Sales Case Digest

COMPILATION OF CASE DIGESTS TOPIC: INTRODUCTION

SALES In the course of the proceedings, the parties agreed to submit the case for decision solely on the basis of documentary exhibits. Upon

1.

CORONEL vs CA and ALCARAZ (263 SCRA 15)

submission of their respective memoranda and the corresponding comment or reply thereto, and on 1 March 1989, judgment was

The case arose from a complaint for specific performance filed by

handed down in favor of the plaintiffs, ordering the defendant to

private respondent Alcaraz against petitioners to consummate the

execute a deed of absolute sale of the land covered by TCT 327403

sale of a parcel of land in Quezon City.

and canceling TCT 331582 and declaring the latter without force and effect. Claims for damages by plaintiffs and counterclaims by the

Facts: On 19 January 1985, Romulo Coronel, et al. executed a

defendants and intervenors were dismissed. A motion for

document entitled “Receipt of Down Payment” in favor of Ramona

reconsideration was thereafter filed, which was denied. CA affirmed decision of TC.

Patricia Alcaraz for P50,000 downpayment of the total amount of P1.24M as purchase price for an inherited house and lot (TCT119627,

Issue: Whether the contract between petitioners and private

Registry of Deeds of Quezon City), promising to execute a deed of

respondent was that of a conditional sale or a mere contract to sell

absolute sale of said property as soon as such has been transferred in their name. The balance of P1.19M is due upon the execution of

Held: Sale, by its very nature, is a consensual contract because it is

said deed. On the same date, Concepcion D. Alcaraz, mother of

perfected by mere consent. The essential elements of a contract of

Ramona, paid the down payment of P50,000.00. On 6 February 1985,

sale are the following: a) Consent or meeting of the minds, that is,

the property originally registered in the name of the Coronels‟ father

consent to transfer ownership in exchange for the price; b)

was transferred in their names (TCT 327043). However, on 18

Determinate subject matter; and c) Price certain in money or its

February 1985, the Coronels sold the property to Catalina B.

equivalent.

Mabanag for P1,580,000.00 after the latter has paid P300,000.00. For this reason, Coronels canceled and rescinded the contract with

Under this definition, a Contract to Sell may not be considered as a

Alcaraz by depositing the down payment in the bank in trust for

Contract of Sale because the first essential element is lacking. In a

Alcaraz.

contract to sell, the prospective seller explicity reserves the transfer of title to the prospective buyer, meaning, the prospective seller does

On 22 February 1985, Alcaraz filed a complaint for specific

not as yet agree or consent to transfer ownership of the property

performance against the Coronels and caused the annotation of a

subject of the contract to sell until the happening of an event, which

notice of lis pendens at the back of TCT 327403. On 2 April 1985,

for present purposes we shall take as the full payment of the

Mabanag caused the annotation of a notice of adverse claim covering

purchase price. What the seller agrees or obliges himself to do is to

the same property with the Registry of Deeds of Quezon City. On 25

fulfill his promise to sell the subject property when the entire amount

April 1985, the Coronels executed a Deed of Absolute Sale over the

of the purchase price is delivered to him. In other words the full

subject property in favor of Mabanag. On 5 June 1985, a new title

payment of the purchase price partakes of a suspensive condition,

over the subject property was issued in the name of Mabanag under

the non-fulfillment of which prevents the obligation to sell from

TCT 351582.

arising and thus, ownership is retained by the prospective seller

1

Sales under Atty. Paolo Dimayuga

complied by atorni2be AUSL

COMPILATION OF CASE DIGESTS

SALES

without further remedies by the prospective buyer. A contract to sell

buyer cannot seek the relief of reconveyance of the property. There is

may thus be defined as a bilateral contract whereby the prospective

no double sale in such case. Title to the property will transfer to the

seller, while expressly reserving the ownership of the subject

buyer after registration because there is no defect in the owner-

property despite delivery thereof to the prospective buyer, binds

seller's title per se, but the latter, of course, may be used for

himself to sell the said property exclusively to the prospective buyer

damages by the intending buyer.

upon fulfillment of the condition agreed upon, that is, full payment of the purchase price.

In a conditional contract of sale, however, upon the fulfillment of the suspensive condition, the sale becomes absolute and this will

A contract to sell may not even be considered as a conditional

definitely affect the seller's title thereto. In fact, if there had been

contract of sale where the seller may likewise reserve title to the

previous delivery of the subject property, the seller's ownership or

property subject of the sale until the fulfillment of a suspensive

title to the property is automatically transferred to the buyer such

condition, because in a conditional contract of sale, the first element

that, the seller will no longer have any title to transfer to any third

of consent is present, although it is conditioned upon the happening

person. Such second buyer of the property who may have had actual

of a contingent event which may or may not occur. If the suspensive

or constructive knowledge of such defect in the seller's title, or at

condition is not fulfilled, the perfection of the contract of sale is

least was charged with the obligation to discover such defect, cannot

completely abated. However, if the suspensive condition is fulfilled,

be a registrant in good faith. Such second buyer cannot defeat the

the contract of sale is thereby perfected, such that if there had

first buyer's title. In case a title is issued to the second buyer, the first

already been previous delivery of the property subject of the sale to

buyer may seek reconveyance of the property subject of the sale.

the buyer, ownership thereto automatically transfers to the buyer by operation of law without any further act having to be performed by

The agreement could not have been a contract to sell because the

the seller. In a contract to sell, upon the fulfillment of the suspensive

sellers herein made no express reservation of ownership or title to

condition which is the full payment of the purchase price, ownership

the subject parcel of land. Furthermore, the circumstance which

will not automatically transfer to the buyer although the property may

prevented the parties from entering into an absolute contract of sale

have been previously delivered to him. The prospective seller still has

pertained to the sellers themselves (the certificate of title was not in

to convey title to the prospective buyer by entering into a contract of

their names) and not the full payment of the purchase price. Under

absolute sale.

the established facts and circumstances of the case, the Court may safely presume that, had the certificate of title been in the names of

It is essential to distinguish between a contract to sell and a

petitioners-sellers at that time, there would have been no reason why

conditional contract of sale specially in cases where the subject

an absolute contract of sale could not have been executed and

property is sold by the owner not to the party the seller contracted

consummated right there and then.

with, but to a third person, as in the case at bench. In a contract to sell, there being no previous sale of the property, a third person

What is clearly established by the plain language of the subject

buying such property despite the fulfillment of the suspensive

document is that when the said "Receipt of Down Payment" was

condition such as the full payment of the purchase price, for

prepared and signed by petitioners Romeo A. Coronel, et al., the

instance, cannot be deemed a buyer in bad faith and the prospective

parties had agreed to a conditional contract of sale, consummation of

2

Sales under Atty. Paolo Dimayuga

complied by atorni2be AUSL

COMPILATION OF CASE DIGESTS

SALES

which is subject only to the successful transfer of the certificate of

Romero, a civil engineer, was engaged in the business of production,

title from the name of petitioners' father, Constancio P. Coronel, to

manufacture

their names.

insulation and processed perlite ore. In 1988, he decided to put up a

and

exportation

of

perlite

filter

aids,

permalite

central warehouse in Metro Manila. The provision on double sale presumes title or ownership to pass to the first buyer, the exceptions being: (a) when the second buyer, in

Flores and his wife offered a parcel of land measuring 1,952 square

good faith, registers the sale ahead of the first buyer, and (b) should

meters. The lot was covered in a TCT in the name of private

there be no inscription by either of the two buyers, when the second

respondent Enriqueta Chua vda. de Ongsiong. Petitioner visited the

buyer, in good faith, acquires possession of the property ahead of

property and, except for the presence of squatters in the area, he

the first buyer. Unless, the second buyer satisfies these requirements,

found the place suitable for a central warehouse. Flores called on

title or ownership will not transfer to him to the prejudice of the first

petitioner with a proposal that should he advance the amount of

buyer. In a case of double sale, what finds relevance and materiality

P50,000.00 which could be used in taking up an ejectment case

is not whether or not the second buyer was a buyer in good faith but

against the squatters, private respondent would agree to sell the

whether or not said second buyer registers such second sale in good

property for only P800/square meter. Romero agreed. Later, a “Deed

faith, that is, without knowledge of any defect in the title of the

of Conditional Sale” was executed between Flores and Ongsiong.

property sold. If a vendee in a double sale registers that sale after he has acquired knowledge that there was a previous sale of the same property to a third party or that another person claims said property in a pervious sale, the registration will constitute a registration in bad faith and will not confer upon him any right. As clearly borne out by the evidence in this case, petitioner Mabanag could not have in good faith, registered the sale entered into on February 18, 1985 because as early as February 22, 1985, a notice of lis pendens had been annotated on the transfer certificate of title in the names of petitioners, whereas petitioner Mabanag registered the said sale sometime in April, 1985. At the time of registration, therefore, petitioner Mabanag knew that the same property had already been previously sold to private respondents, or, at least, she was charged with knowledge that a previous buyer is claiming title to the same property 2.

ROMERO vs CA (250 SCRA 223)

Purchase price = P1,561,600.00; Downpayment = P50K; Balance = to be paid 45 days after the removal of all the squatters; upon full payment, Ongsiong shall execute deed of absolute sale in favour of Romero. Ongsiong sought to return the P50,000.00 she received from petitioner since, she said, she could not “get rid of the squatters” on the lot. She opted to rescind the sale in view of her failure to get rid of the squatters. Regional Trial Court of Makati 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. Issue: WON there was a perfected contract of sale? YES Held:

Facts:

3

Sales under Atty. Paolo Dimayuga

complied by atorni2be AUSL

COMPILATION OF CASE DIGESTS

SALES

A sale is at once perfected when a person (the seller) obligates

Facts: Fr. Antonio Jacobe initially mortgage a 10-hectare property in

himself, for a price certain, to deliver and to transfer ownership of a

Tanay, Rizal (covered by TCT 320725) to the Rural Bank of Alaminos,

specified thing or right to another (the buyer) over which the latter agrees. (BILATERAL and RECIPROCAL CHARACTERISTIC OF SALE)

Laguna to secure a loan in the amount of P10,000. Said mortgage was later foreclosed and the property offered for public auction upon

In determining the real character of the contract, the title given to it

his default. In June 1984, Gregorio Fule, as corporate secretary of the

by the parties is not as much significant as its substance. For

bank, asked Remelia Dichoso andOlivia Mendoza to look for a buyer

example, a deed of sale, although denominated as a deed of

who might be interested in the Tanay property. The two found one in

conditional sale, may be treated as absolute in nature, if title to the

the person of Dr. Ninevetch Cruz. It so happened that in January of

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.

said year, Gregorio Fule, also a jeweler, has shown interest in buying a pair of emerald-cut diamond earrings owned by Dr. Cruz. Dr. Cruz has declined Fule‟s offer to buy said jewelry for P100,000; and a subsequent bid by Fule to buy them for US$6,000 at $1 to P25 while

From the moment the contract is perfected, the parties are bound not

making a sketch of said jewelry during an inspection at the lobby of

only to the fulfillment of what has been expressly stipulated but also

Prudential Bank (the latter instance was declined, since the exchange

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

rate appreciated to P19 per dollar). Subsequently, however, negotiations for the barter of the jewelry and the Tanay property ensued. Atty. Belarmino was requested by Dr. Cruz to check the

sets into motion the period of compliance by petitioner of his own

property and found out that no sale or barter was feasible as the 1-

obligation, i.e., to pay the balance of the purchase price. Private

year period of redemption has not expired. In an effort to cut

respondent‟s failure “to remove the squatters from the property”

through any legal impediment, Fule executed on 19 October 1984, a

within the stipulated period gives petitioner the right to either refuse

deed of redemption on behalf of Fr. Jacobe purportedly in the amount

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.

of P15,987.78, and on even date, Fr. Jacobe sold the property to Fule for P75,000.00. The haste with which the two deeds were executed is shown by the fact that the deed of sale was notarized ahead of the

There was no potestative condition on the part of Ongsiong but a

deed of redemption. As Dr. Cruz had already agreed to the proposed

“mixed” condition “dependent not on the will of the vendor alone but

barter, Fule went to Prudential Bank to take a look at the jewelry.

also of third persons like the squatters and government agencies and personnel concerned.”

