law on sales digested cases

Sales Case Digests UST Faculty of Civil Law Page 1 2A SY 2009-2010

HEIRS OF JUAN SAN ANDRES (VICTOR S. ZIGA) and SALVACION S. TRIA, petitioners, vs. VICENTE RODRIGUEZ, respondent.

G.R. No. 135634 May 31, 2000

Facts:

Juan andres was the owner of the lot situated in liboton, naga city. The sale was evidenced by a deed of sale. Upon the death of juan andres, ramon san andres was appointed as administrator of the estate, and hired geodetic engineer. Jose panero prepared a consolidated plan of the estate and also prepared a sketch plan of the lot sold to respondent. It was found out that respondent had enlarged the area which he purchased from juan. The administrator sent a letter to the respoindent to vacate the said portion in which the latter refused to do.

Respondent alleged that apart from the original lot, which had been sold to him, the latter likewise sold to him the following day the remaining portion of the lot. He alleged that the payment for such would be affected in 5 years from the eecution of the formal deed of sale after a survey is conducted. He also alleged that under the consent of juan, he took possession of the same and introduced improvements thereon.

Respondent deposited in court the balance of the purchase price amounting to P7,035.00 for the aforesaid 509-square meter lot.

On September 20, 1994, the trial court rendered judgment in favor of petitioner. It ruled that there was no contract of sale to speak of for lack of a valid object because there was no sufficient indication to identify the property subject of the sale, hence, the need to execute a new contract.

Respondent appealed to the Court of Appeals, which on April 21, 1998 rendered a decision reversing the decision of the trial court. The appellate court held that the object of the contract was determinable, and that there was a conditional sale with the balance of the purchase price payable within five years from the execution of the deed of sale.

Issue: whether or not there was a valid sale.

Held:

Civil Code provides that By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent.

A contract of sale may be absolute or conditional.

As thus defined, the essential elements of sale are the following:

a) Consent or meeting of the minds, that is, consent to transfer ownership in exchange for the price;

b) Determinate subject matter; and,

c) Price certain in money or its equivalent. 12

As shown in the receipt, dated September 29, 1964, the late Juan San Andres received P500.00 from respondent as "advance payment for the residential lot adjoining his previously paid lot on three sides excepting on the frontage; the agreed purchase price was P15.00 per square meter; and the full amount of the purchase price was to be based on the results of a survey and would be due and payable in five (5) years from the execution of a deed of sale.

Petitioner's contention is without merit. There is no dispute that respondent purchased a portion of Lot 1914-B-2 consisting of 345 square meters. This portion is located in the middle of Lot 1914-B-2, which has a total area of 854 square meters, and is clearly what was referred to in the receipt as the "previously paid lot." Since the lot subsequently sold to respondent is said to adjoin the "previously paid lot" on three sides thereof, the subject lot is capable of being determined without the need of any new contract. The fact that the exact area of these adjoining residential lots is subject to the result of a survey does not detract from the fact that they are determinate or determinable. As the Court of Appeals explained:

15

Concomitantly, the object of the sale is certain and determinate. Under Article 1460 of the New Civil Code, a thing sold is determinate if at the time the contract is entered into, the thing is capable of being determinate without necessity of a new or further agreement between the parties. Here, this definition finds realization.

Thus, all of the essential elements of a contract of


sale are present, i.e., that there was a meeting of the minds between the parties, by virtue of which the late Juan San Andres undertook to transfer ownership of and to deliver a determinate thing for a price certain in money. As Art. 1475 of the Civil Code provides:

The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. . . .That the contract of sale is perfected was confirmed by the former administrator of the estates, Ramon San Andres, who wrote a letter to respondent on March 30, 1966 asking for P300.00 as partial payment for the subject lot. As the Court of Appeals observed:

Without any doubt, the receipt profoundly speaks of a meeting of the mind between San Andres and Rodriguez for the sale. Evidently, this is a perfected contract of sale on a deferred payment of the purchase price. All the pre-requisite elements for a valid purchase transaction are present.

There is a need, however, to clarify what the Court of Appeals said is a conditional contract of sale. Apparently, the appellate court considered as a "condition" the stipulation of the parties that the full consideration, based on a survey of the lot, would be due and payable within five (5) years from the execution of a formal deed of sale. It is evident from the stipulations in the receipt that the vendor Juan San Andres sold the residential lot in question to respondent and undertook to transfer the ownership thereof to respondent without any qualification, reservation or condition.

A deed of sale is considered absolute in nature where there is neither a stipulation in the deed that title to the property sold is reserved in the seller until full payment of the price, nor one giving the vendor the right to unilaterally resolve the contract the moment the buyer fails to pay within a fixed period.

Applying these principles to this case, it cannot be gainsaid that the contract of sale between the parties is absolute, not conditional. There is no reservation of ownership nor a stipulation providing for a unilateral rescission by either party. In fact, the sale was consummated upon the delivery of the lot to respondent.

20 Thus, Art. 1477 provides that the

ownership of the thing sold shall be transferred to the vendee upon the actual or constructive delivery thereof.

The stipulation that the "payment of the full consideration based on a survey shall be due and payable in five (5) years from the execution of a formal deed of sale" is not a condition which affects the efficacy of the contract of sale. It merely provides the manner by which the full consideration is to be computed and the time within which the same is to be paid. But it does not affect in any manner the effectivity of the contract. Consequently, the contention that the absence of a formal deed of sale stipulated in the receipt prevents the happening of a sale has no merit.

The claim of petitioners that the price of P7,035.00 is iniquitous is untenable. The amount is based on the agreement of the parties as evidenced by the receipt (Exh. 2). Time and again, we have stressed the rule that a contract is the law between the parties, and courts have no choice but to enforce such contract so long as they are not contrary to law, morals, good customs or public policy. Otherwise, court would be interfering with the freedom of contract of the parties. Simply put, courts cannot stipulate for the parties nor amend the latter's agreement, for to do so would be to alter the real intentions of the contracting parties when the contrary function of courts is to give force and effect to the intentions of the parties.

The decision of the Court of Appeals is AFFIRMED with the modification that respondent is ORDERED to reimburse petitioners for the expenses of the survey.

Hernando R. Penalosa vs. Severino Santos

G.R. No. 133749 August 23, 2001

Facts:

Severino sold his property to henry. Henry applied for a loan with philam life. As It was already approved pending the submission of certain


documents such as the owners duplicate of transfer certificate of title which is in possession of severino.

Henry already took possession of the property in question after ejectment of the lessees. He also paid an ernest money of 300,000 under the premise that it shall be forfeited in favor of severino in case of nonpayment.

Severino now claims ownership over the property claiming that henry did not pay for the property, therefore there was no sale to speak of.

Issue: whether or not there is a contract of sale perfected in this case.

Held: there was a perfected contract of sale due to the second deed of sale.

The basic characteristic of an absolutely simulated or fictitious contract is that the apparent contract is not really desired or intended to produce legal effects or alter the juridical situation of the parties in any way.

30 However, in this case, the parties already

undertook certain acts which were directed towards fulfillment of their respective covenants under the second deed, indicating that they intended to give effect to their agreement.

Further, the fact that Severino executed the two deeds in question, primarily so that petitioner could eject the tenant and enter into a loan/mortgage contract with Philam Life, is to our mind, a strong indication that he intended to transfer ownership of the property to petitioner. For why else would he authorize the latter to sue the tenant for ejectment under a claim of ownership, if he truly did not intend to sell the property to petitioner in the first place? Needless to state, it does not make sense for Severino to allow petitioner to pursue the ejectment case, in petitioner's own name, with petitioner arguing that he had bought the property from Severino and thus entitled to possession thereof, if petitioner did not have any right to the property.

Also worth noting is the fact that in the case filed by Severino's tenant against Severino and petitioner in 1989, assailing the validity of the sale made to petitioner, Severino explicitly asserted in his sworn answer to the complaint that the sale was a legitimate transaction. He further alleged that the ejectment case filed by petitioner against the tenant was a legitimate action by an owner against one who refuses to turn over possession of his property.

It should be emphasized that the non-appearance of the parties before the notary public who notarized the deed does not necessarily nullify nor render the parties' transaction void ab initio. We have held previously that the provision of Article 1358 of the New Civil Code on the necessity of a public document is only for convenience, not for validity or enforceability. Failure to follow the proper form does not invalidate a contract. Where a contract is not in the form prescribed by law, the parties can merely compel each other to observe that form, once the contract has been perfected.

35 This is consistent

with the basic principle that contracts are obligatory in whatever form they may have been entered into, provided all essential requisites are present.

