Civil Law

SALES Judge Ma. Lynna P.
Adviento
SALES ISSUE: whether or not petitioner and respondent PNB had entered into
a perfected contract for petitioner to repurchase the property from
respondent.
CHAPTER 1 – NATURE AND FORM
SC RULED that there was NO perfected contract of sale between
Art. 1458. By the contract of sale one of the contracting parties the parties.
obligates himself to transfer the ownership and to deliver a determinate
thing, and the other to pay therefor a price certain in money or its A contract of sale is consensual in nature and is perfected upon mere
equivalent. 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
A contract of sale may be absolute or conditional. of sale is not perfected, it cannot, as an independent source of
obligation, serve as a binding juridical relation between the parties.
NATURE AND CHARACTERISTICS
To convert the offer into a contract, the acceptance must be absolute
and must not qualify the terms of the offer; it must be plain,
DEFINITION unequivocal, unconditional and without variance of any sort from the
proposal.
Sale is a contract where one party (seller or vendor) obligates himself to
transfer the ownership of and to deliver a determinate thing, while the A qualified acceptance or one that involves a new proposal constitutes
other party (buyer or vendee) obligates himself to pay for said thing a a counter-offer and a rejection of the original offer. A counter-offer is
price certain in money or its equivalent. considered in law, a rejection of the original offer and an attempt to end
the negotiation between the parties on a different basis. Consequently,
Note that in harmony with Art. 1164, ownership of the thing sold does when something is desired which is not exactly what is proposed in the
not pass to the buyer until delivery. See Arts. 1475, 1477, 1496. offer, such acceptance is not sufficient to guarantee consent because
Essential requisites are consent, object and price. No special form is any modification or variation from the terms of the offer annuls the
required. (Art. 1483) offer. The acceptance must be identical in all respects with that of the
offer so as to produce consent or meeting of the minds.
Effect of offer and counter-offer
STAGES OF A CONTRACT OF SALE:
Manila Metal Container Corporation vs. PNB, G.R. No. 166862,
December 20, 2006 (1) negotiation, covering the period from the time the prospective
Petitioner was the owner of a 8,015-square meter parcel of land located contracting parties indicate interest in the contract to the time the
in Mandaluyong (now a City), Metro Manila. The property was covered contract is perfected;
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 from respondent (2) perfection, which takes place upon the concurrence of the
Philippine National Bank (PNB), petitioner executed a real estate essential elements of the sale which are the meeting of the minds
mortgage over the lot. Respondent PNB later granted petitioner a new of the parties as to the object of the contract and upon the price;
credit accommodation of P1,000,000.00; and, petitioner executed an and
Amendment of Real Estate Mortgage over its property. The petitioner
was unable to pay its obligation to the said respondent. In turn, the (3) consummation, which begins when the parties perform their
respondent filed for a petition for extrajudicial foreclosure of the real respective undertakings under the contract of sale, culminating in
estate mortgage and sought to have the property sold at public auction. the extinguishment thereof.
The petitioner was given a period (expiration--Feb. 17, 1984) to redeem
the property, but, failed to do so. It caused the petitioner to ask for a Effect of document denominated “Agreement between Mr. Sosa
one year extension to redeem the said property. The respondent & Popong Bernardo of Toyota Shaw, Inc.”
referred the matter to Pasay City Branch for appropriate action and
recommendation. Some PNB Pasay City Branch personnel informed Toyota Shaw, Inc. vs. CA, L-11650, May 23, 1995
petitioner that as a matter of policy, the bank does not accept “partial FACTS: Luna L. Sosa, respondent, wanted to purchase a Toyota Lite
redemption.” A new title in favor of PNB was issued for petitioner’s Ace. He transacted business with Popong Bernardo, sales representative
failure to redeem the property. of Toyota. A Vehicle Sales Proposal (VSP) was accomplished and Mr.
Sosa paid a down payment of P100,000. On the scheduled date and time
Meanwhile, the Special Assets Management Department (SAMD) had for the delivery of the car, Toyota refused to release the car because
prepared a statement of account, and as of June 25, 1984 petitioner’s the financing company, B.A. Finance Corporation, refused to finance the
obligation amounted to P1,574,560.47. When apprised of the statement outstanding balance. Mr. Sosa demanded the return of the down
of account, petitioner remitted P725,000.00 to respondent PNB as payment, which Toyota honored, without prejudice to future claim for
“deposit to repurchase,”. damages.
Petitioner declared that it had already agreed to the SAMD’s offer to ISSUE: Was this document, executed and signed by the petitioner's
purchase the property for P1,574,560.47, and that was why it had paid sales representative, a perfected contract of sale, binding upon the
P725,000.00. petitioner, breach of which would entitle the private respondent to
damages and attorney's fees?
Respondent PNB informed petitioner that the PNB Board of Directors
had accepted petitioner’s offer to purchase the property, but for SC RULED that it is not a contract of sale. No obligation on the part of
P1,931,389.53 in cash less the P725,000.00 already deposited with it. 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
Both trial court and CA ruled that there was no perfected contract of certain appears therein.
sale between the parties; hence, petitioner had no cause of action for This Court had already ruled that a definite agreement on the manner
specific performance against respondent. Both declared that of payment of the price is an essential element in the formation of a
respondent had rejected petitioner’s offer to repurchase the property. binding and enforceable contract of sale. This is so because the
University of San Carlos | Page 1

SALES Judge Ma. Lynna P. Adviento
agreement as to the manner of payment goes into the price such that a The values exchanged are almost equivalent to each other
disagreement on the manner of payment is tantamount to a failure to (general rule). By way of exception, some contracts of sale
agree on the price. Definiteness as to the price is an essential element are aleatory, that is, one receives may in time be greater or
of a binding agreement to sell personal property. smaller than what he has given, i.e. sale of genuine
sweepstakes ticket.
At the most, Exhibit "A" may be considered as part of the initial phase
of the generation or negotiation stage of a contract of sale. g. DELIVERY TRANSFERS OWNERSHIP
Ownership does not pass until delivery.
ELEMENTS
SALE VS AGENCY TO SELL
A. ESSENTIAL ELEMENTS
Without which there can be no valid of sale Art. 1466. In construing a contract containing provisions characteristic
of both the contract of sale and of the contract of agency to sell, the
1. Consent or meeting of the minds—consent to transfer ownership in essential clauses of the whole instrument shall be considered. (n)
exchange for the price.
Effect of agreement for exclusive sale of beds where the other
2. Determinate subject matter – includes generic objects that are least party is entitled to commission, among others
determinable; segregated/separated of the same class
Quiroga vs. Parsons Hardware co.
3. Price certain in money or its equivalent The defendant was granted by the plaintiff of the exclusive right to sell
as an “agent” Quiroga beds in the Visayas at the invoice price in Manila.
B. NATURAL ELEMENTS The agreement was for the defendant to pay for the beds at a discount
Those which are inherent in the contract, and which in the absence of from 20% to 25% as commission on the sales. The defendant shall pay
any contrary provision, are deemed to exist in the contract. the plaintiff claims that the defendant is his “agent” while defendant
says he was merely a purchaser.
1. warranty against eviction (deprivation of the property bought)
Issue: Is this a contract of sale or agency?
2. warranty against hidden defects
Held: The Supreme Court declared that the contract by and between
C. ACCIDENTAL ELEMENTS the plaintiff and the defendant was one of purchase and sale, and that
Those which may be present or absent in the stipulation, such as the the obligations the breach of which is alleged as a cause of action are
place or time of payment, or the presence of conditions. not imposed upon the defendant, either by agreement or by law.
EFFECTS OF PRESENCE, ABSENCE, INCOMPLETE ELEMENTS In order to classify a contract, due regard must be given to its essential
1. When all three elements are present, there is Perfected clauses. In the contract in question, what was essential, as constituting
Contract. its cause and subject matter, is that the plaintiff was to furnish the
2. If not present, there is no perfected contract. defendant with the beds which the latter might order, at the price
3. If all the elements are present but there is a defect/illegal, the stipulated, and that the defendant was to pay the price in the manner
contract is voidable/void stipulated. There was the obligation on the part of the plaintiff to supply
the beds, and, on the part of the defendant, to pay their price. These
CHARACTERISTICS features exclude the legal conception of an agency or order to sell
whereby the mandatory or agent received the thing to sell it, and does
not pay its price, but delivers to the principal the price he obtains from
a. CONSENSUAL the sale of the thing to a third person, and if he does not succeed in
Perfected by mere consent. selling it, he returns it.
b. BILATERAL (RECIPROCAL)
Both parties are bound by obligations dependent upon each
SALE VS LEASE OF SERVICE OR CONTRACT FOR A PIECE
other. The power to rescind is implied, neither party incurs
delay if the party does not comply, from the moment one of OF WORK
the parties fulfills his obligation, the default by the other
begins w/out need of prior demand. 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
c. ONEROUS procures for the general market, whether the same is on hand at the
Valuable consideration must be given in order to acquire time or not, is a contract of sale, but if the goods are to be manufactured
rights. specially for the customer and upon his special order, and not for the
general market, it is a contract for a piece of work. (n)
d. NOMINATE
The Code refers to it by special designation or name, that is, Nature of transactions of company engaged in the design,
the contract of sale. supply and installation of certain type of air conditioning
system.
e. PRINCIPAL
For the contract of sale to validly exist, there is no necessity Commissioner of Internal Revenue v. Engineering Equipment
for it to depend upon the existence of another contract. and Supply Co.
Engineering Equipment and Supply Co., a domestic corporation, is
engaged in the design and installation of central type air conditioning
system, pumping plants and steel fabrications. CIR now denounced
Engineering for tax evasion by misdeclaring its imports and failing to pay
f. COMMUTATIVE

the correct percentage taxes due thereon in connivance with its foreign
suppliers. The Commissioner contends that Engineering is a SALE VS DONATION
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 Donation is gratuitous and requires special formalities.
contractors.
PROMISE TO SELL: WHEN BINDING
Contract of Sale v. Contract of Services; Test. — The distinction
between a contract of sale and one for work, labor and materials is
tested by the inquiry whether the thing transferred is one not in Article 1479. A promise to buy and sell a determinate thing for a price
existence and which never would have existed but for the order of the certain is reciprocally demandable.
party desiring to acquire it, or a thing which would have existed but has
been the subject of sale to some other persons even if the order had An accepted unilateral promise to buy or to sell a determinate thing for
not been given. If the article ordered by the purchaser is exactly such a price certain is binding upon the promisor if the promise is supported
as the seller makes and keeps on hand for sale to anyone, and no by a consideration distinct from the price. (1451a)
change or modification of it is made at purchaser's request, it is a
contract of sale even though it may be entirely made after, and in A “bilateral promise to buy and sell” requires NO CONSIDERATION
consequence of the purchaser's order for it. distinct from the selling price. Only the “accepted unilateral promise to
buy or sell” that needs consideration distinct from the selling price
Engineering is a contractor rather than a manufacturer. Supply of air
conditioning units to Engineer's various customers, whether the said If bilateral
machineries were in hand or not, was especially made for each customer A bilateral promise to buy or to sell a certain thing for a price certain
and installed in his building upon his special order. The air conditioning gives to the contracting parties personal rights in that each has the right
units installed in a central type of air conditioning system would not have to demand from the other the fulfillment of the obligation.
existed but for the order of the party desiring to acquire it and if it
existed without the special order of Engineering's customer, the said air If unilateral
conditioning units were not intended for sale to the general public. The acceptance of a unilateral promise to sell must be plain, clear and
Moreover, it advertises itself as a contractor and pays the contractor's unconditional. Therefore, if there is qualified acceptance with terms
tax for design and construction of central type air conditioning systems, different from the offer there is no acceptance, that there is no promise
and does not have ready-made air-conditioning units for sale, but must to buy and there is no perfected sale.
design and construct each unit to meet the particular requirements of
its customers, said taxpayer is considered a contractor rather than a OPTION DEFINED
manufacturer for purposes of the Tax Code. Thus, such taxpayer is not Eulogio vs. Apeles, G.R. No. 167884, January 20, 2009
a manufacturer subject to the 30% advance sales tax prescribed in Contract of Lease with an Option
Section 185 (m) in relation to Section 194 of the Tax Code but is a An option is a contract by which the owner of the property agrees with
contractor subject to the 3% tax imposed by Section 191 of the same another person that the latter shall have the right to buy the former’s
Code. property at a fixed price within a certain time. It is a condition offered
or contract by which the owner stipulates with another that the latter
A taxpayer is required by law to truly declare his importation in the shall have the right to buy the property at a fixed price within a certain
import entries and internal revenue declarations before it is released. time, or under, or in compliance with certain terms and conditions; or
Thus, by requiring its foreign supplier to change the nomenclature of air which gives to the owner of the property the right to sell or demand a
conditioning parts and accessories, and misdeclaring its importation so sale.
as to make them subject to the lower rate of 7% percentage tax under
Section 186 of the Tax Code, thereby evading the payment of the 30% An option is not of itself a purchase, but merely secures the privilege to
tax under Section 185(m) thereof, said taxpayer is subject to the buy. It is not a sale of property but a sale of the right to purchase. It is
payment of the 50% fraud surcharge prescribed by Section 183(a). simply a contract by which the owner of the property agrees with
another person that he shall have the right to buy his property at a fixed
price within a certain time. He does not sell his land; he does not then
SALE VS BARTER agree to sell it; but he does sell something, i.e., the right or privilege to
buy at the election or option of the other party. Its distinguishing
characteristic is that it imposes no binding obligation on the person
Art. 1468. If the consideration of the contract consists partly in money, holding the option, aside from the consideration for the offer.
and partly in another thing, the transaction shall be characterized by the
manifest intention of the parties. If such intention does not clearly "An accepted unilateral promise" can only have a binding effect if
appear, it shall be considered a barter if the value of the thing given as supported by a consideration, which means that the option can still be
a part of the consideration exceeds the amount of the money or its withdrawn, even if accepted, if the same is not supported by any
equivalent; otherwise, it is a sale. consideration.
REMEDY OF OPTIONEE
SALE VS DATION IN PAYMENT
1. Specific performance.
Dation in payment implies that there is an existing obligation whereas
contract of sale, there is no prior obligation. 2. Right of First Refusal
a. Right on the part of the owner that if he decides to
sell the property in the future, he would first
SALE VS LEASE OF THINGS
negotiate its sale to the one he promised.
The delivery in the contract of lease of things does not involve a transfer
of ownership.

Ang Yu Asuncion vs. CA

On July 29, 1987 a Second Amended Complaint for Specific Performance CONTRACT OF SALE: ABSOLUTE OR CONDITIONAL
was filed by Ann Yu Asuncion and Keh Tiong, et al., against Bobby Cu
Unjieng, Rose Cu Unjieng and Jose Tan before the Regional Trial Court,
Branch 31, Manila in Civil Case No. 87-41058, alleging, among others, A contract of sale may be absolute or conditional. A conditional
that plaintiffs are tenants or lessees of residential and commercial contract of sale in turn may be an executed contract or
spaces owned by defendants described as Nos. 630-638 Ongpin Street, executory contract.
Binondo, Manila; that they have occupied said spaces since 1935 and
have been religiously paying the rental and complying with all the
ABSOLUTE
conditions of the lease contract; that on several occasions before
October 9, 1986, defendants informed plaintiffs that they are offering to
sell the premises and are giving them priority to acquire the same; that Ramos vs. Heruela, G.R. No. 145330, Oct. 14, 2005
during the negotiations, Bobby Cu Unjieng offered a price of P6-million ABSOLUTE CONDITIONAL SALE
while plaintiffs made a counter offer of P5-million; that plaintiffs
thereafter asked the defendants to put their offer in writing to which When title to the property passes Ownership remains with the
request defendants acceded; that in reply to defendant's letter, plaintiffs to the vendee upon delivery of vendor and does not pass to the
wrote them on October 24, 1986 asking that they specify the terms and the thing sold vendee until full payment of the
conditions of the offer to sell; that when plaintiffs did not receive any purchase price.
reply, they sent another letter dated January 28, 1987 with the same
request; that since defendants failed to specify the terms and conditions When there is no stipulation in The full payment of the purchase
of the offer to sell and because of information received that defendants the contract that title to the price partakes of a suspensive
were about to sell the property, plaintiffs were compelled to file the property remains with the seller condition, and non-fulfillment of
complaint to compel defendants to sell the property to them. until full payment of the the condition prevents the
purchase price obligation to sell from arising.
"After the issues were joined, defendants filed a motion for summary
judgment which was granted by the lower court. The trial court found If there is no stipulation giving
that defendants' offer to sell was never accepted by the plaintiffs for the the vendor the right to cancel
reason that the parties did not agree upon the terms and conditions of unilaterally the contract the
the proposed sale, hence, there was no contract of sale at all. moment the vendee fails to pay
Nonetheless, the lower court ruled that should the defendants within a fixed period
subsequently offer their property for sale at a price of P11-million or
below, plaintiffs will have the right of first refusal.
Heirs of Mascunana vs. CA, G.R. No. 158646, June 23, 2005
Issue: It is settled that a perfected contract of sale cannot be challenged on
Whether there was perfected contract of sale. the ground of the non-transfer of ownership of the property sold at that
time of the perfection of the contract, since it is consummated upon
Held: In the law on sales, the so-called "right of first refusal" is an delivery of the property to the vendee. It is through tradition or delivery
innovative juridical relation. Needless to point out, it cannot be deemed that the buyer acquires ownership of the property sold. As provided in
a perfected contract of sale under Article 1458 of the Civil Code. Neither Article 1478 of the New Civil Code, when the sale is made through a
can the right of first refusal, understood in its normal concept, per sebe public instrument, the execution thereof is equivalent to the delivery of
brought within the purview of an option under the second paragraph of the thing which is the object of the contract, unless the contrary appears
Article 1479, aforequoted, or possibly of an offer under Article 1319 9 of or can be inferred. The record of the sale with the Register of Deeds
the same Code. An option or an offer would require, among other things, and the issuance of the certificate of title in the name of the buyer over
10 a clear certainty on both the object and the cause or consideration the property merely bind third parties to the sale. As between the seller
of the envisioned contract. In a right of first refusal, while the object and the buyer, the transfer of ownership takes effect upon the execution
might be made determinate, the exercise of the right, however, would of a public instrument covering the real property. Long before the
be dependent not only on the grantor's eventual intention to enter into petitioners secured a Torrens title over the property, the respondents
a binding juridical relation with another but also on terms, including the had been in actual possession of the property and had designated Barte
price, that obviously are yet to be later firmed up. Prior thereto, it can as their overseer.
at best be so described as merely belonging to a class of preparatory
juridical relations governed not by contracts (since the essential Although denominated a “Deed of Conditional Sale,” a sale is still
elements to establish the vinculum juris would still be indefinite and absolute where the contract is devoid of any proviso that title is reserved
inconclusive) but by, among other laws of general application, the or the right to unilaterally rescind is stipulated, e.g., until or unless the
pertinent scattered provisions of the Civil Code on human conduct. price is paid. Ownership will then be transferred to the buyer upon
actual or constructive delivery (e.g. by the execution of a public
Even on the premise that such right of first refusal has been decreed document) of the property sold. Where the condition is imposed upon
under a final judgment, like here, its breach cannot justify the perfection of the contract itself, the failure of the condition would
correspondingly an issuance of a writ of execution under a judgment prevent such perfection. If the condition is imposed on the obligation
that merely recognizes its existence, nor would it sanction an action for of a party which is not fulfilled, the other party may either waive the
specific performance without thereby negating the indispensable condition or refuse to proceed with the sale. (Art. 1545, Civil Code)
element of consensuality in the perfection of contracts. 11 It is not to
say, however, that the right of first refusal would be inconsequential for, A deed of sale is considered absolute in nature where there is neither a
such as already intimated above, an unjustified disregard thereof, given, stipulation in the deed that title to the property sold is reserved in the
for instance, the circumstances expressed in Article 19 12 of the Civil seller until full payment of the price, nor one giving the vendor the right
Code, can warrant a recovery for damages. to unilaterally resolve the contract the moment the buyer fails to pay
within a fixed period.
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 the price.

