Law on Sales Case Digests

7/28/2019 Law on Sales Case Digests

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INTRODUCTION

Buenaventura vs CA (2003)

FACTS: Defendant spouses Leonardo Joaquin and Feliciana Landrito are parents of co-defendants

Fidel, Tomas, Artemio, Clarita, Felicitas, Fe, and Gavino. They are also the parents of plaintiffs Consolacion, Nora, Emma, and Natividad. A deed of sale was executed by the defendant spouses in favor of their co-defendant

children. However, such deed of sale is sought to be declared null and void by the plaintiffs. Plaintiffs argue that:

1. There was no actual consideration2. Even assuming there was consideration, the properties are more than 3-fold

times more valuable than the measly sums appearing therein.3. the sale was the result of a deliberate conspiracy to unjustly deprive the rest of

the compulsory heirs of their legitime. RTC: ruled in favor of the defendants and dismissed the complaint. On the grounds that:

1. plaintiffs do not have a valid cause of action against defendants since there canbe no legitime to speak of prior to the death of their parents.

2.

legitime is computed as of the time of the death of the decedent. CA: affirmed the decision of the RTC

ISSUE: I. W/N the Deeds of Sale are void for lack of consideration

HELD: I. DEED OF SALE VALID.1. A contract of sale is not a real contract, but a consensual contract.2. As a consensual contract, a contract of sale becomes a binding and valid contract upon

the meeting of the minds as to price.3. If there is a meeting of the minds of the parties as to the price, the contract of sale is

valid, despite the manner of payment, or even the breach of that manner of payment.4. It is not the act of payment of price that determines the validity of a contract of sale.5. Payment of the price has nothing to do with the perfection of the contract.

6.

Failure to pay the consideration is different from lack of consideration.7. Petitioners do not have any legal interest over the properties. Their rights over theproperties are merely inchoate and vests only upon their parents death.

Gaite vs Fonacier (1961)

Facts:- Fonacier owned 11 iron lode mineral claims, known as the Dawahan Group, located in

Camarines Norte. He appointed Gaite as his attorney-in-fact to enter into contracts withindividual or juridical persons for the exploration and development of the mining claims.Gaite in turn executed a general assignment conveying the development of the miningclaims into the Larap Iron Mines, a single proprietorship owned by him. Then he startedthe development of those mining claims.

-

Fonacier decided to revoke the authority granted by him to Gaite, and Gaite assented,subject to certain conditions. They entered into a contract, where Gaite transferred toFonacier, for P20k, all his rights and interests on the roads and facilities in the claims, plusthe right to use the business name Larap Iron Mines.Gaite also transferred to Fonacier,for P75k, all this rights and interests over the tons of iron ore that he already extractedfrom the mineral claims. P10k of this was paid upon signing and the contract stated thatthe balance of P65k will be paid from and out of the first letter of credit coveringthe first shipment of iron ores and of the first account derived from the local saleof iron ore made by Larap. To seucre the payment, Fonacier delivered to Gaite a suretybond. Gaite wanted another bond, so Fonacier executed a second one, but it provided thatthe liability of the surety company would attach only when there had been an actual saleof iron ore for an amount of no less than P65k, and that the liability of said suretycompany would automatically expire on Dec 1955.

- Up to Dec 1955, when the bond expired with respect to the surety company, no sale of the

tons of iron ore had been made by Larap, nor had the P65k balance of the price of said orebeen paid to Gaite by Fonacier and his sureties, the second bond automatically expired.


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And when Fonacier and his sureties failed to pay, Gaite filed the present complaint againstthem for the payment of the P65k balance.

o The defendants set up the defense that the obligation sued upon by Gaitewas subject to a condition that the amount of P65k would be payable out of thefirst letter of credit covering the first shipment of iron ore and/or the first amountderived from the local sale of the iron ore by Larap, and that up to the time of thefiling of the complaint no sale of the iron ore had been made. Therefore, theobligation was not due and demandable yet.

o The lower court held in favor of Gaite, and the defendants were ordered to pay theP65k. The lower court held that the oblig of the defendants to pay Gaitewas one with a term: that it would be paid upon the sale of sufficient iron ore,such sale to be effected on or before Dec 1955, and that as the latter failed to putup a good and sufficient security after the bond expired, the oblig became due anddemandable.

Issue: Is the obligation of Fonacier to pay Gaite the P65k an obligation with a period or term andnot one with a suspensive condition?Held: Obligation was subject to a suspensive period or term. Lower court decision affirmed.

- A contract of sale is normally commutative and onerous. Not only does each of the partiesassume a correlative obligation (the seller to deliver and transfer ownership of the thingsold and the buyer to pay the price), but each party anticipates performance by the other

from the very start. While in a sale the obligation of one party can be lawfully subordinatedto an uncertain event, so that the other understands that he assumes the risk of receivingnothing for what he gives, it isnt in the usual course of business to do so. Hence, thecontingent character of the obligation must clearly appear. Nothing is found in the recordto evidence that Gaite desired or assumed to run the risk of losing his right over the orewithout getting paid for it, or that Fonacier understood that Gaite assumed any such risk.This is proven by the fact that Gaite insisted on a bond to guarantee payment of the P65k.

- Plus, to subordinate the oblig to pay the remaining P65k as condition precedent would betantamount to leaving the payment at the discretion of the debtor, for the sale or shipmentcould not be made unless steps were taken to sell the ore.

- Fonacier has forefeited the right to compel Gaite to wait for the sale of the ore beforereceiving payment of the balance of P65k, because of their failure to renew the bond orelse replace it with an equivalent guarantee.

CELESTINO CO & CO. VS. COLLECTOR OF INTERNAL REVENUEContract of sale vs. Contract for a piece of work

Facts:- Celestino Co & Co. is a registered copartnership doing business under the trade name of

Oriental Sash Factory, which makes sash, windows and doors- For years, they paid percentage taxes of 7% on gross receipts (for manufacturers), but in

1952 they began to claim that they should be paying only 3% under sec 191 of theNational Revenue Code (for contractors)

- They contend that Oriental Sash Factory does not manufacture ready-made doors, sashand windows for the public but only upon special order of its select customers and That thethings, had they not been ordered, would not have existed.

-

They filed a petition w/ the Bureau of Internal Revenue and appealed to the CTA, whichboth held that they did not come under the purview of Sec. 191.

Issue: whether Celestino Co & Co. is a manufacturer or a contractor?Held: manufacturer, in the business of selling goods, not services

- Celestino Co & Co. habitually makes sash, windows and doors, as it has represented in itsstationery and advertisements to the public.

- The fact that windows and doors are made by it only when customers place their orders,does not alter the nature of the etablishment, for it only accepted such orders as called forthe employment of such materials as it ordinarily manufactured or was in a positionhabitually to manufacture.

- They do not serve special customers only or confine its services to them alone. Anyonewho has the ability to pay may have such things manufactured by them.

- That the doors and windows must meet desired specifications is neither here nor there. If

the specifications do not happen to be of the kind they habitually manufacture, they wouldnot accept the order and no sale is made.


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- It is only when this factory accepts a job that requires the use of extraordinary oradditional equipment, or involves services not generally performed by it---ir therebycontracts for a piece-of-work---filling special orders within the meaning of Art. 1467. Theorders, however, were not shown to be special.

Commissioner of Internal Revenue vs. Engineering Equipment and Supply Company

1.

EESC is an engineering and machinery firm and is engaged, among others, in the design andinstallation of central type air conditioning system, pumping plants and steel fabrications.

2. One Juan dela Cruz wrote the Collector, now Commissioner of CIR, denouncing EESC for tax evasionand failing to pay the correct percentage taxes due in connivance with foreign suppliers. EESC waslikewise denounced to the Central Bank for alleged fraud in obtaining its dollar allocations.

3. Revenue Examiners reported and recommended to the Collector that Engineering be assessed forP480K+ for not declaring its importations which are subject of tax under Section 185 of the Tax Code(30% of the gross selling price).

4. Assessment was revised and raised to P916K+ inclusive of 25% and 50% surcharges. EESC appealedwith the Court of Tax Appeals (CTA) and reduced liabilities to P740K+. Commissioner not satisfiedfiled appeal to the Court; EESC filed with CTA a motion for recon.

Issue: whether or not EESC is a manufacturer of air conditioning units under Sec. 185, or a contractor underSec. 191 of the Tax Code

Held: Contractor.1. Contract of sale vs. contract of furnishing services, labor, and materials

a. Test: whether the thing transferred is one not in existence and which never would haveexisted but for the order of the party desiring to acquire it, or a thing which would haveexisted and has been the subject of sale to some other persons even if the order had notbeen given. If the article ordered by the purchaser is exactly as such as the plaintiff makesand keeps on hand for sale to anyone, and no change or modification of it is made atdefendants request, it is a contract of sale, even though it may be entirely made after, andin consequence of, the defendants order for it.

2. We find that EESC did not manufacture air conditioning units for sale to the general public, butimported some items which were used in executing contracts entered into by it. EESC undertooknegotiations and execution of individual contracts for the design, supply, and installation of airconditioning units of the central type.

3. EESC definitely did not and was engaged in the manufacture of air conditioning units but had itsservices contracted for the installation of a central system.