3

The elements of a valid contract of sale under Art. 1458 of the Civil Code are: (1) consent or meeting of the minds; (2) determinate subject matter; and (3) price certain in money or its equivalent.

37 In the

instant case, the second deed reflects the presence of all these elements and as such, there is already a perfected contract of sale.

The non-payment of the contract price merely results in a breach of contract for non-performance and warrants an action for rescission or specific performance under Article 1191 of the Civil Code.

Be that as it may, we agree with petitioner that although the law allows rescission as a remedy for breach of contract, the same may not be availed of by respondents in this case. To begin with, it was Severino who prevented full payment of the stipulated price when he refused to deliver the owner's original duplicate title to Philam Life. His refusal to cooperate was unjustified, because as Severino himself admitted, he signed the deed precisely to enable petitioner to acquire the loan. He also knew that the property was to be given as security therefor. Thus, it cannot be said that petitioner breached his obligation towards Severino since the former has always been willing to and could comply with what was incumbent upon him.

In sum, the only conclusion which can be deduced from the aforesaid circumstances is that ownership of the property has been transferred to petitioner.

WHEREFORE, the petition is GRANTED.


PEOPLE OF THE PHILIPPINES v. ELIZABETH GANGUSO G.R. No. 115430 November 23, 1995 DAVIDE, JR., J.: Facts: Major Juvenile Sulapas, Officer-in-charge, Dangerous Drugs Enforcement Section, Pasay City Police Station, received a confidential report from an informant about the rampant trafficking of drugs by Elizabeth Ganguso y Decena a.k.a. "Beth Tomboy". A buy-bust operation was planned with Dennis Vermug acting as poseur-buyer, backed-up by SPO1 Lumapat, SPO1 Gabutin, PO3s Mendoza and Garcia with SPO3 Fucanan as team leader.


The operation was carried out and they were successful in arresting Beth for the violation of Dangerous Drugs Act of 1972. At the same time, they were able to recover a .38 caliber Paltik revolver from the suspect. Several documentary exhibits were presented as evidence to the crime. Beth made statements in her testimony different to that of the polices: policemen barged into her house, searched the premises and her person without a warrant and; denied the revolver recovered from her. At the trial, defense presented two witnesses who also claimed that no buy bust operation took place and no revolver was in the possession of the suspect. Nevertheless, the Regional Trial Court of Pasay convicted her of both charges. She was sentenced to suffer the penalty of life imprisonment and to pay a fine plus costs for the crime involving drugs. She was also sentenced to an indeterminate penalty of ten years and one day of prision mayor, as minimum, to twelve years and one day, as maximum, with fine and costs for the crime of illegal possession of firearms. Hence, Beth appealed. Issue:

Whether the trial court erred in finding that the prosecution has fully met the test of moral certainty as to the guilt of the accused on both charges of violation of section 15, Article III of the Dangerous Drugs Act of 1972 and of illegal possession of firearms.

Decision: The instant appeal is partly granted, and the challenged decision of the Regional Trial Court of Pasay City is modified. As modified, accused-appellant Beth is acquitted for the charge of illegal possession of firearms on ground of reasonable doubt. The penalty imposed on her for the violation of section 15, Article III of the Dangerous Drugs Act of 1972 is reduced to an indeterminate sentence of three months of arresto mayor, as minimum, to three years of prision correccional, as maximum. Ratio Decidendi: Supreme Court held that the elements of a contract of sale were present. Beth is

presumed to have given her consent by not inquiring as to the meaning of S when the officer posed to buy Php 500 worth of S. Therefore, there was a meeting of minds upon a definite object and upon the price.

Though she was not in possession of the

object of sale, Article 1459 merely requires that the vendor must have the right to transfer ownership of the object sold at the time of delivery. In the case at bar, though Beth is not the owner, she had the right to dispose of the prohibited drug. Ownership was thereafter acquired upon her delivery to the men in the alley after her payment of the price.

Supreme Court also held that failure to

conduct prior surveillance and absence of marked money does not affect the evidence of the prosecution. It is sufficient that the members of the operation were accompanied by the informant to the scene; the sale was adequately proven and; the drug subject was presented before the court.

As regards the penalty imposed, since the

shabu only weighs 0.1954 grams, penalty should be prision correccional to reclusion temporal depending upon the quantity. Applying R.A. No. 7659, ISLAW, and the decision in the case of People v. Simon, proper penalty should be within the range of arresto mayor to prision correccional.

R.A. No. 7659, amending R.A. No. 6425,

took effect on 31 December 1993. Being

patently favorable to the appellant, that

amendatory law should be applied

retroactively.

ISLAW: If an offense under the RPC is also

punishable by another law, the court shall

sentence the accused to an indeterminate

sentence, the maximum term of which shall

not exceed the maximum fixed by said law

and the minimum shall not be less than the

minimum term prescribed by the same.

Finally, there was no proof that Beth is guilty

beyond reasonable doubt for the possession of firearms. Hence, presumption of innocence stands for failure of the prosecution to establish such guilt.


HEIRS OF AMPARO DEL ROSARIO v. AURORA SANTOS

G.R. No. L-46892 September 30, 1981 GUERRERO, J.:

Facts: Amparo Del Rosario entered into a contract with Attorney Andres Santos and his wife Aurora Santos whereby the latter sold to the former a 20,000 sq. m. of land which is to be segregated from Lot 1. Said lot forms part of the several lots belonging to a certain Teofilo Custodio, of which lots, Attorney Santos, by agreement with the latter, as his attorneys fees, owns interest thereof. Parties agreed that spouses Andres shall thereafter execute a Deed of Confirmation of Sale in favor of Del Rosario as soon as the title has been released and the subdivision plan of said Lot 1 has been approved by the Land Registration Commissioner. Due to the failure of spouses Andres to execute the deed after the fulfillment of the condition, Del Rosario claims malicious breach of a Deed of Sale.


Defendant thereafter filed a motion to dismiss setting up the defenses of lack of jurisdiction of the court over the subject of the action and lack of cause of action as well as the defense of prescription.

They further alleged that the deed of sale

was only an accommodation graciously extended, out of close friendship between the defendants and the plaintiff, hence, tantamount to waiver, abandonment or otherwise extinguishment of the demand set forth in the complaint.

Finally, defendants alleged that the claim on

which the action or suit is founded is unenforceable under the statute of frauds and that the cause or object of the contract did not exist at the time of the transaction.

The lower court resolved to deny the motion

to dismiss. After actions by respective parties, the lower

court ordered the defendants to execute and convey to plaintiff the 20,000 sq. m. of land to be taken either from Lot 4 or from Lot 5-A of Custodios lots, which defendants own interest thereof.

Aggrieved by the aforesaid decision, the defendants filed an appeal with the Court of Appeals which certified the records of the case to the Supreme Court for final determination. Issue: (As far as it concerns Sales) Whether the sale is valid as to the cause or object of the contract. Decision: The judgment appealed from is hereby affirmed in toto, with costs against the appellants. Ratio Decidendi: Supreme Court held that the execution of the deed of sale is valid notwithstanding the lack of any title to the lot by appellants at the time of execution f the deed of sale in favor of appellee as there can be a sale of an expected thing in accordance with Article 1461 of the New Civil Code:

Art. 1461. Things having a potential existence may be the object of the contract of sale.

The efficacy of the sale of a mere hope or expectancy is deemed subject to the condition that the thing will come into existence.

The sale of a vain hope or expectancy is void.

The case at bar is not a case of a vain hope

or expectancy which is void under the law. The expectant right came into existence or materialized for the appellants actually derived titles from Lot I which subsequently became the object of subdivision.

JOSE M. JAVIER and ESTRELLA F. JAVIER vs. COURT OF APPEALS and LEONARDO TIRO

GR No. 48194 March 15, 1990

Regalado, J.:

FACTS:

Leonardo Tiro executed a Deed of assignment concerning his shares of stock in Timberwealth Corporation on Feb. 15, 1966 in favor of spouses Jose and Estrella Javier and for the amount of P 120,000. Spouses paid P 20,000 as initial payment and the balance to be paid in instalments as agreed. The parties entered into another deed on Feb. 28, 1966 for the addtl forest concession, subject of a pending application, adjoining the area covered in the first deed. As agreed, the payment therefor of P 30,000 shall be paid as soon as the application is approved.

On Nov. 18, 1966, the Dir. of Forestry directed a consolidation for the renewal of the concession. By virtue of the deed, spouses Javier consolidated with the other adjoining concessionaires.On July 16, 1968, Tiro filed a complaint for failure of the spouses to pay the remaining balance.Spouses filed their answer arguing therein the nullity of the deeds and the return of the payments made by them. It appeared in record that the Timberwealth Corporation was a non-existent organization.The trial court dismissed the complaint hence, Tiro appealed to CA. CA


reversed the judgment. Petition to review filed with SC.

