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CASE DIGEST: Teodoro Acap vs CA, Edy Delos Reyes G.R. No.

118114 December 7, and four children) executed a document (Declaration of heirship with waiver of rights),
1995 (251 SCRA 30) (Yellow Pad digest) adjudicating the land equally amongst themselves, and waiving all their rights in favor
of Edy de los Santos. The title continued to be registered in the name of the Vasquez
Document = “Declaration of Heirship and Waiver of Rights” spouses. Upon obtaining the Declaration of Heirship with waiver of rights, Edy filed it
Rental = 10 Cavans of Palay with the Registry of Deeds as part of a notice of adverse claim against the original
certificate of title. Edy told Acap personally he was the new owner of the land and that
Facts:
Lot 1130 is registered in the name of Spouses Vasquez, they died. Their son, Felixberto the lease rentals (10 cavans of palay per annum) were to be paid to him. Allegedly, Acap
inherited the lot, he then executed a DEED OF SALE to Cosmo Pido. Teodoro Acap a agreed and complied. In 1983 however, Acap refused to pay any further lease rentals,
tenant that occupies 9,500m still occupied the lot even after the transfer of ownership, prompting private respondent to get the assistant of the Ministry of Agrarian Reform. A
he paid his rentals religiously, even after Pido died. Pido’s heris waived their rights (via MAR officer informed Acap’s wife about Edy’s ownership, but she said she and her husband did not
the DOCUMENT) in favor of Edy. recognize the ownership over the land. After four years, Edy filed a complaint for recovery
Edy informed Ted that he is the owner and that the monthly should be paid to him, Ted of possession and damages against Acap, as he refused to pay agreed rentals. The trial
agreed to pay the annual RENTAL.
court decided in favor of Edy & stated that the evidence had established that the subject
Come 1983, Ted refused to pay anymore monthly lease, this prompted Ed to ask for
assistance from the Ministry of Agrarian Reform (MAR). land was "sold" by the heirs of Cosme Pido to Edy. It forfeited Acap’s preferred right
MAR invited Ted to a conference to discuss the matter but he did not attend, however, underPD 27 and ordered Acap to deliver the farm to Edy which was affirmed by the CA.
he sent his wife, MAR told the wife that Ed is the new owner of the lot but she said that
they do not recognize Ed’s ownership. Issue: W/N the Declaration of Heirship and Waiver of Rights can be considered a deed of
After 4 years, Edy filed a complaint for recovery of possession and damages against sale in favour of Edy de los Santos of the lot in question.
Ted.
During Trial, Ted contended that he does not recognize the ownership of Edy but still Held: The Declaration of Heirship was not the same as a contract/deed of sale. In a
recognize the ownership of Pido, he as well told that Pido’s widow told him that he contract of sale, one party obligates himself to transfer ownership and to deliver a
should stay in the lot and withhold any monthly payment until she arrives or demands it determinate thing, and the other party to pay a certain price. A declaration of heirship
(The widow is in USA).
and waiver of rights operates as a private instrument when filed with the Registry of
RTC ruled in favor of Edy. CA brushed aside Ted’s argument.
Issue: W/ON the DOCUMENT can be considered as a deed of sale? Deeds. It is in effect an extrajudicial settlement. There is a difference between sale of
hereditary rights and waiver. The first presumes a deed of sale. The second is a mode
Held: No. IN A CONTRACT OF SALE, ONE OF THE PARTIES OBLIGATES HIMSELF of extinction of ownership. Edy, being a stranger to the succession of Cosme Pido cannot
TO TRANSFERAND DELIVER, THE OTHER TO PAY THE PRICE. Declaration of conclusively claim ownership on the sole basis of the waiver document which neither
Heirship and Waiver of Rights operates as a public instrument when filed with the recites the elements of a sale, donation or any other derivative mode of acquiring
Registry of Deeds whereby the instestate heirs adjudicate and divide the estate left by the
ownership. The fact that the adverse claim was duly proven does not prove ownership. It
descendant.
is nothing but a notice of adverse claim. In itself is not sufficient to transfer title to Edy
Sale = Presumes the existence of a contract de los Reyes.

