1

RA 386

Cases: Effect of offer and counter-offer

Manila Metal Container Corporation v. PNB, GR No. 166862, Dec. 20, 2006
Facts: To secure a loan it had obtained from PNB, petitioner executed a real estate mortgage over the lot. Petitioner executed an Amendment of Real Estate Mortgage over its property. Petitioner secured another loan from PNB, payable in quarterly installments of P32,650.00, plus interests and other charges. PNB filed a petition for extrajudicial foreclosure of the real estate mortgage and sought to have the property sold at public auction and was declared the winning. The Certificate of Sale issued in its favor was registered and was annotated at the dorsal portion of the title on February 17, 1983. Thus, the period to redeem the property was to expire on February 17, 1984. Petitioner reiterated its request for a one year extension from February 17, 1984 within which to redeem/repurchase the property on installment basis. It reiterated its request to repurchase the property on installment. Meanwhile, some PNB personnel informed petitioner that as a matter of policy, the bank does not accept "partial redemption." Since petitioner failed to redeem the property, the Register of Deeds issued a new title in favor of respondent PNB. Petitioner's offers had not yet been acted upon by respondent PNB. SAMD recommended to the management of respondent PNB that petitioner be allowed to repurchase the property for P1,574,560.00. PNB management informed petitioner that it was rejecting the offer and the recommendation of the SAMD. (Gracies Note: In a nutshell, there was a series of offers and counter-offers.) Petitioner filed a complaint against PNB for "Annulment of Mortgage and Mortgage Foreclosure, Delivery of Title, or Specific Performance with Damages." PNB averred that it had acquired ownership over the property after the period to redeem had elapsed. It claimed that no contract of sale was perfected between it and petitioner after the period to redeem the property had expired. Issue: whether or not the offer and counter-offer resulted to a perfected contract of sale Ruling: There was NO perfected contract of sale between the parties. A contract is a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service.41 Under Article 1318 of the New Civil Code, there is no contract unless the following requisites concur: (1) Consent of the contracting parties; (2) Object certain which is the subject matter of the contract; (3) Cause of the obligation which is established. Contracts are perfected by mere consent. Once perfected, they bind other contracting parties and the obligations arising have the form of law between the parties and should be complied with in good faith. The parties are bound not only to the fulfillment of what has been expressly stipulated but also to the consequences which, according to their nature, may be in keeping with good faith, usage and law. By the contract of sale, one of the contracting parties obligates himself to transfer the ownership of and deliver a determinate thing, and the other to pay a price certain in money or its equivalent. The absence of any of the essential elements will negate the existence of a perfected contract of sale. In Boston Bank of the Phils. v. Manalo: A definite agreement as to the price is an essential element of a binding agreement to sell personal or real property because it seriously affects the rights and obligations of the parties. Price is an essential element in the formation of a binding and enforceable contract of sale. The fixing of the price can never be left to the decision of one of the contracting parties. But a price fixed by one of the contracting parties, if accepted by the other, gives rise to a perfected sale. A contract of sale is consensual in nature and is perfected upon mere meeting of the minds. When there is merely an offer by one party without acceptance of the other, there is no contract. When the contract of sale is not perfected, it cannot serve as a binding juridical relation between the parties. The stages of a contract of sale are as follows: (1) negotiation; (2) perfection; and (3) consummation.

TITLE VI - SALES CHAPTER 1 NATURE AND FORM OF THE CONTRACT

Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent. A contract of sale may be absolute or conditional. (1445a)

I. Nature and Characteristics A. Definition 1. Sale is a contract where one party (seller or vendor) obligates himself to transfer the ownership of and to deliver a determinate thing, while the other party (buyer or vendee) obligates himself to pay for said thing a price certain in money or its equivalent. CONTRACT OF SALE an agreement whereby a party called the SELLER of VENDOR obligates himself to deliver and transfer the ownership of a determinate thing to another party called the BUYER OR VENDEER who in turn obligates himself to pay therefore, a price certain in money or its equivalent to the former. A contract of sale is, under Article 1475 of the Civil Code, "perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. From that moment, the parties may reciprocally demand performance of contracts." Since there was, between the parties, a meeting of minds upon the object and the price, there was already a perfected contract of sale. What was, however, left to be done was for either party to demand from the other their respective undertakings under the contract. It may be demanded at any time either by the private respondents, who may compel the petitioners to pay for the property or the petitioners, who may compel the private respondents to deliver the property. (Villamor Case) B. Elements (COC) a. Essential Elements

2.

(without which there can be no valid of sale) (1) CONSENT The vendor obligates himself to transfer the ownership of and to deliver a determinate thing, and the vendee obligates himself to pay therefore a price certain in money or its equivalent. (2) OBJECT CERTAIN which is the subject matter of the contract. The object must be licit and at the same time determinate or, at least, capable of being made determinate without the necessity of a new or further agreement between the parties. *segregated/separated of the same class (3) CAUSE OF THE OBLIGATION which is established. The cause as far as the vendor is concerned is the acquisition of the price certain in money or its equivalent, while the cause as far as the vendee is concerned is the acquisition of the thing which is the object of the contract. b. Natural Elements (those which are inherent in the contract, and which in the absence of any contrary provision, are deemed to exist in the contract) 1. warranty against eviction (deprivation of the property bought) 2. warranty against hidden defects c. Accidental Elements (those which may be present or absent in the stipulation, such as the place or time of payment, or the presence of conditions)

Stages of a contract of sale: (1) negotiation, covering the period from the time the prospective contracting

parties indicate interest in the contract to the time the contract is perfected; (2) perfection, which takes place upon the concurrence of the essential elements of the sale which are the meeting of the minds of the parties as to the object of the contract and upon the price; and (3) consummation, which begins when the parties perform their respective undertakings under the contract of sale, culminating in the extinguishment thereof. A negotiation is formally initiated by an offer, which, however, must be certain. At any time prior to the perfection of the contract, either negotiating party may stop the negotiation. At this stage, the offer may be withdrawn; the withdrawal is effective immediately after its manifestation. To convert the offer into a contract, the acceptance must be absolute and must not qualify the terms of the offer; it must be plain, unequivocal, unconditional and without variance of any sort from the proposal. A qualified acceptance or one that involves a new proposal constitutes a counter-offer and a rejection of the original offer. A counter-offer is considered in law, a rejection of the original offer and an attempt to end the negotiation between the parties on a different basis. Consequently, when something is desired which is not exactly what is proposed in the offer, such acceptance is not sufficient to guarantee consent because any modification or variation from the terms of the offer annuls the offer. The acceptance must be identical in all respects with that of the offer so as to produce consent or meeting of the minds.

Toyota Shaw, Inc. v. CA, L-116650, May 23, 1995

Facts: Sosa wanted to purchase a Toyota Lite Ace. Upon contacting Toyota Shaw, Inc., he was told that there was an available unit. There they met Popong Bernardo, a sales representative of Toyota. Sosa emphasized to Bernardo that he needed the Lite Ace not later than 17 June 1989. Bernardo assured Sosa that a unit would be ready for pick up. Bernardo then signed the "Agreements Between Mr. Sosa & Popong Bernardo of Toyota Shaw, Inc." It was also agreed upon by the parties that the balance of the purchase price would be paid by credit financing through B.A. Finance, and for this Gilbert, on behalf of his father, signed the documents of Toyota and B.A. Finance pertaining to the application for financing. Sosa and Gilbert went to Toyota to deliver the downpayment of P100,000.00, but Bernardo told them that the car could not be delivered. Toyota contends that the Lite Ace was not delivered to Sosa because of the disapproval by B.A. Finance of the credit financing application of Sosa. It further alleged that a particular unit had already been reserved and earmarked for Sosa but could not be released due to the uncertainty of payment of the balance of the purchase price. Toyota then gave Sosa the option to purchase the unit by paying the full purchase price in cash but Sosa refused.

Effects of Presence, absence, incomplete elements

-when all 3 elements are present - Perfected Contract -if not present, there is no perfected contract -if all the elements are present but there is a defect/illegal, the contract is voidable/void

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After it became clear that the Lite Ace would not be delivered to him, Sosa asked that his downpayment be refunded. Toyota did so on the very same day by issuing a Far East Bank check for the full amount of P100,000.00, the receipt of which was shown by a check voucher of Toyota, which Sosa signed with the reservation, "without prejudice to our future claims for damages." Issue: whether or not there was a perfected contract of sale Rule: There is NO perfected contract of sale. . No obligation on the part of Toyota to transfer ownership of a determinate thing to Sosa and no correlative obligation on the part of the latter to pay therefore a price certain appears therein. Iloilo; pay the advertisement expenses; and to order the beds by the dozen. SC holds that since it was a contract of purchase and sale, and thus J. Parsons is not held liable for the breach of the contract. For the classification of contracts, due regard must be paid to their essential clauses. In the contract in the instant case, what was essential, constituting its cause and subject matter, was that the plaintiff was to furnish the defendant with the beds which the latter might order, at the stipulated price, and that the defendant was to pay this price in the manner agreed upon. These are precisely the essential features of a contract of purchase and sale. There was the obligation on the part of the plaintiff to supply the beds, and, on that of the defendant, to pay their price. These features exclude the legal conception of an agency or older to sell whereby the mandatary or agent receives 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, Held: That this contract is one of purchase and sale, and not of commercial agency. The agreements contained in the contract constitute, according to law, covenants of purchase and sale, and not of commercial agency. It must be understood that a contract is what the law defines it to be, and not what it is called by the contracting parties. Only the acts of the contracting parties, subsequent to and in connection with, the performance of the contract must be considered in the interpretation of the contract when such interpretation is necessary, but not when, as in the instant case its essential agreements are clearly set forth and plainly show that the contract belongs to a certain kind and not to another. In fact, not a single one of the clauses in the contact necessarily conveys the idea of an agency. The words commission on sales used mean nothing else than a mere discount on the invoice price. The word agency, also used, only expresses that the defendant was the only one that could sell the plaintiff's beds in the Visayan Islands. Adviento: If it were a contract of agency, then Parsons would be liable.

This Court had already ruled that 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. 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. Definiteness as to the price is an essential element of a binding agreement to sell personal property.

C. Characteristics a. Consensualperfected by mere consent. b. Bilateral (reciprocal)both parties are bound by obligations dependent upon each other. The power to rescind is implied, neither party incurs delay if the party does not comply, from the moment one of the parties fulfills his obligation, the default by the other begins w/out need of prior demand. c. Onerousvaluable consideration must be given in order to acquire rights. d. Nominatethe Code refers to it by special designation or name, that is, the contract of sale. e. Principalfor the contract of sale to validly exist, there is no necessity for it to depend upon the existence of another contract. f. Commutativethe values exchanged are almost equivalent to each other (general rule). By way of exception, some contracts of sale are aleatory, that is, one receives may in time be greater or smaller that what he has given, i.e. sale of genuine sweepstakes ticket. g. Delivery transfers ownership ownership does not pass until delivery.

b.

Sale vs. Lease of service or piece of work (1467)

Contract of Sale v. Contract of Services; Test. The distinction between a contract of sale and one for work, labor and materials is tested by the inquiry whether the thing transferred is one not in existence and which never would have existed but for the order of the party desiring to acquire it, or a thing which would have existed but has been the subject of sale to some other persons even if the order had not been given. If the article ordered by the purchaser is exactly such as the seller makes and keeps on hand for sale to anyone, and no change or modification of it is made at purchaser's request, it is a contract of sale even though it may be entirely made after, and in consequence of the purchaser's order for it. (Commissioner of Internal Revenue v. Engineering)

1.

D.

To differentiate sale from (Agency to Sell, Piece of Work, Barter)

Nature of transactions of company engaged in the design, supply, and installation of certain type of air conditioning system

Sale vs. Agency to sell (1466) Art. 1466. In construing a contract containing provisions characteristic of both the contract of sale and of the contract of agency to sell, the essential clauses of the whole instrument shall be considered. Art. 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. (n)

Commissioner of Internal Revenue v. Engineering Equipment and Supply Co.

Facts: Engineering Equipment and Supply Co., a domestic corporation, is engaged in the design and installation of central type air conditioning system, pumping plants and steel fabrications. CIR now denounced Engineering for tax evasion by misdeclaring its imports and failing to pay the correct percentage taxes due thereon in connivance with its foreign suppliers. The Commissioner contends that Engineering is a manufacturer and seller of air conditioning units and parts or accessories thereof and, therefore, it is subject to the 30% advance sales tax. Engineering is a contractor this subject only to the 3% tax imposed on contractors. Contract of Sale v. Contract of Services; Test. The distinction between a contract of sale and one for work, labor and materials is tested by the inquiry whether the thing transferred is one not in existence and which never would have existed but for the order of the party desiring to acquire it, or a thing which would have existed but has been the subject of sale to some other persons even if the order had not been given. If the article ordered by the purchaser is exactly such as the seller makes and keeps on hand for sale to anyone, and no change or modification of it is made at purchaser's request, it is a contract of sale even though it may be entirely made after, and in consequence of the purchaser's order for it. Engineering is a contractor rather than a manufacturer. Supply of air conditioning units to Engineer's various customers, whether the said machineries were in hand or not, was especially made for each customer and installed in his building upon his special order. The air conditioning units installed in a central type of air conditioning system would not have existed but for the order of the party desiring to acquire it and if it existed without the special order of Engineering's customer, the said air conditioning units were not intended for sale to the general public. Moreover, it advertises itself as a contractor and pays the contractor's tax for design and construction of central type air conditioning systems, and does not have ready-made air-conditioning units for sale, but must

a.

Sale vs. Agency to Sell

This is tested by the criterion that if such transfer puts the transferee in the attitude or position of an owner and makes him liable to the transferor as a debtor for the agreed price, and not merely as an agent who must account for the proceeds of a resale, the transaction is that of a sale. But if the delivery is to another, not as his property, but as the property of the principal, who remains the owner and has the right to control sales, fix the price, and terms, demand and receive the proceeds less the agent's commission upon sales made, the transaction is that of an agency to sell. Since the company retained ownership of the goods, even as it delivered possession unto the dealer for resale to customers, the price and terms of which were subject to the company's control, the relationship between the company and the dealer is one of agency. (Commissioner of Internatl Revenue v. Engineering)

design and construct each unit to meet the particular requirements of its customers, said taxpayer is considered a contractor rather than a manufacturer

for purposes of the Tax Code. Thus, such taxpayer is not a manufacturer subject to the 30% advance sales tax prescribed in Section 185 (m) in relation to Section 194 of the Tax Code, but is a contractor subject to the 3% tax imposed by Section 191 of the same Code. A taxpayer is required by law to truly declare his importation in the import entries and internal revenue declarations before it is released. Thus, by requiring its foreign supplier to change the nomenclature of air conditioning parts and accessories, and misdeclaring its importation so as to make them subject to the lower rate of 7% percentage tax under Section 186 of the Tax Code, thereby evading the payment of the 30% tax under Section 185(m) thereof, said taxpayer is subject to the payment of the 50% fraud surcharge prescribed by Section 183(a).

1. Effect of agreement for exclusive sale of beds where the other party is entitled to commission, among others
Quiroga v. Parsons Hardware Co.
Facts: A contract was executed between Quiroga and J. Parsons for the exclusive right to sell Quiroga beds in the Visayan Islands. Quiroga, says that Parsons caused a breach in the contract on through: to sell the beds at invoice price or lower; to have an establishment in

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c. Sale vs Barter (1468) Art. 1468. If the consideration of the contract consists partly in money, and partly in another thing, the transaction shall be characterized by the manifest intention of the parties. If such intention does not clearly appear, 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; otherwise, it is a sale. (1446a) -if the value of the thing is more than the value of the money or its equivalent, the contract is a barter. - If the value of the thing is less than the value of the money, then the contract is a sale. d. Sale vs. dation in payment -dation in payment implies that there is an existing obligation whereas contract of sale, there is no prior obligation. There is a pre-existing obligation to pay a sum of money which is thereby extinguished (look at pg. 9 of paras) e. Sale vs. lease of things - in that delivery in this latter contract does not involve a transfer of ownership f. Sale vs. donation- in that this latter contract is gratuitous and requires special formalities E.. PROMISE TO SELL: WHEN BINDING (Art. 1479) the owner of the property the right to sell or demand a sale. An option is not of itself a purchase, but merely secures the privilege to buy. It is not a sale of property but a sale of the right to purchase. (Eulogio v. Apeles) Test to Determine Whether a Contract is a Contract of Sale or an Option Whether or not the agreement could be specifically enforced. Effect of Breach of Promise to Buy or Sell The injured party can only seek damages. The obligation arising from the option contract are not obligations to give but to do. Acceptance of an Offer The acceptance of the offer must be unqualified and absolute in order to be binding. Policitacion a unilateral promise to buy or sell which is not accepted by the other party. It produces no legal effect. It is a mere offer, and has not been converted into any contract. 1) i. Case Eulogio v. Apeles, GR No. 167884, Jan. 20, 2009
Facts: Spouses Apeles leased the subject property to Arturo Eulogio, Enricos father. Upon Arturos death, his son Enrico succeeded as lessor of the subject property. Enrico used the subject property as his residence and place of business. Spouses Apeles and Enrico allegedly entered into a Contract of Lease with Option to Purchase involving the subject property. The contract purportedly afforded Enrico, before the expiration of the three-year lease period, the option to purchase the subject property. Before the expiration of the contract, Enrico exercised his option to purchase the subject property by communicating verbally and in writing to Luz his willingness to pay the agreed purchase price, but the spouses Apeles supposedly ignored Enricos manifestation. In a letter to Enrico, the spouses Apeles demanded that he pay his rental and that he vacates the subject property since it would be needed by the spouses Apeles themselves. Without heeding the demand of the spouses Apeles, Enrico instituted a Complaint for Specific Performance with Damages against the spouses. Issue: whether or not there was a perfected option contract. Rule: The provision on the option to purchase in the Contract is unenforceable. It is a contract by which the owner of the property agrees with another person that he shall have the right to buy his property at a fixed price within a certain time. He does not sell his land; he does not then agree to sell it; but he does sell something, i.e., the right or privilege to buy at the election or option of the other party. Its distinguishing characteristic is that it imposes no binding obligation on the person holding the option, aside from the consideration for the offer. It is also sometimes called an "unaccepted offer." The second paragraph of Article 1479 provides for the definition and consequent rights and obligations under an option contract. For an option contract to be valid and enforceable against the promissor, there must be a separate and distinct consideration that supports it. In the landmark case of Southwestern Sugar and Molasses Company v. Atlantic Gulf and Pacific Co., declared that for an option contract to bind the promissor, it must be supported by consideration. "An accepted unilateral promise" can only have a binding effect if supported by a consideration, which means that the option can still be withdrawn, even if accepted, if the same is not supported by any consideration. Without consideration that is separate and distinct from the purchase price, an option contract cannot be enforced; that holds true even if the unilateral promise is already accepted by the optionee. The consideration is "the why of the contracts, the essential reason which moves the contracting parties to enter into the contract." To support an option contract, there need not be monetary. Actual cash need not be exchanged for the option. However, by the very nature of an option contract, as defined in Article 1479, the same is an onerous contract for which the consideration must be something of value, although its kind may vary. In Contract of Lease with Option to Purchase, there was no direct evidence to prove the existence of consideration for the option contract. The only consideration agreed upon by the parties in the said Contract is the supposed purchase price for the subject property in the amount not exceeding P1.5 Million, which could not be deemed to be the same consideration for the option contract since the law and jurisprudence explicitly dictate that for the option contract to be valid, it must be supported by a consideration separate and distinct from the price. There no consideration was given by Enrico to the Spouses for the option contract. The absence of monetary or any material consideration keeps this Court from enforcing the rights of the parties under said option contract.

OPTION defined

Art. 1479: A promise to buy and sell a determinate thing for a price certain is reciprocally demandable.

An accepted unilateral promise to buy or to sell a determinate ting for a price certain is binding upon the promissory if the promise is supported by a consideration distinct from the price.
a. Bilateral The first paragraph refers to a bilateral reciprocal contract there being a promise to buy on the part of the buyer, and a promise to sell on the part of the seller. This juridical relationship is reciprocally demandable. The object is a determinate thing and the price is certain. There is no need for a condition for this bilateral promise to buy and sell. The bilateral promise gives to the contracting parties personal rights to demand fulfillment of the obligation from each other. (Borromeo v. Franco, 5 Phil 49) Hence: If bilateral --a bilateral promise to buy or to sell a certain thing for a price certain gives to the contracting parties personal rights in that each has the right to demand from the other the fulfillment of the obligation --a bilateral promise to buy and sell requires NO CONSIDERATION distinct from the selling price --only the accepted unilateral promise to buy or sell that needs consideration distinct from the selling price b. Unilateral The second paragraph refers to an accepted unilateral promise of the (1) Buyer to buy a determinate property for a price certain; or (2) Seller to sell a determinate property for a price certain.

