SALES- Case Digests

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 1.

THE NATURE OF SALE

GAITE v FONACIER

FACTS: Fonacier was the holder of 11 iron lode mineral claims. By a Deed of Assignment, he appointed Gaite as his attorney-in-fact for the purpose of operating the same. Gaite then executed a general assignment conveying the right to develop and exploit the mining claim to Larap Iron Mines, owned by him, and then started to develop the same. Fonacier then decided to revoke the authority granted to Gaite; the latter acceded and transferred the claims back to Fonacier but for consideration—royalties and a sum of P75,000, P10,000 of which was already paid. A balance of P65,000 remained for which Fonacier issued 2 sureties, good for a year. There was a stipulation that the P65,000 balance will be paid from the 1st shipment of ores and its local sale. Eventually, the sureties expired and Fonacier defaulted in settling his debt. He now alleges that the payment of the balance was subject to a suspensive condition—being the 1st shipment and sale of iron ores. st

ISSUE: W/N the 1 shipment and sale of iron ores are considered suspensive condition HELD: NO. It was only a SUSPENSIVE TERM. What took place between Gaite and Fonacier, regarding the transfer of the mining rights, was a sale. A contract of sale is normally ONEROUS and COMMUTATIVE. Each party anticipates performance form the very start. Since a sale is essentially onerous, any doubts must be settled in favor of the greatest reciprocity of rights—in this case, that a period, and not a condition, was contemplated. Had it been a suspensive condition, Fonacier would have been able to postpone payment indefinitely.

2.

Gross inadequacy of price does NOT affect the validity of sale, unless it indicates either (1) a vice of consent or (2) that the parties intended a donation or some other contract. No evidence suggests such circumstances. The price need not be the exact value of the property. In fact, all the parties to the sale believed that they received the commutative value of what they paid for.

3.

CELESTINO & CO. v COLLECTOR

FACTS: Celestino & Co. (Oriental Sash Factory) was paying 7% taxes based on gross receipts for the manufacture and sale of sash products. It now seeks to pay only the 3% tax imposable upon contracts for piece of work—as opposed to the 7% tax on sales—claiming that they do not manufacture ready-made doors for the public but only upon special order of the customers. ISSUE: W/N Celestino & Co. is a contractor (piece of work) HELD: NO. The fact that the sash products are made only upon the order of the customers does NOT change the nature of the establishment. Timing is not the controlling factor but the nature of the work done. They habitually make sash products and can easily duplicate and mass-produce the same. The bulk of their sales come from standard ready-made products—special orders are the exception and come only occasionally. If the goods are manufactured specifically upon special order of the customer and requires extraordinary service, then that would be the time when it can be classified as piece of work. But such is not the case here. Oriental Sash is clearly a manufacturer and massproducer of doors.

BUENAVENTURA v CA

FACTS: Joaquin spouses sold 6 subdivision lots to some of their 9 children evidenced by corresponding Deeds of Sale. The other children, interested in protecting their inheritance, sought to have the deeds of sale declared null and void for prejudicing their legitimes, lack of consideration, and gross inadequacy of price. ISSUE: W/N the contract of sale is valid HELD: YES. At the onset, their rights to the legitimes are merely inchoate and vest only upon the death of their parents; thus they have no legal interest thereof. Payment of the price has nothing to do with the perfection of the contract of sale; it was perfected by mere consent. Failure to pay consideration cannot be equated with lack of consideration, which prevents the existence of a valid contract. The former only results in the right to demand payment or rescission. There was already a meeting of the minds as to the price which was reflected in the Deed of Sale—and that was sufficient. In fact, evidence suggests that the purchase process have indeed been paid. The sales are thus valid. ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA

4.

COMMISSIONER OF INTERNAL REVENUE ENGINEERING EQUIPMENT & SUPPLY CO.

v

FACTS: Engineering Equipment & Supply (EES) was engaged in the business of designing and installing central air-conditioning systems. It was assessed by the CIR for 30% advanced sales tax, among other penalties pursuant to an anonymous complaint filed before the BIR. EES vehemently objected and argued that they are contractors and not manufacturers, and thus, should only be liable for the 3% tax on sales of services or pieces of work. ISSUE: W/N EES is a contractor (piece of work) HELD: YES. EES was NOT a manufacturer of airconditioning units. While it imported such items, they were NOT for sale to the general public and were used as mere components for the design of the centralized air-conditioning system, wherein its designs and specifications are different for every client. Various technical factors must be considered and it can be argued that no 2 plants are the same; all are engineered 1

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 separately and distinctly. Each project requires careful planning and meticulous layout. Such central airconditioning systems and their designs would not have existed were it not for the special order of the party desiring to acquire it. Thus, EES is not liable for the sales tax of 30%.

5.

QUIROGA v PARSONS

FACTS: Quiroga and Parsons Hardware entered into a contract where the former granted the latter the exclusive right to sell Quiroga Beds in the Visayas. It provided for a discount of 25% as commission for the sales, among other conditions. Quiroga alleged that Parsons breached its contractual obligations by selling the beds at a higher price, not having an open establishment in Iloilo, not maintaining a public exhibition, and for not ordering beds by the dozen. Only the last imputation was provided for by the contract, the others were never stipulated. Quiroga argued that since there was a contract of agency between them, such obligations were necessarily implied. ISSUE: W/N the contract between them was one of agency, not sale HELD: NO. The agreement between Quiroga and Parsons was that of a simple purchase and sale—not an agency. Quiroga supplied beds, while Parsons had the obligation to pay their purchase price. These are characteristics of a purchase and sale. In a contract of agency (or order to sell), the agent does not pay its price yet, and sells the products, remitting to the principal its proceeds. Unsold products must also be returned to the principal. The provisions on commission and the use of the word “agency” in the contract as well as the testimonies in court do not affect its nature. Contracts are what the law defines it to be, not what the parties call it.

6.

PUYAT v ARCO AMUSEMENT CO.

FACTS: Arco Amusement was engaged in the business of operating cinematopgraphs. Gonzalo Puyat & Sons Inc (GPS) was the exclusive agent in the Philippines for the Starr Piano Company. Desiring to equip its cinematograph with sound reproducing devices, Arco approached GPS, through its president, GIl Puyat, and an employee named Santos. After some negotiations, it was agreed between the parties that GPS would order sound reproducing equipment from Starr Piano Company and that Arco would pay GPS, in addition to the price of the equipment, a 10% commission, plus all expenses such as freight, insurance, etc. When GPS inquired Starr Piano the price (without discount) of the equipment, the latter quoted such at $1,700 FOB Indiana. Being agreeable to the price (plus 10% commission plus all other expenses), Arco formally authorized the order. The following year, both parties agreed for another order of sound reproducing equipment on the same terms as the first at $1,600 plus 10% plus all other expenses. ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA

Three years later, Arco discovered that the prices quoted to them by GPS with regard to their first 2 orders mentioned were not the net prices, but rather the list price, and that it had obtained a discount from Starr Piano. Moreover, Arco alleged that the equipment were overpriced. Thus, being its agent, GPS had to reimburse the excess amount it received from Arco. ISSUE: W/N there was a contract of agency, not of sale HELD: NO. The letters containing Arco's acceptance of the prices for the equipment are clear in their terms and admit no other interpretation that the prices are fixed and determinate. While the letters state that GPS was to receive a 10% commission, this does not necessarily mean that it is an agent of Arco, as this provision is only an additional price which it bound itself to pay, and which stipulation is not incompatible with the contract of sale. It is GPS that is the exclusive agent of Starr Piano in the Philippines, not the agent of Arco. it is out of the ordinary for one to be the agent of both the seller and the buyer. The facts and circumstances show that Arco entered into a contract of sale with GPS, the exclusive agent of Starr Piano. As such, it is not duty bound to reveal the private arrangement it had with Starr Piano relative to the 25% discount. Thus, GPS is not bound to reimburse Arco for any difference between the cost price and the sales price, which represents the profit realized by GPS out of the transaction.

7.

LO v KJS ECO-FORMWORK SYSTEM PHIL., INC.

FACTS: KJS Inc was engaged in the sale of steel scaffolding. Sonny Lo, a contractor, purchased scaffolding equipment worth P540,000. He made a deposit of P150,000, the balance payable within 10 months. Due to financial difficulties, Lo defaulted after paying only 2 installments. A debt of some P335,000 remained. Thus, Lo assigned in favor of KJS all his receivables from Jomero Realty Corp. which refused to pay and raised the defense of compensation—claiming that Lo also had debts in its favor. KJS thus again sought to collect from Lo who them averred that his debts have already been extinguished by the said assignment. ISSUE: W/N the assignment of credit extinguished the debts HELD: NO. The assignment of credit made by Lo in favor of KJS was in the nature of dacion en pago, which is governed by the law on sales. It is as if KJS bought the credit from Lo, the payment of which is to be charged upon the latter’s debt. Lo, as vendor not good faith, shall be liable for the existence and legality of the credit at the time of the sale (but not for the solvency of the debtor). He is bound by certain warranties. In this case, since the assignment he made in favor of KJS has already been compensated, he should still be liable to pay KJS for his indebtedness. He should make good the warranty and pay the obligation. 2

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 PARTIES TO A CONTRACT OF SALE 1.

PARAGAS v HEIRS OF DOMINADOR BALACANO

FACTS: Balancano, married to Lorenza, owned 2 parcels of land. He was already 81 years old, very weak, could barely talk, and had been battling with liver disease for over a month. On his deathbed, barely a week before he died, he allegedly signed a Deed of Absolute Sale over the lots in favor of Paragas Spouses, accompanied by Atty. De Guzman who proceeded to notarize the same, alleging that it was a mere confirmation of a previous sale and that Gregorio had already paid P50,000 as deposit. The Paragas’ driver was also there to take a picture of Gregorio signing said deed with a ballpen in his hand. There was nothing to show that the contents of the deed were explained to Balacano. Paragas then sold a portion of the disputed lot to Catalino. The grandson of Gregorio, Domingo, sought to annul the sale and the partition. There was no sufficient evidence to support any prior agreement or its partial execution. ISSUE: W/N Balacano is incapacitated to enter into a contract of sale HELD: YES. A person is not rendered incompetent merely because of old age; however, when such age has impaired the mental faculties as to prevent a person from protecting his rights, then he is undeniably incapacitated. He is clearly at a disadvantage, and the courts must be vigilant for his protection. In this case, Balacano’s consent was clearly absent—hence the sale was null and void. The circumstances raise serious doubts on his capacity to render consent. Considering that the Paragas spouses are not owners of the said properties, it only follows that the subsequent sale to Catalino—who was not in good faith—is likewise void. Furthermore, the lots pertained to the conjugal partnership—having been inherited by Balacano during his marriage to Lorenza. Thus, it cannot be sold without the latter’s consent.

2.

properties to each other; the same prohibitions apply to a couple living in as husband and wife without the benefit of marriage. As public interests dictate, to rule otherwise would put the persons in guilt at better position than those legally married.

3.

RUBIAS v BATILLER

FACTS: Militante claimed ownership over a parcel of land and applied for the registration of the same with the CFI; his counsel was his son-in-law, Atty. Rubias. His claim was dismissed by the trial court, thus he appealed. Pending appeal, he sold the lot to Atty. Rubias for P2,000. Batiller, on the other hand, claimed to have inherited the same lot from his ancestors who have been in open, public, peaceful, and actual possession thereof under a claim of title. Atty. Rubias filed an ejectment suit against Batiller who assailed the validity of the sale to Rubias. Given the dismissal of Militante’s application, he had thus no right over the said land that he may have validly transferred to Atty. Rubias. ISSUE: W/N the sale to Atty. Rubias is valid HELD: NO. Even assuming he had title thereto, the sale of the lot to Atty. Rubias would be null and void for being expressly prohibited by the Civil Code. Lawyers cannot acquire by purchase the property or rights under litigation over which they take part by virtue of their profession. The same rule applies to judges, clerks of court, and other judicial officers with respect to the same. The purchase in violation of the above provision is not merely voidable as Atty. Rubias contends; it is VOID and INEXISTENT from the very beginning. The right to set up the defense of its illegality cannot be waived— and, unlike cases involving agents, guardians, or administrators with respect to the properties under their charge, it is not susceptible to compromise or ratification. It is likewise contrary to public policy

CALIMLIM-CANULLAS v FORTUN

FACTS: Mercedes and Fernando were married and had 5 children. Fernando inherited the land upon which their house was built. Fernando left his family to live with his concubine Corazon. He then sold the said lot with the house in favor of Corazon for P2,000. Corazon, unable to take possession of the house and lot, filed a complaint for quieting of title. Mercedes objected alleging that the properties pertained to their conjugal partnership. ISSUE: W/N the sale to Corazon was valid HELD: NO. The properties pertained to the conjugal partnership of Mercedes and Fernando, thus the sale is null and void for lack of Mercedes’ consent and for being contrary to morals and public policy. The law generally prohibits spouses from selling or donating ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA

4.

PHIL. TRUST CO. v ROLDAN

FACTS: Mariano Bernardo, a minor, inherited among others 17 parcels of land from his deceased father. Soccoro Roldan was appointed as his guardian. Soccoro sought and was granted authority to sell the lots to her brother-in-law Ramos for P14,700. Very shortly after, Ramos sold back to Soccoro the same properties for P15,000. She then sold 4 parcels to Emilio Cruz. Phil. Trust Co. replaced Soccoro as guardian and sought to annul all the aforesaid sales. ISSUE: W/N the sale to Ramos was valid HELD: NO. Guardianship is the trust of the highest order. In this case, for all intents and purposes, it was as if

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 Soccoro herself purchased the properties of her ward. Civil Code. She indirectly sold the properties to herself. The same applies even though there was no actual malice or collusion proven. Since the sale to Soccoro was null and void, it only follows that the sales made by Soccoro to Cruz were likewise void. One cannot sell what is not his property. Soccoro tried to correct the problem by allowing Mariano to re-purchase the said properties for P15,000. However, the child would still be at a losing end because it would not entitle him to the fruits of the property during the time when he was not in possession thereof. The SC annulled the sale. CLV: Bad ruling because W/N ward is benefited is IMMATERIAL. Advantage to ward can easily be forged.

5.

FABILLO v IAC

FACTS: Florencio Fabillo contracted the services of Atty. Murillo to revive a lost case over his inheritance from his deceased sister Justinia. He sought to acquire the San Salvador and Pugahanay Properties that his sister left behind against the latter’s husband. They entered into a contract where a contingent fee in favor of Atty. Murillo in case the case won was agreed upon. The fee was 40% of the value of whatever benefit Florencio may derive from the suit—such as if the properties were sold, rented, or mortgaged. It was vague, however, regarding the fee in case Florencio or his heirs decide to occupy

This falls within the prohibition under Art. 1459 of the the house—allowing Atty. Murillo the option to occupy or lease 40% of the said house and lot. A compromise agreement was entered into where Florencio acquired both properties. Atty. Murillo installed a tenant in the Pugahanay Property; later on, Florencio claimed exclusive rights over the properties invoking Art. 1491 of the CC. Florencio and Atty. Murillo both died and were succeeded by their respective heirs. ISSUE: W/N contingent fees agreed upon are valid HELD: YES. Contingent fees are not contemplated by the prohibition in Art. 1491 disallowing lawyers to purchase properties of their clients under litigation. The said prohibition applies only during the pendency of the litigation. Payment of the contingent fee is made after the litigation, and is thus not covered by the prohibition. For as long as there is no fraud or undue influence, or as long as the fees are not exorbitant, the same as valid and enforceable. It is even recognized by the Canons of Professional Ethics. However, considering that the contract is vague on the matter of division of the shares if Florencio occupies the property; the ambiguity is to be construed against Atty. Murillo being the one who drafted the contract and being a lawyer more knowledgeable about the law. The Court thus invoking the time-honored principle that a lawyer shall uphold the dignity of the legal profession, ordered only a contingent fee of P3,000 as reasonable attorney’s fees.

SUBJECT MATTER OF SALE 1.

POLYTECHNIC UNIVERSITY v CA

FACTS: The National Development Corp. (NDC) owned the NDC Compound, a portion of which was leased to Firestone Ceramics, which built several warehouses and facilities therein. Since business between NDC and Firestone went smooth, the lease was twice renewed this time conferring upon Firestone a right of first refusal should NDC decide to dispose of the property. Also, under the contract, Firestone was obliged to introduce considerable improvements thereon. Eventually though, Memo Order No. 214 was issued ordering the transfer of NDC Compound to the government in consideration of the cancellation of NDC’s P57M debt. Pursuant thereto, NDC transferred the property to Polytechnic University (PUP). Firestone sued for specific performance invoking its right of first refusal, and sought to enjoin NDC and PUP from proceeding with the sale. Both PUP and NDC aver that there was no sale involved since ownership of the property remained with the government—both companies being GOCCs. ISSUE: W/N there was a sale HELD: YES. The argument of PUP and NDC was untenable. GOCCs have personalities separate and distinct from the government. “Sale” brings within its ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA

grasp the whole gamut of transfers where ownership of a thing is ceded for consideration. Further, judging from the conduct of the parties in this case, all the elements of a valid sale attend. Consent is manifested by the Memo Order No. 214, the cancellation of liabilities constituted consideration; the subject matter was of course the property subject of the dispute. Since a sale was involved, the right of first refusal in favor of Firestone must be respected. It forms an integral part of the lease and is supported by consideration—Firestone having made substantial investments therein. Only when Firestone fails to exercise such right may the sale to PUP proceed.

2.

ATILANO v ATILANO

FACTS: Eulogio Atilano I purchased Lot 535 and had it subdivided into 5 parts (A to E). He occupied Lot A; his brother, Eulogio II, occupied Lot E. He then sold lots B, C, and D to other persons. He then sold Lot E to his brother Eulogio II. Both brothers died and their heirs found out after a survey that Eulogio I actually occupied Lot E and Eulogio II occupied Lot A. Thus, the heirs of Eulogio II offered to exchange the properties. However, the heirs of Eulogio I refused because Lot E was bigger than Lot A.

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 ISSUE: W/N an exchange of the properties was proper HELD: NO. What took place was a simple mistake in drafting the instrument evidencing the agreement between the brothers. One sells or buys property as he sees it in actual setting and not by the mere lot number in the certificate of title. The brothers remained in possession of their respective portions throughout their lives unaware of the mistake in the designation of the lots. In this case, the instrument simply failed to reflect the true intention of the parties; thus, an exchange of the properties is unnecessary. All the heirs should do is to execute mutual deeds of conveyance.

3.

MELLIZA v CITY OF ILOILO

FACTS: Meliza owned Lot 1214, 9,000 sqm of which she donated to the Mun. of Iloilo for the use of the site of the Mun. Hall. However, the donation was revoked because it was inadequate to meet the requirements of the “Arellano Plan.” Lot 1214 was later divided into 4 lots. Meliza then sold Lots C and D to the Municipality; Lot B was not mentioned in the sale. However, the contract stipulated that the area to be sold to the Municipality would include such areas needed for the construction of the City Hall according the Arellano Plan. She then sold the remaining portions of the lots to Villanueva, who then sold the same to Pio. The sale was for such lots not included in the sale to the Mun. of Iloilo. The City of Iloilo, assuming that Lot B has been sold in its favor pursuant to the Arellano Plan, then donated Lot B to UP. Pio objected and sought to recover the lots stating that Lot B was not included in the initial sale made by Meliza to the Municipality—and that the subject matter of sale should be a determinate thing. ISSUE: W/N there was a determinate/determinable subject matter HELD: YES. The requirement for the subject matter to be determinate is satisfied in this case. Simple reference to the “Arellano Plan” would indicate that it could determine what portions of the contiguous land (lot B) were needed for the construction of the City Hall. There was no need for a further agreement to establish the lots covered by the sale; thus, the sale is valid. Besides, the portions of Lot B covered by the sale were practically at the heart of the City Hall site.

4.

YU TEK & CO. v GONZALES

FACTS: Gonzales received P3,000 from Yu Tek and obligated himself in favor of the latter to deliver 600 piculs of sugar of the 1st and 2nd grade within 3 months. He failed to deliver the sugar and refused to return the money—thus Yu Tek sued him. Gonzales, in seeking to evade liability, invokes fortuitous event, alleging the total failure of his crop. ISSUE: W/N there was perfected contract of sale

ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA

HELD: NO. The subject matter was not yet determinate. The sugar agreed upon has yet to be segregated from all other articles. That being the case, there was merely an executory agreement—a promise of sale, and not a contract of sale itself. Moreover, there was no stipulation that the sugar was to be derived from his crop; he was at liberty to get it from whatever source he could find. The obligation he incurred was for the delivery of the generic thing. Thus, he cannot invoke force majeure under the maxim genus never perishes. His obligation to deliver the sugar is not extinguished. Yu Tek is thus entitled to rescind the contract and recover the money in addition to the stipulated P1,200 as indemnity for losses. DD: This rule no longer holds true. Generic things may now be the subject matter of a contract of sale provided that they have the quality of being DETERMINABLE at the perfection of the contract.

5.

NGA v IAC

FACTS: National Grains Authority (now National Food Authority, NFA) is a government agency created under PD 4. One of its incidental functions is the buying of palay grains from qualified farmers. In 1979, Leon Soriano offered to sell palay grains to the NFA, through its Provincial Manager, William Cabal. He submitted the documents required by the NFA for pre-qualifying as a seller, which were processed and accordingly, he was given a quota of 2,640 cavans of palay. The quota noted in the Farmer’s Information Sheet represented the maximum number of cavans of palay that Soriano may sell to the NFA. On 23 and 24 August 1979, Soriano delivered 630 cavans of palay. The palay delivered were not rebagged, classified and weighed. When Soriano demanded payment of the 630 cavans of palay, he was informed that its payment will be held in abeyance since Mr. Cabal was still investigating on an information he received that Soriano was not a bona fide farmer and the palay delivered by him was not produced from his farmland but was taken from the warehouse of a rice trader, Ben de Guzman. On 28 August 1979, Cabal wrote Soriano advising him to withdraw from the NFA warehouse the 630 cavans stating that NFA cannot legally accept the said delivery on the basis of the subsequent certification of the BAEX technician (Napoleon Callangan) that Soriano is not a bona fide farmer. Instead of withdrawing the 630 cavans of palay, Soriano insisted that the palay grains delivered be paid. He then filed a complaint for specific performance and/or collection of money with damages against the NFA and William Cabal. Meanwhile, by agreement of the parties and upon order of the trial court, the 630 cavans of palay in question were withdrawn from the warehouse of NFA. In 1982, RTC ruled in favor of Soriano and in 1986, CA affirmed decision of RTC. ISSUE: W/N there was a perfected contract of sale HELD: YES. In the present case, Soriano initially offered 5

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 to sell palay grains produced in his farmland to NFA. When the latter accepted the offer by noting in Soriano’s Farmer’s Information Sheet a quota of 2,640 cavans, there was already a meeting of the minds between the parties. The object of the contract, being the palay grains produced in Soriano’s farmland and the NFA was to pay the same depending upon its quality. The contention that – since the delivery were not rebagged, classified and weighed in accordance with the palay procurement program of NFA, there was no acceptance of the offer thus – this is a clear case of policitation or an unaccepted offer to sell, is untenable. The fact that the exact number of cavans of palay to be delivered has not been determined does not affect the perfection of the contract. Article 1349 of the New Civil Code provides that “the fact that the quantity is not determinate shall not be an obstacle to the existence of the contract, provided it is possible to determine the same, without the need of a new contract between the parties.” In the present case, there was no need for NFA and Soriano to enter into a new contract to determine the exact number of cavans of palay to be sold. Soriano can deliver so much of his produce as long as it does not exceed 2,640 cavans.

6.

JOHANNES SCHUBACK & SONS PHIL. TRADING CORP. v CA

FACTS: SJ Industrial, through Ramon San Jose, approached Schuback & Sons Phil. Trading (SSPT) to purchase bus spare parts. He submitted the list of parts he wanted and SSPT coordinated with its Germany Office to quote the prices, and forwarded its formal offer to SJ Industrial, containing the prices, item numbers, descriptions, etc. SJ informed SSPT of his desire to purchase such items and promised to submit the quantity per unit. SJ then submitted such quantities needed to SSPT’s GM, Mr. Reichert. San Jose indicated the same in the Purchase Order with the inscription “this will serve as our initial purchase order. PO will include 3% discount.” SSPT immediately ordered the products from Germany to avail of the old prices— partial deliveries of which were made. Then, for his failure to secure letters of credit, SJ failed to purchase the same and alleged that there was no perfected contract of sale. Thus, SSPT sought damages. ISSUE: W/N there was a perfected contract of sale HELD: YES. Quantity is immaterial in the perfection of a contract of sale. What is important is the meeting of the minds as to the object and cause of the sale. There was already a meeting of the minds in this case from the moment SJ manifested that he will order the parts, although he will communicate quantities later on. In fact, he indeed communicated such needed quantities— this goes to the execution of the contract of sale already. By ordering the parts, SJ acceded to the prices offered by SSPT. On the other hand, SSPT acceded to SJ’s request for discount by immediately ordering the parts. SJ Industrial is thus liable for damages

ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA

7.

NOOL v CA

FACTS: One lot formerly owned by Victorio Nool has an area of 1 hectare. Another lot previously owned by Francisco Nool has an area of 3.0880 hectares. Both parcels are situated in San Manuel, Isabela. Spouses Conchita Nool and Gaudencio Almojera (plaintiffs) alleged that they are the owners of the subject land as they bought the same from Victorio and Francisco Nool, and that as they are in dire need of money, they obtained a loan from DBP, secured by a real estate mortgage on said parcels of land, which were still registered in the names of Victorino and Francisco Nool, at the time, and for the failure of the plaintiffs to pay the said loan, including interest and surcharges, totaling P56,000.00, the mortgage was foreclosed; that within the period of redemption, the plaintiffs contacted Anacleto Nool for the latter to redeem the foreclosed properties from DBP, which the latter did; and as a result, the titles of the 2 parcels of land in question were transferred to Anacleto; that as part of their arrangement or understanding, Anacleto agreed to buy from Conchita the 2 parcels of land under controversy, for a total price of P100,000.00, P30,000.00 of which price was paid to Conchita, and upon payment of the balance of P14,000.00, the plaintiffs were to regain possession of the 2 hectares of land, which amounts spouses Anacleto Nool and Emilia Nebre (defendants) failed to pay, and the same day the said arrangement was made; another covenant was entered into by the parties, whereby the defendants agreed to return to plaintiffs the lands in question, at anytime the latter have the necessary amount; that latter asked the defendants to return the same but despite the intervention of the Barangay Captain of their place, defendants refused to return the said parcels of land to plaintiffs; thereby impelling the plaintiffs to come to court for relief. On the other hand, defendants theorized that they acquired the lands in question from the DBP, through negotiated sale, and were misled by plaintiffs when defendant Anacleto Nool signed the private writing, agreeing to return subject lands when plaintiffs have the money to redeem the same; defendant Anacleto having been made to believe, then, that his sister, Conchita, still had the right to redeem the said properties. It should be stressed that Manuel S. Mallorca, authorized officer of DBP, certified that the 1-year redemption period and that the mortgagors’ right of redemption was not exercised within this period. Hence, DBP became the absolute owner of said parcels of land for which it was issued new certificates of title. About 2 years thereafter, DBP entered into a Deed of Conditional Sale involving the same parcels of land with Anacleto Nool as vendee. Subsequently, the latter was issued new certificates of title in 1988. RTC ruled in favor of Anacleto Nool. CA affirmed. ISSUE: W/N there was a valid contract of sale between Anacleto and Conchita HELD: NO. Article 1459 of the Civil Code provides that “the vendor must have a right to transfer the ownership

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 thereof [object of the sale] at the time it is delivered.” Here, delivery of ownership is no longer possible. The sellers can no longer deliver the object of the sale to the buyers, as the buyers themselves have already acquired title and delivery thereof from the rightful owner, the DBP. Thus, such contract may be deemed to be inoperative and may thus fall, by analogy, under item 5 of Article 1409 of the Civil Code: “Those which contemplate an impossible service.” Article 1505 of the Civil Code provides that “where goods are sold by a person who is not the owner thereof, and who does not sell them under authority or with consent of the owner, the buyer acquires no better title

to the goods than the seller had, unless the owner of the goods is by his conduct precluded from denying the seller’s authority to sell.” In the present case, there is no allegation at all that petitioners were authorized by DBP to sell the property to the private respondents. Further, the contract of repurchase that the parties entered into presupposes that petitioners could repurchase the property that they “sold” to private respondents. As petitioners “sold” nothing, it follows that they can also “repurchase” nothing. In this light, the contract of repurchase is also inoperative and by the same analogy, void.

PRICE AND OTHER CONSIDERATION 1.

MAPALO v MAPALO

FACTS: Miguel and Candida Mapalo were illiterate farmers and owned a parcel of land. Since Maximo Mapalo was to be married, they donated to him the eastern half of the land. Maximo, however, deceived them by making them sign an instrument donating the entire lot. There was a consideration for P5,000 stated in the deed, but the spouses never received anything. Miguel built a fence to divide the lot and continued to occupy the western part. Maximo then registered the entire lot and 13 year after, sold the same to the Narcisos who took possession only of the eastern half. Later on, the Narcisos sought to be declared owners of the entire land; the spouses claimed that the sale to the Narcisos was void for lack of consideration. The CA declared that the sale was merely voidable and the action by the spouses was barred by prescription, being filed after 4 years from the discovery of the fraud. ISSUE: W/N there was a valid contract of sale HELD: Consideration was totally absent; the P5,000 price stipulated was never received/delivered to the spouses. Thus, the sale to the Narcisos was VOID ab initio for want of consideration. The inexistence of the contract is permanent and cannot be the subject of prescription. The Narcisos are also in bad faith—they had knowledge of the true nature and extent of Maximo’s right over the land.

2.

RONGAVILLA v CA

FACTS: Both spinsters and unschooled in English, Mercedes and Florencia dela Cruz are the aunts of Rongavilla. Dela Cruz co-owned a parcel of land (1/2 pro-indiviso) in Las Pinas with another niece named Juanita Jimenez (elder sister of Rongavilla), who kept the OCT, as well as the TCT after it was subdivided. In 1976, Dela Cruz borrowed P2,000 from Rongavilla for the repair of their dilapidated rooftop. A month later, Rongavilla and Jimenez visited their aunts' home and brought with them a document for the signature of their aunts. While the document was in English and upon inquiry by Dela Cruz what it was about, Rongavilla answered that it was merely evidencing the P2,000 ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA

debt. Apparently, it was a Deed of Sale. In 1980, Rongavilla went to Dela Cruz' place and asked them to vacate the lot. Suprised by this, Dela Cruz discovered the misrepresentation her niece made when she signed the document. She the filed an action with the RTC to have the purported Deed of Sale declared null and inexistent for lack of consent and consideration. ISSUE: W/N there was a valid sale HELD: NO. Rongavilla and Jimenez were able to secure the signature of Dela Cruz in the Deed of Absolute Sale through fraud and there was no consideration whatsoever for the alleged sale. The consent was not only vitiated, but it was not given at all. Since there was no consent, the deed of absolute sale is null and void ab initio.

3.

MATE v CA

FACTS: Josefina approached Fernando asking for help. Her family was to be sued by Tan for issuing rubber checks; thus she asked him to cede his 3 lots to Tan and it will be Josefina who will repurchase them for him. He initially rejected her offer. Then, Josefina issued him 2 checks, one for P1.4M, pertaining to the value of the lot, and another for P420,000 corresponding to 6 months’ interests. He agreed, drafted the instrument himself, and ceded his properties to Tan. Later, both checks bounced; he sued Tan for annulment of the sale for lack of consideration since he never received anything. He also sued Josefina criminally, but absconded. ISSUE: W/N there was a valid contract of sale HELD: YES. There was consideration in the form of the check for P420,000. It was his fee for executing the sale. It was not only kindness that impelled him to cede his property, it was also his interest for profit. That he never received money is of no moment; a sale is a consensual contract. He also tacitly admitted to the sale when he filed criminal charges against Josefina. Fernando, being a lawyer, has no one else to blame but

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 himself for the loss. He acted negligently our of desire for profit.

4.

YU BUN GUAN v CA

FACTS: Yu Bun Guan and Ong are married since 1961 and lived together until she and her children were abandoned by him in 1992, because of his incurable promiscuity, volcanic temper, and other vicious vices. In 1968, out of her personal funds, Ong purchased a parcel of land (Rizal Property) from Aurora Seneris. Also, during their marriage, they purchased a house and lot out of their conjugal funds. Before their separation in 1992, she reluctantly agreed to execute a Deed of Sale of the Rizal Property on the promise that Yu Bun Guan would construct a commerical building for the benefit of the children. He suggested that the property should be in his name alone so that she would not be involved in any obligation. The consideration for the sale was the execution of a Deed of Absolute Sale in favor their children and the payment of the loan he obtained from Allied Bank. However, when the Deed of Sale was executed in favor of Yu Bun Guan, he did not pay the consideration of P200K, supposedly the "ostensible" valuable consideration. Because of this, the new TCT issued in his name was not delivered to him by Ong. Yu Bun Guan then filed for a Petition for Replacement of the TCT, with an Affidavit of Loss attached. Ong, on the other hand, executed an Affidavit of Adverse Claim and asked that the sale be declared null and void . RTC ruled in favor of Ong. CA affirmed. ISSUE: W/N there was a valid contract of sale HELD: NO. It is clear from the findings of the lower courts that the Deed of Sale was completely simulated and thus, VOID without effect. No portion of the P200,000 consideration stated in the Deed was ever paid. And, from the facts of the case, it is clear that neither party had any intention whatsoever to pay that amount. Instead, the Deed of Sale was executed merely to facilitate the transfer of the property to petitioner pursuant to an agreement between them to enable him to construct a commercial building and to sell the Juno property to their children. Being merely a subterfuge, that agreement cannot be taken as a consideration for the sale.

5.

ONG v ONG

FACTS: For an in consideration of P1 and other valuable considerations, Imelda Ong transferred through a Deed of Quitclaim her rights over a ½ portion of a parcel of land to Sandra. Later on, she revoked the Deed and donated the whole property to her son, Rex. Sanda, through her guardian, sought to recover ownership and possession thereof. Imelda alleged that the sale was void for lack of consideration.

HELD: YES. There was consideration. Its apparent inadequacy is of no moment since the usual practice in deeds of conveyance is to place a nominal amount although there is more valuable consideration given. Consideration is presumed to exist. He who alleges otherwise assumes the burden of proof. The one peso was not the consideration, but rather the other valuable considerations.

6.

BAGNAS v CA

FACTS: Hilario died with no will and was survived only by collateral relatives. Bagnas (et al) were the nearest kin. Retonil (et al) were also relatives but to a farther extent. They claimed ownership over 10 lots from the estate of Hilario presenting notarized and registered Deeds of Sale (in Tagalog) where the consideration for the lands was P1 and services rendered, being rendered, and to be rendered. Bagnas argued that the sales were fictitious, while Retonil claimed to have done many things for Hilario—such as nursing him on his deathbed. ISSUE: W/N there was a valid contract of sale HELD: NO. At the onset, if a contract has no consideration, it is not merely voidable, but VOID—and even collateral heirs may assail the contract. In this case, there was no consideration. Price must be in money or its equivalent; services are not the equivalent of money insofar as the requirement of price is concerned. A contract is not one for sale if the consideration consists of services. Not only are they vague, they are unknown and not susceptible of determination without a new agreement between the parties.

7.

REPUBLIC v PHIL. RESOURCES DEV. CORP.

FACTS: The Republic brought an action against Apostol for the collection of sums owing to it for his purchase of Palawan Almaciga and other logs. His total debt amounted to some P34,000. PRDC intervened claiming that Apostol, as President of the company, without prior authority, took goods (steel sheets, pipes, bars, etc) from PRDC warehouse and appropriated them to settle his personal debts in favor of the government. The Republic opposed the intervention of PRDC, arguing that price is always paid in money and that payment in kind is no payment at all; hence, money and not the goods of PRDC are under dispute. ISSUE: W/N payment in kind is equivalent to price paid in money HELD: YES. Price may be paid in money or ITS EQUIVALENT—in this case, the goods. Payment need not be in the form of money. The prices for the goods have, in fact, been assessed and determined. PRDC thus has a substantial interest in the case and must be permitted

ISSUE: W/N there was a valid contract of sale ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA

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 to intervene—its goods paid out without authority being under dispute in this case.

8.

NAVARRA v PLANTERS DEV. BANK

FACTS: Navarra spouses are the owners of 5 parcels of land in BF Homes, Paranque. In 1982, they obtained a loan of P1.2M from Planters Bank, secured by a mortgage over these parcels of land. Unfortunately, they defaulted to pay their obligation and thus, Planters Bank foreclosed the property. They were not able to redeem the property as well. On the other hand, RRRC Dev. Corp. is a real estate company owned by the parents of Carmelita Navarra. It obtained a loan from Planters Bank secured by a submit a board resolution from RRRC authorizing such, the Bank refused to apply the excess to his repurchase. In 1988, a portion of the lots was sold to Gatchalian Realty. Navarra spouses filed for specific performance against Planters Bank, alleging that there was a perfected contract of sale (P1.8M, with P300K downpayment). RTC ruled in favor of Navarra spouses. CA reversed. ISSUE: W/N there was a valid contract of sale (consider the repurchase as a sale) HELD: NO. While the letters indicate the amount of P300K as downpayment, they are completely silent as to how the succeeding installment payment shall be made. At most, the letters merely acknowledge that the downpayment was agreed upon by the parties. However,

mortgage over another set of properties of RRRC. Likewise, it defaulted and the properties were foreclosed. However, RRRC was able to negotiate with the Bank for the redemption of the properties by was of a concession whereby the Bank allowed RRRC to refer to it would-be buyers of the properties who would remit their payments directly to the Bank, which would then be considered as redemption price for RRRC. Eventually, these were sold and payments made directly to the Bank were in excess by P300K for the redemption price. In the meantime, Jorge Navarra requested that they repurchase their house and lot for P300K, which the Bank agreed. Accordingly, Jorge Navarra requested further that the excess payment of RRRC be applied as down payment for their repurchase. For his failure to this fact cannot lead to the conclusion that a contract of sale had been perfected. Before a valid and binding contract of sale can exist, the manner of payment of the purchase price must first be established since the agreement on the manner of the payment goes into the price such that a disagreement on the manner of payment is tantamount to a failure to agree on the price. Moreover, the letter/offer failed to specify a definite amount of the purchase price for the sale/repurchase of the properties. It merely stated that it will be based on the redemption value plus accrued interest at the prevailing rate up to the date of the sales contract. Clearly, the lack of a definite offer on the part of the Navarra spouses could not possibly serve as the basis of their claim that the sale was perfected.

FORMATION OF CONTRACT OF SALE 1.

MANILA METAL CONTAINER CORP. v PNB

FACTS: Manila Metal was the owner of a parcel of land in Mnadaluyong. To secure a P900K loan it obtained from PNB, Manila Metal executed a real estate mortgage over the lot. PNB later granted Manila Metal a new credit accommodation of P1M. Manila Metal secured another loan of P653K from PNB. In 1982, PNB sought to have the property foreclosed and sold at a public auction. PNB was the highest bidder. Manila Metal requested an extension of time to redeem the property and to repurchase such on installment. The Special Assets Management Department (SAMD) prepared a statement of account and as of 1984, Manila Metal's obligation amounted to P1.6M, which includes the bid price, interests, advances of insurance premiums, advances on realty taxes, etc. When apprised of the statement of account, Manila Metal remitted P725K to PNB as deposit to repurchase. In the meantime, SAMD recommended that Manila Metal be allowed to repurchase for P1.6M. PNB, however, rejected the recommendation and offered the property at P2.66M, its minimum market value. Manila Metal refused and reiterated that it already acceded to SAMD's offer, to which it remitted P725K. In 1985, PNB accepted the offer but for P1.9M cash ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA

less the P725K deposit. Manila Metal, again, rejected this offer and filed a complaint against PNB for the annulment of foreclosure or specific performance, contending that there was a valid contract of sale between Manila Metal and SAMD. In 1993, while the case was pending, Manila Metal offered to repurchase at P3.5M, but PNB rejected because the market value of the property was at P30M. Manila Metal offered again at P4.25M but was rejected again. ISSUE: W/N there was a valid contract of sale HELD: NO. There was no perfected contract of sale between PNB and Manila Metal because there was no agreement as to the price certain. The Statement of Account prepared by SAMD cannot be classified as a counter-offer. It is simply a recital of its total monetary claims against Manila Metal. The amount stated therein could not be considered as a counter-offer since it was only a recommendation subject to PNB's Board of Directors' approval. Neither can the receipt of P725K by SAMD be regarded as evidence of a perfected contract of sale. The amount is merely an acknowledgment of the receipt of P725K as deposit to repurchase the property. It was accepted by respondent on the condition that the purchase price will still be approved by the Board of 9


 Directors. Pending such approval, Manila Metal cannot legally claim that PNB is already bound by any contract of sale with it.

2.

CARCELLER v CA

FACTS: Carceller leased 2 parcels of land owned by State Investment Houses (SIHI), the period being 18 months at P10,000/month rent. Under the lease, SIHI guaranteed Carceller the exclusive right and option to purchase the said lots within the lease period for the aggregate amount of P1.8M. Around 3 weeks before the end of the lease period, SIHI informed Carceller of the impending termination of the lease and the short period left for him to purchase. He begged for an extension, but SIHI refused. Nevertheless, SIHI offered the property to him for lease for another year, but this time, it also offered it for sale to the public. Carceller thus sued SIHI for specific performance to compel SIHI to execute a Deed of Sale in his favor. ISSUE: W/N Carceller may still exercise the option to purchase the property HELD: YES. Even if Carceller failed to purchase the property within the said period, still equity must intervene. He had introduced substantial improvements thereon; to rule against him would cause damage to him—and SIHI does not stand to gain much therefrom. SIHI clearly intended to sell the lot to him considering that it was under financial distress, that is constantly reminded him of the option and the impending deadline. The delay of 18 days is not substantial. Carceller’s letter to SIHI expressing his intent to purchase the lot is fair notice of intent to exercise the option despite the request for extension. Carceller should thus be allowed to buy the lots.

3.

HELD: NO. The Deeds of Assignment were not option contracts, which may be enforced by Tayag. Not being the legal owners of the property, the tenants had no right to confer upon Tayag the option, more so, the exclusive right to buy the property.

4.

VILLAMOR v CA

FACTS: The Villamors purchased from Macaria ½ of the latter’s land for a price considerably higher than the prevailing market price. They then executed a Deed of Option stating that the only reason why the Villamors agreed to purchase the said lot is because Macaria agreed to confer upon them the exclusive right to purchase the other half of the land. Such sale under the deed may be imposed whenever the need for the sale arises on the part of either party. Macaria sought to repurchase the land, but the Villamors refused. Instead, the Villamors exercised their option to purchase the other half of the property. Macaria refused, thus the Villamors filed a case for specific performance. Macaria averred that the option is void for lack of consideration. ISSUE: W/N the option contract is void for lack of consideration HELD: NO. The Option Contract is supported by a consideration—that being the difference of the agreed price and the market price of the other half of the land, which was sold to the Villamors. Thus, it is valid and may be enforced by the Villamors. The consideration may consist of anything of value. The option was, in fact, the only reason why they purchased the other half for an expensive price. Since the Villamors exercised their option, this is tantamount to an acceptance of the offer—a valid and obligatory contract of sale was thus perfected.

TAYAG v LACSON 5.

FACTS: Angelica Lacson and her children were registered owners of agricultural lands. Tiamzon and others were their farmer-tenants. The tenants executed a Deed of Assignment in favor of Tayag—assigning to the latter their rights to purchase the lands as tenant-tillers of the landholdings possessed by them at P50.00 per sqm. This was subject to the conditions that (1) Lacson, the landowner, would agree to sell the same parels and (2) that there are no more legal impediments to the assignment. Tayag invited the tenants to a meeting to discuss the agreement, but the latter did not attend and wrote Tayag that they have decided to sell their rights to the Lacsons instead because he allegedly betrayed their trust by filing a certain lawsuit. Tayag thus filed a Complaint before the RTC asking that the court fix the period for the payment; he also asked for a Writ of Preliminary Injunction against Lacson and the tenants to enjoin them from accepting any offers for sale made by the tenants. ISSUE: W/N the assignment was in the form of an option contract ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA

SANCHEZ v RIGOS

FACTS: Sanchez and Rigos executed an Option to Purchase where Rigos agreed, promised, and committed to sell to Sanchez a parcel of land in Nueva Ecija for P1,510. In spite of the repeated tenders made by Sanchez, Rigos refused to sell the same. Thus, Sanchez consigned the amounts and filed a case for specific performance. Rigos alleged that the contract between them was a unilateral promise to sell, which is not supported by any consideration, hence, it is not binding. ISSUE: W/N there was a valid option contract HELD: NO. The promisee (Sanchez) cannot compel the promissor (Rigos) to comply with the promise unless the former can establish that the promise was for a consideration. The burden of proof to establish the existence of the consideration lies with Sanchez. Therefore, there was no valid option contract in this case. However, an option without consideration is a mere offer, which is not binding until accepted. But from the moment it is accepted before it is withdrawn, 10


 a valid contract of sale arises. In this case, even though there was no option contract, there was nevertheless an offer and acceptance enough to constitute a valid contract of sale.

6.

VASQUEZ v CA

FACTS: The Vallejera spouses sought to recover from Vasquez an agricultural lot, which they previously sold to him. Along with the previous execution of a Deed of Sale, the parties also executed a Right of Repurchase allowing Vallejera to repurchase the said estate. Vasquez resisted the redemption arguing that the option to buy was not supported by any consideration—and thus not binding upon him. ISSUE: W/N there was a valid option contract HELD: NO. It is apparent that the Right to Repurchase was not supported by any consideration. Thus, in order for the doctrine under Sanchez v Rigos to apply, giving rise to a valid contract of sale, it must be shown that the promissee (Vallejera) accepted the right of repurchase before it was withdrawn by Vasquez. In this case, no such acceptance was made. The vendor a retro (Vallejera) must make actual and simultaneous tender of payment and consignation. Mere expressions of readiness and willingness to repurchase are insufficient. Their ineffectual acceptance allowed Vasquez to withdraw the offer through his refusal to sell the lot. Vasquez thus cannot be compelled to sell the lot.

7.

NIETES v CA

FACTS: Nietes leased from Dr. Garcia the Angeles Educational Institute; the contract contained an Option to Buy the land and school buildings within the period of the lease. It also stipulated that the unused payment will be applied to the purchase price of the school. Nietes paid Garcia certain sums in excess of the rent, which Garcia acknowledged as forming partial payment of the purchase price of the property. Later on, Garcia, through counsel, wrote Nietes informing him of his decision to rescind the contract due to certain violations of the contract—such as poor maintenance, lack of inventory of school equipment, and the use of another name for the said school. Nietes replied by informing Garcia that he decided to exercise his Option to Buy, but Garcia refused to sell. Nietes thereafter deposited the balance of the price to Agro-Industrial Bank, but he later withdrew the said amounts. CA ruled in favor of Garcia stating that the full purchase price must be paid before the Option to Buy may be exercised. Thus, Nietes brought the matter to the SC. ISSUE: W/N actual payment is needed before one may exercise the option to buy HELD: NO. There is nothing in the contract that required Nietes to pay the full price before he could exercise the option. It was sufficient that he informed Garcia of his choice and that he was at that time ready to pay. The ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA

exercise of the option need not be coupled with actual payment so long as such payment is made upon the fulfillment of the owner’s undertaking to deliver the property. This is based on the principle that such option contracts involve reciprocal obligations—and one does not incur delay if the other party fails or refuses to comply with his respective obligation. That being the case, there was no need for Nietes to deposit the said amounts—and his withdrawal thereof does not affect his right.

8.

ANG YU ASUNCION v CA

FACTS: The Unijeng spouses owned certain residential and commercial spaces leased by Ang Yu. They offered to sell the said units to Ang Yu on several occasions and for P6M. Ang Yu made a counter offer for P5M. The Unijeng spouses asked Ang Yu to specify his terms in writing but the latter failed to do so. They failed to arrive at any definite agreement. When Ang Yu discovered that the spouses were planning to sell the property to others, he sued them for specific performance. While the case was pending, the spouses sold the units to Buen Realty for P15M. ISSUE: W/N there was a perfected contract of sale between Unijeng and Ang Yu HELD: NO. There was no perfected contract of sale yet since there was yet any meeting of the minds. Thus, there is no ground for specific performance. During the negotiation stage, any party may withdraw the offer made—especially if it was not supported by any consideration. An Option Contract of a Right of First Refusal is separate and distinct from the actual contract of sale— which is the basis for specific performance. The remedy available to Any Yu, in case the withdrawal was made capriciously and arbitrarily, would be to sue on the basis of abuse of right. In case there was an option contract, timely acceptance would create an obligation to sell on the part of the vendor; but no such circumstance attends in this case.

9.

EQUATORIAL REALTY THEATER INC.

DEV.

INC.

v

MAYFAIR

FACTS: For its theaters, Mayfair was leasing a portion of the property in CM Recto, which Carmelo owns. Under the lease agreement, “if Carmelo should decide to sell the leased premises, Mayfair shall be given 30 days exclusive option to purchase the same.” Carmelo, through Henry Yang, informed the president of Mayfair that the former is interested in selling the whole CM Recto property—and that Araneta offered to purchase the same for $1.2M. Mayfair twice replied through a letter of its intention to exercise its right to repurchase—but Carmelo never replied. Thereafter, Carmelo sold the entire property to Equatorial Realty for some P11M. Thus, Mayfair instituted an action for specific performance and annulment of the sale. 11


 Carmelo alleges that the right, being an option contract, is void for lack of consideration. ISSUE: W/N the right to repurchase is an option contract and void for lack of consideration HELD: NO. The clause in the lease agreement was NOT an option contract, but a RIGHT OF FIRST REFUSAL. It was premised on Carmelo’s decision to sell the said property. It also did not contain a stipulation as to the price of said property. The requirement of separate consideration does not apply to a right of 1st refusal because consideration is already an integral part of the lease. Carmelo violated such right by not affording Mayfair a fair chance to negotiate. It abandoned the negotiations arbitrarily. Equatorial was likewise in bad faith; it was well aware of the right conferred upon Mayfair because its lawyers had ample time to review the contract. That being the case, the contract between Carmelo and Equatorial is rescissible. Mayfair should be allowed to purchase the entire property for the price offered by Equatorial. Rights of First Refusal are also governed by the law on contracts, not the amorphous principles on human relations.

the MOA, Ayala was to undertake the development of the lands except the “retained area.” Under Par. 5.15 of the MOA, “Ayala agreed to give Vasquez a first option to purchase the 4 adjacent lots to the retained area at the prevailing market price at the time of the purchase.” A case was filed by one of the former sub-contractors of Conduit against Ayala causing a 6-year delay in the development of the project. Now, Vasquez comes forward invoking Par. 5.15 claiming that it was a valid option contract, and that Ayala should sell to him the said property at the 1984 prevailing price. Ayala offered to sell the said properties to Vasquez at the prevailing prices (1990); but the latter refused to accept. Ayala discounted the price from P6,500/sqm to P5,000/sqm, but still, Vasquez refused. ISSUE: W/N there was a valid option contract given to Vasquez HELD: NO. Par. 5.15 was NOT an option contract, but a RIGHT OF FIRST REFUSAL. It was predicated upon Ayala’s decision to sell the said properties. The price was also not specified. It was also not supported by any independent consideration. By twice refusing to accept Ayala’s offers, Vasquez lost his right to repurchase. Ayala did not breach its obligation.

10. PARANAQUE KINGS ENTERPRISES INC v CA 12. RIVERA FILIPINA INC v CA FACTS: Catalina owned 8 parcels of land leased to Chua, who assigned its rights thereto to Lee Ching Bing, who, in turn, assigned said rights to Paranaque King Enterprises, which introduced significant improvements on the premises. Under the lease agreement, “in case of sale, the lessee shall have the option or priority to buy the said properties.” Catalina, in violation of the said stipulation, sold the lot to Raymundo for P5M. Paranaque King notified her of the said breach, and she immediately had the lots reconveyed. She then offered the lot to Paranaque King for P15M; but the latter refused claiming that the offer was “ridiculous.” Catalina thereafter sold it again to Raymundo for P9M. ISSUE: W/N there was compliance with the Right of First Refusal assigned to Paranaque King HELD: NO. In a Right of First Refusal, the seller cannot offer the property to another for a lower price or under terms more favorable. It must be offered under the same terms & conditions to Paranaque King; otherwise, the right of first refusal becomes illusory. Only if Paranaque King fails to meet the offer may the property be offered for sale to another buyer—and under the same terms and conditions as well. The Right of First Refusal may also be validly transferred or assigned—as in this case.

11. VASQUEZ v AYALA CORP. FACTS: In 1984, Ayala Corp. entered into a Memorandum of Agreement with Dr. Vasquez buying the latter’s shares with Conduit Development—which constitute some 50 hectares of the land in Ayala Alabang. Under ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA

FACTS: In 1982, Reyes executed a 10-year (renewable) Contract of Lease with Riivera Filipina over a parcel of land in EDSA. Under such contract, the lessee is given a right of first refusal should the lessor decide to sell the property during the terms of the lease. Such property was subject of a mortgage executed by Reyes in favor of Prudential Bank. Since Reyes failed to pay the loan with the bank, it foreclosed the mortgage and it emerged as the highest bidder in the auction sale. Realizing that he could not redeem the property, Reyes decided to sell it and offered it to Riviera Filipina for P5,000/sqm. However, it bargained for P3,500/sqm. Reyes rejected such offer. After 7 months, it again bargained for P4,000/sqm, which again was rejected by Reyes who asked for P6,000/sqm price. After 2 months, it again bargained for P5,000/sqm, but since Reyes insisted on P6,000/sqm price, he rejected Riviera's offer. Nearing the expiry of the redemption period, Reyes and Traballo (his friend) agreed that the latter would buy the same for P5,300. But such deal was not yet formally concluded and negotiations with Riviera Filipina once again transpired but to no avail. In 1989, Cypress and Cornhill Trading were able to come up with the amount sufficient to cover the redemption money, with which Reyes paid to Prudential Bank to redeem the property. Subsequently, a Deed of Absolute Sale was executed in favor of Cypress and Cornhill for P5.4M. Cypress and Cornhill mortgaged the property in favor of Urban Dev. Bank for P3M. Riviera Filipina filed a suit against Reyes, Cypress and Cornhill on the ground that they violated its right of first refusal under the lease contract. RTC ruled in favor of 12


 Reyes, Cypress, and Cornhill. On appeal, CA affirmed the decision of the RTC. ISSUE: W/N Riviera Filipina lost its right of first refusal HELD: YES. As clearly shown by the records and transcripts of the case, the actions of the parties to the contract of lease, Reyes and Riviera, shaped their understanding and interpretation of the lease provision "right of first refusal" to mean simply that should the lessor Reyes decide to sell the leased property during the term of the lease, such sale should first be offered to the lessee Riviera. And that is what exactly ensued between Reyes and Riviera, a series of negotiations on the price per square meter of the subject property with neither party, especially Riviera, unwilling to budge from his offer, as evidenced by the exchange of letters between the two contenders. It can clearly be discerned from Riviera’s letters that Riviera was so intractable in its position and took obvious advantage of the knowledge of the time element in its negotiations with Reyes as the redemption period of the subject foreclosed property drew near. Riviera strongly exhibited a "take-it or leaveit" attitude in its negotiations with Reyes. It quoted its "fixed and final" price as Five Thousand Pesos (P5,000.00) and not any peso more. It voiced out that it had other properties to consider so Reyes should decide and make known its decision "within fifteen days." Riviera even downgraded its offer when Reyes offered anew the property to it, such that whatever amount Reyes initially receives from Riviera would absolutely be insufficient to pay off the redemption price of the subject property. Naturally, Reyes had to disagree with Riviera’s highly disadvantageous offer. Nary a howl of protest or shout of defiance spewed forth from Riviera’s lips, as it were, but a seemingly whimper of acceptance when the counsel of Reyes strongly expressed in a letter dated December 5, 1989 that Riviera had lost its right of first refusal. Riviera cannot now be heard that had it been informed of the offer of Five Thousand Three Hundred Pesos (P5,300.00) of Cypress and Cornhill it would have matched said price. Its stubborn approach in its negotiations with Reyes showed crystal-clear that there was never any need to disclose such information and doing so would be just a futile effort on the part of Reyes. Reyes was under no obligation to disclose the same. Pursuant to Article 1339 of the New Civil Code, silence or concealment, by itself, does not constitute fraud, unless there is a special duty to disclose certain facts, or unless according to good faith and the usages of commerce the communication should be made. The general rule is applicable in the case at bar since Riviera failed to convincingly show that either of the exceptions are relevant to the case at bar.

