Southwestern Sugar & Molasses Co. vs.
Atlantic Gulf & Pacific Company damages equivalent to 6 per centum per annum on the sum of P30,000 from the
97 Phil 247
June 1955
FACTS:
On March 24, 1953, defendant-appellant Atlantic granted plaintiff-appellee
Southwestern an option period of ninety days to buy the formers barge No. 10 for
the sum of P30,000. On May 11 of the same year, Southwestern Company
communicated its acceptance of the option to Atlantic through a letter, to which
the latter replied that their understanding was that the "offer of option" is to be a
cash transaction and to be effected "at the time the lighter is available." On June
25, Atlantic advised the Southwestern Company that since there is still further
work for it, the barge could not be turned over to the latter company.
On June 27, 1953, the Southwestern Company filed this action to compel Atlantic
to sell the barge in line with the option, depositing with the court a check covering
the sum of P30,000, but said check was later withdrawn with the approval of the
court. On June 29, the Atlantic withdrew its "offer of option" with due notices to
Southwestern Company stating that the option was granted merely as a favor. The
Atlantic contended that the option to sell it made to Southwestern Company is null
and void because said option to sell is not supported by any consideration.
The trial court granted herein plaintiff-appellee Southwestern Companys action
for specific performance and ordered herein defendant-appellant Atlantic to pay
date of the filing of the complaint.
ISSUE:
Is Atlantic liable for specific performance and to pay damages in favor of
Southwestern Company?
COURT RULING:
The Supreme Court reversed the trial courts decision applying Article 1479 of the
new Civil Code. The Court reiterated that "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option can still be withdrawn, even if accepted, if said option is not supported by
any consideration. The option that Atlantic had provided was without
consideration, hence, can be withdrawn notwithstanding Southwestern Companys
acceptance of said option.
American jurisprudence hold that an offer, once accepted, cannot be withdrawn,
regardless of whether it is supported or not by a consideration, but the specific
provisions of Article 1479 commands otherwise. While under the "offer of option"
in question appellant Atlantic has assumed a clear obligation to sell its barge to
appellee Southwestern Company and the option has been exercised in accordance
with its terms, and there appears to be no valid or justifiable reason for the former
to withdraw its offer, the Court cannot adopt a different attitude because the law
on the matter is clear.
Atkins Kroll & Co. vs. Cu Hian Tek
102 Phil 984
January 1958
FACTS:
On September 13, 1951, petitioner Atkins Kroll & Co. (Atkins) sent a letter to
respondent B. Cu Hian Tek (Hian Tek) offering (a) 400 cartons of Luneta brand
Sardines in Tomato Sauce 48 / 15-oz. Ovals at $8.25 per carton, (b) 300 cartons of
Luneta brand Sardines Natural 48/15 oz. talls at $6.25 per carton, and (c) 300
cartons of Luneta brand Sardines in Tomato Sauce 100/5-oz. talls at $7.48 per
carton, with all of the offers subject to reply by September 23, 1951. Hian Tek
unconditionally accepted the said offer through a letter delivered on September 21,
1951, but Atkins failed to deliver the commodities due to the shortage of catch of
sardines by the packers in California.
Hian Tek, therefore, filed an action for damages in the CFI of Manila which granted
the same in his favor. Upon Atkins appeal, the Court of Appeals affirmed said
decision but reduced the damages to P3,240.15 representing unrealized profits.
Atkins herein contends that there was no such contract of sale but only an option
to buy, which was not enforceable for lack of consideration because it is provided
under the 2nd paragraph of Article 1479 of the New Civil Code that "an accepted
unilatateral promise to buy or to sell a determinate thing for a price certain is
binding upon the promisor if the promise is supported by a consideration distinct
from the price. Atkins also insisted that the offer was a mere offer of option,
because the "firm offer" was a continuing offer to sell until September 23.
Was there a contract of sale between the parties or only a unilateral promise to
buy?
COURT RULING:
The Supreme Court held that there was a contract of sale between the parties.
Petitioners argument assumed that only a unilateral promise arose when the
respondent accepted the offer, which is incorrect because a bilateral contract to
sell and to buy was created upon respondents acceptance.
Had B. Cua Hian Tek backed out after accepting, by refusing to get the sardines and
/ or to pay for their price, he could also be sued. But his letter-reply to Atkins
indicated that he accepted "the firm offer for the sale" and that "the undersigned
buyer has immediately filed an application for import license. After accepting the