On 23 October 1984, Fule met Atty. Belarmino at the latter‟s residence to prepare the documents of sale. Atty. Belarmino accordingly caused the preparation of a deed of absolute sale while

3.

FULE vs CA (268 SCRA 698)

4

Sales under Atty. Paolo Dimayuga

Fule and Dr. Cruz attended to the safekeeping of the jewelry. The

complied by atorni2be AUSL

COMPILATION OF CASE DIGESTS

SALES

following day, Fule, together with Dichoso and Mendoza, arrived at

to have the earrings tested. Dimayuga, after taking one look at the

the residence of Atty. Belarmino to finally execute a deed of absolute

earrings, immediately declared them counterfeit. At around 9:30

sale. Fule signed the deed and gave Atty. Belarmino the amount of

p.m., Fule went to one Atty. Reynaldo Alcantara residing at Lakeside

P13,700.00 for necessary expenses in the transfer of title over the

Subdivision in San Pablo City, complaining about the fake jewelry.

Tanay property; and issued a certification to the effect that the actual

Upon being advised by the latter, Fule reported the matter to the

consideration of the sale was P200,000.00 and not P80,000.00 as

police station where Dichoso and Mendoza likewise executed sworn

indicated in the deed of absolute sale (the disparity purportedly

statements. On 26 October 1984, Fule filed a complaint before the

aimed at minimizing the amount of the capital gains tax that Fule

RTC San Pablo City against private respondents praying, among other

would have to shoulder). Since the jewelry was appraised only

things, that the contract of sale over the Tanay property be declared

atP160,000.00, the parties agreed that the balance of P40,000.00

null and void on the ground of fraud and deceit. On 30October 1984,

would just be paid later in cash. Thereafter, at the bank, as pre-

the lower court issued a temporary restraining order directing the

arranged, Dr. Cruz and the cashier opened the safety deposit box,

Register of Deeds of Rizal to refrain from acting on the pertinent

and delivered the contents thereof to Fule. Fule inspected the jewelry,

documents involved in the transaction. On 20 November 1984,

near the electric light at the bank‟s lobby, for 10-15 minutes. Fule

however, the same court lifted its previous order and denied the

expressed his satisfaction by nodding his head when asked by Dr.

prayer for a writ of preliminary injunction. After trial, the lower court

Cruz if the jewelry was okay. For services rendered, Fule paid the

rendered its decision on 7March 1989; holding that the genuine pair

agents, Dichoso and Mendoza, the amount of US$300.00 and some

of earrings used as consideration for the sale was delivered by Dr.

pieces of jewelry. He did not, however, give them half of the pair of

Cruz to Fule, thatthe contract was valid even if the agreement

earrings in question, which he had earlier promised. Later in the

between the parties was principally a barter contract, that the

evening, Fule arrived at the residence of Atty. Belarmino complaining

agreement has been consummated at the time the principal parties

that the jewelry given him was fake. Dichoso, who borrowed the car

parted ways at the bank, and that damages are due to the

of Dr. Cruz, called up Atty. Belarmino. Informed that Fule was at the

defendants.

lawyer‟s house, went there posthaste thinking that Fule had finally agreed to give them half of the pair of earrings, only to find Fule demonstrating with a tester that the earrings were fake. Fule then accused Dichoso and Mendoza of deceiving him which they, however, denied. They countered that Fule could not have been fooled because he had vast experience regarding jewelry. Fule nonetheless took back the US$300.00 and jewelry he had given them. Thereafter, the group

From the trial court‟s adverse decision, petitioner elevated the matter to the Court of Appeals. On 20 October 1992, the Court of Appeals, however, rendered a decision affirming in toto the lower court‟s decision. His motion for reconsideration having been denied on 19 October 1993. Hence, the petition for review on certiorari. Issue: Whether the sale should be nullified on the ground of fraud

decided to go to the house of a certain Macario Dimayuga, a jeweler,

5

Sales under Atty. Paolo Dimayuga

complied by atorni2be AUSL

COMPILATION OF CASE DIGESTS

SALES

Held: A contract of sale is perfected at the moment there is a meeting

that now bound him and Dr. Cruz. The nature and value of the thing

of the minds upon the thing which is the object of the contract and

he had taken preclude its return after that supervening period within

upon the price. Being consensual, a contract of sale has the force of

which anything could have happened, not excluding the alteration of

law between the contracting parties and they are expected to abide in

the jewelry or its being switched with an inferior kind.

good faith by their respective contractual commitments. It is evident from the facts of the case that there was a meeting of the minds between petitioner and Dr. Cruz. As such, they are bound by the contract unless there are reasons or circumstances that warrant its nullification.

Ownership over the parcel of land and the pair of emerald-cut diamond earrings had been transferred to Dr. Cruz and petitioner, respectively, upon the actual and constructive delivery thereof. Said contract of sale being absolute in nature, title passed to the vendee upon delivery of the thing sold since there was no stipulation in the

Contracts that are voidable or annullable, even though there may

contract that title to the property sold has been reserved in the seller

have been no damage to the contracting parties are: (1) those where

until full payment of the price or that the vendor has the right to

one of the parties is incapable of giving consent to a contract; and (2)

unilaterally resolve the contract the moment the buyer fails to pay

those where the consent is vitiated by mistake, violence, intimidation,

within a fixed period.

undue influence or fraud. The records, however, are bare of any evidence manifesting that private respondents employed such insidious words or machinations to entice petitioner into entering the contract of barter. It was in fact petitioner who resorted to machinations to convince Dr. Cruz to exchange her jewelry for the Tanay property. Furthermore, petitioner was afforded the reasonable opportunity required in Article 1584 of the Civil Code within which to examine the jewelry as he in fact accepted them when asked by Dr. Cruz if he was satisfied with the same. By taking the jewelry outside the bank, petitioner executed an act which was more consistent with his exercise of ownership over it. This gains credence when it is borne in

While it is true that the amount of P40,000.00 forming part of the consideration was still payable to petitioner, its nonpayment by Dr. Cruz is not a sufficient cause to invalidate the contract or bar the transfer of ownership and possession of the things exchanged considering the fact that their contract is silent as to when it becomes due and demandable. The Supreme Court affirmed in toto the decision of the Court of Appeals, but ordered Dr. Cruz to pay Fule the balance of thepurchase price of P40,000 within 10 days from the finality of the decision; with costs against petitioner. 4.

ONG vs CA (310 SCRA 1)

mind that he himself had earlier delivered the Tanay property to Dr. Cruz by affixing his signature to the contract of sale. That after two

Facts: On 10 May 1983, Jaime Ong and spouses Miguel and Alejandra

hours he later claimed that the jewelry was not the one he intended

Robles executed an “Agreement of Purchase and Sale” respecting 2

in exchange for his Tanay property, could not sever the juridical tie

parcels of land situated at Barrio Puri, San Antonio, Quezon

6

Sales under Atty. Paolo Dimayuga

complied by atorni2be AUSL

COMPILATION OF CASE DIGESTS

SALES

(agricultural including rice mill, piggery) for P2M (initial payment of

outstanding obligation with said bank, with the knowledge and

P600,000 broken into P103,499.91 directly paid to seller on 22

conformity of Ong. Ong, in eturn, voluntarily gave the spouses

March 1983 and P496,500.09 directly paid to BPI to answer for part

authority to operate the rice mill. He, however, continued to be in

of seller‟s loan with the bank; and balance of 1.4M to be paid in 4

possession of the two parcels of land while the spouses were forced

equal quarterly installments of P350,000 the first of which due and

to use the rice mill for residential purposes.

demandable on 15 June 1983); binding themselves that upon the payment of the total purchase price the seller delivers a good and sufficient deed of sale and conveyance for the parcels of land free and clear from liens and encumbrances, that seller delivers, surrenders and transfers the parcels of land including all improvements thereon and to transfer the operations of the piggery and rice mill to the buyer; and that all payments due and demandable under the contract effected in the residence of the seller unless otherwise designated by the parties in writing.

On 2 August 1985, the spouses, through counsel, sent Ong a demand letter asking for the return of the properties. Their demand was left unheeded, so, on 2 September 1985, they filed with the RTC Lucena City, Branch 60, a complaint for rescission of contract and recovery of properties with damages. Later, while the case was still pending with the trial court, Ong introduced major improvements on the subject properties by constructing a complete fence made of hollow blocks and expanding the piggery. These prompted the spouses to ask for a writ of preliminary injunction; which the trial

On 15 May 1983, Ong took possession of the subject parcels of land

court granted, and thus enjoined Ong from introducing

together with the piggery, building, rice mill, residential house and

improvements on the properties except for repairs. On 1 June 1989,

other improvements thereon. Pursuant to the contract, Ong paid the

the trial court rendered a decision in favor of the spouses: ordering

spouses the sum of P103,499.91 2 by depositing it with the UUCPB.

the contract entered into by the parties set aside, ordering the

Subsequently, Ong deposited sums of money with the BPI, in

delivery of the parcels of land and the improvements thereon to the

accordance with their stipulation that petitioner pay the loan of the

spouses, ordering the return of the sum of P497,179.51 to Ong by

spouses with BPI. To answer for his balance of P 1.4M, Ong issued 4

the spouses, ordering Ong to pay the spouses P100,000 for

post-dated Metro Bank checks payable to the spouses in the amount

exemplary damages and P20,000 as attorney‟s fees and litigation

of P350,000.00 each (Check 137708-157711). When presented for

expenses. From this decision, petitioner appealed to the Court of

payment, however, the checks were dishonored due to insufficient

Appeals, which affirmed the decision of the RTC but deleted the

funds. Ong promised to replace the checks but failed to do so. To

award of exemplary damages. In affirming the decision of the trial

make matters worse, out of theP496,500.00 loan of the spouses with

court, the Court of Appeals noted that the failure of petitioner to

BPI, which ong, as per agreement, should have paid, Ong only

completely pay the purchase price is a substantial breach of his

managed to dole out no more than P393,679.60. When the bank

obligation which entitles the private respondents to rescind their

threatened to foreclose the spouses‟ mortgage, they sold 3

contract under Article 1191 of the New Civil Code. Hence, the

transformers of the rice mill worth P51,411.00 to pay off their

petition for review on certiorari.

