t1. SPOUSES LAM vs. KODAK PHILIPPINES, LTD.

Facts:

On January 8, 1992, the Lam Spouses and Kodak Philippines, Ltd. entered into an
agreement (Letter Agreement) for the sale of three (3) units of the Kodak Minilab System
22XL6 (Minilab Equipment) in the amount of 1,796,000.00 per unit, with the following
terms:

This confirms our verbal agreement for Kodak Phils., Ltd. To provide Colorkwik
Laboratories, Inc. with three (3) units Kodak Minilab System 22XL . . . for your proposed
outlets in Rizal Avenue (Manila), Tagum (Davao del Norte), and your existing Multicolor
photo counter in Cotabato City under the following terms and conditions:

1. Said Minilab Equipment packages will avail a total of 19% multiple order
discount based on prevailing equipment price provided said equipment packages
will be purchased not later than June 30, 1992.

2. 19% Multiple Order Discount shall be applied in the form of merchandise and
delivered in advance immediately after signing of the contract. * Also includes start-
up packages worth P61,000.00.

3. NO DOWNPAYMENT.

4. Minilab Equipment Package shall be payable in 48 monthly installments at

THIRTY FIVE THOUSAND PESOS (P35,000.00) inclusive of 24% interest rate for
the first 12 months; the balance shall be re-amortized for the remaining 36 months
and the prevailing interest shall be applied.

5. Prevailing price of Kodak Minilab System 22XL as of January 8, 1992 is at ONE

MILLION SEVEN HUNDRED NINETY SIX THOUSAND PESOS.

6. Price is subject to change without prior notice. *Secured with PDCs; 1st monthly
amortization due 45 days after installation.

Kodak Philippines, Ltd. delivered one (1) unit of the Minilab Equipment and was
subsequently installed. The Lam Spouses issued postdated checks amounting to
35,000.00 each for 12 months as payment for the first delivered unit, with the first check
due on March 31.
The Lam Spouses requested that Kodak Philippines, Ltd. not negotiate the check dated
March 31 allegedly due to insufficiency of funds. The same request was made for the
check due on April 30. However, both checks were negotiated by Kodak Philippines, Ltd.
and were honored by the depository bank. The 10 other checks were subsequently
dishonored after the Lam Spouses ordered the depository bank to stop payment.
Kodak Philippines, Ltd. canceled the sale and demanded that the Lam Spouses return the
unit. The Lam Spouses ignored the demand but also rescinded the contract on account of
Kodak Philippines, Ltd.s failure to deliver the two (2) remaining Minilab Equipment units.
Kodak Philippines, Ltd. filed a Complaint for replevin and/or recovery of sum of money.
The Lam Spouses failed to appear during the pre-trial conference and were declared in
default.
 The trial court issued the Decision in favor of Kodak ordering the seizure of the Minilab
Equipment. Based on this Decision, Kodak was able to obtain a writ of seizure for the
Minilab Equipment installed at the Lam Spouses outlet in Tagum, Davao Province. The
writ was enforced and Kodak gained possession of the Minilab Equipment unit,
accessories, and the generator set.
The Lam Spouses then filed before the CA a Petition to Set Aside the Orders issued by
the trial court. These Orders were subsequently set aside by the CA, and the case was
remanded to the trial court for pre-trial.
In its Decision, the RTC dismissed the case and ordered the Kodak to pay Lam Spouses
Both parties filed an appeal. CA dismissed Kodaks appeal and modified the decision of
the RTC.

Issues:

(1) Whether the contract between petitioners and respondent pertained to obligations that are
severable, divisible, and susceptible of partial performance under Article 1225 of the New
Civil Code; and
(2) Upon rescission of the contract, what the parties are entitled to under Article 1190 and
Article 1522 of the New Civil Code.

Held:

(1) The Letter Agreement contained an indivisible obligation.

The intention of the parties is for there to be a single transaction covering all three (3) units of the
Minilab Equipment. Respondents obligation was to deliver all products purchased under a
"package," and, in turn, petitioners obligation was to pay for the total purchase price, payable in
installments.

The intention of the parties to bind themselves to an indivisible obligation can be further discerned
through their direct acts in relation to the package deal. There was only one agreement covering
all three (3) units of the Minilab Equipment and their accessories. The Letter Agreement specified
only one purpose for the buyer, which was to obtain these units for three different outlets. If the
intention of the parties were to have a divisible contract, then separate agreements could have
been made for each Minilab Equipment unit instead of covering all three in one package deal.
Furthermore, the 19% multiple order discount as contained in the Letter Agreement was applied
to all three acquired units. The "no downpayment" term contained in the Letter Agreement was
also applicable to all the Minilab Equipment units. Lastly, the fourth clause of the Letter Agreement
clearly referred to the object of the contract as "Minilab Equipment Package."

Through the specified terms and conditions, the tenor of the Letter Agreement indicated an
intention for a single transaction. This intent must prevail even though the articles involved are
physically separable and capable of being paid for and delivered individually, consistent with the
New Civil Code: Article 1225. For the purposes of the preceding articles, obligations to give
definite things and those which are not susceptible of partial performance shall be deemed to be
indivisible. When the obligation has for its object the execution of a certain number of days of
work, the accomplishment of work by metrical units, or analogous things which by their nature are
susceptible of partial performance, it shall be divisible. However, even though the object or service
may be physically divisible, an obligation is indivisible if so provided by law or intended by the
parties.
In Nazareno v. Court of Appeals, the indivisibility of an obligation is tested against whether it can
be the subject of partial performance: An obligation is indivisible when it cannot be validly
performed in parts, whatever may be the nature of the thing which is the object thereof. The
indivisibility refers to the prestation and not to the object thereof.

There is no indication in the Letter Agreement that the units petitioners ordered were covered by
three (3) separate transactions. The factors considered by the Court of Appeals are mere
incidents of the execution of the obligation, which is to deliver three units of the Minilab Equipment
on the part of respondent and payment for all three on the part of petitioners. The intention to
create an indivisible contract is apparent from the benefits that the Letter Agreement afforded to
both parties. Petitioners were given the 19% discount on account of a multiple order, with the
discount being equally applicable to all units that they sought to acquire. The provision on "no
down payment" was also applicable to all units. Respondent, in turn, was entitled to payment of
all three Minilab Equipment units, payable by installments.

