Sales Digests Block 2b 2016

Ano ba memorable quotes sa class na ito? Send me a message if you have any ideas 

BLOCK B 2016

SALES DIGESTS BLOCK 2B 2016

Compiled by: Gil Arandia Pucha nasa board pa talaga yung procurator in rem suan (Photo is for those people na may crush kay ma’am hahaha) BLOCK B 2016

SALES DIGESTS BLOCK 2B 2016 Table of Contents Chapter 1: Nature of a Sale ...........................................................4 GAITE v. FONACIER ...................................................................4

Pio Sian Melliza vs. City of Iloilo, University of the Philippines and the Court of Appeals (1968).....................................................25

CELESTINO CO & COMPANY vs.
COLLECTOR OF INTERNAL REVENUE..................................................................................4

Atilano vs. Atilano (May 21, 1969)............................................27

COMMISSIONER OF INTERNAL REVENUE v ENGINEERING EQUIPMENT & SUPPLY CO. ........................................................5

NATIONAL GRAINS AUTHORITY and WILLLAM CABAL vs. THE INTERMEDIATE APPELLATE COURT and LEON SORIANO, ...........30

QUIROGA V PARSONS ...............................................................7

JOHANNES SCHUBACK & SONS PHILIPPINE TRADING CORPORATION vs. THE HON. COURT OF APPEALS ....................31

Puyat v Arco .............................................................................8 KER & CO. LTD. vs. Jose B. LINGAD. ............................................9 Lo v. KJS.................................................................................11 Chapter 2: Parties to a Contract of Sale ........................................12

Yu Tek & Co vs. Basilio Gonzales ..............................................29

CONCHITA NOOL and GAUDENCIO ALMOJERA vs. COURT OF APPEALS, ANACLETO NOOL and EMILIA NEBRE.........................32 Chapter 4: Price and Other Consideration. ...................................33

DOMINGO v CA.......................................................................12

Mitsui Bussan Kaisha vs. Manila Electric Railroad and Light Company................................................................................33

PARAGAS v. HEIRS of BALACANO .............................................14

VILLANUEVA V. CA ..................................................................35

CALIMLIM-CANULLAS v. FORTUN .............................................15

BLOCK B 2016

BLOCK B 2016 MANANSALA VS COURT OF APPEALS........................................24

JOSE R. MORENO, JR. vs Private Management Office ................36

MATABUENA v CERVANTES .....................................................16

Navarra v. Planters Development Bank ....................................39

PHILIPPINE TRUST CO. V ROLDAN ............................................17

Mapalo v. Mapalo...................................................................40

Macariola v Asuncion ..............................................................18

Rongavilla v. CA ......................................................................42

DOMINGO D.RUBIAS vs. ISAIAS BATILLER ................................20

Mate v. CA..............................................................................44

DAROY V ABECIA.....................................................................21

Yu Bun Guan vs Elvira Ong.......................................................45

Chapter 3: Subject Matter of a Contract of Sale ............................22

Vda Catindig v Heirs of Catalina Roque .....................................46

SIBAL Vs VALDEZ.....................................................................22

Ong v. Ong .............................................................................47

PICHEL V. ALONZO ..................................................................23

Bagnas v. CA...........................................................................49

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

2

SALES DIGESTS BLOCK 2B 2016

BLOCK B 2016

Republic v Phil. Resources Development ..................................52

BLOCK B 2016 Secuya v. Selma ......................................................................96

Chapter 5: Formation of a Contract of Sale...................................53

YUVIENCO vs Dacuycuy ...........................................................97

Manila Metal Container Corporation vs Philippine National Bank ..............................................................................................53

Limketkai Sons Milling Inc. v CA ...............................................99

United Muslim and Christian Urban Poor Association v. BRYC....55

Ortega v. Leonardo ............................................................... 101

Carceller v. Court of Appeals....................................................58

Claudel vs CA........................................................................ 102

Tayag vs Lacson ......................................................................60

Alfredo v. Borras................................................................... 103

Sanchez v. Rigos......................................................................61

Toyota Shaw Inc. v. CA .......................................................... 106

Diamante v. CA .......................................................................62

Chapter 6- Obligations of the Seller ........................................... 107

Vazquez v. CA .........................................................................66

Santos v. Santos.................................................................... 107

Nietes vs. CA...........................................................................67

Dy Jr. v. CA ........................................................................... 108

Ang Yu Asuncion vs. Court of Appeals.......................................69

Addison v. Felix..................................................................... 110

Equatorial Realty v. Mayfair Theater ........................................71

Danguilan v. IAC.................................................................... 111

Paranaque Kings vs Court of Appeals........................................73

Pasagui v. Villablanca ............................................................ 112

Vazquez v. Ayala Corporation ..................................................74

Power Commercial and Industrial Corp. v. CA ......................... 113

RIVIERA FILIPINA vs. CA ...........................................................75

Chua v CA............................................................................. 115

Macion v. Guiani .....................................................................80

Vive Eagle Land Inc v CA ........................................................ 117

Uraca v. CA .............................................................................82

Behn, Meyer Co. v Yangco ..................................................... 119

Villonco v. Bormaheco.............................................................83

General Foods Corp v. NACOCO............................................. 120

Oesmer v. Paraiso ...................................................................86

Rudolf Leitz Inc v. CA ............................................................. 121

Limketkai v. CA (MR- 1996).................................................... 100

ADELFA PROPERTIES, INC vs CA................................................88 Fule v. CA ...............................................................................92 Dalion v. CA............................................................................95 Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

3

SALES DIGESTS BLOCK 2B 2016 Chapter 1: Nature of a Sale GAITE v. FONACIER

BLOCK B 2016

obligation. By virtue of the sale being onerous, the favored interpretation of its terms favor the greater reciprocity of interests. Hence, the buyer’s obligation exists, only its due date is postponed.

Facts: Fonacier, owner/holder of 11 iron lode mineral claims executed a deed of assignment appointing Gaiter as his attorney-infact. In light of the appointment, Gaite executed a general assignment conveying the use and development of Fonacier’s mining claims into Larap iron mines owned by Gaite himself. Thereafter, Gaite developed and used the mining claim. In time, he extracted 24,000 metric tons of iron ore. Fonacier then revoked the authority granted to Gaite. Gaite assented, but with the condition that he receive royalties and P75,000 for the iron ores already extracted. Fonacier then issued 2 sureties good for 1 year to answer for the P65,000 balance. The sureties expired and Fonacier defaulted. Fonacier alleged that he is to pay the balance only when the suspensive condition has been fulfilled. Issue(s):

BLOCK B 2016

1. W/N the payment is subject to a suspensive condition Held: There was no suspensive condition, only a suspensive period. The sale or shipment is not a condition for the payment of the balance; it was merely to fix the future date of payment. According to the SC, a contract of sale is normally commutative and onerous, and that the parties thereto assume a correlative

CELESTINO CO & COMPANY vs.
COLLECTOR OF INTERNAL REVENUE Facts: Celestino Co & Company, registered under the trade name “Oriental Sash Factory, markets itself as “Manufacturers of all kinds of doors, windows, sashes, furniture, etc. used season-dried and kiln-dried lumber, of the best quality workmanships.” From 1946 to 1951, it paid taxes equivalent to 7% on the gross receipts under Sec. 186 of the NIRC(National Internal Revenue Code), which is a tax on the original sales of articles by manufacturer, producer or importer. However, in 1952 it began to pay only 3% tax under Sec. 191, which is a tax on sales of services. Petitioner claims that it does not manufacture ready-made doors, sash and windows for the public, but only upon special orders from the customers, hence, it is not engaged in manufacturing, but only in sales of services. Issue: Whether the petitioner’s claim is correct, that it is merely a special service provider – NO. Held: 1. As a general rule, “factories” receive orders for doors and windows of special design only in particular cases but the bulk of their sales is derived from a ready-made doors and windows of standard sizes for the average home. Celestino

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

4

SALES DIGESTS BLOCK 2B 2016 Co & Company habitually makes sash, windows and doors, as it has represented in its stationery and advertisements to the public. That it "manufactures" the same is practically admitted by appellant itself. The fact that windows and doors are made only when customers place their orders does not alter the nature of the establishment.

BLOCK B 2016

sold the materials. Also, the orders herein exhibited were not shown to be “special” as the article expressed. They were merely orders for work.

COMMISSIONER OF INTERNAL REVENUE v ENGINEERING EQUIPMENT & SUPPLY CO. FACTS:

2. It is not true that it serves special customers only. Citing one of its clients, Don Toribio Teodoro & Sons Inc, the court ruled that anyone who sees, and likes, the doors ordered by it, may identically purchase it provided he pays the price. The appellant will not refuse, for it can easily duplicate or even mass-produce the same doors. 3. The nature of the work they do does not fall within the definition of a construction work contractor enumerated in section 191 of the NIRC

BLOCK B 2016

4. Appellant invokes Article 1467 1 of the New Civil Code to bolster its contention that in filing orders for windows and doors according to specifications, it did not sell, but merely contracted for particular pieces of work or "merely sold its services". HOWEVER, Oriental Sash Factory did not merely sell its services to Don Toribio Teodoro & Co. because it also 1

A contract for the delivery at a certain price of an article which the vendor in the ordinary course of his business manufactures or procures for the general mark et, whether the same is on hand at the time or not, is a contract of sale, but if the goods are to be manufactured specially for the customer and upon his special order, and not for the general mark et, it is contract for a piece of work .

Engineering Equipment & Supply (EES) was engaged in the business of designing and installing central air-conditioning systems. On July 27, 1956, certain Juan de la Cruz wrote to the CIR denouncing EES for tax evasion. Pursuant to Section 1852 of the Tax Code, EES was assessed by the CIR for 30% advanced sales tax plus surcharges (of 25% and 50%) for misdeclaring its importation of air conditioning units and parts and accessories. EES appealed to Court of Tax Appeals (CTA), arguing 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. The Court of Tax Appeals reversed the order of the CIR, declaring that EES is a contractor. Hence, this appeal.

ISSUE: W/N EES is a manufacturer of air conditioning units under Section 185 of the Code or a contractor (piece of work) under Section 191.

2

Sec 185. Ther e shall be levied, assessed and collected once only on every original sale, barter, exchange, or similar transaction intended to transfer ownership of…a tax equivalent to 30% of the gross selling price….

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

5

SALES DIGESTS BLOCK 2B 2016 HELD:. EES is a contractor, subject to tax stated in Section 191 of the Code.



There is a distinction between a contract of sale (manufacturer) and a contract for furnishing services, labor and materials. Such difference is tested by the inquiry of whether the thing transferred is one not in existence and which never would have existed but for the order of the party desiring to acquire it, or a thing which would have existed and has been the subject of sale to some other persons even if the order had not been given.

BLOCK B 2016

o Art 1467 (Civil Code) – a contract for the delivery at a certain price of an article which the vendor in the ordinary course of his business manufactures or procures for the general market, whether the same is on hand at the time or not, is a contract of sale, but if the goods are to be manufactured specially for the customer and upon his special order and not for the general market, it is a contract for a piece of work. o A contractor is a person who, in pursuit of independent business undertakes to do a specific job or piece of work for other persons, using his own means and methods without submitting himself to control as to the petty details 

Though EES imported such items, they were NOT for sale to the general public and were used as mere components for

BLOCK B 2016

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 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. This implies that EES did not intend to sell the said aircon units to the general public. Thus, EES is not liable for the sales tax of 30%. 

.EES should be held liable to pay the taxes prescribed in Section 190 of the Code. This compensating tax is not a tax on the importation of goods but a tax on the use of imported goods not subject to sales tax. Hence, it should be held liable to the payment of 30% compensating tax in accordance with Sec 190, but without the 50% mark up provided in Section 183 (b) (I think 50% is removed because it’s for contract of sale!?!?).



Also, EES should be subjected to 25% surcharge for delinquency in the payment of the said tax, as provided in Section 190: o Sec 190 – If any article withdraen from the customhouse or the post office without payment of the compensating tax is subsequently used by the importer for other purposes, corresponding entry should be made in the books of accounts if any are kept or a written notice thereof sent to the

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

6

SALES DIGESTS BLOCK 2B 2016 Collector and payment of the corresponding compensating tax made within 30 days from the date of entry or notice, and if tax is not paid within such period the amount of tax shall be increased by 25%....

the code provides for the exceptions as to the period of limitation of assessment and collection of taxes : o Sec 332 – in case of a false and fraudulent return with intent to evade tax…, the tax may be assessed, or a proceeding in court for the collection of such tax may be begun without assessment at any time within 10 years after the discovery of the falsity, fraud or omission.

MINOR ISSUES 1. W/N EES is guilty of fraud (tax evasion) Held: Yes, as proven by correspondences of EES with foreign companies wherein EES requested that words of airconditioning equipment should not be mentioned in shipping documents. 

BLOCK B 2016



The CTA absolved EES from paying the 50% surcharge prescribed in Sec 183 (a) because the surcharge Section 190 of the tax Code (where EES is subjected to as a contractor) does not provide it. According to CTA, where a particular provision of the tax code does not impose a 50% surcharge as fraud penalty, it cannot be enforced. BUT, because the fraud is too glaring, it was held that EES could not be absolved from the 50% fraud surcharge. Otherwise, it would give premium to an intolerable act of tax evasion.

2. W/N the tax assessment has prescribed Held: no 

EES contends that the prescriptive period is 5 yrs. from importation. But the SC held that Sec 332 of

BLOCK B 2016

QUIROGA V PARSONS FACTS: On January 24, 1911, herein plaintiff-appellant AndressQuiroga and J. Parsons, both merchants, enteredinto a contract, for the exclusive sale of "Quiroga" Beds in the Visayan Islands. It was agreed, among others, that Andres Quiroga grants the exclusive right to sell his beds in the Visayan Islands to J.Parsons, subject to some conditions provided in the contract. Likewise, it was agreed that. Incompensation for the expenses of advertisement which, for the benefit of both contracting parties, Mr.Parsons may find himself obliged to make, Mr.Quiroga assumes the obligation to offer and give thep reference to Mr. Parsons in case anyone should apply for the exclusive agency for any island notcomprised with the Visayan group; and that, Mr. Parsons may sell, or establish branches of his agency forthe sale of "Quiroga" beds in all the towns of the Archipelago where there are no

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

7

SALES DIGESTS BLOCK 2B 2016 exclusive agents, and shall immediately report such action to Mr. Quiroga for his approval. The defendant violated the following obligations: not to sell the beds at higher prices than those of the invoices; to have an open establishment in Iloilo; itself to conduct the agency; to keep the beds on public exhibition, and to pay for the advertisement expenses for the same; and to order the beds by the dozen and in no other manner

He alleged that the defendant washis agent for the sale of his beds in Iloilo, and that said obligations are implied in a contract of commercial agency. ISSUE: 1. Whether or not the defendant, by reason of the contract hereinbefore transcribed, was an agent of theplaintiff for the sale of his beds. HELD:

BLOCK B 2016

one made on the basis of a commission on sales, as the plaintiff claims it was, for these contracts are incompatible with each other. But, besides, examining the clauses of this contract, none of them is found that substantially supports the plaintiff's contention. Not a single one of these clauses necessarily conveys the idea of an agency. These features exclude the legal conception of an agency or order to sellwhereby the mandatory or agent received the thing to sell it, and does not pay its price, but delivers tothe principal the price he obtains from the sale of the thing to a third person, and if he does not succeedin selling it, he returns it. By virtue of the contract between the plaintiff and the defendant, the latter, onreceiving the beds, was necessarily obliged to pay their price within the term fixed, without any otherconsideration and regardless as to whether he had or had not sold the beds. In respect to the defendant's obligation to order by the dozen, the only one expressly imposed by the contract, the effect of its breach would only entitle the plaintiff to disregard the orders which the defendant might place under other conditions; but if the plaintiff consents to fill them, he waives his right and cannot complain for having acted thus at his own free will.

No. BLOCK B 2016

Puyat v Arco In order to classify a contract, due regard must be given to its essential clauses. In the contract in question, there was the obligation on the part of the plaintiff to supply the beds, and, on the part of thedefendant, to pay their price. That the contract by and between the defendant and the plaintiff is one of purchase and sale, in order to show that it was not

Facts: Arco Amusement Company and Gonzalo Puyat & Sons Inc, entered into an agreement that the latter would order sound reproduing equipment from Starr Piano Company (which was based in the US). Gonzalo Puyat & Sons Inc is the exclusive agent of Starr Piano. The first and second order of the said equipment all arrived

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

8

SALES DIGESTS BLOCK 2B 2016 in due time. They were charged the price of the equipment, 10% commission and other charges (freight, insurance, banking, etc.). Some time later, in a civil case filed by another company against Puyat, Arco found out that Puyat charged them with the list price and not the net price of the equipment and that Puyat had received discounts for the order of said equipments. By reason of said events, Arco brought a suit to the CFI of Manila, seeking reimbursement from Puyat. Trial Court ruled that the contract was that of outright purchase and sale and absolved Puyat. The CA reversed the decision by holding that the relationship between petitioner and respondent was that of agency. Issues: W/N there was the contract was that of an agency or an outright purchase and sale. W/N there was fraud when petitioner obtained the consent of the Arco on the price of the sound reproducing equipment.

BLOCK B 2016

Held: SC sustained the theory of the trial court that the contract between petitioner and respondent was that of purchase and sale. The contract entered into was clear in their terms and admit no other interpretation. The agreement between them was for Puyat to sell to Arco the sound reproducing equipment. The 10% commission does not necessarily make the petitioner an agent of the respondent, as this provision is only an additional price which the respondent bound itself to pay, and which stipulation is not incompatible with the contract of purchase and sale. Also, SC noted

BLOCK B 2016 that Puyat was the exclusive agent of Starr Piano and that it is out of the ordinary to be the agent of BOTH the vendor and purchaser There was no fraud. It is to be observed that the twenty-five per cent (25%) discount granted by the Starr Piano Company to the petitioner is available only to the latter as the former's exclusive agent in the Philippines. The respondent could not have secured this discount from the Starr Piano Company and neither was the petitioner willing to waive that discount in favor of the respondent. Respondent willingly paid the price quoted and it received the equipment and machinery as represented. It is well known that local dealers acting as agents of foreign manufacturers, aside from obtaining a discount from the home office, sometimes add to the list price when they resell to local purchasers. Not every concealment is fraud, in this issue SC said that, business acumen permit of the loosening of the sleeves and of the sharpening of the intellect of men and women in the business world.

KER & CO. LTD. vs. Jose B. LINGAD. FACTS: 

Petitioner Ker & Co. was held liable as a commercial broker under Section 194(t) of the National Internal Revenue and was assessed to be liable for P20,272.33 as commercial broker’s percentage tax. o This liability arose when petitioner (Ker & Co. as “distributor”) entered to a contract with United States Rubber International (referred to as “Company”). o The stipulations of their contract states that:

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

9

SALES DIGESTS BLOCK 2B 2016 



That the Company will from time to time consign the specified products to the Distributor as the Company would judge to be necessary.  All goods consigned will remain the property of the Company until sold by the Distributor and all sales made by the Distributor shall be made in his name.  However, it was also stipulated that the contract does not constitute the Distributor the agent or legal representative of the Company for any purpose whatsoever. The Commissioner of Internal Revenue therefore assessed Ker & Co. to be a commercial broker under such agreement and that the Court of Tax Appeals upheld such finding. Hence, the petition to the Supreme Court

ISSUE(s): 1. W/N the relationship between Ker & Co. LTD. and United States Rubber International is one of vendor and vendee or broker and principal.

BLOCK B 2016

HELD/RATIO: 

The Supreme Court affirmed the decision of the Court of Tax Appeals finding that Ker & Co. LTD. is a commercial broker of United States Rubber International. o The National Internal Revenue Code defines a commercial broker as, “…all persons, other than

BLOCK B 2016

importers, manufacturers, producers or bona fide employees, who, for compensation or profit, sell or bring about sales or purchasers of merchandise for other persons or bring proposed buyers and sellers together.” o The Court reiterated the controlling test to be followed as to who falls under the definition of a commercial broker in Commissioner of Internal Revenue v. Constantino which states that:  “Since the company retained ownership of the goods, even as it delivered possession unto the dealer for resale to customers, the price and terms of which were subject to the company’s control, the relationship between the company and the dealer was of agency.” o Salisbury v. Brooks supports such view: o The transaction is a sale if such transfer puts the transferee in the position of an owner and makes him liable to the transferor as a debtor for the agreed price. o The transaction is one of agency to sell if the ownership of the property delivered to the agent remained with principal and has the right to fix the price, control sales and

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

10

SALES DIGESTS BLOCK 2B 2016 receive the proceed less the agent’s commission upon sales made.

BLOCK B 2016 W/N THE EXECUTED DEED OF ASSIGNMENT, A FORM OF DACION EN PAGO, EXTINGUISHED LO’S OBLIGATION TO KJS – No. Held:

Lo v. KJS [G.R. No. 149420. October 8, 2003] Facts: Lo bought from KJS scaffolding equipment worth P540k. He paid a downpayment of P150k, the balance to be payable in ten monthly installments. Upon default on the installments, both parties consented to a dacion en pago to satisfy the debt. A deed of assignment was executed in favor of KJS, assigning Lo’s credit from Jomero Realty Corp. (JRC), a company who owes him money.

BLOCK B 2016

The deed contained, among others, a warranty that Lo (assignor) “shall and will at times hereafter, at the request of said ASSIGNEE, execute and do all such further acts and deeds as shall be reasonably necessary to effectually enable said ASSIGNEE to recover whatever collectibles said ASSIGNOR has in accordance with the true intent and meaning of these presents.” However, when KJS tried to collect from JRC, the latter refused on the ground that Lo was also indebted to him (JRC). So, KJS demanded payment from Lo who however contends that his obligation has been extinguished when they executed the deed of assignment.

1.) No. The deed of assignment served to be a dacion en pago, a special mode of payment where the debtor offers another thing to the creditor who accepts it as equivalent of payment of an outstanding debt. In order that there be a valid dation in payment, the following are the requisites: (1) There must be the performance of the prestation in lieu of payment (animo solvendi) which may consist in the delivery of a corporeal thing or a real right or a credit against the third person; (2) There must be some difference between the prestation due and that which is given in substitution (aliud pro alio); (3) There must be an agreement between the creditor and debtor that the obligation is immediately extinguished by reason of the performance of a prestation different from that due. 2.) However, although there is a dacion en pago which may extinguish an obligation, such dacion is, by express provision of law (Art. 1245), governed by the Law on Sales. Being governed by the Law on Sales, Art. 1628 applies: The vendor i n good faith shall be responsible for the exis tence and legali ty of the credit a t the time of the sale , unless it should ha ve been sold as doubtful ; but not for the sol vency of the debtor, unless i t has been s o expressly s tipula ted or unless the insol vency was prior to the sale and of common knowledge.

Issue: Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

11

SALES DIGESTS BLOCK 2B 2016 Accordingly, Lo, being the vendor of his credit, is bound by law and the stipulation on the deed to warrant the existence and legality of the credit at the time of the sale or assignment. This he failed to do because, as it appears, compensation had already taken place between him and JRC. In other words, at the time he assigned his credit to KJS, the credit was already non-existent because of compensation had already taken place by operation of law.

Chapter 2: Parties to a Contract of Sale

BLOCK B 2016 -since then, they had been in continuous possession and had introduced permanent provisions -that petitioners entered the properties illegally and refused to leave when asked to do so PETITIONER's VERSION -alleged deed of absolute sale is void for being spurious and for lacking consideration -Paulina did not sell her properties to anyone

DOMINGO v CA (sorry for the long digest and dahil hindi paragraph form! heavy to sa facts dahil 2 different versions kaya hiniwalay ko na parang bullet form para mas malinaw. magulo din pagkasulat sa case eh)

BLOCK B 2016

Facts:

-as Paulina's nearest surviving kin within the 5th degree of consanguinity, they inherited the three lots upon her death in 1966 -they had been in possession of the properties for more than 10 years

Paulina Rigonan owned 3 parcels of land in Ilocos. She allegedly sold them to spouses Felipe and Concepcion Rigonan (private respondents) who claim to be her relatives. Respondents filed a complaint for revindication against Petitioners Eugenio Domingo and 2 others, who claim to be Paulina's closest surviving relatives, who allegedly took possession of the properties and refused to vacate the same.

- the alleged consideration for the parcels of land which was for the price of P850 only indicates a fictitious sale

RESPONDENT's VERSION

2. Atty Tagatag (Notary) testified that he personally prepared the deed, that he saw Paulina affix her thumbprint, and that he signed as both witness and notary. He also testified to notarizing Paulina's last will and testament in 1965. The will mentioned the same lots sold to respondents and he could not explain why.

-they are the owners of the three parcels of land through a deed of sale executed by Paulina in 1965

TESTIMONY FOR RESPONDENTS 1. Juan Franco testified that he was a witness to the questionned deed. However when cross-examined and shown the deed, he stated that the deed was not the document he signed as a witness

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

12

SALES DIGESTS BLOCK 2B 2016 3. Felipe Rigonan claimed to be Paulina's close relative, that their fathers were first cousins. But he could not remember the name of Paulina's grandfather. His claim was disputed by defendants who lived withh Paulina as their close kin. TESTIMONY FOR PETITIONERS 1. Jose Flores, owner of the adjacent lot and who lived there with Paulina since he could remember and til her death, said thathe did not receive any notice nor offer to sell the lots. This is contrary to the deed of sale which mentioned that all adjacent owners were notified of the sale. He doesnt have any knowledge of any sale 2. Ruben Blanco, Refistrar of Deeds, testified that only a carbon copy of the deed was filed in his office 3. Zosima Domingo, wife ofEugenio, testified that her husband was Paulina's nephew ( Eugenio's father and Paulina were first cousins) and that they lived with Paulina since 1956. They took care of her daily needs even whenl she was hospitalized and until she died.

BLOCK B 2016

RULINGS OF LOWER COURTS 1. RTC favored herein petitioners and declared them the lawful owners and possessors by virtue of intestate succession. The deed was found to be "fake", being a carbon copy with no original presented, and that the document's execution was tainted with alterations, defects, tamperings, and irregularities which render it void ab initio. Testimonies for respondents were also rebutted as Franco retracted his testimony, Tagatag's testimony was not credible as he is a witness and notary to both the deed and will AND

BLOCK B 2016 ALSO a paid witness to the case. Also, Zosima Domingo, Paulina's housekeeper, testified that he did not seeTagatag and the other parties in Paulina's house on the alleged date of the deed's execution. 2. CA reversed and ordered herein petitioners to vacate the property. Issue W/N the existence and due execution of the deed of sale was established. --NO.

Ruling 1. Respondents only presented a carbon copy of the deed. Although CA calls it a "duplicate original", it contained filled in blanks and alterations.It also did not bear Paulina's signature but only her alleged thumbprint. Franco, also testified that said deed was not the one he signed as witness. The only testimony available for them is Atty Tagatag's, which is uncorroborated and self-serving 2. Irregularities abound regarding the execution and registration of the alleged deed of sale. The carbon copy had intercalations and discrepancies allegedly due to blanks left unfilled by Tagatag during its registration. The alleged other copies also bore different dates of entry and the deed was registered long after its date of execution and after Paulina's death. Paulina, the alleged vendor, was not given a copy.

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

13

SALES DIGESTS BLOCK 2B 2016 Also, Paulina was never asked to vacate the premises she purportedly sold, allegedly because Felipe agreed to let Paulina to stay in the house until her death. In one case, The buyer's immediate possession and occupation of the property was deemed corroborative of truthfulness and authenticity of the deed of sale. The alleged vendor's continued possession in this case throws an inverse implication, a serious doubt on the due execution of the deed of sale. It is also noteworthy that the same parcels of land involved here were still included in he will subsequently executed by Paulina.

BLOCK B 2016

3. The price of P850 allegedly paid by respondents for 9 parcels of land, including 3 parcels in dispute, a house, and a warehouse, raises further questions. Consideration is the why of the contract, the essential reason which moves the contracting parties to enter into the contract. Since Paulina is well-off, we see no compelling reason for her to sell the subject properties at a meager price of P850. (Fictitious and grossly and shockingly inadequate consideration -- sale is void ab initio) 4.The general rule is that a person is not incompetent to contract merely because of advanced years or by reason of physical infirmities. However, when such age or infirmities have impaired the mental faculties so as to prevent the person from properly, intelligently, and firmly protecting her property rights, then she is undeniably incapacitated.At the time of the execution of the alleged contract, Paulina was already of advanced age and senile. Zosima he housekeeper testified that at the time of the alleged

BLOCK B 2016 execution of thhe deed, Paulina was already incapacitated physically and mentally (she was 80 y/o.Zosima narrated that at that time, Paulina plays with her waste and urinates in bed). These raise doubt that she consented to the sale of and the price of the properties. There is also no receipt. IF EVER ASKED: Procedural Issues raised by Respondents 1. Factual determination by the trial court lacks credibility for itwas made by trial judge who presided only in one hearing of the case COURT RULED: A judge may validly render a decision although he has only partly heard the tertimony of the witnesses since he could rely on the records of the case 2. The Petition lacks a certification against forum shopping COURT RULED: Petitiones averred that they attached one in the copy intended for this Court. This is substantial compliance 3. Petition must be deniedbecause it does not present anybsubstantial legal issue, but factual or evidentiary ones which were already firmly resolved by the CA COURT RULED: This petition is properly given due course though mainly factual because of the contradictory findings of the trial court and the CA. The latter court apparenlty overlooked certain relevant factswhich justify a different conclusion.

PARAGAS v. HEIRS of BALACANO G.R. No. 168220 August 31, 2005

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

14

SALES DIGESTS BLOCK 2B 2016 Facts: Gregorio Balacano was the registered land owner of Lots 1175-E and 1175-F in Santiago City, Isabela. He was hospitalized for suffering from liver cirrhosis on June 28, 1996 at the Veterans Hospital in Nueva Viscaya, and was later on transferred to Veterans Memorial Hospital in Quezon City. He died on July 28, 1996. On July 22, 1996, or barely a week before his death, Gregorio purportedly sold Lot 1175-F and a portion of 1175-E to spouses Rudy and Corazon Paragas for P500,000. On October 17, 1996, the spouses sold a portion of Lot 1175-E to Catalino, one of the children of Gregorio.

BLOCK B 2016 reason of physical infirmities. However, when such age or infirmities have impaired the mental faculties so as to prevent the person from properly, intelligently, and firmly protecting her property rights, then she is undeniably incapacitated. In the case at bar, the deed of sale was allegedly signed by Gregorio on his death bed in the hospital. Gregorio was an octogenarian and was suffering an illness at that time – circumstances which raise grave doubts on his physical and mental capacity to freely consent to the contract.

CALIMLIM-CANULLAS v. FORTUN On October 22, 1996, the grandchildren of Gregorio then filed a complaint for annulment of sale and partition. They allege that their grandfather could not have sold the subject lots because at the time of the execution of the deed of sale, their grandfather was seriously ill and dying at that time, which vitiated his consent to the disposition of the property. Issue: 1. W/N the sale of the lots are valid BLOCK B 2016

Held: No. In Domingo v. Court of Appeals, the Court declared as null and void the deed of sale therein inasmuch as the seller, at the time of the execution of the alleged contract, was already of advanced age and senile. The general rule is that a person is not incompetent to contract merely because of advanced years or by

FACTS Mercedes and Fernando were married in 1962 and had 5 children. They lived in a small house on the residential land in question. Fernando inherited such land after the death of his father in 1965. In 1978, Fernando left his family to live w/ his concubine Corazon. He then sold said lot w/ the house in favor of Corazon for P2,000.00. Corazon, unable to take possession of the house and lot, filed a complaint for quieting of title. Mercedes objected alleging that the the sale of the land together with the house and improvements to Corazon was null and void because they are conjugal properties and she had not given her consent to the sale. The trial court at first ruled in favor of Corazon as the lawful owner of the land as well as ½ of the house erected on the land. However, lower court later modified the judgment by declaring that Corazon is the lawful owner of the land but the sale of the conjugal house was null and void.

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

15

SALES DIGESTS BLOCK 2B 2016 ISSUES (1) W/N the construction of a conjugal house on the exclusive property of the husband ipso facto gave the land the character of conjugal property; and (2) W/N the sale of the lot together with the house and improvements thereon was valid under the circumstances surrounding the transaction.

HELD

BLOCK B 2016

(1) YES. According to Article 158 of the Civil Code, buildings constructed at the expense of the partnership during the marriage on land belonging to one of the spouses also pertain to the partnership, but the value of the land shall be reimbursed to the spouse who owns the same. Therefore, Fernando could not have alienated the house and lot to Corazon since Mercedes had not given her consent to said sale. (2) NO. The sale was null and void for being contrary to morals and public policy. The law generally prohibits spouses from selling or donating properties to each other; the same prohibitions apply to a couple living as husband and wife w/o the benefit of marriage. To rule otherwise would be to put the persons in guilt at a better position than those legally married. This is dictated by the public interest.

BLOCK B 2016

MATABUENA v CERVANTES Facts: On February 20, 1956 Felix Matabuena executed a deed of donation inter vivos in favor of Petronila Cervantes, his commonlaw spouse. They married on March 28, 1962. Unfortunately, on Sept. 13 1962, Felix died intestate (um... it means: “Having made no legal will”). Cornelia Matabuena, Felix’ only sister and nearest relative to him, questioned the validity of the donation. She claimed that the ban on donations between spouses should also apply to common-law marriages. She had the land declared in her name by virtue of an affidavit on self-adjudication, paying the estate and inheritance taxes as well. On November 23, 1965, the lower court upheld the validity of the donation saying that it was done while the spouses weren’t married yet, hence the prohibition on art. 133 does not apply. Cornelia then appealed to the supreme court Issue: W/N the ban on a donation between the spouses during a marriage applies to common-law relationship Held: The supreme court reversed the decision of the lower court. While Article 133 of the Civil Code considers as void a donation between the spouses during marriage, policy consideration of the most exigent character as well as the dictates of morality requires that the same prohibition should apply to a common-law relationship, as it is contrary to public policy (JBL Reyes, Buenaventura v. Bautista 1954). The law prohibits donations to the

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

16

SALES DIGESTS BLOCK 2B 2016 other consort because of fear of undue pressure and influence upon the donor. So long as marriage remains the cornerstone of family law, reason and morality alike demand that the disabilities attached to marriage should likewise attach to concubinage. (Spirit of the Law: StatCon: Whatever omission may be apparent in an interpretation purely literal of the language used must be remedied by an adherence to its avowed objective) However, the lack of validity of the donation by the deceased to appellee does not necessarily result in appellant having exclusive right to the disputed property. As a widow, Cervantes is entitled to one-half of the inheritance, and the plaintiff, the surviving sister to the other half.

