Title VI.

- SALES

CHAPTER 1

NATURE AND FORM OF THE CONTRACT

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

A contract of sale may be absolute or conditional. (1445a)

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. 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)

Art. 1467. A contract for the delivery at a certain price of an article which the vendor in the ordinary course of his business manufactures or
procures for the general market, whether the same is on hand at the time or not, is a contract of sale, but if the goods are to be
manufactured specially for the customer and upon his special order, and not for the general market, it is a contract for a piece of work.
(n)

Art. 1468. If the consideration of the contract consists partly in money, and partly in another thing, the transaction shall be characterized by the
manifest intention of the parties. If such intention does not clearly appear, it shall be considered a barter if the value of the thing given
as a part of the consideration exceeds the amount of the money or its equivalent; otherwise, it is a sale. (1446a)

Art. 1469. In order that the price may be considered certain, it shall be sufficient that it be so with reference to another thing certain, or that the
determination thereof be left to the judgment of a special person or persons.

Should such person or persons be unable or unwilling to fix it, the contract shall be inefficacious, unless the parties subsequently agree
upon the price.

If the third person or persons acted in bad faith or by mistake, the courts may fix the price.

Where such third person or persons are prevented from fixing the price or terms by fault of the seller or the buyer, the party not in fault
may have such remedies against the party in fault as are allowed the seller or the buyer, as the case may be. (1447a)

Art. 1470. Gross inadequacy of price does not affect a contract of sale, except as it may indicate a defect in the consent, or that the parties really
intended a donation or some other act or contract. (n)

Art. 1471. If the price is simulated, the sale is void, but the act may be shown to have been in reality a donation, or some other act or contract. (n)
Art. 1472. The price of securities, grain, liquids, and other things shall also be considered certain, when the price fixed is that which the thing
sold would have on a definite day, or in a particular exchange or market, or when an amount is fixed above or below the price on such
day, or in such exchange or market, provided said amount be certain. (1448)

Art. 1473. The fixing of the price can never be left to the discretion of one of the contracting parties. However, if the price fixed by one of the
parties is accepted by the other, the sale is perfected. (1449a)

Art. 1474. Where the price cannot be determined in accordance with the preceding articles, or in any other manner, the contract is inefficacious.
However, if the thing or any part thereof has been delivered to and appropriated by the buyer he must pay a reasonable price therefor.
What is a reasonable price is a question of fact dependent on the circumstances of each particular case. (n)

Art. 1475. The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon
the price.

From that moment, the parties may reciprocally demand performance, subject to the provisions of the law governing the form of
contracts. (1450a)

Art. 1476. In the case of a sale by auction:

(1) Where goods are put up for sale by auction in lots, each lot is the subject of a separate contract of sale.

(2) A sale by auction is perfected when the auctioneer announces its perfection by the fall of the hammer, or in other customary
manner. Until such announcement is made, any bidder may retract his bid; and the auctioneer may withdraw the goods from the
sale unless the auction has been announced to be without reserve.

(3) A right to bid may be reserved expressly by or on behalf of the seller, unless otherwise provided by law or by stipulation.

(4) Where notice has not been given that a sale by auction is subject to a right to bid on behalf of the seller, it shall not be lawful for
the seller to bid himself or to employ or induce any person to bid at such sale on his behalf or for the auctioneer, to employ or
induce any person to bid at such sale on behalf of the seller or knowingly to take any bid from the seller or any person employed
by him. Any sale contravening this rule may be treated as fraudulent by the buyer. (n)

Art. 1477. The ownership of the thing sold shall be transferred to the vendee upon the actual or constructive delivery thereof. (n)

Art. 1478. The parties may stipulate that ownership in the thing shall not pass to the purchaser until he has fully paid the price. (n)

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

An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor if the promise is
supported by a consideration distinct from the price. (1451a)

Art. 1480. Any injury to or benefit from the thing sold, after the contract has been perfected, from the moment of the perfection of the contract to
the time of delivery, shall be governed by Articles 1163 to 1165, and 1262.

This rule shall apply to the sale of fungible things, made independently and for a single price, or without consideration of their weight,
number, or measure.

Should fungible things be sold for a price fixed according to weight, number, or measure, the risk shall not be imputed to the vendee
until they have been weighed, counted, or measured and delivered, unless the latter has incurred in delay. (1452a)

Art. 1481. In the contract of sale of goods by description or by sample, the contract may be rescinded if the bulk of the goods delivered do not
correspond with the description or the sample, and if the contract be by sample as well as description, it is not sufficient that the bulk
of goods correspond with the sample if they do not also correspond with the description.

The buyer shall have a reasonable opportunity of comparing the bulk with the description or the sample. (n)

Art. 1482. Whenever earnest money is given in a contract of sale, it shall be considered as part of the price and as proof of the perfection of the
contract. (1454a)

Art. 1483. Subject to the provisions of the Statute of Frauds and of any other applicable statute, a contract of sale may be made in writing, or by
word of mouth, or partly in writing and partly by word of mouth, or may be inferred from the conduct of the parties. (n)

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)

Art. 1486. In the case referred to in two preceding articles, a stipulation that the installments or rents paid shall not be returned to the vendee or
lessee shall be valid insofar as the same may not be unconscionable under the circumstances. (n)

Art. 1487. The expenses for the execution and registration of the sale shall be borne by the vendor, unless there is a stipulation to the contrary.
(1455a)

Art. 1488. The expropriation of property for public use is governed by special laws. (1456)

Art. 1458
I. Nature and Characteristics.
A. Definition 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 to pay therefor a price certain in money or its equivalent. (See Art. 1458).
*Contract an agreement or meeting of the minds between 2 persons (parties), whereby one binds himself to give something or to
render some service
Note that in harmony with Art. 1164, ownership of the thing sold does not pass to the buyer until delivery. See Arts. 1475, 1477,
1496. Essential requisites are consent meeting of mind, with buyer and seller with respect to price), object (determinate) and cause
(price). No special form is required. (Art. 1483)

Essential Elements:
(If all are present, there is a perfected contract. One is absent, no contract. One is a minor, voidable but valid until annulled.)
1. Consent meeting of the minds with buyer and seller with respect to price
- counter offer (no consent)
Mla. Metal vs PNB
> no meeting of the minds; too many counter offers; no perfected contract
Facts:
Petitioner was the owner of 8,015 square meters of parcel of land located in Mandaluyong City, Metro Manila. To secure a P900,000.00 loan it
had obtained from respondent Philippine National Bank, petitioner executed a real estate mortgage over the lot. Respondent PNB later
granted petitioner a new credit accommodation. On August 5, 1982, respondent PNB filed a petition for extrajudicial foreclosure of the
real estate mortgage and sought to have the property sold at public auction. After due notice and publication, the property was sold at
public action where respondent PNB was declared the winning bidder. Petitioner sent a letter to PNB, requesting it to be granted an
extension of time to redeem/repurchase the property. Some PNB personnel informed that as a matter of policy, the bank does not accept
partial redemption. Since petitioner failed to redeem the property, the Register of Deeds cancelled TCT No. 32098 and issued a new
title in favor of PNB.
Meanwhile, the Special Asset Management Department (SAMD) had prepared a statement of account of petitioners obligation. It also
recommended the management of PNB to allow petitioner to repurchase the property for P1,574,560.oo. PNB rejected the offer and
recommendation of SAMD. It instead suggested to petitioner to purchase the property for P2,660,000.00, in its minimum market value.
Petitioner declared that it had already agreed to SAMDs offer to purchase for P1,574,560.47 and deposited a P725,000.00.
Issue:
Whether or not petitioner and respondent PNB had entered into a perfected contract for petitioner to repurchase the property for respondent.

Ruling:
The SC affirmed the ruling of the appellate court that there was no perfected contact of sale between the parties.
A contract is meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or
to render some service. Under 1818 of the Civil Code, there is no contract unless the following requisites concur:
1. Consent of the contracting parties;
2. Objection certain which is the subject matter of the contract;
3. Cause of the obligation which is established.
Contract is perfected by mere consent which is manifested by the meeting of the offer and the acceptance upon the thing and
causes which are to constitute the contract. Once perfected, the bind between other contracting parties and the obligations
arising therefrom have the form of law between the parties and should be complied in good faith. The absence of any
essential element will negate the existence of a perfected contract of sale.
 The court ruled in Boston Bank of the Philippines vs Manalo:
A definite agreement as to the price is an essential element of a binding agreement to sell personal or real property because it
seriously affects the rights and obligations of the parties. Price is an essential element in the formation of a binding and
enforceable contract of sale. The fixing of the price can never be left to the decision of one of the contracting parties. But a
price fixed by one of the contracting parties, if accepted by the other, gives rise to a perfected sale.
In the case at bar, the parties to the contract is between Manila Metal Container Corporation and Philippine National Bank and
not to Special Asset Management Department. Since the price offered by PNB was not accepted, there is no contract.
Hence it cannot serve as a binding juridical relation between the parties.
2. Object
> In sale: transfer of determinate thing (physically segregated from all others)
3. Cause/Consideration
>In sale: price [ amount + manner of payment = consent ]
B. The characteristics of the contract of sale are that this contract is
a. Consensual, since it is perfected by consent; there is meeting of the minds
b. Bilateral, since the parties are bound to reciprocal prestations; both are obliged to perform (to deliver and to pay the price
c. Onerous, both has obligations, it is not for free; imposes obligations on both parties
d. Nominate, since it has a special designation; there is a name given by law (SALE)
e. Principal, since the contract may exist alone; not created to serve as preparatory contract for another contract; and
f. Commutative, since fulfillment is predetermined in advance; since there is an exchange of equivalent values;
C. Distinctions: Sale is distinguished from -
vs Agency to sell

Sale Agency
Payment of Price The buyer pays for the price of the The agent does not pay for the price. He
goods/property purchased merely accounts for the proceeds of the
sale.
Ownership The buyer becomes the owner of the The agent does not become the owner of
goods/property purchased. the goods/property delivered to him for
sale.
Returns for defects Buyer cannot return the goods/property The agent returns the goods/property if
sold. he was not able to sell the same
Warrant The seller warrants the goods/property The agent does not make any warranty
sold. as long as he acts within his authority in
the name of the principal.
Entering the terms & The seller has full freedom to enter into The agent must follow the instructions of
conditions any terms and conditions on the contract the principal.
of sale

Effect of the agreement for exclusive sale of beds where the other party is entitled to commission:
Quiroga vs Parsons Hardware Co
Facts: On Jan 24, 1911, plaintiff and the respondent entered into a contract making the latter an agent of the former. The contract
stipulates that Don Andres Quiroga, here in petitioner, grants exclusive rights to sell his beds in the Visayan region to J. Parsons. The
contract only stipulates that J.Parsons should pay Quiroga within 6 months upon the delivery of beds.
Quiroga files a case against Parsons for allegedly violating the following stipulations: 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. 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 to 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. The whole question, therefore, reduced itself to
a determination as to whether the defendant, by reason of the contract hereinbefore transcribed, was a purchaser or an agent of the
plaintiff for the sale of his beds.

Issue: Whether the contract is a contract of agency or of sale.

Held: In order to classify a contract, due attention must be given to its essential clauses. In the contract in question, what was essential, as
constituting its cause and subject matter, is that the plaintiff was to furnish the defendant with the beds which the latter might order, at
the price stipulated, and that the defendant was to pay the price in the manner stipulated. 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.
In respect to the defendants obligation to order by the dozen, the only one expressly imposed by the contract, the effect of its breach would
only entitle the plaintiff to disregard the orders which the defendant might place under other conditions; but if the plaintiff consents to
fill them, he waives his right and cannot complain for having acted thus at his own free will.
For the foregoing reasons, we are of opinion that the contract by and between the plaintiff and the defendant was one of purchase and sale,
and that the obligations the breach of which is alleged as a cause of action are not imposed upon the defendant, either by agreement or
by law.
vs Lease of Service or contract for a piece of work

Sale if the article being manufactured and sold by the vendor in the ordinary course of his business, whether finished or
not.
Piece of work if the article is specially manufactured and upon the special order of the customer

CIR vs Engineering Equipment and Supply Co.

In the case at bench, the modular paving blocks are not exactly what the plaintiff-appellee makes and keeps on hand for sale to anyone,
but with a modification that the same be S in shape. Hence, the agreement falls within the ambit of Article 1467 making Article
1729 likewise applicable in the instant case.
As regard the issue of privity of contracts, We need to add only that Article 1311 of the New Civil Code which DMPI invokes is not
applicable where the situation contemplated in Article 1729 obtains.
The intention of the latter provision is to protect the laborers and the materialmen from being taken advantage of by unscrupulous
contractors and from possible connivance between owners and contractors. Thus, a constructive vinculum or contractual privity is
created by this provision, by way of exception to the principle underlying Article 1311 between the owner, on the one hand, and
those who furnish labor and/or materials, on the other. [Velasco vs. Court of Appeals, G.R. No. L-47544, January 28, 1980]
As a matter of fact, insofar as the laborers are concerned, by a special law, Act no. 3959, otherwise known as An Act making it
obligatory for any person, company, firm or corporation owning any work of any kind executed by contract to require the contractor
to furnish a bond guaranteeing the payment of the laborers. they are given added protection by requiring contractors to file bonds
guaranteeing payment to them.
It is true that defendant-appellant had already fully paid its obligation to defendant Garcia however, the formers payment to the latter
does not extinguish its legal obligation to plaintiff-appellee because such payment was irregular. The former should have taken care
not to pay to such contractor the full amount which he is entitled to receive by virtue of the contract, until he shall have shown that
he first paid the wages of the laborer employed in said work, by means of an affidavit made and subscribed by said contractor
before a notary public or other officer authorized by law to administer oaths. There is no showing that defendant appellant DMPI, as
owner of the building, complied with this requirement paid down in Act No. 3959. Hence, under Section 2 of said law, said
defendant-appellant is responsible, jointly and severally with the general contractor, for the payment to plaintiff-appellee as sub-
contractor.
In this connection, while, indeed, Article 1729 refers to the laborers and materialmen themselves, under the peculiar circumstances of this
case, it is but fair and just that plaintiff-appellee be deemed as suing for the reimbursement of what they have already paid the
laborers and materialmen, as otherwise he would be unduly prejudiced while either defendant-appellant DMPI or defendant Garcia
would enrich themselves at plaintiff-appellees expense.
Be that as it may, We so hold that plaintiff-appellee has a lawful claim against defendant-appellant DMPI, owner of the constructed
warehouse since it disregarded the notice of claim of plaintiff-appellee, at a time when the amounts owing from defendant-appellant
DMPI to defendant GARCIA were more than sufficient to pay for plaintiff-appellees claim.
The least that defendant-appellant should have done was to withhold payment of the balance still owing to defendant Garcia as until the
claim of plaintiff-appellee was clarified. (Italics in the original; emphasis and underscoring supplied).

