Concept of Sale to Elements of a Contract of Sale-2B Case Digest

Sales Case Digests

2B S.Y. 2011-2012

Atty. Manuel Casiño Topic: Absolute and Conditional Sales/ Art. 1545 Delta Motors vs. Genuino G.R. No. 55665, February 8, 1989 Cortes, J. Facts:

Private Respondents are owners of an iceplant and cold storage who ordered black iron pipes to Delta Motors (herein petitioner) for which the latter provided two letter quotations indicating the selling price and delivery of said pipes. The terms of payment are also included in the letter quotations which must be complied with by the respondents. Private respondents made initial payments on both contracts but delivery of the pipes was not made by Delta Motors so that the Genuinos are not willing to give subsequent payments notwithstanding the agreed terms of payment requiring them of such. In July 1972 Delta offered to deliver the iron pipes but the Genuinos did not accept the offer because the construction of the ice plant building where the pipes were to be installed was not yet finished. Three years later, on April 15, 1975, Hector Genuino, in behalf of España Extension Ice Plant and Cold Storage, asked Delta to deliver the iron pipes within thirty (30) days from its receipt of the request. But petitioner Delta is unwilling to deliver said iron pipes unless the Genuinos agree to a new quotation price set by the former. Private Respondents rejected the new quoted prices and instead filed a complaint for specific performance with damages seeking to compel Delta to deliver the pipes. Meanwhile, Delta, in its answer prayed for rescission of the contracts pursuant to Art. 1191 of the New Civil Code. Issue: Whether or not Delta is entitled for rescission of contract as the latter is subject to suspensive conditions and only upon their performance or compliance would its obligation to deliver the pipes arise? Held: No. While there is merit in Delta's claim that the sale is subject to suspensive conditions, the Court finds that it has, nevertheless, waived performance of these conditions and opted to go on with the contracts although at a much higher price. Art. 1545 of the Civil Code provides: Art. 1545. Where the obligation of either party to a contract of sale is subject to any condition which is not performed, such party may refuse to proceed with the contract or he may waived performance of the condition. . . it would be highly inequitable for petitioner Delta to rescind the two (2) contracts considering the fact that not only does it have in its possession and ownership the black iron pipes, but also the down payments private respondents have paid. Delta cannot ask for increased prices based on the price offer stipulation in the contracts and in the increase in the cost of goods. Reliance by Delta on the price offer stipulation is misplaced. The moment private respondents accepted the offer of Delta, the contract of sale between them was perfected and neither party could change the terms thereof. Neither could petitioner Delta rely on the fluctuation in the market price of goods to support its claim for rescission.

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Sales Case Digests Atty. Manuel Casiño

2B S.Y. 2011-2012

Topic: Absolute and Conditional Sales G.R. No. 107207 November 23, 1995 VIRGILIO R. ROMERO, Petitioner, vs. HON. COURT OF APPEALS and ENRIQUETA CHUA VDA. DE ONGSIONG, Respondents. Ponente: VITUG, J.: Facts: The petitioner decided to put up a central warehouse in Metro Manila on a land area of approximately 2,000 square meters. The respondents: The land owned by private respondent was offered measuring 1,952 square meters. Petitioner visited the property and, except for the presence of squatters in the area, he found the place suitable for a central warehouse. Private respondent, through her brokers, called on petitioner with a proposal that should petitioner advance the amount of P50,000.00 which could be used in taking up an ejectment case against the squatters, private respondent would agree to sell the property for only P800.00 per square meter. Petitioner expressed his concurrence. On 09 June 1988, a contract, denominated "Deed of Conditional Sale," was executed between petitioner and private respondent. However, private respondent sought to return the P50,000.00 she received from petitioner since she could not "get rid of the squatters" on the lot but petitioner, through a counsel, refused the tender. Petitioner's continued refusal to accept the return of the P50,000.00 advance payment, made private respondent to file with the RTC of Makati a civil case for the rescission of the deed of "conditional" sale, plus damages, and for the consignation of P50,000.00 cash. The RTC rendered decision holding that private respondent had no right to rescind the contract since it was she who "violated her obligation to eject the squatters from the subject property" and that petitioner, being the injured party, was the party who could, under Article 1191 of the Civil Code, rescind the agreement. The case was elevated to the CA. The CA reversed the RTC’s ruling. It opined that the contract entered into by the parties was subject to a resolutory condition, i.e., the ejectment of the squatters from the land, the non-occurrence of which resulted in the failure of the object of the contract; that private respondent substantially complied with her obligation to evict the squatters; that it was petitioner who was not ready to pay the purchase price and fulfill his part of the contract, and that the provision requiring a mandatory return/reimbursement of the P50,000.00 in case private respondent would fail to eject the squatters within the 60-day period was not a penal clause.

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Sales Case Digests Atty. Manuel Casiño

2B S.Y. 2011-2012

Issue: May the vendor demand the rescission of a contract for the sale of a parcel of land for a cause traceable to his own failure to have the squatters on the subject property evicted within the contractually-stipulated period? Held: The ruling of the CA was reversed by the SC ordering private respondent to execute the deed of absolute sale in favor of petitioner. In determining the real character of the contract, the title given to it by the parties is not as much significant as its substance. For example, a deed of sale, although denominated as a deed of conditional sale, may be treated as absolute in nature, if title to the property sold is not reserved in the vendor or if the vendor is not granted the right to unilaterally rescind the contract predicated on the fulfillment or non-fulfillment, as the case may be, of the prescribed condition. The term "condition" in the context of a perfected contract of sale pertains, in reality, to the compliance by one party of an undertaking the fulfillment of which would beckon, in turn, the demandability of the reciprocal prestation of the other party. The reciprocal obligations referred to would normally be, in the case of vendee, the payment of the agreed purchase price and, in the case of the vendor, the fulfillment of certain express warranties (which, in the case at bench is the timely eviction of the squatters on the property). It would be futile to challenge the agreement here in question as not being a duly perfected contract. A sale is at once perfected when a person (the seller) obligates himself, for a price certain, to deliver and to transfer ownership of a specified thing or right to another (the buyer) over which the latter agrees. The object of the sale, in the case, was specifically identified to be a 1,952-square owned by private respondent. The purchase price was fixed, of which P50,000.00 was to be paid upon the execution of the document of sale and the balance payable "45 days after the removal of all squatters. From the moment the contract is perfected, the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all the consequences which, according to their nature, may be in keeping with good faith, usage and law. Under the agreement, private respondent is obligated to evict the squatters on the property. The ejectment of the squatters is a condition the operative act of which sets into motion the period of compliance by petitioner of his own obligation, i.e., to pay the balance of the purchase price. Private respondent's failure "to remove the squatters from the property" within the stipulated period gives petitioner the right to either refuse to proceed with the agreement or waive that condition in consonance with Article 1545 of the Civil Code. This option clearly belongs to petitioner and not to private respondent.

