Sales(Special Contracts) Case Digests

SALES (SPECIAL CONTRACTS) CASE DIGESTS

JUAN P. CABRERA vs. HENRY YSAAC G.R. No. 166790 NOVEMBER 19, 2014 FACTS: Henry Ysaac is one of the co-owners of a parcel of land covered by OCT No. 506 with an area of 5,517 square meters. He leased out a portion of the property to several lessees including Juan Cabrera who leased a 95-square meter portion of the land. In need of money, Henry offered to sell the 95 sq. meter lot but Juan demurred because the lot was too small for his needs since there was no parking space for his vehicle. To deal with Juan’s need, Henry expanded his offer to include two adjoining lands which was then leased by two families but warned that the sale could only proceed if the two families would agree. The deal was almost closed with the agreed price of P 250/sq.m but Juan stated that he could only pay the full price after his retirement. Henry agreed but demanded for an initial payment of P1, 500.00 which Juan paid. ISSUE: Whether or not there was a valid contract of sale between petitioner and respondent. RULING: We find that there was no contract of sale. It was null ab initio. As defined by the Civil Code, “[a] contract is a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service.”For there to be a valid contract, there must be consent of the contracting parties, an object certain which is the subject matter of the contract, and cause of the obligation which is established.76

Sale is a special contract. The seller obligates himself to deliver a determinate thing and to transfer its ownership to the buyer. In turn, the buyer pays for a price certain in money or its equivalent.77 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.”78 The seller and buyer must agree as to the certain thing that will be subject of the sale as well as the price in which the thing will be sold. The thing to be sold is the object of the contract, while the price is the cause or consideration. The object of the sales contract between petitioner and respondent was a definite portion of a co-owned parcel of land. At the time of the alleged sale between petitioner and respondent, the entire property was still held in common. This is evidenced by the original certificate of title, which was under the names of Matilde Ysaac, Priscilla Ysaac, Walter Ysaac, respondent Henry Ysaac, Elizabeth Ysaac, Norma Ysaac, Luis Ysaac, Jr., George Ysaac, Franklin Ysaac, Marison Ysaac, Helen Ysaac, Erlinda Ysaac, and Maridel Ysaac.85 The rules allow respondent to sell his undivided interest in the coownership. However, this was not the object of the sale between him and petitioner. The object of the sale was a definite portion. Even if it was respondent who was benefiting from the fruits of the lease contract to petitioner, respondent has “no right to sell or alienate a concrete, specific or determinate part of the thing owned in common, because his right over the thing is represented by quota or ideal portion without any physical adjudication.” SAN LORENZO DEVELOPMENT CORPORATION VS. CA G.R. NO. 124242, January 21, 2005 FACTS: On 20 August 1986, the Spouses Lu purportedly sold the two parcels of land to respondent Pablo Babasanta. The latter made a down payment of fifty thousand pesos (P50,000.00) as evidenced by a memorandum receipt issued by Pacita Lu of the same date. Several other payments totaling two hundred thousand pesos (P200, 000.00) were made by Babasanta. He demanded the execution of a Final Deed of Sale in his favor so he may effect full payment of

the purchase price; however, the spouses declined to push through with the sale. They claimed that when he requested for a discount and they refused, he rescinded

the

agreement.

Thus,

Babasanta

filed

a

case

for

Specific

Performance. On the other hand, San Lorenzo Development Corporation (SLDC) alleged that on 3 May 1989, the two parcels of land involved, namely Lot 1764-A and 1764-B, had been sold to it in a Deed of Absolute Sale with Mortgage. It alleged that it was a buyer in good faith and for value and therefore it had a better right over the property in litigation. ISSUE: Who between SLDC and Babasanta has a better right over the two parcels of land? RULING: An analysis of the facts obtaining in this case, as well as the evidence presented by the parties, irresistibly leads to the conclusion that the agreement between Babasanta and the Spouses Lu is a contract to sell and not a contract of sale. The receipt signed by Pacita Lu merely states that she accepted the sum of fifty thousand pesos (P50,000.00) from Babasanta as partial payment of 3.6 hectares of farm lot. While there is no stipulation that the seller reserves the ownership of the property until full payment of the price which is a distinguishing feature of a contract to sell, the subsequent acts of the parties convince us that the Spouses Lu never intended to transfer ownership to Babasanta except upon full payment of the purchase price. Babasanta’s letter dated 22 May 1989 was quite telling. He stated therein that despite his repeated requests for the execution of the final deed of sale in his favor so that he could effect full payment of the price, Pacita Lu allegedly refused to do so. In effect, Babasanta himself recognized that ownership of the property would not be transferred to him until such time as he shall have effected full payment of the price. Doubtlessly, the receipt signed by Pacita Lu should legally be considered as a perfected contract to sell.

The perfected contract to sell imposed upon Babasanta the obligation to pay the balance of the purchase price. There being an obligation to pay the price, Babasanta should have made the proper tender of payment and consignation of the price in court as required by law. Glaringly absent from the records is any indication that Babasanta even attempted to make the proper consignation of the amounts due, thus, the obligation on the part of the sellers to convey title never acquired obligatory force. There was no double sale in this case because the contract in favor of Babasanta was a mere contract to sell; hence, Art. 1544 is not applicable. There was neither actual nor constructive delivery as his title is based on a mere receipt. Based on this alone, the right of SLDC must be preferred. == SPS. GODOFREDO and CARMEN ALFREDO vs. SPS. ARMANDO and ADELIA BORRAS G.R. No. 144225 June 17, 2003

FACTS: The Alfredo spouses mortgaged their land to DBP. To pay their debt, they sold the land to spouses Borras for P15,000. The latter also assumed to pay the loan. Borras subsequently paid the balance of the purchase price of the land for which Alfredo issued a receipt dated 11 March 1970 as well as the corresponding owner’s duplicate copy of the land’s OCT. Borras thereafter took possession of the said land. Later, they found out that Alfredo sold the land again to other buyers by securing duplicate copies of the OCTs upon petition with the court. Thus, they filed for specific performance. Alfredo spouses claimed that the sale, not being in writing, is unenforceable under the Statute of Frauds. ISSUE: W/N the contract of sale is unenforceable under the Statute of Frauds. HELD: NO. The Statute of Frauds provides that a contract for the sale of real property shall be unenforceable unless the contract or some note or memorandum of the sale is in writing and subscribed by the party charged or

his agent. The existence of the receipt dated 11 March 1970, 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. Thus, where one party has performed one’s obligation, oral evidence will be admitted to prove the agreement. In the instant case, the parties have consummated the sale of the Subject Land, with both sellers and buyers performing their respective obligations under the contract of sale. In addition, a contract that violates the Statute of Frauds is ratified by the acceptance of benefits under the contract. Alfredo spouses benefited from the contract because they paid their DBP loan and secured the cancellation of their mortgage using the money given by Borras. Alfredo also accepted payment of the balance of the purchase price. Alfredo spouses cannot invoke the Statute of Frauds to deny the existence of the verbal contract of sale because they have performed their obligations, and have accepted benefits, under the verbal contract. Borras spouses have also performed their obligations under the verbal contract. Clearly, both the sellers and the buyers have consummated the verbal contract of sale of the Subject Land. The Statute of Frauds was enacted to prevent fraud. This law cannot be used to advance the very evil the law seeks to prevent.

