ONG JANG CHUAN v. WISE, GR No.

10907, 1916-01-29

Facts:

The contract which forms the basis of this action reads:

"Between Messrs. Wise & Co. (Ltd.), Manila, and Mr. Ong Jang Chuan, Manila.

"We, Wise & Co. (Ltd.), have sold to Mr. Ong Jang Chuan the following goods,... "One thousand (1,000)
sacks of flour, 'Mano' brand,... the expenses of... transportation from the Binondo Canal to be borne by
the purchaser, 500 sacks to be delivered in September and 500 in October, which we bind ourselves to
deliver

Payment of the goods mentioned... shall be made within 30 days counted from the date of delivery, and
interest at the rate of * * * per annum on any unpaid amount that may still be due after the  *  *  *  days
mentioned."... that the reason for the nonfulfilment, on the part of Wise & Co., of the contract made
with the plaintiff, was that the 'Mano' brand of flour which the defendant bound itself to deliver during
the months of September... and October had to come from Australia, and at the time the contract was
executed Wise & Co. did not have a sufficient stock of the said brand of flour... and that, as the
government of Australia prohibited the exportation of (lour, because of the scarcity of grain in that...
country, due to the war that had been declared between Great Britain

It is urged that the trial court erred (1) in holding that the contract above set forth was an agreement to
sell and not a perfected sale, (2) in not finding that the noncompliance of the contract was due to a
fortuitous event, and (3) in condemning the defendant to pay to... the plaintiff the sum of P1,237.50.

ISSUE:

Whether or not there is a perfected contract of sale?

HELD:

NONE.

A contract of sale is no perfected where the parties have agreed upon the price and the thing sold,
unless the latter has been selected and is capable of being physically designated and distinguished from
all others of the same class.

In the case of Yu Tek & Co. v. Gonzalez (29 Phil. Rep., 384), we said:jgc:chanrobles.com.ph

"This court has consistently held that there is a perfected sale with regard to the ’thing’ whenever the
article of sale has been physically segregated from all other articles."cralaw virtua1aw library

In the case under consideration, the undertaking of the defendant was to sell to the plaintiff 1,000 sacks
of "Mano" flour at P11.05 per barrel, 500 sacks to be delivered in September and 500 in October. There
was no delivery at all under the contract. If called upon to designate the article sold, the defendant
could only say that it was "Mano" flour. There was no appropriation of any particular lot of flour. The
flour mentioned in the contract was not "physically segregated from all other articles." In fact, the
defendant did not have in its possession in Manila, at the time the contract was entered into, the 1,000
sacks of flour which it agreed to deliver in September and October. It is therefore clear that under the
rule laid down in the case of Yu Tek & Co., supra, and the cases cited in that opinion, the sale here i
question was not a perfected one.

Gaite v. Fonacier

Facts:

Gaite was appointed by Fonacier as attorney-in-fact to contract any party for the exploration and
development of mining claims. Gaite executed a deed of assignment in favor of a single proprietorship
owned by him. For some reasons, Fonacier revoked the agency, which was acceded to by Gaite, subject
to certain conditions, one of which being the transfer of ores extracted from the mineral claims for
P75,000, of which P10,000 has already been paid upon signing of the agreement and the balance to be
paid from the first letter of credit for the first local sale of the iron ores. To secure payment, Fonacier
delivered a surety agreement with Larap Mines and some of its stockholders, and another one with Far
Eastern Insurance. When the second surety agreement expired with no sale being made on the ores,
Gaite demanded the P65,000 balance. Defendants contended that the payment was subject to the
condition that the ores will be sold.

Issue:

(1) Whether the sale is conditional or one with a period

(2) Whether there were insufficient tons of ores

Held:

(1) The shipment or local sale of the iron ore is not a condition precedent (or suspensive) to the payment
of the balance of P65,000.00, but was only a suspensive period or term. What characterizes a
conditional obligation is the fact that its efficacy or obligatory force (as distinguished from its
demandability) 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.