PHILIPPINE TRUST CO. V ROLDAN

BLOCK B 2016

Facts: Mariano Bernardo inherited 17 parcels of land from his deceased father. Since Mariano was a minor, guardianship proceedings were instituted and her step-mother, Socorro Roldan was appointed as his guardian. Roldan filed in said guardianship proceedings a motion asking for authority to sell as guardian the 17 parcels for the sum of P14,700 to Dr. Fidel C. Ramos, her brother-inlaw, the purpose of the sale being allegedly to invest the money in a residential house in Tindalo Street Manila, which the minor desired to have. The motion was granted and she sold the land with judicial confirmation of the sale. After a week, Dr. Ramos sold to her the same lands for P15,000. Later on, Roldan sold 4 parcels out of the 17 to Emilio Cruz. Philippine Trust Company subsequently replaced Roldan as guardian and sought to declare as null and void the three

BLOCK B 2016 sales that occurred stating that the first two (between Roldan and Dr. Ramos and vice versa) was against Article 1459 of the Civil Code and that the third sale was also ineffectual because Roldan had acquired no valid title to convey to Cruz. Issue: 1. w/n the sale of the 17 parcels of land was null and void for violation of Article 1459 of the Civil Code which prohibits a guardian from purchasing either in person or through the mediation of another the property of her ward. Held: The Supreme Court annulled the 3 contracts of sale in question; declared the minor as the owner of the 17 parcels of land along with its fruits, with the obligation to return to Roldan the price of P14,700 with legal interest. Guardianship is a trust of the highest order, and the trustee cannot be allowed to have any inducement to neglect his ward’s interest and in line with the court’s suspicion whenever the guardian acquires the ward’s property, the Court has no hesitation to declare that in this case, in the eyes of the law, Socorro Roldan took by purchase her ward’s parcels thru her brother-in-law, and that Article 1459 ofthe Civil Code applies. Even if no collusion is proved or that the guardian may have acted without malice, the fact remains that she acquired the properties of her protégé through her brother-in-law.. Due to the very short time between the two sales (a week), it may be deduced that she planned to acquire the properties for herself at the time of

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

17

SALES DIGESTS BLOCK 2B 2016 selling them to Dr. Ramos. The sale between Roldan and Cruz is likewise void because Roldan never acquired title to the parcels of land. More Information: The Philippine Trust Company filed the case against Roldan before the CFI Manila which held that there was no proof that Dr. Ramos was a mere intermediary or that the latter had an agreement with Socorro to buy the parcels for her benefit. The trial court upheld the contracts but allowing the minor to repurchase all the parcels by paying P15, 000, within 1 year. The CA affirmed the judgment. Hence, the appeal to the SC which reversed the decision.

BLOCK B 2016

The defense sought by Roldan through Rodriguez v. Mactal does not apply because in that case the guardian sold the property of her ward in 1926 and repurchased it two years after which is enough to dispel the natural suspicion of the guardian’s motives or actions. In the present case, only 1 week had elapsed between the first two sales. Minor on losing end in the transaction. The calculation, that the investment in the Tindalo Street house produces to the minor the rentals of P2,400 yearly while the parcels of land yield for the stepmother an average of P1,522 yearly, does not include the price of the lot on which the house was erected. Estimating such lot at P14,700 only, the result is that the price paid for the 17 parcels gave the minor an income of only P1,200 a year, whereas the harvest from the seventeen parcels netted his step-mother a yearly profit of P1,522.00. The minor was on the losing end.

BLOCK B 2016

Macariola v Asuncion Who were the petitioners/respondents? Macariola: A civil case for partition of property was decided after her father died. She was unhappy with her share. Apparently it was the smallest and least valuable. So naturally she sued to annul. Judge Asuncion: The Judge who decided Civil Case 3010. He later purchased a lot which was part of that involved in the partition of that case. Facts: Both the petitioner and the respondents in the antecedent civil case are the children of a certain recently deceased Francisco Reyes. The two contending parties in this case were Macariola, child of Reyes by his first wife, and the remaining Reyeses, Francisco’s children with his second wife. The case stemmed from a dispute regarding how to divide the estate of the late Francisco among his various heirs, and for this purpose a civil case had been filed previously which resulted in a project of partition among the properties as between the Macariolas and the Reyeses, duly approved by both. The problem emerged when one of the properties solely owned by Francisco Reyes, Lot Number 1184, was subdivided after the Project of Partition. It was divided into 5 lots, Lot 1184-A through E. Lot 1184-E (2,172 sqm) was thereafter reconveyed (sold) to Dr. Arcadio Galapon and wife, in 1964. On 1965, Galapon thereafter sold a portion of this lot to Judge Asuncion (he was the judge that handled the previous Civil Case regarding partition) and wife. The year after (1966), The spouses Galapon and Asuncion sold their

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

18

SALES DIGESTS BLOCK 2B 2016 collective shares and interests in Lot 1184-E to Traders Manufacturing and Fishing Industries, Inc. of which the spouses Asuncion were shareholders. On 1968, Macariola, filed a complaint to annul the partition of the property. It was only then that Macariola discovered that a lot was already owned by the Judge. Learning of what transpired, Macariola filed a complaint against Judge Asuncion with four causes of action: 1) Violation of Article 1491 of the Civil Code by purchasing a lot which was the subject of decision by him in a judicial proceeding. 2) Violation of Anti-Graft and Corrupt Practices Act by associating with Traders Manufacturing and being a stockholder therein while at the same time a presiding judge. 3) That he willingly associated with an impostor lawyer who was a stockholder at Traders. 4) That he lacked judicial ethics. Issue Important to Sales:

BLOCK B 2016

I)

Whether or not Judge Asuncion Violated Article 1491 of the Civil Code: No

Article 1491 states that: Article 1491. The following persons cannot acquire by purchase, even at a public or judicial action, either in person or

BLOCK B 2016

through the mediation of another: "(5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other officers and employees connected with the administration of justice, the property and rights in litigation or levied upon an execution before the court within whose jurisdiction or territory they exercise their respective functions; this prohibition includes the act of acquiring by assignment and shall apply to lawyers, with respect to the property and rights which may be the object of any litigation in which they may take part by virtue of their profession".

Ruling: The prohibition regarding the purchase of the subject property under article 1491 only applies to property under litigation. By ‘under litigation’, we mean literally that there is still a case pending. By the time Judge Asuncion had acquired the property, there has been a long time had already transpired, there was no appeal filed or perfected in due course, In short, it was already final and executor. Note that his decision was made in 1963, while he purchased the land in 1965. Hence, it was no longer subject of litigation. The subsequent case filed to annul the partition on 1968 did not change the character of the property and the fact that, by then, it was already owned by Asuncion. Hence, there was no violation. Further, the property was purchased not from the parties in litigation, but from an innocent third party afterwards (Galapon). , the Court did say it was improper (not illegal) for the judge to purchase a property previously subject to his judicial

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

19

SALES DIGESTS BLOCK 2B 2016 decision, because judges should avoid the appearance of impropriety. Nevertheless, as to the charges of possessing prohibited interest, the Court took notice of the fact that a few days after the incorporation of Traders, the Asuncions sold their share, implies that they were aware of the appearance of impropriety. This is according to Canon 25, Canons of Judicial Ethics. "A judge should abstain from making personal investments in enterprises which are apt to be involved in litigation in his court; and, after his accession to the bench, he should not retain such investments previously made, longer than a period sufficient to enable him to dispose of them without serious loss. It is desirable that he should, so far as reasonably possible, refrain from all relations which would normally tend to arouse the suspicion that such relations warp or bias his judgment, or prevent his impartial attitude of mind in the administration of his judicial duties. . . ." Judge Asunción was Aquitted Also, he got promoted to Court of Appeals Justice in the end.

DOMINGO D.RUBIAS vs. ISAIAS BATILLER

BLOCK B 2016

FACTS: On August 31, 1964, plaintiff Domingo D. Rubias filed a suit to recover the ownership and possession of certain portions of lot under Psu-99791 located in Barrio General Luna, Barotac Viejo, Iloilo which he bought from his father-in-law, Francisco Militante in 1956 against its present occupant defendant, Isaias Batiller, Before the war, Militante claimed ownership of a parcel of land located in the Barrio of General Luna, municipality of Barotac

BLOCK B 2016 Viejo province of Iloilo, which he caused to be surveyed on, whereby he was issued a plan Psu-99791. During the war, the record of the case was lost before it was heard, so Militante petitioned to reconstitute the case. The CFI of Iloilo dismissed his application. Militante appealed to the CA. Pending appeal, Militante sold the land to plaintiff. However, the CA affirmed the CFI’s decision dismissing Militante’s application for registration. ISSUES:

1. WON the contract of sale between appellant and his fatherin-law, the late Francisco Militante over the property subject of Plan Psu-99791 was void because it was made when plaintiff was counsel of his father-in-law in a land registration case involving the property in dispute (relevant to Sales) HELD: 1. Yes. Plaintiff lacks cause of action that calls for the dismissal of the complaint. No right or title was passed on/sold by Militante to plaintiff because Militante’s application for registration was dismissed. Also, even assuming that Militante had the right to sell to plaintiff, their deed of sale/contract is null and void according to the Civil Code: Art. 1409. The following contracts are inexistent and void from the beginning: xxx (7) Those expressly prohibited by law.

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

20

SALES DIGESTS BLOCK 2B 2016 ART. 1491. The following persons cannot acquire any purchase, even at a public auction, either in person of through the mediation of another: xxx (5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other officers and employees connected with the administration of justice, the property and rights of in litigation or levied upon an execution before the court within whose jurisdiction or territory they exercise their respective functions; this prohibition includes the act of acquiring an assignment and shall apply to lawyers, with respect to the property and rights which may be the object of any litigation in which they may take part by virtue of their profession.

DAROY V ABECIA Nature: Complaint for malpractice filed by Regalado Daroy (now deceased) against Atty. Esteban Abecia, a member of the Bar.

BLOCK B 2016 turn conveyed the land to Nena Abecia, wife of respondent Abecia, for the sum of P1,350.00. Two weeks thereafter, under date of April 17, 1971, the said Jose Gangay executed a Deed of Sale of the same property in favor of Mrs. Nena Abecia, the wife of the respondent, by virtue of which TCT No. T-15926 was issued in the name of Nena Abecia, married to Atty. Esteban Abecia, the respondent. Sometime in the year 1984, the complainant discovered that his said property was already in the name of Mrs. Nena Abecia and Atty. Esteban Abecia. He now claims that these sales are void because Abecia forged his signature on the deeds of sale. IBP disbarred Abecia. Issue: 1. Did the IBP erred in dismissing Abecia? 2. Is the sale of the property void?

Facts:

BLOCK B 2016

Held: Abecia was the counsel for Daroy in a forcible entry case. He hired Abecia as his lawyer and won. To satisfy the award for damages, a parcel of land of the defendant was sold to Daroy at an execution sale. . Upon failure of the defendants to redeem the land, its ownership was consolidated in complainant Daroy. The land was then sold to Daroy’s relative, who then sold it to Abecia’s wife. Complainant Daroy claimed that respondent Abecia forged his signature in a deed of absolute sale, dated March 31, 1971, transferring the subject parcel of land to Jose Gangay purportedly for the sum of P1,250.00 and that in a fictitious deed of absolute sale, dated April 17, 1971, it was made to appear that Gangay in

1. The IBP erred in dismissing Abecia. (see reason in no. 2) 2. Daroy had knowledge of the sale. Complainant very well knew of the execution of the deed of sale as shown in the Sheriff’s Return of Service. The evidence shows that Daroy was a party to the sale at the time it was made and did not “discover” it 9 years later as he claimed. He was not defrauded. The parties thought that because the land had been acquired at a public sale to satisfy a judgment in a case in which respondent was complainant’s counsel, the latter could not acquire the land. The parties made this

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

21

SALES DIGESTS BLOCK 2B 2016 arrangement to circumvent Art. 1491 of the Civil Code which prevents lawyers from acquiring property and rights that may be the object of any litigation in which they may take by virtue of their profession. ART. 1491. The following persons cannot acquire by purchase, even at a public or judicial auction, either in person or through the mediation of another: .... (5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other officers and employees connected with the administration of justice, the property and rights in litigation or levied upon an execution before the court within whose jurisdiction or territory they exercise their respective functions; this prohibition includes the act of acquiring by assignment and shall apply to lawyers, with respect to the property and rights which may be the object of any litigation in which they may take part by virtue of their profession.

BLOCK B 2016

The prohibition in Art. 1491 does not apply to the sale of a parcel of land acquired by a client to satisfy a judgment in his favor, to his attorney was not the subject of the litigation. While judges, prosecuting attorneys, and others connected with the administration of justice are prohibited from acquiring “property or rights in litigation or levied upon in execution” the prohibition with respect to attorneys in the case extends only to “property and rights that may be the object of any litigation in which they may take part by virtue of their profession.”

BLOCK B 2016

Chapter 3: Subject Matter of a Contract of Sale SIBAL Vs VALDEZ Facts: On 1923, Macondray & Co., Inc. bought 8 parcels of land at the auction held by the sheriff of the Province of Tarlac. On the same year, Leon Sibal, the judgment debtor, paid Macondray 2000php as the redemption price of said parcels of land, without specifying the particular parcels to which it was to apply. On 1924, Emilio J. Valdez bought parcels of land, where the sugar cane in question is planted, at the auction held by the sheriff of Province of Tarlac. He bought all of Macondray's rights and interest in the eight parcels of land it acquired. He also paid Macondray another 2000php for the redemption price Sibal paid. Sibal alleged two causes of action (1) that Valdez has refused to accept Sibal's offer to redeem the sugar cane the latter planted and (2) that Valdez has harvested and attempted to further harvest palay that belongs to Sibal. So Sibal prayed for a writ of injuction against Valdez to prevent the latter from possessing the subject property and from further possessing or harvesting the sugar cane and palay in said parcels of land. He also prayed to order Valdez to consent with the redemption of the sugar cane. However, Valdez argued that the sugar cane is his personal property and cannot be subject to redemption. Issue:

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

22

SALES DIGESTS BLOCK 2B 2016 WON the sugar cane in question is a personal property? WON the sugar cane in question is subject to sale? Held: Yes, sugar cane is classified under personal property so it cannot be subject of redemption. Art. 334 of the Civil Code provides that trees, plants, and ungathered products, while they are annexed to the land are real property. However, it has been modified by the Code of Civil Procedure and by Act No. 1508, in the sense that, for the purpose of attachment and execution, and for the purposes of the Chattel Mortgage Law, "ungathered products" have the nature of personal property.

BLOCK B 2016

Yes, a man may sell something which he potentially but not actually possesses. It is valid to sell a thing, which though not yet actually in existence, is reasonably certain to come into existence as the natural increment or usual incident of something already in existence, provided that the thing can be specified and identified. The thing sold must also belong to the vendor to begin with. The buyer's title to the thing will vest upon its existence. Moreover, crops, whether growing or standing in the field ready to be harvested, when produced by annual cultivation, are not part of the realty. They can be sold. Note: The immovability of growing crops are "only in abstracto and without reference to rights on or to the crop acquired by others than the owners of the property to which the crop is attached" but jurisprudence recognizes the possible mobilization of the growing

BLOCK B 2016 crop." [point is crops can be immovable first but then they mature and become movable. Yan pagkagets ko] SC decided that since the Sibal, in good faith, planted the palay in said parcels he is entitled to half of it.

PICHEL V. ALONZO Facts: Prudencio Alonzo was awarded a parcel of land by the PHHC. He leased it to Sua. The board of liquidators cancelled the award to Alonzo on Jan 27, 1965 because the land was leased to someone, which is not allowed by RA 477. It was later reinstated in 1972. Alonzo executed a deed of sale for the coconut fruits (from Sept 15, 1968 to Jan 1, 1976) of the parcel of land awarded to him by PHHC by reason of RA 477. He executed this in favor of Luis Pichel in exchange for payment amounting to 4,200.00. According to RA 477, the grantee is prohibited to sell, lease or encumber the land and the improvements therein within 10 years from the issuance of the title, if he does, the transfer shall be considered null and void. The trial court held that the deed of sale was a contract of lease of the land itself and that it is null and void by virtue of RA 477. It ordered Alonzo to pay back the 4,200 that Pichel paid. Issue:

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

23

SALES DIGESTS BLOCK 2B 2016 1. WON Alonzo has the right to execute such deed of sale considering that the award was, at the time, cancelled by the Board of Liquidators 2. WON the Deed of sale is the prohibited encumbrance contemplated in RA 477 Held: 1. Yes. Cancellation of the award granted pursuant to RA 477 does not automatically divest the awardee of his rights to the land. No immediate reversion to the state. There should be an appropriate proceeding for reversion.

BLOCK B 2016 d. A lease is where one party binds himself to give to another the enjoyment or use of a thing for a price certain for a period which may be definite or indefinite and a sale is one where there is transfer of ownership upon delivery. e. The purpose of the law is fulfilled, not violated when the fruits are sold. The grantee can be self sufficient and not fully reliant on the government.

MANANSALA VS COURT OF APPEALS 2. No.

Facts:

a. The terms of the contract are controlling when there is no ambiguity. No need to resort to statutory construction.

1. Fidela Manansala is the registered owner of a parcel of land in QC. She has been in possession of the land since 1955 by virtue of conditional sale made in her favour by PHHC (now NHA). In 1960, however, the PHHC awarded the land to the spouses Mercado who took possession of the land also in that year.

BLOCK B 2016

b. It is for the SALE of the FRUITS of the land and not lease of the land. The subject matter of the sale is the fruits of the land. Possession and use of Fruits is different from possession and use of land. Different rights. The first one is of the accessories, the second of the principal. Right over the accessories does not vest right over principal. The accessory merely follows the principal and not vice versa. c. A valid sale may be made of a thing, which, though not yet in existence, is reasonably certain to come into existence as natural increment of something in existence and the title will vest on the buyer when it comes into existence. These are called things of “potential existence”.

2. Manansala was able to successfully retrieve the land from the Mercado spouses by claiming precedence not only in actual possession but also in the application for its purchase. In 1984, Manansala paid the full price of the land and thereafter a deed of sale was executed in her favour in 1985. 3. Aranez brought this action for specific performance against Manansala to enforce a deed of sale covering the same lot entered into by her and Manansala in 1960. The contract stipulated that the land shall be transferred to Aranez within 30 days after full payment

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

24

SALES DIGESTS BLOCK 2B 2016 of the purchase price by Manansala to the PHHC. The deed was notarized by Atty. Lopez who was also her counsel against the Mercado spouses. 4. Manansala denies selling the land; alleging further that the deed was a forgery and that her signature was secured through fraud. She also averred that the selling of the land was void because it was made in violation of the prohibition of the PHHC against subsequent disposition of the land within one year after the issuance of the title. 5. The RTC held the signature to be genuine but there was no perfected contract since there was no intention to sell the land and because at the time of the sale, the petitioner was not yet the owner thereof. 6. The CA reversed the decision holding that there was meeting of the minds between the party evidence by the signature of the petitioner in the deed of sale which the NBI found to be genuine. Further, the CA held that the sale was valid in accordance with ART 1461of the Civil Code which provides that things having potential existence may be the object of a contract of sale.

BLOCK B 2016

Issues: 1. W/N the CA erred in validating a contract in violation of law and public policy? 2. W/N the challenged notarial document, apart from being contrary to law and public policy, does not serve the presumption of regularity?

BLOCK B 2016

Held: 1. No, there was no evidence that the sale of the lot was made in violation of any rules of the PHHC. Further, this contention although raised in the trial court was not pursued by Manansala. In her appeal to the CA, she also never argued this point as she simply considered the issues raised by the RTC. Hence this point is considered waived and can’t be urged as a ground to reverse the decision of the CA. (Conclusion of fact by a trial judge --- as affirmed by the CA--- is conclusive upon the SC.) 2. The signature was found out to be genuine as per the report of the NBI. Further, Manasala’s claim that her signature on the deed had been procured through fraud is contradicted by her allegation that the signature on the deed was not hers.

Pio Sian Melliza vs. City of Iloilo, University of the Philippines and the Court of Appeals (1968) FACTS: Juliana Melliza owned Lot 2, Lot 5 and Lot 1214. She donated a part of Lot 1214 to the Municipality of Iloilo to serve as the municipal hall. The donation was revoked by the parties since the area donated was found inadequate to meet the requirements of the municipality development plan called the Arellano Plan.

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

25

SALES DIGESTS BLOCK 2B 2016 Lot 1214 was divided by into several lots, namely: 1214-A, 1214-B, 1214-C and 1214-D. (See illustration below for reference) Juliana executed an instrument which states that she assigns and transfers certain parts of Lot 1214 to the Municipal Govt of Iloilo. Juliana sold her remaining interest in Lot 1214 to Remedios Sian Villanueva who in turn transferred her rights to said portion of land to petitioner Pio Sian Melliza. The City of Iloilo donated the city hall site together with the building thereon to UP Iloilo, which consisted of Lots Nos 1214-B, 1214-C and 1214-D. Pio Sian Melliza asked city authorities for payment of value of Lot 1214-B. No recovery was obtained because the City did not have funds. Pio Sian Melliza filed in the CFI of Manila an action for recovery of Lot 1214B or its value against Iloilo City and UP.

BLOCK B 2016

Defendants answered claiming that Lot 1214-B was included in the public instrument executed by Juliana Melliza in favor of Iloilo municipality. Pio Sian Melliza claims that the public instrument is clear that only 1214-C and 1214-D is included and that the 2nd paragraph of said instrument was only to better identify the lots sold. Petitioner further claims that to hold that 1214-B is included in the sale would render the contract invalid because the law requires as an essential element of sale a “determinate” object. CFI: dismissed the complaint, saying that instrument by Juliana included Lot 1214-B. CA: affirmed CFI decision, and that the portion sold by Juliana necessarily included whatever was needed for construction of avenues, parks, city hall site.

BLOCK B 2016

ISSUES: 1. W/N the conveyance by Juliana Melliza to Iloilo municipality included Lot 1214-B 2. W/N the description of other lots in the 2nd paragraph of the instrument would be legally insufficient, because the object would not be determinate as required by law (SALES issue) HELD: 1. YES. Accdg to the SC, the public instrument describes four parcels of land, Lot 2, Lot 5, Lot 1214-C and Lot 1214D and further describes not only those but also lots needed for the construction of the city hall site, avenues, parks, according to the Arellano Plan. If the parties merely intended to cover the specified lots, there would have been no need for the 2nd paragraph which describes other portions of land contiguous to the four lots needed for the said Arellano Plan. 2. NO. The requirement of the law that a sale must have for its object a determinate thing, is fulfilled as long as, at the time the contract is entered into, the object of the sale is capable of being made determinate without the necessity of a new or further agreement between the parties. (Art 1460 NCC.) The specific mention of some lots plus the statement that the lots object of the sale are the ones needed for the Arellano Plan sufficiently provides a basis, as of the time of the execution of the contract, for rendering determinate said lots without the need of a new and further agreement of the parties.

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

26

SALES DIGESTS BLOCK 2B 2016 The SC also noted that Pio Sian Melliza is the notary public of the public instrument executed by Juliana. As such, he was aware of its terms. Said instrument was also registered with the Register of Deeds and such registration was annotated at the back of the Title Certificate of Juliana. From these facts, Pio Sian Melliza knew of the terms or is chargeable with knowledge of them and should have raised the proper objections with Iloilo City and UP’s possession of Lot 1214-B. He is barred by the principles of civil law, as well as laches, estoppel and equity.Lot 1214

Facts:

municipality of Zamboanga. The lot was thereafter subdivided into 5 parts (LOT 535-A, LOT 535B, LOT 535-C, LOT 535-D, LOT 535-E).

Lot 1214 A

OT 535-E was executed in the name of his brother, Eulogio Atilano II for P150.00 The other three lots was sold as well. The only one left for Atilano I was presumably covered by the title to LOT 535-A.

Lot 1214 B

ano, the

Lot 1214- B Lot 1214-C

defendant.

**For reference, this is how Lot 1214 was divided:

obtained title as to lot 535-E and became co- owners. Years later, in order to end the co-ownership and to properly subdivide the said lot, they had the lot resurveyed. It was here that they discovered that the lot they were occupying was identified as LOT 535-A and not LOT 535-E referred to in the deed of sale.

Atilano vs. Atilano (May 21, 1969)

Instance alleging that they offered to surrender the possession of lot A and demanded in return the possession of lot E.

Lot 1214-D NOTE: Sorry the digest is long. Kailangan specific sa lot numbers eh.

BLOCK B 2016

BLOCK B 2016

Petitioners, plaintiffs- appelees: Heirs of Atilano II Respondents, defendants- appellants: Ladislao Atilano and Gregorio Atilano

The defendants refused to exchange.

understandable for the said lot has greater area compared to lot A they were occupying. (lot E = 2612 m2, lot A=1808 m2)

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

27

SALES DIGESTS BLOCK 2B 2016

o Reference to lot E in the Deed of Sale is an involuntary error

parties at the time of sale.

o Intention of the parties to the sale covers lot A

intended by the parties is lot A where

o Since 1916, Atilano I had been in possession. He even bought adjoining lot to increase area

Atilano II resided , reconstructed his house at the end of the war and where the heirs continued to designation of lot E in the deed of sale was a simple mistake in the drafting. The mistake did not vitiate the consent of the parties nor affected the validity and binding effect of the contract.

that the lot E was registered under Land Registration Act. They cannot acquire the property through prescription. Issue: 1. Whether or not the object of the sale is lot 535-E thus, allowing such exchange of possession. Held:

BLOCK B 2016

BLOCK B 2016 but the intention of the

no longer needed for the parties have already retained possession in conformity with the real intention of the parties.

No.

_______________________________________________________ Shorter narration of facts:

he sees it, in its actual setting

parts. What was left for him was

and by its physical metes and bounds and not by the mere lot number assigned to it in the certificate of title.

presumably covered by title to lot 535-A.

o Atilano II constructed his resident therein even before sale in his favour identified as lot

deed of sale executed covered lot 535-E.

A. o Atilano I on the other hand had his house on lot E and even purchased adjoining lot.

Years later, when Atilano II and his children had the lot E resurveyed, they discovered that the lot was identified as lot 535-A.

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

28

SALES DIGESTS BLOCK 2B 2016

Atilano, successor of Atilano I after he died. (Apparently, lot A has greater area than lot B). However,

BLOCK B 2016 that the contract was limited to sugar he might raise upon his own plantation; that the contract represented a perfected sale; and that by failure of his crop he was relieved from complying with his undertaking by the loss of the thing due (i.e dry season in his hacienda, he could not produce and deliver any sugar).

Ladislao refused.

Issue:

exchange of the lot E occupied by Ladislao

1.

Whether or not there was perfected contract of sale?

Held: o Reference to lot E in the Deed of Sale is an involuntary error o Intention of the parties to the sale covers lot A o Since 1916, Atilano I had been in possession. He even bought adjoining lot to increase area.

Yu Tek & Co vs. Basilio Gonzales

BLOCK B 2016

Facts: Yu Tek and Co obliged Mr. Basilio Gonzales to deliver 600 piculs of sugar of the 1st and 2nd grade. For this service, he will receive compensation of P3, 000, as evidence in a receipt. He will deliver the 600 piculs of sugar at any place in Santa Rosa. The service contract also has a 3-month period stipulation. The contract also states that Mr. Gonzales shall return the P3, 000 and give P1,200 by way of indemnity in case the contract is rescinded. Mr. Gonzales failed to deliver. He was also unable to return the P3000 and payP1200 indemnity. For his defense, Mr. Gonzales contends

No, there is no perfected contract of sale. The SC ruled that there is a perfected sale with regard to the “thing” whenever the article of sale has been physically segregated from all the other articles. In the case at bar, there was no “appropriation” of any particular lot of sugar. Thus, there was only an executor agreement and a promise of a sale. It is clear that Art. 1452, 1096 and 1182 are not applicable. Yu Tek and Co is entitled to receive P3,000. Ratio: 1. Requisites of a Contract. Consideration. A contract of sale is not perfected until the parties have agreed upon the price and the thing sold. A contract whereby a party obligates himself to sell for a price a certain specified quantity of sugar of a given quality, without designating any particular lot of sugar, is not perfected until the quantity agreed upon has been selected and is capable of being physically designated and distinguished from all the other sugar.

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

29

SALES DIGESTS BLOCK 2B 2016 NATIONAL GRAINS AUTHORITY and WILLLAM CABAL vs. THE INTERMEDIATE APPELLATE COURT and LEON SORIANO, FACTS: - In 1979, private respondent Leon Soriano offered to sell palay grains to the NFA

BLOCK B 2016

(National Food Authority, which was previously called the National Grains Authority), through one of its provincial managers, William Cabal.

BLOCK B 2016 Both the RTC and the Intermediate Appellate Court decided in favor of private respondent Soriano. ISSUE: 1. W/N there was a contract of sale in the case at bar? HELD: YES, there was a contract of sale.

- Private respondent Soriano eventually submitted to the NFA several documents required for the sale of palay. In the Farmer's Information Sheet, the maximum number of cavans of palay that Soriano may sell to the NFA was indicated – 2640 cavans.

- In the case at bar, when the NFA 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. Sale is a consensual contract wherein the mutual consent of the parties shall lead to the perfection of the contract.

- A day after submitting the required documents, Soriano delivered 630 cavans of palay to the NFA warehouse. The palay delivered during these two days were not rebagged, classified and weighed.

- Regarding the validity of the subject matter of the contract, the fact that the exact number of cavans of palay to be delivered was not specified does not affect the perfection of the contract.

- Soriano demanded payment of the 630 cavans of palay. However, Cabal wrote to Soriano stating that NFA cannot legally accept the said delivery because a certain Napoleon Callangan certified that Soriano is not a bona fide farmer. Asserting that there was no valid contract of sale, Cabal advised Soriano to withdraw from the NFA warehouse the 630 cavans previously delivered.

o Because Article 1349 states 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."

- Instead of withdrawing the 630 cavans of palay, private respondent 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 Mr. William Cabal.

o In this 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.

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

30

SALES DIGESTS BLOCK 2B 2016 - The reason why NFA initially refused acceptance of the 630 cavans of palay delivered by Soriano is that NFA alleges that Soriano is not a bona fide farmer. The trial court and the appellate court found that Soriano was a bona fide farmer and therefore, he was qualified to sell palay grains to NFA.

JOHANNES SCHUBACK & SONS PHILIPPINE TRADING CORPORATION vs. THE HON. COURT OF APPEALS Facts: • In 1981, SJ industrial contacted with Schuback to purchase bus spare parts from Germany. • SJ Industrial also gave a list of bus spare parts that it would like to purchase. • Schuback then communicated with its German office to provide an estimate of costs.

BLOCK B 2016

• After this, Shuback provided SJ Industrial its formal offer, containing a list of prices, item number, quantity, part number and description to SJ industrial. • SJ Industrial then informed Schuback of its desire to purchase and submitted a purchase order containing the item number, part number and description. • It also promised to follow up in the purchase order the quantity of units it would like to purchase.

BLOCK B 2016 • SJ Industrial eventually submitted the quantity of units it would like to purchase, along with the inscription “this will serve as our initial purchase order”. • Schuback then ordered the parts from its German Office. • Schuback issued an invoice so that SJ Industrial can apply for a letter of credit in favour of Shuback • After some time, Schuback reminded SJ of its obligation to open a letter of credit,SJ responded by stating that it I encountering difficulties in doing so • Schuback then wrote again, demanding that SJ either open a letter of credit and proceed with the order or pay the cancellation fee. • SJ Industrial failed to do either. Schuback sued for damages Issue: 1. W/N there was a perfected contract of sale? Held: Yes - Contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. - Article 1319 of the Civil Code states: "Consent is manifested by the meeting of the offer and acceptance upon the thing and the cause which are to constitute the contract. The offer must be certain and the acceptance absolute. A qualified acceptance constitutes a

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

31

SALES DIGESTS BLOCK 2B 2016 counter offer." The facts indicate that consent on both sides has been manifested - The act of SJ Industrial in informing Schuback of its desire to purchase after receiving a formal offer constitutes a meeting of the minds. - The inscription “this will serve as our initial purchase order” proves further the acceptance of the offer. - The Trial Court is correct in stating that there was a perfected contract of sale. It erred however, when it said that the perfection only occurred when the quantity to be purchased was submitted by SJ Industrial. - Perfection occurred when the initial purchase order was issued even if the quantity to be purchased was not yet available as quantity is not a material to perfection - What is of importance is the meeting of the minds as to the object and cause

BLOCK B 2016

- The omission to open a letter of credit does not prevent the perfection of the contract between the parties, for the opening of the letter of credit is not to be deemed a suspensive condition. - Schuback, in its dealings with SJ Industrial, did not incorporate any provision declaring their contract of sale without effect until after the fulfillment of the act of opening a letterof credit.