4.

EESC should be held liable to pay taxes prescribed in Section 190. This compensating tax is not a taxon the importation of the goods but tax on the use of imported goods not subject to sales tax. (30%compensating tax but without the 50% markup)

Issue: fraud

Held:1. The Commissioner charged Engineering with misdeclaration of the imported air conditioning units and partsor accessories thereof so as to make them subject to a lower rate of percentage tax (7%) under Section 186 ofthe Tax Code, when they are allegedly subject to a higher rate of tax (30%) under its Section 185(m). Thischarge of fraud was denied by Engineering but the Court of Tax Appeals in its decision found adversely andsaid"

... We are amply convinced from the evidence presented by respondent that petitioner deliberatelyand purposely misdeclared its importations. This evidence consists of letters written by petitioner toits foreign suppliers, instructing them on how to invoice and describe the air conditioning unitsordered by petitioner. ...

2. Despite the above findings, however, the Court of Tax Appeals absolved Engineering from paying the 50%surcharge prescribe by Section 183(a) of the Tax Code by reasoning out as follows: Theimposition of the 50% surcharge prescribed by Section 183(a) of the Tax Code is based on willful neglectto file the monthly return within 20 days after the end of each month or in case a false or fraudulent return iswillfully made, it can readily be seen, that petitioner cannot legally be held subject to the 50% surchargeimposed by Section 183(a) of the Tax Code. Neither can petitioner be held subject to the 50% surcharge underSection 190 of the Tax Code dealing on compensating tax because the provisions thereof do not include the50% surcharge. Where a particular provision of the Tax Code does not impose the 50% surcharge as fraudpenalty we cannot enforce a non-existing provision of law notwithstanding the assessment of respondent to thecontrary. Instances of the exclusion in the Tax Code of the 50% surcharge are those dealing on tax on banks,taxes on receipts of insurance companies, and franchise tax. However, if the Tax Code imposes the 50%surcharge as fraud penalty, it expressly so provides as in the cases of income tax, estate and inheritancetaxes, gift taxes, mining tax, amusement tax and the monthly percentage taxes. Accordingly, we hold that

petitioner is not subject to the 50% surcharge despite the existence of fraud in the absence of legal basis tosupport the importation thereof.


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3. The communications of EESC to its foreign importers are strongly indicative of the fraudulent intent ofEngineering to misdeclare its importation of air conditioning units and spare parts or accessories thereof toevade payment of the 30% tax. And since the commission of fraud is altogether too glaring, We cannot agreewith the Court of Tax Appeals in absolving Engineering from the 50% fraud surcharge, otherwise We will begiving premium to a plainly intolerable act of tax evasion.

4. Since the imported air conditioning units-and spare parts or accessories thereof are subject to the

compensating tax of 30% as the same were used in the construction business of Engineering, it is incumbentupon the latter to comply with the aforequoted requirement of Section 190 of the Code, by posting in its booksof accounts or notifying the Collector of Internal Revenue that the imported articles were used for otherpurposes within 30 days. ... Consequently; as the 30% compensating tax was not paid by petitioner within thetime prescribed by Section 190 of the Tax Code as amended, it is therefore subject to the 25% surcharge fordelinquency in the payment of the said tax.

WHEREFORE, the decision appealed from is affirmed with the modification that Engineering is hereby alsomade liable to pay the 50% fraud surcharge.

Quiroga v Parsons Hardware Co.

Quiroga and Parsons, both merchants in Manila, executed a contract between themselves for theexclusive sale of Quiroga beds in the Visayan Islands. The provisions of the contract essentially

stipulated that Parsons would order the beds by the dozen, and would make an allowance of 25%of the invoiced prices. Parsons was also bound to pay for the received beds no later than 60 daysafter shipment. The matters of dispute center on two issues: 1) Parsons obligation to chargecustomers no higher than the invoiced prices, and 2) order the beds strictly by the dozen and in noother manner.

Was this contract one of agency, or one of purchase and sale?

The contract is one of purchase and sale. In order to classify a contract, due regard must be givento its essential clauses. In the contract in question, what was essential is that Quiroga was tofurnish Parsons with the beds which the latter might order, at the price stipulated, and that thedefendant was to pay the price in the manner stipulated. The contract exhibited the features of acontract of purchase and sale. The rule to remember is that when the supposed agent has to

pay the principal the price of the goods, the contract ceases to be one of agency. In agency, theagent surrenders the amount received from the sale of goods, as well as the unsold goodsthemselves. In this case, it did not matter how many were sold; payment had to be made fordelivered beds 60 days upon delivery. Thus, Parsons is not subject to the contract terms inquestion since it, as purchaser, acquires ownership of delivered goods.

SONNY LO vs KJS ECO-FORMWORK SYSTEM PHIL, INC.

Lo, doing business under the name Sans Enterprises, ordered scaffolding equipments fromKJS worth P540,425.80. Lo paid a downpayment of P150,000 and the balance was to bepaid in 10 monthly installments.

KJS delivered the scaffoldings to Lo, who paid the first two installments. However, hisbusiness encountered financial difficulties and he was unable to settle his obligation

despite oral and written demands. Lo and KJS executed a Deed of Assignment, whereby Lo assigned to KJS his receivables in

the amount of P335,462.14 from Jomero Realty Corporation. The agreement alsostipulated: The ASSIGNOR further agrees and stipulates as aforesaid that the saidASSIGNOR, his heirs, executors, administrators, or assigns, shall and will at timeshereafter, at the request of said ASSIGNEE, its successors or assigns, at his cost andexpense, execute and do all such further acts and deeds as shall be reasonably necessaryto effectually enable said ASSIGNEE to recover whatever collectibles said ASSIGNOR has inaccordance with the true intent and meaning of these presents.

When KJS tried to collect the said credit from Jomero, it refused to honor the Deed ofAssignment because it claimed that Lo was also indebted to it. KJS sent a letter to Lodemanding payment but he refused claiming that his obligation had been extinguishedwhen they executed the Deed of Assignment.

KJS filed an action for recovery of a sum of money against Lo with the RTC, whichdismissed the complaint on the ground that the assignment of credit extinguished theobligation. However, the CA held that the Deed of Assignment did not extinguish the


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obligation of Lo.

Issue: W/N the Deed of Assignment extinguished Los obligation. NO, he failed to comply withhis warranty.

In dacion en pago1, as a special mode of payment, the debtor offers another thing to thecreditor who accepts it as equivalent of payment of an outstanding debt. The undertakingreally partakes in one sense of the nature of sale the creditor is really buying the thingor property of the debtor, payment for which is to be charged against the debtors debt.

The assignment of credit, which is in the nature of a sale of personal property, producedthe effects of a dation in payment, which may extinguish the obligation. However, as inany other contract of sale, the vendor or assignor is bound by certain warranties. Paragraph 1 of Article 1628 of the Civil Code provides: The vendor in good faith shall beresponsible for the existence and legality of the credit at the time of the sale, unless itshould have been sold as doubtful; but not for the solvency of the debtor, unless it hasbeen so expressly stipulated or unless the insolvency was prior to the sale and of commonknowledge.

Lo, as assignor, is bound to warrant the existence and legality of the credit at the time ofthe sale or assignment. When Jomero claimed that it was no longer indebted to Lo sincethe latter also had an unpaid obligation to it, it essentially meant that its obligation to Lo

has been extinguished by compensation. As a result, KJS alleged the non-existence of thecredit and asserted its claim to Los warranty under the ass ignment. Lo was thereforerequired to make good its warranty and pay the obligation.

Furthermore, Lo breached his obligation under the Deed of Assignment as he did notexecute and do all such further acts and deeds as shall be reasonably necessary toeffectually enable said ASSIGNEE to recover whatever collectibles said ASSIGNOR has inaccordance with the true intent and meaning of these presents. By warranting theexistence of the credit, Lo should have ensured its performance in case it is found to beinexistent. He should be held liable to pay to KJS the amount of his indebtedness

Judgment Affirmed.

II - PARTIES TO A SALE

Paragas vs. Heirs of Dominador Balacano (2005)

FACTS: Gregorio and Lorenza Balacano owned Lots 1175-E and 117-F. Spouses Balacano had 3 children, namely Domingo, Catalino, and Alfredo. Lorenza died during Dec. 11, 1991, while Gregorio died on July 28, 1996. Prior to Gregorios death, he was admitted in Veterans General Hospital in Nueva Vizcaya,

and later transferred to Veterans Memorial Hospital in QC, until he died. It was alleged that Gregorio, barely a week prior to his death, sold the 2 lots to spouses

Rudy and Corazon Paragas. The said sale appeared in a deed of absolute sale notarized by Atty. De Guzman. The spouses Paragas then sold a portion of one of the lots to Catalino. Domingos children filed a complaint for the annulment of the sale against Catalino and the

spouses Paragas. Domingos children argue that:

1. Grandfather Gregorio was seriously ill at the time of the execution of the deedof sale.

2. Gregorios consent was vitiated.3. That the lots form part of the conjugal partnership properties of Gregorio and

Lorenza. Spouses Paragas moved to dismiss the complaint, arguing that

1. Plaintiffs do not have a cause of action and have no legal ground for theannulment of the deed of sale.

1 Requisites: (1) There must be the performance of the prestation in lieu of payment (animo solvendi) which may consist in the

delivery of a corporeal thing or a real right or a credit against the third person; (2) There must be some difference between theprestation due and that which is given in substitution (aliud pro alio); (3) There must be an agreement between the creditorand debtor that the obligation is immediately extinguished by reason of the performance of a prestation different from thatdue.


