of
within the time limit for complying with the same. Such buyer may, at his PD.957, hence void insofar as third persons are concerned.
option, be reimbursed the total amount paid including amortization interests
but excluding delinquency interests, with interest thereon at the legal rate. 2.)Who has a higher right the new buyer or the respondent?
SC: Yes violated Sec. 18. as provides as follows.

Sec. 18. Mortgages- No mortgage on any unit or lot shall be made by the petitioner stopped paying the monthly amortization. The respondents sent
owner or developer without prior written approval of the authority. Such the petitioner a demand letter, but after the reply of the petitioner with an
approval shall not be granted unless it is shown that the proceeds of the explanation of stop payment the respondent was unheard of.. After 5 years
mortgage loan shall be used for the development of the condominium or the development was soon in progress and petitioner offered to pay the full
subdivision project and effective measures have been provided to ensure purchase price which was already rejected by the respondent. Later on the
such utilization. The loan value of each lot or unit covered by the mortgage property was sold by the respondent to another person.
shall be determined and the buyer thereof, if any, shall be notified before the
release of the loan. The buyer may, at his option, pay his installment for the Issue: 1.)Did the petitioner have any legal basis for stop payment? 2.)Is the
lot or unit directly to the mortgagee who shall apply the payments to the contract to sell between the parties rescinded?
corresponding mortgage indebtness secured by the particular lot or unit
being paid for , with a view to enabling said buyer to obtain title over the lot SC: 1.) Yes.According Section 23 of PD 957
or unit promptly after full payment thereof.
requires only due notice to the owner or developer for stopping further
Since TSE did not obtain prior approval from the NHA the mortgage is void as payments by reason of the latters failure to develop the subdivision
regarding to the property to the respondent as he has no standing to according to the approved plans and within the time limit.
question the validity of the other property.
2.) Respondent has a higher right over the property. Petitioner cannot be Therefore the buyer had the right to stop payment due to the failure of the
considered as a buyer in good faith. He should have considered that it was a developer to comply with the contract. He only needed to give due notice to
town house that was already in progress. The conversion of status from the owner(Huangs) or Developer to give it effect.
mortgagee to buyer will not lessen the importance of such knowledge.
Tamayo vs. Huang

2.) Yes. Respondents sent no notarized notice or any notice of cancellation
Respondents Huang registered owners of four parcels of land located in at all. In fact, it was only after petitioner filed on July 24, 1997 the complaint
Barangay Matina, Davao City executed a contract of "Indenture" with EAP before the HLURB that respondents offered to reimburse petitioner of the
Development Corporation (EAP) under which EAP undertook to manage and total amount he had already paid.
develop said parcels of land into a first class subdivision and sell the lots The contract not having been cancelled in accordance with law, it has
therein in, Doa Luisa Village (the subdivision). remained valid and subsisting. It was, therefore, within petitioners right to
maintain his option to await the completion of the development of and
Carlos R. Tamayo (petitioner) entered into a contract to sell with respondents introduction of improvements in the subdivision and thereafter, upon full
through EAP for a certain lot. Under the contract, petitioner was to pay upon payment of the purchase price, without interest, compel respondents to
execution P35,749.60 and the balance, including interest at the rate of 14% execute a deed of absolute sale, but since the property was sold to a buyer in
per annum, in 60 monthly installments of P4,791.40, without necessity of good faith. The respondents should refund the petitioner for the value of the
demand; and if petitioner failed to pay the installments, respondents were property when it was sold.
given the right to demand interest thereon at the rate of 14% per annum, to
be computed on the same day of the month the installments became due. Cantemperante vs CRS realty
Later on the development of the subdivision was put to stop by EAP, in effect

