DEFINITION AND ELEMENTS OF A CONTRACT OF SALE

CONSENT: PERFECTED CONTRACT

CASE DIGEST IN SALES JUNE 25, 2010 BUTOY TAU KAPPA PHI FRATERNITY 2010
Art. 449. He who builds, plants or sows in bad faith on the land of another, loses what is built, planted or sown without right of indemnity.

1. SPOUSES CONSTANTE & AZUCENA FIRME vs. BUKAL ENTERPRISES G.R. No. 146608, October 23, 2003, J. Carpio Respondent, through his broker, negotiated with petitioner for the purchase of the latters property. The respondent rejected the first draft of the DoAS (Deed of Absolute Sale) because of several objectionable conditions (i.e., relocation of squatters, payment of capital gains tax). A second draft was issued by the respondent which was allegedly accepted by petitioner in view of the deletion of the previous conditions. After furnishing all necessary conditions, and paying the squatters Php60k/family; the respondent fenced the area and covered it with filling materials (approx. spent Php300k for these improvements). However, according to the petitioners, the broker of respondent (Teodoro Aviles) offered to buy the property at Php2,500/sqm instead of the agreed Php4,000/sqm; and that they are also reserving the property for their children. Finally, a third draft was presented by respondent but was again rejected by petitioner for being one-sided (mortgaging the property to the bank and use the proceeds to pay for its amortization). Meantime, the petitioner one day visited their property and discovered that there are bunkers in the property, which the respondents workers occupy. Petitioner demanded immediate removal and vacation of occupants. On trial, the complaint for specific performance and damages, which was filed by respondent, had failed because the RTC ruled in favor of petitioners. On appeal, the decision was reversed. Whether or not there was a perfected contract of sale. No. According to the SC, the records indubitably show that there was no consent on the part of the Spouses Firme, evidenced by their consistent manifestation that they rejected the provisions of the 3rd draft presented by Aviles. Also, the first 2 drafts presented by respondent show that both contain exactly the same provisions. Obviously, the respondent is a builder in bad faith; hence, an award for nominal damages (Php30k) is warranted since respondents violated the property rights of petitioner. (Article 2221 & 2222)

Art. 450. The owner of the land on which anything has been built, planted or sown in bad faith may demand the demolition of the work, or that the planting or sowing be removed, in order to replace things in their former condition at the expense of the person who built, planted or sowed; or he may compel the builder or planter to pay the price of the land, and the owner the proper rent. Under these provisions the Spouses Firme have the following options: (1) to appropriate what Bukal Enterprises has built without any obligation to pay indemnity; (2) to ask Bukal Enterprises to remove what it has built; or (3) to compel Bukal Enterprises to pay the value of the land.

CONSENT: VALIDITY OF A SALE 2. Dr. JOSE and AIDA YASON vs. ARCIAGA G.R. No. 145017, January 28, 2005, J. SandovalGutierrez In 1983, respondents (Emilio and Claudia) sold a parcel of land to herein petitioner worth Php265K, hence, a DoAS was executed. Petitioners had the DoAS registered in Makati and entrusted its registration to Jesus Medina (Php15K Capital Gains Tax). However, without their knowledge, Medina falsified the document and made it appear that the sale took place 4 years ago with the land having a market value of only Php25K. As a result, the land was then divided into 23 titles, 10 of which were already sold to third parties. Sometime in 1989, the children of respondent discovered the falsification and therefore filed a complaint with the provincial prosecutor in Makati. However, the complaint was dismissed for lack of probable cause. Undaunted, they again filed complaint for annulment of the 13 land titles. The RTC dismissed their complaint. On appeal, the 13 land titles were declared null and void being a forged document. The reason for this is that, appellants claimed that their mother (Claudia Arciaga) never gave her consent to the sale, evidenced by her ill condition and only a thumb mark was present in the DoAS at the time of its execution (same date, 13 April 1983 when Claudia died). Whether or not the sale was valid. Yes. A person is not incapacitated to enter into a contract merely because of advanced years or by reason of physical infirmities, unless such age and infirmities impair his mental faculties to the extent that he is unable to properly, intelligently and fairly understand the provisions of said contract. Respondents failed to show clear and convincing evidence that Claudia was deprived of reason or that her condition hindered

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her from freely exercising her own will at the time of the execution of the Deed of Conditional Sale. OBJECT OF SALE

CASE DIGEST IN SALES JUNE 25, 2010 BUTOY TAU KAPPA PHI FRATERNITY 2010
4. SPS BUENAVENTURA vs. COURT APPEALS G.R. No. 126376, May 20, 2003, J. Carpio

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3. HEIRS OF JUAN SAN ANDRES vs. VICENTE RODRIGUEZ G.R. No. 135634, May 31, 2000, J. Mendoza In 1964, petitioner, after selling a property to respondent worth Php2,415, executed a Deed of Sale. Upon petitioners death, his judicial administrator sent a letter to respondent and demanded the latter to vacate the portion allegedly encroached by him. On his answer, respondent alleged that apart from the 345sqm land sold to him by petitioner, the latter likewise sold to him the following day the remaining portion of the property consisting of 509sqm; and that the full amount of purchase price was to be based on the result of the survey and would be due and payable in 5 years from its execution. While the proceeding was pending, both the administrator and respondent died and were substituted by their heirs. On 1994, the RTC rendered a decision in favor of petitioners since there was no sufficient indication to identify the property subject of the sale. On appeal, the CA ruled in favor of respondents, reversing the decision of RTC. 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. Whether or not there was a valid sale. Yes. 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. Article 1458 - 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 therefore a price certain in money or its equivalent. In the case at bench, all the essential elements of a contract: consent, subject matter and consideration; were all present. However, the CA is incorrect in saying that the sale was conditional. The payment of full consideration based on survey shall be due and payable in 5 years from the execution of the formal deed of sale is only a manner by which the full consideration is to be computed and the time with in which the same is to be paid. Also, the absence of a formal deed of sale does not affect in any manner the effectivity of a contract. [Check other digest, and add more supporting doctrines] VALID CONSIDERATION