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2. Gregorio and Paragas already agreed on the sale of the Lots, that theexecution of the Deed of Sale was merely a confirmation of the saidagreement.

RTC: declared the deed of sale null and void, and the lots were CP properties. Grounds:1. Gregorio was ill2. Deed of sale was improperly notarized.3. Atty. De Guzman explanations regarding the erroneous entries on the actual

place and date of execution of the deed of sale were justifications for a lie. (Hetestified that the deed was only a confirmation of a previous agreement bet.Gregorio and Paragas).

4. Rudy Paragas refused or failed to testify about the signing of the deed of sale. CA: affirmed, with modifications: lots were estate of Gregorio

ISSUE: I. W/N the Deed of Sale is null and void.

HELD: I. DEED OF SALE NULL AND VOID1. Gregorio, died due to complications caused by cirrhosis of the liver, had been fighting

the said disease for a month.2. Due to his condition, there are serious doubts at to whether he could read, or fully

understood the contents of the deed of sale.

3.

There are no conclusive evidence that show that the evidence of the deed weresufficiently explained to Gregorio before he affixed his signature.

4. Art. 24 of the NCC provides that in all contractual, property or other relations, whenone of the parties is at a disadvantage on account of his moral dependence, ignorance,indigence, mental weakness, tender age or other handicap, the courts must be vigilantfor his protection.

calimlim-Canullas vs. Fortun (1984)

FACTS: Petitioner Mercedes Calimlim-Canullas and Fernando Canullas were married in 1962 and

had 5 children.

They lived in a house on the residential lot in question.

After Fernandos father died in 1965, Fernando inherited the said land. In 1978, Fernando abandoned his family and lived with private respondent Corazon

Daguines. Both were convicted of concubinage by the CFI. In 1980, Fernando sold the said land to Daguines. In the document of sale, Fernando described the house as also inherited by me from my

deceased parents. Unable to take possession of the lot and house, Daguines filed a complaint against

Mercedes. Mercedes however, claimed that the sale is null and void for reason that the said house

and land were conjugal properties and she had not given her consent to the sale. CFI: declared Daguines as the lawful owner of the house and lot.

ISSUE: I. W/N the construction of a conjugal house on the exclusive property of the husband gavethe land the character of conjugal property.

II. W/N the sale of the lot together with the house and improvements was valid

HELD: I. LAND CONJUGAL PROPERTY5. NCC provides that buildings constructed at the expense of the partnership during

marriage on land belonging to one of the spouses also pertain to the partnership, butthe value of the land shall be reimbursed to the spouse who owns the same.

6. Therefore, both the land and the house belonged to the conjugal partnership, but thecp is indebted to the husband for the value of the land.

7. Husbands power to alienate conjugal property must be with wifes consent.8. Mercedes did not consent to the sale.

II. SALE NULL AND VOID.1. Sale was contrary morals and public policy.


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2. Sale was made by a husband in favor of a concubine after he had abandoned hisfamily and left the conjugal home.

3. NCC provides that contracts whose cause, object, or purpose is contrary to law,morals, good customs, public order, or public policy are void and inexistent from thevery beginning.

Rubias vs Batiller (1973)

Facts:- Francisco Militante claimed that he owned a parcel of land located in Iloilo. He filed with

the CFI of Iloilo an application for the registration of title of the land. This was opposed bythe Director of Lands, the Director of Forestry, and other oppositors. The case was dockedas a land case, and after trial the court dismissed the application for registration. Militanteappealed to the Court of Appeals.

- Pending that appeal, he sold to Rubias (his son-in-law and a lawyer) the land.- The CA rendered a decision, dismissing the application for registration.- Rubias filed a Forcible Entry and Detainer case against Batiller.- In that case, the court held that Rubias has no cause of action because the property in

dispute which Rubias allegedly bought from Militante was the subject matter of a land

case, in which case Rubias was the counsel on record of Militante himself. It thus fallsunder Article 1491 of the Civil Code. (Hence, this appeal.)

Issue: Whether the sale of the land is prohibited under Article 1491.Held: YES. Article 1491 says that The following persons cannot acquire any purchase, even at apublic or judicial auction, either in person or through the mediation of another. (5) Justices,

judges, prosecuting attorneys, clerks of superior and inferior courts, and other officers andemployees connected with the administration of justice, the property and rights in litigation orlevied upon an execution before the court within whose jurisdiction or territory they exercise theirrespective functions; this prohibition includes the act of acquiring by assignment and shall apply tolawyesr, with respect to the property and rights which may be the object of any litigation in whichthey may take part by virtue of their profession. The present case clearly falls under this,especially since the case was still pending appeal when the sale was made.

Issue: Legal effect of a sale falling under Article 1491?Held: NULL AND VOID. CANNOT BE RATIFIED.

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

The public interest and public policy remain paramount and do not permit of compromiseor ratification. In this aspect, the permanent disqualification of public and judicial officers andlawyers grounded onpublic policydiffers from the first three cases of guardians agents andadministrators (under Art 1491). As to their transactions, it has been opined that they may be

ratified by means of and in the form of a new contract, in which case its validity shall be

determined only by the circumstances at the time of execution of such new contract. In thosecases, the object which was illegal at the time of the first contract may have already becomelawful at the time of the ratification or second contract, or the intent, or the service which wasimpossible. The ratification or second contract would then be valid from its execution; however, itdoes not retroact to the date of the first contract.

Decision affirmed.


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Phil Trust Co. vs Roldan (1956)

Facts:- Mariano Bernardo, a minor, inherited properties from his father, deceased. Included in

these were 17 parcels of land located in Bulacan. Socorro Roldan was appointed hisguardian. (Socorro was the stepmother of Mariano.) In the guardianship proceedings,Socorro filed a motion asking for authority to sell as guardian the 17 parcels of land forP14.7k to Dr. Fidel C. Ramos, her brother-in-law, the purpose of the sale being allegedly toinvest the money in a residential house which the minor wanted to have. The motion wasgranted. Socorro then sold the parcels of land to Ramos for P14.7k. But the very next day,Ramos sold the land to Socorro for P15k. And eventually, Socorro sold 4 out of the 17parcels to another party, reserving to herself the right to repuchase.

- The Phil Trust Company replaced Socorro Roldan as guardian. And this present case seeksto undo what she did, claiming that it was void for falling under Art 1459 which prohibitsthe guardian from purchasing either in person or through the mediation ofanother theproperty of her ward.

- The CFI held that Art 1459 was not controlling because there was no proof that Ramos hadpreviously agreed to buy the parcels from Socorro for her benefit. The CFI upheld thecontracts but allowed the minor to repurchase all the parcels by paying P15k. The CAaffirmed the judgment, adding that the minor knew the particulars thereof and approved

the transaction.

Issue: Valid sale?Held: NO. NULL AND VOID.

As guardianship is a trust of the highest order, the trustee cannot be allowed to have anyinducement to neglect his wards interest. Whenever the guardian acquires the wards propertythrough an intermediary, he violates the provisions of Art 1459 and such transaction andsubsequent ones emanating therefrom shall be annulled.

The transactions show that Socorro bought the 17 parcels on the day following the sale toRamos. There may not have been a previous agreement between her and Ramos to the effect thatthe latter would buy the lands for her, but the stubborn fact remains that she acquired herprotgs properties, through her brother-in-law. That she planned to get them for herself at thetime of selling them to Ramos may be deduced from the very short time between the two sales.

Also, the third sale is void because Socorro could pass no title to the third party.The annulment carries with it the obligation of Socorro to return the 17 parcels of land

together with the fruits and the duty of the minor, through his guardian to repay P14.7k with legalinterest.

Fabillo vs IAC (1991)

Facts:- Justina Fabillo bequeathed to her brother Florencio a house and lot in San Salvador, Palo,

Leyte, and to her husband a piece of land in Pugahanay, Palo, Leyte. After Justinas death,Florencio filed a petition for the probate of said will. The court approved the project ofpartition but said that the ownership of the land of Florencio be litigated and determined inseparate proceedings. So two years later, Florencio asked Atty. Murillo to assist him inrecovering the San Salvador property. Murillo asked him for 40% of the money value of

the house and lot as a contingent fee in case of success. Murillo and Florencio then enteredinto a contract: Florencio agreed to pay Murillo, in case of success, the sum equivalent to40% of whatever benefit Florencio may derive from such cases. Also, if the house and lotor a portion thereof is just occupied by Florencio or his heirs, Murillo shall have the optionof either occupying or leasing to any interested party 40% of the house and lot.

- Murillo, pursuant to the contract, filed a case against Justinas husband to recover the SanSalvador property. The case was terminated when the court, upon the parties compromiseagreement, declared Florencio the lawful owner of the San Salvador and Pugahanayproperty. So Murillo then proceeded to exercise ownership over 40% of said properties andinstalled a tenant in the Pugahanay property.