BLOCK B 2016

CONCHITA NOOL and GAUDENCIO ALMOJERA vs. COURT OF APPEALS, ANACLETO NOOL and EMILIA NEBRE FACTS: Two (2) parcels of land are in dispute and litigated upon here. The plaintiff spouses, Conchita Nool and Gaudencio Almojera, now the appellants, seek recovery of the aforementioned parcels of land from the defendants, Anacleto Nool (Conchita’s younger brother) and Emilia Nebre, now the appellees. Conchita and her husband bought the two parcels of land from her two brothers Victorino Nool (1 hectare) and Francisco Nool (3 hectares). As they were in dire need of money, they obtained a loan from the Ilagan Branch of the DBP, in Ilagan, Isabela, secured by a real estate mortgage on said parcels of land, which were still registered in the names of Victorino Nool and Francisco Nool, at the time, and for the failure of plaintiffs to pay the said loan, including interest and surcharges, totaling P56,000.00, the mortgage was foreclosed. The one year redemption period for the foreclosed parcels of land was from March 16, 1982 to March 15, 1983 but the mortgagor’s right of redemption was not exercised by the plaintiff spouses. Because they were unable to redeem the property, Conchita asked her brother Anacleto Nool to redeem the foreclosed properties from DBP, which the latter did; and as a result, the titles of the two (2) parcels of land in question were transferred to Anacleto Nool.

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

32

SALES DIGESTS BLOCK 2B 2016 Defendant Anacleto having been made to believe, then, that his sister, Conchita, still had the right to redeem the said properties had agreement with Conchita to purchase the two (2) parcels of land 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, plaintiffs (Conchita) were to regain possession of the two (2) hectares of land, which amounts defendants (Anacleto) failed to pay, and the same day the said arrangement was made; another covenant was entered into by the parties, whereby Anacleto agreed to return to Conchita the lands in question, at anytime the latter have the necessary amount (the repurchase agreement); that Conchita asked the Anacleto to return the same but despite the intervention of the Barangay Captain of their place, Anacleto refused to return the said parcels of land to Conchita. Anacleto theorized that they acquired the lands in question from the Development Bank of the Philippines, through negotiated sale, and were misled by Conchita when defendant Anacleto Nool signed the private writing, agreeing to return subject lands when plaintiffs have the money to redeem the same.

BLOCK B 2016 2.) Does Conchita have a right to enforce the repurchase agreement? NO. One “repurchases” only what one has previously sold. In other words, the right to repurchase presupposes a valid contract of sale between the same parties. Undisputedly, respondents (Anacleto) acquired title to the property from DBP and not from petitioners (Conchita). Note: if this is hard to understand try reading the actual case kasi mas magulo. Basta in short, Conchita was selling to her brother Anacleto land that she no longer owns because she was beyond the 1 year redemption period and had no chance to redeem her land from DBP. And because Anacleto was made to believe that Conchita still had the right to redeem the properties from DBP he agreed to her offer of selling him the land. Kumbaga maloko din to si Conchita na binebenta nya pa kay Anacleto ang lupa na nabili na mismo ni

ISSUES and HELD:

BLOCK B 2016

1.) Was the sale of Conchita to Anacleto valid? NO. At the time Conchita offered to Anacleto the purchase of the parcels of land she no longer had ownership of them as they were already foreclosed and she did not exercise the mortgagor’s right to redeem them within a year. DBP was already the absolute owner of the parcels of the land at that time, thus Conchita had no object to sell. The sale was UTTERLY VOID AND INEXISTENT.

Chapter 4: Price and Other Consideration. Mitsui Bussan Kaisha vs. Manila Electric Railroad and Light Company GR No. 13753, February 15, 1919, J. Street. Petitioner, Mitsui Bussan Kaisha Respondent, Manila Electric Railroad and Light Company

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

33

SALES DIGESTS BLOCK 2B 2016 Summary/ Memory Aid: Mitsui & Manila Electric Railroad and Light Company Contract of Sale of Coal Act 2432 & Act 2445, additional tax of P1/ metric ton Facts: Mitsui Bussan Kaisha, a Japanese company, had a contract of sale of coal to Manila Electric Railroad and Light Company. The price agreed upon was P9.45 per long ton of coal but it was “subject to modification in variations in calories, ash content and not otherwise”.

BLOCK B 2016

On December 23, 1914, Act No 2432 was passed which imposed a specific tax of P1 per metric unit on coal. This act was amended in Act No. 2445, which stated that “… the burden of said tax or increased rate of tax shall be borne by the person to whom said article is furnished pursuant to such contract, unless the parties have agreed otherwise”. From March to October 1915, Mitsui delivered to Manila Electric 11,874 metric tons of coal. The tax imposed by Act 2432 and 2445 when applied to this delivery is P11,874.75. Mitsui paid the taxes and asked for reimbursement from Manila Electric; however, Manila Electric refused. Thus, Mitsui files this present action to recover the amount paid. The lower court ruled in favor of Mitsui. Issue:

BLOCK B 2016

Whether or not Mitsui or Manila Electric is liable to pay the additional taxes Held/Ratio: The SC held that by the express terms of Act 2445, the burden of the tax should be borne by Manila Electric Company “unless the parties have agreed otherwise”. The original contract contained no express provision on this point and the parties made no contract with reference thereto after Act 2445 was passed. The seller is relieved of the burden of the tax. Act 2445 specifically applies to contracts with fixed prices. This is since the seller who had made deliveries in stated quantities at the current market price and not at a fixed price needed no relief since their prices would immediately increase and automatically apply upon imposition of said Act. The buyer’s defense in stating that the exception clause in the original contract is to be interpreted in favor of them (i.e. they are not entitled to pay taxes) must fail. This exceptional clause of “subject to modification in variations in calories, ash content and not otherwise” pertains only to the quality of coal and ascertaining the value of coal by determining its combustion. It has no bearing upon liability for internal revenue tax. Thus, Manila Electric is liable to pay reimbursement of P11,874.45 to Mitsui by express provision of Act 2445. This is also in accordance with the law of Obligation and Contracts that anyone who pays for another may demand reimbursement at least to the extent that payment may have been beneficial to the debtor.

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

34

SALES DIGESTS BLOCK 2B 2016 VILLANUEVA V. CA G.R No. 107624 January 28, 1997 Panganiban, J. Petitioners: Spouses Villanueva Respondents: Spouses Dela Cruz, Spouses Pile SUMMARY/MEMORY AID: Spouses Villanueva assert that there was a perfected contract of sale between them and the defendants, the Spouses Dela Cruz. Their allegation is based on the P10,000.00 they gave to the defendants. However, the evidence shows that the actual price of the leased land was not fixed. Price must be certain; it must be real, not fictitious. It is not necessary that the certainty of the price be actual or determined at the time of executing the contract, as long as the contract furnishes a basis or measure for ascertaining the amount agreed upon. Since there was no meeting of the minds between the petitioners and the defendants, there was no perfected contract of sale.

BLOCK B 2016

FACTS: Petitioner Gamaliel Villanueva has been a tenant-occupant of a unit in the 3-door apartment building erected on a parcel of land owned by the private respondents, Sps. Dela Cruz. About February of 1986, respondent Jose Dela Cruz offered said parcel of land with the 3-door apartment building for sale and the petitioners, the Sps. Villanueva, showed interest in buying the property.

BLOCK B 2016 Jose dela Cruz asked petitioner Irene Villanueva for a certain amount to pay for the taxes so that the property would be cleared of any encumbrance. Villanueva agreed and gave P10,000.00 on two occasions. Allegedly, it was agreed by them that said P10,000.00 would form part of the sale price of P550,000.00 for the parcel of land. Sometime in March 1987, defendants Dela Cruz executed in favor of their co-defendants, the Sps. Pile, a Deed of Assignment of the other one-half portion of the parcel of land wherein petitioner Gamaliel Villanueva's apartment unit is situated. The petitioners objected to Dela Cruz’ sale to the Sps. Pile because they assert that a contract of sale over the parcel of land had already been perfected between themselves and the Sps. Dela Cruz. The petitioner eventually elevated their complaint to the trial court. Petitioners contend that the P10,000 they gave was partial or advance payment of the property. Necessarily then, there must have been an agreement as to price. They cite Article 1482 of the Civil Code which provides that "whenever earnest money is given in a contract of sale, it shall be considered as part of the price and as proof of the perfection of the contract." However, private respondents contradict this claim with the argument that the P10,000.00 was only payment for realty tax was going to form part of the consideration of the sale if and when the transaction would finally be consummated. Private respondents insist that there "was no clear agreement as to the true amount of consideration."

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

35

SALES DIGESTS BLOCK 2B 2016 The trial court rendered its decision in favor of respondents. An appeal was duly brought to the CA which affirmed the said decision. ISSUE: W/N there was a perfected contract of sale of subject property between the petitioners (Sps. Villanueva) and respondents (Sps. Dela Cruz) HELD/RATIO: NO, THERE WAS NO PERFECTED CONTRACT OF SALE BECAUSE A MEETING OF THE MINDS REGARDING THE PRICE WAS LACKING. 1. According to the testimony of respondent Dela Cruz, he or his spouse had never agreed to a definite price for the subject property. In fact, his testimony during the cross-examination firmly negated any price agreement with petitioners because he and his wife was adamant on the price of P575,000.00 and did not agree to reduce it to P550,000.00, the price preferred by petitioner.

BLOCK B 2016

already a definite agreement as to the price. And it would not have commanded any probative value as it was not signed. 4. The price of the leased land not having been fixed, one of the essential elements which give life to the contract of sale was lacking. Price must be certain, it must be real, not fictitious. It is not necessary that the certainty of the price be actual or determined at the time of executing the contract, as long as the contract furnishes a basis or measure for ascertaining the amount agreed upon. A contract of sale is not void for uncertainty when the price can be made certain by reference to existing invoices identified in the agreement. In this respect, the contract of sale is perfected. The price must be certain, otherwise there is no true consent between the parties. There can be no sale without a price. In the instant case, however, what is dramatically clear from the evidence is that there was no meeting of mind as to the price, expressly or impliedly, directly or indirectly.

JOSE R. MORENO, JR. vs Private Management Office

BLOCK B 2016

2. Petitioners allege that an unsigned deed of sale was prepared by private respondent Jose Dela Cruz. Unfortunately, such was not presented in evidence. 3. However, petitioners aver that even if the unsigned deed of sale was not produced, private respondent Jose dela Cruz admitted in court that he prepared said deed “in accordance with their agreement." This “judicial admission" is allegedly the "best proof of its existence." This argument is unmeritorious because even if such draft deed existed, it does not necessarily follow that there was

G.R. No. 159373

November 16, 2006

Memory Aid: 1. A contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. The offer must be certain and the acceptance absolute.

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

36

SALES DIGESTS BLOCK 2B 2016 2. To reach that moment of perfection, the parties must agree on the same thing in the same sense, so that their minds meet as to all the terms. The minds of parties must meet at every point; nothing can be left open for further arrangement. So long as there is any uncertainty or indefiniteness, or future negotiations or considerations to be had between the parties, there is not a completed contract, and in fact, there is no contract at all.

BLOCK B 2016

3. Contract formation undergoes three distinct stages – preparation or negotiation, perfection or birth, and consummation. Negotiation begins from the time the prospective contracting parties manifest their interest in the contract and ends at the moment of agreement of the parties. The perfection or birth of the contract takes place when the parties agree upon all the essential elements thereof. The last stage is the consummation of the contract wherein the parties fulfill or perform the terms agreed upon, culminating in its extinguishment. Once there is concurrence of the offer and acceptance of the object and cause, the stage of negotiation is finished.

BLOCK B 2016 -PMO called for a conference with Moreno, because it wants to sell the floors it owns in the building, over which Moreno has a right of refusal. At the meeting, PMO stated that the price is 21 Million Pesos - A few days later, PMO, in a letter signed by its trustee, informed Moreno that the Board is in agreement that Mr. Jose Moreno, Jr. has the right of first refusal" and requested Moreno to deposit 10% of the "suggested indicative price" of P21.0 million on or before February 26, 1993 - Moreno paid the P2.1 million on February 26, 1993 for which PMO issued a receipt. - Subsequently however, PMO sent a letter saying that its legal department has questioned the basis for the computation of the indicative price for the said floors - PMO also wrote that its Board has "tentatively agreed on a settlement price of P42,274,702.17" for the said floors. -Moreno questions the actions of PMO, claiming that they already agreed and perfected a contract of sale over the said floors for the amount ofP21.0 million

Facts:

Issue:

-Moreno owns several floors of the J.Moreno Bldg as well as the lot where it stands

W/N there was a perfected contract of sale for the price of 21 Million pesos?

-PMO, on the other hand,is a government agency that owns the other floors of the J.Moreno Bldg

Held: No

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

37

BLOCK B 2016

SALES DIGESTS BLOCK 2B 2016

BLOCK B 2016

4. A contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. The offer must be certain and the acceptance absolute.

8. The letter sent by PMO is merely a suggestive indicative price of the subject floors as it was yet to be approved by the Board of Trustees. Furthemore. The law governing the PMO, a government agency, imposes an additional suspensive condition that sales of government assets must be approve by the Committee on Privatization

5. To reach that moment of perfection, the parties must agree on the same thing in the same sense, so that their minds meet as to all the terms. The minds of parties must meet at every point; nothing can be left open for further arrangement. So long as there is any uncertainty or indefiniteness, or future negotiations or considerations to be had between the parties, there is not a completed contract, and in fact, there is no contract at all.

9. Suggestive Indicative Price cannot be interpreted as a price certain. Under the objective theory of contract, understandings and beliefs are effective only if shared. Based on the objective manifestations of the parties in the case at bar, there was no meeting of the minds

6. Contract formation undergoes three distinct stages – preparation or negotiation, perfection or birth, and consummation. Negotiation begins from the time the prospective contracting parties manifest their interest in the contract and ends at the moment of agreement of the parties. The perfection or birth of the contract takes place when the parties agree upon all the essential elements thereof. The last stage is the consummation of the contract wherein the parties fulfill or perform the terms agreed upon, culminating in its extinguishment. Once there is concurrence of the offer and acceptance of the object and cause, the stage of negotiation is finished.

10. The letter constituted a definite, complete and certain offer is the subjective belief of petitioner alone. The letter in question is a mere evidence of a memorialization of inconclusive negotiations, or a mere agreement to agree, in which material term is left for future negotiations. 11. It is a mere evidence of the parties’ preliminary transactions which did not crystallize into a perfected contract. Preliminary negotiations or an agreement still involving future negotiations is not the functional equivalent of a valid, subsisting agreement.. For a valid contract to have been created, the parties must have progressed beyond this stage of imperfect negotiation. But as the records would show, the parties are yet undergoing the preliminary steps towards the formation of a valid contract.

7. In this case, it is clear that the parties are not past the negotiation stage. Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

38

SALES DIGESTS BLOCK 2B 2016 Navarra v. Planters Development Bank G.R. 172674 July 12, 2007 Sps. Jorge Navarra and Carmelita Bernardo Navarra and RRRC Development Corporation – Petitioner Planters Development Bank and Roberto Gatchalian Realty Inc. Respondent Petition to set aside the assailed decision of the CA reversing the decision of the RTC ruling that there was a perfected contract of sale. Facts:

BLOCK B 2016

The spouses Jorge and Carmelita Navarra are the owners of 5 parcels of land located at B.F. Homes, Parañaque. When the spouses obtained a loan of P1,200,000.00 from Planters Bank, they executed a deed of mortgage over the 5 parcels of land. When the couple failed to pay, the bank foreclosed on the mortgage and mortgaged assets were sold to it for P1,341,850, it being the highest bidder in the auction sale. The spouses Navarra did not redeem their properties in the one-year redemption period. On the other hand, co-petitioner RRRC Development Corporation (RRRC) is a real estate company owned by the parents of Carmelita Bernardo Navarra. RRRC obtained a loan from Planters Bank secured by a mortgage over another set of properties owned by RRRC. The loan having been likewise unpaid, Planters Bank similarly foreclosed the mortgaged assets of RRRC. Unlike the Navarras, however, RRRC was able to negotiate with the Bank for the redemption of its foreclosed properties. The Bank allowed RRRC

BLOCK B 2016

to refer to it would-be buyers of the foreclosed RRRC properties who would remit their payments directly to the Bank, which payments would then be considered as redemption price for RRRC. The foreclosed properties of RRRC were sold to third persons and the payments to the bank even exceeded the redemption price by P300,000.00. The Navarras then wrote the bank proposing to repurchase the 5 lots earlier foreclosed for P1,800,000.00, with a request that he be given until August 31, 1985 to pay the down payment of P300,000.00. Unable to pay when the time came, Jorge asked the bank if the P300,000.00 excess of RRRC can be applied in the meantime as down payment for their lots. The bank agreed but required the submission of a board resolution from RRRC allowing the application of the excess as down payment by the spouses. Because the bank was never given a copy of the board resolution, it sent a letter to Jorge Navarra informing him that it could not proceed with the documentation of the proposed repurchase of the foreclosed properties. The Navarras then filed a complaint for Specific Performance with Injuction as a portion of the lot was by Planters Bank to herein co-respondent Roberto Gatchalian Realty, Inc. (Gatchalian Realty). Issue: Was the repurchase agreement between the spouses Navarra and the bank perfected? Was the offer certain and the acceptance absolute enough so as to engender a meeting of the minds between the parties? “DEFINITELY NOT.”

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

39

SALES DIGESTS BLOCK 2B 2016

BLOCK B 2016



BLOCK B 2016

The element of a price certain was missing. Although P300,000.00 was stated as down payment, the letter was completely silent as to how the succeeding installment payments shall be made.

Mapalo v. Mapalo



At most, the letters merely acknowledge that the down payment of P300,000.00 was agreed upon by the parties.



The Navarras’ letter/offer failed to specify a definite amount of the purchase price for the sale/repurchase of the subject properties. It merely stated that the “purchase price will be based on the redemption value plus accrued interest at the prevailing rate up to the date of the sales contract.” The ambiguity of this statement only bolsters the uncertainty of the Navarras’ so-called “offer” for it leaves much rooms for such questions, as: what is the redemption value? what prevailing rate of interest shall be followed: is it the rate stipulated in the loan agreement or the legal rate? When will the date of the contract of sale be based, shall it be upon the time of the execution of the deed of sale or upon the time when the last installment payment shall have been made? To our mind, these questions need first to be addressed, discussed and negotiated upon by the parties before a definite purchase price can be arrived at.

With the intention of donating, illiterate Mapalo spouses were tricked into selling an entire parcel of land instead of half of the land in “consideration of 500php” which they never received. || A contract of purchase and sale is null and void and produces no effect whatsoever where the same is without cause or consideration in the purchase price which appears thereon as paid has in fact never been paid by the purchaser to the vendor.

G.R. No. L-21489 and L-21628 May 19, 1966 Memory Aid / Doctrine:

FACTS: Spouses Miguel Mapalo and Candida Quiba, simple illiterate farmers, were registered owners, with Torrens title certificate O.C.T. No. 46503, of a 1,635-square-meter residential land in Manaoag, Pangasinan. Out of love and affection for Maximo Mapalo — a brother of Miguel who was about to get married — the spouses decided to donate the eastern half of the land to him. O.C.T. No. 46503 was delivered in 1936, but they were deceived into signing a deed of absolute sale over the entire land in his favor. Maximo and his attorney led the illiterate spouses to believe that what they signed was a deed of donation in Maximo's favor covering only onehalf (the eastern half) of their land. Although the document of sale stated a consideration of Five Hundred (P500.00) Pesos, the spouses did not receive anything of value for the land. Subsequently the Mapalo spouse built a fence in the middle of their land segregating the eastern portion from its western portion. Said fence still exists. The spouses have always been in

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

40

SALES DIGESTS BLOCK 2B 2016 continued possession over the western half of the land up to the present. Meanwhile, Maximo registered the deed of sale in his favor and obtained in his name TCT No. 12829 over the entire land. Thirteen years later in 1951, he sold the entire land for 2500php in favor of the Narcisos. The sale to the Narcisos was in turn registered in 1951 and Transfer Certificate of Title No. 11350 was issued for the whole land in their names. The Narcisos took possession only of the eastern portion of the land in 1951, after the sale in their favor was made.

BLOCK B 2016

CFI decision: In 1952 the Narcisos filed a suit in the CFI to be declared owners of the entire land, for damages, and for rentals. The Mapalo spouses filed their answer with a counterclaim in1965, seeking cancellation of the TCT of the Narcisos as to the western half of the land, on the grounds that their (Mapalos) signatures to the deed of sale of 1936 was procured by fraud and that the Narcisos were buyers in bad faith. They asked for reconveyance to them of the western portion of the land and issuance of a Transfer Certificate of Title in their names as to said portion. The Mapalo spouses also filed in 1957 their own complaint in the CFI of Pangasinan against the Narcisos and Maximo Mapalo. They asked that the deeds of sale of 1936 and of 1951 over the land in question be declared null and void as to the western half of said land. Judge Santiago of the CFI of Pangasinan tried the two cases jointly. The CFI rendered judgment on January 18, 1961, ruling in

BLOCK B 2016 favor of the Mapalos. The court said that the donation was null and void as to the western half of the land. CA decision: The Narcisos appealed to the Court of Appeals. CA reversed the judgment of the CFI, solely on the ground that the consent of the Mapalo spouses to the deed of sale of 1936 having been obtained by fraud, the same was voidable, not void ab initio, and, therefore, the action to annul the same, within four years from notice of the fraud, had long prescribed. It reckoned said notice of the fraud from the date of registration of the sale on March 15, 1938. The Court of First Instance and the Court of Appeals are therefore unanimous that the spouses Mapalo and Quiba were definitely the victims of fraud. It was only on prescription that they lost in the Court of Appeals. ISSUES: 1. W/N, under the Old Civil Code which was in effect at the time of the execution of the sale, the sale to Maximo is void or merely voidable; 2. W/N the Narcisos are purchasers in good faith HELD: 1. The sale is VOID. Under the Civil Code, either the old or the new, for a contract to exist at all, three essential requisites must concur: (1) consent, (2) object, and (3) cause or consideration.1 In the case at hand, the first

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

41

SALES DIGESTS BLOCK 2B 2016 and second elements are present, but the third is lacking (and on that point the CA was completely silent). Was there a cause or consideration to support the existence of a contract of sale? Since the deed of sale was governed by the Old Civil Code, it should be asked if in this case there is no consideration, or one with a statement of false consideration. If the former, it is void and inexistent. If the latter, it is only voidable under the Old Civil Code. The deed of sale of 1936 stated that it had for its consideration P500.00 when in fact said consideration was totally absent. The problem, therefore, is whether a deed which states a consideration that in fact did not exist, is a contract without consideration, and therefore void ab initio, or a contract with a false consideration, and therefore, at least under the Old Civil Code, voidable. According to Manresa, what is meant by a contract that states a false consideration is one that has in fact a real consideration but the same is not the one stated in the document. A contract of purchase and sale is null and void and produces no effect whatsoever where the same is without cause or consideration in that the purchase price which appears thereon as paid has never been paid by the purchaser to the vendor.

BLOCK B 2016

“It has been positively shown by the undisputed testimony of Candida Quiba that Pacifico Narciso and Evaristo Narciso stayed for some days on the western side (the portion in question) of the above-described land until their house was removed in 1940 by the spouses Mapalo and Quiba; secondly, Pacifica Narciso admitted in his testimony in chief that when they bought the property, Miguel Mapalo was still in the premises in question (western part) which he is occupying and his house is still standing thereon; and thirdly, said Pacifico Narciso when presented as a rebuttal and sub-rebuttal witness categorically declared that before buying the land in question he went to the house of Miguel Mapalo and Candida Quiba and asked them if they will permit their elder brother Maximo to sell the property.” The SC reversed and set aside the decision of the CA and rendered another reaffirming in toto the judgment of the CFI, with attorneys’ fees on appeal in favor of the Mapalo spouses in the amount of 1,000.00 Php plus costs, against both Maximo and the Narcisos.

Rongavilla v. CA

BLOCK B 2016

G.R. No. 83974 August 17, 1998 There was no contract of sale in this case. The inexistence of a contract is permanent and incurable and cannot be the subject of prescription. 2. Narcisos are purchasers in bad faith. SC quoted the CFI:

*fact heavy case! Memory Aid: In all contractual, property or other relations, when one of the parties is at a disadvantage on account of his moral dependence, ignorance, indigence, mental weakness, tender age, or other

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

42

SALES DIGESTS BLOCK 2B 2016 handicap, the courts must be vigilant for his protection. (Art. 24, Civil Code)



Facts: 



Sometime in May 1976, private respondents borrowed P200 from the petitioners to have their roof repaired.



Petitioner Rongavilla made the respondents sign a document written in English, claiming that it was only a document to evidence their debt of P2000.



 BLOCK B 2016

Mercedes dela Cruz and Florencia dela Cruz are spinsters who own 1/2 of a parcel of land located in Manuyo, Las Pinas. They are dressmakers who can read and write in Tagalog but unschooled in English. Their nieces are: Juanita Jimenez and petitioner Dolores Rongavilla. (whole land was subdivided beforehand, property under contestion here is the half that belongs to the dela Cruz sisters)

After four years, Rongavilla went back to respondents place asking them to vacate the premises, that she and her husband were now the owners of the land.



Petitioners’ defense: (1) prescription had set in already and (2) deed of sale was valid as it contains all the requisites of a contract.

Trial court (RTC Pasay) – deed of sale void, reconvey property to private respondents CA- affirm RTC decision (plaintiff respondents did not know that what they were signing was a deed of absolute sale. This means that their consent was not only vitiated, there was no consent at all) Issue: Did the Court of Appeals err when it upheld the trial court's judgment that the disputed Deed of Sale is void and inexistent? Held: No. 

Respondents went to the Register of Deeds to verify the matter and found out that what they have signed was a deed of sale. Their Certificate of Title had been cancelled and a new one issued to the petitioners. The land now has even been mortgaged by petitioners with the Cavite Development Bank.

BLOCK B 2016 Respondents filed with the RTC of Pasay to have the deed of sale declared void and inexistent for 2 grounds: (1) lack of consent and (2) want of consideration.

Petitioner’s defense that the deed of sale was valid and that they were the ones paying taxes cannot stand because they admitted in court that they changed the price in the deed of sale. o Petitioners said that the real amount they paid to respondents was P7,800 but only put P2,000 in the Deed of Sale to save taxes.

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

43

SALES DIGESTS BLOCK 2B 2016 o In the deed of sale, the original price printed therein was actually P3000, then petitioners changed it to P2000 by writing over it. (gulo nila diba? Well naguluhan din ung court, kaya nawala ung confidence nila on the validity of the instrument) 

Petitioner’s defense, invoking Art. 1391 of the Civil Code also cannot stand. o The Civil Code provides in Article 1391 that an action to annul a contract on the ground of vitiated consent must be filed within four years from the discovery of the vice of consent. In the instant case, however, we are dealing not with a voidable contract tainted with fraud, mistake, undue influence, violence or intimidation that can justify its nullification, but with a contract that is null and void ab initio. (baranda v baranda)

Mate v. CA

BLOCK B 2016

refused since he did not owe Tan anything and was under no obligation to covey to Tan his properties. After a long discussion, Josie succeeded in convincing Mate to execute a fictitious deed of sale with right to repurchase subject to the following conditions that first, Josie would provide the funds for the repurchase which amounted to P1.4m and would give Mate P420k as interest for 6 months. Checks were then subsequently issued by Josie with the aforesaid amounts. When Mate tried to deposit the two checks in his accounts in preparation for the repurchase, the checks were dishonored for being drawn against a closed account. Realizing that he was swindled, Mate sent a telegram to Josie and even went to Manila to look for her but to no avail. Mate was then constrained to file a criminal case of estafa against Josie but the case was archived since Josie could not be found. Mate also filed a civil case for the reconveyance of the lots he sold under the pacto de retro. The RTC and the CA ruled in favor of Tan hence, the petition for review.

GR. 120724-25 May 21, 1998 Issue(s): Memory Aid: 1. W/N the Deed of Sale with right to purchase was valid. BLOCK B 2016

Facts: Held: Josie Rey, along with the private respondent Tan, went to the petitioner Mate’s house in Tacloban City. Threatened with the criminal prosecution of B.P 22 because of the bad checks Josie Rey issued to Tan, Josie then sought the help of the petitioner Mate whose wife was her cousin. Josie requested Mate to sell his three lots in Tacloban City with a right to repurchase. Initially, Mate

YES, all the elements of a contract were present and it is valid and binding between the parties. The SC denied Mate’s claim that the sale was null and void for lack of consideration because no money changed hands when he signed the contract. The Court found that there was indeed consideration in the form of the P420k

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

44

SALES DIGESTS BLOCK 2B 2016 he got for accommodating Josie’s pleas for help. Other than Mate’s kindness to Josefina, his receipt of the P420k impelled him to execute the pacto de retro. Mate was also estopped from assailing the nullity of the contract for lack of consideration because when he filed the criminal case against Josie he tacitly admitted that there was consideration Petitioner Mate has no one else to blame but himself for his misfortune and thus the Court can only sympathize with him and is constrained to rule against him.

Yu Bun Guan vs Elvira Ong G.R. No. 144735. October 18, 2001 Summary: A simulated deed of sale has no legal effect, and the transfer certificate of title issued in consequence thereof should be cancelled. Pari delicto does not apply to simulated sales. Facts: Respondent Elvira Ong alleges that she and Petitioner Yu Bun Guan are married according to Chinese Rites on April 30, 1961. There are two testimonies:

BLOCK B 2016

I) According to respondent: On March 20,1968, with her own personal funds, she purchased a parcel of land referred to as the Rizal property from Aurora Seneris supported by Title no. 26795 which she registered on April 17,1968 under her own name. In 1983, using their conjugal fund, petitioner and respondent purchased a house and lot registered in their name under Title No. 118884.

BLOCK B 2016

Before their separation in 1992, respondent executed a simulated Deed of Sale of the J.P. Rizal property in her husband’s favor, but on the promise that he would construct a commercial building for the benefit of the children. The consideration for the ‘simulated sale’ was that, after its execution in which he would represent himself as single, a Deed of Absolute Sale would be executed in favor of the three (3) children and that he would pay the Allied Bank, Inc. the loan he obtained. Petitioner did not deliver to respondent the 200,000 peso consideration. Because of the sale, a new title (TCT No. 181033) was issued in his name, but to ‘insure’ that he would comply with his commitment, she did not deliver the owner’s copy of the title to him. In the meantime, Petitioner on the other hand, filed with the RTC, Makati, a ‘Petition for Replacement’ of an owner’s duplicate title. Petitioner falsely made it appear that the owner’s copy of the title was lost or misplaced. On September 17, 1993, a new owner’s copy of the title was issued to petitioner. Later on, failing to perform his promise and gaining knowledge of petitioner’s fraudulent acts, respondent executed an Affidavit of Adverse Claim. Respondent claims that the sale be declared null and void; for the title to be cancelled; payment of actual, moral and exemplary damages; and attorney’s fees. II) On the other hand, Petitioner claims that: Sometime in 1968 or before he became a Filipino, ‘through naturalization,’ the JP Rizal property was being offered to him for sale. Because he was not a Filipino, he utilized respondent as his

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

45

SALES DIGESTS BLOCK 2B 2016 ‘dummy’ and agreed to have the sale executed in the name of respondent although the consideration was his own and from his personal funds. When he finally acquired a Filipino citizenship in 1972, he purchased another property being referred to as the ‘Juno lot’ out of his own funds. If only to reflect the true ownership of the JP Rizal property, a Deed of Sale was then executed in 1972. Believing in good faith that his owner’s copy of the title was lost and not knowing that the same was surreptitiously ‘concealed’ by respondent, he filed in 1993 a petition for replacement of the owner’s copy of the title, in court. Petitioner added that respondent could not have purchased the property because she had no financial capacity to do so; on the other hand, he was financially capable although he was disqualified to acquire the property by reason of his nationality. Respondent was in pari delicto being privy to the simulated sale. Issue: 1) Is the deed of sale valid? 2) Does Pari delicto apply? BLOCK B 2016

Held :

BLOCK B 2016

1) In Ocejo, Perez & Co. vs. Flores, we ruled that a contract of purchase and sale is null and null and void and produces no effect whatsoever where the same is without cause or consideration in that the purchase price which appears thereon as paid has in fact never been paid by the purchaser to vendor. In the present case, it is clear from the factual findings of both lower courts that the Deed of Sale was completely simulated and, hence, void and 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 the parties 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 the consideration for the sale. 2) The principle of in pari delicto provides that when two parties are equally at fault, the law leaves them as they are and denies recovery by either one of them. However, this principle does not apply with respect to inexistent and void contracts. ( Modina v. Court of Appeals)

1) No 2) No Ratio:

Vda Catindig v Heirs of Catalina Roque G.R. No. L-25777 J. Aquino Petitioners: Asuncion Catindig

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

46

SALES DIGESTS BLOCK 2B 2016 Respondents: Heirs of Catalina Roque Summary/mem aid: fishpond, if the price is simulated the sale is VOID FACTS: The Heirs of Catalina Roque are co-owners of a fishpond, which has an area of more than 13 hectares. On Oct. 1, 1941, the co-owners leased the fishpond to Catindig for 10 years for P6000. When the lease was terminated, Catindig was still in possession of the fishpond because she was negotiating with the co-owners for its purchase. She wanted to buy it for P52000. On Oct. 18, 1960, German Ramirez, one of the co-owners, sold his share for P6500. The sale was annotated in the title. Paolo Villanueva, also one of the co-owners, learned of the sale by German Ramirez. On Nov. 18, 1960, the rest of the co-owners filed an action against Catindig to compel her to allow them to redeem that portion of the fishpond sold by German Ramirez. The Court of Appeals found out that Catindig did not pay the purchase price because she was not able to obtain a loan. Hence, CA said that the sale was VOID because the sale was a simulated one.

has in fact never been paid by the purchaser to the vendor. Such a sale is non-existent. It cannot be considered consummated. The CA’s finding that the price was not paid or that the statement in the supposed contracts of sale as to the payment of the price was simulated, fortifies the view that the alleged sales were void

Ong v. Ong G.R. No. L-67888 October 8, 1985 J. Relova Petitioners - Imelda Ong Respondents – Alfredo Ong Private Respondents - Faustino Y Bautista and Fernando M. Mangubat Memory Aid/Doctrine -

Quitclaim is equivalent to Deed of Sale

-

It is not unusual in deeds of conveyance of stating that the consideration given is the sum of P1.00, although the actual consideration may have been much more (Anglo-Saxon practice). Moreover, assuming that said consideration of P1.00 is suspicious, this does not necessarily mean the purchase was not made in good faith and for valid consideration and that the sale is void.