A contract of sale is normally commutative and onerous: not only does each one of the parties assume a
correlative obligation (the seller to deliver and transfer ownership of the thing sold and the buyer to pay
the price),but each party anticipates performance by the other from the very start. While in a sale the
obligation of one party can be lawfully subordinated to an uncertain event, so that the other
understands that he assumes the risk of receiving nothing for what he gives (as in the case of a sale of
hopes or expectations, emptio spei), it is not in the usual course of business to do so; hence, the
contingent character of the obligation must clearly appear. Nothing is found in the record to evidence
that Gaite desired or assumed to run the risk of losing his right over the ore without getting paid for it,
or that Fonacier understood that Gaite assumed any such risk. This is proved by the fact that Gaite
insisted on a bond a to guarantee payment of the P65,000.00, an not only upon a bond by Fonacier, the
Larap Mines & Smelting Co., and the company's stockholders, but also on one by a surety company; and
the fact that appellants did put up such bonds indicates that they admitted the definite existence of
their obligation to pay the balance of P65,000.00.
The appellant have forfeited the right court below that the appellants have forfeited the right to compel
Gaite to wait for the sale of the ore before receiving payment of the balance of P65,000.00, because of
their failure to renew the bond of the Far Eastern Surety Company or else replace it with an equivalent
guarantee. The expiration of the bonding company's undertaking on December 8, 1955 substantially
reduced the security of the vendor's rights as creditor for the unpaid P65,000.00, a security that Gaite
considered essential and upon which he had insisted when he executed the deed of sale of the ore to
Fonacier.

(2) The sale between the parties is a sale of a specific mass or iron ore because no provision was made in
their contract for the measuring or weighing of the ore sold in order to complete or perfect the sale, nor
was the price of P75,000,00 agreed upon by the parties based upon any such measurement.(see Art.
1480, second par., New Civil Code). The subject matter of the sale is, therefore, a determinate object,
the mass, and not the actual number of units or tons contained therein, so that all that was required of
the seller Gaite was to deliver in good faith to his buyer all of the ore found in the mass, notwithstanding
that the quantity delivered is less than the amount estimated by them.

G.R. No. 13203           September 18, 1918

BEHN, MEYER & CO. (LTD.), plaintiff-appellant,

vs.
TEODORO R. YANCO, defendant-appellee.

Facts. — The contract provided for "80 drums Caustic Soda 76 per cent "Carabao" brand al precio de
Dollar Gold Nine and 75/100 1-lbs."

Resorting to the circumstances surrounding the agreement are we are permitted to do, in pursuance of
this provision, the merchandise was shipped from New York on the steamship Chinese Prince. The
steamship was detained by the British authorities at Penang, and part of the cargo, including seventy-
one drums of caustic soda, was removed. Defendant refused to accept delivery of the remaining nine
drums of soda on the ground that the goods were in bad order. Defendant also refused the optional
offer of the plaintiff, of waiting for the remainder of the shipment until its arrival, or of accepting the
substitution of seventy-one drums of caustic soda of similar grade from plaintiff's stock. The plaintiff
thereupon sold, for the account of the defendant, eighty drums of caustic soda from which there was
realized the sum of P6,352.89. Deducting this sum from the selling price of P10,063.86, we have the
amount claimed as damages for alleged breach of the contract.

Law. — It is sufficient to note that the specific merchandise was never tendered. The soda which the
plaintiff offered to defendant was not of the "Carabao" brand, and the offer of drums of soda of another
kind was not made within the time that a March shipment, according to another provision the contract,
would normally have been available.

2. PLACE OF DELIVERY.

Facts. — The contract provided for "c.i.f. Manila, pagadero against delivery of documents."

Law. — Determination of the place of delivery always resolves itself into a question of act. If the contract
be silent as to the person or mode by which the goods are to be sent, delivery by the vendor to a
common carrier, in the usual and ordinary course of business, transfers the property to the vendee. A
specification in a contact relative to the payment of freight can be taken to indicate the intention of the
parties in regard to the place of delivery. If the buyer is to pay the freight, it is reasonable to suppose
that he does so because the goods become his at the point of shipment. On the other hand, if the seller
is to pay the freight, the inference is equally so strong that the duty of the seller is to have the goods
transported to their ultimate destination and that title to property does not pass until the goods have
reached their destination. (See Williston on Sales, PP. 406-408.)