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Sales Case Digests Atty. Manuel Casiño

2B S.Y. 2011-2012

De Leon vs. Benita T. Ong GR No. 170405, Feb. 2, 2010 Absolute and Conditional Sales Facts: On March 10, 1993, Raymundo S. De Leon (petitioner) sold 3 parcels of land to Benita T. Ong (respondent). The said properties were mortgaged to a financial institution; Real Savings & Loan Association Inc. (RSLAI). The parties then executed a notarized deed of absolute sale with assumption of mortgage. As indicated in the deed of mortgage, the parties stipulated that the petitioner (de leon) shall execute a deed of assumption of mortgage in favor of Ong (respondent) after full payment of the P415,000. They also agreed that the respondent (Ong) shall assume the mortgage. The respondent then subsequently gave petitioner P415,000 as partial payment. On the other hand, de leon handed the keys to Ong and de leon wrote a letter to inform RSLAI that the mortgage will be assumed by Ong. Thereafter, the respondent took repairs and made improvements in the properties. Subsequently, respondent learned that the same properties were sold to a certain Viloria after March 10, 1993 and changed the locks, rendering the keys given to her useless. Respondent proceeded to RSLAI but she was informed that the mortgage has been fully paid and that the titles have been given to the said person. Respondent then filed a complaint for specific performance and declaration of nullity of the second sale and damages. The petitioner contended that respondent does not have a cause of action against him because the sale was subject to a condition which requires the approval of RSLAI of the mortgage. Petitioner reiterated that they only entered into a contract to sell. The RTC dismissed the case. On appeal, the CA upheld the sale to respondent and nullified the sale to Viloria. Petitioner moved for reconsideration to the SC. Issue: Whether the parties entered into a contract of sale or a contract to sell? Held: In a contract of sale, the seller conveys ownership of the property to the buyer upon the perfection of the contract. The non-payment of the price is a negative resolutory condition. Contract to sell is subject to a positive suspensive condition. The buyer does not acquire ownership of the property until he fully pays the purchase price. In the present case, the deed executed by the parties did not show that the owner intends to reserve ownership of the properties. The terms and conditions affected only the manner of payment and not the immediate transfer of ownership. It was clear that the owner intended a sale because he unqualifiedly delivered and transferred ownership of the properties to the respondent.

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Sales Case Digests Atty. Manuel Casiño

2B S.Y. 2011-2012

Topic: Contract to Sell Cordero et al v. F.S. Management Development Corp. G.R. No. 167213 October 31, 2006 Carpio-Morales, J. Facts: Belen Cordero and 6 others entered in a contract to sell with F.S. Management Development Corp. (F.S.) over 5 parcels of land located in Nasugbu, Batangas. Under the terms of the contract F.S. will pay a down payment of P3.5 M and pay the remaining balance in 6 quarterly instalments. However F.S. defaulted from paying the instalments. Hus, after demanding from F.S., Belen and the others filed a complaint for rescission of the contract with damages. F.S. contends that it was Belen and the others who first violated the contract to sell by preventing access to the properties despite paying P2.5 M worth of earnest money and two instalments and that Belen and the others refused to execute the final contract of sale unless additional payment of legal interest is made because another buyer was willing to pay a higher price. The RTC ruled in favour of Belen and the others while the CA ruled in favour of F.S. In their motion for reconsideration, Belen and the others contend that the contract to sell may be subject to rescission under Article 1191 of the Civil Code as it involves reciprocal obligations. Issue: Whether or not the contract to sell may be subject to rescission under Art. 1191? Held:

No. Under the contract to sell, the seller retains title to the thing sold until the purchaser fully pays the agreed purchase price. The full payment is a positive suspensive condition, the non fulfilment of which is not a breach of contract but merely an event which prevents the seller from conveying title to the purchaser. The non-payment of the purchase price renders the contract to sell ineffective and without force and effect. Since the obligation of the petitioners did not arise because of the failure of respondent to fully pay the purchase price Art. 1191 would have no application. Art. 1191 will not apply because it presupposes obligations already existent. There can be no rescission of an obligation that is still nonexisting, the suspensive condition not having happened. (Note: The 6 other petitioners are: Darrel Cordero, Egmedio Bautista, Rosemary Bautista, Marion Bautista, Danny Boy Cordero and Ladylyn Cordero)

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Sales Case Digests Atty. Manuel Casiño

2B S.Y. 2011-2012

Distinguished from Dacion in Payment DAO HENG BANK, INC., now BDO UNIVERSAL BANK vs. SPS. LILIA and REYNALDO LAIGO G.R. No. 173856 November 20, 2008 CARPIO MORALES, J.: Facts: Spouses Laigo obtained P11M loan from Dao Heng Bank secured by three real estate mortgages covering two parcels of land of the said spouses. The spouses failed to pay their outstanding obligation drawing them to verbally offer to cede to Dao Heng one of the two mortgaged lots by way of dacion en pago. The properties were appraised but there were no further action of the parties after the appraisal. Dao Heng demanded for payment but the spouses failed to pay. Thus, the properties were foreclosed and sold at a public auction. The spouses filed for a complaint praying for the annulment of the foreclosure of the properties subject of the real estate mortgages and for them to be allowed "to deliver by way of ‘dacion en pago' one of the mortgaged properties as full payment of their mortgaged obligation". Issue:Whether the obligation of the spouses has been extinguished through dacion en pago. Held: No.There is no concrete showingthat after the appraisal of the properties, petitioner approved respondents' proposal to settle their obligation via dacion en pago. Dacion en pago as a mode of extinguishing an existing obligation partakes of the nature of sale whereby property is alienated to the creditor in satisfaction of a debt in money.It is an objective novation of the obligation, hence, common consent of the parties is required in order to extinguish the obligation. . . . In dacion en pago, as a special mode of payment, the debtor offers another thing to the creditor who accepts it as equivalent of payment of an outstanding debt. The undertaking really partakes in one sense of the nature of sale, that is, the creditor is really buying the thing or property of the debtor, payment for which is to be charged against the debtor's debt. As such the elements of a contract of sale, namely, consent, object certain, and cause or consideration must be present. In its modern concept, what actually takes place in dacion en pago is an objective novation of the obligation where the thing offered as an accepted equivalent of the performance of an obligation is considered as the object of the contract of sale, while the debt is considered the purchase price. In any case, common consent is an essential prerequisite, be it sale or novation, to have the effect of totally extinguishing the debt or obligation."Being likened to that of a contract of sale,dacion en pago is governed by the law on sales. The partial execution of a contract of sale takes the transaction out of the provisions of the Statute of Frauds so long as the essential requisites of consent of the contracting parties, object and cause of the obligation concur and are clearly established to be present.