Facts: The only requisite for a contract of sale or contract to sell to exist in law is
Herein petitioners were among those who filed before the HLURB a the meeting of minds upon the thing which is the object of the contract and
complaint 6 for the delivery of certificates of title against respondents CRS the price, including the manner the price is to be paid by the vendee. Under
Realty Development Corporation (CRS Realty), Crisanta Salvador and Cesar Article 1458 of the New Civil Code, in a contract of sale, whether absolute or
Casal. conditional, one of the contracting parties obliges himself to transfer the
ownership of and deliver a determinate thing, and the other to pay therefor
Petitioners averred that they had bought on an installment basis subdivision a price certain in money or its equivalent.
lots from respondent CRS Realty and had paid in full the agreed purchase In the instant case, the failure by respondent CRS Realty to obtain a license
prices; but notwithstanding the full payment and despite demands, to sell the subdivision lots does not render the sales void on that ground
respondents failed and refused to deliver the corresponding certificates of alone especially that the parties have impliedly admitted that there was
title to petitioners. The complaint prayed that respondents be ordered to already a meeting of the minds as to the subject of the sale and price of the
deliver the certificates of title corresponding to the lots petitioners had contract. The absence of the license to sell only subjects respondent CRS
purchased and paid in full and to pay petitioners damages. Realty and its officers civilly and criminally liable for the said violation under
Presidential Decree (P.D.) No. 957 30 and related rules and regulations. The
In his answer, respondent Casal averred that despite his willingness to deliver absence of the license to sell does not affect the validity of the already
them, petitioners refused to accept the certificates of title with notice of lis perfected contract of sale between petitioners and respondent CRS Realty.
pendens covering the subdivision lots.
As found by the Court of Appeals, in the case at bar, the requirements of
Respondents Ang and Cuason claimed in their answer with counterclaim 16 Sections 4 and 5 of P.D. [No.] 957 do not go into the validity of the contract,
that respondent Casal remained the registered owner of the subdivided lots such that the absence thereof would automatically render the contract null
when they were transferred to them and that the failure by petitioners to and void. It is rather more of an administrative convenience in order to allow
annotate their claims on the title indicated that they were unfounded. a more effective regulation of the industry.
Respondent CRS Realty and the Heirs of Laudiza were declared in default for
failure to file their respective answers.
Chapter 2
Issues:
Whether or not the absence of a license to sell has rendered the sales void; Capacity to Buy or Sell
(2) whether or not the subsequent sale to respondent Cuason and Ang
constitutes double sale; Arts. 1489 1492
Held: I. Parties and their Consent
Petitioners assail the Court of Appeals' ruling that the lack of the requisite A. Capacity in general (1489)
license to sell on the part of respondent CRS Realty rendered the sales void;
hence, neither party could compel performance of each other's contractual Art. 1489. All persons who are authorized in this Code to obligate
obligations. themselves, may enter into a contract of sale, saving the modifications
contained in the following articles.

Where necessaries are sold and delivered to a minor or other person Note: The case did not extensively explicate the reason why the sale
without capacity to act, he must pay a reasonable price therefor. Necessaries between spouses are prohibited. However, Art 1490 provides that the
are those referred to in article 290. husband and wife cannot sell property to each other, except: (1) when a
separation of property was agreed upon in the marriage settlements; or (2)
Note: A person who has both juridical capacity and capacity to act is said to when there has been a judicial separation of property under articel 191.
have full civil capacity. It is understood that he is of legal age and suffers no Rationale behind the prohibiton: (a) to prevent the stronger spouse from
restriction on his capacity to act, such person may enter into any contract exploiting the weaker spouse; (b) prevent donations disguised as sales; (c)
including sale. protect third persons, specially creditors, against fraud through the transfer
of the properties of one spouse to the other to evade payment of
B. Special Disqualifications to Buy obligations.
a. Between Spouses
2) Transfer in common law relationship
Case:
1) Effect of sale of land to ones own spouse Ching vs. Goyanko, G.R. No. 165879, November 10, 2006
Uy Siu Pin vs. Cantollas, G.R. No. 46850, June 20, 1940 FACTS: Respondents claim that their parents (Goyanko and Epifania)
acquired a 661 square meter property but they (the parents) were Chinese
Facts: There was a contract entered into between Uy Siu Pin and Casimira citizens at the time, the property was registered in the name of their aunt,
and Blas, which the latter agreed to deliver the mortgaged land and to enjoy Sulpicia Ventura. Sulpicia executed a deed of sale over the property in favor
the same with its improvements to the during the period of 15 years on of reespondents father Goyanko that in turn executed a deed of sale over
condition that Uy Siu Pin would pay El Hogar Filipino the unpaid balance of the same property in favor of his common-law-wife-herein petitioner Maria
the indebtedness of casimira and Blas, together with all other expenses B. Ching. It was only after Goyankos death that they discovered the transfer
including realty taxes. of the said property to Ching. Respondents thus filed with the RTC of Cebu
City a complaint for recovery of the property and the nullification of the deed
When the mortgage debtors, Casimira and Blas, failed to redeem the land of sale.
within the statutory period, a final deed of sale was issued in favor of the
mortgagee, El Hogar Filipino. The latter sold the land to Uy Siu Pin and in turn ISSUE: Whether or not the sale of the property by Goyanko to Ching is valid.
sold the land to his wife Chua Hue.
HELD:
Issues: Is the sale valid between Uy Siu Pin and Chua Hue?
The conveyance of Goyanko in favor of his common-law-wife-herein
Held: SC said No. The sale from Uy Siu Pin to his wife Chua Hue is null and petitioner, was null and void. Article 1409 of the Civil Code states inter alia
void not only because theformer had no right to dispose of the land in that contracts whose cause, object, or purpose is contrary to law, morals,
contorversy but because the sale comes within the prohibition of Article good customs, public order, or public policy are void and inexistent from the
1458 of the Civil Code. very beginning. Article 1352 also provides that: Contracts without cause, or
with unlawful cause, produce no effect whatsoever. The cause is unlawful if

it is contrary to law, morals, good customs. Public order, or public policy. HELD: Petitioner Lorenza, by affixing her signature to the Deed of Sale on the
Additionally, the law emphatically prohibits the spouses from selling property space provided for witnesses, is deemed to have given her implied consent
to each other subject to certain exceptions. Similarly, donations between to the contract of sale. Sale is a consensual contract that is perfected by
spouses during marriage are prohibited. And this is so because if transfers or mere consent, which may either be express or implied. A wifes consent to
conveyances between spouses were allowed during marriage, that would the husbands disposition of conjugal property does not always have to be
destroy the system of conjugal partnership, a basic policy in civil law. It was explicit or set forth in any particular document, so long as it is shown by acts
also designed to prevent the exercise of undue influence by one spouse over of the wife that such consent or approval was indeed given. In the present
the other, as well as to protect the institution of marriage, which is the case, although it appears on the face of the deed of sale that Lorenza signed
cornerstone of family law. The prohibitions apply to a couple living as only as an instrumental witness, circumstances leading to the execution of
husband and wife without benefit of marriage, otherwise, the condition of said document point to the fact that Lorenza was fully aware of the sale of
those who incurred guild would turn out to be better that those in legal their conjugal property and consented to the sale.
union.
Under Article 173, in relation to Article 166, both of the New Civil Code,
b. By Spouse without consent of the other spouse - Void when the deed in question was executed, the lack of marital consent to the
disposition of conjugal property does not make the contract void ab initio but
C. Persons in Trust Relations merely voidable. It has been held that the contract is valid until the court
annuls the same and only upon an action brought by the wife whose consent
2. Sale to agent: Exception to prohibition against sale by principal in was not obtained. In the present case, despite respondents repeated
favor of his agent. demands for Lorenza to affix her signature on all the pages of the deed of
sale, showing respondents insistence on enforcing said contract, Lorenza still
Pelayo vs. Perez, G.R. No. 141323, June 8, 2005 did not fle a case for annulment of the deed of sale. Thus, if the transaction
was indeed entered into without Lorenzas consent, we find it quite puzzling
FACTS: David Pelayo, by a Deed of Absolute Sale, conveyed to Melki Perez why for more than three and a half years, Lorenza did nothing to seek the
two parcels of agricultural land. Loreza, wife of David Pelayo,k and another nullification of the assailed contract.
one whose signature is illegible witnessed the execution of the deed. Loreza, With regards to petitioners asservation that the deed of sale is invalid under
however, signed only the third page. Perez asked Loreza to sign on the first Article 1491 (2) of the New Civil Code, we find such argument unmeritorious.
and second pages of the deed but refused, hence, he instituted the instant Petitioners, by signing the Deed of Sale in favor of respondent, are also
complaint for specific performance against the spouses. Petitioners, in deemed to have given their consent to the sale of the subject property in
adopting the trial courts narration of antecedent facts in their petition, favor of respondent, thereby making the transaction an exception to the
admitted that they authorized respondent to represent them in negotiations general rule that agents are prohibited from purchasing the property of their
with the squatters occupying the disputed property and, in consideration principals.
of respondents services, they executed the subject deed of sale. Defendant
Pelayo claimed that the deed was without his wifes consent, hence, it is null 2) Sale to guardians
and void.
Philippine Trust Co. vs Roldan
ISSUE: Whether or not the deed of sale was null and void.