SALLY YOSHIZAKI vs. JOY TRAINING CENTER OF AURORA, INC G.R. No. 174978 July 31, 2013 FACTS: Respondent Joy Training was the registered owner of a parcel of land and the building thereon (real properties). The parcel of land was designated as Lot No. 125-L and was covered by Transfer Certificate of Title (TCT) No. T-25334. On November 10, 1998, the spouses Richard and Linda Johnson sold the real properties, a Wrangler jeep, and other personal properties in favor of the

spouses Sally and Yoshio Yoshizaki. On the same date, a Deed of Absolute Sale and a Deed of Sale of Motor Vehicle were executed in favor of the spouses Yoshizaki. The spouses Johnson were members of Joy Training’s board of trustees at the time of sale. On December 8, 1998, Joy Training, represented by its Acting Chairperson Reuben V. Rubio filed an action for the Cancellation of Sales and Damages with prayer for the issuance of a Temporary Restraining Order and/or Writ of Preliminary Injunction against the spouses Yoshizaki and the spouses Johnson before the Regional Trial Court of Baler, Aurora (RTC). On January 4, 1999, Joy Training filed a Motion to Amend Complaint with the attached Amended Complaint. The amended complaint impleaded Cecilia A. Abordo, officer-in-charge of the Register of Deeds of Baler, Aurora, as additional defendant. The RTC granted the motion on the same date. In the complaint, Joy Training alleged that the spouses Johnson sold its properties without the requisite authority from the board of directors. It assailed the validity of a board resolution dated September 1, 199811 which purportedly granted the spouses Johnson the authority to sell its real properties. It averred that only a minority of the board, composed of the spouses Johnson and Alexander Abadayan, authorized the sale through the resolution. It highlighted that the Articles of Incorporation provides that the board of trustees consists of seven members, namely: the spouses Johnson, Reuben, Carmencita Isip, Dominador Isip, Miraflor Bolante, and Abelardo Aquino.12 Cecilia and the spouses Johnson were declared in default for their failure to file an Answer within the reglementary period.13 On the other hand, the spouses Yoshizaki filed their Answer with Compulsory Counterclaims on June 23, 1999. They claimed that Joy Training authorized the spouses Johnson to sell the parcel of land. They asserted that a majority of the board of trustees approved the resolution. They maintained that the actual members of the

board of trustees consist of five members, namely: the spouses Johnson, Reuben, Alexander, and Abelardo. Moreover, Connie Dayot, the corporate secretary, issued a certification dated February 20, 1998 authorizing the spouses Johnson to act on Joy Training’s behalf. Furthermore, they highlighted that the Wrangler jeep and other personal properties were registered in the name of the spouses Johnson. Lastly, they assailed the RTC’s jurisdiction over the case. They posited that the case is an intracorporate dispute cognizable by the Securities and Exchange Commission. The RTC ruled in favor of the spouses Yoshizaki. It found that Joy Training owned the real properties. However, it held that the sale was valid because Joy Training authorized the spouses Johnson to sell the real properties. It recognized that there were only five actual members of the board of trustees; consequently, a majority of the board of trustees validly authorized the sale. It also ruled that the sale of personal properties was valid because they were registered in the spouses Johnson’s name. The CA upheld the RTC’s jurisdiction over the case but reversed its ruling with respect to the sale of real properties. It maintained that the present action is cognizable by the RTC because it involves recovery of ownership from third parties ISSUES: 1) Whether or not there was a contract of agency to sell the real properties between Joy Training and the spouses Johnson. 2) As a consequence of the second issue, whether or not there was a valid contract of sale of the real properties between Joy Training and the spouses Yoshizaki. RULING:

Necessarily, the absence of a contract of agency renders the contract of sale unenforceable; Joy Training effectively did not enter into a valid contract of sale with the spouses Yoshizaki. Sally cannot also claim that she was a buyer in good faith. She misapprehended the rule that persons dealing with a registered land have the legal right to rely on the face of the title and to dispense with the need to inquire further, except when the party concerned has actual knowledge of facts and circumstances that would impel a reasonably cautious man to make such inquiry.47 This rule applies when the ownership of a parcel of land is disputed and not when the fact of agency is contested. At this point, we reiterate the established principle that persons dealing with an agent must ascertain not only the fact of agency, but also the nature and extent of the agent’s authority. A third person with whom the agent wishes to contract on behalf of the principal may require the presentation of the power of attorney, or the instructions as regards the agency. The basis for agency is representation and a person dealing with an agent is put upon inquiry and must discover on his own peril the authority of the agent. Thus, Sally bought the real properties at her own risk; she bears the risk of injury occasioned by her transaction with the spouses Johnson. ROSA LIM vs. COURT OF APPEALS and PEOPLE OF THE PHILIPPINES G.R. No. 102784. February 28, 1996 FACTS: Petitioner Rosa Lim who had come from Cebu received from private respondent Victoria Suarez the following two pieces of jewelry: one (1) 3.35 carat diamond ring worth P169, 000.00 and one (1) bracelet worth P170, 000.00, to be sold on commission basis. The agreement was reflected in a receipt marked as Exhibit A for the prosecution. The transaction took place at the Sir Williams Apartelle in Timog Avenue, Quezon City, where Rosa Lim was temporarily billeted.

On December 15, 1987, petitioner returned the bracelet to Vicky Suarez, but failed to return the diamond ring or to turn over the proceeds thereof if sold. As a result, private complainant, aside from making verbal demands, wrote a demand letter to petitioner asking for the return of said ring or the proceeds of the sale thereof. In response, petitioner, thru counsel, wrote a letter to private respondents counsel alleging that Rosa Lim had returned both ring and bracelet to Vicky Suarez sometime in September, 1987, for which reason, petitioner had no longer any liability to Mrs. Suarez insofar as the pieces of jewelry were concerned. Irked, Vicky Suarez filed a complaint for estafa under Article 315, par. 1(b) of the Revised Penal Code for which the petitioner herein stands convicted. ISSUE: What was the real transaction between Rosa Lim and Vicky Suarez - a contract of agency to sell on commission basis as set out in the receipt or a sale on credit?

RULING: Rosa Lim’s signature indeed appears on the upper portion of the receipt immediately below the description of the items taken. We find that this fact does not have the effect of altering the terms of the transaction from a contract of agency to sell on commission basis to a contract of sale. Neither does it indicate absence or vitiation of consent thereto on the part of Rosa Lim which would make the contract void or voidable. The moment she affixed her signature thereon, petitioner became bound by all the terms stipulated in the receipt. She, thus, opened herself to all the legal obligations that may arise from their breach. This is clear from Article 1356 of the New Civil Code which provides: Contracts shall be obligatory in whatever form they may have been entered into, provided all the essential requisites for their validity are present. x x x.

However, there are some provisions of the law which require certain formalities for particular contracts. The first is when the form is required for the validity of the contract; the second is when it is required to make the contract effective as against third parties such as those mentioned in Articles 1357 and 1358; and the third is when the form is required for the purpose of proving the existence of the contract, such as those provided in the Statute of Frauds in Article 1403. A contract of agency to sell on commission basis does not belong to any of these three categories, hence it is valid and enforceable in whatever form it may be entered into. Furthermore, there is only one type of legal instrument where the law strictly prescribes the location of the signature of the parties thereto. This is in the case of notarial wills found in Article 805 of the Civil Code, to wit: Every will, other than a holographic will, must be subscribed at the end thereof by the testator himself x x x. The testator or the person requested by him to write his name and the instrumental witnesses of the will, shall also sign, as aforesaid, each and every page thereof, except the last, on the left margin x x x.

SPS. FERNANDO and LOURDES VILORIA vs. CONTINENTAL AIRLINES, INC G.R. No. 188288 January 16, 2012 FACTS: On or about July 21, 1997 Fernando purchased tickets at US$400.00 each from a travel agency called “Holiday Travel” and was attended to by a certain Margaret Mager (Mager). According to Spouses Viloria, Fernando agreed to buy the said tickets after Mager informed them that there were no available seats at Amtrak, an intercity passenger train service provider in

the United States. Per the tickets, Spouses Viloria were scheduled to leave for Newark on August 13, 1997 and return to San Diego on August 21, 1997. Subsequently, Fernando requested Mager to reschedule their flight to Newark to an earlier date or August 6, 1997. Mager informed him that flights to Newark via Continental Airlines were already fully booked and offered the alternative of a round trip flight via Frontier Air. Since flying with Frontier Air called for a higher fare of US$526.00 per passenger and would mean traveling by night, Fernando opted to request for a refund. Mager, however, denied his request as the subject tickets are non-refundable and the only option that Continental Airlines can offer is the re-issuance of new tickets within one (1) year from the date the subject tickets were issued. Fernando decided to reserve two (2) seats with Frontier Air.

