Manila Metal Container Corporation vs Philippine National Bank

[GR No. 166862, December 20, 2006] No contract of sale because no

agreement as to the price.


Callejo, Sr., J.:

Facts:
Petitioner was the owner of 8,015 square meters of parcel of land located in
Mandaluyong City, Metro Manila. To secure a P900,000.00 loan it had obtained
from respondent Philippine National Bank, petitioner executed a real estate
mortgage over the lot. Respondent PNB later granted petitioner a new credit
accommodation. On August 5, 1982, respondent PNB filed a petition for
extrajudicial foreclosure of the real estate mortgage and sought to have the
property sold at public auction. After due notice and publication, the property was
sold at public action where respondent PNB was declared the winning bidder.
Petitioner sent a letter to PNB, requesting it to be granted an extension of time to
redeem/repurchase the property. Some PNB personnel informed that as a matter
of policy, the bank does not accept partial redemption. Since petitioner failed to
redeem the property, the Register of Deeds cancelled TCT No. 32098 and issued
a new title in favor of PNB.
Meanwhile, the Special Asset Management Department (SAMD) had prepared a
statement of account of petitioners obligation. It also recommended the
management of PNB to allow petitioner to repurchase the property for
P1,574,560.oo. PNB rejected the offer and recommendation of SAMD. It instead
suggested to petitioner to purchase the property for P2,660,000.00, in its
minimum market value. Petitioner declared that it had already agreed to SAMDs
offer to purchase for P1,574,560.47 and deposited a P725,000.00.
Issue:
Whether or not petitioner and respondent PNB had entered into a perfected
contract for petitioner to repurchase the property for respondent.

Ruling:
The SC affirmed the ruling of the appellate court that there was no perfected
contact of sale between the parties.
A contract is meeting of minds between two persons whereby one binds himself,
with respect to the other, to give something or to render some service. Under
1818 of the Civil Code, there is no contract unless the following requisites
concur:
1. Consent of the contracting parties;
2. Objection certain which is the subject matter of the contract;
3. Cause of the obligation which is established.
Contract is perfected by mere consent which is manifested by the meeting of the
offer and the acceptance upon the thing and causes which are to constitute the
contract. Once perfected, the bind between other contracting parties and the
obligations arising therefrom have the form of law between the parties and
should be complied in good faith. The absence of any essential element will
negate the existence of a perfected contract of sale.

The court ruled in Boston Bank of the Philippines vs Manalo:
A definite agreement as to the price is an essential element of a binding
agreement to sell personal or real property because it seriously affects the rights
and obligations of the parties. Price is an essential element in the formation of a
binding and enforceable contract of sale. The fixing of the price can never be left
to the decision of one of the contracting parties. But a price fixed by one of the
contracting parties, if accepted by the other, gives rise to a perfected sale.
In the case at bar, the parties to the contract is between Manila Metal Container
Corporation and Philippine National Bank and not to Special Asset Management
Department. Since the price offered by PNB was not accepted, there is no
contract. Hence it cannot serve as a binding juridical relation between the parties.


Quiroga vs Parsons Contract of Sale
G.R. No. L-11491

Subject: Sales
Doctrine: Contract of Agency to Sell vs Contract of Sale

Facts: On Jan 24, 1911, plaintiff and the respondent entered into a contract
making the latter an agent of the former. The contract stipulates that Don
Andres Quiroga, here in petitioner, grants exclusive rights to sell his beds in the
Visayan region to J. Parsons. The contract only stipulates that J.Parsons should
pay Quiroga within 6 months upon the delivery of beds.
Quiroga files a case against Parsons for allegedly violating the following
stipulations: not to sell the beds at higher prices than those of the invoices; to
have an open establishment in Iloilo; itself to conduct the agency; to keep the
beds on public exhibition, and to pay for the advertisement expenses for the
same; and to order the beds by the dozen and in no other manner. With the
exception of the obligation on the part of the defendant to order the beds by the
dozen and in no other manner, none of the obligations imputed to the defendant
in the two causes of action are expressly set forth in the contract. But the plaintiff
alleged that the defendant was his agent for the sale of his beds in Iloilo, and that
said obligations are implied in a contract of commercial agency. The whole
question, therefore, reduced itself to a determination as to whether the
defendant, by reason of the contract hereinbefore transcribed, was a purchaser
or an agent of the plaintiff for the sale of his beds.