7

Sales under Atty. Paolo Dimayuga

complied by atorni2be AUSL

COMPILATION OF CASE DIGESTS

SALES

Issues: (1) whether the contract entered into by the parties may be

to complete payment of the purchase price. Rather, his failure to do

validly rescinded under Article 1191 of the New Civil Code

so brought about a situation which prevented the obligation of

(2) whether the parties had novated their original contract as to the time and manner of payment Held: Article 1191 of the New Civil Code refers to rescission applicable to reciprocal obligations. Reciprocal obligations are those which arise from the same cause, and in which each party is a debtor and a creditor of the other, such that the obligation of one is dependent upon the obligation of the other. They are to be performed simultaneously such that the performance of one is conditioned upon the simultaneous fulfillment of the other.

respondent spouses to convey title from acquiring an obligatory force. Novation is never presumed, it must be proven as a fact either by express stipulation of the parties or by implication derived from an irreconcilable incompatibility between the old and the new obligation. In order for novation to take place, the concurrence of the following requisites is indispensable: (1) there must be a previous valid obligation; (2) there must be an agreement of the parties concerned to a new contract; (3) there must be the extinguishment of the old contract; and (4) there must be the validity of the new contract. The

A careful reading of the parties' "Agreement of Purchase and Sale"

aforesaid requisites are not found in the case at bench. The

shows that it is in the nature of a contract to sell, as distinguished

subsequent acts of the parties hardly demonstrate their intent to

from a contract of sale. In a contract of sale, the title to the property

dissolve the old obligation as a consideration for the emergence of

passes to the vendee upon the delivery of the thing sold; while in a

the new one.

contract to sell, ownership is, by agreement, reserved in the vendor and is not to pass to the vendee until full payment of the purchase price. In a contract to sell, the payment of the purchase price is a positive suspensive condition, the failure of which is not a breach, casual or serious, but a situation that prevents the obligation of the

The Supreme Court affirmed the decision rendered by the Court of Appeals with the modification that the spouses are ordered to return to Ong the sum P48,680.00 in addition to the amounts already awarded; with costs against petitioner Ong.

vendor to convey title from acquiring an obligatory force. The nonfulfillment of the condition of full payment rendered the contract to sell ineffective and without force and effect. It must be stressed that the breach contemplated in Article 1191 of the 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 binding force. Hence, the agreement of the parties in the case at bench may be set aside, but not because of a breach on the part of petitioner for failure

8

Sales under Atty. Paolo Dimayuga

5.

GAITE vs FONACIER (2 SCRA 830)

Facts: Isabelo Fonacier was the owner and/or holder of 11 iron lode mineral claims (Dawahan Group), situated in Jose Panganiban, Camarines Norte. By a “Deed of Assignment” dated 29 September 1952, Fonacier constituted and appointed Fernando A. Gaite as his true and lawful attorney-in-fact to enter into a contract with any individual or juridical person for the exploration and development of

complied by atorni2be AUSL

COMPILATION OF CASE DIGESTS

SALES

the mining claims on a royalty basis of not less than P0.50 per ton of

and its stockholders as sureties. A second bond was executed by the

ore that might be extracted therefrom. On 19 March 1954, Gaite in

parties to the first bond, on the same day, with the Far Eastern Surety

turn executed a general assignment conveying the development and

and Insurance Co. as additional surety, but it provided that the

exploitation of said mining claims unto the Larap Iron Mines, owned

liability of the surety company would attach only when there had

solely by him. Thereafter Gaite embarked upon the development and

been an actual sale of iron ore by the Larap Mines & Smelting Co. for

exploitation of the mining claims, opening and paving roads within

an amount of not less than P65,000. Both bond were attached and

and outside their boundaries, making other improvements and

made integral parts of the “Revocation of Power of Attorney and

installing facilities therein for use in the development of the mines,

Contract.” On the same day that Fonacier revoked the power of

and in time extracted therefrom what he claimed and estimated to be

attorney, Fonacier entered into a “Contract of Mining Operation” with

approximately 24,000 metric tons of iron ore.

Larap Mines and Smelting Co., Inc. to grant it the right to develop,

For some reason or another, Isabelo Fonacier decided to revoke the authority granted by him to Gaite, and Gaite assented thereto subject to certain conditions. As a result, a document entitled “Revocation of Power of Attorney and Contract” was executed on 8 December 1954, wherein Gaite transferred to Fonacier, for the consideration of P20,000, plus 10% of the royalties that Fonacier would receive from the mining claims, all his rights and interests on all the roads, improvements, and facilities in or outside said claims, the right to use the business name “Larap Iron Mines” and its goodwill, and all the records and documents relative to the mines. In the same document, Gaite transferred to Fonacier all his rights and interests over the “24,000 tons of iron ore, more or less” that the former had already extracted from the mineral claims, in consideration of the

exploit, and explore the mining claims, together with the improvements therein and the use of the name “Larap Iron Mines” and its goodwill, in consideration of certain royalties. Fonacier likewise transferred, in the same document, the complete title to the approximately 24,000 tons of iron ore which he acquired from Gaite, to the Larap Mines & Smelting Co., inconsideration for the signing by the company and its stockholders of the surety bonds delivered by Fonacier to Gaite. On 8 December 1955, the bond with respect to the Far Eastern Surety and Insurance Company expired with no sale of the approximately 24,000 tons of iron ore, nor had the 65,000 balance of the price of said ore been paid to Gaite by Fonacier and his sureties. Whereupon, Gaite demanded from Fonacier and his sureties payment of said amount.

sum of P75,000, P10,000, of which was paid upon the signing of the

When Fonacier and his sureties failed to pay as demanded by Gaite,

agreement, and the balance to be paid out of the first letter of credit

the latter filed a complaint against them in the CFI Manila (Civil Case

covering the first shipment of iron ores or the first amount derived

29310) for the payment of the P65,000 balance of the price of the

from the local sale of iron ore made by the Larap Mines & Smelting

ore, consequential damages, and attorney‟s fees. Judgment was,

Co. To secure the payment of the balance, Fonacier promised to

accordingly, rendered in favor of plaintiff Gaite ordering defendants

execute in favor of Gaite a surety bond; delivered on 8 December

to pay him, jointly and severally, P65,000 with interest at 6% per

1954 with Fonacier as principal and the Larap Mines and Smelting Co.

annum from 9 December 1955 until full payment, plus costs. From

9

Sales under Atty. Paolo Dimayuga

complied by atorni2be AUSL

COMPILATION OF CASE DIGESTS

SALES

this judgment, defendants jointly appealed to the Supreme Court as

also on one by a surety company; and the fact that appellants did put

the claims involved aggregate to more than P200,000.

up such bonds indicates that they admitted the definite existence of

Issue: (1) Whether the sale is conditional or one with a period (2) Whether there were insufficient tons of ores

their obligation to pay the balance of P65,000.00. The appellant have forfeited the right court below that the appellants have forfeited the right to compel Gaite to wait for the sale of the ore

Held: (1) The shipment or local sale of the iron ore is not a condition

before receiving payment of the balance of P65,000.00, because of

precedent (or suspensive) to the payment of the balance of

their failure to renew the bond of the Far Eastern Surety Company or

P65,000.00, but was only a suspensive period or term. What

else replace it with an equivalent guarantee. The expiration of the

characterizes a conditional obligation is the fact that its efficacy or

bonding company's undertaking on December 8, 1955 substantially

obligatory force (as distinguished from its demandability) is

reduced the security of the vendor's rights as creditor for the unpaid

subordinated to the happening of a future and uncertain event; so

P65,000.00, a security that Gaite considered essential and upon

that if the suspensive condition does not take place, the parties

which he had insisted when he executed the deed of sale of the ore

would stand as if the conditional obligation had never existed.

to Fonacier.

A contract of sale is normally commutative and onerous: not only

(2) The sale between the parties is a sale of a specific mass or iron

does each one of the parties assume a correlative obligation (the

ore because no provision was made in their contract for the

seller to deliver and transfer ownership of the thing sold and the

measuring or weighing of the ore sold in order to complete or perfect

buyer to pay the price),but each party anticipates performance by the

the sale, nor was the price of P75,000,00 agreed upon by the parties

other from the very start. While in a sale the obligation of one party

based upon any such measurement.(see Art. 1480, second par., New

can be lawfully subordinated to an uncertain event, so that the other

Civil Code). The subject matter of the sale is, therefore, a determinate

understands that he assumes the risk of receiving nothing for what

object, the mass, and not the actual number of units or tons

he gives (as in the case of a sale of hopes or expectations, emptio

contained therein, so that all that was required of the seller Gaite was

spei), it is not in the usual course of business to do so; hence, the

to deliver in good faith to his buyer all of the ore found in the mass,

contingent character of the obligation must clearly appear. Nothing is

notwithstanding that the quantity delivered is less than the amount

found in the record to evidence that Gaite desired or assumed to run

estimated by them.

the risk of losing his right over the ore without getting paid for it, or that Fonacier understood that Gaite assumed any such risk. This is proved by the fact that Gaite insisted on a bond a to guarantee payment of the P65,000.00, an not only upon a bond by Fonacier, the

The Supreme Court affirmed the decision appealed from, with costs against appellants. 6.

