digested cases sales

7/28/2019 Digested Cases Sales

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Definition of Sale

What does the definition cover?

POLYTECHNIC UNIVERSITY vs. COURT OF APPEALS368 SCRA 691

FACTS:The National Development Corporation (NDC) had in its disposal a 10-hectare property locatedalong Pureza St., Sta. Mesa, Manila which was popularly known as the NDC compound.

Respondent Firestone Ceramics, Inc. (Firestone) entered into three contracts of lease with NDC:

The first contract was a lease covering 2.90118 hectares (2.60 hectares) of the property for useas a manufacturing plant, for a term of 10 years renewable for another 10 years under the sameterms and conditions.

The second contract was the lease of NDCs 4-unit pre-fabricated steel warehouse, which wasco-extensive with the lease of the LESSEE with the LESSOR on the 2.60 hectare-lot.

The third contract concerned a 6-unit pre-fabricated steel warehouse which would expire onDecember 2, 1978.

Prior to the expiration of the third contract, a resolution was passed by the Board of Directors ofthe NDC which was subject to several conditions including with the approval of higherauthorities, decide to dispose and sell these properties including the lot, priority should be givento the LESSEE. In pursuance of the resolution, the lease was extended for another 10 years,renewable for another 10 years and expressly granting Firestone the first option to purchase theleased premises in the event that NDC decides to dispose and sell these properties including the

lot...

Relationships between the parties went smoothly until early 1988 when the lease agreement wasabout to expire. Firestone sent notices to NDC but they were unacknowledged. FIRESTONE'spredicament worsened when rumors of NDC's supposed plans to dispose of the subject propertyin favor of petitioner Polytechnic University of the Philippines (PUP) came to its knowledge.Forthwith, FIRESTONE served notice on NDC conveying its desire to purchase the property in theexercise of its contractual right of first refusal.

Apprehensive that its interest in the property would be disregarded, FIRESTONE instituted anaction for specific performance to compel NDC to sell the leased property in its favor. Meanwhile,

on 21 February 1989 PUP moved to intervene and asserted its interest in the subject property,arguing that a "purchaserpendente lite of property which is subject of a litigation is entitled tointervene in the proceedings." PUP referred to Memorandum Order No. 214 issued by thenPresident Aquino ordering the transfer of the whole NDC compound to the National Government,which in turn would convey the aforementioned property in favor of PUP at acquisition cost. Theissuance was supposedly made in recognition of PUP's status as the "Poor Man's University" aswell as its serious need to extend its campus in order to accommodate the growing studentpopulation. The order ofconveyance of the 10.31-hectare property would automatically result inthe cancellation of NDC's total obligation in favor of the National Government in the amountofP57,193,201.64.

NDC argued that the transaction between PUP and NDC amounted 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 transaction cannot belegally called a sale.

ISSUE: Whether or not there was a sale.

HELD: YES. We believe that the courts a quo did not hypothesize, much less conjure, the sale ofthe disputed property by NDC in favor of petitioner PUP. Aside from the fact that the intention of

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NDC and PUP to enter into a contract of sale was clearly expressed in the Memorandum OrderNo. 214, a close perusal of the circumstances of this case strengthens the theory that theconveyance of the property from NDC to PUP was one of absolute sale, for a valuableconsideration, and not a mere paper transfer as argued by petitioners.

A contract of sale, as defined in the Civil Code, is a contract where one of the parties obligates

himself to transfer the ownership of and to deliver a determinate thing to the other or otherswho shall pay therefore a sum certain in money or its equivalent. It is therefore a generalrequisite for the existence of a valid and enforceable contract of sale that it be mutuallyobligatory, i.e., there should be a concurrence of the promise of the vendor to sell a determinatething and the promise of the vendee to receive and pay for the property so delivered andtransferred. The Civil Code provision is, in effect, a "catch-all" provision which effectively bringswithin its grasp a whole gamut of transfers whereby ownership of a thing is ceded for aconsideration.

Contrary to what petitioners PUP and NDC propose, there is not just one party involved in thequestioned transaction. Petitioners NDC and PUP have their respective charters and therefore

each possesses a separate and distinct individual personality. The inherent weakness of NDC'sproposition that there was no sale as it was only the government which was involved in thetransaction thus reveals itself. Tersely put, it is not necessary to write an extended dissertationon government owned and controlled corporations and their legal personalities. Beyond cavil, agovernment owned and controlled corporation has a personality of its own, distinct and separatefrom that of the government. The intervention in the transaction of the Office of the Presidentthrough the Executive Secretary did not change the independent existence of these entities. Theinvolvement of the Office of the President was limited to brokering the consequent relationshipbetween NDC and PUP. But the withdrawal of the appeal by the Executive Secretary isconsidered significant as he knew, after a review of the records, that the transaction was subjectto existing liens and encumbrances, particularly the priority to purchase the leased premises infavor of FIRESTONE.

The preponderance of evidence shows that NDC sold to PUP the whole NDC compound, includingthe leased premises, without the knowledge much less consent of private respondentFIRESTONE which had a valid and existing right of first refusal.

All three (3) essential elements of a valid sale, without which there can be no sale, wereattendant in the "disposition" and "transfer" of the property from NDC to PUP - consent of theparties, determinate subject matter, and consideration therefor.

Consent to the sale is obvious from the prefatory clauses ofMemorandum Order No. 214 whichexplicitly states the acquiescence of the parties to the sale of the property -

WHEREAS, PUP has expressed its willingness to acquire said NDC properties and NDC hasexpressed its willingness to sell the properties to PUP

The defendants-appellants' interpretation that there was a mere transfer, and not a sale, apartfrom being specious sophistry and a mere play of words, is too strained and hairsplitting. For itis axiomatic that every sale imposes upon the vendor the obligation to transfer ownership as anessential element of the contract. Transfer of title or an agreement to transfer title for a pricepaid, or promised to be paid, is the very essence of sale. At whatever legal angle we view it,therefore, the inescapable fact remains that all the requisites of a valid sale were attendant inthe transaction between co-defendants-appellants NDC and PUP concerning the realities subjectof the present suit.

What is more, the conduct of petitioner PUP immediately after the transaction is in itself anadmission that there was a sale of the NDC compound in its favor. Thus, after the issuanceofMemorandum Order No. 214 petitioner PUP asserted its ownership over the property byposting notices within the compound advising residents and occupants to vacate thepremises. In its Motion for Intervention petitioner PUP also admitted that its interest as a"purchaserpendente lite" would be better protected if it was joined as party-defendant in thecontroversy thereby confessing that it indeedpurchasedthe property.

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ACAP vs. CA (December 7, 1995)

Nature: This is a petition for review on certiorari of the decision of the CA, which affirmed thedecision of the RTC, of holding that private respondent Edy delos Reyes had acquired ownershipof Lot. No. 1130 of the Cadastral Survey, based on a document entitled Declaration of Heirship and Waiver of Rights and ordering the dispossession of petitioner as leasehold tenant of

the land for failure to pay rentals.

Facts:1. The title to Lot no. 1130 was issued and registered in the name of spouses Santiago Vasquez

and Lorenzana Oruma. After both spouses died, their only son Felixberto inherited the Lot. In1975, Felixberto Vasquez executed a duly notarized document entitled Declaration ofHeirship and Deed of Absolute Sale in favor of Cosme Pido.

2. Since 1960,petitioner Teodoro Acap had been the tenant of a portion of the said land,covering an area of 9500 square meters. When the ownership was transferred in 1975 byFelixberto to Cosme Pido, Acap continued to be the registered tenant thereof and religiouslypaid his leasehold rentals to Pido and thereafter, upon Pidos death, to his widow

Laurenciana.3. The controversy began when Pido died intestate and on Nov.27 1981, his surviving heirs

executed a notarized document denominated as declaration of Heirshipand Waiver of Rightsof lot 1130 Hinigaran Cadastre, wherein they declared themselves as the only heirs of thelate Cosme.Pido and adjudicated unto themselves the above mentioned parcel of land inequal shares. The document was signed by all of Pidos heirs. Private respondent Edy delosReyes did not sign said document.

4. At the time of Cosme Pidos death, title to the property continued to be registered in thename of Vasquez spouses. Upon obtaining Declaration of Heirship with waiver of rights in hisfavor, private respondent Edy, held the same with the Registry Of Deeds as part of a noticeof an adverse claim against the original certificate of title.

5. Thereafter,private respondent sought for petitioner(Acap) to personally inform (edy) he hadbecome the new owner of the land and that the lease rentals thereon should be paid to him.private respondent further alleged that he and petitioner entered into an oral leaseagreement wherein petitioner agreed to pay (10) cavans of rice of palay per annum as leaserentals. In 1982, petitioner allegedly complied with said obligation. In 1983, petitionerhowever refused to pay further the rentals on the land, prompting private respondent to seekthe assistance of the Ministry of Agrarian reform.

6. On April 28 1988, after the lapse of o4 years, private respondent filed a complaint forrecovery of possession and damages against petitioner, alleging in the main that as hisleasehold tenant, petitioner refused to pay the agreed annual rental of 10 cavans of palaydespite repeated demands.