Petitioners, seek the declaration of nullity of certain deeds of sale and certificates of titles executed by their parents on behalf of their co-defendant children based on the allegations that - a. no actual valid consideration; b. under pricing of property; c. sale do not reflect true intention of party and; d. deprivation of petitioners legitime. The case was dismissed by the RTC holding that under Article 777 of the NCC, compulsory heirs have the right to a legitime but such right is contingent since said right commences only from the moment of death of the decedent. There is no legitime to speak of because the parents (defendant) are still alive. On appeal, the CA affirmed the decision. Whether or not appellants has cause of action against the appellees. No. Under the law, any person is free to dispose their properties, provided that such dispositions are not made in fraud of creditors. In the case at bench, as held by the SC in Velarde, et al. vs. Paez: The plaintiffs are not parties to the alleged deed of sale and are not principally or subsidiarily bound thereby; hence, they have no legal capacity to challenge their validity. CONTRACT TO SELL 5. SPS RAMOS vs. SPS HERUELA G.R. No. 145330, October 14, 2005, J. Carpio In 1980, a contract of conditional sale was executed by petitioner, for a sale of land, with respondents. In spite of this, 18 years after, petitioner filed a complaint for Recovery of Ownership with Damages against respondent alleging that respondents only paid P4,000 out of the P15,300 consideration. Way back 1982, the petitioners discovered that the respondents, together with spouses Pallori (daughter and son in law), erected another house on the land and refused to vacate the said property. According to the respondents, they already made down payment and monthly payment since March 1980. In 1982, they expressed their willingness to pay the remaining P11,300 but the petitioners refused their offer. The RTC ruled in favor of defendants and declared that the petitioners failed to comply with Sec. 4 of RA 6552:
SEC. 4. In case where less than two years of installments were paid, the seller shall give the buyer a grace period of not less than sixty days from the date the installment became due. If the buyer fails to pay the installments due at the expiration of the grace period, the seller may cancel the contract after thirty days

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CASE DIGEST IN SALES JUNE 25, 2010 BUTOY TAU KAPPA PHI FRATERNITY 2010
from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act.

The issues involve are whether or not the a. RA 6552 is applicable in the case (absolute sale); b. 1191 and 1592 of the NCC are applicable in the case; c. petitioners has the right to cancel the sale; d. respondents have a right to damages. According to the SC, the sale is not absolute. As held in the case of Alfonso vs. CA: It was held that the contract should not be considered as a written but an oral one; not a sale but a promise to sell; and that the absence of a formal deed of conveyance was a strong indication that the parties did not intend immediate transfer of title, but only a transfer after full payment of the price. Article 1191 and 1592 are inapplicable in the case because rescission cannot take place since there is no written contract to speak of. The applicable law is RA 6552, as stated above in Sec. 4, which should have been respected by the petitioners. However, respondents are required to pay 6% per annum on the balance of the purchase price in consonance with their breach of contract as stipulated in Article 2209 of the NCC. Lastly, the petitioners have no right to cancel the sale and at the same time the respondents have no right to damages. CONTRACT TO SELL 6. CRUZ vs. SPS FERNANDO G.R. No. 145470, December 9, 2005, J. AustriaMartinez In 1994, Respondents filed a complaint for accion publiciana against petitioner demanding the latter to vacate the premises and to pay the amount of P500 as a reasonable rental. According to respondents, they bought the land from spouses Glorioso in 1987. Prior to their acquisition, the same rear portion of the land was also offered to the petitioner through a Kasunduan but the latter refused to buy, hence, the whole property was bought by respondents. The RTC rendered a decision in favor of the respondents. On appeal, the lower courts decision was affirmed by the CA. Whether or not the Kasunduan executed by the petitioner with the Gloriosos is a perfected contract of sale. In the case at bench, the 1983 Kasunduan indicated the following conditions: that the Gloriosos agreed to sell to petitioners a portion of the property with an area of 213 meters at the price of P40.00 per square meter; . that petitioners will definitely relocate their house to the portion they bought or will buy by January 31, 1984. Hence, it is evident that the Kasunduan did not establish a definite agreement between the parties concerning the terms of payment. As held in the case of Toyota Shaw, Inc.

vs. CA a definite agreement on the manner of payment of the price is an essential element in the formation of a binding and enforceable contract of sale. Also, there is another suspensive condition yet to be consummated, as indicated in the relocation of the house of petitioner upon payment of the desired amount by January 1984. Hence, petitioners have no superior right of ownership or possession to speak of. Their occupation of the property was merely through the tolerance of the owners. The evidence on record shows that petitioners were able to live and build their house on the property through the permission and kindness of Teresita Glorioso, who was their relative. Considering that petitioners continued possession of the property has already been rendered unlawful, they are bound to pay reasonable rental for the use and occupation thereof, which in this case was appropriately pegged by the RTC at P500.00 per month beginning October 21, 1994 when respondents filed the case against them until they vacate the premises. CONTRACT TO SELL 7. URSAL vs. COURT OF APPEALS G.R. No. 142411, October 14, 2005, J. AustriaMartinez In 1985, the respondents (Spouses Moneset) executed a Contract to Sell House and Lot in favor of Winifreda Ursal with a consideration of P130K as its purchase price. After paying the down payment and six monthly installments, petitioner stopped paying due to Monesets failure to deliver to her the TCT of the property as agreed upon. Unknown to Ursal, the property was again sold by respondent to Dr. Canora; and again for the third time to Bundalo (pacto de retro) who later mortgaged the land with a Rural Bank. The property was then forclosed upon default of the Monesets, hence, Ursal filed an action for declaration of non-effectivity of mortgage and damages against the respondents. The RTC rendered a decision in favor of the bank dismissing the complaint against it but ordered the Monesets to reimburse the petitioner, including damages and the preferential right to redeem the subject house1. On appeal, the CA affirmed in toto the decision of the RTC. The main issue in the case is whether or not the real estate mortgage should have been declared noneffective and non-enforceable. No. In the case at bar, what is involve here is mortgage and not a sale. Although it was held in the case of Cruz vs. Bancom, the bank, unlike private individuals, is expected to exercise greater care and prudence in its dealings, including those involving registered lands. A banking institution is expected to exercise due diligence before entering into a mortgage contract. The 3 of 12

contract between petitioner and respondent is only a contract to sell; hence the petitioner never acquired ownership over the property. Under the law, A contract to sell is a bilateral contract whereby the prospective seller, while expressly reserving the ownership of the subject property despite delivery thereof to the prospective buyer, binds himself to sell the said property exclusively to the prospective buyer upon fulfillment of the condition agreed upon, that is, full payment of the purchase price. What the seller agrees or obligates himself to do is to fulfill his promise to sell the subject property when the entire amount of the purchase price is delivered to him.