ACAP vs CA (251 SCRA 30)

Larap Mines & Smelting Co., and the company's stockholders, but

10

Sales under Atty. Paolo Dimayuga

complied by atorni2be AUSL

COMPILATION OF CASE DIGESTS

SALES

Facts: The title to Lot 1130 of the Cadastral Survey of Hinigaran,

to pay 10 cavans of palay per annum as lease rental. In 1982, Acap

Negros Occidental was evidenced by OCT R-12179. The lot has an

allegedly complied with said obligation.

area of 13,720 sq.m. The title was issued and is registered in the name of spouses Santiago Vasquez and Lorenza Oruma. After both spouses died, their only son Felixberto inherited the lot. In 1975, Felixberto executed a duly notarized document entitled “Declaration of Heirship and Deed of Absolute Sale” in favor of Cosme Pido. Since 1960, Teodoro Acap had been the tenant of a portion of the said land, covering an area of 9,500 sq. m. When ownership was transferred in 1975 by Felixberto to Cosme Pido, Acap continued to be the registered tenant thereof and religiously paid his leasehold rentals to Pido and thereafter, upon Pido‟s death, to his widow Laurenciana. The controversy began when Pido died interstate and on 27 November 1981, his surviving heirs executed a notarized document denominated as “Declaration of Heirship and Waiver of Rights of Lot1130 Hinigaran Cadastre,” wherein they declared to have adjudicated upon themselves the parcel of land in equal share, and that they waive, quitclaim all right, interests and participation over the parcel of land in favor of Edy de los Reyes. The document was signed by all of Pido‟s heirs. Edy de los Reyes did not sign said

In 1983, however, Acap refused to pay any further lease rentals on the land, prompting delos Reyes to seek the assistance of the then Ministry of Agrarian Reform (MAR) in Hinigaran, Negros Occidental. The MAR invited Acap, who sent his wife, to a conference scheduled on 13 October 1983. The wife stated that the she and her husband did not recognize delos Reyes‟s claim of ownership over the land. On 28 April 1988, after the lapse of four (4) years, delos Reys field a complaint for recovery of possession and damages against Acap, alleging that as his leasehold tenant, Acap refused and failed to pay the agreed annual rental of 10 cavans of palay despite repeated demands. On 20 August 1991, the lower court rendered a decision in favor of delos Reyes, ordering the forfeiture of Acap‟s preferred right of a Certificae of Land Transfer under PD 27 and his farmholdings, the return of the farmland in Acap‟s possession to delos Reyes, and Acap to pay P5,000.00 as attorney‟s fees, the sum of P1,000.00 as expenses of litigation and the amount of P10,000.00 as actual damages.

document. It will be noted that at the time of Cosme Pido‟s death,

Aggrieved, petitioner appealed to the Court of Appeals.

title to the property continued to be registered in the name of the

Subsequently, the CA affirmed the lower court‟s decision, holding

Vasquez spouses. Upon obtaining the Declaration of Heirship with

that de los Reyes had acquired ownership of Lot No. 1130 of the

Waiver of Rights in his favor, de los Reyes filed the same with the

Cadastral Survey of Hinigaran, Negros Occidental based on a

Registry of Deeds as part of a notice of an adverse claim against the

document entitled “Declaration of Heirship and Waiver of Rights”, and

original certificate of title.

ordering the dispossession of Acap as leasehold tenant of the land

Thereafter, delos Reyes sought for Acap to personally inform him

for failure to pay rentals. Hence, the petition for review on certiorari.

that he had become the new owner of the land and that the lease

Issues: (1) Whether the “Declaration of Heirship and Waiver of Rights”

rentals thereon should be paid to him. Delos Reyes alleged that he

is a recognized mode of acquiring ownership by private respondent

and Acap entered into an oral lease agreement wherein Acap agreed

11

Sales under Atty. Paolo Dimayuga

complied by atorni2be AUSL

COMPILATION OF CASE DIGESTS

SALES

(2) Whether the said document can be considered a deed of sale in

either a sale, or a donation, or any other derivative mode of acquiring

favor of private respondent

ownership.

Held: An asserted right or claim to ownership or a real right over a

A notice of adverse claim is nothing but a notice of a claim adverse to

thing arising from a juridical act, however justified, is not per se

the registered owner, the validity of which is yet to be established in

sufficient to give rise to ownership over the res. That right or title

court at some future date, and is no better than a notice of lis

must be completed by fulfilling certain conditions imposed by law.

pendens which is a notice of a case already pending in court. It is to

Hence, ownership and real rights are acquired only pursuant to a

be noted that while the existence of said adverse claim was duly

legal mode or process. While title is the juridical justification, mode is

proven, there is no evidence whatsoever that a deed of sale was

the actual process of acquisition or transfer of ownership over a thing

executed between Cosme Pido's heirs and private respondent

in question.

transferring the rights of Pido's heirs to the land in favor of private

In a Contract of Sale, one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other party to pay a price certain in money or its equivalent. Upon the other hand, a declaration of heirship and waiver of rights operates as a public instrument when filed with the Registry of Deeds whereby the intestate heirs adjudicate and divide the estate left by the decedent among themselves as they see fit. It is in effect an extrajudicial settlement between the heirs under Rule 74 of the Rules

respondent. Private respondent's right or interest therefore in the tenanted lot remains an adverse claim which cannot by itself be sufficient to cancel the OCT to the land and title the same in private respondent's name. Consequently, while the transaction between Pido's heirs and private respondent may be binding on both parties, the right of petitioner as a registered tenant to the land cannot be perfunctorily forfeited on a mere allegation of private respondent's ownership without the corresponding proof thereof.

of Court. Hence, there is a marked difference between a sale of

The Supreme Court granted the petition, set aside the decision of the

hereditary rights and a waiver of hereditary rights. The first presumes

RTC Negros Occidental, dismissed the complaint for recovery of

the existence of a contract or deed of sale between the parties. The

possession and damages against Acap for failure to properly state a

second is, technically speaking, a mode of extinction of ownership

cause of action, without prejudice to private respondent taking the

where there is an abdication or intentional relinquishment of a known

proper legal steps to establish the legal mode by which he claims to

right with knowledge of its existence and intention to relinquish it, in

have acquired ownership of the land in question.

favor of other persons who are co-heirs in the succession. Private respondent, being then a stranger to the succession of Cosme Pido, cannot conclusively claim ownership over the subject lot on the sole

7.

QUIJADA vs CA (299 SCRA 695)

Facts:

basis of the waiver document which neither recites the elements of

12

Sales under Atty. Paolo Dimayuga

complied by atorni2be AUSL

COMPILATION OF CASE DIGESTS

SALES

Petitioners (Alfonso, Cresente, Reynalda, Demetrio, Eliuteria, Eulalio,

in favor of the petitioners, holding that Trinidad Quijada did not have

and Warlito) are the children of the late Trinidad Corvera Vda. de

legal title or right to sell the land to Mondejar as it belongs to the

Quijada. Trinidad was one of the heirs of the late Pedro Corvera and

Municipality of Talacogon at that time, and that the deed of sale in

inherited from the latter the 2-hectareparcel of land subject of the

favor of Mondejar did not carry the conformity and acquiescence of

case, situated in the barrio of San Agustin, Talacogon, Agusan del

her children considering that Trinidad was already 63 years old and a

Sur. On 5 April 1956, Trinidad Quijada together with her sisters

widow. The trial court ordered the defendants (private respondents),

Leonila Corvera Vda. de Sequeña and Paz Corvera Cabiltes and

and any person acting in

brother Epapiadito Corvera executed a conditional deed of donation of the 2-hectare parcel of land in favor of the Municipality of Talacogon, the condition being that the parcel of land shall be used solely and exclusively as part of the campus of the proposed provincial high school in Talacogon. Apparently, Trinidad remained in possession of the parcel of land despite the donation. On 29 July 1962, Trinidad sold 1 hectare of the subject parcel of land to Regalado Mondejar. Subsequently, Trinidad verbally sold the remaining 1 hectare to Mondejar without the benefit of a written deed of sale and evidenced solely by receipts of payment. In 1980,

defendants‟ behalf to return and vacate the 2 hectares of land to the plaintiff, and to remove their improvements constructed on the lot; ordered the cancellation of the deed of sale executed by Trinidad to Mondejar, as well as the deeds of sale/relinquishments executed by Mondejar to the other defendants; and ordered the defendants to pay the plaintiffs, in solidum, the amount of P10,000, P8,000, and P30,000 as attorney‟s fees, expenses of litigation and moral damages, respectively. On appeal, the Court of Appeals reversed and set aside the judgment

the heirs of Trinidad, who at that time was already dead, filed a

a quo ruling that the sale made by Trinidad Quijada to respondent

complaint for forcible entry against Mondejar, which complaint was,

Mondejar was valid as the former retained an inchoate interest on the

however, dismissed for failure to prosecute. In 1987, the proposed

lots by virtue of the automatic reversion clause in the deed of

provincial high school having failed to materialize, the Sangguniang

donation. Thereafter, petitioners filed a motion for reconsideration.

Bayan of the municipality of Talacogon enacted a resolution reverting

When the CA denied their motion, petitioners instituted a petition for

the 2 hectares of land donated back to the donors. In the meantime,

review to the Supreme Court.

Mondejar sold portions of the land to Fernando Bautista, Rodolfo Goloran, Efren Guden, and Ernesto Goloran.

Issue: Whether the sale between Trinidad and Regalado is valid considering the capacity of the vendor to execute the contract in view

On 5 July 1988, the petitioners filed a complaint against private

of the conditional deed of donation

respondents (Mondejar, Rodulfo and Ernesto Goloran, Asis, Ras,Abiso, Bautista, Macasero and Maguisay) for quieting of title,

Held: The donor may have an inchoate interest in the donated

recovery of possession and ownership of parcels of land with claim

property during the time that ownership of the land has not reverted

for attorney‟s fees and damages. The trial court rendered judgment

to her. Such inchoate interest may be the subject of contracts

13

Sales under Atty. Paolo Dimayuga

complied by atorni2be AUSL

COMPILATION OF CASE DIGESTS

SALES

including a contract of sale. In this case, however, what the donor

law to the buyer." This rule applies not only when the subject matter

sold was the land itself which she no longer owns. It would have been

of the contract of sale is goods, but also to other kinds of property,

different if the donor-seller sold her interests over the property

including real property.

under the deed of donation which is subject to the possibility of reversion of ownership arising from the non-fulfillment of the resolutory condition. Sale, being a consensual contract, is perfected by mere consent,

The Supreme Court affirmed the assailed decision of the Court of Appeals 8.

CELESTINO vs CIR (99 Phil 841)

which is manifested the moment there is a meeting of the minds as

Facts: Celestino Co & Company is a general co-partnership registered

to the offer and acceptance thereof on three (3) elements: subject

under the trade name “Oriental Sash Factory”. From 1946 to 1951, it

matter, price and terms of payment of the price. Ownership by the

paid taxes equivalent to 7% on the gross receipts under Sec. 186 of

seller on the thing sold at the time of the perfection of the contract of

the NIRC, which is a tax on the original sales of articles by

sale is not an element for its perfection. What the law requires is that

manufacturer, producer or importer. However, in 1952 it began to

the seller has the right to transfer ownership at the time the thing

claim only 3% tax under Sec. 191, which is a tax on sales of services.

sold is delivered. Perfection per se does not transfer ownership which

Petitioner claims that it does not manufacture ready-made doors,

occurs upon the actual or constructive delivery of the thing sold. A

sash and windows for the public, but only upon special orders from

perfected contract of sale cannot be challenged on the ground of

the customers, hence, it is not engaged in manufacturing, but only in

non-ownership on the part of the seller at the time of its perfection;

sales of services.

hence, the sale is still valid. Issue: Whether the petitioner company is engaged in manufacturing, or is merely a special service provider The consummation, however, of the perfected contract is another

Held: Celestino Co & Company habitually makes sash, windows and

matter. It occurs upon the constructive or actual delivery of the

doors, as it has represented in its stationery and advertisements to

subject matter to the buyer when the seller or her successors-in-

the public. That it "manufactures" the same is practically admitted by

interest subsequently acquires ownership thereof. Such circumstance

appellant itself. The fact that windows and doors are made by it only

happened in this case when petitioners who are Trinidad Quijada's

when customers place their orders, does not alter the nature of the

heirs and successors-in-interest became the owners of the subject

establishment, for it is obvious that it only accepted such orders as

property upon the reversion of the ownership of the land to them.

called for the employment of such material-moulding, frames,

Consequently, ownership is transferred to respondent Mondejar and

panels-as it ordinarily manufactured or was in a position habitually to

those who claim their right from him. Article 1434 of the New Civil

manufacture.