Interpretation of document denominated “Agreement of

CONDITIONAL SALE Purchase and Sale”
Ong vs. CA, G.R. No. 97347, July6, 1999
It is in the nature of a contract to sell.
Conditional, which may in turn be—
1. An executed contract In a contract of sale, the title to the property passes to the vendee upon
Which property (ownership) in the thing is transferred from seller the delivery of the thing sold; while in a contract to sell, ownership is,
to buyer, and nonpayment of the price is a negative resolutory by agreement, reserved in the vendor and is not to pass to the vendee
condition. until full payment of the purchase price. In a contract to sell, the
payment of the purchase price is a positive suspensive condition, the
2. An executory contract failure of which is not a breach, casual or serious, but a situation that
Ownership does not pass until some future time. The fulfillment of prevents the obligation of the vendor to convey title from acquiring an
some condition, such as full payment of the purchase price. obligatory force.
DISTINCTIONS Spouses Robles, respondents in the case at bar bound themselves to

EXECUTED CONTRACT EXECUTORY CONTRACT deliver a deed of absolute sale and clean title covering the two parcels
of land upon full payment by the buyer of the purchase price of
Property ownership is conveyed No property is conveyed P2,000,000.00. This promise to sell was subject to the fulfillment of the
suspensive condition of full payment of the purchase price by the
If buyer defaults, seller may sue If buyer defaults, seller is only petitioner. Petitioner, however, failed to complete payment of the
for the price entitled to damages purchase price. The non-fulfillment of the condition of full payment
rendered the contract to sell ineffective and without force and effect. It
Risk of loss is generally borne by Risk of loss is generally borne by must be stressed that the breach contemplated in Article 1191 of the
the buyer the seller New Civil Code is the obligor's failure to comply with an obligation.
Failure to pay, in this instance, is not even a breach but merely an event
which prevents the vendor's obligation to convey title from acquiring
TRANSFER OF OWNERSHIP binding force. Hence, the agreement of the parties in the case at bench
1. Absolute – upon delivery may be set aside, but not because of a breach on the part of petitioner
2. Conditional – ownership is reserved by the owner. for failure to complete payment of the purchase price. Rather, his failure
to do so brought about a situation which prevented the obligation of
respondent spouses to convey title from acquiring an obligatory force.
CONTRACT TO SELL VS CONTRACT OF SALE
Interpretation of document denominated “Receipt of Partial
CONTRACT TO SELL CONTRACT OF SALE Payment”
Coronel vs. CA, G.R. No. 103577, Oct. 7, 1996
The payment in full of the price The non-payment of the price is Defendants Coronels issued a document, receipt of down payment, in
is a positive suspensive a RESOLUTORY condition, i.e. favor of Ramona. In the said document, it was stipulated that the
condition. Hence, if the price is the contract of sale may by such Coronels, upon receipt of the down payment in the amount of 50k
not paid, it is as if the obligation occurrence put an end to a (1.24M total price) for their inherited house and lot, bind themselves to
of the seller to deliver and to transaction that once upon a the effect that they will transfer, from their father, the transfer certificate
transfer ownership never time existed title to their names. After the TCT is under their name, they will execute
became effective and binding. immediately a deed of absolute sale in favor of Ramona and she will pay
the balance of 1.19M. The mother of Ramona, Concepcion, paid the 50k
Ownership is retained by the Title over the property generally as down payment. Thereafter, the Coronels transferred the said property
seller, regardless of delivery and passes to the buyer upon in their names.
is not pass until fill payment of delivery
Coronels sold the property to Catalina for the amount of 1.58M after the
the price
latter paid a down payment of 300k. For this reason, Coronels canceled
and rescinded the contract with Ramona by depositing the down
Since the seller retains After delivery has been made,
payment paid by Concepcion in the bank in trust for Ramona Patricia
ownership, despite delivery, he the seller has lost ownership and
Alcaraz.
is enforcing not rescinding the cannot recover it unless the
contract if he seeks to oust the contract is resolved or rescinded
Concepcion et al. filed a case against specific performance. A notice of
buyer for failure to pay.
lis pendens was annotated at the back of the title. An adverse claim by
Catalina was also annotated. The Coronels executed a deed of absolute
sale in favor of Catalina. Thus, a new title was issued in the name of
CONTRACT TO SELL
Catalina.
A bilateral contract whereby the prospective seller, while expressly
reserving the ownership of the subject property despite delivery thereof
Both trial court and CA ruled in favor of Concepcion. It ordered the
to the prospective buyer, binds himself to sell the said property
specific performance of the agreement.
exclusively to the prospective buyer upon payment of full purchase price.
ISSUE: legal determination of the document, Receipt of Downpayment
CONTRACT OF SALE
No reservation of ownership where the owner can unilaterally rescind
SC RULED that when the "Receipt of Down Payment" is considered in
the contract if one of the parties fails to fulfill its duty.
its entirety, it becomes more manifest that there was a clear intent on
the part of petitioners to transfer title to the buyer, but since the transfer
certificate of title was still in the name of petitioner's father, they could
not fully effect 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 CA.

In a contract of sale, the title passes to the vendee upon the delivery of Thereafter, respondents took possession of the subject property. They
the thing sold; whereas in a contract to sell, ownership is not transferred constructed an 80 by 32-feet building and a steel-matting fence around
upon delivery of the property but upon full payment of the purchase the property to house their truck body-building shop which they called
price. In the former, the vendor has lost and cannot recover ownership the "Emiliano Trucking Body Builder and Auto Repair Shop."
until and unless the contract is resolved or rescinded; whereas in the
latter, title is retained by the vendor until the full payment of the price, On December 24, 1977, before the payment of the balance of the
such payment being a positive suspensive condition and failure of which mortgage amount with PNB, Bate Nabus died. On August 17, 1978, his
is not a breach but an event that prevents the obligation of the vendor surviving spouse, Julie Nabus, and their minor daughter, Michelle Nabus,
to convey title from becoming effective. executed a Deed of Extra Judicial Settlement over the registered land
covered by TCT No. 9697. On the basis of the said document, TCT No.
T-17718 8 was issued on February 17, 1984 in the names of Julie Nabus
and Michelle Nabus.
CONTRACT TO SELL VS CONDITIONAL SALE
During the last week of January 1984, Julie Nabus, accompanied by her
CONDITIONAL SALE second husband, approached Joaquin Pacson to ask for the full payment
Upon happening of the condition, title is transferred. Seller cannot sell of the lot. Joaquin Pacson agreed to pay, but told her to return after
to another person. Ownership is transferred upon creation of necessary four days as his daughter, Catalina Pacson, would have to go over the
documents. numerous receipts to determine the balance to be paid. When Julie
Nabus returned after four days, Joaquin sent her and his daughter,
Coronel vs CA Catalina, to Atty. Elizabeth Rillera for the execution of the deed of
A contract to sell as defined hereinabove, may not even be considered absolute sale. Since Julie was a widow with a minor daughter, Atty.
as a conditional contract of sale where the seller may likewise reserve Rillera required Julie Nabus to return in four days with the necessary
title to the property subject of the sale until the fulfillment of a documents, such as the deed of extrajudicial settlement, the transfer
suspensive condition, because in a conditional contract of sale, the first certificate of title in the names of Julie Nabus and minor Michelle Nabus,
element of consent is present, although it is conditioned upon the and the guardianship papers of Michelle. However, Julie Nabus did not
happening of a contingent event which may or may not occur. If the return.
suspensive condition is not fulfilled, the perfection of the contract of sale
is completely abated (cf. Homesite and Housing Corp. vs. Court of Getting suspicious, Catalina Pacson went to the Register of Deeds of the
Appeals, 133 SCRA 777 [1984]). However, if the suspensive condition is Province of Benguet and asked for a copy of the title of the land. She
fulfilled, the contract of sale is thereby perfected, such that if there had found that it was still in the name of Julie and Michelle Nabus
already been previous delivery of the property subject of the sale to the
buyer, ownership thereto automatically transfers to the buyer by After a week, Catalina Pacson heard a rumor that the lot was already
operation of law without any further act having to be performed by the sold to petitioner Betty Tolero. Catalina Pacson and Atty. Rillera went to
seller. the Register of Deeds of the Province of Benguet, and found that Julie
Nabus and her minor daughter, Michelle Nabus, represented by the
Nabus vs. Pacson former's mother as appointed guardian by a court order dated October
The spouses Bate and Julie Nabus were the owners of parcels of land 29, 1982, had executed a Deed of Absolute Sale in favor of Betty Tolero
with a total area of 1,665 square meters, situated in Pico, La Trinidad, on March 5, 1984.
Benguet, duly registered in their names under TCT No. T-9697 of the
Register of Deeds of the Province of Benguet. The property was Issue: Whether the Deed of Conditional Sale was a contract to sell or a
mortgaged by the Spouses Nabus to the Philippine National Bank (PNB), contract of sale.
La Trinidad Branch, to secure a loan in the amount of P30,000.00.
Held: A contract to sell as defined hereinabove, may not even be
On February 19, 1977, the Spouses Nabus executed a Deed of considered as a conditional contract of sale where the seller may likewise
Conditional Sale 4 covering 1,000 square meters of the 1,665 square reserve title to the property subject of the sale until the fulfillment of a
meters of land in favor of respondents Spouses Pacson for a suspensive condition, because in a conditional contract of sale, the first
consideration of P170,000.00, which was duly notarized on February 21, element of consent is present, although it is conditioned upon the
1977. Their contract had the following condition: happening of a contingent event which may or may not occur. If the
suspensive condition is not fulfilled, the perfection of the contract of sale
THAT, as soon as the full consideration of this sale has been paid by the is completely abated. However, if the suspensive condition is fulfilled,
VENDEE, the corresponding transfer documents shall be executed by the the contract of sale is thereby perfected, such that if there had already
VENDOR to the VENDEE for the portion sold; been previous delivery of the property subject of the sale to the buyer,
ownership thereto automatically transfers to the buyer by operation of
THAT, it is mutually understood that in as much as there is a claim by law without any further act having to be performed by the seller.
other 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 In a contract to sell, upon the fulfillment of the suspensive condition,
case now pending before Branch III of the Court of First Instance of which is the full payment of the purchase price, ownership will not
Baguio and Benguet, should the VENDOR herein be defeated in the said automatically transfer to the buyer although the property may have been
civil action to the end that he is divested of title over the area subject of previously delivered to him. The prospective seller still has to convey
this Instrument, then he hereby warrants that he shall return any and title to the prospective buyer by entering into a contract of absolute sale.
all monies paid by the VENDEE herein whether paid to the PNB, La It is not the title of the contract, but its express terms or stipulations
Trinidad, Benguet Branch, or directly received by herein VENDOR, all that determine the kind of contract entered into by the parties. In this
such monies to be returned upon demand by the VENDEE; case, the contract entitled "Deed of Conditional Sale" is actually a
contract to sell. The contract stipulated that "as soon as the full
THAT, [a] portion of the parcel of land subject of this instrument is consideration of the sale has been paid by the vendee, the
presently in the possession of Mr. Marcos Tacloy, and the VENDOR corresponding transfer documents shall be executed by the vendor to
agrees to cooperate and assist in any manner possible in the ouster of the vendee for the portion sold." 41 Where the vendor promises to
said Mr. Marcos Tacloy from said possession and occupation to the end execute a deed of absolute sale upon the completion by the vendee of
that the VENDEE herein shall make use of said portion as soon as is the payment of the price, the contract is only a contract to sell." The
practicable;

aforecited stipulation shows that the vendors reserved title to the

subject property until full payment of the purchase price. Five-year prohibition against alienation or encumbrances under the
Public Land Act. Eduardo was issued a title in 1976 on the basis of his
As vendees given possession of the subject property, the ownership of free patent application. Such application implies the recognition of the
which was still with the vendors, the Pacsons should have protected public dominion character of the land and, hence, the 5-year prohibition
their interest and inquired from Julie Nabus why she did not return and imposed by the PLA against alienation or encumbrance of the land
then followed through with full payment of the purchase price and the covered by a free patent or homestead should have been considered.
execution of the deed of absolute sale. The Spouses Pacson had the
legal remedy of consigning their payment to the court; however, they The deed of sale which was executed in 1981 is obviously covered by
did not do so. A rumor that the property had been sold to Betty Tolero the proscription, the free patent having been issued in 1976. However,
prompted them to check the veracity of the sale with the Register of petitioners may recover the portion sold since the prohibition was
Deeds of the Province of Benguet. They found out that on March 5, imposed in favor of the free patent holder.
1984, Julie Nabus sold the same property to Betty Tolero through a Deed
of Absolute Sale, and new transfer certificates of title to the property The sale executed 1954 was before the issuance of the patent in 1976.
were issued to Tolero. Apparently, Eduardo disposed of the portion even before he thought of
applying for a free patent. Where the sale or transfer took place before
Unfortunately for the Spouses Pacson, since the Deed of Conditional Sale the filing of the free patent application, whether by the vendor or the
executed in their favor was merely a contract to sell, the obligation of vendee, the prohibition should not be applied. In such a situation,
the seller to sell becomes demandable only upon the happening of the neither the prohibition nor the rationale therefore which is to keep in the
suspensive condition. 43 The full payment of the purchase price is the family of the patentee that portion of the public land which the
positive suspensive condition, the failure of which is not a breach of government has gratuitously given him, by shielding him from the
contract, but simply an event that prevented the obligation of the vendor temptation to dispose of his landholding, could be relevant. Precisely,
to convey title from acquiring binding force. 44 Thus, for its non- he had disposed of his rights to the lot even before the government
fulfilment, there is no contract to speak of, the obligor having failed to could give the title to him.
perform the suspensive condition which enforces a juridical relation. 45
With this circumstance, there can be no rescission or fulfilment of an The mortgage executed in favor of RBSP is also beyond the pale of the
obligation that is still non-existent, the suspensive condition not having prohibition, as it was forged in December 1981 a few months past the
occurred as yet. period of prohibition.
OBJECT DETERMINATE/ DETERMINABLE
Read: Articles 1459-1465. Undivided interest can be subject to sale. The buyer will become a co-
owner.
Licit – not contrary to law, morals, good customs, public order or public a. before partition
policy, within the commerce of man; if illicit, contract is void b. in a mass of fungible goods.
All rights which are not intransmissible or personal may also be the Sale by co-heir of undivided portion of estate
object of sale (i.e. right of usufruct) Vagilidad v. Vagilidad
A 4,280-sqm lot was owned by Zoilo. In 1931, ZOILO died. Subsequently
Services cannot be the object of a contract of sale son of Zolio, Loreto sold to Gabino Vagilidad a portion of said lot as
evidenced by the Deed of Absolute Sale executed by Loreto on 1986.
TEST OF DETERMINABILITY After, Zoilo’s children executed an Extrajudicial Settlement of Estate
a. Capacity to Segregate adjudicating the entire lot to Loreto in 1987. Gabino filed petition of
b. No further agreement surrender of lot against Loreto, claiming that he is owner pursuant to
deed of Sale issued before the extra judicial settlement.
QUALITIES
However, there seemed to be an amicable settlement between them,
and the case was sent to archives.
LAWFUL
Gabino paid real estate taxes on the land he bought from Loreto which
Art. 1459. The thing must be licit and the vendor must have a right to he later sold to Wilfredo Vagilidad. Likewise, a Deed of Absolute Sale
transfer the ownership thereof at the time it is delivered. (n) was also 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
Object must be licit. Vendor must have the right to transfer ownership filed petition for reconveyance.
at the time the object is delivered
The requisite that a thing be determinate is satisfied if at the time the
Unlawful object: contract is entered into, the thing is capable of being made determinate
i. Future inheritance without the necessity of a new or further agreement between the
ii. Homestead (sale within 5-year prohibitory period) parties. Art. 1349 states that the object of every contract must be
determinate, as to its kind. The fact that the quantity is not determinate
Manalapat v. CA shall not be an obstacle to the existence of the contract, provided it is
In 1976, a free patent was issued in Manlapat’s name. In 1954, before possible to determine the same, without the need of a new contract
the subject lot was titled, he sold a portion to Ricardo evidenced by a between the parties. Art. 1460 defines that a thing is determinate when
deed of sale. He conveyed another portion to Ricardo in 1981. Leon it is particularly designated or physically segregated from all others of
Banaag (son-in-law of Manlapat) executed a mortgaged with the subject the same class. The property sold by Loreto to Gabino was determinable.
lot as the collateral. Heirs of Ricardo sought to obtain the title from
petitioners which was in the custody of RBSP, earlier surrendered as a A co-owner has full ownership of his pro-indiviso share and has the right
consequence of the mortgage. to alienate, assign or mortgage it, and substitute another person for its

