CIVIL LAW SALES
Chapter 1 redeem the property, but, failed to do so. It
Nature and Form of Contracts
Art. 1458
Art. 1458. By the contract of sale one of the
contracting parties obligates himself to
transfer the ownership 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.
I. Nature and Characteristics
A. Definition
Sale is a contract where one party (seller
or vendor) obligates himself to transfer
the ownership of and to deliver a
determinate thing, while the other party
(buyer or vendee) obligates himself to pay
for said thing a price certain in money or
its equivalent.
Note that in harmony with Art. 1164,
ownership of the thing sold does not pass
to the buyer until delivery. See Arts. 1475,
1477, 1496. Essential requisites are
consent, object and price. No special form
is required. (Art. 1483)
a. Cases
1. Effect of offer and counter-offer
Manila Metal Container Corporation vs.
PNB, G.R. No. 166862, December 20,
2006
FACTS: Petitioner was the owner of
a 8,015 square meter parcel of land located
in Mandaluyong (now a City), Metro Manila.
The property was covered by Transfer
Certificate of Title (TCT) No. 332098 of the
Registry of Deeds of Rizal. To secure a
P900,000.00 loan it had obtained from
respondent Philippine National Bank (PNB),
petitioner executed a real estate mortgage
over the lot. Respondent PNB later granted
petitioner a new credit accommodation of
P1,000,000.00; and, petitioner executed an
Amendment of Real Estate Mortgage over its
property. The petitioner was unable to pay
its obligation to the said respondent. In turn,
the respondent filed for a petition for
extrajudicial foreclosure of the real estate
mortgage and sought to have the property
sold at public auction. The petitioner was
given a period (expiration--Feb. 17, 1984) to
caused the petitioner to ask for a one year
extension to redeem the said property. The
respondent referred the matter to Pasay City
Branch for appropriate action and
recommendation. Some PNB Pasay City
Branch personnel informed petitioner that
as a matter of policy, the bank does not
accept partial redemption. A new title in
favor of PNB was issued for petitioners
failure to redeem the property.
Meanwhile, the Special Assets
Management Department (SAMD) had
prepared a statement of account, and
as of June 25, 1984 petitioners
obligation amounted to
P1,574,560.47. When apprised of the
statement of account, petitioner
remitted P725,000.00 to respondent
PNB as deposit to repurchase,.
Petitioner declared that it had already
agreed to the SAMDs offer to
purchase the property for
P1,574,560.47, and that was why it
had paid P725,000.00.
Respondent PNB informed petitioner
that the PNB Board of Directors had
accepted petitioners offer to purchase
the property, but for P1,931,389.53 in
cash less the P725,000.00 already
deposited with it.
Both trial court and CA ruled that there was no
perfected contract of sale between the
parties; hence, petitioner had no cause of
action for specific performance against
respondent. Both declared that respondent
had rejected petitioners offer to repurchase
the property.
ISSUE: whether or not petitioner and
respondent PNB had entered into a perfected
contract for petitioner to repurchase the
property from respondent.
SC RULED that there was NO
perfected contract of sale between the
parties.
A contract of sale is consensual in
nature and is perfected upon mere meeting of
the minds. When there is merely an offer by
one party without acceptance of the other,
there is no contract. When the contract of sale
is not perfected, it cannot, as an independent
source of obligation, serve as a binding
juridical relation between the parties.
To convert the offer into a contract,
the acceptance must be absolute and must
 CIVIL LAW SALES
not qualify the terms of the offer; it must be
plain, unequivocal, unconditional and without
variance of any sort from the proposal.
A qualified acceptance or one that
involves a new proposal constitutes a counter-
offer and a rejection of the original offer. A
counter-offer is considered in law, a rejection
of the original offer and an attempt to end the
negotiation between the parties on a different
basis. Consequently, when something is
desired which is not exactly what is proposed
in the offer, such acceptance is not sufficient
to guarantee consent because any
modification or variation from the terms of the
offer annuls the offer. The acceptance must be
identical in all respects with that of the offer
so as to produce consent or meeting of the
minds.
Stages of a contract of sale:
(1) negotiation, covering the period from
the time the prospective contracting
parties indicate interest in the contract to
the time the contract is perfected;
(2) perfection, which takes place upon the
concurrence of the essential elements of
the sale which are the meeting of the
minds of the parties as to the object of the
contract and upon the price; and
(3) consummation, which begins when the
parties perform their respective
undertakings under the contract of sale,
culminating in the extinguishment thereof.
1. Effect of document denominated
Agreement between Mr. Sosa & Popong
Bernardo of Toyota Shaw, Inc.
Toyota Shaw, Inc. vs. CA, L-11650, May
23, 1995
FACTS: Luna L. Sosa, respondent,
wanted to purchase a Toyota Lite Ace. He
transacted business with Popong
Bernardo, sales representative of Toyota.
A Vehicle Sales Proposal (VSP) was
accomplished and Mr. Sosa paid a down
payment of P100,000. On the scheduled
date and time for the delivery of the car,
Toyota refused to release the car because
the financing company, B.A. Finance
Corporation, refused to finance the
outstanding balance. Mr. Sosa demanded
the return of the down payment, which
Toyota honored, without prejudice to
future claim for damages.
ISSUE: Was this document, executed and
signed by the petitioner's sales
representative, a perfected contract of sale,
binding upon the petitioner, breach of which
would entitle the private respondent to
damages and attorney's fees?
SC RULED that it is not a contract of sale.
No obligation on the part of Toyota to
transfer ownership of a determinate thing to
Sosa and no correlative obligation on the
part of the latter to pay therefor a price
certain appears therein.
This Court had already ruled that a
definite agreement on the manner of
payment of the price is an essential element
in the formation of a binding and
enforceable contract of sale. This is so
because the agreement as to the manner of
payment goes into the price such that a
disagreement on the manner of payment is
tantamount to a failure to agree on the
price. Definiteness as to the price is an
essential element of a binding agreement to
sell personal property.
At the most, Exhibit "A" may be
considered as part of the initial phase of the
generation or negotiation stage of a contract
of sale.
B. Elements
a. Essential Elements (without which there can
be no valid of sale)
1. Consent or meeting of the mindsconsent
to transfer ownership in exchange for the
price.
2. Determinate subject matter includes
generic objects that are least determinable
*segregated/separated of the same class
3. Price certain in money or its equivalent
b. Natural Elements (those which are inherent
in the contract, and which in the absence of
any contrary provision, are deemed to exist in
the contract)
1. warranty against eviction (deprivation of
the property bought)
2. warranty against hidden defects
 CIVIL LAW SALES
c. Accidental Elements (those which may be
present or absent in the stipulation, such as
the place or time of payment, or the presence
of conditions)
Effects of Presence, absence, incomplete
elements
-when all 3 elements are present - Perfected
Contract
-if not present, there is no perfected contract
-if all the elements are present but there is a
defect/illegal, the contract is voidable/void
C. Characteristics
a. Consensualperfected by mere consent.
b. Bilateral (reciprocal)both parties are
bound by obligations dependent upon each
other. The power to rescind is implied, neither
party incurs delay if the party does not
comply, from the moment one of the parties
fulfills his obligation, the default by the other
begins w/out need of prior demand.
c. Onerousvaluable consideration must be
given in order to acquire rights.
d. Nominatethe Code refers to it by special
designation or name, that is, the contract of
sale.
e. Principalfor the contract of sale to validly
exist, there is no necessity for it to depend
upon the existence of another contract.
f. Commutativethe values exchanged are
almost equivalent to each other (general rule).
By way of exception, some contracts of sale
are aleatory, that is, one receives may in time
be greater or smaller that what he has given,
i.e. sale of genuine sweepstakes ticket.
g. delivery transfers ownership ownership
does not pass until delivery.
C. Sale vs. Agency to sell (1466)
Art. 1466. In construing a contract containing
provisions characteristic of both the contract
of sale and of the contract of agency to sell,
the essential clauses of the whole instrument
shall be considered. (n)
Cases:
1) effect of agreement for exclusive sale
of beds where the other party is entitled
to commission, among others
Quiroga vs. Parsons Hardware co.
Facts:
The defendant was granted by the plaintiff of
the exclusive right to sell as an agent
Quiroga beds in the Visayas at the invoice
price in Manila. The agreement was for the
defendant to pay for the beds at a discount
from 20% to 25% as commission on the sales.
The defendant shall pay the plaintiff claims
that the defendant is his agent while
defendant says he was merely a purchaser.
Issue:
Is this a contract of sale or agency?
Held:
The Supreme Court declared 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.
In order to classify a contract, due regard
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.
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.
Sale vs. Lease of service or contract for a
piece of work (1467)
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
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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. (n)
Cases:
1) Nature of transactions of
company engaged in the design,
supply and installation of certain
type of air conditioning system.
Commissioner of Internal Revenue v.
Engineering Equipment and Supply Co.
Facts: Engineering Equipment and Supply
Co., a domestic corporation, is engaged in the
design and installation of central type air
conditioning system, pumping plants and steel
fabrications. CIR now denounced Engineering
for tax evasion by misdeclaring its imports
and failing to pay the correct percentage taxes
due thereon in connivance with its foreign
suppliers. The Commissioner contends that
Engineering is a manufacturer and seller of air
conditioning units and parts or accessories
thereof and, therefore, it is subject to the 30%
advance sales tax. Engineering is a contractor
this subject only to the 3% tax imposed on
contractors.
Contract of Sale v. Contract of
Services; 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 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
purchaser's request, it is a contract of
sale even though it may be entirely
made after, and in consequence of the
purchaser's order for it.
Engineering is a contractor rather than
a manufacturer. Supply of air
conditioning units to Engineer's
various customers, whether the said
machineries were in hand or not, was
especially made for each customer
and installed in his building upon his
special order. 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
Engineering's customer, the said air
conditioning units were not intended
for sale to the general public.
Moreover, it advertises itself as a
contractor and pays the contractor's
tax for design and construction of
central type air conditioning systems,
and does not have ready-made air-
conditioning units for sale, but must
design and construct each unit to
meet the particular requirements of
its customers, said taxpayer is
considered a contractor rather than a
manufacturer for purposes of the Tax
Code. Thus, such taxpayer is not a
manufacturer subject to the 30%
advance sales tax prescribed in
Section 185 (m) in relation to Section
194 of the Tax Code, but is a
contractor subject to the 3% tax
imposed by Section 191 of the same
Code.
A taxpayer is required by law to truly
declare his importation in the import
entries and internal revenue
declarations before it is released.
Thus, by requiring its foreign supplier
to change the nomenclature of air
conditioning parts and accessories,
and misdeclaring its importation so as
to make them subject to the lower
rate of 7% percentage tax under
Section 186 of the Tax Code, thereby
evading the payment of the 30% tax
under Section 185(m) thereof, said
taxpayer is subject to the payment of
the 50% fraud surcharge prescribed
by Section 183(a).
c. sales vs. Barter (1468)
Art. 1468. If the consideration of the contract
consists partly in money, and partly in another
thing, the transaction shall be characterized
by the manifest intention of the parties. If
such intention does not clearly appear, it shall
be considered a barter if the value of the thing
given as a part of the consideration exceeds
the amount of the money or its equivalent;
otherwise, it is a sale.
-if the value of the thing is more than the
value of the money or its equivalent, the
contract is a barter. If the value of the thing is
less than the value of the money, then the
contract is a sale.
d. sale vs. dation in payment
-dation in payment implies that there is an
existing obligation whereas contract of sale,
there is no prior obligation.
 CIVIL LAW SALES
e. lease of things - in that delivery in this
latter contract does not involve a transfer of
ownership
f. donation- in that this latter contract is
gratuitous and requires special
formalities
E. Promise to sell: when binding (Art.
1479)
--a bilateral promise to buy and sell
requires NO CONSIDERATION distinct
from the selling price
--only the accepted unilateral promise to
buy or sell that needs consideration
distinct from the selling price
a. If bilateral
--a bilateral promise to buy or
to sell a certain thing for a
price certain gives to the
contracting parties personal
rights in that each has the
right to demand from the
other the fulfillment of the
obligation.
b. If unilateral
--the acceptance of a unilateral promise to sell
must be plain, clear and unconditional.
Therefore, if there is qualified acceptance with
terms different from the offer there is no
acceptance, that there is no promise to buy
and there is no perfected sale.
Cases:
1. Option defined
Eulogio vs. Apeles, G.R. No. 167884, January
20, 2009
Contract of Lease with an Option
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 formers 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.
"An accepted unilateral promise" can only
have a binding effect if supported by a
consideration, which means that the option
can still be withdrawn, even if accepted, if the
same is not supported by any consideration.
ii) Remedy of optionee
-Specific
performance.
2. Right of First Refusal
-Right on the part of the owner that if he
decides to sell the property in the future, he
would first negotiate its sale to the one he
promised.
Ang Yu Asuncion vs. CA
Facts:
On July 29, 1987 a Second Amended
Complaint for Specific Performance was filed
by Ann Yu Asuncion and Keh Tiong, et al.,
against Bobby Cu Unjieng, Rose Cu Unjieng
and Jose Tan before the Regional Trial Court,
Branch 31, Manila in Civil Case No. 87-41058,
alleging, among others, that plaintiffs are
tenants or lessees of residential and
commercial spaces owned by defendants
described as Nos. 630-638 Ongpin Street,
Binondo, Manila; that they have occupied said
spaces since 1935 and have been religiously
paying the rental and complying with all the
conditions of the lease contract; that on
several occasions before October 9, 1986,
 CIVIL LAW SALES
defendants informed plaintiffs that they are
offering to sell the premises and are giving
them priority to acquire the same; that during
the negotiations, Bobby Cu Unjieng offered a
price of P6-million while plaintiffs made a
counter offer of P5-million; that plaintiffs
thereafter asked the defendants to put their
offer in writing to which request defendants
acceded; that in reply to defendant's letter,
plaintiffs wrote them on October 24, 1986
asking that they specify the terms and
conditions of the offer to sell; that when
plaintiffs did not receive any reply, they sent
another letter dated January 28, 1987 with the
same request; that since defendants failed to
specify the terms and conditions of the offer to
sell and because of information received that
defendants were about to sell the property,
plaintiffs were compelled to file the complaint
to compel defendants to sell the property to
them.
"After the issues were joined, defendants filed
a motion for summary judgment which was
granted by the lower court. The trial court
found that defendants' offer to sell was never
accepted by the plaintiffs for the reason that
the parties did not agree upon the terms and
conditions of the proposed sale, hence, there
was no contract of sale at all. Nonetheless, the
lower court ruled that should the defendants
subsequently offer their property for sale at a
price of P11-million or below, plaintiffs will
have the right of first refusal.
Issue:
Whether or not there is perfected contract of
sale
Held:
In the law on sales, the so-called "right of first
refusal" is an innovative juridical relation.
Needless to point out, it cannot be deemed a
perfected contract of sale under Article 1458
of the Civil Code. Neither can the right of first
refusal, understood in its normal concept, per
sebe brought within the purview of an option
under the second paragraph of Article 1479,
aforequoted, or possibly of an offer under
Article 1319 9 of the same Code. An option or
an offer would require, among other things, 10
a clear certainty on both the object and the
cause or consideration of the envisioned
contract. In a right of first refusal, while the
object might be made determinate, the
exercise of the right, however, would be
dependent not only on the grantor's eventual
intention to enter into a binding juridical
relation with another but also on terms,
including the price, that obviously are yet to
be later firmed up. Prior thereto, it can at best
be so described as merely belonging to a class
of preparatory juridical relations governed not
by contracts (since the essential elements to
establish the vinculum juris would still be
indefinite and inconclusive) but by, among
other laws of general application, the
pertinent scattered provisions of the Civil
Code on human conduct.
Even on the premise that such right of first
refusal has been decreed under a final
judgment, like here, its breach cannot justify
correspondingly an issuance of a writ of
execution under a judgment that merely
recognizes its existence, nor would it sanction
an action for specific performance without
thereby negating the indispensable element of
consensuality in the perfection of contracts.
11 It is not to say, however, that the right of
first refusal would be inconsequential for, such
as already intimated above, an unjustified
disregard thereof, given, for instance, the
circumstances expressed in Article 19 12 of
the Civil Code, can warrant a recovery for
damages.
Note: right of first refusal cannot be deemed a
perfected sale because it merely pertains to a
specific property w/out containing an
agreement as to the price.
E. The Contract of Sale may be-
a. Absolute; or
Ramos vs. Heruela, G.R. No.
145330, Oct. 14, 2005
Absolute Sale Cond
when title to the property own
passes to the vendee upon vend
delivery of the thing sold the
paym
price
when there is no stipulation The
in the contract that title to purc
 CIVIL LAW SALES

the property remains with imposed on the obligation of a party which is

not fulfilled, the other party may either waive
the seller until full payment
of the purchase price the condition or refuse to proceed with the
sale. (Art. 1545, Civil Code)

A deed of sale is considered absolute in nature

if there is no stipulation
where there is neither a stipulation in the deed
giving the vendor the right
that title to the property sold is reserved in the
to cancel unilaterally seller
the until full payment of the price, nor one
contract the moment giving
the the vendor the right to unilaterally
vendee fails to pay within a
resolve the contract the moment the buyer
fixed period fails to pay within a fixed period.

b. Conditional, which may in turn be

Heirs of Mascunana vs. CA, G.R. No. 1. An executed contract, or which property
158646, June 23, 2005 (ownership) in the thing is transferred
from seller to buyer, and nonpayment of
Facts: It is settled that a perfected contract the price is a negative resolutory
of sale cannot be challenged on the ground condition.
of the non-transfer of ownership of the
property sold at that time of the perfection of 2. An executory contract- ownership does not
the contract, since it is consummated upon pass until some future time
delivery of the property to the vendee. It is
through tradition or delivery that the buyer -the fulfillment of some condition,
acquires ownership of the property sold. As such as full payment of the purchase
provided in Article 1458 of the New Civil price.
Code, when the sale is made through a public
instrument, the execution thereof is
c. Distinctions
equivalent to the delivery of the thing which
is the object of the contract, unless the
contrary appears or can be inferred. The Executed Contract E
record of the sale with the Register of Deeds
and the issuance of the certificate of title in Property ownership is conveyed N
the name of the buyer over the property
merely bind third parties to the sale. As If buyer defaults, seller may sue for the If
between the seller and the buyer, the price d
transfer of ownership takes effect upon the
execution of a public instrument covering the Risk of loss is generally borne by the buyer R
real property. Long before the petitioners se
secured a Torrens title over the property, the
respondents had been in actual possession of Transfer of ownership
the property and had designated Barte as
their overseer. Absolute upon delivery

Although denominated a Deed of Conditional Conditional ownership is

Sale, a sale is still absolute where the reserved by the owner.
contract is devoid of any proviso that title is
reserved or the right to unilaterally rescind is d. CasesContract to sell vs.
stipulated, e.g., until or unless the price is Contract of Sale
paid. Ownership will then be transferred to
the buyer upon actual or constructive delivery
(e.g. by the execution of a public document) of
the property sold. Where the condition is
imposed upon the perfection of the contract Contract to Sell
itself, the failure of the condition would
prevent such perfection. If the condition is The payment in full of the price is a positive
 CIVIL LAW SALES

suspensive condition. Hence, if the price price by the petitioner. Petitioner, however,
is not
failed to
paid, it is as if the obligation of the seller to complete payment of the purchase
deliver and to transfer ownership price. never The non-fulfillment of the condition of
became effective and binding. full payment rendered the contract to sell
ineffective and without force and effect. It
must be stressed that the breach
Ownership is retained by the seller, regardless
contemplated
of delivery and is not pass until fill payment of in Article 1191 of the New
the price Civil Code is the obligor's failure to comply
with an obligation. Failure to pay, in this
Since the seller retains ownership, instance,
despite is not even a breach but merely an
delivery, he is enforcing not rescinding eventthe which prevents the vendor's
contract if he seeks to oust the buyer obligation
for to convey title from acquiring
failure to pay. binding force. Hence, the agreement of the
parties in the case at bench may be set
Contract to sell a bilateral contract whereby aside, but not because of a breach on the
the prospective seller, while expressly part of petitioner for failure to complete
reserving the ownership of the subject payment of the purchase price. Rather, his
property despite delivery thereof to the failure to do so brought about a situation
prospective buyer, binds himself to sell the which prevented the obligation of
said property exclusively to the prospective respondent spouses to convey title from
buyer upon payment of full purchase price. acquiring an obligatory force.