CASE DIGEST IN SALES JUNE 25, 2010 BUTOY TAU KAPPA PHI FRATERNITY 2010

of the tenants right to purchase. The court ruled in favor of respondents and dismissed the complaint. On appeal, the decision of the lower court was affirmed. In the case at bar, the question of law is whether or not petitioners, on the basis of a verbal contract to sell by Encarnacion, obtained an enforceable right to buy Encarnacion's property superior to that of the Acebos. No. It is well established that where the seller promised to execute a deed of absolute sale upon completion of payment of the purchase price by the buyer, the agreement is a contract to sell. In contracts to sell, where ownership is retained by the seller until payment of the price in full, such payment is a positive suspensive condition, failure of which is not really a breach but an event that prevents the obligation of the vendor to convey title in accordance with Article 1184 of the Civil Code. Article 1545 of the Civil Code also provides that "where the obligation of either party to a contract of sale is subject to any condition which is not performed, such party may refuse to proceed with the contract or he may waive performance of the condition."

In contracts of sale the vendor loses ownership over the property and cannot recover it unless and until the contract is resolved or rescinded, while in contracts to sell, title is retained by the vendor until full payment of the price. As explained in Coronel vs. Court of Appeals In a contract to sell, there being no previous sale of the property, a third person buying such property despite the fulfillment of the suspensive condition such as the full payment of the purchase price, for instance, cannot be deemed a buyer in bad faith and the prospective buyer cannot seek the relief of reconveyance of the property. There is no double sale in such case. Title to the property will transfer to the buyer after registration because there is no defect in the sellers title per se, but the latter, of course, may be sued for damages (Article 1170) by the intending buyer.
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It cannot be denied however that petitioner is also not without fault. She sat on her rights and never consigned the full amount of the property. She therefore cannot ask to be declared the owner of the property especially since the same has already passed to another person by virtue of a deed of absolute sale. CONDITIONAL SALE OF PROPERTY 8. LACANILAO vs. COURT OF APPEALS G.R. No. 121200, September 26, 1996, J. Padilla Eusebio Encarnacion, herein respondent, is the owner of the land which was the subject of lease by petitioners. From 1960s to 1988, the petitioners had religiously paying the monthly rental of said land. Eventually it was sold to them by Encarnacion and agreed to execute a DoAS on June 15, 1988. However, 4 days before the said period, a fire hit the Quezon City hall and all the documents, including respondents title, went into ashes. Petitioners failed to pay the purchase price of P120K on June 15, 1988; hence the land was sold to a different buyer (Acebo) for P145K by Encarnacion. The Acebos sent a notice to the petitioners to vacate the property. Petitioners then filed a complaint for alleged violation

OBJECT OF SALE
PERFECTED CONTRACT OF SALE 1. CAVITE DEVT. BANK vs. LIM G.R. No. 131679, February 1, 2000, J. Mendoza In 1988, Respondent offered to purchase the property of CDB, which the latter acquired through a foreclosure sale from one of its mortgagee, Mr. Rodolfo Guansing. After paying the option money of P30K by the respondent, Lim discovered that the property was originally registered to Perfecto Guansing, father of Rodolfo. Petitioner failed to discover that Rodolfo fraudulently secured the TCT he submitted to the bank for his loan, hence, the land was awarded back to the father. Aggrieved, the respondent filed an action for specific performance against the bank. On March 1993, the RTC ruled in favor of Lim. On appeal, the CA affirmed the RTCs decision. Whether or not there was a perfected contract of sale. Yes. In the case at bar, there was an option contract entered by petitioner bank and respondent. A perfected option contract does not consummate the sale, however, if the option is exercised, the sale may 4 of 12

be perfected. Under Article 1482, it is clear then that the parties in this case actually entered into a contract of sale, partially consummated as to the payment of the price. The decision was then affirmed by the SC with modifications as to the award of damages for being excessive. VOID STIPULATIONS IN CONTRACTS 2. HEIRS OF SAN MIGUEL vs. COURT OF APPEALS G.R. No. 136054, September 5, 2001, J. Pardo In 1974, Respondent, Dominador San Miguel, filed a petition with the CFI to issue title over lots in dispute. However, it was declared null and void upon petition of Severina San Miguel (petitioner). In 1987, the TCT for the land was issued in the names of petitioner. From 1990-1991, several writs were returned unsatisfied. Hence, the heirs of Severina did not pursue the writs of possession and demolition, and instead entered into a compromise with Dominador. According to the compromise, the heirs were to sell the land for P1.5M with the TCT conditioned upon the purchase of another lot, which was not yet titled, at an additional sum of P300K. It was agreed that the 300K shall be fulfilled by Dominador (2) months from the date of the execution of sale, which is August 1993. 3 months after, Dominador filed a complaint with the trial court a motion to deliver the owners copy of TCT, and admitted that he did not pay the P300K for the reason that the petitioner failed to adduced proof of ownership. In time, petitioners opposed stressing the condition in the Kasunduan. The trial court and CA both ruled in favor of the respondent.

CASE DIGEST IN SALES JUNE 25, 2010 BUTOY TAU KAPPA PHI FRATERNITY 2010

Hence, the non-payment of the three hundred thousand pesos (P300,000.00) is not a valid justification for refusal to deliver the certificate of title. Besides, the P1.5M payment was for the land in dispute, not including the untitled one. Therefore, Severina's heirs are bound to deliver the certificate of title covering the lots. ASSIGNMENT OF CREDITS or INCORPOREAL RIGHTS 3. PNB vs. COURT OF APPEALS, IEI G.R. No. 118357, May 6, 1997, J. Romero Check Articles 1624 and 1625 of the NCC. Industrial Enterprises, Inc. entered a coal operating contract with BED (Bureau of Energy Devt.) pursuant to Coal Development Act of 1976.

4. HEIRS OF JUAN SAN ANDRES vs. VICENTE RODRIGUEZ G.R. No. 135634, May 31, 2000, J. Mendoza (SUPRA) FRAUD and BAD FAITH 5. SAMSON vs. COURT OF APPEALS G.R. No. 108245, November 25, 1994, J. Romero Respondent is the owner of Santos and Sons, Inc., a haberdashery store, which occupied the subject premises of a commercial unit building, for 20 years. In 1984, the owner of the building, Susana Realty Corp., informed respondents that the lease contract will expire on July. Nonetheless, the lease contract of respondent was extended until December 1984. In Feb 1985, respondent was informed, through a letter, of the increase in rentals pending renewal of his contract until the arrival of Ms. Madrigal (Owner of Susana Realty). A few days later, petitioner offered to purchase the said store. The same month, the petitioner paid half of the agreed price of P300K and agreed that the balance shall be paid upon renewal of the contract. All went well for the petitioner for a few months. In July, however, he was ordered to vacate the premises due to respondents failure in renewing his lease. Petitioner then filed an action for damages against respondent for fraud and bad faith. The RTC ruled in favor of the petitioner. On appeal, the CA modified the judgment of the RTC finding that the respondent did not exercised fraud, hence, deleting the damages and attorneys fees. Whether or not Angel Santos committed fraud or bad faith in representing petitioner that his contract of lease over the subject premises has been impliedly 5 of 12

Whether or not respondent shall be compelled to pay the P300K despite the petitioners lack of evidence of ownership. No. Under Article 1306. The contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient provided they are not contrary to law, morals, good customs, public order or public policy. To insist that Dominador pay the price of the untitled lot, would result in Severinas Heirs unjust enrichment. The essence of a sale is the transfer of title or an agreement to transfer it for a price actually paid or promised. In Nool vs. CA, if the sellers cant deliver the object of the sale to the buyer, such contract may be deemed inoperative. [Art. 1405, void contracts par. (5)] Article 1183 also provides that, Impossible conditions, those contrary to good customs or public policy and those prohibited by law shall annul the obligation which depends upon them. If the obligation is divisible, that part thereof which is not affected by the impossible or unlawful condition shall be valid.

renewed by Susana Realty. No. Under the facts proven, private respondent cannot be held guilty of fraud or bad faith when he entered into the subject contract with petitioner. The letter sent to him in Feb 1985 made respondent believed that his lease contract was impliedly renewed and that formal renewal would be made upon the arrival of Ms. Madrigal. Art 1338. In contracts, the kind of fraud that will vitiate consent is one where, through insidious words or machinations of one of the contracting parties, the other is induced to enter into a contract which, without them, he would not have agreed to. (dolo causante) It is quite obvious that the respondent did not act in Bad Faith and that there was an honest mistake on the part of Angel Santos. Also, the petitioner is also at fault for failing to exercise sufficient diligence in verifying first the status of private respondents lease. As held by this Court in the case of Caram, Jr. v. Laureta, the rule caveat emptor requires the purchaser to be aware of the supposed title of the vendor and he who buys without checking the vendor's title takes all the risks and losses consequent to such failure. CONSIDERATIONS OBLIGATIONS and FULFILLMENT OF

CASE DIGEST IN SALES JUNE 25, 2010 BUTOY TAU KAPPA PHI FRATERNITY 2010

spouses. The CA reversed and ordered the spouses to pay Tiro 79K as the remaining balance. Whether or not the deed of assignment dated February 15, 1966 and the agreement of February 28, 1966 are null and void, the former for total absence of consideration and the latter for nonfulfillment of the conditions stated therein. Yes. As found by the Court of Appeals, the true cause or consideration of said deed was the transfer of the forest concession of private respondent to petitioners for P120,000.00. The aforesaid contemporaneous and subsequent acts of petitioners and private respondent reveal that the cause stated in the questioned deed of assignment is false. It is settled that the previous and simultaneous and subsequent acts of the parties are properly cognizable indica of their true intention. 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 2nd agreement or assignment, the spouses are not liable under such, as the suspensive condition, which is the approval of the additional license, did not take place. Thus, it did not give rise to any obligation. The said agreement is a bilateral contract which gave rise to reciprocal obligations, that is, the obligation of private respondent to transfer his rights in the forest concession over the additional area and, on the other hand, the obligation of petitioners to pay P30,000.00. The demandability of the obligation of one party depends upon the fulfillment of the obligation of the other. In this case, the failure of private respondent to comply with his obligation negates his right to demand performance from petitioners. Delivery and payment in a contract of sale, are so interrelated and intertwined with each other that without delivery of the goods there is no corresponding obligation to pay. The two complement each other. 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 therefore, which had for its object the transfer of said right to petitioners, never became effective or enforceable. COMMODITY FUTURES CONTRACT

6. JAVIER vs. COURT OF APPEALS G.R. No. 48194, March 15, 1990, J. Regalado Tiro was a holder of an ordinary timber license which he had assigned to the Javier spouses in a Deed of Assignment for 120K, 20K of which was paid upon execution of the contract and 100K to be paid in installments of 10K per shipment of logs from the forest concession. Tiro had filed an application for another timber license to cover 2,000 hectares of the adjoining land. During the pendency of the application with the Bureau of Forestry, he executed another deed of assignment in favor of the spouses; payment would be of 30,000.00php, subject to the condition that the transfer shall be executed upon approval of the application. Upon assumption of the timber license, the spouses were informed that the license was renewed, but would not be renewed again until they are able to create an organization with other adjoining timber license holders for a total of 20,000 hectares. Thus, along with de Lara, Oca and the Sanggaya Logging Comp. the spouses consolidated their licenses, which created a consolidation agreement approved by the BOF. The working unit was thereafter called the North Mindanao Timber Corporation. The spouses failed to pay the balance of the two assignment deeds, and thus, Tiro filed action in the lower court for the balances due. The lower court dismissed the complaint, and ordered Tiro to pay 33K to the

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7. ONAPAL PHIL COMMODITIES vs. COURT OF APPEALS G.R. No. 90707, February 1, 1993, J. Campos Petitioner is engaged in commodity futures trading in Cebu City. Every time a customer enters into a trading transaction with petitioner as broker, the order is communicated by telex to its principal in Hongkong. The transaction either buying or selling, once consummated the petitioner will issue a document as Confirmation of Contract and Balance Sheet. The order would then be sent from Cebu to Manila to Hongkong and finally to Commodity Futures Exchange in Japan. In 1983, private respondent, Susan Chua, was invited to invest in the commodity futures trading by depositing P500K. She was then made to sign the Trading Contract and other documents without making her aware/understand the risks involved. 2 months after, she was informed by the Account Executive to deposit an additional P300K, otherwise she would lose her original P500K deposit. Around September, the respondent was able to get only P470K out of the P800K, she realized that she was engaged in gambling, hence, she filed a case to recover the loss of P330K. The trial court and CA rendered a decision in favor of the respondent. The issue here is whether or not the respondent is entitled to recover the loss of P330K. Yes. Although it may be evident in the case that the contract signed by the respondent was valid, because it complies with the Rules and Regulations on Commodity Futures Trading as prescribed by the SEC, such contract if entered into without the intention of having any goods/commodity pass from one party to another, but with an understanding that at the appointed time, the purchaser is merely to receive or pay the difference between the contract and the market prices, is a transaction which the law will not sanction, for being illegal. Another point to discuss is whether the money of respondent was actually remitted in Hongkong and that there is an arrangement between the petitioner and the Central Bank for the purpose of remitting money abroad. It was discovered by the court that petitioner failed to prove this point. 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. ACQUISITIVE PRESCRIPTION 8. VDA. DE RIGONAN vs. DERECHO G.R. No. 159571, July 15, 2005, J. Panganiban

CASE DIGEST IN SALES JUNE 25, 2010 BUTOY TAU KAPPA PHI FRATERNITY 2010
In 1921, 5 out of the 8 heirs of Hilarion Derecho sold the subject property to Francisco Lacambra under a pacto de retro sale, subject to a five year redemption clause. 7 years after, one of the heirs, Dolores, purchased the lot and immediately occupied it. In 1980, more than 5 decades after, an Affidavit of Adjudication in favor of petitioner, Teodoro Rigonan, (Dolores Son) was executed, declaring the petitioners father (Leandro Rigonan) to be the sole heir of Hilarion. During the same year, the land was mortgaged by petitioner to a bank in Cebu. Dreading foreclosure, he sold the land in favor of Valerio Laude (also a petitioner in the case) and executed a DoAS. In 1993, respondents, as the alleged heirs of Hilarion (3 heirs, not party to the sale in 1921), brought an action with the RTC to recover the property, annul the deed and affidavit of adjudication, whose validity was assailed on the ground of fraud. RTC ruled in favor of the respondents and was affirmed by CA upon appeal. (case was reversed by sc) Whether or not the affidavit of adjudication and deed were both void; and co-ownership still subsists among the heirs of Hilarion in 1928. No. When the Rigonan bought the land from Lacambra in 1928, it was already a conveyance to the spouses in their personal capacities, not as co-owners. The parties to the contract stipulated a five-year redemption period, which expired on July 16, 1926. The failure of the sellers to redeem the property within the stipulated period indubitably vested absolute title and ownership in the vendee, Lacambra. Under a pacto de retro sale, title to and ownership of property are immediately vested in the vendee a retro, subject only to the resolutory condition that the vendor repurchases it within the stipulated period. Also, petitioners acquired title of the land by acquisitive prescription; hence they cannot recover the property despite the nullity of contracts pursuant to Article 1410 of the NCC. Even if the action does not prescribe, LACHES would bar respondents from asserting their claim. Laches is defined as the failure to assert a right for an unreasonable and unexplained length of time, warranting a presumption that the party entitled to assert it has either abandoned or declined to assert it. This equitable defense is based upon grounds of public policy, which requires the discouragement of stale claims for the peace of society. Elements present in order to use laches as a defense: (1) complaint against defendant and a remedy sought; (2) delay in the assertion of rights; (3) lack of knowledge and notice to the defendant regarding the suit; (4) injury or prejudice to the defendant.

CONTRACT OF SALE

1458

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Agency to Sell (Art. 1466) The delivery by a

principal to an agent of his property, the former being an owner, has the right to control the sale, fix the price, and terms, demand and receive the proceeds less the agents commission upon sales made. Ker & Co., Ltd. V. Lingad (1971)