-

The execution of a deed purporting to convey ownership of a realty is in itself prima facie evidence of the existence of a valuable consideration, the party alleging lack of consideration has the burden of proving such allegation

BLOCK B 2016

ISSUE: w/n the sale of the fishpond was void. HELD: YES. The SC said that the sale was simulated. According to Art 1471 of the NCC: If the price is simulated, the sale is void, but the act may be shown to have been in reality a donation, or some other act or contract. A contract of sale is void and produces no effect whatsoever where the price, which appears thereon as paid,

BLOCK B 2016

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

47

SALES DIGESTS BLOCK 2B 2016

o CA affirmed and held Quitclaim Deed is a conveyance of property with a valid cause or consideration; the consideration is the P1.00 Peso; the apparent inadequacy is of no moment since it is the usual practice in deeds of conveyance to place a nominal amount although there is a more valuable consideration given.

Facts -

Imelda Ong for and in consideration of P1.00 and other valuable consideration executed a Quitclaim Deed and transferred, released, assigned and forever quit claimed to Sandra Maruzzo (a MINOR) her heirs and assigns, all her rights, title, interest and participation in the ONE-HALF undivided portion of the parcel of land

-

4 years later, Imelda revoked the Deed of Quitclaim

Issue: W/N the Quitclaim Deed (equivalent to a Deed of Sale) is void for lack of consideration

-

2 years after the revocation, she DONATED the WHOLE property to her son

Held: No. CA ruling affirmed.

-

Maruzzo’s guardian then filed with RTC action for the recovery of ownership of the said lot and the nullification of the Deed of Donation o In response, Imelda contended the Quitclaim Deed is void as it is equivalent to a Deed of Donation which requires ACCEPTANCE. As Maruzzo was a minor, she had no legal personality to accept.

BLOCK B 2016

o RTC ruled in favor of Maruzzo and said the Quitclaim Deed is equivalent to a Deed of Sale. -

Imelda appealed to the CA o Imelda added the P1.00 consideration is not a consideration at all to sustain the ruling that the Deed of Quitclaim is equivalent to a sale.

BLOCK B 2016

-

Quitclaim Deed provides “property was for and in consideration of the One (P 1.00) Peso and the other valuable considerations” o Thus, the cause or consideration is not the One (P1.00) Peso alone but also the other valuable considerations. o Morales Development Co., Inc. vs. CA: It is not unusual in deeds of conveyance of stating that the consideration given is the sum of P1.00, although the actual consideration may have been much more (Anglo-Saxon practice). Moreover, assuming that said consideration of P1.00 is suspicious, this does not necessarily mean the purchase was not made in good faith and for valid consideration and that the sale is void. Indeed, bad faith and inadequacy of the monetary consideration do not render a conveyance inexistent, for the assignor's

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

48

SALES DIGESTS BLOCK 2B 2016 liberality may be sufficient cause for a valid contract (Article 1350, Civil Code), whereas fraud or bad faith may render either rescissible or voidable, although valid until annulled, a contract concerning an object certain entered into with a cause and with the consent of the contracting parties, as in the case at bar. -

BLOCK B 2016

preponderance of evidence in a proper action. (Samanilla vs, Cajucom, et al., 107 Phil. 432). o The execution of a deed purporting to convey ownership of a realty is in itself prima facie evidence of the existence of a valuable consideration, the party alleging lack of consideration has the burden of proving such allegation. (Caballero, et al. vs. Caballero, et al., (CA), 45 O.G. 2536).

Failed to overcome the burden that consideration is presumed: o Although the cause is not stated in the contract it is presumed that it is existing unless the debtor proves the contrary (Article 1354 of the Civil Code).

-

Even assuming the Quitclaim Deed is a donation, acceptance by minors is only required if it is onerous or conditional (Article 726, Civil Code)

o One of the disputable presumptions is that there is a sufficient cause of the contract (Section 5, (r), Rule 131, Rules of Court).

Bagnas v. CA

o It is a legal presumption of sufficient cause or consideration supporting a contract even if such cause is not stated therein (Article 1354, New Civil Code)

PETITIONERS: Isaac Bagnas, Encarnacion Bagnas, Silvestre Bagnas Maximina Bagnas, Sixto Bagnas and Agatona Encarnacion (first cousins of Mateum)

o This presumption cannot be overcome by a simple assertion of lack of consideration especially when the contract itself states that consideration was given, and the same has been reduced into a public instrument with all due formalities and solemnities. To overcome the presumption of consideration the alleged lack of consideration must be shown by

BLOCK B 2016

GR L-38498 August 10, 1989

RESPONDENTS: Hon. Court Of Appeals, Rosa L. Retonil Teofilo Encarnacion, and Jose B. Nambayan (collateral relatives of Mateum though more remote in degree) Memory Aid: Petitioners want to recover land that was allegedly sold by Mateum, their deceased relative, to the respondents for a consideration of P 1.00. The assessed value of the property is at least P 10,500. Petitioners alleged that the deeds of sale were

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

49

SALES DIGESTS BLOCK 2B 2016 fictitious, fraudulent, or valid, alternatively, as donations void for want of acceptance embodied in a public instrument. Respondents denied this, asserting that said sales were made for good and valuable consideration - which are services that they gave to Mateum such as nursing him. Supreme Court said that no transfer occurred. It was void ab initio because there was no consideration (gross disproportion between the stipulated price and the assessed value + evidence that there was no real intention to pay any indicated valuable consideration). Also, Art. 1458 requires that "equivalent" be something representative of money to the effect that services are not equivalent of money insofar as said requirement is concerned and that a contract is not a true sale where the price consists of services or prestations. There was also no valid donation because it was not in a public document. Facts: Hilario Mateum died single, without ascendants or descendants, and survived only by collateral relatives, of whom petitioners were the nearest. He left no will, no debts, and an estate consisting of 29 parcels of land in Kawit and Imus, Cavite, 10 of which are involved in this appeal.

BLOCK B 2016



Respondents registered with the Registry of Deeds for the Province of Cavite two deeds of sale (mostly written in Filipino) purportedly executed by Mateum in their favor covering ten parcels of land. o

Both deeds recited the consideration of the sale to be "... halagang ISANG PISO (Pl.00), salaping Pilipino, at mga naipaglingkod, ipinaglilingkod sa

BLOCK B 2016

aking kapakanan ..." (In English: “the sum of one peso, and services rendered, being rendered, and to be rendered for my seller’s benefit”)



o

One deed was dated February 6, 1963 and covered five parcels of land, and the other was dated March 4, 1963, covering five other parcels, both, therefore, antedating Mateum's death by more than a year.

o

Petitioners assert that despite said sales, Mateum continued to be in possession of the lands, he remained the owner and that the tax payments continued to be paid in his name.

Petitioners filed in the RTC for the annulment of the deeds of sale as fictitious, fraudulent or falsified, or, alternatively, as donations void for want of acceptance embodied in a public instrument. They claim ownership pro indiviso of the lands subject of the deeds by virtue of being intestate heirs of Hilario Mateum. o

Citing Art. 1458 (CC), in prescribing that a sale be for a ... price certain in money or its equivalent ... requires that "equivalent" be something representative of money, e.g., a check or draft, citing Manresa to the effect that services are not the equivalent of money insofar as said requirement is concerned and that a contract is not a true sale where the price consists of services or prestations.

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

50

SALES DIGESTS BLOCK 2B 2016 



Respondent's denied allegations, asserting that said sales were made for good and valuable consideration. They also said that as collateral relatives of Hilario Mateum , they have done many good things for him, nursing him, which services constituted the bulk of the consideration of the sales. And they also set up the defense that petitioners could not question or seek the annulment of the sales because they were mere collateral relatives and were not bound principally or subsidiarily.

False and fictitious consideration o

Petitioners are mere collateral relatives and not forced heirs. They could not legally question the disposition made by Mateum (as in the case of Armentia v. Patriarca). Their evidence of alleged fraud was also insufficient. The fact that the deeds of sale each a stated a consideration of only P1.00 was not in itself evidence of fraud or simulation.





No other true and lawful cause having been shown, the Court finds both said deeds, insofar as they purport to be sales, not merely voidable, but void ab initio.



Note: the essence of this ruling was that evidence was adduced to indicate that there was no real intention to pay any indicated valuable consideration.

Manresa citations: o

Services are not the equivalent of money insofar as said requirement is concerned and that a contract is not a true sale where the price consists of services or prestations.

o

True price, which is essential to the validity of a sale, means existent, real and effective price, that which does not consist in an insignificant amount as, say, P.20 for a house.

CA: affirmed.

ISSUE:

BLOCK B 2016

Apparent gross disproportion between the stipulated price (P 1.00) and the assessed real estate value (at least P 10,500) plainly and unquestionably demonstrates that they state a false and fictitious consideration.

Trial Court: Granted the motion to dismiss. o





BLOCK B 2016

Whether, in view of the fact that, for properties with assessed valuation of more than P10,000.00, the questioned deeds of sale stating a price of only P1.00 plus unspecified past, present and future services to which no value is assigned, said deeds were void or inexistent from the beginning or merely voidable. HELD/RATIO: Transfers were void because there was no valid consideration.



That it is not the same as the concept of a just price which entails weighing and

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

51

SALES DIGESTS BLOCK 2B 2016 measuring, for economic equivalence, the amount of price against all the factors that determine the value of the thing sold 





"Services" mentioned in the questioned deeds of sale are not only vague and uncertain, but are unknown and not susceptible of determination without the necessity of a new agreement between the parties to said deeds.

Not a donation o

BLOCK B 2016

But that there is no need of such a close examination when the immense disproportion between such economic values is patent a case of insignificant or ridiculous price, the unbelievable amount of which at once points out its inexistence.

the law prescribes that donations of immovable property, to be valid, must be made and accepted in a public instrument and it is not denied by the respondents that there has been no such acceptance which they claim is not required.

Republic v Phil. Resources Development GR No. L-10141 / 31 January 1958 / J. Padilla Summary/Memory Aid:

-

BLOCK B 2016

Apostol used company items (logs, steel plates) to pay for his personal debt with the Bureau of Prisons

Facts: Republic of the Philippines filed a case against Macario Apostol and Empire Insurance Co. in the CFI. Demand for money was p34,015.06 with legal interest. Macario Apostol won bids with the Bureau of Prisons for 100 tons of Palawan Almaciga and 3M board feet of logs and contract was executed between Apostol and Bureau of Prisons. Apostol only paid part of what he owed for the items he won in the bid. Empire Insurance Co. was impleaded because it issued a performance bond in favor of Apostol. Phil. Resources Development Corporation filed a petition to intervene in the CFI alleging that Apostol, who was its President, used materials belonging to the company to pay for the debts he owed to Bureau of Prisons. Facts show he incurred such liability in his personal capacity. Phil. Resources alleged that it would lose rights over items it rightfully owned if Court considers such items as payment for Apostol’s debt, when in fact Phil. Resources has nothing to do with the transaction. Phil. Resources tried to have goods returned to them, but Bureau of Prisons did not accede. CFI denies petition to intervene, however, CA reverses decision and orders CFI to allow Phil. Resources to intervene because it stands to be adversely affected if such payment using its goods is validated by the Court as payment of Apostol’s personal debt. In CA, Republic of the Phils. alleges that since suit is for

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

52

BLOCK B 2016

SALES DIGESTS BLOCK 2B 2016 recovery of sum of money, and not the goods turned over by Apostol previously.

Chapter 5: Formation of a Contract of Sale

ISSUE/S: W/N Phil. Resources should be allowed to intervene in the case.

Manila Metal Container Corporation vs Philippine National Bank

HELD/RATIO:

GR no 166862 December 20, 2006

YES.

Petitioner MMCC; Intervenor Tolentino; Respondent PNB; Intervenor DMCI

‘We find no reason for disturbing the foregoing pronouncements. The Government argues that "Price . . . is always paid in terms of money and the supposed payment being in kind, it is no payment at all, "citing Article 1458 of the new Civil Code. However, the same Article provides that the purschaser may pay "a price certain in money or its equivalent," which means that they meant of the price need not be in money. Whether the G.I. sheets, black sheets, M. S. Plates, round bars and G. I. pipes claimed by the respondent corporation to belong to it and delivered to the Bureau of Prison by Macario Apostol in payment of his account is sufficient payment therefore, is for the court to pass upon and decide after hearing all the parties in the case. Should the trial court hold that it is as to credit Apostol with the value or price of the materials delivered by him, certainly the herein respondent corporation would be affected adversely if its claim of ownership of such sheets, plates, bars and pipes is true.’

BLOCK B 2016

Memory aid: Series of offers and counter offers ;) Ponente: Callejo FACTS: 1. MMCC, to secure a loan it had obtained from PNB, executed a real estate mortgage over a parcel of land. 2. In 1982, PNB filed a petition for extrajudicial foreclosure of the real estate mortgage and sought to have the property sold at public auction for P911,532.21, MMCC’s outstanding obligation to PNB. 3. The property was sold at public auction where PNB was declared the winning bidder for P1M. The period to redeem the property was to expire on February 17, 1984. 4. Since petitioner failed to redeem the property, a new title was issued to PNB.

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

53

SALES DIGESTS BLOCK 2B 2016 5. Meanwhile, the Special Assets Management Department (SAMD) had prepared a statement of account, and as of June 25, 1984 MMCC's obligation amounted to P1,574,560.47. When apprised of the statement of account, MMCC remitted P725,000.00 to PNB as "deposit to repurchase," and an official receipt was issued to it. 6. In the meantime, the SAMD recommended to the management of PNB that MMCC be allowed to repurchase the property for P1,574,560.00. However, the PNB management informed MMCC that it is rejecting its offer and SAMD’s proposal. It was suggested that MMCC purchase the property for P2,660,000.00, its minimum market value.

BLOCK B 2016

7. MMCC did not agree to PNB's proposal. Instead, it wrote another letter requesting for a reconsideration. PNB replied in a letter, wherein it reiterated its proposal that MMCC purchase the property for P2,660,000.00. MMCC declared that it had already agreed to the SAMD's offer to purchase the property for P1,574,560.47, and that was why it had paid P725thou. 8. On June 4, 1985, PNB informed MMCC that the PNB Board of Directors had accepted MMCC’s offer to purchase the property, but for P1,931,389.53 in cash less the P725,000.00 already deposited with it. 9. MMCC rejected PNB's proposal. It maintained that PNB had agreed to sell the property for P1,574,560.47, and that since its P725,000.00 downpayment had been accepted, PNB was

BLOCK B 2016

proscribed from increasing the purchase price of the property. 10. MMCC then filed a complaint against PNB for "Annulment of Mortgage and Mortgage Foreclosure, Delivery of Title, or Specific Performance with Damages." To support its cause of action for specific performance, it alleged that there was already a perfected contract of sale between them which the PNB refuted. 11. A series of negotiation ensued after the complaint. MMCC offered P3.5M which PNB rejected asking for its market value of P30M. MMCC then offered P4.5M which the PNB again refused. RTC held that there was no contract of sale but merely an exchange of offers and counteroffers and that the P725thou was a deposit and not a downpayment or earnest money. CA affirmed the RTC’s decision saying that there was no meeting of the minds between MMCC and PNB hence there was no contract of sale, and as such, there was no contract to rescind.

ISSUE: 1. WON MMCC and PNB had entered into a perfected contract for MMCC to repurchase the property from PNB? HELD:

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

54

SALES DIGESTS BLOCK 2B 2016 There was no perfected contract of sale between the parties on June 4, 1985. A definite agreement as to the price is an essential element of a binding agreement to sell personal or real property. When there is merely an offer by one party without acceptance of the other, there is no contract. A negotiation is formally initiated by an offer, which, however, must be certain. To convert the offer into a contract, the acceptance must be absolute and must not qualify the terms of the offer; it must be plain, unequivocal, unconditional and without variance of any sort from the proposal. A qualified acceptance or one that involves a new proposal constitutes a counter-offer and a rejection of the original offer. A counter-offer is considered in law, a rejection of the original offer and an attempt to end the negotiation between the parties on a different basis. The acceptance must be identical in all respects with that of the offer so as to produce consent or meeting of the minds.

BLOCK B 2016

The statement of account prepared by the SAMD cannot be considered an unqualified acceptance to MMCC's offer to purchase the property. The statement is but a computation of the amount which MMCC was obliged to pay in case respondent would later agree to sell the property.

BLOCK B 2016

contract of sale. This contention is likewise negated by the stipulation of facts which the parties entered into in the trial court: 9. On June 25, 1984, MMCC paid P725,000.00 to PNB as deposit to repurchase the property. The deposit of P725,000 was accepted by PNB on the condition that the purchase price is still subject to the approval of the PNB Board. Unless and until PNB accepted the offer on these terms, no perfected contract of sale would arise. Absent proof of the concurrence of all the essential elements of a contract of sale, the giving of earnest money cannot establish the existence of a perfected contract of sale. It appears that, per its letter to MMCC dated June 4, 1985, the PNB had decided to accept the offer to purchase the property. However, this amounted to an amendment of PNB's qualified acceptance, or an amended counter-offer, because while the PNB lowered the purchase price, it still declared that its acceptance was subject to the new lowered price.

United Muslim and Christian Urban Poor Association v. BRYC G.R. No. 179653 | July 31, 2009 | Ponente: NACHURA, J. FACTS:

There is no evidence that the SAMD was authorized by PNB's Board of Directors to accept MMCC's offer and sell the property. Any acceptance by the SAMD of MMCC's offer would not bind PNB.

Respondent Sea Foods Corporation (SFC) is the registered owner of Lot No. 300 located in Lower Calainan, Zamboanga City and covered by Transfer Certificate of Title (TCT) No. 3182 (T-576).

The P725,000.00 it had remitted to PNB was "earnest money" which could be considered as proof of the perfection of a

Sometime in 1991, petitioner United Muslim and Christian Urban Poor Association, Inc. (UMCUPAI), an organization of

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

55

SALES DIGESTS BLOCK 2B 2016 squatters occupying Lot No. 300, through its President, Carmen T. Diola, initiated negotiations with SFC for the purchase thereof. UMCUPAI expressed its intention to buy the subject property using the proceeds of its pending loan application with National Home Mortgage Finance Corporation (NHMF). Thereafter, the parties executed a Letter of Intent to Sell by [SFC] and Letter of Intent to Purchase by UMCUPAI. However, the intended sale was derailed due to UMCUPAI’s inability to secure the loan from NHMF as not all its members occupying Lot No. 300 were willing to join the undertaking. Intent on buying the subject property, UMCUPAI, in a series of conferences with SFC, proposed the subdivision of Lot No. 300 to allow the squatter-occupants to purchase a smaller portion thereof.

BLOCK B 2016

Consequently, sometime in December 1994, Lot No. 300 was subdivided into three (3) parts covered by separate titles. On January 11, 1995, UMCUPAI purchased Lot No. 300-A. In turn, Lot No. 300-B was constituted as road right of way and donated by SFC to the local government. UMCUPAI failed to acquire Lot No. 300-C for lack of funds. On March 5, 1995, UMCUPAI negotiated anew with SFC and was given by the latter another three months to purchase Lot No. 300-C. However, despite the extension, the three-month period lapsed with the sale not consummated because UMCUPAI still failed to obtain a loan from NHMF. Thus, on July 20, 1995, SFC sold Lot No. 300-C to respondent BRYC-V Development Corporation (BRYC). A year later, UMCUPAI filed with the RTC a complaint against respondents SFC and BRYC seeking to annul the sale of Lot

BLOCK B 2016

No. 300-C, and the cancellation of TCT No. T-121,523. UMCUPAI alleged that the sale between the respondents violated its valid and subsisting agreement with SFC embodied in the Letter of Intent. According to UMCUPAI, the Letter of Intent granted it a prior, better, and preferred right over BRYC in the purchase of Lot No. 300-C. In refutation, BRYC said that UMCUPAI’s complaint did not state a cause of action since UMCUPAI had unequivocally recognized its ownership of Lot No. 300-C when UMCUPAI likewise sent BRYC a Letter of Intent dated August 18, 1995 imploring BRYC to re-sell the subject lot. In a separate Answer, SFC countered that the Letter of Intent dated October 4, 1991 is not, and cannot be considered, a valid and subsisting contract of sale. On the contrary, SFC averred that the document was drawn and executed merely to accommodate UMCUPAI and enable it to comply with the loan documentation requirements of NHMF. In all, SFC maintained that the Letter of Intent dated October 4, 1991 was subject to a condition i.e., payment of the acquisition price, which UMCUPAI failed to do when it did not obtain the loan from NHMF.

After trial, the RTC dismissed UMCUPAI’s complaint. The lower court found that the Letter of Intent was executed to facilitate the approval of UMCUPAI’s loan from NHMF for its intended purchase of Lot No. 300. According to the RTC, the Letter of Intent was simply SFC’s declaration of intention to sell, and not a promise to sell, the subject lot. On the whole, the RTC concluded

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

56

SALES DIGESTS BLOCK 2B 2016 that the Letter of Intent was neither a promise, nor an option contract, nor an offer contemplated under Article 1319 of the Civil Code, or a bilateral contract to sell and buy. The CA, on appeal, affirmed in toto the RTC’s ruling. ISSUE: 1. IS THE LETTER OF INTENT TO SELL AND LETTER OF INTENT TO BUY A BILATERAL RECIPROCAL CONTRACT WITHIN THE MEANING OR CONTEMPLATION OF ARTICLE 1479, FIRST PARAGRAPH, CIVIL CODE OF THE PHILIPPINES? HELD/RATIO: Although not stated plainly, UMCUPAI claims that the Letter of Intent is equivalent to a conditional contract of sale subject only to the suspensive condition of payment of the purchase price.

BLOCK B 2016

A contract to sell is a bilateral contract whereby the prospective seller, while expressly reserving the ownership of the subject property despite delivery thereof to the prospective buyer, binds himself to sell the said property exclusively to the prospective buyer upon fulfillment of the condition agreed upon, that is, full payment of the purchase price. In a contract to sell, upon the fulfillment of the suspensive condition which is the full payment of the purchase price, ownership will not automatically transfer to the buyer although the property may have been previously delivered to him. The prospective seller still has to convey title to the prospective buyer by entering into a contract of absolute sale.

BLOCK B 2016

In the instant case, however, the parties executed a Letter of Intent, which is neither a contract to sell nor a conditional contract of sale. As found by the RTC, and upheld by the CA, the Letter of Intent was executed to accommodate UMCUPAI and facilitate its loan application with NHMF. Nowhere in the Letter of Intent does it state that SFC relinquishes its title over the subject property, subject only to the condition of complete payment of the purchase price; nor, at the least, that SFC, although expressly retaining ownership thereof, binds itself to sell the property exclusively to UMCUPAI. The Letter of Intent to Buy and Sell is just that – a manifestation of SFC’s intention to sell the property and UMCUPAI’s intention to acquire the same. In their Agreement, SFC expressly declared its “intention” to sell and UMCUPAI expressly declared its “intention” to buy subject property. An intention is a mere idea, goal, or plan. It simply signifies a course of action that one proposes to follow. It simply indicates what one proposes to do or accomplish. A mere “intention” cannot give rise to an obligation to give, to do or not to do (Article 1156, Civil Code). One cannot be bound by what he proposes or plans to do or accomplish. A Letter of Intent is not a contract between the parties thereto because it does not bind one party, with respect to the other, to give something, or to render some service (Art. 1305, Civil Code). The Letter of Intent/Agreement between SFC and UMCUPAI is merely a written preliminary understanding of the parties wherein they declared their intention to enter into a contract of sale. It is subject to the condition that UMCUPAI will

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

57

SALES DIGESTS BLOCK 2B 2016

BLOCK B 2016

“apply with the Home Mortgage and Finance Corporation for a loan to pay the acquisition price of said land.” One of the requirements for such loan is “a formal manifestation of Intent to Sell” from SFC. Thus, the Letter of Intent to Sell fell short of an “offer” contemplated in Article 1319 of the Civil Code because it is not a certain and definite proposal to make a contract but merely a declaration of SFC’s intention to enter into a contract. UMCUPAI’s declaration of intention to buy is also not certain and definite as it is subject to the condition that UMCUPAI shall endeavor to raise funds to acquire subject land. The acceptance of the offer must be absolute; it must be plain and unconditional. Moreover, the Letter of Intent/Agreement does not contain a promise or commitment to enter into a contract of sale as it merely declared the intention of the parties to enter into a contract of sale upon fulfillment of a condition that UMCUPAI could secure a loan to pay for the price of a land. The Letter of Intent/Agreement is not an “option contract” because aside from the fact that it is merely a declaration of intention to sell and to buy subject to the condition that UMCUPAI shall raise the necessary funds to pay the price of the land, and does not contain a binding promise to sell and buy, it is not supported by a distinct consideration distinct from the price of the land intended to be sold and to be bought. No option was granted to UMCUPAI under the Letter of Intent/Agreement to buy subject land to the exclusion of all others within a fixed period nor was SFC bound under said Agreement to Sell exclusively to UMCUPAI only the said land within the fixed period. Neither can the Letter of Intent/Agreement be considered a bilateral reciprocal contract to sell and to buy contemplated under

BLOCK B 2016 Article 1479 of the Civil Code which is reciprocally demandable. The Letter of Intent/Agreement does not contain a PROMISE to sell and to buy subject property. There was no promise or commitment on the part of SFC to sell subject land to UMCUPAI, but merely a declaration of its intention to buy the land, subject to the condition that UMCUPAI could raise the necessary funds to acquire the same.

Carceller v. Court of Appeals GR No. 124791 February 10, 1999 Quisumbing, J. Petitioners: Jose Ramon Carceller Respondents: Court of Appeals and State Investment Houses, Inc. (SIHI) Memory Aid: lease contract with option to purchase, 6-month extension to exercise option, SIHI with financial problems, Carceller’s improvements on the land, obtained a loan Facts: SIHI is the registered owner of 2 parcels of land including all the improvements thereon. Petitioner and SIHI entered into a lease contract with option to purchase over said two parcels of land, for 18 months at a rate of P10k/month, from Aug 1 1984 until January 30, 1986. The lease contract also states that the option to purchase shall be exercised by written notice to the lessor (SIHI) at anytime within the option period and the document of sale has to be consummated within the month immediately following the month when the lessee exercised his option under the contract.

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

58

SALES DIGESTS BLOCK 2B 2016 On Jan 7, 1986 or 3 weeks before expiration of the lease contract, SIHI notified Carceller of the termination of the lease agreement and the time left to exercise the option to purchase.

1. W/N Carceller should be allowed to exercise the option to purchase the leased property despite the alleged delay in giving the required notice to SIHI

In a letter dated Jan 15, which was received by SIHI on Jan 29, Carceller requested for a 6-month extension of the lease contract, alleging that he needs time to raise funds.

Held:

On Feb 14, SIHI told Carceller that his request was disapproved, but SIHI offered to lease the property to Carceller at a rate of P30k/month for a period of 1 year. SIHI also told Carceller that it decided to offer for sale the subject property to the public. On Feb 18, Carceller notified SIHI of his decision to exercise the option to purchase and made arrangements for the payment of downpayment thereon. On Feb 20, SIHI sent a letter to Carceller stating that the period within which the option period should have been exercised had already lapsed and asked Carceller to vacate the property within 10 days. Carceller filed a complaint for specific performance and damages with the RTC to compel SIHI to execute the deed of sale. RTC: Ordered SIHI to execute a deed of sale in favor of Carceller BLOCK B 2016

BLOCK B 2016

CA: Affirmed RTC’s decision Issue:

YES. Carceller’s letter dated Jan 15 was fair notice of his request for the extension of the lease contract for 6 months to allow him to generate funds to exercise the option to buy. The SC ruled that Carceller’s letter of Jan 15 and his formal exercise of the option on Feb 18 were within a reasonable timeframe consistent with the periods given and the known intent of the parties to the agreement. The SC took into account the primary intent of the parties in entering into the lease contract with option to purchase, as well as their subsequent and contemporaneous acts. SIHI, prior to its negotiation with Carceller, was already beset with financial problems. SIHI was compelled to dispose some of its assets to generate sufficient funds. SIHI’s agreement to enter first into a lease contract with option to purchase is clear proof its intent to promptly dispose of the property. Its letter dated Jan 7 reminding Carceller of the time left to exercise the option to buy, as well as the letter informing Carceller of the decision to sell the property to the general public, clearly showed its desire to sell the property. Carceller manifested his determination to buy the property. He introduced permanent improvements on it and secured an P8M loan to increase his chances of acquiring the property. The SC cited a case wherein it ruled that if a lessee fails to exercise his option to buy within the period agreed upon, the lessee

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

59

SALES DIGESTS BLOCK 2B 2016 loses the right to buy the property later on based on the same terms and conditions SET IN THE OFFER. Carceller could not, therefore, insist on buying the property based on the price agreed upon in the lease agreement. SIHI, on the other hand, could not take advantage of the situation to increase the selling price of the said property by nearly 90% because such leap in the price quoted would show an opportunistic intent to exploit as SIHI knew that Carceller needed the property for his business and he could afford to pay such higher price since Carceller was able to obtain an P8M loan. If the Courts were to allow SIHI to take advantage of the situation, there would be an injustice to Carceller because SIHI would be unjustly enriched at Carceller’s expense. NOTE: Option is defined as a preparatory contract in which one party grants to the other, for a fixed period and under specified conditions, the power to decide, whether or not to enter into a principal contract. It is a separate agreement distinct from the contract which the parties may enter into upon consummation of the option.

Tayag vs Lacson

BLOCK B 2016

GR No. 134971 March 25, 2004

Memory Aid: Famers/tenants; deeds of assignments; option contracts Facts: 

The respondents are the registered owners of three parcels of land located in Mabalacat, Pampanga. The properties are tenanted agricultural lands.



A group of farmers, Julio Tiamson et. al, individually executed a deed of assignment transferring their respective rights as tenants/tillers of the landholdings possessed in consideration of P50.00 per m2 to Herminio Tayag.



Said amount was made payable when legal impediments to the sale of the property no longer existed.



Exclusive right to buy the property was granted if the Lacsons agreed to sell the property with the concurrence of the tenants.



Tayag gave varied sums of money to Tiamson et. al as partial payments and received in return receipts.



Tayag wrote Tiamson et. al invited them for a meeting regarding the negotiations/implementations of the terms of deeds of assignments.



Thereafter, Tiamson et. al replied through a letter that they decided to sell all their rights and interest to the Lacsons.

Petitioner: Herminio Tayag Respondents: Amancia, Rosendo, Antonio, Juan (all surnamed Lacson), Teodisia Lacson-Espinosa, CA

BLOCK B 2016

Additional characters: Tiamson et. al = tenants/tillers/group of farmers Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

60

SALES DIGESTS BLOCK 2B 2016 



The petitioner filed a complaint against Tiamson et. al and the Lacsons before the RTC for the court to fix the period within which to pay the purchase price.

BLOCK B 2016 much less the “exclusive right to buy” the property. Nemo dat quod non habet.



An option is a contract by which the owner of the property agrees with another person that he shall have the right to buy his property at a fixed price within a certain time, or under, in compliance with certain terms and conditions, or which gives to the owner of the property the right to sell or demand a sale.



Imposes no binding obligation on the person holding an option aside from the consideration of the offer.



The second party gets in praesenti, not lands, not an agreement that he shall have the lands but the right to call for and receive lands if he elects.



An option contract is separate and distinct contract from which the parties may enter into upon the conjunction of the option.

One of the arguments of the petitioner is that deed of assignment executed by Tiamson et. al are perfected option contracts.

Issues: 1) WON the respondents agreed to sell the property 2) WON there were perfected option contracts Held: 1. NO. No showing that they agreed to sell the property. 1. Tayag and Tiamson et. al have yet to submit deeds of assignment to DAR, which can approve or disapprove the same.

BLOCK B 2016

2. Tayag even alleged that he was yet to meet Tiamson et. al. 2. NO.

Sanchez v. Rigos No. L-25494 June 14,1972 C.J. Concepcion

Tiamson et. al are were merely tenants and not the registered owners of the property.

Petitoner: Nicolas Sanchez (buyer) Respondent: Severina Rigos (seller)

3. Not being the owners of the property, the tenants could not legally grant the petitioner the option,

Memory Aid: “Option to Purchase”

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

61

SALES DIGESTS BLOCK 2B 2016 Doctrine: Art. 1479 - An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor if the promise is supported by a consideration distinct from the price. Without a consideration separate from the purchase price, an option contract would be void, as a contract, but would still constitute a valid offer; so that if the option is exercised prior to its withdrawal, it is equivalent to an offer being accepted giving rise to a valid and binding sale. FACTS:

BLOCK B 2016

Nicolas Sanchez and Severina Rigos executed an instrument entitled “Option to Purchase," whereby Mrs. Rigos “agreed, promised and committed … to sell" to Sanchez, for P 1,510.00, a parcel of land in Nueva Ecija within two (2) year. Such option shall be deemed “terminated and elapsed," if “Sanchez shall fail to exercise his right to buy the property" within the stipulated period. Since the several tenders of payment of Sanchez were rejected by Rigos, Sanchez just deposited the amount with the CFI of Nueva Ecija and filed an action for specific performance and damages. Rigos contended that the contract between the parties “is a unilateral promise to sell, and the same being unsupported by any valuable consideration, is null and void." Still, the lower court rendered judgment in favor of Sanchez and ordered Rigos to accept the sum Sanchez judicially consigned, and to execute in his favor the requisite deed of conveyance. ISSUE:

BLOCK B 2016

1. Was there a contract to buy and sell between the parties or only a unilateral promise to sell? HELD/RATIO: The instrument was a mere unilateral promise to sell. It was not reciprocally demandable because although Rigos “agreed, promise and committed” herself to sell the land, Sanchez has NOT “agreed and committed himself” to buy. As indicated by its own title, it was a mere "Option to Purchase," so Sanchez had no obligation to purchase the property. Although the sum of P1, 510 was expressly stipulated, there is nothing in the contract to indicate that the promise and undertaking is supported by a consideration "distinct from the price" as required by Art. 1479. In an accepted promise to sell, since there may be no valid contract without a cause or consideration, the promisor is not bound by his promise and may, accordingly, withdraw it. Pending notice of its withdrawal, his accepted promise partakes, however, of the nature of an offer to sell, which, if accepted, results in a perfected contract of sale. SC affirmed the lower court’s decision

Diamante v. CA G.R. No. L-51824 Petitioner: PERCELINO DIAMANTE Respondents: CA and GERARDO DEYPALUBUS

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

62

SALES DIGESTS BLOCK 2B 2016 Summary / Memory Aid:“Option to Repurchase”, Fishpond License/Lease Agreement, DANR Secretary, Bureau of Fishery The effects of a right of repurchase contained in the original document of sale and an option to repurchase subsequent and separate from the original document of sale differ. The latter is a separate contract from the contract of sale; it is merely a unilateral promise to sell, which is a mere offer. For it to be binding on both parties, it must be shown that the there is acceptance and that there is a consideration distinct from the price. In this case, with regard to the document entitled “OPTION TO REPURCHASE” executed by the parties over the property in controversy, it was not conclusively shown that there was acceptance and a separate consideration; thus it was not bonding at all. In conclusion, this “OPTION TO REPURCHASE” cannot be asserted by the petitioner as a ground for the revocation of the respondent’s Fishpond License / Lease Agreement over the subject property.

