cases on sales as reviewer

7/31/2019 Cases on Sales as Reviewer

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FULE VS CA

-nullification of a contract of sale of a 10-hectare property in Tanay, Rizal in consideration of the amount of P40,000.00 and a 2.5 carat

emerald-cut diamond.

- The lower court further ruled that all the elements of a valid contract under Article 1458 of the Civil Code were present,

namely: (a) consent or meeting of the minds; (b) determinate subject matter, and (c) price certain in money or its equivalent. The same

elements, according to the lower court, were present despite the fact that the agreement between petitioner and Dr. Cruz was principally a

barter contract. The lower court explained thus:

x x x. Plaintiffs ownership over the Tanay property passed unto Dra. Cruz upon the constructive delivery thereof by virtue of the Deed of

Absolute Sale (Exh. D). On the other hand, the ownership of Dra. Cruz over the subject jewelries (sic) transferred to the plaintiff upon her

actual personal delivery to him at the lobby of the Prudential Bank. It is expressly provided by law that the thing sold shall be understood as

delivered, when it is placed in the control and possession of the vendee (Art. 1497, Civil Code). The ownership and/or title over the

jewelries (sic) was transmitted immediately before 6:00 p.m. of October 24, 1984. Plaintiff signified his approval by nodding his head.

Delivery or tradition, is one of the modes of acquiring ownership (Art. 712, Civil Code).

Similarly, when Exhibit D was executed, it was equivalent to the delivery of the Tanay property in favor of Dra. Cruz. The

execution of the public instrument (Exh. D) operates as a formal or symbolic delivery of the Tanay property and authorizes the buyer, Dra.

Cruz to use the document as proof of ownership (Florendo v. Foz, 20 Phil. 399). More so, since Exhibit D does not contain any proviso or

stipulation to the effect that title to the property is reserved with the vendor until full payment of the purchase price, nor is there astipulation giving the vendor the right to unilaterally rescind the contract the moment the vendee fails to pay within a fixed period (Taguba

v. Vda. De Leon, 132 SCRA 722; Luzon Brokerage Co. Inc. vs. Maritime Building Co. Inc. 86 SCRA 305; Froilan v. Pan Oriental

Shipping Co. et al. 12 SCRA 276).

-Aside from concluding that the contract of barter or sale had in fact been consummated when petitioner and Dr. Cruz parted ways at the

bank, the trial court likewise dwelt on the unexplained delay with which petitioner complained about the alleged fakery.

QUIROGA VS PARSONS

- But the plaintiff alleged that the defendant was his agent for the sale of his beds in Iloilo, and that said obligations are implied in

a contract of commercial agency. The whole question, therefore, reduced itself to a determination as to whether the defendant, by reason of

the contract hereinbefore transcribed, was a purchaser or an agent of the plaintiff for the sale of his beds.

In order to classify a contract, due regard must be given to its essential clauses. In the contract in question, what was essential, as

constituting its cause and subject matter, is that the plaintiff was to furnish the defendant with the beds which the latter might order, at the

price stipulated, and that the defendant was to pay the price in the manner stipulated. 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. These are precisely the essential features of a contract of purchase and sale. There was the

obligation on the part of the plaintiff to supply the beds, and, on the part of the defendant, to pay their price. These features exclude the

legal conception of an agency or order to sell whereby the mandatory or agent received the thing to sell it, and does not pay its price, but

delivers to the principal the price he obtains from the sale of the thing to a third person, and if he does not succeed in selling it, he returns it.

By virtue of the contract between the plaintiff and the defendant, the latter, on receiving the beds, was necessarily obliged to pay their price

within the term fixed, without any other consideration and regardless as to whether he had or had not sold the beds.

- But the plaintiff alleged that the defendant was his agent for the sale of his beds in Iloilo, and that said obligations are implied ina contract of commercial agency. The whole question, therefore, reduced itself to a determination as to whether the defendant, by reason of

the contract hereinbefore transcribed, was a purchaser or an agent of the plaintiff for the sale of his beds.

In order to classify a contract, due regard must be given to its essential clauses. In the contract in question, what was essential, as

constituting its cause and subject matter, is that the plaintiff was to furnish the defendant with the beds which the latter might order, at the

price stipulated, and that the defendant was to pay the price in the manner stipulated. 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. These are precisely the essential features of a contract of purchase and sale. There was the


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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.

PUYAT VS ARCO

- It appears that the respondent herein brought an action against the herein petitioner in the Court of First Instance of Manila to

secure a reimbursement of certain amounts allegedly overpaid by it on account of the purchase price of sound reproducing equipment and

machinery ordered by the petitioner from the Starr Piano Company of Richmond, Indiana, U.S.A.

- We sustain the theory of the trial court that the contract between the petitioner and the respondent was one of purchase and sale,

and not one of agency, for the reasons now to be stated.

In the first place, the contract is the law between the parties and should include all the things they are supposed to have been

agreed upon. What does not appear on the face of the contract should be regarded merely as "dealer's" or "trader's talk", which can not bind

either party. The letters, Exhibits 1 and 2, by which the respondent accepted the prices of $1,700 and $1,600, respectively, for the sound

reproducing equipment subject of its contract with the petitioner, are clear in their terms and admit no other interpretation that the

respondent in question at the prices indicated which are fixed and determinate. The respondent admitted in its complaint filed with the

Court of First Instance of Manila that the petitioner agreed to sell to it the first sound reproducing equipment and machinery. The thirdparagraph of the respondent's cause of action states:

3. That on or about November 19, 1929, the herein plaintiff (respondent) and defendant (petitioner) entered into an agreement,

under and by virtue of which the herein defendant was to secure from the United States, and sell and deliver to the herein plaintiff, certain

sound reproducing equipment and machinery, for which the said defendant, under and by virtue of said agreement, was to receive the actual

cost price plus ten per cent (10%), and was also to be reimbursed for all out of pocket expenses in connection with the purchase and

delivery of such equipment, such as costs of telegrams, freight, and similar expenses. (Emphasis ours.)

We agree with the trial judge that "whatever unforseen events might have taken place unfavorable to the defendant (petitioner),

such as change in prices, mistake in their quotation, loss of the goods not covered by insurance or failure of the Starr Piano Company to

properly fill the orders as per specifications, the plaintiff (respondent) might still legally hold the defendant (petitioner) to the prices fixed

of $1,700 and $1,600." This is incompatible with the pretended relation of agency between the petitioner and the respondent, because in

agency, the agent is exempted from all liability in the discharge of his commission provided he acts in accordance with the instructionsreceived from his principal (section 254, Code of Commerce), and the principal must indemnify the agent for all damages which the latter

may incur in carrying out the agency without fault or imprudence on his part (article 1729, Civil Code).

While the latters, Exhibits 1 and 2, state that the petitioner was to receive ten per cent (10%) commission, this does not

necessarily make the petitioner an agent of the respondent, as this provision is only an additional price which the respondent bound itself to

pay, and which stipulation is not incompatible with the contract of purchase and sale. ( See Quiroga vs. Parsons Hardware Co., 38 Phil.,

501.)

In the second place, to hold the petitioner an agent of the respondent in the purchase of equipment and machinery from the Starr

Piano Company of Richmond, Indiana, is incompatible with the admitted fact that the petitioner is the exclusive agent of the same company

in the Philippines. It is out of the ordinary for one to be the agent of both the vendor and the purchaser. The facts and circumstances

indicated do not point to anything but plain ordinary transaction where the respondent enters into a contract of purchase and sale with the

petitioner, the latter as exclusive agent of the Starr Piano Company in the United States.

It follows that the petitioner as vendor is not bound to reimburse the respondent as vendee for any difference between the cost

price and the sales price which represents the profit realized by the vendor out of the transaction. This is the very essence of commerce

without which merchants or middleman would not exist.


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COMMISSIONER VS ENGINEERING

- The main issue revolves on the question of whether or not Engineering is a manufacturer of air conditioning units under Section

185(m), supra, in relation to Sections 183(b) and 194 of the Code, or a contractor under Section 191 of the same Code.

-The Commissioner contends that Engineering is a manufacturer and seller of air conditioning units and parts or accessories thereof and,

therefore, it is subject to the 30% advance sales tax prescribed by Section 185(m) of the Tax Code, in relation to Section 19 4 of the same.

- Our New Civil Code, likewise distinguishes a contract of sale from a contract for a piece of work thus:

Art. 1467. A contract for the delivery at a certain price of an article which the vendor in the ordinary course of his business

manufactures or procures for the general market, whether the same is on hand at the time or not, is a contract of sale, but if the goods are to

be manufactured specially for the customer and upon his special order and not for the general market, it is a contract for a piece of work.