7. During the trial, petitioner reiterated his refusal to recognize private respondents ownership

over the subject land. He averred that he continues to recognize Cosme Pido as the owner ofthe said land, and having been a registered tenant therein since 1960. when Pido died, hecontinued to pay rentals to Pidos widow. Petitioner further claimed before the trial court thathe had no knowledge about any transfer or sale of the lot to private respondent in 1981 andeven the following year after Laurencianas departure for abroad. He denied having enteredinto verbal lease tenancy contract w/ private respondent and that assuming that the said lotwas indeed sold to private respondent without his knowledge, RA> 3844, as amended, grantshim the right to redeem the same at a reasonable price. The lower court rendered a decisionin favor of private respondent.

8. Aggrieved, petitioner appealed to the CA brushed aside petitioners appeal. Like therespondent court was also convinced that the declaration of Heirship and Waiver of Rightsatands as prima facie proof of appellees(private respondent) ownership of the land indispute.

Issues:1. Whether or not the subject declaration of heirship and waiver of rights is a recognized mode

of acquiring ownership by private respondent over the lot in question.2. Whether or not the said document can be considered a deeed of sale in favor of private

respondent of the lot in question.

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SC HELD:We find the petition impressed w/ merit.In the case at bench, the trial court was obviously confused as to the nature and effect of theDeclaration of Heirship and Waiver of Right, equating the same with CONTRACT OF (DEED)SALE. They are not the same.In a CONTRACT OF SALE, one of the contracting parties obligates himself to transfer theownership of and to deliver a determinate thing, and the other party to pay a price certain inmoney or its equivalent.Upon the other hand, a declaration of heirship and waiver of rights operates as a publicinstrument when filed with the registry of Deeds whereby the intestate heirs adjudicate anddivide the estate left by the decedent among themselves as they fit. It is in effect anextrajudicial settlement between the heirs under rule 74 of Rules of Court.HENCE, there is a marked difference between a sale of hereditary rights and a waiverof hereditary rights. The first presumes the existence of a contract or deed of salebetween the parties. The second is technically speaking a mode of extinction ofownership where there is an abdication or intentional relinquishment of a known rightwith knowledge of its existence and intention to relinquish it, in favor of the other

persons who are co-heirs in the succession. Private respondent being then a strangerto the succession of Cosme Pido, cannot conclusively claim ownership over the subjectlot on the sole basis of the waiver of document which neither recites the elements ofeither a sale, or a donation, or any other derivative mode of acquiring ownership.Quite surprisingly, both the trial court and the CA concluded that a SALE transpired betweenCosme Pidos heirs and private respondent and that petitioner acquired actual knowledge of saidsale when he was summoned by Ministry of Agrarian Reform to discuss private respondentsclaim over the lot in question.This conclusion has no basis in fact and in law.The declaration of heirship and waiver of rights was excluded by the trial court in its orderbecause the document was neither registered w/ the Registry of Deeds nor identified by theheirs of Pido. There is no showing that private respondent had the same document attached to

or made part of the record. What the trial court admitted was a notice of adverse claim filed w/Registry of Deeds which contained the Declaration of Heirship w/ the waiver of rights and wasannotated at the back of the original certificate of title to the land in question. It is to be notedthat while the existence of said adverse claim was duly proven, there is no evidencewhatsoever that a deed of sale was executed between Cosme Pidos heirs and privaterespondent transferring the rights of Pidos heirs to the land in favor of privaterespondent. Private respondents rights or interest therefore in the tenanted lotremains the adverse claim whisc cannot by itself be sufficient to cancel the OTC to theland and title the same in private respondents name.

Definition of Sale:

Mariano Z. Velarde and Avelina D. Velarde vs. CA, David A. Raymundo and GeorgeRaymundo (July 11, 2001)

Facts: David Raymundo (herein private respondent) is the absolute and registered ownerof a parcel of land , together with the house and other improvement thereon, located at 1918Kamias St., Dasmarias Village, Makati and covered by TCT No. 142177. Said property wasunder lease and was negotiated with herein petitioners for sale. On August 8, 1986, a Deed ofSale with Assumption of Mortgage was executed by defendant David Raymundo, as vendor, infavor of plaintiff Avelina Velarde, as vendee that for and in consideration of the sale vendee paidP800,000.00 to the vendor and the vendee hereby assumes to pay the mortgage obligations onthe property herein sold in the amount of P1,800.000.00, in favor of Bank of Philippine Islands,in the name of the VENDOR until such time her assumption of the mortgage obligations isapproved by the mortgagee bank and in the event said application is disapproved Velarde had topay in full the P1,800,000.00. She further agrees to strictly and faithfully comply with all theterms and conditions appearing the Real Estate Mortgage otherwise her down payment ofP800,000.00 plus all payments made with the Bank of the Philippine Islands on the mortgageloan, shall be forfeited in favor of Mr. David A. Raymundo, as and by way of liquidated damagesand the Deed of Sale with Assumption of Mortgage shall be deemed automatically cancelled.

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Pursuant to said agreements, plaintiffs paid BPI for 3 months Sept-Oct 96 but she did notmake any further payment when informed on December 15, 1986 that their Application forAssumption of Mortgage with BPI, was not approved. This prompted the defendants to write tothe plaintiffs informing the latter that their non-payment to the mortgage bank constitute non-performance of their obligation.

Plaintiffs responded that they are willing to pay the balance in cash not later than January

21, 1987 provided: (a) deliver actual possession of the property not later than January 15, 1987for her immediate occupancy; (b) cause the release of title and mortgage from the Bank and (c)execute and absolute deed of sale in her favor free from any liens or encumbrances not laterthan January 21, 1987.

On January 8, 1987 defendants sent plaintiffs a notarial notice of cancellation/rescission ofthe intended sale of the subject property allegedly due to the latters failure to comply with theterms and conditions of the Deed of Sale with Assumption of Mortgage.

Consequently, petitioners filed on February 9, 1987 a Complaint against privaterespondents for specific performance, nullity of cancellation, writ of possession and damages.The case was tried and heard by then Judge Consuelo Ynares-Santiago who dismissed theComplaint. Petitioners filed a Motion for Reconsideration. Judge Santiago was promoted to CA

and she was replaced by Judge Abad Santos, who granted petitioners Motion forReconsideration and directed the parties to proceed with the sale. He instructed petitioners topay the balance of P1.8 million to private respondents, who , in turn, were ordered to execute adeed of absolute sale and to surrender possession of the disputed property to petitioners.

Private respondents appealed to the CA. The CA set aside the Order of Judge Abad Santosand reinstated then Judge Ynares-Santiagos earlier Decision dismissing petitioners Complaint.Hence this petition.

Issue: Whether or not the non-payment of the mortgage obligation of the petitioner resulted ina breach of the contract of sale.

Ruling: Yes, for the petitioners did not merely stop paying the mortgage obligations. They also

failed to pay the balance of the purchase price. Their agreement mandated that petitionersshould pay the purchase price balance of P1.8 million to private respondents in case the requestto assume the mortgage would be disapproved. Thus, on December 15, 1986, when petitionersreceived notice of the banks disapproval of their application to assume respondents mortgage,they should have paid the balance of the P1.8 million loan. Instead of doing so, petitioners senta letter to private respondents offering to make such payment only upon the fulfillment of hernew conditions. Such conditional offer to pay cannot take the place of actual payment as woulddischarge the obligation of a buyer under a contract of sale.

In a contract of sale, the seller obligates itself to transfer the ownership of and deliver adeterminate thing, and the buyer to pay therefore a price certain in money or its equivalent.

Private respondents had already performed their obligation through the execution of the

Deed of Sale, which effectively transferred ownership of the property to petitioner throughconstructive delivery. Prior physical delivery or possession is not legally required and theexecution of the deed of Sale is deemed equivalent to delivery.

Petitioners, on the other hand, did not perform their correlative obligation of paying thecontract price in the manner agreed upon. Worse, they wanted private respondents to performobligations beyond those stipulated in the contract before fulfilling their own obligation to paythe full purchase price.

What does the definition cover:

VICENTE GOMEZ, as successor-in-interest of awardee LUISA GOMEZ, vs. CA, City ofManila acting thru the City Tenants Security Committee now the Urban SettlementOffice, Register of Deeds of Manila.[G.R. NO. 120747, September 21, 2000]

Nature:This is a petition for review on certiorari under Rule 45 of the Rules of Court questioning

the decision 1 of the Court of Appeals in C.A. G.R. Sp. No. 32101 promulgated on 22 February1995 which annulled and set aside the decision of the Regional Trial Court of Manila, Branch 12in Civil Case No. 51930.

