Sales Nature and Form of Contracts Art. 1458 FACTS: Petitioner Was The Owner of A 8,015 Square Meter

SALES  FACTS: Petitioner was the owner of a 8,015 square meter
parcel of land located in Mandaluyong (now a City), Metro Manila.

Chapter 1 The property was covered by Transfer Certificate of Title (TCT) No.
Nature and Form of Contracts 332098 of the Registry of Deeds of Rizal. To secure a P900,000.00
loan it had obtained from respondent Philippine National Bank
(PNB), petitioner executed a real estate mortgage over the lot.
Art. 1458 Respondent PNB later granted petitioner a new credit
Art. 1458. By the contract of sale one of the contracting parties accommodation of P1,000,000.00; and, petitioner executed an
obligates himself to transfer the ownership and to deliver a Amendment of Real Estate Mortgage over its property. The
determinate thing, and the other to pay therefor a price certain in petitioner was unable to pay its obligation to the said respondent.
money or its equivalent. In turn, the respondent filed for a petition for extrajudicial
foreclosure of the real estate mortgage and sought to have the
A contract of sale may be absolute or conditional.
property sold at public auction. The petitioner was given a period
I. Nature and Characteristics (expiration--Feb. 17, 1984) to redeem the property, but, failed to
do so. It caused the petitioner to ask for a one year extension to
A. Definition redeem the said property. The respondent referred the matter to
Pasay City Branch for appropriate action and recommendation.
Sale is a contract where one party (seller or vendor) obligates Some PNB Pasay City Branch personnel informed petitioner that as
himself to transfer the ownership of and to deliver a a matter of policy, the bank does not accept “partial redemption.”
A new title in favor of PNB was issued for petitioner’s failure to
determinate thing, while the other party (buyer or vendee)
redeem the property.
obligates himself to pay for said thing a price certain in money
or its equivalent. Meanwhile, the Special Assets Management Department
(SAMD) had prepared a statement of account, and as of June
25, 1984 petitioner’s obligation amounted to P1,574,560.47.
Note that in harmony with Art. 1164, ownership of the thing sold When apprised of the statement of account, petitioner
does not pass to the buyer until delivery. See Arts. 1475, 1477, remitted P725,000.00 to respondent PNB as “deposit to
1496. Essential requisites are consent, object and price. No repurchase,”.
special form is required. (Art. 1483) Petitioner declared that it had already agreed to the SAMD’s
offer to purchase the property for P1,574,560.47, and that
a. Cases was why it had paid P725,000.00.
Respondent PNB informed petitioner that the PNB Board of
1. Effect of offer and counter-offer Directors had accepted petitioner’s offer to purchase the
property, but for P1,931,389.53 in cash less the P725,000.00
Manila Metal Container Corporation vs. PNB, G.R. No. 166862, already deposited with it.
December 20, 2006 Both trial court and CA ruled that there was no perfected contract of
sale between the parties; hence, petitioner had no cause of action
for specific performance against respondent. Both declared that
SALES REVIEWER –ATTY. ADVIENTO 1 | Page

BY: AMaWS
respondent had rejected petitioner’s offer to repurchase the (3) consummation, which begins when the parties perform their
property. respective undertakings under the contract of sale, culminating
ISSUE: whether or not petitioner and respondent PNB had in the extinguishment thereof.
entered into a perfected contract for petitioner to repurchase the
property from respondent. 1. Effect of document denominated “Agreement between Mr. Sosa
& Popong Bernardo of Toyota Shaw, Inc.”
SC RULED that there was NO perfected contract of sale
between the parties.
Toyota Shaw, Inc. vs. CA, L-11650, May 23, 1995
A contract of sale is consensual in nature and is perfected
upon mere meeting of the minds. When there is merely an offer by
one party without acceptance of the other, there is no contract. FACTS: Luna L. Sosa, respondent, wanted to purchase a Toyota
When the contract of sale is not perfected, it cannot, as an Lite Ace. He transacted business with Popong Bernardo, sales
independent source of obligation, serve as a binding juridical representative of Toyota. A Vehicle Sales Proposal (VSP) was
relation between the parties. accomplished and Mr. Sosa paid a down payment of P100,000.
To convert the offer into a contract, the acceptance must be On the scheduled date and time for the delivery of the car,
absolute and must not qualify the terms of the offer; it must be Toyota refused to release the car because the financing
plain, unequivocal, unconditional and without variance of any sort company, B.A. Finance Corporation, refused to finance the
from the proposal. outstanding balance. Mr. Sosa demanded the return of the down
A qualified acceptance or one that involves a new proposal payment, which Toyota honored, without prejudice to future
constitutes a counter-offer and a rejection of the original offer. A claim for damages.
counter-offer is considered in law, a rejection of the original offer
and an attempt to end the negotiation between the parties on a ISSUE: Was this document, executed and signed by the petitioner's
different basis. Consequently, when something is desired which is not
exactly what is proposed in the offer, such acceptance is not sales representative, a perfected contract of sale, binding upon
sufficient to guarantee consent because any modification or the petitioner, breach of which would entitle the private
variation from the terms of the offer annuls the offer. The respondent to damages and attorney's fees?
acceptance must be identical in all respects with that of the offer so
as to produce consent or meeting of the minds. SC RULED that it is not a contract of sale. No obligation on the
Stages of a contract of sale: part of Toyota to transfer ownership of a determinate thing to Sosa
(1) negotiation, covering the period from the time the and no correlative obligation on the part of the latter to pay
prospective contracting parties indicate interest in the contract therefor a price certain appears therein.
to the time the contract is perfected; This Court had already ruled that a definite agreement on the
(2) perfection, which takes place upon the concurrence of the manner of payment of the price is an essential element in the
essential elements of the sale which are the meeting of the formation of a binding and enforceable contract of sale. This is so
minds of the parties as to the object of the contract and upon because the agreement as to the manner of payment goes into the
the price; and price such that a disagreement on the manner of payment is

BY: AMaWS
tantamount to a failure to agree on the price. Definiteness as to b. Bilateral (reciprocal)—both parties are bound by obligations
the price is an essential element of a binding agreement to sell dependent upon each other. The power to rescind is implied, neither
personal property. party incurs delay if the party does not comply, from the moment
At the most, Exhibit "A" may be considered as part of the one of the parties fulfills his obligation, the default by the other
initial phase of the generation or negotiation stage of a contract of begins w/out need of prior demand.
sale. c. Onerous—valuable consideration must be given in order to acquire
rights.
B. Elements d. Nominate—the Code refers to it by special designation or name,
that is, the contract of sale.
a. Essential Elements (without which there can be no valid of sale)
e. Principal—for the contract of sale to validly exist, there is no
1. Consent or meeting of the minds—consent to transfer ownership
necessity for it to depend upon the existence of another contract.
in exchange for the price.
f. Commutative—the values exchanged are almost equivalent to each
2. Determinate subject matter – includes generic objects that are
other (general rule). By way of exception, some contracts of sale are
least determinable
aleatory, that is, one receives may in time be greater or smaller that
*segregated/separated of the same class what he has given, i.e. sale of genuine sweepstakes ticket.
3. Price certain in money or its equivalent g. delivery transfers ownership – ownership does not pass until
b. Natural Elements (those which are inherent in the contract, and delivery.
which in the absence of any contrary provision, are deemed to exist C. Sale vs. Agency to sell (1466)
in the contract)
Art. 1466. In construing a contract containing provisions
1. warranty against eviction (deprivation of the property bought) characteristic of both the contract of sale and of the contract of
2. warranty against hidden defects agency to sell, the essential clauses of the whole instrument shall be
considered. (n)
c. Accidental Elements (those which may be present or absent in the
stipulation, such as the place or time of payment, or the presence of Cases:
conditions) 1) effect of agreement for exclusive sale of beds where the other
Effects of Presence, absence, incomplete elements party is entitled to commission, among others
-when all 3 elements are present - Perfected Contract Quiroga vs. Parsons Hardware co.
-if not present, there is no perfected contract Facts:
-if all the elements are present but there is a defect/illegal, the The defendant was granted by the plaintiff of the exclusive right to
contract is voidable/void sell as an “agent” Quiroga beds in the Visayas at the invoice price in
Manila. The agreement was for the defendant to pay for the beds at
C. Characteristics a discount from 20% to 25% as commission on the sales. The
a. Consensual—perfected by mere consent. defendant shall pay the plaintiff claims that the defendant is his
“agent” while defendant says he was merely a purchaser.

BY: AMaWS
Issue: Facts: Engineering Equipment and Supply Co., a domestic
Is this a contract of sale or agency? corporation, is engaged in the design and installation of central type
air conditioning system, pumping plants and steel fabrications. CIR
Held: now denounced Engineering for tax evasion by misdeclaring its
The Supreme Court declared that the contract by and between the imports and failing to pay the correct percentage taxes due thereon
plaintiff and the defendant was one of purchase and sale, and that in connivance with its foreign suppliers. The Commissioner contends
the obligations the breach of which is alleged as a cause of action that Engineering is a manufacturer and seller of air conditioning
are not imposed upon the defendant, either by agreement or by law. units and parts or accessories thereof and, therefore, it is subject to
the 30% advance sales tax. Engineering is a contractor this subject
only to the 3% tax imposed on contractors.
In order to classify a contract, due regard must be given to its • Contract of Sale v. Contract of Services; Test. — The
essential clauses. In the contract in question, what was essential, as distinction between a contract of sale and one for work, labor
constituting its cause and subject matter, is that the plaintiff was to and materials is tested by the inquiry whether the thing
furnish the defendant with the beds which the latter might order, at transferred is one not in existence and which never would
the price stipulated, and that the defendant was to pay the price in have existed but for the order of the party desiring to acquire
the manner stipulated. There was the obligation on the part of the it, or a thing which would have existed but has been the
plaintiff to supply the beds, and, on the part of the defendant, to subject of sale to some other persons even if the order had
pay their price. These features exclude the legal conception of an not been given. If the article ordered by the purchaser is
agency or order to sell whereby the mandatory or agent received the exactly such as the seller makes and keeps on hand for sale to
thing to sell it, and does not pay its price, but delivers to the anyone, and no change or modification of it is made at
principal the price he obtains from the sale of the thing to a third purchaser's request, it is a contract of sale even though it
person, and if he does not succeed in selling it, he returns it. may be entirely made after, and in consequence of the
Sale vs. Lease of service or contract for a piece of work (1467) purchaser's order for it.
Art. 1467. A contract for the delivery at a certain price of an article • Engineering is a contractor rather than a manufacturer.
which the vendor in the ordinary course of his business manufactures Supply of air conditioning units to Engineer's various
or procures for the general market, whether the same is on hand at customers, whether the said machineries were in hand or not,
the time or not, is a contract of sale, but if the goods are to be was especially made for each customer and installed in his
manufactured specially for the customer and upon his special order, building upon his special order. The air conditioning units
and not for the general market, it is a contract for a piece of work. installed in a central type of air conditioning system would
(n) not have existed but for the order of the party desiring to
acquire it and if it existed without the special order of
Cases:
Engineering's customer, the said air conditioning units were
1) Nature of transactions of company engaged in the design, not intended for sale to the general public. Moreover, it
supply and installation of certain type of air conditioning advertises itself as a contractor and pays the contractor's tax
system. for design and construction of central type air conditioning
Commissioner of Internal Revenue v. Engineering Equipment and systems, and does not have ready-made air-conditioning units
Supply Co. for sale, but must design and construct each unit to meet the
particular requirements of its customers, said taxpayer is

BY: AMaWS
considered a contractor rather than a manufacturer for --a “bilateral promise to buy and sell” requires NO
purposes of the Tax Code. Thus, such taxpayer is not a CONSIDERATION distinct from the selling price
manufacturer subject to the 30% advance sales tax prescribed --only the “accepted unilateral promise to buy or sell” that
in Section 185 (m) in relation to Section 194 of the Tax Code, needs consideration distinct from the selling price
but is a contractor subject to the 3% tax imposed by Section
191 of the same Code. a. If bilateral
• A taxpayer is required by law to truly declare his importation --a bilateral promise to buy or to sell a certain thing
in the import entries and internal revenue declarations for a price certain gives to the contracting parties
before it is released. Thus, by requiring its foreign supplier to personal rights in that each has the right to demand
change the nomenclature of air conditioning parts and from the other the fulfillment of the obligation.
accessories, and misdeclaring its importation so as to make b. If unilateral
them subject to the lower rate of 7% percentage tax under
Section 186 of the Tax Code, thereby evading the payment of --the acceptance of a unilateral promise to sell must be plain, clear
the 30% tax under Section 185(m) thereof, said taxpayer is and unconditional. Therefore, if there is qualified acceptance with
subject to the payment of the 50% fraud surcharge prescribed terms different from the offer there is no acceptance, that there is
by Section 183(a). no promise to buy and there is no perfected sale.
c. sales vs. Barter (1468) Cases:
Art. 1468. If the consideration of the contract consists partly in 1. Option defined
money, and partly in another thing, the transaction shall be
characterized by the manifest intention of the parties. If such
Eulogio vs. Apeles, G.R. No. 167884, January 20, 2009
intention does not clearly appear, it shall be considered a barter if
the value of the thing given as a part of the consideration exceeds
the amount of the money or its equivalent; otherwise, it is a sale. Contract of Lease with an Option
-if the value of the thing is more than the value of the money or its An option is a contract by which the owner of the property
equivalent, the contract is a barter. If the value of the thing is less agrees with another person that the latter shall have the right to buy
than the value of the money, then the contract is a sale. the former’s property at a fixed price within a certain time. It is a
d. sale vs. dation in payment condition offered or contract by which the owner stipulates with
another that the latter shall have the right to buy the property at a
-dation in payment implies that there is an existing obligation
fixed price within a certain time, or under, or in compliance with
whereas contract of sale, there is no prior obligation.
certain terms and conditions; or which gives to the owner of the
e. lease of things - in that delivery in this latter contract does not property the right to sell or demand a sale.
involve a transfer of ownership
An option is not of itself a purchase, but merely secures the privilege
f. donation- in that this latter contract is gratuitous and requires to buy. It is not a sale of property but a sale of the right to purchase.
special formalities It is simply a contract by which the owner of the property agrees
E. Promise to sell: when binding (Art. 1479) with another person that he shall have the right to buy his property
at a fixed price within a certain time. He does not sell his land; he

BY: AMaWS
does not then agree to sell it; but he does sell something, i.e., the plaintiffs did not receive any reply, they sent another letter dated
right or privilege to buy at the election or option of the other party. January 28, 1987 with the same request; that since defendants failed
Its distinguishing characteristic is that it imposes no binding to specify the terms and conditions of the offer to sell and because
obligation on the person holding the option, aside from the of information received that defendants were about to sell the
consideration for the offer. property, plaintiffs were compelled to file the complaint to compel
"An accepted unilateral promise" can only have a binding effect if defendants to sell the property to them.
supported by a consideration, which means that the option can still "After the issues were joined, defendants filed a motion for summary
be withdrawn, even if accepted, if the same is not supported by any judgment which was granted by the lower court. The trial court
consideration. found that defendants' offer to sell was never accepted by the
ii) Remedy of optionee plaintiffs for the reason that the parties did not agree upon the
terms and conditions of the proposed sale, hence, there was no
-Specific performance. contract of sale at all. Nonetheless, the lower court ruled that
2. Right of First Refusal should the defendants subsequently offer their property for sale at a
price of P11-million or below, plaintiffs will have the right of first
-Right on the part of the owner that if he decides to sell the refusal.
property in the future, he would first negotiate its sale to the one he
promised. Issue:
Ang Yu Asuncion vs. CA Whether or not there is perfected contract of sale
Facts: Held:
On July 29, 1987 a Second Amended Complaint for Specific In the law on sales, the so-called "right of first refusal" is an
Performance was filed by Ann Yu Asuncion and Keh Tiong, et al., innovative juridical relation. Needless to point out, it cannot be
against Bobby Cu Unjieng, Rose Cu Unjieng and Jose Tan before the deemed a perfected contract of sale under Article 1458 of the Civil
Regional Trial Court, Branch 31, Manila in Civil Case No. 87-41058, Code. Neither can the right of first refusal, understood in its normal
alleging, among others, that plaintiffs are tenants or lessees of concept, per sebe brought within the purview of an option under the
residential and commercial spaces owned by defendants described as second paragraph of Article 1479, aforequoted, or possibly of an
Nos. 630-638 Ongpin Street, Binondo, Manila; that they have offer under Article 1319 9 of the same Code. An option or an offer
occupied said spaces since 1935 and have been religiously paying the would require, among other things, 10 a clear certainty on both the
rental and complying with all the conditions of the lease contract; object and the cause or consideration of the envisioned contract. In
that on several occasions before October 9, 1986, defendants a right of first refusal, while the object might be made determinate,
informed plaintiffs that they are offering to sell the premises and are the exercise of the right, however, would be dependent not only on
giving them priority to acquire the same; that during the the grantor's eventual intention to enter into a binding juridical
negotiations, Bobby Cu Unjieng offered a price of P6-million while relation with another but also on terms, including the price, that
plaintiffs made a counter offer of P5-million; that plaintiffs obviously are yet to be later firmed up. Prior thereto, it can at best
thereafter asked the defendants to put their offer in writing to be so described as merely belonging to a class of preparatory
which request defendants acceded; that in reply to defendant's juridical relations governed not by contracts (since the essential
letter, plaintiffs wrote them on October 24, 1986 asking that they elements to establish the vinculum juris would still be indefinite and
specify the terms and conditions of the offer to sell; that when

