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LAW ON SALES l Judge Adviento l EH 409 SY: 2018-2019 ATOC | ATON | JAILANI | PLAZA

AUGUST 20, 2018 - 2 Hours

QUIZ QUESTIONS

When is a contract of sale considered as absolute?

What is a conditional contract of sale?

What is the effect of the non-fulfillment of the suspenive condition in a Contract to Sell?

If the law requires that the object of sale is a determinate thing, may John, the owner of 1000sqm
parcel of land, sell a 400sqm undivided portion thereof. Explain.

In Heir of Arturo Reyes vs Beltran, why did the contract to sell between Miguel Soco and Arturo Reyes
not ripen to a Contract on Sale?

DISCUSSION PROPER

When do you consider Sale to be absolute? In the case of Ramos vs Heruela,

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

In Heirs of Mascuñana vs CA, CA said Sale is absolute when the contact is devoid of any proviso that title
is reserved or the right to unilaterally rescind is stipulated.

When is Sale considered to be conditional?

Conditional sale may be executed (the ownership is already transfered to the buyer) but the non
fulfillment of a suspensive condition terminates or extinguishes the contract.

Non payment of the suspensive condition becomes a negative resolutory condition that extinguishes or
entitles the seller to rescind the contract. It may also be executory, where ownership does not pass
until after fulfillment of the suspensive condition.

Conditional Contract of Sale

In case of payment of the full purchase price, title is automatically transfered to the buyer because the
sale is automatically perfected (discussed in Coronel vs CA. Please take note that Judge keeps on
repeating the case)
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Coronel Case

Court said that the Contract to Sell, the perspective seller rather expressly reserves ownership. But in
the cases assigned (in our syllabus), there was never an instance that the seller expressly reserves title.
So you have to look at the contemporaneous acts of the parties prior, during and after the contract i
order to determine the intention of the parties.

Because in the Coronel Case, the receipt of downpayment was the evidence of that conditional sale. But
in another case where there was also receipt of downpayment, the court said that the absemce of a
public document signifies that the contract was only a Contact to Sell and not a Contract of Sale.

There is no hard and fast rule to determine whether a contract is a Contract of Sale of Contact to Sell.

There is one rule that is consistent, if the seller reserves title or ownership over the property then you
conclued that the contract is a Contract to Sell. The problem lies in determining whether, you take into
consideration the attending circumstances, did the seller reserve the title to a contract. Thats what you
have to determine. That is the issue that usually goes to court.

READ CORONEL CASE. BECAUSE IT DOES NOT ONLY DISCUSSES ABOUT ABSOLUTE SALE AND
CONDITIONAL SALE BUT ALSO DISCUSSES ABOUT CONTRACTS TO SELL.

When asked about the distinction between Absolute Sale and Contract to Sell, or a Contract of Sale and
a Contract to Sell, your first answer is the transfer of ownership.

In Contract of Sale, there is no reservation of title therefore delivery transfer ownership.

In a Contract to Sell, the seller reserves ownership.

How does a conditional sale differ from a Contract of Sale? Both conditional Contract of Sale and
Contract to Sell involve the fullfillment of a suspensive condition.

According to Coronel, if its a Conditional Contract of Sale, the fulfillment on the Suspensive Condition
perfects the Contract of Sale and if the property is already delivered to the buyer, ownership is
immediately transfered (theres no more act to be performed by the seller). Where as in a Contract to
Sell, the fulfilment of the suspensive condition gives rise to the duty of the seller to convey title (the
seller still has to Sell and to transfer ownership to the buyer).

The condition in the Coronel Case was the transfer of the title in the names of the sellers because the
title was still in the name of their father, who has died, gives rise to the obligation of the buyer to pay
the balance of the purchase price. So the fulfillment of the condition merely gives rise to the mode of
payment of the price.
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OBJECT

The object must be licit and the vendor must have a right to transfer ownership at the time it is
delivered.

Things that cannot be the object of sale:

 Illegal objects
 Future inheritance
 Homestead or Free patents
o The grantee cannot sell the property sold to him at any time(Prohibitory period – 5
years) Manlapat vs CA
 It was shortly before the 5 year period was to last, the selling of the property
would be declared void. Even if you charge the seller with bad faith, because the
seller knows that there is a prohibitory period, sold the property it’s for the
government to initiate Reversion Proceedings. It’s not for any neighbor or third
party in interested in acquiring the property to initiate the Reversion
Proceedings. If the government does not initiate, the property goes back to the
seller. Reversion is not automatic.