Facts: Parcels located in Guiguinto, Bulacan, were part of the properties Even without proof that she had connived with Dr. Ramos. Remembering the
inherited by Mariano L. Bernardo from his father, Marcelo Bernardo, general doctrine that guardianship is a trust of the highest order, and the
deceased. In view of his minority, guardianship proceedings were instituted, trustee cannot be allowed to have any inducement to neglect his ward's
wherein Socorro Roldan was appointed his guardian. She was the surviving interest and in line with the court's suspicion whenever the guardian
spouse of Marcelo Bernardo, and the stepmother of said Mariano L. acquires the ward's property 1 we have no hesitation to declare that in this
Bernardo. case, in the eyes of the law, Socorro Roldan took by purchase her ward's
On July 27, 1947, Socorro Roldan filed in said guardianship proceedings parcels thru Dr. Ramos, and that Article 1459 of the Civil Code applies.
(Special Proceeding 2485, Manila), a motion asking for authority to sell as
guardian the 17 parcels for the sum of P14,700 to Dr. Fidel C. Ramos, the
purpose of the sale being allegedly to invest the money in a residential 3. Sale to public officers
house, which the minor desired to have on Tindalo Street, Manila. The
motion was granted. Maharlika Broadcasting Corp. vs. Tagle
Socorro Roldan, as guardian, executed the proper deed of sale in favor of her FACTS: The GSIS was the registered owner of a parcel of land that was sold to
brother-in-law Dr. Fidel C. Ramos. Dr. Fidel C. Ramos executed in favor of petitioner Maharlika Publishing Corporation together with the building
Socorro Roldan, personally, a deed of conveyance covering the same thereon as well as the printing machinery and equipment therein. Among the
seventeen parcels, for the sum of P15,000. conditions of the sale are that petitioner shall pay to the GSIS monthly
installments until the total purchase price shall be fully paid and that failure
The Philippine Trust Company replaced Socorro Roldan as guardian, on to pay any monthly installment within 90 days from due date, the contract
August 10, 1948. And this litigation, started two months later, seeks to undo shall be deemed automatically cancelled. Maharlika failed to pay the
what the previous guardian had done. The step-mother in effect, sold to installments for several months. This resulted to a public bidding of this
herself, the properties of her ward, contends the plaintiff, and the sale particular property. Petitioner submitted a letter-proposal that reads: I bid
should be annulled because it violates Article 1459 of the Civil Code to match the highest bidder. The bidding committee rejected petitioners
prohibiting the guardian from purchasing "either in person or through the bid and accepted the private respondent Luz Tagles bid. After approval and
mediation of another" the property of her ward. confirmation of the sale, the GSIS executed a Deed of Conditional Sale in
favor of Tagles. Luz Tagle is the wife of Edilberto Tagle. Edilberto Tagle was
ISSUE: the Chief, Retirment Division, GSIS, from 1970 to 1978. He worked for the
Whether or not the sale was valid. GSIS since 1952.
HELD: ISSUE: Whether or not the sale is valid.
As Guardianship is a trust of the highest order, the trustee cannot be allowed HELD: In providing the prohibitions under Article 1491, the Code tends to
to have any inducement to neglect his ward's interest; and whenever the prevent fraud, or more precisely, tends not give occasion for fraud, which is
guardian acquires the ward's property through an intermediary, he violates what can and must be done.
the provision of Article 1459 of the Civil Code and such transaction and
subsequent ones emanating therefrom shall be annulled. The point is that he is a public officer and his wife acts for and in his name in
any transaction with the GSIS. If he is allowed to participate in the public

