SALES- Case Digests

SALES|DEANCLV|2D2012

ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA 1

THE NATURE OF SALE 1. GAITE v FONACIER

FACTS: Fonacier was the holder of 11 iron lode mineral claims. By a Deed of Assignment, he appointed Gaite as his attorney-in-fact for the purpose of operating the same. Gaite then executed a general assignment conveying the right to develop and exploit the mining claim to Larap Iron Mines, owned by him, and then started to develop the same. Fonacier then decided to revoke the authority granted to Gaite; the latter acceded and transferred the claims back to Fonacier but for considerationroyalties and a sum of P75,000, P10,000 of which was already paid. A balance of P65,000 remained for which Fonacier issued 2 sureties, good for a year. There was a stipulation that the P65,000 balance will be paid from the 1st shipment of ores and its local sale. Eventually, the sureties expired and Fonacier defaulted in settling his debt. He now alleges that the payment of the balance was subject to a suspensive conditionbeing the 1st shipment and sale of iron ores. ISSUE: W/N the 1st shipment and sale of iron ores are considered suspensive condition HELD: NO. It was only a SUSPENSIVE TERM. What took place between Gaite and Fonacier, regarding the transfer of the mining rights, was a sale. A contract of sale is normally ONEROUS and COMMUTATIVE. Each party anticipates performance form the very start. Since a sale is essentially onerous, any doubts must be settled in favor of the greatest reciprocity of rightsin this case, that a period, and not a condition, was contemplated. Had it been a suspensive condition, Fonacier would have been able to postpone payment indefinitely. 2. BUENAVENTURA v CA

FACTS: Joaquin spouses sold 6 subdivision lots to some of their 9 children evidenced by corresponding Deeds of Sale. The other children, interested in protecting their inheritance, sought to have the deeds of sale declared null and void for prejudicing their legitimes, lack of consideration, and gross inadequacy of price. ISSUE: W/N the contract of sale is valid HELD: YES. At the onset, their rights to the legitimes are merely inchoate and vest only upon the death of their parents; thus they have no legal interest thereof. Payment of the price has nothing to do with the perfection of the contract of sale; it was perfected by mere consent. Failure to pay consideration cannot be equated with lack of consideration, which prevents the existence of a valid contract. The former only results in the right to demand payment or rescission. There was already a meeting of the minds as to the price which was reflected in the Deed of Saleand that was sufficient. In fact, evidence suggests that the purchase process have indeed been paid. The sales are thus valid.

Gross inadequacy of price does NOT affect the validity of sale, unless it indicates either (1) a vice of consent or (2) that the parties intended a donation or some other contract. No evidence suggests such circumstances. The price need not be the exact value of the property. In fact, all the parties to the sale believed that they received the commutative value of what they paid for. 3. CELESTINO & CO. v COLLECTOR

FACTS: Celestino & Co. (Oriental Sash Factory) was paying 7% taxes based on gross receipts for the manufacture and sale of sash products. It now seeks to pay only the 3% tax imposable upon contracts for piece of workas opposed to the 7% tax on salesclaiming that they do not manufacture ready-made doors for the public but only upon special order of the customers. ISSUE: W/N Celestino & Co. is a contractor (piece of work) HELD: NO. The fact that the sash products are made only upon the order of the customers does NOT change the nature of the establishment. Timing is not the controlling factor but the nature of the work done. They habitually make sash products and can easily duplicate and mass-produce the same. The bulk of their sales come from standard ready-made productsspecial orders are the exception and come only occasionally. If the goods are manufactured specifically upon special order of the customer and requires extraordinary service, then that would be the time when it can be classified as piece of work. But such is not the case here. Oriental Sash is clearly a manufacturer and mass-producer of doors. 4. COMMISSIONER OF INTERNAL REVENUE v

ENGINEERING EQUIPMENT & SUPPLY CO. FACTS: Engineering Equipment & Supply (EES) was engaged in the business of designing and installing central air-conditioning systems. It was assessed by the CIR for 30% advanced sales tax, among other penalties pursuant to an anonymous complaint filed before the BIR. EES vehemently objected and argued that they are contractors and not manufacturers, and thus, should only be liable for the 3% tax on sales of services or pieces of work. ISSUE: W/N EES is a contractor (piece of work) HELD: YES. EES was NOT a manufacturer of air-conditioning units. While it imported such items, they were NOT for sale to the general public and were used as mere components for the design of the centralized air-conditioning system, wherein its designs and specifications are different for every client. Various technical factors must be considered and it can be argued that no 2 plants are the same; all are engineered



separately and distinctly. Each project requires careful planning and meticulous layout. Such central air-conditioning systems and their designs would not have existed were it not for the special order of the party desiring to acquire it. Thus, EES is not liable for the sales tax of 30%. 5. QUIROGA v PARSONS

FACTS: Quiroga and Parsons Hardware entered into a contract where the former granted the latter the exclusive right to sell Quiroga Beds in the Visayas. It provided for a discount of 25% as commission for the sales, among other conditions. Quiroga alleged that Parsons breached its contractual obligations by selling the beds at a higher price, not having an open establishment in Iloilo, not maintaining a public exhibition, and for not ordering beds by the dozen. Only the last imputation was provided for by the contract, the others were never stipulated. Quiroga argued that since there was a contract of agency between them, such obligations were necessarily implied. ISSUE: W/N the contract between them was one of agency, not sale HELD: NO. The agreement between Quiroga and Parsons was that of a simple purchase and salenot an agency. Quiroga supplied beds, while Parsons had the obligation to pay their purchase price. These are characteristics of a purchase and sale. In a contract of agency (or order to sell), the agent does not pay its price yet, and sells the products, remitting to the principal its proceeds. Unsold products must also be returned to the principal. The provisions on commission and the use of the word agency in the contract as well as the testimonies in court do not affect its nature. Contracts are what the law defines it to be, not what the parties call it. 6. PUYAT v ARCO AMUSEMENT CO.

FACTS: Arco Amusement was engaged in the business of operating cinematopgraphs. Gonzalo Puyat & Sons Inc (GPS) was the exclusive agent in the Philippines for the Starr Piano Company. Desiring to equip its cinematograph with sound reproducing devices, Arco approached GPS, through its president, GIl Puyat, and an employee named Santos. After some negotiations, it was agreed between the parties that GPS would order sound reproducing equipment from Starr Piano Company and that Arco would pay GPS, in addition to the price of the equipment, a 10% commission, plus all expenses such as freight, insurance, etc. When GPS inquired Starr Piano the price (without discount) of the equipment, the latter quoted such at $1,700 FOB Indiana. Being agreeable to the price (plus 10% commission plus all other expenses), Arco formally authorized the order. The following year, both parties agreed for another order of sound reproducing equipment on the same terms as the first at $1,600 plus 10% plus all other expenses.

Three years later, Arco discovered that the prices quoted to them by GPS with regard to their first 2 orders mentioned were not the net prices, but rather the list price, and that it had obtained a discount from Starr Piano. Moreover, Arco alleged that the equipment were overpriced. Thus, being its agent, GPS had to reimburse the excess amount it received from Arco. ISSUE: W/N there was a contract of agency, not of sale HELD: NO. The letters containing Arco's acceptance of the prices for the equipment are clear in their terms and admit no other interpretation that the prices are fixed and determinate. While the letters state that GPS was to receive a 10% commission, this does not necessarily mean that it is an agent of Arco, as this provision is only an additional price which it bound itself to pay, and which stipulation is not incompatible with the contract of sale. It is GPS that is the exclusive agent of Starr Piano in the Philippines, not the agent of Arco. it is out of the ordinary for one to be the agent of both the seller and the buyer. The facts and circumstances show that Arco entered into a contract of sale with GPS, the exclusive agent of Starr Piano. As such, it is not duty bound to reveal the private arrangement it had with Starr Piano relative to the 25% discount. Thus, GPS is not bound to reimburse Arco for any difference between the cost price and the sales price, which represents the profit realized by GPS out of the transaction. 7. LO v KJS ECO-FORMWORK SYSTEM PHIL., INC.

FACTS: KJS Inc was engaged in the sale of steel scaffolding. Sonny Lo, a contractor, purchased scaffolding equipment worth P540,000. He made a deposit of P150,000, the balance payable within 10 months. Due to financial difficulties, Lo defaulted after paying only 2 installments. A debt of some P335,000 remained. Thus, Lo assigned in favor of KJS all his receivables from Jomero Realty Corp. which refused to pay and raised the defense of compensationclaiming that Lo also had debts in its favor. KJS thus again sought to collect from Lo who them averred that his debts have already been extinguished by the said assignment. ISSUE: W/N the assignment of credit extinguished the debts HELD: NO. The assignment of credit made by Lo in favor of KJS was in the nature of dacion en pago, which is governed by the law on sales. It is as if KJS bought the credit from Lo, the payment of which is to be charged upon the latters debt. Lo, as vendor not good faith, shall be liable for the existence and legality of the credit at the time of the sale (but not for the solvency of the debtor). He is bound by certain warranties. In this case, since the assignment he made in favor of KJS has already been compensated, he should still be liable to pay KJS for his indebtedness. He should make good the warranty and pay the obligation.



PARTIES TO A CONTRACT OF SALE 1. PARAGAS v HEIRS OF DOMINADOR BALACANO

FACTS: Balancano, married to Lorenza, owned 2 parcels of land. He was already 81 years old, very weak, could barely talk, and had been battling with liver disease for over a month. On his deathbed, barely a week before he died, he allegedly signed a Deed of Absolute Sale over the lots in favor of Paragas Spouses, accompanied by Atty. De Guzman who proceeded to notarize the same, alleging that it was a mere confirmation of a previous sale and that Gregorio had already paid P50,000 as deposit. The Paragas driver was also there to take a picture of Gregorio signing said deed with a ballpen in his hand. There was nothing to show that the contents of the deed were explained to Balacano. Paragas then sold a portion of the disputed lot to Catalino. The grandson of Gregorio, Domingo, sought to annul the sale and the partition. There was no sufficient evidence to support any prior agreement or its partial execution. ISSUE: W/N Balacano is incapacitated to enter into a contract of sale HELD: YES. A person is not rendered incompetent merely because of old age; however, when such age has impaired the mental faculties as to prevent a person from protecting his rights, then he is undeniably incapacitated. He is clearly at a disadvantage, and the courts must be vigilant for his protection. In this case, Balacanos consent was clearly absenthence the sale was null and void. The circumstances raise serious doubts on his capacity to render consent. Considering that the Paragas spouses are not owners of the said properties, it only follows that the subsequent sale to Catalinowho was not in good faithis likewise void. Furthermore, the lots pertained to the conjugal partnershiphaving been inherited by Balacano during his marriage to Lorenza. Thus, it cannot be sold without the latters consent. 2. CALIMLIM-CANULLAS v FORTUN FACTS: Mercedes and Fernando were married and had 5 children. Fernando inherited the land upon which their house was built. Fernando left his family to live with his concubine Corazon. He then sold the said lot with the house in favor of Corazon for P2,000. Corazon, unable to take possession of the house and lot, filed a complaint for quieting of title. Mercedes objected alleging that the properties pertained to their conjugal partnership. ISSUE: W/N the sale to Corazon was valid HELD: NO. The properties pertained to the conjugal partnership of Mercedes and Fernando, thus the sale is null and void for lack of Mercedes consent and for being contrary to morals and public policy. The law generally prohibits spouses from selling or donating

properties to each other; the same prohibitions apply to a couple living in as husband and wife without the benefit of marriage. As public interests dictate, to rule otherwise would put the persons in guilt at better position than those legally married. 3. RUBIAS v BATILLER

FACTS: Militante claimed ownership over a parcel of land and applied for the registration of the same with the CFI; his counsel was his son-in-law, Atty. Rubias. His claim was dismissed by the trial court, thus he appealed. Pending appeal, he sold the lot to Atty. Rubias for P2,000. Batiller, on the other hand, claimed to have inherited the same lot from his ancestors who have been in open, public, peaceful, and actual possession thereof under a claim of title. Atty. Rubias filed an ejectment suit against Batiller who assailed the validity of the sale to Rubias. Given the dismissal of Militantes application, he had thus no right over the said land that he may have validly transferred to Atty. Rubias. ISSUE: W/N the sale to Atty. Rubias is valid HELD: NO. Even assuming he had title thereto, the sale of the lot to Atty. Rubias would be null and void for being expressly prohibited by the Civil Code. Lawyers cannot acquire by purchase the property or rights under litigation over which they take part by virtue of their profession. The same rule applies to judges, clerks of court, and other judicial officers with respect to the same. The purchase in violation of the above provision is not merely voidable as Atty. Rubias contends; it is VOID and INEXISTENT from the very beginning. The right to set up the defense of its illegality cannot be waivedand, unlike cases involving agents, guardians, or administrators with respect to the properties under their charge, it is not susceptible to compromise or ratification. It is likewise contrary to public policy 4. PHIL. TRUST CO. v ROLDAN

FACTS: Mariano Bernardo, a minor, inherited among others 17 parcels of land from his deceased father. Soccoro Roldan was appointed as his guardian. Soccoro sought and was granted authority to sell the lots to her brother-in-law Ramos for P14,700. Very shortly after, Ramos sold back to Soccoro the same properties for P15,000. She then sold 4 parcels to Emilio Cruz. Phil. Trust Co. replaced Soccoro as guardian and sought to annul all the aforesaid sales. ISSUE: W/N the sale to Ramos was valid HELD: NO. Guardianship is the trust of the highest order. In this case, for all intents and purposes, it was as if



Soccoro herself purchased the properties of her ward. This falls within the prohibition under Art. 1459 of the Civil Code. She indirectly sold the properties to herself. The same applies even though there was no actual malice or collusion proven. Since the sale to Soccoro was null and void, it only follows that the sales made by Soccoro to Cruz were likewise void. One cannot sell what is not his property. Soccoro tried to correct the problem by allowing Mariano to re-purchase the said properties for P15,000. However, the child would still be at a losing end because it would not entitle him to the fruits of the property during the time when he was not in possession thereof. The SC annulled the sale. CLV: Bad ruling because W/N ward is benefited is IMMATERIAL. Advantage to ward can easily be forged. 5. FABILLO v IAC

FACTS: Florencio Fabillo contracted the services of Atty. Murillo to revive a lost case over his inheritance from his deceased sister Justinia. He sought to acquire the San Salvador and Pugahanay Properties that his sister left behind against the latters husband. They entered into a contract where a contingent fee in favor of Atty. Murillo in case the case won was agreed upon. The fee was 40% of the value of whatever benefit Florencio may derive from the suitsuch as if the properties were sold, rented, or mortgaged. It was vague, however, regarding the fee in case Florencio or his heirs decide to occupy

the houseallowing Atty. Murillo the option to occupy or lease 40% of the said house and lot. A compromise agreement was entered into where Florencio acquired both properties. Atty. Murillo installed a tenant in the Pugahanay Property; later on, Florencio claimed exclusive rights over the properties invoking Art. 1491 of the CC. Florencio and Atty. Murillo both died and were succeeded by their respective heirs. ISSUE: W/N contingent fees agreed upon are valid HELD: YES. Contingent fees are not contemplated by the prohibition in Art. 1491 disallowing lawyers to purchase properties of their clients under litigation. The said prohibition applies only during the pendency of the litigation. Payment of the contingent fee is made after the litigation, and is thus not covered by the prohibition. For as long as there is no fraud or undue influence, or as long as the fees are not exorbitant, the same as valid and enforceable. It is even recognized by the Canons of Professional Ethics. However, considering that the contract is vague on the matter of division of the shares if Florencio occupies the property; the ambiguity is to be construed against Atty. Murillo being the one who drafted the contract and being a lawyer more knowledgeable about the law. The Court thus invoking the time-honored principle that a lawyer shall uphold the dignity of the legal profession, ordered only a contingent fee of P3,000 as reasonable attorneys fees.

SUBJECT MATTER OF SALE 1. POLYTECHNIC UNIVERSITY v CA

FACTS: The National Development Corp. (NDC) owned the NDC Compound, a portion of which was leased to Firestone Ceramics, which built several warehouses and facilities therein. Since business between NDC and Firestone went smooth, the lease was twice renewed this time conferring upon Firestone a right of first refusal should NDC decide to dispose of the property. Also, under the contract, Firestone was obliged to introduce considerable improvements thereon. Eventually though, Memo Order No. 214 was issued ordering the transfer of NDC Compound to the government in consideration of the cancellation of NDCs P57M debt. Pursuant thereto, NDC transferred the property to Polytechnic University (PUP). Firestone sued for specific performance invoking its right of first refusal, and sought to enjoin NDC and PUP from proceeding with the sale. Both PUP and NDC aver that there was no sale involved since ownership of the property remained with the governmentboth companies being GOCCs. ISSUE: W/N there was a sale HELD: YES. The argument of PUP and NDC was untenable. GOCCs have personalities separate and distinct from the government. Sale brings within its

grasp the whole gamut of transfers where ownership of a thing is ceded for consideration. Further, judging from the conduct of the parties in this case, all the elements of a valid sale attend. Consent is manifested by the Memo Order No. 214, the cancellation of liabilities constituted consideration; the subject matter was of course the property subject of the dispute. Since a sale was involved, the right of first refusal in favor of Firestone must be respected. It forms an integral part of the lease and is supported by considerationFirestone having made substantial investments therein. Only when Firestone fails to exercise such right may the sale to PUP proceed. 2. ATILANO v ATILANO

FACTS: Eulogio Atilano I purchased Lot 535 and had it subdivided into 5 parts (A to E). He occupied Lot A; his brother, Eulogio II, occupied Lot E. He then sold lots B, C, and D to other persons. He then sold Lot E to his brother Eulogio II. Both brothers died and their heirs found out after a survey that Eulogio I actually occupied Lot E and Eulogio II occupied Lot A. Thus, the heirs of Eulogio II offered to exchange the properties. However, the heirs of Eulogio I refused because Lot E was bigger than Lot A.



ISSUE: W/N an exchange of the properties was proper HELD: NO. What took place was a simple mistake in drafting the instrument evidencing the agreement between the brothers. One sells or buys property as he sees it in actual setting and not by the mere lot number in the certificate of title. The brothers remained in possession of their respective portions throughout their lives unaware of the mistake in the designation of the lots. In this case, the instrument simply failed to reflect the true intention of the parties; thus, an exchange of the properties is unnecessary. All the heirs should do is to execute mutual deeds of conveyance. 3. MELLIZA v CITY OF ILOILO

FACTS: Meliza owned Lot 1214, 9,000 sqm of which she donated to the Mun. of Iloilo for the use of the site of the Mun. Hall. However, the donation was revoked because it was inadequate to meet the requirements of the Arellano Plan. Lot 1214 was later divided into 4 lots. Meliza then sold Lots C and D to the Municipality; Lot B was not mentioned in the sale. However, the contract stipulated that the area to be sold to the Municipality would include such areas needed for the construction of the City Hall according the Arellano Plan. She then sold the remaining portions of the lots to Villanueva, who then sold the same to Pio. The sale was for such lots not included in the sale to the Mun. of Iloilo. The City of Iloilo, assuming that Lot B has been sold in its favor pursuant to the Arellano Plan, then donated Lot B to UP. Pio objected and sought to recover the lots stating that Lot B was not included in the initial sale made by Meliza to the Municipalityand that the subject matter of sale should be a determinate thing. ISSUE: W/N there was a determinate/determinable subject matter HELD: YES. The requirement for the subject matter to be determinate is satisfied in this case. Simple reference to the Arellano Plan would indicate that it could determine what portions of the contiguous land (lot B) were needed for the construction of the City Hall. There was no need for a further agreement to establish the lots covered by the sale; thus, the sale is valid. Besides, the portions of Lot B covered by the sale were practically at the heart of the City Hall site. 4. YU TEK & CO. v GONZALES

FACTS: Gonzales received P3,000 from Yu Tek and obligated himself in favor of the latter to deliver 600 piculs of sugar of the 1st and 2nd grade within 3 months. He failed to deliver the sugar and refused to return the moneythus Yu Tek sued him. Gonzales, in seeking to evade liability, invokes fortuitous event, alleging the total failure of his crop. ISSUE: W/N there was perfected contract of sale

HELD: NO. The subject matter was not yet determinate. The sugar agreed upon has yet to be segregated from all other articles. That being the case, there was merely an executory agreementa promise of sale, and not a contract of sale itself. Moreover, there was no stipulation that the sugar was to be derived from his crop; he was at liberty to get it from whatever source he could find. The obligation he incurred was for the delivery of the generic thing. Thus, he cannot invoke force majeure under the maxim genus never perishes. His obligation to deliver the sugar is not extinguished. Yu Tek is thus entitled to rescind the contract and recover the money in addition to the stipulated P1,200 as indemnity for losses. DD: This rule no longer holds true. Generic things may now be the subject matter of a contract of sale provided that they have the quality of being DETERMINABLE at the perfection of the contract. 5. NGA v IAC

FACTS: National Grains Authority (now National Food Authority, NFA) is a government agency created under PD 4. One of its incidental functions is the buying of palay grains from qualified farmers. In 1979, Leon Soriano offered to sell palay grains to the NFA, through its Provincial Manager, William Cabal. He submitted the documents required by the NFA for pre-qualifying as a seller, which were processed and accordingly, he was given a quota of 2,640 cavans of palay. The quota noted in the Farmers Information Sheet represented the maximum number of cavans of palay that Soriano may sell to the NFA. On 23 and 24 August 1979, Soriano delivered 630 cavans of palay. The palay delivered were not rebagged, classified and weighed. When Soriano demanded payment of the 630 cavans of palay, he was informed that its payment will be held in abeyance since Mr. Cabal was still investigating on an information he received that Soriano was not a bona fide farmer and the palay delivered by him was not produced from his farmland but was taken from the warehouse of a rice trader, Ben de Guzman. On 28 August 1979, Cabal wrote Soriano advising him to withdraw from the NFA warehouse the 630 cavans stating that NFA cannot legally accept the said delivery on the basis of the subsequent certification of the BAEX technician (Napoleon Callangan) that Soriano is not a bona fide farmer. Instead of withdrawing the 630 cavans of palay, Soriano insisted that the palay grains delivered be paid. He then filed a complaint for specific performance and/or collection of money with damages against the NFA and William Cabal. Meanwhile, by agreement of the parties and upon order of the trial court, the 630 cavans of palay in question were withdrawn from the warehouse of NFA. In 1982, RTC ruled in favor of Soriano and in 1986, CA affirmed decision of RTC. ISSUE: W/N there was a perfected contract of sale HELD: YES. In the present case, Soriano initially offered



to sell palay grains produced in his farmland to NFA. When the latter accepted the offer by noting in Sorianos Farmers Information Sheet a quota of 2,640 cavans, there was already a meeting of the minds between the parties. The object of the contract, being the palay grains produced in Sorianos farmland and the NFA was to pay the same depending upon its quality. The contention that since the delivery were not rebagged, classified and weighed in accordance with the palay procurement program of NFA, there was no acceptance of the offer thus this is a clear case of policitation or an unaccepted offer to sell, is untenable. The fact that the exact number of cavans of palay to be delivered has not been determined does not affect the perfection of the contract. Article 1349 of the New Civil Code provides that the fact that the quantity is not determinate shall not be an obstacle to the existence of the contract, provided it is possible to determine the same, without the need of a new contract between the parties. In the present case, there was no need for NFA and Soriano to enter into a new contract to determine the exact number of cavans of palay to be sold. Soriano can deliver so much of his produce as long as it does not exceed 2,640 cavans. 6. JOHANNES SCHUBACK & SONS PHIL. TRADING

CORP. v CA FACTS: SJ Industrial, through Ramon San Jose, approached Schuback & Sons Phil. Trading (SSPT) to purchase bus spare parts. He submitted the list of parts he wanted and SSPT coordinated with its Germany Office to quote the prices, and forwarded its formal offer to SJ Industrial, containing the prices, item numbers, descriptions, etc. SJ informed SSPT of his desire to purchase such items and promised to submit the quantity per unit. SJ then submitted such quantities needed to SSPTs GM, Mr. Reichert. San Jose indicated the same in the Purchase Order with the inscription this will serve as our initial purchase order. PO will include 3% discount. SSPT immediately ordered the products from Germany to avail of the old pricespartial deliveries of which were made. Then, for his failure to secure letters of credit, SJ failed to purchase the same and alleged that there was no perfected contract of sale. Thus, SSPT sought damages. ISSUE: W/N there was a perfected contract of sale HELD: YES. Quantity is immaterial in the perfection of a contract of sale. What is important is the meeting of the minds as to the object and cause of the sale. There was already a meeting of the minds in this case from the moment SJ manifested that he will order the parts, although he will communicate quantities later on. In fact, he indeed communicated such needed quantitiesthis goes to the execution of the contract of sale already. By ordering the parts, SJ acceded to the prices offered by SSPT. On the other hand, SSPT acceded to SJs request for discount by immediately ordering the parts. SJ Industrial is thus liable for damages

7. NOOL v CA FACTS: One lot formerly owned by Victorio Nool has an area of 1 hectare. Another lot previously owned by Francisco Nool has an area of 3.0880 hectares. Both parcels are situated in San Manuel, Isabela. Spouses Conchita Nool and Gaudencio Almojera (plaintiffs) alleged that they are the owners of the subject land as they bought the same from Victorio and Francisco Nool, and that as they are in dire need of money, they obtained a loan from DBP, secured by a real estate mortgage on said parcels of land, which were still registered in the names of Victorino and Francisco Nool, at the time, and for the failure of the plaintiffs to pay the said loan, including interest and surcharges, totaling P56,000.00, the mortgage was foreclosed; that within the period of redemption, the plaintiffs contacted Anacleto Nool for the latter to redeem the foreclosed properties from DBP, which the latter did; and as a result, the titles of the 2 parcels of land in question were transferred to Anacleto; that as part of their arrangement or understanding, Anacleto agreed to buy from Conchita the 2 parcels of land under controversy, for a total price of P100,000.00, P30,000.00 of which price was paid to Conchita, and upon payment of the balance of P14,000.00, the plaintiffs were to regain possession of the 2 hectares of land, which amounts spouses Anacleto Nool and Emilia Nebre (defendants) failed to pay, and the same day the said arrangement was made; another covenant was entered into by the parties, whereby the defendants agreed to return to plaintiffs the lands in question, at anytime the latter have the necessary amount; that latter asked the defendants to return the same but despite the intervention of the Barangay Captain of their place, defendants refused to return the said parcels of land to plaintiffs; thereby impelling the plaintiffs to come to court for relief. On the other hand, defendants theorized that they acquired the lands in question from the DBP, through negotiated sale, and were misled by plaintiffs when defendant Anacleto Nool signed the private writing, agreeing to return subject lands when plaintiffs have the money to redeem the same; defendant Anacleto having been made to believe, then, that his sister, Conchita, still had the right to redeem the said properties. It should be stressed that Manuel S. Mallorca, authorized officer of DBP, certified that the 1-year redemption period and that the mortgagors right of redemption was not exercised within this period. Hence, DBP became the absolute owner of said parcels of land for which it was issued new certificates of title. About 2 years thereafter, DBP entered into a Deed of Conditional Sale involving the same parcels of land with Anacleto Nool as vendee. Subsequently, the latter was issued new certificates of title in 1988. RTC ruled in favor of Anacleto Nool. CA affirmed. ISSUE: W/N there was a valid contract of sale between Anacleto and Conchita HELD: NO. Article 1459 of the Civil Code provides that the vendor must have a right to transfer the ownership



thereof [object of the sale] at the time it is delivered. Here, delivery of ownership is no longer possible. The sellers can no longer deliver the object of the sale to the buyers, as the buyers themselves have already acquired title and delivery thereof from the rightful owner, the DBP. Thus, such contract may be deemed to be inoperative and may thus fall, by analogy, under item 5 of Article 1409 of the Civil Code: Those which contemplate an impossible service. Article 1505 of the Civil Code provides that where goods are sold by a person who is not the owner thereof, and who does not sell them under authority or with consent of the owner, the buyer acquires no better title

to the goods than the seller had, unless the owner of the goods is by his conduct precluded from denying the sellers authority to sell. In the present case, there is no allegation at all that petitioners were authorized by DBP to sell the property to the private respondents. Further, the contract of repurchase that the parties entered into presupposes that petitioners could repurchase the property that they sold to private respondents. As petitioners sold nothing, it follows that they can also repurchase nothing. In this light, the contract of repurchase is also inoperative and by the same analogy, void.

PRICE AND OTHER CONSIDERATION

1. MAPALO v MAPALO FACTS: Miguel and Candida Mapalo were illiterate farmers and owned a parcel of land. Since Maximo Mapalo was to be married, they donated to him the eastern half of the land. Maximo, however, deceived them by making them sign an instrument donating the entire lot. There was a consideration for P5,000 stated in the deed, but the spouses never received anything. Miguel built a fence to divide the lot and continued to occupy the western part. Maximo then registered the entire lot and 13 year after, sold the same to the Narcisos who took possession only of the eastern half. Later on, the Narcisos sought to be declared owners of the entire land; the spouses claimed that the sale to the Narcisos was void for lack of consideration. The CA declared that the sale was merely voidable and the action by the spouses was barred by prescription, being filed after 4 years from the discovery of the fraud. ISSUE: W/N there was a valid contract of sale HELD: Consideration was totally absent; the P5,000 price stipulated was never received/delivered to the spouses. Thus, the sale to the Narcisos was VOID ab initio for want of consideration. The inexistence of the contract is permanent and cannot be the subject of prescription. The Narcisos are also in bad faiththey had knowledge of the true nature and extent of Maximos right over the land.

2. RONGAVILLA v CA FACTS: Both spinsters and unschooled in English, Mercedes and Florencia dela Cruz are the aunts of Rongavilla. Dela Cruz co-owned a parcel of land (1/2 pro-indiviso) in Las Pinas with another niece named Juanita Jimenez (elder sister of Rongavilla), who kept the OCT, as well as the TCT after it was subdivided. In 1976, Dela Cruz borrowed P2,000 from Rongavilla for the repair of their dilapidated rooftop. A month later, Rongavilla and Jimenez visited their aunts' home and brought with them a document for the signature of their aunts. While the document was in English and upon inquiry by Dela Cruz what it was about, Rongavilla answered that it was merely evidencing the P2,000

debt. Apparently, it was a Deed of Sale. In 1980, Rongavilla went to Dela Cruz' place and asked them to vacate the lot. Suprised by this, Dela Cruz discovered the misrepresentation her niece made when she signed the document. She the filed an action with the RTC to have the purported Deed of Sale declared null and inexistent for lack of consent and consideration. ISSUE: W/N there was a valid sale HELD: NO. Rongavilla and Jimenez were able to secure the signature of Dela Cruz in the Deed of Absolute Sale through fraud and there was no consideration whatsoever for the alleged sale. The consent was not only vitiated, but it was not given at all. Since there was no consent, the deed of absolute sale is null and void ab initio.

3. MATE v CA FACTS: Josefina approached Fernando asking for help. Her family was to be sued by Tan for issuing rubber checks; thus she asked him to cede his 3 lots to Tan and it will be Josefina who will repurchase them for him. He initially rejected her offer. Then, Josefina issued him 2 checks, one for P1.4M, pertaining to the value of the lot, and another for P420,000 corresponding to 6 months interests. He agreed, drafted the instrument himself, and ceded his properties to Tan. Later, both checks bounced; he sued Tan for annulment of the sale for lack of consideration since he never received anything. He also sued Josefina criminally, but absconded. ISSUE: W/N there was a valid contract of sale HELD: YES. There was consideration in the form of the check for P420,000. It was his fee for executing the sale. It was not only kindness that impelled him to cede his property, it was also his interest for profit. That he never received money is of no moment; a sale is a consensual contract. He also tacitly admitted to the sale when he filed criminal charges against Josefina. Fernando, being a lawyer, has no one else to blame but



himself for the loss. He acted negligently our of desire for profit.

4. YU BUN GUAN v CA

FACTS: Yu Bun Guan and Ong are married since 1961 and lived together until she and her children were abandoned by him in 1992, because of his incurable promiscuity, volcanic temper, and other vicious vices. In 1968, out of her personal funds, Ong purchased a parcel of land (Rizal Property) from Aurora Seneris. Also, during their marriage, they purchased a house and lot out of their conjugal funds. Before their separation in 1992, she reluctantly agreed to execute a Deed of Sale of the Rizal Property on the promise that Yu Bun Guan would construct a commerical building for the benefit of the children. He suggested that the property should be in his name alone so that she would not be involved in any obligation. The consideration for the sale was the execution of a Deed of Absolute Sale in favor their children and the payment of the loan he obtained from Allied Bank. However, when the Deed of Sale was executed in favor of Yu Bun Guan, he did not pay the consideration of P200K, supposedly the "ostensible" valuable consideration. Because of this, the new TCT issued in his name was not delivered to him by Ong. Yu Bun Guan then filed for a Petition for Replacement of the TCT, with an Affidavit of Loss attached. Ong, on the other hand, executed an Affidavit of Adverse Claim and asked that the sale be declared null and void . RTC ruled in favor of Ong. CA affirmed. ISSUE: W/N there was a valid contract of sale HELD: NO. It is clear from the findings of the lower courts that the Deed of Sale was completely simulated and thus, VOID without effect. No portion of the P200,000 consideration stated in the Deed was ever paid. And, from the facts of the case, it is clear that neither party had any intention whatsoever to pay that amount. Instead, the Deed of Sale was executed merely to facilitate the transfer of the property to petitioner pursuant to an agreement between them to enable him to construct a commercial building and to sell the Juno property to their children. Being merely a subterfuge, that agreement cannot be taken as a consideration for the sale.

5. ONG v ONG FACTS: For an in consideration of P1 and other valuable considerations, Imelda Ong transferred through a Deed of Quitclaim her rights over a portion of a parcel of land to Sandra. Later on, she revoked the Deed and donated the whole property to her son, Rex. Sanda, through her guardian, sought to recover ownership and possession thereof. Imelda alleged that the sale was void for lack of consideration. ISSUE: W/N there was a valid contract of sale

HELD: YES. There was consideration. Its apparent inadequacy is of no moment since the usual practice in deeds of conveyance is to place a nominal amount although there is more valuable consideration given. Consideration is presumed to exist. He who alleges otherwise assumes the burden of proof. The one peso was not the consideration, but rather the other valuable considerations.

6. BAGNAS v CA FACTS: Hilario died with no will and was survived only by collateral relatives. Bagnas (et al) were the nearest kin. Retonil (et al) were also relatives but to a farther extent. They claimed ownership over 10 lots from the estate of Hilario presenting notarized and registered Deeds of Sale (in Tagalog) where the consideration for the lands was P1 and services rendered, being rendered, and to be rendered. Bagnas argued that the sales were fictitious, while Retonil claimed to have done many things for Hilariosuch as nursing him on his deathbed. ISSUE: W/N there was a valid contract of sale HELD: NO. At the onset, if a contract has no consideration, it is not merely voidable, but VOIDand even collateral heirs may assail the contract. In this case, there was no consideration. Price must be in money or its equivalent; services are not the equivalent of money insofar as the requirement of price is concerned. A contract is not one for sale if the consideration consists of services. Not only are they vague, they are unknown and not susceptible of determination without a new agreement between the parties.

7. REPUBLIC v PHIL. RESOURCES DEV. CORP. FACTS: The Republic brought an action against Apostol for the collection of sums owing to it for his purchase of Palawan Almaciga and other logs. His total debt amounted to some P34,000. PRDC intervened claiming that Apostol, as President of the company, without prior authority, took goods (steel sheets, pipes, bars, etc) from PRDC warehouse and appropriated them to settle his personal debts in favor of the government. The Republic opposed the intervention of PRDC, arguing that price is always paid in money and that payment in kind is no payment at all; hence, money and not the goods of PRDC are under dispute. ISSUE: W/N payment in kind is equivalent to price paid in money HELD: YES. Price may be paid in money or ITS EQUIVALENTin this case, the goods. Payment need not be in the form of money. The prices for the goods have, in fact, been assessed and determined. PRDC thus has a substantial interest in the case and must be permitted



to interveneits goods paid out without authority being under dispute in this case.

8. NAVARRA v PLANTERS DEV. BANK FACTS: Navarra spouses are the owners of 5 parcels of land in BF Homes, Paranque. In 1982, they obtained a loan of P1.2M from Planters Bank, secured by a mortgage over these parcels of land. Unfortunately, they defaulted to pay their obligation and thus, Planters Bank foreclosed the property. They were not able to redeem the property as well. On the other hand, RRRC Dev. Corp. is a real estate company owned by the parents of Carmelita Navarra. It obtained a loan from Planters Bank secured by a

mortgage over another set of properties of RRRC. Likewise, it defaulted and the properties were foreclosed. However, RRRC was able to negotiate with the Bank for the redemption of the properties by was of a concession whereby the Bank allowed RRRC to refer to it would-be buyers of the properties who would remit their payments directly to the Bank, which would then be considered as redemption price for RRRC. Eventually, these were sold and payments made directly to the Bank were in excess by P300K for the redemption price. In the meantime, Jorge Navarra requested that they repurchase their house and lot for P300K, which the Bank agreed. Accordingly, Jorge Navarra requested further that the excess payment of RRRC be applied as down payment for their repurchase. For his failure to

submit a board resolution from RRRC authorizing such, the Bank refused to apply the excess to his repurchase. In 1988, a portion of the lots was sold to Gatchalian Realty. Navarra spouses filed for specific performance against Planters Bank, alleging that there was a perfected contract of sale (P1.8M, with P300K downpayment). RTC ruled in favor of Navarra spouses. CA reversed. ISSUE: W/N there was a valid contract of sale (consider the repurchase as a sale) HELD: NO. While the letters indicate the amount of P300K as downpayment, they are completely silent as to how the succeeding installment payment shall be made. At most, the letters merely acknowledge that the downpayment was agreed upon by the parties. However,

this fact cannot lead to the conclusion that a contract of sale had been perfected. Before a valid and binding contract of sale can exist, the manner of payment of the purchase price must first be established since the agreement on the manner of the payment goes into the price such that a disagreement on the manner of payment is tantamount to a failure to agree on the price. Moreover, the letter/offer failed to specify a definite amount of the purchase price for the sale/repurchase of the properties. It merely stated that it will be based on the redemption value plus accrued interest at the prevailing rate up to the date of the sales contract. Clearly, the lack of a definite offer on the part of the Navarra spouses could not possibly serve as the basis of their claim that the sale was perfected.

FORMATION OF CONTRACT OF SALE

1. MANILA METAL CONTAINER CORP. v PNB FACTS: Manila Metal was the owner of a parcel of land in Mnadaluyong. To secure a P900K loan it obtained from PNB, Manila Metal executed a real estate mortgage over the lot. PNB later granted Manila Metal a new credit accommodation of P1M. Manila Metal secured another loan of P653K from PNB. In 1982, PNB sought to have the property foreclosed and sold at a public auction. PNB was the highest bidder. Manila Metal requested an extension of time to redeem the property and to repurchase such on installment. The Special Assets Management Department (SAMD) prepared a statement of account and as of 1984, Manila Metal's obligation amounted to P1.6M, which includes the bid price, interests, advances of insurance premiums, advances on realty taxes, etc. When apprised of the statement of account, Manila Metal remitted P725K to PNB as deposit to repurchase. In the meantime, SAMD recommended that Manila Metal be allowed to repurchase for P1.6M. PNB, however, rejected the recommendation and offered the property at P2.66M, its minimum market value. Manila Metal refused and reiterated that it already acceded to SAMD's offer, to which it remitted P725K. In 1985, PNB accepted the offer but for P1.9M cash

less the P725K deposit. Manila Metal, again, rejected this offer and filed a complaint against PNB for the annulment of foreclosure or specific performance, contending that there was a valid contract of sale between Manila Metal and SAMD. In 1993, while the case was pending, Manila Metal offered to repurchase at P3.5M, but PNB rejected because the market value of the property was at P30M. Manila Metal offered again at P4.25M but was rejected again. ISSUE: W/N there was a valid contract of sale HELD: NO. There was no perfected contract of sale between PNB and Manila Metal because there was no agreement as to the price certain. The Statement of Account prepared by SAMD cannot be classified as a counter-offer. It is simply a recital of its total monetary claims against Manila Metal. The amount stated therein could not be considered as a counter-offer since it was only a recommendation subject to PNB's Board of Directors' approval. Neither can the receipt of P725K by SAMD be regarded as evidence of a perfected contract of sale. The amount is merely an acknowledgment of the receipt of P725K as deposit to repurchase the property. It was accepted by respondent on the condition that the purchase price will still be approved by the Board of

ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA

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Directors. Pending such approval, Manila Metal cannot legally claim that PNB is already bound by any contract of sale with it.

2. CARCELLER v CA FACTS: Carceller leased 2 parcels of land owned by State Investment Houses (SIHI), the period being 18 months at P10,000/month rent. Under the lease, SIHI guaranteed Carceller the exclusive right and option to purchase the said lots within the lease period for the aggregate amount of P1.8M. Around 3 weeks before the end of the lease period, SIHI informed Carceller of the impending termination of the lease and the short period left for him to purchase. He begged for an extension, but SIHI refused. Nevertheless, SIHI offered the property to him for lease for another year, but this time, it also offered it for sale to the public. Carceller thus sued SIHI for specific performance to compel SIHI to execute a Deed of Sale in his favor. ISSUE: W/N Carceller may still exercise the option to purchase the property HELD: YES. Even if Carceller failed to purchase the property within the said period, still equity must intervene. He had introduced substantial improvements thereon; to rule against him would cause damage to himand SIHI does not stand to gain much therefrom. SIHI clearly intended to sell the lot to him considering that it was under financial distress, that is constantly reminded him of the option and the impending deadline. The delay of 18 days is not substantial. Carcellers letter to SIHI expressing his intent to purchase the lot is fair notice of intent to exercise the option despite the request for extension. Carceller should thus be allowed to buy the lots.

3. TAYAG v LACSON FACTS: Angelica Lacson and her children were registered owners of agricultural lands. Tiamzon and others were their farmer-tenants. The tenants executed a Deed of Assignment in favor of Tayagassigning to the latter their rights to purchase the lands as tenant-tillers of the landholdings possessed by them at P50.00 per sqm. This was subject to the conditions that (1) Lacson, the landowner, would agree to sell the same parels and (2) that there are no more legal impediments to the assignment. Tayag invited the tenants to a meeting to discuss the agreement, but the latter did not attend and wrote Tayag that they have decided to sell their rights to the Lacsons instead because he allegedly betrayed their trust by filing a certain lawsuit. Tayag thus filed a Complaint before the RTC asking that the court fix the period for the payment; he also asked for a Writ of Preliminary Injunction against Lacson and the tenants to enjoin them from accepting any offers for sale made by the tenants. ISSUE: W/N the assignment was in the form of an option contract

HELD: NO. The Deeds of Assignment were not option contracts, which may be enforced by Tayag. Not being the legal owners of the property, the tenants had no right to confer upon Tayag the option, more so, the exclusive right to buy the property.

4. VILLAMOR v CA FACTS: The Villamors purchased from Macaria of the latters land for a price considerably higher than the prevailing market price. They then executed a Deed of Option stating that the only reason why the Villamors agreed to purchase the said lot is because Macaria agreed to confer upon them the exclusive right to purchase the other half of the land. Such sale under the deed may be imposed whenever the need for the sale arises on the part of either party. Macaria sought to repurchase the land, but the Villamors refused. Instead, the Villamors exercised their option to purchase the other half of the property. Macaria refused, thus the Villamors filed a case for specific performance. Macaria averred that the option is void for lack of consideration. ISSUE: W/N the option contract is void for lack of consideration HELD: NO. The Option Contract is supported by a considerationthat being the difference of the agreed price and the market price of the other half of the land, which was sold to the Villamors. Thus, it is valid and may be enforced by the Villamors. The consideration may consist of anything of value. The option was, in fact, the only reason why they purchased the other half for an expensive price. Since the Villamors exercised their option, this is tantamount to an acceptance of the offera valid and obligatory contract of sale was thus perfected.

5. SANCHEZ v RIGOS FACTS: Sanchez and Rigos executed an Option to Purchase where Rigos agreed, promised, and committed to sell to Sanchez a parcel of land in Nueva Ecija for P1,510. In spite of the repeated tenders made by Sanchez, Rigos refused to sell the same. Thus, Sanchez consigned the amounts and filed a case for specific performance. Rigos alleged that the contract between them was a unilateral promise to sell, which is not supported by any consideration, hence, it is not binding. ISSUE: W/N there was a valid option contract HELD: NO. The promisee (Sanchez) cannot compel the promissor (Rigos) to comply with the promise unless the former can establish that the promise was for a consideration. The burden of proof to establish the existence of the consideration lies with Sanchez. Therefore, there was no valid option contract in this case. However, an option without consideration is a mere offer, which is not binding until accepted. But from the moment it is accepted before it is withdrawn,


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a valid contract of sale arises. In this case, even though there was no option contract, there was nevertheless an offer and acceptance enough to constitute a valid contract of sale.

6. VASQUEZ v CA FACTS: The Vallejera spouses sought to recover from Vasquez an agricultural lot, which they previously sold to him. Along with the previous execution of a Deed of Sale, the parties also executed a Right of Repurchase allowing Vallejera to repurchase the said estate. Vasquez resisted the redemption arguing that the option to buy was not supported by any considerationand thus not binding upon him. ISSUE: W/N there was a valid option contract HELD: NO. It is apparent that the Right to Repurchase was not supported by any consideration. Thus, in order for the doctrine under Sanchez v Rigos to apply, giving rise to a valid contract of sale, it must be shown that the promissee (Vallejera) accepted the right of repurchase before it was withdrawn by Vasquez. In this case, no such acceptance was made. The vendor a retro (Vallejera) must make actual and simultaneous tender of payment and consignation. Mere expressions of readiness and willingness to repurchase are insufficient. Their ineffectual acceptance allowed Vasquez to withdraw the offer through his refusal to sell the lot. Vasquez thus cannot be compelled to sell the lot.

7. NIETES v CA FACTS: Nietes leased from Dr. Garcia the Angeles Educational Institute; the contract contained an Option to Buy the land and school buildings within the period of the lease. It also stipulated that the unused payment will be applied to the purchase price of the school. Nietes paid Garcia certain sums in excess of the rent, which Garcia acknowledged as forming partial payment of the purchase price of the property. Later on, Garcia, through counsel, wrote Nietes informing him of his decision to rescind the contract due to certain violations of the contractsuch as poor maintenance, lack of inventory of school equipment, and the use of another name for the said school. Nietes replied by informing Garcia that he decided to exercise his Option to Buy, but Garcia refused to sell. Nietes thereafter deposited the balance of the price to Agro-Industrial Bank, but he later withdrew the said amounts. CA ruled in favor of Garcia stating that the full purchase price must be paid before the Option to Buy may be exercised. Thus, Nietes brought the matter to the SC. ISSUE: W/N actual payment is needed before one may exercise the option to buy HELD: NO. There is nothing in the contract that required Nietes to pay the full price before he could exercise the option. It was sufficient that he informed Garcia of his choice and that he was at that time ready to pay. The

exercise of the option need not be coupled with actual payment so long as such payment is made upon the fulfillment of the owners undertaking to deliver the property. This is based on the principle that such option contracts involve reciprocal obligationsand one does not incur delay if the other party fails or refuses to comply with his respective obligation. That being the case, there was no need for Nietes to deposit the said amountsand his withdrawal thereof does not affect his right.

8. ANG YU ASUNCION v CA FACTS: The Unijeng spouses owned certain residential and commercial spaces leased by Ang Yu. They offered to sell the said units to Ang Yu on several occasions and for P6M. Ang Yu made a counter offer for P5M. The Unijeng spouses asked Ang Yu to specify his terms in writing but the latter failed to do so. They failed to arrive at any definite agreement. When Ang Yu discovered that the spouses were planning to sell the property to others, he sued them for specific performance. While the case was pending, the spouses sold the units to Buen Realty for P15M. ISSUE: W/N there was a perfected contract of sale between Unijeng and Ang Yu HELD: NO. There was no perfected contract of sale yet since there was yet any meeting of the minds. Thus, there is no ground for specific performance. During the negotiation stage, any party may withdraw the offer madeespecially if it was not supported by any consideration. An Option Contract of a Right of First Refusal is separate and distinct from the actual contract of salewhich is the basis for specific performance. The remedy available to Any Yu, in case the withdrawal was made capriciously and arbitrarily, would be to sue on the basis of abuse of right. In case there was an option contract, timely acceptance would create an obligation to sell on the part of the vendor; but no such circumstance attends in this case.

9. EQUATORIAL REALTY DEV. INC. v MAYFAIR THEATER INC.

FACTS: For its theaters, Mayfair was leasing a portion of the property in CM Recto, which Carmelo owns. Under the lease agreement, if Carmelo should decide to sell the leased premises, Mayfair shall be given 30 days exclusive option to purchase the same. Carmelo, through Henry Yang, informed the president of Mayfair that the former is interested in selling the whole CM Recto propertyand that Araneta offered to purchase the same for $1.2M. Mayfair twice replied through a letter of its intention to exercise its right to repurchasebut Carmelo never replied. Thereafter, Carmelo sold the entire property to Equatorial Realty for some P11M. Thus, Mayfair instituted an action for specific performance and annulment of the sale.


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Carmelo alleges that the right, being an option contract, is void for lack of consideration. ISSUE: W/N the right to repurchase is an option contract and void for lack of consideration HELD: NO. The clause in the lease agreement was NOT an option contract, but a RIGHT OF FIRST REFUSAL. It was premised on Carmelos decision to sell the said property. It also did not contain a stipulation as to the price of said property. The requirement of separate consideration does not apply to a right of 1st refusal because consideration is already an integral part of the lease. Carmelo violated such right by not affording Mayfair a fair chance to negotiate. It abandoned the negotiations arbitrarily. Equatorial was likewise in bad faith; it was well aware of the right conferred upon Mayfair because its lawyers had ample time to review the contract. That being the case, the contract between Carmelo and Equatorial is rescissible. Mayfair should be allowed to purchase the entire property for the price offered by Equatorial. Rights of First Refusal are also governed by the law on contracts, not the amorphous principles on human relations.

10. PARANAQUE KINGS ENTERPRISES INC v CA FACTS: Catalina owned 8 parcels of land leased to Chua, who assigned its rights thereto to Lee Ching Bing, who, in turn, assigned said rights to Paranaque King Enterprises, which introduced significant improvements on the premises. Under the lease agreement, in case of sale, the lessee shall have the option or priority to buy the said properties. Catalina, in violation of the said stipulation, sold the lot to Raymundo for P5M. Paranaque King notified her of the said breach, and she immediately had the lots reconveyed. She then offered the lot to Paranaque King for P15M; but the latter refused claiming that the offer was ridiculous. Catalina thereafter sold it again to Raymundo for P9M. ISSUE: W/N there was compliance with the Right of First Refusal assigned to Paranaque King HELD: NO. In a Right of First Refusal, the seller cannot offer the property to another for a lower price or under terms more favorable. It must be offered under the same terms & conditions to Paranaque King; otherwise, the right of first refusal becomes illusory. Only if Paranaque King fails to meet the offer may the property be offered for sale to another buyerand under the same terms and conditions as well. The Right of First Refusal may also be validly transferred or assignedas in this case.

11. VASQUEZ v AYALA CORP. FACTS: In 1984, Ayala Corp. entered into a Memorandum of Agreement with Dr. Vasquez buying the latters shares with Conduit Developmentwhich constitute some 50 hectares of the land in Ayala Alabang. Under

the MOA, Ayala was to undertake the development of the lands except the retained area. Under Par. 5.15 of the MOA, Ayala agreed to give Vasquez a first option to purchase the 4 adjacent lots to the retained area at the prevailing market price at the time of the purchase. A case was filed by one of the former sub-contractors of Conduit against Ayala causing a 6-year delay in the development of the project. Now, Vasquez comes forward invoking Par. 5.15 claiming that it was a valid option contract, and that Ayala should sell to him the said property at the 1984 prevailing price. Ayala offered to sell the said properties to Vasquez at the prevailing prices (1990); but the latter refused to accept. Ayala discounted the price from P6,500/sqm to P5,000/sqm, but still, Vasquez refused. ISSUE: W/N there was a valid option contract given to Vasquez HELD: NO. Par. 5.15 was NOT an option contract, but a RIGHT OF FIRST REFUSAL. It was predicated upon Ayalas decision to sell the said properties. The price was also not specified. It was also not supported by any independent consideration. By twice refusing to accept Ayalas offers, Vasquez lost his right to repurchase. Ayala did not breach its obligation.

12. RIVERA FILIPINA INC v CA FACTS: In 1982, Reyes executed a 10-year (renewable) Contract of Lease with Riivera Filipina over a parcel of land in EDSA. Under such contract, the lessee is given a right of first refusal should the lessor decide to sell the property during the terms of the lease. Such property was subject of a mortgage executed by Reyes in favor of Prudential Bank. Since Reyes failed to pay the loan with the bank, it foreclosed the mortgage and it emerged as the highest bidder in the auction sale. Realizing that he could not redeem the property, Reyes decided to sell it and offered it to Riviera Filipina for P5,000/sqm. However, it bargained for P3,500/sqm. Reyes rejected such offer. After 7 months, it again bargained for P4,000/sqm, which again was rejected by Reyes who asked for P6,000/sqm price. After 2 months, it again bargained for P5,000/sqm, but since Reyes insisted on P6,000/sqm price, he rejected Riviera's offer. Nearing the expiry of the redemption period, Reyes and Traballo (his friend) agreed that the latter would buy the same for P5,300. But such deal was not yet formally concluded and negotiations with Riviera Filipina once again transpired but to no avail. In 1989, Cypress and Cornhill Trading were able to come up with the amount sufficient to cover the redemption money, with which Reyes paid to Prudential Bank to redeem the property. Subsequently, a Deed of Absolute Sale was executed in favor of Cypress and Cornhill for P5.4M. Cypress and Cornhill mortgaged the property in favor of Urban Dev. Bank for P3M. Riviera Filipina filed a suit against Reyes, Cypress and Cornhill on the ground that they violated its right of first refusal under the lease contract. RTC ruled in favor of


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Reyes, Cypress, and Cornhill. On appeal, CA affirmed the decision of the RTC. ISSUE: W/N Riviera Filipina lost its right of first refusal HELD: YES. As clearly shown by the records and transcripts of the case, the actions of the parties to the contract of lease, Reyes and Riviera, shaped their understanding and interpretation of the lease provision "right of first refusal" to mean simply that should the lessor Reyes decide to sell the leased property during the term of the lease, such sale should first be offered to the lessee Riviera. And that is what exactly ensued between Reyes and Riviera, a series of negotiations on the price per square meter of the subject property with neither party, especially Riviera, unwilling to budge from his offer, as evidenced by the exchange of letters between the two contenders. It can clearly be discerned from Rivieras letters that Riviera was so intractable in its position and took obvious advantage of the knowledge of the time element in its negotiations with Reyes as the redemption period of the subject foreclosed property drew near. Riviera strongly exhibited a "take-it or leave-it" attitude in its negotiations with Reyes. It quoted its "fixed and final" price as Five Thousand Pesos (P5,000.00) and not any peso more. It voiced out that it had other properties to consider so Reyes should decide and make known its decision "within fifteen days." Riviera even downgraded its offer when Reyes offered anew the property to it, such that whatever amount Reyes initially receives from Riviera would absolutely be insufficient to pay off the redemption price of the subject property. Naturally, Reyes had to disagree with Rivieras highly disadvantageous offer. Nary a howl of protest or shout of defiance spewed forth from Rivieras lips, as it were, but a seemingly whimper of acceptance when the counsel of Reyes strongly expressed in a letter dated December 5, 1989 that Riviera had lost its right of first refusal. Riviera cannot now be heard that had it been informed of the offer of Five Thousand Three Hundred Pesos (P5,300.00) of Cypress and Cornhill it would have matched said price. Its stubborn approach in its negotiations with Reyes showed crystal-clear that there was never any need to disclose such information and doing so would be just a futile effort on the part of Reyes. Reyes was under no obligation to disclose the same. Pursuant to Article 1339 of the New Civil Code, silence or concealment, by itself, does not constitute fraud, unless there is a special duty to disclose certain facts, or unless according to good faith and the usages of commerce the communication should be made. The general rule is applicable in the case at bar since Riviera failed to convincingly show that either of the exceptions are relevant to the case at bar.

13. MACION v GUIANI FACTS: Macion and Dela Vida Institute entered into a contract to sell, where the latter assured the former that it will buy the 2 parcels of land in Cotabato City on or before July 31, 1991 at P1.75M. In the meantime,

Dela Vida took possession of it and promptly built an edifice worth P800,000. However, on the said date, the sale did not materialize. Consequently, Macion filed a complaint for unlawful detainer against Dela Vida, while Dela Vida countered with a complaint for reformation of the contract to sell. These differences were eventually settled. In 1992, both parties entered into a compromise agreement where Macion will give Dela Vida 5 months to raise P2.06M and in case of failure to do so, Dela Vida would vacate the premises. After 2 months, Dela Vida alleged that they had negotiated a loan from BPI and requested Macion to execute the contract to sell in its favor. However, Macion refused, which prompted Dela Vida to file an urgent motion for an order to direct Macion to execute the contract to sell. In return, Macion filed a motion for execution of judgment alleging that after 5 months, Dela Vida was not able to settle their obligations with Macion. RTC ruled in favor of Dela Vida. ISSUE: W/N it was proper to execute a contract to sell in favor of Dela Vida HELD: YES. Although the compromise agreement (par. 7) does NOT give Dela Vida the right to demand from Macion the execution of the contract to sell in its favor. From this paragraph, it is clear that Macion is obliged to execute a Deed of Sale and not a Contract to Sell upon payment of the full price of P2.06M. Thereafter, Macion will turn over to Dela Vida the TCT. HOWEVER, a review of the facts reveals that even prior to the signing of the compromise agreement, both parties had entered into a contract to sell, which was superseded by a compromise agreement. This compromise agreement must be interpreted as bestowing upon Dela Vida the power to demand a contract to sell from Macion. Where Macion promised to execute a deed of absolute sale upon completing payment of the price, it is a contract to sell. In the case at bar, the sale is still in the executory stage since the passing of title is subject to a suspensive condition--that if Dela Vida is able to secure the needed funds to purchase the properties from Macion. A mere executory sale, one where the sellers merely promise to transfer the property at some future date, or where some conditions have to be fulfilled before the contract is converted from an executory to an executed one, does not pass ownership over the real estate being sold. It cannot be denied that the compromise agreement, having been signed by both parties, is tantamount to a bilateral promise to buy and sell a certain thing for a price certain. Hence, this gives the contracting parties rights in personam, such that each has the right to demand from the other the fulfillment of their respective undertakings. Demandability may be exercised at any time after the execution of the Deed.

14. VILLONCO v BORMAHECO FACTS: Cervantes and his wife owned 3 parcels of land along Buendia where he buildings of Bormaheco Inc were situated. Beside their property were lots owned by Villonco Realty. Cervantes entered into several


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negotiations with Villonco for sale of the Buendia property. Cervantes made a written offer of P400/sqm with a downpayment of P100,000 to serve as earnest money. The offer also made the consummation of the sale dependent upon the acquisition by Bormaheco of a Sta. Ana property. Villonco made a counter-offer stating that the earnest money was to earn 10% interest p.a. The check was enclosed with the reply letter. Cervantes accepted and cashed the check. The Sta. Ana Property was awarded to Bormaheco; the transfer was also duly approved. However, Cervantes sent the check back to Villonco with the interest thereonstating that he was no longer interested in selling the property. He also claims that no contract was perfected; Villonco sues for specific performance. ISSUE: W/N there was a perfected contract of sale HELD: YES. There was a perfected contract of sale. The alleged changes made in the counter-offer are immaterial and are mere clarifications. The changes of the words Sta. Ana property to another property as well as the insertion of the number 12 in the date, and the words per annum in the interest are trivial. There is no incompatibility in the offer and counter-offer. Cervantes assented to the interest and he, in fact, paid the same. Also, earnest money constitutes prood of the perfection of the contract of sale and forms part of the consideration. The condition regarding the acquisition of the Sta. Ana property was likewise fulfilled; there is thus no ground for the refusal of Cervantes to consummate the sale.

15. OESMER v PARAISO DEV CORP. FACTS: Oesmers are co-owners of undivided shares of 2 parcels of agricultural and tenanted land in Cavite, which are unregistered and originally owned by their parents. When their parents died, they acquired the lots as heirs by right of succession. In 1989, Paular, a resident and former Mun. Sec. of Carmona Cavite, brought Ernesto Oesmer (one of the heirs) to meet with Lee, President of Paraiso Development Corp, in Manila for the purpose of brokering the sale of Ernesto's properties to Paraiso Dev. Corp. A contract to sell was entered into between Paraiso Dev. Corp and Ernesto as well as Enriqueta. A check in the amount of P100,000 payable to Ernesto was given as option money. Eventually, Rizalino, Leonora, Bibiano Jr, and Librado also signed the Contract to Sell. However, 2 of their brothers, Adolfo and Jesus, refused to sign the document. A couple of months after, the Oesmers informed Paraiso (through a letter) that it is rescinding the Contract to Sell and returning the option money. However, Paraiso did not respond and thus, Oesmers filed a complaint for declaration of nullity of the Contract to Sell with the RTC, which ruled in favor of Paraiso Dev. Corp. On appeal, CA modified by declaring that the Contract to Sell is valid and binding as to the undivided shares of the six signatories of the document. ISSUE: W/N the Contract to Sell is valid as to all

signatories HELD: NO. It is true that the signatures of the 5 siblings did not confer authority on Ernesto as agent to sell their respective shares in the properties, because such authority to sell an immovable is required to be in writing. However, those signatures signify their act of directly (not through an agent) selling their personal shares to Paraiso Dev. Corp. In the case at bar, the Contract to Sell was perfected when the petitioners consented to the sale to the respondent of their shares in the subject parcels of land by affixing their signatures on the said contract. Such signatures show their acceptance of what has been stipulated in the Contract to Sell and such acceptance was made known to respondent corporation when the duplicate copy of the Contract to Sell was returned to the latter bearing petitioners signatures. As to petitioner Enriquetas claim that she merely signed as a witness to the said contract, the contract itself does not say so. There was no single indication in the said contract that she signed the same merely as a witness. The fact that her signature appears on the right-hand margin of the Contract to Sell is insignificant. The contract indisputably referred to the Heirs of Bibiano and Encarnacion Oesmer, and since there is no showing that Enriqueta signed the document in some other capacity, it can be safely assumed that she did so as one of the parties to the sale. In the instant case, the consideration of P100,000.00 paid by respondent to petitioners was referred to as option money. However, a careful examination of the words used in the contract indicates that the money is not option money but earnest money. Earnest money and option money are not the same but distinguished thus: (a) earnest money is part of the purchase price, while option money is the money given as a distinct consideration for an option contract; (b) earnest money is given only where there is already a sale, while option money applies to a sale not yet perfected; and, (c) when earnest money is given, the buyer is bound to pay the balance, while when the would-be buyer gives option money, he is not required to buy, but may even forfeit it depending on the terms of the option.

16. FULE v CA FACTS: Fule, a banker and a jeweler, acquired a 10-hectare property in Rizal (Tanay Property), which used to be under the name of Fr. Antonio Jacobe, who mortgaged it to Rural Bank of Alaminos to secure a loan of P10,000. However, the mortgage was foreclosed. In 1984, Fule asked Dichoso and Mendoza to look for a buyer of the Tanay property. They found one in the person of Cruz, who owns a pair of diamond earrings. Fule was interested to buy these earrings, but Cruz refused to sell them to him for the price he offered. Subsequently, negotiations for the barter between the earrings and the property ensued. But it turned out that the redemption period for the property has not yet expired. Thus, Fule executed a deed of redemption on behalf of Fr. Jacobe in the amount of P16,000, and on even date, Fr. Jacobe sold the property to Fule for


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P75,000. The Deed of Sale was notarized ahead of the Deed of Redemption. Subsequently, a Deed of Sale over the earrings was executed and when it was delivered, Fule contends that the earrings were fake, even using a tester to prove such allegation. Thereafter, they decided to Dimayuga, a jeweler, to have the earrings tested. After a glance, Dimayuga declared them fake. Fule filed a complaint with the RTC against Cruz and her lawyer, Belarmino, praying that the contract of sale over the Tanay property be declared null and void on the ground of fraud and deceit. RTC ruled in favor of Cruz and Belarmino. ISSUE: W/N the Deed of Sale over the Tanay Property is valid HELD: YES. It is evident from the facts of the case that there was a meeting of the minds between petitioner and Dr. Cruz. As such, they are bound by the contract unless there are reasons or circumstances that warrant its nullification. The records, however, are bare of any evidence manifesting that private respondents employed such insidious words or machinations to entice petitioner into entering the contract of barter. Neither is there any evidence showing that Dr. Cruz induced petitioner to sell his Tanay property or that she cajoled him to take the earrings in exchange for said property. On the contrary, Dr. Cruz did not initially accede to petitioner's proposal to buy the said jewelry. Rather, it appears that it was petitioner, through his agents, who led Dr. Cruz to believe that the Tanay property was worth exchanging for her jewelry as he represented that its value was P400,000.00 or more than double that of the jewelry which was valued only at P160,000.00. If indeed petitioner's property was truly worth that much, it was certainly contrary to the nature of a businessman-banker like him to have parted with his real estate for half its price. In short, it was in fact petitioner who resorted to machinations to convince Dr. Cruz to exchange her jewelry for the Tanay property. Furthermore, petitioner was afforded the reasonable opportunity required in Article 1584 of the Civil Code within which to examine the jewelry as he in fact accepted them when asked by Dr. Cruz if he was satisfied with the same. By taking the jewelry outside the bank, petitioner executed an act which was more consistent with his exercise of ownership over it. This gains credence when it is borne in mind that he himself had earlier delivered the Tanay property to Dr. Cruz by affixing his signature to the contract of sale. That after two hours he later claimed that the jewelry was not the one he intended in exchange for his Tanay property, could not sever the juridical tie that now bound him and Dr. Cruz. The nature and value of the thing he had taken preclude its return after that supervening period within which anything could have happened, not excluding the alteration of the jewelry or its being switched with an inferior kind.

17. DAILON v CA FACTS: Sabesaje sues to recover ownership of a parcel of land based on a private document of absolute sale executed by Dailon. Dailon denies the fact of the sale alleging that the same being embodied in a private instrument, the same cannot convey title under Art. 1358 of the Civil Code which requires that contracts which have for their object the creation, transmission, modification, or extinction of real rights over immovable property must appear in a public instrument. ISSUE: W/N there was a valid/perfected contract of sale HELD: YES. The necessity of a public instrument is only for conveniencenot for validity and enforceability. Such is not a requirement for the validity of a contract of sale, which is perfected by mere consent. Dailon should thus be compelled to execute the corresponding deed of conveyance in a public instrument in favor of Sabesaje. If the sale is made through a public instrument, it amounts to constructive delivery.

18. SECUYA v VDA DE SELMA FACTS: Caballero owned certain friar lands. She entered into an Agreement of Partition where she parted with 1/3 of the said property in favor of Sabellona. Sabellona took possession thereof and sold a portion to Dalmacio Secuya through a private instrument that is already lost. Secuya, along with his many relatives took possession of the said land. Later on, Selma bought a portion of the said land, including that occupied by Secuya; she bought it from Caesaria Caballero. She presented a Deed of Absolute Sale and a TCT. Secuya filed a case for quieting of title. CA upheld Selmas title considering that she had a TCT and a Deed of Sale. ISSUE: Who has a better right, Secuya or Selma? HELD: The Secuyas have nothing to support their supposed ownership over the parcel of land. The best evidence they could have had was the private instrument indicating the sale to their predecessor-in-interest. But the instrument is lost. Even so, it is only binding as between the parties and cannot prejudice 3rd persons since it is not embodied in the public document. Selma, on the other hand, has all the supporting documents necessary; she also acted in good faith and thought that the Secuyas were merely tenants. They did not even pay realty taxes and did not have their claim annotated to the certificate of sale.

19. YUVIENGCO v DACUYCUY FACTS: Yuvienco entered into a contract with Yao King Ong and the other occupants, wherein the former will sell to the latter the Sotto property in Tacloban City for P6.5M provided that the latter made known their decision to buy it or not later than July 31, 1978. When Yuvienco's representative went to Cebu with a prepared and duly signed contract for the purpose of perfecting


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and consummating the transaction, Yao King Ong and other occupants found variance between the terms of payment stipulated in the document and what they had in mind. Thus, it was returned unsigned. Thus, the action for specific performance. ISSUE: W/N the claim for specific performance of Yao King Ong is enforceable under the Statute of Frauds HELD: YES. It is nowhere alleged in the complaint that there is any writing or memorandum, much less a duly signed agreement to the effect, that the price of P6,500,000 fixed by petitioners for the real property herein involved was agreed to be paid not in cash but in installments as alleged by Yao King Ong. The only documented indication of the non-wholly-cash payment extant in the record is the deeds already signed by Yuvienco and taken to Tacloban by Atty. Gamboa for the signatures of the respondents. In other words, the 90-day term for the balance of P4.5 M insisted upon by respondents choices not appear in any note, writing or memorandum signed by either the petitioners or any of them, not even by Atty. Gamboa. Hence, looking at the pose of respondents that there was a perfected agreement of purchase and sale between them and petitioners under which they would pay in installments of P2 M down and P4.5 M within ninety 90) days afterwards it is evident that such oral contract involving the "sale of real property" comes squarely under the Statute of Frauds (Article 1403, No. 2(e), Civil Code.) In any sale of real property on installments, the Statute of Frauds read together with the perfection requirements of Article 1475 of the Civil Code must be understood and applied in the sense that the idea of payment on installments must be in the requisite of a note or memorandum therein contemplated. While such note or memorandum need not be in one single document or writing and it can be in just sufficiently implicit tenor, imperatively the separate notes must, when put together', contain all the requisites of a perfected contract of sale. To put it the other way, under the Statute of Frauds, the contents of the note or memorandum, whether in one writing or in separate ones merely indicative for an adequate understanding of all the essential elements of the entire agreement, may be said to be the contract itself, except as to the form.

20. LIMKETKAI SONS MILLING INC v CA FACTS: In 1976, Philippine Remnants Co., Inc. constituted the Bank of the Philippine Islands (BPI) as its trustee to manage, administer, and sell its real estate property, one of which was the disputed lot in Pasig. In 1988, Pedro Revilla, Jr., a licensed real estate broker, was given formal authority by BPI to sell the lot for P1,000/sqm. Broker Revilla contacted Alfonso Lim of Limketkai Sons Milling (LSM) who agreed to buy the land. LSM asked that the price of P1,000/sqm. be reduced to P900.00 while Albano stated the price is to be P1,100.00. The parties finally agreed that the lot would be sold at P1,000/sqm. to be paid in cash. Notwithstanding the final agreement to pay P1,000/sqm. on a cash basis, Alfonso Lim (LSM official)

asked if it was possible to pay on terms. The bank officials stated that there was no harm in trying to ask for payment on terms because in previous transactions, the same had been allowed. It was the understanding, however, that should the term payment be disapproved, then the price shall be paid in cash. It was Albano who dictated the terms under which the installment payment may be approved, and acting thereon, Alfonso Lim wrote BPI through Merlin Albano embodying the payment initially of 10% and the remaining 90% within a period of 90 days. 2 or 3 days later, LSM learned that its offer to pay on terms had been frozen. Alfonso Lim went to BPI and tendered the full payment of P33,056,000.00 to Albano. The payment was refused because Albano stated that the authority to sell that particular piece of property in Pasig had been withdrawn from his unit. The same check was tendered to BPI Vice-President Nelson Bona who also refused to receive payment. LSM filed an action for specific performance with damages against BPI. In the course of the trial, BPI informed the trial court that it had sold the property under litigation to National Book Store (NBS) in 1989. The complaint was thus amended to include NBS. RTC ruled in favor of LSM, holding that there was a perfected contract of sale between LSM and BPI. CA reversed, holding that no contract of sale was perfected because there was no concurrence of the three requisites enumerated in Article 1318 of the Civil Code. ISSUE: W/N there was a valid contract of sale HELD: YES. There was a meeting of the minds between the buyer and the bank in respect to the price of P1,000/sqm. The requirements in the payment of the purchase price on terms instead of cash were suggested by BPI Vice-President Albano. Since the authority given to broker Revilla sp

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