As he was having second thoughts on traveling via Frontier Air, Fernando went to the Greyhound Station where he saw an Amtrak station nearby. Fernando made inquiries and was told that there are seats available and he can travel on Amtrak anytime and any day he pleased. Fernando then purchased two (2) tickets for Washington, D.C. From Amtrak, Fernando went to Holiday Travel and confronted Mager with the Amtrak tickets, telling her that she had misled them into buying the Continental Airlines tickets by misrepresenting that Amtrak was already fully booked. Fernando reiterated his demand for a refund but Mager was firm in her position that the subject tickets are non-refundable. Upon returning to the Philippines, Fernando sent a letter to CAI on February 11, 1998, demanding a refund and alleging that Mager had deluded them into purchasing the subject tickets. On June 17, 1999, Fernando went to Continental’s ticketing office at Ayala Avenue, Makati City to have the subject tickets replaced by a single round trip ticket to Los Angeles, California under

his name. Therein, Fernando was informed that Lourdes’ ticket was nontransferable, thus, cannot be used for the purchase of a ticket in his favor. In a letter dated June 21, 1999, Fernando demanded for the refund of the subject tickets as he no longer wished to have them replaced. In addition to the dubious circumstances under which the subject tickets were issued, Fernando claimed that CAI’s act of charging him with US$1,867.40 for a round trip ticket to Los Angeles, which other airlines priced at US$856.00, and refusal to allow him to use Lourdes’ ticket, breached its undertaking under its March 24, 1998 letter. On September 8, 2000, Spouses Viloria filed a complaint against CAI, praying that CAI be ordered to refund the money they used in the purchase of the subject tickets with legal interest from July 21, 1997 and to pay P1, 000,000.00 as moral damages, P500, 000.00 as exemplary damages and P250,000.00 as attorney’s fees. Following a full-blown trial, the RTC rendered its April 3, 2006 Decision, holding that Spouses Viloria are entitled to a refund in view of Mager’s misrepresentation in obtaining their consent in the purchase of the subject tickets. Furthermore, the RTC ruled that CAI acted in bad faith in reneging on its undertaking to replace the subject tickets within two (2) years from their date of issue when it charged Fernando with the amount of US$1,867.40 for a round trip ticket to Los Angeles and when it refused to allow Fernando to use Lourdes’ ticket. On appeal, the CA reversed the RTC’s April 3, 2006 Decision, holding that CAI cannot be held liable for Mager’s act in the absence of any proof that a principal-agent relationship existed between CAI and Holiday Travel. According to the CA, Spouses Viloria, who have the burden of proof to establish the fact of agency, failed to present evidence demonstrating that Holiday Travel is CAI’s agent. Furthermore, contrary to Spouses Viloria’s claim, the contractual relationship between Holiday Travel and CAI is not an agency but that of a sale.

ISSUE: Whether or not a principal-agent relationship exists between CAI and Holiday Travel RULING: Contrary to the findings of the CA, all the elements of an agency exist in this case. The first and second elements are present as CAI does not deny that it concluded an agreement with Holiday Travel, whereby Holiday Travel would enter into contracts of carriage with third persons on CAI’s behalf. The third element is also present as it is undisputed that Holiday Travel merely acted in a representative capacity and it is CAI and not Holiday Travel who is bound by the contracts of carriage entered into by Holiday Travel on its behalf. The fourth element is also present considering that CAI has not made any allegation that Holiday Travel exceeded the authority that was granted to it. In fact, CAI consistently maintains the validity of the contracts of carriage that Holiday Travel executed with Spouses Viloria and that Mager was not guilty of any fraudulent misrepresentation. That CAI admits the authority of Holiday Travel to enter into contracts of carriage on its behalf is easily discernible from its February 24, 1998 and March 24, 1998 letters, where it impliedly recognized the validity of the contracts entered into by Holiday Travel with Spouses Viloria. When Fernando informed CAI that it was Holiday Travel who issued to them the subject tickets, CAI did not deny that Holiday Travel is its authorized agent. Prior to Spouses Viloria’s filing of a complaint against it, CAI never refuted that it gave Holiday Travel the power and authority to conclude contracts of carriage on its behalf. As clearly extant from the records, CAI recognized the validity of the contracts of carriage that Holiday Travel entered into with Spouses Viloria and considered itself bound with Spouses Viloria by the terms and conditions thereof; and this constitutes an unequivocal testament to Holiday Travel’s authority to act as its agent. This Court cannot therefore allow CAI to take an altogether different position and deny that Holiday Travel is its agent without condoning or giving imprimatur to whatever damage or prejudice that may result from such denial or retraction to Spouses Viloria, who relied on good

faith on CAI’s acts in recognition of Holiday Travel’s authority. Estoppel is primarily based on the doctrine of good faith and the avoidance of harm that will befall an innocent party due to its injurious reliance, the failure to apply it in this case would result in gross travesty of justice. Estoppel bars CAI from making such denial. As categorically provided under Article 1869 of the Civil Code, “[a]gency may be express, or implied from the acts of the principal, from his silence or lack of action, or his failure to repudiate the agency, knowing that another person is acting on his behalf without authority.” COMMISSIONER OF INTERNAL REVENUE vs. COURT OF APPEALS, COURT OF TAX APPEALS and ADMU G.R. No. 115349. April 18, 1997 FACTS: Private respondent Ateneo de Manila University is a non-stock, non-profit educational institution with auxiliary units and branches all over the Philippines. One such auxiliary unit is the Institute of Philippine Culture (IPC), which has no legal personality separate and distinct from that of private respondent. The IPC is a Philippine unit engaged in social science studies of Philippine society and culture. Occasionally, it accepts sponsorships for its research activities from international organizations, private foundations and government agencies. On July 8, 1983, private respondent received from petitioner Commissioner of Internal Revenue a demand letter dated June 3, 1983, assessing private respondent the sum of P174, 043.97 for alleged deficiency contractor’s tax, and an assessment dated June 27, 1983 in the sum of P1,141,837 for alleged deficiency income tax, both for the fiscal year ended March 31, 1978. Denying said tax liabilities, private respondent sent petitioner a letter-protest and subsequently filed with the latter a memorandum contesting the validity of the assessments.

On March 17, 1988, petitioner rendered a letter-decision canceling the assessment for deficiency income tax but modifying the assessment for deficiency contractor’s tax by increasing the amount due to P193, 475.55. Unsatisfied,

private

respondent

requested

for

a

reconsideration

or

reinvestigation of the modified assessment. At the same time, it filed in the respondent court a petition for review of the said letter-decision of the petitioner. While the petition was pending before the respondent court, petitioner issued a final decision dated August 3, 1988 reducing the assessment for deficiency contractor’s tax from P193, 475.55 to P46, 516.41, exclusive of surcharge and interest. On July 12, 1993, the respondent court rendered a decision cancelling the contractor’s tax assessment slapped on IPC in the amount of P46, 516.41 exclusive of surcharge and interest for the fiscal year ended March 31, 1978. Not satisfied with the RTC’s decision, CIR seeks the decision’s reversal via a petition for review with the Supreme Court.

ISSUE: Whether or not Ateneo de Manila University has Contracts for the Sale of its Services of its Institute of Philippine Culture and thus is taxable within the purview of then Section 205 of the National Internal Revenue Code. RULING: After reviewing the records of this case, we find no evidence that Ateneo’s Institute of Philippine Culture ever sold its services for a fee to anyone or was ever engaged in a business apart from and independently of the academic purposes of the university.