ISSUE:

W/N THE TWO DEEDS ARE NULL AND VOID, THE FORMER FOR TOTAL ABSENCE OF CONSIDERATION AND THE LATTER FOR NON-FULFILLMENT OF CONDITIONS.

RULING:

Decision Modified.

Petitioners contend that the deed of assignment conveyed to them the shares of stocks of private respondent in Timberwealth Corporation, as stated in the deed itself. Since said corporation never came into existence, no share of stocks was ever transferred to them, hence the said deed is null and void for lack of cause or consideration.

The true cause or consideration of said deed was the transfer of the forest concession of private respondent to petitioners for P120,000.00. This finding is supported by the contemporaneous and subsequent acts of petitioners and private respondent. It is settled that the previous and simultaneous and subsequent acts of the parties are properly cognizable indicia of their true intention. Their acts reveal that the cause stated in the questioned deed of assignment is false.

The deed of assignment of February 15, 1966 is a relatively simulated contract which states a false cause or consideration, or one where the parties conceal their true agreement. A contract with a false consideration is not null and void per se. Under Article 1346 of the Civil Code, a relatively simulated contract, when it does not prejudice a third person and is not intended for any purpose contrary to law, morals, good customs, public order or public policy binds the parties to their real agreement.

As to the nullity for the non-fulfilment of the conditions, SC agrees. The efficacy of said deed of assignment is subject to the condition that the application of private respondent for an additional area for forest concession be approved by the Bureau of Forestry. Since private respondent did not obtain that approval, said deed produces no effect. When a contract is subject to a suspensive condition, its birth or effectivity can take place only if

and when the event which constitutes the condition happens or is fulfilled.

Moreover, under the second paragraph of Article 1461 of the Civil Code, the efficacy of the sale of a mere hope or expectancy is deemed subject to the condition that the thing will come into existence. In this case, since private respondent never acquired any right over the additional area for failure to secure the approval of the Bureau of Forestry, the agreement executed therefor, which had for its object the transfer of said right to petitioners, never became effective or enforceable.

ONAPAL PHILS. COMMODITIES, INC. vs. THE COURT OF APPEALS and SUSAN CHUA

February 1, 1993 GR No. 90707

Campos, Jr., J.:

FACTS:

ONAPAL Phils. Commodities, Inc. is a commission merchant/broker licensed by SEC, engaged in commodity futures trading.

Futures Commission Merchant/Broker refers to a corporation or partnership, which must be registered and licensed as a Futures Commission Merchant/Broker and is engaged in soliciting or in accepting orders for the purchase or sale of any commodity for future delivery on or subject to the rules of the contract market and that, in connection with such solicitation or acceptance of orders, accepts any money, securities or property (or extends credit in lieu thereof) to margin, guarantee or secure any trade or contract that results or may result therefrom. Its Account Executive Elizabeth Diaz invited Susan Chua to invest in commodity futures trading and they subsequently entered into a commodity futures contract without explanation to Susan as to the risks involved.

A commodity futures contract refers to an agreement to buy or sell a specified quantity and grade of a commodity at a future date at a price established at the floor of the exchange.

As stipulated in the trading contract, Susan may withdraw anytime and she did. From P 800,000 Susan invested, she was able to get only P 470,000. Hence, complaint was filed with the trial court. The trial court found and rendered the trading contract a


specie of gambling and therefore null and void. CA upheld the judgment.

Hence, petition for certiorari with SC.

ISSUE: W/N THE TRADING CONTRACT IS NULL AND VOID AS IT APPEARS TO BE A SPECIE OF GAMBLING

RULING:

Petition Dismissed. The trading contract signed by the parties, is a contract for the sale of products for future delivery, in which either seller or buyer may elect to make or demand delivery of goods agreed to be bought and sold, but where no such delivery is actually made. By delivery is meant the act by which the res or subject is placed in the actual or constructive possession or control of another. ONAPAL received the customer's orders and private respondent's money. As per terms of the trading contract, customer's orders shall be directly transmitted by the petitioner as broker to its principal, Frankwell Enterprises Ltd. of Hongkong , which in turn must place the customer's orders with the Tokyo Exchange. There is no evidence that the orders and money were transmitted to its principal Frankwell Enterprises Ltd. in Hongkong nor were the orders forwarded to the Tokyo Exchange. We draw the conclusion that no actual delivery of goods and commodity was intended and ever made by the parties. In the realities of the transaction, the parties merely speculated on the rise and fall in the price of the goods/commodity subject matter of the transaction. If private respondent's speculation was correct, she would be the winner and the petitioner, the loser, so petitioner would have to pay private respondent the "margin". But if private respondent was wrong in her speculation then she would emerge as the loser and the petitioner, the winner. The petitioner would keep the money or collect the difference from the private respondent. This is clearly a form of gambling provided for with unmistakeable certainty under Article 2018

If a contract which purports to be for the delivery of goods, securities or shares of stock is entered into with the intention that the difference between the price stipulated and the exchange or market price at the time of the pretended delivery shall be paid by the loser to the winner, the transaction is null and void. The loser may recover what he has paid.

Sps. Bernardo Buenaventura and Consolacion Joaquin vs. Court of Appeals

November 20, 2003 GR No. 126376 First Division Ponente: Carpio, J. Facts: Defendant spouses Leonardo Joaquin and Feliciana Landrito are the parents of plaintiffs Consolacion, Nora, Emma and Natividad as well as of defendants Fidel, Tomas, Artemio, Clarita, Felicitas, Fe, and Gavino, all surnamed Joaquin. Leonardo and Feliciana executed several deeds of sale in favour of their co-defendant children. Petitioners then filed an action the Regional Trial Court (RTC) of Makati seeking to declare as null and void ab initio the deeds of sale executed by Leonardo and Feliciana claiming that: (1) here was no actual valid consideration for the deeds of sale, (2) assuming that there was consideration in the sums reflected in the questioned deeds, the properties are more than three-fold times more valuable than the measly sums appearing therein, and (3) the deeds of sale do not reflect and express the true intent of the parties Defendants, on the other hand aver (1) that the sales were with sufficient considerations and made by defendants parents voluntarily, in good faith, and with full knowledge of the consequences of their deeds of sale; and (2) that the certificates of title were issued with sufficient factual and legal basis. The RTC dismissed the case, declaring that the deeds of sale were all executed for valuable consideration. On appeal, the Court of Appeals affirmed the decision of the RTC. Issues:

(1) Whether there the deeds of sale are void for lack of consideration


(2) Whether the deeds of sale are void for gross inadequacy of price

Held: The petition is without merit. (1) A contract of sale is not a real contract, but a consensual contract. As a consensual contract, a contract of sale becomes a binding and valid contract upon the meeting of the minds as to

price. If there is a meeting of the minds of the parties as to the price, the contract of sale is valid, despite the manner of payment, or even the breach of that manner of payment. If the real price is not stated in the contract, then the contract of sale is valid but subject to reformation. If there is no meeting of the minds of the parties as to the price, because the price stipulated in the contract is simulated, then the contract is void. Article 1471 of the Civil Code states that if the price in a contract of sale is simulated, the sale is void. It is not the act of payment of price that determines the validity of a contract of sale. Payment of the price has nothing to do with the perfection of the contract. Payment of the price goes into the performance of the contract. Failure to pay the consideration is different from lack of consideration. The former results in a right to demand the fulfillment or cancellation of the obligation under an existing valid contract while the latter prevents the existence of a valid contract. Petitioners failed to show that the prices in the Deeds of Sale were absolutely simulated. To prove simulation, petitioners presented Emma Joaquin Valdozs testimony stating that their father, respondent Leonardo Joaquin, told her that he would transfer a lot to her through a deed of sale without need for her payment of the purchase price. The trial court did not find the allegation of absolute simulation of price credible. Petitioners failure to prove absolute simulation of price is magnified by their lack of knowledge of their respondent siblings financial capacity to buy the questioned lots. On the other hand, the Deeds of Sale which petitioners presented as evidence plainly showed the cost of each lot sold. Not only did respondents minds meet as to the purchase price, but the real price was also stated in the Deeds of Sale. As of the filing of the complaint, respondent siblings have also fully paid the price to their respondent father. (2) Articles 1355 of the Civil Code states: Art. 1355. Except in cases specified by law, lesion or inadequacy of cause shall not invalidate a

contract, unless there has been fraud, mistake or undue influence. Article 1470 of the Civil Code further provides: Art. 1470. Gross inadequacy of price does not affect a contract of sale, except as may indicate a

defect in the consent, or that the parties really intended a donation or some other act or contract. Petitioners failed to prove any of the instances mentioned in Articles 1355 and 1470 of the Civil Code which would invalidate, or even affect, the Deeds of Sale. Indeed, there is no requirement that the price be equal to the exact value of the subject matter of sale. All the respondents believed that they received the commutative value of what they gave.


