Ryan Christian T Lupos

2 Executive
Law on Sales
Alfredo vs Borras
404 SCRA 145 June 17, 2003
Facts:
A parcel of land measuring 81,524 square meters (“Subject Land”) in Barrio Culis,
Mabiga, Hermosa, Bataan is the subject of controversy in this case. Petitioners
(“Godofredo and Carmen”) had mortgaged the Subject Land for P7,000.00 with the
Development Bank of the Philippines (“DBP”). To pay the debt, Carmen and Godofredo
sold the Subject Land to private respondents (“Armando and Adelia”) for P15,000.00, the
buyers to pay the DBP loan and its accumulated interest, and the balance to be paid in cash
to the sellers. Armando and Adelia gave Godofredo and Carmen the money to pay the loan
to DBP which signed the release of mortgage. The former subsequently paid the balance
of the purchase price of the Subject Land for which Carmen issued a receipt dated 11 March
1970. They then took possession of the Subject Land. Subsequently, Armando and Adelia
discovered that Godofredo and Carmen had re-sold portions of the Subject Land to several
persons. The private respondents then filed a complaint for specific performance against
petitioners.
Issue: Whether or not there was a perfected contract of sale between the parties?
Held:
Yes. The contract of sale between the spouses Godofredo and Carmen and the
spouses Armando and Adelia was a perfected contract. A contract is perfected once there
is consent of the contracting parties on the object certain and on the cause of the
obligation. In the instant case, the object of the sale is the Subject Land, and the price
certain is P15,000.00. The trial and appellate courts found that there was a meeting of the
minds on the sale of the Subject Land and on the purchase price of P15,000.00. The
contract of sale of the Subject Land has also been consummated because the sellers and
buyers have performed their respective obligations under the contract. In a contract of
sale, the seller obligates himself to transfer the ownership of the determinate thing sold,
and to deliver the same, to the buyer who obligates himself to pay a price certain to the
seller. In the instant case, Godofredo and Carmen delivered the Subject Land to Armando
and Adelia, while Armando and Adelia paid the full purchase price as evidenced by the
receipt issued by Carmen.
Spouses Firme vs. Bukal Enterprises and Development Corp.
G.R. No. 146608 23 October 2003
Facts: Spouses Constante and Azucena Firme are the registered owners of a parcel of land
located on Dahlia Avenue, Fairview Park, Quezon City. Renato de Castro, the vice
president of Bukal Enterprises and Development Corporation authorized his friend,
Teodoro Aviles, a broker, to negotiate with the Spouses Firme for the purchase of the
Property. On 28 March 1995, Bukal Enterprises filed a complaint for specific performance
and damages with the trial court, alleging that the Spouses Firme reneged on their
agreement to sell the Property. The complaint asked the trial court to order the Spouses
Firme to execute the deed of sale and to deliver the title to the Property to Bukal Enterprises
upon payment of the agreed purchase price. On 7 August 1998, the trial court rendered
judgment against Bukal Enterprises, dismissing the case and ordering Bukal Enterprises to
pay the Spouses Constante and Azucena Firme (1) the sum of P335,964.90 as and by way
of actual and compensatory damages; (2) the sum of P500,000.00 as and by way of moral
damages; (3) the sum of P100,000.00 as and by way of attorney’s fees; and (4) the costs of
the suit.
The trial court held there was no perfected contract of sale as Bukal Enterprises failed to
establish that the Spouses Firme gave their consent to the sale of the Property; and that
Aviles had no valid authority to bind Bukal Enterprises in the sale transaction. Bukal
Enterprises appealed to the Court of Appeals, which reversed and set aside the decision of
the trial court. The appellate court ordered the Spouses Firme to execute the Deed of
Absolute Sale transferring the ownership of the subject property to Bukal Enterprises
immediately upon receipt of the purchase price of P3,224,000.00 and to perform all such
acts necessary and proper to effect the transfer of the property covered by TCT 264243 to
Bulak Enterprises; and directed Bukal Enterprises to deliver the payment of the purchase
price of the property within 60 days from the finality of the judgment. The Court of Appeals
held that the lack of a board resolution authorizing Aviles to act on behalf of Bukal
Enterprises in the purchase of the Property was cured by ratification; inasmuch as Bukal
Enterprises ratified the purchase when it filed the complaint for the enforcement of the sale.