13. MACION v GUIANI FACTS: Macion and Dela Vida Institute entered into a contract to sell, where the latter assured the former that it will buy the 2 parcels of land in Cotabato City on or before July 31, 1991 at P1.75M. In the meantime, ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA

Dela Vida took possession of it and promptly built an edifice worth P800,000. However, on the said date, the sale did not materialize. Consequently, Macion filed a complaint for unlawful detainer against Dela Vida, while Dela Vida countered with a complaint for reformation of the contract to sell. These differences were eventually settled. In 1992, both parties entered into a compromise agreement where Macion will give Dela Vida 5 months to raise P2.06M and in case of failure to do so, Dela Vida would vacate the premises. After 2 months, Dela Vida alleged that they had negotiated a loan from BPI and requested Macion to execute the contract to sell in its favor. However, Macion refused, which prompted Dela Vida to file an urgent motion for an order to direct Macion to execute the contract to sell. In return, Macion filed a motion for execution of judgment alleging that after 5 months, Dela Vida was not able to settle their obligations with Macion. RTC ruled in favor of Dela Vida. ISSUE: W/N it was proper to execute a contract to sell in favor of Dela Vida HELD: YES. Although the compromise agreement (par. 7) does NOT give Dela Vida the right to demand from Macion the execution of the contract to sell in its favor. From this paragraph, it is clear that Macion is obliged to execute a Deed of Sale and not a Contract to Sell upon payment of the full price of P2.06M. Thereafter, Macion will turn over to Dela Vida the TCT. HOWEVER, a review of the facts reveals that even prior to the signing of the compromise agreement, both parties had entered into a contract to sell, which was superseded by a compromise agreement. This compromise agreement must be interpreted as bestowing upon Dela Vida the power to demand a contract to sell from Macion. Where Macion promised to execute a deed of absolute sale upon completing payment of the price, it is a contract to sell. In the case at bar, the sale is still in the executory stage since the passing of title is subject to a suspensive condition--that if Dela Vida is able to secure the needed funds to purchase the properties from Macion. A mere executory sale, one where the sellers merely promise to transfer the property at some future date, or where some conditions have to be fulfilled before the contract is converted from an executory to an executed one, does not pass ownership over the real estate being sold. It cannot be denied that the compromise agreement, having been signed by both parties, is tantamount to a bilateral promise to buy and sell a certain thing for a price certain. Hence, this gives the contracting parties rights in personam, such that each has the right to demand from the other the fulfillment of their respective undertakings. Demandability may be exercised at any time after the execution of the Deed.

14. VILLONCO v BORMAHECO FACTS: Cervantes and his wife owned 3 parcels of land along Buendia where he buildings of Bormaheco Inc were situated. Beside their property were lots owned by Villonco Realty. Cervantes entered into several 13


 negotiations with Villonco for sale of the Buendia property. Cervantes made a written offer of P400/sqm with a downpayment of P100,000 to serve as earnest money. The offer also made the consummation of the sale dependent upon the acquisition by Bormaheco of a Sta. Ana property. Villonco made a counter-offer stating that the earnest money was to earn 10% interest p.a. The check was enclosed with the reply letter. Cervantes accepted and cashed the check. The Sta. Ana Property was awarded to Bormaheco; the transfer was also duly approved. However, Cervantes sent the check back to Villonco with the interest thereon—stating that he was no longer interested in selling the property. He also claims that no contract was perfected; Villonco sues for specific performance. ISSUE: W/N there was a perfected contract of sale HELD: YES. There was a perfected contract of sale. The alleged changes made in the counter-offer are immaterial and are mere clarifications. The changes of the words “Sta. Ana property” to another property as well as the insertion of the number “12” in the date, and the words “per annum” in the interest are trivial. There is no incompatibility in the offer and counteroffer. Cervantes assented to the interest and he, in fact, paid the same. Also, earnest money constitutes prood of the perfection of the contract of sale and forms part of the consideration. The condition regarding the acquisition of the Sta. Ana property was likewise fulfilled; there is thus no ground for the refusal of Cervantes to consummate the sale.

15. OESMER v PARAISO DEV CORP. FACTS: Oesmers are co-owners of undivided shares of 2 parcels of agricultural and tenanted land in Cavite, which are unregistered and originally owned by their parents. When their parents died, they acquired the lots as heirs by right of succession. In 1989, Paular, a resident and former Mun. Sec. of Carmona Cavite, brought Ernesto Oesmer (one of the heirs) to meet with Lee, President of Paraiso Development Corp, in Manila for the purpose of brokering the sale of Ernesto's properties to Paraiso Dev. Corp. A contract to sell was entered into between Paraiso Dev. Corp and Ernesto as well as Enriqueta. A check in the amount of P100,000 payable to Ernesto was given as option money. Eventually, Rizalino, Leonora, Bibiano Jr, and Librado also signed the Contract to Sell. However, 2 of their brothers, Adolfo and Jesus, refused to sign the document. A couple of months after, the Oesmers informed Paraiso (through a letter) that it is rescinding the Contract to Sell and returning the option money. However, Paraiso did not respond and thus, Oesmers filed a complaint for declaration of nullity of the Contract to Sell with the RTC, which ruled in favor of Paraiso Dev. Corp. On appeal, CA modified by declaring that the Contract to Sell is valid and binding as to the undivided shares of the six signatories of the document. ISSUE: W/N the Contract to Sell is valid as to all ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA

signatories HELD: NO. It is true that the signatures of the 5 siblings did not confer authority on Ernesto as agent to sell their respective shares in the properties, because such authority to sell an immovable is required to be in writing. However, those signatures signify their act of directly (not through an agent) selling their personal shares to Paraiso Dev. Corp. In the case at bar, the Contract to Sell was perfected when the petitioners consented to the sale to the respondent of their shares in the subject parcels of land by affixing their signatures on the said contract. Such signatures show their acceptance of what has been stipulated in the Contract to Sell and such acceptance was made known to respondent corporation when the duplicate copy of the Contract to Sell was returned to the latter bearing petitioners’ signatures. As to petitioner Enriqueta’s claim that she merely signed as a witness to the said contract, the contract itself does not say so. There was no single indication in the said contract that she signed the same merely as a witness. The fact that her signature appears on the right-hand margin of the Contract to Sell is insignificant. The contract indisputably referred to the “Heirs of Bibiano and Encarnacion Oesmer,” and since there is no showing that Enriqueta signed the document in some other capacity, it can be safely assumed that she did so as one of the parties to the sale. In the instant case, the consideration of P100,000.00 paid by respondent to petitioners was referred to as “option money.” However, a careful examination of the words used in the contract indicates that the money is not option money but earnest money. “Earnest money” and “option money” are not the same but distinguished thus: (a) earnest money is part of the purchase price, while option money is the money given as a distinct consideration for an option contract; (b) earnest money is given only where there is already a sale, while option money applies to a sale not yet perfected; and, (c) when earnest money is given, the buyer is bound to pay the balance, while when the would-be buyer gives option money, he is not required to buy, but may even forfeit it depending on the terms of the option.

16. FULE v CA FACTS: Fule, a banker and a jeweler, acquired a 10hectare property in Rizal (Tanay Property), which used to be under the name of Fr. Antonio Jacobe, who mortgaged it to Rural Bank of Alaminos to secure a loan of P10,000. However, the mortgage was foreclosed. In 1984, Fule asked Dichoso and Mendoza to look for a buyer of the Tanay property. They found one in the person of Cruz, who owns a pair of diamond earrings. Fule was interested to buy these earrings, but Cruz refused to sell them to him for the price he offered. Subsequently, negotiations for the barter between the earrings and the property ensued. But it turned out that the redemption period for the property has not yet expired. Thus, Fule executed a deed of redemption on behalf of Fr. Jacobe in the amount of P16,000, and on even date, Fr. Jacobe sold the property to Fule for 14


 P75,000. The Deed of Sale was notarized ahead of the Deed of Redemption. Subsequently, a Deed of Sale over the earrings was executed and when it was delivered, Fule contends that the earrings were fake, even using a tester to prove such allegation. Thereafter, they decided to Dimayuga, a jeweler, to have the earrings tested. After a glance, Dimayuga declared them fake. Fule filed a complaint with the RTC against Cruz and her lawyer, Belarmino, praying that the contract of sale over the Tanay property be declared null and void on the ground of fraud and deceit. RTC ruled in favor of Cruz and Belarmino. ISSUE: W/N the Deed of Sale over the Tanay Property is valid HELD: YES. 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. 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. Neither is there any evidence showing that Dr. Cruz induced petitioner to sell his Tanay property or that she cajoled him to take the earrings in exchange for said property. On the contrary, Dr. Cruz did not initially accede to petitioner's proposal to buy the said jewelry. Rather, it appears that it was petitioner, through his agents, who led Dr. Cruz to believe that the Tanay property was worth exchanging for her jewelry as he represented that its value was P400,000.00 or more than double that of the jewelry which was valued only at P160,000.00. If indeed petitioner's property was truly worth that much, it was certainly contrary to the nature of a businessmanbanker like him to have parted with his real estate for half its price. In short, 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 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 hours he later claimed that the jewelry was not the one he intended in exchange for his Tanay property, could not sever the juridical tie that now bound him and Dr. Cruz. The nature and value of the thing he had taken preclude its return after that supervening period within which anything could have happened, not excluding the alteration of the jewelry or its being switched with an inferior kind.

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17. DAILON v CA FACTS: Sabesaje sues to recover ownership of a parcel of land based on a private document of absolute sale executed by Dailon. Dailon denies the fact of the sale alleging that the same being embodied in a private instrument, the same cannot convey title under Art. 1358 of the Civil Code which requires that contracts which have for their object the creation, transmission, modification, or extinction of real rights over immovable property must appear in a public instrument. ISSUE: W/N there was a valid/perfected contract of sale HELD: YES. The necessity of a public instrument is only for convenience—not for validity and enforceability. Such is not a requirement for the validity of a contract of sale, which is perfected by mere consent. Dailon should thus be compelled to execute the corresponding deed of conveyance in a public instrument in favor of Sabesaje. If the sale is made through a public instrument, it amounts to constructive delivery.

18. SECUYA v VDA DE SELMA FACTS: Caballero owned certain friar lands. She entered into an Agreement of Partition where she parted with 1/3 of the said property in favor of Sabellona. Sabellona took possession thereof and sold a portion to Dalmacio Secuya through a private instrument that is already lost. Secuya, along with his many relatives took possession of the said land. Later on, Selma bought a portion of the said land, including that occupied by Secuya; she bought it from Caesaria Caballero. She presented a Deed of Absolute Sale and a TCT. Secuya filed a case for quieting of title. CA upheld Selma’s title considering that she had a TCT and a Deed of Sale. ISSUE: Who has a better right, Secuya or Selma? HELD: The Secuyas have nothing to support their supposed ownership over the parcel of land. The best evidence they could have had was the private instrument indicating the sale to their predecessor-ininterest. But the instrument is lost. Even so, it is only binding as between the parties and cannot prejudice 3rd persons since it is not embodied in the public document. Selma, on the other hand, has all the supporting documents necessary; she also acted in good faith and thought that the Secuyas were merely tenants. They did not even pay realty taxes and did not have their claim annotated to the certificate of sale.

19. YUVIENGCO v DACUYCUY FACTS: Yuvienco entered into a contract with Yao King Ong and the other occupants, wherein the former will sell to the latter the Sotto property in Tacloban City for P6.5M provided that the latter made known their decision to buy it or not later than July 31, 1978. When Yuvienco's representative went to Cebu with a prepared and duly signed contract for the purpose of perfecting 15


 and consummating the transaction, Yao King Ong and other occupants found variance between the terms of payment stipulated in the document and what they had in mind. Thus, it was returned unsigned. Thus, the action for specific performance. ISSUE: W/N the claim for specific performance of Yao King Ong is enforceable under the Statute of Frauds HELD: YES. It is nowhere alleged in the complaint that there is any writing or memorandum, much less a duly signed agreement to the effect, that the price of P6,500,000 fixed by petitioners for the real property herein involved was agreed to be paid not in cash but in installments as alleged by Yao King Ong. The only documented indication of the non-wholly-cash payment extant in the record is the deeds already signed by Yuvienco and taken to Tacloban by Atty. Gamboa for the signatures of the respondents. In other words, the 90day term for the balance of P4.5 M insisted upon by respondents choices not appear in any note, writing or memorandum signed by either the petitioners or any of them, not even by Atty. Gamboa. Hence, looking at the pose of respondents that there was a perfected agreement of purchase and sale between them and petitioners under which they would pay in installments of P2 M down and P4.5 M within ninety 90) days afterwards it is evident that such oral contract involving the "sale of real property" comes squarely under the Statute of Frauds (Article 1403, No. 2(e), Civil Code.) In any sale of real property on installments, the Statute of Frauds read together with the perfection requirements of Article 1475 of the Civil Code must be understood and applied in the sense that the idea of payment on installments must be in the requisite of a note or memorandum therein contemplated. While such note or memorandum need not be in one single document or writing and it can be in just sufficiently implicit tenor, imperatively the separate notes must, when put together', contain all the requisites of a perfected contract of sale. To put it the other way, under the Statute of Frauds, the contents of the note or memorandum, whether in one writing or in separate ones merely indicative for an adequate understanding of all the essential elements of the entire agreement, may be said to be the contract itself, except as to the form.

20. LIMKETKAI SONS MILLING INC v CA FACTS: In 1976, Philippine Remnants Co., Inc. constituted the Bank of the Philippine Islands (BPI) as its trustee to manage, administer, and sell its real estate property, one of which was the disputed lot in Pasig. In 1988, Pedro Revilla, Jr., a licensed real estate broker, was given formal authority by BPI to sell the lot for P1,000/sqm. Broker Revilla contacted Alfonso Lim of Limketkai Sons Milling (LSM) who agreed to buy the land. LSM asked that the price of P1,000/sqm. be reduced to P900.00 while Albano stated the price is to be P1,100.00. The parties finally agreed that the lot would be sold at P1,000/sqm. to be paid in cash. Notwithstanding the final agreement to pay P1,000/sqm. on a cash basis, Alfonso Lim (LSM official) ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA

asked if it was possible to pay on terms. The bank officials stated that there was no harm in trying to ask for payment on terms because in previous transactions, the same had been allowed. It was the understanding, however, that should the term payment be disapproved, then the price shall be paid in cash. It was Albano who dictated the terms under which the installment payment may be approved, and acting thereon, Alfonso Lim wrote BPI through Merlin Albano embodying the payment initially of 10% and the remaining 90% within a period of 90 days. 2 or 3 days later, LSM learned that its offer to pay on terms had been frozen. Alfonso Lim went to BPI and tendered the full payment of P33,056,000.00 to Albano. The payment was refused because Albano stated that the authority to sell that particular piece of property in Pasig had been withdrawn from his unit. The same check was tendered to BPI Vice-President Nelson Bona who also refused to receive payment. LSM filed an action for specific performance with damages against BPI. In the course of the trial, BPI informed the trial court that it had sold the property under litigation to National Book Store (NBS) in 1989. The complaint was thus amended to include NBS. RTC ruled in favor of LSM, holding that there was a perfected contract of sale between LSM and BPI. CA reversed, holding that no contract of sale was perfected because there was no concurrence of the three requisites enumerated in Article 1318 of the Civil Code. ISSUE: W/N there was a valid contract of sale HELD: YES. There was a meeting of the minds between the buyer and the bank in respect to the price of P1,000/sqm. The requirements in the payment of the purchase price on terms instead of cash were suggested by BPI Vice-President Albano. Since the authority given to broker Revilla specified cash payment, the possibility of paying on terms was referred to the Trust Committee but with the mutual agreement that “if the proposed payment on terms will not be approved by our Trust Committee, Limketkai should pay in cash, the amount was no longer subject to the approval or disapproval of the Committee, it is only on the terms.” The record shows that if payment was in cash, either broker Revilla or Aromin had full authority. But because LSM took advantage of the suggestion of Vice-President Albano, the matter was sent to higher officials. Immediately upon learning that payment on terms was frozen and/or denied, Limketkai exercised his right within the period given to him and tendered payment in full, thus complying with their agreement. The negotiation or preparation stage started with the authority given by Philippine Remnants to BPI to sell the lot, followed by the authority given by BPI and confirmed by Philippine Remnants to broker Revilla to sell the property, the offer to sell to Limketkai, the inspection of the property and the negotiations with Aromin and Albano at the BPI offices. The perfection of the contract took place when Aromin and Albano, acting for BPI, agreed to sell and Alfonso Lim with Albino Limketkai, acting for LSM, agreed to buy the disputed lot at P1,000/sqm. Aside from this there was the earlier agreement between LSM and the authorized broker.

16


 There was a concurrence of offer and acceptance, on the object, and on the cause thereof.

21. ORTEGA v LEONARDO

partial performance, which takes the verbal agreement out of the operation of the Statute of Frauds.

22. CLAUDEL v CA

FACTS: Ortega occupied a parcel of land. After the liberation, the government assigned the lot to the Rural Progress Admin. She asserted her right thereto; but was disputed by Leonardo. Ortega and Leonardo agreed to a compromise. The agreement was for Ortega to desist from pressing her claim, and Leonardo, upon getting the lot, would sell to her a portion thereof provided she paid for the surveying of the lot. If he acquired title, she could stay as tenant. Ortega thus desisted from her claim, paid for the surveying of the lot and the preparation of the plan, and regularly paid him a monthly rental. When she remodeled her son’s house beside the lot, it extended over the subject lot. When Leonardo acquired title, he refused to sell the portion agreed upon. He claims that the contract is unenforceable based on the Statute of Frauds.

FACTS: Cecilio Claudel acquired a lot from the Bureau of Lands. He occupied the same, declared it in his name and dutifully paid his taxes. After his death, his heirs and siblings contested each other claiming ownership thereof. It was his heirs who were in possession of the property. They partitioned it amongst themselves, registered each portion under the Torrens System, and each paid their respective taxes. The siblings filed a case for cancellation of titles and reconveyance arguing that there was a verbal sale between Cecilio and their parents over the lot. As evidence, they presented a subdivision plan. CA ordered the cancellation of the TCTs in favor of the heirs.

ISSUE: W/N the contract is unenforceable

HELD: NO. As a rule, a sale of land is valid regardless of the form it may have been entered into. However, in the event that a 3rd party disputes the ownership, there is no such proof in support of the ownership. As such, it cannot prejudice 3rd persons—such as the heirs in this case. Also, the heirs had a right to rely upon their Torrens titles, which, as opposed to the subdivision plans, are definitely more credible. Further, the subsequent buyers were in bad faith because Armando & Adelia registered their adverse claim—this amounts to constructive notice, which negates good faith. The Statute of Frauds likewise does not apply considering that Godofredo & Carmen had already derived the benefits from the sale—such as the money to pay for the loan. The receipt also suffices to constitute the memorandum required by the Statute of Frauds. Assuming that the sale was voidable because it was conjugal property, the same was ratified by Godofredo by introducing Armando & Adelia to the Natanawans as the new lessors. Also, even though titled as Specific Performance, the complaint was one for reconveyance— and prescription does not lie of one who is in actual possession of the property.

HELD: NO. The contract is enforceable because there was partial performance. Ortega made substantial improvements on the lot, desisted from her claim, continued possession, and paid for the surveying, and also paid the rentals. All these put together amount to

23. ALFREDO v BORRAS FACTS: Godofredo & Carmen mortgaged their land to DBP for P7,000. To pay their debt, they sold the land to Armando & Adelia for P15,000. The latter also assumed to pay the loan. Carmen issued Armando & Adelia a receipt for the sale. They also delivered to Armando & Adelia the Original Certificate of Title, tax declarations, and tax receipts. They also introduced Armando & Adelia to the Natanawans, the tenants of the said property as the new lessors. They thereafter took possession of the said land. Later, they found out that Godofredo & Carmen sold the land again to other buyers by securing duplicate copies of the OCTs upon petition with the court. Thus, they filed for specific performance. Godofredo & Carmen claimed that the sale, not being in writing, is unenforceable under the Statute of Frauds. ISSUE: W/N the contract of sale is unenforceable under the Statute of Frauds. HELD: NO. The Statute of Frauds is applicable only to executory contracts, not those that have already been partially or completely consummated. In this case, the sale of the land to Armando & Adelia had already been consummated. The ownership of the land was also transferred to Armando & Adelia when they were introduced to the Natanawans and took possession thereof. Therefore, when Godofredo & Carmen sold the land to other buyers, it was no longer theirs to sell. ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA

ISSUE: W/N there was a valid sale between Cecilio and his siblings

23. TOYOTA SHAW INC v CA FACTS: Luna Sosa wanted to buy a Toyota Lite Ace. He went to Toyota Shaw where he met Popong Bernardo, a sales rep. Sosa explained that he needed the Lite Ace by June 17, otherwise, he would become a laughing stock. Bernardo guaranteed that the vehicle would be delivered. They executed a document entitled Agreements between Sosa & Popong Bernardo of Toyota Shaw” where a P100K downpayment was stipulated and that the Lite Ace would be available at a given date. When the day of reckoning arrived, the Lite Ace was unavailable—the explanation of Bernardo being “nasulot ng ibang malakas.” However, according to Toyota, the true reason was that BA Finance, which was supposed to 17


 answer for the balance of the purchase price, did not approve Sosa’s application. Toyota also returned the downpayment. Thus, Sosa sued for damages amounting to P1.2M due to his humiliation, hurt feelings, sleepless nights, and so on. ISSUE: W/N there was a perfected contract of sale HELD: NO. Toyota Shaw should NOT be held liable for damages because there was no perfected contract of sale in the first place. There was no agreement as to the price and the manner of payment—which are both

essential to the perfection of the sale. It was also clear that Bernardo signed the document in his personal capacity and it was up to Sosa to inquire as to the extent of the former’s capacity. Sosa did not even sign it. It was nothing but a mere proposal, which did not mature into a perfected contract of sale in lieu of the subsequent events. In fact, it made no specific reference to the sale of a vehicle. No obligations could thus arise therefrom. Sosa has no one else to blame but himself for his humiliation for bragging about something he does not own yet.


CONSUMMATION/PERFECTION OF CONTRACT 1.

SANTOS v SANTOS

FACTS: Jesus and Rosalia owned a lot with a 4-door apartment. They sold through a public instrument the said property to their children, Salvador and Rosa—who sold her share to Salvador as well. Nonetheless, in spite of the sale, Rosalia remained in possession and control over the property. Jesus, Rosalia and Salvador died. Zenaida, claiming to be Salvador’s heir, demanded rent from the tenants. The other children of Jesus and Rosalia filed a case for reconveyance averring that the sale to Salvador was fictitious and done merely to accommodate him. ISSUE: W/N the sale to Salvador was fictitious HELD: YES. While it is true that sale through a public instrument is equivalent to delivery of the things sold which has the effect of transferring ownership, the delivery can be rebutted by clear and convincing evidence. The vendor’s continuous possession makes the sale dubious. Salvador never took possession of the property. He surrendered the titles to his mother after having registered the lots in his name, he never collected rentals, neither has he paid the taxes thereon. Thus, there was no real transfer of ownership. That being the case, the action for reconveyance was imprescriptible.

ISSUE: W/N Wilfredo, as mortgagor, can sell the tractor subject of a mortgage HELD: YES. The mortgagor (Wilfredo) had every right to sell the property subject to mortgage—even without the consent of the mortgagee as long as the purchaser assumes the liability of the mortgagor. In this case, there was constructive delivery already upon the execution of the public instrument—even if the tractor could not yet be delivered. Execution of the public instrument and mutual consent of the parties was equivalent to constructive delivery. Therefore, at the time when the sheriff levied upon the tractor, it was no longer the property of Wilfredo. Also the clearing of the check was not a condition for the consummation of the sale but only upon the extinguishment of the mortgage.

3.

ADDISON v FELIX

FACTS: Addison owned 4 parcels of land, which he sold to Felix, through public instrument. The down payment was made; the final installment to be paid after the issuance of the certificate of title. Addison sued Felix to compel the latter to pay the last installment—but Felix refused and sought to rescind the contract due to the absolute failure of Addison to deliver the thing sold. ISSUE: W/N there was delivery

2.

DY JR v CA

FACTS: Perfecto and Wilfredo Dy are brothers. Wilfredo purchased a truck and a tractor, both of which were mortgaged to Libra Financing as security for a loan. Perfecto wanted to purchase the tractor, he convinced his sister to purchase the truck. Perfecto executed a public document to evidence the sale. Libra acceded to the sale and agreed that upon the issuance and encashment of the check that they issued for the purpose, the chattels can be released. However, in a case against Wilfredo filed by Gelac Trading, the sheriff seized the tractor on levy and sold the same on public auction, with Gelac as the highest bidder. Perfecto thus sought to recover the truck from Gelac.

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HELD: NO. While it is true that execution of a public instrument is tantamount to delivery of the thing sold, in order for such symbolic delivery to have the effect of tradition, the vendor should have had control over the thing and at the moment of the sale, its delivery could have been made. In this case, the ownership was disputed by the Villafuertes, who were in possession of the land. Addison even failed to show the land to Felix due to the hostile opposition; he also failed to have it surveyed. The legal fiction of delivery thus yields to reality—no delivery was ever made. Felix had every right therefore to rescind the contract. Had there been an agreement that Felix would have to undertake to evict the Villafuertes, the result may have been different, but there is no such agreement.

18


 4.

DANGUILAN v IAC

6.

POWER COMMERCIAL AND INDUSTRIAL CORP. v CA

FACTS: Domingo owned 2 lots, which he donated through a private instrument to Danguilan for the consideration that the latter must take care of him for the remainder of his life and manage his burial. Domingo’s daughter, Apolonia, laid claim to the land, presenting a public document allegedly executed in her favor, the purchase price being paid for by her mother. She however failed to take possession of the said property after the execution of the deed. In fact, she moved out of the farm when Danguilan started to cultivate the same for as long as she was given a share from the harvests. She decided to file a case only after the deliveries of farm produce have ceased.

FACTS: Power Commercial Corp. entered into a contract of sale with the Quiambao spouses. It agreed to assume the mortgages thereon. A Deed of Absolute Sale with Assumption of Mortgage was executed. Power Commercial failed to settle the mortgage debt contracted by the spouses, thus it could not undertake the proper action to evict the lessees on the lot. Power Commercial thereafter sought to rescind the contract of the sale alleging that it failed to take actual and physical possession of the lot—which allegedly negated constructive delivery.

ISSUE: Who has a better title over the land, Danguilan or Apolonia?

HELD: YES. First, such a condition that the Quiambao spouses would evict the lessees therein was not stipulated in the contract. In fact, Power Commercial was well aware of the presence of the tenants therein. Also in this case, Power Commercial was given control over the said lot and it endeavored to terminate the occupation of the actual tenants. Control cannot be equated with actual possession. Power Commercial, as purchaser, agreed voluntarily to assume the risks involved. The public instrument executed amounted to symbolic delivery of the property sold and authorized the buyer to use the document as proof of ownership. Power Commercial was deprived of ownership only after it failed to remit the amortizations, but not due to failure of delivery.

