ABSOLUTE AND CONDITIONAL SALES

1. PEOPLE'S HOMESITE & HOUSING CORPORATION vs. COURT OF APPEALS, RIZALINO L.

MENDOZA and ADELAIDA R. MENDOZA.

G.R. No. L-61623 December 26, 1984 Aquino, J

FACTS:

On February 18, 1960, the People's Homesite & Housing Corporation (PHHC) board of directors passed Resolution
No. 513 wherein it stated "that subject to the approval of the Quezon City Council of the above-mentioned
Consolidation Subdivision Plan, Lot 4. containing 4,182.2 square meters be, as it is hereby awarded to Spouses
Rizalino Mendoza and Adelaida Mendoza, at a price of twenty-one pesos (P21.00) per square meter" and "that this
award shall be subject to the approval of the OEC (PHHC) Valuation Committee and higher authorities"

The city council disapproved the proposed consolidation subdivision plan. Another subdivision plan was prepared
and submitted to the city council for approval. The revised plan, which included Lot 4, with a reduced area of
2,608.7, was approved by the city council.

The PHHC board of directors passed a resolution recalling all awards of lots to persons who failed to pay the deposit
or down payment for the lots awarded to them. The Mendozas never paid the price of the lot nor made the 20%
initial deposit.

The PHHC board of directors passed Resolution No. 218, withdrawing the tentative award of Lot 4 to the Mendoza -
spouses under Resolution No. 513 and re-awarding said lot jointly and in equal shares to Miguela Sto. Domingo,
Enrique Esteban, Virgilio Pinzon, Leonardo Redublo and Jose Fernandez.

The five awardees made the initial deposit. The corresponding deeds of sale were executed in their favor. The
subdivision of Lot 4 into five lots was approved by the city council and the Bureau of Lands.

The Mendoza spouses asked for reconsideration of the withdrawal of the previous award to them of Lot 4 and for
the cancellation of the re-award of said lot to Sto. Domingo and four others.

ISSUE:

Whether or not there was a perfected sale of Lot 4, with the reduced area, to the Mendozas which they can enforce
against the PHHC by an action for specific performance.

HELD:

NO. There was no perfected sale of Lot 4.

It was conditionally or contingently awarded to the Mendozas subject to the approval by the city council of the
proposed consolidation subdivision plan and the approval of the award by the valuation committee and higher
authorities. The city council did not approve the subdivision plan.

When the plan with the area of Lot 4 reduced to 2,608.7 square meters was approved, the Mendozas should have
manifested in writing their acceptance of the award for the purchase of Lot 4 just t o show that they were still
interested in its purchase although the area was reduced and to obviate ally doubt on the matter. They did not do so.
The PHHC board of directors acted within its rights in withdrawing the tentative award. We cannot say there wa s a
meeting of minds on the purchase of Lot 4 with an area of 2,608.7 square meters at P21 a square meter.
"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 law
governing the form of contracts." (Art. 1475, Civil Code).

"In conditional obligations, the acquisition of rights, as well as the extinguishment or loss of those already acquired,
shall depend upon the happening of the event which constitutes the condition.” (Art. 1181, Civil Code).

2. DELTA MOTORS VS GENUINO GR NO. 5565, FEBRUARY 8, 1989

FACTS:

Private Respondents are owners of an iceplant and cold storage who ordered black iron pipes to Delta Motors
(herein petitioner) for which the latter provided two letter quotations indicating the selling price and delivery of said
pipes.

The terms of payment are also included in the letter quotations which must be complied with by the respondents.

Private respondents made initial payments on both contracts but delivery of the pipes was not made by Delta Motors
so that the Genuinos are not willing to give subsequent payments notwithstanding the agreed terms of payment
requiring them of such.

In July 1972 Delta offered to deliver the iron pipes but the Genuinos did not accept the offer because the
construction of the ice plant building where the pipes were to be installed was not yet finished.

Three years later, on April 15, 1975, Hector Genuino, in behalf of España Extension Ice Plant and Cold Storage,

asked Delta to deliver the iron pipes within thirty (30) days from its receipt of the request.

But petitioner Delta is unwilling to deliver said iron pipes unless the Genuin os agree to a new quotation price set by
the former. Private Respondents rejected the new quoted prices and instead filed a complaint for specific
performance with damages seeking to compel Delta to deliver the pipes. Meanwhile, Delta, in its answer prayed for
rescission of the contracts pursuant to Art. 1191 of the New Civil Code.

TC ruled in favor of Delta.

On appeal, the Court of Appeals reversed and ordered private respondents to make the payments specified in "Terms
of Payment — (b)" of the contracts and to execute the promissory note required in the first contract and thereafter,
Delta should immediately commence delivery of the black iron pipes.

ISSUE:

Whether or not Delta is entitled for rescission of contract as the latter is subject to suspensive conditions and only
upon their performance or compliance would its obligation to deliver the pipes arise?

HELD

No. While there is merit in Delta's claim that the sale is subject to suspensive conditions, the Court finds that it has,
nevertheless, waived performance of these conditions and opted to go on with the contracts although at a much
higher price. Art. 1545 of the Civil Code provides:
Art. 1545. Where the obligation of either party to a contract of sale is subject to any condition which is not
performed, such party may refuse to proceed with the contract or he may waived performance of the condition. . .

It would be highly inequitable for petitioner Delta to rescind the two (2) contracts considering the fact that not only
does it have in its possession and ownership the black iron pipes, but also the down payments private respondents
have paid. Delta cannot ask for increased prices based on the price offer stipulation in the contracts and in the
increase in the cost of goods. Reliance by Delta on the price offer stipulation is misplaced. The moment private
respondents accepted the offer of Delta, the contract of sale between them was perfected and neither party could
change the terms thereof. Neither could petitioner Delta rely on the fluctuation in the market price of goods to
support its claim for rescission.

Finally, Delta cannot ask for increased prices based on the price offer stipulation in the contracts and in the increase
in the cost of goods. Reliance by Delta on the price offer stipulation is misplaced. Said stipulation makes reference
to Delta's price offer as remaining firm for thirty (30) days and thereafter, will be subject to its review and
confirmation. The offers of Delta, however, were accepted by the private respondents within the thirty (30)-day
period. And as stipulated in the two (2) letter-quotations, acceptance of the offer gives rise to a contract between the
parties:

In the event that this proposal is acceptable to you, please indicate your conformity by signing the spac e provided
herein below which also serves as a contract of this proposal. [Exhs. "A" and "C"; Exhs. "1" and "2".]

And as further provided by the Civil Code:

Art. 1319. Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which
are to constitute the contract.

Art. 1475. The contract of sale is perfected at the moment there is a meeting of minds upon thing which is the object
of the contract and upon the price.

Thus, the moment private respondents accepted the offer of Delta, the contract of sale between them was perfected
and neither party could change the terms thereof.

Neither could petitioner Delta rely on the fluctuation in the market price of goods to support its claim for rescission.
The stipulation in the two (2) contracts as to delivery, ex-stock subject to prior sales, means that "the goods have not
been delivered and that there are no prior commitments other than the sale covered by the contracts.. . once the offer
is accepted, the company has no more option to change the price." [CFI Decision, p. 5; Rollo, p. 45; Emphasis
supplied.] Thus, petitioner cannot claim for higher prices for the black iron pipes due to the increase in the cost of
goods. Based on the foregoing, petitioner Delta and private respondents Genuinos should comply with the original
terms of their contracts.
3. DIGNOS vs CA

158 SCRA 375

FACTS:

Before Us is a petition for review on certiorari seeking the reversal of the decision of the CA affirming the decision
of the CFI in declaring that the second sale of the disputed land null and void.

Petitioner spouses were owners of a land located in Cebu City. On June 7, 1965, petitioners sold the said land to the
respondents for the sum of P28,000.00, payable in two installments, with an assumption of indebtedness with the
First Insular Bank of Cebu in the sum of P12,000.00, which was paid and acknowledged by the vendors in the deed
of sale executed in favor of the petitioners, and the next installment in the sum of P4,000.00 to be paid on or before
September 15, 1965.