Waiver = mode of extinction of ownership

PUP vs CA
Acap vs CA GR No. 118114 Dec. 7, 1995
Facts: petitioner National Development Corporation (NDC), a government owned and
Facts: The title to a lot in Negros Occidental was issued and is registered in the name of controlled corporation created under CA 182 as amended by CA 311 and PD No. 668,
spouses Santiago Vasquez and Lorenza Oruma. After both spouses died, their only son had in its disposal a ten (10)-hectare property located along Pureza St., Sta. Mesa,
Felixberto inherited the lot. In 1975, Felixberto sold the lot to Cosme Pido. Since 1960, Manila. The estate was popularly known as the NDC compound and covered by Transfer
Teodoro Acap was tenant of a portion of the land. When ownership was transferred in Certificates of Title.
1975, Acap continued to be the registered tenant and religiously paid his rentals to Pido,
and after his death, to his widow Laurencia. Pido died intestate and his surviving heirs (wife
May 1965 private respondent Firestone Ceramics Inc. (FIRESTONE) manifested its desire sale of the NDC compound to petitioner PUP in violation of its leasehold rights over the
to lease a portion of the property for its ceramic manufacturing business. On 24 August 2.60-hectare8 property and the warehouses thereon which would expire in 1999.
1965 NDC and FIRESTONE entered into a contract of lease denominated as Contract No. FIRESTONE likewise prayed for the issuance of a writ of preliminary injunction to enjoin
C-30-65 covering a portion of the property measured at 2.90118 hectares for use as a NDC from disposing of the property pending the settlement of the controversy.
manufacturing plant for a term of ten (10) years, renewable for another ten (10) years
under the same terms and conditions.1 In consequence of the agreement, FIRESTONE FIRESTONE adduced in evidence a letter of Antonio A. Henson dated 15 July 1988
constructed on the leased premises several warehouses and other improvements needed addressed to Mr. Jake C. Lagonera, Director and Special Assistant to Executive Secretary
for the fabrication of ceramic products. Catalino Macaraeg, reviewing a proposed memorandum order submitted to then
President Corazon C. Aquino transferring the whole NDC compound, including the
on 8 January 1969, FIRESTONE entered into a second contract of lease with NDC over leased property, in favor of petitioner PUP.
the latter's four (4)-unit pre-fabricated reparation steel warehouse stored in Daliao,
Davao. FIRESTONE agreed to ship the warehouse to Manila for eventual assembly within The survey listed FIRESTONE as lessee of a portion of the property, placed at
the NDC compound. The second contract, denominated as Contract No. C-26-68, was for 29,00010 square meters, whose contract with NDC was set to expire on 31 December
similar use as a ceramic manufacturing plant and was agreed expressly to be "co- 198911 renewable for another ten (10) years at the option of the lessee. The report
extensive with the lease of LESSEE with LESSOR on the 2.60 hectare-lot."2 expressly recognized FIRESTONE's right of first refusal to purchase the leased property
"should the lessor decide to sell the same.
On 31 July 1974 the parties signed a similar contract concerning a six (6)-unit pre-
fabricated steel warehouse which, as agreed upon by the parties February 1989 PUP moved to intervene and asserted its interest in the subject property,
arguing that a "purchaser pendente lite of property which is subject of a litigation is
FIRESTONE wrote NDC requesting for an extension of their lease agreement. entitled to intervene in the proceedings."13 PUP referred to Memorandum Order No.
Consequently on 29 November 1978 the Board of Directors of NDC adopted Resolution 214 issued by then President Aquino ordering the transfer of the whole NDC compound
No. 11-78-117 extending the term of the lease, subject to several conditions among to the National Government, which in turn would convey the aforementioned property in
which was that in the event NDC "with the approval of higher authorities, decide to favor of PUP at acquisition cost. The issuance was supposedly made in recognition of
dispose and sell these properties including the lot, priority should be given to the PUP's status as the "Poor Man's University" as well as its serious need to extend its
LESSEE"4 (underscoring supplied). On 22 December 1978, in pursuance of the resolution, campus in order to accommodate the growing student population. The order of
the parties entered into a new agreement for a ten-year lease of the property, renewable conveyance of the 10.31-hectare property would automatically result in the cancellation
for another ten (10) years, expressly granting FIRESTONE the first option to purchase of NDC's total obligation in favor of the National Government.
the leased premises in the event that it decided "to dispose and sell these properties
including the lot the trial court granted PUP's motion to intervene. FIRESTONE moved for reconsideration
but was denied. On certiorari, the Court of Appeals affirmed the order of the trial court.
The parties' lessor-lessee relationship went smoothly until early 1988 when FIRESTONE, FIRESTONE came to us on review.
cognizant of the impending expiration of their lease agreement with NDC, informed the
latter through several letters and telephone calls that it was renewing its lease over the FIRESTONE amended its complaint to include PUP and Executive Secretary Catalino
property. While its letter of 17 March 1988 was answered by Antonio A. Henson, General Macaraeg, Jr., as party-defendants, and sought the annulment of Memorandum Order
Manager of NDC, who promised immediate action on the matter, the rest of its No. 214. FIRESTONE alleged that although Memorandum Order No. 214 was issued
communications remained unacknowledged.7 FIRESTONE's predicament worsened when "subject to such liens/leases existing [on the subject property]," PUP disregarded and
rumors of NDC's supposed plans to dispose of the subject property in favor of petitioner violated its existing lease by increasing the rental rate at P200,000.00 a month while
Polytechnic University of the Philippines (PUP) came to its knowledge. Forthwith, demanding that it vacated the premises immediately.14 FIRESTONE prayed that in the
FIRESTONE served notice on NDC conveying its desire to purchase the property in the event Memorandum Order No. 214 was not declared unconstitutional, the property
exercise of its contractual right of first refusal. should be sold in its favor at the price for which it was sold to PUP

FIRESTONE instituted an action for specific performance to compel NDC to sell the After trial on the merits, judgment was rendered declaring the contracts of lease
leased property in its favor. FIRESTONE averred that it was pre-empting the impending executed between FIRESTONE and NDC covering the 2.60-hectare property and the
warehouses constructed thereon valid and existing until 2 June 1999. PUP was ordered that it be mutually obligatory, i.e., there should be a concurrence of the promise of the
and directed to sell to FIRESTONE the "2.6 hectare leased premises or as may be vendor to sell a determinate thing and the promise of the vendee to receive and pay for
determined by actual verification and survey of the actual size of the leased properties. the property so delivered and transferred.

The trial court ruled that the contracts of lease executed between FIRESTONE and NDC Contrary to what petitioners PUP and NDC propose, there is not just one party involved
were interrelated and inseparable because "each of them forms part of the integral in the questioned transaction. Petitioners NDC and PUP have their respective charters
system of plaintiff's brick manufacturing plant x x x if one of the leased premises will be and therefore each possesses a separate and distinct individual personality.33 The
taken apart or otherwise detached from the two others, the purpose of the lease as well inherent weakness of NDC's proposition that there was no sale as it was only the
as plaintiff's business operations would be rendered useless and inoperative. government which was involved in the transaction thus reveals itself

It thus decreed that FIRESTONE could exercise its option to purchase the property until The involvement of the Office of the President was limited to brokering the consequent
2 June 1999 inasmuch as the 22 December 1978 contract embodied a covenant to renew relationship between NDC and PUP. But the withdrawal of the appeal by the Executive
the lease for another ten (10) years at the option of the lessee as well as an agreement Secretary is considered significant as he knew, after a review of the records, that the
giving the lessee the right of first refusal. transaction was subject to existing liens and encumbrances, particularly the priority to
purchase the leased premises in favor of FIRESTONE.
Subsequently, the Court of Appeals affirmed the decision of the trial court ordering the
sale of the property in favor of FIRESTONE The preponderance of evidence shows that NDC sold to PUP the whole NDC compound,
including the leased premises, without the knowledge much less consent of private
Issue: (a) whether the transfer of the leased property from NDC to PUP amounted to a respondent FIRESTONE which had a valid and existing right of first refusal.
sale; and, (b) whether FIRESTONE can rightfully invoke its right of first refusal.
All three (3) essential elements of a valid sale, without which there can be no sale, were
whether the contract of lease with right of first refusal and valid consideration between attendant in the "disposition" and "transfer" of the property from NDC to PUP - consent of
firestone and ndc is valid and existing the parties, determinate subject matter,and consideration therefor.

Ruling: We do not see it the way PUP and NDC did. It is elementary that a party to a
Consent to the sale is obvious from the prefatory clauses of Memorandum Order No.
contract cannot unilaterally withdraw a right of first refusal that stands upon valuable 214 which explicitly states the acquiescence of the parties to the sale of the property -
consideration.
WHEREAS, PUP has expressed its willingness to acquire said NDC properties and
our paramount interest in education does not license us, or any party for that matter, to NDC has expressed its willingness to sell the properties to PUP
destroy the sanctity of binding obligations. Education may be prioritized for legislative or
budgetary purposes, but we doubt if such importance can be used to confiscate private
property such as FIRESTONE's right of first refusal.
we now proceed to determine whether FIRESTONE should be allowed to exercise its right
Aside from the fact that the intention of NDC and PUP to enter into a contract of sale was of first refusal over the property. Such right was expressly stated by NDC and
clearly expressed in the Memorandum Order No. 214,31 a close perusal of the FIRESTONE in par. XV of their third contract
circumstances of this case strengthens the theory that the conveyance of the property
from NDC to PUP was one of absolute sale, for a valuable consideration, and not a mere
paper transfer as argued by petitioners. Should the LESSOR desire to sell the leased premises during the term of this Agreement,
or any extension thereof, the LESSOR shall first give to the LESSEE, which shall have
the right of first option to purchase the leased premises subject to mutual agreement of
A contract of sale, as defined in the Civil Code, is a contract where one of the parties both parties.38
obligates himself to transfer the ownership of and to deliver a determinate thing to the
other or others who shall pay therefore a sum certain in money or its equivalent. 32 It is In the instant case, the right of first refusal is an integral and indivisible part of the
therefore a general requisite for the existence of a valid and enforceable contract of sale contract of lease and is inseparable from the whole contract. The consideration for the
right is built into the reciprocal obligations of the parties. Thus, it is not correct for petitioner a new credit accommodation of P1,000,000.00. On March 31, 1981, petitioner
petitioners to insist that there was no consideration paid by FIRESTONE to entitle it to secured another loan of P653,000.00 from respondent PNB, payable in quarterly
the exercise of the right, inasmuch as the stipulation is part and parcel of the contract of installments of P32,650.00, plus interests and other charges
lease making the consideration for the lease the same as that for the option.
PNB filed a petition for extrajudicial foreclosure of the real estate mortgage and sought to
It is a settled principle in civil law that when a lease contract contains a right of first have the property sold at public auction for P911,532.21, petitioner's outstanding
refusal, the lessor is under a legal duty to the lessee not to sell to anybody at any price obligation to respondent PNB .
until after he has made an offer to sell to the latter at a certain price and the lessee has
failed to accept it.39 The lessee has a right that the lessor's first offer shall be in his favor.
the property was sold at public auction where respondent PNB was declared the winning
bidder. The Certificate of Sale7 issued in its favor was registered with the Office of the
The option in this case was incorporated in the contracts of lease by NDC for the benefit
Register of Deeds.
of FIRESTONE which, in view of the total amount of its investments in the property,
wanted to be assured that it would be given the first opportunity to buy the property at a
Petitioner sent a letter dated August 25, 1983 to respondent PNB, requesting that it be
price for which it would be offered. Consistent with their agreement, it was then implicit
for NDC to have first offered the leased premises of 2.60 hectares to FIRESTONE prior to granted an extension of time to redeem/repurchase the property.
the sale in favor of PUP. Only if FIRESTONE failed to exercise its right of first priority
could NDC lawfully sell the property to petitioner PUP. Meanwhile, some PNB Pasay City Branch personnel informed petitioner that as a matter
of policy, the bank does not accept "partial redemption. Since petitioner failed to redeem
In contracts of sale, the basis of the right of first refusal must be the current offer of the the property, the Register of Deeds cancelled TCT No. 32098 on June 1, 1984, and
seller to sell or the offer to purchase of the prospective buyer. Only after the lessee- issued a new title in favor of respondent PNB.
grantee fails to exercise its right under the same terms and within the period
Petitioner rejected respondent's proposal in a letter dated July 14, 1988. It maintained
contemplated can the owner validly offer to sell the property to a third person,
that respondent PNB had agreed to sell the property for P1,574,560.47, and that since
again, under the same terms as offered to the grantee.40 It appearing that the whole NDC
its P725,000.00 downpayment had been accepted, respondent PNB was proscribed from
compound was sold to PUP for P554.74 per square meter, it would have been more
increasing the purchase price of the property.21 Petitioner averred that it had a net
proper for the courts below to have ordered the sale of the property also at the same
balance payable in the amount of P643,452.34. Respondent PNB, however, rejected
price.
petitioner's offer to pay the balance of P643,452.34 in a letter dated August 1, 1989
WHEREFORE, the petitions in G.R. No. 143513 and G.R. No. 143590 are DENIED
petitioner filed a complaint against respondent PNB for "Annulment of Mortgage and
private respondent FIRESTONE CERAMICS, INC., shall have six (6) months from receipt Mortgage Foreclosure, Delivery of Title, or Specific Performance with Damages
of the approved survey within which to exercise its right to purchase the leased property
In its Answer to the complaint, respondent PNB averred, as a special and affirmative
at P1,500.00 per square meter, and petitioner Polytechnic University of the Philippines is
defense, that it had acquired ownership over the property after the period to redeem had
ordered to reconvey the property to FIRESTONE CERAMICS, INC., in the exercise of its
elapsed. It claimed that no contract of sale was perfected between it and petitioner after
right of first refusal
the period to redeem the property had expired.

Issue: 1. whether or not petitioner and respondent PNB had entered into a perfected
Manila Metal Container vs PNB contract for petitioner to repurchase the property from respondent.

Facts: Petitioner was the owner of a 8,015 square meter parcel of land located in the trial court rendered judgment dismissing the amended complaint and respondent
Mandaluyong (now a City), Metro Manila. The property was covered by Transfer PNB's counterclaim. It ordered respondent PNB to refund the P725,000.00 deposit
Certificate of Title (TCT) No. 332098 of the Registry of Deeds of Rizal. To secure petitioner had made.32 The trial court ruled that there was no perfected contract of sale
a P900,000.00 loan it had obtained from respondent Philippine National Bank (PNB), between the parties; hence, petitioner had no cause of action for specific performance
petitioner executed a real estate mortgage over the lot. Respondent PNB later granted against respondent.
CA rendered judgment on May 11, 2000 affirming the decision of the RTC.37 It declared original offer and an attempt to end the negotiation between the parties on a different
that petitioner obviously never agreed to the selling price proposed by respondent PNB basis.
(P1,931,389.53) since petitioner had kept on insisting that the selling price should be
lowered to P1,574,560.47. Clearly therefore, there was no meeting of the minds between In this case, petitioner had until February 17, 1984 within which to redeem the property.
the parties as to the price or consideration of the sale However, since it lacked the resources, it requested for more time to redeem/repurchase
the property under such terms and conditions agreed upon by the parties.
Ruling: ruling of the appellate court that there was no perfected contract of sale between
the parties on June 4, 1985 is correct. We do not agree with petitioner's contention that the P725,000.00 it had remitted to
respondent was "earnest money" which could be considered as proof of the perfection of
A contract is a meeting of minds between two persons whereby one binds himself, with a contract of sale under Article 1482 of the New Civil Code. The provision reads:
respect to the other, to give something or to render some service.41 Under Article 1318 of
the New Civil Code, there is no contract unless the following requisites concur: ART. 1482. Whenever earnest money is given in a contract of sale, it shall be
considered as part of the price and as proof of the perfection of the contract.
(1) Consent of the contracting parties;
Thus, the P725,000.00 was merely a deposit to be applied as part of the purchase price
(2) Object certain which is the subject matter of the contract; of the property, in the event that respondent would approve the recommendation of
SAMD for respondent to accept petitioner's offer to purchase the property
(3) Cause of the obligation which is established. for P1,574,560.47. Unless and until the respondent accepted the offer on these terms, no
perfected contract of sale would arise.
Contracts are perfected by mere consent which is manifested by the meeting of the offer
and the acceptance upon the thing and the cause which are to constitute the It appears that although respondent requested petitioner to conform to its amended
contract.42 Once perfected, they bind other contracting parties and the obligations counter-offer, petitioner refused and instead requested respondent to reconsider its
arising therefrom have the form of law between the parties and should be complied with amended counter-offer. Petitioner's request was ultimately rejected and respondent
in good faith. The parties are bound not only to the fulfillment of what has been offered to refund its P725,000.00 deposit.
expressly stipulated but also to the consequences which, according to their nature, may
be in keeping with good faith, usage and law In sum, then, there was no perfected contract of sale between petitioner and respondent
over the subject property.
The absence of any of the essential elements will negate the existence of a perfected
contract of sale IN LIGHT OF ALL THE FOREGOING, the petition is DENIED.

A contract of sale is consensual in nature and is perfected upon mere meeting of the
The assailed decision is AFFIRMED
minds. When there is merely an offer by one party without acceptance of the other, there
is no contract.47 When the contract of sale is not perfected, it cannot, as an independent
source of obligation, serve as a binding juridical relation between the parties.
Delpher Trades vs IAC
A negotiation is formally initiated by an offer, which, however, must be certain.50 At any
time prior to the perfection of the contract, either negotiating party may stop the Facts: Delfin Pacheco and his sister, Pelagia Pacheco, were the owners of 27,169 square
negotiation. At this stage, the offer may be withdrawn; the withdrawal is effective meters of real estate Identified as Lot. No. 1095, Malinta Estate, in the Municipality of
immediately after its manifestation Polo (now Valenzuela), Province of Bulacan.

A qualified acceptance or one that involves a new proposal constitutes a counter-offer the said co-owners leased to Construction Components International Inc. the same
and a rejection of the original offer. A counter-offer is considered in law, a rejection of the property and providing that during the existence or after the term of this lease the lessor
should he decide to sell the property leased shall first offer the same to the lessee and The petitioners maintain that the Pachecos did not sell the property. They argue that
the letter has the priority to buy under similar conditions. there was no sale and that they exchanged the land for shares of stocks in their own
corporation.
lessee Construction Components International, Inc. assigned its rights and obligations
under the contract of lease in favor of Hydro Pipes Philippines, Inc. with the signed Ruling:
conformity and consent of lessors Delfin Pacheco
We rule for the petitioners.
contract of lease, as well as the assignment of lease were annotated at he back of the
title, as per stipulation of the parties (Exhs. A to D-3 inclusive) After incorporation, one becomes a stockholder of a corporation by subscription or by
purchasing stock directly from the corporation or from individual owners thereof
On January 3, 1976, a deed of exchange was executed between lessors Delfin and
Pelagia Pacheco and defendant Delpher Trades Corporation whereby the former conveyed In the case at bar, in exchange for their properties, the Pachecos acquired 2,500 original
to the latter the leased property (TCT No.T-4240) together with another parcel of land unissued no par value shares of stocks of the Delpher Trades Corporation.
also located in Malinta Estate, Valenzuela, Metro Manila
Consequently, the Pachecos became stockholders of the corporation by subscription "The
essence of the stock subscription is an agreement to take and pay for original unissued
On the ground that it was not given the first option to buy the leased property pursuant
shares of a corporation, formed or to be formed."
to the proviso in the lease agreement, respondent Hydro Pipes Philippines, Inc., filed an
amended complaint for reconveyance of Lot. No. 1095 in its favor under conditions
It is to be stressed that by their ownership of the 2,500 no par shares of stock, the
similar to those whereby Delpher Trades Corporation acquired the property from Pelagia
Pachecos have control of the corporation. Their equity capital is 55% as against 45% of
Pacheco and Delphin Pacheco. the other stockholders, who also belong to the same family group.

lower court's decision was affirmed on appeal by the Intermediate Appellate Court. In effect, the Delpher Trades Corporation is a business conduit of the Pachecos. What
they really did was to invest their properties and change the nature of their ownership
The defendants-appellants, now the petitioners, filed a petition for certiorari to review the from unincorporated to incorporated form by organizing Delpher Trades Corporation to
appellate court's decision. take control of their properties and at the same time save on inheritance taxes.

Issue: whether or not the "Deed of Exchange" of the properties executed by the Pachecos The records do not point to anything wrong or objectionable about this "estate planning"
on the one hand and the Delpher Trades Corporation on the other was meant to be a scheme resorted to by the Pachecos. "The legal right of a taxpayer to decrease the
contract of sale which, in effect, prejudiced the private respondent's right of first refusal amount of what otherwise could be his taxes or altogether avoid them, by means which
over the leased property included in the "deed of exchange." the law permits, cannot be doubted."

Delpher Trades Corporation is a family corporation; that the corporation was organized The "Deed of Exchange" of property between the Pachecos and Delpher Trades
by the children of the two spouses (spouses Pelagia Pacheco and Benjamin Hernandez Corporation cannot be considered a contract of sale. There was no transfer of actual
and spouses Delfin Pacheco and Pilar Angeles) who owned in common the parcel of land ownership interests by the Pachecos to a third party. The Pacheco family merely changed
leased to Hydro Pipes Philippines in order to perpetuate their control over the property their ownership from one form to another. The ownership remained in the same hands.
through the corporation and to avoid taxes; that in order to accomplish this end, two Hence, the private respondent has no basis for its claim of a light of first refusal under
the lease contract.
pieces of real estate, including Lot No. 1095 which had been leased to Hydro Pipes
Philippines, were transferred to the corporation; that the leased property was transferred
WHEREFORE, the instant petition is hereby GRANTED, The questioned decision and
to the corporation by virtue of a deed of exchange of property;
resolution of the then Intermediate Appellate Court are REVERSED and SET ASIDE.
Under this factual backdrop, the petitioners contend that there was actually no transfer
of ownership of the subject parcel of land since the Pachecos remained in control of the
property.
Toyota Shaw vs CA Sosa asked that his downpayment be refunded. Toyota gave the check 100k with receipt
of which was shown by a check voucher of Toyota,5 which Sosa signed with the
Facts: reservation, "without prejudice to our future claims for damages."

June of 1989, Luna L. Sosa wanted to purchase a Toyota Lite Ace. It was then a seller's Sosa sent two letters to Toyota. In the first letter, dated 27 June 1989 and signed by
market and Sosa had difficulty finding a dealer with an available unit for sale. But upon him, he demanded the refund, within five days from receipt, of the downpayment of
contacting Toyota Shaw, Inc., he was told that there was an available unit. P100,000.00 plus interest from the time he paid it and the payment of damages with a
warning that in case of Toyota's failure to do so he would be constrained to take legal
Sosa emphasized to Bernardo that he needed the Lite Ace not later than 17 June 1989. action. 6 The second, dated 4 November 1989 and signed by M. O. Caballes, Sosa's
Bernardo assured Sosa that a unit would be ready for pick up at 10:00 a.m. on 17 June counsel, demanded one million pesos representing interest and damages, again, with a
1989. Bernardo then signed the aforequoted "Agreements Between Mr. Sosa & Popong warning that legal action would be taken if payment was not made within three days.
Bernardo of Toyota Shaw, Inc." It was also agreed upon by the parties that the balance of
the purchase price would be paid by credit financing through B.A. Finance, and for this Sosa, the latter filed on 20 November 1989 with Branch 38 of the Regional Trial Court
Gilbert, on behalf of his father, signed the documents of Toyota and B.A. Finance (RTC) of Marinduque a complaint against Toyota for damages under Articles 19 and 21 of
pertaining to the application for financing the Civil Code in the total amount of P1,230,000.00

15 June 1989, Sosa and Gilbert went to Toyota to deliver the downpayment of Toyota alleged that no sale was entered into between it and Sosa, that Bernardo had no
P100,000.00. They met Bernardo who then accomplished a printed Vehicle Sales authority to sign Exhibit "A" for and in its behalf, and that Bernardo signed Exhibit "A"
Proposal (VSP) No. 928,2 on which Gilbert signed under the subheading CONFORME. in his personal capacity. As special and affirmative defenses, it alleged that: the VSP did
This document shows that the customer's name is "MR. LUNA SOSA" not state date of delivery; Sosa had not completed the documents required by the
financing company, and as a matter of policy, the vehicle could not and would not be
that payment is by "installment," to be financed by "B.A. and that the "BALANCE TO BE released prior to full compliance with financing requirements.
FINANCED" is "P274,137.00." CONDITIONS OF SALES
trial court rendered on 18 February 1992 a decision in favor of Sosa. 12 It ruled that
1. This sale is subject to availability of unit. Exhibit "A," the "AGREEMENTS BETWEEN MR. SOSA AND POPONG BERNARDO," was a
valid perfected contract of sale between Sosa and Toyota which bound Toyota to deliver
2. Stated Price is subject to change without prior notice, Price prevailing and in effect at the vehicle to Sosa,
time of selling will apply. . . .
Toyota appealed to the Court of Appeals. Court of Appeals affirmed in toto the appealed
17 June 1989, at around 9:30 a.m., Bernardo called Gilbert to inform him that the decision.
vehicle would not be ready for pick up at 10:00 a.m. as previously agreed upon but at
2:00 p.m. that same day. At 2:00 p.m., Sosa and Gilbert met Bernardo at the latter's Issue: a. whether or not the standard VSP was the true and documented understanding
office. According to Sosa, Bernardo informed them that the Lite Ace was being readied for of the parties which would have led to the ultimate contract of sale.
delivery. After waiting for about an hour, Bernardo told them that the car could not be
b. whether or not Sosa has any legal and demandable right to the delivery of the vehicle
delivered .
despite the non-payment of the consideration and the non-approval of his credit
Toyota contends, however, that the Lite Ace was not delivered to Sosa because of the application by B.A. Finance
disapproval by B.A. Finance of the credit financing application of Sosa. It further alleged
that a particular unit had already been reserved and earmarked for Sosa but could not Ruling: We find merit in the petition.
be released due to the uncertainty of payment of the balance of the purchase price.
Toyota then gave Sosa the option to purchase the unit by paying the full purchase price Neither logic nor recourse to one's imagination can lead to the conclusion that Exhibit
in cash but Sosa refused. "A" is a perfected contract of sale.
Article 1458 of the Civil Code defines a contract of sale as follows: the extent of Bernardo's authority as an
agent20 in respect of contracts to sell Toyota's vehicles
Art. 1458. By the contract of sale one of the contracting parties obligates
himself to transfer the ownership of and to deliver a determinate thing, Exhibit "A" may be considered as part of the initial phase of the generation or
and the other to pay therefor a price certain in money or its equivalent. negotiation stage of a contract of sale

A contract of sale may be absolute or conditional. Accordingly, in a sale on installment basis which is financed by a financing company,
three parties are thus involved: the buyer who executes a note or notes for the unpaid
and Article 1475 specifically provides when it is deemed perfected: balance of the price of the thing purchased on installment, the seller who assigns the
notes or discounts them with a financing company, and the financing company which is
Art. 1475. The contract of sale is perfected at the moment there is a subrogated in the place of the seller, as the creditor of the installment buyer. 24 Since
meeting of minds upon the thing which is the object of the contract and B.A. Finance did not approve Sosa's application, there was then no meeting of minds on
upon the price. the sale on installment basis.

From that moment, the parties may reciprocally demand performance, The VSP was a mere proposal which was aborted in lieu of subsequent events. It follows
subject to the provisions of the law governing the form of contracts. that the VSP created no demandable right in favor of Sosa for the delivery of the vehicle
to him, and its non-delivery did not cause any legally indemnifiable injury.
What is clear from Exhibit "A" is not what the trial court and the Court of Appeals appear
to see. It is not a contract of sale. No obligation on the part of Toyota to transfer The award then of moral and exemplary damages and attorney's fees and costs of suit is
ownership of a determinate thing to Sosa and no correlative obligation on the part of the without legal basis.
latter to pay therefor a price certain appears therein. The provision on the downpayment
of P100,000.00 made no specific reference to a sale of a vehicle. If it was intended for a
contract of sale, it could only refer to a sale on installment basis, as the VSP executed WHEREFORE, the instant petition is GRANTED.
the following day confirmed. But nothing was mentioned about the full purchase price
and the manner the installments were to be paid.
Toyota Shaw Inc., petitioner vs CA and Luna L. Sosa, respondents
(GR No. 116650, 244 SCRA 320, 23 May 1995)
This Court had already ruled that a definite agreement on the manner of payment of the
price is an essential element in the formation of a binding and enforceable contract of
Doctrines:
sale. 18 This is so because the agreement as to the manner of payment goes into the price Obligations and Contracts/Sales – Stages of contract: There are three stages in a
such that a disagreement on the manner of payment is tantamount to a failure to agree contract of sale – (a) preparation, conception, or generation, which is the period of
on the price. Definiteness as to the price is an essential element of a binding agreement negotiation and bargaining, ending at the moment of agreement of the parties; (b)
to sell personal property. 19
perfection or birth of the contract, which is the moment when the parties come to agree
on the terms of the contract; and (c) consummation or death, which is the fulfillment or
Moreover, Exhibit "A" shows the absence of a meeting of minds between Toyota and performance of the terms agreed upon in the contract.
Sosa. For one thing, Sosa did not even sign it. For another, Sosa was well aware from its Sales - Parties in installment sale: In a sale on installment basis which is financed by a
title, written in bold letters, viz., financing company, three parties are thus involved: the buyer who executes a note or
notes for the unpaid balance of the price of the thing purchased on installment, the
AGREEMENTS BETWEEN MR. SOSA & POPONG seller who assigns the notes or discounts them with a financing company, and the
BERNARDO OF TOYOTA SHAW, INC. financing company which is subrogated in the place of the seller, as the creditor of the
installment buyer.
Agency – Diligence to find agent’s authority to represent principal: A person dealing
that he was not dealing with Toyota but with Popong Bernardo and that the latter did not
with an agent is put upon inquiry and must discover upon his peril the authority of the
misrepresent that he had the authority to sell any Toyota vehicle. He knew that Bernardo
agent.
was only a sales representative of Toyota and hence a mere agent of the latter. It was
incumbent upon Sosa to act with ordinary prudence and reasonable diligence to know
Torts and Damages – Exemplary damages: Art. 2229 of the New Civil Code states that On 17 June 1989, Bernardo called around 9:30 a.m. informing Gilbert that the vehicle
exemplary or corrective damages are imposed by way of example or correction for the would not be ready for pick up at 10:00 a.m. as previously agreed, but at 2:00 p.m. the
public good, in addition to moral, temperate, liquidated, or compensatory damages. same day. Sosa and Gilbert met Bernardo 2 p.m. at the latter's office and Bernardo
informed them that the Lite Ace was being readied for delivery. But after waiting for
Facts: about an hour, Bernardo told them that the car could not be delivered.
Exhibit A
The RTC Marinduque Br. 38 decided that there was a contract of sale between Toyota
4 June 1989 Shaw through its agent Mr. Popong Bernardo and Mr. Luna Sosa. The said trial court
also held that Toyota Shaw did gave impression that Bernardo has an (apparent)
AGREEMENTS BETWEEN MR. SOSA & POPONG BERNARDO OF TOYOTA SHAW, INC. authority to transact with Sosa in its behalf, and it did not made known to Sosa that
Bernardo dealt beyond his capacity. Thus, the RTC ordered Toyota Shaw to pay damages
1. all necessary documents will be submitted to TOYOTA SHAW, INC. (POPONG to Mr. Sosa:
BERNARDO) a week after, upon arrival of Mr. Sosa from the Province (Marinduque)
where the unit will be used on the 19th of June. 1. The sum of P75,000.00 for moral damages;
2. the downpayment of P100,000.00 will be paid by Mr. Sosa on June 15, 1989. 2. The sum of P10,000.00 for exemplary damages;
3. the TOYOTA SHAW, INC. LITE ACE yellow, will be pick-up [sic] and released by 3. The sum of P30,000.00 attorney's fees plus P2,000.00 lawyer's transportation