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Facts:1. Pursuant to the Land for the Landless Programs of the City of Manila and in accordance withCity Ordinance No. 6880, the Office of the City Mayor issued Resolution No. 16-A, 3 Series of1978, dated 17 May 1978, which effectively set guidelines and criteria for the award of cityhome lots to qualified and deserving applicants. Attached to said resolution and made as integralpart thereof was a Contract to sell that further laid down terms and conditions, which the lot

awardees must comply with.2. On 30 June 1978, the City of Manila, through the City Tenants Security Committee presentlyknown as the Urban Settlement Office, passed Resolution 17-18 5 which in effect awarded to 46applicants, 37 home lots in the former Ampil-Gororspe estate located in Tondo, Manila. LuisaGomez, predecessor-in-interest of herein petitioner Vicente Gomez, was awarded Lot 4, Block 1,subject to the provisions of Resolution No. 3-78 of the CTSC and building, subdivision and zoningrules and regulations. Consequently, a certificate of award dated 02 July 1978 was granted bythe CTSC in favor of Luisa Gomez, who paid the purchase price of the lot in the amount ofP3,556.00 on installment basis.3. In 1979, Luisa Gomez traveled to the United States of America but returned to the Philippinesin the same year. On 18 January 1980, Luisa Gomez finally paid in full the P3,556.00 purchase

price of the lot. Despite the full payment, Luisa still paid in installment an amount of P8,244.00,in excess of the purchase price, which the City of Manila accepted. Additionally, the lot wasdeclared for taxation purposes and the corresponding real estate taxes thereon paid from 1980-1988. In 1982, Luisa, together with her spouse Daniel, left again for the United States ofAmerica where she died on 09 January 1983. She survived by her husband and four children,namely, Ramona Takorda, Edgardo Gomez, Erlinda Pena and Rebecca Dizon.4. Subsequently, in a memorandum dated 07 February 1984, the Urban Settlements Officer andExecutive Secretary of the CTSC directed the Western Police District, City Hall Detachment, toconduct an investigation regarding reported violations of the terms and conditions of the awardcommitted by the lot awardees.5. On 19 December 1984, team leader Pfc. Reynaldo Cristobal rendered an investigation reportaddressed to the City Mayor of Manila, as Chairman of the CTSC, stating, among others, that of

all the lot awardees in the said estate, Daniel Gomez was confirmed to have violated the termsand conditions of their respective awards, as the place was found actually occupied by ErlindaPerez and her family together with Mr. Mignony Lorghas and family, who are paying monthlyrentals of P210.00 each to Vicente Gomez, brother of awardee. Daniel Gomez is now presentlyresiding in the US and only returns for vacation once in awhile as a balikbayan.6. Thus, on 1 July 1986, the CTSC, headed by then City Mayor Gemiliano Lopez Jr. as Chairman,issued Resolution No. 015-86, adopting the findings of the investigation report submitted by Pfc.Cristobal, and ordering the cancellation of the lot awards of Daniel Gomez, and other awardeeswho were found to have committed violations, and further declaring the forfeiture of paymentsmade by said awardees as reasonable compensation for the use of the home lots.7. Petitioner Vicente Gomez, acting as attorney-in-fact of his brother Daniel Gomez asked for

reconsideration of the CTSC resolution revoking the award of the lot. Three memoranda werelater filed in the CTSC praying the Resolution 15-86 be set aside and that the award of the lot berestored to Luisa Gomez, or her heirs or successor-in-interest, preferably Vicente Gomez.8. On 5 February 1990, herein petitioner filed before the RTC of Manila, a petition for certiorariand prohibition. The lower court granted this. On appeal, the CA reversed the lower courtsdecision prompting petitioner to file a motion for reconsideration, which the appellate courtdenied via its assailed resolution dated 29 June 1995. Hence, the instant appeal where the courtof controversy revolves around the propriety of CTSCs act of canceling the lot award, throughResolution # 015-86, and further declaring the forfeiture of amounts paid by the awardee, asreasonable compensation for the use of the home lot.

Held: The petition is unmeritorious.The cancellation of the award covering Lot 4, Block 1, by the City of Manila, acting thru

the CTSC, was properly exercised within the bounds of law and contractual stipulation betweenthe parties.

The cancellation of the award covering, through expediency of Resolution 015-86 wasproper.

Primarily, it must be stressed that the contract entered into between the City of Manilaand awardee Luisa Gomez was not one of sale but a contract to sell. Which, under both statutoryand case law, has its own attributes, peculiarities and effects

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In a contract of sale, the title passes to the vendee upon the delivery of the thing sold;whereas in a contract of sell, by agreement, the ownership is reserved in the vendor and is notpass until the full payment of the price. In a contract of sale, the vendor has lost and cannotrecover ownership until and unless the contract is resolved or rescinded; whereas in a contractto sell, title is retained by the vendor until the full payment of purchase price, such paymentbeing a positive suspensive condition and failure of which is not a breach but an event that

prevents the obligation of the vendor to convey title from being effective.A contract of sale may either be absolute or conditional. One form of conditional sale is

what is now popularly termed as a Contract to Sell where ownership or title is retained untilthe fulfillment of positive suspensive condition normally the payment of the purchase price in themanner agreed upon.

The contracting parties are accorded the liberality and freedom to establish suchstipulations, clauses, terms and conditions as they may deem convenient, provided the same arenot contrary to law, morals, good customs, public order or public policy.

Under the present circumstances, we see no hindrance that prohibits the parties fromstipulating other lawful conditions, aside from full payment of the purchase price, which theypledge to bind themselves and upon which transfer of ownership depends.

In the instant case, we uphold the Contract to sell which explicitly provides for additionalterms and conditions upon which the lot awardees are bounded.As to the matter of acceptance, the same may be evidenced by some acts, Verily,

Resolution 16-A and the contract to sell which was annexed, attached and made to form part ofsaid resolution, clearly laid down the terms and conditions which the awardee-vendee mustcomply with. Accordingly, as an awardee, Luisa Gomez, her heirs and successors-in-interestalike, are duty-bound to perform the correlative obligations embodied in Resolution 16-A and theContract to Sell.

Stages in the life of a contract of sale:G.R. No. 137290, July 31, 2000SAN MIGUEL PROPERTIES PHILIPPINES, INC., petitioner vs. SPOUSES ALFREDO

HUANG AND GRACE HUANG, respondents.

Nature: This is a petition for review of the decision dated April 8, 1997 of the Court of Appealswhich reversed the decision of the Regional Trial Court, Branch 153, Pasig City dismissing thecomplaint brought by respondents against petitioner for enforcement of a contract of sale.

Facts:

1. Part of Petitioner San Miguel Properties Philippines, Inc.s inventory are two parcels of landtotaling 1,738 square meters at the corner of Meralco Avenue and General Capinpin Street,Barrio Oranbo, Pasig city. On February 21, 1994, the properties were offered for sale forP52,140,000.00 in cash. The offer was made to Atty. Helena M. Dauz who was acting for

respondent spouses as undisclosed principals. In a letter dated March 24, 1994, Atty. Dauzsignified her clients interest in purchasing the properties for the amount for which they wereoffered by petitioner, under the following terms: the sum of P500,000.00 would be given asearnest money and the balance would be paid in eight equal monthly installments from May toDecember, 1994. However, petitioner refused the counter-offer.2. On March 29, 1994, Atty. Dauz wrote another letter proposing the following terms for thePurchase of the Properties, viz:

This is to express our interest to buy your above-mentioned property with an area of

1,738 sq. meters. For this purpose, we are enclosing herewith the sum of P1,000,000.00representing earnest deposit money subject to the following conditions:

1. We will be given the exclusive option to purchase the property within the 30 days fromthe date of your acceptance of this offer.

2. During said period, we will negotiate on the terms and conditions of the purchase;SMPPI will secure the necessary Management and Board approvals; and we initiate the

documentation if there is mutual agreement between us.3. In the event that we do not come to an agreement on this transaction, the said

amount of P1,000,000.00 shall be refundable to us in full upon demand.3. Isidro A. Sobrecarey, petitioners vice-president and operations manager for corporate realestate, indicated his conformity to the offer by affixing his signature to the letter and accepted

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the earnest deposit of P1 million. Upon request of respondent spouses, Sobrecarey orderedthe removal of the FOR SALE sign from the properties.4. Atty. Dauz and Sobrecarey then commenced negotiatons. During their meeting on April 8,1994, Sobrecarey informed Atty. Dauz that petitioner was willing to sell the subject propertieson a 90-day term. Atty. Dauz countered with an offer of six months within which to pay. OnApril 4, 1994, the parties again met during which Sobrecarey informed Atty. Dauz that petitioner

had not yet acted on her counter offer. This prompted Atty. Dauz to propose a four-monthperiod of amortization. On April 25, 1994, Atty. Dauz asked for an extension of 45 days fromApril 29, 1994 to June 13, 1994 within which to exercise her option to purchase the property.Her request was granted.5. On July 7, 1994, petitioner, through its president and chief executive officer, FedericoGonzales, wrote Atty. Dauz informing her that because the parties failed to agree on the termsand conditions of the sale despite the extension granted by petitioner, the latter was returningthe amount of P1 million given as earnest-deposit. On July 20, 1994, respondent spouses,through counsel, wrote petitioner demanding the executing within 5 days of a Deed of Salecovering the properties. Respondents attempted to return the earnest deposit but petitionerrefused on the ground that respondents option to purchase had already expired.

6. On August 16, 1994, respondent spouses filed a complaint for specific performance againstpetitioner before the Regional Trial Court, Brach 133, Pasig City. The trial court grantedpetitioners motion and dismissed the action. Respondents filed a motion for reconsideration,but it was denied by the trial court. They then appealed to the Court of Appeals, which on April8, 1997, rendered a decision reversing the judgment of the trial court. Petitioner moved forreconsideration of the trial courts decision, but its motion was denied. Hence, this petition.