- Eventually, Florencio claimed exclusive rights over the properties and refused to giveMurillo the share of the produce of the properties. Murillo then filed a complaint, askingthat he be declared owner of 40% of the two properties. Florencio asked that the contractbe declared null and void, plus that they had vitiated consent.


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- The lower court: There was insufficient evidence to prove that the consent was vitiated.Ordered Florencio to pay 40% of the net produce of the property. Declared Murillo asowner of 40% of both the properties. IAC affirmed.

- Note: The case is being carried on by Florencio and Murillos heirs.

Issue: Stipulation valid?

Held: YES. A contingent fee does not fall under prohibition in Art 1491 par 5.While Art 1491 par 5 prohibits lawyers from acquiring by purchase the properties andrights which are the objects of litigation in which they may take part by virtue of their profession,this prohibition applies only if the sale of the assignment of the property takes place during thependency of the litigation involving the clients property. A contract between a lawyer and hisclient stipulating a contingent fee is not covered by said prohibition. The payment of such fee isnot made during the pendency of the litigation but only after judgment has been rendered in thecase handled by the lawyer. As long as the lawyer does not exert undue influence and no fraud iscommitted, a contract for contingent fee is valid and enforceable.

However, a careful look at the contract shows that the parties intended 40% of the valueof the properties as Murillos contingent fee. Plus, the stipulation on Murillo having the option tooccupy or lease to any interested party 40% of the house and lot is declared vague. The ambiguityshould be resolved against Murillo because it was he who drafted the contract.

IAC decision reversed. Florencios heirs ordered to pay Murillos heirs the amount of P3k as hiscontingent fee.

III SUBJECT MATTER

PUP V. CA

- Firestone Ceramics (Firestone) entered into a lease contract w/ the National DevelopmentCorporation (NDC) for a portion of its property in Sta. Mesa. 2 more lease agreements wereentered into for NDCs 4-unit pre-fabricated reparation steel warehouse and 6-unit pre-fabricated reparation steel warehouse. Such agreements provided for extenion of the terms ofthe lease.

-

Firestone requested for an extension, which was granted w/ the condition that in the eventNDC "with the approval of higher authorities, decide to dispose and sell these propertiesincluding the lot, priority should be given to the LESSEE first refusal

- Firestone again requested for an extension, but the communications were unacknowledged.FIRESTONE's predicament worsened when rumors of NDC's supposed plans to dispose of thesubject property in favor of petitioner Polytechnic University of the Philippines (PUP) came toits knowledge. Forthwith, FIRESTONE served notice on NDC conveying its desire to purchasethe property in the exercise of its contractual right of first refusal.

- The PUP-NDC agreement revolved around Memorandum No. 24 issued by Pres. Aquinoordering the transfer of the property to PUP.

- PUP and NDC claim that there was no sale between them:o The right of first refusal invoked was limited to the warehouse and not the loto The courts supposedly created a contract to sell b/w the parties. It argued that the

"court cannot substitute or decree its mind or consent for that of the parties in

determining whether or not a contract (has been) perfected between PUP and NDCo NDC posits that the transaction did not amount to a sale considering that "ownership

of the property remained with the government." Petitioner NDC introduced the novelproposition that if the parties involved are both government entities the transactioncannot be legally called a sale.

Issues:1. w/n there was a contract of sale b/w PUP and NDC2. w/n Firestone should be allowed to exercise its right of refusal

Held:1. YES- Aside from the fact that the intention of NDC and PUP to enter into a contract of sale was

clearly expressed in the Memorandum Order No. 214, a close perusal of the circumstancesof this case strengthens the theory that the conveyance of the property from NDC to PUP


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was one of absolute sale, for a valuable consideration, and not a mere paper transfer asargued by petitioners.

- there is not just one party involved in the questioned transaction. Petitioners NDC and PUPhave their respective charters and therefore each possesses a separate and distinctindividual personality

- All elements of asale were present:o Consent Memorandum No. 214: WHEREAS, PUP has expressed its willingness

to acquire said NDC properties and NDC has expressed its willingness to sell theproperties to PUP

o Consideration the cancellation of NDC's liabilities in favor of the NationalGovernment in the amount of P57,193,201.64 constituted the "consideration" forthe sale

o PUP asserted its ownership over the property by posting notices within thecompound advising residents and occupants to vacate the premises

2. YES-the right of first refusal is an integral and indivisible part of the contract of lease and isinseparable from the whole contract. , it is not correct for petitioners to insist that there wasno consideration paid by FIRESTONE to entitle it to the exercise of the right, inasmuch as thestipulation is part and parcel of the contract of lease making the consideration for the lease the

same as that for the option

Atilano vs Atilano

Facts:- Atilano I bought from Villanueva Lot 535 of the then municipality of Zamboanga cadastre.

Atilano I had the lot subdivided into five parts (referred to as Lots A-E fromhereon). He then sold Lot E in favor of his brother, Atilano II. Lots B-D were sold toother persons. Atilano I kept Lot A for himself. When he died, title of the lot passed toLadislao Atilano.

- Atilano II and his children then obtained the transfer of certificate of title over Lot E intheir names as co-owners. When they decided to have the land resurveyed, theydiscovered that they were actually occupying Lot A and not Lot E, as referred toin the deed, while the land which remained in the possession of the vendor(Atilano I) and which passed to his successor Ladislao Atilano was Lot E and notLot A. [They basically switched around lots without their knowledge.]

- Atilano II passed away. His heirs filed the present action. They claimed that they hadoffered to surrender to Atilano Is heirs (defendants) the possession of Lot A anddemanded in return Lot E, but that the defendants had refused to accept the exchange.(Thats understandable since Lot E is much bigger than Lot A.) The defendants, on theother hand, claim that the reference to Lot E in their deed of sale was an involuntary errorand that the intention of the parties was to convey the lot correctly identified as Lot A.

o The trial court held in favor of the plaintiffs.

Issue: What is binding, the intent of the parties or the lots named in the deeds?Held: Intent. Plaintiffs ordered to execute a deed of conveyance of Lot E in favor of thedefendants, and the latter are ordered to give Lot A to them.

When one sells or buys real property, one sells or buys the property as he sees it, in itsactual setting and by its physical metes and bounds, and not by the mere lot number assigned toit in the certificate of title. In this case, the portion correctly referred to as Lot A was already in thepossession of the vendee, Atilano II, even before the sale in his favor. In like manner, Atinalo Ihad his house on Lot E. The two brothers continued in possession of the respective portions for therest of their lives, obviously ignorant of the initial mistake.

The real issue here is not adverse possession, but the real intention of the parties to thatsale. From all the facts and circumstances, it shows that the object was that portion where thevendee was already residing, and where his heirs continued to reside thereafter; namely, Lot A,and that its designation as Lot E in the deed of sale was a simple mistake.

The Civil Code provides a remember for such a situation by means of reformation of theinstrument. In this case, the deed of sale executed need no longer be reformed. The parties haveretained possession of their respective properties and all they should do is to execute mutualdeeds of conveyance.


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LONDRES V CA

- Filomena vidal (mother of the petitioners) sold 2 parcels of land (Lots 1320, 1333) toConsolacion and Julian Alovera

- Petitioners seek for the declaration of nullity of the contract, because the validity fo theAbsolute Sale is in doubt due to alleged tampering. (+just compensation vs. DPWH)

o The cadastral lot number of the second lot mentioned in the Absolute Sale wasaltered to read Lot 1333 when it was originally written as Lot 2034. Lot 2034 wasalso written in the copy of the Records Mgt. and Archives Ofc.

- The Aloveras explained that Julian was in good faith and that he was deaf and dumb, so hewas placed at a disadvantageous position. When they discovered that the Absolute Saleindicated Lot 2034, they went back to Filomena, who made the correction. However, thecopy of the notary remained unchanged.

- TC decided in favor of the Aloveras:o The description in the Absolute Sale corresponds to Lot 1333.o The Absolute Sale states that the lot is in Brgy. Baybay, where Lot 1333 is

situated. Lot 2034, on the other hand, can be found in Brgy. Culasi.o Plus, there was no evidence that pets family owned Lot 2034 at any time.

Issue: w/n the Absolute Sale is valid

Held: YES: the true object of the sale is Lot 1333- The correction was made to reflect the true object of the sale, Lot 1333.- Petitioners rely on the technical descriptions of Lots 1320 and 1333 that were issued by

the Bureau of Lands on November 8, 1988. When private respondents and Filomenaexecuted the sale, they based the description of the two lots on the tax declarations ofFilomena.. What really defines a piece of land is not the area mentioned in its description,but the boundaries therein laid down, as enclosing the land and indicating its limits. In thiscase, the boundaries of the two lots are sufficiently designated in the Absolute Sale,leaving no room to doubt the identity of the objects of the sale.