Stressing that it is not the Ateneo de Manila University per se which is being taxed, Petitioner Commissioner of Internal Revenue contends that the tax is due on its activity of conducting researches for a fee. The tax is due on the gross receipts made in favor of IPC pursuant to the contracts the latter entered to conduct researches for the benefit primarily of its clients. The tax is imposed on the exercise of a taxable activity. x x x [T]he sale of services of private respondent is made under a contract and the various contracts entered into between private respondent and its clients are almost of the same terms, showing, among others, the compensation and terms of payment. In theory, the Commissioner of Internal Revenue may be correct. However, the records do not show that Ateneos IPC in fact contracted to sell its research services for a fee. Clearly then, as found by the Court of Appeals and the Court of Tax Appeals, petitioner’s theory is inapplicable to the established factual milieu obtaining in the instant case. In the first place, the petitioner has presented no evidence to prove its bare contention that, indeed, contracts for sale of services were ever entered into by the private respondent. Moreover, the Court of Tax Appeals accurately and correctly declared that the funds received by the Ateneo de Manila University are technically not a fee. They may however fall as gifts or donations which are tax-exempt as shown by private respondent’s compliance with the requirement of Section 123 of the National Internal Revenue Code providing for the exemption of such gifts to an educational institution. It is also well to stress that the questioned transactions of Ateneo’s Institute of Philippine Culture cannot be deemed either as a contract of sale or a contract for a piece of work. By the contract of sale, one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent. By its very nature, a contract of sale requires a transfer of ownership.

In the case at bench, it is clear from the evidence on record that there was no sale either of objects or services because, as adverted to earlier, there was no transfer of ownership over the research data obtained or the results of research projects undertaken by the Institute of Philippine Culture. Furthermore, it is clear that the research activity of the Institute of Philippine Culture is done in pursuance of maintaining Ateneos university status and not in the course of an independent business of selling such research with profit in mind. This is clear from a reading of the regulations governing universities: 31. In addition to the legal requisites an institution must meet, among others, the following requirements before an application for university status shall be considered: xxxxxxxxx (e) The institution must undertake research and operate with a competent qualified staff at least three graduate departments in accordance with the rules and standards for graduate education. One of the departments shall be science and technology. The competence of the staff shall be judged by their effective teaching, scholarly publications and research activities published in its school journal as well as their leadership activities in the profession. (f) The institution must show evidence of adequate and stable financial resources and support, a reasonable portion of which should be devoted to institutional development and research. (underscoring supplied) xxxxxxxxx 32. University status may be withdrawn, after due notice and hearing, for failure to maintain satisfactorily the standards and requirements therefor.

DEL MONTE PHILIPPINES, INC vs. NAPOLEON N. ARAGONES G.R. No. 153033. June 23, 2005

FACTS: On September 18, 1988, herein petitioner Del Monte Philippines Inc. (DMPI) entered into an Agreement with MEGA-WAFF, represented by Managing Principal Edilberto Garcia (Garcia), whereby the latter undertook the supply and installation of modular pavement at DMPIs condiments warehouse at Cagayan de Oro City within 60 calendar days from signing of the agreement. To source its supply of concrete blocks to be installed on the pavement of the DMPI warehouse, MEGA-WAFF, as CONTRACTOR represented by Garcia, entered into a Supply Agreement with Dynablock Enterprises, represented by herein respondent Aragones, as SUPPLIER ISSUE: Whether or not the Supply Agreement entered into was in the nature of a contract for a piece of work. RULING: The petition fails. The authorities petitioner cited in fact show that the nature of the Supply Agreement between Aragones and MEGA-WAFF was one for a piece of work. Contrary to petitioners claim that save for the shape, there was no consideration of any special needs or requirements of DMPI taken into account in the design or manufacture of the concrete paving blocks, the Supply Agreement is replete with specifications, terms or conditions showing that it was one for a piece of work. At this juncture it is well to note that the Supply Agreement was in the nature of a contract for a piece of work. The distinction between a contract of sale and one for work, labor and materials is tested by inquiry whether the thing transferred is one not in existence and which never would have existed

but for the order of the party desiring to acquire it, or a thing which would have existed but has been the subject of sale to some other persons even if the order had not been given. If the article ordered by the purchaser is exactly such as the seller makes and keeps on hand for sale to anyone, and no change or modification of it is made at purchaser’s request, it is a contract of sale even though it may be entirely made after, and in consequence of the purchaser’s order for it.

[Commissioner of Internal Revenue vs. Engineering Equipment

and Supply Company, G.R. No. L-27044, June 30, 1975] In the case at bench, the modular paving blocks are not exactly what the plaintiff-appellee makes and keeps on hand for sale to anyone, but with a modification that the same be “S” in shape. Hence, the agreement falls within the ambit of Article 1467 making Article 1729 likewise applicable in the instant case. As regard the issue of privity of contracts, We need to add only that Article 1311 of the New Civil Code which DMPI invokes is not applicable where the situation contemplated in Article 1729 obtains.

The intention of the latter

provision is to protect the laborers and the materialmen from being taken advantage of by unscrupulous contractors and from possible connivance between owners and contractors. Thus, a constructive vinculum or contractual privity is created by this provision, by way of exception to the principle underlying Article 1311 between the owner, on the one hand, and those who furnish labor and/or materials, on the other. [Velasco vs. Court of Appeals, G.R. No. L-47544, January 28, 1980] As a matter of fact, insofar as the laborers are concerned, by a special law, Act no. 3959, otherwise known as “An Act making it obligatory for any person, company, firm or corporation owning any work of any kind executed by contract to require the contractor to furnish a bond guaranteeing the payment of the laborers.” they are given added protection by requiring contractors to file bonds guaranteeing payment to them.

It is true that defendant-appellant had already fully paid its obligation to defendant Garcia however, the former’s payment to the latter does not extinguish its legal obligation to plaintiff-appellee because such payment was irregular. The former should have taken care not to pay to such contractor the full amount which he is entitled to receive by virtue of the contract, until he shall have shown that he first paid the wages of the laborer employed in said work, by means of an affidavit made and subscribed by said contractor before a notary public or other officer authorized by law to administer oaths. There is no showing that defendant appellant DMPI, as owner of the building, complied with this requirement paid down in Act No. 3959. Hence, under Section 2 of said law, said defendant-appellant is responsible, jointly and severally with the general contractor, for the payment to plaintiff-appellee as sub-contractor.

In this connection, while, indeed, Article 1729 refers to the laborers and materialmen themselves, under the peculiar circumstances of this case, it is but fair and just that plaintiff-appellee be deemed as suing for the reimbursement of what they have already paid the laborers and materialmen, as otherwise he would be unduly prejudiced while either defendant-appellant DMPI or defendant Garcia would enrich themselves at plaintiff-appellee’s expense.

Be that as it may, We so hold that plaintiff-appellee has a lawful claim against defendant-appellant DMPI, owner of the constructed warehouse since it disregarded the notice of claim of plaintiff-appellee, at a time when the amounts owing from defendant-appellant DMPI to defendant GARCIA were more than sufficient to pay for plaintiff-appellee’s claim.

The least that

defendant-appellant should have done was to withhold payment of the balance still owing to defendant Garcia as until the claim of plaintiff-appellee was clarified. (Italics in the original; emphasis and underscoring supplied).[24]

INOCENCIA YU DINO vs. COURT OF APPEALS and ROMAN SIO G.R. No. 113564. June 20, 2001 FACTS: Petitioners spouses Dino, doing business under the trade name "Candy Claire Fashion Garment" are engaged in the business of manufacturing and selling shirts. Respondent Sio is part owner and general manager of a manufacturing corporation doing business under the trade name "Universal Toy Master Manufacturing." Petitioners and respondent Sio entered into a contract whereby the latter would manufacture for the petitioners 20,000 pieces of vinyl frogs and 20,000 pieces of vinyl moose heads at P7.00 per piece in accordance with the sample approved by the petitioners. These frogs and moose heads were to be attached to the shirts petitioners would manufacture and sell. Respondent Sio delivered in several installments the 40,000 pieces of frogs and moose heads. The last delivery was made on September 28, 1988. Petitioner fully

paid

the

agreed

price.

