sales (case digest).doc

GEM ROSE ORTIZ ALLANCase Digest on Law on Sales_____________________________________________________________________________________

Quiroga vs. Parsons Hardware 38 Phil 501 August 1918

FACTS: Plaintiff Andres Quiroga and J. Parsons entered into a contract, where it was stated among others that Quiroga grants in favor of Parsons the exclusive rights to sell his beds in the Visayan Islands under some conditions. The defendant was obliged under the contract to pay for the beds, at a discount of 25% as a commission on the sales. The payment had to be made whether or not the defendant was able to sell his beds. Quiroga contends that Parsons violated the following obligations: not to sell beds at higher prices than those of the invoices, to have an open establishment in Iloilo; to conduct the agency, to keep the beds on public exhibition, and to pay for the advertisement expenses for the same, and to order the beds by the dozen and in no other manner. He further alleged that Parsons was his agent for the sale in Iloilo, and said obligations are implied in a contract of commercial agency.

ISSUE: Whether or not this is a contract of sale or agency to sell.

RULING: The contract entered into by the parties is one of contract of sale. In the contract in question, what was essential, as constituting the cause and subject matter, is that Quiroga was to furnish Parsons with beds which the latter might order, at the price stipulated, and that Parsons was to pay the price in the manner stipulated. These features exclude the legal conception of an Agency or Order to Sell, whereby the mandatory or agent received the thing to sell it, and does not pay its price, but delivers to the principal the price he obtains from the sale of the thing to a third person, and if he does not succeed in selling it, he returns it.


Atkins Kroll & Co. vs. Cu Hian Tek 102 Phil 984 January 1958

FACTS: Petitioner Atkins Kroll & Co. sent a letter to respondent B. Cu Hian Tek offering one thousand cartons of sardines. Hian Tek unconditionally accepted the said offer through a letter delivered on, but Atkins failed to deliver the commodities due to the shortage of catch of sardines by the packers in California. Hian Tek, therefore, filed an action for damages in the CFI of Manila which granted the same in his favor. Upon Atkins’ appeal, the Court of Appeals affirmed said decision but reduced the damages representing unrealized profits. Atkins herein contends that there was no such contract of sale but only an option to buy, which was not enforceable for lack of consideration because it is provided under the 2nd paragraph of Article 1479 of the New Civil Code that "an accepted unilatateral promise to buy or to sell a determinate thing for a price certain is binding upon the promisor if the promise is supported by a consideration distinct from the price.” Atkins also insisted that the offer was a mere offer of option, because the "firm offer" was a continuing offer to sell.

ISSUE: Whether or not there was a perfected contract of sale between the parties.

RULING: Yes, the Supreme Court held that there was a contract of sale between the parties. Petitioner’s argument assumed that only a unilateral promise arose when the respondent accepted the offer, which is incorrect because a bilateral contract to sell and to buy was created upon respondent’s acceptance. In this case at bar, however, upon respondent’s acceptance of herein petitioner's offer, a bilateral promise to sell and to buy ensued, and the respondent had immediately assumed the obligations of a purchaser.


San Miguel Properties vs. Sps. Huang336 SCRA 737

FACTS: San Miguel Properties is engaged in the purchase and sale of real properties, of which include two parcels of land. These properties were offered for sale. Such offer was made to Atty. Dauz on behalf of Sps. Huang. Atty. Dauz wrote San Miguel informing the respondents ‘interest to buy the property and enclosed therein a check (P1,000,000.00) as earnest deposit subject to certain conditions, to wit: (1) that they be given the exclusive option to purchase the property within 30 days from acceptance of the offer; (2) that during the option period, the parties would negotiate the terms and conditions of the purchase; and (3) petitioner would secure the necessary approvals while respondents would handle the documentation. Sobrecarey, San Miguel Properties VP indicated his conformity to the offer; signed the letter; and accepted the earnest deposit. By agreement of the parties, they agreed that respondents will be given 6 months within which to pay. Upon failure of respondents to pay despite the extension of time given, petitioner through its Pres & CEO Gonzales, wrote Atty. Dauz, that they are returning the earnest deposit. Respondent spouses through counsel, wrote petitioner demanding the execution of a deed of conveyance in their favor. They attempted to return the earnest deposit but were refused by San Miguel. Respondent spouses filed a complaint for specific performance. Trial court, upon motion, dismissed the complaint, which was reversed by the CA. ISSUE: Whether or not all the essential elements existed for a perfected sale.

RULING: No, hence, there was no perfected contract of sale. In the present case, it is not the giving of earnest money, but the proof of the concurrence of all the essential elements of the contract of sale which establishes the existence of a perfected sale. In Navarro v. Sugar producers Cooperative Marketing Association Inc., we laid down the rule that the manner of payment of the purchase price is an essential element before a valid and binding contract of sale can exist. Although the Civil Code does not expressly state that the minds of the parties must also meet on the terms of payment of the price, the same is needed, otherwise there is no sale. As held in Toyota Shaw Inc. c. Court of Appeals, agreement on the manner of payment goes into the price such that a disagreement on the manner of the payment is tantamount to a failure to agree on the price. WHEREFORE, the decision of the Court of Appeals is REVERSED and respondents’ complaint is DISMISSED.