- Lot 2034 does not fit the description of the 2nd parcel in the Absolute Sale.- when one sells or buys real property, one sells or buys the property as he sees it, in its

actual setting and by its physical metes and bounds, and not by the mere lot numberassigned to it in the certificate of title. As long as the true intentions of the parties areevident, the mistake will not vitiate the consent of the parties, or affect the validity andbinding effect of the contract between them.

o evidence shows that the designation of the second parcel of land sold as Lot 2034was merely an oversight or a typographical error. The intention of the parties tothe Absolute Sale became unmistakably clear when private respondents, asvendees, took possession of Lots 1320 and 1333 in the concept of owners withoutthe objection of Filomena, the vendor.

- Even if the notarized copy indicated the wrong lot, the intent of the parties must prevail.Non-compliance w/ formal requirements does not adversely affect the validity of thecontract or the rights and obligations of the parties.

MELLIZA vs. CITY OF ILOILO (1968)Sales Part 3 of Outline (Subject Matter)

1. Julian Melliza during her lifetime owned, 3 parcels or residential land in Iloilo City. (Lots 2,5, and 1214). Total area of Lot 1214 was 29, 073 sq. meters.

2. Julian Meliiza donated to the Municipality of Iloilo 9,000 sq. meters of Lot 1214 to serve assite for the municipal hall. The donation was however revoked because of inadequacy tomeet the requirements of the Arellano Plan.

3. Subsequently ,Lot 124 was divided to A and B. Still later, B was further subdivided into 1,2, 3. Lot 1214-B-1 (4,563 sq. m) became as Lot 1214-B; Lot 1214-B-2 (6,653 sq. m)became as Lot 1214-C; Lot 1214-B3 (4,135 sq. m) became Lot 1214-D

4. Julian Melliza sold her remaining interest to Remedios Villanueva who acquired title to theland. Villanueva transferred her rights to the portion of the land to Pio Sian Melliza whoalso obtained title. But there was annotation at the back of Pios certificate that:

a. (a) that a portion of 10,788 square meters of Lot 1214 now designated as LotsNos. 1214-B-2 and 1214-B-3 of the subdivision plan belongs to the Municipality of

Iloilo as per instrument dated November 15, 1932....


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5. On August 24, 1949 the City of Iloilo, which succeeded to the Municipality of Iloilo,donated the city hall site together with the building thereon, to the University of thePhilippines (Iloilo branch). The site donated consisted of Lots Nos. 1214-B, 1214-C and1214-D, with a total area of 15,350 square meters, more or less.

6. Sometime in 1952, the University of the Philippines enclosed the site donated with a wirefence. Pio Sian Melliza thereupon made representations, thru his lawyer, with the cityauthorities for payment of the value of the lot (Lot 1214-B). No recovery was obtained,because as alleged by plaintiff, the City did not have funds

7. On December 10, 1955 Pio Sian Melliza filed an action in the Court of First Instance ofIloilo against Iloilo City and the University of the Philippines for recovery of Lot 1214-B orof its value.

8. CFI: dismissed complaint of Pio Melliza; instrument already executed by Melliza included inthe conveyance of Lot 1214-B.

9. Ca: affirmed CFI decision

Issue: whether or not the conveyance by Juliana Melliza to Iloilo municipality included that portionof Lot 1214 known as Lot 1214-B.

HELD:1. It should be stressed, also, that the sale to Remedios Sian Villanueva from which Pio

Sian Melliza derived title did not specifically designate Lot 1214-B, but only suchportions of Lot 1214 as were not included in the previous sale to Iloilo municipality(Stipulation of Facts, par. 5, Record on Appeal, p. 23). And thus, if said Lot 1214-B hadbeen included in the prior conveyance to Iloilo municipality, then it was excluded from thesale to Remedios Sian Villanueva and, later, to Pio Sian Melliza.

Issue: true intention of the parties1. First of all, there is no question that the paramount intention of the parties was to provide

Iloilo municipality with lots sufficient or adequate in area for the construction of the IloiloCity hall site, with its avenues and parks. For this matter, a previous donation for thispurpose between the same parties was revoked by them, because of inadequacy of thearea of the lot donated.

2. Secondly, reading the public instrument in toto, with special reference to the paragraphsdescribing the lots included in the sale, shows that said instrument describes four parcelsof land by their lot numbers and area; and then it goes on to further describe, not onlythose lots already mentioned, but the lots objectof the sale, by stating that said lots arethe ones needed for the construction of the city hall site, avenues and parks according tothe Arellano plan. If the parties intended merely to cover the specified lots Lots 2, 5,1214-C and 1214-D, there would scarcely have been any need for the next paragraph,since these lots are already plainly and very clearly described by their respective lotnumber and area.

3. The requirement of the law that a sale must have for its object a determinate thing, isfulfilled as long as, at the time the contract is entered into, the object of the sale is capableof being made determinate without the necessity of a new or further agreement betweenthe parties (Art. 1273, old Civil Code; Art. 1460, New Civil Code). The specific mention ofsome of the lots plus the statement that the lots object of the sale are the ones needed forcity hall site, avenues and parks, according to the Arellano plan, sufficiently provides a

basis, as of the time of the execution of the contract, for rendering determinate said lotswithout the need of a new and further agreement of the parties.4. Furthermore, Pio Sian Melliza, from the stipulation of facts, was the notary public of the

public instrument. As such, he was aware of its terms. Said instrument was also registeredwith the Register of Deeds and such registration was annotated at the back of thecorresponding title certificate of Juliana Melliza. From these stipulated facts, it can beinferred that Pio Sian Melliza knew of the aforesaid terms of the instrument or ischargeable with knowledge of them; that knowing so, he should have examined theArellano plan in relation to the public instrument Exhibit "D"; that, furthermore, he shouldhave taken notice of the possession first by the Municipality of Iloilo, then by the City ofIloilo and later by the University of the Philippines of Lot 1214-B as part of the city hall siteconveyed under that public instrument, and raised proper objections thereto if it was hisposition that the same was not included in the same.

5. The fact remains that, instead, for twenty long years, Pio Sian Melliza and his

predecessors-in-interest, did not object to said possession, nor exercise any act ofpossession over Lot 1214-B. Applying, therefore, principles of civil law, as well as laches,


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estoppel, and equity, said lot must necessarily be deemed included in the conveyance infavor of Iloilo municipality, now Iloilo City.

Yu Tek & Co. v Gonzalez

Yu Tek and Gonzalez entered into a contract of sale in which the former would pay the latterP3,000 and would in turn be bound to deliver 600 piculs of sugar (of the first and second grade)within a period of three months. Failing to do so within the specified time would result in therecission of the contract, the refund of the P3,000, as well as a penalty of P1,200 which Gonzalezwould have to pay. Yu Tek proved before the court that three months had passed with no deliveryof sugar. Gonzalez contended that a stipulation was verbally agreed upon, saying that the sugarwas to come from the crops which he raised from his plantation. Gonzalez further contended thatthe crop failed miserably, and thus the delivery could not be possibly effected. The SC struck thisdown by saying that parol evidence which adds totally new stipulations which are not at all alludedto in the written contract cannot be entertained by the courts.

Given that the sugar subject of the contract could not be particularly designated or physicallysegregated, is there still a perfected contract of sale?

Yes there is, under the New Civil Code. Such contract is perfected upon the meeting of the mindsbetween the parties as regards the subject matter of the contract, which should determinate or atleast determinable. In the present case, the sugar can be considered a generic thing. Followingthe principle of genus never perishes, Gonzalez cannot now claim to be released from hisobligation of delivery since it is, under the contract, impossible to lose. Generic things can alwaysbe replaced in fulfilling an obligation. He could have done so and effected a valid delivery of 600piculs of sugar, but failed to do so within the three months agreed upon. Therefore, he is liable forthe refund of the purchase price as well as the P1,200 penalty.

JOHANNES SCHUBACK & SONS PHIL. TRADING CORP vs CA

Sometime in 1981, Ramon San Jose (doing business under PHILIPPINE SJ INDUSTRIALTRADING) contacted Schuback Hamburg through the Philippine Consulate General inGermany because he wanted to purchase MAN bus spare parts and he was referred topetitioner, their trading partner in the Philippines. San Jose submitted to petitioner a list ofthe parts he wanted to purchase with specific part numbers and description and petitionerreplied with a letter with a quotation on the items.

Dec 17, petitioner submitted its formal offer containing the item number, quantity, partnumber, description, unit price and total.

Dec 24, San Jose informed petitioner of his desire to avail of the prices of the parts at thattime and enclosed a Purchase Order w/c contained the item number, part number anddescription. He promised to submit the quantity per unit he wanted to order on December28 or 29.

Dec 29, San Jose personally submitted the quantities he wanted to Mr. Reichert, GeneralManager of petitoner, w/c were written in ink by San Jose in the same Purchase Orderpreviously submitted at the bottom of which, San Jose wrote in ink above his signature:

"NOTE: Above P.O. will include a 3% discount. The above will serve as our initial P.O. Petitioner ordered the items from Schuback Hamburg, who in turn ordered the items from

NDK, a supplier of MAN spare parts in Germany. Schuback Hamburg sent petitioner aproforma invoice to be used by San Jose in applying for a letter of credit.

An order confirmation was later sent by Schuback Hamburg to petitioner w/c wasforwarded to and received by San Jose.

Petitioner reminded San Jose to open the letter of credit to avoid delay in shipment andpayment of interest, who replied, that he was having difficulty with that. In the meantime,Schuback Hamburg received invoices from NDK for partial deliveries and even paid NDK.

Petitioner again reminded San Jose of his order and advised that the case may beendorsed to its lawyers. San Jose replied that he did not make any valid Purchase Orderand that there was no definite contract between him and plaintiff.

Schuback Hamburg issued a Statement of Account to petitioner charging plaintiff 30%cancellation fee, storage and interest charges in the total amount of DM 51,917.81 w/c

was deducted from their account with Schuback Hamburg. Demand letters were sent to San Jose to no avail. Thus, petitioner filed the case.


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TC: in favor of petitioner CA: reverse decision of TC; no meeting of the minds as to theprice

ISSUE: W/N a contract of sale has been perfected between the parties.

A contract of sale is perfected at the moment there is a meeting of minds upon the thingwhich is the object of the contract and upon the price (Art 1475 NCC)

A formal offer was made when petitioner submitted its proposal containing the item

number, quantity, part number, description, the unit price and total to San Jose. On Dec24, San Jose confirmed to purchase on the indicated prices and even issued a PurchaseOrder. However, it did not contain the quantities per unit but he merely bound himself tosubmit the quantities a week after, as they were confirmed later on Dec 29.

A binding contract of sale existed upon issuance of the purchase order & not upon theconfirmation of the buyer of the quantities covered by the order. Perfection did not takeplace on Dec 29 but on Dec 24. Although the quantity to be ordered was madedeterminate only on Dec 29, quantity is immaterial in the perfection of a sales contract.What is of importance is the meeting of the minds as to the objectand cause, which fromthe facts disclosed, show that as of Dec 24, these essential elements had already occurred.

The opening of a letter of credit in favor of Schuback Hamburg is only a mode of payment& it is not among the essential requirements of a contract of sale (Art 1305 & 1474 NCC)

and therefore does not prevent the perfection of the contract between the parties.

PETITION GRANTED. REINSTATE ORDER OF TC.

IV CONSIDERATION / PRICE

Mapalo v. Mapalo

Mate v CA

Josie Rey and Inocencio Tan went to Fernando Mates residence, where Rey (being a cousin ofMates wife) appealed to Mate to help her stave off prosecution by Tan. It appears that Rey had

issued several rubber checks in favor of Tan which amounted to over P4,000,000. Fearingprosecution under BP 22, Rey convinced Mate to cede to Tan his three lots in Tacloban City whichwould later on be repurchased by Rey for Mate (as in a pacto de retro sale). Mate agreed to signthe Deed of Sale with Right of Repurchase, on the condition that, among other things, the rate ofinterest would be 5% per month. It was also demanded by Mate that although the titles would bedelivered to Tan, the sale would not be registered in the Register of Deeds. In consideration ofthis, Rey issued two checks in Mates favor (1.4 M for the selling price and 420 K for the interest).Sometime later, Mate deposited these checks in two different banks (he had both a Metrobank anda UCPB account) and (surprise surprise) the checks were dishonored for being drawn against aclosed account. Mate tried to track Rey down but she had long gone into hiding. Mate nowimpugns the pacto de retro sale stating, amongst other things, that the sale was void for lack ofconsideration.

Was there valid consideration in the sale?

Yes, there was. While Mate did not actually get the 1.4 M from Tan (the vendee), he had in hispossession a postdated check of Rey in an equivalent amount precisely to repurchase the two lotson or before the time provided (six months). He even got another check for 420 K representingthe interest. There is absolutely no basis for Mate to file a complaint against Tan to annul the saleon the ground of lack of consideration, invoking his failure to encash the checks. His cause ofaction was to file a BP 22 case against Rey, which he did. But the filing of the criminal cases wasitself a tacit admission by Mate that there was a consideration of the pacto de retro sale. He is, ineffect, stopped from questioning the same.

(Note: Mate also alleged that there existed a condition upon the sale, a stipulation saying that ifthe checks ended up being dishonored, the sale would be annulled. Thats total BS. Tan wasalready poised to file criminal cases against Rey for the issuance of past worthless checks. It


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wouldnt be logical for Tan to agree to this supposed stipulation since he would, in the event of thechecks being rejected, still be left unserved.)

Ong v. OngP1.00 consideration AND OTHER VALUABLE CONSIDERATIONS

Imelda Ong executed for and in consideration of P1.00 and other valuable considerations, a Quitclaim Deed in favor of a minor, Sandra Maruzzo where she transferred all her rights over of an undivided portion of a parcel of land. Subsequently, she revoked said Quitclaim and donatedthe whole property to her son, Rex Ong Jimenez. Maruzzo filed for recovery ofownership/possession and the nullification of the Deed of Donation. Ong contends that theQuitclaim Deed was void as it is equivalent to a Deed of Donation, where acceptance by the doneeis required and at the time, Maruzzo was still a minor who was incapable of accepting.

TC: Quitclaim = Deed of Sale. There was valid conveyance.Ong appealed and contended that the P1.00 consideration was not consideration at all to

amount to a sale. CA affirmed, saying that it is usual practice in deeds of conveyance to place anominal amount although there is a more valuable consideration given.

Issue: w/n there was valid consideration

Held: YES, the conveyance to Maruzzo is valid.The conveyance was for and in consideration of P1.00 and other valuable considerationspaid by Maruzzo through her representative. It was not just the P1.00 that was theconsideration. The execution of a deed conveying ownership of a realty is in itself prima facieevidence of the existence of valuable consideration, the party alleging lack of consideration has theburden of proving such allegation.

Bagnas v. CA

Republic v Phil. Resources

Macario Apostol, president of Phil. Resources, submitted the highest bids for two auctions held bythe Bureau of Prisons, one for 100 tons of Palawan almaciga and another for three million boardfeet of logs. In both cases, he was not able to pay the full bid price, leaving outstandingobligations totaling more than P65,000. In payment thereof and without the companysknowledge or consent, he surrendered certain goods (e.g. G.I. sheets, black sheets, M.S. plates,round bars and G.I. pipes) to the Bureau in an attempt to settle the said obligations. Upondiscovery of this, Phil. Resources demanded the return of the goods from the Bureau but the latterrefused.

Can the delivery of these goods be considered payment for the outstanding balance of Apostolsobligations?

It is for the Court to decide. The Civil Code provides that price is always paid in terms of moneyand the supposed payment being in kind, it is no payment at all. However, the same article alsoprovides that the purchaser may pay a price certain in money or its equivalent which means that

payment of the price need not be in money. It is therefore within the province of the Court todecide whether the goods submitted are sufficient as payment. Should the ruling be in theaffirmative, it will of course be considered that such is to the detriment of Phil. Resources,assuming that it can prove its ownership over the goods in question. The law, in this case, willcertainly protect Phil. Resources interests, and it will have adequate legal remedies to resort toshould they incur loss as a result of Apostols payment.

VELASCO vs CA

Lorenzo Velasco & Magdalena Estate, Inc. entered into a contract of sale involving a lot inNew Manila for 100K.The agreement was that Lorenzo would give a down payment of 10K(as evidenced by a receipt) to be followed by 20K (time w/in which to make full downpayment was not specified) and the balance of 70K would be paid in installments, theequal monthly amortization to be determined as soon as the 30K had been paid. Lorenzo

paid the 10K but when he tendered payment for 20K, Magdalena refused to accept &refused to execute a formal deed of sale. Velasco filed a complaint for damages.


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Magdalena denied having any dealings/contractual relations w/ Lorenzo. It contends that aportion ofthe property was being leased by Lorenzos sister-in-law, Socorro Velasco whowent to their office & they agreed to the sale of the property (30K down payment, 70K oninstallments+9% interest). Since Socorro was only able to pay 10K, it was merelyaccepted as deposit & on her request, the receipt was made in the name of Lorenzo.Socorro failed to complete the down payment & neither has she paid the 70K. It was only2 years after that she tendered payment for 20K & by then, Magdalena considered theiroffer to sell rescinded.

According to Lorenzo, he had requested Socorro to make the necessary contracts & he hadauthorized her to make negotiations w/ Magdalena on her own name, as he doesntunderstand English. He also uses as evidence the receipt to prove that there already hadbeen a perfected contract to sell as the annotations therein indicated that earnest moneyfor 10K had been received & also the agreed price (100K, 30K dp & bal in 10 yrs) appearsthereon. To further prove that it was w/ him & not w/ Socorro that Magdalena dealt with,he showed 5 checks drawn by him for payment of the lease of the property.

W/N there was a consummated sale? NO

The minds of the parties did not meet in regard to the matter of payment. It is admittedthat they still had to meet and agree on how & when the down payment & installments

were to be paid. Therefore, it cannot be said that a definite & firm sales agreementbetween the parties had been perfected.

The definite agreement on the manner of payment of the purchase price is an essentialelement in the formation of a binding & enforceable contract of sale.

The fact that Velasco delivered to Magdalena the sum of 10K as part of the down paymentthat they had to be pay cannot be considered as sufficient proof of the perfection of anypurchase & sale agreement between the parties under Art 1428, NCC.

