Sales Case.docx

Laforteza v. Machuca Facts: Roberto Laforteza and Gonzalo Laforteza, Jr., in their capacities as attorneys-in-fact of Dennis Laforteza, entrered into a MOA (Contract to Sell) with Alonzo Machuca over a house and lot registered in the name of the late Francisco Laforteza. Machuca was able to pay the earnest money but however failed to pay the balance on time. Upon a request of an extension of time, Machuca informed petitioner heirs that the balance was already covered, but petitioners refused to accept the balance and told Machuca that the subject property is no longer for sale. The petitioners contend that the Memorandum of Agreement is merely a lease agreement with “option to purchase”; hence, it only gave the respondent a right to purchase the subject property within a limited period without imposing upon them any obligation to purchase it. And since the respondent’s tender of payment was made after the lapse of the option agreement, his tender did not give rise to the perfection of a contract of sale. Issue: (1) WON the tender of payment after the lapse of the option agreement gave rise to the perfection of a contract of sale. (2) WON the six-moth period during which the respondent would be in possession of the property as lessee was a period within which to exercise an option. Held: (1) It did. A perusal of the Memorandum Agreement shows that the transaction between the petitioners and the respondent was one of sale and lease. A contract of sale is a consensual contract and is perfected at the moment there is a meeting of the minds upon the thing which is the object of the contract and upon the price. From that moment the parties may reciprocally demand performance subject to the provisions of the law governing the form of contracts. In the case at bench, all the elements of a contract of sale were thus present. (1) The six-month period during which the respondent would be in possession of the property as lessee, was clearly not a period within which to exercise an option. An option is a contract granting a privilege to buy or sell within an agreed time and at a determined price. An option contract is a separate and distinct contract from that which the parties may enter into upon the consummation of the option. An option must be supported by consideration. An option contract is governed by the second paragraph of Article 1479 of the Civil Code, which reads: Art. 1479… . An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor if the promise is supported by a consideration distinct from the price. In the present case, the six-month period merely delayed the demandability of the contract of sale and did not determine its perfection for after the expiration of the six-month period, there was an absolute obligation on the part of the petitioners and the respondent to comply with the terms of the sale.

1

Limketkai vs. CA Facts: In this motion for reconsideration, the Court based its decision on several exhibits presented by Limketkai which showed, among others, BPI’s repeated rejection of Limketkai’s proposal to buy a certain property which was issued to a real estate broker to sell the property. Issue: WON there was, as evidenced by the affidavits, a perfected contract of sale between Limketkai and BPI over the subject property. Held: There was none. Article 1475 of the NCC specifically provides when a contract of sale is deemed perfected, to wit: Art. 1475. The contract of sale is perfected at the moment there is meeting of minds upon the thing which is the object of the contract and upon the price. From that moment, the parties may reciprocally demand performance, subject to the provisions of the law governing the form of contracts. The Court in Toyota Shaw, Inc. v. Court of Appeals had already ruled that a definite agreement on the manner of payment of the price is an essential element in the formation of a binding and enforceable contract of sale. Petitioner’s exhibits did not establish any definitive agreement or meeting of the minds between the concerned parties as regards the price or term of payment. N.B. On the subject of consent as an essential element of contracts, Article 1319 of the Civil Code has this to say: Art. 1319. Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. The offer must be certain and the acceptance absolute. A qualified acceptance constitutes a counter-offer. The acceptance of an offer must therefor be unqualified and absolute. In other words, it must be identical in all respects with that of the offer so as to produce consent or meeting of the minds. This was not the case herein considering that petitioner’s acceptance of the offer was qualified, which amounts to a rejection of the original offer. 7 And contrary to petitioner’s assertion that its offer was accepted by respondent BPI, there was no showing that petitioner complied with the terms and conditions explicitly laid down by respondent BPI for prospective buyers. Neither was the petitioner able to prove that its offer to buy the subject property was formally approved by the beneficial owner of the property and the Trust Committee of the Bank; an essential 2

requirement for the acceptance of the offer which was clearly specified in Exhibits F and H. Even more telling is petitioner’s unexplained failure to reduce in writing the alleged acceptance of its offer to buy the property at P1,000/sq. m.

EDCA vs. Santos Facts: Mr. Cruz bought 406 books payable upon delivery from EDCA. Upon discovery that said Mr. Cruz was an impostor and that the check issued by the impostor as payment was dishonored, EDCA with the assistance of the police, seized the 120 books from spouses Santos who bought said books from the impostor, without a warrant. After petitioner refused the demand made by the spouses Santos for recovery of the books, said spouses obtained a writ of preliminary attachment, and thus petitioner surrendered the books to the spouses. Now, petitioner alleges that they have been unlawfully deprived of the books. The petitioner argues that it was, because the impostor acquired no title to the books that he could have validly transferred to the private respondents. Its reason is that as the payment check bounced for lack of funds, there was a failure of consideration that nullified the contract of sale between it and Cruz. Issue: WON the Contract of Sale between Mr. Cruz and EDCA was null and void for lack of consideration. Held: The Contract of Sale is valid. The contract of sale is consensual and is perfected once agreement is reached between the parties on the subject matter and the consideration. According to the Civil Code: Art. 1475. The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. From that moment, the parties may reciprocally demand performance, subject to the provisions of the law governing the form of contracts. Art. 1477. The ownership of the thing sold shall be transferred to the vendee upon the actual or constructive delivery thereof. Art. 1478. The parties may STIPULATE that ownership in the thing shall not pass to the purchaser until he has fully paid the price. It is clear from the above provisions, particularly the last one quoted, that ownership in the thing sold shall not pass to the buyer until full payment of the purchase only if there is a stipulation to that effect. Otherwise, the rule is that such ownership shall pass from the vendor to the vendee upon the actual or constructive delivery of the thing sold even if the purchase price has not yet been paid.

3

Non-payment only creates a right to demand payment or to rescind the contract, or to criminal prosecution in the case of bouncing checks. But absent the stipulation above noted, delivery of the thing sold will effectively transfer ownership to the buyer who can in turn transfer it to another. Actual delivery of the books having been made, Cruz acquired ownership over the books which he could then validly transfer to the private respondents. The fact that he had not yet paid for them to EDCA was a matter between him and EDCA and did not impair the title acquired by the private respondents to the books.

Sanchez vs. Rigos Facts: Nicolas Sanchez and Severina Rigos executed an instrument entitled “Option to Purchase,” whereby Mrs. Rigos “agreed, promised and committed … to sell” to Sanchez the sum of P1,510.00, a parcel of land situated within two (2) years from said date with the understanding that said option shall be deemed “terminated and elapsed,” if “Sanchez shall fail to exercise his right to buy the property” within the stipulated period. Inasmuch as several tenders of payment of the sum of Pl,510.00, made by Sanchez within said period, were rejected by Mrs. Rigos, Mr. Sanchez deposited said amount with the Court of First Instance and commenced against the latter the present action, for specific performance and damages. Defendant’s special defense: the contract between the parties “is a unilateral promise to sell, and the same being unsupported by any valuable consideration, by force of the New Civil Code, is null and void.” Issue: What is the proper application of Article 1479, NCC, re: ART. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally demandable. An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor if the promise is supported by a consideration distinct from the price. Held: There is no question that under article 1479 of the new Civil Code “an option to sell,” or “a promise to buy or to sell,” as used in said article, to be valid must be “supported by a consideration distinct from the price.” This is clearly inferred from the context of said article that a unilateral promise to buy or to sell, even if accepted, is only binding if supported by consideration. In other words, “an accepted unilateral promise can only have a binding effect if supported by a consideration which means that the option can still be withdrawn, even if accepted, if the same is not supported by any consideration. It is not disputed that the option is without consideration. It can therefore be withdrawn notwithstanding the acceptance of it by appellee. 4

Since there may be no valid contract without a cause or consideration, the promisor is not bound by his promise and may, accordingly, withdraw it. Pending notice of its withdrawal, his accepted promise partakes, however, of the nature of an offer to sell which, if accepted, results in a perfected contract of sale.