- Engineering, in a nutshell, fabricates, assembles, supplies and installs in the buildings of its various customers the central type

air conditioning system; prepares the plans and specifications therefor which are distinct and different from each other; the air conditioning

units and spare parts or accessories thereof used by petitioner are not the window type of air conditioner which are manufactured,

assembled and produced locally for sale to the general market; and the imported air conditioning units and spare parts or accessories

thereof are supplied and installed by petitioner upon previous orders of its customers conformably with their needs and requirements.

The facts and circumstances aforequoted support the theory that Engineering is a contractor rather than a manufacturer.

- Applying the facts of the aforementioned case to the present case, We see that the supply of air conditioning units to Engineer's various

customers, whether the said machineries were in hand or not, was especially made for each customer and installed in his building upon his

special order. The air conditioning units installed in a central type of air conditioning system would not have existed but for the order of the

party desiring to acquire it and if it existed without the special order of Engineering's customer, the said air conditioning units were not

intended for sale to the general public. Therefore, We have but to affirm the conclusion of the Court of Tax Appeals that Engineering is a

contractor rather than a manufacturer, subject to the contractors tax prescribed by Section 191 of the Code and not to the advance sales tax

imposed by Section 185(m) in relation to Section 194 of the same Code.

CELESTINO VS COLLECTOR

-Celestino Co & Company is a duly registered general copartnership doing business under the trade name of "Oriental Sash

Factory". From 1946 to 1951 it paid percentage taxes of 7 per cent on the gross receipts of its sash, door and window factory, in accordance

with section one hundred eighty-six of the National Revenue Code imposing taxes on sale of manufactured articles. However in 1952 it

began to claim liability only to the contractor's 3 per cent tax (instead of 7 per cent) under section 191 of the same Code; and having failed

to convince the Bureau of Internal Revenue, it brought the matter to the Court of Tax Appeals, where it also failed

- The truth of the matter is that it sold materials ordinarily manufactured by it sash, panels, mouldingsto Teodoro & Co.,

although in such form or combination as suited the fancy of the purchaser. Such new form does not divest the Oriental Sash Factory of its

character as manufacturer. Neither does it take the transaction out of the category of sales under Article 1467 above quoted, because

although the Factory does not, in the ordinary course of its business, manufacture and keep on stock doors of the kindsold to Teodoro, it

could stock and/or probably had in stock the sash, mouldings and panels it used therefor (some of them at least).


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CHAPTER II: PARTIES TO A CONTRACT

CALIMLIM-CANULAS VS FORTUN

- The foregoing premises considered, it follows that FERNANDO could not have alienated the house and lot to DAGUINES since

MERCEDES had not given her consent to said sale. 4

Anent the second issue, we find that the contract of sale was null and void for being contrary to morals and public policy. The sale wasmade by a husband in favor of a concubine after he had abandoned his family and left the conjugal home where his wife and chi ldren lived

and from whence they derived their support. That sale was subversive of the stability of the family, a basic social institution which public

policy cherishes and protects. 5

Article 1409 of the Civil Code states inter alia that: contracts whose cause, object, or purpose is contrary to law, morals, good customs,

public order, or public policy are voidand inexistent from the very beginning.

Article 1352 also provides that: "Contracts without cause, or with unlawful cause, produce no effect whatsoever. The cause is unlawful if it

is contrary to law, morals, good customs, public order, or public policy."

Additionally, the law emphatically prohibits the spouses from selling property to each other subject to certain exceptions. 6 Similarly,

donations between spouses during marriage are prohibited. 7 And this is so because if transfers or con conveyances between spouses were

allowed during marriage, that would destroy the system of conjugal partnership, a basic policy in civil law. It was also designed to preventthe exercise of undue influence by one spouse over the other, 8as well as to protect the institution of marriage, which is the cornerstone of

family law. The prohibitions apply to a couple living as husband and wife without benefit of marriage, otherwise, "the condition of those

who incurred guilt would turn out to be better than those in legal union." Those provisions are dictated by public interest and their criterion

must be imposed upon the wig of the parties. That was the ruling in Buenaventura vs. Bautista, also penned by Justice JBL Reyes (CA) 50

O.G. 3679, and cited inMatabuena vs. Cervantes. 9 We quote hereunder the pertinent dissertation on this point:

We reach a different conclusion. While Art. 133 of the Civil Code considers as void a donation between the spouses during the marriage,

policy considerations of the most exigent character as wen as the dictates of morality require that the same prohibition should apply to a

common-law relationship.

As announced in the outset of this opinion, a 1954 Court of Appeals decision, Buenaventura vs. Bautista, 50 OG 3679, interpreting a

similar provision of the old Civil Code speaks unequivocally. If the policy of the law is, in the language of the opinion of the then Justice

J.B.L. Reyes of that Court, 'to prohibit donations in favor of the other consort and his descendants because of fear of undue influence andimproper pressure upon the donor, a prejudice deeply rooted in our ancient law, ..., then there is every reason to apply the same prohibitive

policy to persons living together as husband and wife without benefit of nuptials

MACARIOLA VS ASUNCION

- Article 1491. The following persons cannot acquire by purchase, even at a public or judicial action, either in person or through the

mediation of another:

xxx xxx xxx

(5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other officers and employees connected with the

administration of justice, the property and rights in litigation or levied upon an execution before the court within whose jurisdiction or

territory they exercise their respective functions; this prohibition includes the act of acquiring by assignment and shall apply to lawyers,

with respect to the property and rights which may be the object of any litigation in which they may take part by virtue of their profession

[emphasis supplied].

The prohibition in the aforesaid Article applies only to the sale or assignment of the property which is the subject of litigation to the

persons disqualified therein. WE have already ruled that "... for the prohibition to operate, the sale or assignment of the property must take

place during the pendency of the litigation involving the property" (The Director of Lands vs. Ababa et al., 88 SCRA 513, 519 [1979],

Rosario vda. de Laig vs. Court of Appeals, 86 SCRA 641, 646 [1978]).


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In the case at bar, when the respondent Judge purchased on March 6, 1965 a portion of Lot 1184-E, the decision in Civil Case No. 3010

which he rendered on June 8, 1963 was already final because none of the parties therein filed an appeal within the reglementary period;

hence, the lot in question was no longer subject of the litigation. Moreover, at the time of the sale on March 6, 1965, respondent's order

dated October 23, 1963 and the amended order dated November 11, 1963 approving the October 16, 1963 project of partition made

pursuant to the June 8, 1963 decision, had long become final for there was no appeal from said orders.

MATABUENA VS HERNANDEZ

- In 1956, herein appellants brother Felix Matabuena donated a piece of lot to his common-law spouse, herein appellee Petronila

Cervantes. Felix and Petronila got married only in 1962 or six years after the deed of donation was executed. Five months later, or

September 13, 1962, Felix died. Thereafter, appellant Cornelia Matabuena, by reason of being the only sister and nearest collateral relative

of the deceased, filed a claim over the property, by virtue of a an affidavit of self-adjudication executed by her in 1962, had the land

declared in her name and paid the estate and inheritance taxes thereon. The lower court of Sorsogon declared that the donation was valid

inasmuch as it was made at the time when Felix and Petronila were not yet spouses, rendering Article 133 of the Civil Code inapplicable.

ISSUE: Whether or not the ban on donation between spouses during a marriage applies to a common-law relationship.

HELD:

While Article 133 of the Civil Code considers as void a donation between the spouses during marriage, policy consideration of

the most exigent character as well as the dictates of morality requires that the same prohibition should apply to a common-law relationship.

As stated in Buenaventura vs. Bautista (50 OG 3679, 1954), if the policy of the law is to prohibit donations in favor of the other

consort and his descendants because of fear of undue and improper pressure and influence upon the donor, then there is every reason to

apply the same prohibitive policy to persons living together as husband and wife without the benefit of nuptials.

The lack of validity of the donation by the deceased to appellee does not necessarily result in appellant having exclusive right to

the disputed property. As a widow, Cervantes is entitled to one-half of the inheritance, and the surviving sister to the other half.

Article 1001, Civil Code: Should brothers and sisters or their children survive with the widow or widower, the latter shall be

entitled to one-half of the inheritance and the brothers and sisters or their children to the other half.