promise and before he exercises his option, the holder of the option is not bound
to buy. In this case at bar, however, upon respondents acceptance of herein
petitioner's offer, a bilateral promise to sell and to buy ensued, and the
respondent had immediately assumed the obligations of a purchaser.
ATKINS, KROLL and CO., INC.,
vs.
B. CUA HIAN TEK
FACTS:
Atkins Kroll & Co. sent a letter to B. Cu HianTek on September 13, 1951, offering
cartons of Luneta brand Sardines subject to reply by September 23, 1951. HianTek
unconditionally accepted the said offer through a letter delivered on September 21,
1951, but Atkins failed to deliver the commodities due to the shortage of catch of
sardines by the packers in California.
HianTek, therefore, filed an action for damages in the CFI of Manila which granted
the same in his favor.
Atkins herein contends that there was no such contract of sale but only an option
to buy, which was not enforceable for lack of consideration because it is provided
under the 2nd paragraph of Article 1479 of the New Civil Code that "an accepted
unilatateral promise to buy or to sell a determinate thing for a price certain is
binding upon the promisor if the promise is supported by a consideration distinct
from the price. Atkins also insisted that the offer was a mere offer of option,
because the "firm offer" was a continuing offer to sell until September 23.
ISSUE:
Whether a contract of sale was constituted between the parties or only a
unilateral promise to buy.
COURT RULING:
SC held that there was a contract of sale between the parties. ATKINs argument
assumed that only a unilateral promise arose when the respondent accepted the
offer is incorrect because a bilateral contract to sell and to buy was created upon
HIAN TEKs acceptance.
B. CuaHianTeks letter-reply to Atkins indicated that he accepted "the firm offer for
the sale. After accepting the promise and before he exercises his option, the
holder of the option is not bound to buy. In this case at bar, however, upon TEKs
acceptance of herein ATKIN's offer, a bilateral promise to sell and to buy ensued,
and the respondent had immediately assumed the obligations of a purchaser.
Serra vs. Court of Appeals, and RCBC
229 SCRA 60
January 1994
FACTS:
Petitioner Federico Serra, who is the owner of a 374 square meter parcel of land
located at Masbate, Masbate, and private respondent Rizal Commercial Banking
Corporation (RCBC) entered into a "Contract of Lease with Option to Buy" in May
25, 1975 which provided that Serra will lease the subject land to RCBC for a period
of 25 years from June 1, 1975 to June 1, 2000, that the RCBC has the option to
purchase the same at P210.00 per square meter within a period of 10 years from
May 25, 1975, the date of the signing of the Contract, and that Serra will have to
register said land under the Torrens System to the Register of Deeds of Province of
Masbate within the same 10-year option period. Pursuant to said contract, RCBC
constructed improvements on the subject land to house its branch office, while the
petitioner had the property, within 3 years from 1975, duly registered with OCT No.
0-232 under the Torrens System. Later, petitioner alleged that as soon as he had
the property registered, he kept on pursuing the branch manager for the sale of
the lot as per their agreement, but it was not until September 4, 1984, that RCBC
decided to exercise the option.
RCBC 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, but petitioner replied that he is no longer selling the property. RCBC
then filed an action for specific performance and damages against Serra in March
1985 alleging that during the negotiations it made clear to petitioner that it
intends to stay permanently on property once its branch office is opened unless
the exigencies of the business requires otherwise.
Although finding that the contract was valid, the lower court ruled that the option
to buy is unenforceable because it lacked a consideration distinct from the price
and RCBC did not exercise its option within the reasonable time. Upon motion for
reconsideration, however, the lower court reversed itself on the 2nd issue,
declared the contract as valid, and ordered Serra to deliver the proper deed of sale
to RCBC. The Court of Appeals likewise affirmed said decision.
ISSUE:
Was there a valid contract of lease with option to buy between the parties? Was
there a consideration distinct from the price to support the option given to RCBC?
COURT RULING:
The Supreme Court affirmed the appellate courts decision. A contract of adhesion
is one wherein a party, usually a corporation, prepares the stipulations in the
contract, while the other party merely affixes his signature or his "adhesion"
thereto. These types of contracts are as binding as ordinary contracts because in
reality, the party who adheres to the contract is free to reject it entirely.
In the case at bar, the Supreme Court did not find the situation to be inequitable