Subsequently,

petitioners

returned

to

respondent 29,772 pieces of frogs and moose heads for failing to comply with the approved sample. The return was made on different dates: the initial one on December 12, 1988 consisting of 1,720 pieces, the second on January 11, 1989, and the last on January 17, 1989. Petitioners then demanded from the respondent a refund of the purchase price of the returned goods in the amount of P208, 404.00. As respondent Sio refused to pay, petitioners filed on July 24, 1989 an action for collection of a sum of money in the Regional Trial Court of Manila, Branch 38 where it ruled in favor of the petitioners. Respondent Sio sought recourse in the Court of Appeals. In its April 30, 1993 decision, the appellate court affirmed the trial court decision. Respondent then filed

a

Motion

for

Reconsideration

and

a

Supplemental

Motion

for

Reconsideration alleging therein that the petitioners' action for collection of

sum of money based on a breach of warranty had already prescribed. On January 24, 1994, the respondent court reversed its decision and dismissed petitioners' Complaint for having been filed beyond the prescriptive period. ISSUE: Whether or not the contract executed by and between the petitioners and the respondent was a contract for a piece of work. Was there a breach of warranty committed by respondent Sio. RULING: We uphold the respondent's contention. The following provisions of the New Civil Code are apropos: "Art. 1467. A contract for the delivery at a certain price of an article which the vendor in the ordinary course of his business manufactures or 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." "Art. 1713. By the contract for a piece of work the contractor binds himself to execute a piece of work for the employer, in consideration of a certain price or compensation. The contractor may either employ only his labor or skill, or also furnish the material." As this Court ruled in Engineering & Machinery Corporation v. Court of Appeals, et al.,[12] "a contract for a piece of work, labor and materials may be distinguished from a contract of sale by the inquiry as to whether the thing transferred is one not in existence and which would never have existed but for the order of the person desiring it. In such case, the

contract is one for a piece of work, not a sale. On the other hand, if the thing subject of the contract would have existed and been the subject of a sale to some other person even if the order had not been given then the contract is one of sale. The contract between the petitioners and respondent stipulated that respondent would manufacture upon order of the petitioners 20,000 pieces of vinyl frogs and 20,000 pieces of vinyl moose heads according to the samples specified and approved by the petitioners. Respondent Sio did not ordinarily manufacture these products, but only upon order of the petitioners and at the price agreed upon. Clearly, the contract executed by and between the petitioners and the respondent was a contract for a piece of work. At any rate, whether the agreement between the parties was one of a contract of sale or a piece of work, the provisions on warranty of title against hidden defects in a contract of sale apply to the case at bar, viz: "Art. 1714. If the contractor agrees to produce the work from material furnished by him, he shall deliver the thing produced to the employer and transfer dominion over the thing. This contract shall be governed by the following articles as well as by the pertinent provisions on warranty of title and against hidden defects and the payment of price in a contract of sale." "Art. 1561. The vendor shall be responsible for warranty against the hidden defects which the thing sold may have, should they render it unfit for the use for which it is intended, or should they diminish its fitness for such use to such an extent that, had the vendee been aware thereof, he would not have acquired it or would have given a lower price for it; but said vendor shall not be answerable for patent defects or those which may be visible, or for those which are not visible if the vendee is an expert who, by reason of his trade or profession, should have known them." "Art. 1571. Actions arising from the provisions of the preceding ten articles shall be barred after six months from the delivery of the thing sold." (Emphasis supplied)

There is no dispute that respondent made the last delivery of the vinyl products to petitioners on September 28, 1988. It is also settled that the action to recover the purchase price of the goods petitioners returned to the respondent was filed on July 24, 1989, more than nine months from the date of last delivery. Petitioners having filed the action three months after the six-month period for filing actions for breach of warranty against hidden defects stated in Art. 1571, the appellate court dismissed the action. ALI AKANG vs. MUNICIPALITY OF ISULAN, SULTAN KUDARAT PROVINCE G.R. No. 186014 June 26, 2013 FACTS: Ali Akang (petitioner) is a member of the national and cultural community belonging to the Maguindanaon tribe of Isulan, Province of Sultan Kudarat and the registered owner of Lot 5-B-2-B-14-F (LRC) Psd 1100183 located at Kalawag III, Isulan, Sultan Kudarat, covered by Transfer Certificate of Title (TCT) No. T-3653,5 with an area of 20,030 square meters. Sometime in 1962, a two-hectare portion of the property was sold by the petitioner

to

the

Municipality

of

Isulan,

Province

of

Sultan

Kudarat

(respondent) through then Isulan Mayor Datu Ampatuan under a Deed of Sale executed on July 18, 1962. The respondent immediately took possession of the property and began construction of the municipal building. Thirty-nine (39) years later or on October 26, 2001, the petitioner, together with his wife, Patao Talipasan, filed a civil action for Recovery of Possession of Subject Property and/or Quieting of Title thereon and Damages against the respondent, represented by its Municipal Mayor, et al. In his complaint, the petitioner alleged, among others, that the agreement was one to sell, which was not consummated as the purchase price was not paid.

In its answer, the respondent denied the petitioner’s allegations, claiming, among others: that the petitioner’s cause of action was already barred by laches; that the Deed of Sale was valid; and that it has been in open, continuous and exclusive possession of the property for forty (40) years. ISSUE: Whether the Deed of Sale dated July 18, 1962 is a valid and perfected contract of sale; (2) whether there was payment of consideration by the respondent; and (3) whether the petitioner’s claim is barred by laches RULING: The Deed of Sale executed by the petitioner and the respondent is a perfected contract of sale, all its elements being present. There was mutual agreement between them to enter into the sale, as shown by their free and voluntary signing of the contract. There was also an absolute transfer of ownership of the property by the petitioner to the respondent as shown in the stipulation: “x x x I [petitioner] hereby sell, transfer, cede, convey and assign as by these presents do have sold, transferred, ceded, conveyed and assigned, x x x.” There was also a determinate subject matter, that is, the two-hectare parcel of land as described in the Deed of Sale. Lastly, the price or consideration is at Three Thousand Pesos (P3, 000.00), which was to be paid after the execution of the contract. The fact that no express reservation of ownership or title to the property can be found in the Deed of Sale bolsters the absence of such intent, and the contract, therefore, could not be one to sell. Had the intention of the petitioner been otherwise, he could have: (1) immediately sought judicial recourse to prevent further construction of the municipal building; or (2) taken legal action to contest the agreement. The petitioner did not opt to undertake any of such recourses.

SPS EMMA H. VER REYES and RAMON REYES vs. DOMINADOR SALVADOR G.R. No. 139047 September 11, 2008 FACTS: A parcel of unregistered land located the Province of Rizal, now a part of Metro Manila, designated as Lot 1 of Plan Psu-205035, with an area of 19,545 square meters (subject property) is the core of the controversy in the Petitions at bar. It previously formed part of a bigger parcel of agricultural land first declared in the name of Domingo Lozada (Domingo) in the year 1916 under Tax Declaration No. 2932. Domingo married Graciana San Jose in the year 1887and their marriage produced two children, namely Nicomedes and Pablo. After the settlement, the subject property, i.e., Lot 1, was adjudicated to Nicomedes; while Lot 2 was given to the heirs of Pablo.

Nicomedes then

declared the subject property in his name in 1965 under Tax Declaration No. 2050. On 23 June 1965, Nicomedes executed a Deed of Conditional Sale over the subject property in favor of Emma Ver Reyes (Emma), which stated that the Vendor [Nicomedes] is the true and lawful owner of a parcel of land situated at Tungtong, Las Pinas, Rizal. Emma was only able to pay the first installment of the total purchase price agreed upon by the parties. Furthermore, as will be discussed later on, Nicomedes did not succeed in his attempt to have any title to the subject property issued in his name. On 14 June 1968, Nicomedes entered into another contract involving the subject property with Rosario D. Bondoc (Rosario).Designated as an Agreement of Purchase and Sale. On 7 March 1969, Nicomedes and Rosario executed a Joint Affidavit,[14] whereby they confirmed the sale of the subject property by Nicomedes to Rosario through the Agreement of Purchase and Sale dated 14 June 1968. They likewise agreed to have the said Agreement registered with the Registry of

Deeds in accordance with the provisions of Section 194 of the Revised Administrative Code, as amended by Act No. 3344. The Agreement of Purchase and Sale was thus registered on 10 March 1969. Five months thereafter, Nicomedes executed on 10 August 1969 a third contract, a Deed of Absolute Sale of Unregistered Land,[16] involving a portion of the subject property measuring 2,000 square meters, in favor of Maria Q. Cristobal (Maria). Nicomedes passed away on 29 June 1972.