V FORMATION OF CONTRACT OF SALE

OPTION CONTRACT

CARCELLER vs CA

Respondent State Investment House, Inc. (SIHI) owns 2 parcels of land in Cebu and it entered into alease contract w/ option to purchase with Carceller at a monthly rental of 10K for a period of 18months. The lease contract stated that should Carceller exercise his privilege to purchase, he wouldhave to pay 1.8M (360K down payment & balance to be paid over 60 months w/ 24%interest/annum).

3 weeks before the expiration of the lease contract, SIHI notified Carceller of the impendingtermination of the lease & of the short time w/c he could still validly exercise the option.

Carceller wrote a letter to SIHI requesting for a 6 month extension of the lease contract alleging thathe needed to raise sufficient funds to be able to exercise his option . 14 days after the expiration of thelease, SIHI informed Carceller that his request was disapproved and instead, offered to lease theproperty for 1 year at 30K/month and also informed him that the property would be offered for sale tothe general public.

Four days later, Carceller notified SIHI of his decision to exercise the option to purchase & madearrangements for the payment of the 360K d/payment. SIHI responded saying that the option periodhad already lapsed & asked him to vacate w/in 10 days & to pay rental & penalties.

Carceller filed a complaint for specific performance & damages against SIHI.RTC: SIHI to execute deed of sale in favor of Carceller.CA: Affirmed but purchase price should be based on prevailing market value.

W/N Carceller should be allowed to exercise the option to purchase despite the alleged delay ofSIHI in giving the required notice to him?

An option is a preparatory contract in w/c one party grants to the other, for a fixed period & underspecified conditions, the power to decide w/n to enter into a principal contract. It binds the party whohas given the option not to enter into a principal contract w/ any other person during the perioddesignated. It is a separate agreement distinct from the contract w/c the parties may enter into uponthe consummation of the option.

Carcellers letter to SIHI was fair notice of his intent to exercise the option, despite the request for theextension of the lease contract. He asked for the extension so that he may be able to raise sufficientfunds to exercise his option to buy. Furthermore, if Carceller is not granted the option, it will cause

him damage as he had already introduced considerable improvements of the property. Even thought the option was exercised beyond the option period, it is still a substantial compliance w/

the exercise of the option. Carceller had already given notice of his intention to purchase the property


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w/in the option period when he asked for the extension. It was only after Carcellers request forextension was denied that he notified SIHI of his desire to exercise the option formally. The delay of18 days was neither substantial nor fundamental and did not amount to a breach that woulddefeat the intention of the parties when they executed the lease contract w/ option to purchase

AFFIRMED but remanded to the RTC to determine the fair market value of the property at the time the optionwas exercised.

Tayag v Lacson

A group of farmers/tillers, who farmed on the land owned by the Lacson family, entered into separate Deeds ofAssignment with Tayag. According to the Deeds, each of the farmers would waive in favor of Tayag his right tothe actual area of land being tilled, provided that there be no legal impediment prejudicing the smooth transferof lawful ownership of the property in Tayags name. The going price would be P50.00 per square meter ofland actually being tilled by each farmer. Tayag then started paying various sums to each of the farmers, tobe taken as partial payments under the Deeds terms. To further expedite the process, Tayag called a meetingto work out the implementation of the terms of their separate agreements. However, the farmers wrote backto Tayag, saying that they werent planning to attend the meeting, and that they were planning to sell theirrights and interests over the land to the Lacson family instead. They also claimed that they were tricked intoagreeing on the Deeds, and that they received the various sums from Tayag in the form of loans, not aspayments under the Deeds. In his response, Tayag claimed that the farmers were being coerced by theLacsons to renege on their previous commitments to him and that the Deeds must be honored in the interestof law. The trial court ruled in favor of Tayag (granting him injunctive relief) but the CA reversed, andenjoined the trial court from proceeding with the civil case.

Can the Lacsons be enjoined from the disposal or encumbrance of the property?

the petitioner was burdened to establish the following: (1) a right in esse or a clear and unmistakable right tobe protected; (2) a violation of that right; (3) that there is an urgent and permanent act and urgent necessityfor the writ to prevent serious damage

No. They were not parties to the Deeds of Assigment between Tayag and the farmers. (1) As dulyregistered owners of the property, the Lacsons have the right to enjoy and dispose of the property without anyother limitations than those established by law. They may enter into contracts covering their property withanother under such terms and conditions as they may deem beneficial provided they are not contrary to law,morals, good conduct, public order or public policy.

(2) In addition, the Deeds stated that such right in favor of Tayag would be available only if thereexisted no legal obstacle to his acquisition of the property. There is no showing in the petitioners complaint

that the respondents had agreed to sell their property, and that the legal impediments to the agreement nolonger existed. The petitioner and the defendants-tenants had yet to submit the Deeds of Assignment to theDepartment of Agrarian Reform which, in turn, had to act on and approve or disapprove the same.

In this case, the defendants-tenants-subtenants, under the deeds of assignment, granted to thepetitioner not only an option but the exclusive right to buy the landholding. But the grantors were merely thedefendants-tenants, and not the respondents, the registered owners of the property. Not being the registeredowners of the property, the defendants-tenants could not legally grant to the petitioner the option, much lessthe exclusive right to buy the property.

He never even came close to having a claim to the land; there is no right to speak of. It must also benoted that Tayags supposed scheme is truly revolting to the conscience. For the measly sum of fifty bucks persquare meter, hed be depriving the farmers/tillers of their interests over the land they work so hard tocultivate.

Issue: W/N the deeds of assignment executed are perfected option contracts?

Held: NO1. An option contract by which the owner of the property agrees with another person that he shallhave the right to buy his property at a fixed price within a certain time.

2. It imposes no binding obligation on the person holding the option, aside from the considerationfor the offer.

3. Until accepted, it is not, properly speaking, treated as a contract.4. An option contract is a separate and distinct contract from which the parties may enter into upon

the conjunction of the option.

Villamor v CA consideration = diff. b/w 70 (price agreed upon to be paid) minus the prevailing market priceof the property. Thus, the option could not be withdrawn anytime before the lapse of the period.

- Macaria sold of her lot to Sps. Villamor. That this was bought only because she promised to sell herother half at 70. = consideration

- Contract of sale perfected when the Villamors accepted the offer.

SANCHEZ V. RIGOS


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- Sanchez and Rigos entered into an Option to Purchase. Here, Rigos agreed, promise and committed

to Sanchez a parcel of land in Nueva Ecija for 1,510, provided that Sanchez exercise his right topurchase the property within 2 years. Failure to do so within the stipulated period would deem theoption terminated and elapsed.

- Rigos rejected several tenders of payment by Sanchez, which prompted the latter to deposit theamount in the court and file the case.

-

Defense: 2

nd

par. Of 1479: the contract was a unilateral promise to sell, and it being unsupported byany valuable consideration, is null and void. Thus, such an agreement is not binding.- Sanchez: 1st par of 1479: the contract is reciprocally demandable.- TC: Rigos must accept and sell the property to Sanchez, using 1324 as basis.

w/n Rigos could refuse the tender of payments, since the Option to Purchase was not supported byany valuable consideration? Which provision governs, 1324 or 1479?

Rigos should not have refused the payments, as a valid contract of sale was created when Sanchezexercised his right to purchase within the stipulated period and before withdrawal of the option.

- Applicable provision: 2nd par of 1479o The Option was not reciprocally demandable, as it did not impose upon Sanchez the

obligation to purchase the property. It merely granted him an option to buy, as clearlyindicated in the caption Option to Purchase. There is nothing in the contract to indicate thatRigos agreement to sell is supported by a consideration distinct from the stipulated price.

- There has been a conflict in the interpretation of Articles 1324 and 1479, which provides:-

Southwestern Sugar & Molasses v. Atlantic Gulf & Pacific Co., in essence, states that a unilateralpromise to but or to sell, even if accepted, is only binding if supported by a consideration. Thus, theoption can still be withdrawn, even if accepted. The case makes a distinction b/w 1324 and 1479, inthat the former is the general rule and the latter applies specifically to a promise to buy and sell.

- But the court recognized that later cases state that such an option, although not binding as a contractin itself for lack of a separate consideration, nevertheless generated a bilateral contract of purchaseand sale upon acceptance.

o More favored view, as reconciles the two provisions.

Vasquez vs. CA (1991)

1. Spouses Martin Vallejera and Apolonia Olea (respondents) filed this action against Spouses CiprianoVasquez (petitioners herein) seeking to redeem a lot sold by respondent spouses.

2. Said lot was registered in the name of Vallejera and Olea and the same lot was leased by them to

Cipriano and Vasquez (1966-1969). After the execution of the lease, Cipriano and Vasquez tookpossession of the lot, up to now and devoted the same to the cultivation of sugar.

3. Respondent spouses sold the lot to the petitioners under a Deed of Sale which was duly ratified andnotarized. Petitioners got hold then of a TCT. Along with the Deed of Sale is a separate instrument(Right to Repurchase) was executed by them granting the respondent spouses such right torepurchase lot for 12k. (also ratified and notarized)

4. However, after securing petitioners title, respondent spouses sold the same lot to Benito Derrama.Upon protestations of defendant, the said second sale was cancelled after the payment of 12 k bypetitioners to Derrama.