because petitioner is a highly educated man, who, at the time of the trial was
already a CPA-Lawyer, and when he entered into the contract, was already a CPA,
holding a respectable position with the Metropolitan Manila Commission. It is
evident that a man of his stature should have been more cautious in transactions
he enters into, particularly where it concerns valuable properties. Also, in the
present case, the consideration is even more onerous on the part of the lessee
since it 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. ROMAN vs. GRIMALT
G.R.No. 2412, April 11, 1906
FACTS: Pedro Roman, the owner of the schooner Sta. Maria and Andres Grimalt
had been negotiating for several days for the purchase of the schooner. They
agreed upon the sale of the vessel for the sum of P1500 payable on three
installments, provided the title papers to the vessel were in proper form. The sale
was not perfected and the purchaser did not consent to the execution of the deed
of transfer for the reason that the title of the vessel was in the name of one
Paulina Giron and not in the name of Pedro Roman. Roman promised however, to
perfect his title to the vessel but he failed to do so. The vessel was sunk in the bay
in the afternoon of June 25, 1904 during a severe storm and before the owner had
complied with the condition exacted by the proposed purchaser. On the 30th of
June 1904, plaintiff demanded for the payment of the purchase price of the vessel
in the manner stipulated and defendant failed to pay.
ISSUE: Whether there was a perfected contract of sale and who will bear the loss.
HELD: There was no perfected contract of sale because the purchase of which had
not been concluded. The conversations had between the parties and the letter
written by defendant to plaintiff did not establish a contract sufficient in itself to
create reciprocal rights between the parties.
If no contract of sale was actually executed by the parties the loss of the vessel
must be borne by its owner and not by the party who only intended to purchase it
and who was unable to do so on account of failure on the part of the owner to
show proper title to the vessel and thus enable them to draw up contract of sale.
Roman vs. Grimalt
6 Phil 96
April 1906
FACTS:
In between the 13th to the 23d of June, 1904, petitioner Pedro Roman, the owner,
and respondent Andres Grimalt, the purchaser, verbally agreed upon the sale of
the schooner Santa Marina. In his letter on June 23, Grimalt agreed to buy the
vessel and offered to pay in three installments of P500 each on July 15, September
15, and November 15, provided the title papers to the vessel were in proper form.
The title of the vessel, however, was in the name of one Paulina Giron and not in
the name of Roman as the alleged owner. Roman promised to perfect his title to
the vessel, but failed so the papers he presented did not show that he was the
owner of the vessel. On June 25, 1904, the vessel sank in the Manila harbor during
a severe storm, even before Roman was able to produce for Grimalt the proper
papers showing that the former was in fact the owner of the vessel in question and
not Paulina Giron. As a result, Grimalt refused to pay the purchase price when
Roman made a demand on June 30, 1904.
On July 2, 1904, Roman filed this complaint in the CFI of Manila, which found that
the parties had not arrived at a definite understanding, and later dismissed said
complaint.
ISSUE:
Who should bear the risk of loss?
COURT RULING:
 On June 1, 1967, Carmelo entered into a Contract of Lease with Mayfair Theater
Inc. fpr 20 years. The lease covered a portion of the second floor and mezzanine of
The Supreme Court affirmed the decision of the lower court and declared Roman
a two-storey building with about 1,610 square meters of floor area, which
as the one who should bear the risk of lost because there was no actual contract of
respondent used as Maxim Theater.
sale. If no contract of sale was actually executed by the parties, the loss of the
vessel must be borne by its owner and not by a party who only intended to
purchase it and who was unable to do so on account of failure on the part of the
owner to show proper title to the vessel and thus enable them to draw up the
contract of sale. Grimalt was under no obligation to pay the price of the vessel, the Two years later, on March 31, 1969, Mayfair entered into a second Lease with
purchase of which had not been concluded. The conversations between the parties Carmelo for another portion of the latters property this time, a part of the second
and the letter Grimalt had written to Roman did not establish a contract sufficient floor of the two-storey building, and two store spaces on the ground floor. In that
in itself to create reciprocal rights between the parties. space, Mayfair put up another movie house known as Miramar Theater. The
Contract of Lease was likewise for a period of 20 years.
EQUATORIAL V. MAYFAIR- Sale of Land

While execution of a public instrument of sale is recognized by law as equivalent to

the delivery of the thing sold, such constructive or symbolic delivery is merely
presumptive. It is nullified by the failure of the vendee to take actual possession of
the land sold.
Both leases contained a clause giving Mayfair a right of first refusal to purchase the
subject properties. Sadly, on July 30, 1978 - within the 20-year-lease term -- the
subject properties were sold by Carmelo to Equatorial Realty Development, Inc. for
eleven million smackers, without their first being offered to Mayfair.

FACTS:
As a result of the sale of the subject properties to Equatorial, Mayfair filed a
Carmelo & Bauermann, Inc. owned a land, together with two 2-storey buildings at
Complaint before the Regional Trial Court of Manila for the recission of the Deed
Claro M. Recto Avenue, Manila, and covered by TCT No. 18529.
of Absolute Sale between Carmelo and Equatorial, specific performance, and
damages. RTC decided for Carmelo and Equatorial. Tsk tsk.

CA reversed and ruled for Mayfair. The SC denied a petition questioning the CA
decision. What happened is that the contract did get rescinded, Equatorial got its
money back and asserted that Mayfair have the right to purchase the lots for 11
million bucks.
Decision became final and executory, so Mayfair deposited with the clerk the 11M
(less 847grand withholding) payment for the properties (Carmelo somehow
disappeared).
Meanwhile, on Sept 18, 1997, barely five months after Mayfair submitted its
Motion for Execution, Equatorial demanded from Mayfair backrentals and
reasonable compensation for the Mayfairs continued use of the subject premises
after its lease contracts expired. Remember that Mayfair was still occupying the
premises during all this hullabaloo.
ISSUE:
Whether or not Equatorial was the owner of the subject property and could thus
enjoy the fruits and rentals.
HELD:NO.
Nor right of ownership was transferred from Carmelo to Equatorial since there was
failure to deliver the property to the buyer. Compound this with the fact that the
sale was even rescinded.
The court went on to assert that rent is a civil fruit that belonged to the owner of
the property producing it by right of accession. Hence, the rentals that fell due
from the time of the perfection of the sale to petitioner until its rescission by final
judgment should belong to the owner of the property during that period.
We remember from SALES that in a contract of sale, one of the contracting parties
obligates himself to transfer ownership of and to deliver a determinate thing and
the other to pay therefor a price certain in money or its equivalent.
Ownership of the thing sold is a real right, which the buyer acquires only upon
delivery of the thing to him in any of the ways specified in articles 1497 to 1501,
or in any other manner signifying an agreement that the possession is transferred
from the vendor to the vendee. This right is transferred, not by contract alone,
but by tradition or delivery. There is delivery if and when the thing sold is placed
in the control and possession of the vendee.
While execution of a public instrument of sale is recognized by law as equivalent to meters of floor area, which respondent used as a movie house known as Maxim
the delivery of the thing sold, such constructive or symbolic delivery is merely Theater 2. two store spaces on the ground floor and the mezzanine, with a
presumptive. It is nullified by the failure of the vendee to take actual possession of combined floor area of about 300 square meters also used as a movie house
the land sold. Miramar Theater)

Lease contracts contained a provision granting Mayfair a right of first refusal to

purchase the subject properties.

However, before the contracts ended, the subject properties were sold for P11,300
For property to be delivered, we need two things. Delivery of property or title, and
by Carmelo to Equatorial Realty Development, Inc.
transfer of control or custody to the buyer.
This prompted Mayfair to file a case for the annulment of the Deed of Absolute
Sale between Carmelo and Equatorial, specific performance and damages.

In 1996, the Court ruled in favor of Mayfair.

Possession was never acquired by the petitioner. It therefore had no rights to rent.
Barely five months after Mayfair had submitted its Motion for Execution,
Equatorial filed an action for collection of sum of money against Mayfair claiming
payment of rentals or reasonable compensation for the defendants use of the
EQUATORIAL REALTY DEVELOPMENT, INC., vs. MAYFAIR THEATER, INC. subject premises after its lease contracts had expired.
Posted on September 21, 2013 by winnieclaire Maxim Theater contract expired on May 31, 1987, while the Lease Contract
covering the premises occupied by Miramar Theater lapsed on March 31, 1989.
Standard
The lower court debunked the claim of Equatorial for unpaid back rentals, holding
[G.R. No. 133879. November 21, 2001.]
that the rescission of the Deed of Absolute Sale in the mother case did not confer
on Equatorial any vested or residual propriety rights, even in expectancy.

