CASE DIGESTS FOR SALES:

Orduña, et al. v. Fuentebella, et al.

Makati Sports Club, Inc. v. Cheng, et. al.
Vazquez v. Ayala Corporation
Spouses Serrano, et. al. v. Caguiat
Philippine National Bank v. Spouses Rocamora
PCI Leasing & Finance, Inc. v. Spouses Dai
Magna Financial Services Group, Inc. v. Colarina

SUBMITTED TO:
JUDGE MA. CECILIA AUSTRIA

SUBMITTED BY: JERUEH L. LABRO

Doctor of Jurisprudence – JD2

July 27, 2011

Statute of Frauds

ORDUÑA, ET AL. v. FUENTEBELLA, ET AL.

G.R. No. 176841
June 29, 2010
Velasco, Jr., J.:

FACTS:
Antonita Orduña purchased a residential lot from Gabriel Sr. payable in
installments but no deed of sale was executed. The installments were paid to
Gabriel Sr. and later to Gabriel Jr. after the death of the former. Improvements
were thereafter introduced by petitioner and the latter even paid its real property
tax since 1979. Unknown to Orduña, the property has been subject to further
alienations until the same was ceded to respondent, Fuentebilla, Jr. Orduña, after
being demanded by Fuentebilla to vacate the disputed land, then filed a
Complaint for Annulment of Sale, Title, Reconveyance with Damages with a
prayer to acquire ownership over the subject lot upon payment of their
remaining balance. The Regional Trial Court dismissed the petition because the
verbal sale between Gabriel Sr. and Orduña was unenforceable under the Statute
of Frauds. This was later affirmed by the Court of Appeals.

ISSUE:
Whether or not the sale of the subject lot by Gabriel Sr. to Antonita is
unenforceable under the Statute of Frauds

HELD:
No. It is a well-settled rule that the Statute of Frauds as expressed in Article
1403, par. (2), of the Civil Code is applicable only to purely executory contracts
and not to contracts which have already been executed either totally or partially.
Here, the verbal contract of sale has been partially executed through the partial
payments made by Orduña duly received by both Gabriel Jr. and his father. The
purpose of the Statute of Fraud is prevention fraud and perjury in the
enforcement of obligations depending for their evidence on the unassisted
memory of witnesses, by requiring some contracts and transactions to be
evidenced by a writing signed by the party to be charged. Since there is already
ratification of the verbal contract through the acceptance of benefits through the
partial payments, it is thus withdrawn from the purview of the Statute of Frauds.
Sale of Shares of Stock in relation to Articles 1461-1462 of the New Civil
Code

MAKATI SPORTS CLUB, INC. v. CHENG, ET. AL.

G.R. No. 178523
June 16, 2010
Nachura, J.:

FACTS:
Makati Sports Club Inc (MSCI) adopted a resolution authorizing the sale of its
unissued shares. Respondent Hodreal expressed his interest to buy a share but it
was Mc Foods who acquired the same from MSCI and in whose favor a stock
certificate was issued. Unknown to plaintiff, pending its negotiation for the sale of
the shares with Mc Foods, the latter had likewise been negotiating the sale of the
same with Hodreal. Eventually, Hodreal was able to acquire the share from Mc
Foods when the latter made known its intention to resell the share. Mc Foods
notified MSCI of the sale to Hodreal and a new certificate of stock was issued.
MSCI’s complaint for fraud was dismissed by the lower court, whose decision was
affirmed by the Court of Appeals. Before the Supreme Court, MSCI, among many
of its contentions, alleged that the resale of the said share to the Hodreal occurred
before Mc Foods gained ownership over the said unissued share, thus the transfer
from Mc Foods to Hodreal is void.

ISSUE:
Whether or not the anticipated and expected ownership of shares of stock
may be the object of a contract of sale

HELD:
Yes. Considering that Mc Foods tendered its full payment to MSCI and the
execution of the Deed of Sale, even assuming that it was driven solely by the
intent to speculate on the price of the share of stock, it had all the right to
negotiate and transact, at least on the anticipated and expected ownership of the
share, with Hodreal. Mc Foods had the inherent right flowing from its ownership
of the stocks to demand the delivery of the stock certificate in its name. The
corporation’s obligation to register is ministerial upon the buyer’s acquisition of
ownership of the share of stock. MSCI, either by its board, its by-laws, or the act
of its officers, can’t then create restrictions in stock transfers notwithstanding that
the stock certificate, mere representation of ownership, was issued at a later time.
Right of First Refusal/ Option Contract

VASQUEZ v. AYALA CORPORATION

G.R. No. 149734
November 19, 2004
Tinga, J.:

FACTS:
The Vasquez spouses sold to Ayala Corporation all their shares of stocks in
Conduit Development, Inc. Among the terms and conditions stipulated under the
Memorandum of Agreement (MOA) was that Ayala Corp. would give the Vasquez
spouses a first option to purchase four developed lots next to the Retained Area at
the prevailing market price at the time of the purchase as indicated in paragraph
5. 15 of the MOA. When Ayala offered to sell the four lots back to the Vasquez
spouses by virtue of the provision of the MOA, the parties were not able to agree
what prevailing price should apply. The regional trial court ruled that since the
option to purchase the 4 lots was with a consideration, paragraph 5.15 is an
option contract. The Court of Appeals held otherwise and claimed that it was a
right of first refusal there being no separate consideration.

ISSUE:
Whether or not paragraph 5.15 of the MOA constitute an option contract or a
right of first refusal

HELD:
Paragraph 5.15 of the MOA constitutes a mere right of first refusal there being
no fixed period and a determined price at which the subject lots will be offered
for sale as connoted by the phrase “at the prevailing market price at the time of
the purchase”. More so, paragraph 5.5 is not in any way a preparatory or a
separate and distinct contract from that which the parties may enter into upon its
the consummation. An independent consideration was also wanting because the
contested paragraph’s purpose was to give the Vasquez spouses the first option to
purchase the lots at a price acceptable by Ayala upon the latter’s offer. Articles
1324 and 1479 were then not applicable. Thus, paragraph 5.15 cannot be
considered an option contract. Relatively, petitioners' right of first refusal was
deemed lost when its counter-offer was rejected by respondent.

Article 1482 of the Civil Code - Earnest Money

SPOUSES SERRANO, ET. AL. v. CAGUIAT

G.R. No. 139173
February 28, 2007
Sandoval-Gutierrez, J.:

FACTS:
Spouses Serrano agreed to sell in favor of respondent Caguiat a parcel of land
at ₱1,500.00 per square meter. Caguiat partially paid petitioners ₱100, 000.00
as evidenced by a receipt issued by petitioners indicating therein respondent’s
promise to pay the remaining balance. Respondent, after making known his
readiness to pay the balance, requested from petitioners the preparation of the
necessary Deed of Sale. When petitioners cancelled the transaction and intended
to return to Caguiat his partial payment, respondent filed a complaint for specific
performance and damages. The trial court relying on Article 1482 of the Civil
Code ruled that the payment of ₱ 100, 000.00 being an earnest money signified
the perfection of the contract of sale. The Court of Appeals denied petitioners’
motion for reconsideration in affirmation of the lower court’s decision.

ISSUE:
Whether or not the partial payment constitutes an earnest money as
manifested in Article 1482 of the Civil Code

HELD:
No. Article 1482 applies only to earnest money given in a contract of sale. It
was apparent that the earnest money in the case at bar was given in lieu of a
contract to sell. Unlike in a contract of sale, the ownership of the parcel of land
was retained by the Spouses Serrano and shall only be passed to Caguiat upon full
payment of the purchase price as evidenced by the receipt. Relatively, no Deed of
Sale has been executed as proof of the intention of the parties to immediately
transfer the ownership of the parcel of land. Spouses Serrano also retained
ownership of the certificate of title of the lot, thereby indicating no actual or
constructive delivery of the ownership of the property. Finally, should the
transaction pushed through, Caguiat’s payment of the remaining balance would
have been a suspensive condition since the transfer of ownership was
subordinated to the happening of a future and uncertain event.
Article 1484 – Remedies of a vendor in a contract of sale of a personal
property payable in installments (Not Applicable in Real Estate Mortgage)

PHILIPPINE NATIONAL BANK v. SPOUSES ROCAMORA

G.R. No. 164549
September 18, 2009
Brion, J.:

FACTS:
Respondent Spouses Rocamora obtained a loan from Philippine National Bank
(PNB) secured by deeds of real estate mortgage and of chattel mortgage.
Escalation clauses were indicated in both promissory note and real estate
mortgage deed in case of nonpayment or nonrenewal on due date. When
respondents defaulted in their payment, foreclosure proceedings followed.
However, the recovered proceeds were insufficient to cover the entire loan
obligations of respondents, hence a complaint for deficiency judgment was
initiated by PNB. Spouses Rocamora claimed that they were not liable for the
deficiency because of the invalidity of the escalation clauses and the unreasonable
delay of PNB in initiating the foreclosure proceedings. The Court of Appeals
affirmed the trial court’s decision finding merit in respondents’ arguments and
dismissing PNB’s complaint.

ISSUE:
Whether or not petitioner PNB may still recover the deficiency of the loan
obligations resulting after the foreclosure proceedings

HELD:
No. Although the silence of both Acts Nos. 1508 and 3153 as to the right to
recover the deficiency resulting after the foreclosure proceeds were deducted
from the principal obligation is generally construed to grant the mortgagee of the
right to maintain an action for the deficiency, the mortgagee must be able to
prove the basis for the deficiency judgment it seeks. Unfortunately, PNB did not
prove this by its failure to provide a detailed and credible accounting of the
claimed deficiency. Moreover, the delay in commencing foreclosure proceedings
included interest and penalty charges which accrued during the period covered
by the delay. Hence, to award PNB’s deficiency claim would be to award it for its
delay and its undisputed disregard of PD 385.
Article 1484 – Remedies of a vendor in a contract of sale of a personal
property payable in installments

PCI LEASING & FINANCE, INC. v. SPOUSES DAI

G.R. No.148980
September 21, 2007
Carpio-Morales, J.:

FACTS:
Spouses Dai obtained a loan from PCI Leasing & Finance, Inc. payable in
monthly installments. The loan was secured by a promissory note and a deed of
chattel mortgage both of which provided for acceleration clause. When
respondents defaulted in paying the 2 nd and 3rd installments, petitioner initiated a
complaint for replevin and won. However, after a year, petitioner filed a
complaint for deficiency judgment and/or collection of sum money. Respondents
argued that petitioner was barred by a prior judgment and Article 1484 of the
Civil Code. The trial court decided in favor of respondent. The Court of Appeals,
although affirming the lower court, dismissed the invocation of Article 1484
since it applies only to a case of sale of personal property payable in installments
which is secured by a chattel mortgage between the vendor and the vendee over
the thing sold.

ISSUE:
Whether or not petitioner, a chattel mortgagee, after opting to foreclose the
mortgage, may still sue to recover any deficiency in the loan obligation

HELD:
No. It is clear that petitioner succeeded in taking possession of the mortgaged
vehicle and pursued the foreclosure of the mortgage as manifested by the conduct
of the auction sale. Under Article 1484, par. 3 of the Civil Code, the delivery of
possession of the mortgaged property extinguished Spouses Dai’s liability because
petitioner had actually caused the foreclosure sale of the mortgaged property
when it recovered possession. Consequently, petitioner is barred from recovering
any balance of the respondents’ outstanding obligation not satisfied by the loan
The election of any of the remedies in Article 1484 is a waiver of the right to
resort to the other.

Article 1484 – Remedies of a vendor in a contract of sale of a personal

property payable in installments

MAGNA FINANCIAL SERVICES GROUP, INC. v. COLARINA

G.R. No. 158635
December 9, 2005
Chico-Nazario, J.:

FACTS:
Colarina bought from petitioner a Suzuki Multicab payable on installments
and secured by an integrated promissory note and a deed of chattel mortgage.
Upon respondent’s default in payment, petitioner filed a Complaint for
Foreclosure of the Chattel Mortgage with Replevin. Colarina then voluntarily
surrendered the physical possession of the vehicle. Failing to answer within the
reglementary period, the Municipal Trial Court ordered respondent to pay
petitioner the unpaid balance of the vehicle’s purchase price. This was affirmed
by the Regional Trial Court. The Court of Appeals, on the other hand, reversed
and set aside the decisions of the lower courts granting the payment of the
payment of the unpaid balance for being inconsistent with petitioner’s complaint
for foreclosure.

ISSUE:
Whether or not the foreclosure of mortgage, as an exercise of the 3 rd remedy in
Article 1484, is in nature an action for sum of money with execution of the security

HELD:
No. A contract of chattel mortgage is in the nature of a conditional sale of
personal property given as a security for the payment of a debt, or the
performance of some other obligation specified therein, the condition being that
the sale shall be void upon the seller paying to the purchaser a sum of money or
doing some other act named. If the condition is performed according to its terms,
the mortgage and sale immediately become void, and the mortgagee is thereby
divested of his title. But in case of nonpayment, foreclosure is one of the
alternative remedies available to a mortgagee. Since the petitioner has undeniably
elected a remedy of foreclosure under Article 1484(3) of the Civil Code, it is
bound by its election and thus may not be allowed to change what it has opted for
nor to ask for more.