Labagala vs. Santiago

December 4, 2001 GR No. 132305 Second Division Ponente: Quisumbing, J. Facts: Jose T. Santiago owned a parcel of land. Alleging that Jose had fraudulently registered it in his name alone, his sisters Nicolasa and Amanda Santiago (respondents), sued Jose for recovery of 2/3 share of the property. On April 20, 1981, the trial court in that case decided in favor of the sisters, recognizing their right of ownership over portions of the property. Jose died intestate. Thereafter, the respondents filed an action before the Regional Trial Court of Manila seeking to recover Joses 1/3 share over the property. Respondents claim that Joses share in the property ipso jure belongs to them because they are the only legal heirs of their brother, who died intestate and without issue. They allege that it is highly improbable for petitioner to have paid the supposed consideration of P150,000 for the sale of the subject property because petitioner was unemployed and without any visible means of livelihood at the time of the alleged sale. Petitioner Labagala, on the other hand, claims that she is the daughter of Jose and argued that the purported sale of the property was in fact a donation to her. The RTC held that while there was indeed no consideration for the deed of sale executed by Jose in favor of petitioner, but said deed constitutes a valid donation. On appeal, the Court of Appeals reversed the decision of the RTC Issue: Whether the purported deed of sale was valid Held: There is no valid sale. Clearly, there is no valid sale in this case. Jose did not have the right to transfer ownership of the entire property to petitioner since 2/3 thereof belonged to his sisters. Petitioner could not have given her consent to the contract, being a minor at the time. Consent of the contracting parties is among the essential requisites of a contract, including one of


sale, absent which there can be no valid contract. Moreover, petitioner admittedly did not pay any centavo for the property, which makes the sale void. Article 1471 of the Civil Code provides: If the price is simulated, the sale is void, but the act may be shown to have been in reality a donation, or some other act or contract.

Dizon vs. Court of Appeals

G.R. No. 122544 302 SCRA 288 FIRST DIVISION Ponente: Martinez, J Facts: On 1974, Private respondent Overland Express Lines, Inc (lessee) entered into a Contract of Lease with Option to Buy with petitioners (lessors) involving a land situated at Quezon City for one (1) year. During that period the respondent was granted an option to purchase the land. 1976, for failure of lessee to pay the rentals the petitioners filed an action for ejectment. The City Court rendered judgment ordering lessee to vacate the leased premises and to pay the rentals in arrears and damages with interests. Lessee filed a petition enjoining the enforcement of said judgment and dismissal of the case for lack of jurisdiction. Such petition was denied. Thereafter, lessee filed for an action for specific performance to compel the execution of a deed of sale pursuant to the option to purchase and the receipt of the partial consideration given to Alice Dizon and for the fixing of period to pay the balance. Respondent Court of Appeals rendered a decision upholding the jurisdiction of City Court and concluding that there was a perfected contract of sale between the parties due to the said partial payment. Petitioners motion for reconsideration was denied by the respondent Court. HTP. Issues: Whether the Quezon City court has jurisdiction over the ejectment case? Whether the money given constitutes partial consideration to the option to purchase the land? Whether or not there is a perfected contract of sale? Ruling:

1. The petitioneres had a cause of action to institute an ejectment suit against the lessee with the City Court thus the city court (now MTC) has jurisdiction over it. The filing of lessor of a suit with the RTC did not divest the City Court of its jurisdiction to take cognizance over the ejectment case.


2. The term stipulated in the contract of lease with

option to buy is just one (1) year. Having failed to exercise the option within that period, the lessee cannot enforce its option to purchase anymore. Even assuming that such option still subsists, when the lessee tendered the amount on 1975, the suit for specific performance to enforce the option to purchase was filed only on 1985 ore more than ten (10) years after accrual of the cause of action.

Since the lessee did not purchase within the stipulated one (1) year and afterwhich still kept possession thereof, there was an implicit renewal of the contract reviving all the terms in the original contract which are only germane to the lessees rights of continued enjoyment of the property leased. The option to purchase is not deemed incorporated.

3. There was no perfected contract of sale

between the parties. In herein case, the lessee gave the money to Alice Dizon in an attempt to resurrect the lapsed option.The basis for agency is representation and a person dealing with an agent is put upon inquiry and must discover upon his peril the authority of the agent. Here, there was no showing that petitioners consented to the act of Alice Dizon nor authorized her to act on their behalf with regard to her transaction with the lessee. Therefore, one of the essential elements for a contract of sale to be perfected is lacking: consent.

Heirs of San Juan Andres vs. Rodriguez

G.R. 135634 332 SCRA 769 SECOND DIVISION Ponente: Mendoza, J

Facts: Juan San Andres sold a portion of his land to respondent Vicente Rodriguez evidenced by a Deed of Sale. Upon the death of Juan, Ramon San Andres was appointed judicial administrator of his estate. Ramon engaged the serviced of geodetic engineers to survey the lot. From such survey, thtey discovered that the respondent had enlarged the area which he purchased from the late Juan. Ramon then send a letter demanding the respondent to vacate the portion allegedly encroached by him. However, respondent refused to do so claiming that he purchased the same from the late Juan with both parties treating the two lots as one who parcel of land. Respondent further alleged that the full payment of the additional lot would be effected within five (5) years from the execution of the deed of sale after a survey is conducted over said property. Respondent attached to his answer a receipt signed by the late Juan as proof of the purchase. Respondent thereafter deposited in the court the balance of the purchase price. While the case is pending, Ramon died and was replaced by son Ricardo. Vicente also died and was substituted by his heirs. The trial court rendered judgement in faovr of the petitioner and ruled that there was no contract of sale because there is no valid object because there is no sufficient indication. Respondent Court of Appeals reversed the decision rendered by the Trial Court. Issues:

Whether the Court erred in holding that there is a valid contract of sale? Whether the Court erred in holding that the consignation is valid? Whether the amount of consignation is untenable? Whether the respondent is barred by prescription and laches from enforcing the contract? Rulings:

1. There is a valid Contract of Sale because all the essential elements are present. In herein case, petitioners contention that there is no determinate object is without merit. The receipt described the lot as previously paid lot. Since the lot subsequently sold to respondent is said to adjoin the previously paid lot on three sides thereof, the subject lot is capable of being determined without the need of any new contract. The contract of Sale can be gainsaid to be absolute because there is no reservation of


ownership. The stipulation payment of full consideration based on a survey shall be due and payable in five (5) years from the execution of deed of sale is not a condition which affects the efficacy of the contract. It merely provides for the manner of computation of payment..

2. Consignation is proper only in cases where an existing obligation is due. In herein case since there is no deed of sale yet thus the period when the purchase price should be paid has not commenced yet which makes it not yet due and demandable. The court is not erroneous because it thereafter ordered the execution of deed and the acceptance of the deposit.

3. The amount is based on the agreement which is the law between the parties. Thus, it is binding and the court can only give force and effect to the intentions of the parties.

4. Since there was no Deed of Sale yet and the respondent wants to pay the purchase price, he deemed it proper to deposit it in the Court. Thus, Prescription does not apply.

LAGRIMAS A. BOY, petitioner, vs. COURT OF APPEALS, ISAGANI P. RAMOS and ERLINDA GASINGAN RAMOS, respondents.

April 14, 2004 G.R. No. 125088

FIRST DIVISION

AZCUNA, J.:

Facts:

On September 24, 1993, spouses Isagani P. Ramos and Erlinda Gasingan Ramos, filed an action for ejectment against Lagrimas A. Boy (Lagrimas), with the Metropolitan Trial Court of Manila. In their Complaint, the spouses alleged that they are the owners of a parcel of land and the house existing thereon at 1151 Florentino Torres St., Singalong, Manila. They acquired the said properties from Lagrimas who sold the same to them by virtue of a Deed of Absolute Sale,

which was executed on June

4, 1986. However, Lagrimas requested for time to vacate the premises, and they agreed thereto, because they were not in immediate need of the premises. Time came when they needed the said house as they were only renting their own residence. They then demanded that Lagrimas vacate the subject premises, but she refused to do so. Hence, they initiated this action for ejectment against Lagrimas.