FACTS: It further ruled that the Court categorically stated that the Deed of Absolute Sale
had been rescinded subjecting the present complaint to res judicata.

Hence, Equatorial filed the present petition.

Mayfair Theater, Inc. was a lessee of portions of a building owned by Carmelo &
Bauermann, Inc. Their lease contracts of 20 years (1. which covered a portion of
the second floor and mezzanine of a two-storey building with about 1,610 square

ISSUE: whether Equatorial was the owner of the subject property and could thus
enjoy the fruits or rentals therefrom
HELD: NO.
CIVIL LAW; PROPERTY; CIVIL FRUIT OF OWNERSHIP; RENTALS. Rent is a civil fruit
that belongs to the owner of the property producing it by right of accession.
Consequently and ordinarily, the rentals that fell due from the time of the
perfection of the sale to petitioner until its rescission by final judgment should
belong to the owner of the property during that period.
SALES; OWNERSHIP OF THE THING SOLD IS TRANSFERRED, NOT BY CONTRACT
ALONE, BUT BY TRADITION OR DELIVERY. By a contract of sale, one of the
contracting parties obligates himself to transfer ownership of and to deliver a
determinate thing and the other to pay therefor a price certain in money or its
equivalent. Ownership of the thing sold is a real right, which the buyer acquires
only upon delivery of the thing to him in any of the ways specified in Articles 1497
to 1501, or in any other manner signifying an agreement that the possession is
transferred from the vendor to the vendee. This right is transferred, not by
contract alone, but by tradition or delivery. Non nudis pactis sed traditione
dominia rerum transferantur.
THERE IS DELIVERY WHEN THE THING SOLD IS PLACED UNDER THE CONTROL AND
POSSESSION OF THE VENDEE. [T]here is said to be delivery if and when the thing
sold is placed in the control and possession of the vendee. Thus, it has been held
that while the execution of a public instrument of sale is recognized by law as
equivalent to the delivery of the thing sold, such constructive or symbolic delivery,
being merely presumptive, is deemed negated by the failure of the vendee to take
actual possession of the land sold. Delivery has been described as a composite act,
a thing in which both parties must join and the minds of both parties concur. It is
an act by which one party parts with the title to and the possession of the property,
and the other acquires the right to and the possession of the same. In its natural
sense, delivery means something in addition to the delivery of property or title; it
means transfer of possession. In the Law on Sales, delivery may be either actual or
constructive, but both forms of delivery contemplate the absolute giving up of the
control and custody of the property on the part of the vendor, and the assumption
of the same by the vendee.
ID.; NOT PRESENT IN CASE AT BAR. [T]heoretically, a rescissible contract is valid
until rescinded. However, this general principle is not decisive to the issue of
whether Equatorial ever acquired the right to collect rentals. What is decisive is the
civil law rule that ownership is acquired, not by mere agreement, but by tradition
or delivery. Under the factual environment of this controversy as found by this
Court in the mother case, Equatorial was never put in actual and effective control
or possession of the property because of Mayfairs timely objection.
ID.; EXECUTION OF CONTRACT OF SALE AS FORM OF CONSTRUCTIVE DELIVERY
HOLDS TRUE ONLY WHEN THERE IS NO IMPEDIMENT THAT MAY PREVENT THE
PASSING OF THE PROPERTY FROM THE VENDOR TO THE VENDEE. From the
peculiar facts of this case, it is clear that petitioner never took actual control and
possession of the property sold, in view of respondents timely objection to the
sale and the continued actual possession of the property. The objection took the
form of a court action impugning the sale which, as we know, was rescinded by a
judgment rendered by this Court in the mother case. It has been held that the
execution of a contract of sale as a form of constructive delivery is a legal fiction. It
holds true only when there is no impediment that may prevent the passing of the
property from the hands of the vendor into those of the vendee. When there is
such impediment, fiction yields to reality the delivery has not been effected.
Hence, respondents opposition to the transfer of the property by way of sale to
Equatorial was a legally sufficient impediment that effectively prevented the
passing of the property into the latters hands.
ID.; EXECUTION OF PUBLIC INSTRUMENT GIVES RISE ONLY TO A PRIMA FACIE
PRESUMPTION OF DELIVERY. The execution of a public instrument gives rise, . . .
only to a prima facie presumption of delivery. Such presumption is destroyed when
the instrument itself expresses or implies that delivery was not intended; or when
by other means it is shown that such delivery was not effected, because a third
person was actually in possession of the thing. In the latter case, the sale cannot be
considered consummated.
ID.; OBLIGATIONS AND CONTRACTS; RESCISSIBLE CONTRACTS; NOT ONLY THE
LAND AND BUILDING SOLD SHALL BE RETURNED TO THE SELLER BUT ALSO THE
RENTAL PAYMENTS PAID, IF ANY. [T]he point may be raised that under Article
1164 of the Civil Code, Equatorial as buyer acquired a right to the fruits of the thing
sold from the time the obligation to deliver the property to petitioner arose. That
time arose upon the perfection of the Contract of Sale on July 30, 1978, from
which moment the laws provide that the parties to a sale may reciprocally demand
performance. Does this mean that despite the judgment rescinding the sale, the
right to the fruits belonged to, and remained enforceable by, Equatorial? Article
1385 of the Civil Code answers this question in the negative, because [r]escission
creates the obligation to return the things which were the object of the contract,
together with their fruits, and the price with its interest; . . . . Not only the land
and building sold, but also the rental payments paid, if any, had to be returned by
the buyer.
ID.; SALES; CONTRACT OF SALE; RENTAL PAYMENTS MADE SHOULD NOT BE