On November 25, 1965, the petitioners sold the same land in favor of spouses, Luciano Cabigas and Jovita L. De
Cabigas, who were then U.S. citizens, for the price of P35,000.00. A deed of absolute sale was executed by the
petitioners in favor of the Cabigas spouses, and which was registered in the Office of the Register of Deeds pursuant
to the provisions of Act No. 3344.

As the petitioners refused to accept from respondent the balance of the purchase price of the land, and as the latter
discovered the second sale made by the former to the Cabigas spouses, respondents brought the present suit.

RTC: Declared the second sale null and void and ordered the respondents to pay P16,000.00 upon the execution of
the sale.

CA: Affirmed RTC’s decision.

ISSUE

Is the first sale an absolute sale which effectively transfers the ownership over the property in question to the
respondent and not merely a contract to sell or promise to sell?

HELD

The first sale is an ABSOLUTE SALE and NOT a contract to sell.

Jurisprudence dictates that deed of sale is absolute in nature although denominated as a "Deed of Conditional Sale"
where nowhere in the contract in question is a proviso or stipulation to the effect that title to the prope rty sold is
reserved in the vendor until full payment of the purchase price, nor is there a stipulation giving the vendor the right
to unilaterally rescind the contract the moment the vendee fails to pay within a fixed period.

In the case at bar, a careful examination of the contract shows that there is no such stipulation reserving the title of
the property on the vendors nor does it give them the right to unilaterally rescind the contract upon non -payment of
the balance thereof within a fixed period. On the contrary, all the elements of a valid contract of sale under Article
1458.

Moreover, "where time is not of the essence of the agreement, a slight delay on the part of one party in the
performance of his obligation is not a sufficient ground for the rescission of the agreement." Considering that
respondent has only a balance of P4,000.00 and was delayed in payment only for one month, equity and justice
mandate that he be given an additional period within which to complete payment of the purchase price
4. VIRGILIO ROMERO VS CA

G.R. No. 107207 November 23, 1995 Vitug, J.

FACTS:

Petitioner Virgilio R. Romero was engaged in the business of production, manufacture and exportation of perlite
filter aids, permalite insulation and processed perlite ore. In 1988, petitioner and his foreign partners decided to put
up a central warehouse in Metro Manila on a land area of approximately 2,000 square meters. The project was made
known to several freelance real estate brokers.

A day or so after the announcement, Alfonso Flores and his wife, accompanied by a broker, offered a parcel of land
measuring 1,952 square meters. in the name of private respondent Enriqueta Chua vda. de Ongsiong. Petitioner
visited the property and, except for the presence of squatters in the area, he found the place suitable for a central
warehouse.

Later, the Flores spouses called on petitioner with a proposal that should he advance the amount of P50,000.00
which could be used in taking up an ejectment case against the squatters, private respondent would agree to sell the
property for only P800.00 per square meter. Petitioner expressed his concurrence. On 09 June 1988, a contract,
denominated "Deed of Conditional Sale," was executed between petitioner and private responden t. It was agreed
that the vendor would take care of the informal settlers.

Pursuant to the agreement, private respondent filed a complaint for ejectment against Melchor Musa and 29 other
squatter families with the Metropolitan Trial Court of Parañaque. A few months later, a judgment was rendered
ordering the defendants to vacate the premises. The decision was handed down beyond the 60dayperiod (expiring 09
August 1988) stipulated in the contract.

In a letter, dated 07 April 1989, private respondent sought to return the P50,000.00 she received from petitioner as
down payment since, she said, she could not "get rid of the squatters" on the lot. They contend that the Deed of
Conditional Sale had been rendered null and void by virtue of his client's failure to evict the squatters from the
premises within the agreed 60day period. He added that private respondent had decided to retain the property.

Private respondent, prompted by petitioner's continued refusal to accept the return of the P50,000.00 advance
payment, filed with the Regional Trial Court of Makati, for rescission of the deed of "conditional" sale, plus
damages, and for the consignation of P50,000.00 cash.

Regional Trial Court of Makati rendered decision holding that private respondent had no right to re scind the
contract since it was she who "violated her obligation to eject the squatters from the subject property" and that
petitioner, being the injured party, was the party who could, under Article 1191 of the Civil Code, rescind the
agreement. The court ruled that the provisions in the contract relating to (a) the return/reimbursement of the
P50,000.00 if the vendor were to fail in her obligation to free the property from squatters within the stipulated period
or(b), upon the other hand, the sum's forfeiture by the vendor if the vendee were to fail in paying the agreed
purchase price, amounted to "penalty clauses".

The lower court, accordingly, dismissed the complaint and ordered, instead, private respondent to eject or cause the
ejectment of the squatters from the property and to execute the absolute deed of conveyance upon payment of the
full purchase price by petitioner.

CA reversed the decision and opined opined that the contract entered into by the parties was subject to a resolutory
condition, i.e., the ejectment of the squatters from the land, the non-occurrence of which resulted in the failure of the
object of the contract
ISSUE:

WON private respondents has the right to rescind the contract

HELD:

NO! A perfected contract of sale may either be absolute or conditional depending on whether the agreement is
devoid of, or subject to, any condition imposed on the passing of title of the thing to be conveyed or on the
obligation of a party thereto. When ownership is retained until the fulfilment of a posit ive condition the breach of
the condition will simply prevent the duty to convey title from acquiring an obligatory force. If the condition is
imposed on an obligation of a party which is not complied with, the other party may either refuse to proceed or
waive said condition (Art. 1545, Civil Code). Where, of course, the condition is imposed upon the perfection of the
contract itself, the failure of such condition would prevent the juridical relation itself from coming into existence.

In any case, private respondent's action for rescission is not warranted. She is not the injured party. The right of
resolution of a party to an obligation under Article 1191 of the Civil Code is predicated on a breach of faith by the
other party that violates the reciprocity between them. It is private respondent who has failed in her obligation under
the contract.

Petitioner did not breach the agreement. He has agreed, in fact, to shoulder the expenses of the execution of the
judgment in the ejectment case and to make arrangements with the sheriff to effect such execution. Petitionerhas
tendered payment and demanded forthwith the execution of the deed of absolute sale. Parenthetically, this offer to
pay, having been made prior to the demand for rescission, assuming for the sake of argument that such a demand is
proper under Article 1592 of the Civil Code, would likewise suffice to defeat private respondent's prerogative to
rescind thereunder.
5. CORONEL vs CA

G.R. No. 103577. October 7, 1996 Melo, J.

FACTS:

On January 19, 1985—Coronel executed a document entitled "Receipt of Down Payment" in favor of plaintiff
Alcaraz with the following conditions appurtenant to the sale: 1) Ramona will make a down payment of P50,000.00
upon execution of the document aforestated; 2) The Coronels will cause the transfer in their names of the title of the
property registered in the name of their deceased father upon receipt of the P50,000.00 Pesos down payment; and
3)Upon the transfer in their names of the subject property, the Coronels will execute the deed of absolute sale in
favor of Ramona and the latter will pay the former the whole balance of P1,190,000.00. On February 18, 1985, the
Coronels sold the property to Mabanag; Coronels cancelled and rescinded the contract with Alcaraz by depositing
the down payment paid by Concepcion in the bank in trust for Ramona Patricia Alcaraz. As such, Concepcion, et al.,
filed a complaint for specific performance against the Coronels. Coronels executed a Deed of Absolute Sale over the
subject property in favor of Catalina

ISSUE:

Whether or not there is perfected contract of sale

HELD:

No.

It is essential to distinguish between a contract to sell and a conditional contract of sale specially in cases where the
subject property is sold by the owner not to the party the seller contracted with, but to a third person, as in the case at
bench. In a contract to sell, there being no previous sale of the property, a third person buying such property despite
the fulfillment of the suspensive condition such as the full payment of the purchase price, for instance, cannot be
deemed a buyer in bad faith and the prospective buyer cannot seek the relief of reconveyance of the property. There
is no double sale in such case. Title to the property will transfer to the buyer after registration because there is no
defect in the owner-seller's title per se, but the latter, of course, may be used for damages by the intending buyer.

In a conditional contract of sale, however, upon the fulfillment of the suspensive condition, the sale becomes
absolute and this will definitely affect the seller's title thereto. In fact, if there had been previous delivery of the
subject property, the seller's ownership or title to the property is automatically transferred to the buyer such that, the
seller will no longer have any title to transfer to any third person. Applying Article 1544 of the Civil Code, such
second buyer of the property who may have had actual or constructive knowledge of such defect in the seller's title,
or at least was charged with the obligation to discover such defect, cannot be a registrant in good faith. Such second
buyer cannot defeat the first buyer's title. In case a title is issued to the second buyer, the first buyer may seek
reconveyance of the property subject of the sale.

With the foregoing conclusions, the sale to the other petitioner, Catalina B. Mabanag, gave rise to a case of double
sale where Article 1544 of the Civil Code will apply.

In a case of double sale, what finds relevance and materiality is not whether or not the second buyer was a buyer in
good faith but whether or not said second buyer registers such second sale in good faith, that is, without knowledge
of any defect in the title of the property sold.

As clearly borne out by the evidence in this case, petitioner Mabanag could not have in good faith, registered the
sale entered into on February 18, 1985 because as early as February 22, 1985, a notice of lis pendens had been
annotated on the transfer certificate of title in the names of petitioners, whereas petitioner Mabanag registered the
said sale sometime in April, 1985. At the time of registration, therefore, petitioner Mabanag knew that the same
property had already been previously sold to private respondents, or, at least, she was charged with knowledge that a
previous buyer is claiming title to the same property. Petitioner Mabanag cannot close her eyes to the defect in
petitioners' title to the property at the time of the registration of the property.

6. UNITED MUSLIM AND CHRISTIAN URBAN POOR ASSOCIATION, INC. VS.

BRYC-V DEVELOPMENT CORPORATION

G.R. No. 179653, July 31, 2009

NACHURA, J.:

FACTS:

Respondent Sea Foods Corporation (SFC) is the registered owner of Lot No. 300 located in Lower Calainan,
Zamboanga City and covered by Transfer Certificate of Title (TCT) No. 3182. Sometime in 1991, petitioner United
Muslim and Christian Urban Poor Association, Inc. (UMCUPAI), an organization of squatters occupying Lot No.
300, through its President, Carmen T. Diola, initiated negotiations with SFC for the purchase thereof. UMCUPAI
expressed its intention to buy the subject property using the proceeds of its pending loan application with National
Home Mortgage Finance Corporation (NHMF). The parties executed a Letter of Intent. However, the intended sale
was derailed due to UMCUPAIs inability to secure the loan from NHMF as not all its members occupying Lot No.

300 were willing to join the undertaking. Intent on buying the subject property, UMCUPAI, in a series of
conferences with SFC, proposed the subdivision of Lot No. 300 to allow the squatter-occupants to purchase a
smaller portion thereof.

Consequently, sometime in December 1994, Lot No. 300 was subdivided into three (3) parts covered by separate
titles. UMCUPAI failed to acquire Lot No. 300-C for lack of funds. On March 5, 1995, UMCUPAI negotiated anew
with SFC and was given by the latter another three months to purchase Lot No. 300-C. However, despite the
extension, the three-month period lapsed with the sale not consummated because UMCUPAI still failed to obtain a
loan from NHMF. Thus, on July 20, 1995, SFC sold Lot No. 300-C for P2,547,585.00 to respondent BRYC-V
Development Corporation (BRYC).

UMCUPAI filed with the RTC a complaint against respondents SFC and BRYC s eeking to annul the sale of Lot
No. 300-C, alleging that the sale between the respondents violated its valid and subsisting agreement with SFC
embodied in the Letter of Intent. According to UMCUPAI, the Letter of Intent granted it a prior, better, and
preferred right over BRYC in the purchase of Lot No. 300-C. According to the RTC, the Letter of Intent was simply
SFCs declaration of intention to sell, and not a promise to sell, the subject lot. On the whole, the RTC concluded that
the Letter of Intent was neither a promise, nor an option contract, nor an offer contemplated under Article 1319 of
the Civil Code, or a bilateral contract to sell and buy. CA affirmed.
ISSUE

Whether or not UMCUPA ask for the annulment of the sale?

HELD:

NO. Nowhere in the Letter of Intent does it state that SFC relinquishes its title over the subject property, subject
only to the condition of complete payment of the purchase price; nor, at the least, that SFC, although expressly
retaining ownership thereof, binds itself to sell the property exclusively to UMCUPAI. The Letter of

Intent to Buy and Sell is just that a manifestation of SFCs intention to sell the property and UMCUPAI’s intention to
acquire the same.

The Letter of Intent/Agreement between SFC and UMCUPAI is merely a written preliminary understanding of the
parties wherein they declared their intention to enter into a contract of sale. It is subject to the condition that
UMCUPAI will apply with the Home Mortgage and Finance Corporation for a loan to pay the ac quisition price of
said land. One of the requirements for such loan is a formal manifestation of Intent to Sell from SFC. Thus, the
Letter of Intent to Sell fell short of an offer contemplated in Article 1319 of the Civil Code because it is not a certain
and definite proposal to make a contract but merely a declaration of SFCs intention to enter into a contract.
UMCUPAIs declaration of intention to buy is also not certain and definite as it is subject to the condition that
UMCUPAI shall endeavor to raise funds to acquire subject land. The acceptance of the offer must be absolute; it
must be plain and unconditional. Moreover, the Letter of Intent/Agreement does not contain a promise or
commitment to enter into a contract of sale as it merely declared the intention of the parties to enter into a contract
of sale upon fulfillment of a condition that UMCUPAI could secure a loan to pay for the price of a land

The failure of UMCUPAI to acquire Lot No. 300-C before it was sold to BRYC-V cannot be blamed on SFC
because all that UMCUPAI had to do was to raise funds to pay for Lot No. 300-C which it did with respect to Lot
No. 300-A.
7. DELFIN TAN VS ERLINDA C. BENOLIRAO, ANDREW C. BENOLIRAO, ROMANO C.
BENOLIRAO, DION C. BENOLIRAO, SPS. REYNALDO TANINGCO and NORMA D. BENOLIRAO,
EVELYN T. MONREAL, and ANN KARINA TANINGCO

GR NO. 153820, October 16, 2009

BRION, J

FACTS:

Spouses Lamberto and Erlinda Benolirao and the Spouses Reynaldo and Norma Taningco were the coowners of a
689square meter parcel of land (property) located in Tagaytay City and covered by Transfer Certificate of Title (TCT)
No. 26423. On October 6, 1992, the co-owners executed a Deed of Conditional Sale over the property in favor of
Tan for the price of P1,378,000.00. Pursuant to such, Tan issued and delivered to the co-owners/vendors a check for
P20,000 as downpayment for the property, for which a receipt was issued to him. Later, Lamberto
Benorilao died intestate. Erlinda, his widow and one of the vendors of the property, and their children, executed an
extrajudicial settlement of the decedent’s property. An annotation was made thereon to the tenor that “x x x any
liability to credirots (sic), excluded heirs and other persons having right to the property, for a period of two (2) years,
with respect only to the share of Erlinda, Andrew, Romano and Dion, all surnamed Benolirao” On the basis of such
settlement, a new certificate of title over the property was issued in the names of the Spouses Reynaldo and
Norma Taningco and Erlinda Benolirao and her children. As stated in the Deed of Conditional
Sale, Tan had until March 15, 1993 to pay the balance of the purchase price. By agreement of the parties, this period
was extended by two months, so Tan had until May 15, 1993 to pay the balance. Tan however failed to pay, despite
further extensions given to him, prompting the vendors to make a written demand within 5 days of
notice, otherwise, they would rescind the sale. Tan refused to comply with such, alleging that
by the annotation in the TCT, he is prevented from getting a clean title, and therefore he could no longer be required
to pay the balance of the purchase price. He then demanded the return of his down payment. When the vendors refused
to comply with his demand, Tan filed a complaint with t he RTC for specific performance, alleging that there there
was a novation of the Deed of Conditional Sale done without his consent since the annotation on the title created an
encumbrance over the property. Tan prayed for the refund of the down payment and the rescission of the contract. Tan
later on amended his complaint, contending that if the respondents insist on forfeiting the down payment, he would
be willing to pay the balance of the purchase price provided there is reformation of the Deed of Conditional Sale. In
the meantime, Tan caused the annotation on the title of a notice of
lis pendens . However, later, the respondents issued a Deed of Absolute Sale in favor
ofHector De Guzman. Thereafter, the respondents moved for the cancellation of the notice of lis pendens on the ground
that it was inappropriate since the case that Tan filed was a personal action which did not involve either title to, or
possession of, real property. The RTC issued an order dated October 22, 1993 granting the respondents motion to
cancel the lis pendens annotation on the title. Meanwhile, based on the Deed of Absolute Sale in his favor, de Guzman
registered the property and TCT No. 28104 was issued in
his name. Tan then filed a motion to carry over the lis pendens annotation to TCT No. 28104 registered
in de Guzmans name, but the RTC denied the motion. The RTC ruled that the forfeiture of the downpayment was in
accordance with the conditions in the Deed of Conditional Sale.The CA affirmed the RTC ruling, hence this petition
ISSUE

Whether or not the forfeiture of the downpayment was correctly upheld by the RTC and the CA

HELD

NO. The contract to sell was terminated when the vendors could no longer legally compel Tan to pay the balance of
the purchase price as a result of the legal encumbrance which attached to the title of the property. Since Tans refusal
to pay was due to the supervening event of a legal encumbrance on the property and not through his own fault or
negligence, we find and so hold that the forfeiture of Tans down payment was clearly unwarranted. The
true nature of the contract in question is revealed in stipulation (d) “That in case, BUYER has complied with the
terms and conditions of this contract, then the SELLERS shall execute and deliver to the BUYER the appropriate
Deed of Absolute Sale;”—that is, the contract here is a contract to sell, where the seller promises to execute a deed
of absolute sale upon the completion by the buyer of the payment of the price. In the
present case, and as held in a number of cases decided by the Supreme Court, rescission cannot be had as a remedy
in contracts to sell. The rationale has been enunciated in Santos vs CA: [I]n a contract
to sell, title remains with the vendor and does not pass on to the vendee until the purchase price is paid in
full. Thus, in a contract to sell, the payment of the purchase price is a positive suspensive condition.
Failure to pay the price agreed upon is not a mere breach, casual or serious, but a situation that prevents the
obligation of the vendor to convey title from acquiring an obligatory force. This is entirely different from the
situation in a contract of sale, where nonpayment of the price is a negative resolutory condition. The effects in law
are not identical. In a contract of sale, the vendor has lost ownership of the thing sold and cannot recover it, unless
the contract of sale is rescinded and set aside. In a contract to sell, however, the vendor remains the owner for as
long as the vendee has not complied fully with the condition of paying the purchase price. If the vendor should
eject the vendee for failure to meet the
condition precedent, he is enforcing the contract and not rescinding it. x x x Article 1592 speaks of nonpayment of
the purchase price as a resolutory condition. It does not apply to a contract to sell. As to Article 1191, it is
subordinated to the provisions of Article 1592 when applied to sales of immovable property. Neither provision is
applicable [to a contract to sell].

NOTES:

Among the conditions stated in the Deed are the following:

a) An initial downpayment of TWO HUNDRED (P200,000.00) THOUSAND PESOS, Philippine Currency,

upon signing of this contract; then the remaining balance of ONE MILLION ONE HUNDRED SEVENTY EIGHT
THOUSAND (P1,178,000.00) PESOS, shall be payable within a period of one hundred fifty (150) days from date
hereof without interest;

b) That for any reason, BUYER fails to pay the remaining balance within above mentioned period, the
BUYER shall have a grace period of sixty (60) days within which to make the payment, provided that there shall be
an interest of 15% per annum on the balance amount due from the
SELLERS;

c) That should in case (sic) the BUYER fails to comply with the terms and conditions within the above stated
grace period, then the SELLERS shall have the right to forfeit the down payment, and to rescind this conditional sale
without need of judicial action;

d) That in case, BUYER have complied with the terms and conditions of this contract, then the

SELLERS shall execute and deliver to the BUYER the appropriate Deed of Absolute Sale
8. RAYMUNDO DE LEON VS BENITA ONG

G.R. No. 170405, February 2, 2010

FACTS:

On March 10, 1993, petitioner Raymundo S. de Leon sold three parcels of land with improvements situated in
Antipolo, Rizal to respondent Benita T. Ong. Parcels of land were subject to a mortgage in favor of Real Savings
and Loan Association, Incorporated. A Notarized Deed of Absolute Sale with Assumption of Mortgage was
executed by the parties. The following are found in the deed:

that petitioner “does hereby sell, transfer and convey in a manner absolute and irrevocable, unto said respondent...”
the subject parcels of land

upon payment by Ong of Php415,000 petitioner will execute and sign a Deed of Absolute Sale with Assumption of
Mortgage

Ong to assume payment of outstanding loan with RSLAI in the amount of Php684,500 Ong
gave the Php415,000, de Leon handed keys to properties and sent a letter to the bank informing the latter of the sale
and authorizing it to accept payment from respondent and release the certificates of title. Ong
introduced improvements and likewise informed the bank about the sale. The bank said that Ong shall undergo
credit investigation.

Respondent learned that petitioner again sold the same properties to one Leona Viloria after March 10, 1993 and
changed the locks, rendering the keys he gave her useless. Respondent thus proceeded to RSLAI to inquire about the
credit investigation. However, she was informed that petitioner had already paid the amount due and had taken back
the certificates of title. Respondent
filed a complaint for specific performance, declaration of nullity of the second sale and damages against petitioner
and Viloria in the Regional Trial Court (RTC) of Antipolo, Rizal, Branch 74. She claimed that since petitioner had
previously sold the properties to her on March 10, 1993, he no longer had the right to sell the same to Viloria.
Thus, petitioner fraudulently deprived her of the properties.

ISSUES

(1) Whether the contract entered into is a Contract of Sale or Contract to Sell.

(2) Whether there was a Void Subsequent Sale or Double Sale.

HELD

(1) The contract entered into was a CONTRACT OF SALE In a Contract of

Sale the seller conveys ownership of the property to the buyer upon the perfe ction of the contract. Should the buyer
default in the payment of the purchase price, the seller may either sue for the collection thereof or have the contract
judicially resolved and set aside. The non-payment of the price is therefore a negative resolutory condition.

In a Contract to Sell, it is subject to a positive suspensive condition. The buyer does not acquire ownership of the
property until he fully pays the purchase price. For this reason, if the buyer defaults in the payment thereof, the seller
can only sue for damages.

*Nothing in said instrument implied that petitioner reserved ownership of the properties until the full payment of the
purchase price. Terms and conditions pertained to the performance of the contract, not the perfection thereof nor the
transfer of ownership.
*Article 1498 of the Civil Code provides that, as a rule, the execution of a notarized deed of sale is equivalent to the
delivery of a thing sold. Indicators that petitioner had unqualifiedly delivered and transferred ownership of
properties to respondent:

- notarized deed of absolute sale was executed

- keys to the properties were tuned over

- RSLAI was authorized to received payment from Ong and release certificates of title to her

* Article 1186. The condition shall be deemed fulfilled when the obligor voluntarily prevents its
fulfillment. Since de Leon himself prevented approval of the bank with regard to assumption of mortgage by Ong by
paying his outstanding obligation and taking bank certificates of title without notifying Ong, it is deemed
fulfilled. (2) There was DOUBLE SALE Ong is a purchaser in good faith.

- A purchaser in good faith is one who buys the property of another without notice that some other person
has a right to, or an interest in, such property and pays a full and fair price for the same at the time of such purchase,
or before he has notice of some other person’s claim or interest in the
property. Ong is deemed released from payment of the remainder of purchase price.

- de Leon voluntarily prevented the fulfillment of this condition and the same has become legally impossible Ong
is also considered in possession of the property already for the same reasons indicated for the transfer of ownership.

Nonetheless, while the condition as to the payment of the balance of the purchase price was deemed fulfilled,
respondent’s obligation to pay it subsisted. Otherwise, she would be unjustly enriched at the expense of petitioner.
Petitioner to transfer titles to respondent.
CONTRACT TO SELL

1. LUZON DEVELOPMENT BANK VS ANGELES CATHERINE ENRIQUEZ

G.R. No. 168646 January 12, 2011 DEL CASTILLO, J.

FACTS:

Petitioner DELTA is engaged in the business of developing and selling real estate properties, particularly Delta
Homes I in Cavite. In 1995, for the purpose of developing Delta Homes 1, DELTA obtained a 4 million loan from
the Luzon Development Bank (BANK), a domestic financial corporation that extends loans to subdivision
developers/owners. To secure the loan, DELTA executed real estate mortgage on their properties, including Lot 4 of
Delta Homes I, which is the subject matter of the case

In 1997, DELTA executed a Contract to Sell with respondent Angeles Catherine Enriquez (Enriquez) for Lot 4 of
Delta Homes I . The contract indicated that (1) upon failure to pay 3 successive monthly installment payments,
DELTA may consider the Contract to Sell null and void ab initio without need for further court action and all
payments shall be forfeited, and (2) DELTA shall execute a final deed of sale in favor of the BANK only upon full
payment of the total consideration.

DELTA defaulted in its loan and the BANK agreed to dacion en pago instead of foreclosing the REM; a Deed of
Assignment in Payment of Debt was executed in favor of the BANK.

In 1999, Enriquez filed a complaint against the BANK and DELTA, and sought a full refund of the amount paid to
DELTA, award of damages, and the imposition of administrative fines on DELTA and the BANK. The HLURB
Board ruled that the Contract to Sell was valid and the ownership over Lot 4 was already conveyed to Enriquez.

DELTA's contention was that the Contract to Sell contained a condition that ownership shall only be transferred to
Enriquez upon the latter’s full payment of the purchase price to DELTA. Since Enriquez has yet to comply with this
suspensive condition, ownership is retained by DELTA.

ISSUE

Whether or not the Contract to Sell conveyed ownership to Enriquez

HELD

NO, in a Contract to Sell the seller obliges himself to sell the subject property only upon the happening of a
suspensive condition, such as full payment of the purchase price; ownership is retained by the prospective seller
without further remedies by the prospective buyer. The terms of their Contract to Sell expressly provided that
DELTA has reserved ownership until full payment, and shall have the right to unilaterally void the contract upon

Enriquez's failure to pay installment thrice successively.

Since the Contract to Sell did not transfer ownership to Enriquez, DELTA can valid ly transfer such ownership to
the BANK. However, because what is involved is a subdivision lot, the transferee BANK is bound by the Contract
to Sell and has to respect Enriquez's rights as per PD 957. Although the Contract to Sell was not registered, the
BANK is not deemed a purchaser in good faith because (1) the property was a subdivision lot and therefore within
the purview of PD 957, and (2) it knew that the loaned amounts were to be used for the development of DELTAs
subdivision project, for this was indicated in the corresponding promissory notes.
"Bound by the terms of the Contract to Sell, the BANK is obliged to respect the same and honor the payments
already made by Enriquez for the purchase price of Lot 4. Thus, the BANK can only collect the balan ce of the
purchase price from Enriquez and has the obligation, upon full payment, to deliver to Enriquez a clean title over the
subject property."

Special note: Section 17 of PD 957 - Registration. All contracts to sell, deeds of sale, and other similar instruments
relative to the sale or conveyance of the subdivision lots and condominium units, whether or not the purchase price
is paid in full, shall be registered by the seller in the Office of the Register of Deeds of the province or city where the
property is situated.

2. SPS ONNIE SERRANO AND AMPARO HERRERA VS GODOFREDO CAGUIAT

G.R. No. 139173, February 28, 2007 SANDOVAL-GUTIERREZ, J.:

FACTS:

Spouses Onnie and Amparo Herrera are the registered owners of a lot located in Las Piñas, Metro Manila. Sometime
in March 1990, Godofredo Caguiat, offered to buy the lot. Spouses Serrano agreed to sell it at P1,500.00 per square
meter. Caguiat then gave them P100,000.00 as partial payment. In turn, Spouses Serrano gave him the
corresponding receipt stating that Caguiat promised to pay the balance of the purchase price on or before March 23,
1990. On March 28, 1990, Caguiat, then wrote Spouses Serrano informing them of his readiness to pay the balance.
Spouses Serrano, however, informed him that they are leaving for abroad and that they are cancelling the
transaction. He may likewise recover the earnest money of P100, 000. anytime. Thereafter, Spouses Serrano sent a
check in the amount of P100,000 to Caguiat’s counsel. Caguiat then filed a complaint ag ainst Spouses Serrano for
specific performance and damages.

ISSUE

Whether or not the document receipt that was signed by both and is issued to Caguiat is a contract of sale since there
was already an earnest money given.

HELD

NO, the receipt is that of a contract to sell. A contract to sell is akin to a conditional sale where the efficacy or
obligatory force of the vendor’s obligation to transfer title is subordinated to the happening of a future and uncertain
event, so that if the suspensive condition does not take place, the parties would stand as if the conditional obligation
had never existed. The suspensive condition is commonly full payment of the purchase price. In a contract to sell,
ownership is retained by the seller and is not to pass to the buyer until full payment of the price. In this case, the
“Receipt for Partial Payment” shows that the true agreement between the parties is a contract to sell. First,
ownership over the property was retained by petitioners and was not to pass to respondent until full payment of
the purchase price. Second, the agreement between the parties was not embodied in a deed of sale. Third, petitioners
retained possession of the certificate of title of the lot.
3. DARREL CORDERO, EGMEDIO BAUTISTA, ROSEMAY BAUTISTA, MARION
BAUTISTA, DANNY BOY CORDERO, LADYLYN CORDERO and BELEN CORDERO, vs F.S.
MANAGEMENT & DEVELOPMENT CORPORATION

G.R. No. 167213 October 31, 2006

FACTS:

On or about October 27, 1994, petitioner entered into a contract to sell with respondent, over five (5) parcels of land
located in Nasugbu, Batangas. The contract to sell contained the following terms and conditions:

1. That the BUYER will buy the whole lots above described from the OWNER consisting of 50 hectares more
or less at P25/sq.m. or with a total price of P12,500,000.00;

2. That the BUYER will pay the OWNER the sum of P500,000.00 as earnest money which will entitle the
latter to enter the property and relocate the same, construct the necessary paths and roads with the help of the
necessary parties in the area;

3. The BUYER will pay the OWNER the sum of THREE MILLION FIVE HUNDRED THOUSAND
PESOS ONLY (P3,500,000.00) on or before April 30, 1995 and the remaining balance will be paid within

18 mons. (sic) from the date of payment of P3.5 Million pesos in 6 equal quarterly payments or P1,411,000.00 every
quarter;

4. The title will be transferred by the OWNER to the BUYER upon complete payment of the agreed purchase
price. Provided that any obligation by the OWNER brought about by enc umbrance or mortgage with any bank shall
be settled by the OWNER or by the BUYER which shall be deducted the total purchase price;

5. Provided, the OWNER shall transfer the titles to the BUYER even before the complete payment if the
BUYER can provide post dated checks which shall be in accordance with the time frame of payments as above
stated and which shall be guaranteed by a reputable bank;

6. Upon the payment of the earnest money and the down payment of 3.5 Million pesos the BUYER can
occupy and introduce improvements in the properties as owner while owner is guaranteeing that the properties will
have no tenants or squatters in the properties and cooperate in the development of any project or exercise of
ownerships by the BUYER;

7. Delay in the payment by the BUYER in the agreed due date will entitle the SELLER for the legal interest.

Pursuant to the terms and conditions of the contract to sell, respondent paid earnest money in the amount of
P500,000 on October 27, 1994. She likewise paid P1,000,000 on June 30, 1995 and another P1,000,000 on July 6,
1995. No further payments were made thereafter.