Del Monte Phils. Inc. vs Aragones

FACTS:
Del Monte Philippines Inc. (DMPI) entered into an Agreement with MEGA-WAFF, represented by Managing Principal Edilberto
Garcia (Garcia), whereby the latter undertook the supply and installation of modular pavement at DMPIs condiments warehouse
within 60 calendar days from signing of the agreement.
To source its supply of concrete blocks to be installed on the pavement of the DMPI warehouse, MEGA-WAFF, as CONTRACTOR
represented by Garcia, entered into a Supply Agreement with Dynablock Enterprises, represented by herein respondent Aragones,
as SUPPLIER.
After the installation of the pavement in the warehouse, Aragones later on demand from MEGA-WAFF the full payment of the concrete
blocks, on which he failed to collect.
Aragones later failed to collect from MEGA-WAFF the full payment of the concrete blocks. He thus sent DMPI a letter dated March 10,
1989, received by the latter on March 13, 1989, advising it of MEGA-WAFFs unpaid obligation and requesting it to earmark and
withhold the amount of P188,652.65 from [MEGA-WAFFs] billing to be paid directly to him [l]est Garcia collects and fails to
pay [him].

ISSUE:
Whether it was one of sale or for a piece of work.

HELD:
Under Art. 1467 then of the Civil Code which provides:
ART. 1467. A contract for the delivery at a certain price of an article which the vendor in the ordinary course of his business
manufactures or procures for the general market, whether the same is on hand at the time or not, is a contract of sale, but if the
goods are to be manufactured specially for the customer and upon his special order, and not for the general market, it is a contract
for a piece of work.

The Supply Agreement was decidedly a contract for a piece of work.

Following Art. 1729 of the Civil Code which provides:

ART. 1729. Those who put their labor upon or furnish materials for a piece of work undertaken by the contractor have an action against
the owner up to the amount owing from the latter to the contractor at the time the claim is made.

vs Barter in that the latters consideration consists in the giving of another thing rather than a price in money (See 1468, 1638)
Barter contract where one of the parties binds himself to give one thing in consideration of the others promise to give
another thing.
It is similar to a contract of sale except instead of paying a price in money, another thing is given in lieu thereof.

Rules to follow:
1. Determine intention of parties. Manifest intention of parties shall prevail.
2. If intention could not be determined, consider the value of the thing as part of consideration.

vs Dation in payment - in that the latter involves a pre-existing debt which is thereby extinguished (1245)
Dation transfer or conveyance of ownership of a thing as an accepted equivalent of performance
 vs Lease of things - in that delivery in this latter contract does not involve a transfer of ownership
Sale transfer of ownership
Lease transfer of temporary possession of the thing

vs Donation - in that this latter contract is gratuitous and requires special formalities
Donation gratuitous
Sale onerous

*For taxation purposes: Real Property 7%; Donation 30%

*Need for formalities if donation, donation and acceptance needs to be in a public document

D. Promise to Sell: when binding (1479)

a. If bilateral (promise to sell a determinate thing coupled with a correlative promise to buy at a specified price): it is binding
as an executory agreement.
b. If unilateral (promise to sell with the promise at liberty to buy or not at his option; or vice versa); it must have a separate
consideration, independent of the price (option contract)
Option Contract a privilege exiting in one person, for which he had paid for consideration, which gives him the right to
buy fro another person at any time within the agreed period at a fixed price.
Option contract by which the owner of the property agrees with another person that he shall have the right to buy his
property at a fixed price within a certain time.
Eulogio vs Apeles
An option is a contract by which the owner of the property agrees with another person that the latter shall have the right to buy the
former's property at a fixed price within a certain time. It is a condition offered or contract by which the owner stipulates with another
that the latter shall have the right to buy the property at a fixed price within a certain time, or under, or in compliance with certain terms
and conditions; or which gives to the owner of the property the right to sell or demand a sale. An option is not of itself a purchase, but
merely secures the privilege to buy. It is not a sale of property but a sale of the right to purchase. It is simply a contract by which the
owner of the property agrees with another person that he shall have the right to buy his property at a fixed price within a certain time. He
does not sell his land; he does not then agree to sell it; but he does sell something, i.e., the right or privilege to buy at the election or
option of the other party. Its distinguishing characteristic is that it imposes no binding obligation on the person holding the option, aside
from the consideration for the offer.

PNOC vs Keppel
An option contract must be supported by a separate consideration that is either clearly specified as such in the contract or duly proven
by the offeree/promisee.
An option contract is defined in the second paragraph of Article 1479 of the Civil Code:
Article 14791 x x x An accepted promise to buy or to sell a determinate thing for a price certain is binding upon the promissor if the
promise is supported by a consideration distinct from the price.
An option contract is a contract where one person (the offeror/promissor) grants to another person (the offeree/promisee) the right or
privilege to buy (or to sell) a determinate thing at a fixed price, if he or she chooses to do so within an agreed period.59
As a contract, it must necessarily have the essential elements of subject matter, consent, and consideration.60 Although an option
contract is deemed a preparatory contract to the principal contract of sale,61 it is separate and distinct therefrom,62 thus, its
essential elements should be distinguished from those of a sale.63chanrobleslaw
In an option contract, the subject matter is the right or privilege to buy (or to sell) a determinate thing for a price certain,64 while in a
sales contract, the subject matter is the determinate thing itself.65 The consent in an option contract is the acceptance by the
offeree of the offerer's promise to sell (or to buy) the determinate thing, i.e., the offeree agrees to hold the right or privilege to buy
(or to sell) within a specified period. This acceptance is different from the acceptance of the offer itself whereby the offeree asserts
his or her right or privilege to buy (or to sell), which constitutes as his or her consent to the sales contract. The consideration in an
option contract may be anything of value, unlike in a sale where the purchase price must be in money or its equivalent.66 There is
sufficient consideration for a promise if there is any benefit to the offeree or any detriment to the offeror.67
In the present case, PNOC claims the option contract is void for want of consideration distinct from the purchase price for the land.

Right of first refusal

*it is a contractual grant of the first priority to buy the property in the event that seller sells the same.
Ang Yu Asuncion vs CA
Facts:
July 29, 1987: An amended Complaint for Specific Performance was filed by petitioners Ang Yu Asuncion and others against Bobby
Cu Unjieng, Rose Cu Unjieng and Jose Tan before RTC.
Petitioners (Ang Yu) alleged that:
- they are the tenants or lessees of residential and commercial spaces owned by Bobby Unijeng and others located in Binondo, Manila
(since 1935)
that on several occasions before October 9, 1986, the lessors informed the lessees (petitioners) that they are offering to sell the
premises and are giving them priority to acquire the same;
- that during the negotiations, Bobby Cu Unjieng offered a price of P6-million while they made a counter offer of P5-million;
- that they wrote them on October 24, 1986 asking that they specify the terms and conditions of the offer to sell; that when plaintiffs
did not receive any reply, they sent another letter dated January 28, 1987 with the same request;
 The RTC found that Cu Unjiengs offer to sell was never accepted by the petitioners (Ang Yu) for the reason that they did not agree
upon the terms and conditions of the proposed sale, hence, there was no contract of sale at all. The Court of Appeals affirmed the
decision of the lower court. This decision was brought to the Supreme Court by petition for review on certiorari which subsequently
denied the appeal on May 6, 1991 for insufficiency in form and substance. (Referring to the first case filed by Ang Yu)
November 15, 1990: While the case was pending consideration by this Court, the Cu Unjieng spouses executed a Deed of Sale
transferring the subject petitioner to petitioner Buen Realty and Development Corporation.
Petitioner Buen Realty and Development Corporation, as the new owner of the subject property, wrote a letter to the lessees
demanding that the latter vacate the premises.
August 30, 1991: the RTC ordered the Cu Unjiengs to execute the necessary Deed of Sale of the property in litigation in favor of
plaintiffs Ang Yu Asuncion, Keh Tiong and Arthur Go for the consideration of P15 Million pesos in recognition of petitioners right of
first refusal and that a new Transfer Certificate of Title be issued in favor of the buyer. The court also set aside the title issued to Buen
Realty Corporation for having been executed in bad faith. On September 22, 1991, the Judge issued a writ of execution.
The CA reversed the RTC ruling.

Issue: WON Buen Realty can be bound by the writ of execution by virtue of the notice of lis pendens, carried over on TCT No. 195816
issued in the name of Buen Realty, at the time of the latters purchase of the property on 15 November 1991 from the Cu Unjiengs. NO

Held:
Right of first refusal is not a perfected contract of sale under Article 1458 of the Civil Code
In the law on sales, the so-called right of first refusal is an innovative juridical relation. Needless to point out, it cannot be deemed a
perfected contract of sale under Article 1458 of the Civil Code.

In a right of first refusal, while the object might be made determinate, the exercise of the right, however, would be dependent not only on the
grantors eventual intention to enter into a binding juridical relation with another but also on terms, including the price, that obviously
are yet to be later firmed up. Prior thereto, it can at best be so described as merely belonging to a class of preparatory juridical relations
governed not by contracts (since the essential elements to establish the vinculum juris would still be indefinite and inconclusive) but
by, among other laws of general application, the pertinent scattered provisions of the Civil Code on human conduct.

The proper action for violation of the right of first refusal is to file an action for damages and NOT writ of execution
The final judgment in Civil Case No. 87-41058, it must be stressed, has merely accorded a right of first refusal in favor of petitioners (Ang
Yu et. al). The consequence of such a declaration entails no more than what has heretofore been said. In fine, if, as it is here so
conveyed to us, petitioners are aggrieved by the failure of private respondents to honor the right of first refusal, the remedy is not a
writ of execution on the judgment, since there is none to execute, but an action for damages in a proper forum for the purpose.

Unconditional mutual promise to buy vs. Accepted unilateral promise

An unconditional mutual promise to buy and sell, as long as the object is made determinate and the price is fixed, can be obligatory on the
parties, and compliance therewith may accordingly be exacted.

An accepted unilateral promise which specifies the thing to be sold and the price to be paid, when coupled with a valuable consideration
distinct and separate from the price, is what may properly be termed a perfected contract of option. This contract is legally binding, and
in sales, it conforms with the second paragraph of Article 1479 of the Civil Code, viz:

Art. 1479. . . .
An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor if the promise is
supported by a consideration distinct from the price. (1451a)

Observe, however, that the option is not the contract of sale itself. The optionee has the right, but not the obligation, to buy. Once the option
is exercised timely, i.e., the offer is accepted before a breach of the option, a bilateral promise to sell and to buy ensues and both
parties are then reciprocally bound to comply with their respective undertakings.

Buen Realty cannot be ousted from the ownership and possession of the property
Furthermore, whether private respondent Buen Realty Development Corporation, the alleged purchaser of the property, has acted in good
faith or bad faith and whether or not it should, in any case, be considered bound to respect the registration of the lis pendens in Civil
Case No. 87-41058 are matters that must be independently addressed in appropriate proceedings. Buen Realty, not having been
impleaded in Civil Case No. 87-41058, cannot be held subject to the writ of execution issued by respondent Judge, let alone ousted
from the ownership and possession of the property, without first being duly afforded its day in court.

E. The Contract of Sale may be

a. Absolute (when no condition is imposed and ownership passes to the vendee upon delivery; or
Ramos vs Heruela

FACTS OF THE CASE:

The spouses Gomer and Leonor Ramos own a parcel of land, consisting of 1,883 square meters, of the Register of Deeds of Cagayan de
Oro City. On 18 February 1980, the spouses Ramos made an agreement with the spouses Santiago and Minda Heruela covering
306 square meters of the land . According to the spouses Ramos, the agreement is a contract of conditional sale. The spouses
Heruela allege that the contract is a sale on installment basis.

On 27 January 1998, the spouses Ramos filed a complaint for Recovery of Ownership with Damages against the spouses Heruela. The
spouses Ramos allege that out of the P15,300 consideration for the sale of the land, the spouses Heruela paid only P4,000. The
last installment that the spouses Heruela paid was on 18 December 1981. The spouses Ramos assert that the spouses Heruela's
unjust refusal to pay the balance of the purchase price caused the cancellation of the Deed of Conditional Sale. In June 1982, the
spouses Ramos discovered that the spouses Heruela were already occupying a portion of the land. Cherry and Raymond Pallori
("spouses Pallori"), daughter and son-in-law, respectively, of the spouses Heruela, erected another house on the land. The spouses
Heruela and the spouses Pallori refused to vacate the land despite demand by the spouses Ramos.