SC HELD: The petition is MERITORIOUS.Respondents did not give the P1 million as earnest money as provided by Art.

1482 of the Civil Code. They presented the amount merely as a deposit of what wouldeventually become the earnest money or downpayment should a contract of sale bemade by them. The amount was thus given not as a part of the purchase price and as

proof of the perfection of the contract of sale but only as a guarantee that respondentswould not back out of the sale. Respondents in fact described the amount as anearnest deposit.

In the present case, the P1 million earnest deposit could not have been given as earnestmoney as contemplated in Art. 1482 because, at the time when petitioner accepted theterms of respondents offer of March 29, 1994, their contract had not yet beenperfected. This is evident from the following conditions attached by respondents to their letter.The first condition for an option period of 30 days sufficiently shows that a sale was neverperfected. As petitioner correctly points out, acceptance of this condition did not give rise to aperfected sale but merely to an option or an accepted unilateral promise on the part ofrespondents to buy the subject properties within 30 days from the date of acceptance of the

offer. Furthermore, even the option secured by respondents from petitioner was fatallydefective. Under the second paragraph of Art. 1479, an accepted unilateral promise to buy orsell a determinate thing for a price certain is binding upon the promisor only if the promise issupported by a distinct consideration. Consideration in an option contract may be anything ofvalue, unlike in sale where it must be the price certain in money or its equivalent. There is noshowing here of any consideration for the option. Lacking any proof of such consideration, theoption is unenforceable. Equally compelling as proof of the absence of a perfect sale is thesecond condition that, during the option period, the parties would negotiate the terms andconditions of the purchase. The stages of a contact of sale are as follows: (1)negotiation, covering the period from the time the prospective contracting partiesindicate interest in the contract to the time the contract is perfected; (2) perfection,which takes place upon the concurrence of the essential elements of the sale whichare the meeting of the minds of the parties as to the object of the contract and uponthe price; and (3) consummation, which begins when the parties perform theirrespective undertakings under the contract of sale, culminating in the extinguishmentthereof. In the present case, the parties never got past the negotiation stage. The allege

indubitable evidence of a perfected sale cited by the appellate court was nothing more thanoffers and counter-offers which did not amount to any final arrangement containing the essentialelements of a contract of sale. While the parties already agreed on the real properties which

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were the objects of the sale and on the purchase price, the fact remains that they failed to arriveat mutually acceptable terms of payment, despite the 45 day extension given by petitioner.

The manner of payment of the purchase price is an essential element before a valid andbinding contract of sale can exist. Although the Civil Code does not expressly state that theminds of the parties must also meet on the terms or manner of payment of the price, the sameis needed otherwise there is no sale.

Thus, it is not the giving of earnest money, but the proof of the concurrence of all theessential elements of the contract of sale which establishes the existence of a perfected sale.

In the absence of a perfected contract of sale, it is immaterial whether Isidro A.Sobrecarey had the authority to enter into a contract of sale in behalf of petitioner. This issue,therefore, needs no further discussion.

WHEREFORE, the decision of the Court of Appeals is REVERSED and respondentscomplaint is DISMISSED.

Brokers:MEDRANO vs. CA (February 18, 2005)

Nature: This is a petition for review of the Decision of the Court of Appeals (CA) affirming intoto the Decision of the Regional Trial Court (RTC) of Makati City, Branch 135, in Civil Case No.15664 which awarded to the respondents their 5% brokers commission.

Facts:1. Bienvenido R. Medrano was the Vice-Chairman of Ibaan Rural Bank a bank owned by theMedrano family. In 1986, Mr. Medrano asked Mrs. Estela Flor, a cousin-in-law, to look for abuyer of a foreclosed asset of the bank, a 17-hectare mango plantation priced at P2,200,000.00,located in Ibaan, Batangas.2. Mr. Dominador Lee, a businessman from Kati City, was a client of respondent Mrs. Pacita G.Boran, a licensed real estate broker. The two met through a previous transaction where Leeresponded to an ad in a newspaper put up by Borboan for an 8-hectare property in Lubo,Batangas, planted with atis trees. Lee expressed that he preferred a land with mango treesinstead. Borbon promised to get back to him as soon as she would be able to find a propertyaccording to his specifications.3. Borbon relayed to her business associates and friends that she had a ready buyer for amango orchard. Flor then advised her that her cousin-in-law owned a mango plantation whichwas up for sale. She told Flor to confer with Mediano and to give them a written authority tonegotiate the sale of the property. Thus, on September 3, 1986, Medrano issued the Letter ofAuthority.4. Two days after an ocular inspection was said to be conducted, respondent Josefina Antoniocalled Lee to inquire about the result of his ocular inspection. Lee told her that the mango trees

looked sick so he was bringing an agriculturist to the property. Three weeks thereafter,

Antonio called Lee again to make a follow up of the latters visit to Ibaan. Lee informed her thathe already purchased the property and had made a down payment of P1,000,000.00. . Theremaining balance of P1,200,000.00 was to be paid upon the approval of the incorporationpapers of the corporation he was organizing by the Securities and Exchange Commision.According to Antonio, Lee asked her if they had already received their commission. Sheanswered no and Lee expressed surprise over this.5. A Deed of Sales was eventually executed on November 6, 1986 between the bank, and KGBFarms, Inc., for the purchase price of P1,200,000.00. Since the sale of property wasconsummated, the respondents asked from the petitioners their commission, or 5% of thepurchase price. The petitioners refused to pay and offered a measly sum of P5,000.00 each.Hence, the respondents were constrained to file an action against herein petitioners.6. The trial court rendered a Decision in favor of the respondents.7. On May 3, 2001, the CA promulgated the assailed decision affirming the finding of the trialcourt that the letter of authority was valid and binding. Applying the principle of agency, theappellate court ruled that Bienvenido Medrano constituted the respondents as his agents,granting them authority to represent and act on behalf of the former in the sale of the 17-hectare mango plantation. The CA also ruled that the trial court did not err in finding that therespondents were the procuring cause of the sale. Suffice it to state that were it not for therespondents, Lee would not have known that there was a mango orchard offered for sale.Undaunted by the CAs unfavorable decision, the petitioners filed the instant petition.

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SC HELD: The petition is DENIED.The records disclose that respondent Pacita Borbon is a licensed real estate broker and

respondents Josefina Antonio and Esta A. Flor are her associates. A BROKER is generally definedas one who is engage, for others, on a commission, negotiating contracts, relative to relative toproperty with the custody of which he has no concern; the negotiator between other parties,never acting in his own name but in the name of those who employed him; he is strictly a

middleman and for some purposes the agent of both parties. A BROKER is one whoseoccupation is to bring parties together, in matters of trade, commerce or navigation. For therespondents participation in finding a buyer for the petitioners property, the petitioners refuseto pay them commission, asserting that they are not the efficient procuring cause of the sale,and that the letter of authority signed by petitioner Medrano is not binding against thepetitioners.

Procuring cause is meant to be the proximate cause. The term procuring cause, indescribing a brokers activity, refers to a cause originating a series of events which, withoutbreak in their continuity, result in accomplishment of prime objective of the employment of thebroker producing a purchaser ready, willing and able to buy real estate on the owners terms.A broker will be regarded as the procuring cause of a sale, so as to be entitled to

commission, if his efforts are the foundation on which the negotiations resulting in asale are begun. Indeed, the evidence on record shows that the respondents wereinstrumental in the sale of the property to Lee. Without their intervention, no salecould have been consummated. They were the ones who set the sale of the subjectland in motion. While the letter-authority issued in favor of the respondents was non-exclusive, no evidence was adduced to show that there were other persons, aside from therespondents, who informed Lee about the property for sale. Ganzon testified that noadvertisement was made announcing the sale of the lot, nor did she give any authority to otherbrokers/agents to sell the subject property. It can thus be readily inferred that the respondentswere the only ones who knew about the property for sale and were responsible in leading abuyer to its consummation. All these circumstances lead us to the inescapable conclusion thatthe respondents were the procuring cause of the sale. When there is a close, proximate and

causal connection between the brokers efforts and the principals sale of his property, thebroker is entitled to a commission.

Essential Characteristics:

G.R. No. 107207 (November 23, 1995)VIRGILIO R. ROMERO, petitioner, vs. HON. COURT OF APPEALS and ENRIQUE CHUAVDA. DE ONGSIONG, respondents

May the vendor demand the rescission of a contract for the sale of a parcel ofland for a cause traceable to his own failure to have the squatters on the subject

property evicted within the contractually-stipulated period?