CONSTRUED AS A RECOGNITION OF THE BUYER AS NEW ORDER BUT MERELY TO
AVOID IMMINENT EVICTION; CASE AT BAR. The fact that Mayfair paid rentals to
Equatorial during the litigation should not be interpreted to mean either actual
delivery or ipso facto recognition of Equatorials title. The CA Records of the
mother case show that Equatorial as alleged buyer of the disputed properties
and as alleged successor-in-interest of Carmelos rights as lessor submitted two
ejectment suits against Mayfair. Filed in the Metropolitan Trial Court of Manila, the
first was docketed as Civil Case No. 121570 on July 9, 1987; and the second, as Civil
Case No. 131944 on May 28, 1990. Mayfair eventually won them both. However,
to be able to maintain physical possession of the premises while awaiting the
outcome of the mother case, it had no choice but to pay the rentals. The rental
payments made by Mayfair should not be construed as a recognition of Equatorial
as the new owner. They were made merely to avoid imminent eviction.
STATUTORY CONSTRUCTION; GENERAL PROPOSITIONS DO NOT DECIDE SPECIFIC
CASES. As pointed out by Justice Holmes, general propositions do not decide
specific cases. Rather, laws are interpreted in the context of the peculiar factual
situation of each case. Each case has its own flesh and blood and cannot be
decided on the basis of isolated clinical classroom principles.
CIVIL LAW; SALES; VALID FROM INCEPTION BUT JUDICIALLY RESCINDED BEFORE IT
COULD BE CONSUMMATED; CASE AT BAR. [T]he sale to Equatorial may have
been valid from inception, but it was judicially rescinded before it could be
consummated. Petitioner never acquired ownership, not because the sale was void, Motion to Dismiss, the trial court found that the issue of ownership of the subject
as erroneously claimed by the trial court, but because the sale was not property has been decided by this Court in favor of Mayfair. . . . Hence, the trial
consummated by a legally effective delivery of the property sold. court decided the Motion to Dismiss on the basis of res judicata, even if it erred in
interpreting the meaning of rescinded as equivalent to void. In short, it ruled
on the ground raised; namely, bar by prior judgment. By granting the Motion, it
ID.; ID.; BUYER IN BAD FAITH; NOT ENTITLED TO ANY BENEFIT; ENTITLED SOLELY disposed correctly, even if its legal reason for nullifying the sale was wrong.
TO THE RETURN OF THE PURCHASE PRICE; MUST BEAR ANY LOSS. [A]ssuming
for the sake of argument that there was valid delivery, petitioner is not entitled to
any benefits from the rescinded Deed of Absolute Sale because of its bad faith. Norkis Distributors Inc. vs. Court of Appeals, and Nepales
This being the law of the mother case decided in 1996, it may no longer be
193 SCRA 694
changed because it has long become final and executory. . . . Thus, petitioner was
and still is entitled solely to the return of the purchase price it paid to Carmelo; no February 1991
more, no less. This Court has firmly ruled in the mother case that neither of them is
entitled to any consideration of equity, as both took unconscientious advantage
of Mayfair. In the mother case, this Court categorically denied the payment of
FACTS:
interest, a fruit of ownership. By the same token, rentals, another fruit of
ownership, cannot be granted without mocking this Courts en banc Decision,
which has long become final. Petitioners claim of reasonable compensation for
respondents use and occupation of the subject property from the time the lease On September 20, 1979, private respondent Alberto Nepales bought from the
expired cannot be countenanced. If it suffered any loss, petitioner must bear it in Norkis Distributors, Inc. (Norkis) in its Bacolod branch a brand new Yamaha
silence, since it had wrought that loss upon itself. Otherwise, bad faith would be Wonderbike motorcycle Model YL2DX with Engine No.L2-329401K Frame
rewarded instead of punished. No.NL2-0329401, color maroon, which was then on display in the Norkis
showroom. The Branch Manager Avelino Labajo agreed to accept the P7,500.00
price payable by means of a Letter of Guaranty from the Development Bank of the
Philippines (DBP), Kabankalan. Hence, credit was extended to Nepales, and as
ID.; ID.; ID.; ID.; APPLICABLE IN CASE AT BAR. Suffice it to say that, clearly, our
security for the loan, he executed a chattel mortgage on the motorcycle in favor of
ruling in the mother case bars petitioner from claiming back rentals from
DBP. Labajo issued the Norkis Sales Invoice No. 0120 perfecting the contract of sale,
respondent. Although the court a quo erred when it declared void from
and Nepales signed the same to conform to the terms of the sale, while the unit
inception the Deed of Absolute Sale between Carmelo and petitioner, our
remained in Norkis' possession. On November 6, 1979, it was registered under
foregoing discussion supports the grant of the Motion to Dismiss on the ground
Alberto Nepales name in the Land Transportation Commission.
that our prior judgment in GR No. 106063 has already resolved the issue of back
rentals. On the basis of the evidence presented during the hearing of Mayfairs
On January 22, 1980, the motorcycle was delivered to a certain Julian Nepales who
was allegedly the agent of Alberto Nepales but the latter denies it. The record
shows, however, that Alberto and Julian Nepales presented the unit to DBP's
Appraiser-Investigator Ernesto Arriesta at the DBP offices in Kabankalan, Negros
Occidental Branch. On February 3, 1980, the motorcycle met an accident at
Binalbagan, Negros Occidental while being driven by a certain Zacarias Payba. The
unit was a total wreck, was returned, and stored inside Norkis' warehouse.
COURT RULING:
Affirming the decision of the Court of Appeals, the Supreme Court reiterated that
Article 1496 of the Civil Code which provides that "in the absence of an express
assumption of risk by the buyer, the things sold remain at seller's risk until the
ownership thereof is transferred to the buyer," is applicable in the case at bar for
there was neither an actual nor constructive delivery of the thing sold.

On March 20, 1980, DBP released the proceeds of private respondent's motorcycle
loan to Norkis in the total sum of P7,500. As the price of the motorcycle later The Court of Appeals correctly ruled that the purpose of the execution of the sales
increased to P7,828 in March, 1980, Nepales paid the difference of P328 and invoice dated September 20, 1979 and the registration of the vehicle in the name
demanded the delivery of the motorcycle. Norkis failed to deliver the unit, and of Alberto Nepales with the Land Registration Commission was not to transfer the
Nepales filed an action for specific performance with damages in the RTC of ownership and dominion over the motorcycle to him, but only to comply with the
Himamaylan, Negros Occidental. Norkis answered that the motorcycle had already requirements of the DBP for processing private respondent's motorcycle loan. The
been delivered to private respondent before the accident, hence, he should bear circumstances in the case itself more than amply rebut the disputable presumption
the risk of loss or damage as owner of the unit. The lower court ruled in favor of of delivery upon which Norkis anchors its defense to Nepales' action.
Nepales, and the Court of Appeals affirmed the decision but deleted the award of
damages "in the amount of P50.00 a day from February 3, 1980 until payment of
the present value of the damaged vehicle." Norkis concedes that there was no
"actual" delivery of the vehicle, but insists that there was constructive delivery of
the unit upon the issuance of the sales invoice, upon the registration of the unit in
Nepales name, and upon the issuance of the official receipt.

ISSUE:

Who should bear the risk of loss?