(2) The power to rescind obligations is implied in reciprocal ones, in case one of the
obligors should not comply with what is incumbent upon him.

The injured party may choose between the fulfilment and the rescission of the obligation, with the
payment of damages in either case. He may also seek rescission, even after he has chosen
fulfilment, if the latter should become impossible.

The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of
a period.

Rescission under Article 1191 has the effect of mutual restitution. In Velarde v. Court of Appeals:
Rescission abrogates the contract from its inception and requires a mutual restitution of benefits
received.

The Court of Appeals correctly ruled that both parties must be restored to their original situation
as far as practicable, as if the contract was never entered into. Petitioners must relinquish
possession of the delivered Minilab Equipment unit and accessories, while respondent must
return the amount tendered by petitioners as partial payment for the unit received. Further,
respondent cannot claim that the two (2) monthly installments should be offset against the amount
awarded by the Court of Appeals to petitioners because the effect of rescission under Article 1191
is to bring the parties back to their original positions before the contract was entered into.

When rescission is sought under Article 1191 of the Civil Code, it need not be judicially
invoked because the power to resolve is implied in reciprocal obligations. The right to
resolve allows an injured party to minimize the damages he or she may suffer on account of the
other partys failure to perform what is incumbent upon him or her. When a party fails to comply
with his or her obligation, the other partys right to resolve the contract is triggered. The
resolution immediately produces legal effects if the non-performing party does not
question the resolution. Court intervention only becomes necessary when the party who
allegedly failed to comply with his or her obligation disputes the resolution of the
contract. Since both parties in this case have exercised their right to resolve under Article 1191,
there is no need for a judicial decree before the resolution produces effects.
2. FERNANDO A. GAITE vs. ISABELO FONACIER, GEORGE KRAKOWER, LARAP MINES
& SMELTING CO., INC., SEGUNDINA VIVAS, FRNACISCO DANTE, PACIFICO ESCANDOR
and FERNANDO TY

FACTS:
Isabelo Fonacier was the owner and/or holder of 11 iron lode mineral claims, known as
the Dawahan Group. By a "Deed of Assignment", Fonacier constituted and appointed Fernando
Gaite as his true and lawful attorney-in-fact to enter into a contract with any individual or juridical
person for the exploration and development of the mining claims. On March 19, 1954, Gaite in
turn executed a general assignment conveying the development and exploitation of said mining
claims into the Larap Iron Mines, a single proprietorship owned solely by and belonging to him,
on the same royalty basis provided by the Deed of Assignment".

Eventually, Fonacier decided to revoke the authority granted by him to Gaite to exploit and
develop the mining claims in question, and Gaite assented subject to certain conditions. As a
result, a "Revocation of Power of Attorney and Contract" was executed, wherein Gaite transferred
to Fonacier, all his rights and interests on development and exploitation of said mining claims, in
consideration of the sum of P75,000.00, P10,000.00 of which was paid upon the signing of the
agreement, and the balance of P65,000.00 will be paid from and out of the first letter of credit
covering the first shipment of iron ores and of the first amount derived from the local sale of iron
ore made by the Larap Mines & Smelting Co. Inc., its assigns, administrators, or successors in
interests.

To secure the payment of P65k, Fonacier executed a surety bond with himself as principal,
the Larap Mines and Smelting Co. and its stockholder as sureties. Yet, this was refused by Gaite.
He further required another bond underwritten by a bonding company to secure the payment of
the balance. Hence a second bond was produced with Far Eastern Surety as an additional surety,
provided the liability of Far Eastern would only prosper when there had been an actual sale of the
iron ores of not less than the agreed amount of P65k, moreover, its liability was to automatically
expire on December 1955.

On December 1955, the second bond had expired and no sale amounting to the
stipulation as prior agreed nor had the balance been paid to Gaite by Fonacier. Thus such failure,
prompted Gaite to file a complaint in the CFI of Manila for the payment of the balance and other
damages.

The lower court ruled the obligation was one with a term and that the obligation became
due and demandable under Article 1198 of the New Civil Code. Hence, the defendants jointly filed
an appeal.

ISSUE: Whether or not the Lower Court erred in holding the obligation of the respondent to pay
the petitioner the balance as one with a term and not one with a suspensive condition; and that
the term expired on December 1955

RULING: No, LC didnt err. Obligation one with a term.

Gaite acted within his rights in demanding payment and instituting this action one year
from and after the contract was executed, either because the debtors had impaired the securities
originally given and thereby forfeited any further time within which to pay; or because the term of
payment was originally of no more than one year, and the balance of P65,000, became due and
payable thereafter.

The Lower Court was legally correct in holding the shipment or sale of the iron ore is not
a condition or suspensive to the payment of the balance of P65,000, but was only a suspensive
period or term. What characterizes a conditional obligation is the fact that its obligatory
force, as distinguished from its demandability, is subordinated to the happening of a future
and uncertain event; so that if the suspensive condition does not take place, the parties
would stand as if the conditional obligation had never existed.

The sale of the ore to Fonacier was a sale on credit, and not an aleatory contract where
the transferor, Gaite, would assume the risk of not being paid at all; and that the previous sale or
shipment of the ore was not a suspensive condition for the payment of the balance of the agreed
price, but was intended merely to fix the future date of the payment.

While as to the right of Fonacier to insist that Gaite should wait for the sale or shipment of
the ore before receiving payment; or, in other words, whether or not they are entitled to take full
advantage of the period granted them for making the payment. The Fonacier have forfeited the
right to compel Gaite to wait for the sale of the ore before receiving payment of the balance of
P65,000.00, because of their failure to renew the bond of the Far Eastern Surety Company or
else replace it with an equivalent guarantee. The expiration of the bonding company's undertaking
on December 8, 1955 substantially reduced the security of the vendor's rights as creditor for the
unpaid P65,000.00, a security that Gaite considered essential and upon which he had insisted
when he executed the deed of sale of the ore to Fonacier (first bond).

Under paragraphs 2 and 3 of Article 1198 of the Civil Code of the Philippines: ART. 1198.
The debtor shall lose every right to make use of the period: (2) When he does not furnish to the
creditor the guaranties or securities which he has promised. (3) When by his own acts he has
impaired said guaranties or securities after their establishment, and when through
fortuitous event they disappear, unless he immediately gives new ones equally satisfactory.

Appellants' failure to renew or extend the surety company's bond upon its expiration
plainly impaired the securities given to the creditor (appellee Gaite), unless immediately renewed
or replaced.

Nevertheless, there is no merit in appellants' argument that Gaite's acceptance of the

surety company's bond with full knowledge that on its face it would automatically expire within
one year was a waiver of its renewal after the expiration date. No such waiver could have been
intended, for Gaite stood to lose and had nothing to gain barely; and if there was any, it could be
rationally explained only if the appellants had agreed to sell the ore and pay Gaite before the
surety company's bond expired on December 8, 1955. But in the latter case the defendants-
appellants' obligation to pay became absolute after one year from the transfer of the ore to
Fonacier by virtue of the deed, first bond.

3. Spouses Buenaventura v. Court of Appeals

FACTS:
Defendant spouses Leonardo Joaquin and Feliciana Landrito are the parents of the 4 of 9 children
who are the petitioners: Consolacion, Nora, Emma and Natividad as well as of remaining 5
children as defendants: Fidel, Tomas, Artemio, Clarita, Felicitas, Fe, and Gavino, all surnamed
JOAQUIN. The married Joaquin children are joined in this action by their respective spouses.

The petitioners sought to be declared null and void certain deeds of sale covering 6 parcels of
land executed by respondent parents Leonardo Joaquin and Feliciana Landrito in favor of their
co-defendant children and the corresponding certificates of title issued in their names. In seeking
the declaration of nullity of the aforesaid deeds of sale and certificates of title, petitioners, in their
complaint, aver that the purported sale of the properties in litis was the result of a deliberate
conspiracy designed to unjustly deprive the rest of the compulsory heirs (plaintiffs herein) of their
legitime. It was also claimed by the petitioners that there was no valid consideration for the sale,
and even assuming that there was consideration, it was inadequate compared to the real value
of the properties.

The trial court ruled in favor of the respondents which was affirmed by the CA, hence this appeal.

ISSUE:

1. Whether Petitioners have a legal interest over the properties subject of the Deeds of Sale
2. Whether the deeds of sale are void for lack of consideration or grossly inadequate
consideration. NO

RULING:

1. Petitioners do not have any legal interest over the properties subject of the Deeds of Sale.
The petitioners right to their parents properties is merely inchoate and vests only upon
their parents death. While still living, the parents of petitioners are free to dispose of their
properties. In their overzealousness to safeguard their future legitime, petitioners forget
that theoretically, the sale of the lots to their siblings does not affect the value of their
parents estate. While the sale of the lots reduced the estate, cash of equivalent value
replaced the lots taken from the estate.

2. A contract of sale is not a real contract, but a consensual contract. As a consensual

contract, a contract of sale becomes a binding and valid upon the meeting of the
minds as to price. If there is a meeting of the minds of the parties as to the price,
the contract of sale is valid, despite the manner of payment, or even the breach of
that manner of payment. If there is no meeting of the minds of the parties as to the
price, because the price stipulated in the contract is simulated, then the contract is
void

Payment of the price goes into the performance of the contract. Failure to pay the
consideration is different from lack of consideration. The former results in a right to
demand the fulfillment or cancellation of the obligation while the latter prevents the
existence of a valid contract

Petitioners failed to show that the prices in the Deeds of Sale were absolutely
simulated. Not only did respondents minds meet as to the purchase price, but the
real price was also stated in the Deeds of Sale.
 Art. 1470 states that Gross inadequacy of price does not affect a contract of
sale, except as may indicate a defect in the consent, or that the parties really intended a
donation or some other act or contract. Petitioners failed to prove any of the instances
mentioned in 1470 of the Civil Code which would invalidate, or even affect, the Deeds of
Sale. Indeed, there is no requirement that the price be equal to the exact value of the
subject matter of sale. All the respondents believed that they received the
commutative value of what they gave

4. Celestino Co & Co v CIR

Facts:

Celestino Co & Company is a duly registered general co-partnership doing business under the
trade name of Oriental Sash Factory. For several years it paid percentage taxes of 7% on the
gross receipts of its sash, door and window factory, which is a tax on the original sales of
articles by manufacturer, producer or importer. However, in 1952 it began to claim only 3% tax,
which is a tax on sales of services. Petitioner claims that it does not manufacture ready-made
doors, but only upon special orders from the customers, hence, it is not engaged in
manufacturing, but only in sales of services.

Having failed to convince BIR, petitioner went to the Court of Tax Appeal where it also failed.
CTA, in its decision, holds that the petitioner has chosen for its tradename and has offered
itself to the public as a Factory, which means it is out to do business, in its chosen lines on a
big scale. As a general rule, sash 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.

Even if we were to believe petitioners claim that it does not manufacture ready-made sash,
doors and windows for the public and that it makes these articles only special order of its
customers that does not make it a contractor.

Issue: Whether the petitioner company provides special services or is engaged in

manufacturing.

Held: MANUFACTURER

The important thing to remember is that Celestino 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 by it only when customers place their orders, does not
alter the nature of the establishment, for it is obvious that it only accepted such orders
as called for the employment of such material-moulding, frames, panels-as it ordinarily
manufactured or was in a position habitually to manufacture. The Oriental Sash Factory
does nothing more than sell the goods that it mass-produces or habitually makes; sash, panels,
mouldings, frames, cutting them to such sizes and combining them in such forms as its
customers may desire.

Petitioner invokes Article 1467 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.
It is at once apparent that the Oriental Sash Factory did not merely sell its services because it
also sold the materials. The truth of the matter is that it sold materials ordinarily manufactured
by it sash, panels, mouldings although in such form or combination as suited the fancy of the
purchaser. Such new form does not divest the Oriental Sash Factory of its character as
manufacturer. Neither does it take the transaction out of the category of sales under Article
1467, because although the Factory does not, in the ordinary course of its business,
manufacture and keep on stock doors, it could stock and/or probably had in stock the sash,
mouldings and panels it used therefor (some of them at least).

In our opinion when this Factory accepts a job that requires the use of extraordinary or
additional equipment, or involves services not generally performed by it - it thereby contracts for
a piece of work filing special orders within the meaning of Article 1467. The orders herein
exhibited were not shown to be special. They were merely orders for work nothing is shown
to call them special requiring extraordinary service of the factory.