enjoyment. The subject parcel, being an inherited property, is subject

to the rules of co-ownership under the Civil Code. Co-ownership is the EXISTING, FUTURE OR CONTINGENT
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 property held in common, no individual or co-owner can claim title Sale of Future Inheritance
to any definite portion thereof. All that the co-owner has is an ideal or Tanedo vs CA
abstract quota or proportionate share in the entire property. LORETO On October 20, 1962, Lazaro Tañedo executed a notarized deed of
sold the subject property to GABINO as a co-owner. LORETO had a right, absolute sale in favor of his eldest brother, Ricardo Tañedo, and the
even before the partition to transfer in whole or in part his undivided latter’s wife, Teresita Barera, private respondents herein, whereby he
interest in the lot even without the consent of his co-heirs. This right is conveyed to the latter in consideration of P1,500.00, “one hectare of
absolute. Thus, what GABINO obtained by virtue of the sale on were the whatever share I shall have over Lot No. 191 of the cadastral survey of
same rights as the vendor LORETO had as co-owner, in an ideal share Gerona, Province of Tarlac and covered by Title T-l3829 of the Register
equivalent to the consideration given under their transaction. of Deeds of Tarlac,” the said property being his “future inheritance” from
Consequently, when LORETO purportedly sold to WILFREDO the same his parents (Exh. 1). Upon the death of his father Matias, Lazaro
portion of the lot, he was no longer the owner said lot. Based on the executed an “Affidavit of Conformity” dated February 28, 1980 (Exh. 3)
principle that "no one can give what he does not have," LORETO could to “re-affirm, respect. acknowledge and validate the sale I made in
not have validly sold to WILFREDO what he no longer had. 1962.” On January 13, 1981, Lazaro executed another notarized deed
of sale in favor of private respondents covering his “undivided ONE
Effect of agreement where the exact number of palay to be sold TWELVE (1/12) of a parcel of land known as Lot 191 x x (Exh. 4). He
was not fixed. acknowledged therein his receipt of P 10,000.00 as consideration
National Grains Authority v. IAC therefor. In February 1981, Ricardo learned that Lazaro sold the same
Leon Soriano submitted the documents required by the NFA for pre- property to his children, petitioners herein, through a deed of sale dated
qualifying as a seller. These were processed and he was given a quota December 29, 1980 (Exh. E). On June 7, 1982, private respondents
of 2,640 cavans of palay. On August 1979, Soriano delivered 630 cavans recorded the Deed of Sale (Exh. 4) in their favor in the Registry of Deeds
of palay. The palay delivered were not rebagged, classified and weighed. and the corresponding entry was made in Transfer Certificate of Title
When Soriano demanded payment, he was informed that it was held in No. 166451 (Exh. 5).
abeyance since Mr. Cabal was still investigating on an information that
Soriano was not a bona fide farmer and the palay delivered was not Petitioners on July 16, 1982 filed a complaint for rescission (plus
produced from his farmland but was taken from the warehouse of a rice damages) of the deeds of sale executed by Lazaro in favor of private
trader, Ben de Guzman. Petitioner wrote Soriano advising him to respondents covering the property inherited by Lazaro from his father.
withdraw the 630 cavans. Instead of withdrawing, Soriano insisted that
the palay grains delivered be paid. NFA was ordered to pay Soriano. Issue: Is a sale of future inheritance valid?
Present case involves a perfected contract of sale. Soriano initially Held: “No contract may be entered into upon a future inheritance
offered to sell palay grains produced in his farmland to NFA. When the except in cases expressly authorized by law.”
latter accepted the offer by noting in Soriano’s Farmer’s Information
Sheet a quota of 2,640 cavans, there was already a meeting of the minds Consequently, said contract made in 1962 is not valid and cannot be the
between the parties. The object of the contract, being the palay grains source of any right nor the creator of any obligation between the parties.
produced in Soriano’s farmland and the NFA was to pay the same Hence, the “affidavit of conformity” dated February 28, 1980, insofar as
depending upon its quality. The contention that – since the delivery were it sought to validate or ratify the 1962 sale, is also useless and, in the
not rebagged, classified and weighed in accordance with the palay words of the respondent Court, “suffers from the same infirmity.” Even
procurement program of NFA, there was no acceptance of the offer thus private respondents in their memorandum concede this.
– this is a clear case of an unaccepted offer to sell, is untenable.
Quantity being indeterminate does not affect perfection of contract; No TRANSFERABILITY OF OWNERSHIP
need to create new contract. The fact that the exact number of cavans
of palay to be delivered has not been determined does not affect the
perfection of the contract. In the present case, there was no need for Ownership
NFA and Soriano to enter into a new contract to determine the exact 1. It need not exist at the perfection of the contract. Required at
number of cavans of palay to be sold. Soriano can deliver so much of the time of delivery
his produce as long as it does not exceed 2,640 cavans. (It did not need 2. Subsequent acquisition of title by a vendor w/out title
a new contract to make 630 cavans a determinate thing). validates the sale
3. Acquisition of title by the vendee may depend upon a
Sale a consensual contract; Acceptance is on the offer and not the goods contingency (right of redemption)
delivered. Sale is a consensual contract, “there is perfection when there
is consent upon the subject matter and price, even if neither is The seller must have the right to transfer the ownership of the thing or
delivered.” (Obana vs. C.A., L-36249, March 29, 1985, 135 SCRA 557, right sold to the buyer at the time of delivery and not at the time of the
560). The acceptance referred to which determines consent is the making of the contract.
acceptance of the offer of one party by the other and not of the goods
delivered. Nemo dat quod non habet, as an ancient Latin maxim says. One cannot
give what does not have.
Compliance of mutual obligations once a contract of sale is perfected.
From the moment the contract of sale is perfected, it is incumbent upon Note: When ownership is required – At the time of sale but ownership
the parties to comply with their mutual obligations or “the parties may may not be with the seller in case of future things.
reciprocally demand performance” thereof. (Article 1475, Civil Code, 2nd
par.) Sale by mortgagee of land not proper subject of mortgage
Cavite Development Bank v. Lim, 324 SCRA 346
Rodolfo Guansing obtained a fraudulent title by executing an Extra-
Judicial Settlement of the Estate With Waiver where he made it appear
that he and Perfecto Guansing were the only surviving heirs entitled to

the property, and that Perfecto had waived all his rights thereto. there was no pending other application yet. That at the time he applied
Consequently he acquired title and used this to acquire a loan. CDB for title, he was recognized as the actual applicant / occupant.
foreclosed the mortgage and granted him the period of redemption,
which he did not exercise. Heirs of Arturo Reyes v. Beltran G.R. No. 176474
Facts: A big parcel of lot was originally owned by Spouses Laquian.
It is not required that, at the perfection stage, the seller be the owner When the Spouses died, the property was left with the wife’s siblings.
of the thing sold or even that such subject matter of the sale exists at Through an "Extrajudicial Settlement of the Estate of the Deceased
that point in time. Thus, under Art. 1434 of the Civil Code, when a person Constancia R. Socco (wife)," the parcel of land was partitioned into 3
sells or alienates a thing which, at that time, was not his, but later lots. Before the partition, Miguel Socco, 1 of the heirs sold his share to
acquires title thereto, such title passes by operation of law to the buyer Arturo Reyes as evidenced by the Contract to Sell stating that he is to
or grantee. This is the same principle behind the sale of "future goods" inherit a particular portion. But upon partition, the said portion sold was
under Art. 1462 of the Civil Code. However, under Art. 1459, at the time adjudicated to respondent, Elena Socco – Beltran, and not to Miguel
of delivery or consummation stage of the sale, it is required that the Socco.
seller be the owner of the thing sold. Otherwise, he will not be able to
comply with his obligation to transfer ownership to the buyer. It is the SC: Article 1459 of the Civil Code on contracts of sale, “The thing must
consummation stage where the principle of nemo dat quod non habet be licit and the vendor must have a right to transfer ownership thereof
applies. In this case, the sale by CDB to Lim of the property mortgaged at the time it is delivered.” The law specifically requires that the vendor
in 1983 by Rodolgo Guansing must, therefore, be deemed a nullity for must have ownership of the property at the time it is delivered.
CDB did not have a valid title to the said property. To be sure, CDB never Petitioners claim that the property was constructively delivered to them
acquired a valid title to the property because the foreclosure sale, by in 1954 by virtue of the Contract to Sell. However, as already pointed
virtue of which the property had awarded to CDB as highest bidder, is out by this Court, it was explicit in the Contract itself that, at the time it
likewise void since the mortgagor was not the owner of the property was executed, Miguel R. Socco was not yet the owner of the property
foreclosed. and was only expecting to inherit it. Hence, there was no valid sale from
which ownership of the subject property could have transferred from
CDB cannot be considered a mortgagee in good faith. While petitioners Miguel Socco to Arturo Reyes. Without acquiring ownership of the
are not expected to conduct an exhaustive investigation on the history subject property, Arturo Reyes also could not have conveyed the same
of the mortgagor's title, CDB cannot be excused from the duty of to his heirs, herein petitioners.
exercising the due diligence required of banking institutions in
ascertaining the validity of the title. The law specifically requires that the vendor must have ownership of the
property at the time it is delivered. Petitioners cannot derive title to the
That after the payment of the 10% “option money”, the Offer to subject property by virtue of the Contract to Sell. It was stated in the
Purchase provides for the payment only of the balance of the purchase Contract that the vendor was not yet the owner of the subject property
price, implying that the "option money" forms part of the purchase price. and was merely expecting to inherit the same. It was also declared that
This is precisely the result of paying earnest money under Art. 1482 of conveyance of the subject to the buyer was a conditional sale. It is,
the Civil Code. It is clear then that the parties in this case actually therefore, apparent that the sale of the subject property in favor of
entered into a contract of sale, partially consummated as to the payment Arturo Reyes was conditioned upon the event that Miguel Socco would
of the price. actually inherit and become the owner of the said property. Absent such
occurrence, Miguel R. Socco never acquired ownership of the subject
Conveyance of privilege to purchase land before it is awarded property which he could validly transfer to Arturo Reyes. Without
to the tenant or occupant. acquiring ownership of the subject property, Arturo Reyes also could not
Hermosilla v. Remoquillo have conveyed the same to his heirs, herein petitioners. -assignment
Facts: Apolinario Hermosilla was occupying a lot in San Pedro Tunasan was done prior to the application.
Homesite, a land of the Republic. He divided the lot into 2. The 1st
portion was given to his son Salvador and the other(questioned lot) to
his grandson Jaime Remoquillo through a Deed of Assignment. A law PRICE
was passed prohibiting the transfer of ownership of the said lot. Salvador
and Jaime after made a Kasunduan ng Paglipat Ng Karapatan sa Isang
Lagay na Lupang Solar (Kasunduan) whereby Jaime transferred Read: Articles 1469-1474
ownership of the 65 square meters (the questioned property) in favor of
Salvador. NHA awarded Jaime title. Salvador and his heirs questioned Price – sum certain in money or its equivalent.
the title stating they have their house and in actual possession of the
questioned lot. General principles in the agreement as to price
Boston Bank of the Philippines v. Manalo, G. R. No. 158149,
When the Kasunduan was executed in 1972 by Jaime in favor of February 9, 2006
Salvador — petitioners' predecessor-in-interest — Lot 19, of which the Boston Bank, now petitioner, filed the instant petition for review on
questioned property forms part, was still owned by the Republic. Nemo certiorari assailing the CA rulings. It maintains that, as held by the CA,
dat quod non habet. Nobody can give what he does not possess. Jaime the records do not reflect any schedule of payment of the 80% balance
could not thus have transferred anything to Salvador via the Kasunduan. of the purchase price, or P278,448.00. Petitioner insists that unless the
parties had agreed on the manner of payment of the principal amount,
The transfer became one in violation of law and therefore void ab initio. including the other terms and conditions of the contract, there would be
Hence, petitioners acquired no right over the lot from a Void Kasunduan, no existing contract of sale or contract to sell.47
for no rights are created. It is generally considered that as between the
parties to a contract, validity cannot be given to it by estoppel if it is Issue: Whether Petitioner, as seller, forged a perfect contract to sell
prohibited by law or is against public policy. over a real property to respondents, as buyer.
Since the property was previously a public land, petitioners have no Held: We agree with petitioner’s contention that, for a perfected
personality to impute violation of the law. If the title was in fact contract of sale or contract to sell to exist in law, there must be an
fraudulently obtained, it is the State which should file the suit to recover agreement of the parties, not only on the price of the property sold, but
the property through the Office of the Solicitor General. Consequently, also on the manner the price is to be paid by the vendee.
Jaime’s ownership was valid not being contrary to any law and since

A definite agreement as to the price is an essential element of a binding truly there was no contract, because the contracting parties did not in
agreement to sell personal or real property because it seriously affects fact intend to execute one, but only to formulate a sale in such a manner
the rights and obligations of the parties. Price is an essential element in that, for the particular purposes sought by Bustos and Cruzado, it would
the formation of a binding and enforceable contract of sale. The fixing appear to have been celebrated solely that Cruzado might hold his office
of the price can never be left to the decision of one of the contracting of procurador on the strength of the security afforded by the value of
parties. But a price fixed by one of the contracting parties, if accepted the land feignedly sold.
by the other, gives rise to a perfected sale.
This action is of course improper, not only because the sale was
It is not enough for the parties to agree on the price of the property. simulated, but also because it was not consummated. The price of the
The parties must also agree on the manner of payment of the price of land was not paid nor did the vendee take possession of the property
the property to give rise to a binding and enforceable contract of sale or from the 7th of September, 1875, when the said sale was feigned, until
contract to sell. This is so because the agreement as to the manner of the time of his death; nor did any of his successors, nor the plaintiff
payment goes into the price, such that a disagreement on the manner himself until the date of his claim, enter into possession of the land.
of payment is tantamount to a failure to agree on the price.
That the contract of purchase and sale, as consensual, is perfected by
In a contract to sell property by installments, it is not enough that the consent as to the price and the thing and is consummated by the
parties agree on the price as well as the amount of downpayment. The reciprocal delivery of the one and the other, the full ownership of the
parties must, likewise, agree on the manner of payment of the balance thing sold being conveyed to the vendee, from which moment the rights
of the purchase price and on the other terms and conditions relative to of action derived from this right may be exercised.
the sale. Even if the buyer makes a downpayment or portion thereof,
such payment cannot be considered as sufficient proof of the perfection It is, then, of the utmost importance to examine whether in the said sale
of any purchase and sale between the parties. the purchase price was paid and whether the vendee took possession of
the land supposed to have been sold.
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 Effect if there is no consideration – null and void (non-existence
balance of the purchase price on the property amounting to of the contract).
P278,448.00. Doles v. Angeles, G. R. No. 149353, June 26, 2006
On April 1, 1997, Ma. Aura Tina Angeles (respondent) filed with the RTC
a complaint for Specific Performance with Damages against Jocelyn B.
REQUISITES Doles (petitioner), docketed as Civil Case No. 97-82716. Respondent
alleged that petitioner was indebted to the former in the concept of a
personal loan amounting to P405,430.00 representing the principal
THE PRICE MUST BE REAL amount and interest; that on October 5, 1996, by virtue of a "Deed of
Absolute Sale", petitioner, as seller, ceded to respondent, as buyer, a
Art. 1471. If the price is simulated, the sale is void, but the act may be parcel of land, as well as the improvements thereon, with an area of 42
shown to have been in reality a donation, or some other act or contract. square meters, covered by Transfer Certificate of Title No. 382532,4 and
located at a subdivision project known as Camella Townhomes Sorrente
Price is real when at the perfection of the sale, there is legal intention in Bacoor, Cavite, in order to satisfy her personal loan with respondent;
on the part of the buyer to pay the price and the legal expectation on that this property was mortgaged to National Home Mortgage Finance
the part of the seller to receive such price as the value of the subject Corporation (NHMFC) to secure petitioner’s loan in the sum of
matter he obligates himself to deliver. P337,050.00 with that entity.
Price is false whenthe contract is valid but subject to reformation to WON: The contract of sale on the parcel of land was executed for a
indicate the real price upon which the minds of the parties have met. cause.
If price is simulated, it produces no effect. HELD: Since the sale is predicated on that loan, then the sale is void for
Cruzado v. Bustos, G. R. No. 10244, February 29, 1916 lack of consideration.
Counsel for the plaintiff Santiago Cruzado filed a written complaint on
October 8, 1910, amended on September 25, 1913, in which he alleged In view of these anomalies, the Court cannot entertain the possibility
that plaintiff was the owner of certain rural property situated in the that respondent agreed to assume the balance of the mortgage loan
barrio of Dolores, formerly San Isidro, of the municipality of Bacolor, which petitioner allegedly owed to the NHMFC, especially since the
Pampanga, containing an area of 65 balitas and bounded as set forth in record is bereft of any factual finding that petitioner was, in the first
the complaint; that Estafania Bustos, during her lifetime, and now the place, endowed with any ownership rights to validly mortgage and
administrator of her estate, together with the other defendant, Manuel convey the property. As the complainant who initiated the case,
Escaler, had, since the year 1906 up to the present, been detaining the respondent bears the burden of proving the basis of her complaint.
said parcel of land, and had refused to deliver the possession thereof to Having failed to discharge such burden, the Court has no choice but to
plaintiff and to recognize his ownership of the same, notwithstanding declare the sale void for lack of cause. And since the sale is void, the
the repeated demands made upon them; that by such detention, the Court finds it unnecessary to dwell on the issue of whether duress or
plaintiff had suffered losses and damages to the amount of P3,500. He intimidation had been foisted upon petitioner upon the execution of the
therefore asked for judgment declaring plaintiff to be the owner of the sale.
said parcel of land and ordering defendants to return it to plaintiff and
to pay the latter P3,500 for losses and damages, and the costs.
IN MONEY OR ITS EQUIVALENT
WON: The deed of sale of 65 balitas of land situated in the
municipality of Bacolor, Pampanga, executed by Estefania Bustos, with
the assistance of her husband Bernardino Dizon, in favor of Agapito Torres vs CA
Geronimo Cruzado, for the sum of P2,200, was simulated. Petitioners and respondent entered into a joint venture agreement for
the development of a parcel land located at Lapu-Lapu City island of
HELD: The simulation of the said sale was effected by making a Mactan into a subdivision. Pursuant to the contract, petitioners executed
pretended contract which bore the appearance of truth, when really and a deed of sale covering the said parcel of land in favor of the respondent,