Sometime in May 1988, Erlinda Ramos and Lagrimas executed an agreement (Kasunduan) acknowledging that the subject parcel of land, together with the upper portion of the house thereon, had been sold by Lagrimas to the spouses Ramos for P31,000; that of the said price, the sum of P22,500 (representing P15,000 cash loan plus P7,500 as interest from September 1984 to May 1988) had been paid; that the balance of P8,500 would be paid on the last week of August 1988; and that possession of the property would be transferred to the spouses Ramos only upon full payment of the purchase price.

Issue:

WHETHER OR NOT THE COURT OF APPELS GRAVELY ERRED AND ABUSED ITS DISCRETION IN NOT INTERPRETING THAT THE "KASUNDUAN" EXECUTED BY AND BETWEEN PETITIONER (DEFENDANT) AND PRIVATE RESPONDENT (PLAINTIFF) SUPERSEDES THE DEED OF SALE WHICH HAS NOT BEEN CONSUMMATED. NO.

Ruling:

The Court of Appeals did not give credence to the statement in the Kasunduan that private respondents paid only P22,500 to petitioner since her indebtedness already reached P26,200. CA gave weight to the argument of private respondents


that Erlinda Ramos was merely tricked into signing the Kasunduan.

It has been established that petitioner sold the subject property to private respondents for the price of P31,000, as evidenced by the Deed of Absolute Sale, the due execution of which was not controverted by petitioner. The contract is absolute in nature, without any provision that title to the property is reserved in the vendor until full payment of the purchase price.

By the contract of sale,

petitioner (as vendor), obligated herself to transfer the ownership of, and to deliver, the subject property to private respondents (as vendees) after they paid the price of P31,000. Under Article 1477 of the Civil Code, the ownership of the thing sold shall be transferred to the vendee upon the actual or constructive delivery thereof.

In addition, Article 1498 of the Civil Code provides that when the sale is made through a public instrument, as in this case, the execution thereof shall be equivalent to the delivery of the thing which is the object of the contract, if from the deed the contrary does not appear or cannot clearly be inferred. In this case, the Deed of Absolute Sale does not contain any stipulation against the constructive delivery of the property to private respondents. In the absence of stipulation to the contrary, the ownership of the property sold passes to the vendee upon the actual or constructive delivery thereof. The Deed of Absolute Sale, therefore, supports private respondents right of material possession over the subject property.


SPS. HENRY CO AND ELIZABETH CO AND MELODY CO, petitioners,

vs. COURT OF APPEALS AND MRS. ADORACION CUSTODIO, represented by her Attorney-in-fact, TRINIDAD KALAGAYAN, respondents.

August 17, 1999

G.R. No. 112330

THIRD DIVISION

GONZAGA-REYES, J.:

Facts:

. . . sometime on October 9, 1984, plaintiff entered into a verbal contract with defendant for her

purchase of the latter's house and lot located at 316 Beata St., New Alabang Village, Muntinlupa, Metro Manila, for and in consideration of the sum of $100,000.00. One week thereafter, plaintiff paid to the defendants the amounts of $1,000.00 and P40,000.00 as earnest money, in order that the same may be reserved for her purchase, said earnest money to be deducted from the total purchase price. The purchase price of $100,000.00 is payable in two payments $40,000.00 on December 4, 1984 and the balance of $60,000.00 on January 5, 1985. On January 25, 1985, although the period of payment had already expired, plaintiff paid to the defendant Melody Co in the United States, the sum of $30,000.00, as partial payment of the purchase price. Defendant's counsel, Atty. Leopoldo Cotaco, wrote a letter to the plaintiff dated March 15, 1985, demanding that she pay the balance of $70,000.00 and not receiving any response thereto, said lawyer wrote another letter to plaintiff dated August 8, 1986, informing her that she has lost her "option to purchase" the property subject of this case and offered to sell her another property.

Issue:

Whether or not the Court of Appeals erred in ordering the spouses Co (COS) to return the $30,000.00 paid by CUSTODIO pursuant to the "option" granted to her over the Beata property? NO.

Ruling:

The March 15, 1985 letter sent by the COS through their lawyer to the CUSTODIO reveals that the parties entered into a perfected contract of sale and not an option contract.

A contract of sale is a consensual contract and is perfected at the moment there is a meeting of the minds upon the thing which is the object of the contract and upon the price. From that moment the parties may reciprocally demand 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 or meeting of the minds; (2) determinate subject matter; and (3) price certain in money or its equivalent. As evidenced by the March 15, 1985


letter, all three elements of a contract of sale are present in the transaction between the petitioners and respondent. Custodio's offer to purchase the Beata property, subject of the sale at a price of $100,000.00 was accepted by the COS. Even the manner of payment of the price was set forth in the letter. Earnest money in the amounts of US$1,000.00 and P40,000.00 was already received by the COS. Under Article 1482 of the Civil Code, earnest money given in a sale transaction is considered part of the purchase price and proof of the perfection of the sale.

. The COS were of the mistaken belief that CUSTODIO had lost her "option" over the Beata property when she failed to pay the remaining balance of $70,000.00 pursuant to their August 8, 1986 letter. Accordingly, CUSTODIO acted well within her rights when she attempted to pay the remaining balance of $70,000.00 to complete the sum owed of $100,000.00 as the contract was still subsisting at that time. When the COS refused to accept said payment and to deliver the Beata property, CUSTODIO immediately sued for the rescission of the contract of sale and prayed for the return of the $30,000.00 she had initially paid.

Under Article 138518

of the Civil Code, rescission creates the obligation to return the things which were the object of the contract but such rescission can only be carried out when the one who demands rescission can return whatever he may be obliged to restore.

The property involved has not been delivered to the appellee. She has therefore nothing to return to the appellants. The price received by the appellants has to be returned to the appellee as aptly ruled by the lower court, for such is a consequence of rescission, which is to restore the parties in their former situations.


SAN MIGUEL PROPERTIES PHILIPPINES, INC., PETITIONER, VS. SPOUSES ALFREDO HUANG AND GRACE HUANG, RESPONDENTS.

[GRN 137290 July 31, 2000]

First Division

Facts:

Petitioner San Miguel Properties Philippines, Inc. is a domestic corporation engaged in the purchase and sale of real properties. Parts of its inventory are two parcels of land totaling to 1, 738 square meters at the corner of Meralco Avenue and Gen. Capinpin St., Barrio Oranbo, Pasig City.

On February 21, 1994, the properties were offered for sale for 52,140,000 in cash. The offer was made to Atty. Helena Dauz who was acting for respondent spouses as undisclosed principals. In a letter dated March 24, 1994, Atty. Dauz signified her clients interest in purchasing the properties for the amount for which they were offered by petitioner, under the following terms: the sum of 500,000

would be given as earnest money and the balance would be paid in 8 equal monthly installments from May to December 1994. However, petitioner refused the counter-offer.

Atty. Dauz thus wrote San Miguel expressing the interest of respondent spouses, subject to the following conditions:

1. We will be given the exclusive option to purchase the property within 30 days from 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 1,000,000 shall be refundable to us in full upon demand.

On July 7, 1994, San Miguel, through its president, Federico Gonzales, wrote Atty. Dauz informing her that because the parties failed to agree on the terms and conditions of the sale despite the extension granted by San Miguel, it is

already returning the amount of 1 Million given as earnest-deposit.

Respondent spouses, through their counsel, demanded the execution of the Deed of Sale and attempted to return the earnest-deposit but SMPPI refused to accept it on the ground that the option to purchase had already expired.

Thus on August 16, 1994, respondent spouses filed a complaint for specific performance against SMPPI but the latter moved to dismiss said complaint alleging that: 1. the alleged exclusive option of respondent spouses lacked a consideration separate and distinct from the purchase price and was thus unenforceable; and 2. the complaint did not allege a cause of action because there was no meeting of the minds between the parties and therefore, no perfected contract of sale. This motion was opposed by respondent spouses.

RTC granted the motion to dismiss but the CA reversed it on appeal and held that all the requisites of a perfected contract of sale had been complied with as the offer made in connection with which the earnest money in the amount of 1 Million was tendered by respondent spouses had already been accepted by SMPPI. The court cited Art. 1482


of the Civil Code which provides that whenever earnest money is given in a contract of sale, it shall be considered as part of the price and proof of the perfection of the contract.

Issue: Whether or not the contract of sale was

perfected.

Ruling:

The contract of sale was not perfected. In holding that there is perfected contract of sale, the CA relied on the following findings: (1) earnest money was allegedly given by respondents and accepted by SMPPI through its vice-president and operations manager, Isidro Sobrecarey; and (2) the documentary evidence in the records show that there was perfected contract of sale.