ENGINEERING AND MACHINERY CORP. vs. COURT OF APPEALSG.R. No. 52267 January 24, 1996

FACTS: Almeda and Engineering signed a contract, wherein Engineering undertook to fabricate, furnish and install the air-conditioning system in the latter’s building in consideration of P210,000.00. Petitioner was to furnish the materials, labor, tools and all services required in order to so fabricate and install said system. The system was completed and accepted by private respondent, who paid in full the contract price. Almeda learned from the employees of NIDC of the defects of the air-conditioning system of the building. Almeda spent for the repair of the air conditioning system. He now sues Engineering for the refund of the repair. Engineering contends that the contract was of sale and the claim is barred by prescription since the responsibility of a vendor for any hidden faults or defects in the thing sold runs only for 6 months. Almeda contends that since it was a contract for a piece of work, hence the prescription period was ten years. RTC found that Engineering failed to install certain parts and accessories called for by the contract, and deviated from the plans of the system, thus reducing its operational effectiveness to achieve a fairly desirable room temperature.

ISSUE: Whether or not the contract for the fabrication and installation of a central air-conditioning system in a building, one of “sale” or “for a piece of work”.

RULING: The contract in question is one for a piece of work. It is not petitioner’s line of business to manufacture air-conditioning systems to be sold “off-the-shelf.” Its business and particular field of expertise is the fabrication and installation of such systems as ordered by customers and in accordance with the particular plans and specifications provided by the customers. Naturally, the price or compensation for the system manufactured and installed will depend greatly on the particular plans and specifications agreed upon with the customers.


NATIONAL GRAINS AUTHORITY vs. IACG.R. No. 74470 March 8, 1989

FACTS: Private respondent Leon Soriano offered to sell palay grains to NFA through William Cabal, the provincial manager in Tuguegarao. The documents submitted were processed, and he was given a quota of 2,640 cavans, which is the maximum number of cavans he may sell to NFA. On the same day and on the following day, Soriano delivered 630 cavans, which were no re-bagged, classified and weighed. When he demanded payment, he was told that payment will be held in abeyance since Mr. Cabal was still investigating on information received that Soriano was not a bona fide farmer. Instead of withdrawing the palay, Soriano insisted that the palay grains be delivered and paid. He filed a complaint for specific performance. Petitioners contend that the delivery was merely made for the purpose of offering it for sale because until the grains were re-bagged, classified and weighed, they are not considered sold.

ISSUE: Whether there was a perfected sale.

RULING: Yes, there was a perfected sale. Soriano initially offered to sell palay grains produced in his farmland to NFA. When the latter accepted the offer by noting in Soriano's Farmer's Information Sheet a quota of 2,640 cavans, there was already a meeting of the minds between the parties. The object of the contract, being the palay grains produced in Soriano's farmland and the NFA was to pay the same depending upon its quality. The fact that the exact number of cavans of palay to be delivered has not been determined does not affect the perfection of the contract. Article 1349 of the New Civil Code provides: "The fact that the quantity is not determinate shall not be an obstacle to the existence of the contract, provided it is possible to determine the same, without the need of a new contract between the parties." In this case, there was no need for NFA and Soriano to enter into a new contract to determine the exact number of cavans of palay to be sold. Soriano can deliver so much of his produce as long as it does not exceed 2,640 cavans. From the moment the contract of sale is perfected, it is incumbent upon the parties to comply with their mutual obligations or "the parties may reciprocally demand performance" thereof.


GALANG vs. COURT OF APPEALSG.R. No. 80645 August 3, 1993

FACTS: Ramon Buenaventura on his own behalf and as attorney-in-fact of Angeles, Corazon, Amparo, and Maria Luisa, all surnamed Buenaventura, sold to Guadalupe and Marcelino Galang 2 parcels of land situated in Tagaytay City. Marcelino and Guadalupe Galang, herein petitioners paid to the sellers the 1st: 25% of the purchases price as stated in a deed. Therafter, they allegedly demanded from private respondents the removal of the encargado from the premises and the delivery of the owners duplicate certificate of the title. Private respondents failed to do so despite the willingness of petitioners to pay the 2nd: 25% of the purchase price. Consequently, Marcelino and Guadalupe Galang filed a complaint for specific performance with damages.

ISSUE: Whether or not the encargado was a tenant.

RULING: Yes, encargado was a tenant. The Court discerns no reversible error in the finding and conclusion of the trial court that the unnamed encargado on the lands in question is actually a tenant or agricultural lessee. The bases of this ineluctable conclusion are not hard to so, as succinctly point out by the court a quo, the encargado is staying in his own existing house thereon, and subject agricultural land is planted with coffee and other plants not only by the encargado but also by his deceased parents. The court held that there is no basis for rescinding the contract because the removal of the encargado was not a condition precedent to the contract of sale. Rather it was one alternative periods of payment of the 2nd installment given by the seller himself to the buyers. Secondly, even granting that it was indeed a legal status of the encargado, the lower court was rash in holding that the encargado was a tenant of the land in question. The petition is hereby granted and the decision of the CA is reversed and set aside. Petitioners are ordered to pay the full 75% balance.