who then had it registered in his name. Thereafter, respondent Exhibit G was duly executed on May 3, 1910. In accordance with the
mortgaged the property in the bank, and according to the joint terms of this exhibit a committee of appraisers was appointed to
agreement, the money obtained amounting to P40,000.00 was to be ascertain and fix the actual value of La Insular. The committee rendered
used for the development of the subdivision. However, the project did its report on November 14, 1910, fixing the net value at P4,428,194.44.
not push through, and the land was subsequently foreclosed by the Of this amount 4/173 part represented the plaintiffs’s share on his
bank. Because of this, petitioners filed a civil case before the Regional P20,000 of the nominal capital. In Exhibit J which was executed on
Trial Court of Cebu City, which was later dismissed by the trial court. On November 22, 1910, the plaintiff acknowledged to have received from
appeal, the Court of Appeals affirmed the decision of the trial court. The the defendant that amount.
appellate court held that the petitioner and respondent had formed a
partnership for the development of the subdivision. Thus, they must Subsequently to the execution of Exhibit J, demand was made by the
bear the loss suffered by the partnership in the same proportion as their plaintiff upon the defendant for his share of the profits from June 30,
share in the profits stipulated in the contract. Aggrieved by the decision, 1909, to November 22, 1910. This demand was refused and thereupon
petitioner filed the instant petition contending that the Court of Appeals this action was instituted to recover said profits. Upon the evidence
erred in concluding that the transaction between the petitioners and submitted at the hearing, the court below held: (1) That the agreement
respondent was that of a joint venture/partnership. of May 3, 1910, was by its terms a contract to sell in the future and did
not pass title and (2) that the sale of plaintiff’s interest did not include
SC: The Joint Venture Agreement clearly states that the consideration the profits in question. Judgment was rendered accordingly, with
for the sale was the expectation of profits from the subdivision project. interest and cost. The defendant appealed.
Its first stipulation states that petitioners did not actually receive
payment for the parcel of land sold to respondent. Consideration, more SC: It was the appraisers who were appointed to ascertain and fix the
properly denominated as cause, can take different forms, such as the total net value of the factory for the purpose of determining the true
prestation or promise of a thing or service by another. In this case, the present value of the interest.
cause of the contract of sale consisted not in the stated peso value of - The appraiser was the one who determined the total net value of the
the land, but in the expectation of profits from the subdivision project, shares of the company and thereafter that of Bareto’s share.
for which the land was intended to be used. As explained by the trial
court, "the land was in effect given to the partnership as [petitioner's] By reference to invoices
participation therein. . . . There was therefore a consideration for the McCulough v. Aenlle & Co.,G. R. No. 1300, February 3, 1904
sale, the [petitioners] acting in the expectation that, should the venture For the purpose of carrying into effect the said contract of sale entered
come into fruition, they [would] get sixty percent of the net profits." 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
Note: Expectations of profits from the subdivision projects is a valid mercantile partnership denominated R. Aenlle & Co., by virtue of the
form of consideration. powers conferred upon them and in compliance with the instructions
given them by Don Matias Saenz de Vizmanos y Lecaros, the manager
It is sufficient if it can be determined by the stipulations of the contract of the said partnership, solemnly declare that they sell, absolutely and
made by the parties thereto/ by reference to an agreement incorporated in fee simple, to E. C. McCullough, the tobacco and cigarette factory
in the contract. known as "La Maria Cristina," located at No. 36 Calle Echague, Plaza de
Goiti, Santa Cruz district, this city, said sale including the trade-mark "La
Maria Cristina," which was been duly registered, the stock of tobacco in
leaf and manufacture, machinery, labels, wrappers, furniture, fixtures,
CERTAIN OR ASCERTAINABLE (DETERMINATE)
and everything else belonging to the said factory, as shown in the
inventory to be drawn up for the purpose of making formal delivery of
HOW DETERMINED the said property.
A. By a third person (1469, pars. 1, 2, 4) This sum is subject to modification, in accordance with the result shown
If the third person is unable or unwilling to fix the price, the by the inventory to be drawn up. In this inventory the value of each
contract is inefficacious unless the parties come to an individual piece of furniture will be fixed at 10 per cent below the price
agreement shown in the partnership inventory. The machinery and cost of installing
the same will also be fixed at 10 per cent below its invoice price. The
B. By the Courts (1469, par. 3) value of the tobacco, both in leaf and in process of manufacture, boxes,
If there is bad faith or mistake of the third party fixing the labels, wrappers, cigars, cigarettes, and paper mouthpieces for
price. cigarettes will be fixed at the invoice price. The value of tobacco made
up into cigars will be fixed in accordance with the price list of the
C. By reference to a definite day, a particular exchange or market partnership, less 20 per cent discount. The cigars will be inventoried at
(1472) the prices in the same list, less a discount of 35 per cent. The P20,000
mentioned as the value of the trade-mark will, however, remain
D. By reference to invoices unchanged.
E. By reference to the application of known factors, e.g. “in In December 1901, the plaintiff, with others, organized a company, to
proportion to variations in calories and ash content of coal” which the plaintiff sold all the tobacco bought by him from the
defendant. The purchaser, the new company, on examining these two
Barreto v. Sta. Marina, G. R. No. L-8169, December 29, 1913 lots, rejected them because the tobacco was not of the quality indicated
(***CAVEAT EMPTOR: PLS READ THE FULL TEXT. CASE DOCTRINE in the inventory. Thereupon the plaintiff, claiming that the tobacco in
RELATED TO SALES NOT CLEARLY ESTABLISHED IN THE CASE……) these two lots was worthless, brought this action against the defendant
to recover what he paid.
The La Insular cigar and cigarette factory is a joint account association
with a nominal capital of P865,000, the plaintiff’s share being P20,000, WON: There was a perfected contract of sale entered into by the
or 4/173 of the whole. On March 14, 1910, the plaintiff’s attorneys wrote parties on August 27,1901.
the defendant’s local representative a letter offering to sell to the
defendant plaintiff’s participation in the factory. The result of the HELD: The document of August 27 was a completed contract of sale.
correspondence between the parties and their representatives was that The articles which were the subject of the sale were definitely and finally

agreed upon. The appellee agreed to buy, among other things, all of the the contract evidently was that the defendant would take over the
leaf tobacco in the factory. This was sufficient description of the thing movables and the improvements at an appraised valuation, and the
sold. The price for each article was fixed. It is true that the price of this defendant obligated itself to promote the appraisal in good faith. As the
tobacco, for example, was not stated in dollars and cents in the contract. defendant partially frustrated the appraisal, it violated a term of the
But by its terms the appellee agreed to pay therefor the amount named contract and made itself liable for the true value of the things contracted
in the invoices then in existence. The price could be made certain by a about, as such value may be established in the usual course of proof.
mere reference to those invoices. By the instrument of August 27 the Furthermore, it must occur to any one, as the trial judge pointed out,
contract was perfected and thereafter each party could compel the other that an unjust enrichment of the defendant would result from allowing
to fulfill it. By its terms the appellee was bound to take all the leaf it to appropriate the movables without compensating the plaintiff
tobacco then belonging to the factory and to pay therefor the prices thereof.
named in the invoices. This obligation was absolute and did not depend
at all upon the quality of the tobacco or its value. The appellee did not, The fourth assignment of error is concerned with the improvements.
in this contract, reserve the right to reject the tobacco if it were not of Attention is here directed to the fact that the improvements placed on
a specific crop. He did not buy tobacco of a particular kind, class, or the hacienda by the plaintiff became a part of the realty and as such
quality. He bought all the tobacco which the appellant owned and agreed passed to the defendant by virtue of the transfer effected by the three
to pay for it what the defendant had paid for it. The plaintiff testified owner in the deed of conveyance (Exhibit B.). It is therefore insisted
that this was the express agreement. that, the defendant having thus acquired the improvements, the plaintiff
should not be permitted to recover their value again from the defendant.
This criticism misses the point. There can be no doubt that the defendant
EFFECT OF INDETERMINABILITY acquired the fixed improvements when it acquired the land, but the
Contract is inefficacious. question is whether the defendant is obligated to indemnify the plaintiff
for his outlay in making the improvements. It was upon the
Robles v. Lizarraga Hermanos, G. R. No. L-26173, July 13, 1927 consideration of the defendant's promise so to indemnify the plaintiff
(Sale of Improvements introduced in Hacienda) that the latter agreed to surrender the lease nearly two no doubt as to
This action was instituted in the Court of First Instance of Occidental the validity of the promise made under these circumstances to the
Negros by Zacarias Robles against Lizarraga Hermanos, a mercantile plaintiff.
partnership organized under the laws of the Philippine Islands, for the
purpose of recovering compensation for improvements made by the EFFECT OF INADEQUACY OF PRICE (1470) DOES NOT AFFECT
plaintiff upon the hacienda "Nahalinan" and the value of implements and THE CONTRACT BUT MAY SHOW VICE OF CONSENT (1470).
farming equipment supplied to the hacienda by the plaintiff, as well as REFER TO INADEQUACY OF CAUSE IN GENERAL, ART. 1355.
damages for breach of contract. Upon hearing the cause the trial court Art. 1470. Gross inadequacy of price does not affect a contract of sale,
gave judgment for the plaintiff to recover of the defendant the sum of except as it may indicate a defect in the consent, or that the parties
P14,194.42, with costs. From this judgment the defendant appealed. really intended a donation or some other act or contract.
WON: The petitioner is allowed to recover the value of the It does not affect the contract but may show vice of consent.
improvements. The offended party may invoke Art. 19 of the NCC (Abuse of
Right Principle)
HELD: In the case before us the deed of conveyance purports to
transfer to the defendant only such interests in certain properties as had Askay v. Cosolan
come to the conveyors by inheritance. Nothing is said concerning the Askay obtained a title to the Mineral Claim which he allegedly sold to
rights in the hacienda which the plaintiff had acquired by lease or Cosalan. It was alleged that there is inadequacy of the consideration for
concerning the things that he had placed thereon by way of transfer which, according to the deed of conveyance, and to the oral
improvement or had acquired by purchase. The verbal contract which testimony, consisted of P107.00 in cash, a bill fold, one sheet, one cow
the plaintiff has established in this case is therefore clearly independent and two carabaos.
of the main contract of conveyance, and evidence of such verbal
contract is admissible under the doctrine above stated. The rule that a Issue: Whether the sale was valid.
preliminary or contemporaneous oral agreement is not admissible to
vary a written contract appears to have more particular reference to the Held: YES
obligation expressed in the written agreement, and the rule had never The fact that the bargain is a hard one, coupled with mere inadequacy
been interpreted as being applicable to matters of consideration or of price when both parties are in a position to form an independent
inducement. In the case before us the written contract is complete in judgment concerning the transaction, is not sufficient ground for the
itself; the oral agreement is also complete in itself, and it is a collateral cancellation of a contract.
to the written contract, notwithstanding the fact that it deals with related
matters. Aguilar v. Rubiato
Rubiato was the owner of parcels of land and was desirous of obtaining
A contract for the sale of goods, chattels or things in action, at a price a loan. He thereafter signed a power of attorney in favor of a certain
of not less than P100, shall be unenforceable unless the contract, or Vila to secure a loan and to execute any writing for the mortgage of
some note or memorandum thereof shall be in writing and subscribed land. Vila pursuant to the power of attorney then sold the land to Aguilar,
by the party charged, or by his agent; and it is insisted that the court with the right of repurchase within one year and Rubiato was to remain
erred in admitting proof of a verbal contract over the objection of the in possession of the land as lessee. One year expired and Aguilar filed a
defendant's attorney. But it will be noted that the same subsection case to consolidate ownership over the lands.
contains a qualification, which is stated in these words, "unless the buyer
accept and receive part of such goods and chattels." In the case before Issue: Whether the contract was of sale or loan.
us the trial court found that the personal property, consisting of farming
implements and other movables placed on the farm by the plaintiff, have Held: LOAN
been utilized by the defendant in the cultivation of the hacienda, and In addition to the evidence, there is one very cogent reason which impels
that the defendant is benefiting by those things. us to the conclusion that Rubiato is only responsible to the plaintiff for
a loan. It is — that the inadequacy of the price which Vila obtained for
We are of the opinion that the stipulation with respect to the appraisal the eight parcels of land belonging to Rubiato is so great that the minds
of the property did not create a suspensive condition. The true sense of revolts at it.

Xxx The members of this court after most particular and cautious But if the price is simulated, there is no meeting of the minds, thus the
consideration, having in view all the facts and all the naturals tendencies contract is void (CC Art. 1471).
of mankind, consider that Rubiato is only responsible to the plaintiff for
the loan of P800. 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
EFFECT OF FAILURE OF CONSIDERATION consideration. The former results in a rt to demand fulfillment or
Sps. Buenaventura v. CA cancellation of the contract while the latter prevents the existence of a
Sps Leonardo Joaquin & Feliciano Landrito are the parents of petitioners. valid contract.
Petitioners assail the sale of several lands by their parents to their other
siblings (see p. 265 for complete list of sales made) for being void ab Petitioners failed to show that the prices in the deeds of sale were
initio based on the following grounds: simulated. They don’t even know the financial capacity of their siblings
to buy these lots. Respondents’ minds met as to the purchase price w/c
1. no actual valid consideration was stated in the deeds of sale & the buyer siblings have paid the price
2. properties are more than 3x more valuable than the measly to their parents.
purchase price (purchase price was grossly inadequate)
3. deeds of sale do not reflect & express the true intent of the 3. WON the Deeds of Sale are void for gross inadequacy of the
parties price. – NO.
4. deliberate conspiracy designed to unjustly deprive the rest of
the compulsory heirs of their legitime. CC Art. 1355: Except in cases specified by law, lesion/ INADEQUACY OF
CAUSE shall not invalidate a contract, unless there has been fraud,
Defense of the respondents: mistake or undue influence.
1. no cause of action, requisite standing & interest
2. sales were w/sufficient considerations & made by their CC Art. 1470: Gross inadequacy of price doesn’t affect a contract of sale,
parents voluntarily in good faith & w/full knowledge of the except as may indicate a defect in the consent or that the parties really
consequences intended a donation or some other act or contract.
3. certificates of title were issued w/factual & legal basis.
Petitioners failed to prove any instance in the aforementioned provisions
Trial court dismissed the case WRT Gavino Joaquin & Lea Asis. Ruled in that would invalidate the deeds of sale. There is no requirement that the
favor of the respondents & dismissed the complaint. price be equal to the exact value of the property on sale. It only matters
1. The right of the compulsory heirs to a legitime is contingent that all respondents believed that they received the commutative value
& it only commences from the moment of the death of the of what they gave.
decedent (CC Art. 777). The value of the property left at the
death of the testator is the basis for determining the legitime Vales vs. Villa
(Art. 908). Plaintiffs cannot claim an impairment of their Courts cannot be guardians of people who are not legally incompetent.
legitime since their parents are still alive. Courts operate not because a person has been defeated/overcome by
2. Deeds of Sale were executed for valuable consideration. another, but because he has been defeated or overcome ILEGALLY.
There should be a violation of the law, commission of what the law
CA affirmed Trial Court decision. In addition to the grounds stated by knows as an actionable wrong, before the courts are authorized to lay
the trial court, CA also mentioned that: hold of the situation & remedy it.
1. While still alive, parents are free to dispose of their properties
provided such is not done in fraud of creditors. Note: Failure of consideration is different from the lack of
2. Petitioners are not parties in interest since they’re not parties consideration, the former results in a right to demand the fulfillment/
to the deeds of sale nor are they creditors of their parents. cancellation of the obligation under the existing valid contract. This is
different from lack of consideration w/c prevents the existence of a valid
Issues: contract.
1. WON petitioners have a legal interest over the properties
subject of the Deeds of Sale. – NO. EFFECT OF EARNEST MONEY (1482)
Art. 1482. Whenever earnest money is given in a contract of sale, it
The complaint betrays their motive for filing the case. They are shall be considered as part of the price and as proof of the perfection of
interested in obtaining the properties by hereditary succession, but they the contract
have failed to show any legal right to these properties.
a. It is considered part of the price, unless the contract is otherwise
Real party-in-interest is one who is either benefited or injured by the b. It is proof of perfection of the contract
judgment of the party entitled to the avails of the suit. This includes
parties to the agreement or are bound either principally/subsidiarily. Earnest money is something of value that the buyer was really in earnest
Parties must have a present substantial interest & not merely and given after the perfection of the contract. It is part of the purchase
expectancy/future contingent subordinate or consequential interest. price.
In this case, the petitioners only have an inchoate rt w/c vests only upon OPTION MONEY
the death of their parents. Besides, sale of the lots to their siblings does Option money is an amount distinct from the purchase price, in order to
not affect the value of their parents’ estate since the lots are replaced secure for the buyer, the opportunity to make up his mind. Once it is
with cash of equivalent value. put up, the seller cannot dispose of the thing during the time agreed
upon, otherwise the seller can be sued for damages.
2. WON the deeds of sale are void for lack of consideration. –
NO. Oesmer v. Paraiso Devt Corp
Petitioners in this case are brothers and sisters and the co-owners of
A contract of sale is not a real contract but a consensual contract. It’s undivided shared is parcels of land originally owned by their parents.
binding & valid upon the meeting of the minds as to the price regardless One the petitioners, Ernesto, met with the President of Paraiso for
of the manner of payment or breach of such. It’s still valid even if the purpose of brokering the sale of petitioners’ properties to respondent
real price is not stated in the contract, making it subject to reformation. corp. A contract to sell was the executed, signed by the siblings except

Adolfo and Jesus. An amount of P100,000 was also given as option condition that the purchase price is subject to the approval of the PNB
money. Later however, petitioners informed PAraiso of their intention to Board.
rescind the Contract to sell and to return the amount of P100,000 paid
by the corporation. Their contention was that the contract to sell was Note: absence of proof of the concurrence of all the essential elements
void because the signatures made by the siblings were not for consent of a contract of sale, the giving of earnest money cannot establish the
to sell the property, assuming the signatures indicate consent, the existence of a perfected contract of sale.
contract was subject to a suspensive condition which is the approval of
the sale by all the co-owners which did not occur because two of the Serrano v Caguiat G.R. No. 139173
siblings did not approve of the sale; lastly, that it is void for it is a Caguiat offered to buy the lot owned by spouses Serrano. Respondent
unilateral promise to sell without consideration distinct from price. gave P100K as partial payment, in turn, petitioners gave a receipt with
a statement that respondent promised to pay the balance of the
Held: As to the last contention, the court ruled that the contract to sell purchase price. Respondents were leaving for abroad and sought to
is not a unilateral promise to sell: cancel the transaction. Petitioners contend that there is no perfected
contract as there was no clear agreement between the parties as to the
In the instant case, the consideration of P100,000.00 paid by respondent amount of consideration.
to petitioners was referred to as "option money." However, a careful
examination of the words used in the contract indicates that the money SC: In holding that there is a perfected contract of sale, both courts
is not option money but earnest money. "Earnest money" and "option mainly relied on the earnest money given by respondent to petitioners
money" are not the same but distinguished thus: (a) earnest money is (Art. 1482). We are not convinced.
part of the purchase price, while option money is the money given as a
distinct consideration for an option contract; (b) earnest money is given It is true that Article 1482 of the Civil Code provides that “Whenever
only where there is already a sale, while option money applies to a sale earnest money is given in a contract of sale, it shall be considered as
not yet perfected; and, (c) when earnest money is given, the buyer is part of the price and proof of the perfection of the contract.” However,
bound to pay the balance, while when the would-be buyer gives option this article speaks of earnest money given in a contract of sale. In this
money, he is not required to buy, but may even forfeit it depending on case, the earnest money was given in a contract to sell. The earnest
the terms of the option. money forms part of the consideration only if the sale is consummated
upon full payment of the purchase price. Now, since the earnest money
The sum of P100,000.00 was part of the purchase price. Although the was given in a contract to sell, Article 1482, which speaks of a contract
same was denominated as "option money," it is actually in the nature of of sale, does not apply.
earnest money or down payment when considered with the other terms
of the contract. Doubtless, the agreement is not a mere unilateral As previously discussed, the suspensive condition (payment of the
promise to sell, but, indeed, it is a Contract to Sell as both the trial court balance by respondent) did not take place. Clearly, respondent cannot
and the appellate court declared in their Decisions. compel petitioners to transfer ownership of the property to him.
Manila Metal Container Corporation v. PNB

Facts: Petitioner was the owner of a parcel of land and to be able to RULES IN ORDINARY SALES
secure a loan from PNB, petitioner executed a real party mortgage over
the land. For its failure to pay, PNB foreclose the mortgaged and sold at
public auction for which PNB was the winning bidder, with a one year ARTICLES 1475-1488
period of redemption by the petitioner. Petitioner requested that there
be an extension of time to redeem the property and it allowed to RULES IN ORDINARY SALES
repurchase the property on installment. Meanwhile,the Special Assets
Management Department had prepared a statement of accountof the
petitioner’s obligation to which amounted to 1.5M. petitioner thereafter FORM
remitted thte amount of 800,000 as deposit to repurchase the property.
When SAMD recommended to the management of the PNB that
petitioner be allowed to repurchase the property at 1.5M, the A) GENERAL RULE (1483)
management rejected and suggested that the property be purchased at
2.7M which was later reduced to 1.9M. But petitioner refused. 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
Petitioner now filed a case for delivery of title, annulment of mortgage by word of mouth, or partly in writing and partly by word of mouth, or
and specific performance with damages. It was its contention that it may be inferred from the conduct of the parties. (n)
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. Written agreement is not essential. Sale is consensual contract.
Its acceptance of the offer resulted in a perfected contract of sale.
Verbal agreement of sale
Respondent contended that the parties never graduated for the Caoili v. CA
negotiation stage – all that transpires was an exchange of proposal and Caoili was a lessee in the property of respondent. Respondent borrowed
counter-proposals and nothing more. There was still no agreement as money from Caoili in the amount of Php 30,000 which they stipulated
to the amount and the manner of payment. The account made by SAMD would form part of their rentals. When rentals was paid off, they entered
cannot be classified as counter-offer because it was merely recital of into a “not formal or written contract” on the sale of the property. They
facts of the obligations of petitioners. executed a "Receipt" denominated as an "Addendum to Agreement
dated August 8, 1990". It was stated they received from petitioners the
Issue: WON the P800,000 deposited is an earnest money. sum of P140,000.00, in addition to the partial payment of P60,000.00,
the "balance payable when the good title in the name of herein vendor
Held NO is delivered to the spouses." Yet respondent refused to execute
The P800,000 could not be considered as an earnest money because an document. Respondent says that the Php 140,000 was for improvements
earnest money forms part of the purchase price. In this case, it did not. and the Php 60,000 served as rental on the period they haven’t paying
The P800,000 was merely a deposit that was accepted by PNB on the their rentals (amounts were claimed as partial payments by Caoili. RTC

and CA both decided in favor of Caoili yet CA reduced the amount One who alleges any defect, or the lack of consent to a contract by
awarded. reason of fraud or undue influence, must establish by full, clear and
convincing evidence, such specific acts that vitiated the party’s consent.
Held: Petitioners adduced no proof that Roque had lost control of his mental
(Not made in writing) The absence of a formal deed of sale does not faculties at the time of the sale. Undue influence is not to be inferred
render the agreement null and void or without any effect. The provision from age, sickness, or debility of body, if sufficient intelligence remains.
of Article 1358 of the Civil Code on the necessity of a public document The Deed of Sale which states “receipt of which in full I hereby
is only for convenience, not for validity or enforceability. It does not acknowledge to my entire satisfaction” is an acknowledgment receipt in
mean that no contract has been perfected so long as the essential itself. Moreover, the presumption that a contract has sufficient
requisites of consent of the contracting parties, object, and cause of the consideration cannot be overthrown by a mere assertion that it has no
obligation concur. Under the agreement, private respondent was consideration.
obligated to deliver a good title to petitioners and this condition is the
operative act which would give rise to the corresponding obligation of Heirs are bound by contracts entered into by their predecessors-in-
petitioners to pay the balance of the purchase price. Since it is not interest. Having been sold already to Belardo, the two properties no
disputed that private respondent has not delivered a good title, longer formed part of Roque’s estate which petitioners could have
petitioners have by law the right to either refuse to proceed with the inherited.
agreement or to waive that condition pursuant to Article 1545 of the
Civil Code. B) STATUTE OF FRAUDS APPLIED
The Addendum being notarized is a prima facie evidence of the facts Statute of Frauds applies only in cases for
stated therein. a) Specific performance, and
b) For damages based on breach of contract
Effect of lack of technical description in the contract
Naranja v. CA Where the contract of sale has already been consummated, its
Roque Naranja was the registered owner of a parcel of land, enforcement cannot be barred by the Statute of Frauds, which applies
denominated as Lot No. 4 in Consolidation-Subdivision Plan (LRC) Pcs- on executory agreement.
886, Bacolod Cadastre, with an area of 136 square meters and covered
by Transfer Certificate of Title (TCT) No. T-18764. Roque was also a co- C) WHEN FORM IS ESSENTIAL
owner of an adjacent lot, Lot No. 2, of the same subdivision plan, which
he co-owned with his brothers, Gabino and Placido Naranja. When 1) Under the Statute of Frauds
Placido died, his one-third share was inherited by his children, Nenita, • Realty- a sale of real property orally is valid. The buyer may
Nazareto, Nilda, Naida and Neolanda, all surnamed Naranja, herein compel the seller to execute a formal deed of sale to be
petitioners. Lot No. 2 is covered by TCT No. T-18762 in the names of enforceable.
Roque, Gabino and the said children of Placido. TCT No. T-18762 •
remained even after Gabino died. The other petitioners — Serafin • Goods and chattels at a price of not less than P 500.
Naranja, Raul Naranja, and Amelia Naranja-Rubinos — are the children
of Gabino. 2) Sale of land through an AGENT (1874)
Authority shall be in writing.
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 and his one-third share in Lot No. 2 to Belardo on August
PERFECTION OF A CONTRACT OF SALE
21, 1981, through a Deed of Sale of Real Property which was duly
notarized by Atty. Eugenio Sanicas. The Deed of Sale reads:
Perfection of a contract of sale (Art. 1475)
I, ROQUE NARANJA, of legal age, single, Filipino and a resident of - At the moment there is a meeting of the minds (consensual)
Bacolod City, do hereby declare that I am the registered owner of Lot - The parties may reciprocally demand performance, subject to the
No. 4 of the Cadastral Survey of the City of Bacolod, consisting of 136 provisions of law governing the form of contracts
square meters, more or less, covered by Transfer Certificate of Title No.
T-18764 and a co-owner of Lot No. 2, situated at the City of Bacolod, Requirements for perfection:
consisting of 151 square meters, more or less, covered by Transfer 1. When parties are face to face – when an offer is accepted without
Certificate of Title No. T-18762 and my share in the aforesaid Lot No. 2 conditions nor qualifications
is one-third share.
2. Through correspondence or telegram – when the offeror has
Issue: knowledge of the acceptance
Whether the sale was valid.
3. When sale is subject to a suspensive condition – from the moment
Held: the condition is fulfilled
To be valid, a contract of sale need not contain a technical description
of the subject property. Contracts of sale of real property have no Mere perfection of the contract does not necessarily transfer
prescribed form for their validity; they follow the general rule on ownership.
contracts that they may be entered into in whatever form, provided all Romulo Coronel, et al vs. CA and Alcaraz G.R. No. 103577,
the essential requisites for their validity are present. The failure of the October 7, 1996
parties to specify with absolute clarity the object of a contract by The Coronels sold their inherited house and lot to Ramona Patricia
including its technical description is of no moment. What is important is Alcaraz, with the conditions that they will effect the transfer of the title
that there is, in fact, an object that is determinate or at least from their deceased father to their names upon receipt of the down
determinable, as subject of the contract of sale. The deed of sale clearly payment, and after the transfer they will execute a Deed of Sale in favor
identifies the subject properties by indicating their respective lot of Alcaraz. The conditions were embodied in a document labeled
numbers, lot areas, and the certificate of title covering them. “Receipt of Down Payment.” Alcaraz paid, and the title was transferred
in the Coronels’ name. However, the Coronels sold the property to
Catalina Mabanag, rescinded the contract with Alcaraz, and eventually

executed a Deed of Sale in favor of Mabanag. In the complaint for

specific performance filed against them, the Coronels contended that c. Before the fall of the hammer
theirs was merely an executory contract to sell, hence there was no The bidder may retract his bid. The auctioneer may
perfected contract of sale. withdraw the goods from the sale
HELD: The parties had agreed to a conditional contract of sale, EXCEPTION: If the auction has been announced to be
consummation of which is subject only to the successful transfer of the without reserve
certificate of title from the name of the petitioner’s father to their names.
d. Limitations of the seller:
Since the condition contemplated by the parties which is the issuance of The seller himself cannot bid. He cannot employ or
a certificate of title in petitioner’s names was fulfilled on February 6, induce any person to bid on his behalf
1985, the respective obligations of the parties under the contract of sale
became mutually demandable. EXCEPTION: If right to bid has been expressly reserved
Note: even if document was denominated “ Receipt of down payment” e. Limitations of the auctioneer (if he is not the
from that moment on, there was a perfected contract of sale albeit seller);
conditional (i.e. transfer of title to heirs and payment of balance of The auctioneer cannot bid. He cannot employ or
purchase price) induce to bid on behalf of the seller. He cannot knowingly
take any bid from the seller or any person employed by him.
Manila Mining Corporation (MMC) vs. Miguel Tan G.R. No.
171702, February 12, 2009 The sale by auction is perfected when the auctioneer
MMC ordered and received various electrical materials from Miguel Tan, announces its perfection by the fall of the hammer or in other
and upon failure to pay the full amount despite several demands, Tan customary manner (Case: Dizon vs. Dizon – Considering that the
filed a collection suit. MMC contended that the absence of stamp marks auction sale has been perfected, a supplemental sale with higher
on the original invoices and purchase orders negated the receipt of said consideration at the instance of only one party(herein petitioner) could
documents by MMC’s representatives, a requisite for payment. Having no longer be validly executed)
not received them thereby having no consent, their contract could not
have been perfected. Before the hammer falls:
o The bidder may retract his bid. The reason behind this is that every
The purchase orders constituted accepted offers when Tan supplied the bidder is merely an offer and therefore, before it is accepted, it may be
electrical materials to MMC. Hence, petitioner cannot evade its obligation withdrawn
to pay by claiming lack of consent to the perfected contracts of sale. The o The auctioneer may also withdraw the goods from the sale EXCEPT if
invoices furnished the details of the transactions. the auction has been announced to be WITHOUT RESERVE.
Note: the purchase orders constituted accepted offers when Tan Auction Sale where the seller reserved the right to reject any
supplied electrical materials to MMC. and all the bids
Leoquinco vs. Postal Savings Bank
1) The buyer has the right to a reasonable opportunity for Because of the expressed stipulation that PSB reserved to themselves
examination before acceptance (1584) except when a carrier the right to reject any and all bids, the bid of petitioner may be rejected.
delivers “C.O.D.” Petitioner’s participation in the auction means submission or being
bounded to the rules of auction whether the purchaser knew the rules
2) Sale by description and/or sample (1481): The bulk of the or not.
goods must correspond to either or both.
Limitations of the seller:
PLACE OF PERFECTION o The seller himself cannot bid
1) where there was meeting of the minds o He cannot employ or induce any person to bid on his behalf (people
2) in case of acceptance through letter or telegram, in the place where who bid for the seller, but are not themselves bound, are called “by-
the offer was made. bidders” or “puffers”)
o EXCEPTION: if right to bid has been expressly reserved and that notice
of such was given
EXPENSES
Limitations of the auctioneer (if he is not the seller)
a. Of Execution and Registration of the sale (1487) are borne by the o The auctioneer cannot bid
Seller 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
b. Of putting the goods in a deliverable state (1521, last par.) are also employed by him
borne by the Seller.
In an execution sale:
1. Judgment Creditor will have a writ to garnish or attach the
property of the debtor and sheriff sells it in a public sale
RULES ON SPECIAL SALES
2. Judgment debtor has the right to redeem the property within
1 year
A. SALES AT AUCTION
a. Sales of separate lots are separate contracts Note: The owner of the property offered for sale at auction has the right
of sale to prescribe the manner, condition and terms of sale and where these
are reasonable and are made known to the buyer, they are binding upon
b. When perfected – when the auctioneer them.
announces its perfection by the fall of the hammer, or in
other customary manner Q: Why can’t the seller participate in the bidding?