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Sales Case Digests Atty. Manuel Casiño

2B S.Y. 2011-2012

Distinguished from Payment by Cession Development Bank of the Philippines vs. Court of Appeals and Lydia Cuba G.R. No. 118342 January 5, 1998 Davide, Jr.: Facts: Petitioner Lydia P. Cuba, a grantee of a Fishpond Lease Agreement, obtained loans from defendant Development Bank of the Philippines (DBP). As security for said loans, Cuba executed two Deeds of Assignment of her Leasehold Rights. When she failed to pay her loan on the scheduled dates in accordance with the terms of the Promissory Notes, respondent DBP appropriated the Leasehold Rights of petitioner over the fishpond in question without foreclosure proceedings. Thereafter, defendant DBP executed a Deed of Conditional Sale of the Leasehold Rights in favor of Cuba over the same fishpond. Petitioner again failed to pay the amortizations stipulated in the Deed of Conditional Sale. Defendant DBP took possession of the Leasehold Rights of the fishpond and executed a Deed of Conditional Sale in favor of defendant Agripina Caperal. Cuba argues that the assignment of leasehold rights was a mortgage contract and that the act of DBP in appropriating to itself CUBA's leasehold rights over the fishpond in question without foreclosure proceedings was invalid. DBP stressed that it merely exercised its contractual right under the Assignments of Leasehold Rights, which was a payment by cession. The trial court ruled that DBP never acquired lawful ownership of CUBA's leasehold rights. On appeal, the court reversed the decision hence, this petition. Issue: Whether or not the assignment of Cuba’s leasehold rights is a payment by cession? Held: No, the assignment of leasehold rights was a mortgage contract. In their stipulation of facts the parties admitted that the assignment was by way of security for the payment of the loans. An assignment to guarantee an obligation is in effect a mortgage. Moreover, the assignment does not amount to payment by cession under Article 1255 of the Civil Code for the plain and simple reason that there was only one creditor, the DBP. Article 1255 contemplates the existence of two or more creditors and involves the assignment of all the debtor's property. Thus, the assignment, being in its essence a mortgage, was but a security and not a satisfaction of indebtedness.

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Sales Case Digests

2B S.Y. 2011-2012

Atty. Manuel Casiño Topic: Distinguished from Contract of Agency to Sell Quiroga v. Parsons Hardware Co., G.R. No. 11491. August 23, 1918 Ponente: J. Avancena Facts:

On January 24, 1911, plaintiff Andres Quiroga and J. Parsons (to whose rights and obligations the present defendant Parsons Hardware Co. later subrogated itself) entered into a contract, where it was stated among others that Quiroga grants in favor of Parsons the exclusive rights to sell his beds in the Visayan Islands under some conditions. One of the said conditions provided that “Mr. Parsons may sell, or establish branches of his agency for the sale of "Quiroga" beds in all the towns of the Archipelago where there are no exclusive agents, and shall immediately report such action to Mr. Quiroga for his approval” while another one passed on to Parsons the obligation to order by the dozen and in no other manner the beds from Quiroga. Alleging that the Parsons was his agent for the sale of his beds in Iloilo, Quiroga filed a complaint against the former for violating the following obligations implied in what he contended to be a contract of commercial agency: not to sell the beds at higher prices than those of the invoices; to have an open establishment in Iloilo; itself to conduct the agency; to keep the beds on public exhibition, and to pay for the advertisement expenses for the same; and to order the beds by the dozen and in no other manner. Issue: Is the defendant, by reason of the contract, a purchaser or an agent of the plaintiff for the sale of the latter’s beds in Iloilo? Held: The Supreme Court declared that the contract by and between the plaintiff and the defendant was one of purchase and sale, and that the obligations the breach of which is alleged as a cause of action are not imposed upon the defendant, either by agreement or by law. In order to classify a contract, due regard must be given to its essential clauses. In the contract in question, what was essential, as constituting its cause and subject matter, is that the plaintiff was to furnish the defendant with the beds which the latter might order, at the price stipulated, and that the defendant was to pay the price in the manner stipulated. There was the obligation on the part of the plaintiff to supply the beds, and, on the part of the defendant, to pay their price. These features exclude the legal conception of an agency or order to sell whereby the mandatory or agent received the thing to sell it, and does not pay its price, but delivers to the principal the price he obtains from the sale of the thing to a third person, and if he does not succeed in selling it, he returns it.

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Sales Case Digests

2B S.Y. 2011-2012

Atty. Manuel Casiño Topic: Distinguished from Contract of Agency to Sell or a Contract of Sale Lim vs. People G.R. No. L-34338 Nov. 21, 1984

Ponente: Justice Relova Facts: Lourdes Valerio Lim, a businesswoman, was found guilty of the crime of estafa after failing to comply with her obligation to give Maria de Guzman Vda. De Ayroso the expected profit (P799.50) from the latter’s tobacco consisting of 615 kilos at P1.30/kilo which was sold by Lim, as agent of Ayroso. Under the agreement, the appellant was to receive the overprice for which she could sell the tobacco. Lim issued a receipt to Ayroso after receiving the tobacco, and the transaction was witnessed by Ayroso’s sister and maid. However, after selling the tobacco, Lim was only able to give Ayroso P240.00 in three (3) installments and failed to deliver the balance even after demands from the plaintiff. CA affirmed the decision of the lower court as well as its claim that the receipt issued by the petitioner is a contract of agency to sell as against Lim’s theory that it is a contract of sale. Issue: whether the receipt is a contract of agency to sell or a contract of sale of the subject tobacco, thereby precluding criminal liability of petitioner for the crime charged. Held: It is clear in the agreement, Exhibit "A", that the proceeds of the sale of the tobacco should be turned over to the complainant as soon as the same was sold, or, that the obligation was immediately demandable as soon as the tobacco was disposed of. Anent the argument that petitioner was not an agent because Exhibit "A" does not say that she would be paid the commission if the goods were sold, the acts of the petitioner negates her argument as she clearly intend to make a profit out of the transaction. The fact that appellant received the tobacco to be sold at P1.30 per kilo and the proceeds to be given to complainant as soon as it was sold (contract of agency to sell), strongly negates transfer of ownership of the goods (contract of sale) to the petitioner. The agreement (Exhibit "A') constituted her as an agent with the obligation to return the tobacco if the same was not sold.