Code supports the ruling that the seller's "title passes by operation of

14

Sales under Atty. Paolo Dimayuga

complied by atorni2be AUSL

COMPILATION OF CASE DIGESTS

SALES

Any builder or homeowner, with sufficient money, may order windows or doors of the kind manufactured by this appellant. Therefore it is not true that it serves special customers only or confines its services to them alone. And anyone who sees, and likes, the doors ordered by Don Toribio Teodoro & Sons Inc. may purchase from appellant doors of the same kind, provided he pays the price. Surely, the appellant will not refuse, for it can easily duplicate or even mass-produce the same doors-it is mechanically equipped to do so.

CIR received an anonymous letter denouncing Engineering for tax evasion by misdeclaring its imported articles and failing to pay the correct percentage taxes due thereon in connivance with its foreign suppliers. Engineering was likewise denounced to the Central Bank (CB) for alleged fraud in obtaining its dollar allocations. So, NBI and Central Bank conducted a raid and search on which occasion voluminous records of the firm were seized and confiscated. CIR also

The Oriental Sash Factory does nothing more than sell the goods that

reported about deficiency advance sales tax. CIR assessed against the

it mass-produces or habitually makes; sash, panels, mouldings,

Company payment of the increased amount and suggested that

frames, cutting them to such sizes and combining them in such

P10,000 be paid as compromise in extrajudicial settlement of the

forms as its customers may desire. When this Factory accepts a job

Company‟s penal liability for violation of the Tax Code. The firm,

that requires the use of extraordinary or additional equipment, or

however, contested the tax assessment and requested that it be

involves services not generally performed by it-it thereby contracts

furnished with the details and particulars of the Commissioner‟s

for a piece of work filing special orders within the meaning of Article

assessment. Engineering appealed the case to the Court of Tax

1467. The orders herein exhibited were not shown to be special.

Appeals. During the pendency of the case the investigating revenue

They were merely orders for work nothing is shown to call them

examiners reduced the Company‟s deficiency tax. CTA declared that

special requiring extraordinary service of the factory.

Engineering is a contractor and is exempt from deficiency

Anyway, supposing for the moment that the transactions were not sales, they were neither lease of services nor contract jobs by a

manufacturers sales tax. The Commissioner, not satisfied with the decision of the CTA, appealed to the Supreme Court.

contractor. But as the doors and windows had been admittedly

Issue: 1) WON Engineering Equipment is a manufacturer or

"manufactured" by the Oriental Sash Factory, such transactions could

contractor? CONTRACTOR.

be, and should be taxed as "transfers" thereof under section 186 of the National Revenue Code. 9.

CIR vs ENGR. EQUUIPMENT (64 SCRA 590)

Facts: Engineering Equipment and Supply Co., an engineering and

2) Corrollarily WON the installation of a centralized air-conditioning system a contact of sale or a contract for piece of work? CONTRACT FOR PIECE OF WORK. 3) Is Celestino Co vs. CIR case applicable in this case? NO.

machinery firm, is engaged in the design and installation of central type air conditioning system, pumping plants and steel fabrications.

15

Sales under Atty. Paolo Dimayuga

complied by atorni2be AUSL

COMPILATION OF CASE DIGESTS

SALES

Held: 1) The word “contractor” has come to be used with special

order of the party desiring to acquire it, or a thing which would have

reference to a person who, in the pursuit of the independent

existed and has been the subject of sale to some other persons even

business, undertakes to do a specific job or piece of work for other

if the order had not been given. If the article ordered by the

persons, using his own means and methods without submitting

purchaser is exactly such as the plaintiff makes and keeps on hand

himself to control as to the petty details. The true test of a contractor

for sale to anyone, and no change or modification of it is made at

is that when he renders service in the course of an independent

defendant‟s request, it is a contract of sale, even though it may be

occupation, representing the will of his employer only as to the result

entirely made after, and in consequence of, the defendants order for

of his work, and not as to the means by which it is accomplished.

it.

Engineering did not manufacture air conditioning units for sale to the

The air conditioning units installed in a central type of air

general public, but imported some items (as refrigeration

conditioning system would not have existed but for the order of the

compressors in complete set, heat exchangers or coils) which were

party desiring to acquire it and if it existed without the special order

used in executing contracts entered into by it. Engineering undertook

of Engineering‟s customer, the said air conditioning units were not

negotiations and execution of individual contracts for the design,

intended for sale to the general public. Hence, it is a contract for a

supply and installation of air conditioning units of the central type

piece of work.

taking into consideration in the process such factors as the area of the space to be air conditioned; the number of persons occupying or would be occupying the premises; the purpose for which the various

3) Celestino Co compared to Engineering Equipment: Points of discussion:

air conditioning areas are to be used; and the sources of heat gain or cooling load on the plant such as sun load, lighting, and other electrical appliances which are or may be in the plan. Relative to the installation of air conditioning system, Engineering designed and

1)

Advertisement as manufacturer/contractor

2)

Ready-made materials

engineered complete each particular plant and that no two plants

In Celestino Co, the Court held the taxpayer to be a manufacturer

were identical but each had to be engineered separately.

rather than a contractor of sash, doors and windows manufactured in its factory. From the very start, Celestino Co intended itself to be a manufacturer of doors, windows, sashes etc. as it did register a

2) NATURE OF OBJECT TEST:

special trade name for its sash business and ordered company stationery carrying the bold print “ORIENTAL SASH FACTORY.” As a

The distinction between a contract of sale and one for work, labor

general rule, sash factories receive orders for doors and windows of

and materials is tested by the inquiry whether the thing transferred is

special design only in particular cases, but the bulk of their sales is

one NOT in existence and which never would have existed but for the

derived from ready-made doors and windows of standard sizes for

16

Sales under Atty. Paolo Dimayuga

complied by atorni2be AUSL

COMPILATION OF CASE DIGESTS

SALES

the average home, which “sales” were reflected in their books of

beds by the dozen and in no other manner. With the exception of the

accounts totalling P118,754.69 for the period of only nine (9)

obligation on the part of the defendant to order the beds by the

months. The Court found said sum difficult to have been derived

dozen and in no other manner, none of the obligations imputed to

from its few customers who placed special orders for these items.

the defendant in the two causes of action are expressly set forth in

In the present case, the company advertised itself as Engineering Equipment and Supply Company, Machinery Mechanical Supplies, Engineers, Contractors and not as manufacturers. It likewise paid the contractors tax on all the contracts for the design and construction of central system. Similarly, it did not have ready-made air conditioning units for sale. 10. QUIROGA vs PARSONS HARDWARE Facts: On 24 January 1911, in Manila, a contract was entered into by and between the Quiroga and J. Parsons (to whose rights and obligations Parsons Hardware later subrogated itself) for the exclusive sale of Quiroga Beds in the Visayan Islands. Quiroga was to furnish the Parson with the beds (which the latter might order, at the price stipulated) and that Parson was to pay the price in the manner stipulated. The price agreed upon was the one determined by Quiroga for the sale of these beds in Manila, with a discount of from 20 to 25 per cent, according to their class. Payment was to be made at the end of sixty days, or before, at Quiroga‟s request, or in cash, if Parson so preferred, and in these last two cases an additional discount was to be allowed for prompt payment.

the contract. But the plaintiff alleged that the defendant was his agent for the sale of his beds in Iloilo, and that said obligations are implied in a contract of commercial agency. The whole question, therefore, reduced itself to a determination as to whether the defendant, by reason of the contract hereinbefore transcribed, was a purchaser or an agent of the plaintiff for the sale of his beds. Issue: Whether the contract is a contract of agency or of sale. Held: In order to classify a contract, due attention 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. Payment was to be made at the end of sixty days, or before, at the plaintiff‟s request, or in cash, if the defendant so preferred, and in these last two cases an additional discount was to be allowed for prompt payment. These are precisely the essential features of a contract of purchase and sale. 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

Quiroga files a case against Parsons for allegedly violating the

agent received the thing to sell it, and does not pay its price, but

following stipulations: not to sell the beds at higher prices than those

delivers to the principal the price he obtains from the sale of the

of the invoices; to have an open establishment in Iloilo; itself to

thing to a third person, and if he does not succeed in selling it, he

conduct the agency; to keep the beds on public exhibition, and to

returns it. By virtue of the contract between the plaintiff and the

pay for the advertisement expenses for the same; and to order the

defendant, the latter, on receiving the beds, was necessarily obliged

17

Sales under Atty. Paolo Dimayuga

complied by atorni2be AUSL

COMPILATION OF CASE DIGESTS

SALES

to pay their price within the term fixed, without any other

Puyat sent a cable to the Starr Piano Company, inquiring about the

consideration and regardless as to whether he had or had not sold

equipment desired and making the said company to quote its price of

the beds.

$1,700 FOB factory Richmond, Indiana. Puyat informed the plaintiff of

In respect to the defendant‟s obligation to order by the dozen, the only one expressly imposed by the contract, the effect of its breach would only entitle the plaintiff to disregard the orders which the defendant might place under other conditions; but if the plaintiff consents to fill them, he waives his right and cannot complain for having acted thus at his own free will.

the price of $1,700, and being agreeable to the price, Arco, in a letter dated 19 November 1929, formally authorized the order. The equipment arrived about the end of the year 1929, and upon delivery of the same to Arco and the presentation of necessary papers, the price of $1,700, plus the 10% commission agreed upon the plus all the expenses and charges, was duly paid by the Arco to Puyat. He following year, another order for sound reproducing equipment was

For the foregoing reasons, we are of opinion that the contract by and

placed by Arco with Puyat, on the same terms as the first order. The

between the plaintiff and the defendant was one of purchase and

equipment under the second order arrived in due time, and the

sale, and that the obligations the breach of which is alleged as a

defendant was duly paid the price of $1,600 with its10 per cent

cause of action are not imposed upon the defendant, either by

commission, and $160, for all expenses and charges. This amount of

agreement or by law.

$160 does not represent actual out-of-pocket expenses paid by Puyat, but a mere flat charge and rough estimate made by Puyat

11. PUYAT and SONS vs ARCO AMUSEMENT COMP. (72 Phil 402)

equivalent to 10% of the price of $1,600 of the equipment.