A: He cannot bid because in doing such he can manipulate the biddings Sale of car on straight term
of other participants. LEVY HERMANOS V GERVACIO
In Macondray & Co. vs. De Santos (33 OG 2170), it was held that “in
Note: it is the seller who will set the terms and condition of the sale. If order to apply the provisions of article 1454-A of the Civil Code it must
the seller will bid in the auction without reserving such right and appear that there was a contract for the sale of personal property
informing the public, the sales will be considered as fraudulent. payable in installments and that there has been a failure to pay two or
more installments.” The contract, in the present case, while a sale of
Q: Will such fraud affect the perfection of the contract? personal property, is not, however, one on installments, but on straight
term, in which the balance, after payment of the initial sum, should be
A: Yes, the contract will be VOID with NO force and effect paid in its totality at the time specified in the promissory note.
B. SALES BY SAMPLE AND/ OR DESCRIPTION (1481) The transaction is not, therefore, the one contemplated in Act 4122 and
Sales by Sample and/or Description (1481) accordingly the mortgagee is not bound by the prohibition therein
a. The bulk of the goods must correspond to either or both contained as to its right to the recovery of the unpaid balance.
b. The buyer must have an opportunity to compare
c. Effect: the contract may be rescinded at the option of the Theoretically, there is no difference between paying the price in two
buyer installments and paying the same partly in cash and partly in one
installment, in so far as the size of each partial payment is concerned;
PACIFIC COMMERCIAL COMPAN vs. ERMITA MARKET & COLD but in actual practice the difference exists, for, according to the regular
STORES, INC. course of business, in contracts providing for payment of the price in
Plaintiff contracted to sell to defendant an automatic refrigerating two installments, there is generally a provision for initial payment.
machine as per description stated in the sales contract. The machine
was delivered and by mutual agreement the vendor installed the A cash payment cannot be considered as a payment by installment, and
machine. The machine did not give the results expected from it, and the even if it can be so considered, still the law does not apply, for it requires
defendant refused to pay the balance of its purchase price and the cost non-payment of two or more installments in order that its provisions
of the installation of the machine. Thereupon plaintiff brought this may be invoked. In the present case, only one installment was unpaid.
action.
Sale of Truck on installment where foreclosure was not pursued
Held: The fact that the defendant could not use the machine SPOUSES ROMULO DE LA CRUZ and DELIA DE LA CRUZ, and
satisfactorily in the three cold stores divisions cannot be attributed to DANIEL FAJARDO vs. ASIAN CONSUMER AND INDUSTRIAL
plaintiff's fault; the machine was strictly in accordance with the written FINANCE CORPORATION and the HONORABLE COURT OF
contract between the parties, and the defendant can hardly honestly say APPEALS,
that there was any deception by the plaintiff. Facts:
On 22 September 1982, the spouses Romulo de la Cruz and Delia de la
C. SALE OF PERSONALTY PAYABLE BY INSTALLMENTS (RECTO Cruz, and one Daniel Fajardo, petitioners herein, purchased on
LAW) installment basis one (1) unit Hino truck from Benter Motor Sales
Corporation (BENTER for brevity). To secure payment, they executed in
Alternative remedies in case of non-payment (1484) favor of BENTER a chattel mortgage over the vehicle 1 and a promissory
1) To exact fulfillment of the obligation note for P282,360.00 payable in thirty (30) monthly installments of
P9,412.00. 2 On the same date, BENTER assigned its rights and interest
2) Cancel the sale should the vendee fail to pay two or more over the vehicle in favor of private respondent Asian Consumer and
installments. (This is an exception to 1191) Industrial Finance Corporation (ASIAN for brevity). 3 Although
petitioners initially paid some installments, they subsequently defaulted
3) Foreclose the chattel mortgage (if one was constituted) on more than two (2) installments. Thereafter, notwithstanding the
should the vendee fail to pay two or more installments. But demand letter of ASIAN, 4 petitioners failed to settle their obligation.
there may be no further action to recover the unpaid balance.
A contrary stipulation is void. On 26 September 1984, by virtue of a petition for extrajudicial
foreclosure of chattel mortgage, the sheriff attempted to repossess the
Promissory note with chattel mortgage vehicle but was unsuccessful because of the refusal of the son of
MACONDRAY V DE SANTOS petitioner, Rolando de la Cruz to surrender the same. Hence, the return
Granting that there was a contract between the parties for the sale of of the sheriff that the service was not satisfied.
personal property payable in installments, which does not clearly appear
in the record before this court, the complaint does not allege nor does On 10 October 1984, petitioner Romulo de la Cruz brought the vehicle
it appear in the record that there was a failure to pay two or more to the office of ASIAN and left it there where it was inventoried and
installments. On the contrary the promissory note, copied in the inspected.
complaint, was executed January 11, 1934, and, according to the
complaint, on or about January 21, 1934,the automobile, while in the On 27 November 1984, ASIAN filed an ordinary action with the court a
possession of the defendant, was wrecked and by reason of the failure quo for collection of the balance of P196,152.99 of the purchase price,
of the defendant to replace said automobile or to pay the value thereof plus liquidated damages and attorney's fees.
the plaintiff foreclosed the mortgage on what remained of the wrecked
automobile and brought this suit to recover the balance due on the Petitioners take exception. They nevertheless insist that he should not
promissory note executed in its favor. later be allowed to change course midway in the process, abandon the
foreclosure and shift to other remedies such as collection of the balance,
In order to apply the provisions of article 1454-A of the Civil Code it must especially after having recovered the mortgaged chattel from them and
appear that there was a contract for the sale of personal property while retaining possession thereof.
payable in installments and that there has been a failure to pay two or
more installments. HELD: The instant case is covered by the so-called "Recto Law", now
Art. 1484 of the New Civil Code, which provides: "In a contract of sale
of personal property the price of which is payable in installments, the
vendor may exercise any of the following remedies: (1) Exact fulfillment

of the obligation, should the vendee fail to pay; (2) Cancel the sale, D. LEASES OF PERSONALTY WITH OPTION TO BUY.
should the vendee's failure to pay cover two or more installments; (3) Elisco Tool and Manufacturing Corp. vs. CA
Foreclose the chattel mortgage on the thing sold, if one has been Rolando Lantan was employed at the Elisco Tool Manufacturing
constituted, should the vendee's failure to pay cover two or more Corporation as head of its cash department. On January 9, 1980, he
installments. In this case, he shall have no further action against the entered into an agreement with the company, called lease with option
purchaser to recover any unpaid balance of the price. Any agreement to to buy car within 5 years. That owner ship shall retain with the company
the contrary shall be void." In this jurisdiction, the three (3) remedies until full payment and all necessary expenses for maintenance shall be
provided for in the "Recto Law" are alternative and not cumulative; the borne by the employee. Subsequently the company has ceased
exercise of one would preclude the other remedies. Consequently, operation and the employee was laid off. It took the company 2 years
should the vendee-mortgagor default in the payment of two or more of to institute proceedings.
the agreed installments, the vendor-mortgagee has the option to avail
of any of these three (3) remedies: either to exact fulfillment of the Sellers desirous of making conditional sales of their goods, but who do
obligation, to cancel the sale, or to foreclose the mortgage on the not wish openly to make a bargain in that form, for one reason or
purchased chattel, if one was constituted. (Pacific Commercial Co. another, have frequently resorted to the device of making contracts in
vs. De la Rama) the form of leases either with options to the buyer to purchase for a
small consideration at the end of term, provided the so-called rent has
It is thus clear that while ASIAN eventually succeeded in taking been duly paid, or with stipulations that if the rent throughout the term
possession of the mortgaged vehicle, it did not pursue the foreclosure is paid, title shall thereupon vest in the lessee. It is obvious that such
of the mortgage as shown by the fact that no auction sale of the vehicle transactions are leases only in name. The so-called rent must
was ever conducted. "Under the law, the delivery of possession of the necessarily be regarded as payment of the price in installments
mortgaged property to the mortgagee, the herein appellee, can only since the due payment of the agreed amount results, by the
operate to extinguish appellant's liability if the appellee had actually terms of the bargain, in the transfer of title to the lessee.
caused the foreclosure sale of the mortgaged property when it recovered
possession thereof. Consequently, in the case before Us, there being no The so-called monthly rentals are in truth form monthly amortization on
actual foreclosure of the mortgaged property, ASIAN is correct in the price of the car. The contract being one of sale on installment, the
resorting to an ordinary action for collection of the unpaid balance of the Court of Appeals correctly applied to it the following provisions of the
purchase price. Civil Code:
MAGNA VS COLARINA Art. 1484. In a contract of sale of personal property, the price of which
“Undoubtedly the principal object of the above amendment (referring to is payable in installments, the vendor may exercise any of the following
Act 4122 amending remedies:
Art. 1454, Civil Code of 1889) was to remedy the abuses committed in (1) Exact fulfillment of the obligation, should the vendee fail to pay;
connection with the foreclosure of chattel mortgages. This amendment
prevents mortgagees from seizing the mortgaged property, buying it at (2) Cancel the sale, should the vendee's failure to pay cover two or more
foreclosure sale for a low price and then bringing the suit against the installments;
mortgagor for a deficiency judgment. The almost invariable result of this
procedure was that the mortgagor found himself minus the property and (3) Foreclose the chattel mortgage on the thing sold, if one has been
still owing practically the full amount of his original indebtedness.” constituted, should the vendee's failure to pay cover two or more
installments. In this case, he shall have no further action against the
In its Memorandum before us, petitioner resolutely declared that it has purchaser to recover any unpaid balance of the price. Any agreement to
opted for the remedy provided under Article 1484(3) of the Civil Code, the contrary shall be void.
that is, to foreclose the chattel mortgage.
The remedies provided for in Art. 1484 are alternative, not
It is, however, unmistakable from the Complaint that petitioner cumulative. The exercise of one bars the exercise of the others.
preferred to avail itself of the first and third remedies under Article 1484, limitation applies to contracts purporting to be leases of personal
at the same time suing for replevin. For this reason, the Court of Appeals property with option to buy by virtue of Art. 1485. The condition that
justifiably set aside the decision of the RTC. Perusing the Complaint, the the lessor has deprived the lessee of possession or enjoyment of the
petitioner, under its prayer number 1, sought for the payment of the thing for the purpose of applying Art. 1485 was fulfilled in this case by
unpaid amortizations which is a remedy that is provided under Article the filing by petitioner of the complaint for replevin to recover possession
1484(1) of the Civil Code, allowing an unpaid vendee to exact fulfillment of movable property. By virtue of the writ of seizure issued by the trial
of the obligation. At the same time, petitioner prayed that Colarina be court, the deputy sheriff seized the vehicle on August 6, 1986 and
ordered to surrender possession of the vehicle so that it may ultimately thereby deprived private respondents of its use. The car was not
be sold at public auction, which remedy is contained under Article returned to private respondent until April 16, 1989, after two (2) years
1484(3). Such a scheme is not only irregular but is a flagrant and eight (8) months, upon issuance by the Court of Appeals of a writ
circumvention of the prohibition of the law. By praying for the of execution.
foreclosure of the chattel, Magna Financial Services Group, Inc.
renounced whatever claim it may have under the promissory note. 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
Article 1484, paragraph 3, provides that if the vendor has availed himself price. It further petitioner to pay private respondents the amount of
of the right to foreclose the chattel mortgage, “he shall have no further P431.94 as excess payment, as well as rentals at the rate of P1,000 a
action against the purchaser to recover any unpaid balance of the month for depriving private respondents of the use of their car.
purchase price. Any agreement to the contrary shall be void.” In other
words, in all proceedings for the foreclosure of chattel mortgages PCI Leasing and Finance vs. Giraffe X
executed on chattels which have been sold on the installment plan, the Giraffe entered into an agreement with PCI leasing over 2 machines
mortgagee is limited to the property included in the mortgage. worth P8,000,000. Giraffe agreed to pay P116,878.21 monthly and
P181,362 for the other machine. It has also remitted the amount of
P3,120,000 as goodwill. A year into the life of the lease agreement,
respondent defaulted in paying the monthly rentals. PCI Sued Giraffe for
possession of the machineries and for payment of the remaining term.

Issue: Whether the underlying lease agreement are covered between actual cancellation of the contract. The deed of sale or assignment shall
1484 and 1485 of the New Civil Code? be done by notarial act.
SC: Yes, they are. Evidently the contract above is in reality an option 1. The buyer has the right to sell/assign his right to another
to purchase the equipment. person (must be done by notarial act)
2. The buyer has the right to reinstate the contract by upgrading
THE RECTO LAW the account during the grace period and before actual
Art. 1484. In a contract of sale of personal property, the price of which cancellation of the contract.
is payable in installments, the vendor may exercise any of the following
Right to advance payment w/out interest
xxx
"(a) To pay, without additional interest, the unpaid
3.) Foreclose the chattel mortgage on the thing sold, if one has been installments due within the total grace period earned by him,
constituted, should the vendee’s failure to pay cover two or more which is hereby fixed at the rate of one month grace period
installments. In this case he shall have no further action against the for every one year of installment payments made; x x x
purchaser to recover any unpaid balance of the price. Any agreement 1. The buyer has the right to pay in advance any installment/ the
contrary shall be void. full balance of the purchase price anytime w/out interest and
to have such full payment annotated in the certificate of title.
Art. 1485. The preceding article shall be applied to contract purporting
to be leases of personal property with the option to buy, when the leasor Section 6. The buyer shall have the right to pay in advance any
deprived the lesee of the possession or enjoyment of the thing. installment or the full unpaid balance of the purchase price any time
without interest and to have such full payment of the purchase price
Therefore Giraffe is not liable to pay for the remaining term since the annotated in the certificate of title covering the property.
machineries has been foreclosed.
NOTE: to be refunded of the cash surrender value of his payments if the
PCI LEASING v. GIRAFFE lease agreement is in reality a lease with an contract is cancelled.
option to purchase the equipment. This has been made manifest by the
actions of the petitioner itself, foremost of which is the declarations i) Actual cancellation takes place:
made in its demand letter to the respondent. There could be no other 1)after 30 days from receipt of notice of cancellation by
explanation than that if the respondent paid the balance, then it could notarial act.
keep the equipment for its own; if not, then it should return them. This 2) upon full payment of cash surrender value.
is clearly an option to purchase given to the respondent. Being so, Article
1485 of the Civil Code should apply. Sale of real property on installments (Maceda Law [RA 6552])
E. SALE OF REAL PROPERTY ON INSTALLMENTS (MACEDA LAW, a. When the buyer has paid at least two years of installments
RA 6552) REALITY INSTALLMENT BUYER PROTECTION ACT. 1)Rights of buyer:
ii) Default in payment
a. Applicability
Real estate bought on installment basis. aa) To pay without additional interest, the unpaid installments
Transactions covered: sale/ financing of real estate on installment (cash surrender value) within the grace period
payments, including residential condominium apartments but:
1. industrial lots bb) Grace period is one month for every year of installment
2. commercial building payments made
3. sales to tenants under RA 3844
Limitation: The right can be exercised only once every 5 years
b. Rules when the buyer has paid at least 2 years of ii) Cancellation of sale
installments. aa) Up to 5 years installments, refund of 50% of payments
1.) Rights of Buyers – bb) After 5 years of installments, additional 5%/year but shall
(a) In case of default in payment Section 3 of R.A. No. 6552 provided not exceed 90% of total payments made
for the rights of the buyer in case of default in the payment of
succeeding installments, where he has already paid at least two (2) When cancellation takes effect:
years of installments, thus: aa) After 30 days from receipt by the buyer of (notarized) notice of
cancellation; or
If the contract is cancelled, the seller shall refund to the buyer the cash bb) After 30 days from receipt by the buyer of notarial demand for
surrender value of the payments on the property equivalent to fifty per rescission
cent of the total payments made; provided, that the actual cancellation
of the contract shall take place after thirty days from receipt by the buyer *In both cases after full payment of cash surrender value
of the 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 c. When the buyer has paid less than two years installments
the buyer." 1) The buyer has at least 60 days grace period within which to pay
the installment due
Right to update payments
2) After the grace period, contract may be cancelled as in “B” above
Right to assign/ reinstate contract (must be in Public
document) (If the buyer fails to pay the installments due at the expiration of the
Section 5. Under Section 3 and 4, the buyer shall have the right to sell grace period, the seller may cancel the contract after thirty days from
his rights or assign the same to another person or to reinstate the receipt by the buyer of the notice of cancellation or the demand for
contract by updating the account during the grace period and before rescission of the contract by a notarial act.)

Pagtalunan vs. De Manzano notice of cancellation or the demand for rescission of the contract by a
(Patricio), petitioner’s stepfather and predecessor-in-interest, entered notarial act.
into a Contract to Sell with respondent, wife of Patricio’s former
mechanic, Teodoro Manzano, whereby the former agreed to sell, and In this case, the spouses Heruela paid less than two years of
the latter to buy, a house and lot which formed half of a parcel of land. installments. Thus, Section 4 of RA 6552 applies. However, there was
The consideration of P17,800 was agreed to be paid in the following neither a notice of cancellation nor demand for rescission by notarial act
manner: P1,500 as downpayment upon execution of the Contract to Sell, to the spouses Heruela. In Olympia Housing, Inc. v. Panasiatic Travel
and the balance to be paid in equal monthly installments of P150 on or Corp., 22 the Court ruled that the vendor could go to court to demand
before the last day of each month until fully paid. judicial rescission in lieu of a notarial act of rescission. However, an
action for reconveyance is not an action for rescission. The Court
It was also stipulated in the contract that respondent could immediately explained in Olympia:
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 The action for reconveyance filed by petitioner was predicated on an
automatically rescinded without need of judicial declaration, and that all assumption that its contract to sell executed in favor of respondent
payments made and all improvements done on the premises by buyer had been validly cancelled or rescinded. The records would show
respondent would be considered as rentals for the use and occupation that, indeed, no such cancellation took place at any time prior to the
of the property or payment for damages suffered, and respondent was institution of the action for reconveyance. . . .
obliged to peacefully vacate the premises and deliver the possession
thereof to the vendor. xxx xxx xxx
Petitioner claimed that respondent paid only P12,950. She allegedly . . . Not only is an action for reconveyance conceptually different from
stopped paying after December 1979 due to personal problems with the an action for rescission but that, also, the effects that flow from an
petitioner. Petitioner asserted that when respondent ceased paying her affirmative judgment in either case would be materially dissimilar in
installments, her status of buyer was automatically transformed to that various respects. The judicial resolution of a contract gives rise to mutual
of a lessee. Therefore, she continued to possess the property by mere restitution which is not necessarily the situation that can arise in an
tolerance of Patricio. action for reconveyance. Additionally, in an action for rescission (also
often termed as resolution), unlike in an action for reconveyance
Issue: Whether the respondent has the right to occupy the premises? predicated on an extrajudicial rescission (rescission by notarial act), the
SC: Yes, According to Republic Act No. 6552 -- "The Realty Installment Court, instead of decreeing rescission, may authorize for a just cause
Buyer Protection Act," or more popularly known as the Maceda Law the fixing of a period.
(b) If the contract is cancelled, the seller shall refund to the buyer the In the present case, there being no valid rescission of the contract to
cash surrender value of the payments on the property equivalent to fifty sell, the action for reconveyance is premature. Hence, the spouses
percent of the total payments made and, after five years of installments, Heruela have not lost the statutory grace period within which to pay.
an additional five percent every year but not to exceed ninety percent The trial court should have fixed the grace period to sixty days
of the total payments made: Provided, That the actual cancellation of conformably with Section 4 of RA 6552.
the 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 Sale of subdivision lot on installments where the buyer
by a notarial act and upon full payment of the cash surrender value to defaulted.
the buyer. Active Realty Corporation vs. Daroya
ACTIVE REALTY & DEVELOPMENT CORPORATION entered into a
The Court agrees with petitioner that the cancellation of the Contract to Contract to Sell1 with respondent NECITA DAROYA whereby the latter
Sell may be done outside the court particularly when the buyer agrees agreed to buy a 515 sq. m. lot for P224,025.00 in petitioner’s subdivision
to such cancellation. to be paid in amortization within 5 years, valued at P346,367.00, a figure
higher than that stated as the contract price. The buyer defaulted in
However, the cancellation of the contract by the seller must be in three (3) monthly amortizations. Petitioner sent respondent a notice of
accordance with Sec. 3. cancellation2 of their contract to sell. When respondent offered to pay
for the balance of the contract price, petitioner refused as it has allegedly
Firstly the demand letter made by the petitioner to vacate the premises sold the lot to another buyer. The respondent has already paid 4 years.
does not constitute notice of cancellation. Second petitioner cannot insist already more than the contract price.
on compliance with the requirement by assuming that the cash
surrender value payable to the buyer had been applied to rentals of the Issue: Whether or not the petitioner can be compelled to refund to the
property after respondent failed to pay the installments due. respondent the value of the lot or to deliver a substitute lot at
respondent’s option?
Therefore a deed of absolute sale shall be made after payment of
purchase price. SC: Yes, According to Republic Act No. 6552 -- "The Realty Installment
Buyer Protection Act," or more popularly known as the Maceda Law
c. Rules when the buyer has paid less than 2 years of More specifically, Section 3 of R.A. No. 6552 provided for the rights of
installments ( Refer to case below) the buyer in case of default in the payment of succeeding installments,
where he has already paid at least two (2) years of installments, thus:
Where the buyer paid less than 2 years installments
Ramos vs Heruela "(a) To pay, without additional interest, the unpaid installments due
Down payments, deposits or options on the contract shall be included in within the total grace period earned by him, which is hereby fixed at the
the computation of the total number of installments made. rate of one-month grace period for everyone year of installment
payments made; x x x
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 (b) If the contract is cancelled, the seller shall refund to the buyer the
the date the installment became due. If the buyer fails to pay the cash surrender value of the payments on the property equivalent to fifty
installments due at the expiration of the grace period, the seller may per cent of the total payments made; provided, that the actual
cancel the contract after thirty days from receipt by the buyer of the cancellation of the contract shall take place after thirty days from receipt