-

BLOCK B 2016

A fishery lot (with an area of 9.4 hectares and covered by Fishpond Permit No. F-2021) was in the name of Dionio. Upon Diono’s death, her heirs, petitioner Diamante and Dafeliz, inherited the property which they divided among themselves. The petitioner Diamante’s share of the fishery lot is the subject of this case.

-

In 1960, petitioner, as evidenced by a deed of sale, sold all his remaining rights over his portion of the fishery lot to the private respondent because of dire financial need.

After several days, Deypalubus executed in favor of the petitioner Diamante another document entitled: “Option to Repurchase”, wherein the property in question can be repurchased by the petitioner within 10 years from said date, with a 10 grace period. 

VERY IMPT. FACT: This option to repurchase was a separate agreement from the contract of sale of the subject fishery lot.

-

In applying for a Fishpond Permit and a Fishpond Lease Agreement, private respondent submitted to the Bureau of Fisheries (BOF) the deed of sale of his transaction with petitioner. But he did not include the “Option to Repurchase” in his application.

-

Eventually, the BOF issued in favor of private respondent a Fishpond Permit and a Fishpond Lease Agreement (Fishpond Permit No. 4953-Q and FLA No. 1372, respectively).

-

In December 1963, petitioner requested the BOF to nullify the FLA granted to respondent because the former is entitled to a valid twenty-year option to repurchase (in accordance with the “Option to Repurchase” they executed).

-

This request was dismissed. Petitioner then sought a reconsideration of the dismissal which was denied.

-

Petitioner sought again for a reconsideration with the DANR Secretary. This time, he was successful. The DANR Secretary

The Facts: -

BLOCK B 2016

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

63

SALES DIGESTS BLOCK 2B 2016 granted his motion in an Order cancelling FLA No. 1372. The Secretary stated that there was a misrepresentation of an essential or material fact committed by the respondent Deypalubos in his application for the permit and the lease agreement when the “Option to Repurchase” was not submitted.

discretion was committed by respondent Secretary inasmuch as private respondent was given ample opportunity to be heard on his claim re. the invalidity of the “Option to Repurchase”. -

o Based his ruling on Section 20 of Fisheries Admin. Order No. 60: any false statements, or any alteration, change or modification of any or all terms and conditions made in the application shall cause the cancellation of the permit or lease. -

Because of the Secretary’s denial of his appeal, private respondent filed with the CFI of Iloilo seeking to annul the Secretary's order on the ground that the Secretary gravely abused his discretion in not giving him the opportunity to prove that the “Option to Repurchase” was forged.

BLOCK B 2016

o Basically, Deypalubus was asserting that the “Option to Repurchase” was forged, and thus, the Secretary of DANR shouldn’t have relied on such document in junking his Fishpond Permit/Lease Agreement. -

-

The CFI decided in favor of the private respondent, stating that: (1) the DANR Secretary abused his discretion and (2) petitioner cannot repurchase the fishpond as the “Option to Repurchase” is of doubtful validity. Petitioner appealed to the CA. It reversed the decision of the trial court on the ground that no grave abuse of

BLOCK B 2016

Subsequently, acting on the Motion of Reconsideration filed by respondent, the CA reversed its own decision and affirmed the previous CFI ruling. o The CA’s reasoning: The DANR Secretary had gone beyond his statutory authority and had clearly acted in abuse of discretion in giving due weight to the “Option to Repurchase” whose genuineness and due execution had been successfully impugned and denied by Deypalubus.

-

Petitioner Diamante goes to the SC: contends that the findings of fact of administrative bodies should be accorded respect, absent a showing of arbitrariness.

The Issue: 1. W/N the decision of the DANR Secretary (which in essence recognized the “Option of Repurchase” and thus revoked the respondent’s fishpond license) should be set aside? Held / Ratio: YES, THE DECISION OF THE SECRETARY SHOULD BE SET ASIDE AND THUS, THE FISHPOND LICENSE/LEASE AGREEMENT OF RESPONDENT SHOULD BE REINSTATED.

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

64

SALES DIGESTS BLOCK 2B 2016 1. The Secretary did not gravely abuse of discretion in so far as he sufficiently gave ample opportunity to the respondents in alleging the forgery of the “Option to Repurchase”. 2. HOWEVER: the SC held that the respondent Secretary gravely erred in holding that private respondent's nondisclosure of the “Option to Repurchase” in his application for a fishpond license constituted a falsehood or a misrepresentation of an essential or material fact. The Secretary misunderstood the effects of a right to repurchase which was granted subsequently and separately from the original document of sale. 3. As indicated by Article 1601 of the Civil Code, the right of repurchase (per se) is not a right granted the vendor by the vendee in a subsequent or separate instrument, but is a right reserved by the vendor in the same instrument of sale as one of the stipulations of the contract.

BLOCK B 2016

4. Once the deed of absolute sale is executed, the vendor can no longer reserve the right to repurchase. Any right thereafter granted to vendor by the vendee in a separate instrument cannot be considered a right of repurchase, but some other right like an option to buy in the instant case. 5. An agreement to repurchase, when made separately from the contract of sale, becomes a promise to sell, meaning: if the contract of sale does not contain the right of repurchase within it, the buyer acquires the thing completely.

BLOCK B 2016

6. If the buyer subsequently grants the seller the right to repurchase, which is subsequent and independent from the contract of sale, it is a NEW CONTRACT entered into by the buyer as an absolute owner of the object. In this case the seller (Diamante) has not reserved to himself the right to repurchase 7. Hence, the “Option to Repurchase” executed by private respondent in the present case, was merely a promise to sell, which must be governed by Article 1479 of the Civil Code which basically states that: 

A unilateral promise to sell (which is the “Option to Repurchase” in this case) was a mere offer which cannot be converted into a contract except when there is acceptance. Acceptance is the act that gives life to a juridical obligation. Furthermore, the acceptance can only be binding if this is supported by a consideration distinct from the price.

8. A copy of the so-called “Option to Repurchase” is neither attached to the records nor quoted in any of the pleadings of the parties. The SC, therefore, could not properly rule on whether or not the promise was accepted and a consideration distinct from the price was given. Undoubtedly, in the absence of either or both acceptance and separate consideration, the promise to sell is not binding upon respondent Deypalubus. Thus, the absence of the “Option to Repurchase” in respondent’s application for a fishpond license with the BOF did not warrant the revocation of the said granted license.

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

65

SALES DIGESTS BLOCK 2B 2016 Vazquez v. CA G.R. No. 83759 July 12, 1991 SPOUSES CIPRIANO VASQUEZ and VALERIANA GAYANELO, petitioners, vs. HONORABLE COURT OF APPEALS and SPOUSES MARTIN VALLEJERA and APOLONIA OLEA, respondents. Doctrine: Right to repurchase must be stipulated as a condition in the same document, not in a subsequent document.

BLOCK B 2016 Issue: W/N Spouses has the right to repurchase under the contract. Held: -

Sanchez v Rigos doctrine does not apply. In that case, it was shown that even if the option was not supported by a consideration and hence not binding, Sanchez was able to show that he accepted the same before Rigos withdrew the the option(which in reality is just an offer to enter into a contract of sale since it is not supported by a consideration)

-

-In this case, it was clear that there was no consideration for the option. The burden to prove it lies on the spouses, which they were not able to do.

-

It is also clear that the spouses never accepted the option(which just like in the Sanchez case, is in reality just an offer since it has no consideration)

-

- Signature of Vasquez on the right to repurchase document is not enough since it is lacking the signature of the real beneficiary of such document, the Spouses

-

-Even assuming that there was really a right to repurchase, To effectively exercise the right, the Spouses must make an actual and simultaneous tender of payment or consignation. This they did not do.

-

For there to be a valid reservation of the right to repurchase, the right must be reserved by the vendor in the same instrument of sale as one of the stipulations of the contract and not in a subsequent document

Facts: - Respondent Spouses Martin Vallejera and Apolonia Olea sold his land in Negros Occidental to .Petitioner Vasquez -The Deed of Sale was duly ratified and notarized. On the same day and along with the execution of the Deed of Sale, a separate instrument, denominated as Right to Repurchase was executed by the parties. -This instrument granted the spouses a right to repurchase the lot

BLOCK B 2016

-When the spouses seek to repurchase the lot,however, Vasquez refused. -Vasquez claims that the right to repurchase document is just an option to buy, and since it has no consideration distinct from the purchase price, it is not binding upon him - Spouses filed a case against Vasquez

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

66

SALES DIGESTS BLOCK 2B 2016 -

Otherwise, it is just an option to to buy or a mere promise to resell.

Concepcion

PETITIONER: Aquilino Nietes RESPONDENT: Hon. Court of Appeals & Dr. Pablo Garcia Maya: sorry this is a bit long, but I could not shorten it even more without compromising the important details. Please pay attention to the highlighted dates. FACTS: In 1959, Dr. Pablo Garcia who is the owner of the Angeles Educational Institute leased his property to Aquilino Nietes for P5,000 a year for a period 5 years with the option to buy the property from June 1960 to June 1965. Pertinent portion of which states:

BLOCK B 2016

Lease will be considered as part payment for the sale of the land and school; 6. That an inventory of all properties in the school will be made on March 31, 1960;”

Nietes vs. CA August 18, 1972

BLOCK B 2016

“4. That the LESSOR agrees to give the LESSEE an option to buy the land and the school building, for a price of ONE HUNDRED THOUSAND PESOS (P100,000) within the period of the Contract of Lease; 5. That should the LESSEE buy the lot, land and the school building within the stipulated period, the unused payment for the Contract of

The terms of the contract also stated that on or before March 30, 1960 that the full balance of P25,000.00 be paid, but Nietes had only paid up P24,757.00 as of August 4, 1961 which was P347.00 short. On September 4, 1961, Nietes paid Garcia the additional sum of P3,000, for which Garcia issued the following receipt: Received the amount of (P3,000.00) Three Thousand Pesos from Mrs. Nietes as per advance pay for the school, the contract of lease being paid. (Sgd.) PABLO GARCIA (Exh. B) And on December 13, 1962, Nietes paid Garcia another additional sum of P2,200 for which Garcia issued the following receipt: To Whom it May Concern: This is to certify that I received the sum of Two Thousand Two Hundred Pesos, Philippine Currency, from Mrs. Catherine R. Nietes as the partial payment on the purchase of the property as specified on the original contract of "Contract of Lease with the First Option to Buy" originally contracted and duly signed. (Sgd.) DR. PABLO GARCIA (Exh. C)

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

67

SALES DIGESTS BLOCK 2B 2016 However, on July 1964 before the 5 year-lease has expired, Dr. Garcia’s counsel wrote to rescind the contract for the following reasons:

2. That you had not been using the original name of the school — Angeles Institute, thereby extinguishing its existence in the eyes of the public and injuring its prestige.

present action, in the Court of First Instance of Pampanga, for specific performance of Dr. Garcia's alleged obligation to execute in his (Nietes') favor a deed of absolute sale of the leased property, free from any lien or encumbrance whatsoever, he having meanwhile mortgaged it to the People's Bank and Trust Company, and to compel him (Garcia) to accept whatever balance of the purchase price is due him, as well as to recover from him the aggregate sum of P90,000 by way of damages, apart from attorney's fees and the costs.

3. That through your fault, no inventory has been made of all properties of the school.

The trial court ruled in favor of Nietes, but the Court of Appeals overturned it.

4. That up to this time, you had not collected or much less helped in the collection of back accounts of former students.

ISSUES:

“1. That you had not maintained the building, subject of the lease contract in good condition.

… the foregoing obligations had been one, if not, the principal moving factors which had induced the lessor in agreeing with the terms embodied in your contract of lease, without which fulfillment, said contract could not have come into existence.” Nietes then responded through his counsel that he will exercise his option to buy the land and building subject matter of the lease and the he is ready to pay the balance of the purchase price in accordance with the contract. BLOCK B 2016

BLOCK B 2016

On July 26, 1965, Nietes deposited with the branch office of the Agro-Industrial Bank in Angeles City checks amounting to P84,860.50, as balance of the purchase price of the property, but he withdrew said sum of P84,860.50 on August 12, 1965, after the checks had been cleared. On August 2, 1965, he commenced the

1. Must the full purchase price be paid before the option could be exercised? NO. The SC did not agree with the CA’s that the full price must be paid before the option could be exercised. The contract does not say that Nietes had to pay the stipulated price of P100,000 before exercising his option to buy the property in question. Accordingly, said option is governed by the general principles on obligations, pursuants to which: In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him. From the moment one of the parties fulfills his obligation, delay by the other begins. In the case of an option to buy, the creditor may validly and effectively exercise his right by merely advising the debtor of the

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

68

SALES DIGESTS BLOCK 2B 2016 former's decision to buy and expressing his readiness to pay the stipulated price, provided that the same is available and actually delivered to the debtor upon execution and delivery by him of the corresponding deed of sale. Unless and until the debtor shall have done this the creditor is not and cannot be in default in the discharge of his obligation to pay.

NO. The SC ruled that there was substantial compliance as Nietes was only P343.00 short. Besides as of September 4, 1961, Nietes had already paid P27,757.00 which was in excess of P25,000.00

Nietes need not have deposited, therefore, with the AgroIndustrial Bank checks amounting altogether to P84,860.50 on July 26, 1965, and the withdrawal thereof soon after does not and cannot affect his cause of action in the present case. In making such deposit, he may have had the intent to show his ability to pay the balance of the sum due to Dr. Garcia as the sale price of his property. In short, said deposit and its subsequent withdrawal cannot affect the result of the present case.

Ang Yu Asuncion vs. Court of Appeals

2. When did Nietes INFORM Garcia of exercise his option to buy? On September 4, 1961, which is well within the period of lease Nietes has already informed Dr. Garcia of his intent to exercise the option by paying the sum of P3,000.00 “as per advance pay for the school, the contract of lease being paid.”

BLOCK B 2016

3. When was the option validly EXERCISED? On December 13, 1962, where it was indicated by Dr. Garcia in the receipt ‘as the partial payment on the purchase of the property as specified on the original contract of "Contract of Lease with the First Option to Buy."’ 4. Did the non-compliance of Nietes of the installment payment affect his option to buy?

BLOCK B 2016

December 2, 1994 Petitioner: Ang Yu Asuncion Respondents: Bobby Cu Unjieng Doctrine: The right of first refusal belongs to a class of preparatory relations bound not by the laws on contracts but by various provisions of the Civil Code and by human conduct. The remedy for an aggrieved party who has been denied the right of first refusal is an action for damages. Facts: On July 29, 1987, a Second Amended Complaint for Specific Performance was filed by Ang Yu Asuncion and Keh Tiong, et al., against Bobby Cu Unjieng and Jose Tan before the RTC of Manila. The plaintiffs were tenants or lessees of residential and commercial spaces owned by defendants in Binondo. On several conditions defendants informed the plaintiffs that they were offering to sell the premises and were giving them priority to acquire the same. During negotiations, Bobby Cu Unjieng offered a price of P6 million while plaintiffs made a counter of offer of P5 million. Plaintiff then

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

69

SALES DIGESTS BLOCK 2B 2016 asked the defendants to put their offer in writing to which the defendants acceded. In reply to defendants’ letter, plaintiffs wrote, asking that they specify the terms and conditions of the offer to sell. When the plaintiffs did not receive any reply, they sent another letter with the same request. Since defendants failed to specify the terms and conditions of the offer to sell and because of information received that the defendants were about to sell the property, plaintiffs filed a complaint to compel defendants to sell the property to them. The RTC dismissed the complaint on the ground that the parties did not agree upon the terms and conditions of the proposed sale; hence, there was no contact of sale at all. However the court also ruled that should the Cu Unjiengs subsequently offer the property for sale at a price of 11 million or below, the Asuncions would have the right of first refusal.

BLOCK B 2016

On November 15, 1990, the Cu Unjieng spouses executed a Deed of Sale transferring the property in question to Buen Realty and Development Corporation in consideration of 15 million pesos. Buen Realty, as the new owner of the subject property, wrote to the lessees demanding that they vacate the premises. The Asuncions said that Buen Realty and Development Corporation bought the property subject to the notice of lis pendens. filed a Motion for Execution. On August 30, 1991, the RTC ordered the Cu Unjiengs to execute the necessary Deed of Sale of the property in litigation in favor of plaintiffs Ang Yu Asuncion, Keh Tiong and Arthur Go for the consideration of P15 Million pesos in recognition of petitioners’

BLOCK B 2016

right of first refusal and that a new Transfer Certificate of Title be issued in favor of the buyer. The court also set aside the title issued to Buen Realty Corporation for having been executed in bad faith. On September 22, 1991, the Judge issued a writ of execution. On December 4 1991, the appellate court, on appeal by private respondent, set aside and declared without force and effect the above questioned orders of the court a quo. Issue: 1.W/N Buen Realty was bound by the writ of execution by virtue of the notice of lis pendens. – NO Held: The SC affirms the CA’s decision. In the law on sales, the so-called “right of first refusal” is an innovative juridical relation. Needless to point out, it cannot be deemed a perfected contract of sale under Article 1458 of the Civil Code. In a right of first refusal, while the object might be made determinate, the exercise of the right, however, would be dependent not only on the grantor’s eventual intention to enter into a binding juridical relation with another but also on terms, including the price, that obviously are yet to be later firmed up. Prior thereto, it can at best be so described as merely belonging to a class of preparatory juridical relations governed not by contracts (since the essential elements to establish the vinculum juris would still be indefinite and inconclusive) but by, among other laws of

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

70

SALES DIGESTS BLOCK 2B 2016 general application, the pertinent scattered provisions of the Civil Code on human conduct. The final judgment of the lower court, it must be stressed, has merely accorded a “right of first refusal” in favor of petitioners. The consequence of such a declaration entails no more than what has heretofore been said. If petitioners are aggrieved by the failure of private respondents to honor the right of first refusal, the remedy is not a writ of execution on the judgment, since there is none to execute, but an action for damages in a proper forum for the purpose. Furthermore, Buen Realty, not having been impleaded in Civil Case No. 87-41058, cannot be held subject to the writ of execution issued by respondent Judge, let alone ousted from the ownership and possession of the property, without first being duly afforded its day in court.





Each of their contracts contained a clause stating: “That if the LESSOR should desire to sell the leased premises, the LESSEE shall be given 30-days exclusive option to purchase the same.” (right of first refusal)



Some time later, Carmelo asked Mayfair if it wanted to buy. Mayfair tried to negotiate but Carmelo suddenly didn’t reply. It became silent on the issue and then Carmelo sold the entire property to Equatorial on July 30, 1978 for P11.3M. (within the 20-year lease period)



Mayfair sued for (1) specific performance and (2) annulment of the sale

Equatorial Realty v. Mayfair Theater G.R. No. 106063 November 21, 1996

BLOCK B 2016

EQUATORIAL REALTY DEVELOPMENT, INC. & CARMELO & BAUERMANN, INC., petitioners, vs. MAYFAIR THEATER, INC., respondent. Facts: 

Carmelo & Bauermann, Inc. (“Carmelo”) a parcel of land, together with two 2-storey buildings, located at Claro M Recto Avenue, Manila, and covered by TCT No. 18529.

BLOCK B 2016 On June 1967, It leased a part of its property to respondent Mayfair. (a portion of the 2nd floor and the 2nd floor and mezzanine) for 20 years. Two years after, another contract of lease was entered into by the parties for 20 years also (this time, another portion of the 2nd floor and two store spaces at the ground floor) *extra: naging Movie Houses to, Maxim Theatre and Miramax Theatre.

RTC: sale was valid. pay rent till the end of the lease to Equatorial as it is the new owner. clauses in Carmelo and Mayfair’s contracts are an option clause. However, the option contract wasn’t valid as it did not contain a separate consideration. Mayfair cannot compel Carmelo to sell. CA: Reverse RTC. Clauses in contracts were actually Rights of First Refusal.

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

71

SALES DIGESTS BLOCK 2B 2016 “it is evident that the provision granting Mayfair "30-days exclusive option to purchase" the leased premises is NOT AN OPTION in the context of Arts. 1324 and 1479, second paragraph, of the Civil Code. Although the provision is certain as to the object (the sale of the leased premises) the price for which the object is to be sold is not stated in the provision Otherwise stated, the questioned stipulation is not by itself, an "option" or the "offer to sell" because the clause does not specify the price for the subject property.”

Notes:

ISSUES:

Dissent by Justice Vitug –

1. Is it a right of first refusal or an option contract?

He agrees that the clause in the contract is a right of first refusal. However, he disagrees that the right warrants for a rescission of the sale between Carmelo and Equatorial. Right of first refusal is a simple juridical relation, and a breach of this right gives rise to damages according to Art. 19 of the Civil Code (HUMAN RELATIONS part) and not rescission under OBLICON.

2. Is the sale valid? HELD: 1. CONTRACT OF RIGHT OF FIRST REFUSAL 2. Yes, but it is rescissible. (Art 1380-1381(3): rescission by injured third parties, like creditors) Petitioners acted in bad faith to render the “right of first refusal clause” inutile.

BLOCK B 2016

BLOCK B 2016



Carmelo may have initially recognized Mayfair’s right, but it violated Mayfair’s right when it abandoned the negotiations without giving Mayfair an opportunity to come up with a definite offer within the 30-day period. (Carmelo didn’t sell naman kaagad, he laid low then biglang sold it to Equatorial)



Carmelo sets up the defense of impossible performance because the leased properties do not constitute the whole property itself and that the property is INDVISIBLE. However, the SC holds that instead of nullifying the

agreement, it should be construed as to mean that the whole property, including those not leased by Mayfair, should be included when it exercises its right to buy. 

Contract of sale deemed rescinded, Carmelo returns to Equatorial the purchase price, and should allow Mayfair to buy the property for the same price (P11.3M)

Concur/Dissent by Justice Romero – He agrees also it’s a right of first refusal. However, he disagrees that the sale should be rescinded as there is no specific provision in the Civil Code allowing the offerree (Mayfair) to rescind a contract between the offerror (Carmelo) and a subsequent buyer (Equatorial). He also doesn’t agree that Mayfair be made to buy the property for the same price Equatorial bought it (P11.3M) because there was no consideration yet in the right of first refusal aka Mayfair and Carmelo haven’t agreed on a price yet should Mayfair exercise his right.

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

72

SALES DIGESTS BLOCK 2B 2016 Paranaque Kings vs Court of Appeals [G.R. No. 111538. February 26, 1997] Summary: Right of first refusal enforceable by an action for specific performance. Facts: Catalina Santos, respondent, is the owner of 8 parcles of land in Paranaque City. On 1977, she leased the property to Fredrick Chua. On February 12, 1979, Fredrick Chua assigned all his rights to the lease to Lee Ching Bing. On August 6, 1979, Lee Ching Bing assigned all his rights to Paranaque Kings, petitioner.

BLOCK B 2016

In the lease contract, Par 9 provides that the lessee shall have the first option or priority to buy the properties subject to the lease. All of the terms above were duly registered. The conflict arose in 1988 when Santos sold the 8 lots to Raymundo, respondent as well, for 5m. This was in contravention of the above right of first refusal. Santos repurchased the property from Raymundo and subsequently offered to sell the properties to Petitioner for 15m pesos, giving them 10 days to reply, but petitioner counter-offered 5m. Meanwhile, 1989, Santos executed another deed of sale to Raymundo, this time, for 9m- violating the right of first refusal again. It was only 2 days after she sold her properties that Santos responded to petitioner saying the period has lapsed and petitioner is no longer privy to the contract claiming that Raymundo is now the rightful owner. The facts show that there is collusion between the two respondents to make the petitioners buy the property for more than its actual value of 5m. Considerable improvements were made by petitioner worth 3m in the belief that

BLOCK B 2016

his right of first refusal would let him buy the property. Petitioner prayed for 15m worth of damages. RTC dismissed saying that the refusal of petitioner to buy the property at 15m amounted to a refusal which absolves Santos of any responsibility. CA affirmed saying that par 9 provided no real basis for computing the price of the properties therefore it would be crazy to allow a buyer to dicated his own price and force it upon santos. Hence, this petition. Issue: 1.Whether or not the breach of contractual option to buy states a valid cause of action. Held: Yes, it is a valid cause of action. Ratio: a) A cause of action exists when: (1) a right in favor of the plaintiff exists; (2) an obligation of defendant to uphold such right, and (3) an act or omission on the part of such defendant constituting a breach- allowing the plaintiff to recover damages. A careful examination of the complaint reveals that it sufficiently alleges an actionable contractual breach on the part of private respondents. Under paragraph 9 of the contract of lease between respondent Santos and petitioner, the latter was granted the “first option or priority” to purchase the leased properties in case Santos decided to sell. If Santos never decided to sell at all,

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

73

SALES DIGESTS BLOCK 2B 2016 there can never be a breach, much less an enforcement of such “right.” But on September 21, 1988, Santos sold said properties to Respondent Raymundo without first offering these to petitioner. Santos indeed realized her error, since she repurchased the properties after petitioner complained. Thereafter, she offered to sell the properties to petitioner for P15 million, which petitioner, however, rejected because of the “ridiculous” price. But Santos again appeared to have violated the same provision of the lease contract when she finally resold the properties to respondent Raymundo for only P9 million without first offering them to petitioner at such price. Whether there was actual breach which entitled petitioner to damages and/or other just or equitable relief, is a question which can better be resolved after trial on the merits where each party can present evidence to prove their respective allegations and defenses. The basic rule is that the basis of the right of the first refusal must be the current offer to sell of the seller or offer to purchase of any prospective buyer. Only after the grantee ** fails to exercise its right of first priority under the same terms and within the period contemplated, could the owner validly offer to sell the property to a third person, again, under the same terms as offered to the grantee BLOCK B 2016

*

Vazquez v. Ayala Corporation G.R. No. 149734. November 19, 2004 Ponente: Justice Tinga Petitioner – Spouses Vazquez

BLOCK B 2016

Respondent – Ayala Corp. Mem. Aid: Ayala Alabang, option contract vs. right of first refusal FACTS: Spouses Vazquez owns Conduit Development Inc. in 1981, the Spouses entered into an MOA with Ayala. The MOA stipulates that Ayala will buy the Spouse’s shares in Conduit. Conduit Development owns a 49.9 hectare property in Ayala Alabang. Under the MOA, Ayala will develop the 49.9 hectare property EXCEPT the “retained area” (18000 sq.m). The “retained area” shall be remain with the Spouses. The land to be developed will be called the “remaining area” (Remaining area  land to be developed by Ayala, retained area  land to owned by the Spouses; which is 18000 sq.m of the 49.9 hectares). In the Remaining Area, there are 4 lots, which are adjacent to the Retained Area of the Spouses. Under the Par 5.15 of the MOA: 5.15. The BUYER (AYALA) agrees to give the SELLERS (Vasquez) a first option to purchase four developed lots next to the “Retained Area” at the prevailing market price at the time of the purchase. In 1990, after AYALA was able to develop the said lots, AYALA offered to sell the 4 parcels of land to Vasquez at P6.5k/sq.m , which was the market price in 1990. Vasquez refused the offer. Vasquez contended that the purchase price should be P460/ sq.m , which was the market price in 1981 (time of purchase). AYALA then lowered the purchase price to P5k/ sq m but Vasquez refused again. Instead he made a counter offer to buy the lots at P2k/ sq m. This time, AYALA refused. The Spouses contend

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

74

SALES DIGESTS BLOCK 2B 2016 that Par. 5.15 is an Option contract. Ayala contends that it is a right of first refusal. ISSUE: 1. w/n Par. 5.15 is an Option contract or right of first refusal. HELD:

BLOCK B 2016

the purchase” connotes that there is no definite period within which AYALA is bound to reserve the subject lots for Vasquez to exercise his privilege to purchase. Neither is there a fixed or determinable price at which the subject lots will be offered for sale. The price is considered certain if it may be determined with reference to another thing certain or if the determination thereof is left to the judgment of a specified person or persons.

Option contract  is a preparatory contract in which one party grants to another, for a fixed period and at a determined price, the privilege to buy or sell, or to decide whether or not to enter into a principal contract. It binds the party who has given the option not to enter into the principal contract with any other person during the period designated, and within that period, to enter into such contract with the one to whom the option was granted, if the latter should decide to use the option. It is a separate and distinct contract from that which the parties may enter into upon the consummation of the option. It must be supported by consideration

Further, paragraph 5.15 was inserted into the MOA to give Vasquez the first crack to buy the subject lots at the price that AYALA would be willing to accept when it offers the subject lots for sale. It is not supported by an independent consideration.

Right of First Refusal  while the object might be made determinate, the exercise of the right would be dependent not only on the grantor’s eventual intention to enter into a binding juridical relation with another but also on terms, including the price, that are yet to be firmed up.

COURT OF APPEALS, JUAN L. REYES, PHILIPPINE CYPRESS CONSTRUCTION & DEVELOPMENT CORPORATION, CORNHILL TRADING CORPORATION AND URBAN DEVELOPMENT BANK, respondents.

RIVIERA FILIPINA vs. CA RIVIERA FILIPINA, INC., petitioner, vs.

BLOCK B 2016

FACTS: In the instant case, paragraph 5.15 is obviously a mere right of first refusal and not an option contract. Although the paragraph has a definite object such as the sale of the 4 lots, the period within which they will be offered for sale to Vasquez and, necessarily, the price for which the subject lots will be sold are not specified. The phrase “at the prevailing market price at the time of

o Reyes (lessor) executed a 10 year renewable Contract of Lease with Riviera (lessee) re property on EDSA -

Parcel was subject of a Real Estate Mortgage and was extra judicially foreclosed subject to the 1 year redemption period

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

75

SALES DIGESTS BLOCK 2B 2016 o Since Reyes did not have the money to redeem the property, he decided to sell it -

-

The lease contract expressly provided that the “LESSEE shall have the right of first refusal should the LESSOR decide to sell the property during the term of the lease”

BLOCK B 2016

-

5K/sqm, complete payment within sixty (60) to ninety (90) days which they felt was the market price of the property -

Offer was not accepted

-

He further expressed, “let it be made clear that, much as it is the earnest desire of my client to really give you the preference to purchase the subject property, you have unfortunately failed to take advantage of such opportunity and thus lost your right of first refusal in sale of said property”

There were negotiations on the price between Reyes and Riviera but the parties did not agree on the price

o In a letter, Reyes’ counsel informed Riviera that they were selling the property for 6K/sqm and that conformably to the provisions stipulated in CONTRACT OF LEASE, notice is served upon your goodselves for you to exercise “the right of first refusal” in the sale of said property, for which purpose you are hereby given a period of ten (10) days from your receipt hereof within which to thus purchase the same under the terms and conditions aforestated, and failing which you shall be deemed to have thereby waived such pre-emptive right and my client shall thereafter be absolutely free to sell the subject property to interested buyers. Riviera sent a letter in response to notice indicating Riviera’s interest to purchase the subject property and increased its offer to 5K/sqm which was not accepted

o Riviera then wrote Reyes confirming Riviera’s intent to purchase the subject property for the fixed price of

BLOCK B 2016

o After, Reyes offered the property to his his close family friend, the president of Cypress for 6K/sqm -

Eventually, they agreed on the sale price of 5.3K/sqm

-

Cypress did not have the amount with which to pay so he said he’d look for a partner for that purpose.

-

Reyes told Cypress that he had already afforded Riviera its right of first refusal but they cannot agree because Riviera’s final offer was for 5K/sqm

o Apprehensive of the impending expiration of the redemption period of and as the deal between Reyes and Traballo was not yet formally concluded, Reyes through his nephew, Atty. Alinea, again offered the property to Riviera but asked them to raise their offer for the purchase of the said property a little higher.

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

76

SALES DIGESTS BLOCK 2B 2016 -

Riviera however said that his offer is 5K/sqm payment of which would be fifty percent (50%) down within thirty (30) days upon submission of certain documents in three (3) days, the balance payable in five (5) years in equal monthly installments at twelve percent (12%) interest in diminishing balance (second offer downgraded the previous offer)

-

Reyes did not agree to the price so he nephew asked Riviera again to increase his price but Riviera refused

-

Reyes did not expressly offer his subject property to Riviera at the price 5.3K/sqm

BLOCK B 2016

o Cypress found a partner, Cornhill, and were able to come up with the redemption money which Reyes paid to the Bank to redeem the subject property -

A Deed of Absolute Sale covering the subject property was executed by Reyes in favor of Cypress and Cornhill 5.3M

-

On the same date, Cypress and Cornhill mortgaged the subject property to Urban Development Bank for 3M

o Thereafter, Riviera sought from Reyes, Cypress and Cornhill a resale of the subject property to it claiming that its right of first refusal under the lease contract was violated

-

Riviera filed the suit to compel Reyes, Cypress, Cornhill and Urban Development Bank to transfer the disputed title to the land in favor of Riviera upon its payment of the price paid by Cypress and Cornhill

-

Contends that the right of first refusal principally amounts to a right to match in the sense that it needs another offer for the right to be exercised

-

Contends it would have upped its offer had it known of Cypress’ offer of 5.3K/sqm

BLOCK B 2016

o RTC dismissed and held that there was no violation of the right of first refusal o CA affirmed -

Riviera was uncompromising in its counter offer of only P5K/sqm

-

Deemed estopped belatedly asserting that it would have been willing to pay a price higher than 5K/sqm

-

Situtation would be different had REYES’ nondisclosure of counter-offer to RIVIERA resulted in the sale of the subject property at equal or less than Riviera’s offer; in which case, REYES would have been rightly accused of cunningly circumventing Riviera’s right of first refusal.