Hence: If unilateral --the acceptance of a unilateral promise to sell must be plain, clear and unconditional. Therefore, if there is qualified acceptance with terms different from the offer there is no acceptance, that there is no promise to buy and there is no perfected sale.

ii) Remedy of Optionee for breach -Specific performance

Option Contract An optional contract is a privilege existing in one person, for which he had paid a consideration, which gives him the right to buy, for example, certain merchandise or certain specified property from another person at any time within the agreed period at a fixed price. The contract of option is a separate and distinct contract from the contract where the parties may enter into upon the consummation of the option. A consideration for an optional contract is just as important as the consideration for any other kind of contract. An option is a contract by which the owner of the property agrees with another person that the latter shall have the right to buy the formers property at a fixed price within a certain time. It is a condition offered or contract by which the owner stipulates with another that the latter shall have the right to buy the property at a fixed price within a certain time, or under, or in compliance with certain terms and conditions; or which gives to

2) Right of First Refusal Right on the part of the owner that if he decides to sell the property in the future, he would first negotiate its sale to the one he promised.
Ang Yu Asuncion vs. CA Facts: On July 29, 1987 a Second Amended Complaint for Specific Performance was filed by

Ann Yu Asuncion and Keh Tiong, et al., against Bobby Cu Unjieng, Rose Cu Unjieng and Jose Tan before the Regional Trial Court, Branch 31, Manila in Civil Case No. 87-41058, alleging, among others, that plaintiffs are tenants or lessees of residential and commercial spaces owned by defendants described as Nos. 630-638 Ongpin Street, Binondo, Manila; that they have occupied said spaces since 1935 and have been religiously paying the rental and complying with all the conditions of the lease contract; that on several occasions before

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October 9, 1986, defendants informed plaintiffs that they are offering to sell the premises and are giving them priority to acquire the same; that during the negotiations, Bobby Cu Unjieng offered a price of P6-million while plaintiffs made a counter offer of P5-million; that plaintiffs thereafter asked the defendants to put their offer in writing to which request defendants acceded; that in reply to defendant's letter, plaintiffs wrote them on October 24, 1986 asking that they specify the terms and conditions of the offer to sell; that when plaintiffs did not receive any reply, they sent another letter dated January 28, 1987 with the same request; that since defendants failed to specify the terms and conditions of the offer to sell and because of information received that defendants were about to sell the property, plaintiffs were compelled to file the complaint to compel defendants to sell the property to them. "After the issues were joined, defendants filed a motion for summary judgment which was granted by the lower court. The trial court found that defendants' offer to sell was never accepted by the plaintiffs for the reason that the parties did not agree upon the terms and conditions of the proposed sale, hence, there was no contract of sale at all. Nonetheless, the lower court ruled that should the defendants subsequently offer their property for sale at a price of P11-million or below, plaintiffs will have the right of first refusal. Issue: Whether or not there is perfected contract of sale Held: 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 sebe brought within the purview of an option under the second paragraph of Article 1479, aforequoted, or possibly of an offer under Article 1319 9 of the same Code. An option or an offer would require, among other things, 10 a clear certainty on both the object and the cause or consideration of the envisioned contract. In a right of first refusal, while the object might be made determinate, the exercise of the right, however, would be dependent not only on the grantor's eventual intention to enter into a binding juridical relation with another but also on terms, including the price, that obviously are yet to be later firmed up. Prior thereto, it can at best be so described as merely belonging to a class of preparatory juridical relations governed not by contracts (since the essential elements to establish the vinculum juris would still be indefinite and inconclusive) but by, among other laws of general application, the pertinent scattered provisions of the Civil Code on human conduct. Even on the premise that such right of first refusal has been decreed under a final judgment, like here, its breach cannot justify correspondingly an issuance of a writ of execution under a judgment that merely recognizes its existence, nor would it sanction an action for specific performance without thereby negating the indispensable element of consensuality in the perfection of contracts. 11 It is not to say, however, that the right of first refusal would be inconsequential for, such as already intimated above, an unjustified disregard thereof, given, for instance, the circumstances expressed in Article 19 12 of the Civil Code, can warrant a recovery for damages. Note: right of first refusal cannot be deemed a perfected sale because it merely pertains to a specific property w/out containing an agreement as to the price. contract. The Court reiterated the Manuel ruling in Alfonso v. Court of Appeals: . . . In Manuel, "only the price and the terms of payment were in writing," but the most important matter in the controversy, the alleged transfer of title was never "reduced to any written document. 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." Under these circumstances, the Court ruled Article 1504 of the Civil Code of 1889 (Art. 1592 of the present Code) to be inapplicable to the contract in controversy a contract to sell or promise to sell "where title remains with the vendor until fulfillment of a positive suspensive condition, such as full payment of the price. Spouses Heruela did not immediately take actual, physical possession of the land. According to the spouses Ramos, in March 1981, they allowed the niece of the spouses Heruela to occupy a portion of the land. Indeed, the spouses Ramos alleged that they only discovered in June 1982 that the spouses Heruela were already occupying the land. In their answer to the complaint, the spouses Heruela and the spouses Pallori alleged that their occupation of the land is lawful because having made partial payments of the purchase price, "they already considered themselves owners" of the land. 18 Clearly, there was no transfer of title to the spouses Heruela. The spouses Ramos retained their ownership of the land. This only shows that the parties did not intend the transfer of ownership until full payment of the purchase price. RA 6552 is the Applicable Law. The trial court did not err in applying RA 6552 to the present case. Articles 1191 and 1592 of the Civil Code are applicable to contracts of sale. In contracts to sell, RA 6552 applies. In Rillo v. Court of Appeals, the Court declared: the Maceda Law, R.A. No. 6552 recognizes in conditional sales of all kinds of real estate (industrial, commercial, residential) the right of the seller to cancel the contract upon non-payment of an installment by the buyer, which is simply an event that prevents the obligation of the vendor to convey title from acquiring binding force. It also provides the right of the buyer on installments in case he defaults in the payment of succeeding installments . . Sec. 3. In all transactions or contracts involving the sale or financing of real estate on installment payments, including residential condominium apartments but excluding industrial lots, commercial buildings and sales to tenants under Republic Act Numbered Thirty-eight hundred forty-four as amended by Republic Act Numbered Sixty-three hundred eighty-nine, where the buyer has paid at least two years of installments, the buyer is entitled to the following rights in case he defaults in the payment of succeeding installments: (a) To pay, without additional interest, the unpaid installments due within the total grace period earned by him, which is hereby fixed at the rate of one month grace period for every one year of installment payments made: Provided, That this right shall be exercised by the buyer only once in every five years of the life of the contract and its extensions, if any. (b) If the contract is cancelled, the seller shall refund to the buyer the cash surrender value of the payments on the property equivalent to fifty per cent of the total payments made and, after five years of installments, an additional five per cent every year but not to exceed ninety per cent of the total payments made: Provided, That the actual cancellation of the contract shall take place after thirty days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act and upon full payment of the cash surrender value to the buyer. Down payments, deposits or options on the contract shall be included in the computation of the total number of installments made. 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 from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act. In this case, the spouses Heruela paid less than two years of installments. Thus, Section 4 of RA 6552 applies. However, there was neither a notice of cancellation nor demand for rescission by notarial act to the spouses Heruela. In Olympia Housing, Inc. v. Panasiatic Travel Corp., the Court ruled that the vendor could go to court to demand judicial rescission in lieu of a notarial act of rescission. However, an action for reconveyance is not an action for rescission. The Court explained in Olympia: The action for reconveyance filed by petit ioner was predicated on an assumption that its contract to sell executed in favor of respondent buyer had been validly cancelled or rescinded. The records would show that, indeed, no such cancellation took place at any time prior to the institution of the action for reconveyance. . . .xxx xxx xxx In the present case, there being no valid rescission of the contract to sell, the action for reconveyance is premature. Hence, the spouses Heruela have not lost the statutory grace period within which to pay. The trial court should have fixed the grace period to sixty days conformably with Section 4 of RA 6552.The spouses Heruela are not entirely fault-free. They have been remiss in performing their obligation. The trial court found that the spouses Heruela offered once to pay the balance of the purchase price. However, the spouses Heruela did not consign the payment during the pendency of the case. In the meanwhile, the spouses Heruela enjoyed the use of the land. WHEREFORE, we AFFIRM the RTC, dismissing the complaint for Recovery of Ownership with Damages, with MODIFICATION.

F. The Contract of Sale may bea. Absolute; or Ramos v. Heruela. GR. No. 145330, Oct. 14, 2005

Absolute a. ownership is transferred to the buyer upon delivery regardless of when payment of price is made (note: it is not payment of the price that transfers ownership, it is the delivery of the thing which may be real or constructive) b. there is no stipulation in the contract that title to the property remains with the seller until full payment of the purchase price c. there is no stipulation giving the vendor the right to cancel unilaterally the contract the moment the vendee fails to pay within a fixed period
Facts: Spouses Ramos own a parcel of land, consisting of 1,883 square meters. They made an agreement with spouses Heruela covering 306 square meters of the land. According to the spouses Ramos, the agreement is a contract of conditional sale. The spouses Heruela allege that the contract is a sale on installment basis. The spouses Ramos filed a complaint for Recovery of Ownership with Damages against the spouses Heruela. The spouses Ramos allege that out of the P15,300 consideration for the sale of the land, the spouses Heruela paid only P4,000. The spouses Ramos assert that the spouses Heruelas unjust refusal to pay the balance of the purchase price caused the cancellation of the Deed of Conditional Sale. The Ramoses discovered that the spouses Heruela were already occupying a portion of the land. Spouses Pallori, daughter and son-inlaw of the spouses Heruela, erected another house on the land. The spouses Heruela and the spouses Pallori refused to vacate the land despite demand by the spouses Ramos. The trial court ruled that the contract is a sale by installment. The trial court ruled that the spouses Ramos failed to comply with Section 4 of Republic Act No. 6552 ("RA 6552"), 6 as follows: 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 from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act. Ruling: The Agreement is a Contract to Sell In this case, the agreement of the parties is embodied in a one-page, handwritten document. The document does not contain the usual terms and conditions of a formal deed of sale. The original document, elevated to this Court as part of the Records, is torn in part. Only the words "LMENT BASIS" is legible on the title. The names and addresses of the parties and the identity of the property cannot be ascertained. In Manuel v. Rodriguez, et al., the Court ruled that to be a written contract, all the terms must be in writing, so that a contract partly in writing and partly oral is in legal effect an oral

Absolute Sale When title to the property passes to the vendee upon delivery of the thing sold When there is no stipulation in the contract that title to the property remains with the seller until full payment of the purchase price If there is no stipulation giving the vendor the right to cancel unilaterally the contract the moment the vendee fails to pay within a fixed period

Conditional Sale Ownership remains with the vendor and does not pass to the vendee until full payment of the purchase price. The full payment of the purchase price partakes of a suspensive condition, and non-fulfillment of the condition prevents the obligation to sell from arising.

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Heirs of Mascunana vs. CA, G.R. No. 158646, June 23, 2005
Facts: It is settled that a perfected contract of sale cannot be challenged on the ground of the non-transfer of ownership of the property sold at that time of the perfection of the contract, since it is consummated upon delivery of the property to the vendee. It is through tradition or delivery that the buyer acquires ownership of the property sold. As provided in Article 1458 of the New Civil Code, when the sale is made through a public instrument, the execution thereof is equivalent to the delivery of the thing which is the object of the contract, unless the contrary appears or can be inferred. The record of the sale with the Register of Deeds and the issuance of the certificate of title in the name of the buyer over the property merely bind third parties to the sale. As between the seller and the buyer, the transfer of ownership takes effect upon the execution of a public instrument covering the real property. Long before the petitioners secured a Torrens title over the property, the respondents had been in actual possession of the property and had designated Barte as their overseer. Although denominated a Deed of Conditional Sale, a sale is still absolute where the contract is devoid of any proviso that title is reserved or the right to unilaterally rescind is stipulated, e.g., until or unless the price is paid. Ownership will then be transferred to the buyer upon actual or constructive delivery ( e.g. by the execution of a public document) of the property sold. Where the condition is imposed upon the perfection of the contract itself, the failure of the condition would prevent such perfection. If the condition is imposed on the obligation of a party which is not fulfilled, the other party may either waive the condition or refuse to proceed with the sale. (Art. 1545, Civil Code) A deed of sale is considered absolute in nature where there is neither a stipulation in the deed that title to the property sold is reserved in the seller until full payment of the price, nor one giving the vendor the right to unilaterally resolve the contract the moment the buyer fails to pay within a fixed period.

thereof to the prospective buyer, binds himself to sell the said property exclusively to the prospective buyer upon payment of full purchase price. Contract of Sale- no reservation of ownership where the owner can unilaterally rescind the contract if one of the party fails to fulfill its duty.

Ong v CA G.R. No. 97347

Interpretation of document denominated agreement of Purchase and Sale is equivalent to that of a contract to sell The contract they entered into was that the seller undertakes to execute the absolute deed of sale only upon full payment of the purchase price. The sellers are retaining ownership over the property even if the property is in the possession of the buyer. The Court said that in a contract of sale ownership is transferred upon delivery of the property. In a contract to sell, ownership is by agreement reserved by the vendor until full payment of the purchase price. Moreover, full payment of the purchase price is a positive suspensive condition. Therefore, the failure to fulfill the condition is not a breach of the contract. It prevents the obligation of the vendor to convey title from acquiring an obligatory force. The obligation of the vendor to transfer ownership and to convey title does not arise. It is in the nature of a contract to sell.
Facts: Ong and spouses Robles executed an Agreement of Purchase and Sale of 2 parcels of land for P2M initial payment of P600,000 and balance of 1.4M to be paid in 4 installments binding themselves that upon the payment of the total purchase price the seller delivers a good and sufficient deed of sale and conveyance for the parcels of land. Ong took possession of the land, building improvements thereon. Ongs checks were dishonored due to insufficient funds. The spouses asked for the return of the properties and filed a complaint for rescission of contract and recovery of properties. SC: Agreement of Purchase and Sale is in the nature of contract to sell. A careful reading of the parties Agreement of Purchase and Sale shows that it is in the nature of a contract to sell. The spouses bound themselves to deliver a deed of absolute sale and clean title covering the two parcels of land upon full payment by the buyer of the purchase price of P2M. This promise to sell was subject to the fulfillment of the suspensive condition of full payment of the purchase price by the Ong. The non-fulfillment of the condition of full payment rendered the contract to sell ineffective and without force and effect. It must be stressed that the breach contemplated in Article 1191 of the New Civil Code is the obligors failure to comply with an obligation already extant, not a failure of a condition to render binding that obligation. Failure to pay, in this instance, is not even a breach but merely an event which prevents the vendors obligation to convey title from acquiring binding force. Hence, the agreement of the parties the present case may be set aside, but not because of a breach on the part of Ong for failure to complete payment of the purchase price. Rather, his failure to do so brought about a situation which prevented the obligation of the spouses to convey title from acquiring an obligatory force.

b.

Conditional, which may in turn be

- may either be an executed contract or an executory contract and usually a contract to sell a. Executed Contract - which property (ownership) in the thing is transferred from seller to buyer, and nonpayment of the price is a negative resolutory condition which entitles the seller to the rescission or cancellation of the contract - ownership is already transferred - one of the party has performed his part (ex. Partial payment; earnest money is already paid) b. Executory Contract - (an agreement or contract to sell) when ownership does not pass until i. Some future time, or ii. The fulfillment of some condition, such as full payment of the purchase price when said payment then becomes a positive suspensive condition
1. 2. An executed contract, or which property (ownership) in the thing is transferred from seller to buyer, and nonpayment of the price is a negative resolutory condition. An executory contract- ownership does not pass until some future time -the fulfillment of some condition, such as full payment of the purchase price. c. Distinctions

Q: Do you need to sue for the cancellation of the contract if the buyer fails to comply with his obligation in a contract to sell? A: No. Unless the contract is covered by the Maceda Law

Executed Contract Property ownership is conveyed If buyer defaults, seller may sue for the price Risk of loss is generally borne by the buyer

Executory Contract No property is conveyed If buyer defaults, seller is only entitled to damages Risk of loss is generally borne by the seller

H. Contract to Sell vs. Conditional Sale Coronel vs. CA, G.R. No. 103577, Oct. 7, 1996
FACTS: Defendants Coronels issued a document, receipt of down payment, in favor of Ramona. In the said document, it was stipulated that the Coronels, upon receipt of the down payment in the amount of 50k (1.24M total price) for their inherited house and lot, bind themselves to the effect that they will transfer, from their father, the transfer certificate title to their names. After the TCT is under their name, they will execute immediately a deed of absolute sale in favor of Ramona and she will pay the balance of 1.19M. The mother of Ramona, Concepcion, paid the 50k as down payment. Thereafter, the Coronels transferred the said property in their names. Coronels sold the property to Catalina for the amount of 1.58M after the latter paid a down payment of 300k. For this reason, Coronels canceled and rescinded the contract with Ramona by depositing the down payment paid by Concepcion in the bank in trust for Ramona Patricia Alcaraz. Concepcion et al. filed a case against specific performance. A notice of lis pendens was annotated at the back of the title. An adverse claim by Catalina was also annotated. The Coronels executed a deed of absolute sale in favor of Catalina. Thus, a new title was issued in the name of Catalina. Both trial court and CA ruled in favor of Concepcion. It ordered the specific performance of the agreement. ISSUE: legal determination of the document, Receipt of Downpayment SC RULED: The agreement is a contract of sale as there was no express reservation of ownership or title to the subject parcel of land.

Transfer of ownership
Absolute upon delivery Conditional ownership is reserved by the owner. G. Contract of Sale vs Contract to sell

Contract to Sell The payment in full of the price is a positive suspensive condition. Hence, if the price is not paid, it is as if the obligation of the seller to deliver and to transfer ownership never became effective and binding. Ownership is retained by the seller, regardless of delivery and is not pass until fill payment of the price Since the seller retains ownership, despite delivery, he is enforcing not rescinding the contract if he seeks to oust the buyer for failure to pay.

Contract of Sale The non-payment of the price is a RESOLUTORY condition, i.e. the contract of sale may by such occurrence put an end to a transaction that once upon a time existed Title over the property generally passes to the buyer upon delivery After delivery has been made, the seller has lost ownership and cannot recover it unless the contract is resolved or rescinded

Contract to Sell a bilateral contract whereby the prospective seller, while expressly reserving the ownership of the subject property despite delivery

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That when the "Receipt of Down Payment" is considered in its entirety, it becomes more manifest that there was a clear intent on the part of petitioners to transfer title to the buyer, but since the transfer certificate of title was still in the name of petitioner's father, they could not fully effect such transfer although the buyer was then willing and able to immediately pay the purchase price. This is a contract OF sale, SC affirmed the decision of CA. In a contract of sale, the title passes to the vendee upon the delivery of the thing sold; whereas in a contract to sell, ownership is not transferred upon delivery of the property but upon full payment of the purchase price. In the former, the vendor has lost and cannot recover ownership until and unless the contract is resolved or rescinded; whereas in the latter, title is retained by the vendor until the full payment of the price, such payment being a positive suspensive condition and failure of which is not a breach but an event that prevents the obligation of the vendor to convey title from becoming effective. Contract of sale Article 1458, as one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent. Sale, thus, by its very nature a consensual contract because it is perfected by mere consent. Conditional contract of sale: if suspensive condition not fulfilled, pefection abated; if fulfilled, contract of sale perfected such that if there had already been previous delivery of the property subject of the sale to the buyer, ownership thereto automatically transfers to the buyer by operation of law without any further act having to be performed by the seller. In conditional contract of sale, sale becomes absolute upon fulfillment of condition; if property sold to another, first buyer may seek reconveyance Document entitled Receipt of Down Payment indicates Conditional Contract of Sale and not contract to sellThe agreement could not have been a contract to sell because the sellers made no express reservation of ownership or title to the subject parcel of land. What is clearly established by the plain language of the subject document is that when the said Receipt of Down Payment was prepared and signed by petitioners, the parties had agreed to a conditional contract of sale, consummation of which is subject only to the successful transfer of the certificate of title from the name of petitioners father to their names. The su spensive condition was fulfilled thus, the conditional contract of sale between the parties became obligatory, the only act required for the consummation thereof being the delivery of the property by means of the execution of the deed of absolute sale in a public instrument, which petitioners unequivocally committed themselves to do as evidenced by the Receipt of Down Payment. Condition deemed fulfilled when obligor voluntary prevents its fulfillment: Article 1186 provides that the condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment. After a week, Catalina Pacson heard a rumor that the lot was already sold to petitioner Betty Tolero. Catalina Pacson and Atty. Rillera went to the Register of Deeds of the Province of Benguet, and found that Julie Nabus and her minor daughter, Michelle Nabus, represented by the former's mother as appointed guardian by a court order dated October 29, 1982, had executed a Deed of Absolute Sale in favor of Betty Tolero on March 5, 1984. Issue: Whether the Deed of Conditional Sale was a contract to sell or a contract of sale. Held: A contract to sell as defined hereinabove, may not even be considered as a conditional contract of sale where the seller may likewise reserve title to the property subject of the sale until the fulfillment of a suspensive condition, because in a conditional contract of sale, the first element of consent is present, although it is conditioned upon the happening of a contingent event which may or may not occur. If the suspensive condition is not fulfilled, the perfection of the contract of sale is completely abated. However, if the suspensive condition is fulfilled, the contract of sale is thereby perfected, such that if there had already been previous delivery of the property subject of the sale to the buyer, ownership thereto automatically transfers to the buyer by operation of law without any further act having to be performed by the seller. In a contract to sell, upon the fulfillment of the suspensive condition which is the full payment of the purchase price, ownership will not automatically transfer to the buyer although the property may have been previously delivered to him. The prospective seller still has to convey title to the prospective buyer by entering into a contract of absolute sale. It is not the title of the contract, but its express terms or stipulations that determine the kind of contract entered into by the parties. In this case, the contract entitled "Deed of Conditional Sale" is actually a contract to sell. The contract stipulated that "as soon as the full consideration of the sale has been paid by the vendee, the corresponding transfer documents shall be executed by the vendor to the vendee for the portion sold." 41 Where the vendor promises to execute a deed of absolute sale upon the completion by the vendee of the payment of the price, the contract is only a contract to sell." 42 The aforecited stipulation shows that the vendors reserved title to the subject property until full payment of the purchase price. As vendees given possession of the subject property, the ownership of which was still with the vendors, the Pacsons should have protected their interest and inquired from Julie Nabus why she did not return and then followed through with full payment of the purchase price and the execution of the deed of absolute sale. The Spouses Pacson had the legal remedy of consigning their payment to the court; however, they did not do so. A rumor that the property had been sold to Betty Tolero prompted them to check the veracity of the sale with the Register of Deeds of the Province of Benguet. They found out that on March 5, 1984, Julie Nabus sold the same property to Betty Tolero through a Deed of Absolute Sale, and new transfer certificates of title to the property were issued to Tolero. Unfortunately for the Spouses Pacson, since the Deed of Conditional Sale executed in their favor was merely a contract to sell, the obligation of the seller to sell becomes demandable only upon the happening of the suspensive condition. 43 The full payment of the purchase price is the positive suspensive condition, the failure of which is not a breach of contract, but simply an event that prevented the obligation of the vendor to convey title from acquiring binding force. 44 Thus, for its non-fulfilment, there is no contract to speak of, the obligor having failed to perform the suspensive condition which enforces a juridical relation. 45 With this circumstance, there can be no rescission or fulfilment of an obligation that is still nonexistent, the suspensive condition not having occurred as yet.