HELD: DANGUILAN. At the onset, the donation in favor of Danguilan was valid even though embodied in a private instrument, because it was an onerous donation. The deed of sale presented by Apolonia was also suspicious. It was only 3 years old and the consideration was paid for by her mother. Assuming that it was valid, still the presumptive delivery is overcome by the fact that she failed to take possession of the property. Ownership, after all, is not transferred by mere stipulation butby actual and adverse possession. She even transferred the same to Danguilan possession of the same. She cannot have a better right in this case than Danguilan.

ISSUE: W/N there was delivery

7. 5.

CHUA v CA

PASAGUI v VILLABLANCA

FACTS: Pasagui purchased a parcel of land form the Bocar Spouses for P2,800, which was embodied in a public instrument. They failed to take possession of the property because the Villablancas illegally took possession of the property and harvested the coconuts therein. Thus, Pasagui filed a case for ejectment before the CFI. The Bocar spouses were likewise impleaded. The latter contested that the case should be dismissed because the CFI did not have jurisdiction over forcible entry cases. ISSUE: W/N this is a case of forcible entry HELD: NO. The case was not for forcible entry because there was no allegation that Pasagui was in prior physical possession of the land and that the Villablancas, through force, stealth, or threat, deprived them thereof. While the sale was made through a public document is equivalent to delivery, this presumption only holds true if there is no impediment to the possession of the purchaser. Such is not the case here. Since Pasagui had not yet acquired physical possession of the land, the case was not one for forcible entry and the CFI (not municipal courts) has jurisdiction.

ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA

FACTS: Valdes-Choy is the owner of the subject matter, when she advertised the property for sale. Chua responded to the advertisement, and met up with Valdes-Choy. They agreed for the purchase price of P10,800,000, to be paid on July 15, 1989. This was evidenced by an earnest money for P100,000, which was put on a receipt, stating that the money will be forfeited upon failure to pay on the dat stipulated. On July 13, Valdes-Choy executed two deeds of absolute sale, first, pertaining to the house and lot, valued at P8,000,000, and second, pertaining to the movable properties therein. The next day, Chua issued a check worth P485,000 for the purpose paying the capital gains tax. The value was deducted from the balance, with an outstanding value of P10,295,000 (additional P80,000 for the documentary stamp tax). Chua also showed a check worth P10,215,00 to Valdes-Choy, however, he demanded that the TCT should first be transferred to his name before paying the check. Out of anger, ValdesChoy tore the deed of absolute sale. On the reckoning date, Valdes-Choy tried to make a compromise with Chua, but she did not get any response. Two days later, Chua filed an action for specific performance, which the trial court dismissed. A week later, he filed another action for specific performance, where the court ruled in favor of him. On appeal, CA reversed.

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 ISSUE: 1. 2.

Whether the agreement was a contract of sale or contract to sell Whether registration is needed to transfer ownership

RULING: It is a contract to sell. First, when the agreement was made, the earnest money is forfeited in favor of Valdes-Choy who may then sell the land to other interested parties. This is the nature of reserving the ownership of the property, subject to the full payment of the purchase price. Second, absent of a formal deed of conveyance of the property in favor of the buyer shows that there was no intention to transfer ownership immediately. The non-fulfillment of the suspensive condition, which is payment of the full purchase price prevents the obligation to sell from arising, where the owner retains the ownership over the property. Art 1482 speaks of earnest money as an evidence of a perfected contract of sale. However, in this case, the earnest money was paid in part consideration of a contract to sell, and therefore, art 1482 does not apply. Delivery is effected upon execution of the sale in a public instrument. However, registration is not needed in order to complete the deed of sale. Delivery is what transfers ownership, and not registration in the Registry of Property. Registration is only necessary to bind third persons; it is not a mode of acquiring ownership.

8.

VIVE EAGLE LAND INC v CA

FACTS: In 1987, Spouses Flores, as owners, sold 2 parcels of land in Cubao to Tatic Square International Corp for P5.7M. Tatic applied for a loan with Capital Rual Bank of Makati to finance its purchase of the said lots, which the bank granted provided that the torrens title over the lots would be registered under its name as collateral for the payment of the loan. In 1988, Tatic sold these parcels of land to Vive Eagle Land Inc (VELI) for P6.3M, although the torrens titles over the lots were still in the custody of the bank. During the same year, VELI sold one of these parcels of land to Genuino Ice Co. Inc. for P4M. Also, a deed of assignment of rights in which VELI assigned in favor of Genuino Ice all rights and interests under the Deed of Sale executed by spouses Flores and the other Deed of Sale executed by Tatic in VELI's favor, in so far as that lot is concerned. FloresTatic (2 lots)VELI (2 lots)Genuino Ice (1 lot) Genuino Ice demanded that VELI pay its capital gains tax amounting to P285,000. However, VELI refused saying that the Spouses Flores and Tobias (broker of the sale) are responsible to pay the tax. Genuino Ice filed an action for specific performance against VELI, contending that VELI failed to transfer title to and in the name of Genuino Ice, to cause the eviction of the occupants, and to pay the tax and other dues to effectuate the transfer of the title of the property. RTC ruled in favor of Genuino Ice, CA affirmed. ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA

ISSUE: W/N VELI is obliged to pay for the expenses to transfer the title of the property to Genuino Ice HELD: YES. Under Art. 1487 of the CC, the expenses for the registration of the sale should be shouldered by the vendor (VELI) unless there is a stipulation to the contrary. In the absence of the stipulation of the parties relating to the expenses for the registration of the sale and the transfer of the title to the vendee (Genuino Ice), Art. 1487 shall be applied in a supplementary manner. Under Art. 1495 of the CC, VELI, as vendor, is obliged to transfer title over the property and deliver the same to the vendee (Genuino Ice). While Art. 1498 of the CC provides that the execution of a notarized deed of absolute sale shall be equivalent to the delivery of the property, the same shall not apply if from the deed the contrary does not appear or cannot clearly be inferred. In this case, Genuino Ice and VELI agreed that the latter would cause the eviction of the tenants and deliver possession of the property. It is clear that at the time the petitioner executed the deed of sale in favor of Genuino Ice, there were tenants in the property. It cannot be concluded that the property was thereby delivered to Genuino Ice.

9.

BHEN MEYER & CO. v YANGCO

FACTS: Yangco ordered 80 drums of caustic soda “Carabao Brand” from Bhen & Meyer. The instrument evidencing the agreement made use of the terms “FOB” and “CIF.” The goods were detained by the British authorities in Penang. Bhen & Meyer alleges that Yangco had already acquired ownership of the said goods and should thus pay for the purchase price. However, Yangco refused to accept the same alleging that the goods were not “Carabao Brand” and that the same were adulterated. ISSUE: W/N ownership is transferred/delivery is effected with FOB and CIF from seller to buyer HELD: NO. The terms FOB and CIF mean that the costs of delivery are for the seller. This means that it is the seller’s duty to make sure that the goods are duly delivered. Until then, ownership of the goods had not yet passed. Had the expenses been for the buyer, the goods are deemed delivered upon delivery to the common carrier. In this case, the delivery has not been effected to the buyer, thus, the latter had every right to rescind the contract of sale.

10. GENERAL FOODS v NACOCO FACTS: • General Foods is a foreign corporation licensed to do business in the Philippines. • National Coconut Corporation (NACOCO) sold to General Foods 1500 tons of long copra under the terms: a. Quantity: Seller could deliver 5% more or less than the contracted quantity, and the 20


 surplus/deficiency shall be paid on the basis of the delivered weight. b. Price: CIF New York. c. Payment: Buyers to open an Irrevocable Letter of Credit for 95% of invoice value based on shipping weight. d. Balance of the price was to be ascertained on the basis of outturn weights and quality of the cargo at the port of discharge. e. Weights: Net landed weights. • In the Philippines, the net cargo was weighed at 1054 tons, the alleged weight delivered by NACOCO. NACOCO then withdrew 95% (or $136,000) of the amount in the Letter of Credit in favor of NACOCO. • In New York, the net cargo was reweighed and found to weigh only 898 short tons. General Foods demanded the refund of the amount of $24000. • NACOCO’s officer’s-in-charge acknowledged in a letter liability the deficiency and promised payment as soon as funds were available. • However, NACOCO was abolished and went into liquidation. The Board of Liquidators refused to pay the claim of General Foods. • General Foods then filed to recover $24,000 and 17% exchange tax plus attorney’s fees and costs. • General Foods alleges that although the sale quoted CIF New York, the agreement contemplated the payment of the price according to the weight and quality of the cargo upon arrival in New York (port of destination). Therefore, the risk of shipment was upon the seller. • NACOCO alleges that the contract is an ordinary CIF, which means that delivery to the carrier is delivery to the buyer. Therefore, the shipment having been delivered to the buyer and the buyer having paid the price, the sale was consummated. ISSUES: 1. Whether the weight in New York should be the basis upon payment of the price of copra should be made. – Yes. The weight in New York should be the basis. 2. Whether what is to be ascertained based upon the outturn weights and quality at port of discharge was only the balance due to be paid. – No. The balance due to be paid is not the only basis. HELD: • Under an ordinary CIF agreement, delivery to the buyer is complete upon delivery of the goods to the carrier and tender of the shipping and other documents required by the contract and the insurance policy are taken in the buyer’s behalf. However, the parties may, by express stipulation, modify a CIF contract and throw the risk upon the seller until the arrival in the port of destinations. • In this case, the terms of the contract indicate and intention that the precise amount to be paid by the buyer depended upon the ascertainment of the exact net weight of the cargo at the point of destination: a. Net landed weights were to govern. b. The balance of the price was to be ascertained on the basis of outturn weights and quality of the cargo at the port of discharge. c. The seller could deliver 5% more or less than the ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA

contracted quantity, and the surplus/deficiency shall be paid on the basis of the delivered weight. • While the risk of loss was apparently placed on General Foods after the delivery of the cargo to the carrier, it was agreed that the payment of the price was to be according to the “net landed weight” which is 898 (weighed in New York) and not 1054 (weighed in the Philippines). • NACOCO had the burden to prove that the shortage was due to risks of voyage and not the natural drying up of copra. In other words, if the weight deficiency was due to the risks of the voyage, General Food would not have been entitled to any claim in the deficiency. • The provision on the “balance of the price was to be ascertained on the basis of outturn weights and quality of the cargo at the port of discharge” should not be construed separately from the provision that the “net landed weight” was to control. • The manifest intention of the parties was for the total price to be finally ascertained only upon determining the net weight and quality of the goods upon arrival in New York, most likely because the nature of copra is that it dries up and diminishes weight during the voyage. • In fact, this intention was shown by the letter of the officer-in-charge of NACOCO acknowledging NACOCO’s liability to General Foods. Though this letter of acknowledgement should not be construed as an admission of liability of NACOCO, it is nevertheless competent evidence of NACOCO’s intention to be bound by the net landed weight or outturn weight of the copra at the port of discharge.

11. PACIFIC VEGETABLE OIL CORP v SINGZON FACTS: • Petitioner and respondent entered into a contract in the US whereby Singzon agreed to ship 500 tons of copra, with the agreement CIF, Pacific Coast • Singzon failed to deliver, but the parties entered into a settlement, whereby Singzon would deliver 300 tons at the same terms the contract provided that should Singzon again default, he would pay $10,000 for damages and the original contract would be revived • Singzon again failed to ship the copra, and he did not pay the fine or ship the 500 tons as originally agreed • Pacific filed an action to recover damages • Singzon claims that Pacific had no legal personality to sue because it is a foreign corporation HELD: • The contract was perfected in the US by a broker and representatives of the parties payment was made to a bank in California and delivery undertaken through CIF, Pacific Coast • Under that arrangement, the vendor is to pay not only the cost of goods, but also the freight and insurance expenses, and this is taken to indicate that the delivery is to be made at the port of destination • Since CIF includes both insurance and freight expenses to be paid by the seller, ordinarily, before the vessel arrives at the point of destination the risk of loss be for 21


 the account of the seller.

12. RUDOLF LIETZ INC v CA FACTS: Buriol previously owned a parcel of unregistered land in Palawan. In 1986, he entered into a lease agreement with Flaviano and Tiziana Turatello and Sani (Italians) involving a hectare of his property. This agreement was for a period of 25 years, renewable for another 25 years. After the paying P10,000 downpayment, Turatello and Sani took possession of the land. However, this agreement was only reduced into writing in 1987. After 11 months, Buriol sold the same parcel of land (5 hec) to Rudolf Lietz Inc for P30,000. Later on, Rudolf Lietz Inc discovered that Buriol owned only 4 hectares with one hectare covered by the lease; thus, only 3 hectares were delivered to it. Rudolf Lietz Inc instituted a complaint for the annulment of the lease against Buriol, Sani and the Turatellos before the RTC. RTC and CA ruled in favor of Buriol, Sani and Turatellos. ISSUE: Whether the sale between Buriol and Rudolf Lietz Inc is a lump sum or unit price sale HELD: LUMP SUM SALE. The Deed of Absolute Sale shows that the parties agreed on the purchase price on a predetermined area of 5 hectares within the specified boundaries and not based on a particular rate per area. In accordance with Art. 1542, there shall be no reduction in the purchase price even if the area delivered to Rudolf Lietz Inc is less than that states in the contract. In the instant case, the area within the boundaries as stated in the contract shall control over the area agreed upon in the contract.

and creates lien upon the land. The spouses acquired their titles under the Torrens System and they acted in good faith by exercising due diligence; thus, they have a better right to the said property.

14. NAVAL v CA FACTS: In 1969, Ildefonso Naval sold a parcel of land to Gregorio; the sale was recorded under Act 3344. Also in 1969, Gregorio sold portions thereof to Balilla, Camalla and the Moya Spouses, who thereafter took possession of their respective portions. Juanita, a great granddaughter of Ildefonso, surfaced and claimed that the land was sold to her by the latter in the year 1972; she also presented an OCT as evidence. It must be noted that the property was not yet registered under the Torrens System when it was sold to Juanita and Gregorio. ISSUE: W/N Juanita has a better title (since it is registered) than Balilla, Camalla and Moya spouses HELD: NO. Art. 1544 is not applicable because the land was unregistered under the Torrens System at the time of the 1st sale. The applicable law is Act 3344. Under said law, registration by the 1st buyer is constructive notice to the 2nd buyer—and as such, the latter cannot be deemed to be in good faith. Applying the principle of priority in time, priority in rights, Juanita cannot claim to have a better right. The fact that Juanita was able to secure a title in her name does not operate to vest ownership. The Torrens System cannot be used as a means to protect usurpers.

15. CARILLO v CA 13. NAAWAN COMMUNITY RURAL BANK INC v CA FACTS: Comayas offered to sell to the Lumo Spouses a house and lot. The property was already registered under the Torrens System that time and they made appropriate inquiries with the RD; they found out that it was mortgaged for P8,000, paid Comayas to settle the mortgage, and the release of the adverse claim was annotated in the title. Thereafter, they executed an Absolute Deed of Sale over the subject property and registered the same. However, it turns out that it was already previously sold to Naawan Community Rural Bank; it was then unregistered. The Bank foreclosed on the property, purchased the same, and registered it under Act 3344. Thus, the Bank sought to eject the spouses. However, the latter countered with an action for quieting of title. ISSUE: Who has a better title, Naawan or Lumo spouses? HELD: LUMO SPOUSES. Where a person claims to have superior property rights by virtue of a sheriff’s sale, the benefit of Art. 1544 applies favorably only if the property is registered under the Torrens System—not under Act 3344. Registration under the Torrens System is the operative act that gives validity to the transfer ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA

FACTS: Gonzales purchased from Priscilla, acting as agent of Aristotle, the latter’s land. For failure to execute the Deed of Sale, she filed a case for specific performance and impleaded Priscilla (not Aristotle). The latter defaulted and judgment was rendered against her ordering the nullification of the OCT of Aristotle and the issuance of a new certificate of title in favor of Gonzales. The Dabons thereafter surfaced and sought to annul the judgment of the trial court averring that they purchased the property from Aristotle himself and they were not impleaded as the real parties in interest. ISSUE: Who has better title, Gonzales or Dabon? HELD: DABON. The decision of the lower court in favor of Gonzales was void due to extrinsic fraud. The Dabons were deprived of their day in court and through questionable means at that—such as the failure to give them appropriate notice of the proceedings, and not having them impleaded even though they are the parties to be adversely affected. Instead, it was the agent who was impleaded—not the principal or the subsequent purchasers. The court never acquired jurisdiction. It must be noted that the property was sold to Gonzales in 1988, while the same was sold to the Dabons in 1989; nonetheless, the requirements of double-sale 22


 are two-fold: acquisition in good faith and registration in good faith. Based on the foregoing, the case is remanded to the lower court for further proceeding.

16. CARBONELL v CA FACTS: Poncio, a Batanes native, owned a parcel of land, which he offered to sell to Carbonell and Infante. The land was mortgaged to Republic Bank. Poncio and Carbonell agreed to the sale of the land, and the latter assumed to pay the mortgage in favor of the bank. Poncio and Carbonell executed an instrument where the latter allowed the former to remain in the premises in spite of the sale for a period of 1 year. Later on, when the Formal Deed of Sale was to be executed, Poncio told Carbonell that he could no longer proceed with the sale as he had already sold the same to Infante for a better price. Carbonell immediately sought to register adverse claim; 4 days later, Infante registered the sale with the adverse claim annotated thereto. Infante thereafter introduced significant improvements on the property. They now dispute ownership over the said land.

18. MENDOZA v KALAW FACTS: In 1919, Federico Canet sold to Kalaw a parcel of land under a Conditional Sale. 2 months after, Canet sold to Mendoza the same parcel of land under an Absolute Sale. Mendoza took possession thereof, cleaned and fenced it, and sought to have the same registered but Kalaw opposed. When Kalaw first tried to register the same, he was denied but an anotacion preventiva was annotated in the title. ISSUE: Who has a better title, Canet or Kalaw? HELD: CANET. While a conditional sale came before the absolute sale, still the latter must prevail. A conditional sale, before the happening of the condition, is hardly a sale especially if the condition has yet to be complied with. The anotacion preventiva obtained by Kalaw cannot create an advantage in his favor as the same was good for only 30 days. The court ruled in favor of Mendoza.

ISSUE: Who has a better title, Carbonell or Infante? HELD: CARBONELL. In order to claim the benefit of Art. 1544, the buyer of realty must register the property in good faith. It is a pre-condition to a superior title. In this case, Infante was not in good faith, thus the prior sale to Carbonell must prevail. Infante registered her claim 4 days after the adverse claim was registered, she had notice that Carbonell paid off the mortgage debt as the mortgage passbook was already in his possession. She likewise ignored Carbonell and refused to talk to here. These are badges of bad faith that taint her registration.

17. SAN LORENZO DEV CORP v CA FACTS: Spouses Lu owned 2 parcels of land, which they purportedly sold to Babasanta. He demanded the execution of a Final Deed of Sale in his favor so he may effect full payment of the purchase price; however, the spouses declined to push through with the sale. They claimed that when he requested for a discount and they refused, he rescinded the agreement. Thus, Babasanta filed a case for Specific Performance. San Lorenzo Development Corp. (SLDC) intervened claiming that the lots have been sold to it by virtue of a Deed of Absolute Sale with Mortgage and that it was a purchaser in good faith. Both sales were not registered. ISSUE: Who has a better title, Babasanta or SLDC? HELD: SLDC. There was no double sale in this case because the contract in favor of Babasanta was a mere contract to sell; hence, Art. 1544 is not applicable. The ownership of the property was not to be transmitted in his favor until the full payment of the purchase price. There was neither actual nor constructive delivery as his title is based on a mere receipt. Based on this alone, the right of SLDC must be preferred. ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA

19. ADALIN v CA FACTS: Elena Kado and her siblings owned a lot with a 5door commercial building fronting Imperial Hotel. The units were leased. Elena contracted the services of Bautista, who brought Yu and Lim to her for the purpose of buying the premises. During the meeting, it was agreed that the Yu and Lim would buy the said units except for the 5th which is to be bought by Adalin. They entered into a Conditional Sale where Elena was obligated to evict the tenants before the full payment of the purchase price. Elena offered the same for sale to the lessees but they refused claiming that they could not afford; thus, she filed a case for ejectment against them. Thereafter, the lessees decided to exercise their right to buy the units—Kalaw ruled that since the sale to Yu and Lim was conditional, the subsequent sale to the lessees must be preferred. ISSUE: Who has a better title, Yu and Lim or the lessees? HELD: YU AND LIM. While it is true that the Deed was for Conditional Sale, examination of the contents thereof would show that it was one for the actual sale. During the meeting, the property was already sold; the only conditions were that Elena would evict the lessees before the full payment of the price. The choice of to whom to sell the property had already been decided. That being the case, since the sale in favor of Yu and Lim was the prior sale, it must be preferred. Besides, Elena was guilty of double-dealing, which cannot be sanctioned in law. It was, after all, her obligation to evict the lessees. The lessees were in bad faith as well for having knowledge of the supposed sale in favor of Yu and Lim. Their subsequent registration of the sale cannot shield them in their fraud.

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 20. CHENG v GENATO FACTS: Genato owned 2 parcels of land in Paradise Farms. He agreed with the Da Jose spouses to enter into a contract to sell over the said parcels; it was embodied in a public instrument annotated to the certificates of title. They asked for and were granted an extension for the payment of the purchase price. Unknown to them, Genato dealt with Cheng regarding the lot, executed an Affidavit to annul the Contract to Sell, appraised the latter of his decision to rescind the sale, and received a down payment from Cheng upon the guarantee that the said contract to sell will be annulled. By chance, Genato and the spouses met at the RD, where he again agreed to continue the contract with them. He advised Cheng of his decision; the latter countered that the sale had already been perfected. Cheng executed an Affidavit of Adverse Claim and had it annotated to the TCTs and sued for specific performance. ISSUE: Who has a better title, Cheng or the Da Jose spouses? HELD: DA JOSE SPOUSES. Both agreements involve a contract to sell, which makes Art. 1544 inapplicable since neither a transfer of ownership nor a sales transaction took place. A contract to sell is premised upon a suspensive condition—the full payment of the purchase price. That being the case, the elementary principle of first in time, priority in right should apply. As such, the contract in favor of the Da Jose spouses must prevail considering that the same had not been validly rescinded. Besides, Cheng cannot be considered to have acted in good faith as he had knowledge of the prior transaction in favor of the spouses.

21. CONSOLIDATED RURAL BANK INC v CA FACTS: The Madrid Brothers owned a parcel of land, which was later subdivided. Rizal Madrid sold his share to Gamaio and Dayag; the other brothers offered no objection. The sale was not registered under the Torrens System. Gamaio and Dayag sold the southern half to Teodoro, and the northern half to Hernandez, who thereafter donated the same to his daughter. They all maintained possession of the properties. Later on, the brothers all sold their shared to Marquez who further subdivided the same, registered the lands, and mortgaged portions thereof to Consolidated Bank and Bank of Cauayan. For failure to settle his debt, CB foreclosed the property. The successors-in-interest of Gamiao and Dayag sought reconveyance. CB interposed that the mortgage must be respected. ISSUE: Who has a better title, Marquez or the successors-in-interest of Gamiao and Dayag HELD: The successors-in-interest of Gamiao and Dayag. While Marquez was the 1st to register the lands under the Torrens System, Art. 1544 does not apply as the double-multiple sales were not done by the single vendor—in this case by the brothers on the one side and Gamiao and Dayag on the other. That being the case, ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA

the simple rule on priority in time, priority in right would apply. As such, the successors-in-interest of Gamiao and Dayag would have a better right as the sale in their favor came ahead of time. Further, Marquez was not in good faith. He knew that the property was being claimed by other parties who were in possession thereof instead, he willfully closed his eyes to the possibility of the flaws.

22. ESTATE OF LINO OLAGUER v ONGJOCO FACTS: (Super detailed, with lots of unimportant facts, so I'll only state whatever is related to the case at hand) Petitioners are the children of Lino Olaguer and Olivia Olaguer. When Lino died, Olivia became the administrator and Eduardo Olaguer as co-administrator of his estate. Olivia then got married to Jose Olaguer. As administrators, Olivia and Eduardo sold 12 parcels of land owned by Lino to Pastor Bacani, including Lot 76 which is the lot in question. A day later, it was sold back to them, splitting to them the portion of which 6/13 went to Olivia, while 7/13 went to Eduardo. She then made a special power of attorney in favor of Jose, giving him the power to sell, mortgage, transfer, assign endorse and deliver with respect to her share over Lot 76. The lot was sudivided, having Lots 76-B to 76-G in the name of Olivia. As attorney-in-fact, Jose sold the six parcels of land in favor of his son, Virgilio Olaguer. Lots 76-B and 76-C was consolidated and further subdivided into a proportional share, making them Lots 1 and 2. Jose, claiming to be the attorney-in-fact of his son, sold Lots 1 and 2 to Emiliano Ongjoco. He further sold Lots 76-D to 76-G to Ongjoco twice on different dates, this time evidenced by a notarized general power of attorney. Petitioners moved for the sale made by Spouses Olivia and Jose Olaguer to be null and void. RTC ruled in favor of petitioners (on the subject lots), but CA reversed. ISSUE: Whether Ongjoco was a buyer in good faith RULING: With respect to Lots 1 and 2, he cannot be considered a buyer in good faith since there was no proof that the sale on both lots was evidenced by a written power of attorney. According to Agency Law, a sale of a piece of land must be coupled with a written authority of such agent, else the sale is void. Since the respondent was not able to show proof that there really was an existing written authority, the sale over such lots cannot be considered valid, and must be returned to the Estate of Lino Olaguer. With respect to Lots 76-D to 76-G, there was a notarized general power of attorney to show evidence that authority had been given by Virgilio to his father to dispose the subject lots. Since petitioners was not able to show any proof that the lots being sold twice to respondent show bad faith, good faith must be presumed. Being notarized, the regularity of such general power of attorney must also be presumed.

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 23. ABRIGO v DE VERA FACTS: By virtue of a compromise agreement judicially approved, Villafania sold to Rosenda and Rosita a house and lot. Unknown to them, Villafania obtained a free patent over the said land and sold it to De Vera. On the other hand, Rosenda and Rosita sold the property to the spouses Abrigo. Now De Vera and Abrigo dispute ownership over the property—the former filing an ejectment suit against the latter. ISSUE: Who has a better title, Abrigo or De Vera? HELD: DE VERA. Abrigo registered the property under Act 3344, while De Vera registered the same under the Torrens System. Naturally, De Vera’s right prevails. Registration must be done in the proper registry to bind the land. It was also proven that De Vera acted in good faith considering that there was nothing in the certificate of title or the circumstances, which would have aroused suspicion and mandated her to make an inquiry. Registration under Act 3344 does not suffice to constitute constructive notice in order to negate the good faith of the registrant under the Torrens System. De Vera’s right must be upheld.

24. DAGUPAN TRADING CO v MACAM FACTS: Sammy Maron and his 7 brothers were co-owners of a parcel of land for which they applied for registration. Pending the proceedings, they sold the same to Macam, who thereafter introduced substantial improvements thereon. Later on, the property was levied upon and sold in favor of Dagupan Trading, which thereafter registered the Sheriff’s Final Certificate of Sale ISSUE: Who has a better right, Macam or Dagupan? HELD: MACAM. In this case, the sale in favor of Macam was executed before the land was registered, while the sale in favor of Dagupan was made after the registration. In such a case, the Rules of Court will apply such that the delivery of the Sheriff’s Final Certificate of Sale in favor of Dagupan merely substitutes the latter into the shoes of the seller Maron and acquires all rights, interests, and claims of the latter. Considering that at the time of the levy, Maron was no longer the owner of the land, then no title can thereafter pass in favor of Dagupan. Macam’s title is thus sustained.

ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA

25. CARUMBA v CA FACTS: Canuto sold a parcel of land to Carumba by virtue of a Deed of Sale of Unregistered Land. The sale was never registered. Thereafter, Canuto was sued for collection of money, and the said land was levied upon and sold to Balbuena, who registered it. ISSUE: Who has a better right, Carumba or Balbuena? HELD: CARUMBA. Art. 1544 does not apply in this case. Instead, the Rules of Court are applicable. Balbuena, the later vendee, merely steps into the shoes of the judgment debtor and acquires all the rights and interests of the latter. By the time the lot was sold through the foreclosure proceedings, it was no longer owned by Canuto by virtue of a prior sale to Carumba— who has a better right.

26. ACABAL v ACABAL FACTS: Sps. Acabal sold their lot to their son Villaner Acabal who in turn transferred it to his godson-nephew Leonardo Acabal. This was later on sold to Leonardo and Ramon Nicolas hence a complaint was filed by Villaner against them and his nephew arguing that what he signed was a Lease contract and not a sales contract. The RTC ruled in favor of Nicolas which was reversed by the CA thus the case at bar. ISSUE: W/N there was a valid sale HELD: YES It is valid only insofar as 5/9 of the land is concerned. This is so because the property in question was bought during the pendency of the marriage of Villaner therefore it is presumed to belong to the conjugal partnership. Leonarda failed to prove otherwise. Nevertheless, when Justiniana (wife) died, her share vested on her 8 children, and her husband vesting him with 5/9 share on the property. Since it is not yet partitioned, he cannot yet claim title to any definite portion of the property but only to his ideal, abstract or spiritual share. He may still dispose of the same for every co-owner has absolute ownership over his undivided interest in the co-owned property. However, he cannot dispose of the shares of his co-owners based on nemo dat qui non habet. Since he sold it without the consent of the other co-owners, the sale is still valid only insofar as his shares are concerned. And the finding that both Leonardo and Villaner were in pari delicto, the same is irrelevant because the property concerned is unregistered.

25


 SALE BY NON-OWNER/BY ONE HAVING VOIDABLE TITLE: LIFE OF A CONTRACT OF SALE 1.

PAULMITAN v CA

FACTS: When Agatona died, she was succeeded by 2 sons: Pascual and Donato. She left 2 parcels of land. Pascual died leaving 7 heirs. The titles remained in the name of Agatona and the lots were never partitioned. Donato, thereafter, executed an affidavit of Declaration of Heirship—unilaterally adjudicating one of the lots to himself. He thereafter sold the entire lot to his daughter Juliana. For the failure to pay taxes, the lot was forfeited and sold at a public auction, but Juliana later redeemed the property. The Heirs of Pascual then surfaced and sought to partition the property. ISSUE: W/N Juliana became the owner of the entire lot upon her redemption of the property HELD: NO.From the moment of Agatona’s death, her heirs, Pascual and Donato, became co-owners of the undivided lot. When Donato died, his pro-indiviso share transferred to his heirs. That being the case, when Donato sold the entire property to his daughter, he was merely co-owner thereof and transferred only his undivided share. If a co-owner alienates the entire property without the consent of the other co-owners, the sale will affect only his share. Thus, only ½ undivided share passed on to Juliana. The fact that Juliana redeemed the property does not operate to terminate the co-ownership. It merely entitles her to reimbursement from the other coowners—redemption being a necessary expense. Until reimbursement, Juliana holds a lien upon the lot for the amount due to her. However, a partition is in order.

2.

also sell their undivided share in the co-ownership. Otherwise, the properties sold would be subject to a partition, which cannot happen to the properties in this case. School equipment, as well as the buildings, are indivisible. Thus, they cannot be subject to partition.

3.

BUCTON v GABAR

FACTS: Josefina bought a parcel of land from Villarin. By verbal agreement, Josefina sold a ½ portion thereof to Nicanora for P3,000. Nicanora paid P1,000 then P400—all evidence by receipts—then she loaned Josefina P1,000 and thereafter along with her spouse, took possession of the lot and built their house as well as apartments thereon. Villarin then issued a Deed of Sale to Josefina, but the latter refused to execute the corresponding Deed of Sale to Nicanora. Josefina claimed that the amounts paid by Nicanora were in the concept of loans. Thus, Nicanora filed a case for specific performance. ISSUE: W/N there was a sale between Josefina and Nicanora HELD: YES. Assuming that at the time when Josefina sold the lot to Nicanora, she was not yet the owner thereof. When Villarin executed the Deed of Sale in her favor, title passed to Nicanora by operation of law. Although the sale between Josefina and Nicanora was verbal, it was as between them. Considering that Nicanora has paid the purchase price, she became owner of ½ of the lot. Likewise, although the complaint was titled “specific performance” it was actually one for quieting of title, which is imprescriptible so long as the plaintiff is in possession of the lot.

MINDANAO v YAP

FACTS: Rosenda and Sotero were among co-owners of 3 parcels of land, which they sold to Ildefonso Yap for some P100K without the consent of the other co-owners. They included in the sale certain buildings and laboratory and other educational equipment within the said properties, which were actually owned by Mindanao Academy. Mindanao Academy and the other co-owners assailed the validity of the sale. The trial court declared the sale null and void. Yap contends that Erlinda, one of the co-owners owning 5/12 share of the co-ownership, does not have the standing to challenge the sale for being in bad faith. ISSUE: W/N the sale is null and void as to its entirety HELD: YES. Although the general rule is that if a coowner alienates the entire property without the consent of the other co-owners, the sale will affect only his share, such rule does not apply if the property cannot be partitioned/subdivided. In this case, aside from the fact that Rosenda and Sotero cannot sell the entire property including the school equipment, they cannot ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA

4.

CITY OF MANILA v BUGSUK LUMBER

FACTS: Bugsuk Lumber had an office in Manila. The City Treasurer assessed it for license fees and mayor’s permit—alleging that Bugsuk sold at wholesale and retail to different lumber dealers in Manila. Bugsuk refused to pay alleging that the lumber it produced were delivered directly from the shipper to the buyer, that they paid the appropriate Timber License Fees and that their Manila Office only received orders and accepted payments. Bugsuk alleges that it is not a dealer and its office is not a store to warrant the imposition of the additional taxes. ISSUE: W/N Bugsuk is liable for the additional taxes HELD: NO. A dealer buys to sell again; Bugsuk produced its own lumber from Palawan. Thus, it is not a dealer. Its Manila office is not a store as well. A store is a place where goods are kept for sale—whether for retail or wholesale. The Manila office only processed the orders and payments; it did not keep goods therein or act as a 26


 dealer or intermediary between the field office and the customers. Thus, it is not liable for the said taxes.

5.

SUN BROS. & CO. v VELASCO

FACTS: Sun Brothers sold an Admiral Refrigerator to Lopez upon the agreement that ownership will only pass to the latter upon payment of the full purchase price. Lopez paid only the downpayment and sold the same to JV Trading (owned by Velasco) and was displayed in the latter’s store. It was thereafter bought by CO Kang Chiu from JV Trading. Sun Brothers sought to recover the refrigerator. ISSUE: W/N Sun Brothers may recover the thing HELD: NO. It is true that where a person who is not the owner of a thing sells the same, the buyer acquires no better title than the seller has. In this case. Lopez obviously had no title to the goods for having failed to pay the full price. It only follows that JV Trading had no title thereto as Velasco was not in good faith. He should have inquired if Lopez had good title to it—the same not being engaged in the business of selling appliances. HOWEVER, when the refrigerator passed to Co Kang Chiu, the latter acquired valid title thereto. The exception to the foregoing rule is the purchase in good faith in a merchant store or a fair or a market. This rule fosters stability to commerce and business transactions. Co Kang Chiu purchased the refrigerator in a merchant store—and for value and in good faith. Thus, he is protected by the law. Sun Brothers would not be entitled to recover the refrigerator—not even if they pay its value—since they were not deprived of the same unlawfully. Lopez is the one who should be liable to Sun Brothers for the full purchase price of the ref.

Tagatac was NOT unlawfully deprived within the context of the Civil Code. The sale between Feist and Tagatac was merely voidable—valid until annulled. There was a valid transmission of ownership. The fact that Feist did not pay only gives rise to an action to resolve the contract or demand payment. When Feist sold the car to Sanchez, the sale between him and Tagatac was still valid; therefore, good title passed to Sanchez. As between 2 innocent parties, the one who made possible the injury must bear the loss.

7.

FACTS: EDCA sold books to Tomas dela Pena who fraudulently represented himself to be Prof. Jose Cruz, a Dean of DLSU. EDCA delivered him the books, the check Tomas issued was dishonored because he did not have an account at all. Tomas thereafter sold the books at a discount to Leonor Santos. EDCA, with the aid of the police, stormed the Santos Bookstore to retrieve the books. ISSUE: W/N EDCA may retrieve the books from Santos HELD: NO. Ownership of the books passed to Tomas upon the delivery thereof. He had the right to transfer the same to Santos. The fact that he did not pay for the books only warrants rescission or an action for payment. EDCA cannot be considered to have been unlawfully deprived under the CC as to warrant recovery of the books from Santos. Possession of movable property acquired in good faith is equivalent to title. Santos was a buyer in good faith, thus he is protected by the law.

8. 6.

TAGATAC v JIMENEZ

FACTS: Tagatac bought a car abroad and brought it to the Philippines. Warner Feist deceived her into believing that he was very rich and purchased her car. She delivered possession thereof. Levy (another name of Feist) issued her a postdated check, which was dishonored. Feist then disappeared with the car. Feist was able to register the car in his name and eventually sold the car to Sanchez, who then sold the same to Jimenez. Jimenez even labored to verify the car’s records with Motor Vehicle Office. Jimenez then delivered the car to California Car Exchange for display. Tagatac, upon finding out, sought to recover the car, but Jimenez refused. ISSUE: W/N Jimenez may refuse to give the car back HELD: YES. Jimenez was a buyer in good faith of the car—he had no knowledge of any defect in the title of the seller. It is true that one who has lost any movable or has been unlawfully deprived thereof may recover the same from the possessor. However, in this case,

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EDCA PUBLISHING v SANTOS

AZNAR v YAPDIANGCO

FACTS: Teodoro advertised for sale his Ford Fairlane car. De Dios approached them purporting to be a nephew of Marella. Teodoro transacted with Marella who agreed to buy the car, agreeing to pay the same only after the car has been registered in his name. The Deed was registered in his name, but Marella has yet to pay so the documents were not delivered to him, he pleaded with Ireneo, Teodoro’s son, that they proceed to Marella’s sister to secure the shortage of cash. Ireneo agreed. They proceeded thereto, Ireneo was accompanied by De Dios and an anonymous person. De Dios was able to induce Ireneo to hand over the documents under the pretext that he will show them to his lawyer, Ireneo agreed. De Dios made Ireneo wait and thereafter escaped with the car and the deed. Marella was then able to sell the car to Aznar. The police thereafter seized the car in Aznar’s possession. Aznar countered with a complaint for Replevin. ISSUE: W/N Teodoro may recover the car from Aznar HELD: YES. Teodoro was clearly unlawfully deprived of the car. There was no valid delivery to Marella, hence the latter acquired no title to the car. Delivery must be 27


 coupled with intent. That being the case, Teodoro has the right to claim the car not only from the thief, but also from 3rd persons who may have acquired it in good faith. The buyer would only be entitled to reimbursement if he purchased the same in good faith from a public sale.

9.

CRUZ v PAHATI

FACTS: Jose Cruz delivered his car to Belizo for the latter to sell the same. Belizo forged the letter of Cruz to the Motor Section of the Bureau of Public Works and converted the same into a Deed of Sale. Using the forged deed, he had the car registered in his name. Thereafter, Belizo sold the car to Bulahan, who in turn sold the same to Pahati. However, the car was impounded by the police, and the sale to Pahati was cancelled. Bulahan now contends that between 2 innocent parties (Bulahan and Cruz), the person who made possible the injury must bear the loss—in this case, supposedly Cruz. ISSUE: W/N Cruz may recover the car from Bulahan HELD: YES. It is true that both Bulahan and Cruz acted in good faith. One who has lost a movable or had been deprived of the same may recover it from the possessor. This rule applies squarely to this case. Thus, since Cruz was unlawfully deprived by Belizo through the latter’s artifice, he is entitled to recover the same even against a subsequent purchaser in good faith. The only exception to this rule is if the purchaser acquired the same from a public sale—in which case, reimbursement is in order. It was, in fact, Bulahan who acted negligently in failing to detect the forged Deed of Sale.

10. DIZON v SUNTAY FACTS: Lourdes Suntay is the owner of a 3-carat diamond ring valued at P5,500. She and Clarita Sison entered into a transaction wherein the ring would be sold on commission. Clarita received the ring and issued a receipt. After some time, Lourdes made demands for the return of the ring but the latter refused to comply. When Lourdes insisted on the return, Clarita gave her the pawnshop ticket which is the receipt of the pledge and she found out that 3 days after the ring was received by Clarita, it was pledged by Melia Sison, the niece of Clarita’s husband in connivance with Clarita with the pawnshop of Dominador Dizon for P2,600. Lourdes then filed an estafa case. She then asked

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Dominador Dizon for the return of the ring pledged but refused to return the ring thus the case filed by Lourdes. The CFI issued a writ of replevin so Lourdes was able to have possession of the ring during the pendency of the case. The CFI also ruled in her favor which was affirmed by the CA on appeal. Thus the case at bar. ISSUE: W/N the CA erred in ruling that Lourdes has a right to possession of the ring HELD: NO It reiterated the ruling in de Garcia v. CA, that the controlling provision is Art. 559 of the CC which states that the possession ofmovable property acquired in good faith is equivalent to a title. Nevertheless, one who has lost any movable or has been unlawfully deprived thereof may recover it from the person in possession of the same. If the possessor of a movable lost of which the owner has been unlawfully deprived, has acquired it in good faith at a public sale, the owner cannot obtain its return without reimbursing the price paid therefor. Lourdes, being unlawfully deprived of her ring thus she has a right to recover it from the current possessor. Dizon is engaged in a business where presumably ordinary prudence would require him to inquire whether or not an individual who is offering the jewelry by pledge is entitled to do so. The principle of estoppel cannot help him at all. Since there was no precaution availed of, perhaps because of the difficulty of resisting opportunity for profit, he only has himself to blame and should be the last to complain if the right of the true owner of the jewelry should be recognized. Other issues raised: 1. Principle of estoppel = has its roots in equity, moral right and natural justice.  For estoppel to exist, there must be a declaration, act or omission by the party who is sought to be bound.  A party should not be permitted to go against his own acts to the prejudice of another. Concurring opinion by J. Teehankee:  Interpretation of the “unlawfully deprived” in Art. 559 of the CC. It is understood to include all cases where there has been no valid transmission of ownership. If our legislature intended interpretation to be that of the French Code, it certainly would have adopted and used a narrower term than the broad language of Art. 559 (formerly 464) and the accepted meaning in accordance with our jurisprudence.

28


 LOSS, DETERIORATION, FRUITS AND OTHER BENEFITS 1.

ROMAN v GRIMALT

2.

FACTS: Grimalt transacted with Roman for the purchase of a “schooner” called the Santa Marina. The sale was predicted upon the condition that it was seaworthy and that Roman would perfect his title thereto—the same being registered to Paulina Giron. Only of the said conditions were complied with will Grimalt purchase the same. The terms of payment were likewise agreed upon. Roman did nothing to perfect his title; then due to a severe storm, the vessel sank. Roman now sues Grimalt for the purchase price of the vessel.

LAWYERS COOPERATIVE PUBLISHING v TABORA

FACTS: Tabora purchased volumes of AmJur from Lawyers Coop. The agreement was for ownership to remain with Lawyers Coop until payment of the full price. “Loss or damage to the goods after delivery to the buyer is for the account of the latter.” The books were delivered to his office; that same night, his office was razed by fire. Tabora failed to pay the full purchase price. Now Lawyers Coop sues him for the balance. Tabora invokes force majeure. ISSUE: Who bears the loss?

ISSUE: W/N Grimalt is liable for the loss HELD: NO. There was yet to be a perfected contract between them for the failure of Roman to perfect his title. That being the case, the loss is for the account of Roman as the owner thereof.

HELD: TABORA. While it is true that generally, loss is for the account of the owner, the same does not apply here because the parties themselves have expressly stipulated that loss, after delivery to the buyer, are for the account of the latter. Besides, the stipulation retaining ownership to the seller is intended merely to secure payment by the buyer. Likewise, the obligation of Tabora consists of the delivery not a determinate thing, but a generic thing—money. Thus, he is not absolved from liability.

REMEDIES FOR BREACH OF CONTRACT OF SALE 1.

LEVY v GERVACIO

FACTS: Levy Hermanos sold a Packard car to Lazaro Gervacio. Gervacio made an initial payment and executed a promissory note for the balance of P2,400. He failed to pay the note at maturity date so Levy Hermanos foreclosed the mortgage and bought it at the public auction for P800. Levy Hermanos then filed a complaint for the collection of the remaining balance and interest. CFI ruled in favor of Gervacio finding that Levy can no longer recover the unpaid balance once he has chosen foreclosure. Thus the case at bar. ISSUE: W/N Levy Hermanos can still collect the balance HELD: YES In order to apply Art. 1454-A of the CC, there must be (1) a contract of sale of personal property payable in installments and (2) there has been a failure to pay 2 or more installments. In the case at bar, although it is a sale of personal property, it is not payable in installments. It is payable in a straight term in which the balance should be paid in its totality at maturity date of the PN, therefore the prohibition does not apply.

balance payable in 24 installments. Title to the property remained with Delta until the payment of the full purchase price. Under the agreement, failure to pay 2 monthly installments makes the obligation entirely due and demandable. The units were delivered, Niu failed to pay. Thus, Delta filed a complaint for Replevin and applied the installments paid by Niu as rentals; Niu contends that the contractual stipulations are unconscionable. ISSUE: W/N the unconscionable

DELTA MOTOR SALES CORP. v NIU KIM DUAN

FACTS: Niu Kim Duan purchased from Delta Motors 3 air conditioning units. Niu paid the downpayment, the ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA

Delta

availed

of

was

HELD: NO. A stipulation in the contract treating installments as rentals in case of failure to pay is VALID—so long as they are not unconscionable. The provision in this case is reasonable. An unpaid seller has 3 alternative (not cumulative) remedies: (1) exact fulfillment of the obligation, (2) cancel the sale for default in 2 installments, and (3) foreclose the chattel mortgage (if any) but the seller cannot anymore claim the unpaid balance of the price. Delta chose the 2nd remedy. Having done so, it is now barred from claiming the balance of the purchase price.

3. 2.

remedy

TAJANLANGIT v SOUTHERN MOTORS

FACTS: Tajanlangit bought 2 tractors and a thresher from Southern Motors. They executed a promissory note in payment thereof; it contained an acceleration clause. Tajanlangit failed to pay any of the stipulated 29


 installments. Thus, Southern Motors sued him on the PN. The sheriff levied upon the properties of Tajanlangit (same machineries) and sold them at a public auction to satisfy the debt. Southern Motors now prayed for execution. Tajanlangit sought to annul the writ of execution—claiming that since Southern Motors repossessed the machineries (mortgaged), he was therefore relieved from liability on the balance of the purchase price. ISSUE: W/N Tajanlangit is relieved from his obligation to pay HELD: NO. While it is true that the foreclosure on the chattel mortgage on the thing sold bars further action for the recovery of the balance of the purchase price, this does not apply in this case since Southern did not foreclose on the mortgage but insteas sued based on the PNs exclusively. That being the case, it is not limited to the proceeds of the sale on execution of the mortgaged goods and may claim the balance from Tajanlangit.

4.

NONATO v IAC

FACTS: Nonato spouses purchased from People’s Car a Volkwagen car. They issued a PN with chattel mortgage. People’s Car thereafter assigned its rights to the note to Investors Finance. The Nonatos defaulted, thus Investors Finance repossessed the car and demanded the payment of the balance of the purchase price. ISSUE: W/N Investors Finance may still demand for the payment of the balance when it repossessed the car HELD: NO. The remedies contemplated under Art. 1484 are ALTERNATIVE—not cumulative. Investors Finance in effect cancelled the sale and it cannot now claim the balance of the purchase price. When it took possession of the car, it gave the spouses 15 days to redeem the car. This could mean that their failure to do so would constrain the company to retain the permanent possession of the car. There was no attempt at all the return the car—thus, it is untrue that the same was retained merely for appraisal.

5.

RIDAD v FILIPINAS INVESTMENT (Filinvest)

FACTS: Ridad purchased from Supreme Sales 2 Ford Consul Sedans, payable in 24 installments, for which he executed a PN with chattel mortgage over the said property. Another chattel mortgage was executed this time upon a separate Chevy car, and another one upon the franchise to operate taxi cabs. Supreme Sales thereafter assigned its rights under the PN to Filinvest. Ridad defaulted and Filinvest foreclosed on the mortgage. It was the highest bidder for the foreclosure sale of the sedans. But unable to fully satisfy the debt, it also foreclosed the Chevy and the franchise. ISSUE: W/N Filinvest may still foreclose the Chevy and the franchise to fully satisfy the debt ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA

HELD: NO. When the unpaid seller forecloses on the mortgage, the law precludes him from bringing further actions against the vendee for whatever balance, which was not satisfied by the first foreclosure. By choosing to foreclose on the Ford sedans, Filinvest renounced all other rights which it might have had under the PN; it must content itself with the proceeds of the sale of the sedans at the public auction.

6.

ZAYAS v LUNETA MOTORS

FACTS: Zayas purchased a Ford Thames Freighter from Escano Enterprises, the dealer of Luneta Motor Co. The unit was delivered and Zayas issued a PN payable in 26 installments secured by a chattel mortgage over the subject motor vehicle. Zayas failed to pay, thus Luneta extra-judicially foreclosed on the mortgage and was the highest bidder. However, considering that the proceeds of the sale was insufficient to cover the debt, Luneta filed a case for the recovery of the balance of the purchase price. Zayas refused to pay. ISSUE: W/N Luneta may still recover the balance HELD: NO. When the unpaid seller forecloses on the mortgage, the law precludes him from bringing further actions against the vendee for whatever balance, which was not satisfied from the foreclosure. Luneta contends that Escano Enterprises is a different and distinct entity and maintains that its contract with Zayas was a loan. This is unsubstantiated as the agency relationship between Luneta and Escano is clear. Nevertheless, assuming that they were distinct entities, the nature of the transaction remains the same. If Escano assigned its right to Luneta, the latter merely acquires the rights of the formers—hence, Art. 1484 of the CC would likewise be inapplicable.

7.

NORTHERN MOTORS v SAPINOSO

FACTS: • Respondent Casiano Sapinoso purchased from petitioner Northern Motors an Opel Kadett car for P12,171 making a downpayment and executing a promissory note for the balance of P10,540 payable in installments • To secure the payment of the note, Sapinoso executed in favor of Northern Motors a chattel mortgage on the car; the mortgage provided among others that upon Sapinoso’s default in payment of any part of the principal or interest, Northern Motors may elect any of the ff. remedies (a) sale of the car by Northern (b) cancellation of the sale to Sapinoso (c) extrajudicial foreclosure (d) ordinary civil action for fulfillment of the mortgage contract; additionally, whichever remedy is chosen, Sapinoso waives his right to reimbursement of any and all amounts on the principal and interest already paid • Sapinoso failed to pay the first 5 installments due from August-November 1965; he made payments though on November and December and on April the next year but failed to make subsequent payments 30


 • Northern Motors filed a complaint stating that it was availing of the option of extrajudically foreclosing the mortgage and prayed that (a) a writ of replevin be issued upon its filing of a bond (b) it be declared to have the rightful possession of the car (c) in default of delivery, Sapinoso be ordered to pay the balance with interest • Subsequent to the commencement of the action but before filing of his answer, Sapinoso made 2 payments amounting to P1,250 on the promissory note; in the meantime, a writ of replevin was issued and the car was turned over to Northern Motors • Sapinoso claimed that he withheld payments because the car was defective and Northern Motors failed to fix it despite his repeated demands TRIAL COURT RULING • Northern Motors had the right to foreclose the chattel mortgage with Sapinoso failing to pay more than 2 installments • However, the foreclosure and the recovery of unpaid balance are alternative remedies which may not be pursued conjunctively; Northern Motors thereby renounced whatever claim it had on the promissory note • Ordered Northern Motors to return of the P1,250 which it had received from Sapinoso after filing the case and electing to foreclose ISSUE: W/N as under Article 1484 of the Civil Code,21 plaintiff Northern Motors is barred from recovering unpaid balance of the debt having elected to foreclose on the chattel mortgage. – NO. HELD: • In issuing the writ of replevin and upholding after trial the right to possession of the car by Northern Motors, the court below correctly considered the action as one of replevin to secure possession of the car as preliminary step to a foreclosure sale • The court below however erred in concluding that the legal effect of the action was to bar Northern Motors from accepting further payments on the promissory note • It is the fact of foreclosure and actual sale of the mortgaged chattel that bars further recovery by the vendor of any balance on the vendee’s outstanding obligation not satisfied by the sale • In the present case, there is no occasion to apply the restrictive provision of Article 1484 as there has not yet been a foreclosure sale resulting in a deficiency • A mortgage creditor before the actual foreclosure sale is not precluded from recovering the unpaid balance although he has filed for replevin for the purpose of extrajudicial foreclosure • Also, a mortgage creditor who has elected to foreclose but subsequently desists from proceeding with the auction sale without gaining any advantage and without causing any disadvantage to the mortgagor is not barred from suing on the unpaid account • And as applicable here, a mortgage creditor is not barred from accepting before a foreclosure sale payments voluntarily tendered by the debtor-mortgagor who admits indebtedness.

ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA

8.

CRUZ v FILIPINAS INVESTMENT & FINANCE CORP.

FACTS: Ruperto Cruz bought a bus from Far East Motor Corp which was payable on installments of P1,487.20/month for 30 months with 12% interest. Cruz executed a PN in the sum of the purchase price. To secure the paypent of the PN, Cruz executed a chattel mortgage on the bus. Since no downpayment was made, Far East required Cruz to execute another security and for the a REM was executed on the land and building of Mrs. Reyes which at that time was mortgaged to DBP. Far East then assigned all its rights and indorsed the PN to Filipinas Investment and Financing Corp. Cruz defaulted in payment of the PN with only P500 being ever paid. Filipinas had the chattel mortgage foreclosed and it was the highest bidder at the foreclosure sale. However, the proceeds were not sufficient to cover the balance so it paid the indebtedness of Mrs. Reyes and requested that it be sold at foreclosure sale as well. Thus Cruz and Mrs. Reyes filed an action with the CFI to have the REM constituted on her land cancelled. The CFI ruled in favor of Cruz and Reyes finding that the extrajudicial foreclosure barred further action for recovery thus the case at bar. ISSUE: W/N recovery from an additional security is included in the prohibition thus allowing Filipinas to recover the balance HELD: NO Art. 1484 provides that when in a (1) a sale of personal property and (2) payable on installments there was default in payment of 2 or more installments, the remedies of the seller are: 1. To exact fulfillment of the obligation, should the vendor fail to pay 2. Cancel the sale, 3. Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee’s failure to pay cover 2 or more installments. In this case, he shall have no further action against the purchaser to recover any unpaid balance of the price. x x x It has been held that these remedies are alternative thus the exercise of one bars the exercise of the others. This is so to prevent he abuses committed in connection with foreclosure mortgages wherein the mortgagees would seize the mortgaged property and buying them at a very low price at the sale and then bringing suit for collection of the unpaid balance resulting in the mortgagor still liable to pay his original debt plus losing the property. To allow Filipinas to recover thru the additional security would result in a circumvention of the law. Should the guarantor be compelled to pay the balance then the guarantor would be entitled to recover from the debtor-vendee. In the end, it would still be the debtor-vendee who would bear the payment of the purchase price. Also, the word “action” in Art. 1484 covers all types of legal demand of one’s right whether judicial or extrajudicial thus the barring effect applies to an extrajudicial foreclosure. 31




9.

