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Dizon vs CA and Overland Express Lines

January 28, 1999

FACTS:

Overland Express Lines, Inc. entered into a Contract of Lease with Option toBuy with petitioners involving a 1,755.80 square meter parcel of landsituated at corner MacArthur Highway and South H Street, Diliman, QuezonCity. The term of the lease was for 1 year commencing from May 16, 1974 upto May 15, 1975. During this period, Overland Express Lines was granted an

option to purchase for the amount of P3,000.00 per square meter. Thereafter,the lease shall be on a per month basis with a monthly rental of P3,000.00.

For failure of Overland Express Lines to pay the increased rental of P8,000.00per month effective June 1976, petitioners filed an action for ejectmentagainst it. The lower court rendered judgment ordering Overland ExpressLines to vacate the leased premises and to pay the sum of P624,000.00representing rentals in arrears and/or as damages in the form of reasonablecompensation for the use and occupation of the premises during the periodof illegal detainer from June 1976 to November 1982 at the monthly rental ofP8,000.00, less payments made, plus 12% interest per annum fromNovember 18, 1976, the date of filing of the complaint, until fully paid, thesum of P8,000.00 a month starting December 1982, until Overland ExpressLines fully vacates the premises, and to pay P20,000.00 as and by way of

attorneys fees.

ISSUE: WON Overland Express Lines actually paid the alleged P300,000.00 to FidelaDizon, as representative (agent) of petitioners in consideration of the option

HELD: No.

CA opined that the payment by Overland Express Lines of P300,000.00 aspartial payment for the leased property, which petitioners accepted (throughAlice A. Dizon) and for which an official receipt was issued, was the operativeact that gave rise to a perfected contract of sale, and that for failure ofpetitioners to deny receipt thereof, Overland Express Lines can thereforeassume that Alice A. Dizon, acting as agent of petitioners, was authorized bythem to receive the money in their behalf. CA went further by stating that in

fact, what was entered into was a conditional contract of sale whereinownership over the leased property shall not pass to the Overland ExpressLines until it has fully paid the purchase price. Since Overland Express Linesdid not consign to the court the balance of the purchase price and continuedto occupy the subject premises, it had the obligation to pay the amount ofP1,700.00 in monthly rentals until full payment of the purchase price.

In an attempt to resurrect the lapsed option, Overland Express Lines gaveP300,000.00 to petitioners (thru Alice A. Dizon) on the erroneouspresumption that the said amount tendered would constitute a perfectedcontract of sale pursuant to the contract of lease with option to buy. Therewas no valid consent by the petitioners (as co-owners of the leasedpremises) on the supposed sale entered into by Alice A. Dizon, as petitionersalleged agent, and Overland Express Lines. The basis for agency isrepresentation and a person dealing with an agent is put upon inquiry andmust discover upon his peril the authority of the agent. As provided in Article

1868 of the New Civil Code, there was no showing that petitioners consentedto the act of Alice A. Dizon nor authorized her to act on their behalf withregard to her transaction with private respondent. The most prudent thingprivate respondent should have done was to ascertain the extent of theauthority of Alice A. Dizon. Being negligent in this regard, private respondentcannot seek relief on the basis of a supposed agency.

Every person dealing with an agent is put upon inquiry and must discoverupon his peril the authority of the agent. If he does not make such inquiry, heis chargeable with knowledge of the agents authority, and his ignorance of

that authority will not be any excuse. Persons dealing with an assumedagency, whether the assumed agency be a general or special one, are boundat their peril, if they would hold the principal, to ascertain not only the fact ofthe agency but also the nature and extent of the authority, and in case eitheris controverted, the burden of proof is upon them to establish it.

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Fule vs. Court of Appeals

March 2, 1998

Romero, J.:

Facts:

Gregorio Fule a banker and jeweler, acquired a 10-hectare property to be calledTanay Property. It used to be in the name of Fr. Antonio Jacobe but it was mortgage tothe bank where petitioner worked as corporate secretary. Upon failure of Fr. Jacobe to

pay, the Tanay Property was foreclosed and sold at public auction.

Since petitioner was the corporate secretary of the bank which foreclosed the property,petitioner sought the help of Dichoso and Mendoza to look for a buyer. They found one inthe person of Dr. Cruz.

Dr. Cruzwas the owner of a pair of diamond earrings which the petitioner found to beat a value of Php 100,000. Later, petitioner offered to buy the earrings for $6,000 at therate of Php 25 for every $1. Dr. Cruz still declined stating that the real price is Php 19 to$1.

Later, negotiations for a barter ensued. Petitioner would sell the Tanay Property whileDr. Cruz would give the petitioner the diamond earrings.

October 19, 1984, Dr. Cruz was already amendable to the barter so petitioner went overto check the jewelry. In the afternoon of October 23, 1984, petitioner met Atty.Belarmino to prepare the deed of sale. Petitioner then signed this the following day andwent over to the bank to get the jewelries. Upon inspecting the jewelries, petitioner wassatisfied and left at around 6 p.m. that day. However, 2 hours later, at 8 p.m. petitionerwent over to the house of Atty. Belarmino and told the latter that the jewelries involvedin the barter were fake. A jeweler by the name of Macario Dimayuga confirmed that saidearrings were fake.

The lower court held that the sale was valid, and this was affirmed by the CA.

Issue / Held:

WON the CA erred in upholding the validity of the sale. NO.

Ratio:- Contracts are perfected by mere consent. A contract of sale is perfected at the

moment there is a meeting of the minds upon the thing which is the object ofthe contract and upon the price. It is evident from the facts that there was ameeting of the minds between the petitioner and Dr. Cruz.

- Annullable contracts are those where in the parties are:1. Incapable of giving consent to a contract, and2. Those where the consent is vitiated by mistake violence, intimidation,

undue influence or fraud.- Petitioner alleges that since the jewelry turned out to be counterfeit, his

consent was vitiated by fraud. But the SC held that it was petitioner who acted

in bad faith. He had the opportunity to examine the jewelry many times beforehe actually took them in his possession. It was only after 2 hours, where a

switch between the genuine and fake diamonds did he call the a ttention of therespondent to the fact that the diamonds were fake.

- Moreover, the court held thatownership over the parcel of land and the pairof emerald-cut diamond earrings had been transferred to Dr. Cruz and

petitioner, respectively, upon the actual and constructive deliver thereof.WHEREFORE, Decision of the CA is AFFIRMED.*there is another issue regarding moral and nominal damages in the case. This caseis under barter in the outline. So, you think I should add that issue still?

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Celestino Co & Co. v. Collector of Internal Revenue

August 31, 1956

Bengzon, J.

Relevant Provision:Art. 1467. A contract for the delivery at a certain price of an article which the vendor inthe ordinary course of his business manufactures or procures for the general market,whether the same is on hand at the time or not, is a contract of sale, but if the goods areto be manufactured specially for the customer and upon his special order, and not for

the general market, it is a contract for a piece of work.

Facts:

Celestino Co & Company is a duly registered general co-partnership doingbusiness under the trade name of Oriental Sash Factory

From 1946 to 1951, it paid percentage taxes of 7% on the gross receipts of itssash, door and window factory.

o In accordance with section 186 of the National Revenue Code In 1952, it began to claim liability only to the contractors 3%

o Under section 191 of same code Petitioner claims that they produce doors and windows specially for certain

clients only

o Petitioner presents letters, sketches of doors and windows and pricequotations sent by the manager of the factory to four customers who

allegedly made special orders for doors and windows from the said

factory.

o (Hence, would be a Contract for a Piece of Work)

Issue/Held:WON Petitioners business is involved in contracts for pieces of work. / NO. It isinvolved in contracts of sale.

Ratio:

Any builder or homeowner, with sufficient money, may order windows or doorsof the kind manufactured by this appellant.

That the doors and windows must meet desired specifications is neither here northere.

o If theses specifications do not happen to be of the kind habituallymanufactured by the appellant special forms of sash, mouldings or

panels it would not accept the orderand no sale is made.

In relation to Art. 1467 of the Civil Code:o It is apparent that the Oriental Sash Factory did not merely sell its

services to Don Toribio Teodoro & Co (claimed special client) because it

also sold the materials.

It soldmaterials ordinarily manufactured by it, althoughin such form or combination as suited the fancy of the

purchaser.

Although the Factory does not, in the ordinary course of itsbusiness, manufacture and keep on stock doors of the kind

sold to Teodoro, it could stockand/or probably hand in stock

the sash, mouldings and panels it used therefor.

Dispositive:Appealed decision affirmed. Celestino Co & Company must pay percentage taxes of 7%on the gross receipts of its sash, door and window factory in accordance with sec. 186 ofthe National Revenue Code and NOT as a contractor under sec. 191.

Commissioner v Engineering Equipment

COMMISSIONER OF INTERNAL REVENUE vs. ENGINEERING EQUIPMENTG.R. No. L-27044 June 30, 1975

Facts:

Engineering Equipment and Supply Co., an engineering and machinery firm, is engaged

in the design and installation of central type air conditioning system, pumping plants andsteel fabrications.