-

Riviera was well-aware of Reyes’ financial needs at that time and took advantage of Reyes

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

77

SALES DIGESTS BLOCK 2B 2016 -

RIVIERA exercised its right whimsically to the prejudice of REYES who had commendably given RIVIERA extra leeway in exercising it.

-

No longer necessary for the defendant Reyes to expressly and categorically offer to the plaintiff the subject property at 5.3K/sqm to comply his obligation to give first refusal to the plaintiff as stipulated in the Contract of Lease as to do so would be a useless ceremony and would only be an exercise in futility, considering the firm and unbending position of the plaintiff, which defendant Reyes already knew, that the plaintiff, at any event, was not amenable to increasing its price at over P5,000.00, per square meter.

-

Reyes’ fundamental and intrinsic right of ownership which necessarily carries with it the exclusive right to dispose of it to whoever he pleases, must ultimately prevail over RIVIERA’s right of first refusal which it unscrupulously tried to exercise.

entered into in violation of a right of first refusal of another person, while valid, is rescissible. o Doctrine of Right of First Refusal -

1992: Guzman, Bocaling & Co. v. Bonnevie: a lease with a proviso granting the lessee the right of first priority “all things and conditions being equal” meant that there should be identity of the terms and conditions to be offered to the lessee and all other prospective buyers, with the lessee to enjoy the right of first priority. A deed of sale executed in favor of a third party who cannot be deemed a purchaser in good faith, and which is in violation of a right of first refusal granted to the lessee is not voidable under the Statute of Frauds but rescissible under Articles 1380 to 1381 (3) of the New Civil Code.

-

1994: Ang Yu Asuncion v. Court of Appeals: departed from the doctrine (above) and refused to rescind a contract of sale which violated the right of first refusal. The Court held that the so-called “right of first refusal” cannot be deemed a perfected contract of sale under Article 1458 of the New Civil Code and, as such, a breach thereof decreed under a final judgment does not entitle the aggrieved party to a writ of execution of the judgment but to an action for damages in a proper forum for the purpose.

-

1996: Equatorial Realty Development, Inc. v. Mayfair Theater, Inc: reverted back to the doctrine in Guzman

BLOCK B 2016

ISSUE: W/N Riviera lost its right of first refusal - YES HELD: Decision of CA affirmed. General Rule: The prevailing doctrine is that a right of first refusal means identity of terms and conditions to be offered to the lessee and all other prospective buyers and a contract of sale

BLOCK B 2016

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

78

SALES DIGESTS BLOCK 2B 2016 Bocaling & Co. v. Bonnevie stating that rescission is a relief allowed for the protection of one of the contracting parties and even third persons from all injury and damage the contract may cause or to protect some incompatible and preferred right by the contract.

BLOCK B 2016

-

1997: Parañaque Kings Enterprises, Inc. v. Court of Appeals: affirmed the nature of and the concomitant rights and obligations of parties under a right of first refusal. The Court, summarizing the rulings in Guzman, Bocaling & Co. v. Bonnevie and Equatorial Realty Development, Inc. v. Mayfair Theater, Inc., held that in order to have full compliance with the contractual right granting petitioner the first option to purchase, the sale of the properties for the price for which they were finally sold to a third person should have likewise been first offered to the former. Further, there should be identity of terms and conditions to be offered to the buyer holding a right of first refusal if such right is not to be rendered illusory. Lastly, the basis of the right of first refusal must be the current offer to sell of the seller or offer to purchase of any prospective buyer.

Exception: Courts cannot rewrite the contract between parties. The intention of the parties should be given primary consideration, which will be gauged by their contemporary and subsequent acts

BLOCK B 2016

o In the case at bar, the Court finds relevant and significant the cardinal rule in the interpretation of contracts that the intention of the parties shall be accorded primordial consideration and in case of doubt, their contemporaneous and subsequent acts shall be principally considered o The Supreme Court, has no right to make new contracts for the parties or ignore those already made by them, simply to avoid seeming hardships -

In the interpretation of the right of first refusal as understood by the parties, the question as to what is to be included therein or what is meant by the same, as in all other provisions of the contract, is for the parties and not for the court to determine, and this question may not be resolved by what the parties might have provided had they thought about it, which is evident from Riviera claims, or by what the court might conclude regarding abstract fairness (this part is worded weirdly)

o An examination of the attendant particulars of the case do not persuade us to uphold Riviera’s view (that it would have matched the offer). The records and transcripts of the case show 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

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

79

SALES DIGESTS BLOCK 2B 2016 -

A series of negotiations on the price per sqm ensued

-

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

-

-

It quoted its “fixed and final” price as 5K/sqm not any peso more.

-

No express protest when informed by Reyes that Riviera had lost its right of first refusal; Riviera cannot now be heard that had it been informed of the offer 5.3K/sqm of Cypress and Cornhill it would have matched said price

-

BLOCK B 2016

Riviera strongly exhibited a “take-it or leave-it” attitude in its negotiations with Reyes

-

Reyes was under no obligation to disclose Cypress’ offer; 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. We apply the general rule in the case at bar since Riviera failed to convincingly show that either of the exceptions are relevant to the case at bar. Its stubborn approach in its negotiations with Reyes showed crystal-clear that there was never any need to

BLOCK B 2016 disclose such information and doing so would be just a futile effort on the part of Reyes.

Macion v. Guiani G.R. No. 106837 || August 4, 1993 J. Romero Petitioner: Henry and Angeles Macion Respondents: Hon. Guiani (RTC Judge) & DE LA VIDA Institute Facts: This case revolves around two parcels of adjoining lots owned by petitioners which are the proposed extension sites of the De La Vida Institute, an educational institution in Cotabato City. They entered into a contract to sell where the president of De La Vida assured the Macions that they will buy the property for P1,750,000 on or before July 31, 1991. So, the Macions surrendered the physical possession of the land to De La Vida. De La Vida then built an edifice worth P800k. When the said date arrived, the sale did not materialize. Petitioners filed a case of unlawful detainer against De La Vida. De La Vida filed a complaint for reformation of contract. What they did was enter into a compromise agreement3 which stipulated that the 3

The compromise agreement provided: 6. that upon the ex ecution of this agreement, the defendant will furnish the plaintiff with xerox copy of the land title for each lot

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

80

SALES DIGESTS BLOCK 2B 2016 Macions will give De La Vida 5 months to raise the amount of P2,060,000 and that in case of failure to pay, they will immediately vacate the property. After 2 months, De La Vida alleged that they had negotiated a loan from BPI and requested Macion to execute a contract to sell in their favor. However, Macion refused, which led De La Vida to file an urgent motion for order to direct Macion to execute the contract. In return, Macion filed a motion for execution of judgment alleging that after 5 months, De La Vida was not able to settle their obligation. 

RTC: Ruled in favor of De La Vida. Ruled that the proximate cause of De La Vida's failure to comply with the compromise agreement was Macion’s refusal to execute a contract to sell as required under the agreement. RTC added that petitioners should have executed the contract to sell because anyway they would not be prejudiced since there was no transfer of ownership involved in a contract to sell.

BLOCK B 2016

Issue/Held:

which the latter may use for the purpose of providing information in securing a loan from any financing or banking institution of their choice. 7. that if within the period of five (5) months from and after February 6, 1992, the plaintiff succeeds in obtaining funds for the purpose of settling their obligations with defendants in the total sum of P2,060,000.00 the latter shall oblige themselves to execute, sign and deliver to the former the corresponding Deed of Sale for the two (2) lots which is the subject of this case and turn-over to said plaintiff the owner's duplicate copy of TCT Nos. T-22004 and T-22005 of the Registry of Deeds for the City of Cotabato.

BLOCK B 2016

1. Did the RTC judge commit grave abuse of discretion when he ordered Macion to execute the contract to sell? NO. 2. Whether the compromise agreement gives private respondent-buyer the right to demand from petitionersellers the execution of a contract to sell in favor of the former. Ratio: Although the compromise agreement (par. 7) does NOT give De La 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 full price. After that, Macion will turn over the TCT. However, in the interpretation of the compromise agreement, the Court must delve in the contemporaneous and subsequent acts of the parties to fathom the real intention of the parties. A review of the facts reveal that even before the signing of the agreement, both parties had entered into a contract to sell, which was superseded by a compromise agreement. This agreement must be interpreted as giving De La Vida the power to demand a contract to sell from Macion. Where the seller promised to execute a deed of absolute sale upon completing payment of the price, it is a contract to sell. In this case, the sale is still in the executory stage since the passing of title is subject to a suspensive condition, namely, that if De La Vida is able to secure the needed funds to be used in the purchase of the 2 lots. 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

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

81

SALES DIGESTS BLOCK 2B 2016 before the contract is converted from an executory to an executed one, does not pass ownership over the real estate being sold.

BLOCK B 2016

In our jurisdiction, it has been that an accepted bilateral promise to buy and sell is in a sense similar to, but not exactly the same, as a perfected contract of sale because there is already a meeting of minds upon the thing which is the object of the contract and upon the price. But a contract of sale is consummated only upon the delivery and payment. 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 thing certain for a certain price. 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. Note: Court also said that the order of respondent judge directing petitioners to issue a contract to sell does not place petitioners in any danger of losing their property without consideration. In contracts to sell, payment is a positive suspensive condition, failure of which does not constitute a breach but an event that prevents the obligation of the vendor to convey title from materializing, in accordance with Article 1184 of the Civil Code. Petitioners as promisors were never obliged to convey title before the happening of the suspensive condition. In fact, nothing stood in the way of their selling the property to another after an unsuccessful demand for said price upon the expiration of the time agreed upon. WHEREFORE, the instant petition is DISMISSED. Petitioners are hereby ordered to EXECUTE a contract to sell in favor of private respondents. On the other hand, private respondent is ordered to

BLOCK B 2016 DEPOSIT with the trial court current rentals pending consummation of the transaction between the parties. The trial court is ordered to FIX anew the period within which private respondents may be given the opportunity to raise funds for the purchase of the two (2) adjoining lots owned by petitioners

Uraca v. CA G.R. No. 115158.

5 Sept. 1997

J. Panganiban

Emilia M. Uraca, Concordia D. Ching And Ong Seng, Represented By Enedino H. Ferrer, Petitioners, v. Court Of Appeals, Jacinto Velez, Jr., Carmen Velez Ting, Avenue Merchandising, Inc., Felix Ting And Alfredo Go, Respondents. Summary / Memory Aid: -

Purchase of building in Cebu City, sold by Velezes to Uraca et. al; question on novation to extinguish contract of sale

FACTS: Velezes (respondents) were owners of a lot and commercial building in Cebu. Uraca, et. al (petitioners) were lessees. Velez through Carmen Ting sent a letter offering to sell the property to Uraca, et. al for P1.5M. Uraca et. al, through Atty. Daitol sent a letter of reply accepting the offer to sell. Uraca then went to see Carmen but Carmen told Uraca that the price was changed to P1.4M. Uraca changed terms of payment by offering to pay P1M in

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

82

SALES DIGESTS BLOCK 2B 2016 downpayment and remaining P400K in installment within 30 days. Carmen Ting refused. Afterwards, Velezes sold property to Avenue Merhandising, Inc. for P1.5M. Uraca filed petition with RTC to nullify sale to Avenue. Uraca also annotated lis pendens on Certificate of Title. Avenue filed for ejectment against Uraca. RTC ruled in favor of Uraca by stating that there was a perfected contract of sale on first offer (P1.5M) and that the change to P1.4M was only modificatory novation which did not extinguish the first contract. Velez appealed to CA and won. CA held that second contract for P1.4M novated the first contract for P1.5M. Also, since price of P1.4M was not agreed upon, there was no meeting of the minds.

BLOCK B 2016

an irreconcilable incompatibility between old and new obligations or contracts. After a thorough review of the records, we find this element lacking in the case at bar. Uraca et. al and the Velezes clearly did not perfect a new contract because the essential requisite of consent was absent, the parties having failed to agree on the terms of the payment. Counter-offer on terms of payment was not accepted. There was no unqualified, absolute acceptance. There was double sale to Uraca and Avenue. However, Avenue was in bad faith as it knew that Uraca was offered to buy the property and that Uraca et. al did intend to purchase the lot and building. Avenue’s store was close to the building and they knew Uraca et. al. Also, Felix Ting from Avenue spoke with Uraca and Uraca declared intention to purchase property.

ISSUE/S:

RTC decision revived, but with modification — Contract price is P1.5M and not P1.4M.

W/N there was novation between two contracts W/N there was a double sale (first to Uraca, second to Avenue)

Villonco v. Bormaheco

HELD: NO novation, and YES, there was a double sale. Extinctive novation requires: (1) the existence of a previous valid obligation; (2) the agreement of all the parties to the new contract; (3) the extinguishment of the old obligation or contract; and (4) the validity of the new one. The foregoing clearly show that novation is effected only when a new contract has extinguished an earlier contract between the same parties. In this light, novation is never presumed; it must be proven as a fact either by express stipulation of the parties or by implication derived from

BLOCK B 2016

G.R. L-26872 // July 25, 1975 // Aquino VILLONCO REALTY COMPANY and Edith Perez de Tagle v. BORMAHECO INC, Francisco N. Cervantes and Rosario N. Cervantes FACTS Parties to the Case:

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

83

SALES DIGESTS BLOCK 2B 2016 (P) Villonco Realty Company (with brothers Romeo and Teofilo Villongco)

P100,000 as earnest money. Also stated was that the sale would only be consummated only after he had consummated the purchase of another property located in Sta.Ana, Manila. (final negotiations would be known after 45 days.)

Edith Perez de Tagle: intervened as a Real Estate Broker (R) Bormaheco Inc: a dealer and importer of industrial and agricultural machinery

-

(P) Villonco made a counter-offer which stated that, should the Sta.Ana deal of Cervantes not become consummated, the deposit of P100,000 as earnest money will be returned with 10% interest.

-

The contract was received and signed by Cervantes.

Francisco N. Cervantes: President Rosario N. Cervantes: Wife -

owners of three lots located at Buendia Ave, Makati, Rizal

-

lots were mortgaged to DPB as security for a loan. The debt was fully paid on July 10, 1969

Feb 14, 1964 -

Narration of Facts: Feb 1964 -

BLOCK B 2016

-

-

negotiations were undertaken between the two parties for the sale of the two lots and the improvements thereon. The brothers Villongco conferred with Francisco Cervantes on his office to discuss the price and terms of the sale. During negotiations, Villongco assumed that the lots belonged to Bormaheco, Inc, and that Cervantes was duly authorized to sell the same. Cervantes did not disclose to the (P)s that a) the lots were conjugal properties of himself and his wife, and b) that they were mortgaged to the DBP. On a letter from Cervantes to (P), Cervantes offered the sale of the property for P400 per sq.m, with a deposit of

BLOCK B 2016

Bormaheco’s bid for the Punta property was already accepted. What was only necessary was the approval of the sale, which was already pending in the office of the functionary on March 4.

March 30,1964 -

Francisco Cervantes returned the earnest money with the interest of P694.20 (at 10% per annum).

-

His reason: “Despite the lapse of 45 days from Febuary 12, 1964, there is no certainty yet for the acquisition of the Punta Property”

-

Villongco refused to receive the letter/checks. When the contracts was rescinded, he was already aware that the Punta (Sta.Ana) lot had been awarded to Bormaheco.

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

84

SALES DIGESTS BLOCK 2B 2016 -

-

Cervantes said that the 45-day period had already expired and the sale to Bormaheco of the Punta property had not been consummated. He already said that this letter was his manifestation that “they are no longer interested to sell the property.” Villonco countered that the condition for the cancellation of the contract had not arisen, and at the same time, announced that an action for breach of contract would be filed against Bormaheco.

RTC Ruling: Ruled in favor of (P) Villongco. They ordered the Cervantes spouses (who were found out to own the land themselves) to execute in favor of Bormaheco, then directed Bormaheco to convey the same lots to Villonco. CA Ruling: None. The SC took cognizance of the appeal because the amount involved is more than P200,000 and the appeal was perfected before RA 5440 which took effect on September 9, 1968. ISSUE 1) W/N a contract of sale was perfected. YES

BLOCK B 2016

RULING Contention of (R) Cervantes: The contract of sale was not perfected because Cervantes made a supposedly qualified acceptance of the revised offer, which acceptance amounted to a counter-offer, and because the condition that Bormaheco, Inc. would acquire the Punta land within the 45day period was not fulfilled.

BLOCK B 2016

(P) also claim that the contract does not bind (R) Paraiso because the latter did not sign the said contract as to indicate its consent to be bound by its terms. They maintain that the contract is a unilateral promise to sell and the option money does not bind them for lack of cause or consideration distinct from the purchase price. Ratio of the Supreme Court: Bormaheco’s acceptance of Villonco’s offer to purchase the Buendia Avenue property, as shown in Villonco’s letter (March 4,1964), proves that there was a meeting of minds upon the subject matter and consideration of the sale. On the date of that letter, the sale was perfected. There was no evidence as to what changes were made by Cervantes in Villonco’s revised offer. And, there was no evidence that Villonco did not assent to the supposed changes, the assent if ever not being made known to Cervantes. The crucial fact that Villonco paid the P100,000 earnest money/down payment, and Bormaheco accepted, implies that Cervantes was aware that Villono had accepted the modifications which he had made in the counter-offer. The SC said that alleged changes/qualifications in the offer are not material and are merely clarifications. (Some of the changes:) “Nassco’s property in Sta.Ana” became “Another property in Sta.Ana”

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

85

SALES DIGESTS BLOCK 2B 2016 “Interest” became “Interest PA (Per annum)”

PARAISO DEVELOPMENT CORP.

The controlling fact in this case is that there was an agreement between the parties on the subject matter, the price, and the mode of payment, and that part of the price was paid. Ar. 1482 of the CC states that “Whenever earnest money is given in a contract of sale, it shall be considered as part of the price and as proof of the perfection of the contract.”

FACTS

(R) Cervantes’ contention that the contract was not perfected because of the 45-day condition was not sustained by the SC. The SC said that the 45-day period was merely an estimate or forecast of how long it would take Bormaheco to acquire the Nassco (Sta.Ana) property, and that it wasn’t a “condition or a deadline set for the defendant corporation to decide whether or not to go through with the sale of its Bendia property.”

BLOCK B 2016

In fact, par.5 of the same offer stated that “final negotiations on both properties can be definitely known after 45 days.” This showed that it didn’t mean that Bormaheco should acquire the Nassco property within 45 days. It meant that, within that period, it would be known if Bormaheco would be able to acquire the Nassco property AND whether it would be able to sell the Buendia property.

Oesmer v. Paraiso

Parties to the Case: (P) Rizalino, Ernesto, Leonora, Bibiano jr., Librado, Enriqueta Oesmer Adolfo Oesmer and Jesus Oesmer -

brothers and sisters

-

co-owners of undivided shares of two parcels of agricultural and tenanted land situated in Barangay Ulong Tubig, Carmona, Cavite

-

when parents passed away, they acquired the lots as heirs of the former by right of succession.

(R) Paraiso Development Corporation: known to be engaged in the Real Estate Business Narration of Facts: March 1989 -

Rogelio Paular brought along (p) Ernesto to meet with Sotero Lee, President of (R) Paraiso Development Corporation, at Otani Hotel in Manila.

-

The reason for the meeting was to broker the sale of (P)’s properties to (R) Paraiso.

G.R. 157493 // February 5, 2007 // Chico-Nazario Rizalino, Josefina, Rolando and Fernando, Ernesto, Leonora, Bibiano jr., Librado, and Enriqueta OESMER v.

BLOCK B 2016

April 1989

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

86

SALES DIGESTS BLOCK 2B 2016 -

A Contract to Sell was prepared, then signed by Enriqueta, Rizalino, Leonora, Bibiano, Jr., and Librado. Ernesto, who also signed, was given a check in the amount of P100,000, given as option money. However, Adolfo and Jesus DID NOT SIGN.

November 1989 -

-

(P) informed (R) corporation through a letter addressed to the latter that they intended to rescind the Contract to Sell and to return the amount of P100,000 given as option money. (R) Corporation did not respond to the aforesaid letter.

May 1991 - (P) together with Adolfo and Jesus filed a complaint for Declaration of Nullity / Annulment of Option Agreement or Contract to Sell with Damages before the RTC of Bacoor, Cavite

BLOCK B 2016

RTC Ruling: Ruled in favor of (R) Corporation. “The assailed Contract to Sell is valid and binding only to the undivided proportionate share of the signatory of this document and recipient of the check,” which was (P) co-owner Ernesto Oesmer. CA Ruling: Ruled in favor of (R) Corporation. However, modified decision by declaring that “The assailed Contract to Sell is valid and binding with respect to the undivided proportionate share of the six (6) signatories of this document,” which were Ernesto, Enriqueta, Librado, Rizalino, Bibiano jr, and Leonora Oesmer.

BLOCK B 2016

1) W/N the CA erred in not holding that the supposed Contract to Sell is not binding upon (P) Ernesto Oesmer’s co-owners. NO 2) W/N the CA erred in not holding that the supposed Contract to Sell is void altogether considering that (R) Paraiso did not sign it as to indicate its consent to be bound by its terms, and that the Contract is really a unilateral promise to sell without consideration distinct from the price, and hence, void. NO RULING Contention of (P): The signatures of the five on the margins of the supposed Contract to Sell did not confer authority on (P) Ernesto as agent to sell their respective shares. Without written authority, the contract should be void as to them. Even assuming the signatures indicated consent, such consent was merely conditional. In other words, the effectivity of the contract was subject to a suspensive condition, which is the approval of the sale by all the co-owners. (P) also claim that the contract does not bind (R) Paraiso because the latter did not sign the said contract as to indicate its consent to be bound by its terms. They maintain that the contract is a unilateral promise to sell and the option money does not bind them for lack of cause or consideration distinct from the purchase price. Ratio of the Supreme Court:

ISSUES Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

87

SALES DIGESTS BLOCK 2B 2016 While it is true that the signatures of the five (5) did not confer authority on (P) Ernesto as agent (needs a written authority to sell an immovable, etc), the Contract to Sell remains valid and binding upon them because they had also affixed their signatures on the contract. With this, a written authority was never necessary because, through their own signatures, the five were not selling their shares through an agent, but selling them directly and in their own right. The SC ruled that the Contract to Sell was perfected when the (P) consented to the sale to (R) Paraiso of their shares by affixing their signatures on the contract. The signatures show their acceptance of whatever was stipulated in the Contract to Sell, and such acceptance was made known to (R) Paraiso.

BLOCK B 2016

On the matter of the (P)’s contention that the consent was conditional, the SC ruled that the terms of the contract were clear and mentioned nothing about the presence of a suspensive condition. On the matter of the defense that the contract is void because it didn’t bear the signature of (R) Paraiso, the SC ruled that (R)’s consent to be bound is shown by their partial performance of the obligation when it tendered the P100,000 to form part of the purchase price. By force of law, (R) Paraiso is required to complete the payment to enforce the terms of the contract. On the final defense that the contract is a unilateral promise to sell because it used the word “Option Money” to describe the P100,000, the SC ruled that the cash is actually “Earnest Money,” or

BLOCK B 2016

Down payment. The RTC and CA were correct in stating that there indeed existed a Contract to Sell. Differences: Earnest Money is PART of the purchase price; Option Money is the money given as a direct consideration for an option contract. Earnest Money is only given when there is already a sale; Option Money applies to a sale not perfected. Earnest Money, when given, binds the buyer to pay the balance; Option Money, when given, does not require the would-be buyer to buy.

ADELFA PROPERTIES, INC vs CA GR No. Petitioners : Adelfa Properties Respondent: Rosario Jimenez-Castaneda and Salud Jimenez, CA Memory Aid: Contract of Sell Facts: 

The respondents and brothers (Jose and Dominador Jimenez) are registered co-owners of a parcel of land with area of 17,710 sqm in Las Pinas.

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

88

SALES DIGESTS BLOCK 2B 2016 

Jose and Dominador sold their share (1/2 of the parcel of land, eastern portion) to Adelfa properties pursuant to a “Kasulatan sa Bilihan ng Lupa.” Subsequently, a “Confirmatory Extrajudicial Partition Agreement” executed by the Jimenezes. The eastern portion of the lot, with an area of 8,555 sqm was adjudicated to Jose and Dominador while the western portion to Rosario and Salud.



Adelfa properties expressed interest in buying the western portion of the property from Rosario and Salud.



An “exclusive option to purchase” was executed between Adelfa and Rosario and Salud with the ff. conditions:

BLOCK B 2016 certificate of title was filed in court through Atty. Bernardo. A new copy of certificate of title was eventually issued but remained in possession of Atty. Bernardo who turned it over to Adelfa.



Before Adelfa could pay, it received summons with a copy of a complaint filed by the nephews and nieces of Rosario and Salud against Jose and Dominador and Adelfa in RTC of Makati for annulment of the deed of sale in favor of Household Corp and recovery of ownership of the property.



Adelfa then wrote to Rosario and Salud stating that they will hold payment of the full purchase price until the case between them and the nieces and nephews would be settled. Adelfa sent another letter to Jose and Dominador. Salud refused to heed the suggestion of Adelfa and attributed suspension of payment of the purchase price to “lack of word of honor.”



Adelfa annotated on the title of the lot its option contract with Salud and Rosario and the contract of sale with Jose and Dominador. Rosario and Salud sent Francisca Jimenez to see Atty. Bernardo, Adelfa’s counsel, to inform him that they were cancelling the transaction. Atty. Bernardo offered to pay the purchase price provided that Php 500K be deducted from settlement of civil case. This was rejected by Rosario and Salud. Atty. Bernardo wrote again, reducing the amount from Php 500K to Php 300K, but was rejected by Rosario and Salud.



RTC dismissed case filed by nephews and nieces.

o Selling price – Php 2.856M o Option Money – Php 50K from Adelfa, credited as partial payment upon consummation of sale o Balance to be paid on or before Nov 30, 1989

BLOCK B 2016

o In case of default by Adelfa, the option will be cancelled and 50% of the option money to be forfeited and the other 50% will be refunded upon the sale of property to third person o All expenses, capital gains tax and doc stamps are for the account of the vendors and expenses for registration of the deed of sale for the account of Adelfa 

Owner’s copy of certificate of title issued to Salud was lost so petition for the re-issuance of a new owner’s copy of

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

89

SALES DIGESTS BLOCK 2B 2016 





Adelfa caused to be annotated again 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. (Php1.5M was paid as downpayment)

BLOCK B 2016 right to unilaterally resolve contract the moment buyer fails to pay within the fixed period.



Atty. Bernardo wrote Rosario and Salud that Adelfa is willing to pay the purchase price and execute a deed of absolute sale. Rosario and Salud ignored this. Jimenez’ counsel sent a letter to Adelfa with a check for Php 25K (refund of 5% of option money). Rosario and Salud requested Adelfa to return the copy of the certificate of Title of Salud. However, Adelfa failed to give such.

o Exclusive option to purchase does not mention that Adelfa is obliged to return possession or ownership of the property as a consequence of non-payment o There was no stipulation on reconveyance in the event that Adelfa does not comply with its obligation.

Rosario and Salud filed a civil case for annulment of contract with damages.

Issue:



The parties never intended to transfer ownership prior to complete payment of purchase price. In effect, there was an implied agreement that ownership shall not pass until the price is fully paid. This kind of stipulation constitutes a Contract to Sell.



It was not shown that there was a delivery (actual or constructive) of the property to Adelfa. The option to purchase was not in a public instrument and Adelfa did not take actual physical possession. Rosario and Salud claimed that the only reason that Atty.Bernardo had the title was because he was their counsel in the petition for reconstitution.



The document should be legally considered as a perfected contract to sell from subsequent acts of the

1. W/N the “exclusive option to purchase” executed between Adelfa and the Rosario and Salud is an option contract 2. W/N there was a valid suspension of payment of the purchase price by Adelfa

BLOCK B 2016

Held/Ratio: 1. NO. The agreement is a contract of sell and not an option contract nor a contract of sale. 

A deed of sale is absolute in nature where neither stipulation in deed that title to property sold is reserved in seller until full payment of price nor giving the vendor

SC held that parties never intended to transfer ownership except upon full payment of purchase price because of the ff:

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

90

SALES DIGESTS BLOCK 2B 2016 parties. The fact that the document was entitled “Exclusive option to purchase” was not controlling when the text actually shows that it was a contract to sell. 



BLOCK B 2016



Option, in law on sales, is a continuing offer or contract by which the owner stipulates with another that the latter shall have the right to buy the property at a fixed price within a certain time under, or in compliance with, certain terms and conditions or which gives to the owner of the property the right to sell or demand a sale. It is also called an “unaccepted offer.” The option is not a purchase but merely secures the privilege to buy. It is not a sale of property but a sale of the right to purchase. The distinction between an option and a contract of sale is that an option is an unaccepted offer. It states the terms and conditions on which the owner is willing to sell his land, if the holder elects to accept them within the time limited. If the holder does so elect he must give notice to the other party, and the accepted offer becomes a valid and binding contract. If an acceptance is not made within the time fixed, the owner is no longer bound by his offer, and the option is at an end. A contract of sale fixes rights and obligations of both parties at the time of its execution. The offer and the acceptance are concurrent as minds of contracting parties meet in terms of agreement.

BLOCK B 2016



In the case at bar, there was concurrence of Adelfa’s offer to buy and Rosario and Salud’s acceptance. Where formal acceptance is required, acceptance may be shown by acts, conduct, or words of a party recognizing the existence of the contract of sale.



Adelfa was supposed to pay but later offered a downpayment of Php 50K. Rosario and Salud agreed to the counter-offer and later signed an exclusive option to purchase, creating a perfected contract to sell. The agreement as to the object, price of the property, and the terms of payment was clear and well-defined. Nothing was left to be done except the performance of the respective obligations of the parties.



Adelfa’s offer to deduct Php500K from purchase price for settlement of the civil case was not a counter-offer. The perfected contract between the parties already existed at the time the alleged counter-offer was made.



The test in determining whether a contract is a contract of sale or purchase or a mere option is whether or not the agreement could be specifically enforced.



An agreement is only an option when no obligation rests on the party to make any payment except such as may be agreed on between the parties as consideration to support the option until he has made up his mind within the time specified.

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

91

SALES DIGESTS BLOCK 2B 2016 



the balance of the purchase price by reason of the aforesaid vindicatory action filed against it.

The parties were already contemplating payment of the balance of the purchase price and were not merely quoting the agreed value for the property. “Balance “ connotes a remainder or something remaining from the original total sum already agreed upon. The Php 500K is earnest money intended to form part of the purchase price, not distinct from the consideration for the sale of the property and is considered proof of the perfection of the contract. It constitutes an advance payent and must, therefore, be deducted from the total price.



Even with a valid suspension, Rosario and Salud may no longer be compelled to sell and deliver the subject property to Adelfa as there was no proper payment (only a letter was sent by Adelfa expressing the intent to pay- not a valid tender of payment). Consignation is essential aside from tender of payment, if there is refusal to accept the payment. This is different from an option contract where consignation is not necessary because it involves exercise of right or privilege rather than discharge of obligation; therefore, tender of payment is sufficient.



With Adelfa’s failure to comply with its obligation, Rosario and Salud announced rescission in a letter to Adelfa. The written notice of rescission was deemed sufficient.



Adelfa’s failure to reply to the letter regarding the rescission suggested an admission of the veracity and validity of the claim of Rosario and Salud.

Distinctions between earnest and option money: o Earnest money – part of the purchase price; given only where there is already a sale; when given buyer is bound to pay the balance o Option money – money given as a distinct consideration for an option contract; money applies to a sale not yet perfected; buyer is not bound to buy

BLOCK B 2016

2. Yes, there was a valid suspension 

Art 1590 applies because the agreement is a contract to sell and not an option contract



Although the complaint prayed for the annulment only of the contract of sale executed between Adelfa and the Jimenez brothers, the same prayed for the recovery of Adelfa’s share in that parcel of land. Adelfa is justified in suspending payment of

BLOCK B 2016

Fule v. CA G.R. 12212 // March 2, 1998 // Romero FACTS

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

92

SALES DIGESTS BLOCK 2B 2016 Individuals in the Case: Gregorio Fule – banker by profession (corporate secretary of the Rural Bank of Alaminos), as well as a jeweler.

made a sketch thereof, before giving the jewelry back to Cruz. -

Cruz had declined Fule’s initial offer to buy the earrings, as well the aforementioned other offer. However, due to his interest in the Tanay property, negotiations for the barter of the jewelry and the property ensued. Cruz requested (pR) Atty. Juan Belarmino to check on the property, and ultimately cause the preparation of a deed of absolute sale, which was signed by petitioner, who also gave the necessary expenses for the transfer of title.

-

Oct 24: At 8pm in the evening, the same day the valuables were exchanged, Fule arrived at the residence of Atty. Bellarmino complaining that the jewelry given was fake. The former used a tester to prove the alleged fakery.

-

The group (including Dichoso and Mendoza) decided to go to the house of a certain Macario Dimayuga, a jeweler, to have the earrings tested. Dimayuga took one look and declared them counterfeit.

-

October 26: Fule filed a complaint before the RTC of San Pablo City against private respondents praying that the contract of sale over the Tanay property be declared null and void on the ground of fraud and deceit.