BY: AMaWS
inconclusive) but by, among other laws of general application, the when there is no The full payment
pertinent scattered provisions of the Civil Code on human conduct. stipulation in the of the purchase
Even on the premise that such right of first refusal has been decreed contract that title to price partakes of a
under a final judgment, like here, its breach cannot justify the property remains s u s p e n s i v e
correspondingly an issuance of a writ of execution under a judgment with the seller until condition, and
that merely recognizes its existence, nor would it sanction an action full payment of the non-fulfillment of
for specific performance without thereby negating the indispensable purchase price the condition
element of consensuality in the perfection of contracts. 11 It is not prevents the
to say, however, that the right of first refusal would be obligation to sell
inconsequential for, such as already intimated above, an unjustified from arising.
disregard thereof, given, for instance, the circumstances expressed
in Article 19 12 of the Civil Code, can warrant a recovery for if there is no
damages. stipulation giving the
vendor the right to
Note: right of first refusal cannot be deemed a perfected sale cancel unilaterally
because it merely pertains to a specific property w/out containing the contract the
an agreement as to the price. moment the vendee
E. The Contract of Sale may be- fails to pay within a
fixed period
a. Absolute; or
Ramos vs. Heruela, G.R. No. 145330, Oct. 14, 2005
Heirs of Mascunana vs. CA, G.R. No. 158646, June 23, 2005
Facts: It is settled that a perfected contract of sale cannot be
Absolute Sale Conditional Sale challenged on the ground of the non-transfer of ownership of the
when title to the Ownership remains property sold at that time of the perfection of the contract, since it
property passes to with the vendor is consummated upon delivery of the property to the vendee. It is
the vendee upon and does not pass through tradition or delivery that the buyer acquires ownership of
delivery of the thing to the vendee the property sold. As provided in Article 1458 of the New Civil
sold until full payment Code, when the sale is made through a public instrument, the
of the purchase execution thereof is equivalent to the delivery of the thing which is
price. the object of the contract, unless the contrary appears or can be
inferred. The record of the sale with the Register of Deeds and the
issuance of the certificate of title in the name of the buyer over the
property merely bind third parties to the sale. As between the
seller and the buyer, the transfer of ownership takes effect upon
the execution of a public instrument covering the real property.
Long before the petitioners secured a Torrens title over the

BY: AMaWS
property, the respondents had been in actual possession of the Risk of loss is generally Risk of loss is generally
property and had designated Barte as their overseer. borne by the buyer borne by the seller
Although denominated a “Deed of Conditional Sale,” a sale is still
absolute where the contract is devoid of any proviso that title is Transfer of ownership
reserved or the right to unilaterally rescind is stipulated, e.g., until Absolute – upon delivery
or unless the price is paid. Ownership will then be transferred to the
buyer upon actual or constructive delivery (e.g. by the execution of Conditional – ownership is reserved by the owner.
a public document) of the property sold. Where the condition is d. Cases—Contract to sell vs. Contract of Sale
imposed upon the perfection of the contract itself, the failure of the
condition would prevent such perfection. If the condition is imposed
on the obligation of a party which is not fulfilled, the other party Contract to Sell Contract of Sale
may either waive the condition or refuse to proceed with the sale.
(Art. 1545, Civil Code) The payment in full of The non-payment of the
A deed of sale is considered absolute in nature where there is the price is a positive price is a RESOLUTORY
neither a stipulation in the deed that title to the property sold is suspensive condition. condition, i.e. the
reserved in the seller until full payment of the price, nor one giving Hence, if the price is not contract of sale may by
the vendor the right to unilaterally resolve the contract the moment paid, it is as if the such occurrence put an
the buyer fails to pay within a fixed period. obligation of the seller end to a transaction that
to deliver and to once upon a time existed
b. Conditional, which may in turn be— transfer ownership never
1. An executed contract, or – which property (ownership) in the became effective and
thing is transferred from seller to buyer, and nonpayment of the binding.
price is a negative resolutory condition.
Ownership is retained by Title over the property
2. An executory contract- ownership does not pass until some future the seller, regardless of generally passes to the
time delivery and is not pass buyer upon delivery
-the fulfillment of some condition, such as full payment of until fill payment of the
the purchase price. price
c. Distinctions Since the seller retains After delivery has been
ownership, despite made, the seller has lost
Executed Contract Executory Contract delivery, he is enforcing ownership and cannot
not rescinding the recover it unless the
Property ownership is No property is conveyed contract if he seeks to contract is resolved or
conveyed oust the buyer for rescinded
If buyer defaults, seller If buyer defaults, seller failure to pay.
may sue for the price is only entitled to
damages Contract to sell – a bilateral contract whereby the prospective seller,
while expressly reserving the ownership of the subject property

BY: AMaWS
despite delivery thereof to the prospective buyer, binds himself to prevented the obligation of respondent spouses to convey title
sell the said property exclusively to the prospective buyer upon from acquiring an obligatory force.
payment of full purchase price.
Contract of Sale- no reservation of ownership where the owner can 2. Interpretation of document denominated “Receipt of Partial
unilaterally rescind the contract if one of the party fails to fulfill its Payment”
duty.
Coronel vs. CA, G.R. No. 103577, Oct. 7, 1996
1. Interpretation of document denominated “Agreement of
Purchase and Sale” FACTS: Defendants Coronels issued a document, receipt of down
payment, in favor of Ramona. In the said document, it was
Ong vs. CA, G.R. No. 97347, July6, 1999 stipulated that the Coronels, upon receipt of the down payment in
It is in the nature of a contract to sell. the amount of 50k (1.24M total price) for their inherited house and
In a contract of sale, the title to the property passes to the lot, bind themselves to the effect that they will transfer, from
vendee upon the delivery of the thing sold; while in a contract to their father, the transfer certificate title to their names. After the
sell, ownership is, by agreement, reserved in the vendor and is not TCT is under their name, they will execute immediately a deed of
to pass to the vendee until full payment of the purchase price. In absolute sale in favor of Ramona and she will pay the balance of
a contract to sell, the payment of the purchase price is a positive 1.19M. The mother of Ramona, Concepcion, paid the 50k as down
suspensive condition, the failure of which is not a breach, casual or payment. Thereafter, the Coronels transferred the said property in
serious, but a situation that prevents the obligation of the vendor their names.
to convey title from acquiring an obligatory force. Coronels sold the property to Catalina for the amount of 1.58M
Spouses Robles, respondents in the case at bar bound after the latter paid a down payment of 300k. For this reason,
themselves to deliver a deed of absolute sale and clean title Coronels canceled and rescinded the contract with Ramona by
covering the two parcels of land upon full payment by the buyer of depositing the down payment paid by Concepcion in the bank in
the purchase price of P2,000,000.00. This promise to sell was trust for Ramona Patricia Alcaraz.
subject to the fulfillment of the suspensive condition of full Concepcion et al. filed a case against specific performance. A
payment of the purchase price by the petitioner. Petitioner, notice of lis pendens was annotated at the back of the title. An
however, failed to complete payment of the purchase price. The adverse claim by Catalina was also annotated. The Coronels
non-fulfillment of the condition of full payment rendered the executed a deed of absolute sale in favor of Catalina. Thus, a new
contract to sell ineffective and without force and effect. It must title was issued in the name of Catalina.
be stressed that the breach contemplated in Article 1191 of the Both trial court and CA ruled in favor of Concepcion. It ordered the
New Civil Code is the obligor's failure to comply with an obligation. specific performance of the agreement.
Failure to pay, in this instance, is not even a breach but merely an
event which prevents the vendor's obligation to convey title from ISSUE: legal determination of the document, Receipt of
acquiring binding force. Hence, the agreement of the parties in the Downpayment
case at bench may be set aside, but not because of a breach on the SC RULED that when the "Receipt of Down Payment" is considered in
part of petitioner for failure to complete payment of the purchase its entirety, it becomes more manifest that there was a clear intent
price. Rather, his failure to do so brought about a situation which on the part of petitioners to transfer title to the buyer, but since the

BY: AMaWS
transfer certificate of title was still in the name of petitioner's Facts:
father, they could not fully effect such transfer although the buyer The spouses Bate and Julie Nabus were the owners of parcels of land
was then willing and able to immediately pay the purchase price. with a total area of 1,665 square meters, situated in Pico, La
This is a contract OF sale, SC affirmed the decision of CA. Trinidad, Benguet, duly registered in their names under TCT No.
In a contract of sale, the title passes to the vendee upon the delivery T-9697 of the Register of Deeds of the Province of Benguet. The
of the thing sold; whereas in a contract to sell, ownership is not property was mortgaged by the Spouses Nabus to the Philippine
transferred upon delivery of the property but upon full payment of National Bank (PNB), La Trinidad Branch, to secure a loan in the
the purchase price. In the former, the vendor has lost and cannot amount of P30,000.00.
recover ownership until and unless the contract is resolved or On February 19, 1977, the Spouses Nabus executed a Deed of
rescinded; whereas in the latter, title is retained by the vendor until Conditional Sale 4 covering 1,000 square meters of the 1,665 square
the full payment of the price, such payment being a positive meters of land in favor of respondents Spouses Pacson for a
suspensive condition and failure of which is not a breach but an consideration of P170,000.00, which was duly notarized on February
event that prevents the obligation of the vendor to convey title from 21, 1977. Their contract had the following condition:
becoming effective.
THAT, as soon as the full consideration of this sale has been paid by
H. Contract to sell vs. Conditional sale the VENDEE, the corresponding transfer documents shall be executed
Conditional Sale – upon happening of the condition, title is by the VENDOR to the VENDEE for the portion sold;
transferred. Seller cannot sell to another person. THAT, it is mutually understood that in as much as there is a claim by
Compared to Contract to sell other persons of the entire property of which the portion subject of
-ownership is transferred upon creation of necessary documents. this Instrument is only a part, and that this claim is now the subject
of a civil case now pending before Branch III of the Court of First
Coronel vs CA Instance of Baguio and Benguet, should the VENDOR herein be
A contract to sell as defined hereinabove, may not even be defeated in the said civil action to the end that he is divested of
considered as a conditional contract of sale where the seller may title over the area subject of this Instrument, then he hereby
likewise reserve title to the property subject of the sale until the warrants that he shall return any and all monies paid by the VENDEE
fulfillment of a suspensive condition, because in a conditional herein whether paid to the PNB, La Trinidad, Benguet Branch, or
contract of sale, the first element of consent is present, although it directly received by herein VENDOR, all such monies to be returned
is conditioned upon the happening of a contingent event which may upon demand by the VENDEE;
or may not occur. If the suspensive condition is not fulfilled, the THAT, [a] portion of the parcel of land subject of this instrument is
perfection of the contract of sale is completely abated (cf. Homesite presently in the possession of Mr. Marcos Tacloy, and the VENDOR
and Housing Corp. vs. Court of Appeals, 133 SCRA 777 [1984]). agrees to cooperate and assist in any manner possible in the ouster
However, if the suspensive condition is fulfilled, the contract of sale of said Mr. Marcos Tacloy from said possession and occupation to the
is thereby perfected, such that if there had already been previous end that the VENDEE herein shall make use of said portion as soon as
delivery of the property subject of the sale to the buyer, ownership is practicable;
thereto automatically transfers to the buyer by operation of law
without any further act having to be performed by the seller. Thereafter, respondents took possession of the subject property.
They constructed an 80 by 32-feet building and a steel-matting fence
Nabus vs. Pacson around the property to house their truck body-building shop which
SALES REVIEWER –ATTY. ADVIENTO 10 | P a g e

BY: AMaWS
they called the "Emiliano Trucking Body Builder and Auto Repair Held:
Shop." A contract to sell as defined hereinabove, may not even be
On December 24, 1977, before the payment of the balance of the considered as a conditional contract of sale where the seller may
mortgage amount with PNB, Bate Nabus died. On August 17, 1978, likewise reserve title to the property subject of the sale until the
his surviving spouse, Julie Nabus, and their minor daughter, Michelle fulfillment of a suspensive condition, because in a conditional
Nabus, executed a Deed of Extra Judicial Settlement over the contract of sale, the first element of consent is present, although it
registered land covered by TCT No. 9697. On the basis of the said is conditioned upon the happening of a contingent event which may
document, TCT No. T-17718 8 was issued on February 17, 1984 in the or may not occur. If the suspensive condition is not fulfilled, the
names of Julie Nabus and Michelle Nabus. perfection of the contract of sale is completely abated. However, if
During the last week of January 1984, Julie Nabus, accompanied by the suspensive condition is fulfilled, the contract of sale is thereby
her second husband, approached Joaquin Pacson to ask for the full perfected, such that if there had already been previous delivery of
payment of the lot. Joaquin Pacson agreed to pay, but told her to the property subject of the sale to the buyer, ownership thereto
return after four days as his daughter, Catalina Pacson, would have automatically transfers to the buyer by operation of law without any
to go over the numerous receipts to determine the balance to be further act having to be performed by the seller.
paid. When Julie Nabus returned after four days, Joaquin sent her In a contract to sell, upon the fulfillment of the suspensive condition
and his daughter, Catalina, to Atty. Elizabeth Rillera for the which is the full payment of the purchase price, ownership will not
execution of the deed of absolute sale. Since Julie was a widow with automatically transfer to the buyer although the property may have
a minor daughter, Atty. Rillera required Julie Nabus to return in four been previously delivered to him. The prospective seller still has to
days with the necessary documents, such as the deed of extrajudicial convey title to the prospective buyer by entering into a contract of
settlement, the transfer certificate of title in the names of Julie absolute sale.
Nabus and minor Michelle Nabus, and the guardianship papers of It is not the title of the contract, but its express terms or
Michelle. However, Julie Nabus did not return. stipulations that determine the kind of contract entered into by the
Getting suspicious, Catalina Pacson went to the Register of Deeds of parties. In this case, the contract entitled "Deed of Conditional Sale"
the Province of Benguet and asked for a copy of the title of the land. is actually a contract to sell. The contract stipulated that "as soon as
She found that it was still in the name of Julie and Michelle Nabus the full consideration of the sale has been paid by the vendee, the
After a week, Catalina Pacson heard a rumor that the lot was already corresponding transfer documents shall be executed by the vendor to
sold to petitioner Betty Tolero. Catalina Pacson and Atty. Rillera went the vendee for the portion sold." 41 Where the vendor promises to
to the Register of Deeds of the Province of Benguet, and found that execute a deed of absolute sale upon the completion by the vendee
Julie Nabus and her minor daughter, Michelle Nabus, represented by of the payment of the price, the contract is only a contract to sell."
the former's mother as appointed guardian by a court order dated 42 The aforecited stipulation shows that the vendors reserved title
October 29, 1982, had executed a Deed of Absolute Sale in favor of to the subject property until full payment of the purchase price.
Betty Tolero on March 5, 1984. As vendees given possession of the subject property, the ownership
Issue: of which was still with the vendors, the Pacsons should have
protected their interest and inquired from Julie Nabus why she did
2)Whether the Deed of Conditional Sale was a contract to sell or a not return and then followed through with full payment of the
contract of sale. purchase price and the execution of the deed of absolute sale. The
Spouses Pacson had the legal remedy of consigning their payment to

BY: AMaWS
the court; however, they did not do so. A rumor that the property Art. 1462. The goods which form the subject of a contract of sale
had been sold to Betty Tolero prompted them to check the veracity may be either existing goods, owned or possessed by the seller, or
of the sale with the Register of Deeds of the Province of Benguet. goods to be manufactured, raised, or acquired by the seller after the
They found out that on March 5, 1984, Julie Nabus sold the same perfection of the contract of sale, in this Title called "future goods."
property to Betty Tolero through a Deed of Absolute Sale, and new There may be a contract of sale of goods, whose acquisition by the
transfer certificates of title to the property were issued to Tolero. seller depends upon a contingency which may or may not happen. (n)
Unfortunately for the Spouses Pacson, since the Deed of Conditional Art. 1463. The sole owner of a thing may sell an undivided interest
Sale executed in their favor was merely a contract to sell, the therein. (n)
obligation of the seller to sell becomes demandable only upon the
happening of the suspensive condition. 43 The full payment of the Art. 1464. In the case of fungible goods, there may be a sale of an
purchase price is the positive suspensive condition, the failure of undivided share of a specific mass, though the seller purports to sell
which is not a breach of contract, but simply an event that and the buyer to buy a definite number, weight or measure of the
prevented the obligation of the vendor to convey title from acquiring goods in the mass, and though the number, weight or measure of the
binding force. 44 Thus, for its non-fulfilment, there is no contract to goods in the mass is undetermined. By such a sale the buyer becomes
speak of, the obligor having failed to perform the suspensive owner in common of such a share of the mass as the number, weight
condition which enforces a juridical relation. 45 With this or measure bought bears to the number, weight or measure of the
circumstance, there can be no rescission or fulfilment of an mass. If the mass contains less than the number, weight or measure
obligation that is still non-existent, the suspensive condition not bought, the buyer becomes the owner of the whole mass and the
having occurred as yet. seller is bound to make good the deficiency from goods of the same
kind and quality, unless a contrary intent appears. (n)
Art. 1465. Things subject to a resolutory condition may be the object
Arts. 1459-1465 of the contract of sale. (n)
Art. 1459. The thing must be licit and the vendor must have a right Arts. 1459-1465
to transfer the ownership thereof at the time it is delivered. (n) I. OBJECT
Art. 1460. A thing is determinate when it is particularly designated or • Licit – not contrary to law, morals, good customs, public order
physical segregated from all other of the same class. or public policy, within the commerce of man; if illicit, contract is
void
The requisite that a thing be determinate is satisfied if at the time • All rights which are not intransmissible or personal may also
the contract is entered into, the thing is capable of being made be the object of sale (i.e. right of usufruct)
determinate without the necessity of a new or further agreement • Services cannot be the object of a contract of sale
between the parties. (n)
Art. 1461. Things having a potential existence may be the object of Test of Determinability
the contract of sale. a. Capacity to Segregate
b. No further agreement
The efficacy of the sale of a mere hope or expectancy is deemed
subject to the condition that the thing will come into existence.
The sale of a vain hope or expectancy is void. (n) A. Qualities – The object must be:

BY: AMaWS
a. Lawful (1459) by the vendor or the vendee, the prohibition should not be applied.
In such a situation, neither the prohibition nor the rationale
Art. 1459. The thing must be licit and the vendor must have a right therefore which is to keep in the family of the patentee that portion
to transfer the ownership thereof at the time it is delivered. (n) of the public land which the government has gratuitously given him,
by shielding him from the temptation to dispose of his landholding,
• Object must be licit could be relevant. Precisely, he had disposed of his rights to the lot
• Vendor must have the right to transfer ownership at the time even before the government could give the title to him.
the object is delivered • The mortgage executed in favor of RBSP is also beyond the
pale of the prohibition, as it was forged in December 1981 a few
Unlawful object: months past the period of prohibition.
i. Future inheritance
ii. Homestead (sale within 5 year prohibitory period) b. determinate or Determinable
- undivided interest can be subject to sale. The buyer will become a
Manalapat v. CA co-owner.
a. before partition
Facts: In 1976, a free patent was issued in Manlapat’s name. In 1954, b. in a mass of fungible goods.
before the subject lot was titled, he sold a portion to Ricardo
evidenced by a deed of sale. He conveyed another portion to Ricardo Cases:
in 1981. Leon Banaag (son-in-law of Manlapat) executed a mortgaged 1) sale by co-heir of undivided portion of estate
with the subject lot as the collateral. Heirs of Ricardo sought to
obtain the title from petitioners which was in the custody of RBSP,
earlier surrendered as a consequence of the mortgage. Vagilidad v. Vagilidad
SC: Five-year prohibition against alienation or encumbrances under Facts:

the Public Land Act. Eduardo was issued a title in 1976 on the basis 4,280 sqm of lot was owned by Zoilo. In 1931, ZOILO died.
of his free patent application. Such application implies the Subsequently son of Zolio, Loreto sold to Gabino Vagilidad a portion
recognition of the public dominion character of the land and, hence, of said lot as evidenced by the Deed of Absolute Sale executed by
the 5-year prohibition imposed by the PLA against alienation or Loreto on 1986. After, Zoilo’s children executed an Extrajudicial
encumbrance of the land covered by a free patent or homestead Settlement of Estate adjudicating the entire lot to Loreto in 1987.
should have been considered. Gabino filed petition of surrender of lot against Loreto, claiming that
• The deed of sale which was executed in 1981 is obviously he is owner pursuant to deed of Sale issued before the extra judicial
covered by the proscription, the free patent having been issued in settlement.
1976. However, petitioners may recover the portion sold since the However, there seemed to be an amicable settlement between
prohibition was imposed in favor of the free patent holder. them, and the case was sent to archives.
• The sale executed 1954 was before the issuance of the patent Gabino paid real estate taxes on the land he bought from Loreto
in 1976. Apparently, Eduardo disposed of the portion even before he which he later sold to Wilfredo Vagilidad. Likewise, a Deed of
thought of applying for a free patent. Where the sale or transfer Absolute Sale was also made by Loreto in favor of Wilfredo for the
took place before the filing of the free patent application, whether

BY: AMaWS
same portion of lot. Wlfredo mortgaged this property to obtain a Facts: Leon Soriano submitted the documents required by the NFA
loan. Gabino and his wife filed petition for reconveyance. for pre-qualifying as a seller. These were processed and he was given
• The requisite that a thing be determinate is satisfied if at the a quota of 2,640 cavans of palay. On August 1979, Soriano delivered
time the contract is entered into, the thing is capable of being made 630 cavans of palay. The palay delivered were not rebagged,
determinate without the necessity of a new or further agreement classified and weighed. When Soriano demanded payment, he was
between the parties. Art. 1349 states that the object of every informed that it was held in abeyance since Mr. Cabal was still
contract must be determinate, as to its kind. The fact that the investigating on an information that Soriano was not a bona fide
quantity is not determinate shall not be an obstacle to the existence farmer and the palay delivered was not produced from his farmland
of the contract, provided it is possible to determine the same, but was taken from the warehouse of a rice trader, Ben de Guzman.
without the need of a new contract between the parties. Art. 1460 Petitioner wrote Soriano advising him to withdraw the 630 cavans.
defines that a thing is determinate when it is particularly designated Instead of withdrawing, Soriano insisted that the palay grains
or physically segregated from all others of the same class. The delivered be paid. NFA was ordered to pay Soriano.
property sold by Loreto to Gabino was determinable. • Present case involves a perfected contract of sale. Soriano
• A co-owner has full ownership of his pro-indiviso share and initially offered to sell palay grains produced in his farmland to NFA.
has the right to alienate, assign or mortgage it, and substitute When the latter accepted the offer by noting in Soriano’s Farmer’s
another person for its enjoyment. The subject parcel, being an Information Sheet a quota of 2,640 cavans, there was already a
inherited property, is subject to the rules of co-ownership under the meeting of the minds between the parties. The object of the
Civil Code. Co-ownership is the right of common dominion which two contract, being the palay grains produced in Soriano’s farmland and
or more persons have in a spiritual part of a thing, not materially or the NFA was to pay the same depending upon its quality. The
physically divided. Before the partition of the property held in contention that – since the delivery were not rebagged, classified
common, no individual or co-owner can claim title to any definite and weighed in accordance with the palay procurement program of
portion thereof. All that the co-owner has is an ideal or abstract NFA, there was no acceptance of the offer thus – this is a clear case
quota or proportionate share in the entire property. LORETO sold the of an unaccepted offer to sell, is untenable.
subject property to GABINO as a co-owner. LORETO had a right, even • Quantity being indeterminate does not affect perfection of
before the partition to transfer in whole or in part his undivided contract; No need to create new contract. The fact that the exact
interest in the lot even without the consent of his co-heirs. This right number of cavans of palay to be delivered has not been determined
is absolute. Thus, what GABINO obtained by virtue of the sale on does not affect the perfection of the contract. In the present case,
were the same rights as the vendor LORETO had as co-owner, in an there was no need for NFA and Soriano to enter into a new contract
ideal share equivalent to the consideration given under their to determine the exact number of cavans of palay to be sold. Soriano
transaction. Consequently, when LORETO purportedly sold to can deliver so much of his produce as long as it does not exceed
WILFREDO the same portion of the lot, he was no longer the owner 2,640 cavans. (It did not need a new contract to make 630 cavans a
said lot. Based on the principle that "no one can give what he does determinate thing).
not have," LORETO could not have validly sold to WILFREDO what he
no longer had. • Sale a consensual contract; Acceptance is on the offer and
not the goods delivered. Sale is a consensual contract, “there is
2) Effect of agreement where the exact number of palay to be perfection when there is consent upon the subject matter and price,
sold was not fixed. even if neither is delivered.” (Obana vs. C.A., L-36249, March 29,
1985, 135 SCRA 557, 560). The acceptance referred to which
National Grains Authority v. IAC

BY: AMaWS
determines consent is the acceptance of the offer of one party by corresponding entry was made in Transfer Certificate of Title No.
the other and not of the goods delivered. 166451 (Exh. 5).
• Compliance of mutual obligations once a contract of sale is Petitioners on July 16, 1982 filed a complaint for rescission (plus
perfected.   damages) of the deeds of sale executed by Lazaro in favor of private
From the moment the contract of sale is perfected, it is incumbent respondents covering the property inherited by Lazaro from his
upon the parties to comply with their mutual obligations or “the father.
parties may reciprocally demand performance” thereof. (Article
1475, Civil Code, 2nd par.) Issue:
Is a sale of future inheritance valid?
c. Existing, Future, or contingent (1462)
Case: Held:
“(n)o contract may be entered into upon a future inheritance except
1) Sale of Future Inheritance in cases expressly authorized by law.”
Tanedo vs Ca Consequently, said contract made in 1962 is not valid and cannot be
the source of any right nor the creator of any obligation between the
Facts: parties.
Hence, the “affidavit of conformity” dated February 28, 1980,
insofar as it sought to validate or ratify the 1962 sale, is also useless
On October 20, 1962, Lazaro Tañedo executed a notarized deed of and, in the words of the respondent Court, “suffers from the same
absolute sale in favor of his eldest brother, Ricardo Tañedo, and the infirmity.” Even private respondents in their memorandum concede
latter’s wife, Teresita Barera, private respondents herein, whereby this.
he conveyed to the latter in consideration of P1,500.00, “one
hectare of whatever share I shall have over Lot No. 191 of the
cadastral survey of Gerona, Province of Tarlac and covered by Title T- d. Transferability of Ownership
l3829 of the Register of Deeds of Tarlac,” the said property being his Ownership
“future inheritance” from his parents (Exh. 1). Upon the death of his
father Matias, Lazaro executed an “Affidavit of Conformity” dated 1. It need not exist at the perfection of the contract. Required
February 28, 1980 (Exh. 3) to “re-affirm, respect. acknowledge and at the time of delivery
validate the sale I made in 1962.” On January 13, 1981, Lazaro 2. Subsequent acquisition of title by a vendor w/out title
executed another notarized deed of sale in favor of private validates the sale
respondents covering his “undivided ONE TWELVE (1/12) of a parcel
3. Acquisition of title by the vendee may depend upon a
of land known as Lot 191 x x (Exh. 4). He acknowledged therein his
contingency (right of redemption)
receipt of P 10,000.00 as consideration therefor. In February 1981,
Ricardo learned that Lazaro sold the same property to his children, • The seller must have the right to transfer the ownership of the
petitioners herein, through a deed of sale dated December 29, 1980 thing or right sold to the buyer at the time of delivery and not at the
(Exh. E). On June 7, 1982, private respondents recorded the Deed of time of the making of the contract.
Sale (Exh. 4) in their favor in the Registry of Deeds and the • Nemo dat quod non habet, as an ancient Latin maxim says. One
cannot give what does not have.

BY: AMaWS
Note: When ownership is required –At the time of sale but ownership • That after the payment of the 10% “option money”, the Offer
may not be w/ the seller in case of future things. to Purchase provides for the payment only of the balance of the
Cases: purchase price, implying that the "option money" forms part of the
purchase price. This is precisely the result of paying earnest money
1. Sale by mortgagee of land not proper subject of mortgage under Art. 1482 of the Civil Code. It is clear then that the parties in
Cavite Development Bank v. Lim, 324 scra 346 this case actually entered into a contract of sale, partially
consummated as to the payment of the price.
Facts: Rodolfo Guansing obtained a fraudulent title by executing an
Extra-Judicial Settlement of the Estate With Waiver where he made 2. Conveyance of privilege to purchase land before it is awarded to
it appear that he and Perfecto Guansing were the only surviving heirs the tenant or occupant.
entitled to the property, and that Perfecto had waived all his rights Hermosilla v. Remoquillo
thereto. Consequently he acquired title and used this to acquire a
loan. CDB foreclosed the mortgage and granted him the period of Facts: Apolinario Hermosilla was occupying a lot in San Pedro
redemption, which he did not exercise. Tunasan Homesite, a land of the Republic. He divided the lot into 2.
The 1st portion was given to his son Salvador and the
• It is not required that, at the perfection stage, the seller be other(questioned lot) to his grandson Jaime Remoquillo through a
the owner of the thing sold or even that such subject matter of the Deed of Assignment. A law was passed prohibiting the transfer of
sale exists at that point in time. Thus, under Art. 1434 of the Civil ownership of the said lot. Salvador and Jaime after made a
Code, when a person sells or alienates a thing which, at that time, Kasunduan ng Paglipat Ng Karapatan sa Isang Lagay na Lupang Solar
was not his, but later acquires title thereto, such title passes by (Kasunduan) whereby Jaime transferred ownership of the 65 square
operation of law to the buyer or grantee. This is the same principle meters (the questioned property) in favor of Salvador. NHA awarded
behind the sale of "future goods" under Art. 1462 of the Civil Code. Jaime title. Salvador and his heirs questioned the title stating they
However, under Art. 1459, at the time of delivery or consummation have their house and in actual possession of the questioned lot.
stage of the sale, it is required that the seller be the owner of the
thing sold. Otherwise, he will not be able to comply with his • When the Kasunduan was executed in 1972 by Jaime in favor
obligation to transfer ownership to the buyer. It is the consummation of Salvador — petitioners' predecessor-in-interest — Lot 19, of which
stage where the principle of nemo dat quod non habet applies. In the questioned property forms part, was still owned by the Republic.
this case, the sale by CDB to Lim of the property mortgaged in 1983 Nemo dat quod non habet. Nobody can give what he does not
by Rodolgo Guansing must, therefore, be deemed a nullity for CDB possess. Jaime could not thus have transferred anything to Salvador
did not have a valid title to the said property. To be sure, CDB never via the Kasunduan.
acquired a valid title to the property because the foreclosure sale, • The transfer became one in violation of law and therefore
by virtue of which the property had awarded to CDB as highest void ab initio. Hence, petitioners acquired no right over the lot from
bidder, is likewise void since the mortgagor was not the owner of the a Void Kasunduan, for no rights are created. It is generally
property foreclosed. considered that as between the parties to a contract, validity cannot
• CDB cannot be considered a mortgagee in good faith. While be given to it by estoppel if it is prohibited by law or is against
petitioners are not expected to conduct an exhaustive investigation public policy.
on the history of the mortgagor's title, CDB cannot be excused from • Since the property was previously a public land, petitioners
the duty of exercising the due diligence required of banking have no personality to impute violation of the law. If the title was in
institutions in ascertaining the validity of the title. fact fraudulently obtained, it is the State which should file the suit

BY: AMaWS
to recover the property through the Office of the Solicitor General. subject property in favor of Arturo Reyes was conditioned upon the
Consequently, Jaime’s ownership was valid not being contrary to any event that Miguel Socco would actually inherit and become the
law and since there was no pending other application yet. That at owner of the said property. Absent such occurrence, Miguel R. Socco
the time he applied for title, he was recogned as the actual never acquired ownership of the subject property which he could
applicant / occupant. validly transfer to Arturo Reyes. Without acquiring ownership of the
subject property, Arturo Reyes also could not have conveyed the
Heirs of Arturo Reyes v. Beltran G.R. No. 176474 same to his heirs, herein petitioners.
Facts: A big parcel of lot was originally owned by Spouses Laquian. -assignment was done prior to the application.
When the Spouses died, the property was left with the wife’s ARTICLES 1469-1474
siblings. Through an "Extrajudicial Settlement of the Estate of the Art. 1469. In order that the price may be considered certain, it shall
Deceased Constancia R. Socco (wife)," the parcel of land was be sufficient that it be so with reference to another thing certain, or
partitioned into 3 lots. Before the partition, Miguel Socco, 1 of the that the determination thereof be left to the judgment of a special
heirs sold his share to Arturo Reyes as evidenced by the Contract to person or persons.
Sell stating that he is to inherit a particular portion. But upon
partition, the said portion sold was adjudicated to respondent, Elena Should such person or persons be unable or unwilling to fix it, the
Socco – Beltran, and not to Miguel Socco. contract shall be inefficacious, unless the parties subsequently agree
upon the price.
SC: Article 1459 of the Civil Code on contracts of sale, “The thing
must be licit and the vendor must have a right to transfer ownership If the third person or persons acted in bad faith or by mistake, the
thereof at the time it is delivered.” The law specifically requires courts may fix the price.
that the vendor must have ownership of the property at the time it is Where such third person or persons are prevented from fixing the
delivered. Petitioners claim that the property was constructively price or terms by fault of the seller or the buyer, the party not in
delivered to them in 1954 by virtue of the Contract to Sell. fault may have such remedies against the party in fault as are
However, as already pointed out by this Court, it was explicit in the allowed the seller or the buyer, as the case may be. (1447a)
Contract itself that, at the time it was executed, Miguel R. Socco
was not yet the owner of the property and was only expecting to Art. 1470. Gross inadequacy of price does not affect a contract of
inherit it. Hence, there was no valid sale from which ownership of sale, except as it may indicate a defect in the consent, or that the
the subject property could have transferred from Miguel Socco to parties really intended a donation or some other act or contract. (n)
Arturo Reyes. Without acquiring ownership of the subject property, Art. 1471. If the price is simulated, the sale is void, but the act may
Arturo Reyes also could not have conveyed the same to his heirs, be shown to have been in reality a donation, or some other act or
herein petitioners. contract. (n)
The law specifically requires that the vendor must have ownership of Art. 1472. The price of securities, grain, liquids, and other things
the property at the time it is delivered. Petitioners cannot derive shall also be considered certain, when the price fixed is that which
title to the subject property by virtue of the Contract to Sell. It was the thing sold would have on a definite day, or in a particular
stated in the Contract that the vendor was not yet the owner of the exchange or market, or when an amount is fixed above or below the
subject property and was merely expecting to inherit the same. It price on such day, or in such exchange or market, provided said
was also declared that conveyance of the subject to the buyer was a amount be certain. (1448)
conditional sale. It is, therefore, apparent that the sale of the

BY: AMaWS
Art. 1473. The fixing of the price can never be left to the discretion the contracting parties, if accepted by the other, gives rise to a
of one of the contracting parties. However, if the price fixed by one perfected sale.57
of the parties is accepted by the other, the sale is perfected. (1449a) It is not enough for the parties to agree on the price of the property.
Art. 1474. Where the price cannot be determined in accordance with The parties must also agree on the manner of payment of the price
the preceding articles, or in any other manner, the contract is of the property to give rise to a binding and enforceable contract of
inefficacious. However, if the thing or any part thereof has been sale or contract to sell. This is so because the agreement as to the
delivered to and appropriated by the buyer he must pay a reasonable manner of payment goes into the price, such that a disagreement on
price therefor. What is a reasonable price is a question of fact the manner of payment is tantamount to a failure to agree on the
dependent on the circumstances of each particular case. (n) price.58
I. Price – sum certain in money or its equivalent. In a contract to sell property by installments, it is not enough that
Case: General principles in the agreement as to price the parties agree on the price as well as the amount of
downpayment. The parties must, likewise, agree on the manner of
Boston Bank of the Philippines v. Manalo, G. R. No. 158149, payment of the balance of the purchase price and on the other terms
February 9, 2006 and conditions relative to the sale. Even if the buyer makes a
FACTS:Boston Bank, now petitioner, filed the instant petition for downpayment or portion thereof, such payment cannot be
review on certiorari assailing the CA rulings. It maintains that, as considered as sufficient proof of the perfection of any purchase and
held by the CA, the records do not reflect any schedule of payment sale between the parties.
of the 80% balance of the purchase price, or P278,448.00. Petitioner We agree with the contention of the petitioner that, as held by the
insists that unless the parties had agreed on the manner of payment CA, there is no showing, in the records, of the schedule of payment
of the principal amount, including the other terms and conditions of of the balance of the purchase price on the property amounting to
the contract, there would be no existing contract of sale or contract P278,448.00
to sell.47
A. Requisites:
1. The price must be real (1471)
WON: Petitioner, as seller, forged a perfect contract to sell over a
real property to respondents, as buyer. Art. 1471. If the price is simulated, the sale is void, but the act may
be shown to have been in reality a donation, or some other act or
HELD: We agree with petitioner’s contention that, for a perfected contract.
contract of sale or contract to sell to exist in law, there must be an
agreement of the parties, not only on the price of the property sold, -price is real- when at the perfection of the sale, there is legal
but also on the manner the price is to be paid by the vendee. intention on the part of the buyer to pay the price and the legal
expectation on the part of the seller to receive such price as the
A definite agreement as to the price is an essential element of a value of the subject matter he obligates himself to deliver.
binding agreement to sell personal or real property because it
seriously affects the rights and obligations of the parties. Price is an -price is false- the contract is valid but subject to reformation to
essential element in the formation of a binding and enforceable indicate the real price upon which the minds of the parties have
contract of sale. The fixing of the price can never be left to the met.
decision of one of the contracting parties. But a price fixed by one of a.) Effect if price is simulated- produces no effect.