In the year 1929, the „Teatro Arco‟, was engaged in the business of

Three years later, in connection with a civil case in Vigan, filed by one

operating cinematographs. In 1930, its name was changed to Arco

Fidel Reyes against Puyat, the officials of the Arco discovered that the

Amusement Company. About the same time, Gonzalo Puyat & Sons,

price quoted to them by Puyat with regard to their two orders was not

Inc., in addition to its other business, was acting as exclusive agents

the net price but rather the list price, and that the defendant had

in the Philippines for the Starr Piano Company of Richmond, Indiana,

obtained a discount from the Starr Piano Company. Moreover, by

USA, which dealt in cinematograph equipment and machinery. Arco,

reading reviews and literature on prices of machinery and

desiring to equip its cinematograph with sound reproducing devices,

cinematograph equipment, said officials of Arco were convinced that

approached Puyat. After some negotiations, it was agreed between

the prices charged them by the defendant were much too high

the parties, Puyat would, on behalf of Arco Amusement, order sound

including the charges for out-of-pocket expenses. For these reasons,

reproducing equipment from the Star Piano Company and that Arco

they sought to obtain a reduction from Puyat or rather a

Amusement would pay Puyat, in addition to the price of the

reimbursement. Failing in this they brought an action with the CFI

equipment, 10% commission, plus all expenses, such as, freight,

Manila.

insurance, banking charges, cables, etc. At the expense of the Arco,

18

Sales under Atty. Paolo Dimayuga

complied by atorni2be AUSL

COMPILATION OF CASE DIGESTS

SALES

The trial court held that the contract between the parties was one of

of $1,700 and $1,600." This is incompatible with the pretended

the outright purchase and sale, and absolved Puyat from the

relation of agency between the petitioner and the respondent,

complaint. The appellate court, however, held that the relation

because in agency, the agent is exempted from all liability in the

between the parties was that of agent and principal, Puyat acting as

discharge of his commission provided he acts in accordance with the

agent of Arco in the purchase of the equipment in question, and

instructions received from his principal (section 254, Code of

sentenced Puyat to pay Arco alleged over payments in the total sum

Commerce), and the principal must indemnify the agent for all

of $1,335.52 or P2,671.04, together with legal interest thereon from

damages which the latter may incur in carrying out the agency

the date of the filing of the complaint until said amount is fully paid,

without fault or imprudence on his part (article 1729, Civil Code).

as well as to pay the costs of the suit in both instances.

While the letters state that the petitioner was to receive ten per cent

Hence, the petition for the issuance of a writ of certiorari to the Court

(10%) commission, this does not necessarily make the petitioner an

of Appeals for the purposed of reviewing its decision in civil case GR

agent of the respondent, as this provision is only an additional price

1023.

which the respondent bound itself to pay, and which stipulation is

Issue: Whether the contract between petitioner and respondent is that

not incompatible with the contract of purchase and sale.

of agency where agent is bound to indemnify the principal for

In the second place, to hold the petitioner an agent of the respondent

damages, or a mere contract of sale

in the purchase of equipment and machinery from the Starr Piano

Held: The letters, by which the respondent accepted the prices for the sound reproducing equipment subject of its contract with the petitioner, are clear in their terms and admit no other interpretation that the respondent in question at the prices indicated which are fixed and determinate. The respondent admitted in its complaint filed with the Court of First Instance of Manila that the petitioner agreed to sell to it the first sound reproducing equipment and machinery. We agree with the trial judge that "whatever unforseen events might have taken place unfavorable to the defendant (petitioner), such as change in prices, mistake in their quotation, loss of the goods not covered by insurance or failure of the Starr Piano Company to properly fill the orders as per specifications, the plaintiff (respondent) might still legally hold the defendant (petitioner) to the prices fixed

19

Sales under Atty. Paolo Dimayuga

Company of Richmond, Indiana, is incompatible with the admitted fact that the petitioner is the exclusive agent of the same company in the Philippines. It is out of the ordinary for one to be the agent of both the vendor and the purchaser. The facts and circumstances indicated do not point to anything but plain ordinary transaction where the respondent enters into a contract of purchase and sale with the petitioner, the latter as exclusive agent of the Starr Piano Company in the United States. It follows that the petitioner as vendor is not bound to reimburse the respondent as vendee for any difference between the cost price and the sales price which represents the profit realized by the vendor out of the transaction. This is the very essence of commerce without which merchants or middleman would not exist.

complied by atorni2be AUSL

COMPILATION OF CASE DIGESTS

SALES

The Supreme Court granted the writ of certiorari, reversed the

contending that the assessment for the years 1946 to 1952 had

decision of the appellate court, and absolved Puyat & Sons from the

already prescribed. After one hearing, the Conference Staff of the

complaint in GR 1023, without pronouncement regarding costs

Bureau of Internal Revenue eliminated the 50% fraud penalty and held

TOPIC: PARTIES TO A CONTRACT OF SALE 12. MEDINA vs CIR (1 SCRA 675)

that the taxes assessed against him before 1948 had already prescribed. Based on these findings, the Collector issued a modified assessment, demanding the payment of only P3,325.68. Antonio again requested for reconsideration, but the Collector, in his letter of

Facts: On 20 May 1944, Antonio Medina married Antonia Rodriguez.

4 April 1955, denied the same.

Before 1946, the spouses had neither property nor business of their own. Later, however, Antonio acquired forest concessions in the

Antonio appealed to the Court of Tax Appeals, which rendered

municipalities of San Mariano and Palanan, Isabela. From 1946 to

judgment upholding a tax assessment of the Collector of Internal

1948, the logs cut and removed by the Antonio from his concessions

Revenue except with respect to the imposition of so-called

were sold to different persons in Manila through his agent, Mariano

compromise penalties, which were set aside. Hence a petition to

Osorio. In 1949, Antonia started to engage in business as a lumber

review the decision of the CTA.

dealer, and up to around1952, Antonio sold to her almost all the logs produced in his San Mariano concession. Antonia, in turn, sold in Manila the logs bought from her husband through the same agent,

Issue: Whether or not the sales made by the petitioner to his wife could be considered as his original taxable sales

Mariano Osorio. The proceeds were either received by Osorio for

Held: It appears that at the time of the marriage between petitioner

Antonio or deposited by said agent in Antonio‟s current account with

and his wife, they neither had any property nor business of their own,

the PNB.

as to have really urged them to enter into the supposed property

On the thesis that the sales made by Antonio to his wife were null and void pursuant to the provisions of Article 1490 of the Civil Code of the Philippines, the Collector considered the sales made by Antonia as Antonio‟s original sales taxable under Section 186 of the National Internal Revenue Code and, therefore, imposed a tax assessment on Antonio. On 30 November 1963,Antonio protested the assessment; however, the Collector insisted on his demand. On 9 July 1954, Antonio filed a petition for reconsideration, revealing for the first time the existence of an alleged premarital agreement of complete separation of properties between him and his wife, and

20

Sales under Atty. Paolo Dimayuga

agreement. Secondly, the testimony that the separation of property agreement was recorded in the Registry of Property three months before the marriage, is patently absurd, since such a prenuptial agreement could not be effective before marriage is celebrated, and would automatically be cancelled if the union was called off. In the third place, despite their insistence on the existence of the ante nuptial contract, the couple, strangely enough, did not act in accordance with its alleged covenants. It was not until July of 1954 that he alleged, for the first time, the existence of the supposed property separation agreement. Finally, the Day Book of the Register of Deeds on which the agreement would have been entered, had it

complied by atorni2be AUSL

COMPILATION OF CASE DIGESTS

SALES

really been registered as petitioner insists, and which book was

Daguines initiated a complaint before the CFI Pangasinan (Branch 1,

among those saved from the ravages of the war, did not show that

Civil Case 15620) on19 June 1980 for quieting of title and damages

the document in question was among those recorded therein.

against Calimlim-Canullas. Calimlim-Canullas resisted and claimed

The wife is authorized to engage in business and for the incidents that flow therefrom when she so engages therein. But the transactions permitted are those entered into with strangers, and do not constitute exceptions to the prohibitory provisions of Article 1490 against sales between spouses.

that the house in dispute where she and her children were residing, including the coconut trees on the land, were built and planted with conjugal funds and through her industry; that the sale of the land together with the house and improvements to Daguines was null and void because they are conjugal properties and she had not given her consent to the sale. On 6 October 1980, the trial court ruled in favor

Contracts violative of the provisions of Article 1490 of the Civil Code

of Daguines as the lawful owner of the land as well as ½ of the house

are null and void. Being void transactions, the sales made by the

erected on the land. Upon reconsideration and on 27 November

petitioner to his wife were correctly disregarded by the Collector in

1980, however, the lower court modified the judgment by declaring

his tax assessments that considered as the taxable sales those made

Daguines as the lawful owner of the land and 10 coconut trees

by the wife through the spouses' common agent, Mariano Osorio. In

thereon but declaring the sale of the conjugal house including 3

upholding that stand, the Court below committed no error.

coconuts and their crops during the conjugal relation of the spouses null and void. A petition for review on certiorari was filed with

The Supreme Court affirmed the appealed decision with cost against

Supreme Court.

the petitioner. During the pendency of the appeal, however, Fernando Canullas and 13. CALIMLIM-CANULAS vs FORTUN (129 SCRA 675) Facts: Mercedes Calimlim-Canullas and Fernando Canullas were married on 19 December 1962. They begot five children. They lived

Corazon Daguines were convicted of concubinage in a judgment rendered on 27 October 1981 by the then CFI Pangasinan, Branch II, which judgment has become final.

in a small house on the residential land in question with an area of

Issues: (1) Whether or not the construction of a conjugal house on

approximately 891 sq. m., located at Bacabac, Bugallon, Pangasinan.

the exclusive property of the husband ipso facto gave the land the

After Canullas‟ father died in 1965, he inherited the land. In 1978,

character of conjugal property

Canullas abandoned his family and lived with Corazon Daguines. On 15 April 1980, Canullas sold the subject property with the house

(2) Whether or not the sale of the lot together with the house and

thereon to Daguines for the sum of P2,000.00. In the document of

improvements thereon was valid under the circumstances

sale, Canullas described the house as “also inherited by me from my

surrounding the transaction

deceased parents.” Unable to take possession of the lot and house,

21

Sales under Atty. Paolo Dimayuga

complied by atorni2be AUSL

COMPILATION OF CASE DIGESTS Held: (1) Both the land and the building belong to the conjugal partnership but the conjugal partnership is indebted to the husband for the value of the land. The spouse owning the lot becomes a creditor of the conjugal partnership for the value of the lot, which value would be reimbursed at the liquidation of the conjugal partnership. FERNANDO could not have alienated the house and lot to DAGUINES since MERCEDES had not given her consent to said sale.

SALES 14. GUIANG vs CA (291 SCRA 372) Facts: Gilda and Judie Corpuz were married civilly on 24 December 1968 in Bacolod City. The couple have 3 children (Junie, Harriet, and Jodie or Joji. On 14 February 1983, the Corpuzes, with Gilda Corpuz as vendee, bought a 421 sq. m. lot (Lot 8, Block9, (LRC) Psd-165409) located in Barangay Gen. Paulino Santos (Bo. 1), Koronadal, South Cotabato from Manuel Callejo who signed as vendor through a

(2) The contract of sale was null and void for being contrary to morals

conditional deed of sale for a total consideration of P14,735.00. The

and public policy. The sale was made by a husband in favor of a

consideration was payable in installment, with right of cancellation in

concubine after he had abandoned his family and left the conjugal

favor of vendor should vendee fail to pay 3 successive installments.

home where his wife and children lived and from whence they derived

On 22 April 1988, the Corpuzes sold ½ portion of their lot to spouses

their support. That sale was subversive of the stability of the family, a

Antonio and Luzviminda Guiang. The latter have since then occupied

basic social institution which public policy cherishes and protects.

the ½portion and built their house thereon. They are thus adjoining

The law emphatically prohibits the spouses from selling property to

neighbors of the Corpuzes. On June 1989, Gilda Corpuz left for

each other subject to certain exceptions. Similarly, donations

Manila, with the consent of her husband, to look for work abroad.

between spouses during marriage are prohibited. And this is so

Unfortunately, she became a victim of an unscrupulous illegal

because if transfers or con conveyances between spouses were

recruiter, was not able to go abroad, and stayed for sometime in

allowed during marriage, that would destroy the system of conjugal

Manila. Sometime in January 1990, Harriet Corpuz learned that her

partnership, a basic policy in civil law. It was also designed to prevent

father intended to sell the remaining ½ portion including their house,

the exercise of undue influence by one spouse over the other, as well

of their home lot to the Guiangs. She wrote a letter to her mother

as to protect the institution of marriage, which is the cornerstone of

informing her, who in turn replied that she was objecting to the sale.

family law. The prohibitions apply to a couple living as husband and

Harriet, however, did not inform her father about this; but instead

wife without benefit of marriage, otherwise, "the condition of those

gave the letter to Mrs. Luzviminda Guiang so that Guiang would

who incurred guilt would turn out to be better than those in legal

advise her father. However, in the absence of his wife Gilda Corpuz,

union." Those provisions are dictated by public interest and their

and on 1 March 1990, Judie Corpuz sold the remaining ½ portion of

criterion must be imposed upon the wig of the parties.

the lot and the house thereon to Luzviminda Guiang thru a document

The Supreme Court set aside the decision and resolution of the lower court, and declared the sale of the lot, house and improvements null and void; without costs.

22

Sales under Atty. Paolo Dimayuga

known as „Deed of Transfer of Rights‟ (Exh. „A‟) for a total consideration of P30,000.00 of which P5,000.00 was to be paid in June 1990. Judie Corpuz‟s children Junie and Harriet signed the document as witnesses. On 5 March 1990, obviously to cure whatever

complied by atorni2be AUSL

COMPILATION OF CASE DIGESTS

SALES

defect in Judie Corpuz‟s title over the lot transferred, Luzviminda

approached the Barangay Captain for the annulment of the

Guiang as vendee executed another agreement over the lot with

settlement. Annulment not having been made, Gilda stayed put in her

Manuela Jimenez Callejo, widow of Manuel Callejo (the original

house and lot. The Guiangs followed thru the amicable settlement

registered owner), who signed as vendor for a consideration of

with a motion for the execution of the amicable settlement, filing the

P9,000.00. Judie Corpuz signed as a witness to the sale. The new sale

same with the MTC Koronadal, South Cotabato. The proceedings [are]

describes the lot sold as Lot 8, Block 9, (LRC) Psd-165408. As a

still pending before the said court,with the filing of the instant suit.

consequence of the sale, the Guiangs spent P600.00for the preparation of the Deed of Transfer of Rights; P9,000.00 as the amount they paid to Mrs. Manuela Callejo, having assumed the remaining obligation of the Corpuzes to Mrs. Callejo; P100.00; a total of P759.62 basic tax and special educationalfund on the lot; P127.50 as the total documentary stamp tax on the various documents; P535.72 for the capital gains tax; P22.50as transfer tax; a standard fee of P17.00; certification fee of P5.00. These expenses particularly the taxes and other expenses towards the transfer of the title to the Guiangs were incurred for the whole Lot 9, Block 8, (LRC) Psd165409.

On 28 May 1990, Gilda Corpuz filed an Amended Complaint against her husband Judie Corpuz and the Guiangs. The said Complaint sought the declaration of a certain deed of sale, which involved the conjugal property of private respondent and her husband, null and void. On 9 September 1992, The RTC Koronodal, South Cotabato (Branch 25) rendered a decision in favor of Gilda Corpuz, recognizing her lawful and valid ownership and possession over the remaining ½ portion of the lot, declaring the deed of transfer of rights and the amicable settlement null and void, and ordering Gilda Corpuz to reimburse the Guiangs the amount of P9,000 corresponding to the payment made by the Guiangs to Callejo for the unpaid balance and

On 11 March 1990, Gilda Corpuz returned home. She gathered her

another P379.62representing ½ of the amount of realty taxes paid by

children, who were staying in different households, together and

the Guiangs, both with legal interests thereon computed from the

stayed at their house. Her husband was nowhere to be found. She

finality of the decision; without pronouncement as to costs.

was informed by her children that their father had a wife already. For

Dissatisfied, the Guiangs filed an appeal with the Court of Appeals.

staying in their house sold by her husband, Gilda was complained

On 30January 1996, the appellate court affirmed the decision of the

against by the Guiangs before the Barangay authorities of Barangay

lower court. Their motion for reconsideration was also denied. A

General Paulino Santos (Bo. 1), Koronadal, South Cotabato, for

petition for review was before the Supreme Court.

trespassing (Barangay Case 38). On 16 March 1990, the parties thereat signed a document known as „amicable settlement‟ requiring the Corpuzes to leave the house voluntarily on or before 7 April 1990, without any charge. Believing that she had received the shorter end of the bargain, Gilda

23

Sales under Atty. Paolo Dimayuga

Issue: Whether the sale was void or merely voidable and was ratified by the amicable settlement Held: Respondent's consent to the contract of sale of their conjugal property was totally inexistent or absent. The nullity of the contract of sale is premised on the absence of private respondent's consent.

complied by atorni2be AUSL

COMPILATION OF CASE DIGESTS

SALES

To constitute a valid contract, the Civil Code requires the concurrence

record was reconstituted in the CFI Iloilo (Land Case R-695, GLRO

of the following elements: (1) cause, (2) object, and (3) consent, the

Rec. 54852). The CFI heard the land registration case on 11

last element being indubitably absent in the case at bar.

November 1952, and after trial the Court dismissed the application

Neither can the "amicable settlement" be considered a continuing offer that was accepted and perfected by the parties, following the last sentence of Article 124. The order of the pertinent events is clear: after the sale, petitioners filed a complaint for trespassing against private respondent, after which the barangay authorities secured an "amicable settlement" and petitioners filed before the MTC a motion for its execution. The settlement, however, does not mention a continuing offer to sell the property or an acceptance of such a continuing offer. Its tenor was to the effect that private

for registration. Militante appealed to the Court of Appeals (CA-GR 13497-R). Pending the disposal of the appeal or on 18 June 1956, Militante sold to Domingo Rubias, his son-in-law and a lawyer by profession, the land technically described in Psu-99791. The sale wasduly recorded in the Office of the Register of Deeds for the Province of Iloilo (Entry 13609) on 14 July 1960. On 22 September1958, the CA promulgated its judgment confirming the decision of the trial court dismissing the Application for Registration filed by Militante.

respondent would vacate the property. By no stretch of the

Domingo Rubias declared the land for taxation purposes under Tax

imagination, can the Court interpret this document as the acceptance

Declaration (TD) 8585 for 1957; TD 9533 and TD 10019 for1961; TD

mentioned in Article 124.

9868 for 1964, paying the land taxes under TD 8585 and TD 9533.

The Supreme Court denied the petition, and affirmed the challenged decision and resolution; with costs against the Guiangs 15. RUBIAS vs BATILLER (51 SCRA 120)

Militante has also declared the land for taxation purposes under TD 5172 in 1940, under TD T-86 for 1945, under TD 7122 for 1948, and paid the land taxes for 1940, for 1945-46, for 1947, for 1947 & 1948, for 1948, and for 1948 and 1949. TD 2434 in the name of Liberato Demontaño for the land described therein was cancelled by

Facts: Francisco Militante claimed ownership of a parcel of land

TD 5172 of Militante. Demontaño paid the land tax under TD 2434

located in the Barrio General Luna, Barotac Viejo, Iloilo, which he

on 20 December 1939 for the years 1938 and 1959. Isaias Batiller

caused to be surveyed on 18-31 July 1934, whereby he was issued a

had declared for taxation purposes Lot 2 of Psu-144241 under TD

plan Psu-99791 (containing an area of 171.3561hectares.) Before the

8583 for 1957 and a portion of Lot 2 under TD 8584 for 1945. TD

war with Japan, Militante filed with the CFI Iloilo an application for the

8483 was revised by TD 9498 while TD 9584 was cancelled by TD

registration of title of the land technically described in Psu-99791

9584 both in the name of Batiller. Batiller paid the land taxes for Lot

opposed by the Director of Lands, the Director of Forestry and other

2 on 9 November 1960 for the year 1945 and 1946, 1950 and 1960

oppositors. However, during the war with Japan, the record of the

as shown by the certificate of the treasurer. The land claimed by

case was lost before it was heard, so after the war Militante

Batiller as his own was surveyed on 6-7 June 1956, and a plan

petitioned the Court to reconstitute the record of the case. The

24

Sales under Atty. Paolo Dimayuga

complied by atorni2be AUSL

COMPILATION OF CASE DIGESTS

SALES

approved by Director of Lands on 15 November 1956 was issued,

Held: The stipulated facts and exhibits of record indisputably

identified as Psu 155241.

established plaintiff's lack of cause of action and justified the

On 22 April 1960, Rubias filed a forcible Entry and Detainer case against Batiller in the Justice of the Peace Court of Barotac Viejo, Iloilo. On May 1961 and after trial, the Municipal Court of Barotac Viejo decided the case in favor of the Batiller. Rubias appealed from the decision of the Municipal Court of Barotac Viejo to the CFI Iloilo.

outright dismissal of the complaint. Plaintiff's claim of ownership to the land in question was predicated on the sale thereof made by his father-in- law in his favor, at a time when Militante's application for registration thereof had already been dismissed by the Iloilo land registration court and was pending appeal in the Court of Appeals.

