SALES Annotated Syllabus

Embed Size (px)

Citation preview

  • 7/31/2019 SALES Annotated Syllabus

    1/60

    APPENDIX B

    TOPICAL INDEX(The Topical Index presents in outline form the manner by which the Law on Sales isdiscussed in the book, and serves as a syllabus for classroom discussions. The xs in

    the outline represent cases which need no extended discussions either because theessence of their rulings are already summarized in the outline or they contain similarrulings as other cases to be discussed. Unless otherwise indicated, the numbered

    articles refer to articles of the Civil Code of the Philippines)

    I. THE NATURE OF SALE

    A.DEFINITION OF SALE (Art. 1458)

    Sale is a contract by which one of the contracting parties obligates himself to transfer theownership

    1and to deliver possession, of a determinate thing, and the other to pay therefor a

    price certain in money or its equivalent. xCruz v. Fernando, 477 SCRA 173 (2005).2

    1. Elements of Sale

    Elements of sale: (a) consent or meeting of the minds; (b) determinate subject matter;and (c) price certain in money or its equivalent. xNavarra v. Planters Dev. Bank, 527 SCRA562 (2007).

    3

    Absence of any essential elements negates a sale xDizon v. CA, 302 SCRA 288(1999),

    4even when earnest money has been paid. Manila Metal Container Corp. v. PNB,

    511 SCRA 444 (2006).

    Sale being a consensual contract, its essential elements must be proven xVillanueva v.CA, 267 SCRA 89 (1997); but once proven, a sales validity is not affected by a previouslyexecuted fictitious deed of salexPealosa v. Santos, 363 SCRA 545 (2001); and the burdenis on the other party to prove otherwise. xHeirs of Ernesto Biona v. CA, 362 SCRA 29

    (2001).

    2. Stages of Contract of Sale

    Policitacion covers period from the time the prospective contracting parties indicateinterest in the contract to the time the contract is perfected. Perfection takes place upon theconcurrence of the essential elements, which are the meeting of the minds of the parties asto the object of the contract and upon the price. Consummation begins when the partiesperform their respective undertakings, culminating in the extinguishment thereof. xSanMiguel Properties Philippines, Inc. v. Huang, 336 SCRA 737 (2000).

    5

    1Ownership is the independent and general power of a person over a thing for purposes recognized by law and within

    the limits established thereby. According to Art. 428 of the Civil Code, this means that: The owner has the right to enjoy

    and dispose of a thing, without other limitations than those established by law. x x x Aside from the jus utendiand thejusabutendiinherent in the right to enjoy the thing, the right to dispose, or thejus disponendi, is the power of the owner toalienate, encumber, transform and even destroy the thing owned. Flancia v. Court of Appeals, 457 SCRA 224 (2005).

    2Alfredo v. Borras, 404 SCRA 145 (2003); Manila Metal Container Corp. v. PNB, 511 SCRA 444 (2006); Roberts v.

    Papio, 515 SCRA 346 (2007).3Jovan Land, Inc. v. CA, 268 SCRA 160 (1997); Quijada v. CA, 299 SCRA 695 (1998); Co v. CA, 312 SCRA 528

    (1999); San Andres v. Rodriguez, 332 SCRA 769 (2000); Roble v. Arbasa, 362 SCRA 69 (2001); Polytechnic University v.

    CA, 368 SCRA 691 (2001); Katipunan v. Katipunan, 375 SCRA 199 (2002); Londres v. CA, 394 SCRA 133 (2002);Manongsong v. Estimo, 404 SCRA 683 (2003); Jimenez, Jr. v. Jordana, 444 SCRA 250 (2004); San Lorenzo Dev. Corp.v. CA, 449 SCRA 99 (2005); Yason v. Arciaga, 449 SCRA 458 (2005); Roberts v. Papio, 515 SCRA 346 (2007); Navarra

    v. Planters Dev. Bank, 527 SCRA 562 (2007); Republic v. Florendo, 549 SCRA 527 (2008).4Roberts v. Papio, 515 SCRA 346 (2007).

    5Limketkai Sons Milling, Inc. v. Court of Appeals, 250 SCRA 523 (1995); Jovan Land, Inc. v. CA, 268 SCRA 160

    (1997); Bugatti v. Court of Appeals, 343 SCRA 335 (2000); Moreno, Jr. v. Private Management Office, 507 SCRA 63

  • 7/31/2019 SALES Annotated Syllabus

    2/60

    2

    3.Sale Creates Real Obligations To Give (Art. 1165)

    4. Essential Characteristics of Sale:

    a. Nominate and Principal

    A contract of sale is what the law defines it to be, taking into consideration itsessential elements, and not what the contracting parties call it. xSantos v. Court of

    Appeals, 337 SCRA 67 (2000).

    6

    b. Consensual (Art. 1475)

    A contract of sale is not a real, but a consensual contract, and becomes valid andbinding upon the meeting of the minds of the parties as to the object and the price

    7, that:

    Upon its perfection, the parties may reciprocally demand performance. xHeirsof Venancio Bejenting v. Baez, 502 SCRA 531 (2006);

    8subject only to the

    provisions of the law governing the form of contracts. xCruz v. Fernando, 477SCRA 173 (2005).

    It remains valid even if parties have not affixed their signatures to its writtenform xGabelo v. CA, 316 SCRA 386 (1999), or the manner of payment isbreached. xPilipinas Shell Petroleum Corp v. Gobonseng, 496 SCRA 305

    (2006).The binding effect of sale is based on the principle that the obligations arising

    therefrom have the force of law between the parties. xVeterans Federation of thePhilippines v. Court of Appeals, 345 SCRA 348 (2000).

    Perfection Distinguished from Demandability Not all contracts of sale becomeautomatically and immediately effective. In sales with assumption of mortgage, there is acondition precedent to the sellers consent and without the approval of the mortgagee,the sale is not perfected.xBian Steel Corp. v. Court of Appeals, 391 SCRA 90 (2002).

    No Contract Situation versus Void Contract Absence of consent (i.e.,complete meeting of minds) negates the existence of a perfected sale. xFirme v. BukalEnterprises and Dev. Corp., 414 SCRA 190 (2003). The contract then is null and void abinitio, absolutely wanting in civil effects; hence, it does not create, modify, or extinguish

    the juridical relation to which it refers.xCabotaje v. Pudunan, 436 SCRA 423 (2004).

    When there is no meeting of the minds on price, the contract is not perfected anddoes not serve as a binding juridical relation between the parties. xManila MetalContainer Corp. v. PNB, 511 SCRA 444 (2006),

    9and should be more accurately

    denominated as inexistent, as it did not pass the stage of generation to the point ofperfection. xNHA v. Grace Baptist Church, 424 SCRA 147 (2004).

    c. Bilateral and Reciprocal (Arts. 1169 and 1191)

    A contract of sale gives rise to reciprocal obligations, which arise from the samecause with each party being a debtor and creditor of the other, such that the obligation ofone is dependent upon the obligation of the other; and they are to be performed

    (2006); Manila Metal Container Corp. v. PNB, 511 SCRA 444 (2006); Navarra v. Planters Dev. Bank, 527 SCRA 562(2007); Province of Cebu v. Heirs of Rufina Morales, 546 SCRA 315 (2008).

    6Bowe v. CA, 220 SCRA 158 (1993); Romero v. CA, 250 SCRA 223 (1995); Lao v. CA, 275 SCRA 237 (1997); Cavite

    Development Bank v. Lim, 324 SCRA 346 (2000).7Romero v. CA, 250 SCRA 223 (1995); Balatbat v. CA, 261 SCRA 128 (1996); Coronel v. CA, 263 SCRA 15 (1996);

    City of Cebu v. Heirs of Candido Rubi, 306 SCRA 408 (1999); Agasen v. CA, 325 SCRA 504 (2000); Laforteza v.

    Machuca, 333 SCRA 643 (2000); Londres v. Court of Appeals, 394 SCRA 133 (2002); Alcantara-Daus v. de Leon, 404SCRA 74 (2003); Buenaventura v. Court of Appeals, 416 SCRA 263 (2003); San Lorenzo Dev. Corp. v. CA, 449 SCRA 99(2005); Yason v. Arciaga, 449 SCRA 458 (2005); Ainza v. Padua, 462 SCRA 614 (2005); Roberts v. Papio, 515 SCRA

    346 (2007); MCC Industrial Sales Corp. v. Ssangyong Corp., 536 SCRA 408 (2007); Castillo v. Reyes. 539 SCRA 193(2007) .

    8Province of Cebu v. Heirs of Rufina Morales, 546 SCRA 315 (2008).

    9Roberts v. Papio, 515 SCRA 346 (2007).

  • 7/31/2019 SALES Annotated Syllabus

    3/60

    3

    simultaneously, so that the performance of one is conditioned upon the simultaneousfulfillment of the other.xCortes v. Court of Appeals, 494 SCRA 570 (2006).

    10

    The power to rescind is implied in reciprocal ones in case one of the obligors shouldnot comply with what is incumbent upon him, and without need of prior demand.xAlmocera v. Ong, 546 SCRA 164 (2008).

    11

    d. Onerous (Gaite v. Fonacier, 2 SCRA 830 [1961]).

    e. Commutative (BUT SEE: Arts. 1355 and 1470)

    In a contract of sale, there is no requirement that the price be equal to the exactvalue of the subject matter of sale; all that is required is that the parties believed that theywill receive good value in exchange for what they will give. Buenaventura v. CA, 416SCRA 263 (2003).

    f. Sale Is Title and Not Mode

    Sale is not a mode, but merely a title. A mode is the legal means by which dominionor ownership is created, transferred or destroyed, but title is only the legal basis by whichto affect dominion or ownership. Sale by itself does not transfer or affect ownership; themost that sale does is to create the obligation to transfer ownership. It is tradition ordelivery, as a consequence of sale, that actually transfers ownership.xSan Lorenzo Dev.

    Corp. v. CA, 449 SCRA 99 (2005),12citingVILLANUEVA,PHILIPPINE LAW ON SALES, 1995ed., at p. 5.

    Sellers ownership of the thing sold is not an element of perfection; what the lawrequires is that seller has the right to transfer ownership at the time the of delivery.xQuijada v. CA, 299 SCRA 695 (1998).

    13

    BUT SEE: xTitong v. CA, 287 SCRA 102 (1998), which defined a sale as a contracttransferring dominion and other real rights in the thing sold.

    B. SALE DISTINGUISHED FROM SIMILAR CONTRACTS

    A contract is what the law defines it to be, taking into consideration its essential elements,and the title given to it by the parties is not as much significant as its substance.

    14The transfer

    of ownership in exchange for a price paid or promised is the very essence of a contract of sale.xSantos v. Court of Appeals, 337 SCRA 67 (2000).

    In determining the real character of sale, courts look at the intent of the parties, their trueaim and purpose in entering into the contract, as well as by their conduct, words, actions anddeeds prior to, during and immediately after executing the agreement, and not at thenomenclature used to describe it, xLao v. Court of Appeals, 275 SCRA 237 (1997).