Facts:1. Petitioner Virgilio R. Romero, a civil engineer, was engaged in the business of production,manufacture and exportation of perlite filer aids, permalite insulation and process perlite ore. In1988, petitioner and his foreing partners decidd to put up a central warehouse in Metro Manilaon a land area of approximately 2,000 square meters. The project was made known to severalfreelance real estate brokers.2. A day or so after the announcement, Alfonso Flores and his accompanied by a broker, offereda parcel of land measuring 1,952 square meters covered by TCT No. 361402 in the name ofprivate respondent Enriqueta Chua Vda. De Ongsion. Petitioner visited the property and, exceptfor the presence of squatters in the area, he found the place suitable for a central warehouse.3. Later, the Flores spouses called on petitioner with a proposal that should he advance theamount of P50,000.00 which could be used in taking up an ejectment case against thesquatters, private respondent would agree to sell the property for only P800.00 per squaremeter. Petitioner expressed his concurrence. On 09 June 1988, a contract, denominated Deedof Conditional Sale was executed between petitioner and private respondent.4. Pursuant to this agreement, private respondent filed a complaint for ejectment (Civil CaseNo. 7579) against Melchor Musa and other squatter families with the Metropolitan Trial Court of

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Paraaque. A few months later, or on 21 February 1989, judgment was rendered ordering thedefendants to vacate the premises.5. In a letter dated 07 April 1989, private respondent sought to return the P50,000.00 shereceived from the petitioner since, she said, she could not get rid of the squatters on the lot.Atty. Sergio A. F. Apostol, counsel for the petitioner, in his reply of 17 April 1989, refused thetender. Meanwhile, the President Commission for the Urban Pool (PCUD asked the

Metropolitan Trial Court of Paraaque for a grace period of 45 days within which to relocate andtransfer the squatter families. Acting favorable on the request, the court suspended theenforcement of the writ of execution accordingly.6. Atty. Joaquin Yuseco, Jr., counsel for private respondent advised Atty. Apostol that the Deedof Conditional Sale had been rendered null and void by virtue of his clients failure to evict thesquatters form the premises within the agreed 60-day period. He added that private respondenthad decided to retain the property. On 23 June 1989, Atty. Apostol wrote back, claiming theperfection of the contract of sale.7. Private respondent, prompted by petitioners continued refusal to accept the return of theP50,000 advance payment, filed with the Regional Trial Court of Makati, Branch 133, Civil CaseNo. 89-4394 for a rescission of the deed of conditional sale, plus damages, and for the

consignation of P50,000.00 cash. The Regional Trial Court of Makati rendered decision holdingthat private respondent had no right to rescind the contract sine it was she who violated herobligation to eject the squatters from the subject property. Private respondent appealed to theCourt of Appeals. On 29 May 1992, the appellate court rendered its decision. It opined that thecontract entered into by the parties was subject to a resolutory condition, i.e., the ejectment ofthe squatters from the land, the non-occurrence of which resulted in the failure of the object ofthe contract; that private respondent substantially compiled with her obligation to evict thesquatters; that it was petitioner who was not ready to pay the purchase price and fulfill his partof the contract, and that the provision requiring a mandatory return/reimbursement of theP50,000.00 in case private respondent would fail to eject the squatters within the 60-day periodwas not a penal clause.

SC HELD: A perfected contract of sale may either be absolute or conditional depending onwhether the agreement is devoid of, or subject to, any condition imposed on the passing of titleof the thing to be conveyed or on the obligation of party thereto. When ownership is retaineduntil the fulfillment of a positive condition the breach of the condition will simply prevent theduty to convey title from acquiring an obligatory force. If the condition is imposed on anobligation of a party which is not complied with, the other party may either refuse to proceed orwaive said condition (Art. 1545, Civil Code). Where, of course, the condition is imposed uponthe perfection of the contract itself, the failure of such condition would prevent the juridicalrelation itself from coming into existence.

It would be futile to challenge the agreement here in question as not being duly perfectedcontract. A sale is at once perfected where a person (the seller) obligates himself, for a price

certain, to deliver and to transfer ownership of a specified thing or right to another (the buyer)over which the latter agrees.

The object of the sale, in case before us, was specifically identified to be as 1,952-squaremeter lot in San Dionisio, Paraaque, Rizal, covered by Transfer Certificate of Title No. 361402of the Registry of Deeds for Pasig and therein technically described. The purchase price wasfixed at P1,561,600.00, of which P50,000.00 was to be paid upon the payable 45 days after theremoval of all squatters from the above described property.

From the moment the contract is perfected, the parties are bound not only to thefulfillment of what has been expressly stipulated but also to all the consequences which,according to their nature, may be in keeping with good faith, usage and law. Under theagreement, private respondent is obligated to evict the squatters on the property. Theejectment of the squatters is a condition the operative act of which sets into motionthe period of compliance by petitioner of his own obligation, i.e., to pay the balance ofthe purchase price. Private respondents failure to remove the squatters from the propertywithin the stipulated period gives petitioner the right to either refuse to proceed with theagreement or waive that condition in consonance with Article 1545 of the Civil Code. This optionclearly belongs to petitioner and not to private respondent.

In contracts of sale particularly, Article 1545 of the Civil Code, aforementioned,allows the oblige to choose between proceeding with the agreement or waiving theperformance of the condition. It is this provision which is the pertinent rule in the

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case at bench. Here, evidently, petitioner has waived the performance of the conditionimposed on private respondent to free the property from squatters.

In an case, private respondents action for rescission is not warranted. She is not theinjured party.

WHEREFORE, the questioned decision of the Court of Appeals is hereby REVERSED andSET ASIDE, and another is entered ordering petitioner to pay private respondent the balance of

the purchase price and the latter to execute the deed of absolute sale in favor of petitioner.

Title vs. substance; nominate contractSPS. SANTOS vs. CA, SPS. CASEDA (August 1, 2000)Facts: Spouses Santos owned the house and lot consisting of 350 square meters located at Lot7, Block 8, Better Living Subdivision, Paraaque, Metro Manila. The land together with thehouse, was mortgaged with the Rural Bank of Salinas, Inc., to secure a loan of P150,000.00maturing on June 16, 1987. Sometime in 1984, Rosalinda Santos met Carmen Caseda, afellow market vendor of hers in Pasay City and soon became very good friends with her.

On June 16, 1984, the bank sent Rosalinda Santos a letter demanding payment ofP16,915.84 in unpaid interest and other charges. Since the Santos couple had no funds,

Rosalinda offered to sell the house and lot to Carmen. After inspecting the real property, Carmenand her husband agreed.

The other terms and conditions that the parties agreed upon were for the Caseda spousesto pay: (1) the balance of the mortgage loan with the Rural bank; (2) the real estate taxes; (3)the electric and water bills; and (4) the balance of the cash price to be paid not later than June16, 1987, which was the maturity date of the loan. The Casedas gave an initial payment ofP54,100.00 and immediately took possession of the property, which they then leased out. Theyalso paid in installments, P81,696.84 of the mortgage loan. The Casedas, however, failed to paythe remaining balance of the loan because they suffered bankruptcy in 1987. Notwithstandingthe state of their finances, Carmen nonetheless paid in March 1990, the real estate taxes on theproperty for 1981-1984. She also settled the electric bills from December 12, 1988 to July 12,1989. All these payments were made in the name of Rosalinda Santos. In January 1989, theSantoses, seeing that the Casedas lacked the means to pay the remaining installments and/oramortization of the loan, repossessed the property. The Santoses then collected the rentals fromthe tenants.

In February 1989, Carmen Caseda sold her fishpond in Batangas. She then approachedpetitioners and offered to pay the balance of the purchase price for the house and lot. Theparties, however, could not agree, and the deal could not push through because the Santoseswanted a higher price.

On August 11, 1989, the Casedas filed Civil Case No. 89-4759, with the RTC of Makati, tohave the Santoses execute the final deed of conveyance over the property, or in default thereof,to reimburse the amount of P180,000.00 paid in cash and P249,900.00 paid to the rural bank,plus interest, as well as rentals for eight months amounting to P32,000.00, plus damages and

costs of suit. The lower court dismissed the Casedas complaint since plaintiffs were short of thepurchase price and cannot, therefore, demand specific performance. The trial court further heldthat the Casedas were not entitled to reimbursement of payments already made because offailure of plaintiffs to liquidate the mortgage loan on time, which had ballooned from its originalfigure. Logically, plaintiffs must share in the burden arising from their failure to liquidate theloan per their contractual commitment.

On appeal, the appellate court reversed the lower court. The appellate court held thatrescission was not justified under the circumstances and allowed the Caseda spouses a period ofninety days within which to pay the balance of the agreed purchase price.

Issue: Whether the subject transaction is not a contract of absolute sale but a mere oralcontract to sell in which case judicial demand for rescission (art. 1592,7 civil code) is notapplicable

Ruling: It must be emphasized from the outset that a contract is what the law defines it tobe, taking into consideration its essential elements, and not what the contracting parties call it.Article 1458 of the Civil Code defines a contract of sale. Note that the said article expresslyobliges the vendor to transfer the ownership of the thing sold as an essential element of acontract of sale. The Court is far from persuaded that there was a transfer of ownershipsimultaneously with the delivery of the property purportedly sold. The records clearly show that,

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notwithstanding the fact that the Casedas first took then lost possession of the disputed houseand lot, the title to the property, TCT No. 28005 (S-11029) issued by the Register of Deeds ofParaaque, has remained always in the name of Rosalinda Santos. 17 Note further that althoughthe parties agreed that the Casedas would assume the mortgage, all amortization paymentsmade by Carmen Caseda to the bank were in the name of Rosalinda Santos. The foregoingcircumstances categorically and clearly show that no valid transfer of ownership was made

by the Santoses to the Casedas. Absent this essential element, their agreement cannot bedeemed a contract of sale. The Court agrees with petitioner's averment that theagreement between Rosalinda Santos and Carmen Caseda is a contract to sell . Incontracts to sell, ownership is reserved the by the vendor and is not to pass until fullpayment of the purchase price. This is fully applicable and understandable in this case, giventhat the property involved is a titled realty under mortgage to a bank and would require notarialand other formalities of law before transfer thereof could be validly effected.

It follows that the appellate court erred when it decreed that a judicial rescission of saidagreement was necessary. This is because there was no rescission to speak of in the first place.As earlier pointed, in a contract to sell, title remains with the vendor and does not passon to the vendee until the purchase price is paid in full . Thus, in contract to sell, the

payment of the purchase price is a positive suspensive condition. Failure to pay theprice agreed upon is not a mere breach, casual or serious, but a situation that preventsthe obligation of the vendor to convey title from acquiring an obligatory force. This isentirely different from the situation in a contract of sale, where non-payment of the price is anegative resolutory condition. The effects in law are not identical. In a contract of sale, thevendor has lost ownership of the thing sold and cannot recover it, unless the contract of sale isrescinded and set aside. In a contract to sell, however, the vendor remains the owner for as longas the vendee has not complied fully with the condition of paying the purchase. If the vendorshould eject the vendee for failure to meet the condition precedent, he is enforcing the contractand not rescinding it. When the petitioners in the instant case repossessed the disputed houseand lot for failure of private respondents to pay the purchase price in full, they were merelyenforcing the contract and not rescinding it. As petitioners correctly point out the Court of

Appeals erred when it ruled that petitioners should have judicially rescinded the contractpursuant to Articles 1592 and 1191 of the Civil Code. Article 1592 speaks of non-payment of thepurchase price as a resolutory condition. It does not apply to a contract to sell. As to Article1191, it is subordinated to the provisions of Article 1592 when applied to sales of immovableproperty.23 Neither provision is applicable in the present case.

The instant petition is GRANTED and the assailed decision of the Court of Appeals in CA-G.R. CV No. 30955 is REVERSED and SET ASIDE. The judgment of the Regional Trial Court ofMakati, Branch 133, with respect to the DISMISSAL of the complaint in Civil Case No. 89-4759,is hereby REINSTATED.


CAVITE DEVELOPMENT BANK vs. LIM & CA(February 1, 2000)Facts: June 15, 1983 Rodolfo Guansing obtained a loan in the amount of 90,000.00 from Cavite Devt

Bank (CDB), to secure which, he mortgaged a parcel of land situated at No. 63 Calavite St., LaLoma, QC registered in his name. As Guansing defaulted in the payment of his loan, CDBforeclosed the mortgage.

At the foreclosure sale held on March 15, 1984 , the mortgage d property was sold to CBD, as

the highest bidder. June 16, 1988, private respondent Lolita Chan Lim, assisted by a broker named Remedios

Gatpadan, offered to purchase the property from CBD. Lim paid CBD 30,000.00 as Option

Money. Lim discovered that the subject property was originally registered in the name of Perfecto

Guansing and was fraudulently acquired by Rodolfo. Aggrieved by what she considered a serious misrepresentation by CBD and its mother-

company, FEBTC, on their ability to sell the subject property, Lim joined by her husband, filedon August 29, 1989 an action for specific performance and damages against petitioners.

March 10, 1993, the trial court rendered a decision in favor of the Lim spouses. It ruled that:

(1) there was a perfected contract of sale between Lim and CBD, contrary to the latters

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contention that the written offer to purchase and the payment of 30,000.00 were merely pre-conditions to the sale and still subject to the approval of FEBTC; (2) performance by CBD of tisobligation under the perfected contract of sale had become impossible on account of the 1984decision in Civil Case no. Q-39732 canceling the title in the name of mortgagor RodolfoGuansing; (3) CBD and FEBTC were not exempt from liability despite the impossibility ofperformance, because they could not credibly disclaim knowledge of the cancellation of

Rodolfo Guansings title without admitting their failure to discharge their duties to the public asreputable banking institutions; and (4) CBD and FEBTC are liable for damages for theprejudice caused against the Lims.

Petitioners brought the matter to the CA, which, on October 14, 1997 affirmed in toto the

decision of the RTC.

Issue: WON the sale by CBD to Lim is valid?

Ruling:Art. 2085 of the CC, in providing for the essential requisites of the contract of mortgage

and pledge, requires, among other things, that the mortgagor or pledgor be the absolute owner

of the thing pledged or mortgaged, in anticipation of a possible foreclosure sale should themortgagor default in the payment of the loan.

There is, however, a stipulation where, despite the fact that the mortgagor is not theowner of the mortgaged property, his title being fraudulent, the mortgage contract and anyforeclosure sale arising therefrom are given effect by reason of public policy. This is the doctrineof mortgage in good faith based on the rule that all persons dealing with property coveredby a Torrens Certificated of Title, as buyers or mortgagees, are not required to go beyond whatappears on the face of the title. In the present case, it is clear that the sellers no longer had nay title to the parcels ofland at the time of sale. Since Exh. D, the alleged contract of repurchase, was dependent on thevalidity of Exh. C, it is itself void. A void contract cannot give rise to a valid one. Verily, Art.1422 of the CC provides that (a) contract which is the direct result of a previous illegal contractis also a void and inexistent contract.

Given the CBDs acceptance of Lims offer to purchase, it appears that a contract of salewas perfected and indeed partially executed because of the partial payment of the purchaseprice. There is however, a serious legal obstacle to such sale, rendering it impossible for CBD toperform its obligation as seller to deliver and transfer ownership of the property.

Nemo dat quod non habet, as an ancient Latin maxim says: One cannot give what onedoes not have.

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. It is, therefore, not required that, at theperfection stage, the seller be the owner of the thing sold or even the such subject matter of thesale exist at that point in time. Thus, Art. 1434 of the CC, when a person sales or alienates a

thing which, at the time, was not his, but later acquires title thereto, such title passes byoperation of law to the buyer or grantee. This is the same principle behind the sale of futuregoods under Art. 1462 of the CC. However, under Art. 1459, at the time of delivery orconsummation 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 obligation to transfer ownership to the buyer. Itis at the consummation stage where the principle of Nemo dat quod non habetapplies.

It is standard practice for banks, before approving a loan, to send representative to thepremises of the land offered as collateral and to investigate who are the real owners thereof,noting the banks are expected to exercise more care and prudence than private individuals intheir dealings, even those involving registered lands, for their business is affected with publicinterest.

Petitioners are guilty of fraud, because on June 16, 1988, when Lim was asked by CBD topay the 10% option money, CBD already knew that it was no longer the owner of the sameproperty, its title having been cancelled.

Essential Characteristics

BALATBAT vs. CA, SPS. REPUYAN (August 28, 1996)Facts: On June 15, 1977, Aurelio A. Roque filed a complaint for partition docketed againstCorazon Roque, Alberto de los Santos, Feliciano Roque, Severa Roque and Osmundo Roquebefore the then Court of First Instance of Manila. The trial court rendered a decision in favor of

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plaintiff Aurelio A. Roque, of which he was entitled to one-half share pro-indiviso thereof. Withrespect to the one-half share pro-indiviso now forming the estate of Maria Mesina (Roqueswife), plaintiff and the four children, the defendants here, are each entitled to one-fifth (1/5)share pro-indiviso.

On April 1, 1980, Aurelio A. Rogue sold his 6/10 share in T.C.T. No. 135671 to spousesAurora Tuazon-Repuyan and Jose Repuyan as evidenced by ."Deed of Absolute Sale." On July

21, 1980, Aurora Tuazon Repuyan caused the annotation of her affidavit of adverse claim onthe Transfer Certificate of Title No. 135671.

On August 20, 1980, Aurelio A. Roque filed a complaint for "Rescission of Contract"docketed as Civil Case No. 134131 against spouses Aurora Tuazon-Repuyan and Jose Repuyanbefore Branch IV of the then Court of First Instance of Manila. The complaint is grounded onspouses Repuyan's failure to pay the balance of P45,000.00 of the purchase price. OnSeptember 5, 1980, spouses Repuyan filed their answer with counterclaim.

In the meantime, the trial court issued an order in Civil Case No. 109032 (Partition case)dated February 2, 1982 of which a deed of absolute sale was executed on February 4, 1982between Aurelio S. Roque, Corazon Roque, Feliciano Roque, Severa Roque and Osmundo Roqueand Clara Balatbat, married to Alejandro Balatbat.

On May 20, 1982, petitioner Clara Balatbat filed a motion to intervene in Civil Case No.134131 which was granted as per court's resolution of October 21, 1982. However, ClaraBalatbat failed to file her complaint in intervention. On April 15, 1986, the trial court rendered adecision dismissing the complaint for lack of merit, and declaring the Deed of Absolute Saledated April 1, 1980 as valid and enforceable.

On December 9, 1988, petitioner Clara Balatbat and her husband, Alejandro Balatbat filedthe instant complaint for delivery of the owners duplicate copy of T.C.T. No. 135671 docketed asCivil Case No. 88-47176 before Branch 24 of the Regional Trial Court of Manila against privaterespondents Jose Repuyan and Aurora Repuyan. On August 2, 1990, the Regional Trial Court ofManila, Branch 24, rendered a decision dismissing the complaint.