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Sales Case Digests Atty. Manuel Casiño

2B S.Y. 2011-2012

DISTINGUISHED FROM CONTRACT FOR A PIECE OF WORK Commissioner of Internal Revenue vs. Engineering Equipment and Supply Company and the Court of Tax Appeals G.R. No. L-27044 June 30, 1975 Engineering Equipment and Supply Company vs. Commissioner of Internal Revenue and the Court of Tax Appeals G.R. No. L-27452 June 30, 1975 FACTS: Engineering Equipment and Supply Company (EESC), engaged in design and installation of central type air conditioning system, pumping plants and steel fabrications, was accused of tax evasion by misdeclaring its imported articles and failing to pay the correct percentage taxes due thereon in connivance with its foreign supplier. One Juan de la Cruz allegedly wrote the then Collector, now Commissioner, of Internal Revenue and denounced EESC, as well as to the Central Bank (CB). A raid was then conducted by CB together with the National Bureau of Investigation (NBI), where several records of EESC were seized and confiscated. The revenue examiners reported that EESC has a P916,362.56 deficiency advance sales tax and manufacturers sales tax. The Commissioner then assessed and demanded EESC the payment of such and a P10,000 compromise in extrajudicial settlement of EESC’s penal liability for violating the Tax Code. EESC contested the assessment but the Commissioner said that it was in accordance with the law. EESC appealed to the Court of Tax Appeals (CTA) and the investigating revenue examiners reduced the deficiency of EESC to P740, 587.86 during the pendency of the case. The reduction was due to the finding of CTA that EESC is a contractor, hence, the manufacturer’s sales tax was subtracted from the original assessed tax. The Commissioner then appealed, arguing, among others, that the CTA erred in holding EESC as a contractor and not a manufacturer. ISSUE: Whether or not EESC is a manufacturer of air conditioning units. RULING: No. EESC is a contractor. The Court provided that the distinction between a contract of sale and one for work, labor and materials is tested by the inquiry whether the thing transferred is one not in existence and which never would have existed but for the order of the party desiring to acquire it, or a thing which would have existed and has been the subject of sale to some other persons even if the order had not been given. If the article ordered by the purchaser is exactly such as the plaintiff makes and keeps on hand for sale to anyone, and no change or modification of it is made at defendant's request, it is a contract of sale, even though it may be entirely made after, and in consequence of, the defendants order for it. The Civil Code likewise distinguishes the two, as provided in Article 1467. Moreover, the Court discussed that a contractor is specially referred to as a person who, in the pursuit of the independent business, undertakes to do a specific job or piece of work for other persons, using his own means and methods without submitting himself to control as to the petty details. The true test of a contractor would seem to be that he renders service in the course of an independent occupation, representing the will of his employer only as to the result of his work, and not as to the means by which it is accomplished. Page | 10

Sales Case Digests Atty. Manuel Casiño

2B S.Y. 2011-2012

Based on the facts and circumstances provided by the record of BIR and CTA, and from the exhibits submitted by both EESC and the Commissioner, the Court found that EESC did not manufacture air conditioning units for sale to the general public, but imported some items which were used in executing contracts entered into by it. It undertook negotiations and execution of individual contracts for design, supply, and installation of central type air conditioning units. EESC nevertheless was found guilty of fraud for misdeclaring its importation of air conditioning units and spare parts or accessories thereof to evade payment of a 30% compensating tax, for which it shall also be subject to a 25% surcharge for delinquency in the payment of said tax. As such, the Court affirmed the decision of CTA with modification that EESC be made liable to pay 50% fraud surcharge.

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Sales Case Digests Atty. Manuel Casiño

2B S.Y. 2011-2012

Elements of a Contract of Sale G.R. No. 159723 : September 9, 2004 ANTONIO S. LIM, JR., represented by his attorney-in-fact, PAZ S. LIM, petitioner vs. VICTOR K. SAN and ELINDO LO, Respondents Facts: Petitioner Antonio S. Lim, Jr., represented by his mother, Paz S. Lim, as attorney-in-fact, filed a complaint4 before the Regional Trial Court of Davao City seeking the annulment of a Deed of Absolute Sale5 involving a parcel of land purportedly executed by Paz S. Lim in favor of her brother, respondent Victor K. San. The petitioner alleged that the signature of the Attorney-in-Fact in the aforecited Deed of Absolute Sale was obtained through fraud and trickery employed by the herein defendant and that she never appeared before the Notary Public, who notarized the said deed and that no consideration was ever paid, much less received by the plaintiff or by his Attorney-in-Fact. Simply put, the Deed of Absolute Sale was void ab initio for lack of consideration and for lack of a valid consent; Issue: Whether or not the Deed of Absolute Sale obtained by the defendant was void Held: A contract is a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service.12 It has three essential elements, or those without which there can be no contract consent, subject matter and cause. A knowledge of these essential elements is material because the perfection stage or the birth of the contract only occurs when the parties to a contract agree upon the essential elements of the same.14 A contract of sale is consensual, as such it is perfected by mere consent.16 Consent is essential for the existence of a contract, and where it is wanting, the contract is non-existent.17 Consent in contracts presupposes the following requisites: (1) it should be intelligent or with an exact notion of the matter to which it refers; (2) it should be free; and (3) it should be spontaneous. Intelligence in consent is vitiated by error; freedom by violence, intimidation or undue influence; and spontaneity by fraud.18 Thus, a contract where consent is given through mistake, violence, intimidation, undue influence or fraud is voidable. In determining whether consent is vitiated by the circumstances provided for in Article 1330 of the Civil Code of the Philippines, courts are given a wide latitude in weighing the facts or circumstances in a given case and in deciding in favor of what they believe to have actually occurred, considering the age, physical infirmity, intelligence, relationship and the conduct of the parties at the time of making the contract and subsequent thereto, irrespective of whether the contract is in a public or private writing.20 The petition is DENIED.