RESTITUTA vs. CAG.R. No. L-37831 November 23, 1981

FACTS: Two parcels of land belong to Restituta V. Vda. De Gordon, inclusive, the taxes against said parcels of land remained unpaid. The City Treasurer of Quezon City, upon warrant of a certified copy of the record of such delinquency, advertised for sale the parcels of land. The public sale of the parcels of land was sold to Rosario Duazo. The certificate of sale executed by the City Treasurer was duly registered in the office of the Register of Deeds of Quezon City. Upon the failure of the registered owner to redeem the parcels of land within the 1-year period prescribed by law, the City Treasurer of Quezon City executed a final deed of sale of said lands and the improvements thereon. Said final deed of sale was also registered in the Office of the Register of Deeds of Quezon City. Later on, Duazo filed a petition for consolidation of ownership. The appellate court upheld the tax sale of the real properties at which Duazo acquired the same and her ownership upon Vda. de Gordon’s failure to redeem the same, having found the sale to have been conducted “under the direction and supervision of the City Treasurer of Quezon City after the proper procedure and legal formalities had been duly accomplished.” The combined assessed value of the two parcels of land is P16,800.00. The price paid at the public sale is P10,500.00. The residential house on the land is assessed at P45,580.00. But the assessment was made in 1961. The present value of the residential house must be much less now considering the depreciation for over ten years. While the price of P10,500.00 is less than the total assessed value of the land and the improvement thereon, said price cannot be considered so grossly inadequate as to be shocking to the conscience of the court. The appellate court's decision, mere inadequacy of the price alone is not sufficient ground to annul the public sale.

ISSUE: Whether or not the price is grossly inadequate as to justify the setting aside of public sale.

RULING: No, gross inadequacy of the purchase price is not sufficient ground to annul the public sale. As the court held in Velasquez vs. Coronet, alleged gross inadequacy of the price is not material “when law gives the owner the right to redeem as when a sale is made at public auction, upon the theory that the lesser the price the easier it is for the owner to effect the redemption.


MOISES JOCSON vs. CAG.R. No. L-55322 February 16, 1989

FACTS: Spouses Emilio Jocson & Alejandra Poblete had 2 children: Moises Jocson & Agustina Jocson-Vasquez. Agustina is married to Ernesto Vasquez. Alejandra died intestate. Emilio died intestate. Moises filed complaint, assailing validity of 3 documents executed by Emilio during his lifetime. He prays that it be declared null & void and that the properties involved be partitioned between him and his sister. Moises alleged that defendants were employed in their parents’ business and they must have used business earnings or simulated consideration in order to purchase the properties. RTC decided in favor of petitioner. Documents were simulated and fictitious because: 1) no proof that Agustina did pay for the properties 2) prices was grossly inadequate tantamount to lack of consideration at all, 3) improbability of sale considering circumstances, designed to exclude Moises. Court of Appeals reversed the decision.

ISSUE: Whether or not prices were simulated.

RULING: No, prices were not simulated. In fact, purchase price was higher than assessed value. Besides the difference between market value and purchase price is understandable considering father’s filial love for her daughter. Gross inadequacy of price alone does not affect the contract except perhaps an indication of defect in consent (Civil Code Art. 1470). No proof of defective consent.


FELIX DANGUILAN vs. IACG.R. No. L-69970 November 28, 1988

FACTS: Domingo Melad owned 2 lots in Cagayan, a residential lot and a farm lot. Danguilan and Apolonia Melad both claim rights over the said lots. Melad’s contends: based on a Deed of Sale signed by Domingo. This sale was supposedly entered into by her mother when she was just a kid, the payment for such sale earned by her mother at the Tabacalera Factory. She also claimed that she was the illegitimate daughter of Melad, who lived with them until he died. She explained that she vacated the place because Melad asked her permission to cultivate the land as her tenant who would deliver pne half of the harvest to her. But she filed a complaint since the deliveries have stopped. Danguilan’s contends: Donations in 2 private instruments were made by Domingo to him and his wife (Domingo’s niece), in exchange for taking care of the old man, and cultivating his land and with the understanding that he would bury him upon his death.

ISSUE: Whether or not the sale was consummated.

RULING: No, the sale was not consummated. Even assuming the validity of the deed of sale, the record shows that the private respondent did not take possession of the disputed properties and indeed waited until to file the action for recovery of the lands from the petitioner. If she did have possession, she transferred the same to Danguilan, by her own admission. She failed to show that she consummated the contract of sale by actual delivery of the properties to her and actual possession thereof in the concept of purchaser-owner. As to the argument that symbolic delivery was effected through the deed of sale, the Code imposes upon the vendor the obligation to deliver the thing sold and such is done when it is placed in the hands and possession of the vendee. In order that symbolic delivery may produce the effect of tradition, control over the thing sold is necessary and not just ownership and right of possession


ANG YU ASUNCION vs. COURT OF APPEALS238 scra 602

FACTS: Petitioner Ang Yu Asuncion and Keh Tiong leased a property of respondents Bobby Cu Unjieng, Rose Cu Unjieng and Jose Tan in Binondo Manila. Respondents informed plaintiffs that they are offering to sell the premises and are giving them priority to acquire the same. Respondents offered 6 million for the property but petitioners offered 5 miliion. Respondents accepted and asked petitioners to put in writing the terms and conditions but the latter never provided such. When defendants were about to sell the property, plaintiffs were compelled to file the complaint to compel defendants to sell the property to them. Court recognizes the right of first refusal of the petitioner. Notwithstanding the court’s decision, respondent sold the property to Buen Realty and Development Corporation.

ISSUE: Whether or not the petitioners can demand specific performance to the respondents to sell to them the property.

