Quiroga vs.

Parsons Hardware
38 Phil 501
August 1918

FACTS:

On January 24, 1911, plaintiff Andres Quiroga and J. Parsons (to whose rights and obligations the present
defendant Parsons Hardware Co. later subrogated itself) entered into a contract, where it was stated among
others that Quiroga grants in favor of Parsons the exclusive rights to sell his beds in the Visayan Islands under
some conditions. One of the said conditions provided that Mr. Parsons may sell, or establish branches of his
agency for the sale of "Quiroga" beds in all the towns of the Archipelago where there are no exclusive agents, and
shall immediately report such action to Mr. Quiroga for his approval while another one passed on to Parsons the
obligation to order by the dozen and in no other manner the beds from Quiroga.

Alleging that the Parsons was his agent for the sale of his beds in Iloilo, Quiroga filed a complaint against the
former for violating the following obligations implied in what he contended to be a contract of commercial agency:
not to sell the beds at higher prices than those of the invoices; to have an open establishment in Iloilo; itself to
conduct the agency; to keep the beds on public exhibition, and to pay for the advertisement expenses for the
same; and to order the beds by the dozen and in no other manner.

ISSUE:

Is the defendant, by reason of the contract, a purchaser or an agent of the plaintiff for the sale of the latters beds
in Iloilo?

COURT RULING:

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.

Yu Tek & Co. v. Gonzales

Facts:
A contract was executed between the herein parties, whereby Mr. Basilio Gonzales acknowledges the receipt of
P3,000 from Yu Tek & Co., and that in consideration of which he obligates himself to deliver to the latter 600 piculs
of sugar of the first and second grade, according to the result of polarization, within 3 months. There is a
stipulation providing for rescission with P1,200 penalty in case of failure to deliver. No sugar was delivered, so
plaintiff filed a case praying for the judgment of P3,000 plus P1,200. P3,000 was awarded, thus, both parties
appealed.
Issues:
(1) Whether compliance of the obligation to deliver depends upon the production in defendants plantation
(2) Whether there is a perfected sale
(3) Whether liquidated damages of P1,200 should be awarded to the plaintiff
Held:
(1) There is not the slightest intimation in the contract that the sugar was to be raised by the defendant. Parties
are presumed to have reduced to writing all the essential conditions of their contract. While parol evidence is
admissible in a variety of ways to explain the meaning of written contracts, it cannot serve the purpose of
incorporating into the contract additional contemporaneous conditions which are not mentioned at all in the
writing, unless there has been fraud or mistake. It may be true that defendant owned a plantation and expected to
raise the sugar himself, but he did not limit his obligation to his own crop of sugar. Our conclusion is that the
condition which the defendant seeks to add to the contract by parol evidence cannot be considered. The rights of
the parties must be determined by the writing itself.
(2) We conclude that the contract in the case at bar was merely an executory agreement; a promise of sale and not
a sale. At there was no perfected sale, it is clear that articles 1452, 1096, and 1182 are not applicable. The
defendant having defaulted in his engagement, the plaintiff is entitled to recover the P3,000 which it advanced to
the defendant, and this portion of the judgment appealed from must therefore be affirmed.
(3) The contract plainly states that if the defendant fails to deliver the 600 piculs of sugar within the time agreed
on, the contract will be rescinded and he will be obliged to return the P3,000 and pay the sum of P1,200 by way of
indemnity for loss and damages. There cannot be the slightest doubt about the meaning of this language or the
intention of the parties. There is no room for either interpretation or construction. Under the provisions of article
1255 of the Civil Code contracting parties are free to execute the contracts that they may consider suitable,
provided they are not in contravention of law, morals, or public order. In our opinion there is nothing in the
contract under consideration which is opposed to any of these principles.

Ker and Co., LTD vs Lingad

GR No. L-20871 April 30, 1971

Facts:
CIR assessed the sum of P20,272.33 as the commercial brokers percentage tax, surcharge, and compromise
penalty against Ker & Co. Ker and Co. requested for the cancellation of the assessment and filed a petition for
review with the Court of Tax Appeals. The CTA ruled that Ker and Co is liable as a commercial broker. Ker has a
contract with US rubber. Ker is the distributor of the said company. Ker was precluded from disposing the products
elsewhere unless there has been a written consent from the company. The prices, discounts, terms of payment,
terms of delivery and other conditions of sale were subject to change in the discretion of the Company.
Issue:
Whether the relationship of Ker and Co and US rubber was that of a vendor- vendee or principal-broker

Ruling:
The relationship of Ker and Co and US rubber was that of a principal-broker/ agency. Ker and Co is only an agent of
the US rubber because it can dispose of the products of the Company only to certain persons or entities and within
stipulated limits, unless excepted by the contract or by the Rubber Company, it merely receives, accepts and/or
holds upon consignment the products, which remain properties of the latter company, every effort shall be made
by petitioner to promote in every way the sale of the products and that sales made by petitioner are subject to
approval by the company. Since the company retained ownership of the goods, even as it delivered possession
unto the dealer for resale to customers, the price and terms of which were subject to the companys control, the
relationship between the company and the dealer is one of agency.

G.R. No. 70149 January 30, 1989

EUSEBIO C. LU, petitioner,
vs.
THE INTERMEDIATE APPELLATE COURT, HEIRS OF SANTIAGO BUSTOS and JOSEFINA ALBERTO,

It is therefore, a foregone conclusion that Lu's priority right to purchase the questioned property arose as early as
February 3, 1967 per Contract of Lease with ALBERTO, long before the registration of the adverse claim of BUSTOS
on February 21, 1972. It is well-settled in this jurisdiction that prior registration of a hen creates a preference, (PNB
vs. Javellana, 92 Phil. 525) since the act of registration shall be the operative act to convey and affect the land.
There can be no question that as of February 14, 1972, when the Deed of Sale in favor of LU was executed, the
only registered hens affecting TCT No. 74567 were the lease contract granting LU the preferential right to purchase
the property and his own adverse claim over the same. Bustos adverse claim was registered only on February 21,
1972 4 years after the execution of Exhibits "A" and 'B'. There is no showing that LU had any knowledge of the said
execution of Exhibits "A" and 'B' when he agreed to buy the lot in question under the terms of the previous
Contract of Lease. Prior to the consummation of the sale in Manila, as a precautionary measure, petitioner LU's
brother, Atty. Jose Lu, went to the Office of the Register of Deeds of Pangasinan to verify the titles of the seven
subdivided lots and found them to be clean (t.s.n. Sept. 23, 1974.)
Again worth mentioning is the fact that after 3 separate suits (Civil Case No. U-2041 entitled Josefina Alberto de
Pabalan vs. Eusebio C. Lu CFI of Pangasinan at Urdaneta, CA-G.R. No. 42603-R entitled Eusebio C. Lu vs. Hon.
Amado S. Santiago and Josefina Alberto; and Civil Case No. 74305 entitled Eusebio C. Lu vs. Josefina Alberto de
Pabalan', CFI-Manila-see paragraphs 12, 14 and 15, Stipulation of Facts, pp. 44-45. Record on Appeal; Exhs. 2-Lu, 4-
Lu and 4-Lu) and 4 years of litigations, a Compromise Agreement between the parties (ALBERTO and LU) was
arrived at and submitted to the Manila Court on February 15, 1972 (Exh. 6-Lu). In consideration of the withdrawal
of all claims and counterclaims between them arising from the Lease Contract dated February 3, 1967, ALBERTO
agreed to sell, and LU agreed to purchase, the remaining 7 out of the 12 subdivided lots formerly covered by TCT
No. 45787 (13622-P). Lu paid the amount of P125,000.00 for the subdivided lots (Exh. 8-Lu) and Pl,000.00 for the
old existing improvements thereon (Exh. 9-Lu). Hence, there was valuable consideration paid for the sale.
Unquestionably, therefore, LU was a buyer in good faith, merely exercising a right previously and expressly granted
to him under the Lease Contract between him and Josefina Alberto Vda. de Pabalan, duly recognized by the trial
court by approving their Compromise Agreement on February 15, 1972.
If ever there was a failure on the part of the Register of Deeds to annotate BUSTOS' adverse claim on LU's new
title, LU should or could not be faulted for such omission and be attributed with bad faith in buying the property.
Petitioner LU relied on the certificate of title of the registered owner (Alberto), which did not contain the alleged
claim of BUSTOS at the time of the sale. As such, LU as purchaser should not be required to inquire beyond what
the certificate of title indicates. Moreover, assuming that there was indeed a sale of the questioned lot to BUSTOS
based on the two (2) private receipts (Exhs. A & B), and since admittedly no formal Deed of Sale was executed and
no corresponding title delivered to him, and that since the transaction in favor of LU was recorded in the registry,
the latter must prevail over the former holding that the ownership of the property was lawfully transferred from
ALBERTO to LU.
The appellate court's decision therefore was not in line with Our settled doctrines and principles because the
decisive legal circumstance was not whether or not the private receipts (Exhs. A & B), bore the elements of a sale.
The real controversy was on whether the contract arising from said receipts could be enforced in the light of the
priority right of petitioner under the registered contract of 1967. Respondent BUSTOS was not able to show how
petitioner LU lost his priority right in favor of respondent.
No sale between BUSTOS and ALBERTO could have been perfected since the condition precedent and accepted by
BUSTOS for the sale of the property failed to materialize. ALBERTO's consent to sell was predicated on the
rescission of LUs right to buy. During the appreciation of facts ALBERTO explained to the trial court the real intent
and purpose of Exhs. A and B. She clarified that because she wanted to disengage herself from the priority right of
petitioner, urged by the insistence of BUSTOS, among other lessees, to exercise their alleged verbal priority rights,
she had to file an action for the rescission of the contract of lease with LU, but needing money to finance said
action, she had to ask for advance money from BUSTOS, on the condition that if she succeeded, the advances
would be charged to the purchase price, but if she failed they would be in payment of rentals. The Court of
Appeals, on appeal by certiorari of the original action for rescission (Civil Case U-2041 in the Court of First Instance
of Pangasinan) in its decision dated June 9, 1970 issued a writ of prohibition enjoining the Pangasinan Court from
further taking cognizance as said case unless it would be to dismiss the same. It is clear therefore that ALBERTO
lost her suit for rescission. Such dismissal of the action for rescission preceded the compromise agreement in Civil
Case No. 74305 instituted in Manila. In other words, when the compromise agreement between LU and ALBERTO
was submitted to the court in Civil Case No. 74305, and approved by it and when correspondingly, the sale to LU
was executed by ALBERTO pursuant to the compromise, there was no legal impediment present to block the
validity of its execution. The trial court's finding in this matter which we are adopting reads as follows:
The alleged sale in favor of Bustos as evidenced by the written note (Exhibit "A"), and receipt (Exhibit "B") were
executed very much later than the Contract Lease Agreement (Exhibit "1 - Lu") in favor of Lu. Having given the
priority right to purchase the disputed lot to Lu in 1967 in a duly notarized document, it would appear unnatural
for Alberto to sell the same property to Bustos one year later while the preferential right to Lu to purchase still
exist. The Court is more inclined to believe the version of Alberto as corroborated by Atty. Sansano, that prior to
the institution of the Urdaneta case which seeks to rescind the lease contract in favor of Lu and thus eradicate the
latter's preferential right to buy the property in dispute, arrangements were made with the tenants-occupants of
the entire lot of 1,760 square meters to generate funds to finance the litigation with the understanding that should
the case succeed, the amount; advanced would be considered as part payments of the lots occupied by them, but
if the suit fails, said advances would be deducted from the accruing rentals in the respective areas occupied by
them (t.s.n., p. 41, July 15, 1974; t.s.n., pp. 8-11, September 23, 1974). Alberto expressly declared that this
condition was personally conveyed to Bustos (t.s.n., p. 46, July 15, 1974) and this finds corroboration in the tenor
of the written note (Exhibit "A") which states: "Kailangan ko ang tulong mo pahiramin mo ako ng P2,000.00 dos mil
pesos, aawasin sa bayad ng lote na binibili mo sa akin sa Carmen". Obviously, Alberto know that she had no right
whatever to dispose said properties to third persons other than to Lu to whom she gave the priority right to
purchase under the lease contract of February 3, 1967, unless the same be first cancelled or rescinded. Further
corroboration is supplied by the fact that from the time Bustos gave these advances, no rentals were collected
from, or paid by, him (t.s.n., p. 20, November 16, 1973; t.s.n., p. 41, July 15, 1974) which also confirms the
arrangement entered into. Besides, if there was no condition attached to the acceptance of the amounts
embodied in Exhibits "A" and "B", Bustos would have insisted in the execution of a deed of sale on installment
basis by Alberto. (pp. 144-146, Rollo)
WHEREFORE, finding merit in the appeal of petitioner, the assailed decision is hereby REVERSED and the decision
of the then Court of First Instance of Pangasinan in Civil Case No. 144-R, dated December 23, 1974 is hereby
REINSTATED.

G.R. No. 132305 December 4, 2001

LABAGALA vs. SANTIAGO

FACTS:

Jose T. Santiago owned a parcel of land in Manila. However, his sisters sued him for recovery of 2/3 share of the
land alleging that he had fraudulently registered it in his name. The trial court decided in favor of his sisters.

Jose died intestate. His sisters then filed a complaint before the RTC for recovery of the 1/3 portion of said
property which was in the possession of Ida C. Labagala (who claimed to be Ida C. Santiago, the daughter of Jose).

The trial court ruled in favor of Labagala. According to the trial court, the said deed constitutes a valid donation.
Even if it were not, petitioner would still be entitled to Jose's 1/3 portion of the property as Jose's daughter.

When appealed, the Court of Appeals (CA) reversed the decision of the trial court. It took into account that Ida
was born of different parents, as indicated her birth certificate.

ISSUES:

1. WON respondents may impugn petitioner's filiation in this action for recovery of title and possession.

2. WON petitioner is entitled to Jose's 1/3 portion of the property he co-owned with respondents, through
succession, sale, or donation.

HELD:

The Court AFFIRMED the decision of the CA.

On Issue No. 1

Yes.

Article 263 refers to an action to impugn the legitimacy of a child, to assert and prove that a person is not a man's
child by his wife. However, the present respondents are asserting not merely that petitioner is not a legitimate
child of Jose, but that she is not a child of Jose at all.

A baptismal certificate, a private document, is not conclusive proof of filiation. Use of a family name certainly does
not establish pedigree. Thus, she cannot inherit from him through intestate succession.

On Issue No. 2

No.

The Court ruled that there is no valid sale in this case. Jose did not have the right to transfer ownership of the
entire property to petitioner since 2/3 thereof belonged to his sisters. Petitioner could not have given her consent
to the contract, being a minor at the time. Consent of the contracting parties is among the essential requisites of a
contract, including one of sale, absent which there can be no valid contract. Moreover, petitioner admittedly did
not pay any centavo for the property which makes the sale void. Article 1471 of the Civil Code provides that 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.

Neither may the purported deed of sale be a valid deed of donation. Even assuming that the deed is genuine, it
cannot be a valid donation. It lacks the acceptance of the donee required by Art. 725 of the Civil Code. Being a
minor, the acceptance of the donation should have been made by her father or mother or her legal representative
pursuant to Art. 741 of the same Code. No one of those mentioned in the law accepted the donation for Ida.

ROQUE vs LAPUZ
GR ## GR No. L-32811
Petitioner: Felipe C. Roque,
Respondents: Nicanor Lapuz and Court of Appeals
March 31, 1980
Guerrero, J.

DOCTRINE

(SHORT VERSION)

Plaintiff Roque and defendant Lapuz entered in an agreement of sale for a couple of lots to be paid in 120 equal
monthly payments. After some time, Lapuz requested Roque if he can substitute the present lots and move and
occupy to another lot. The new lots are corner lots which have better location, thus much more expensive. Roque
agreed to the request of Lapuz but Roque charged a higher rate which correspond to the higher value of the new
lot. Lapuz first agreed to the new rate but he never paid for another instalment again. Roque made demands that
Lapuz pay his accrued instalments but the latter refused to comply with the demands. Roque then demanded the
vacation of the land but still to no avail. The petitioner brought the matter to the courts and CA granted Lapuz a
period of (90) ninety days to pay the balance remaining. SC reversed CA holding that having been in default and
acted in bad faith, he is not entitled to the new period of 90 days

FACTS (Just read this if you want the details, otherwise the short version will suffice)
Sometime in 1964. plaintiff Roque and defendant Lapuz entered into an agreement of sale covering Lots 1, 2 and 9,
Block 1, of said property, payable in 120 equal monthly installments at the rate of P16.00, P15.00 per square
meter, respectively. In accordance with said agreement, defendant paid to plaintiff the sum of P150.00 as deposit
and the further sum of P740.56 to complete the payment of four monthly installments covering the months of
July, August, September, and October, 1954.

On January 24, 1955, defendant requested plaintiff that he be allowed to abandon and substitute Lots 1, 2 and 9,
the subject with Lots 4 and 12, Block 2 of the Rockville Subdivision, which are corner lots, to which request plaintiff
graciously acceded. The evidence discloses that defendant proposed to plaintiff modification of their previous
contract to sell because he found it quite difficult to pay the monthly installments on the three lots, and besides
the two lots he had chosen were better lots, being corner lots. In addition, it was agreed that the purchase price of
these two lots would be at the uniform rate of P17.00 per square meter payable in 120 equal monthly
installments, with interest at 8% annually on the balance unpaid. Pursuant to this new agreement, defendant
occupied and possessed Lots 4 and 12, and enclosed them, including the portion where his house now stands, with
barbed wires and adobe walls. However, aside from the deposit of P150.00 and the amount of P740.56, which
were paid under their previous agreement, defendant failed to make any further payment on account of the
agreed monthly installments for the two lots in dispute, under the new contract to sell. Plaintiff demanded upon
defendant not only to pay the stipulated monthly installments in arrears, but also to make up-to-date his
payments, but defendant refused to comply with plaintiff's demands.

On or about November 3, 1957, plaintiff demanded upon defendant to vacate the lots in question and to pay the
reasonable rentals thereon at the rate of P60.00 per month from August, 1955. On January 22, 1960, petitioner
Felipe C, Roque filed the complaint against defendant Nicanor Lapuz for rescission and cancellation of the
agreement of sale between them involving the two lots in question and prayed that judgment be rendered
ordering the rescission and cancellation of the agreement of sale, the defendant to vacate the two parcels of land
and remove his house therefrom and to pay to the plaintiff the reasonable rental thereof at the rate of P60.00 a
month from August 1955 until such time as he shall have vacated the premises, and to pay the sum of P2,000.00 as
attorney's fees, costs of the suit and award such other relief or remedy as may be deemed just and equitable in the
premises.

The Court of Appeals rendered its decision that the defendant Nicanor Lapuz is granted a period of ninety (90)
days from entry hereof within which to pay the balance. Hence, this appeal.

ISSUES/HELD

(1) WoN Lapuz is entitled to the benefits of the third paragraph of Article 1191 New Civil Code, for fixing period -
NO

RATIO

(1) No. Respondent as obligor is not entitled to the benefits of paragraph 3 of Art. 1191, NCC Having been in
default and acted in bad faith, he is not entitled to the new period of 90 days from entry of judgment within which
to pay petitioner the balance of P11,434.44 with interest due on the purchase price of P12,325.00 for the two lots.
To allow and grant respondent an additional period for him to pay the balance of the purchase price, which
balance is about 92% of the agreed price, would be tantamount to excusing his bad faith and sanctioning the
deliberate infringement of a contractual obligation that is repugnant and contrary to the stability, security and
obligatory force of contracts. Moreover, respondent's failure to pay the succeeding 116 monthly installments after
paying only 4 monthly installments is a substantial and material breach on his part, not merely casual, which takes
the case out of the application of the benefits of pa paragraph 3, Art. 1191, N.C.C.

Pursuant to Art. 1191, New Civil Code, petitioner is entitled to rescission with payment of damages which the trial
court and the appellate court, in the latter's original decision, granted in the form of rental at the rate of P60.00
per month from August, 1955 until respondent shall have actually vacated the premises, plus P2,000.00 as
attorney's fees. The Court affirmed the same to be fair and reasonable. The Court also sustained the right of the
petitioner to the possession of the land, ordering thereby respondent to vacate the same and remove his house
therefrom.

DECISION

Judgment reversed.

Atkins Kroll & Co. vs. Cu Hian Tek

102 Phil 984
January 1958

FACTS:

On September 13, 1951, petitioner Atkins Kroll & Co. (Atkins) sent a letter to respondent B. Cu Hian Tek (Hian Tek)
offering (a) 400 cartons of Luneta brand Sardines in Tomato Sauce 48 / 15-oz. Ovals at $8.25 per carton, (b) 300
cartons of Luneta brand Sardines Natural 48/15 oz. talls at $6.25 per carton, and (c) 300 cartons of Luneta brand
Sardines in Tomato Sauce 100/5-oz. talls at $7.48 per carton, with all of the offers subject to reply by September
23, 1951. Hian Tek unconditionally accepted the said offer through a letter delivered on September 21, 1951, but
Atkins failed to deliver the commodities due to the shortage of catch of sardines by the packers in California.

Hian Tek, therefore, filed an action for damages in the CFI of Manila which granted the same in his favor. Upon
Atkins appeal, the Court of Appeals affirmed said decision but reduced the damages to P3,240.15 representing
unrealized profits. Atkins herein contends that there was no such contract of sale but only an option to buy, which
was not enforceable for lack of consideration because it is provided under the 2nd paragraph of Article 1479 of the
New Civil Code that "an accepted unilatateral promise to buy or to sell a determinate thing for a price certain is
binding upon the promisor if the promise is supported by a consideration distinct from the price. Atkins also
insisted that the offer was a mere offer of option, because the "firm offer" was a continuing offer to sell until
September 23.

Was there a contract of sale between the parties or only a unilateral promise to buy?

COURT RULING:

The Supreme Court held that there was a contract of sale between the parties. Petitioners argument assumed that
only a unilateral promise arose when the respondent accepted the offer, which is incorrect because a bilateral
contract to sell and to buy was created upon respondents acceptance.

Had B. Cua Hian Tek backed out after accepting, by refusing to get the sardines and / or to pay for their price, he
could also be sued. But his letter-reply to Atkins indicated that he accepted "the firm offer for the sale" and that
"the undersigned buyer has immediately filed an application for import license. After accepting the promise and
before he exercises his option, the holder of the option is not bound to buy. In this case at bar, however, upon
respondents acceptance of herein petitioner's offer, a bilateral promise to sell and to buy ensued, and the
respondent had immediately assumed the obligations of a purchaser

G.R. No. L-17527 April 30, 1963

SUN BROTHERS APPLIANCES, INC., plaintiff-appellee,
vs.
DAMASO P. PEREZ, defendant-appellant.
Dominador A. Alafriz for plaintiff-appellee.
Robert P. Halili & Associates for defendant-appellant.
LABRADOR, J.:
This is an action brought by the plaintiff to recover from defendant the sum of P1,404.00, the price of one Admiral
Air Conditioner, Slim Style, Model 100-23-1 H.P., Serial No. 2978828, delivered to the defendant by the plaintiff
under a conditional sale agreement entered into by and between them on December 6, 1958, in the City of Manila,
plus stipulated interest of 12% from January 6, 1959 until the same is fully paid, together with P200 as attorney's
fees, and costs. Defendant answered that the air-conditioner in question was delivered to him installed in the
office of the defendant located at Gardiner street, Lucena, Quezon on December 14, 1959 but that said air-
conditioner was totally destroyed by fire which occured in the morning of December 28, 1958 at 2 o'clock.
Defendant further claimed that the machine was destroyed by force majeure, not by the defendant's fault and/or
negligence and, therefore, he is not liable under the conditional sale, Annex "A", which the parties, plaintiff and
defendant, had executed.
At the trial of the case the parties entered into a stipulation of facts, the most important provision of which are as
follows:
1. That defendant admits that on December 6, 1958, he entered into a Conditional Sale Agreement with the
plaintiff, copy of which contract is attached to the complaint as Annex "A";
2. That pursuant to the terms and conditions provided in the said Conditional Sale Agreement the plaintiff
delivered to the defendant (1) Admiral Air Conditioner Slim Style Model 100-23-1 HP, Serial No. 2978828 with the
contract price of P1,678.00 and that said Air Conditioner was received by the defendant;
3. That defendant made a down payment of P274.00 on December 6, 1958, pursuant to the terms and conditions
of the Conditional Sales Agreement; and Air Conditioner was installed by the plaintiff, thru its representative, at
Lucena, Quezon;
4. That said Air Conditioner was burned on December 27,1958, on or about 2:00 o'clock in the morning, however,
defendant will present evidence to show that the Air Conditioner subject of the complaint herein was burned
where it was installed by the plaintiff;
5. That defendant, after making down payment of P274.00 to the plaintiff, did not pay any of the monthly
installments of P78.00 thereafter, leaving a balance of P1,404.00 in favor of the plaintiff;
6. That after defendant presents evidence to prove that the Air Conditioner was burned where it was installed by
the plaintiff to the satisfaction of this Honorable Court, the parties agree to leave to this Honorable Court the
resolution of the issue whether loss by fire extinguishes the obligation of the defendant to pay to the plaintiff the
subsequent installments of the initial payment;"
The Court of First Instance before which the action was brought rendered judgment condemning the defendant to
pay the plaintiff the amount demanded in the complaint, including interest and attorney's fees. The defendant has
appealed the case directly to us as involving only a question of law.
The conditional sale executed by the plaintiff and defendant contained the following stipulation:
"2. Title to said property shall vest in the Buyer only upon full payment of the entire account as herein provided,
and only upon complete performance of all the other conditions herein specified:
"3. The Buyer shall keep said property in good condition and properly protected against the elements, at his/its
address above-stated, and undertakes that if said property or any part thereof be lost, damaged, or destroyed for
any causes, he shall suffer such loss, or repair such damage, it being distinctly understood and agreed that said
property remains at Buyer's risk after delivery;"
The Court below declared that as the buyer would be liable in case of loss for any cause, such buyer assumed
liability even in case of loss by fortuitous event; so it rendered judgment declaring defendant liable for the sun
demanded together with interest and attorney's fees.
Wherefore, the parties respectfully pray that the foregoing stipulation of facts be admitted and approved by this
Honorable Court, without prejudice to the parties adducing other evidence to prove their case not covered by this
stipulation of facts. 1wph1.t
In this Court on appeal defendant-appellant argues that inasmuch as the title to the property sold shall vest in the
buyer only upon full payment of the price, the loss of the vendor; that the phrase "for any cause" used in
paragraph 2 of the agreement may not be interpreted to include a fortuitous event absolutely beyond the control
of the appellant; and that although Article 1174 of the new Civil Code recognizes the exception on fortuitous event
when the parties to a contract expressly so stipulate, the phrase "for any cause" used in the contract did not
indicate any intention of the parties that the loss of the unit due to fortuitous event is to be included within the
responsibility of the vendor.
In answer to the arguments above set forth the appellee argues that the stipulation in the contract of sale whereby
the buyer shall be liable for any loss, damage or destruction for any cause, is not contrary to law, morals or public
policy and is specifically authorized to be stipulated upon between the parties by Article 1174 of the Civil Code;
that the risk of loss was expressly stipulated to be undertaken by the buyer, even if the title to the property sold
remained, also by stipulation, in the vendor; that the terms "any cause" used in the agreement includes a
fortuitous event, and an express stipulation making the vendee responsible in such case is valid.
We believe that the agreement making the buyer responsible for any loss whatsoever, fortuitous or otherwise,
even if the title to the property remains in the vendor, is neither contrary to law, nor to morals or public policy. We
have held such stipulation to be legal in the case of Government vs. Amechazurra, 10 Phil. 637 (Tolentino,
Commentaries on the Civil Code, Vol. IV, p. 120)and declare it to be based on a sound public policy in conditional
sales according to American decisions.
"The weight of authority support the rule that where goods are sold and delivered to the vendor under an
agreement that the title is to remain in the vendor until payment, the loss or destruction of the property while in
the possession of the vendor before payment, without his fault, does not relieve him from the obligation to pay
the price, and he, therefore, suffers the loss. In accord with this rule are the provisions of the Uniform Sales Act
and the Uniform Conditional Sales Act. There are several basis for this rule. First is the absolute and unconditional
nature of the vendee's promise to pay for the goods. The promise is nowise dependent upon the transfer of the
absolute title. Second is the fact that the vendor has fully performed his contract and has nothing further to do
except receive payment, and the vendee received what he bargained for when he obtained the right of possession
and use of the goods and the right to acquire title upon making full payment of the price. A third basis advanced
for the rule is the policy of providing an incentive to care properly for the goods, they being exclusively under the
control and dominion of the vendee." (47 Am. Jur., pp. 81-82).
We, therefore, agree with the trial court that the loss by fire or fortuitous event was expressly agreed in the
contract to be borne by the buyer and this express agreement is not contrary to law but sanctioned by it as well as
by the demands of sound, public policy. The judgment of the court below is affirmed, with costs against defendant-
appellant.

CARMEN DEL PRADO,

Petitioner,

SPOUSES ANTONIO L. CABALLERO and LEONARDA

CABALLERO,
Respondents.

This is a petition for review on certiorari of the decision[1] of the Court of Appeals (CA) dated September 26, 2000
and its resolution denying the motion for reconsideration thereof.

The facts are as follows:

In a judgment rendered on February 1, 1985 in Cadastral Case No. N-6 (LRC Rec. No. N-611), Judge Juan Y. Reyes of
the Regional Trial Court (RTC) of Cebu City, Branch 14, adjudicated in favor of Spouses Antonio L. Caballero and
Leonarda B. Caballero several parcels of land situated in Guba, Cebu City, one of which was Cadastral Lot No.
11909, the subject of this controversy.[2] On May 21, 1987, Antonio Caballero moved for the issuance of the final
decree of registration for their lots.[3] Consequently, on May 25, 1987, the same court, through then Presiding
Judge Renato C. Dacudao, ordered the National Land Titles and Deeds Registration Administration to issue the
decree of registration and the corresponding titles of the lots in favor of the Caballeros. [4]

On June 11, 1990, respondents sold to petitioner, Carmen del Prado, Lot No. 11909 on the basis of the tax
declaration covering the property. The pertinent portion of the deed of sale reads as follows:
That we, Spouses ANTONIO L. CABALLERO and LEONARDA B. CABALLERO, Filipinos, both of legal age and residents
of Talamban, Cebu City, Philippines, for and in consideration of the sum of FORTY THOUSAND PESOS (P40,000.00),
Philippine Currency, paid by CARMEN DEL PRADO, Filipino, of legal age, single and a resident of Sikatuna St., Cebu
City, Philippines, the receipt of which is full is hereby acknowledged, do by these presents SELL, CEDE, TRANSFER,
ASSIGN & CONVEY unto the said CARMEN DEL PRADO, her heirs, assigns and/or successors-in-interest, one (1)
unregistered parcel of land, situated at Guba, Cebu City, Philippines, and more particularly described and bounded,
as follows:

A parcel of land known as Cad. Lot No. 11909, bounded as follows:

North : Lot 11903

East : Lot 11908
West : Lot 11910
South : Lot 11858 & 11912

containing an area of 4,000 square meters,

more or less, covered by Tax Dec. No. 00787 of the Cebu City Assessors Office, Cebu City.

of which parcel of land we are the absolute and lawful owners.

Original Certificate of Title (OCT) No. 1305, covering Lot No. 11909, was issued only on November 15, 1990, and
entered in the Registration Book of the City of Cebu on December 19, 1990. [5] Therein, the technical description of
Lot No. 11909 states that said lot measures about 14,457 square meters, more or less. [6]

On March 20, 1991, petitioner filed in the same cadastral proceedings a Petition for Registration of Document
Under Presidential Decree (P.D.) 1529[7] in order that a certificate of title be issued in her name, covering the
whole Lot No. 11909. In the petition, petitioner alleged that the tenor of the instrument of sale indicated that the
sale was for a lump sum or cuerpo cierto, in which case, the vendor was bound to deliver all that was included
within said boundaries even when it exceeded the area specified in the contract. Respondents opposed, on the
main ground that only 4,000 sq m of Lot No. 11909 was sold to petitioner. They claimed that the sale was not for
a cuerpo cierto. They moved for the outright dismissal of the petition on grounds of prescription and lack of
jurisdiction.

After trial on the merits, the court found that petitioner had established a clear and positive right to Lot No. 11909.
The intended sale between the parties was for a lump sum, since there was no evidence presented that the
property was sold for a price per unit. It was apparent that the subject matter of the sale was the parcel of land,
known as Cadastral Lot No. 11909, and not only a portion thereof.[8]

Thus, on August 2, 1993, the court a quo rendered its decision with the following dispositive portion:

WHEREFORE, premises considered, the petition is hereby granted and judgment is hereby rendered in favor of
herein petitioner. The Register of Deeds of the City of Cebu is hereby ordered and directed to effect the
registration in his office of the Deed of Absolute Sale between Spouses Antonio Caballero and Leonarda Caballero
and Petitioner, Carmen del Prado dated June 11, 1990 covering Lot No. 11909 after payment of all fees prescribed
by law. Additionally, the Register of Deeds of the City of Cebu is hereby ordered to cancel Original Certificate No.
1305 in the name of Antonio Caballero and Leonarda Caballero and the Transfer Certificate of Title be issued in the
name of Petitioner Carmen del Prado covering the entire parcel of land known as Cadastral Lot No. 11909.[9]

An appeal was duly filed. On September 26, 2000, the CA promulgated the assailed decision, reversing and setting
aside the decision of the RTC.
The CA no longer touched on the character of the sale, because it found that petitioner availed herself of an
improper remedy. The petition for registration of document is not one of the remedies provided under P.D. No.
1529, after the original registration has been effected. Thus, the CA ruled that the lower court committed an error
when it assumed jurisdiction over the petition, which prayed for a remedy not sanctioned under the Property
Registration Decree. Accordingly, the CA disposed, as follows:

IN VIEW OF ALL THE FOREGOING, the appealed decision is REVERSED and SET ASIDE and a new one entered
dismissing the petition for lack of jurisdiction. No pronouncement as to costs. [10]

Aggrieved, petitioner filed the instant petition, raising the following issues:

I. WHETHER OR NOT THE COURT OF APPEALS COMMITTED GRAVE ERROR IN MAKING FINDINGS OF FACT
CONTRARY TO THAT OF THE TRIAL COURT[;]
II. WHETHER OR NOT THE COURT OF APPEALS COMMITTED GRAVE ERROR IN FAILING TO RULE THAT THE
SALE OF THE LOT IS FOR A LUMP SUM OR CUERPO CIERTO[;]
III. WHETHER OR NOT THE COURT A QUO HAS JURISDICTION OVER THE PETITION FOR REGISTRATION OF
THE DEED OF ABSOLUTE SALE DATED 11 JUNE 1990 EXECUTED BETWEEN HEREIN PETITIONER AND
RESPONDENTS[.][11]

The core issue in this case is whether or not the sale of the land was for a lump sum or not.

Petitioner asserts that the plain language of the Deed of Sale shows that it is a sale of a real estate for a lump sum,
governed under Article 1542 of the Civil Code.[12] In the contract, it was stated that the land contains an area of
4,000 sq m more or less, bounded on the North by Lot No. 11903, on the East by Lot No. 11908, on the South by
Lot Nos. 11858 & 11912, and on the West by Lot No. 11910. When the OCT was issued, the area of Lot No. 11909
was declared to be 14,475 sq m, with an excess of 10,475 sq m. In accordance with Article 1542, respondents are,
therefore, duty-bound to deliver the whole area within the boundaries stated, without any corresponding increase
in the price.Thus, petitioner concludes that she is entitled to have the certificate of title, covering the whole Lot
No. 11909, which was originally issued in the names of respondents, transferred to her name.

We do not agree.

In Esguerra v. Trinidad,[13] the Court had occasion to discuss the matter of sales involving real estates. The Courts
pronouncement is quite instructive:

In sales involving real estate, the parties may choose between two types of pricing agreement: a unit price
contract wherein the purchase price is determined by way of reference to a stated rate per unit area (e.g., P1,000
per square meter), or a lump sum contract which states a full purchase price for an immovable the area of which
may be declared based on the estimate or where both the area and boundaries are stated (e.g., P1 million for
1,000 square meters, etc.). In Rudolf Lietz, Inc. v. Court of Appeals (478 SCRA 451), the Court discussed the
distinction:

In a unit price contract, the statement of area of immovable is not conclusive and the price may be reduced or
increased depending on the area actually delivered. If the vendor delivers less than the area agreed upon, the
vendee may oblige the vendor to deliver all that may be stated in the contract or demand for the proportionate
reduction of the purchase price if delivery is not possible. If the vendor delivers more than the area stated in the
contract, the vendee has the option to accept only the amount agreed upon or to accept the whole area, provided
he pays for the additional area at the contract rate.

xxxx
In the case where the area of an immovable is stated in the contract based on an estimate, the actual area
delivered may not measure up exactly with the area stated in the contract.According to Article 1542 of the Civil
Code, in the sale of real estate, made for a lump sum and not at the rate of a certain sum for a unit of measure or
number, there shall be no increase or decrease of the price, although there be a greater or less areas or number
than that stated in the contract. . . .
xxxx
Where both the area and the boundaries of the immovable are declared, the area covered within the boundaries
of the immovable prevails over the stated area. In cases of conflict between areas and boundaries, it is the latter
which should prevail. What really defines a piece of ground is not the area, calculated with more or less certainty,
mentioned in its description, but the boundaries therein laid down, as enclosing the land and indicating its limits. In
a contract of sale of land in a mass, it is well established that the specific boundaries stated in the contract must
control over any statement with respect to the area contained within its boundaries. It is not of vital consequence
that a deed or contract of sale of land should disclose the area with mathematical accuracy. It is sufficient if its
extent is objectively indicated with sufficient precision to enable one to identify it. An error as to the superficial
area is immaterial. Thus, the obligation of the vendor is to deliver everything within the boundaries, inasmuch as it
is the entirety thereof that distinguishes the determinate object. [14]

The Court, however, clarified that the rule laid down in Article 1542 is not hard and fast and admits of an
exception. It held:

A caveat is in order, however. The use of more or less or similar words in designating quantity covers only
a reasonable excess or deficiency. A vendee of land sold in gross or with the description more or less with
reference to its area does not thereby ipso facto take all risk of quantity in the land..

Numerical data are not of course the sole gauge of unreasonableness of the excess or deficiency in area. Courts
must consider a host of other factors. In one case (see Roble v. Arbasa, 414 Phil. 343 [2001]), the Court found
substantial discrepancy in area due to contemporaneous circumstances. Citing change in the physical nature of the
property, it was therein established that the excess area at the southern portion was a product of reclamation,
which explained why the lands technical description in the deed of sale indicated the seashore as its southern
boundary, hence, the inclusion of the reclaimed area was declared unreasonable. [15]

In the instant case, the deed of sale is not one of a unit price contract. The parties agreed on the purchase price
of P40,000.00 for a predetermined area of 4,000 sq m, more or less, bounded on the North by Lot No. 11903, on
the East by Lot No. 11908, on the South by Lot Nos. 11858 & 11912, and on the West by Lot No. 11910. In a
contract of sale of land in a mass, the specific boundaries stated in the contract must control over any other
statement, with respect to the area contained within its boundaries. [16]

Blacks Law Dictionary[17] defines the phrase more or less to mean:

About; substantially; or approximately; implying that both parties assume the risk of any ordinary discrepancy. The
words are intended to cover slight or unimportant inaccuracies in quantity, Carter v. Finch, 186 Ark. 954, 57
S.W.2d 408; and are ordinarily to be interpreted as taking care of unsubstantial differences or differences of small
importance compared to the whole number of items transferred.

Clearly, the discrepancy of 10,475 sq m cannot be considered a slight difference in quantity. The difference in the
area is obviously sizeable and too substantial to be overlooked. It is not a reasonable excess or deficiency that
should be deemed included in the deed of sale.

We take exception to the avowed rule that this Court is not a trier of facts. After an assiduous scrutiny of the
records, we lend credence to respondents claim that they intended to sell only 4,000 sq m of the whole Lot No.
11909, contrary to the findings of the lower court. The records reveal that when the parties made an ocular
inspection, petitioner specifically pointed to that portion of the lot, which she preferred to purchase, since there
were mango trees planted and a deep well thereon. After the sale, respondents delivered and segregated the area
of 4,000 sq m in favor of petitioner by fencing off the area of 10,475 sq m belonging to them. [18]

Contracts are the law between the contracting parties. Sale, by its very nature, is a consensual contract, because it
is perfected by mere consent. The essential elements of a contract of sale are the following: (a) consent or meeting
of the minds, that is, consent to transfer ownership in exchange for the price; (b) determinate subject matter; and
(c) price certain in money or its equivalent. All these elements are present in the instant case. [19]

More importantly, we find no reversible error in the decision of the CA. Petitioners recourse, by filing the petition
for registration in the same cadastral case, was improper. It is a fundamental principle in land registration that a
certificate of title serves as evidence of an indefeasible and incontrovertible title to the property in favor of the
person whose name appears therein. Such indefeasibility commences after one year from the date of entry of the
decree of registration.[20] Inasmuch as the petition for registration of document did not interrupt the running of the
period to file the appropriate petition for review and considering that the prescribed one-year period had long
since expired, the decree of registration, as well as the certificate of title issued in favor of respondents, had
become incontrovertible.[21]

G.R. No. L-10056 December 24, 1915

SONG FO & CO., plaintiff-appellant, vs.MANUEL ORIA, defendant-appellant.

CARSON, J.:
Song Fo & Co., the original plaintiff in this action, sold a launch to Oria, the defendant, for P16,500, payable in
quarterly installments of P1,000, together with interest at the rate of ten per centum per annum. The launch was
delivered to Oria in Manila, but was shipwrecked and became a total loss while en route to Oria's place of business
in Samar. No part of the purchase price has ever been paid and this action was instituted for the recovery of the
total amount of the purchase price with interest thereon until paid. The trial court gave judgment in favor of the
plaintiff for P6,000 and interest, that being the amount of the unpaid installments due under the express terms of
the contract at the date of the institution of the action; but declined to enter judgment for the balance of the
indebtedness on the ground that, under the express terms of the contract, it was not due and payable when the
complaint was filed.
From this judgment both parties appealed, and the record is now before us on their duly perfected bills of
exceptions.
The defendant's contentions on this appeal are substantially limited to his claim that under the terms of the deed
of sale of the launch, Song Fo & Co. had obligated themselves to insure the launch, and since they had failed and
neglected to do so, they themselves should suffer the loss resulting from the shipwreck of the launch without
insurance.1awphil.net
It cannot be denied that if the contract of sale did in fact impose on Song Fo & Co. an imperative obligation to
insure the launch, which under the terms of the contract was mortgaged to secure the payment of the purchase
price, and if Song Fo & Co. did in fact fail and neglect to insure the launch in compliance with the terms of the
contract, Oria would be entitled to have the amount of his indebtedness reduced by the amount of the insurance
which he would have been entitled to have applied to the payment of the purchase price had Song Fo & Co.
faithfully complied with the terms of the contract.
But an examination of the terms of the deed of sale of the launch discloses that Song Fo & Co. did not expressly
obligated themselves to insure and keep the launch insured, although it is true that the contract expressly
authorized them to insure it in their own name.
Counsel for Oria contend, however, that although the language of the contract did not in express terms obligate
Song Fo & Co. to insure the launch, it was their duty so to do under all the circumstances, and it is insisted that
they should not be permitted to evade the loss resulting from their negligence in the performance of that duty.
The contract expressly authorized Song Fo & Co. to insure the launch in their own name and to charge the
estimated cost of the premiums with interest at the rate of ten per centum to Oria, and there is much force in the
contention of counsel for Oria at least to extent that under all the circumstances, it was the duty of Song Fo & Co.
to insure the vessel if they could. But there is nothing in the record which would justify a holding that Song Fo &
Co. obligated themselves to insure the launch at all events. There is nothing in the written contract, examined in
the light of all the surrounding circumstances, which justifies an inference that there was any thought in the mind
of either of the parties that the vendor of the launch would himself insure her against loss or damage during the
long period allowed for the payment of the purchase price; yet that substantially would be the effect of the effect
of the assumption of an obligation of an obligation to insure and keep her insured at all events. On the contrary,
the language of the contract, which authorized Song Fo & Co. to take out insurance in their own name and to
charge the amount of the premium to Oria, when read in the light of the transaction of which it was a part,
imposed at most, a duty upon Song Fo & Co. to take such reasonable measures looking to the insurance of the
vessel as might be required of a prudent man in connection with the insurance of his own property.
The undisputed evidence of record shows that Song Fo & Co. did in fact make a bona fide attempt to insure the
launch, and to that end did all in their power and adopted all available means which could reasonably be required
of them. It appears, however, that partly due to the dangerous nature of the coast of Samar along which Oria
desired to operate the launch, and partly due to the some lack of confidence in the character and reputation of the
owner of the property for which application for insurance was made, the local agents of the marine insurance
companies declined to accept the risk without previous communication within their foreign principals: and the
launch was lost before they could ascertain the wishes of these principals as to the execution of an insurance
contract. It appears also that Oria, who had exclusive control of the operation of the vessel, sent her from Manila
to Samar on the trip in the course of which she was shipwrecked, well knowing that she had not yet been insured:
and that Song Fo & Co. had no power to interfere, or to keep her in port pending their application for insurance.
Indeed it is evident that under the terms of the deed of sale, they would not have had the right to detain the vessel
in a place of safety, against the wishes of Oria, had the insurance agents definitely declined their insurance
proposals.
Under these circumstances we are of opinion and so hold that Song Fo & Co. were in no wise responsible under
the contract for the loss of the launch without insurance and that the contentions of the defendant in this regard
furnish no defense to the action against him for the purchase agreed upon in the deed of sale.
Coming now to examine the contentions of the plaintiffs on their appeal, we think that the trial judge erred in
declining to render judgment in their favor for the total amount of the purchase price of the launch. He appears to
have relied upon the provisions of article 1125 of the Civil Code but to have overlooked the co-related provisions
of article 1129 of the same code.
These articles are as follows:itc-a1f
1125. Obligations, the fulfillment of which has been fixed for a certain day, are exigible only when such day arrives.
By a certain day is understood one which shall necessarily arrive, even when the date of arrival is unknown.
When the uncertainty consists in the arrival or non-arrival of the day, then the obligations is conditional and shall
be controlled by the proceeding section.
1129. The debtor shall lose all right to profit by the term:
1. When, after the obligation has been contracted, it appears that he is insolvent, unless he gives security for the
debt.
2. When he does not give to the creditor the security he is bound to give.
3. When by his own acts, he acts, he has reduced such security after giving it, or when it disappears through an
unforeseen event (vis major), unless it is immediately substituted by a new one equally safe.
The security for the payment of the purchase price of the launch itself having disappeared as a result of an
unforeseen event (vis major), and no other security having been substituted therefor, the plaintiffs were clearly
entitled to recover judgment not only for the installments of the indebtedness due under the terms of the contract
at the time when the instituted their action, but also for all installments which, but for the loss of the vessel had
not matured at that time.
The judgment entered in the court below should be modified by substituting for so much thereof as provides for
the recovery by the plaintiff of P6,000 together with interest of November 1911, a provision for the recovery of
P16,500 together with interest at the rate of ten per centum per annum, from the 15th day of November, 1911,
and thus modified, the judgment appealed from should be affirmed with the costs of this instance against the
appellant. So ordered.
SAN MIGUEL PROPERTIES PHILS., INC. v SPOUSES ALFREDO and GRACE HUANG, G. R. No. 137290, 31 July 2000
Nature of the Case: A petition for review for a decision of the Court of Appeals which reversed the decision of
the RTC dismissing the complaint brought by the Huangs against San Miguel Properties for enforcement of a
contract of sale.
Facts: San Miguel Properties offered two parcels of land for sale and the offer was made to an agent of the
respondents. An earnest-deposit of P1 million was offered by the respondents and was accepted by the
petitioners authorized officer subject to certain terms.
Petitioner, through its executive officer, wrote the respondents lawyer that because ethe parties failed to agree
on the terms and conditions of the sale despite the extension granted by the petitioner, the latter was returning
the earnest-deposit.
The respondents demanded execution of a deed of sale covering the properties and attempted to return the
earnest-deposit but petitioner refused on the ground that the option to purchase had already expired.
A complaint for specific performance was filed against the petitioner and the latter filed a motion to dismiss the
complaint because the alleged exclusive option of the respondents lacked a consideration separate and distinct
from the purchase price and was thus unenforceable; the complaint did not allege a cause of action because there
was no meeting of the mind between the parties and therefore the contact of sale was not perfected.
The trial court granted the petitioners motion and dismissed the action. The respondents filed a motion for
reconsideration but were denied by the trial court. The respondents elevated the matter to the Court of Appeals
and the latter reversed the decision of the trial court and held that a valid contract of sale had been complied with.
Petitioner filed a motion for reconsideration but was denied.
Issue: WON there was a perfected contract of sale between the parties
Ruling: The decision of the appellate court was reversed and the respondents complaint was dismissed.
Ratio Decidendi: It is not the giving of earnest money , but the proof of the concurrence of all the essential
elements of the contract of sale which establishes the existence of a perfected sale.
The P1 million earnest-deposit could not have been given as earnest money because at the time when petitioner
accepted the terms of respondents offer, their contract had not yet been perfected. This is evident from the
following conditions attached by respondents to their letter.
The first condition for an option period of 30 days sufficiently shows that a sale was never perfected. As petitioner
correctly points out, acceptance of this condition did not give rise to a perfected sale but merely to an option or an
accepted unilateral promise on the part of respondents to buy the subject properties within 30 days from the date
of acceptance of the offer. Such option giving respondents the exclusive right to buy the properties within the
period agreed upon is separate and distinct from the contract of sale which the parties may enter. All that
respondents had was just the option to buy the properties which privilege was not, however, exercised by them
because there was a failure to agree on the terms of payment. No contract of sale may thus be enforced by
respondents.
Even the option secured by respondents from petitioner was fatally defective. Under the second paragraph of Art.
1479, an accepted unilateral promise to buy or sell a determinate thing for a price certain is binding upon the
promisor only if the promise is supported by a distinct consideration. Consideration in an option contract may be
anything of value, unlike in sale where it must be the price certain in money or its equivalent. There is no showing
here of any consideration for the option. Lacking any proof of such consideration, the option is unenforceable.
Equally compelling as proof of the absence of a perfected sale is the second condition that, during the option
period, the parties would negotiate the terms and conditions of the purchase. The stages of a contract of sale are
as follows: (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.
In the present case, the parties never got past the negotiation stage. The alleged indubitable evidence of a
perfected sale cited by the appellate court was nothing more than offers and counter-offers which did not amount
to any final arrangement containing the essential elements of a contract of sale. While the parties already agreed
on the real properties which were the objects of the sale and on the purchase price, the fact remains that they
failed to arrive at mutually acceptable terms of payment, despite the 45-day extension given by petitioner.
VICENTE LIM and MICHAEL LIM, petitioners, vs. COURT OF APPEALS and LIBERTY H. LUNA, respondents.
DECISION
MENDOZA, J.:
Private respondent Liberty Luna is the owner of a piece of land located at the corner of G. Araneta
Avenue and Quezon Avenue in Quezon City. The land, consisting of 1,013.6 square meters, is covered by TCT No.
193230 of Registry of Deeds of Quezon City. On September 2, 1988 private respondent sold the land to petitioners
Vicente and Michael Lim for P3,547,600.00. As prepared by petitioners broker, Atty. Rustico Zapata of the Zapata
Realty Company, the receipt embodying the agreement [1] read as follows:
RECEIPT
RECEIVED from ZAPATA REALTY CO. INC., through Mr. Edmundo Kaimo of 101 Kaimo Building, Metrobank Cashiers
Check No. 020583, Dasmarias branch, in the sum of TWO HUNDRED THOUSAND (P200,000.00) PESOS, as earnest
money for the purchase of a parcel of land at the corner of G. Araneta Avenue and Quezon Avenue, Quezon City,
with an area of 1,013.6 sq. m. covered by TCT 193230, Registry of Deeds for Quezon City, at the price
of P3,547,600.00, subject to the following conditions:
1. This sum of P200,000.00 shall form part of the purchase price;
2. The balance of P3,347,600.00 shall be paid in full after the squatters/occupants have totally vacated the
premises;
3. The seller assumes full responsibility to eject the squatters/occupants within a period of sixty (60) days from the
date of receipt of the earnest money; and in case the seller shall fail in her commitment to eject the
squatters/occupants within said period, the seller shall refund to the buyer this sum of P200,000.00 [plus another
sum of ONE HUNDRED THOUSAND (P100,000.00) PESOS as liquidated damages]; however, if the buyer shall fail to
pay the balance after the seller has ejected the squatters/occupants, this sum of P200,000.00 shall be forfeited by
the seller;
4. Capital gains tax, documentary stamps tax and brokers commission shall be for sellers account while transfer
and registration fees shall be for buyers account.
5. That Zapata Realty Co. Inc. and Edmundo F. Kaimo are the exclusive brokers of the buyers Vicente & Michael
Lim.
6. Buyer assumes responsibility of the premises immediately upon eviction of the squatters.
Quezon City, September 2, 1988.
(SGD.) LIBERTY H. LUNA
(Seller)
WITNESSED BY:
(SGD.) EDMUNDO KAIMO
However, when private respondent signed the receipt, she crossed out the bracketed portion in paragraph 3
providing for the payment by private respondent of the amount of P100,000.00 as liquidated damages in the event
she failed to eject the squatters sixty (60) days after the signing of the agreement. Thereafter, a check
for P200,000.00 was given to private respondent as earnest money, leaving a balance of P3,347,600.00 to be paid
in full after the squatters are ejected.
Private respondent Luna failed to eject the squatters from the land despite her alleged efforts to do so. It appears
that private respondent asked the help of a building official and a city engineers to effect
ejectment.[2] Nonetheless, petitioners did not demand the return of their earnest money.
On January 17, 1989, the parties met at the office of Edmundo Kaimo to negotiate a price increase to facilitate the
ejectment of the squatters. The parties agreed to an increase of P500.00 per square meter, by rounding off the
total purchase price to P4,000,000.00, with the remaining 13.6 square meters of the 1.013.6 square meters given
as a discount. Less the P200,000.00 given as earnest money, the balance to be paid by petitioners
was P3,800,000.00.
After a few days, private respondent tried to return the earnest money alleging her failure to eject the
squatters. She claimed that as a result of her failure to remove the squatters from the land, the contract of sale
ceased to exist and she no longer had the obligation to sell and deliver her property to petitioners. As petitioners
had refused to accept the refund of the earnest money, private respondent wrote them on February 22, 1989 that
the amount would be deposited in court by consignation. On March 10, 1989, private respondent filed a complaint
for consignation against petitioners.
Private respondent alleged that it was her obligation to return the earnest money under paragraph 3 of the receipt
since the condition of ejecting the squatters had not been fulfilled but petitioners unjustly refused to accept the
refund. She claimed that although she tried her best to eject the squatters, she failed in her efforts.
Petitioners, on the other hand, argued in their answer that the legal requisites for a valid consignation were not
present and, therefore the consignation was improper. They claimed that private respondent never really intended
to eject the squatters, as evidence by the absence of a case for ejectment. Petitioners charged that private
respondent has used her own failure as an excuse to get out of her contract.
Private respondent testified that she had wanted to return the earnest money after realizing that she could not
successfully eject the squatters but that she was not able to do so because petitioners broker, Zapata Realty
Company, refused to give her petitioners address.[3] In her cross examination, she claimed that the primary reason
for the January 17, 1989meeting was for her to return the money and to withdraw from the sale and that the idea
of increasing the price came from petitioners to convince her to continue with the sale.[4] She later admitted,
however, that the price increase and decision to proceed with the sale were mutually agreed upon by her and
petitioner Vicente Lim.[5] Her admission was confirmed by her broker, Edmundo Kaimo, who testified [6] that the
purpose of the meeting was to discuss ways of carrying out the sale, considering that private respondent was
having difficulty ejecting the squatters and that what he private respondent proposed to petitioners was to
increase the purchase price to facilitate the ejectment.
Testifying in their turn, petitioner Vicente Lim denied that the January 17, 1989 meeting was held at their
instance.[7] He said that he was reluctant to agree to the price increase but was prevailed upon to do so by his
broker, Zapata Realty Company, and by Edmundo Kaimo. This testimony was corroborated by Atty. Rustico Zapata
and Francisco Zapata of the Zapata Realty Company.
On December 28, 1992 the trial court[8] rendered a decision holding that there was a perfected contract of sale
between the parties and that pursuant to Art. 1545 of the Civil Code, although the failure of private respondent to
eject the squatters was a breach of warranty, the performance of warranty could be waived by the buyer, as
petitioners did in this case. It found private respondent to have acted in bad faith by not exerting earnest efforts to
eject the squatters, in order to get out of the contract. The dispositive portion of its decision reads:
WHEREFORE, under cool reflection and prescinding from the foregoing, judgment is rendered in favor of the
defendants and against plaintiff:
1. The complaint is dismissed.
2. Perforce, plaintiff is ordered to comply with the Receipt Agreement dated September 02, 1988 regarding the
sale to the defendants of the property covered by Transfer Certificate of Title No. T-193230 of the Registry of
Deeds of Quezon City, upon payment by the defendants of the balance of P3,800,000.00.
3. Plaintiff is ordered to pay the defendants the sum of P500,000.00 as moral damages.
4. Plaintiff to pay defendants the sum of P50,000.00 by way of attorneys fees.
5. Plaintiff to pay the cost.
SO ORDERED.
The private respondent appealed to the Court of Appeals, which reversed [9] the trial court and allowed the
complaint for consignation. It held that as a result of the nun-fulfillment of the condition of ejecting the squatters,
petitioners lost the right to demand from the private respondent the sale of the land to them. The appellate court
described the sale in this case as a contract with a conditional obligation whereby the private respondents
obligation to sell and deliver and the petitioners obligation to pay the balance of the purchase price depended on
the fulfillment of the condition that the squatters be removed within 60 days.
The Court of Appeals held:
Under such conditions, upon the ejectment of the squatters plaintiff would acquire the right to demand that
defendants proceed with the sale and pay the balance of the purchase price; and, on the other hand, should the
event not happen, defendants would lose the right they had acquired by giving the earnest money to plaintiff to
demand that the latter sell said land to them.
It also ruled that consignation was proper as the obligation to refund earnest money was a clear debt and that
contrary to the finding of the trial court, the facts show that private respondent exerted earnest efforts to eject
the squatters and was, therefore, not in bad faith.
The petitioners filed this petition for review on the following grounds.
I. THE RULING OF THE COURT OF APPEALS THAT THE NON-FULFILLMENT OF THE CONDITION OF EJECTING THE
SQUATTERS RESULTED IN DEFENDANTS LOSING THE RIGHT (ACQUIRED BY VIRTUE OF THE EARNEST MONEY) TO
DEMAND THAT PLAINTIFF SELL THE LAND TO THEM IS PATENTLY AGAINST THE SPECIFIC LAW ON SALES, AND IS A
DISTORTED AND CLEARLY ERRONEOUS APPLICATION OF THE GENERAL PROVISIONS OF THE LAW ON OBLIGATIONS
AND CONTRACTS.
II. THE RULING OF THE COURT OF APPEALS IS A DISTORTION OF THE CONTRACT BETWEEN THE PARTIES, WAY OF
JUSTICE ITSELF BECAUSE IT REWARDS RATHER THAN SANCTIONS THE NON-PERFORMANCE OF A CONTRACTED
OBLIGATION.
III. THE QUESTION OF WHETHER OR NOT RESPONDENT LUNA EXERTED EARNEST EFFORTS TO EJECT THE
SQUATTERS DOES NOT PERTAIN TO THE ISSUE OF THE PROPRIETY OF CONSIGNATION BUT REFERS TO THE MATTER
OF WHETHER OR NOT RESPONDENT LUNA WAS IN BAD FAITH AND IS THEREFORE LIABLE FOR DAMAGES INFLICTED
UPON THE PETITIONERS; AND THE RULING THAT SUCH EARNEST EFFORTS WAS PRESENT IS CONTRARY TO
UNCONTRADICTED EVIDENCE.
The petition is well taken. The first question is whether as a result of private respondents failure to eject the
squatters from the land, petitioners, as the Court of Appeals ruled, lost the right to demand that the land be sold
to them. We hold that they did not and that the appellate court erred in holding otherwise. The agreement, as
quoted, shows a perfected contract of sale. Under Art. 1475 of the Civil Code, there is a perfected contract of sale
if there is a meeting of the minds on the subject and the price. A sale is a consensual contract requiring only the
consent of the parties on these two points. In this case, the parties agreed on the subject, the 1,013.6 square
meter lot and on the purchase price of P4,000,000.00. No particular form is required for the validity of their
contract and, therefore, upon its perfection. The parties can reciprocally demand performance of their respective
obligations.[10]
Indeed, the earnest money given is proof of the perfection of the contract. As Art. 1482 of the Civil Code states,
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. This perfected contract imposed reciprocal obligations on the parties. Petitioners
obligation was to pay the balance of the price, while private respondents obligation was to deliver the property to
petitioners upon payment of the price. It is true that private respondent undertook to eject the squatters before
the delivery of the property within a certain period and that for her failure to carry out her obligation she could be
ordered to refund the P200,000.00 earnest money. But whether she would be obliged to do so depends on
petitioners who can waive the condition and opt to proceed with the sale instead.
Private respondent Luna contends that as the condition of ejecting the squatters was not met, she no longer has
an obligation to proceed with the sale of her lot. This contention is erroneous. Private respondent fails to
distinguish between a condition imposed on the perfection of the contract and a condition imposed on the
performance of an obligation. Failure to comply with the first condition results in the failure of a contract, while
failure to comply with the second condition only gives the other party the option either to refuse to proceed with
the sale or to waive the condition. Thus, Art. 1545 of the Civil Code states:
ART. 1545. Where the obligation of either party to a contract of sale is subject to any condition which is not
performed, such party may refuse to proceed with the contract or he may waive performance of the condition. If
the other party has promised that the condition should happen or be performed, such first mentioned party may
also treat the nonperformance of the condition as a breach of warranty.
Where the ownership in the things has not passed, the buyer may treat the fulfillment by the seller of his
obligation to deliver the same as described and as warranted expressly or by implication in the contract of sale as a
condition of the obligation of the buyer to perform his promise to accept and pay for the thing. (Emphasis added)
In this case, there is already a perfected contract. The condition was imposed only on the performance of the
obligation. Hence, petitioners have the right to choose whether to demand the return of P200,000.00 which they
have paid as earnest money or to proceed with the sale. They have chosen to proceed with the sale and private
respondent cannot refuse to do so.
Indeed, private respondent is not the injured party. She cannot rescind the contract without violating the principle
of mutuality of contracts, which prohibits allowing the validity and performance of contracts to be left to the will of
one of the parties.[11] Thus in a case[12] on all fours with this case, this Court held:
Under the agreement, private respondent is obligated to evict the squatters on the property. The ejectment of the
squatters is a condition the operative act of which sets into motion the period of compliance by petitioner of his
own obligation, i.e., to pay the balance of the purchase price. Private respondents failure to remove the squatters
from the property within the stipulated period gives petitioner the right to either refuse to proceed with the
agreement or waive that condition in consonance with Article 1545 of the Civil Code. This option clearly belongs to
petitioner and not to private respondent.[13]
....
In any case, private respondents action for rescission is not warranted. She is not the injured party. The right of
resolution of a party to an obligation under Article 1191 of the Civil Code is predicated on a breach of faith by the
other party that violates the reciprocity between them. It is private respondent who has failed in her obligation
under the contract.[14]
The second question is whether private respondent is liable for damages to petitioners. The trial court correctly
found private respondent guilty of breach of contract and awarding moral damages and attorneys fees to
petitioners. The court held:
The failure of the plaintiff (Luna) to eject the squatters which is her full responsibility and commitment" under the
contract of sale, aggravated by her persistence in evading the obligation to deliver the property on the basis of her
very own failure, the persistence culminating in the instant case for consignation, show not just a breach of
contract but a breach in bad faith. . . .
The Court finds that the defendant may be awarded moral damages in the amount they prayed for, which
is P500,000.00 considering that it was the same amount which the parties have determined as the cost of the
removal of the squatters. The clear absence of merit of plaintiffs position, which at [the] bottom is an attempt to
profit from ones own breach, compels this court to award attorneys fees, defendants having been unnecessary
dragged into a litigation.
Indeed, the evidence shows that private respondent made little more than token effort to seek the ejectment of
squatters from the land, revealing her real intention to be finding a way of getting out of her contract. Her failure
to eject the squatters despite sufficient time and funds given to her by petitioners, her offer to return the earnest
money only a month after their meeting on January 17, 1989 in which she agreed to proceed with the sale in
consideration of which the purchase price was increased by almost P500,000.00 and her consignation of the
earnest money despite petitioners insistence that the sale should go on even if she had failed to eject the
squatters all these betray private respondents failure to comply with her obligation.Private respondents lack of
intention to really comply with her obligation under the contract is underscored by her failure to seek the
assistance of courts in ejecting the squatters. It might be granted that, at first, she thought going to the city
engineers office was the expedient way of ejecting the squatters. However, having seen the futility of such
recourse and having been given money, private respondent had no excuse for filing the action below. Her failure to
make use of her resources and her insistence on rescinding the sale shows quite clearly that she was indeed just
looking for away to get out of her contractual obligation by pointing to her own abject failure to rid the land of
squatters.
The Court of Appeals erred in holding that private respondent had made earnest efforts in discharging her
obligation, relying for this purpose on the testimony of Domingo Tapay, Building Official of Quezon City. Edgardo C.
Julian, Civil Engineer in charge of demolition in the Office of the Building Official of Quezon City, testified that
though a request for demolition had been made by private respondent Luna, no demolition actually took place and
that the attempt to do so was made only sometime in mid-1989.[15] This confirms the letter dated April 24, 1989 of
the City Engineers Office of Quezon City to petitioner that as of that date there was no record in that office of any
request for the ejectment of squatters from the land.[16]
The trial court awarded P500,000.00 to petitioners as moral damages for suffering, delay and inconvenience they
experienced as a result of private respondents failure in bad faith to proceed under the contract. This amount
corresponds to the price increase agreed to be paid to private respondent to facilitate the ejectment of the
squatters.
The award of moral damages is in accordance with Art. 2220 of the Civil Code which provides that moral damages
may be awarded in case of a breach of contract where the defendant acted fraudulently or in bad faith. However,
the amount awarded is in our opinion excessive. To be sure the amount to be awarded depends upon the
discretion of the court based on the circumstances of each case but, having regard for the purposes for awarding
such damages, we think that fixing the amount equivalent to the increase given to private respondent would be
contrary to the rule that moral damages are not intended to enrich the complainant at the expense of the
defendant[17] or to penalize the defendant.[18] Under the circumstance an award of P100,000.00 would be fair and
reasonable.
This Court also agrees with the award of attorneys fees by the trial court. As found by the trial court, there was
clear absence of merit in private respondents position thus unnecessarily forcing petitioners to litigate. Under Art.
2208(4)(5) of the Civil Code, attorneys fees may be recovered when the civil action or proceeding against the
plaintiff is clearly unfounded and where defendant acted in gross and evident bad faith in refusing to satisfy the
plaintiffs claim.
WHEREFORE, the decision of the Court of Appeals is REVERSED and that of the Regional Trial Court is REINSTATED,
with the MODIFICATION that private respondent is ordered to pay the sum of P100,000.00 as moral damages
and P50,000.00 as attorneys fees to petitioners.

Zayas, Jr. v. Luneta Motor Company, et al.

G.R. No. L-30583 October 23, 1982
Gutierrez, Jr., J.

Facts:
Eutropio Zayas, Jr, purchased on installment basis a motor vehicle from Mr. Roque Escao of the Escao
Enterprises in Cagayan de Oro City, dealer of respondent Luneta Motor Company , under the following terms and
conditions:

Selling price P7,500.00

Financing charge P1,426.82
Total Selling Price P8,926.82
Payable on Delivery P1,006.82
Payable in 24 months at 12% interest per annum P7,920.00

The motor vehicle was delivered to the petitioner who paid the initial payment in the amount of
P1,006.82, and executed a promissory note in the amount of P7,920.00, the balance of the total selling price, in
favor of respondent Luneta Motor Company. The promissory note stated the amounts and dates of payment of 26
installments covering the P7,920.00 debt. Simultaneously with the execution of the promissory note and to secure
its payment, the petitioner executed a chattel mortgage on the subject motor vehicle in favor of the respondent.
After paying a total amount of P3,148.00, the petitioner was unable to pay further monthly installments prompting
the respondent Luneta Motor Company to extra-judicially foreclose the chattel mortgage. The motor vehicle was
sold at public auction with the respondent Luneta Motor Company as the highest bidder in the amount of
P5,000.00. Since the payments made by petitioner Zayas, Jr. plus the P5,000.00 realized from the foreclosure of
the chattel mortgage could not cover the total amount (P7,920.00) of the promissory note executed by the
petitioner in favor of the respondent Luneta Motor Company, the latter filed an action for the recovery of the
balance of P1,551.74 plus interests.

Issue:
whether or not a deficiency amount after the motor vehicle, subject of the chattel mortgage, has been
sold at public auction could still be recovered by respondent company

Held:
No. The main defense of respondent Luneta Motor Company is that Escao Enterprises, Cagayan de Oro
City from which petitioner Zayas, Jr. purchased the subject motor vehicle was a distinct and different entity; that
the role of Luneta Motor Company in the said transaction was only to finance the purchase price of the motor
vehicle; and that in order to protect its interest as regards the promissory note executed in its favor, a chattel
mortgage covering the same motor vehicle was also executed by petitioner Zayas, Jr. In short, respondent Luneta
Motor Company maintains that the contract between the company and the petitioner was only an ordinary loan
removed from the coverage of Article 1484 of the New Civil Code.
This is untenable. The Escao Enterprises of Cagayan de Oro City was an agent of Luneta Motor Company. Avery
significant evidence which proves the nature of the relationship between Luneta Motor Company and Escao
Enterprises is Annex A of the petitioners Opposition to Urgent Motion for Reconsideration. Annex A is a
Certification from the cashier of Escao Enterprises on the monthly installments paid by Zayas, Jr. In the
certification, the promissory note in favor of Luneta Motor Company was specifically mentioned. There was Escao
Enterprises, a dealer of respondent Luneta Motor Company, was merely a collecting-agent as far as the purchase
of the subject motor vehicle was concerned. The principal and agent relationship is clear.

But even assuming that the distinct and independent entity theory of the private respondent is valid,
the nature of the transaction as a sale of personal property on installment basis remains. When, therefore, Escao
Enterprises, assigned its rights vis--vis the sale to respondent Luneta Motor Company, the nature of the
transaction involving Escao Enterprises and Zayas, Jr. did not change at all. As assignee, respondent Luneta Motor
Company had no better rights than assignor Escao Enterprises under the same transaction. The transaction would
still be a sale of personal property in installments covered by Article 1484 of the New Civil Code.

Pascual vs. Universal Motors Corp.

61 SCRA 121
November 1974

FACTS:

Plaintiff-appellee spouses Lorenzo Pascual and Leonila Torres (spouses Pasqual) executed the real estate mortgage
subject matter of this complaint on December 14, 1960 to secure the payment of the indebtedness of PDP Transit,
Inc. (PDP Trans.) for the purchase of 5 units of Mercedes Benz trucks, with a total purchase price or principal
obligation of P152,506.50 which was to bear interest at 1% per month starting that day, but the plaintiffs'
guarantee is not to exceed P50,000.00 which is the value of the mortgage. The PDP Trans., as the spouses
Pasqual's principal, paid to defendant-appellant Universal Motors Corporation (Universal Motors) the sum of
P92,964.91 on April 5, 1961 for two of the five Mercedes Benz trucks and on May 22, 1961 for the remaining three,
thus leaving a balance of P68,641.69 including interest due on February 8, 1965.

On March 19, 1965, Universal Motors filed this complaint with the CFI of Manila against the PDP Trans. to collect
the balance due under the Chattel Mortgages and to repossess all the units sold to PDP Trans. as the spouse
Pascuals principal, including the 5 units guaranteed under the subject Real (Estate) Mortgage. During the
hearinbg, Universal Motors admitted that it was able to repossess all the units sold to the latter, including the 5
units guaranteed by the subject real estate mortgage, and to foreclose all the chattel mortgages constituted
thereon, resulting in the sale of the trucks at public auction. As the real estate mortgagors, the spouses Pascual
filed an action with the CFI of Quezon City for the cancellation of the mortgage they constituted on 2 parcels of
land in favor of the Universal Motors to guarantee the obligation of PDP Trans. to the amount of P50,000. The said
CFI rendered judgment in favor of the spouses Pascual and ordered the cancellation of the mortgage.

ISSUE:

Was Article 1484 of the New Civil Code applicable in the case at bar?

COURT RULING:

The Supreme Court affirmed the lower courts decision. Appellant Universal Motors argues that Article 1484 is not
applicable to the case at bar because there is no evidence on record that the purchase by PDP Trans. of the 5
trucks was payable in installments and that the PDP Trans. had failed to pay two or more installments. Universal
Motors also contends that what Article 1484 prohibits is for the vendor to recover from the purchaser the unpaid
balance of the price after he has foreclosed the chattel mortgage on the thing sold, but not a recourse against the
security put up by a third party.
The Supreme Court concluded to the contrary, saying that the first issue was whether or not the sale was one on
installments. The lower court found that it was, and that there was failure to pay two or more installments, a
finding which is not subject to review by the Supreme Court.

The next contention is that what article 1484 withholds from the vendor is the right to recover any deficiency
from the purchaser after the foreclosure of the chattel mortgage, and not a recourse to the additional security
put up by a third party to guarantee the purchaser's performance of his obligation. But the Supreme Court to
sustain this argument of the appellant would be to indirectly subvert and public policy overturn the protection
given by Article 1484.

Spouses Dela Cruz vs CA

214 SCRA 103
GR. No. 94828, September 18, 1992
DOCTRINE: While it is true that under par. 3 of 1484, the vendor, after he decides to foreclose the mortgage upon
the thing sold, is precluded from instituting any further action against the purchaser to recover any unpaid balance
of the price, it is the fact of foreclosure and actual sale of the mortgaged chattel that bar recovery by the vendor
of any balance of the purchasers outstanding obligation not satisfied by the sale

Facts: Petitioner purchased on installment a truck from BENTER motor sales Corp. And to secure payment,
petitioners executed in favor of BENTER a chattel mortgage over the vehicle and a promissory note. BENTER then
assigned its rights and interest over the vehicle in favor of private respondent ASIAN consumer and industrial
finance corp. Petitioners initially paid some installment but subsequently defaulted for more than 2 installments. A
demand letter was sent by respondent corp to petitioner, but the latter failed to settle their obligation.
Subsequently, by virtue of a petition for extrajudicial foreclosure, the sheriff attempted to repossess
vehicle but was unsuccessful because of the refusal of the son of petitioner to turnover the same. Some 2 weeks
later, the petitioner brought the vehicle to the office of respondent corp. And left it there for inventory and
inspection.
Respondent thereafter filed an ordinary action for the collection of the balance of the purchase price. The
trial court rendered judgment in favor of respondent. Ca affirmed the jusgment on appeal.
Issue: Is the chattel mortgage, after opting to foreclose the mortgage but failing afterward to sell the property at
public auction, still sue to recover the unpaid balance of the purchase price?
Ruling: Yes. The Supreme Court, citing several pertinent cases, have stated in the wise: Under the law, the
delivery of possession of the mortgaged property to the mortgagee, the herein appellee, can only operate to
extinguish appellants liability if the appellee had actually caused the foreclosure sale of the mortgaged property
when it recovered possession thereof. It is worth noting that it is the fact of foreclosure and actual sale of the
mortgaged chattel that bar recovery by the vendor of any balance of the purchasers outstanding obligation not
satisfied by the sale (New Civil Code, par. 3, Article 1484). Consequently, 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.