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Sales Case Digests

2B S.Y. 2011-2012

Atty. Manuel Casiño Topic: Elements of the Contract of Sale Swedish Match AB vs. Court of Appeals G.R. No. 128120, October 20, 2004 Ponente: Tinga, J. Facts:

Swedish Match, AB (SMAB) is a corporation organized under the laws of Sweden, however, had 3 subsidiary corporations in the Philippines organized under Philippine laws: Phimco, Provident Tree Farms, Inc, and OTT/Louie (Phils,), Inc.

In 1988, STORA, its parent company, decided to sell SMAB and the latter’s worldwide match, lighter and shaving products operation to Swedish Match NV (SMNV). Enriquez, VP of SMSA (management company of SMAB), was held under special instructions that the sale of Phimco shares should be executed on or before June 30, 1990. Respondent GM Antonio Litonjua of ALS Management and Development Corp. was one of the interested parties to acquire Phimco shares, offering US$36 million. After an exchange of information between CEO Rossi of SMAB and Litonjua, the latter informed that they may not be able to submit their final bid on the given deadline considering that the acquisition audit of Phimco and the review of the draft agreements have not been completed. In a letter dated July 3, 1990, Rossi informed Litonjua that on July 2, SMAB signed a conditional contract with a local group for the disposal of Phimco and that the latter’s bid would no longer be considered unless the local group would fail to consummate the transaction on or before September 15, 1990. Irked by SMAB’s decision to junk his bid, Litonjua asserted that the US$36 million bid was final, thus finalizing the terms of the sale. After 2 months from receipt of Litonjua’s letter, Enriquez informed the former that the proposed sale with the local buyers did not materialize and invited to resume negotiations for the sale of Phimco shares based on a new set of conditions, as to reducing the period of sale from 30-day to 15, to which Litonjua expressed objections and emphasized that the new offer constituted an attempt to reopen the already perfected contract of sale. Issue:

Whether or not there was a perfected contract of sale between petitioners and respondents, with respect to the Phimco shares. Held:

No, there was no perfected contract of sale since Litonjua’s letter of proposing acquisition of the Phimco shares for US$36 million was merely an offer. Consent in a contract of sale should be manifested by the meeting of the offer and acceptance upon the thing and the cause which are to constitute the contract. The lack of a definite offer on the part of the respondents could not possibly serve as the basis of their claim that the sale of the Phimco shares in their favour was perfected, for one essential element of a contract of sale needed to be certain --- the price in money or its equivalent. Obviously, there can be no sale without a price. Respondents’ attempt to prove the alleged verbal acceptance of their US$36 million bid becomes futile since there was in the first place no meeting of the minds with respect to the price, and such was merely a preliminary offer. Respondents’ failure to submit their final bid on the deadline set by the petitioners prevented the perfection of the contract of sale. *Petition was GRANTED. Page | 13

Sales Case Digests

2B S.Y. 2011-2012

Atty. Manuel Casiño Topic: Elements of the Contract of Sale

MANILA METAL CONTAINER CORPORATION, vs. PHILIPPINE NATIONAL BANK G.R. No. 166862

December 20, 2006

CALLEJO, SR., J.: Facts: Petitioner Manila Metal Container Corporation (MMCC) obtained a loan of 900,000 from respondent bank in which he executed a real estate mortgage on one of its lots. MMCC however failed to comply with the payment of the loan. PNB then filed an extrajudicial foreclosure of the estate mortgage ans sought to have the property sold at a public auction. PNB was declared the winning bidder. MMCC then requested an extension of time to repurchase the property on instalment basis bit it was rejected by PNB. Meanwhile, the Special Assets Management Department (SAMD) had prepared a statement of account, and as of June 25, 1984 petitioner's obligation amounted to P1,574,560.47. When apprised of the statement of account, petitioner remitted P725,000.00 to respondent PNB as "deposit to repurchase," and Official Receipt No. 978191 was issued stating that “The deposit of P725,000 was accepted by PNB on the condition that the purchase price is still subject to the approval of the PNB Board.” SAMD then informed MMCC that the current market price of the lot was at 2,660,000 which the latter rejected with a counter offer and insisted that it should be 1,574,560. PNB’s Board of Directors then accepted MMCC’s offer to purchase the property but for 1,931,389 in cash. Again, MMCC insisted on the 1.5M. MMCC’s claim rests on the argument that PNB approved the repurchase price of P1,574,560.47 for which it accepted P725,000.00 from Manila Metal. PNB cannot take advantage of its own delay and long inaction in demanding a higher amount based on unilateral computation of interest rate without the consent of Manila Metal. The trial court and the CA ruled that there was no perfected contract of sale because there was no meeting of the minds. Issue: Whether or not there is a perfected contract of sale between the parties. Held: No, there is none. A contract is a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service. Under Article 1318 of the New Civil Code, there is no contract unless the following requisites concur: (1) Consent of the contracting parties; (2) Object certain which is the subject matter of the contract; (3) Cause of the obligation which is established. Contracts are perfected by mere consent which is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. Once perfected, they bind other contracting parties and the obligations arising therefrom have the form of law between the parties and should be complied with in good faith. Page | 14

Sales Case Digests Atty. Manuel Casiño

2B S.Y. 2011-2012

By the contract of sale, one of the contracting parties obligates himself to transfer the ownership of and deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent. The absence of any of the essential elements will negate the existence of a perfected contract of sale. A contract of sale is consensual in nature and is perfected upon mere meeting of the minds. When there is merely an offer by one party without acceptance of the other, there is no contract. When the contract of sale is not perfected, it cannot, as an independent source of obligation, serve as a binding juridical relation between the parties. NOTE: In San Miguel Properties Philippines, Inc. v. Huang, the Court ruled that the stages of a contract of sale are as follows: (1) negotiation, covering the period from the time the prospective contracting parties indicate interest in the contract to the time the contract is perfected; (2) perfection, which takes place upon the concurrence of the essential elements of the sale which are the meeting of the minds of the parties as to the object of the contract and upon the price; and (3) consummation, which begins when the parties perform their respective undertakings under the contract of sale, culminating in the extinguishment thereof. In the instant case, the parties involved did not even get pass the negotiation stage. A qualified acceptance or one that involves a new proposal constitutes a counter-offer and a rejection of the original offer. A counter-offer is considered in law, a rejection of the original offer and an attempt to end the negotiation between the parties on a different basis. What happened is that MMCC offered to repurchase which PNB rejected. It then offered the down payment of 700K+ as partial payment of the 1.5M. This was never approved by the PNB for they demanded 1.9M. But again, MMCC insisted on the 1.5M. There was never an acceptance to speak off in the first place. A contract of sale was never perfected.