BY: AMaWS
Cruzado v. Bustos, G. R. No. 10244, February 29, 1916s That the contract of purchase and sale, as consensual, is perfected
FACTS:Counsel for the plaintiff Santiago Cruzado filed a written by consent as to the price and the thing and is consummated by the
complaint on October 8, 1910, amended on September 25, 1913, in reciprocal delivery of the one and the other, the full ownership of
which he alleged that plaintiff was the owner of certain rural the thing sold being conveyed to the vendee, from which moment
property situated in the barrio of Dolores, formerly San Isidro, of the the rights of action derived from this right may be exercised.
municipality of Bacolor, Pampanga, containing an area of 65 balitas It is, then, of the utmost importance to examine whether in the said
and bounded as set forth in the complaint; that Estafania Bustos, sale the purchase price was paid and whether the vendee took
during her lifetime, and now the administrator of her estate, possession of the land supposed to have been sold.
together with the other defendant, Manuel Escaler, had, since the b.) Effect if there is no consideration – null and void (non-
year 1906 up to the present, been detaining the said parcel of land, existence of the contract).
and had refused to deliver the possession thereof to plaintiff and to
recognize his ownership of the same, notwithstanding the repeated Doles v. Angeles, G. R. No. 149353, June 26, 2006
demands made upon them; that by such detention, the plaintiff had FACTS:On April 1, 1997, Ma. Aura Tina Angeles (respondent) filed
suffered losses and damages to the amount of P3,500. He therefore with the RTC a complaint for Specific Performance with Damages
asked for judgment declaring plaintiff to be the owner of the said against Jocelyn B. Doles (petitioner), docketed as Civil Case No.
parcel of land and ordering defendants to return it to plaintiff and to 97-82716. Respondent alleged that petitioner was indebted to the
pay the latter P3,500 for losses and damages, and the costs. former in the concept of a personal loan amounting to P405,430.00
WON: The deed of sale of 65 balitas of land situated in the representing the principal amount and interest; that on October 5,
municipality of Bacolor, Pampanga, executed by Estefania Bustos, 1996, by virtue of a "Deed of Absolute Sale", petitioner, as seller,
with the assistance of her husband Bernardino Dizon, in favor of ceded to respondent, as buyer, a parcel of land, as well as the
Agapito Geronimo Cruzado, for the sum of P2,200, was simulated. improvements thereon, with an area of 42 square meters, covered by
Transfer Certificate of Title No. 382532,4 and located at a
HELD: The simulation of the said sale was effected by making a subdivision project known as Camella Townhomes Sorrente in Bacoor,
pretended contract which bore the appearance of truth, when really Cavite, in order to satisfy her personal loan with respondent; that
and truly there was no contract, because the contracting parties did this property was mortgaged to National Home Mortgage Finance
not in fact intend to execute one, but only to formulate a sale in Corporation (NHMFC) to secure petitioner’s loan in the sum of
such a manner that, for the particular purposes sought by Bustos and P337,050.00 with that entity.
Cruzado, it would appear to have been celebrated solely that
Cruzado might hold his office of procurador on the strength of the WON: The contract of sale on the parcel of land was executed for a
security afforded by the value of the land feignedly sold. cause.
This action is of course improper, not only because the sale was HELD: Since the sale is predicated on that loan, then the sale is void
simulated, but also because it was not consummated. The price of for lack of consideration.
the land was not paid nor did the vendee take possession of the In view of these anomalies, the Court cannot entertain the possibility
property from the 7th of September, 1875, when the said sale was that respondent agreed to assume the balance of the mortgage loan
feigned, until the time of his death; nor did any of his successors, which petitioner allegedly owed to the NHMFC, especially since the
nor the plaintiff himself until the date of his claim, enter into record is bereft of any factual finding that petitioner was, in the first
possession of the land. place, endowed with any ownership rights to validly mortgage and

BY: AMaWS
convey the property. As the complainant who initiated the case, service by another. In this case, the cause of the contract of sale
respondent bears the burden of proving the basis of her complaint. consisted not in the stated peso value of the land, but in the
Having failed to discharge such burden, the Court has no choice but expectation of profits from the subdivision project, for which the
to declare the sale void for lack of cause. And since the sale is void, land was intended to be used. As explained by the trial court, "the
the Court finds it unnecessary to dwell on the issue of whether land was in effect given to the partnership as [petitioner's]
duress or intimidation had been foisted upon petitioner upon the participation therein. . . . There was therefore a consideration for
execution of the sale. the sale, the [petitioners] acting in the expectation that, should the
b. In money or its equivalent (1458) venture come into fruition, they [would] get sixty percent of the net
profits."
Torres vs CA
-expectations of profits from the subdivision projects is a valid form
Facts: of consideration.
Petitioners and respondent entered into a joint venture agreement -it is sufficient if it can be determined by the stipulations of the
for the development of a parcel land located at Lapu-Lapu City contract made by the parties thereto/ by reference to an agreement
island of Mactan into a subdivision. Pursuant to the contract, incorporated in the contract.
petitioners executed a deed of sale covering the said parcel of land
in favor of the respondent, who then had it registered in his name. 3. Certain or ascertainable (determinable)
Thereafter, respondent mortgaged the property in the bank, and a.) How determined
according to the joint agreement, the money obtained amounting to i. By a third person (1469, pars. 1, 2, 4)
P40,000.00 was to be used for the development of the subdivision.
However, the project did not push through, and the land was aa) If the third person is unable or unwilling to fix the price,
subsequently foreclosed by the bank. Because of this, petitioners the contract is inefficacious unless the parties come to an agreement
filed a civil case before the Regional Trial Court of Cebu City, which
was later dismissed by the trial court. On appeal, the Court of
Appeals affirmed the decision of the trial court. The appellate court
held that the petitioner and respondent had formed a partnership for Barreto v. Sta. Marina, G. R. No. L-8169, December 29, 1913
the development of the subdivision. Thus, they must bear the loss
(***CAVEAT EMPTOR: PLS READ THE FULL TEXT. CASE DOCTRINE
suffered by the partnership in the same proportion as their share in
RELATED TO SALES NOT CLEARLY ESTABLISHED IN THE CASE……)
the profits stipulated in the contract. Aggrieved by the decision,
petitioner filed the instant petition contending that the Court of FACTS: The La Insular cigar and cigarette factory is a joint account
Appeals erred in concluding that the transaction between the association with a nominal capital of P865,000, the plaintiff’s share
petitioners and respondent was that of a joint venture/partnership. being P20,000, or 4/173 of the whole. On March 14, 1910, the
plaintiff’s attorneys wrote the defendant’s local representative a
SC: The Joint Venture Agreement clearly states that the
letter offering to sell to the defendant plaintiff’s participation in the
consideration for the sale was the expectation of profits from the
factory. The result of the correspondence between the parties and
subdivision project. Its first stipulation states that petitioners did not
their representatives was that Exhibit G was duly executed on May 3,
actually receive payment for the parcel of land sold to respondent.
1910. In accordance with the terms of this exhibit a committee of
Consideration, more properly denominated as cause, can take
appraisers was appointed to ascertain and fix the actual value of La
different forms, such as the prestation or promise of a thing or
Insular. The committee rendered its report on November 14, 1910,

BY: AMaWS
fixing the net value at P4,428,194.44. Of this amount 4/173 part Cristina," located at No. 36 Calle Echague, Plaza de Goiti, Santa Cruz
represented the plaintiffs’s share on his P20,000 of the nominal district, this city, said sale including the trade-mark "La Maria
capital. In Exhibit J which was executed on November 22, 1910, the Cristina," which was been duly registered, the stock of tobacco in
plaintiff acknowledged to have received from the defendant that leaf and manufacture, machinery, labels, wrappers, furniture,
amount. fixtures, and everything else belonging to the said factory, as shown
Subsequently to the execution of Exhibit J, demand was made by the in the inventory to be drawn up for the purpose of making formal
plaintiff upon the defendant for his share of the profits from June delivery of the said property.
30, 1909, to November 22, 1910. This demand was refused and This sum is subject to modification, in accordance with the result
thereupon this action was instituted to recover said profits. Upon the shown by the inventory to be drawn up. In this inventory the value of
evidence submitted at the hearing, the court below held: (1) That each individual piece of furniture will be fixed at 10 per cent below
the agreement of May 3, 1910, was by its terms a contract to sell in the price shown in the partnership inventory. The machinery and cost
the future and did not pass title and (2) that the sale of plaintiff’s of installing the same will also be fixed at 10 per cent below its
interest did not include the profits in question. Judgment was invoice price. The value of the tobacco, both in leaf and in process
rendered accordingly, with interest and cost. The defendant of manufacture, boxes, labels, wrappers, cigars, cigarettes, and
appealed. paper mouthpieces for cigarettes will be fixed at the invoice price.
SC: It was the appraisers who were appointed to ascertain and fix The value of tobacco made up into cigars will be fixed in accordance
the total net value of the factory for the purpose of determining the with the price list of the partnership, less 20 per cent discount. The
true present value of the interest. cigars will be inventoried at the prices in the same list, less a
discount of 35 per cent. The P20,000 mentioned as the value of the
- The appraiser was the one who determined the total net value of trade-mark will, however, remain unchanged.
the shares of the company and thereafter that of Bareto’s share.
In December, 1901, the plaintiff, with others, organized a
ii. By the Courts (1469, par. 3) if there is bad faith or mistake of company, to which the plaintiff sold all the tobacco bought by him
the third party fixing the price from the defendant. The purchaser, the new company, on examining
iii) By reference to a definite day, a particular exchange or these two lots, rejected them because the tobacco was not of the
market (1472) quality indicated in the inventory. Thereupon the plaintiff, claiming
that the tobacco in these two lots was worthless, brought this action
iv) By reference to invoices against the defendant to recover what he paid.
McCulough v. Aenlle & Co.,G. R. No. 1300, February 3, 1904 WON: There was a perfected contract of sale entered into by the
FACTS:For the purpose of carrying into effect the said contract of parties on August 27,1901.
sale entered into with the other party hereto, said Francisco HELD: The document of August 27 was a completed contract of sale.
Gonzalez y de la Fuente and Don Antonio la Puente y Arce, in the The articles which were the subject of the sale were definitely and
name and on behalf of the mercantile partnership denominated R. finally agreed upon. The appellee agreed to buy, among other things,
Aenlle & Co., by virtue of the powers conferred upon them and in all of the leaf tobacco in the factory. This was sufficient description
compliance with the instructions given them by Don Matias Saenz de of the thing sold. The price for each article was fixed. It is true that
Vizmanos y Lecaros, the manager of the said partnership, solemnly the price of this tobacco, for example, was not stated in dollars and
declare that they sell, absolutely and in fee simple, to E. C. cents in the contract. But by its terms the appellee agreed to pay
McCullough, the tobacco and cigarette factory known as "La Maria therefor the amount named in the invoices then in existence. The

BY: AMaWS
price could be made certain by a mere reference to those invoices. which the plaintiff has established in this case is therefore clearly
By the instrument of August 27 the contract was perfected and independent of the main contract of conveyance, and evidence of
thereafter each party could compel the other to fulfill it. By its such verbal contract is admissible under the doctrine above stated.
terms the appellee was bound to take all the leaf tobacco then The rule that a preliminary or contemporaneous oral agreement is
belonging to the factory and to pay therefor the prices named in the not admissible to vary a written contract appears to have more
invoices. This obligation was absolute and did not depend at all upon particular reference to the obligation expressed in the written
the quality of the tobacco or its value. The appellee did not, in this agreement, and the rule had never been interpreted as being
contract, reserve the right to reject the tobacco if it were not of a applicable to matters of consideration or inducement. In the case
specific crop. He did not buy tobacco of a particular kind, class, or before us the written contract is complete in itself; the oral
quality. He bought all the tobacco which the appellant owned and agreement is also complete in itself, and it is a collateral to the
agreed to pay for it what the defendant had paid for it. The plaintiff written contract, notwithstanding the fact that it deals with related
testified that this was the express agreement. matters.
v) By reference to the application of known factors, e.g. “in A contract for the sale of goods, chattels or things in action, at a
proportion to variations in calories and ash content of coal”2.) price of not less than P100, shall be unenforceable unless the
Effect of indeterminability –contract is inefficacious contract, or some note or memorandum thereof shall be in writing
and subscribed by the party charged, or by his agent; and it is
Robles v. Lizarraga Hermanos, G. R. No. L-26173, July 13, 1927 insisted that the court erred in admitting proof of a verbal contract
(Sale of Improvements introduced in Hacienda) over the objection of the defendant's attorney. But it will be noted
that the same subsection contains a qualification, which is stated in
FACTS:This action was instituted in the Court of First Instance of these words, "unless the buyer accept and receive part of such goods
Occidental Negros by Zacarias Robles against Lizarraga Hermanos, a and chattels." In the case before us the trial court found that the
mercantile partnership organized under the laws of the Philippine personal property, consisting of farming implements and other
Islands, for the purpose of recovering compensation for movables placed on the farm by the plaintiff, have been utilized by
improvements made by the plaintiff upon the hacienda "Nahalinan" the defendant in the cultivation of the hacienda, and that the
and the value of implements and farming equipment supplied to the defendant is benefiting by those things.
hacienda by the plaintiff, as well as damages for breach of contract.
Upon hearing the cause the trial court gave judgment for the We are of the opinion that the stipulation with respect to the
plaintiff to recover of the defendant the sum of P14,194.42, with appraisal of the property did not create a suspensive condition. The
costs. From this judgment the defendant appealed. true sense of the contract evidently was that the defendant would
take over the movables and the improvements at an appraised
WON: The petitioner is allowed to recover the value of the valuation, and the defendant obligated itself to promote the
improvements. appraisal in good faith. As the defendant partially frustrated the
HELD: In the case before us the deed of conveyance purports to appraisal, it violated a term of the contract and made itself liable
transfer to the defendant only such interests in certain properties as for the true value of the things contracted about, as such value may
had come to the conveyors by inheritance. Nothing is said concerning be established in the usual course of proof. Furthermore, it must
the rights in the hacienda which the plaintiff had acquired by lease occur to any one, as the trial judge pointed out, that an unjust
or concerning the things that he had placed thereon by way of enrichment of the defendant would result from allowing it to
improvement or had acquired by purchase. The verbal contract appropriate the movables without compensating the plaintiff
thereof.

BY: AMaWS
The fourth assignment of error is concerned with the improvements. independent judgment concerning the transaction, is not sufficient
Attention is here directed to the fact that the improvements placed ground for the cancellation of a contract.
on the hacienda by the plaintiff became a part of the realty and as
such passed to the defendant by virtue of the transfer effected by Aguilar v. Rubiato
the three owner in the deed of conveyance (Exhibit B.). It is
therefore insisted that, the defendant having thus acquired the Facts: Rubiato was the owner of parcels of land and was desirous of
improvements, the plaintiff should not be permitted to recover their obtaining a loan. He thereafter signed a power of attorney in favor
value again from the defendant. This criticism misses the point. of a certain Vila to secure a loan and to execute any writing for the
There can be no doubt that the defendant acquired the fixed mortgage of land. Vila pursuant to the power of attorney then sold
improvements when it acquired the land, but the question is the land to Aguilar, with the right of repurchase within one year and
whether the defendant is obligated to indemnify the plaintiff for his Rubiato was to remain in possession of the land as lessee. One year
outlay in making the improvements. It was upon the consideration of expired and Aguilar filed a case to consolidate ownership over the
the defendant's promise so to indemnify the plaintiff that the latter lands.
agreed to surrender the lease nearly two no doubt as to the validity Issue :Whether the contract was of sale or loan.
of the promise made under these circumstances to the plaintiff.
Held: LOAN
3) Effect of inadequacy of price (1470) does not affect the
contract, but may show vice of consent (1470). Refer to In addition to the evidence, there is one very cogent reason which
inadequacy of cause in general, Art. 1355. impels us to the conclusion that Rubiato is only responsible to the
plaintiff for a loan. It is — that the inadequacy of the price which
Art. 1470. Gross inadequacy of price does not affect a contract of Vila obtained for the eight parcels of land belonging to Rubiato is so
sale, except as it may indicate a defect in the consent, or that the great that the minds revolts at it.
parties really intended a donation or some other act or contract. Xxx The members of this court after most particular and cautious
-it does not affect the contract but may show vice of consent. consideration, having in view all the facts and all the naturals
tendencies of mankind, consider that Rubiato is only responsible to
-the offended party may invoke Art. 19 of the NCC ( Abuse of Right the plaintiff for the loan of P800.
Principle)
Askay v. Cosolan 4) Effect of Failure of Consideration
Facts: Askay obtained a title to the Mineral Claim which he allegedly
sold to Cosalan. It was alleged that there is inadequacy of the Sps. Buenaventura v. CA
consideration for transfer which, according to the deed of Facts: Sps Leonardo Joaquin & Feliciano Landrito are the parents of
conveyance, and to the oral testimony, consisted of P107.00 in cash, petitioners. Petitioners assail the sale of several lands by their
a bill fold, one sheet, one cow and two carabaos. parents to their other siblings (see p. 265 for complete list of sales
Issue: WON the sale is valid. made) for being void ab initio based on the ff grounds:
Held: YES 1. no actual valid consideration
The fact that the bargain is a hard one, coupled with mere 2. properties are more than 3x more valuable than the measly
inadequacy of price when both parties are in a position to form an purchase price (purchase price was grossly inadequate)