petitioner for estafa. However, it was later proven that Suarez received the bracelet (P170K) from Nadera, and the later sold the ring (P169K) to another, but the check she issued in favor of Suarez had bounced due to non-payment of her buyer. Whether or not the petitioner is liable for estafa under the RPC. No. Generally, the delivery to a third person of the thing held in trust is not a defense in estafa. However, this rule has already been modified in subsequent cases. In People vs. Nepomuceno and People vs. Trinidad In cases of estafa the profit or gain must be obtained by the accused personally, through his own acts, and his mere negligence in permitting another to take advantage or benefit from the entrusted chattel cannot constitute estafa under Article 315 paragraph 1-b, of the Revised Penal Code; unless there is conspiracy with the one who carried out the misappropriation. If there is no such evidence, direct or circumstantial, and if the proof is clear that the accused herself was the innocent victim of her sub-agent's faithlessness, her acquittal is in order. Moreover, Lim is only civilly liable with respect to the ring in the amount of P169K plus 6% legal interest. CONTRACT OF AGENCY 2. LOURDES LIM vs. PEOPLE G.R. No. L-34338, November 21, 1984, J. Relova In 1966, petitioner offered to sell respondents tobacco (Maria Ayroso), and they agreed to the proposition to sell tobacco consisting of 615kg at P1.30/kg. The petitioner was to receive the overprice for which she could sell the tobacco. The total value was P799.50 and P240 was paid by petitioner to Ayroso. Demands for the payment of the balance of the value of the tobacco were made upon the appellant by Ayroso, and particularly by her sister, Salud Bantug. As no further amount was paid, the complainant filed a complaint against the appellant for estafa. The RTC and CA ruled in favor of the respondent, convicting Lim for estafa. Whether there exists a contract of agency to sell or a contract of sale. As defined under contract of agency, see ibid. there was no transfer of ownership of the goods to the petitioner. The agreement constituted her as an agent with the obligation to give something to Ayroso upon sale of the tobacco or return the tobacco if the same was not sold. Therefore, the courts ruling in convicting Lim for estafa is not to be contested. CONTRACT OF AGENCY 3. CIR vs. CTA and CONSTANTINO G.R. No. L-25926, February 27, 1970, J. Reyes

Contract for Piece of Work (Arts. 1467, 1713

to 1715) - Under Art. 1467, what determines whether the contract is one of work or of sale is whether the thing has been manufactured specially for the customer and upon his special order. If the thing is specially done at the order of another, this is a contract for a piece of work. If the thing is manufactured or procured for the general market in the ordinary course of business, it is a contract of sale. To Tolentino, the distinction depends on the intention of parties: if parties intended that at some future date an object has to be delivered, without considering the work or labor of the party bound to deliver, the contract is one of sale. But if one of the parties accepts the undertaking on the basis of some plan, taking into account the work he will employ personally or through another, there is a contract for a piece of work.

Barter or Exchange (Arts. 1468, 1638 to 1641)

it shall be considered a barter if the value of the thing given as a part of the consideration exceeds the amount of the money or its equivalent.; By a contract of barter or exchange, one of the parties binds himself to give one thing in consideration of the others promise to give another thing. Failure of one party to prove ownership of the thing promised, or one who loses the thing through eviction is entitled to recover what he has given and has the right to damages.
Article 1458. Sale is a contract by which one of the contracting parties obligates himself to transfer the ownership, and to deliver possession, of a determinate thing, and the other to pay therefor a price certain in money or its equivalent.

MISSAPPROPRIATION IN SALE 1. ROSA LIM vs. COURT OF APPEALS G.R. No. 102784, April 7, 1997, J. Hermosisima In 1987, petitioner was introduced by her friend Aurelia Nadera with herein respondent. They entered into an agreement with respondent (Victoria Suarez) in selling 2 pieces of jewelry worth P339K. Subsequently, Lim became uninterested with the agreement, hence returned the jewelry to Nadera as agreed upon by the parties. Suarez filed a complaint against Lim for estafa against petitioner. The RTC and CA ruled in favor of Suarez, convicting the

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Respondent, Cirilio D. Constantino, is engaged in the business of selling trucks, machineries, equipment and spare parts shipped to him by IHM (Intl. Harvester, Macleod Inc.) He is designated as the exclusive dealer of the company. After an assessment conducted by CIR against respondent, the latter protested the assessment on the ground that he is not a commercial broker. Upon his reversal by the Tax Court, the CIR Commissioner interposed the present appeal. The issue here is whether the relationship between IHM and the respondent is one of principal and agent, as maintained by the Commissioner, or one of vendor and vendee, as maintained by the respondent taxpayer. A casual examination of respondent's evidence may give the impression that this relationship with the company is that of vendor and vendee, but a closer look into the actual legal effect of the terms and conditions embodied, rather than the names of the contracts used or the terminologies employed, in the chain of documents shows that the relation between the company and the respondent is one of principal and agent. It is proven that the dealer (respondent) merely collects and holds the proceeds in trust, and title to goods still belongs to IHM and not the dealer. Also, the effect of the arrangement in the so called Retail Financing Agreement of the dealer is that it is the very customer who buys on credit because the purchase money comes from him, not the dealer, and the credit that is financed is the credit of the customer, not that of the dealer. Although it is expressly provided in the agreement between the respondent and IHM that the former is not the companys agent, it is evident in the case that the function of respondent is one of a dealer. PIECE OF WORK and WARRANTY AGAINST HIDDEN DEFECTS 4. ENGINEERING and MACHINERY CORP. vs. CA G.R. No. 52267, January 24, 1996, J. Panganiban

CASE DIGEST IN SALES JUNE 25, 2010 BUTOY TAU KAPPA PHI FRATERNITY 2010

having been decreed back to Almeda, he re-acquired possession sometime in 1971. It was then that he learned from some NIDC employees of the defects of the air-conditioning system of the building. Almeda discovered the defects of the system and concluded that it was not capable of maintaining the desired room temperature of 76F 2F. On the basis of this report, Almeda filed on 8 May 1971 an action for damages against the Corporation with the then CFI Rizal (Civil Case 14712). The complaint alleged that the air-conditioning system installed by the Corporation did not comply with the agreed plans and specifications, hence, Almeda prayed for the amount of P210,000.00 representing the rectification cost, P100,000.00 as damages and P15,000.00 as attorneys fees. The Corporation moved to dismissed the case, alleging prescription, but which was denied by the Court. The trial court rendered a decision, which ordered the Corporation to pay Almeda the amount needed to rectify the faults and deficiencies of the air-conditioning system installed by the Corporation in Almedas building, plus damages, attorneys fees and costs). Petitioner appealed to the Court of Appeals, which affirmed the decision of the trial court. The Supreme Court denied the petition and affirmed the decision assailed; without costs. Under the law, A contract for a piece of work, labor and materials may be distinguished from a contract of sale by the inquiry as to whether the thing transferred is one not in existence and which would never have existed but for the order of the person desiring it . The contract in question is one for a piece of work. It is not the Corporations line of business to manufacture airconditioning systems to be sold off-the-shelf. Check Article 1715 of the NCC. The remedy against violations of the warranty against hidden defects is either to withdraw from the contract (rehibitory action) or to demand a proportionate reduction of the price (accion quanti minoris), with damages in either case. While it is true that Article 1571 of the Civil Code provides for a prescriptive period of six months for a rehibitory action, said rule may be applied only in case of implied warranties; and where there is an express warranty in the contract, the prescriptive period is the one specified in the express warranty, and in the absence of such period, the general rule on rescission of contract, which is four years (Article 1389, Civil Code) shall apply. CONTRACT of PIECE OF WORK 5. DEL MONTE vs. ARAGONES G.R. No. 153033, June 23, 2005, J. Carpio-Morales

