SMPPI VS SPS HUANG
Facts
 Subject: two parcels of land totaling 1,738 sq. m. at the
corner of Meralco Avenue and General Capinpin Street in
Pasig City
 The properties were offered for sale for P52.14M in cash
to Atty. Dauz who was acting for the Spouses Huang.
 Atty. Dauz made an offer which was accepted by
Socbrecarey, SMPPI vice president and operations
manager for real estate
 The offer has the following terms:
o Earnest-deposit money of P1M
o Sps would be given the exclusive option to
purchase the property within 30 days from the
acceptance of the offer
o During the period  negotiation on the terms
and conditions of the purchase
o If no agreement  P1M should be returned
 No agreement was made so SMPPI returned the P1M
 The Spouses did not accept the P1M and instead, filed an
action for specific performance against SMPPI
 RTC dismissed the action
 CA reversed RTC on the following grounds:
o There is already a perfected contract of sale
o The P1M is the earnest money
o Applied Art. 1428: whenever earnest money is
given in a contract of sale, it shall be considered
as part of the price and as proof of the
perfection of the contract
Petitioner’s Argument: CA erred
 A contract of sale was not perfected; There was merely
an option contract which is unenforceable for lack of
distinct consideration
 The absence of agreement as to the mode of payment
was fatal to the perfection of the contract of sale.
SC’s Ruling: Petition GRANTED (CA decision is reversed)
 The P1M is not an earnest money but a deposit of what
would eventually become the earnest money of
downpayment should the perfection of the contract of
sale be made
o Not part of a purchase price but only as a
guarantee that respondents would not back out
of the sale
o Described as “earnest-deposit” in the offer
 The P1M cannot be considered as an earnest money
because no contract of sale had not yet been perfected
as shown by the following conditions:
o Respondents asked to be given the exclusive
option to purchase the property within 30 days
from the acceptance of the offer
 Shows that there is no perfected sale
but merely an option or an accepted
unilateral promise on the part of
respondents to buy the subject
properties within 30 days
 Since there was no agreement on the
terms of payment, no contract of sale
may be enforced
 To be binding to the promisor,
pursuant to Art. 1479, an accepted
unilateral promise to buy or sell a
determinate thing for a price certain is
binding upon the promisor only if the
promise is supported by a distinct
consideration. No showing of any
consideration for the option.
o During the option period, the parties would
negotiate the terms and condition of the
purchase
Stages of Contract of Sale
1. Negotiation: period from the time the prospective
contracting parties indicate interest in the
contract to the time the contract is perfected.
2. Perfection: takes place upon the concurrence of
the essential elements of the sale which are the
meeting of the minds of the parties at to the
object of the contract and upon the price
3. Consummation: begins when the parties perform
their respective undertakings under the contract
of sale, culminating in the extinguishment thereof
 In this case, the parties never got past the
negotiation stage.
Rule: The manner of payment of the purchase price is an
essential element before a valid and binding contract of
sale can exist.
 Agreement on the manner of payment goes into the
price such that a disagreement on the manner of
payment is tantamount to a failure to agree on the
price
o Petitioner would secure the necessary approvals
while respondents would handle the
documentation.
DESIDERIO DALISAY INVESTMENTS, INC., VS SSS
Facts
 Subject: Parcel of land with an area of 2,450 sq.m. in
Davao City
 SSS filed a case before the Social Security Commission
(SSC) against Dalisay Group of Companies (DGC) for the
collection of unremitted SSS premium contributions of
DGC’s employees
 Desiderio Dalisay, then President, sent a letter to SSS
offering the subject land to offset the DGC’s liabilities at
P3.5M
 Parties failed to arrive at an agreement as to the
appraised value thereof
 Atty. Cabaroguis, as a representative of DGC, explained
to SSS that DGC cannot settle its liabilities in cash and
offered the subject land as a dacion which is accepted by
SSS as the appraised value of P2M. He also relayed to SS
that they are requesting that the P2M amount be applied
pwgs
 first to the unpaid premiums and the excess be used to
settle part of the penalties due. He also assured that the
properties would be turned over to SSS free of liens and
encumbrances.
 SSC approved and accepted the dacion offered by Atty.
Cabaroguis.