The thing must be determinate or determinable

2 test of determinability:

1. Capacity to Segregate
2. No further agreement - the thing must be capable of being made determined without
entering into another contract.
a. Ex. Undivided Interest in property
i. Selling of specific portion of land is allowed (Seller is the owner)
ii. Selling of an undivided portion of land is allowed (Seller must be the sole owner.
Seller and Buyer becomes co-owners of the property sold. No specific portion is
owned by either of them, they are co-owners)

Vagilidad v Vagilidad
A property belongs to the estate of father of Loreto, the father has died, ownership where succession
transpires immediately after death, succession sets in, you don’t have to execute document for you to
be the owner of estate, immediately you will become the co-owner of the estate. The moment the
father of Loreto died, he became the co-owner the property but he had other siblings, they were the co-
owner of the property pro-in-diviso.

Can a co-owner sell a specific portion of a co-owned property prior to partition? No, because you are a
co-owner of an undivided property, there’s no partition yet, you are a co-owner of the entire property.

But why did the court give effect to that sale? SC said, it was held that the fact that an agreement that
purported the sale of the whole property does not render the sale void for it was well established that
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the binding force of the contract is legally possible to do so. The binding force of a contract must be
recognized as far as it is legally possible.

Is it possible to give binding effect to the contract? Yes, because his siblings waived their right and
eventually he became the owner of the entire property, so he could sell a specific portion.

NGA v IAC
Soriano, a farmer was granted by NGA a quota of 2,640 cavans of palay. He was only able to deliver 630
cavans of palay. He tried to collect several events transpired and the government didn’t want to pay him.
Soriano sued payment because he already delivered the palay. The government contends that there was
no perfected contract of sale because there was no determinate subject matter.

Was there a determinate subject matter in the contract? Yes, the court said that 2,640 was only the
maximum that he could sell to the government. If he delivered 630 cavans of palay then the government
is bound to pay because they accepted the 630 cavans of palay. There was a determinate subject matter.

The law says that the Object of a contract is must be:


 Licit
 Have the right to transfer of ownership

Ownership of the thing is required at the time of delivery because ownership is transferred to the
buyer.

If ownership is required at the time of delivery, can the parties enter a contract for the sale of future
things, or goods that is still to be manufactured? Yes, as long as they exist and owned by the seller at
the time of delivery.

If at the time of sale, the vendor has no title yet but eventually obtains title? That subsequent
acquisition of title validates the sale (Valigidad v Vagilidad)

Ownership by the vendee maybe paired upon a contingency.

What do you mean by acquisition of ownership by the vendee may depend upon a contingency?
Example - Real estate Mortgage is foreclosed, the property is sold in auction. After the foreclosure of
sale, the owner / mortgager has one year from the registration of the sale within which he could redeem
the property from the highest bidder. If you are the highest bidder, your ownership is subject to that
CONTINGENCY of redemption by mortgagor. Your ownership or title becomes absolute only if there’s no
redemption within the period.

Cavite Development v Lim


Was there a perfected contract of sale between CDB and Lim? Yes, but there was a serious legal
obstacle that prevented CDB from transferring title to Lim.

A son, who executed an affidavit of adjudication claiming that he was the sole owner during the lifetime
of his father. He was able to transfer the title of this property in his name. He obtained a loan and
mortgaged the property. Since the property is not his he did not pay the loan and CDB foreclosed the
mortgage.
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The foreclosure, usually the only bidder is the mortgagor. The father heard about the actions made by
his son, he then filed a case for the reversion of the title under his name. Moreover, the son in this case
did not contest for his father’s actions. The father ordered for the reversion of the title under his name.
The court said, the son (Rodolfo) did not have the title of that property, if you are the mortgagor then
you must be the absolute owner because of the risk that the property might be sold. Rodolfo can’t
validly mortgage the property. No valid mortgage there was no valid foreclosure. CDB did not acquire
title over the property.

Reyes v Beltran
Miguel Soco was the brother of Constancia , the latter died. When she died, her siblings adjudicated her
estates among themselves but they have not identified their respective shares in the estate. Miguel sold
this property under a contract to sell to Reyes . The contract to sell but there’s a condition that he would
sell this to Reyes if this would inherit this (actually he already inherit but he was not the absolute owner,
he was only a co-owner of the land). The heirs did not adjudicate or identify their respective shares.
Reyes died, so the heirs of Reyes sued Miguel for the execution of the Deed of Sale over this property
which is the subject of the contract to sell between Miguel and Reyes.

Can the heirs compel Beltran who also died subsequently to sell this property to them. SC, No.
Contract to sell was conditioned on Miguel be inheriting the property in question and did not happen.
The condition was not fulfilled. The buyer in the contract to sell, who was substituting by his heirs can’t
compel to deliver the property to sell the property to them.

Since the property A was adjudicated to Miguel, do you think the heirs can compel Miguel to sell
property B?

Miguel couldn’t sell property B because it was not adjudicated to him, only property A was adjudicated
to him. Could the heirs compel Miguel to sell property B?

In contract to sell just like contract to sale, there’s a determinate subject matter.

The determinate subject matter in the case at bar is only property A, therefore they can’t compel Miguel
to sell property B.

PRICE

What is price? It is the sum in money or its equivalent of the thing sold. Ideally, price is a sum certain in
money.

Boston Bank v Manalo


For perfected contract to sell or contract to sale there must be existing law that the party would agree
not only on the price but also the manner that the price is to be paid.

Requisite for a valid price


 Real – there’s a real intention for the other party to pay and there’s real intention on the part of
the seller to receive and to collect.
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If no real intention to pay and no real expectation to receive simulated price exist.

Note: If the contract is not shown to be a donation or any other act or contract transferring ownership
because the parties do not intend to be bound at all, the ownership of the thing is not transferred.

Requisites of a simulated contract:

a. Outward declaration of will different from the will of the parties;

b. The false appearance must have been intended by mutual agreement; and

c. The purpose is to deceive third persons.

Cruzado v Bustos
A poor man has no money nor property, who applied for the position of pruporador. He qualified for the
position but could not assume and start working because he was required to put up a bind either in cash
or in property, he doesn’t have any of this.

IMPORTANT POINTS IN THE CASE OF CRUZADO vs BUSTOS

 VENDOR AND PURCHASER; FICTITIOUS CONTRACT OF SALE; BINDING FORCE


A contract of sale was simulated for the sole purpose of making it appear that the vendee acquired
for the sum of P2,200, and became the owner of a piece of real properly, which was to serve him
as security to enable him to hold the office of procurador of a Court of First Instance, pursuant to
the statutes in force during the previous sovereignty. Such contract was perfect and binding upon
both contracting parties, it appearing in the public instrument executed for the purpose that the
vendor and the vendee agreed upon the property sold and on the price stipulated; but such
contract cannot be considered to have been consummated, unless it is proved that the purchaser
paid the price and took possession of the property.

Even though the said fictitious deed of sale be considered valid and effective, as being a perfect
and binding contract between the contracting parties, yet when the vendee has not paid the price
nor taken possession of the property which continued in the possession of the vendors until they
later sold it to a third person, such contract cannot give rise to an action for the recovery of
possession. Such an action arises from a consummated contract and the contract is what confers a
title which transfers the ownership.

The vendee of a piece of real property acquired by means of a simulated purchase, who has
neither paid the price of the said property nor taken possession of it, cannot convey to his
successors in interest any property right or title therein, but only the right to demand in a personal
action the fulfillment of the perfected contract of sale; and he cannot be permitted to assert any
right of ownership, nor to bring an action for recovery of possession, for the reason that said
contract of sale was not consummated.
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 DELIVERY
The legal fiction of the delivery, by the vendor to the vendee, of the public instrument executed
for the purpose, instead of the tradition or possession of the thing sold, produces no effect, nor is
the sale consummated, if the vendee does not take possession of the thing and pay the price
thereof. (Arts. 1258 and 1450, Civil Code.)

 RIGHT TO PRODUCTS
The vendee is also like a creditor with respect to the products of the thing sold and is entitled to
demand them from the moment the obligation arises to deliver to him the thing which produces
such fruits; notwithstanding, he acquires no real right in the thing sold to him, until it has been
delivered to him by tradition or possession. (Arts. 609 and 1095, Civil Code.)

 REGISTRATION OF SECOND COPY OF INSTRUMENT OF SALE


The entry in the property registry of the second copy of said simulated deed of sale, obtained from
the archives because the whereabouts of the first copy was unknown, cannot affect the rights
acquired by the present owner of the realty apparently sold in the said instrument, because the
contract of sale was not consummated and because the successor in interest of the pretended
vendee who obtained the registration of the property has acquired no property right or title in the
said registered realty.

 LIMITATION OF ACTIONS
After the lapse of 35 years, both the personal action and the real action for recovery of possession
have prescribed, even though the latter action be proper, pursuant to the provisions of article 1939
of the Civil Code.

What is the effect of a contract of sale if there’s no consideration? It’s null and void.

Cruzado v. Bustos

FACTS: Counsel for the plaintiff Santiago Cruzado filed a written complaint on October 8, 1910, amended
on September 25, 1913, in which he alleged that plaintiff was the owner of certain rural property
situated in the barrio of Dolores, formerly San Isidro, of the municipality of Bacolor, Pampanga,
containing an area of 65 balitas and bounded as set forth in the complaint; that Estafania Bustos, during
her lifetime, and now the administrator of her estate, together with the other defendant, Manuel
Escaler, had, since the year 1906 up to the present, been detaining the said parcel of land, and had
refused to deliver the possession thereof to plaintiff and to recognize his ownership of the same,
notwithstanding the repeated demands made upon them; that by such detention, the plaintiff had
suffered losses and damages to the amount of P3,500. He therefore asked for judgment declaring
plaintiff to be the owner of the said parcel of land and ordering defendants to return it to plaintiff and to
pay the latter P3,500 for losses and damages, and the costs.

WON: The deed of sale of 65 balitas of land situated in the municipality of Bacolor, Pampanga, executed
by Estefania Bustos,with the assistance of her husband Bernardino Dizon, in favor of Agapito Geronimo
Cruzado, for the sum of P2,200, was simulated.
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HELD: The simulation of the said sale was effected by making a pretended contract which bore the
appearance of truth, when really and truly there was no contract, because the contracting parties did
not in fact intend to execute one, but only to formulate a sale in such a manner that, for the particular
purposes sought by Bustos and Cruzado, it would appear to have been celebrated solely that Cruzado
might hold his office of procurador on the strength of the security afforded by the value of the land
feignedly sold.

This action is of course improper, not only because the sale was simulated, but also because it was not
consummated. The price of the land was not paid nor did the vendee take possession of the property
from the 7th of September, 1875, when the said sale was feigned, until the time of his death; nor did
any of his successors, nor the plaintiff himself until the date of his claim, enter into possession of the
land.

That the contract of purchase and sale, as consensual, is perfected by consent as to the price and the
thing and is consummated by the reciprocal delivery of the one and the other, the full ownership of the
thing sold being conveyed to the vendee, from which moment the rights of action derived from this
right may be exercised.

IMPORTANT POINT IN THE CASE OF DOLES vs ANGELES

 STATUS OF SALE PREDICATED ON THE LOAN


In view of the two agency relationships, petitioner and respondent are not privy to the contract of loan
between their principals. Since the sale is predicated on that loan, then the sale is void for lack of
consideration

Doles v. Angeles

FACTS: On April 1, 1997, Ma. Aura Tina Angeles (respondent) filed with the RTC a complaint for Specific
Performance with Damage against Jocelyn B. Doles (petitioner), docketed as Civil Case No. 97-82716.
Respondent alleged that petitioner was indebted to the former in the concept of a personal loan
amounting to P405,430.00 representing the principal amount and interest; that on October 5, 1996, by
virtue of a "Deed of Absolute Sale", petitioner, as seller, ceded to respondent, as buyer, a parcel of land,
as well as the improvements thereon, with an area of 42 square meters, covered by Transfer Certificate
of Title No. 382532,4 and located at a subdivision project known as Camella Townhomes Sorrente in
Bacoor, Cavite, in order to satisfy her personal loan with respondent; that this property was mortgaged
to National Home Mortgage Finance Corporation (NHMFC) to secure petitioner’s loan in the sum of
P337,050.00 with that entity.

WON: The contract of sale on the parcel of land was executed for a cause.

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

What is the remedy of the party aggrieved if the price or consideration is false? Reformation Of
Document/Instrument.

Reformation Of Document/Instrument- is a type of equitable remedy wherein the contract is


rewritten in a way that better expresses the intentions of the parties. For example, sometimes a
breach of contract may occur because the parties were mistaken as to one of the contract terms,
such as the delivery date or the definition of a word in the contract. In such cases, the contract may
then be rewritten or “reformed” in order to remedy the breach.

Effect of inadequacy of price (1470) does not affect the contract, but may show vice of consent (1470).
Refer to inadequacy of cause in general, Art. 1355.

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

-it does not affect the contract but may show vice of consent.

-the offended party may invoke Art. 19 of the NCC ( Abuse of Right Principle)

In money or its equivalent (1458), money is to be understood as currency.

Its equivalent means promissory notes, checks and other mercantile instruments generally accepted as
representing money.

Note: Expectations of profits from the subdivision projects is a valid form of consideration.

Note: It is sufficient if it can be determined by the stipulations of the contract made by the parties
thereto/ by reference to an agreement incorporated in the contract.

IMPORTANT POINT IN THE CASE OF TORRES vs CA

 FORM OF CONSIDERATION
Expectations of profits from the subdivision projects is a valid form of consideration. It is sufficient if it
can be determined by the stipulations of the contract made by the parties thereto/ by reference to an
agreement incorporated in the contract.
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Torres vs CA

Facts: Petitioners and respondent entered into a joint venture agreement for the development of a
parcel land located at Lapu-Lapu City island of Mactan into a subdivision. Pursuant to the contract,
petitioners executed a deed of sale covering the said parcel of land in favor of the respondent, who then
had it registered in his name. Thereafter, respondent mortgaged the property in the bank, and
according to the joint agreement, the money obtained amounting to P40,000.00 was to be used for the
development of the subdivision. However, the project did not push through, and the land was
subsequently foreclosed by the bank. Because of this, petitioners filed a civil case before the Regional
Trial Court of Cebu City, which was later dismissed by the trial court. On appeal, the Court of Appeals
affirmed the decision of the trial court. The appellate court held that the petitioner and respondent had
formed a partnership for

the development of the subdivision. Thus, they must bear the loss suffered by the partnership in the
same proportion as their share in the profits stipulated in the contract. Aggrieved by the decision,
petitioner filed the instant petition contending that the Court of Appeals erred in concluding that the
transaction between the petitioners and respondent was that of a joint venture/partnership.

SC: The Joint Venture Agreement clearly states that the consideration for the sale was the expectation
of profits from the subdivision project. Its first stipulation states that petitioners did not actually receive
payment for the parcel of land sold to respondent. Consideration, more properly denominated as cause,
can take different forms, such as the prestation or promise of a thing or service by another. In this case,
the cause of the contract of sale consisted not in the stated peso value of the land, but in the
expectation of profits from the subdivision project, for which the land was intended to be used. As
explained by the trial court, "the land was in effect given to the partnership as [petitioner's]
participation therein. . . . There was therefore a consideration for the sale, the [petitioners] acting in the
expectation that, should the venture come into fruition, they [would] get sixty percent of the net
profits."

IMPORTANT POINT IN THE CASE OF TORRES vs CA

 PRINCIPAL AND AGENT; REVOCATION OF AGENT'S AUTHORITY


The time during which the agent may hold his position is indefinite or undetermined, when no
period has been fixed in his commission and so long as the confidence reposed in him by the
principal exists; but as soon as this confidence disappears the principal has a right to revoke the
power he conferred upon the agent, especially when the latter has resigned his position for good
reasons. (Art. 1733, Civil Code; art. 279, Code of Commerce.)

 RIGHT OF PRINCIPAL TO DISMISS AGENT


Even though a period is stipulated during which the agent or employee is to hold his position in the
service of the owner or head of a mercantile establishment, yet the latter may, for any of the
special reasons specified in article 300 of the Code of Commerce, dismiss such agent or employee
even before the termination of the period.
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 DAMAGES
No period having been stipulated and the principal owner of the business having acted within his
powers in relieving his agent and appointing another person in his stead, for good reasons and
because of the express written resignation by the employee or agent of the position he was
holding, it would be improper to award him damages, which were not proven, except his right to
collect the salary due for one month prior to quitting the position, as accorded by article 302 of the
Code of Commerce.

Certain or ascertainable (determinable)

The price is certain if:

a. The parties have fixed or agreed upon a definite amount; or

b. It be certain with reference to another this certain; or

c. The determination of the price is left to the judgment of a specified person or persons and
even before such determination.

a.) How determined


1. By a third person (1469, pars. 1, 2, 4)

If the third person is unable or unwilling to fix the price, the contract is inefficacious
unless the parties come to an agreement

Barreto v. 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 being P20,000, or 4/173 of the whole. On
March 14, 1910, the plaintiff’s attorneys wrote the defendant’s local representative a letter
offering to sell to the defendant plaintiff’s participation in the factory. The result of the
correspondence between the parties and their representatives was that Exhibit G was duly
executed on May 3, 1910. In accordance with the terms of this exhibit a committee of appraisers
was appointed to ascertain and fix the actual value of La Insular. The committee rendered its
report on November 14, 1910, fixing the net value at P4,428,194.44. Of this amount 4/173 part
represented the plaintiffs’s share on his P20,000 of the nominal capital. In Exhibit J which was
executed on

November 22, 1910, the plaintiff acknowledged to have received from the defendant
that amount.

Subsequently to the execution of Exhibit J, demand was made by the plaintiff upon the
defendant for his share of the profits from June 30, 1909, to November 22, 1910. This demand
was refused and thereupon this action was instituted to recover said profits. Upon the evidence
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submitted at the hearing, the court below held: (1) That the agreement of May 3, 1910, was by
its terms a contract to sell in the future and did not pass title and (2) that the sale of plaintiff’s
interest did not include the profits in question. Judgment was rendered accordingly, with
interest and cost. The defendant appealed.

SC: It was the appraisers who were appointed to ascertain and fix the total net value of
the factory for the purpose of determining the true present value of the interest.

The appraiser was the one who determined the total net value of the shares of the
company and thereafter that of Bareto’s share.

2) By the Courts (1469, par. 3) if there is bad faith or mistake of the third party fixing the price

3) By reference to a definite day, a particular exchange or market (1472) 


4) By reference to invoices 


What if the price cannot be determined? The contract of sale is inefficacious.

McCulough v. Aenlle & Co.

FACTS: For the purpose of carrying into effect the said contract of sale entered into with
the other party hereto, said Francisco Gonzalez y de la Fuente and Don Antonio la Puente y Arce,
in the name and on behalf of the mercantile partnership denominated R. Aenlle & Co., by virtue
of the powers conferred upon them and in compliance with the instructions given them by Don
Matias Saenz de Vizmanos y Lecaros, the manager of the said partnership, solemnly declare that
they sell, absolutely and in fee simple, to E. C. McCullough, the tobacco and cigarette factory
known as "La Maria Cristina," located at No. 36 Calle Echague, Plaza de Goiti, Santa Cruz district,
this city, said sale including the trade-mark "La Maria Cristina," which was been duly registered,
the stock of tobacco in leaf and manufacture, machinery, labels, wrappers, furniture, fixtures,
and everything else belonging to the said factory, as shown in the inventory to be drawn up for
the purpose of making formal delivery of the said property.

This sum is subject to modification, in accordance with the result shown by the
inventory to be drawn up. In this inventory the value of each individual piece of furniture will be
fixed at 10 per cent below the price shown in the partnership inventory. The machinery and cost
of installing the same will also be fixed at 10 per cent below its invoice price. The value of the
tobacco, both in leaf and in process of manufacture, boxes, labels, wrappers, cigars, cigarettes,
and paper mouthpieces for cigarettes will be fixed at the invoice price. The value of tobacco
made up into cigars will be fixed in accordance with the price list of the partnership, less 20 per
cent discount. The cigars will be inventoried at the prices in the same list, less a discount of 35
per cent. The P20,000 mentioned as the value of the trade-mark will, however, remain
unchanged.
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In December, 1901, the plaintiff, with others, organized a company, to which the
plaintiff sold all the tobacco bought by him from the defendant. The purchaser, the new
company, on examining these two lots, rejected them because the tobacco was not of the
quality indicated in the inventory. Thereupon the plaintiff, claiming that the tobacco in these
two lots was worthless, brought this action against the defendant to recover what he paid.

ISSUE: Whether or not there was a perfected contract of sale entered into by the parties
on August 27, 1901?

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

5.) By application of known facts

What is the effect of indeterminability? The contract is inefficacious.

Case: Sale of imporvements introduced in hacienda

Robles v. Lizarraga Hermanos

FACTS: This action was instituted in the Court of First Instance of Occidental Negros by Zacarias Robles
against Lizarraga Hermanos, a mercantile partnership organized under the laws of the Philippine Islands,
for the purpose of recovering compensation for improvements made by the plaintiff upon the hacienda
"Nahalinan" and the value of implements and farming equipment supplied to the hacienda by the
plaintiff, as well as damages for breach of contract. Upon hearing the cause the trial court gave
judgment for the plaintiff to recover of the defendant the sum of P14,194.42, with costs. From this
judgment the defendant appealed.

ISSUE: Whether or not the petitioner is allowed to recover the value of the improvements?

RULING: In the case before us the deed of conveyance purports to transfer to the defendant only such
interests in certain properties as had come to the conveyors by inheritance. Nothing is said concerning
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the rights in the hacienda which the plaintiff had acquired by lease or concerning the things that he had
placed thereon by way of improvement or had acquired by purchase. The verbal contract which the
plaintiff has established in this case is therefore clearly independent of the main contract of conveyance,
and evidence of such verbal contract is admissible under the doctrine above stated. The rule that a
preliminary or contemporaneous oral agreement is not admissible to vary a written contract appears to
have more particular reference to the obligation expressed in the written agreement, and the rule had
never been interpreted as being applicable to matters of consideration or inducement. In the case
before us the written contract is complete in itself; the oral agreement is also complete in itself, and it is
a collateral to the written contract, notwithstanding the fact that it deals with related matters.

A contract for the sale of goods, chattels or things in action, at a price of not less than P100, shall be
unenforceable unless the contract, or some note or memorandum thereof shall be in writing and
subscribed by the party charged, or by his agent; and it is insisted that the court erred in admitting proof
of a verbal contract over the objection of the defendant's attorney. But it will be noted that the same
subsection contains a qualification, which is stated in these words, "unless the buyer accept and receive
part of such goods and chattels." In the case before us the trial court found that the personal property,
consisting of farming implements and other movables placed on the farm by the plaintiff, have been
utilized by the defendant in the cultivation of the hacienda, and that the defendant is benefiting by
those things.

We are of the opinion that the stipulation with respect to the appraisal of the property did not create a
suspensive condition. The true sense of the contract evidently was that the defendant would take over
the movables and the improvements at an appraised valuation, and the defendant obligated itself to
promote the appraisal in good faith. As the defendant partially frustrated the appraisal, it violated a
term of the contract and made itself liable for the true value of the things contracted about, as such
value may be established in the usual course of proof. Furthermore, it must occur to any one, as the trial
judge pointed out, that an unjust enrichment of the defendant would result from allowing it to
appropriate the movables without compensating the plaintiff thereof.

The fourth assignment of error is concerned with the improvements. Attention is here directed to the
fact that the improvements placed on the hacienda by the plaintiff became a part of the realty and as
such passed to the defendant by virtue of the transfer effected by the three owner in the deed of
conveyance (Exhibit B.). It is therefore insisted that, the defendant having thus acquired the
improvements, the plaintiff should not be permitted to recover their value again from the defendant.
This criticism misses the point. There can be no doubt that the defendant acquired the fixed
improvements when it acquired the land, but the question is whether the defendant is obligated to
indemnify the plaintiff for his outlay in making the improvements. It was upon the consideration of the
defendant's promise so to indemnify the plaintiff that the latter agreed to surrender the lease nearly
two no doubt as to the validity of the promise made under these circumstances to the plaintiff.

Effect of inadequacy of price (1470)

 It does not affect the contract, but may show vices of consent.
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Cases: Askay v. Cosalan

FACTS: Askay obtained a title to the Mineral Claim which he allegedly sold to Cosalan.
It was alleged that there is inadequacy of the consideration for transfer which, according to
the deed of conveyance, and to the oral testimony, consisted of P107.00 in cash, a bill fold,
one sheet, one cow and two carabaos.

ISSUE: Whether or not the sale was valid?

RULING: Yes. The fact that the bargain is a hard one, coupled with mere inadequacy
of price when both parties are in a position to form an independent judgment concerning the
transaction, is not sufficient ground for the cancellation of a contract.

Aguilar v. Rubiato

FACTS: Rubiato was the owner of parcels of land and was desirous of obtaining a loan.
He thereafter signed a power of attorney in favor of a certain Vila to secure a loan and to
execute any writing for the mortgage of land. Vila pursuant to the power of attorney then
sold the land to Aguilar, with the right of repurchase within one year and Rubiato was to
remain in possession of the land as lessee. One year expired and Aguilar filed a case to
consolidate ownership over the lands.

ISSUE: Whether or not the contract was of sale or loan?

RULING: It was a loan. In addition to the evidence, there is one very cogent reason
which impels us to the conclusion that Rubiato is only responsible to the plaintiff for a loan. It
is — that the inadequacy of the price which Vila obtained for the eight parcels of land
belonging to Rubiato is so great that the minds revolts at it.

The members of this court after most particular and cautious consideration, having in
view all the facts and all the naturals tendencies of mankind, consider that Rubiato is only
responsible to the plaintiff for the loan of P800.

Effect of failure of consideration

Sps. Buenaventura v. CA

Facts: Sps Leonardo Joaquin & Feliciano Landrito are the parents of petitioners.
Petitioners assail the sale of several lands by their parents to their other siblings (see p. 265 for
complete list of sales made) for being void ab initio based on the ff grounds:

1. No actual valid consideration;

2. Properties are more than 3x more valuable than the measly purchase price (purchase
price was grossly inadequate);

3. Deeds of sale do not reflect & express the true intent of the parties; and
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4. Deliberate conspiracy designed to unjustly deprive the rest of the compulsory heirs of
their legitime.

Defense of the respondents:

1. No cause of action, requisite standing and interest

2. Sales were with sufficient considerations & made by their parents voluntarily in good
faith & with full knowledge of the consequences.

3. Certificates of title were issued w/factual & legal basis.

Trial court dismissed the case with respect to Gavino Joaquin & Lea Asis and
Ruled in favor of the respondents & dismissed the complaint:

1. The right of the compulsory heirs to a legitime is contingent and it only


commences from the moment of the death of the decedent (CC Art. 777). The value of
the property left at the death of the testator is the basis for determining the legitime
(Art. 908). Plaintiffs cannot claim an impairment of their legitime since their parents are
still alive.

2. Deeds of Sale were executed for valuable consideration. CA affirmed


Trial Court decision. In addition to the grounds stated by the trial court, CA also
mentioned that:

 While still alive, parents are free to dispose of their properties


provided such is not done in fraud of creditors.
 Petitioners are not parties in interest since they’re not parties to the
deeds of sale nor are they creditors of their parents.

ISSUES: 1. WON petitioners have a legal interest over the properties subject of
the Deeds of Sale. – NO.

The complaint betrays their motive for filing the case. They are
interested in obtaining the properties by hereditary succession but they have
failed to show any legal right to these properties. Real party-in-interest is one
who is either benefited or injured by the judgment of the party entitled to the
avails of the suit. This includes parties to the agreement or are bound either
principally/subsidiarily. Parties must have a present substantial interest & not
merely expectancy/future contingent subordinate or consequential interest. In
this case, the petitioners only have an inchoate right which vests only upon the
death of their parents. Besides, sale of the lots to their siblings does not affect
the value of their parents’ estate since the lots are replaced with cash of
equivalent value.
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2. WON the deeds of sale are void for lack of consideration. – NO.

A contract of sale is not a real contract but a consensual contract. It’s


binding & valid upon the meeting of the minds as to the price regardless of the
manner of payment or breach of such. It’s still valid even if the real price is not
stated in the contract, making it subject to reformation. But if the price is
simulated, there is no meeting of the minds, thus the contract is void (CC Art.
1471). Act of payment of the price does not determine the validity of a contract
of sale. Failure to pay the consideration is different from lack of consideration.
The former results in a right to demand fulfillment or cancellation of the
contract while the latter prevents the existence of a valid contract. Petitioners
failed to show that the prices in the deeds of sale were simulated. They don’t
even know the financial capacity of their siblings to buy these lots. Respondents’
minds met as to the purchase price w/c was stated in the deeds of sale & the
buyer siblings have paid the price to their parents.

3. WON the Deeds of Sale are void for gross inadequacy of the price.
– NO.

CC Art. 1355: Except in cases specified by law, lesion/INADEQUACY OF


CAUSE shall not invalidate a contract, unless there has been fraud, mistake or
undue influence. CC Art. 1470: Gross inadequacy of price doesn’t affect a
contract of sale, except as may indicate a defect in the consent or that the
parties really intended a donation or some other act or contract. Petitioners
failed to prove any instance in the aforementioned provisions that would
invalidate the deeds of sale. There is no requirement that the price be equal to
the exact value of the property on sale. It only matters that all respondents
believed that they received the commutative value of what they gave. Vales vs.
Villa: Courts cannot be guardians of people who are not legally incompetent.
Courts operate not because a person has been defeated/overcome by another,
but because he has been defeated or overcome ILEGALLY. There should be a
violation of the law, commission of what the law knows as an actionable wrong,
before the courts are authorized to lay hold of the situation & remedy it.

Note: Failure of consideration is different from the lack of consideration,


the former results in a right to demand the fulfillment/cancellation of the
obligation under the existing valid contract. This is different from lack of
consideration which prevents the existence of a valid contract.
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Earnest money (1482)

It is something of value given by the buyer to the seller to show that the buyer is really in
earnest, and to bind the bargain.

Note: It is actually a partial payment of the purchase price, and must be deducted from the total
price.

Cases: Manila Metal Container Corp. v. PNB

FACTS: Petitioner was the owner of a parcel of land and to be able to secure a loan from
PNB, petitioner executed a real party mortgage over the land. For its failure to pay, PNB
foreclose the mortgaged and sold at public auction for which PNB was the winning bidder, with
a one year period of redemption by the petitioner. Petitioner requested that there be an
extension of time to redeem the property and it allowed to repurchase the property on
installment. Meanwhile,the Special Assets Management Department had prepared a statement
of accountof the petitioner’s obligation to which amounted to 1.5M. petitioner thereafter
remitted thte amount of 800,000 as deposit to repurchase the property. When SAMD
recommended to the management of the PNB that petitioner be allowed to repurchase the
property at 1.5M, the management rejected and suggested that the property be purchased at
2.7M which was later reduced to 1.9M. But petitioner refused.

Petitioner now filed a case for delivery of title, annulment of mortgage and specific
performance with damages. It was its contention that it already accepted the offer of SAMD to
sell the property at 1.5M, hence, PNB could no longer unilaterally withdraw its offer to sell the
property. Its acceptance of the offer resulted in a perfected contract of sale.

Respondent contended that the parties never graduated for the negotiation stage – all
that transpires was an exchange of proposal and counter-proposals and nothing more. There
was still no agreement as to the amount and the manner of payment. The account made by
SAMD cannot be classified as counter-offer because it was merely recital of facts of the
obligations of petitioners.

ISSUE: Whether or not the P800,000 deposited is an earnest money?

RULING: No. The P800,000 could not be considered as an earnest money because an
earnest money forms part of the purchase price. In this case, it did not. The P800,000 was
merely a deposit that was accepted by PNB on the condition that the purchase price is subject
to the approval of the PNB Board.

Note: Absence of proof of the concurrence of all the essential elements of a contract of
sale, the giving of earnest money cannot establish the existence of a perfected contract of sale.
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Serrano v. Caguiat

FACTS: Caguiat offered to buy the lot owned by spouses Serrano. Respondent gave
P100K as partial payment, in turn, petitioners gave a receipt with a statement that respondent
promised to pay the balance of the purchase price. Respondents were leaving for abroad and
sought to cancel the transaction. Petitioners contend that there is no perfected contract as
there was no clear agreement between the parties as to the amount of consideration.

RULING: In holding that there is a perfected contract of sale, both courts mainly relied
on the earnest money given by respondent to petitioners (Art. 1482). We are not convinced.

It is true that Article 1482 of the Civil Code provides that “Whenever earnest 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.” However, this article speaks of earnest money given in a contract of sale. In
this case, the earnest money was given in a contract to sell. The earnest money forms part of
the consideration only if the sale is consummated upon full payment of the purchase price.
Now, since the earnest money was given in a contract to sell, Article 1482, which speaks of a
contract of sale, does not apply.

As previously discussed, the suspensive condition (payment of the balance by


respondent) did not take place. Clearly, respondent cannot compel petitioners to transfer
ownership of the property to him.