Issue: Whether the contract is a contract of agency or of sale.

Held: In order to classify a contract, due attention must be given to its essential
clauses. In the contract in question, what was essential, as constituting its cause
and subject matter, is that the plaintiff was to furnish the defendant with the beds
which the latter might order, at the price stipulated, and that the defendant was to
pay the price in the manner stipulated. Payment was to be made at the end of
sixty days, or before, at the plaintiffs request, or in cash, if the defendant so
preferred, and in these last two cases an additional discount was to be allowed
for prompt payment. These are precisely the essential features of a contract of
purchase and sale. There was the obligation on the part of the plaintiff to
supply the beds, and, on the part of the defendant, to pay their price. These
features exclude the legal conception of an agency or order to sell whereby the
mandatory or agent received the thing to sell it, and does not pay its price, but
delivers to the principal the price he obtains from the sale of the thing to a third
person, and if he does not succeed in selling it, he returns it. By virtue of the
contract between the plaintiff and the defendant, the latter, on receiving the beds,
was necessarily obliged to pay their price within the term fixed, without any other
consideration and regardless as to whether he had or had not sold the beds.
In respect to the defendants obligation to order by the dozen, the only one
expressly imposed by the contract, the effect of its breach would only entitle the
plaintiff to disregard the orders which the defendant might place under other
conditions; but if the plaintiff consents to fill them, he waives his right and cannot
complain for having acted thus at his own free will.
For the foregoing reasons, we are of opinion that the contract by and between
the plaintiff and the defendant was one of purchase and sale, and that the
obligations the breach of which is alleged as a cause of action are not imposed
upon the defendant, either by agreement or by law.

COMMISSIONER OF INTERNAL REVENUE vs. ENGINEERING EQUIPMENT
G.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 and steel fabrications.

CIR received an anonymous letter denouncing Engineering for tax evasion by
misdeclaring its imported articles and failing to pay the correct percentage taxes
due thereon in connivance with its foreign suppliers. Engineering was likewise
denounced to the Central Bank (CB) for alleged fraud in obtaining its dollar
allocations. So, NBI and Central Bank conducted a raid and search on which
occasion voluminous records of the firm were seized and confiscated. CIR also
reported about deficiency advance sales tax. CIR assessed against the
Company payment of the increased amount and suggested that P10,000 be paid
as compromise in extrajudicial settlement of the Companys penal liability for
violation of the Tax Code. The firm, however, contested the tax assessment and
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 the pendency of the case the investigating revenue examiners
reduced the Companys deficiency tax. CTA declared that Engineering is a
contractor and is exempt from deficiency manufacturers sales tax. The
Commissioner, not satisfied with the decision of the 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 of sale or a contract for piece of work? CONTRACT FOR PIECE OF
WORK.
3) Is Celestino Co vs. CIR case applicable in this case? NO.

Held:

1) The word contractor has come to be used with special reference to a person
who, in the pursuit of the independent business, undertakes to do a specific job
or piece of work for other persons, using his own means and methods without
submitting himself to control as to the petty details. The true test of a contractor is
that when he renders service in the course of an independent occupation,
representing the will of his employer only as to the result 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, but imported some items (as refrigeration compressors in complete set,
heat exchangers or coils) which were used in executing contracts entered into by
it. Engineering undertook negotiations and execution of individual contracts for
the design, supply and installation of air conditioning units of the central type
taking into consideration in the process such factors as the area of the space to
be air conditioned; the number of persons occupying or would be occupying the
premises; the purpose for which the various air conditioning areas are to be
used; and the sources of heat gain or cooling load on the plant such as sun load,
lighting, and other electrical appliances which are or may be in the plan. Relative
to the installation of air conditioning system, Engineering designed and
engineered complete each particular plant and that no two plants were identical
but each had to be engineered separately.