Remelia Dichoso and Oliva Mendoza – commissioned by Fule to look for a purchaser Dr. Ninevetch Cruz – owner of the jewelry Atty. Juan Bellarmino Macario Dimayuga - tester Narration of Facts: 1984

BLOCK B 2016

-

(P) Gregorio Fule is the owner of a 10-hectare property in Tanay, Rizal.

-

Fule asked Dichoso and Mendoza to look for an interested buyer. The two found one in (pR) Dr. Ninevetch Cruz.

-

The gods of fortune must have been smiling on Fule, because it just so happened that Dr. Cruz was the owner of a pair of emerald-cut diamond earrings that Fule had been eyeing since January of the same year.

-

It is important to note that Fule’s mother had examined the earrings and appraised them as genuine. Also, Fule himself during the period when he had made another offer, had inspected the jewelry at the lobby of another bank, and

BLOCK B 2016

Ruling of the Trial Court The trial court said that the sale was valid, that all the elements of a valid contract under Ar.1458 (first provision of the Law on Sales), were present. Dr. Cruz delivered the subject

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

93

SALES DIGESTS BLOCK 2B 2016 jewelries to Fule. Fule took the items, and manifested his satisfaction by not questioning the order and by failing to protest, complain, or even ask for additional time to examine the jewelries. There was consent/meeting of the minds, a determinate subject matter, and a price certain in money or its equivalent present in the events, despite the fact that the contract was principally one of barter. The trial court also said that the plaintiff is estopped from claiming that the item he received was fake. They emphasized that Fule was a Business Management graduate of La Salle University, a professional banker, and a jeweler in his own right. According to the court, once a contract is shown to have been consummated or fully performed by the parties thereto, its existence and binding effect can no longer be disputed. Ruling of the Court of Appeals

the court, it was evident from the case facts that there was a meeting of the minds between Fule and Dr. Cruz. The SC found that (P) Fule’s argument that there was fraud present which would make the contract voidable, because he was made to believe that the earrings were genuine (and thus, his consent was vitiated), untenable. The court stated that there was no evidence manifesting that the private respondents employed insidious words or machinations to entice Fule into entering the contract of barter. Neither was there evidence that Dr. Cruz induced Fule to part with the property, or take the earrings in exchange. In fact, it was Fule who suspiciously made Cruz believe that the former’s property was valued more than it really is. Even assuming that Fule alleged mistake as a ground for the nullification (which he didn’t), the court said that, to invalidate a contract, mistake must refer to either:

Court of Appeals affirmed the ruling of the trial court.

1) the substance of the thing that is object of the contract, or

ISSUE

2) those conditions which have principally moved one or both of the parties to enter into the contract.

W/N the Court of Appeals erred in upholding the validity of the contract of barter or sale under the circumstances of the case. NO. They did not. BLOCK B 2016

BLOCK B 2016

RULING The Supreme Court reiterated that contracts are perfected by mere consent (Ar.1315), and that a contract of sale is perfected at the moment there is a meeting of the minds upon the thing which is the object of the contract and upon the price. (Ar.1475) For

Mistake was not present in the case. Fule had numerous opportunities to examine the jewelry for himself, which he did. The Civil Code provides that there is no mistake if the party alleging it knew the doubt, contingency, or risk affecting the object of the contract. (Ar. 1333) To finalize, the SC affirmed in toto the decision of the Court of Appeals. I guess you can say that petitioner, he acted the fule.

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

94

SALES DIGESTS BLOCK 2B 2016 TERMS: “Fraud” – when, through insidious words or machinations of one of the contracting parties, the other is induced to enter into a contract which, without them, he would not have agreed. “Insidious” – treacherous, crafty / proceeding in a gradual, subtle way, but with harmful effects.

Dalion v. CA G.R. 78903. February 28, 1990.

BLOCK B 2016

FACTS: Ruperto Sabesaje sued to recover ownership of a parcel of land, based on a private document of absolute sale, dated July 1, 1965, allegedly executed by Segundo Dalion, who denied the fact of sale, contending that the document sued upon is fictitious, that his signature was forged, and that the subject land is conjugal property, which he and his wife acquired in 1960. The Dalions acquired the property from Saturnina Sabesaje. Saturnina claims that the Dalions begged her to let them administer the land because Dalion had no means of livelihood. The Dalions likewise denied this, but they admitted to administering 5 other parcels of land in Leyte, which belonged to Sabesaje’s grandfather. They were supposed to receive 10% and 15% commission for sales of copra and abaca, respectively, but they were never paid. Sabesaje’s suit, they claim, is an attempt to harass the Dalions and keep them from suing for the unpaid commissions.

BLOCK B 2016

The RTC and ruled in favor of Sabesaje, upholding the validity of the sale. The CA likewise ruled in favor of Sabesaje, reiterating the findings of the RTC that the authenticity of the subject deed was proven by testimony of witnesses to the execution. Against Dalion’s mere denial that he signed the documens, the positive testimonies of the witnesses, aside from the testimony of Sebasaje, must prevail. Dalion affirmatively alleged forgery, but he never presented any witness or evidence to prove it. Mere denial of having signed does not suffice to show forgery— there is need of clear and convincing evidence. In addition, Dailon’s two signatures on the document were very similar to the specimen signatures. The court also commented that a forger would not typically sign twice, for fear that he might commit a revealing error. Assuming authenticity of his signature and the genuineness of the document, Dalion still impugns the validity of the sale on the ground that it is embodied in a private document, and thus did not convey title or right to the lot. AT ISSUE: 1. Validity of the contract of sale – settled upon 2. The necessity of a public document for transfer of ownership HELD: The provision of Art. 1358 on the necessity of a public document is for convenience, not enforceability. It is not a requirement for the validity of a contract of sale of a parcel of land that it be embodied in a public instrument.

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

95

SALES DIGESTS BLOCK 2B 2016 A contract of sale is a consensual contract, which means that the sale is perfected by mere consent. No particular form is required for its validity. Upon perfection, the parties may reciprocally demand performance. The trial court thus rightly and legally ordered Dalion to deliver to Sebaje the parcel of land and to execute the corresponding formal deed of conveyance in a public document.

Secuya v. Selma G.R. No. 136021

February 22, 2000

BENIGNA SECUYA, MIGUEL SECUYA, MARCELINO SECUYA, CORAZON SECUYA, RUFINA SECUYA, BERNARDINO SECUYA, NATIVIDAD SECUYA, GLICERIA SECUYA and PURITA SECUYA, petitioners, vs. GERARDA M. VDA. DE SELMA, respondent Memory Aid:

BLOCK B 2016

Dalmacio Secuya is the predecessor-in-interest of the petitioners. Dalmacio died single and his heirs are the petitioners (brothers, sisters, nephews, and nieces). In action for quieting of title, the plaintiffs must show not only that there is a cloud or contrary interest over the subject real property, but that they have a valid title to it. In the present case, the action must fail, because petitioners failed to show the requisite title.

BLOCK B 2016

A sale of land needs to be registered in the Registry of Property in order to bind third persons. An unregistered sale of land (private document) is still valid but will bind only the contracting parties. Facts:

Maxima Caballero owned a piece of land. She entered into an Agreement for Partition with a Sabellona wherein Maxima bound herself to sell 1/3 of the land. Sabellona then took possession of that portion of the land and later sold another portion thereof (3000 sq.m) to one Dalmacio Secuya. Dalmacio and the other Secuyas occupied and cultivated that land. Petitioner’s claim: (Maxima-Sabellona-Dalmacio-petitioners) Sometime later, respondent Salma contested their possession. Salma says that she bought the land from a widow Cesaria Caballero. Cesaria Caballero inherited the land from her husband, Silverio Aro, who bought the land from Maxima Caballero’s heirs. Salma’s claim: (Maxima-Maxima’s heirs-Silverio Aro-Cesaria Caballero-respondent) The Secuyas filed an action to quiet title. RTC ruled in favor of Salma. CA affirmed. Issues: Who is entitled to the land?

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

96

SALES DIGESTS BLOCK 2B 2016 Held: Salma owns the land. 1. Validity of Agreement of Partition between Maxima Caballero and Sabellona Caballero and Sabellona weren’t co-owners, hence, there was nothing to partition/divide. Caballero bound herself to sell the land to Sabellona but failed to do so. The agreement was actually one of an express trust, governed by Art. 1444 of the Civil Code, as Sabellona was granted the right to enjoy the property. This trust was then repudiated when Maxima’s heirs did not deliver/transfer the property to her after Maxima’s death. They did not also attach the agreement in the title. The heirs then sold the land to Silverio Aro.

BLOCK B 2016

2. Validity of Sale to Dalmacio Secuya Even arguing that the express trust wasn’t repudiated, the sale to Dalmacio Secuya cannot be upheld. The deed of sale wasn’t embodied in a public instrument and registered at the Registry of Property; hence, it cannot bind third parties. The deed of sale wasn’t also presented in court as it was already destroyed/lost. Petitioners also did not prove that they exercise owner’s rights to the property; they weren’t even paying land taxes over the piece of land. 3. Validity of Salma’s title Salma’s title is valid. She wasn’t bound by the deed of sale to Secuya as it wasn’t registered in the Registry of Property. She was a

BLOCK B 2016

purchaser in good faith even if she did know the petitioners. Salma relied on her seller’s claim that the Secuyas didn’t own the lot.

YUVIENCO vs Dacuycuy G.R. No. L-55048 May 27, 1981 Facts: On July 12, 1978, Petitioners Pedro C.Gamboa offered to property ( in Tacloban City) to respondent Mr. Yao King Ong for 6.5 million pesos provided that the latter made known their decision to buy the subject property not later than July 21 1978. This was provided in a letter sent by Gamboa to Yao. Defendant responded favorably to the sale. However, upon meeting up with Gamboa on Aug 1,1978, Yao was surprised that the mode of payment was changed. From the “orginal agreement of having 90 days to pay for the 4.5m, it was reduced to 30 days. Issue: Was there a contract of sale? Whether or not the claim for specific performance of respondents is enforceable under the Statute of Frauds? Held: No. They are still at negotiation. There is no perfected sale. Ratio: A) ART. 1319. Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

97

SALES DIGESTS BLOCK 2B 2016 constitute the contract. The offer must be certain the acceptance absolute. A qualified acceptance constitute a counter-offer. Acceptance made by letter or telegram does not bind offerer except from the time it came to his knowledge. The contract, in a case, is presumed to have been entered into in the place where the offer was made.

BLOCK B 2016

In the instant case, We can lay aside, for the moment, petitioners' contention that the letter of July 12, 1978 of Atty. Pedro C. Gamboa to respondents Yao King Ong and his companions constitute an offer that is "certain", although the petitioners claim that it was a mere expression of willingness to sell the subject property and not a direct offer of sale to said respondents. What We consider as more important and truly decisive is what is the correct juridical significance of the telegram of respondents instructing Atty. Gamboa to "proceed to Tacloban to negotiate details." We underline the word "negotiate" advisedly because to Our mind it is the key word that negates and makes it legally impossible for Us to hold that respondents' acceptance of petitioners' offer, assuming that it was a "certain" offer indeed, was the "absolute" one that Article 1319 above-quoted requires. Respondents now maintain that what the telegram refers to as "details" to be "negotiated" are mere "accidental elements", not the essential elements of the contract. They even invite attention to the fact that they have alleged in their complaint that it was as early as "in the month of October, 1977 (that) negotiations between plaintiffs and defendants for the purchase and sale (in question) — were made, thus resulting to offers of same defendants and counter-offer of plaintiffs". But to Our mind such alleged facts

BLOCK B 2016

precisely indicate the failure of any meeting of the minds of the parties, and it is only from the letter and telegrams above-quoted that one can determine whether or not such meeting of the minds did materialize. As We see it, what such allegations bring out in bold relief is that it was precisely because of their past failure to arrive at an agreement that petitioners had to put an end to the uncertainty by writing the letter of July 12, 1978. On the other hand, that respondents were all the time agreeable to buy the property may be conceded, but what impresses Us is that instead of "absolutely" accepting the "certain" offer — if there was one — of the petitioners, they still insisted on further negotiation of details. For anyone to read in the telegram of Yao that they accepted the price of P6,500,000.00 would be an inference not necessarily warranted by the words "we agree to buy" and "proceed Tacloban to negotiate details". If indeed the details being left by them for further negotiations were merely accidental or formal ones, what need was there to say in the telegram that they had still "to negotiate (such) details", when, being unessential per their contention, they could have been just easily clarified and agreed upon when Atty. Gamboa would reach Tacloban? B) whether or not the claim for specific performance of respondents is enforceable under the Statute of Frauds? It is nowhere alleged in said paragraphs 8 to 12 of 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 respondents. The only documented indication of the non-wholly-cash payment extant in the record is that stipulated in Annexes 9 and 10 above-

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

98

SALES DIGESTS BLOCK 2B 2016 referred to, the deeds already signed by the petitioners and taken to Tacloban by Atty. Gamboa for the signatures of the respondents. In other words, the 90-day 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

Limketkai Sons Milling Inc. v CA GR 118509 // December 1, 1995 // Melo, J. Summary/Memory Aid:

BLOCK B 2016

Facts: Philippine Remnants Co. constituted BPI as its trustee to sell real property it owns. BPI was given the task of selling the disputed lot located in Bagong Ilog, Pasig City. BPI then authorized a real estate broker, Revilla Jr. to sell the lot @ P1k p/sq. m. Remnants (trustor) concurred to this arrangement Revilla Jr. then found a buyer, Alfonso Lim who is employed by petitioner Limketkai. Roberto Aromin, the Assistant VicePresident of BPI then gave the officials of Limketkai and Revilla permission to enter and inspect the said lot. Satisfied with said lot, Limketkai agreed to purchase said lot and Revilla formally informed

BLOCK B 2016

BPI that he procured a buyer. BPI Vice Pres Albano and Asst. VP Aromin negotiated with Limketkai officials for the price and subsequently agreed that the lot would be bought at P1k per sq./m in CASH. (Note: was there a perfected contract at this point?) Petitioner, however, subsequently asked if they could pay on terms. BPI officials stated that there would be no harm in asking the BPI board but it was understood that if such arrangement was denied, the price shall be paid in CASH. Couple days after, Limketkai found out that its offer to pay on terms had been FROZEN. Limketkai then immediately went to BPI and tendered full payment in CASH but was refused by BPI officials. Limketkai then filed for Specific Performance against BPI on the ground that they already had a perfected contract. However BPI already sold the disputed lot under litigation to National Book Store. RTC ruled in favor of Limketkai voiding the sale to NBS and ordered the cancellation of the TCT issued to NBS. CA however, reversed the RTC dismissing the action for specific performance. Issue: W/N there was a perfected contract of sale between Limketkai and BPI Ratio/Held: Authority of Aromin and Revilla to sell the lot.

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

99

SALES DIGESTS BLOCK 2B 2016 It is not disputed that Revilla had authority to sell the disputed lot since this is evidenced by a letter (think of this as an SPA) authorizing Revilla TO SELL the said property and not merely to look for a buyer. However, Aromin’s authority to sell is a bit more tricky. The SC reasoned that since Revilla had authority to sell the property they had no reason to doubt the authority of the two BPI VP’s (Aromin and Albano) whose job was to manage and administer real estate. The SC held that Aromin did not act outside the scope of his authority during the time the transaction was made Was there a perfected contract of sale? The SC said YES, the contract was perfected when Aromin and Albano, acting for BPI agreed to sell to Limketkai @ P1k p/sq. m. At this point there was a concurrence of offer and acceptance, on the object and on the cause thereof.

BLOCK B 2016

A sale of land is VALID regardless of the form it may have been entered into. The requisite form under Art. 1458 is only for convenience and greater efficacy and non-compliance therewith would NOT affect its validity Also, in the case at bar, BPI crossed examined Limketkai’s witnesses, the SC held that such act was deemed to be a waiver of the defense of the Statute of frauds. The SC also gave credence to the existence of memoranda evidencing the elements of a perfected contract, thus taking it out of the SoF. Is NBS an innocent purchaser for value?

BLOCK B 2016

The SC said NO, because NBS ignored the notice of lis pendens annotated on the title when they purchased the lot. Limketkai impugned upon NBS several badges of fraud, namely: 

Sale was supposed to be through a broker, but top BPI officials took over the sale when a close friend (someone in NBS) of theirs became interested (Note: wont list the others nalang, basta bad faith talaga si NBS)

The SC reversed the CA and REINSTATED the RTC decision.

You thought this case was over?!? Hell no, here come round 2 since BPI filed an MR to a SC decision.

Limketkai v. CA (MR- 1996) Same facts as above. The MR reproduced in full all the supposed memoranda exchanged by BPI and Limketkai see full text! In this MR, the SC reversed itself and said that the memoranda, when scrutinized, do not reveal a perfection of the purported contract of sale. The court said that what the memoranda establishes are the repeated refusals of BPI to sell the lot at P1k p/sq.m to Limketkai. Thus, it did not establish a meeting of the minds between the parties hence, no perfection. Furthermore, the SC now says that ACCEPTANCE of the OFFER MUST BE ABSOLUTE and in the case at bar, there was no showing of such acceptance.

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

100

SALES DIGESTS BLOCK 2B 2016 The SC held that Limketkai failed to comply with the requirements of the Statute of Frauds, categorically stating that, to consider such memoranda (between BPI and Limketkai) as sufficient compliance with the SOF is to betray the avowed purpose of the law. Oral testimony may not be also used to establish the alleged perfected contract of sale as theis would violate the parol evidence rule. It was wrong of the RTC to have admitted testimony to evidence despite the objection of BPI’s lawyers. Melo, J. Dissenting Well guys, medyo tinatamad nako i-digest pa ung dissenting opinion.. pero basically inulit lang niya ung sinabi sa 1995 case kasi siya ung ponente doon.

lot was assigned by the government to Rural Progress Administration, defendant (Leonardo) asserted the same right. During the investigation of this “conflicting interest,” defendant asked plaintiff to desist from pressing her claim and promised that if he would succeed in getting the title to Lot I, he would sell to her a portion (55.60 sqm at P25 per sqm). His other conditions included that she paid for the surveying and subdivision and that she continue as tenant with a monthly rental of P10 until said portion shall have been segregated and the purchase price fully paid. Plaintiff accepted the offer and desisted from the claim.

Memory aid: partial performance, combination of acts

After the plans of subdivision and segregation had been approved by the Bureau of Lands, plaintiff tendered to defendant the purchase price which the other refused without reason. Ortega had already caused a survey and segregation of the portion of the land they agreed upon, and in fact extended a portion of her son’s house into the segregated portion. The court explained that an oral agreement to sell a piece of land is not enforceable. Plaintiff argued that it is partially fulfilled as she desisted from claiming by reason of the promise of the defendant. The court says that the desistance is not part of the sale. Only upon payment will the contract be enforced.

FACTS

ISSUE

Long before and until her house had been completely destroyed during the liberation of the City of Manila, plaintiff (Ortega) occupied a parcel of land, designated as Lot I, Block 3 located at San Andres Street, Malate, Manila. After liberation she re-occupied it. When the administration and disposition of the said

Whether or not there was an enforceable contract

Ortega v. Leonardo L-11311. May 28, 1958. Ponente: Bengzon. Petitioner: Ortega Defendant: Leonardo

BLOCK B 2016

BLOCK B 2016

HELD There was an enforceable contract because there was partial performance. The CFI ruling that partial performance occurs

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

101

SALES DIGESTS BLOCK 2B 2016

G.R. No. 85240 || July 12, 1991

BLOCK B 2016 CFI dismissed the complaint by saying that since the subject matter is a real property, the absence of any document evidencing the sale would preclude the admission of oral testimony (Statute of Frauds). CFI also said that such sale would have already prescribed anyways because it was filed more than 30 years after the cause of action had arisen. CA reversed the decision of the CFI noting that the Statute of Frauds applies only to executory contracts and not to consummated sales as in the case at bar and that given the nature of their relationship with one another it is not unusual that no document to evidence the sale was executed. Also, the defense of prescription cannot be set up against petitioners because the action was not for recovery of possession but for cancellation of titles issued to the heirs of Cecilio in 1973. The siblings of Cecilio commenced their complaint for the cancellation of titles 4 years after the partition. There is no prescription of action yet. CA then ordered the cancellation of the TCTs issued for the partition.

Facts:

Issue:

As early as 1922 Basilio Claudel acquired from the Bureau of Lands, a lot on the Muntinlupa Estate Subdivision. He secured a TCT and declared the lots in his name in his tax declarations. He paid the taxes thereon until his death. His widow and thereafter his son paid the taxes. This lot is now the subject of this litigation. On one side the Heirs of Cecilio and on the other hand, the Siblings of Cecilio. In 1972, the heirs of cecilio partitioned the lot among themselves. The siblings of cecilio filed a case contesting the partition by claiming that in 1930, their parents had purchased from the late Cecilio several portions of the lot. They admit that the transaction was verbal and submitted a subdivision plan of the said land as proof of the sale.

W/N a contract of sale of land may be proven orally in this case. – No.

only when part of the purchase when part of the purchase is made cannot be accepted. Ortega made substantial improvements on the lot, desisted from the claim, continued possession, paid for surveying and paid for the rentals. It is enough to hold that the combination of all of these acts amounted to partial performance. It would be a fraud upon the plaintiff if the defendant were permitted to oppose performance of his part after he has allowed or induced the former to perform in reliance upon the agreement. And since there was partial performance, it takes it out of the Statute of Frauds.

BLOCK B 2016

Claudel vs CA || Ponente: Sarmiento

Held: The rule of thumb is that a sale of land, once consummated, is valid regardless of the form it may have been entered into. Nowhere does law or jurisprudence prescribe that the contract of sale be put in writing. However, in the event that a third party, as in this case, disputes the ownership of the property, the person against whom that claim is brought cannot present any proof of such sale and hence has no means to enforce the contract. Thus the

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

102

SALES DIGESTS BLOCK 2B 2016 Statute of Frauds was precisely devised to protect the parties in a contract of sale of real property so that no such contract is enforceable unless certain requisites, for purposes of proof, are met. Therefore, the existence of the contract of sale made by Cecilio with his siblings cannot be proved because there were no documents to evidence that a sale did indeed take place. As to prescription, an oral contract prescribes in 6 years. The law recognizes the superiority of the torrens title and carries more weight as proof of ownership than the survey or subdivision plan of a parcel of land in the name of the siblings of Cecilio.

SAVELLANO, DANTON D. MATAWARAN, SPOUSES DELFIN F. ESPIRITU, JR. and ESTELA S. ESPIRITU and ELIZABETH TUAZON

Certain facts of the case also belie the claim of ownership of the siblings of Cecilio. First, they regularly paid money to the heirs for ‘taxes’, why would you pay taxes to the heirs and not directly to the Government? Also, two of the respondents who derive their right from the siblings of Claudel bought a portion of the lot from the heirs of cecilio. Why would you buy a portion of the lot that you claim to own? These facts taken together with the lack of evidence to prove the contract of sale indicate that the heirs of Cecilio are the rightful owners of the lot in question.

Facts:

BLOCK B 2016

Alfredo v. Borras G.R. No. 144225 June 17, 2003

BLOCK B 2016

Respondents, SPOUSES ARMANDO BORRAS and ADELIA LOBATON BORRAS Memory Aid: Double sale, first sale enforceable although was voidable and ratified because applicable law at that time was not family code but civil code, second sale void

Spouses Godofredo and Carmen owned a parcel of land which was mortgaged to Development Bank of the Philippines (DBP). To pay their debt, they sold the said land to spouses Armando and Adelia for P15,000. Armando and Adelia Borras gave Godofredo and Carmen Alfredo the money to pay the loan to DBP which signed the release of mortgage and returned the owner’s duplicate copy of the OCT to Godofredo and Carmen. Godofredo and Carmen then delivered to Adelia the owner’s duplicate copy of the OCT, with the document of cancellation of mortgage, official receipts of realty tax payments, and tax declaration in the name of Godofredo. Godofredo and Carmen introduced Armando and Adelia, as the new owners of the Subject Land, to the Natanawans, the old tenants of the Subject Land. Armando and Adelia then took possession of the Subject Land.

Petitioners, SPOUSES GODOFREDO ALFREDO and CARMEN LIMON ALFREDO, SPOUSES ARNULFO SAVELLANO and EDITHA B. Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

103

SALES DIGESTS BLOCK 2B 2016 Sometime later, Armando and Adelia learned that Godofredo and Carmen resold the same land to Savellano et al (Subsequent Buyers). Hence, this suit was filed to compel Godofredo and Carmen to issue a Deed of Absolute Sale to Armando and Adelia, and to declare the sale to the Subsequent Buyers void. Godofredo and Carmen allege (1) That the action is unenforceable under the Statute of Frauds. They point out that there is no written instrument evidencing the alleged contract of sale over the Subject Land in favor of Armando and Adelia. They object to whatever parole evidence Armando and Adelia introduced or offered on the alleged sale unless the same was in writing and subscribed by Godofredo.

BLOCK B 2016

(2) That if not unenforceable, it is void pursuant to the Family Code because Carmen sold the land without the consent of Godofredo (raised in CA) and because the sale was made during the 25-year period that the law prohibits the alienation of land grants without the approval of the Secretary of Agriculture and Natural Resources (raised only in SC). (3) Petitioners asserted that the Subsequent Buyers were buyers in good faith and for value.

BLOCK B 2016 RTC ruled in favor of Armando and Adelia. It held that there was a perfected contract of sale between the parties which is evidenced by the following: (1) Godofredo and Carmen delivered to Armando and Adelia the Subject Land; (2) Armando and Adelia treated as their own tenants the tenants of Godofredo and Carmen; (3) Godofredo and Carmen turned over to Armando and Adelia documents such as the owner’s duplicate copy of the title of the Subject Land, tax declaration, and the receipts of realty tax payments in the name of Godofredo; and (4) the DBP cancelled the mortgage on the Subject Property upon payment of the loan of Godofredo and Carmen. Moreover, the receipt of payment issued by Carmen served as an acknowledgment, if not a ratification, of the verbal sale between the sellers and the buyers. The trial court ruled that the Statute of Frauds is not applicable because in this case the sale was perfected. CA affirmed in toto Issue: (1) w/n the sale in favor of Armando and Adelia is valid and enforceable – Yes.

RTC Decision (2) w/n the sale in favor of the Subsequent Buyers is valid because they are purchasers in good faith – No. Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

104

SALES DIGESTS BLOCK 2B 2016 Held: (1) Yes. Enforceable There is a perfected contract of sale between them. All the elements of a sale are present: Consent, Subject matter - the subject land, and the price of P15,000. The sale has been consummate because the the sellers and buyers have performed their respective obligations under the contract.

BLOCK B 2016

In a contract of sale, the seller obligates himself to transfer the ownership of the determinate thing sold, and to deliver the same, to the buyer who obligates himself to pay a price certain to the seller. In this case, Godofredo and Carmen delivered the Subject Land to Armando and Adelia, placing the latter in actual physical possession of the Subject Land. This physical delivery of the Subject Land also constituted a transfer of ownership of the Subject Land to Armando and Adelia. Ownership of the thing sold is transferred to the vendee upon its actual or constructive delivery. Godofredo and Carmen also turned over to Armando and Adelia the documents of ownership to the Subject Land, namely the owner’s duplicate copy of the OCT, the tax declaration and the receipts of realty tax payments. On the other hand, Armando and Adelia paid the full purchase price as evidenced by the receipt issued by Carmen. Armando and Adelia fulfilled their obligation to pay the price agreed upon. Indeed, upon payment to DBP, the DBP cancelled the mortgage on the Subject Land and returned the owner’s duplicate copy of OCT No. 284 to Godofredo and Carmen.

BLOCK B 2016

The RTC and CA are correct in not applying the Statute of Frauds because this only applies to executory contracts. The existence of the receipt for payment, which is a memorandum of the sale, removes the transaction from the provisions of the Statute of Frauds. The Statute of Frauds applies only to executory contracts and not to contracts either partially or totally performed. In addition, a contract that violates the Statute of Frauds is ratified by the acceptance of benefits under the contract. Godofredo and Carmen benefited from the contract because they paid their DBP loan and secured the cancellation of their mortgage using the money given by Armando and Adelia. Godofredo and Carmen also accepted payment of the balance of the purchase price. Voidable but now ratified With regard to their defense of nullity on the ground of lack of husband’s consent and on the ground that the sale was made during the 25-year prohibitive period, the contention is untenable. The sale was made in 1970, before the Family Code took effect. Therefore, the applicable law at that time is the Old Civil Code which only makes the sale by the wife without the husband’s consent voidable. However, Godofredo cannot anymore seek the contract’s annulment because he has already ratified the same by introducing Armando and Adelia as the new owners to the tenants of the land, and by accepting the using the purchase price to pay their debt to DBP. (2) No. The Subsequent Buyers are not in good faith. Armando and Adelia registered their adverse claim on the land on February 8,

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

105

SALES DIGESTS BLOCK 2B 2016 1994, while the Subequent Buyers bought the lands on February 22, 1994. They cannot be held to be in good faith because the registration in the Register of Deeds served as constructive notice to them of the defect in the title of the sellers.

Toyota Shaw Inc. v. CA GR. 116650 May 23, 1995 Memory Aid: Facts:

BLOCK B 2016

The private respondent, Sosa wanted to buy a Toyota Lite Ace but experienced difficulty in finding a dealer with available units for sale because of the prevailing market conditions at the time (there was a shortage in supply). When they contacted the Toyota Shaw Inc (Toyota) he was told that they had an available unit and so Sosa met with Popong Bernardo, a sales representative of Toyota. Sosa emphatically emphasized to Bernardo that he needs the car no later than June 17, 1989 because he needs it for a trip to Marinduque. Bernardo then assured Sosa that the unit would be available for pick up at 10am June 17, 1989 and signed an agreement entitled, “AGREEMENTS BETWEEN MR. SOSA & POPONG BERNARDO OF TOYOTA SHAW, INC.” wherein it was stipulated that the unit will be picked0up and released on the 17th of June. (Note: the agreement was not signed by Sosa) Sosa then made a downpayment of P100k and the parties also agreed that the balance of the purchasing price would be paid

BLOCK B 2016

by BA Financing. Sosa then met with Bernardo to accomplish a Vehicle Sales Proposal (VSP) however, the spaces for “Delivery Terms” were not filled up. Quirante, the sales supervisor of Bernardo, checked and approved the VSP. The day of reckoning came when Bernardo called Sosa that the vehicle would not be available for pick-up at the aforementioned time but rather at 2pm the same day. When Sosa went to Toyota Shaw at 2pm and after waiting for an hour, Bernardo informed them that the vehicle could not be delivered because “nasulot ang unit ng ibang malakas.” Toyota contends however, that the Lite Ace was not delivered because BA Finance disapproved Sosa’s application for credit. Toyota further alleged that the vehicle was already earmarked for Sosa but could not release it since BA rejected the credit application. Sosa then demanded the refund of his downpayment which Toyota complied with. Sosa, however, made a reservation that his acceptance of the refund is, “without reservation for future claims for damages.” Sosa then filed a complaint against Toyota under Articles 19 and 21 of the Civil Code. RTC ruled in favor of Sosa which the CA, in turn, affirmed. Issue(s): 1. W/N the agreement between Sosa and Bernardo was a perfected contract of sale binding upon Toyota Shaw, Inc. Held/Ratio:

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

106

SALES DIGESTS BLOCK 2B 2016 NO, the agreement between Sosa and Bernardo cannot be construed as a perfected contract of sale binding upon Toyota because there was no obligation on the part of Toyota to transfer ownership of the vehicle to Sosa and no correlative obligation on the part of the latter to pay a price certain. The downpayment cannot be considered as the price because it made no reference to the sale of the vehicle and nothing was mentioned about the full purchase price and the manner the installments were to be paid. Moreover, the VSP was merely a proposal which was subsequently aborted since BA Finance denied Sosa’s credit application. Thus it follows that, the aborted VSP created no demandable right in favor of Sosa for the delivery of the vehicle and its non-delivery created no legally indemnifiable injury.

BLOCK B 2016

The agreement between Bernardo and Sosa did not constitute as a meeting of the minds because for one thing, Sosa never signed it and that from the title of the agreement clearly shows that Sosa was NOT dealing with Toyota but with Popong Bernardo. Sosa knew that Bernardo was merely a sales representative of Toyota and hence an agent of the latter. It was incumbent upon Sosa to act with prudence to know the extent of Bernardo’s authority as an agent. Therefore, Sosa must discover upon his own peril the extent of Bernardo’s authority as an agent.

BLOCK B 2016

Chapter 6- Obligations of the Seller Santos v. Santos Facts: Petitioner Zenaida Santos was the widow of Salvador Santos and the brother of the respondents Calixto, Alberto, Antonio and Rosa. Their parents (respondent’s), Jesus and Rosalia, owned a parcel of land located in Sta. Cruz Manila and on it was a 4-door apartment. This apartment was being administeredby their mother Rosalia. The parents, Jesus and Rosalia then executed a deed of sale in favor of their children Salvador and Rosa. Subsequently, Rosa sold her share to Salvador but despite of the sale, Rosalia (mother) continued to receive the rentals from the apartment units. Sometime in 1979, Jesus died but unfortunately did not resurrect and was followed by his son Salvador and wife a few months after. Salvador’s widow, petitioner Zenaida, then demanded rentals from the tenants of the apartment units. However, the tenants refused to pay and Zenaida filed an ejectment suit against the former which the MTC of Manila granted. 10 years after, the brothers of Salvador filed an action for reconveyance against Zenaida alleging that the two deeds of sale executed in favor of Salvador were SIMULATED for lack of consideration. The respondent siblings allege that the deeds of sale were executed to accommodate Salvador to generate funds for his business ventures. Zenaida denied these allegations.