Petitioners thus sent respondent a demand letter, however Respondent ignored the demand.

The Petitioners, filed before the RTC of Parañaque a complaint for rescission of contract with damages alleging that
respondent failed to comply with its obligations under the contract to sell, specifically its obligation to pay the
downpayment of P3.5 Million by April 30, 1995, and the balance within 18 months thereafter; and that consequently
petitioners are entitled to rescind the contract to sell as well as demand the payment of damages.

The Respondent, alleged that petitioners have no cause of action considering that they were the first to violate the
contract to sell by preventing access to the properties despite payment of P2.5 Million Pesos; petitioners prevented it
from complying with its obligation to pay in full by refusing to execute the final contract of sale unless additional
payment of legal interest is made; and petitioners’ refusal to execute the final contract of sale was due to the
willingness of another buyer to pay a higher price.
The TRIAL COURT, issued its decision on November 18, 1997, finding for petitioners and ordering respondent to
pay damages and attorney’s fees.

The COURT OF APPEALS set aside the contract to sell, it finding that petitioners’ obligation thereunder did not
arise for failure of respondent to pay the full purchase price. It also set aside the award to petitioners of damages for
not being duly proven. And it ordered petitioners to return "the amount received from [respondent]."

ISSUE:

Whether or not a CONTRACT TO SELL may be subject to rescission under Article 1191 of the Civil Code.

HELD:

NO. Under a contract to sell, the seller retains title to the thing to be sold until the purchaser fully pays the agreed
purchase price. The full payment is a positive suspensive condition, the non-fulfillment of which is not a breach
of contract but merely an event that prevents the seller from conveying title to the purchaser. The non-payment of
the purchase price renders the contract to sell ineffective and without force and effect.

The petitioners retained ownership without further remedies by the respondents until the payment of the purc hase
price of the property in full. Such payment is a positive suspensive condition, failure of which is not really a breach,
serious or otherwise, but an event that prevents the obligations of the petitioners to convey title from arising.

The non-fulfillment by the respondent of his obligation to pay, which is a suspensive condition to the obligation
of the petitioners to sell and deliver the title to the property, rendered the contract to sell ineffective and without
force and effect.

Article 1191 of the New Civil Code will not apply because it presupposes an obligation already extant. There can
be no rescission of an obligation that is still non-existing, the suspensive condition not having happened.

Articles 1191 and 1592 of the Civil Code are applicable to contracts of sale. In contracts to sell, RA 6552 applies.

x x x Known as the Maceda Law, R.A. No. 6552 recognizes in conditional sales of all kinds of real estate (industrial,
commercial, residential) the right of the seller to cancel the contract upon non-payment of an installment by the
buyer, which is simply an event that prevents the obligation of the vendor to convey title from acquiring binding
force. It also provides the right of the buyer on installments in case he defaults in the payment of succeeding
installments x x x.

The properties subject of the contract having been intended for commercial, and not for residential, purposes,
petitioners are entitled to retain the payments already made by respondent. RA 6552 expressly recognizes the
vendor’s right to cancel contracts to sell on installment basis industrial and commercial properties with full retention
of previous payments.

WHEREFORE, the assailed Court of Appeals Decision is AFFIRMED with the MODIFICATION that
petitioners are entitled to retain the payments already received from respondent.
DATION IN PAYMENT

1. DAO HENG BANK VS SPS LILIA AND REYNALDO LAIGO

G.R. No. 173856 November 20, 2008 Ponente: Carpio Morale

FACTS:

Sps. Laigo obtained loans from Dao Heng Bank to secure payment of which they forged 3 real estate mortgages.
They failed to settle their outstanding obligations, drawing them to verbally offer to cede to Dao Heng one of 2
mortgage lots by way of dacion en pago. Dao Heng had the properties appraised. Bu t there appears to have been no
further action after the appraisal.

Dao Heng was later to demand the settlement of respondents obligation which they failed to heed. Dao Heng filed
an application to foreclose the REM and the properties were then sold to pet itioner at a public auction.

Respondents negotiated for redemption a year after the sale to which the petitioner stated the redemption price. But
nothing was heard from the respondents thereafter. The petitioner then advised the respondents that it would have
the titles consolidated after the expiration of the redemption period.

Six days before the expiration of the redemption period, the respondents filed a complaint for annulment of the
foreclosure of the properties and for them to deliver by way of dacion en pago one of the mortgaged properties as
full payment of [their] mortgaged obligation. Respondents claim that Dao Heng verbally agreed to enter into a
dacion en pago.

Petitioner claimed that there was no meeting of the minds between the parties on t he settlement of respondents loan
via dacion en pago and that the claim of respondents are unenforceable under the Statute of Frauds. Respondents
opposed and argued that their delivery of the titles to the mortgaged properties constituted partial performance of
their obligation under the dacion en pago.

ISSUE:

Whether or not there was a perfected dacion en pago (No)

HELD:

Dacion en pago as a mode of extinguishing an existing obligation partakes of the nature of sale whereby property is
alienated to the creditor in satisfaction of a debt in money. It is an objective novation of the obligation, hence,
common consent of the parties is required in order to extinguish the obligation.

. . . In dacion en pago, as a special mode of payment, the debtor offers another thing to the creditor who accepts it as
equivalent of payment of an outstanding debt. The undertaking really partakes in one sense of the nature of sale, that
is, the creditor is really buying the thing or property of the debtor, payment for which is t o be charged against the
debtors debt. As such the elements of a contract of sale, namely, consent, object certain, and cause or consideration
must be present. In its modern concept, what actually takes place in dacion en pago is an objective novation of the
obligation where the thing offered as an accepted equivalent of the performance of an obligation is considered as the
object of the contract of sale, while the debt is considered the purchase price. In any case, common consent is an
essential prerequisite, be it sale or novation, to have the effect of totally extinguishing the debt or obligation.

Being likened to that of a contract of sale, dacion en pago is governed by the law on sales. The partial execution of a
contract of sale takes the transaction out of the provisions of the Statute of Frauds so long as the essential requisites
of consent of the contracting parties, object and cause of the obligation concur and are clearly established to be
present.
Respondents claim that petitioners commissioning of an appraiser to appraise the value of the mortgaged properties,
his services for which they and petitioner paid, and their delivery to petitioner of the titles to the properties constitute
partial performance of their agreement to take the case out of the provisions on the Statute of Frauds.

There is no concrete showing, however, that after the appraisal of the properties, petitioner approved respondents
proposal to settle their obligation via dacion en pago. The delivery to petitioner of the titles to the properties is a
usual condition sine qua non to the execution of the mortgage, both for security and registration purposes. For if the
title to a property is not delivered to the mortgagee, what will prevent the mortgagor from again encumbering it also
by mortgage or even by sale to a third party.

Finally, that respondents did not deny proposing to redeem the mortgages, as reflected in petitioners June 29, 2001
letter to them, dooms their claim of the existence of a perfected dacion en pago

PAYMENT BY CESSION

1. DBP VS CA AND LYDIA CUBA GR NO. 118342 January 5, 1998

FACTS

Private respondent Lydia Cuba is a grantee of a fishpond lease agreement from the Government. She later obtained a
loan from DBP in the amounts of P109, 000, P109, 000, and P98, 700 under the terms stated in the three promissory
notes. As a security for the said loan Cuba executed a two Deed of Assignment of her Leasehold Rights. Then she
failed to pay her loan when it became due in accordance with the terms of the promis sory notes. DBP in turn
appropriated the leasehold rights of Cuba over the fishpond, without foreclosure proceedings, whether judicial or
extrajudicial. After appropriating the said leasehold rights DBP executed a Deed of Conditional Sale of the
Leasehold Rights in favor of respondent Cuba over the same fishpond, to which Cuba agreed. Respondent Cuba
failed to pay the amortizations stipulated in the Deed of Conditional Sale, however she was able enter with DBP a
temporary arrangement with DBP for the Deferment Notarial Rescission of Deed of Conditional Sale. However, a
Notice of Rescission thru Notarial Act was sent the DBP to Cuba, then it took possession of the fishpond in
question. After it took possession of the said fishpond, DBP disposed the property in favor of Agripina Caperal
through a deed of conditional sale. Then a new fishpond lease agreement was awarded by the Government to
Caperal.

Lydia Cuba filed an action with the Regional Trial Court of Pangasinan for the declaration of nullity of DBP’s
appropriation of her leaseholds over the subject fishpond, for the annulment of the Deed of Conditional Sale
executed in her favor by DBP, the annulment of DBP’s sale of the fishpond to Caperal, and the restoration of her
rights over the said fishpond and for damages. The RTC ruled in favor of Cuba, declaring that DBP’s taking
possession and ownership of the subject property without foreclosure was violative of Art. 2088 of the Civil Code,
and that condition No.12 of the Assignment of the Leasehold Rights was void for being a clear case of
pactumcommissorium.

DBP claims that the was in the nature of a cession under Art. 1255.

Both Cuba and DBP elevated the case to the CA, with Cuba seeking an increase in the amount of damages, while
DBP questioned the findings of fact and law of the RTC. The CA reversed the ruling of the RTC with regards to the
validity of the acts of DBP.
ISSUE:

Whether or not the Assignment of the Leasehold Rights constitute payment by cession under Art. 1255 of the Civil
code.

HELD:

No. The Supreme court held that the assignment did not amount to payment by cession under Article 1255 of the
Civil Code for the plain and simple reason that there was only one creditor, the DBP. Article 1255 contemplates the
existence of two or more creditors and involves the assignment of all the debtors property.

CONTRACT OF AGENCY TO SELL

1. QUIROGA VS PARSONS HARDWARE CO

GR No. L-11491 Aug. 23, 1918 Avancena, J.:

FACTS

On Jan. 4, 1911, petitioner and respondent entered into a contract, in which Don Andres Quiroga grants Parsons
Hardware exclusive rights to sell his beds in the Visayas, furnishing beds of his manufacture for respondent's stores
in Iloilo, with a 25% discount. In his complaint, plaintiff avers that the respondent failed to comply with the
obligation of ordering by the dozen, and other obligations implied in a contract of agency.

ISSUE

Whether or not the contract was of agency or a sale

HELD

It was a contract of sale. None of the words in the contract indicated an agency. The words “commission on sales”
meant nothing more than a discount on the invoice price. 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.
2. KER & CO., LTD. vs. JOSE B. LINGAD, as Acting Commissioner of Internal Revenue G.R. No. L-
20871, April 30, 1971

FERNANDO, J.

FACTS

It was shown that petitioner was assessed by the then Commissioner of Internal Revenue Melecio R. Domingo the
sum of P20,272.33 as the commercial broker's percentage tax, surcharge, and compromise penalty for the period
from July 1, 1949 to December 31, 1953. There was a request on the part of petitioner for the cancellation of such
assessment, which request was turned down. As a result, it filed a petition for review with the Court of Tax Appeals.
In its answer, the then Commissioner Domingo maintained his stand that petitioner should be taxed in such amount
as a commercial broker.

Such liability arose from a contract of petitioner with the United States Rubber International, the former being
referred to as the Distributor and the latter specifically designated as the Company. The contract was to apply to
transactions between the former and petitioner, as Distributor, from July 1, 1948 to continue in force until
terminated by either party giving to the other sixty days' notice.

Then came this crucial stipulation: "The Company shall from time to time consign to the Distributor and the
Distributor will receive, accept and/or hold upon consignment the products specified under the terms of this
agreement in such quantities as in the judgment of the Company may be necessary for the successful solicitation and
maintenance of business in the territory, and the Distributor agrees that responsibility for the final sole of all goods
delivered shall rest with him. All goods on consignment shall remain the property of the Comp any until sold by the
Distributor to the purchaser or purchasers, but all sales made by the Distributor shall be in his name, in which the
sale price of all goods sold less the discount given to the Distributor by the Company in accordance with the
provision of paragraph 13 of this agreement, whether or not such sale price shall have been collected by the
Distributor from the purchaser or purchasers, shall immediately be paid and remitted by the Distributor to the
Company. It is further agreed that this agreement does not constitute Distributor the agent or legal representative 4
of the Company for any purpose whatsoever. Distributor is not granted any right or authority to assume or to create
any obligation or responsibility, express or implied, in behalf of or in the name of the Company, or to bind the
Company in any manner or thing whatsoever." Issue: whether the relationship thus created is one of vendor and
vendee or of broker and principal.

ISSUE:

Whether the relationship thus created is one of vendor and vendee or of broker and principal.

HELD:

Broker-principal. The relationship of Ker and Co and US rubber was that of a principal-broker/ agency. Ker and Co
is only an agent of the US rubber because it can dispose of the products of the Company only to certain persons or
entities and within stipulated limits, unless excepted by the contract or by the Rubber Company, it merely receives,
accepts and/or holds upon consignment the products, which remain properties of the latter company, every effort
shall be made by petitioner to promote in every way the sale of the products and that sales made by petitioner are
subject to approval by the company. Since the company retained ownership of the goods, even as it delivered
possession unto the dealer for resale to customers, the price and terms of which were subject to the company’s
control, the relationship between the company and the dealer is one of agency.
3. LOURDES VALERIO LIM VS PEOPLE GR NO. L-34338 November 21, 1984

FACTS

On January 10, 1966, the Lim went to the house of Maria Ayroso and proposed to sell Ayroso’s tobacco. Ayroso
agreed to the proposition of the ap• pellant to sell her tobacco consisting of 615 kilos at P1.30 a kilo. The appellant
was to receive the overprice for which she could sell the tobacco. An agreement was made that said tobacco was to
be sold by Lim and that the proceed will be given to Ayroso as soon as it was sold. This was signed by the appellant
and witnessed by the complainant’s sister, Salud Bantug, and the latter’s maid, Genoveva Ruiz. Of the total value of
P799.50, the appellant had paid to Ayroso only P240.00, and this was paid on three different times. Demands for the
payment of the balance of the value of the tobacco were made upon the appellant by Ay roso, and particularly by her
sister, Salud Bantug. Although the appellant denied that demands for payment were made upon her, it is a fact that
on October 19, 1966, she wrote a letter to Salud Bantug that she was apologizing for the delay of the giving of
proceeds and that she has some of the money already.

ISSUE

Whether or not Lim’s role constitutes as an agent with respect to Valerio.

HELD

Yes. Aside from the fact that Maria Ayroso testified that the appellant asked her to be her agent in selling Ayros o’s
tobacco, the appellant herself admitted that there was an agreement that upon the sale of the tobacco she would be
given something. The appellant is a businesswoman, and it is, unbelievable that she would go to the extent of going
to Ayroso’s house if she did not intend to make a profit out of the transaction. Certainly, if she was doing a favor to
Maria Ayroso and it was Ayroso who had requested her to sell her tobacco, it would not have been the appellant
who would have gone to the house of Ayroso, but it would have been Ayroso who would have gone to the house of
the appellant and deliver the tobacco to the appellant. The fact that appellant received the tobacco to be sold at P1.30
per kilo and the proceeds to be given to complainant as soon as it was sold, strongly negates transfer of ownership of
the goods to the petitioner.
4. SPS FERNANDO AND LOURDES VILORIA VS CONTINENTAL AIRLINES GR No. 188288
January 16, 2012

FACTS:

On or about July 21, 1997 and while in the United States, Fernando purchased for himself and his wife, Lourdes,
two (2) round trip airline tickets from San Diego, California to Newark, New Jersey on board Continental Airlines.
Fernando purchased the tickets at US$400.00 each from a travel agency called “Holiday Travel” and was attended to
by a certain Margaret Mager (Mager). According to Spouses Viloria, Fernando agreed to buy the said tickets after
Mager informed them that there were no available seats at Amtrak, an intercity passenger train service provider in
the United States.

Fernando opted to request for a refund. Mager, however, denied his request as the subject tickets are non -
refundable and the only option that Continental Airlines can offer is the re-issuance of new tickets. Fernando
decided to reserve two (2) seats with Frontier Air. Upon inquiry in Amtrak, Fernando was told that there are seats
available and he can travel on Amtrak anytime and any day he pleased. Fernando then purchased two (2) tickets for
Washington, D.C. In a letter dated March 24, 1998, Continental Micronesia denied Fernando’s request for a refund
and advised him that he may take the subject tickets to any Continental ticketing location for the re -issuance of new
tickets. Continental Micronesia informed Fernando that the subject tickets may be used as a form of payment for the
purchase of another Continental ticket, albeit with a re-issuance fee. Thereafter, In a letter dated June 21, 1999,
Fernando demanded for the refund of the subject tickets as he no longer wished to have them rep laced. Fernando
claimed that CAI’s acts constitute a breach of its undertaking under its March 24, 1998 letter.

Hence, a complaint was filed against the respondents. Among other things, Fernando asserts that Mager was a sub-
agent of Holiday Travel who was in turn a ticketing agent of Holiday Travel who was in turn a ticketing agent of
Continental Airlines. Proceeding from this premise, they contend that Continental Airlines should be held liable for
the acts of Mager. The Regional Trial Court rendered a judgment in favor of the plaintiff ordering CAI to refund the
money they used to purchase the ticket with legal interest from July 21, 1997 and for damages. On appeal, the Court
of Appeals reversed the lower court’s judgment. CA held that the elements of ag ency are not attendant under the
circumstances stated. It ruled that. “As the basis of agency is representation, there must be, on the part of the
principal, an actual intention to appoint, an intention naturally inferable from the principal’s words or actions. In the
same manner, there must be an intention on the part of the agent to accept the appointment and act upon it. Absent
such mutual intent, there is generally no agency… We have perused the evidence and documents so far presented.
We find nothing except bare allegations of plaintiffs-appellees that Mager/Holiday Travel was acting in behalf of
Continental Airlines. From all sides of legal prism, the transaction in issue was simply a contract of sale, wherein
Holiday Travel buys airline tickets from Continental Airlines and then, through its employees, Mager included, sells
it at a premium to clients.”

ISSUE

Whether or not it is a contract of agency to sell

HELD

Contrary to the findings of the CA, all the elements of an agency exist in this case. That CAI admits the authority of
Holiday Travel to enter into contracts of carriage on its behalf is easily discernible from its February 24, 1998 and
March 24, 1998 letters. Further, the Court held that, “the decisions say the transfer of title or agreement to transfer it
for a price paid or promised is the essence of sale. If such transfer puts the transferee in the attitude or position of an
owner and makes him liable to the transferor as a debtor for the agreed price, and not merely as an agent who must
account for the proceeds of a resale, the transaction is a sale; while the essence of an agency to sell is the delivery to
an agent, not as his property, but as the property of the principal, who remains the owner and has the right to control
sales, fix the price, and terms, demand and receive the proceeds less the agent's commission upon sales made.

CAI is the one bound by the contracts of carriage embodied by the tickets being sold by Holiday Travel on its
behalf. It is undisputed that CAI and not Holiday Travel who is the party to the contracts of carriage executed by
Holiday Travel with third persons who desire to travel via Continental Airlines, and this conclusively indicates the
existence of a principal-agent relationship. That the principal is bound by all the obligations contracted by the agent
within the scope of the authority granted to him is clearly provided under Article 1910 of the Civil Code and this
constitutes the very notion of agency.

CONTRACT FOR A PIECE OF WORK

1. CIR VS ENGINEERING AND SUPPLY CO 64 SCRA 590

FACTS

Engineering Equipment and Supply Co. (Engineering for short), a domestic corporation, is an engineering and
machinery firm. As operator of an integrated engineering shop, it is engaged, among others, in the de sign and
installation of central type air conditioning system. Engineering equipment was accused of tax evasion by
misdeclaring its imported articles and failing to pay the correct percentage tax due. The court of tax appeals ruled
that respondent is as a contractor and not a manufacturer and as such, respondent is declared exempt from
the deficiency manufacturers sales tax covering the period of xxx.

Commissioner of internal revenue appealed.

ISSUE

Whether respondent is a contractor or a manufacturer as would make it liable for manufacturer’s sales tax.

HELD

The arguments of both the Engineering and the Commissioner call for a clarification of the term contractor as well
as the distinction between a contract of sale and contract for furnishing services, labor and materials. The distinction
between a contract of sale and one for work, labor and materials is tested by the inquiry whether the thing
transferred is one not in existence and which never would have existed but for the order of the party desiring to
acquire it, or a thing which would have existed and has been the subject of sale to some other persons even if the
order had not been given.If the article ordered by the purchaser is exactly such as the plaintiff makes and keeps on
hand for sale to anyone, and no change or modification of it is made at defendant's request, it is a contract of sale,
even though it may be entirely made after, and in consequence of, the defendants order for it.

Our New Civil Code, likewise distinguishes a contract of sale from a contract for a piece of work in Art. 1467.The
word "contractor" has come to be used with special reference to a person who, in the pursuit of the independent
business, undertakes to do a specific job or piece of work for other persons, using his own means and methods
without submitting himself to control as to the petty details.The true test of a contractor as was held in the cases of
Luzon Stevedoring Co., vs. Trinidad, 43, Phil. 803, 807-808, and La Carlota Sugar Central vs. Trinidad, 43, Phil.
816, 819, would seem to be that he renders service in the course of an independent occupation, representing the will
of his employer only as to the result of his work, and not as to the means by which it is accomplished.
Respondent, 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.

2. DEL MONTE PHILS VS NAPOLEON ARAGONES GR No. 153033 June 23, 2005

FACTS:

On September 18, 1988, herein petitioner Del Monte Philippines Inc. (DMPI) entered into an “Agreement” with
MEGA-WAFF, represented by “Managing Principal” Edilberto Garcia (Garcia), whereby the latter undertook

“the supply and installation of modular pavement” at DMPI’s condiments warehouse at Cagayan de Oro City within
60 calendar days from signing of the agreement. To source its supply of concrete blocks to be installed on the
pavement of the DMPI warehouse, MEGA -WAFF, as CONTRACTOR represented by Garcia, entered into a
“Supply Agreement” with Dynablock Enterprises, represented by herein respondent Aragones, as SUPPLIER.

After the installation of the pavement in the warehouse, Aragones later on demand from MEGA-WAFFthe full
payment of the concrete blocks on which he failed to collect. Aragones later failed to collect from MEGA -WAFF
the full payment of the concrete blocks. He thus sent DMPI a letter dated March 10, 1989, received

by the latter on March 13, 1989, advising it of MEGA -WAFF’s unpaid obligation and requesting it to earmark and
withhold the amount of P188,652.65 “from [MEGA -WAFF’s] billing” to be paid directly to him “lest Garcia
collects and fails to pay him.”

ISSUE:

Whether or not it was a sale or piece of work.

HELD:

Under Art. 1467 then of the Civil Code which provides:

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.

The Supply Agreement was in the nature of a contract for a piece of work. Following Art. 1729 of the Civil Code
which provides:

ART. 1729. Those who put their labor upon or furnish materials for a piece of work undertaken by the contractor
have an action against the owner up to the amount owing from the latter to the contractor at the time the claim is
made.