Nabus vs. Pacson Facts:The spouses Bate and Julie Nabus were the owners of parcels of land with a total area

of 1,665 square meters, situated in Pico, La Trinidad, Benguet, duly registered in their names under TCT No. T-9697 of the Register of Deeds of the Province of Benguet. The property was mortgaged by the Spouses Nabus to the Philippine National Bank (PNB), La Trinidad Branch, to secure a loan in the amount of P30,000.00. On February 19, 1977, the Spouses Nabus executed a Deed of Conditional Sale 4 covering 1,000 square meters of the 1,665 square meters of land in favor of respondents Spouses Pacson for a consideration of P170,000.00, which was duly notarized on February 21, 1977. Their contract had the following condition: THAT, as soon as the full consideration of this sale has been paid by the VENDEE, the corresponding transfer documents shall be executed by the VENDOR to the VENDEE for the portion sold; THAT, it is mutually understood that in as much as there is a claim by other persons of the entire property of which the portion subject of this Instrument is only a part, and that this claim is now the subject of a civil case now pending before Branch III of the Court of First Instance of Baguio and Benguet, should the VENDOR herein be defeated in the said civil action to the end that he is divested of title over the area subject of this Instrument, then he hereby warrants that he shall return any and all monies paid by the VENDEE herein whether paid to the PNB, La Trinidad, Benguet Branch, or directly received by herein VENDOR, all such monies to be returned upon demand by the VENDEE; THAT, [a] portion of the parcel of land subject of this instrument is presently in the possession of Mr. Marcos Tacloy, and the VENDOR agrees to cooperate and assist in any manner possible in the ouster of said Mr. Marcos Tacloy from said possession and occupation to the end that the VENDEE herein shall make use of said portion as soon as is practicable; Thereafter, respondents took possession of the subject property. They constructed an 80 by 32-feet building and a steel-matting fence around the property to house their truck bodybuilding shop which they called the "Emiliano Trucking Body Builder and Auto Repair Shop." On December 24, 1977, before the payment of the balance of the mortgage amount with PNB, Bate Nabus died. On August 17, 1978, his surviving spouse, Julie Nabus, and their minor daughter, Michelle Nabus, executed a Deed of Extra Judicial Settlement over the registered land covered by TCT No. 9697. On the basis of the said document, TCT No. T-17718 8 was issued on February 17, 1984 in the names of Julie Nabus and Michelle Nabus. During the last week of January 1984, Julie Nabus, accompanied by her second husband, approached Joaquin Pacson to ask for the full payment of the lot. Joaquin Pacson agreed to pay, but told her to return after four days as his daughter, Catalina Pacson, would have to go over the numerous receipts to determine the balance to be paid. When Julie Nabus returned after four days, Joaquin sent her and his daughter, Catalina, to Atty. Elizabeth Rillera for the execution of the deed of absolute sale. Since Julie was a widow with a minor daughter, Atty. Rillera required Julie Nabus to return in four days with the necessary documents, such as the deed of extrajudicial settlement, the transfer certificate of title in the names of Julie Nabus and minor Michelle Nabus, and the guardianship papers of Michelle. However, Julie Nabus did not return. Getting suspicious, Catalina Pacson went to the Register of Deeds of the Province of Benguet and asked for a copy of the title of the land. She found that it was still in the name of Julie and Michelle Nabus

Arts. 1459-1465 I. OBJECT

Art. 1459. The thing must be licit and the vendor must have a right to transfer the ownership thereof at the time it is delivered. Art. 1460. A thing is determinate when it is particularly designated or physical segregated from all other of the same class. The requisite that a thing be determinate is satisfied if at the time the contract is entered into, the thing is capable of being made determinate without the necessity of a new or further agreement between the parties. Art. 1461. Things having a potential existence may be the object of the contract of sale. The efficacy of the sale of a mere hope or expectancy is deemed subject to the condition that the thing will come into existence. The sale of a vain hope or expectancy is void. Art. 1462. The goods which form the subject of a contract of sale may be either existing goods, owned or possessed by the seller, or goods to be manufactured, raised, or acquired by the seller after the perfection of the contract of sale, in this Title called "future goods." There may be a contract of sale of goods, whose acquisition by the seller depends upon a contingency which may or may not happen. (n) Art. 1463. The sole owner of a thing may sell an undivided interest therein. Art. 1464. In the case of fungible goods, there may be a sale of an undivided share of a specific mass, though the seller purports to sell and the buyer to buy a definite number, weight or measure of the goods in the mass, and though the number, weight or measure of the

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goods in the mass is undetermined. By such a sale the buyer becomes owner in common of such a share of the mass as the number, weight or measure bought bears to the number, weight or measure of the mass. If the mass contains less than the number, weight or measure bought, the buyer becomes the owner of the whole mass and the seller is bound to make good the deficiency from goods of the same kind and quality, unless a contrary intent appears. Art. 1465. Things subject to a resolutory condition may be the object of the contract of sale. A. Qualities The object must be: a. Lawful (1459) Licit not contrary to law, morals, good customs, public order or public policy, within the commerce of man; if illicit, contract is void All rights which are not intransmissible or personal may also be the object of sale (i.e. right of usufruct) Services cannot be the object of a contract of sale Article 1460 Q: Are all things which are in the commerce of man be an object of sale? Can rights be an object of transmission, be an object of sale? A: Rights may be transferred but cannot be an object of sale. Services can be an object of contract but not of contract of sale Q: What objects cannot be an object of sale? A: Real properties which are under the homestead and free patent, and is still within the prohibition period, cannot be an object of sale Manalapat v. CA Vagilidad v. Vagilidad
Facts: 4,280 sqm of lot was owned by Zoilo. In 1931, ZOILO died. Subsequently son of Zolio, Loreto sold to Gabino Vagilidad a portion of said lot as evidenced by the Deed of Absolute Sale executed by Loreto. After, Zoilos children executed an Extrajudicial Settlement of Estate adjudicating the entire lot to Loreto. Gabino paid real estate taxes on the land he bought from Loreto which he later sold to Wilfredo Vagilidad. Likewise, a Deed of Absolute Sale was made by Loreto in favor of Wilfredo for the same portion of lot. Wlfredo used this to be able to get a TCT and used his property as mortgage of a loan. Contract between Gabino and Loreto was vald. The requisite that a thing be determinate is satisfied if at the time the contract is entered into, the thing is capable of being made determinate without the necessity of a new or further agreement between the parties. Art. 1349 states that the object of every contract must be determinate, as to its kind. 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. Art. 1460 defines that a thing is determinate when it is particularly designated or physically segregated from all others of the same class. The property sold by Loreto to Gabino was determinable. A co-owner has full ownership of his pro-indiviso share and has the right to alienate, assign or mortgage it, and substitute another person for its enjoyment. The subject parcel, being an inherited property, is subject to the rules of co-ownership under the Civil Code. Co-ownership is the right of common dominion which two or more persons have in a spiritual part of a thing, not materially or physically divided. Before the partition of the property held in common, no individual or co-owner can claim title to any definite portion thereof. All that the co-owner has is an ideal or abstract quota or proportionate share in the entire property. LORETO sold the subject property to GABINO as a co-owner. LORETO had a right, even before the partition to transfer in whole or in part his undivided interest in the lot even without the consent of his co-heirs. This right is absolute. Thus, what GABINO obtained by virtue of the sale on were the same rights as the vendor LORETO had as co-owner, in an ideal share equivalent to the consideration given under their transaction. Consequently, when LORETO purportedly sold to WILFREDO the same portion of the lot, he was no longer the owner said lot. Based on the principle that "no one can give what he does not have," LORETO could not have validly sold to WILFREDO what he no longer had.

Undivided interest can be subject to sale. The buyer will become a co-owner. a. before partition b. in a mass of fungible goods. Determinate or Indeterminate The requisite that a thing be determinate is satisfied if at the time the contract is entered into, the thing is capable of being made determinate without the necessity of a new or further agreement between the parties. Art. 1349 states that the object of every contract must be determinate, as to its kind. 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. Art. 1460 defines that a thing is determinate when it is particularly designated or physically segregated from all others of the same class. The property sold by Loreto to Gabino was determinable. (Vagilidad v Vagilidad)

1. Sale by a Co-heir of undivded portin of estate

In this case, before given he was given the patent, Manlapat already sold the land to Ricardo Cruz. Prior to the issuance of a patent, the land can be validly sold Thus it was only the sale of the 50 sq. m. which was void as it was sold after the issuance of the patent Note: the mortgagor must be the owner of the property otherwise the mortgage is void.

Facts: In 1976, a free patent was issued in Manlapats name. In 1954, before the subject lot was titled, he sold a portion to Ricardo evidenced by a deed of sale. He conveyed another portion to Ricardo in 1981. Leon Banaag (son-in-law of Manlapat) executed a mortgaged with the subject lot as the collateral. Heirs of Ricardo sought to obtain the title from petitioners which was in the custody of RBSP, earlier surrendered as a consequence of the mortgage. SC: Five-year prohibition against alienation or encumbrances under the Public Land Act. Eduardo was issued a title in 1976 on the basis of his free patent application. Such application implies the recognition of the public dominion character of the land and, hence, the 5-year prohibition imposed by the PLA against alienation or encumbrance of the land covered by a free patent or homestead should have been considered. The deed of sale which was executed in 1981 is obviously covered by the proscription, the free patent having been issued in 1976. However, petitioners may recover the portion sold since the prohibition was imposed in favor of the free patent holder. The sale executed 1954 was before the issuance of the patent in 1976. Apparently, Eduardo disposed of the portion even before he thought of applying for a free patent. Where the sale or transfer took place before the filing of the free patent application, whether by the vendor or the vendee, the prohibition should not be applied. In such a situation, neither the prohibition nor the rationale therefore which is to keep in the family of the patentee that portion of the public land which the government has gratuitously given him, by shielding him from the temptation to dispose of his landholding, could be relevant. Precisely, he had disposed of his rights to the lot even before the government could give the title to him. The mortgage executed in favor of RBSP is also beyond the pale of the prohibition, as it was forged in December 1981 a few months past the period of prohibition.

2. Effectof Agreement where the exact number of palay to be sold was not fixed.
Article 1464 National Grains Authority v. IAC
Facts: Leon Soriano submitted the documents required by the NFA for pre-qualifying as a seller. These were processed and he was given a quota of 2,640 cavans of palay. On August 1979, Soriano delivered 630 cavans of palay. The palay delivered were not rebagged, classified and weighed. When Soriano demanded payment, he was informed that it was held in abeyance since Mr. Cabal was still investigating on information that Soriano was not a bona fide farmer and the palay delivered was not produced from his farmland but was taken from the warehouse of a rice trader, Ben de Guzman. Petitioner wrote Soriano advising him to withdraw the 630 cavans. Instead of withdrawing, Soriano insisted that the palay grains delivered be paid. NFA was ordered to pay Soriano. Present case involves a perfected contract of sale. Soriano initially offered to sell palay grains produced in his farmland to NFA. When the latter accepted the offer by noting in Sorianos Farmers 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 Sorianos farmland and the NFA was to pay the same depending upon its quality. The contention that since the delivery were not rebagged, classified and weighed in accordance with the palay procurement program of NFA, there was no acceptance of the offer thus this is a clear case of an unaccepted offer to sell, is untenable. Quantity being indeterminate does not affect perfection of contract; No need to create new contract. 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. In the present 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. (It did not need a new contract to make 630 cavans a determinate thing). Sale a consensual contract; Acceptance is on the offer and not the goods delivered. Sale is a consensual contract, there is perfection when there is consent upon the subject matter and price, even if neither is delivered. (Obana vs. C.A., L-36249, March 29, 1985, 135 SCRA 557, 560). The acceptance referred to which determines consent is the acceptance of the offer of one party by the other and not of the goods delivered. Compliance of mutual obligations once a contract of sale is perfected. 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. (Article 1475, Civil Code, 2nd par.)

Q: Why is it there a difference in the ruling in the Manlapat and Hermosilla case? A: The difference in the ruling was die to the different laws that governed in the case. In the first case, the law used was based on the homestead law provided under CA 141. On the other hand, in the Hermosilla case, what was used as basis for the decision was Land Authority Administration #4. In Patent, there is no in pari de licto - You or your heirs can recover the land even if you committed the mistake of selling it within the 5 years prohibitory period Q: Can you execute a confirmatory deed of sale which will take effect after the 5 year period? A: No, for there is nothing to confirm because you cannot ratify a void contract. b. Determinate and Determinable TEST: no need for a new contract to determine the subject matter

Test of Determinability
-

Capacity to Segregate No further agreement

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c. Existing, or Future or Contingent -future things may be sold but not future inheritance Cases:

Remember the following: Future Inheritance cannot be an object of sale Future destruction or with potential destruction can be an object of sale Mere expectancy can be subject of sale as long as HOPE is not VAIN While there can be a sale of future property, there can generally be no donation of future property A person who has a right over a thing (although he is not the owner of the thing itself) may sell such right. (ex. A usufructuary may generally sell his usufructuary right)
Sale of an expected thing or Emptio Rei Sperati not materialize, the sale is not effective - If the expected thing does

1. Sale by mortgagee of land not proper subject of mortgage

Cavite Development Bank v. Lim, 324 scra 346
Facts: Rodolfo Guansing obtained a fraudulent title by executing an Extra-Judicial Settlement of the Estate With Waiver where he made it appear that he and Perfecto Guansing were the only surviving heirs entitled to the property, and that Perfecto had waived all his rights thereto. Consequently he acquired title and used this to acquire a loan. CDB foreclosed the mortgage and granted him the period of redemption, which he did not exercise. It is not required that, at the perfection stage, the seller be the owner of the thing sold or even that such subject matter of the sale exists at that point in time. Thus, under Art. 1434 of the Civil Code, when a person sells or alienates a thing which, at that time, was not his, but later acquires title thereto, such title passes by operation of law to the buyer or grantee. This is the same principle behind the sale of "future goods" under Art. 1462 of the Civil Code. However, under Art. 1459, at the time of delivery or consummation stage of the sale, it is required that the seller be the owner of the thing sold. Otherwise, he will not be able to comply with his obligation to transfer ownership to the buyer. It is the consummation stage where the principle of nemo dat quod non habet applies. In this case, the sale by CDB to Lim of the property mortgaged in 1983 by Rodolgo Guansing must, therefore, be deemed a nullity for CDB did not have a valid title to the said property. To be sure, CDB never acquired a valid title to the property because the foreclosure sale, by virtue of which the property had awarded to CDB as highest bidder, is likewise void since the mortgagor was not the owner of the property foreclosed. CDB cannot be considered a mortgagee in good faith. While petitioners are not expected to conduct an exhaustive investigation on the history of the mortgagor's title, CDB cannot be excused from the duty of exercising the due diligence required of banking institutions in ascertaining the validity of the title. That after the payment of the 10% option money, the Offer to Purchase provides for the payment only of the balance of the purchase price, implying that the "option money" forms part of the purchase price. This is precisely the result of paying earnest money under Art. 1482 of the Civil Code. 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.

Sale of the Hope itself or Emptio Spei - It does not matter whether the expected thing materialized or not; what is important is that the hope itself validly existed - Ex. Sale of a valid sweepstakes ticket. Whether the ticket wins or not, the sale itself is valid - If the hope or expectancy itself is vain, the sale is itself void.

1)
Article 1461 Tanedo vs Ca

Sale of Future Inheritance invalid

Facts: On October 20, 1962, Lazaro Taedo executed a notarized deed of absolute sale in favor of his eldest brother, Ricardo Taedo, and the latters wife, Teresita Barera, private respondents herein, whereby he conveyed to the latter in consideration of P1,500.00, one hectare of whatever share I shall have over Lot No. 191 of the cadastral survey of Gerona, Province of Tarlac and covered by Title T-l3829 of the Register of Deeds of Tarlac, the said property being his future inheritance from his parents (Exh. 1). Upon the death of his father Matias, Lazaro executed an Affidavit of Conformity dated February 28, 1980 (Exh. 3) to reaffirm, respect. acknowledge and validate the sale I made in 1962. On January 13, 1981, Lazaro executed another notarized deed of sale in favor of private respondents covering his undivided ONE TWELVE (1/12) of a parcel of land known as Lot 191 x x (Exh. 4). He acknowledged therein his receipt of P 10,000.00 as consideration therefor. In February 1981, Ricardo learned that Lazaro sold the same property to his children, petitioners herein, through a deed of sale dated December 29, 1980 (Exh. E). On June 7, 1982, private respondents recorded the Deed of Sale (Exh. 4) in their favor in the Registry of Deeds and the corresponding entry was made in Transfer Certificate of Title No. 166451 (Exh. 5). Petitioners on July 16, 1982 filed a complaint for rescission (plus damages) of the deeds of sale executed by Lazaro in favor of private respondents covering the property inherited by Lazaro from his father. Issue: Is a sale of future inheritance valid? Held: (n)o contract may be entered into upon a future inheritance except in cases expressly authorized by law. Consequently, said contract made in 1962 is not valid and cannot be the source of any right nor the creator of any obligation between the parties. Hence, the affidavit of conformity dated February 28, 1980, insofar as it sought to validate or ratify the 1962 sale, is also useless and, in the words of the respondent Court, suffers from the same infirmity. Even private respondents in their memorandum concede this.

2. Conveyance of privilege to purchase land before it is awarded to the tenant or occupant.

Hermosilla v. Remoquillo
Facts: Apolinario Hermosilla was occupying a lot in San Pedro Tunasan Homesite, a land of the Republic. He divided the lot into 2. The 1st portion was given to his son Salvador and the other(questioned lot) to his grandson Jaime Remoquillo through a Deed of Assignment. A law was passed prohibiting the transfer of ownership of the said lot. Salvador and Jaime after made a Kasunduan ng Paglipat Ng Karapatan sa Isang Lagay na Lupang Solar (Kasunduan) whereby Jaime transferred ownership of the 65 square meters (the questioned property) in favor of Salvador. NHA awarded Jaime title. Salvador and his heirs questioned the title stating they have their house and in actual possession of the questioned lot. When the Kasunduan was executed in 1972 by Jaime in favor of Salvador petitioners' predecessor-in-interest Lot 19, of which the questioned property forms part, was still owned by the Republic. Nemo dat quod non habet. Nobody can give what he does not possess. Jaime could not thus have transferred anything to Salvador via the Kasunduan. The transfer became one in violation of law and therefore void ab initio. Hence, petitioners acquired no right over the lot from a Void Kasunduan, for no rights are created. It is generally considered that as between the parties to a contract, validity cannot be given to it by estoppel if it is prohibited by law or is against public policy. Since the property was previously a public land, petitioners have no personality to impute violation of the law. If the title was in fact fraudulently obtained, it is the State which should file the suit to recover the property through the Office of the Solicitor General. Consequently, Jaimes ownership was valid not being contrary to any law and since there was no pending other application yet. That at the time he applied for title, he was recogned as the actual applicant / occupant.

d. Transferability of Ownership Ownership 1. 2. 3. It need not exist at the perfection of the contract. Required at the time of delivery Subsequent acquisition of title by a vendor w/out title validates the sale Acquisition of title by the vendee may depend upon a contingency (right of redemption)

Heirs of Arturo Reyes v. Beltran G.R. No. 176474

(property not adjudicated) The contract to sell on which the petitioners based their claim over the subject property was executed by Miguel Socco who was not the owner of the property, therefore had NO right to transfer the same. Article 1459 provides that the thing must be licit and vendor must have a right to transfer ownership at the time of delivery.
Facts: A big parcel of lot was originally owned by Spouses Laquian. When the Spouses died, the property was left with the wifes siblings. Through an "Extrajudicial Settlement of the Estate of the Deceased Constancia R. Socco (wife)," the parcel of land was partitioned into 3 lots. Before the partition, Miguel Socco, 1 of the heirs sold his share to Arturo Reyes as evidenced by the Contract to Sell stating that he is to inherit a particular portion. But upon partition, the said portion sold was adjudicated to respondent, Elena Socco Beltran, and not to Miguel Socco. SC: Article 1459 of the Civil Code on contracts of sale, The thing must be licit and the vendor must have a right to transfer ownership thereof at the time it is delivered. The law specifically requires that the vendor must have ownership of the property at the time it is delivered. Petitioners claim that the property was constructively delivered to them in 1954 by virtue of the Contract to Sell. However, as already pointed out by this Court, it was explicit in the Contract itself that, at the time it was executed, Miguel R. Socco was not yet the owner of

The seller must have the right to transfer the ownership of the thing or right sold to the buyer at the time of delivery and not at the time of the making of the contract. Nemo dat quod non habet, as an ancient Latin maxim says. One cannot give what does not have. Note: When ownership is required At the time of sale but ownership may not be w/ the seller in case of future things.

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the property and was only expecting to inherit it. Hence, there was no valid sale from which ownership of the subject property could have transferred from Miguel Socco to Arturo Reyes. Without acquiring ownership of the subject property, Arturo Reyes also could not have conveyed the same to his heirs, herein petitioners. The law specifically requires that the vendor must have ownership of the property at the time it is delivered. Petitioners cannot derive title to the subject property by virtue of the Contract to Sell. It was stated in the Contract that the vendor was not yet the owner of the subject property and was merely expecting to inherit the same. It was also declared that conveyance of the subject to the buyer was a conditional sale. It is, therefore, apparent that the sale of the subject property in favor of Arturo Reyes was conditioned upon the event that Miguel Socco would actually inherit and become the owner of the said property. Absent such occurrence, Miguel R. Socco never acquired ownership of the subject property which he could validly transfer to Arturo Reyes. Without acquiring ownership of the subject property, Arturo Reyes also could not have conveyed the same to his heirs, herein petitioners. -assignment was done prior to the application. Price is an essential element in the formation of a binding and enforceable contract of sale. The fixing of the price can never be left to the decision of one of the contracting parties. But a price fixed by one of the contracting parties, if accepted by the other, gives rise to a perfected sale.57 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.58 In a contract to sell property by installments, it is not enough that the parties agree on the price as well as the amount of downpayment. The parties must, likewise, agree on the manner of payment of the balance of the purchase price and on the other terms and conditions relative to the sale. Even if the buyer makes a downpayment or portion thereof, such payment cannot be considered as sufficient proof of the perfection of any purchase and sale between the parties. We agree with the contention of the petitioner that, as held by the CA, there is no showing, in the records, of the schedule of payment of the balance of the purchase price on the property amounting to P278,448.00

ARTICLES 1469-1474 Art. 1469. In order that the price may be considered certain, it shall be sufficient that it be so with reference to another thing certain, or that the determination thereof be left to the judgment of a special person or persons. Should such person or persons be unable or unwilling to fix it, the contract shall be inefficacious, unless the parties subsequently agree upon the price. If the third person or persons acted in bad faith or by mistake, the courts may fix the price. Where such third person or persons are prevented from fixing the price or terms by fault of the seller or the buyer, the party not in fault may have such remedies against the party in fault as are allowed the seller or the buyer, as the case may be. (1447a) Art. 1470. Gross inadequacy of price does not affect a contract of sale, except as it may indicate a defect in the consent, or that the parties really intended a donation or some other act or contract. Art. 1471. If the price is simulated, the sale is void, but the act may be shown to have been in reality a donation, or some other act or contract. Art. 1472. The price of securities, grain, liquids, and other things shall also be considered certain, when the price fixed is that which the thing sold would have on a definite day, or in a particular exchange or market, or when an amount is fixed above or below the price on such day, or in such exchange or market, provided said amount be certain. (1448) Art. 1473. The fixing of the price can never be left to the discretion of one of the contracting parties. However, if the price fixed by one of the parties is accepted by the other, the sale is perfected. (1449a) Art. 1474. Where the price cannot be determined in accordance with the preceding articles, or in any other manner, the contract is inefficacious. However, if the thing or any part thereof has been delivered to and appropriated by the buyer he must pay a reasonable price therefor. What is a reasonable price is a question of fact dependent on the circumstances of each particular case. I.Price sum certain in money or its equivalent. Case:

A. Requisites: a. The price must be REAL (1471) Art. 1471. If the price is simulated, the sale is void, but the act may be shown to have been in reality a donation, or some other act or contract. price is real- when at the perfection of the sale, there is legal intention on the part of the buyer to pay the price and the legal expectation on the part of the seller to receive such price as the value of the subject matter he obligates himself to deliver. price is false- the contract is valid but subject to reformation to indicate the real price upon which the minds of the parties have met.

1.) Effect if price is simulatedproduces no effect.

Cruzado v. Bustos, G. R. No. 10244, February 29, 1916s

Cruzado: father of the petitioner, No legal intention to pay, bond for procurador Bustos: old lady, no legal expectation to receive payment, not obligates herself to deliver the property No right has been transmitted from a simulated sale. His alleged right cannot prevail against a third person who
FACTS: Counsel for the plaintiff Santiago Cruzado filed a written complaint on October 8, 1910, amended on September 25, 1913, in which he alleged that plaintiff was the owner of certain rural property situated in the barrio of Dolores, formerly San Isidro, of the municipality of Bacolor, Pampanga, containing an area of 65 balitas and bounded as set forth in the complaint; that Estafania Bustos, during her lifetime, and now the administrator of her estate, together with the other defendant, Manuel Escaler, had, since the year 1906 up to the present, been detaining the said parcel of land, and had refused to deliver the possession thereof to plaintiff and to recognize his ownership of the same, notwithstanding the repeated demands made upon them; that by such detention, the plaintiff had suffered losses and damages to the amount of P3,500. He therefore asked for judgment declaring plaintiff to be the owner of the said parcel of land and ordering defendants to return it to plaintiff and to pay the latter P3,500 for losses and damages, and the costs. WON: The deed of sale of 65 balitas of land situated in the municipality of Bacolor, Pampanga, executed by Estefania Bustos, with the assistance of her husband Bernardino Dizon, in favor of Agapito Geronimo Cruzado, for the sum of P2,200, was simulated.

General principles in the agreement as to price

Boston Bank of the Philippines v. Manalo, G. R. No. 158149, February 9, 2006
FACTS: Boston Bank, now petitioner, filed the instant petition for review on certiorari assailing the CA rulings. It maintains that, as held by the CA, the records do not reflect any schedule of payment of the 80% balance of the purchase price, or P278,448.00. Petitioner insists that unless the parties had agreed on the manner of payment of the principal amount, including the other terms and conditions of the contract, there would be no existing contract of sale or contract to sell.47 WON: Petitioner, as seller, forged a perfect contract to sell over a real property to respondents, as buyer. HELD: We agree with petitioners contention that, 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 is to be paid by the vendee. A definite agreement as to the price is an essential element of a binding agreement to sell personal or real property because it seriously affects the rights and obligations of the parties.

HELD:The simulation of the said sale was effected by making a pretended contract which bore the appearance of truth, when really and truly there was no contract, because the contracting parties did not in fact intend to execute one, but only to formulate a sale in such a manner that, for the particular purposes sought by Bustos and Cruzado, it would appear to have been celebrated solely that Cruzado might hold his office of procurador on the strength of the security afforded by the value of the land feignedly sold. This action is of course improper, not only because the sale was simulated, but also because it was not consummated. The price of the land was not paid nor did the vendee take possession of the property from the 7th of September, 1875, when the said sale was feigned, until the time of his death; nor did any of his successors, nor the plaintiff himself until the date of his claim, enter into possession of the land. That the contract of purchase and sale, as consensual, is perfected by consent as to the price and the thing and is consummated by the reciprocal delivery of the one and the other, the full ownership of the thing sold being conveyed to the vendee, from which moment the rights of action derived from this right may be exercised. It is, then, of the utmost importance to examine whether in the said sale the purchase price was paid and whether the vendee took possession of the land supposed to have been sold.

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2.) Effect if there is no consideration null and void (non-existence of the contract).
Doles v. Angeles, G. R. No. 149353, June 26, 2006 Barreto v. Sta. Marina, G. R. No. L-8169, December 29, 1913
(***CAVEAT EMPTOR: PLS READ THE FULL TEXT. CASE DOCTRINE RELATED TO SALES NOT CLEARLY ESTABLISHED IN THE CASE) FACTS: The La Insular cigar and cigarette factory is a joint account association with a nominal capital of P865,000, the plaintiffs share being P20,000, or 4/173 of the whole. On March 14, 1910, the plaintiffs attorneys wrote the defendants local representative a letter offering to sell to the defendant plaintiffs participation in the factory. The result of the correspondence between the parties and their representatives was that Exhibit G was duly executed on May 3, 1910. In accordance with the terms of this exhibit a committee of appraisers was appointed to ascertain and fix the actual value of La Insular. The committee rendered its report on November 14, 1910, fixing the net value at P4,428,194.44. Of this amount 4/173 part represented the plaintiffss share on his P20,000 of the nominal capital. In Exhibit J which wa s executed on November 22, 1910, the plaintiff acknowledged to have received from the defendant that amount. Subsequently to the execution of Exhibit J, demand was made by the plaintiff upon the defendant for his share of the profits from June 30, 1909, to November 22, 1910. This demand was refused and thereupon this action was instituted to recover said profits. Upon the evidence submitted at the hearing, the court below held: (1) That the agreement of May 3, 1910, was by its terms a contract to sell in the future and did not pass title and (2) that the sale of plaintiffs interest did not include the profits in question. Judgment was rendered accordingly, with interest and cost. The defendant appealed. SC: It was the appraisers who were appointed to ascertain and fix the total net value of the factory for the purpose of determining the true present value of the interest. - The appraiser was the one who determined the total net value of the shares of the company and thereafter that of Baretos share.

Sale is predicated on the loan, thus the sale is void for lack of consideration between petitioner and respondent since they were not privy to the contract of loan.
FACTS: On April 1, 1997, Ma. Aura Tina Angeles (respondent) filed with the RTC a complaint for Specific Performance with Damages against Jocelyn B. Doles (petitioner), docketed as Civil Case No. 97-82716. Respondent alleged that petitioner was indebted to the former in the concept of a personal loan amounting to P405,430.00 representing the principal amount and interest; that on October 5, 1996, by virtue of a "Deed of Absolute Sale", petitioner, as seller, ceded to respondent, as buyer, a parcel of land, as well as the improvements thereon, with an area of 42 square meters, covered by Transfer Certificate of Title No. 382532,4 and located at a subdivision project known as Camella Townhomes Sorrente in Bacoor, Cavite, in order to satisfy her personal loan with respondent; that this property was mortgaged to National Home Mortgage Finance Corporation (NHMFC) to secure petitioners loan in the sum of P337,050.00 with that entity. WON: The contract of sale on the parcel of land was executed for a cause.

HELD: Since the sale is predicated on that loan, then the sale is void for lack of consideration. In view of these anomalies, the Court cannot entertain the possibility that respondent agreed to assume the balance of the mortgage loan which petitioner allegedly owed to the NHMFC, especially since the record is bereft of any factual finding that petitioner was, in the first place, endowed with any ownership rights to validly mortgage and convey the property. As the complainant who initiated the case, respondent bears the burden of proving the basis of her complaint. Having failed to discharge such burden, the Court has no choice but to declare the sale void for lack of cause. And since the sale is void, the Court finds it unnecessary to dwell on the issue of whether duress or intimidation had been foisted upon petitioner upon the execution of the sale.

McCulough v. Aenlle & Co.,G. R. No. 1300, February 3, 1904

FACTS: Furniture and tobacco were sold, the furniture at 90% of the price shown in a subsequent inventory, and the tobacco at the invoice price. WON: Is the price here already considered certain? HELD: Yes. In view of the reference to certain amounts. (Paras, p.30) The document of August 27 was a completed contract of sale. The articles which were the subject of the sale were definitely and finally agreed upon. The appellee agreed to buy, among other things, all of the leaf tobacco in the factory. This was sufficient description of the thing sold. The price for each article was fixed. It is true that the price of this tobacco, for example, was not stated in dollars and cents in the contract. But by its terms the appellee agreed to pay therefor the amount named in the invoices then in existence. The price could be made certain by a mere reference to those invoices. By the instrument of August 27 the contract was perfected and thereafter each party could compel the other to fulfill it. By its terms the appellee was bound to take all the leaf tobacco then belonging to the factory and to pay therefor the prices named in the invoices. This obligation was absolute and did not depend at all upon the quality of the tobacco or its value. The appellee did not, in this contract, reserve the right to reject the tobacco if it were not of a specific crop. He did not buy tobacco of a particular kind, class, or quality. He bought all the tobacco which the appellant owned and agreed to pay for it what the defendant had paid for it. The plaintiff testified that this was the express agreement.

b.

In money or its equivalent (1458)

Torres vs CA
Lapu-lapu subdivision lot case: no money for consideration; but the expectation of profit (equivalent)
Facts:Petitioners and respondent entered into a joint venture agreement for the development of a parcel land located at Lapu-Lapu City island of Mactan into a subdivision. Pursuant to the contract, petitioners executed a deed of sale covering the said parcel of land in favor of the respondent, who then had it registered in his name. Thereafter, respondent mortgaged the property in the bank, and according to the joint agreement, the money obtained amounting to P40,000.00 was to be used for the development of the subdivision. However, the project did not push through, and the land was subsequently foreclosed by the bank. Because of this, petitioners filed a civil case before the Regional Trial Court of Cebu City, which was later dismissed by the trial court. On appeal, the Court of Appeals affirmed the decision of the trial court. The appellate court held that the petitioner and respondent had formed a partnership for the development of the subdivision. Thus, they must bear the loss suffered by the partnership in the same proportion as their share in the profits stipulated in the contract. Aggrieved by the decision, petitioner filed the instant petition contending that the Court of Appeals erred in concluding that the transaction between the petitioners and respondent was that of a joint venture/partnership. SC: The Joint Venture Agreement clearly states that the consideration for the sale was the expectation of profits from the subdivision project. Its first stipulation states that petitioners did not actually receive payment for the parcel of land sold to respondent. Consideration, more properly denominated as cause, can take different forms, such as the prestation or promise of a thing or service by another. In this case, the cause of the contract of sale consisted not in the stated peso value of the land, but in the expectation of profits from the subdivision project, for which the land was intended to be used. As explained by the trial court, "the land was in effect given to the partnership as [petitioner's] participation therein. . . . There was therefore a consideration for the sale, the [petitioners] acting in the expectation that, should the venture come into fruition, they [would] get sixty percent of the net profits." -expectations of profits from the subdivision projects is a valid form of consideration. -it is sufficient if it can be determined by the stipulations of the contract made by the parties thereto/ by reference to an agreement incorporated in the contract.

2.) Effect of indeterminability contract is inefficacious

Sale of Improvements introduced in Hacienda

Robles v. Lizarraga Hermanos, G. R. No. L-26173, July 13, 1927
FACTS: This action was instituted in the Court of First Instance of Occidental Negros by Zacarias Robles against Lizarraga Hermanos, a mercantile partnership organized under the laws of the Philippine Islands, for the purpose of recovering compensation for improvements made by the plaintiff upon the hacienda "Nahalinan" and the value of implements and farming equipment supplied to the hacienda by the plaintiff, as well as damages for breach of contract. Upon hearing the cause the trial court gave judgment for the plaintiff to recover of the defendant the sum of P14,194.42, with costs. From this judgment the defendant appealed. WON: The petitioner is allowed to recover the value of the improvements.

c. Certain or ascertainable (determinable) 1.)

How determined i.) By a third person (1469, pars. 1, 2, 4) -refer to case Barreto vs. Sta. Marina aa) If the third person is unable or unwilling to fix the price, the contract is inefficacious unless the parties come to an agreement ii.) By the Courts (1469, par. 3) if there is bad faith or mistake of the third party fixing the price iii.) By reference to a definite day, a particular exchange or market (1472) iv.) By reference to invoices -refer to case: McCulough v. Aenlle & Co. v.) By reference to the application of known factors, e.g. in proportion to variations in calories and ash content of coal2.)

HELD: In the case before us the deed of conveyance purports to transfer to the defendant only such interests in certain properties as had come to the conveyors by inheritance. Nothing is said concerning the rights in the hacienda which the plaintiff had acquired by lease or concerning the things that he had placed thereon by way of improvement or had acquired by purchase. The verbal contract which the plaintiff has established in this case is therefore clearly independent of the main contract of conveyance, and evidence of such verbal contract is admissible under the doctrine above stated. The rule that a preliminary or contemporaneous oral agreement is not admissible to vary a written contract appears to have more particular reference to the obligation expressed in the written agreement, and the rule had never been interpreted as being applicable to matters of consideration or inducement. In the case before us the written contract is complete in itself; the oral agreement is also complete in itself, and it is a collateral to the written contract, notwithstanding the fact that it deals with related matters. A contract for the sale of goods, chattels or things in action, at a price of not less than P100, shall be unenforceable unless the contract, or some note or memorandum thereof shall be in writing and subscribed by the party charged, or by his agent; and it is insisted that the court erred in admitting proof of a verbal contract over the objection of the defendant's attorney. But it will be noted that the same subsection contains a qualification, which is stated in these words, "unless the buyer accept and receive part of such goods and chattels." In the case before us the trial court found that the personal property, consisting of farming implements and other movables placed on the farm by the plaintiff, have been utilized by the defendant in the cultivation of the hacienda, and that the defendant is benefiting by those things.

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We are of the opinion that the stipulation with respect to the appraisal of the property did not create a suspensive condition. The true sense of the contract evidently was that the defendant would take over the movables and the improvements at an appraised valuation, and the defendant obligated itself to promote the appraisal in good faith. As the defendant partially frustrated the appraisal, it violated a term of the contract and made itself liable for the true value of the things contracted about, as such value may be established in the usual course of proof. Furthermore, it must occur to any one, as the trial judge pointed out, that an unjust enrichment of the defendant would result from allowing it to appropriate the movables without compensating the plaintiff thereof. The fourth assignment of error is concerned with the improvements. Attention is here directed to the fact that the improvements placed on the hacienda by the plaintiff became a part of the realty and as such passed to the defendant by virtue of the transfer effected by the three owner in the deed of conveyance (Exhibit B.). It is therefore insisted that, the defendant having thus acquired the improvements, the plaintiff should not be permitted to recover their value again from the defendant. This criticism misses the point. There can be no doubt that the defendant acquired the fixed improvements when it acquired the land, but the question is whether the defendant is obligated to indemnify the plaintiff for his outlay in making the improvements. It was upon the consideration of the defendant's promise so to indemnify the plaintiff that the latter agreed to surrender the lease nearly two no doubt as to the validity of the promise made under these circumstances to the plaintiff. 2. sales were w/sufficient considerations & made by their parents voluntarily in good faith & w/full knowledge of the consequences 3. certificates of title were issued w/factual & legal basis. Trial court dismissed the case WRT Gavino Joaquin & Lea Asis. Ruled in favor of the respondents & dismissed the complaint. 1. The right of the compulsory heirs to a legitime is contingent & it only commences from the moment of the death of the decedent (CC Art. 777). The value of the property left at the death of the testator is the basis for determining the legitime (Art. 908). Plaintiffs cannot claim an impairment of their legitime since their parents are still alive. 2. Deeds of Sale were executed for valuable consideration. CA affirmed Trial Court decision. In addition to the grounds stated by the trial court, CA also mentioned that: 1. While still alive, parents are free to dispose of their properties provided such is not done in fraud of creditors. 2. Petitioners are not parties in interest since theyre not parties to the deeds of sale nor are they creditors of their parents. Issues : 1.WON petitioners have a legal interest over the properties subject of the Deeds of Sale. NO. The complaint betrays their motive for filing the case. They are interested in obtaining the properties by hereditary succession but they have failed to show any legal right to these properties. Real party-in-interest is one who is either benefited or injured by the judgment of the party entitled to the avails of the suit. This includes parties to the agreement or are bound either principally/subsidiarily. Parties must have a present substantial interest & not merely expectancy/future contingent subordinate or consequential interest. In this case, the petitioners only have an inchoate rt w/c vests only upon the death of their parents. Besides, sale of the lots to their siblings does not affect the value of their parents estate since the lots are replaced with cash of equivalent value. 2. WON the deeds of sale are void for lack of consideration. NO. A contract of sale is not a real contract but a consensual contract. Its binding & valid upon the meeting of the minds as to the price regardless of the manner of payment or breach of such. Its still valid even if the real price is not stated in the contract, making it subject to reformation. But if the price is simulated, there is no meeting of the minds, thus the contract is void (CC Art. 1471). Act of payment of the price does not determine the validity of a contract of sale. Failure to pay the consideration is different from lack of consideration. The former results in a rt to demand fulfillment or cancellation of the contract while the latter prevents the existence of a valid contract. Petitioners failed to show that the prices in the deeds of sale were simulated. They dont even know the financial capacity of their siblings to buy these lots. Respondents minds met as to the purchase price w/c was stated in the deeds of sale & the buyer siblings have paid the price to their parents. 3. WON the Deeds of Sale are void for gross inadequacy of the price. NO. CC Art. 1355: Except in cases specified by law, lesion/ INADEQUACY OF CAUSE shall not invalidate a contract, unless there has been fraud, mistake or undue influence. CC Art. 1470: Gross inadequacy of price doesnt affect a contract of sale, except as may indicate a defect in the consent or that the parties really intended a donation or some other act or contract. Petitioners failed to prove any instance in the aforementioned provisions that would invalidate the deeds of sale. There is no requirement that the price be equal to the exact value of the property on sale. It only matters that all respondents believed that they received the commutative value of what they gave. Vales vs. Villa: Courts cannot be guardians of people who are not legally incompetent. Courts operate not because a person has been defeated/overcome by another, but because he has been defeated or overcome ILEGALLY. There should be a violation of the law, commission of what the law knows as an actionable wrong, before the courts are authorized to lay hold of the situation & remedy it.