ISSUE:
1.WHETHER THE OWNER-PETITIONER CAN RECOVER THEIR OWNERSHIP OF THE PROPERTY FROM BUYER-
RESPONDENTS
 HELD:
No. The sale is an installment. Applying the Maceda Law or R.A. 6552, which involves sale on real property, in case where less than
two years of installments were paid, the vendor-respondent shall give the buyer a grace period of not less than sixty days from the
date the installment became due. If the buyer fails to pay the installments due at the expiration of the grace period, the seller may
cancel the contract after thirty days from receipt by the buyer of the notice of cancellation or the demand for rescission of the
contract by a notarial act. The spouses Heruela paid less than two years of installments. However, there was neither a notice of
cancellation nor demand for rescission by notarial act to the spouses Heruela . The spouses Heruela shall pay the spouses Ramos
P11,300 as balance of the purchase price plus interest at 6%. Upon payment, the spouses Ramos shall execute a deed of absolute
sale of the land and deliver the certificate of title in favor of the spouses Heruela. In case of failure to thus pay within 60 days from
finality of this Decision, the spouses Heruela and the spouses Pallori shall immediately vacate the premises without need of further
demand, and the down payment and installment payments of P4,000 paid by the spouses Heruela shall constitute rental for the
land;

Heirs of Mascunana vs CA
In a contract of sale, the non-payment of the price is a resolutory condition which extinguishes the transaction that, for a time, existed
and discharges the obligation created under the transaction. A seller cannot unilaterally and extrajudicially rescind a contract of
sale unless there is an express stipulation authorizing it. In such case, the vendor may file an action for specific performance or
judicial rescission.

b. Conditional, which may in turn be

1) An executed contract, which property (ownership) in the thing is transferred from seller to buyer, and nonpayment of
the price is a negative resolutory condition; or
2) An executory contract (an agreement or contract to sell) when ownership does not pass until
i) Some future time, or
ii) The fulfillment of some condition, such as full payment of the purchase price when said payment then
becomes a positive suspensive condition

Coronel vs CA
Facts:
The case arose from a complaint for specific performance filed by private respondent Alcaraz against petitioners to consummate the sale
of a parcel of land in Quezon City.
On January 19, 1985, petitioners executed a Receipt of Down Payment of P50,000 in favor of plaintiff Ramona Alcaraz, binding
themselves to transfer the ownership of the land in their name from their deceased father, afterwhich the balance of P1,190,000
shall be paid in full by Alcaraz. On February 6, 1985, the property was transferred to petitioners. On February 18, 1985, petitioners
sold the property to Mabanag. For this reason, Concepcion, Ramonas mother, filed an action for specific performance.

Issue:
Whether the contract between petitioners and private respondent was that of a conditional sale or a mere contract to sell

HELD:
CONTRACT OF SALE- contracting parties obligates himself to transfer the ownership and to deliver a determinate thing and the
other to pay a price certain in money or its equivalent.
CONTRACT TO SELL- the prospective seller explicitly reserves the transfer of the title to the prospective buyer, meaning the
seller does not yet agree or consent to transfer the ownership of the property until the happening of a contingent event like full
payment of price.

SUPREME COURT RULING:

When the Receipt of Down Payment document was prepared and signed by Romulo Coronel, the parties had agreed to a
conditional contract of sale the consummation of the contract is subject only to the successful transfer of the certificate of Title.
According to Supreme Court, the receipt of down payment document manifests a clear intent of the Coronels to transfer the title to the
buyer, but since the title is still in the name effect the transfer even though the buyers are able and willing to immediately pay the
purchase price. The agreement as well could not have been a contract to sell because the seller or the Coronels made no express
reservation of ownership or the title of the land.
On Feb. 6, 1985, the Contract of Sale between the Coronels and the Alcaraz became obligatory.

3) Distinctions

Executed Contract Executory Contract

Property (ownership) is conveyed No property is conveyed

If buyer defaults, seller may sue for If buyer defaults, seller is only entitled to
the price damages
Risk of loss is generally borne by Risk of loss is generally borne by the
the buyer seller
Contract of sale vs Contract to Sell

Contract of Sale Contract to Sell

Title over the property passes to the buyer upon delivery unless
there is a contrary agreement
Non-payment of the purchase price is the resolutory condition,
meaning the sale becomes ineffective upon the happening of the
condition (non-payment). Seller may rescind the contractor
exact payment.
After delivery of object, seller loses relationship over it. Unless,
the contrary is set aside, he cannot recover the object.
Ownership is retained by the seller whether or not there is a
delivery. Ownership passes to buyer only upon full payment of
price.
The payment in full is a positive suspensive condition,
meaning, if the price is not paid, the obligation to deliver and
transfer ownership on the part of the seller does not become
effective.
Whether there is a delivery or not, the seller retains the
ownership of the object. If the seller, due to the non-payment of
price is ousting the buyer from the property, he is not
rescinding the contract of sale but is precisely enforcing it.

Ong vs. CA, G.R. No. 97347, July 6, 1999:

In a contract of sale, the title to the property passes to the vendee upon the delivery of the thing sold; while in a contract to sell, ownership is, by
agreement, reserved in the vendor and is not to pass to the vendee until full payment of the purchase price. In a contract to sell, the payment of the
purchase price is a positive suspensive condition, the failure of which is not a breach, casual or serious, but a situation that prevents the obligation
of the vendor to convey title from acquiring an obligatory force.

Carrascoso vs. CA, G.R. No. 123672, December 14, 2005

In a contract of sale, the title passes to the vendee upon the delivery of the thing sold; whereas in a contract to sell, ownership is not transferred
upon delivery of the property but upon full payment of the purchase price. In the former, the vendor has lost and cannot recover ownership until
and unless the contract is resolved or rescinded; whereas in the latter, title is retained by the vendor until the full payment of the price, such
payment being a positive suspensive condition and failure of which is not a breach but an event that prevents the obligation of the vendor to convey
title from becoming effective.

Conditional contract of sale vs. contract to sell (Carrascoso case, supra)

In a conditional contract of sale, if the suspensive condition is fulfilled, the contract of sale is thereby perfected, such that if there
had already been previous delivery of the property subject of the sale to the buyer, ownership thereto automatically transfers to the
buyer by operation of law without any further act having to be performed by the seller. Whereas in a contract to sell, upon
fulfillment of the suspensive condition, ownership will not automatically transfer to the buyer although the property may have been
previously delivered to him. The prospective seller still has to convey title to the prospective buyer by entering into a contract of
absolute sale.

Olivares Realty Corp. vs Castillo

x x x.

Summary judgment in this case is proper.

A motion for summary judgment is filed either by the claimant or the defending party. The trial court then hears the motion for summary judgment.
If indeed there are no genuine issues of material fact, the trial court shall issue summary judgment. Section 3, Rule 35 of the 1997 Rules of Civil
Procedure provides:

SEC. 3. Motion and proceedings thereon. The motion shall be served at least ten (10) days before the time specified for the hearing. The adverse
party may serve opposing affidavits, depositions, or admission at least three (3) days before the hearing. After the hearing, the judgment sought
shall be rendered forthwith if the pleadings, supporting affidavits, depositions, and admissions on file, show that, except as to the amount of
damages, there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.

An issue of material fact exists if the answer or responsive pleading filed specifically denies the material allegations of fact set forth in the
complaint or pleading. If the issue of fact requires the presentation of evidence, it is a genuine issue of fact. However, if the issue could be
resolved judiciously by plain resort to the pleadings, affidavits, depositions, and other papers on file, the issue of fact raised is sham, and the trial
court may resolve the action through summary judgment.

A summary judgment is usually distinguished from a judgment on the pleadings. Under Rule 34 of the 1997 Rules of Civil Procedure, trial may
likewise be dispensed with and a case decided through judgment on the pleadings if the answer filed fails to tender an issue or otherwise admits the
material allegations of the claimants pleading.

Judgment on the pleadings is proper when the answer filed fails to tender any issue, or otherwise admits the material allegations in the complaint.
On the other hand, in a summary judgment, the answer filed tenders issues as specific denials and affirmative defenses are pleaded, but the issues
raised are sham, fictitious, or otherwise not genuine.

In this case, Olivarez Realty Corporation admitted that it did not fully pay the purchase price as agreed upon in the deed of conditional sale. As to
why it withheld payments from Castillo, it set up the following affirmative defenses: First, Castillo did not file a case to void the Philippine
Tourism Authoritys title to the property; second, Castillo did not clear the land of the tenants; third, Castillo allegedly sold the property to a third
person, and the subsequent sale is currently being litigated before a Quezon City court.

Considering that Olivarez Realty Corporation and Dr. Olivarezs answer tendered an issue, Castillo properly availed himself of a motion for
summary judgment.

However, the issues tendered by Olivarez Realty Corporation and Dr. Olivarezs answer are not genuine issues of material fact. These are issues
that can be resolved judiciously by plain resort to the pleadings, affidavits, depositions, and other papers on file; otherwise, these issues are sham,
fictitious, or patently unsubstantial.
X x x.
Arts. 1459 1465
I. Object
A. Qualities The object must be:
a. Existing, or Future or Contingent (1462)
1) Potential existence is sufficient (1461) (Emptio rei speratae)
2) Things under resolutory condition (potential destruction) may be objects of a valid sale (1465)
3) Sale of a mere hope or expectancy (1461) is valid unless the hope is vain (Emptio spei)

*Goods all chattels personal but not things in action or money of legal tender in the Philippines.
*Existing goods actually existing at the time of the perfection of the contract.
*Future goods those which do not exist yet have a potential existence.

Tanedo vs CA
FACTS:
Lazaro Taedo executed a deed of absolute sale in favor of Ricardo Taedo and Teresita Barrera in which he conveyed a
parcel of land which he will inherit. Upon the death of his father he executed an affidavit of conformity to reaffirm
the said sale. He also executed another deed of sale in favor of the spouses covering the parcel of land he already
inherited. Ricardo registered the last deed of sale in the registry of deeds in their favor.

Ricardo later learned that Lazaro sold the same property to his children through a deed of sale.

ISSUE:
WON the Taedo spouses have a better right over the property against the children of Lazaro Taedo.

HELD:
Since a future inheritance generally cannot be a subject of a contract, the deed of sale and the affidavit of conformity
made by Lazaro has no effect. The subject of dispute therefore is the deed of sale made by him in favor of spouses
Taedo and another to his children after he already legally acquired the property.

Thus, although the deed of sale in favor of private respondents was later than the one in favor of petitioners, ownership
would vest in the former because of the undisputed fact of registration. On the other hand, petitioners have not
registered the sale to them at all.

Petitioners contend that they were in possession of the property and that private respondents never took possession
thereof. As between two purchasers, the one who registered the sale in his favor has a preferred right over the other
who has not registered his title, even if the latter is in actual possession of the immovable property.