On 26 November 1964 and after the trial, the CFI decided the case

Article 1491 of our Civil Code (like Article 1459 of the Spanish Civil

likewise in favor of Batiller, holding that he has “better right to

Code) prohibits in its six paragraphs certain persons, by reason of

possess the land in question having been in the actual possession

the relation of trust or their peculiar control over the property, from

thereof under a claim of title many years before Militante sold the

acquiring such property in their trust or control either directly or

land to Rubias.

indirectly and "even at a public or judicial auction," as follows: (1)

On 31 August 1964, Rubias filed a suit to recover the ownership and possession of certain portions of lot under Psu-99791,bought from his father-in-law, Francisco Militante in 1956, against its present

guardians; (2) agents; (3) administrators; (4) public officers and employees; judicial officers and employees, prosecuting attorneys, and lawyers; and (6) others especially disqualified by law.

occupant Batiller, who allegedly entered said portions of the lot in

Fundamental consideration of public policy render void and

1945 and in 1959. Rubias prayed also for damages and attorney‟s

inexistent such expressly prohibited purchase (e.g. by public officers

fees. On 17 August 1965, the CFI dismissed the case, the court

and employees of government property intrusted to them and by

therein practically agreeing that the contract between Rubias and

justices, judges, fiscals and lawyers of property and rights in

Militante was null and void.Rubias filed a motion for reconsideration,

litigation and submitted to or handled by them, under Article 1491,

which was likewise denied by the lower court on 14 January 1966.

paragraphs (4) and (5) of our Civil Code) has been adopted in a new

Thereafter, Rubiasfiled an appeal before the Court of Appeals, which

article of our Civil Code, viz, Article 1409 declaring such prohibited

certified said appeal to the Supreme as involving purely legal

contracts as "inexistent and void from the beginning."

questions.

Indeed, the nullity of such prohibited contracts is definite and

Issue: Whether or not the contract of sale between appellant and his

permanent and cannot be cured by ratification. The public interest

father-in-law was void because it was made when plaintiff was

and public policy remain paramount and do not permit of

counsel of his father-in-law in a land registration case involving the

compromise or ratification. In his aspect, the permanent

property in dispute

disqualification of public and judicial officers and lawyers grounded on public policy differs from the first three cases of guardians, agents

25

Sales under Atty. Paolo Dimayuga

complied by atorni2be AUSL

COMPILATION OF CASE DIGESTS

SALES

and administrators (Article 1491, Civil Code), as to whose

the sale. On 13 August 1947, Ramos executed in favor of Roldan, a

transactions it had been opined that they may be "ratified" by means

deed of conveyance covering the same 17 parcels, for the sum of

of and in "the form of a new contact, in which cases its validity shall

P15,000. On 21 October 1947, Roldan sold 4 parcels out of the 17 to

be determined only by the circumstances at the time the execution of

Emilio Cruz for P3,000, reserving to herself the right to repurchase.

such new contract. The causes of nullity which have ceased to exist cannot impair the validity of the new contract. Thus, the object which was illegal at the time of the first contract, may have already become lawful at the time of the ratification or second contract; or the service which was impossible may have become possible; or the intention which could not be ascertained may have been clarified by the parties. The ratification or second contract would then be valid from its execution; however, it does not retroact to the date of the first contract."

The Philippine Trust Company replaced Roldan as guardian on 10 August 1948. Two months later, the Company, as guardian, filed before the CFI Manila a complaint against Roldan to annul 2 contracts regarding 17 parcels of land claiming that the step-mother in effect, sold to herself, the properties of her ward, and the sale should be annulled for violating Article 1459 of the Civil Code prohibiting the guardian from purchasing the property of her ward. The trial court upheld the contracts but allowing the minor to repurchase all the parcels by paying P15,000, within 1 year. The CA affirmed the

The Supreme Court affirmed the order of dismissal appealed, with costs against Rubias. 16. PHIL. TRUST COMPANY vs ROLDAN (99 Phil 392) Facts: 17 parcels located in Guiguinto, Bulacan, were part of the properties inherited by Mariano L. Bernardo from his father, the late

judgment. Hence, the appeal. Issue: Whether the sale of the land by the guardian is null and void for being violative of the prohibition for a guardian to purchase either in person or through the mediation of another the property of her ward

Marcelo Bernardo. In view of his minority, guardianship proceedings

Held: Remembering the general doctrine that guardianship is a trust

were instituted, wherein Socorro Roldan, surviving spouse of

of the highest order, and the trustee cannot be allowed to have any

Bernardo and stepmother to Mariano, was appointed his guardian. On

inducement to neglect his ward‟s interest, and in line with the court‟s

27 July 1947, Roldan filed in said guardianship proceedings (Special

suspicion whenever the guardian acquires ward‟s property we have

Proceeding 2485, Manila), a motion asking for authority to sell as

no hesitation to declare that in this case, in the eyes of the law,

guardian the 17 parcels for the sum of P14,700 to Dr. Fidel C.

Socorro Roldan took by purchase her ward‟s parcels thru Dr. Ramos,

Ramos, her brother-in-law, the purpose of the sale being allegedly to

and that Article 1459 of the Civil Code applies.

invest the money in a residential house, which the minor desired to have on Tindalo Street, Manila. The motion was granted. On 5 August 1947, Roldan, as guardian, executed the proper deed of sale in favor of Ramos, and on 12 August 1947 obtained a judicial confirmation of

26

Sales under Atty. Paolo Dimayuga

The Supreme Court annulled the 3 contracts of sale in question; declared the minor as the owner of the 17 parcels of land, with the obligation to return to Roldan the price of P14,700 with legal interest

complied by atorni2be AUSL

COMPILATION OF CASE DIGESTS

SALES

from 12 August 1947; ordered Roldan and Emilio Cruz to deliver said

Alonzo filed for the annulment of the contract on the ground that it

parcels of land to the minor; required Roldan to pay him beginning

violated the provisions of R.A. 477, which states that lands awarded

with 1947 the fruits, which her attorney admits, amounted to P1,522

under the said law shall not be subject to encumbrance or alienation,

a year; authorized the minor to deliver directly to Emilio Cruz, out of

otherwise the awardee shall no longer be entitled to apply for another

the price of P14,700 abovementioned, the sum of P3,000; and

piece of land. The lower court ruled that the contract, which it held as

charged appellees with the costs.

a contract of lease, is null and void.

TOPIC: SUBJECT MATTER OF SALE 17. PITCHEL vs ALONZO(3 SCRA 34)

Issues: (1) Whether the respondent had the right or authority to execute the "Deed of Sale" in 1968, his award having been cancelled previously by the Board of Liquidators on January 27, 1965

Facts: Respondent Prudencio Alonzo was awarded by the Government that parcel of land in Basilan City in accordance with Republic Act No. 477. The award was cancelled by the Board of Liquidators on January

(2) Whether the contract is one for lease of the land, or for sale of

27, 1965 on the ground that, previous thereto, plaintiff was proved

coconut fruits

to have alienated the land to another, in violation of law. In 1972, plaintiff's rights to the land were reinstated. On August 14, 1968, plaintiff and his wife sold to defendant Luis Pichel all the fruits of the coconut trees which may be harvested in the land in question for the period, September 15, 1968 to January 1, 1976, in consideration of P4,200.00. Even as of the date of sale, however, the land was still under lease to one, Ramon Sua, and it was the agreement that part of the consideration of the sale, in the sum of P3,650.00, was to be paid by defendant directly to Ramon Sua so as to release the land from the clutches of the latter. Pending said payment plaintiff refused to allow the defendant to make any harvest. In July 1972, defendant for the first time since the execution of the

(3) Whether the contract is an encumbrance as contemplated by R.A. 477 Held: (1) Until and unless an appropriate proceeding for reversion is instituted by the State, and its reacquisition of the ownership and possession of the land decreed by a competent court, the grantee cannot be said to have been divested of whatever right that he may have over the same property. Herein respondent is not deemed to have lost any of his rights as grantee during the period material to the case at bar, i.e., from the cancellation of the award in 1965 to its reinstatement in 1972. Within said period, respondent could exercise all the rights pertaining to a grantee.

deed of sale in his favor, caused the harvest of the fruit of the

(2) A perusal of the deed fails to disclose any ambiguity or obscurity

coconut trees in the land.

in its provisions, nor is there doubt as to the real intention of the contracting parties. The terms of the agreement are clear and unequivocal, hence the literal and plain meaning thereof should be

27

Sales under Atty. Paolo Dimayuga

complied by atorni2be AUSL

COMPILATION OF CASE DIGESTS

SALES

observed. The document in question expresses a valid contract of

improvements thereon. Permanent improvements on a parcel of land

sale. It has the essential elements of a contract of sale. The subject

are things incorporated or attached to the property in a fixed

matter of the contract of sale in question are the fruits of the coconut

manner, naturally or artificially. They include whatever is built,

trees on the land during the years from September 15, 1968 up to

planted or sown on the land which is characterized by fixity,

January 1, 1976, which subject matter is a determinate thing. Under

immutability or immovability. Houses, buildings, machinery, animal

Article 1461 of the New Civil Code, things having a potential

houses, trees and plants would fall under the category of permanent

existence may be the object of the contract of sale. Pending crops

improvements, the alienation or encumbrance of which is prohibited.

which have potential existence may be the subject matter of sale. The

The purpose of the law is not violated when a grantee sells the

essential difference between a contract of sale and a lease of things

produce or fruits of his land. On the contrary, the aim of the law is

is that the delivery of the thing sold transfers ownership, while in

thereby achieved, for the grantee is encouraged and induced to be

lease no such transfer of ownership results as the rights of the lessee

more industrious and productive, thus making it possible for him and

are limited to the use and enjoyment of the thing leased.

his family to be economically self-sufficient and to lead a respectable

The contract was clearly a "sale of the coconut fruits." The vendor sold, transferred and conveyed "by way of absolute sale, all the coconut fruits of his land," thereby divesting himself of all ownership or dominion over the fruits during the seven-year period. The possession and enjoyment of the coconut trees cannot be said to be the possession and enjoyment of the land itself because these rights are distinct and separate from each other, the first pertaining to the

life. At the same time, the Government is assured of payment on the annual installments on the land. We agree with herein petitioner that it could not have been the intention of the legislature to prohibit the grantee from selling the natural and industrial fruits of his land, for otherwise, it would lead to an absurd situation wherein the grantee would not be able to receive and enjoy the fruits of the property in the real and complete sense.

accessory or improvements (coconut trees) while the second, to the principal (the land). A transfer of the accessory or improvement is not a transfer of the principal. It is the other way around, the accessory follows the principal. Hence, the sale of the nuts cannot be interpreted nor construed to be a lease of the trees, much less

First 17 cases only. More compilation of cases on this subject matter will be posted. Sources: http://www.scribd.com/yumiganda http://princesslawyer.blogspot.com

extended further to include the lease of the land itself. The grantee of a parcel of land under R.A. No. 477 is not prohibited from alienating or disposing of the natural and/or industrial fruits of the land awarded to him. What the law expressly disallows is the encumbrance or alienation of the land itself or any of the permanent

28

Sales under Atty. Paolo Dimayuga

complied by atorni2be AUSL