BORBON II v SERVICEWIDE SPECIALISTS INC.

FACTS: Daniel and Francisco Borbon issued a PN in favor of Pangasinan Auto Mart for the purchase of certain chattels. It was secured by a chattel mortgage. The rights under the note were assigned to Filinvest, which later assigned said rights to Servicewide. The Borbons failed to pay, thus the mortgages were foreclosed. The Borbons aver that the seller delivered chattels not strictly in accord with their instructions; nonetheless, they cannot evade liability because the notes have passed to holders for value and in good faith. The trial court sustained the foreclosure but awarded liquidated damages and attorney’s fees in addition to the proceeds of the auction sale. ISSUE: W/N it was proper for the trial court to award liquidated damages and attorney’s fees in addition to the proceeds of the auction sale HELD: NO. First, when a person assigns credits to another, the latter is bound under the same law; thus, Art. 1484 is equally applicable. In case of foreclosure, the legislative intent is not merely to limit the proscription to collecting the unpaid balance of the debt but also to other claims including costs of litigation and attorney’s fees. That being the case, the SC struck down the award of liquidated damages, but considering the facts of the case, the award of attorney’s fees is reasonable and sustained.

10. MACONDRAY & CO v EUSTAQUIO FACTS: Eustaquio bought a De Soto car from Macondray for which he executed a PN, payable in installments, with a stipulation of attorney’s fees, expenses for collection, and other costs. It was secured by a chattel mortgage over the said car. As usual Eustaquio failed to pay, and Macondray foreclosed on the mortgage. However, there remained a balance of some P340 for which Macondray sues Eustaquio. Macondray also contends that at least the stipulated interests and attorney’s fees must be claimable. ISSUE: W/N Macondray may still claim the interests and attorney’s fees stipulated HELD: NO. If the seller avails of his right to foreclose on the mortgage, he can no longer bring an action against the buyer for the unpaid balance—this includes all the obligations such as attorney’s fees, stipulated interests, expenses of collection and other costs.

11. FILIPINAS INVESTMENT & FINANCE CORP v RIDAD FACTS: • The RIDAD SPOUSES purchased a Ford Consul Sedan from Supreme Sales and Dev’t. Corp. Supreme Sales was the assignor-in-interest of FILIPINAS Investment and Finance, appellees herein. ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA

• The car was worth 13,371 of which 1,160 was paid upon delivery, and the remaining balance to be paid in 24 monthly installments. A promissory note and chattel mortgage were executed by the Ridad’s to ensure fulfillment of their obligation. • The Ridad Spouses failed to pay the last 5 installments, which prompted Filipinas to file a replevin suit in the city court of Manila, or in the alternative, to recover the unpaid balance if delivery could not be effected. • The complaint of Filipinas stated that there was an unjustifiable failure and refusal of the Ridad Spouses to surrender the car for foreclosure. The sheriff was able to seize the car and sell it in a public auction. • The Ridad Spouses were declared in default during these proceedings due to their alleged non-receipt of summons; and the order of default included an order to pay Filipinas 500 for attorney’s fees and 163 for expenses incurred in seizing the car. (this is what the case is about) • Their motion to set aside the order of default was denied by the city court of Manila, thus the Ridad’s appealed to the CFI Manila. The CFI said that the only issue to be resolved was with regard to the atty’s fees and the expenses incurred due to the seizure of the car. It ruled that Filipinas was entitled to recover both amounts; for the seizure of the car, and the lowered the attys fees of 300. • This decision was appealed to the SC RIDAD SPOUSES’ CONTENTIONS • Pursuant to Art 148422 (specifically #3) Filipinas, by opting to foreclose the chattel mortgage renounced all rights it had under the promissory note, as well as payment for the unpaid balance, including any amount it would be entitled to under this action, such as atty’s fees and costs of suit. FILIPINAS’ CONTENTIONS: • They are entitled to an award for atty’s fees and costs of suit by virtue of the unjustifiable failure and refusal of the Ridad Spouses to comply with their obligations. • What 1484 prohibit is the recovery of the unpaid balance by means of another replevin suit. ISSUE: Whether under Art 1484 (the Recto Law) Fiipinas is entitled to the award for attorneys fees and expenses incurred due to the seizure of the car. – Yes, but with certain qualifications. HELD: Art 1484 is called the Recto Law, and was created to protect mortgagors from mortgagees who wanted to unjustly enrich themselves. No. 3 of Art 1484, discussing the right to foreclose, means that if the vendor opts for this remedy he shall have no further action to recover any unpaid balance of the same. The decided case of Macondray & Co. v Estaquio has almost the exact facts and deals with the same issue of this case. In Macondray, it was ruled that “the words ‘unpaid balance’ in no. 3 of art 1848 refer to the deficiency judgement which the mortgagee may be entitled to, when after the public auction of the mortgaged chattel, the proceeds are insufficient to cover the full amount of the secured obligation, which 32


 include… attorneys fees and costs of suit. Were it the intention of legislature to limit its meaning to the unpaid balance of the principal, it would have so stated.” In other words, the mortgagee is limited to the property mortgaged and is not entitled to attys fees and costs of suit. Such doctrine prevents the circumvention of the Recto Law. Prior to its enactment, sellers unjustly enriched themselves at the expense of their buyers; by recovering the goods sold upon default of installment payers, by retaining the amounts already paid, and by claiming for damages. Looking at the doctrine of Macondray, it appears that in no instance may the mortgagee recover any sum from the mortgagor after the foreclosure of the mortgage. But although the court agrees with the above stated doctrine, it seems that the mortgagees are not protected against perverse mortgagors. Examples of perverse mortgagors are those who deceitfully hide their mortgaged movables, or upon default of payment, refuse to give up its possession for foreclosure. When the mortgagor does these acts, the mortgagee has no choice but to institute a suit for replevin to recover possession of the chattel and enforce his rights over such. It logically follows that the necessary expenses incurred by the mortgagee to regain possession of what he had a right to possess should be borne by the mortgagor. Such recoverable expenses include attys fees, and expenses incurred in seizing the chattel. In this case, the court found that the amounts awarded by the lower court were reasonable. The ruling in this case, in so far as it conflicts with previously established doctrines, is pro tanto qualified.

12. PCI LEASING AND FINANCE INC v GIRAFFE-X CREATIVE IMAGING INC FACTS: PCI Leasing and Giraffe entered into a Lease Agreement whereby PCI Leasing leased several machineries for a rent of P116, 878. 21/month for 36 months and P181, 362/month for 36 months for a total of P10, 736, 647.56. Giraffe paid the amount of P3, 120, 000 as guaranty deposit. However, after 1 year, Giraffe defaulted in its monthly-rental payment obligations. After a 3-month default, PCI demanded a formal pay-orsurrender-equipment type but the demand went unheeded thus PCI instituted the instant case and prayed for the issuance for the writ of replevin. The trial court issued a writ of replevin. Giraffe filed a motion to dismiss arguing that PCI was barred from pursuing any other claim since the seizure of the 2 leased equipments because the contract was in reality a lease with option to buy. The RTC granted the motion to dismiss ruling that it was akin to a contract covered by art. 1485 hence can no longer pursue its claim. Hence the case at bar. ISSUE: W/N the contract was covered by Art. 1485 and 1484 hence barred PCI from recovering HELD: YES A financial lease is one where a financing company would, in effect, initially purchase a mobile equipment ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA

and turn around to lease it to a client who gets, in addition, an option to purchase the property at the expiry of the lease period. In the case at bar, PCI acquired the office equipments for their subsequent lease to Giraffe, with the latter undertaking to pay a monthly fixed rental for the whole 36 months. Giraffe made a guaranty deposit. Their agreement was that in case Giraffe fails to pay any rental due, PCI will have cumulative remedies, such as, to recover all rentals for the remaining term of the lease and recover all amounts advanced for Giraffe’s account. When PCI demanded for payment of the balance, it made a demand for either of the choices. Either to pay the balance hence Giraffe can keep the equipment or surrender them if he cannot. The so-called monthly rentals were in fact monthly amortizations of the price of the leased office equipment. The imperatives of equity, the contractual stipulations and the actuations of the parties, the SC has treated a purported financial lease as actually a sale of movable property on installments and prevented recovery. The Lease Agreement is in reality a lease with an option to purchase the equipment. This has been made manifest by the actions of PCI itself. In choosing replevin, PCI waived its right to bring an action to recover unpaid rentals.

13. LEGARDA v SALDANA FACTS: Saldana entered into a contract with Legarda Hermanos. Legarda agreed to sell 2 equal lots for P1,500 each, payable in 120 equal installments over a period of 10 years at 10% per annum. Saldana paid 95 of the 120 installments over 8 years, which was recorded in his account with Legarda, but without stating as to which lots the payments were made. The said account stated that Saldana still owed 1,311.72 for the 2 lots, although he had already pain more the P1,500, the value of one lot. After 5 years, Saldana contacted Legardo Hermanos stating that he was interested in building a house on the lots, however, he was prevented from doing such because Hermanos failed to introduce the stipulated improvements on the subdivision (roads to his lots). He further indicated his intentions to continue his payments. In his reply, Legarda Hermanos said that since Saldana failed to complete the 120 payments in time, as they have previously stipulated, all the amounts paid, together with the improvements on the premises have been considered as rents paid and as payment for damages. Furthermore, the sale was cancelled. Saldana then filed an action demanding the delivery of the 2 lots and for the execution of the corresponding deed of conveyance after payment of the outstanding balance. Subsequently, Legarda Hermanos partitioned the subdivision among the brothers and sisters, and the two lots were among those allotted to Jose Legarda (corespondent). The lower court sustained Legarda Hermanos’ cancellation of the contracts and dismissed Saldana’s 33


 complaint. The CA eventually reversed this. The CA ordered Legarda Hermanos to deliver to Saldana one of the two lots, at his option. Furthermore, Hermanos was told to execute the deed of conveyance. ISSUE: Should the claim of Hermanos Legarda be upheld? He claims that the payment should be considered as rent and that the sale should be cancelled? – No. HELD: The SC applied the principles of equity and justice, as correctly held by the CA. considering that Saldana had already paid the total sum of P3,582.06 including interests, which is even more than the value of the two lots. And even if the sum applied to the principal alone were to be considered, which was of the total of P1,682.28, the same was already more than the value of one lot, which is P1,500.00. The only balance due on both lots was P1,317.72, which was even less than the value of one lot. By this, the court ruled that Saldana had already paid for at least one lot. And he is given the choice as to which one. Even considering that Saldana as having defaulted after February 1956, when he suspended payments after the 95th installment, he had as of the already paid by way of principal (P1,682.28) more than the full value of one lot (P1,500.00). Furthermore, regardless of the propriety of applying Article 1592 thereto, Legarda Hermanos was not denied substantial justice. According to ART. 1234, “If the obligation has been substantially performed in good faith, the obligor may recover as though there had been a strict and complete fulfillment, less damages suffered by the obligee,” and “that in the interest of justice and equity, the decision appealed from may be upheld upon the authority of ART. 1234.”

The Board of Commissioners of the HLURB only modified the award. The Office of the President adopted the findings of facts and conclusions of law by the Board thus was elevated to the CA which likewise affirmed the decision of the OP. Hence, the case at bar. ISSUE: W/N Pacifico has paid at least 2 years of installments HELD: NO The total payments made by Pacifico amounted to P846, 600. What should be used as divisor is the amount of the installment in the downpayment. The P750, 000 downpayment was to be paid in 6 monthly installments therefore deducting it from what he paid, the remaining balance is P96,600. Pacifico was able to pay the downpayment in 11 months after the last monthly installment was due. But he failed to pay at least 2 years of installments therefore he is not entitled to a refund of the cash surrender value of his payments under Sec. 3 of RA 6552. What is applicable is Sec 4 which provides that the buyer should be given a grace period of not less than 60 days and if he should still fail to do so, the seller may cancel the contract after 30 days from receipt of the buyer of the notice of cancellation. Pacifico admitted that the under the restructured scheme, the 1st installment on the 70% balance of the purchase was due on Jan 5, 1998. Although he issued checks to cover for them, the 1st 2 were dishonored. When he was notified of the dishonor, he took no action hence the 60 day grace period lapsed. Hence the cancellation was justified.

15. MCLAUGHLIN v CA 14. JESTRA DEV AND MANAGEMENT CORP v PACIFICO FACTS: Daniel Pacifico signed a Reservation application with Fil-Estate Marketing Assn for the purchase of a house nad lot and paid the reservation fee. The Reservation application contained the amounts to be paid in installments with interests. Unable to comply with the schedule of payments, Pacifico requested Jestra to allow him to make periodic payments which the latter granted. They later on executed a contract to sell when the remaining balance was only P260K. Pacifico requested twice for a restructuring of his unsettled obligation which Jestra granted subject to certain conditions of additional penalties et al. As compliance to the condition, Pacifico issued 12 postdated checks however he is unable to pay so he requested that he be allowed to dispose the property to recover his interest and he could recover the 12 post dated checks, which was this time was denied by Jestra. Jestra then sent a notarial notice of cancellation that they are giving him until a certain date to pay or else the contract will be automatically cancelled. Pacifico then filed a complaint before the HLURB claiming that despite his full payment of the downpayment, Jestra failed to deliver to him the property and instead sold it to another buyer. HRLURB Arbiter decided in Pacifico’s favor finding Jestra liable. ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA

FACTS: Petitioner Luisa McLaughlin (seller) and private respondent Ramon Flores (buyer) entered into a contract of conditional sale of real property. The total purchase price is P140,000. P26,550 should be paid upon execution of the deed and the balance not later than May 31, 1977 with an interest of 1% per month until fully paid. Flores failed to pay and hence petitioner filed a complaint for the rescission of the deed of conditional sale. Eventually, the parties entered into a compromise agreement, which was accepted by the court. The parties agreed that Flores shall pay P50,000 upon signing of the agreement and the balance in 2 equal installments payable on June 30, 1980 and December 31, 1980. Flores also agreed to pay P1,000 monthly rental until the obligation is fully paid for the use of the subject matter of the deed of conditional sale. They also agreed that in the event Flores fails to comply with his obligations, the petitioner will be entitled to the issuance of a writ of execution rescinding the deed of conditional sale and all the payments made will be forfeited in favor of the plaintiff. On October 15, 1980, petitioner wrote to Flores demanding payment of the balance on or before October 31. This demand included the installment due on June 30 and December 31, 1980. On October 30, Flores sent a letter signifying his willingness and intention to pay the 34


 full balance. On November 7, petitioner filed a motion for writ of execution alleging that Flores failed to pay the installment due on June 1980 and also failed to pay the monthly rentals from that date. She prayed that the deed of conditional sale be rescinded with forfeiture of all payments and payment of the monthly rentals and eviction of Flores. The trial court granted the motion. On November 17, Flores filed a motion for reconsideration tendering at the same time a certified manager’s check payable to petitioner and covering the entire obligation including the December 1980 installment. The trial court denied the motion. On appeal, the CA ruled in favor of Flores holding that the delay in payment was not a violation of an essential condition which would warrant a rescission since On November 17 or just 17 days from the October 31 deadline set by petitioner, Flores tendered the certified manager’s check and that it was inequitable for Flores to forfeit all the payments made (P101,550). ISSUE: WHETHER it is inequitable to cancel the contract and to have the amount paid by Flores be forfeited to petitioner particularly after Flores had tendered the certified manager’s check in full payment of the obligation. – YES. HELD: There is already substantial compliance by Flores with the compromise agreement. More importantly, the Maceda law recognizes the vendor’s right to cancel the contract to sell upon the breach and nonpayment of the stipulated installments but requires a grace period after

at least 2 years of regular installment payments. But in cases where less than 2 years of installments were paid, the seller shall give the buyer a grace period of not less than 60 days from the date the installment became due. If the buyer fails to pay the installments due at the expiration of the grace period, the seller may cancel the contract after thirty days from the receipt by the buyer of the notice of the cancellation or the demand for rescission of the contract by a notarial act. Assuming that under the terms of agreement the December 31 installment was due when on October 15 petitioner demanded payment of the balance on or before October 31, petitioner could cancel the contract after 30 days from the receipt by Flores of the notice of cancellation. Considering petitioner’s motion for execution filed on November 7 as a notice of cancellation, petitioner could cancel the contract after 30 days from the receipt by Flores of said motion. Flores’ tender of payment together with his motion for reconsideration on November 17 was well within the 30 day period granted by law. The tender made by Flores of a certified bank manager’s check was a valid tender of payment. It covered the full amount of the obligation. However, although he had made a valid tender of payment which preserved his rights as a vendee, he did not follow it with consignation or deposit of the sum due with the court. Hence he remains liable for the payment of his obligation because of his failure to deposit the amount due with the court.

REMEDY OF RESCISSION IN SALES CONTRACT COVERING IMMOVABLES: CONTRACT OF SALE VS. CONTRACT TO SELL 1.

ADELFA PROPERTIES INC v CA

FACTS: Rosario Jimenez-Castaneda, Salud Jimenez and their brothers, Jose and Dominador Jimenez, were the registered co-owners of a parcel of land in Las Piñas. In 1988, Jose and Dominador sold their share consisting of 1/2 of said parcel of land, specifically the eastern portion thereof, to Adelfa Properties. Subsequently, a “Confirmatory Extrajudicial Partition Agreement” was executed by the Jimenezes, wherein the eastern portion of the subject lot, was adjudicated to Jose and Dominador Jimenez, while the western portion was allocated to Rosario and Salud Jimenez. Thereafter, Adelfa Properties expressed interest in buying the western portion of the property from Rosario and Salud. Accordingly, in 1989, an “Exclusive Option to Purchase” was executed between the parties, with the condition that the selling price shall be P2.86M, that the option money of P50,000 shall be credited as partial payment upon the consummation of sale, that the balance is to be paid on or before 30 November 1989, and that in case of default by Adelfa Properties to pay the balance, the option is cancelled and 50% of the option money shall be forfeited and the other 50% refunded upon the sale of the property to a third party. Meanwhile, a complaint was filed by the nephews and nieces of Rosario and Salud against Jose and Dominador ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA

for annulment of the deed of sale in favor of Household Corporation and recovery of ownership of the property. As a consequence, Adelfa Properties held payment of the full purchase price and suggested that they settle the case with their nephews and nieces. In 1990, Adelfa Properties caused to be annotated on the TCT the exclusive option to purchase. On the same day, Rosario and Salud executed a Deed of Conditional Sale in favor of Emylene Chua over the same parcel of land for P3M, of which P1.5M was paid to the former on said date, with the balance to be paid upon the transfer of title to the specified 1/2 portion. Atty. Bernardo wrote Rosario and Salud informing the latter that in view of the dismissal of the case against them, Adelfa Properties was willing to pay the purchase price, and he requested that the corresponding deed of absolute sale be executed. This was ignored by Rosario and Salud. Jimenez’ counsel sent a letter to Adelfa Properties enclosing therein a check for P25,000.00 representing the refund of 50% of the option money paid under the exclusive option to purchase. Rosario and Salud then requested Adelfa Properties to return the owner’s duplicate copy of the certificate of title of Salud Jimenez. Adelfa Properties failed to surrender the certificate of title. Rosario and Salud Jimenez filed a petition for the annulment of contract, while Emylene Chua, the subsequent purchaser of the lot, filed a complaint in 35


 intervention. RTC ruled in favor of the Jimenezes and CA affirmed. ISSUE: W/N the contract between the Jimenezes and Adelfa Properties is an option contract HELD: NO. The alleged option contract is a contract to sell, rather than a contract of sale. The distinction between the two is important for in contract of sale, the title passes to the vendee upon the delivery of the thing sold; whereas in a contract to sell, by agreement the ownership is reserved in the vendor and is not to pass until the full payment of the price. In a contract of sale, the vendor has lost and cannot recover ownership until and unless the contract is resolved or rescinded; whereas in a contract to sell, title is retained by the vendor until the full payment of the price, such payment being a positive suspensive condition and failure of which is not a breach but an event that prevents the obligation of the vendor to convey title from becoming effective. Thus, a deed of sale is considered absolute in nature where there is neither a stipulation in the deed that title to the property sold is reserved in the seller until the full payment of the price, nor one giving the vendor the right to unilaterally resolve the contract the moment the buyer fails to pay within a fixed period. The parties never intended to transfer ownership to Adelfa Properties to completion of payment of the purchase price, this is inferred by the fact that the exclusive option to purchase, although it provided for automatic rescission of the contract and partial forfeiture of the amount already paid in case of default, does not mention that Adelfa Properties is obliged to return possession or ownership of the property as a consequence of non-payment. There is no stipulation anent reversion or reconveyance of the property in the event that petitioner does not comply with its obligation. With the absence of such a stipulation, it may legally be inferred that there was an implied agreement that ownership shall not pass to the purchaser until he had fully paid the price. Article 1478 of the Civil Code does not require that such a stipulation be expressly made. Consequently, an implied stipulation to that effect is considered valid and binding and enforceable between the parties. A contract which contains this kind of stipulation is considered a contract to sell. Moreover, that the parties really intended to execute a contract to sell is bolstered by the fact that the deed of absolute sale would have been issued only upon the payment of the balance of the purchase price, as may be gleaned from Adelfa Properties’ letter dated 16 April 1990 wherein it informed the vendors that it “is now ready and willing to pay you simultaneously with the execution of the corresponding deed of absolute sale.”

2.

CORONEL v CA

FACTS: In 1985, Coronel executed a document entitled "Receipt of Down Payment" in favor of Alcaraz for P50,000 dp of P1.24M as purchase price for an inherited house and lot promising to execute a deed of absolute ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA

sale as soon as it has been transferred in their name. The balance of P1.19M is due upon the execution of the deed. When title to the property was finally transferred to their names, the Coronels sold the property to Mabanag for P1.58M after she paid P300K dp. Because of this, they cancelled and rescinded the contract with Alcaraz by returning the P50,00 dp. Alcaraz filed a complaint for specific performance against the Coronels and cause the annotation of a notice of lis pendens on the TCT. Mabanag, on the other hand, caused the annotation of a notice of adverse claim with the RD. However, the Coronels executed a Deed of Absolute Sale in favor Mabanag. RTC ruled in favor of Alcaraz. CA affirmed. ISSUE: Whether the “receipt of downpayment” serves a contract to sell or a conditional contract of sale HELD: NO. The agreement could not have been a contract to sell because the sellers made no express reservation of ownership or title to the subject parcel of land. Furthermore, the circumstance, which prevented the parties from entering into an absolute contract of sale, pertained to the sellers themselves (the certificate of title was not in their names) and not the full payment of the purchase price. Under the established facts and circumstances of the case, had the certificate of title been in the names of petitioners-sellers at that time, there would have been no reason why an absolute contract of sale could not have been executed and consummated right there and then. Moreover, unlike in a contract to sell, petitioners did not merely promise to sell the property to private respondent upon the fulfillment of the suspensive condition. On the contrary, having already agreed to sell the subject property, they undertook to have the certificate of title changed to their names and immediately thereafter, to execute the written deed of absolute sale. What is clearly established by the plain language of the subject document is that when the said “Receipt of Down Payment” was prepared and signed by petitioners, the parties had agreed to a conditional contract of sale, consummation of which is subject only to the successful transfer of the certificate of title from the name of petitioners’ father to their names. The suspensive condition was fulfilled on 6 February 1985 and thus, the conditional contract of sale between the parties became obligatory, the only act required for the consummation thereof being the delivery of the property by means of the execution of the deed of absolute sale in a public instrument, which petitioners unequivocally committed themselves to do as evidenced by the “Receipt of Down Payment.”

3.

PNB v CA

FACTS: • PNB owned a parcel of land which Lapaz Kaw Ngo offered to buy. Events under the first letter-agreement • PNB accepted Lapaz’s offer subject to certain stipulations. The important ones are the following: 1. The selling price shall be P5.4million. Lapaz had already paid P100,000 as deposit. 36


 2. Upon failure to pay the additional deposit worth P970,000, the P100,000 shall be forfeited and PNB shall be authorized to sell the property to another. 3. The property shall be cleared of its present tenants at the expense of Lapaz. 4. Sale was subject to other terms and conditions to be imposed. • Lapaz agreed, so she proceeded to clear the lot of its tenants at her own expense. • However, due to difficulties in money, she requested for adjustment of payment proposals, which the bank denied. PNB also reminded her that she had not yet sent her letter of conformity to the agreement reached and told her to pay the full price of P5.4million. If not, the lot will be sold to other parties. • Lapaz requested for a reduction of the price as the size of the land was substantially reduced. PNB agreed. • PNB still did not receive payment from Lapaz, and gave the latter the last chance to pay the balance of the down payment. If she failed to pay, the sale shall be cancelled and the P100,000 payment shall be forfeited. • Lapaz failed to pay, so P100,000 was forfeited and the sale never materialized. PNB leased the premises to a certain Rivera. • Lapaz requested for a refund of her deposit in the total amount of P660,000 and asked that the forfeited P100,000 be reduced to P30,000. PNB agreed. Events under the second letter-agreement • Lapaz requested for a revival of the previously approved offer to PNB. PNB approved. • All conditions as in the first agreement were the same, except for the purchase price and deposit. The price was P5.1million, the deposit was P200,000. • Lapaz refused, however, to conform to the condition of vacating the premises at her expense as she had already done so under the first agreement. (She apparently considered this second letter-agreement as a continuation of the first so she said that she was no longer required to evict the tenants as she had already done so.) Besides, according to her, the occupants of the property were tenants of PNB. PNB refused this offer. •To prevent the forfeiture of her P200,000 deposit, she signed the letter-agreement. She told PNB that she was willing to pay the remaining deposit of P800K as long as it was PNB who would clear the property. PNB refused, and forfeited the P200,000 of Lapaz. • PNB informed Lapaz that they had already decided to sell the property for not less than P7M. ISSUES: 1. Whether or not there was a perfected contract of sale. – No. There was no perfected contract of sale. 2. Whether or not the P100,000 or the P200,000 was earnest money. – No. They were not earnest money. HELD: • It is important to note that the first letter-agreement was cancelled and thereafter no longer existed. The second letter-agreement is not a contract of sale but a contract to sell whose conditions were not fulfilled, which prevented the obligations therein from obtaining obligatory force. • A contract to sell is one where the obligatory force of ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA

the vendor’s obligation to transfer title is subordinated to a happening of a future and uncertain event. So that if the suspensive condition does not take place, the parties would stand as if the conditional obligation never existed. • In the instant case, the second letter-agreement was replete with conditions that Lapaz had to fulfill before the sale could be executed. The sale was dependent upon Lapaz’s compliance with certain conditions (i.e., payment, eviction of occupants). It was stipulated in the contract that her failure to pay the additional deposit would allow PNB to forfeit the price and allow them to sell the property to other parties. • This stipulation took the nature of a reservation of title in the vendor until full payment of the purchase price, or giving the vendor the right to unilaterally rescind the contract the moment the buyer fails to pay within the fixed period. • In addition, Lapaz’s refusal to evict the occupants on the ground that she had already done so under the first agreement was not justified as the two letteragreements were different transactions all together. Her fulfillment of the conditions in the first one did not carry over to the second one despite the identity of the stipulation. •The P100,000 and the P200,000 were not also earnest money. Article 1482, which defines earnest money, gives only a disputable presumption that prevails in the absence of rebuttal evidence. In the instant case, the letter-agreements themselves were the evidence that proved the intention of the parties to enter into negotiations leading to a contract of sale mutually acceptable to both as to absolutely bind them. The P100,000 and the P200,000 could not have been proof of the perfection of the sale as the letter-agreements were full of condition precedents before the sale could be executed. The money thus given could be considered as part of the consideration of PNB’s promise to reserve the property for Lapaz.

4.