b. Lawful the thing must be licit and the vendor must have a right to transfer the ownership thereof at the time it is delivered
(1459)
Manlapat vs CA
Facts:
The controversy involves Lot No. 2204, a parcel of land with an area of 1,058 square meters, located at Panghulo, Obando,
Bulacan. The property had been originally in the possession of Jose Alvarez, Eduardos grandfather, until his demise in 1916. It
remained unregistered until 8 October 1976 when OCT No. P-153(M) was issued in the name of Eduardo pursuant to a free
patent issued in Eduardos name3 that was entered in the Registry of Deeds of Meycauayan, Bulacan. 4 The subject lot is adjacent
to a fishpond owned by one Ricardo Cruz (Ricardo), predecessor-in-interest of respondents Consuelo Cruz and Rosalina Cruz-
Bautista (Cruzes).
Thereafter, two separate contract of sale was entered into by Eduardo with Ricardo, constituting the area of 603 square meters of
the lot, the first 503 square meters was sold on 19 December 1954, before it was titled, while the succeeding 50 square meters
was sold on 18 March 1981, after it was titled.
In December 1981, Leon Banaag, Jr. (Banaag), as attorney-in-fact of his father-in-law Eduardo, executed a mortgage with the
Rural Bank of San Pascual, Obando Branch (RBSP), for P100,000.00 with the subject lot as collateral. Banaag deposited the
owners duplicate certificate of OCT No. P-153(M) with the bank.
Upon learning of their right to the subject lot, the Cruzes immediately tried to confront petitioners on the mortgage and obtain the
surrender of the OCT. The Cruzes, however, were thwarted in their bid to see the heirs. On the advice of the Bureau of Lands,
NCR Office, they brought the matter to the barangay captain of Barangay Panghulo, Obando, Bulacan. During the hearing,
petitioners were informed that the Cruzes had a legal right to the property covered by OCT and needed the OCT for the purpose
of securing a separate title to cover the interest of Ricardo. Petitioners, however, were unwilling to surrender the OCT.
Secured copy of OCT from RBSP. Made a photocopy of the same OCT. Showed the copy to the Registry of Deeds which advice
them to make a subdivision plan to segregate their interest in the whole property.
They asked the opinion of Land Registration Officer, who agreed with the advice given by the Registry of Deeds. Made a
subdivision plan with the help of 2 geodetic engineers. Presented the plan to the Land Management Bureau who approved of the
same plan.
After the Cruzes presented the owners duplicate certificate, along with the deeds of sale and the subdivision plan, the Register of
Deeds cancelled the OCT and issued in lieu thereof TCT No. T-9326-P(M) covering 603 square meters of Lot No. 2204 in the
name of Ricardo and TCT No. T-9327-P(M) covering the remaining 455 square meters in the name of Eduardo.
On 9 August 1989, the Cruzes went back to the bank and surrendered to Salazar TCT No. 9327-P(M) in the name of Eduardo and
retrieved the title they had earlier given as substitute collateral. After securing the new separate titles, the Cruzes furnished
petitioners with a copy of TCT No. 9327-P(M) through the barangay captain and paid the real property tax for 1989.
n October of 1989, Banaag went to RBSP, intending to tender full payment of the mortgage obligation. It was only then that he
learned of the dealings of the Cruzes with the bank which eventually led to the subdivision of the subject lot and the issuance of
two separate titles thereon. In exchange for the full payment of the loan, RBSP tried to persuade petitioners to accept TCT No. T-
9327-P(M) in the name of Eduardo.
The trial court found that petitioners were entitled to the reliefs of reconveyance and damages. On this matter, it ruled that
petitioners were bona fide mortgagors of an unclouded title bearing no annotation of any lien and/or encumbrance. This fact,
 according to the trial court, was confirmed by the bank when it accepted the mortgage unconditionally on 25 November 1981. It
found that petitioners were complacent and unperturbed, believing that the title to their property, while serving as security for a
loan, was safely vaulted in the impermeable confines of RBSP. To their surprise and prejudice, said title was subdivided into two
portions, leaving them a portion of 455 square meters from the original total area of 1,058 square meters, all because of the
fraudulent and negligent acts of respondents and RBSP. The trial court ratiocinated that even assuming that a portion of the
subject lot was sold by Eduardo to Ricardo, petitioners were still not privy to the transaction between the bank and the Cruzes
which eventually led to the subdivision of the OCT into TCTs No. T-9326-P(M) and No. T-9327-P(M), clearly to the damage
and prejudice of petitioners.
The CA reversed the RTC decision. The appellate court ruled that petitioners were not bona fide mortgagors since as early as
1954 or before the 1981 mortgage, Eduardo already sold to Ricardo a portion of the subject lot with an area of 553 square meters.
This fact, the Court of Appeals noted, is even supported by a document of sale signed by Eduardo Jr. and Engracia Aniceto, the
surviving spouse of Eduardo, and registered with the Register of Deeds of Bulacan. The appellate court also found that on 18
March 1981, for the second time, Eduardo sold to Ricardo a separate area containing 50 square meters, as a road right-of-way.
Clearly, the OCT was issued only after the first sale. It also noted that the title was given to the Cruzes by RBSP voluntarily, with
knowledge even of the banks counsel. Hence, the imposition of damages cannot be justified, the Cruzes themselves being the
owners of the property. Certainly, Eduardo misled the bank into accepting the entire area as a collateral since the 603-square
meter portion did not anymore belong to him. The appellate court, however, concluded that there was no conspiracy between the
bank and Salazar.
Issue: W/N the mortgage of the entire property, with the inclusion of the disputed portion of Ricardos interest, is valid
Held:
A careful perusal of the evidence on record reveals that the Cruzes have sufficiently proven their claim of ownership over the portion of
Lot No. 2204 with an area of 553 square meters. The duly notarized instrument of conveyance was executed in 1954 to which no
less than Eduardo was a signatory. The execution of the deed of sale was rendered beyond doubt by Eduardos admission in
his Sinumpaang Salaysay dated 24 April 1963.35These documents make the affirmance of the right of the Cruzes ineluctable.
Registration is not a requirement for validity of the contract as between the parties, for the effect of registration serves chiefly to bind
third persons. The principal purpose of registration is merely to notify other persons not parties to a contract that a transaction
involving the property had been entered into. Where the party has knowledge of a prior existing interest which is unregistered at the
time he acquired a right to the same land, his knowledge of that prior unregistered interest has the effect of registration as to him.
Further, the heirs of Eduardo cannot be considered third persons for purposes of applying the rule. The conveyance shall not be valid
against any person unless registered, except (1) the grantor, (2) his heirs and devisees, and (3) third persons having actual notice or
knowledge thereof. Not only are petitioners the heirs of Eduardo, some of them were actually parties to the Kasulatan executed in
favor of Ricardo. Thus, the annotation of the adverse claim of the Cruzes on the OCT is no longer required to bind the heirs of
Eduardo, petitioners herein.
The requirements of a valid mortgage are clearly laid down in Article 2085 of the New Civil Code, viz:
ART. 2085. The following requisites are essential to the contracts of pledge and mortgage:
(1) That they be constituted to secure the fulfillment of a principal obligation;
(2) That the pledgor or mortgagor be the absolute owner of the thing pledged or mortgaged;
(3) That the persons constituting the pledge or mortgage have the free disposal of their property, and in the absence thereof, that they
be legally authorized for the purpose.
Third persons who are not parties to the principal obligation may secure the latter by pledging or mortgaging their own property.
(emphasis supplied)
For a person to validly constitute a valid mortgage on real estate, he must be the absolute owner thereof as required by Article 2085 of
the New Civil Code. The mortgagor must be the owner, otherwise the mortgage is void. In a contract of mortgage, the mortgagor
remains to be the owner of the property although the property is subjected to a lien. A mortgage is regarded as nothing more than a
mere lien, encumbrance, or security for a debt, and passes no title or estate to the mortgagee and gives him no right or claim to the
possession of the property. In this kind of contract, the property mortgaged is merely delivered to the mortgagee to secure the
fulfillment of the principal obligation. Such delivery does not empower the mortgagee to convey any portion thereof in favor of
another person as the right to dispose is an attribute of ownership. The right to dispose includes the right to donate, to sell, to pledge
or mortgage. Thus, the mortgagee, not being the owner of the property, cannot dispose of the whole or part thereof nor cause the
impairment of the security in any manner without violating the foregoing rule. The mortgagee only owns the mortgage credit, not
the property itself.

1) What sales are forbidden:

i) Of cattle with contagious diseases (1575)
ii) Of future inheritance (1347)
c. Transferability of ownership by the vendor is required at the time of delivery (1459)
1) It need not exist at the perfection of the contract
2) Subsequent acquisition of title by a vendor without title, validates the sale and title passes to the vendee by operation
of law (1434)
3) Acquisition by the buyer may depend on a contingency (1462)

Cavite Devt Bank vs Lim

Facts:
Petitioners Cavite Development Bank (CDB) and Far East Bank and Trust Company (FEBTC) are banking institutions duly organized
and existing under Philippine laws. On or about June 15, 1983, a certain Rodolfo Guansing obtained a loan in the amount of
P90,000.00 from CDB, to secure which he mortgaged a parcel of land situated at No. 63 Calavite Street, La Loma, Quezon City and
covered by TCT No. 300809 registered in his name. As Guansing defaulted in the payment of his loan, CDB foreclosed the
mortgage.

At the foreclosure sale held on March 15, 1984, the mortgaged property was sold to CDB as the highest bidder. Guansing failed to
redeem, and on March 2, 1987, CDB consolidated title to the property in its name. TCT No. 300809 in the name of Guansing was
cancelled and, in lieu thereof, TCT No. 355588 was issued in the name of CDB.1wphi1.nt

On June 16, 1988, private respondent Lolita Chan Lim, assisted by a broker named Remedios Gatpandan, offered to purchase the
property from CDB.

Pursuant to the foregoing terms and conditions of the offer, Lim paid CDB P30,000.00 as Option Money, for which she was issued
Official Receipt No. 3160, dated June 17, 1988, by CDB. However, after some time following up the sale, Lim discovered that the
subject property was originally registered in the name of Perfecto Guansing, father of mortgagor Rodolfo Guansing, under TCT No.
91148.
Aggrieved by what she considered a serious misrepresentation by CDB and its mother-company, FEBTC, on their ability to sell the
subject property, Lim, joined by her husband, filed on August 29, 1989 an action for specific performance and damages against
petitioners in the Regional Trial Court.

On March 10, 1993, the trial court rendered a decision in favor of the Lim spouses. Petitioners brought the matter to the Court of
Appeals, which, on October 14, 1997, affirmed in toto the decision of the Regional Trial Court.

Issue: WON there was a valid sale.

Held: NO.

In this case, the sale by CDB to Lim of the property mortgaged in 1983 by Rodolfo Guansing must, therefore, be deemed a nullity for
CDB did not have a valid title to the said property. To be sure, CDB never acquired a valid title to the property because the
foreclosure sale, by virtue of which, the property had been awarded to CDB as highest bidder, is likewise void since the mortgagor
was not the owner of the property foreclosed.

A foreclosure sale, though essentially a "forced sale," is still a sale in accordance with Art. 1458 of the Civil Code, under which the
mortgagor in default, the forced seller, becomes obliged to transfer the ownership of the thing sold to the highest bidder who, in
turn, is obliged to pay therefor the bid price in money or its equivalent. Being a sale, the rule that the seller must be the owner of the
thing sold also applies in a foreclosure sale. This is the reason Art. 2085 of the Civil Code, in providing for the essential requisites
of the contract of mortgage and pledge, requires, among other things, that the mortgagor or pledgor be the absolute owner of the
thing pledged or mortgaged, in anticipation of a possible foreclosure sale should the mortgagor default in the payment of the loan.

There is, however, a situation where, despite the fact that the mortgagor is not the owner of the mortgaged property, his title being
fraudulent, the mortgage contract and any foreclosure sale arising therefrom are given effect by reason of public policy. This is the
doctrine of "the mortgagee in good faith" based on the rule that all persons dealing with property covered by a Torrens Certificate of
Title, as buyers or mortgagees, are not required to go beyond what appears on the face of the title. The public interest in upholding
the indefeasibility of a certificate of title, as evidence of the lawful ownership of the land or of any encumbrance thereon, protects a
buyer or mortgagee who, in good faith, relied upon what appears on the face of the certificate of title.

This principle is cited by petitioners in claiming that, as a mortgagee bank, it is not required to make a detailed investigation of the
history of the title of the property given as security before accepting a mortgage.

We are not convinced, however, that under the circumstances of this case, CDB can be considered a mortgagee in good faith. While
petitioners are not expected to conduct an exhaustive investigation on the history of the mortgagor's title, they cannot be excused
from the duty of exercising the due diligence required of banking institutions. In Tomas v. Tomas, we noted that it is standard
practice for banks, before approving a loan, to send representatives to the premises of the land offered as collateral and to
investigate who are real owners thereof, noting that banks are expected to exercise more care and prudence than private individuals
in their dealings, even those involving registered lands, for their business is affected with public interest.

Hermosilla vs Remoquillo
Facts:
A transfer of property arising from a void contract does not confer title over it.

Apolinario Hermosilla (Apolinario) occupies a parcel of land in San Pedro Tunasan Homesite until his death in 1964. The lot was
subdivided into two, Lot 12 and Lot 19 with the same area of 341 square meters. The Republic of the Philippines acquired through
purchase a 65- square meter lot which forms part of Lot 19.

Apolinario made a Deed of Assignment in 1962 transferring possession of Lot 19 in favor of his grandson, Jaime Remoquillo. The Land
Tenure Administration (LTA) later found that Lot 19 is still available for qualified applicants. Jaime, being its occupant filed an
application in 1963.

Apolinario conveyed Lot 12 to his son Salvador Hermosilla (Salvador). He filed for an application to purchase the said lot and was
granted by the LTA. Jaime and Salvador made a Kasunduan whereby Jaime transferred ownership of the 65 sq. m. in Lot 19 in
favor of Salvador. The LTA awarded Lot 19 to Jaime, for which he and his wife were issued a title.

After Apolinario died, his daughter Angela Hermosilla (Angela) filed a protest before the LTA contending that as an heir of the
deceased, she is also entitled to Lots 12 and 19. By Resolution of the LTA, the protest was dismissed.

Thus, Angela et al. filed for the annulment of the title on the ground of fraud. The trial court held that the Angela et al. were co-owners
of the subject property. The Court of Appeals (CA) rendered the Kasunduan void because at the time of its execution, the lot was
still owned by the state and so there was no right that was transferred to Jaime as well as to Angela, et al.

ISSUES:

Whether or not Angela et al. acquired any right over the property.

HELD:

The transfer became one in violation of law (the rules of the PHHC being promulgated in pursuance of law have the force of law) and
therefore void ab initio. Hence, Angela et al. acquired no right over the lot from a contract void ab initio, no rights are created.
Estoppel will not apply for it cannot be predicated on an illegal act. It is generally considered that as between the parties to a
contract, validity cannot be given to it by estoppel if it is prohibited by law or is against public policy.

Angela et al. go on to postulate that if the Kasunduan is void, it follows that the 1962 Deed of Assignment executed by Apolinario in
favor of Jaime is likewise void to thus deprive the latter of any legal basis for his occupation and acquisition of Lot 19.

Angela et al.s position fails. They lose sight of the fact that, as reflected above, Jaime acquired Lot 19 in his own right, independently
of the Deed of Assignment.

In another vein, since the property was previously a public land, Angela et al. have no personality to impute fraud or misrepresentation
against the State or violation of the law. If the title was in fact fraudulently obtained, it is the State which should file the suit to
 recover the property through the Office of the Solicitor General. The title originated from a grant by the government, hence, its
cancellation is a matter between the grantor and the grantee.

Heirs of Arturo Reyes vs Beltran

Facts:
Elena Socco-Beltran (Socco) filed an application for Lot No. 6-B, alleging that it was adjudicated in her favor in the extra-judicial
settlement of ConstanciaSoccos estate, before the Department of Agrarian Reform (DAR). The heirs of Arturo Reyes opposed the
application on the ground that Lot No. 6-B was sold by Miguel R. Socco, brother of Socco, in favor of their father, Atty. Arturo
Reyes, as evidenced by the Contract to Sell.

Issue: Whether or not petitioners have a better right to the subject property over the respondents?