RULING: No, petitioners never accepted the offer when they refused to make the terms and condition of the sale. As such, respondents have the right to sell the property to other parties. Even if petitioners are aggrieved by the failure of private respondents to honor the right of first refusal, the remedy is not a writ of execution on the judgment, since there is none to execute, but an action for damages in a proper forum for the purpose. The petitioners have been granted off in the first place is just a mere ‘right of first refusal’. In the law on sales, the so-called “right of first refusal” is an innovative juridical relation. Needless to point out, it cannot be deemed a perfected contract of sale under Article 1458 of the Civil Code. Neither can the right of first refusal, understood in its normal concept, per se be brought within the purview of an option under the second paragraph of Article 1479.


EQUATORIAL REALTY vs. MAYFAIR264 scra 482

FACTS: Petitioner Carmelo and Bauermann Inc. leased its parcel of land with 2-storey building to respondent Mayfair Theater Inc. They entered a contract which provides that if the lessor should desire to sell the leased premises, the lessee shall be given 30-days exclusive option to purchase the same. Carmelo informed Mayfair that it will sell the property to Equatorial. Mayfair made known its interest to buy the property but only to the extent of the leased premises. Notwithstanding Mayfair’s intention, Carmelo sold the property to Equatorial.

ISSUE: Whether or not the sale of the property to Equatorial is valid.

RULING: No, the sale of the property to Equatorial is not valid. The sale of the property should be rescinded because Mayfair has the right of first refusal. Both Equatorial and Carmelo are in bad faith because they knew of the stipulation in the contract regarding the right of first refusal. The stipulation is a not an option contract but a right of first refusal and as such the requirement of a separate consideration for the option, has no applicability in the instant case. The consideration is built in the reciprocal obligation of the parties. In reciprocal contract, the obligation or promise of each party is the consideration for that of the other. (Promise to lease in return of the right to first refusal). With regard to the impossibility of performance, only Carmelo can be blamed for not including the entire property in the right of first refusal. Court held that Mayfair may not have the option to buy the property, not only the leased area but the entire property.


NORKIS DISTRIBUTORS vs. CAG.R. No. 91029 February 7, 1991

FACTS: Private respondent Alberto Nepales bought from the Norkis Distributors, Inc. a brand new Yamaha Wonderbike motorcycle, which was then on display in the Norkis showroom. The Branch Manager Avelino Labajo agreed to accept the P7,500.00 price payable by means of a Letter of Guaranty from the Development Bank of the Philippines (DBP), Kabankalan. Hence, credit was extended to Nepales, and as security for the loan, he executed a chattel mortgage on the motorcycle in favor of DBP. Labajo issued the Norkis Sales Invoice perfecting the contract of sale, and Nepales signed the same to conform to the terms of the sale, while the unit remained in Norkis' possession. It was registered under Alberto Nepales’ name in the Land Transportation Commission.

The motorcycle was delivered to a certain Julian Nepales who was allegedly the agent of Alberto Nepales but the latter denies it. The record shows, however, that Alberto and Julian Nepales presented the unit to DBP's Appraiser-Investigator Ernesto Arriesta at the DBP offices in Kabankalan, Negros Occidental Branch. The motorcycle met an accident at Binalbagan, Negros Occidental while being driven by a certain Zacarias Payba. The unit was a total wreck, was returned, and stored inside Norkis' warehouse. DBP released the proceeds of private respondent's motorcycle loan to Norkis in the total sum of P7,500. As the price of the motorcycle later increased to P7,828 in March, 1980, Nepales paid the difference of P328 and demanded the delivery of the motorcycle. Norkis failed to deliver the unit, and Nepales filed an action for specific performance with damages in the RTC of Himamaylan, Negros Occidental. Norkis answered that the motorcycle had already been delivered to private respondent before the accident, hence, he should bear the risk of loss or damage as owner of the unit. The lower court ruled in favor of Nepales, and the Court of Appeals affirmed the decision but deleted the award of damages "in the amount of P50.00 a day until payment of the present value of the damaged vehicle." Norkis concedes that there was no "actual" delivery of the vehicle, but insists that there was constructive delivery of the unit upon the issuance of the sales invoice, upon the registration of the unit in Nepales’ name, and upon the issuance of the official receipt.

ISSUE: Who should bear the risk of loss.

RULING: Affirming the decision of the Court of Appeals, the Supreme Court reiterated that Article 1496 of the Civil Code which provides that "in the absence of an express assumption of risk by the buyer, the things sold remain at seller's risk until the ownership thereof is transferred to the buyer," is applicable in the case at bar for there was neither an actual nor constructive delivery of the thing sold. The Court of Appeals correctly ruled that the purpose of the execution of the sales invoice and the registration of the vehicle in the name of Alberto Nepales with the Land Registration Commission was not to transfer the ownership and dominion over the motorcycle to him, but only to comply with the requirements of the DBP for processing private respondent's motorcycle loan. The circumstances in the case itself more than amply rebut the disputable presumption of delivery upon which Norkis anchors its defense to Nepales' action.


INDUSTRIAL TEXTILES vs. LPJ ENTERPRISE217 SCRA 322

FACTS: Cesar Campos, a Vice-President of petitioner Industrial Textile Manufacturing Company of the Philippines asked Lauro Panganiban, Jr., President of respondent corporation, if he would like to cooperate in an experiment to develop plastic cement bags. Consequently, Panganiban agreed to use the plastic cement bags. Petitioner delivered orders consecutively, other payments were made, thus prompting petitioner's Legal Department to send demand letters to respondent corporation. Respondent admitted its liability for the covered by the first purchase order. With respect to the second, third, and fourth purchase orders, respondent, however, denied full responsibility. Thereafter, petitioner was asked to take back the unused plastic bags. Considering however, that the bags were in the cement factory of respondent's supplier, petitioner maintained that it was respondent's obligation to return the bags to them. Apparently, this was not done and so petitioner demanded payment for the such bags. The trial court sentencing the defendant to pay. Respondent corporation's appeal was upheld by the appellate court when it reversed the trial court's decision and dismissed the case with costs against petitioner.

ISSUE: Whether or not respondent may be held liable for the plastic bags which were not actually used for packing cement as originally intended.

RULING: Yes, if the purchaser desired to incorporate a stipulation securing to him the right of return, he should have done so at the time the contract was made. On the other hand, the buyer cannot accept part and reject the rest of the goods since this falls outside the normal intent of the parties in the "on approval" situation. Finally, the conditions which allegedly govern the transaction according to respondent may not be considered. The trial court correctly observed that such conditions should have been distinctly specified in the purchase orders and respondent's failure to do so is fatal to its cause. In the light of these principles, we hold that the transaction between respondent and petitioner constituted an absolute sale. Accordingly, respondent is liable for the plastic bags delivered to it by petitioner.


RADIOWEALTH FINANCE COMPANY vs. MANUELITO PALILEOG.R. NO 83432 August 20, 1993

FACTS: Spouses Castro sold a parcel of unregistered coconut land in Surigao del Norte to Manuelito Palileo. The sale is evidenced by a notarized deed of sale and Palileo exercised acts of ownership through his mother and also paid real estate taxes. Meanwhile, a judgment over a civil case was rendered against Enrique Castro ordering him to pay 22 thousand to Radiowealth Finance Co. Pursuant to this, the provincial sheriff levied upon and sold in public auction the subject land that was previously sold to Palileo. A certificate of sale was issued in favor of Radiowealth being the lone bidder and after the expiration of the period of redemption, a deed of final sale was also executed in their favor and both deeds was registered to the Registry of Deeds

Under Act.3344 mere registration of a sale in one’s favor does not give him any right over the land if the vendor was not anymore the owner of the land having previously sold the same to somebody else even if the earlier sale was unrecorded. Article 1544 of the Civil Code has no application to land not registered under the Torrens system. It was explained that this is because the purchaser of unregistered land at a sheriffs execution sale only steps into the shoes of the judgment debtor, and merely acquires the latter's interest in the property sold as of the time the property was levied upon. As such, the execution sale of the unregistered land in favor of petitioner is of no effect because the land no longer belonged to the judgment debtor as of the time of the said execution sale.

ISSUE: Whether or not the sale in public auction is valid.

RULING: No, the sale in public auction is not valid. If Art. 1544 had been applied; the judgment should be rendered in favor of Radiowealth being the one who registered the land first. But since the subject land is an unregistered land, a different rule should apply.


CRUZ vs. CABANA29 SCRA 656 June 22, 1984

FACTS: Defendant Leodegaria Cabana sold a parcel of land with right of repurchase to defendants-spouses Teofilo Legaspi and Iluminada Cabana. A document stipulated that the land can be repurchased by the vendor within one year. Said land was not repurchased and in the meantime, however, said defendants-spouses took possession of the land. Upon request of Leodegaria Cabana, the title of the land was lent to her in order to mortgage the property to the Philippine National Bank. Said title was forthwith, deposited with the PNB. Defendant Leodegaria Cabana sold the land by way of absolute sale to the defendants-spouses. However, defendant sold the same property to plaintiff Abelardo Cruz and the latter was able to register it in his name. While the title was registered in plaintiff-appellant Cruz’s name, he knew of the sale of the land to defendants spouses Legaspi, as he was informed in the Office of the Register of Deed of Quezon.

ISSUE: Whether or not, the second buyer Cruz, being the first to register the land creates right as against the first buyer, notwithstanding his knowledge of the previous sale.

RULING: No, said respondent spouses were likewise the first to register the sale with the right of repurchase in their favor under the Register of Deeds. They could not register the absolute deed of sale in their favor and obtain the corresponding transfer certificate of title because at that time the seller’s duplicate certificate was still with the bank. But there is no question and the lower courts so found conclusively as a matter of fact, that when petitioner Cruz succeeded in registering the later sale in his favor, he knew and he was informed of the prior sale in favor of respondents spouses. The knowledge of the first sale Abelardo Cruz had gained defeats his rights even if he is first to register the second sale, since such knowledge taints his prior registration with bad faith. This is the exacted by Article 1544 of the Civil Code. Before the second buyer can obtain priority over the first, he must show that he acted in good faith throughout from the time of acquisition until the title is transferred to him by registration or failing registration, by delivery of possession. The second buyer must show continuing good faith and innocence or lack of knowledge of the first sale until his contract ripens into full ownership through prior registration as provided by law. Respondent appellate court correctly held that such knowledge of a prior transfer of a registered property by a subsequent purchaser makes him a purchaser in bad faith and his knowledge of such transfer vitiates his title acquired, by virtue of the latter instrument of conveyance which creates no right as against the first purchaser.


NAVAL VS CA483 SCRA 102

FACTS: Ildefonso A. Naval sold a parcel of land to Gregorio B. Galarosa. The sale was recorded in the Registry of Property of the Registry of Deeds. Subsequently, Gregorio sold portions of the land to respondents Conrado Rodrigo Balilla, Jaime Nacion, and spouses Ireneo and Ester Moya and Juanito Camalla. All buyers occupied the portion they bought, built improvements thereon, and paid the taxes due thereto. The controversy arose when petitioner Juanita Naval, the great granddaughter of Ildefonso, was issued by the Register of Deeds an Original Certificate of Title of the subject land. She claimed that she bought the subject land from Ildefonso. Petitioner filed a complaint for recovery of possession against Bartolome Aguirre, Conrado Balila, Ireneo Moya, Jaime Nacion and Domingo Nacion. However, the case was dismissed. Petitioner re-filed the complaint for recovery of possession with damages before the MCTC against Juanita Camalla, Diosdado Balila, Conrado Balila, Forferia Aguirre, Jaime Nacion and Ester Moya. After trial, the MCTC rendered its decision, in favor of plaintiff Juanita Naval. Respondents thereafter elevated the case to the Court of Appeals. Finding the prior registration of the deed of sale between Ildefonso and Gregorio with the Register of Deeds as a constructive notice to subsequent buyers, the appellate court reversed the decision of the RTC.

ISSUE: Who have the superior right over the parcel of land sold.

RULING: Respondents, still have superior right over the disputed property, even if petitioner argues that she purchased and registered the subject land in good faith and without knowledge of any adverse claim thereto. Supreme Court held in Rayos v. Reyes “The issue of good faith or bad faith of the buyer is relevant only where the subject of the sale is registered land and the purchaser is buying the same from the registered owner whose title to the land is clean x x x in such case the purchaser who relies on the clean title of the registered owner is protected if he is a purchaser in good faith for value.” Since the properties in question are unregistered lands, petitioners as subsequent buyers thereof did so at their peril. Their claim of having bought the land in good faith, i.e., without notice that some other person has a right to or interest in the property, would not protect them if it turns out, as it actually did in this case, that their seller did not own the property at the time of the sale. In the case at bar, since Ildefonso no longer owned the subject land at the time of the sale to the petitioner, he had nothing to sell and the latter did not acquire any right to it. Even if we apply Article 1544, the facts would nonetheless show that respondents and their predecessors-in-interest registered first the source of their ownership and possession, i.e., the 1969 deed of sale, and possessed the subject land at the earliest time. Applying the doctrine of “priority in time, priority in rights” or “prius tempore, potiorjure,” respondents are entitled to the ownership and possession of the subject land. WHEREFORE, in view of the foregoing, the petition is DENIED.


ADELFA PROPERTIES INC VS CA, ROSARIO JIMENEZ CASTANEDA AND SALUD JIMENEZG.R. No. 111238 January 25, 1995

FACTS: Rosario Jimenez-Castaneda, Salud Jimenez and their brothers, Jose and Dominador Jimenez, were the registered co-owners of a parcel of land. Jose and Dominador Jimenez sold their share consisting of 1/2 of said parcel of land, specifically the eastern portion thereof, to Adelfa Properties.” Subsequently, a “Confirmatory Extrajudicial Partition Agreement” was executed by the Jimenez’s, wherein the eastern portion of the subject lot, was adjudicated to Jose and Dominador Jimenez, while the western portion was allocated to Rosario and Salud Jimenez. Thereafter, Adelfa Properties expressed interest in buying the western portion of the property from Rosario and Salud. Before Adelfa Properties could make payment, it received summons, together with a copy of a complaint filed by the nephews and nieces of Rosario and Salud against the latter, Jose and Dominador Jimenez, and Adelfa Properties in the RTC, for annulment of the deed of sale in favor of Household Corporation and recovery of ownership of the property. Rosario and Salud sent Francisca Jimenez to see Atty. Bernardo, in his capacity as Adelfa Properties’ counsel, and to inform the latter that they were cancelling the transaction. Adelfa Properties was willing to pay the purchase price, and he requested that the corresponding deed of absolute sale be executed. This was ignored by Rosario and Salud. Jimenez’ counsel sent a letter to Adelfa Properties enclosing therein a check for representing the refund of 50% of the option money paid under the exclusive option to purchase. Rosario and Salud Jimenez filed Civil Case in the RTC for annulment of contract with damages, praying, among others, that the exclusive option to purchase be declared null and void; that Adelfa Properties be ordered to return the owner’s duplicate certificate of title; and that the annotation of the option contract on TCT be cancelled.

ISSUE: Whether or not the contract is a Contract of Sale, Option Contract or Contract to Sell.

RULING: The alleged option contract is a contract to sell, rather than a contract of sale. The distinction between the two is important for in 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 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. That the parties really intended to execute a contract to sell is bolstered by the fact that the deed of absolute sale would have been issued only upon the payment of the balance of the purchase price, as may be gleaned from Adelfa Properties’ letter wherein it informed the vendors that it “is now ready and willing to pay you simultaneously with the execution of the corresponding deed of absolute sale.” The important task in contract interpretation is always the ascertainment of the intention of the contracting parties and that task is to be discharged by looking to the words they used to project that intention in their contract, all the words not just a particular word or two, and words in context not words standing alone. Moreover, judging from the subsequent acts of the parties which will hereinafter be discussed, it is undeniable that the intention of the parties was to enter into a contract to sell. In addition, the title of a contract does not necessarily determine its true nature. Hence, the fact that the document under discussions entitled “Exclusive Option to Purchase” is not controlling where the text thereof shows that it is a contract to sell.