The letters "c.i.f." found in British contracts stand for cost, insurance, and freight. They signify that the
price fixed covers not only the cost of the goods, but the expense of freight and insurance to be paid by
the seller. (Ireland vs. Livingston, L. R., 5 H. L., 395.) Our instant contract, in addition to the letters "c.i.f.,"
has the word following, "Manila." Under such a contract, an Australian case is authority for the
proposition that no inference is permissible that a seller was bound to deliver at the point of
destination. (Bowden vs. Little, 4 Comm. [Australia], 1364.)

In mercantile contracts of American origin the letters "F.O.B." standing for the words "Free on Board,"
are frequently used. The meaning is that the seller shall bear all expenses until the goods are delivered
where they are to be "F.O.B." According as to whether the goods are to be delivered "F.O.B." at the
point of shipment or at the point of destination determines the time when property passes.

Both the terms "c.i.f." and "F.O.B." merely make rules of presumption which yield to proof of contrary
intention. As Benjamin, in his work on Sales, well says: "The question, at last, is one of intent, to be
ascertained by a consideration of all the circumstances." For instance, in a case of Philippine origin,
appealed to the United States Supreme Court, it was held that the sale was complete on shipment,
though the contract was for goods, "F.O.B. Manila," the place of destination the other terms of the
contract showing the intention to transfer the property. (United States vs. R. P. Andrews & Co. [1907],
207 U.S., 229.)

With all due deference to the decision of the High Court of Australia, we believe that the word Manila in
conjunction with the letters "c.i.f." must mean that the contract price, covering costs, insurance, and
freight, signifies that delivery was to made at Manila. If the plaintiff company has seriously thought that
the place of delivery was New York and Not Manila, it would not have gone to the trouble of making
fruitless attempts to substitute goods for the merchandise named in the contract, but would have
permitted the entire loss of the shipment to fall upon the defendant. Under plaintiffs hypothesis, the
defendant would have been the absolute owner of the specific soda confiscated at Penang and would
have been indebted for the contract price of the same.

This view is corroborated by the facts. The goods were not shipped nor consigned from New York to
plaintiff. The bill of lading was for goods received from Neuss Hesslein & Co. the documents evidencing
said shipment and symbolizing the property were sent by Neuss Hesslein & Co. to the Bank of the
Philippine Islands with a draft upon Behn, Meyer & Co. and with instructions to deliver the same, and
thus transfer the property to Behn, Meyer & Co. when and if Behn, Meyer & Co. should pay the draft.

The place of delivery was Manila and plaintiff has not legally excused default in delivery of the specified
merchandise at that place.

3. TIME OF DELIVERY.
Facts. — The contract provided for: "Embarque: March 1916," the merchandise was in fact shipped from
New York on the Steamship Chinese Prince on April 12, 1916.

Law. — The previous discussion makes a resolution of this point unprofitable, although the decision of
the United States Supreme Court in Norrington vs. Wright (([1885], 115 U.S., 188) can be read with
profit. Appellant's second and third assignments of error could, if necessary, be admitted, and still could
not recover.

THE CONTRACT.

To answer the inquiry with which we begun this decision, the contract between the parties was for 80
drums of caustic soda, 76 per cent "Carabao" brand, at the price of $9.75 per one hundred pounds, cost,
insurance, and freight included, to be shipped during March, 1916, to be delivered to Manila and paid
for on delivery of the documents.

PERFORMANCE.

In resume, we find that the plaintiff has not proved the performance on its part of the conditions
precedent in the contract. The warranty — the material promise — of the seller to the buyer has not
been complied with. The buyer may therefore rescind the contract of sale because of a breach in
substantial particulars going to the essence of the contract. As contemplated by article 1451 of the Civil
Code, the vendee can demand fulfillment of the contract, and this being shown to be impossible, is
relieved of his obligation. There thus being sufficient ground for rescission, the defendant is not liable.

The judgment of the trial court ordering that the plaintiff take nothing by its action, without special
finding as to costs, is affirmed, with the costs of this instance. Against the appellant. So ordered.

GOLDENROD, INC., petitioner vs. COURT OF APPEALS, PIO BARRETTO & SONS, INC., PIO BARRETTO
REALTY DEVELOPMENT, INC., and ANTHONY QUE, Respondents.

Pio Barretto and Sons, Inc. (BARRETTO & SONS) owned forty-three (43) parcels of registered land with a
total area of 18,500 square meters located at Carlos Palanca St., Quiapo, Manila, which were mortgaged
with the United Coconut Planters Bank (UCPB). In 1988, the obligation of the corporation with UCPB
remained unpaid making foreclosure of the mortgage imminent.

Goldenrod, Inc. (GOLDENROD), offered to buy the property from BARRETTO & SON with 1 million as
earnest money.

When the term of existence of BARRETTO & SONS expired, all its assets and liabilities including the
property located in Quiapo were transferred to respondent Pio Barretto Realty Development, Inc.
(BARRETTO REALTY). Petitioners offer to buy the property resulted in its agreement with respondent
BARRETTO REALTY that petitioner would pay the following amounts: (a) P24.5 million representing the
outstanding obligations of BARRETTO REALTY with UCPB on 30 June 1988, the deadline set by the bank
for payment; and, (b) P20 million which was the balance of the purchase price of the property to be paid
in installments within a 3-year period with interest at 18% per annum.

Petitioner did not pay UCPB the P24.5 million loan obligation of BARRETTO REALTY on the deadline set
for payment; instead, it asked for an extension of one (1) month or up to 31 July 1988 to settle the
obligation, which the bank granted. On 31 July 1988, petitioner requested another extension of sixty
(60) days to pay the loan. This time the bank demurred.

On 30 August 1988 Alicia P. Logarta, President of Logarta Realty and Development Corporation
(LOGARTA REALTY), which acted as agent and broker of petitioner, wrote private respondent Anthony
Que informing him on behalf of petitioner that it could not go through with the purchase of the property
due to circumstances beyond its fault, i.e., the denial by UCPB of its request for extension of time to pay
the obligation. In the same letter, Logarta also demanded the refund of the earnest money of P1 million
which petitioner gave to respondent BARRETTO REALTY.

The respondents did not heed the request for refund arguing that the money is the payment of damages
from the breach of contract of the Golden Rod.

Golden Rod filed a case at RTC which ruled in favour of them but the decision was reversed by the CA.

ISSUE:

In the absence of a specific stipulation, may the seller of real estate keep the earnest money to answer
for damages in the event the sale fails due to the fault of the prospective buyer?

HELD:

No.

Under Art. 1482 of the Civil Code, whenever earnest money is given in a contract of sale, it shall be
considered as part of the purchase price and as proof of the perfection of the contract. Petitioner clearly
stated without any objection from private respondents that the earnest money was intended to form
part of the purchase price. It was an advance payment which must be deducted from the total price.
Hence, the parties could not have intended that the earnest money or advance payment would be
forfeited when the buyer should fail to pay the balance of the price, especially in the absence of a clear
and express agreement thereon. By reason of its failure to make payment petitioner, through its agent,
informed private respondents that it would no longer push through with the sale. In other words,
petitioner resorted to extrajudicial rescission of its agreement with private Respondents.

In University of the Philippines v. de los Angeles,2 the right to rescind contracts is not absolute and is
subject to scrutiny and review by the proper court. We held further, in the more recent case of Adelfa
Properties, Inc. v. Court of Appeals,3 that rescission of reciprocal contracts may be extrajudicially
rescinded unless successfully impugned in court. If the party does not oppose the declaration of
rescission of the other party, specifying the grounds therefor, and it fails to reply or protest against it, its
silence thereon suggests an admission of the veracity and validity of the rescinding party's claim.

Article 1385 of the Civil Code provides that rescission creates the obligation to return the things which
were the object of the contract together with their fruits and interest. The vendor is therefore obliged to
return the purchase price paid to him by the buyer if the latter rescinds the sale,4 or when the
transaction was called off and the subject property had already been sold to a third person, as what
obtained in this case.

The return of the earnest money is ordered.

SOSTENES CAMPILLO v. CA, GR No. L-56483, 1984-05-29
Facts:
On February 27, 1961,... Tomas de Vera and his wife Felisa Serafico sold two (2) parcels of land located
in Tondo, Manila... to Simplicio Santos, now deceased and is represented by his administratrix, Zenaida
Diaz Vda. de Santos, the herein private respondent.
Said sale was however never presented... for registration in the office of the Registry of Deeds of Manila
nor noted in the title covering the property.
On January 27, 1962, petitioner Sostenes Campillo obtained a judgment for a sum of money against
Tomas de Vera in Civil Case
That judgment became final and executory, and petitioner obtained an order for the issuance of a... writ
of execution.
pursuant thereto, the City Sheriff levied on three (3) parcels of land... in the name of Tomas de Vera,
including the two (2) parcels of land which the latter previously sold to Simplicio
Santos.
notice of the sale of said lots was issued by the Sheriff and published in the "Daily Record" and "La
Nueva Era."
On July 25, 1962, the three parcels of land were sold at public auction... in favor of petitioner who was
issued the corresponding certificate of sale. After the lapse of one year, the City Sheriff executed the
final deed of sale in favor of petitioner over the... three (3) parcels of land levied and sold on execution.
Claiming to be the owner of the two parcels of land by reason of the previous sale to him by Tomas de
Vera, Simplicio Santos filed an action to annul the levy, notice of sale, sale at public auction and final
deed of sale of Lots 1 and 2 in favor of petitioner Campillo, with... damages.
petitioner... alleged that he is an innocent purchaser for value and that the supposed previous sale could
not be preferred over the levy and sale at public auction because it was not registered.
After due trial, the lower court rendered judgment sustaining the validity of the levy and sale at public
auction... because at the time of the levy and sale, the disputed properties were still registered in the
name of the judgment debtor, Tomas de Vera.
Issues:
who has a better right or title to the herein disputed two (2) parcels of land ---
Simplicio Santos who earlier purchased them in a private sale but failed to register his sale, or petitioner
Sostenes Campillo who subsequently purchased them at an execution sale and obtained a certificate of
title.
Ruling:
rule in favor of the herein petitioner
It is settled in this jurisdiction that a sale of real estate, whether made as a result of a private transaction
or of a foreclosure or execution sale, becomes legally effective against third persons only from the date
of its registration.
considering that the properties subject matter hereof were actually attached and levied upon at a time
when said properties stood in the official records of the Registry of Deeds as still owned by and
registered in the name of the judgment debtor, Tomas de
Vera, the attachment, levy and subsequent sale of said properties are proper and legal.
The net result is that the execution sale made in favor of the herein petitioner transferred to him all the
rights, interest and participation of the judgment debtor in the afore-stated... properties as actually
appearing in the certificate of title
As succinctly stated in the case of Philippine National Bank vs. Court of Appeals... the rule applies that a
person dealing with registered land is not required to go behind the register to determine the condition
of the property and he is merely charged... with notice of the burdens on the property which are noted
on the face of the register or the certificate of title. Hence, the petitioner herein, as the purchaser in the
execution sale of the registered land in suit, acquires such right and interest as appears in the
certificate... of title unaffected by prior lien or encumbrances not noted therein. This must be so in order
to preserve the efficacy and conclusiveness of the certificate of title which is sanctified under our
Torrens system of land registration.

Bachrach Motor Co. v. Millan

G.R. No. L-42256, 25 April 1935, 61 Phil 409

FACTS:

Defendant Millan bought a second hand Renault touring car from plaintiff Bachrach Motor Co. The
amount of P939 was the balance of the purchase price of the said car which defendant and plaintiff
agreed that the payment of such balance shall be in a monthly installment basis. Thus, on December 12,
1933, owing to the said transaction, defendant executed a promissory note for the sum of P939 and a
chattel mortgage in favor of defendant, duly registered with the Register of Deeds of the City of Manila.

Subsequently, defendant failed to pay the installments which fell due on December 22, 1933, and
January 22 and February 22, 1934 thus violating the terms of the said promissory note and chattel
mortgage. As of March 17, 1934, after crediting to defendant of all the payments made, the defendant
still owes the sum of P928.50 together with the interest at the rate of 12 per cent per annum. Defendant
offered to return the second hand Renault touring car to the plaintiff in payment of the full amount
under the promissory note and the chattel mortgage, but the plaintiff refused to receive the same, and
has filed this complaint for the full amount of the purchase price.

ISSUE:

Whether a vendor of personal property on the installment plan, upon the failure of the purchaser to
comply with his obligation under such a contract, exact the fulfillment of that obligation, or does article
1454-A deprive him of that right and limit him to the right to cancel such a sale or foreclose a mortgage
if one has been given on the property.

Article 1454 of the Civil Code, as amended by Act No. 4122 of the Philippine Legislature, now reads:
ART. 1454. When earnest money or a pledge has been given to bind the contract of purchase and sale,
the contract may be rescinded if the vendee should be willing to forfeit the earnest money or pledge or
the vendor to return double the amount.

ART. 1454-A. In a contract for the sale of personal property payable in installments, failure to pay two or
more installments shall confer upon the vendor the right to cancel the sale or foreclose the mortgage if
one has been given on the property, without reimbursement to the purchaser of the installments
already paid, if there be an agreement to this effect.

However, if the vendor has chosen to foreclose the mortgage he shall have no further action against the
purchaser for the recovery of any unpaid balance owing by the same, and any agreement to the
contrary shall be null and void.

The same rule shall apply to leases of personal property with option to purchase, when the lessor has
chosen to deprive the lessee of the enjoyment of such personal property.

This amendment prevents mortgagees from seizing the mortgaged property, buying it at foreclosure
sale for a low price and then bringing suit against the mortgagor for a deficiency judgment. Thus, in all
proceedings for the foreclosure of chattel mortgages, executed on chattels which have been sold on the
installment plan, the mortgagee is limited to the property included in the mortgage.

Meanwhile article 1124 of the Civil Code provides:

ART. 1124. The right to resolve reciprocal obligations, in case one of the obligors should fail to comply
with that which is incumbent upon him, is deemed to be implied.

The person prejudiced may choose between exacting the fulfillment of the obligation or its resolution
with indemnity for losses and payment of interest in either case. He may also demand the resolution of
the obligation even after having elected its fulfillment, should the latter be found impossible.

In harmonizing the aforementioned provisions, It is apparent that that part of article 1124 of the Civil
Code, mentioned above, has not been repealed. In enacting Act No. 4122 , the legislature did not intend
to limit the remedies available to a vendor of personal property on the installment plan to the right to
cancel the sale or foreclose the mortgage if one had been given on the property. The real object of that
law is to prevent the exercise of either of these rights by such a vendor until after the vendee has failed
to pay two or more installments and furthermore to prescribe and limit the rights of the vendor after he
has availed himself of either of the remedies mentioned therein.

Therefore in a sale of personal property on the installment plan the vendor may elect to exact the
fulfillment of the obligation, as the plaintiff has done in this case, cancel the sale or foreclose his
mortgage if one has been given on the property so sold. But if he elects to cancel or foreclose the
mortgage, he is bound by the provisions of article 1454-A of the Civil Code.

The judgment of the trial court is reversed and let judgment be entered in favor of the plaintiff and
against the defendant for the sum of P928.50 with interest thereon at the rate of 12 per cent per annum
from March 17, 1934, until paid in full, plus the sum of P232.12 as attorneys' fees and penalty, without
costs in either instance.