5. CIR V ENGINEERING EQUIPMENT AND SUPPLY COMPANY

Facts: Engineering Equipment and Supply Co. is an engineering and machinery firm. As operator
of an integrated engineering shop, it is engaged in the design and installation of central type air
conditioning system, pumping plants and steel fabrications.

The Commissioner of Internal Revenue received an anonymous tip denouncing Engineering for
tax evasion by misdeclaring its imported articles and failing to pay the correct percentage taxes
due thereon in connivance with its foreign suppliers. Acting on these denunciations, a raid and
search was conducted by a joint team of CB, NBI and BIR agents. It was recommended that
Engineering be assessed for deficiency of advance sales tax on the theory that it misdeclared its
importation of air conditioning units and parts and accessories. The firm, however, contested the
tax assessment and requested that it be furnished with the details and particulars of the
Commissioner's assessment. Engineering appealed the case to the Court of Tax Appeals and
during the pendency of the case the investigating revenue examiners reduced Engineering's
deficiency tax liabilities.

CTA rendered a decision declaring that Engineering is exempt from the deficiency manufacturers
sales tax. The CIR filed an appeal to the SC.

Petitioners contention: Engineering is a manufacturer and seller of air conditioning units and parts
or accessories thereof and, therefore, it is subject to the 30% advance sales tax

Respondents contention: Engineering claims that it is not a manufacturer and setter of air-
conditioning units and spare parts or accessories but a contractor engaged in the design, supply
and installation of the central type of air-conditioning system subject to the 3% tax imposed by
Section 191 of the same Code, which is essentially a tax on the sale of services or labor of a
contractor rather than on the sale of articles

Issue: W/N Engineering is a manufacturer of air conditioning units or a contractor

Held: Engineering is a Contractor

We find that Engineering did not manufacture air conditioning units for sale to the general public,
but imported some items which were used in executing contracts entered into by it. Engineering,
therefore, undertook negotiations and execution of individual contracts for the design, supply and
installation of air conditioning units of the central type. Engineering designed and engineered
completed each particular plant and that no two plants were identical but each had to be
engineered separately. The facts and circumstances aforequoted support the theory that
Engineering is a contractor rather than a manufacturer.

The distinction between a contract of sale and one for work, labor and materials is tested
by the inquiry whether the thing transferred is one not in existence and which never would
have existed but for the order of the party desiring to acquire it, or a thing which would
have existed and has been the subject of sale to some other persons even if the order had
not been given. If the article ordered by the purchaser is exactly such as the plaintiff makes
and keeps on hand for sale to anyone, and no change or modification of it is made at
defendant's request, it is a contract of sale, even though it may be entirely made after, and
in consequence of, the defendants order for it.

The word "contractor" has come to be used with special reference to a person who, in the pursuit
of the independent business, undertakes to do a specific job or piece of work for other persons,
using his own means and methods without submitting himself to control as to the petty details

The argument of CIR that Engineering can mass produce air conditioning units for sale to the
public or to any customer with enough money to buy the same is untenable in the light of the fact
that air conditioning units, packaged, or what we know as self-contained air conditioning units,
are distinct from the central system which Engineering dealt in. It was testified that "the central
type air conditioning system is an engineering job that requires planning and meticulous
layout due to the fact that usually architects assign definite space and usually the spaces
they assign are very small and of various sizes. Engineering definitely did not and was not
engaged in the manufacture of air conditioning units but had its services contracted for the
installation of a central system

We see that the supply of air conditioning units to Engineer's various customers, whether the said
machineries were in hand or not, was especially made for each customer and installed in his
building upon his special order. The air conditioning units installed in a central type of air
conditioning system would not have existed but for the order of the party desiring to acquire it and
if it existed without the special order of Engineering's customer, the said air conditioning units
were not intended for sale to the general public.

6. Andres Quiroga vs Parsons Hardware Co.

Doctrine: Contract of Agency to Sell vs Contract of Sale

Facts:

On Jan 24, 1911, plaintiff and the respondent entered into a contract. The contract stipulates
that Don Andres Quiroga, here in petitioner, grants exclusive rights to sell his beds in the
Visayan region to J. Parsons. The contract only stipulates that J.Parsons should pay Quiroga
within 6 months upon the delivery of beds.

Quiroga files a case against Parsons for allegedly violating the following stipulations: 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. With the exception of the obligation on the part of the defendant to order the beds by
the dozen and in no other manner, none of the obligations imputed to the defendant in the two
causes of action are expressly set forth in the contract. But the plaintiff alleged that the
defendant was his agent for the sale of his beds in Iloilo, and that said obligations are implied in
a contract of commercial agency.

The whole question, therefore, reduced itself to a determination as to whether the defendant, by
reason of the contract hereinbefore transcribed, was a purchaser or an agent of the plaintiff for
the sale of his beds.

Issue: Whether the contract is a contract of agency or of sale.

Held: In order to classify a contract, due attention must be given to its essential clauses. In the
contract in question, what was essential, as constituting its cause and subject matter, is that the
plaintiff was to furnish the defendant with the beds which the latter might order, at the price
stipulated, and that the defendant was to pay the price in the manner stipulated. Payment was
to be made at the end of sixty days, or before, at the plaintiffs request, or in cash, if the
defendant so preferred, and in these last two cases an additional discount was to be allowed for
prompt payment. These are precisely the essential features of a contract of purchase and sale.

There was the obligation on the part of the plaintiff to supply the beds, and, on the part of the
defendant, to pay their price. These features exclude the legal conception of an agency or order
to sell whereby the mandatory or agent received the thing to sell it, and does not pay its price,
but delivers to the principal the price he obtains from the sale of the thing to a third person, and
if he does not succeed in selling it, he returns it. By virtue of the contract between the plaintiff
and the defendant, the latter, on receiving the beds, was necessarily obliged to pay their price
within the term fixed, without any other consideration and regardless as to whether he had or
had not sold the beds.

In respect to the defendants 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.

For the foregoing reasons, we are of opinion that the contract by and between the plaintiff and
the defendant was one of purchase and sale, and that the obligations the breach of which is
alleged as a cause of action are not imposed upon the defendant, either by agreement or by
law.