bidding of properties foreclosed or confiscated by the GSIS, there will always A thing is said to be in litigation only if there is some contest or litigation over
be the suspicion among other bidders and the general public that the insider it in court, but also from the moment that it becomes subject to the judicial
official had access to information and connection with his fellow GSIS official action of the judge. In the present case, there is no proof to show that at the
as to allow him to eventually acquire the property. It is precisely the need to time the deed of Transfer of Rights and Interest was executed, the probate
forestall such suspicions and to restore confidence in the public service that court issued an order granting the Motion for Termination of Proceeding and
the Civil Code now declares such transactions to be void from the beginning Discharge of the Executor and Bond. Since the judge has yet to act on the
and not merely voidable. above-mentioned motion, if follows that the subject property which is the
subject matter of the deed of Transfer of Rights and Interest, is still the
4. Sale/transfer to attorney object of litigation.
Gurrea vs. Suplico, G.R. No. 144320, April 26, 2006 Having been established that the subject property was still the object of
litigation at the time the subject deed of Transfer of Rights and Interest was
FACTS: Adelina Gurrea continued to be the owner of the lot (TCT No. 58253) executed, the assignment of rights and interest over the subject property in
until her death. Thereafter, a special proceeding was instituted to settle her favor of respondent is null and void for being violative of the provisions of
estate. Under her will, the San Juan lot was bequeathed to Pilar and Luis Article 1491 of the Civil Code which expressly prohibits lawyers from
Gurrea, while 700,000 pesetas, of the lot in Baguio and 1-hectare piece of acquiring property or rights which may be the object of any litigation in
land in Negros Occidental were given to Ricardo Gurrea. Ricardo Gurrea, which they may take party by virtue of their profession.
represented by and through his counsel Atty. Enrique Suplico filed an
Opposition in Special Proceeding No. 7185. In consideration of said C. Incapacity to sell
representation, Ricardo Gurrea agreed to pay Atty. Suplico a contigent fee
of twenty (20%) of whatever is due me, either real or personal property. a. Homesteaders
Later on, Ricardo withdrew his Opposition. The properties adjudicated to
Ricardo based on the project of partition were the Baguio lot, San Juan lot, Cases
and a parcel of land in Negros Occidental. As payment of his attorneys fees,
Ricarod Gurrea offered the San Juan lot to Atty. Suplico who was hesitant to 1. Sale of portions of a parcel of land (1) prior to issuance and (2) within 5
accept as the property was occupied by squatters. However, in order not to years from issuance of free patent
antagonize his client, Atty. Suplico agreed to Ricardos proposal with the
further understanding that he will receive an additional commission of 5% if Manlapat vs. CA, G.R. No. 125585, June 8, 2005
he sells the Baguio property. Thereafter, Atty. Suplico registered the deed of
Transfer of Rights and Interest and obtained the title to the San Juan FACTS: The controversy involves Lot No. 2204 that had been originally in the
property under his name. possession of Jose Alvarez, Eduardos grandfather, until his demise in 1916.
It remained unregistered until October 8, 1976 when OCT No. P-153 was
ISSUE: Whether or not the subject property is still the object of litigation; If issued in the name of Eduardo pursuant to a free patent issued in Eduardos
affirmative, whether or not the sale is void for being violative of the name that was entered in the Registry of Deed. Before the subject lot was
provisions of Article 1491 (5) of the Civil Code. titled, Eduardo sold 533 sq.m. of the land to Ricardo on December 19, 1954.
The sale is evidence by a deed of sale entitled Kasulatan ng Bilihang
HELD: The sale to Atty. Suplico is null and void. Tuluyan ng Lupang Walang Titulo which was signed by Eduardo himself as