LUZON BROKERAGE VS MARITIME G.R. No. L-25885 November 16, 1978

FACTS: Myers Building Co., Inc., owner of three parcels of land, together with the improvements thereon, entered into a contract entitled "Deed of Conditional Sale" in favor of Maritime Building Co., Inc., whereby the former sold the same to the latter this price was paid upon the execution of the said contract and the parties agreed that the balance was to be paid in monthly installments until the same was fully paid. . Myers reserved the right to cancel contract in case of Maritime’s failure to pay installments. Maritime failed to pay, hence, Myers cancelled the contract. The Maritime Building Co., Inc. now contends (1) that the Myers Building Co., Inc. cannot cancel the contract entered into by them for the conditional sale of the properties in question extrajudicially and (2) that it had not failed to pay the monthly installments due under the contract and, therefore, is not guilty of having violated the same. The trial court found the position of Schedler indefensible, and that Maritime, by its failure to pay, committed a breach of the sale contract; that Myers Company, from and after the breach, became entitled to terminate the contract, to forfeit the installments paid, as well as to repossess, and collect the rentals of, the building from its lessee, Luzon Brokerage Co. Myers duly appealed to this Court.

ISSUE: Whether or not the contract between the parties is of a contract of sale or contract to sell.

RULING: It is a contract to sell, not of sale. When payment was not made, contract of sale was not perfected. The distinction between contracts of sale and contract to sell with reserved title has been recognized by this Court in repeated decisions upholding the power of promisors under contracts to sell in case of failure of the other party to complete payment, to extrajudicially terminate the operation of the contract, refuse conveyance and retain the sums or installments already received, where such rights are expressly provided for, as in this case.


AYALA vs. ROSA DIANA REALTY346 SCRA 663

FACTS: Appellant-petitioner entered into a transaction with Manuel Sy and Sy Ka Kieng where former sold a lot. The deed of sale had some encumbrances contained in the Special Conditions of Sale (SCS) and Deed of Restrictions (DR), which should be followed by the vendees. The stipulations in the SCS are: a building proposal must be submitted to Ayala which must be in accordance with the DR, the construction of the building must be completed, and that there will be no resale of the lot. The DR specified the limits in height and floor area of the building to be constructed. However, Sy and Kieng, failed to build a building but nonetheless with the permission of Ayala, the vendees sold the lot to the respondent, Rosa Diana Realty. Respondent Company agreed to abode by the SCS and the DR stipulations. Prior to the construction, Rosa Diana submitted a building plan to Ayala complying with the DR but it also passed a different building plan to the building administrator of Makati, which did not comply with the stipulations in the DR. While the building, “The Peak,” was being constructed, Ayala filed a case praying that: 1) Rosa Diana, be compelled to comply with the DR and build the building in accordance with the building plan submitted to Ayala; or 2) on the alternative, the rescission of the deed of sale. The trial court ruled in favor of the respondent and thus, Rosa Diana was able to complete the construction of “The Peak.” Undeterred, Ayala filed before the Register of Deeds (RD) of Makati a cause of annotation lis pendens. RD refused to grant Ayala such registration for in the lower court; the case is of personal action for a specific performance and/or rescission. However, the Land Registration Authority (LRA) reversed RD’s ruling. The appellate court upheld the RD’s ruling stating that the case before the trial court is a personal action for the cause of action arises from the alleged violation of the DR. The trial court sustained the respondent’s point saying that Ayala was guilty of abandonment a n d / o r e s t o p p e l s d u e t o i t s f a i l u r e t o e n f o r c e t h e t e r m s o f t h e D R a n d S C S against Sy and Kieng. Ayala discriminately chose which obligor would be made to follow certain conditions, which is not fair and legal. On appeal, the CA affirmed the lower court’s ruling. Hence, this petition.

ISSUE: Whether or not Rosa Diana committed a breach of contract.

RULING: Yes, the Supreme Court ruled that Rosa Diana committed a breach of contract by submitting a building plan to Ayala complying with the DR and submitting a different building plan to the building administrator of Makati, which did not comply with the stipulations in the DR. Contractual Obligations between parties have the force of law between them and absent any allegation that the same are contrary to law, morals, good customs, public order or public policy, they must complied with in good faith. Thus, the assailed decision of the Court of Appeals is reversed and set aside.


ASTORGA vs. CA133 SCRA 748

FACTS: Lucila Dableo, a widow, sold a lot to the spouses Concordia Astorga and Francisco Astorga The sale was not registered immediately because the owner's duplicate was in Lucila's possession was lost. The sale to the Astorgas was registered and was issued to them. The Astorga spouses took possession of the lot. On the other hand, the spouses Concepcion Abaluyan and Froilan Montaño allegedly bought from the spouses Lucila Dableo and Vicente Esperas Montaño was a compadre of Lucila. The deed was notarized only on February 21, 1957. It was registered only in 1968, or more than eleven years after it was notarized. The delay was not explained. Montaño filed an action for forcible entry in the city court gainst the Astorga spouses. City Judge concluded that the Astorga spouses are the owners of lot. He dismissed the case because he found that the Astorga spouses had prior possession of the lot and that Montaño never had possession thereof. Montaño appealed to the Court of First Instance which affirmed the dismissal. On motion for reconsideration, the trial court set aside its decision and ordered Montaño to implead Dableo. The complaint was amended. Dableo was declared in default. After hearing, ordered the Astorgas and Dableo to vacate. Montaño was placed in possession of the lot. The Astorgas appealed to the Court of Appeals.