Serra vs. CA Facts: Federico Serra, owner of a parcel of land in Masbate, and private respondent Rizal Commercial Banking Corporation (RCBC) in its desire to put up a branch in said place, entered into a “Contract of Lease with Option to Buy.” Pursuant to said contract, a building and other improvements were constructed on the land which housed the branch office of RCBC in Masbate, Masbate. Within three years from the signing of the contract, petitioner complied with his part of the agreement by having the property registered and placed under the TORRENS SYSTEM. When the respondent bank decided to exercise its option and informed petitioner, through a letter, of its intention to buy the property at the agreed price of not greater than P210.00 per square meter or a total of P78,430.00, petitioner replied that he is no longer selling the property. Issue: WON There was no consideration to support the option, distinct from the price, hence, the option cannot be exercised, as required by Art. 1479 of the NCC. Held: There was a consideration, thus the option can be exercised. Article 1324 of the Civil Code provides that when an offeror has allowed the offeree a certain period to accept, the offer maybe withdrawn at anytime before acceptance by communicating such withdrawal, except when the option is founded upon consideration, as something paid or promised. On the other hand, Article 1479 of the Code provides that an accepted unilateral promise to buy and 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. In a unilateral promise to sell, where the debtor fails to withdraw the promise before the acceptance by the creditor, the transaction becomes a bilateral contract to sell and to buy, because upon acceptance by the creditor of the offer to sell by the debtor, there is already a meeting of the minds of the parties as to the thing which is determinate and the price which is certain. In which case, the parties may then reciprocally demand performance. Jurisprudence has taught us that an optional contract is a privilege existing only in one party — the buyer. For a separate consideration paid, he is given the right to decide to purchase or not, a certain merchandise or property, at any time within the agreed period, at a fixed price. This being his prerogative, he may not be compelled to exercise the option to buy before the time expires.

5

In the present case, the consideration entails transferring of the building and/or improvements on the property to petitioner, should respondent bank fail to exercise its option within the period stipulated.

Coronel v. CA Facts: Petitioners Coronel executed a document entitled “Receipt of Down Payment” in favor of private respondents Ramona, which reads in part: “Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City, the sum of Fifty Thousand Pesos purchase price of our inherited house and lot, covered by TCT No. 1199627 of the Registry of Deeds of Quezon City, in the total amount of P1,240,000.00,” without any reservation of title until full payment of the entire purchase price. Issue: What is the real nature of the contract entered into by Coronel and Ramona? Or, did they enter into a Contrat of Sale or to a Contract to Sell? Held: The agreement was a Contract of Sale. The Civil Code defines a contract of sale, thus: Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent. 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. Thus, the parties did not merely enter into a contract to sell where the sellers, after compliance by the buyer with certain terms and conditions, promised to sell the property to the latter. What may be perceived from the respective undertakings of the parties to the contract is that petitioners had already agreed to sell the house and lot they inherited from their father, completely willing to transfer full ownership of the subject house and lot to the buyer if the documents were then in order. It just happened, however, that the transfer certificate of title was 6

then still in the name of their father. It was more expedient to first effect the change in the certificate of title so as to bear their names. That is why they undertook to cause the issuance of a new transfer of the certificate of title in their names upon receipt of the down payment in the amount of P50,000.00. As soon as the new certificate of title is issued in their names, petitioners were committed to immediately execute the deed of absolute sale. Only then will the obligation of the buyer to pay the remainder of the purchase price arise. Heirs of Zambales vs. CA Facts: The Zambales spouses own a parcel of land issued pursuant to a homestead patent. On October 29, 1959, the Zambaleses, duly assisted by their counsel, entered into a Compromise Agreement with the Nin Bay Mining Corporation which contains an agreement that the Zambaleses binds themselves to sell transfer and convey said lot to the Corporation which binds itself to purchase and pay for the same, which shall be reciprocally demandable and enforceable by the parties on September 10, 1960. On September 10, 1960, the Corporation, as attorney-infact for the Zambaleses, sold the property to Preysler. Issue: WON the subsequent sale of the property is valid. Held: No. The sale of a homestead lot within the five-year prohibitory period is illegal and void. The law prohibiting any transfer or alienation of homestead land within five years from the issuance of the patent does not distinguish between executory and consummated sales; and it would hardly be in keeping with the primordial aim of this prohibition to preserve and keep in the family of the homesteader the piece of land that the state had gratuitously given to them, to hold valid a homestead sale actually perfected during the period of prohibition but with the execution of the formal deed of conveyance and the delivery of possession of the land sold to the buyer deferred until after the expiration of the prohibitory period, purposely to circumvent the very law that prohibits and declares invalid such transaction to protect the homesteader and his family. In the compromise agreement executed between the parties, (1) the Zambaleses promised to sell and the Corporation agreed to buy the disputed lot at P500.00 per hectare, the contract to be reciprocally demandable and enforceable on September 10, 1960; and as a substitute procedure, (2) an irrevocable agency was constituted in favor of the Corporation as attorney- in-fact to sell the land to any third person on September 10, 1960 or any time thereafter. Quiroga vs. Parsons Hardware Facts: Mr. Quigora and J.Parsons of the Parsons Hardware entered into a contract which contains among others: Mr. Quiroga was to furnish the J.Parson 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. 7

The price agreed upon was the one determined by the plaintiff for the sale of these beds in Manila, with a discount of from 20 to 25 per cent, according to their class. Payment was to be made at the end of sixty days, or before, at the plaintiff’s request, or in cash, if the defendant so preferred, and in these last two cases an additional discount was to be allowed for prompt payment. Issue: WON the contract entered into was a Contract of Sale or an Agency. Or, whether J. Parson, by reason of the contract, was a purchaser or an agent of the plaintiff for the sale of his beds.

Held: The contract is a Contract of Sale, and thus J. Parson is a purchaser. The contract precisely contains the essential requisites of a contract of purchase and sale. There was the obligation on the part of the plaintiff to supply the beds, and, on the part of the defendant, to pay their price. These features exclude the legal conception of an agency or order to sell whereby the mandatory or agent received the thing to sell it, and does not pay its price, but delivers to the principal the price he obtains from the sale of the thing to a third person, and if he does not succeed in selling it, he returns it. By virtue of the contract between the plaintiff and the defendant, the latter, on receiving the beds, was necessarily obliged to pay their price within the term fixed, without any other consideration and regardless as to whether he had or had not sold the beds. It would be enough to hold, as we do, that the contract by and between the defendant and the plaintiff is one of purchase and sale, in order to show that it was not one made on the basis of a commission on sales, as the plaintiff claims it was, for these contracts are incompatible with each other. But, besides, examining the clauses of this contract, none of them is found that substantially supports the plaintiff’s contention. Not a single one of these clauses necessarily conveys the idea of an agency. The words commission on sales used in clause (A) of article 1 mean nothing else, as stated in the contract itself, than a mere discount on the invoice price. The word agency, also used in articles 2 and 3, only expresses that the defendant was the only one that could sell the plaintiff’s beds in the Visayan Islands. With regard to the remaining clauses, the least that can be said is that they are not incompatible with the contract of purchase and sale. Sps. Bernardo Buenaventura and Consolacion Joaquin, et al. vs. CA, et al. Facts: Petitioner spouses Joaquin seeks the declaration of the various Deeds of Sale executed by their defendant parents in favor of their defendant brothers and sisters herein. They allege, among others, that there was no actual valid consideration for the deeds of sale over the properties in litis. Issue: WON the Deeds of Sale are void for lack of consideration.

8

Held: The Deeds of Sale are valid. A contract of sale is not a real contract, but a consensual contract. As a consensual contract, a contract of sale becomes a binding and valid contract upon the meeting of the minds as to price. If there is a meeting of the minds of the parties as to the price, the contract of sale is valid, despite the manner of payment, or even the breach of that manner of payment. If the real price is not stated in the contract, then the contract of sale is valid but subject to reformation. If there is no meeting of the minds of the parties as to the price, because the price stipulated in the contract is simulated, then the contract is void. Article 1471 of the Civil Code states that if the price in a contract of sale is simulated, the sale is void. It is not the act of payment of price that determines the validity of a contract of sale. Payment of the price has nothing to do with the perfection of the contract. Payment of the price goes into the performance of the contract. Failure to pay the consideration is different from lack of consideration. The former results in a right to demand the fulfillment or cancellation of the obligation under an existing valid contract while the latter prevents the existence of a valid contract. Petitioners failed to show that the prices in the Deeds of Sale were absolutely simulated. the Deeds of Sale which petitioners presented as evidence plainly showed the cost of each lot sold. Not only did respondents’ minds meet as to the purchase price, but the real price was also stated in the Deeds of Sale. As of the filing of the complaint, respondent siblings have also fully paid the price to their respondent father. MEDRANO and IBAAN RURAL BANK vs. COURT OF APPEALSG.R. No. 150678 February 18, 2005 Facts: Bienvenido Medrano was the Vice-Chairman of Ibaan Rural Bank. He asked Flor (a cousin), to look for a buyer of a foreclosed asset of the bank (17-hectare mango plantation with 720 trees priced at P2.2M). Dominador Lee,a Makati businessman was a client of respondent Pacita Borbon, a licensed real estate broker. Borbon relayed toher business associates and friends that she had a ready buyer for a mango orchard. Flor then advised her that her cousinin-law owned a mango plantation which was up for sale. She told Flor to confer with Medrano and togive them a written authority to negotiate the sale of the property. Medrano issued the Letter of Authority to Borbon and Antonio to negotiate with any prospective buyer for the sale of the mango plantation. He promisedBorbon to pay a commission of 5% of the total purchase price to be agreed upon by the buyer and seller.An ocular inspection was held by Lee. Lee informed Antonio that he already purchased the property and hadm a d e a d o w n p a y m e n t o f P 1 M . T h e r e m a i n i n g b a l a n c e o f P 1 . 2 M w a s t o b e p a i d u p o n t h e a p p r o v a l o f t h e incorporation papers of the corporation he was organizing by the SEC. According to Antonio, Lee asked her if they had already received their commission. She answered "no," and Lee expressed surprise over this. Since thesale of the 9

property was consummated, the respondents asked from the petitioners their commission, or 5% of the purchase price. The petitioners refused to pay and offered a measly sum of P5,000.00 each. Hence, the present action. Medrano’s defense: Borbon and Antonio did not perform any act to consummate the sale. The petitioners pointed out that the respondents (1) did not verify the real owner of the property; (2) never saw the property inquestion; (3) never got in touch with the registered owner of the property; and (4) neither did they perform anyact of assisting their buyer in having the property inspected and verified.

Issue: WON the plaintiffs are entitled to any commission for the sale of the subject property? Held: The respondents are indeed the procuring cause of the sale. If not for the respondents, Lee would not haveknown about the mango plantation being sold by the petitioners. The sale was consummated. The bank had profited from such transaction. It would certainly be iniquitous if the respondents would not be rewarded their commission pursuant to the letter of authority. “Procuring cause” = the proximate cause. The term "procuring cause," in describing a broker’s activity, refersto a cause originating a series of events which, without break in their continui ty, result in accomplishment of prime objective of the employment of the broker – producing a purchaser ready, willing and able to buy real estate on the owner’s terms.The evidence on record shows that the respondents were instrumental in the sale of the property to Lee. Withouttheir intervention, no sale could have been consummated. They were the ones who set the sale of the subjectland in motion. While the letter-authority issued in favor of the respondents was non-exclusive, no evidence wasa d d u c e d t o s h o w t h a t t h e r e w e r e other persons, aside from the respondents, who informed Lee about t h e property for sale. When there is a close, proximate and causal connection between the broker’s efforts and the principal’s sale of his property, the broker is entitled to a commission.In the absence of fraud, irregularity or illegality in its execution, such letter-authority serves as a contract,and is considered as the law between the parties. T h e c l e a r i n t e n t i o n i s t o r e w a r d t h e r e s p o n d e n t s f o r procuring a buyer for the property

DELPHER TRADES CORPORATIO vs.IAC G.R. No. L-69259 January 26, 1988 Facts: Delfin Pacheco and sister Pelagia were the owners of a parcel of land in Polo (now Valenzuela). On April 3,1974, they leased to Construction Components International Inc. the property and providing for a right of firstrefusal should it decide to buy the said property.Construction Components International, Inc. assigned its rights and obligations under the contract of lease infavor of Hydro Pipes Philippines, Inc. with the 10

signed conformity and consent of Delfin and Pelagia. In 1976, a deed of exchange was executed between lessors Delfin and Pelagia Pacheco and defendant Delpher TradesCorporation whereby the Pachecos conveyed to the latter the leased property together with another parcel of land also located in Malinta Estate, Valenzuela for 2,500 shares of stock of defendant corporation with a totalvalue of P1.5M.On the ground that it was not given the first option to buy the leased property pursuant to the proviso in thelease agreement, respondent Hydro Pipes Philippines, Inc., filed an amended complaint for reconveyance of thelot.Trivia lang: Delpher Trades Corp is owned by the Pacheco Family, managed by the sons an d daughters of D e l f i n a n d P e l a g i a . T h e i r primary defense is that there is no transfer of ownership because the P a c h e c o s remained in control of the original co -owners. The transfer of ownership, if anything, was merely in form butnot in substance. Issue: WON the Deed of Exchange of the properties executed by the Pachecos a n d t h e D e l p h e r T r a d e s Corporation on the other was meant to be a contract of sale which, in effect, prejudiced the Hydro Phil's rightof first refusal over the leased property included in the "deed of exchange"? Held: By their ownership of the 2,500 no par shares of stock, the Pachecos have control of the corporation. Their equity capital is 55% as against 45% of the other stockholders, who also belong to the same family group. In effect, the Delpher Trades Corporation is a business conduit of the Pachecos. What they really did was to investt h e i r properties and change the nature of their ownership from unincorporated t o i n c o r p o r a t e d f o r m b yo r g a n i z i n g D e l p h e r T r a d e s C o r p o r a t i o n t o t a k e c o n t r o l o f t h e i r p r o p e r t i e s a n d a t t h e s a m e t i m e s a v e o n inheritance taxes.T h e "Deed of Exchange" of property between the Pachecos and Delpher Trades C o r p o r a t i o n c a n n o t b e considered a contract of sale. There was no transfer of actual ownership interests by the Pachecos to athird party. The Pacheco family merely changed their ownership from one form to another. The ownershipremained in the same hands. Hence, the private respondent has no basis for its claim of a light of first refusal under the lease contract

TOYOTA SHAW, INC. vs COURT OF APPEALS G.R. No. L-116650 May 23, 1995 Facts: Sometime in June of 1989, Luna L. Sosa wanted to purchase a Toyota Lite Ace. It was then a seller's marketand Sosa had difficulty finding a dealer with an available unit for sale. But upon contacting Toyota Shaw, Inc.,he was told that there was an available unit. So on 14 June 1989, Sosa and his son, Gilbert, went to the Toyotaoffice at Shaw. There they met Popong Bernardo, a sales representative of Toyota.Sosa emphasized to Bernardo that he needed the Lite Ace not later than 17 June 1989 because he, his family,and a 11

balikbayan guest would use it on 18 June 1989 to go to Marinduque, his home province, where he wouldcelebrate his birthday on the 19th of June. He added that if he does not arrive in his hometown with the new car,he would become a "laughing stock." Bernardo assured Sosa that a unit would be ready for pick up at 10AM on17 June 1989. Bernardo then signed the "Agreements Between Mr. Sosa & Popong Bernardo of Toyota Shaw,Inc." P100 thousand was the downpayment, but the purchase price was not mentioned in the contract. It wasalso agreed upon by the parties that the balance of the purchase price would be paid by credit financing throughB.A. Finance.Toyota contends, however, that the Lite Ace was not delivered to Sosa because of the 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 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 in cash but Sosa refused. The financing corporation seemed to have not approved Sosa’s application. Issue: WON there was a perfected contract of sale? Held:Exhibit "A" or the “Agreement” is NOT a perfected contract of sale . Nothing was mentioned about the full purchase price and the manner the i n s t a l l m e n t s w e r e t o b e p a i d . A definite agreement on the manner of payment of the price is an essential element in the formation of a bindingand enforceable contract of sale. This is so because the agreement as to the manner of payment goes into the p r i c e s u c h t h a t a d i s a g r e e m e n t o n t h e m a n n e r o f p a ym e n t i s t a n t a m o u n t t o a f a i l u r e t o a g r e e o n t h e p r i c e . Definiteness as to the price is an essential element of a binding agreement to sell personal property.Exhibit "A" shows the absence of a meeting of minds between Toyota and Sosa. For one thing, Sosa did not e v e n s i g n i t . H e was not dealing with Toyota but with Popong Bernardo. Bernardo w a s o n l y a sales representative of Toyota and hence a mere agent of the latter.Exhibit "A" may be considered as part of the initial phase of the generation or negotiation stage of a contractof sale. Accordingly, in a sale on installment basis which is financed by a financing company, three parties arethus involved: the buyer who executes a note or notes for the unpaid balance of the price of the thing purchasedon installment, the seller who assigns the notes or discounts them with a financing company, and the financingcompany which is subrogated in the place of the seller, as the creditor of the installment buyer. Since B.A.Finance did not approve Sosa's application, there was then no meeting of minds on the sale on installment basis. The Vehicle Sales Proposal was a mere proposal which was aborted in lieu of subsequent events. It followsthat 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 12

VALENCIA V. CABANTINGApril 26, 1991 Facts: • In 1933, petitioner Paulino Valencia and his wife Romana allegedly bout a parcel of land, wherethey built their residential house from a certain Serapia Raymundo, an heir of Pedro Raymundo, theoriginal owner of the parcel of land. • However, they failed to register the sale or secure a transfer certificate of title in their names. • Then, a conference was held in the house of Atty. Jovellanos to settle the dispute between Serapiaand the Sps. Valencia. • As a result, Serapia was willing to relinquish her ownership if the V a l e n c i a s c o u l d s h o w documents evidencing ownership. • Paulino presented a deed of sale written in Ilocano. Serapia claimed that the deed covered adifferent property. Thus, the parties were not able to settle their differences. • Assisted by Atty. Cabanting, Serapia filed a complaint against Paulino for the recovery of possession with damages. • The Valencias, on the other hand, engaged the services of Atty. Antiniw, who advised them to present a notarized deed of sale instead of the document in Ilocano. For the amount of P200 paid by Paulino to Atty. Antiniw, the latter paid a person who wouldforge the signature of the alleged vendor. • The Pangasinan CFI favored Serapia. • While the petition was of appeal, Serapia sold 40 sq. m. to Atty. Jovellanos and the remainingwas also sold to her counsel, Atty. Cabanting. ISSUE: WON Atty. Cabanting purchased the subject property in violation of Art. 1491, NCC. HELD: YES! • Art. 1491, NCC, prohibiting the sale to counsel concerned, applies only while the litigation is pending. o A thing is said to be in litigation not only if it there is some contest or litigation over it incourt, but also from the moment that it becomes to the judicial action of the judge. • In the case at bar, while it is true that Atty. Cabanting purchased the lot after finality of judgment,there was still a certiorari proceeding. o In certiorari proceedings, the appellate court may either grant or dismiss the petition. o Thus, it is not safe to conclude, for purposes under Art. 1491, NCC, that litigation has terminated when the judgment of the trial court become final while certiorari connected therewith is still in progress. 13

CIR v. AICHI FORGING COMPANY OF ASIA, INC. G.R. No. 184823 October 6, 2010 Facts: Petitioner filed a claim of refund/credit of input vat in relation to its zero-rated sales from July 1, 2002 to September 30, 2002. The CTA 2nd Division partially granted respondent’s claim for refund/credit. Petitioner filed a Motion for Partial Reconsideration, insisting that the administrative and the judicial claims were filed beyond the two-year period to claim a tax refund/credit provided for under Sections 112(A) and 229 of the NIRC. He reasoned that since the year 2004 was a leap year, the filing of the claim for tax refund/credit on September 30, 2004 was beyond the two-year period, which expired on September 29, 2004. He cited as basis Article 13 of the Civil Code, which provides that when the law speaks of a year, it is equivalent to 365 days. In addition, petitioner argued that the simultaneous filing of the administrative and the judicial claims contravenes Sections 112 and 229 of the NIRC. According to the petitioner, a prior filing of an administrative claim is a “condition precedent” before a judicial claim can be filed. The CTA denied the MPR thus the case was elevated to the CTA En Banc for review. The decision was affirmed. Thus the case was elevated to the Supreme Court. Respondent contends that the non-observance of the 120-day period given to the CIR to act on the claim for tax refund/credit in Section 112(D) is not fatal because what is important is that both claims are filed within the two-year prescriptive period. In support thereof, respondent cited Commissioner of Internal Revenue v. Victorias Milling Co., Inc. [130 Phil 12 (1968)] where it was ruled that “if the CIR takes time in deciding the claim, and the period of two years is about to end, the suit or proceeding must be started in the CTA before the end of the two-year period without awaiting the decision of the CIR.” Issues: 1. Whether or not the claim for refund was filed within the prescribed period 2. Whether or not the simultaneous filing of the administrative and the judicial claims contravenes Section 229 of the NIRC, which requires the prior filing of an administrative claim, and violates the doctrine of exhaustion of administrative remedies Held: 1. Yes. As ruled in the case of Commissioner of Internal Revenue v. Mirant Pagbilao Corporation (G.R. No. 172129, September 12, 2008), the two-year period should be reckoned from the close of the taxable quarter when the sales were made. In Commissioner of Internal Revenue v. Primetown Property Group, Inc (G.R. No. 162155, August 28, 2007, 531 SCRA 436), we said that as between the Civil Code, which provides that a year is equivalent to 365 days, and the Administrative Code of 1987, which states that a year is

14

composed of 12 calendar months, it is the latter that must prevail being the more recent law, following the legal maxim, Lex posteriori derogat priori. Thus, applying this to the present case, the two-year period to file a claim for tax refund/credit for the period July 1, 2002 to September 30, 2002 expired on September 30, 2004. Hence, respondent’s administrative claim was timely filed. 2. Yes. We find the filing of the judicial claim with the CTA premature. Section 112(D) of the NIRC clearly provides that the CIR has “120 days, from the date of the submission of the complete documents in support of the application [for tax refund/credit],” within which to grant or deny the claim. In case of full or partial denial by the CIR, the taxpayer’s recourse is to file an appeal before the CTA within 30 days from receipt of the decision of the CIR. However, if after the 120-day period the CIR fails to act on the application for tax refund/credit, the remedy of the taxpayer is to appeal the inaction of the CIR to CTA within 30 days. Subsection (A) of Section 112 of the NIRC states that “any VAT-registered person, whose sales are zero-rated or effectively zero-rated may, within two years after the close of the taxable quarter when the sales were made, apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such sales.” The phrase “within two (2) years x x x apply for the issuance of a tax credit certificate or refund” refers to applications for refund/credit filed with the CIR and not to appeals made to the CTA. The case of Commissioner of Internal Revenue v. Victorias Milling, Co., Inc. is inapplicable as the tax provision involved in that case is Section 306, now Section 229 of the NIRC. Section 229 does not apply to refunds/credits of input VAT. The premature filing of respondent’s claim for refund/credit of input VAT before the CTA warrants a dismissal inasmuch as no jurisdiction was acquired by the CTA. During the two marriages of Aleja, she and her respective husbands acquired parcels of land. The lands from the first marriage were duly partitioned. After the death of her second husband, Aleja sold to her son Roman, and daughter Angeles, parcels of land. Afater Aleja’s death, her other children filed a complaint against Roman & Angeles for the annulment of the deeds of sale in their favor executed by Aleja; and to partition the properties. Among the questioned sales was the one executed in favor of Angeles which is a half portion of the conjugal property of Aleja and her 2nd husband, the hilly portion was specifically marked in a sketch. Issue: WON Aleja may validly sell a one half portion of a conjugal property, the hilly portion of which had been specifically marked in a sketch. Held: Yes, she may validly sell one-half portion of a lot, the hilly portion of which had been specifically identified/marked in a sketch, but there must be proof that the conjugal property had been partitioned after the death of the 2nd husband. Otherwise, the sale may be considered valid only as Aleja’s one half interest therein. 15

Aleja could not have sold particular hilly portion specified in the deed of sale in absence of proof that the conjugal partnership property had been partitioned after the death of Santiago. Before such partition, Aleja could not claim title to any definite portion of the property for all she had was an ideal or abstract quota or proportionate share in the entire property.

Melanio Imperial vs. CA & Guillermo Solleza

G.R. No. 102037 July 17, 1996

Facts: Melanio and Adela are siblings who own one half undivided share over two lots. In order to expedite the registration of the lands, Adela waived her rights over the lands. Later on, Guillermo acknowledged the one-half share of Adela over the lots. Melanio then sold one of the lots. Adela died and was survived by Guillermo (husband), among others. Guillermo filed a case against Melanio to reconvey/return to Adela the other lot since Melanio never gave any share of the proceeds of the sale to Adela. Issue: WON Guillermo (as Adela’s heir) can claim the other lot as his own considering that Melanio, who co-owns the two lots with his sister Adela, sold one of the lots without giving his sister a share of the proceeds. Held: Yes. Inasmuch as the terms of the agreement between Adela and Melanio provide for one-half undivided share for petitioner over the two lots, and the petitioner in effect waived his rights over one-half of the remaining lot when he sold and appropriated solely as his own the entire proceeds from the sale of the lot, Law and equity dictate that other lot should now belong to the estate of the late Adela, represented by her heirs.

Sps. Felix & Nicanora Bucton vs. Sps. Zosimo & Josefina Gabar January 31, 1974

G.R. No. L-36359

Facts:

16

Nicanora Bucton & Josefina Gabar are sisters-in-law. Josefina bought a land from Villarin on installment basis. Josefina then entered into a verbal agreement with Nicanora that the latter would pay one-half of the price and would then own one-half of the land. Nicanora agreed. She paid the initial amount evidenced by a receipt. Sps Bucton then took possession of the land and made thereon improvements. When a deed of sale was executed in favor of Sps Gabar for the land, Sps Bucton sought to obtain a separate title but was refused. Sps Bucton filed a case for specific performance which was granted by the trial court. CA reversed, ruling that the action for specific performance was based on the receipt of the initial payment which was executed 22 years ago, thus had already prescribed (10 years prescription for an action based on a written agreement –Art. 1444). Sps Bucton argues that as owners in actual, continuous and physical possession of the land since its purchase, their right of action did not prescribe. Issue; WON Sps Bucton’s right of action to compel Sps Gabar to execute a formal deed of conveyance in their favor, has prescribed. Held: No. The real and ultimate basis of petitioners’ action is their ownership of one-half of the lot coupled with their possession thereof (not the receipt), which entitles them to a conveyance of the property. By the delivery of the possession of the land, the sale was consummated and title was transferred to Sps Bucton, that the action is actually not for specific performance, since all it seeks is to quiet title, to remove the cloud cast upon Bucton’s ownership as a result of Gabar’s refusal to recognize the sale made and that as Sps Bucton are in possession of the land, the action is imprescriptible.

Jalbuena vs. Lizarraga

G.R. No. L-10599 December 24, 1915

Facts: Lizarraga, as judgment creditor, caused the sheriff to levy upon an old sugar mill as the property of Doronilla, judgment debtor. The property was sold in a public auction. Subsequently, Jalbuena sought to recover the mill upon the ground that she is the exclusive owner of such. Jalbuena however, knew of that the property had been levied; and that it would be sold as the property of her husband. However, she stood by and permitted the sale to go forward without making the slightest protest until ownership had already passed to another. Issue: WON Jalbuena is estopped from recovering the property. Held: Yes.

17

Jalbuena had full knowledge of the fact that the property was going to be sold to pay the debts of her husband. She did not communicate her claim to the purchaser, and it is now too late to assert such a claim. “When a person having title to or an interest in property knowingly stands by and suffers it to be sold under judgment or decree, without asserting his title or right or making it known to the bidders, he cannot afterward set up his claim.” The phrase “stood by” does not import an actual presence, but implies knowledge under such circumstances as to render it the duty of the possessor to communicate it. “… it is now a well-established principle that where the true owner of property, for however short a time, holds out another, or, with knowledge of his own right, allows another to appear, as the owner of or as having full power of disposition over the property, the same being in the latter’s actual possession, and innocent third parties are thus led into dealing with some [such] apparent owner, they will be protected.” “Whenever a party has, by his own declaration, act, or omission, intentionally and deliberately led another to believe a particular thing true, and to act upon such belief, he can not, in any litigation arising out of such declaration, act, or omission, be permitted to falsify it.”

Dizon vs. Suntay

G.R. No. L-30817 September 29, 1972

Facts: Suntay is the owner of a diamond ring. She entered into a transaction with Sison to sell the ring on commission. After the lapse of a considerable time, not having heard from Sison, Suntay demanded for the return of the ring. Sison could not comply. It was discovered later on that the ring has been pledged by Sison’s niece (with the connivance of Sison) to Dizon (pawnshop). Suntay demanded for the return of the ring. Upon refusal, he instituted a case of replevin. Trial court ruled that Suntay has the right to recover. Dizon sought to reverse this decision, invoking estoppel. Issue: WON Suntay can recover the diamond ring. Held: Yes. In the present case not only has the ownership and the origin of the jewels misappropriated been unquestionably proven but also that Dizon, acting fraudulently and in bad faith, disposed of them and pledged them contrary to agreement, with no right of ownership, and to the prejudice of the injured party, who was thereby illegally deprived of the ring; therefore, in accordance with the provisions of article 464, the owner has an absolute right to recover the jewels from the possession of whosoever holds them. Petitioner ought to have been on his guard before accepting the pledge in question. Evidently there was no such precaution availed of. 18

The only exception the law allows is when there is acquisition in good faith of the possessor at a public sale, in which case the owner cannot obtain its return without reimbursing the price. Rodolfo Guansing obtained a loan from CDB, secured by a parcel of land. Upon default, the mortgage was foreclosed. The mortgaged property was sold to CDB as the highest bidder. Guansing failed to redeem, thus CDB consolidated the property in its name. Subsequently, Lolita Lim offered to purchase the property from CDB evidenced by a written offer to purchase with terms, to wit: there would be 10% option money and the balance shall be payable in cash. Lim paid the option money (Php30,000.00) but later on discovered that the subject property was registered in the name of Perfecto Guansing, father of Rodolfo. It appears however that Perfecto instituted a civil action for the cancellation of his son’s title, and the decision therein has been final and executory. Aggrieved by what they considered a serious misrepresentation on the part of CDB to sell the property, Sps. Lim instituted an action for specific performance and damages.

Spouses Lim v. Cavite Develpoment Corporation Sps. Lim: There was a perfected contract of sale as ruled by the trial court, affirmed by the CA. Cavite Devt Bank: There was no perfected contract of sale. They contend that the contract was merely an option contract not a contract of sale. Lim’s payment of the option money cannot be considered as an earnest money. Issue: WON the amount of Php30,000.00 paid by Lim is an option money or an earnest money. Held: Lim’s payment of Php30,000.00 shall be considered as earnest money, thus there was a perfected contract of sale. An option contract is a preparatory contract in which one party grants to the other, for a fixed period and under specified conditions, the power to decide, whether or not to enter into a principal contract, it binds the party who has given the option not to enter into the principal contract with any other person during the period; designated, and within that period, to enter into such contract with the one to whom the option was granted, if the latter should decide to use the option. It is a separate agreement distinct from the contract to which the parties may enter upon the consummation of the option.

19

An option contract is therefore a contract separate from and preparatory to a contract of sale which, if perfected, does not result in the perfection or consummation of the sale. Only when the option is exercised may a sale be perfected. In this case, however, after the payment of the 10% option money, the Offer to Purchase provides for the payment only of the balance of the purchase price, implying that the “option money” forms part of the purchase price. This is precisely the result of paying earnest money under Art. 1482 of the Civil Code. It is clear then that the parties in this case actually entered into a contract of sale, partially consummated as to the payment of the price. Given CDB’s acceptance of Lim’s offer to purchase, it appears that a contract of sale was perfected and, indeed, partially executed because of the partial payment of the purchase price. There is, however, a serious legal obstacle to such sale, rendering it impossible for CDB to perform its obligation as seller to deliver and transfer ownership of the property. Nemo dat quod non habet, One cannot give what one does not have. Venturanza vs. JM Tuason & Ramirez Facts: JM Tuason was the registered owner of Lot 22. Florencio Cronico offered to buy the lot from JM Tuason with the help of Mary Venturanza. Cronico was required to present proofs of her rights to the lot, and indeed presented certain documents showing her priority rights to buy the lot. Claudio Ramirez also learned that said lot was being sold. Both Cronico and Ramirez then sent individual letters to JM Tuason expressing their desire to purchase the land and requested information concerning the area, the price, and other terms and conditions of the contract to sell. JM Tuason sent separate reply letters to the prospective buyers. Cronico was able to obtain the letter the next day and thus presented the letter to the Head of the Real Estate Department of JM Tuason; and requested Venturanza to issue a check as down payment, but the same was refused. Ramirez, on the other hand, received the letter two days after it was sent stating that the lot was available for sale under the conditions set forth and that said lot was being offered for sale on a first come first serve basis. He then immediately verbally accepted such, followed by a letter to JM Tuason confirming the verbal acceptance, the next day. Counsel of Ramirez then wrote JM Tuason for the early execution of the Contract to Sell with a check as down payment (Mar 31). Counsel of Cronico, however, also wrote JM Tuason requesting that the lot be sold to him (Mar 27). Subsequently, JM Tuason and Ramirez executed a Contract to Sell, which resulted an instant suit. Arguments: Cronico: That the promise to sell is supported by a consideration as to her because she had established her link as successor of Gregorio Venturanza who bought the lot from Juan Ramos who in turn acquired said lot from Pedro Deudor.

20

JM Tuason: As ruled by the CA, the records do not show that JM Tuason’s letter-offer or unilateral promise to sell was supported by a consideration other than the selling price. Issue: WON JM Tuason’s promise to sell the lot to Cronico has a consideration separate from the selling price of said lot and thus binding upon the promissory to comply with such promise. Held: No, the promise of the respondent company to sell the lot in question to the petitioner, Florencia Cronico has no consideration separate from the selling price of said lot. It appears that the Compromise Agreement upon which Cronico predicates her right to buy the lot in question has been rescinded and set aside.

(1) In order that a unilateral promise may be binding upon the promisor, Article 1479, Civil Code of the Philippines, requires the concurrence of the condition that the promise be “supported by a consideration distinct from the price. Accordingly, the promisee can not compel the promisor to comply with the promise, unless the former establishes the existence of said distinct consideration. The promisee has the burden of proving such consideration. (Sanchez vs. Rigos, 45 SCRA 368, 372-373) The petitioner, Florencia Cronies, has not established the existence of a consideration distinct from the price of the lot in question. (2) The petitioner cannot claim that she had accepted the promise before it was withdrawn because she had violated the condition of “first, come, first served” basis. (3) It was only on March 27, 1962 that the respondent company received a letter from counsel of the petitioner requesting that the lot subject of this litigation be sold to her. The respondent, Claudio R. Ramirez, had on March 23, 1962, confirmed in writing his verbal acceptance of the terms and conditions of the sale of the lot in question. Romero vs. CA Facts: Vigillo Romero, a civil engineer and engaged in a certain business, decided to put up a central warehouse in Manila. Subsequently, Sps. Flores offered a parcel of land registered in the name of Enriqueta Onsiang. Romero visited the property and, except for the presence of squatters in the area, he found the place suitable for the warehouse. Later, Onsiang called on Romero with a proposal that should he advance the amount of P50,000.00 which could be used in taking up an ejectment case against the squatters, she would agree to sell the property for only P800.00 per square meter. Romero expressed his concurrence. A contract, denominated as “Deed of Conditional Sale” was executed between them. The P50,000.00 was paid. Later on, judgment was rendered ordering ejectment of the squatters. In a letter later on, Onsiang sought to return the P50,000.00 advance payment since she could not get rid of the squatters. Upon Romero’s

21

continued refusal, Onsiang filed a case for rescission of their deed of conditional sale plus damages. Arguments: Romero: The contract of sale between the parties was perfected from the very moment that there was a meeting of the minds of the parties upon the subject lot and the price. Moreover, the contract had already been partially fulfilled and executed upon receipt of the down payment. Onsiang: The Deed of Conditional Sale had been rendered null and void by virtue of her to evict the squatters from the premises within the agreed 60-day period. He also added that she had “decided to retain the property.” Issue: WON Onsiang action for rescission is warranted. Held: NO, the 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. Petitioner did not breach the agreement. He has agreed, in fact, to shoulder the expenses of the execution of the judgment in the ejectment case and to make arrangements with the sheriff to effect such execution. In his letter of 23 June 1989, counsel for petitioner has tendered payment and demanded forthwith the execution of the deed of absolute sale. Parenthetically, this offer to pay, having been made prior to the demand for rescission, assuming for the sake of argument that such a demand is proper under Article 1592 of the Civil Code, would likewise suffice to defeat private respondent’s prerogative to rescind thereunder. Sps. Onnie and Amparo Herrera vs. Caguiat Spouses Caguiat v. CA Facts: Sps. Onnie and Amparo Herrera are the registered owners of a lot. Godofredo Caguiat offered to buy the lot. Petitioners agreed to sell it. Respondent then gave P100,000.00 as partial payment evidenced by a Receipt for Partial Payment issued to him, promising to pay the balance of the purchase price on or before a certain date, and then they will execute and sign the final deed of sale. Respondent then wrote petitioners of his readiness to pay the balance and requesting them to prepare the final deed of sale. In reply, petitioners informed through their counsel that they are leaving for abroad and thus cancelling the transaction. Petitioners informed them that they can recover the earnest money at any time and even delivered to respondent’s counsel a PNB Manager’s Check worth P100,000.00 payable to him. Because of the cancellation, respondent filed a complaint for specific performance plus damages. 22

Arguments: Sps. Onnie and Amparo: the Receipt is not a perfected contract of sale as provided for in Article 1458 in relation to Article 1475 of the Civil Code. The delivery to them of P100,000.00 as down payment cannot be considered as proof of the perfection of a contract of sale under Article 1482 of the same Code since there was no clear agreement between the parties as to the amount of consideration.

Caguiat: As ruled by the trial court, affirmed by the CA, there was a perfected contract of sale relying on the earnest money given by respondent to petitioners, invoking Art 1482 of the CC. Issue: WON the P100,000.00 paid by Caguiat to Sps. Onnie and Amparo Herrera can be considered as earnest money contemplated in Art. 1482. Held: NO. It is true that Article 1482 of the Civil Code provides that “Whenever earnest money is given in a contract of sale, it shall be considered as part of the price and proof of the perfection of the contract.” However, this article speaks of earnest money given in a contract of sale. In this case, the earnest money was given in a contract to sell. The earnest money forms part of the consideration only if the sale is consummated upon full payment of the purchase price. Now, since the earnest money was given in a contract to sell, Article 1482, which speaks of a contract of sale, does not apply. The suspensive condition (payment of the balance by respondent) did not take place. Clearly, respondent cannot compel petitioners to transfer ownership of the property to him. —————————————— The partied agreed to a conditional contract of sale, consummation of which is subject only to the full payment of the purchase price. Chua vs. CA & Valdez-Choy Facts: Valdez-Choy advertised for sale her paraphernal house and lot. Chua responded to the advertisement and later on both agreed on a purchase price of P10,800,000.00 payable in cash. Valdez-Choy received from Chua a check for P100,000.00 as earnest money. Chua then handed to Valdez-Choy a PBCom manager’s check (P485,000.00) as partial payment. Chua then showed a PBCom manager’s check (P10,215,000.00) representing the balance of the purchase price. However, Chua did not give this PBCom check to Valdez-Choy until a new TCT is issued first in 23

his name. Valdez-Choy, however, wanted to be first paid the full consideration before a new TCT is issued in the name of Chua. As a result, Chua filed and re-filed a complaint for specific performance with damages. Arguments: Chua: He argues for the first time that his payment of earnest money and its acceptance by Valdes-Choy precludes the latter from rejecting the binding effect of the contract of sale. Thus, Chua claims that Valdes-Choy may not validly rescind the contract of sale without following Article 1592[22] of the Civil Code which requires demand, either judicially or by notarial act, before rescission may take place. Valdez-Choy: As ruled by the CA, Chuas stance to pay the full consideration only after the Property is registered in his name was not the agreement of the parties. Issue: WON Vhua’s payment of the earnest money and its acceptance by Valdes-Choy preclude the latter from rejecting the binding effect of the contract of sale. Held: NO. 1. The agreement between Chua and Valdes-Choy, as evidenced by the Receipt, is a contract to sell and not a contract of sale. Ownership over the Property was retained by Valdes-Choy and was not to pass to Chua until full payment of the purchase price.

2. It is true that Article 1482 of the Civil Code provides that [W]henever earnest money is given in a contract of sale, it shall be considered as part of the price and proof of the perfection of the contract. However, this article speaks of earnest money given in a contract of sale. In this case, the earnest money was given in a contract to sell. The Receipt evidencing the contract to sell stipulates that the earnest money is a forfeitable deposit, to be forfeited if the sale is not consummated should Chua fail to pay the balance of the purchase price. The earnest money forms part of the consideration only if the sale is consummated upon full payment of the purchase price. If there is a contract of sale, Valdes-Choy should have the right to compel Chua to pay the balance of the purchase price. Chua, however, has the right to walk away from the transaction, with no obligation to pay the balance, although he will forfeit the earnest money. Clearly, there is no contract of sale. The earnest money was given in a contract to sell, and thus Article 1482, which speaks of a contract of sale, is not applicable.

Since the agreement between Valdes-Choy and Chua is a mere contract to sell, the full payment of the purchase price partakes of a suspensive condition. The non-fulfillment of the condition

24

prevents the obligation to sell from arising and ownership is retained by the seller without further remedies by the buyer. San Miguel Properties vs. Sps. Huang Facts: San Miguel Properties is engaged in the purchase and sale of real properties, of which include two parcels of land. These properties were offered for sale at P52,140,000.00. Such offer was made to Atty. Dauz on behalf of Sps. Huang. Atty. Dauz wrote San Miguel informing the respondents’ interest to buy the property and enclosed therein a check (P1,000,000.00) as earnest deposit subject to certain conditions, to wit: (1) that they be given the exclusive option to purchase the property within 30 days from acceptance of the offer; (2) that during the option period, the parties would negotiate the terms and conditions of the purchase; and (3) petitioner would secure the necessary approvals while respondents would handle the documentation. Sobrecarey, San Miguel Properties VP indicated his conformity to the offer; signed the letter; and accepted the earnest deposit. By agreement of the parties, they agreed that respondents will be given 6 months within which to pay. Upon failure of respondents to pay despite the extension of time given, petitioner through its Pres & CEO Gonzales, wrote Atty. Dauz, that they are returning the earnest deposit. Respondent spouses through counsel, wrote petitioner demanding the execution of a deed of conveyance in their favor. They attempted to return the earnest deposit but was refused by San Miguel. Respondent spouses filed a complaint for specific performance. Trial court, upon motion, dismissed the complaint, which was reversed by the CA.

Arguments:

San Miguel: the Court of Appeals erred in finding that there was a perfected contract of sale between the parties because the letter of respondents, which petitioner accepted, merely resulted in an option contract, albeit it was unenforceable for lack of a distinct consideration. Petitioner argues that the absence of agreement as to the mode of payment was fatal to the perfection of the contract of sale. Petitioner also disputes the appellate courts ruling that Isidro A. Sobrecarey had authority to sell the subject real properties. Sps. Huang: As held by CA, there is a perfected contract of sale since the earnest money was allegedly given by respondents and accepted by petitioner through its vice-president and operations manager, Sobrecarey. The Court holds that respondents did not give the P1 million as “earnest money” as provided by Art. 1482 of the Civil Code. They presented the amount merely as a deposit of what would eventually become the earnest money or downpayment should a contract of sale be made by them. The amount was thus given not as a part of the purchase price and as proof of the perfection of the contract of sale but only as a guarantee that respondents would not back out of the sale. Respondents in fact described the amount as an “earnest-deposit.

25

Issue: WON the earnest deposit could have been given as earnest money contemplated in Art. 1482, and thus there was a perfected contract of sale. Held: No, hence, there was no perfected contract of sale. In the present case, the P1 million “earnest-deposit” could not have been given as earnest money as contemplated in Art. 1482 because, at the time when petitioner accepted the terms of respondents’ offer, their contract had not yet been perfected. The first condition for an option period of 30 days sufficiently shows that a sale was never perfected. 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. Heirs of Cecilio Claudel vs. CA & Heirs of Macario Claudel (Siblings of Cecilio) Facts: Cecilio Claudel acquired from the Bureau of Lands a parcel of land. Thirty-nine years after his death, two branches of Cecilio’s family contested the ownership over the land – the Heirs of Cecilio and the Siblings of Cecilio. The Heirs of Cecilio partitioned the lot among themselves and obtained the corresponding TCTs. Siblings of Cecilio filed a complaint for Cancellation of Titles and Reconveyance with Damages alleging that their parents had purchased from the late Cecilio several portions of the lot. They admitted that the transaction was verbal but they were able to present the subdivision plan. The CFI dismissed the complaint disregarding the evidence. The CA reversed the CFI’s ruling ordering the cancellation of the TCTs issued in the name of the Heirs of Cecilio. As ruled by the CA, the Statute of Frauds applies only to executory contracts and not to consummated sales as in the case at bar where oral evidence may be admitted. Issue: WON a contract of sale of land may be proven orally. Held: Yes, a contract of sale of land may be proven orally subject to certain exceptions. This case falls within the exception. The rule of thumb is that a sale of land, once consummated, is valid regardless of the form it may have been entered into. For nowhere does law or jurisprudence prescribe that the contract of sale be put in writing before such contract can validly cede or transmit rights over a certain real property between the parties themselves.

However, in the event that a third party, as in this case, disputes the ownership of the property, the person against whom that claim is brought cannot present any proof of such sale and hence has no means to enforce the contract. Thus the Statute of Frauds was precisely devised to protect 26

the parties in a contract of sale of real property so that no such contract is enforceable unless certain requisites, for purposes of proof, are met. The provisions of the Statute of Frauds pertinent to the present controversy, state:

Art. 1403 (Civil Code). The following contracts are unenforceable, unless they are ratified:

2) Those that do not comply with the Statute of Frauds as set forth in this number. In the following cases, an agreement hereafter made shall be unenforceable by action unless the same, or some note or memorandum thereof, be in writing, and subscribed by the party charged, or by his agent; evidence, therefore, of the agreement cannot be received without the writing, or a secondary evidence of its contents:

e) An agreement for the leasing for a longer period than one year, or for the sale of real property or of an interest therein;

The purpose of the Statute of Frauds is to prevent fraud and perjury in the enforcement of obligations depending for their evidence upon the unassisted memory of witnesses by requiring certain enumerated contracts and transactions to be evidenced in Writing. Therefore, except under the conditions provided by the Statute of Frauds, the existence of the contract of sale made by Cecilio with his siblings cannot be proved.

Sps. Dalion vs. CA & Sabesaje Jr. Facts: Sabesaje sued to recover ownership of a parcel of land, based on a private document of absolute sale, allegedly executed by Dalion, who, however denied the fact of sale, contending that the document sued upon is fictitious, his signature thereon, a forgery, and that subject land is conjugal property, it having been acquired by himself and his wife from Saturnina Sabesaje. They admitted having administered a lot belonging to the grandfather of Sabesaje. They further allege that they never received their commission in the administration of the lot, thus according to Sps. Dalion, Sabesaje’s suit is merely intended to preempt and forestall their threat to sue for the unpaid commissions. Aggrieved by the trial court’s decision, Dalion appealed to the CA. The

27

CA upheld the validity of the sale based, among others, on the testimonies of the people who witnessed the execution of the subject deed. Issue: WON the sale is valid considering that such was executed in a private document. Held: Yes, the sale is valid. Assuming authenticity of his signature and the genuineness of the document, Dalion nonetheless still impugns the validity of the sale on the ground that the same is embodied in a private document, and did not thus convey title or right to the lot in question since “acts and contracts which have for their object the creation, transmission, modification or extinction of real rights over immovable property must appear in a public instrument”. This argument is misplaced. The provision of Art. 1358 on the necessity of a public document is only for convenience, not for validity or enforceability. It is not a requirement for the validity of a contract of sale of a parcel of land that this be embodied in a public instrument.

A contract of sale is a consensual contract, which means that the sale is perfected by mere consent. No particular form is required for its validity. Upon perfection of the contract, the parties may reciprocally demand performance (Art. 1475, NCC), i.e., the vendee may compel transfer of ownership of the object of the sale, and the vendor may require the vendee to pay the thing sold (Art. 1458, NCC).

The trial court thus rightly and legally ordered Dalion to deliver to Sabesaje the parcel of land and to execute corresponding formal deed of conveyance in a public document. A sale of a real property may be in a private instrument but that contract is valid and binding between the parties upon its perfection. And a party may compel the other party to execute a public instrument embodying their contract affecting real rights once the contract appearing in a private instrument has been perfected (See Art. 1357). Manuel Pagtalunan vs. Rufina dela Cruz Vda. De Manzano Facts: Patricio Pagtalunan (petitioner’s father), entered into a contract to sell with respondent, whereby the former agreed to sell and the latter to buy, a house and lot which formed half of a parcel of land. The downpayment was paid but the monthly installments were allegedly stopped without any justification. Respondent averred that she and Patricio entered into an agreement suspending the payment of the installments within a certain period. But even before lapse of such period, 28

Patricio resumed demolishing the house. Respondent did not deny that she still owed Patricio P5,650, but claimed that she did not resume paying her monthly installment because of the unlawful acts committed by Patricio, as well as the filing of the ejectment case against her. A demand to vacate the premises was also ignored by respondent. Petitioner then filed a complaint for unlawful detainer against respondent. MTC rendered a decision in favor of petitioner ruling that respondent’s failure to pay some of the installments resulted in the resolution/termination of the contract to sell. RTC reversed this decision ruling that the agreement could not be automatically rescinded since there was delivery to the buyer. A judicial determination of rescission must be secured by petitioner as a condition precedent to convert the possession de facto of respondent from lawful to unlawful. On appeal, the CA found that the parties, the MTC & RTC, failed to apply RA 6552 (Maceda law); ruling further that the contract to sell was not validly cancelled/rescinded under the RA.

Arguments: Petitioner contends that respondent also had more than the grace periods provided under the Maceda Law within which to pay. There is nothing in the Maceda Law, petitioner asserts, which gives the buyer a right to pay arrearages after the grace periods have lapsed, in the event of an invalid demand for rescission. The Maceda Law only provides that actual cancellation shall take place after 30 days from receipt of the notice of cancellation or demand for rescission and upon full payment of the cash surrender value to the buyer. Issue: WON the Maceda law is applicabl; and WON the contract to sell was validly cancelled under the Maceda law. Held: The CA correctly ruled that R.A No. 6552, which governs sales of real estate on installment, is applicable in the resolution of this case. This case originated as an action for unlawful detainer. Respondent is alleged to be illegally withholding possession of the subject property after the termination of the Contract to Sell between Patricio and respondent. It is, therefore, incumbent upon petitioner to prove that the Contract to Sell had been cancelled in accordance with R.A. No. 6552. The pertinent provision of R.A. No. 6552 reads: Sec. 3. In all transactions or contracts involving the sale or financing of real estate on installment payments, including residential condominium apartments but excluding industrial lots, commercial buildings and sales to tenants under Republic Act Numbered Thirty-eight hundred forty-four as amended by Republic Act Numbered Sixty-three hundred eighty-nine, where the buyer has paid at least two years of installments, the buyer is entitled to the following rights in case he defaults in the payment of succeeding installments:

29

(a) To pay, without additional interest, the unpaid installments due within the total grace period earned by him, which is hereby fixed at the rate of one month grace period for every one year of installment payments made: Provided, That this right shall be exercised by the buyer only once in every five years of the life of the contract and its extensions, if any. (b) If the contract is cancelled, the seller shall refund to the buyer the cash surrender value of the payments on the property equivalent to fifty percent of the total payments made and, after five years of installments, an additional five percent every year but not to exceed ninety percent of the total payments made: Provided, That the actual cancellation of the contract shall take place after thirty days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act and upon full payment of the cash surrender value to the buyer.

R.A. No. 6552, otherwise known as the “Realty Installment Buyer Protection Act,” recognizes in conditional sales of all kinds of real estate (industrial, commercial, residential) the right of the seller to cancel the contract upon non-payment of an installment by the buyer, which is simply an event that prevents the obligation of the vendor to convey title from acquiring binding force. The Court agrees with petitioner that the cancellation of the Contract to Sell may be done outside the court particularly when the buyer agrees to such cancellation. However, the cancellation of the contract by the seller must be in accordance with Sec. 3 (b) of R.A. No. 6552, which requires a notarial act of rescission and the refund to the buyer of the full payment of the cash surrender value of the payments on the property. Actual cancellation of the contract takes place after 30 days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act and upon full payment of the cash surrender value to the buyer.

Based on the records of the case, the Contract to Sell was not validly cancelled or rescinded under Sec. 3 (b) of R.A. No. 6552, among others, Petitioner contends that he has complied with the requirements of cancellation under Sec. 3 (b) of R.A. No. 6552. He asserts that his demand letter dated February 24, 1997 should be considered as the notice of cancellation or demand for rescission by notarial act and that the cash surrender value of the payments on the property has been applied to rentals for the use of the house and lot after respondent stopped payment after January 1980. The Court, however, finds that the letter dated February 24, 1997, which was written by petitioner’s counsel, merely made formal demand upon respondent to vacate the premises in question within five days from receipt thereof since she had “long ceased to have any right to possess the premises x x x due to her failure to pay without justifiable cause the installment payments x x x.”

30