The Deed of Absolute Sale of

Unregistered Land between Nicomedes and Maria was registered only on 8 February 1973,[18] or more than seven months after the former’s death.

ISSUE: Which party acquired valid and registrable title to the same.

RULING: After a conscientious review of the arguments and evidence presented by the parties, the Court finds that the Deed of Conditional Sale between Nicomedes and Emma and the Agreement of Purchase and Sale between Nicomedes and Rosario were both mere contracts to sell and did not transfer ownership or title to either of the buyers in light of their failure to fully pay for the purchase price of the subject property. A Contract to Sell may not be considered as a Contract of Sale because the first essential element is lacking.

In a contract to sell, the prospective seller

explicitly reserves the transfer of title to the prospective buyer, meaning, the prospective seller does not as yet agree or consent to transfer ownership of the property subject of the contract to sell until the happening of an event, which for present purposes we shall take as the full payment of the purchase price. What the seller agrees or obliges himself to do is to fulfill his promise to sell the

subject property when the entire amount of the purchase price is delivered to him.

In other words the full payment of the purchase price partakes of a

suspensive condition, the non-fulfillment of which prevents the obligation to sell from arising and thus, ownership is retained by the prospective seller without further remedies by the prospective buyer.

Viewed in light of the foregoing pronouncements, the Deed of Conditional Sale executed by Nicomedes in favor of Emma on 23 June 1965 is unmistakably a mere contract to sell. The Court looks beyond the title of said document, since the denomination or title given by the parties in their contract is not conclusive of the nature of its contents.[52] In the construction or interpretation of an instrument, the intention of the parties is primordial and is to be pursued.[53] If the terms of the contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulations shall control. If the words appear to be contrary to the evident intention of the parties, the latter shall prevail over the former.

EQUATORIAL REALTY DEVELOPMENT, INC. vs. MAYFAIR THEATER, INC. G.R. No. 106063. November 21, 1996 FACTS: Carmelo & Bauermann, Inc. (“Carmelo”) used to own a parcel of land, together with two 2-storey buildings constructed thereon, located at Claro M. Recto Avenue, Manila, and covered by TCT No. 18529 issued in its name by the Register of Deeds of Manila. On June 1, 1967, Carmelo entered into a Contract of Lease with Mayfair Theater Inc. (“Mayfair”) for a period of 20 years. The lease covered a portion of the second floor and mezzanine of a two-storey building with about 1,610 square meters of floor area, which respondent used as a movie house known as Maxim Theater.

Two years later, on March 31, 1969, Mayfair entered into a second Contract of Lease with Carmelo for the lease of another portion of the latter’s property -namely, a part of the second floor of the two-storey building, with a floor area of about 1,064 square meters; and two store spaces on the ground floor and the mezzanine, with a combined floor area of about 300 square meters. In that space, Mayfair put up another movie house known as Miramar Theater. The Contract of Lease was likewise for a period of 20 years. Both leases contained a provision granting Mayfair a right of first refusal to purchase the subject properties. However, on July 30, 1978 - within the 20-year-lease term -- the subject properties were sold by Carmelo to Equatorial Realty Development, Inc. (“Equatorial”) for the total sum of P11,300,000, without their first being offered to Mayfair. As a result of the sale of the subject properties to Equatorial, Mayfair filed a Complaint before the Regional Trial Court of Manila (Branch 7) for (a) the annulment of the Deed of Absolute Sale between Carmelo and Equatorial, (b) specific performance, and (c) damages.

After trial on the merits, the lower

court rendered a Decision in favor of Carmelo and Equatorial. On appeal (docketed as CA-GR CV No. 32918), the Court of Appeals (CA) completely reversed and set aside the judgment of the lower court. ISSUE: Whether Equatorial was the owner of the subject property and could thus enjoy the fruits or rentals therefrom. RULING: We hold that under the peculiar facts and circumstances of the case at bar, no right of ownership was transferred from Carmelo to Equatorial in view of a patent failure to deliver the property to the buyer.

From the peculiar facts of this case, it is clear that petitioner never took actual control and possession of the property sold, in view of respondent’s timely objection to the sale and the continued actual possession of the property. The objection took the form of a court action impugning the sale which, as we know, was rescinded by a judgment rendered by this Court. It has been held that the execution of a contract of sale as a form of constructive delivery is a legal fiction. It holds true only when there is no impediment that may prevent the passing of the property from the hands of the vendor into those of the vendee. When there is such impediment, “fiction yields to reality - the delivery has not been effected.” Hence, respondent’s opposition to the transfer of the property by way of sale to Equatorial was a legally sufficient impediment that effectively prevented the passing of the property into the latter’s hands. ESTELITA VILLAMAR vs. BALBINO MANGAOIL G.R. No. 188661 April 11, 2012 FACTS: Villamar is the registered owner of a 3.6080 hectares parcel of land [hereinafter referred as the subject property] in San Francisco, Manuel, Isabela covered by Transfer Certificate of Title (TCT) No. T-92958-A. On March 30, 1998, she entered into an Agreement with Mangaoil for the purchase and sale of said parcel of land. On April 1, 1998, the parties executed a Deed of Absolute Sale whereby Villamar (then Estelita Bernabe) transferred the subject parcel of land to Mangaoil for and in consideration of [P]150,000.00. In a letter dated September 18, 1998, Mangaoil informed Villamar that he was backing out from the sale agreed upon giving as one of the reasons therefor:

“3. That the area is not yet fully cleared by encumbrances as there are tenants who are not willing to vacate the land without giving them back the amount that they mortgaged the land.” Mangaoil demanded refund of his P 185,000.00 down payment. Reiterating said demand in another letter dated April 29, 1999, the same, however, was unheeded. On January 28, 2002, the respondent filed before the RTC a complaint for rescission of contract against the petitioner. In the said complaint, the respondent sought the return of P185, 000.00 which he paid to the petitioner, payment of interests thereon to be computed from March 27, 1998 until the suit's termination, and the award of damages, costs and P20,000.00 attorney's fees ISSUE: Whether or not the failure of the petitioner to deliver to the respondent both the physical possession of the subject property and the certificate of title covering the same amount to a substantial breach of the former's obligations to the latter constituting a valid cause to rescind the agreement and deed of sale entered into by the parties. RULING: We rule in the affirmative. The RTC and the CA both found that the petitioner failed to comply with her obligations to deliver to the respondent both the possession of the subject property and the certificate of title covering the same. Article 1458 of the NCC obliges the seller to transfer the ownership of and to deliver a determinate thing to the buyer, who shall in turn pay therefor a price certain in money or its equivalent. In addition thereto, Article 1495 of the NCC binds the seller to warrant the thing which is the object of the sale. On the other hand, Article 1498 of the same code provides that when the sale is made

through a public instrument, the execution thereof shall be equivalent to the delivery of the thing which is the object of the contract, if from the deed, the contrary does not appear or cannot clearly be inferred. As can be gleaned from the agreement of the contending parties, the respondent initially paid the petitioner P185,000.00 for the latter to pay the loan obtained from the Rural Bank of Cauayan and to cause the release from the said bank of the certificate of title covering the subject property. The rest of the amount shall be used to pay the mortgages over the subject property which was executed in favor of Lacaden and Parangan. After the release of the TCT, a deed of sale shall be executed and transfer shall be immediately effected so that the title covering the subject property can be used as a collateral for a loan the respondent will apply for, the proceeds of which shall be given to the petitioner.