ISSUE: Whether or not the sale to petitioner Astorgas or the sale of respondent Monaño should prevail.

RULING: The sale by Lucila Dableo to the Astorga spouses should prevail because the Astorga spouses acquired ownership over the disputed lot since they were the first to register in good faith their sale in the registry of property. Lucila Dableo delivered to them the reconstituted owner's duplicate. Under article 1544 of the Civil Code Article 1544: If the same things should have been sold to different vendees, the ownership shall be transferred to the person who may have first taken possession thereof in good faith, if it should be movable property. Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith recorded it in the Registry of Property. Should there be no inscription, the ownership shall pertain to the person who in good faith was first in possession; and in the absence thereof, to the person who presents the oldest title, provided there is good faith.


Carbonel vs CA 89 SCRA 99

FACTS: Petitioner Carbonell lives in an adjoining lot owned by Respondent Poncio, latter’s lot is mortgaged in favor of Republic Savings Bank. Petitioner and another Respondent (Infante) offered to buy the land owned by Poncio. Which Poncio, in his failure to pay the mortgaged agreed for the petitioner to buy the land including his house on the condition that from the purchase price would come the money to be paid to the bank. Both parties settled the arrears of the mortgaged. However, Petitioner only have P200.00 as per respondent’s information that he only owes the same to the bank. Respondent then withdrew the deficit amount and was reimbursed by Carbonell the following day. The parties executed a document stipulating that, Poncio may still occupy the land sold by him to the petitioner and if after a year, he still can’t find a place to move, that he shall pay rent in favor of the petitioner. Subsequently, Poncio had told Carbonell that the former can no longer pursue with the sale for he had given the land to Infante, to which he cannot withdraw even if he goes to jail. The lot was fenced by Infante. Atty. Jose Garcia advised her to present an adverse claim over the land in question with the Office of the Register of Deeds of Rizal. Poncio, admittedly sold the land to Infante when she improved her offer. With the information that the land was not yet registered, Atty. Garcia in favor of the petitioner prepared an adverse claim over the property. Whereby upon registration of the same by Infante, the said adverse claim was noted in the Transfer Certificate of Title. Petitioner filed a second complaint, alleging that the sale between Poncio and Infante be declared null and void. Respondent’s allegation was that, Petitioner’s claim was unenforceable for lack of written document. Trial Court ruled that the second sale was null and void. However, after re-trial, Trial Court reversed it’s decision ruling that the claim of the respondents were greater than that of the petitioner. CA ruled in favor of petitioner, alleging that it has a superior right over the respondent. After a motion for reconsideration CA reversed its decision.

ISSUE: Whether or not Petitioner has the superior right over the property.

RULING: Yes, petitioner has the superior right over the property. Article 1544, New Civil Code, which is decisive of this case, recites: If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first taken possession thereof in good faith, if it should movable property. Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property. Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the possession; and, in the absence thereof, to the person who presents the oldest title, provided there is good faith. When Carbonell bought the lot from Poncio, she was the only buyer thereof and the title of Poncio was still in his name solely encumbered by bank mortgage duly annotated thereon. Carbonell was not aware and she could not have been aware of any sale of Infante as there was no such sale to Infante then. Hence, Carbonell's prior purchase of the land was made in good faith. Her good faith subsisted and continued to exist when she recorded her adverse claim prior to the registration of Infantes's deed of sale. Carbonell's good faith did not cease after Poncio told her of his second sale of the same lot to Infante.


Campillo vs CA G.R. No. 56483 May 29, 1984

FACTS: Tomas de Vera was the owner of two parcels of land in Tondo, Manila. De Vera sold the lands to Simplicio Santos. Santos however did not register the sale in the Registry of Deeds, which means that the land was still under de Vera’s name. On the other hand, de Vera was indebted to Campillo. Campillo obtained a judgment for sum of money. De Vera’s 3 parcels of land, including those sold to Santos were levied in 1962 in favor of Campillo. Campillo acquired the land and he was able to have the lands be registered under his name.

ISSUE: Who has better right over the property: Santos who first bought it without registering it or Campillo who subsequently purchased it at a public auction and have it registered under his name.

RULING: Campillo has the right over the said properties. It is settled in this jurisdiction that a sale of real estate, whether made as a result of a private transaction or of a foreclosure or execution sale, becomes legally effective against third persons only from the date of its registration. Santos purchase of the two parcels of land may be valid but it is not enforceable against third persons for he failed to have it registered. Campillo is a purchaser in good faith as he was not aware of any previous sale for Santos never caused the annotation of the sale. The purchaser Campillo in the execution sale of the registered land in suit, acquires such right and interest as appears in the certificate of title unaffected by prior lien or encumbrances not noted therein. This must be so in order to preserve the efficacy and conclusiveness of the certificate of title which is sanctified under our Torrens system of land registration.

sales (case digest).doc

Documents

sales

rosa diana

trial court

supreme court

appellate

owners duplicate

rosa diana

improvements