 Dalisay-Tirol, acting President and GM informed SSS that
they would turn over the building
 In the meantime, Desiderio Dalisay passed away
 Later, PNB executed a Deed of Confirmatory Sale in favor
of DDII for properties that it reacquired
 SSS then filed an adverse claim over the properties
 DDII asked for the condonation of the penalties, the
return of the property and to offset their obligations
against the back rentals of SSS for occupying the subject
property
 DDII filed an action to quiet title
 RTC ruled in favor of DDII holding that there was no
perfected dation in payment but a qualified acceptance
which amounts to a counter-offer
 CA reversed RTC. CA found that there was a perfected
dation in payment and the sale was consummated upon
the delivery of the subject property to SSS. CA added that
even assuming that the dation is defective, said defect is
immaterial due to DDII’s inaction which lasted for 20
years.
SC’s Ruling
Requisites for an action to quiet title
1. Plaintiff has a legal or an equitable title or interest
in the real property subject of the action
2. The deed, claim, encumberance, or proceeding
claimed to be casting cloud on his title must be
shown to be invalid or inoperative despite its
prima facie appearance of validity of legal efficacy
A dation en pago is perfected
Dacion en pago: property is alienated to the creditor in
satisfaction of a debt in money
Art. 1245 provides that the law on sales shall apply to a
dacion en pago
It requires delivery and transmission of ownership of a
thing owned by the debtor to the creditor as an accepted
equivalent of the performance of the obligation.
 To determine if there was a dation in payment, the Court
reviewed the evidence and events whether these
correspond to the 3 stages of a contract of sale
o Negotiation
 Atty. Cabaroguis offered the property
at P2M which the SSS accepted. No one
questioned his authority after the
conclusion of the negotiations.
Furthermore, the company
immediately arranged for the
property’s turnover. It is only now that
such authority is being questioned
when many years have passed.
o Perfection
Rule: An acceptance is considered absolute
and unqualified when it is identical in all
respects with that of the offer so as to
produce consent or a meeting of the minds.
 SSS’ agreement to the P2M offer was
not a counter-offer but an acceptance
of the new reduced offer.
o Consummation
Consummation begins when the parties
perform their respective undertakings under
the contract of sale
Art. 1497: The thing sold shall be understood
as delivered, when it is placed in the control
and possession of the vendee.
 DDII turned over the property.
Furthermore, nowhere in their
communications that the company will
turn over the possession of the
property to SSS to show its goodwill
while the negotiations were pending.
Delivery is an act by which one party parts
with the title to and the possession of the
property, and the other acquires the right to
and the possession of the same.
It may either be 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 by the vendee.
 Petitioner has lost its title over the property which would
give it legal personality to file an action to quiet a title.
PICHEL VS ALONZO
Facts
 Subject: Coconut fruits
 Alonzo was awarded by the Gov’t a parcel of land
o The award was cancelled because it was proven
that Alonzo alienated the land to another in
violation of the law.
o However, in 1972, Alonzo’s rights were
reinstated.
 Alonzo sold to Pichel the fruits of the coconut trees at
P4,200. The Deed of Sale provided that the sale included
the future fruits to be produced by the trees in the said
land.
 A case was filed to annul the said Deed of Sale
 RTC ruled that the contract is not a contract of sale but a
contract of lease since it was consensual; its purpose is to
allow the enjoyment of the thing; and, the enjoyment or
use of the thing is for a certain and definite period of
time. RTC further added that deed of sale violated RA
477.
pwgs
SC’s Ruling: It is a contract of sale and no violated of RA 477.
 Cancellation of an award granted pursuant to the
provisions of RA 477 does not automatically divest the
awarded of his rights to the land unless an appropriate
proceed is instituted by the State. Since no proceeding
was instituted, Alonzo is not deemed to have lost any of
his rights as grantee.
 The terms of the agreement are clear and unequivocal.
The subject matter of the sale are the fruits.
Rule: thing having a potential existence may be the object
of the contract of sale.
 Not a contract of lease
The essential difference between a contract of sale and a
lease of things is that the delivery of the thing sold
transfers ownership, while in lease no such transfer of
ownership results as the right of the lessee are limited to
the use and enjoyment of the thing leased.
 The possession and enjoyment of the coconut trees
cannot be said to be the possession and enjoyment of
the land itself because these rights are distinct and
separate from each other, the first pertaining to the
accessory or improvements (coconut trees) while the
second, to the principal (the land). A transfer of the
accessory or improvement is not a transfer of the
principal.