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Atty. Manuel Casiño Topic: Elements of the Contract of Sale Abalos v. Macatangay Jr. G.R. No. 155043, Sept. 30, 2004 Tinga, J.

Facts: Spouses Arturo and Esther Abalos are registered owners of a parcel of land in Makati City. On June 2, 1988, armed with purportedly Special Power of Attorney (SPA) issued by his wife, Arturo executed a Receipt and Memorandum of Agreement (RMOA) in favor of the respondent binding himself to sell the subject property to the latter and not to offer the same to other party within 30 days from date. Arturo acknowledged the receipt of P5,000, which will be deducted from the total agreed price of the subject property amounting to P1,300,000. Seemingly, a marital squabble was brewing between the spouses. Esther executed a SPA appointing her sister to act in her behalf in connection the transfer of the property to the respondent. On November 16, 1989, respondent sent a letter to the spouses informing the latter of his willingness to pay the agreed purchase price and thereafter. On that very same day, Esther executed a Contract to Sell to the extent of her conjugal interest and obligated herself to surrender the possession of the property and to execute a deed of absolute sale upon full payment. Respondent sent a letter dated December 7, 1989 informing the spouses that he had already prepared a check to cover the remaining unpaid balance of the purchase price and reiterated his demand to the latter to fulfil their obligation. However, the spouses failed o deliver the land causing the respondent to file a complaint for specific performance. The RTC dismissed the case and ruled that the SPA ostensibly issued by Esther in favor of his husband was void, as it was falsified. Thus, the latter has no authority to sell the property. This ruling by the RTC was reversed by the CA. The appellate court ruled that the SPA in favor of Arturo, assuming that it was void, cannot affect the transaction between Ester and respondent. It was by virtue of the SPA executed by Esther appointing her sister in her behalf which binds Esther to sell the property to the respondent. Issue: WON there was a perfected contract of sale executed between the petitioner and respondent. Held: No. In a contract of sale, the seller must consent to transfer the ownership in exchange for the price, the subject matter must be determinate, and the price must be certain in money or its equivalent. In this case, there was no contract of sale rather a perfected contract of option was entered into by Arturo and respondent. An option merely grants a privilege to buy or sell within the agreed time and purchase price. A perfected contract of option does not result in the perfection of the sale. It is only when the option is exercised may a sale be perfected. The P5,000 paid by respondent is viewed not as earnest money but merely an option money. RMOA signifies a unilateral offer of Arturo to sell the property to respondent and does not impose the respondent an obligation to buy the said property, as in fact, the agreement does not even bear the respondent's signature. Further, it is crystal clear that the intent of Arturo was to only to grant the respondent a privilege to buy the property within the specified period. There is nothing in the

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RMOA which indicates that Arturo agreed to transfer the ownership of the land which is an essential element in the contract of sale.

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Sales Case Digests

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Atty. Manuel Casiño Elements of the Contract of Sale Roman v. Grimalt 6 Phil. 96, April 11, 1906 Torres, J.: Facts:

Pedro Roman, the petitioner-owner and Andres Grimalt, the respondent-purchaser, verbally agreed upon the sale of the schooner Santa Marina in between the 13th to the 23d of June, 1904. In his letter on June 23, Grimalt agreed to buy the vessel and offered to pay in three installments of P500 each on July 15, September 15, and November 15, respectively, provided that the title papers to the vessel were in proper form. However, the title of the vessel was in the name of one Paulina Giron and not in the name of Roman as the alleged owner. Even promising to perfect his title to the vessel, Roman failed to do so. The papers he presented did not show that he was the owner of the vessel. On June 25, 1904, the vessel sank in the Manila harbor during a severe storm, even before Roman was able to produce for Grimalt the proper papers showing that the former was in fact the owner of the vessel in question and not Paulina Giron. As a result, Grimalt refused to pay the purchase price when Roman made a demand on June 30, 1904. On July 2, 1904, Roman filed this complaint in the CFI of Manila, which found that the parties had not arrived at a definite understanding. Issue:

Was there a valid Contract of Sale?

Held:

The Supreme Court affirmed the decision of the lower court and dismissed the complaint since no actual contract of sale existed. A sale shall be considered perfected and binding as between vendor and vendee when they have agreed as to the thing which is the object of the contract and as to the price, even though neither has been actually delivered. Ownership is not considered transmitted until the property is actually delivered and the purchaser has taken possession of the value and paid the price agreed upon, in which case the sale is considered perfected. When the sale is made by means of a public instrument the execution thereof shall be equivalent to the delivery of the thing which is the object of the contract. The sale of the schooner was not perfected and the purchaser did not consent to the execution of the deed of transfer for the reason that the title of the vessel was in the name of another instead that of Pedro Roman, the alleged owner. Also, since the vessel sank before the date of its delivery, the defendant was under no obligation to pay the price of the vessel because the purchase of which had not been concluded. The conversations between the parties and the letter written by the defendant to the plaintiff did not establish a contract sufficient in itself to create reciprocal rights between the parties.

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Sales Case Digests Atty. Manuel Casiño

2B S.Y. 2011-2012

Topic:Elements of the Contract of Sale Dizonvs CA* G.R. No. 122544 Jan. 28, 2003 (ejectment case); G.R. No. 124741. January 28, 2003 (dismissal of the ejectment case) *Continuation of cases with same G.R. Nos. dated Jan. 28, 1999; cases for 2003 are only about the Second Motion for Reconsideration, and Motion to Suspend Procedural Rules in the Higher Interest of Substantial Justice filed by private respondent (Overland Express Land). Ponente: Justice Martinez (1999); Justice Ynares-Santiago (2003) Facts:Overland Express Lines, Inc. (OEL), lessee, entered into a Contract of Lease with Option to Buy with petitioners, lessors, involving a land in Diliman, Q.C. for a term of one (1) year (May 16, 1974 to May 15, 1975) with a monthly renal of P3,000.00. During this period, OEL was granted an option to purchase the land for P3,000.00/sq. m. After the expiration of the contract, OEL did not purchased the property and there was only an implicit renewal of the Contract of Lease. Subsequently, OEL failed to pay the increased rental of P8,000.00 /mo. effective June 1976. Petitioners filed an action for ejectment to MTC of QC which was granted by the latter. On appeal OEL claimed that they have expressed their intention to buy the property by paying P300,000.00 as partial payment to Alice Dizon as an alleged agent of petitioners. CA rendered a decision concluding that there was a perfected contract of sale between the parties on the leased premises and that pursuant to the option to buy agreement, private respondent had acquired the rights of a vendee in a contract of sale. And that the payment made to Alice was the operative act that gave rise to a perfected contract of sale, and ordered the petitioners to execute a deed of absolute sale of the land in favor of OEL. Issue: Whether or not there was a perfected contract of sale between the parties Held:Petitioners have established a right to evict private respondent from the subject premises for nonpayment of rentals. An implied new lease does not ipso facto carry with it any implied revival of private respondent's option to purchase (as lessee thereof) the leased premises (Art. 1670) because it is alien to the possession of the lessee. Private respondent's right to exercise the option to purchase expired with the termination of the original contract of lease for one year. There was no perfected contract of sale between petitioners and private respondent. Under Article 1475 of the New Civil Code, "the contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. From that moment, the parties may reciprocally demand performance, subject to the provisions of the law governing the form of contracts." Thus, the elements of a contract of sale are consent, object, and price in money or its equivalent. It bears stressing that the absence of any of these essential elements negates the existence of a perfected contract of sale. Sale is a consensual contract and he who alleges it must show its existence by competent proof. There was no valid consent by the petitionerson the supposed sale entered into by Alice A. Dizon, as petitioners' alleged agent, and private respondent.