With regard to the alleged payment and acceptance of the earnest money, the SC holds that respondents did not give the 1 Million as earnest money as contemplated in Art. 1482. Respondents presented the amount merely as deposit of what would eventually become earnest money or down payment should a contract of sale be made by them. The amount was thus given not as part of the purchase price and proof of the perfection of the contract of sale but only as guarantee that respondents would not back out of the sale. They even described it as earnest-deposit.

All that respondents had was just an option to buy the properties which privilege was not exercised by them because there was a failure to agree on the terms of payment. No contract of sale may thus be enforced by respondents.


SPOUSES ONNIE SERRANO AND AMPARO HERRERA, PETITIONERS, VS. GODOFREDO

CAGUIAT, RESPONDENT.

[GRN 139173 February 28, 2007]First Division

Facts:

Petitioners are registered owners of a lot located in Las Pias. On March 23, 1900, respondent offered to buy the lot and petitioners agreed to sell it at 1,500 per square meter. Respondent then gave 100,000 as partial payment.

A few days after, respondent, through his counsel, wrote petitioners informing them of his readiness to pay the balance of the contract price and requesting them to prepare the Deed of Sale.

Petitioners, through counsel, informed respondent in a letter that Amparo Herrera would be leaving for abroad on or before April 15, 1990 and they are canceling the transaction and that respondent may recover the earnest money (100,000) anytime. Petitioners also wrote him stating that they already delivered a managers check to his counsel in said amount.

Respondent thus filed a complaint for specific performance and damages with the RTC of Makati.

The trial court ruled that there was already a perfected contract of sale between the parties and ordered the petitioners to execute a final deed of sale in favor of respondent.

The Court of appeals affirmed said decision.

Issue: Whether or not there was a contract of sale.

Ruling:

The transaction was a contract to sell.

When petitioners declared in the Receipt for Partial Payment that they

RECEIVED FROM MR. GODOFREDO CAGUIAT THE AMOUNT OF ONE HUNDRED THOUSAND PESOS AS PARTIAL PAYMENT OF OUR LOT SITUATED IN LAS PIAS

MR. CAGUIAT PROMISED TO PAY THE BALANCE OF THE PURCHASE PRICE ON OR BEFORE MARCH 23, 1990, AND THAT WE WILL EXECUTE AND SIGN THE FINAL DEED OF SALE ON THIS DATE. there can be no other interpretation than that they agreed to a conditional contract of sale, consummation of which is subject only to the full payment of the purchase price.

A contract to sell is akin to a conditional sale where the efficacy or obligatory force of the vendors obligation to transfer title is subordinated to the happening of a future and uncertain event, so that if the suspensive condition does not take place, the parties would stand as if the conditional obligation had never existed. The suspensive condition is commonly full payment of the purchase price.

In this case, the Receipt for Partial Payment shows that the true agreement between the parties is a contract to sell.

First, ownership over the property was retained by petitioners and was not to pass to respondent until full payment of the purchase price. Second, the agreement between the parties was not embodied in a deed of sale. The absence of a formal deed of conveyance is a strong indication that the parties did not intend immediate transfer of ownership, but only a transfer after full payment of the purchase price. Third, petitioners retained possession of the certificate of title of the lot.

It is true that Article 1482 provides that whenever earnest money is given in a contract of sale, it shall be considered as part of the price and


proof of the perfection of the contract. However, this article speaks of earnest money given in a contract of sale. In this case, the earnest money was given in a contract to sell. The earnest money forms part of the consideration only if the sale is consummated upon full payment of the purchase price.

Clearly, respondent cannot compel petitioners to transfer ownership of the property to him.

PCI Leasing and Finance Inc. Vs. Giraffe- X Creative Imaging, Inc. July 12, 2007 GR 142618 First Division Garcia, J Facts:

-On December 4, 1996, petitioner PCI LEASING and respondent GIRAFFE entered into a Lease Agreement, whereby the former leased out to the latter one (1) set of Silicon High Impact Graphics and accessories worth P3,900,00.00 and one (1) unit of Oxberry Cinescan 6400-10 worth P6,500,000.00. - A year into the life of the Lease Agreement, GIRAFFE defaulted in its monthly rental-payment obligations. And following a three-month default, PCI LEASING addressed a formal pay-or-surrender-equipment type of demand letter dated February 24, 1998 to GIRAFFE. - The demand went unheeded. - PCI Leasing instituted a case against GIRAFFE. PCI prayed for the issuance of a writ of replevin for the recovery of the leased property - Upon PCI LEASINGs posting of a replevin bond, the trial court issued a writ of replevin, paving the way for PCI LEASING to secure the seizure and delivery of the equipment covered by the basic lease agreement. - Instead of an answer, GIRAFFE filed a Motion to Dismiss,arguing that the seizure of the two (2) leased equipment stripped PCI LEASING of its cause of action. -GIRAFFE argues that, pursuant to Article 1484 of the Civil Code on installment sales of personal property, PCI LEASING is barred from further pursuing any claim arising from the lease agreement and the companion contract documents, adding that the agreement between the parties is in reality a lease of movables with option to buy. -GIRAFFE asserts in its Motion to Dismiss that the civil complaint filed by PCI LEASING is proscribed by the application to the case of Articles 1484 and 1485, supra, of the Civil Code.

- PCI Leasing on the other hand maintains that its contract with GIRAFFE is a straight lease without an option to buy. - petitioner contends that the financial leasing arrangement it concluded with the respondent represents a straight lease covered by R.A. No. 5980, the Financing Company Act, as last amended by R.A. No. 8556, otherwise known as Financing Company Act of 1998, and is outside the application and coverage of the Recto Law. To the petitioner, R.A. No. 5980 defines and authorizes its existence and business. -the trial court granted GIRAFFEs motion to dismiss - motion for reconsideration was denied, hence this petition for review. Issue: Whether the agreement between PCI Leasing and GIRAFFE is governed by Articles 1484 and 1485 of the Civil Code? Held: Petition denied. Trial Courts decision affirmed Ratio: -The PCI LEASING- GIRAFFE lease agreement is in reality a lease with an option to purchase the equipment. This has been made manifest by the actions of the petitioner itself, foremost of which is the declarations made in its demand letter to the respondent. There could be no other explanation than that if the respondent paid the balance, then it could keep the equipment for its own; if not, then it should return them. This is clearly an option to purchase given to the respondent. Being so, Article 1485 of the Civil Code should apply. - The present case reflects a situation where the financing company can withhold and conceal - up to the last moment - its intention to sell the property subject of the finance lease, in order that the provisions of the Recto Law may be circumvented. It may be, as petitioner pointed out, that the basic lease agreement does not contain a purchase option clause. The absence, however, does not necessarily argue against the idea that what the parties are into is not a straight lease, but a lease with option to purchase. This Court has, to be sure, long been aware of the practice of vendors of personal property of denominating a contract of sale on installment as one of lease to prevent the ownership of the object of the sale from passing to the vendee until and unless the price is fully paid. -Being leases of personal property with option to purchase as contemplated in the above article, the


contracts in question are subject to the provision that when the lessor in such case has chosen to deprive the lessee of the enjoyment of such personal property, he shall have no further action against the lessee for the recovery of any unpaid balance owing by the latter, agreement to the contrary being null and void. -In choosing, through replevin, to deprive the respondent of possession of the leased equipment, the petitioner waived its right to bring an action to recover unpaid rentals on the said leased items. Paragraph (3), Article 1484 in relation to Article 1485 of the Civil Code, which we are hereunder re-reproducing, cannot be any clearer. ART. 1484. In a contract of sale of personal property the price of which is payable in installments, the vendor may exercise any of the following remedies: xxx xxx xxx (3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee's failure to pay cover two or more installments. In this case, he shall have no further action against the purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be void. ART. 1485. The preceding article shall be applied to contracts purporting to be leases of personal property with option to buy, when the lessor has deprived the lessee of the possession or enjoyment of the thing. -As we articulated in Elisco Tool Manufacturing Corp. v. Court of Appeals, the remedies provided for in Article 1484 of the Civil Code are alternative, not cumulative. The exercise of one bars the exercise of the others. This limitation applies to contracts purporting to be leases of personal property with option to buy by virtue of the same Article 1485. The condition that the lessor has deprived the lessee of possession or enjoyment of the thing for the purpose of applying Article 1485 was fulfilled in this case by the filing by petitioner of the complaint for a sum of money with prayer for replevin to recover possession of the office equipment. By virtue of the writ of seizure issued by the trial court, the petitioner has effectively deprived respondent of their use, a situation which, by force of the Recto Law, in turn precludes the former from maintaining an action for recovery of accrued rentals or the recovery of the balance of the purchase price plus interest.