 What the law expressly disallows is the encumbrance or
alienation of the land itself or any of the permanent
improvements thereon
REYES VS TUPARAN
Facts
 Subject: residential and commercial lot located in
Valenzuela
 Reyes was the owner of the subject property where she
built a commercial building and a residential apartment.
She had been operating a drugstore and cosmetics store
on the ground floor of the building.
 Tuparan leased a space on the ground floor of the
building for her pawnshop business.
 Reyes mortgaged the property to Farmers Savings Bank
and Loan Bank (FSL) to secure a loan.
 Reyes decided to sell her properties to liquidate her bank
loan and finance he business.
 Tuparan verbally offered to buy the properties for P4.2M
on installment basis and to assume the bank loan. Other
conditions on the offer:
o Condition sale will be cancelled when Reyes
found a buyer within 3 months
o Reyes would not pay rent and continue
operating her store
o Lease for 15 years in favor of Reyes when
Tuparan fully paid
o Tuparan will renew the fire insurance policies
 Their agreement was not made in writing because of
their friendship.
 Tuparan defaulted in the payment of her obligations. She
paid Reyes in small amounts from time to time to
perform her obligation.
 Reyes alleged that despite finding a buyer, Tuparan
reneged to cancel the sale.
 Later, Tuparan offered P751K to fully paid the property.
 Reyes did not accept and filed for rescission of contract.
 RTC & CA:
o Breach was not substantial
o Tuparan had already paid a substantial amount
of the purchase price
o Rescission cannot be granted.
SC’s Ruling: Affirms the ruling of the courts below
 The subject contract is a contract to sell and not a
contract of sale.
 The petitioners obligation to sell the subject properties
becomes demandable only upon the happening of the
positive suspensive condition, which is the respondents
full payment of the purchase price. Without respondents
full payment, there can be no breach of contract to speak
of because petitioner has no obligation yet to turn over
the title. Respondents failure to pay in full the purchase
price is not the breach of contract contemplated under
Article 1191 of the New Civil Code but rather just an
event that prevents the petitioner from being bound to
convey title to the respondent.
Sale, by its very nature, is a consensual contract because
it is perfected by mere consent. The essential elements
of a contract of sale are the following: 
o Consent or meeting of the minds, that is,
consent to transfer ownership in exchange
for the price;
o Determinate subject matter; and
o Price certain in money or its equivalent.
A Contract to Sell may not be considered as a Contract of
Sale because the first essential element is lacking. In a
contract to sell, the prospective seller explicitly reserves
the transfer of title to the prospective buyer, meaning, the
prospective seller does not as yet agree or consent to
transfer ownership of the property subject of the contract
to sell until the happening of an event, which for present
purposes we shall take as the full payment of the purchase
price.
In a contract to sell, upon the fulfillment of the suspensive
condition which is the full payment of the purchase price,
ownership will not automatically transfer to the buyer
although the property may have been previously delivered
to him. The prospective seller still has to convey title to the
prospective buyer by entering into a contract of absolute
sale.
In a contract of sale, the title to the property passes to the
vendee upon the delivery of the thing sold; in a contract to
sell, ownership is, by agreement, reserved in the vendor
and is not to pass to the vendee until full payment of the
pwgs
 purchase price.
In the contract of sale, the buyers non-payment of the
price is a negative resolutory condition; in the contract to
sell, the buyers full payment of the price is a positive
suspensive condition to the coming into effect of the
agreement.
 A substantial amount of the purchase price has already
been paid. It is only right and just to allow Tuparan to pay
the said unpaid balance of the purchase price to Reyes
 Granting that a rescission can be permitted under Article
1191, the Court still cannot allow it for the reason that,
considering the circumstances, there was only a slight or
casual breach in the fulfillment of the obligation.
SPS VALENZUELA VS KALAYAAN DEVT
Facts
 Subject: a parcel of land owned by Kalayaan but being
occupied by Spouses Valenzuela who introduced several
improvements
 Spouses negotiated with Kalayaan to purchase the
portion of the lot they were occupying
 The parties executed a Contract to Sell wherein the
petitioners would purchase 236 sqm. The Spouses
initially gave 500k upon signing and agreed to pay the
balance in 12 equal monthly installments
 Sps paid for the first three months but failed to pay for
the incoming months
 Sps requested that a deed of sale be issued for 118 sqm
representing the payment they have made
 Kalayaan did not execute a deed of sale but continued to
ask the Sps to settle their obligation
 The Sps proposed that Juliet, sister of the wife, would
assume the payment of the balance. Juliet paid made
payments which were accepted by Kalayaan.