    1. Donation (Arts. 725 and 1471)

    Unlike a donation, sale is a disposition for valuable consideration with no diminution ofthe estate but merely substitution of values, with the property sold replaced by the equivalentmonetary consideration; unlike donation, a valid sale cannot have the legal effect of deprivingthe compulsory heirs of their legitimes. xManongsong v. Estimo, 404 SCRA 683 (2003).

    The rules on double sales under Art. 1544 find no relevance to contracts of donation.xHemedes v. Court of Appeals, 316 SCRA 347 (1999).

    2. Barter (Arts. 1468, 1638 to 1641)

    10Ong v. Court of Appeals, 310 SCRA 1 (1999); Mortel v. KASSCO, 348 SCRA 391 (2000); Agro Conglomerates, Inc.

    v. CA, 348 SCRA 450 (2000); Velarde v. Court of Appeals, 361 SCRA 56 (2001); Carrascoso, Jr. v. Court of Appeals, 477SCRA 666 (2005).

    11Vda. De Quirino v. Palarca, 29 SCRA 1 (1969)

    12Acap v. CA, 251 SCRA 30 (1995).

    13Equatorial Realty Dev. Inc. v. Mayfair Theater, Inc., 370 SCRA 56 (2001);Alcantara-Daus v. de Leon, 404 SCRA 74

    (2003); Heirs of Jesus M. Mascuana v. Court of Appeals, 461 SCRA 186 (2005).14

    Romero v. CA, 250 SCRA 223 (1995).

  • 7/31/2019 SALES Annotated Syllabus

    4/60

    4

    3.Contract for Piece-of-Work (Arts. 1467, 1713 to 1715)

    The Crux: Ineluctably, whether the contract be one of sale or one for a piece of work,a transfer of ownership is involved and a party necessarily walks away with an object.xCommissioner of Internal Revenue v. CA, 271 SCRA 605 (1997), citingVILLANUEVA,LAWON SALES, pp. 7-9 (1995). In both provisions on warranty of title against hidden defectsapplies. xDio v. CA, 359 SCRA 91 (2001).

    When a person stipulates for the future sale of articles which he is habitually making,

    and which at the time are not made or finished, it is essentially a contract of sale and not acontract for labor xInchausti & Co. v. Cromwell, 20 Phil. 345 (1911); even when he

    executes production thereof only after an order is placed by customers. Celestino & Co.

    v. Collector, 99 Phil. 841 (1956).

    If the thing is specially done only upon the specific order of another, this is a contractfor a piece of work; if the thing is manufactured or procured for the general market in the

    ordinary course of business, it is a contract of sale. Commissioner of Internal Revenue

    v. Engineering Equipment & Supply Co., 64 SCRA 590 (1975).15

    To Tolentino, the distinction depends on the intention of parties : if parties intended thatat some future date an object has to be delivered, without considering the work or labor ofthe party bound to deliver, the contract is one of sale; but if one of the parties accepts theundertaking on the basis of some plan, taking into account the work he will employpersonally or through another, the contract is for a piece of work. xEngineering &Machinery Corp. v. CA, 252 SCRA 156 (1996).

    4.Agency to Sell(Art. 1466)

    Assumption by agent of the risk pertaining to the cost or price of the subject mattermakes the relationship that of buyer-seller, for the agent does not assume risk with respectto the price or the property subject of the relationship. xKer & Co., Ltd. v. Lingad, 38 SCRA524 (1971). Consequently: (a) the contractual relationship is not inherently revocable.

    Quiroga v. Parsons, 38 Phil. 501 (1918); or (b) the purported agent does not have to

    account for the profit margin earned from acquiring the property for the purported principal.

    Puyat v. Arco Amusement Co., 72 Phil. 402 (1941).

    One factor that most clearly distinguishes agency from other legal concepts, includingsale, is control; one person the agent agrees to act under the control or direction ofanother the principal. xVictorias Milling Co., Inc. v. CA, 333 SCRA 663 (2000).

    Commercial broker, commission merchant or indentor is a middleman acting in his ownname, and acts as agent for both seller and buyer to effect a sale between them. Althoughhe is neither seller nor buyer to the contract effected he may voluntarily assume warrantiesof seller. xSchmid and Oberly, Inc. v. RJL Martinez, 166 SCRA 493 (1988).

    5. Dacion En Pago (Arts. 1245 and 1934)

    Governed by the law on sales, dation in payment is a transaction that takes place whenproperty is alienated to the creditor in full satisfaction of a debt in moneyit involves thedelivery and transmission of ownership of a thing as an accepted equivalent of theperformance of the obligation.xYuson v. Vitan, 496 SCRA 540 (2007).

    In its modern concept, what actually takes place in dacion en pago is an objectivenovation of the obligation where the thing offered as an accepted equivalent of theperformance of an obligation is considered as the object of the contract of sale, while thedebt is considered as the purchase price.xAquintey v. Tibong511 SCRA 414 (2006).

    Elements of dation in payment: (a) performance of the prestation in lieu of payment(animo solvendi) which may consist in the delivery of a corporeal thing or a real right or acredit against the third person; (b) some difference between the prestation due and that

    15Commissioner of Internal Revenue v. Arnoldus Carpentry Shop, 159 SCRA 199 (1988); Del Monte Philippines, Inc.

    v. Aragones, 461 SCRA 139 (2005).

  • 7/31/2019 SALES Annotated Syllabus

    5/60

    5

    which is given in substitution (aliud pro alio); and (c) agreement between the creditor anddebtor that the obligation is immediately extinguished by reason of the performance of a

    presentation different from that due. Lo v. KJS Eco-Formwork System Phil., Inc., 413

    SCRA 182 (2003).16

    Fordacion to arise, there must be actual delivery of the property to the creditor by wayof extinguishment of the pre-existing debt. xPhilippine Lawin Bus Co. v. CA, 374 SCRA 332(2002).

    17BUTSEEOBITER:xSSS v. Court of Appeals, 553 SCRA 677 (2008).

    There is no dation when there is no such transfer of ownership in favor of the creditor,as when the possession is only by way of security. xPNB v. Pineda, 197 SCRA 1 (1991).

    A creditor, especially a bank, which enters into dacion en pago, should know and mustaccept the legal consequence thereof, that the pre-existing obligation is totally extinguished.xEstanislao v. East West Banking Corp., 544 SCRA 369 (2008).

    6. Lease (Arts. 1484 and 1485)

    When rentals in a lease are clearly meant to be installment payments to a salecontract, despite the nomenclature given by the parties, it is a sale by installments andgoverned by the Recto Law. xFilinvest Credit Corp. v. CA, 178 SCRA 188 (1989).

    II. PARTIES TO A CONTRACT OF SALE (Arts. 1489-1492)

    1. General Rule: Every person having legal capacity to obligate himself, may validly enter intoa contract of sale, whether as seller or as buyer. (Art. 1489)

    2. Minors, Insane and Demented Persons, Deaf-Mutes(Arts. 1327, 1397 and 1399)

    A minor cannot be deemed to have given her consent to a contract of sale; consent isamong the essential requisites of a contract, including one of sale, absent of which therecan be no valid contract. [?] xLabagala v. Santiago, 371 SCRA 360 (2001).

    a. Necessaries (Arts. 1489 and 290)

    b.xEmancipation (Arts. 399 and 1397; Inutile: Majority age now at 18 years, Arts. 234and 236, Family Code, amended by R.A. 6809).

    c. Protection of the Senile and Elderly (Art. 24) andIlliterates (Art. 1332)

    Under Art. 1332, when one of the parties is unable to read, or if the contract is in alanguage not understood by him, and mistake or fraud is alleged, the person enforcing thecontract must show that the terms thereof have been fully explained to the former;otherwise, sale is void. [?] xVda. De Ape v. Court of Appeals , 456 SCRA 193 (2005).

    While a person is not incompetent to contract merely because of advanced years or byreason of physical infirmities, when such age or infirmities have impaired the mentalfaculties so as to prevent the person from properly, intelligently or firmly protecting hisproperty rights, then he is undeniably incapacitated, and the sale he entered into is void

    [?]. Paragas v. Heirs of Dominador Balacano, 468 SCRA 717 (2005).18

    3. Sales By and Between Spouses:

    a.Contracts with Third Parties (Arts. 73, 96, and 124, Family Code)

    16Aquintey v. Tibong511 SCRA 414 (2006).

    17Filinvest Credit Corp. v. Philippine Acetylene Co., Inc. 111 SCRA 421 (1982); Vda. de Jayme v. Court of Appeals,

    390 SCRA 380 (2002).18

    Domingo v. Court of Appeals, 367 SCRA 368 (2001).

  • 7/31/2019 SALES Annotated Syllabus

    6/60

    6

    Under Art. 124 of Family Code, sale by husband of a conjugal property without thewifes consent is void, not merely voidable, since the resulting contract lacks one of theessential elements of full consent. xGuiang v. CA, 291 SCRA 372 (1998).

    19

    A wife affixing her signature to a Deed of Sale as a witness is deemed to have givenher consent. xPelayo v. Perez, 459 SCRA 475 (2005).

    As an exception, husband may dispose of conjugal property without wifes consent ifsuch sale is necessary to answer for conjugal liabilities mentioned in Articles 161 and 162.

    xAbalos v. Macatangay, Jr., 439 SCRA 64 (2004).

    b.Between Spouses (Arts. 133, 1490, 1492; Sec. 87, Family Code)

    Sales between spouses who are not governed by a complete separation of propertyregime are void, not just voidable. xMedina v. Collector, 1 SCRA 302 (1960).

    Sale by husband of conjugal land to his concubine is null and void for being contrary tomorals and public policy and subversive of the stability of the family, a basic social

    institution which public policy cherishes and protects. Calimlim-Canullas v. Fortun, 129

    SCRA 675 (1984).20

    Since under Art. 1490, the spouses cannot validly sell property to one another, thenpolicy consideration and the dictates of morality require that the prohibition should apply

    also to common-law relationships. cf. Matabuena v. Cervantes, 38 SCRA 284 (1971).Nevertheless, when property resold to a third-party buyer in good faith and for value,

    reconveyance is no longer available. xCruz v. CA, 281 SCRA 491 (1997).

    The in pari delicto doctrinewould apply to the spouses-parties under Art. 1490, sinceonly the heirs and the creditors can question the sales nullity. xModina v. Court ofAppeals, 317 SCRA 696 (1999).

    4. Others Relatively Disqualified (Arts. 1491 and 1492)

    Contracts entered into in violation of Arts. 1490 and 1492 are not merely voidable, but

    are null and void. Rubias v. Batiller, 51 SCRA 120 (1973).21

    a.Guardians, Agents and Administrators

    No more need to comply with xRodriquez v. Mactal, 60 Phil. 13 (1934) whichrequired showing that a third party bought as conduit/nominee of the buyer disqualifiedunder Art. 1491; rather, the presumption now is that such disqualified party obtained the

    property in violation of said article. Philippine Trust Co. v. Roldan, 99 Phil. 392

    (1956).

    Prohibition against agents does not apply if the principal consents to the sale of theproperty in the hands of the agent.xDistajo v. CA, 339 SCRA 52 (2000).

    Hereditary rights are not included in the prohibition insofar as administrator orexecutor of the estate of the deceased. xNaval v. Enriquez, 3 Phil. 669 (1904).

    b.Attorneys.