BY: AMaWS
3. deeds of sale do not reflect & express the true intent of the parties to the agreement or are bound either principally/subsidiarily.
parties Parties must have a present substantial interest & not merely
4. deliberate conspiracy designed to unjustly deprive the rest of the expectancy/future contingent subordinate or consequential interest.
compulsory heirs of their legitime. In this case, the petitioners only have an inchoate rt w/c vests only
Defense of the respondents: upon the death of their parents. Besides, sale of the lots to their
siblings does not affect the value of their parents’ estate since the
1. no cause of action, requisite standing & interest lots are replaced with cash of equivalent value.
2. sales were w/sufficient considerations & made by their parents 2. WON the deeds of sale are void for lack of consideration. – NO.
voluntarily in good faith & w/full knowledge of the consequences
A contract of sale is not a real contract but a consensual contract.
3. certificates of title were issued w/factual & legal basis. It’s binding & valid upon the meeting of the minds as to the price
Trial court dismissed the case WRT Gavino Joaquin & Lea Asis. Ruled regardless of the manner of payment or breach of such. It’s still valid
in favor of the respondents & dismissed the complaint. even if the real price is not stated in the contract, making it subject
to reformation. But if the price is simulated, there is no meeting of
1. The right of the compulsory heirs to a legitime is contingent & it the minds, thus the contract is void (CC Art. 1471).
only commences from the moment of the death of the decedent (CC
Art. 777). The value of the property left at the death of the testator Act of payment of the price does not determine the validity of a
is the basis for determining the legitime (Art. 908). Plaintiffs cannot contract of sale. Failure to pay the consideration is different from
claim an impairment of their legitime since their parents are still lack of consideration. The former results in a rt to demand
alive. fulfillment or cancellation of the contract while the latter prevents
the existence of a valid contract.
2. Deeds of Sale were executed for valuable consideration.
Petitioners failed to show that the prices in the deeds of sale were
CA affirmed Trial Court decision. In addition to the grounds stated by simulated. They don’t even know the financial capacity of their
the trial court, CA also mentioned that: siblings to buy these lots. Respondents’ minds met as to the purchase
1. While still alive, parents are free to dispose of their properties price w/c was stated in the deeds of sale & the buyer siblings have
provided such is not done in fraud of creditors. paid the price to their parents.
2. Petitioners are not parties in interest since they’re not parties to 3. WON the Deeds of Sale are void for gross inadequacy of the price.
the deeds of sale nor are they creditors of their parents. – NO.
Issues : CC Art. 1355: Except in cases specified by law, lesion/ INADEQUACY
OF CAUSE shall not invalidate a contract, unless there has been
1.WON petitioners have a legal interest over the properties subject
fraud, mistake or undue influence.
of the Deeds of Sale. – NO.
CC Art. 1470: Gross inadequacy of price doesn’t affect a contract of
The complaint betrays their motive for filing the case. They are
sale, except as may indicate a defect in the consent or that the
interested in obtaining the properties by hereditary succession but
parties really intended a donation or some other act or contract.
they have failed to show any legal right to these properties.
Petitioners failed to prove any instance in the aforementioned
Real party-in-interest is one who is either benefited or injured by the
provisions that would invalidate the deeds of sale. There is no
judgment of the party entitled to the avails of the suit. This includes
requirement that the price be equal to the exact value of the

BY: AMaWS
property on sale. It only matters that all respondents believed that amount of P100,000 paid by the corporation. Their contention was
they received the commutative value of what they gave. that the contract to sell was void because the signatures made by
Vales vs. Villa: Courts cannot be guardians of people who are not the siblings were not for consent to sell the property, assuming the
legally incompetent. Courts operate not because a person has been signatures indicate consent, the contract was subject to a suspensive
defeated/overcome by another, but because he has been defeated or condition which is the approval of the sale by all the co-owners
overcome ILEGALLY. There should be a violation of the law, which did not occur because two of the siblings did not approve of
commission of what the law knows as an actionable wrong, before the sale; lastly, that it is void for it is a unilateral promise to sell
the courts are authorized to lay hold of the situation & remedy it. without consideration distinct from price.
Note: Failure of consideration is different from the lack of Held: As to the last contention, the court ruled that the contract to
consideration, the former results in a right to demand the sell is not a unilateral promise to sell:
fulfillment/ cancellation of the obligation under the existing valid In the instant case, the consideration of P100,000.00 paid by
contract. This is different from lack of consideration w/c prevents respondent to petitioners was referred to as "option money."
the existence of a valid contract. However, a careful examination of the words used in the contract
B. Effect of earnest money (1482) indicates that the money is not option money but earnest money.
"Earnest money" and "option money" are not the same but
Art. 1482. Whenever earnest money is given in a contract of sale, it distinguished thus: (a) earnest money is part of the purchase price,
shall be considered as part of the price and as proof of the while option money is the money given as a distinct consideration for
perfection of the contract an option contract; (b) earnest money is given only where there is
a. It is considered part of the price, unless the contract is otherwise already a sale, while option money applies to a sale not yet
b. It is proof of perfection of the contract perfected; and, (c) when earnest money is given, the buyer is bound
to pay the balance, while when the would-be buyer gives option
Earnest money- it is something of value that the buyer was really in money, he is not required to buy, but may even forfeit it depending
earnest and given after the perfection of the contract. on the terms of the option.20
-part of the purchase price. The sum of P100,000.00 was part of the purchase price. Although the
same was denominated as "option money," it is actually in the nature
Option money- distinct consideration. of earnest money or down payment when considered with the other
terms of the contract. Doubtless, the agreement is not a mere
unilateral promise to sell, but, indeed, it is a Contract to Sell as both
Oesmer v. Paraiso Devt Corp the trial court and the appellate court declared in their Decisions.
Facts: Petitioners in this case are brothers and sisters and the co-
owners of undivided shared is parcels of land originally owned by Manila Metal Container Corporation v. PNB
their parents. One the petitioners, Ernesto, met with the President
of Paraiso for purpose of brokering the sale of petitioners’ properties Facts: Petitioner was the owner of a parcel of land and to be able to
to respondent corp. A contract to sell was the executed, signed by secure a loan from PNB, petitioner executed a real party mortgage
the siblings except Adolfo and Jesus. An amount of P100,000 was also over the land. For its failure to pay, PNB foreclose the mortgaged
given as option money. Later however, petitioners informed PAraiso and sold at public auction for which PNB was the winning bidder,
of their intention to rescind the Contract to sell and to return the with a one year period of redemption by the petitioner. Petitioner
requested that there be an extension of time to redeem the property

BY: AMaWS
and it allowed to repurchase the property on installment. Facts: Caguiat offered to buy the lot owned by spouses Serrano.
Meanwhile,the Special Assets Management Department had prepared Respondent gave P100K as partial payment, in turn, petitioners gave
a statement of accountof the petitioner’s obligation to which a receipt with a statement that respondent promised to pay the
amounted to 1.5M. petitioner thereafter remitted thte amount of balance of the purchase price. Respondents were leaving for abroad
800,000 as deposit to repurchase the property. When SAMD and sought to cancel the transaction. Petitioners contend that there
recommended to the management of the PNB that petitioner be is no perfected contract as there was no clear agreement between
allowed to repurchase the property at 1.5M, the management the parties as to the amount of consideration.
rejected and suggested that the property be purchased at 2.7M SC: In holding that there is a perfected contract of sale, both courts
which was later reduced to 1.9M. But petitioner refused. mainly relied on the earnest money given by respondent to
Petitioner now filed a case for delivery of title, annulment of petitioners (Art. 1482). We are not convinced.
mortgage and specific performance with damages. It was its
contention that it already accepted the offer of SAMD to sell the It is true that Article 1482 of the Civil Code provides that “Whenever
property at 1.5M, hence, PNB could no longer unilaterally withdraw earnest money is given in a contract of sale, it shall be considered as
its offer to sell the property. Its acceptance of the offer resulted in a part of the price and proof of the perfection of the contract.”
perfected contract of sale. However, this article speaks of earnest money given in a contract of
Respondent contended that the parties never graduated for the sale. In this case, the earnest money was given in a contract to sell.
negotiation stage – all that transpires was an exchange of proposal The earnest money forms part of the consideration only if the sale is
and counter-proposals and nothing more. There was still no consummated upon full payment of the purchase price. Now, since
agreement as to the amount and the manner of payment. The the earnest money was given in a contract to sell, Article 1482,
account made by SAMD cannot be classified as counter-offer because which speaks of a contract of sale, does not apply.
it was merely recital of facts of the obligations of petitioners. As previously discussed, the suspensive condition (payment of the
balance by respondent) did not take place. Clearly, respondent
Issue: WON the P800,000 deposited is an earnest money. cannot compel petitioners to transfer ownership of the property to
Held -NO him.
The P800,000 could not be considered as an earnest money because
an earnest money forms part of the purchase price. In this case, it ARTICLES 1475-1488
did not. The P800,000 was merely a deposit that was accepted by
PNB on the condition that the purchase price is subject to the I. RULES IN ORDINARY SALES
approval of the PNB Board. A. Form
a. General Rule (1483)
Note: absence of proof of the concurrence of all the essential
elements of a contract of sale, the giving of earnest money cannot Art. 1483. Subject to the provisions of the Statute of Frauds and of
establish the existence of a perfected contract of sale. any other applicable statute, a contract of sale may be made in
writing, or by word of mouth, or partly in writing and partly by word
of mouth, or may be inferred from the conduct of the parties. (n)
Serrano v Caguiat G.R. No. 139173 -written agreement is not essential
-sale is consensual contract

BY: AMaWS
1. Verbal agreement of sale Naranja v. CA
Caoili v. CA Facts: Roque Naranja was the registered owner of a parcel of land,
FACTS: Caoili was a lessee in the property of respondent. denominated as Lot No. 4 in Consolidation-Subdivision Plan (LRC)
Respondent borrowed money from Caoili in the amount of Php 30,000 Pcs-886, Bacolod Cadastre, with an area of 136 square meters and
which they stipulated would form part of their rentals. When rentals covered by Transfer Certificate of Title (TCT) No. T-18764. Roque was
was paid off, they entered into a “not formal or written contract” on also a co-owner of an adjacent lot, Lot No. 2, of the same
the sale of the property. They executed a "Receipt" denominated as subdivision plan, which he co-owned with his brothers, Gabino and
an "Addendum to Agreement dated August 8, 1990". It was stated Placido Naranja. When Placido died, his one-third share was
they received from petitioners the sum of P140,000.00, in addition inherited by his children, Nenita, Nazareto, Nilda, Naida and
to the partial payment of P60,000.00, the "balance payable when the Neolanda, all surnamed Naranja, herein petitioners. Lot No. 2 is
good title in the name of herein vendor is delivered to the spouses." covered by TCT No. T-18762 in the names of Roque, Gabino and the
Yet respondent refused to execute document. Respondent says that said children of Placido. TCT No. T-18762 remained even after
the Php 140,000 was for improvements and the Php 60,000 served as Gabino died. The other petitioners — Serafin Naranja, Raul Naranja,
rental on the period they haven’t paying their rentals (amounts were and Amelia Naranja-Rubinos — are the children of Gabino.
claimed as partial payments by Caoili. RTC and CA both decided in Roque had no other source of income except for the P200.00 monthly
favor of Caoili yet CA reduced the amount awarded. rental of his two properties. To show his gratitude to Belardo, Roque
Held: sold Lot No. 4 and his one-third share in Lot No. 2 to Belardo on
August 21, 1981, through a Deed of Sale of Real Property which was
• 1. (Not made in writing) The absence of a formal deed of sale duly notarized by Atty. Eugenio Sanicas. The Deed of Sale reads:
does not render the agreement null and void or without any effect.
The provision of Article 1358 of the Civil Code on the necessity of a I, ROQUE NARANJA, of legal age, single, Filipino and a resident of
public document is only for convenience, not for validity or Bacolod City, do hereby declare that I am the registered owner of
enforceability. It does not mean that no contract has been perfected Lot No. 4 of the Cadastral Survey of the City of Bacolod, consisting of
so long as the essential requisites of consent of the contracting 136 square meters, more or less, covered by Transfer Certificate of
parties, object, and cause of the obligation concur. Under the Title No. T-18764 and a co-owner of Lot No. 2, situated at the City of
agreement, private respondent was obligated to deliver a good title Bacolod, consisting of 151 square meters, more or less, covered by
to petitioners and this condition is the operative act which would Transfer Certificate of Title No. T-18762 and my share in the
give rise to the corresponding obligation of petitioners to pay the aforesaid Lot No. 2 is one-third share.
balance of the purchase price. Since it is not disputed that private Issue:
respondent has not delivered a good title, petitioners have by law W/N the sale was valid.
the right to either refuse to proceed with the agreement or to waive
that condition pursuant to Article 1545 of the Civil Code. Held:
• 2. The Addendum being notarized is a prima facie evidence of • To be valid, a contract of sale need not contain a technical
the facts stated therein. description of the subject property. Contracts of sale of real
property have no prescribed form for their validity; they follow the
general rule on contracts that they may be entered into in whatever
2. Effect of lack of technical description in the contract form, provided all the essential requisites for their validity are

BY: AMaWS
present. The failure of the parties to specify with absolute clarity • Realty- a sale of real property orally is valid. The buyer may
the object of a contract by including its technical description is of no compel the seller to execute a formal deed of sale to be
moment. What is important is that there is, in fact, an object that is enforceable.
determinate or at least determinable, as subject of the contract of • Goods and chattels at a price of not less than P 500.
sale. The deed of sale clearly identifies the subject properties by
indicating their respective lot numbers, lot areas, and the certificate 2) Sale of land through an Agent (1874) – authority shall be in
of title covering them. writing.
• One who alleges any defect, or the lack of consent to a B. Perfection of a contract of sale (Art. 1475)
contract by reason of fraud or undue influence, must establish by - At the moment there is a meeting of the minds (consensual)
full, clear and convincing evidence, such specific acts that vitiated
the party’s consent. Petitioners adduced no proof that Roque had - The parties may reciprocally demand performance, subject to the
lost control of his mental faculties at the time of the sale. Undue provisions of law governing the form of contracts
influence is not to be inferred from age, sickness, or debility of body, Requirements for perfection:
if sufficient intelligence remains.
a. When parties are face to face – when an offer is accepted
• The Deed of Sale which states “receipt of which in full I hereby without conditions nor qualifications
acknowledge to my entire satisfaction” is an acknowledgment
b. Thru correspondence or telegram – when the offeror has
receipt in itself. Moreover, the presumption that a contract has
knowledge of the acceptance
sufficient consideration cannot be overthrown by a mere assertion
that it has no consideration. c. When sale is subject to a suspensive condition – from the
moment the condition is fulfilled
• Heirs are bound by contracts entered into by their
predecessors-in-interest. Having been sold already to Belardo, the • Mere perfection of the contract does not necessarily transfer
two properties no longer formed part of Roque’s estate which ownership.
petitioners could have inherited.
b) Statute of Frauds applied Romulo Coronel, et al vs. CA and Alcaraz G.R. No. 103577,
Statute of Frauds applies only in cases for October 7, 1996
a) Specific performance, and FACTS: The Coronels sold their inherited house and lot to Ramona
Patricia Alcaraz, with the conditions that they will effect the
b) For damages based on breach of contract
transfer of the title from their deceased father to their names upon
Where the contract of sale has already been consummated, its receipt of the down payment, and after the transfer they will
enforcement cannot be barred by the Statute of Frauds, which execute a Deed of Sale in favor of Alcaraz. The conditions were
applies on executory agreement . embodied in a document labeled “Receipt of Down Payment.”
c)When form is essential Alcaraz paid, and the title was transferred in the Coronels’ name.
However, the Coronels sold the property to Catalina Mabanag,
1)Under the Statute of Frauds rescinded the contract with Alcaraz, and eventually executed a
Deed of Sale in favor of Mabanag. In the complaint for specific
performance filed against them, the Coronels contended that theirs

BY: AMaWS
was merely an executory contract to sell, hence there was no 2) Sale by description and/or sample (1481): The bulk of the
perfected contract of sale. goods must correspond to either or both.
HELD: The parties had agreed to a conditional contract of sale, b. Place of Perfection
consummation of which is subject only to the successful transfer of 1) where there was meeting of the minds
the certificate of title from the name of the petitioner’s father to
their names. 2) in case of acceptance through letter or telegram, in the place
where the offer was made.
Since the condition contemplated by the parties which is the
issuance of a certificate of title in petitioner’s names was fulfilled C. Expenses
on February 6, 1985, the respective obligations of the parties under a. Of Execution and Registration of the sale (1487) are borne by the
the contract of sale became mutually demandable. Seller
Note: even if document was denominated “ Receipt of down b. Of putting the goods in a deliverable state (1521, last par.)
payment” from that moment on, there was a perfected contract of are also borne by the Seller.
sale albeit conditional (i.e. transfer of title to heirs and payment of
balance of purchase price) II Rules on Special Sales
A.Sales at Auction
Manila Mining Corporation (MMC) vs. Miguel Tan G.R. No. 171702, a. Rules
February 12, 2009 a. Sales of separate lots are separate contracts of sale
FACTS: MMC ordered and received various electrical materials from b. When perfected – when the auctioneer announces its
Miguel Tan, and upon failure to pay the full amount despite several perfection by the fall of the hammer, or in other customary
demands, Tan filed a collection suit. MMC contended that the manner
absence of stamp marks on the original invoices and purchase
c. Before the fall of the hammer
orders negated the receipt of said documents by MMC’s
representatives, a requisite for payment. Having not received them • The bidder may retract his bid
thereby having no consent, their contract could not have been • The auctioneer may withdraw the goods from the sale
perfected.
EXCEPTION: If the auction has been announced to be without
HELD: The purchase orders constituted accepted offers when Tan reserve
supplied the electrical materials to MMC. Hence, petitioner cannot
evade its obligation to pay by claiming lack of consent to the d. Limitations of the seller:
perfected contracts of sale. The invoices furnished the details of 1. The seller himself cannot bid
the transactions.
2. He cannot employ or induce any person to bid on his
Note: the purchase orders constituted accepted offers when Tan behalf
supplied electrical materials to MMC.
EXCEPTION: If right to bid has been expressly reserved
1) The buyer has the right to a reasonable opportunity for
examination before acceptance (1584) except when a carrier e. Limitations of the auctioneer (if he is not the seller);
delivers “C.O.D.” 1. The auctioneer cannot bid

BY: AMaWS
2. He cannot employ or induce to bid on behalf of the o The auctioneer cannot bid
seller o He cannot employ or induce to bid on behalf of the seller
3. He cannot knowingly take any bid from the seller or o He cannot knowingly take any bid from the seller or any person
any person employed by him. employed by him
Cases: In an execution sale:
The sale by auction is perfected when the auctioneer announces its · Judgment Creditor will have a writ to garnish or attach the
perfection by the fall of the hammer or in other customary manner property of the debtor and sheriff sells it in a public sale
(Case: Dizon vs. Dizon – Considering that the auction sale has been
perfected, a supplemental sale with higher consideration at the · Judgment debtor has the right to redeem the property within 1
instance of only one party(herein petitioner) could no longer be year
validly executed) Note: The owner of the property offered for sale at auction has the
- Before the hammer falls: right to prescribed the manner, condition and terms of sale and
where these are reasonable and are made known to the buyer, they
o The bidder may retract his bid. The reason behind this is that every are binding upon them.
bidder is merely an offer and therefore, before it is accepted, it may
be withdrawn Q: Why can’t the seller participate in the bidding?
o The auctioneer may also withdraw the goods from the sale EXCEPT A: He cannot bid because in doing such he can manipulate the
if the auction has been announced to be WITHOUT RESERVE. biddings of other participants
2) Auction Sale where the seller reserved the right to reject any and Note: it is the seller who will set the terms and condition of the sale.
all the bids If the seller will bid in the auction without reserving such right and
informing the public, the sales will be considered as fraudulent.
Case: Leoquinco vs. Postal Savings Bank
Q: Will such fraud affect the perfection of the contract?
- Because of the expressed stipulation that PSB reserved to
themselves the right to reject any and all bids, the bid of petitioner A: Yes, the contract will be VOID with NO force and effect
may be rejected. Petitioner’s participation in the auction means B.Sales by sample and/ or description (1481)
submission or being bounded to the rules of auction whether the
purchaser knew the rules or not Sales by Sample and/or Description (1481)
- Limitations of the seller: a. The bulk of the goods must correspond to either or both
o The seller himself cannot bid b. The buyer must have an opportunity to compare
o He cannot employ or induce any person to bid on his behalf c. Effect: the contract may be rescinded at the option of the
(people who bid for the seller, but are not themselves bound, are buyer
called “by-bidders” or “puffers”) PACIFIC COMMERCIAL COMPAN vs. ERMITA MARKET & COLD STORES,
o EXCEPTION: if right to bid has been expressly reserved and that INC.
notice of such was given Plaintiff contracted to sell to defendant an automatic refrigerating
- Limitations of the auctioneer (if he is not the seller) machine as per description stated in the sales contract. The machine