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Sales Case Digests Atty. Manuel Casiño

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Elements of the Contract of Sale TOYOTA SHAW, INC., petitioner, vs. COURT OF APPEALS and LUNA L. SOSA, respondents. G.R. No. L-116650 May 23, 1995 DAVIDE, JR., J.: FACTS: Luna L. Sosa wanted to purchase a Toyota Lite Ace. He met Popong Bernardo, a sales representative of Toyota. Sosa emphasized to Bernardo that he needed the Lite Ace not later than 17 June 1989 because he, his family, and a balikbayan guest would use it on 18 June 1989 to go to Marinduque, his home province, where he would celebrate his birthday on the 19th of June. He added that if he does not arrive in his hometown with the new car, he would become a "laughing stock." Bernardo assured Sosa that a unit would be ready for pick up at 10:00 a.m. on 17 June 1989. Bernardo then signed the aforequoted "Agreements Between Mr. Sosa & Popong Bernardo of Toyota Shaw, Inc." It was also agreed upon by the parties that the balance of the purchase price would be paid by credit financing through B.A. Finance, and for this Gilbert, on behalf of his father, signed the documents of Toyota and B.A. Finance pertaining to the application for financing. The next day, 15 June 1989, Sosa and Gilbert went to Toyota to deliver the downpayment of P100,000.00. They met Bernardo who then accomplished a printed Vehicle Sales Proposal (VSP) No. 928, 2 on which Gilbert signed under the subheading CONFORME. The vehicle was not delivered at the date promised since the B.A. Finance of the credit financing application of Sosa was not approved. Toyota then gave Sosa the option to purchase the unit by paying the full purchase price in cash but Sosa refused. After it became clear that the Lite Ace would not be delivered to him, Sosa asked that his downpayment be refunded. Toyota did so on the very same day. Sosa subsequently filed a case claiming for damages. Issue: WON Sosa can rightfully claim for damages and attorney’s fees. Held: No. There is no perfected contract of sale. (Art. 1458 – …price certain) No obligation on the part of 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 certain appears therein. The provision on the downpayment of P100,000.00 made no specific reference to a sale of a vehicle. If it was intended for a contract of sale, it could only refer to a sale on installment basis, as the VSP executed the following day confirmed. But nothing was mentioned about the full purchase price and the manner the installments were to be paid. This Court had already ruled that a definite agreement on the manner of payment of the price is an essential element in the formation of a binding and enforceable contract of sale. This is so because the agreement as to the manner of payment goes into the price such that a disagreement on the manner of payment is tantamount to a failure to agree on the price. Definiteness as to the price is an essential element of a binding agreement to sell personal property. At the most, the VSP may be considered as part of the initial phase of the generation or negotiation stage of a contract of sale. There are three stages in the contract of sale, namely: (a) preparation, conception, or generation; (b) perfection or birth of the contract; and (c) consummation or death. Accordingly, in a sale on installment basis which is financed by a financing company, three parties are thus involved: the buyer who executes a note or notes for the unpaid balance of the price of the thing purchased on installment, the seller who assigns the notes or discounts Page | 20

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them with a financing company, and the financing company which is subrogated in the place of the seller, as the creditor of the installment buyer. 24 Since B.A. Finance did not approve Sosa's application, there was then no meeting of minds on the sale on installment basis (ART. 1475). The VSP was a mere proposal which was aborted in lieu of subsequent events. It follows that the VSP created no demandable right in favor of Sosa for the delivery of the vehicle to him, and its non-delivery did not cause any legally indemnifiable injury.

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Sales Case Digests Atty. Manuel Casiño

2B S.Y. 2011-2012

Elements of A Contract of Sale

CASE:

Raet v. Court of Appeals G.R. No. 128016, September 17,1998 295 SCRA 677

PONENTE:

Mendoza, J

FACTS:

Cesar & Elvira Raet (Sps. Raet) and Rex and Edna Mitra negotiated with Amparo Gatus concerning the possibility of buying the rights of the latter to certain units at the Las Villas de Sto. Niño Subdivision in Meycauayan, Bulacan. This subdivision was developed by Phil-Ville Development and Housing Corp. (PVDHC) primarily for parties qualified to obtain loans from the Government Service Insurance System (GSIS). The spouses Raet and spouses Mitra paid Gatus the total amounts of P40,000.00 and P35,000.00 respectively with official receipts issued by Gatus in her own name. Spouses Raet and spouses Mitra applied for loan as they were not GSIS members. PVDHC would process the applications for purchase of the units upon the approval by the GSIS of petitioners’ loan applications. The spouses Raet and spouses Mitra paid to PVDHC the amount of P32,653.00 and P27,000.00 respectively on the understanding that these amounts would be credited to the purchase prices of the units which will be determined after the approval of their loan applications with the GSIS. Meanwhile, the spouses Raet and spouses Mitra were allowed to occupy certain units. It appears that GSIS disapproved the loan applications of both spouse. For this reason they were advised to seek other sources of financing. In the meantime, they were allowed to remain in the subject premises. However the petitioners failed to raise money, thus asking them to vacate the units but they refused to do so. PVDHC filed ejectment cases against them before the Municipal Trial Court of Meycauayan, Bulacan and it was affirmed by the Regional Trial Court (RTC) and the Court of Appeals. The spouses Raet and spouses Mitra had earlier filed complaints against PVDHC with the Regional Trial Court for the recovery of the supplemental costs they paid to PVDHC. However it was dismissed because RTC did not have jurisdiction over cases involving disputes between subdivision buyers and developers which fall within the exclusive competence of the Housing and Land Use Regulatory Board (HLURB). Spouses Raet and spouses Mitra filed a complaint for specific performance and damages against Amparo Gatus and PVDHC with the HLURB which gave judgment in petitioners’ favor. On appeal, the Board of Commissioners of the HLURB reversed the judgment. Petitioners’ elevated the case to the Office of the President which sustained the ruling of HLURB. The case was elevated to the CA by PVDHC. The decision was set

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aside by the CA without prejudice to the right to proceed against Amparo Gatus. Hence, this petition for certiorari by the spouses Raet and the spouses Mitra. ISSUE:

Whether there were perfected contracts of sale between petitioners and private respondent PVDHC involving the units in question.