vendor and his wife Engracia Ancieto with a certain Santiago Enriquez free patent application, whether by the vendor or the vendee, the
signing as witness. The Kasulatan was registered with the Register of Deeds. prohibition should not be applied. In such situation, neither the prohibition
On March 18, 1981, another Deed of Sale conveyed another portion of the not the rationale therefor which is to keep in the family of the patentee that
subject lot as right of way was executed by Eduardo in favor of Ricardo. The portion of the public land which the government has gratuitously given him,
deed was notarized. Leon Banaag, as attorney-in-fact of his father-in-law by shielding him from the temptation to dispose of his landholdings, could
(Eduardo) mortgage with the Rural Bank for P100,000.00 with the subject be relevant. Precisely, he had disposed of his rights to the lot even before
lot as collateral. Banaag deposited the owners duplicate certificate of OCT the government could give the title to him.
No. P-153 with the bank. Ricardo and Eduardo died.
2. Effect of verbal sale within 5-year prohibitory period
The Cruzes, upon learning their right to the subject lot immediately tried to
confront petitioners mortgage and obtain the surrender of the OCT. Having Manzano vs. Ocampo, L-46850, June 20, 1940
failed to physically obtain the title from petitioners, the Cruzes went to
RBSP which had custody of the owners duplicate certificate of the OCT. Facts: Victoriano Manzano, now deceased, was granted a homestead patent
They were able to secure a clearance to borrow the title and was able to on June 25, 1934, and the land was registered in his name on July 25, 1934
have the Register of Deeds cancel the OCT and issue two separate titles in under Original Certificate of Title No. 4590. On January 4, 1938, he and
the name of Ricardo andEduardo. respondent Rufino Ocampo agreed on the sale of said homestead for the
amount of P1,900.00, P1,100.00 of which was paid by Ocampo to Manzano
ISSUE: Whether or not the sale of the land is prohibited or not. on the same day, and for the balance, he executed a promissory note.
Knowing, however, that any sale of the homestead at that time was
HELD: Free patent application implies the recognition of the public prohibited and void, the parties likewise agreed that the deed of sale was to
dominion character of the land and, hence, the five year prohibition be made only after the lapse of five years from the date of Manzano's
imposed by the Public land Act against alienation or encumbrance of the patent. And to protect the buyer Ocampo's rights in the agreed sale,
land covered by a free patent or homestead should have been considered. Manzano executed in his favor a "Mortgage of Improvements" over the
homestead to secure the amount of P1,100.00 already received as down
The deed of sale covering the 50 sq.m. right of way executed on March 18, payment on the price.
1981 is obviously covered by proscription, the free patent having been
issued on October 8, 1979. However, petitioners may recover the portion It is clear that a perfected contract of sale had already been entered
sold since the prohibition was imposed in favor of the free patent holder. into by the parties within the period of prohibition. There was nothing
Under the Public Land Act, the prohibition to alienate is predicated on the "futuristic" in this agreement, except that, being fully aware of the
fundamental policy of the State to preserve and keep in the family of the prohibition, Manzano's title has not ripened into absolute ownership.
homesteader that portion of public land which the State has gratuitously
given to him, and recovery is allowed even where the land acquired under This execution of the formal deed after the expiration of the
the Public Land Act was sold and not merely encumbered, within the prohibitory period did not and could not legalize a contract that was void
prohibited period. from its inception. Nor was this formal deed of sale "a totally distinct
transaction from the promissory note and the deed of mortgagee for it was
The sale of the 533 sq.m. was executed 22 years before the issuance of the executed only in compliance and fulfillment of the vendor's previous
patent in 1976. Where the sale or transfer took place before the filing of the promise, under the perfected sale to execute in favor of his vendee the

formal act of conveyance after the lapse of the period of inhibition of five
years from the date of the homestead patent.
Sale in question is illegal and void for having been made within five
years from the date of Manzano's patent, in violation of section 118 of the
Public Land Law. Being void from its inception, the approval thereof by the
Undersecretary of Agriculture and Natural Resources after the lapse of five
years from Manzano's patent did not legalize the sale. The result is that the
homestead in question must be returned to Manzano's heirs, who are, in
turn, bound to restore to Ocampo the, sum of P3,000.00 received by
Manzano as the price thereof.
D. When incompetent buys he must pay a reasonable price for

necessaries delivered to him. The resulting sale is valid.
The above rule seems to be founded on quasi-contract
E. Effect of forbidden sales

a. Between husband and wife under the community regime, the sale is void
1) But strangers cannot assail the transfer
b. Between persons in trust relations, as regards
1) Those based on public trust
i) Public officers, employees, government experts (1491, par. 4), and
ii) Judges, Justices, Prosecutors, Clerks of Court, lawyers (1491, par. 5) -
such sales are void (1409, No. 7)
2) Those based on private trust -
i) Guardians (1491, par. 1)
ii) Agents (1491, par. 2)
ii) Executors and administrators (1491, par. 3) - such sales are voidable,
not void

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SALES FACTS: Petitioner was the owner of a 8,015 square meter parcel of

land located in Mandaluyong (now a City), Metro Manila. The property

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A contract of sale is consensual in nature and is perfected upon mere

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B. Elements b. Bilateral (reciprocal)both parties are bound by obligations dependent

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Held: Facts: Engineering Equipment and Supply Co., a domestic corporation, is

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Held: E. The Contract of Sale may be-

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Contract of Sale- no reservation of ownership where the owner can

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Cruzado v. Bustos, G. R. No. 10244, February 29, 1916s

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Doles v. Angeles, G. R. No. 149353, June 26, 2006 Facts:

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1. Verbal agreement of sale

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a) Specific performance, and

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d. Limitations of the seller: Case: Leoquinco vs. Postal Savings Bank

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a. The bulk of the goods must correspond to either or both Cases:

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Right to update payments i) Actual cancellation takes place:

1)after 30 days from receipt of notice of cancellation by notarial act.

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SC: Yes violated Sec. 18. as provides as follows.

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Tamayo vs. Huang

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