BY: AMaWS
was delivered and by mutual agreement the vendor installed the mortgage on what remained of the wrecked automobile and brought
machine. The machine did not give the results expected from it, and this suit to recover the balance due on the promissory note executed
the defendant refused to pay the balance of its purchase price and in its favor.
the cost of the installation of the machine. Thereupon plaintiff In order to apply the provisions of article 1454-A of the Civil Code it
brought this action. must appear that there was a contract for the sale of personal
Held: The fact that the defendant could not use the machine property payable in installments and that there has been a failure to
satisfactorily in the three cold stores divisions cannot be attributed pay two or more installments.
to plaintiff's fault; the machine was strictly in accordance with the 2) Sale of car on straight term
written contract between the parties, and the defendant can hardly
honestly say that there was any deception by the plaintiff. LEVY HERMANOS V GERVACIO
Sale of Personalty payable by Installments (Recto Law) In Macondray & Co. vs. De Santos (33 OG 2170), it was held that “in
order to apply the provisions of article 1454-A of the Civil Code it
a. Alternative remedies in case of non-payment (1484) must appear that there was a contract for the sale of personal
1) To exact fulfillment of the obligation property payable in installments and that there has been a failure to
2) Cancel the sale should the vendee fail to pay two or pay two or more installments.” The contract, in the present case,
more installments while a sale of personal property, is not, however, one on
installments, but on straight term, in which the balance, after
i) This is an exception to 1191 payment of the initial sum, should be paid in its totality at the time
3) Foreclose the chattel mortgage (if one was specified in the promissory note.
constituted) should the vendee fail to pay two or more The transaction is not, therefore, the one contemplated in Act 4122
installments. But there may be no further action to and accordingly the mortgagee is not bound by the prohibition
recover the unpaid balance. A contrary stipulation is therein contained as to its right to the recovery of the unpaid
void. balance.
Cases: Theoretically, there is no difference between paying the price in two
1) Promissory note with chattel mortgage installments and paying the same partly in cash and partly in one
installment, in so far as the size of each partial payment is
MACONDRAY V DE SANTOS concerned; but in actual practice the difference exists, for,
Granting that there was a contract between the parties for the sale according to the regular course of business, in contracts providing
of personal property payable in installments, which does not clearly for payment of the price in two installments, there is generally a
appear in the record before this court, the complaint does not allege provision for initial payment.
nor does it appear in the record that there was a failure to pay A cash payment cannot be considered as a payment by installment,
twoor more installments. On the contrary the promissory note, and even if it can be so considered, still the law does not apply, for
copied in the complaint, was executed January 11, 1934, and, it requires non-payment of two or more installments in order that its
according to the complaint, on or about January 21, 1934,the provisions may be invoked. In the present case, only one installment
automobile, while in the possession of the defendant, was wrecked was unpaid.
and by reason of the failure of the defendant to replace said
automobile or to pay the value thereof the plaintiff foreclosed the

BY: AMaWS
3) Sale of Truck on installment where foreclosure was not HELD:
pursued The instant case is covered by the so-called "Recto Law", now Art.
SPOUSES ROMULO DE LA CRUZ and DELIA DE LA CRUZ, and DANIEL 1484 of the New Civil Code, which provides: "In a contract of sale of
FAJARDO vs. ASIAN CONSUMER AND INDUSTRIAL FINANCE personal property the price of which is payable in installments, the
CORPORATION and the HONORABLE COURT OF APPEALS, vendor may exercise any of the following remedies: (1) Exact
Facts: fulfillment of the obligation, should the vendee fail to pay; (2)
Cancel the sale, should the vendee's failure to pay cover two or more
On 22 September 1982, the spouses Romulo de la Cruz and Delia de installments; (3) Foreclose the chattel mortgage on the thing sold, if
la Cruz, and one Daniel Fajardo, petitioners herein, purchased on one has been constituted, should the vendee's failure to pay cover
installment basis one (1) unit Hino truck from Benter Motor Sales two or more installments. In this case, he shall have no further
Corporation (BENTER for brevity). To secure payment, they executed action against the purchaser to recover any unpaid balance of the
in favor of BENTER a chattel mortgage over the vehicle 1 and a price. Any agreement to the contrary shall be void." In this
promissory note for P282,360.00 payable in thirty (30) monthly jurisdiction, the three (3) remedies provided for in the "Recto Law"
installments of P9,412.00. 2 On the same date, BENTER assigned its are alternative and not cumulative; the exercise of one would
rights and interest over the vehicle in favor of private respondent preclude the other remedies. Consequently, should the vendee-
Asian Consumer and Industrial Finance Corporation (ASIAN for mortgagor default in the payment of two or more of the agreed
brevity). 3 Although petitioners initially paid some installments they installments, the vendor-mortgagee has the option to avail of any of
subsequently defaulted on more than two (2) installments. these three (3) remedies: either to exact fulfillment of the
Thereafter, notwithstanding the demand letter of ASIAN, 4 obligation, to cancel the sale, or to foreclose the mortgage on the
petitioners failed to settle their obligation. purchased chattel, if one was constituted. (Pacific Commercial Co.
On 26 September 1984, by virtue of a petition for extrajudicial vs. De la Rama)
foreclosure of chattel mortgage, the sheriff attempted to repossess It is thus clear that while ASIAN eventually succeeded in taking
the vehicle but was unsuccessful because of the refusal of the son of possession of the mortgaged vehicle, it did not pursue the
petitioner, Rolando de la Cruz to surrender the same. Hence, the foreclosure of the mortgage as shown by the fact that no auction
return of the sheriff that the service was not satisfied. LLpr sale of the vehicle was ever conducted. "Under the law, the delivery
On 10 October 1984, petitioner Romulo de la Cruz brought the of possession of the mortgaged property to the mortgagee, the
vehicle to the office of ASIAN and left it there where it was herein appellee, can only operate to extinguish appellant's liability if
inventoried and inspected. 5 the appellee had actually caused the foreclosure sale of the
mortgaged property when it recovered possession thereof.
On 27 November 1984, ASIAN filed an ordinary action with the court Consequently, in the case before Us, there being no actual
a quo for collection of the balance of P196,152.99 of the purchase foreclosure of the mortgaged property, ASIAN is correct in resorting
price, plus liquidated damages and attorney's fees. to an ordinary action for collection of the unpaid balance of the
Petitioners take exception. They nevertheless insist that he should purchase price.
not later be allowed to change course midway in the process, 4) MAGNA VS COLARINA
abandon the foreclosure and shift to other remedies such as
collection of the balance, especially after having recovered the “Undoubtedly the principal object of the above amendment
mortgaged chattel from them and while retaining possession thereof. (referring to Act 4122 amending

BY: AMaWS
Art. 1454, Civil Code of 1889) was to remedy the abuses committed Elisco Tool and Manufacturing Corp. vs. CA
in connection with the foreclosure of chattel mortgages. This Rolando Lantan was employed at the Elisco Tool Manufacturing Corporation as head
of its cash department. On January 9, 1980, he entered into an agreement with the
amendment prevents mortgagees from seizing the mortgaged company, called lease with option to buy car within 5 years. That owner ship shall
property, buying it at foreclosure sale for a low price and then retain with the company until full payment and all necessary expenses for
bringing the suit against the mortgagor for a deficiency judgment. maintenance shall be borne by the employee. Subsequently the company has ceased
The almost invariable result of this procedure was that the operation and the employee was laid off. It took the company 2 years to institute
mortgagor found himself minus the property and still owing proceedings.
• Sellers desirous of making conditional sales of their goods, but who do not
practically the full amount of his original indebtedness.” wish openly to make a bargain in that form, for one reason or another, have
In its Memorandum before us, petitioner resolutely declared that it frequently resorted to the device of making contracts in the form of leases
either with options to the buyer to purchase for a small consideration at
has opted for the remedy provided under Article 1484(3) of the Civil the end of term, provided the so-called rent has been duly paid, or with
Code, that is, to foreclose the chattel mortgage. stipulations that if the rent throughout the term is paid, title shall
It is, however, unmistakable from the Complaint that petitioner thereupon vest in the lessee. It is obvious that such transactions are leases
only in name. The so-called rent must necessarily be regarded as
preferred to avail itself of the first and third remedies under Article payment of the price in installments since the due payment of the
1484, at the same time suing for replevin. For this reason, the Court agreed amount results, by the terms of the bargain, in the transfer of
of Appeals justifiably set aside the decision of the RTC. Perusing the title to the lessee.
• The so-called monthly rentals are in truth form monthly amortization on
Complaint, the petitioner, under its prayer number 1, sought for the the price of the car. The contract being one of sale on installment, the
payment of the unpaid amortizations which is a remedy that is Court of Appeals correctly applied to it the following provisions of the Civil
provided under Article 1484(1) of the Civil Code, allowing an unpaid Code:
vendee to exact fulfillment of the obligation. At the same time, Art. 1484. In a contract of sale of personal property the price of which is
payable in installments, the vendor may exercise any of the following
petitioner prayed that Colarina be ordered to surrender possession of remedies:
the vehicle so that it may ultimately be sold at public auction, which (1) Exact fulfillment of the obligation, should the vendee fail to
remedy is contained under Article 1484(3). Such a scheme is not only pay;
irregular but is a flagrant circumvention of the prohibition of the (2) Cancel the sale, should the vendee's failure to pay cover two or
law. By praying for the foreclosure of the chattel, Magna Financial more installments;
(3) Foreclose the chattel mortgage on the thing sold, if one has
Services Group, Inc. renounced whatever claim it may have under been constituted, should the vendee's failure to pay cover two or
the promissory note. more installments. In this case, he shall have no further action
Article 1484, paragraph 3, provides that if the vendor has availed against the purchaser to recover any unpaid balance of the price.
Any agreement to the contrary shall be void.
himself of the right to foreclose the chattel mortgage, “he shall have • The remedies provided for in Art. 1484 are alternative, not cumulative.
no further action against the purchaser to recover any unpaid The exercise of one bars the exercise of the others. limitation applies to
balance of the purchase price. Any agreement to the contrary shall contracts purporting to be leases of personal property with option to buy by
be void.” In other words, in all proceedings for the foreclosure of virtue of Art. 1485. The condition that the lessor has deprived the lessee of
chattel mortgages executed on chattels which have been sold on the possession or enjoyment of the thing for the purpose of applying Art. 1485
was fulfilled in this case by the filing by petitioner of the complaint for
installment plan, the mortgagee is limited to the property included replevin to recover possession of movable property. By virtue of the writ
in the mortgage. of seizure issued by the trial court, the deputy sheriff seized the vehicle on
August 6, 1986 and thereby deprived private respondents of its use. The car
D. Leases of personalty with option to buy. was not returned to private respondent until April 16, 1989, after two (2)
Cases:

BY: AMaWS
years and eight (8) months, upon issuance by the Court of Appeals of a writ 1. industrial lots
of execution.
• The employee having found to have paid more than the value of the thing 2. commercial bldg..
P60,000 should be considered as payment of the full purchase price. It
further petitioner to pay private respondents the amount of P431.94 as 3. sales to tenants under RA 3844
excess payment, as well as rentals at the rate of P1,000 a month for b. Rules when the buyer has paid at least 2 years of installments.
depriving private respondents of the use of their car.
1.) Rights of Buyers –
PCI Leasing and finance vs. Giraffe X
Giraffe entered into an agreement with PCI leasing over 2 machines worth I. In case of default in payment Section 3 of R.A. No. 6552 provided
P8,000,000. Giraffe agreed to pay P116,878.21 monthly and P181,362 for the other for the rights of the buyer in case of default in the payment of
machine. It has also remitted the amount of P3,120,000 as goodwill. A year into the succeeding installments, where he has already paid at least two (2)
life of the lease agreement, respondent defaulted in paying the monthly rentals. PCI years of installments, thus:
Sued Giraffe for possession of the machineries and for payment of the remaining
term. (b) If the contract is cancelled, the seller shall refund to the buyer
Issue: Whether the underlying lease agreement are covered between 1484 and 1485 the cash surrender value of the payments on the property equivalent
of the New Civil Code? to fifty per cent of the total payments made; provided, that the
SC: Yes they are. Evidently the contract above is in reality an option to purchase
the equipment. actual cancellation of the contract shall take place after thirty days
The Recto Law from receipt by the buyer of the notice of cancellation or the
Art. 1484. In a contract of sale of personal property the price of which is payable in demand for rescission of the contract by a notarial act and upon full
installments, the vendor may exercise any of the following payment of the cash surrender value to the buyer."
3.) Foreclose the chattel mortgage on the thing sold, if one has been constituted,
should the vendee’s failure to pay cover two or more installments. In this case he Right to update payments
shall have no further action against the purchaser to recover any unpaid balance of
the price. Any agreement contrary shall be void.
Art. 1485. The preceding article shall be applied to contract purporting to be leases Right to assign/ reinstate contract (must be in Public document)
of personal property with the option to buy, when the leasor deprived the lesee of
the possession or enjoyment of the thing. Section 5. Under Section 3 and 4, the buyer shall have the right to
• Therefore Giraffe is not liable to pay for the remaining term since the sell his rights or assign the same to another person or to reinstate
machineries has been foreclosed. the contract by updating the account during the grace period and
• PCI LEASING- GIRAFFE lease agreement is in reality a lease with an option
to purchase the equipment. This has been made manifest by the actions of before actual cancellation of the contract. The deed of sale or
the petitioner itself, foremost of which is the declarations made in its assignment shall be done by notarial act.
demand letter to the respondent. There could be no other explanation than
that if the respondent paid the balance, then it could keep the equipment
1. The buyer has the right to sell/assign his right to another
for its own; if not, then it should return them. This is clearly an option to person (must be done by notarial act)
purchase given to the respondent. Being so, Article 1485 of the Civil Code 2. The buyer has the right to reinstate the contract by upgrading
should apply.
the account during the grace period and before actual
E. Sale of Real Property on Installments ( Maceda Law, RA 6552) cancellation of the contract.
Reality Installment Buyer Protection Act.
Right to advance payment w/out interest
a. Applicability- Real estate bought on installment basis.
"(a) To pay, without additional interest, the unpaid
Transactions covered: sale/ financing of real estate on installment installments due within the total grace period earned by him,
payments, including residential condominium apartments but:

BY: AMaWS
which is hereby fixed at the rate of one month grace period aa) After 30 days from receipt by the buyer of (notarized) notice of
for every one year of installment payments made; x x x cancellation; or
1. The buyer has the right to pay in advance any installment/ bb) After 30 days from receipt by the buyer of notarial demand for
the full balance of the purchase price anytime w/out interest rescission
and to have such full payment annotated in the certificate of *In both cases after full payment of cash surrender value
title.
c. When the buyer has paid less than two years installments
Section 6. The buyer shall have the right to pay in advance any
installment or the full unpaid balance of the purchase price any time 1) The buyer has at least 60 days grace period within which to
without interest and to have such full payment of the purchase price pay the installment due
annotated in the certificate of title covering the property. 2) After the grace period, contract may be cancelled as in “B”
NOTE: to be refunded of the cash surrender value of his payments if above
the contract is cancelled. (If the buyer fails to pay the installments due at the expiration of
i) Actual cancellation takes place: the grace period, the seller may cancel the contract after thirty days
from receipt by the buyer of the notice of cancellation or the
1)after 30 days from receipt of notice of cancellation by demand for rescission of the contract by a notarial act.)
notarial act.
Pagtalunan vs. De Manzano
2) upon full payment of cash surrender value.
(Patricio), petitioner’s stepfather and predecessor-in-interest,
Sale of real property on installments (Maceda Law [RA 6552]) entered into a Contract to Sell with respondent, wife of Patricio’s
a.When the buyer has paid at least two years of installments former mechanic, Teodoro Manzano, whereby the former agreed to
1)Rights of buyer: sell, and the latter to buy, a house and lot which formed half of a
parcel of land. The consideration of P17,800 was agreed to be paid
ii) Default in payment in the following manner: P1,500 as downpayment upon execution of
aa) To pay without additional interest, the unpaid installments (cash the Contract to Sell, and the balance to be paid in equal monthly
surrender value) within the grace period installments of P150 on or before the last day of each month until
fully paid.
bb) Grace period is one month for every year of installment
payments made It was also stipulated in the contract that respondent could
immediately occupy the house and lot; that in case of default in the
Limitation: The right can be exercised only once every 5 years payment of any of the installments for 90 days after its due date,
ii) Cancellation of sale the contract would be automatically rescinded without need of
judicial declaration, and that all payments made and all
aa) Up to 5 years installments, refund of 50% of payments
improvements done on the premises by respondent would be
bb) After 5 years of installments, additional 5%/year but shall considered as rentals for the use and occupation of the property or
not exceed 90% of total payments made payment for damages suffered, and respondent was obliged to
peacefully vacate the premises and deliver the possession thereof to
the vendor.
When cancellation takes effect:

BY: AMaWS
Petitioner claimed that respondent paid only P12,950. She allegedly Ramos vs Heruela
stopped paying after December 1979 due to personal problems with Down payments, deposits or options on the contract shall be
the petitioner. Petitioner asserted that when respondent ceased included in the computation of the total number of installments
paying her installments, her status of buyer was automatically made.
transformed to that of a lessee. Therefore, she continued to possess
the property by mere tolerance of Patricio. Sec. 4.In case where less than two years of installments were paid,
the seller shall give the buyer a grace period of not less than sixty
Issue: Whether the respondent has the right to occupy the premises? days from the date the installment became due. If the buyer fails to
SC: Yes, According to Republic Act No. 6552 -- "The Realty pay the installments due at the expiration of the grace period, the
Installment Buyer Protection Act," or more popularly known as the seller may cancel the contract after thirty days from receipt by the
Maceda Law buyer of the notice of cancellation or the demand for rescission of
(b) If the contract is cancelled, the seller shall refund to the buyer the contract by a notarial act.
the cash surrender value of the payments on the property equivalent In this case, the spouses Heruela paid less than two years of
to fifty percent of the total payments made and, after five years of installments. Thus, Section 4 of RA 6552 applies. However, there was
installments, an additional five percent every year but not to exceed neither a notice of cancellation nor demand for rescission by notarial
ninety percent of the total payments made: Provided, That the act to the spouses Heruela. In Olympia Housing, Inc. v. Panasiatic
actual cancellation of the contract shall take place after thirty days Travel Corp., 22 the Court ruled that the vendor could go to court to
from receipt by the buyer of the notice of cancellation or the demand judicial rescission in lieu of a notarial act of rescission.
demand for rescission of the contract by a notarial act and upon full However, an action for reconveyance is not an action for rescission.
payment of the cash surrender value to the buyer.9 The Court explained in Olympia:
The Court agrees with petitioner that the cancellation of the The action for reconveyance filed by petitioner was predicated on an
Contract to Sell may be done outside the court particularly when the assumption that its contract to sell executed in favor of respondent
buyer agrees to such cancellation. buyer had been validly cancelled or rescinded. The records would
However, the cancellation of the contract by the seller must be in show that, indeed, no such cancellation took place at any time prior
accordance with Sec. 3. to the institution of the action for reconveyance. . . .
Firstly the demand letter made by the petitioner to vacate the xxx xxx xxx
premises does not constitute notice of cancellation. Second . . . Not only is an action for reconveyance conceptually different
petitioner cannot insist on compliance with the requirement by from an action for rescission but that, also, the effects that flow
assuming that the cash surrender value payable to the buyer had from an affirmative judgment in either case would be materially
been applied to rentals of the property after respondent failed to dissimilar in various respects. The judicial resolution of a contract
pay the installments due. gives rise to mutual restitution which is not necessarily the situation
Therefore a deed of absolute sale shall be made after payment of that can arise in an action for reconveyance. Additionally, in an
purchase price. action for rescission (also often termed as resolution), unlike in an
action for reconveyance predicated on an extrajudicial rescission
c. Rules when the buyer has paid less than 2 years of installments (rescission by notarial act), the Court, instead of decreeing
( Refer to case below) rescission, may authorize for a just cause the fixing of a period. 23
1) where the buyer paid less than 2 years installments

BY: AMaWS
In the present case, there being no valid rescission of the contract to (b) If the contract is cancelled, the seller shall refund to the buyer
sell, the action for reconveyance is premature. Hence, the spouses the cash surrender value of the payments on the property equivalent
Heruela have not lost the statutory grace period within which to pay. to fifty per cent of the total payments made; provided, that the
The trial court should have fixed the grace period to sixty days actual cancellation of the contract shall take place after thirty days
conformably with Section 4 of RA 6552. from receipt by the buyer of the notice of cancellation or the
demand for rescission of the contract by a notarial act and upon full
2) Sale of subdivision lot on installments where the buyer defaulted. payment of the cash surrender value to the buyer."
We hold that the contract to sell between the parties remains valid
Active Realty Corporation vs. Daroya and subsisting. Following Section 3(a) of R.A. No. 6552, respondent
has the right to offer to pay for the balance of the purchase price,
ACTIVE REALTY & DEVELOPMENT CORPORATION entered into a without interest, which she did in this case. However since the lot
Contract to Sell1 with respondent NECITA DAROYA whereby the latter has been sold to another party it is only just and equitable that the
agreed to buy a 515 sq. m. lot for P224,025.00 in petitioner’s petitioner be ordered to refund to respondent the actual value of
subdivision to be paid in amortization within 5 years, valued at the lot resold, i.e., P875,000.00, with 12% interest per annum.
P346,367.00, a figure higher than that stated as the contract price.
The buyer defaulted in three (3) monthly amortizations. Petitioner
sent respondent a notice of cancellation2 of their contract to sell. F. PD No. 957
When respondent offered to pay for the balance of the contract a. Important provisions
price, petitioner refused as it has allegedly sold the lot to another Sec. 4, 5, 7,18,23 ,24 ,25
buyer. The respondent has already paid 4 years. already more than
the contract price. Section 4. Registration of Projects The registered owner of a parcel
of land who wishes to convert the same into a subdivision project
Issue: Whether or not the petitioner can be compelled to refund to shall submit his subdivision plan to the Authority which shall act upon
the respondent the value of the lot or to deliver a substitute lot at and approve the same, upon a finding that the plan complies with
respondent’s option? the Subdivision Standards' and Regulations enforceable at the time
SC: Yes, According to Republic Act No. 6552 -- "The Realty the plan is submitted. The same procedure shall be followed in the
Installment Buyer Protection Act," or more popularly known as the case of a plan for a condominium project except that, in addition,
Maceda Law said Authority shall act upon and approve the plan with respect to
More specifically, Section 3 of R.A. No. 6552 provided for the rights the building or buildings included in the condominium project in
of the buyer in case of default in the payment of succeeding accordance with the National Building Code (R.A. No. 6541).
installments, where he has already paid at least two (2) years of The subdivision plan, as so approved, shall then be submitted to the
installments, thus: Director of Lands for approval in accordance with the procedure
"(a) To pay, without additional interest, the unpaid installments due prescribed in Section 44 of the Land Registration Act (Act No. 496, as
within the total grace period earned by him, which is hereby fixed at amended by R.A. No. 440): Provided, that it case of complex
the rate of one month grace period for every one year of installment subdivision plans, court approval shall no longer be required. The
payments made; x x x condominium plan as likewise so approved, shall be submitted to the
Register of Deeds of the province or city in which the property lies
and the same shall be acted upon subject to the conditions and in

BY: AMaWS
accordance with the procedure prescribed in Section 4 of the mortgage contains a stipulation that the mortgagee shall release the
Condominium Act (R.A. No. 4726). mortgage on any subdivision lot or condominium unit as soon as the
The owner or the real estate dealer interested in the sale of lots or full purchase price for the same is paid by the buyer.
units, respectively, in such subdivision project or condominium The person filing the registration statement shall pay the registration
project shall register the project with the Authority by filing fees prescribed therefor by the Authority.
therewith a sworn registration statement containing the following Thereupon, the Authority shall immediately cause to be published a
information: notice of the filing of the registration statement at the expense of
(a) Name of the owner; the applicant-owner or dealer, in two newspapers general
(b) The location of the owner's principal business office, and if the circulation, one published in English and another in Pilipino, once a
owner is a non-resident Filipino, the name and address of his agent week for two consecutive weeks, reciting that a registration
or representative in the Philippines is authorized to receive notice; statement for the sale of subdivision lots or condominium units has
been filed in the National Housing Authority; that the aforesaid
(c) The names and addresses of all the directors and officers of the registration statement, as well as the papers attached thereto, are
business firm, if the owner be a corporation, association, trust, or open to inspection during business hours by interested parties, under
other entity, and of all the partners, if it be a partnership; such regulations as the Authority may impose; and that copies
(d) The general character of the business actually transacted or to thereof shall be furnished to any party upon payment of the proper
be transacted by the owner; and fees.
(e) A statement of the capitalization of the owner, including the The subdivision project of the condominium project shall be deemed
authorized and outstanding amounts of its capital stock and the registered upon completion of the above publication requirement.
proportion thereof which is paid-up. The fact of such registration shall be evidenced by a registration
certificate to be issued to the applicant-owner or dealer.
The following documents shall be attached to the registration
statement: Section 5. License to sell. Such owner or dealer to whom has been
issued a registration certificate shall not, however, be authorized to
(a) A copy of the subdivision plan or condominium plan as approved sell any subdivision lot or condominium unit in the registered project
in accordance with the first and second paragraphs of this section. unless he shall have first obtained a license to sell the project within
(b) A copy of any circular, prospectus, brochure, advertisement, two weeks from the registration of such project.
letter, or communication to be used for the public offering of the The Authority, upon proper application therefor, shall issue to such
subdivision lots or condominium units; owner or dealer of a registered project a license to sell the project
(c) In case of a business firm, a balance sheet showing the amount if, after an examination of the registration statement filed by said
and general character of its assets and liabilities and a copy of its owner or dealer and all the pertinent documents attached thereto,
articles of incorporation or articles of partnership or association, as he is convinced that the owner or dealer is of good repute, that his
the case may be, with all the amendments thereof and existing by- business is financially stable, and that the proposed sale of the
laws or instruments corresponding thereto. subdivision lots or condominium units to the public would not be
fraudulent.
(d) A title to the property which is free from all liens and
encumbrances: Provided, however, that in case any subdivision lot or Section 7. Exempt transactions. A license to sell and performance
condominium unit is mortgaged, it is sufficient if the instrument of bond shall not be required in any of the following transactions:

BY: AMaWS
(a) Sale of a subdivision lot resulting from the partition of land Where the transaction or contract was entered into prior to the
among co-owners and co-heirs. effectivity of Republic Act No. 6552 on August 26, 1972, the
(b) Sale or transfer of a subdivision lot by the original purchaser defaulting buyer shall be entitled to the corresponding refund based
thereof and any subsequent sale of the same lot. on the installments paid after the effectivity of the law in the
absence of any provision in the contract to the contrary.
(c) Sale of a subdivision lot or a condominium unit by or for the Section 25. Issuance of Title. The owner or developer shall deliver
account of a mortgagee in the ordinary course of business when the title of the lot or unit to the buyer upon full payment of the lot
necessary to liquidate a bona fide debt. or unit. No fee, except those required for the registration of the
Section 18. Mortgages. No mortgage on any unit or lot shall be made deed of sale in the Registry of Deeds, shall be collected for the
by the owner or developer without prior written approval of the issuance of such title. In the event a mortgage over the lot or unit is
Authority. Such approval shall not be granted unless it is shown that outstanding at the time of the issuance of the title to the buyer, the
the proceeds of the mortgage loan shall be used for the development owner or developer shall redeem the mortgage or the corresponding
of the condominium or subdivision project and effective measures portion thereof within six months from such issuance in order that
have been provided to ensure such utilization. The loan value of the title over any fully paid lot or unit may be secured and delivered
each lot or unit covered by the mortgage shall be determined and to the buyer in accordance herewith.
the buyer thereof, if any, shall be notified before the release of the
loan. The buyer may, at his option, pay his installment for the lot or Cases:
unit directly to the mortgagee who shall apply the payments to the
corresponding mortgage indebtedness secured by the particular lot Far East Bank & Trust Co vs. Marquez
or unit being paid for, with a view to enabling said buyer to obtain
title over the lot or unit promptly after full payment thereto; Marquez entered into a contract to sell with TSE involving a 52.5 sqm
lot and a three storey townhouse for P800,000. Later respondent was
Section 23. Non-Forfeiture of Payments. No installment payment able to pay a total of P600,000. TSE then mortgaged the whole
made by a buyer in a subdivision or condominium project for the lot property to Far East Bank. TSE was unable to pay and the property
or unit he contracted to buy shall be forfeited in favor of the owner was foreclosed and sold in favor of Far East Bank.
or developer when the buyer, after due notice to the owner or
developer, desists from further payment due to the failure of the Issue: 1.)Whether or not the mortgage contract violated Section 18
owner or developer to develop the subdivision or condominium of PD.957, hence void insofar as third persons are concerned.
project according to the approved plans and within the time limit for 2.)Who has a higher right the new buyer or the respondent?
complying with the same. Such buyer may, at his option, be SC: Yes violated Sec. 18. as provides as follows.
reimbursed the total amount paid including amortization interests
but excluding delinquency interests, with interest thereon at the Sec. 18. Mortgages- No mortgage on any unit or lot shall be made by
legal rate. the owner or developer without prior written approval of the
authority. Such approval shall not be granted unless it is shown that
Section 24. Failure to pay installments. The rights of the buyer in the proceeds of the mortgage loan shall be used for the development
the event of this failure to pay the installments due for reasons of the condominium or subdivision project and effective measures
other than the failure of the owner or developer to develop the have been provided to ensure such utilization. The loan value of
project shall be governed by Republic Act No. 6552. each lot or unit covered by the mortgage shall be determined and
the buyer thereof, if any, shall be notified before the release of the

BY: AMaWS
loan. The buyer may, at his option, pay his installment for the lot or Issue: 1.)Did the petitioner have any legal basis for stop payment?
unit directly to the mortgagee who shall apply the payments to the 2.)Is the contract to sell between the parties rescinded?
corresponding mortgage indebtness secured by the particular lot or SC: 1.) Yes.According Section 23 of PD 957
unit being paid for , with a view to enabling said buyer to obtain
title over the lot or unit promptly after full payment thereof. requires only due notice to the owner or developer for stopping
further payments by reason of the latter’s failure to develop the
Since TSE did not obtain prior approval from the NHA the mortgage is subdivision according to the approved plans and within the time
void as regarding to the property to the respondent as he has no limit.
standing to question the validity of the other property.
2.) Respondent has a higher right over the property. Petitioner Therefore the buyer had the right to stop payment due to the failure
cannot be considered as a buyer in good faith. He should have of the developer to comply with the contract. He only needed to
considered that it was a town house that was already in progress. give due notice to the owner(Huangs) or Developer to give it effect.
The conversion of status from mortgagee to buyer will not lessen the
importance of such knowledge.
2.) Yes. Respondents sent no notarized notice or any notice of
Tamayo vs. Huang cancellation at all. In fact, it was only after petitioner filed on July
Respondents Huang registered owners of four parcels of land located 24, 1997 the complaint before the HLURB that respondents offered
in Barangay Matina, Davao City executed a contract of "Indenture" to reimburse petitioner of the total amount he had already paid.
with EAP Development Corporation (EAP) under which EAP undertook The contract not having been cancelled in accordance with law, it
to manage and develop said parcels of land into a first class has remained valid and subsisting. It was, therefore, within
subdivision and sell the lots therein in, Doña Luisa Village (the petitioner’s right to maintain his option to await the completion of
subdivision). the development of and introduction of improvements in the
subdivision and thereafter, upon full payment of the purchase price,
Carlos R. Tamayo (petitioner) entered into a contract to sell with without interest, compel respondents to execute a deed of absolute
respondents through EAP for a certain lot. Under the contract, sale, but since the property was sold to a buyer in good faith. The
petitioner was to pay upon execution P35,749.60 and the balance, respondents should refund the petitioner for the value of the
including interest at the rate of 14% per annum, in 60 monthly property when it was sold.
installments of P4,791.40, without necessity of demand; and if
petitioner failed to pay the installments, respondents were given the Cantemperante vs CRS realty
right to demand interest thereon at the rate of 14% per annum, to be
computed on the same day of the month the installments became Facts:
due. Later on the development of the subdivision was put to stop by Herein petitioners were among those who filed before the HLURB a
EAP, in effect petitioner stopped paying the monthly amortization. complaint 6 for the delivery of certificates of title against
The respondents sent the petitioner a demand letter, but after the
reply of the petitioner with an explanation of stop payment the respondents CRS Realty Development Corporation (CRS Realty),
respondent was unheard of.. After 5 years the development was soon Crisanta Salvador and Cesar Casal.
in progress and petitioner offered to pay the full purchase price
which was already rejected by the respondent. Later on the property Petitioners averred that they had bought on an installment basis
was sold by the respondent to another person. subdivision lots from respondent CRS Realty and had paid in full the
agreed purchase prices; but notwithstanding the full payment and

BY: AMaWS
despite demands, respondents failed and refused to deliver the that ground alone especially that the parties have impliedly
corresponding certificates of title to petitioners. The complaint admitted that there was already a meeting of the minds as to the
prayed that respondents be ordered to deliver the certificates of subject of the sale and price of the contract. The absence of the
title corresponding to the lots petitioners had purchased and paid in license to sell only subjects respondent CRS Realty and its officers
full and to pay petitioners damages. civilly and criminally liable for the said violation under Presidential
Decree (P.D.) No. 957 30 and related rules and regulations. The
In his answer, respondent Casal averred that despite his willingness absence of the license to sell does not affect the validity of the
to deliver them, petitioners refused to accept the certificates of already perfected contract of sale between petitioners and
title with notice of lis pendens covering the subdivision lots. respondent CRS Realty.
Respondents Ang and Cuason claimed in their answer with As found by the Court of Appeals, in the case at bar, the
counterclaim 16 that respondent Casal remained the registered requirements of Sections 4 and 5 of P.D. [No.] 957 do not go into the
owner of the subdivided lots when they were transferred to them validity of the contract, such that the absence thereof would
and that the failure by petitioners to annotate their claims on the automatically render the contract null and void. It is rather more of
title indicated that they were unfounded. Respondent CRS Realty and an administrative convenience in order to allow a more effective
the Heirs of Laudiza were declared in default for failure to file their regulation of the industry.
respective answers.
Chapter 2
Issues:
Whether or not the absence of a license to sell has rendered the Capacity to Buy or Sell
sales void; (2) whether or not the subsequent sale to respondent Arts. 1489 – 1492
Cuason and Ang constitutes double sale;
I. Parties and their Consent
Held: A. Capacity in general (1489)
Petitioners assail the Court of Appeals' ruling that the lack of the Art. 1489. All persons who are authorized in this Code to obligate
requisite license to sell on the part of respondent CRS Realty themselves, may enter into a contract of sale, saving the
rendered the sales void; hence, neither party could compel modifications contained in the following articles.
performance of each other's contractual obligations.
Where necessaries are sold and delivered to a minor or other
The only requisite for a contract of sale or contract to sell to exist in person without capacity to act, he must pay a reasonable price
law is the meeting of minds upon the thing which is the object of the therefor. Necessaries are those referred to in article 290.
contract and the price, including the manner the price is to be paid
Note: A person who has both juridical capacity and capacity to act is
by the vendee. Under Article 1458 of the New Civil Code, in a
said to have full civil capacity. It is understood that he is of legal age
contract of sale, whether absolute or conditional, one of the
and suffers no restriction on his capacity to act, such person may
contracting parties obliges himself to transfer the ownership of and
enter into any contract including sale.
deliver a determinate thing, and the other to pay therefor a price
certain in money or its equivalent. B. Special Disqualifications to Buy
In the instant case, the failure by respondent CRS Realty to obtain a a. Between Spouses
license to sell the subdivision lots does not render the sales void on