Dissatisfied, petitioner Balatbat filed an appeal before the respondent Court of Appealswhich affirmed the ruling of the lower court.

Issues: Whether or not the alleged sale to the private respondents was merely executory andnot a consummated transaction?

Whether or not there was a double sale as contemplated under art. 1544 of the CivilCode?

Whether or not petitioner was a buyer in good faith and for value?Whether or not the court of appeals erred in giving weight and consideration to the

evidence of the private respondents which were not offered?Ruling: The Court finds the sale as consummated, hence, valid and enforceable. In a decisiondated April 15, 1986 of the Regional Trial Court of Manila Branch IV in Civil Case No. 134131,the Court dismissed vendor's Aurelio Roque complaint for rescission of the deed of sale anddeclared that the Sale dated April 1, 1980, as valid and enforceable. No appeal having been

made, the decision became final and executory. It must be noted that herein petitioner Balatbatfiled a motion for intervention in that case but did not file her complaint in intervention. In thatcase wherein Aurelio Roque sought to rescind the April 1, 1980 deed of sale in favor of theprivate respondents for non-payment of the P45,000.00 balance, the trial court dismissed thecomplaint for rescission. The P45,000.00 balance is payable only "after the property covered byT.C.T. No. 135671 has been partitioned and subdivided, and title issued in the name of theBUYER" hence, vendor Roque cannot demand payment of the balance unless and until theproperty has been subdivided and titled in the name of private respondents. Devoid of anystipulation that "ownership in the thing shall not pass to the purchaser until he hasfully paid the price", ownership in thing shall pass from the vendor to the vendee uponactual or constructive delivery of the thing sold even if the purchase price has not yetbeen fully paid. The failure of the buyer to make good the price does not, in law, cause theownership to revest to the seller unless the bilateral contract of sale is first rescinded or resolvedpursuant to Article 1191 of the New Civil Code. Non-payment only creates a right to demandthe fulfillment of the obligation or to rescind the contract.

With respect to the non-delivery of the possession of the subject property to theprivate respondent, suffice it to say that ownership of the thing sold is acquired onlyfrom the time of delivery thereof, either actual or constructive. 28 Article 1498 of the CivilCode provides that when the sale is made through a public instrument, the execution thereofshall be equivalent to the delivery of the thing which is the object of the contract, if from the

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deed the contrary does not appear or cannot be inferred. The execution of the public instrument,without actual delivery of the thing, transfers the ownership from the vendor to the vendee, whomay thereafter exercise the rights of an owner over the same. 30 In the instant case, vendorRoque delivered the owner's certificate of title to herein private respondent. It is not necessarythat vendee be physically present at every square inch of the land bought by him, possession ofthe public instrument of the land is sufficient to accord him the rights of ownership.

A contract of sale being consensual, it is perfected by the mere consent of theparties. Delivery of the thing bought or payment of the price is not necessary for the perfectionof the contract; and failure of the vendee to pay the price after the execution of the contractdoes not make the sale null and void for lack of consideration but results at most in default onthe part of the vendee, for which the vendor may exercise his legal remedies.

Article 1544 of the Civil Code provides that in case of double sale of an immovableproperty, ownership shall be transferred (1) to the person acquiring it who in good faith firstrecorded it in the Registry of Property; (2) in default thereof, to the person who in good faithwas first in possession; and (3) in default thereof, to the person who presents the oldest title,provided there is good faith.

In the case at bar, vendor Aurelio Roque sold 6/10 portion of his share in TCT No. 135671

to private respondents Repuyan on April 1, 1980. Subsequently, the same lot was sold again byvendor Aurelio Roque (6/10) and his children (4/10) on February 4, 1982. Undoubtedly, this is acase of double sale contemplated under Article 1544 of the New Civil Code.

This is an instance of a double sale of an immovable property hence, the ownershipshall vests in the person acquiring it who in good faith first recorded it in the Registryof Property. Evidently, private respondents Repuyan's caused the annotation of an adverseclaim on the title of the subject property denominated as Entry No. 5627/T-135671 on July 21,1980. 35The annotation of the adverse claim on TCT No. 135671 in the Registry of Property issufficient compliance as mandated by law and serves notice to the whole world.

Evidently, petitioner cannot be considered as a buyer in good faith. If petitioner didinvestigate before buying the land on February 4, 1982, she should have known that there was apending case and an annotation of adverse claim was made in the title of the property before

the Register of Deeds and she could have discovered that the subject property was already soldto the private respondents. One who purchases real estate with knowledge of a defect or lack oftitle in his vendor cannot claim that he has acquired title thereto in good faith as against the trueowner of the land or of an interest therein; and the same rule must be applied to one who hasknowledge of facts which should have put him upon such inquiry and investigation as might benecessary to acquaint him with the defects in the title of his vendor. Good faith, or the want of itis not a visible, tangible fact that can be seen or touched, but rather a state or condition of mindwhich can only be judged of by actual or fancied tokens or signs.

Petition for review is hereby DISMISSED for lack of merit.


CORONEL vs CA (263 S 15 October 7, 1996)Facts: This case has its roots in a complaint for specific performance to compel herein petitioners to

consummate the sale of a parcel of land with its improvements located along Roosevelt Ave.,QC entered in to by the parties sometime in January 1985 for the price of P1,240,000.00.

On January 19, 1985, Coronel, et. al executed a document entitled Receipt of Down

Payment in favor of plaintiff Ramona Patricia Alcaraz after plaintiff-appellee ConcepcionAlcaraz, mother of Ramona, paid the down payment of P50,000.00. However, on February 18,1985, the Coronels sold the property to intervenor-appellant Catalina Mabanag forP1,580,000.00 after the latter has paid P300,000.00. For this reason, Coronels cancelled andrescinded the contract with Ramona by depositing the down payment paid in the bank in trust

for Ramona. On February 22, 1985, Concepcion, et.al filed a complaint for specific performance against the

Coronels. RTC-QC rendered judgment favorable to Concepcion and ordered the cancellation of sale to

Mabanag. Concepcions Motion for Reconsideration was denied; hence an appeal was made toCa which affirmed RTCs decision.

Hence, this petition where Concepcion contended that the Receipt of Down Payment

embodied a perfected contract of sale, while Coronels insisted that what the document

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signified was a mere executory contract to sell, subject to certain suspensive conditions, andbecause of the absence of Ramona, who left for the USA, said contract could not possiblyripen into a contract of absolute sale.

Issue: WON the Receipt of Down Payment was a binding contract of sale? (contract of salevs. contract to sell; contract to sell and conditional contract of sale)

Ruling:The document entitled Receipt of Down Payment which was offered in evidence by both

the parties embodied the binding contract between Ramona and the Coronels, pertaining to aparticular house and lot.

Art. 1305. A contract is a meeting of minds between two persons whereby one bindshimself, with respect to the other, to give something or render some service.

Art. 1458. by the contract of sale one of the contracting parties obligates himself totransfer the ownership of and to deliver a determinate thing, and the other to pay therefore aprice certain in money or its equivalent.

Sale, by its very nature, is a consensual contract because it is perfected by mere consent.

The essential elements of a contract of sale are the following:a) Consent or meeting of the minds, that is, consent to transfer ownership in exchange for theprice;

b) Determinate subject matter; andc) Price certain in money or its equivalent.

Contract to sell may not be considered as a Contract of Sale because the first essentialelement is lacking. In Contract to Sell, the prospective seller explicitly reserves the transfer oftitle to the prospective buyer, meaning, the prospective seller does not as yet agree or consentto transfer ownership of property subject of the contract to sell until the happening of an event,which for present purposes we shall take as the full payment of the purchase price. What theseller agrees or obliges himself to do is to fulfill his promise to sell the subject property whenthe entire amount of the purchase price is delivered to him. In other words, the full payment of

the purchase price partakes of a suspensive condition, the non-fulfillment of which prevents theobligation to sell from arising and thus, ownership is retained by the prospective seller withoutfurther remedies by the prospective buyer.

A Contract to Sell may thus be defined as a bilateral contract whereby the prospectiveseller while expressly reserving the ownership of the subject property despite deliver thereof tothe prospective buyer, binds himself to sell the property exclusively to the prospective buyerupon fulfillment of the condition agreed upon, that is full payment of the purchase price.

In a contract to sell, upon the fulfillment of the suspensive condition which is the fullpayment of the purchase price, ownership will not automatically transfer to the buyer althoughthe property may have been previously delivered to him. The prospective seller still has toconvey the title to the prospective buyer by entering into a contract of absolute sale.

In conditional contract of sale, however, upon the fulfillment of the suspensive condition,the sale becomes absolute and this will definitely affect the sellers title thereto. In fact, if therehad been previous delivery of the subject property, the sellers ownership or title to theproperty is automatically transferred to the buyer such that, the seller will no longer have naytitle to transfer to any third person. Applying Art. 1544 of the CC, such second buyer of theproperty who may have had actual or constructive knowledge of such defect in the sellers title,or atleast was charged with the obligation to discover such defect, cannot be a registrant ingood faith. Such second buyer cannot defeat the first buyers title. In case the title is issued tothe second buyer, the first buyer may seek reconveyance of the property subject of the sale.