Ruling: The Court ruled that the petitioners could not derive title of Lot No. 6-B because Miguel R. Socco was not yet the owner of the
said lot and was only expecting to inherit the same. The contract was a conditional sale, conditioned upon the event Miguel Socco
would actually inherit and become the owner of the said property. The Court, relying on Article 1459 of the Civil Code on contracts
of sale, said that, The thing must be licit and the vendor must have the right to transfer the ownership thereof at the time it is
delivered. The law specifically requires that the vendor must have ownership of the property at the time of it is delivered. Hence,
there was no valid sale from which ownership of the property could have transferred from Miguel Socco to Arturo Reyes, since, at
the time of the execution, the former was not yet the owner of the same and was only expecting to inherit it. Furthermore, Arturo
Reyes, not having acquired ownership of the property, could not have conveyed the same to his heirs.

d. Determinate or indeterminate (1460) (by description or segregation) (capable of being segregated without the need for the
creation of a new contract)

1) Undivided interest (1463) may be the object of sale; or

2) Undivided share in a mass of fungible goods (1464)
i) This results in proportional ownership. If the mass contains less than the quantity sold, the buyer is to make
good the deficiency
Note: Goods are corporeal movables other than money. (1636)

*Fungible goods those that cannot be used without being consumed; any unit treated as the equivalent of any other unit.

Vagilidad vs Vagilidad
(based on notes bec no digest online)
- Loreto sold his share, specifically designating portion.
- Can he sell? Yes. A definite one? No. He is a co-owner of an undivided portion.
- After having sold before, he cant sell the same. ???

National Grains Authority vs IAC

Facts:
On August 23, 1979, private respondent Leon Soriano offered to sell palay grains to NFA through William Cabal, the provincial
manager in Tuguegarao. The documents submitted were processed, and he was given a quota of 2,640 cavans, which is the
maximum number of cavans he may sell to NFA. On the same day and on the following day, Soriano delivered 630 cavans, which
were no rebagged, classified and weighed. When he demanded payment, he was told that payment will be held in abeyance since
Mr. Cabal was still investigating on an information received that Soriano was not a bona fide farmer. Instead of withdrawing the
palay, Soriano insisted that the palay grains be delivered and paid. He filed a complaint for specific performance. Petitioners
contend that the delivery was merely made for the purpose of offering it for sale because until the grains were rebagged, classified
and weighed, they are not considered sold.

Issue:
Whether there was a perfected sale

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

Arts. 1466 1468 (not in the syllabus. still read)

I. Criteria--
A. To differentiate sale from
a. Agency to sell (1466)
This is a matter of intent: the entire contract and its essential clauses should be construed
b. Lease of service or contract for a piece of work (1467)
Whether manufactured for the general market or on special order is the point of inquiry. In the former case, it is a sale. In
the latter, it is a contract for a piece of work.
c. Barter (1468)
1) When the consideration is partly in money:
Intent governs first; if the intention is not clear, it is barter if the thing given as part of the consideration is
proportionately greater in value than the money given; otherwise, it is sale.
Arts. 1469- 1474
I. Price (cause/consideration)
- Price is a sum of money or its equivalent
- decide on the PRICE and MANNER OF PAYMENT

Boston Bank of the Philippines vs Manalo

FACTS:
1. Xavierville Estate, Inc. (XEI) sold to The Overseas Bank of Manila (OBM) some residential lots in Xavierville subdivision. Nevertheless, XEI
continued selling the residential lots in the subdivision as agent of OBM.
2. Carlos Manalo, Jr. proposed to XEI, through its President Emerito Ramos (Ramos), that he will purchase two lots in the Xavierville subdivision
and offered as part of the downpayment the P34,887.66 Ramos owed him. XEI, through Ramos, agreed.
3. In a letter dated August 22, 1972 to Perla Manalo (Carlos wife), Ramos confirmed the reservation of the lots. In the letter he also pegged the
price of the lots at P348,060 with a 20% down payment of the purchase price amounting to P69,612.00 (less the P34,887.66 owing from
Ramos), payable as soon as XEI resumes its selling operations; the corresponding Contract of Conditional Sale would then be signed on or
before the same date. Perla Manalo conformed to the letter agreement.
4. Thereafter, the spouses constructed a house on the property. The spouses were notified of XEIs resumption of selling operations. However, they
did not pay the balance of the downpayment because XEI failed to prepare a contract of conditional sale and transmit the same to them. XEI
also billed them for unpaid interests which they also refused to pay. XEI turned over its selling operations to OBM.
5. Subsequently, Commercial Bank of Manila (CBM) acquired the Xavierville Estate from OBM. CBM requested Perla Manalo to stop any on-
going construction on the property since it (CBM) was the owner of the lot and she had no permission for such construction. Perla informed
them that her husband had a contract with OBM, through XEI, to purchase the property. She promised to send CBM the documents. However,
she failed to do so. Thus, CBM filed a complaint for unlawful detainer against the spouses. But later on, CBM moved to withdraw its complaint
because of the issues raised. In the meantime, CBM was renamed the Boston Bank of the Philippines.
6. Then, the spouses filed a complaint for specific performance and damages against the bank before the RTC. The spouses alleged that they had
always been ready and willing to pay the installments on the lots sold to them but no contract was forthcoming. The spouses further alleged
that upon their partial payment of the downpayment, they were entitled to the execution and delivery of a Deed of Absolute Sale covering the
subject lots. During the trial, the spouses adduced in evidence the separate Contracts of Conditional Sale executed between XEI and 3 other
buyers to prove that XEI continued selling residential lots in the subdivision as agent of OBM after the latter had acquired the said lots.
RTC :
The trial court ordered the petitioner (Boston Bank) to execute a Deed of Absolute Sale in favor of the spouses upon the payment of the spouses of
the balance of the purchase price. It ruled that under the August 22, 1972 letter agreement of XEI and the spouses, the parties had a "complete
contract to sell" over the lots, and that they had already partially consummated the same.

CA:
The Court of Appeals sustained the ruling of the RTC, but declared that the balance of the purchase price of the property was payable in fixed
amounts on a monthly basis for 120 months, based on the deeds of conditional sale executed by XEI in favor of other lot buyers.
Boston Bank filed a Motion for the Reconsideration of the decision alleging that there was no perfected contract to sell the two lots, as there was no
agreement between XEI and the respondents on the manner of payment as well as the other terms and conditions of the sale. Boston Bank also
asserts that there is no factual basis for the CA ruling that the terms and conditions relating to the payment of the balance of the purchase price
of the property (as agreed upon by XEI and other lot buyers in the same subdivision) were also applicable to the contract entered into between
the petitioner and the respondents. CA denied the MR.
ISSUES:
2.) Whether or not there was a perfected contract to sell the property
3.) Whether or not the CA correctly held that the terms of the deeds of conditional sale executed by XEI in favor of the other lot buyers in the
subdivision, which contained uniform terms of 120 equal monthly installments, constitute evidence that XEI also agreed to give the Manalo
spouses the same mode and timeline of payment. (Evidence, Disputable Presumptions, Habits and Customs Rule 130, Section 34)
HELD:
2.) NO. In a contract to sell property by installments, it is not enough that the parties agree on the price as well as the amount of downpayment. The
parties must, likewise, agree on the manner of payment of the balance of the purchase price and on the other terms and conditions relative to
the sale. Even if the buyer makes a downpayment or portion thereof, such payment cannot be considered as sufficient proof of the perfection of
any purchase and sale between the parties. 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 the price. The agreement as to the manner of payment goes into the price, such that a disagreement on the manner
of payment is tantamount to a failure to agree on the price. We have meticulously reviewed the records, including Ramos February 8, 1972
and August 22, 1972 letters to respondents and find that said parties confined themselves to agreeing on the price of the property
(P348,060.00), the 20% downpayment of the purchase price (P69,612.00), and credited respondents for the P34,887.00 owing from Ramos as
part of the 20% downpayment. Based on these two letters, the determination of the terms of payment of the P278,448.00 had yet to be agreed
upon on or before December 31, 1972, or even afterwards, when the parties sign the contract of conditional sale. So long as an essential
element entering into the proposed obligation of either of the parties remains to be determined by an agreement which they are to make, the
contract is incomplete and unenforceable.
3.) NO. The bare fact that other lot buyers were allowed to pay the balance of the purchase price of lots purchased by them in 120 or 180 monthly
installments does not constitute evidence that XEI also agreed to give the respondents the same mode and timeline of payment. Under Section
34, Rule 130 of the Revised Rules of Court, evidence that one did a certain thing at one time is not admissible to prove that he did the same or
similar thing at another time, although such evidence may be received to prove habit, usage, pattern of conduct or the intent of the parties.
Habit, custom, usage or pattern of conduct must be proved like any other facts. The offering party must establish the degree of specificity and
frequency of uniform response that ensures more than a mere tendency to act in a given manner but rather, conduct that is semi-automatic in
nature. The offering party must allege and prove specific, repetitive conduct that might constitute evidence of habit. The examples offered in
evidence to prove habit, or pattern of evidence must be numerous enough to base on inference of systematic conduct. Mere similarity of
contracts does not present the kind of sufficiently similar circumstances to outweigh the danger of prejudice and confusion. In determining
whether the examples are numerous enough, and sufficiently regular, the key criteria are adequacy of sampling and uniformity of response. It is
only when examples offered to establish pattern of conduct or habit are numerous enough to lose an inference of systematic conduct that
examples are admissible. Respondents failed to allege and prove that, as a matter of business usage, habit or pattern of conduct, XEI granted
all lot buyers the right to pay the balance of the purchase price in installments of 120 months of fixed amounts with pre-computed interests, and
that XEI and the respondents had intended to adopt such terms of payment relative to the sale of the two lots in question. Indeed, respondents
adduced in evidence the three contracts of conditional sale executed by XEI and other lot buyers merely to prove that XEI continued to sell lots
in the subdivision as sales agent of OBM after it acquired said lots, not to prove usage, habit or pattern of conduct on the part of XEI to require
all lot buyers in the subdivision to pay the balance of the purchase price of said lots in 120 months.
A. Requisites:
a. The price must be real (1471): The sale is void if the price is simulated.
*If price is false reform document, not contract. The contract was valid.
*Price not paid: no effect. Remedy: specific performance

Cruzado vs Bustos
Case:
An appeal from the judgment of CFI Pampanga allowing declaring defendant Bustos as the rightful owner of the property in
question.
Bustos and Escaler who has said to be detaining such land, refused to deliver the possession thereof to plaintiff and refused to
recognize his ownership of the same.
Facts:
Agapito Cruzado was a poor man living in Pampanga, he had a job in court but was still not enough to support his family. He
aspired to hold the office of procurador in the CFI of Pampanga but he was unable to give the required bond, an indispensable
condition for his appointment.
Since Cruzado was friends with Bustos, a rich woman in their place. He begged the latter to simulate a mortgage deed of a certain
property and have it executed in court in his favor only to pose that he has real property to enable him to qualify to such position of
procurador. In truth, the said mortagage was a front and fraudulent but was effected by making a pretended contract which bore the
appearance of truth.
It is unquestionable that the contract of sale was perfect and binding upon both contracting parties since their names both appear in
that instrument to have agreed upon the thing sold. But it is also undeniable that the said contract was not consummated. 1.)
Cruzado did not pay the purchase price of P2,200 2.) he never took possession of the land apparently sold in the said deed. All that
the vendee did was to pledge the land as a security for the faithful discharge of the duties of his office.
Santiago Cruzado, the son, brought an action for recovery of possession, founded on the right transmitted to him by his father at his
death a right arising from the said simulated deed of sale of the land in question.
Issue:
W/N the said deed of sale was simulated, not with the intent to defraud 3 rd persons, but for the sole purpose of making it appear that
Agapito Cruzado has real property?
W/N rights of transmission acquired by Santiago Cruzado from the death of his father, pertaining to the said land in contest is valid
and without defect?
Ruling:
Under the law, the contract of purchase and sale, as consensual, is perfected by consent as to the price and the thing and is
consummated by the reciprocal delivery of the one and the other. Full ownership of the thing sold being conveyed to the vendee,
from which moment the right of action derived from this right may be exercised. the record discloses that there was no payment
made by Cruzado to Bustos, thus, rendering the contract not to be consummated.
Art 1164 states that, a creditor has a right to the fruits of the time the obligation to deliver it arise. However, he shall not acquire a
property right thereto until it has been delivered to him.
Besides the failure to pay the purchase price, neither the vendee nor his heirs, had at any time taken possession of the land. Seven
witnesses attest to the fact, Bustos and her husband while still living, continued to possess the said land supposedly sold to Agapito
Cruzado and cultivated it, as she had done long before the sale of September 1875 to September 1891, the date of complaint by
Santiago Cruzado.
Consequently, at the death of Agapito, he could not have transmitted to the Santiago as his successor any greater right than a
personal right to exact fulfillment of a contract, as plaintiff was not the owner of the said land, he could not validly register it. This
fulfillment of a right has already prescribed since, under the law, prescription towards real property shall be 30 years. In the case at
bar, the action to recover took 34 years to bring it to court, thus has already prescribed.
Petition is denied.

Doles vs Angeles
The CA is incorrect when it considered the fact that the supposed friends of [petitioners], the actual borrowers, did not present
themselves to [respondent] as evidence that negates the agency relationshipit is sufficient that petitioner disclosed to respondent
that the former was acting in behalf of her principals, her friends whom she referred to respondent. For an agency to arise, it is not
necessary that the principal personally encounter the third person with whom the agent interacts. The law in fact contemplates, and
to a great degree, impersonal dealings where the principal need not personally know or meet the third person with whom her agent
transacts; precisely, the purpose of agency is to extend the personality of the principal through the facility of the agent.

Here, Doles and Angeles were mere agents. If consideration is the unpaid loan, Doles owed Pua not Angeles. Doles wasnt the credtor.
Money is not owned by Doles.

b. In money or its equivalent (1458)

Torres vs CA
(based on notes) Consideration: expectation that money will not be owned. ???

c. Certain or Ascertainable (determinable)

1) How determined:
i) By a third person (1469, pars. 1, 2, 4)
aa) If the third person is unable or unwilling to fix the price, the contract is inefficacious unless the parties
come to an agreement

Barreto vs Sta. Marina

Facts:
The La Insular cigar and cigarette factory is a joint account association with a nominal capital of P865,000, the
plaintiff's share is P20,000, or 4/173 of the whole. The plaintiff's attorneys wrote the defendant's local
representative a letter offering to sell plaintiff's share in the factory. The result of the correspondence between
the parties and their representatives was that Exhibit G was duly executed on May 3, 1910. In accordance with
the terms of this exhibit a committee of appraisers was appointed to ascertain and fix the actual value of La
Insular. The committee rendered its report on November 14, 1910, fixing the net value at P4,428,194.44.
Subsequently to the execution of Exhibit J, demand was made by the plaintiff upon the defendant for his share
of the profits from June 30, 1909, to November 22, 1910. This demand was refused and thereupon this action
was instituted to recover said profits.
 The plaintiff argued that if the agreement of May 3, 1910, was a perfected sale he cannot recover any profits
after that date; while on the other hand the defendant concedes that if said agreement was only a promise to sell
in the future it, standing alone, would not prevent recovery in this action.

ISSUE: Whether the agreement made by the parties on May 3, 1910 was a perfected contract of sale.

HELD: YES, it was a perfected contract of sale.

Article 1450 of the Civil Code reads: "The sale shall be perfected between vendor and vendee and shall be
binding on both of them, if they have agreed upon the thing which is the object of the contract and upon the
price, even when neither has been delivered."
This is supplemented by Article 1447 of the Code which reads as follows: "In order that the price may be
considered fixed, it shall be sufficient that it be fixed with regard to another determine thing also specific, or
that the determination of the same be left to the judgment of a specified person."
The contract of May 3, 1910, provides that:"Whereas the respective contracting parties have agreed, the one to sell
and the other to buy the whole of the right, title and interest of the said Antonio Maria Barretto in and to the
said joint account association, including not only the individual participation of the said party of the second
part standing on the books of the association in the name of Antonio M. Barretto, but also one-half of the share
in the business which stands on the books in the name of Barretto & Company constituting a total nominal
share of P54,700 Philippine currency in the total nominal capital of P865,000 Philippine currency

Under article 1450, supra there are two indispensable requisites in a perfected sale: (1) There must be an
agreement upon the things which is the object of the contract; and (2) the contracting parties must agree
upon the price. The object of the contract in the case at bar was the whole of the plaintiff's right, title,
and interest in La Insular. This whole was 4/173 of the entire net value of the business. The parties agreed
that the price should be 4/173 of the total net value. The fixing of such net value was unreservedly left to the
judgment of the appraisers. As to the thing and the price the minds of the contracting parties met, and all
questions relating thereto were settled. Nothing was left unfinished in so far as the contracting parties
were concerned. Neither party could withdraw from the contract without the consent of the other. The
result is that the two essential requisites necessary to constitute a perfected sale were present.

We find that the parties did not only agree "the one to sell and the other to buy" and that "one will immediately
sell and the other will immediately buy" the whole of the plaintiff's interest but that they were unable to agree
"as to the true present value of the said interest;" they did agree, however, upon the method of fixing and
determining such value by appointing appraisers for this purpose. It was the duty of the appraisers to hear the
respective claims of the one and the other party relative to the value and assets of the business, "and in
accordance with the proof adduced relative to said values to fix and determine the same for the purposes of the
purchase and sale above mentioned." They did not say for the purpose of a sale to be made in the future. Is the
language, "for the purposes of the purchase and sale above mentioned" any the less significant or controlling
than that relied upon by the plaintiff found in the first and fifth paragraph? When the parties used this language
they had in mind the purchase and sale which they had just made. According to the ordinary and well-
understood use of the words "purchase" and "sale" they mean, in the absence of any expression to limit their
significance, a transmutation of property from one party to another in consideration of some price or
recompense in value; a transmission of property by a voluntary act or agreement, founded on a valuable
consideration; divesting the title out of the vendor and vesting it in the vendee. Again, not only was the title of
the plaintiff's interest vested in the defendant on the execution of the contract of May 3 but the possession of
that interest was also then transferred to the defendant. (Art. 1462, Civil Code; Uy Piaoco vs. McMicking, 10
Phil. Rep., 286.)

ii) By the Courts (1469, par. 3) if there is bad faith or mistake of the third party fixing the price
iii) By reference to a definite day, a particular exchange or market (1472)
iv) By reference to invoices

McCulough vs Aenlle
Facts:
On Aug 27, 1901, the parties made a written contract for the purpose of carrying into effect the said contract of
sale. Don Maties Saenz e Vizmanos y Lecaros the manager of R. Aenlle & Co declares that they sell absolutely
and in fee simple to E.C. Mcculough, the tobacco & cigarette factory known as La Maria Cristina including
the tradem mark La Maria Cristina and everything else belonging to the said factory. The inventory
mentioned in the contract was made by the defendant and delivered to the plaintiff. The parties have completed
the mentioned inventory of machinery, furniture, and other tools of the said tobacco factory representing a total
amount of P131K after deducting the 20% discount that has been agreed including the value of the trade-mark
at P20K and that the E.C. Mcculough, the purchaser, remained in the possession of the tobacco factory. The
plaintiff want others organized. The purchaser examine the two lots but the plaintiff with others rejected the
purchaser and the tobacco was not qualify indicated in the inventory. The plaintiff claims that the tobacco in
these lots was worthless, and brought this action against the defendant to recover what he paid.
Issue: WON the plaintiff can recover what he paid.
Ruling:
No. The plaintiff cannot recover the costs. It was a sufficient compliance with the contract. The fact that the
tobacco was described as one class instead of another would be unimportant. The appellee did not purchase by
class or quality but by quantity.

v) By reference to the application of known factors, e.g. in proportion to variations in calories and ash
content of coal
vi) But never by one party to the contract (1473) unless the price is separately accepted by the other party.
2) Effect of indeterminability: the contract is inefficacious (1474) (as when the third party is unable to or refuses to
fix the price)

Robles vs Lizarraga Hermanos

Doctrine:
The lessee may prove an independent verbal agreement on the part of the landlord to put the leased premises in a safe
condition.
The appraised value of the property may be used to determine the price.
Facts:
A parcel of land was originally owned by the parents of the present plaintiff, Zacarias Robles. Upon the death of his father,
plaintiff leased the parcel of land from the administrator with the stipulation that any permanent improvements necessary to the
cultivation and exploitation of the hacienda should be made at the expense of the lessee without right to indemnity at the end of
the term. As the place was in a run-down state, and it was foreseen that the lessee would be put to much expense in bringing the
property to its productive capacity, the annual rent was fixed at the moderate amount of P2,000 per annum.
The plaintiff made various improvements and additions to the plant. The firm of Lizarraga Hermanos was well aware of the nature
and extent of these improvements.
When the plaintiffs mother died, defendant came forward with a proposal to buy the heirs portion of the property. In consideration
that the plaintiff should shorten the term of his lease to the extent stated, the defendant agreed to pay him the value of all
betterments that he had made on the land and furthermore to purchase from him all that belonged to him personally on the land.
The plaintiff agreed to this.
On the ensuing instrument made, no reference was made to the surrender of the plaintiffs rights as lessee, except in fixing the date
when the lease should end; nor is anything said concerning the improvements which the plaintiff had placed. At the same time
the promise of the defendant to compensate for him for the improvements was wanting. Accordingly, the representative of the
defendant explained that this was unnecessary in view of the confidence existing between the parties.
On the part of the defendant it was claimed that the agreement with respect to compensating the plaintiff for improvements and
other things was never in fact made.
Issue:
1. Whether or not the lessee may contest the validity of a written contract with oral evidence
2. Whether or not the appreciation value can be used to determine the price
Held:
1. Yes. In case of a written contract of lease, the lessee may prove an independent verbal agreement on the part of the landlord
to put the leased premises in a safe condition. The verbal contract which the plaintiff has established in this case is therefore
clearly independent of the main contract of conveyance, and evidence of such verbal contract is admissible under the doctrine
above stated. In the case before us the written contract is complete in itself; the oral agreement is also complete in itself, and it
is a collateral to the written contract, notwithstanding the fact that it deals with related matters.
2. Yes. The stipulation with respect to the appraisal of the property did not create a suspensive condition. The true sense of the
contract evidently was that the defendant would take over the movables and the improvements at an appraised valuation, and
the defendant obligated itself to promote the appraisal in good faith. As the defendant partially frustrated the appraisal, it
violated a term of the contract and made itself liable for the true value of the things contracted about, as such value may be
established in the usual course of proof. Furthermore, an unjust enrichment of the defendant would result from allowing it to
appropriate the movables without compensating the plaintiff thereof.

3) Inadequacy of price does not affect the contract, but may show vice of consent (1470). Refer to inadequacy of
cause in general, Art. 1355.
Askay vs Cosapan (full text bec mubo)
Facts:
The plaintiff in this case is Askay, an illiterate Igorrote between 70 and 80 years of age, residing in the municipal district of Tublay,
Province of Benguet, who at various times has been the owner of mining property. The defendant is Fernando A. Cosalan, the
nephew by marriage of Askay, and municipal president of Tublay, who likewise has been interested along with his uncle in
mining enterprises.
About 1907, Askay obtained title to the Pet Kel Mineral Claim located in Tublay, Benguet. On November 23, 1914, if we are to
accept defendant's Exhibit 1, Askay sold this claim to Cosalan. Nine years later, in 1923, Askay instituted action in the Court of
First Instance of Benguet to have the sale of the Pet Kel Mineral Claim declared null, to secure possession of the mineral claim,
and to obtain damages from the defendant in the amount of P10,500. Following the presentation of various pleadings including
the answer of the defendant, and following trial before Judge of First Instance Harvey, judgment was rendered dismissing the
complaint and absolving the defendant from the same, with costs against the plaintiff. On being informed of the judgment of the
trial court, plaintiff attacked it on two grounds: The first, jurisdictional, and the second, formal. Both motions were denied and
an appeal was perfected.
Two questions are suggested by the assignments of error. The first is whether Judge George R. darvey had jurisdiction to try the
case. The second is whether the plaintiff has established his cause of action by a preponderance of the evidence.
1. On April 16, 1923, as appears from the Official Gazette, the Secretary of Justice authorized and instructed the Honorable George
R. Harvey, Judge of First Instance of the Ninth Judicial District, to hold a special term of court in the City of Baguio, Mountain
Province, beginning May 2,1923. (Administrative Order No. 43, 21 Off. Gaz., p. 893.) Acting under the authority granted by
the order of the Secretary of Justice, Judge Harvey proceeded to hear the case of Askay vs. Cosalan, without protest from
anyone until after an adverse decision for the plaintiff and until after Judge Harvey had left the district.
The point which plaintiff now presses is that Act No. 3107, amendatory of section 156 of the Administrative Code, which
authorizes a Judge of First Instance to be detailed by the Secretary of Justice to temporary duty, for a period which shall in no
case exceed six months, in a district or province other than his own, for the purpose of trying all kinds of cases, excepting
criminal and election cases, was not in force until fifteen days after the completion of the publication of the statute in the
Official Gazette, or not until August 3, 1923. Plaintiff relies on section 11 of the Administrative Code, which in part reads: "A
statute passed by the Philippine Legislature shall, in the absence of special provision, take effect at the beginning of the
fifteenth day after the completion of the publication of the statute in the Official Gazette, the date of issue being excluded."
Now turning to Act No. 3107, its final section provides that "This Act shall take effect on its approval." The Act was approved on
March 17, 1923. Obviously, therefore, there being a special provision in Act No. 3107, it applies to the exclusion of the general
provision contained in the Administrative Code.
Recalling, therefore, that Act No. 3107 went into effect on March 17, 1923, and that it was subsequent thereto, on April 16, 1923,
that Judge Harvey was authorized to hold court at Baguio, beginning with May 2, 1923, appellant's argument along this line is
found to be without persuasive merit. We pass to the material issue which is one of fact.
 II. Plaintiff contends that the sale of the Pet Kel Mineral Claim was accomplished through fraud and deceit on the part of the
defendant. Plaintiff may be right but in our judgment he has failed to establish his claim. Fraud must be both alleged and
proved.
One fact exists in plaintiff's favor, and this is the age and ignorance of the plaintiff who could be easily duped by the defendant, a
man of greater intelligence. Another fact is the inadequacy of the consideration for the transfer which, according to the
conveyance, consisted of Tl and other valuable consideration, and which, according to the oral testimony, in reality consisted of
P107 in cash, a bill fold, one sheet, one cow, and two carabaos. Gross inadequacy naturally suggests fraud and is some evidence
thereof, so that it may be sufficient to show it when taken in connection with other circumstances, such as ignorance or the fact
that one of the parties has an advantage over the other. But the fact that the bargain was a hard one, coupled with mere
inadequacy of price when both parties are in a position to form an independent judgment concerning the transaction, is not a
sufficient ground for the cancellation of a contract.
Against the plaintiff and in favor of the defendant, we have the document itself executed in the presence of witnesses and before a
notary public and filed with the mining recorder. The notary public, Nicanor Sison, and one of the attesting witnesses, Apolonio
Ramos, testified to the effect that in the presence of the plaintiff and the defendant and of the notary public and the subscribing
witnesses, the deed of sale was interpreted to the plaintiff and that thereupon he placed his thumb mark on the document. Two
finger print experts, Dr. Charles S. Banks and A. Simkus, have declared in depositions that the thumb mark on Exhibit 1 is that
of Askay. No less than four other witnesses testified that at various times Askay had admitted to them that he had sold the Pet
Kel Mine to Fernando A. Cosalan.
Having in mind all of these circumstances, how can the plaintiff expect the courts to nullify the deed of sale on mere suspicion?
Having waited nine years from the date when the deed was executed, nine years from the time Fernando A. Cosalan started
developing the mine, nine years from the time Askay himself had been deprived of the possession of the mine, and nine years
permitting of a third party to obtain a contract of lease from Cosalan, how can this court overlook plaintiff's silent acquiescence
in the legal rights of the defendant? On the facts of record, the trial judge could have done nothing less than dismiss the action.
We conclude, therefore, that Judge Harvey had jurisdiction to try this case, that his findings of fact are in accordance with the
evidence, that no prejudicial error was committed in the trial, and that the complaint was properly dismissed. As a result,
judgment is affirmed with costs against the appellant. So ordered.