BY: AMaWS
Case: name of their aunt, Sulpicia Ventura. Sulpicia executed a deed of
1) Effect of sale of land to one’s own spouse sale over the property in favor of reespondent’s father Goyanko that
Uy Siu Pin vs. Cantollas, G.R. No. 46850, June 20, 1940 in turn executed a deed of sale over the same property in favor of
his common-law-wife-herein petitioner Maria B. Ching. It was only
Facts: There was a contract entered into between Uy Siu Pin and after Goyanko’s death that they discovered the transfer of the said
Casimira and Blas, which the latter agreed to deliver the mortgaged property to Ching. Respondents thus filed with the RTC of Cebu City
land and to enjoy the same with its improvements to the during the a complaint for recovery of the property and the nullification of the
period of 15 years on condition that Uy Siu Pin would pay El Hogar deed of sale.
Filipino the unpaid balance of the indebtedness of casimira and Blas,
together with all other expenses including realty taxes. ISSUE: Whether or not the sale of the property by Goyanko to Ching
is valid.
When the mortgage debtors, Casimira and Blas, failed to redeem the
land within the statutory period, a final deed of sale was issued in HELD:
favor of the mortgagee, El Hogar Filipino. The latter sold the land to The conveyance of Goyanko in favor of his common-law-wife-herein
Uy Siu Pin and in turn sold the land to his wife Chua Hue. petitioner, was null and void. Article 1409 of the Civil Code states
Issues: Is the sale valid between Uy Siu Pin and Chua Hue? inter alia that contracts whose cause, object, or purpose is contrary
to law, morals, good customs, public order, or public policy are void
Held: SC said No. The sale from Uy Siu Pin to his wife Chua Hue is and inexistent from the very beginning. Article 1352 also provides
null and void not only because theformer had no right to dispose of that: “Contracts without cause, or with unlawful cause, produce no
the land in contorversy but because the sale comes within the effect whatsoever. The cause is unlawful if it is contrary to law,
prohibition of Article 1458 of the Civil Code. morals, good customs. Public order, or public policy.” Additionally,
Note: The case did not extensively explicate the reason why the sale the law emphatically prohibits the spouses from selling property to
between spouses are prohibited. However, Art 1490 provides that each other subject to certain exceptions. Similarly, donations
“the husband and wife cannot sell property to each other, except: between spouses during marriage are prohibited. And this is so
(1) when a separation of property was agreed upon in the marriage because if transfers or conveyances between spouses were allowed
settlements; or (2) when there has been a judicial separation of during marriage, that would destroy the system of conjugal
property under articel 191. partnership, a basic policy in civil law. It was also designed to
Rationale behind the prohibiton: (a) to prevent the stronger spouse prevent the exercise of undue influence by one spouse over the
from exploiting the weaker spouse; (b) prevent donations disguised other, as well as to protect the institution of marriage, which is the
as sales; (c) protect third persons, specially creditors, against fraud cornerstone of family law. The prohibitions apply to a couple living
through the transfer of the properties of one spouse to the other to as husband and wife without benefit of marriage, otherwise, “the
evade payment of obligations. condition of those who incurred guild would turn out to be better
that those in legal union.”
2) Transfer in common law relationship b. By Spouse without consent of the other spouse - Void
Ching vs. Goyanko, G.R. No. 165879, November 10, 2006 C. Persons in Trust Relations
FACTS: Respondents claim that their parents (Goyanko and Epifania) 2. Sale to agent: Exception to prohibition against sale by
acquired a 661 square meter property but they (the parents) were principal in favor of his agent.
Chinese citizens at the time, the property was registered in the

BY: AMaWS
Pelayo vs. Perez, G.R. No. 141323, June 8, 2005 not fle a case for annulment of the deed of sale. Thus, if the
FACTS: David Pelayo, by a Deed of Absolute Sale, conveyed to Melki transaction was indeed entered into without Lorenza’s consent, we
Perez two parcels of agricultural land. Loreza, wife of David Pelayo,k find it quite puzzling why for more than three and a half years,
and another one whose signature is illegible witnessed the execution Lorenza did nothing to seek the nullification of the assailed contract.
of the deed. Loreza, however, signed only the third page. Perez With regards to petitioner’s asservation that the deed of sale is
asked Loreza to sign on the first and second pages of the deed but invalid under Article 1491 (2) of the New Civil Code, we find such
refused, hence, he instituted the instant complaint for specific argument unmeritorious. Petitioners, by signing the Deed of Sale in
performance against the spouses. Petitioners, in adopting the trial favor of respondent, are also deemed to have given their consent to
court’s narration of antecedent facts in their petition, admitted that the sale of the subject property in favor of respondent, thereby
they authorized respondent to represent them in negotiations with making the transaction an exception to the general rule that agents
the “squatters” occupying the disputed property and, in are prohibited from purchasing the property of their principals.
consideration of respondent’s services, they executed the subject
deed of sale. Defendant Pelayo claimed that the deed was without 2) Sale to guardians
his wife’s consent, hence, it is null and void.
Philippine Trust Co. vs Roldan
ISSUE: Whether or not the deed of sale was null and void.
Facts: Parcels located in Guiguinto, Bulacan, were part of the
HELD: Petitioner Lorenza, by affixing her signature to the Deed of properties inherited by Mariano L. Bernardo from his father, Marcelo
Sale on the space provided for witnesses, is deemed to have given Bernardo, deceased. In view of his minority, guardianship
her implied consent to the contract of sale. Sale is a consensual proceedings were instituted, wherein Socorro Roldan was appointed
contract that is perfected by mere consent, which may either be his guardian. She was the surviving spouse of Marcelo Bernardo, and
express or implied. A wife’s consent to the husband’s disposition of the stepmother of said Mariano L. Bernardo.
conjugal property does not always have to be explicit or set forth in On July 27, 1947, Socorro Roldan filed in said guardianship
any particular document, so long as it is shown by acts of the wife proceedings (Special Proceeding 2485, Manila), a motion asking for
that such consent or approval was indeed given. In the present case, authority to sell as guardian the 17 parcels for the sum of P14,700 to
although it appears on the face of the deed of sale that Lorenza Dr. Fidel C. Ramos, the purpose of the sale being allegedly to invest
signed only as an instrumental witness, circumstances leading to the the money in a residential house, which the minor desired to have on
execution of said document point to the fact that Lorenza was fully Tindalo Street, Manila. The motion was granted.
aware of the sale of their conjugal property and consented to the
sale. Socorro Roldan, as guardian, executed the proper deed of sale in
Under Article 173, in relation to Article 166, both of the New Civil favor of her brother-in-law Dr. Fidel C. Ramos. Dr. Fidel C. Ramos
Code, when the deed in question was executed, the lack of marital executed in favor of Socorro Roldan, personally, a deed of
consent to the disposition of conjugal property does not make the conveyance covering the same seventeen parcels, for the sum of
contract void ab initio but merely voidable. It has been held that the P15,000.
contract is valid until the court annuls the same and only upon an
action brought by the wife whose consent was not obtained. In the The Philippine Trust Company replaced Socorro Roldan as guardian,
present case, despite respondent’s repeated demands for Lorenza to on August 10, 1948. And this litigation, started two months later,
affix her signature on all the pages of the deed of sale, showing seeks to undo what the previous guardian had done. The step-mother
respondent’s insistence on enforcing said contract, Lorenza still did in effect, sold to herself, the properties of her ward, contends the

BY: AMaWS
plaintiff, and the sale should be annulled because it violates Article this particular property. Petitioner submitted a letter-proposal that
1459 of the Civil Code prohibiting the guardian from purchasing reads: “I bid to match the highest bidder.” The bidding committee
"either in person or through the mediation of another" the property rejected petitioner’s bid and accepted the private respondent Luz
of her ward. Tagle’s bid. After approval and confirmation of the sale, the GSIS
executed a Deed of Conditional Sale in favor of Tagles. Luz Tagle is
ISSUE: the wife of Edilberto Tagle. Edilberto Tagle was the Chief, Retirment
Whether or not the sale was valid. Division, GSIS, from 1970 to 1978. He worked for the GSIS since 1952.
ISSUE: Whether or not the sale is valid.
HELD:
HELD: In providing the prohibitions under Article 1491, the Code
As Guardianship is a trust of the highest order, the trustee cannot be tends to prevent fraud, or more precisely, tends not give occasion for
allowed to have any inducement to neglect his ward's interest; and fraud, which is what can and must be done.
whenever the guardian acquires the ward's property through an The point is that he is a public officer and his wife acts for and in his
intermediary, he violates the provision of Article 1459 of the Civil name in any transaction with the GSIS. If he is allowed to participate
Code and such transaction and subsequent ones emanating therefrom in the public bidding of properties foreclosed or confiscated by the
shall be annulled. GSIS, there will always be the suspicion among other bidders and the
general public that the insider official had access to information and
Even without proof that she had connived with Dr. Ramos. connection with his fellow GSIS official as to allow him to eventually
Remembering the general doctrine that guardianship is a trust of the acquire the property. It is precisely the need to forestall such
highest order, and the trustee cannot be allowed to have any suspicions and to restore confidence in the public service that the
inducement to neglect his ward's interest and in line with the court's Civil Code now declares such transactions to be void from the
suspicion whenever the guardian acquires the ward's property 1 we beginning and not merely voidable.
have no hesitation to declare that in this case, in the eyes of the
law, Socorro Roldan took by purchase her ward's parcels thru Dr. 4. Sale/transfer to attorney
Ramos, and that Article 1459 of the Civil Code applies. Gurrea vs. Suplico, G.R. No. 144320, April 26, 2006
FACTS: Adelina Gurrea continued to be the owner of the lot (TCT No.
3. Sale to public officers 58253) until her death. Thereafter, a special proceeding was
Maharlika Broadcasting Corp. vs. Tagle instituted to settle her estate. Under her will, the San Juan lot was
bequeathed to Pilar and Luis Gurrea, while 700,000 pesetas, ¼ of the
FACTS: The GSIS was the registered owner of a parcel of land that lot in Baguio and 1-hectare piece of land in Negros Occidental were
was sold to petitioner Maharlika Publishing Corporation together with given to Ricardo Gurrea. Ricardo Gurrea, represented by and through
the building thereon as well as the printing machinery and his counsel Atty. Enrique Suplico filed an Opposition in Special
equipment therein. Among the conditions of the sale are that Proceeding No. 7185. In consideration of said representation, Ricardo
petitioner shall pay to the GSIS monthly installments until the total Gurrea agreed to pay Atty. Suplico “a contigent fee of twenty (20%)
purchase price shall be fully paid and that failure to pay any monthly of whatever is due me, either real or personal property.” Later on,
installment within 90 days from due date, the contract shall be Ricardo withdrew his Opposition. The properties adjudicated to
deemed automatically cancelled. Maharlika failed to pay the Ricardo based on the project of partition were the Baguio lot, San
installments for several months. This resulted to a public bidding of Juan lot, and a parcel of land in Negros Occidental. As payment of

BY: AMaWS
his attorney’s fees, Ricarod Gurrea offered the San Juan lot to Atty. Manlapat vs. CA, G.R. No. 125585, June 8, 2005
Suplico who was hesitant to accept as the property was occupied by FACTS: The controversy involves Lot No. 2204 that had been
squatters. However, in order not to antagonize his client, Atty. originally in the possession of Jose Alvarez, Eduardo’s grandfather,
Suplico agreed to Ricardo’s proposal with the further understanding until his demise in 1916. It remained unregistered until October 8,
that he will receive an additional commission of 5% if he sells the 1976 when OCT No. P-153 was issued in the name of Eduardo
Baguio property. Thereafter, Atty. Suplico registered the deed of pursuant to a free patent issued in Eduardo’s name that was
Transfer of Rights and Interest and obtained the title to the San Juan entered in the Registry of Deed. Before the subject lot was titled,
property under his name. Eduardo sold 533 sq.m. of the land to Ricardo on December 19,
ISSUE: Whether or not the subject property is still the object of 1954. The sale is evidence by a deed of sale entitled “Kasulatan ng
litigation; If affirmative, whether or not the sale is void for being Bilihang Tuluyan ng Lupang Walang Titulo” which was signed by
violative of the provisions of Article 1491 (5) of the Civil Code. Eduardo himself as vendor and his wife Engracia Ancieto with a
HELD: The sale to Atty. Suplico is null and void. certain Santiago Enriquez signing as witness. The Kasulatan was
registered with the Register of Deeds. On March 18, 1981, another
A thing is said to be in litigation only if there is some contest or Deed of Sale conveyed another portion of the subject lot as right of
litigation over it in court, but also from the moment that it becomes way was executed by Eduardo in favor of Ricardo. The deed was
subject to the judicial action of the judge. In the present case, there notarized. Leon Banaag, as attorney-in-fact of his father-in-law
is no proof to show that at the time the deed of Transfer of Rights (Eduardo) mortgage with the Rural Bank for P100,000.00 with the
and Interest was executed, the probate court issued an order subject lot as collateral. Banaag deposited the owner’s duplicate
granting the Motion for Termination of Proceeding and Discharge of certificate of OCT No. P-153 with the bank. Ricardo and Eduardo
the Executor and Bond. Since the judge has yet to act on the above- died.
mentioned motion, if follows that the subject property which is the
subject matter of the deed of Transfer of Rights and Interest, is still The Cruzes, upon learning their right to the subject lot immediately
the object of litigation. tried to confront petitioners mortgage and obtain the surrender of
the OCT. Having failed to physically obtain the title from
Having been established that the subject property was still the petitioners, the Cruzes went to RBSP which had custody of the
object of litigation at the time the subject deed of Transfer of Rights owner’s duplicate certificate of the OCT. They were able to secure a
and Interest was executed, the assignment of rights and interest clearance to borrow the title and was able to have the Register of
over the subject property in favor of respondent is null and void for Deeds cancel the OCT and issue two separate titles in the name of
being violative of the provisions of Article 1491 of the Civil Code Ricardo andEduardo.
which expressly prohibits lawyers from acquiring property or rights
which may be the object of any litigation in which they may take ISSUE: Whether or not the sale of the land is prohibited or not.
party by virtue of their profession. HELD: Free patent application implies the recognition of the public
C. Incapacity to sell dominion character of the land and, hence, the five year prohibition
imposed by the Public land Act against alienation or encumbrance of
a. Homesteaders the land covered by a free patent or homestead should have been
Cases considered.
1. Sale of portions of a parcel of land (1) prior to issuance and (2) The deed of sale covering the 50 sq.m. right of way executed on
within 5 years from issuance of free patent March 18, 1981 is obviously covered by proscription, the free patent

BY: AMaWS
having been issued on October 8, 1979. However, petitioners may • It is clear that a perfected contract of sale had already been
recover the portion sold since the prohibition was imposed in favor entered into by the parties within the period of prohibition. There
of the free patent holder. Under the Public Land Act, the prohibition was nothing "futuristic" in this agreement, except that, being fully
to alienate is predicated on the fundamental policy of the State to aware of the prohibition, Manzano's title has not ripened into
preserve and keep in the family of the homesteader that portion of absolute ownership.
public land which the State has gratuitously given to him, and • This execution of the formal deed after the expiration of the
recovery is allowed even where the land acquired under the Public prohibitory period did not and could not legalize a contract that was
Land Act was sold and not merely encumbered, within the void from its inception. Nor was this formal deed of sale "a totally
prohibited period. distinct transaction from the promissory note and the deed of
The sale of the 533 sq.m. was executed 22 years before the mortgagee for it was executed only in compliance and fulfillment of
issuance of the patent in 1976. Where the sale or transfer took the vendor's previous promise, under the perfected sale to execute
place before the filing of the free patent application, whether by in favor of his vendee the formal act of conveyance after the lapse
the vendor or the vendee, the prohibition should not be applied. In of the period of inhibition of five years from the date of the
such situation, neither the prohibition not the rationale therefor homestead patent.
which is to keep in the family of the patentee that portion of the • Sale in question is illegal and void for having been made
public land which the government has gratuitously given him, by within five years from the date of Manzano's patent, in violation of
shielding him from the temptation to dispose of his landholdings, section 118 of the Public Land Law. Being void from its inception, the
could be relevant. Precisely, he had disposed of his rights to the lot approval thereof by the Undersecretary of Agriculture and Natural
even before the government could give the title to him. Resources after the lapse of five years from Manzano's patent did not
2. Effect of verbal sale within 5-year prohibitory period legalize the sale. The result is that the homestead in question must
Manzano vs. Ocampo, L-46850, June 20, 1940 be returned to Manzano's heirs, who are, in turn, bound to restore to
Ocampo the, sum of P3,000.00 received by Manzano as the price
Facts: Victoriano Manzano, now deceased, was granted a homestead thereof.
patent on June 25, 1934, and the land was registered in his name on
July 25, 1934 under Original Certificate of Title No. 4590. On January D. When incompetent buys – he must pay a reasonable price for
4, 1938, he and respondent Rufino Ocampo agreed on the sale of said necessaries delivered to him. The resulting sale is valid.
homestead for the amount of P1,900.00, P1,100.00 of which was The above rule seems to be founded on quasi-contract
paid by Ocampo to Manzano on the same day, and for the balance, E. Effect of forbidden sales
he executed a promissory note. Knowing, however, that any sale of a. Between husband and wife under the community regime, the sale is void
the homestead at that time was prohibited and void, the parties 1) But strangers cannot assail the transfer
likewise agreed that the deed of sale was to be made only after the b. Between persons in trust relations, as regards –
lapse of five years from the date of Manzano's patent. And to protect 1) Those based on public trust –
the buyer Ocampo's rights in the agreed sale, Manzano executed in i) Public officers, employees, government experts (1491, par. 4), and
his favor a "Mortgage of Improvements" over the homestead to secure ii) Judges, Justices, Prosecutors, Clerks of Court, lawyers (1491, par. 5) -
the amount of P1,100.00 already received as down payment on the such sales are void (1409, No. 7)
price. 2) Those based on private trust -
i) Guardians (1491, par. 1)
ii) Agents (1491, par. 2)

BY: AMaWS
ii) Executors and administrators (1491, par. 3) - such sales are voidable, not
void

BY: AMaWS

Sales Nature and Form of Contracts Art. 1458 FACTS: Petitioner Was The Owner of A 8,015 Square Meter

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Sales Nature and Form of Contracts Art. 1458 FACTS: Petitioner Was The Owner of A 8,015 Square Meter

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SALES FACTS: Petitioner was the owner of a 8,015 square meter

parcel of land located in Mandaluyong (now a City), Metro Manila.

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SALES  FACTS: Petitioner was the owner of a 8,015 square meter