MEDINA VS COLLECTOR

- The records show that on or about May 20, 1944, petitioning taxpayer Antonio Medina married Antonia Rodriguez. Before 1946, thespouses had neither property nor business of their own. Later, however, petitioner acquired forest, concessions in the municipalities of SanMariano and Palanan in the Province of Isabela. From 1946 to 1948, the logs cut and removed by the petitioner from his concessions weresold to different persons in Manila through his agent, Mariano Osorio.

Some time in 1949, Antonia R. Medina, petitioner's wife, started to engage in business as a lumber dealer, and up to around 1952,petitioner sold to her almost all the logs produced in his San Mariano, concession. Mrs. Medina, In turn, sold in Manila the logs boughtfrom her husband through the same agent, Mariano Osorio. The proceeds were, upon instructions from petitioner, either received by Osoriofor petitioner or deposited by said agent in petitioner's current account with the Philippine National Bank.

On the thesis that the sales made by petitioner to his wife were null and void pursuant to the provisions of Article 1490 of the Civil Code ofthe Philippines (formerly, Art. 1458, Civil Code of 1889), the Collector considered the sales made by Mrs. Medina as the petitioner'soriginal sales taxable under Section 186 of the National Internal Revenue Code and, therefore, imposed a tax assessment on petitioner,calling for the payment of P4,553.54 as deficiency sales taxes and surcharges from 1949 to 1952. This same assessment of September 26,

1953 sought also the collection of another sum of P643.94 as deficiency sales tax and surcharge based on petitioner's quarterly returns from1946 to 1952.

- Contracts violative of the provisions of Article 1490 of the Civil Code are null and void (Uy Sui Pin vs. Cantollas, 70 Phil. 55; Uy Coque

vs. Sioca 45 Phil. 43). Being void transactions, the sales made by the petitioner to his wife were correctly disregarded by the Collector in

his tax assessments that considered as the taxable sales those made by the wife through the spouses' common agent, Mariano Osorio.


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PHIL TRUST CORP VS ROLDAN

-As guardian of the property of the minor Mariano L. Bernardo, the Philippine Trust Company filed in the Manila court of first instance a

complaint to annul two contracts regarding 17 parcels of land: (a) sale thereof by Socorro Roldan, as guardian of said minor, to Fidel C.

Ramos; and (b) sale thereof by Fidel C. Ramos to Socorro Roldan personally. The complaint likewise sought to annul a conveyance of four

out of the said seventeen parcels by Socorro Roldan to Emilio Cruz.

The action rests on the proposition that the first two sales were in reality a sale by the guardian to herselftherefore, null and void under

Article 1459 of the Civil Code. As to the third conveyance, it is also ineffective, because Socorro Roldan had acquired no valid title to

convey to Cruz.

- Again, supposing she knew the parcels were actually worth P17,000; then she agreed to sell them to Dr. Ramos at P14,700;andknowing the realtys value she offered him the next day P15,000 or P15,500, and got it. Will there be any doubt that she was recreant to her

guardianship, and that her acquisition should be nullified? Even without proof that she had connived with Dr. Ramos. Remembering the

general doctrine that guardianship is a trust of the highest order, and the trustee cannot be allowed to have any inducement to neglect his

wards interest and in line with the courts suspicion whenever the guardian acquires the wards property 1 we have no hesitation to declare

that in this case, in the eyes of the law, Socorro Roldan took by purchase her wards parcels thru Dr. Ramos, and that Article 1459 of the

Civil Code applies.

- She acted it may be true without malice; may have been no previous agreement between her and Dr. Ramos to the effect that the latter

would buy the lands for her. But the stubborn fact remains that she acquired her proteges properties, through her brother-in-law. That she

planned to get them for herself at the time of selling them to Dr. Ramos, may be deduced from the very short time between the two sales

(one week). The temptation which naturally besets a guardian so circumstanced, necessitates the annulment of the transaction, even if no

actual collusion is proved (so hard to prove) between such guardian and the intermediate purchaser. This would uphold a sound principle of

equity and justice. 2

- Hence, from both the legal and equitable standpoints these three sales should not be sustained: the first two for violation of article 1459 of

the Civil Code; And the third because Socorro Roldan could pass no title to Emilio Cruz. The annulment carries with is (Article 1303 Civil

Code) the obligation of Socorro Roldan to return the 17 parcels together with their fruits and the duty of the minor, through his guardian to

repay P14,700 with legal interest.

RUBIAS VS BATILLER

-One of the issues: (1) whether or not the contract of sale between appellant and his father-in-law, the late Francisco Militante over the

property subject of Plan Psu-99791 was void because it was made when plaintiff was counsel of his father-in-law in a land registration case

involving the property in dispute;

- No error could be attributed either to the lower court's holding that the purchase by a lawyer of the property in litigation from his client is

categorically prohibited by Article 1491, paragraph (5) of the Philippine Civil Code, reproduced supra; 6and that consequently, plaintiff's

purchase of the property in litigation from his client (assuming that his client could sell the same since as already shown above, his client's

claim to the property was defeated and rejected) was void and could produce no legal effect, by virtue of Article 1409, paragraph (7) of our

Civil Code which provides that contracts "expressly prohibited or declared void by law' are "inexistent and that "(T)hese contracts cannot

be ratified. Neither can the right to set up the defense of illegality be waived."

The 1911 case of Wolfson vs. Estate of Martinez 7 relied upon by plaintiff as holding that a sale of property in litigation to the party

litigant's lawyer "is not void but voidable at the election of the vendor" was correctly held by the lower court to have been superseded by

the later 1929 case ofDirector of Lands vs. Abagat. 8In this later case of Abagat, the Court expressly cited two antecedent cases involving

the same transaction of purchase of property in litigation by the lawyer which was expressly declared invalid under Article 1459 of the

Civil Code of Spain (of which Article 1491 of our Civil Code of the Philippines is the counterpart) upon challenge thereof not by the

vendor-client but by the adverse parties against whom the lawyer was to enforce his rights as vendee thus acquired.


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These two antecedent cases thus cited in Abagat clearly superseded (without so expressly stating the previous ruling in Wolfson:

The spouses, Juan Soriano and Vicente Macaraeg, were the owners of twelve parcels of land. Vicenta Macaraeg died in November, 1909,

leaving a large number of collateral heirs but no descendants. Litigation between the surviving husband, Juan Soriano, and the heirs of

Vicenta immediately arose, and the herein appellant Sisenando Palarca acted as Soriano's lawyer. On May 2, 1918, Soriano executed a deed

for the aforesaid twelve parcels of land in favor of Sisenando Palarca and on the following day, May 3, 1918, Palarca filed an application

for the registration of the land in the deed. After hearing, the Court of First Instance declared that the deed was invalid by virtue of the

provisions of article 1459 of the Civil Code, which prohibits lawyers and solicitors from purchasing property rights involved in any

litigation in which they take part by virtue of their profession. The application for registration was consequently denied, and upon appeal

by Palarca to the Supreme Court, the judgement of the lower court was affirmed by a decision promulgated November 16,1925 . (G.R. No.

24329, Palarca vs. Director of Lands, not reported.)

In the meantime cadastral case No. 30 of the Province of Tarlac was instituted, and on August 21, 1923, Eleuteria Macaraeg, as

administratrix of the estate of Vicente Macaraeg, filed claims for the parcels in question. Buenaventura Lavitoria administrator of the estate

of Juan Soriano, did likewise and so did Sisenando Palarca. In a decision dated June 21, 1927, the Court of First Instance, Judge Carballo

presiding, rendered judgment in favor of Palarea and ordered the registration of the land in his name. Upon appeal to this court by the

administration of the estates of Juan Soriano and Vicente Macaraeg, the judgment of the court below was reversed and the land

adjudicated to the two estates as conjugal property of the deceased spouses . (G.R. No. 28226, Director of Lands vs. Abagat, promulgated

May 21, 1928, not reported.) 9

In the very case ofAbagatitself, the Court, again affirming the invalidity and nullity of the lawyer's purchase of the land in litigation from

his client, ordered the issuance of a writ of possession for the return of the land by the lawyer to the adverse parties without reimbursement

of the price paid by him and other expenses, and ruled that "the appellant Palarca is a lawyer and is presumed to know the law. He must,

therefore, from the beginning, have been well aware of the defect in his title and is, consequently, a possessor in bad faith."

As already stated, Wolfson andAbagatwere decided with relation to Article 1459 of the Civil Code of Spain then adopted here, until it was

superseded on August 30, 1950 by the Civil Code of the Philippines whose counterpart provision is Article 1491.