HELD:

As the Court of Appeals held, there was no contract of sale perfected between the private parties over the said property, there being no meeting of minds as to terms, especially on the price thereof. The Supreme Court held that the parties had not reached any agreement with regard to the sale of the units in question. First, the records do not show the total costs of the units and the payment schemes therefore. The figures referred to by the private respondent PVDHC were mere estimates given to them by Amparo Gatus. The parties’ transactions, therefore, lacked the requisite essential for the perfection of contracts. Second, petitioners dealt with Gatus. But Gatus was not the agent of private respondent PVDHC. Indeed, the criminal case for estafa against her was dismissed because it was found that she never represented herself to be an agent of PVDHC. The Civil Code requires for the validity of a sale involving land that agent should have an authorization in writing, which Gatus did not possess. Third, since PVDHC had no knowledge of the figures Gatus gave to petitioners as estimates of the costs of the units, it could not have ratified the same at the time the latter applied for the purchase of the units. Fourth, there was no written contracts to evidence the alleged sales. Wherefore, the petition is dismissed.

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Sales Case Digests Atty. Manuel Casiño

2B S.Y. 2011-2012

Elements of the Contract of Sale G.R. No. L-61623 December 26, 1984 PEOPLE'S HOMESITE vs CA AQUINO, J.: FACTS: A resolution was passed by the PHHC board of directors stating that lot 4, subject to the approval of QC Council shall be awarded to spouses Mendozas, herein respondents-appellees and that this award shall be subject to the approval of the PHHC valuation committee and higher authorities. The first proposed consolidation subdivision plan was disapproved by the city council. It was then revised and finally approved on Feb. 25, 1964. Nevertheless, the spouses never paid the price of the lot nor made the 20% initial deposit as required. On April 26, 1965, the PHHC board of directors passed a resolution recalling all award of lots to persons who did not pay deposit or down payment. Since the Mendozas did not pay any, the PHHC withdrew the lot from them and re-awarded it jointly and equally to another five awardees. They made the initial deposit and subsequently deeds of sale were executed in their favor. The subdivision of Lot 4 into five lots was approved by the city council and the Bureau of Lands. The Mendozas asked for reconsideration of the withdrawal and later filed an instant action for specific performance and damages. The trial court sustained the withdrawal but the CA reversed the decision and declared void the re-award and directed PHHC to sell the disputed lot to the Mendozas. ISSUE: Whether there was a perfected sale of Lot 4, with the reduced area, to the Mendozas which they can enforce against the PHHC by an action for specific performance. HELD: There was no perfected sale of Lot 4. Art. 1475 of the Civil Code states that a contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. From that moment, the parties may reciprocally demand performance, subject to the law governing the form of contracts. In the case at bar, the lot was conditionally awarded to the Mendozas subject to the approval by the city council of the proposed consolidation subdivision plan and the approval of the award by the valuation committee and higher authorities. Since there was no payment made and the valuation committee and higher authorities have not approved the award, there was not meeting of the minds and thus the contract was not perfected.

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Sales Case Digests Atty. Manuel Casiño

2B S.Y. 2011-2012

Topic: Elements of the Contract of Sale Case: Artates and Pojas v. Urbi; G.R. No. L-29421; Jan. 30, 1971 Ponente: Justice JBL Reyes Facts: Spouses Lino Artate and Manuela Pojas sought the annulment of execution sale of their homestead which was issued to them by proper land authorities on 23 September 1952. The public sale was held on 2 June 1962 in order to satisfy a judgment by awarding the amount of Php 1,476.35 to Daniel Urbi, who suffered physical injuries inflicted by Lino Artate in an earlier case dated 14 March 1956. Meanwhile, defendant Daniel Urbi sold the assailed homestead to Crisanto Soliven, a minor, supposedly for the sum of Php 2,676.35 on 26 June 1961. The spouses argue that the public sale of the homestead in order to satisfy civil liability was in violation of Sec. 118 of the Public Land Law exempting said property from execution for any debt contracted within five years from the date of the issuance of the patent. Issue: Whether or not the public sale of homestead to satisfy civil liability is valid. Held: No, it is not.In the case at bar, the homestead patent covering the land in question (No. V-12775) was issued to appellants on 23 September 1952, and it was sold at public auction to satisfy the civil liability of appellant Lino Artates to Daniel Urbi, adjudged in the 14 March 1956 decision of the Justice of the Peace Court of Camalaniugan, Cagayan. There can be no doubt that the award of damages to Urbi created for Artates a civil obligation, an indebtedness, that commenced from the date such obligation was decreed on 14 March 1956. Consequently, it is evident that it can not be enforced against, or satisfied out of, the sale of the homestead lot acquired by appellants less than 5 years before the obligation accrued. And this is true even if the sale involved here is not voluntary. For purposes of complying with the law, it is immaterial that the satisfaction of the debt by the encumbrancing or alienation of the land grant made voluntarily, as in the case of an ordinary sale, or involuntarily, such as that effected through levy on the property and consequent sale at public auction. In both instances, the spirit of the law would have been violated. The execution sale in this case being null and void, the possession of the land should be returned to the owners, the herein appellants. There would even be no need to order appellee Urbi to execute a deed of reconveyance thereof to the owners. It appears that what was issued here to the judgment creditor/purchaser was only the sheriff's provisional certificate, under which he derived no definite title or right until the period for redemption has expired, without a redemption having been made, or issuance of a final deed or certificate of sale. In other words, the purchaser herein has not acquired an absolute ownership or title in fee over the land that would necessitate a deed of reconveyance to revert ownership back to the appellant spouses.

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2B S.Y. 2011-2012