A. DEFINITION OF SALE (ART. 1458) Article 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. Definition A contract of sale is a contract where one party obligates himself to deliver a determinate thing to another part, who in turn, obligates himself to the other to pay a sum of money or its equivalent. Essential Requisites The contract of sale, being a contract, has the same requisites, namely, consent, object, and cause.

Apprehensive that its interest in the property would be disregarded, FIRESTONE instituted an action for specific performance to compel NDC to sell the leased property in its favor. 21 February 1989 PUP moved to intervene and asserted its interest in the subject property, arguing that a "purchaser pendente lite of property which is subject of a litigation is entitled to intervene in the proceedings. Convinced that PUP was a necessary party to the controversy that ought to be joined as party defendant in order to avoid multiplicity of suits, the trial court granted PUP's motion to intervene. FIRESTONE moved for reconsideration but was denied. On certiorari, the Court of Appeals affirmed the order of the trial court. After trial on the merits, judgment was rendered declaring the contracts of lease executed between FIRESTONE and NDC covering the 2.60-hectare property and the warehouses constructed thereon valid and existing until 2 June 1999. PUP was ordered and directed to sell to FIRESTONE the "2.6 hectare leased premises or as may be determined by actual verification and survey of the actual size of the leased properties where plaintiff's fire brick factory is located" at P1,500.00 per square meter considering that, as admitted by FIRESTONE, such was the prevailing market price thereof. The trial court ruled that the contracts of lease executed between FIRESTONE and NDC were interrelated and inseparable because "each of them forms part of the integral system of plaintiff's brick manufacturing plant x x x if one of the leased premises will be taken apart or otherwise detached from the two others, the purpose of the lease as well as plaintiff's business operations would be rendered useless and inoperative." Court of Appeals affirmed the decision of the trial court ordering the sale of the property in favor of FIRESTONE. The Court of Appeals observed that as there was a sale of the subject property, NDC could not excuse itself from its obligation TO OFFER THE PROPERTY FOR SALE FIRST TO FIRESTONE BEFORE IT COULD TO OTHER PARTIES. Ruling: We believe that the courts a quo did not hypothesize, much less conjure, the sale of the disputed property by NDC in favor of petitioner PUP. A contract of sale, as defined in the Civil Code, is a contract where one of the parties obligates himself to transfer the ownership of and to deliver a determinate thing to the other or others who shall pay therefore a sum certain in money or its equivalent. It is therefore a general requisite for the existence of a valid and enforceable contract of sale that it be mutually obligatory, i.e., there should be a concurrence of the promise of the vendor to sell a determinate thing and the promise of the vendee to receive and pay for the property so delivered and transferred. The Civil Code provision is, in effect, a "catch-all" provision which effectively brings within its grasp a whole gamut of transfers whereby ownership of a thing is ceded for a consideration. The preponderance of evidence shows that NDC sold to PUP the whole NDC compound, including the leased premises, without the knowledge much less consent of private respondent FIRESTONE which had a valid and existing right of first refusal. All three (3) essential elements of a valid sale, without which there can be no sale, were attendant in the disposition and transfer of the property from NDC to PUP consent of the parties, determinate subject matter, and consideration therefor. The defendants-appellants interpretation that there was a mere transfer, and not a sale, apart from being specious sophistry and a mere play of words, is

1. Consent - Also called meeting of the minds. mutual agreement, or

consensus ad idem. It essentially refers to a situation where the two parties of the contract has a mutual understanding in the formation of the contract of sale. This essentially means that there is consent in the part of the seller to transfer ownership of the determinate thing and in the part of the buyer to pay the equivalent price. Note that both of the parties must have the legal capacity to give their consent.

2. Object - This is the subject matter of the contract. It must be

determinate or capable of being determinate.

3. Cause - This refers the the price, in terms of money or its equivalent.
Kinds of Contract of Sale 1. Absolute - This refers to a contract of sale that is not subject to any condition or does not require any condition for the transfer of ownership.

2. Conditional - This refers to a contract of sale that contemplates

contingency, or is subject to a condition. It follows then that the delivery of the determinate thing does not necessarily transfer ownership, unless the contingency or condition is fulfilled.

POLYTECHNIC UNIVERSITY OF THE PHILIPPINES V. CA, 368 S 691 (2001) Facts: Petitioner National Development Corporation (NDC), a government owned and controlled corporation had in its disposal a ten (10)-hectare property located along Pureza St., Sta. Mesa, Manila. May 1965 private respondent Firestone Ceramics Inc. (FIRESTONE) manifested its desire to lease a portion of the property for its ceramic manufacturing business NDC and FIRESTONE entered into a contract of lease. Covering a portion of the property measured at 2.90118 hectares for use as a manufacturing plant for a term of ten (10) years, renewable for another ten (10) years under the same terms and conditions. A subsequent second contract was entered upon by the parties after 3-1/2 years. The parties' lessor-lessee relationship went smoothly until early 1988 when FIRESTONE, cognizant of the impending expiration of their lease agreement with NDC, informed the latter through several letters and telephone calls that it was renewing its lease over the property. While its letter of 17 March 1988 was answered by Antonio A. Henson, General Manager of NDC, who promised immediate action on the matter, the rest of its communications remained unacknowledged.

SALES I Atty. Llaguno

too strained and hairsplitting. For it is axiomatic that every sale imposes upon the vendor the obligation to transfer ownership as an essential element of the contract. Transfer of title or an agreement to transfer title for a price paid, or promised to be paid, is the very essence of sale (Kerr & Co. v. Lingad, 38 SCRA 524; Schmid & Oberly, Inc., v. RJL Martinez Fishing Corp., 166 SCRA 493). At whatever legal angle we view it, therefore, the inescapable fact remains that all the requisites of a valid sale were attendant in the transaction between co-defendants-appellants NDC and PUP concerning the realities subject of the present suit.

Ruling: There can be no valid contract of sale between Mapalad and Nordelak. A contract is defined as a juridical convention manifested in legal form, by virtue of which one or more persons bind themselves in favor of another, or others, or reciprocally, to the fulfillment of a prestation to give, to do, or not to do. There can be no contract unless the following concur: (a) consent of the contracting parties; (b) object certain which is the subject matter of the contract; (c) cause of the obligation which is established. Specifically, by the contract of sale, one of the contracting parties obligates himself to transfer ownership of and to deliver a determinate thing and the other party to pay therefor a price certain in money or its equivalent. The essential requisites of a valid contract of sale are: (1) Consent of the contracting parties by virtue of which the vendor obligates himself to transfer ownership of and to deliver a determinate thing, and the vendee obligates himself to pay therefor 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. (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, which the cause as far as the vendee is concerned is the acquisition of the thing which is the object of the contract. Contracts of sale are perfected by mere consent, which is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. Consent may be given only by a person with the legal capacity to give consent. In the case of juridical persons such as corporations like Mapalad, consent may only be granted through its officers who have been duly authorized by its board of directors. In the present case, consent was purportedly given by Miguel Magsaysay, the person who signed for and in behalf of Mapalad in the deed of absolute sale dated November 2, 1989. However, as he categorically stated on the witness stand during trial, he was no longer connected with Mapalad on the said date because he already divested all his interests in said corporation as early as 1982. Even assuming, for the sake of argument, that the signatures purporting to be his were genuine, it would still be voidable for lack of authority resulting in his incapacity to give consent for and in behalf of the corporation. On this score, the contract of sale may be annulled for lack of consent on the part of Mapalad. The third element for a valid contract of sale is likewise lacking. Lack of consideration makes a contract of sale fictitious. A fictitious sale is void ab initio.

1. ELEMENTS OF CONTRACT OF SALE - SANCHEZ V. MAPALAD

REALTY CORP, 541 SCRA 397 Where a deed of sale was attended by fraud and proved to be fictitious, the buyer acquired no title to the subject property. The sale of four parcels of prime land along Roxas Boulevard surrendered by a former associate of President Marcos to the Aquino government bears the earmarks of a grand scam perpetrated by the very same persons appointed by the Presidential Commission on Good Government (PCGG) to safeguard the assets of the sequestered companies. They must be restored to the custody of the government until their true owner is finally determined. It would be odious to have the PCGG work so hard to recover them only to have them lost due to manipulation of an unscrupulous official. Facts: Respondent Mapalad was the registered owner of four (4) parcels of land located along Roxas Boulevard, Baclaran, Paraaque. After the February 1986 EDSA Revolution, Jose Y. Campos executed an affidavit [6] admitting, among others, that Mapalad was one of the companies he held in trust for former President Ferdinand E. Marcos. Campos turned over all assets, properties, records and documents pertaining to Mapalad to the new administration led by then President Corazon C. Aquino. Josef personally talked to GM Manalili to inquire about what happened to the titles he took from Narciso. GM Manalili promised to return the titles as soon as he found them. He never did, despite repeated demands on him. Felimon Oliquiano, Jr., president of Nordelak Development Corporation (Nordelak, for brevity), filed a notice of adverse claim over the subject properties based on a deed of sale purportedly executed on November 2, 1989 by Miguel Magsaysay in his capacity as president and board chairman of Mapalad, selling the four lots to Nordelak for the total purchase price of P20,190,000.00. This deed of sale was notarized by Elpidio T. Clemente as Document No. 121, Page 26, Book No. 82 Series of 1989. On January 19, 1993, the PCGG asked the Paraaque RD to immediately recall, revoke and cancel the four (4) titles that were issued in favor of Nordelak.On February 3, 1993, Mapalad commenced, before the RTC, Makati City, the present action for annulment of deed of sale and reconveyance of title with damages against Nordelak, that is now the subject of this petition. RTC Judgment: DISMISSED for lack of cause of action and for being without merit. CA Disposition: DECLARING as null and void the deed of absolute sale dated 02 November 1989 executed by and between Mapalad Realty Corporation and Nordelak Development Corporation. Issue: Whether or not there was a valid sale between Mapalad and Nordelak? Whether or not petitioner Sanchez acquired valid title over the properties as innocent purchaser for value despite a defect in Nordelak's title?

SALES I Atty. Llaguno

2. STAGES OF CONTRACT OF SALE JOVAN LAND V. CA, 268 S 160 (1997) Facts: Petitioner Jovan Land, Inc. is a corporation engaged in the real estate business. Its President and Chairman of the Board of Directors is one Joseph Sy. Private respondent Eugenio Quesada is the owner of the Q Building located on an 801 sq. m. lot at the corner of Mayhaligue Street and Rizal Avenue, Sta. Cruz, Manila. Petitioner through Joseph Sy made a written offer, dated July 27, 1987 for P10.25 million. Second offer was made with earnest money which was again rejected by Conrado Quesada. A third offer was made for 12million pesos with 1million as earnest money. On the basis of this annotation which petitioner insists is the proof that there already exists a valid, perfected agreement to sell the Mayhaligue property, petitioner filed with the trial court, a complaint for specific performance and collection of sum of money with damages. RTC dismissed case for lack of cause of action. CA affirmed. Issue: Does the annotation of the third letter-offer signed Received original, 9-4-89 constitutes a perfected agreement to sell as respondent can be said to have accepted petitioners payment in the form of a check which was enclosed in the third letter? NO. Ruling: Court agrees. Such an annotation by Conrado Quesada amounts to neither a written nor an implied acceptance of the offer of Joseph Sy. It is merely a memorandum of the receipt by the former of the latters offer. The requisites of a valid contract of sale are lacking in said receipt and therefore the sale is neither valid nor enforceable. Although there was a series of communications through letter-offers and rejections as evident from the facts of this case, still it is undeniable that no written agreement was reached between petitioner and private respondent with regard to the sale of the realty. Hence, the alleged transaction is unenforceable as the requirements under the Statute of Frauds have not been complied with. Under the said provision, an agreement for the sale of real property or of an interest therein, to be enforceable, must be in writing and subscribed by the party charged or by an agent thereof. Moreover, it is a fundamental principle that before contract of sale can be valid, the following elements must be present, viz: (a) consent or meeting of the minds; (b) determinate subject matter; (3) price certain in money or its equivalent. Until the contract of sale is perfected, it cannot, as an independent source of obligation, serve as a binding juridical relation between the parties. 3. OBLIGATIONS CREATED (ART. 1165) 2 SETS OF REAL OBLIGATIONS. Art. 1165. When what is to be delivered is a determinate thing, the creditor, in addition to the right granted him by Article 1170, may compel the debtor to make the delivery. If the thing is indeterminate or generic, he may ask that the obligation be complied with at the expense of the debtor.

If the obligor delays, or has promised to deliver the same thing to two or more persons who do not have the same interest, he shall be responsible for any fortuitous event until he has effected the delivery. (1096) Specific performance Substitute performance Liability for Fortuitous Event

4. CHARACTERISTIC OF SALE BALATBAT V. CA, G.R. NO. 109410, AUGUST 28, 1996 Facts: on June 15, 1977, Aurelio A. Roque filed a complaint for partition against Corazon Roque, Alberto de los Santos, Feliciano Roque, Severa Roque and Osmundo Roque. Defendants therein were declared in default and plaintiff presented evidence ex-parte. On March 29, 1979, the trial court rendered a decision in favor of plaintiff Aurelio A. Roque. Aurelio Roque and Maria Mesina during their conjugal union and the house constructed thereon was likewise built during their marital union. Out of their union, plaintiff and Maria Mesina had four children, who are the defendants in this case. When Maria Mesina died on August 28, 1966, the only conjugal properties left are the house and lot above stated of which plaintiff herein, as the legal spouse, is entitled to one-half share pro-indiviso thereof. With respect to the one-half share pro-indiviso now forming the estate of Maria Mesina, plaintiff and the four children, the defendants here, are each entitled to one-fifth (1/5) share pro-indiviso. The deceased wife left no debt. Register of Deeds of Manila issued a Transfer Certificate of Title No. 135671 in the name of the following persons in the following proportions:[5] Aurelio A. Roque Severina M. Roque Osmundo M. Roque Feliciano M. Roque Corazon M. Roque 6/10 share 1/10 share 1/10 share 1/10 share 1/10 share

Aurelio A. Roque sold his 6/10 share in T.C.T. No. 135671 to spouses Aurora Tuazon-Repuyan and Jose Repuyan as evidenced by a "Deed of Absolute Sale. Spouses failed to pay Php45,000 causing Aurelio A. Roque to file Rescission of Contract. Vendor Aurelio Roque sold 6/10 portion of his share in TCT No. 135671 to private respondents Repuyan on April 1, 1980. Subsequently, the same lot was sold again by vendor Aurelio Roque (6/10) and his children (4/10). Balatbat, one of the children, said that she bought the property for value and in good faith. Repuyan was the first one to annotate adverse claim over the property in the Registry of Deeds. Issue: Was the sale to Repuyan spouses merely executor and thus does not confer any right? No. Ruling: The sale was consummated, hence, valid and enforceable. In April 1980, Aurelio filed for rescission of the sale between him and Repuyan but the court denied his petition, it was not appealed so it became final and executory. Roque cannot demand payment of the balance unless and until the property has been subdivided and titled in the name of private respondents. On the contention that there was no delivery to the Repuyan spouses. Ruling: When the sale is made through a public instrument, the execution

SALES I Atty. Llaguno

thereof shall be equivalent to the delivery of the thing which is the object of the contract, if from the deed the contrary does not appear or cannot be inferred. A contract of sale being consensual, it is perfected by the mere consent of the parties. Delivery of the thing bought or payment of the price is not necessary for the perfection of the contract. On the issue of double sale: Yes there was double sale. But whom shall the right over the property pertain to. Article 1544 provides an answer for this. The ownership shall vests in the person acquiring it who in good faith first recorded it in the Registry of Property. It cannot also be said that Balatbat was in good faith, failing to investigate on the annotation of adverse claim by the Repuyan, which is constructive knowledge already. AGASEN V. CA, G.R. NO. 115508 Facts: Respondent Petra Bilog, assisted by her husband Felipe Bilog, filed a complaint for Recovery of Possession and Ownership1 with the Regional Trial Court of Agoo, La Union, involving an Eight Thousand Four Hundred Seventy Four (8,474) square meter parcel of land registered in her name. She alleged that sometime in 1964 or 1965, petitioners took possession and assumed ownership of the said property, appropriating the fruits therefrom. She alleged that despite demands on them to vacate the land, petitioners refused to do so and even filed a case for Annulment of TCT and/or Reconveyance with Damages before the same court, which case was, however, dismissed. Private respondent prayed that she be declared the true and absolute owner of the subject land and petitioners be ordered to turn over possession thereof to her. Petitioners Alejandro Agasen and Fortunata Calonge-Agasen asserted that the subject land used to form part of Lot No. 2192, a forty two thousand three hundred seventy two (42,372) square meter parcel of land owned in common by the five (5) Bilog siblings, private respondent Petra Bilog being one of them. RTC favored petitioners declaring TCT of respondent null and void. CA reversed the decision. Issue: whether or not the two (2) documents, relied upon by petitioners as basis for their claim of ownership, are valid? Ruling: No. The following circumstances all indicate the genuineness and due execution of the subject documents: (1) The subject documents were duly notarized public documents; (2) The documents enjoy the legal presumption of validity; (3) Their genuineness and due execution were not specifically denied under oath by private respondent; (4) Private respondent's signature thereon were found genuine by the lower court upon a comparison of her signature thereon with that in her own documentary evidence; (5) The actual identification and positive testimony of petitioner; and (6) The testimony of the lawyer who had notarized one of the subject documents. Private respondent's bare denial of the same cannot, by any measure, overcome the above-mentioned evidence and legal presumptions in petitioners' favor. Contracts are obligatory in whatever form they may have been entered into provided all essential requisites are present. The provision of Article 1358 on the necessity of a public document is only for convenience, not for validity or enforceability. It is not a requirement for the validity of a contract of sale of a parcel of land that this be embodied in a public instrument. in Fule vs. Court of Appeals

The Civil Code provides that contracts are perfected by mere consent. From this moment, the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all the consequences which, according to their nature, may be in keeping with good faith, usage and law. A contract of sale is perfected at the moment there is a meeting of the minds upon the thing which is the object of the contract and upon the price. Being consensual, a contract of sale has the force of law between the contracting parties and they are expected to abide in good faith by their respective contractual commitments. Article 1358 of the Civil Code which requires the embodiment of certain contracts in a public instrument, is only for convenience, and registration of the instrument only adversely affects third parties. Formal requirements are, therefore, for the benefit of third parties. Non-compliance therewith does not adversely affect the validity of the contract nor the contractual rights and obligations of the parties thereunder. CITY OF CEBU V. HEIRS OF RUBI, G.R. NO. 128579, APRIL 29, 1999 Facts: Candido Rubi was a lessor (sic) from the Province of Cebu of a parcel of land identified as Lot 1141 of the Banilad Estate containing an area of THIRTY THREE THOUSAND ONE HUNDRED EIGHTY EIGHT (33,188) square meters Paragraph 7 of the contract of lease provides that the lessee shall use the leased premises for residential and agricultural purposes only and pursuant to this stipulation, Candido Rubi introduced various improvements, among which is a residential building constructed in 1961 where he and his family resided up to the time of his death in 1983. In 1964, the Province of Cebu conveyed by way of donation to the City of Cebu two hundred and ten (210) lots among which was Lot 1141 leased to Candido Rubi. A year after, City of cebu enacted ordinance authorizing City mayor to sell at public auction the 210 province-owned lots donated to defendant City of Cebu, among which was Lot 1141. On February 3, 1976, Candido Rubi wrote the City Mayor of Cebu stating that he was one of the bidders of Lots 1141-B, 1141-C and 1141-D in a bidding held January 30, 1976 at 10:00 a.m. at the Office of the City Mayor and that as lessee of Lot No. 1141-D he is exercising his option of equaling the highest bid price at P10.00 per square meter on the area that is on level ground and P8.00 per square meter on the remaining area. On March 9, 1976, Mayor Eulogio E. Borres furnished Candido Rubi a copy of the award and instructed him to make the necessary payment for the land in order that the deed of sale may be executed in his favor. In a 3rd Indorsement, dated January 6, 1981, the City Attorney replied to the City Administrator's 2nd Indorsement stating that there appears to be no legal impediment to the request of Mr. Rubi, however, per the charter of the City of Cebu, the City Mayor must be clothed with the corresponding authority from the Sangguniang Panglunsod to sell Lot 1141-D to Candido Rubi at the price approved by the Committee on Award per Resolution No. 7 of the City Appraisal Committee dated April 7, 1976 Candido Rubi died on February 17, 1983, survived by his wife, Maria J. Rubi, and children Lina Rubi Bonoan, Hilda Rubi Borres and Sylvia Machacor, plaintiffs in the case. RTC - contract between the parties was a mere contract to sell on the part of the defendant City of Cebu in which the full payment of the price was a positive suspensive condition. Since the latter condition was not met, the seller's obligation to deliver and transfer ownership of the property never vested.

SALES I Atty. Llaguno

CA - The Court of Appeals reversed the court. It ruled that there was a perfected contract of sale but Candido Rubi was not able to make payments thereunder due to circumstances beyond his control. Such failure of the buyer to pay within a fixed period does not, by itself, bar the transfer of ownership or possession, much less dissolve the contract of sale. Ruling: There was a perfected contract of sale between the parties. A contract of sale is a consensual contract and is perfected at the moment there is a meeting of the minds upon the thing which is the object of the contract and upon the price. From that moment, the parties may reciprocally demand performance subject to the provisions of the law governing the form of contracts. The elements of a valid contract of sale under Article 1458 of the Civil Code are (1) consent or meeting of the minds; (2) determinate subject matter; and (3) price certain in money or its equivalent.[9] All three elements are present in the transaction between the City of Cebu and Candido Rubi. On February 3, 1976, Candido Rubi wrote the City Mayor that he was one of the bidders of Lot 1141-D in a bidding held on January 30, 1976 and that he was exercising his option of equaling the highest bid price of P10.00 per square meter for the area containing 6,423 square meters and P8.00 per square meter for the area containing 5,511 square meters. The acceptance by the city was conveyed in the letter of Mayor Eulogio Borres informing Rubi of the resolution of the Appraisal Committee appraising Lot 1141-D at P10.00 for the area of 6,423 square meters and P8.00 for the rest of the area consisting of 5,511 square meters and advising him to pay for the lot within 15 days from receipt thereof. There was a perfected agreement between the City of Cebu and Rubi whereby the City obligated itself to transfer the ownership of and deliver Lot 1141-D and Rubi to pay the price. The effect of an unqualified acceptance of the offer or proposal of the bidder is to perfect a contract, upon notice of the award to the bidder.[10] An agreement presupposes a meeting of the minds and when that point is reached in the negotiations between the parties intending to enter into a contract, the purported contract is deemed perfected and none of them may thereafter disengage himself therefrom without being liable to the other in an action for specific performance. We hold that the exchange of written correspondence between the parties, earlier cited, constitutes sufficient writing to evidence the agreement for purposes of complying with the statute of frauds. CA decision affirmed. LONDRES V. CA, 394 S 133 (2002) Facts: Paulina Arcenas originally owned these two parcels of land. After Paulinas death, ownership of the lots passed to her daughter, Filomena VidaI. The surviving children of Filomena, namely, Sonia Fuentes Londres (Sonia for brevity), Armando V. Fuentes, Chi-Chita Fuentes Quintia, Roberto V. Fuentes, Leopoldo V. Fuentes and Marilou Fuentes Esplana (petitioners for brevity) now claim ownership over Lots 1320 and 1333. Respondents Consolacion Alivio Alovera (Consolacion for brevity) and Elena Alovera Santos (Elena for brevity) anchor their right of ownership over Lots 1320 and 1333 on the Absolute Sale executed by Filomena on April 24, 1959 (Absolute Sale for brevity). Filomena sold the two lots in favor of Consolacion and her husband, Julian Alovera (Julian for brevity). Elena is the daughter of Consolacion and Julian (deceased). Petitioners filed a complaint for the declaration of nullity of contract, damages and just compensation. Petitioners sought to nullify the Absolute Sale

conveying Lots 1320 and 1333 and to recover just compensation from public respondents Department of Public Works and Highways and Department of Transportation and Communication. RTC upheld the validity of the Absolute sale. Filomena vidal (mother of the petitioners) sold 2 parcels of land (Lots 1320, 1333) to Consolacion and Julian Alovera Petitioners seek for the declaration of nullity of the contract because the validity for the Absolute Sale is in doubt due to alleged tampering. (+just compensation vs. DPWH) The cadastral lot number of the second lot mentioned in the Absolute Sale was altered to read Lot 1333 when it was originally written as Lot 2034. Lot 2034 was also written in the copy of the Records Mgt. and Archives Ofc. The Aloveras explained that Julian was in good faith and that he was deaf and dumb, so he was placed at a disadvantageous position. When they discovered that the Absolute Sale indicated Lot 2034, they went back to Filomena, who made the correction. However, the copy of the notary remained unchanged. TC decided in favor of the Aloveras: The description in the Absolute Sale corresponds to Lot 1333. The Absolute Sale states that the lot is in Brgy. Baybay, where Lot 1333 is situated. Lot 2034, on the other hand, can be found in Brgy. Culasi. Plus, there was no evidence that pets family owned Lot 2034 at any time. Issue: Deed of sale is valid? Ruling: YES: the true object of the sale is Lot 1333 The correction was made to reflect the true object of the sale, Lot 1333. Petitioners rely on the technical descriptions of Lots 1320 and 1333 that were issued by the Bureau of Lands on November 8, 1988. When private respondents and Filomena executed the sale, theybased thedescriptionofthetwolotsonthetaxdeclarationsof Filomena.. What really defines a piece of land is not the area mentioned in its description, but the boundaries therein laid down, as enclosing the land and indicating its limits. In this case, theboundariesofthetwolotsaresufficientlydesignatedintheAbsolute Sale, leavingnoroomtodoubttheidentityoftheobjectsofthesale. nd Lot 2034 does not fit the description of the 2 parcel in the Absolute Sale. when one sells or buys real property, one sells or buys the property as he sees it, in its actual setting and by its physical metes and bounds, and not by the mere lot number assigned to it in the certificate of title. As long as the true intentions of the parties are evident, the mistake will not vitiate the consent of the parties, or affect the validity and binding effect of the contract between them. evidence shows that the designation of the second parcel of land sold as Lot 2034 was merely an oversight or a typographical error. The intention of the parties to the Absolute Sale became unmistakably clear when private respondents, as vendees, took possession of Lots 1320 and 1333 in the concept of owners without the objection of Filomena, the vendor. Even if the notarized copy indicated the wrong lot, the intent of the parties must prevail. Non-compliance w/ formal requirements does not adversely affect the validity of the contract or the rights and obligations of the parties.

SALES I Atty. Llaguno

GAITE V. FONACIER, 2 SCRA 830 (1961) Facts: Isabelo Fonacier was the owner and/or holder of 11 iron lode mineral claims (Dawahan Group), situated in Jose Panganiban, Camarines Norte. By a Deed of Assignment dated 29 September 1952, Fonacier constituted and appointed Fernando A. Gaite as his true and lawful attorneyin-fact to enter into a contract with any individual or juridical person for the exploration and development of the mining claims on a royalty basis of not less than P0.50 per ton of ore that might be extracted therefrom. On 19 March 1954, Gaite in turn executed a general assignment conveying the development and exploitation of said mining claims unto the Larap Iron Mines, owned solely by him. Thereafter Gaite embarked upon the development and exploitation of the mining claims, opening and paving roads within and outside their boundaries, making other improvements and installing facilities therein for use in the development of the mines, and in time extracted therefrom what he claimed and estimated to be approximately 24,000 metric tons of iron ore. For some reason or another, Isabelo Fonacier decided to revoke the authority granted by him to Gaite, and Gaite assented thereto subject to certain conditions. As a result, a document entitled Revocation of Power of Attorney and Contract was executed on 8 December 1954, wherein Gaite transferred to Fonacier, for the consideration of P20,000, plus 10% of the royalties that Fonacier would receive from the mining claims, all his rights and interests on all the roads, improvements, and facilities in or outside said claims, the right to use the business name Larap Iron Mines and its goodwill, and all the records and documents relative to the mines. In the same document, Gaite transferred to Fonacier all his rights and interests over the 24,000 tons of iron ore, more or less that the former had already extracted from the mineral claims, in consideration of the sum of P75,000, P10,000, of which was paid upon the signing of the agreement, and the balance to be paid out of the first letter of credit covering the first shipment of iron ores or the first amount derived from the local sale of iron ore made by the Larap Mines & Smelting Co. To secure the payment of the balance, Fonacier promised to execute in favor of Gaite a surety bond; delivered on 8 December 1954 with Fonacier as principal and the Larap Mines and Smelting Co. and its stockholders as sureties. A second bond was executed by the parties to the first bond, on the same day, with the Far Eastern Surety and Insurance Co. as additional surety, but it provided that the liability of the surety company would attach only when there had been an actual sale of iron ore by the Larap Mines & Smelting Co. for an amount of not less than P65,000. Both bond were attached and made integral parts of the Revocation of Power of Attorney and Contract. On the same day that Fonacier revoked the power of attorney, Fonacier entered into a Contract of Mining Operation with Larap Mines and Smelting Co., Inc. to grant it the right to develop, exploit, and explore the mining claims, together with the improvements therein and the use of the name Larap Iron Mines and its goodwill, in consideration of certain royalties. Fonacier likewise transferred, in the same document, the complete title to the approximately 24,000 tons of iron ore which he acquired from Gaite, to the Larap Mines & Smelting Co., in consideration for the signing by the company and its stockholders of the surety bonds delivered by Fonacier to Gaite. On 8 December 1955, the bond with respect to the Far Eastern Surety and Insurance Company expired with no sale of the approximately 24,000 tons of iron ore, nor had the 65,000 balance of the price of said ore been paid to Gaite by Fonacier and his sureties. Whereupon, Gaite demanded from Fonacier and his sureties payment of said amount. When Fonacier and his sureties failed to pay as demanded by Gaite, the latter filed a complaint against them in the CFI Manila (Civil Case 29310) for the payment of the P65,000 balance of the price of the ore, consequential damages, and attorneys fees. Judgment was, accordingly, rendered in favor of plaintiff Gaite ordering defendants to pay him, jointly and severally, P65,000 with interest at 6% per annum from 9 December 1955 until full payment, plus costs. From this judgment, defendants jointly appealed to the Supreme Court as the claims involved aggregate to more than P200,000. Ruling: The Supreme Court affirmed the decision appealed from, with costs against appellants. 1. Shipment or local sale of ore not a condition precedent but a suspensive period or term The shipment or local sale of the iron ore is not a condition precedent (or suspensive) to the payment of the balance of P65,000, but was only a suspensive period or term. What characterizes a conditional obligation is the fact that its efficacy or obligatory force (as distinguished from its demandability) is subordinated to the happening of a future and uncertain event; so that if the suspensive condition does not take place, the parties would stand as if the conditional obligation had never existed. 2. The words of the contract express no contingency in the buyers obligation to pay. The contract stipulates that the balance of Sixty-Five Thousand Pesos (P65,000) will be paid out of the first letter of credit covering the first shipment of iron ore . . . etc. There is no uncertainty that the payment will have to be made sooner or later; what is undetermined is merely the exact date at which it will be made. By the very terms of the contract, therefore, the existence of the obligation to pay is recognized; only its maturity or demandability is deferred. 3. Contract of sale commutative and onerous; Each party assume correlative obligation and anticipate performance from the other A contract of sale is normally commutative and onerous: not only does each one of the parties assume a correlative obligation (the seller to deliver and transfer ownership of the thing sold and the buyer to pay the price), but each party anticipates performance by the other from the very start. While in a sale the obligation of one party can be lawfully subordinated to an uncertain event, so that the other understands that he assumes the risk of receiving nothing for what he gives (as in the case of a sale of hopes or expectations, emptio spei), it is not in the usual course of business to do so; hence, the contingent character of the obligation must clearly appear. In the present case, nothing is found in the record to evidence that Gaite desired or assumed to run the risk of losing his rights over the ore without getting paid for it, or that Fonacier understood that Gaite assumed any such risk. The fact that appellants did put up such bonds indicates that they admitted the definite existence of their obligation to pay the balance of P65,000. 4. To consider sale as a condition precedent leaves the payment at the discretion o fthe debtor To subordinate the obligation to pay the remaining P65,000 to the sale or shipment of the ore as a condition precedent, would be tantamount to leaving the payment at the discretion of the debtor, for the sale or shipment could not be made unless the appellants took steps to sell the ore. Appellants would thus be able to postpone payment indefinitely. Such construction of the contract should be avoided. 5. Interpretation incline in favor of the greatest reciprocity of interests Assuming that there could be doubt whether by the wording of the contract the parties intended a suspensive condition or a suspensive period (dies ad quem) for the payment of the P65,000, the rules of interpretation would incline the scales in favor of the greatest reciprocity of interests, since sale is essentially onerous. The Civil Code of the Philippines, Article 1378, paragraph 1, in fine, provides if the contract is onerous, the doubt shall be settled in favor of the greatest reciprocity of interests and there can be no question that greater reciprocity obtains if the buyers obligation is deemed to be actually existing, with only its maturity (due date) postponed or deferred, than if such obligation were viewed as non-existent or not binding until the ore was sold. 6. Sale of ore to Fonacier was a sale on credit, not an aleatory contract

