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SUBJECT MATTER OF SALE the sum of P6,422; these lots and portions being the ones
needed by the municipal government for the construction of
1. MELLIZA vs CITY OF ILOILO (23 SCRA 477)
avenues, parks and City hall site according the “Arellano plan.”

Facts: Juliana Melliza during her lifetime owned, among other

On 14 January 1938, Melliza sold her remaining interest in Lot
properties, 3 parcels of residential land in Iloilo City (OCT
1214 to Remedios Sian Villanueva (thereafter TCT 18178).
3462).Said parcels of land were known as Lots Nos. 2, 5 and
Remedios in turn on 4 November1946 transferred her rights
1214. The total area of Lot 1214 was 29,073 sq. m. On 27
to said portion of land to Pio Sian Melliza (thereafter TCT
November 1931she donated to the then Municipality of Iloilo,
2492). Annotated at the back of Pio Sian Melliza‟s title
9,000 sq. m. of Lot 1214, to serve as site for the municipal
certificate was the following “that a portion of 10,788 sq. m.
hall. The donation was however revoked by the parties for the
of Lot 1214 now designated as Lots 1412-B-2 and1214-B-3
reason that the area donated was found inadequate to meet
of the subdivision plan belongs to the Municipality of Iloilo as
the requirements of the development plan of the municipality,
per instrument dated 15 November 1932.” On 24 August 1949
the so-called “Arellano Plan.”
the City of Iloilo, which succeeded to the Municipality of Iloilo,

Subsequently, Lot 1214 was divided by Certeza Surveying Co., donated the city hall site together with the building thereon,
Inc. into Lots 1214-A and 1214-B. And still later, Lot 1214-B to the University of the Philippines (Iloilo branch). The site

was further divided into Lots 1214-B-1, Lot 1214-B-2 and donated consisted of Lots 1214-B, 1214-C and 1214-D, with

Lot1214-B-3. As approved by the Bureau of Lands, Lot 1214- a total area of 15,350 sq. m., more or less. Sometime in 1952,

B-1, with 4,562 sq. m., became known as Lot 1214-B; Lot the University of the Philippines enclosed the site donated with
1214-B-2,with 6,653 sq. m., was designated as Lot 1214-C; a wire fence. Pio Sian Melliza thereupon made representations,

and Lot 1214-B-3, with 4,135 sq. m., became Lot 1214-D. On thru his lawyer, with the city authorities for payment of the

15 November1932, Juliana Melliza executed an instrument value of the lot (Lot 1214-B). No recovery was obtained,

without any caption providing for the absolute sale involving because as alleged by Pio Sian Melliza, the City did not have

all of lot 5, 7669 sq.m. of Lot 2 (sublots 2-B and 2-C), and a funds. The University of the Philippines, meanwhile, obtained

portion of 10,788 sq. m. of Lot 1214 (sublots 1214-B2 and Transfer Certificate of Title No. 7152 covering the three lots,

1214-B3) in favor of the Municipal Government of Iloilo for Nos. 1214-B,1214-C and 1214-D.On 10 December 1955 Pio
Sian Melizza filed an action in the CFI Iloilo against Iloilo City

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and the University of the Philippines for recovery of Lot 1214-
B or of its value. After stipulation of facts and trial, the CFI
rendered its decision on 15 August 1957, dismissing the
complaint. Said court ruled that the instrument executed by
Juliana Melliza in favor of Iloilo municipality included in the
conveyance Lot 1214-B, and thus it held that Iloilo City had
the right to donate Lot 1214-B to UP. Pio Sian Melliza
appealed to the Court of Appeals. On 19 May 1965, the CA
affirmed the interpretation of the CFI that the portion of Lot
1214 sold by Juliana Melliza was not limited to the 10,788
square meters specifically mentioned but included whatever
was needed for the construction of avenues, parks and the city
hall site. Nonetheless, it ordered the remand of the case for
reception of evidence to determine the area actually taken by
Iloilo City for the construction of avenues, parks and for city
hall site. Hence, the appeal by Pio San Melliza to the Supreme
Court.
One of his causes of action was that the contract of sale
executed between Melliza and the Mun. referred only to lots
1214-C and 1214-D and it is unwarranted to include lot
1214-B as being included under the description therein
because that would mean that the object of the contract of
sale would be indeterminate. One of the essential
requirements for a contract of sale is that it should have for its
object a determinate thing.
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HELD: The paramount intention of the parties was to provide
Iloilo municipality with lots sufficient or adequate in area for
the construction of the Iloilo City hall site, with its avenues
and parks. For this matter, a previous donation for this
purpose between the same parties was revoked by them,
because of inadequacy of the area of the lot donated. Said
instrument described 4parcels of land by their lot numbers
and area; and then it goes on to further describe, not only
those lots already mentioned, but the lots object of the sale,
by stating that said lots were the ones needed for the
construction of the city hall site, avenues and parks according
to the Arellano plan. If the parties intended merely to cover
the specified lots (Lots 2, 5, 1214-C and 1214-D), there
would scarcely have been any need for the next paragraph,
since these lots were already plainly and very clearly described
by their respective lot number and areas. Said next paragraph
does not really add to the clear description that was already
given to them in the previous one. It is therefore the more
reasonable interpretation to view it as describing those other
portions of land contiguous to the lots that, by reference to
the Arellano plan, will be found needed for the purpose at
hand, the construction of the city hall site.
The requirement of the law that a sale must have for its object
a determinate thing, is fulfilled as long as, at the time the
contract is entered into, the object of the sale is capable of
being made determinate without the necessity of a new or
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further agreement between the parties (Art. 1273, old Civil judgment for the P3,000 and the additional P1,200. Judgment
Code; Art. 1460, New Civil Code). The specific mention of was rendered for P3,000 only, and from this judgment both
some of the lots plus the statement that the lots object of the parties appealed.
sale are the ones needed for city hall site; avenues and parks,
Defendant alleges that the court erred in refusing to permit
according to the Arellano plan, sufficiently provides a basis, as
parol evidence showing that the parties intended that the
of the time of the execution of the contract, for rendering
sugar was to be secured from the crop which the defendant
determinate said lots without the need of a new and further
raised on his plantation, and that he was unable to fulfill the
agreement of the parties.
contract by reason of the almost total failure of his crop.
The Supreme Court affirmed the decision appealed from
The second contention of the defendant arises from the first.
insofar as it affirms that of the CFI, and dismissed the
He assumes that the contract was limited to the sugar he
complaint; without costs
might raise upon his own plantation; that the contract
2. YU TEK vs GONZALES (29 Phil 384) represented a perfected sale; and that by failure of his crop he
was relieved from complying with his undertaking by loss of
FACTS: A written contract was executed between Basilio
the thing due. (Arts. 1452, 1096, and 1182, Civil Code.)
Gonzalez and Yu Tek and Co., where Gonzales was obligated
to deliver600 piculs of sugar of the 1st and 2nd grade to Yu ISSUES: 1) Whether compliance of the obligation to deliver
Tek, within the period of 3 months (1 January-31 March 1912) depends upon the production in defendant‟s plantation
at any place within the municipality of Sta. Rosa, which Yu Tek
2) Whether there is a perfected sale
& Co. or its representative may designate; and in case,
Gonzales does not deliver, the contract will be rescinded and 3) Whether liquidated damages of P1,200 should be awarded
Gonzales shall be obligated to return the P3,000 received and to the plaintiff
also the sum of P1,200by way of indemnity for loss and
HELD: 1) The case appears to be one to which the rule which
damages. No sugar had been delivered to Yu Tek & Co. under
excludes parol evidence to add to or vary the terms of a
this contract nor had it been able to recover the P3,000. Yu
written contract is decidedly applicable. There is not the
Tek & Co. filed a complaint against Gonzales, and prayed for
slightest intimation in the contract that the sugar was to be