When the Receipt of Down Payment is considered in its entirety, it becomes moremanifest that there was a clear intent on the part of petitioners to transfer title to the buyer,but since the Transfer Certificate of Title (TCT) was still in the name of petitioners father, theycould not fully effect such transfer although the buyer was then willing and able to immediatelypay the purchase price.

The agreement could not have been a contract to sell because the seller herein made noexpress reservation of ownership or title to the subject parcel of land.

What is clearly established by the plain language of the subject document is that when thesaid Receipt of Down Payment was prepared and signed by petitioners Romeo Coronel, et. al,the parties had agreed to a conditional contract of sale, consummation of which is subject

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only to the successful transfer of the certificate of title from the name of petitioners father,Constancio Coronel, to their names.

Since the condition contemplated by the parties which is the issuance of a certificate oftitle in petitioners name was fulfilled on February 6,19854, the respective obligations of theparties under the contract of sale became mutually demandable, that is, petitioners, as sellers,were obliged to present the transfer certificate of title already in their names to private

respondent Ramona Alcaraz, the buyer, and to immediately execute the Deed of Absolute Sale,while the buyer on her part, was obliged to forthwith pay the balance of the purchase priceamounting to P1,190,000.00.

JUDGMENT AFFIRMED.

Consensual Contract

LAFORTEZA vs. MACHUCA (June 16, 2000)Facts: The property involved consists of a house and lot located at No. 7757 Sherwood Street,Marcelo Green Village, Paraaque, Metro Manila and registered in the name of the late FranciscoQ. Laforteza, although it is conjugal in nature. On August 2, 1988, defendant Lea Zulueta-Laforteza executed a Special Power of Attorney in favor of defendants Roberto Z. Laforteza and

Gonzalo Z. Laforteza, Jr., appointing both as her Attorney-in-fact authorizing them jointly to sellthe subject property and sign any document for the settlement of the estate of the late FranciscoQ. Laforteza. Likewise on the same day, defendant Michael Z. Laforteza executed a SpecialPower of Attorney in favor of defendants Roberto Z. Laforteza and Gonzalo Laforteza, Jr.,likewise, granting the same authority. Both agency instruments contained a provision that inany document or paper to exercise authority granted, the signature of both attorneys-in-factmust be affixed.

On October 27, 1988, defendant Dennis Z. Laforteza executed a Special Power of Attorneyin favor of defendant Roberto Z. Laforteza for the purpose of selling the subject property. Ayear later, on October 30, 1989, Dennis Z. Laforteza executed another Special Power of Attorneyin favor of defendants Roberto Z. Laforteza and Gonzalo Laforteza, Jr. naming both attorneys-in-fact for the purpose of selling the subject property and signing any document for the settlementof the estate of the late Francisco Q. Laforteza. The subsequent agency instrument containedsimilar provisions that both attorneys-in-fact should sign any document or paper executed in theexercise of their authority.

In the exercise of the above authority, on January 20, 1989, the heirs of the lateFrancisco Q. Laforteza represented by Roberto Z. Laforteza and Gonzalo Z. Laforteza, Jr. enteredinto a Memorandum of Agreement (Contract to Sell) with the plaintiff over the subject propertyfor the sum of P630,000.00. P30,000.00 as earnest money, to be forfeited in favor of thedefendants if the sale is not effected due to the fault of the plaintiff and P600,000.00 uponissuance of the new certificate of title.

Significantly, the fourth paragraph of the Memorandum of Agreement contained aprovision as follows:xxx. Upon issuance by the proper Court of the new title, the BUYER-LESSEE

shall be notified in writing and said BUYER-LESSEE shall have thirty (30) days to produce thebalance of P600,000.00 which shall be paid to the SELLER-LESSORS upon the execution of theExtrajudicial Settlement with sale. On January 20, 1989, plaintiff paid the earnest moneyplus rentals on the said property. Plaintiff requested an extension of 30 days deadline up toNovember 15, 1989 within which to produce the balance of P600,000.00. Defendant Roberto Z.Laforteza, assisted by his counsel Atty. Romeo L. Gutierrez, signed his conformity to theplaintiffs letter request. The extension, however, does not appear to have been approved byGonzalo Z. Laforteza, the second attorney-in-fact as his conformity does not appear to havebeen secured.

On November 15, 1989, plaintiff informed the defendant heirs that he already had thebalance but the defendants, refused to accept it. On November 20, 1998, defendants informedthe plaintiff that they were canceling the Memorandum of Agreement (Contract to Sell) in viewof the plaintiffs failure to comply with his contractual obligations. Thereafter, plaintiff filed theinstant action for specific performance. The lower court rendered judgment on July 6, 1994 infavor of the plaintiff. Petitioners appealed to the Court of Appeals, which affirmed withmodification the decision of the lower court.

Issue: Whether the trial and appellate courts correctly construed the memorandum ofagreement as imposing reciprocal obligations

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Ruling: The appeal is bereft of merit.A perusal of the Memorandum Agreement shows that the transaction between the

petitioners and the respondent was one of sale and lease. A contract of sale is a consensualcontract and is perfected at the moment there is a meeting of the minds upon the thing which isthe object of the contract and upon the price. From that moment the parties may reciprocallydemand performance subject to the provisions of the law governing the form of contracts. The

elements of a valid contract of sale under Article 1458 of the Civil Code are (1) consent ormeeting of the minds; (2) determinate subject matter and (3) price certain in money or itsequivalent.

In the case at bench, there was a perfected agreement between the petitioners and therespondent whereby the petitioners obligated themselves to transfer the ownership of anddeliver the house and lot and the respondent to pay the price amounting to six hundredthousand pesos. All the elements of a contract of sale were thus present. However, the balanceof the purchase price was to be paid only upon the issuance of the new certificate of title in lieuof the one in the name of the late Francisco Laforteza and upon the execution of an extrajudicialsettlement of his estate. Prior to the issuance of the "reconstituted" title, the respondent wasalready placed in possession of the house and lot as lessee thereof for six months at a monthly

rate of P3,500.00.The six-month period during which the respondent would be in possession of the propertyas lessee, was clearly not a period within which to exercise an option. An option is a contractgranting a privilege to buy or sell within an agreed time and at a determined price. An optioncontract is a separate and distinct contract from that which the parties may enter into upon theconsummation of the option. An option must be supported by consideration.

In the present case, the six-month period merely delayed the demandability of thecontract of sale and did not determine its perfection for after the expiration of the six-monthperiod, there was an absolute obligation on the part of the petitioners and the respondent tocomply with the terms of the sale. The fact that after the expiration of the six-month period, therespondent would retain possession of the house and lot without need of paying rentals for theuse therefor, clearly indicated that the parties contemplated that ownership over the property

would already be transferred by that time.The issuance of the new certificate of title in the name of the late Francisco Laforteza and

the execution of an extrajudicial settlement of his estate was not a condition which determinedthe perfection of the contract of sale. The petitioners fail to distinguish between a conditionimposed upon the perfection of the contract and a condition imposed on the performance of anobligation. Failure to comply with the first condition results in the failure of a contract, while thefailure to comply with the second condition only gives the other party the option either to refuseto proceed with the sale or to waive the condition.

In the case at bar, there was already a perfected contract. The condition was imposedonly on the performance of the obligations contained therein. Considering however that the titlewas eventually "reconstituted" and that the petitioners admit their ability to execute the

extrajudicial settlement of their fathers estate, the respondent had a right to demand fulfillmentof the petitioners obligation to deliver and transfer ownership of the house and lot.

What further militates against petitioners argument that they did not enter into a contractof sale is the fact that the respondent paid thirty thousand pesos (P30,000.00) as earnestmoney. Earnest money is something of value to show that the buyer was really in earnest, andgiven to the seller to bind the bargain.1[17] Whenever earnest money is given in a contract ofsale, it is considered as part of the purchase price and proof of the perfection of the contract.

The Court does not subscribe to the petitioners view that the Memorandum Agreementwas a contract to sell. There is nothing contained in the Memorandum Agreement from which itcan reasonably be deduced that the parties intended to enter into a contract to sell

Although the memorandum agreement was also denominated as a "Contract to Sell", wehold that the parties contemplated a contract of sale. A deed of sale is absolute in naturealthough denominated a conditional sale in the absence of a stipulation reserving title in thepetitioners until full payment of the purchase price.] In such cases, ownership of the thing soldpasses to the vendee upon actual or constructive delivery thereof. The mere fact that theobligation of the respondent to pay the balance of the purchase price was made subject to thecondition that the petitioners first deliver the reconstituted title of the house and lot does notmake the contract a contract to sell for such condition is not inconsistent with a contract of sale.

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As to whether the failure of the respondent to pay the balance of the purchase price withinthe period allowed is fatal to his right to enforce the agreement, the court rules in the negative.

Admittedly, the failure of the respondent to pay the balance of the purchase price was abreach of the contract and was a ground for rescission thereof. The extension of thirty (30) daysallegedly granted was correctly found by the Court of Appeals to be ineffective i

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