The imperatives of honest dealings given prominence in the Civil Code under the heading: Human Relations, provide another reason why we must hold the petitioner to its word as embodied in its demand letter. Else, we would witness a situation where even if the respondent surrendered the equipment voluntarily, the petitioner can still sue upon its claim. This would be most unfair for the respondent. We cannot allow the petitioner to renege on its word. Yet more than that, the very word or as used in the letter conveys distinctly its intention not to claim both the unpaid balance and the equipment. It is not difficult to discern why: if we add up the amounts paid by the respondent, the residual value of the property recovered, and the amount claimed by the petitioner as sued upon herein (for a total of P21,779,029.47), then it would end up making an instant killing out of the transaction at the expense of its client, the respondent. The Recto Law was precisely enacted to prevent this kind of aberration. Moreover, due to considerations of equity, public policy and justice, we cannot allow this to happen. Not only to the respondent, but those similarly situated who may fall prey to a similar scheme. Elisco Tool Manufacturing Corp. Vs. Court of Appeals et. al.


May 31, 1999 GR 109966 Second Division

Mendoza J. Facts: -Private respondent Rolando Lantan was employed at the Elisco Tool Manufacturing Corporation as head of its cash department. On January 9, 1980, he entered into an agreement with the company which provided as follows: - that, Elisco Tool Manufacturing Corp is the owner of a car which for and in consideration of a monthly rental of P 1010.65 will be leased to Rolando Lantan for 5 years - That, Rolando Lantan shall pay the lease thru salary deduction from his monthly remuneration in the amount as above specified for a period of FIVE (5) years; - That, he shall for the duration of the lease contract, shoulder all expenses and costs of registration, insurance, repair and maintenance, gasoline, oil, part replacement inclusive of all expenses necessary to maintain the vehicle in top condition -That, at the end of FIVE (5) year period or upon payment of the 60

th monthly rental, Lantan may

exercise the option to purchase the motor vehicle from Elisco and all monthly rentals shall be applied to the payment of the full purchase price of the car and further, should Lantan desire to exercise this option before the 5-year period lapse, he may do so upon payment of the remaining balance on the five year rental unto Elisco, it being understood however that the option is limited to the EMPLOYEE; -That, in case of default in payment THREE (3) accumulated monthly rentals, Elisco shall have the full right to lease the vehicle to another EMPLOYEE; -That, in the event of resignation and or dismissal from the service, Lantan shall return the subject motor vehicle to the EMPLOYER in good working and body condition. -On the same day, January 9, 1980, private respondent executed a promissory note which states his promise to pay P 1,010.65 without the necessity of notice or demand in accordance with the schedule of payment - After taking possession of the car, Lantan installed accessories worth P15,000.00 -In 1981, Elisco Tool ceased operations, as a result of which private respondent Rolando Lantan was laid off. Nonetheless, as of December 4, 1984, private respondent was able to make payments for the car in the total amount of P61,070.94. -On June 6, 1986, petitioner filed a complaint, entitled replevin plus sum of money, against private respondent Rolando Lantan, his wife Rina, and two other persons, identified only as John and

Susan Doe, before the Regional Trial Court of Pasig, Metro Manila. -Petitioner alleged that private respondents failed to pay the monthly rentals that despite demands, private respondents failed to settle their obligation thereby entitling petitioner to the possession of the car; that petitioner was ready to post a bond in an amount double the value of the car, which was P60,000; and that in case private respondents could not return the car, they should be held liable for the amount of P60,000 plus the accrued monthly rentals thereof, with interest at the rate of 14% per annum, until fully paid. - Upon the posting of the bond, the sheriff took possession of the car and after 5 days turned it over to the petitioner - private respondents claim that their agreement was to buy and sell and not lease with option to buy the car - in its reply, petitioner maintained that the contract was one of lease with option to purchase and that the promissory note was merely a nominal security for the agreement. - trial court rendered its decision in favor of the private respondent - petitioner appealed to CA, petitioner filed motion for execution pending appeal - CA affirmed in toto the decision of the trial court, hence the petition for review on certiorari Issue/s: Whether the Court of Appeals erred (a) in disregarding the admission in the pleadings as to what documents contain the terms of the parties agreement. (b) in holding that the interest stipulation in respondents Promissory Note was not valid and binding. (c) in holding that respondents had fully paid their obligations. Held: The decision of the Court of Appeals is AFFIRMED with costs against petitioner. Ratio: First. Petitioner does not deny that private respondent Rolando Lantan acquired the vehicle in question under a car plan for executives of the Elizalde group of companies. Under a typical car plan, the company advances the purchase price of a car to be paid back by the employee through monthly deductions from his salary. The company retains ownership of the motor vehicle until it shall have been fully paid for. However, retention of registration of the car in the companys name is only a form of a lien on the vehicle in the event that the


employee would abscond before he has fully paid for it. There are also stipulations in car plan agreements to the effect that should the employment of the employee concerned be terminated before all installments are fully paid, the vehicle will be taken by the employer and all installments paid shall be considered rentals per agreement. This Court has long been aware of the practice of vendors of personal property of denominating a contract of sale on installment as one of lease to prevent the ownership of the object of the sale from passing to the vendee until and unless the price is fully paid. As this Court noted in Vda. de Jose v. Barrueco: Sellers desirous of making conditional sales of their goods, but who do not wish openly to make a bargain in that form, for one reason or another, have frequently resorted to the device of making contracts in the form of leases either with options to the buyer to purchase for a small consideration at the end of term, provided the so-called rent has been duly paid, or with stipulations that if the rent throughout the term is paid, title shall thereupon vest in the lessee. It is obvious that such transactions are leases only in name. The so-called rent must necessarily be regarded as payment of the price in installments since the due payment of the agreed amount results, by the terms of the bargain, in the transfer of title to the lessee. Second. The contract being one of sale on installment, the Court of Appeals correctly applied to it the following provisions of the Civil Code: The remedies provided for in Art. 1484 are alternative, not cumulative. The exercise of one bars the exercise of the others. This limitation applies to contracts purporting to be leases of personal property with option to buy by virtue of Art. 1485. The condition that the lessor has deprived the lessee of possession or enjoyment of the thing for the purpose of applying Art. 1485 was fulfilled in this case by the filing by petitioner of the complaint for replevin to recover possession of movable property. By virtue of the writ of seizure issued by the trial court, the deputy sheriff seized the vehicle on August 6, 1986 and thereby deprived private respondents of its use. The car was not returned to private respondent until April 16, 1989, after two (2) years and eight (8) months, upon issuance by the Court of Appeals of a writ of execution. Petitioner prayed that private respondents be made to pay the sum of P39,054.86, the amount that they were supposed to pay as of May 1986, plus interest at the legal rate. At the same time, it prayed for the issuance of a writ of replevin or the delivery to it of the motor vehicle complete with accessories and

equipment. In the event the car could not be delivered to petitioner, it was prayed that private respondent Rolando Lantan be made to pay petitioner the amount of P60,000.00, the estimated actual value of the car, plus accrued monthly rentals thereof with interests at the rate of fourteen percent (14%) per annum until fully paid. This prayer of course cannot be granted, even assuming that private respondents have defaulted in the payment of their obligation. This led the trial court to say that petitioner wanted to eat its cake and have it too. Both the trial court and the Court of Appeals correctly ruled that private respondents could no longer be held liable for the amounts of P39,054.86 or P60,000.00 because private respondents had fulfilled their part of the obligation. The agreement does not provide for the payment of interest on unpaid monthly rentals or installments because it was entered into in pursuance of a car plan adopted by the company for the benefit of its deserving employees. As the trial court correctly noted, the car plan was intended to give additional benefits to executives of the Elizalde group of companies. Third. Private respondents presented evidence that they felt bad, were worried, embarrassed and mentally tortured by the repossession of the car. This has not been rebutted by petitioner. There is thus a factual basis for the award of moral damages. In addition, petitioner acted in a wanton, fraudulent, reckless and oppressive manner in filing the instant case, hence, the award of exemplary damages is justified. The award of attorneys fees is likewise proper considering that private respondents were compelled to incur expenses to protect their rights

PEOPLE'S INDUSTRIAL AND COMMERCIAL CORPORATION, petitioner, vs. COURT OF APPEALS and MAR-ICK INVESTMENT CORPORATION, respondents.