The spouses Firme filed the petition for review on certiorari before the Supreme Court.
Issue: Whether there was a perfected contract between the Spouses Firme and Bukal
Enterprises, the latter allegedly being represented by Aviles.
Held: There was no consent on the part of the Spouses Firme. Consent is an essential
element for the existence of a contract, and where it is wanting, the contract is non-existent.
The essence of consent is the conformity of the parties on the terms of the contract, the
acceptance by one of the offer made by the other. The Spouses Firme flatly rejected the
offer of Aviles to buy the Property on behalf of Bukal Enterprises. There was therefore no
concurrence of the offer and the acceptance on the subject matter, consideration and terms
of payment as would result in a perfected contract of sale. Further, there was no approval
from the Board of Directors of Bukal Enterprises as would finalize any transaction with
the Spouses Firme. Aviles did not have the proper authority to negotiate for Bukal
Enterprises. Aviles testified that his friend, De Castro, had asked him to negotiate with the
Spouses Firme to buy the Property. De Castro, as Bukal Enterprises’ vice president,
testified that he authorized Aviles to buy the Property. However, there is no Board
Resolution authorizing Aviles to negotiate and purchase the Property on behalf of Bukal
Enterprises. It is the board of directors or trustees which exercises almost all the corporate
powers in a corporation. Under Sections 23 and 36 of the Corporation Code, the power to
purchase real property is vested in the board of directors or trustees. While a corporation
may appoint agents to negotiate for the purchase of real property needed by the corporation,
the final say will have to be with the board, whose approval will finalize the transaction. A
corporation can only exercise its powers and transact its business through its board of
directors and through its officers and agents when authorized by a board resolution or its
by-laws. Aviles, who negotiated the purchase of the Property, is neither an officer of Bukal
Enterprises nor a member of the Board of Directors of Bukal Enterprises. There is no Board
Resolution authorizing Aviles to negotiate and purchase the Property for Bukal Enterprises.
There is also no evidence to prove that Bukal Enterprises approved whatever transaction
Aviles made with the Spouses Firme. In fact, the president of Bukal Enterprises did not
sign any of the deeds of sale presented to the Spouses Firme. Even De Castro admitted that
he had never met the Spouses Firme. Considering all these circumstances, it is highly
improbable for Aviles to finalize any contract of sale with the Spouses Firme. Furthermore,
the Court notes that in the Complaint filed by Bukal Enterprises with the trial court, Aviles
signed the verification and certification of non-forum shopping. The verification and
certification of non-forum shopping was not accompanied by proof that Bukal Enterprises
authorized Aviles to file the complaint on behalf of Bukal Enterprises. The power of a
corporation to sue and be sued is exercised by the board of directors. “The physical acts of
the corporation, like the signing of documents, can be performed only by natural persons
duly authorized for the purpose by corporate by-laws or by a specific act of the board of
directors.” The purpose of verification is to secure an assurance that the allegations in the
pleading are true and correct and that it is filed in good faith. True, this requirement is
procedural and not jurisdictional. However, the trial court should have ordered the
correction of the complaint since Aviles was neither an officer of Bukal Enterprises nor
authorized by its Board of Directors to act on behalf of Bukal Enterprises
Jovan Land vs. Court of Appeals
G.R. No. 125531, February 12, 1997
FACTS:
Petitioner Jovan Land, Inc. is a corporation engaged in real estate business. Its President
is on Joseph Sy. On the other hand, herein private respondent Eugenio Quesada is the
owner of the Q Building located in Mayhaligue, Sta. Cruz, Manila.
Petitioner learned from one Consolacion Mendoza that private respondent was selling his
Mayhaligue property. Thus, petitioner thru its president made a written offer to private
respondent. The first two offers were rejected. However, on the third attempt, Sy sent a
letter to Quesada constituting the offer; the letter having annotation with the phrase
“received original, 9-8-89” beside which appears the signature of private respondent.
In lieu, petitioner insist that a perfected agreement to sell the Mayhaligue property
existed, hence, it filed with the RTC of Quezon City a complaint for specific performance
and collection of sum of money and damages. However, the trial court ruled against
petitioner. On appeal to the CA, the appelate court just affirmed the trial court’s decision.
Hence this.
ISSUE: Whether or not there was a contract of sale perfected and thus is valid?
RULING:
The Court held No.
That it is a fundamental principle that before a contract of sale be valid, the following
must be present: 1. consent or meeting of the minds; 2. determinate subject matter; and,
3. price certain in money or its eqivalent. That until contract of sale is perfected, it
cannot, as an independent source of obligation, serve as a binding juridical relation
between the parties.
In the case at bar, petitioner anchors its arguments on the third letter-offer, however, the
court ruled that there is nothing written or documentary to show that such offer was
accepted by private respondent and such annotation in the letter is just a mere
memorandum of the receipt. The requisites of a valid contract of sale are lacking in the
said receipt and therefore, the “sale” is not valid.
Lim Lao vs. Court of Appeals
274 SCRA 572
FACTS: Father Artelijo Palijo was investing with Premiere Investment House through
the latter’s trader, Rosemarie Lachenal. Through the course of his business with Premiere
Investment, he was issued three Traders Royal Bank checks in the amounts of P150k,
P150k, and P26k, respectively. These checks were eventually dishonored.
The checks, before they were issued to Palijo went through the normal procedure within
Premiere investment, to wit; First, the checks are required to be co-signed by Lina Lim
Lao, a junior officer of Premiere Investment. Second, the checks are then forwarded to her
head office to be co-signed by one Teodulo Asprec. Third, Asprec would then decide to
whom the checks were to be ultimately issued and delivered, in this case to Palijo.
Since the checks were dishonored, Palijo sent notices of dishonor to Premiere Investment
but he sent the same to the latter’s main office in Cubao (note that Lao and Asprec were
holding office in the Binondo Branch of Premiere Investment). Premiere Investment was
only able to pay P5k and no further payment was made. Apparently, Premiere Investment
was going insolvent and was subsequently placed under receivership.
Palijo filed a criminal case against Lao and Asprec for violation of Batas Pambansa Blg.
22.
ISSUE: Whether or not Lao is guilty of the crime charged.
HELD: No. The elements of violations against BP 22 are as follows:
1. That a person makes or draws and issues any check.
2. That the check is made or drawn and issued to apply on account or for value.
3. That the person who makes or draws and issues the check knows at the time of issue that
he does not have sufficient funds in or credit with the drawee bank for the payment of such
check in full upon its presentment.
4. That the check is subsequently dishonored by the drawee bank for insufficiency of funds
or credit, or would have been dishonored for the same reason had not the drawer, without
any valid reason, ordered the bank to stop payment.
In the present case, the fact alone that petitioner was a signatory to the checks that were
subsequently dishonored merely engenders the prima facie presumption that she knew of
the insufficiency of funds, but it does not render her automatically guilty under B.P. 22.
After a thorough review of the case at bar, the SC finds that Petitioner Lao did not have
actual knowledge of the insufficiency of funds in the corporate accounts at the time she
affixed her signature to the checks involved in this case, at the time the same were issued,
and even at the time the checks were subsequently dishonored by the drawee bank. The
scope of Lao’s duties and responsibilities did not encompass the funding of the
corporation’s checks; her duties were limited to the marketing department of the Binondo
branch.
Further, there can be no prima facie evidence of knowledge of insufficiency of funds in the
instant case because no notice of dishonor was actually sent to or received by Lao. Pariljo
sent the notices of dishonor to Premiere Investment’s main branch. The main branch did
not send the notices to the Binondo branch because it deemed it futile because at that time
it knows that it does not have sufficient funds to cover the debt anyway. Notice to the main
branch does not serve as constructive notice to Lao. BP 22 is a personal crime hence notice
should have been sent to her personally if she were to be made liable.
Victorias Milling Co. Vs. Court of Appeals
FACTS:

St. Therese Merchandising (STM) regularly bought sugar from Victorias Milling
Co (VMC). In the course of their dealings, VMC issued several Shipping List/Delivery
Receipts (SLDRs) to STM as proof of purchases. Among these was SLDR No.
1214M.SLDR No. 1214M, dated October 16, 1989, covers 25,000 bags of sugar. Each bag
contained 50 kg and priced at P638.00 per bag. The transaction covered was a “direct sale”.
 On October 25, 1989, STM sold to private respondent Consolidated Sugar
Corporation (CSC) its rights in the same SLDR for P14,750,000.00. CSC issued checks in
payment. That same day, CSC wrote petitioner that it had been authorized by STM to
withdraw the sugar covered by the said SLDR. Enclosed in the letter were a copy of SLDR
No. 1214M and a letter of authority from STM authorizing CSC to “withdraw for and in
our behalf the refined sugar covered by the SLDR” 
On Oct. 27, 1989, STM issued
checks to VMC as payment for 50,000 bags, covering SLDR No. 1214M. 
CSC
surrendered the SLDR No. 1214M and to VMC’s NAWACO Warehouse and was allowed
to withdraw sugar. But only 2,000 bags had been released because VMC refused to release
the other 23,000 bags.

Therefore, CSC informed VMC that SLDR No. 1214M had been “sold and
endorsed” to it. But VMC replied that it could not allow any further withdrawals of sugar
against SLDR No. 1214M because STM had already withdrawn all the sugar covered by
the cleared checks. VMC also claimed that CSC was only representing itself as STM’s
agent as it had withdrawn the 2,000 bags against SLDR No. 1214M “for and in behalf” of
STM. Hence, CSC filed a complaint for specific performance against Teresita Ng Sy (doing
business under STM's name) and VMC. However, the suit against Sy was discontinued
because later became a witness. RTC ruled in favor of CSC and ordered VMC to deliver
the 23,000 bags left. CA concurred. Hence this appeal.
ISSUES:

W/N CA erred in not ruling that CSC was an agent of STM and hence, estopped to sue
upon SLDR No. 1214M as assignee.
HELD:

NO. CSC was not an agent of STM. VMC heavily relies on STM’s letter of authority that
said CSC is authorized to withdraw sugar “for and in our behalf”. It is clear from Art. 1868
that the: basis of agency is representation. On the part of the principal, there must be
an actual intention to appoint or an intention naturally inferable from his words or
actions, and on the part of the agent, there must be an intention to accept the
appointment and act on it, and in the absence of such intent, there is generally NO
agency. One factor, which most clearly distinguishes agency from other legal concepts, is
control; one person – the agent – agrees to act under the control or direction of another –
the principal. Indeed, the very word “agency” has come to connote control by the principal.
The control factor, more than any other, has caused the courts to put contracts between
principal and agent in a separate category. Where the relation of agency is dependent upon
the acts of the parties, the law makes no presumption of agency and it is always a fact to
be proved, with the burden of proof resting upon the persons alleging the agency, to show
not only the fact of its existence but also its nature and extent. It appears that CSC was a
buyer and not an agent of STM. CSC was not subject to STM’s control. The terms “for and
in our behalf” should not be eyed as pointing to the existence of an agency relation.
Whether or not a contract is one of sale or agency depends on the intention of the
parties as gathered from the whole scope and effect of the language employed.
Ultimately, what is decisive is the intention of the parties. (In fact, CSC even informed
VMC that the SLDR was sold and endorsed to it.)

Agency distinguished from sale.

In an agency to sell, the agent, in dealing with the thing received, is bound to act according
to the instructions of his principal, while in a sale, the buyer can deal with the thing as he
pleases, being the owner. The elementary notion of sale is the transfer of title to a thing
from one to another, while the essence of agency involves the idea of an appointment of
one to act for another. Agency is a relationship which often results in a sale, but the sale is
a subsequent step in the transaction. (Teller, op. cit., p. 26; see Commissioner of Internal
Revenue vs. Manila Machinery & Supply Co., 135 SCRA 8 [1985].) An authorization
given to another containing the phrase “for and in our behalf’’ does not necessarily
establish an agency, as ultimately what is decisive is the intention of the parties. Thus, the
use of the words “sold and endorsed’’ may mean that the parties intended a contract of sale,
and not a contract of agency.
Manonsong vs. Estimo
404 SCRA 683 June 25, 2003
FACTS:
Allegedly, Guevarra inherited a property from Justina Navarro, which is now under
possession of the heirs of Guevarra. Guevarra had six children, one of them is Vicente
Lopez, the father of petitioner Manongson. The respondents, the Jumaquio sisters and
Leoncia Lopez claimed that the property was actually sold to them by Justina Navarro prior
to her death. The respondents presented the deed of sale. The petitioners filed a complaint
praying for the partition and award to them of an area equivalent to 1/5 by right of
representation. RTC ruled that the conveyance made by Justina Navarro is subject to nullity
because the property conveyed had a conjugal character and that Guevarra as her
compulsory heir should have the legal right to participate with the distribution of the estate
under question to the exclusion of others. The deed of sale did not at all provide for the
reserved legitime or the heirs, and, therefore it has no force and effect against Guevarra
and should 'e declared a nullity ab initio.
ISSUE:
Whether petitioners were able to prove that Manongsong is a co-owner of the Property and
therefore entitled to demand for its partition
HELD:
There was no evidence presented to establish that Navarro acquired the Property during
her marriage. There is no basis for applying the presumption under Article 160 of the Civil
Code to the present case. On the contrary, Tax Declaration No. 911 showed that, as far
back as in 1949, the Property was declared solely in Navarro’s name.This tends to support
the argument that the Property was not conjugal.
We likewise find no basis for the trial court’s declaration that the sale embodied in the
Kasulatan deprived the compulsory heirs of Guevarra of their legitimes. As opposed to a
disposition inter vivos by lucrative or gratuitous title, a valid sale for valuable consideration
does not diminish the estate of the seller. When the disposition is for valuable
consideration, there is no diminution of the estate but merely a substitution of values, that
is, the property sold is replaced by the equivalent monetary consideration.
Under Article 1458 of the Civil Code, the elements of a valid contract of sale are: (1)
consent or meeting of the minds; (2) determinate subject matter and (3) price certain in
money or its equivalent. The presence of these elements is apparent on the face of the
Kasulatan itself. The Property was sold in 1957 for P250.00
Medina v CIR
1 SCRA 302 January 28, 1961
FACTS:
On 20 May 1944, Antonio Medina married Antonia Rodriguez. Before 1946, the spouses
had neither property nor business of their own. Later, however, Antonio acquired forest
concessions in the municipalities of San Mariano and Palanan, Isabela. In 1949, Antonia
started to engage in business as a lumber dealer, and up to around1952, Antonio sold to her
almost all the logs produced in his San Mariano concession. Antonia, in turn, sold in Manila
the logs bought from her husband through the same agent, Mariano Osorio. The proceeds
were either received by Osorio for Antonio or deposited by said agent in Antonio‟s current
account with the PNB. On the thesis that the sales made by Antonio to his wife were null
and void pursuant to the provisions of Article 1490 of the Civil Code of the Philippines,
the Collector considered the sales made by Antonia as Antonio‟s original sales taxable
under Section 186 of the National Internal Revenue Code and, therefore, imposed a tax
assessment on Antonio. On 30 November 1963,Antonio protested the assessment;
however, the Collector insisted on his demand. On 9 July 1954, Antonio filed a petition for
reconsideration, revealing for the first time the existence of an alleged premarital
agreement of complete separation of properties between him and his wife, and contending
that the assessment for the years 1946 to 1952 had already prescribed. After one hearing,
the Conference Staff of the Bureau of Internal Revenue eliminated the 50% fraud penalty
and held that the taxes assessed against him before 1948 had already prescribed. Based on
these findings, the Collector issued a modified assessment, demanding the payment of only
P3,325.68. Thus, this review.
ISSUE:
Whether or not the sales in question made by petitioner to his wife were fictitious,
simulated, and not bona fide
HELD:
The petitioner argues that the prohibition to sell expressed under Article 1490 of the Civil
Code has no application to the sales made by said petitioner to his wife, because said
transactions are contemplated and allowed by the provisions of Articles 7 and 10 of the
Code of Commerce. But said provisions merely state, under certain conditions, a
presumption that the wife is authorized to engage in business and for the incidents that flow
therefrom when she so engages therein. But the transactions permitted are those entered
into with strangers, and do not constitute exceptions to the prohibitory provisions of Article
1490 against sales between spouses. Contracts violative of the provisions of Article 1490
of the Civil Code are null and void Being void transactions, the sales made by the petitioner
to his wife were correctly disregarded by the Collector in his tax assessments that
considered as the taxable sales those made by the wife through the spouses' common agent,
Mariano Osorio.
Limson vs CA
375 SCRA 209 April 20, 2001
FACTS:
Spouses offered to sell to Lourdes Limson the subject land through their agent Marcosa
Sanchez. She agreed to buy the property and gave them 20K as ‘earnest money’;
respondent signed a receipt and gave her 10-day option period to buy the property. Lorenzo
de Vera informed her that the property was mortgaged to the Ramoses and asked her to
pay the balance of the purchase price to settle the obligation with the latter. She agreed to
meet with respondents and Ramoses to consummate transaction but Asuncion and the
Ramoses did not appear. She claimed that she was willing to pay but transaction did not
materialize because of unpaid back taxes on the property. She gave respondents checks to
pay the said taxes which were considered as part of the purchase price. Limson learned that
the property is subject to negotiation between the spouses and SUNVAR Realty
Development Corporation. Limson Filed an Affidavit of Adverse Claim which was
annotated to the title. A Deed of Sale executed between spouses and SUNVAR and a title
was issued to SUNVAR with the annotation of adverse claim.
ISSUE:
Whether or not there was a perfected contract to sell between petitioner and respondents.
HELD:
No. The agreement was a “contract of option” not a “contract to sell”. 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 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. Until acceptance, it is not, properly
speaking, a contract, and does not vest, transfer, or agree to transfer, any title to, or any
interest or right in the subject matter, but is merely a contract by which the owner of the
property gives the optionee the right or privilege of accepting the offer and buying the
property on certain terms
Equatorial Realty Dev., Inc. vs Mayfair Theater
264 SCRA 483 March 21, 1996
FACTS:
Mayfair Theater, Inc. was a lessee of portions of a building owned by Carmelo &
Bauermann, Inc. Their lease contracts of 20. Lease contracts contained a provision granting
Mayfair a right of first refusal to purchase the subject properties. However, before the
contracts ended, the subject properties were sold for P11,300 by Carmelo to Equatorial
Realty Development, Inc. This prompted Mayfair to file a case for the annulment of the
Deed of Absolute Sale between Carmelo and Equatorial, specific performance and
damages. The Court ruled in favor of Mayfair. Barely five months after Mayfair had
submitted its Motion for Execution, Equatorial filed an action for collection of sum of
money against Mayfair claiming payment of rentals or reasonable compensation for the
defendant’s use of the subject premises after its lease contracts had expired. Maxim Theater
contract expired, while the Lease Contract covering the premises occupied by Miramar
Theater lapsed. The lower court debunked the claim of Equatorial for unpaid back rentals,
holding that the rescission of the Deed of Absolute Sale in the mother case did not confer
on. Equatorial any vested or residual propriety rights, even in expectancy. It further ruled
that the Court categorically stated that the Deed of Absolute Sale had been rescinded
subjecting the present complaint to res judicata. Hence, Equatorial filed the present
petition.
ISSUE:
Whether or not Equatorial is entitled to back rentals
HELD:
No. In the case, there was no right of ownership transferred from Carmelo to Equatorial in
view of a patent failure to deliver the property to the buyer. By a 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 therefore a price certain in money or its equivalent.”
Ownership of the thing sold is a real right, which the buyer acquires only upon delivery of
the thing to him “in any of the ways specified in articles 1497 to 1501, or in any other
manner signifying an agreement that the possession is transferred from the vendor to the
vendee.” In the case, Mayfair’s opposition to the transfer of the property by way of sale to
Equatorial was a legally sufficient impediment that effectively prevented the passing of the
property into the latter’s hands. Rent is a civil fruit that belongs to the owner of the property
producing it by right of accession. Consequently and ordinarily, the rentals that fell due
from the time of the perfection of the sale to petitioner until its rescission by final judgment
should belong to the owner of the property during that period. Not having been the owner,
Equatorial cannot be entitled to the civil fruits of ownership like rentals of the thing sold.
Active Realty & Development Co. Vs. Daroya
FACTS: Petitioner ACTIVE REALTY & DEVELOPMENT CORPORATION is the
owner and developer of Town & Country Hills Executive Village. It entered into a
Contract to Sell1 with respondent NECITA DAROYA, a contract worker in the Middle
East, whereby the latter agreed to buy a 515 sq. m. lot forP224,025.00 in petitioner’s
subdivision.
The contract to sell stipulated that the respondent shall pay the initial amount upon
execution of the contract and the balance in monthly installments. The respondent was in
default in three amortizations and by this petitioner sent respondent a notice of
cancellation2 of their contract to sell, to take effect thirty (30) days from receipt of the
letter. It does not appear from the records, however, when respondent received the letter.
Nonetheless, when respondent offered to pay for the balance of the contract price,
petitioner refused as it has allegedly sold the lot to another buyer.
The respondent filed before Arbitration Branch of the Housing and Land Use Regulatory
Board (HLURB) a complaint for damages and specific performance. The HLURB ruled
in favor of the respondents and declared that the cancellation of the contract to sell is
void. On appeal, the HLURB Board of Commissioners set aside the Arbiter’s Decision.
The Board refused to apply the remedies provided under the Maceda Law and instead
deemed it fit to formulate an "equitable" solution to the case. Respondent appealed to the
Office of the President. On June 2, 1998, then Chief Presidential Counsel Renato C.
Corona, acting by authority of the President, modified the Decision of the HLURB as he
found that it was not in accord with the provisions of the Maceda Law.
ISSUE
Whether or not the petitioner can be compelled to refund to the respondent the value of
the lot or to deliver a substitute lot at respondent’s option.
RULING
Yes. The contract to sell in the case at bar is governed by Republic Act No. 6552 -- "The
Realty Installment Buyer Protection Act," or more popularly known as the Maceda Law -
- which came into effect in September 1972. Its declared public policy is to protect
buyers of real estate on installment basis against onerous and oppressive conditions.16
The law seeks to address the acute housing shortage problem in our country that has
prompted thousands of middle and lower class buyers of houses, lots and condominium
units to enter into all sorts of contracts with private housing developers involving
installment schemes. Lot buyers, mostly low income earners eager to acquire a lot upon
which to build their homes, readily affix their signatures on these contracts, without an
opportunity to question the onerous provisions therein as the contract is offered to them
on a "take it or leave it" basis.17 Most of these contracts of adhesion, drawn exclusively
by the developers, entrap innocent buyers by requiring cash deposits for reservation
agreements which oftentimes include, in fine print, onerous default clauses where all the
installment payments made will be forfeited upon failure to pay any installment due even
if the buyers had made payments for several years.18 Real estate developers thus enjoy an
unnecessary advantage over lot buyers who they often exploit with iniquitous results.
They get to forfeit all the installment payments of defaulting buyers and resell the same
lot to another buyer with the same exigent conditions. To help especially the low income
lot buyers, the legislature enacted R.A. No. 6552 delineating the rights and remedies of
lot buyers and protect them from one-sided and pernicious contract stipulations.
More specifically, Section 3 of R.A. No. 6552 provided for the rights of the buyer in case
of default in the payment of succeeding installments, where he has already paid at least
two (2) years of installments, thus:
"(a) To pay, without additional interest, the unpaid installments due within the
total grace period earned by him, which is hereby fixed at the rate of one month
grace period for every one year of installment payments made; x x x
(b) If the contract is cancelled, the seller shall refund to the buyer the cash
surrender value of the payments on the property equivalent to fifty per cent of the
total payments made; provided, that the actualcancellation of the contract shall
take place after thirty days from receipt by the buyer of the notice of cancellation
or the demand for rescission of the contract by a notarial act and upon full
payment of the cash surrender value to the buyer."
Thus, for failure to cancel the contract in accordance with the procedure provided by law,
we hold that the contract to sell between the parties remains valid and subsisting.
Following Section 3(a) of R.A. No. 6552, respondent has the right to offer to pay for the
balance of the purchase price, without interest, which she did in this case.