In 1962, Engineering and Machinery Corporation (the Corporation) entered a contract with Almeda, the former to fabricate, furnish and install the airconditioning system in the latters building along Buendia Avenue, Makati in consideration of P12,000.00. The Corporation was to furnish the materials, labor, tools and all services required in order to so fabricate and install said system. The system was completed in 1963 and accepted by Almeda, who paid in full the contract price. In 1965, Almeda sold the building to the National Investment and Development Corporation (NIDC). The latter took possession of the building but on account of NIDCs noncompliance with the terms and conditions of the deed of sale, Almeda was able to secure judicial rescission thereof. The ownership of the building

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In 1988, petitioner (DMPI) entered into an agreement with MEGA-WAFF for the installation of modular pavement that shall be completed 60 days from signing of the agreement. To supply the concrete blocks needed by the company, MEGA-WAFF (contractor) executed Supply Agreement with respondent, represented by Napoleon Aragones (supplier). The supplier shall provide the contractor with all labor, materials, equipment etc. costing at P7.00 per unit piece of hollow blocks. However, the obligations was not met by MEGA-WAFF, hence the respondent got wind up in the dispute between DMPI and MEGA. Aragones failed to collect from MEGA the full payments of concrete blocks, therefore, went directly to DMPI and advising it to pay to him directly the unpaid obligation of MEGA. However, the petitioner, instead of following Aragones advice, sent a check to MEGA representing its balance to the latter. Respondent was prompted to file a case for sum of money with damages against petitioners contending that it was liable to him, who put labor upon and furnished materials for a piece of work. The RTC and CA ruled in favor of respondent. The SC also denied the petition. Whether or not the Supply Agreement between MEGA and Aragones was a contract of sale. No. The contract was decidedly a Piece of Work, under Article 1467., A contract for the delivery at a certain price of an article which the vendor in the ordinary course of his business manufactures or procures for the general market, whether the same is on hand at the time or not, is a contract of sale, but if the goods are to be manufactured specially for the customer and upon his special order, and not for the general market, it is a contract for a piece of work. Also, ART. 1729 states that: Those who put their labor upon or furnish materials for a piece of work undertaken by the contractor have an action against the owner up to the amount owing from the latter to the contractor at the time the claim is made. In addition, ACT 3959, requires contractor to file bonds guaranteeing payment to laborers. Lastly, as held in the case of Velasco v. CA, a constructive vinculum or contractual privity was created between petitioner and Aragones, by way of exception underlying the principle of nontransmissible rights in contracts (Art 1311). BARTER AGREEMENT 6. TAN QUETO vs. COURT OF APPEALS G.R. No. L-35648, May 16, 1983, J. Abad Santos

CASE DIGEST IN SALES JUNE 25, 2010 BUTOY TAU KAPPA PHI FRATERNITY 2010

PRICE OR CONSIDERATION of THE CONTRACT OF SALE

MANNER OF PAYMENT OF PRICE 1. BOSTON BANK (fr. Bank of Commerece) vs. MANALO G.R. No. 158149, February 9, 2006, J. In 1967, the Xavierville Estates, Inc. (XEI) executed a Deed of Sale of Real Estate with The Overseas Bank of Manila (OBM), subject to the approval of its Board of Directors, and was covered by real estate mortgage in favor of PNB and Central Bank. In 1972, the president of XEI, Emerito Ramos, Jr. contracted the service of respondent, Engr. Carlos Manalo, Jr., who was in the business of drilling deep water wells and installing pumps under the business name Hurricane Commercial, Inc. After installing a water pump at Ramos residence, respondent proposed to XEI, through Ramos, to purchase lot in Xavierville and offered as down payment the P34K Ramos owed him. The spouses Manalo, after choosing lots 1 and 2 of block 2 then constructed a house and installed fence around the perimeter of their chosen lot. After resumption of office by XEI, respondent refused to pay the balance of the down payment because Ramos failed to prepare the Contract of Conditional Sale. On August 1973, the respondent received a statement of account showing their balances and plus interest. On January 1974, another SOA was received by the respondent, inclusive of interest of the purchase price of the lots. In 1976, Manalo constructed a business sign in the sidewalk near his house but was ordered to remove said sign on the ground the the sidewalk was not part of the land. Subsequently, XEI turned its selling operation to OBM which was later acquired by Central Bank of Manila (CBM). In 1986, CBM requested the respondent (Perla Manalo) to stop any construction on the property since it was the owner of the lot and respondent had no permission for construction. After a conference meeting, it was agreed that respondent will furnish, as proof of ownership, the corresponding documents with CBM, however, she failed to do so. The respondent offered an amicable settlement with CBM, now Boston Bank, to abide by the purchase price of the property. However, petitioner bank proposed that the price of P1,500 per sqm was a reasonable starting point for negotiation of the settlement. The respondent filed a complaint for specific performance and damages against the bank and subsequently won the case, ordering the later to execute a DoAS after payment of the sum of P900K plus damages+. On appeal, the CA modified the decision of the RTC changing the price of the lot to the original price agreed upon in 10 of 12

7. TAN QUETO vs. COURT OF APPEALS G.R. No. L-35648, February 27, 1987, J. Paras

1972 plus interest of 12% per annum from September 1972, deleting the award for damages. SC reversed the decision and ordered the RTC to dismiss the complaint.

CASE DIGEST IN SALES JUNE 25, 2010 BUTOY TAU KAPPA PHI FRATERNITY 2010

Whether there was a perfected contract of sale or contract to sell between the parties. No. According the the SC, if a material element of a contemplated contract is left for future negotiations, the same is too indefinite to be enforceable. And when an essential element of a contract is reserved for future agreement of the parties, no legal obligation arises until such future agreement is concluded. For a perfected contract of sale or contract to sell to exist in law, there must be an agreement of the parties, not only on the price of the property sold, but also on the manner the price to be paid by the vendee. It is not enough for the parties to agree on the price of the property. The parties must also agree on the manner of payment of the price of the property to give rise to a binding and enforceable contract of sale or contract to sell. This is so because the agreement as to the manner of payment goes into the price, such that a disagreement on the manner of payment is tantamount to a failure to agree on the price. CONTRACT OF ADHESION 2. SERRA vs. COURT OF APPEALS G.R. No. 103338, January 4, 1994, J. Petitioner Federico Serra, owner of a lot, and private respondent Rizal Commercial Banking Corporation (RCBC) entered into a "Contract of Lease with Option to Buy" in May 25, 1975 which provided that Serra will lease the subject land to RCBC for a period of 25 years from June 1, 1975 to June 1, 2000, that the RCBC has the option to purchase the same at P210.00 per square meter within a period of 10 years from May 25, 1975, the date of the signing of the Contract, and that Serra will have to register said land under the Torrens System to the Register of Deeds of Province of Masbate within the same 10year option period. Pursuant to said contract, RCBC constructed improvements on the subject land to house its branch office, while the petitioner had the property, within 3 years from 1975, duly registered with OCT No. 0-232 under the Torrens System. RCBC informed petitioner of its intention to buy the property but petitioner replied that he is no longer selling the property. RCBC then filed an action for specific performance and damages against Serra in March 1985 alleging that during the negotiations it made clear to petitioner that it intends to stay permanently on property once its branch office is opened unless the exigencies of the business requires otherwise. Although finding that the contract was valid, the lower court ruled that the

option to buy is unenforceable because it lacked a consideration distinct from the price (lower than P210/sqm) and RCBC did not exercise its option within the reasonable time. Upon motion for reconsideration, however, the lower court reversed itself on the 2nd issue, declared the contract as valid, and ordered Serra to deliver the proper deed of sale to RCBC. The Court of Appeals likewise affirmed said decision. The Supreme Court affirmed the appellate courts decision. Whether or not there was a valid contract of lease with option to buy between the parties. Was there a consideration distinct from the price to support the option given to RCBC? Yes. The contract of "LEASE WITH OPTION TO BUY" between petitioner and respondent bank is valid, effective and enforceable; the price being certain and that there was consideration distinct from the price to support the option given to the lessee. Accordingly, a contract of adhesion is one wherein a party, usually a corporation, prepares the stipulations in the contract, while the other party merely affixes his signature or his "adhesion" thereto. These types of contracts are as binding as ordinary contracts because in reality, the party who adheres to the contract is free to reject it entirely. In the case at bar, the Supreme Court did not find the situation to be inequitable because petitioner is a highly educated man, who, at the time of the trial was already a CPA-Lawyer. It is evident that a man of his stature should have been more cautious in transactions he enters into, particularly where it concerns valuable properties. Also, in the present case, the consideration is even more heavy on the part of the lessee since it entails transferring of the building and/or improvements on the property to petitioner, should respondent bank fail to exercise its option within the period stipulated. CONVENTIONAL REDEMPTION 3. ABAPO vs. COURT OF APPEALS G.R. No. 128677, March 2, 2000, J. De Leon In 1967, petitioner siblings Santiago and Crispula Abapo executed a contract; a Deed of Sale under Pacto de Retro sold for P500 with right to repurchase after 5 years, with Teodolfo Quimada. More than 7 years after, Quimado sold the land back to Crispula and her husband Pedro Bacalso. The spouses Bacalso had possession, enjoyed the fruits of the land and paid the corresponding real estate taxes thereon to the exclusion of Santiago Abapo. In 1990, Santiago instituted a petition for reconstitution of title which was later granted. Upon discovery by Crispula, she instituted a complaint for Quieting of Title with Damages. The trial court ruled in favor of respondents, declaring her as the absolute owner of

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the property. On appeal, the challenged decision was affirmed by the CA. The SC denied the petition.

CASE DIGEST IN SALES JUNE 25, 2010 BUTOY TAU KAPPA PHI FRATERNITY 2010

Whether or not the contract entered in 1967 may be considered as an equitable mortgage in view of the unusually inadequate consideration pursuant to Article 1602 of the NCC. No. In the case at bench, the price of P500 is not unusually inadequate. The extant record reveals that the assessed value of the land in dispute in 1970 was only P400. Thus, at the time of sale in 1967 the price of P500 is indisputably over and above the assessed value of P400. Besides, the mere fact that the price is inadequate does not per se support the conclusion that the contract was a loan or that the property was not at all sold to Teodulfo Quimada. The price fixed in a sale with right to repurchase is not necessarily the true value of the land sold. The rationale is that the vendor has the right to repurchase the land. It is the practice to fix a relatively reduced price, although not a grossly inadequate one, in order to afford the vendor a retro every facility to redeem the land. Thus, inadequacy of price is not sufficient to set aside a sale unless it is grossly inadequate or purely shocking to the conscience. 4. BRAVO-GUERRERO vs. BRAVO G.R. No. 152658, July 9, 2005, J.

5. RAMOS vs. HEIRS OF RAMOS G.R. No. 14048, April 25, 2002, J.

6. MODINA vs. COURT OF APPEALS G.R. No. 10935, October 29, 1999, J.

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