TOYOTA SHAW, INC. on the 17th of June at 10 a.m. fare per trip in attending to the hearing of the case;
4. The sum of P2,000.00 transportation fare per trip of the plaintiff in attending the
Very truly yours, hearing of this case; and to pay the costs of suit.
(Sgd.) POPONG BERNARDO.
Dissatisfied with the trial court’s decision, Toyota Shaw appealed the RTC judgment to
Mr. Luna L. Sosa wanted to purchase a Toyota Lite Ace but had difficulty in finding a the Court of Appeals, but the appellate court affirmed in totality the lower trial court’s
dealer selling an available unit. When he was told upon contacting Toyota Shaw that judgment via its 29 July 1994 decision.
there was an available unit, he and his son Gilbert went to its office at Shaw Blvd., Pasig,
Metro Manila on 14 June 1989. They met there a Toyota sales representative named Issues and Held by the Supreme Court: Toyota Shaw appealed decision of Court of
Popong Bernardo and he emphasized to Bernardo that he needed the Lite Ace not later Appeals that affirmed in toto Regional Trial Court (RTC) Marinduque Br. 38’s decision
than 17 June 1989 because he, his family, and a balikbayan guest would use it on 18 raising the following issues,
June 1989 to go to his home province Marinduque and celebrate his birthday on 19th of
June 1989. 1. W/N agreement signed by Popong Bernardo (as sales agent of Toyota Shaw) and
Mr. Luna Sosa constituted a perfected contract of sale?
Mr. Sosa was assured by Bernardo that the unit will be ready for pickup on 10 a.m. of
17 June 1989 and he signed an agreement between him and Bernardo. They also agreed The Supreme Court held that there was no perfected contract between Toyota
that the purchase price’s balance will be paid through BA Finance’s credit financing Shaw and Mr. Luna Sosa, in relation to the agreement signed by Sosa and
while Gilbert signed on his behalf the financing application with Toyota Shaw and BA Bernardo. The court reasoned the following things: (1) there was no obligation for
Finance. Toyota Shaw to deliver the vehicle to Sosa and that the PhP100,000 initial cash
outlay did not specifically refer to a sale of vehicle. (2) The document did not
On 15 June 1989, he and his son Gilbert went back to give Toyota Shaw the PhP100,000 show the meeting of the minds contemplated in Art. 1475 of the New Civil Code
downpayment (initial cash outlay) and his son signed the printed Vehicle Sales Proposal needed for perfection of a sale contract. For one thing, Mr. Sosa did not sign the
(VSP) No. 928 Bernardo accomplished under CONFORME. VSP No. 928 showed Luna agreement. Also, it is clear from the agreement that Mr. Bernardo is a mere
Sosa’s name, his home address, the vehicle’s model series Lite Ace 1500 and described agent of Toyota Shaw and it is incumbent for Sosa to know if Bernardo has the
as 4 Dr minibus, payment terms on installment, balance to be financed by BA authority to act in Toyota Shaw’s behalf. The Court stated that at most, the
(PhP274,137) and the mentioned initial cash outlay – the delivery were not filled out. It agreement may be considered as part of the negotiation stage of the sale
also contained the following conditions: First, the sale is subject to unit’s availability. contract.
Second, the price stated is subject to change without prior notice, and that applicable
price will be the one in effect and prevailing at selling time. Bernardo’s supervisor 2. W/N Mr. Luna Sosa can demand delivery of the Lite Ace despite Toyota Shaw’s
Rodrigo Quirante checked and approved the VSP. allegation that BA Finance disapproved his credit application and for non-
payment of the consideration for the vehicle?
As to this issue, the Supreme Court upheld the argument of Toyota Shaw that
the disapproval of Sosa’s credit financing application by BA Finance because he
refused to pay the full purchase price, causing cancellation of the VSP.
Moreover, Toyota returned the PhP100,000 through a check they issued to Mr.
Luna Sosa (its receipt proven by Toyota Shaw’s check voucher signed by Sosa).
The VSP was mere proposal and in view of the events after it was signed, there
was no demandable rights for Sosa to ask the vehicle’s delivery.

3. W/N Mr. Luna Sosa is entitled to damages?

The Supreme Court held that Sosa is not entitled to awarding of moral and
exemplary damages, as well as payment for attorney’s fees and costs of suit,
since the only ground Sosa used to claim moral damages is it was known to his
friends, townmates, and relatives that he was buying a Toyota Lite Ace which
they expected to see on his birthday and because of van’s failure of delivery, he
suffered humiliation, shame, and sleepless nights. The Court reasoned that he
should not have announced his plan to buy the car knowing that he might not
be able to pay its full purchase price and therefore, he was the one himself who
brought embarrassment by bragging about a thing which he did not own yet.

The petition of Toyota Shaw is granted and the decision of Court of Appeals affirming the
Marinduque RTC’s decision is reversed. The counterclaims are likewise dismissed.

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