Contract of Sale- no reservation of ownership

where the owner can unilaterally rescind the
contract if one of the party fails to fulfill its 2. Interpretation of document denominated
duty. Receipt of Partial Payment

1. Interpretation of document denominated Coronel vs. CA, G.R. No. 103577, Oct. 7,
Agreement of Purchase and Sale 1996

Ong vs. CA, G.R. No. 97347, July6, 1999 FACTS: Defendants Coronels issued a
document, receipt of down payment, in
It is in the nature of a contract to sell. favor of Ramona. In the said document, it
was stipulated that the Coronels, upon
receipt of the down payment in the amount
In a contract of sale, the title to the
of 50k (1.24M total price) for their inherited
property passes to the vendee upon the
house and lot, bind themselves to the effect
delivery of the thing sold; while in a contract
that they will transfer, from their father, the
to sell, ownership is, by agreement,
transfer certificate title to their names. After
reserved in the vendor and is not to pass to
the TCT is under their name, they will
the vendee until full payment of the
execute immediately a deed of absolute sale
purchase price. In a contract to sell, the
in favor of Ramona and she will pay the
payment of the purchase price is a positive
balance of 1.19M. The mother of Ramona,
suspensive condition, the failure of which is
Concepcion, paid the 50k as down payment.
not a breach, casual or serious, but a
Thereafter, the Coronels transferred the said
situation that prevents the obligation of the
property in their names.
vendor to convey title from acquiring an
obligatory force.
Coronels sold the property to Catalina for
the amount of 1.58M after the latter paid a
Spouses Robles, respondents in the
down payment of 300k. For this reason,
case at bar bound themselves to deliver a
Coronels canceled and rescinded the
deed of absolute sale and clean title
contract with Ramona by depositing the
covering the two parcels of land upon full
down payment paid by Concepcion in the
payment by the buyer of the purchase price
bank in trust for Ramona Patricia Alcaraz.
of P2,000,000.00. This promise to sell was
subject to the fulfillment of the suspensive
condition of full payment of the purchase Concepcion et al. filed a case against
specific performance. A notice of lis
 CIVIL LAW SALES
pendens was annotated at the back of the
title. An adverse claim by Catalina was also
annotated. The Coronels executed a deed of
absolute sale in favor of Catalina. Thus, a
new title was issued in the name of Catalina.
Both trial court and CA ruled in favor of
Concepcion. It ordered the specific
performance of the agreement.
ISSUE: legal determination of the document,
Receipt of Downpayment
SC RULED that when the "Receipt of Down
Payment" is considered in its entirety, it
becomes more manifest that there was a clear
intent on the part of petitioners to transfer
title to the buyer, but since the transfer
certificate of title was still in the name of
petitioner's father, they could not fully effect
such transfer although the buyer was then
willing and able to immediately pay the
purchase price. This is a contract OF sale, SC
affirmed the decision of CA.
In a contract of sale, the title passes to the
vendee upon the delivery of the thing sold;
whereas in a contract to sell, ownership is not
transferred upon delivery of the property but
upon full payment of the purchase price. In
the former, the vendor has lost and cannot
recover ownership until and unless the
contract is resolved or rescinded; whereas in
the latter, title is retained by the vendor until
the full payment of the price, such payment
being a positive suspensive condition and
failure of which is not a breach but an event
that prevents the obligation of the vendor to
convey title from becoming effective.
H. Contract to sell vs. Conditional sale
Conditional Sale upon happening of the
condition, title is transferred. Seller cannot sell
to another person.
Compared to Contract to sell
-ownership is transferred upon creation of
necessary documents.
Coronel vs CA
A contract to sell as defined hereinabove, may
not even be considered as a conditional
contract of sale where the seller may likewise
reserve title to the property subject of the sale
until the fulfillment of a suspensive condition,
because in a conditional contract of sale, the
first element of consent is present, although it
is conditioned upon the happening of a
contingent event which may or may not occur.
If the suspensive condition is not fulfilled, the
perfection of the contract of sale is completely
abated (cf. Homesite and Housing Corp. vs.
Court of Appeals, 133 SCRA 777 [1984]).
However, if the suspensive condition is
fulfilled, the contract of sale is thereby
perfected, such that if there had already been
previous delivery of the property subject of
the sale to the buyer, ownership thereto
automatically transfers to the buyer by
operation of law without any further act
having to be performed by the seller.
Nabus vs. Pacson
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. Their contract had the
following condition:
THAT, as soon as the full consideration of this
sale has been paid by the VENDEE, the
corresponding transfer documents shall be
executed by the VENDOR to the VENDEE for
the portion sold;
THAT, it is mutually understood that in as
much as there is a claim by other persons of
the entire property of which the portion
subject of this Instrument is only a part, and
that this claim is now the subject of a civil
case now pending before Branch III of the
Court of First Instance of Baguio and Benguet,
should the VENDOR herein be defeated in the
 CIVIL LAW SALES
said civil action to the end that he is divested
of title over the area subject of this
Instrument, then he hereby warrants that he
shall return any and all monies paid by the
VENDEE herein whether paid to the PNB, La
Trinidad, Benguet Branch, or directly received
by herein VENDOR, all such monies to be
returned upon demand by the VENDEE;
THAT, [a] portion of the parcel of land subject
of this instrument is presently in the
possession of Mr. Marcos Tacloy, and the
VENDOR agrees to cooperate and assist in any
manner possible in the ouster of said Mr.
Marcos Tacloy from said possession and
occupation to the end that the VENDEE herein
shall make use of said portion as soon as is
practicable;
Thereafter, respondents took possession of
the subject property. They constructed an 80
by 32-feet building and a steel-matting fence
around the property to house their truck body-
building shop which they called the "Emiliano
Trucking Body Builder and Auto Repair Shop."
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-
17718 8 was issued on February 17, 1984 in
the names of Julie Nabus and Michelle Nabus.
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. Catalina Pacson and Atty. Rillera
went to the Register of Deeds of the Province
of Benguet, and found that Julie Nabus and
her minor daughter, Michelle Nabus,
represented by the former's mother as
appointed guardian by a court order dated
October 29, 1982, had executed a Deed of
Absolute Sale in favor of Betty Tolero on March
5, 1984.
Issue:
2)Whether the Deed of Conditional Sale was a
contract to sell or a contract of sale.
Held:
A contract to sell as defined hereinabove, may
not even be considered as a conditional
contract of sale where the seller may likewise
reserve title to the property subject of the sale
until the fulfillment of a suspensive condition,
because in a conditional contract of sale, the
first element of consent is present, although it
is conditioned upon the happening of a
contingent event which may or may not occur.
If the suspensive condition is not fulfilled, the
perfection of the contract of sale is completely
abated. However, if the suspensive condition
is fulfilled, the contract of sale is thereby
perfected, such that if there had already been
previous delivery of the property subject of
the sale to the buyer, ownership thereto
automatically transfers to the buyer by
operation of law without any further act
having to be performed by the seller.
In a contract to sell, upon the fulfillment of the
suspensive condition which is the full payment
of the purchase price, ownership will not
automatically transfer to the buyer although
the property may have been previously
delivered to him. The prospective seller still
has to convey title to the prospective buyer by
entering into a contract of absolute sale.
It is not the title of the contract, but its
express terms or stipulations that determine
 CIVIL LAW SALES
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.
As vendees given possession of the subject
property, the ownership of which was still with
the vendors, the Pacsons should have
protected their interest and inquired from Julie
Nabus why she did not return and then
followed through with full payment of the
purchase price and the execution of the deed
of absolute sale. The Spouses Pacson had the
legal remedy of consigning their payment to
the court; however, they did not do so. A
rumor that the property had been sold to
Betty Tolero prompted them to check the
veracity of the sale with the Register of Deeds
of the Province of Benguet. They found out
that on March 5, 1984, Julie Nabus sold the
same property to Betty Tolero through a Deed
of Absolute Sale, and new transfer certificates
of title to the property were issued to Tolero.
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. 43 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. 44
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. 45 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.
Arts. 1459-1465
Art. 1459. The thing must be licit and the
vendor must have a right to transfer the
ownership thereof at the time it is delivered.
(n)
Art. 1460. A thing is determinate when it is
particularly designated or physical segregated
from all other of the same class.
The requisite that a thing be determinate is
satisfied if at the time the contract is entered
into, the thing is capable of being made
determinate without the necessity of a new or
further agreement between the parties. (n)
Art. 1461. Things having a potential existence
may be the object of the contract of sale.
The efficacy of the sale of a mere hope or
expectancy is deemed subject to the condition
that the thing will come into existence.
The sale of a vain hope or expectancy is void.
(n)
Art. 1462. The goods which form the subject of
a contract of sale may be either existing
goods, owned or possessed by the seller, or
goods to be manufactured, raised, or acquired
by the seller after the perfection of the
contract of sale, in this Title called "future
goods."
There may be a contract of sale of goods,
whose acquisition by the seller depends upon
a contingency which may or may not happen.
(n)
Art. 1463. The sole owner of a thing may sell
an undivided interest therein. (n)
Art. 1464. In the case of fungible goods, there
may be a sale of an undivided share of a
specific mass, though the seller purports to
sell and the buyer to buy a definite number,
weight or measure of the goods in the mass,
and though the number, weight or measure of
the goods in the mass is undetermined. By
such a sale the buyer becomes owner in
common of such a share of the mass as the
number, weight or measure bought bears to
the number, weight or measure of the mass. If
the mass contains less than the number,
weight or measure bought, the buyer becomes
 CIVIL LAW SALES
the owner of the whole mass and the seller is
bound to make good the deficiency from
goods of the same kind and quality, unless a
contrary intent appears. (n)
Art. 1465. Things subject to a resolutory
condition may be the object of the contract of
sale. (n)
Arts. 1459-1465
I. OBJECT
Licit not contrary to law, morals,
good customs, public order or public policy,
within the commerce of man; if illicit, contract
is void
All rights which are not intransmissible
or personal may also be the object of sale (i.e.
right of usufruct)
Services cannot be the object of a
contract of sale
Test of Determinability
a. Capacity to Segregate
b. No further agreement
A. Qualities The object must be:
a. Lawful (1459)
Art. 1459. The thing must be licit and the
vendor must have a right to transfer the
ownership thereof at the time it is delivered.
(n)
Object must be licit
Vendor must have the right to transfer
ownership at the time the object is delivered
Unlawful object:
i. Future inheritance
ii. Homestead (sale within 5 year
prohibitory period)
Manalapat v. CA
Facts: In 1976, a free patent was issued in
Manlapats name. In 1954, before the subject
lot was titled, he sold a portion to Ricardo
evidenced by a deed of sale. He conveyed
another portion to Ricardo in 1981. Leon
Banaag (son-in-law of Manlapat) executed a
mortgaged with the subject lot as the
collateral. Heirs of Ricardo sought to obtain
the title from petitioners which was in the
custody of RBSP, earlier surrendered as a
consequence of the mortgage.
SC: Five-year prohibition against alienation or
encumbrances under the Public Land Act.
Eduardo was issued a title in 1976 on the
basis of his free patent application. Such
application implies the recognition of the
public dominion character of the land and,
hence, the 5-year prohibition imposed by the
PLA against alienation or encumbrance of the
land covered by a free patent or homestead
should have been considered.
The deed of sale which was executed
in 1981 is obviously covered by the
proscription, the free patent having been
issued in 1976. However, petitioners may
recover the portion sold since the prohibition
was imposed in favor of the free patent holder.
The sale executed 1954 was before
the issuance of the patent in 1976.
Apparently, Eduardo disposed of the portion
even before he thought of applying for a free
patent. Where the sale or transfer took place
before the filing of the free patent application,
whether by the vendor or the vendee, the
prohibition should not be applied. In such a
situation, neither the prohibition nor the
rationale therefore which is to keep in the
 CIVIL LAW SALES
family of the patentee that portion of the
public land which the government has
gratuitously given him, by shielding him from
the temptation to dispose of his landholding,
could be relevant. Precisely, he had disposed
of his rights to the lot even before the
government could give the title to him.
The mortgage executed in favor of
RBSP is also beyond the pale of the
prohibition, as it was forged in December 1981
a few months past the period of prohibition.
b. determinate or Determinable
- undivided interest can be subject to sale. The
buyer will become a co-owner.
a. before partition
b. in a mass of fungible goods.
Cases:
1) sale by co-heir of undivided portion of
estate
Vagilidad v. Vagilidad
Facts:
4,280 sqm of lot was owned by Zoilo. In 1931,
ZOILO died. Subsequently son of Zolio, Loreto
sold to Gabino Vagilidad a portion of said lot
as evidenced by the Deed of Absolute Sale
executed by Loreto on 1986. After, Zoilos
children executed an Extrajudicial Settlement
of Estate adjudicating the entire lot to Loreto
in 1987. Gabino filed petition of surrender of
lot against Loreto, claiming that he is owner
pursuant to deed of Sale issued before the
extra judicial settlement.
However, there seemed to be an amicable
settlement between them, and the case was
sent to archives.
Gabino paid real estate taxes on the land he
bought from Loreto which he later sold to
Wilfredo Vagilidad. Likewise, a Deed of
Absolute Sale was also made by Loreto in
favor of Wilfredo for the same portion of lot.
Wlfredo mortgaged this property to obtain a
loan. Gabino and his wife filed petition for
reconveyance.
The requisite that a thing be
determinate is satisfied if at the time the
contract is entered into, the thing is capable of
being made determinate without the necessity
of a new or further agreement between the
parties. Art. 1349 states that the object of
every contract must be determinate, as to its
kind. The fact that the quantity is not
determinate shall not be an obstacle to the
existence of the contract, provided it is
possible to determine the same, without the
need of a new contract between the parties.
Art. 1460 defines that a thing is determinate
when it is particularly designated or physically
segregated from all others of the same class.
The property sold by Loreto to Gabino was
determinable.
A co-owner has full ownership of his
pro-indiviso share and has the right to
alienate, assign or mortgage it, and substitute
another person for its enjoyment. The subject
parcel, being an inherited property, is subject
to the rules of co-ownership under the Civil
Code. Co-ownership is the right of common
dominion which two or more persons have in a
spiritual part of a thing, not materially or
physically divided. Before the partition of the
property held in common, no individual or co-
owner can claim title to any definite portion
thereof. All that the co-owner has is an ideal or
abstract quota or proportionate share in the
entire property. LORETO sold the subject
property to GABINO as a co-owner. LORETO
had a right, even before the partition to
transfer in whole or in part his undivided
interest in the lot even without the consent of
his co-heirs. This right is absolute. Thus, what
GABINO obtained by virtue of the sale on were
the same rights as the vendor LORETO had as
co-owner, in an ideal share equivalent to the
consideration given under their transaction.
Consequently, when LORETO purportedly sold
to WILFREDO the same portion of the lot, he
was no longer the owner said lot. Based on
the principle that "no one can give what he
does not have," LORETO could not have
validly sold to WILFREDO what he no longer
had.
 CIVIL LAW SALES
2) Effect of agreement where the exact
number of palay to be sold was not
fixed.
National Grains Authority v. IAC
Facts: Leon Soriano submitted the documents
required by the NFA for pre-qualifying as a
seller. These were processed and he was given
a quota of 2,640 cavans of palay. On August
1979, Soriano delivered 630 cavans of palay.
The palay delivered were not rebagged,
classified and weighed. When Soriano
demanded payment, he was informed that it
was held in abeyance since Mr. Cabal was still
investigating on an information that Soriano
was not a bona fide farmer and the palay
delivered was not produced from his farmland
but was taken from the warehouse of a rice
trader, Ben de Guzman. Petitioner wrote
Soriano advising him to withdraw the 630
cavans. Instead of withdrawing, Soriano
insisted that the palay grains delivered be
paid. NFA was ordered to pay Soriano.
Present case involves a perfected
contract of sale. Soriano initially offered to sell
palay grains produced in his farmland to NFA.
When the latter accepted the offer by noting
in Sorianos Farmers Information Sheet a
quota of 2,640 cavans, there was already a
meeting of the minds between the parties.
The object of the contract, being the palay
grains produced in Sorianos farmland and the
NFA was to pay the same depending upon its
quality. The contention that since the
delivery were not rebagged, classified and
weighed in accordance with the palay
procurement program of NFA, there was no
acceptance of the offer thus this is a clear
case of an unaccepted offer to sell, is
untenable.
Quantity being indeterminate does not
affect perfection of contract; No need to
create new contract. The fact that the exact
number of cavans of palay to be delivered has
not been determined does not affect the
perfection of the contract. In the present case,
there was no need for NFA and Soriano to
enter into a new contract to determine the
exact number of cavans of palay to be sold.
Soriano can deliver so much of his produce as
long as it does not exceed 2,640 cavans. (It
did not need a new contract to make 630
cavans a determinate thing).
Sale a consensual contract;
Acceptance is on the offer and not the goods
delivered. Sale is a consensual contract,
there is perfection when there is consent
upon the subject matter and price, even if
neither is delivered. (Obana vs. C.A., L-
36249, March 29, 1985, 135 SCRA 557, 560).
The acceptance referred to which determines
consent is the acceptance of the offer of one
party by the other and not of the goods
delivered.
Compliance of mutual obligations once
a contract of sale is perfected. From the
moment the contract of sale is perfected, it is
incumbent upon the parties to comply with
their mutual obligations or the parties may
reciprocally demand performance thereof.
(Article 1475, Civil Code, 2nd par.)
c. Existing, Future, or contingent (1462)
Case:
1) Sale of Future Inheritance
Tanedo vs Ca
Facts:
On October 20, 1962, Lazaro Taedo executed
a notarized deed of absolute sale in favor of
his eldest brother, Ricardo Taedo, and the
latters wife, Teresita Barera, private
respondents herein, whereby he conveyed to
the latter in consideration of P1,500.00, one
hectare of whatever share I shall have over
Lot No. 191 of the cadastral survey of Gerona,
Province of Tarlac and covered by Title T-l3829
of the Register of Deeds of Tarlac, the said
property being his future inheritance from
his parents (Exh. 1). Upon the death of his
 CIVIL LAW SALES
father Matias, Lazaro executed an Affidavit of
Conformity dated February 28, 1980 (Exh. 3)
to re-affirm, respect. acknowledge and
validate the sale I made in 1962. On January
13, 1981, Lazaro executed another notarized
deed of sale in favor of private respondents
covering his undivided ONE TWELVE (1/12) of
a parcel of land known as Lot 191 x x (Exh. 4).
He acknowledged therein his receipt of P
10,000.00 as consideration therefor. In
February 1981, Ricardo learned that Lazaro
sold the same property to his children,
petitioners herein, through a deed of sale
dated December 29, 1980 (Exh. E). On June 7,
1982, private respondents recorded the Deed
of Sale (Exh. 4) in their favor in the Registry of
Deeds and the corresponding entry was made
in Transfer Certificate of Title No. 166451 (Exh.
5).
Petitioners on July 16, 1982 filed a complaint
for rescission (plus damages) of the deeds of
sale executed by Lazaro in favor of private
respondents covering the property inherited
by Lazaro from his father.
Issue:
Is a sale of future inheritance valid?
Held:
(n)o contract may be entered into upon a
future inheritance except in cases expressly
authorized by law.
Consequently, said contract made in 1962 is
not valid and cannot be the source of any
right nor the creator of any obligation between
the parties.
Hence, the affidavit of conformity dated
February 28, 1980, insofar as it sought to
validate or ratify the 1962 sale, is also useless
and, in the words of the respondent Court,
suffers from the same infirmity. Even private
respondents in their memorandum concede
this.
d. Transferability of Ownership
Ownership
1. It need not exist at the perfection of
the contract. Required at the time of
delivery
2. Subsequent acquisition of title by a
vendor w/out title validates the sale
3. Acquisition of title by the vendee may
depend upon a contingency (right of
redemption)
The seller must have the right to transfer
the ownership of the thing or right sold to the
buyer at the time of delivery and not at the
time of the making of the contract.
Nemo dat quod non habet, as an ancient
Latin maxim says. One cannot give what does
not have.
Note: When ownership is required At the time
of sale but ownership may not be w/ the seller
in case of future things.
Cases:
1. Sale by mortgagee of land not proper
subject of mortgage
Cavite Development Bank v. Lim, 324
scra 346
Facts: Rodolfo Guansing obtained a fraudulent
title by executing an Extra-Judicial Settlement
of the Estate With Waiver where he made it
appear that he and Perfecto Guansing were
the only surviving heirs entitled to the
property, and that Perfecto had waived all his
rights thereto. Consequently he acquired title
and used this to acquire a loan. CDB
foreclosed the mortgage and granted him the
period of redemption, which he did not
exercise.
It is not required that, at the
perfection stage, the seller be the owner of
the thing sold or even that such subject
matter of the sale exists at that point in time.
Thus, under Art. 1434 of the Civil Code, when
a person sells or alienates a thing which, at
that time, was not his, but later acquires title
thereto, such title passes by operation of law
to the buyer or grantee. This is the same
principle behind the sale of "future goods"
 CIVIL LAW SALES
under Art. 1462 of the Civil Code. However,
under Art. 1459, at the time of delivery or
consummation stage of the sale, it is required
that the seller be the owner of the thing sold.
Otherwise, he will not be able to comply with
his obligation to transfer ownership to the
buyer. It is the consummation stage where the
principle of nemo dat quod non habet applies.
In this case, the sale by CDB to Lim of the
property mortgaged in 1983 by Rodolgo
Guansing must, therefore, be deemed a nullity
for CDB did not have a valid title to the said
property. To be sure, CDB never acquired a
valid title to the property because the
foreclosure sale, by virtue of which the
property had awarded to CDB as highest
bidder, is likewise void since the mortgagor
was not the owner of the property foreclosed.
CDB cannot be considered a a Void Kasunduan, for no rights are created. It
mortgagee in good faith. While petitioners are
not expected to conduct an exhaustive
investigation on the history of the mortgagor's
title, CDB cannot be excused from the duty of
exercising the due diligence required of
banking institutions in ascertaining the validity
of the title.
That after the payment of the 10%
option money, the Offer to Purchase
provides for the payment only of the balance
of the purchase price, implying that the
"option money" forms part of the purchase
price. This is precisely the result of paying
earnest money under Art. 1482 of the Civil
Code. It is clear then that the parties in this
case actually entered into a contract of sale,
partially consummated as to the payment of
the price.
2. Conveyance of privilege to purchase land
before it is awarded to the tenant or occupant.
Hermosilla v. Remoquillo
Facts: Apolinario Hermosilla was occupying a
lot in San Pedro Tunasan Homesite, a land of
the Republic. He divided the lot into 2. The 1st
portion was given to his son Salvador and the
other(questioned lot) to his grandson Jaime
Remoquillo through a Deed of Assignment. A
law was passed prohibiting the transfer of
ownership of the said lot. Salvador and Jaime
after made a Kasunduan ng Paglipat Ng
Karapatan sa Isang Lagay na Lupang Solar
(Kasunduan) whereby Jaime transferred
ownership of the 65 square meters (the
questioned property) in favor of Salvador. NHA
awarded Jaime title. Salvador and his heirs
questioned the title stating they have their
house and in actual possession of the
questioned lot.
When the Kasunduan was executed in
1972 by Jaime in favor of Salvador
petitioners' predecessor-in-interest Lot 19,
of which the questioned property forms part,
was still owned by the Republic. Nemo dat
quod non habet. Nobody can give what he
does not possess. Jaime could not thus have
transferred anything to Salvador via the
Kasunduan.
The transfer became one in violation
of law and therefore void ab initio. Hence,
petitioners acquired no right over the lot from
is generally considered that as between the
parties to a contract, validity cannot be given
to it by estoppel if it is prohibited by law or is
against public policy.
Since the property was previously a
public land, petitioners have no personality to
impute violation of the law. If the title was in
fact fraudulently obtained, it is the State
which should file the suit to recover the
property through the Office of the Solicitor
General. Consequently, Jaimes ownership was
valid not being contrary to any law and since
there was no pending other application yet.
That at the time he applied for title, he was
recogned as the actual applicant / occupant.
Heirs of Arturo Reyes v. Beltran G.R. No.
176474
Facts: A big parcel of lot was originally owned
by Spouses Laquian. When the Spouses died,
the property was left with the wifes siblings.
Through an "Extrajudicial Settlement of the
Estate of the Deceased Constancia R. Socco
(wife)," the parcel of land was partitioned into
3 lots. Before the partition, Miguel Socco, 1 of
the heirs sold his share to Arturo Reyes as
evidenced by the Contract to Sell stating that
he is to inherit a particular portion. But upon
partition, the said portion sold was
adjudicated to respondent, Elena Socco
Beltran, and not to Miguel Socco.
 CIVIL LAW SALES
SC: Article 1459 of the Civil Code on
contracts of sale, The thing must be licit and
the vendor must have a right to transfer
ownership thereof at the time it is delivered.
The law specifically requires that the vendor
must have ownership of the property at the
time it is delivered. Petitioners claim that the
property was constructively delivered to them
in 1954 by virtue of the Contract to Sell.
However, as already pointed out by this Court,
it was explicit in the Contract itself that, at the
time it was executed, Miguel R. Socco was not
yet the owner of the property and was only
expecting to inherit it. Hence, there was no
valid sale from which ownership of the subject
property could have transferred from Miguel
Socco to Arturo Reyes. Without acquiring
ownership of the subject property, Arturo
Reyes also could not have conveyed the same
to his heirs, herein petitioners.
The law specifically requires that the vendor
must have ownership of the property at the
time it is delivered. Petitioners cannot derive
title to the subject property by virtue of the
Contract to Sell. It was stated in the Contract
that the vendor was not yet the owner of the
subject property and was merely expecting to
inherit the same. It was also declared that
conveyance of the subject to the buyer was a
conditional sale. It is, therefore, apparent that
the sale of the subject property in favor of
Arturo Reyes was conditioned upon the event
that Miguel Socco would actually inherit and
become the owner of the said property. Absent
such occurrence, Miguel R. Socco never
acquired ownership of the subject property
which he could validly transfer to Arturo
Reyes. Without acquiring ownership of the
subject property, Arturo Reyes also could not
have conveyed the same to his heirs, herein
petitioners.
-assignment was done prior to the application.
ARTICLES 1469-1474
Art. 1469. In order that the price may be
considered certain, it shall be sufficient that it
be so with reference to another thing certain,
or that the determination thereof be left to the
judgment of a special person or persons.
Should such person or persons be unable or
unwilling to fix it, the contract shall be
inefficacious, unless the parties subsequently
agree upon the price.
If the third person or persons acted in bad
faith or by mistake, the courts may fix the
price.
Where such third person or persons are
prevented from fixing the price or terms by
fault of the seller or the buyer, the party not in
fault may have such remedies against the
party in fault as are allowed the seller or the
buyer, as the case may be. (1447a)
Art. 1470. Gross inadequacy of price does not
affect a contract of sale, except as it may
indicate a defect in the consent, or that the
parties really intended a donation or some
other act or contract. (n)
Art. 1471. If the price is simulated, the sale is
void, but the act may be shown to have been
in reality a donation, or some other act or
contract. (n)
Art. 1472. The price of securities, grain,
liquids, and other things shall also be
considered certain, when the price fixed is
that which the thing sold would have on a
definite day, or in a particular exchange or
market, or when an amount is fixed above or
below the price on such day, or in such
exchange or market, provided said amount be
certain. (1448)
Art. 1473. The fixing of the price can never be
left to the discretion of one of the contracting
parties. However, if the price fixed by one of
the parties is accepted by the other, the sale
is perfected. (1449a)
Art. 1474. Where the price cannot be
determined in accordance with the preceding
articles, or in any other manner, the contract
is inefficacious. However, if the thing or any
part thereof has been delivered to and
appropriated by the buyer he must pay a
reasonable price therefor. What is a
reasonable price is a question of fact
dependent on the circumstances of each
particular case. (n)
I. Price sum certain in money or
its equivalent.
Case: General principles in the
agreement as to price
 CIVIL LAW SALES
Boston Bank of the Philippines v. Manalo,
G. R. No. 158149, February 9, 2006
FACTS: Boston Bank, now petitioner, filed the
instant petition for review on certiorari
assailing the CA rulings. It maintains that, as
held by the CA, the records do not reflect any
schedule of payment of the 80% balance of
the purchase price, or P278,448.00. Petitioner
insists that unless the parties had agreed on
the manner of payment of the principal
amount, including the other terms and
conditions of the contract, there would be no
existing contract of sale or contract to sell.47
WON: Petitioner, as seller, forged a perfect
contract to sell over a real property to
respondents, as buyer.
HELD: We agree with petitioners contention
that, for a perfected contract of sale or
contract to sell to exist in law, there must be
an agreement of the parties, not only on the
price of the property sold, but also on the
manner the price is to be paid by the vendee.
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.57
It is not enough for the parties to agree on the
price of the property. The parties must also
agree on the manner of payment of the price
of the property to give rise to a binding and
enforceable contract of sale or contract to sell.
This is so because the agreement as to the
manner of payment goes into the price, such
that a disagreement on the manner of
payment is tantamount to a failure to agree
on the price.58
In a contract to sell property by installments, it
is not enough that the parties agree on the
price as well as the amount of downpayment.
The parties must, likewise, agree on the
manner of payment of the balance of the
purchase price and on the other terms and
conditions relative to the sale. Even if the
buyer makes a downpayment or portion
thereof, such payment cannot be considered
as sufficient proof of the perfection of any
purchase and sale between the parties.
We agree with the contention of the petitioner
that, as held by the CA, there is no showing, in
the records, of the schedule of payment of the
balance of the purchase price on the property
amounting to P278,448.00
A. Requisites:
1. The price must be real (1471)
Art. 1471. If the price is simulated, the sale is
void, but the act may be shown to have been
in reality a donation, or some other act or
contract.
-price is real- when at the perfection of the
sale, there is legal intention on the part of the
buyer to pay the price and the legal
expectation on the part of the seller to receive
such price as the value of the subject matter
he obligates himself to deliver.
-price is false- the contract is valid but
subject to reformation to indicate the real
price upon which the minds of the parties
have met.
a.) Effect if price is simulated- produces
no effect.
Cruzado v. Bustos, G. R. No. 10244,
February 29, 1916s
FACTS: Counsel for the plaintiff Santiago
Cruzado filed a written complaint on October
8, 1910, amended on September 25, 1913, in
which he alleged that plaintiff was the owner
of certain rural property situated in the barrio
of Dolores, formerly San Isidro, of the
municipality of Bacolor, Pampanga, containing
an area of 65 balitas and bounded as set forth
in the complaint; that Estafania Bustos, during
her lifetime, and now the administrator of her
estate, together with the other defendant,
Manuel Escaler, had, since the year 1906 up
to the present, been detaining the said parcel
of land, and had refused to deliver the
possession thereof to plaintiff and to recognize
his ownership of the same, notwithstanding
 CIVIL LAW SALES
the repeated demands made upon them; that
by such detention, the plaintiff had suffered
losses and damages to the amount of P3,500.
He therefore asked for judgment declaring
plaintiff to be the owner of the said parcel of
land and ordering defendants to return it to
plaintiff and to pay the latter P3,500 for losses
and damages, and the costs.
WON: The deed of sale of 65 balitas of land
situated in the municipality of Bacolor,
Pampanga, executed by Estefania Bustos, with
the assistance of her husband Bernardino
Dizon, in favor of Agapito Geronimo Cruzado,
for the sum of P2,200, was simulated.
HELD: The simulation of the said sale was
effected by making a pretended contract
which bore the appearance of truth, when
really and truly there was no contract,
because the contracting parties did not in fact
intend to execute one, but only to formulate a
sale in such a manner that, for the particular
purposes sought by Bustos and Cruzado, it
would appear to have been celebrated solely
that Cruzado might hold his office of
procurador on the strength of the security
afforded by the value of the land feignedly
sold.
This action is of course improper, not only
because the sale was simulated, but also
because it was not consummated. The price of
the land was not paid nor did the vendee take
possession of the property from the 7th of
September, 1875, when the said sale was
feigned, until the time of his death; nor did
any of his successors, nor the plaintiff himself
until the date of his claim, enter into
possession of the land.
That the contract of purchase and sale, as
consensual, is perfected by consent as to the
price and the thing and is consummated by
the reciprocal delivery of the one and the
other, the full ownership of the thing sold
being conveyed to the vendee, from which
moment the rights of action derived from this
right may be exercised.
It is, then, of the utmost importance to
examine whether in the said sale the purchase
price was paid and whether the vendee took
possession of the land supposed to have been
sold.
b.) Effect if there is no consideration null
and void (non-existence of the contract).
Doles v. Angeles, G. R. No. 149353, June
26, 2006
FACTS: On April 1, 1997, Ma. Aura Tina
Angeles (respondent) filed with the RTC a
complaint for Specific Performance with
Damages against Jocelyn B. Doles (petitioner),
docketed as Civil Case No. 97-82716.
Respondent alleged that petitioner was
indebted to the former in the concept of a
personal loan amounting to P405,430.00
representing the principal amount and
interest; that on October 5, 1996, by virtue of
a "Deed of Absolute Sale", petitioner, as seller,
ceded to respondent, as buyer, a parcel of
land, as well as the improvements thereon,
with an area of 42 square meters, covered by
Transfer Certificate of Title No. 382532,4 and
located at a subdivision project known as
Camella Townhomes Sorrente in Bacoor,
Cavite, in order to satisfy her personal loan
with respondent; that this property was
mortgaged to National Home Mortgage
Finance Corporation (NHMFC) to secure
petitioners loan in the sum of P337,050.00
with that entity.
WON: The contract of sale on the parcel of
land was executed for a cause.
HELD: Since the sale is predicated on that
loan, then the sale is void for lack of
consideration.
In view of these anomalies, the Court cannot
entertain the possibility that respondent
agreed to assume the balance of the
mortgage loan which petitioner allegedly
owed to the NHMFC, especially since the
record is bereft of any factual finding that
petitioner was, in the first place, endowed with
any ownership rights to validly mortgage and
convey the property. As the complainant who
initiated the case, respondent bears the
burden of proving the basis of her complaint.
Having failed to discharge such burden, the
Court has no choice but to declare the sale
void for lack of cause. And since the sale is
void, the Court finds it unnecessary to dwell
on the issue of whether duress or intimidation
had been foisted upon petitioner upon the
execution of the sale.
b. In money or its equivalent (1458)
 CIVIL LAW SALES
Torres vs CA
Facts:
Petitioners and respondent entered into a joint
venture agreement for the development of a
parcel land located at Lapu-Lapu City island of
Mactan into a subdivision. Pursuant to the
contract, petitioners executed a deed of sale
covering the said parcel of land in favor of the
respondent, who then had it registered in his
name. Thereafter, respondent mortgaged the
property in the bank, and according to the
joint agreement, the money obtained
amounting to P40,000.00 was to be used for
the development of the subdivision. However,
the project did not push through, and the land
was subsequently foreclosed by the bank.
Because of this, petitioners filed a civil case
before the Regional Trial Court of Cebu City,
which was later dismissed by the trial court.
On appeal, the Court of Appeals affirmed the
decision of the trial court. The appellate court
held that the petitioner and respondent had
formed a partnership for the development of
the subdivision. Thus, they must bear the loss
suffered by the partnership in the same
proportion as their share in the profits
stipulated in the contract. Aggrieved by the
decision, petitioner filed the instant petition
contending that the Court of Appeals erred in
concluding that the transaction between the
petitioners and respondent was that of a joint
venture/partnership.
SC: The Joint Venture Agreement clearly
states that the consideration for the sale was
the expectation of profits from the subdivision
project. Its first stipulation states that
petitioners did not actually receive payment
for the parcel of land sold to respondent.
Consideration, more properly denominated as
cause, can take different forms, such as the
prestation or promise of a thing or service by
another. In this case, the cause of the contract
of sale consisted not in the stated peso value
of the land, but in the expectation of profits
from the subdivision project, for which the
land was intended to be used. As explained by
the trial court, "the land was in effect given to
the partnership as [petitioner's] participation
therein. . . . There was therefore a
consideration for the sale, the [petitioners]
acting in the expectation that, should the
venture come into fruition, they [would] get
sixty percent of the net profits."
-expectations of profits from the subdivision
projects is a valid form of consideration.
-it is sufficient if it can be determined by the
stipulations of the contract made by the
parties thereto/ by reference to an agreement
incorporated in the contract.
3. Certain or ascertainable
(determinable)
a.) How determined
i. By a third person (1469, pars. 1, 2, 4)
aa) If the third person is unable or
unwilling to fix the price, the contract is
inefficacious unless the parties come to an
agreement
Barreto v. Sta. Marina, G. R. No. L-8169,
December 29, 1913
(***CAVEAT EMPTOR: PLS READ THE FULL
TEXT. CASE DOCTRINE RELATED TO SALES
NOT CLEARLY ESTABLISHED IN THE CASE)
FACTS: The La Insular cigar and cigarette
factory is a joint account association with a
nominal capital of P865,000, the plaintiffs
share being P20,000, or 4/173 of the whole.
On March 14, 1910, the plaintiffs attorneys
wrote the defendants local representative a
letter offering to sell to the defendant
plaintiffs participation in the factory. The
result of the correspondence between the
parties and their representatives was that
Exhibit G was duly executed on May 3, 1910.
In accordance with the terms of this exhibit a
committee of appraisers was appointed to
ascertain and fix the actual value of La Insular.
The committee rendered its report on
November 14, 1910, fixing the net value at
P4,428,194.44. Of this amount 4/173 part
represented the plaintiffss share on his
P20,000 of the nominal capital. In Exhibit J
which was executed on November 22, 1910,
the plaintiff acknowledged to have received
from the defendant that amount.
Subsequently to the execution of Exhibit J,
demand was made by the plaintiff upon the
 CIVIL LAW SALES
defendant for his share of the profits from June
30, 1909, to November 22, 1910. This demand
was refused and thereupon this action was
instituted to recover said profits. Upon the
evidence submitted at the hearing, the court
below held: (1) That the agreement of May 3,
1910, was by its terms a contract to sell in the
future and did not pass title and (2) that the
sale of plaintiffs interest did not include the
profits in question. Judgment was rendered
accordingly, with interest and cost. The
defendant appealed.
SC: It was the appraisers who were appointed
to ascertain and fix the total net value of the
factory for the purpose of determining the true
present value of the interest.
- The appraiser was the one who determined
the total net value of the shares of the
company and thereafter that of Baretos
share.
ii. By the Courts (1469, par. 3) if there is
bad faith or mistake of the third party fixing
the price
iii) By reference to a definite day, a
particular exchange or market (1472)
iv) By reference to invoices
McCulough v. Aenlle & Co.,G. R. No.
1300, February 3, 1904
FACTS: For the purpose of carrying into effect
the said contract of sale entered into with the
other party hereto, said Francisco Gonzalez y
de la Fuente and Don Antonio la Puente y
Arce, in the name and on behalf of the
mercantile partnership denominated R. Aenlle
& Co., by virtue of the powers conferred upon
them and in compliance with the instructions
given them by Don Matias Saenz de Vizmanos
y Lecaros, the manager of the said
partnership, solemnly declare that they sell,
absolutely and in fee simple, to E. C.
McCullough, the tobacco and cigarette factory
known as "La Maria Cristina," located at No.
36 Calle Echague, Plaza de Goiti, Santa Cruz
district, this city, said sale including the trade-
mark "La Maria Cristina," which was been duly
registered, the stock of tobacco in leaf and
manufacture, machinery, labels, wrappers,
furniture, fixtures, and everything else
belonging to the said factory, as shown in the
inventory to be drawn up for the purpose of
making formal delivery of the said property.
This sum is subject to modification, in
accordance with the result shown by the
inventory to be drawn up. In this inventory the
value of each individual piece of furniture will
be fixed at 10 per cent below the price shown
in the partnership inventory. The machinery
and cost of installing the same will also be
fixed at 10 per cent below its invoice price.
The value of the tobacco, both in leaf and in
process of manufacture, boxes, labels,
wrappers, cigars, cigarettes, and paper
mouthpieces for cigarettes will be fixed at the
invoice price. The value of tobacco made up
into cigars will be fixed in accordance with the
price list of the partnership, less 20 per cent
discount. The cigars will be inventoried at the
prices in the same list, less a discount of 35
per cent. The P20,000 mentioned as the value
of the trade-mark will, however, remain
unchanged.
In December, 1901, the plaintiff, with
others, organized a company, to which the
plaintiff sold all the tobacco bought by him
from the defendant. The purchaser, the new
company, on examining these two lots,
rejected them because the tobacco was not of
the quality indicated in the inventory.
Thereupon the plaintiff, claiming that the
tobacco in these two lots was worthless,
brought this action against the defendant to
recover what he paid.
WON: There was a perfected contract of sale
entered into by the parties on August 27,1901.
HELD: The document of August 27 was a
completed contract of sale. The articles which
were the subject of the sale were definitely
and finally agreed upon. The appellee agreed
to buy, among other things, all of the leaf
tobacco in the factory. This was sufficient
description of the thing sold. The price for
each article was fixed. It is true that the price
of this tobacco, for example, was not stated in
dollars and cents in the contract. But by its
terms the appellee agreed to pay therefor the
amount named in the invoices then in
existence. The price could be made certain by
a mere reference to those invoices. By the
instrument of August 27 the contract was
perfected and thereafter each party could
compel the other to fulfill it. By its terms the
appellee was bound to take all the leaf
 CIVIL LAW SALES
tobacco then belonging to the factory and to
pay therefor the prices named in the invoices.
This obligation was absolute and did not
depend at all upon the quality of the tobacco
or its value. The appellee did not, in this
contract, reserve the right to reject the
tobacco if it were not of a specific crop. He did
not buy tobacco of a particular kind, class, or
quality. He bought all the tobacco which the
appellant owned and agreed to pay for it what
the defendant had paid for it. The plaintiff
testified that this was the express agreement.
v) By reference to the application of known
factors, e.g. in proportion to variations in
calories and ash content of coal2.)
Effect of indeterminability contract is
inefficacious
Robles v. Lizarraga Hermanos, G. R. No.
L-26173, July 13, 1927
(Sale of Improvements
introduced in Hacienda)
FACTS: This action was instituted in the Court
of First Instance of Occidental Negros by
Zacarias Robles against Lizarraga Hermanos, a
mercantile partnership organized under the
laws of the Philippine Islands, for the purpose
of recovering compensation for improvements
made by the plaintiff upon the hacienda
"Nahalinan" and the value of implements and
farming equipment supplied to the hacienda
by the plaintiff, as well as damages for breach
of contract. Upon hearing the cause the trial
court gave judgment for the plaintiff to
recover of the defendant the sum of
P14,194.42, with costs. From this judgment
the defendant appealed.
WON: The petitioner is allowed to recover
the value of the improvements.
HELD: In the case before us the deed of
conveyance purports to transfer to the
defendant only such interests in certain
properties as had come to the conveyors by
inheritance. Nothing is said concerning the
rights in the hacienda which the plaintiff had
acquired by lease or concerning the things
that he had placed thereon by way of
improvement or had acquired by purchase.
The verbal contract which the plaintiff has
established in this case is therefore clearly
independent of the main contract of
conveyance, and evidence of such verbal
contract is admissible under the doctrine
above stated. The rule that a preliminary or
contemporaneous oral agreement is not
admissible to vary a written contract appears
to have more particular reference to the
obligation expressed in the written agreement,
and the rule had never been interpreted as
being applicable to matters of consideration or
inducement. In the case before us the written
contract is complete in itself; the oral
agreement is also complete in itself, and it is a
collateral to the written contract,
notwithstanding the fact that it deals with
related matters.
A contract for the sale of goods, chattels or
things in action, at a price of not less than
P100, shall be unenforceable unless the
contract, or some note or memorandum
thereof shall be in writing and subscribed by
the party charged, or by his agent; and it is
insisted that the court erred in admitting proof
of a verbal contract over the objection of the
defendant's attorney. But it will be noted that
the same subsection contains a qualification,
which is stated in these words, "unless the
buyer accept and receive part of such goods
and chattels." In the case before us the trial
court found that the personal property,
consisting of farming implements and other
movables placed on the farm by the plaintiff,
have been utilized by the defendant in the
cultivation of the hacienda, and that the
defendant is benefiting by those things.
We are of the opinion that the stipulation with
respect to the appraisal of the property did not
create a suspensive condition. The true sense
of the contract evidently was that the
defendant would take over the movables and
the improvements at an appraised valuation,
and the defendant obligated itself to promote
the appraisal in good faith. As the defendant
partially frustrated the appraisal, it violated a
term of the contract and made itself liable for
the true value of the things contracted about,
as such value may be established in the usual
course of proof. Furthermore, it must occur to
any one, as the trial judge pointed out, that an
unjust enrichment of the defendant would
result from allowing it to appropriate the
movables without compensating the plaintiff
thereof.
 CIVIL LAW SALES

The fourth assignment of error is concerned The fact that the bargain is a hard one,
with the improvements. Attention is here coupled with mere inadequacy of price when
directed to the fact that the improvements both parties are in a position to form an
placed on the hacienda by the plaintiff independent judgment concerning the
became a part of the realty and as such transaction, is not sufficient ground for the
passed to the defendant by virtue of the cancellation of a contract.
transfer effected by the three owner in the
deed of conveyance (Exhibit B.). It is therefore
insisted that, the defendant having thus
acquired the improvements, the plaintiff Aguilar v. Rubiato
should not be permitted to recover their value
again from the defendant. This criticism
Facts: Rubiato was the owner of parcels of
misses the point. There can be no doubt that
land and was desirous of obtaining a loan. He
the defendant acquired the fixed
thereafter signed a power of attorney in favor
improvements when it acquired the land, but
of a certain Vila to secure a loan and to
the question is whether the defendant is
execute any writing for the mortgage of land.
obligated to indemnify the plaintiff for his
Vila pursuant to the power of attorney then
outlay in making the improvements. It was
sold the land to Aguilar, with the right of
upon the consideration of the defendant's
repurchase within one year and Rubiato was
promise so to indemnify the plaintiff that the
to remain in possession of the land as lessee.
latter agreed to surrender the lease nearly two
One year expired and Aguilar filed a case to
no doubt as to the validity of the promise
consolidate ownership over the lands.
made under these circumstances to the
plaintiff.
Issue :Whether the contract was of sale or
loan.
3) Effect of inadequacy of price (1470)
does not affect the contract, but may
show vice of consent (1470). Refer to Held: LOAN
inadequacy of cause in general, Art.
1355. In addition to the evidence, there is one very
cogent reason which impels us to the
Art. 1470. Gross inadequacy of price does not conclusion that Rubiato is only responsible to
affect a contract of sale, except as it may the plaintiff for a loan. It is that the
indicate a defect in the consent, or that the inadequacy of the price which Vila obtained
parties really intended a donation or some for the eight parcels of land belonging to
other act or contract. Rubiato is so great that the minds revolts at it.

-it does not affect the contract but may show
vice of consent.
-the offended party may invoke Art. 19 of the
NCC ( Abuse of Right Principle)
Xxx The members of this court after most
particular and cautious consideration, having
in view all the facts and all the naturals
tendencies of mankind, consider that Rubiato
is only responsible to the plaintiff for the loan
of P800.