Aguilar vs Rubiato
> Rbuato sold in pacto de retro sale (sale with right to repurchase)
>8 parcels of land for P800 (valued at P26K)
>wa ko kasabot

4) Effect of failure of consideration

Sps. Buenaventura vs CA
Facts
Felicitas, Fe, and Gavino, all surnamed JOAQUIN. The married Joaquin children are joined in this action by their respective
spouses. Sought to be declared null and void ab initio are certain deeds of sale covering 6 parcels of land executed by defendant
parents Leonardo Joaquin and Feliciana Landrito in favor of their co-defendant children and the corresponding certificates of
title issued in their names. In seeking the declaration of nullity of the aforesaid deeds of sale and certificates of title, plaintiffs,
in their complaint, aver that the purported sale of the properties in litis was the result of a deliberate conspiracy designed to
unjustly deprive the rest of the compulsory heirs (plaintiffs herein) of their legitime.
ISSUE:
Whether Petitioners have a legal interest over the properties subject of the Deeds of Sale
RULING:
Petitioners do not have any legal interest over the properties subject of the Deeds of Sale. As the appellate court stated, petitioners
right to their parents properties is merely inchoate and vests only upon their parents death. While still living, the parents of
petitioners are free to dispose of their properties. In their overzealousness to safeguard their future legitime, petitioners forget
that theoretically, the sale of the lots to their siblings does not affect the value of their parents estate. While the sale of the lots
reduced the estate, cash of equivalent value replaced the lots taken from the estate.

B. Effect of earnest money (1482)

a. It is considered part of the price, unless the contract is otherwise
b. It is proof of perfection of the contract

*Earnest Money or Arras money given to the seller by the prospective buyer to show that the latter is truly interested in
buying the property, and it aims to bind the bargain; it is something of value to show that the buyer was really in earnest, and
given to the seller to bind the bargain.
*Failure to pay balance of purchase price: cant sell to another person.

Manila Metal Container Corporation vs PNB

Facts:
Petitioner was the owner of 8,015 square meters of parcel of land located in Mandaluyong City, Metro Manila. To secure
a P900,000.00 loan it had obtained from respondent Philippine National Bank, petitioner executed a real estate mortgage over
the lot. Respondent PNB later granted petitioner a new credit accommodation. On August 5, 1982, respondent PNB filed a
petition for extrajudicial foreclosure of the real estate mortgage and sought to have the property sold at public auction. After due
notice and publication, the property was sold at public action where respondent PNB was declared the winning bidder.
Petitioner sent a letter to PNB, requesting it to be granted an extension of time to redeem/repurchase the property. Some PNB
personnel informed that as a matter of policy, the bank does not accept partial redemption. Since petitioner failed to redeem
the property, the Register of Deeds cancelled TCT No. 32098 and issued a new title in favor of PNB.
Meanwhile, the Special Asset Management Department (SAMD) had prepared a statement of account of petitioners obligation. It
also recommended the management of PNB to allow petitioner to repurchase the property for P1,574,560.oo. PNB rejected the
offer and recommendation of SAMD. It instead suggested to petitioner to purchase the property for P2,660,000.00, in its
minimum market value. Petitioner declared that it had already agreed to SAMDs offer to purchase for P1,574,560.47 and
deposited a P725,000.00.
Issue:
Whether or not petitioner and respondent PNB had entered into a perfected contract for petitioner to repurchase the property for
respondent.
Ruling:
The SC affirmed the ruling of the appellate court that there was no perfected contact of sale between the parties.
A contract is meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to
render some service. Under 1818 of the Civil Code, there is no contract unless the following requisites concur:
1. Consent of the contracting parties;
2. Objection certain which is the subject matter of the contract;
3. Cause of the obligation which is established.
Contract is perfected by mere consent which is manifested by the meeting of the offer and the acceptance upon the thing and causes
which are to constitute the contract. Once perfected, the bind between other contracting parties and the obligations arising
therefrom have the form of law between the parties and should be complied in good faith. The absence of any essential element
will negate the existence of a perfected contract of sale.

The court ruled in Boston Bank of the Philippines vs Manalo:

A definite agreement as to the price is an essential element of a binding agreement to sell personal or real property because it
seriously affects the rights and obligations of the parties. Price is an essential element in the formation of a binding and
enforceable contract of sale. The fixing of the price can never be left to the decision of one of the contracting parties. But a price
fixed by one of the contracting parties, if accepted by the other, gives rise to a perfected sale.
In the case at bar, the parties to the contract is between Manila Metal Container Corporation and Philippine National Bank and not
to Special Asset Management Department. Since the price offered by PNB was not accepted, there is no contract. Hence it
cannot serve as a binding juridical relation between the parties.

Serrano vs Caguiat
Facts
Spouses Onnie and Amparo Herrera, petitioners, are the registered owners of a lot located in Las Pias, Metro Manila covered by
Transfer Certificate of Title No. T-9905
Sometime in March 1990, Godofredo Caguiat, respondent, offered to buy the lot. Petitioners agreed to sell it at P1,500.00 per
square meter. Respondent then gave petitioners P100,000.00 as partial payment. In turn, petitioners gave respondent the
corresponding receipt stating that respondent promised to pay the balance of the purchase price on or before March 23, 1990,
On March 28, 1990, respondent, through his counsel Atty. Ponciano Espiritu, wrote petitioners informing them of his readiness to
pay the balance of the contract price and requesting them to prepare the final deed of sale.
On April 4, 1990, petitioners, through Atty. Ruben V. Lopez, sent a letter [4] to respondent stating that petitioner Amparo Herrera
is leaving for abroad on or before April 15, 1990 and that they are canceling the transaction. Petitioners also informed
respondent that he can recover the earnest money of P100,000.00 anytime.
Again, on April 6, 1990, [5] petitioners wrote respondent stating that they delivered to his counsel Philippine National Bank
Managers Check No. 790537 dated April 6, 1990 in the amount of P100,000.00 payable to him.
In view of the cancellation of the contract by petitioners, respondent filed with the Regional Trial Court, Branch 63, Makati City a
complaint against them for specific performance and damages, docketed as Civil Case No. 90-1067.

LOWER COURTS (REGIONAL TRIAL COURT)

The decision passed by the lower court which is the Regional Trial Court is; In the case of Mr. Caguiat, who is the respondent (the
buyer of the land) and Mr. Herrera and Mr. Serrano, the petitioners (the owner of the land) there is a breach of contract because
of the immediate cancellation of the contract of sale agreed by the two parties even without asking for the permission of one
party. The regional trial court stated that the contract binding the two parties is a CONTRACT OF SALE wherein the payment
of P100000.00 is considered as a proof of the contracts perfection applying that the contract is the approved by both parties and
can never be cancelled by either party without the consent of the latter even if the return of payment will be possible.
The lower court orders the petitioners to continue the contract of sale, because the respondent is ready to deliver the money in
exchange of the deed of sale to be approved and signed by the petitioners. They are demanded to execute the deed of sale in
favor of the respondent.

COURT OF APPEALS (APPELLATE COURT)

The appellate court agreed with the decision passed by the Regional trial court stating that the binding force of the obligation is a
perfect contract of sale due to the receipt of cash in the amount of P100000.00 for the partial payment of the specific land
owned by the petitioners. Upon the receipt of cash it is presumed that the contract of sale is then perfected and both parties are
then required to perform their obligation as seller and buyer. And the ownership of the land is to be transferred to the
respondent upon the delivery of the thing sold but the obligation arises once the parties agreed with the contract and is perfected
upon the receipt of cash payments.
The court of appeals ordered that the petitioner should then transfer the ownership of the land through the deed of sale because it is
the rule of the contract of sale.

SUPREMECOURT
Upon the submission of motion of reconsideration by the petitioners, the Supreme Court thoroughly examines the agreement made
by the two parties including the decisions passed by the Regional Trial Court and by the Court of appeals. Through inspection
of the given evidence which is the receipt given by the petitioners, the Supreme Court came up stating that the lower courts
have just misinterpreted the situation because of the cash receipt being involve in the case. The Supreme Court declared that the
binding force of the two parties involve is not a Contract of sale but a contract to sell stating that the ownership of the thing is
possessed by the owner unless there is a full payment made by the other party and in this case the only payment made by the
respondent is a down payment and it then gave the petitioners the right to cancel the contract and there can be no other
interpretation than that they agreed to a conditional contract of sale, The words Receipt of partial payment is a perfect
evidence that the contract present in the situation is a Contract to Sell. The Supreme Court requires the Court of Appeals to
Reversed their decision about the case due to some misinterpretation of the article Whenever earnest money is given in a
contract of sale, it shall be considered as part of the price and proof of the perfection of the contract.. because this article is
only applicable for application of the Contract of Sale.
Arts. 1475-1488
I. Rules in Ordinary Sales
A. Form
a. Generally consensual No particular form is required (1483)

Caoili vs CA
- Why was there no contract of sale?
- absence of form of deed of sale
- there is presence of elements of contract
- Form: Not essential in the contract.

* Sale that a form is required by law:

- Form is required for the enforceability: not always. [Required: only purely executory contracts]
*Even if buyer only has receipt for DP, that does not mean that it is a contract of sale

Naranja vs CA
> effect of lack of technical description in the contract (not discussed)

Limketkai Sons Milling, Inc.

>unsigned and unnotarized deed of sales (not discussed)

*Is invoice necessary for a contract of sale? NO.

b. But the Statute of Frauds applies if the thing sold is

1) Realty (immovables) or an interest therein (1403, 2f) but if through an agent, see 1874
2) Goods, chattels and choses in action, worth P500 or more (1403)

c. Exceptionally, form is essential to validity inter partes (solemn contract) in

1) Sale of large cattle (1581) (See PD1147 ); which is invalid unless registered and a certificate of transfer obtained
2) Sale of land through an agent (1874) (the agents authority must be in writing)
B. Perfection
a. General Rule: by consent (1475) upon the subject matter and price, even if neither is delivered.

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

Coronel vs CA
FACTS:
Coronel et al. consummated the sale of his property located in Quezon City to respondent Alcaraz. Since the title of the property
was still in the name of the deceased father of the Coronels, they agreed to transfer its title to their name upon payment of the
down payment of 50K. and thereafter an absolute deed of sale will be executed.

Alcarazs mother paid the down payment in behalf of her daughter and as such, Coronel made the transfer of title to their name.
Notwithstanding this fact, Coronel sold the property to petitioner Mabanag and rescinded its prior contract with Alcaraz.

ISSUE:
WON the rescission of the first contract between Coronel and Alcaraz is valid.

HELD:
The case is a contract of sale subject to a suspensive condition in which consummation is subject only to the successful transfer of
the certificate of title from the name of petitioners' father, to their names. Thus, the contract of sale became obligatory.

With regard to double sale, the rule that the first in time, stronger in right should apply. The contention of the petitioner that she was
a buyer in good faith because the notice of lis pendens in the title was annotated after she bought the property is of no merit. In
case of double sale, what finds relevance and materiality is not whether or not the second buyer was a buyer in good faith but
whether or not said second buyer registers such second sale in good faith, that is, without knowledge of any defect in the title of
the property sold.

The ruling should be in favor of Alcaraz because Mabanag registered the property two months after the notice of lis pendens was
annotated in the title and hence, she cannot be a buyer in good faith.

Manila Mining Corp vs Tan

SC: When Tan supplied purchase order

*Is invoice necessary for a contract of sale? NO. It is not necessary for perfection of contract.

b. Place of Perfection:
1) Where the offer was made (1319, last par.)
 c. Effect of Loss of the Thing Sold:
1) At the time of perfection:
i) Total loss: the contract is inoperative (1493)
ii) Partial loss: the buyers option (1494) is to avoid or accept the remainder
iii) Deterioration is equivalent to loss (1494) when all or a material part has substantially changed in character.
2) After perfection and before delivery (risk of loss)
i) By the fault of one party: the party at fault is liable (1480, 1538)
ii) By fortuitous event: There are conflicting provisions (1480, 1504, 1538) but if the title has passed, the risk is
upon the owner (buyer)
iii Reconciliation: 1504 should be treated as a specific provision (exception). Therefore:
aa) In sales of goods (corporeal movables) the risk is on the seller (1504) before title passes
bb) In sales of other property (realty or choses in action) the risk is on the buyer (1480)
cc) Where delivery is delayed by fault the risk is on the party at fault (1504)
dd) Where the sale is conditional: the risk is on the buyer(1538)

iv) According to Tolentino (Vol. V Tolentino pp. 28-29, copyright 1992): the vendor should bear the loss and the
vendee should not be bound to pay the price, for the following reasons:
aa) It is fundamental in the NCC, expressed in 1477 and 1496, that ownership is transferred by delivery;
hence, before delivery the vendor owns the thing and should suffer its loss; res perit domino. If he is
allowed to recover the price, he suffers no loss, which is imposed upon the vendee who has not yet
acquired ownership.
bb) The obligations of vendor and vendee are reciprocal, and, therefore, one depends upon the other. If the
obligation of the vendor to deliver is extinguished, the correlative obligation of the vendee to pay,
which depends upon it, cannot remain subsisting.
cc) 1480, par. 3, is not an exception but is an expression of the general rule that the risk is not imputed to the
vendee until after delivery. That paragraph considers the delivery completed only when the fungibles
have been weighed, counted, or measured, because it is only then that the thing becomes determinate.
Before such completion of delivery, the vendor bears the risk.
dd) Purchase and sale is an onerous contract, where the cause, with respect to the vendee, is the thing. If
he cannot have the thing, it is juridically illogical and unjust to make him pay its price.
C. Expenses -
a. Of Execution and Registration of the sale (1487) are borne by the Seller
b. Of putting the goods in a deliverable state (1521, last par.) are also borne by the Seller

II. Rule in Special Sales

A. Sales at Auction (1476) --
a. For separate lots, each lot is a separate sale (par. 1)
b. Upon the fall of the hammer (or other customary method) bids are no longer retractable (par. 2)
c. The seller may bid (par. 3) if the right is expressly reserved, unless the law or stipulation provides the contrary
1) If notice be not given that the right to bid is reserved (par. 4) the seller may not lawfully bid or cause a bid to be
made in his behalf.
i) Exception: The Pledgor may bid at the foreclosure sale (2113) of the thing pledged.
d. The seller may reject any and all bids unless the auction has been announced as without reserve

Dizon vs Dizon
Facts:
Petitioner Domingo Dizon purchased from his nephew, herein respondent Elpidio Dizon a house and lot located in Tondo, Manila. Respondent
failed to deliver the house and lot to petitioner. Co-owner of the lot, respondents brother Ricardo, did not give said respondent a written
authority to sell his share. Petitioner then filed with the RTC a complaint for specific performance and sum of money with damages
against respondent. RTC rendered a decision rescinding the contract between the parties.

The trial court issued a writ of execution implemented by sheriff Cesar Cabildo, who then scheduled the auction sale of respondents
properties. Petitioners attorney-in-fact as well as respondent and counsel participated. Petitioner was the highest bidder having offered
P180,000.00. In the afternoon of said auction date, the sheriff went to respondents house and showed Supplemental Minutes on Sheriffs
Sale offering a new bid at P1,690,074.41 in lieu of the earlier bid. Respondent refused to sign contending that it would be difficult for
himto redeem the property and besides, the auction sale had already been perfected and the subsequent sale is a new or second sale. He
moved to quash the minutes but the trial court denied the motion. His MR was also denied.

On petition for certiorari and prohibition before the CA, it granted the petition and set aside the questioned orders.

ISSUE
Has petitioner the option to amend his bid being the highest bidder to conform to the amounts awarded in his favor by the trial court?

HELD
No. Article 1476 (2) of the Civil Code provides: xxx (2) A sale by auction is perfected when the auctioneer announces its perfection by the
fall of the hammer, or in other customary manner. Until such announcement is made, any bidder may retract his bid; and the auctioneer
may withdraw the goods from the sale unless the auction has been announced to be without reserve.

During the public auction conducted, which began at 10:25 AM and ended at 10:45 AM, the sheriff declared petitioner as the highest
bidder. Considering that the auction sale had already been perfected, a supplemental sale with the higher consideration at the instance of
only one partycould no longer be validly executed.

CA affirmed; petition denied

 Leoquinco vs Postal Savings Bank
Facts:
The owner of property offered for sale either at public or private auction has the right to prescribe the manner, conditions and
terms of such sale. He may provide that all of the purchase price shall be paid at the time of the sale or any portion thereof,
or that time will be given for the payment. (Blossom vs. Milwaukee and Chicago Railroad Co., 3 Wallace [U. S.], 196.)

The conditions of a public sale, announced by an auctioneer or the owner of the property at the time and place of the sale, are
binding upon a purchaser, whether he knew them or not. (Kennell vs. Boyer, 144 Iowa, 303; Vanleer vs. Fain, 6 Humphrey
[Tenn.], 104.)

B. Sales by Sample and/or Description (1481)

a. The bulk of the goods must correspond to either or both
b. The buyer must have an opportunity to compare
c. Effect: the contract may be rescinded at the option of the buyer
C. Sale of Personalty payable by Installments (Recto Law)
a. Alternative remedies in case of non-payment (1484)
1) To exact fulfillment of the obligation
2) Cancel the sale should the vendee fail to pay two or more installments
i) This is an exception to 1191
3) Foreclose the chattel mortgage (if one was constituted) should the vendee fail to pay two or more installments.
But there may be no further action to recover the unpaid balance. A contrary stipulation is void.

Recto Law:
Magna Financial Services Group, Inc. vs. Colarina, G.R. 158635, December 9, 2005

In its Complaint, Magna Financial Services Group, Inc. made the following prayer:

WHEREFORE, it is respectfully prayed that judgment render ordering defendant:

1. To pay the principal sum of P131,607.00 with penalty charges at 4.5% per month from January 1999 until paid
plus liquidated damages.

2. Ordering defendant to reimburse the plaintiff for attorneys fee at 25% of the amount due plus expenses of litigation at
not less than P10,000.00.

3. Ordering defendant to surrender to the plaintiff the possession of the Multicab described in paragraph 2 of the
complaint.

4. Plaintiff prays for other reliefs just and equitable in the premises.

It is further prayed that pendent lite, an Order of Replevin issue commanding the Provincial Sheriff at Legazpi City
or any of his deputies to take such multicab into his custody and, after judgment, upon default in the payment of the
amount adjudged due to the plaintiff, to sell said chattel at public auction in accordance with the chattel mortgage
law.

Held:
It is, however, unmistakable from the Complaint that petitioner preferred to avail itself of the first and third remedies under
Article 1484, at the same time suing for replevin. For this reason, the Court of Appeals justifiably set aside the decision of
the RTC. Perusing the Complaint, the petitioner, under its prayer number 1, sought for the payment of the unpaid
amortizations which is a remedy that is provided under Article 1484(1) of the Civil Code, allowing an unpaid vendee to
exact fulfillment of the obligation. At the same time, petitioner prayed that Colarina be ordered to surrender possession of
the vehicle so that it may ultimately be sold at public auction, which remedy is contained under Article 1484(3). Such a
scheme is not only irregular but is a flagrant circumvention of the prohibition of the law. By praying for the foreclosure of
the chattel, Magna Financial Services Group, Inc. renounced whatever claim it may have under the promissory note.

Article 1484, paragraph 3, provides that if the vendor has availed himself of the right to foreclose the chattel mortgage, he shall
have no further action against the purchaser to recover any unpaid balance of the purchase price. Any agreement to the
contrary shall be void. In other words, in all proceedings for the foreclosure of chattel mortgages executed on chattels
which have been sold on the installment plan, the mortgagee is limited to the property included in the mortgage.

b. Compare these remedies with the resolution of reciprocal obligations (1191)

c. A stipulation that installments (or rent) already paid is not returnable is valid, unless unconscionable (1486)
d. Waiver of benefit of these articles is void
D. Leases of Personalty with Option to Buy:
a. The rules in 1484 are applicable where the lessor deprives the lessee of possession or enjoyment of the thing (1485)
b. 1486 (retention of payments) is also applicable
E. Sale of real property on installments (Maceda Law [RA 6552])
a. Applicability:
Sale of real property on installment, including residential condominium apartments but excluding industrial lots
b. When the buyer has paid at least two years of installments
1) Rights of buyer:
 ii) Default in payment
aa) To pay without additional interest, the unpaid installments (cash surrender value) within the grace
period
bb) Grace period is one month for every year of installment payments made
Limitation: The right can be exercised only once every 5 years
ii) Cancellation of sale
aa) Up to 5 years installments, refund of 50% of payments
bb) After 5 years of installments, additional 5%/year but shall not exceed 90% of total payments made

When cancellation takes effect:

aa) After 30 days from receipt by the buyer of (notarized) notice of cancellation; or
bb) After 30 days from receipt by the buyer of notarial demand for rescission
*In both cases after full payment of cash surrender value
c. When the buyer has paid less than two years installments
1) The buyer has at least 60 days grace period within which to pay the installment due
2) After the grace period, contract may be cancelled as in B above
(If the buyer fails to pay the installments due at the expiration of the grace period, the seller may cancel the contract
after thirty days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract
by a notarial act.)

Maceda Law:
Fabrigas vs. San Francisco del Monte, Inc., G.R. 152346, November 25, 2005:

The cancellation of the contract under Section 4 is a two-step process. First, the seller should extend the buyer a grace
period of at least sixty (60) days from the due date of the installment. Second, at the end of the grace period, the seller shall
furnish the buyer with a notice of cancellation or demand for rescission through a notarial act, effective thirty (30) days
from the buyers receipt thereof. It is worth mentioning, of course, that a mere notice or letter, short of a notarial act, would
not suffice.

While the Court concedes that Del Monte had allowed petitioners a grace period longer than the minimum sixty (60)-day
requirement under Section 4, it did not comply, however, with the requirement of notice of cancellation or a demand for
rescission. Instead, Del Monte applied the automatic rescission clause of the contract. Contrary, however, to Del Montes
position which the appellate court sustained, the automatic cancellation clause is void under Section 7 [18] in relation to
Section 4 of R.A. 6552

F. Expropriation (1488) is governed by special law

CHAPTER 2

CAPACITY TO BUY OR SELL

Art. 1489. All persons who are authorized in this Code to obligate themselves, may enter into a contract of sale, saving the modifications
contained in the following articles.

Where necessaries are 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)

Art. 1490. The husband and the wife cannot sell property to each other, except:

(1) When a separation of property was agreed upon in the marriage settlements; or

(2) When there has been a judicial separation or property under Article 191. (1458a)

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

(1) The guardian, the property of the person or persons who may be under his guardianship;

(2) Agents, the property whose administration or sale may have been entrusted to them, unless the consent of the principal has been
given;

(3) Executors and administrators, the property of the estate under administration;

(4) Public officers and employees, the property of the State or of any subdivision thereof, or of any government-owned or controlled
corporation, or institution, the administration of which has been intrusted to them; this provision shall apply to judges and
government experts who, in any manner whatsoever, take part in the sale;

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

(6) Any others specially disqualified by law. (1459a)

Art. 1492. The prohibitions in the two preceding articles are applicable to sales in legal redemption, compromises and renunciations. (n)

Arts. 1489 1492

I. Parties and their Consent
A. Capacity in general (1489). A person capacitated to contract is also generally capacitated to buy or sell.
a. The sellers incapacity to alienate the thing sold does not avoid the contract, but may prevent performance and entitle the
buyer to rescind.
B. Special Disqualifications to buy:
a. Husband and wife (14900) while under the community regime (absolute or relative)
b. Persons in trust relations (1491), public or private (agents, guardians, administrators, public officers, judges, attorneys, etc.)
1) Transactions included in the disqualification (1492): redemption, compromise, arbitration, leases (1646)
2) Includes persons expressly disqualified by law in similar cases (ejusdem generic)
i) Under the Constitution, aliens may not acquire residential lands - such sales are void
aa) This prohibition was suspended during the Japanese occupation
bb) Under the provisions of 1412, however, neither party may set aside the contract since both are in pari
delicto
cc) But subsequent naturalization of the alien buyer as a Filipino citizen before the sale is attacked
validates such acquisition, retroacting to the date of the conveyance
ii) Krivenko ruling applied to unregistered religious organizations
c. In auctions, the seller may not bid, unless notice is given (1476, par 4) reserving such right.
d. The seller cannot buy in resale (after rescission or stoppage in transitu) where directly or indirectly (1533)
C. Incapacity to Sell:
a) Homesteaders: can not sell within 5 years from issuance of the patent or grant (Public Land Act, C.A. 141, Sec. 118)
b. Sale by one who is not the owner: see 1505
D. When an incompetent buys (1489, par. 2): He must pay a reasonable price for necessaries delivered to him.
a. The above rule seems to be founded on quasi-contract
E. Effect of forbidden sales:
a. Between husband and wife under the community regime, the sale is void
1) But strangers cannot assail the transfer
b. Between persons in trust relations, as regards
1) Those based on public trust
i) Public officers, employees, government experts (1491, par. 4), and
ii) Judges, Justices, Prosecutors, Clerks of Court, lawyers (1491, par. 5) - such sales are void (1409, No. 7)
2) Those based on private trust -
i) Guardians (1491, par. 1)
ii) Agents (1491, par. 2)
iii) Executors and administrators (1491, par. 3) - such sales are voidable, not void

CHAPTER 3

EFFECTS OF THE CONTRACT

WHEN THE THINGSOLD HAS BEEN LOST

Art. 1493. If at the time the contract of sale is perfected, the thing which is the object of the contract has been entirely lost, the contract shall be
without any effect.

But if the thing should have been lost in part only, the vendee may choose between withdrawing from the contract and demanding the
remaining part, paying its price in proportion to the total sum agreed upon. (1460a)

Art. 1494. Where the parties purport a sale of specific goods, and the goods without the knowledge of the seller have perished in part or have
wholly or in a material part so deteriorated in quality as to be substantially changed in character, the buyer may at his option treat the
sale:

(1) As avoided; or

(2) As valid in all of the existing goods or in so much thereof as have not deteriorated, and as binding the buyer to pay the agreed price
for the goods in which the ownership will pass, if the sale was divisible. (n)

Arts. 1493-1494
I. Distinction
A. 1493 and 1494 refer to loss, deterioration, or injury at the time the contract is perfected
1480 and 1504 refer to such loss, deterioration, or injury after perfection but before delivery