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raised by the defendant. Parties are presumed to have reduced
to writing all the essential conditions of their contract. While
parol evidence is admissible in a variety of ways to explain the
meaning of written contracts, it cannot serve the purpose of
incorporating into the contract additional contemporaneous
conditions which are not mentioned at all in the writing,
unless there has been fraud or mistake. It may be true that
defendant owned a plantation and expected to raise the sugar
himself, but he did not limit his obligation to his own crop of
sugar. Our conclusion is that the condition which the
defendant seeks to add to the contract by parol evidence
cannot be considered. The rights of the parties must be
determined by the writing itself.
2) Article 1450 defines a perfected sale as follows: “The sale
shall be perfected between vendor and vendee and shall be
binding on both of them, if they have agreed upon the thing
which is the object of the contract and upon the price, even
when neither has been delivered.” Article 1452 provides that
“the injury to or the profit of the thing sold shall, after the
contract has been perfected, be governed by the provisions of
articles 1096 and 1182.” There is a perfected sale with regard
to the “thing” whenever the article of sale has been physically
segregated from all other articles
In McCullough vs. Aenlle & Co. (3 Phil 285), a particular
tobacco factory with its contents was held sold under a
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contract which did not provide for either delivery of the price
or of the thing until a future time. In Barretto vs. Santa Marina
(26 Phil 200),specified shares of stock in a tobacco factory
were held sold by a contract which deferred delivery of both
the price and the stock until the latter had been appraised by
an inventory of the entire assets of the company. In Borromeo
vs. Franco (5 Phil.Rep., 49) a sale of a specific house was held
perfected between the vendor and vendee, although the
delivery of the price was withheld until the necessary
documents of ownership were prepared by the vendee. In Tan
Leonco vs. Go Inqui (8 Phil. Rep.,531) the plaintiff had
delivered a quantity of hemp into the warehouse of the
defendant. The defendant drew a bill of exchange in the sum
of P800, representing the price which had been agreed upon
for the hemp thus delivered. Prior to the presentation of the
bill for payment, in said case, the hemp was destroyed.
Whereupon, the defendant suspended payment of the bill. It
was held that the hemp having been already delivered, the title
had passed and the loss was the vendee‟s. It is our purpose to
distinguish the case at bar from all these cases.
The contract in the present case was merely an executory
agreement; a promise of sale and not a sale. As there was no
perfected sale, it is clear that articles 1452, 1096, and 1182
are not applicable. The agreement upon the “thing” which was
the object of the contract was not within the meaning of
article 1450. Sugar is one of the staple commodities of this
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country. For the purpose of sale its bulk is weighed, the
customary unit of weight being denominated a „‟picul.'‟ There
was no delivery under the contract. If called upon to designate
the article sold, it is clear that Gonzales could only say that it
was “sugar.” He could only use this generic name for the thing
sold. There was no “appropriation” of any particular lot of
sugar. Neither party could point to any specific quantity of
sugar.
The contract in the present case is different from the contracts
discussed in the cases referred to. In the McCullough case, for
instance, the tobacco factory which the parties dealt with was
specifically pointed out and distinguished from all other
tobacco factories. So, in the Barretto case, the particular
shares of stock which the parties desired to transfer were
capable of designation. In the Tan Leonco case, where a
quantity of hemp was the subject of the contract, it was shown
that quantity had been deposited in a specific warehouse, and
thus set apart and distinguished from all other hemp
The Supreme Court affirmed the judgment appealed from with
the modification allowing the recovery of P1,200 under
paragraph 4 of the contract, without costs
3. NATONAL GRAINS AUTHORITY vs IAC
FACTS: National Grains Authority (now National Food
Authority, NFA) is a government agency created under PD 4.
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One of its incidental functions is the buying of palay grains
from qualified farmers. On 23 August 1979, Leon Soriano
offered to sell palay grains to the NFA, through the Provincial
Manager (William Cabal) of NFA in Tuguegarao, Cagayan. He
submitted the documents required by the NFA for pre-
qualifying as a seller, which were processed and accordingly,
he was given a quota of 2,640 cavans of palay. The quota
noted in the Farmer‟s Information Sheet represented the
maximum number of cavans of palay that Soriano may sell to
the NFA. On 23 and 24 August 1979, Soriano delivered 630
cavans of palay. The palay delivered were not rebagged,
classified and weighed. When Soriano demanded payment of
the 630 cavans of palay, he was informed that its payment will
beheld in abeyance since Mr. Cabal was still investigating on
an information he received that Soriano was not a bona fide
farmer and the palay delivered by him was not produced from
his farmland but was taken from the warehouse of a rice
trader, Ben de Guzman. On 28 August 1979, Cabal wrote
Soriano advising him to withdraw from the NFA warehouse the
630 cavans stating that NFA cannot legally accept the said
delivery on the basis of the subsequent certification of the
BAEX technician (Napoleon Callangan) that Soriano is not a
bona fide farmer.
Instead of withdrawing the 630 cavans of palay, Soriano
insisted that the palay grains delivered be paid. He then filed a
complaint for specific performance and/or collection of money
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with damages on 2 November 1979, against the NFA and between the parties. The object of the contract, being the
William Cabal (Civil Case 2754). Meanwhile, by agreement of palay grains produced in Soriano's farmland and the NFA was
the parties and upon order of the trial court, the 630 cavans of to pay the same depending upon its quality.
palay in question were withdrawn from the warehouse of NFA.
The fact that the exact number of cavans of palay to be
On 30 September 1982, the trial court found Soriano a bona
delivered has not been determined does not affect the
fide farmer and rendered judgment ordering the NFA, its
perfection of the contract. Article 1349 of the New Civil Code
officers and agents to pay Soriano the amount of P47,250.00
provides: ".The fact that the quantity is not determinate shall
representing the unpaid price of the 630 cavans of palay plus
not be an obstacle to the existence of the contract, provided it
legal interest thereof (12% per annum, from the filing of
is possible to determine the same, without the need of a new
complaint on 20 November1979 until fully paid). NFA and
contract between the parties." In this case, there was no need
Cabal filed a motion for reconsideration, which was denied by
for NFA and Soriano to enter into a new contract to determine
the court on 6 December 1982.Appeal was filed with the
the exact number of cavans of palay to be sold. Soriano can
Intermediate Appellate Court. On 23 December 1986, the then
deliver so much of his produce as long as it does not exceed
IAC upheld the findings of the trialc ourt and affirmed the
2,640 cavans. From the moment the contract of sale is
decision ordering NFA and its officers to pay Soriano the price
perfected, it is incumbent upon the parties to comply with
of the 630 cavans of rice plus interest. Themotion for
their mutual obligations or "the parties may reciprocally
reconsideration of the appellate court‟s decision was denied in
demand performance" thereof.
a resolution dated 17 April 1986. Hence, the present petition
for review with the sole issue of whether or not there was a The Supreme Court dismissed the instant petition for review,
contract of sale in the present case. and affirmed the assailed decision of the then IAC (now Court
of Appeals) is affirmed; without costs.
ISSUE: Whether there was a perfected sale

4. SCHUBACK & SONS vs. CA

HELD: Soriano initially offered to sell palay grains produced in
his farmland to NFA. When the latter accepted the offer by FACTS: In 1981, Ramon San Jose (Philippine SJ Industrial
noting in Soriano's Farmer's Information Sheet a quota of Trading) established contact with Johannes Schuback & Sons
2,640 cavans, there was already a meeting of the minds Philippine Trading Corporation through the Philippine

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Consulate General in Hamburg, West Germany, because he immediately ordered the items needed by San Jose from
wanted to purchase MAN bus spare parts from Germany. Schuback Hamburg. Schuback Hamburg in turn ordered the
Schuback communicated with its trading partner, Johannes items from NDK, a supplier of MAN spare parts in West
Schuback and Sohne Handelsgesellschaft m.b.n. & Co. Germany.
(Schuback Hamburg) regarding the spare parts San Jose
On 4 January 1982, Schuback Hamburg sent Schuback a
wanted to order. On 16 October 1981,San Jose submitted to
proforma invoice to be used by San Jose in applying for a
Schuback a list of the parts he wanted to purchase with
letter of credit. Said invoice required that the letter of credit be
specific part numbers and description. Schuback referred the
opened in favor of Schuback Hamburg. San Jose acknowledged
list to Schuback Hamburg for quotations. Upon receipt of the
receipt of the invoice. An order confirmation was later sent by
quotations, Schuback sent to San Jose a letter dated25
Schuback Hamburg to Schuback which was forwarded to and
November 1981 enclosing its offer on the items listed. On 4
received by San Jose on 3 February 1981. On 16 February
December 1981, San Jose informed Schuback that he
1982, Schuback reminded San Jose to open the letter of credit
preferred genuine to replacement parts, and requested that he
to avoid delay in shipment and payment of interest. In the
be given a 15% discount on all items. On 17 December 1981,
meantime, Schuback Hamburg received invoices from NDK for
Schuback submitted its formal offer containing the item
partial deliveries on Order 12204. On 16 February 1984,
number, quantity, part number, description, unit price and
Schuback Hamburg paid NDK. On 18 October 1982, Schuback
total to San Jose. On24 December 1981, San Jose informed
again reminded San Jose of his order and advised that the case
Schuback of his desire to avail of the prices of the parts at that
may be endorsed to its lawyers. San Jose replied that he did
time and enclosed its Purchase Order 0101 dated 14
not make any valid PO and that there was no definite contract
December 1981. On 29 December 1981, San Jose personally
between him and Schuback. Schuback sent a rejoinder
submitted the quantities he wanted to Mr. Dieter Reichert,
explaining that there is a valid PO and suggesting that San
General Manager of Schuback, at the latter‟s residence. The
Jose either proceed with the order and open a letter of credit
quantities were written in ink by San Jose in the same PO
or cancel the order and pay the cancellation fee of 30% F.O.B.
previously submitted. At the bottom of said PO, San Jose wrote
value, or Schuback will endorse the case to its lawyers.
in ink above his signature: “NOTE: Above PO will include a 3%
Schuback Hamburg issued a Statement of Account to
discount. The above will serve as our initial PO.” Schuback

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Schuback enclosing therewith Debit Note charging Schuback
30% cancellation fee, storage and interest charges in the total
amount of DM 51,917.81. Said amount was deducted from
Schuback‟s account with Schuback Hamburg. Demand letters
sent to San Jose by Schuback‟s counsel dated 22 March 1983
and 9J une 1983 were to no avail.
Schuback filed a complaint for recovery of actual or
compensatory damages, unearned profits, interest, attorney‟s
fees and costs against San Jose. In its decision dated 13 June
1988, the trial court ruled in favor of Schuback by ordering
San Jose to pay it, among others, actual compensatory
damages in the amount of DM 51,917.81, unearned profits in
the amount of DM14,061.07, or their peso equivalent. San
Jose elevated his case before the Court of Appeals. On 18
February 1992, the appellate court reversed the decision of
the trial court and dismissed Schuback‟s complaint. It ruled
that there was no perfection of contract since there was no
meeting of the minds as to the price between the last week of
December 1981 and the first week of January 1982. Hence,
the petition for review on certiorari.
ISSUE: Whether or not a contract of sale has been perfected
between the parties
HELD: Article 1319 of the Civil Code states: "Consent is
manifested by the meeting of the offer and acceptance upon
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the thing and the cause which are to constitute the contract.
The offer must be certain and the acceptance absolute. A
qualified acceptance constitutes a counter offer." The facts
presented to us indicate that consent on both sides has been
manifested. The offer by petitioner was manifested on
December 17, 1981 when petitioner submitted its proposal
containing the item number, quantity, part number,
description, the unit price and total to private respondent. On
December 24, 1981, private respondent informed petitioner of
his desire to avail of the prices of the parts at that time and
simultaneously enclosed its Purchase Order. At this stage, a
meeting of the minds between vendor and vendee has
occurred, the object of the contract: being the spare parts and
the consideration, the price stated in petitioner's offer dated
December 17, 1981 and accepted by the respondent on
December 24, 1981.
Although the quantity to be ordered was made determinate
only on 29 December 1981, quantity is immaterial in the
perfection of a sales contract. What is of importance is the
meeting of the minds as to the object and cause, which from
the facts disclosed, show that as of 24 December 1981, these
essential elements had already concurred. Thus, perfection of
the contract took place, not on 29 December 1981, but rather
on 24 December 1981.
5. NOOL vs CA
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FACTS: One lot formerly owned by Victorio Nool (TCT T-
74950) has an area of 1 hectare. Another lot previously owned
byF rancisco Nool (TCT T-100945) has an area of 3.0880
hectares. Both parcels are situated in San Manuel, Isabela.
Spouses Conchita Nool and Gaudencio Almojera (plaintiffs)
alleged that they are the owners of the subject land as they
bought the same from Victorio and Francisco Nool, and that as
they are in dire need of money, they obtained a loan from the
Ilagan Branch of the DBP (Ilagan, Isabela), secured by a real
estate mortgage on said parcels of land, which were still
registered in the names of Victorino and Francisco Nool, at the
time, and for the failure of the plaintiffs to pay the said loan,
including interest and surcharges, totaling P56,000.00, the
mortgage was foreclosed; that within the period of
redemption, the plaintiffs contacted Anacleto Nool for the
latter to redeem the foreclosed properties from DBP, which the
latter did; and as a result, the titles of the2 parcels of land in
question were transferred to Anacleto; that as part of their
arrangement or understanding, Anacleto agreed to buy from
Conchita the 2 parcels of land under controversy, for a total
price of P100,000.00, P30,000.00 of which price was paid to
Conchita, and upon payment of the balance of P14,000.00,
the plaintiffs were to regain possession of the 2 hectares of
land, which amounts spouses Anacleto Nool and Emilia Nebre
(defendants) failed to pay, and the same day the said
arrangement was made; another covenant was entered into by
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the parties, whereby the defendants agreed to return to
plaintiffs the lands in question, at anytime the latter have the
necessary amount; that latter asked the defendants to return
the same but despite the intervention of the Barangay Captain
of their place, defendants refused to return the said parcels of
land to plaintiffs; thereby impelling the plaintiffs to come to
court for relief. On the other hand, defendants theorized that
they acquired the lands in question from the DBP, through
negotiated sale, and were misled by plaintiffs when defendant
Anacleto Nool signed the private writing, agreeing to return
subject lands when plaintiffs have the money to redeem the
same; defendant Anacleto having been made to believe, then,
that his sister, Conchita, still had the right to redeem the said
properties
It should be stressed that Manuel S. Mallorca, authorized
officer of DBP, certified that the 1-year redemption period
(from 16March 1982 up to 15 March 1983) and that the
mortgagors‟ right of redemption was not exercised within this
period. Hence, DBP became the absolute owner of said parcels
of land for which it was issued new certificates of title, both
entered on 23 May1983 by the Registry of Deeds for the
Province of Isabela. About 2 years thereafter, on 1 April 1985,
DBP entered into a Deed of Conditional Sale involving the
same parcels of land with Anacleto Nool as vendee.
Subsequently, the latter was issued new certificates of title on
8 February 1988.
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The trial court ruled in favor of the defendants, declaring the
private writing to be an option to sell, not binding and
considered validly withdrawn by the defendants for want of
consideration; ordering the plaintiffs to return to the
defendants the sum of P30,000.00 plus interest thereon at the
legal rate, from the time of filing of defendants‟ counterclaim
until the same is fully paid; to deliver peaceful possession of
the 2 hectares; and to pay reasonable rents on said 2 hectares
at P5,000.00 per annum or at P2,500.00 per cropping from
the time of judicial demand until the said lots shall have been
delivered to the defendants; and to pay the costs. The
plaintiffs appealed to the Court of Appeals (CA GR CV 36473),
which affirmed the appealed judgment intoto on 20 January
1993. Hence, the petition before the Supreme Court.
ISSUE: Whether the Contract of Repurchase is valid.
HELD: Nono dat quod non habet, No one can give what he
does not have; Contract of repurchase inoperative thus void.
A contract of repurchase arising out of a contract of sale
where the seller did not have any title to the property “sold” is
not valid. Since nothing was sold, then there is also nothing to
repurchase.
Article 1505 of the Civil Code provides that “where goods are
sold by a person who is not the owner thereof, and who does
not sell them under authority or with consent of the owner,
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the buyer acquires no better title to the goods than the seller
had, unless the owner of the goods is by his conduct
precluded from denying the seller‟s authority to sell.”
Jurisprudence, on the other hand, teaches us that “a person
can sell only what he owns or is authorized to sell; the buyer
can as a consequence acquire no more than what the seller
can legally transfer.” No one can give what he does not have —
nono dat quod non habet.
In the present case, there is no allegation at all that petitioners
were authorized by DBP to sell the property to the private
respondents. Further, the contract of repurchase that the
parties entered into presupposes that petitioners could
repurchase the property that they “sold” to private
respondents. As petitioners “sold” nothing, it follows that they
can also “repurchase” nothing. In this light, the contract of
repurchase is also inoperative and by the same analogy, void.
The Supreme Court denied the petition, and affirmed the
assailed decision of the Court of Appeals
6. VILLAFLOR vs CA
FACTS: On 16 January 1940, Cirilo Piencenaves, in a Deed of
Absolute Sale, sold to Vicente Villafor, a parcel of agricultural
land (planted to Abaca) containing an area of 50 hectares,
more or less. The deed states that the land was sold to
Villaflor on 22 June1937, but no formal document was then
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executed, and since then until the present time, Villaflor has property of the lessor at the end of the lease without
been in possession and occupation of the same. Before the obligation on the part of the latter for expenses incurred in
sale of said property, Piencenaves inherited said property form the construction of the same.
his parents and was in adverse possession of such without
On 7 July 1948, in an “Agreement to Sell” Villaflor conveyed to
interruption for more than 50 years. On the same day, Claudio
Nasipit Lumber, 2 parcels of land. Parcel 1 contains an area of
Otero, in a Deed of Absolute Sale sold to Villaflor a parcel of
112,000 hectares more or less, divided into lots 5412, 5413,
agricultural land (planted to corn), containing an area of 24
5488, 5490,5491, 5492, 5850, 5849, 5860, 5855, 5851,
hectares, more or less; Hermogenes Patete, in a Deed of
5854, 5855, 5859, 5858, 5857, 5853, and 5852; and
Absolute Sale sold to Villaflor, a parcel of agricultural land
containing abaca, fruit trees, coconuts and thirty houses of
(planted to abaca and corn), containing an area of 20 hectares,
mixed materials belonging to the Nasipit Lumber Company.
more or less. Both deed state the same details or
Parcel 2 contains an area of 48,000more or less, divided into
circumstances as that of Piencenaves‟. On 15 February 1940,
lots 5411, 5410, 5409, and 5399, and containing 100 coconut
Fermin Bocobo, in a Deed of Absolute Sale sold to Villaflor, a
trees, productive, and 300 cacao trees. From said day, the
parcel of agricultural land (planted with abaca), containing an
parties agreed that Nasipit Lumber shall continue to occupy
area of 18 hectares, more or less.
the property not anymore in concept of lessee but as
On 8 November 1946, Villaflor leased to Nasipit Lumber Co., prospective owners.
Inc. a parcel of land, containing an area of 2 hectares,
On 2 December 1948, Villaflor filed Sales Application V-807
together with all the improvements existing thereon, for a
with the Bureau of Lands, Manila, to purchase under the
period of 5 years (from 1 June 1946) at a rental of P200.00 per
provisions of Chapter V, XI or IX of CA 141 (The Public Lands
annum to cover the annual rental of house and building sites
Act), as amended, the tract of public lands. Paragraph 6 of the
for 33 houses or buildings. The lease agreement allowed the
Application, states: „I understand that this application conveys
lessee to sublease the premises to any person, firm or
no right to occupy the land prior to its approval, and I
corporation; and to build and construct additional houses with
recognize that the land covered by the same is of public
the condition the lessee shall pay to the lessor the amount of
domain and any and all rights I may have with respect thereto
50 centavos per month for every house and building; provided
that said constructions and improvements become the

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by virtue of continuous occupation and cultivation are hereby
relinquished to the Government.
On 7 December 1948, Villaflor and Nasipit Lumber executed
an “Agreement,” confirming the Agreement to Sell of 7 July
1948, but with reference to the Sales Application filed with the
Bureau of Land. On 31 December 1949, the Report by the
public land inspector (District Land Office, Bureau of Lands, in
Butuan) contained an endorsement of the said officer
recommending rejection of the Sales Application of Villaflor
for having leased the property to another even before he had
acquired transmissible rights thereto. In a letter of Villaflor
dated 23 January1950, addressed to the Bureau of Lands, he
informed the Bureau Director that he was already occupying
the property when the Bureau‟s Agusan River Valley
Subdivision Project was inaugurated, that the property was
formerly claimed as private property, and that therefore, the
property was segregated or excluded from disposition
because of the claim of private ownership. Likewise, in a letter
of Nasipit Lumber dated 22 February 1950 addressed to the
Director of Lands, the corporation informed the Bureau that it
recognized Villaflor as the real owner, claimant and occupant
of the land; that since June 1946, Villaflor leased 2hectares
inside the land to the company; that it has no other interest on
the land; and that the Sales Application of Villaflor should be
given favorable consideration.
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SALES
On 24 July 1950, the scheduled date of auction of the property
covered by the Sales Application, Nasipit Lumber offered the
highest bid of P41.00 per hectare, but since an applicant
under CA 141, is allowed to equal the bid of the highest
bidder, Villaflor tendered an equal bid, deposited the
equivalent of 10% of the bid price and then paid the
assessment in full.
On 16 August 1950, Villaflor executed a document,
denominated as a “Deed of Relinquishment of Rights,” in favor
on Nasipit Lumber, in consideration of the amount of P5,000
that was to be reimbursed to the former representing part of
the purchase price of the land, the value of the improvements
Villaflor introduced thereon, and the expenses incurred in the
publication of the Notice of Sale; in light of his difficulty to
develop the same as Villaflor has moved to Manila. Pursuant
thereto, on 16 August1950, Nasipit Lumber filed a Sales
Application over the 2 parcels of land, covering an area of 140
hectares, more or less. This application was also numbered V-
807. On 17 August 1950 the Director of Lands issued an
“Order of Award” in favor of Nasipit Lumber; and its
application was entered in the record as Sales Entry V-407.On
27 November 1973, Villafor wrote a letter to Nasipit Lumber,
reminding the latter of their verbal agreement in 1955; but the
new set of corporate officers refused to recognize Villaflor‟s
claim.
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In a formal protest dated 31 January 1974 which Villaflor filed
with the Bureau of Lands, he protested the Sales Application of
Nasipit Lumber, claiming that the company has not paid him
P5,000.00 as provided in the Deed of Relinquishment of
Rights dated 16 August 1950. On 8 August 1977, the Director
of Lands found that the payment of the amount of P5,000.00
in the Deed and the consideration in the Agreement to Sell
were duly proven, and ordered the dismissal of Villaflor‟s
protest.
On 6 July 1978, Villaflor filed a complaint in the trial court for
“Declaration of Nullity of Contract (Deed of Relinquishment of
Rights), Recovery of Possession (of two parcels of land subject
of the contract), and Damages” at about the same time that he
appealed the decision of the Minister of Natural Resources to
the Office of the President. On 28 January 1983, he died. The
trial court ordered his widow, Lourdes D. Villaflor, to be
substituted as petitioner. After trial in due course, the then CFI
Agusan del Norte and Butuan City, Branch III, dismissed the
complaint on the grounds that: (1) petitioner admitted the due
execution and genuineness of the contract and was estopped
from proving its nullity, (2) the verbal lease agreements were
unenforceable under Article 1403 (2)(e) of the Civil Code, and
(3) his causes of action were barred by extinctive prescription
and/or laches. It ruled that there was prescription and/or
laches because the alleged verbal lease ended in 1966, but the
action was filed only on 6 January 1978. The 6-year period
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within which to file an action on an oral contract per Article
1145 (1) of the Civil Code expired in 1972. Nasipit Lumber
was declared the lawful owner and actual physical possessor
of the 2 parcels of land (containing a total area of 160
hectares). The Agreements to Sell Real Rights and the Deed of
Relinquishment of Rights over the 2 parcels were likewise
declared binding between the parties, their successors and
assigns; with double costs against Villaflor. The heirs of
petitioner appealed to the Court of Appeals which, however,
rendered judgment against them via the assailed Decision
dated 27 September 1990 finding petitioner‟s prayers —(1) for
the declaration of nullity of the deed of relinquishment, (2) for
the eviction of private respondent from the property and (3)
for the declaration of petitioner‟s heirs as owners —to be
without basis.
Not satisfied, petitioner‟s heirs filed the petition for review
dated 7 December 1990. In a Resolution dated 23 June 1991,
the Court denied this petition “for being late.” On
reconsideration, the Court reinstated the petition.
ISSUE: Whether the sale is valid or void for the alleged
existence of simulation of contract
HELD: The provision of the law is specific that public lands
can only be acquired in the manner provided for therein and
not otherwise(Sec. 11, CA. No. 141, as amended). In his sales
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application, petitioner expressly admitted that said property not own the land and that the same is a public land under the
was public land. This is formidable evidence as it amounts to administration of the Bureau of Lands, to which the
an admission against interest. The records show that Villaflor application was submitted, all of its acts prior thereof,
had applied for the purchase of lands in question with this including its real estate tax declarations, characterized its
Office (Sales Application V-807) on 2 December 948. There is possessions of the land as that of a “sales applicant”. And
a condition in the sales application to the effect that he consequently, as one who expects to buy it, but has not as yet
recognizes that the land covered by the same is of public done so, and is not, therefore, its owner.
domain and any and all rights he may have with respect
The rule on the interpretation of contracts (Article 1371) is
thereto by virtue of continuous occupation and cultivation are
used in affirming, not negating, their validity. Article 1373,
relinquished to the Government of which Villaflor is very much
which is a conjunct of Article 1371, provides that, if the
aware. It also appears that Villaflor had paid for the
instrument is susceptible of two or more interpretations, the
publication fees appurtenant to the sale of the land. He
interpretation which will make it valid and effectual should be
participated in the public auction where he was declared the
adopted. In this light, it is not difficult to understand that the
successful bidder. He had fully paid the purchase price
legal basis urged by petitioner does not support his allegation
thereof. It would be a height of absurdity for Villaflor to be
that the contracts to sell and the deed of relinquishment are
buying that which is owned by him if his claim of private
simulated and fictitious.
ownership thereof is to be believed. The area in dispute is not
the private property of the petitioner. Simulation occurs when an apparent contract is a declaration
of a fictitious will, deliberately made by agreement of the
It is a basic assumption of public policy that lands of whatever
parties, in order to produce, for the purpose of deception, the
classification belong to the state. Unless alienated in
appearance of a juridical act which does not exist or is
accordance with law, it retains its rights over the same as
different from that which was really executed. Such an
dominus. No public land can be acquired by private persons
intention is not apparent in the agreements. The intent to sell,
without any grant, express or implied from the government. It
on the other hand, is as clear as daylight. The fact, that the
is indispensable then that there be showing of title from the
agreement to sell (7 December 1948) did not absolutely
state or any other mode of acquisition recognized by law. s
transfer ownership of the land to private respondent, does not
such sales applicant manifestly acknowledged that he does

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show that the agreement was simulated. Petitioner‟s delivery
of the Certificate of Ownership and execution of the deed of
absolute sale were suspensive conditions, which gave rise to a
corresponding obligation on the part of the private
respondent, i.e., the payment of the last installment of the
consideration mentioned in the Agreement. Such conditions
did not affect the perfection of the contract or prove
simulation
Nonpayment, at most, gives the vendor only the right to sue
for collection. Generally, in a contract of sale, payment of the
price is a resolutory condition and the remedy of the seller is
to exact fulfillment or, in case of a substantial breach, to
rescind the contract under Article 1191 of the Civil Code.
However, failure to pay is not even a breach, but merely an
event which prevents the vendor‟s obligation to convey title
from acquiring binding force.
T he requirements for a sales application under the Public
Land Act are: (1) the possession of the qualifications required
by said Act (under Section 29) and (2) the lack of the
disqualifications mentioned therein (under Sections 121, 122,
and 123). Section121 of the Act pertains to acquisitions of
public land by a corporation from a grantee: The private
respondent, not the petitioner, was the direct grantee of the
disputed land. Sections 122 and 123 disqualify corporations,
which are not authorized by their charter, from acquiring
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public land; the records do not show that private respondent
was not so authorized under its charter
The Supreme Court dismissed the petition.
PRICE
7. LOYOLA vs CA
FACTS: A parcel of land (Lot 115-A-1 of subdivision plan
[LRC] Psd-32117, a portion of Lot 115-A described on Plan
Psd-55228, LRC[GLRO] Record 8374, located in Poblacion,
Binan, Laguna, and containing 753 sq.m., TCT T-32007) was
originally owned in common by the siblings Mariano and
Gaudencia Zarraga, who inherited it from their father. Mariano
predeceased his sister who died single, without offspring on 5
August 1983, at the age of 97. Victorina Zarraga vda. de
Loyola and Cecilia Zarraga, are sisters of Gaudencia and
Mariano. The property was subject of Civil Case B-1094 before
the then CFI Laguna (Branch 1, Spouses Romualdo Zarraga, et
al. v .Gaudencia Zarraga, et al.). Romualdo Zarraga was the
plaintiff in Civil Case B-1094. The defendants were his
siblings: Nieves, Romana, Guillermo, Purificacion, Angeles,
Roberto, Estrella, and Jose, all surnamed Zarraga, as well as
his aunt, Gaudencia. The trial court decided Civil Case B-1094
in favor of the defendants. Gaudencia was adjudged owner of
the 1/2 portion of Lot 115-A-1. Romualdo elevated the
decision to the Court of Appeals and later the Supreme Court.
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The petition (GR 59529) was denied by the Court on 17 March
1982.On 24 August 1980, nearly 3 years before the death of
Gaudencia while GR 59529 was still pending before the
Supreme Court.
On said date, Gaudencia allegedly sold to the children of
Mariano Zarraga (Nieves, Romana, Romualdo, Guillermo,
Lucia, Purificacion, Angeles, Roberto, Estrella Zarraga) and the
heirs of Jose Zarraga Aurora, Marita, Jose, Ronaldo, Victor,
Lauriano,and Ariel Zarraga; first cousins of the Loyolas) her
share in Lot 115-A- 1 for P34,000.00. The sale was evidenced
by a notarizeddocument denominated as “Bilihang Tuluyan ng
Kalahati (1/2) ng Isang Lagay na Lupa.” Romualdo, the
petitioner in GR 59529, was among the vendees.The decision
in Civil Case B-1094 became final. The children of Mariano
Zarraga and the heirs of Jose Zarraga (privaterespondents)
filed a motion for execution.
On 16 February 1984, the sheriff executed the corresponding
deed of reconveyance to Gaudencia. On 23 July 1984,
however, the Register of Deeds of Laguna, Calamba Branch,
issued in favor of private respondents, TCT T-116067, on the
basis of the sale on 24 August 1980 by Gaudencia to them. On
31 January 1985, Victorina and Cecilia filed a complaint,
docketed as Civil Case B-2194, with the RTC of Biñan, Laguna,
for the purpose of annulling the sale and the TCT. Victorina
died on 18 October 1989, while Civil Case B-2194 was
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SALES
pending with the trial court. Cecilia died on 4 August 1990,
unmarried and childless. Victorina and Cecilia were
substituted by Ruben, Candelaria,Lorenzo, Flora, Nicadro,
Rosario, Teresita and Vicente Loyola as plaintiffs. The trial
court rendered judgment in favor of complainants; declaring
the simulated deed of absolute sale as well as the issuance of
the corresponding TCT null and void, ordering the Register of
Deeds of Laguna to cancel TCT T-116087 and to issue
another one in favor of the plaintiffs and the defendants as
co-owners and legal heirs of the late Gaudencia, ordering the
defendants to reconvey and deliver the possession of the
shares of the plaintiff on the subject property, ordering the
defendants to pay P20,000 as attorney‟s fees and cost of suit,
dismissing the petitioner‟s claim for moral and exemplary
damages, and dismissing the defendants‟ counterclaim for
lack of merit. On appeal, and on 31 August 1993, the
appellate court reversed the trial court (CA-GR CV 36090). On
September 15, 1993, the petitioners (as substitute parties for
Victorina and Cecilia, the original plaintiffs) filed a motion for
reconsideration, which was denied on 6 June 1994. Hence, the
petition for review on certiorari.
ISSUE: Whether the alleged sale between Gaudencia and
respondents is valid
HELD: Petitioners vigorously assail the validity of the execution
of the deed of absolute sale suggesting that since the notary
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public who prepared and acknowledged the questioned Bilihan
did not personally know Gaudencia, the execution of the deed
was suspect. The rule is that a notarized document carries the
evidentiary weight conferred upon it with respect to its due
execution, and documents acknowledged before a notary
public have in their favor the presumption of regularity. By
their failure to overcome this presumption, with clear and
convincing evidence, petitioners are estopped from
questioning the regularity of the execution of the deed.
Petitioners suggest that all the circumstances lead to the
conclusion that the deed of sale was simulated. Simulation is
"the declaration of a fictitious will, deliberately made by
agreement of the parties, in order to produce, for the
purposes of deception, the appearances of a juridical act
which does not exist or is different what that which was really
executed." Characteristic of simulation is that the apparent
contract is not really desired or intended to produce legal
effect or in any way alter the juridical situation of the parties.
Perusal of the questioned deed will show that the sale of the
property would convert the co-owners to vendors and
vendees, a clear alteration of the juridical relationships. This is
contrary to the requisite of simulation that the apparent
contract was not really meant to produce any legal effect. Also
in a simulated contract, the parties have no intention to be
bound by the contract. But in this case, the parties clearly
intended to be bound by the contract of sale, an intention they
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SALES
did not deny. The requisites for simulation are: (a) an outward
declaration of will different from the will of the parties; (b) the
false appearance must have been intended by mutual
agreement; and (c) the purpose is to deceive third persons.
None of these are present in the assailed transaction.
Contracts are binding only upon the parties who execute
them. Article 1311 of the Civil Code clearly covers this
situation. In the present case Romualdo had no knowledge of
the sale, and thus, he was a stranger and not a party to it.
Even if curiously Romualdo, one of those included as buyer in
the deed of sale, was the one who questioned Gaudencia‟s
ownership in Civil Case B-1094, Romana testified that
Romualdo really had no knowledge of the transaction and he
was included as a buyer of the land only because he was a
brother.
Petitioners fault the Court of Appeals for not considering that
at the time of the sale in 1980, Gaudencia was already 94
years old; that she was already weak; that she was living with
private respondent Romana; and was dependent upon the
latter for her daily needs, such that under these
circumstances, fraud or undue influence was exercised by
Romana to obtain Gaudencia's consent to the sale. The rule on
fraud is that it is never presumed, but must be both alleged
and proved. For a contract to be annulled on the ground of
fraud, it must be shown that the vendor never gave consent to
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its execution. If a competent person has assented to a
contract freely and fairly, said person is bound. There also is a
disputable presumption, that private transactions have been
fair and regular. Applied to contracts, the presumption is in
favor of validity and regularity. In this case, the allegation of
fraud was unsupported, and the presumption stands that the
contract Gaudencia entered into was fair and regular.
Petitioners also claim that since Gaudencia was old and senile,
she was incapable of independent and clear judgment.
However, a person is not incapacitated to contract merely
because of advanced years or by reason of physical infirmities.
Only when such age or infirmities impair his mental faculties
to such extent as to prevent him from properly, intelligently,
and fairly protecting his property rights, is he considered
incapacitated. Petitioners show no proof that Gaudencia had
lost control of her mental faculties at the time of the sale. The
notary public who interviewed her, testified that when he
talked to Gaudencia before preparing the deed of sale, she
answered correctly and he was convinced that Gaudencia was
mentally fit and knew what she was doing.
Petitioners seem to be unsure whether they are assailing the
sale of Lot 115-A-1 for being absolutely simulated or for
inadequacy of the price. These two grounds are irreconcilable.
If there exists an actual consideration for transfer evidenced
by the alleged act of sale, no matter how inadequate it be, the
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transaction could not be a “simulated sale.” No reversible error
was thus committed by the Court of Appeals in refusing to
annul the questioned sale for alleged inadequacy of the price
The Supreme Court denied the petition, and affirmed the
assailed decision of the Court of Appeals; with costs against
petitioners
8. UY vs CA
FACTS: William Uy and Rodel Roxas are agents authorized to
sell 8 parcels of land by the owners thereof. By virtue of such
authority, they offered to sell the lands, located in Tuba,
Tadiangan, Benguet to National Housing Authority (NHA) to be
utilized and developed as a housing project. On 14 February
1989, the NHA Board passed Resolution 1632 approving the
acquisition of said lands, with an area of 31.8231 hectares, at
the cost of P23.867 million, pursuant to which the parties
executed a series of Deeds of Absolute Sale covering the
subject lands. Of the 8 parcels of land, however, only 5 were
paid for by the NHA because of the report it received from the
Land Geosciences Bureau of the Department of Environment
and Natural Resources (DENR)that the remaining area is
located at an active landslide area and therefore, not suitable
for development into a housing project.
On 22 November 1991, the NHA issued Resolution 2352
cancelling the sale over the 3 parcels of land. The NHA,
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through Resolution 2394, subsequently offered the amount of
P1.225 million to the landowners as daños perjuicios. On 9
March 1992, petitioners Uy and Roxas filed before the RTC
Quezon City a Complaint for Damages against NHA and its
General Manager Robert Balao. After trial, the RTC rendered a
decision declaring the cancellation of the contract to be
justified. The trial court nevertheless awarded damages to
plaintiffs in the sum of P1.255 million, the same amount
initially offered by NHA to petitioners as damages.
Upon appeal by petitioners, the Court of Appeals reversed the
decision of the trial court and entered a new one dismissing
the complaint. It held that since there was “sufficient
justifiable basis” in cancelling the sale, “it saw no reason” for
the award of damages. The Court of Appeals also noted that
petitioners were mere attorneys-in-fact and, therefore, not
the real parties-in-interest in the action before the trial court.
Their motion for reconsideration having been denied,
petitioners seek relief from the Supreme Court.
ISSUES: 1) Whether the petitioners are real parties in interest
2) Whether the cancellation is justified
HELD: 1) Section 2, Rule 3 of the Rules of Court requires that
every action must be prosecuted and defended in the name of
the real party-in-interest. The real party-in-interest is the
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party who stands to be benefited or injured by the judgment
or the party entitled to the avails of the suit. “Interest,” within
the meaning of the rule, means material interest, an interest in
the issue and to be affected by the decree, as distinguished
from mere interest in the question involved, or a mere
incidental interest. Cases construing the real party-in-interest
provision can be more easily understood if it is borne in mind
that the true meaning of real party-in-interest may be
summarized as follows: An action shall be prosecuted in the
name of the party who, by the substantive law, has the right
sought to be enforced.
Where the action is brought by an attorney-in-fact of a land
owner in his name, (as in our present action) and not in the
name of his principal, the action was properly dismissed
because the rule is that every action must be prosecuted in the
name of the real parties-in-interest (Section 2, Rule 3, Rules
of Court)
Petitioners claim that they lodged the complaint not in behalf
of their principals but in their own name as agents directly
damaged by the termination of the contract. Petitioners in this
case purportedly brought the action for damages in their own
name and in their own behalf. An action shall be prosecuted in
the name of the party who, by the substantive law, has the
right sought to be enforced. Petitioners are not parties to the
contract of sale between their principals and NHA. They are
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mere agents of the owners of the land subject of the sale. As
agents, they only render some service or do something in
representation or on behalf of their principals. The rendering
of such service did not make them parties to the contracts of
sale executed in behalf of the latter. Since a contract may be
violated only by the parties thereto as against each other, the
real parties-in-interest, either as plaintiff or defendant, in an
action upon that contract must, generally, either be parties to
said contract. Petitioners have not shown that they are
assignees of their principals to the subject contracts. While
they alleged that they made advances and that they suffered
loss of commissions, they have not established any agreement
granting them "the right to receive payment and out of the
proceeds to reimburse [themselves] for advances and
commissions before turning the balance over to the
principal[s]."
2) The right of rescission or, more accurately, resolution, of a
party to an obligation under Article 1191 is predicated on a
breach of faith by the other party that violates the reciprocity
between them. The power to rescind, therefore, is given to the
injured party. Article 1191 states that “the power to rescind
obligations is implied in reciprocal ones, in case one of the
obligors should not comply with what is incumbent upon him.
The injured party may choose between the fulfillment and the
rescission of the obligation, with the payment of damages in
either case. He may also seek rescission, even after he has
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chosen fulfillment, if the latter should become impossible.” In
the present case, the NHA did not rescind the contract.
Indeed, it did not have the right to do so for the other parties
to the contract, the vendors, did not commit any breach, much
less a substantial breach, of their obligation. Their obligation
was merely to deliver the parcels of land to the NHA, an
obligation that they fulfilled. The NHA did not suffer any injury
by the performance thereof
The cancellation was not a rescission under Article 1191.
Rather, the cancellation was based on the negation of the
cause arising from the realization that the lands, which were
the object of the sale, were not suitable for housing. Cause is
the essential reason which moves the contracting parties to
enter into it. In other words, the cause is the immediate, direct
and proximate reason which justifies the creation of an
obligation through the will of the contracting parties. Cause,
which is the essential reason for the contract, should be
distinguished from motive, which is the particular reason of a
contracting party which does not affect the other party.
Ordinarily, a party's motives for entering into the contract do
not affect the contract. However, when the motive
predetermines the cause, the motive may be regarded as the
cause. In this case, it is clear, and petitioners do not dispute,
that NHA would not have entered into the contract were the
lands not suitable for housing. In other words, the quality of
the land was an implied condition for the NHA to enter into
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the contract. On the part of the NHA, therefore, the motive

was the cause for its being a party to the sale. We hold that
the NHA was justified in canceling the contract. The realization
of the mistake as regards the quality of the land resulted in
the negation of the motive/cause thus rendering the contract
inexistent.

The Supreme Court denied the petition

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