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

107

SALES DIGESTS BLOCK 2B 2016 The RTC ruled in favor of the respondent siblings on the ground that although there was a deed of sale in favor of Salvador, the seller, parent-spouses Jesus and Rosalia continued to possess the property and exercised rights of ownership over the said property. The CA affirmed the RTC and held that in order for the execution of a public instrument to effect TRADITION/DELIVERY, the vendor shall have CONTROL over the thing sold at the moment of the sale. It is not enough to confer upon the buyer ownership and right of possession but must place the thing sold under the buyer’s CONTROL. This did not happen in the case at bar since the parentspouses Jesus and Rosalia remained in dominion, control and possession of the thing allegedly sold. Issues: W/N payment of taxes and retention of possession are indication of continued ownership by the sellers W/N a sale through a public instrument is equivalent to delivery W/N Rosalia’s cause of action prescribed

BLOCK B 2016

Ratio/Held On the first issue YES, although it is true that tax receipts do not constitute sufficient proof of ownership, the continued possession and administration over the property vested upon Rosalia ownership over the disputed property. Even though Salvador already registered the property in his name, he subsequently surrendered such title to his mother. The

BLOCK B 2016 aforementioned circumstances are clear indications that ownership remained with the original owners, namely Rosalia. The vendor’s continued possession of the property makes dubious the contract of sale between the property. On the second issue, NO, nowhere in the Civil Code does it say that the execution of a deed of sale is a conclusive presumption of delivery of possession. The Code merely states that execution shall be equivalent to delivery and this presumption MAY BE REBUTTED by clear and convincing evidence. Presumptive delivery CAN BE NEGATED by the failure of the vendee to take actual possession of the thing sold. Applying the doctrine found in Norkis where it is said that the critical factor which gives legal effect to the mode of delivery used is the ACTUAL INTENTION of the vendor to deliver and its acceptance by the vendee. In the case at bar, there was no actual intention to deliver the property on the part of the parent-spouses Jesus and Rosalia to their child Salvador because it was only made to accommodate Salvador. On the issue of prescription, the court held NO, the complaint filed by the respondent-sibling was an action for reconveyance on the ground that the deed of sales were fictitious and simulated. The complaint amounts to a declaration of nullity of a void contract, which is IMPRECRIPTIBLE. Neither can their action be barred by laches.

Dy Jr. v. CA Facts:

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

108

SALES DIGESTS BLOCK 2B 2016 The petitioner, Perfecto Dy and Wilfredo Dy are brothers. In 1979, Wilfredo purchased a truck and tractor through the financing extended by LIBRA. The truck and tractor were both mortgaged to LIBRA as security of the loan. Perfecto wanted to buy the tractor from his brother Wilfredo so he wrote a letter to LIBRA requesting that he be allowed to purchase the tractor and assume the mortgage in place of Wilfredo. LIBRA, thru its manager Ares APPROVED such request. Hence, Wilfredo executed a deed of absolute sale in favor of Perfecto. However, possession of the subject tractor was with LIBRA due to Wilfredo’s failure to pay the mortgage.

BLOCK B 2016

LIBRA refused to release the said tractor to Perfecto despite the offer of full payment because the financing covered BOTH the truck AND tractor so LIBRA was insisting on payment for both truck and tractor. Perfecto was able to convince his sister Carol to purchase the truck and then offered payment to LIBRA for both truck and tractor. LIBRA being a cunt, insisted that since the payment was thru an out-of-town check, it MUST BE CLEARED FIRST before they can release the chattels. Meanwhile, another civil case for collection was filed by GELAC against Wilfredo. In this case, a writ of execution was issued against the properties of Wilfredo and on the strength of such writ, the provincial sheriff was able to seize the tractor and sold it to GELAC in a public auction where it was the lone bidder. Subsequently, GELAC sold said tractor to Gonzales, their stockholder. The check cleared but Perfecto could not take possession of the tractor since GELAC already took custody of said tractor. Hence,

BLOCK B 2016

Perfecto filed an action to recover the subject tractor in the RTC of Cebu City. The RTC ruled in favor of Perfecto but this was however reversed by the CA on the ground that Wilfredo was still the owner of the tractor when the alias writ of execution was issued. Issues: W/N Perfecto was the owner of the tractor when the writ of execution was issued W/N the sale of the tractor to Perfecto was done in fraud of creditors Ratio/Held: YES, Perfecto was already the owner of the said tractor by virtue of constructive delivery when the deed of sale was executed in his favor. It is well-settled that the mortgagor remains the owner of the mortgaged property and has the absolute right to sell such property on the condition that he/she obtain consent from the mortgagee under pain of criminal prosecution (Art 319 par. 2 of RPC). Even if no consent was obtained from the mortgagee, the validity of the sale would not be affected. In the case at bar, it was proven that LIBRA allowed Perfecto to purchase the tractor and assume the debt of his brother. In the instant case, actual delivery of the subject tractor could not be made because possession of the tractor was with LIBRA due to Wilfredo’s failure to pay the amortization. The law supports LIBRA’s possession of the tractor because it is a necessary

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

109

SALES DIGESTS BLOCK 2B 2016 step for it to be able to sell the property. Although Wilfredo was not in actual possession and control of the tractor, his right of ownership was not divested from him upon his default. Neither can LIBRA claim that it is the owner of the mortgaged property because the mortgagee cannot become the owner of the property mortgaged and the only remedy of the mortgagee is to foreclose on the property and sell it at a public auction. In the case at bar, there is no showing that LIBRA foreclosed on the property.

BLOCK B 2016

When a third person assumes a mortgage he steps into the shoes of the original mortgagor. Perfecto’s payment of the check was intended to extinguish the mortgage and was not intended to be considered as payment of the purchase price since the relationship between LIBRA and Perfecto was not one of sale but still a MORTGAGE. The clearing or encashment of the check was not determinative of the consummation of sale, therefore the contention of LIBRA that the consummation of the sale depended upon encashment of the check is UNTENABLE. The sale of the subject tractor was consummated upon the EXECUTION of the public instrument between Perfecto and Wilfredo and at this time, constructive delivery was already effected. Wilfredo was not the owner of the tractor anymore when the writ of execution was issued and hence the sheriff could not levy upon said tractor. Anent the second issue, the SC found no reason that the sale was done in fraud of creditors, there being no sufficient evidence to show such fraud. Wilfredo and Perfecto being brothers do not mean that the sale they entered into was fraudulent.

BLOCK B 2016

Addison v. Felix Facts Addison sold to Felix with the consent of her husband Balbino Tioco four parcels of land. It was agreed upon that Felix will pay at the execution of the deed the sum of P3k and bound herself to pay the remainder in installments, P2k on July 15, 1914 and P5k 30 days after the issuance of a certificate of title in her name. It was also agreed upon that within 10 year after the issuance of title in Felix’s name, Felix will pay P10 for each coconut tree in bearing and P5 for each tree not bearing that might be growing in the parcels of land sold. It was also stipulated that Felix will deliver to Addison 25% of the value of the products she might obtain from the parcels of land from the time she takes possession until the Torrens title be issued in Felix’s favor. It was also stipulated that Felix may rescind the contract, in which case Felix would be obliged to return to Addison the net value of all the products of the products sold and Addison would be obliged to return to Felix the sums the latter paid at 10% interest per annum. Addison then filed a suit to compel Felix to pay the first installment of P2k. Felix and her husband alleged that Addison failed to deliver to them the said land notwithstanding their demands to make such delivery. Felix then asked to be absolved from the complaint and to rescind the contract and for Addison to return the P3k they paid to the latter.

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

110

SALES DIGESTS BLOCK 2B 2016 Evidence adduced during trial showed that only two out of four parcels of lands were available for immediate possession. The other two parcels, 2/3 of which were found to be in the possession of Juan Villafierte who claimed to be the owner of the parcels of land occupied by him. They found that they would have to file a suit to be able to possess such land. The RTC rendered judgment in favor of Felix and ordered the contract rescinded on the ground that the land sold was not registered in accordance with the Torrens system and on the stipulation of the contract that “within one year from the date of the certificate of title in favor of Felix, the latter may rescind the present contract of purchase and sale” Issue: W/N Addison made effective delivery to Felix Ratio/Held:

BLOCK B 2016

NO, the record shows that Addison did not deliver the thing sold because with respect to the two parcels of land, Addison was not able to show them to the purchaser and as regards to the other two, more than 2/3 of its area was in the hostile and adverse possession of a third person. It is true that the execution of a public instrument is equivalent to the delivery of the thing sold, but in order to produce the legal effect of delivery, it is NECESSARY that the vendor shall have control over the thing sold that, at the moment of the slae, its material delivery could be made. Even though a public instrument may have been executed, the purchaser cannot make use of the

BLOCK B 2016

thing sold because of the interposition of another will, then fiction will yield to reality and therefore, no effective delivery has been made. It is evident in the case at bar, that mere execution of a public instrument did not constitue as fulfillment of the obligation of the seller to deliver the thing sold and from such non-fulfillment the buyer can demand rescission.

Danguilan v. IAC Facts The respondent, Apolonia Melad filed a complaint against the petitioner, Danguilan for the recovery of a farm and residential lot which she claims she purchased from Domingo Melad. Danguilan answered that he had been in open, continuous and adverse possession of the said land having acquired them from Domingo Melad. Case was dismissed for failure to prosecute but was subsequently re-filed. At the trial, Apolonia presented a notarized deed of sale signed by Domingo Melad which conveyed the properties to her for the sum of P80. She claims that the sum was paid by her mother who worked at the Tabacalera factory. Apolonia claimed to be the illegitimate daughter of Domingo Melad. She moved out of the farm only when Danguilan asked her permission to cultivate the land and to stay therein. Apolonia agreed on the condition that Danguilan

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

111

SALES DIGESTS BLOCK 2B 2016 would deliver to her part of the harvest from the farm. This was corroborated only by her mother. Danguilan on the other hand, claims that he was the husband of Isidra Melad, Domingo’s niece whom he had taken as his ward since Domingo and his wife had no children of their own. He claims that in 1941 and 1943, Domingo signed a private instrument which conveyed to Danguilan the disputed lots on the condition that the latter would take care of the grantor and would bury him upon his death. This was corroborated by three witnesses, two of them declared that neither Apolonia nor her mother ever lived in land with Domingo Melad. The RTC ruled in favor of Danguilan, finding Apolonia’s evidence to be unpersuasive and unconvincing. They held that Apolonia’s claim that she moved out of the property and left it in the possession of Danguilan was contradictory to her claim of ownership. The decision concluded that where there was doubt as to the ownership of the property, presumption was in favor of the one actually occupying the property.

BLOCK B 2016 The Court held that even assuming the validity of the deed of sale executed by Domingo Melad in favor of Apolonia was valid, the record shows that Apolonia did not take possession of the property and waited until 1962 to file the action for recovery against Danguilan. If she ever did have possession of the disputed lots, she transferred it to Danguilan when she moved out to another lot belonging to her step-brother. In other words she failed to show that she consummated the contract of sale by actual delivery of the properties to her and her actual possession thereof in the concept of purchaser-owner. There is no dispute that it is Danguilan and not Apolonia who is in actual possession of the disputed properties. Even if the respective claims of the parties were both to be discarded as being in herently weak, the decision should still be in Danguilan’s favor since, “..being in possession is presumed to be the owner and cannot be obliged to show or prove a better right.”

Pasagui v. Villablanca

BLOCK B 2016

The CA however reversed, on the ground that the private instruments executed by Domingo Melad in favor of Danguilan was null and void as it was a donation of real property and should have been effected through a public instrument. Issues: W/N Apolonia Melad is the lawful owner of the disputed property. Ratio/Held:

Facts: Calixta Pasagui and Fausta Mosar filed a complaint against the defendants spouses Bocar alleging that the parcel of agricultural land they bought for the consideration of P2.8k was being illegally occupied by the defendants spouses Villablanca depriving the petitioner possession thereof. Pasagui was suing the spouse Bocar by virtue of the warranty clause contained in the deed of sale they executed.

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

112

SALES DIGESTS BLOCK 2B 2016

BLOCK B 2016

The appellees, Villablanca moved to dismiss the case alleging that the CFI does not have jurisdiction since it is an action of forcible entry. The Pasaguis on the other hand, opposed the dismissal claiming that it was not an action for forcible entry since it was not alleged that the deprivation was through force, stealth, intimidation etc.

IMPEDIMENT exists that would prevent the passing of property from the seller to the buyer. In the case at bar, however, Pasagui could not take possession of the land since it is being occupied by Villablanca hence; the action is not one of Forcible Entry since there was no prior possession of the land by Pasagui and the depravation of possession was not through FITSS granting jurisdiction to the CFI.

The CFI however dismissed, holding that the action was one of forcible entry and hence jurisdiction belonged to the Justice of the Peace and not with the trial court.

Power Commercial and Industrial Corp. v. CA

Issues: Facts: W/N the Pasagui’s action was one of forcible entry Ratio/Held:

BLOCK B 2016

NO, it is well settled that what determines jurisdiction of the municipal court in forcible entry cases are the allegations found in the complaint and the character of relief sought. In the case at bar, the complaint did not allege that Pasagui were in physical possession of the land and have been deprived of such possession through force, intimidation, threat etc. The complaint simply alleges that Pasagui bought the parcel of land from Bocar for P2.8k through a deed of sale which was notarized and registered and that the Villablanca took possession of the said lot, depriving Pasagui of possession. The execution of the deed of absolute sale in a public instrument is equivalent to delivery of the land subject of the sale. Such constructive delivery would only have effect if no

Petitioner Power Commercial and Industrial Corp (PCIC) needed a bigger office space and warehouse for its products. For this purpose it entered into a contract of sale with the respondentspouses Quiambao for a parcel of land located in San Antonio Village, Makati City. The parties agreed that PCIC would pay the Quiambaos P108k as downpayment and the balance of P295k would be paid once the deed of transfer of the title has been executed. It was also agreed upon that, PCIC would assume the mortgage of the Quiambaos with PNB amounting to around P80k. The Quiambaos however, mortgaged the said land again to guarantee a loan of P145k, P80k of which was already paid to the spouses. PCIC also agreed to assume the second mortgage. On June 26, 1979 the PCIC and the Quiambaos executed a Deed of Absolute Sale with Assumption of Mortgage which stipulated the following: 

Price=P295k to be paid in cash

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

113

SALES DIGESTS BLOCK 2B 2016    

Said land is not covered by the Land Reform Code Warrants that the Quiambaos are the lawful owners of the land described, free from any lien/encumberance Warrants peaceful possession of the land to PCIC States that the property is mortgaged to PNB for P145k which PCIC would assume to pay

Constantino, the General Manager of PCIC, submitted to the PNB the deed of sale along with the formal application for assumption of mortgage.

BLOCK B 2016

PNB however, informed the Quiambaos that PCIC failed to submit the papers necessary for the assumption of mortgage. PNB also told the Quiambaos that the application was deemed withdrawn and that the mortgage of P145k was deemed fully due and demandable and be paid within 15 days from notice. It turns out however, that PCIC paid PNB P41k and P20k on various dates which were to be applied to the outstanding loan. It was also found that, PCIC sent letters to PNB requesting that, “PCIC’s application for assumption of mortgage be approved and that the title be transferred to PCIC’s name because it was found that tenants occupied the land.” PNB however replied saying that PCIC needs to pay the remaining balance plus interest. This led PCIC to file a case against the Quiambaos for recission plus damages before the RTC of Pasig. PCIC then replied to PNB demanding the return of the payments they made since the application for mortgage was never approved. During the pendency of the trial, the property was foreclosed upon and was bought by PNB at the public auction.

BLOCK B 2016

The RTC ruled in favor of PCIC on the ground that the Quiambaos failed to deliver actual possession of the land to PCIC, entitling the latter to for rescission and ordering PNB to return to PCIC the payments made by the latter. This was however reversed by the CA, on the ground that the deed of sale did not obligate the Quiambaos to eject the lessees from the land as a pre-condition of the sale nor was the lessees occupation a breach of warranty. Hence, there was no substantial breach that would justify recission. Issues: W/N there was substantial breach to justify rescission, because of nonejectment of the tenants and failure to deliver the lot sold W/N solution indebitii applies, obligating PNB to return to PCIC the payments they made Ratio/Held: NO, the “alleged” failure of the Quiambaos to eject the lessees and to deliver actual physical possession of the land did not constitute substantial breach to justify rescission, because:  

(1) such “failure to eject” was NOT STIPULATED as a condition (2) its effects and consequences were also not specified

The stipulations found in the deed of sale that “…warrants the land is free from any lien/encumberance, warrants peaceful possession in favor of PCIC etc etc” pertains to the usual warranty against eviction and NOT TO A CONDITION that was not met.

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

114

SALES DIGESTS BLOCK 2B 2016 Powers, the General Manager of PCIC, admitted to the fact that he did not ask PCIC’s lawyers to stipulate in the contract the guarantee to eject tenants, this proved to be fatal since it caused obscurity and therefore must be taken against PCIC. If the parties intended to impose upon the Quiambaos the obligations to ejects the tenants from the lot sold, they should have included a provision saying so. Absent a stipulation therefor, the nonfullfilment of ejectment cannot be a ground for rescission. Furthermore, it was found that PCIC was aware that tenants did occupy the said lot, and even tasked its lawyers to eject such tenants.

BLOCK B 2016

On the issue of delivery, the SC held that there was indeed delivery through the execution of the deed of sale. The lot in question was placed in the control of PCIC which enabled them to file the ejectment suit. Considering that deed of sale did not stipulate ejectment as a pre-condition, the SC held that execution of the deed of sale was sufficient delivery. Prior physical delivery is not legally required and the execution of the deed of sale is deemed equivalent to delivery. (Note: is this contradictory to what the SC has been saying in the prior cases? Isn’t the presence of tenants here a impediment to PCIC from taking possession of the land? Ewan haha) The court held that there was no breach of warranty against eviction can be appreciated because the facts of the case do not show that the requirements for breach was satisfied. The presence of lessees did not constitute as an encumberance nor does it deprive PCIC from control over the lot. PCIC’s deprivation of the lot

BLOCK B 2016

was due to its own fault, by its failure to pay the amortizations causing the lot to be foreclosed. On the issue of solution indebitii, the SC held that PCIC was under the obligation to pay the amortizations under the contract of sale and the deed of real estate of mortgage. Therefore it cannot be said that PCIC did not have any duty to pay PNB amortization, hence, there can be no mistake in payment.

Chua v CA Facts Valdes-Choy advertised for sale her paraphernal house and lot located in San Lorenzo Village, Makati City. Petitioner Chua responded to the ad and they two agreed on a purchase price of P10.8M payable in cash. Chua then paid Valdes-Choy P100k in earnest money stipulating that failure to pay the remaining balance of P10.7M would result to forfeiture of the earnest money. Chua then secured from PBCom a managers check worth P480k. However, Chua immediately issued a stop-payment order on the managers check claiming that it was lost/misplaced. On the same day, PBCom Asst. VP Pe, notified the PBCom Operation group of Chua’s stop-payment order. On the same day, Chua and ValdesChoy met with their respective counsels to execute the necessary documents and to arrange the payments. The first Deed of Sale covered the house and lot at the purchase price of P8M. The second

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

115

SALES DIGESTS BLOCK 2B 2016 Deed of Sale covered the movable properties in the house at the price of P2.8M. The capital gains tax was pegged at P485k.

The RTC ruled in favor of Chua, however the CA reversed and set aside the RTC decision dismissing the complaint.

The next day, Chua handed to Valdes-Choy the alleged “lost” PBCom check for P480k so Valdes-Choy could pay the capital gains tax since the latter did not have enough funds to pay such taxes. On the same day, Chua accompanied Valdes-Choy to Traders Royal Bank where she deposited the manager’s check and subsequently purchased a Trader’s Royal Bank check payable to the Commissioner of Internal Revenue for the capital gains tax. ValdesChoy gave the TRB check to her counsel who undertook to pay the CGT.

The RTC ruling

It was at this moment that Chua showed to Valdes-Choy a PBCom check for P10.215M representing the remaining balance of the purchase price. However, Chua refused to give it Valdes-Choy since the former required that the property be registered first in his name before he would turn the check over. This caused Valdes-Choy to rage on Chua tearing up the deeds of sale in the process claiming that it wasn’t part of their agreement.

BLOCK B 2016

The transaction was at an impasse and neither side were budging until Valdes-Choy suggested to her counsel that Chua should place the check in escrow and then she would cause the issuance of the TCT in Chua’s name. However, this fell on deaf ears. Chua then filed with the RTC a complaint for specific performance against Valdes-Choy but which was subsequently dismissed. Chua however, refilled the case for specific performance plus damages and the trial court gave due course to the complaint.

 



BLOCK B 2016

Parties entered into a contract to sell evidenced by the receipt of P100k as earnest money Chua complied with the terms of the contract to sell since he was prepared pay the balance on the condition that all papers must be in “proper order” before full payment is made Valdes-Choy did not perform her obligations under the contract since the capital gains tax was still not paid.

The CA ruling 

   

In reversing the RTC, they said that Chua’s refusal to pay until the Certificate was issued in his name was not part of their agreement. The CA found that all papers were in proper order hence Chua had no valid reason not to pay on the agreed date. Valdes-Choy was in a position to deliver the disputed property to Chua Chua’s capacity to pay could not be equated with actual payment since he actually refused to do so Non-payment of the CGT has no bearing on the validity of the Deed of Sale since it is only after the deeds are signed and notarized can the final computation and payment of the CGT be made.

Issues:

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

116

SALES DIGESTS BLOCK 2B 2016 W/N there was a perfected contract of sale or a mere contract to sell

obligation to sell from arising and ownership is retained by the seller without further remedies by the buyer.

W/N Chua can compel Valdes-Choy to cause the issuance of a new TCT in Chua’s name before payment of the full price

It is only once the buyer pays the full purchase price would the seller be obligated to transfer ownership to the buyer. In the sale of real property, the seller is not obligated to transfer in the name of the a new certificate of title but rather to transfer ownership of the real property. There is a difference because a buyer may become the owner of the real property even though the title is still registered in the name of the seller. As between the seller and buyer, ownership is transferred not by issuance of a new certificate of title, but by the execution of the instrument of sale in a public document. When the deed of absolute sale is signed by the parties and notarized then the delivery is deemed made by the seller to the buyer.

Ratio/Held: The court held that the agreement by Chua and ValdesChoy, as evidenced by the Receipt, IS A CONTRACT TO SELL and not a contract of sale.  

BLOCK B 2016

BLOCK B 2016

In a contract of sale, title passes to the vendee upon delivery of the thing sold In a contract to sell, ownership remains with vendor and is not to pass to the vendee until full payment of the purchase price

In the case at bar, the stipulation allowing Valdes-Choy to forfeit the earnest money in case of Chua’s failure to pay the balance is in the nature of a stipulation reserving ownership in the seller until full payment of the purchase price. The agreement between Chua and Valdes-Choy was embodied in a receipt rather than in a deed of sale, since ownership not having passed between them. It was also shown that Valdes-Choy retained possession of the certificate of title and all other documents relative to the sale. These are proof that the agreement did not transfer to Chua either by actual or constructive delivery, ownership of the property. Since the agreement between Valdes-Choy and Chua is one of contract to sell, the full payment of the purchase price is a suspensive condition, non-fulfillment of which prevents the

In the case at bar it was found that Valdes-Choy was in a position to comply with her obligations as a seller  

She signed the deeds of sale in the presence of Chua She was prepared to turn over the owner’s duplicate of the TCT, along with the tax declarations and latest realty tax receipt to Chua

Chua’s refusal to pay the balance price put himself in default and has only himself to blame for the rescission by Valdes-Choy.

Vive Eagle Land Inc v CA

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

117

SALES DIGESTS BLOCK 2B 2016 Facts:



The spouses Flores were the owners of two parcels of land located in Cubao, Quezon City. The spouses Flores and TATIC executed an agreement to sell which bound the spouses to sell such properties to TATIC. TATIC then applied for a loan with Capital Rural Bank of Makati to finance the purchase of the lots. The bank agreed to grant the application of TATIC on the condition that the properties be registered in TATIC’s name as it would be used as collateral for the loan.



The spouses Flores, TATIC, Tobias, and the Bank entered into a memorandum of agreement where it was stipulated that:



 



Subsequently, VELI sold to its president, petitioner Cervantes and Genuino Ice Co. Inc (GICI) for the price of P4m. They executed a deed of assignment of rights to this effect.

Pursuant to their MOA, the spouses Flores executed a deed of absolute sale in favor of TATIC for the price of P5.7m and turned over the custody of the titles to the Bank.

The respondent GICI wrote a letter to letter to VELI demanding VELI to pay the capital gains taxes but this was rejected by VELI. Respondent GICI then filed a complaint against VELI and its president Cervantes for specific performance plus damages, claiming that VELI failed to deliver the properties to GICI, to cause the ejectment of the occupants of properties and to pay the capital gains taxes. VELI answered, stating that it is exempt from payment of the CGT and that is the spouses Flores and Tobias who are liable for the payment of such taxes and that is also the spouses Flores and Tobias who are responsible for the ejectment of occupants.

TATIC subsequently caused the sale of the said lots to petitioner Vive Eagle Land Inc (VELI) for the price of P6.3m and warranted that:

The RTC ruled in favor GICI that it should be VELI who is liable to pay the GCT since the latter was not privy to the agreement between the spouses Flores, TATIC and VELI and as such is not

 

BLOCK B 2016

Warrants that the properties are free from any liens/encumberances Tobias, the broker, will undertake the payment of all taxes and assessment imposed over the lots, including the payment of the capital gains tax Tobias would also undertake the ejectment of tenants on the lots with the assistance of the spouses Flores The expenses incurred by TATIC and Tobias would be deducted from the purchase price of the property



BLOCK B 2016 There were valid titles to the property and that TATIC would deliver to VELI possession thereof to the latter Warrants that the land is free from any liens/encumberances except the mortgage subsisting in favor of the Bank TATIC would undertake to remove the occupants/tenants, otherwise VELI may may withhold payment of the balance of the purchase price TATIC would cause the registration of the titles covering the lots in its name VELI would assume the mortgage

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

118

SALES DIGESTS BLOCK 2B 2016 bound by those deeds. VELI then appealed to the CA which affirmed the CA decision. Issues: W/N VELI is obliged to pay the expenses for the transfer of property in favor of GICI

BLOCK B 2016

VELI should include the income from such sale in its ordinary income tax returns, whatever gains or losses it incurred in the sale of such property.

Behn, Meyer Co. v Yangco

W/N VELI is liable for the capital gains tax W/N VELI is obliged to evict the remaining occupants on the property Ratio/Held:

BLOCK B 2016

YES, VELI is liable for the said expenses because under Art 1487 of the Civil Code, the expenses for the registration of sale should be shouldered by the vendor unless there is a stipulation to the contrary. While Art. 1498 of the Civil Code provides that the execution of a notarized deed of sale shall be equivalent to delivery of the property, this would not apply if, from the deed, the contrary does not appear or cannot clearly be inferred. In the case at bar, the GICI and VELI agreed that the latter would cause the eviction of the occupants and deliver possession of the property to GICI. By virtue of this stipulation, VELI is obliged to cause the eviction of occupants unless there is a contrary stipulation. VELI is not liable for the payment of the CGT because it is a corporation and are exempt from such taxes for any sale or exchange or disposition of property. The CGT is only imposed upon individual taxpayers and not on corporations. However, petitioner

Facts The contract between Behn, Meyer Co. and Yangco was for the delivery 80 drums of Caustic Soda, 76% Carabao Brand for the sum of $9.75 per 100lbs C.I.F Manila. The merchandise mentioned was shipped originally from NY aboard the steamship Chinese Prince. However, the steamship was detained by the British authorities at Penang, where 71 drums were confiscated. When the ship reached Manila, Yangco refused to accept the delivery since the remaining 9 drums were in bad shape. Yangco refused Behn, Meyer’s offer that the former wait until the other 71 drums were delivered or to accept the substitution of 71 drums of caustic soda of similar grade. Behn, Meyer sold the 80 drums of caustic soda which was supposed to be delivered to Yangco. The sale amounted to around P6k but the 80 drums costs around P10k and this was the amount claimed by Yangco for damages for the alleged breach of contract. Issues: W/N Behn Meyer Co is liable to Yangco for non-delivery

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

119

SALES DIGESTS BLOCK 2B 2016 Ratio/Held YES, Behn Meyer is liable to Yangco for damages for its breach of contract. The contract provides for C.I.F Manila which stands for costs, insurance and freight must mean that the delivery will be made in Manila. In the case at bar, the contract providing for C.I.F Manila means that Behn, Meyer was still the owner of the goods when it was confiscated in Penang since the delivery was to be made at Manila. Hence, Behn Meyer is liable to Yangco for breach of contract. However, the determination of the place of the delivery is always a question of fact. If the contract be silent as to this point, delivery by the seller to a common carrier would signify transfer of the property to the buyer. A couple of presumptions to this regard is made:   

BLOCK B 2016



If the buyer pays for the freight, it is presumed that property is transferred at the point of shipment If the seller pays for the freight, it is presumed that the property is transferred when it reaches its destination If it is C.I.F, as explained above, the seller pays for the costs, insurance and freight of the goods If its F.O.B or Free on Board, it means that seller covers ALL expenses until the goods are delivered to the buyer.

These are all presumptions and would ordinarily yield to proof of the contrary.

BLOCK B 2016

General Foods Corp v. NACOCO Facts NACOCO sold to General Foods Corp 1,500 (later reduced to 1,000) long tons of copra at $164 per ton of 2,000 pounds. NACOCO shipped 1054.6 short tons of copra to General Foods on board the S.S Mindoro. The weighing of the copra was done by Luzon Brokerage. By virtue of the weighing done by Luzon Brokerage, NACOCO prepared the corresponding bills of lading and withdrew from General Foods’ letter of credit the amount of P136k. When the goods reached NY, General Foods found that there was a deficiency since the copra only weighed at around 900 short tons so General Foods demanded from NACOCO a refund amounting to around $24k. Jose Nieva, Sr., an officer in charge in NACOCO acknowledged the deficiency in the outturn weights of the copra and promised payment as soon as funds were available. Since NACOCO was abolished sometime after this, General Foods filed a claim with the Board of Liquidators for the sum of $24k which the latter refused. General Foods then went to the CFI of Manila which also dismissed the complaint. Not giving up, General Foods appealed to the CA who also dismissed their complaint. Being the persistent bastards they are, General Foods appealed to the SC. Issue: W/N the weight in New York should be the basis for the payment of copra

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

120

SALES DIGESTS BLOCK 2B 2016 Ratio/Held:

BLOCK B 2016

YES, the terms of the contract between NACOCO and General Foods provided that the amount to be paid depends on the weight of the cargo when it reached the point of destination, which in this case is New York. It was the manifest intention of the parties the total price to be paid was to be ascertained upon determining the net weight and quality of the goods upon arrival in New York. This intention was proven by the fact that the officer in charge of NACOCO, Nieves Sr., acknowledged NACOCO’s intention to be bound by the outturn weight at the port of destination.

measured 5 hectares, “more or less”. It also described the boundaries of the land. Lietz later discovered that Buriol owned only 4 hectares, with 1 more covered by the lease agreement. Hence, only 3 hectares were actually delivered

While the risk of loss was apparently placed on General Foods after the delivery of the cargo to the carrier, NACOCO failed to overcome the burden of proof that the loss was due to voyage risks (i.e drying up of the copra).

Lietz then filed a complaint for Annulment of Lease with Recovery of Possession against Buriol and the Italians. He alleged that Buriol sold to him the lot in evident bad faith and malice knowing that he owned only 4 hectares, not 5. The trial court dismissed the complaint and the counterclaim of the Italians for damages. The CA affirmed the dismissal. It held that under Article 1542, Lietz is no longer entitled to a reduction in price. Lietz appealed contending that he is entitled to reduction under Article 1539.

Rudolf Leitz Inc v. CA

Issue:

Facts:

W/N Lietz entitled to a reduction in the purchase price of the lot because of the reduced area of the property delivered to him

Agapito Buriol owned a parcel of unregistered land in Palawan. On 15 Aug 1986, Buriol entered into a lease agreement with Flavia Turatello, TizianaTuratello, and Paola Sani, all Italians, involving 1 hectare of the property. The lease agreement was for 25 years, renewable for another 25 years. The Italians then took possession of the land after paying a down payment of ₱10,000. The lease agreement was subsequently reduced into writing in Jan 1987. On 17 Nov 1986, Buriol sold the land to Rudolf Lietz, Inc. for the amount of ₱30,000. The Deed of Absolute Sale states that the land

BLOCK B 2016

Held: No. Under Article 1542, there shall be no reduction in the purchase price even if the area delivered is less than that stated in the contract. Article 1539 governs a sale of immovable by the unit, that is, at a stated price per unit area. In a unit price contract, the statement of area of immovable is not conclusive and the price maybe reduced or increased depending on the area actually delivered.

Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

121

SALES DIGESTS BLOCK 2B 2016

BLOCK B 2016

In some instances, a sale of an immovable may be made for a lump sum and not at a rate per unit. In the case where the area of the immovable is stated in the contract based on an estimate, the actual area delivered may not measure up exactly with the area stated in the contract. A vendee of land, when sold in gross or with the description “more or less” with reference to its area, does not thereby ipso facto take all risk of quantity in the land. The use of “more or less” or similar words in designating quantity covers only a reasonable excess or deficiency.

BLOCK B 2016

What really defines a piece of ground is not the area mentioned in its description, but the boundaries therein laid down, as enclosing the land and indicating its limits. In a contract of sale of land in a mass, it is well established that the specific boundaries stated in the contract must control over any statement with respect to the area contained within its boundaries. In this case, the sale is one made for a lump sum. 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 Article 1542, there shall be no reduction in the purchase price even if the area delivered to Lietz is less than that stated in the contract. The area within the boundaries as stated in the contract shall control over the area agreed upon. Lietz had an ocular inspection prior to the perfection of the contract. Thus, he gained a fair estimate of the area of the property sold to him. Also, his subscription to the Deed of Absolute Sale indicates his assent to the correct description of the boundaries of the property Altavas, Arandia, Avila, Bautista, Bantug, Camacho, Catacutan-Estabillo, Cayetano, Cocabo Cusipag, Dantes, Dilangalen, Diego, Elamparo, Flores, Galang, Garcia, Geraldez, Guiyab, Henares, Hizon, Lee, Manalo, Matias, Mendoza, Morales, Ong, Santos, Sarmiento, Yap

122