2)NATURE OF OBJECT TEST:

The distinction between a contract of sale and one for work, labor and materials
is tested by the 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 and 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 plaintiff makes and keeps on hand for
sale to anyone, and no change or modification of it is made at defendants
request, it is a contract of sale, even though it may be entirely made after, and in
consequence of, the defendants order for it.

The air conditioning units installed in a central type of air conditioning system
would not have existed but for the order of the party desiring to acquire it and if it
existed without the special order of Engineerings customer, the said air
conditioning units were not intended 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/contractor
2) Ready-made materials

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 stationery carrying the bold print ORIENTAL SASH
FACTORY. As a general rule, sash factories receive orders for doors and
windows of special design only in particular cases, but the bulk of their sales is
derived from ready-made doors and windows of standard sizes for the average
home, which sales were reflected in their books of accounts totalling
P118,754.69 for the period of only nine (9) months. The Court found said sum
difficult to have 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 as manufacturers. It likewise paid the contractors tax on all the contracts for
the design and construction of central system. Similarly, it did not have ready-
made air conditioning units for sale.

Eulogio vs Apeles

Spouses Apeles lease a property in QC to Enrico Eulogio . The parties entered
into a contract of lease with option to purchase for a price of not exceeding 1.5 M
before expiration in 3 years. Before 3 years lease was over Eulogio attempted to
purchase but was ignored. He then filed for an action allowing him to acquire
ownership of the property after paying the agreed amount.

Issue: WON Eulogio has the right to acquire ownership of the property.

Held. No.

An option is a contract by which the owner of the property agrees with another
person that the latter shall have the right to buy the former's property at a fixed
price within a certain time. It is a condition offered or contract by which the owner
stipulates with another that the latter shall have the right to buy the property at a
fixed price within a certain time, or under, or in compliance with certain terms and
conditions; or which gives to the owner of the property the right to sell or demand
a sale. An option is not of itself a purchase, but merely secures the privilege to
buy. It is not a sale of property but a sale of the right to purchase. It is simply a
contract by which the owner of the property agrees with another person that he
shall have the right to buy his property at a fixed price within a certain time. He
does not sell his land; he does not then agree to sell it; but he does sell
something, i.e., the right or privilege to buy at the election or option of the other
party. Its distinguishing characteristic is that it imposes no binding obligation on
the person holding the option, aside from the consideration for the offer.

ANG YU V. CA (December 02, 1994)

FACTS:
Petitioner Ang Yu Asuncion and Keh Tiong leased a property of respondents Bobby Cu
Unjieng, Rose Cu Unjieng and Jose Tan in Binondo Manila.

Respondents informed plaintiffs that they are offering to sell the premises and are
giving them priority to acquire the same.

Respondents 6M for the property but petitioners offered 5M. Respondents acceted and
asked petitioners to put in writing the terms and conditions but the latter never
provided such.

When defendants were about to sell the property, plaintiffs were compelled to file the
complaint to compel defendants to sell the property to them. Court recognizes the right
of first refusal of the petitioner. Notwithstanding the courts decision, respondent sold
the property to Buen Realty and Development Corporation.

ISSUE:
WON petitioners can demand specific performance to the respondents to sell to them
the property.

HELD:
The petitioners never accepted the offer when they refused to make the terms and
condition of the sale. As such, respondents has the right to sell the property to other
parties.

Even if petitioners are aggrieved by the failure of private respondents to honor the right
of first refusal, the remedy is not a writ of execution on the judgment, since there is
none to execute, but an action for damages in a proper forum for the purpose.

Promises to Buy and Sell
Unconditional mutual promise to buy and sell As long as the object is made
determinate and the price is fixed, can be obligatory on the parties, and compliance
therewith may accordingly be exacted. The Right of First Refusal falls under this
classification.

Accepted unilateral promise If it specifies the thing to be sold and the price to be paid
and when coupled with a valuable consideration distinct and separate from the price, is
what may properly be termed a perfected contract of option. This contract is legally
binding. (Par. 2 Art. 1458) Note however, that the option is a contract separate and
distinct from the contract of sale. Once the option is exercised before it is withdrawn, a
bilateral promise to sell and to buy ensues and both parties are then reciprocally bound
to comply with their respective undertakings.

Offers with a Period
Where a period is given to the offeree within which to accept the offer, the following
rules generally govern:
If the period is not itself founded upon or supported by a consideration Offeror may
withdraw offer at any time before its acceptance (or knowledge of its acceptance).
However, the right to withdraw must not be exercised whimsically or arbitrarily
otherwise it can give rise to damages under Art. 19 of the New Civil Code
If period is founded on a separate consideration This is a perfected contract of option.
Withdrawal of the offer within the period of the option is deemed a breach of the
contract of option (not the sale). If, in fact, the optioner-offeror withdraws the offer
before its acceptance (exercise of the option) by the optionee-offeree, the latter may
not sue for specific performance on the proposed contract (object of the option) since
it has failed to reach its own stage of perfection. The optioner-offeror, however, renders
himself liable for damages for breach of the option.
Earnest money This is not an offer with a period. Earnest money is distinguished from
the option contract if the consideration given will be considered as a part of the
purchase price of the object of the sale. Earnest money is evidence of a perfected
contract of sale. (Art. 1482)

SPS RAMOS vs. SPS HERUELA
G.R. No. 145330, October 14, 2005, J. Carpio

In 1980, a contract of conditional sale was executed by petitioner, for a sale of land, with
respondents. In spite of this, 18 years after, petitioner filed a complaint for Recovery of Ownership
with Damages against respondent alleging that respondents only paid P4,000 out of the P15,300
consideration. Way back 1982, the petitioners discovered that the respondents, together with
spouses Pallori (daughter and son in law), erected another house on the land and refused to
vacate the said property. According to the respondents, they already made down payment and
monthly payment since March 1980. In 1982, they expressed their willingness to pay the
remaining P11,300 but the petitioners refused their offer. The RTC ruled in favor of defendants
and declared that the petitioners failed to comply with Sec. 4 of RA 6552:

The issues involve are whether or not the a. RA 6552 is applicable in the case (absolute sale); b.
1191 and 1592 of the NCC are applicable in the case; c. petitioners has the right to cancel the
sale; d. respondents have a right to damages.

According to the SC, the sale is not absolute. As held in the case of Alfonso vs. CA: It was held
that the contract should not be considered as a written but an oral one; not a sale but a promise
to sell; and that the absence of a formal deed of conveyance was a strong indication that the
parties did not intend immediate transfer of title, but only a transfer after full payment of the price.
Article 1191 and 1592 are inapplicable in the case because rescission cannot take place since
there is no written contract to speak of. The applicable law is RA 6552, as stated above in Sec.
4, which should have been respected by the petitioners. However, respondents are required
to pay 6% per annum on the balance of the purchase price in consonance with their breach of
contract as stipulated in Article 2209 of the NCC. Lastly, the petitioners have no right to cancel
the sale and at the same time the respondents have no right to damages.





Heirs of Mascunana vs CA
#27 Heirs of Jesus Mascunana v. CA (March)
Masunana bought a parcel of land from the Wuthrich siblings. Part of which Mascunana, he
later sold to Sumilhig. The contract price is 4,690 with 3,690 as down payment. Their agreement
says:
That the balance of ONE THOUSAND PESOS (P1,000.00) shall be paid by the VENDEE unto the
VENDOR as soon as the above-portions of Lot 124 shall have been surveyed in the name of the
VENDEE and all papers pertinent and necessary to the issuance of a separate Certificate of Title
in the name of the VENDEE shall have been prepared.
Sumilhig later sold the same lot to Layumas. Years after, Layumas wrote to the heirs of
Mascunana (since Mascunana died already) offering to pay the 1,000 balance of the purchase
price of the property. The addressee, however, refused to receive the mail matter.
Heirs Mascunana then filed a complaint for recovery of possession against Barte ( an individual
whom Layumas allowed to stay on the subject property).
Issue: WON the contract of alienation of the subject lot in favor of Sumilhig was a contract to
sell or a contract of sale
Held: Sale
Article 1458 of the New Civil Code provides:
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. A contract of sale may be absolute or conditional.
Thus, there are three essential elements of sale, to wit:
a) Consent or meeting of the minds, that is, consent to transfer ownership in exchange for the
price; b) Determinate subject matter; and
c) Price certain in money or its equivalent.
In this case, there was a meeting of the minds between the vendor and the vendee, when the
vendor undertook to deliver and transfer ownership over the property covered by the deed of
absolute sale to the vendee for the price of P4,690.00 of which P3,690.00 was paid by the
vendee to the vendor as down payment. The vendor undertook to have the property sold,
surveyed and segregated and a separate title therefor issued in the name of the vendee, upon
which the latter would be obliged to pay the balance of P1,000.00. There was no stipulation in
the deed that the title to the property remained with the vendor, or that the right to unilaterally
resolve the contract upon the buyers failure to pay within a fixed period was given to such
vendor. Patently, the contract executed by the parties is a deed of sale and not a contract to
sell.

Ong vs Ca GR 97347 July 6, 1999

G.R. No. 97347
Jaime Ong vs. Court of Appeals and Robles couple
July 6, 1999

Facts:
Petitioner Jaime Ong and respondents, Robles couple executed an Agreement of Purchase and
Sale with regard to 2 parcels of land, on which a rice mill and a piggery were found and thus
included. The terms and conditions of the contract included an initial payment, payment for the
loan of the sellers including interest, and the balance to be satisfied in 4 equal quarterly
installments.

As agreed, petitioner took possession of the subject property and everything else thereon upon
satisfaction of the initial payment. However, petitioner failed to comply with the payment for
the loan. Plus, the checks that the petitioner issued to the couple as payment for the balance
were dishonored due to insufficient funds. To avoid foreclosure, the respondent couple sold the
ricemill with the knowledge and conformity of petitioner.

Respondents sought for the rescission of the properties due to the latters failure to comply with
the terms and conditions on the contract.

RTC ruled in favor of the Robles couple and ordered the restitution of the properties. The couple
were also ordered to return an amount, as determined by the court, to Ong.

CA affirmed the decision in contemplation of Article 1191 of The New Civil Code

Issue:
(1) whether the contract entered into by the parties may be validly rescinded under Article 1191
of the New Civil Code as distinguished to Article 1383 of the same.
(2) whether the parties had novated their original contract as to the time and manner of
payment.

HELD:
The Contract entered into by the parties was a Contract to Sell which means that the payment
of the purchase price is a positive suspensive condition, the failure of which is not a breach,
casual or serious, but a situation that prevents the obligation of the vendor to convey title from
acquiring an obligatory force.

Respondents bound themselves to deliver a deed of absolute sale and clean title covering the
two parcels of land upon full payment by the buyer of the purchase price of P2,000,000.00
subject to the fulfillment of the suspensive condition of full payment of the purchase price by
the petitioner. Petitioner, however, failed to complete payment of the purchase price. The non-
fulfillment of the condition of full payment rendered the contract to sell ineffective and without
force and effect.

As to the issue on novation, in order for novation to take place, the concurrence of the following
requisites is indispensable: (1) there must be a previous valid obligation; (2) there must be an
agreement of the parties concerned to a new contract; (3) there must be the extinguishment of
the old contract; and (4) there must be the validity of the new contract. 25 The aforesaid
requisites are not found in the case at bench.
Coronel vs CA GR 10357
Facts: Coronel et al. consummated the sale of his property located in Quezon City to respondent
Alcaraz. Since the title of the property was still in the name of the deceased father of the
Coronels, they agreed to transfer its title to their name upon payment of the down payment of
50K. and thereafter an absolute deed of sale will be executed.

Alcarazs mother paid the down payment in behalf of her daughter and as such, Coronel made
the transfer of title to their name. Notwithstanding this fact, Coronel sold the property to
petitioner Mabanag and rescinded its prior contract with Alcaraz.

ISSUE:
WON the rescission of the first contract between Coronel and Alcaraz is valid.

HELD:
The case is a contract of sale subject to a suspensive condition in which consummation is subject
only to the successful transfer of the certificate of title from the name of petitioners' father, to
their names. Thus, the contract of sale became obligatory.

With regard to double sale, the rule that the first in time, stronger in right should apply. The
contention of the petitioner that she was a buyer in good faith because the notice of lis pendens
in the title was annotated after she bought the property is of no merit. In case of double sale,
what finds relevance and materiality is not whether or not the second buyer was a buyer in
good faith but whether or not said second buyer registers such second sale in good faith, that is,
without knowledge of any defect in the title of the property sold.

The ruling should be in favor of Alcaraz because Mabanag registered the property two months
after the notice of lis pendens was annotated in the title and hence, she cannot be a buyer in
good faith.

Nabus Vs. Pacson
NABUS vs. 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 under TCT
No. T-9697 of the Register of Deeds of the Province of Benguet. 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.
Pursuant to the Deed of Conditional Sale, respondents paid PNB the amount of P12,038.86 on
February 22, 19776 and P20,744.30 on July 17, 19787 for the full payment of the loan.
On December 24, 1977, before the payment of the balance of the mortgage amount with PNB,
Bate Nabus died. On August 17, 1978, his surviving spouse, Julie Nabus, and their minor
daughter, Michelle Nabus, executed a Deed of Extra Judicial Settlement over the registered land
covered by TCT No. 9697. On the basis of the said document, TCT No. T- 177188 was issued on
February 17, 1984 in the names of Julie Nabus and Michelle Nabus.
Meanwhile, respondents continued paying their balance, not in installments of P2,000.00 as
agreed upon, but in various, often small amounts ranging from as low as P10.009 to as high as
P15,566.00,10 spanning a period of almost seven years, from March 9, 197711 to January 17,
1984.12
There was a total of 364 receipts of payment. The receipts showed that the total sum paid by
respondents to the Spouses Nabus was P112,455.16,14 leaving a balance of P57,544.84.
During the last week of January 1984, Julie Nabus, accompanied by her second husband,
approached Joaquin Pacson to ask for the full payment of the lot. Joaquin Pacson agreed to pay,
but told her to return after four days as his daughter, Catalina Pacson, would have to go over the
numerous receipts to determine the balance to be paid. When Julie Nabus returned after four
days, Joaquin sent her and his daughter, Catalina, to Atty. Elizabeth Rillera for the execution of
the deed of absolute sale. Since Julie was a widow with a minor daughter, Atty. Rillera required
Julie Nabus to return in four days with the necessary documents, such as the deed of
extrajudicial settlement, the transfer certificate of title in the names of Julie Nabus and minor
Michelle Nabus, and the guardianship papers of Michelle. However, Julie Nabus did not return.
Getting suspicious, Catalina Pacson went to the Register of Deeds of the Province of Benguet and
asked for a copy of the title of the land. She found that it was still in the name of Julie and
Michelle Nabus.
After a week, Catalina Pacson heard a rumor that the lot was already sold to petitioner Betty
Tolero.
On March 28, 2008, respondents Joaquin and Julia Pacson filed with the Regional Trial Court of La
Trinidad, Benguet (trial court) a Complaint for Annulment of Deeds, with damages and prayer for
the issuance of a writ of preliminary injunction.
Julie and Michelle Nabus alleged that respondent Joaquin Pacson did not proceed with the
conditional sale of the subject property when he learned that there was a pending case over the
whole property. Joaquin proposed that he would rather lease the property with a monthly rental
of P2,000.00 and apply the sum ofP13,000.00 as rentals, since the amount was already paid to
the bank and could no longer be withdrawn. Hence, he did not affix his signature to the second
page of a copy of the Deed of Conditional Sale.26 Julie Nabus alleged that in March 1994, due to
her own economic needs and those of her minor daughter, she sold the property to Betty Tolero,
with authority from the court.
Betty Tolero put up the defense that she was a purchaser in good faith and for value. She
testified that it was Julie Nabus who went to her house and offered to sell the property
consisting of two lots with a combined area of 1,000 square meters. She consulted Atty. Aurelio
de Peralta before she agreed to buy the property. She and Julie Nabus brought to Atty. De
Peralta the pertinent papers such as TCT No. T-17718 in the names of Julie and Michelle Nabus,
the guardianship papers of Michelle Nabus and the blueprint copy of the survey plan showing the
two lots. After examining the documents and finding that the title was clean, Atty. De Peralta
gave her the go-signal to buy the property.
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:

1. 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 and the other copies of the contract were all signed by Joaquin Pacson and the other
parties to the contract.

2. The Court holds that the contract entered into by the Spouses Nabus and respondents was a
contract to sell, not a contract of sale.

A contract of sale is defined in Article 1458 of the Civil Code, thus:

Art. 1458. 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.

A contract of sale may be absolute or conditional.

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

Coronel v. Court of Appeals distinguished a contract to sell from a contract of sale, thus:

Sale, by its very nature, is a consensual contract because it is perfected by mere
consent. The essential elements of a contract of sale are the following:
a. Consent or meeting of the minds, that is, consent to transfer
ownership in exchange for the price;
b. Determinate subject matter; and
c. Price certain in money or its equivalent.

Under this definition, 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-fulfilment 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.

Stated positively, upon the fulfillment of the suspensive condition which is the full
payment of the purchase price, the prospective sellers obligation to sell the subject
property by entering into a contract of sale with the prospective buyer becomes
demandable as provided in Article 1479 of the Civil Code which states:
Art. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally
demandable. An accepted unilateral promise to buy or to sell a determinate thing for
a price certain is binding upon the promissor if the promise is
supported by a consideration distinct from the price.
A contract to sell may thus be defined as a bilateral contract whereby the prospective
seller, while expressly reserving the ownership of the subject property despite delivery
thereof to the prospective buyer, binds himself to sell the said property exclusively to
the prospective buyer upon fulfillment of the condition agreed upon, that is, full
payment of the purchase price.

It is not the title of the contract, but its express terms or stipulations that determine the
kind of contract entered into by the parties. In this case, the contract entitled "Deed of
Conditional Sale" is actually a contract to sell. The contract stipulated that "as soon as
the full consideration of the sale has been paid by the vendee, the corresponding
transfer documents shall be executed by the vendor to the vendee for the portion
sold."41 Where the vendor promises to execute a deed of absolute sale upon the
completion by the vendee of the payment of the price, the contract is only a contract to
sell."42 The aforecited stipulation shows that the vendors reserved title to the subject
property until full payment of the purchase price.

If respondents paid the Spouses Nabus in accordance with the stipulations in the Deed
of Conditional Sale, the consideration would have been fully paid in June 1983. Thus,
during the last week of January 1984, Julie Nabus approached Joaquin Pacson to ask for
the full payment of the lot. Joaquin Pacson agreed to pay, but told her to return after
four days as his daughter, Catalina Pacson, would have to go over the numerous
receipts to determine the balance to be paid.

Unfortunately for the Spouses Pacson, since the Deed of Conditional Sale executed in
their favor was merely a contract to sell, the obligation of the seller to sell becomes
demandable only upon the happening of the suspensive condition. The full payment of
the purchase price is the positive suspensive condition, the failure of which is not a
breach of contract, but simply an event that prevented the obligation of the vendor to
convey title from acquiring binding force. Thus, for its non-fulfilment, there is no
contract to speak of, the obligor having failed to perform the suspensive condition
which enforces a juridical relation. With this circumstance, there can be no rescission or
fulfilment of an obligation that is still non-existent, the suspensive condition not having
occurred as yet. Emphasis should be made that the breach contemplated in Article 1191
of the New Civil Code is the obligors failure to comply with an obligation already extant,
not a failure of a condition to render binding that obligation.

Since the contract to sell was without force and effect, Julie Nabus validly conveyed the
subject property to another buyer, petitioner Betty Tolero, through a contract of
absolute sale, and on the strength thereof, new transfer certificates of title over the
subject property were duly issued to Tolero.

The Spouses Pacson, however, have the right to the reimbursement of their payments
to the Nabuses, and are entitled to the award of nominal damages.

WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals in CA-G.R.
CV No. 44941, dated November 28, 2003, is REVERSED and SET ASIDE. Judgment is
hereby rendered upholding the validity of the sale of the subject property made by
petitioners Julie Nabus and Michelle Nabus in favor of petitioner Betty Tolero, as well as
the validity of Transfer Certificates of Title Nos. T-18650 and T-18651 issued in the name
of Betty Tolero. Petitioners Julie Nabus and Michelle Nabus are ordered to reimburse
respondents spouses Joaquin and Julia Pacson the sum of One Hundred Twelve
Thousand Four Hundred Fifty-Five Pesos and Sixteen Centavos (P112,455.16), and to pay
Joaquin and Julia Pacson nominal damages in the amount of Ten Thousand Pesos
(P10,000.00), with annual interest of twelve percent (12%) until full payment of the
amounts due to Joaquin and Julia Pacson.
Essential Elements of Contract of Sales
Consent : The offer must be accepted and the acceptance must be absolute
Object : if the parties do not have to enter into another agreement of being
determinate the subject matter.
Consideration:
SALE IS NOT A MODE OF ACQUIRING OWNERSHIP. It is merely a TITLE. The mode of
acquiring ownership is DELIVERY.

The mandatory or agent received the thing to sell it, and does not pay its price, but
delivers to the principal the price he obtains from the sale of the thing to a third person,
and if he does not succeed in selling it, he returns it.

CASE of CIR vs ENGINERRING, you need to distinguish to determine
the correct TAX LIABILITY.
Barter, why distinguish? RURAL PROPERTY and there is a ADJACENT
PROPERTY which is NOT divided by any brooks, trees, river, ocean,
lake, whatever; this ADJACENT OWNER has the right of redemption
and can retain the property from the buyer. IF BARTER THIS DOES
NOT APPLY
Sales Vs. Donation
For tax puposes, sale if it is a CAPITAL asset not an ORDINARY asset
you are only taxed a 7.5% tax. If you DONATE a certain property to
another person who is not related to you is not a member of your
family as contemplated in the tax code. You will be slapped with a tax
of 30%. So if sale capital gains tax of 7.5%, on the other hand if
donation 30%.
Unilateral
In other words, if the option is not supported by a separate
consideration, even if the offeree has accepted the promisor or offeror
can withdraw. He is not bound. In the CASE of YUL something.