BABASA v CA

FACTS: In 1981, a contract of “Conditional Sale of Registered Lands” was executed between the spouses Vivencio and Elena Babasa as vendors and Tabangao Realty Inc. (Tabangao) as vendee over 3 parcels of land in Batangas. Since the certificates of title over the lots were in the name of third persons who had already executed deeds of reconveyance and disclaimer in favor of the Babasas, it was agreed that the total purchase price of P2,121,920.00 would be paid in the following manner: P300,000.00 upon signing of the contract, and P1,821,920.00 upon presentation by the Babasas of transfer certificates of titles in their name, free from all liens and encumbrances, and delivery of registerable documents of sale in favor of Tabangao within 20 months from the signing of the contract. In the meantime, the retained balance of the purchase price would earn interest at 17% per annum or P20,648.43 monthly payable to the Babasas until 31 December 1982. It was expressly stipulated that Tabangao would have the absolute and unconditional right to take immediate possession of the lots as well as introduce any 37


 improvements thereon. On 18 May 1981 Tabangao leased the lots to Shell Gas Philippines, Inc. (SHELL), which immediately started the construction thereon of a Liquefied Petroleum Gas Terminal Project, an approved zone export enterprise of the Export Processing Zone. Tabangao is the real estate arm of SHELL. The parties substantially complied with the terms of the contract. Tabangao paid the first installment of P300,000.00 to the Babasas while the latter delivered actual possession of the lots to the former. In addition, Tabangao paid P379,625.00 to the tenants of the lots as disturbance compensation and as payment for existing crops as well as P334,700.00 to the owners of the houses standing thereon in addition to granting them residential lots with the total area of 2,800 square meters. Tabangao likewise paid the stipulated monthly interest for the 20month period amounting to P408,580.80. Meanwhile, the Babasas filed Civil Case 519 and Petition 373 for the transfer of titles of the lots in their name. However, 2 days prior to the expiration of the 20-month period, specifically on 31 December 1982, the Babasas asked Tabangao for an indefinite extension within which to deliver clean titles over the lots. They asked that Tabangao continue paying the monthly interest of P20,648.43 starting January 1983 on the ground that Civil Case 519 and Petition 373 had not yet been resolved with finality in their favor. Tabangao refused the request. In retaliation the Babasas executed a notarized unilateral rescission dated 28 February 1983 to which Tabangao responded by reminding the Babasas that they were the ones who did not comply with their contractual obligation to deliver clean titles within the stipulated 20-month period, hence, had no right to rescind their contract. The Babasas insisted on the unilateral rescission and demanded that SHELL vacate the lots. On 19 July 1983 Tabangao instituted an action for specific performance with damages in the RTC Batangas City to compel the spouses to comply with their obligation to deliver clean titles over the properties. The Babasas moved to dismiss the complaint on the ground that their contract with Tabangao became null and void with the expiration of the 20-month period given them within which to deliver clean certificates of title. SHELL entered the dispute as intervenor praying that its lease over the premises be respected by the Babasas. RTC ruled in favor of Tabangao and Shell. CA affirmed. ISSUE: W/N there was a contract of absolute sale between the Babasa and Tabagao HELD: YES. Although denominated “Conditional Sale of Registered Lands,” the contract between the spouses and Tabangao is one of absolute sale. Aside from the terms and stipulations used therein indicating such kind of sale, there is absolutely no proviso reserving title in the Babasas until full payment of the purchase price, nor any stipulation giving them the right to unilaterally rescind the contract in case of non-payment. A deed of sale is absolute in nature although denominated a conditional sale” absent such stipulations. In such cases, ownership of the thing sold passes to the vendee upon the constructive or actual delivery thereof. In the ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA

instant case, ownership over Lots 17827-A, 17827-B and 17827-C passed to Tabangao both by constructive and actual delivery. Constructive delivery was accomplished upon the execution of the contract of 11 April 1981 without any reservation of title on the part of the Babasas while actual delivery was made when Tabangao took unconditional possession of the lots and leased them to its associate company SHELL which constructed its multi-million peso LPG Project thereon. In Romero v. Court of Appeals and Lim v. Court of Appeals, the Court distinguished between a condition imposed on the perfection of a contract and a condition imposed merely on the performance of an obligation. While failure to comply with the first condition results in the failure of a contract, failure to comply with the second merely gives the other party the option to either refuse to proceed with the sale or to waive the condition. In the present case, the spouses’ contract with Tabangao did not lose its efficacy when the 20month period stipulated therein expired without the spouses being able to deliver clean certificates of title such that Tabangao may no longer demand performance of their obligation.

5.

VALDEZ v CA

FACTS: Carlos Valdez Sr. and Josefina Valdez were owners of a parcel of land. When Carlos Sr. died, Josefina subdivided the property into eight lots. On May 1, 1979, she executed a special power attorney, authorizing her son Carlos Jr, who was a practicing lawyer, to sell a portion thereof (lots 3-C and 3-D) to Jose Lagon for P80,000. Part of consideration was also for Lagon to transfer the Rural Bank of Isulan to the subject property, and to construct a commercial building beside the bank. Without knowledge of Josefina, Carlos Jr. entered into a different agreement, selling the property for P40/square meter, and it was indicated in the deed that the P80,000 had already been paid in cash. A downpayment of P20,000 was paid by the wife of Lagon, to which Josefina issued a receipt. Carlos Jr. prepared an affidavit, signed by Lagon, the transfer of the bank and the construction of commercial building as part of the condition, else the deed of absolute sale shall be null and void without need of demand. Lagon failed to comply with the considerations stated in the deed, to which the Valdez refused to deliver the torrens title. Lagon had Lot 3-C to be subdivided into three separate lots, to which he paid the professional services. Josefina used the subdivision survey, and sold Lot 3-C-2 to PCIB, evidenced by a deed of absolute sale, exectued a real mortgage over Lot 3-C-3 to DBP, and executed a deed of absolute sale in favor of Carlos Jr. over Lot 3-C-1. She also sold lot 3-D to Engr. Rodolfo Delfin. Lagon filed a complaint against Josefina and Carlos Jr for specific performance and damages. Trial Court ruled in favor of Lagon. CA reversed, but reversed itself, ruling in favor or Lagon. ISSUE: Whether the agreement was a contract of sale or contract to sell / Whether the contract was ratified RULING: It is a contract of sale. The nature of the 38


 contract must be inferred from the express terms and agreement and from the contemporaneous and subsequent acts of the parties thereto. When Josefina, through her son acting a an attorney-in-fact, executed a deed of absolute sale in favor of Lagon, she did not reserve the ownership of the property, subject to the completion of payment of the consideration. However, Carlos Jr. exceeded his authority when he entered into a different agreement with Lagon, making the contract unenforceable, unless ratified. In this case, it was ratified when Josefina accepted the downpayment of P20,000 and issued a receipt as a consequence of ratifying the contract. It must be noted, however, that an affidavit was signed by Lagon as part of the consideration, to transfer the Rural Bank of Isulan as well as constructing a commercial bank beside the bank, both failed to perform by Lagon, making the deed of absolute sale null and void. It cannot be considered as an afterthought contrived by Carlos Jr. since Lagon admitted in court the authenticity of the affidavit, and its binding effect against him. There was no need to rescind the contract because it was clearly stipulated that failure to comply with such obligation makes the deed null and void, though petitioners are obliged to refund the respondent's partial payment of the subject property.

6.

DIGNOS v CA

FACTS: Dignos is the owner of a parcel of land in LapuLapu City, which they sold to Jabil for P28,000, payable in 2 installments and with an assumption of indebtedness with First Insular Bank of Cebu for P12,000. However, Dignos also sold the same land in favor of Cabigas, who were US citizens, for P35,000. A Deed of Absolute Sale was executed in favor of the Cabigas spouses. Jabil filed a suit against Dignos with CFI of Cebu. RTC ruled in favor of Jabil and declared the sale to Cabigas null and void. On appeal, CA affirmed RTC decision with modification. ISSUE: W/N the contract between Dignos and Jabil is a contract of sale (as opposed to a contract to sale) HELD: YES. A deed of sale is absolute in nature although denominated as a “Deed of Conditional Sale” where nowhere in the contract in question is a proviso or stipulation to the effect that title to the property sold is reserved in the vendor until full payment of the purchase price, nor is there a stipulation giving the vendor the right to unilaterally rescind the contract the moment the vendee fails to pay within a fixed period. In the present case, there is no stipulation reserving the title of the property on the vendors nor does it give them the right to unilaterally rescind the contract upon non-payment of the balance thereof within a fixed period. While there was no constructive delivery of the land sold in the present case, as subject Deed of Sale is a private instrument, it is beyond question that there was actual delivery thereof. As found by the trial court, the Dignos spouses delivered the possession of the land in ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA

question to Jabil as early as 27 March 1965 so that the latter constructed thereon Sally’s Beach Resort also known as Jabil’s Beach Resort in March, 1965; Mactan White Beach Resort on 15 January 1966 and Bevirlyn’s Beach Resort on 1 September 1965. Such facts were admitted by the Dignos spouses.

7.

UNIVERSITY OF THE PHILIPPINES v DELOS ANGELES

FACTS: • UP was given a land grant which shall be developed to obtain additional income for its support. • UP and ALUMCO entered into a logging agreement where ALUMCO was granted the exclusive authority for an extendible period of 5 years (by mutual agreement), to cut and remove timber from the land grant inconsideration of royalties and fees to be paid to UP. • ALUMCO incurred an unpaid amount of P219,363. UP demanded payment but it failed to pay. ALUMCO received a letter that UP would rescind or terminate their logging agreement. They executed an instrument “Acknowledgement of Debt & Proposed Manner of Payment” which the UP President approved. ALUMCO agreed to give their creditor (UP) the right to consider the logging agreement as rescinded without necessity of any judicial suit and creditor will be entitled to P50,000 for liquidated damages. • ALUMCO continued logging but still incurred unpaid accounts. UP then informed them that as of that date, they considered rescinded the agreement and of no further legal effect. UP then filed for collection of the unpaid accounts and the trial court gave them preliminary injunction to prevent ALUMCO from continuing their logging. • Through a public bidding, the concession was awarded to Sta. Clara Lumber Company and a new agreement was entered into between them and UP. • ALUMCO tried to enjoin the bidding but the contract was already concluded and Sta. Clara started its operation. • Upon motion by ALUMCO, UP was declared in contempt of court for violating the writ of injunction against them. • ALUMCO’s contentions are the following: a. It blamed its former general manager for their failure to pay their account. b. Logs cut were rotten; thus, they were unable to sell them. c. UP’s unilateral rescission was invalid without a court order. ISSUE: W/N UP can validly rescind its agreement with ALUMCO even without court order. –Yes. UP can unilaterally rescind the agreement. HELD: • UP and ALUMCO expressly stipulated in their “Acknowledgement of Debt” that upon default of payment, creditor UP has the right and power to rescind their Logging Agreement without the necessity of a judicial suit. • There is nothing in the law that prohibits the parties from entering into agreements that violation of terms of 39


 the contract would cause its cancellation even without court intervention. • Act of a party in treating a contract as cancelled on account of any infraction by the other party must be made known to the other and is always provisional, being subject to scrutiny and review by the proper court. If the other party deems the rescission unjustified, he free to resort to judicial action. The court shall, after due hearing, decide if the rescission was proper, in which case it will be affirmed and if not proper, the responsible party will be liable for damages. • A party who deems the contract violated may consider it rescinded and act accordingly, even without court action but it proceeds at its own risk. Only the final judgment of the court will conclusively settle whether the action taken was proper or not. But the law does not prohibit the parties from exercising due diligence to minimize their own damages. • UP was able to show a prima facie case of breach of contract and default in payment by ALUMCO. Excuses by ALUMCO are not proper for them to suspend their payments. • Thus, the Supreme Court lifted the injunction.

8.

PALAY INC v CLAVE

FACTS: In 1965, Palay Inc., through its President Onstott, executed in favor of Dumpit (respondent) a Contract to Sell a parcel of land in Antipolo, RIzal. The sale was for P23,300 with 9% interest p.a., payable with a downpayment of P4,660 and monthly installments of least, there was a written notice sent to the defaulter informing him of the rescission. Par. 6 cannot be considered a waiver of Dumpit's right to be notified because it was a contract of adhesion. A waiver must be certain and unequivocal and intelligently made; such waiver follows only where the liberty of choice has been fully accorded. Moreover, the indispensability of notice of cancellation to the buyer is protected under RA 6551. It is a matter of public policy to protect the buyers of real estate on installment payments against onerous and oppressive conditions. Waiver of notice is one such onerous and oppressive condition to buyers of real estate on installment payments. 2. YES. As a consequence of the rescission of the contract, right to the lot should be restored to Dumpit or the same should be replaced by another acceptable lot. However, considering that the lot had been resold to a third person, Dumpit is entitled to refund of the installments paid plus legal interest of 12%.

9.

LIM v CA

FACTS: In 1965, Orlinos (3 co-owners) mortgaged a parcel of land in Diliman, QC to Progressive Commercial Bank as security for a P100K loan. They failed to pay the loan and the mortgage was foreclosed, where the bank acquired the property as the highest bidder at the auction sale. The bank transferred all its assets, ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA

P246.42 until fully paid. Par. 6 of the contract provided for automatic extrajudicial rescission upon default in payment of any monthly installment after the lapse of 90 days from the expiration of the grace period of a month, without need of notice and forfeiture of all installments paid. Dumpit was able to pay the dp and several installments amounting to P13,722.50, with the last payment made on Dec. 5, 1967 for installments up to Sept. 1967. In 1973, Dumpit requested Palay Inc to update his overdue accounts and sought its permission to assign his rights to Dizon. However, Palay informed him that his Contract to Sell had long been rescinded pursuant to Par. 6 and that the lot had already been resold. Dumpit filed a complaint with the NHA for reconveyance with an alternative prayer for refund. NHA ruled in favor of Dumpit, stating that the rescission is void for lack of either judicial or notarial demand. Office of the President affirmed. ISSUE: 1. W/N notice or demand may be dispensed with by stipulation in a contract to sell 2. W/N Palay should be liable for the refund of the installment payments made by Dumpit HELD: 1. NO. Although a judicial action for rescission of a contract is not necessary where the contract provides for its revocation and cancellation for violation of any of its terms and condition, jurisprudence has shown that at including the said land, to Pacifico Banking Corp. (PBC). In 1975, the Orlinos, who remained in possession of the land, made a written offer to PBC to redeem the property. In response, the bank agreed provided that P160K should be paid in full upon signing of the Deed of Absolute Sale and that as additional consideration, Orlinos' share on a property in Caloocan City should be conveyed to the bank. After a year, PBC advised the Orlinos that if the transaction will not be finalized in 30 days, it would be offered to other buyers. However, negotiations ensued between them until 2 years after, PBC sold the land to spouses Lim for P300K. The Orlinos filed a complaint against PBC and Lim for the annulment of the deed of sale on the ground that the subject land had bee earlier sold to them. RTC held that PBC and Lim acted in bad faith knowing that there was a cloud in the status of the property. CA affirmed. ISSUE: Whether the transaction between PBC and the Orlinos is a contract to sell or a contract of sale HELD: CONTRACT TO SELL. There was no immediate transfer of title to the Orlinos as what would have happened if there had been a sale. The supposed sale was never registered and there was no new TCT in favor of the Orlinos. They also acknowledged that the title to the property would remain with the bank until their transaction shall be finalized. Moreover, the consideration agreed upon was never paid to convert the agreement into a contract of sale. As payment of 40


 the consideration was a positive suspensive condition, title to the property never passed to the private respondents. Thus, the property was legally unencumbered and still belonged to PBC when it was sold to Lim. On RESCISSION: Although a contract to sell imposes reciprocal obligations and cannot be terminated unilaterally by either party, judicial rescission is required under Art. 1911 of the CC. However, this rule is not absolute. Jurisprudence has shown that a party may take it upon itself to consider the contract rescinded and act accordingly albeit subject to judicial confirmation, which may or may not be given. It is true that the rescinding party takes a risk that its action may not be approved by the court. The Orlinos obligated themselves to deliver to PBC P160K and their share on the property in Caloocan City. However, the Orlinos did not act on their obligations. PBC could not be required to wait for them forever. Thus, PBC had the right to consider the contract to sell between them terminated for non-payment of the stipulated consideration.

10. AFP MUTUAL BENEFIT ASSN INC v CA FACTS: This case involved Solid Homes Inc's MR of the

SC's decision reversing the CA's decision and ordering the RD to cancel the notice of lis pendens on the titles issued to AFPMBAI, declaring it as buyer in good faith and for value. Investco Inc and Solid Homes Inc entered into a contract to sell. During this time, the titles to the Quezon City and Marikina properties had not been transferred in the name of Investco Inc as asignee of the owners, Angela Perez Staley and Antonio Perez. Thus, Investco Inc merely agreed to sell and Solid Homes to buy the former's rights and interest in the properties. However, Solid Homes Inc. reneged or defaulted on its obligation. Thus, Investco Inc rescinded extra-judicially such contract to sell. After such event, AFPMBAI and Investco Inc entered into a contract of absolute sale, wherein the former paid in full, causing the transfer of titles in its name. ISSUE: W/N Investco Inc properly rescinded its contract to sell and buy with Solid Homes Inc HELD: YES. Upon Solid Homes Inc's failure to comply with its obligation under the contract, there was no need to judicially rescind the contract. Failure by one of the parties to abide by the conditions in a contract to sell resulted in the rescission of the contract.

CONDITIONS AND WARRANTIES 1.

LA FORTEZA v MACHUCA

FACTS: * The disputed property in this case consists of a house and lot located at Marcelo Green Village, Paranaque, which is registered in the name of the late Francisco Laforteza, although it is conjugal in nature * Lea Zulueta-Laforteza executed a Special Power of Attorney in favor of Robert and Gonzalo Laforteza, appointing both as her attorney-in-fact authorizing them jointly to sell the subject property and sign any document for the settlement of the estate of the late Francisco Laforteza * Michael Laforteza also executed a Special Power of Attorney in favor of Robert and Gonzalo Laforteza granting them the same authority. Both agency instruments contained a provision that in any document or paper to exercise authority granted, the signature of both attorneys-in-fact must be affixed * Dennis Laforteza executed an SPA in favor of Robert L. for the purpose of selling the subject property. A year later, he executed another SPA in favor of Robert and Gonzalo L. naming both attorneys-in-fact for the purpose of selling the subject property and signing any document for the settlement of the estate of the late Francisco LAforteza. Both agency instruments contained same provisions as that mentioned above. * In the exercise of the above authority, the heirs of the late Franciso L. represented by Robert and Gonzalo L entered into a Memorandum of Agreement (Contract to Sell) with Machuca over the subject property for the sum of 630,000 payable as follows:

ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA

-30,000 –earnest money, to be forfeited in favor of Lafortezas if the sale is not effected due to the fault of Machuca -600,000 – upon issuance of the new certificate of title in the name of late Francisco Laforteza and upon execution of an extra judicial settlement of the decedent’s estate with sale in favor of Machuca * Paragraph 4 of the Memorandum contained a provision that: upon issuance of the new title, the Machuca shall be notified in writing and he shall have 30 days to produce the balance of 600k which shall be paid to Laforteza upon execution of the extrajudicial settlement * Machuca paid earnest money of 30k plus rentals for subject property *Upon failure of Machuca to comply with the payment of the balance, Lafortezas informed the formed that they were canceling the contract * Machuca requested that he intends to tender payment of the balance which was refused by the Lafortezas who insisted for the rescission of the memorandum. * Machuca filed an action for specific performance * TC: ruled in favor of Machuca which the CA affirmed ISSUES: W/N THE CONTRACT EXECUTED BY THE PARTIES IS A CONTRACT OF SALE OR A CONTRACT TO SELL RULING: CONTRACT OF SALE AND LEASE The Memorandum of Agreement shows that the transaction between the petitioners and respondent was one of sale and lease A contract of sale is a consensual contract and is perfected at the moment there is a meeting of the 41


 minds upon the thing which is the object of the contract and upon the price. From that moment the parties may reciprocally demand performance subject to the provisions of the law governing the form of contracts. In this case, there was a perfected agreement between the petitioners and respondent whereby Lafortezas obligated themselves to transfer the ownership of and deliver the house and lot and Machuca to pay the price amounting to 630k. All the elements of a contract of sale were thus present. However, the balance of the purchase price was to be paid only upon the issuance of the new certificate of title in lieu of the one in the name of the late Francisco Laforteza and upon the execution of an extrajudicial settlement of his estate. Prior to the issuance of the “reconstituted” title, Machuca was already placed in possession of the house and lot as lessee thereof for 6 months at a monthly rate of 3,500k. It was stipulated that should the issuance of the new title and execution of the extrajudicial settlement be completed prior to expiration of 6month period, Machuca would be liable only for the rentals pertaining to the period commencing from the date of the execution of the agreement up to the executon of the extrajudicial settlement. It was also expressly stipulated that if after the expiration of the 6 month period, the lost title was not yet replaced and the extrajudicial partition was not yet executed, Machuca would no longer be required to pay rentals and would continue to occupy and use the premises until the subject condition was complied with by Lafortezas. The 6-month period during which Machuca would be in possession of the property as lessee, was clearly not a period within which to exercise such option. An option is a contract granting a privilege to buy or sell within an agreed time and at a determined price. In this case, the 6-month period merely delayed the demandability of the contract of sale and did not determine perfection for after the expiration of the 6 month period, there was a absolute obligation on the part of Lafortezas and Machuca to comply with the terms of the sale. The fact that after the expiration of the 6-month period, Machuca would retain possession of the house and lot without need of paying rentals for the use therefore, clearly indicated that the parties contemplated that ownership over the property would already be transferred by that time. What further indicated that this was a contract of sale was the payment of earnest money. Earnest money is something of value to show that buyer was really in earnest, and given to the seller to bind the bargain. Whenever earnest money is given in a contract of sale, it is considered as part of the purchase price and proof of the perfection of the contract. 2.

HEIRS OF PEDRO ESCANLAR v CA

FACTS: The Heirs of Cari-an executed a Deed of Sale of Rights, Interests, and Participation over a parcel of undivided land in favor of the Heirs of Escanlar. It was stipulated that “the contract shall become effective only upon approval of the CFI of Negros Occidental.” ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA

The Heirs of Escanlar failed to pay the balance of the purchase price, but the Heirs of Cari-an never demanded payment and continued to accept belated payments. They later on sold their interests over the same land to the Chuas and assailed the validity of the Deed of Sale they executed with the Heirs of Escanlar. The lower courts annulled the contract for not having the approval of the court as stipulated. ISSUE: W/N the Deed of Sale to the Heirs of Escanlar is valid HELD: YES. There is a distinction between the validity and effectivity. Only the effectivity was made subject to the condition. So long as all the requisites (consent, subject matter, and price) are present, as in this case, the contract is already perfected. Nonetheless, the intent of the parties clearly manifests their intention to give efficacy to the contract. In fact, the vendors continued to accept payments. That being the case, the sale in favor of the Heirs of Escanlar must be preferred as it is a valid and subsisting one.

3.

POWER COMMERCIAL AND INDUSTRIAL CORP. v CA

FACTS: Power Commercial Corp entered into a contract of sale with the Quiambao spouses. It agreed to assume the mortgages thereon. A Deed of Absolute Sale with Assumption of Mortgage was executed. Power Commercial Corp failed to settle the mortgage debt contracted by the spouses, thus it could not undertake the proper action to evict the lessees on the lot. Power Commercial Corp thereafter sought to rescind the contract of sale alleging that it failed to take actual and physical possession of the lot. ISSUE: W/N there was a breach of warranty on the part of the spouses that it would evict the lessees HELD: NO. First, such condition that the Quiambao spouses would have to evict the lessees was not stipulated in the contract. Thus, it cannot be considered a condition imposed upon its perfection. In fact, Power Commercial Corp. was well aware of the presence of the tenants therein. It was also given control over the said lot and it endeavored to terminate the occupation of its actual tenants. Also, since it was Power Commercial that knowingly undertook the risk of evicting the lessees, it cannot now claim that there was a breach of warranty on the part of the vendor.

4.

GUINHAWA v PEOPLE

FACTS: * Jaime Guinhawa was engaged in the business of selling brand new motor vehicles, including Mitsubishi vans, under the business name of Guinrox Motor Sales. His office and display room for cars were located along Panganiban Avenue, Naga City. He employed Gil Azotea as his sales manager.

42


 * Guinhawa purchased a brand new Mitsubishi L-300 Versa Van from the Union Motors Corporation (UMC) in Paco, Manila. * The van bore Plate no. DLK 406. Guinhawa’s driver, Olayan, drove the van from Manila to Naga City. * However, while the van was traveling along the highway in Daet, Camarines Norte, Olayan suffered a heart attack. The van went out of control, traversed the highway onto the opposite lane, and was ditched into the canal parallel to the highway. The van was damaged, and the left front tire had to be replaced. * The van was repaired and later offered for sale in Guinhawa’s showroom. * Spouses Ralph and Josephine Silo wanted to buy a new van for their garment business; they purchased items in Manila and sold them in Naga City. * Unaware that the van had been damaged and repaired on account of the accident in Daet, the couple decided to purchase the van for 591k. Azotea, sales manager, suggested that the couple make a downpayment of 118,200, and pay the balance of the purchase price by installments via a loan from the United Coconut Planters Bank (UCPB), with the van as collateral. * Azotea offered to make the necessary arrangements with UCPB for the consummation of the loan transaction wherein the couple agreed. * The spouses executed a Promissory Note for the amount of 692,676 as payment of the balance on the purchase price, and as evidence of the chattel mortgage over the van in favor of UCPB. * The couple arrived in Guinhawa’s office to take delivery of the van. The latter executed the deed of sale, and the couple paid the 161,470 downpayment, for they were issued a receipt. They were furnished a Service Manual which contained the warranty terms and conditions. * Azotea instructed the couple on how to start the van and to operate its radio. Ralph Silo no longer conducted a test drive; he and his wife assumed that there were no defects in the van as it was brand new. * Josephine Silo, accompanied by Glenda Pingol, went to Manila on board the van, with Glenda’s husband as the driver. On their return trip to Naga from Manila, the driver heard a squeaking sound, which seemed to be coming from underneath the van. The squeaking sound persisted and upon examination at the Shell gasoline station, it was found out that some parts underneath the van had been welded. * Guinhawa insisted that the defects were mere factory defects. As the defects persisted, the spouses requested that Guinhawa replace the van with 2 Charade-Daihatsu vehicles within a week or two, with the additional costs to be taken from their downpayment. * The spouses brought the car to Rx Auto Clinic for examination wherein the mechanic discovered that it was the left front stabilizer that was producing the annoying sound, and that it had been repaired. * Josephine Silo filed for rescission of the sale and refund of their money. * They instituted also a criminal complaint for other deceits made by Guinhawa by making fraudulent representations about the car being brand new and that it never encountered an accident. ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA

ISSUE: W/N THERE WERE FRAUDULENT REPRESENTATIONS MADE BY THE SELLER, GUINHAWA BY VIRTUE OF THE CONTRACT OF SALE EXECUTED BETWEEN HIM AND THE COUPLE RULING: YES Article 1389 of NCC provides that failure to disclose facts when there is a duty to reveal them constitutes fraud. In a contract of sale, a buyer and seller do not deal from equal bargaining positions when the latter has knowledge, a material fact which, if communicated to the buyer, would render the grouns unacceptable or, at least, substantially less desirable. If, in a contract of sale, the vendor knowingly allowed the vendee to be deceived as to the thing sold in a material matter by failing to disclose an intrinsic circumstance that it vital to the contract, knowing that the vendee is acting upon the presumption that no such fact exists, deceit is accomplished by the suppression of the truth. In this case, Guinhawa and Azotea knew that the van had figured in an accident, was damaged and had to be repaired. Nevertheless, the van was placed in the showroom, thus making it appear to the public that it was a brand new unit. Guinhawa was mandated to reveal the foregoing facts to Silos but they even obdurately declared when they testified that the court did not figure in an accident, nor had it been repaired. Even when Guinhawa was apprised that Silos had discovered the van’s defects, the former agreed to replace the van, but changed his mind and insisted that it must be first sold. Guinhawa is not relieved of his criminal liability for deceitful concealment of material facts, even if Silos made a visual inspection of the van’s interior and exterior before she agreed to buy and failed to inspects its under chassis.

5.

ANG v CA

FACTS: * Under a car-swapping scheme, Bruno Soledad sold his Mitsubishi GSR sedan 1982 model to Jaime Ang by a Deed of Absolute Sale * For his part, Ang conveyed to Soledad his Mitsubishi Lancer model 1988 also by a Deed of Absolute Sale * As Ang’s car was of a later model, Soledad paid him an additional 55,000 * Ang, a buyer and seller of used vehicles, later offered the Mitsubishi GSR for sale through Far Eastern Motors, a second hand auto display center. The car was even sold to a certain Paul Bugash for 225k. * Before the Deed could be registered in Bugash’s name, however, the vehicle was seized by virtue of a writ of replevin on account of the alleged failure of Ronaldo Panes, the owner of the car prior to Soledad, to pay the mortgage debt constituted thereon. * To secure the release of the vehicle, Ang paid BA Finance the amount of 62,038.47. Soledad refused to reimburse the said amount, despite repeated demands, drawing Ang to charge him for estafa with abuse of confidence. 43


 ISSUE: W/N THE COMPLAINT HAD PRESCRIBED HINGES ON A DETERMINATION OF WHAT KIND OF WARRANTY IS PROVIDED IN THE DEED OF ABSOLUTE SALE RULING: YES A warranty is a statement or representation made by the seller of goods, contemporaneously and as part of the contract of sale, having reference to the character, quality or title of the goods, and by which he promises or undertakes to insure that certain facts are or shall be as he then represents them. Warranties by the seller may be express or implied. In declaring that Soledad owned and had clean title to the vehicle at the time of the deed of absolute sale was forged, he gave an implied warranty of title. In pledging that he “will defend the same from all claims or any claim whatsoever and will save the vendee from any suit by the government of the Republic of the Phils, Soledad gave a warranty against eviction. Given Ang’s business of buying and selling used vehicles, he could not have merely relied on Soledad’s affirmation that the car was free from liens and encumbrances. He was expected to have thoroughly verified the car’s registration and related documents. Since what Soledad, as seller, gave was an implied warranty, the prescriptive period to file a breach thereof is 6 months after the delivery of the vehicle, following Art. 1571. But even if the date of filing of the damages. Various expert witnesses were presented during the trial. ISSUE: W/N Nutrimix should be held liable for the death of the livestock HELD: NO. In alleging that there was a violation of warranty against hidden defects, the spouses assumed the burden of proof. However, this they failed to overcome. Under the law, the defect must exist at the time the sale was made and at the time the product left the hands of the seller, which the spouses failed to prove. The feeds were belatedly tested—3 months after the death of the broilers and hogs. This means that at

action is reckoned from the date, Ang instituted his first complaint for damages and not when filed the complaint subject of this case, the action just the same had prescribed, it having been filed 16 months after the date of delivery of the vehicle. On the basis of breach of warranty against eviction, essential requisites thereof were not met. For one, there is no judgment, which deprived Ang of the vehicle. For another, there was no suit for eviction which Soledad as seller was impleaded as co-defendant at the instance of the vendee. Even under the principle of solutio indebiti, Ang cannot recover from Soledad the amount he paid BA Finance. For, Ang settled the mortgage debt on his own volition under the supposition that he would resell the car. It turned out that he did pay BA Finance in order to avoid returning the payment made by the ultimate buyer Bugash.

6.

NUTRIMIX FEEDS CORP v CA

FACTS: Evangelista spouses purchased feeds from Nutrimix. They refused to pay their unsettled debt claiming that thousands of their livestock were poisoned by the Nutrimix feeds. Nutrimix sued them for collection of money. The spouses countered with a suit for that time, they may have already been contaminated. They failed to prove that the feeds delivered to be tested were the same feeds that allegedly poisoned the animals. It is also common practice for them to mix different kinds of feeds. The mere death of the animals does not raise a prima facie case of breach of warranty. In this case, the evidence presented by the spouses are only circumstantial. The remedies of breach of warranty against hidden defects are either withdrawal from the contract or to demand a proportionate reduction of the price plus damages in either case. In this case, though the spouses failed to make out their case, hence they should be liable for their debt.

EXTINGUISHMENT OF SALE 1.

ROBERTS v PAPIO

FACTS: * The Spouses Papio were the owners of a 274 sqm residential lot located in Makati. In order to secure a 59k loan from the Amparo Investments Corp, they executed a real estate mortgage on the property. Upon Papio’s failure to pay the loan, the corporation filed a petition for the extrajudicial foreclosure of the mortgage. * Since the couple needed money to redeem the property and to prevent the foreclosure of the real estate mortgage, they executed a Deed of Absolute Sale over the property in favor of Martin Papio’s cousin, Amelia Roberts. * Of the 95k purchase price, 59k was paid to the Amparo Investments Corp, while the 26k difference was retained by the spouses. As soon as the spouses had settled their ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA

obligation, the corporation returned the owner’s duplicate TCT which was then delivered to Amelia Roberts. * The parties (A. Roberts as lessor and Martin Papio as lessee) executed a 2-year contract of lease. The contract was subject to renewal or extension for a like period at the option of the lessor, the lessee waiving thereby the benefits of an implied new lease. The lessee was obliged to pay monthly rentals of 800 to be deposited in the lessor’s account. * A new TCT was issued in the name of Amelia Roberts as owner. Martin Papio paid the rentals and thereafter for another year. He then failed to pay rentals, but he and his family nevertheless remained in possession of the property for almost 13 years. * A. Roberts reminded Papio that he failed to pay monthly rentals amounting to a total liability of 410k. She demanded that Papio vacate the property within 15 44


 days from receipt of the letter in case he failed to settle the amount. * A. Roberts filed a complaint for unlawful detainer and damages against Martin Papio ISSUE: W/N THE DEED OF ABSOLUTE SALE AND CONTRACT OF LEASE EXECUTED BY THE PARTIES IS AN EQUITABLE MORTGAGE OVER THE PROPERTY RULING: NO An equitable mortgage is one that, although lacking in some formality, form or words, or other requisites demanded by a statute, nevertheless reveals the intention of the parties to charge a real property as security for a debt and contain nothing impossible or contrary to law. A contract between the parties is an equitable mortgage if the following requisites are present: a. the parties entered into a contract denominated as a contract of sale and b. the intention was to secure an existing debt by way of mortgage. The decisive factor is the intention of the parties. In an equitable mortgage, the mortgagor retains ownership over the property but subject to foreclosure and sale at public auction upon failure of the mortgagor to pay his obligation. In contrast, in a pacto de retro sale, ownership of the property sold is immediately transferred to the vendee a retro subject only to the right of the vendor a retro to repurchase the property upon compliance with legal requirements for the repurchase. The failure of the vendor a retro to exercise the right to repurchase within the agreed time vests upon the vendee a retro, by operation of law, absolute title over the property. One repurchases only what one has previously sold. The right to repurchase presupposes a valid contract of sale between same parties. By insisting that he had repurchased the property, Papio thereby admitted that the deed of absolute sale executed by him and Roberts was in fact and in law a deed of absolute sale and not an equitable mortgage; he had acquired ownership over the property based on said deed. Respondent, is thus estopped from asserting that the contract under the deed of absolute sale is an equitable mortgage unless there is an allegation and evidence of palpable mistake on the part of respondent, or a fraud on the part of Roberts.

2.

MISTERIO v CEBU STATE COLLEGE OF SCIENCE AND TECHNOLOGY

FACTS: Asuncion sold to Sudlon Agricultural High School (SAHS) a parcel of land, reserving the right to repurchase the same in case (1) the school ceases to exist, or (2) the school transfers location. She had her right annotated. She died. By virtue of BP 412, SAHS was merged with the Cebu State College, effective June 1983. In 1990, the heirs of Asuncion sought to exercise their right to redeem, claiming that school has ceased to exist. ISSUE: W/N the heirs of Asuncion may still exercise their right to redeem the property ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA

HELD: NO. Their right has already prescribed. Considering that no period for redemption was agreed upon, the law imposes a 4-year limitation. This means that from the time the school was merged to Cebu State College, they had 4 years, or until June 1987 to redeem the property. However, they failed to do so within the period. Failure to redeem automatically consolidates ownership in favor of the vendee. The fact that the right to redeem was annotated does not make it imprescriptible, it only serves to notify third persons.

3.

SOLID HOMES INC v CA

FACTS: * Solid Homes executed in favor of State Financing Center a Real Estate Mortgage on its properties embraced in the TCT, in order to secure the payment of a loan of 10M which the former obtained from the latter. * A year later, Solid Homes applied for and was granted an additional loan of 1, 511,270.03 by State Financing, and to secure its payment, Solid executed an amendment to real estate mortgage whereby the credits secured by the first mortgage on the abovementioned properties were increased from 10M to 11,511,270.03. * Solid homes obtained additional credits and financing facilities from State Financing in the sum of 1,499,811.97 and to secure its payment, the former executed the amendment to real estate mortgage whereby the mortgage executed on its properties was again amended so that the loans or credits secured thereby were further increased from 11,511, 270.03 to 13,011,082.00 * When the obligations became due and payable, State Financing made repeated demands upon Solid homes for the payment thereof, but the latter failed to do so. * State Financing filed a petition for extrajudicial foreclosure of the mortgages who in pursuance of the petition, issued a notice of sheriff’s sale whereby the mortgaged properties of Solid homes and the improvements existing thereon, including the V.V. Soliven Towers II Building were set for public auction sale in order to satisfy the full amount of Solid homes’ mortgage indebtedness, the interest thereon, and the fees and expenses incidental to the foreclosure proceedings. * Before the scheduled public auction sale, the mortgagor Solid homes made representations and induced State Financing to forego with the foreclosure of the real estate mortgage. By reason thereof, State Financing agreed to suspend the foreclosure of mortgaged properties, subject to the terms and conditions they agreed upon, and in pursuance of the said agreement, they executed a document entitled MEMORANDUM OF AGREEMENT/DACION EN PAGO. ISSUE: 1. 2.

W/N THE MEMORANDUM OF AGREEMENT/ DACION EN PAGO EXECUTED BY THE PARTIES IS VALID AND BINDING W/N SOLID HOMES CAN CLAIM DAMAGES ARISING FROM THE NON-ANNOTATION OF ITS 45


 RIGHT OF REPURCHASE IN THE CONSOLIDATED TITLES RULING: 1. YES | 2. NO The Memorandum of Agreement/Dacion En Pago was valid and binding, and that the registration of said instrument in the Register of Deeds was in accordance with law and the agreement of the parties. Solid homes utterly failed to prove that respondent corporation had maliciously and in bad faith caused the non-annotation of petitioner’s right of repurchase so as to prevent the latter from exercising such right. On the contrary, it is admitted by both parties that State Financing informed Solid homes of the registration with the register of deeds of their memorandum of agreement/dacion en pago and the issuance of the new certificates of title in the name of State Financing. Clearly, petitioner was not prejudiced by the nonannotation of such right in the certificates of title issued in the name of State Financing. Also, it was not the function of the corporation to cause said annotation. It was equally the responsibility of petitioner to protect its own rights by making sure that its right of repurchase was indeed annotated in the consolidated titles of State Financing. The only legal transgression of State was its failure to observe the proper procedure in effecting the consolidation of the titles in its name. But this does not automatically entitle the petitioner to damages absent convincing proof of malice and bad faith on the part of private respondent-corporation

4.

A. FRANCISCO REALTY v CA

FACTS: A. Francisco Realty and Development Corp. granted a loan worth P7.5M in favor of spouses Javillonar, to which the latter executed three documents: a) a promissory note containing the interest charge of 4% monthly, b) a deed of mortgage over the subject property, c) an undated deed of sale of the mortgaged property. Since the spouses allegedly failed to comply with the payments, petitioner registered the sale in its favor, getting a TCT issued in its name without knowledge by the spouses. Subsequently, the spouses obtained another loan worth P2.5M, signing another promissory note in favor of petitioner. Petitioner demanded the possession of the property, as well as the interest payments, to which the spouses refused to comply. Petitioner filed an action for possession in the RTC. RTC ruled in favor of petitioner, but CA reversed.

ownership, b) the alleged new liability of the spouses c) the alleged continuing liability of the spouses. It is clear that the petitioners had other issues which involve more than just a simple claim of of immediate possession, and thus the RTC had jurisdiction over the case. However, the transfer was in the nature of pactum commissorium, since the sale was really considered as an equitable mortgage. It was really intended by the spouses to make such undated deed of sale a security. Also, when petitioners transferred the title in its name, the spouses was never informed of such action. Such transfer was therefore void, making the TCT held by petitioners null and void as well.

5.

ABILLA v GOBONSENG

FACTS: Spouses Abilla instituted against Spouses Gobonseng an action for specific performance, recovery of sum of money and damages, seeking the reimbursement of the expenses they incurred in the preparation and registration of 2 public instruments-Deed of Sale and Option to Buy. As a defense, Spouses Gobonseng contended that the transaction covered by these instruments was a mortgage. RTC ruled in favor of Spouses Abilla, stating that it was a sale giving Spouses Gobonseng until Aug. 31, 1983 within which to buy back the 17 lots subject of the sale. CA affirmed and held that the transaction was a pacto de retro sale, and not an equitable mortgage. In 1999, Spouses Gobonseng filed with the RTC an urgent motion to repuchase the lots with tender of payment, which was denied. However, after the judge inhibited himself from the case, it was reraffled to a different branch, which granted the motion to repurchase. ISSUE: W/N Spouses Gobonseng may exercise the right to repurchase, as stipulated in Art. 1606 (3) HELD: NO. Sellers in a sale judicially-declared as pacto de retro may NOT exercise the right to repurchase within the 30-day period provided under Art. 1606, although they have taken the position that the same was an equitable mortgage, if it shown that there was no honest belief thereof since: (a) none of the circumstances under Art. 1602 were shown to exist to warrant a conclusion that the transaction was an equitable mortgage; and (b) that if they truly believed the sale to be an equitable mortgage, as a sign of good faith, they should have consigned with the trial court the amount representing their alleged loan, on or before the expiration of the right to repurchase.

ISSUE: 1. 2.

Whether the RTC had jurisdiction over the case (property issue) Whether the sale was considered as an equitable mortgage

RULING: Even though the case was filed less than one year after the demand to vacate, making it an action of unlawful detainer, there were other issues to be considered such as: a) the validity of the transfer of ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA

6.

FRANCISCO v BOISER

FACTS: • Petitioner Adalia Francisco and three of her sisters, Ester, Elizabeth, and Adeluisa, were co-owners of four parcels of registered land in Caloocan City • On August 1979, they sold 1/5 of their undivided share to their mother, Adela Blas, for PhP10,000, making her a co-owner of the real property to that extent 46


 • 7 years later, in 1986, however, Adela sold her 1/5 share for PhP10,000 to respondent Zenaida Boiser, another sister of petitioner • In 1992 or 6 years after the sale, Adalia received summons with a copy of a complaint by Zenaida demanding her share in the rentals being collected from the tenants of the Ten Commandments Building, which stands on the co-owned property • Adalia then informs Zenaida that she was exercising her right of redemption as co-owner of the subject property, depositing for that purpose PhP10,000 with the Clerk of Court • The case was however dismissed after Zenaida was declared non-suited, and Adalia’s counterclaim was thus dismissed as well • 3 years after, Adalia institutes a complaint demanding the redemption of the property, contending that the 30day period for redemption under Art. 1623 had not begun to run against her or any of the other co-owners, since the vendor Adela did not inform them about the sale, which fact they only came to know of when Adalia received the summons in 1992 • Zenaida on the other hand contends that Adalia already knew of the sale even before she received the summons since Zenaida had informed Adalia by letter of the sale with a demand for her share of the rentals three months before filing suit, attaching to it a copy of the deed of sale • Adalia’s receipt of the said letter is proven by the fact that within a week, she advised the tenants of the building to disregard Zenaida’s letter-demand • The trial court dismissed the complaint for legal redemption, holding that Art. 1623 does not prescribe any particular form of notifying co-owners on appeal, the CA affirmed ISSUE: Whether the letter-demand by Zenaida to Adalia, to which the deed of sale was attached, can be considered as sufficient compliance with the notice requirement of Art. 1623 for the purpose of legal redemption HELD: • The petitioner points out that the case does not concern the particular form in which such notice must be given, but rather the sufficiency of notice given by a vendee in lieu of the required notice to be given by the vendor or prospective vendor • The text of Art. 1623 clearly and expressly prescribes that the 30 days for making the redemption shall be counted from notice in writing by the vendor it makes sense to require that notice be given by the vendor and nobody else, since the vendor of an undivided interest is in the best position to know who are his co-owners, who

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under the law must be notified of the sale • Notice by the co-owner likewise removes all doubt as to the fact of the sale, its perfection, and its validity by not immediately notifying, or not notifying at all, a coowner, the vendor can delay or even effectively prevent the meaningful exercise of the right of redemption • However, it would be unjust in the case at bar to require the vendor Adela to serve notice of the sale, when the fact has already been established in both lower courts Adalia has effectively exercised her right when she deposited the PhP10,000 redemption price 7 days after receiving the summons Fallo • Petition granted, decision of the CA reversed • The decision in Etcuban v. CA is abandoned, and the one in Butte v. Manuel Uy and Sons, Inc., as affirmed in Salatandol v. Retes, upheld NOTE • The Court failed to negate or possibly appreciate the fact of Adalia’s knowledge of the sale prior to the summons, as proven her letter-advise to the tenants of the building • The period given by the Court to Adalia was 30 days after the receipt of the summons on 5 August 1992, which is 4 September 1992

7.

SORIANO v BAUTISTA

FACTS: Bautista spouses mortgaged their lot to Soriano, who took possession thereof and cultivated the same. Pursuant to Par. 5 of their agreement, Soriano decided to buy the lot. Bautista refused to sell claiming that being mortgagors, they cannot be deprived of their right to redeem the property. ISSUE: W/N Soriano may buy the mortgaged property of Bautista HELD: YES. True that the transaction is a mortgage, which carried with it a customary right of redemption. However, the mortgagor’s right to redeem was rendered defeasible at the election of the mortgagees by virtue of Par. 5, allowing them the option to purchase the said lot. There is nothing immoral or illegal about such stipulation. It was supported by the same consideration as the mortgage contract and constituted an irrevocable continuing offer within the time stipulated. That being the case, Bautista spouses must be compelled to honor the sale.

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 ASSIGNMENT 1.

NYCO SALES CORP v BA FINANCE

FACTS: NYCO Sales Corp extended a credit accommodation to the Fernandez Brothers. The brothers, acting in behalf of Sanshell Corp, discounted a BPI check for P60,000 with NYCO, which then indorsed the said check to BA Finance accompanied by a Deed of Assignment. BA Finance, in turn, released the funds, which were used by the brothers. The BPI check was dishonored. The brothers issued a substitute check, which was also dishonored. Now BA Finance goes after NYCO, which disclaims liability. ISSUE: W/N NYCO, as the assignor, is liable for breach of warranties HELD: YES. The assignor (NYCO) warrants both the existence and legality of the credit, as well as the solvency of the debtor. If there is a breach of any of the 2 warranties, the assignor is liable to the assignee. That being the case, NYCO cannot evade liability. So long as the credit remains unpaid, the assignor remains liable notwithstanding failure to give notice of dishonor that is because the liability of NYCO stems form the assignment, not on the checks alone.

2.

LICAROS v GATMAITAN

FACTS: Abelardo Licaros invested his money worth $150,000 with Anglo-Asean Bank, a money market placement by way of deposit, based in the Republic of Venatu. Unexpectedly, he had a hard time getting back his investments as well as the interest earned. He then sought the counsel of Antonio Gatmaitan, a reputable banker and investor. They entered into an agreement, where a non-negotiable promissory note was to be executed in favor of Licaros worth $150,000, and that Gatmaitan would take over the value of the investment

made by Licaros with the Anglo-Asean Bank at the former's expense. When Gatmaitan contacted the foreign bank, it said they will look into it, but it didn't prospered. Because of the inability to collect, Gatmaitan did not bother to pay Licaros the value of the promissory note. Licaros, however, believing that he had a right to collect from Gatmaitan regardless of the outcome, demanded payment, but was ignore. Licaros filed a complaint against Gatmaitan for the collection of the note. The trial court ruled in favor of Licaros, but CA reversed. ISSUE: Whether the memorandum of agreement between petitioner and respondent is one of assignment of credit or one of conventional subrogation RULING: It is a conventional subrogation. An assignment of credit has been defined as the process of transferring the right of the assignor to the assignee who would then have a right to proceed against the debtor. Consent of the debtor is not required is not necessary to product its legal effects, since notice of the assignment would be enough. On the other hand, subrogation of credit has been defined as the transfer of all the rights of the creditor to a third person, who substitutes him in all his rights. It requires that all the related parties thereto, the original creditor, the new creditor and the debtor, enter into a new agreement, requiring the consent of the debtor of such transfer of rights. In the case at hand, it was clearly stipulated by the parties in the memorandum of agreement that the express conformity of the third party (debtor) is needed. The memorandum contains a space for the signature of the Anglo-Asean Bank written therein "with our conforme". Without such signature, there was no transfer of rights. The usage of the word "Assignment" was used as a general term, since Gatmaitan was not a lawyer, and therefore was not well-versed with the language of the law.

BULK SALES LAW 1.

CHIN v UY: CA case contained in O.G.

DOCTRINE: A sale made of all the effects in the vendor's store without the buyer being furnished a sworn list of creditors as required by Sec 3, is null and void irrespective of the good or bad faith of the buyer, and judgment creditors may treat such sale as never having been made and proceed to have execution levied on the properties thus sold.

2.

DBP in a "deed of cession of property in payment of obligation" or dacion en pago. In turn, DBP sold these assets to Union Glass that same year. In 1983, Yu instituted an action against Pioneer Glass, DBP, and Union Glass, asserting that the transfer of the assets to DBP was void by reason of fraud. •

DBP v HON JUDGE OF RTC OF MANILA

FACTS: In 1978, Pioneer Glass Manufacturing Corp.purchased from Yu (under Ancar Equipment Parts and Tonicar) equipment parts worth P7,000. However, Pioneer failed or refused to pay upon demand. Without informing Yu, Pioneer Glass transferred all its assets to ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA

•

•

Pioneer Glass: denied liability to Yu on the ground that by virtue of the dacion en pago in favor of DBP, the bank assumed liability to its creditors including Yu under a payment scheme, which is under pending implementation DBP: denied liability to Yu on the ground that there being no proof that the unpaid merchandise purchased by Pioneer Glass were among those transferred to it Union Glass: denied liability to Yu on the 48


 ground that there was no privity of contract between them, or assuming applicability of the Bulk Sales Law, no liability attached to Union Glass. MTC denied the motions to dismiss filed by Union Glass and DBP and ruled in favor of Yu. RTC affirmed MTC's decision. ISSUE: W/N the Bulk Sales Law covers the conveyance in question (its violation would make DBP, Union Glass, and Pioneer Glass liable to Yu) HELD: NO. Under the Bulk Sales Law, the terms "goods" and "merchandise," having acquired a fixed meaning, refer to things and articles, which are kept for sale by a merchant. Likewise, the term "fixtures" has been interpreted to mean the chattels, which the merchants usually possess and annex to the premises occupied by

them in order to store, handle and display their goods and wares. The technicality of these terms conveys the intention of the law to apply it to merchants who are in the business of selling goods and wares and similar merchandise. In this case, Pioneer Glass manufactured glass only on specific orders and it did not sell directly to consumers but manufactured its products only for particular clients. Thus, Pioneer Glass was NOT a merchandiser. Moreover, the dacion en pago between Pioneer and DBP transferred and conveyed the bulk of its corporate assets to extinguish its outstanding debts to DBP. Thus, the subject matter of the deed of cession was the assets, not stock-in-trade. Such conveyance was clearly outside the ambit of the Bulk Sales Law. SC ordered Pioneer Glass, not DBP and Union Glass, to pay Yu the price of the equipment purchased plus interest.

RETAIL TRADE LIBERALIZATION ACT OF 2000 AND RELATED PROVISIONS OF THE ANTI-DUMMY LAW 1.

KING v HERNAEZ

FACTS: Macario King, a naturalized Filipino, owned the grocery store Import Meat & Produce. He employed 3 Chinamen, one as purchaser and 2 others as salesmen. He sought the permission of the President to retain the services of the 3, but was denied based on the Retail Trade Law and the Anti-Dummy Law, which prohibit aliens from interfering in the management and operation of retail establishments. King contends that the 3 aliens are employed in non-control positions and do not participate in the management, thus, they are not covered by the Anti-Dummy Law. ISSUE: W/N the employment of the 3 Chinamen is covered under the Anti-Dummy Law HELD: YES. The prohibition covers the entire range of employment, regardless of whether they are control or non-control positions. Thus, employment of aliens for evening clerical positions is prohibited. The reason is obvious: to plug any loopholes that unscrupulous aliens may exploit for the purpose of circumventing the law.

2.

BALMACEDA v UNION CARBIDE PHILIPPINES INC

FACTS: Union Carbide was a manufacturer having 2 divisions: the Consumer Products Division and the Industrial Products Division.

“consumption goods.” They are sold to manufacturers and industries as raw materials. They are intermediate goods, not consumption goods.

3.

GOODYEAR TIRE v REYES SR

FACTS: Goodyear, a corporation not wholly owned by Filipinos, was engaged in the manufacturing and sale of rubber products such as tires, batteries, conveyor belts, soles of shoes, etc. ISSUE: W/N Goodyear is covered by the Retail Trade Law insofar as the prohibition against aliens from engaging in retail trade is concerned. HELD: NO. “Retail” pertains to the direct selling to the general public of merchandise of goods for consumption. They pertain to goods for personal, family and household consumption. A manufacturer who sells his products to industrial and commercial users so that the latter may use the same to render some general service to the public is clearly not covered by the prohibition. The enterprise of Goodyear clearly falls within this category. The sale to proprietary planters and persons engaged in the exploration of natural resources is also included in the said classification and cannot be considered “retail” as to come within the ambit of the prohibition. But insofar as sale to employees and officers is concerned, this may be considered “retail” and comes under the prohibition.

ISSUE: W/N the Industrial Products Division is engaged in the retail business HELD: NO. “Retail” pertains to the direct selling to the general public of merchandise of goods for consumption. They pertain to goods for personal, family and household consumption. The products sold under this division are clearly not covered by the term ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA

4.

DBP v HON JUDGE OF RTC OF MANILA

FACTS: In 1978, Pioneer Glass Manufacturing Corp.purchased from Yu (under Ancar Equipment Parts and Tonicar) equipment parts worth P7,000. However, Pioneer failed or refused to pay upon demand. Without 49


 informing Yu, Pioneer Glass transferred all its assets to DBP in a "deed of cession of property in payment of obligation" or dacion en pago. In turn, DBP sold these assets to Union Glass that same year. In 1983, Yu instituted an action against Pioneer Glass, DBP, and Union Glass, asserting that the transfer of the assets to DBP was void by reason of fraud. Pioneer Glass: denied liability to Yu on the ground that by virtue of the dacion en pago in favor of DBP, the bank assumed liability to its creditors including Yu under a payment scheme, which is under pending implementation DBP: denied liability to Yu on the ground that there being no proof that the unpaid merchandise purchased by Pioneer Glass were among those transferred to it Union Glass: denied liability to Yu on the ground that there was no privity of contract between them, or

ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA

assuming applicability of the Bulk Sales Law, no liability attached to Union Glass. MTC denied the motions to dismiss filed by Union Glass and DBP and ruled in favor of Yu. RTC affirmed MTC's decision. ISSUE: W/N the Pioneer Glass is a merchandiser, covered under the Retail Trade Act HELD: NO. There was an undisputed evidence that Pioneer Glass manufactures glass only on specific orders and does not sell directly to consumers but manufactures its products only for particular clients. As such, it cannot be said the Pioneer Glass is a merchandiser within the meaning of the Retail Trade Act.

50