G.R. No. 112733 October 24, 1997

281 SCRA 206

Ponente: ROMERO, J. (THIRD DIVISION)

Facts:

Private respondent Mar-ick Investment Corporation is the exclusive and registered owner of


Mar-ick Subdivision in Barrio Buli, Cainta, Rizal. On May 29, 1961, private respondent entered into 6 agreements with petitioner People's Industrial and Commercial Corporation whereby it agreed to sell to petitioner 6 subdivision lots.

Five of the agreements stipulate that the petitioner agreed to pay private respondent for each lot, the amount of P7,333.20 with a down payment of P480.00. The balance of P6,853.20 shall be payable in 120 equal monthly installments of P57.11 every 30th of the month, for a period of ten years. With respect to another lot, the parties agreed to the purchase price of P7,730.00 with a down payment of P506.00 and equal monthly installments of P60.20. After the lapse of ten years, petitioner still had not fully paid for the six lots. It had paid only the down payment and 8 installments.

After a series of negotiations between the parties, they agreed to enter into a new contract to sell on October 11, 1983. The contract stipulates that the previous contracts have been cancelled due to the failure of the purchaser to pay the stipulated installments.

Neither of the parties signed the new contract. Siatianum issued checks in the total amount of P37,642.72 to private respondent. Private respondent received but did not encash the checks. Instead, it filed in the Regional Trial Court of Antipolo, Rizal, a complaint for accion publiciana de posesion against petitioner and Tomas Siatianum, as president and majority stockholder of petitioner. It prayed that petitioner surrender possession of the lots of Mar-ick Subdivision, and that petitioner and Tomas Siatianum be ordered to pay reasonable rentals for the use of the lots. In the alternative, the complaint prayed that should the agreements be deemed not automatically cancelled, the same agreements should be declared null and void. Lower court rendered a decision finding that the original agreements of the parties were validly cancelled. The parties did not enter into a new contract in accordance with Art. 1403 (2) of the Civil Code as the parties did not sign the draft contract. Receipt by private respondent of the five checks could not amount to perfection of the contract because private respondent never encashed and benefited from those checks. There was no meeting of the minds between the parties because Art. 475 of the Civil Code should be read with the Statute of Frauds that requires the embodiment of the contract in a note or memorandum. What was clearly proven was that both parties negotiated a new contract after the

termination of the first. Thus, the fact that the parties tried to negotiate a new contract indicated that they considered the first contract as already cancelled. Petitioner elevated the case to the Court of Appeals which affirmed in toto the lower court's decision.

Issue: Whether or

not there was a perfected and enforceable contract of sale on October 11, 1983 which modified the earlier contracts to sell which had not been validly rescinded.

Ruling: The contracts to sell of 1961 were cancelled to which the parties voluntarily bound themselves. When petitioner failed to abide by its obligation to pay the installments provision No. 9 of the contract automatically took effect which states that should the purchaser fail to make the payment of any of the monthly installments as agreed herein, this contract shall, by the mere fact of nonpayment, expire by itself and become null and void. The 1961 agreements are contracts to sell and not contracts of sale. The distinction between these contracts is depicted in Adelfa Properties, Inc. v. Court of Appeals which states that the distinction between the two is important for in a contract of sale, the title passes to the vendee upon the delivery of the thing sold; whereas in a contract to sell, by agreement the ownership is reserved in the vendor and is not to pass until the full payment of the price. In a contract of sale, the vendor has lost and cannot recover ownership until and unless the contract is resolved or rescinded; whereas, in a contract to sell, title is retained by the vendor until the full payment of the price, such payment being 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 becoming effective. Thus, a deed of sale is considered absolute in nature where there is neither a stipulation in the deed that title to the property sold is reserved in the seller until the full payment of the price, nor one giving the vendor the right to unilaterally resolve the contract the moment the buyer fails to pay within a fixed period. Being contracts to sell, Article 1592 of the Civil Code which requires rescission either by judicial action or notarial act is not applicable.

Petitioner alleges that there was a new

perfected and enforceable contract of sale between the parties in October 1983. Private respondent's company lawyer volunteered that after the cancellation of the 1961 agreements, the parties


should negotiate and enter into a new agreement. However, after he had drafted the contract and sent it to petitioner, the latter deposited a check for downpayment but its representative refused to sign the prepared contract. In the absence of proof to the contrary, this draft contract may be deemed to embody the agreement of the parties. Private respondent did not and has not denied the existence of that contract. Under these facts, therefore, the parties may ideally be considered as having perfected the contract of October 1983. Justice and equity, however, will not be served by a positive ruling on the perfection and performance of the contract to sell. There are facts on record proving that the parties had not arrived at a definite agreement. By Atty. Villamayor's admission, the checks were not encashed because Tomas Siatianun did not sign the draft contract that he had prepared. On his part, Tomas Siatianun explained that he did not sign the contract because it covered 7 lots while their agreement was only for 6 lots. The number of lots to be sold is a material component of the contract to sell. Without an agreement on the matter, the parties may not in any way be considered as having arrived at a contract under the law. Moreover, installments paid by the petitioner on the land should be deemed rentals. Article 1486 of the Civil Code provides that a stipulation that the installments or rents paid shall not be returned to the vendee or lessee shall be valid insofar as the same may not be unconscionable under the circumstances. WHEREFORE, the instant petition for review on certiorari is hereby denied and the questioned Decision of the Court of Appeals is AFFIRMED.

REGALADO DAROY, complainant, vs. ATTY. ESTEBAN ABECIA, respondent.

A.C. No. 3046 October 26, 1998

Ponente: MENDOZA, J. (SECOND DIVISION)

Facts:

This refers to the complaint for malpractice filed by Regalado Daroy against Esteban Abecia, a member of the Bar. Respondent Abecia was counsel of complainant Daroy in a case for forcible entry before the Municipal Trial Court of Opol, Misamis Oriental. Judgment was rendered in favor of complainant. To satisfy the judgment, the sheriff sold at public auction a parcel of land belonging to one of the defendants to complainant Daroy as highest bidder. Upon failure of the defendants to redeem the land, its ownership was consolidated in complainant Daroy. Complainant Daroy claimed that respondent


Abecia forged his signature in a deed of absolute sale transferring the parcel of land to Jose Gangay and that in a fictitious deed of absolute sale it was made to appear that Gangay in turn conveyed the land to Nena Abecia, wife of respondent Abecia. Daroy alleged that he entrusted the title to the land to Abecia as his counsel and allowed him to take possession of the land upon the latters request. By means of the forged deed of sale, Abecia was able to obtain new transfer certificates of title, first in the name of Gangay and then in that of Mrs. Abecia, from the Registry of Deeds of Misamis Oriental. Daroy claimed he discovered the fraud only in 1984. On July 15, 1993, Commissioner Plaridel Jose ruled that respondent Abecia is guilty of malpractice and recommended his disbarment. The Integrated Bar of the Philippines approved the report but reduced the penalty to indefinite suspension. Respondent Abecia filed a Motion for Reconsideration and/or Appeal.

Issues: Whether or not the Commission on Bar Discipline erred when it held that complainant had no knowledge of the execution of the Deed of Absolute Sale. Whether or not respondent Atty. Esteban Abecia is prohibited from acquiring the parcel of land.

Ruling: Respondents motion is well taken. As already stated, the land in question was purchased by complainant at the sheriffs sale. Deputy Sheriff stated that when he finally transferred the land to the buyer, he placed in possession of the land not only the buyer, Regalado Daroy, but also the latters assignee, Nena Abecia, in whose name the title to the land had in fact been transferred. It would appear, therefore, that Daroy already knew that title to the land had already been transferred in the name of the respondents wife. Indeed, what appears to have happened in this case is that the parties thought that because the land had been acquired by complainant at a public sale held in order to satisfy a judgment in his favor in a case in which respondent was complainants counsel, the latter could not acquire the land. The parties apparently had in mind Art. 1491 of the Civil Code which provides:

ART. 1491. The following persons cannot acquire by purchase, even at a public or judicial auction, either in person or through the mediation of another:

5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other officers and employees connected with the administration of justice, the property and rights in litigation or levied upon an execution before the court within whose jurisdiction or territory they exercise their respective functions; this prohibition includes the act of acquiring by assignment and shall apply to lawyers, with respect to the property and rights which may be the object of any litigation in which they may take part by virtue of their profession.

In Guevara v. Calalang, we held that the prohibition in Art. 1491 does not apply to the sale of a parcel of land, acquired by a client to satisfy a judgment in his favor, to his attorney as long as the property was not the subject of the litigation. While judges, prosecuting attorneys, and others connected with the administration of ju

law on sales digested cases

Documents

contract of sale

valid sale

conditional sale

portion of lot

formal deed of sale

residential lot

paid lot

middle of lot