    Prohibition applies only while litigation is pending. xDirector of Lands v. Ababa, 88SCRA 513 (1979); even when the litigation is not adversarial in nature Rubias v.

    Batiller, 51 SCRA 120 (1973); or when it is a certiorari proceeding that may have nomeritxValencia v. Cabanting, 196 SCRA 302 (1991).

    Prohibition applies only to a sale to a lawyer of record, and does not coverassignment of the property given in judgment made by a client to an attorney, who hasnot taken part in the case. xMunicipal Council of Iloilo v. Evangelista, 55 Phil. 290

    19Cirelos v. Hernandez, 490 SCRA 625 (2006); Bautista v. Silva, 502 SCRA 334 (2006).

    20Ching v. Goynako, Jr., 506 SCRA 735 (2006).

    21Uy Sui Pin v. Cantollas, 70 Phil. 55 (1940); Medina v. Collector, 1 SCRA 302 (1961).

  • 7/31/2019 SALES Annotated Syllabus

    7/60

    7

    (1930);22

    nor to a lawyer who acquired property prior to the time he intervened as counselin the suit involving such property.xDel Rosario v. Millado, 26 SCRA 700(1969).

    Prohibition does not apply: (a) to sale of a land acquired by a client to satisfy ajudgment in his favor, to his attorney as long as the property was not the subject of thelitigation. xDaroy v. Abecia, 298 SCRA 172 (1998); or (b) to a contingency feearrangement which grants the lawyer of record proprietary rights to the property inlitigation since the payment of said fee is not made during the pendency of litigation but

    only after judgment has been rendered.Fabillo v. IAC, 195 SCRA 28 (1991).

    23

    c.Judges

    A judge should restrain himself from participating in the sale of propertiesit isincumbent upon him to advise the parties to discontinue the transaction if it is contrary tolaw. Britanico v. Espinosa, 486 SCRA 523 (2006).

    A judge who buys property in litigation before his court after the judgment becomesfinaldoes not violate Art. 1491, but he can be administratively disciplined for violation ofthe Code of Judicial Ethics. xMacariola v. Asuncion, 114 SCRA 77 (1982).

    Even when the main cause is a collection of a sum of money, the properties leviedare still subject to the prohibition. xGan Tingco v. Pabinguit, 35 Phil. 81 (1916).

    III.SUBJECT MATTER OF SALE (Arts. 1459 to 1465)

    Transfer of title or an agreement to transfer it for a price paid or promised to be paid isthe essence of sale. xCommissioner of Internal Revenue v. CA and Ateneo de ManilaUniversity, 271 SCRA 605 (1997).

    The Civil Code provisions defining sales is a catch-all provision which effectively bringswithin it grasp a whole gamut of transfers whereby ownership of a thing is ceded for aconsideration. Polytechnic University v. CA, 368 SCRA 691 (2001).

    Where under an agreement, a party renounces and transfers whatever rights, interests,or claims she has over a parcel of land in favor of another party in consideration of the latterspayment of therein loan, the agreement is essentially a sale, and the rule on delivery effectedthrough a public instrument apply. xCaoibes, Jr. v. Caoibes-Pantoja, 496 SCRA 273 (2006).

    1. Must Be Existing, Future or Contingent (Arts. 1347, 1348, and 1462)

    a. Emptio Rei Speratae (Arts. 1461 and 1347)

    Pending crops which have potential existence may be valid object of sale.xSibal v.Valdez, 50 Phil. 512 (1927); and such transaction cannot be considered to effectively besale of the land or any part thereof. xPichel v. Alonzo, 111 SCRA 341 (1981).

    b. Emptio Spei (Art. 1461)

    c. Subject to Resolutory Condition (Art. 1465)

    2. Must Be Licit (Arts. 1347, 1459 and 1575)

    Under Art. 1347, a sale involving future inheritance is void and cannot be the sourceof any right nor create any obligation.xTaedov. Court of Appeals, 252 SCRA 80 (1996).

    Article 1347 does not cover waiver of hereditary rights which is not equivalent to sale,since waiver is a mode of extinction of ownership in favor of the other persons who areco-heirs. xAcap v. Court of Appeals, 251 SCRA 30 (1995).

    A mortgagor is not prevented from selling the property, since it is merelyencumbrance and effect a loss of his principal attribute as owner to dispose of the

    22Gregorio Araneta, Inc. v. Tuason de Paterno, 49 O.G. 45 (1952).

    23Recto v. Harden, 100 Phil. 427 (1956); Vda. de Laig v. CA, 86 SCRA 641 (1978).

  • 7/31/2019 SALES Annotated Syllabus

    8/60

    8

    property. Law even considers void a stipulation forbidding the owner from alienatingmortgaged immovable.xPineda v. CA, 409 SCRA 438 (2003).

    3. Must Be Determinate or At Least Determinable (Art. 1460)

    When the deed of sale describes a lot adjacent to the land seen, agreed upon anddelivered to the buyer, such land is the one upon which the minds have met, and not that

    erroneously described in the deed. Atilano v. Atilano, 28 SCRA 231 (1969).24

    a.Generic things may be object of sale (Arts. 1246 and 1409[6])

    Subject matter is determinable when by a formula or description agreed upon atperfection there is a way by which the courts can delineate independent of the will of

    the parties. Melliza v. City of Iloilo, 23 SCRA 477 (1968).

    Where the lot sold is said to adjoin the previously paid lot on three sides thereof,the subject lot is capable of being determined without the need of any new contract,even when the exact area of the adjoining residential lot is subject to the result of asurvey. xSan Andres v. Rodriguez, 332 SCRA 769 (2000).

    Determinable subject matter of sale are not subject to risk of loss until they are

    physically segregated or particularly designated. Yu Tek & Co. v. Gonzales, 29 Phil.384 (1915).

    b.Undivided Interest (Art. 1463) orUndivided Share in a Mass of Fungible Goods(Art. 1464) May result it co-ownership.

    4. Quantity of Subject Matter Not Essential for Perfection? (Art. 1349)

    Sale of grains is perfected even when the exact quantity or quality is not known, so

    long as the source of the subject is certain. NGA v. IAC, 171 SCRA 131 (1989).

    Where seller quoted to buyer the items offered for sale, by item number, part number,description and unit price, and the buyer had sent in reply a purchase order withoutindicating the quantity being order, there was already a perfected contract of sale, even

    when required letter of credit had not been opened by the buyer. Johannes Schuback

    & Sons Phil. Trading Corp. v. CA, 227 SCRA 719 (1993).

    5. Sellers Obligation to Transfer Title to Buyer(Art. 1459, 1462, and 1505)

    a. Seller's Ownership Need Not Exist at Perfection:

    Sale of copra for future delivery does not make seller liable for estafa for failing todeliver because the contract is still valid and the obligation was civil and not criminal.xEsguerra v. People, 108 Phil. 1078 (1960).

    A perfected contract of sale cannot be challenged on the ground of the sellersnon-ownership of the thing sold at the time of the perfection of the contract; it is atdelivery that the law requires the seller to have the right to transfer ownership of thething sold. xAlcantara-Daus v. de Leon, 404 SCRA 74 (2003).

    It is essential that seller is owner of the property he is selling. The principalobligation of a seller is to transfer the ownership of the property sold (Art. 1458). Thislaw stems from the principle that nobody can dispose of that which does not belong tohim. NEMO DAT QUOD NON HABET. xNoel v. CA, 240 SCRA 78 (1995).

    That the sellers are no longer owners of the goods at perfection does not appearto be one of the void contracts enumerated in Art. 1409 of Civil Code, and under Art.1402 the Civil Code itself recognizes a sale where the goods are to be acquired x x xby the seller after the perfection of the contract of sale clearly implying that a sale is

    24Londres v. CA, 394 SCRA 133 (2002).

  • 7/31/2019 SALES Annotated Syllabus

    9/60

    9

    possible even if the seller was not the owner at the time of sale, provided he acquirestitle to the property later on; nevertheless such contract may be deemed to beinoperative and may thus fall, by analogy, under Art. 1409(5): Those which

    contemplate an impossible service. Nool v. CA, 276 SCRA 149 (1997).

    b.Subsequent Acquisition of Title by Non-Owner Seller (Art. 1434) validates thesale and title passes to the seller by operation of law.

    c. Acquisition by the Buyer May Even Depend on Contingency (Art. 1462).

    X6.Illegality of Subject Matter (Arts. 1409, 1458, 1461, 1462, and 1575)

    a. Special Laws: narcotics (R.A. 6425); wild bird or mammal (Act 2590, Sec. 7); rare wildplants (Act 3983); poisonous plants or fruits (R.A. 1288); dynamited fish (R.A 428);gunpowder and explosives (Act 2255); firearms and ammunitions (P.D. 9); sale ofrealty by non-Christians (Sec. 145, Revised Adm. Code, R.A 4252)

    b. Following Sales of Land Void:

    By Non-Christian if not approved by Provincial Governor per Sec. 145 of RevisedAdministrative Code. xTac-an v. CA, 129 SCRA 319 (1984).

    Friar land without consent of Secretary of Agriculture required under Act No. 1120. xAlonsov. Cebu Country Club, Inc., 375 SCRA 390 (2002); Liao v. CA, 323 SCRA 430 (2000).

    Made in violation of land reform laws declaring tenant-tillers as the full owners of the landsthey tilled.xSiacor v. Gigantana, 380 SCRA 306 (2002).

    Reclaimed lands are of the public domain and cannot, without congressional fiat, be sold,public or private. Fisheries Dev. Authority v. Court of Appeals, 534 SCRA 490 (2007).

    IV. PRICE AND OTHER CONSIDERATION (Arts. 1469-1474)

    Price signifies the sum stipulated as the equivalent of the thing sold and also everyincident taken into consideration for the fixing of the price put to the debit of the buyer andagreed to by him. xInchausti & Co. v. Cromwell, 20 Phil. 345 (1911).

    Seller cannot unilaterally increase the price previously agreed upon with the buyer, evenwhen due to increased construction costs. xGSIS v. Court of Appeals, 228 SCRA 183 (1993).

    Buyer who opted to purchase the land on installment basis with imposed interest, cannotlater unilaterally disavow the obligation created by the stipulation in the contract which setsthe interest at 24% per annum: The rationale behind having to pay a higher sum on theinstallment is to compensate the vendor for waiting a number of years before receiving thetotal amount due. The amount of the stated contract price paid in full today is worth muchmore that a series of small payments totaling the same amount. x x x To assert that mereprompt payment of the monthly installments should obviate imposition of the stipulatedinterest is to ignore an economic fact and negate one of the most important principles onwhich commerce operates.xBortikey v. AFP RSBS, 477 SCRA 511 (2005).

    1. Price Must Be Real (Art. 1471)

    a. When Price Simulated

    (1) Mapalo v. Mapalo, 17 SCRA 114 (1966), versus: When two aged ladies, not

    versed in English, sign a Deed of Sale on representation by buyer that it was merelyto evidence their lending of money, the situation constitutes more than just fraud andvitiation of consent to give rise to a voidable contract, since there was in fact nointention to enter into a sale, there was no consent at all, and more importantly, therewas no consideration or price agreed upon, which makes the contract void ab initio.Rongavilla v. Court of Appeals, 294 SCRA 289 (1998).

    (2) Mate v. CA, 290 SCRA 463 (1998), versus: When Deed of Sale was executed to

    facilitate transfer of property to buyer to enable him to construct a commercial

  • 7/31/2019 SALES Annotated Syllabus

    10/60

    10

    building and to sell the property to the children, such arrangement being merely asubterfuge on the part of buyer, the agreement cannot also be taken as aconsideration and sale is void. Yu Bun Guan v. Ong, 367 SCRA 559 (2001).

    (3) Effects When Price Simulated The principle of in pari delicto nonoritur action,which denies all recovery to the guilty parties inter se, where the price is simulated;the doctrine applies only where the nullity arises from the illegality of theconsideration or the purpose of the contract. xModina v. Court of Appeals, 317

    SCRA 696 (1999).25

    b. When Price is False (Arts. 1353 and 1354)

    When the parties intended to be bound but the deed did not reflect the actual priceagreed upon, there is only a relative simulation of the contract which remains valid andenforceable, but subject to reformation. xMacapgal v. Remorin, 458 SCRA 652 (2005).

    When price indicated in deed of absolute sale is undervalued considerationpursuant to intention to avoid payment of higher capital gains taxes, the price stated isfalse, but the sale is still valid and binding on the real terms. xHeirs of Spouses Balite v.Lim, 446 SCRA 54 (2004).

    c.Non-Payment of Price

    Sale being consensual, failure of buyer to pay the price does not make the contractvoid for lack of consideration or simulation, but results in buyers default, for which theseller may exercise his legal remedies. xBalatbat v. CA, 261 SCRA 128 (1996).

    26

    In a contract of sale, the non-payment of the price is a resolutory condition whichextinguishes the transaction that, for a time, existed and discharges the obligationscreated thereunder. [?] The remedy of an unpaid seller in a contract of sale is to seekeither specific performance or rescission. xHeirs of Pedro Escanlar v. Court of Appeals,281 SCRA 176 (1997).

    27

    Badge That Price Is Simulated, Not Just Unpaid:It is a badge of simulated price,which render the sale void, when the price, which appears thereon as paid, has in factnever been paid by the purchaser to the seller. xVda. de Catindig. v. Heirs of CatalinaRoque, 74 SCRA 83 (1976).

    28

    2. Must Be in Money or Its Equivalent (Arts. 1458 and 1468)

    Price must be valuable consideration as mandated by Civil Law, instead of any

    price mandated in common law. Ong v. Ong, 139 SCRA 133 (1985); Bagnas v. CA,

    176 SCRA 159 (1989); Republic v. Phil. Resources Dev., 102 Phil. 960 (1958).

    Consideration for sale can take different forms, such as theprestation or promise of athing or service by another, thus:

    When deed provides that the consideration was the expected profits from the subdivisionproject. xTorres v. Court of Appeals, 320 SCRA 428 (1999).

    Cancellation of liabilities on the property in favor of the seller. xPolytechnic University v.Court of Appeals,368SCRA691(2001).

    25Yu Bun Guan v. Ong, , 367 SCRA 559 (2001); Gonzales v. Trinidad, 67 Phil. 682 (1939)

    26Pealosa v. Santos, 363 SCRA 545 (2001); Soliva v. The Intestate Estate of Marcelo M. Villalba, 417 SCRA 277

    (2003); Province of Cebu v. Heirs of Rufina Morales, 546 SCRA 315 (2008).27

    Villaflor v. Court of Appeals, 280 SCRA 297 (1997).28

    Ocejo v. Florex, 40 Phil. 921 (1920); Ladanga v. CA, 131 SCRA 361 (1984); Rongavilla v. Court of Appeals, 294SCRA 289 (1998); Labagala v. Santiago, 371 SCRA 360 (2001); Cruz v. Bancom Finance Corp., 379 SCRA 490 (2002);Montecillo v. Reynes, 385 SCRA 244 (2002); Republic v. Southside Homeowners Asso., 502 SCRA 587 (2006); Quimpo,

    Sr. v Abad Vda de Beltran, 545 SCRA 174 (2008).

  • 7/31/2019 SALES Annotated Syllabus

    11/60

    11

    Assumption of mortgage constituted on the property sold. xDoles v. Angeles, 492 SCRA607 (20060.

    29

    3. Must Be Certain or Ascertainable at Perfection (Art. 1469)

    a. How Price Determined to be Ascertainable

    (i) Set by third person appointed at perfection (Art. 1469)

    (ii) Set by the courts (Art. 1469)

    (iii) By reference to a definite day, particular exchange or market (Art. 1472)

    (iv) By reference to another thing certain, such as to invoices then in existence andclearly identified by the agreement xMcCullough v. Aenlle, 3 Phil. 285 (1904); orknown factors or stipulated formula (xMitsui v. Manila, 39 Phil. 624 (1919).

    Price is ascertainable if the terms of the contract furnishes the courts a basis ormeasure for determining the amount agreed upon, without having to refer back to eitheror both parties. xVillanueva v. Court of Appeals, 267 SCRA 89 (1997).

    30

    Where the sale involves an asset under a privatization scheme which attaches apeculiar meaning or signification to the term indicative price as merely constituting aball-park figure, then the price is not certain. xMoreno, Jr. v. Private Management Office,507 SCRA 63 (2006).

    Consideration is generally agreed upon as whole even if it consists of several parts,and even if it is contained in one or more instruments; otherwise there would be no pricecertain, and the contract of sale not perfected. xArimas v. Arimas, 55 O.G. 8682.

    b. Price Never Set By One or Both Parties (Arts. 1473, 1182), unless the price isseparately accepted by the other party.

    c. Effects of Unascertainability: Sale is inefficacious..

    BUT:If Buyer Appropriates the Object, He Must Pay Reasonable Price. (Art. 1474)

    There can be no concept of appropriation when it comes to land?Where a church organization has been allowed possession and introduce

    improvements on the land as part of its application to purchase with the NHA, andthereafter it refused the formal resolution of the NHA Board setting the price andinsisted on paying the lower price allegedly given by the NHA Field Office, there canbe no binding contract of sale upon which an action for specific performance canprosper, not even on fixing the price equal to the fair market value of the property.xNHA v. Grace Baptist Church, 424 SCRA 147 (2004).

    4. Manner of Payment of Price ESSENTIAL

    A definite agreement on the manner of payment of price is an essential element in theformation of a binding and enforceable contract sale; without it the sale is void and an action

    for specific performance must fail. Navarra v. Planters Dev. Bank, 527 SCRA 562

    (2007).31

    When the manner of payment of the price is discussed after acceptance, then suchacceptance did not produce a binding and enforceable contract of sale. xNavarro v. SugarProducer's Corp., 1 SCRA 1180 (1961).

    29The deed of sale with assumption of mortgage is a registrable instrument and must be registered with the Register of

    Deeds in order to bind third parties. Rodriguez v. Court of Appeals, 495 SCRA 490 (2006).30

    Boston Bank of the Philippines v. Manalo, 482 SCRA 108 (2006).31

    Velasco v. CA, 51 SCRA 439 (1973); Co v. Court of Appeals, 286 SCRA 76 (1998); San Miguel Properties

    Philippines v. Huang, 336 SCRA 737 (2000); Montecillo v. Reynes, 385 SCRA 244 (2002); Edrada v. Ramos, 468 SCRA597 (2005); Cruz v. Fernando, 477 SCRA 173 (2005); Marnelego v. Banco Filipino Savings and Mortgage Bank, 480SCRA 399 (2006); Boston Bank of the Phil. v. Manalo, 482 SCRA 108 (2006); Platinum Plans Phil., Inc. v. Cucueco, 488

    SCRA 156 (2006); Manila Metal Container Corp. v. PNB, 511 SCRA 444 (2006).

  • 7/31/2019 SALES Annotated Syllabus

    12/60

    12

    Where there is no other basis for the payment of the subsequent amortizations in a Deedof Conditional Sale, the reasonable conclusion one can reach is that the subsequentpayments shall be made in the same amount as the first payment. [?] xDBP v. Court ofAppeals, 344 SCRA 492 (2000).

    5. Inadequacy of Price Does Not Affect Ordinary Sale (Arts. 1355 and 1470)

    Mere inadequacy of the price does not affect the validity of the sale when both parties are

    in a position to form an independent judgment concerning the transaction, unless fraud,mistake, or undue influence indicative of a defect in consent is present. The contract may beannulled for vitiated consent and not due to the inadequacy of price. xBautista v. Court ofAppeals, 436 SCRA 141 (2004).

    32

    Absent any evidence of the fair market value of a land as of the time of its sale, it cannotbe concluded that the price at which it was sold was inadequate. xAcabal v. Acabal, 454SCRA 897 (2005).

    33

    a. Gross Inadequacy of Price May Avoid Judicial Sale:

    (i) Only when it is shocking to the conscience of man. xPascua v. Simeon, 161 SCRA 1(1988); and

    (ii) There is showing that, in the event of a resale, a better price can be obtained. xCu Bie

    v. Court of Appeals, 15 SCRA 307 (1965).

    34

    UNLESS: There is right of redemption, in which case the proper remedy is to redeem.

    xDe Leon v. Salvador, 36 SCRA 567 (1970).35

    But: By way of extraordinary circumstances perceived, when in a judicial sale the right ofredemption has been lost, where the inadequacy of the price is purely shocking tothe conscience, such that the mind revolts at it and such that a reasonable manwould neither directly or indirectly be likely to consent to it, the same will be seaside. xCometa v. Court of Appeals, 351 SCRA 294 (2001).

    There is gross inadequacy in price if a reasonable man will not agree to dispose ofhis property. Dorado Vda. De Delfin v. Dellota, 542 SCRA 397 (2008).

    When judicial sale is voided without fault of purchaser, the latter is entitled return ofprice with simple interest, together with all sums paid out by him in improvementsintroduced on the property, taxes, and other expenses. xSeven Brothers Shipping Corp. v.Court of Appeals, 246 SCRA 33 (1995).

    b. Lesion of more than 1/4 of value of thing makes sale rescissible unless approvedby court . (Art. 1386).

    c.Gross inadequacy of price may raise the presumption of equitable mortgage. (Art.1602).

    V. FORMATION OF CONTRACT OF SALE (Arts. 1475-1488)

    A.POLICITACIONSTAGE (Art. 1479)

    Policitation stage covers the doctrine of freedom of contract which signifies or impliesthe right to choose with whom to contract. A property owner is free to offer his property forsale to any interested person, and is not duty bound to sell the same to the occupantthereof, absent any prior agreement vesting the occupants the right of first priority to buy.xGabelo v. Court of Appeals, 316 SCRA 386 (1999).

    32Ereeta v. Bezore, 54 SCRA 13 (1973).

    33Avila v. Barabat, 485 SCRA 8 (2006).

    34Tayengco v. Court of Appeals, 15 SCRA 306 (1965); Republic v. NLRC, 244 SCRA 564 (1995).

    35Vda. de Gordon v. Court of Appeals, 109 SCRA 388 (1981).

  • 7/31/2019 SALES Annotated Syllabus

    13/60

    13

    A negotiation is formally initiated by an offer, which, however, must be certain. At anytime prior to the perfection of the contract, either negotiating party may stop the negotiation.At this stage, the offer may be withdrawn; the withdrawal is effective immediately after itsmanifestation. To convert the offer into a contract, the acceptance must be absolute andmust not qualify the terms of the offer; it must be plain, unequivocal, unconditional andwithout variance of any sort from the proposal. Manila Metal Container Corp. v. PNB,511 SCRA 444 (2006).

    36

    An unaccepted unilateral promise (offer to buy or to sell) prior to acceptance, does notgive rise to any obligation or right. xRaroque v. Marquez, 37 O.G. 1911.

    Where the offer is given with a stated time for its acceptance, the offer is terminated atthe expiration of that time.xVillegas v. Court of Appeals, 499 SCRA 276 (2006).

    1. Option Contract

    An option is a preparatory contract in which one party grants to the other, for a fixedperiod and under specified conditions, the power to decide, whether or not to enter into aprincipal contract. It binds the party who has given the option, not to enter into the principalcontract with any other person during the period designated, and, within that period, toenter into such contract with the one to whom the option was granted, if the latter shoulddecide to use the option. It is a separate agreement distinct from the contract of sale which

    the parties may enter into upon the consummation of the option. Carceller v. Court ofAppeals, 302 SCRA 718 (1999).

    37

    An option imposes no binding obligation on the person holding the option aside from

    the consideration for the offer. Until accepted, it is not treated as a sale. Tayag v.

    Lacson, 426 SCRA 282 (2004).38

    Tenants, not being the registered owners, cannot grant an option on the land, muchless any exclusive right to buy the property under the Latin saying nem dat quod nonhabet. xTayag v. Lacson, 426 SCRA 282 (2004).

    a. Meaning of Separate Consideration (Arts. 1479 and 1324)

    A unilateral promise to sell, in order to be binding upon the promissor, must be for aprice certain and supported by a consideration separate from such price. xSalame v.

    Court of Appeals, 239 SCRA 356 (1995).39

    The separate consideration in an option may be anything of value, unlike in salewhere it must be the price certain in money or its equivalent. Villamor v. Court ofAppeals, 202 SCRA 607 (1991),

    40such when the option is attached to a real estate

    mortgagexSoriano v. Bautista, 6 SCRA 946 (1962).

    Although no consideration is expressly mentioned in an option contract, it ispresumed that it exists and may be proved, and once proven, the option is binding.xMontinola v. Cojuangco, 78 Phil. 481 (1947).

    b. No Separate Consideration: Void as Option, Valid as a Certain Offer Sanchez v.

    Rigos, 45 SCRA 368 (1972).41

    BUTLATELY: xYao Ka Sin Trading v. CA, 209 SCRA 763 (1991); xMontilla v. CA, 161SCRA 855 (1988); xNatino v. IAC, 197 SCRA 323 (1991); andxDiamante v. CA, 206 SCRA 52 (1992).

    36Navarra v. Planters Dev. Bank, 527 SCRA 562 (2007).

    37Laforteza v. Machuca, 333 SCRA 643 (2000); Buot v. CA, 357 SCRA 846 (2001); Tayag v. Lacson, 426 SCRA 282

    (2004);Abalos v. Macatangay, Jr., 439 SCRA 649 (2004); Vasquez v. Ayala Corp., 443 SCRA 231 (2004).38Adelfa Properties, Inc. v. CA, 240 SCRA 565 (1995); Kilosbayan, Inc. v. Morato, 246 SCRA 540 (1995); San Miguel

    Properties Philippines, Inc. v. Huang, 336 SCRA 737 (2000); Limson v. CA, 357 SCRA 209 (2001).39

    JMA House, Inc. v. Sta. Monica Industrial and Dev. Corp., 500 SCRA 526 (2006).40

    De la Cavada v. Diaz, 37 Phil. 982 (1918); xSan Miguel Properties Philippines, Inc. v. Huang, 336 SCRA 737 (2000)41AffirmingAtkins, Kroll & Co., Inc. v. Cua, 102 Phil. 948 (1958); overturningSouthwestern Sugar Molasses Co. v.

    Atlantic Gulf & Pacific Co., 97 Phil. 249 (1955).

  • 7/31/2019 SALES Annotated Syllabus

    14/60

    14

    c. There Must Be Acceptance of Option Offer. Vazquez v. CA, 199 SCRA 102 (1991).

    d. Proper Exercise of Option Contract. Nietes v. CA, 46 SCRA 654 (1972).

    An option attached to a lease when not exercised within the option period isextinguished and cannot be deemed to have been included in the implied renewal(tacita reconduccion) of the lease. xDizon v. CA, 302 SCRA 288 (1999).

    Proper exercise of an option gives rise to the reciprocal obligations of sale xHeirs ofLuis Bacus v. Court of Appeals, 371 SCRA 295 (2001),42

    which must be enforced withten (10) years as provided under Art. 1144. xDizon v. Court of Appeals, 302 SCRA 288(1999).

    There must be virtual exercise of option with the option period. Carceller v.Court of Appeals, 302 SCRA 718 (1999).

    2.Right of First Refusal

    A right of first refusal cannot be the subject of specific performance, but breach wouldallow a recovery of damages.xGuerrero v. Yigo, 96 Phil. 37 (1954).

    Rights of first refusal only constitute innovative juridical relations, but do not rise tothe level of contractual commitment since with the absence of agreement on price certain,

    they are not subject to contractual enforcement. Ang Yu Asuncion v. Court of Appeals,238 SCRA 602 (1994).

    Right of first refusal contained in a lease, when breached by promissor allowsenforcement by the promisee by way of rescission of the sale entered into with the thirdparty, pursuant to Arts. 1381(3) and 1385 of Civil Code. xGuzman, Bocaling & Co. v.

    Bonnevie, 206 SCRA 668 (1992); Equatorial Realty Dev., Inc. v. Mayfair Theater, Inc.,

    264 SCRA 483 (1996);43

    Paranaque Kings Enterprises, Inc. v. CA, 268 SCRA 727,

    741 (1997).

    In a right of first refusal, while the object might be made determinate, the exercise ofthe right would be dependent not only on the grantors eventual intention to enter into abinding juridical relation with another but also on terms, including the price, that are yet tobe firmed up. . . . the offer may be withdrawn anytime by communicating the withdrawal

    to the other party. Vasquez v. Ayala Corp., 443 SCRA 231 (2004).

    A right of first refusal clause simply means that should the lessor decide to sell theleased property during the term of the lease, such sale should first be offered to thelessee; and the series of negotiations that transpire between the lessor and the lessee onthe basis of such preference is deemed a compliance of such clause even when no finalpurchase agreement is perfected between the parties. The lessor was then at liberty tooffer the sale to a third party who paid a higher price, and there is no violation of the right

    of the lessee. Riviera Filipina, Inv. v. Court of Appeals, 380 SCRA 245 (2002).44

    A right of first refusal in a lease in favor of the lessee cannot be availed of by thesublessee. xSadhwani v. Court of Appeals, 281 SCRA 75 (1997).

    4.Mutual Promises to Buy and Sell(Art. 1479): True Contract to SellMutual promises to buy and sell a certain thing for a certain price gives each of the

    contracting parties a right to demand from the other the fulfillment of the obligation.xBorromeo v. Franco, 5 Phil. 49 (1905).

    42Limson v. Court of Appeals, 357 SCRA 209 (2001).

    43Rosencor Dev. Corp. v. Inquing, 354 SCRA 119 (2001); Conculada v. CA, 367 SCRA 164 (2001); Polytechnic

    University v. CA,368SCRA691(2001); Riviera Filipina, Inv. v. Court of Appeals, 380 SCRA 245 (2002); Lucrative Realty

    and Dev. Corp. v. Bernabe, Jr., 392 SCRA 679 (2002); Villegas v. Court of Appeals, 499 SCRA 276 (2006).44

    Polytechnic University v. CA,368SCRA691(2001);Villegas v. CA, 499 SCRA 276 (2006).

  • 7/31/2019 SALES Annotated Syllabus

    15/60

    15

    Even in this case the certainty of the price must also exist, otherwise, there is no validand enforceable contract to sell. xTan Tiah v. Yu Jose, 67 Phil. 739 (1939).

    An accepted bilateral promise to buy and sell is in a sense similar to, but not exactlythe same, as a perfected contract of sale because there is already a meeting of mindsupon the thing which is the object of the contract and upon the price.

    45But a contract of

    sale is consummated only upon delivery and payment, whereas in a bilateral promise tobuy and sell gives the contracting parties rights in personam, such that each has the right

    to demand from the other the fulfillment of their respective undertakings. Macion v.Guiani, 225 SCRA 102 (1993).46

    The cause of action under a mutual promise to buy and sell is 10 years. xVillamor v.Court of Appeals, 202 SCRA 607 (1991).

    B. PERFECTION STAGE (Arts. 1475, 1319, 1325 and 1326)

    Sale is perfected at the moment there is a meeting of minds upon the thing which is theobject of the contract and upon the price. From that moment, the parties may reciprocallydemand performance subject to the law governing the form of contracts. xMarnelego v.Banco Filipino Savings and Mortgage Bank, 480 SCRA 399 (2006).

    47

    Mutual consent being a state of mind, its existence may only be inferred from theconfluence of two acts of the parties: an offer certain as to the object of the contract and its

    consideration, and an acceptance of the offer which is absolute in that it refers to the exactobject and consideration embodied in said offer. xVillanueva v. PNB, 510 SCRA 275(2006).

    48

    If a material element of a contemplated contract is left for future negotiations, the sameis too indefinite to be enforceable. For a contract to be enforceable, its terms must becertain and explicit, not vague or indefinite. xBoston Bank of the Phil. v. Manalo, 482 SCRA108 (2006).

    So long as there is any uncertainty or indefiniteness, or future negotiations orconsideration yet to be had between the parties, there is no contract at all. xMoreno, Jr. v.Private Management Office, 507 SCRA 63 (2006).

    1.Absolute Acceptance of a Certain Offer(Art. 1475)

    A qualified acceptance or one that involves a new proposal constitutes a counter-offerand a rejection of the original offer. The acceptance must be identical in all respects with

    that of the offer so as to produce consent or meeting of minds. Manila Metal Container

    Corp. v. PNB, 511 SCRA 444 (2006).49

    Placing the word Noted and signing such note at the bottom of the written offercannot be considered an acceptance that would give rise to a valid contract of sale. xDBPv. Ong, 460 SCRA 170 (2005).

    If sale subject to suspensive condition: No perfected sale of a lot where the awardthereof was expressly made subject to approval by the higher authorities and thereeventually was no acceptance manifested by the supposed awardee. xPeople's Homesite& Housing Corp. v. CA, 133 SCRA 777 (1984).

    2. When Deviation Allowed: Villonco v. Bormaheco, 65 SCRA 352 (1975).

    3. Sale by Auction (Arts. 1476, 1403(2)(d), 1326)

    45El Banco Nacional Filipino v. Ah Sing, 69 Phil. 611 (1940); Manuel v. Rodriguez, 109 Phil. 1 (1960).

    46Borromeo v. Franco, 5 Phil. 49 (1905); Villamor v. CA, 202 SCRA 607 (1991); Coronel v. CA, 263 SCRA 15 (1996).

    47Valdez v. Court of Appeals, 439 SCRA 55 (2004); Blas v. Angeles-Hutalla, 439 SCRA 273 (2004); Ainza v. Padua,

    462 SCRA 614 (2005); Cruz v. Fernando, 477 SCRA 173 (2005).48

    Moreno, Jr. v. Private Management Office, 507 SCRA 63 (2006).49

    Beaumont v. Prieto, 41 Phil. 670 (1916); Zayco v. Serra, 44 Phil. 326 (1923).

  • 7/31/2019 SALES Annotated Syllabus

    16/60

    16

    The terms and conditions provided by the owner of property to be sold at auction arebinding upon all bidders, whether they knew of such conditions or not. xLeoquinco v.Postal Savings Bank, 47 Phil. 772 (1925).

    A auction sale is perfected by the fall of the hammer or in other customary mannerand it does not matter that another was allowed to match the bid of the highest bidder.xProvince of Cebu v. Heirs of Rufina Morales, 546 SCRA 315 (2008).

    4.Earnest Money(Art. 1482)Earnest money given by the buyer shall be considered as part of the price and as

    proof of the perfection of the contract. It constitutes an advance payment to be deductedfrom the total price.xEscueta v. Lim, 512 SCRA 411 (2007).

    Absent proof of the concurrence of all the essential elements of a contract of sale, thegiving of earnest money cannot establish the existence of a perfected contract of sale.Manila Metal Container Corp. v. PNB, 511 SCRA 444 (2006).

    50

    Article 1482 does not apply when earnest money given in a contract to sellxSerrano v.Caguiat, 517 SCRA 57 (2007), especially where by stipulation the buyer has the right towalk away from the transaction, with no obligation to pay the balance, although he willforfeit the earnest money. xChua v. Court of Appeals, 401 SCRA 54 (2003).

    51

    When there is no provision for forfeiture of earnest money in the event the sale fails tomaterialize, then with the rescission it becomes incumbent upon seller to return theearnest money as legal consequence of mutual restitution. xGoldenrod, Inc. v. Court ofAppeals, 299 SCRA 141 (1998).

    5. Difference Between Earnest Money and Option Money. Oesmer v. Paraiso Dev.Corp., 514 SCRA 228 (2007).

    6. Sale Deemed Perfected Where Offer Was Made. (Art. 1319)

    C. FORMAL REQUIREMENTS OF SALES (Arts. 1357, 1358, 1406 and 1483)

    1. Form Not Important for Validity of Sale

    Sale of land under private instrument is valid. xGallar v. Husain, 20 SCRA 186

    (1967).52

    Articles 1357 and 1358, in relation to Art. 1403(2), require that the sale of real propertymust be in writing for it to be enforceable, it need not be notarized for there is nothing inthose provisions which require that it must be executed in a public document to be valid.xMartinez v. CA, 358 SCRA 38 (2001);

    53but both its due execution and its authenticity

    must be proven, pursuant to Sec. 20, Rule 132 of the Rules of Court. xTigno v. Aquino,444 SCRA 61 (2003).

    a. Other Rulings on Deeds of Sale:

    Seller may agree to a deed of absolute sale before full payment of the purchase price. x PanPacific Industrial Sales Co., Inc. v. CA, 482 SCRA 164 (2006).

    Assuming that the buyers failed to pay the full price stated in the Deed of Sale, such partial

    failure would not render the sale void. Bravo-Guerrero v. Bravo, 465 SCRA 244 (2005). That marital consent was executed prior to the Deed of Absolute Sale does not indicate that it

    is a phoney. Pan Pacific Industrial Sales Co., Inc. v. CA, 482 SCRA 164 (2006).

    A Deed of Sale when acknowledged before a notary public, enjoys the presumption of

    regularity and due execution. To overthrow that presumption, sufficient, clear and convincing

    50Limjoco v. CA, 37 SCRA 663 (1971); Villonco v. Bormaheco, 65 SCRA 352 (1975); Spouses Doromal, Sr. v. CA, 66

    SCRA 575 (1975); PNB v. CA, 262 SCRA 464 (1996); San Miguel Properties Philippines, Inc. v. Huang, 336 SCRA 737

    (2000); Platinum Plans Phil. Inc. v. Cucueco, 488 SCRA 156 (2006).51

    San Miguel Properties Philippines, Inc. v. Huang, 336 SCRA 737 (2000).52

    F. Irureta Goyena v. Tambunting, 1 Phil. 490 (1902).53

    Heirs of Biona v. CA, 362 SCRA 29 (2001).

  • 7/31/2019 SALES Annotated Syllabus

    17/60

    17

    evidence is required, otherwise the document should be upheld. xBravo-Guerrero v. Bravo,465 SCRA 244 (2005).

    54

    Notarization of Deeds of Sale by one who was not a notary public does not affect the validitythereof; said documents were merely converted into private documents. xR.F. Navarro & Co.Inc. v. Vailoces, 361 SCRA 139 (2001).

    Notarization of a deed of sale does not guarantee its validity nor is it conclusive of the trueagreement of the parties thereto, because it is not the function of the notary public to validatean instrument that was never intended by the parties to have any binding legal effect.

    xSalonga v. Concepcion, 470 SCRA 291 (2005).55

    Buyers immediate taking of possession of subject property corroborates the truthfulness andauthenticity of the deed of sale. xAlcos v. IAC, 162 SCRA 823 (1988). Conversely, thesellers continued possession of the property makes dubious the contract of sale betweenthem. xSantos v. Santos, 366 SCRA 395 (2001).

    56

    Any substantial difference between the terms of the Contract to Sell and the concomitantDeed of Absolute Sale (such as difference in subject matter, and difference in price and/orthe terms thereof), does not make the transaction between the seller and the buyer void, for it

    is truism that the execution of the Deed of Absolute Sale effectively rendered the previousContract to Sell ineffective and cancelled [through the process of novation]. xLumbres v.Talbrad, Jr., 516 SCRA 575 (2007).

    b. Value of Business Forms to Prove Sale:

    Business forms, e.g., order slip, delivery charge invoice and the like, which areissued by the seller in the ordinary course of the business are not always fullyaccomplished to contain all the necessary information describing in detail the wholebusiness transactionmore often than not they are accomplished perfunctorilywithout proper regard to any legal repercussion for such neglect such that despitetheir being often incomplete, said business forms are commonly recognized inordinary commercial transactions as valid between the parties and at the very leastthey serve as an acknowledgment that a business transaction has in fact transpired.xDonato C. Cruz Trading Corp. v. CA, 347 SCRA 13 (2000).

    These documents are not mere scraps of paper bereft of probative value but vitalpieces of evidence of commercial transactions. They are written memorials of thedetails of the consummation of contracts. xLagon v. Hooven Comalco Industries, Inc.,349 SCRA 363 (2001).

    2. WHEN FORM IMPORTANT IN SALE

    a. To Bind Third Parties

    Article 1358 which requires the embodiment of certain contracts in a publicinstrument is only for convenience, and registration of the instrument only adverselyaffects third parties. Formal requirements are, therefore, for the benefit of third parties;and non-compliance therewith does not adversely affect the validity of the contract northe contractual rights and obligations of the parties thereunder. Fule v. CA, 286SCRA 698 (1998);

    57Dalion v. CA, 182 SCRA 872 (1990).

    58

    Non-registration of a contract of sale does not affect its validity and binding effect asbetween the contracting parties themselves. xUniversal Robina Sugar Milling Corp. v.Heirs of Angel Teves, 389 SCRA 316 (2002).

    While sale of land appearing in a private deed is binding between the parties, itcannot be considered binding on third persons, if it is not embodied in a public

    54Yason v. Arciaga, 449 SCRA 458 (2005); Union Bank v. Ong, 491 SCRA 581 (2006); Tapuroc v. Loquellano Vda. De

    Mende, 512 SCRA 97 (2007); Alfaro v. Court of Appeals, 519 SCRA 270 (2007); Santos v. Lumbao, 519 SCRA 408

    (2007); Pedrano v. Heirs of Benedicto Pedrano, 539 SCRA 401 (2007).55

    Nazareno v. CA, 343 SCRA 637 (2000); Santos v. Heirs of Jose P. Mariano, 344 SCRA 284 (2000)56

    Domingo v. CA, 367 SCRA 368 (2001).57

    Universal Robina Sugar Milling Corp. v. Heirs of Angel Teves, 389 SCRA 316 (2002).58

    Limketkai Sons Milling, Inc. v. CA, 250 SCRA 523 (1995);Agasen v. CA, 325 SCRA 504 (2000).

  • 7/31/2019 SALES Annotated Syllabus

    18/60

    18

    instrument and recorded in the Registry of Deeds. Secuya v. Vda. De Selma, 326

    SCRA 244 (2000).59

    b. For Enforceability Between the Parties: STATUTE OF FRAUDS (Arts. 1403 and 1405)

    The term Statute of Frauds is descriptive of the statutes which require certainclasses of contracts, such as agreements for the sale of real property, to be in writing,the purpose being to prevent fraud and perjury in the enforcement of obligations

    depending for their evidence on the unassisted memory of witnesses by requiringcertain enumerated contracts and transactions to be evidenced by a writing signed bythe party to be charged.

    60

    Presupposes Valid Contract of Sale The application of the Statute of Fraudspresupposes the existence of a perfected contract. When the records show that therewas no perfected contract of sale, there is no basis for the application of the Statute ofFrauds.xFirme v. Bukal Enterprises and Dev. Corp., 414 SCRA 190 (2003).

    61

    (1) Coverage:

    (i) Sale of Real Property A sale of realty cannot be proven by means ofwitnesses, but must necessarily be evidenced by a written instrument, dulysubscribed by the party charged, or by secondary evidence of the contents ofsuch document. No other evidence can be received except the documentaryevidence referred to. xGorospe v. Ilayat, 29 Phil. 21 (1914).62

    (ii)Agency to Sell or to Buy As contrasted from sale, an agency to sell does notbelong to any of the three categories of contracts covered by Arts. 1357 and1358 and not one enumerated under the Statutes of Frauds in Art. 1403. xLimv. Court of Appeals, 254 SCRA 170 (1996).

    63

    (iii) Rights of First Refusal A right of first refusal is not covered by the statuteof frauds. Furthermore, Art. 1403(2)(e) of Civil Code presupposes the existenceof a perfected, albeit unwritten, contract of sale; a right of first refusal, such asthe one involved in the instant case, is not by any means a perfected contract ofsale of real property.xRosencor Dev. Corp. v. Inquing, 354 SCRA 119 (2001).

    (iv) Equitable Mortgage Statute does not stand in the way of treating an absolute

    deed as a mortgage, when such was the parties intention, although theagreement for redemption or defeasance is proved by parol evidence.xCuyugan v. Santos, 34 Phil. 100 (1916).

    64

    (v) Right to Repurchase The deed of sale and the verbal agreement allowing theright of repurchase should be considered as an integral whole; the deed of saleis itself the note or memorandum evidencing the contract. xMactan CebuInternational Airport Authority v. Court of Appeals, 263 SCRA 736 (1996).

    (2) Memorandum ( Yuviengco v. Dacuycuy, 104 SCRA 668 [1981]; Limketkai

    Sons Milling, Inc. v. CA, 250 SCRA 523 [1995];BUT SEE255 SCRA 6).

    For the memorandum to take the sale out of the coverage of the Statute ofFrauds, it must contain all the essential terms of the contract of sale. xTorcuator v.Bernabe, 459 SCRA 439 (2005),

    65even when scattered into various

    correspondences which can be brought together xCity of Cebu v. Heirs of CandidoRubi, 306 SCRA 408 (1999).

    66

    59Talusan v. Tayag, 356 SCRA 263 (2001); Santos v. Manalili, 476 SCRA 679 (2005).

    60Shoemaker v. La Tondea, 68 Phil. 24 (1939).

    61xRosencor Development Corp. v. Inquing, 354 SCRA 119 (2001).

    62Alba Vda. De Rax v. Court of Appeals, 314 SCRA 36 (1999).

    63Torcuator v. Bernabe, 459 SCRA 439 (2005).

    64Rosales v. Suba, 408 SCRA 664 (2003).

    65Paredes v. Espino, 22 SCRA 1000 (1968).

    66Berg v. Magdalena Estate, Inc., 92 Phil. 110 (1952); Limketkai Sons Milling, Inc. v. CA, 250 SCRA 523 (1995); First

    Philippine Intl Bank v. CA, 252 SCRA 259 (1996).

  • 7/31/2019 SALES Annotated Syllabus

    19/60

    19

    EXCEPTION:Electronic Documents under the E-COMMERCE ACT(R.A.8792)

    (3) Partial Execution (Art. 1405) Ortega v. Leonardo, 103 Phil. 870 (1958);

    Claudel v. Court of Appeals, 199 SCRA 113

    (1991).

    Delivery of the deed to buyers agent, with no intention to part with the title untilthe purchase price is paid, does not take the case out of the Statute of Frauds.

    xBaretto v. Manila Railroad Co., 46 Phil. 964 (1924).

    The Statute of Frauds does not apply to contracts either partially or totallyperformed. In addition, a contract that violates the Statute of Frauds is ratified by theacceptance of benefits under the contract, such as the acceptance of the purchase

    price and using the proceeds to pay outstanding loans. Alfredo v. Borras, 404

    SCRA 145 (2003).67

    (4) Waiver (Art. 1405) Cross-examination on the contract is deemed a waiver of thedefense of the Statute.xLimketkai Sons Milling, Inc. v. CA, 250 SCRA 523 (1995).

    68

    (5) Rulings on Receipts and Other Documentary Evidence of Sale

    Since a contract of sale is perfected by mere consent, then when the dealer of

    motor vehicles accepts a deposit of P50,0000 and pulls out a unit from theassembler for that purpose, it was in breach of contract when it sold the carsubsequently to another buyer. xXentrex Automotive, Inc. v. Court of Appeals, 291SCRA 66 (1998).

    Sales invoices are not evidence of payment of the price, but evidence of thereceipt of the goods; since the best evidence to prove payment is the official receipt.El Oro Engravers Corp. v. Court of Appeals, 546 SCRA 42 (2008).

    A receipt which is merely an acknowledgment of the sum received, without anyindication therein of the total purchase price of the land or of the monthlyinstallments to be paid, cannot be the basis of valid sale. xLeabres v. CA, 146SCRA 158 (1986).

    69

    In itself, the absence of receipts, or any proof of consideration, would not be

    conclusive of the inexistence of a sale since consideration is always presumed.xTigno v. Aquino, 444 SCRA 61 (2003).

    Receipts proves payment which takes the sale out of the Statute of Frauds.

    Toyota Shaw, Inc. v. Court of Appeals, 244 SCRA 320 (1995).

    c. For Validity: Sale of Realty Through Agent, Authority Must Be in Writing (Art. 1874)

    When sale of a piece of land or any interest therein is through an agent, the authorityof the latter shall be in writing; otherwise, the sale shall be void, even when:

    Agent is the son of the owner. xDelos Reyes v. CA, 313 SCRA 632 (1999)

    There is partial payment of the price received by the supposed agent. xDizon v. CA, 396

    SCRA 154 (2003).70

    In the case of a corporate owner of realty. xCity-Lite Realty Corp. v. CA, 325 SCRA 385(2000).

    71

    67Vda. de Jomoc v. CA, 200 SCRA 74 (1991); Soliva v. The Intestate Estate of Marcelo M. Villalba , 417 SCRA 277

    (2003);Ainza v. Padua, 462 SCRA 614 (2005); De la Cena v. Briones, 508 SCRA 62 (2006).68

    Lacanilao v. CA, 262 SCRA 486 (1996).69

    Limson v. CA, 357 SCRA 209 (2001).70

    Firme v. Bukal Enterprises and Dev. Corp., 414 SCRA 190 (2003).71

    Pineda v. CA, 376 SCRA 222 (2002).

  • 7/31/2019 SALES Annotated Syllabus

    20/60

    20

    When the Contract to Sell was signed by the co-owners themselves as witnesses, thewritten authority for their agent mandated under Article 1874 of the Civil Code is no longerrequired.xOesmer v. Paraiso Dev. Corp., 514 SCRA 228, 237 (2007).

    c. Sale of Large Cattle (Art. 15851; Sec. 529, Revised Adm. Code)

    XD.SIMULATED SALES

    Characteristic of simulation is that the apparent contract is not really desired or intendedto produce legal effect or in any way alter the parties juridical situation, or that the partieshave no intention to be bound by the contract. The requisites are: (a) an outward declarationof will different from the will of the parties; (b) false appearance must have been intended bymutual agreement; and (c) purpose is to deceive third persons. xManila Banking Corp. v.Silverio, 466 SCRA 438 (2005).

    72

    1.Badges and Non-badges of Simulation:

    Non-payment of the stipulated consideration, absence of any attempt by the buyers to assert

    their alleged rights over the subject property. xVillaflor v. CA, 280 SCRA 297 (1997).

    Failure of alleged buyers to collect rentals from alleged seller. xSantiago v. CA, 278 SCRA 98(1997); but not when there appears a legitimate lessor-lessee relationship between the vendeeand the vendor. xUnion Bank v. Ong, 491 SCRA 581 (2006).

    Although the agreement did not provide for the absolute transfer ownership of the land tobuyer, that did not amount to simulation, since delivery of certificate of ownership andexecution of deed of absolute sale were expressly stipulated as suspensive conditions, whichgave rise to the corresponding obligation on part of buyer to pay the last installments. xVillaflor

    v. CA, 280 SCRA 297 (1997).

    Bare assertions that the signature appearing on the Deeds of Sale is not that of her husband isnot enough to allege simulation, since forgery is not presumed; it must be proven by clear,positive and convincing evidence. xR.F. Navarro & Co. v. Vailoces, 361 SCRA 139 (2001).

    Simulation of contract and gross inadequacy of price are distinct legal concepts, with differenteffects the concept of a simulated sale is incompatible with inadequacy of price. When theparties to an alleged contract do not really intend to be bound by it, the contract is simulatedand void. Gross inadequacy of price by itself will not result in a void contract, and it does noteven affect the validity of a contract of sale, unless it signifies a defect in the consent or thatthe parties actually intended a donation or some other contract. xBravo-Guerrero v. Bravo, 465SCRA 244 (2005).

    2.When Motive Nullifies the Sale

    In sale, consideration is, as a rule, different from the motive of parties, and when theprimary motive is illegal, such as when the sale was executed over a land to illegallyfrustrate a person's right to inheritance and to avoid payment of estate tax, the sale isvoid because illegal motive predetermined purpose of the contract. xOlegario v. CA, 238SCRA 96 (1994).

    73

    Where the parties to a contract of sale agreed to a consideration, but the amountreflected in the final Deed of Sale was lower, their motivation being to pay lower taxes onthe transaction, the contract of sale remains valid and enforceable upon the terms of thereal consideration. Although illegal, the motives neither determine nor take the place of

    the consideration. xHeirs of Spouses Balite v. Lim, 446 SCRA 54 (2004).

    3. Remedies Allowed When Sale Simulated

    When a contract of sale is void, the right to set up its nullity or non-existence isavailable to third persons whose interests are directly affected thereby. Likewise, theremedy ofaccion pauliana is available when the subject matter is a conveyance, otherwise

    72Rosario v. CA, 310 SCRA 464 (1999); Loyola v. CA, 326 SCRA 285 (2000); Yu Bun Guan v. Ong, 367

    SCRA 559 (2001); Payongayong v. CA, 430 SCRA 210 (2004).73

    Uy v. CA, 314 SCRA 69, 81 (1999).

  • 7/31/2019 SALES Annotated Syllabus

    21/60

    21

    valid, undertaken in fraud of creditors. xManila Banking Corp. v. Silverio, 466 SCRA 438(2005).

    The rescissory action to set aside contracts in fraud of creditors is accion pauliana,essentially a subsidiary remedy accorded under Article 1383 which the party sufferingdamage can avail of only when he has no other legal means to obtain reparation for thesame. In such action, it must be shown that both contracting parties have acted maliciouslyso as to prejudice the creditors who were prevented from collecting their claims. Rescission

    if generally unavailing should a third person, acting in good faith, is in lawful possession ofthe property since he is protect by law against a suit for rescission by the registration of thetransfer to him in the registry. xUnion Bank v. Ong, 491 SCRA 581 (2006).

    4. Effect When Sale Declared Void:

    The action for the declaration of the contracts nullity is imprescriptiblean action forreconveyance of property on a void contract of sale does not prescribe. Fil-Estate Golf and Dev.,Inc. v. Navarro, 526 SCRA 51 (2007).

    Possessor is entitled to keep the fruits during the period for which the buyer held the property ingood faith. xDBP v. CA, 316 SCRA 650 (1999).

    Then restoration of what has been given is in order, since the relationship between parties in anycontract even if subsequently voided must always be characterized and punctuated by good

    faith and fair dealing. xDe los Reyes v. CA, 313 SCRA 632 (1999); xHeirs of Ignacia Aguilar-

    Reyes v. Mijares, 410 SCRA 97 (2003).

    Alien who purchases land in the name of his Filipina lover, has no standing to seeklegal remedies to either recover the property or the purchase price paid, since thetransaction is void ab initio for being in violation of the constitutional prohibition. xFrenzel v.Catito, 406 SCRA 55 (2003).

    VI. CONSUMMATION (Arts. 1493-1506) ANDPERFORMANCE OF CONTRACT (Arts. 1536-1544, 1582-1590)

    A. OBLIGATIONS OF SELLER

    1. Preserve Subject Matter (Art. 1163)2. Deliver with Fruits and Accessories (Arts. 1164, 1166, 1495, 1537)

    3.DELIVER THE SUBJECT MATTER (Art. 1477)

    a. Legal Premises for Doctrines on Tradition

    When the sale is void or fictitious, no valid title over the subject matter can beconveyed to the buyer even with delivery. Nemo potest nisi quod de jure potestNo man can do anything except what he can do lawfully. xTraders Royal Bank v.CA, 269 SCRA 15 (1997).

    When seller had no ownership over the subject matter at the time of delivery, novalid title can pass in favor of the buyer. Nemo dat quod non habet No man cangive that which he does not have. xTsai v. CA, 366 SCRA 324 (2001).

    74

    Although tax declaration is not evidence of title, nevertheless when at the time ofdelivery there is no proof that the seller had ownership and as in fact the taxdeclaration to the subject property was in the name of another person, then therewas no transfer of ownership by delivery. xHeirs of Severina San Miguel v. Court ofAppeals, 364 SCRA 523 (2001).

    b. General Doctrines on Tradition, Whether Actual or Constructive:

    74Tangalin v. Court of Appeals, 371 SCRA 49 (2001)

  • 7/31/2019 SALES Annotated Syllabus

    22/60

    22

    It may be stipulated that ownership in the thing shall not pass to buyer until he hasfully paid price (Art. 1478).

    In the absence of such stipulation to the contrary, tradition produces its naturaleffects in law, most important of which being conveyance of ownership, withoutprejudice to right of the seller to claim payment of the price. xFroilan v. Pan OrientalShipping Co., 12 SCRA 276 (1964).

    75

    Delivery contemplates the absolute giving up of the control and custody of the

    property on the part of the vendor, and the assumption of the same by the vendee.Non nudis pactis sed traditione dominia rerum transferantur. And there is said to bedelivery if and when the thing sold is placed in the control and possession of thevendee. xEquatorial Realty Dev. Inc. v. Mayfair Theater, Inc., 370 SCRA 56 (2001).

    Since delivery of subject matter of sale is an obligation on the part of the seller, theacceptance thereof by the buyer is nota condition for the completeness of delivery.xLa Fuerza v. CA, 23 SCRA 1217 (1968).

    In the absence of an express stipulation to the contrary, payment of purchaseprice of the goods is not a condition precedent to the transfer of title to the buyer, buttitle passes by the delivery of the goods. xPhil. Suburban Dev. Corp. v. AuditorGeneral, 63 SCRA 397 (1975).

    76

    Failure of the buyer to make good the price does not, in law, cause the ownershipto revest to the seller unless the bilateral contract of sale is first rescinded or resolvedpursuant to Art. 1191. xBalatbat v. CA, 261 SCRA 128 (1996).

    c. Physical Delivery (Art. 1497)

    It is not necessary that seller himself delivers title to the buyer because the thingsold is understood as delivered when it is placed in control and possession of buyer.Thus, when sellers themselves introduced the tenant to the buyer as the new ownersof the land, and from that time on the buyer acted as landlord thereof, there wasdelivery that transferred title to the buyer. xAlfredo v. Borras, 404 SCRA 145 (2003).

    d. Constructive Delivery: EXECUTION OF A PUBLIC INSTRUMENT (Art. 1498)

    Where deed of sale or any agreement analogous to a deed of sale, is madethrough a public instrument, its execution is equivalent to the delivery of the property.Caoibes, Jr. v. Caoibes-Pantoja, 496 SCRA 273 (2006).

    77

    Under Art. 1498, the mere execution of the deed of conveyance in a publicinstrument is equivalent to the delivery of the property, and that prior physical deliveryor possession is not legally required, since ownership and possession are two entirelydifferent legal concepts. Notwithstanding the presence of illegal occupants on thesubject property, transfer of ownership by symbolic delivery under Art. 1498 can still beeffected through the execution of the deed of conveyance. xSabio v. InternationalCorporate Bank, 364 SCRA 385 (2001).

    There is nothing in Article 1498 that provides that execution of a deed of sale is aconclusive presumption of delivery of possession; presumptive delivery can be negatedby the failure of the vendee to take actual possession of the land or the continued

    enjoyment of possession by the vendor. Santos v. Santos, 366 SCRA 395 (2001).78

    (i)As to Movables (Arts. 1498-1499, 1513-1514; Dy, Jr. v. CA, 198 SCRA 826).

    Where it is stipulated that deliveries must be made to the buyer or his dulyauthorized representative named in the contracts, the seller is under obligation to

    75Kuenzle & Streiff v. Watson & Co., 13 Phil. 26 (1909); Ocejo, Perez & Co. v. Int'l Banking Corp., 37 Phil. 631 (1918).

    76Ocampo v. Court of Appeals, 233 SCRA 551 (1994).

    77Tating v. Marcella, 519 SCRA 79 (2007)

    78Equatorial Realty Dev. Inc. v. Mayfair Theater, Inc., 370 SCRA 56 (2001); xEngreso v. De La Cruz, 401 SCRA 217

    (2003); Ten Forty Realty and Dev. Corp. v. Cruz, 410 SCRA 484 (2003); Copuyoc v. De Solas, 504 SCRA 176 (2006).

  • 7/31/2019 SALES Annotated Syllabus

    23/60

    23

    deliver in accordance with such instructions.. xLagon v. Hooven Comalco Industries,Inc., 349 SCRA 363 (2001).

    Execution by supposed buyers of a chattel mortgage over subject vehicle in favorof the financing company does not mean that ownership had been transferred to them,for delivery must be on the part of the seller. xUnion Motor Corp. v. CA, 361 SCRA506 (2001).

    Neither issuance of an invoice, which is not a document of title xP.T. Cerna Corp.

    v. CA, 221 SCRA 19 (1993),79 nor of the registration certificate of vehiclexUnion MotorCorp. v. CA, 361 SCRA 506 (2001),

    80would constitute constructive delivery.

    (ii)As to Immovables (Art. 1498)

    Issuance of an acknowledgment receipt of partial payment, when it is not a publicinstrument does not convey title. xSan Lorenzo Dev. Corp. v. Court of Appeals , 449SCRA 99 (2005).

    In case of immovables, when sale is made through a public instrument, theexecution thereof shall be equivalent to the delivery of the thing which is the object ofthe contract, if from the deed the contrary does not appear or cannot clearly beinferred xMunicipality of Victorias v. CA, 149 SCRA 31 (1987);

    81and that prior physical

    delivery or possession is not legally required since execution of the deed is deemed

    equivalent to delivery. xManuel R. Dulay Enterprises, Inc. v. Court of Appeals , 225SCRA 678 (1993), Provided That:

    (a) The thing sold is subject to the control of the seller Addison v. Felix, 38

    Phil. 404 (1918); and

    (b) Such control should remain within a reasonable period after the execution of

    the instrument Danguilan v. IAC, 168 SCRA 22 (1988); Pasagui v.

    Villablanca, 68 SCRA 18 (1975).

    EXCEPT: When buyer assumes the risks of ownership and possession. Power

    Commercial and Industrial Corp. v. CA, 274 SCRA 597 (1997).

    Execution of Deed of Conditional Sale with provision that final deed of sale to

    be executed upon full payment does not transfer ownership of the subject matter.xFortune Tobacco Corp. v. NLRC, 200 SCRA 766 (1991).

    (1) Registration of Title is Separate Mode from Execution of Public InstrumentThe recording of the sale with the proper Registry of Deeds and the transfer ofthe certificate of title in the name of the buyer are necessary only to bind thirdparties to the transfer of ownership. As between the seller and the buyer, thetransfer of ownership takes effect upon the execution of a public instrument

    conveying the real estate. Chua v. Court of Appeals, 401 SCRA 54 (2003).

    BUTSEE: Under Art. 1495, seller is obliged to transfer title over the property and

    deliver the same to the vendee. Vive Eagle Land, Inc. v. Court of

    Appeals, 444 SCRA 445 (2004).

    (2) Customary Steps in Selling Immovables Customarily, in the absence of a

    contrary agreement, the submission by an individual seller to the buyer of thefollowing papers would complete a sale of real estate: (1) owners duplicate copyof the Torrens title; (2) signed deed of absolute sale; (3) tax declaration; and (4)latest realty tax receipt. They buyer can retain the amount for the capital gainstax and pay it upon authority of the seller, or the seller can pay the tax,

    79Norkis Distributors v. CA, 193 SCRA 694 (1991).

    80Abuan v. Garcia, 14 SCRA 759 (1965); Santos v. Santos, 366 SCRA 395 (2001).

    81Florendo v. Foz, 20 Phil. 388 (1911); Sanchez v. Ramos, 40 Phil. 614 (1919); Quimson v. Rosete, 87 Phil. 159

    (1950); Phil. Suburban Dev. v. Auditor, 63 SCRA 397 (1975).

  • 7/31/2019 SALES Annotated Syllabus

    24/60

    24

    depending on the agreement of the parties. Chua v. Court of Appeals, 401

    SCRA 54 (2003).

    (iii)As to Incorporeal Property (Arts. 1498 and 1501).

    e. Constitutum Possessorium (Art. 1500) A provision in the deed of sale granting toseller a right to lease the subject matter of the sale is valid: the possession is deemed tobe constituted in the vendee by virtue of this mode of tradition. xAmigo v. Teves, 96 Phil.

    252 (1954).

    f. Traditio Brevi Manu Prior to the sale, petitioners were in possession of the subjectproperty as lessees. Upon sale to them of the rights, interests and participation as to the portion pro indiviso, they remained in possession, not in the concept of lessees anymorebut as owners now through symbolic delivery known as traditio brevi manu. xHeirs ofPedro Escanlar v. CA, 281 SCRA 176 (1997).

    4. Transfer Ownership to Vendee Upon Delivery (Arts. 1477, 1478, and 1496)

    a.When Buyer Refuses to Accept (Art. 1588)

    b. In Case of Express or Implied Reservation (Arts. 1478 and 1503)

    5.Taking-Out Insurance Coverage (Art. 1523)

    6. Time and Place of Delivery (Art. 1521).

    7. Expenses of Execution and Registration (Art. 1487), and of Putting Goods inDeliverable Estate (Art. 1521).

    Unless otherwise stipulated: (a) under Art. 1487 the expenses for the registration of thesale should be shouldered by the vendor xVive Eagle Land, Inc. v. Court of Appeals, 444SCRA 445 (2004); and (b) duty to withhold taxes due on the sale is imposed on seller.xEquitable Realty Development Inc. v. Mayfair Theater, Inc., 332 SCRA 139 (2000).

    Buyer has more interest in having the capital gains tax paid immediately since this is apre-requisite to the issuance of a new Torrens title in his name. Nevertheless, as far as thegovernment is concerned, the capital gains tax remains a liability of the seller since it is a

    tax on the sellers gain from the sale of the real estate. Payment of the capital gains tax,however, is not a pre-requisite to the transfer of ownership to the buyer. The transfer ofownership takes effect upon the signing and notarization of the deed of absolute sale.xChua v. Court of Appeals, 401 SCRA 54 (2003).

    A judgment on a contract of sale that decrees sellers obligations to execute anddeliver the deed of absolute sale and the certificate of title, does not necessarily includewithin its terms the obligation to pay for the expenses in notarizing a deed of sale and inobtaining new certificate of title. xJose Clavano, Inc. v. HLRB, 378 SCRA 172 (2002).

    B.SPECIAL RULES ON COMPLETENESS OF DELIVERY

    1. In Case of Movables(Art. 1522 and 1537, 1480)

    When the contract does not provide for the measuring or weighing of a sold specificmass, and the price agreed upon was not based on such measurement, then [t]hesubject matter of the sale is, therefore, a determinate object, the mass, and not the actualnumber of units or tons contained therein, so that all that is required of seller was todeliver in good faith to his buyer all of those found in the mass, notwithstanding that thequantity delivered is less than th