11. Manongsong v.

Estimo, 404 SCRA 683 (2003)

Facts:
Allegedly, AgatonaGuevarra (“Guevarra”) inherited a property from Justina Navarro, which is
now under possession of the heirs of Guevarra. Guevarra had six children, one of them is Vicente
Lopez, the father of petitioner Milagros Lopez Manongsong (“Manongsong”). The respondents,
the Jumaquio sisters and Leoncia Lopez claimed that the property was actually sold to them by
Justina Navarro prior to her death. The respondents presented deed of sale dated October 11,
1957. Milagros and Carlito Manongsong (“petitioners”) filed a Complaint on June 19, 1992
praying for the partition and award to them of an area equivalent to one-fifth (1/5), by right of
representation. The RTC ruled that the conveyance made by Justina Navarro is subject to nullity
because the property conveyed had a conjugal character and that AgatonaGuevarra as her
compulsory heir should have the legal right to participate with the distribution of the estate under
question to the exclusion of others. The Deed of Sale did not at all provide for the reserved
legitime or the heirs, and, therefore it has no force and effect against Agatona Guevarra and
should be declared a nullity ab initio.
Issue:
Whether or not the rights of the compulsory heirs were impaired by the alleged sale of the
property by Justina.
Ruling:
No. The Kasulatan, being a document acknowledged before a notary public, is a public
document and prima facie evidence of its authenticity and due execution. There is no basis for
the trial court’s declaration that the sale embodied in the Kasulatan deprived the compulsory
heirs of Guevarra of their legitimes. As opposed to a disposition inter vivos by lucrative or
gratuitous title, a valid sale for valuable consideration does not diminish the estate of the seller.
When the disposition is for valuable consideration, there is no diminution of the estate but
merely a substitution of values, that is, the property sold is replaced by the equivalent monetary
consideration. The Property was sold in 1957 for P250.00.
The trial court’s conclusion that the Property was conjugal, hence the sale is void ab initio was
not based on evidence, but rather on a misapprehension of Article 160 of the Civil Code, which
provides: “All property of the marriage is presumed to belong to the conjugal partnership; unless
it be proved that it pertains exclusively to the husband or to the wife.” The presumption under
Article 160 of the Civil Code applies only when there is proof that the property was acquired
during the marriage. Proof of acquisition during the marriage is an essential condition for the
operation of the presumption in favor of the conjugal partnership. There was no evidence
presented to establish that Navarro acquired the Property during her marriage.

12. Inchausti & Co. v. Cromwell, 20 Phil. 345 (1911

Facts:
Inchausti & Co. is engaged in the business of buying and selling at wholesale hemp, both for its
own account and on commission. The operation of baling hemp is designated among merchants
by the word ‘prensaje.’ Inchausti, in all its sales of hemp, quoted the price to the buyer at so
much per picul, no mention being made of baling. The company in accordance with the custom
mentioned in paragraph V hereof, collected and received, under the denomination of ‘prensaje,’
from purchasers of hemp sold by the said firm for its own account, in addition to the price
expressly agreed upon for the said hemp, sums aggregating P380,124.35 and collected for the
account of the owners of hemp sold by the plaintiff firm in Manila on commission, and under the
said denomination of ‘prensaje,’ in addition to the price expressly agreed upon for said hemp,
sums aggregating P31,080. Inchausti has always paid to Ellis Cromwell, in the office of the
Collector of Internal Revenue the tax collectible upon the selling price expressly agreed upon for
all hemp sold but has not, until compelled to do so, paid the said tax upon sums received from
the purchaser of such hemp under the denomination of ‘prensaje.’ Ellis Cromwell, in his capacity
as Collector of Internal Revenue, made demand in writing upon the plaintiff firm for the payment
within the period of five (5) days of the sum of P1,370.68, the amount collected from purchasers
of hemp under the denomination of ‘prensaje.’ Inchausti paid for such demand under protest but
Cromwell still refuses to return such amount.
The contention of the defendant was that the said charge made under the denomination of
“prensaje” is in truth and in fact a part of the gross value of the hemp sold and of its actual
selling price, and that therefore the tax imposed by section 139 of Act No. 1189 lawfully accrued
on said sums, that the collection thereof was lawfully and properly made and that therefore the
plaintiff is not entitled to recover back said sum or any part thereof; and that the defendant
should have judgment against plaintiff for his costs.
Issues:
1. Whether the price for the contract of sale should include the charge made under the
denomination of “prensaje”
2. Whether there exists a contract of sale.
Ruling:
The Supreme Court stated that there can be no question that, if the value of the hemp were not
augmented to the amount of P1.75 per bale by said operation, the purchaser would not pay that
sum. If one buys a bale of hemp at a stipulated price of P20, well knowing that there is an
agreement on his part, express or implied, to pay an additional amount of P1.75 for that bale, he
considers the bale of hemp worth P21.75. It is agreed, as we have before stated, that hemp is sold
in bales. Therefore, baling is performed before the sale. The purchaser of hemp owes to the seller
nothing whatever by reason of their contract except the value of the hemp delivered. That value,
that sum which the purchaser pays to the vendee, is the true selling price of the hemp, and every
item which enters into such price is a part of such selling price. By force of the custom prevailing
among hemp dealers in the Philippine Islands, a purchaser of hemp in the market, unless he
expressly stipulates that it shall be delivered to him in loose form, obligates himself to purchase
and pay for baled hemp. Whether or not such agreement is express or implied, whether it is
actual or tacit, it has the same force. After such an agreement has once been made by the
purchaser, he has no right to insist thereafter that the seller shall furnish him with unbaled hemp.
It is undoubted that the vendees, in the sales referred to in the case at bar, would have had no
right, after having made their contracts, to insist on the delivery of loose hemp with the purpose
in view themselves to perform the baling and thus save 75 centavos per bale. It is unquestioned
that the seller, the plaintiff, would have stood upon his original contract of sale, that is, the
obligation to deliver baled hemp, and would have forced his vendees to accept baled hemp, he
himself retaining among his own profits those which accrued from the process of baling. The
Court stated that the distinction between a contract of sale and one for work, labor, and materials,
is tested by the inquiry whether the thing transferred is one not in existence and which would
never have existed but for the order of the party desiring to acquire it, or a thing which would
have existed and been the subject of sale to some other person, even if the order had not been
given. Further, when a person stipulates for the future sale of articles which he is habitually
making, and which at the time are not made or finished, it is essentially a contract of sale and not
a contract for labor. It is otherwise where the article would not have been made but for the
agreement; and where the article ordered by the purchase is exactly such as the vendor makes
and keeps on hand for sale to anyone, and no change or modification of it is made at the vendee’s
request, it is a contract of sale even though it be entirely made after and in consequence of the
vendee’s order for it. Furthermore, the Court defined “price.” The word “price” signifies the sum
stipulated as the equivalent of the thing sold and also every incident taken into consideration f or
the fixing of the price put to the debit of the vendee and agreed to by him.

13. Celestino & Co. v. Collector, 99 Phil. 841 (1956)

Facts:
Celestino Co and Company is the owner of the Oriental Sash Factory. Since the time it was
established on 1946, the company has been paying percentage taxes of 7% on its gross receipts
in accordance with Section 186 of the National Internal Revenue Code. However, since 1952, the
company started paying 3% contractor’s tax in accordance with Section 191 of the same Code.
Celestino claims that his company is not engaged in a manufacturing industry under Section 186,
but is a contractor within the purview of Section 191. He insists that his company does not
manufacture ready-made sash, door, and window available for the general public, but only upon
the special orders of their customers. Having failed to convince the Bureau of Internal Revenue,
the petitioner brought the matter to the Court of Tax Appeals where the case got dismissed. The
decision of the Court of Tax Appeals held that the petitioner used it for its trade name and
offered itself to the public as a factory.
Issues:
Whether or not the petitioner is engaged in a manufacturing company and be taxed under Section
186 of the National Internal Revenue Code
Ruling:
Yes. Under Section 191 of the National Internal Revenue Code, the percentage tax is imposed on
the sale of services, in contradiction with the tax imposed in Section 186 of the same Code which
is a tax on the sales of goods manufactures, produced or imported. The company habitually
makes sash, windows, and doors as it had been represented to the public. The fact that the
windows and doors are made only when customer place their orders does not alter the nature of
the establishment for the obvious reason that they accept special orders other than making ready-
made products. The factory does nothing more than sell the goods that it mass produces or
habitually makes.
Under Article 1467. A contract for the delivery at a certain price of an article which the vendor
in the ordinary course of his business manufactures or procures for the general market, whether
the same is on hand at the time or not, is a contract of sale, but if the goods are to be
manufactured specially for the customer and upon his special order, and not for the general
market, it is contract for a piece of work.

Celestino Co and Company practically sold materials ordinarily manufacture by it, although in
such a form or combination as suited in the fancy of a purchaser. Such new form does not divest
the Oriental Sash Factory of its character as manufacturer. The factory accepts a job that requires
the use of extraordinary or additional equipment, or involves services not general performed by it
– thereby contracts for a piece of work within the meaning of Article 1467. However, orders
exhibited were not shown to be special. In fact, they were merely orders for work – nothing is
shown to call them special requiring extraordinary service for the factory.

Anyway, supposing for the moment that the transactions were not sales, they were neither lease
of services nor contract jobs by a contractor. But as the doors and windows had been admittedly
"manufactured" by the Oriental Sash Factory, such transactions could be, and should be taxed as
"transfers" thereof under section 186 of the National Revenue Code.

14. CIR v. Eng’ing Equipment & Supply Co., 64 SCRA 590 (1975)

Facts:
Engineering Equipment and Supply Co. is an engineering and machinery firm. As operator of an
integrated engineering shop, it is engaged in the design and installation of central type air
conditioning system, pumping plants and steel fabrications. The Commissioner of Internal
Revenue received an anonymous tip denouncing Engineering for tax evasion by misdeclaring its
imported articles and failing to pay the correct percentage taxes due thereon in connivance with
its foreign suppliers. Acting on these denunciations, a raid and search was conducted by a joint
team of CB, NBI and BIR agents. It was recommended that Engineering be assessed for
deficiency of advance sales tax on the theory that it misdeclared its importation of air
conditioning units and parts and accessories. The firm, however, contested the tax assessment
and requested that it be furnished with the details and particulars of the Commissioner's
assessment. Engineering appealed the case to the Court of Tax Appeals and during the pendency
of the case the investigating revenue examiners reduced Engineering's deficiency tax liabilities.
CTA rendered a decision declaring that Engineering is exempt from the deficiency
manufacturers sales tax. The CIR filed an appeal to the SC. Petitioner’s contention: Engineering
is a manufacturer and seller of air conditioning units and parts or accessories thereof and,
therefore, it is subject to the 30% advance sales tax Respondent’s contention: Engineering claims
that it is not a manufacturer and setter of air-conditioning units and spare parts or accessories but
a contractor engaged in the design, supply and installation of the central type of air-conditioning
system subject to the 3% tax imposed by Section 191 of the same Code, which is essentially a
tax on the sale of services or labor of a contractor rather than on the sale of articles

Issue:
W/N Engineering is a manufacturer of air conditioning units or a contractor

Ruling:
Engineering is a Contractor We find that Engineering did not manufacture air conditioning units
for sale to the general public, but imported some items which were used in executing contracts
entered into by it. Engineering, therefore, undertook negotiations and execution of individual
contracts for the design, supply and installation of air conditioning units of the central type.
Engineering designed and engineered complete each particular plant and that no two plants were
identical but each had to be engineered separately. The facts and circumstances aforequoted
support the theory that Engineering is a contractor rather than a manufacturer.
The distinction between a contract of sale and one for work, labor and materials is tested by the
inquiry whether the thing transferred is one not in existence and which never would have existed
but for the order of the party desiring to acquire it, or a thing which would have existed and has
been the subject of sale to some other persons even if the order had not been given. If the article
ordered by the purchaser is exactly such as the plaintiff makes and keeps on hand for sale to
anyone, and no change or modification of it is made at defendant's request, it is a contract of sale,
even though it may be entirely made after, and in consequence of, the defendants order for it.
The word "contractor" has come to be used with special reference to a person who, in the pursuit
of the independent business, undertakes to do a specific job or piece of work for other persons,
using his own means and methods without submitting himself to control as to the petty details
The argument of CIR that Engineering can mass produce air conditioning units for sale to the
public or to any customer with enough money to buy the same is untenable in the light of the fact
that air conditioning units, packaged, or what we know as self-contained air conditioning units,
are distinct from the central system which Engineering dealt in. It was testified that "the central
type air conditioning system is an engineering job that requires planning and meticulous layout
due to the fact that usually architects assign definite space and usually the spaces they assign are
very small and of various sizes. Engineering definitely did not and was not engaged in the
manufacture of air conditioning units but had its services contracted for the installation of a
central system We see that the supply of air conditioning units to Engineer's various customers,
whether the said machineries were in hand or not, was especially made for each customer and
installed in his building upon his special order. The air conditioning units installed in a central
type of air conditioning system would not have existed but for the order of the party desiring to
acquire it and if it existed without the special order of Engineering's customer, the said air
conditioning units were not intended for sale to the general public.
15. Quiroga v. Parsons, 38 Phil. 501 (1918)

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.

Ruling:

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.

16. Victorias Milling Co., Inc. v. CA

Facts:

St. Therese Merchandising (STM) regularly bought sugar from Victorias Milling Co (VMC). In
the course of their dealings, VMC issued several Shipping List/Delivery Receipts (SLDRs) to
STM as proof of purchases. Among these was SLDR No. 1214M. SLDR No. 1214M, dated
October 16, 1989, covers 25,000 bags of sugar. Each bag contained 50 kg and priced at P638.00
per bag. The transaction covered was a “direct sale”.

On October 25, 1989, STM sold to private respondent Consolidated Sugar Corporation (CSC)
its rights in the same SLDR for P14,750,000.00. CSC issued checks in payment. That same day,
CSC wrote petitioner that it had been authorized by STM to withdraw the sugar covered by the
said SLDR. Enclosed in the letter were a copy of SLDR No. 1214M and a letter of authority
from STM authorizing CSC to “withdraw for and in our behalf the refined sugar covered by the
SLDR” On Oct. 27, 1989, STM issued checks to VMC as payment for 50,000 bags, covering
SLDR No. 1214M. CSC surrendered the SLDR No. 1214M and to VMC’s NAWACO
Warehouse and was allowed to withdraw sugar. But only 2,000 bags had been released because
VMC refused to release the other 23,000 bags.

Therefore, CSC informed VMC that SLDR No. 1214M had been “sold and endorsed” to it. But
VMC replied that it could not allow any further withdrawals of sugar against SLDR No. 1214M
because STM had already withdrawn all the sugar covered by the cleared checks. VMC also
claimed that CSC was only representing itself as STM’s agent as it had withdrawn the 2,000
bags against SLDR No. 1214M “for and in behalf” of STM. Hence, CSC filed a complaint for
specific performance against Teresita Ng Sy (doing business under STM's name) and VMC.
However, the suit against Sy was discontinued because later became a witness. RTC ruled in
favor of CSC and ordered VMC to deliver the 23,000 bags left. CA concurred. Hence this
appeal.

Issue:

W/N CA erred in not ruling that CSC was an agent of STM and hence, estopped to sue upon
SLDR No. 1214M as assignee.

Ruling:

NO. CSC was not an agent of STM. VMC heavily relies on STM’s letter of authority that said
CSC is authorized to withdraw sugar “for and in our behalf”. It is clear from Art. 1868 that the:
basis of agency is representation. On the part of the principal, there must be an actual intention to
appoint or an intention naturally inferable from his words or actions, and on the part of the agent,
there must be an intention to accept the appointment and act on it, and in the absence of such
intent, there is generally NO agency. One factor, which most clearly distinguishes agency from
other legal concepts, is control; one person – the agent – agrees to act under the control or
direction of another – the principal. Indeed, the very word “agency” has come to connote control
by the principal. The control factor, more than any other, has caused the courts to put contracts
between principal and agent in a separate category. Where the relation of agency is dependent
upon the acts of the parties, the law makes no presumption of agency and it is always a fact to be
proved, with the burden of proof resting upon the persons alleging the agency, to show not only
the fact of its existence but also its nature and extent. It appears that CSC was a buyer and not an
agent of STM. CSC was not subject to STM’s control. The terms “for and in our behalf” should
not be eyed as pointing to the existence of an agency relation. Whether or not a contract is one of
sale or agency depends on the intention of the parties as gathered from the whole scope and
effect of the language employed. Ultimately, what is decisive is the intention of the parties. (In
fact, CSC even informed VMC that the SLDR was sold and endorsed to it.)

Agency distinguished from sale.

In an agency to sell, the agent, in dealing with the thing received, is bound to act according to the
instructions of his principal, while in a sale, the buyer can deal with the thing as he pleases, being
the owner. The elementary notion of sale is the transfer of title to a thing from one to another,
while the essence of agency involves the idea of an appointment of one to act for another.
Agency is a relationship which often results in a sale, but the sale is a subsequent step in the
transaction. (Teller, op. cit., p. 26; see Commissioner of Internal Revenue vs. Manila Machinery
& Supply Co., 135 SCRA 8 [1985].) An authorization given to another containing the phrase
“for and in our behalf’’ does not necessarily establish an agency, as ultimately what is decisive is
the intention of the parties. Thus, the use of the words “sold and endorsed’’ may mean that the
parties intended a contract of sale, and not a contract of agency.

17. Puyat v. Arco Amusement Co., 72 Phil. 402 (1941).

Facts:

Arco Amusement was engaged in the business of operating cinematographs. Gonzalo Puyat &
Sons Inc (GPS) was the exclusive agent in the Philippines for the Starr Piano Company. Desiring
to equip its cinematograph with sound reproducing devices, Arco approached GPS. After some
negotiations, it was agreed between the parties that GPS would order sound reproducing
equipment from Starr Piano Company and that Arco would pay GPS, in addition to the price of
the equipment, a 10% commission, plus all expenses such as freight, insurance, etc. When GPS
inquired Starr Piano the price (without discount) of the equipment, the latter quoted such at
$1,700. Being agreeable to the price (plus 10% commission plus all other expenses), Arco
formally authorized the order. The following year, both parties agreed for another order of sound
reproducing equipment on the same terms as the first at $1,600 plus 10% plus all other expenses.

Three years later, Arco discovered that the prices quoted to them by GPS with regard to their
first 2 orders mentioned were not the net prices, but rather the list price, and that it had obtained
a discount from Starr Piano. Moreover, Arco alleged that the equipments were overpriced. Thus,
being its agent, GPS had to reimburse the excess amount it received from Arco.
Issue:

W/N there was a contract of agency, not of sale

Ruling:

The letters containing Arco's acceptance of the prices for the equipment are clear in their terms
and admit no other interpretation that the prices are fixed and determinate. While the letters state
that GPS was to receive a 10% commission, this does not necessarily mean that it is an agent of
Arco, as this provision is only an additional price which it bound itself to pay, and which
stipulation is not incompatible with the contract of sale. The facts and circumstances show that
Arco entered into a contract of sale with GPS, the exclusive agent of Starr Piano. As such, it is
not duty bound to reveal the private arrangement it had with Starr Piano relative to the 25%
discount. Being the exclusive agent of Starr, Arco could not have secured this discount with Starr
and neither is GPS willing to waive the discount for Arco. Thus, GPS is not bound to reimburse
Arco for any difference between the cost price and the sales price, which represents the profit
realized by GPS out of the transaction.

18. Yuson v. Vitan, 496 SCRA 540 (2007)

Facts:

In October 2002, Mar Yuson who was a taxi driver and had 8 children, received a sum of money
by way of inheritance. He and his wife intended to use the money for several purposes.

When they were able to purchase a secondhand taxi, and Atty. Vitan helped him with legal
matters regarding the purchase. Unfortunately, Yuson’s other plans were put on hold when Atty.
Vitan borrowed P100, 000 from them in December 2002. To guarantee payment, Atty. Vitan
executed in favor of Yuson several postdated checks to over the loaned amount, but however,
these turned out to be worthless.

Yuson maintained that he had repeatedly tried to recover the debt, but was unsuccessful every
time. When no payment was still made pursuant to the administrative case against Atty. Vitan,
Yuson demanded a collateral to secure the loan. Thus, in his favor, Atty. Vitan executed a
document denominated as a Deed of Absolute Sale, covering Atty. Vitan’s parcel of land located
in Sta. Maria, Bulacan. According to Yuson, their intention was to transfer the title of the
property to him temporarily, so that he could either sell or mortgage the said land. Further, if it
was mortgaged, Atty. Vitan would redeem it as partial or full payment of the loan. Allegedly, the
parties executed another Deed of Absolute Sale in favor of Atty. Vitan wherein Yuson was
vendor. The purpose for this was not explained by either party.

Yuson was able to mortgage the property for P30,000 but contrary to their earlier agreement,
Atty. Vita did not redeem it from the mortgage, sent a letter instead, promising Yuson to pay on
or before July 12, 2004.
In the IBP-NCLA, Atty. Vitan averred that he had settled his obligation through a Deed of
Absolute Sale over his residential property. The purpose of such was for Yuson to use, mortgage,
or sell the property and return to him the excess of the proceeds after obtaining his money.
Additionally, he called the second document as a Counter Deed of Sale, executed to be sort of a
collateral/security for the account of his liaison officer Estur, whom he alleged that she was the
one who incurred said debts.

Issue: W/N Atty. Vitan’s obligation was extinguished by virtue of the first Deed of Absolute Sale

Ruling: NO.

Atty. Vitan contends that his obligation was already extinguished, because he had allegedly sold
his Bulacan property to complainant. Basically, he is asserting that what had transpired was a
dation in payment. Governed by the law on sales, it is a transaction that takes place when a piece
of property is alienated to the creditor in satisfaction of a debt in money. It involves delivery and
transmission of ownership of a thing -- by the debtor to the creditor -- as an accepted equivalent
of the performance of the obligation.

However, the records reveal that he did not really intend to sell and relinquish ownership over
his property in Sta. Maria, Bulacan, notwithstanding the execution of a Deed of Absolute Sale in
favor of Yuson. The second Deed of Absolute Sale, which reconveyed the property to
respondent, is proof that he had no such intention. This second Deed, which he referred to as his
"safety net," betrays his intention to counteract the effects of the first one.

Ergo, Atty. Vitan was taking back with his right hand what he had given with his left. The
second Deed of Absolute Sale returned the parties right back where they started, as if there were
no sale in favor of complainant to begin with. In effect, on the basis of the second Deed of Sale,
respondent took back and asserted his ownership over the property despite having allegedly sold
it. Thus, he fails to convince us that there was a bona fide dation in payment or sale that took
place between the parties; that is, that there was an extinguishment of obligation.

It appears that the true intention of the parties was to use the Bulacan property to facilitate
payment. They only made it appear that the title had been transferred to complainant to authorize
him to sell or mortgage the property.Atty. Vitan himself admitted in his letter dated July 30,
2004, that their intention was to convert the property into cash, so that payment could be
obtained by complainant and the excess returned to respondent. The records, however, do not
show that the proceeds derived were sufficient to discharge the obligation of the lawyer fully;
thus, he is still liable to the extent of the deficiency.

19. Philippine Lawin Bus Co. v. CA, 374 SCRA 332 (2002)

Facts:

Advance Capital Corporation, a licensed lending investor, extended a loan to petitioner

Philippine Lawin Bus Company of P8,000,000.00 payable within 1 year.
To guarantee payment of the loan, Lawin executed in favor of Advance the following
documents: (1) A Deed of Chattel Mortgage wherein 9 units of buses were constituted as
collaterals: (2) A joint and several UNDERTAKING of defendant Master Tours and Travel
Corporation, signed by Isidro Tan and Marciano: and (3) A joint and several UNDERTAKING,
executed and signed by Esteban, Isidro, Marciano and Henry, all surnamed Tan. Out of the
P8,000,000.00 loan, P1,800,000.00 was paid. Thus, Lawin was able to avail an additional loan of
P2,000,000.00 for one (1) month.

LAWIN failed to pay the promissory note and the same was renewed. But LAWIN failed to pay
the two promissory notes so that it was granted a loan re-structuring for two (2) months. Despite
the restructuring, LAWIN failed to pay.Respondent foreclosed the mortgaged buses and as the
sole bidder thereof, the amount of P2,000,000.00 was accepted by the deputy sheriff conducting
the sale and credited to the account of LAWIN.

Thereafter, identical demand letters were sent to petitioners to pay their obligation. Despite
repeated demands, petitioners failed to pay their indebtedness which totaled of P16,484,992.42.
Thus, the suit for sum of money, wherein the respondent prays that defendants solidarily pay
plaintiff.

Issue:

WoN there was dacion en pago between the parties upon the surrender or transfer of the
mortgaged buses to the respondent.

Ruling:

No, the Court affirms with CA that there was no dacion en pago that took place between
the parties.

Article 1245 of the Civil Code provides that the law on sales shall govern an agreement of
dacion en pago. A contract of sale is perfected at the moment there is a meeting of the minds of
the parties thereto upon the thing which is the object of the contract and upon the price. In this
case, there was no meeting of the minds between the parties on whether the loan of the
petitioners would be extinguished by dacion en pago. The receipts show that the two buses were
delivered to respondent in order that it would take custody for the purpose of selling the same.
Such an agreement negates transfer of absolute ownership over the property to respondent, as in
a sale.

Thus, the Court REVERSES and SETS ASIDE the appealed decision.

20. Filinvest Credit Corp. v. CA, 178 SCRA 188 (1989)

Facts:
Spouses Jose and Iluminada Sy Bang were engaged in the sale of gravel produced from crushed
rocks and used for construction purposes. They engaged the serviced of Mr. Ruben Mercurio of
Gemini Motor Sales, to look for a rock crusher. Mr. Mercurio then referred them to Rizal
Consolidated who had said machinery for sale.
They applied for financial assistance with Filinvest Credit regarding their purchase of the
machine. Fiinvest agreed to extend to the Spouses Sy Bang financial aid on the following
conditions: that the machinery be purchased in the Filinvest's name; that it be leased (with option
to purchase upon the termination of the lease period) to the Spouses Sy Bang; and that Spouses
Sy Bang execute a real estate mortgage as security for the amount advanced by Filinvest.
Accordingly, on May 18,1981, a contract of lease of machinery (with option to purchase) was
entered into by the parties whereby the spouses agreed to lease from Filinvest the rock crusher
for two years starting from July 5, 1981 payable as follows: P10,000.00 – first 3 months,
P23,000.00 – next 6 months, P24,800.00 – next 15 months. It was likewise stipulated that at the
end of the two-year period, the machine would be owned by the spouses.
The spouses then issued a check for P150,550 as initial rental, and 24 postdated checks
corresponding to 24 monthly rentals in favor of Filinvest. They likewise executed a real estate
mortgage over two parcels of land to guarantee their compliance with the lease contract. The
rock crusher was then delivered to the spouses. However, 3 months later, the souses stopped
payment when petitioner had not acted on the complaints of the spouses about the machine. As a
consequence, petitioner extra-judicially foreclosed the real estate mortgage. To thwart the
impending auction, the spouses filed a complaint for rescission of the contract of lease and
annulment of the real estate mortgage.
Issue:
1. W/N the nature of the contract is one of a contract of sale.
2. W/N the remedies of the seller provided for in Article 1484 are cumulative.
Ruling:
1. YES.
It is apparent here that the intent of the parties to the subject contract is for the so-called rentals
to be the installment payments. Upon the completion of the payments, then the rock crusher,
subject matter of the contract, would become the property of the private respondents. This form
of agreement has been criticized as a lease only in name.
Sellers desirous of making conditional sales of their goods, but who do not wish openly to make
a bargain in that form, for one reason or another, have frequently resorted to the device of
making contracts in the form of leases either with options to the buyer to purchase for a small
consideration at the end of term, provided the so-called rent has been duly paid, or with
stipulations that if the rent throughout the term is paid, title shall thereupon vest in the lessee. It
is obvious that such transactions are leases only in name. The so-called rent must necessarily be
regarded as payment of the price in installments since the due payment of the agreed amount
results, by the terms of bargain, in the transfer of title to the lessee.
2. NO.
They are alternative. The seller of movable in installments, in case the buyer fails to pay 2 or
more installments, may elect to pursue either of the following remedies: (1) exact fulfillment by
the purchaser of the obligation; (2) cancel the sale; or (3) foreclose the mortgage on the
purchased property if one was constituted thereon. It is now settled that the said remedies are
alternative and not cumulative, and therefore, the exercise of one bars the exercise of the others.
Indubitably, the device – contract of lease with option to buy – is at times resorted to as a means
to circumvent Article 1484, particularly paragraph (3) thereof. Through the set-up, the vendor,
by retaining ownership over the property in the guise of being the lessor, retains, likewise the
right to repossess the same, without going through the process of foreclosure, in the event the
vendee-lessee defaults in the payment of the installments. There arises therefore no need to
constitute a chattel mortgage over the movable sold. More important, the vendor, after
repossessing the property and, in effect, canceling the contract of sale, gets to keep all the
installments-cum-rentals already paid.