 Kalayaan however filed an action for rescission of
contract and damages
 The RTC and CA ruled in favor of Kalayaan.
 Sps maintained that they are entitled of the half of the
land as they already paid for it. They argued that there
was a valid novation as there was a change in the person
of the principal debtor.
SC’s Ruling: Denied the petition
On the Contract to Sell
 Since petitioners failed to fully pay the purchase price for
the entire property, Kalayaans obligation to convey title
to the property did not arise. Thus, Kalayaan may validly
cancel the contract to sell its land to petitioner, not
because it had the power to rescind the contract, but
because their obligation thereunder did not arise.
 Petitioners failed to pay the balance of the purchase
price. Such payment is a positive suspensive condition,
failure of which is not a breach, serious or otherwise, but
an event that prevents the obligation of the seller to
convey title from arising.
On Novation: There is no valid novation.
Novation is the extinguishment of an obligation by the
substitution or change of the obligation by a subsequent
one which extinguishes or modifies the first, either by
changing the object or principal conditions, or by
substituting another in place of the debtor, or by
subrogating a third person in the rights of the creditor.
Article 1292 of the Civil Code provides that [i]n order that
an obligation may be extinguished by another which
substitutes the same, it is imperative that it be so declared
in unequivocal terms, or that the old and the new
obligations be on every point incompatible with each
other. Novation is never presumed.
Article 1292 of the Civil Code provides that [i]n order that
an obligation may be extinguished by another which
substitutes the same, it is imperative that it be so declared
in unequivocal terms, or that the old and the new
obligations be on every point incompatible with each
other. Novation is never presumed.
Requisites:
1) There must be a previous valid
obligation;
2) There must be an agreement of the
parties concerned to a new contract;
3) There must be the extinguishment of
the old contract; and
4) There must be the validity of the new
contract.
 All the requisites are not present in this case. Kalayaan
never agreed to the creation of a new contract between
them or Juliet.
SPS PAMPLONA VS SPOUSES CUETO
Facts
 Subject: a lot in Batangas City
 The registered owner of the lot are the Spouses Cipriano
Pamplona and Bibiana Intac
 Lilia Cueto, sister of Bibiana, agreed to Bibiana that Lilia
would buy the lot on installment basis
 The agreement was verbal
 Bibiana sent a notebook to Lilia wherein she can enter
the list of remittances
 Lilia allowed her son to reside in the subject property.
She, through her son (Roilan), religiously paid the annual
realty taxes including electric and water bills.
 Bibiana filed an unlawful detainer against Roilan. Being
indigent, Roilan failed to defend themselves and they
were evicted.
 Coming back to the Philippines, Lilia learned about the
unlawful detainer case and executed an Affidavit of
Adverse Claim.
 After compliance with her obligation, Lilia demanded
from Spouses Pamplona to execute the necessary deed.
 Bibiana argued that the remittances were not for the
purchase of property but for a past debt. She also added
that she has been the one paying the real property taxes.
pwgs
 RTC ruled in favor of the Sps Pamplona finding that Sps
Cueto failed to substantiate the existence of the contract
to sell
 CA reversed the RTC’s decision and declared that there
was sufficient evidence.
SC’s Ruling: in favor of Lilia Cueto
 Records show that there is sufficient evidence
o Lilia sent money to Bibiana who did not deny
such fact
o Records show that the parties agreed that
Roilan and his father would occupy the property
o Lilia immediately took steps to protect her
interest by annotating her adverse claim on the
petitioners’ title
o Bibiana failed to establish that the payments
were for past debt.
 The admissions by Roilan and his father of the
petitioners’ ownership of the property could not be
appreciated in favor of the petitioner. It should be noted
that the contract is a contract to sell and not a contract
of sale. Under the contract to sell, the ownership had yet
to pass to Lilia upon fully payment of the purchase price.
Contract of Sale Contract to Sell
Title passes to the buyer Ownership is reserved in
upon delivery of the thing the seller and is not to pass
sold until the full payment of the
purchase price
Vendor has lost and cannot Title remains in the vendor
recover the ownership of if the vendee does not
the land sold until and comply with the condition
unless the contract of sale is precedent of making
itself resolved and set aside payment
 The failure of Roilan to raise as defense in the unlawful
detainer suit against him the existence of the contract to
sell could not be property construed as an admission by
silence on the part of Lilia.

pwgs