TOMAS K. CHUA vs. CA and ENCARNACION VALDES-CHOY G.R. No. 119255. April 9, 2003 FACTS: Valdes-Choy advertised for sale her paraphernal house and lot (Property) with an area of 718 square meters located at No. 40 Tampingco Street corner Hidalgo Street, San Lorenzo Village, Makati City. The Property is covered by Transfer Certificate of Title No. 162955 (TCT) issued by the Register of Deeds of Makati City in the name of Valdes-Choy. Chua responded to the advertisement. After several meetings, Chua and Valdes-Choy agreed on a purchase price of P10, 800,000.00 payable in cash. On 30 June 1989, Valdes-Choy received from Chua a check for P100,000.00. The receipt (Receipt) evidencing the transaction, signed by Valdes-Choy as seller, and Chua as buyer, reads: 30 June 1989 RECEIPT

RECEIVED from MR. TOMAS K. CHUA PBCom Check No. 206011 in the amount of ONE HUNDRED THOUSAND PESOS ONLY (P100,000.00) as EARNEST MONEY for the sale of the property located at 40 Tampingco cor. Hidalgo, San Lorenzo Village, Makati, Metro Manila (Area : 718 sq. meters). The balance of TEN MILLION SEVEN HUNDRED THOUSAND (P10,700,000.00) is payable on or before 15 July 1989. Capital Gains Tax for the account of the seller. Failure to pay balance on or before 15 July 1989 forfeits the earnest money. This provided that all papers are in proper order.[6] CONFORME: ENCARNACION VALDES Seller TOMAS K. CHUA Buyer ISSUE: Whether there is a perfected contract of sale of immovable property RULING: The petition is bereft of merit. There is no dispute that Valdes-Choy is the absolute owner of the Property which is registered in her name under TCT No.162955, free from all liens and encumbrances. She was ready, able and willing to deliver to Chua the owners duplicate copy of the TCT, the signed Deeds of Sale, the tax declarations, and the latest realty tax receipt. There is also no dispute that on 13 July 1989, Valdes-Choy received PBCom Check No. 206011 for P100,000.00 as earnest money from Chua. Likewise, there is no controversy that the Receipt for the P100,000.00 earnest money embodied the terms of the binding contract between Valdes-Choy and Chua. Further, there is no controversy that as embodied in the Receipt, Valdes-Choy and Chua agreed on the following terms: (1) the balance of P10,215,000.00 is payable on or before 15 July 1989; (2) the capital gains tax is for the account of Valdes-Choy; and (3) if Chua fails to pay the balance of P10,215,000.00 on or before 15 July 1989, Valdes-Choy has the right to forfeit the earnest money,

provided that all papers are in proper order. On 13 July 1989, Chua gave Valdes-Choy the PBCom managers check for P485,000.00 to pay the capital gains tax. Both the trial and appellate courts found that the balance of P10,215,000.00 was not actually paid to Valdes-Choy on the agreed date. On 13 July 1989, Chua did show to Valdes-Choy the PBCom managers check for P10,215,000.00, with Valdes-Choy as payee. However, Chua refused to give this check to Valdes-Choy until a new TCT covering the Property is registered in Chuas name. Or, as the trial court put it, until there is proof of payment of the capital gains tax which is a pre-requisite to the issuance of a new certificate of title. PCI LEASING AND FINANCE, INC vs. UCPB GENERAL INSURANCE CO., INC G.R. No. 162267 July 4, 2008 FACTS: On October 19, 1990 at about 10:30 p.m., a Mitsubishi Lancer car with Plate Number PHD-206 owned by United Coconut Planters Bank was traversing the Laurel Highway, Barangay Balintawak, Lipa City. The car was insured with plaintiff-appellee [UCPB General Insurance Inc.], then driven by Flaviano Isaac with Conrado Geronimo, the Asst. Manager of said bank, was hit and bumped by an 18-wheeler Fuso Tanker Truck with Plate No. PJE-737 and Trailer Plate No. NVM-133, owned by defendants-appellants PCI Leasing & Finance, Inc. allegedly leased to and operated by defendant-appellant Superior Gas & Equitable Co., Inc. (SUGECO) and driven by its employee, defendant appellant Renato Gonzaga. The impact caused heavy damage to the Mitsubishi Lancer car resulting in an explosion of the rear part of the car. The driver and passenger suffered physical injuries. However, the driver defendant-appellant Gonzaga continued on its [sic] way to its [sic] destination and did not bother to bring his victims to the hospital. Plaintiff-appellee paid the assured UCPB the amount of P244, 500.00 representing the insurance coverage of the damaged car.

As the 18-wheeler truck is registered under the name of PCI Leasing, repeated demands were made by plaintiff-appellee for the payment of the aforesaid amounts. However, no payment was made. Thus, plaintiff-appellee filed the instant case on March 13, 1991. PCI Leasing and Finance, Inc., (petitioner) interposed the defense that it could not be held liable for the collision, since the driver of the truck, Gonzaga, was not its employee, but that of its co-defendant Superior Gas & Equitable Co., Inc. (SUGECO). In fact, it was SUGECO, and not petitioner, that was the actual operator of the truck, pursuant to a Contract of Lease signed by petitioner and SUGECO. Petitioner, however, admitted that it was the owner of the truck in question. ISSUE: Whether petitioner, as a financing company, is absolved from liability by the enactment of Republic Act (R.A.) No. 8556, or the Financing Company Act of 1998.

RULING: Section 12. Liability of lessors. — Financing companies shall not be liable for loss, damage or injury caused by a motor vehicle, aircraft, vessel, equipment, machinery or other property leased to a third person or entity except when the motor vehicle, aircraft, vessel, equipment or other property is operated by the financing company, its employees or agents at the time of the loss, damage or injury. Petitioner’s argument that the enactment of R.A. No. 8556, especially its addition of the new Sec. 12 to the old law, is deemed to have absolved petitioner from liability, fails to convince the Court. These developments, indeed, point to a seeming emancipation of financing companies from the obligation to compensate claimants for losses suffered from

the operation of vehicles covered by their lease.

Such, however, are not

applicable to petitioner and do not exonerate it from liability in the present case. The new law, R.A. No. 8556, notwithstanding developments in foreign jurisdictions, does not supersede or repeal the law on compulsory motor vehicle registration. No part of the law expressly repeals Section 5(a) and (e) of R.A. No. 4136, as amended, otherwise known as the Land Transportation and Traffic Code The non-registration of the lease contract between petitioner and its lessee precludes the former from enjoying the benefits under Section 12 of R.A. No. 8556. This ruling may appear too severe and unpalatable to leasing and financing companies, but the Court believes that petitioner and other companies so situated are not entirely left without recourse. They may resort to third-party complaints against their lessees or whoever are the actual operators of their vehicles. In the case at bar, there is, in fact, a provision in the lease contract between petitioner and SUGECO to the effect that the latter shall indemnify and hold the former free and harmless from any “liabilities, damages, suits, claims or judgments” arising from the latter's use of the motor vehicle.[32]

Whether petitioner would act against SUGECO based on this

provision is its own option. PCI LEASING AND FINANCE, INC vs. GIRAFFE-X CREATIVE IMAGING, INC G.R. No. 142618 July 12, 2007 SPS GOMER and LEONOR RAMOS vs. SPS SANTIAGO and MINDA HERUELA G.R. No. 145330 October 14, 2005 FACTS: ISSUE: RULING:

GOODYEAR PHILIPPINES, INC vs. ANTHONY SY and JOSE L. LEE G.R. No. 154554 November 9, 2005 FACTS: Goodyear Philippines, Inc. formerly owned a motor vehicle which it purchased from Industrial and Transport Equipment, Inc. in 1983. It had since been in the service of Goodyear until April 30, 1986 when it was hijacked. This hijacking was reported to the Philippine National Police (PNP) which issued out an alert alarm on the said vehicle as a stolen one. It was later on recovered also in 1986. The vehicle was used by Goodyear until 1996, when it sold it to Anthony Sy on September 12, 1996. Sy, in turn, sold it to Jose L. Lee on January 29, 1997. But the latter on December 4, 1997, filed an action for rescission of contract with damages against Sy, because he could not register the vehicle in his name due to the certification from the PNP Regional Traffic Management Office in Legazpi City that it was a stolen vehicle and the alarm covering the same was not lifted. Instead, the PNP in Legazpi City impounded the vehicle and charged Lee criminally. Upon being informed by Sy of the denial of the registration of the vehicle in Lee’s name, Goodyear requested on July 10, 1997 the PNP to lift the stolen vehicle alarm status. This notwithstanding, [Goodyear] was impleaded as thirdparty defendant in the third-party complaint filed by Sy on January 9, 1998. A motion to dismiss was filed by Goodyear on March 24, 1998 on the twin grounds that the third-party complaint failed to state a cause of action and even if it did, such cause of action was already extinguished. An opposition thereto was interposed by Sy on April 17, 1998. The Regional Trial Court [(RTC)] resolved to dismiss the third-party complaint on the basis that it stated no cause of action. Thus, Sy seasonably filed an appeal to the CA which found that Goodyear did not make good its warranty in the Deed of Sale: to convey the vehicle to Respondent Anthony Sy free from all liens, encumbrances and legal impediments. ISSUE:

Whether or not petitioner did breach the implied warranty against hidden encumbrances regarding the sale of the motor vehicle resulting in the nonregistration thereof. RULING: In the present case, petitioner did not breach the implied warranty against hidden encumbrances. The subject vehicle that had earlier been stolen by a third party was subsequently recovered by the authorities and restored to petitioner, its rightful owner. Whether Sy had knowledge of the loss and subsequent recovery, the fact remained that the vehicle continued to be owned by petitioner, free from any charge or encumbrance whatsoever. (Granting without admitting) Gratia argumenti that there was a breach of the implied warranty against hidden encumbrances, notice of the breach was not given to petitioner within a reasonable time. Article 1586 of the Civil Code requires that notice be given after the breach, of which Sy ought to have known. In his Third-Party Complaint against petitioner, there was no allegation at all that respondent had given petitioner the requisite notice. More important, an action for damages for a breach of implied warranties must be brought within six months from the delivery of the thing sold. [35 Art. 1571 of the Civil Code] The vehicle was understood to have been delivered to Sy when it was placed in his control or possession. Upon execution of the Deed of Sale on September 12, 1996, control and possession of the vehicle was transferred to respondent. That the vehicle had been delivered is bolstered by the fact that no contrary allegation was raised in the Third-Party Complaint. Whether the period should be reckoned from the actual or from the constructive delivery through a public instrument, more than six months had lapsed before the filing of the Third-Party Complaint.

JULIE NABUS, MICHELLE NABUS and BETTY TOLERO vs. JOAQUIN and JULIA PACSON G.R. No. 161318 November 25, 2009

FACTS: The spouses Bate and Julie Nabus were the owners of parcels of land with a total area of 1,665 square meters, situated in Pico, La Trinidad, Benguet, duly registered in their names. The property was mortgaged by the Spouses Nabus to the Philippine National Bank (PNB), La Trinidad Branch, to secure a loan in the amount of P30,000.00. On February 19, 1977, the Spouses Nabus executed a Deed of Conditional Sale [4] covering 1,000 square meters of the 1,665 square meters of land in favor of respondents Spouses Pacson for a consideration of P170,000.00, which was duly notarized on February 21, 1977.

The

consideration was to be paid, thus:

ISSUES: 1)

Whether or not the Deed of Conditional Sale was converted into a

contract of lease; 2)

Whether the Deed of Conditional Sale was a contract to sell or a

contract of sale. RULING: As regards the first issue, the Deed of Conditional Sale entered into by the Spouses Pacson and the Spouses Nabus was not converted into a contract of lease. The 364 receipts issued to the Spouses Pacson contained either the phrase “as partial payment of lot located in Km. 4” or “cash vale” or “cash vale (partial payment of lot located in Km. 4),” evidencing sale under the contract and not the lease of the property. Further, as found by the trial court, Joaquin Pacson’s non-signing of the second page of a carbon copy of the Deed of Conditional Sale was

through sheer inadvertence, since

the original

contract[34] and the other copies of the contract were all signed by Joaquin Pacson and the other parties to the contract.

On the second issue, petitioners contend that the contract executed by the respondents and the Spouses Nabus was a contract to sell, not a contract of sale. They allege that the contract was subject to the suspensive condition of full payment of the consideration agreed upon before ownership of the subject property could be transferred to the vendees. Since respondents failed to pay the full amount of the consideration, having an unpaid balance of P57,544.84, the obligation of the vendors to execute the Deed of Absolute Sale in favor of respondents did not arise. Thus, the subsequent Deed of Absolute Sale executed in favor of Betty Tolero, covering the same parcel of land was valid, even if Tolero was aware of the previous deed of conditional sale. Ramos v. Heruela differentiates a contract of absolute sale and a contract of conditional sale as follows: Article 1458 of the Civil Code provides that a contract of sale may be absolute or conditional. A contract of sale is absolute when title to the property passes to the vendee upon delivery of the thing sold. A deed of sale is absolute when there is no stipulation in the contract that title to the property remains with the seller until full payment of the purchase price. The sale is also absolute if there is no stipulation giving the vendor the right to cancel unilaterally the contract the moment the vendee fails to pay within a fixed period. In a conditional sale, as in a contract to sell, ownership remains with the vendor and does not pass to the vendee until full payment of the purchase price. The full payment of the purchase price partakes of a suspensive condition, and non-fulfillment of the condition prevents the obligation to sell from arising.[36]

UMCUPAI VS. BRYC-V DEVELOPMENT CORPORATION Facts:

Respondent Sea Foods Corp is the registered owner of Lot No. 300 which was occupied by squatters who belongs to the United Muslim Christian Urban Poor Association, Inc. Sometimes in 1991, UMCUPAI thru its President expressed its intention to buy the lot and initiated negotiations with SFC. It would use the proceeds of its pending loan application with NHMFC. Thereafter the parties executed a Letter of Intent to Sell by SFC and a Letter of Intent to Purchase by UMCUPAI , which provides: WHEREAS, [SFC] is the registered owner of a parcel [of] land designated as Lot No. 300 situated in Lower Calarian, Zamboanga City, consisting of 61,736 square meters, and more particularly described in Transfer Certificate of Title No. 576 of the Registry of Deeds of Zamboanga City; WHEREAS, UMCUPAI, an association duly registered with the SEC (Registration No. 403410) and duly accredited with the Presidential Commission for the Urban Poor, has approached [SFC] and negotiated for the ACQUISITION of the above-described property of [SFC]; WHEREAS, in pursuance to the negotiations between [SFC] and UMCUPAI, the latter has taken steps with the proper government authorities particularly the Mayor of Zamboanga City and its City Housing Board which will act as “Originator” in the acquisition of said property which will enable UMCUPAI to avail of its Community Mortgage Program; WHEREAS, it appears that UMCUPAI will ultimately apply with the Home Mortgage and Finance Corporation for a loan to pay the acquisition price of said land; WHEREAS, as one of the steps required by the government authorities to initiate proceedings is to receive a formal manifestation of Intent to Sell from [SFC]; NOW, THEREFORE, for and in consideration of the foregoing premises, the parties hereto agree as follows: 1. [SFC] expressly declares its intention to sell Lot No. 300 with an area of 61,736 square meters situated in Lower Calarian, Zamboanga City and covered by TCT No. 576 of the Registry of Deeds of Zamboanga City to UMCUPAI at the price of P105.00 per square meter, free from all liens, charges and encumbrances; 2. That UMCUPAI hereby expressly declares its intention to buy the aforesaid property and shall endeavor to raise the necessary funds to acquire same at the abovementioned price of P105.00 per square meter; 3. That the Absolute Deed of Sale shall be executed, signed and delivered together with the title and all other pertinent documents upon full payment of the purchase price; 4. That [SFC] shall pay the capital gains tax and documentary stamps, Registration, transfer tax and other expenses shall be paid by the UMCUPAI. [3]

But since 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 was 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. Subsequently UMCUPAI purchased Lot 300-A; Lot 300-B was designated as road right of way. When UMCUPAI failed to buy Lot 300-C for lack of funds despite the extension given to purchase the lot, SFC sold the lot to BRYC-V. UMCUPAI filed an action against respondents for the nullification of the contract between SFC and BRYC-V UMCUPAI alleged that SFC 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. ISSUE: Whether or not a Letter of Intent to Buy is equivalent to a bilateral reciprocal contract within the meaning or contemplation of Article 1479, first paragraph, Civil Code of the Philippines RULING: