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SALES CASES 01
YU BUN GUAN, petitioner, vs. ELVIRA ONG, respondent.
G.R. No. 144735. October 18, 2001
Facts:
Yu Bun Guan (P) and ElviroOng (R) were married on
April 30, 1961. Before their separation in 1992, they executed
a simulated Deed of Sale on a property located at J.P. Rizal.
This property (Title No. 26795) was bought by Elvira Ong out
of her personal fund in 1968. She agreed to execute the Deed
of Sale on Yu Bun’s promise that he would construct a
commercial building for the benefit of the children. The
consideration for the simulated sale was that, after its
execution in which he would represent himself as single, a
Deed of Absolute Sale would be executed in favor of the
three (3) children and that he would pay the Allied Bank, Inc.
the loan he obtained.He did not pay the consideration of PhP
200,000.00, which was the ostensible valuable consideration.
On the contrary, she paid for the capital gains tax and all the
other assessments even amounting to not less than P60,
000.00, out of her personal funds. Because of the sale, a new
title (TCT No. 181033) was issued in his name, but to insure
that he would comply with his commitment, she did not
deliver the owners copy of the title to him.
However, Yu Bun refused to perform his promise and
threatens Elvira on delivering to him the owner’s copy of the
title, which she averred. Petitioner filed a Petition for
Replacement of owner’s duplicate title. He made it appear
that the title was lost or misplaced. The Court granted the
petition and a new copy of the title was issued. Upon
discovery, Elvira immediately executed an Affidavit of
Adverse Claim and asked the Court that the sale of the
property be declared null and void.
Petitioner avers his wife’s claim and contends that
property was bought with his own money. He was not
allowed to purchase it due to his nationality, as such, they
simulated a sale to reflect the true ownership. He also
asserted that respondent was in pari delicto* being privy to
the simulated sale.
RTC declared that the property was the paraphernal
property of respondent and that the rule of in pari delicto
was not applicable in the case as it would apply onlyto
existing contracts with an illegal cause or object, not to
simulated or fictitious contracts or to those that were
inexistent due to lack of an essential requisite such as cause
or consideration. It declared the Deed of Sale void for having
it simulated and executed during the marriage of the parties.
CA uphold the ruling of the RTC.
Issue:
WON the Deed of Sale was valid contract
Held:
No.
The Court affirmed the ruling of the RTC and CA that the
property was a paraphernal property of Elvira Ong and the
Deed of Sale executed between them was void. Citing
Rongavillavs CA, the Court ruled that a deed of sale, in which
the stated consideration had not in fact been paid, is null and
void. A contract of purchase and sale is null and void and
produces no effect whatsoever where the same is without
cause or consideration in that the purchase price which
appears thereon as paid has in fact never been paid by the
purchaser to vendor.
It is clear that the Deed of Sale was completely
simulated and hence, void and without legal effect. No
portion of the PhP 200,000.00 consideration stated in the
contract was ever paid. The Deed of Sale was executed
merely to facilitate the transfer of the property to petitioner
pursuant to an agreement between the parties to enable him
to construct a commercial building and to sell the Juno
property to their children. Being merely a subterfuge, that
agreement cannot be taken as the consideration for the sale.
Moreover, the principle of in pari delicto does not apply
in this case because the Deed of Sale was void.
* inpari delicto-when two parties are equally at fault, the law
leaves them as they are and denies recovery by either one of
them
MASICLAT vs. CENTENO ( 1956 )
NATURE Appeal from CA Decision
FACTS:
Defendant-respondent Centeno owned 15 sacks of rice
offered for sale at her store situated on a street near public
market. In the morning of Jan. 21, 1951, a person approached
defendant and offered her to purchase the rice in question.
Defendant agreed to sell 15 sacks of rice in question at P26/
sack, which the buyer promised to pay as soon as he would
receive the price of his adobe stones which were being then
unloaded from a truck owned Francisco Tan, then parked at
the opposite side of the street in front of the Union Grocery
facing the defendant’s store. Relying on this promise and
upon the request of said purchaser, the defendant ordered
the rice in question loaded in the said truck, of which the
plaintiff was the caretaker, expecting that as soon as the
adobe stones would be paid, said purchaser would pay her
the price of the rice. While the rice was being loaded on the
truck and even thereafter, defendant kept an eye on it
waiting for the purchaser to come to pay her. When the
adobe stones were completely unloaded from the truck, the
defendant looked for the purchaser, but the latter was no
found. So defendant decided to unload the rice from the
truck but to her surprise plaintiff-petitioner Masiclat objected
on the ground that he has bought it at P26/sack from a
person whom he did not know and whom he met only that
morning for the first time. Defendant insisted in unloading
the rice and the plaintiff objected. Hence, defendant called a
policeman to investigate the matter and the latter brought
the rice in question to the Municipal building where it was
deposited pending investigation. Plaintiff then initiated this
action for recovery of possession of the rice in question.
ISSUES
1. WON the contract of sale was consummated between
respondent Centeno and unknown purchaser (alleged
unknown seller to plaintiff)
2. WON petitioners have a better title to the rice in question
HELD
A. NO
Ratio: Although a contract of sale is perfected upon the
parties having agreed as to the thing which is the subject
matter of the contract and the price, ownership is not
considered transmitted until the property is actually delivered
and the purchaser has taken possession and paid the price
agreed upon.

Reasoning:
1) The evidence does not clearly show the identity of the
person who tried to buy the rice in question from the
respondent, and neither does it show that the same person
was the one who sold the commodity to Ramon Masiclat.
2) The sale between the respondent Centeno and the
unknown purchaser was not consummated because although
the former allowed the rice in question to be loaded in the
truck, she did not intend to transfer its ownership until she
was paid the stipulated price; and this is very evident from
the fact that respondent continually watched her rice and
demanded its unloading as soon as the unknown purchaser
was missing. Respondent thus has not lost ownership and
legal possession thereof.
B. NO
The general principle of law as enunciated in A1505 CC that
where one of 2 persons must suffer the fraud of a third, the
loss should fall upon him who has enabled the third person to
do the wrong, does not apply for the ff.
reasons:
1) there was no definite finding that the unknown purchaser
was same person who sold the rice to Masiclat,
2) Centeno could not have been so negligent as to allow the
unknown purchaser to run away with said rice and enable
him to sell it to Masiclat, it evident that in fact Centeno kept
an eye on the rice in question.
Disposition Decision of CA is affirmed.
Facts:
Centeno sold sacks of rice at a store on a street near the
public market. A person offered to buy 15 sacks of rice, to be
paid as soon as he sold his adobe stone, which was being
unloaded, from a truck on the opposite side of the street.
Centeno then order the sacks of rice to be loaded onto the
truck. Masiclat, loaded the rice while Centeno watched.
However the buyer did not come back. Upon orders of
Centeno to unload the rice, Masiclat objected. Masiclat
claimed to have bought the rice.
Issue:
WON Masiclat had better title to the rice over Centeno (No)
Ruling:
Centeno did not lose her ownership over the rice as she did
not intend to part with her ownership over the rice until the
price was paid. This was evident by her watching the sacks
being loaded in the truck. As Masiclat did not buy the rice
from a merchant’s store or market, he did not acquire a
better title than Centeno.
FACTS:
Centeno (defendant) was the owner of 15 sacks of rice, which
were for sale at her store near the public market of Angeles.
A stranger approached her and offered to purchase the rice.
Centeno agreed to sell the 15 sacks for P26.00 each, which
the stranger promised to pay as soon as he would receive the
price of his adobe stones (which were being then unloaded
from a truck parked at the opposite side of the street).
Relying on this promise, Centeno ordered the rice loaded in
the aforementioned truck, of which Masiclat (plaintiff) was
the caretaker, on the expectation that as soon as the adobe
stones would be paid, the stranger would pay her the price of
the rice. While the rice was being loaded, Centeno was
keeping an eye on it, waiting for the stranger to come and
pay her. When the stones were completely unloaded, the
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stranger could nowhere be found. Thereupon, Centeno
decided to unload the rice from the truck, but Masiclat
objected on the ground that he has bought it at P26.00 per
sack from a person whom he did not know.
Quiroga vs Parsons
G.R. No. L-11491
Subject: Sales
Doctrine: Contract of Agency to Sell vs Contract of Sale
Facts:
On Jan 24, 1911, plaintiff and the respondent entered into a
contract making the latter an “agent” of the former. The
contract stipulates that Don Andres Quiroga, here in
petitioner, grants exclusive rights to sell his beds in the
Visayan region to J. Parsons. The contract only stipulates that
J.Parsons should pay Quiroga within 6 months upon the
delivery of beds.
Quiroga files a case against Parsons for allegedly violating the
following stipulations: not to sell the beds at higher prices
than those of the invoices; to have an open establishment in
Iloilo; itself to conduct the agency; to keep the beds on public
exhibition, and to pay for the advertisement expenses for the
same; and to order the beds by the dozen and in no other
manner. With the exception of the obligation on the part of
the defendant to order the beds by the dozen and in no other
manner, none of the obligations imputed to the defendant in
the two causes of action are expressly set forth in the
contract. But the plaintiff alleged that the defendant was his
agent for the sale of his beds in Iloilo, and that said
obligations are implied in a contract of commercial agency.
The whole question, therefore, reduced itself to a
determination as to whether the defendant, by reason of the
contract hereinbefore transcribed, was a purchaser or an
agent of the plaintiff for the sale of his beds.
Issue:
Whether the contract is a contract of agency or of sale.
Held:
In order to classify a contract, due attention must be given to
its essential clauses. In the contract in question, what was
essential, as constituting its cause and subject matter, is that
the plaintiff was to furnish the defendant with the beds which
the latter might order, at the price stipulated, and that the
defendant was to pay the price in the manner stipulated.
Payment was to be made at the end of sixty days, or before,
at the plaintiff’s request, or in cash, if the defendant so
preferred, and in these last two cases an additional discount
was to be allowed for prompt payment. These are precisely
the essential features of a contract of purchase and sale.
There was the obligation on the part of the plaintiff to supply
the beds, and, on the part of the defendant, to pay their
price. These features exclude the legal conception of an
agency or order to sell whereby the mandatory or agent
received the thing to sell it, and does not pay its price, but
delivers to the principal the price he obtains from the sale of
the thing to a third person, and if he does not succeed in
selling it, he returns it. By virtue of the contract between the
plaintiff and the defendant, the latter, on receiving the beds,
was necessarily obliged to pay their price within the term
fixed, without any other consideration and regardless as to
whether he had or had not sold the beds.
In respect to the defendant’s obligation to order by the
dozen, the only one expressly imposed by the contract, the
effect of its breach would only entitle the plaintiff to
disregard the orders which the defendant might place under

other conditions; but if the plaintiff consents to fill them, he
waives his right and cannot complain for having acted thus at
his own free will.
For the foregoing reasons, we are of opinion that the contract
by and between the plaintiff and the defendant was one of
purchase and sale, and that the obligations the breach of
which is alleged as a cause of action are not imposed upon
the defendant, either by agreement or by law.
CIR v. CONSTANTINO
G.R. No. L-25926 February 27, 1970
Doctrine:
• The transfer of title or agreement to transfer it for a price
paid or promised is the essence of sale. If such transfer puts
the transferee in the attitude or position of an owner and
makes him liable to the transferor as a debtor for the agreed
price, and not merely as an agent who must account for the
proceeds of a resale, the transaction is a sale; while the
essence of an agency to sell is the delivery to an agent, not as
his property, but as the property of the principal, who
remains the owner and has the right to control sales, fix the
price, and terms, demand and receive the proceeds less the
agent’s commission upon sales made.
• That the dealer issues his own sales invoice to the customer
is neither a means of acquiring ownership nor is it proof of
ownership.
Facts:
Petitioner Commissioner of Internal Revenue (CIR) assessed
against and demanded from respondent Constantino the
commercial broker’s percentage tax of 6% on his gross
compensation for 1956, as dealer or distributor of the
products of International Harvester, Macleod, Inc. (IHM).
Respondent is designated as the exclusive dealer of the
products IHM within a prescribed territory. In classifying
himself as an independent merchant instead of a commercial
broker, respondent Constantino cites that he may buy IHM
products for Resale to his customers; that he is granted trade
discounts and a cash discount under certain conditions; that
he may purchase service parts on open credit account or on a
30-day term; and that he sold service parts to his customers
on cash basis. Constantino also cited the fact that his
purchases are covered by IHM’s sales invoices, and when he
re-sells he issues his own sales invoice.
Constantino protested the assessment on the ground that he
is not a commercial broker. On his protest being overruled,
he filed a petition for review with the Court of Tax Appeals,
which, after trial, found for him. Upon his reversal by the tax
court, the CIR interposed the present appeal.
Issue:
Whether or not the relationship between the respondent and
IHM is that of a vendor and a vendee
Held:
No. A casual examination of respondent’s evidence may give
the impression that this relationship with the company is that
of vendor and vendee, but a closer look into the actual legal
effect of the terms and conditions embodied, rather than the
names of the contracts used or the terminologies employed,
in the chain of documents shows that the relation between
the company and the respondent is one of principal and
agent.
Respondent failed to state or notice, however, the condition
in his agreement with IHM, which is in small print, that the
title of the goods delivered under this order shall remain in
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IHM until the full purchase price shall have been paid in cash
or acceptable security. That the dealer should issue his own
sales invoice to the customer is neither a means of acquiring
ownership nor is it proof of ownership.
Since the company retained ownership of the goods, even as
it delivered possession unto the dealer for resale to
customers, the price and terms of which were subject to the
company’s control, the relationship between the company
and the dealer is one of agency, tested under the following
criterion:
The difficulty in distinguishing between contracts of sale and
the creation of an agency to sell has led to the establishment
of rules by the application of which this difficulty may be
solved. The decisions say the transfer of title or agreement to
transfer it for a price paid or promised is the essence of sale.
If such transfer puts the transferee in the attitude or position
of an owner and makes him liable to the transferor as a
debtor for the agreed price, and not merely as an agent who
must account for the proceeds of a resale, the transaction is a
sale; while the essence of an agency to sell is the delivery to
an agent, not as his property, but as the property of the
principal, who remains the owner and has the right to control
sales, fix the price, and terms, demand and receive the
proceeds less the agent’s commission upon sales made
(Salisbury v. Brooks, 94 SE 117, 118-119).
The control by the company of the resale made, or agreed
upon to be made, by the dealer is so pervasive as to exclude
the idea of the latter being an independent merchant. As
respondent is not an independent merchant, but an agent,
the discount of 16% that he receives is not a “trade discount”
but a compensation or profit for selling or bringing about
sales or purchases of merchandise for the company.
Arturo Abalos vs Galicano Macatangay, Jr.
439 SCRA 649 – Civil Law – Law on Sales – Option – Earnest
Money
Arturo and Esther Abalos were husband and wife. They own a
parcel of land in Makati. On June 2, 1988, Arturo, armed with
a purported Special Power of Attorney, executed a Receipt
and Memorandum of Agreement in favor of Galicano
Macatangay, Jr. in which Arturo acknowledged he received a
P5k check from Galicano as earnest money to be deducted
from the purchase price and that Arturo binds himself to sell
the land to Galicano within 30 days from receipt of the P5k.
The purchase price agreed upon was P1.3 M. However, the
P5k check was dishonored due to insufficiency.
Apparently however, Esther and Arturo were having a rocky
relationship. Esther executed a SPA in favor of her sister and
that she is selling her share in the conjugal property to
Galicano. It was alleged that that the RMOA is not valid for
Esther’s signature was not affixed thereto. And that Esther
never executed a SPA in favor of Arturo. Galicano informed
the couple that he has prepared a check to cover the
remainder of the amount that needs to be paid for the land.
He demanded that the land be delivered to him. But the
spouses failed to deliver the land. Galicano sued the spouses.
ISSUE:
Whether or not there was a contract of sale between Arturo
and Galicano. Whether or not the subsequent agreement
between Galicano and Esther is binding and that it cured the
defect of the earlier contract between Arturo and Galicano.
HELD:
No. No matter how the RMOA is looked upon, the same
cannot be valid. At best, the agreement between Arturo and
Galicano is a mere grant of privilege to purchase to Galicano.

The promise to sell is not binding to Arturo for there was
actually no consideration distinct from the price. Be it noted
that the parties considered the P5k as an earnest money to
be deducted from the purchase price.
Sanchez vs. Rigos
45 SCRA 368 June 1972
FACTS:
In an instrument entitled "Option to Purchase," executed on
April 3, 1961, defendant-appellant Severina Rigos "agreed,
promised and committed ... to sell" to plaintiff-appellee
Nicolas Sanchez for the sum of P1,510.00 within two (2) years
from said date, a parcel of land situated in the barrios of Abar
and Sibot, San Jose, Nueva Ecija. It was agreed that said
option shall be deemed "terminated and elapsed," if
“Sanchez shall fail to exercise his right to buy the property"
within the stipulated period. On March 12, 1963, Sanchez
deposited the sum of Pl,510.00 with the CFI of Nueva Ecija
and filed an action for specific performance and damages
against Rigos for the latter’s refusal to accept several tenders
of payment that Sanchez made to purchase the subject land.
Defendant Rigos contended that the contract between them
was only “a unilateral promise to sell, and the same being
unsupported by any valuable consideration, by force of the
New Civil Code, is null and void." Plaintiff Sanchez, on the
other hand, alleged in his compliant that, by virtue of the
option under consideration, "defendant agreed and
committed to sell" and "the plaintiff agreed and committed to
buy" the land described in the option. The lower court
rendered judgment in favor of Sanchez and ordered Rigos to
accept the sum Sanchez judicially consigned, and to execute
in his favor the requisite deed of conveyance. The Court of
Appeals certified the case at bar to the Supreme Court for it
involves a question purely of law.
ISSUE:
Was there a contract to buy and sell between the parties or
only a unilateral promise to sell?
COURT RULING:
The Supreme Court affirmed the lower court’s decision. The
instrument executed in 1961 is not a "contract to buy and
sell," but merely granted plaintiff an "option" to buy, as
indicated by its own title "Option to Purchase." The option
did not impose upon plaintiff Sanchez the obligation to
purchase defendant Rigos' property. Rigos "agreed, promised
and committed" herself to sell the land to Sanchez for
P1,510.00, but there is nothing in the contract to indicate
that her aforementioned agreement, promise and
undertaking is supported by a consideration "distinct from
the price" stipulated for the sale of the land. The lower court
relied upon Article 1354 of the Civil Code when it presumed
the existence of said consideration, but the said Article only
applies to contracts in general.
However, it is not Article 1354 but the Article 1479 of the
same Code which is controlling in the case at bar because the
latter’s 2nd paragraph refers to "sales" in particular, and,
more specifically, to "an accepted unilateral promise to buy
or to sell." Since there may be no valid contract without a
cause or consideration, the promisor is not bound by his
promise and may, accordingly, withdraw it. Pending notice of
its withdrawal, his accepted promise partakes, however, of
the nature of an offer to sell which, if accepted, results in a
perfected contract of sale. Upon mature deliberation, the
Court reiterates the doctrine laid down in the Atkins case and
deemed abandoned or modified the view adhered to in the
Southwestern Company case.
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Assuming arguendo that it was a bilateral promise to buy and
sell, the same is still not binding for Galicano failed to render
a payment of legal tender. A check is not a legal tender.
Still assuming arguendo, that the P5k was an earnest money
which supposedly perfected a contract of sale, the RMOA is
still not valid for Esther’s signature was not affixed. The
property is conjugal and under the Family Code, the spouses’
consents are required. Further, the earnest money here is not
actually the earnest money contemplated under Article 1482
under the Civil Code.
The subsequent agreement between Esther and Galicano did
not ratify the earlier transaction between Arturo and
Galicano. A void contract can never be ratified.
EQUATORIAL V. MAYFAIR - Sale of Land
While execution of a public instrument of sale is recognized
by law as equivalent to the delivery of the thing sold, such
constructive or symbolic delivery is merely presumptive. It is
nullified by the failure of the vendee to take actual possession
of the land sold.
FACTS:
Carmelo & Bauermann, Inc. owned a land, together with two
2-storey buildings at Claro M. Recto Avenue, Manila, and
covered by TCT No. 18529.
On June 1, 1967, Carmelo entered into a Contract of Lease
with Mayfair Theater Inc. fpr 20 years. The lease covered a
portion of the second floor and mezzanine of a two-storey
building with about 1,610 square meters of floor area, which
respondent used as Maxim Theater.
Two years later, on March 31, 1969, Mayfair entered into a
second Lease with Carmelo for another portion of the latter’s
property this time, a part of the second floor of the two-
storey building, and two store spaces on the ground floor. 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 clause giving Mayfair a right of first
refusal to purchase the subject properties. Sadly, on July 30,
1978 - within the 20-year-lease term -- the subject properties
were sold by Carmelo to Equatorial Realty Development, Inc.
for eleven million smackers, without their first being offered
to Mayfair.
As a result of the sale of the subject properties to Equatorial,
Mayfair filed a Complaint before the Regional Trial Court of
Manila for the recission of the Deed of Absolute Sale between
Carmelo and Equatorial, specific performance, and damages.
RTC decided for Carmelo and Equatorial. Tsk tsk.
CA reversed and ruled for Mayfair. The SC denied a petition
questioning the CA decision. What happened is that the
contract did get rescinded, Equatorial got its money back and
asserted that Mayfair have the right to purchase the lots for
11 million bucks.
Decision became final and executory, so Mayfair deposited
with the clerk the 11M (less 847grand withholding) payment
for the properties (Carmelo somehow disappeared).
Meanwhile, on Sept 18, 1997, barely five months after
Mayfair submitted its Motion for Execution, Equatorial
demanded from Mayfair backrentals and reasonable
compensation for the Mayfair’s continued use of the subject
premises after its lease contracts expired. Remember that
Mayfair was still occupying the premises during all this
hullabaloo.

ISSUE:
Whether or not Equatorial was the owner of the subject
property and could thus enjoy the fruits and rentals.
HELD:
NO.
Nor right of ownership was transferred from Carmelo to
Equatorial since there was failure to deliver the property to
the buyer. Compound this with the fact that the sale was
even rescinded.
The court went on to assert that rent is a civil fruit that
belonged to the owner of the property producing it by right
of accession. Hence, the rentals that fell due from the time of
the perfection of the sale to petitioner until its rescission by
final judgment should belong to the owner of the property
during that period.
We remember from SALES that in a contract of sale, “one of
the contracting parties obligates himself to transfer
ownership of and to deliver a determinate thing and the
other to pay therefor a price certain in money or its
equivalent.”
Ownership of the thing sold is a real right, which the buyer
acquires only upon delivery of the thing to him “in any of the
ways specified in articles 1497 to 1501, or in any other
manner signifying an agreement that the possession is
transferred from the vendor to the vendee.” This right is
transferred, not by contract alone, but by tradition or
delivery. There is delivery if and when the thing sold “is
placed in the control and possession of the vendee.”
While execution of a public instrument of sale is recognized
by law as equivalent to the delivery of the thing sold, such
constructive or symbolic delivery is merely presumptive. It is
nullified by the failure of the vendee to take actual possession
of the land sold.
For property to be delivered, we need two things. Delivery of
property or title, and transfer of control or custody to the
buyer.
Possession was never acquired by the petitioner. It therefore
had no rights to rent.
SPS. LITONJUA vs. L & R CORPORATION
FACTS:
This stems from loans obtained by the spouses Litonjua from
L&R Corporation in the aggregate sum of P400,000.00;
P200,000.00 of which was obtained on August 6, 1974 and
the remaining P200,000.00 obtained on March 27, 1978. The
loans were secured by a mortgage constituted by the spouses
upon their two parcels of land and the improvements
thereon. The mortgage was duly registered with the Register
of Deeds.
Spouses Litonjua sold to Philippine White House Auto Supply,
Inc. (PWHAS) the parcels of land they had previously
mortgaged to L & R Corporation for the sum of P430,000.00.
Meanwhile, with the spouses Litonjua having defaulted in the
payment of their loans, L & R Corporation initiated
extrajudicial foreclosure proceedings with the Ex-Oficio
Sheriff of Quezon City. The mortgaged properties were sold
at public auction to L & R Corporation as the only bidder for
the amount of P221,624.58.
On April 22, 1981, L & R Corporation wrote a letter to the
Sheriff, copy furnished to the Register of Deeds, stating: (1)
that the sale of the mortgaged properties to PWHAS was
without its consent, in contravention of paragraphs 8 and 9 of
their Deed of Real Estate Mortgage; and (2) that it was not
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the spouses Litonjua, but PWHAS, who was seeking to
redeem the foreclosed properties, when under Articles 1236
and 1237 of the New Civil Code, the latter had no legal
personality or capacity to redeem the same.
On the other hand, the spouses Litonjua asked the Register of
Deeds to annotate their Certificate of Redemption as an
adverse claim on the titles of the subject properties on
account of the refusal of L & R Corporation to surrender the
owner’s duplicate copies of the titles to the subject
properties. With the refusal of the Register of Deeds to
annotate their Certificate of Redemption, the Litonjua
spouses filed a Petition on July 17, 1981 against L & R
Corporation for the surrender of the owner’s duplicate of
Transfer Certificates of Title No. 197232 and 197233 before
the then CFI.
ISSUE:
WON there was a Valid and enforceable stipulation granting
the mortgagee the right of first refusal.
HELD:
While petitioners question the validity of paragraph 8 of their
mortgage contract, they appear to be silent insofar as
paragraph 9 thereof is concerned. Said paragraph 9 grants
upon L & R Corporation the right of first refusal over the
mortgaged property in the event the mortgagor decides to
sell the same. We see nothing wrong in this provision. The
right of first refusal has long been recognized as valid in our
jurisdiction.
The consideration for the loan-mortgage includes the
consideration for the right of first refusal. L & R Corporation
is in effect stating that it consents to lend out money to the
spouses Litonjua provided that in case they decide to sell the
property mortgaged to it, then L & R Corporation shall be
given the right to match the offered purchase price and to
buy the property at that price. Thus, while the spouses
Litonjua had every right to sell their mortgaged property to
PWHAS without securing the prior written consent of L & R
Corporation, it had the obligation under paragraph 9, which is
a perfectly valid provision, to notify the latter of their
intention to sell the property and give it priority over other
buyers. It is only upon failure of L & R Corporation to exercise
its right of first refusal could the spouses Litonjua validly sell
the subject properties to others, under the same terms and
conditions offered to L & R Corporation.
It was then held that the Contract of Sale there, which
violated the right of first refusal, was rescissible.
In the case at bar, PWHAS cannot claim ignorance of the right
of first refusal granted to L & R Corporation over the subject
properties since the Deed of Real Estate Mortgage containing
such a provision was duly registered with the Register of
Deeds. As such, PWHAS is presumed to have been notified
thereof by registration, which equates to notice to the whole
world.
That it did not duly exercised its right of first refusal at the
opportune time cannot be taken against it, precisely because
it was not notified by the spouses Litonjua of their intention
to sell the subject property and thereby, to give it priority
over other buyers.
Federico Serra vs Court of Appeals
229 SCRA 60 – Civil Law – Contracts – Option Contract –
Consideration Distinct from the Price
In 1975, a “Lease Contract with Option to Buy” was executed
between Federico Serra and the Rizal Commercial Banking
Corporation (RCBC). It was agreed that Serra shall lease to

RCBC his land from the year 1975 to 2000. It was also agreed
that within 10 years from 1975, RCBC shall exercise an option
whether or not to buy the said lot at a price not exceeding
P210.00 per square meter. However, no option money was
provided for in the contract hence, RCBC did not pay any
option money for the exercise of such option to buy. What
was provided, however, was a clause which states that in
case RCBC fails to exercise such option to buy, it shall forfeit
all improvements it made (or will make) on said land in favor
of Serra.
In 1984, RCBC communicated to Serra that it now wants to
buy the said land. Serra however refused. RCBC sued Serra.
Serra now contends that the option to buy was ineffective
because it was not supported by any consideration distinct
from the price hence, it is not binding upon him.
ISSUE:
Whether or not there was no consideration distinct from the
price.
HELD:
No, there is a consideration here. The Supreme Court ruled
that in this case, the consideration which is distinct from the
price was the agreement in the contract which stated that if
RCBC fails to exercise its option to buy, it shall transfer all
improvements made on the land [by RCBC] in favor of Serra.
Such is an agreement more onerous than the payment of
option money. Since there is a consideration distinct from the
price, Serra is bound by the option contract. Therefore, he
cannot refuse to sell the land to RCBC.
1484
Carbonell vs. Court of Appeals, and Poncio
69 SCRA 99 January 1976
FACTS:
On January 27, 1955, respondent Jose Poncio executed a
private memorandum of sale of his parcel of land with
improvements situated in San Juan, Rizal in favor of
petitioner Rosario Carbonell who knew that the said property
was at that time subject to a mortgage in favor of the
Republic Savings Bank (RSB) for the sum of P1,500.00. Four
days later, Poncio, in another private memorandum, bound
himself to sell the same property for an improved price to
one Emma Infante for the sum of P2,357.52, with the latter
still assuming the existing mortgage debt in favor of the RSB
in the amount of P1,177.48. Thus, in February 2, Poncio
executed a formal registerable deed of sale in her (Infante's)
favor. So, when the first buyer Carbonell saw the seller
Poncio a few days afterwards, bringing the formal deed of
sale for the latter's signature and the balance of the agreed
cash payment, she was told that he could no longer proceed
with formalizing the contract with her (Carbonell) because he
had already formalized a sales contract in favor of Infante.
To protect her legal rights as the first buyer, Carbonell
registered on February 8, 1955 with the Register of Deeds her
adverse claim as first buyer entitled to the property.
Meanwhile, Infante, the second buyer, was able to register
the sale in her favor only on February 12, 1955, so that the
transfer certificate of title issued in her name carried the duly
annotated adverse claim of Carbonell as the first buyer. The
trial court declared the claim of the second buyer Infante to
be superior to that of the first buyer Carbonell, a decision
which the Court of Appeals reversed. Upon motion for
reconsideration, however, Court of Appeals annulled and set
aside its first decision and affirmed the trial court’s decision.
ISSUE:
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Who has the superior right over the subject property?
COURT RULING:
The Supreme Court reversed the appellate court’s decision
and declared the first buyer Carbonell to have the superior
right over the subject property, relying on Article 1544 of the
Civil Code. Unlike the first and third paragraphs of said Article
1544, which accord preference to the one who first takes
possession in good faith of personal or real property, the
second paragraph directs that ownership of immovable
property should be recognized in favor of one "who in good
faith first recorded" his right. Under the first and third
paragraphs, good faith must characterize the prior
possession, while under the second paragraph, good faith
must characterize the act of anterior registration.
When Carbonell bought the lot from Poncio on January 27,
1955, she was the only buyer thereof and the title of Poncio
was still in his name solely encumbered by bank mortgage
duly annotated thereon. Carbonell was not aware - and she
could not have been aware - of any sale to Infante as there
was no such sale to Infante then. Hence, Carbonell's prior
purchase of the land was made in good faith which did not
cease after Poncio told her on January 31, 1955 of his second
sale of the same lot to Infante. Carbonell wanted to meet
Infante but the latter refused so to protect her legal rights,
Carbonell registered her adverse claim on February 8, 1955.
Under the circumstances, this recording of Carbonell’s
adverse claim should be deemed to have been done in good
faith and should emphasize Infante's bad faith when the
latter registered her deed of sale 4 days later.
SPOUSES NONATO V IAC (INVESTOR'S FINANCE CORP)
ESCOLIN; 1985
FACTS
- On June 28, 1976, defendant spouses Restituto Nonato and
Ester Nonato purchased one (1) unit of Volkswagen Sakbayan
from the People's Car, Inc., on installment basis. To secure
complete payment, the defendants executed a promissory
note and a chattel mortgage in favor of people's Car, Inc.
People's Car, Inc., assigned its rights and interests over the
note and mortgage in favor of plaintiff Investor's Finance
Corporation (FNCB) Finance). For failure of defendants to pay
two or more installments, despite demands, the car was
repossessed by plaintiff 1978. on March 20, 1978
- Despite repossession, plaintiff demanded from defendants
that they pay the balance of the price of the car. Finally, on
June 9, 1978, plaintiff filed before the Court of First Instance
of Negros Occidental the present complaint against
defendants for the latter to pay the balance of the price of
the car, with damages and attorney's fees.
- In their answer, the spouses Nonato alleged by way of
defense that when the company repossessed the vehicle, it
had, by that act, effectively cancelled the sale of the vehicle.
It is therefore barred from exacting recovery of the unpaid
balance of the purchase price, as mandated by the provisions
of Article 1484 of the Civil Code. - The trial court as well as
the appellate court ruled against the Nonatos.
ISSUE
WON the vendor, or his assignee, who had cancelled the sale
of a motor vehicle for failure of the buyer to pay two or more
of the stipulated installments, may also demand payment of
the balance of the purchase price.
HELD
NO. A vendor or his assignee who has availed of one of the
remedies under Article 1484 of the Civil Code is barred from
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availing of the other remedies mentioned therein. The choice upon signing it and made a manifestation in front of notary
of the vendor in the said law is alternative, not cumulative. public.
Reasoning- The applicable law in the case at bar, involving as This case is about the signing of a deed of sale in which two of
it does a sale of personal property on installment, is Article the four parties were minors with age 18, and 19. On the date
1484 of the Civil Code which provides:" of sale, these minors presented themselves that they were of
legal age at the time they signed it, and they made the same
In a contract of sale of personal property the price of which
manifestation before the notary public.
is payable in installments, the vendor may exercise any of
the following remedies: ISSUE:
(1) Exact fulfillment of the obligation, should the vendee fail Whether or not the deed of sale is valid when the minors
to pay; presented themselves that they were of legal age.
(2) Cancel the sale, should the vendee's failure to pay cover RATIO:
two or more installments;
The courts laid down that such sale of real estate was still
(3) Foreclose the chattel mortgage on the thing sold, if one valid since it was executed by minors, who have passed the
has been constituted, should the vendee's failure to pay ages of puberty and adolescence, and are near the adult age,
cover two or more installments. In this case, he shall have and that the minors pretended that they had already reached
no further action against the purchaser to recover any their majority.
unpaid balance of the price. Any agreement to the contrary
Article 38. Minority, insanity or imbecility, the state of being a
shall be void."
deaf-mute, prodigality and civil-interdiction are mere
The meaning of the aforequoted provision has been restrictions on the capacity to act, and do not exempt the
repeatedly enunciated in a long line of cases. Thus; "Should incapacitated person from certain obligations, as when the
the vendee or purchaser of a personal property default in the latter arise from his acts or from property relations, such as
payment of two or more of the agreed installments, the easements.
vendor or seller has the option to avail of any of these three
Also, these minors cannot be permitted afterwards to excuse
remedies - either to exact fulfillment by the purchaser of the
themselves from compliance with the obligation assumed by
obligation, or to cancel the sale, or to foreclose the mortgage
them or seek their annulment. This is in accordance with the
on the purchased personal property, if one was constituted.
provisions of the law on estoppels.
These remedies have been recognized as alternative, not
cumulative, that the exercise of one would bar the exercise of This is in accordance with the provisions of the law on
the others estoppel.
- It is not disputed that the respondent company had taken Art 1431 of Civil Code. Through estoppel, an admission or
possession of the car purchased by the Nonatos on representation is rendered conclusive upon the person
installments. But while the Nonatos maintain that the making it, and cannot be denied or disproved as against the
company had, by that act, exercised its option to cancel the person relying thereon.
contract of sale, the company contends that the repossession
This is also in accordance with the provisions of Rule 123, Sec
of the vehicle was only for the purpose of appraising its value
68, Par. A
and for storage and safekeeping pending full payment by the
Nonatos of the purchasing price. The company thus denies Rule 123, sec 68, Par. A...”Whenever a party has, by his own
having exercised its right to cancel the sale of the declaration, act or omission, intentionally and deliberately led
repossessed car. The records show otherwise. another to believe a particular thing to be true, and to act
upon such belief, he cannot, in any litigation arising out of
- The receipt issued by the respondent company to the
such declaration, act or omission, cannot be permitted to
Nonatos when it took possession of the vehicle states that
falsify it.
the vehicle could be redeemed within fifteen [15] days. This
could only mean that should petitioners fail to redeem the
car within the aforesaid period by paying the balance of the
purchase price, the company would retain permanent
possession of the vehicle, as it did in fact. - Indeed, the acts
performed by the corporation are wholly consistent with the
conclusion that it had opted to cancel the contract of sale of
the vehicle. It is thus barred from exacting payment from
petitioners of the balance of the price of the vehicle which it
had already repossessed. It cannot have its cake and eat it
too.
Decision of IAC reversed.
Mercado v. Espiritu
37 Phil 215
FACTS: Margarita Espiritu died leaving a 48-hectare land. The
plaintiffs alleged that they are the children and heirs of
Margarita and that defendant Luis Espiritu, brother of
Margarita, induced and fraudulently succeeded in getting the
plaintiffs to sell their land for a sum of P400 as opposed to its
original value. Hence, the plaintiffs sought to annul the deed
of sale and asserted that 2 of the 4 parties were minors.
These two minors presented themselves to be of legal age