by the buyer of the notice of cancellation or the demand for rescission thereof and existing by-laws or instruments corresponding
of the contract by a notarial act and upon full payment of the cash thereto.
surrender value to the buyer." (d) A title to the property which is free from all liens and
encumbrances: Provided, however, that in case any
We hold that the contract to sell between the parties remains valid and subdivision lot or condominium unit is mortgaged, it is
subsisting. Following Section 3(a) of R.A. No. 6552, respondent has the sufficient if the instrument of mortgage contains a stipulation
right to offer to pay for the balance of the purchase price, without that the mortgagee shall release the mortgage on any
interest, which she did in this case. However since the lot has been sold subdivision lot or condominium unit as soon as the full
to another party it is only just and equitable that the petitioner be purchase price for the same is paid by the buyer.
ordered to refund to respondent the actual value of the lot resold, i.e.,
P875,000.00, with 12% interest per annum. The person filing the registration statement shall pay the registration
fees prescribed therefor by the Authority.
F. PRESIDENTIAL DECREE NO. 957
a. Important provisions Thereupon, the Authority shall immediately cause to be published a
Sec. 4, 5, 7,18,23 ,24 ,25 notice of the filing of the registration statement at the expense of the
applicant-owner or dealer, in two newspapers general circulation, one
Section 4. Registration of Projects The registered owner of a parcel of published in English and another in Pilipino, once a week for two
land who wishes to convert the same into a subdivision project shall consecutive weeks, reciting that a registration statement for the sale of
submit his subdivision plan to the Authority which shall act upon and subdivision lots or condominium units has been filed in the National
approve the same, upon a finding that the plan complies with the Housing Authority; that the aforesaid registration statement, as well as
Subdivision Standards' and Regulations enforceable at the time the plan the papers attached thereto, are open to inspection during business
is submitted. The same procedure shall be followed in the case of a plan hours by interested parties, under such regulations as the Authority may
for a condominium project except that, in addition, said Authority shall impose; and that copies thereof shall be furnished to any party upon
act upon and approve the plan with respect to the building or buildings payment of the proper fees.
included in the condominium project in accordance with the National
Building Code (R.A. No. 6541). The subdivision project of the condominium project shall be deemed
registered upon completion of the above publication requirement. The
The subdivision plan, as so approved, shall then be submitted to the fact of such registration shall be evidenced by a registration certificate
Director of Lands for approval in accordance with the procedure to be issued to the applicant-owner or dealer.
prescribed in Section 44 of the Land Registration Act (Act No. 496, as
amended by R.A. No. 440): Provided, that it case of complex subdivision Section 5. License to sell. Such owner or dealer to whom has been
plans, court approval shall no longer be required. The condominium plan issued a registration certificate shall not, however, be authorized to sell
as likewise so approved, shall be submitted to the Register of Deeds of any subdivision lot or condominium unit in the registered project unless
the province or city in which the property lies and the same shall be he shall have first obtained a license to sell the project within two weeks
acted upon subject to the conditions and in accordance with the from the registration of such project.
procedure prescribed in Section 4 of the Condominium Act (R.A. No.
4726). The Authority, upon proper application therefor, shall issue to such
owner or dealer of a registered project a license to sell the project if,
The owner or the real estate dealer interested in the sale of lots or units, after an examination of the registration statement filed by said owner or
respectively, in such subdivision project or condominium project shall dealer and all the pertinent documents attached thereto, he is convinced
register the project with the Authority by filing therewith a sworn that the owner or dealer is of good repute, that his business is financially
registration statement containing the following information: stable, and that the proposed sale of the subdivision lots or
condominium units to the public would not be fraudulent.
(a) Name of the owner;
(b) The location of the owner's principal business office, and if the Section 7. Exempt transactions. A license to sell and performance bond
owner is a non-resident Filipino, the name and address of his shall not be required in any of the following transactions:
agent or representative in the Philippines is authorized to (a) Sale of a subdivision lot resulting from the partition of land
receive notice; among co-owners and co-heirs.
(c) The names and addresses of all the directors and officers of (b) Sale or transfer of a subdivision lot by the original purchaser
the business firm, if the owner be a corporation, association, thereof and any subsequent sale of the same lot.
trust, or other entity, and of all the partners, if it be a (c) Sale of a subdivision lot or a condominium unit by or for the
partnership; account of a mortgagee in the ordinary course of business
(d) The general character of the business actually transacted or when necessary to liquidate a bona fide debt.
to be transacted by the owner; and
(e) A statement of the capitalization of the owner, including the Section 18. Mortgages. No mortgage on any unit or lot shall be made
authorized and outstanding amounts of its capital stock and by the owner or developer without prior written approval of the
the proportion thereof which is paid-up. Authority. Such approval shall not be granted unless it is shown that the
proceeds of the mortgage loan shall be used for the development of the
The following documents shall be attached to the registration statement: condominium or subdivision project and effective measures have been
provided to ensure such utilization. The loan value of each lot or unit
(a) A copy of the subdivision plan or condominium plan as covered by the mortgage shall be determined and the buyer thereof, if
approved in accordance with the first and second paragraphs any, shall be notified before the release of the loan. The buyer may, at
of this section. his option, pay his installment for the lot or unit directly to the mortgagee
(b) A copy of any circular, prospectus, brochure, advertisement, who shall apply the payments to the corresponding mortgage
letter, or communication to be used for the public offering of indebtedness secured by the particular lot or unit being paid for, with a
the subdivision lots or condominium units; view to enabling said buyer to obtain title over the lot or unit promptly
(c) In case of a business firm, a balance sheet showing the after full payment thereto.
amount and general character of its assets and liabilities and
a copy of its articles of incorporation or articles of partnership Section 23. Non-Forfeiture of Payments. No installment payment made
or association, as the case may be, with all the amendments by a buyer in a subdivision or condominium project for the lot or unit he

contracted to buy shall be forfeited in favor of the owner or developer Tamayo vs. Huang
when the buyer, after due notice to the owner or developer, desists from Respondents Huang registered owners of four parcels of land located in
further payment due to the failure of the owner or developer to develop Barangay Matina, Davao City executed a contract of "Indenture" with
the subdivision or condominium project according to the approved plans EAP Development Corporation (EAP) under which EAP undertook to
and within the time limit for complying with the same. Such buyer may, manage and develop said parcels of land into a first-class subdivision
at his option, be reimbursed the total amount paid including amortization and sell the lots therein in, Doña Luisa Village (the subdivision).
interests but excluding delinquency interests, with interest thereon at
the legal rate. Carlos R. Tamayo (petitioner) entered into a contract to sell with
respondents through EAP for a certain lot. Under the contract, petitioner
Section 24. Failure to pay installments. The rights of the buyer in the was to pay upon execution P35,749.60 and the balance, including
event of this failure to pay the installments due for reasons other than interest at the rate of 14% per annum, in 60 monthly installments of
the failure of the owner or developer to develop the project shall be P4,791.40, without necessity of demand; and if petitioner failed to pay
governed by Republic Act No. 6552. the installments, respondents were given the right to demand interest
thereon at the rate of 14% per annum, to be computed on the same
Where the transaction or contract was entered into prior to the day of the month the installments became due. Later on, the
effectivity of Republic Act No. 6552 on August 26, 1972, the defaulting development of the subdivision was put to stop by EAP, in effect
buyer shall be entitled to the corresponding refund based on the petitioner stopped paying the monthly amortization. The respondents
installments paid after the effectivity of the law in the absence of any sent the petitioner a demand letter, but after the reply of the petitioner
provision in the contract to the contrary. with an explanation of stop payment the respondent was unheard of...
After 5 years the development was soon in progress and petitioner
Section 25. Issuance of Title. The owner or developer shall deliver the offered to pay the full purchase price which was already rejected by the
title of the lot or unit to the buyer upon full payment of the lot or unit. respondent. Later on, the property was sold by the respondent to
No fee, except those required for the registration of the deed of sale in another person.
the Registry of Deeds, shall be collected for the issuance of such title.
In the event a mortgage over the lot or unit is outstanding at the time Issues:
of the issuance of the title to the buyer, the owner or developer shall 1.) Did the petitioner have any legal basis for stop payment?
redeem the mortgage or the corresponding portion thereof within six 2.) Is the contract to sell between the parties rescinded?
months from such issuance in order that the title over any fully paid lot
or unit may be secured and delivered to the buyer in accordance SC: 1.) Yes. Section 23 of PD 957 requires only due notice to the owner
herewith. or developer for stopping further payments by reason of the latter’s
failure to develop the subdivision according to the approved plans and
Far East Bank & Trust Co vs. Marquez within the time limit.
Marquez entered into a contract to sell with TSE involving a 52.5 sqm
lot and a three storey townhouse for P800,000. Later respondent was Therefore, the buyer had the right to stop payment due to the failure of
able to pay a total of P600,000. TSE then mortgaged the whole property the developer to comply with the contract. He only needed to give due
to Far East Bank. TSE was unable to pay and the property was foreclosed notice to the owner (Huangs) or Developer to give it effect.
and sold in favor of Far East Bank.
2.) Yes. Respondents sent no notarized notice or any notice of
Issues: cancellation at all. In fact, it was only after petitioner filed on July 24,
1.) Whether or not the mortgage contract violated Section 18 of PD.957, 1997 the complaint before the HLURB that respondents offered to
hence void insofar as third persons are concerned. reimburse petitioner of the total amount he had already paid.
2.) Who has a higher right the new buyer or the respondent? The contract not having been cancelled in accordance with law, it has
remained valid and subsisting. It was, therefore, within petitioner’s right
SC: Yes violated Sec. 18. as provides as follows. to maintain his option to await the completion of the development of
and introduction of improvements in the subdivision and thereafter,
Sec. 18. Mortgages- No mortgage on any unit or lot shall be made by upon full payment of the purchase price, without interest, compel
the owner or developer without prior written approval of the authority. respondents to execute a deed of absolute sale, but since the property
Such approval shall not be granted unless it is shown that the proceeds was sold to a buyer in good faith. The respondents should refund the
of the mortgage loan shall be used for the development of the petitioner for the value of the property when it was sold.
condominium or subdivision project and effective measures have been
provided to ensure such utilization. The loan value of each lot or unit Cantemperante vs CRS realty
covered by the mortgage shall be determined and the buyer thereof, if Herein petitioners were among those who filed before the HLURB a
any, shall be notified before the release of the loan. The buyer may, at complaint 6 for the delivery of certificates of title against respondents
his option, pay his installment for the lot or unit directly to the mortgagee CRS Realty Development Corporation (CRS Realty), Crisanta Salvador
who shall apply the payments to the corresponding mortgage indebtness and Cesar Casal.
secured by the particular lot or unit being paid for , with a view to
enabling said buyer to obtain title over the lot or unit promptly after full Petitioners averred that they had bought on an installment basis
payment thereof. subdivision lots from respondent CRS Realty and had paid in full the
agreed purchase prices; but notwithstanding the full payment and
Since TSE did not obtain prior approval from the NHA the mortgage is despite demands, respondents failed and refused to deliver the
void as regarding to the property to the respondent as he has no corresponding certificates of title to petitioners. The complaint prayed
standing to question the validity of the other property. that respondents be ordered to deliver the certificates of title
corresponding to the lots petitioners had purchased and paid in full and
2.) Respondent has a higher right over the property. Petitioner cannot to pay petitioners damages.
be considered as a buyer in good faith. He should have considered that
it was a town house that was already in progress. The conversion of In his answer, respondent Casal averred that despite his willingness to
status from mortgagee to buyer will not lessen the importance of such deliver them, petitioners refused to accept the certificates of title with
knowledge. notice of lis pendens covering the subdivision lots.

Respondents Ang and Cuason claimed in their answer with counterclaim B. SPECIAL DISQUALIFICATIONS TO BUY
16 that respondent Casal remained the registered owner of the a. Between Spouses
subdivided lots when they were transferred to them and that the failure
by petitioners to annotate their claims on the title indicated that they Effect of sale of land to one’s own spouse
were unfounded. Respondent CRS Realty and the Heirs of Laudiza were Uy Siu Pin vs. Cantollas, G.R. No. 46850, June 20, 1940
declared in default for failure to file their respective answers. There was a contract entered into between Uy Siu Pin and Casimira and
Blas, which the latter agreed to deliver the mortgaged land and to enjoy
Issues: the same with its improvements to the during the period of 15 years on
Whether or not the absence of a license to sell has rendered the sales condition that Uy Siu Pin would pay El Hogar Filipino the unpaid balance
void; (2) whether or not the subsequent sale to respondent Cuason and of the indebtedness of casimira and Blas, together with all other
Ang constitutes double sale; expenses including realty taxes.
Held: When the mortgage debtors, Casimira and Blas, failed to redeem the
Petitioners assail the Court of Appeals' ruling that the lack of the land within the statutory period, a final deed of sale was issued in favor
requisite license to sell on the part of respondent CRS Realty rendered of the mortgagee, El Hogar Filipino. The latter sold the land to Uy Siu
the sales void; hence, neither party could compel performance of each Pin and in turn sold the land to his wife Chua Hue.
other's contractual obligations.
Issues: Is the sale valid between Uy Siu Pin and Chua Hue?
The only requisite for a contract of sale or contract to sell to exist in law
is the meeting of minds upon the thing which is the object of the contract Held: SC said No. The sale from Uy Siu Pin to his wife Chua Hue is null
and the price, including the manner the price is to be paid by the vendee. and void not only because theformer had no right to dispose of the land
Under Article 1458 of the New Civil Code, in a contract of sale, whether in contorversy but because the sale comes within the prohibition of
absolute or conditional, one of the contracting parties obliges himself to Article 1458 of the Civil Code.
transfer the ownership of and deliver a determinate thing, and the other
to pay therefor a price certain in money or its equivalent. Note: The case did not extensively explicate the reason why the sale
between spouses are prohibited. However, Art 1490 provides that “the
In the instant case, the failure by respondent CRS Realty to obtain a husband and wife cannot sell property to each other, except: (1) when
license to sell the subdivision lots does not render the sales void on that a separation of property was agreed upon in the marriage settlements;
ground alone especially that the parties have impliedly admitted that or (2) when there has been a judicial separation of property under articel
there was already a meeting of the minds as to the subject of the sale 191.
and price of the contract. The absence of the license to sell only subjects
respondent CRS Realty and its officers civilly and criminally liable for the Rationale behind the prohibition: (a) to prevent the stronger spouse
said violation under Presidential Decree (P.D.) No. 957 30 and related from exploiting the weaker spouse; (b) prevent donations disguised as
rules and regulations. The absence of the license to sell does not affect sales; (c) protect third persons, specially creditors, against fraud through
the validity of the already perfected contract of sale between petitioners the transfer of the properties of one spouse to the other to evade
and respondent CRS Realty. payment of obligations.
As found by the Court of Appeals, in the case at bar, the requirements Transfer in common law relationship
of Sections 4 and 5 of P.D. [No.] 957 do not go into the validity of the Ching vs. Goyanko, G.R. No. 165879, November 10, 2006
contract, such that the absence thereof would automatically render the Respondents claim that their parents (Goyanko and Epifania) acquired a
contract null and void. It is rather more of an administrative convenience 661 square meter property but they (the parents) were Chinese citizens
in order to allow a more effective regulation of the industry. at the time, the property was registered in the name of their aunt,
Sulpicia Ventura. Sulpicia executed a deed of sale over the property in
favor of reespondent’s father Goyanko that in turn executed a deed of
CHAPTER 2 – CAPACITY TO BUY OR SELL sale over the same property in favor of his common-law-wife-herein
petitioner Maria B. Ching. It was only after Goyanko’s death that they
discovered the transfer of the said property to Ching. Respondents thus
Arts. 1489 – 1492 filed with the RTC of Cebu City a complaint for recovery of the property
and the nullification of the deed of sale.
I. Parties and their Consent
ISSUE: Whether or not the sale of the property by Goyanko to Ching is
A. CAPACITY IN GENERAL (1489) valid.
Art. 1489. All persons who are authorized in this Code to obligate HELD: The conveyance of Goyanko in favor of his common-law-wife-
themselves, may enter into a contract of sale, saving the modifications herein petitioner, was null and void. Article 1409 of the Civil Code states
contained in the following articles. inter alia that contracts whose cause, object, or purpose is contrary to
law, morals, good customs, public order, or public policy are void and
Where necessaries are sold and delivered to a minor or other person inexistent from the very beginning. Article 1352 also provides that:
without capacity to act, he must pay a reasonable price therefor. “Contracts without cause, or with unlawful cause, produce no effect
Necessaries are those referred to in article 290. whatsoever. The cause is unlawful if it is contrary to law, morals, good
customs. Public order, or public policy.” Additionally, the law
Note: A person who has both juridical capacity and capacity to act is emphatically prohibits the spouses from selling property to each other
said to have full civil capacity. It is understood that he is of legal age subject to certain exceptions. Similarly, donations between spouses
and suffers no restriction on his capacity to act, such person may enter during marriage are prohibited. And this is so because if transfers or
into any contract including sale. conveyances between spouses were allowed during marriage, that
would destroy the system of conjugal partnership, a basic policy in civil
law. It was also designed to prevent the exercise of undue influence by
one spouse over the other, as well as to protect the institution of
marriage, which is the cornerstone of family law. The prohibitions apply
to a couple living as husband and wife without benefit of marriage,