3.) Effect of inadequacy of price (1470) does not affect the contract, but may show vice of consent (1470). Refer to inadequacy of cause in general, Art. 1355. Art. 1470. Gross inadequacy of price does not affect a contract of sale, except as it may indicate a defect in the consent, or that the parties really intended a donation or some other act or contract. -it does not affect the contract but may show vice of consent. -the offended party may invoke Art. 19 of the NCC (Abuse of Right Principle) Askay v. Cosolan
Facts: Askay obtained a title to the Mineral Claim which he allegedly sold to Cosalan. It was alleged that there is inadequacy of the consideration for transfer which, according to the deed of conveyance, and to the oral testimony, consisted of P107.00 in cash, a bill fold, one sheet, one cow and two carabaos. Issue: WON the sale is valid. Held: YES The fact that the bargain is a hard one, coupled with mere inadequacy of price when both parties are in a position to form an independent judgment concerning the transaction, is not sufficient ground for the cancellation of a contract.

Aguilar v. Rubiato
Facts: Rubiato was the owner of parcels of land and was desirous of obtaining a loan. He thereafter signed a power of attorney in favor of a certain Vila to secure a loan and to execute any writing for the mortgage of land. Vila pursuant to the power of attorney then sold the land to Aguilar, with the right of repurchase within one year and Rubiato was to remain in possession of the land as lessee. One year expired and Aguilar filed a case to consolidate ownership over the lands. Issue :Whether the contract was of sale or loan. Held: LOAN In addition to the evidence, there is one very cogent reason which impels us to the conclusion that Rubiato is only responsible to the plaintiff for a loan. It is that the inadequacy of the price which Vila obtained for the eight parcels of land belonging to Rubiato is so great that the minds revolts at it. Xxx The members of this court after most particular and cautious consideration, having in view all the facts and all the naturals tendencies of mankind, consider that Rubiato is only responsible to the plaintiff for the loan of P800.

1)
Sps. Buenaventura v. CA

Effect of Failure of Consideration

Facts: Sps Leonardo Joaquin & Feliciano Landrito are the parents of petitioners. Petitioners assail the sale of several lands by their parents to their other siblings (see p. 265 for complete list of sales made) for being void ab initio based on the ff grounds: 1. no actual valid consideration 2. properties are more than 3x more valuable than the measly purchase price (purchase price was grossly inadequate) 3. deeds of sale do not reflect & express the true intent of the parties 4. deliberate conspiracy designed to unjustly deprive the rest of the compulsory heirs of their legitime. Defense of the respondents: 1. no cause of action, requisite standing & interest

Note: Failure of consideration is different from the lack of consideration, the former results in a right to demand the fulfillment/ cancellation of the obligation under the existing valid contract. This is different from lack of consideration w/c prevents the existence of a valid contract.

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B. Earnest Money (1482) Art. 1482. Whenever earnest money is given in a contract of sale, it shall be considered as part of the price and as proof of the perfection of the contract a. It is considered part of the price, unless the contract is otherwise b. It is proof of perfection of the contract Earnest money- it is something of value that the buyer was really in earnest and given after the perfection of the contract. -part of the purchase price. Option money - distinct consideration. Manila Metal Container Corporation v. PNB
Petitioner was the owner of a parcel of land and to be able to secure a loan from PNB, petitioner executed a real party mortgage over the land. For its failure to pay, PNB foreclose the mortgaged and sold at public auction for which PNB was the winning bidder, with a one year period of redemption by the petitioner. Petitioner requested that there be an extension of time to redeem the property and it allowed to repurchase the property on installment. Meanwhile,the Special Assets Management Department had prepared a statement of accountof the petitioners obligation to which amounted to 1.5M. petitioner thereafter remitted thte amount of 800,000 as deposit to repurchase the property. When SAMD recommended to the management of the PNB that petitioner be allowed to repurchase the property at 1.5M, the management rejected and suggested that the property be purchased at 2.7M which was later reduced to 1.9M. But petitioner refused. Petitioner now filed a case for delivery of title, annulment of mortgage and specific performance with damages. It was its contention that it already accepted the offer of SAMD to sell the property at 1.5M, hence, PNB could no longer unilaterally withdraw its offer to sell the property. Its acceptance of the offer resulted in a perfected contract of sale. Respondent contended that the parties never graduated for the negotiation stage all that transpires was an exchange of proposal and counter-proposals and nothing more. There was still no agreement as to the amount and the manner of payment. The account made by SAMD cannot be classified as counter-offer because it was merely recital of facts of the obligations of petitioners. WON the P800,000 deposited is an earnest money. -NO The P800,000 could not be considered as an earnest money because an earnest money forms part of the purchase price. In this case, it did not. The P800,000 was merely a deposit that was accepted by PNB on the condition that the purchase price is subject to the approval of the PNB Board. Caoili was a lessee in the property of respondent. Respondent borrowed money from Caoili in the amount of Php 30,000 which they stipulated would form part of their rentals. When rentals was paid off, they entered into a not formal or written contract on the sale of the property. They executed a "Receipt" denominated as an "Addendum to Agreement dated August 8, 1990". It was stated they received from petitioners the sum of P140,000.00, in addition to the partial payment of P60,000.00, the "balance payable when the good title in the name of herein vendor is delivered to the spouses." Yet respondent refused to execute document. Respondent says that the Php 140,000 was for improvements and the Php 60,000 served as rental on the period they havent paying their rentals (amounts were claimed as partial payments by Caoili. RTC and CA both decided in favor of Caoili yet CA reduced the amount awarded. 1. (Not made in writing) The absence of a formal deed of sale does not render the agreement null and void or without any effect. The provision of Article 1358 of the Civil Code on the necessity of a public document is only for convenience, not for validity or enforceability. It does not mean that no contract has been perfected so long as the essential requisites of consent of the contracting parties, object, and cause of the obligation concur. Under the agreement, private respondent was obligated to deliver a good title to petitioners and this condition is the operative act which would give rise to the corresponding obligation of petitioners to pay the balance of the purchase price. Since it is not disputed that private respondent has not delivered a good title, petitioners have by law the right to either refuse to proceed with the agreement or to waive that condition pursuant to Article 1545 of the Civil Code. The Addendum being notarized is a prima facie evidence of the facts stated therein

2. Effect of lack of technical description in the contract

Naranja v. CA

Technical description is not necessary for there is no prescribed form of validity of contract of sale of real properties. What is mportant is that the subject of the contract of sale is an object that is DETERMINATE or at least DETERMINABLE Note: if the sale of a piece of land or interest therein when made thru an agent is VOID unless the agents authority is in writing.
To be valid, a contract of sale need not contain a technical description of the subject property. Contracts of sale of real property have no prescribed form for their validity; they follow the general rule on contracts that they may be entered into in whatever form, provided all the essential requisites for their validity are present. The failure of the parties to specify with absolute clarity the object of a contract by including its technical description is of no moment. What is important is that there is, in fact, an object that is determinate or at least determinable, as subject of the contract of sale. The deed of sale clearly identifies the subject properties by indicating their respective lot numbers, lot areas, and the certificate of title covering them. One who alleges any defect, or the lack of consent to a contract by reason of fraud or undue influence, must establish by full, clear and convincing evidence, such specific acts that vitiated the partys consent. Petitioners adduced no proof that Roque had lost control of his mental faculties at the time of the sale. Undue influence is not to be inferred from age, sickness, or debility of body, if sufficient intelligence remains. The Deed of Sale which states receipt of which in full I hereby acknowledge to my entire satisfaction is an acknowledgment receipt in itself. Moreov er, the presumption that a contract has sufficient consideration cannot be overthrown by a mere assertion that it has no consideration. Heirs are bound by contracts entered into by their predecessors-in-interest. Having been sold already to Belardo, the two properties no longer formed part of Roques estate which petitioners could have inherited.

Serrano v Caguiat G.R. No. 139173

Facts: Caguiat offered to buy the lot owned by spouses Serrano. Respondent gave P100K as partial payment, in turn, petitioners gave a receipt with a statement that respondent promised to pay the balance of the purchase price. Respondents were leaving for abroad and sought to cancel the transaction. Petitioners contend that there is no perfected contract as there was no clear agreement between the parties as to the amount of consideration. SC: In holding that there is a perfected contract of sale, both courts mainly relied on the earnest money given by respondent to petitioners (Art. 1482). We are not convinced.

It is true that Article 1482 of the Civil Code provides that Whenever earnest m oney is given in a contract of sale, it shall be considered as part of the price and proof of the perfection of the contract. However, this article speaks of earnest money given in a contract of sale. In this case, the earnest money was given in a contract to sell. The earnest money forms part of the consideration only if the sale is consummated upon full payment of the purchase price. Now, since the earnest money was given in a contract to sell, Article 1482, which speaks of a contract of sale, does not apply. As previously discussed, the suspensive condition (payment of the balance by respondent) did not take place. Clearly, respondent cannot compel petitioners to transfer ownership of the property to him.

b. When Statute of Frauds Apply Statute of Frauds applies only in cases for a) b) Specific performance, and For damages based on breach of contract

ARTICLES 1475-1488 I. RULES IN ORDINARY SALES A. Form a. General Rule (1483) Art. 1483. Subject to the provisions of the Statute of Frauds and of any other applicable statute, a contract of sale may be made in writing, or by word of mouth, or partly in writing and partly by word of mouth, or may be inferred from the conduct of the parties. (n)

Where the contract of sale has already been consummated, its enforcement cannot be barred by the Statute of Frauds, which applies on executory agreement. c. When Form is Essential 1) Under the Statute of Frauds Realty- a sale of real property orally is valid. The buyer may compel the seller to execute a formal deed of sale to be enforceable. Goods and chattels at a price of not less than P 500.

1. Verbal agreement of sale

Caoili v. CA

2) Sale of land through an Agent (1874) authority shall be in writing.

Verbal agreement of sale - Absence of a formal deed of sale does not render the agreement null and void or without any effect. The necessity of a public document (art. 1358) is only for convenience, not for validity or enforceability So long as the essential requisites of consent, object and cause of the obligation concur, there is a valid contract of sale
-

B. Perfection of a contract of sale (Art. 1475) a. General Rule At the moment there is a meeting of the minds (consensual) The parties may reciprocally demand performance, subject to the provisions of law governing the form of contracts

Requirements for perfection: a. When parties are face to face when an offer is accepted without conditions nor qualifications

Partly in writing and party by word of mouth May be inferred from the conduct of parties

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b. c. Thru correspondence or telegram when the offeror has knowledge of the acceptance When sale is subject to a suspensive condition from the moment the condition is fulfilled II. Rules on Special Sales A. Sales at Auction (Art. 1476) In the case of a sale by auction: (1) Where goods are put up for sale by auction in lots, each lot is the subject of a separate contract of sale. (2) A sale by auction is perfected when the auctioneer announces its perfection by the fall of the hammer, or in other customary manner. Until such announcement is made, any bidder may retract his bid; and the auctioneer may withdraw the goods from the sale unless the auction has been announced to be without reserve. (3) A right to bid may be reserved expressly by or on behalf of the seller, unless otherwise provided by law or by stipulation. (4) Where notice has not been given that a sale by auction is subject to a right to bid on behalf of the seller, it shall not be lawful for the seller to bid himself or to employ or induce any person to bid at such sale on his behalf or for the auctioneer, to employ or induce any person to bid at such sale on behalf of the seller or knowingly to take any bid from the seller or any person employed by him. Any sale contravening this rule may be treated as fraudulent by the buyer. In short: a. Sales of separate lots are separate contracts of sale b. When perfected when the auctioneer announces its perfection by the fall of the hammer, or in other customary manner Before the fall of the hammer The bidder may retract his bid Manila Mining Corporation (MMC) vs. Miguel Tan February 12, 2009 G.R. No. 171702, The auctioneer may withdraw the goods from the sale EXCEPTION: If the auction announced to be without reserve d. Limitations of the seller: 1. 2. The seller himself cannot bid He cannot employ or induce any person to bid on his behalf has been

Mere perfection of the contract does not necessarily transfer ownership. Romulo Coronel, et al vs. CA and Alcaraz G.R. No. 103577, October 7, 1996
FACTS: The Coronels sold their inherited house and lot to Ramona Patricia Alcaraz, with the conditions that they will effect the transfer of the title from their deceased father to their names upon receipt of the down payment, and after the transfer they will execute a Deed of Sale in favor of Alcaraz. The conditions were embodied in a document labeled Receipt of Down Payment. Alcaraz paid, and the title was transferred in the Coronels name. However, the Coronels sold the property to Catalina Mabanag, rescinded the contract with Alcaraz, and eventually executed a Deed of Sale in favor of Mabanag. In the complaint for specific performance filed against them, the Coronels contended that theirs was merely an executory contract to sell, hence there was no perfected contract of sale. HELD: The parties had agreed to a conditional contract of sale, consummation of which is subject only to the successful transfer of the certificate of title from the name of the petitioners father to their names. Since the condition contemplated by the parties which is the issuance of a certificate of title in petitioners names was fulfilled on February 6, 1985, the respective obligations of the parties under the contract of sale became mutually demandable. Note: even if document was denominated Receipt of down payment from that moment on, there was a perfected contract of sale albeit conditional (i.e. transfer of title to heirs and payment of balance of purchase price)

c.

FACTS: MMC ordered and received various electrical materials from Miguel Tan, and upon failure to pay the full amount despite several demands, Tan filed a collection suit. MMC contended that the absence of stamp marks on the original invoices and purchase orders negated the receipt of said documents by MMCs representatives, a requisite for payment. Having not received them thereby having no consent, their contract could not have been perfected. HELD: The purchase orders constituted accepted offers when Tan supplied the electrical materials to MMC. Hence, petitioner cannot evade its obligation to pay by claiming lack of consent to the perfected contracts of sale. The invoices furnished the details of the transactions.

EXCEPTION: If right to bid has been expressly reserved e. Limitations of the auctioneer (if he is not the seller); 1. 2. The auctioneer cannot bid He cannot employ or induce to bid on behalf of the seller He cannot knowingly take any bid from the seller or any person employed by him

Note: the purchase orders constituted accepted offers when Tan supplied electrical materials to MMC.

1) The buyer has the right to a reasonable opportunity for examination before acceptance (1584) except when a carrier delivers C.O.D. 2) Sale by description and/or sample (1481): The bulk of the goods must correspond to either or both. b. Place of Perfection 1) where there was meeting of the minds

3.

By-bidders or puffers people who bid for seller, but are not themselves bound Case: a.

2) in case of acceptance through letter or telegram, in the place where the offer was made.

Validity of Supplemental Munutes on Sherrifs Sale

Dizon vs. Dizon

The sale by auction is perfected when the auctioneer announces its perfection by the fall of the hammer or in other customary manner (Case: Dizon vs. Dizon Considering that the auction sale has been perfected, a supplemental sale with higher consideration at the instance of only one party(herein petitioner) could no longer be validly executed) Before the hammer falls: - The bidder may retract his bid. The reason behind this is that every bidder is merely an offer and therefore, before it is accepted, it may be withdrawn - The auctioneer may also withdraw the goods from the sale EXCEPT if the auction has been announced to be WITHOUT RESERVE.

Phil. Virginia Tobacco Administration (PVTA) vs. de los Angeles, et al G.R. No. L-33079, December 11, 1978 PVTA was vested with the power and duty to direct, supervise and control all functions and operations with respect to the trading of Virginia tobacco and in line with this duty, it entered into a management contract with Central Cooperative Exchange, Inc. (CCE), to procure, redry, store and service Virginia tobacco for the PVTA and advance payment to the trading entities within 48 hours from its acceptance. On or about July 24, 1963, a fire broke out and razed down the plant, demands were made for the collection of the value of the tobacco, no payments were given, hence, the suit. PVTA maintained that since the tobacco was still to be inspected, graded and weighed when the plant was destroyed the contract of sale was not perfected. HELD: The decisive factor is the delivery of the thing sold. So that it is placed under the control and possession of the vendee C. Expenses a. Of Execution and Registration of the sale (1487) are borne by the Seller b. Of putting the goods in a deliverable state (1521, last par.) are also borne by the Seller.

2) Auction Sale where the seller reserved the right to reject any and all the bids
Leoquinco vs. Postal Savings Bank Q: Can seller bid? A. NO. he can manipulate the price. He can bid if he reserves his right to bid and notifies.
Because of the expressed stipulation that PSB reserved to themselves the right to reject any and all bids, the bid of petitioner may be rejected. Petitioners participation in the auction means submission or being bounded to the rules of auction whether the purchaser knew the rules or not

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Limitations of the seller: The seller himself cannot bid He cannot employ or induce any person to bid on his behalf (people who bid for the seller, but are not themselves bound, are called by-bidders or puffers)

EXCEPTION: if right to bid has been expressly reserved and that notice of such was given Limitations of the auctioneer (if he is not the seller) The auctioneer cannot bid He cannot employ or induce to bid on behalf of the selle He cannot knowingly take any bid from the seller or any person employed by him

Cancel the sale, should the vendees failure to pay cover two or more installments (if the remedy of cancellation is availed of, there must be a MUTUAL RESTITUTION of whatever had been received by either party; except is there is a proviso that installments paid shall be forfeited. Such stipulation is valid, provided it is NOT UNCONSCIONALBE (question of fact) under the circumstance. RECTO LAW: Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendees failure to pay cover two or more installments. In this case, he shall have no further action against the purchases to recover any unpaid balance of the price. Any agreement to the contrary shall be VOID.
C. Sale of Personalty payable by Installments (Recto Law)

In an execution sale: Judgment Creditor will have a writ to garnish or attach the property of the debtor and sheriff sells it in a public sale Judgment debtor has the right to redeem the property within 1 year Note: The owner of the property offered for sale at auction has the right to prescribed the manner, condition and terms of sale and where these are reasonable and are made known to the buyer, they are binding upon them.

Q: when is Recto Law applicable? A: 1. Applicable to personal property on installments 2. Rights of unpaid seller (article 1484) 3. Mortgage is constituted on the VERY OBJECT OF THE SALE PURPOSE OF THE RECTO LAW - This was to remedy the abuses committed in connection with the foreclosure of chattel mortgages. Otherwise, the buyer would find himself without the property and still indebted Note: The remedies enumerated in this article are NOT CUMULATIVE. They are ALTERNATIVE, and if one is exercised, the others cannot be made use of
a. Alternative remedies in case of non-payment (1484) 1) To exact fulfillment of the obligation 2) Cancel the sale should the vendee fail to pay two or more installments

Q: Why cant the seller participate in the bidding? A: He cannot bid because in doing such he can manipulate the biddings of other participants Note: it is the seller who will set the terms and condition of the sale. If the seller will bid in the auction without reserving such right and informing the public, the sales will be considered as fraudulent. Q: Will such fraud affect the perfection of the contract? A: Yes, the contract will be VOID with NO force and effect

B.

Sale by description or sample (Art. 1481)

i) This is an exception to 1191 3) Foreclose the chattel mortgage (if one was constituted) should the vendee fail to pay two or more installments. But there may be no further action to recover the unpaid balance. A contrary stipulation is void. b. Cases a.

The bulk of the goods must correspond to either or both The buyer must have an opportunity to compare Effect: the contract may be rescinded at the option of the buyer Sale by description goods must correspond with the description; where the buyer relies on the sellers representations or descriptions MACONDRAY V DE SANTOS

Promissory note with chattel mortgage

Sale by sample goods must correspond with the sample shown; where the seller warrants that the bulk of the goods shall correspond with the sample in kind, quality and character

cannot invoke RECTO LAW If the remedy chosen by the vendor is to foreclose the mortgage, he shall have no further action against the purchaser for the recovery of any unpaid balance owing by the same
Granting that there was a contract between the parties for the sale of personal property payable in installments, which does not clearly appear in the record before this court, the complaint does not allege nor does it appear in the record that there was a failure to pay twoor more installments. On the contrary the promissory note, copied in the complaint, was executed January 11, 1934, and, according to the complaint, on or about January 21, 1934,the automobile, while in the possession of the defendant, was wrecked and by reason of the failure of the defendant to replace said automobile or to pay the value thereof the plaintiff foreclosed the mortgage on what remained of the wrecked automobile and brought this suit to recover the balance due on the promissory note executed in its favor. In order to apply the provisions of article 1454-A of the Civil Code it must appear that there was a contract for the sale of personal property payable in installments and that there has been a failure to pay two or more installments.

Sale by description and sample the bulk should correspond with both the sample and description

PACIFIC COMMERCIAL COMPAN vs. ERMITA MARKET & COLD STORES, INC.

What was delivered corresponds to what was described before the sale, although the machine is of no purpose to what is intended for her, buyer should pay!
Plaintiff contracted to sell to defendant an automatic refrigerating machine as per description stated in the sales contract. The machine was delivered and by mutual agreement the vendor installed the machine. The machine did not give the results expected from it, and the defendant refused to pay the balance of its purchase price and the cost of the installation of the machine. Thereupon plaintiff brought this action. Held: The fact that the defendant could not use the machine satisfactorily in the three cold stores divisions cannot be attributed to plaintiff's fault; the machine was strictly in accordance with the written contract between the parties, and the defendant can hardly honestly say that there was any deception by the plaintiff.

b. LEVY HERMANOS V GERVACIO

Sale of car on straight term

Article 1484 - Contemplates on a sale of PERSONAL PROPERTY the price of which is payable in INSTALLMENTS Remedies: Exact fulfillment of the obligation, should the vendee failed to pay

If the sale is for cash or on STRAIGHT TERMS (also called CASH SALE), Article 1484 does NOT apply - Straight term: balance, after payment of the initial sum, should be paid in its TOTALITY at the time specified in the promissory note. In this case, since the sale was that of a cash sale, it is not bound by the prohibition in Art. 1484 as to its right to recovery of the unpaid balance

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In Macondray & Co. vs. De Santos (33 OG 2170), it was held that in order to apply the provisions of article 1454-A of the Civil Code it must appear that there was a contract for the sale of personal property payable in installments and that there has been a failure to pay two or more installments. The contract, in the present case, while a sale of personal property, is not, however, one on installments, but on straight term, in which the balance, after payment of the initial sum, should be paid in its totality at the time specified in the promissory note. The transaction is not, therefore, the one contemplated in Act 4122 and accordingly the mortgagee is not bound by the prohibition therein contained as to its right to the recovery of the unpaid balance. Theoretically, there is no difference between paying the price in two installments and paying the same partly in cash and partly in one installment, in so far as the size of each partial payment is concerned; but in actual practice the difference exists, for, according to the regular course of business, in contracts providing for payment of the price in two installments, there is generally a provision for initial payment. A cash payment cannot be considered as a payment by installment, and even if it can be so considered, still the law does not apply, for it requires non-payment of two or more installments in order that its provisions may be invoked. In the present case, only one installment was unpaid. It is thus clear that while ASIAN eventually succeeded in taking possession of the mortgaged vehicle, it did not pursue the foreclosure of the mortgage as shown by the fact that no auction sale of the vehicle was ever conducted. "Under the law, the delivery of possession of the mortgaged property to the mortgagee, the herein appellee, can only operate to extinguish appellant's liability if the appellee had actually caused the foreclosure sale of the mortgaged property when it recovered possession thereof. Consequently, in the case before Us, there being no actual foreclosure of the mortgaged property, ASIAN is correct in resorting to an ordinary action for collection of the unpaid balance of the purchase price.

MAGNA VS COLARINA

Where the mortgage elects a remedy of foreclosure, the law requires the actual foreclosure of the mortgaged chattel. It is actual sale of the mortgaged chattel that would bar the creditor from recovering any unpaid balance. Although no actual foreclosure as contemplated under the law has taken place in this case, since the vehicle is already in the possession of Magna and it has persistently avowed that it elects the remedy of foreclosure, the CA, thus, ruled correctly in directing the foreclosure of the said vehicle without more.
Undoubtedly the principal object of the above amendment (referring to Act 4122 amending Art. 1454, Civil Code of 1889) was to remedy the abuses committed in connection with the foreclosure of chattel mortgages. This amendment prevents mortgagees from seizing the mortgaged property, buying it at foreclosure sale for a low price and then bringing the suit against the mortgagor for a deficiency judgment. The almost invariable result of this procedure was that the mortgagor found himself minus the property and still owing practically the full amount of his original indebtedness. In its Memorandum before us, petitioner resolutely declared that it has opted for the remedy provided under Article 1484(3) of the Civil Code, that is, to foreclose the chattel mortgage. It is, however, unmistakable from the Complaint that petitioner preferred to avail itself of the first and third remedies under Article 1484, at the same time suing for replevin. For this reason, the Court of Appeals justifiably set aside the decision of the RTC. Perusing the Complaint, the petitioner, under its prayer number 1, sought for the payment of the unpaid amortizations which is a remedy that is provided under Article 1484(1) of the Civil Code, allowing an unpaid vendee to exact fulfillment of the obligation. At the same time, petitioner prayed that Colarina be ordered to surrender possession of the vehicle so that it may ultimately be sold at public auction, which remedy is contained under Article 1484(3). Such a scheme is not only irregular but is a flagrant circumvention of the prohibition of the law. By praying for the foreclosure of the chattel, Magna Financial Services Group, Inc. renounced whatever claim it may have under the promissory note. Article 1484, paragraph 3, provides that if the vendor has availed himself of the right to foreclose the chattel mortgage, he shall have no further action against the purchaser to recover any unpaid balance of the purchase price. Any agreement to the contrary shall be void. In other words, in all proceedings for the foreclosure of chattel mortgages executed on chattels which have been sold on the installment plan, the mortgagee is limited to the property included in the mortgage.

c.

Sale of Truck on installment where foreclosure was not pursued

SPOUSES ROMULO DE LA CRUZ and DELIA DE LA CRUZ, and DANIEL FAJARDO vs. ASIAN CONSUMER AND INDUSTRIAL FINANCE CORPORATION and the HONORABLE COURT OF APPEALS,

Facts: Asian was not the seller but steps into the shoes of the original creditor Dela Cruz did not pay thus Asian foreclosed the mortgages - When sheriff tried to retrieve the property, dela Cruz did not surrender the property right away. It was only 2 weeks after that the petitioner voluntarily surrendered the property - Asia sued for the price rather than pursue the foreclosure Issue: Can you first sue for foreclosure then change yourr mind and ask for specific performance Ruling: It is only when the vendor did not desist in the continuance of foreclosure in its own initiative that it can still choose to ask for specific performance instead
Facts: On 22 September 1982, the spouses Romulo de la Cruz and Delia de la Cruz, and one Daniel Fajardo, petitioners herein, purchased on installment basis one (1) unit Hino truck from Benter Motor Sales Corporation (BENTER for brevity). To secure payment, they executed in favor of BENTER a chattel mortgage over the vehicle 1 and a promissory note for P282,360.00 payable in thirty (30) monthly installments of P9,412.00. 2 On the same date, BENTER assigned its rights and interest over the vehicle in favor of private respondent Asian Consumer and Industrial Finance Corporation (ASIAN for brevity). 3 Although petitioners initially paid some installments they subsequently defaulted on more than two (2) installments. Thereafter, notwithstanding the demand letter of ASIAN, 4 petitioners failed to settle their obligation. On 26 September 1984, by virtue of a petition for extrajudicial foreclosure of chattel mortgage, the sheriff attempted to repossess the vehicle but was unsuccessful because of the refusal of the son of petitioner, Rolando de la Cruz to surrender the same. Hence, the return of the sheriff that the service was not satisfied. LLpr On 10 October 1984, petitioner Romulo de la Cruz brought the vehicle to the office of ASIAN and left it there where it was inventoried and inspected. 5 On 27 November 1984, ASIAN filed an ordinary action with the court a quo for collection of the balance of P196,152.99 of the purchase price, plus liquidated damages and attorney's fees. Petitioners take exception. They nevertheless insist that he should not later be allowed to change course midway in the process, abandon the foreclosure and shift to other remedies such as collection of the balance, especially after having recovered the mortgaged chattel from them and while retaining possession thereof. HELD: The instant case is covered by the so-called "Recto Law", now Art. 1484 of the New Civil Code, which provides: "In a contract of sale of personal property the price of which is payable in installments, the vendor may exercise any of the following remedies: (1) Exact fulfillment of the obligation, should the vendee fail to pay; (2) Cancel the sale, should the vendee's failure to pay cover two or more installments; (3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee's failure to pay cover two or more installments. In this case, he shall have no further action against the purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be void." In this jurisdiction, the three (3) remedies provided for in the "Recto Law" are alternative and not cumulative; the exercise of one would preclude the other remedies. Consequently, should the vendeemortgagor default in the payment of two or more of the agreed installments, the vendormortgagee has the option to avail of any of these three (3) remedies: either to exact fulfillment of the obligation, to cancel the sale, or to foreclose the mortgage on the purchased chattel, if one was constituted. (Pacific Commercial Co. vs. De la Rama)

Q: Why is it that in the case of dela Cruz, the filing of specific performance was still granted even after the expressed desire to foreclose the mortgage was done, however, in the Magna case, although foreclosure had not yet technically took place because there was still no foreclosure sale, filing for specific performance can no longer be obtained? (difference of Asian and Magna case) A: In the first case, there was bad faith with dela Cruz because they did not voluntarily surrender the object right away. On the other hand, Elias Colarina voluntarily surrendered the object upon the expressed desire of foreclosure was given.
C. Leases of personalty with option to buy.

Elisco Tool and Manufacturing Corp. vs. CA

Rolando Lantan was employed at the Elisco Tool Manufacturing Corporation as head of its cash department. On January 9, 1980, he entered into an agreement with the company, called lease with option to buy car within 5 years. That owner ship shall retain with the company until full payment and all necessary expenses for maintenance shall be borne by the employee. Subsequently the company has ceased operation and the employee was laid off. It took the company 2 years to institute proceedings. Sellers desirous of making conditional sales of their goods, but who do not wish openly to make a bargain in that form, for one reason or another, have frequently resorted to the device of making contracts in the form of leases either with options to the buyer to purchase for a small consideration at the end of term, provided the so-called rent has been duly paid, or with stipulations that if the rent throughout the term is paid, title shall thereupon vest in the lessee. It is obvious that such transactions are leases only in name. The so-called rent must necessarily be regarded as payment of the price in installments since the due payment of the agreed amount results, by the terms of the bargain, in the transfer of title to the lessee. The so-called monthly rentals are in truth form monthly amortization on the price of the car. The contract being one of sale on installment, the Court of Appeals correctly applied to it the following provisions of the Civil Code: Art. 1484. In a contract of sale of personal property the price of which is payable in installments, the vendor may exercise any of the following remedies: (1) Exact fulfillment of the obligation, should the vendee fail to pay;

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(2) Cancel the sale, should the vendee's failure to pay cover two or more installments; (3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee's failure to pay cover two or more installments. In this case, he shall have no further action against the purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be void. The remedies provided for in Art. 1484 are alternative, not cumulative. The exercise of one bars the exercise of the others. limitation applies to contracts purporting to be leases of personal property with option to buy by virtue of Art. 1485. The condition that the lessor has deprived the lessee of possession or enjoyment of the thing for the purpose of applying Art. 1485 was fulfilled in this case by the filing by petitioner of the complaint for replevin to recover possession of movable property. By virtue of the writ of seizure issued by the trial court, the deputy sheriff seized the vehicle on August 6, 1986 and thereby deprived private respondents of its use. The car was not returned to private respondent until April 16, 1989, after two (2) years and eight (8) months, upon issuance by the Court of Appeals of a writ of execution. The employee having found to have paid more than the value of the thing P60,000 should be considered as payment of the full purchase price. It further petitioner to pay private respondents the amount of P431.94 as excess payment, as well as rentals at the rate of P1,000 a month for depriving private respondents of the use of their car.

Note: In both cases after full payment of cash surrender value

a. Applicability- Real estate bought on installment basis. Transactions covered: sale/ financing of real estate on installment payments, including residential condominium apartments but: 1. 2. 3. industrial lots commercial bldg.. sales to tenants under RA 3844

b. Rules when the buyer has paid at least 2 years of installments. 1.) Rights of Buyers i. In case of default in payment Section 3 of R.A. No. 6552 provided for the rights of the buyer in case of default in the payment of succeeding installments, where he has already paid at least two (2) years of installments, thus: ii. If the contract is cancelled, the seller shall refund to the buyer the cash surrender value of the payments on the property equivalent to fifty per cent of the total payments made; provided, that the actual cancellation of the contract shall take place after thirty days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act and upon full payment of the cash surrender value to the buyer."

PCI Leasing and finance vs. Giraffe X

Since the lessor has deprived the lessee of possession or enjoyment of the thing by REPLEVIN, he can no longer ask for the purchase value; he is considered to have waived his rights to bring an action to recover unpaid rentals on the said leased item
Giraffe entered into an agreement with PCI leasing over 2 machines worth P8,000,000. Giraffe agreed to pay P116,878.21 monthly and P181,362 for the other machine. It has also remitted the amount of P3,120,000 as goodwill. A year into the life of the lease agreement, respondent defaulted in paying the monthly rentals. PCI Sued Giraffe for possession of the machineries and for payment of the remaining term. Issue: Whether the underlying lease agreement are covered between 1484 and 1485 of the New Civil Code? SC: Yes they are. Evidently the contract above is in reality an option to purchase the equipment. The Recto Law Art. 1484. In a contract of sale of personal property the price of which is payable in installments, the vendor may exercise any of the following 3.) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendees failure to pay cover two or more installments. In this case he shall have no further action against the purchaser to recover any unpaid balance of the price. Any agreement contrary shall be void. Art. 1485. The preceding article shall be applied to contract purporting to be leases of personal property with the option to buy, when the leasor deprived the lesee of the possession or enjoyment of the thing. Therefore Giraffe is not liable to pay for the remaining term since the machineries has been foreclosed. PCI LEASING- GIRAFFE lease agreement is in reality a lease with an option to purchase the equipment. This has been made manifest by the actions of the petitioner itself, foremost of which is the declarations made in its demand letter to the respondent. There could be no other explanation than that if the respondent paid the balance, then it could keep the equipment for its own; if not, then it should return them. This is clearly an option to purchase given to the respondent. Being so, Article 1485 of the Civil Code should apply.

Right to update payments Right to assign/ reinstate contract (must be in Public document)
Section 5. Under Section 3 and 4, the buyer shall have the right to sell his rights or assign the same to another person or to reinstate the contract by updating the account during the grace period and before actual cancellation of the contract. The deed of sale or assignment shall be done by notarial act. 1. 2. The buyer has the right to sell/assign his right to another person (must be done by notarial act) The buyer has the right to reinstate the contract by upgrading the account during the grace period and before actual cancellation of the contract.

Right to advance payment w/out interest

"(a) To pay, without additional interest, the unpaid installments due within the total grace period earned by him, which is hereby fixed at the rate of one month grace period for every one year of installment payments made; x x x The buyer has the right to pay in advance any installment/ the full balance of the purchase price anytime w/out interest and to have such full payment annotated in the certificate of title. Section 6. The buyer shall have the right to pay in advance any installment or the full unpaid balance of the purchase price any time without interest and to have such full payment of the purchase price annotated in the certificate of title covering the property. NOTE: to be refunded of the cash surrender value of his payments if the contract is cancelled. Actual cancellation takes place: 1) after 30 days from receipt of notice of cancellation by notarial act. 2) upon full payment of cash surrender value. Sale of real property on installments (Maceda Law [RA 6552])

E. Sale of Real Property on Installments (Maceda Law, RA 6552) Reality Installment Buyer Protection Act.

MACEDA LAW (RA 6552) Q: When is this law applicable? A: - An act to provide protection to buyers of REAL ESTATE on installment payments - This includes residential condominium apartments but excluding industrial lots, commercial buildings and sales to tenants (under RA 3844/6379), where the buyer has paid at least two years of installments - It applies to both Contract of Sale and Contract to Sell Q: What are the Rules when the buyer has paid at least two years of installments but defaults in the payment of succeeding installments? A: Default in payment - To pay without additional interest, the unpaid installments (cash surrender value) within the grace period Grace period is one month for every year of installment payments made Limitation: The right can be exercised only once every 5 years Cancellation of sale/ Cash Surrender Value (how much should seller refund?) - Up to 5 years installments, refund of 50% of payments After 5 years of installments, additional 5% per year but shall not exceed 90% of total payments made
When cancellation takes effect: - After 30 days from receipt by the buyer of (notarized) notice of cancellation; or - After 30 days from receipt by the buyer of notarial demand for rescission

In short: Rights of buyer: Default in payment To pay without additional interest, the unpaid installments (cash surrender value) within the grace period Grace period is one month for every year of installment payments made Limitation: The right can be exercised only once every 5 years

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Cancellation of sale Up to 5 years installments, refund of 50% of payments After 5 years of installments, additional 5%/year but shall not exceed 90% of total payments made

Q: What are the Rules when the buyer has paid less than two years of installments? A: The buyer has at least 60 days grace period within which to pay the installment due If the buyer fails to pay the installments due at expiration of the grace period, the seller may cancel contract after thirty days from receipt by the buyer of notice of cancellation or the demand for rescission of contract by a notarial act the the the the

When cancellation takes effect: (refer to: Pagtalunan vs. deManzano) After 30 days from receipt by the buyer of (notarized) notice of cancellation; or After 30 days from receipt by the buyer of notarial demand for rescission

1) Where the buyer paid less than 2 years installments

Ramos vs Heruela

*In both cases after full payment of cash surrender value c. When the buyer has paid less than two years installments 1) The buyer has at least 60 days grace period within which to pay the installment due 2) After the grace period, contract may be cancelled as in B above (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 from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act.)

In this case since there was no notice of cancellation given to the lessee, they are not yet considered to have defaulted in giving the payment as the grace period has not yet been counted. Thus, they are still given the right to pay for the unpaid installments despite the great lapse of time.
Down payments, deposits or options on the contract shall be included in the computation of the total number of installments made. 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 from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act. In this case, the spouses Heruela paid less than two years of installments. Thus, Section 4 of RA 6552 applies. However, there was neither a notice of cancellation nor demand for rescission by notarial act to the spouses Heruela. In Olympia Housing, Inc. v. Panasiatic Travel Corp., 22 the Court ruled that the vendor could go to court to demand judicial rescission in lieu of a notarial act of rescission. However, an action for reconveyance is not an action for rescission. The Court explained in Olympia: The action for reconveyance filed by petitioner was predicated on an assumption that its contract to sell executed in favor of respondent buyer had been validly cancelled or rescinded. The records would show that, indeed, no such cancellation took place at any time prior to the institution of the action for reconveyance. . . . xxx xxx xxx . . . Not only is an action for reconveyance conceptually different from an action for rescission but that, also, the effects that flow from an affirmative judgment in either case would be materially dissimilar in various respects. The judicial resolution of a contract gives rise to mutual restitution which is not necessarily the situation that can arise in an action for reconveyance. Additionally, in an action for rescission (also often termed as resolution), unlike in an action for reconveyance predicated on an extrajudicial rescission (rescission by notarial act), the Court, instead of decreeing rescission, may authorize for a just cause the fixing of a period. 23 In the present case, there being no valid rescission of the contract to sell, the action for reconveyance is premature. Hence, the spouses Heruela have not lost the statutory grace period within which to pay. The trial court should have fixed the grace period to sixty days conformably with Section 4 of RA 6552.

Pagtalunan vs. De Manzano

Actual cancellation of the contract shall take place AFTER 30 DAYS from receipt by the buyer of the (1) notice of cancellation or the demand for rescission of the contracts by a notarial act and upon (2) payment of the cash surrender value (TWIN REQUIRMENT SHOULD BE MADE)
(Patricio), petitioners stepfather and predecessor-in-interest, entered into a Contract to Sell with respondent, wife of Patricios former mechanic, Teodoro Manzano, whereby the former agreed to sell, and the latter to buy, a house and lot which formed half of a parcel of land. The consideration of P17,800 was agreed to be paid in the following manner: P1,500 as downpayment upon execution of the Contract to Sell, and the balance to be paid in equal monthly installments of P150 on or before the last day of each month until fully paid. It was also stipulated in the contract that respondent could immediately occupy the house and lot; that in case of default in the payment of any of the installments for 90 days after its due date, the contract would be automatically rescinded without need of judicial declaration, and that all payments made and all improvements done on the premises by respondent would be considered as rentals for the use and occupation of the property or payment for damages suffered, and respondent was obliged to peacefully vacate the premises and deliver the possession thereof to the vendor. Petitioner claimed that respondent paid only P12,950. She allegedly stopped paying after December 1979 due to personal problems with the petitioner. Petitioner asserted that when respondent ceased paying her installments, her status of buyer was automatically transformed to that of a lessee. Therefore, she continued to possess the property by mere tolerance of Patricio. Issue: Whether the respondent has the right to occupy the premises? SC: Yes, According to Republic Act No. 6552 -- "The Realty Installment Buyer Protection Act," or more popularly known as the Maceda Law (b) If the contract is cancelled, the seller shall refund to the buyer the cash surrender value of the payments on the property equivalent to fifty percent of the total payments made and, after five years of installments, an additional five percent every year but not to exceed ninety percent of the total payments made: Provided, That the actual cancellation of the contract shall take place after thirty days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act and upon full payment of the cash surrender value to the buyer.9 The Court agrees with petitioner that the cancellation of the Contract to Sell may be done outside the court particularly when the buyer agrees to such cancellation. However, the cancellation of the contract by the seller must be in accordance with Sec. 3. Firstly the demand letter made by the petitioner to vacate the premises does not constitute notice of cancellation. Second petitioner cannot insist on compliance with the requirement by assuming that the cash surrender value payable to the buyer had been applied to rentals of the property after respondent failed to pay the installments due. Therefore a deed of absolute sale shall be made after payment of purchase price.

2.)

Sale of subdivision lot on installments where the buyer defaulted.

Active Realty Corporation vs. Daroya

The failure to cancel the contract in accordance with the procedure provided by law (twin requirements), the court held that the contract to sell between the parties remains valid and subsisting. - As Daroya lost her chance to pay the balance, since the property was sold to a 3rd party, it is only just and equitable that the petitioner be ordered to refund Daroya the actual value of the lot resold or at the value it was sold to the 2nd buyer.
ACTIVE REALTY & DEVELOPMENT CORPORATION entered into a Contract to Sell1 with respondent NECITA DAROYA whereby the latter agreed to buy a 515 sq. m. lot for P224,025.00 in petitioners subdivision to be paid in amortization within 5 years, valued at P346,367.00, a figure higher than that stated as the contract price. The buyer defaulted in three (3) monthly amortizations. Petitioner sent respondent a notice of cancellation2 of their contract to sell. When respondent offered to pay for the balance of the contract price, petitioner refused as it has allegedly sold the lot to another buyer. The respondent has already paid 4 years. already more than the contract price. Issue: Whether or not the petitioner can be compelled to refund to the respondent the value of the lot or to deliver a substitute lot at respondents option? SC: Yes, According to Republic Act No. 6552 -- "The Realty Installment Buyer Protection Act," or more popularly known as the Maceda Law More specifically, Section 3 of R.A. No. 6552 provided for the rights of the buyer in case of default in the payment of succeeding installments, where he has already paid at least two (2) years of installments, thus:

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"(a) To pay, without additional interest, the unpaid installments due within the total grace period earned by him, which is hereby fixed at the rate of one month grace period for every one year of installment payments made; x x x (b) If the contract is cancelled, the seller shall refund to the buyer the cash surrender value of the payments on the property equivalent to fifty per cent of the total payments made; provided, that the actual cancellation of the contract shall take place after thirty days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act and upon full payment of the cash surrender value to the buyer." We hold that the contract to sell between the parties remains valid and subsisting. Following Section 3(a) of R.A. No. 6552, respondent has the right to offer to pay for the balance of the purchase price, without interest, which she did in this case. However since the lot has been sold to another party it is only just and equitable that the petitioner be ordered to refund to respondent the actual value of the lot resold, i.e., P875,000.00, with 12% interest per annum.

articles of partnership or association, as the case may be, with all the amendments thereof and existing by-laws or instruments corresponding thereto. (d) A title to the property which is free from all liens and encumbrances: Provided, however, that in case any subdivision lot or condominium unit is mortgaged, it is sufficient if the instrument of mortgage contains a stipulation that the mortgagee shall release the mortgage on any subdivision lot or condominium unit as soon as the full purchase price for the same is paid by the buyer. The person filing the registration statement shall pay the registration fees prescribed therefor by the Authority. Thereupon, the Authority shall immediately cause to be published a notice of the filing of the registration statement at the expense of the applicant-owner or dealer, in two newspapers general circulation, one published in English and another in Pilipino, once a week for two consecutive weeks, reciting that a registration statement for the sale of subdivision lots or condominium units has been filed in the National Housing Authority; that the aforesaid registration statement, as well as the papers attached thereto, are open to inspection during business hours by interested parties, under such regulations as the Authority may impose; and that copies thereof shall be furnished to any party upon payment of the proper fees. The subdivision project of the condominium project shall be deemed registered upon completion of the above publication requirement. The fact of such registration shall be evidenced by a registration certificate to be issued to the applicant-owner or dealer. Section 5. License to sell. Such owner or dealer to whom has been issued a registration certificate shall not, however, be authorized to sell any subdivision lot or condominium unit in the registered project unless he shall have first obtained a license to sell the project within two weeks from the registration of such project. The Authority, upon proper application therefor, shall issue to such owner or dealer of a registered project a license to sell the project if, after an examination of the registration statement filed by said owner or dealer and all the pertinent documents attached thereto, he is convinced that the owner or dealer is of good repute, that his business is financially stable, and that the proposed sale of the subdivision lots or condominium units to the public would not be fraudulent. Section 7. Exempt transactions. A license to sell and performance bond shall not be required in any of the following transactions: (a) Sale of a subdivision lot resulting from the partition of land among co-owners and co-heirs. (b) Sale or transfer of a subdivision lot by the original purchaser thereof and any subsequent sale of the same lot. (c) Sale of a subdivision lot or a condominium unit by or for the account of a mortgagee in the ordinary course of business when necessary to liquidate a bona fide debt. Section 18. Mortgages. No mortgage on any unit or lot shall be made by the owner or developer without prior written approval of the Authority. Such approval shall not be granted unless it is shown that the proceeds of the mortgage loan shall be used for the development of the condominium or subdivision project and effective measures have been provided to ensure such utilization. The loan value of each lot or unit covered by the mortgage shall be determined and the buyer thereof, if any, shall be notified before the release of the loan. The buyer may, at his option, pay his installment for the lot or unit directly to the mortgagee who shall apply the payments to the corresponding mortgage indebtedness secured by the particular lot or unit being paid for, with a view to enabling said buyer to obtain title over the lot or unit promptly after full payment thereto; Section 23. Non-Forfeiture of Payments. No installment payment made by a buyer in a subdivision or condominium project for the lot or unit he contracted to buy shall be forfeited in favor of the owner or developer when the buyer, after due notice to the owner or developer, desists from further payment due to the failure of the owner or developer to develop the subdivision or condominium project according to the approved plans and within the time limit for complying with the same. Such buyer may, at his option, be reimbursed the total amount paid including amortization interests but excluding delinquency interests, with interest thereon at the legal rate. Section 24. Failure to pay installments. The rights of the buyer in the event of this failure to pay the installments due for reasons other than the failure of the owner or developer to develop the project shall be governed by Republic Act No. 6552. Where the transaction or contract was entered into prior to the effectivity of Republic Act No. 6552 on August 26, 1972, the defaulting buyer shall be entitled to the corresponding refund based on the installments paid after the effectivity of the law in the absence of any provision in the contract to the contrary. Section 25. Issuance of Title. The owner or developer shall deliver the title of the lot or unit to the buyer upon full payment of the lot or unit. No fee, except

Article 1488 - Generally, since expropriation is involuntary, it does not result in a sale - It only becomes a transaction of sale if the property owner voluntarily sells the property to the government Eminent Domain right given to the state Expropriation refers to the process ESSENTIAL REQUISITES FOR EXPROPRIATION 1. Taking by competent authority 2. Observance of due process of law 3. Taking for public use 4. Payment of just compensation

F. PD No. 957 a. Important provisions Sec. 4, 5, 7, 18, 23 ,24 ,25 Section 4. Registration of Projects The registered owner of a parcel of land who wishes to convert the same into a subdivision project shall submit his subdivision plan to the Authority which shall act upon and approve the same, upon a finding that the plan complies with the Subdivision Standards' and Regulations enforceable at the time the plan is submitted. The same procedure shall be followed in the case of a plan for a condominium project except that, in addition, said Authority shall act upon and approve the plan with respect to the building or buildings included in the condominium project in accordance with the National Building Code (R.A. No. 6541). The subdivision plan, as so approved, shall then be submitted to the Director of Lands for approval in accordance with the procedure prescribed in Section 44 of the Land Registration Act (Act No. 496, as amended by R.A. No. 440): Provided, that it case of complex subdivision plans, court approval shall no longer be required. The condominium plan as likewise so approved, shall be submitted to the Register of Deeds of the province or city in which the property lies and the same shall be acted upon subject to the conditions and in accordance with the procedure prescribed in Section 4 of the Condominium Act (R.A. No. 4726). The owner or the real estate dealer interested in the sale of lots or units, respectively, in such subdivision project or condominium project shall register the project with the Authority by filing therewith a sworn registration statement containing the following information: (a) Name of the owner; (b) The location of the owner's principal business office, and if the owner is a non-resident Filipino, the name and address of his agent or representative in the Philippines is authorized to receive notice; (c) The names and addresses of all the directors and officers of the business firm, if the owner be a corporation, association, trust, or other entity, and of all the partners, if it be a partnership; (d) The general character of the business actually transacted or to be transacted by the owner; and (e) A statement of the capitalization of the owner, including the authorized and outstanding amounts of its capital stock and the proportion thereof which is paidup. The following documents shall be attached to the registration statement: (a) A copy of the subdivision plan or condominium plan as approved in accordance with the first and second paragraphs of this section. (b) A copy of any circular, prospectus, brochure, advertisement, letter, or communication to be used for the public offering of the subdivision lots or condominium units; (c) In case of a business firm, a balance sheet showing the amount and general character of its assets and liabilities and a copy of its articles of incorporation or

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those required for the registration of the deed of sale in the Registry of Deeds, shall be collected for the issuance of such title. In the event a mortgage over the lot or unit is outstanding at the time of the issuance of the title to the buyer, the owner or developer shall redeem the mortgage or the corresponding portion thereof within six months from such issuance in order that the title over any fully paid lot or unit may be secured and delivered to the buyer in accordance herewith. Far East Bank & Trust Co vs. Marquez
Marquez entered into a contract to sell with TSE involving a 52.5 sqm lot and a three storey townhouse for P800,000. Later respondent was able to pay a total of P600,000. TSE then mortgaged the whole property to Far East Bank. TSE was unable to pay and the property was foreclosed and sold in favor of Far East Bank. Issue: 1.)Whether or not the mortgage contract violated Section 18 of PD.957, hence void insofar as third persons are concerned. 2.) Who has a higher right the new buyer or the respondent? SC: Yes violated Sec. 18. as provides as follows. Sec. 18. Mortgages- No mortgage on any unit or lot shall be made by the owner or developer without prior written approval of the authority. Such approval shall not be granted unless it is shown that the proceeds of the mortgage loan shall be used for the development of the condominium or subdivision project and effective measures have been provided to ensure such utilization. The loan value of each lot or unit covered by the mortgage shall be determined and the buyer thereof, if any, shall be notified before the release of the loan. The buyer may, at his option, pay his installment for the lot or unit directly to the mortgagee who shall apply the payments to the corresponding mortgage indebtness secured by the particular lot or unit being paid for , with a view to enabling said buyer to obtain title over the lot or unit promptly after full payment thereof. Since TSE did not obtain prior approval from the NHA the mortgage is void as regarding to the property to the respondent as he has no standing to question the validity of the other property. 2.) Respondent has a higher right over the property. Petitioner cannot be considered as a buyer in good faith. He should have considered that it was a town house that was already in progress. The conversion of status from mortgagee to buyer will not lessen the importance of such knowledge. In his answer, respondent Casal averred that despite his willingness to deliver them, petitioners refused to accept the certificates of title with notice of lis pendens covering the subdivision lots. Respondents Ang and Cuason claimed in their answer with counterclaim 16 that respondent Casal remained the registered owner of the subdivided lots when they were transferred to them and that the failure by petitioners to annotate their claims on the title indicated that they were unfounded. Respondent CRS Realty and the Heirs of Laudiza were declared in default for failure to file their respective answers. Issues: Whether or not the absence of a license to sell has rendered the sales void; (2) whether or not the subsequent sale to respondent Cuason and Ang constitutes double sale; Held: Petitioners assail the Court of Appeals' ruling that the lack of the requisite license to sell on the part of respondent CRS Realty rendered the sales void; hence, neither party could compel performance of each other's contractual obligations. The only requisite for a contract of sale or contract to sell to exist in law is the meeting of minds upon the thing which is the object of the contract and the price, including the manner the price is to be paid by the vendee. Under Article 1458 of the New Civil Code, in a contract of sale, whether absolute or conditional, one of the contracting parties obliges himself to transfer the ownership of and deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent. In the instant case, the failure by respondent CRS Realty to obtain a license to sell the subdivision lots does not render the sales void on that ground alone especially that the parties have impliedly admitted that there was already a meeting of the minds as to the subject of the sale and price of the contract. The absence of the license to sell only subjects respondent CRS Realty and its officers civilly and criminally liable for the said violation under Presidential Decree (P.D.) No. 957 30 and related rules and regulations. The absence of the license to sell does not affect the validity of the already perfected contract of sale between petitioners and respondent CRS Realty. As found by the Court of Appeals, in the case at bar, the requirements of Sections 4 and 5 of P.D. [No.] 957 do not go into the validity of the contract, such that the absence thereof would automatically render the contract null and void. It is rather more of an administrative convenience in order to allow a more effective regulation of the industry.

CHAPTER 2 CAPACITY TO BUY OR SELL Arts. 1489 1492

Tamayo vs. Huang I. Parties and their Consent

Respondents Huang registered owners of four parcels of land located in Barangay Matina, Davao City executed a contract of "Indenture" with EAP Development Corporation (EAP) under which EAP undertook to manage and develop said parcels of land into a first class subdivision and sell the lots therein in, Doa Luisa Village (the subdivision). Carlos R. Tamayo (petitioner) entered into a contract to sell with respondents through EAP for a certain lot. Under the contract, petitioner was to pay upon execution P35,749.60 and the balance, including interest at the rate of 14% per annum, in 60 monthly installments of P4,791.40, without necessity of demand; and if petitioner failed to pay the installments, respondents were given the right to demand interest thereon at the rate of 14% per annum, to be computed on the same day of the month the installments became due. Later on the development of the subdivision was put to stop by EAP, in effect petitioner stopped paying the monthly amortization. The respondents sent the petitioner a demand letter, but after the reply of the petitioner with an explanation of stop payment the respondent was unheard of.. After 5 years the development was soon in progress and petitioner offered to pay the full purchase price which was already rejected by the respondent. Later on the property was sold by the respondent to another person. Issue: 1.)Did the petitioner have any legal basis for stop payment? 2.)Is the contract to sell between the parties rescinded? SC: 1.) Yes.According Section 23 of PD 957 requires only due notice to the owner or developer for stopping further payments by reason of the latters failure to develop the subdivision according to the approved plans and within the time limit. Therefore the buyer had the right to stop payment due to the failure of the developer to comply with the contract. He only needed to give due notice to the owner(Huangs) or Developer to give it effect. 2.) Yes. Respondents sent no notarized notice or any notice of cancellation at all. In fact, it was only after petitioner filed on July 24, 1997 the complaint before the HLURB that respondents offered to reimburse petitioner of the total amount he had already paid. The contract not having been cancelled in accordance with law, it has remained valid and subsisting. It was, therefore, within petitioners right to maintain his option to await the completion of the development of and introduction of improvements in the subdivision and thereafter, upon full payment of the purchase price, without interest, compel respondents to execute a deed of absolute sale, but since the property was sold to a buyer in good faith. The respondents should refund the petitioner for the value of the property when it was sold.

A. Capacity in general (1489) Art. 1489. All persons who are authorized in this Code to obligate themselves, may enter into a contract of sale, saving the modifications contained in the following articles. Where necessaries are sold and delivered to a minor or other person without capacity to act, he must pay a reasonable price therefor. Necessaries are those referred to in article 290.

Note: A person who has both juridical capacity and capacity to act is said to have full civil capacity. It is understood that he is of legal age and suffers no restriction on his capacity to act, such person may enter into any contract including sale. Necessaries include everything that is indispensible for sustenance, dwelling, clothing, and medical attendance according to the social position of the family. Support also includes the education of the person entitled to be supported
Article 1490 The husband and the wife cannot sell property to each other, except: (1) When a separation of property was agreed upon in the marriage settlements; or (2) When there has been a judicial separation or property under Article 191. (1458a) GR: husband and wife cannot sell property to each other - Why? To avoid prejudice to third persons; to prevent one from unduly influencing the other EXCEPTION: (becomes voidable when there is vitiated consent) o When a separation of property was agreed upon the marriage settlements o When there has been a judicial separation of property under Article 191 - Effect of Sale: VOID. Q: Who can assail the nullity of the sale? A: Only prior creditors as well as the heirs of either spouse may invoke the nullity of the sale.

Cantemperante vs CRS realty Facts:

Herein petitioners were among those who filed before the HLURB a complaint 6 for the delivery of certificates of title against respondents CRS Realty Development Corporation (CRS Realty), Crisanta Salvador and Cesar Casal. Petitioners averred that they had bought on an installment basis subdivision lots from respondent CRS Realty and had paid in full the agreed purchase prices; but notwithstanding the full payment and despite demands, respondents failed and refused to deliver the corresponding certificates of title to petitioners. The complaint prayed that respondents be ordered to deliver the certificates of title corresponding to the lots petitioners had purchased and paid in full and to pay petitioners damages.

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Note: The spouses themselves, since they are parties to an illegal act, cannot avail themselves of the illegality of the sale. The law will generally leave them as they are. B. Special Disqualifications to Buy a. Between Spouses b. By Spouse without consent of the other spouse - Void c. Persons in Trust Relations Article 1491 The following persons cannot acquire by purchase, even at a public or judicial auction, either in person or through the mediation of another: (1) The guardian, the property of the person or persons who may be under his guardianship; (2) Agents, the property whose administration or sale may have been entrusted to them, unless the consent of the principal has been given; (3) Executors and administrators, the property of the estate under administration; (4) Public officers and employees, the property of the State or of any subdivision thereof, or of any government-owned or controlled corporation, or institution, the administration of which has been intrusted to them; this provision shall apply to judges and government experts who, in any manner whatsoever, take part in the sale; (5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other officers and employees connected with the administration of justice, the property and rights in litigation or levied upon an execution before the court within whose jurisdiction or territory they exercise their respective functions; this prohibition includes the act of acquiring by assignment and shall apply to lawyers, with respect to the property and rights which may be the object of any litigation in which they may take part by virtue of their profession. (6) Any others specially disqualified by law. (1459a)

1)

Effect of sale of land to ones own spouse

Uy Siu Pin vs. Cantollas, G.R. No. 46850, June 20, 1940

The sale from Uy Siu Pin to his wife Chua Hue is NULL and VOID not only because the former had no right to dispose of the land in controversy in view of the existence of the contract between petitioner and respondent but because such sale comes within the prohibition of article 1490.
Facts: There was a contract entered into between Uy Siu Pin and Casimira and Blas, which the latter agreed to deliver the mortgaged land and to enjoy the same with its improvements to the during the period of 15 years on condition that Uy Siu Pin would pay El Hogar Filipino the unpaid balance of the indebtedness of casimira and Blas, together with all other expenses including realty taxes. When the mortgage debtors, Casimira and Blas, failed to redeem the land within the statutory period, a final deed of sale was issued in favor of the mortgagee, El Hogar Filipino. The latter sold the land to Uy Siu Pin and in turn sold the land to his wife Chua Hue. Issues: Is the sale valid between Uy Siu Pin and Chua Hue? Held: SC said No. The sale from Uy Siu Pin to his wife Chua Hue is null and void not only because theformer had no right to dispose of the land in contorversy but because the sale comes within the prohibition of Article 1458 of the Civil Code.

Note: The case did not extensively explicate the reason why the sale between spouses are prohibited. However, Art 1490 provides that the husband and wife cannot sell property to each other, except: (1) when a separation of property was agreed upon in the marriage settlements; or (2) when there has been a judicial separation of property under articel 191. Rationale behind the prohibiton: (a) to prevent the stronger spouse from exploiting the weaker spouse; (b) prevent donations disguised as sales; (c) protect third persons, specially creditors, against fraud through the transfer of the properties of one spouse to the other to evade payment of obligations. 2) Transfer in relationship common law

This article refers to RELATIVE INCAPACITY - The following persons cannot acquire by purchase, even at a public or judicial auction: The guardian property of the person who may be under his guardianship Agents property entrusted to him, unless the consent of the principal has been given (he may buy after the termination of the agency) 1.) Sale to agent: Exception to prohibition against sale by principal in favor of his agent.
Pelayo vs. Perez, G.R. No. 141323, June 8, 2005

Ching vs. Goyanko, G.R. No. 165879, November 10, 2006

The proscription against sale of property between spouses applies even to common law relationships - The contract of sale between the father of respondents and petitioner was null and void for being contrary to morals and public policy. The sale was made by a husband in favor of a concubine. - Consequently, contracts whose cause, object or purpose is contrary to law, morals, good customs, public order, or public policy are void and inexistent from the very beginning
FACTS: Respondents claim that their parents (Goyanko and Epifania) acquired a 661 square meter property but they (the parents) were Chinese citizens at the time, the property was registered in the name of their aunt, Sulpicia Ventura. Sulpicia executed a deed of sale over the property in favor of reespondents father Goyanko that in turn executed a deed of sale over the same property in favor of his common-law-wife-herein petitioner Maria B. Ching. It was only after Goyankos death that they discovered the transfer of the said property to Chi ng. Respondents thus filed with the RTC of Cebu City a complaint for recovery of the property and the nullification of the deed of sale. ISSUE: Whether or not the sale of the property by Goyanko to Ching is valid. HELD: The conveyance of Goyanko in favor of his common-law-wife-herein petitioner, was null and void. Article 1409 of the Civil Code states inter alia that contracts whose cause, object, or purpose is contrary to law, morals, good customs, public order, or public policy are void and inexistent from the very beginning. Article 1352 also provides that: Contracts without cause, or with unlawful cause, produce no effect whatsoever. The cause is unlawful if it is contrary to law, morals, good customs. Public order, or public policy. Additionally, the law emphatically prohibits the spouses from selling property to each other subject to certain exceptions. Similarly, donations between spouses during marriage are prohibited. And this is so because if transfers or conveyances between spouses were allowed during marriage, that would destroy the system of conjugal partnership, a basic policy in civil law. It was also designed to prevent the exercise of undue influence by one spouse over the other, as well as to protect the institution of marriage, which is the cornerstone of family law. The prohibitions apply to a couple living as husband and wife without benefit of marriage, otherwise, the condition of those who incurred guild would turn out to be better that those in legal union.

A wifes consent to the husbands disposition of conjugal property DOES NOT always have to be explicit or set forth in any particular document, so long as it is shown by acts of the wife that such consent or approval was given The prohibition against agents purchasing property in their hands for sale or management is NOT ABSOLUTE. It does not apply if the principal consents to the sale of the property in the hands of the agent or administrator. Executors and administrators the property of the estate under administration Public officers and employees property of the state or subdivision thereof
FACTS: David Pelayo, by a Deed of Absolute Sale, conveyed to Melki Perez two parcels of agricultural land. Loreza, wife of David Pelayo,k and another one whose signature is illegible witnessed the execution of the deed. Loreza, however, signed only the third page. Perez asked Loreza to sign on the first and second pages of the deed but refused, hence, he instituted the instant complaint for specific performance against the spouses. Petitioners, in adopting the trial courts narration of antecedent facts in their petition, admitted that they authorized respondent to represent them in negotiations with the squatters occupying the disputed property and, in consideration of respondents services, they executed the subject deed of sale. Defendant Pelayo claimed that the deed was without his wifes consent, hence, it is null and void. ISSUE: Whether or not the deed of sale was null and void. HELD: Petitioner Lorenza, by affixing her signature to the Deed of Sale on the space provided for witnesses, is deemed to have given her implied consent to the contract of sale. Sale is a consensual contract that is perfected by mere consent, which may either be express or implied. A wifes consent to the husbands disposition of conjugal property does not always have to be explicit or set forth in any particular document, so long as it is shown by acts of the wife that such consent or approval was indeed given. In the present case, although it appears on the face of the deed of sale that Lorenza signed only as an instrumental witness, circumstances leading to the execution of said document point to the fact that Lorenza was fully aware of the sale of their conjugal property and consented to the sale.

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Under Article 173, in relation to Article 166, both of the New Civil Code, when the deed in question was executed, the lack of marital consent to the disposition of conjugal property does not make the contract void ab initio but merely voidable. It has been held that the contract is valid until the court annuls the same and only upon an action brought by the wife whose consent was not obtained. In the present case, despite respondents repeated demands for Lorenza to affix her signature on all the pages of the deed of sale, showing respondents insistence on enforcing said contract, Lorenza still did not fle a case for annulment of the deed of sale. Thus, if the transaction was indeed entered into without Lorenzas consent, we find it quite puzzling why for more than three and a half years, Lorenza did nothing to seek the nullification of the assailed contract. With regards to petitioners asservation that the deed of sale is invalid under Article 1491 (2) of the New Civil Code, we find such argument unmeritorious. Petitioners, by signing the Deed of Sale in favor of respondent, are also deemed to have given their consent to the sale of the subject property in favor of respondent, thereby making the transaction an exception to the general rule that agents are prohibited from purchasing the property of their principals. HELD: In providing the prohibitions under Article 1491, the Code tends to prevent fraud, or more precisely, tends not give occasion for fraud, which is what can and must be done. The point is that he is a public officer and his wife acts for and in his name in any transaction with the GSIS. If he is allowed to participate in the public bidding of properties foreclosed or confiscated by the GSIS, there will always be the suspicion among other bidders and the general public that the insider official had access to information and connection with his fellow GSIS official as to allow him to eventually acquire the property. It is precisely the need to forestall such suspicions and to restore confidence in the public service that the Civil Code now declares such transactions to be void from the beginning and not merely voidable.

4.) Sale/transfer to attorney

Gurrea vs. Suplico, G.R. No. 144320, April 26, 2006

2.) Sale to guardians

Philippine Trust Co. vs Roldan
Facts: Parcels located in Guiguinto, Bulacan, were part of the properties inherited by Mariano L. Bernardo from his father, Marcelo Bernardo, deceased. In view of his minority, guardianship proceedings were instituted, wherein Socorro Roldan was appointed his guardian. She was the surviving spouse of Marcelo Bernardo, and the stepmother of said Mariano L. Bernardo. On July 27, 1947, Socorro Roldan filed in said guardianship proceedings (Special Proceeding 2485, Manila), a motion asking for authority to sell as guardian the 17 parcels for the sum of P14,700 to Dr. Fidel C. Ramos, the purpose of the sale being allegedly to invest the money in a residential house, which the minor desired to have on Tindalo Street, Manila. The motion was granted. Socorro Roldan, as guardian, executed the proper deed of sale in favor of her brother-in-law Dr. Fidel C. Ramos. Dr. Fidel C. Ramos executed in favor of Socorro Roldan, personally, a deed of conveyance covering the same seventeen parcels, for the sum of P15,000. The Philippine Trust Company replaced Socorro Roldan as guardian, on August 10, 1948. And this litigation, started two months later, seeks to undo what the previous guardian had done. The step-mother in effect, sold to herself, the properties of her ward, contends the plaintiff, and the sale should be annulled because it violates Article 1459 of the Civil Code prohibiting the guardian from purchasing "either in person or through the mediation of another" the property of her ward. ISSUE: Whether or not the sale was valid. HELD: As Guardianship is a trust of the highest order, the trustee cannot be allowed to have any inducement to neglect his ward's interest; and whenever the guardian acquires the ward's property through an intermediary, he violates the provision of Article 1459 of the Civil Code and such transaction and subsequent ones emanating therefrom shall be annulled. Even without proof that she had connived with Dr. Ramos. Remembering the general doctrine that guardianship is a trust of the highest order, and the trustee cannot be allowed to have any inducement to neglect his ward's interest and in line with the court's suspicion whenever the guardian acquires the ward's property 1 we have no hesitation to declare that in this case, in the eyes of the law, Socorro Roldan took by purchase her ward's parcels thru Dr. Ramos, and that Article 1459 of the Civil Code applies.

Q: When is an object considered under litigation? A: A thing is said to be in litigation not only if there is some contest or litigation over it in court, but also from the moment that it becomes subject to the judicial action of the judge. Hence, it is not safe to conclude, for purpose under article 1491 that the litigation has terminated when the judgment of the trial court became final while a certiorari connected therewith is still in progress Since in this case, the judge has yet to act on the execution, it follows that the subject property is still the object of litigation, that is special proceeding no. 7185 (while the subject property was assigned to Gurrea, the title over the subject lot was still in the name of Adelina and was not conveyed to Ricardo Gurrea when the Transfer of Rights and Interest was executed) Assignment of rights and interest was NULL and VOID
FACTS: Adelina Gurrea continued to be the owner of the lot (TCT No. 58253) until her death. Thereafter, a special proceeding was instituted to settle her estate. Under her will, the San Juan lot was bequeathed to Pilar and Luis Gurrea, while 700,000 pesetas, of the lot in Baguio and 1-hectare piece of land in Negros Occidental were given to Ricardo Gurrea. Ricardo Gurrea, represented by and through his counsel Atty. Enrique Suplico filed an Opposition in Special Proceeding No. 7185. In consideration of said representation, Ricardo Gurrea agreed to pay Atty. Suplico a contigent fee of twenty (20%) of whatever is due me, either real or personal property. Later on, Ricardo withdrew his Opposition. The properties adjudicated to Ricardo based on the project of partition were the Baguio lot, San Juan lot, and a parcel of land in Negros Occidental. As payment of his attorneys fees, Ricarod Gurrea offered the San Juan lot to Atty. Suplico who was hesitant to accept as the property was occupied by squatters. However, in order not to antagonize his client, Atty. Suplico agreed to Ricardos proposal with the further understanding that he will receive an additional commission of 5% if he sells the Baguio property. Thereafter, Atty. Suplico registered the deed of Transfer of Rights and Interest and obtained the title to the San Juan property under his name. ISSUE: Whether or not the subject property is still the object of litigation; If affirmative, whether or not the sale is void for being violative of the provisions of Article 1491 (5) of the Civil Code. HELD: The sale to Atty. Suplico is null and void. A thing is said to be in litigation only if there is some contest or litigation over it in court, but also from the moment that it becomes subject to the judicial action of the judge. In the present case, there is no proof to show that at the time the deed of Transfer of Rights and Interest was executed, the probate court issued an order granting the Motion for Termination of Proceeding and Discharge of the Executor and Bond. Since the judge has yet to act on the above-mentioned motion, if follows that the subject property which is the subject matter of the deed of Transfer of Rights and Interest, is still the object of litigation. Having been established that the subject property was still the object of litigation at the time the subject deed of Transfer of Rights and Interest was executed, the assignment of rights and interest over the subject property in favor of respondent is null and void for being violative of the provisions of Article 1491 of the Civil Code which expressly prohibits lawyers from acquiring property or rights which may be the object of any litigation in which they may take party by virtue of their profession.

3.) Sale to public officers

Maharlika Broadcasting Corp. vs. Tagle

In this case, Luz Tagle was the wife of the Chief of the Retirement Division of GSIS SC declares it to be a policy of the law that public officers who hold positions of trust may not bid DIRECTLY or INDIRECTLY to acquire properties foreclosed by their offices and sold at public auction Why? So as to avoid the suspicion among other bidders and the general public that the insider official had access to information and connections as to allow one to eventually acquire the property It is precisely the need to forestall such suspicions and to restore confidence in the public service that the Civil Code now declares such transactions to be VOID from the beginning and not merely voidable. Justices, Judges, prosecuting attorneys, clerks of superior and inferior courts, and other officers and employees connected with the administration of justice the property and rights in litigation or levied upon and execution
FACTS: The GSIS was the registered owner of a parcel of land that was sold to petitioner Maharlika Publishing Corporation together with the building thereon as well as the printing machinery and equipment therein. Among the conditions of the sale are that petitioner shall pay to the GSIS monthly installments until the total purchase price shall be fully paid and that failure to pay any monthly installment within 90 days from due date, the contract shall be deemed automatically cancelled. Maharlika failed to pay the installments for several months. This resulted to a public bidding of this particular property. Petitioner submitted a letterproposal that reads: I bid to match the highest bidder. The bidding committee rejected petitioners bid and accepted the private respondent Luz Tagles bid. After approval and confirmation of the sale, the GSIS executed a Deed of Conditional Sale in favor of Tagles. Luz Tagle is the wife of Edilberto Tagle. Edilberto Tagle was the Chief, Retirment Division, GSIS, from 1970 to 1978. He worked for the GSIS since 1952. ISSUE: Whether or not the sale is valid.

Note: A lawyer who purchase the property of his client which is in litigation would be a BREACH OF PROFESSIONAL CONDUCT Article 1491 DOES NOT prohibit a lawyer from acquiring a certain percentage of the value of the properties in litigation that may be awarded to his client Q: What is the reason for the law? A: Public policy prohibits the transactions in view of the fiduciary relationship involved Note: While aliens cannot buy land because of the Constitution, they do not fall under the phrase any others specially disqualified by law under 1490. Aliens can become lessees even if they cannot buy lands. Article 1492 - The prohibitions in the two preceeding articles are applicable to sales in legal redemption, compromise and renunciation

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SUMMARY OF IMPORTANT POINTS Special Disqualifications to buy: a. Husband and wife (14900) while under the community regime (absolute or relative) b. Persons in trust relations (1491), public or private (agents, guardians, administrators, public officers, judges, attorneys, etc.) 1. Transactions included in the disqualification (1492): redemption, compromise, arbitration, leases (1646) 2. Includes persons expressly disqualified by law in similar cases (ejusdem generic) i. Under the Constitution, aliens may not acquire residential lands- such sales are void This prohibition was suspended during the Japanese occupation Manzano vs. Ocampo, L-46850, June 20, 1940 Under the provisions of 1412, however, neither party may set aside the contract since both are in pari delicto But subsequent naturalization of the alien buyer as a Filipino citizen before the sale is attacked validates such acquisition, retroacting to the date of the conveyance ii. Krivenko ruling applied to unregistered religious organizations c. In auctions, the seller may not bid, unless notice is given (1476, par 4) reserving such right. d. The seller cannot buy in resale (after rescission or stoppage in transitu) where directly or indirectly (1533)
HELD: Free patent application implies the recognition of the public dominion character of the land and, hence, the five year prohibition imposed by the Public land Act against alienation or encumbrance of the land covered by a free patent or homestead should have been considered. The deed of sale covering the 50 sq.m. right of way executed on March 18, 1981 is obviously covered by proscription, the free patent having been issued on October 8, 1979. However, petitioners may recover the portion sold since the prohibition was imposed in favor of the free patent holder. Under the Public Land Act, the prohibition to alienate is predicated on the fundamental policy of the State to preserve and keep in the family of the homesteader that portion of public land which the State has gratuitously given to him, and recovery is allowed even where the land acquired under the Public Land Act was sold and not merely encumbered, within the prohibited period. The sale of the 533 sq.m. was executed 22 years before the issuance of the patent in 1976. Where the sale or transfer took place before the filing of the free patent application, whether by the vendor or the vendee, the prohibition should not be applied. In such situation, neither the prohibition not the rationale therefor which is to keep in the family of the patentee that portion of the public land which the government has gratuitously given him, by shielding him from the temptation to dispose of his landholdings, could be relevant. Precisely, he had disposed of his rights to the lot even before the government could give the title to him.

2.)

Effect of verbal sale within 5year prohibitory period

Victorino Manzano and Ocampo entered into a contract of sale. Knowing however, that any sale of the homestead at that time was prohibited and void, the parties likewise agreed that the deed of sale was to be made only after the lapse of five years from the date of Manzanos patent It is clear that a perfected contract of sale had already been entered into by the parties within the period of prohibition. This execution of the formal deed after the expiration of the prohibitory period did not and could not legalize a contract that was void from its inception
Facts: Victoriano Manzano, now deceased, was granted a homestead patent on June 25, 1934, and the land was registered in his name on July 25, 1934 under Original Certificate of Title No. 4590. On January 4, 1938, he and respondent Rufino Ocampo agreed on the sale of said homestead for the amount of P1,900.00, P1,100.00 of which was paid by Ocampo to Manzano on the same day, and for the balance, he executed a promissory note. Knowing, however, that any sale of the homestead at that time was prohibited and void, the parties likewise agreed that the deed of sale was to be made only after the lapse of five years from the date of Manzano's patent. And to protect the buyer Ocampo's rights in the agreed sale, Manzano executed in his favor a "Mortgage of Improvements" over the homestead to secure the amount of P1,100.00 already received as down payment on the price. It is clear that a perfected contract of sale had already been entered into by the parties within the period of prohibition. There was nothing "futuristic" in this agreement, except that, being fully aware of the prohibition, Manzano's title has not ripened into absolute ownership. This execution of the formal deed after the expiration of the prohibitory period did not and could not legalize a contract that was void from its inception. Nor was this formal deed of sale "a totally distinct transaction from the promissory note and the deed of mortgagee for it was executed only in compliance and fulfillment of the vendor's previous promise, under the perfected sale to execute in favor of his vendee the formal act of conveyance after the lapse of the period of inhibition of five years from the date of the homestead patent. Sale in question is illegal and void for having been made within five years from the date of Manzano's patent, in violation of section 118 of the Public Land Law. Being void from its inception, the approval thereof by the Undersecretary of Agriculture and Natural Resources after the lapse of five years from Manzano's patent did not legalize the sale. The result is that the homestead in question must be returned to Manzano's heirs, who are, in turn, bound to restore to Ocampo the, sum of P3,000.00 received by Manzano as the price thereof.

C. Incapacity to sell a. Homesteaders cannot sell within 5 years from issuance of the patent or grant (Public Land Act, C.A. 141, Sec. 118)

Cases

1.) Sale of portions of a parcel of land (1) prior to issuance and (2) within 5 years from issuance of free patent
Manlapat vs. CA, G.R. No. 125585, June 8, 2005

5 year prohibition imposed by the Public land Act against alienation or encumbrance of the land covered by a free patent or homestead should be considered Where the sale or transfer took place before the filing of the free patent application, whether by the vendor or the vendee, the prohibition should not be applied Patent holder who sold the land to another during the prohibition period may still recover the portion sold (no in pari de licto)
FACTS: The controversy involves Lot No. 2204 that had been originally in the possession of Jose Alvarez, Eduardos grandfather, until his demise in 1916. It remained unregistered until October 8, 1976 when OCT No. P-153 was issued in the name of Eduardo pursuant to a free patent issued in Eduardos name that was entered in the Registry of Deed. Before the subject lot was titled, Eduardo sold 533 sq.m. of the land to Ricardo on December 19, 1954. The sale is evidence by a deed of sale entitled Kasulatan ng Bilihang Tuluyan ng Lupang Walang Titulo which was signed by Eduardo himself as vendor and his wife Engracia Ancieto with a certain Santiago Enriquez signing as witness. The Kasulatan was registered with the Register of Deeds. On March 18, 1981, another Deed of Sale conveyed another portion of the subject lot as right of way was executed by Eduardo in favor of Ricardo. The deed was notarized. Leon Banaag, as attorney-in-fact of his father-in-law (Eduardo) mortgage with the Rural Bank for P100,000.00 with the subject lot as collateral. Banaag deposited the owners duplicate certificate of OCT No. P-153 with the bank. Ricardo and Eduardo died. The Cruzes, upon learning their right to the subject lot immediately tried to confront petitioners mortgage and obtain the surrender of the OCT. Having failed to physically obtain the title from petitioners, the Cruzes went to RBSP which had custody of the owners duplicate certificate of the OCT. They were able to secure a clearance to borrow the title and was able to have the Register of Deeds cancel the OCT and issue two separate titles in the name of Ricardo andEduardo. ISSUE: Whether or not the sale of the land is prohibited or not.

D.

When incompetent buys he must pay a reasonable price for necessaries delivered to him. The resulting sale is valid . The above rule seems to be founded on quasi-contract

Sale by one who is not the owner: Article 1505 - Where the goods are sold by a person who is not the owner thereof, and who does not sell them under authority or with the consent of the owner, the buyer requires no better title to the goods than the seller had, unless the owner of the goods is by his conduct precluded from denying the sellers authority to sell
E. Effect of forbidden sales

a. Between husband and wife under the community regime, - the sale is void b. But strangers cannot assail the transfer c. Between persons in trust relations, as regards 1) Those based on public trust

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i) Public officers, employees, government experts (1491, par. 4), and ii) Judges, Justices, Prosecutors, Clerks of Court, lawyers (1491, par. 5) - such sales are VOID (1409, No. 7) 2) Those based on private trust i) Guardians (1491, par. 1) ii) Agents (1491, par. 2) iii) Executors and administrators (1491, par. 3) - such sales are VOIDABLE, not void A. Case: 1504 par. 1 applied

Gaisano Cagayan, Inc. (GCI) vs. Insurance Company of North America G.R. No. 147839, June 8, 2006
The Gaisano Superstore Complex in Cagayan de Oro City was consumed by fire, including stocks of ready-made clothing materials sold and delivered by Intercapitol Marketing Corp. (IMC) and Levi Strauss (Phils), Inc. (LSPI). IMC and LSPI filed claims under their respective fire insurance policies, and made several demands for payment upon GCI. GCI contends that it cannot be held liable because the property covered by the insurance policies were destroyed due to fortuitous event, and despite delivery, IMC and LSPI assumed the risk of loss when they secured fire insurance policies over the goods. HELD: What were insured against were the accounts of IMC and LSPI with GCI which remained unpaid 45 days after the loss through the fire, and not the loss or destruction of the goods delivered. The present case clearly falls under paragraph (1), Article 1504 of the Civil Code. Thus, when the seller retains ownership only to insure that the buyer will pay its debt, the risk of the loss is borne by the buyer. Accordingly, GCI bears the risk of loss of the goods delivered.

CHAPTER 3 Effect of the Contract When the Thing Sold Has Been Lost Art.1493-1494 1. Thing entirely lost Where the thing is entirely lost at the time of perfection, the contract is inexistent and void because there is no object. Thing partially lost If the subject matter is only partially lost, the vendee may elect between (1) withdrawing from the contract and (2) demanding the remaining part, paying its proportionate price.

2.

When a thing is considered LOST -A thing is lost when it perishes or goes out of commerce or disappears in such a way that its existence is unknown or it cannot be recovered. (Art.1189) I. Distinction A. Effect of Loss of the Thing Sold

a. At the time of Perfection: Between 1493 and 1494 1. TOTAL LOSS Article 1493 applies to a sale of specific thing. 2. PARTIAL LOSS 3. DETERIORATION Article 1494, on the other hand, applies only to sales of goods, that is, the object of the sale consists of a mass of specific goods which means goods identified and agreed upon at the time a contract of sale is made.(Art. 1636) -Both articles have actually the same essence providing two alternative remedies to the buyer in case of deterioration or partial loss of the object prior to the sale. -The second option or alternative to Art.1494 is applicable only if the objects of the sale are divisible. If they are indivisible like cars, the only available option is avoidance of the sale.

b. After Perfection and Before Delivery (risk of loss) Between 1480 and 1504 -The loss or injury referred to in Articles 1493 and 1494 is one which has taken place before or at the time the contract of sale is perfected. - The loss or injury mentioned in Articles 1480 and 1504 occurs after the contract is perfected but prior to the time of delivery

NOTE: Article 1493 - This refers to a case of loss of the object even BEFORE the perfection of the contract - There would be no cause or consideration, hence the contract is void Seller will have to bear the loss Q: What are the remedies of the buyer when the object has been PARTLY or PARTIALLY LOST? A: choose between (1) withdrawal or rescission (2) specific performance as to remainder by payment of proportional price Article 1494 - Speaks of loss of specific goods - Remedies of buyer: Cancellation (avoidance) or specific performance as to the remaining existing goods (if the sale was divisible)

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