5. Petitioner spouses resisted this action for redemption on the premise that the Right to Repurchase isjust an option to buy as such is not supported by a considereation distinct from the price, making itnot binding to them.

6. LC: against Cipriano and Vasquez; MR: denied also; CA: in favor of Vallejo and Olea

Issue: w/n there was a valid right to repurchase

Held: NONE1. It is clear that the right to repurchase was not supported by consideration distinct from the price. The

rule is that the promisee has the burden of proving such consideration. Unfortunately, Vallejera andOlea, promisees in the right to repurchase failed to prove such consideration. The record does notshow that Vallejera and Olea accepted the right to repurchase.

2. Disagrees with the LC that Vallejera and Olea accepted the right to repurchase as evidenced by theannotation and registration of the same on the back of the TCT in the name of respondent spouses. Assuch, the Vasquez spouses are estopped from disregarding it. The annotation and registration of theright to repurchase at the back of the TCT of the petitioners cannot be considered as acceptance ofthe right to repurchase. Its only purpose is to bind purchasers of such registered land. In effect, theannotation of the right to repurchase found at the back of the certificate of title over the subject landof respondent spouses served as a notice of the existence of such unilateral promise of the petitionersto resell the same to respondent spouses.

3. The respondents did not sign the offer. Acceptance should be made by the promisee, in this case, therespondent spouses and not the promisors, the petitioners herein.

4. The respondent spouses ineffectual acceptance then of the option to buy validated the petitionersrefusal to sell the parcel which can be considered as a withdrawal of the option to buy.


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5. Since the transaction between the petitioners and respondents was not a sale with a right torepurchase, the respondents cannot avail of conventional redemption.

6. Petition granted.

Nietes v. CA accepted- Dr. Garcia entered into a Contract of Lease w/ Option to Buy for 5 yrs., with the option period

coinciding with the lease period, for the Angeles Educational Institute- Before the lapse of the period, he tried to rescind the contract for supposed violations by Nietes (likenot using the original name of the school).

- There was acceptance well within the period, before Garcia tried to rescind.- Pmt of 2K+ , for which a receipt was issued by Garcia, acknowledging it as advance payment

for the purchase- Letter by Nietes lawyer in reply to the rescission letter saying that they are exercising theit

right- The acceptance need not be coupled with payment.

Nietes v CA

Nietes and Garcia entered into a Contract of Lease with Option to Buy, involving a school in Pampanga whichGarcia owned. It was a five-year lease at 5k per year, payable in three installments. However, instead ofpaying in that manner, Nietes instead made smaller payments, albeit still amounting to the total of 25k plusan excess of more than 2k paid within the period of lease. Garcia later on sent a letter to Nietes, wishing torescind the contract for a number of reasons (mainly centered on subpar maintenance). Nietes replied bysaying that he never violated any of the terms set forth in the lease contract, and that moreover, he wasexercising his option to buy and ready to pay the balance of the purchase price at any time. He then made thenecessary deposit of funds (about 84k) at the Agro-Industrial Development Bank. Garcia contends that sinceno full payment had yet been made, Nietes could not be validly exercising his option to buy.

Was full payment of the purchase price necessary for a valid exercise of the option to buy?

No. First of all, Garcia is in estoppel. When one of the final payments had been made which actually exceededthe 25k rent, Garcia stated in the receipt that such payment had been made as advance pay for the school,the Contract of Lease being paid. In that regard, Garcia was actually acknowledging and assenting to Nietesintention to buy the school, as evidenced by his payments exceeding the rent. Also, in the case of an option tobuy, the creditor may validly and effectively exercise his right by merely advising the debtor of the formersdecision to buy and expressing his readiness to pay the stipulated price, provided that the same is available

and actually delivered to the debtor upon execution and delivery by him of the corresponding deed of sale. Inother words, an option to buy is governed by provisions on reciprocal obligations. All the buyer needs to do isto make known his intention to buy and express his capacity to pay the sale price, and in return, the sellerneeds to execute and deliver the deed of sale. Besides, nowhere was it stipulated that Nietes had to make fullpayment just to exercise his option.

Ang Yu Asuncion vs Court of Appeals

- Ang Yu Asuncion and Keh Tiong leased, for more than 50 years and religiously paying the rent,residential and commercial spaces in Binondo, owned by the Cu Unjiengs and Jose Tan. On severaloccasions, the lessors informed Ang Yu that they are offering to sell the premises and are giving thempriority.

- Ang Yu asked the lessors to put their offer in writing, which they said they would but they neveractually put it in writing. Ang Yu filed the case, claiming that the Cu Unjiengs failed to specify the

terms and conditions of the offer to sell and that information was received that they were about to sellthe property, so Ang Yu wants to compel the lessors to sell the property to them.o ** RTC: The Cu Unjiengs offer to sell was never accepted by Ang Yu, for the reason that the

parties didntagree upon the terms, but nevertheless, should the Cu Unjiengs offer theirproperty for sale at a price of P11M or lower, Ang Yu will have the right of first refusal.

o CA: Affirmed with modification. There will still be a right of first refusal whether the price islower or above P11M.

- The Cu Unjieng spouses executed a deed of sale, selling the property to Buen Realty, for P15M. BuenRealty filed a case asking Ang Yu to vacate, but Ang Yu claimed that Buen bought the land while itwas under lis pendens.

o RTC: Buen Realtys title is set aside as having been executed in bad faith. Cu Unjiengspouses ordered to sell the property to Ang Yu for P15M.

o CA: Reversed. Order to sell is without effect.Issue: Are the Cu Unjiengs bound to sell the property to Ang Yu and co.?Held: NO.

The stages of a contract of sale are negotiation, perfection, and consummation. Until the contract isperfected, it cannot, as an independent source of obligation, serve as a binding juridical relation.


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A negotiation is formally initiated by an offer. An imperfect promise (politacion) is merely an offer.Thus, at any time prior to the perfection of the contract, either negotiating party may stop the negotiation, andthe offer may be withdrawn.

If a period is given to the offeree within which to accept the offer, the following rulesgovern:

1. If the period is not founded upon or supported by a consideration, the offeror is still free and hasthe right to withdraw the offer before its acceptance.

2.

If the period has a separate consideration, a contract of option is deemed perfected and itwould be a breach of that contract to withdraw the offer during the agreed period. However, thatoption is an independent contract by itself, and it is to be distinguished from the projected mainagreement (subject matter of the option) which is obviously yet to be concluded. If the optioner-offeror withdraws the offer before its acceptance (exercise of the option) by the optionee-offeree,the latter may not sue for specific performance on the proposed contract (object of the option)since it has failed to reach its own stage of perfection. The optioner-offeror, however, rendershimself liable for damages for breach of the option.

Here, the first decisions (**) only granted a right of first refusal. In a right of first refusal, while theobject might be made determinate, the exercise of the right, however, would be dependent not only on thegrantors eventual intention to enter into a binding juridical relation with another, but also on terms, includingthe price, that obviously are yet to be firmed up. Prior thereto, it can at best be so described as merelybelonging to a class of preparatory juridical relations governed not by contracts. The breach of right of firstrefusal cannot justify corresponding an issuance of a writ of execution under a judgment, nor would it sanctionan action for specific performance without negating the indispensable element of consensuality.

If Ang Yu is aggrieved by the failure to honor the right of first refusal, the remedy is not a writ ofexecution on the judgment, but an action for damages.

Ang Yu Asuncion vs. CA (1994)

FACTS: Ang Yu Asuncion, et al., (plaintiffs) are tenants/lessees of residential and commercial spaces owned

by the Cu Unjieng. The Cu Unjiengs informed the plaintiffs that they are offering to sell the said premises and are giving

them priority. During the negotiations, the Cu Unjiengs offered a price of P6M, but the plaintiffs counter offered P5M. Plaintiffs then asked the Cu Unjiengs to put their offer in writing, which the latter agreed. Plaintiffs then asked that the terms and conditions of the offer to sell be specified, but the Cu Unjiengs

did not reply. Thus, plaintiffs filed a complaint to compel the Cu Unjiengs to sell the property to them. RTC: offer to sell was never accepted, bec. parties never agreed on the terms and conditions of the

proposed sale. However, the court held that the plaintiffs had a right of first refusal in case theproperty was to be sold at a price lower than P11M.

CA: affirmed the decision of RTC, with modications on that, due to the economy today, right of firstrefusal should also be made available to plaintiffs if the price is in excess of P11M.

Later, the Cu Unjiengs executed a Deed of Sale in favor of Buen Realty and Development Corporation(defendant), transferring the property to the latter for P15M.

Plaintiffs filed a Motion of Execution praying that the CA ruling be implemented. RTC: granted the said motion, ordered defendant to execute the Deed of Sale in favor of plaintiffs, in

recognition of their right of first refusal. CA: set aside the said order of the lower court.

ISSUE: I. W/N plaintiffs right of first refusal be recognized and the property should be sold in their favor.

HELD: I. NO8. Until the contract is perfected, it cannot, as an independent source of obligation, serve as a

binding juridical relation.9. A contract is perfected when a person (seller), obligates himself, for a price certain, to deliver andto transfer ownership of a thing or right to another (buyer).

10. In the law on sales, the so-c

Law on Sales Case Digests

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