SALES I Atty. Llaguno

The sale of the ore to Fonacier was a sale on credit, and not an aleatory contract where the transferor, Gaite, would assume the risk of not being paid at all; and that the previous sale or shipment of the ore was not a suspensive condition for the payment of the balance of the agreed price, but was intended merely to fix the future date of the payment. 7. Non-renewal of bond impaired the securities given to the creditor Appellants have forfeited the right to compel Gaite to wait for the sale of the ore before receiving payment of the balance of P65,000, because of their failure to renew the bond of the Far Eastern Surety Company or else replace it with an equivalent guarantee. The expiration of the bonding companys undertaking on 8 December 1955 substantially reduced the security of the vendors rights as creditor for the unpaid P65,000, a security that Gaite considered essential and upon which he had insisted when he executed the deed of sale of the ore to Fonacier. The case squarely comes under paragraphs 2 and 3 of Article 1198 of the Civil Code of the Philippines which provides (2) When he does not furnish to the creditor the guaranties or securities which he has promised. (3) When by his own acts he has impaired said guaranties or securities

been guilty of any fraud in making any misrepresentation to appellants as to the total quantity of ore in the stockpiles of the mining claims in question since Gaites estimate appears to be substantially correct.obligation must clearly appear. In the present case, nothing is found in the record to evidence that Gaite desired or assumed to run the risk of losing his rights over the ore without getting paid for it, or that Fonacier understood that Gaite assumed any such risk. The fact that appellants did put up such bonds indicates that they admitted the definite existenceof their obligation to pay the balance of P65,000. CONSENSUAL SPOUSES BUENAVENTURA V. COURT OF APPEALS, G.R. NO. 126376, NOVEMBER 2003 Facts: Defendant spouses Leonardo Joaquin and Feliciana Landrito are parents of co-defendants Fidel, Tomas, Artemio, Clarita, Felicitas, Fe, and Gavino.

after their establishment, and when through fortuitous event they disappear, unless he immediately gives new ones equally satisfactory. Appellants failure to renew or extend the surety companys bond upon its expiration plainly impaired the securities given to the creditor (appellee Gaite), unless immediately renewed or replaced. 8. No waiver intended by creditor Gaites acceptance of the surety companys bond with full knowledge that on its face it would automatically expire within one year was not a waiver of its renewal after the expiration date. No such waiver could have been intended, for Gaite stood to lose and had nothing to gain thereby; and if there was any, it could be rationally explained only if the appellants had agreed to sell the ore and pay Gaite before the surety companys bond expired on 8 December 1955. But in the latter case the defendantsappellants obligation to pay became absolute after 1 year from the transfer of the ore to Fonacier by virtue of the deed. 9. No short-delivery made by Gaite This is a case of a sale of a specific mass of fungible goods for a single price or a lump sum, the quantity of 24,000 tons of iron ore, more or less, stated in the contract, being a mere estimate by the parties of the total tonnage weight of the mass; and second, that the evidence shows that neither of the parties had actually measured or weighed the mass, so that they both tried to arrive at the total quantity by making an estimate of the volume thereof in cubic meters and then multiplying it by the estimated weight per ton of each cubic meter. The sale between the parties is a sale of a specific mass of iron ore because no provision was made in their contract for the measuring or weighing of the ore sold in order to complete or perfect the sale, nor was the price of P75,000 agreed upon by the parties based upon any such measurement (see Art. 1480, second par., New Civil Code). The subjectmatter of the sale is, therefore, a determinate object, the mass, and not the actual number of units or tons contained therein, so that all that was required of the seller Gaite was to deliver in good faith to his buyer all of the ore found in the mass, notwithstanding that the quantity delivered is less than the amount estimated by them (Mobile Machinery & Supply Co., Inc. vs. York Oilfield Salvage Co., Inc. 171 So. 872, applying art. 2459 of the Luisiana Civil Code). The contract expressly stated the amount to be 24,000 tons, more or less. Applying the tonnage factor provided by the chief of Mines and Metallurgical Division of the Bureau of Mines which was between 3 metric tons minimum to 5 metric tons maximum, which was near the 3.3 metric ton tonnage factor adopted by Engr. Gamatero (at the request of Krakower, a stockholder of Larap), and if appellants witness is correct in his estimate of 6,609 cubic meters of ore, the product is 21,809.7 tons which is not far from the 24,000 tons estimate. (cf. Pine River Logging & Improvement Co. vs. U. S., 186 U.S. 279, 46, L. Ed. 1164). Thus, there was no short-delivery as would entitle appellants to the payment of damages, nor could Gaite have

They are also the parents of plaintiffs Consolacion, Nora, Emma, and Natividad. A deed of sale was executed by the defendant spouses in favor of their co-defendant children. However, such deed of sale is sought to be declared null and void by the plaintiffs. Plaintiffs argue that: 1. There was no actual consideration 2. Even assuming there was consideration, the properties are more than 3-fold times more valuable than the measly sums appearing therein. 3. the sale was the result of a deliberate conspiracy to unjustly deprive the rest of the compulsory heirs of their legitime. RTC: ruled in favor of the defendants and dismissed the complaint. On the grounds that: 1. plaintiffs do not have a valid cause of action against defendants since there can be no legitime to speak of prior to the death of their parents. 2. legitime is computed as of the time of the death of the decedent. CA: affirmed the decision of the RTC Issue: Deeds of Sale are void for lack of consideration Ruling: I. DEED OF SALE VALID. 1. A contract of sale is not a real contract, but a consensual contract. 2. As a consensual contract, a contract of sale becomes a binding and valid contract upon the meeting of the minds as to price. 3. If there is a meeting of the minds of the parties as to the price, the contract of sale is valid, despite the manner of payment, or even the breach of that manner of payment. 4. It is not the act of payment of price that determines the validity of a contract of sale. 5. Payment of the price has nothing to do with the perfection of the contract. 6. Failure to pay the consideration is different from lack of consideration. 7. Petitioners do not have any legal interest over the properties. Their rights over the properties are merely inchoate and vests only upon their parents death. Held that a sale over a subject matter is not a real contract, but a consensual contract, which becomes a valid and binding contract upon the meeting of the minds as to the price. Once there is a meeting of the minds as to the price, the sale is valid, despite the manner of its actual payment, or even when there has been breach thereof. If the real price is not stated in the contract, then the sale is valid but subject to reformation; if there is no meeting of the minds as to the price, because the price stipulated is simulated, then the contract is void.

SALES I Atty. Llaguno

B. SALE DISTINGUISHED FROM SIMILAR CONTRACTS 1. Donation (Arts. 725 and 1471) Art. 725. Donation is an act of liberality whereby a person disposes gratuitously of a thing or right in favor of another, who accepts it. Art. 1471. If the price is simulated, the sale is void, but the act may shown to have been in reality a donation, or some other act or contract. 1. Barter (Arts. 1468, 1638 to 1641)

failed to convince the Bureau of Internal Revenue, it brought the matter to the Court of Tax Appeals, where it also failed. Issue: Is Co & Co. a manufacturer or contractor? MANUFACTURER. Is Co & Co.s business a matter of contract of sale or contract of piece of work? SALE. Ruling: 1.) That Celestino Co & Company habitually makes sash, windows and doors, as it has represented in its stationery and advertisements to the public. That it manufactures the same is practically admitted by appellant itself. It also named itself factory. 2.) In our opinion when this Factory accepts a job that requires the use of extraordinary or additional equipment, or involves services not generally performed by it-it thereby contracts for a piece of work filing special orders within the meaning of Article 1467. The orders herein exhibited were not shown to be special. They were merely orders for work nothing is shown to call them special requiring extraordinary service of the factory. The thought occurs to us that if, as alleged-all the work of appellant is only to fill orders previously made, such orders should not be called special work, but regular work. Would a factory do business performing only special, extraordinary or peculiar merchandise? Supposing for the moment that the transactions were not sales, they were neither lease of services nor contract jobs by a contractor. But as the doors and windows had been admittedly manufactured by the Oriental Sash Factory, such transactions could be, and should be taxed as transfers thereof under section 186 of the National Revenue Code. COMMISSIONER OF INTERNAL REVENUE EQUIPMENT & SUPPLY CO., 64 SCRA 590 (1975); V. ENGINEERING

Article 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) Article 1638. By the contract of barter or exchange one of the parties binds himself to give one thing in consideration of the other's promise to give another thing. (1538a) Article 1641. As to all matters not specifically provided for in this Title, barter shall be governed by the provisions of the preceding Title relating to sales. (1541a) 2. Contract for Piece-of-Work (Arts. 1467, 1713 to 1715)

Article 1467. A contract for the delivery at a certain price of an article which the vendor in the ordinary course of his business manufactures or procures for the general market, whether the same is on hand at the time or not, is a contract of sale, but if the goods are to be manufactured specially for the customer and upon his special order, and not for the general market, it is a contract for a piece of work. (n) Article 1713. By the contract for a piece of work the contractor binds himself to execute a piece of work for the employer, in consideration of a certain price or compensation. The contractor may either employ only his labor or skill, or also furnish the material. (1588a) Article 1715. The contract shall execute the work in such a manner that it has the qualities agreed upon and has no defects which destroy or lessen its value or fitness for its ordinary or stipulated use. Should the work be not of such quality, the employer may require that the contractor remove the defect or execute another work. If the contract fails or refuses to comply with this obligation, the employer may have the defect removed or another work executed, at the contractor's cost. (n) CELESTINO & CO. V. COLLECTOR, 99 PHIL. 841 (1956);

Facts: Celestino Co & Company is a duly registered general copartnership

doing business under the trade name of Oriental Sash Factory". From 1946 to 1951 it paid percentage taxes of 7 per cent on the gross receipts of its sash, door and window factory, in accordance with section one hundred eighty-six of the National Revenue Code imposing taxes on sales of manufactured articles. However in 1952 it began to claim liability only to the contractor's 3 per cent tax (instead of 7 per cent) under section 191 of the same Code; and having failed to convince the Bureau of Internal Revenue, it brought the matter to the Court of Tax Appeals. Petitioner contends that he is an ordinary contractor. It presented duplicate copies of letters, sketches of doors and windows and price quotations supposedly sent by the manager of the Oriental Sash Factory to four customers who allegedly made special orders for doors and windows from the said factory. Having

Facts: Engineering. Equipment and Supply Co. (Engineering for short), a domestic corporation, is an engineering and machinery firm. As operator of an integrated engineering shop, it is engaged, among others, in the design and installation of central type air conditioning system, pumping plants and steel fabrications. On July 27, 1956, one Juan de la Cruz, wrote the then Collector, now Commissioner, of Internal Revenue denouncing Engineering for tax evasion by misdeclaring its imported articles and failing to pay the correct percentage taxes due thereon in connivance with its foreign suppliers. Engineering was likewise denounced to the Central Bank (CB) for alleged fraud in obtaining its dollar allocations. Acting on these denunciations, a raid and search was conducted by a joint team of Central Bank, (CB), National Bureau of Investigation (NBI) and Bureau of Internal Revenue (BIR) agents on September 27, 1956, on which' occasion voluminous records of the firm were seized and confiscated. On September 30, 1957, revenue examiners Quesada and Catudan reported and recommended to the then Collector, now Commissioner, of Internal Revenue that Engineering be assessed for P480,912.01 as deficiency advance sales tax on the theory that it misdeclared its importation of air conditioning units and parts and accessories thereof which are subject to tax under Section 185(m)[1] of the Tax Code. On March 3, 1959, the Commissioner assessed against, and demanded upon, Engineering payment of the increased amount and suggested that P10,000 be paid as compromise in extrajudicial settlement of Engineering's penal liability for violation of the Tax Code. The firm, however, contested the tax assessment and requested that it be furnished with the details and particulars of the Commissioner's assessment. CTA ruled in favor of Engineering but must pay respondent, or his duly authorized collection agent, the sum of P174,141.62 as compensating tax and 25% surcharge for the period from 1953 to September 1956.