CIR received an anonymous letter denouncing Engineering for tax evasion bymisdeclaring its imported articles and failing to pay the correct percentage taxes duethereon in connivance with its foreign suppliers. Engineering was likewise denounced tothe Central Bank (CB) for alleged fraud in obtaining its dollar allocations. So, NBI andCentral Bank conducted a raid and search on which occasion voluminous records of thefirm were seized and confiscated. CIR also reported about deficiency advance sales tax.CIR assessed against the Company payment of the increased amount and suggested thatP10,000 be paid as compromise in extrajudicial settlement of the Companys penalliability for violation of the Tax Code. The firm, however, contested the tax assessmentand requested that it be furnished with the details and particulars of the Commissioners

assessment.Engineering appealed the case to the Court of Tax Appeals. During thependency of the case the investigating revenue examiners reduced the Companysdeficiency tax. CTA declared that Engineering is a contractor and is exempt fromdeficiency manufacturers sales tax. The Commissioner, not satisfied with the decision ofthe CTA, appealed to the Supreme Court.

Issue:

1) WON Engineering Equipment is a manufacturer or contractor? CONTRACTOR.2)Corrollarily WON the installation of a centralized air-conditioning system a contact ofsale or a contract for piece of work? CONTRACT FOR PIECE OF WORK.3) Is Celestino Covs. CIR case applicable in this case? NO.

Held:

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1)

The word contractor has come to be used with special reference to a person who, in thepursuit of the independent business, undertakes to do a specific job or piece of work forother persons, using his own means and methods without submitting himself to controlas to the petty details. The true test of a contractor is that when he renders service in thecourse of an independent occupation, representing the will of his employer only as to theresult of his work, and not as to the means by which it is accomplished.

Engineering did not manufacture air conditioning units for sale to the general public, butimported some items (as refrigeration compressors in complete set, heat exchangers orcoils) which were used in executing contracts entered into by it. Engineering undertooknegotiations and execution of individual contracts for the design, supply and installationof air conditioning units of the central type taking into consideration in the process suchfactors as the area of the space to be air conditioned; the number of persons occupyingor would be occupying the premises; the purpose for which the various air conditioningareas are to be used; and the sources of heat gain or cooling load on the plant such as sunload, lighting, and other electrical appliances which are or may be in the plan. Relative tothe installation of air conditioning system, Engineering designed and engineeredcomplete each particular plant and that no two plants were identical but each had to beengineered separately.

2)

NATURE OF OBJECT TEST:

The distinction between a contract of sale and one for work, labor and materials is testedby the inquiry whether the thing transferred is one NOT in existence and which neverwould have existed but for the order of the party desiring to acquire it, or a thing whichwould have existed and has been the subject of sale to some other persons even if theorder had not been given. If the article ordered by the purchaser is exactly such as theplaintiff makes and keeps on hand for sale to anyone, and no change or modification of itis made at defendants request, it is a contract of sale, even though it may be entirelymade after, and in consequence of, the defendants order for it.

The air conditioning units installed in a central type of air conditioning system would nothave existed but for the order of the party desiring to acquire it and if it existed withoutthe special order of Engineerings customer, the said air conditioning units were notintended for sale to the general public. Hence, it is a contract for a piece of work.

3)

Celestino Co compared to Engineering Equipment:

Points of discussion:1) Advertisement as manufacturer/contractor2) Ready-madematerials

In Celestino Co, the Court held the taxpayer to be a manufacturer rather than a

contractor of sash, doors and windows manufactured in its factory. From the very start,Celestino Co intended itself to be a manufacturer of doors, windows, sashes etc. as it did

register a special trade name for its sash business and ordered company stationerycarrying the bold print ORIENTAL SASH FACTORY. As a general rule, sash factoriesreceive orders for doors and windows of special design only in particular cases, but thebulk of their sales is derived from ready-made doors and windows of standard sizes forthe average home, which sales were reflected in their books of accounts totallingP118,754.69 for the period of only nine (9) mon ths. The Court found said sum difficult tohave been derived from its few customers who placed special orders for these items.

In the present case, the company advertised itself as Engineering Equipment and Supply

Company, Machinery Mechanical Supplies, Engineers, Contractors and not asmanufacturers. It likewise paid the contractors tax on all the contracts for the design andconstruction of central system. Similarly, it did not have ready-made air conditioningunits for sale.

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Quiroga vs Parsons (1918)J. Avancena

1. Quiroga and Parsons entered into a contract with the following conditions:a. Mr. Quiroga shall manufacture beds and shall invoice them at the

same price he has fixed for sales in Manila + 25% commission on thesale + Parsons shall order the beds by the dozen

b. Parsons shall pay within a period of 60 days from shipment datec. Transpo + Shipment expenses = Quiroga; Freight + insurance and

Unloading cost = Parsonsd. If before an invoice falls due, Quiroga should request its payment, thesame will be considered as prompt payment = 2% deduction frominvoice amount

e. Quiroga shall give 15 days notice for any price alteration he wants f. Parsons shall not sell other beds than the Quiroga bedsg. Quiroga assumes the obligation to offer and give preference to

Parsons in case anyone should apply for the exclusive agency outsideVisayas

h. Parsons can sell the bed in any part of the Philippines where there areno exclusive agents

i. Contract is for an unlimited period and may be terminated by eithercontracting parties by a previous 90 day notice.

2. Quiroga filed a complaint against Parsons for allegedly violating portions oftheir agreement. With the exception of not ordering beds by the dozen, none ofthe obligations imputed to Parsons are expressly set forth in the contract.

a. Quiroga: The obligations we agreed upon are implied in a contract ofcommercial agency so Parsons should have followed his obligationsdutifully as my agent.

3. SC:a. Is this a contract of agency or a contract of sale? CONTRACT OF

SALE!

i. In order to classify a contract, due regard must be given toits essential clauses.

ii. APPLICATION: In the contract in question, what wasessential, as its cause and subject matter, is that Parsonswas to pay the price in the manner stipulated. The priceagreed upon was determined by Quiroga with certaindiscounts if applicable. Payment was to be made at the endof 60 days, or at Quirogas request subject to a 2% discountfor prompt payment.

iii. ^ These are essentially the features of a contract of purchaseand sale. There was the obligaton on the part of Quiroga tofurnish the beds and there was obligation on the part ofParsons to pay the price.

1. These features exclude the legal conception of anagency or order to sell whereby the agent receivedthe thing to sell it and does not pay the price, butdelivers to the principal the price he obtains fromthe sale of a thing to 3rd person, and if he does not

succeed in selling it, he returns it.

iv. Debunking Quiroga: After examining the clauses of thecontract, none of the single clauses conveys the idea ofagency.

1. The word commission on salesmerely meansa discount in price

2. The word agency only expresses the idea that itwas only Parsons who could sell the beds in theVisayan Islands

3. Re: Other clauses They are not incompatiblewith the contract of purchase and sale4. Re: Testimony of Former VP of Parsons whoallegedly drafted the said contractWell, hereally is not the one who drafted according toParsons evidence + supposing he is, then he ismistaken for thinking that what he is drafting is acontract of agency.

a. Contract is what the law defines it to benot what the parties call it.

5. Re: Quirogas argument that it was agencybecause Parsons returned the beds it could not

sellMutual tolerance in the performance oftheir duties under the contract

6. Re: Parsons Obligation to order by the dozenIf breached, then Quiroga could just disregardParsons order but if he consents then he cannotcomplain anymore because ha acted of his own freewill.

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DAO HENG BANK, INC (now Banco de Oro Universal Bank) v. LAIGO

Carpio Morales, J.November 20, 2008

Relevant Law:

Art. 1245: Dation in payment, whereby property is alienated to the creditor insatisfaction of a debt in money shall be governed by the law of sales.

FACTS:

Spouses Lilia and Reynaldo Laigo obtained loans from Dao Heng Bank in the amountof 11M to secure the payment of which they forged 3 real estate mortgages covering2 parcels of land

The loans were payable within 12 months from the execution of the promissorynotes covering the loans.

By 2000, respondents failed to settle their outstanding obligation drawing them toverbally offer to cede to Dao Heng one of the two mortgage lots by way of dacion enpago. The land has been appraised but there was no further action.

Dao Heng was later to demand the settlement of the obligation (10,385,109). Uponnon-payment, Dao Heng filed an application to foreclose the real estate mortgage.

The properties were sold for 10,776,242 to Banco de Oro Universal Bank, thehighest bidder.

The spouses move to redeem the property and Dao Heng Bank proposed theredemption scheme as follows: Redemption price shall be 11.5M plus 12% interest based on diminishing

balance payable in staggered payments up to January 2, 2002. 3M to be paid immediately upon receipt of this approval (see case for other conditions)

Nothing was heard from the respondents hence the bank proceeded to consolidatethe titles immediately after the expiration of the redemption period

Six days before the expiration of the redemption period, the respondents filed acomplaint with the RTC praying for the annulment of the foreclosure of the propertiesand for them to be allowed to deliver by way of dacion en pago one of themortgaged properties as full payment of their mortgaged obligation

The spouses claim that Dao Heng verbally agreed to enter into a dacion en pago,while Dao Heng said that there was no meeting of the minds between the parties forthe settlement of the claim by dacion en pago. Hence, the bank moved to dismiss thecomplaint because it is unenforceable under the Statute of Frauds (must be inwriting). The spouses, on the other hand, argued that the delivery of the titles to themortgaged properties constituted partial performance of their obligation under thedacion en pago, taking it out of the coverage of the Statute of Frauds.

ISSUE: WON there was a valid dacion en pago.

HELD: No. There was no common consent between the parties. Dao Heng Bank found theoffer to settle by way of daccion not acceptable and thus, it opted to foreclose on themortgage.

RATIO:

Dacion en pago as a mode of extinguishing an existing obligation partakes of thenature of sale whereby the property is alienated to the creditor in satisfaction of adebt in money. It is an objective novation of the obligation, hence, common consentis required.

In dacion en pago, the debtor offers another thing to the creditor who accepts it asequivalent for payment of an outstanding debt. It partakes of a nature of a sale, thecreditor buying the property of the debtor, hence the elements of a sale (consent,object, cause or consideration) must be present.

In dacion en pago, what actually takes place is an objective novation of theobligation, where the thing offered as an accepted equivalent of the performance ofan obligation is considered as the object of the contract of sale while the debt is thepurchase price.

In any case, common consent is an essential prerequisite be it a sale or novation tohave the effect of totally extinguishing the debt or obligation.

Being likened to that of a contract of sale, it is governed by the law of sales. Hence,the partial execution of the contract of sale takes it out of the provisions of theStatute of Frauds so long as the essential requisites of consent, object and causeconcur. However, in this case, there is no showing that after the appraisal of theproperty, the bank approved of the proposal. The delivery of the title is the usualcondition sine qua non to the execution of the mortgage.

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Luzon Brokerage v. Maritime Building

January 31, 1972

J. JBL Reyes

Facts:

- 1949: Defendant Myers Building Co. entered into a Deed of Conditional Sale infavor of Bary Building co. (later known as Maritime Building Co.) for the sale of

3 parcels of land in Manila

o PhP 1Mo PhP 50k paid upon the execution of the said contract; The balance to

be paid in monthly instalments of PhP 10k, with 10% interest per

annum until fully paid

o Paragraph O: In case of failure to pay any instalment, the contractshall be annulled at the option of the vendor and all payments already

made shall be forfeited + vendor has the right to re-enter and take

possession of the property

- Monthly instalment was amended to PhP 5k per month and interest was raisedto 5.5% p.a.

- Monthly instalments were regularly paid until 1961: Maritime requested for amoratorium on the monthly payments until the end of 1961 = difficulties in

connection with the warehouse businesso Board of directors rejected the request for suspension of payments

- Maritime failed to pay for the months of April and May 1961; May 1961: Myersdemanded payment for instalments that were due and demandable

- June 1961: Myers wrote to Maritime advising it of the cancellation of the Deedof Conditional Sale entered into between them and demanded possession

- Myers demanded upon Luzon Brokerage (to whom Maritime leased theproperties) payment of monthly rentals of PhP 10k and the surrender of the

same to it -> Luzon found itself in a payment to the wrong party = filed a ction

for interpleader against Maritime

- Myers filed an action against Maritime, praying for the confirmation of its rightto cancel said contract

o Maritime contends: (1) Myers cannot cancel the contractextrajudicially; (2) not failed to pay monthly payments

- Trial Court: Maritime = breach of contract -> Myers entitled to terminate saidcontract + forfeit prior instalments + repossess building + collect rentals from

Luzon Brokerage

Issue/Held: WON Myers was entitled to extrajudicially rescind the contract [YES]

Ratio:

- Default not made in good faitho Letter of Maritime to Myers Co. = non-payment of installments was

the result of a deliberate course of action, designed to coerce Myers

Co. into answering for an alleged promise of the late FH Myers to

indemnify Schedler (Majority stock holder of Myers Co)

o Attempt to burden Myers Building Co. with an uncollectible debt sincethe enforcement of the estate of FH Myers was already barred

o Breach of contract tainted with fraud or maliceo Being in bad faith, Maritime is not entitled to ask the court for more

time to make payment, effectively removing the breach or default

- Irrelevant if breach is casual or seriouso Manuel v. Rodriguez: Contracts to sell -> full payment is a positive

suspensive condition, failure of which is not a breach (casual or

serious) but an event that prevented the obligation of the vendor to

convey the title from acquiring binding force [Art. 1117 of Old Civil

Code]

- Re: Extrajudicial Rescissiono Court cited actual terms in the contract: should the VENDEE fail to

pay any of the monthly instalments when due xxx then this Deed of

Conditional Sale SHALL AUTOMATICALLY and WITHOUT ANY

FURTHER FORMALITY, become NULL AND VOID xxx

o Cited UP v. De Los Angeles: The party who deems the contractviolated may consider it resolved or rescinded, and act accordingly,

without previous court action, but it proceeds at its own risk

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Title: Dignos v CA

Date: Feb. 29, 1988

Ponente: Bidin, J.

Facts:The Dignos spouses were owners of a parcel of land. On June 7, 1965, petitioners, Dignosspouses, sold the said parcel of land to respondent Atilano J. Jabil for the sum ofP28,000.00, payable in two installments, with an assumption of indebtedness with theFirst Insular Bank of Cebu in the sum of P12,000.00, which was paid and acknowledged

by the vendors in the deed of sale executed in favor of Jabil, and the next installment inthe sum of P4,000.00 to be paid on or before September 15, 1965.

On November 25, 1965, the Dignos spouses sold the same land in favor of the spouses,Luciano Cabigas and Jovita L. De Cabigas, who were then U.S. citizens, for the price ofP35,000.00. A deed of absolute sale was executed by the Dignos spouses in favor of theCabigas spouses.

As the Dignos spouses refused to accept from Jabil the balance of the purchase price ofthe land, and as he discovered the second sale made by the spouses to the Cabigasspouses, Jabil brought the present suit.

Issue:I. Whether or not subject contract is a deed of absolute sale or a contract Lot

sell. DEED OF SALE!

Ratio:Petitioners argue it was a contract to sell subject to the suspensive condition of fullpayment of the price.

Untenable.

Thus, it has been held that a deed of sale is absolute in nature although denominated asa "Deed of Conditional Sale" where nowhere in the contract in question is a proviso orstipulation to the effect that title to the property sold is reserved in the vendor until fullpayment of the purchase price, nor is there a stipulation giving the vendor the right tounilaterally rescind the contract the moment the vendee fails to pay within a fixed

period.

A careful examination of the contract shows that there is no such stipulation reservingthe title of the property on the vendors nor does it give them the right to unilaterallyrescind the contract upon non-payment of the balance thereof within a fixed period.

On the contrary, all the elements of a valid contract of sale under Article 1458 of the CivilCode, are present, such as: (1) consent or meeting of the minds; (2) determinate subjectmatter; and (3) price certain in money or its equivalent. In addition, Article 1477 of thesame Code provides that "The ownership of the thing sold shall be transferred to thevendee upon actual or constructive delivery thereof."

Moreover, though there was no constructive delivery, the Deed of Sale being a private

instrument, there was actual delivery, as evidenced by the delivery of the Dignos spouses

of the land to Jabil, then on which the latter constructed a beach resort called JabilsBeach Resort.

Petition dismissed.

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Medina v. Collector of Internal Revenue

January 28, 1961

Reyes, JBL

Facts:

-Petitioner Medina married Antonia Rodriguez. Before 1946, the spouses had neitherproperty nor business of their own. Later, however, petitioner acquired forest,concessions in the municipalities of San Mariano and Palanan in the Province of Isabela.From 1946 to 1948, the logs cut and removed by the petitioner from his concessions

were sold to different persons in Manila through his agent, Mariano Osorio.- Antonia started getting into the lumber business as well. Husband sold to her logs fromSan Mariano. She also sold in Manila these logs through agent, Osorio. The proceedswere, upon instructions from petitioner, either received by Osorio for petitioner ordeposited by said agent in petitioner's current account with the Philippine NationalBank.- Collector considered sale by Mrs. Medina as petitioners original sales taxable under theSec. 186 of National Internal Revenue Code (deficiency sales tax, surcharges) citing thatsales made by husband to wife was null and void pursuant to Art. 1490/- Petitioner resisted saying he has an agreement of complete separation of propertiesand assessment for years 46-52 had already prescribed.Court of Tax Appeals- Ruled no such premarital agreement between the spouses and saleof husband to his wife was fictitious, simulated and not bona fide.ISSUE: WON there was really a prenuptial agreement of complete separation of

property between the spouses? NO

WON sales made by the petitioner to his wife could be considered as his original

taxable sales under the provisions of Section 186 of the National Internal Revenue

Code? YES because sale between spouses is null and void

RATIO:

- On the first issue, at the time of their marriage they had neither property norbusiness to be the subject of such premarital agreement. They also could not

say their agreement was recorded in the Registry of Property, due to the above

fact (also not reflected on the records). Also, they have been acting otherwise to

their claim. Ownership, usufruct and administration of business all by husband.

This allegation was also made late, after they were informed of the CC

prohibition.

- Contracts violative of the provisions of Article 1490 of the Civil Code are nulland void. Being void transactions, the sales made by the petitioner to his wife

were correctly disregarded by the Collector in his tax assessments that

considered as the taxable sales those made by the wife through the spouses'

common agent, Mariano Osorio. In upholding that stand, the Court of Tax

Appeals committed no error.

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CORNELIA MATABUENA vs. PETRONILA CERVANTES

Note: This case is incredibly hard to find (none can be found anywhere). Presented

here are patched up digests I got from various sources from the Internet. I

apologize!

L-2877 (38 SCRA 284)March 31, 1971

FACTS: In 20 February 1956, herein appellants brother Felix Matabuena donated apiece of lot to his common-law spouse, herein appellee Petronila Cervantes (sheaccepted). Felix and Petronila got married only in 1962 or six years after the deed ofdonation was executed.

Five months later, or September 13, 1962, Felix died. Thereafter, appellantCornelia Matabuena, by reason of being the only sister and nearest collateral relative ofthe deceased, filed a claim over the property, by virtue of a an affidavit of self-adjudication executed by her in 1962, had the land declared in her name and paid theestate and inheritance taxes thereon.

Cornelia (plaintiff-appellant), sister of Felix Matabuena maintains that thedonation made by Felix to Petronila Cervantes (defendant-appellee) was void becausethey were living without the benefit of marriage (common law marriage). This is inpursuant to Article 133 of Civil Code which provides "Every donation betweenthespouses during the marriage shall be void. On 23 November 1965, the lower courtupheld the validity of the donation as it was made before Cervantes marriage to thedonor. Hence this appeal.

ISSUE: Whether or not the ban on donation between spouses during a marriage appliesto a common-law relationship.

HELD: Lower Court decision is REVERSED. Ban on donation also applies to

common-law relationship.

RATIO: While Article 133 of the Civil Code considers as void a donation between thespouses during marriage, policy consideration of the most exigent character as well asthe dictates of morality requires that the same prohibition should apply to a common-law relationship.

As stated in Buenaventura vs. Bautista (50 OG 3679, 1954), if the policy of thelaw is to prohibit donations in favor of the other consort and his descendants because offear of undue and improper pressure and influence upon the donor, then there is everyreason to apply the same prohibitive policy to persons living together as husband andwife without the benefit of nuptials.

The lack of validity of the donation by the deceased to appellee does notnecessarily result in appellant having exclusive right to the disputed property. As awidow, Cervantes is entitled to one-half of the inheritance, and the surviving sister to theother half.

Article 1001, Civil Code: Should brothers and sisters or their children survivewith the widow or widower, the latter shall be entitled to one-half of the inheritance andthe brothers and sisters or their children to the other half.

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CRUZ v. CA

November 1997 | J. Bellosillo

Petitioner: Gloria CruzPrivate Respondents: Romy Suzara and Manuel Vizconde

FACTS:

Gloria Cruz owned Lot 10 (area: 747.7 square meters; location: Brgy. Doa Imelda,Quezon City), together with the improvements therein, which was covered by TCT No.

242553 in her name. 1997 Cruz began living together with Romeo Suzara as husband and wife without

the benefit of marriage.

1982 solely out of love and affection for Suzara, she executed a deed of absolute saleover Lot 10 in Suzaras favor, without any monetary consideration. Suzara registeredthe document in his favor and used the property as collateral for a bank loan ofP350,000.

Four years later, as Suzara failed to pay the loan, the mortgage was foreclosed. Cruzpaid the bank P40,638 to restructure the loan, resulting in the extension of theredemption period to two years

However, without Cruzs knowledge and before the expiration of the extended period,Suzara redeemed the property. She tried to talk to him but he avoided her.

Finally, to protect her own interests, Cruz executed an Affidavit of Adverse Claimwhich she filed with the Register of Deeds in Quezon City, asserting that her sale infavor of Suzara was null and void for: (1) lack of consideration, and (2) being contraryto law and public policy.

February 1990 Cruz filed a complaint with the Regional Trial Court of Manilaagainst respondent Suzara for quieting of title, declaration of nullity of documents anddamages with prayer for writ of preliminary injunction.

o Suzaras response: (1) he was already the registered owner of the property asevidenced by TCT No. 295388, having acquired the same from petitionerthrough a notarized deed of absolute sale; (2) the sale was for a valuableconsideration and not tainted with fraud nor executed under duress; and, (3)petitioner Cruz was estopped from impugning the validity of the sale andquestioning his title over the property

RTC issued a TRO enjoining Suzara from disposing and/or encumbering thelitigated property until further orders

April 1990 Cruz filed an ex parte motion to admit her amended complaintimpleading respondent Manuel Vizconde as additional defendant, and praying that theRegister of Deeds of Quezon City be ordered to annotate her notice of lispendens (pending suit) on respondent Suzaras title

o RTC resolved in favor of her motion, and the amended complaint was admitted.o RTC also ordered the Register of Deeds to show cause why it was refusing to

annotate the notice oflis pendens filed by her.

May 1990 the Register of Deeds filed a manifestation informing the trial court thatthe property had been sold by respondent Suzara to his co-respondent Vizconde whowas already the registered owner thereof. Since Vizconde was not impleaded in thecase the notice oflis pendens could not be annotated on his title until the requirementsof law were met and the annotation of the notice judicially ordered.

o Vizcondes response: (1) there was no privity of contract between him andpetitioner; (2) he (Vizconde) was a purchaser for value in good faith; (3) the

sale between him and Suzara was executed on 22 December 1989 or longbefore the execution of the Affidavit of Adverse Claim; and, (4) the action wasbarred by laches, estoppel and prescription.

RTCdismissed Cruzs complaint, Suzaras counterclaim, and Vizcondes cross claim.It ruled that the sale between Cruz and Suzara was valid as love, affection, andaccommodation was the consideration for the sale.

oRTC found Vizconde an innocent purchaser, because at the time of his purchasehe was unaware of the adverse claim of Cruz

CA affirmed the RTC. Hence this petition.ISSUES:

(1) WON the sale between Cruz and Suzara valid(2) WON Cruz have the legal personality to question the legality of the sale (3) WON Vizconde was an innocent, good faith purchaser

HELD: Petition of Cruz DENIED, CA ruling affirmed.

RATIO:

Cruzs argument: (1) there being a factual finding by the trial court and the Court ofAppeals that she and respondent Suzara were common-law husband and wife, the salebetween them was void and inexistent, as per 1490 of the Civil Code; (2) theconsideration of "love, affection and accommodation" for the sale was not a valid cause

for the conveyance of the property as there was no price paid in money or itsequivalent; and (3) resultantly, the sale by Suzara to his co-respondent Vizconde mustalso be declared null and void the latter being a purchaser in bad faith.

We cannot sustain petitioner. Although under Art. 1490 the husband and wife cannotsell property to one another as a rule which, for policy consideration and the dictatesof morality require that the prohibition apply to common-law relationships, petitionercan no longer seek reconveyance of the property to her as it has already been acquiredby respondent Vizconde in good faith and for value from her own transferee.

The real purpose of the Torrens system of registration is to quiet title to land and toput a stop to any question of legality of the title except claims which have beenrecorded in the certificate of title at the time of registration or which may arisesubsequent thereto. Every registered owner and e very subsequent purchaserfor value in good faith holds the title to the property free from all encumbrancesexcept those noted in the certificate. Hence, a purchaser is not required to explorefurther what the Torrens title on its face indicates in quest for any hidden defect orinchoate right that may subsequently defeat his right thereto.[6]

Where innocent third persons acquire rights over the property the court cannotdisregard such rights and order the total cancellation of the certificate. The effect ofsuch an outright cancellation would be to impair public confidence in the certificate oftitle, for everyone dealing with property registered under the Torrens system wouldhave to inquire in every instance whether the title has been regularly or irregularlyissued. This is contrary to the evident purpose of the law.

oA purchaser in good faith is one who buys the property of another withoutnotice that some other person has a right to or interest in such property andpays a full and fair price for the same at the time of such purchase or before hehas notice of the claim of another person.

http://sc.judiciary.gov.ph/jurisprudence/1997/nov1997/120122.htm#_edn6http://sc.judiciary.gov.ph/jurisprudence/1997/nov1997/120122.htm#_edn6http://sc.judiciary.gov.ph/jurisprudence/1997/nov1997/120122.htm#_edn6http://sc.judiciary.gov.ph/jurisprudence/1997/nov1997/120122.htm#_edn6

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At the time respondent Suzara executed the deed of absolute sale on 22 December1989 in favor of respondent Vizconde, which was acknowledged before a notarypublic, Suzara was the registered owner appearing in the certificate of title.

There is no doubt that respondent Vizconde was a purchaser for value in good faithand that when he bought the property he had no knowledge that some other personhad a right to or an adverse interest in the property. As the Court of Appeals observed,Vizconde paid a full and fair price for the property at the time of the purchase andbefore he had any notice of petitioner's claim or interest in the property.

For purposes of resolving the present controversy, the allegation that there was asecond deed of sale executed solely for the purpose of evading the penalties resultingfrom late payment of taxes and registration is immaterial. The fact is, petitionerherself admits that the actual sale of the property occurred on 22 December 1989. Acontract of sale is consensual and is perfected once agreement is reached between theparties on the subject matter and the consideration therefor.

We cannot grant petitioner's prayer to have respondent Vizconde's certificate of titledeclared null and void. Neither can we order the reconveyance of the property topetitioner. Vizconde being a purchaser of registered land for value in good faith holdsan indefeasible title to the land. This is without prejudice however to any appropriateremedy petitioner may take against her erstwhile common-law husband, respondentSuzara.

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The Philippine Trust Company v. Socorro Roldan

Petitioners:The Philippine Trust CompanyRespondents: Socorro RoldanMay 31, 1956

Bengzon, J.

FACTS:

Marcelo Bernardo died and left his son, Mariano L. Bernardo (a minor) with 17parcels of land. In view of his minority, guardianship proceedings were

instituted, wherein Socorro Roldan was appointed his guardian. She was thesurviving spouse of Marcelo Bernardo, and the stepmother of said Mariano L.Bernardo.

July 27, 1947: Socorro Roldan filed in said guardianship proceedings, a motionasking for authority to sell as guardian the 17 parcels for the sum of P14,700 toDr. Fidel C. Ramos (her brother-in-law), the purpose of the sale being allegedlyto invest the money in a residential house, which the minor desired to have onTindalo Street, Manila. The motion was granted.

August 5, 1947: Socorro Roldan, as guardian, executed the proper deed of salein favor of her brother-in-law Dr. Fidel C. Ramos.

August 12, 1947: she asked for, and obtained, judicial confirmation of the sale. August 13, 1947, Dr. Fidel C. Ramos executed in favor of Socorro Roldan,

personally, a deed of conveyance covering the same seventeen parcels, for the

sum of P15,000. October 21, 1947 Socorro Roldan sold four parcels out of the seventeen to

Emilio Cruz for P3,000, reserving to herself the right to repurchase.

August 10, 1948: Philippine Trust Company became Marianos guardian. Twomonths later, they instituted this proceeding seeking to annul the two contracts(a) sale thereof by Socorro Roldan, as guardian of said minor, to Fidel C. Ramos;(b) sale thereof by Fidel C. Ramos to Socorro Roldan personally; (c) aconveyance of four out of the said seventeen parcels by Socorro Roldan toEmilio Cruz; and alleges that such sale was contrary to Article 1459 of the CivilCode prohibiting the guardian from purchasing either in person or through themediation of another the property of her ward.

Defendant asserts that she merely repurchased the lot from her brother-in-lawto preserve it and give her protg the opportunity to redeem said property.

CFI: Article was not Controlling. (Rodriguez v. Mactal). CA affirmed.

ISSUE:

WON the sale of the properties was valid?

HELD:

Re: Sale to Dr. RamosNo. The sale is INVALID. CA decision REVERSED.

Guardianship is a trust of the highest order, and the trustee cannot be allowedto have any inducement to neglect his wards interest

She acted it may be true without malice; may have been no previous agreementbetween her and Dr. Ramos to the effect that the latter would buy the lands for

her. But the stubborn fact remains that she acquired her proteges properties,through her brother-in-law.

That she planned to get them for herself at the time of selling them to Dr.Ramos, may be deduced from the very short time between the two sales (oneweek).

The temptation which naturally besets a guardian so circumstanced,necessitates the annulment of the transaction, even if no actual collusion isproved (so hard to prove) between such guardian and the intermediatepurchaser. This would uphold a sound principle of equity and justice.

Whenever a guardian acquires the property of his ward, the Court is alwayssuspicious. Hence, in the eyes of the law, Socorro Roldan took by purchase herwards parcels thru Dr. Ramos, and that Article 1459 of the Civil Code applies.

Rodriguez v. Mactal: Does not apply here. In that case, two years have elapsedbefore the guardian acquired the property sold. Such long period of time issufficient to dispel the natural suspicion of the guardians motives or actions. Inthe case at bar, however, only one week had elapsed. And technically speaking,we could say, only one day had elapsed from the judicial approval of the sale(August 12), to the purchase by the guardian.

From both the legal and equitable standpoints these three sales should not besustained: the first two for violation of article 1459 of the Civil Code; and thethird because Socorro Roldan could pass no title to Emilio Cruz. The annulmentcarries with is (Article 1303 Civil Code) the obligation of Socorro Roldan to

return the 17 parcels together with their fruits and the duty of the minor,through his guardian to repay P14,700 with legal interest.

Dispositive:

Judgment is therefore rendered: a. Annulling the three contracts of sale in question; b.declaring the minor as the owner of the seventeen parcels of land, with the obligation toreturn to Socorro Roldan the price of P14,700 with legal interest from August 12,1947;yc. Ordering Socorro Roldan and Emilio Cruz to deliver said parcels of land to theminor; d. Requiring Socorro Roldan to pay him beginning with 1947 the fruits, which herattorney admits, amounted to P1,522 a year; e. Authorizing the minor to deliver directlyto Emilio Cruz, out of the price of P14,700 above mentioned, the sum of P3,000; and f.charging Appellees with the costs.

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TITLE: Rubias vs. BatillerDATE: May 29, 1973PONENTE: Teehankee, J.

PARTIES:Plaintiff-appellant (1) Domingo RubiasDefendant-appellee (1)- Isaias Batiller

RELEVANT LAWS: Civil Code

Art. 1409. The following contracts are inexistent and void from the beginning:xxx xxx xxx(7) Those expressly prohibited by law.

Art. 1491. The following persons cannot acquire any purchase, even at a public auction,either in person of through the mediation of another: .

xxx xxx xxx(5)Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, andother officers and employees connected with the administration of justice, theproperty and rights of in litigation or levied upon an execution before the courtwithin whose jurisdiction or territory they exercise their respective functions; thisprohibition includes the act of acquiring an assignment and shall apply to lawyers,with respect to the property and rights which may be the object of any litigation inwhich they may take part by virtue of their profession.'

FACTS: Before the war with Japan, Francisco Militante filed with the CFI Iloilo an application

for the registration of the title of the subject land in Iloilo. However, during the warwith Japan, the record of the case was lost before it was heard. Upon petition byMilitante after the war, the record was reconstituted at the CFI Iloilo. Then, CFI Iloiloheard the land registration case but dismissed the application for registration.Militante then appealed to the Court of Appeals and in which case, plaintiff was thecounsel on record of Militante.

Pending the disposal of the appeal in the CA, Militante sold the land to the plaintiff. The CA dismissed the application for registration filed by Militante. Later, plaintiff filed forcible Entry and Detainer case against Isaias Batiller in the

Justice of the Peace Court of Barotac Viejo Province of Iloilo. The municipal

court decided in favor of the defendant. Defendant asserted that the land was originally owned and possessed by Felipe

Batiller, his great grandfather. The defendant succeeded his father, Basilio Bat iller,in the ownership and possession of the land in the year 1930. Since then up to thepresent, the land remains in the possession of the defendant--- his possession beingactual, open, public, peaceful and continuous in the concept of an owner, exclusive ofany other rights and adverse to all other claimants.

Furthermore, defendant alleged that plaintiff could not have acquired any interest inthe property in dispute as the contract that the plaintiff had with Francisco Militantewas inexistent and void. Defendants invoked Articles 1409 and 1491 of the CivilCode.

ISSUE:

WON the contract of sale between Rubias and his father-in-law over the property subjectwas void because it was made when plaintiff was counsel of his father-in-law in a landregistration case involving the property in disputeHELD/RATIO: Yes. It was void.

1. First of all, with the Court of Appeals' 1958 final judgment affirming the dismissal ofMilitante's application for registration, the lack of any rightful claim or title of Militanteto the land was conclusively and decisively judicially determined. Hence, there was noright or title to the land that could be transferred or sold by Militante's purported sale in

1956 in favor of plaintiff.

2. Nonetheless, plaintiff's purchase of the property in litigation from his client (assumingthat his client could sell the same since as already shown above, his client's claim to theproperty was defeated and rejected) was void and could produce no legal effect, byvirtue of Article 1409, paragraph (7) of our Civil Code which provides that contracts"expressly prohibited or declared void by law' are "inexistent and that "(T)hese contractscannot be ratified. Neither can the right to set up the defense of illegality be waived."

Article 1491 of our Civil Code (like Article 1459 of the Spanish Civil Code) prohibits in itssix paragraphs certain persons, by reason of the re lation of trust or their peculiar controlover the property, from acquiring such property in their trust or control either directlyor indirectly and "even at a public or judicial auction," as follows: (1) guardians; (2)agents; (3) administrators; (4) public officers and employees; judicial officers andemployees, prosecuting attorneys, and lawyers; and (6) others especially disqualified bylaw.

APPEAL DISMISSED.

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MACARIOLA v ASCUNCION

May 31, 1982Makasiar, J.

PERTINENT LAW:

Article 1491. The following persons cannot acquire by purchase, even at a public orjudicial action, either in person or through the mediation of another:xxx xxx xxx(5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, andother officers and employees connected with the administration of justice, the propertyand rights in litigation or levied upon an execution before the court within whosejurisdiction or territory they exercise their respective functions; this prohibition includesthe act of acquiring by assignment and shall apply to lawyers, with respect to theproperty and rights which may be the object of any litigation in which they may take partby virtue of their profession [emphasis supplied].

FACTS

June 8, 1963 decision for Civil Case 3010 was rendered by Hon. Judge Elias B.Asuncion of the Court of Appeals of Leyte

o Complaint for partitioning of the properties left by the deceasedFrancisco Reyes

o Partition project submitted and he approved in an Order datedOctober 23, 1963

o Bernardita Macariola one of the parties Lot 1184 adjudicated to plaintiffs Reyes in equal shares (5 lots) July 31, 1964 Lot 1184-E (one of the properties) was sold to Dr. Arcadio Galapon

who later sold the same to Judge Asuncion and his wife on March 6, 1965

Sps. Asuncion and Sps. Galapon conveyed their respective shares and interests inthe lot to the Traders Manufacturing and Fishing Industries Inc.

o Judge Asuncion was president here August 9, 1968 Bernardita Macariola filed a complaint dated August 6, 1968

against Judge Ascuncion with acts unbecoming of a judge.o Upon acquiring the lot, he violated Article 1491 par. 5 of the NCC,o By associating himself with the Traders Manufacturing and

FishingIndustries, Inc., as a stockholder and a ranking officer while hewas a judge - Art. 14, pars. 1 and 5 of the Code a nd Commerce, Sec. 3par. H of R.A. 3019, Sec. 12 Rule XVIII of the Civil Service Rules andCanon 25 of the Canons of Judicial Ethics.

ISSUE:

Whether or not respondent judges acquisition ofthe property is null and void?

HELD: NORATIO:

Probation in art 1491 applies only to the sale or assignment of the property whichis subject of litigation to the persons disqualified therein.

o Only applies to the sale or assignment of the property which is theissue of the litigation

Previous ruling that: "... for the prohibition to operate, the sale or assignment of theproperty must take place during the pendencyof the litigation involving theproperty.

When the respondent Judge purchased on March 6, 1965a portion of Lot 1184-E,the decision in Civil Case No. 3010 which he rendered on June 8, 1963was alreadyfinal because none of the parties therein filed an appeal within the reglementaryperiod

The lot therefore was no longer subject of the litigationo Also Judge Asuncion did not buy the lot in question directly from the

plaintiffs in Civil Case No. 3010 but from Dr. Arcadio Galapon whoearlier purchased Lot1184-E from the plaintiffs Reyes after thefinality of the decision in Civil Case No. 3010.

However since hes already an Associate Justice in the Court of Appeals, he shouldbe more discreet in his private and business activities because his conduct as amember of the Judiciary must not only be characterized with proprie ty but must alwaysbe above suspicion.

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Martinez vs. CA

April 29, 1974

Esguerra, J

FACTS

Sps. Martinez are registered owners of 2 parcels of land in Lubao, PampangaBoth are fishponds

o The property in dispute is the second lot (Lot 2)

The lot was originally owned by Paulino Montemayor which was eventuallysold to Potenciano Garcia

Garcia was prevented by the president of Lubao (Beltran) from restoring thedikes on the property

o June 22, 1914 - Garcia filed a civil case to restrain Beltran frommolesting him in the possession of said second parcel with anapplication for a writ of preliminary injunction

The Court ruled in favor of Garciao From June 22, 1914 until the outbreak of the Pacific War the dikes

around the property remained closed

1925 Garcia applied for the registration of both parcels of land in his nameo CFI granted the registration

Thereafter, the ownership changed hands until they were acquired by the Sps.Martinez

The disputants referred the matter to the Committee on Rivers and Streams(which appointed a sub-committee)

o Conducted an ocular inspection of the propertyo The sub-committee found out that it is not a public river but a private

fish pond owned by the spouses

Municipal officials of Lubao refused to recognize the decision of the Committee 1954 Sps. Martinez filed a civil case against Lubao Mayor

o Praying that the Mayor be enjoined from molesting them in theirpossession of their property and in the construction of the dikestherein

4 years later, while the case was pending, the Sec. of Public Works andCommunications (PWC) ordered an investigation

oPursuant to RA 2056

1

o He ordered that the dikes be removed, with the threat that the dikes

will be demolished if the Sps. Fails to comply within 30 days

The Civil case was eventually decided in favor of the Sps. CA reversed the judgment of court aquo

ISSUES1. WON C erred in declaring that parcel No. 2 is a public river and ordered

the cancellation of the registration2. WON the Sps. Are buyers in good faith

1"An Act To Prohibit, Remove and/or Demolish the Construction of Dams. Dikes, Or Any Other Walls In

Public Navigable Waters, Or Waterways and In Communal Fishing Grounds, To Regulate Works in Such

Waters or Waterways And In Communal Fishing Grounds, And To Provide Penalties For Its Violation, And

For Other Purposes.

HELDISSUES 1 and 2

The properties are parts of the public domain intended for public use, areoutside the commerce of men and, therefore, not subject to privateappropriation.

o CC Art. 339 par. 1 intended for public use, are outside the commerce of men

and, therefore, not subject to private appropriation.

Ledesma vs. Municipality of Ilo-iloo

A simple possession of a certificate of title under the Torrens systemdoes not necessarily make the possessor a true owner of all theproperty described therein. If a person obtains title under the Torrenssystem which includes by mistake or oversight, lands which cannot beregistered under the Torrens system, he does not by virtue of saidcertificate alone become the owner of the land i llegally included.

Dizon, et al. v. Rodriguez, et alo incontestable and indefeasible character of a Torrens certificate of

title does not operate when the land covered thereby is not capable ofregistration.

The Land Registration Court has no jurisdiction over non-registerableproperties, such as public navigable rivers which are parts of the publicdomain, and cannot validly adjudge the registration of title in favor of a privateapplicant.

Also, the right of reversion or reconveyance to the State of the public propertiesfraudulently registered and which are not capable of private appropriation orprivate acquisition does not prescribe.

In the case at bar, Lot. No. 2 is a branch of the main river that has bee n coveredwith water since time immemorial

o A river is not capable of private appropriation or acquisition byprescription

ISSUE 3

Sps. Argue that the nullification of its registration would be contrary to the lawand to the applicable decisions of the Supreme Court as it would destroy thestability of the title which is the core of the system of registration.

SC: Before purchasing a parcel of land, the Sps. Must have known the conditionof the land that they were buying and the obstacles or restrictions thereon thatmay be put up by the government in connection with their project of convertingLot No. 2 in question into a fishpond.

o they willfully and voluntarily assumed the risks attendant to the saleof said lot.

o One who buys something with knowledge of defect or lack of titlein his vendor cannot claim that he acquired it in good faith

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Melliza vs. City of Iloilo

Petitioner: Pio Sian MellizaRespondents: City of Iloilo, University of the Philippines, Court of AppealsApril 30 1968

Bengzon, J.P., J.

Topic: Requisites of Valid Subject Matter Must be determinate or determinable

FACTS:

Juliana Melliza owned three parcels of land in Iloilo City, among them Lot No. 1214.On November 27, 1931, she donated 9000 square meters of Lot 1214 to the thenMunicipality of Iloilo. However, this donation was revoked by the parties because theland area was inadequate to meet the requirements of Iloilos development plan.Later, Lot No. 1214 was divided into Lots 1214-A and 1214-B.Lot 1214-B was also later divided into three Lot 1214-B, Lot 1214-C and Lot 1214-DOn November 15, 1932, Juliana Melliza executed an instrument, expressly donating Lots1214-C and 1214-D to Iloilo, as well as such other portions or lots as were necessary forthe municipal hall site according to the Arellano plan.Juliana Melliza then sold her remaining interest in Lot 1214 to Remedios Sian Villanueva,who transferred it to Pio Sian Melliza, herein petitioner.On August 24, 1949, Iloilo donated the lots they received and the building therein to UP-Iloilo. UP commenced fencing the site in 1952. It was at this point that Pio Sian Mellizademanded payment for Lot 1214-B which, though not expressly mentioned in the 1932instrument of donation, was also included in the municipal hall site.

Petitioner contended that, not being included in the 1932 instrument, respondents couldnot claim the lot. Moreover, the part of the instrument stating that other portions or lotsas necessary are also included in the donation could not justify respondents claim over1214-B because the law requires as an essential element of sale a determinate object.The CFI ruled for respondents and the CA affirmed the CFI ruling.

ISSUES:

1. WON the 1932 instrument of donation may include Lot 1214-B

HELD:

Yes, Lot 1214-B is included in the donation. Petitioner cannot demand payment for

it.Reading the public instrumentin toto, with special reference to the paragraphs

describing the lots included in the sale, shows that said instrument describes fourparcels of land by their lot numbers and area; and then it goes on to further describe, notonly those lots already mentioned, but the lots objectof the sale, by stating that said lotsare the ones needed for the construction of the city hall site, avenues and parks according to the Arellano plan.If the parties intended merely to cover the specified lots 1214-C and 1214-D, therewould scarcely have been any need for the next paragraph, since these lots are a lreadyplainly and very clearly described by their respective lot number and area. Said nextparagraph does not really add to the clear description that was already given to them inthe previous one.It is therefore the more reasonable interpretation, to view itas describing those otherportions of land contiguous to the lots aforementionedthat, by reference to the Arellanoplan, will be found needed for the purpose at hand, the construction of the city hall site.

This lot is 1214-B.

As to petitioners contention that this would not be a determinate object as required bylaw, the Court ruled that the requirement of the law that a sale must have for its object adeterminate thing, is fulfilled as long as, at the time the contract is entered into, theobject of the sale is capable of being made determinate without the necessity of a new orfurther agreement between the parties (Art. 1273, old Civil Code; Art. 1460, New CivilCode).The specific mention of some of the lots plus the statement that the lots object of the saleare the ones needed for city hall site, avenues and parks, according to the Arellano plan,sufficiently provides a basis, as of the time of the execution of the contract, for renderingdeterminate said lots without the need of a new and further agreement of the parties.This could only refer to Lot 1214-B, being adjacent to 1214-C and 1214-D.The Arellano plan was in existence as early a s 1928. The required area for the municipalhall plan was already known and Lots 1214-C and 1214-D alone could not cover it.Therefore, it could be determined which, and how much of the portions of landcontiguous to those specifically named, were needed for the construction of the city hallsite.

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Atilano v Atilano

May 21, 1969Makalintal

Must be determinate or determinable

Facts:

Eulogio Atilano I purchased from Gerardo Villanueva lot no 535 in the Municipality ofZamboanga. He obtained a TCT in his name. In 1920, he subdivided the land into 5 parts(535-A, B, C, D, and 535-E). He executed a deed of sale covering 535-E for the sum ofP150 in favor of his brother Eulogio Atilano II. Eulogio II obtained TCT in his name. LotsB, C, and D were also sold and only Lot 535-A was retained by Eulogio I. Upon his death,the lot passed to Ladislao Atilano (defendant).Dec 6, 1952, Eulogio II obtained another TCT to name his children as co-heirs. In 1959,desiring to put an end to the co-ownership, they had the land resurveyed and discoveredthat the land they were actually occupying was lot 535-A and not 535-E as referred to inthe 1920 deed while Ladislao was in possession of lot 535-E.The heirs of Eulogio II filed the action in the CFI of Zamboanga that they had offered tosurrender possession of lot A and demanded the return of lot E but defendants refused toaccept. Lot E has an area of 2, 612 sq m and Lot A has only 1, 808sq m.CFI ruled in favor of the plaintiffs.Defendant Atilano: The reference to lot E in the 1920 deed of sale was an involuntaryerror. The intention of the parties was to convey the lot correctly identified as lot A. since

1916, Eulogio I had been possessing lot E. He had his house built and even bought aportion of an adjacent land to increase its area.

Issue: Who owns lot 535-E? Defendant Atilano

Ratio:

When one sells or buys real property, a piece of land, for example, one sells or

buys the property as he sees it, in its actual setting and by its physical metes and

bounds, and not by a mere lot number assigned to it in the certificate of title.In this case, Eulogio II was already in possession of lot A and constructed his residencethere even before the sale. The two brothers continued possession of the respectiveportions for the rest of their lives, ignorant of the mistake in the designation of the lot inthe sale.

The real intention of the parties to the sale was that the object was the specific portionwhere the vendee was then residing, where he constructed his house and where his heirscontinued to reside namely, lot A and that its designation as lot E in the deed was asimple mistake in the drafting of the document. The mistake did not vitiate the consent ofthe parties or affect the validity and binding effect of the contract. Reformation of thesale need no longer be performed. All they should do is to execute mutual deeds ofconveyance.Reversed.

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Pichel vs Alonzo

Jan. 30, 1982

Guerrero, J.

Facts:

- Alonzo was awarded a parcel of land by the Government.- The award was cancelled because Alonzo alienated it to another which was a

violation of law.- Alonzo sold to Pichel all the fruits of the coconut tress which may be harvested

for the period Sept. 15, 1968 Jan. 1, 1976 for P4,200. (Added info: Ramon Suais leasing the land being sold by Alonzo)

- Alonzo asked the court to annul the deed of sale because the action goes againstRA 477 (law that awarded the land to Alonzo)

- Lower court: the deed of sale was an encumbrance.Issue:

1. WON the document between Pichel and Alonzo was a valid contract.2. WON the deed of sale in question is an encumbrance on the land and its

improvements prohibited by Section 8 of Republic Act 477; and

Held: Complaint Dismissed. Lower Court decision is set aside.

1. Yes. All the essential elements of a contract of sale under Art. 1485 are present.Art. 1458. By the contract of sale one of the contractingparties obligates himself to transfer the ownership of and todeliver a determinate thing, and the other to pay therefor aprice certain in money or its equivalent.

The Subject matter of the contract are the fruits of the coconut tree on the landduring the years from Sept. 15, 1968 to Jan. 1, 1976. The subject matter is adeterminate thing.

Art. 1461 provides that things having potential existence may be the object ofthe contract of sale. Hence, pending crops which have potential existence may

be the object of the contract of sale.

The Court's holding that the contract in question fits the definition of a lease ofthings wherein one of the parties binds himself to give to another theenjoyment or use of a thing for a price certain and for a period which may bedefinite or indefinite (Art. 1643, Civil Code of the Philippines) is erroneous.

The essential difference between a contract of sale and a lease of things is thatthe delivery of the thing sold transfers ownership, while in lease no suchtransfer of ownership results as the rights of the lessee are limited to the useand enjoyment of the thing leased.

2. The grantee of a parcel of land under R.A. No. 477 is not prohibited fromalienating or disposing of the natural and/or industrial fruits of the land

awarded to him. What the law expressly disallows is the encumbrance oralienation of the land itself or any of the permanent improvements thereon.

Permanent improvements on a parcel of land are things incorporated orattached to the property in a fixed manner, naturally or artificially. Theyinclude whatever is built, planted or sown on the land which is characterized byfixity, immutability or immovability.

Houses, buildings, machinery, animal houses, trees and plants would fall underthe category of permanent improvements, the alienation or encumbrance ofwhich is prohibited by R.A. No. 477. While coconut trees are permanentimprovements of a land, their nuts are natural or industrial fruits which aremeant to be gathered or severed from the trees, to be used, enjoyed, sold orotherwise disposed of by the owner of the land. Hence, respondents had theright and prerogative to sell the coconut fruits of the trees growing on theproperty.

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Yu Tek vs. Gonzales

February 1, 1915Trent, J:

GENERIC THINGSArticle 1246. When the obligation consists in the delivery of an indeterminate orgeneric thing, whose quality and circumstances have not been stated, the creditor cannotdemand a thing of superior quality. Neither can the debtor deliver a thing of inferiorquality. The purpose of the obligation and other circumstances shall be taken intoconsideration.Article 1409. The following contracts are inexistent and void from the beginning:(6) Those where the intention of the parties relative to the principal object of thecontract cannot be ascertained;

FACTS

Contract between Gonzales and Yu Tek Co:1. Gonzales received 3,000 php as consideration for the delivery of 600 piculs of

sugar, first and second grade, within a period of three months at any placewithin the municipality of Sta. Rosa which Yu Tek may designate.

2. Non-delivery within 3 months = recission of contract + return of 3,000 php +1,200 php as indeminity for loss and damages

No sugar delivered to Yu Tek nor was it able to recover the 3,000 php.

First Contention:

Gonzales: He should be allowed to present parol evidence showing that the partiesintended that sugar was to be obtained exclusively from the crop which Gonzales raisedon his plantation. Non-fulfillment of contract was because of total failure of crop.SC: No slightest intimation in the contract that suggest such condition. The contractplaced no restriction in the manner of obtaining the sugar. He can purchase it on themarket or raise it himself.

Second Contention:

Gonzales:1. Contract limited to the sugar he might raise on his plantation.

2. Contract represented a perfect sale.3. By failure of his crop he was relieved from complying with is undertaking because ofloss of thing due.

ISSUE:

WON there was a perfected sale.There was NO perfected sale.

There is a perfected sale with regard to the "thing" whenever the article of sale has

been physically segregated from all other articles

In this case, there was no segregation of the object of the contract. If called upon todesignate the article sold, it is clear that the defendant could only say that it was "sugar."He could only use this generic name for the thing sold. There was no "appropriation" of

any particular lot of sugar. Neither party could point to any specific quantity of sugar andsay: "This is the article which was the subject of our contract."

The contract in the case at bar was merely an executory agreement; a promise of sale andnot a sale. As there was no perfected sale, it is clear that article 1262 is not applicable.Gonzales having defaulted in his engagement, Yu Tek is entitled to recover the 3,000 phpwhich it advanced to the defendant.

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Hernaez v Hernaez

November 13, 1915

Trent, J.

Facts

Spouses Pedro Hernaez and Juana Espinosa died, leaving several legitimate descendants.Their estates have not been divided yet but are both under administration, until theinstitution of the institution of the action.

November 6, 1901: Domingo Hernaez y Espinosa, son of the spouses, sold all his interestin both the spouses estates to his son, Vicente Hernaez y Tuason.

February 27, 1907: In connivance with Vicente,

Domingo executed a document of sale in favor of Alejandro Montelibano yRamos all his undivided interest in his fathers estate + 1/18 of his undivided

interest in his mothers estate

Domingo also executed a document of sale in favor of Jose Montelibano Uy-Cana 4/18 of his interest in his mothers estate

August 19, 1912: Jose Montelibano Uy-Cana sold his interest in the estate to AlejandroMontelibano y Ramos.

January 8, 1913: Rosendo Hernaez y Espinosa, another son of the spouses, was notifiedof Montelibanos purchases and the latters motion asking that he be substituted asassignee of the interests of various heirs of the estate which he acquired by purchase.

Notwithstanding Rosendos knowledge of the motion, he entered into a contract of salewith Vicente.

January 24, 1913: Rosendo instituted the action seeking to subrogate himself in therights acquired by Montelibano in the estate.

ISSUE:WON Alejandro is the true owner of the interest over the e state of the dead spouses.

Yes. However, Rosendo may subrogate himself in the rights acquired by Montelibano inpursuant to Art 1607 (i.e. If any of the heirs should sell his hereditary rights to a strangerbefore the division, all or any of the co-heirs may subrogate himself in the place of thepurchaser, reimbursing him for the value of the purchase, provided they do so within theperiod of a month, to be counted from the time they were informed thereof.)

1. Vicente is estopped when Domingo sold the interests with his connivance. He cannotanymore assert his title as against any of the vendees Montelibano and Uy -Cana.

where true owner of propertyholds out another, or with knowledge of hisown right, allows another to appear as owner of or as having full power of dispositionover the property, the same being in the latters actual possession, and innocent thirdparties are thus led into delaing with such apparent owner, third parties will beprotected.

2. Montelibano acquired his interest in the estate for a valuable consideration and ingood faith.

Alejandro Montelibano is the holder of a prior equitable right and should havepriority over the purchaser [Rosendo] of a subsequent estate without value or withnotice of equitable right, but not as against a subsequent purchaser for value and withoutnotice.

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SIY CONG BIENG & CO., INC. V HONGKONG & SHANGHAI BANKING CORPORATION

March 5, 1932

J. Ostrand

Facts:- Otto Ranft called the office of Siy Cong Bieng to purchase hemp(abaca) and he

was offered bales of hemp as described in the quedans (warehouse receipts)- Parties agreed to a price and on the same date, the quedans, together with the

covering invoice, were sent to Ranft, without having paid for the hemp, but theplaintiffs understanding was that the payment would be made against thesame quedans, and it appears that in previous transaction of the same kindbetween the bank and the plaintiff, quedans were paid one or two days aftertheir delivery to them

- In the evening that the quedans were delivered, Ranft died, and when theplaintiff found that such was the case, it immediately demanded the return ofthe quedans, or the payment of the value, but was told that the quedans hadbeen sent to the herein defendant as soon as they were received by Ranft

- Demand was made by the plaintiff to the bank for the return of the quedans, ortheir value, which demand was refused by the bank on the ground that it was aholder of the quedans in due course

Issue:

WON HSBC acquired the quedans in good faith. YESWON Siy is e stopped from questioning the HSBCs title to the quedans. YES

Held:- First, the quedans were negotiable in form and duly endorsed in blank by the

plaintiff and by Otto Ranft- Also, it follows that on the delivery of the qeudans to the bank, they were no

longer the property of the indorser unless he liquidated his debt with the bank.Also, Ranft delivered to HSBC the quedans for a valuable consideration, whichis valid.

- Plaintiff insists that the defendant, before the delivery of the quedans, shouldhave ascertained whether Ranft had any authority to negotiate the quedan butSC was unable to find anything in the record which would have compelled the

bank to investigate the indorser. The bank had a perfect right to act as it did,and its action is in accordance with sections 47, 38, and 40 of the WarehouseReceipts Act (Act No. 2137)

- For a warehouse receipt to be negotiated, it should be properly indorsed anddelivered which is evident in this case. Since it was a blank warehouse receipt,it may be delivered to any person, and the bearer thereon becomes the ownerof the receipt

- Also, Siy is estopped from denying that the bank had a valid title tothe quedans for the reason that the plaintiff had voluntarily clothed Ranft withall the attributes of ownership and upon which the defendant bank relied

- National Safe Deposit vs. Hibbs - Where one of two innocent persons mustsuffer a loss he who by his conduct made the loss possible must bear it

- The bank is not responsible for the loss; the negotiable quedans were dulynegotiated to the bank and as far as the record shows, there is no fraud on thepart of the defendant.

The appealed judgment is reversed and the appellant is absolved from the plaintiff's

complaint. Without costs. So ordered.

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VICENTA JALBUENA v. SALVADOR LIZARRAGA etal.

December 24, 1915

Trent, J.

Facts:

Salvador Lizarraga, the judgement creditor, caused the sheriff of the province of Iloilo tolevy upon an old sugar-mill. At the time of the levy, Ildefonso Doronilla (the judgementdebtor and husband of Jalbuena) told the sheriff that the mill belonged to him. Lopezpurchased the land in the public sale.

The present action was instituted by Jalbuena for the purpose of recovering the mill (orits value), alleging that the property was her exclusive property and that her husbandhad no interest therein.

The action was dismissed. RTC found that Jalbuena knew that the sugar millwas being levied upon as the property of her husband and yet she stood by.She never protested and let the sale proceed. Thus, she is estopped fromasserting her claim of ownership against Lizarraga et al.

Jalbuena appealed.Issue:

WON Jalbuena has the right to demand the return of the sugar mill?

Held/Ratio:

NO. SC ruled that he cannot demand the return of the mill. An execution is an order tothe sheriff to attach and sell the property of the judgment debtor. If the sheriff sells theproperty of another person, he exceeds his authority and the true owner may sue fordamages or for the recovery of the property, provided that such owner has not lost hisright to do so by his own conduct.

Court cited No. 1 of Section 333 of the Code of Civil Procedure:"Whenever a party has, by his own declaration, act, or omission, intentionally anddeliberately led another to believe a particular thing true, and to act upon such belief, hecannot, in any litigation arising out of such declaration, act, or omission, be permitted tofalsify it."

The phrase "stood by" does not mean actual presence, but implies knowledge under such

circumstances as to render it the duty of the possessor to communicate it. Jalbuena hadfull knowledge of the fact that the property was going to be sold to pay the debts of herhusband but she did NOT communicate her claim to the purchaser.

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SUN BROTHERS COMP. V. VELASCO

Angeles, J.

Parties:Plaintiff: Sun Brothers Company (Sun Bros)Defendants: Jose Velasco, Co Kang Chiu

FACTS:

Sun Bros filed an action for recovery of personal property against FranciscoLopez (Lopez), Jose Velasco (Velasco), and Co Kang Chiu (Chiu) to return hisrefrigerator.

Sun Bros entered into a Conditional Sale Agreementwith Lopez, where Sun Brosdelivered a refrigerator along with a transformer to Lopez for the amount ofP1700. Lopez paid P500 as down payment.

o The conditions of the Conditional Sale Agreement:o 1. The ref shall remain the absolute property of Sun Bros until Lopez

has paid the full purchase price o 2. Lopez shall not remove the ref from his address nor part possession

of it without authorization, if he does, Sun Bros may rescind thecontract, and may keep the down payment as liquidated damages.

Without the knowledge of Sun Bros, Lopez sold the ref to J.V. Trading (abusiness store in Manila owned by Velasco) for the sum of P850 bymisrepresenting himself as the absolute owner. Then, again without Sun Brosknowledge, Velasco, who placed the ref on display in his store, sold the ref toChiu for the sum of P985. The ref was then delivered to the residence andbusiness address of Chiu.

CFI held: Sun bros are the absolute owner. Chiu, who is in possession, mustreturn the ref, and failure to do so, Velasco must pay Sun Bros. Both Velascoand Chiu appealed claiming that the sale was valid and they should be declaredthe true owners.

ISSUE: WON SUN BROS IS THE ABSOLUTE OWNER OF THE REFRIGERATOR? No. Chiu is.

HELD:

The case depends on the proper application of Art. 1505 of the CC:o Art. 1505: Subject to the provisions of this title, where goods are sold

by a person who is not the owner thereof, and who does not sell themunder authority or with the consent of the owner, the buyer acquiresno better title to the goods than the seller had, unless the owner of thegoods is by his conduct precluded from denying the sellers authorityto sell.

o Nothing in this title shall affect: Par. 1) provisions of any factors acts,recording laws, or any other provision of law enabling the apparentowner of goods to dispose of them as if he were the true ownerthereof Par. 2) xxx Par. 3) Purchases made in a merchants store, or infairs, or markets, in accordance with the Code of Commerce and special

laws

Clearly, Lopez violated the contract (when it removed the possession withoutconsent), which is contrary to the conditional sale hence Lopez never had title

to the ref because such title would only be vested upon payment of the full

purchase price, which was not done. However, the ref is now in the hands of aninnocent third party for value.

The court ruled that what must be applied is not Par. 1 but Par. 3. Chiu boughtthe ref at a merchant store (when it was on display at J.V. Trading). Hence, Chiushould be declared to have acquired a valid title to the ref, even though hispredecessors in interest did not have any right of ownership over it. This is acase of an imperfect or void title ripening into a valid one, as a result of someintervening causes.

Because, where the rights and interests of a vendor comes into clash with thatof an innocent buyer for value, the latter must be protected. This rule isimportant in order to protect innocent third parties who make purchases ingood faith and for value (give stability to business transactions). The doctrineof caveat emptor (buyer beware) is now rarely applied and if ever mentioned, itis more of an exception rather than the rule.

Not even the remedy granted by 559 to the owner of a movable to obtain itsreturn provided he reimburses the one in possession is available to Sun Brosbecause neither did it lose the ref nor was it unlawfully deprived. Sun Brosvoluntarily parted with it pursuant to a contract of purchase and sale.

Thus, Recourse of Sun Bros is to file a claim for indemnity against Lopez. CFIreversed.

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Masiclat v. Centeno

May 31, 1956

Paras

Topic: Sale in Merchants Store, Market or Fair

Facts:- Centeno owned 15 sacks of rice which she offered to an unknown purchaser in

her store near the public market of Angeles. He was willing to buy the rice at 26pesos per sack, and promised to pay as soon as he would receive the paymentfrom the adobe stones that were being unloaded from his truck.

- The sacks of rice were then loaded into his truck and Centeno was watchingover the sacks. After the adobe stones were unloaded, the purchaser still hasnot paid. Since the purchaser was nowhere to be found, Centeno ordered theunloading of the rice.

- Masiclat (the caretaker