otherwise, “the condition of those who incurred guild would turn out to On July 27, 1947, Socorro Roldan filed in said guardianship proceedings
be better that those in legal union.” (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,
b. By Spouse without consent of the other spouse the purpose of the sale being allegedly to invest the money in a
The transfer is void. residential house, which the minor desired to have on Tindalo Street,
Manila. The motion was granted.
C. PERSONS IN TRUST RELATIONS
Socorro Roldan, as guardian, executed the proper deed of sale in favor
Sale to agent: Exception to prohibition against sale by principal of her brother-in-law Dr. Fidel C. Ramos. Dr. Fidel C. Ramos executed in
in favor of his agent. favor of Socorro Roldan, personally, a deed of conveyance covering the
Pelayo vs. Perez, G.R. No. 141323, June 8, 2005 same seventeen parcels, for the sum of P15,000.
David Pelayo, by a Deed of Absolute Sale, conveyed to Melki Perez two
parcels of agricultural land. Loreza, wife of David Pelayo,k and another The Philippine Trust Company replaced Socorro Roldan as guardian, on
one whose signature is illegible witnessed the execution of the deed. August 10, 1948. And this litigation, started two months later, seeks to
Loreza, however, signed only the third page. Perez asked Loreza to sign undo what the previous guardian had done. The step-mother in effect,
on the first and second pages of the deed but refused, hence, he sold to herself, the properties of her ward, contends the plaintiff, and
instituted the instant complaint for specific performance against the the sale should be annulled because it violates Article 1459 of the Civil
spouses. Petitioners, in adopting the trial court’s narration of antecedent Code prohibiting the guardian from purchasing "either in person or
facts in their petition, admitted that they authorized respondent to through the mediation of another" the property of her ward.
represent them in negotiations with the “squatters” occupying the
disputed property and, in consideration of respondent’s services, they ISSUE: Whether or not the sale was valid.
executed the subject deed of sale. Defendant Pelayo claimed that the
deed was without his wife’s consent, hence, it is null and void. HELD: As Guardianship is a trust of the highest order, the trustee cannot
be allowed to have any inducement to neglect his ward's interest; and
ISSUE: Whether or not the deed of sale was null and void. whenever the guardian acquires the ward's property through an
intermediary, he violates the provision of Article 1459 of the Civil Code
HELD: Petitioner Lorenza, by affixing her signature to the Deed of Sale and such transaction and subsequent ones emanating therefrom shall
on the space provided for witnesses, is deemed to have given her be annulled.
implied consent to the contract of sale. Sale is a consensual contract
that is perfected by mere consent, which may either be express or Even without proof that she had connived with Dr. Ramos.
implied. A wife’s consent to the husband’s disposition of conjugal Remembering the general doctrine that guardianship is a trust of the
property does not always have to be explicit or set forth in any particular highest order, and the trustee cannot be allowed to have any
document, so long as it is shown by acts of the wife that such consent inducement to neglect his ward's interest and in line with the court's
or approval was indeed given. In the present case, although it appears suspicion whenever the guardian acquires the ward's property 1 we have
on the face of the deed of sale that Lorenza signed only as an no hesitation to declare that in this case, in the eyes of the law, Socorro
instrumental witness, circumstances leading to the execution of said Roldan took by purchase her ward's parcels thru Dr. Ramos, and that
document point to the fact that Lorenza was fully aware of the sale of Article 1459 of the Civil Code applies.
their conjugal property and consented to the sale.
Sale to public officers
Under Article 173, in relation to Article 166, both of the New Civil Code, Maharlika Broadcasting Corp. vs. Tagle
when the deed in question was executed, the lack of marital consent to The GSIS was the registered owner of a parcel of land that was sold to
the disposition of conjugal property does not make the contract void ab petitioner Maharlika Publishing Corporation together with the building
initio but merely voidable. It has been held that the contract is valid until thereon as well as the printing machinery and equipment therein.
the court annuls the same and only upon an action brought by the wife Among the conditions of the sale are that petitioner shall pay to the GSIS
whose consent was not obtained. In the present case, despite monthly installments until the total purchase price shall be fully paid and
respondent’s repeated demands for Lorenza to affix her signature on all that failure to pay any monthly installment within 90 days from due date,
the pages of the deed of sale, showing respondent’s insistence on the contract shall be deemed automatically cancelled. Maharlika failed
enforcing said contract, Lorenza still did not fle a case for annulment of to pay the installments for several months. This resulted to a public
the deed of sale. Thus, if the transaction was indeed entered into bidding of this particular property. Petitioner submitted a letter-proposal
without Lorenza’s consent, we find it quite puzzling why for more than that reads: “I bid to match the highest bidder.” The bidding committee
three and a half years, Lorenza did nothing to seek the nullification of rejected petitioner’s bid and accepted the private respondent Luz Tagle’s
the assailed contract. bid. After approval and confirmation of the sale, the GSIS executed a
Deed of Conditional Sale in favor of Tagles. Luz Tagle is the wife of
With regards to petitioner’s asservation that the deed of sale is invalid Edilberto Tagle. Edilberto Tagle was the Chief, Retirment Division, GSIS,
under Article 1491 (2) of the New Civil Code, we find such argument from 1970 to 1978. He worked for the GSIS since 1952.
unmeritorious. Petitioners, by signing the Deed of Sale in favor of
respondent, are also deemed to have given their consent to the sale of ISSUE: Whether or not the sale is valid.
the subject property in favor of respondent, thereby making the
transaction an exception to the general rule that agents are prohibited HELD: In providing the prohibitions under Article 1491, the Code tends
from purchasing the property of their principals. to prevent fraud, or more precisely, tends not give occasion for fraud,
which is what can and must be done.
Sale to guardians
Philippine Trust Co. vs Roldan The point is that he is a public officer and his wife acts for and in his
Parcels located in Guiguinto, Bulacan, were part of the properties name in any transaction with the GSIS. If he is allowed to participate in
inherited by Mariano L. Bernardo from his father, Marcelo Bernardo, the public bidding of properties foreclosed or confiscated by the GSIS,
deceased. In view of his minority, guardianship proceedings were there will always be the suspicion among other bidders and the general
instituted, wherein Socorro Roldan was appointed his guardian. She was public that the insider official had access to information and connection
the surviving spouse of Marcelo Bernardo, and the stepmother of said with his fellow GSIS official as to allow him to eventually acquire the
Mariano L. Bernardo. property. It is precisely the need to forestall such suspicions and to

restore confidence in the public service that the Civil Code now declares Banaag, as attorney-in-fact of his father-in-law (Eduardo) mortgage with
such transactions to be void from the beginning and not merely voidable. the Rural Bank for P100,000.00 with the subject lot as collateral. Banaag
deposited the owner’s duplicate certificate of OCT No. P-153 with the
Sale/transfer to attorney bank. Ricardo and Eduardo died.
Gurrea vs. Suplico, G.R. No. 144320, April 26, 2006
FACTS: Adelina Gurrea continued to be the owner of the lot (TCT No. The Cruzes, upon learning their right to the subject lot immediately tried
58253) until her death. Thereafter, a special proceeding was instituted to confront petitioners mortgage and obtain the surrender of the OCT.
to settle her estate. Under her will, the San Juan lot was bequeathed to Having failed to physically obtain the title from petitioners, the Cruzes
Pilar and Luis Gurrea, while 700,000 pesetas, ¼ of the lot in Baguio and went to RBSP which had custody of the owner’s duplicate certificate of
1-hectare piece of land in Negros Occidental were given to Ricardo the OCT. They were able to secure a clearance to borrow the title and
Gurrea. Ricardo Gurrea, represented by and through his counsel Atty. was able to have the Register of Deeds cancel the OCT and issue two
Enrique Suplico filed an Opposition in Special Proceeding No. 7185. In separate titles in the name of Ricardo and Eduardo.
consideration of said representation, Ricardo Gurrea agreed to pay Atty.
Suplico “a contigent fee of twenty (20%) of whatever is due me, either ISSUE: Whether or not the sale of the land is prohibited or not.
real or personal property.” Later on, Ricardo withdrew his Opposition.
The properties adjudicated to Ricardo based on the project of partition HELD: Free patent application implies the recognition of the public
were the Baguio lot, San Juan lot, and a parcel of land in Negros dominion character of the land and, hence, the five year prohibition
Occidental. As payment of his attorney’s fees, Ricarod Gurrea offered imposed by the Public land Act against alienation or encumbrance of the
the San Juan lot to Atty. Suplico who was hesitant to accept as the land covered by a free patent or homestead should have been
property was occupied by squatters. However, in order not to antagonize considered.
his client, Atty. Suplico agreed to Ricardo’s proposal with the further
understanding that he will receive an additional commission of 5% if he The deed of sale covering the 50 sq.m. right of way executed on March
sells the Baguio property. Thereafter, Atty. Suplico registered the deed 18, 1981 is obviously covered by proscription, the free patent having
of Transfer of Rights and Interest and obtained the title to the San Juan been issued on October 8, 1979. However, petitioners may recover the
property under his name. portion sold since the prohibition was imposed in favor of the free patent
holder. Under the Public Land Act, the prohibition to alienate is
ISSUE: Whether or not the subject property is still the object of predicated on the fundamental policy of the State to preserve and keep
litigation; If affirmative, whether or not the sale is void for being violative in the family of the homesteader that portion of public land which the
of the provisions of Article 1491 (5) of the Civil Code. State has gratuitously given to him, and recovery is allowed even where
the land acquired under the Public Land Act was sold and not merely
HELD: The sale to Atty. Suplico is null and void. encumbered, within the prohibited period.
A thing is said to be in litigation only if there is some contest or litigation The sale of the 533 sq.m. was executed 22 years before the issuance of
over it in court, but also from the moment that it becomes subject to the patent in 1976. Where the sale or transfer took place before the
the judicial action of the judge. In the present case, there is no proof to filing of the free patent application, whether by the vendor or the
show that at the time the deed of Transfer of Rights and Interest was vendee, the prohibition should not be applied. In such situation, neither
executed, the probate court issued an order granting the Motion for the prohibition not the rationale therefor which is to keep in the family
Termination of Proceeding and Discharge of the Executor and Bond. of the patentee that portion of the public land which the government
Since the judge has yet to act on the above-mentioned motion, if follows has gratuitously given him, by shielding him from the temptation to
that the subject property which is the subject matter of the deed of dispose of his landholdings, could be relevant. Precisely, he had
Transfer of Rights and Interest, is still the object of litigation. disposed of his rights to the lot even before the government could give
the title to him.
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 Effect of verbal sale within 5-year prohibitory period
was executed, the assignment of rights and interest over the subject Manzano vs. Ocampo, L-46850, June 20, 1940
property in favor of respondent is null and void for being violative of the Facts: Victoriano Manzano, now deceased, was granted a homestead
provisions of Article 1491 of the Civil Code which expressly prohibits patent on June 25, 1934, and the land was registered in his name on
lawyers from acquiring property or rights which may be the object of July 25, 1934 under Original Certificate of Title No. 4590. On January 4,
any litigation in which they may take party by virtue of their profession. 1938, he and respondent Rufino Ocampo agreed on the sale of said
homestead for the amount of P1,900.00, P1,100.00 of which was paid
INCAPACITY TO SELL by Ocampo to Manzano on the same day, and for the balance, he
executed a promissory note. Knowing, however, that any sale of the
A. Homesteaders homestead at that time was prohibited and void, the parties likewise
agreed that the deed of sale was to be made only after the lapse of five
Sale of portions of a parcel of land (1) prior to issuance and (2) years from the date of Manzano's patent. And to protect the buyer
within 5 years from issuance of free patent Ocampo's rights in the agreed sale, Manzano executed in his favor a
Manlapat vs. CA, G.R. No. 125585, June 8, 2005 "Mortgage of Improvements" over the homestead to secure the amount
The controversy involves Lot No. 2204 that had been originally in the of P1,100.00 already received as down payment on the price.
possession of Jose Alvarez, Eduardo’s grandfather, until his demise in
1916. It remained unregistered until October 8, 1976 when OCT No. P- It is clear that a perfected contract of sale had already been entered into
153 was issued in the name of Eduardo pursuant to a free patent issued by the parties within the period of prohibition. There was nothing
in Eduardo’s name that was entered in the Registry of Deed. Before the "futuristic" in this agreement, except that, being fully aware of the
subject lot was titled, Eduardo sold 533 sq.m. of the land to Ricardo on prohibition, Manzano's title has not ripened into absolute ownership.
December 19, 1954. The sale is evidence by a deed of sale entitled
“Kasulatan ng Bilihang Tuluyan ng Lupang Walang Titulo” which was This execution of the formal deed after the expiration of the prohibitory
signed by Eduardo himself as vendor and his wife Engracia Ancieto with period did not and could not legalize a contract that was void from its
a certain Santiago Enriquez signing as witness. The Kasulatan was inception. Nor was this formal deed of sale "a totally distinct transaction
registered with the Register of Deeds. On March 18, 1981, another Deed from the promissory note and the deed of mortgagee for it was executed
of Sale conveyed another portion of the subject lot as right of way was only in compliance and fulfillment of the vendor's previous promise,
executed by Eduardo in favor of Ricardo. The deed was notarized. Leon 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 (4) Public officers and employees, the property of the State or of
from the date of the homestead patent. any subdivision thereof, or of any government-owned or
controlled corporation, or institution, the administration of
Sale in question is illegal and void for having been made within five years which has been intrusted to them; this provision shall apply
from the date of Manzano's patent, in violation of section 118 of the to judges and government experts who, in any manner
Public Land Law. Being void from its inception, the approval thereof by whatsoever, take part in the sale;
the Undersecretary of Agriculture and Natural Resources after the lapse
of five years from Manzano's patent did not legalize the sale. The result (5) Justices, judges, prosecuting attorneys, clerks of superior and
is that the homestead in question must be returned to Manzano's heirs, inferior courts, and other officers and employees connected
who are, in turn, bound to restore to Ocampo the, sum of P3,000.00 with the administration of justice, the property and rights in
received by Manzano as the price thereof. litigation or levied upon an execution before the court within
whose jurisdiction or territory they exercise their respective
functions; this prohibition includes the act of acquiring by
When incompetent buys – he must pay a reasonable price for assignment and shall apply to lawyers, with respect to the
necessaries delivered to him. The resulting sale is valid. property and rights which may be the object of any litigation
in which they may take part by virtue of their profession;
The above rule seems to be founded on quasi-contract.
(6) Any others specially disqualified by law. (1459a)
Effect of forbidden sales
1. Between husband and wife under the community regime, the Article 1492. The prohibitions in the two preceding articles are
sale is void. But strangers cannot assail the transfer. applicable to sales in legal redemption, compromises and renunciations.
(n)
2. Between persons in trust relations, as regards –
A) 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)
iii) Executors and administrators (1491, par. 3)

Such sales are voidable, not void
Article 1489. All persons who are authorized in this Code to obligate
themselves, may enter into a contract of sale, saving the modifications
contained in the following articles.
Where necessaries are those sold and delivered to a minor or other

person without capacity to act, he must pay a reasonable price therefor.
Necessaries are those referred to in article 290. (1457a)
Article 1490. The husband and the wife cannot sell property to each
other, except:
(1) When a separation of property was agreed upon in the

marriage settlements; or
(2) When there has been a judicial separation of property under

article 191. (1458a)
Article 1491. The following persons cannot acquire by purchase, even

at a public or judicial auction, either in person or through the mediation
of another:
(1) The guardian, the property of the person or persons who may
be under his guardianship;
(2) Agents, the property whose administration or sale may have

been intrusted to them, unless the consent of the principal
has been given;
(3) Executors and administrators, the property of the estate

under administration;

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SALES Judge Ma. Lynna P.

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Ang Yu Asuncion vs. CA

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Interpretation of document denominated “Agreement of

DISTINCTIONS Spouses Robles, respondents in the case at bar bound themselves to

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aforecited stipulation shows that the vendors reserved title to the

OBJECT DETERMINATE/ DETERMINABLE

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enjoyment. The subject parcel, being an inherited property, is subject

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Manila Metal Container Corporation v. PNB

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executed a Deed of Sale in favor of Mabanag. In the complaint for

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ii) Judges, Justices, Prosecutors, Clerks of Court, lawyers

ii) Agents (1491, par. 2)

iii) Executors and administrators (1491, par. 3)

Where necessaries are those sold and delivered to a minor or other

(1) When a separation of property was agreed upon in the

(2) When there has been a judicial separation of property under

Article 1491. The following persons cannot acquire by purchase, even

(2) Agents, the property whose administration or sale may have

(3) Executors and administrators, the property of the estate

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