SALES I Atty. Llaguno

Issue: Is the installation of a centralized air-conditioning system a contact

of sale or a contract for piece of work? CONTRACT FOR PIECE OF WORK. Ruling: 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 Engineerings customer, the said air conditioning units were not intended for sale to the general public. 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 and 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 plaintiff makes and keeps on hand for sale to anyone, and no change or modification of it is made at defendants request, it is a contract of sale, even though it may be entirely made after, and in consequence of, the defendants order for it. Engineering did not manufacture air conditioning units for sale to the general public, but imported some items (as refrigeration compressors in complete set, heat exchangers or coils, which were used in executing contracts entered into by it. Engineering, therefore, undertook negotiations and execution of individual contracts for the design, supply and installation of air conditioning units of the central, taking into consideration in the process such factors as the area of the space to be air conditioned; the number of persons occupying or would be occupying the premises; the purpose for which the various air conditioning areas are to be used; and the sources of heat gain or cooling load on the plant such as sun load, lighting, and other electrical appliances which are or may be in the plan. Contractor or manufacturer? Engineering is a contractor rather than a manufacturer, subject to the contractors tax prescribed by Section 191 of the Code and not to the advance sales tax imposed by Section 185(m) in relation to Section 194 of the same Code. ENGINEERING & MACHINERY CORP. V. CA, 252 SCRA 156. Facts: Pursuant to a contract, petitioner undertook to install air conditioning system in private respondents building. The building was later sold to the National Investment and Development Corporation which took possession of it. Upon NIDCs failure to comply with certain conditions, the sale was rescinded. NIDC reported to respondent that there were certain defects in the air conditioning system. Respondent filed a complaint against petitioner for non-compliance with the agreed plans and specifications. Petitioner moved to dismiss the complaint on the ground of the 6-month prescription of warranty against hidden defects. Private respondent averred that the contract was not of sale but for a piece of work, the action for damages of which prescribes after 10 years. Issue: Is a contract for the fabrication and installation of a central airconditioning system in a building, one of sale or for a piece of work? CONTRACT FOR PIECE OF WORK. Ruling: A contract for a piece of work, labor and materials may be distinguished from a contract of sale by the inquiry as to whether the thing transferred is one not in existence and which would never have existed but for the order, of the person desiring it. In such case, the contract is one for a piece of work, not a sale. On the other hand, if the thing subject of the contract would have existed and been the subject of a sale to some other person even if the order had not been given, then the contract is one of sale.

The distinction between the two contracts depends on the intention of the parties. Thus, if the parties intended that at some future date an object has to be delivered, without considering the work or labor of the party bound to deliver, the contract is one of sale. But if one of the parties accepts the undertaking on the basis of some plan, taking into account the work he will employ personally or through another, there is a contract for a piece of work. Clearly, the contract in question is one for a piece of work. It is not petitioner's line of business to manufacture air-conditioning systems to be sold "off-the-shelf." Its business and particular field of expertise is the fabrication and installation of such systems as ordered by customers and in accordance with the particular plans and specifications provided by the customers. Naturally, the price or compensation for the system manufactured and installed will depend greatly on the particular plans and specifications agreed upon with the customers. The remedy against violations of the warranty against hidden defects is either to withdraw from the contract (redhibitory action) or to demand a proportionate reduction of the price (accion quanti manoris), with damages in either case. While it is true that Article 1571 of the Civil Code provides for a prescriptive period of six months for a redhibitory action, a cursory reading of the ten preceding articles to which it refers will reveal that said rule may be applied only in case of implied warranties; and where there is an express warranty in the contract, as in the case at bench, the prescriptive period is the one specified in the express warranty, and in the absence of such period, "the general rule on rescission of contract, which is four years (Article 1389, Civil Code) shall apply". It would appear that this suit is barred by prescription because the complaint was filed more than four years after the execution of the contract and the completion of the air-conditioning system. However, a close scrutiny of the complaint filed in the trial court reveals that the original action is not really for enforcement of the warranties against hidden defects, but one for breach of the contract itself. The governing law is Article 1715. However, inasmuch as this provision does not contain a specific prescriptive period, the general law on prescription, which is Article 1144 of the Civil Code, will apply. Said provision states, inter alia, that actions "upon a written contract" prescribe in ten (10) years. Since the governing contract was executed on September 10, 1962 and the complaint was filed on May 8, 1971, it is clear that the action has not prescribed. The mere fact that the private respondent accepted the work does not, ipso facto, relieve the petitioner from liability for deviations from and violations of the written contract, as the law gives him ten (10) years within which to file an action based on breach thereof. 3. Agency to Sell (Art. 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. (n) QUIROGA V. PARSONS, 38 PHIL. 501 (1918); Facts: On January 24, 1911, in this city of Manila, a contract in the following tenor was entered into by and between the plaintiff, as party of the first part, and J. Parsons (to whose rights and obligations the present defendant later subrogated itself), as party of the second part: "CONTRACT EXECUTED BY AND BETWEEN ANDRES QUIROGA AND J. PARSONS, BOTH MERCHANTS ESTABLISHED IN MANILA, FOR THE EXCLUSIVE SALE OF 'QUIROGA' BEDS IN THE VISAYAN ISLANDS.
"Article 1. Don Andres Quiroga grants the exclusive right to sell his beds in the Visayan Islands to J. Parsons under the following conditions:

SALES I Atty. Llaguno

"(A) Mr. Quiroga shall furnish beds of his manufacture to Mr. Parsons for the latter's establishment in Iloilo, and shall invoice them at the same price he has fixed for sales, in Manila, and, in the invoices, shall make an allowance of a discount of 25 per cent of the invoiced prices, as commission on the sales; and Mr. Parsons shall order the beds by the dozen, whether of the same or of different styles. "(B) Mr. Parsons binds himself to pay Mr. Quiroga for the beds received, within a period of sixty days from the date of their shipment. "(C) The expenses for transportation and shipment shall be borne by M. Quiroga, and the freight, insurance, and cost of unloading from the vessel at the point where the beds are received, shall be paid by Mr. Parsons. "(D) If, before an invoice falls due, Mr. Quiroga should request its payment, said payment when made shall be considered as a prompt payment, and as such a deduction of 2 per cent shall be made from the amount of the invoice. "The same discount shall he made on the amount of any invoice which Mr. Parsons may deem convenient to pay in cash. "(E) Mr. Quiroga binds himself to give notice at least fifteen days before hand of any alteration in price which he may plan to make in respect to his beds, and agrees that if on the date when such alteration takes effect he should have any order pending to be served to Mr. Parsons, such order shall enjoy the advantage of the alteration if the price thereby be lowered, but shall not be affected by said alteration if the price thereby be increased, for, in this latter case, Mr. Quiroga assumed the obligation to invoice the beds at the price at which the order was given. "(F) Mr. Parsons binds himself not to sell any other kind except the 'Quiroga' beds. "Art. 2. In compensation for the expenses of advertisement which, for the benefit of both contracting parties, Mr. Parsons may find himself obliged to make, Mr. Quiroga assumes the obligation to offer and give the preference to Mr. Parsons in case anyone should apply for the exclusive agency for any island not comprised within the Visayan group. "Art. 3. Mr. Parsons may sell, or establish branches of his agency for the sale of 'Quiroga' beds in all the towns of the Archipelago where there are no exclusive agents, and shall immediately report such action to Mr. Quiroga for his approval. "Art. 4. This contract is made for an unlimited period, and may be terminated by either of the contracting parties on a previous notice of ninety days to the other party." Of the three causes of action alleged by the plaintiff in his complaint, only two of them constitute the subject matter of this appeal and both substantially amount to the averment that the defendant violated the following obligations: not to sell the beds at higher prices than those of the invoices; to have an open establishment in Iloilo; itself to conduct the agency; to keep the beds on public exhibition, and to pay for the advertisement expenses for the same; and to order the beds by the dozen and in no other manner. As may be seen, with the exception of the obligation on the part of the defendant to order the beds by the dozen and in no other manner, none of the obligations imputed toA the defendant in the two causes of action are expressly set forth in the contract. But the plaintiff alleged that the defendant was his agent for the sale of his beds in Iloilo, and that said obligations are implied in a contract of commercial agency.

price. The word agency, also used in articles 2 and 3, only expresses that the defendant was the only one that could sell the plaintiffs beds in the Visayan Islands. With regard to the remaining clauses, the least that can be said is that they are not incompatible with the contract of purchase and sale. PUYAT V. ARCO AMUSEMENT CO., 72 PHIL. 402' (1941); Facts: "In the year 1929, the Teatro Arco', a corporation duly organized under the laws of the Philippine Islands, with its office in Manila, was engaged in the business of operating cinematographs. In 1930, its name was changed to Arco Amusement Company. C. S. Salmon was the president, while A. B. Coulette was the business manager. About the same time, Gonzalo Puyat & Sons, Inc., another corporation doing business in the Philippine Islands, with office in Manila, in addition to its other business, was acting as exclusive agents in the Philippines for the Starr Piano Company of Richmond, Indiana, U. S. A. It would seem that this last company dealt in cinematograph equipment and machinery, and the Arco Amusement Company desiring to equip its cinematograph with sound reproducing devices, approached Gonzalo Puyat & Sons, Inc., thru its then president and acting manager, Gil Puyat, and an employee named Santos. The parties agreed order sound reproducing equipment from the Star Piano Company and that the plaintiff would pay the defendant, in addition to the price of the equipment, a 10 per cent commission, plus all expenses, such as, freight, insurance, banking charges, cables, etc. "About three years later, in connection with a civil case in Vigan, filed by one Fidel Reyes against the defendant herein Gonzalo Puyat & Sons, Inc., the officials of the Arco Amusement Company discovered that the price quoted to them by the defendant with regard to their two orders above mentioned was not the net price but rather the list price, and that the defendant had obtained a discount from the Starr Piano Company. Moreover, by reading-reviews and literature on prices of machinery and cinematograph equipment, said officials of the plaintiff were convinced that the prices charged them by the defendant were much too high including the charges for out-of-pocket expenses. For these reasons, they sought to obtain a reduction from the defendant or rather a reimbursement, and failing in this they brought the present action." The trial court held that the contract between the petitioner and the respondent was one of outright purchase and sale, and absolved that petitioner from the complaint. CA held that the relation between petitioner and respondent was that of agent and principal, the petitioner acting as agent of the respondent in the purchase of the equipment. Issue: Was the contract a contract of sale or contract of agency to sell? CONTRACT OF SALE. Ruling: The contract is the law between the parties and should include all the things they are supposed to have been agreed upon. What does not appear on the face of the contract should be regarded merely as dealers or traders talk, which can not bind either party. While Exhibits 1 and 2, state that the petitioner was to receive ten per cent (10%) commission, this does not necessarily make the petitioner an agent of the respondent, as this provision is only an additional price which the respondent bound itself to pay, and which stipulation is not incompatible with the contract of purchase and sale. Puyat and Sons is the exclusive agent of the same company in the Philippines. It is out of the ordinary for one to be the agent of both the vendor and the purchaser. The facts and circumstances indicated do not point to anything but plain ordinary transaction where the respondent enters into a

Issue: Was it a contract of agency or a contract of sale? CONTRACT OF SALE. Ruling: Payment was to be made at the end of sixty days, or before, at the plaintiffs request, or in cash, if the defendant so preferred, and in these last two cases an additional discount was to be allowed for prompt payment. 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 the part of the defendant, to pay their price. These features exclude the legal conception of an agency or order to sell whereby the mandatory or agent received the thing to sell it, and does not pay its price, but delivers to the principal the price he obtains from the sale of the thing to a third person, and if he does not succeed in selling it, he returns it. By virtue of the contract between the plaintiff and the defendant, the latter, on receiving the beds, was necessarily obliged to pay their price within the term fixed, without any other consideration and regardless as to whether he had or had not sold the beds. Not a single one of these clauses necessarily conveys the idea of an agency. The words commission on sales used in clause (A) of article 1 mean nothing else, as stated in the contract itself, than a mere discount on the invoice

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contract of purchase and sale with the petitioner, the latter as exclusive agent of the Starr Piano Company in the United States. The respondent, therefore, could not have offered to pay a 10 per cent commission to the petitioner provided it was given the benefit of the 25 per cent discount enjoyed by the petitioner. It is well known that local dealers acting as agents of foreign manufacturers, aside from obtaining a discount from the home office, sometimes add to the list price when they resell to local purchasers. It was apparently to guard against an exhorbitant additional price that the respondent sought to limit it to 10 per cent, and the respondent is estopped from questioning that additional price. If the respondent later on discovers itself at the short end of a bad bargain, it alone must bear the blame, and it cannot rescind the contract, much less compel a reimbursement of the excess price, on that ground alone. KER AND CO., LTD. V. LINGAD, 38 SCRA 524 (1971) Facts: Then Commissioner of Internal Revenue Melecio R. Domingo assessed the petitioner the sum of P20,272.33 as the commercial broker's percentage tax, surcharge, and compromise penalty for the period from July 1, 1949 to December 31, 1953. There was a request on the part of petitioner for the cancellation of such assessment, which request was turned down. As a result, it filed a petition for review with the Court of Tax Appeals. On October 19, 1962, the Court of Tax Appeals held petitioner taxable except as to the compromise penalty of P500.00, the amount due from it being fixed at P19,772.33. Such liability arose from a contract of petitioner with the United States Rubber International, the former being referred to as the Distributor and the latter specifically designated as the Company. The contract was to apply to transactions between the former and petitioner, as Distributor, from July 1, 1948 to continue in force until terminated by either party giving to the other sixty days' notice. The shipments would cover products "for consumption in Cebu, Bohol, Leyte, Samar, Jolo, Negros Oriental, and Mindanao except [the] province of Davao", petitioner, as Distributor, being precluded from disposing such products elsewhere than in the above places unless written consent would first be obtained from the Company. Petitioner, as Distributor, is required to exert every effort to have the shipment of the products in the maximum quantity and to promote in every way the sale thereof. The prices, discounts, terms of payment, terms of delivery and other conditions of sale were subject to change in the discretion of the Company. It was stipulated in their contract that products are to be cosigned from time to time and shall remain as property of the company. Issue: Was it a contract of agency or a contract of sale? CONTRACT OF AGENCY or BROKERAGE. Ruling: 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 companys control, the relationship between the company and the dealer is one of agency, . The difficulty in distinguishing between contracts of sale and the creation of an agency to sell has led to the establishment of rules by the application of which this difficulty may be solved. The decisions say the transfer of title or agreement to transfer it for a price paid or promised is the essence of sale. 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 a sale; while the essence of an agency to sell is the delivery to an agent, 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 agents commission upon sales made.

4.

Dacion En Pago (Arts. 1245 and 1934)

Art. 1245. Dation in payment, whereby property is alienated to the creditor in satisfaction of a debt in money, shall be governed by the law of sales. (n) Art. 1934. An accepted promise to deliver something by way ofcommodatum or simple loan is binding upon parties, but the commodatumor simple loan itself shall not be perfected until the delivery of the object of the contract. (n) PHILIPPINE LAWIN BUS CO. V. CA, 374 SCRA 322 (2002) Facts: Lawin initially loaned from Advance Capital Corp. (ACC) Php 8M payable w/in 1 yr and guaranteed by a chattel mortgage of Lawins 9 buses. Lawin was in default in its payments and was able to pay only Php 1.8M. Lawin obtained its second loan of 2M payable in one month under a promissory note. Lawin was in default again hence it asked ACC for a restructuring of the loan despite this Lawin was still not able to pay. The buses for foreclosed and it was sold for 2M. ACC sent Lawin demand letters to settle its indebtedness amounting to Php16,484,992.42 then subsequently filed a suit for sum of money against Lawin. Lawin in its defense said that there was already an arrangement to settle the obligation A. Sale of 9 buses and its proceeds will cover for the full payment; OR B. ACC will shoulder the rehabilitation of the buses and the earnings of the operation will be then applied to the loan Issue: Was it a dacion en pago beween the parties? NO Ruling: Dacion en Pago is a special mode of payment, the debtor offers another thing to the creditor who accepts it as equivalent of payment of the outstanding obligation. It partakes the nature of a sale whose essential elements are a) consent b)object certain and c) cause and the contract is perfected at the moment of the meeting of the minds of the parties. In this case there was no meeting of the minds between Lawin and ACC that the obligation would be extinguished by dacion en pago. The receipts shows that the delivery of the 2 buses to ACC didnt transfer the ownership of the bus to ACC rather they were deemed to be only as Lawins agent in the sale of the bus whereby the proceeds are then to be applied as payment for the loan. 6. Subscription Contract 7. Lease (Arts. 1484 and 1485) 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; (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. (1454-A-a) Art. 1485. The preceding article shall be applied to contracts purporting to be leases of personal property with option to buy, when the lessor has deprived the lessee of the possession or enjoyment of the thing. (1454-A-a)

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II. PARTIES TO A CONTRACT OF SALE (Arts. 1489 and 1492) Capacity to Buy or Sell Article 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 those 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. (1457a) 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 of property under article 191. (1458a) 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 intrusted 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) Article 1492. The prohibitions in the two preceding articles are applicable to sales in legal redemption, compromises and renunciations. (n) A. MINORS, INSANE AND DEMENTED PERSONS, DEAF-MUTES (Arts. 1327, 1397, 1399) Article 1327. The following cannot give consent to a contract: (1) Unemancipated minors; (2) Insane or demented persons, and deaf-mutes who do not know how to write. (1263a)

Article 1397. The action for the annulment of contracts may be instituted by all who are thereby obliged principally or subsidiarily. However, persons who are capable cannot allege the incapacity of those with whom they contracted; nor can those who exerted intimidation, violence, or undue influence, or employed fraud, or caused mistake base their action upon these flaws of the contract. (1302a) Article 1399. When the defect of the contract consists in the incapacity of one of the parties, the incapacitated person is not obliged to make any restitution except insofar as he has been benefited by the thing or price received by him. (1304) 1. Necessaries (Arts. 1489 and 290) Article 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 those 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. (1457a) Article 290. Support is everything that is indispensable 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 until he completes his education or training for some profession, trade or vocation, even beyond the age of majority. (142a) 2. Emancipation (Arts. 399 and 1397, Art 234 and 236, Family Code) Article 399. Emancipation by marriage or by voluntary concession shall terminate parental authority over the child's person. It shall enable the minor to administer his property as though he were of age, but he cannot borrow money or alienate or encumber real property without the consent of his father or mother, or guardian. He can sue and be sued in court only with the assistance of his father, mother or guardian. (317a) Article 1397. The action for the annulment of contracts may be instituted by all who are thereby obliged principally or subsidiarily. However, persons who are capable cannot allege the incapacity of those with whom they contracted; nor can those who exerted intimidation, violence, or undue influence, or employed fraud, or caused mistake base their action upon these flaws of the contract. (1302a) Article 234. When there is danger that a person obliged to give support may lose his or her fortune because of grave mismanagement or on account of riotous living, his or her spouse, if any, and a majority of those entitled to be supported by him or by her may petition the Court of First Instance for the creation of the family home. Article 236. The family home may be dissolved upon the petition of the person who has constituted the same, with the written consent of his or her spouse and of at least one half of all the other beneficiaries who are eighteen years of age or over. The court may grant the petition if it is satisfactorily shown that the best interest of the family requires the dissolution of the family home.

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B. SALES BY AND BETWEEN SPOUSES 1. Contracts with Third Parties (Arts. 73, 96, and 124, Family Code) Art. 73. Either spouse may exercise any legitimate profession, occupation, business or activity without the consent of the other. The latter may object only on valid, serious, and moral grounds. In case of disagreement, the court shall decide whether or not: (1) The objection is proper, and (2) Benefit has occurred to the family prior to the objection or thereafter. If the benefit accrued prior to the objection, the resulting obligation shall be enforced against the separate property of the spouse who has not obtained consent. The foregoing provisions shall not prejudice the rights of creditors who acted in good faith. (117a) Section 4. Ownership, Administrative, Enjoyment and Disposition of the Community Property Art. 96. The administration and enjoyment of the community property shall belong to both spouses jointly. In case of disagreement, the husband's decision shall prevail, subject to recourse to the court by the wife for proper remedy, which must be availed of within five years from the date of the contract implementing such decision. In the event that one spouse is incapacitated or otherwise unable to participate in the administration of the common properties, the other spouse may assume sole powers of administration. These powers do not include disposition or encumbrance without authority of the court or the written consent of the other spouse. In the absence of such authority or consent, the disposition or encumbrance shall be void. However, the transaction shall be construed as a continuing offer on the part of the consenting spouse and the third person, and may be perfected as a binding contract upon the acceptance by the other spouse or authorization by the court before the offer is withdrawn by either or both offerors. (206a) Section 5. Administration of the Conjugal Partnership Property Art. 124. The administration and enjoyment of the conjugal partnership shall belong to both spouses jointly. In case of disagreement, the husband's decision shall prevail, subject to recourse to the court by the wife for proper remedy, which must be availed of within five years from the date of the contract implementing such decision. In the event that one spouse is incapacitated or otherwise unable to participate in the administration of the conjugal properties, the other spouse may assume sole powers of administration. These powers do not include disposition or encumbrance without authority of the court or the written consent of the other spouse. In the absence of such authority or consent, the disposition or encumbrance shall be void. However, the transaction shall be construed as a continuing offer on the part of the consenting spouse and the third person, and may be perfected as a binding contract upon the acceptance by the other spouse or authorization by the court before the offer is withdrawn by either or both offerors. (165a)

RAVINA V. VILLA ABRILLE, G.R. NO. 160708, OCTOBER 16, 2009; Facts: The disposition or encumbrance of conjugal properties by one spouse must have the consent of the other spouse, or if the latter is incapacitated, the authority of the court. Without such consent or authority, the disposition or encumbrance is void. This is the main rule applied in this case. It also illustrates the rule that anyone who does not act with justice, observe honesty and good faith in the exercise of his/her legal rights is liable for damages caused by those acts. This is the case of Paul and Vicky, husband and wife with four children. When they got married Paul already owned a parcel of land (Lot 8) solely registered in his name under TCT No. 26471. In 1982 the spouses purchased the parcel of land (Lot 7) adjacent to Pauls property with an area of 555 square meters and covered by TCT 88674. Then they put up their conjugal house on both lots with the savings they accumulated through their joint efforts and with the proceeds of the loan from a bank. Later on they also introduced improvements thereon including a poultry house and an annex. In 1991, the couples relationship turned sour when Paul got a mistress and neglected his family. Vicky was thus forced to sell or mortgage some of their movables to support the family and the studies of the children. On the other hand Paul offered to sell their house and the two lots on which it stood to the spouses Willy and Pat without even consulting or informing Vicky. So when Vicky learned about it she objected and informed the couple Pat and Willy of her objections. Nevertheless, Paul still proceeded with the sale to Pat and Willy who accepted his offer despite Vickys objections. So on June 21, 1991, Paul executed a Deed of Sale in favor of Pat and Willy without Vickys consent and signature over her name. Then on July 5, 1991 when Vicky was out of the house and the four children were in school, Paul, acting in connivance with spouses Pat and Willy began transferring all the belongings of Vicky and her children to an apartment. When Vicky and her daughter came home later, they were stopped from entering. So they just waited at the gate until evening under the rain. They asked for police assistance but to no avail allegedly because it was purely a family matter. Thus Vicky and her children filed a complaint before the RTC for Annulment of Sale, Specific Performance, Damages and Attorneys fees with Preliminary Mandatory Injunction against Paul and the spouses Pat and Willy. Vicky claimed that the sale of Lot 7 and the house erected thereon which were conjugal properties was null and void because it was without her consent. She also claimed that they are entitled to damages because of the manner they were evicted from their own conjugal home. Issue: Were Vicky and her children correct? Ruling: Yes. Lot 7 covered by TCT 88674 was acquired in 1982 during the marriage of Paul and Vicky. Hence it is presumed to belong to their conjugal partnership. No clear, convincing and satisfactory evidence have been presented to overcome said presumption. Likewise the house built thereon is conjugal property having been constructed through the joint efforts of Vicky and Paul who even obtained a loan from a bank. Under Article 124 of the Family Code which took effect on August 3, 1988, the sale of said properties on June 21, 1991 is void because it is done without the consent of both husband and wife. The manner by which Vicky and her children were removed from their family home was also condemnable. While Vicky was out and her children were in

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school, Paul, acting in connivance with the spouses Pat and Willy surreptitiously transferred all their personal belongings to another place. Then they were not allowed to enter their rightful home or family abode despite their impassioned pleas. Hence they are entitled to award for damages. Any person who willfully causes loss or injury to another in a manner contrary to morals, good customs or public policy shall compensate the latter for the damages caused. Hence the sale of lot 7 in favor of Pat and Willy together with the house thereon is declared null and void and Paul should return the price paid for them to Pat and Willy while the latter should re-convey the lot and house to spouses Vicky and Paul. The spouses Pat and Willy as well as Paul should also jointly and severally pay Vicky P100,000 and her four children P50,000 each as moral damages as well as P10,000 exemplary damages. AGGABAO V. PARULAN, JR., 629 SCRA 562 (2010) Facts: Involved in this action are two parcels of land and their improvements in Paraaque City and registered under the name of Spouses Parulan, who have been estranged from one another. Real estate broker Atanacio offered the property to Spouses Aggabao who upon Atanacios insistence prevailed upon them, so that they and Atanacio met with Ma. Elena (Parulans wife) at the site of the property. During their meeting, Spouses Aggabao paid Ma. Elena earnest money amounting to P20,000 which she acknowledged with a handwritten receipt. Then and there, they agreed on the terms of how the buyers will pay the price of the property. Spouses Aggabao complied with all the terms with regard to the payment of the properties, but when Ma. Elena already needed to turn over the owners duplicate copies for both lands, she was able to turn over only one (which was successfully transferred to the name of spouses Aggabao). For the other one, she said that it is with a relative in HongKong but she promised to deliver it to the spouses in a week. Needless to say, she failed to do so and by doing their own verification, the spouses found out that said copy of title was in the hands of Dionisios brother. The spouses met with Dionisios brother, Atty. Parulan, who told them that he is the one with the power to sell the property. He demanded P800,000 for said property and gave the spouses several days to decide. When Atty. Parulan did not hear back from the spouses, he gave them a call, and was then informed that they have already paid the full amount to Ma. Elena. Subsequently, Dionisio, through Atty. Parulan, commenced an action praying for the declaration of the nullity of the deed of absolute sale executed by Ma. Elena, and the cancellation of the title issued to the petitioners by virtue thereof. Issue: Whether or not the sale of conjugal property made by Ma. Elena, by presenting a special power of attorney to sell (SPA) purportedly executed by respondent husband in her favor was validly made to the vendees?

spouse may assume sole powers of administration. These powers do not include disposition or encumbrance without authority of the court or the written consent of the other spouse. In the absence of such authority or consent, the disposition or encumbrance shall be void. Xxx Spouses Aggabao also failed to substantiate their contention that Dionisio, while holding the administration over the property, had delegated to his brother, Atty. Parulan, the administration of the property, considering that they did not present in court the SPA granting to Atty. Parulan the authority for the administration. Nonetheless, the Court would like to stress that the power of administration does not include acts of disposition or encumbrance, which are acts of strict ownership. As such, an authority to dispose cannot proceed from an authority to administer, and vice versa, for the two powers may only be exercised by an agent by following the provisions on agency of the Civil Code (from Article 1876 to Article 1878). Specifically, the apparent authority of Atty. Parulan, being a special agency, was limited to the sale of the property in question, and did not include or extend to the power to administer the property. On the other hand, we agree with Dionisio that the void sale was a continuing offer from the petitioners and Ma. Elena that Dionisio had the option of accepting or rejecting before the offer was withdrawn by either or both Ma. Elena and the petitioners. The last sentence of the second paragraph of Article 124 of the Family Code makes this clear, stating that in the absence of the other spouses consent, the transaction should be construed as a continuing offer on the part of the consenting spouse and the third person, and may be perfected as a binding contract upon the acceptance by the other spouse or upon authorization by the court before the offer is withdrawn by either or both offerors. 2. Between Spouses (Arts. 133, 1490, 1492) Article 133. Every donation between the spouses during the marriage shall be void. This prohibition does not apply when the donation takes effect after the death of the donor. Neither does this prohibition apply to moderate gifts which the spouses may give each other on the occasion of any family rejoicing. (1334a) 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 of property under article 191. (1458a) Article 1492. The prohibitions in the two preceding articles are applicable to sales in legal redemption, compromises and renunciations. (n) MEDINA V. COLLECTOR, 1 SCRA 302 Facts: On 20 May 1944, Antonio Medina married Antonia Rodriguez. Before 1946, the spouses had neither property nor business of their own. Later, however, Antonio acquired forest concessions in the municipalities of San Mariano and Palanan, Isabela. From 1946 to 1948, the logs cut and removed by the Antonio from his concessions were sold to different persons in Manila through his agent, Mariano Osorio. In 1949, Antonia started to engage in business as a lumber dealer, and up to around 1952, Antonio sold to her

Ruling: No, the Court ruled that the sale of conjugal property without the consent of the husband was not merely voidable but void; hence, it could not be ratified. Spouses Aggabao also cannot use the defense that they are buyers in good faith because they did not exercise the necessary prudence to inquire into the wifes authority to sell. The relevant part of Article 124 of the Family Code provides that: xxx In the event that one spouse is incapacitated or otherwise unable to participate in the administration of the conjugal properties, the other

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almost all the logs produced in his San Mariano concession. Antonia, in turn, sold in Manila the logs bought from her husband through the same agent, Mariano Osorio. The proceeds were either received by Osorio for Antonio or deposited by said agent in Antonios current account with the PNB. On the thesis that the sales made by Antonio to his wife were null and void pursuant to the provisions of Article 1490 of the Civil Code of the Philippines, the Collector considered the sales made by Antonia as Antonios original sales taxable under Section 186 of the National Internal Revenue Code and, therefore, imposed a tax assessment on Antonio. On 30 November 1963, Antonio protested the assessment; however, the Collector insisted on his demand. On 9 July 1954, Antonio filed a petition for reconsideration, revealing for the first time the existence of an alleged premarital agreement of complete separation of properties between him and his wife, and contending that the assessment for the years 1946 to 1952 had already prescribed. After one hearing, the Conference Staff of the Bureau of Internal Revenue eliminated the 50% fraud penalty and held that the taxes assessed against him before 1948 had already prescribed. Based on these findings, the Collector issued a modified assessment, demanding the payment of only P3, 325.68. Antonio again requested for reconsideration, but the Collector, in his letter of 4 April 1955, denied the same. Antonio appealed to the Court of Tax Appeals, which rendered judgment upholding a tax assessment of the Collector of Internal Revenue except with respect to the imposition of so-called compromise penalties, which were set aside. Hence a petition to review the decision of the CTA. The Supreme Court affirmed the appealed decision with cost against the petitioner. Issue: Whether or not the sales made by the petitioner to his wife could be considered as his original taxable sales? Ruling:

in business and for the incidents that flow there from when she so engages therein. The transactions permitted therein however are those entered into with strangers, and do not constitute exceptions to the prohibitory provisions of Article 1490 against sales between spouses.

c) Government always an interested party in taxable transactions.

The government is always an interested party to all matters involving taxable transactions and qualified to question their validity or legitimacy whenever necessary to block tax evasion. It cannot be contended thus that the Collector cannot assail the questioned sales, he being a stranger to said transactions.

d) Contracts violative of Article 1490 null and void. Contracts violative

of the provisions of Article 1490 of the Civil Code are null and void (Uy Sui Pin vs. Cantollas, 70 Phil. 55; Uy Coque vs. Sioca, 45 Phil. 43). In the present case, being void transactions, the sales made by the petitioner to his wife were correctly disregarded by the Collector in his tax assessments that considered as the taxable sales those made by the wife through the spouses common agent, Mariano Osorio. 3. APPLICABILITY TO COMMON-LAW SPOUSES (ART. 133) Article 133. Every donation between the spouses during the marriage shall be void. This prohibition does not apply when the donation takes effect after the death of the donor. Neither does this prohibition apply to moderate gifts which the spouses may give each other on the occasion of any family rejoicing. (1334a) CALIMLIM CANULLAS V. FORTUN, 129 SCRA 675 (1984); Facts: Petitioner Mercedes Calimlim-Canullas and Fernando Canullas were married in 1962, with 5 children, and were living on a house situated on a land inherited by the latter. In 1978, Fernando abandoned his family and lived with Corazon Daguines. In 1980, Fernando sold the house and lot to Daguines, who initiated a complaint for quieting of title. Mercedes resisted, claiming that the house and lot were conjugal properties, and the sale was null nad void for she had not consented thereto. Issue: (1) Whether or not the construction of a conjugal house on the exclusive property of the husband ipso facto gave the land the character of conjugal property (2) Whether or not the sale of the lot together with the house and improvements thereon was valid under the circumstances surrounding the transaction Ruling: (1) Both the land and the building belong to the conjugal partnership but the conjugal partnership is indebted to the husband for the value of the land. The spouse owning the lot becomes a creditor of the conjugal partnership for the value of the lot, which value would be reimbursed at the liquidation of the conjugal partnership. FERNANDO could not have alienated the house and lot to DAGUINES since MERCEDES had not given her consent to said sale. (2) The contract of sale was null and void for being contrary to morals and public policy. The sale was made by a husband in favor of a concubine after he had abandoned his family and left the conjugal home where his wife and children lived and from whence they derived their support. That sale was subversive of the stability of the family, a basic social institution which public policy cherishes and protects. 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

a) No evidence proving pre-marital agreement of absolute separation

between the spouses. Aside from the material inconsistencies in the testimony of petitioners witnesses, the circumstantial evidence is against petitioners claim. (1) It appears that at the time of the marriage between the petitioner and his wife, they neither had any property nor business of their own, as to have really urged them to enter into the supposed property agreement. (2) The testimony that the separation of property agreement was recorded in the Registry of Property 3 months before the marriage is patently absurd, since such a pre-nuptial agreement could not be effective before marriage is celebrated. (3) Despite their insistence on the existence of the ante- nuptial contract, the couple, strangely enough, did not act in accordance with its alleged covenants; but that even during their taxable years, the ownership, usufruct, and administration of their properties and business were in the husband. (4) Although petitioner already knew that Article 1490 prohibits sales between spouses married under a community system, it was not until July 1954 that the allege the existence of the alleged property separation agreement. (5) The Day Book of the Register of Deeds on which the agreement would have been entered, which was saved from the ravages of war, did not show that the document in question was among those recorded therein.

b) Article 7 and 10 of Code of Commerce does not exempt from the

prohibition of sale between spouses under Article 1490 of the Civil Code. Article 7 and 10 of the Code of Commerce merely state, under certain conditions, a presumption that the wife is authorized to engage

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because if transfers or con 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 guilt would turn out to be better than those in legal union." Those provisions are dictated by public interest and their criterion must be imposed upon the wig of the parties. 4. IS IN PARI DELICTO DOCTRINE APPLICABLE TO PROHIBIT RECOVERY? The common law defense of in pari delicto refers to [t]he principle that a plaintiff who has participated in wrongdoing may not recover damages resulting from the wrongdoing. Blacks Law Dictionary 806 (8th ed. 2004). This principle is based on the relative circumstances of the parties at the time of the execution or performance of the contract and generally may be raised in an action at law or in equity. OHalloran v. PricewaterhouseCoopers LLP, 969 So.2d 1039, 1044 (Fla. 2d DCA 2007) (The defense of in pari delicto is both an affirmative defense and an equitable defense that prohibits plaintiffs from recovering damages resulting from their own wrongdoing. (quoting Nisselson v. Lernout, 469 F.3d 143, 151 (1st Cir.2006)); PARI DELICTO DOCTRINE - both parties are guilty, no action against each other; those who come in equity must come with clean hands; applies only to illegal contracts & not to inexistent contracts; does not apply when a superior public policy intervenes EXCEPTION TO PARI DELICTO RULE 1. If purpose has not yet been accomplished & If damage has not been caused to any 3rd person Requisites: a) contract is for an illegal purpose b) contract must be repudiated by any of the parties before purpose is accomplished or damage is caused to 3rd parties c) court believes that public interest will be served by allowing recovery (discretionary upon the court ) based on remorse; illegality is accomplished when parties entered into contract; before it takes effect party w/c is remorseful prevents it 2. Where laws are issued to protect certain sectors: consumer protection, labor, usury law a) Consumer protection if price of commodity is determined by statute, any person paying an amount in excess of the maximum price allowed may recover such excess b) Labor if law sets the minimum wage for laborers, any laborer who agreed to receive less may still be entitled to recover the deficiency; if law set max working hours & laborer who undertakes to work longer may demand additional compensation c) Interest paid in excess of the interest allowed by the usury law may be recovered by debtor with interest from date of payment 3. If one party is incapacitated, courts may allow recovery of money, property delivered by incapacitated person in the interest of justice; pari delicto cannot apply because an incapacitated person does not know what he is entering into; unable to understand the consequences of his own action 4. If agreement is not illegal per se but merely prohibited & prohibition is

designated for the protection of the plaintiff may recover what he has paid or delivered by virtue of public policy MUTUAL RESTITUTION IN VOID CONTRACTS General Rule: parties should return to each other what they have given by virtue of the void contract in case where nullity arose from defect in essential elements 1. return object of contract & fruits 2. return price plus interest Exception: No recovery can be had in cases where nullity of contract arose from illegality of contract where parties are in pari delicto; except: a. incapacitated not obliged to return what he gave but may recover what he has given b. other party is less guilty or not guilty C. SCENARIOS INVOLVING CONFLICT OF INTEREST DUE TO TRUST RELATIONSHIPS (Arts. 1491 and 1492) 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 intrusted 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) Article 1492. The prohibitions in the two preceding articles are applicable to sales in legal redemption, compromises and renunciations. (n) 1. STATUS OF SUCH CONTRACTS RUBIAS V. BATILLER, 51 S 120 (1973). Facts: Francisco Militante claimed ownership of a parcel of land located in the Barrio General Luna, Barotac Viejo, Iloilo, which he caused to be surveyed on 18-31 July 1934, whereby he was issued a plan Psu-99791 (containing an area of 171.3561 hectares.) Before the war with Japan, Militante filed with the CFI Iloilo an application for the registration of title of

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the land technically described in Psu-99791 opposed by the Director of Lands, the Director of Forestry and other oppositors. However, during the war with Japan, the record of the case was lost before it was heard, so after the war Militante petitioned the Court to reconstitute the record of the case. The record was reconstituted in the CFI Iloilo (Land Case R-695, GLRO Rec. 54852). The CFI heard the land registration case on 11 November 1952, and after trial the Court dismissed the application for registration. Militante appealed to the Court of Appeals (CA-GR 13497-R). Pending the disposal of the appeal or on 18 June 1956, Militante sold to Domingo Rubias, his son-in-law and a lawyer by profession, the land technically described in Psu-99791. The sale was duly recorded in the Office of the Register of Deeds for the Province of Iloilo (Entry 13609) on 14 July 1960. On 22 September 1958, the CA promulgated its judgment confirming the decision of the trial court dismissing the Application for Registration filed by Militante. Domingo Rubias declared the land for taxation purposes under Tax Declaration (TD) 8585 for 1957; TD 9533 and TD 10019 for 1961; TD 9868 for 1964, paying the land taxes under TD 8585 and TD 9533. Militante has also declared the land for taxation purposes under TD 5172 in 1940, under TD T-86 for 1945, under TD 7122 for 1948, and paid the land taxes for 1940, for 1945-46, for 1947, for 1947 & 1948, for 1948, and for 1948 and 1949. TD 2434 in the name of Liberato Demontao for the land described therein was cancelled by TD 5172 of Militante. Demontao paid the land tax under TD 2434 on 20 December 1939 for the years 1938 and 1959. Isaias Batiller had declared for taxation purposes Lot 2 of Psu-144241 under TD 8583 for 1957 and a portion of Lot 2 under TD 8584 for 1945. TD 8483 was revised by TD 9498 while TD 9584 was cancelled by TD 9584 both in the name of Batiller. Batiller paid the land taxes for Lot 2 on 9 November 1960 for the year 1945 and 1946, 1950 and 1960 as shown by the certificate of the treasurer.The land claimed by Batiller as his own was surveyed on 6-7 June 1956, and a plan approved by Director of Lands on 15 November 1956 was issued, identified as Psu 155241. On 22 April 1960, Rubias filed a forcible Entry and Detainer case against Batiller in the Justice of the Peace Court of Barotac Viejo, Iloilo. On May 1961 and after trial, the Municipal Court of Barotac Viejo decided the case in favor of the Batiller. Rubias appealed from the decision of the Municipal Court of Barotac Viejo to the CFI Iloilo. On 26 November 1964 and after the trial, the CFI decided the case likewise in favor of Batiller, holding that he has better right to possess the land in question having been in the actual possession thereof under a claim of title many years before Militante sold the land to Rubias. On 31 August 1964, Rubias filed a suit to recover the ownership and possession of certain portions of lot under Psu-99791, bought from his father-in-law, Francisco Militante in 1956, against its present occupant Batiller, who allegedly entered said portions of the lot in 1945 and in 1959. Rubias prayed also for damages and attorneys fees. On 17 August 1965, the CFI dismissed the case, the court therein practically agreeing that the contract between Rubias and Militante was null and void. Rubias filed a motion for reconsideration, which was likewise denied by the lower court on 14 January 1966. Thereafter, Rubias filed an appeal before the Court of Appeals, which certified said appeal to the Supreme as involving purely legal questions. The Supreme Court affirmed the order of dismissal appealed, with costs against Rubias. Issue: Whether the sale of the land is prohibited under Article 1491. Ruling:

a) Purchase of a lawyer of a property in litigation prohibited;

Contract void and cannot be ratified. The purchase by a lawyer of the property in litigation from his client is categorically prohibited by Article 1491, paragraph of the Philippine Civil Code (The following persons cannot acquire any purchase, even at a public or judicial auction, either in person or through the mediation of another xxx 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 their 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.) and that consequently, Rubias purchase of the property in litigation from his client(and father- in-law) was void and could produce no legal effect, by virtue of Article 1409, paragraph of our Civil Code which provides that contracts expressly prohibited or declared void by law are inexistent and void from the beginning and that These contracts cannot be ratified. Neither can the right to set up the defense of illegality be waived.

b) Prohibitions under Article 1491 NCC (Article 1459 Spanish Civil

Code) Article 1491 of our Civil Code (like Article 1459 of the Spanish Civil Code) prohibits in its six paragraphs certain persons, by reason of the relation of trust or their peculiar control over the property, from acquiring such property in their trust or control either directly or indirectly and even at a public or judicial auction, as follows: (1) guardians; (2) agents; (3) administrators; (4) public officers and employees; judicial officers and employees, prosecuting attorneys, and lawyers; and (6) others especially disqualified by law. 2. GUARDIANS, AGENTS AND ADMINISTRATORS PHIL. TRUST CO. V. ROLDAN, 99 P 39 (1956) Facts: 17 parcels located in Guiguinto, Bulacan, were part of the properties inherited by Mariano L. Bernardo from his father, the late Marcelo Bernardo. In view of his minority, guardianship proceedings were instituted, wherein Socorro Roldan, surviving spouse of Bernardo and stepmother to Mariano, was appointed his guardian. On 27 July 1947, 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, her brother-in-law, 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. On 5 August 1947, Roldan, as guardian, executed the proper deed of sale in favor of Ramos, and on 12 August 1947 obtained a judicial confirmation of the sale. On 13 August 1947, Ramos executed in favor of Roldan, a deed of conveyance covering the same 17 parcels, for the sum of P15, 000. On 21 October 1947, Roldan sold 4 parcels out of the 17 to Emilio Cruz for P3, 000, reserving to herself the right to repurchase. The Philippine Trust Company replaced Roldan as guardian on 10 August 1948. Two months later, the Company, as guardian, filed before the CFI Manila a complaint against Roldan to annul 2 contracts regarding 17 parcels of land claiming that the step-mother in effect, sold to herself, the properties of her ward, and the sale should be annulled for violating Article 1459 of the Civil Code prohibiting the guardian from purchasing the property of her ward. The trial court upheld the contracts but allowing the minor to repurchase all the parcels by paying P15, 000, within 1 year. The CA affirmed the judgment. Hence, the appeal.

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The Supreme Court annulled the 3 contracts of sale in question; declared the minor as the owner of the 17 parcels of land, with the obligation to return to Roldan the price of P14, 700 with legal interest from 12 August 1947; ordered Roldan and Emilio Cruz to deliver said parcels of land to the minor; required Roldan to pay him beginning with 1947 the fruits, which her attorney admits, amounted to P1, 522 a year; authorized the minor to deliver directly to Emilio Cruz, out of the price of P14,700 above mentioned, the sum of P3,000; and charged appellees with the costs. Issue: Whether the sale of the land by the guardian is null and void for being violative of the prohibition for a guardian to purchase either in person or through the mediation of another the property of her ward? Ruling:

only P1,200 a year, whereas the harvest from the seventeen parcels netted his step-mother a yearly profit of P1,522.00. The minor was on the losing end.

e) Three Sales void. From both the legal and equitable standpoints these
three sales should not be sustained: the first two for violation of article 1459 of the Civil Code; and the third because Roldan could pass no title to Emilio Cruz. The annulment carries with is (Article 1303 Civil Code) the obligation of Roldan to return the 17 parcels together with their fruits and the duty of the minor, through his guardian to repay P14,700 with legal interest. 3. ATTORNEYS FABILLO V. LAC, 195 SCRA 28 (1991). Facts: Justina Fabillo bequeathed to her brother Florencio a house and lot in San Salvador, Palo, Leyte, and to her husband a piece of land in Pugahanay, Palo, Leyte. After Justinas death, Florencio filed a petition for the probate of said will. The court approved the project of partition but said that the ownership of the land of Florencio be litigated and determined in separate proceedings. So two years later, Florencio asked Atty. Murillo to assist him in recovering the San Salvador property. Murillo asked him for 40% of the money value of the house and lot as a contingent fee in case of success. Murillo and Florencio then entered into a contract: Florencio agreed to pay Murillo, in case of success, the sum equivalent to 40% of whatever benefit Florencio may derive from such cases. Also, if the house and lot or a portion thereof is just occupied by Florencio or his heirs, Murillo shall have the option of either occupying or leasing to any interested party 40% of the house and lot. Murillo, pursuant to the contract, filed a case against Justinas husband to recover the San Salvador property. The case was terminated when the court, upon the parties compromise agreement, declared Florencio the lawful owner of the San Salvador and Pugahanay property. So Murillo then proceeded to exercise ownership over 40% of said properties and installed a tenant in the Pugahanay property. Eventually, Florencio claimed exclusive rights over the properties and refused to give Murillo the share of the produce of the properties. Murillo then filed a complaint, asking that he be declared owner of 40% of the two properties. Florencio asked that the contract be declared null and void, plus that they had vitiated consent. The lower court: There was insufficient evidence to prove that the consent was vitiated. Ordered Florencio to pay 40% of the net produce of the property. Declared Murillo as owner of 40% of both the properties. IAC affirmed. Note: The case is being carried on by Florencio and Murillos heirs. Issue: Stipulation valid? Ruling: YES. A contingent fee does not fall under prohibition in Art 1491 par 5. While Art 1491 par 5 prohibits lawyers from acquiring by purchase the properties and rights which are the objects of litigation in which they may take part by virtue of their profession, this prohibition applies only if the sale of the assignment of the property takes place during the pendency of the litigation involving the clients property. A contract between a lawyer and his client stipulating a contingent fee is not covered by said prohibition. The payment of such fee is not made during the pendency of the litigation but only after judgment has been rendered in the case handled by the lawyer. As long as the lawyer does not exert undue influence and no fraud is committed, a contract for contingent fee is valid and enforceable.

a) Guardianship is a trust of the highest order; Article 1459 applies.

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 wards interest and in line with the courts suspicion whenever the guardian acquires the wards property, the Court has no hesitation to declare that, in the eyes of the law, the guardian (Roldan) took by purchase her wards parcels (thru Dr. Ramos), and that Article 1459 of the Civil Code applies.

b) Annulment of the transaction, even if no collusion is proved,

would uphold equity and justice. The guardian may have acted without malice; there may have been no previous agreement between her and Dr. Ramos to the effect that the latter would buy the lands for her but the fact remains that she acquired her proteges properties, through her brother-in-law. That she planned to get them for herself at the time of selling them to Dr. Ramos, may be deduced from the very short time between the two sales. The temptation which naturally besets a guardian so circumstanced, necessitates the annulment of the transaction, even if no actual collusion is proved (so hard to prove) between such guardian and the intermediate purchaser. This would uphold a sound principle of equity and justice.

c) Rodriguez v. Mactal does not apply; length of time different,

sufficient to dispel suspicion. In Rodrigues v. Mactal, where the guardian Mactal sold in January 1926 the property of her ward to Silverio Chioco, and in March 1928 she bought it from Chioco, the Court declared the in order to bring the sale in this case within the part of Article 1459, quoted above, it is essential that the proof submitted establish some agreement between Silverio Chioco and Trinidad Mactal to the effect that Chioco should buy the property for the benefit of Mactal. If there was no such agreement, either express or implied, then the sale cannot be set aside. The subsequent purchase of Mactal, in said case, cannot be annulled as there was no proof of a previous agreement between Chioco and her. Two years had elapsed between the sales, and such period of time was sufficient to dispel the natural suspicion of the guardians motives or actions. In the present case, only 1 week had elapsed. And if we were technical, only 1 day had elapsed from the judicial approval of the sale (August 12), to the purchase by the guardian (August 13).

d) Minor on losing end in the transaction. The calculation, that the

investment in the Tindalo Street house produces to the minor the rentals of P2,400 yearly while the parcels of land yield for the stepmother an average o P1,522 yearly, does not include the price of the lot on which the house was erected. Estimating such lot at P14,700 only, (ordinarily the city lot is more valuable than the building) the result is that the price paid for the 17 parcels gave the minor an income of

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However, a careful look at the contract shows that the parties intended 40% of the value of the properties as Murillos contingent fee. Plus, the stipulation on Murillo having the option to occupy or lease to any interested party 40% of the house and lot is declared vague. The ambiguity should be resolved against Murillo because it was he who drafted the contract. IAC decision reversed. Florencios heirs ordered to pay Murillos heirs the amount of P3k as his contingent fee.

Ruling: Petition no merit. (1) Nullity of the sale of the Philinterlife shares of stock made by Juliana Ortaez and Jose Ortaez in favor of petitioner FLAG is already a closed case. There can be no adjudication of a property under intestate proceedings without the approval of the court. That is basic unless you can present justification on that. In fact, there are two steps: first, you ask leave and then execute the document and then ask for approval of the document executed. The heirs of the decedent without securing court approval have appropriated as their own personal property the properties of [the] Estate, to the exclusion and the extreme prejudice of the other claimant/heirs. There being no legal justification, petitioner has no basis for demanding that public respondent [the intestate court] approve the sale of the Philinterlife shares of the Estate by Juliana and Jose Ortaez in favor of the Filipino Loan Assistance Group. Juliana Ortaez, and her three sons, Jose, Rafael and Antonio, all surnamed Ortaez, invalidly entered into a memorandum of agreement extrajudicially partitioning the intestate estate among themselves, despite their knowledge that there were other heirs or claimants to the estate and before final settlement of the estate by the intestate court. Since the appropriation of the estate properties by Juliana Ortaez and her children (Jose, Rafael and Antonio Ortaez) was invalid, the subsequent sale thereof by Juliana and Jose to a third party (FLAG), without court approval, was likewise void. An heir can sell his right, interest, or participation in the property under administration under Art. 533 of the Civil Code which provides that possession of hereditary property is deemed transmitted to the heir without interruption from the moment of death of the decedent.An heir can only alienate such portion of the estate that may be allotted to him in the division of the estate by the probate or intestate court after final adjudication, that is, after all debtors shall have been paid or the devisees or legatees shall have been given their shares. An heir may only sell his ideal or undivided share in the estate, not any specific property therein. In Manotok Realty, Inc. vs. Court of Appeals (149 SCRA 174), We held that the sale of an immovable property belonging to the estate of a decedent, in a special proceedings, needs court approval. (2) It goes without saying that the increase in Philinterlifes authorized capital stock, approved on the vote of petitioners non-existent shareholdings and obviously calculated to make it difficult for Dr. Ortaezs estate to reassume its controlling interest in Philinterlife, was likewise void ab initio.

4. JUDGES D. SALES BY ADMINISTRATORS/EXECUTORS LEE V. RTC, G.R. NO. 146006, FEBRUARY 23, 2004 Facts: Dr. Juvencio P. Ortaez incorporated the Philippine International Life Insurance Company, Inc. on July 6, 1956. On July 21, 1980, Dr. Ortaez died. He left behind a wife (Juliana Salgado Ortaez), three legitimate children (Rafael, Jose and Antonio Ortaez) and five illegitimate children by Ligaya Novicio (herein private respondent Ma. Divina Ortaez-Enderes and her siblings Jose, Romeo, Enrico Manuel and Cesar, all surnamed Ortaez). Son Rafael Ortaez petitoned to be the administratrix of the estate their father which the court approved. Rafael and Jose Ortaez joint special administrators of their fathers estate. The Second wife opposed said petition. Special administrators submitted an inventory of the estate of their father which included, among other properties, 2,029[3] shares of stock in Philippine International Life Insurance Company (hereafter Philinterlife), representing 50.725% of the companys outstanding capital stock. First wife claimed conjugal share in the 1,014[4] Philinterlife shares of stock as her conjugal share in the estate, sold said shares with right to repurchase in favor of herein petitioner Filipino Loan Assistance Group (FLAG), represented by its president, herein petitioner Jose C. Lee. The same thing was done by Special Administrator Jose Ortaez. Both failed to repurchase said share of stocks which was later owned by petitoner FLAG. Later, intestate court granted respondent Enderes appoinment as special administratix of the Philinterlife shares of stock. She filed motions to declare void ab initio MOA previously dome by first family and partialy declare nullity of extrajudicial settlement of the decedent's estate. She also filed a motion to declare void ab inito deeds of sale of Philinterlife shares of stock. Administrator Jose Ortaez filed an omnibus motion for (1) the approval of the deeds of sale of the Philinterlife shares of stock and (2) the release of Ma. Divina Ortaez-Enderes as special administratrix of the Philinterlife shares of stock on the ground that there were no longer any shares of stock for her to administer. This was denied by intestate court. The board of directors of Philinterlife increased the authorized capital stock of Philinterlife, diluting in the process the 50.725% controlling interest of the decedent, Dr. Juvencio Ortaez, in the insurance company. This became the subject of a separate action at the Securities and Exchange Commission filed by private respondent-Special Administratrix Enderes against petitioner Jose Lee and other members of the FLAG-controlled board of Philinterlife on November 7, 1994. Issue: (1) Core dispute on the legality of the sale of decedent Dr. Ortaezs Philinterlife shares of stock to petitioner FLAG. (2) can the intestate or probate court execute its order nullifying the invalid sale? YES

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III. SUBJECT MATTER OF SALE (Arts. 1459 to 1465) 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. (n) 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. (n) 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. (n) 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. (n) 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 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. (n) Art. 1465. Things subject to a resolutory condition may be the object of the contract of sale. (n) 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)

1.

The thing must be capable of existence a. Emptio Rei Speratae (1461 and 1347)

A purchase in the hope of an uncertain future profit; the purchase of a thing not yet inexistence or not yet in the possession of the seller, as, the cast of a net or a crop to begrown, and the price of which is to depend on the actual gain. On the other hand, if theprice is fixed and not subject to fluctuation, but is to be paid whether the gain begreater or less, it is called emptio spei. Mackeld. Rom. Law.

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. (n) Art. 1347. All things which are not outside the commerce of men, including future things, may be the object of a contract. All rights which are not intransmissible may also be the object of contracts. No contract may be entered into upon future inheritance except in cases expressly authorized by law. All services which are not contrary to law, morals, good customs, public order or public policy may likewise be the object of a contract. (1271a) b. Emptio Spei (1461)

[Latin purchase of a hope] An emptio rei speratae in which the price is fixed, regardless of actual gain. Even if the future event, such as the casting of a net, produced nothing, the buyer had to pay. 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. (n) c. Subject to resolutory condition (1465)

A. MUST BE EXISTING, FUTURE OR CONTIGENT (Arts. 1347, 1348 and 1462) Art. 1347. All things which are not outside the commerce of men, including future things, may be the object of a contract. All rights which are not intransmissible may also be the object of contracts. No contract may be entered into upon future inheritance except in cases expressly authorized by law. All services which are not contrary to law, morals, good customs, public order or public policy may likewise be the object of a contract. (1271a) Art. 1348. Impossible things or services cannot be the object of contracts. (1272)

Art. 1465. Things subject to a resolutory condition may be the object of the contract of sale. (n)

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QUIJADA V. CA, GR. NO. 126444, DECEMBER 4, 1988. Facts: Heirs of the late Trinidad Quijada (petitioners) filed a complaint against respondents for quieting title, recovery of possession and ownership of parcels of land with claim for attorney's fees and damages. On April 5, 1956, Trinidad Quijada together with her sisters Leonila Corvera Vda. de Sequea and Paz Corvera Cabiltes and brother Epapiadito Corvera executed a conditional deed of donation of the two-hectare parcel of land subject of the case in favor of the Municipality of Talacogon, the condition being that the parcel of land shall be used solely and exclusively as part of the campus of the proposed provincial high school in Talacogon. Despite said donation, Trinidad remained in possession of the said land. Later on, Trinidad sold parcel of land 2 hectares of land to Regalado Mondejar (1 hectare) in a verbal sale without a deed. The Sangguniang Bayan of the municipality of Talacogon enacted a resolution reverting the two (2) hectares of land donated back to the donors. In the meantime, defendant-appellant (respondent) Regalado Mondejar sold portions of the land to defendants-appellants (respondents) Fernando Bautista, Rodolfo Goloran, Efren Guden and Ernesto Goloran. It was contended by the petitioners that said property was never sold to Regalado Mondejar. Lower court ruled "Trinidad Quijada had no legal title or right to sell the land to defendant Mondejar in 1962, 1966, 1967 and 1968, the same not being hers to dispose of because ownership belongs to the Municipality of Talacogon and, secondly, that the deed of sale executed by Trinidad Quijada in favor of Mondejar did not carry with it the conformity and acquiescence of her children, more so that she was already 63 years old at the time, and a widow Court of Appeals reversed and set aside the judgment a quo ruling that the sale made by Trinidad Quijada to respondent Mondejar was valid as the former retained an inchoate interest on the lots by virtue of the automatic reversion clause in the deed of donation. Issue: Whether sale was valid? YES Ruling: Sale, being a consensual contract, is perfected by mere consent, which is manifested the moment there is a meeting of the minds as to the offer and acceptance thereof on three (3) elements: subject matter, price and terms of payment of the price. Ownership by the seller on the thing sold at the time of the perfection of the contract of sale is not an element for its perfection. What the law requires is that the seller has the right to transfer ownership at the time the thing sold is delivered. Perfection per se does not transfer ownership which occurs upon the actual or constructive delivery of the thing sold. A perfected contract of sale cannot be challenged on the ground of non-ownership on the part of the seller at the time of its perfection; hence, the sale is still valid. The consummation, however, of the perfected contract is another matter. It occurs upon the constructive or actual delivery of the subject matter to the buyer when the seller or her successors-in-interest subsequently acquires ownership thereof. Such circumstance happened in this case when petitioners who are Trinidad Quijada's heirs and successors-in-interest became the owners of the subject property upon the reversion of the ownership of the land to them. Consequently, ownership is transferred to respondent Mondejar and those who claim their right from him. Article 1434 of the New Civil Code supports the ruling that the seller's "title passes by

operation of law to the buyer." This rule applies not only when the subject matter of the contract of sale is goods, but also to other kinds of property, including real property. The Court did not consider as void the sale by the donor of land previously donated to a local government unit under a resolutory condition as a sale outside the commerce of men under Article 1409 (4) of the Civil Code, in that patrimonial properties of a local government unit, especially those conditionally owned by said unit, as being outside the commerce of men, it held that the objects referred to as outside the commerce of man are those which cannot be appropriated, such as the open seas and the heavenly bodies. 2. Sellers obligation to transfer ownership at the time of delivery (Arts. 1459, 1462, 1505, 1434 and 1462) 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. (n) 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. 1505. Subject to the provisions of this Title, where 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 acquires no better title to the goods than the seller had, unless the owner of the goods is by his conduct precluded from denying the seller's authority to sell. Nothing in this Title, however, shall affect: (1) The provisions of any factors' act, recording laws, or any other provision of law enabling the apparent owner of goods to dispose of them as if he were the true owner thereof; (2) The validity of any contract of sale under statutory power of sale or under the order of a court of competent jurisdiction; (3) Purchases made in a merchant's store, or in fairs, or markets, in accordance with the Code of Commerce and special laws. (n) Art. 1434. When a person who is not the owner of a thing sells or alienates and delivers it, and later the seller or grantor acquires title thereto, such title passes by operation of law to the buyer or grantee. 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)

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B. MUST BE LICIT (Arts. 1347, 1459 and 1575) Art. 1347. All things which are not outside the commerce of men, including future things, may be the object of a contract. All rights which are not intransmissible may also be the object of contracts. No contract may be entered into upon future inheritance except in cases expressly authorized by law. All services which are not contrary to law, morals, good customs, public order or public policy may likewise be the object of a contract. (1271a) 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. (n) Art. 1575. The sale of animals suffering from contagious diseases shall be void. A contract of sale of animals shall also be void if the use or service for which they are acquired has been stated in the contract, and they are found to be unfit therefor. (1494a)

Lots Nos. 1214-B, 1214-C and 1214-D, with a total area of 15,350 square meters, more or less. The University of the Philippines, meanwhile, obtained Transfer Certificate of Title No. 7152 covering the three lots, Nos. 1214-B, 1214-C and 1214-D. On December 10, 1955 Pio Sian Melliza filed an action in the Court of First Instance of Iloilo against Iloilo City and the University of the Philippines for recovery of Lot 1214-B or of its value. The court ruled favoring UP. Issue: Whether or not the conveyance by Juliana Melliza to Iloilo municipality included that portion of Lot 1214 known as Lot 1214-B? YES Ruling: The court held that the requirement that a sale must have for its object a determinate thing is fulfilled as long as, at the time the contract is entered into, the object of the sale is capable of being made determinate without the necessity of a new or further agreement between the parties. The requirement in Melliza was deemed fulfilled under the contract of sale because it specifically referred to such other portion of the lots required by the Arellano plan, which had long been in existence and it specifically provided for the land areas needed for the city hall site. Therefore, at the time of the perfection of the contract, the exact area of the land needed, which was the subject matter of the sale, could be determined by simply referring to the Arellano plan, without the parties needing to draw-up a new contract, nor even clarify matters or explain their intentions. HEIRS OF SAN ANDRES V. RODRIGUEZ, 332 S 769 (2000); Facts: Juan San Andres sold 345 square meters a portion of Lot No. 1914B-2 to Vicente S. Rodriguez evidenced by a Deed of Sale. Juan San Andres died and Ramon San Andres was appointed judicial administrator of the decedent's estate in Special Proceedings. Geodetic engineer, Jose Peero services was availed to measure and prepare a plan for the property that was priory sold. It was found that Vicente S. Rodriguez had encroached part of the property by 509 sqm. A letter was sent to Vicente S. Rodriguez to vacate said encroached area which was refused by him to do. He contended that said encroached was later sold to him by Juan San Andres evidenced by a receipt with signature of the deceased. Respondent then cosigned to the court the remaining amount to be paid for the said purchased of the lot. While case was pending, judicial administrator Ramon San Andres died and was substituted by his son Ricardo San Andres. On the other band, respondent Vicente Rodriguez died and was substituted by his heirs. Lower Court rendered judgment in favor of petitioner. It ruled that there was no contract of sale to speak of for lack of a valid object because there was no sufficient indication in Exhibit 2 to identify the property subject of the sale, hence, the need to execute a new contract. CA reversed the decision. Issue: Whether sale was valid? YES. Ruling: It was held that where the lot is described to be adjoining the previously paid lot on three sides thereof, the sold lot was deemed capable of being determined without the need of a new contract and the fact that the exact area adjoining residential lot is subject to the result of a survey does not detract from the fact that is determinate or determinable.

C. MUST BE DETERMINATE OR DETERMINABLE (1460) 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. (n)

MELLIZA V. CITY OF ILO-ILO, 23 SCRA 477 (1968)

Facts: Juliana Melliza owned 3 parcels of land in Iloilo City under Original
Certificate of Title No. 3462 known as Lots Nos. 2, 5 and 1214. The total area of Lot No. 1214 was 29,073 square meters. In 1931, she donated 9,000 square meters of Lot 1214, to serve as site for the municipal hall. Donation was however revoked. Lot No. 1214 was divided by Certeza Surveying Co., Inc. into Lots 1214-A and 1214-B. And still later, Lot 1214-B was further divided into Lots 1214-B1, Lot 1214-B-2 and Lot 1214-B-3. Later, Juliana Melliza executed an instrument without any caption, selling property Lot No. 1214 in consideration of P6,422.00 to the Government of Iloilo City. The remaining portion was sold to remedios Sian Villanueva who thereafter obtained her own registered title. Remedios in turn on November 4, 1946 transferred her rights to said portion of land to Pio Sian Melliza, who obtained Transfer Certificate of Title No. 2492. The instrument of sale did not mention lot 1214-B, although it was contiguous to the other two lots, but stipulated that the area being sold shall include the area needed for the construction of the city hall site, avenues and parks according to the Arellano plan. The Arellano plan had long been in existence before the execution of the deed. On August 24, 1949 the City of Iloilo, which succeeded to the Municipality of Iloilo, donated the city hall site together with the building thereon, to the University of the Philippines (Iloilo branch). The site donated consisted of

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There is no dispute that respondent purchased a portion of Lot 1914-B-2 consisting of 345 square meters. This portion is located in the middle of Lot 1914-B-2, which has a total area of 854 square meters, and is clearly what was referred to in the receipt as the "previously paid lot." Since the lot subsequently sold to respondent is said to adjoin the "previously paid lot" on three sides thereof, the subject lot is capable of being determined without the need of any new contract. The contract of sale in this case is perfected, and the delivery of the subject lot to respondent effectively transferred ownership to him. For this reason, respondent seeks to comply with his obligation to pay the full purchase price, but because the deed of sale is yet to be executed, he deemed it appropriate to deposit the balance of the purchase price in court. Accordingly, Art. 1144 of the Civil Code has no application to the instant case. Considering that a survey of the lot has already been conducted and approved by the Bureau of Lands, respondent's heirs, assign or successors-in-interest should reimburse the expenses incurred by herein petitioners, pursuant to the provisions of the contract. 1. Generic things as objects of sale (Arts. 1246 and 1409[6]) Art. 1246. When the obligation consists in the delivery of an indeterminate or generic thing, whose quality and circumstances have not been stated, the creditor cannot demand a thing of superior quality. Neither can the debtor deliver a thing of inferior quality. The purpose of the obligation and other circumstances shall be taken into consideration. (1167a)

Messrs. Yu Tek and Co. proved that no sugar had been delivered to it under this contract nor had it been able to recover the P3,000. Issue: (1) Whether compliance of the obligation to deliver depends upon the production in defendants plantation? NO. (2) Whether there is a perfected sale? NO. Ruling: (1) In the case at bar, it is sought to show that the sugar was to be obtained exclusively from the crop raised by the defendant. There is no clause in the written contract which even remotely suggests such a condition. The defendant undertook to deliver a specified quantity of sugar within a specified time. The contract placed no restriction upon the defendant in the matter of obtaining the sugar. He was equally at liberty to purchase it on the market or raise it himself. There is not the slightest intimation in the contract that the sugar was to be raised by the defendant. Parties are presumed to have reduced to writing all the essential conditions of their contract. While parol evidence is admissible in a variety of ways to explain the meaning of written contracts, it cannot serve the purpose of incorporating into the contract additional contemporaneous conditions which are not mentioned at all in the writing, unless there has been fraud or mistake. It may be true that defendant owned a plantation and expected to raise the sugar himself, but he did not limit his obligation to his own crop of sugar. Our conclusion is that the condition which the defendant seeks to add to the contract by parol evidence cannot be considered. The rights of the parties must be determined by the writing itself. In the McCullough case, for instance, the tobacco factory which the parties dealt with was specifically pointed out and distinguished from all other tobacco factories. So, in the Barretto case, the particular shares of stock which the parties desired to transfer were capable of designation. In the Tan Leonco case, where a quantity of hemp was the subject of the contract, it was shown that that quantity had been deposited in a specific warehouse, and thus set apart and distinguished from all other hemp. (2) We conclude that the contract in the case at bar was merely an executory agreement; a promise of sale and not a sale. At there was no perfected sale, it is clear that articles 1452, 1096, and 1182 are not applicable. The defendant having defaulted in his engagement, the plaintiff is entitled to recover the P3,000 which it advanced to the defendant, and this portion of the judgment appealed from must therefore be affirmed. 2. Undivided Interest (1463, 1464) Art. 1463. The sole owner of a thing may sell an undivided interest therein. (n) 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 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. (n)

Art. 1409. The following contracts are inexistent and void from the beginning: (1) Those whose cause, object or purpose is contrary to law, morals, good customs, public order or public policy; (2) Those which are absolutely simulated or fictitious; (3) Those whose cause or object did not exist at the time of the transaction; (4) Those whose object is outside the commerce of men; (5) Those which contemplate an impossible service; (6) Those where the intention of the parties relative to the principal object of the contract cannot be ascertained; (7) Those expressly prohibited or declared void by law. These contracts cannot be ratified. Neither can the right to set up the defense of illegality be waived.

YU TEK & CO., V. GONZALES, 29 PHIL. 384 (1915) Facts: Mr. Basilio Gonzalez in consideration of P3,000 contracted with Messrs. Yu Tek and Co. to deliver 600 piculs of sugar of the first and second grade, according to the result of the polarization, within the period of three months in year 1912. There is condition in contract that it will be rescinded in the event there was failure on part Mr. Basilio Gonzalez to deliver the said sugar.

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3.

Undivided Share in a mass of fungible goods may be object of sale. (Art. 1464)

D. WHETHER QUANTITY OF OBJECT IS ESSENTIAL FOR PERFECTION (Art. 1349) Art. 1349. 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. (1273) NATIONAL GRAINS AUTHORITY V. IAC, 171 SCRA 131 (1989); Facts: National Grains Authority (now National Food Authority, NFA for short) is a government agency incidental functions is the buying of palay grains from qualified farmers. Respondent Leon Soriano offered to sell palay grains to the NFA, through William Cabal, the Provincial Manager of NFA stationed at Tuguegarao, Cagayan. He submitted the documents required by the NFA for pre-qualifying as a seller. Soriano's documents were processed and accordingly, he was given a quota of 2,640 cavans of palay. The quota noted in the Farmer's Information Sheet represented the maximum number of cavans of palay that Soriano may sell to the NFA. Soriano delivered 630 cavans of palay. The palay delivered during these two days were not rebagged, classified and weighed. when Soriano demanded payment of the 630 cavans of palay, he was informed that its payment will be held in abeyance after investigation by Mr. Cabal that Soriano was not a bona tide farmer and the palay delivered by him was not produced from his farmland but was taken from the warehouse of a rice trader, Ben de Guzman. Cabal wrote Soriano advising him to withdraw from the NFA warehouse the 630 cavans Soriano delivered stating that NFA cannot legally accept the said delivery on the basis of the subsequent certification of the BAEX technician, Napoleon Callangan that Soriano is not a bona fide farmer. Soriano did not withdraw said 630 cavans of palay but instead filed a complaint for specific performance and/or collection of money. Trial court favored Soriano and ordered NFA and its officers to pay Soriano the price of the 630 cavans of rice plus interest. CA denied MR by petitioners. Issue: Whether or not there was a contract of sale? YES. Ruling: The court held that there was a point of agreement already a perfected and binding contract of sale, and to which NFA was obliged to comply and pay the purchase price for the grains actually delivered by the seller-farmer Soriano, thus In the case at bar, Soriano initially offered to sell palay grains produced in his farmland to NFA. When the latter accepted the offer by noting in Soriano's Farmer's Information Sheet a quota of 2,640 cavans, there was already a meeting of the minds between the parties. The object of the contract, being the palay grains produced in Soriano's farmland and the NFA was to pay the same depending upon its quality. The fact that the exact number of cavans of palay to be delivered has not been determined does not affect the perfection of the contract. Article 1349 of the New Civil Code provides: "... The fact that the quantity is not determinate

shall not be an obstacle to the existence of the contract, provided it is possible to determine the same, without the need of a new contract between the parties." In this case, there was no need for NFA and Soriano to enter into a new contract to determine the exact number of cavans of palay to be sold. Soriano can deliver so much of his produce as long as it does not exceed 2,640 cavans. The controlling doctrine is that specific quantity of the subject matter is not important when it is still possible to determine the quantity without the need of a new contract between the parties, and therefore complies with the requisite of being determinable. JOHANNES SCHUBACK & SONS PHIL. TRADING CORP. V. COURT OF APPEALS, 227 SCRA 719 (1993). Facts: On October 16, 1981, defendant submitted to plaintiff the list of bus spare parts he wanted to purchase to its counterpart in Hamburg. Plaintiff sent an offer on the items listed. On December 4, 1981, defendant informed plaintiff that he preferred genuine to replacement parts, and requested a 15% discount. On December 17, plaintiff submitted its formal offer. On December 24, defendant submitted a purchase order, and submitted the quantity on December 29. Plaintiff immediately ordered the items from Schuback Hamburg, which thereafter ordered the same from NDK, a supplier in Germany. Plaintiff sent a pro-forma invoice to be used in applying for letter of credit. On February 16, 1982, plaintiff reminded defendant to open a letter of credit to avoid delay in shipment. Defendant mentioned the difficulty he was encountering in procuring the same. Plaintiff continued receiving invoices and partial deliveries from NDK. On October 18, 1982, plaintiff again reminded the defendant to open a letter of credit. Defendant replied that he did not make a valid purchase order and that there was no definite contract between him and the plaintiff. Plaintiff sent a rejoinder explaining that there is a valid Purchase Order and suggesting that defendant either proceed with the order and open a letter of credit or cancel the order and pay the cancellation fee of 30% of F.O.B. value, or plaintiff will endorse the case to its lawyers. Demand letters sent to defendant by plaintiff's counsel dated March 22, 1983 and June 9, 1983 were to no avail. Consequently, petitioner filed a complaint for recovery of actual or compensatory damages, unearned profits, interest, attorney's fees and costs against private respondent. Issue: Whether or not a contract of sale has been perfected between the parties? YES. Ruling: The Court held that a binding contract of sale existed between parties upon issuance of the purchase order, and not upon the confirmation of the buyer of the quantities covered by the order, thus While we agree with the trial court's conclusion that indeed a perfection of contract was reached between the parties, we differ as to the exact date when it occurred, for perfection took place, not on December 29, 1981. Although the quantity to be ordered was made determinate only on December 29, 1981, quantity is immaterial in the perfection of a sales contract. What is of importance is the meeting of the minds as to the object and cause, which from the facts disclosed, show that as of December 24, 1981, these essential elements had already occurred. However, nothing in the facts indicated that as of 24 December 1981 the quantity of the objects ordered could be determined outside of a subsequent agreement by the parties. The ruling in Johannes Schuback relied upon

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National Grains Authority, and yet in the latter case at the time of the perfection of the contract, there was in fact a maximum quantity agreed upon. Article 1319 of the Civil Code states: "Consent is manifested by the meeting of the offer and acceptance upon the thing and the cause which are to constitute the contract. The offer must be certain and the acceptance absolute. A qualified acceptance constitutes a counter offer." The facts presented to us indicate that consent on both sides has been manifested. The offer by petitioner was manifested on December 17, 1981 when petitioner submitted its proposal containing the item number, quantity, part number, description, the unit price and total to private respondent. On December 24, 1981, private respondent informed petitioner of his desire to avail of the prices of the parts at that time and simultaneously enclosed its Purchase Order. At this stage, a meeting of the minds between vendor and vendee has occurred, the object of the contract: being the spare parts and the consideration, the price stated in petitioner's offer dated December 17, 1981 and accepted by the respondent on December 24, 1981. E. LEGALITY OF SUBJECT MATTER (Arts. 1409, 1458, 1461, 1462 and 1575) Art. 1409. The following contracts are inexistent and void from the beginning: (1) Those whose cause, object or purpose is contrary to law, morals, good customs, public order or public policy; (2) Those which are absolutely simulated or fictitious; (3) Those whose cause or object did not exist at the time of the transaction; (4) Those whose object is outside the commerce of men; (5) Those which contemplate an impossible service; (6) Those where the intention of the parties relative to the principal object of the contract cannot be ascertained; (7) Those expressly prohibited or declared void by law. 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) 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. (n) 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. 1575. The sale of animals suffering from contagious diseases shall be void. A contract of sale of animals shall also be void if the use or service for which they are acquired has been stated in the contract, and they are found to be unfit therefor. (1494a) 1. Special laws 2. Absolutely simulated sale

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