SALES (SPECIAL CONTRACTS) CASE DIGESTS

JUAN P. CABRERA vs. HENRY YSAAC

G.R. No. 166790 NOVEMBER 19, 2014
FACTS:
Henry Ysaac is one of the co-owners of a parcel of land covered by OCT
No. 506 with an area of 5,517 square meters. He leased out a portion of the
property to several lessees including Juan Cabrera who leased a 95-square
meter portion of the land. In need of money, Henry offered to sell the 95 sq.
meter lot but Juan demurred because the lot was too small for his needs since
there was no parking space for his vehicle.
To deal with Juans need, Henry expanded his offer to include two adjoining
lands which was then leased by two families but warned that the sale could
only proceed if the two families would agree.
The deal was almost closed with the agreed price of P 250/sq.m but Juan
stated that he could only pay the full price after his retirement. Henry agreed
but demanded for an initial payment of P1, 500.00 which Juan paid.
ISSUE: Whether or not there was a valid contract of sale between petitioner and
respondent.
RULING:
We find that there was no contract of sale. It was null ab initio.
As defined by the Civil Code, [a] contract is a meeting of minds between two
persons whereby one binds himself, with respect to the other, to give something
or to render some service.For there to be a valid contract, there must be
consent of the contracting parties, an object certain which is the subject
matter of the contract, and cause of the obligation which is
established.76

Sale is a special contract. The seller obligates himself to deliver a

determinate thing and to transfer its ownership to the buyer. In turn, the buyer
pays for a price certain in money or its equivalent.77 A contract of sale is
perfected at the moment there is a meeting of minds upon the thing which is
the object of the contract and upon the price.78 The seller and buyer must
agree as to the certain thing that will be subject of the sale as well as the price
in which the thing will be sold. The thing to be sold is the object of the
contract, while the price is the cause or consideration.
The object of the sales contract between petitioner and respondent was a
definite portion of a co-owned parcel of land. At the time of the alleged sale
between petitioner and respondent, the entire property was still held in
common. This is evidenced by the original certificate of title, which was under
the names of Matilde Ysaac, Priscilla Ysaac, Walter Ysaac, respondent Henry
Ysaac, Elizabeth Ysaac, Norma Ysaac, Luis Ysaac, Jr., George Ysaac, Franklin
Ysaac, Marison Ysaac, Helen Ysaac, Erlinda Ysaac, and Maridel Ysaac.85
The rules allow respondent to sell his undivided interest in the coownership.
However, this was not the object of the sale between him and petitioner. The
object of the sale was a definite portion. Even if it was respondent who was
benefiting from the fruits of the lease contract to petitioner, respondent has no
right to sell or alienate a concrete, specific or determinate part of the thing
owned in common, because his right over the thing is represented by quota or
ideal portion without any physical adjudication.
SAN LORENZO DEVELOPMENT CORPORATION VS. CA
G.R. NO. 124242, January 21, 2005
FACTS:
On 20 August 1986, the Spouses Lu purportedly sold the two parcels of
land to respondent Pablo Babasanta. The latter made a down payment of fifty
thousand pesos (P50,000.00) as evidenced by a memorandum receipt issued by
Pacita Lu of the same date. Several other payments totaling two hundred
thousand pesos (P200, 000.00) were made by Babasanta. He demanded the
execution of a Final Deed of Sale in his favor so he may effect full payment of

the purchase price; however, the spouses declined to push through with the
sale. They claimed that when he requested for a discount and they refused, he
rescinded

the

agreement.

Thus,

Babasanta

filed

case

for

Specific

Performance.
On the other hand, San Lorenzo Development Corporation (SLDC) alleged
that on 3 May 1989, the two parcels of land involved, namely Lot 1764-A and
1764-B, had been sold to it in a Deed of Absolute Sale with Mortgage. It alleged
that it was a buyer in good faith and for value and therefore it had a better
right over the property in litigation.
ISSUE:
Who between SLDC and Babasanta has a better right over the two
parcels of land?
RULING:
An analysis of the facts obtaining in this case, as well as the evidence
presented by the parties, irresistibly leads to the conclusion that the agreement
between Babasanta and the Spouses Lu is a contract to sell and not a contract
of sale.
The receipt signed by Pacita Lu merely states that she accepted the sum
of fifty thousand pesos (P50,000.00) from Babasanta as partial payment of 3.6
hectares of farm lot. While there is no stipulation that the seller reserves the
ownership of the property until full payment of the price which is a
distinguishing feature of a contract to sell, the subsequent acts of the parties
convince us that the Spouses Lu never intended to transfer ownership to
Babasanta except upon full payment of the purchase price.
Babasantas letter dated 22 May 1989 was quite telling. He stated therein
that despite his repeated requests for the execution of the final deed of sale in
his favor so that he could effect full payment of the price, Pacita Lu allegedly
refused to do so. In effect, Babasanta himself recognized that ownership of the
property would not be transferred to him until such time as he shall have
effected full payment of the price. Doubtlessly, the receipt signed by Pacita Lu
should legally be considered as a perfected contract to sell.

The perfected contract to sell imposed upon Babasanta the obligation to

pay the balance of the purchase price. There being an obligation to pay the
price, Babasanta should have made the proper tender of payment and
consignation of the price in court as required by law. Glaringly absent from the
records is any indication that Babasanta even attempted to make the proper
consignation of the amounts due, thus, the obligation on the part of the sellers
to convey title never acquired obligatory force.
There was no double sale in this case because the contract in favor of
Babasanta was a mere contract to sell; hence, Art. 1544 is not applicable.
There was neither actual nor constructive delivery as his title is based on a
mere receipt. Based on this alone, the right of SLDC must be preferred.
==
SPS. GODOFREDO and CARMEN ALFREDO vs. SPS. ARMANDO and ADELIA BORRAS
G.R. No. 144225 June 17, 2003

FACTS:
The Alfredo spouses mortgaged their land to DBP. To pay their debt, they
sold the land to spouses Borras for P15,000. The latter also assumed to pay the
loan. Borras subsequently paid the balance of the purchase price of the land
for which Alfredo issued a receipt dated 11 March 1970 as well as the
corresponding owners duplicate copy of the lands OCT.
Borras thereafter took possession of the said land. Later, they found out that
Alfredo sold the land again to other buyers by securing duplicate copies of the
OCTs upon petition with the court. Thus, they filed for specific performance.
Alfredo spouses claimed that the sale, not being in writing, is unenforceable
under the Statute of Frauds.
ISSUE: W/N the contract of sale is unenforceable under the Statute of Frauds.
HELD: NO.
The Statute of Frauds provides that a contract for the sale of real
property shall be unenforceable unless the contract or some note or
memorandum of the sale is in writing and subscribed by the party charged or

his agent. The existence of the receipt dated 11 March 1970, which is a
memorandum of the sale, removes the transaction from the provisions of the
Statute of Frauds. The Statute of Frauds applies only to executory
contracts and not to contracts either partially or totally performed. Thus,
where one party has performed ones obligation, oral evidence will be admitted
to prove the agreement. In the instant case, the parties have consummated the
sale of the Subject Land, with both sellers and buyers performing their
respective obligations under the contract of sale. In addition, a contract that
violates the Statute of Frauds is ratified by the acceptance of benefits
under the contract. Alfredo spouses benefited from the contract because they
paid their DBP loan and secured the cancellation of their mortgage using the
money given by Borras. Alfredo also accepted payment of the balance of the
purchase price.
Alfredo spouses cannot invoke the Statute of Frauds to deny the
existence of the verbal contract of sale because they have performed their
obligations, and have accepted benefits, under the verbal contract. Borras
spouses have also performed their obligations under the verbal contract.
Clearly, both the sellers and the buyers have consummated the verbal contract
of sale of the Subject Land. The Statute of Frauds was enacted to prevent
fraud. This law cannot be used to advance the very evil the law seeks to
prevent.

SALLY YOSHIZAKI vs. JOY TRAINING CENTER OF AURORA, INC

G.R. No. 174978 July 31, 2013
FACTS:
Respondent Joy Training was the registered owner of a parcel of land and the
building thereon (real properties). The parcel of land was designated as Lot
No. 125-L and was covered by Transfer Certificate of Title (TCT) No. T-25334.
On November 10, 1998, the spouses Richard and Linda Johnson sold the real
properties, a Wrangler jeep, and other personal properties in favor of the

spouses Sally and Yoshio Yoshizaki. On the same date, a Deed of Absolute
Sale and a Deed of Sale of Motor Vehicle were executed in favor of the spouses
Yoshizaki. The spouses Johnson were members of Joy Trainings board of
trustees at the time of sale.
On December 8, 1998, Joy Training, represented by its Acting
Chairperson Reuben V. Rubio filed an action for the Cancellation of Sales
and Damages with prayer for the issuance of a Temporary Restraining
Order and/or Writ of Preliminary Injunction against the spouses Yoshizaki
and the spouses Johnson before the Regional Trial Court of Baler, Aurora
(RTC).
On January 4, 1999, Joy Training filed a Motion to Amend Complaint with the
attached Amended Complaint. The amended complaint impleaded Cecilia A.
Abordo, officer-in-charge of the Register of Deeds of Baler, Aurora, as
additional defendant. The RTC granted the motion on the same date.
In the complaint, Joy Training alleged that the spouses Johnson sold its
properties without the requisite authority from the board of directors. It
assailed the validity of a board resolution dated September 1, 199811 which
purportedly granted the spouses Johnson the authority to sell its real
properties. It averred that only a minority of the board, composed of the
spouses Johnson and Alexander Abadayan, authorized the sale through the
resolution. It highlighted that the Articles of Incorporation provides that the
board of trustees consists of seven members, namely: the spouses Johnson,
Reuben, Carmencita Isip, Dominador Isip, Miraflor Bolante, and Abelardo
Aquino.12
Cecilia and the spouses Johnson were declared in default for their failure to file
an Answer within the reglementary period.13 On the other hand, the spouses
Yoshizaki filed their Answer with Compulsory Counterclaims on June 23, 1999.
They claimed that Joy Training authorized the spouses Johnson to sell the
parcel of land. They asserted that a majority of the board of trustees
approved the resolution. They maintained that the actual members of the

board of trustees consist of five members, namely: the spouses Johnson,

Reuben, Alexander, and Abelardo. Moreover, Connie Dayot, the corporate
secretary, issued a certification dated February 20, 1998 authorizing the
spouses Johnson to act on Joy Trainings behalf. Furthermore, they
highlighted that the Wrangler jeep and other personal properties were
registered in the name of the spouses Johnson. Lastly, they assailed the
RTCs jurisdiction over the case. They posited that the case is an intracorporate dispute cognizable by the Securities and Exchange Commission.
The RTC ruled in favor of the spouses Yoshizaki. It found that Joy Training
owned the real properties. However, it held that the sale was valid because
Joy Training authorized the spouses Johnson to sell the real properties. It
recognized that there were only five actual members of the board of trustees;
consequently, a majority of the board of trustees validly authorized the
sale. It also ruled that the sale of personal properties was valid because
they were registered in the spouses Johnsons name.
The CA upheld the RTCs jurisdiction over the case but reversed its ruling
with respect to the sale of real properties. It maintained that the present
action is cognizable by the RTC because it involves recovery of ownership from
third parties
ISSUES:
1) Whether or not there was a contract of agency to sell the real properties
between Joy Training and the spouses Johnson.
2) As a consequence of the second issue, whether or not there was a valid
contract of sale of the real properties between Joy Training and the spouses
Yoshizaki.
RULING:

Necessarily, the absence of a contract of agency renders the contract of sale

unenforceable; Joy Training effectively did not enter into a valid contract of sale
with the spouses Yoshizaki. Sally cannot also claim that she was a buyer in
good faith. She misapprehended the rule that persons dealing with a registered
land have the legal right to rely on the face of the title and to dispense with the
need to inquire further, except when the party concerned has actual knowledge
of facts and circumstances that would impel a reasonably cautious man to
make such inquiry.47 This rule applies when the ownership of a parcel of land
is disputed and not when the fact of agency is contested.
At this point, we reiterate the established principle that persons dealing
with an agent must ascertain not only the fact of agency, but also the
nature and extent of the agents authority. A third person with whom the
agent wishes to contract on behalf of the principal may require the
presentation of the power of attorney, or the instructions as regards the agency.
The basis for agency is representation and a person dealing with an agent is
put upon inquiry and must discover on his own peril the authority of the
agent. Thus, Sally bought the real properties at her own risk; she bears the
risk of injury occasioned by her transaction with the spouses Johnson.
ROSA LIM vs. COURT OF APPEALS and PEOPLE OF THE
PHILIPPINES
G.R. No. 102784. February 28, 1996
FACTS:
Petitioner Rosa Lim who had come from Cebu received from private respondent
Victoria Suarez the following two pieces of jewelry: one (1) 3.35 carat diamond
ring worth P169, 000.00 and one (1) bracelet worth P170, 000.00, to be sold on
commission basis. The agreement was reflected in a receipt marked as Exhibit
A for the prosecution. The transaction took place at the Sir Williams Apartelle
in Timog Avenue, Quezon City, where Rosa Lim was temporarily billeted.

On December 15, 1987, petitioner returned the bracelet to Vicky Suarez, but
failed to return the diamond ring or to turn over the proceeds thereof if
sold. As a result, private complainant, aside from making verbal demands,
wrote a demand letter to petitioner asking for the return of said ring or the
proceeds of the sale thereof. In response, petitioner, thru counsel, wrote a letter
to private respondents counsel alleging that Rosa Lim had returned both ring
and bracelet to Vicky Suarez sometime in September, 1987, for which reason,
petitioner had no longer any liability to Mrs. Suarez insofar as the pieces of
jewelry were concerned. Irked, Vicky Suarez filed a complaint for estafa under
Article 315, par. 1(b) of the Revised Penal Code for which the petitioner herein
stands convicted.
ISSUE:
What was the real transaction between Rosa Lim and Vicky Suarez - a contract
of agency to sell on commission basis as set out in the receipt or a sale on
credit?

RULING:
Rosa Lims signature indeed appears on the upper portion of the receipt
immediately below the description of the items taken. We find that this fact
does not have the effect of altering the terms of the transaction from a
contract of agency to sell on commission basis to a contract of sale.
Neither does it indicate absence or vitiation of consent thereto on the part of
Rosa Lim which would make the contract void or voidable. The moment she
affixed her signature thereon, petitioner became bound by all the terms
stipulated in the receipt. She, thus, opened herself to all the legal obligations
that may arise from their breach. This is clear from Article 1356 of the New
Civil Code which provides:
Contracts shall be obligatory in whatever form they may
have been entered into, provided all the essential
requisites for their validity are present. x x x.

However, there are some provisions of the law which require certain formalities
for particular contracts. The first is when the form is required for the validity
of the contract; the second is when it is required to make the contract
effective as against third parties such as those mentioned in Articles 1357
and 1358; and the third is when the form is required for the purpose of
proving the existence of the contract, such as those provided in the Statute
of Frauds in Article 1403. A contract of agency to sell on commission basis
does not belong to any of these three categories, hence it is valid and
enforceable in whatever form it may be entered into.
Furthermore, there is only one type of legal instrument where the law strictly
prescribes the location of the signature of the parties thereto. This is in the
case of notarial wills found in Article 805 of the Civil Code, to wit:
Every will, other than a holographic will, must be subscribed at
the end thereof by the testator himself x x x.
The testator or the person requested by him to write his name and the
instrumental witnesses of the will, shall also sign, as aforesaid, each and every
page thereof, except the last, on the left margin x x x.

SPS. FERNANDO and LOURDES VILORIA vs. CONTINENTAL AIRLINES, INC

G.R. No. 188288 January 16, 2012
FACTS:
On or about July 21, 1997 Fernando purchased tickets at US$400.00
each from a travel agency called Holiday Travel and was attended to by a
certain Margaret Mager (Mager). According to Spouses Viloria, Fernando
agreed to buy the said tickets after Mager informed them that there were
no available seats at Amtrak, an intercity passenger train service provider in

the United States. Per the tickets, Spouses Viloria were scheduled to leave for
Newark on August 13, 1997 and return to San Diego on August 21, 1997.
Subsequently, Fernando requested Mager to reschedule their flight to Newark to
an earlier date or August 6, 1997. Mager informed him that flights to Newark
via Continental Airlines were already fully booked and offered the alternative of
a round trip flight via Frontier Air. Since flying with Frontier Air called for a
higher fare of US$526.00 per passenger and would mean traveling by night,
Fernando opted to request for a refund. Mager, however, denied his request as
the subject tickets are non-refundable and the only option that Continental
Airlines can offer is the re-issuance of new tickets within one (1) year from
the date the subject tickets were issued. Fernando decided to reserve two
(2) seats with Frontier Air.

As he was having second thoughts on traveling via Frontier Air, Fernando went
to the Greyhound Station where he saw an Amtrak station nearby. Fernando
made inquiries and was told that there are seats available and he can
travel on Amtrak anytime and any day he pleased. Fernando then
purchased two (2) tickets for Washington, D.C.
From Amtrak, Fernando went to Holiday Travel and confronted Mager with the
Amtrak tickets, telling her that she had misled them into buying the
Continental Airlines tickets by misrepresenting that Amtrak was already
fully booked. Fernando reiterated his demand for a refund but Mager was
firm in her position that the subject tickets are non-refundable.
Upon returning to the Philippines, Fernando sent a letter to CAI on February
11, 1998, demanding a refund and alleging that Mager had deluded them
into purchasing the subject tickets. On June 17, 1999, Fernando went to
Continentals ticketing office at Ayala Avenue, Makati City to have the subject
tickets replaced by a single round trip ticket to Los Angeles, California under

his name. Therein, Fernando was informed that Lourdes ticket was nontransferable, thus, cannot be used for the purchase of a ticket in his favor.
In a letter dated June 21, 1999, Fernando demanded for the refund of the
subject tickets as he no longer wished to have them replaced. In addition to the
dubious circumstances under which the subject tickets were issued, Fernando
claimed that CAIs act of charging him with US$1,867.40 for a round trip ticket
to Los Angeles, which other airlines priced at US$856.00, and refusal to allow
him to use Lourdes ticket, breached its undertaking under its March 24, 1998
letter.
On September 8, 2000, Spouses Viloria filed a complaint against CAI, praying
that CAI be ordered to refund the money they used in the purchase of the
subject tickets with legal interest from July 21, 1997 and to pay P1, 000,000.00
as moral damages, P500, 000.00 as exemplary damages and P250,000.00 as
attorneys fees.
Following a full-blown trial, the RTC rendered its April 3, 2006 Decision,
holding that Spouses Viloria are entitled to a refund in view of Magers
misrepresentation in obtaining their consent in the purchase of the subject
tickets. Furthermore, the RTC ruled that CAI acted in bad faith in reneging on
its undertaking to replace the subject tickets within two (2) years from their
date of issue when it charged Fernando with the amount of US$1,867.40 for a
round trip ticket to Los Angeles and when it refused to allow Fernando to use
Lourdes ticket.
On appeal, the CA reversed the RTCs April 3, 2006 Decision, holding that CAI
cannot be held liable for Magers act in the absence of any proof that a
principal-agent relationship existed between CAI and Holiday Travel. According
to the CA, Spouses Viloria, who have the burden of proof to establish the fact of
agency, failed to present evidence demonstrating that Holiday Travel is CAIs
agent. Furthermore, contrary to Spouses Vilorias claim, the contractual
relationship between Holiday Travel and CAI is not an agency but that of a sale.

ISSUE: Whether or not a principal-agent relationship exists between CAI and

Holiday Travel
RULING:
Contrary to the findings of the CA, all the elements of an agency exist in
this case. The first and second elements are present as CAI does not deny that
it concluded an agreement with Holiday Travel, whereby Holiday Travel
would enter into contracts of carriage with third persons on CAIs behalf.
The third element is also present as it is undisputed that Holiday Travel
merely acted in a representative capacity and it is CAI and not Holiday
Travel who is bound by the contracts of carriage entered into by Holiday Travel
on its behalf. The fourth element is also present considering that CAI has not
made any allegation that Holiday Travel exceeded the authority that was
granted to it. In fact, CAI consistently maintains the validity of the contracts
of carriage that Holiday Travel executed with Spouses Viloria and that Mager
was not guilty of any fraudulent misrepresentation. That CAI admits the
authority of Holiday Travel to enter into contracts of carriage on its behalf is
easily discernible from its February 24, 1998 and March 24, 1998 letters,
where it impliedly recognized the validity of the contracts entered into by
Holiday Travel with Spouses Viloria. When Fernando informed CAI that it was
Holiday Travel who issued to them the subject tickets, CAI did not deny that
Holiday Travel is its authorized agent.
Prior to Spouses Vilorias filing of a complaint against it, CAI never refuted that
it gave Holiday Travel the power and authority to conclude contracts of carriage
on its behalf. As clearly extant from the records, CAI recognized the validity of
the contracts of carriage that Holiday Travel entered into with Spouses Viloria
and considered itself bound with Spouses Viloria by the terms and conditions
thereof; and this constitutes an unequivocal testament to Holiday Travels
authority to act as its agent. This Court cannot therefore allow CAI to take an
altogether different position and deny that Holiday Travel is its agent without
condoning or giving imprimatur to whatever damage or prejudice that may
result from such denial or retraction to Spouses Viloria, who relied on good

faith on CAIs acts in recognition of Holiday Travels authority. Estoppel is

primarily based on the doctrine of good faith and the avoidance of harm that
will befall an innocent party due to its injurious reliance, the failure to apply it
in this case would result in gross travesty of justice. Estoppel bars CAI from
making such denial.
As categorically provided under Article 1869 of the Civil Code, [a]gency may be
express, or implied from the acts of the principal, from his silence or lack of
action, or his failure to repudiate the agency, knowing that another person is
acting on his behalf without authority.
COMMISSIONER OF INTERNAL REVENUE
vs.
COURT OF APPEALS, COURT OF TAX APPEALS and ADMU
G.R. No. 115349. April 18, 1997
FACTS:
Private respondent Ateneo de Manila University is a non-stock, non-profit
educational institution with auxiliary units and branches all over the
Philippines. One such auxiliary unit is the Institute of Philippine Culture (IPC),
which has no legal personality separate and distinct from that of private
respondent. The IPC is a Philippine unit engaged in social science studies of
Philippine society and culture. Occasionally, it accepts sponsorships for its
research activities from international organizations, private foundations and
government agencies.
On July 8, 1983, private respondent received from petitioner Commissioner of
Internal Revenue a demand letter dated June 3, 1983, assessing private
respondent the sum of P174, 043.97 for alleged deficiency contractors tax, and
an assessment dated June 27, 1983 in the sum of P1,141,837 for alleged
deficiency income tax, both for the fiscal year ended March 31, 1978. Denying
said tax liabilities, private respondent sent petitioner a letter-protest and
subsequently filed with the latter a memorandum contesting the validity of the
assessments.

On March 17, 1988, petitioner rendered a letter-decision canceling the

assessment for deficiency income tax but modifying the assessment for
deficiency contractors tax by increasing the amount due to P193, 475.55.
Unsatisfied,

private

respondent

requested

for

reconsideration

or

reinvestigation of the modified assessment. At the same time, it filed in the

respondent court a petition for review of the said letter-decision of the
petitioner. While the petition was pending before the respondent court,
petitioner issued a final decision dated August 3, 1988 reducing the
assessment for deficiency contractors tax from P193, 475.55 to P46, 516.41,
exclusive of surcharge and interest.
On July 12, 1993, the respondent court rendered a decision cancelling the
contractors tax assessment slapped on IPC in the amount of P46, 516.41
exclusive of surcharge and interest for the fiscal year ended March 31, 1978.
Not satisfied with the RTCs decision, CIR seeks the decisions reversal via a
petition for review with the Supreme Court.

ISSUE:
Whether or not Ateneo de Manila University has Contracts for the Sale of its
Services of its Institute of Philippine Culture and thus is taxable within the
purview of then Section 205 of the National Internal Revenue Code.
RULING:
After reviewing the records of this case, we find no evidence that Ateneos
Institute of Philippine Culture ever sold its services for a fee to anyone or
was ever engaged in a business apart from and independently of the
academic purposes of the university.

Stressing that it is not the Ateneo de Manila University per se which is being
taxed, Petitioner Commissioner of Internal Revenue contends that the tax is
due on its activity of conducting researches for a fee. The tax is due on the
gross receipts made in favor of IPC pursuant to the contracts the latter entered
to conduct researches for the benefit primarily of its clients. The tax is imposed
on the exercise of a taxable activity. x x x [T]he sale of services of private
respondent is made under a contract and the various contracts entered into
between private respondent and its clients are almost of the same terms,
showing, among others, the compensation and terms of payment.
In theory, the Commissioner of Internal Revenue may be correct. However, the
records do not show that Ateneos IPC in fact contracted to sell its research
services for a fee. Clearly then, as found by the Court of Appeals and the Court
of Tax Appeals, petitioners theory is inapplicable to the established factual
milieu obtaining in the instant case.
In the first place, the petitioner has presented no evidence to prove its bare
contention that, indeed, contracts for sale of services were ever entered into by
the private respondent.
Moreover, the Court of Tax Appeals accurately and correctly declared that the
funds received by the Ateneo de Manila University are technically not a fee.
They may however fall as gifts or donations which are tax-exempt as
shown by private respondents compliance with the requirement of Section
123 of the National Internal Revenue Code providing for the exemption of such
gifts to an educational institution.
It is also well to stress that the questioned transactions of Ateneos Institute of
Philippine Culture cannot be deemed either as a contract of sale or a contract
for a piece of work. By the contract of sale, one of the contracting parties
obligates himself to transfer the ownership of and to deliver a determinate
thing, and the other to pay therefor a price certain in money or its
equivalent. By its very nature, a contract of sale requires a transfer of
ownership.

In the case at bench, it is clear from the evidence on record that there was no
sale either of objects or services because, as adverted to earlier, there was no
transfer of ownership over the research data obtained or the results of
research projects undertaken by the Institute of Philippine Culture.
Furthermore, it is clear that the research activity of the Institute of Philippine
Culture is done in pursuance of maintaining Ateneos university status and not
in the course of an independent business of selling such research with profit in
mind. This is clear from a reading of the regulations governing universities:
31. In addition to the legal requisites an institution must meet,
among others, the following requirements before an application
for university status shall be considered:
xxxxxxxxx
(e) The institution must undertake research and operate with a
competent qualified staff at least three graduate departments in
accordance with the rules and standards for graduate education.
One of the departments shall be science and technology. The
competence of the staff shall be judged by their effective
teaching, scholarly publications and research activities published
in its school journal as well as their leadership activities in the
profession.
(f) The institution must show evidence of adequate and stable
financial resources and support, a reasonable portion of which
should be devoted to institutional development and research.
(underscoring supplied)
xxxxxxxxx
32. University status may be withdrawn, after due notice and
hearing, for failure to maintain satisfactorily the standards and
requirements therefor.

DEL MONTE PHILIPPINES, INC vs. NAPOLEON N. ARAGONES

G.R. No. 153033. June 23, 2005

FACTS:
On September 18, 1988, herein petitioner Del Monte Philippines Inc. (DMPI)
entered into an Agreement with MEGA-WAFF, represented by Managing
Principal Edilberto Garcia (Garcia), whereby the latter undertook the supply
and installation of modular pavement at DMPIs condiments warehouse at
Cagayan de Oro City within 60 calendar days from signing of the agreement.
To source its supply of concrete blocks to be installed on the pavement of the
DMPI warehouse, MEGA-WAFF, as CONTRACTOR represented by Garcia,
entered into a Supply Agreement with Dynablock Enterprises, represented by
herein respondent Aragones, as SUPPLIER
ISSUE:
Whether or not the Supply Agreement entered into was in the nature of a
contract for a piece of work.
RULING:
The petition fails.
The authorities petitioner cited in fact show that the nature of the Supply
Agreement between Aragones and MEGA-WAFF was one for a piece of work.
Contrary to petitioners claim that save for the shape, there was no
consideration of any special needs or requirements of DMPI taken into account
in the design or manufacture of the concrete paving blocks, the Supply
Agreement is replete with specifications, terms or conditions showing
that it was one for a piece of work.
At this juncture it is well to note that the Supply Agreement was in the
nature of a contract for a piece of work. The distinction between a contract of
sale and one for work, labor and materials is tested by inquiry whether the
thing transferred is one not in existence and which never would have existed

but for the order of the party desiring to acquire it, or a thing which would have
existed but has been the subject of sale to some other persons even if the order
had not been given. If the article ordered by the purchaser is exactly such as
the seller makes and keeps on hand for sale to anyone, and no change or
modification of it is made at purchasers request, it is a contract of sale even
though it may be entirely made after, and in consequence of the purchasers
order for it.

[Commissioner of Internal Revenue vs. Engineering Equipment

and Supply Company, G.R. No. L-27044, June 30, 1975]

In the case at bench, the modular paving blocks are not exactly what the
plaintiff-appellee makes and keeps on hand for sale to anyone, but with a
modification that the same be S in shape. Hence, the agreement falls within
the ambit of Article 1467 making Article 1729 likewise applicable in the instant
case.
As regard the issue of privity of contracts, We need to add only that Article
1311 of the New Civil Code which DMPI invokes is not applicable where the
situation contemplated in Article 1729 obtains.

The intention of the latter

provision is to protect the laborers and the materialmen from being taken
advantage of by unscrupulous contractors and from possible connivance
between owners and contractors. Thus, a constructive vinculum or contractual
privity is created by this provision, by way of exception to the principle
underlying Article 1311 between the owner, on the one hand, and those who
furnish labor and/or materials, on the other. [Velasco vs. Court of Appeals,
G.R. No. L-47544, January 28, 1980]
As a matter of fact, insofar as the laborers are concerned, by a special law, Act
no. 3959, otherwise known as An Act making it obligatory for any person,
company, firm or corporation owning any work of any kind executed by
contract to require the contractor to furnish a bond guaranteeing the payment
of the laborers. they are given added protection by requiring contractors to file
bonds guaranteeing payment to them.

It is true that defendant-appellant had already fully paid its obligation to

defendant Garcia however, the formers payment to the latter does not
extinguish its legal obligation to plaintiff-appellee because such payment was
irregular. The former should have taken care not to pay to such contractor the
full amount which he is entitled to receive by virtue of the contract, until he
shall have shown that he first paid the wages of the laborer employed in said
work, by means of an affidavit made and subscribed by said contractor before a
notary public or other officer authorized by law to administer oaths. There is
no showing that defendant appellant DMPI, as owner of the building, complied
with this requirement paid down in Act No. 3959. Hence, under Section 2 of
said law, said defendant-appellant is responsible, jointly and severally with the
general contractor, for the payment to plaintiff-appellee as sub-contractor.

In this connection, while, indeed, Article 1729 refers to the laborers and
materialmen themselves, under the peculiar circumstances of this case, it is
but fair and just that plaintiff-appellee be deemed as suing for the
reimbursement of what they have already paid the laborers and materialmen,
as otherwise he would be unduly prejudiced while either defendant-appellant
DMPI or defendant Garcia would enrich themselves at plaintiff-appellees
expense.

Be that as it may, We so hold that plaintiff-appellee has a lawful claim against

defendant-appellant DMPI, owner of the constructed warehouse since it
disregarded the notice of claim of plaintiff-appellee, at a time when the
amounts owing from defendant-appellant DMPI to defendant GARCIA were
more than sufficient to pay for plaintiff-appellees claim.

The least that

defendant-appellant should have done was to withhold payment of the balance

still owing to defendant Garcia as until the claim of plaintiff-appellee was
clarified. (Italics in the original; emphasis and underscoring supplied).[24]

INOCENCIA YU DINO vs. COURT OF APPEALS and ROMAN SIO

G.R. No. 113564. June 20, 2001
FACTS:
Petitioners spouses Dino, doing business under the trade name "Candy Claire
Fashion Garment" are engaged in the business of manufacturing and selling
shirts. Respondent Sio is part owner and general manager of a manufacturing
corporation doing business under the trade name "Universal Toy Master
Manufacturing."
Petitioners and respondent Sio entered into a contract whereby the latter would
manufacture for the petitioners 20,000 pieces of vinyl frogs and 20,000
pieces of vinyl moose heads at P7.00 per piece in accordance with the
sample approved by the petitioners. These frogs and moose heads were to
be attached to the shirts petitioners would manufacture and sell.
Respondent Sio delivered in several installments the 40,000 pieces of frogs and
moose heads. The last delivery was made on September 28, 1988. Petitioner
fully

paid

the

agreed

price.

Subsequently,

petitioners

returned

to

respondent 29,772 pieces of frogs and moose heads for failing to comply
with the approved sample. The return was made on different dates: the initial
one on December 12, 1988 consisting of 1,720 pieces, the second on January
11, 1989, and the last on January 17, 1989.
Petitioners then demanded from the respondent a refund of the purchase
price of the returned goods in the amount of P208, 404.00. As respondent
Sio refused to pay, petitioners filed on July 24, 1989 an action for collection of
a sum of money in the Regional Trial Court of Manila, Branch 38 where it
ruled in favor of the petitioners.
Respondent Sio sought recourse in the Court of Appeals. In its April 30, 1993
decision, the appellate court affirmed the trial court decision. Respondent then
filed

Motion

for

Reconsideration

and

Supplemental

Motion

for

Reconsideration alleging therein that the petitioners' action for collection of

sum of money based on a breach of warranty had already prescribed. On

January 24, 1994, the respondent court reversed its decision and
dismissed petitioners' Complaint for having been filed beyond the
prescriptive period.
ISSUE:
Whether or not the contract executed by and between the petitioners and the
respondent was a contract for a piece of work. Was there a breach of warranty
committed by respondent Sio.
RULING:
We uphold the respondent's contention.
The following provisions of the New Civil Code are apropos:
"Art. 1467. A contract for the delivery at a certain price of an
article which the vendor in the 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 are to 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."
"Art. 1713. By the contract for a piece of work the contractor
binds himself to execute a piece of work for the employer, in
consideration of a certain price or compensation. The contractor
may either employ only his labor or skill, or also furnish the
material."
As this Court ruled in Engineering & Machinery Corporation v. Court of
Appeals, et al.,[12] "a contract for a piece of work, labor and materials may
be distinguished from a contract of sale by the inquiry as to whether the
thing transferred is one not in existence and which would never have
existed but for the order of the person desiring it. In such case, the

contract is one for a piece of work, not a sale. On the other hand, if the thing
subject of the contract would have existed and been the subject of a sale to
some other person even if the order had not been given then the contract is one
of sale. The contract between the petitioners and respondent stipulated that
respondent would manufacture upon order of the petitioners 20,000 pieces
of vinyl frogs and 20,000 pieces of vinyl moose heads according to the
samples specified and approved by the petitioners.
Respondent Sio did not ordinarily manufacture these products, but only upon
order of the petitioners and at the price agreed upon. Clearly, the contract
executed by and between the petitioners and the respondent was a
contract for a piece of work. At any rate, whether the agreement between the
parties was one of a contract of sale or a piece of work, the provisions on
warranty of title against hidden defects in a contract of sale apply to the case at
bar, viz:
"Art. 1714. If the contractor agrees to produce the work from
material furnished by him, he shall deliver the thing produced to
the employer and transfer dominion over the thing. This
contract shall be governed by the following articles as well as by
the pertinent provisions on warranty of title and against hidden
defects and the payment of price in a contract of sale."
"Art. 1561. The vendor shall be responsible for warranty
against the hidden defects which the thing sold may
have, should they render it unfit for the use for which it is
intended, or should they diminish its fitness for such use to such
an extent that, had the vendee been aware thereof, he would
not have acquired it or would have given a lower price for it; but
said vendor shall not be answerable for patent defects or those
which may be visible, or for those which are not visible if the
vendee is an expert who, by reason of his trade or profession,
should have known them."
"Art. 1571. Actions arising from the provisions of the preceding
ten articles shall be barred after six months from the
delivery of the thing sold." (Emphasis supplied)

There is no dispute that respondent made the last delivery of the vinyl products
to petitioners on September 28, 1988. It is also settled that the action to
recover the purchase price of the goods petitioners returned to the respondent
was filed on July 24, 1989, more than nine months from the date of last
delivery. Petitioners having filed the action three months after the six-month
period for filing actions for breach of warranty against hidden defects stated in
Art. 1571, the appellate court dismissed the action.
ALI AKANG vs. MUNICIPALITY OF ISULAN, SULTAN KUDARAT PROVINCE
G.R. No. 186014 June 26, 2013
FACTS:
Ali Akang (petitioner) is a member of the national and cultural community
belonging to the Maguindanaon tribe of Isulan, Province of Sultan Kudarat
and the registered owner of Lot 5-B-2-B-14-F (LRC) Psd 1100183 located at
Kalawag III, Isulan, Sultan Kudarat, covered by Transfer Certificate of Title
(TCT) No. T-3653,5 with an area of 20,030 square meters.
Sometime in 1962, a two-hectare portion of the property was sold by the
petitioner

to

the

Municipality

of

Isulan,

Province

of

Sultan

Kudarat

(respondent) through then Isulan Mayor Datu Ampatuan under a Deed of Sale
executed on July 18, 1962.
The respondent immediately took possession of the property and began
construction of the municipal building. Thirty-nine (39) years later or on
October 26, 2001, the petitioner, together with his wife, Patao Talipasan, filed a
civil action for Recovery of Possession of Subject Property and/or Quieting of
Title thereon and Damages against the respondent, represented by its
Municipal Mayor, et al. In his complaint, the petitioner alleged, among others,
that the agreement was one to sell, which was not consummated as the
purchase price was not paid.

In its answer, the respondent denied the petitioners allegations, claiming,

among others: that the petitioners cause of action was already barred by
laches; that the Deed of Sale was valid; and that it has been in open,
continuous and exclusive possession of the property for forty (40) years.
ISSUE:
Whether the Deed of Sale dated July 18, 1962 is a valid and perfected contract
of sale; (2) whether there was payment of consideration by the respondent; and
(3) whether the petitioners claim is barred by laches
RULING:
The Deed of Sale executed by the petitioner and the respondent is a perfected
contract of sale, all its elements being present. There was mutual agreement
between them to enter into the sale, as shown by their free and voluntary
signing of the contract. There was also an absolute transfer of ownership of
the property by the petitioner to the respondent as shown in the stipulation:
x x x I [petitioner] hereby sell, transfer, cede, convey and assign
as by these presents do have sold, transferred, ceded, conveyed
and assigned, x x x.
There was also a determinate subject matter, that is, the two-hectare parcel of
land as described in the Deed of Sale. Lastly, the price or consideration is at
Three Thousand Pesos (P3, 000.00), which was to be paid after the
execution of the contract. The fact that no express reservation of
ownership or title to the property can be found in the Deed of Sale bolsters
the absence of such intent, and the contract, therefore, could not be one to sell.
Had the intention of the petitioner been otherwise, he could have: (1)
immediately sought judicial recourse to prevent further construction of the
municipal building; or (2) taken legal action to contest the agreement. The
petitioner did not opt to undertake any of such recourses.

SPS EMMA H. VER REYES and RAMON REYES vs. DOMINADOR

SALVADOR
G.R. No. 139047 September 11, 2008
FACTS:
A parcel of unregistered land located the Province of Rizal, now a part of Metro
Manila, designated as Lot 1 of Plan Psu-205035, with an area of 19,545 square
meters (subject property) is the core of the controversy in the Petitions at bar. It
previously formed part of a bigger parcel of agricultural land first declared in
the name of Domingo Lozada (Domingo) in the year 1916 under Tax
Declaration No. 2932. Domingo married Graciana San Jose in the year
1887and their marriage produced two children, namely Nicomedes and Pablo.
After the settlement, the subject property, i.e., Lot 1, was adjudicated to
Nicomedes; while Lot 2 was given to the heirs of Pablo.

Nicomedes then

declared the subject property in his name in 1965 under Tax Declaration No.
2050.
On 23 June 1965, Nicomedes executed a Deed of Conditional Sale over the
subject property in favor of Emma Ver Reyes (Emma), which stated that the
Vendor [Nicomedes] is the true and lawful owner of a parcel of land situated at
Tungtong, Las Pinas, Rizal. Emma was only able to pay the first installment
of the total purchase price agreed upon by the parties. Furthermore, as
will be discussed later on, Nicomedes did not succeed in his attempt to have
any title to the subject property issued in his name.
On 14 June 1968, Nicomedes entered into another contract involving the
subject property with Rosario D. Bondoc (Rosario).Designated as an Agreement
of Purchase and Sale.
On 7 March 1969, Nicomedes and Rosario executed a Joint Affidavit,[14]
whereby they confirmed the sale of the subject property by Nicomedes to
Rosario through the Agreement of Purchase and Sale dated 14 June 1968.
They likewise agreed to have the said Agreement registered with the Registry of

Deeds in accordance with the provisions of Section 194 of the Revised

Administrative Code, as amended by Act No. 3344. The Agreement of Purchase
and Sale was thus registered on 10 March 1969.
Five months thereafter, Nicomedes executed on 10 August 1969 a third
contract, a Deed of Absolute Sale of Unregistered Land,[16] involving a portion
of the subject property measuring 2,000 square meters, in favor of Maria Q.
Cristobal (Maria).
Nicomedes passed away on 29 June 1972.

The Deed of Absolute Sale of

Unregistered Land between Nicomedes and Maria was registered only on 8

February 1973,[18] or more than seven months after the formers death.

ISSUE:
Which party acquired valid and registrable title to the same.

RULING:
After a conscientious review of the arguments and evidence presented by the
parties, the Court finds that the Deed of Conditional Sale between Nicomedes
and Emma and the Agreement of Purchase and Sale between Nicomedes and
Rosario were both mere contracts to sell and did not transfer ownership or title
to either of the buyers in light of their failure to fully pay for the purchase price
of the subject property.
A Contract to Sell may not be considered as a Contract of Sale because the first
essential element is lacking.

In a contract to sell, the prospective seller

explicitly reserves the transfer of title to the prospective buyer, meaning, the
prospective seller does not as yet agree or consent to transfer ownership of the
property subject of the contract to sell until the happening of an event, which
for present purposes we shall take as the full payment of the purchase price.
What the seller agrees or obliges himself to do is to fulfill his promise to sell the

subject property when the entire amount of the purchase price is delivered to
him.

In other words the full payment of the purchase price partakes of a

suspensive condition, the non-fulfillment of which prevents the obligation to

sell from arising and thus, ownership is retained by the prospective seller
without further remedies by the prospective buyer.

Viewed in light of the foregoing pronouncements, the Deed of Conditional Sale

executed by Nicomedes in favor of Emma on 23 June 1965 is unmistakably a
mere contract to sell. The Court looks beyond the title of said document, since
the denomination or title given by the parties in their contract is not conclusive
of the nature of its contents.[52] In the construction or interpretation of an
instrument, the intention of the parties is primordial and is to be pursued.[53]
If the terms of the contract are clear and leave no doubt upon the intention of
the contracting parties, the literal meaning of its stipulations shall control. If
the words appear to be contrary to the evident intention of the parties, the
latter shall prevail over the former.

EQUATORIAL REALTY DEVELOPMENT, INC. vs. MAYFAIR THEATER, INC.

G.R. No. 106063. November 21, 1996
FACTS:
Carmelo & Bauermann, Inc. (Carmelo) used to own a parcel of land, together
with two 2-storey buildings constructed thereon, located at Claro M. Recto
Avenue, Manila, and covered by TCT No. 18529 issued in its name by the
Register of Deeds of Manila.
On June 1, 1967, Carmelo entered into a Contract of Lease with Mayfair
Theater Inc. (Mayfair) for a period of 20 years. The lease covered a portion of
the second floor and mezzanine of a two-storey building with about 1,610
square meters of floor area, which respondent used as a movie house known as
Maxim Theater.

Two years later, on March 31, 1969, Mayfair entered into a second Contract of
Lease with Carmelo for the lease of another portion of the latters property -namely, a part of the second floor of the two-storey building, with a floor area of
about 1,064 square meters; and two store spaces on the ground floor and the
mezzanine, with a combined floor area of about 300 square meters. In that
space, Mayfair put up another movie house known as Miramar Theater. The
Contract of Lease was likewise for a period of 20 years.
Both leases contained a provision granting Mayfair a right of first refusal
to purchase the subject properties. However, on July 30, 1978 - within the
20-year-lease term -- the subject properties were sold by Carmelo to
Equatorial Realty Development, Inc. (Equatorial) for the total sum of
P11,300,000, without their first being offered to Mayfair.
As a result of the sale of the subject properties to Equatorial, Mayfair filed a
Complaint before the Regional Trial Court of Manila (Branch 7) for (a) the
annulment of the Deed of Absolute Sale between Carmelo and Equatorial, (b)
specific performance, and (c) damages.

After trial on the merits, the lower

court rendered a Decision in favor of Carmelo and Equatorial. On appeal

(docketed as CA-GR CV No. 32918), the Court of Appeals (CA) completely
reversed and set aside the judgment of the lower court.
ISSUE:
Whether Equatorial was the owner of the subject property and could thus enjoy
the fruits or rentals therefrom.
RULING:
We hold that under the peculiar facts and circumstances of the case at bar, no
right of ownership was transferred from Carmelo to Equatorial in view of a
patent failure to deliver the property to the buyer.

From the peculiar facts of this case, it is clear that petitioner never took
actual control and possession of the property sold, in view of respondents
timely objection to the sale and the continued actual possession of the
property. The objection took the form of a court action impugning the sale
which, as we know, was rescinded by a judgment rendered by this Court. It
has been held that the execution of a contract of sale as a form of
constructive delivery is a legal fiction. It holds true only when there is no
impediment that may prevent the passing of the property from the hands of the
vendor into those of the vendee. When there is such impediment, fiction yields
to reality - the delivery has not been effected.
Hence, respondents opposition to the transfer of the property by way of sale to
Equatorial was a legally sufficient impediment that effectively prevented the
passing of the property into the latters hands.
ESTELITA VILLAMAR vs. BALBINO MANGAOIL
G.R. No. 188661 April 11, 2012
FACTS:
Villamar is the registered owner of a 3.6080 hectares parcel of land [hereinafter
referred as the subject property] in San Francisco, Manuel, Isabela covered by
Transfer Certificate of Title (TCT) No. T-92958-A. On March 30, 1998, she
entered into an Agreement with Mangaoil for the purchase and sale of said
parcel of land.
On April 1, 1998, the parties executed a Deed of Absolute Sale whereby
Villamar (then Estelita Bernabe) transferred the subject parcel of land to
Mangaoil for and in consideration of [P]150,000.00.
In a letter dated September 18, 1998, Mangaoil informed Villamar that
he was backing out from the sale agreed upon giving as one of the reasons
therefor:

3. That the area is not yet fully cleared by encumbrances as there are
tenants who are not willing to vacate the land without giving them back the
amount that they mortgaged the land.
Mangaoil demanded refund of his P 185,000.00 down payment. Reiterating said
demand in another letter dated April 29, 1999, the same, however, was
unheeded.
On January 28, 2002, the respondent filed before the RTC a complaint for
rescission of contract against the petitioner. In the said complaint, the
respondent sought the return of P185, 000.00 which he paid to the petitioner,
payment of interests thereon to be computed from March 27, 1998 until the
suit's termination, and the award of damages, costs and P20,000.00 attorney's
fees
ISSUE:
Whether or not the failure of the petitioner to deliver to the respondent both the
physical possession of the subject property and the certificate of title covering
the same amount to a substantial breach of the former's obligations to the
latter constituting a valid cause to rescind the agreement and deed of sale
entered into by the parties.
RULING:
We rule in the affirmative.
The RTC and the CA both found that the petitioner failed to comply with
her obligations to deliver to the respondent both the possession of the subject
property and the certificate of title covering the same.
Article 1458 of the NCC obliges the seller to transfer the ownership of and to
deliver a determinate thing to the buyer, who shall in turn pay therefor a price
certain in money or its equivalent. In addition thereto, Article 1495 of the NCC
binds the seller to warrant the thing which is the object of the sale. On the
other hand, Article 1498 of the same code provides that when the sale is made

through a public instrument, the execution thereof shall be equivalent to the

delivery of the thing which is the object of the contract, if from the deed, the
contrary does not appear or cannot clearly be inferred.
As can be gleaned from the agreement of the contending parties, the
respondent initially paid the petitioner P185,000.00 for the latter to pay the
loan obtained from the Rural Bank of Cauayan and to cause the release from
the said bank of the certificate of title covering the subject property. The rest of
the amount shall be used to pay the mortgages over the subject property which
was executed in favor of Lacaden and Parangan. After the release of the TCT, a
deed of sale shall be executed and transfer shall be immediately effected so
that the title covering the subject property can be used as a collateral for a loan
the respondent will apply for, the proceeds of which shall be given to the
petitioner.

TOMAS K. CHUA vs. CA and ENCARNACION VALDES-CHOY

G.R. No. 119255. April 9, 2003
FACTS:
Valdes-Choy advertised for sale her paraphernal house and lot (Property) with
an area of 718 square meters located at No. 40 Tampingco Street corner
Hidalgo Street, San Lorenzo Village, Makati City. The Property is covered by
Transfer Certificate of Title No. 162955 (TCT) issued by the Register of Deeds of
Makati City in the name of Valdes-Choy. Chua responded to the advertisement.
After several meetings, Chua and Valdes-Choy agreed on a purchase price of
P10, 800,000.00 payable in cash.
On 30 June 1989, Valdes-Choy received from Chua a check for P100,000.00.
The receipt (Receipt) evidencing the transaction, signed by Valdes-Choy as
seller, and Chua as buyer, reads:
30 June 1989
RECEIPT

RECEIVED from MR. TOMAS K. CHUA PBCom Check No. 206011 in the
amount of ONE HUNDRED THOUSAND PESOS ONLY (P100,000.00) as
EARNEST MONEY for the sale of the property located at 40 Tampingco cor.
Hidalgo, San Lorenzo Village, Makati, Metro Manila (Area : 718 sq. meters).
The balance of TEN MILLION SEVEN HUNDRED THOUSAND (P10,700,000.00)
is payable on or before 15 July 1989. Capital Gains Tax for the account of the
seller. Failure to pay balance on or before 15 July 1989 forfeits the earnest
money. This provided that all papers are in proper order.[6]
CONFORME: ENCARNACION VALDES Seller
TOMAS K. CHUA Buyer
ISSUE:
Whether there is a perfected contract of sale of immovable property
RULING:
The petition is bereft of merit.
There is no dispute that Valdes-Choy is the absolute owner of the Property
which is registered in her name under TCT No.162955, free from all liens and
encumbrances. She was ready, able and willing to deliver to Chua the owners
duplicate copy of the TCT, the signed Deeds of Sale, the tax declarations, and
the latest realty tax receipt. There is also no dispute that on 13 July 1989,
Valdes-Choy received PBCom Check No. 206011 for P100,000.00 as earnest
money from Chua. Likewise, there is no controversy that the Receipt for the
P100,000.00 earnest money embodied the terms of the binding contract
between Valdes-Choy and Chua.
Further, there is no controversy that as embodied in the Receipt, Valdes-Choy
and Chua agreed on the following terms: (1) the balance of P10,215,000.00 is
payable on or before 15 July 1989; (2) the capital gains tax is for the account of
Valdes-Choy; and (3) if Chua fails to pay the balance of P10,215,000.00 on or
before 15 July 1989, Valdes-Choy has the right to forfeit the earnest money,

provided that all papers are in proper order. On 13 July 1989, Chua gave
Valdes-Choy the PBCom managers check for P485,000.00 to pay the capital
gains tax.
Both the trial and appellate courts found that the balance of P10,215,000.00
was not actually paid to Valdes-Choy on the agreed date. On 13 July 1989,
Chua did show to Valdes-Choy the PBCom managers check for
P10,215,000.00, with Valdes-Choy as payee. However, Chua refused to give this
check to Valdes-Choy until a new TCT covering the Property is registered in
Chuas name. Or, as the trial court put it, until there is proof of payment of the
capital gains tax which is a pre-requisite to the issuance of a new certificate of
title.
PCI LEASING AND FINANCE, INC vs. UCPB GENERAL INSURANCE CO., INC
G.R. No. 162267 July 4, 2008
FACTS:
On October 19, 1990 at about 10:30 p.m., a Mitsubishi Lancer car with Plate
Number PHD-206 owned by United Coconut Planters Bank was traversing the
Laurel Highway, Barangay Balintawak, Lipa City. The car was insured with
plaintiff-appellee [UCPB General Insurance Inc.], then driven by Flaviano
Isaac with Conrado Geronimo, the Asst. Manager of said bank, was hit and
bumped by an 18-wheeler Fuso Tanker Truck with Plate No. PJE-737 and
Trailer Plate No. NVM-133, owned by defendants-appellants PCI Leasing &
Finance, Inc. allegedly leased to and operated by defendant-appellant Superior
Gas & Equitable Co., Inc. (SUGECO) and driven by its employee, defendant
appellant Renato Gonzaga.
The impact caused heavy damage to the Mitsubishi Lancer car
resulting in an explosion of the rear part of the car. The driver and passenger
suffered physical injuries. However, the driver defendant-appellant Gonzaga
continued on its [sic] way to its [sic] destination and did not bother to bring his
victims to the hospital.
Plaintiff-appellee paid the assured UCPB the amount of P244, 500.00
representing the insurance coverage of the damaged car.

As the 18-wheeler truck is registered under the name of PCI Leasing,

repeated demands were made by plaintiff-appellee for the payment of the
aforesaid amounts. However, no payment was made. Thus, plaintiff-appellee
filed the instant case on March 13, 1991.
PCI Leasing and Finance, Inc., (petitioner) interposed the defense that it
could not be held liable for the collision, since the driver of the truck, Gonzaga,
was not its employee, but that of its co-defendant Superior Gas & Equitable
Co., Inc. (SUGECO). In fact, it was SUGECO, and not petitioner, that was the
actual operator of the truck, pursuant to a Contract of Lease signed by
petitioner and SUGECO. Petitioner, however, admitted that it was the owner of
the truck in question.
ISSUE:
Whether petitioner, as a financing company, is absolved from liability by the
enactment of Republic Act (R.A.) No. 8556, or the Financing Company Act of
1998.

RULING:
Section 12. Liability of lessors. Financing companies shall not be liable for
loss, damage or injury caused by a motor vehicle, aircraft, vessel, equipment,
machinery or other property leased to a third person or entity except when the
motor vehicle, aircraft, vessel, equipment or other property is operated by the
financing company, its employees or agents at the time of the loss, damage or
injury.
Petitioners argument that the enactment of R.A. No. 8556, especially
its addition of the new Sec. 12 to the old law, is deemed to have absolved
petitioner from liability, fails to convince the Court.
These developments, indeed, point to a seeming emancipation of financing
companies from the obligation to compensate claimants for losses suffered from

the operation of vehicles covered by their lease.

Such, however, are not

applicable to petitioner and do not exonerate it from liability in the present

case.
The new law, R.A. No. 8556, notwithstanding developments in foreign
jurisdictions, does not supersede or repeal the law on compulsory motor
vehicle registration. No part of the law expressly repeals Section 5(a) and (e) of
R.A. No. 4136, as amended, otherwise known as the Land Transportation and
Traffic Code
The non-registration of the lease contract between petitioner and its lessee
precludes the former from enjoying the benefits under Section 12 of R.A. No.
8556.
This ruling may appear too severe and unpalatable to leasing and
financing companies, but the Court believes that petitioner and other
companies so situated are not entirely left without recourse. They may resort
to third-party complaints against their lessees or whoever are the actual
operators of their vehicles. In the case at bar, there is, in fact, a provision in the
lease contract between petitioner and SUGECO to the effect that the latter shall
indemnify and hold the former free and harmless from any liabilities,
damages, suits, claims or judgments arising from the latter's use of the motor
vehicle.[32]

Whether petitioner would act against SUGECO based on this

provision is its own option.

PCI LEASING AND FINANCE, INC vs. GIRAFFE-X CREATIVE IMAGING, INC
G.R. No. 142618 July 12, 2007
SPS GOMER and LEONOR RAMOS vs. SPS SANTIAGO and MINDA HERUELA
G.R. No. 145330 October 14, 2005
FACTS:
ISSUE:
RULING:

GOODYEAR PHILIPPINES, INC vs. ANTHONY SY and JOSE L. LEE

G.R. No. 154554 November 9, 2005
FACTS:
Goodyear Philippines, Inc. formerly owned a motor vehicle which it purchased
from Industrial and Transport Equipment, Inc. in 1983. It had since been in
the service of Goodyear until April 30, 1986 when it was hijacked. This
hijacking was reported to the Philippine National Police (PNP) which issued out
an alert alarm on the said vehicle as a stolen one. It was later on recovered also
in 1986. The vehicle was used by Goodyear until 1996, when it sold it to
Anthony Sy on September 12, 1996.
Sy, in turn, sold it to Jose L. Lee on January 29, 1997. But the latter on
December 4, 1997, filed an action for rescission of contract with damages
against Sy, because he could not register the vehicle in his name due to the
certification from the PNP Regional Traffic Management Office in Legazpi City
that it was a stolen vehicle and the alarm covering the same was not lifted.
Instead, the PNP in Legazpi City impounded the vehicle and charged Lee
criminally.
Upon being informed by Sy of the denial of the registration of the vehicle in
Lees name, Goodyear requested on July 10, 1997 the PNP to lift the stolen
vehicle alarm status. This notwithstanding, [Goodyear] was impleaded as thirdparty defendant in the third-party complaint filed by Sy on January 9, 1998.
A motion to dismiss was filed by Goodyear on March 24, 1998 on the
twin grounds that the third-party complaint failed to state a cause of action
and even if it did, such cause of action was already extinguished. An opposition
thereto was interposed by Sy on April 17, 1998.
The Regional Trial Court [(RTC)] resolved to dismiss the third-party complaint
on the basis that it stated no cause of action. Thus, Sy seasonably filed an
appeal to the CA which found that Goodyear did not make good its warranty in
the Deed of Sale: to convey the vehicle to Respondent Anthony Sy free from all
liens, encumbrances and legal impediments.
ISSUE:

Whether or not petitioner did breach the implied warranty against hidden
encumbrances regarding the sale of the motor vehicle resulting in the nonregistration thereof.
RULING:
In the present case, petitioner did not breach the implied warranty against
hidden encumbrances. The subject vehicle that had earlier been stolen by a
third party was subsequently recovered by the authorities and restored to
petitioner, its rightful owner. Whether Sy had knowledge of the loss and
subsequent recovery, the fact remained that the vehicle continued to be owned
by petitioner, free from any charge or encumbrance whatsoever.
(Granting without admitting) Gratia argumenti that there was a breach of the
implied warranty against hidden encumbrances, notice of the breach was not
given to petitioner within a reasonable time. Article 1586 of the Civil Code
requires that notice be given after the breach, of which Sy ought to have
known. In his Third-Party Complaint against petitioner, there was no allegation
at all that respondent had given petitioner the requisite notice.
More important, an action for damages for a breach of implied warranties must
be brought within six months from the delivery of the thing sold. [35 Art. 1571
of the Civil Code] The vehicle was understood to have been delivered to Sy when
it was placed in his control or possession. Upon execution of the Deed of Sale
on September 12, 1996, control and possession of the vehicle was transferred
to respondent. That the vehicle had been delivered is bolstered by the fact that
no contrary allegation was raised in the Third-Party Complaint. Whether the
period should be reckoned from the actual or from the constructive delivery
through a public instrument, more than six months had lapsed before the
filing of the Third-Party Complaint.

JULIE NABUS, MICHELLE NABUS and BETTY TOLERO

vs.
JOAQUIN and JULIA PACSON
G.R. No. 161318 November 25, 2009

FACTS:
The spouses Bate and Julie Nabus were the owners of parcels of land
with a total area of 1,665 square meters, situated in Pico, La Trinidad, Benguet,
duly registered in their names. The property was mortgaged by the Spouses
Nabus to the Philippine National Bank (PNB), La Trinidad Branch, to secure a
loan in the amount of P30,000.00.
On February 19, 1977, the Spouses Nabus executed a Deed of
Conditional Sale [4] covering 1,000 square meters of the 1,665 square meters of
land in favor of respondents Spouses Pacson for a consideration of
P170,000.00, which was duly notarized on February 21, 1977.

The

consideration was to be paid, thus:

ISSUES:
1)

Whether or not the Deed of Conditional Sale was converted into a

contract of lease;
2)

Whether the Deed of Conditional Sale was a contract to sell or a

contract of sale.
RULING:
As regards the first issue, the Deed of Conditional Sale entered into by
the Spouses Pacson and the Spouses Nabus was not converted into a
contract of lease. The 364 receipts issued to the Spouses Pacson contained
either the phrase as partial payment of lot located in Km. 4 or cash vale or
cash vale (partial payment of lot located in Km. 4), evidencing sale under the
contract and not the lease of the property. Further, as found by the trial court,
Joaquin Pacsons non-signing of the second page of a carbon copy of the Deed
of Conditional Sale was

through sheer inadvertence, since

the original

contract[34] and the other copies of the contract were all signed by Joaquin
Pacson and the other parties to the contract.

On the second issue, petitioners contend that the contract executed by the
respondents and the Spouses Nabus was a contract to sell, not a contract of
sale. They allege that the contract was subject to the suspensive condition of
full payment of the consideration agreed upon before ownership of the subject
property could be transferred to the vendees. Since respondents failed to pay
the full amount of the consideration, having an unpaid balance of P57,544.84,
the obligation of the vendors to execute the Deed of Absolute Sale in favor of
respondents did not arise. Thus, the subsequent Deed of Absolute Sale
executed in favor of Betty Tolero, covering the same parcel of land was valid,
even if Tolero was aware of the previous deed of conditional sale.
Ramos v. Heruela differentiates a contract of absolute sale and a contract of
conditional sale as follows:
Article 1458 of the Civil Code provides that a contract of sale may be absolute
or conditional. A contract of sale is absolute when title to the property
passes to the vendee upon delivery of the thing sold. A deed of sale is
absolute when there is no stipulation in the contract that title to the
property remains with the seller until full payment of the purchase price.
The sale is also absolute if there is no stipulation giving the vendor the
right to cancel unilaterally the contract the moment the vendee fails to
pay within a fixed period. In a conditional sale, as in a contract to sell,
ownership remains with the vendor and does not pass to the vendee until full
payment of the purchase price. The full payment of the purchase price
partakes of a suspensive condition, and non-fulfillment of the condition
prevents the obligation to sell from arising.[36]

UMCUPAI VS. BRYC-V DEVELOPMENT CORPORATION

Facts:

Respondent Sea Foods Corp is the registered owner of Lot No. 300 which was
occupied by squatters who belongs to the United Muslim Christian Urban Poor
Association, Inc.
Sometimes in 1991, UMCUPAI thru its President expressed its intention to buy
the lot and initiated negotiations with SFC. It would use the proceeds of its
pending loan application with NHMFC.
Thereafter the parties executed a Letter of Intent to Sell by SFC and a Letter of
Intent to Purchase by UMCUPAI , which provides:
WHEREAS, [SFC] is the registered owner of a parcel [of] land designated
as Lot No. 300 situated in Lower Calarian, Zamboanga City, consisting of 61,736 square meters,
and more particularly described in Transfer Certificate of Title No. 576 of the Registry of Deeds of
Zamboanga City;
WHEREAS, UMCUPAI, an association duly registered with the SEC (Registration No.
403410) and duly accredited with the Presidential Commission for the Urban Poor, has
approached [SFC] and negotiated for the ACQUISITION of the above-described property of
[SFC];
WHEREAS, in pursuance to the negotiations between [SFC] and UMCUPAI, the latter
has taken steps with the proper government authorities particularly the Mayor of Zamboanga City
and its City Housing Board which will act as Originator in the acquisition of said property
which will enable UMCUPAI to avail of its Community Mortgage Program;
WHEREAS, it appears that UMCUPAI will ultimately apply with the Home Mortgage
and Finance Corporation for a loan to pay the acquisition price of said land;
WHEREAS, as one of the steps required by the government authorities to initiate
proceedings is to receive a formal manifestation of Intent to Sell from [SFC];
NOW, THEREFORE, for and in consideration of the foregoing premises, the parties
hereto agree as follows:
1.
[SFC] expressly declares its intention to sell Lot No. 300 with an area of 61,736
square meters situated in Lower Calarian, Zamboanga City and covered by TCT No. 576 of the
Registry of Deeds of Zamboanga City to UMCUPAI at the price of P105.00 per square meter, free
from all liens, charges and encumbrances;
2.
That UMCUPAI hereby expressly declares its intention to buy the aforesaid
property and shall endeavor to raise the necessary funds to acquire same at the
abovementioned price of P105.00 per square meter;
3.
That the Absolute Deed of Sale shall be executed, signed and delivered together
with the title and all other pertinent documents upon full payment of the purchase price;
4.
That [SFC] shall pay the capital gains tax and documentary stamps,
Registration, transfer tax and other expenses shall be paid by the UMCUPAI. [3]

But since the intended sale was derailed due to UMCUPAIs

inability to secure the loan from NHMF as not all its members
occupying Lot No. 300 was willing to join the undertaking. Intent
on buying the subject property, UMCUPAI, in a series of
conferences with SFC, proposed the subdivision of Lot No. 300 to
allow the squatter-occupants to purchase a smaller portion
thereof. Subsequently UMCUPAI purchased Lot 300-A; Lot 300-B
was designated as road right of way.
When UMCUPAI failed to buy Lot 300-C for lack of funds
despite the extension given to purchase the lot, SFC sold the lot to
BRYC-V. UMCUPAI filed an action against respondents for the
nullification of the contract between SFC and BRYC-V
UMCUPAI alleged that SFC violated its valid and subsisting
agreement with SFC embodied in the Letter of Intent. According to
UMCUPAI, the Letter of Intent granted it a prior, better, and
preferred right over BRYC in the purchase of Lot No. 300-C.
ISSUE: Whether or not a Letter of Intent to Buy is equivalent to a bilateral
reciprocal contract within the meaning or contemplation of Article 1479, first
paragraph, Civil Code of the Philippines
RULING: