Compiled by Anouck Tan 1
ESSENTIAL CHARACTERISTICS OF A CONTRACT OF SALE
Villanueva vs. PNB (GR No. 154493, Dec. 6, 2006)
Facts:
Special Assets Management Department (SAMD) of the
Philippine National Bank (PNB) issued an advertisement for
the sale thru bidding of certain PNB properties in
Calumpang, General Santos City, with an advertised floor
price of P1,409,000.00 and P2,268,000.00 for Lot No. 17 &
19 respectively.
Bidding conditions:
1) that cash bids be submitted not later than April 27,
1989;
2) that said bids be accompanied by a 10% deposit in
manager's or cashier's check; and
3) that all acceptable bids be subject to approval by PNB
authorities.
PNB-General Santos Branch, Reynaldo Villanueva
(Villanueva) offered to purchase Lot Nos. 17 and 19
for P3,677,000.00. He also manifested that he was
depositing P400,000.00 to show his good faith but with the
understanding that said amount may be treated as part of
the payment of the purchase price only when his offer is
accepted by PNB. At the bottom of said letter there
appears an unsigned marginal note stating
that P400,000.00 was deposited into Villanueva's account
(Savings Account No. 43612) with PNB-General Santos
Branch.
PNB-General Santos Branch forwarded the letter to
(Guevara), Vice President, SAMD. Guevara informed
Villanueva that only Lot No. 19 is available and that the
asking price therefor is P2,883,300.00.9 Guevara further
wrote:
If our quoted price is acceptable to you, please submit a
revised offer to purchase. Sale shall be subject to our Board
of Director's approval and to other terms and conditions
imposed by the Bank on sale of acquired assets.
Instead of submitting a revised offer, Villanueva merely
inserted at the bottom of Guevara's letter a July 11, 1990
marginal note which states: PRICE OF P2,883,300.00
(downpayment of P600,000.00 and the balance payable in
two (2) years at quarterly amortizations.)
Villanueva paid P200,000.00 to PNB which issued O.R. No.
16997 to acknowledge receipt of the "partial payment
deposit on offer to purchase."
On the dorsal portion of Official Receipt No. 16997,
Villanueva signed a typewritten note, stating:
This is a deposit made to show the sincerity of my
purchase offer with the understanding that it shall be
returned without interest if my offer is not favorably
considered or be forfeited if my offer is approved but I
fail/refuse to push through the purchase.
P380,000.00 was also debited from Villanueva's Savings
Account No. 43612 and credited to SAMD. However,
Guevara wrote Villanueva that, upon orders of the PNB
Board of Directors to conduct another appraisal and public
bidding of Lot No. 19, SAMD is deferring negotiations with
him over said property and returning his deposit
of P580,000.00.15 Undaunted, Villanueva attempted to
deliver postdated checks covering the balance of the
purchase price but PNB refused the same.
RTC: execute a deed of sale in favor of the plaintiff over Lot
19 after payment of the balance in cash in the amount
of P2,303,300.00.
There existed a perfected contract of sale between PNB
and Villanueva. Villanueva's P580,000.00 downpayment
was actually in the nature of earnest money acceptance of
which by PNB signified that there was already a sale. RTC
further cited contemporaneous acts of PNB purportedly
indicating that, as early as July 25, 1990, it considered Lot
19 already sold, as shown by Guevara's July 25, 1990 letter
(Exh. "H")20 to another interested buyer.
CA: There was no perfected contract of sale because the
July 6, 1990 letter of Guevara constituted a qualified
acceptance of the June 28, 1990 offer of Villanueva, and
to which Villanueva replied on July 11, 1990 with a
modified offer. In the case at bench, consent, in respect
to the price and manner of its payment, is lacking. The
letter dated July 6, 1990 constituted a counter-offer (Art.
1319, Civil Code), to which appellee made a new
proposal, i.e., to pay the amount of P2,883,300.00 in
staggered amounts, that is, P600,000.00 as
downpayment and the balance within two years in
quarterly amortizations.

A qualified acceptance, or one that involves a new
proposal, constitutes a counter-offer and a rejection of
the original offer (Art. 1319, id.). Consequently, when
something is desired which is not exactly what is
proposed in the offer, such acceptance is not sufficient to
generate consent because any modification or variation
from the terms of the offer annuls the offer.
Appellee's new proposal, which constitutes a counter-
offer, was not accepted by appellant, its board having
decided to have Lot 19 reappraised and sold thru public
bidding.
Moreover, it was clearly stated in Guevara's July 6, 1990
letter that "the sale shall be subject to our Board of
Director's approval and to other terms and conditions
imposed by the Bank on sale of acquired assets."
ISSUES:
1. whether a perfected contract of sale exists between
petitioner and respondent PNB
2. whether the conduct and actuation of respondent
constitutes bad faith as to entitle petitioner to moral
and exemplary damages and attorney's fees.
HELD:
Court sustains the CA on both issues.
Perfection
Contracts of sale are perfected by mutual consent
whereby the seller obligates himself, for a price certain,
to deliver and transfer ownership of a specified thing or
right to the buyer over which the latter agrees.
Consent
Mutual consent being a state of mind, its existence may
only be inferred from the confluence of two acts of the
parties: an offer certain as to the object of the contract
and its consideration, and an acceptance of the offer
which is absolute in that it refers to the exact object and
consideration embodied in said offer. While it is
impossible to expect the acceptance to echo every
nuance of the offer, it is imperative that it assents to
those points in the offer which, under the operative facts
of each contract, are not only material but motivating as
well. Anything short of that level of mutuality produces
not a contract but a mere counter-offer awaiting
acceptance.
Compiled by Anouck Tan 2
To determine whether there was mutual consent
between the parties herein, it is necessary to retrace each
offer and acceptance they made.
Consideration
the offer and its acceptance must be unanimous both on
the rate of the payment and on its term. An acceptance
of an offer which agrees to the rate but varies the term is
ineffective.
When respondent replied to the June 28, 1990 offer with
a July 6, 1990 letter that only Lot No. 19 is available and
that the price therefor is now P2,883,300.00. As the CA
pointed out, this reply was certainly not an acceptance of
the June 28, 1990 offer but a mere counter-offer. It
deviated from the original offer on three material points:
first, the object of the proposed sale is now only Lot No.
19 rather than Lot Nos. 17 and 19; second, the area of the
property to be sold is still 41,190 sq. m but an 8,797-sq.
m portion is now part of a public road; and third, the
consideration is P2,883,300 for one lot rather
than P3,677,000.00 for two lots. More important, this July
6, 1990 counter-offer imposed two conditions: one, that
petitioner submit a revised offer to purchase based on
the quoted price; and two, that the sale of the property
be approved by the Board of Directors and subjected to
other terms and conditions imposed by the Bank on the
sale of acquired assets.
Not on the negotiation stage
Respondent's July 6, 1990 counter-offer quoted the price
of P2,833,300.00 and was also silent on the term of
payment. Up to that point, the term or schedule of
payment was not on the negotiation table. Thus, when
petitioner suddenly introduced a term of payment in his
July 11, 1990 counter-offer, he interjected into the
negotiations a new substantial matter on which the
parties had no prior discussion and over which they must
yet agree.31 Petitioner's July 11, 1990 counter-offer,
therefore, did not usher the parties beyond the
negotiation stage of contract making towards its
perfection. He made a counter-offer that required
acceptance by respondent.
Acceptance of petitioner's payments did not amount to an
implied acceptance of his last counter-offer.
To recall, petitioner sent his June 28, 1990 offer to PNB-
General Santos Branch. Said branch did not act on his
offer except to endorse it to Guevarra. Thereafter,

petitioner transacted directly with Guevarra. Petitioner
then cannot pretend that PNB-General Santos Branch had
authority to accept his July 11, 1990 counter-offer by
merely accepting his P380,000.00 payment.
Neither did SAMD have authority to bind PNB. In its April
1989 invitation to bid, as well as its July 6, 1990 counter-
offer, SAMD was always careful to emphasize that
whatever offer is made and entertained will be subject to
the approval of respondent's higher authorities.
Mere deposits
petitioner referred to his payments as mere "deposits."
Even O.R. No. 16997 refers to petitioner's payment as
mere deposit. It is only in the debit notice issued by PNB-
General Santos Branch where petitioner's payment is
referred to as "downpayment". But then, as we said, PNB-
General Santos Branch has no authority to bind
respondent by its interpretation of the nature of the
payment made by petitioner.
In sum, the amounts paid by petitioner were not in the
nature of downpayment or earnest money but were mere
deposits or proof of his interest in the purchase of Lot No.
19. Acceptance of said amounts by respondent does not
presuppose perfection of any contract.
Quijada vs. CA - 299 SCRA 695
Facts:
Petitioners are heirs of the late Trinidad Quijada, and
Trinidad was one of the heirs of the late Pedro Corvera
and inherited from the latter the two-hectare parcel of
land subject of the case. Quijada together with her sisters
and brother, executed a conditional deed of donation in
favor of the Municipality of Talacogon, the condition
being that the parcel of land shall be used solely and
exclusively as part of the campus of the proposed
provincial high school in Talacogon.
Trinidad remained in possession of the parcel of land
despite the donation. On July 29, 1962, Trinidad sold one
(1) hectare of the subject parcel of land to defendant-
appellant Regalado Mondejar and verbally sold the
remaining one (1) hectare to defendant-appellant
(respondent) Regalado Mondejar without the benefit of a
written deed of sale and evidenced solely by receipts of
payment.
Compiled by Anouck Tan 3
In 1987, the proposed provincial high school having failed
to materialize, the Sangguniang Bayan of the municipality
of Talacogon enacted a resolution reverting the two (2)
hectares of land donated back to the donors.
Meanwhile, Regalado Mondejar sold portions of the land
to defendants-appellants (respondents) Fernando
Bautista, Goloran, etc.
Petitioners contend:
alleged that their deceased mother never sold, conveyed,
transferred or disposed of the property in question to any
person or entity much less to Regalado Mondejar save the
donation made to the Municipality of Talacogon in 1956;
that at the time of the alleged sale to Regalado Mondejar
by Trinidad Quijada, the land still belongs to the
Municipality of Talacogon, hence, the supposed sale is null
and void.
Respondents:
land in dispute was sold to Regalado Mondejar, while the
other hectare is on installment basis. They also alleged that
plaintiffs action is barred by laches or has prescribed.
Court a quo:
1. Quijada had no legal title or right to sell the land to
defendant Mondejar in 1962, 1966, 1967 and 1968,
the same not being hers to dispose of because
ownership belongs to the Municipality of Talacogon
2. the deed of sale executed by Trinidad Quijada in favor
of Mondejar did not carry with it the conformity and
acquiescence of her children, more so that she was
already 63 years old at the time, and a widow
CA:
The sale made by Trinidad Quijada to respondent
Mondejar was valid as the former retained an inchoate
interest on the lots by virtue of the automatic reversion
clause in the deed of donation.
ISSUE:
WON the sale of the subject property made by Trinidad
Quijada to respondent Mondejar is void, considering that
at that time, ownership was already transferred to the
Municipality of Talacogon.
Held:
No. It was valid.

The donation made on April 5, 1956 by Trinidad Quijada
and her brother and sisters7 was subject to the condition
that the donated property shall be "used solely and
exclusively as a part of the campus of the proposed
Provincial High School in Talacogon."8 The donation further
provides that should "the proposed Provincial High School
be discontinued or if the same shall be opened but for some
reason or another, the same may in the future be closed"
the donated property shall automatically revert to the
donor.
When the Municipality's acceptance of the donation was
made known to the donor, the former became the new
owner of the donated property — donation being a mode
of acquiring and transmitting ownership 11 —
notwithstanding the condition imposed by the donee.
The donation is perfected once the acceptance by the
donee is made known to the donor.12 According,
ownership is immediately transferred to the latter and
that ownership will only revert to the donor if the
resolutory condition is not fulfilled.
RESOLUTORY CONDITION
In this case, that resolutory condition is the construction
of the school. It has been ruled that when a person
donates land to another on the condition that the latter
would build upon the land a school, the condition
imposed is not a condition precedent or a suspensive
condition but a resolutory one. 13
Thus, at the time of the sales made in 1962 towards 1968,
the alleged seller (Trinidad) could not have sold the lots
since she had earlier transferred ownership thereof by
virtue of the deed of donation.
So long as the resolutory condition subsists and is capable
of fulfillment, the donation remains effective and the
donee continues to be the owner subject only to the rights
of the donor or his successors-in-interest under the deed
of donation. Since no period was imposed by the donor on
when must the donee comply with the condition, the latter
remains the owner so long as he has tried to comply with
the condition within a reasonable period. Such period,
however, became irrelevant herein when the donee-
Municipality manifested through a resolution that it
cannot comply with the condition of building a school and
the same was made known to the donor. Only then —
when the non-fulfillment of the resolutory condition was
brought to the donor's knowledge — that ownership of the
Compiled by Anouck Tan 4
donated property reverted to the donor as provided in the
automatic reversion clause of the deed of donation.
The donor may have an inchoate interest in the donated
property during the time that ownership of the land has
not reverted to her. Such inchoate interest may be the
subject of contracts including a contract of sale. In this
case, however, what the donor sold was the land itself
which she no longer owns. It would have been different if
the donor-seller sold her interests over the property
under the deed of donation which is subject to the
possibility of reversion of ownership arising from the non-
fulfillment of the resolutory condition.
PERFECTION
Be that at it may, there is one thing which militates
against the claim of petitioners. Sale, being a consensual
contract, is perfected by mere consent, which is
manifested the moment there is a meeting of the
minds17 as to the offer and acceptance thereof on three
(3) elements: subject matter, price and terms of payment
of the price. 18 Ownership by the seller on the thing sold
at the time of the perfection of the contract of sale is not
an element for its perfection. What the law requires is
that the seller has the right to transfer ownership at the
time the thing sold is delivered. 19
Perfection per se does not transfer ownership which
occurs upon the actual or constructive delivery of the thing
sold. 20 A perfected contract of sale cannot be challenged
on the ground of non-ownership on the part of the seller
at the time of its perfection; hence, the sale is still valid.
CONSUMMATION
It occurs upon the constructive or actual delivery of the
subject matter to the buyer when the seller or her
successors-in-interest subsequently acquires ownership
thereof. Such circumstance happened in this case when
petitioners — who are Trinidad Quijada's heirs and
successors-in-interest — became the owners of the
subject property upon the reversion of the ownership of
the land to them. Consequently, ownership is transferred
to respondent Mondejar and those who claim their right
from him. Article 1434 of the New Civil Code supports the
ruling that the seller's "title passes by operation of law to
the buyer." 21 This rule applies not only when the subject
matter of the contract of sale is goods,22 but also to other
kinds of property, including real property.

OUTSIDE THE COMMERCE OF MAN
No merit. However, nowhere in Article 1409 (4) is it
provided that the properties of a municipality, whether it
be those for public use or its patrimonial property 25 are
outside the commerce of men. Besides, the lots in this
case were conditionally owned by the municipality. To
rule that the donated properties are outside the
commerce of men would render nugatory the
unchallenged reasonableness and justness of the
condition which the donor has the right to impose as
owner thereof. Moreover, the objects referred to as
outsides the commerce of man are those which cannot
be appropriated, such as the open seas and the heavenly
bodies.
LACHES
Not yet barred thereby. The 1960's sales made by
Trinidad Quijada cannot be the reckoning point as to
when petitioners' cause of action arose. They had no
interest over the property at that time except under the
deed of donation to which private respondents were not
privy.
Vda. De Ape vs. CA – 456 SCRA 193
Facts:
Private respondent instituted a case for “Specific
Performance of a Deed of Sale with Damages” against
Fortunato and his wife Petitioner. It was alleged in the
complaint that on 11 April 1971, private respondent and
Fortunato entered into a contract of sale of land under
which for a consideration of P5,000.00, Fortunato agreed
to sell his share in Lot No. 2319 to private
respondent. The agreement was contained in a receipt
prepared by private respondent’s son-in-law, Andres
Flores, at her behest.
Fortunato and petitioner denied the material allegations
of the complaint and claimed that Fortunato never sold
his share in Lot No. 2319 to private respondent and that
his signature appearing on the purported receipt after
getting only 30 pesos from the respondents was forged.
She also stated in her testimony that her husband was an
illiterate and only learned how to write his name in order
to be employed in a sugar central.
Compiled by Anouck Tan 5
Respondent:
Fortunato went to her store at the time when their lease
contract was about to expire. He allegedly demanded the
rental payment for his land but as she was no longer
interested in renewing their lease agreement, they
agreed instead to enter into a contract of sale which
Fortunato acceded to provided private respondent
bought his portion of Lot No. 2319 for
P5,000.00. Thereafter, she asked her son-in-law Flores to
prepare the aforementioned receipt. Flores read the
document to Fortunato and asked the latter whether he
had any objection thereto. Fortunato then went on to
affix his signature on the receipt.
CA:
trial court should have found that exhibit G bears all the
earmarks of a private deed of sale which is valid, binding
and enforceable between the parties, and that as a
consequence of the failure and refusal on the part of the
vendor Fortunato Ape to live up to his contractual
obligation, he and/or his heirs and successors-in-interest
can be compelled to execute in favor of, and to deliver to
the vendee, plaintiff-appellant Generosa Cawit de
Lumayno a registerable deed of absolute sale
Issue: Whether a contract of sale exist between the
Petitioner and Defendant?
Held:
No, A contract of sale is a consensual contract, thus, it is
perfected by mere consent of the parties. It is born from
the moment there is a meeting of minds upon the thing
which is the object of the sale and upon the price. Upon
its perfection, the parties may reciprocally demand
performance, that is, the vendee may compel the transfer
of the ownership and to deliver the object of the sale
while the vendor may demand the vendee to pay the
thing sold.
For there to be a perfected contract of sale, however, the
following elements must be present: consent, object, and
price in money or its equivalent.

In this case, as private respondent is the one seeking to
enforce the claimed contract of sale, she bears the
burden of proving that the terms of the agreement were
fully explained to Fortunato Ape who was an
illiterate. This she failed to do. While she claimed in her
testimony that the contents of the receipt were made
clear to Fortunato, such allegation was debunked by
Andres Flores himself when the latter took the witness
stand. As can be gleaned from Flores’s testimony, while
he was very much aware of Fortunato’s inability to read
and write in the English language, he did not bother to
fully explain to the latter the substance of the receipt. He
even dismissed the idea of asking somebody else to assist
Fortunato considering that a measly sum of thirty pesos
was involved.
Evidently, it did not occur to Flores that the document he
himself prepared pertains to the transfer altogether of
Fortunato’s property to his mother-in-law. It is precisely
in situations such as this when the wisdom of Article 1332
of the Civil Code readily becomes apparent which is “to
protect a party to a contract disadvantaged by illiteracy,
ignorance, mental weakness or some other handicap.”
The Court annulled the contract of sale between
Fortunato and private respondent on the ground of
vitiated consent.
RIGHT OF LEGAL REDEMPTION
Article 1623 of the Civil Code provides:
The right of legal pre-emption or redemption shall not be
exercised except within thirty days from the notice in
writing by the prospective vendor, or by the vendor, as
the case may be. The deed of sale shall not be recorded
in the Registry of Property, unless accompanied by an
affidavit of the vendor that he has given written notice
thereof to all possible redemptioners.
In this case, the records are bereft of any indication that
Fortunato was given any written notice of prospective or
consummated sale of the portions of Lot No. 2319 by the
vendors or would-be vendors. The thirty (30)-day
redemption period under the law, therefore, has not
commenced to run.
Compiled by Anouck Tan 6
Despite this, however, we still rule that petitioner could
no longer invoke her right to redeem from private
respondent for the exercise of this right "presupposes the
existence of a co-ownership at the time the conveyance
is made by a co-owner and when it is demanded by the
other co-owner or co-owners."42 The regime of co-
ownership exists when ownership of an undivided thing
or right belongs to different persons.43 By the nature of a
co-ownership, a co-owner cannot point to specific
portion of the property owned in common as his own
because his share therein remains intangible.44 As legal
redemption is intended to minimize co-ownership,45 once
the property is subdivided and distributed among the co-
owners, the community ceases to exist and there is no
more reason to sustain any right of legal redemption.46
In this case, records reveal that although Lot No. 2319 has
not yet been formally subdivided, still, the particular
portions belonging to the heirs of Cleopas Ape had
already been ascertained and they in fact took possession
of their respective parts.
Laforteza vs. Machuca – 333 SCRA 643 (GR No. 137552,
June 16, 2000)
PARTIES: HEIRS OF FRANCISCO LAFORTEZA – SELLER
ALONZO MACHUCA – BUYER
SUBJECT: A house and lot located at No. 7757 Sherwood
Street, Marcelo Green Village, Parañaque, Metro Manila
worth P630 000.00.
FACTS:
In the exercise of the authority of Special Power Of
Attorney, on January 20, 1989, the heirs of the late
Francisco Q. Laforteza represented by Roberto Z.
Laforteza and Gonzalo Z. Laforteza, Jr. entered into a
Memorandum of Agreement (Contract to Sell) with the
plaintiff over the subject property for the sum of
(P630,000.00) payable as follows:
(a) P30,000.00 as earnest money, to be forfeited in favor
of the defendants if the sale is not effected due to the
fault of the plaintiff;
(b) P600,000.00 upon issuance of the new certificate of
title in the name of the late Francisco Q. Laforteza and

upon execution of an extra-judicial settlement of the
decedent's estate with sale in favor of the plaintiff
Significantly, the fourth paragraph of the Memorandum
of Agreement (Contract to Sell) dated January 20, 1989
(Exh. "E", supra.) contained a provision as follows: . . . .
Upon issuance by the proper Court of the new title, the
BUYER-LESSEE shall be notified in writing and said
BUYERLESSEE shall have thirty (30) days to produce the
balance of P600,000.00 which shall be paid to the SELLER-
LESSORS upon the execution of the Extrajudicial
Settlement with sale.
On January 20, 1989, plaintiff paid the earnest money of
THIRTY THOUSAND PESOS (P30,000.00), plus rentals for
the subject property .
On September 18, 1998 3, defendant heirs, through their
counsel wrote a letter to the plaintiff furnishing the latter
a copy of the reconstituted title to the subject property,
advising him that he had thirty (3) days to produce the
balance of P600,000.00 under the Memorandum of
Agreement which plaintiff received on the same date.
On October 18, 1989, plaintiff sent the defendant heirs a
letter requesting for an extension of the THIRTY (30) DAYS
deadline up to November 15, 1989 within which to
produce the balance of P600,000.00. Defendant Roberto
Z. Laforteza, assisted by his counsel Atty. Romeo L.
Gutierrez, signed his conformity to the plaintiff's letter
request.
The extension, however, does not appear to have been
approved by Gonzalo Z. Laforteza, the second attorney-
in-fact as his conformity does not appear to have been
secured. On November 15, 1989, plaintiff informed the
defendant heirs, through defendant Roberto Z. Laforteza,
that he already had the balance of P600,000.00 covered
by United Coconut Planters Bank Manager's Check dated
November 15, 1989 .
However, the defendants, refused to accept the balance
.Defendant Roberto Z. Laforteza had told him that the
subject property was no longer for sale . On November
20, defendants informed plaintiff that they were
canceling the Memorandum of Agreement (Contract to
Sell) in view of the plaintiff's failure to comply with his
contractual obligations.
Compiled by Anouck Tan 7
Thereafter, plaintiff reiterated his request to tender
payment of the balance of P600,000.00. Defendants,
however, insisted on the rescission of the Memorandum
of Agreement.
Thereafter, plaintiff filed the instant action for specific
performance.
LOWER COURT:
The lower court rendered judgment in favor of the Alonzo
Machuca and against the defendant heirs of the late
Francisco Q. Laforteza,. Petitioners appealed to the Court
of Appeals,
CA:
This affirmed with the decision of the lower court. Hence
this petition wherein the petitioners raise the issues:
ISSUES:
(1) Whether or not the MOA is an OPTION CONTRACT,
CONTRACT TO SELL or a CONTRACT OF SALE.
2) WON the six-month period during which the respondent
would be in possession of the property as lessee was a
period within which to exercise an option.
HELD:
In the case at bench, there was a perfected agreement
between the petitioners and the respondent whereby the
petitioners obligated themselves to transfer the
ownership of and deliver the house and lot located at
7757 Sherwood St., Marcelo Green Village, Parañaque
and the respondent to pay the price amounting to six
hundred thousand pesos (P600,000.00).
All the elements of a contract of sale were thus present.
The elements of a valid contract of sale under Article 1458
of the Civil Code are (1) consent or meeting of the minds;
(2) determinate subject matter and (3) price certain
money or its equivalent.
Assuming petitioners were ready to comply with their
obligation (and Machuca cannot)
we find that rescission of the contract will still not
prosper. The rescission of a sale of an immovable property

is specifically governed by Article 1592 of the New Civil
Code, which reads:
In the sale of immovable property, even though it may
have been stipulated that upon failure to pay the price at
the time agreed upon the rescission of the contract shall
of right take place, the vendee may pay, even after the
expiration of the period, as long as no demand for
rescission of the contract has been made upon him either
judicially or by a notarial act. After the demand, the court
may not grant him a new term.
It is not disputed that the petitioners did not make a
judicial or notarial demand for rescission.
WON six-month period during which the respondent
would be in possession of the property as lessee was a
period within which to exercise an option.
The six-month period, during which the respondent
would be in possession of the property as lessee, was
clearly not a period within which to exercise an option. An
option is a contract granting a privilege to buy or sell
within an agreed time and at a determined price. An
option contract is a separate and distinct contract from
that which the parties may enter into upon the
consummation of the option. An option must be
supported by consideration.
An option contract is governed by the second paragraph
of Article 1479 of the Civil Code, which reads:
Art. 1479. An accepted unilateral promise to buy or to sell
a determinate thing for a price certain is binding upon the
promissor if the promise is supported by a consideration
distinct from the price.
In the present case, the six-month period merely delayed
the demandability of the contract of sale and did not
determine its perfection for after the expiration of the six-
month period, there was an absolute obligation on the
part of the petitioners and the respondent to comply with
the terms of the sale.
BILATERAL AND RECIPROCAL
Cortes vs. Court of Appeals - 494 SCRA 570 (GR No.
126083, July 12, 2006)
Compiled by Anouck Tan 8
FACTS:
For the purchase price of 3.7M, Villa Esperanza
Development Corporation and Antonio Cortes entered
into a contract of sale over the lots located at Baclaran,
Parañaque, Metro Manila. The Corporation advanced to
Cortes the total sum of P1,213,000.00. Later, in
September 1983, the parties executed a deed of absolute
sale on the following terms:
The Corporation shall advance 2.2 M as downpayment,
and Cortes shall likewise deliver the TCT for the 3 lots. The
balance of 1.5M shall be payable within a year from the
date of the execution.
The Corporation filed the instant case for specific
performance seeking to compel Cortes to deliver the TCTs
and the original copy of the Deed of Absolute Sale.
According to the Corporation, despite its readiness and
ability to pay the purchase price, Cortes refused delivery
of the sought documents. Cortes claimed that the
owner’s duplicate copy of the three TCTs were
surrendered to the Corporation and it is the latter which
refused to pay in full the agreed down payment.
RTC:
Rescind the sale and directed Cortes to return to the
Corporation the amount of P1,213,000.00, plus interest.
CA:
Reversed the decision and directed Cortes to execute a
Deed of Absolute Sale conveying the properties and to
deliver the same to the Corporation together with the
TCTs, simultaneous with the Corporation’s payment of
the balance of the purchase price of P2,487,000.00.
ISSUE: W/N there is delay in the performance of the
parties’ obligations that would justify the rescission of the
contract of sale.
HELD:
There is no doubt that the contract of sale in question
gave rise to a reciprocal obligation of the parties.
Reciprocal obligations are those which arise from the
same cause, and which each party is a debtor and a
creditor of the other, such that the obligation of one is
dependent upon the obligation of the other.

They are to be performed simultaneously, so that the
performance of one is conditioned upon the
simultaneous fulfillment of the other.
In the present case, the Deed of Sale contained a
stipulation that the Corporation shall pay in full the
downpayment upon execution of the contract. However,
based on Cortes’ admission, he agreed that the
Corporation’s full payment of the downpayment would
depend upon the delivery of the TCTs of the three subject
lots. As such, the corresponding reciprocal obligation of
the Corporation’s payment was the transfer of titles by
Cortes. His obligation is not only to affix the signature in
the Deed, but to set into motion the process that would
facilitate transfer of title of the lots.
As correctly found by the CA, Cortes never surrendered
said documents to the Corporation. Cortes avers that he
delivered the TCT’s through the broker’s son. He further
avers that the broker’s son delivered it to the broker, who
in turn delivered them to the Corporation. However,
Marcosa Sanchez’s unrebutted testimony is that, she did
not receive the TCTs. She also denied knowledge of
delivery thereof to her son, Manny.
What further strengthened the findings of the Court of
Appeals that Cortes did not surrender the subject
documents was the offer of Cortes’ counsel at the pre-
trial to deliver the TCTs and the Deed of Absolute Sale if
the Corporation will pay the balance of the down
payment. Indeed, if the said documents were already in
the hands of the Corporation, there was no need for
Cortes’ counsel to make such offer.
Considering that their obligation was reciprocal,
performance thereof must be simultaneous. The mutual
inaction of Cortes and the Corporation therefore gave rise
to a compensation morae or default on the part of both
parties because neither has completed their part in their
reciprocal obligation. Cortes is yet to deliver the original
copy of the notarized Deed and the TCTs, while the
Corporation is yet to pay in full the agreed down payment
of P2,200,000.00. This mutual delay of the parties cancels
out the effects of default, such that it is as if no one is
guilty of delay.
Additionally, under Article 1169 of the Civil Code, from
the moment one of the parties fulfills his obligation, delay
by the other begins. Since Cortes did not perform his part,
the provision of the contract requiring the Corporation to
Compiled by Anouck Tan 9
pay in full the down payment never acquired obligatory
force.
Onerous
Gaite vs. Fonacier - 2 SCRA 831 (GR No. L-11827, July 31,
1961)
FACTS:
Isabelo Fonacier executed a ‘Deed of Assignment’ in favor
of Fernando Gaite as his true and lawful attorney-in-fact
so that the latter may enter into a contract for the
exploration and development of the mining claims owned
by Fonacier. Gaite executed a general assignment
conveying the development and exploitation of said
mining claims to Larap Iron Mines owned by him.
Fonacier decided to revoke the ‘Deed of Assignment’ to
which Gaite assented on the condition that Fonacier is to
pay him P75,000 for the 24,000 metric tons of iron lodes
already extracted and to retain the company name Larap
Iron MInes. Fonacier already paid P10,000 leaving a
balance of P65,000 which, as agreed by them, is to be
derived from the local sale of Iron ore made by Larap Iron
Mines. On December 8, 1954, Fonacier issued a security
bond to secure payment of balance with Far Eastern
Surety and Insurance Co. but the surety provided that
liability to the company will only attach when there had
been actual sale of iron ore by Larap Iron Mines for an
amount of not less than P65,000 and that the bond will
automatically expire on December 8, 1955.
No sale of the iron ore was made thereafter. Gaite failed
to pay Fonacier the balance and the surety company
refused to pay contending that the bond expired
automatically
Gaite instituted the present case. Fonacier argued that
the payment of the P65,000 balance was subject to the
condition that it would be paid out of the first sale of the
iron ore by Larap Mines which did not happen.
ISSUE:
WON the obligation of Fonacier to pay Gaite the balance
of P65,000 was extinguished because the iron ore was not
sold within a year.
HELD:

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. That the sale did not occur within a period
of one year did not extinguish the obligation of Fonacier
to pay Gaite the balance of P65,000 because it does not
seem to be the intention of the parties to the contract.
The Court looked into several circumstances which lead
them to conclude that the sale of the iron ore is but a
suspensive term. First, the words of the contract express
no contingency in the buyer's obligation to pay.
Second, in the usual course of business, an onerous
contract is most likely preferred by the parties in a sale.
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.
Assuming that there could be doubt whether by the
wording of the contract the parties indented a suspensive
condition or a suspensive period (dies ad quem) for the
payment of the P65,000.00, the rules of interpretation
would incline the scales in favor of "the greater
reciprocity of interests", since sale is essentially onerous.
The Civil Code of the Philippines, Article 1378, paragraph
1, in fine, provides:
“If the contract is onerous, the doubt shall be
settled in favor of the greatest reciprocity of
interests.”
There can be no question that greater reciprocity obtains
if the buyer' obligation is deemed to be actually existing,
with only its maturity (due date) postponed or deferred,
that if such obligation were viewed as nonexistent or not
binding until the ore was sold.
The only rational view that can be taken is that the sale of
the ore to Fonacier was a sale on credit, and not an
aleatory contract where the transferor, Gaite, would
assume the risk of not being paid at all; and that the
previous sale or shipment of the ore was not a suspensive
condition for the payment of the balance of the agreed
Compiled by Anouck Tan 10
price, but was intended merely to fix the future date of
the payment.
Commutative
Buenaventura vs. CA - 416 SCRA 263
FACTS:
Defendant spouses Leonardo Joaquin and Feliciana
Landrito are the parents of plaintiffs Consolacion, Nora,
Emma and Natividad as well as of defendants Fidel,
Tomas, Artemio, Clarita, Felicitas, Fe, and Gavino, all
surnamed JOAQUIN. The married Joaquin children are
joined in this action by their respective spouses. Sought
to be declared null and void ab initio are certain deeds of
sale of real property executed by defendant parents
Leonardo Joaquin and Feliciana Landrito in favor of their
co-defendant children.
The petitioners argue that the deeds of sale are simulated
as they are null and void ab initio because:
1. There was no actual valid consideration for the deeds
of sale over the properties in litis;
2. Assuming that there was consideration in the sums
reflected in the questioned deeds, the properties are
more than three-fold times more valuable than the
measly sums appearing therein;
3. The deeds of sale do not reflect and express the true
intent of the parties (vendors and vendees); and
4. The purported sale of the properties in litis was the
result of a deliberate conspiracy designed to unjustly
deprive the rest of the compulsory heirs of their legitime.
The trial court ruled in favor of the defendants. The Court
of Appeals affirmed the trial court’s decision.
ISSUE:
(I) WON petitioners have a legal interest over
the properties subject of the Deeds of Sale
(II) WON the Deeds of Sale are void for lack of
consideration
(III) WON the Deeds of Sale are void for gross
inadequacy of price
RULING:

I. No, petitioners do not have a legal interest
over the properties subject of the Deeds of
Sale.
Petitioners failed to show any legal right to
the properties. In actions for the annulment
of contracts, such as this action, the real
parties are those who are parties to the
agreement or are bound either principally or
subsidiarily or are prejudiced in their rights
with respect to one of the contracting parties
and can show the detriment which would
positively result to them from the contract
even though they did not intervene in it.
Petitioners do not have any legal interest
over the properties subject of the Deeds of
Sale. As the appellate court stated,
petitioners’ right to their parents properties
is merely inchoate and vests only upon their
parents death. While still living, the parents
of petitioners are free to dispose of their
properties
III.
In their overzealousness to safeguard their
future legitime, petitioners forget that
theoretically, the sale of the lots to their
siblings does not affect the value of their
parents’ estate. While the sale of the lots
reduced the estate, cash of equivalent value
replaced the lots taken from the estate.
II. It is not the act of payment of price that
determines the validity of a contract of sale.
Payment of the price has nothing to do with
the perfection of the contract. Payment of
the price goes into the performance of the
contract. Failure to pay the consideration is
different from lack of consideration. The
former results in a right to demand the
fulfillment or cancellation of the obligation
under an existing valid contract while the
latter prevents the existence of a valid
contract.
A contract of sale is not a real contract, but a
consensual contract. As a consensual
contract, a contract of sale becomes a
Compiled by Anouck Tan 11
binding and valid contract upon the meeting
of the minds as to price. If there is a meeting
of the minds of the parties as to the price, the
contract of sale is valid, despite the manner
of payment, or even the breach of that
manner of payment. If the real price is not
stated in the contract, then the contract of
sale is valid but subject to reform.
Petitioners’ failure to prove absolute
simulation of price is magnified by their lack
of knowledge of their respondent siblings’
financial capacity to buy the questioned lots.
On the other hand, the Deeds of Sale which
petitioners presented as evidence plainly
showed the cost of each lot sold. Not only did
respondents’ minds meet as to the purchase
price, but the real price was also stated in the
Deeds of Sale. As of the filing of the
complaint, respondent siblings have also fully
paid the price to their respondent father.
Article 1355: Except in cases specified by law,
lesion or inadequacy of cause shall not
invalidate a contract, unless there has been
fraud, mistake or undue influence.
Art. 1470. Gross inadequacy of price does not
affect a contract of sale, except as may
indicate a defect in the consent, or that the
parties really intended a donation or some
other act or contract
Petitioners failed to prove any of the
instances mentioned in Articles 1355 and
1470 of the Civil Code which would
invalidate, or even affect, the Deeds of Sale.
Indeed, there is no requirement that the
price be equal to the exact value of the
subject matter of sale. All the respondents
believed that they received the commutative
value of what they gave.
Courts cannot follow one every step of his life
and extricate him from bad bargains, protect
him from unwise investments, relieve him
from one-sided contracts, or annul the
effects of foolish acts. There must be, in
addition, a violation of the law, the
commission of what the law knows as an

actionable wrong, before the courts are
authorized to lay hold of the situation and
remedy it.
Sale is Title and Not Mode
San Lorenzo Development Corp. vs. CA, - (G.R. No.
124242, Jan. 21, 2005)
FACTS:
Respondents Miguel Lu and Pacita Zavalla, (hereinafter,
the Spouses Lu) owned two (2) parcels of land situated in
Sta. Rosa, Laguna covered by TCT No. T-39022 and TCT
No. T-39023 both measuring 15,808 square meters or a
total of 3.1616 hectares.
According to Pablo Babasanta, Spouses Lu sold the two
parcels of land to him, for the price of P15.00 per square
meter. Babasanta made a downpayment of P50,000.00 as
evidenced by a memorandum receipt issued by Pacita Lu
of the same date. Several other payments totaling
P200,000.00 were made by Babasanta. Babasanta wrote
a letter to Pacita Lu to demand the execution of a final
deed of sale in his favor so that he could effect full
payment of the purchase price. Babasanta notified the
spouses about having received information that the
spouses sold the same property to another without his
knowledge and consent.
The Spouses Lu alleged that Pacita Lu obtained loans from
Babasanta and when the total advances of Pacita reached
P50,000.00, the latter and Babasanta, without the
knowledge and consent of Miguel Lu, had verbally agreed
to transform the transaction into a contract to sell the
two parcels of land to Babasanta with the P50,000.00 to
be considered as the downpayment for the property and
the balance to be paid on or before 31 December 1987.
Respondents Lu added that as of November 1987, total
payments made by Babasanta amounted to only P
200,000.00 and the latter allegedly failed to pay the
balance of P260,000.00 despite repeated demands.
Babasanta had purportedly asked Pacita for a reduction
of the price from P15.00 to P12.00 per square meter and
when the Spouses Lu refused to grant Babasantas
request, the latter rescinded the contract to sell and
declared that the original loan transaction just be carried
out in that the spouses would be indebted to him in the
amount of P200,000.00.
Compiled by Anouck Tan 12
SLDC (San Lorenzo Development Corporation) filed a
Motion to Intervene and alleged that it had legal interest
in the subject matter under litigation because the two
parcels of land involved had been sold to it in a Deed of
Absolute Sale with Mortgage. It alleged that it was a buyer
in good faith and for value and therefore it had a better
right over the property in litigation.
RTC rendered a decision upholding the sale made to SLDC
and ordered Spouses Lu to pay Babasanta the sum of
P200,000. CA reversed the decision declaring the sale
between Babasanta and Spouses Lu valid and the sale to
SLDC null and void on the ground that it was a purchaser
in bad faith.
ISSUE:
1. WON the agreement between Babasanta and Spouses
Lu was a contract to sell and not a contract of sale
2. WON the registration of the sale after the annotation
of the notice of lis pendens obliterate the effects of
delivery and possession in good faith which admittedly
had occurred prior to SLDCs knowledge of the transaction
in favor of Babasanta
RULING:
1. The agreement between Babasanta and Spouses
Lu was a contract to sell and not a contract of
sale.
A document was presented showing that Pacita
Lu acknowledged receipt of P50,000 and that she
agreed to sell the 3.6 hectares at P15 per square
meter. The receipt signed by Pacita Lu merely
states that she accepted the sum of P50,000.00
from Babasanta as partial payment of 3.6
hectares of farm lot situated in Sta. Rosa, Laguna.
While there is no stipulation that the seller
reserves the ownership of the property until full
payment of the price which is a distinguishing
feature of a contract to sell, the subsequent acts
of the parties convince us that the Spouses Lu
never intended to transfer ownership to
Babasanta except upon full payment of the
purchase price.
Babasantas letter dated 22 May 1989 was quite
telling. He stated therein that despite his
repeated requests for the execution of the final
deed of sale in his favor so that he could effect

full payment of the price, Pacita Lu allegedly
refused to do so. In effect, Babasanta himself
recognized that ownership of the property would
not be transferred to him until such time as he
shall have effected full payment of the price.
Moreover, had the sellers intended to transfer
title, they could have easily executed the
document of sale in its required form
simultaneously with their acceptance of the
partial payment, but they did not. Doubtlessly,
the receipt signed by Pacita Lu should legally be
considered as a perfected contract to sell.
The distinction between a contract to sell and a
contract of sale is quite germane. In a contract of
sale, title passes to the vendee upon the delivery
of the thing sold; whereas in a contract to sell, by
agreement the ownership is reserved in the
vendor and is not to pass until the full payment of
the price. In a contract of sale, the vendor has lost
and cannot recover ownership until and unless
the contract is resolved or rescinded; whereas in
a contract to sell, title is retained by the vendor
until the full payment of the price, such payment
being a positive suspensive condition and failure
of which is not a breach but an event that
prevents the obligation of the vendor to convey
title from becoming effective.
The perfection of a contract of sale should not be
confused with its consummation. In relation to
the acquisition and transfer of ownership, it
should be noted that sale is not a mode, but
merely a title. A mode is the legal means by which
dominion or ownership is created, transferred or
destroyed, but title is only the legal basis by
which to affect dominion or ownership. Under
Article 712 of the Civil Code, ownership and other
real rights over property are acquired and
transmitted by law, by donation, by testate and
intestate succession, and in consequence of
certain contracts, by tradition. Contracts only
constitute titles or rights to the transfer or
acquisition of ownership, while delivery or
tradition is the mode of accomplishing the same.
Therefore, sale by itself does not transfer or
affect ownership; the most that sale does is to
create the obligation to transfer ownership. It is
tradition or delivery, as a consequence of sale,
that actually transfers ownership.
Compiled by Anouck Tan 13
Explicitly, the law provides that the ownership of
the thing sold is acquired by the vendee from the
moment it is delivered to him in any of the ways
specified in Article 1497 to 1501. The word
delivered should not be taken restrictively to
mean transfer of actual physical possession of the
property. The law recognizes two principal
modes of delivery, to wit: (1) actual delivery; and
(2) legal or constructive delivery.
Actual delivery consists in placing the thing sold
in the control and possession of the vendee. Legal
or constructive delivery, on the other hand, may
be had through any of the following ways: the
execution of a public instrument evidencing the
sale; symbolical tradition such as the delivery of
the keys of the place where the movable sold is
being kept; traditio longa manu or by mere
consent or agreement if the movable sold cannot
yet be transferred to the possession of the buyer
at the time of the sale; traditio brevi manu if the
buyer already had possession of the object even
before the sale; and traditio constitutum
possessorium, where the seller remains in
possession of the property in a different capacity.
Respondent Babasanta did not acquire
ownership by the mere execution of the receipt
by Pacita Lu acknowledging receipt of partial
payment for the property. For one, the
agreement between Babasanta and the Spouses
Lu, though valid, was not embodied in a public
instrument. Hence, no constructive delivery of
the lands could have been effected. For another,
Babasanta had not taken possession of the
property at any time after the perfection of the
sale in his favor or exercised acts of dominion
over it despite his assertions that he was the
rightful owner of the lands. Simply stated, there
was no delivery to Babasanta, whether actual or
constructive, which is essential to transfer
ownership of the property. Thus, even on the
assumption that the perfected contract between
the parties was a sale, ownership could not have
passed to Babasanta in the absence of delivery,
since in a contract of sale ownership is
transferred to the vendee only upon the delivery
of the thing sold.

2. No, it did not obliterate the delivery and
possession in good faith.
It must be stressed that as early as 11 February
1989, the Spouses Lu executed the Option to Buy
in favor of SLDC upon receiving P316,160.00 as
option money from SLDC. After SLDC had paid
more than one half of the agreed purchase price
of P1,264,640.00, the Spouses Lu subsequently
executed on 3 May 1989 a Deed of Absolute Sale
in favor or SLDC. At the time both deeds were
executed, SLDC had no knowledge of the prior
transaction of the Spouses Lu with Babasanta.
Simply stated, from the time of execution of the
first deed up to the moment of transfer and
delivery of possession of the lands to SLDC, it had
acted in good faith and the subsequent
annotation of lis pendens has no effect at all on
the consummated sale between SLDC and the
Spouses Lu.
Section 52 of the Property Registration Decree
(P.D. No. 1529) which reads, thus: Sec. 52.
Constructive notice upon registration. Every
conveyance, mortgage, lease, lien, attachment,
order, judgment, instrument or entry affecting
registered land shall, if registered, filed, or
entered in the office of the Register of Deeds for
the province or city where the land to which it
relates lies, be constructive notice to all persons
from the time of such registering, filing, or
entering.
However, the constructive notice operates as
such by the express wording of Section 52from
the time of the registration of the notice of lis
pendens which in this case was effected only on
2 June 1989, at which time the sale in favor of
SLDC had long been consummated insofar as the
obligation of the Spouses Lu to transfer
ownership over the property to SLDC is
concerned. More fundamentally, a notice of lis
pendens only serves as a warning to a
prospective purchaser or incumbrancer that the
particular property is in litigation; and that he
should keep his hands off the same, unless he
intends to gamble on the results of the litigation.
Precisely, in this case SLDC has intervened in the
pending litigation to protect its rights. Obviously,
SLDCs faith in the merit of its cause has been
Compiled by Anouck Tan 14
vindicated with the Courts present decision
which is the ultimate denouement on the
controversy.
Equatorial Realty vs. Mayfair Theater, Inc. - 370 SCRA 56
FACTS:
This case stemmed from a Civil Case entitled "Mayfair"
Theater, Inc. v. Carmelo and Bauermann, Inc., et al.,"
where Carmelo & Bauermann, Inc entered into a Contract
of Lease with Mayfair Theater Inc. ("Mayfair") for a period
of 20 years. The lease covered a portion of the second
floor and mezzanine of a two-storey building it owned
which respondent used as a movie house known as
Maxim Theater.
Two years later,Mayfair entered into a second Contract of
Lease with Carmelo for the lease of another portion of the
latter's property .In that space, Mayfair put up another
movie house known as Miramar Theater. The Contract of
Lease was likewise for a period of 20 years.
Both leases contained a provision granting Mayfair a right
of first refusal to purchase the subject properties.
However, on July 30, 1978 — within the 20-year-lease
term — the subject properties were sold by Carmelo to
Equatorial Realty Development, Inc. ("Equatorial"),
without their first being offered to Mayfair.
As a result of the sale of the subject properties to
Equatorial, Mayfair filed a Complaint for (a) the
annulment of the Deed of Absolute Sale between
Carmelo and Equatorial, (b) specific performance, and (c)
damages. After trial on the merits, the lower court
rendered a Decision in favor of Carmelo and Equatorial.
The Supreme Court made the following pronouncement
for this case: The Deed of Absolute Sale between
petitioners Equatorial Realty Development, Inc. and
Carmelo & Bauermann, Inc.is deemed rescinded; Carmelo
& Bauermann is ordered to return to petitioner Equatorial
Realty Development the purchase price. The latter is
directed to execute the deeds and documents necessary
to return ownership to Carmelo & Bauermann of the
disputed lots. Carmelo & Bauermann is ordered to allow
Mayfair Theater, Inc. to buy the aforesaid lots.
The foregoing Decision of this Court became final and
executory. Subsequently, Mayfair filed a Motion for
Execution, which the trial court granted.

However, Carmelo could no longer be located. Thus,
following the order of execution of the trial court, Mayfair
deposited with the clerk of court. The lower court issued
a Deed of Reconveyance in favor of Carmelo and a Deed
of Sale in favor of Mayfair. On the basis of these
documents, the Registry of Deeds of Manila canceled
Equatorial's titles and issued new Certificates of Title in
the name of Mayfair.
Meanwhile, barely five months after Mayfair had
submitted its Motion for Execution before the RTC of
Manila, Equatorial filed action for the collection of a sum
of money against Mayfair, claiming payment of rentals or
reasonable compensation for the defendant's use of the
subject premises after its lease contracts had expired.
ISSUE: Whether or not Equatorial is entitled to back
rentals
RULING:
No. Equatorial is not entitled to back rentals.
No right of ownership was transferred from Carmelo to
Equatorial in view of a patent failure to deliver the
property to the buyer.
Rent is a civil fruit that belongs to the owner of the
property producing it by right of accession. Consequently
and ordinarily, the rentals that fell due from the time of
the perfection of the sale to petitioner until its rescission
by final judgment should belong to the owner of the
property during that period
By a contract of sale, "one of the contracting parties
obligates himself to transfer ownership of and to deliver
a determinate thing and the other to pay therefor a price
certain in money or its equivalent."
Ownership of the thing sold is a real right, which the buyer
acquires only upon delivery of the thing to him "in any of
the ways specified in articles 1497 to 1501, or in any other
manner signifying an agreement that the possession is
transferred from the vendor to the vendee." This right is
transferred, not merely by contract, but also by tradition
or delivery. And there is said to be delivery if and when
the thing sold "is placed in the control and possession of
the vendee." Thus, it has been held that while the
execution of a public instrument of sale is recognized by
law as equivalent to the delivery of the thing sold, such
constructive or symbolic delivery, being merely
presumptive, is deemed negated by the failure of the
vendee to take actual possession of the land sold.
Compiled by Anouck Tan 15
In the Law on Sales, delivery may be either actual or
constructive, but both forms of delivery contemplate "the
absolute giving up of the control and custody of the
property on the part of the vendor, and the assumption
of the same by the vendee."
It is clear that petitioner never took actual control and
possession of the property sold, in view of respondent's
timely objection to the sale and the continued actual
possession of the property. The objection took the form
of a court action impugning the sale which, as we know,
was rescinded by a judgment rendered by this Court in
the mother case. It has been held that the execution of a
contract of sale as a form of constructive delivery is a legal
fiction. It holds true only when there is no impediment
that may prevent the passing of the property from the
hands of the vendor into those of the vendee. When
there is such impediment, "fiction yields to reality — the
delivery has not been effected."
Hence, respondent's opposition to the transfer of the
property by way of sale to Equatorial was a legally
sufficient impediment that effectively prevented the
passing of the property into the latter's hands.
The execution of a public instrument gives rise, therefore,
only to a prima facie presumption of delivery. Such
presumption is destroyed when the instrument itself
expresses or implies that delivery was not intended; or
when by other means it is shown that such delivery was
not effected, because a third person was actually in
possession of the thing. In the latter case, the sale cannot
be considered consummated.
Ownership is acquired, not by mere agreement, but by
tradition or delivery. Under the factual environment of
this controversy as found by this Court in the mother
case, Equatorial was never put in actual and effective
control or possession of the property because of
Mayfair's timely objection.
In short, the sale to Equatorial may have been valid from
inception, but it was judicially rescinded before it could
be consummated. Petitioner never acquired ownership,
not because the sale was void, as erroneously claimed by
the trial court, but because the sale was not
consummated by a legally effective delivery of the
property sold.