Askay v. Cosolan

Facts: Askay obtained a title to the Mineral

4) Effect of Failure of Consideration
Claim which he allegedly sold to Cosalan. It
was alleged that there is inadequacy of the
consideration for transfer which, according to
the deed of conveyance, and to the oral
testimony, consisted of P107.00 in cash, a bill Sps. Buenaventura v. CA
fold, one sheet, one cow and two carabaos.
Facts: Sps Leonardo Joaquin & Feliciano
Issue: WON the sale is valid. Landrito are the parents of petitioners.
Petitioners assail the sale of several lands by
Held: YES their parents to their other siblings (see p. 265
 CIVIL LAW SALES
for complete list of sales made) for being void
ab initio based on the ff grounds:
1. no actual valid consideration
2. properties are more than 3x more valuable
than the measly purchase price (purchase
price was grossly inadequate)
3. deeds of sale do not reflect & express the
true intent of the parties
4. deliberate conspiracy designed to unjustly
deprive the rest of the compulsory heirs of
their legitime.
Defense of the respondents:
1. no cause of action, requisite standing &
interest
2. sales were w/sufficient considerations &
made by their parents voluntarily in good faith
& w/full knowledge of the consequences
3. certificates of title were issued w/factual &
legal basis.
Trial court dismissed the case WRT Gavino
Joaquin & Lea Asis. Ruled in favor of the
respondents & dismissed the complaint.
1. The right of the compulsory heirs to a
legitime is contingent & it only commences
from the moment of the death of the decedent
(CC Art. 777). The value of the property left at
the death of the testator is the basis for
determining the legitime (Art. 908). Plaintiffs
cannot claim an impairment of their legitime
since their parents are still alive.
2. Deeds of Sale were executed for
valuable consideration.
CA affirmed Trial Court decision. In addition to
the grounds stated by the trial court, CA also
mentioned that:
1. While still alive, parents are free to dispose
of their properties provided such is not done in
fraud of creditors.
2. Petitioners are not parties in interest since
theyre not parties to the deeds of sale nor are
they creditors of their parents.
Issues :
1.WON petitioners have a legal interest over
the properties subject of the Deeds of Sale.
NO.
The complaint betrays their motive for filing
the case. They are interested in obtaining the
properties by hereditary succession but they
have failed to show any legal right to these
properties.
Real party-in-interest is one who is either
benefited or injured by the judgment of the
party entitled to the avails of the suit. This
includes parties to the agreement or are
bound either principally/subsidiarily. Parties
must have a present substantial interest & not
merely expectancy/future contingent
subordinate or consequential interest.
In this case, the petitioners only have an
inchoate rt w/c vests only upon the death of
their parents. Besides, sale of the lots to their
siblings does not affect the value of their
parents estate since the lots are replaced
with cash of equivalent value.
2. WON the deeds of sale are void for lack of
consideration. NO.
A contract of sale is not a real contract but a
consensual contract. Its binding & valid upon
the meeting of the minds as to the price
regardless of the manner of payment or
breach of such. Its still valid even if the real
price is not stated in the contract, making it
subject to reformation. But if the price is
simulated, there is no meeting of the minds,
thus the contract is void (CC Art. 1471).
Act of payment of the price does not
determine the validity of a contract of sale.
Failure to pay the consideration is different
from lack of consideration. The former results
in a rt to demand fulfillment or cancellation of
the contract while the latter prevents the
existence of a valid contract.
Petitioners failed to show that the prices in the
deeds of sale were simulated. They dont even
know the financial capacity of their siblings to
buy these lots. Respondents minds met as to
the purchase price w/c was stated in the
deeds of sale & the buyer siblings have paid
the price to their parents.
 CIVIL LAW SALES
3. WON the Deeds of Sale are void for gross
inadequacy of the price. NO.
CC Art. 1355: Except in cases specified by law,
lesion/ INADEQUACY OF CAUSE shall not
invalidate a contract, unless there has been
fraud, mistake or undue influence.
CC Art. 1470: Gross inadequacy of price
doesnt affect a contract of sale, except as
may indicate a defect in the consent or that
the parties really intended a donation or some
other act or contract.
Petitioners failed to prove any instance in the
aforementioned provisions that would
invalidate the deeds of sale. There is no
requirement that the price be equal to the
exact value of the property on sale. It only
matters that all respondents believed that
they received the commutative value of what
they gave.
Vales vs. Villa: Courts cannot be guardians of
people who are not legally incompetent.
Courts operate not because a person has been
defeated/overcome by another, but because
he has been defeated or overcome ILEGALLY.
There should be a violation of the law,
commission of what the law knows as an
actionable wrong, before the courts are
authorized to lay hold of the situation &
remedy it.
Note: Failure of consideration is different
from the lack of consideration, the former
results in a right to demand the fulfillment/
cancellation of the obligation under the
existing valid contract. This is different from
lack of consideration w/c prevents the
existence of a valid contract.
B. Effect of earnest money (1482)
Art. 1482. Whenever earnest money is given
in a contract of sale, it shall be considered as
part of the price and as proof of the perfection
of the contract
a. It is considered part of the price, unless the
contract is otherwise
b. It is proof of perfection of the contract
Earnest money- it is something of value that
the buyer was really in earnest and given after
the perfection of the contract.
-part of the purchase price.
Option money- distinct consideration.
Oesmer v. Paraiso Devt Corp
Facts: Petitioners in this case are brothers
and sisters and the co-owners of undivided
shared is parcels of land originally owned by
their parents. One the petitioners, Ernesto,
met with the President of Paraiso for purpose
of brokering the sale of petitioners properties
to respondent corp. A contract to sell was the
executed, signed by the siblings except Adolfo
and Jesus. An amount of P100,000 was also
given as option money. Later however,
petitioners informed PAraiso of their intention
to rescind the Contract to sell and to return
the amount of P100,000 paid by the
corporation. Their contention was that the
contract to sell was void because the
signatures made by the siblings were not for
consent to sell the property, assuming the
signatures indicate consent, the contract was
subject to a suspensive condition which is the
approval of the sale by all the co-owners
which did not occur because two of the
siblings did not approve of the sale; lastly,
that it is void for it is a unilateral promise to
sell without consideration distinct from price.
Held: As to the last contention, the court
ruled that the contract to sell is not a
unilateral promise to sell:
In the instant case, the consideration of
P100,000.00 paid by respondent to petitioners
was referred to as "option money." However, a
careful examination of the words used in the
contract indicates that the money is not
option money but earnest money. "Earnest
money" and "option money" are not the same
but distinguished thus: (a) earnest money is
part of the purchase price, while option money
is the money given as a distinct consideration
for an option contract; (b) earnest money is
given only where there is already a sale, while
option money applies to a sale not yet
 CIVIL LAW SALES
perfected; and, (c) when earnest money is
given, the buyer is bound to pay the balance,
while when the would-be buyer gives option
money, he is not required to buy, but may
even forfeit it depending on the terms of the
option.20
The sum of P100,000.00 was part of the
purchase price. Although the same was
denominated as "option money," it is actually
in the nature of earnest money or down
payment when considered with the other
terms of the contract. Doubtless, the
agreement is not a mere unilateral promise to
sell, but, indeed, it is a Contract to Sell as both
the trial court and the appellate court declared
in their Decisions.
Manila Metal Container Corporation v.
PNB
Facts: Petitioner was the owner of a parcel of
land and to be able to secure a loan from PNB,
petitioner executed a real party mortgage
over the land. For its failure to pay, PNB
foreclose the mortgaged and sold at public
auction for which PNB was the winning bidder,
with a one year period of redemption by the
petitioner. Petitioner requested that there be
an extension of time to redeem the property
and it allowed to repurchase the property on
installment. Meanwhile,the Special Assets
Management Department had prepared a
statement of accountof the petitioners
obligation to which amounted to 1.5M.
petitioner thereafter remitted thte amount of
800,000 as deposit to repurchase the property.
When SAMD recommended to the
management of the PNB that petitioner be
allowed to repurchase the property at 1.5M,
the management rejected and suggested that
the property be purchased at 2.7M which was
later reduced to 1.9M. But petitioner refused.
Petitioner now filed a case for delivery of title,
annulment of mortgage and specific
performance with damages. It was its
contention that it already accepted the offer of
SAMD to sell the property at 1.5M, hence, PNB
could no longer unilaterally withdraw its offer
to sell the property. Its acceptance of the offer
resulted in a perfected contract of sale.
Respondent contended that the parties never
graduated for the negotiation stage all that
transpires was an exchange of proposal and
counter-proposals and nothing more. There
was still no agreement as to the amount and
the manner of payment. The account made by
SAMD cannot be classified as counter-offer
because it was merely recital of facts of the
obligations of petitioners.
Issue: WON the P800,000 deposited is an
earnest money.
Held -NO
The P800,000 could not be considered as an
earnest money because an earnest money
forms part of the purchase price. In this case,
it did not. The P800,000 was merely a deposit
that was accepted by PNB on the condition
that the purchase price is subject to the
approval of the PNB Board.
Note: absence of proof of the concurrence of
all the essential elements of a contract of sale,
the giving of earnest money cannot establish
the existence of a perfected contract of sale.
Serrano v Caguiat G.R. No. 139173
Facts: Caguiat offered to buy the lot owned
by spouses Serrano. Respondent gave P100K
as partial payment, in turn, petitioners gave a
receipt with a statement that respondent
promised to pay the balance of the purchase
price. Respondents were leaving for abroad
and sought to cancel the transaction.
Petitioners contend that there is no perfected
contract as there was no clear agreement
between the parties as to the amount of
consideration.
SC: In holding that there is a perfected
contract of sale, both courts mainly relied on
the earnest money given by respondent to
petitioners (Art. 1482). We are not convinced.
It is true that Article 1482 of the Civil Code
provides that Whenever earnest money is
given in a contract of sale, it shall be
 CIVIL LAW SALES
considered as part of the price and proof of
the perfection of the contract. However, this
article speaks of earnest money given in a
contract of sale. In this case, the earnest
money was given in a contract to sell. The
earnest money forms part of the consideration
only if the sale is consummated upon full
payment of the purchase price. Now, since
the earnest money was given in a contract to
sell, Article 1482, which speaks of a contract
of sale, does not apply.
As previously discussed, the suspensive
condition (payment of the balance by
respondent) did not take place. Clearly,
respondent cannot compel petitioners to
transfer ownership of the property to him.
ARTICLES 1475-1488
I. RULES IN ORDINARY SALES
A. Form
a. General Rule (1483)
Art. 1483. Subject to the provisions of the
Statute of Frauds and of any other applicable
statute, a contract of sale may be made in
writing, or by word of mouth, or partly in
writing and partly by word of mouth, or may
be inferred from the conduct of the parties. (n)
-written agreement is not essential
-sale is consensual contract
1. Verbal agreement of sale
Caoili v. CA
FACTS: Caoili was a lessee in the property of
respondent. Respondent borrowed money
from Caoili in the amount of Php 30,000 which
they stipulated would form part of their
rentals. When rentals was paid off, they
entered into a not formal or written contract
on the sale of the property. They executed a
"Receipt" denominated as an "Addendum to
Agreement dated August 8, 1990". It was
stated they received from petitioners the sum
of P140,000.00, in addition to the partial
payment of P60,000.00, the "balance payable
when the good title in the name of herein
vendor is delivered to the spouses." Yet
respondent refused to execute document.
Respondent says that the Php 140,000 was for
improvements and the Php 60,000 served as
rental on the period they havent paying their
rentals (amounts were claimed as partial
payments by Caoili. RTC and CA both decided
in favor of Caoili yet CA reduced the amount
awarded.
Held:
1. (Not made in writing) The absence
of a formal deed of sale does not render the
agreement null and void or without any effect.
The provision of Article 1358 of the Civil Code
on the necessity of a public document is only
for convenience, not for validity or
enforceability. It does not mean that no
contract has been perfected so long as the
essential requisites of consent of the
contracting parties, object, and cause of the
obligation concur. Under the agreement,
private respondent was obligated to deliver a
good title to petitioners and this condition is
the operative act which would give rise to the
corresponding obligation of petitioners to pay
the balance of the purchase price. Since it is
not disputed that private respondent has not
delivered a good title, petitioners have by law
the right to either refuse to proceed with the
agreement or to waive that condition pursuant
to Article 1545 of the Civil Code.
2. The Addendum being notarized is a
prima facie evidence of the facts stated
therein.
2. Effect of lack of technical
description in the contract
Naranja v. CA
Facts: Roque Naranja was the registered
owner of a parcel of land, denominated as Lot
No. 4 in Consolidation-Subdivision Plan (LRC)
Pcs-886, Bacolod Cadastre, with an area of
136 square meters and covered by Transfer
Certificate of Title (TCT) No. T-18764. Roque
was also a co-owner of an adjacent lot, Lot No.
2, of the same subdivision plan, which he co-
owned with his brothers, Gabino and Placido
Naranja. When Placido died, his one-third
share was inherited by his children, Nenita,
 CIVIL LAW SALES
Nazareto, Nilda, Naida and Neolanda, all
surnamed Naranja, herein petitioners. Lot No.
2 is covered by TCT No. T-18762 in the names
of Roque, Gabino and the said children of
Placido. TCT No. T-18762 remained even after
Gabino died. The other petitioners Serafin
Naranja, Raul Naranja, and Amelia Naranja-
Rubinos are the children of Gabino.
Roque had no other source of income except
for the P200.00 monthly rental of his two
properties. To show his gratitude to Belardo,
Roque sold Lot No. 4 and his one-third share in
Lot No. 2 to Belardo on August 21, 1981,
through a Deed of Sale of Real Property which
was duly notarized by Atty. Eugenio Sanicas.
The Deed of Sale reads:
I, ROQUE NARANJA, of legal age, single,
Filipino and a resident of Bacolod City, do
hereby declare that I am the registered owner
of Lot No. 4 of the Cadastral Survey of the City
of Bacolod, consisting of 136 square meters,
more or less, covered by Transfer Certificate of
Title No. T-18764 and a co-owner of Lot No. 2,
situated at the City of Bacolod, consisting of
151 square meters, more or less, covered by
Transfer Certificate of Title No. T-18762 and
my share in the aforesaid Lot No. 2 is one-third
share.
Issue:
W/N the sale was valid.
Held:
To be valid, a contract of sale need not
contain a technical description of the subject
property. Contracts of sale of real property
have no prescribed form for their validity; they
follow the general rule on contracts that they
may be entered into in whatever form,
provided all the essential requisites for their
validity are present. The failure of the parties
to specify with absolute clarity the object of a
contract by including its technical description
is of no moment. What is important is that
there is, in fact, an object that is determinate
or at least determinable, as subject of the
contract of sale. The deed of sale clearly
identifies the subject properties by indicating
their respective lot numbers, lot areas, and
the certificate of title covering them.
One who alleges any defect, or the
lack of consent to a contract by reason of
fraud or undue influence, must establish by
full, clear and convincing evidence, such
specific acts that vitiated the partys consent.
Petitioners adduced no proof that Roque had
lost control of his mental faculties at the time
of the sale. Undue influence is not to be
inferred from age, sickness, or debility of
body, if sufficient intelligence remains.
The Deed of Sale which states receipt of
which in full I hereby acknowledge to my
entire satisfaction is an acknowledgment
receipt in itself. Moreover, the presumption
that a contract has sufficient consideration
cannot be overthrown by a mere assertion
that it has no consideration.
Heirs are bound by contracts entered
into by their predecessors-in-interest. Having
been sold already to Belardo, the two
properties no longer formed part of Roques
estate which petitioners could have inherited.
b) Statute of Frauds applied
Statute of Frauds applies only in cases for
a) Specific performance, and
b) For damages based on breach of
contract
Where the contract of sale has already been
consummated, its enforcement cannot be
barred by the Statute of Frauds, which applies
on executory agreement .
c) When form is essential
1) Under the Statute of Frauds
Realty- a sale of real property orally is
valid. The buyer may compel the
seller to execute a formal deed of
sale to be enforceable.
Goods and chattels at a price of not
less than P 500.
2) Sale of land through an Agent (1874)
authority shall be in writing.
B. Perfection of a contract of sale (Art. 1475)
 CIVIL LAW SALES
- At the moment there is a meeting of the
minds (consensual)
- The parties may reciprocally demand
performance, subject to the provisions of law
governing the form of contracts
Requirements for perfection:
a.When parties are face to face when an
offer is accepted without conditions nor
qualifications
b.Thru correspondence or telegram when
the offeror has knowledge of the acceptance
c. When sale is subject to a suspensive
condition from the moment the condition is
fulfilled
Mere perfection of the contract does not
necessarily transfer ownership.
Romulo Coronel, et al vs. CA and Alcaraz
G.R. No. 103577, October 7, 1996
FACTS: The Coronels sold their inherited
house and lot to Ramona Patricia Alcaraz,
with the conditions that they will effect the
transfer of the title from their deceased
father to their names upon receipt of the
down payment, and after the transfer they
will execute a Deed of Sale in favor of
Alcaraz. The conditions were embodied in a
document labeled Receipt of Down
Payment. Alcaraz paid, and the title was
transferred in the Coronels name. However,
the Coronels sold the property to Catalina
Mabanag, rescinded the contract with
Alcaraz, and eventually executed a Deed of
Sale in favor of Mabanag. In the complaint for
specific performance filed against them, the
Coronels contended that theirs was merely
an executory contract to sell, hence there
was no perfected contract of sale.
HELD: The parties had agreed to a
conditional contract of sale, consummation of
which is subject only to the successful
transfer of the certificate of title from the
name of the petitioners father to their
names.
Since the condition contemplated by the
parties which is the issuance of a certificate
of title in petitioners names was fulfilled on
February 6, 1985, the respective obligations
of the parties under the contract of sale
became mutually demandable.
Note: even if document was denominated
Receipt of down payment from that moment
on, there was a perfected contract of sale
albeit conditional (i.e. transfer of title to heirs
and payment of balance of purchase price)
Manila Mining Corporation (MMC) vs.
Miguel Tan G.R. No. 171702, February
12, 2009
FACTS: MMC ordered and received various
electrical materials from Miguel Tan, and
upon failure to pay the full amount despite
several demands, Tan filed a collection suit.
MMC contended that the absence of stamp
marks on the original invoices and purchase
orders negated the receipt of said documents
by MMCs representatives, a requisite for
payment. Having not received them thereby
having no consent, their contract could not
have been perfected.
HELD: The purchase orders constituted
accepted offers when Tan supplied the
electrical materials to MMC. Hence, petitioner
cannot evade its obligation to pay by
claiming lack of consent to the perfected
contracts of sale. The invoices furnished the
details of the transactions.
Note: the purchase orders constituted
accepted offers when Tan supplied electrical
materials to MMC.
1) The buyer has the right to a reasonable
opportunity for examination before
acceptance (1584) except when a carrier
delivers C.O.D.
2) Sale by description and/or sample
(1481): The bulk of the goods must
correspond to either or both.
b. Place of Perfection
1) where there was meeting of the minds

2) in case of acceptance through letter or
telegram, in the place where the offer was
made.
C. Expenses
a. Of Execution and Registration of the sale
(1487) are borne by the Seller
b.Of putting the goods in a deliverable state
(1521, last par.) are also borne by the Seller.
II Rules on Special Sales
A. Sales at Auction
a. Rules
a. Sales of separate lots
separate contracts of sale
b. When perfected when the
auctioneer announces its perfection
by the fall of the hammer, or in other
customary manner
c. Before the fall of the hammer
The bidder may retract his bid
The auctioneer may withdraw
the goods from the sale
EXCEPTION: If the auction has been
announced to be without reserve
d. Limitations of the seller:
1. The seller himself cannot bid
2. He cannot employ or induce
any person to bid on his behalf
EXCEPTION: If right to bid has been
expressly reserved
e. Limitations of the auctioneer
(if he is not the seller);
1. The auctioneer cannot bid
2. He cannot employ or induce to
bid on behalf of the seller
CIVIL LAW SALES
3. He cannot knowingly take any
bid from the seller or any person
employed by him.
Cases:
The sale by auction is perfected when the
auctioneer announces its perfection by the fall
of the hammer or in other customary manner
(Case: Dizon vs. Dizon Considering that the
auction sale has been perfected, a
supplemental sale with higher consideration at
the instance of only one party(herein
petitioner) could no longer be validly
executed)
- Before the hammer falls:
o The bidder may retract his bid. The reason
are
behind this is that every bidder is merely an
offer and therefore, before it is accepted, it
may be withdrawn
o The auctioneer may also withdraw the goods
from the sale EXCEPT if the auction has been
announced to be WITHOUT RESERVE.
2) Auction Sale where the seller reserved the
right to reject any and all the bids
Case: Leoquinco vs. Postal Savings Bank
- Because of the expressed stipulation that
PSB reserved to themselves the right to reject
any and all bids, the bid of petitioner may be
rejected. Petitioners participation in the
auction means submission or being bounded
to the rules of auction whether the purchaser
knew the rules or not
- Limitations of the seller:
o The seller himself cannot bid
o He cannot employ or induce any person to
bid on his behalf (people who bid for the
seller, but are not themselves bound, are
called by-bidders or puffers)
o EXCEPTION: if right to bid has been
expressly reserved and that notice of such
was given
- Limitations of the auctioneer (if he is not the
seller)

o The auctioneer cannot bid
o He cannot employ or induce to bid on behalf
of the seller
o He cannot knowingly take any bid from the
seller or any person employed by him
In an execution sale:
Judgment Creditor will have a writ to
garnish or attach the property of the debtor
and sheriff sells it in a public sale
Judgment debtor has the right to redeem
the property within 1 year
Note: The owner of the property offered for
sale at auction has the right to prescribed the
manner, condition and terms of sale and
where these are reasonable and are made
known to the buyer, they are binding upon
them.
Q: Why cant the seller participate in the
bidding?
A: He cannot bid because in doing such he can
manipulate the biddings of other participants
Note: it is the seller who will set the terms and
condition of the sale. If the seller will bid in the
auction without reserving such right and
informing the public, the sales will be
considered as fraudulent.
Q: Will such fraud affect the perfection of the
contract?
A: Yes, the contract will be VOID with NO force
and effect
B. Sales by sample and/ or description
(1481)
Sales by Sample and/or Description (1481)
a. The bulk of the goods
correspond to either or both
b. The buyer must have
opportunity to compare
c. Effect: the contract may
rescinded at the option of the buyer
CIVIL LAW SALES
PACIFIC COMMERCIAL COMPAN vs.
ERMITA MARKET & COLD STORES, INC.
Plaintiff contracted to sell to defendant an
automatic refrigerating machine as per
description stated in the sales contract. The
machine was delivered and by mutual
agreement the vendor installed the machine.
The machine did not give the results expected
from it, and the defendant refused to pay the
balance of its purchase price and the cost of
the installation of the machine. Thereupon
plaintiff brought this action.
Held: The fact that the defendant could not
use the machine satisfactorily in the three
cold stores divisions cannot be attributed to
plaintiff's fault; the machine was strictly in
accordance with the written contract between
the parties, and the defendant can hardly
honestly say that there was any deception by
the plaintiff.
Sale of Personalty payable by Installments
(Recto Law)
a. Alternative remedies in case of non-
payment (1484)
1) To exact fulfillment of the
obligation
2) Cancel the sale should the
vendee fail to pay two or more installments
i) This is an exception
to 1191
3) Foreclose the chattel
mortgage (if one was
constituted) should the
vendee fail to pay two or more
installments. But there may
be no further action to recover
the unpaid balance. A
contrary stipulation is void.
Cases:
must
1) Promissory note with chattel mortgage
an MACONDRAY V DE SANTOS
Granting that there was a contract between
be the parties for the sale of personal property
payable in installments, which does not clearly
 CIVIL LAW SALES
appear in the record before this court, the
complaint does not allege nor does it appear
in the record that there was a failure to pay
twoor more installments. On the contrary the
promissory note, copied in the complaint, was
executed January 11, 1934, and, according to
the complaint, on or about January 21,
1934,the automobile, while in the possession
of the defendant, was wrecked and by reason
of the failure of the defendant to replace said
automobile or to pay the value thereof the
plaintiff foreclosed the mortgage on what
remained of the wrecked automobile and
brought this suit to recover the balance due
on the promissory note executed in its favor.
In order to apply the provisions of article
1454-A of the Civil Code it must appear that
there was a contract for the sale of personal
property payable in installments and that
there has been a failure to pay two or more
installments.
2) Sale of car on straight term
LEVY HERMANOS V GERVACIO
In Macondray & Co. vs. De Santos (33 OG
2170), it was held that in order to apply the
provisions of article 1454-A of the Civil Code it
must appear that there was a contract for the
sale of personal property payable in
installments and that there has been a failure
to pay two or more installments. The
contract, in the present case, while a sale of
personal property, is not, however, one on
installments, but on straight term, in which
the balance, after payment of the initial sum,
should be paid in its totality at the time
specified in the promissory note.
The transaction is not, therefore, the one
contemplated in Act 4122 and accordingly the
mortgagee is not bound by the prohibition
therein contained as to its right to the
recovery of the unpaid balance.
Theoretically, there is no difference between
paying the price in two installments and
paying the same partly in cash and partly in
one installment, in so far as the size of each
partial payment is concerned; but in actual
practice the difference exists, for, according to
the regular course of business, in contracts
providing for payment of the price in two
installments, there is generally a provision for
initial payment.
A cash payment cannot be considered as a
payment by installment, and even if it can be
so considered, still the law does not apply, for
it requires non-payment of two or more
installments in order that its provisions may
be invoked. In the present case, only one
installment was unpaid.
3) Sale of Truck on installment where
foreclosure was not pursued
SPOUSES ROMULO DE LA CRUZ and DELIA
DE LA CRUZ, and DANIEL FAJARDO vs.
ASIAN CONSUMER AND INDUSTRIAL
FINANCE CORPORATION and the
HONORABLE COURT OF APPEALS,
Facts:
On 22 September 1982, the spouses Romulo
de la Cruz and Delia de la Cruz, and one
Daniel Fajardo, petitioners herein, purchased
on installment basis one (1) unit Hino truck
from Benter Motor Sales Corporation (BENTER
for brevity). To secure payment, they executed
in favor of BENTER a chattel mortgage over
the vehicle 1 and a promissory note for
P282,360.00 payable in thirty (30) monthly
installments of P9,412.00. 2 On the same
date, BENTER assigned its rights and interest
over the vehicle in favor of private respondent
Asian Consumer and Industrial Finance
Corporation (ASIAN for brevity). 3 Although
petitioners initially paid some installments
they subsequently defaulted on more than two
(2) installments. Thereafter, notwithstanding
the demand letter of ASIAN, 4 petitioners
failed to settle their obligation.
On 26 September 1984, by virtue of a petition
for extrajudicial foreclosure of chattel
mortgage, the sheriff attempted to repossess
the vehicle but was unsuccessful because of
the refusal of the son of petitioner, Rolando de
la Cruz to surrender the same. Hence, the
return of the sheriff that the service was not
satisfied. LLpr
On 10 October 1984, petitioner Romulo de la
Cruz brought the vehicle to the office of ASIAN
and left it there where it was inventoried and
inspected. 5
On 27 November 1984, ASIAN filed an
ordinary action with the court a quo for
collection of the balance of P196,152.99 of the
 CIVIL LAW SALES
purchase price, plus liquidated damages and
attorney's fees.
Petitioners take exception. They nevertheless
insist that he should not later be allowed to
change course midway in the process,
abandon the foreclosure and shift to other
remedies such as collection of the balance,
especially after having recovered the
mortgaged chattel from them and while
retaining possession thereof.
HELD:
The instant case is covered by the so-called
"Recto Law", now Art. 1484 of the New Civil
Code, which provides: "In a contract of sale of
personal property the price of which is
payable in installments, the vendor may
exercise any of the following remedies: (1)
Exact fulfillment of the obligation, should the
vendee fail to pay; (2) Cancel the sale, should
the vendee's failure to pay cover two or more
installments; (3) Foreclose the chattel
mortgage on the thing sold, if one has been
constituted, should the vendee's failure to pay
cover two or more installments. In this case,
he shall have no further action against the
purchaser to recover any unpaid balance of
the price. Any agreement to the contrary shall
be void." In this jurisdiction, the three (3)
remedies provided for in the "Recto Law" are
alternative and not cumulative; the exercise of
one would preclude the other remedies.
Consequently, should the vendee-mortgagor
default in the payment of two or more of the
agreed installments, the vendor-mortgagee
has the option to avail of any of these three
(3) remedies: either to exact fulfillment of the
obligation, to cancel the sale, or to foreclose
the mortgage on the purchased chattel, if one
was constituted. (Pacific Commercial Co.
vs. De la Rama)
It is thus clear that while ASIAN eventually
succeeded in taking possession of the
mortgaged vehicle, it did not pursue the
foreclosure of the mortgage as shown by the
fact that no auction sale of the vehicle was
ever conducted. "Under the law, the delivery
of possession of the mortgaged property to
the mortgagee, the herein appellee, can only
operate to extinguish appellant's liability if the
appellee had actually caused the foreclosure
sale of the mortgaged property when it
recovered possession thereof. Consequently,
in the case before Us, there being no actual
foreclosure of the mortgaged property, ASIAN
is correct in resorting to an ordinary action for
collection of the unpaid balance of the
purchase price.
4) MAGNA VS COLARINA
Undoubtedly the principal object of the above
amendment (referring to Act 4122 amending
Art. 1454, Civil Code of 1889) was to remedy
the abuses committed in connection with the
foreclosure of chattel mortgages. This
amendment prevents mortgagees from
seizing the mortgaged property, buying it at
foreclosure sale for a low price and then
bringing the suit against the mortgagor for a
deficiency judgment. The almost invariable
result of this procedure was that the
mortgagor found himself minus the property
and still owing practically the full amount of
his original indebtedness.
In its Memorandum before us, petitioner
resolutely declared that it has opted for the
remedy provided under Article 1484(3) of the
Civil Code, that is, to foreclose the chattel
mortgage.
It is, however, unmistakable from the
Complaint that petitioner preferred to avail
itself of the first and third remedies under
Article 1484, at the same time suing for
replevin. For this reason, the Court of Appeals
justifiably set aside the decision of the RTC.
Perusing the
Complaint, the petitioner, under its prayer
number 1, sought for the payment of the
unpaid amortizations which is a remedy that is
provided under Article 1484(1) of the Civil
Code, allowing an unpaid vendee to exact
fulfillment of the obligation. At the same time,
petitioner prayed that Colarina be ordered to
surrender possession of the vehicle so that it
may ultimately be sold at public auction,
which remedy is contained under Article
1484(3). Such a scheme is not only irregular
but is a flagrant circumvention of the
prohibition of the law. By praying for the
foreclosure of the chattel, Magna Financial
Services Group, Inc. renounced whatever
claim it may have under the promissory note.
Article 1484, paragraph 3, provides that if the
vendor has availed himself of the right to
 CIVIL LAW SALES
foreclose the chattel mortgage, he shall have
no further action against the purchaser to
recover any unpaid balance of the purchase
price. Any agreement to the contrary shall be
void. In other words, in all proceedings for
the foreclosure of chattel mortgages executed
on chattels which have been sold on the
installment plan, the mortgagee is limited to
the property included in the mortgage.
D. Leases of personalty with
option to buy.
Cases:
Elisco Tool and Manufacturing Corp. vs.
CA
Rolando Lantan was employed at the Elisco
Tool Manufacturing Corporation as head of its
cash department. On January 9, 1980, he
entered into an agreement with the company,
called lease with option to buy car within 5
years. That owner ship shall retain with the
company until full payment and all necessary
expenses for maintenance shall be borne by
the employee. Subsequently the company has
ceased operation and the employee was laid
off. It took the company 2 years to institute
proceedings.
Sellers desirous of making conditional
sales of their goods, but who do not
wish openly to make a bargain in that
form, for one reason or another, have
frequently resorted to the device of
making contracts in the form of leases
either with options to the buyer to
purchase for a small consideration at
the end of term, provided the so-
called rent has been duly paid, or with
stipulations that if the rent throughout
the term is paid, title shall thereupon
vest in the lessee. It is obvious that
such transactions are leases only in
name. The so-called rent must
necessarily be regarded as
payment of the price in
installments since the due
payment of the agreed amount
results, by the terms of the bargain,
in the transfer of title to the lessee.
The so-called monthly rentals are in
truth form monthly amortization on
the price of the car. The contract being
one of sale on installment, the Court
of Appeals correctly applied to it the
following provisions of the Civil Code:
Art. 1484. In a contract of sale of
personal property the price of which is
payable in installments, the vendor
may exercise any of the following
remedies:
(1) Exact fulfillment of the
obligation, should the vendee fail to
pay;
(2) Cancel the sale, should the
vendee's failure to pay cover two or
more installments;
(3) Foreclose the chattel
mortgage on the thing sold, if
one has been constituted,
should the vendee's failure to
pay cover two or more
installments. In this case, he
shall have no further action
against the purchaser to
recover any unpaid balance of
the price. Any agreement to
the contrary shall be void.
The remedies provided for in Art. 1484
are alternative, not cumulative. The
exercise of one bars the exercise of
the others. limitation applies to
contracts purporting to be leases of
personal property with option to buy
by virtue of Art. 1485. The condition
that the lessor has deprived the lessee
of possession or enjoyment of the
thing for the purpose of applying Art.
1485 was fulfilled in this case by the
filing by petitioner of the complaint for
replevin to recover possession of
movable property. By virtue of the
writ of seizure issued by the trial
court, the deputy sheriff seized the
vehicle on August 6, 1986 and thereby
deprived private respondents of its
use. The car was not returned to
private respondent until April 16,
1989, after two (2) years and eight (8)
months, upon issuance by the Court of
Appeals of a writ of execution.
The employee having found to have
paid more than the value of the thing
P60,000 should be considered as
payment of the full purchase price. It
further petitioner to pay private
respondents the amount of P431.94 as
excess payment, as well as rentals at
the rate of P1,000 a month for
depriving private respondents of the
use of their car.
PCI Leasing and finance vs. Giraffe X
Giraffe entered into an agreement with PCI
leasing over 2 machines worth P8,000,000.
Giraffe agreed to pay P116,878.21 monthly
and P181,362 for the other machine. It has
also remitted the amount of P3,120,000 as
goodwill. A year into the life of the lease
agreement, respondent defaulted in paying
the monthly rentals. PCI Sued Giraffe for
possession of the machineries and for
payment of the remaining term.
Issue: Whether the underlying lease
agreement are covered between 1484 and
1485 of the New Civil Code?
 CIVIL LAW SALES
SC: Yes they are. Evidently the contract
above is in reality an option to purchase the
equipment.
The Recto Law
Art. 1484. In a contract of sale of personal
property the price of which is payable in
installments, the vendor may exercise any of
the following
3.) Foreclose the chattel mortgage on the
thing sold, if one has been constituted, should
the vendees failure to pay cover two or more
installments. In this case he shall have no
further action against the purchaser to recover
any unpaid balance of the price. Any
agreement contrary shall be void.
Art. 1485. The preceding article shall be
applied to contract purporting to be leases of
personal property with the option to buy,
when the leasor deprived the lesee of the
possession or enjoyment of the thing.
Therefore Giraffe is not liable to pay
for the remaining term since the
machineries has been foreclosed.
PCI LEASING- GIRAFFE lease
agreement is in reality a lease with an
option to purchase the equipment.
This has been made manifest by the
actions of the petitioner itself,
foremost of which is the declarations
made in its demand letter to the
respondent. There could be no other
explanation than that if the
respondent paid the balance, then it
could keep the equipment for its own;
if not, then it should return them. This
is clearly an option to purchase given
to the respondent. Being so, Article
1485 of the Civil Code should apply.
E. Sale of Real Property on Installments (
Maceda Law, RA 6552) Reality
Installment Buyer Protection Act.
a. Applicability- Real estate bought
installment basis.
Transactions covered: sale/ financing of real
estate on installment payments, including
residential condominium apartments but:
1. industrial lots
2. commercial bldg..
3. sales to tenants under RA 3844
b. Rules when the buyer has paid at least 2
years of installments.
1.) Rights of Buyers
I. In case of default in payment Section 3 of
R.A. No. 6552 provided for the rights of the
buyer in case of default in the payment of
succeeding installments, where he has already
paid at least two (2) years of installments,
thus:
(b) If the contract is cancelled, the seller shall
refund to the buyer the cash surrender value
of the payments on the property equivalent to
fifty per cent of the total payments made;
provided, that the actual cancellation of the
contract shall take place after thirty days from
receipt by the buyer of the notice of
cancellation or the demand for rescission of
the contract by a notarial act and upon full
payment of the cash surrender value to the
buyer."
Right to update payments
Right to assign/ reinstate contract (must be in
Public document)
Section 5. Under Section 3 and 4, the buyer
shall have the right to sell his rights or assign
the same to another person or to reinstate the
contract by updating the account during the
grace period and before actual cancellation of
the contract. The deed of sale or assignment
shall be done by notarial act.
1. The buyer has the right to sell/assign
his right to another person (must be
done by notarial act)
on
2. The buyer has the right to reinstate
the contract by upgrading the account
during the grace period and before
actual cancellation of the contract.
Right to advance payment w/out interest
"(a) To pay, without additional interest,
the unpaid installments due within the
total grace period earned by him,
which is hereby fixed at the rate of
one month grace period for every one
year of installment payments made; x
xx
1. The buyer has the right to pay in
advance any installment/ the full
balance of the purchase price anytime
 CIVIL LAW SALES
w/out interest and to have such full
payment annotated in the certificate
of title.
Section 6. The buyer shall have the right to
pay in advance any installment or the full
unpaid balance of the purchase price any time
without interest and to have such full payment
of the purchase price annotated in the
certificate of title covering the property.
NOTE: to be refunded of the cash surrender
value of his payments if the contract is
cancelled.
i) Actual cancellation takes place:
1)after 30 days from receipt of notice
of cancellation by notarial act.
2) upon full payment of cash
surrender value.
Sale of real property on installments (Maceda
Law [RA 6552])
a.When the buyer has paid at least two years
of installments
1)Rights of buyer:
ii) Default in payment
aa) To pay without additional interest, the
unpaid installments (cash surrender value)
within the grace period
bb) Grace period is one month for every year
of installment payments made
Limitation: The right can be exercised only
once every 5 years
ii) Cancellation of sale
aa) Up to 5 years installments, refund
of 50% of payments
bb) After 5 years of installments,
additional 5%/year but shall not exceed 90%
of total payments made
When cancellation takes effect:
aa) After 30 days from receipt by the buyer of
(notarized) notice of cancellation; or
bb) After 30 days from receipt by the buyer of
notarial demand for rescission
*In both cases after full payment of cash
surrender value
c. When the buyer has paid less than two
years installments
1) The buyer has at least 60 days grace
period within which to pay the installment due
2) After the grace period, contract may be
cancelled as in B above
(If the buyer fails to pay the installments due
at the expiration of the grace period, the seller
may cancel the contract after thirty days from
receipt by the buyer of the notice of
cancellation or the demand for rescission of
the contract by a notarial act.)
Pagtalunan vs. De Manzano
(Patricio), petitioners stepfather and
predecessor-in-interest, entered into a
Contract to Sell with respondent, wife of
Patricios former mechanic, Teodoro Manzano,
whereby the former agreed to sell, and the
latter to buy, a house and lot which formed
half of a parcel of land. The consideration of
P17,800 was agreed to be paid in the following
manner: P1,500 as downpayment upon
execution of the Contract to Sell, and the
balance to be paid in equal monthly
installments of P150 on or before the last day
of each month until fully paid.
It was also stipulated in the contract that
respondent could immediately occupy the
house and lot; that in case of default in the
payment of any of the installments for 90 days
after its due date, the contract would be
automatically rescinded without need of
judicial declaration, and that all payments
made and all improvements done on the
premises by respondent would be considered
as rentals for the use and occupation of the
property or payment for damages suffered,
and respondent was obliged to peacefully
vacate the premises and deliver the
possession thereof to the vendor.
 CIVIL LAW SALES
Petitioner claimed that respondent paid only
P12,950. She allegedly stopped paying after
December 1979 due to personal problems
with the petitioner. Petitioner asserted that
when respondent ceased paying her
installments, her status of buyer was
automatically transformed to that of a lessee.
Therefore, she continued to possess the
property by mere tolerance of Patricio.
Issue: Whether the respondent has the right
to occupy the premises?
SC: Yes, According to Republic Act No. 6552 --
"The Realty Installment Buyer Protection Act,"
or more popularly known as the Maceda Law
(b) If the contract is cancelled, the seller shall
refund to the buyer the cash surrender value
of the payments on the property equivalent to
fifty percent of the total payments made and,
after five years of installments, an additional
five percent every year but not to exceed
ninety percent of the total payments made:
Provided, That the actual cancellation of the
contract shall take place after thirty days from
receipt by the buyer of the notice of
cancellation or the demand for rescission of
the contract by a notarial act and upon full
payment of the cash surrender value to the
buyer.9
The Court agrees with petitioner that the
cancellation of the Contract to Sell may be
done outside the court particularly when the
buyer agrees to such cancellation.
However, the cancellation of the contract by
the seller must be in accordance with Sec. 3.
Firstly the demand letter made by the
petitioner to vacate the premises does not
constitute notice of cancellation. Second
petitioner cannot insist on compliance with
the requirement by assuming that the cash
surrender value payable to the buyer had
been applied to rentals of the property after
respondent failed to pay the installments due.
Therefore a deed of absolute sale shall be
made after payment of purchase price.
c. Rules when the buyer has paid less than 2
years of installments ( Refer to case below)
1) where the buyer paid less than 2 years
installments
Ramos vs Heruela
Down payments, deposits or options on the
contract shall be included in the computation
of the total number of installments made.
Sec. 4.In case where less than two years of
installments were paid, the seller shall give
the buyer a grace period of not less than sixty
days from the date the installment became
due. If the buyer fails to pay the installments
due at the expiration of the grace period, the
seller may cancel the contract after thirty
days from receipt by the buyer of the notice of
cancellation or the demand for rescission of
the contract by a notarial act.
In this case, the spouses Heruela paid less
than two years of installments. Thus, Section 4
of RA 6552 applies. However, there was
neither a notice of cancellation nor demand
for rescission by notarial act to the spouses
Heruela. In Olympia Housing, Inc. v. Panasiatic
Travel Corp., 22 the Court ruled that the
vendor could go to court to demand judicial
rescission in lieu of a notarial act of rescission.
However, an action for reconveyance is not an
action for rescission. The Court explained in
Olympia:
The action for reconveyance filed by petitioner
was predicated on an assumption that its
contract to sell executed in favor of
respondent buyer had been validly cancelled
or rescinded. The records would show that,
indeed, no such cancellation took place at any
time prior to the institution of the action for
reconveyance. . . .
xxx xxx xxx
. . . Not only is an action for reconveyance
conceptually different from an action for
rescission but that, also, the effects that flow
from an affirmative judgment in either case
would be materially dissimilar in various
respects. The judicial resolution of a contract
gives rise to mutual restitution which is not
necessarily the situation that can arise in an
action for reconveyance. Additionally, in an
action for rescission (also often termed as
resolution), unlike in an action for
reconveyance predicated on an extrajudicial
 CIVIL LAW SALES
rescission (rescission by notarial act), the
Court, instead of decreeing rescission, may
authorize for a just cause the fixing of a
period. 23
In the present case, there being no valid
rescission of the contract to sell, the action for
reconveyance is premature. Hence, the
spouses Heruela have not lost the statutory
grace period within which to pay. The trial
court should have fixed the grace period to
sixty days conformably with Section 4 of RA
6552.
2) Sale of subdivision lot on installments
where the buyer defaulted.
Active Realty Corporation vs. Daroya
ACTIVE REALTY & DEVELOPMENT
CORPORATION entered into a Contract to Sell1
with respondent NECITA DAROYA whereby the
latter agreed to buy a 515 sq. m. lot for
P224,025.00 in petitioners subdivision to be
paid in amortization within 5 years, valued at
P346,367.00, a figure higher than that stated
as the contract price. The buyer defaulted in
three (3) monthly amortizations. Petitioner
sent respondent a notice of cancellation2 of
their contract to sell. When respondent offered
to pay for the balance of the contract price,
petitioner refused as it has allegedly sold the
lot to another buyer. The respondent has
already paid 4 years. already more than the
contract price.
Issue: Whether or not the petitioner can be
compelled to refund to the respondent the
value of the lot or to deliver a substitute lot at
respondents option?
SC: Yes, According to Republic Act No. 6552 --
"The Realty Installment Buyer Protection Act,"
or more popularly known as the Maceda Law
More specifically, Section 3 of R.A. No. 6552
provided for the rights of the buyer in case of
default in the payment of succeeding
installments, where he has already paid at
least two (2) years of installments, thus:
"(a) To pay, without additional interest, the
unpaid installments due within the total grace
period earned by him, which is hereby fixed at
the rate of one month grace period for every
one year of installment payments made; x x x
(b) If the contract is cancelled, the seller shall
refund to the buyer the cash surrender value
of the payments on the property equivalent to
fifty per cent of the total payments made;
provided, that the actual cancellation of the
contract shall take place after thirty days from
receipt by the buyer of the notice of
cancellation or the demand for rescission of
the contract by a notarial act and upon full
payment of the cash surrender value to the
buyer."
We hold that the contract to sell between the
parties remains valid and subsisting. Following
Section 3(a) of R.A. No. 6552, respondent has
the right to offer to pay for the balance of the
purchase price, without interest, which she did
in this case. However since the lot has been
sold to another party it is only just and
equitable that the petitioner be ordered to
refund to respondent the actual value of the
lot resold, i.e., P875,000.00, with 12% interest
per annum.
F. PD No. 957
a. Important provisions
Sec. 4, 5, 7,18,23 ,24 ,25
Section 4. Registration of Projects The
registered owner of a parcel of land who
wishes to convert the same into a subdivision
project shall submit his subdivision plan to the
Authority which shall act upon and approve
the same, upon a finding that the plan
complies with the Subdivision Standards' and
Regulations enforceable at the time the plan is
submitted. The same procedure shall be
followed in the case of a plan for a
condominium project except that, in addition,
said Authority shall act upon and approve the
plan with respect to the building or buildings
included in the condominium project in
accordance with the National Building Code
(R.A. No. 6541).
 CIVIL LAW SALES
The subdivision plan, as so approved, shall
then be submitted to the Director of Lands for
approval in accordance with the procedure
prescribed in Section 44 of the Land
Registration Act (Act No. 496, as amended by
R.A. No. 440): Provided, that it case of
complex subdivision plans, court approval
shall no longer be required. The condominium
plan as likewise so approved, shall be
submitted to the Register of Deeds of the
province or city in which the property lies and
the same shall be acted upon subject to the
conditions and in accordance with the
procedure prescribed in Section 4 of the
Condominium Act (R.A. No. 4726).
The owner or the real estate dealer interested
in the sale of lots or units, respectively, in
such subdivision project or condominium
project shall register the project with the
Authority by filing therewith a sworn
registration statement containing the
following information:
(a) Name of the owner;
(b) The location of the owner's principal
business office, and if the owner is a non-
resident Filipino, the name and address of his
agent or representative in the Philippines is
authorized to receive notice;
(c) The names and addresses of all the
directors and officers of the business firm, if
the owner be a corporation, association, trust,
or other entity, and of all the partners, if it be
a partnership;
(d) The general character of the business
actually transacted or to be transacted by the
owner; and
(e) A statement of the capitalization of the
owner, including the authorized and
outstanding amounts of its capital stock and
the proportion thereof which is paid-up.
The following documents shall be attached to
the registration statement:
(a) A copy of the subdivision plan or
condominium plan as approved in accordance
with the first and second paragraphs of this
section.
(b) A copy of any circular, prospectus,
brochure, advertisement, letter, or
communication to be used for the public
offering of the subdivision lots or
condominium units;
(c) In case of a business firm, a balance sheet
showing the amount and general character of
its assets and liabilities and a copy of its
articles of incorporation or articles of
partnership or association, as the case may
be, with all the amendments thereof and
existing by-laws or instruments corresponding
thereto.
(d) A title to the property which is free from all
liens and encumbrances: Provided, however,
that in case any subdivision lot or
condominium unit is mortgaged, it is sufficient
if the instrument of mortgage contains a
stipulation that the mortgagee shall release
the mortgage on any subdivision lot or
condominium unit as soon as the full purchase
price for the same is paid by the buyer.
The person filing the registration statement
shall pay the registration fees prescribed
therefor by the Authority.
Thereupon, the Authority shall immediately
cause to be published a notice of the filing of
the registration statement at the expense of
the applicant-owner or dealer, in two
newspapers general circulation, one published
in English and another in Pilipino, once a week
for two consecutive weeks, reciting that a
registration statement for the sale of
subdivision lots or condominium units has
been filed in the National Housing Authority;
that the aforesaid registration statement, as
well as the papers attached thereto, are open
to inspection during business hours by
interested parties, under such regulations as
the Authority may impose; and that copies
thereof shall be furnished to any party upon
payment of the proper fees.
The subdivision project of the condominium
project shall be deemed registered upon
completion of the above publication
requirement. The fact of such registration shall
be evidenced by a registration certificate to be
issued to the applicant-owner or dealer.
Section 5. License to sell. Such owner or
dealer to whom has been issued a registration
certificate shall not, however, be authorized to
 CIVIL LAW SALES
sell any subdivision lot or condominium unit in
the registered project unless he shall have
first obtained a license to sell the project
within two weeks from the registration of such
project.
The Authority, upon proper application
therefor, shall issue to such owner or dealer of
a registered project a license to sell the
project if, after an examination of the
registration statement filed by said owner or
dealer and all the pertinent documents
attached thereto, he is convinced that the
owner or dealer is of good repute, that his
business is financially stable, and that the
proposed sale of the subdivision lots or
condominium units to the public would not be
fraudulent.
Section 7. Exempt transactions. A license to
sell and performance bond shall not be
required in any of the following transactions:
(a) Sale of a subdivision lot resulting from the
partition of land among co-owners and co-
heirs.
(b) Sale or transfer of a subdivision lot by the
original purchaser thereof and any subsequent
sale of the same lot.
(c) Sale of a subdivision lot or a condominium
unit by or for the account of a mortgagee in
the ordinary course of business when
necessary to liquidate a bona fide debt.
Section 18. Mortgages. No mortgage on any
unit or lot shall be made by the owner or
developer without prior written approval of the
Authority. Such approval shall not be granted
unless it is shown that the proceeds of the
mortgage loan shall be used for the
development of the condominium or
subdivision project and effective measures
have been provided to ensure such utilization.
The loan value of each lot or unit covered by
the mortgage shall be determined and the
buyer thereof, if any, shall be notified before
the release of the loan. The buyer may, at his
option, pay his installment for the lot or unit
directly to the mortgagee who shall apply the
payments to the corresponding mortgage
indebtedness secured by the particular lot or
unit being paid for, with a view to enabling
said buyer to obtain title over the lot or unit
promptly after full payment thereto;
Section 23. Non-Forfeiture of Payments. No
installment payment made by a buyer in a
subdivision or condominium project for the lot
or unit he contracted to buy shall be forfeited
in favor of the owner or developer when the
buyer, after due notice to the owner or
developer, desists from further payment due
to the failure of the owner or developer to
develop the subdivision or condominium
project according to the approved plans and
within the time limit for complying with the
same. Such buyer may, at his option, be
reimbursed the total amount paid including
amortization interests but excluding
delinquency interests, with interest thereon at
the legal rate.
Section 24. Failure to pay installments. The
rights of the buyer in the event of this failure
to pay the installments due for reasons other
than the failure of the owner or developer to
develop the project shall be governed by
Republic Act No. 6552.
Where the transaction or contract was entered
into prior to the effectivity of Republic Act No.
6552 on August 26, 1972, the defaulting buyer
shall be entitled to the corresponding refund
based on the installments paid after the
effectivity of the law in the absence of any
provision in the contract to the contrary.
Section 25. Issuance of Title. The owner or
developer shall deliver the title of the lot or
unit to the buyer upon full payment of the lot
or unit. No fee, except those required for the
registration of the deed of sale in the Registry
of Deeds, shall be collected for the issuance of
such title. In the event a mortgage over the lot
or unit is outstanding at the time of the
issuance of the title to the buyer, the owner or
developer shall redeem the mortgage or the
corresponding portion thereof within six
months from such issuance in order that the
title over any fully paid lot or unit may be
secured and delivered to the buyer in
accordance herewith.
Cases:
Far East Bank & Trust Co vs. Marquez
 CIVIL LAW SALES
Marquez entered into a contract to sell with
TSE involving a 52.5 sqm lot and a three
storey townhouse for P800,000. Later
respondent was able to pay a total of
P600,000. TSE then mortgaged the whole
property to Far East Bank. TSE was unable to
pay and the property was foreclosed and sold
in favor of Far East Bank.
Issue: 1.)Whether or not the mortgage
contract violated Section 18 of PD.957, hence
void insofar as third persons are concerned.
2.)Who has a higher right the new buyer or
the respondent?
SC: Yes violated Sec. 18. as provides as
follows.
Sec. 18. Mortgages- No mortgage on any unit
or lot shall be made by the owner or developer
without prior written approval of the authority.
Such approval shall not be granted unless it is
shown that the proceeds of the mortgage loan
shall be used for the development of the
condominium or subdivision project and
effective measures have been provided to
ensure such utilization. The loan value of each
lot or unit covered by the mortgage shall be
determined and the buyer thereof, if any, shall
be notified before the release of the loan. The
buyer may, at his option, pay his installment
for the lot or unit directly to the mortgagee
who shall apply the payments to the
corresponding mortgage indebtness secured
by the particular lot or unit being paid for ,
with a view to enabling said buyer to obtain
title over the lot or unit promptly after full
payment thereof.
Since TSE did not obtain prior approval from
the NHA the mortgage is void as regarding to
the property to the respondent as he has no
standing to question the validity of the other
property.
2.) Respondent has a higher right over the
property. Petitioner cannot be considered as a
buyer in good faith. He should have
considered that it was a town house that was
already in progress. The conversion of status
from mortgagee to buyer will not lessen the
importance of such knowledge.
Tamayo vs. Huang
Respondents Huang registered owners of four
parcels of land located in Barangay Matina,
Davao City executed a contract of "Indenture"
with EAP Development Corporation (EAP)
under which EAP undertook to manage and
develop said parcels of land into a first class
subdivision and sell the lots therein in, Doa
Luisa Village (the subdivision).
Carlos R. Tamayo (petitioner) entered into a
contract to sell with respondents through EAP
for a certain lot. Under the contract, petitioner
was to pay upon execution P35,749.60 and
the balance, including interest at the rate of
14% per annum, in 60 monthly installments of
P4,791.40, without necessity of demand; and
if petitioner failed to pay the installments,
respondents were given the right to demand
interest thereon at the rate of 14% per
annum, to be computed on the same day of
the month the installments became due. Later
on the development of the subdivision was put
to stop by EAP, in effect petitioner stopped
paying the monthly amortization. The
respondents sent the petitioner a demand
letter, but after the reply of the petitioner with
an explanation of stop payment the
respondent was unheard of.. After 5 years the
development was soon in progress and
petitioner offered to pay the full purchase
price which was already rejected by the
respondent. Later on the property was sold by
the respondent to another person.
Issue: 1.)Did the petitioner have any legal
basis for stop payment? 2.)Is the contract to
sell between the parties rescinded?
SC: 1.) Yes.According Section 23 of PD 957
requires only due notice to the owner or
developer for stopping further payments by
reason of the latters failure to develop the
subdivision according to the approved plans
and within the time limit.
Therefore the buyer had the right to stop
payment due to the failure of the developer to
comply with the contract. He only needed to
give due notice to the owner(Huangs) or
Developer to give it effect.
2.) Yes. Respondents sent no notarized notice
or any notice of cancellation at all. In fact, it
 CIVIL LAW SALES
was only after petitioner filed on July 24, 1997
the complaint before the HLURB that
respondents offered to reimburse petitioner of
the total amount he had already paid.
The contract not having been cancelled in
accordance with law, it has remained valid
and subsisting. It was, therefore, within
petitioners right to maintain his option to
await the completion of the development of
and introduction of improvements in the
subdivision and thereafter, upon full payment
of the purchase price, without interest, compel
respondents to execute a deed of absolute
sale, but since the property was sold to a
buyer in good faith. The respondents should
refund the petitioner for the value of the
property when it was sold.
Cantemperante vs CRS realty
Facts:
Herein petitioners were among those who filed
before the HLURB a complaint 6 for the
delivery of certificates of title against
respondents CRS Realty Development
Corporation (CRS Realty), Crisanta Salvador
and Cesar Casal.
Petitioners averred that they had bought on an
installment basis subdivision lots from
respondent CRS Realty and had paid in full the
agreed purchase prices; but notwithstanding
the full payment and despite demands,
respondents failed and refused to deliver the
corresponding certificates of title to
petitioners. The complaint prayed that
respondents be ordered to deliver the
certificates of title corresponding to the lots
petitioners had purchased and paid in full and
to pay petitioners damages.
In his answer, respondent Casal averred that
despite his willingness to deliver them,
petitioners refused to accept the certificates
of title with notice of lis pendens covering the
subdivision lots.
Respondents Ang and Cuason claimed in their
answer with counterclaim 16 that respondent
Casal remained the registered owner of the
subdivided lots when they were transferred to
them and that the failure by petitioners to
annotate their claims on the title indicated
that they were unfounded. Respondent CRS
Realty and the Heirs of Laudiza were declared
in default for failure to file their respective
answers.
Issues:
Whether or not the absence of a license to sell
has rendered the sales void; (2) whether or
not the subsequent sale to respondent Cuason
and Ang constitutes double sale;
Held:
Petitioners assail the Court of Appeals' ruling
that the lack of the requisite license to sell on
the part of respondent CRS Realty rendered
the sales void; hence, neither party could
compel performance of each other's
contractual obligations.
The only requisite for a contract of sale or
contract to sell to exist in law is the meeting
of minds upon the thing which is the object of
the contract and the price, including the
manner the price is to be paid by the vendee.
Under Article 1458 of the New Civil Code, in a
contract of sale, whether absolute or
conditional, one of the contracting parties
obliges himself to transfer the ownership of
and deliver a determinate thing, and the other
to pay therefor a price certain in money or its
equivalent.
In the instant case, the failure by respondent
CRS Realty to obtain a license to sell the
subdivision lots does not render the sales void
on that ground alone especially that the
parties have impliedly admitted that there was
already a meeting of the minds as to the
subject of the sale and price of the contract.
The absence of the license to sell only
subjects respondent CRS Realty and its
officers civilly and criminally liable for the said
 CIVIL LAW SALES
violation under Presidential Decree (P.D.) No.
957 30 and related rules and regulations. The
absence of the license to sell does not affect
the validity of the already perfected contract
of sale between petitioners and respondent
CRS Realty.
As found by the Court of Appeals, in the case
at bar, the requirements of Sections 4 and 5 of
P.D. [No.] 957 do not go into the validity of the
contract, such that the absence thereof would
automatically render the contract null and
void. It is rather more of an administrative
convenience in order to allow a more effective
regulation of the industry.
Chapter 2
Capacity to Buy or Sell
Arts. 1489 1492
I. Parties and their Consent
A. Capacity in general (1489)
Art. 1489. All persons who are authorized in
this Code to obligate themselves, may enter
into a contract of sale, saving the
modifications contained in the following
articles.
Where necessaries are sold and
delivered to a minor or other person without
capacity to act, he must pay a reasonable
price therefor. Necessaries are those referred
to in article 290.
Note: A person who has both juridical capacity
and capacity to act is said to have full civil
capacity. It is understood that he is of legal
age and suffers no restriction on his capacity
to act, such person may enter into any
contract including sale.
B. Special Disqualifications to Buy
a. Between Spouses
Case:
1) Effect of sale of land to ones own
spouse
Uy Siu Pin vs. Cantollas, G.R. No. 46850,
June 20, 1940
Facts: There was a contract entered into
between Uy Siu Pin and Casimira and Blas,
which the latter agreed to deliver the
mortgaged land and to enjoy the same with its
improvements to the during the period of 15
years on condition that Uy Siu Pin would pay
El Hogar Filipino the unpaid balance of the
indebtedness of casimira and Blas, together
with all other expenses including realty taxes.
When the mortgage debtors, Casimira and
Blas, failed to redeem the land within the
statutory period, a final deed of sale was
issued in favor of the mortgagee, El Hogar
Filipino. The latter sold the land to Uy Siu Pin
and in turn sold the land to his wife Chua Hue.
Issues: Is the sale valid between Uy Siu Pin
and Chua Hue?
Held: SC said No. The sale from Uy Siu Pin to
his wife Chua Hue is null and void not only
because theformer had no right to dispose of
the land in contorversy but because the sale
comes within the prohibition of Article 1458 of
the Civil Code.
Note: The case did not extensively explicate
the reason why the sale between spouses are
prohibited. However, Art 1490 provides that
the husband and wife cannot sell property to
each other, except: (1) when a separation of
property was agreed upon in the marriage
settlements; or (2) when there has been a
judicial separation of property under articel
191.
Rationale behind the prohibiton: (a) to prevent
the stronger spouse from exploiting the
weaker spouse; (b) prevent donations
disguised as sales; (c) protect third persons,
specially creditors, against fraud through the
transfer of the properties of one spouse to the
other to evade payment of obligations.
2) Transfer in common law relationship
 CIVIL LAW SALES
Ching vs. Goyanko, G.R. No. 165879,
November 10, 2006
FACTS: Respondents claim that their parents
(Goyanko and Epifania) acquired a 661 square
meter property but they (the parents) were
Chinese citizens at the time, the property was
registered in the name of their aunt, Sulpicia
Ventura. Sulpicia executed a deed of sale over
the property in favor of reespondents father
Goyanko that in turn executed a deed of sale
over the same property in favor of his
common-law-wife-herein petitioner Maria B.
Ching. It was only after Goyankos death that
they discovered the transfer of the said
property to Ching. Respondents thus filed with
the RTC of Cebu City a complaint for recovery
of the property and the nullification of the
deed of sale.
ISSUE: Whether or not the sale of the
property by Goyanko to Ching is valid.
HELD:
The conveyance of Goyanko in favor of his
common-law-wife-herein petitioner, was null
and void. Article 1409 of the Civil Code states
inter alia that contracts whose cause, object,
or purpose is contrary to law, morals, good
customs, public order, or public policy are void
and inexistent from the very beginning. Article
1352 also provides that: Contracts without
cause, or with unlawful cause, produce no
effect whatsoever. The cause is unlawful if it is
contrary to law, morals, good customs. Public
order, or public policy. Additionally, the law
emphatically prohibits the spouses from
selling property to each other subject to
certain exceptions. Similarly, donations
between spouses during marriage are
prohibited. And this is so because if transfers
or conveyances between spouses were
allowed during marriage, that would destroy
the system of conjugal partnership, a basic
policy in civil law. It was also designed to
prevent the exercise of undue influence by
one spouse over the other, as well as to
protect the institution of marriage, which is
the cornerstone of family law. The prohibitions
apply to a couple living as husband and wife
without benefit of marriage, otherwise, the
condition of those who incurred guild would
turn out to be better that those in legal
union.
b. By Spouse without consent of the other
spouse - Void
C. Persons in Trust Relations
2. Sale to agent: Exception to prohibition
against sale by principal in favor of his agent.
Pelayo vs. Perez, G.R. No. 141323, June
8, 2005
FACTS: David Pelayo, by a Deed of Absolute
Sale, conveyed to Melki Perez two parcels of
agricultural land. Loreza, wife of David
Pelayo,k and another one whose signature is
illegible witnessed the execution of the deed.
Loreza, however, signed only the third page.
Perez asked Loreza to sign on the first and
second pages of the deed but refused, hence,
he instituted the instant complaint for specific
performance against the spouses. Petitioners,
in adopting the trial courts narration of
antecedent facts in their petition, admitted
that they authorized respondent to represent
them in negotiations with the squatters
occupying the disputed property and, in
consideration of respondents services, they
executed the subject deed of sale. Defendant
Pelayo claimed that the deed was without his
wifes consent, hence, it is null and void.
ISSUE: Whether or not the deed of sale was
null and void.
HELD: Petitioner Lorenza, by affixing her
signature to the Deed of Sale on the space
provided for witnesses, is deemed to have
given her implied consent to the contract of
sale. Sale is a consensual contract that is
perfected by mere consent, which may either
be express or implied. A wifes consent to the
husbands disposition of conjugal property
does not always have to be explicit or set forth
in any particular document, so long as it is
shown by acts of the wife that such consent or
approval was indeed given. In the present
case, although it appears on the face of the
deed of sale that Lorenza signed only as an
instrumental witness, circumstances leading
to the execution of said document point to the
fact that Lorenza was fully aware of the sale of
their conjugal property and consented to the
sale.
Under Article 173, in relation to Article 166,
both of the New Civil Code, when the deed in
 CIVIL LAW SALES

question was executed, the lack of marital to have on Tindalo Street, Manila. The motion
consent to the disposition of conjugal property was granted.
does not make the contract void ab initio but
merely voidable. It has been held that the
contract is valid until the court annuls the
same and only upon an action brought by the Socorro Roldan, as guardian, executed the
wife whose consent was not obtained. In the proper deed of sale in favor of her brother-in-
present case, despite respondents repeated law Dr. Fidel C. Ramos. Dr. Fidel C. Ramos
demands for Lorenza to affix her signature on executed in favor of Socorro Roldan,
all the pages of the deed of sale, showing personally, a deed of conveyance covering the
respondents insistence on enforcing said same seventeen parcels, for the sum of
contract, Lorenza still did not fle a case for P15,000.
annulment of the deed of sale. Thus, if the
transaction was indeed entered into without
Lorenzas consent, we find it quite puzzling
why for more than three and a half years,
Lorenza did nothing to seek the nullification of The Philippine Trust Company replaced
the assailed contract. Socorro Roldan as guardian, on August 10,
1948. And this litigation, started two months
later, seeks to undo what the previous
With regards to petitioners asservation that
guardian had done. The step-mother in effect,
the deed of sale is invalid under Article 1491
sold to herself, the properties of her ward,
(2) of the New Civil Code, we find such
contends the plaintiff, and the sale should be
argument unmeritorious. Petitioners, by
annulled because it violates Article 1459 of
signing the Deed of Sale in favor of
the Civil Code prohibiting the guardian from
respondent, are also deemed to have given
purchasing "either in person or through the
their consent to the sale of the subject
mediation of another" the property of her
property in favor of respondent, thereby
ward.
making the transaction an exception to the
general rule that agents are prohibited from
purchasing the property of their principals.

ISSUE:

Whether or not the sale was valid.

2) Sale to guardians

HELD:
Philippine Trust Co. vs Roldan

Facts: Parcels located in Guiguinto, Bulacan,

were part of the properties inherited by
As Guardianship is a trust of the highest order,
Mariano L. Bernardo from his father, Marcelo
the trustee cannot be allowed to have any
Bernardo, deceased. In view of his minority,
inducement to neglect his ward's interest; and
guardianship proceedings were instituted,
whenever the guardian acquires the ward's
wherein Socorro Roldan was appointed his
property through an intermediary, he violates
guardian. She was the surviving spouse of
the provision of Article 1459 of the Civil Code
Marcelo Bernardo, and the stepmother of said
and such transaction and subsequent ones
Mariano L. Bernardo.
emanating therefrom shall be annulled.

On July 27, 1947, Socorro Roldan filed in said

guardianship proceedings (Special Proceeding
2485, Manila), a motion asking for authority to
sell as guardian the 17 parcels for the sum of
P14,700 to Dr. Fidel C. Ramos, the purpose of
the sale being allegedly to invest the money in
a residential house, which the minor desired
Even without proof that she had connived with
Dr. Ramos. Remembering the general doctrine
that guardianship is a trust of the highest
order, and the trustee cannot be allowed to
 CIVIL LAW SALES
have any inducement to neglect his ward's
interest and in line with the court's suspicion
whenever the guardian acquires the ward's
property 1 we have no hesitation to declare
that in this case, in the eyes of the law,
Socorro Roldan took by purchase her ward's
parcels thru Dr. Ramos, and that Article 1459
of the Civil Code applies.
3. Sale to public officers
Maharlika Broadcasting Corp. vs. Tagle
FACTS: The GSIS was the registered owner of
a parcel of land that was sold to petitioner
Maharlika Publishing Corporation together
with the building thereon as well as the
printing machinery and equipment therein.
Among the conditions of the sale are that
petitioner shall pay to the GSIS monthly
installments until the total purchase price
shall be fully paid and that failure to pay any
monthly installment within 90 days from due
date, the contract shall be deemed
automatically cancelled. Maharlika failed to
pay the installments for several months. This
resulted to a public bidding of this particular
property. Petitioner submitted a letter-proposal
that reads: I bid to match the highest bidder.
The bidding committee rejected petitioners
bid and accepted the private respondent Luz
Tagles bid. After approval and confirmation of
the sale, the GSIS executed a Deed of
Conditional Sale in favor of Tagles. Luz Tagle is
the wife of Edilberto Tagle. Edilberto Tagle was
the Chief, Retirment Division, GSIS, from 1970
to 1978. He worked for the GSIS since 1952.
ISSUE: Whether or not the sale is valid.
HELD: In providing the prohibitions under
Article 1491, the Code tends to prevent fraud,
or more precisely, tends not give occasion for
fraud, which is what can and must be done.
The point is that he is a public officer and his
wife acts for and in his name in any
transaction with the GSIS. If he is allowed to
participate in the public bidding of properties
foreclosed or confiscated by the GSIS, there
will always be the suspicion among other
bidders and the general public that the insider
official had access to information and
connection with his fellow GSIS official as to
allow him to eventually acquire the property. It
is precisely the need to forestall such
suspicions and to restore confidence in the
public service that the Civil Code now declares
such transactions to be void from the
beginning and not merely voidable.
4. Sale/transfer to attorney
Gurrea vs. Suplico, G.R. No. 144320,
April 26, 2006
FACTS: Adelina Gurrea continued to be the
owner of the lot (TCT No. 58253) until her
death. Thereafter, a special proceeding was
instituted to settle her estate. Under her will,
the San Juan lot was bequeathed to Pilar and
Luis Gurrea, while 700,000 pesetas, of the
lot in Baguio and 1-hectare piece of land in
Negros Occidental were given to Ricardo
Gurrea. Ricardo Gurrea, represented by and
through his counsel Atty. Enrique Suplico filed
an Opposition in Special Proceeding No. 7185.
In consideration of said representation,
Ricardo Gurrea agreed to pay Atty. Suplico a
contigent fee of twenty (20%) of whatever is
due me, either real or personal property.
Later on, Ricardo withdrew his Opposition. The
properties adjudicated to Ricardo based on the
project of partition were the Baguio lot, San
Juan lot, and a parcel of land in Negros
Occidental. As payment of his attorneys fees,
Ricarod Gurrea offered the San Juan lot to Atty.
Suplico who was hesitant to accept as the
property was occupied by squatters. However,
in order not to antagonize his client, Atty.
Suplico agreed to Ricardos proposal with the
further understanding that he will receive an
additional commission of 5% if he sells the
Baguio property. Thereafter, Atty. Suplico
registered the deed of Transfer of Rights and
Interest and obtained the title to the San Juan
property under his name.
ISSUE: Whether or not the subject property is
still the object of litigation; If affirmative,
whether or not the sale is void for being
violative of the provisions of Article 1491 (5) of
the Civil Code.
HELD: The sale to Atty. Suplico is null and
void.
A thing is said to be in litigation only if there is
some contest or litigation over it in court, but
also from the moment that it becomes subject
to the judicial action of the judge. In the
 CIVIL LAW SALES
present case, there is no proof to show that at
the time the deed of Transfer of Rights and
Interest was executed, the probate court
issued an order granting the Motion for
Termination of Proceeding and Discharge of
the Executor and Bond. Since the judge has
yet to act on the above-mentioned motion, if
follows that the subject property which is the
subject matter of the deed of Transfer of
Rights and Interest, is still the object of
litigation.
Having been established that the subject
property was still the object of litigation at the
time the subject deed of Transfer of Rights and
Interest was executed, the assignment of
rights and interest over the subject property in
favor of respondent is null and void for being
violative of the provisions of Article 1491 of
the Civil Code which expressly prohibits
lawyers from acquiring property or rights
which may be the object of any litigation in
which they may take party by virtue of their
profession.
C. Incapacity to sell
a. Homesteaders
Cases
1. Sale of portions of a parcel of land (1)
prior to issuance and (2) within 5 years
from issuance of free patent
Manlapat vs. CA, G.R. No. 125585, June
8, 2005
FACTS: The controversy involves Lot No.
2204 that had been originally in the
possession of Jose Alvarez, Eduardos
grandfather, until his demise in 1916. It
remained unregistered until October 8, 1976
when OCT No. P-153 was issued in the name
of Eduardo pursuant to a free patent issued
in Eduardos name that was entered in the
Registry of Deed. Before the subject lot was
titled, Eduardo sold 533 sq.m. of the land to
Ricardo on December 19, 1954. The sale is
evidence by a deed of sale entitled
Kasulatan ng Bilihang Tuluyan ng Lupang
Walang Titulo which was signed by Eduardo
himself as vendor and his wife Engracia
Ancieto with a certain Santiago Enriquez
signing as witness. The Kasulatan was
registered with the Register of Deeds. On
March 18, 1981, another Deed of Sale
conveyed another portion of the subject lot
as right of way was executed by Eduardo in
favor of Ricardo. The deed was notarized.
Leon Banaag, as attorney-in-fact of his father-
in-law (Eduardo) mortgage with the Rural
Bank for P100,000.00 with the subject lot as
collateral. Banaag deposited the owners
duplicate certificate of OCT No. P-153 with
the bank. Ricardo and Eduardo died.
The Cruzes, upon learning their right to the
subject lot immediately tried to confront
petitioners mortgage and obtain the
surrender of the OCT. Having failed to
physically obtain the title from petitioners,
the Cruzes went to RBSP which had custody
of the owners duplicate certificate of the
OCT. They were able to secure a clearance to
borrow the title and was able to have the
Register of Deeds cancel the OCT and issue
two separate titles in the name of Ricardo
andEduardo.
ISSUE: Whether or not the sale of the land is
prohibited or not.
HELD: Free patent application implies the
recognition of the public dominion character
of the land and, hence, the five year
prohibition imposed by the Public land Act
against alienation or encumbrance of the
land covered by a free patent or homestead
should have been considered.
The deed of sale covering the 50 sq.m. right
of way executed on March 18, 1981 is
obviously covered by proscription, the free
patent having been issued on October 8,
1979. However, petitioners may recover the
portion sold since the prohibition was
imposed in favor of the free patent holder.
Under the Public Land Act, the prohibition to
alienate is predicated on the fundamental
policy of the State to preserve and keep in
the family of the homesteader that portion of
public land which the State has gratuitously
given to him, and recovery is allowed even
where the land acquired under the Public
Land Act was sold and not merely
encumbered, within the prohibited period.
The sale of the 533 sq.m. was executed 22
years before the issuance of the patent in
1976. Where the sale or transfer took place
before the filing of the free patent
application, whether by the vendor or the
 CIVIL LAW SALES
vendee, the prohibition should not be
applied. In such situation, neither the
prohibition not the rationale therefor which is
to keep in the family of the patentee that
portion of the public land which the
government has gratuitously given him, by
shielding him from the temptation to dispose
of his landholdings, could be relevant.
Precisely, he had disposed of his rights to the
lot even before the government could give
the title to him.
2. Effect of verbal sale within 5-year
prohibitory period
Manzano vs. Ocampo, L-46850, June 20,
1940
Facts: Victoriano Manzano, now deceased,
was granted a homestead patent on June 25,
1934, and the land was registered in his name
on July 25, 1934 under Original Certificate of
Title No. 4590. On January 4, 1938, he and
respondent Rufino Ocampo agreed on the sale
of said homestead for the amount of
P1,900.00, P1,100.00 of which was paid by
Ocampo to Manzano on the same day, and for
the balance, he executed a promissory note.
Knowing, however, that any sale of the
homestead at that time was prohibited and
void, the parties likewise agreed that the deed
of sale was to be made only after the lapse of
five years from the date of Manzano's patent.
And to protect the buyer Ocampo's rights in
the agreed sale, Manzano executed in his
favor a "Mortgage of Improvements" over the
homestead to secure the amount of P1,100.00
already received as down payment on the
price.
It is clear that a perfected contract of
sale had already been entered into by the
parties within the period of prohibition. There
was nothing "futuristic" in this agreement,
except that, being fully aware of the
prohibition, Manzano's title has not ripened
into absolute ownership.
This execution of the formal deed after
the expiration of the prohibitory period did not
and could not legalize a contract that was void
from its inception. Nor was this formal deed of
sale "a totally distinct transaction from the
promissory note and the deed of mortgagee
for it was executed only in compliance and
fulfillment of the vendor's previous promise,
under the perfected sale to execute in favor of
his vendee the formal act of conveyance after
the lapse of the period of inhibition of five
years from the date of the homestead patent.
Sale in question is illegal and void for
having been made within five years from the
date of Manzano's patent, in violation of
section 118 of the Public Land Law. Being void
from its inception, the approval thereof by the
Undersecretary of Agriculture and Natural
Resources after the lapse of five years from
Manzano's patent did not legalize the sale.
The result is that the homestead in question
must be returned to Manzano's heirs, who are,
in turn, bound to restore to Ocampo the, sum
of P3,000.00 received by Manzano as the price
thereof.
D. When incompetent buys he must pay a
reasonable price for necessaries
delivered to him. The resulting sale is
valid.
The above rule seems to be founded on
quasi-contract
E. Effect of forbidden sales
a. Between husband and wife under the
community regime, the sale
is void
1) But strangers cannot assail the transfer
b. Between persons in trust relations, as
regards
1) Those based on public trust
i) Public officers, employees,
government
experts (1491, par.
4), and
ii) Judges, Justices, Prosecutors,
Clerks of Court,
lawyers (1491,
par. 5) - such
sales are void
(1409, No. 7)
2) Those based on private trust -
i) Guardians (1491, par. 1)
ii) Agents (1491, par. 2)
ii) Executors and administrators
(1491, par. 3) - such sales are
voidable, not void
CIVIL LAW SALES