7. GONZALO PUYAT & SONS, INC., petitioner, vs. ARCO AMUSEMENT COMPANY
(formerly known as Teatro Arco), respondent.

Facts:

1. In the year 1929, the "Teatro Arco" was engaged in the business of operating
cinematographs. In 1930, its name was changed to Arco Amusement Company. C. S.
Salmon was the president, while A. B. Coulette was the business manager.

2. About the same time, Gonzalo Puyat & Sons, Inc. was acting as the exclusive agents in
the Philippines for the Starr Piano Company of Richmond, Indiana, U.S. A.
 3. It was agreed after some negotiations that Arco Amusement Company would order sound
reproducing equipment from the Starr Piano Company and that the Arco would pay
Gonzalo Puyat in addition to the price of the equipment, a 10 per cent commission, plus
all expenses, such as, freight, insurance, banking charges, cables, etc.

4. At the expense of the respondent, the petitioner sent a cable to the Starr Piano Company,
inquiring about the equipment desired and making the said company to quote its price
without discount. A reply was received by Gonzalo Puyat & Sons, Inc., with the price,
evidently the list price of $1,700 f.o.b. factory Richmond, Indiana. The petitioner did not
show the respondent the cable of inquiry nor the reply but merely informed the respondent
of the price of $1,700.

5. Sometime the following year, Arco Amusement Company placed another order for sound
reproducing equipment to Gonzalo Puyat & Sons, Inc. on the same terms as the first order.
This agreement or order was confirmed by Gonzalo, that is to say, that Arco would pay for
the equipment the amount of $1,600, which was supposed to be the price quoted by the
Starr Piano Company, plus 10 per cent commission, plus all expenses incurred. The
equipment under the second order arrived in due time, and Gonzalo was duly paid the
price of $1,600 with its 10 per cent commission, and $160, for all expenses and charges.
This amount of $160 does not represent actual out-of-pocket expenses paid by the Arco,
but a mere flat charge and rough estimate made by the defendant equivalent to 10 per
cent of the price of $1,600 of the equipment.

6. About three years later, the officials of the Arco Amusement Company discovered that the
price quoted to them by the defendant with regard to their two orders mentioned was not
the net price but rather the list price, and that the defendants had obtained a discount from
the Starr Piano Company. Moreover, by reading reviews and literature on prices of
machinery and cinematograph equipment, said officials of Arco were convinced that the
prices charged them by Gonzalo were much too high including the charges for out-of-
pocket expense. For these reasons, they sought to obtain a reduction from Gonzalo or
rather a reimbursement, and failing in this they brought the present action.

7. The trial court held that the contract between the petitioner and the respondent was one
of outright purchase and sale, and absolved that petitioner from the complaint. The
appellate court, however, by a division of four, with one justice dissenting held that
the relation between petitioner and respondent was that of agent and principal, the
petitioner acting as agent of the respondent in the purchase of the equipment in question.
The appellate court further argued that even if the contract between the petitioner and the
respondent was one of purchase and sale, the petitioner was guilty of fraud in concealing
the true price and hence would still be liable to reimburse the respondent for the
overpayments made by the latter.

Issues: W/N the contract between the parties was one of purchase and sale

Decisions: Yes, contract of sale

1. In the first place, the contract is the law between the parties and should include all the
things they are supposed to have been agreed upon. What does not appear on the face
of the contract should be regarded merely as "dealer's" or "trader's talk", which bind either
party.
 2. We agree with the trial judge that "whatever unforseen events might have taken place
unfavorable to the petitioner, such as change in prices, mistake in their quotation, loss of
the goods not covered by insurance or failure of the Starr Piano Company to properly fill
the orders as per specifications, the respondent might still legally hold the petitioner to the
prices fixed of $1,700 and $1,600." This is incompatible with the pretended relation of
agency between the petitioner and the respondent, because in agency, the agent is
exempted from all liability in the discharge of his commission provided he acts in
accordance with the instructions received from his principal (section 254, Code of
Commerce), and the principal must indemnify the agent for all damages which the latter
may incur in carrying out the agency without fault or imprudence on his part

3. It follows that the petitioner as vendor is not bound to reimburse the respondent as vendee
for any difference between the cost price and the sales price which represents the profit
realized by the vendor out of the transaction. This is the very essence of commerce without
which merchants or middleman would not exist.

8. LO V. KJS ECO-FRAMEWORK SYSTEM PHIL INC G.R. NO 149420 (2003)

FACTS:

Respondent KJS Eco-Framework System is a corporation engaged in the sale of steel

scaffoldings, while petitioner Sonny Lo is a building contractor.

1. In February 1990, petitioner ordered scaffolding equipment from the respondent amounting
to P540, 425.80. He paid a down payment of P150,000 and the balance was to be paid in 10
monthly installments
2. However, Lo was only able to pay the first 2 monthly installments due to financial difficulties
despite demands from the respondent
3. In October 1990, petitioner and respondent executed a deed of assignment whereby
petitioner assigned to respondent his receivables of P335,462.14 from Jomero Realty Corp
4. But when respondent tried to collect the said credit from Jomero Realty Corp, the latter
refused to honor the deed of assignment because it claimed that the petitioner was also
indebted to it. As such, KJS sent Lo a demand letter but the latter refused to pay, claiming
that his obligation had been extinguished when they executed the deed of assignment
5. Subsequently, respondent filed an action for recovery of sum of money against petitioner.
6. Petitioner argued that his obligation was extinguished with the execution of the deed of
assignment of credit. Respondent alleged that Jomero Realty Corp refused to honor the deed
of assignment because it claimed that the petitioner had outstanding indebtedness to it
7. The trial court dismissed the complaint on the ground that the assignment of credit
extinguished the obligation
8. Upon appeal, CA reversed the trial court decision and held in favor of KJS. CA held that
a. Petitioner failed to comply with his warranty under the deed
b. The object of the deed did not exist at the time of the transaction, rendering it void under
Art 1409 NCC
c. Petitioner violated the terms of the deed of assignment when he failed to execute and do
all acts necessary to effectually enable the respondent to recover the collectibles

ISSUE: WON the deed of assignment extinguished the petitioners obligation

HELD: No, the petitioners obligation was not extinguished with the execution of the deed of
assignment.

An assignment of credit is an agreement by virtue of which the owner of a credit, known as the
assignor, by a legal cause, such as sale, dacion en pago, exchange or donation, and without the
consent of the debtor, transfers his credit and accessory rights to another, known as the assignee,
who acquires the power to enforce it to the same extent as the assignor could enforce it against
the debtor.

In dacion en pago, as a special mode of payment, the debtor offers another thing to the creditor
who accepts it as equivalent of payment of an outstanding debt. 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. The undertaking really partakes
in one sense of the nature of sale, that is, the creditor is really buying the thing or property of the
debtor, payment for which is to be charged against the debtors debt. As such, the vendor in good
faith shall be responsible, for the existence and legality of the credit at the time of the sale but not
for the solvency of the debtor, in specified circumstances.

Hence, it may well be that the assignment of credit, which is in the nature of a sale of
personal property, produced the effects of a dation in payment which may extinguish the
obligation. However, as in any other contract of sale, the vendor or assignor is bound by
certain warranties. More specifically, the first paragraph of Article 1628 of the Civil Code
provides:

The vendor in good faith shall be responsible for the existence and legality of the credit at the
time of the sale, unless it should have been sold as doubtful; but not for the solvency of the debtor,
unless it has been so expressly stipulated or unless the insolvency was prior to the sale and of
common knowledge.

From the above provision, petitioner, as vendor or assignor, is bound to warrant the existence
and legality of the credit at the time of the sale or assignment. When Jomero claimed that it was
no longer indebted to petitioner since the latter also had an unpaid obligation to it, it essentially
meant that its obligation to petitioner has been extinguished by compensation. In other words,
respondent alleged the non-existence of the credit and asserted its claim to petitioners warranty
under the assignment. Therefore, it necessary for the petitioner to make good its warranty and
pay the obligation.

Furthermore, the petitioner breached his obligation under the Deed of Assignment, to 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.

Indeed, by warranting the existence of the credit, petitioner should be deemed to have ensured
the performance thereof in case the same is later found to be inexistent. He should be held liable
to pay to respondent the amount of his indebtedness.

9. PARAGAS v. HEIRS OF DOMINADOR BALACANO

FACTS:
Gregorio Balacano, married to Lorenza, owned 2 parcels of land. He was already 81 years old,
very weak, could barely talk, and had been battling w/ liver disease for over a month prior to his
death.

On his deathbed, barely a week before he died, he allegedly signed a Deed of Absolute Sale
over the lots in favor of the Paragas Spouses, accompanied by Atty. De Guzman who
proceeded to notarize the same, who alleged that it was a mere confirmation of a previous sale
and that Gregorio had already paid a P 50k deposit. The Paragas driver was also there to take
a picture of Gregorio signing the said deed, w/ a ballpen in his hand.

There was nothing to show that the contents of the deed were explained to Gregorio. Paragas
then sold a portion of the disputed lot to Catalino, the son of Gregorio. The grandson of
Gregorio, Domingo, sought to annul the sale and partition. There was no sufficient evidence to
support any prior agreement or partial execution thereof.

ISSUE: W/N Balacano is incapacitated to enter into a contract of sale

HELD: YES. The contract of sale is void.

A person is not rendered incompetent merely because of old age; however, when such
age has impaired the mental faculties as to prevent a person from protecting his rights,
then he is undeniably incapacitated. He is clearly at a disadvantage, and the courts must be
vigilant for his protection. In this case, Gregorios consent was clearly absent hence the sale
was null and void. The dubious circumstances raise serious doubts on his capacity to render
consent.

Considering that the Paragas Spouses are not owners of the said properties, it only follows that
the subsequent sale thereof to Catalino who was not in good faith is likewise void. Further,
the lots pertained to the conjugal partnership having been inherited by Gregorio during his
marriage to Lorenza. It cannot thus be sold w/o the latters consent.

10. CORNELIA MATABUENA vs. PETRONILA CERVANTES

FACTS: In 1956, the petitioners brother Felix Matabuena donated a piece of lot to his common-
law spouse, respondent Petronila Cervantes. Felix and Petronila eventually got married in 1962
or six years after the deed of donation was executed. Five months later, Felix died.

Thereafter, Cornelia Matabuena, by reason of being the only sister and nearest collateral relative
of the deceased, filed a claim over the property, by virtue of an affidavit of self-adjudication
executed by her, had the land declared in her name and paid the estate and inheritance taxes
thereon.

The lower court of Sorsogon declared that the donation was valid because it was made at the
time when Felix and Petronila were not yet spouses, rendering Article 133 of the Civil Code
inapplicable.

ISSUE: Whether or not the ban on donation between spouses during a marriage applies to a
common-law relationship.
HELD: YES.

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 stated in Buenaventura vs. Bautista (50 OG 3679, 1954), if the policy of the law is to prohibit
donations in favor of the other consort and his descendants because of fear of undue and
improper pressure and influence upon the donor, then there is every reason to apply the same
prohibitive policy to persons living together as husband and wife without the benefit of nuptials.

The lack of validity of the donation by the deceased to respondent does not necessarily result in
petitioner having exclusive right to the disputed property. As a widow, Cervantes is entitled to
one-half of the inheritance, and the surviving sister to the other half.

Article 1001, Civil Code: Should brothers and sisters or their children survive with the widow or
widower, the latter shall be entitled to one-half of the inheritance and the brothers and sisters or
their children to the other half.

11. Domingo Rubias vs Isaias Batiller (1973)

Facts:
- Francisco Militante claimed that he owned a parcel of land located in Iloilo. He filed with
the CFI of Iloilo an application for the registration of title of the land. This was opposed by
the Director of Lands, the Director of Forestry, and other oppositors. The case was docked
as a land case, and after trial the court dismissed the application for registration. Militante
appealed to the Court of Appeals.
- Pending that appeal, he sold the land to the petitioner, Atty Domingo Rubias, his son in
law and lawyer.
- The CA rendered a decision, dismissing the application for registration.
- Rubias filed a Forcible Entry and Detainer case against Batiller, who calims that he and
his predecessors-in-interest have always been in actual, open and continuous possession
since time immemorial under claim of ownership of the land
- In that case, the court held that Rubias has no cause of action because the property in
dispute which Rubias allegedly bought from Militante was the subject matter of a land
case, in which case Rubias was the counsel on record of Militante himself. It thus falls
under Article 1491 of the Civil Code. (Hence, this appeal.)

Issue: Whether the sale of the land is prohibited under Article 1491.

Held: YES.

Article 1491 says that The following persons cannot acquire any 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. The present case clearly falls under this, especially since
the case was still pending appeal when the sale was made.

Issue: Legal effect of a sale falling under Article 1491?

Held: NULL AND VOID. CANNOT BE RATIFIED.

Manresa considered such prohibited acquisitions (which fell under the Spanish Civil Code) as
merely voidable because the Spanish Code did not recognize nullity. But our Civil Code does
recognize the absolute nullity of contracts whose cause, object or purpose is contrary to
law, morals, good customs, public order or public policy or which are expressly
prohibited or declared void by law and declares such contracts inexistent and void from
the beginning. The nullity of such prohibited contracts is definite and permanent, and cannot
be cured by ratification.

The public interest and public policy remain paramount and do not permit of compromise
or ratification. In this aspect, the permanent disqualification of public and judicial officers and
lawyers grounded on public policy differs from the first three cases of guardians, agents and
administrators (under Art 1491). As to their transactions, it has been opined that they may be
ratified by means of and in the form of a new contract, in which case its validity shall be
determined only by the circumstances at the time of execution of such new contract. In those
cases, the object which was illegal at the time of the first contract may have already become lawful
at the time of the ratification or second contract, or the intent, or the service which was impossible.
The ratification or second contract would then be valid from its execution; however, it does not
retroact to the date of the first contract.

12. PHILIPPINE TRUST CO. V. ROLDAN - Robynne

Facts: Mariano L. Bernardo, a minor, inherited from his father 17 parcels of land. In view of his
minority, guardianship proceedings were instituted, wherein Socorro Roldan was appointed his
guardian. She was the surviving spouse of Marcelo Bernardo, and the stepmother of said Mariano
L. Bernardo.

Socorro filed in a motion asking for authority to sell as guardian the parcels of land to Dr. Fidel
Ramos for the purpose of investing the money in a house which Mariano wanted, which was
granted. Subsequently, Dr. Ramos executed in favor of Socorro, personally, a deed of
conveyance covering the parcels of land. Socorro, then sold 4 parcels of land to Emilio Cruz.

Philippine Trust Co replaced Socorro as guardian and sought to undo what the previous guardian
had done. Socorro, in effect, sold to herself the properties of her ward and such sale should be
annulled because it violated Art 1459 of the Civil Code prohibiting the guardian from purchasing
either in person or through the mediation of another the property of her ward.

The CFI held the article was not controlling, because there was no proof that Fidel C. Ramos was
a mere intermediary or that the latter had previously agreed with Socorro Roldan to buy the
parcels for her benefit. The CA affirmed the judgment.

Issue: W/N the 2 contracts of sale made by Socorro was valid

Held: No, contracts are not valid. The court held the sale was not valid even if there was
no proof of connivance between Socorro and Ramos.
Remembering the general doctrine that guardianship is a trust of the highest order, and
the trustee cannot be allowed to have any inducement to neglect his wards interest, and
in line with the courts suspicion whenever the guardian acquires the wards property, we have no
hesitation to declare that in this case, Socorro took by purchase her wards parcels thru Dr.
Ramos, and that Article 1459 of the Civil Code applies. It may be true that there was no previous
agreement, but the fact remains that she acquired the properties, through her brother-in-law. That
she planned to get them for herself at the time of selling them to Dr. Ramos, may be deduced
from the very short time between the two sales (one week). The temptation which naturally besets
a guardian so circumstanced, necessitates the annulment of the transaction.

Hence, from both the legal and equitable standpoints these three sales should not be sustained:
the first two for violation of article 1459 of the Civil Code, and the third because Socorro Roldan
could pass no title to Emilio Cruz.

13. FLORENCIO FABILLO and JOSEFA TANA (substituted by their heirs

Gregorio Fabillo, Roman Fabillo, Cristeta F. Maglinte and Antonio
Fabillo),petitioners, vs. THE HONORABLE INTERMEDIATE APPELLATE
COURT (Third Civil Case Division) and ALFREDO MURILLO (substituted by
his heirs Fiamita M. Murillo, Flor M. Agcaoili and Charito M.
Babol), respondents.

FACTS:

In her last will and testament, Justina Fabillo bequeathed to her brother, Florencio Fabillo, a
house and lot in San Salvador Leyte and to her husband, Gregorio D. Brioso, a piece of land in
Pugahanay Leyte. After Justina's death, Florencio filed a petition for the probate of said will and
the probate court approved the project of partition

Two years later, Florencio sought the assistance of lawyer Alfredo M. Murillo in recovering the
San Salvador property. Atty Murillo proposed that he be furnished with 40% of the value of the
property in case they win the case, and such was entered into by both parties in a contract.
Upon filing of the case by Atty Murillo, it was dismissed by virtue of a compromise agreement,
and they won.
Atty Murillo sought to enforce the contract and took possession of 40% of the property and
produce thereof. Sometime later, Florencio Fabillo claimed exclusive right over the two
properties and refused to give Murillo his share of their produce. Murillo filed a complaint and
prayed that he be declared the lawful owner of 40% of the two properties. Petitioners, on the
other hand, contend that such contingent fee violates the prohibition under Art 1491, and is
excess and unconscionable.
Supreme Court ruled that it does not violate such civil code provision, however it is excess,
considering the value of the property, nature of the case, length of time and effort he had to
work in such case.
DETAILED FACTS

1.Petitioners seek the reversal of the appellate court's decision interpreting in favor of lawyer
Alfredo M. Murillo the contract of services entered into between him and his clients, spouses
Florencio Fabillo and Josefa Taa.
2. In her last will and testament dated August 16, 1957, Justina Fabillo bequeathed to her
brother, Florencio, a house and lot in San Salvador Street, Palo, Leyte and to her husband,
Gregorio D. Brioso, a piece of land in Pugahanay, Palo, Leyte.

3.After Justina's death, Florencio filed a petition for the probate of said will.

4.Two years later, Florencio sought the assistance of lawyer Alfredo M. Murillo in recovering the
San Salvador property. Acquiescing to render his services, Murillo wrote Florencio the following
handwritten letter, that considering the former lawyer of the case lost, and the present case is a
revival of a lost case, he requested a 40% of the money value of the house and lot as a
contingent fee in case of success.

5.Thirteen days later, Florencio and Murillo entered into a contract of services to that effect.

6. Pursuant to said contract, Murillo filed to recover the San Salvador property. The case was
terminated on October 29, 1964 when the court, upon the parties' joint motion in the nature of a
compromise agreement, declared Florencio Fabillo as the lawful owner not only of the San
Salvador property but also the Pugahanay parcel of land.

7.Consequently, Murillo proceeded to implement the contract of services between him and
Florencio Fabillo by taking possession and exercising rights of ownership over 40% of said
properties. He installed a tenant in the Pugahanay property.

8.Florencio Fabillo claimed exclusive right over the two properties and refused to give Murillo his
share of their produce.

9. Murillo prayed to be declared the lawful owner of 40% of the properties and to be paid his
share of the produce of the land among consequential, moral and exemplary damages.

10.Defendants claimed that the contract entered into by the Fabillo Spouses were vitiated by old
age and ailment, and that the 40% contingent fee was excessive and unfair.

11. Lower Court ruled that the evidence to prove vitiation of consent is insufficient. The court
upheld Murillo's claim for "contingent attorney's fees of 40% of the value of recoverable
properties. However, the court declared Murillo to be the lawful owner of 40% of both the San
Salvador and Pugahanay properties and the improvements thereon. It directed the defendants
to pay jointly and severally to Murillo the amount of P1,200 representing 40% of the net produce
of the Pugahanay property from 1967 to 1973; entitled Murillo to 40% of the 1974 and 1975
income of the Pugahanay property which was on deposit with a bank, and ordered defendants
to pay the costs of the suit.

12. Both parties filed motions for the reconsideration of said decision

ISSUES:
(1) Did the contract of services violate the prohibition under Art 1491? No
The contract of services did not violate said provision of law. Article 1491 of the Civil Code,
specifically paragraph 5 thereof, prohibits lawyers from acquiring by purchase even at a public
or judicial auction, properties and rights which are the objects of litigation in which they may take
part by virtue of their profession. The said prohibition, however, applies only if the sale or
assignment of the property takes place during the pendency of the litigation involving
the client's property.
A contract between a lawyer and his client stipulating a contingent fee is not covered
by said prohibition under Article 1491 (5) of the Civil Code because the payment of said fee
is not made during the pendency of the litigation but only after judgment has been
rendered in the case handled by the lawyer. In fact, under the 1988 Code of Professional
Responsibility, a lawyer may have a lien over funds and property of his client and may apply so
much thereof as may be necessary to satisfy his lawful fees and disbursements.
As long as the lawyer does not exert undue influence on his client, that no fraud is
committed or imposition applied, or that the compensation is clearly not excessive as to
amount to extortion, a contract for contingent fee is valid and enforceable. Moreover,
contingent fees were impliedly sanctioned by No. 13 of the Canons of Professional Ethics which
governed lawyer-client relationships when the contract of services was entered into between the
Fabillo spouses and Murillo.
(2) Is the value of the contingent fee improper? yes
Considering the nature of the case, the value of the properties subject matter thereof, the length
of time and effort exerted on it by Murillo, we hold that Murillo is entitled to the amount of Three
Thousand Pesos (P3,000.00) as reasonable attorney's fees for services rendered in the case
which ended on a compromise agreement. In so ruling, we uphold "the time-honored legal
maxim that a lawyer shall at all times uphold the integrity and dignity of the legal profession so
that his basic ideal becomes one of rendering service and securing justice, not moneymaking.
For the worst scenario that can ever happen to a client is to lose the litigated property to his
lawyer in whom all trust and confidence were bestowed at the very inception of the legal
controversy."
CHAPTER III
1. PUP v CA

FACTS: Petitioner National Development Corp., a government owned and controlled corporation,
had in its disposal a 10 hectares property. Sometime in May 1965, private respondent Firestone
Corporation manifested its desire to lease a portion of it for ceramic manufacturing business. On
August 24, 1965, both parties entered into a contract of lease for a term of 10 years renewable
for another 10 years. Prior to the expiration of the aforementioned contract, Firestone wrote NDC
requesting for an extension of their lease agreement. It was renewed with an express grant to
Firestone of the first option to purchase the leased premise in the event that it was decided "to
dispose and sell the properties including the lot..."
Cognizant of the impending expiration of the leased agreement, Firestone informed NDC through
letters and calls that it was renewing its lease. No answer was given. Firestone's predicament
worsened when it learned of NDC's supposed plans to dispose the subject property in favor of
petitioner Polytechnic University of the Philippines. PUP referred to Memorandum Order No. 214
issued by then President Aquino ordering the transfer of the whole NDC compound to the National
Government. The order of conveyance would automatically result in the cancellation of NDC's
total obligation in favor of the National Government.
Firestone instituted an action for specific performance to compel NDC to sell the leased property
in its favor.
ISSUE: Whether or not there is a valid sale between NDC and PUP? YES
RULING:
A contract of sale, as defined in the Civil Code, is a contract where one of the parties
obligates himself to transfer the ownership of and to deliver a determinate thing to the
other or others who shall pay therefore a sum certain in money or its equivalent. It is
therefore a general requisite for the existence of a valid and enforceable contract of sale that it be
mutually obligatory, i.e., there should be a concurrence of the promise of the vendor to sell a
determinate thing and the promise of the vendee to receive and pay for the property so delivered
and transferred. The Civil Code provision is, in effect, a "catch-all" provision which
effectively brings within its grasp a whole gamut of transfers whereby ownership of a thing
is ceded for a consideration.
All three (3) essential elements of a valid sale, without which there can be no sale, were attendant
in the "disposition" and "transfer" of the property from NDC to PUP - consent of the parties,
determinate subject matter, and consideration therefor.
Consent to the sale is obvious from the prefatory clauses of Memorandum Order No. 214 which
explicitly states the acquiescence of the parties to the sale of the property. Furthermore, the
cancellation of NDC's liabilities in favor of the National Government constituted the "consideration"
for the sale.