Article 1491 of our Civil Code (like Article 1459 of the Spanish Civil Code) prohibits in its six paragraphs certain persons, by reason of the

relation of trust or their peculiar control over the property, from acquiring such property in their trust or control either directly or indirectly

and "even at a public or judicial auction," as follows: (1) guardians; (2) agents; (3) administrators; (4) public officers and employees;

judicial officers and employees, prosecuting attorneys, and lawyers; and (6) others especially disqualified by law.

In Wolfson which involved the sale and assignment of a money judgment by the client to the lawyer, Wolfson, whose right to so purchasethe judgment was being challenged by the judgment debtor, the Court, through Justice Moreland, then expressly reserved decision on

"whether or not the judgment in question actually falls within the prohibition of the article" and held only that the sale's "voidability can not

be asserted by one not a party to the transaction or his representative," citing from Manresa 10that "(C)onsidering the question from the

point of view of the civil law, the view taken by the code, we must limit ourselves to classifying as void all acts done contrary to the

express prohibition of the statute. Now then: As the code does not recognize such nullity by the mere operation of law, the nullity of the

acts hereinbefore referred to must be asserted by the person having the necessary legal capacity to do so and decreed by a competent court."

The reason thus given by Manresa in considering such prohibited acquisitions under Article 1459 of the Spanish Civil Code as merely

voidable at the instance and option of the vendor and not void"that the Code does not recognize such nullity de pleno derecho"is no

longer true and applicable to our own Philippine Civil Code which does recognize the absolute nullity of contracts "whose cause, object, or

purpose is contrary to law, morals, good customs, public order or public policy" or which are "expressly prohibited or declared void by

law" and declares such contracts "inexistent and void from the beginning ." 12


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CHAPTER III: SUBJECT MATTER

ATILANO VS ATILANO

- The logic and common sense of the situation lean heavily in favor of the defendants' contention. When one sells or buys real

propertya piece of land, for example one sells or buys the property as he sees it, in its actual setting and by its physical metes and

bounds, and not by the mere lot number assigned to it in the certificate of title. In the particular case before us, the portion correctly referred

to as lot No. 535-A was already in the possession of the vendee, Eulogio Atilano II, who had constructed his residence therein, even before

the sale in his favor even before the subdivision of the entire lot No. 535 at the instance of its owner, Eulogio Atillano I. In like manner the

latter had his house on the portion correctly identified, after the subdivision, as lot No. 535-E, even adding to the area thereof by purchasing

a portion of an adjoining property belonging to a different owner. The two brothers continued in possession of the respective portions the

rest of their lives, obviously ignorant of the initial mistake in the designation of the lot subject of the 1920 until 1959, when the mistake

was discovered for the first time.

- The real issue here is not adverse possession, but the real intention of the parties to that sale. From all the facts and circumstances we are

convinced that the object thereof, as intended and understood by the parties, was that specific portion where the vendee was then already

residing, where he reconstructed his house at the end of the war, and where his heirs, the plaintiffs herein, continued to reside thereafter:

namely, lot No. 535-A; and that its designation as lot No. 535-E in the deed of sale was simple mistake in the drafting of the document. The

mistake did not vitiate the consent of the parties, or affect the validity and binding effect of the contract between them. The new Civil Codeprovides a remedy for such a situation by means of reformation of the instrument. This remedy is available when, there having been a

meeting of the minds of the parties to a contract, their true intention is not expressed in the instrument purporting to embody the agreement

by reason of mistake, fraud, inequitable conduct on accident (Art. 1359, et seq.) In this case, the deed of sale executed in 1920 need no

longer reformed. The parties have retained possession of their respective properties conformably to the real intention of the parties to that

sale, and all they should do is to execute mutual deeds of conveyance.

MARTINEZ VS CA

The requisites for considering a contract of sale with a right of repurchase as an equitable mortgage are (1) that the parties entered into acontract denominated as a contract of sale and (2) that their intention was to secure an existing debt by way of mortgage.32 A contract of

sale with right to repurchase gives rise to the presumption that it is an equitable mortgage in any of the following cases: (1) when the priceof a sale with a right to repurchase is unusually inadequate; (2) when the vendor remains in possession as lessee or otherwise; (3) when,upon or after the expiration of the right to repurchase, another instrument extending the period of redemption or granting a new period isexecuted; (4) when the purchaser retains for himself a part of the purchase price; (5) when the vendor binds himself to pay the taxes on thething sold; (6) in any other case where it may be fairly inferred that the real intention of the parties is that the transaction shall secure thepayment of a debt or the performance of any other obligation.33 In case of doubt, a contract purporting to be a sale with right to repurchaseshall be construed as an equitable mortgage.34

In this case, the following circumstances indicate that the private respondents intended the transaction to be an equitable mortgage and nota contract of sale: (1) Private respondents Veneracion never took actual possession of the three lots; (2) Private respondents De la Pazremained in possession of the Melencio lot which was co-owned by them and where they resided; (3) During the period between the firstsale and the second sale to private respondents Veneracion, they never made any effort to take possession of the properties; and (4) whenthe period of redemption had expired and private respondents Veneracion were informed by the De la Pazes that they are offering the lotsfor sale to another person for P200,000.00, they never objected. To the contrary, they offered to purchase the two lots for P180,000.00when they found that a certain Mr. Tecson was prepared to purchase it for the same amount. Thus, it is clear from these circumstances thatboth private respondents never intended the first sale to be a contract of sale, but merely that of mortgage to secure a debt of P150,000.00.

With regard to the second sale, which is the true contract of sale between the parties, it should be noted that this Court in several cases,35has ruled that a purchaser who is aware of facts which should put a reasonable man upon his guard cannot turn a blind eye and later claimthat he acted in good faith. Private respondent Reynaldo himself admitted during the pre-trial conference in the MTC in Civil Case No.9523 (for ejectment) that petitioner was already in possession of the property in dispute at the time the second Deed of Sale was executedon June 1, 1983 and registered on March 4, 1984. He, therefore, knew that there were already occupants on the property as early as 1981.The fact that there are persons, other than the vendors, in actual possession of the disputed lot should have put private respondents oninquiry as to the nature of petitioner's right over the property. But he never talked to petitioner to verify the nature of his right. He merely


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relied on the assurance of private respondent Godofredo De la Paz, who was not even the owner of the lot in question, that he would takecare of the matter. This does not meet the standard of good faith.

3. The appellate court's reliance on Arts. 1357 and 1358 of the Civil Code to determine private respondents Veneracion's lack of knowledgeof petitioner's ownership of the disputed lot is erroneous.

Art. 135736and Art. 1358,37 in relation to Art. 1403(2)38 of the Civil Code, requires that the sale of real property must be in writing for it tobe enforceable. It need not be notarized. If the sale has not been put in writing, either of the contracting parties can compel the other toobserve such requirement.39 This is what petitioner did when he repeatedly demanded that a Deed of Absolute Sale be executed in his favorby private respondents De la Paz. There is nothing in the above provisions which require that a contract of sale of realty must be executedin a public document. In any event, it has been shown that private respondents Veneracion had knowledge of facts which would put themon inquiry as to the nature of petitioner's occupancy of the disputed lot.

MELLIZA VS CITY OF ILOILO

- At the outset, it is well to mark that the issue is whether or not the conveyance by Juliana Melliza to Iloilo municipality included that

portion of Lot 1214 known as Lot 1214-B. If not, then the same was included, in the instrument subsequently executed by Juliana Melliza

of her remaining interest in Lot 1214 to Remedios Sian Villanueva, who in turn sold what she thereunder had acquired, to Pio Sian Melliza.

It should be stressed, also, that the sale to Remedios Sian Villanueva from which Pio Sian Melliza derived title did not specificallydesignate Lot 1214-B, but only such portions of Lot 1214 as were not included in the previous sale to Iloilo municipality (Stipulation of

Facts, par. 5, Record on Appeal, p. 23). And thus, if said Lot 1214-B had been included in the prior conveyance to Iloilo municipality, then

it was excluded from the sale to Remedios Sian Villanueva and, later, to Pio Sian Melliza.

The point at issue here is then the true intention of the parties as to the object of the public instrument Exhibit "D". Said issue revolves on

the paragraph of the public instrument aforequoted and its purpose, i.e., whether it was intended merely to further describe the lots already

specifically mentioned, or whether it was intended to cover other lots not yet specifically mentioned.

- First of all, there is no question that the paramount intention of the parties was to provide Iloilo municipality with lots sufficient or

adequate in area for the construction of the Iloilo City hall site, with its avenues and parks. For this matter, a previous donation for this

purpose between the same parties was revoked by them, because of inadequacy of the area of the lot donated.

Secondly, reading the public instrument in toto, with special reference to the paragraphs describing the lots included in the sale, shows that

said instrument describes four parcels of land by their lot numbers and area; and then it goes on to further describe, not only those lots

already mentioned, but the lots object of the sale, by stating that said lots are the ones needed for the construction of the city hall site,

avenues and parks according to the Arellano plan. If the parties intended merely to cover the specified lotsLots 2, 5, 1214-C and 1214-

D, there would scarcely have been any need for the next paragraph, since these lots are already plainly and very clearly described by their

respective lot number and area. Said next paragraph does not really add to the clear description that was already given to them in the

previous one.

It is therefore the more reasonable interpretation, to view it as describing those other portions of land contiguous to the lots aforementioned

that, by reference to the Arellano plan, will be found needed for the purpose at hand, the construction of the city hall site.

Appellant however challenges this view on the ground that the description of said other lots in the aforequoted second paragraph of the

public instrument would thereby be legally insufficient, because the object would allegedly not be determinate as required by law.

Such contention fails on several counts. The requirement of the law that a sale must have for its object a determinate thing, is fulfilled aslong as, at the time the contract is entered into, the object of the sale is capable of being made determinate without the necessity of a new or

further agreement between the parties (Art. 1273, old Civil Code; Art. 1460, New Civil Code). The specific mention of some of the lots

plus the statement that the lots object of the sale are the ones needed for city hall site, avenues and parks, according to the Arellano plan,

sufficiently provides a basis, as of the time of the execution of the contract, for rendering determinate said lots without the need of a new

and further agreement of the parties.


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PICHEL VS ALONZO

- On August 14, 1968, plaintiff and his wife sold to defendant an the fruits of the coconut trees which may be harvested in the land in

question for the period, September 15, 1968 to January 1, 1976, in consideration of P4,200.00.

- The lower court rendered its decision now under review, holding that although the agreement in question is denominated by the parties as

a deed of sale of fruits of the coconut trees found in the vendor's land, it actually is, for all legal intents and purposes, a contract of lease of

the land itself. According to the Court:

... the sale aforestated has given defendant complete control and enjoyment of the improvements of the land. That the contract is

consensual; that its purpose is to allow the enjoyment or use of a thing; that it is onerous because rent or price certain is stipulated; and that

the enjoyment or use of the thing certain is stipulated to be for a certain and definite period of time, are characteristics which admit of no

other conclusion. ... The provisions of the contract itself and its characteristics govern its nature. 4

The Court, therefore, concluded that the deed of sale in question is an encumbrance prohibited by Republic Act No. 477

- Simply and directly stated, the "Deed of Sale dated August 14, 1968 is precisely what it purports to be. It is a document evidencing the

agreement of herein parties for the sale of coconut fruits of Lot No. 21, and notfor the lease of the land itself as found by the lower Court.

In clear and express terms, the document defines the object of the contract thus: "the herein sale of the coconut fruits are for an the fruits on

the aforementioned parcel of land during the years ...(from) SEPTEMBER 15, 1968; up to JANUARY 1, 1976." Moreover, as petitioner

correctly asserts, the document in question expresses a valid contract of sale. It has the essential elements of a contract of sale as definedunder Article 1485 of the New Civil Code which provides thus:

Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate

thing, and the other to pay therefor a price certain in money or its equivalent.

A contract of sale may be absolute or conditional.

The subject matter of the contract of sale in question are the fruits of the coconut trees on the land during the years from September 15,

1968 up to January 1, 1976, which subject matter is a determinate thing. Under Article 1461 of the New Civil Code, things having a

potential existence may be the object of the contract of sale. And in Sibal vs. Valdez, 50 Phil. 512, pending crops which have potential

existence may be the subject matter of the sale. Here,

- Mr. Mechem says that a valid sale may be made of a thing, which though not yet actually in existence, is reasonably certain to come into

existence as the natural increment or usual incident of something already in existence, and then belonging to the vendor, and the title will

vest in the buyer the moment the thing comes into existence. (Emerson vs. European Railway Co., 67 Me., 387; Cutting vs. Packers

Exchange, 21 Am. St. Rep. 63) Things of this nature are said to have a potential existence. A man may sell property of which he is

potentially and not actually possess. He may make a valid sale of the wine that a vineyard is expected to produce; or the grain a field may

grow in a given time; or the milk a cow may yield during the coming year; or the wool that shall thereafter grow upon sheep; or what may

be taken at the next case of a fisherman's net; or fruits to grow; or young animals not yet in existence; or the goodwill of a trade and the

like. The thing sold, however, must be specific and Identified. They must be also owned at the time by the vendor. (Hull vs. Hull 48 Conn.

250 (40 Am. Rep., 165) (pp. 522-523).

YU TEK VS GONZALES

- The basis of this action is a written contract, that defendant acknowledges receipt of the sum of P3,000 from plaintiff and that in

consideration of said sum the former obligates himself to deliver to the latter 600 piculs of sugar of the first and second grade, according to

the result of the polarization, within the period of three months, beginning on the 1st day of January, 1912, and ending on the 31st day of

March of the same year, 1912; that in case defendant does not deliver to plaintiff the 600 piculs of sugar within the period of three months,

referred to in the second paragraph of this document, this contract will be rescinded and the said defendant will then be obligated to return

to plaintiff the P3,000 received and also the sum of P1,200 by way of indemnity for loss and damages.


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Plaintiff proved that no sugar had been delivered to it under this contract nor had it been able to recover the P3,000. Plaintiff prayed for

judgment for the P3,000 and, in addition, for P1,200 under paragraph 4, supra. Judgment was rendered for P3,000 only, and from this

judgment both parties appealed.

-In the case at bar, it is sought to show that the sugar was to be obtained exclusively from the crop raised by the defendant. There is no

clause in the written contract which even remotely suggests such a condition. The defendant undertook to deliver a specified quantity of

sugar within a specified time. The contract placed no restriction upon the defendant in the matter of obtaining the sugar. He was equally at

liberty to purchase it on the market or raise it himself. It may be true that defendant owned a plantation and expected to raise the sugar

himself, but he did not limit his obligation to his own crop of sugar. Our conclusion is that the condition which the defendant seeks to add

to the contract by parol evidence cannot be considered. The rights of the parties must be determined by the writing itself.

The second contention of the defendant arises from the first. He assumes that the contract was limited to the sugar he might raise upon his

own plantation; that the contract represented a perfected sale; and that by failure of his crop he was relieved from complying with his

undertaking by loss of the thing due. (Arts. 1452, 1096, and 1182, Civil Code.) This argument is faulty in assuming that there was a

perfected sale. Article 1450 defines a perfected sale as follows:

The sale shall be perfectedbetween vendor and vendee and shall be binding on both of them, if they have agreed upon the thing which is

the object of the contract and upon the price, even when neither has been delivered.

Article 1452 reads: "The injury to or the profit of the thing sold shall, after the contract has been perfected, be governed by the provisions

of articles 1096 and 1182."

This court has consistently held that there is a perfected sale with regard to the "thing" whenever the article of sale has been physically

segregated from all other articles.

- Thus, a particular tobacco factory with its contents was held sold under a contract which did not provide for either delivery of the price or

of the thing until a future time. McCullough vs. Aenlle and Co. (3 Phil. Rep., 295). Quite similar was the recent case ofBarretto vs. Santa

Marina (26 Phil. Rep., 200) where specified shares of stock in a tobacco factory were held sold by a contract which deferred delivery of

both the price and the stock until the latter had been appraised by an inventory of the entire assets of the company. InBorromeo vs. Franco

(5 Phil. Rep., 49) a sale of a specific house was held perfected between the vendor and vendee, although the delivery of the price was

withheld until the necessary documents of ownership were prepared by the vendee. In Tan Leonco vs. Go Inqui (8 Phil. Rep., 531) the

plaintiff had delivered a quantity of hemp into the warehouse of the defendant. The defendant drew a bill of exchange in the sum of P800,

representing the price which had been agreed upon for the hemp thus delivered. Prior to the presentation of the bill for payment, the hemp

was destroyed. Whereupon, the defendant suspended payment of the bill. It was held that the hemp having been already delivered, the titlehad passed and the loss was the vendee's. It is our purpose to distinguish the case at bar from all these cases.

In the case at bar the undertaking of the defendant was to sell to the plaintiff 600 piculs of sugar of the first and second classes. Was this an

agreement upon the "thing" which was the object of the contract within the meaning of article 1450, supra? Sugar is one of the staple

commodities of this country. For the purpose of sale its bulk is weighed, the customary unit of weight being denominated a "picul." There

was no delivery under the contract. Now, if called upon to designate the article sold, it is clear that the defendant could only say that it was

"sugar." He could only use this generic name for the thing sold. There was no "appropriation" of any particular lot of sugar. Neither party

could point to any specific quantity of sugar and say: "This is the article which was the subject of our contract." How different is this from

the contracts discussed in the cases referred to above! In the McCullough case, for instance, the tobacco factory which the p arties dealt with

was specifically pointed out and distinguished from all other tobacco factories. So, in the Barretto case, the particular shares of stock which

the parties desired to transfer were capable of designation. In the Tan Leonco case, where a quantity of hemp was the subject of the

contract, it was shown that that quantity had been deposited in a specific warehouse, and thus set apart and distinguished from all other

hemp.

A number of cases have been decided in the State of Louisiana, where the civil law prevails, which confirm our position. Perhaps the latest

is Witt Shoe Co. vs. Seegars and Co. (122 La., 145; 47 Sou., 444). In this case a contract was entered into by a traveling salesman for a

quantity of shoes, the sales having been made by sample. The court said of this contract:

But it is wholly immaterial, for the purpose of the main question, whether Mitchell was authorized to make a definite contract of sale or

not, since the only contract that he was in a position to make was an agreement to sell or an executory contract of sale. He says that plaintiff

sends out 375 samples of shoes, and as he was offering to sell by sample shoes, part of which had not been manufactured and the rest of

which were incorporated in plaintiff's stock in Lynchburg, Va., it was impossible that he and Seegars and Co. should at that time have


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agreed upon the specific objects, the title to which was to pass, and hence there could have been no sale. He and Seegars and Co. might

have agreed, and did (in effect ) agree, that the identification of the objects and their appropriation to the contract necessary to make a sale

should thereafter be made by the plaintiff, acting for itself and for Seegars and Co., and the legend printed in red ink on p laintiff's billheads

("Our responsibility ceases when we take transportation Co's. receipt `In good order'" indicates plaintiff's idea of the moment at which such

identification and appropriation would become effective. The question presented was carefully considered in the case of State vs. Shields,

et al. (110 La., 547, 34 Sou., 673) (in which it was absolutely necessary that it should be decided), and it was there held that in receiving an

order for a quantity of goods, of a kind and at a price agreed on, to be supplied from a general stock, warehoused at another place, the agentreceiving the order merely enters into an executory contract for the sale of the goods, which does not divest or transfer the title of any

determinate object, and which becomes effective for that purpose only when specific goods are thereafter appropriated to the contract; and,

in the absence of a more specific agreement on the subject, that such appropriated takes place only when the goods as ordered are delivered

to the public carriers at the place from which they are to be shipped, consigned to the person by whom the order is given, at which time and

place, therefore, the sale is perfected and the title passes.

This case and State vs. Shields, referred to in the above quotation are amply illustrative of the position taken by the Louisiana court on the

question before us. But we cannot refrain from referring to the case of Larue and Prevost vs. Rugely, Blair and Co. (10 La. Ann., 242)

which is summarized by the court itself in the Shields case as follows:

. . . It appears that the defendants had made a contract for the sale, by weight, of a lot of cotton, had received $3,000 on account of the

price, and had given an order for its delivery, which had been presented to the purchaser, and recognized by the press in which the cotton

was stored, but that the cotton had been destroyed by fire before it was weighed. It was held that it was still at the risk of the seller, and that

the buyer was entitled to recover the $3,000 paid on account of the price.

We conclude that the contract in the case at bar was merely an executory agreement; a promise of sale and not a sale. At there was no

perfected sale, it is clear that articles 1452, 1096, and 1182 are not applicable. The defendant having defaulted in his engagement, the

plaintiff is entitled to recover the P3,000 which it advanced to the defendant, and this portion of the judgment appealed from must therefore

be affirmed.


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CHAPTER IV : PRICE

MAPALO VS MAPALO

-The spouses Miguel Mapalo and Candida Quiba, simple illiterate farmers, were registered owners, with Torrens title certificate O.C.T. No.

46503, of a 1,635-square-meter residential land in Manaoag, Pangasinan. Said spouses-owners, out of love and affection for Maximo

Mapaloa brother of Miguel who was about to get married decided to donate the eastern half of the land to him. O.C.T. No. 46503

was delivered. As a result, however, they were deceived into signing, on October 15, 1936, a deed of absolute sale over the entire landin

his favor. Their signatures thereto were procured by fraud, that is, they were made to believe by Maximo Mapalo and by the attorney who

acted as notary public who "translated" the document, that the same was a deed of donation in Maximo's favor covering one-half (the

eastern half) of their land. Although the document of sale stated a consideration of Five Hundred (P500.00) Pesos, the aforesaid spouses did

not receive anything of value for the land.

- The Narcisos appealed to the Court of Appeals. In its decision on May 28, 1963, the Court of Appeals reversed the judgment of the Court

of First Instance, solely on the ground that the consent of the Mapalo spouses to the deed of sale of 1936 having been obtained by fraud, the

same was voidable, not void ab initio, and, therefore, the action to annul the same, within four years from notice of the fraud, had long

prescribed. It reckoned said notice of the fraud from the date of registration of the sale on March 15, 1938. The Court of First Instance and

the Court of Appeals are therefore unanimous that the spouses Mapalo and Quiba were definitely the victims of fraud. It was only on

prescription that they lost in the Court of Appeals.

From said decision of the Court of Appeals, the Mapalo spouses appealed to this Court.

And here appellants press the contention that the document dated October 15, 1936, purporting to sell the entire land in favor of Maximo

Mapalo, is void, not merely voidable, as to the western portion of the land for being absolutely simulated or fictitious.

Starting with fundamentals, under the Civil Code, either the old or the new, for a contract to exist at all, three essential requisites must

concur: (1) consent, (2) object, and (3) cause or consideration.1 The Court of Appeals is right in that the element of consent is present as to

the deed of sale of October 15, 1936. For consent was admittedly given, albeit obtained by fraud. Accordingly, said consent, although

defective, did exist. In such case, the defect in the consent would provide a ground for annulment of a voidable contract, not a reason for

nullity ab initio.

The parties are agreed that the second element of object is likewise present in the deed of October 15, 1936, namely, the parcel of land

subject matter of the same.

Not so, however, as to the third element of cause or consideration. And on this point the decision of the Court of Appeals is silent.

-It is reduced, then, to the question whether there was an onerous conveyance of ownership, that is, a sale, by virtue of said deed of October

15, 1936, with respect to said western portion. Specifically, was there a cause or consideration to support the existence of a contrary of

sale?

The rule under the Civil Code, again be it the old or the new, is that contracts without a cause or consideration produce no effect

whatsoever.2 Nonetheless, under the Old Civil Code, the statement of a false consideration renders the contract voidable, unless it is proven

that it is supported by another real and licitconsideration.3 And it is further provided by the Old Civil Code that the action for annulment of

a contract on the ground of falsity of consideration shall last four years, the term to run from the date of the consummation of the contract.4

Accordingly, since the deed of sale of 1936 is governed by the Old Civil Code, it should be asked whether its case is one wherein there is

no consideration, or one with a statement of afalse consideration. If the former, it is void and inexistent; if the latter, only voidable, under

the Old Civil Code. As observed earlier, the deed of sale of 1936 stated that it had for its consideration Five Hundred (P500.00) Pesos.

In fact, however, said consideration was totally absent. The problem, therefore, is whether a deed which states a consideration that in

fact did not exist, is a contract without consideration, and therefore void ab initio, or a contract with a false consideration, and therefore, at

least under the Old Civil Code, voidable.

According to Manresa, what is meant by a contract that states a false consideration is one that has in fact a real consideration but the same

is not the one stated in the document.


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- From the foregoing it can be seen that where, as in this case, there was in fact no consideration, the statement of one in the deed will not

suffice to bring it under the rule of Article 1276 of the Old Civil Code as stating a false consideration.

In our view, therefore, the ruling of this Court in Ocejo, Perez & Co. vs. Flores, 40 Phil. 921, is squarely applicable herein. In that case we

ruled that a contract of purchase and sale is null and void and produces no effect whatsoever where the same is without cause or

consideration in that the purchase price which appears thereon as paid has in fact never been paid by the purchaser to the vendor.

ONG VS ONG

- Records show that on February 25, 1976 Imelda Ong, for and in consideration of One (P1.00) Peso and other valuable considerations,

executed in favor of private respondent Sandra Maruzzo, then a minor, a Quitclaim Deed whereby she transferred, released, assigned and

forever quit-claimed to Sandra Maruzzo, her heirs and assigns, all her rights, title, interest and participation in the ONE-HALF ()

undivided portion of the parcel of land.

- A careful perusal of the subject deed reveals that the conveyance of the one- half () undivided portion of the above-described property

was for and in consideration of the One (P 1.00) Peso and the other valuable considerations (emphasis supplied) paid by private

respondent Sandra Maruzzo through her representative, Alfredo Ong, to petitioner Imelda Ong. Stated differently, the cause or

consideration is not the One (P1.00) Peso alone but also the other valuable considerations. As aptly stated by the Appellate Court-

... although the cause is not stated in the contract it is presumed that it is existing unless the debtor proves the contrary (Article 1354 of the

Civil Code). One of the disputable presumptions is that there is a sufficient cause of the contract (Section 5, (r), Rule 131, Rules of Court).

It is a legal presumption of sufficient cause or consideration supporting a contract even if such cause is not stated therein (Article 1354,

New Civil Code of the Philippines.) This presumption cannot be overcome by a simple assertion of lack of consideration especially when

the contract itself states that consideration was given, and the same has been reduced into a public instrument with all due formalities and

solemnities. To overcome the presumption of consideration the alleged lack of consideration must be shown by preponderance of evidence

in a proper action. (Samanilla vs, Cajucom, et al., 107 Phil. 432).

The execution of a deed purporting to convey ownership of a realty is in itself prima facie evidence of the existence of a valuable

consideration, the party alleging lack of consideration has the burden of proving such allegation. (Caballero, et al. vs. Caballero, et al.,

(CA), 45 O.G. 2536).

Moreover, even granting that the Quitclaim deed in question is a donation, Article 741 of the Civil Code provides that the requirement ofthe acceptance of the donation in favor of minor by parents of legal representatives applies only to onerous and conditional donations

where the donation may have to assume certain charges or burdens (Article 726, Civil Code). The acceptance by a legal guardian of a

simple or pure donation does not seem to be necessary (Perez vs. Calingo, CA-40 O.G. 53). Thus, Supreme Court ruled in Kapunan vs.

Casilan and Court of Appeals, (109 Phil. 889) that the donation to an incapacitated donee does not need the acceptance by the lawful

representative if said donation does not contain any condition. In simple and pure donation, the formal acceptance is not important for the

donor requires no right to be protected and the donee neither undertakes to do anything nor assumes any obligation. The Quitclaim now in

question does not impose any condition.

BAGNAS VS CA

- On April 3, 1964, the private respondents, themselves collateral relatives of Mateum though more remote in degree than the petitioners,

registered with the Registry of Deeds for the Province of Cavite two deeds of sale purportedly executed by Mateum in their (respondents')

favor covering ten parcels of land. Both deeds were in Tagalog, save for the English descriptions of the lands conveyed under one of them;

and each recited the reconsideration of the sale to be" ... halagang ISANG PISO (Pl.00), salaping Pilipino, at mga naipaglingkod,

ipinaglilingkod sa aking kapakanan ..." ("the sum of ONE PESO Pl.00), Philippine Currency, and services rendered, being rendered and to

be rendered for my benefit").

- Without necessarily according all these assertions its full concurrence, but upon the consideration alone that the apparent gross, not to say

enormous, disproportion between the stipulated price (in each deed) of P l.00 plus unspecified and unquantified services and the

undisputably valuable real estate allegedly sold worth at least P10,500.00 going only by assessments for tax purposes which, it is well-


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known, are notoriously low indicators of actual value plainly and unquestionably demonstrates that they state a false and fictitious

consideration, and no other true and lawful cause having been shown, the Court finds both said deeds, insofar as they purport to be

sales, not merely voidable, but void ab initio.

Neither can the validity of said conveyances be defended on the theory that their true causa is the liberality of the transferor and they may

be considered in reality donationsbecause the lawalso prescribes that donations of immovable property, to be valid, must be made and

accepted in a public instrument, and it is not denied by the respondents that there has been no such acceptance which they claim is not

required.

The transfers in question being void, it follows as a necessary consequence and conformably to the concurring opinion in Armentia, with

which the Court fully agrees, that the properties purportedly conveyed remained part of the estate of Hilario Mateum, said transfers

notwithstanding, recoverable by his intestate heirs, the petitioners herein, whose status as such is not challenged.

MORALES VS CA

- Morales maintains that the sale by Montinola to Reyes and that later made by Reyes to the Abellas are "suspicious"; that, consequently, Reyes and

the Abellas were not purchasers in good faith and for value; and that these two (2) premises, in turn, lead to the conclusion that both sales are "null and

void."

This syllogism is obviously faulty. The major premise thereof is based upon the fact that the consideration stated in the deeds of sale in favor of

Reyes and the Abellas is P1.00. It is not unusual, however, in deeds of conveyance adhering to the Anglo-Saxon practice of stating that the consideration

given is the sum of P1.00, although the actual consideration may have been much more. Moreover, assuming that said consideration of P1.00 is suspicious,

this circumstance, alone, does not necessarily justify the inference that Reyes and the Abellas were not purchasers in good faith and for value. Neither does

this inference warrant the conclusion that the sales were null and void ab initio. Indeed, bad faith and inadequacy of the monetary consideration do not

render a conveyance inexistent, for the assignor's liberality may be sufficient cause for a valid contract , whereas fraud or bad faith may render either

rescissible or voidable although valid until annulled, a contract concerning an object certain, entered into with a cause and with the consent of the contracting

parties, as in the case at bar. What is more, the aforementioned conveyance may not be annulled, in the case at bar, inasmuch as Reyes and the Abellas are

not parties therein.

REPUBLIC VS PHIL RESOURCES CORP

- Petitioner ardently claims that the reason behind its motion to intervene is the desire to protect its rights and interests over some

materials purportedly belonging to it; that said material were unauthorizedly and illegally assigned and delivered to the Bureau of Prisons

by petitioning corporation's president Macario Apostol in payment of the latter's personal accounts with the said entity; and that the Bureau

of Prisons refused to return said materials despite petitioner's demands to do so.

- Respondents, on the other hand, assert that the subject matter of the original litigation is a sum of money allegedly due to the

Bureau of Prisons from Macario Apostol and not the goods or the materials reportedly turned over by Apostol as payment of his private

debts to the Bureau of Prisons and the recovery of which is sought by the petitioner; and that for this reason, petitioner has no legal interest

in the very subject matter in litigation as to entitle it to intervene.

We find no merit in respondents' contention. It is true that the very subject matter of the original case is a sum of money. But it is

likewise true as borne out by the records, that the materials purportedly belonging to the petitioner corporation have been assessed and

evaluated and their price equivalent in terms of money have been determined; and that said materials for whatever price they have

been assigned by defendant now respondent Apostol as tokens of payment of his private debts with the Bureau of Prisons. In view of these

considerations, it becomes enormously plain in the event the respondent judge decides to credit Macario Apostol with the value of the

goods delivered by the latter to the Bureau of Prisons, the petitioner corporation stands to be adversely affected by such judgment. The

conclusion, therefore, is inescapable that the petitioner possesses a legal interest in the matter in litigation and that such interest is of an

actual, material, direct and immediate nature as to entitle petitioner to intervene.- The Government argues that "Price . . . is always paid in terms of money and the supposed payment being in kind, it is no

payment at all, "citing Article 1458 of the new Civil Code. However, the same Article provides that the purchaser may pay "a price certain

in money or its equivalent," which means that they meant of the price need not be in money. Whether the G.I. sheets, black sheets, M. S.

Plates, round bars and G. I. pipes claimed by the respondent corporation to belong to it and delivered to the Bureau of Prison by Macario

Apostol in payment of his account is sufficient payment therefore, is for the court to pass upon and decide after hearing all the parties in the

case. Should the trial court hold that it is as to credit Apostol with the value or price of the materials delivered by him, certainly the herein

respondent corporation would be affected adversely if its claim of ownership of such sheets, plates, bars and pipes is true.


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TOYOTA SHAW VS CA

-

At the heart of the present controversy is the document marked Exhibit "A" 1 for the private respondent, which was signed by a sales

representative of Toyota Shaw, Inc. named Popong Bernardo. The document reads as follows:

4 June 1989AGREEMENTS BETWEEN MR. SOSA

& POPONG BERNARDO OF TOYOTA

SHAW, INC.

1. all necessary documents will be submitted to TOYOTA SHAW, INC. (POPONG BERNARDO) a week after, upon arrival of Mr.Sosa from the Province (Marinduque) where the unit will be used on the 19th of June.

2. the downpayment of P100,000.00 will be paid by Mr. Sosa on June 15, 1989.3. the TOYOTA SHAW, INC. LITE ACE yellow, will be pick-up [sic] and released by TOYOTA SHAW, INC. on the 17th of June

at 10 a.m.

Very truly yours,

(Sgd.) POPONG BERNARDO.

Was this document, executed and signed by the petitioner's sales representative, a perfected contract of sale, binding upon the petitioner,

breach of which would entitle the private respondent to damages and attorney's fees?

Exhibit "A" is NOT a perfected contract of sale.

Article 1458 of the Civil Code defines a contract of sale as follows:

Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate

thing, and the other to pay therefor a price certain in money or its equivalent.

A contract of sale may be absolute or conditional. and Article 1475 specifically provides when it is deemed perfected:

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.

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 ownership of a determinate thing to Sosa and no correlative obligation on the part of the latter to pay

therefor a price certain appears therein. 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 the following day

confirmed. But nothing was mentioned about the full purchase price and the manner the installments were to be paid.

This Court had already ruled that a definite agreement on the manner of payment of the price is an essential element in the formation of

a binding and enforceable contract of sale.18This is so because the agreement as to the manner of payment goes into the price such

that a disagreement on the manner of payment is tantamount to a failure to agree on the price.Definiteness as to the price is an

essential element of a binding agreement to sell personal property. 19

Moreover, Exhibit "A" shows the absence of a meeting of minds between Toyota and Sosa. For one thing, Sosa did not even sign it. For

another, Sosa was well aware from its title, written in bold letters, viz.,

AGREEMENTS BETWEEN MR. SOSA & POPONG BERNARDO OF TOYOTA SHAW, INC.

that he was not dealing with Toyota but with Popong Bernardo and that the latter did not misrepresent that he had the authority to sell any

Toyota vehicle. He knew that Bernardo 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 the extent of Bernardo's authority as an


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agent 20 in respect of contracts to sell Toyota's vehicles. A person dealing with an agent is put upon inquiry and must discover upon his peril

the authority of the agent. 21

At the most, Exhibit "A" may be considered as part of the initial phase of the generation or negotiation stage of a contract of sale. There are

three stages in the contract of sale, namely:

(a) preparation, conception, or generation, which is the period of negotiation and bargaining, ending at the moment of agreement ofthe parties;

(b) 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 performance of the terms agreed upon in the contract. 22

The second phase of the generation or negotiation stage in this case was the execution of the VSP. It must be emphasized that thereunder,

the downpayment of the purchase price was P53,148.00 while the balance to be paid on installment should be financed by B.A. Finance

Corporation. It is, of course, to be assumed that B.A. Finance Corp. was acceptable to Toyota, otherwise it should not have mentioned B.A.

Finance in the VSP.

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 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 subrogated in the place of the seller, as the creditor of the

installment buyer. 24Since B.A. Finance did not approve Sosa's application, there was then no meeting of minds on the sale on installment

basis.

VELASCO VS CA

- This is a suit for specific performance filed by Lorenzo Velasco against the Magdalena Estate, Inc. on the allegation that on November 29,

1962 the plaintiff and the defendant had entered into a contract of sale (Annex A of the complaint) by virtue of which the defendant offered

to sell the plaintiff and the plaintiff in turn agreed to buy a parcel of land with an area of 2,059 square meters for the to tal purchase price of

P100,000.00.

It is alleged by the plaintiff that the agreement was that the plaintiff was to give a down payment of P10,000.00 to be followed by

P20,000.00 and the balance of P70,000.00 would be paid in installments, the equal monthly amortization of which was to be determined as

soon as the P30,000.00 down payment had been completed. It is further alleged that the plaintiff paid down payment of P10,000.00 onNovember 29, 1962 as per receipt No. 207848 (Exh. "A")and that when on January 8, 1964 he tendered to the defendant the payment of the

additional P20,000.00 to complete the P30,000.00 the defendant refused to accept and that eventually it likewise refused to execute a

formal deed of sale obviously agreed upon. The plaintiff demands P25,000.00 exemplary damages, P2,000.00 actual damages and

P7,000.00 attorney's fees.

The defendant, in its Answer, denies that it has had any direct dealings, much less, contractual relations with the plaintiff regarding the

property in question, and contends that the alleged contract described in the document attached to the complaint as Annex A is entirely

unenforceable under the Statute of Frauds; that the truth of the matter is that a portion of the property in question was being leased by a

certain Socorro Velasco who, on November 29, 1962, went to the office of the defendant indicated her desire to purchase the lot; that the

defendant indicated its willingness to sell the property to her at the price of P100,000.00 under the condition that a down payment of

P30,000.00 be made, P20,000.00 of which was to be paid on November 31, 1962, and that the balance of P70,000.00 including interest a

9% per annum was to be paid on installments for a period of ten years at the rate of P5,381.32 on June 30 and December of every year until

the same shall have been fully paid; that on November 29, 1962 Socorro Velasco offered to pay P10,000.00 as initial payment instead ofthe agreed P20,000.00 but because the amount was short of the alleged P20,000.00 the same was accepted merely as deposited and upon

request of Socorro Velasco the receipt was made in the name of her brother-in-law the plaintiff herein; that Socorro Velasco failed to

complete the down payment of P30,000.00 and neither has she paid any installments on the balance of P70,000.00 up to the present time;

that it was only on January 8, 1964 that Socorro Velasco tendered payment of P20,000.00, which offer the defendant refused to accept

because it had considered the offer to sell rescinded on account of her failure to complete the down payment on or before December 31,

1962.

The lone witness for the plaintiff is Lorenzo Velasco, who exhibits the receipt, Exhibits A, issued in his favor by the Magdalena Estate,

Inc., in the sum of P10,000.00 dated November 29, 1962. He also identifies a letter (Exh. B)of the Magdalena Estate, Inc. addressed to him


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and his reply thereto. He testifies that Socorro Velasco is his sister-in-law and that he had requested her to make the necessary contacts with

defendant referring to the purchase of the property in question. Because he does not understand English well, he had authorized her to

negotiate with the defendant in her whenever she went to the office of the defendant, and as a matter of fact, the receipt for the P10,000.00

down payment was issued in his favor. The plaintiff also depends on Exhibit A to prove that there was a perfected follows: "Earnest money

for the purchase of Lot 15, Block 7, Psd-6129, Area 2,059 square meters including improvements thereonP10,000.00." At the bottom of

Exhibit A the following appears: "Agreed price: P100,000.00, P30,000.00 down payment, bal. in 10 years."

To prove that the Magdalena Estate, Inc. had been dealing all along with him and not with his sister-in-law and that the Magdalena Estate,

Inc. knew very well that he was the person interested in the lot in question and not his sister-in-law, the plaintiff offers in evidence five

checks all drawn by him in favor of Magdalena Estate, Inc. for payment of the lease of the property. ....

There does not seem to be any dispute regarding the fact that the Velasco family was leasing this property from the Magdalena Estate, Inc.

since December 29, 1961; that the Velasco family sometime in 1962 offered to purchase the lot as a result of which Lorenzo Velasco thru

Socorro Velasco made the P10,000.00 deposit or, in the language of the defendant 'earnest money or down payment' as evidenced by

Exhibit A. The only matter that remains to be decided is whether the talks between the Magdalena Estate, Inc. and Lorenzo Velasco either

directly or thru his sister-in-law Socorro Velasco ever ripened into a consummated sale. It is the position of the defendant (1) that the sale

was never consummated and (2) that the contract is unenforceable under the Statute of Frauds.

The court a quo agreed with the respondent's (defendant therein) contention that no contract of sale was perfected because the minds of the

parties did not meet "in regard to the manner of payment." The court a quo appraisal of this aspect of the action below is correct. The

material averments contained in the petitioners' complaint themselves disclose a lack of complete "agreement in regard to the manner of

payment" of the lot in question. The complaint states pertinently:

4. That plaintiff and defendant further agreed that the total down payment shall by P30,000.00, including the P

cases on sales as reviewer

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