DIGEST FORMAT

Case Title
G.R. NO. | DATE | PONENTE
Keywords:

Sales FACTS
CASE DIGESTS ●

ISSUES – HELD – RATIO

ISSUE
HELD
Ateneo Law School
Block 2E 2026 | InDIGESTion
RATIO
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DOCTRINE AND NOTES

 Week 1
Heirs of Caburnay v. Heirs of Sison
G.R. NO. 230934 | 2 December 2020 | CAGUIOA, J.
Keywords: Family Code eme
FACTS
● Teodulo Sison married twice and has children from the first marriage.
● After the death of his first wife (Perpetua) and while married to his
second wife (Perla), the husband entered into a contract with petitioners'
predecessor-in-interest (Apolinario Caburnay) wherein he sold property
acquired in his first marriage without the consent of his second wife nor
the children from the first marriage.
● Apolinario paid the initial payment of 40,000 pesos out of 150,000 which
was acknowledged by Teodulo in a handwritten receipt.
○ Thereafter, Apolinario's family occupied the property.
○ Then, the second, third installment was made until the remaining
balance was only 30,000 pesos.
● However, Teodulo passed away before the balance of the purchase price
could be paid.
○ Consequently, Apolinario's advanced age and failing memory, no
follow-up was made thus, the purchase price remained unpaid until
his death.
● Later, the property was subject to Extrajudicial Settlement of the Estate
of Teodulo and the subject property was given to Jesus Sison.
● Thus, petitioners prayed that the Extrajudicial Settlement of Estate be
declared null and void and be compelled to execute a Deed of Absolute
Sale in their favor upon payment of the remaining balance of P30,000.
● RTC and CA denied the complaint since there is no showing that
respondent Perla gave her consent to the sale of Teodulo's share of the
subject property.
○ Thus, the sale is void.
ISSUES – HELD – RATIO
W/N Teodulo could validly dispose of his share in the property acquired
during his first marriage without needing to obtain the consent of his second
spouse and his other seven co-owners?
YES, but only to the portion of Teodulo’s share
RATIO
● The third paragraph of Article 130 of the Family Code provides that a
mandatory regime of complete separation of property shall govern the
property relations of the subsequent marriage should the surviving
spouse contract a subsequent marriage without liquidating the conjugal
partnership property.
○ When a complete or total separation of property governs the
property relations, no portion of the properties of the marriage will
be common, and the fruits of the properties of either spouse, as well
as his or her earnings from any profession, work or industry, will
belong to him or her as exclusive property.
○ Each spouse owns the property which he or she brings to the
marriage or which he or she may acquire during the marriage by
onerous or gratuitous title.
● Given that complete separation of property governed the subsequent
marriage of Teodulo and Perla, the 9/16 undivided share or interest in the
subject property of Teodulo belonged to him and remained with him as
his separate property when he married Perla.
○ Thus, he could have disposed of this without need of consent from
Perla.
● The disposition or encumbrance of the entire property is valid only if the
other heirs or co-owners give their consent thereto pursuant to Article
491 of the Civil Code, which provides that none of the co owners shall,
without the consent of the others, make alterations in the thing owned in
common, even though benefits for all would result there from.
Petitioners' invocation of Article 92 to justify that the subject property is
excluded from the community property of Teodulo and Perla, and is
partly Teodulo's separate property, which he could alienate without need
of Perla’s consent, is incorrect.
○ As to their invocation of Article 103, which applies to community
property, it is likewise incorrect because the property regime of
Teodulo and Perpetua was the conjugal partnership of gains.
● Thus, the applicable provision is Article 130 of the Family Code. Based
on the elements of sale, the transaction between Teodulo and Apolinario
is indeed a contract of sale.
○ There was a meeting of the minds: Teodulo agreed to transfer
ownership of and to deliver the subject property and Apolinario
agreed to pay the purchase price of P150,000.00.
 ○ The object is the subject property, which is determinate and licit. under Article 130 of the Family Code, his disposition of the entire
For Teodulo, the cause or consideration was the receipt of the subject property cannot be entirely valid as his right to dispose as a
payment of the purchase price while for Apolinario, it was the co-owner is limited by Article 493 of the Civil Code to the share or
transfer of ownership and delivery of the subject property to him. part pertaining to him.
○ Not only was the sale between Teodulo and Apolinario perfected, it ● The sale by Teodulo of the subject property to Apolinario was not
was partially consummated. necessarily or totally or entirely void, for his rights as a co-owner to the
○ Teodulo had substantially complied with his presentation as the extent of 9/16 thereof was effectively transferred, making the buyer,
seller when he placed the subject property in the control and Apolinario, a co-owner of the subject property to that extent and a trustee
possession of Apolinario without reserving its ownership. for the benefit of the coheirs of Teodulo, his seven children, in respect of
○ What was left was the transfer of the certificate of title covering their combined 7/16 interest therein that was not validly sold to
the subject property from Teodulo to Apolinario. Apolinario.
○ As control and possession of the subject property had earlier been ○ Upon Apolinario's death, petitioners stepped into his shoes and
ceded by Teodulo to Apolinario after the payment of the initial became co-owners together with Jesus of the subject property.
P40,000.00 on September 23, 1994, without any stipulation that
ownership in the subject property would not pass to Apolinario
until he had fully paid the price, the quoted proviso in the October DOCTRINE AND NOTES
20, 1999 receipt had no effect on the ownership of the subject ● From the perspective of the definition of the “contract of sale” under
property having already been transferred to Apolinario by actual Article 1458, and that of “obligation” under Article 1156 as “a juridical
delivery necessity to give, to do or not to do,” the prestations of the seller are: (1)
● The proviso is simply a reservation of a portion of the purchase price to to transfer the ownership of a determinate thing and (2) to deliver that
ensure the transfer of the certificate of title from Teodulo to Apolinario. determinate thing, while the corresponding prestation of the buyer is to
○ Sale being a reciprocal obligation, both Teodulo and Apolinario pay therefor a price certain in money or its equivalent.
stood to benefit from the proviso.
○ Teodulo would not need to spend his own funds to effect the
transfer of title and Apolinario could be assured of the transfer of
title by making sure that the remaining P30,000.00 would be spent
for that purpose.
○ Despite the existence of a valid contract of sale over the subject
property between Teodulo and Apolinario, the sale is effective only
to the extent of the share or interest of Teodulo therein pursuant to
Article 493 of the Civil Code which, as discussed above, is 9/16 of
the subject property.
○ Therefore, while Teodulo sold the entire subject property which he
owned in common with his seven children, the sale only affected
his undivided share and Apolinario acquired only Teodulo's 9/16
abstract share in the property held in common.
○ While Teodulo could dispose of his 9/16 undivided interest therein
by virtue of Article 145 of the Family Code because that pertained
to him as his separate property in his subsequent marriage to Perla

Viovicente v. Viovicente
G.R. NO. 219074 | 28 July 2020 | Lazaro-Javier
Keywords:
Petitioners are Spouses Teodorico and Dominga Viovicente (Parents of Danilo)
Respondents are Spouses Danilo (Son of Petitioners YAAAW) and Alice
Viovicente
FACTS
Petitioner’s Version
● Teodorico Viovicente testified that he was married to Dominga and
respondent Danilo Viovicente was their eldest son. He was the registered
owner of a property located in San Pedro, Laguna.
○ He acquired it through a GSIS real estate loan and paid it
through salary deductions for fifteen (15) years.
● On June 24, 1993, Danilo went to their house in Tacloban City and
forced him and Dominga to sign a Deed of Absolute Sale.
○ They initially refused because the property was intended for
Danilo's siblings for their eventual study in Manila.
○ Because of his refusal, Danilo angrily shouted and threw a
briefcase at him but missed.
■ Out of fear, he and Dominga signed the Deed even
without receiving any payment as consideration.
■ When he was able to secure a copy of the Deed in
2002, he noted that the acknowledgment portion falsely
stated that he personally appeared before a notary in
Makati City on July 14, 1993.
● This was physically impossible since he
reported for work at the GSIS-Tacloban City
that day.
● In 2002, he learned that Danilo and Danilo’s wife, respondent Alice
Viovicente, were able to transfer the property to their names and were
issued a TCT (TCT-356656) through a fictitious Deed of Absolute Sale.
○ He denied ever signing it. As with the Deed of Sale dated June
24, 1993, he too denied personally appearing before a notary
public in Makati where the Deed of Sale dated December 14,
1995 was supposedly executed.
■ The GSIS-Tacloban City certified that he reported for
work that day.
● Hence, he and Dominga filed the Complaint for reconveyance of
property, nullity of the supposed sale of real property, and cancellation of
TCT.
Respondent’s Version
● Danilo Viovicente denied using force and intimidation to obtain his
parents' signature on the Deed of Sale dated June 24, 1993.
● He testified that sometime in 1983, Teodorico commented that it would
be convenient to have a house in Manila where his siblings could stay.
○ He initially dismissed the idea for lack of funds. Teodorico then
suggested that he (Teodorico) could apply for a loan to cover the
downpayment while he (Danilo) would be in charge of paying
the amortizations; and upon full payment thereof, Teodorico
would convey the property to him.
■ He agreed to this arrangement.
● Though reluctant at first, Teodorico signed the Deed of Sale dated June
24, 1993 after he (Danilo) assured him that the property could still be
used by his siblings.
○ To facilitate the transfer of the property to his name, he gave the
Deed of Sale dated June 24, 1993 to his brother Phio who
executed an identical Deed to avoid paying surcharges and
penalties.
● Before petitioners filed the complaint, their family had a meeting where
Teodorico told him to reconvey the property, claiming he was coerced
into signing the Deed.
● GSIS Chief of the Accounts Administrative Division Gavino B.
Gagarin testified that Teodorico's timecards from 1993 to 1995 and
daily time records for the period covering January to August 1992
were all unsigned.
________________________________________________________
● Trial Court level: Ruled in favor of the petitioners (parents).
○ The Deed of Sale dated June 24, 1993 was devoid of any
consideration because petitioners were merely forced to sign it.
○ There was simply no evidence to establish Danilo's supposed
arrangement with Teodorico.
● CA level: Reversed.
 ○ Petitioners failed to overthrow the presumption that this Deed of
Sale dated December 14, 1995 was actually executed and the
consequent Torrens title, issued with regularity.
○ Petitioners' assertion that the Deed of Sale dated December 14,
1995 was forged was unsubstantiated.
○ Lastly, the action for reconveyance had already prescribed
because the supposedly forged TCT was issued on January 16,
1996 while the action was only filed in 2003.
W/N the conveyance in favor of respondents was valid
NO, it was not valid.
RATIO
● There was never any valid conveyance of the property in favor of
respondents. Whether respondents base their claim of ownership on the
Deed of Absolute Sale dated December 14, 1995 or Deed of Sale dated
June 24, 1993 is immaterial. Both were void.
○ The first was spurious or forged;
○ The second did not have any consideration in exchange for the
supposed sale of the lot.
● Article 1458 of the Civil Code defines contract of sale, thus:
○ “By the contract of sale one of the contracting parties obligates
himself to transfer the ownership of and to deliver a determinate
thing, and the other to pay therefor a price certain in money or its
equivalent.”
● The elements of a valid contract of sale are:
○ (1) consent or meeting of the minds;
○ (2) determinate subject matter; and
○ (3) price certain in money or its equivalent.
■ Absent any of the elements, the sale is fictitious or otherwise
void.
■ Specifically, Article 1471 of the Civil Code decrees that if
the price in a contract of sale is simulated, the sale is void.
● A close look at the transcript of the cross examination reveals that
petitioners did not receive a single centavo from respondents.
○ The trial court was persuaded by petitioners’ testimony and thus
held:
■ “On its face, the Deed of Absolute Sale purports to be
supported by a consideration in the form of a price certain in
money. However, based on the evidence presented by
plaintiffs, they were merely forced by Danilo Viovicente to
sign the Deed of Absolute Sale and that they did not receive
any consideration in the amount of P111,180.00 from Danilo
Viovicente. There was indisputably a total absence of
consideration contrary to what is stated in the Deed of
Absolute Sale. Where, as in this case, the deed of absolute
sale states that the purchase price has been paid but in fact
has never been paid, the deed of sale is null and void ab
initio for lack of consideration.”
● Danilo did not present any evidence to prove his supposed amortization
payments, much less, his agreement with Teodorico that the latter will
obtain a GSIS loan to purchase the property while he (Danilo) will pay
the amortizations thereof.
○ Meanwhile, Teodorico presented a GSIS certification Teodorico
was granted a housing unit and had been paying monthly
amortizations.
■ Another GSIS Certification certified that Teodorico's
housing loan was already fully paid on December 8, 1992.
● We cite now two case laws:
○ Spouses Lequin v. Spouses Vizconde decreed that where the deed
of sale states that the purchase price has been paid but in fact has
never been paid, the deed of sale is null and void ab initio for lack
of consideration.
○ In Labagala v. Santiago, the Court declared void for want of
consideration the sale of the property. Admittedly, Labagala did not
pay any centavo for the property, which makes the sale void
pursuant to Article 1471 of the Civil Code.
● In sum, TCT No. 356656 is void because…
○ For one, it was issued based on a spurious Deed of Sale unilaterally
executed on December 14, 1995.
○ For another, the Deed absolutely lacked consideration from
respondents.
DOCTRINE AND NOTES

● There was another issue also (unrelated): W/N petitioners’ cause of

action is barred by prescription? NO, it is not.
○ Petitioners’ action for nullity of a spurious deed of sale is
imprescriptible (Article 1410 of the Civil Code — The action or
defense for the declaration of the inexistence of a contract does
not prescribe.)
○ A forged or spurious deed of sale cannot be the source of
ownership.
■ In Heirs of Arao v. Heirs of Eclipse (OBLICON
CASE), the Court held that title cannot be used to
validate the forgery or cure a void sale. Verily, the
registered owner does not thereby lose his title, and
neither does the assignee in the forged deed acquire
any right or title to the property.

Dizon v. CA
G.R. NO. | DATE | PONENTE
Keywords: 300K, PERFECTED CONTRACT OF SALE, option to purchase
FACTS
● Petitioners and private respondent executed a contract of lease for one(1)
year with option to purchase. The lease contract expired without the
private respondent, as lessee, purchasing the parcel of land but remaining
in possession thereof. Hence, there was an implicit renewal of the lease
contract on a monthly basis. Subsequently, private respondent belatedly
exercised its option to buy through Alice Dizon who accepted the amount
of P300,000.00 purportedly as partial payment of the purchase price of
the land.
○ Alex Dizon was acting for and in behalf of Fidela Dizon who is the
mother of the petitioners and who is a co-owner of the said property
● Petitioners were ordered to return the P300k that they received but they
refused to do so
● Respondents argue that there was a perfected contract of sale as shown in
the receipt of the partial payment of P300K.
ISSUES – HELD – RATIO
ISSUE – W/N there was a perfected contract of sale between the parties by
the acceptance of Alice A. Dizon of the P300,000.00,
purportedly as partial payment of the purchase price of the land (and W/N
petitioners are estopped from questioning the belated exercise by private
respondent of its option to buy when they accepted the said partial
payment.)
HELD - NO.
RATIO
● There could not have been a perfected contract of sale.
● There is absolutely no written proof of Alice Dizon's authority to bind
petitioners. First of all, she was not even a co-owner of the property.
Neither was she empowered by the co-owners to act on their behalf.
○ Based on Art. 1874 of the Civil Code, when the sale of a piece of
land or interest therein is through an agent, the authority of the
latter shall be in writing; otherwise, the sale shall be void.
■ Thus the authority of an agent to execute a contract for the
sale of real estate must be conferred in writing and must give
him specific authority, either to conduct the general business
of the principal or to execute a binding contract containing
terms and conditions which are in the contract he did execute
.
■ A special power of attorney is necessary to enter into any
contract by which the ownership of an immovable is
transmitted or acquired either gratuitously or for a valuable
consideration.
● IN THIS CASE, petitioners cannot be deemed to have received partial
payment of the supposed purchase price for the land through Alice
Dizon. It cannot even be said that Alice Dizon's acceptance of the money
bound at least the share of Fidela Dizon, in the absence of a written
power of attorney from the latter. It should be borne in mind that the
Receipt dated June 20, 1975, while made out in the name of Fidela
Dizon, was signed by Alice Dizon alone.
● On the implied renewal of the contract of lease, said implied renewal
affected only those terms and conditions which are germane to the
lessee's right of continued enjoyment of the property.
○ The option to purchase afforded private respondent expired after
the one-year period granted in the contract. Otherwise stated, the
implied renewal of the lease did not include the option to purchase.
○ Germane in a contract of lease: right of continued enjoyment of the
property
DOCTRINE AND NOTES
● Article 1874 of the Civil Code : "When a sale of a piece of land or any
interest therein is through an agent, the authority of the latter shall be in
writing; otherwise, the sale shall be void."
● Implied renewal of contracts of lease only include terms and conditions
that are germane to the lessee's right of continued enjoyment of the
property
 prevailing market value and the respondent offering 4.25M in cash as the
Manila Metal Container Corp. v. PNB purchase price
G.R. NO. | DATE | PONENTE ● The trial court ruled that there was no perfect contract of sale between
Keywords: the parties and that PNB should return the 725K paid by petitioner to
them.
FACTS ● CA: affirmed the decision of the RTC
● Petitioner: owner of a parcel of land; secured a 900k loan from ○ petitioner obviously never agreed to the selling price proposed by
respondent Philippine National Bank (PNB) thru a reals estate mortgage respondent PNB (P1,931,389.53) since petitioner had kept on
over the lot insisting that the selling price should be lowered to P1,574,560.47.
○ Petitioner secured another loan from them amounting to 653K ○ Petitioner’s original offer to purchase the property had not been
● Respondent PNB filed an application for extrajudicial foreclosure of the accepted by respondent PNB > no contract to rescind
mortgage and have the property sold at a public auction for petitioner's
outstanding obligation plus interests and attorney’s fees. PETITIONER’S ARGUMENTS RESPONDENT’S ARGUMENTS
○ Property was sold to PNB as the winning bidder
● Petitioner sent a letter asking for extension of time to redeem/repurchase Respondent had accepted its offer thru parties never graduated from the
the property. Respondent PNB told petitioner that the request had been SAMD, to sell the property for only 1.5M "negotiation stage" as they could not agree
referred to its Pasay City Branch for appropriate action and ● When the acceptance was made on the amount of the repurchase price of
recommendation it deposited 725K as partial the property
● Petitioner sent a letter again reiterating his request for extension. payment evidenced by the ● All that happened was an
meanwhile , some PNB Pasay City Branch personnel told him that the receipt they got > the acceptance exchange of proposals and
bank does not accept “partial redemption” as he planned to repurchase of this deposit amounts to an counter-proporsals
the property on an installment basis. acceptance of tis offer to ● A definite agreement on the
● Petitioner failed to redeem the property so the REgister of Deeds repurchase amount and manner of payment
cancelled his title and issued a new title in favor of respondent PNB. of the price are essential
● Meanwhile, the Special Assets Management Department (SAMD) had PNB Board of Directors had approved elements in the formation of a
prepared a statement of account, showing petitioner's obligation petitioner's offer to purchase the property. binding and enforceable contract
amounting to P1,574,560.47. It claims that this was the suspensive of sale.
○ When apprised of the statement of account, petitioner remitted condition, the fulfillment ○ There was no such
P725,000.00 to respondent PNB as "deposit to repurchase," and of which gave rise to the contract. agreement in this case.
Official Receipt No. 978191 was issued to it. ● Respondent could no longer
● In the meantime, the SAMD recommended to the management of unilaterally withdraw its offer to The Statement of Account prepared by
respondent PNB that petitioner be allowed to repurchase the property for sell the property for SAMD as of June 25, 1984 cannot be
P1,574,560.0 P1,574,560.47, since the classified as a counter-offer; it is simply a
○ PNB informed petitioner that it was rejecting the offer and acceptance of the offer resulted recital of its total monetary claims against
recommendation the SAMD. they suggested that the price of the in a perfected contract of sale petitioner.
property is 2.6M representing its minimum market value. ● The amount is merely an
● There was a back and forth of between petitioner and respondent as to Respondent was proscribed from acknowledgement of the receipt
the purchase price of the property until PNB settled at 30M as its increasing the interest rate after it had of the 725K as deposit to
 ● A contract of sale is consensual in nature and is perfected upon mere
accepted respondent's offer to sell the repurchase the property > the
meeting of the minds. When there is merely an offer by one party without
property for P1,574,560.00. acceptance of respondent of the
acceptance of the other, there is no contract.
amount was qualified by the
○ When it is not perfected > not a source of obligation
condition that the purchase price
would still be approved by its
● San Miguel Properties Philippines, Inc. v. Huang: stages of a contract of
Board of Directors
sale
1. Negotiation: the period from the time the prospective
ISSUES – HELD – RATIO contracting parties indicate interest in the contract to the time
the contract is perfected
ISSUE – W/N petitioner and respondent PNB had entered into a perfected a. Formally initiated by an offer which must be certain
contract for petitioner to repurchase the property from respondent. (W/N b. The offer may be withdrawn here
there was a perfected contract of sale) 2. Perfection: takes place upon the concurrence of the essential
HELD – NO. elements of the sale which are the meeting of the minds of the
parties as to the object of the contract and upon the price
RATIO 3. Consummation: begins when the parties perform their
● A contract is a meeting of minds between two persons whereby one respective undertakings under the contract of sale, culminating
binds himself, with respect to the other, to give something or to render in the extinguishment thereof
some service. ● To convert the offer into a contract, the acceptance must be absolute and
● Article 1318 of the New Civil Code, there is no contract unless the must not qualify the terms of the offer; it must be plain, unequivocal,
following requisites concur: unconditional and without variance of any sort from the proposal
1. Consent of the contracting parties ○ A qualified acceptance or one that involves a new proposal
2. Object certain which is the subject matter constitutes a counter-offer and a rejection of the original offer. A
3. Cause of the obligatio counter-offer is considered in law, a rejection of the original
● Contracts are perfected by mere consent which is manifested by the offer and an attempt to end the negotiation between the parties
meeting of the offer and the acceptance upon the thing and the cause on a different basis
which are to constitute the contract. When this happens, the parties are ○ The acceptance must be identical in all respects with that of the
bound not only to the fulfillment of what has been expressly stipulated offer so as to produce consent or meeting of the minds.
but also to the consequences which, according to their nature, may be in
keeping with good faith, usage and law. In this case, respondent’s acceptance of petitioner’s offer was qualified. Hence, at
● By the contract of sale, one of the contracting parties obligates himself to most it is considered as a counter-offer
transfer the ownership of and deliver a determinate thing, and the other to ● Petitioner requested several times for the extension of the period to
pay therefor a price certain in money or its equivalent. The absence of repurchase the property. The recommendation by SAMD of 1.5M as the
any of the essential elements will negate the existence of a perfected purchase price does not bind the respondents as there is no showing that
contract of sale. SAMD was authorized by respondent’s Board of Directors to accept the
○ Boston Bank of the Philippines v. Manalo: Price is an essential offer and sell the property
element in the formation of a binding and enforceable contract ● Further, when PNB accepted the 725K deposit, it was subject to the
of sale. condition that respondent accepts SAMD recommendation to purchase
the property for only 1.5M
 ○ Unless and until the respondent accepted the offer on these
terms, no perfected contract of sale would arise. Absent proof of
the concurrence of all the essential elements of a contract of
sale, the giving of earnest money cannot establish the existence
of a perfected contract of sale
● In the course of the events in the case, the petitioner and respondent
never reached an agreement as to the purchase price
○ Petitioner: 1.5M; PNB: 2.6M
○ Petitioner: still 1.5M; PNB: balance of 1.9M as there is a 725K
deposit
○ Petitioner: 3.5M; PNB: 30M
○ Petitioner: 4.25M; PNB: rejected this na

It appears that although respondent requested petitioner to conform to its amended

counter-offer, petitioner refused and instead requested respondent to reconsider its
amended counter-offer. Petitioner's request was ultimately rejected and respondent
offered to refund its P725,000.00 deposit.

In sum, then, there was no perfected contract of sale between petitioner and
respondent over the subject property.

DOCTRINE AND NOTES

● A contract of sale is consensual in nature and is perfected upon mere

meeting of the minds. When there is merely an offer by one party without
acceptance of the other, there is no contract.
○ When it is not perfected > not a source of obligation
● To convert the offer into a contract, the acceptance must be absolute and
must not qualify the terms of the offer; it must be plain, unequivocal,
unconditional and without variance of any sort from the proposal
○ A qualified acceptance or one that involves a new proposal
constitutes a counter-offer and a rejection of the original offer. A
counter-offer is considered in law, a rejection of the original
offer and an attempt to end the negotiation between the parties
on a different basis
○ The acceptance must be identical in all respects with that of the
offer so as to produce consent or meeting of the minds

GSIS v. Lopez
G.R. NO. 165568 | July 13, 2009 | CARPIO, J
Keywords:
FACTS
● Lopez obtained a loan of P22,500 from the GSIS. To secure the loan,
Lopez mortgaged his house and lot. When he defaulted on the loan, GSIS
foreclosed on the real estate mortgage and obtained title to the property.
Meanwhile, GSIS allowed Lopez to remain on the property for a monthly
rent of P1,200.
● Thereafter, Lopez accumulated arrears in rent. Thus, GSIS demanded
payment through a letter.
● When no payment was made, GSIS sent another letter inviting Lopez to
bid for the subject property. The scheduled bidding was canceled when
Lopez obtained a TRO from the RTC.
● Lopez offered to repurchase the property from the GSIS. GSIS replied
that he may be allowed to repurchase the property subject to the
approval by the Board of Trustees on cash basis for an amount based
on the current market value of the property (155,000) plus unpaid rentals
and accrued real estate taxes, if any. Accordingly, Lopez should put up a
10% deposit as earnest money subject to refund, should the Board reject
his offer.
○ Lopez paid the 10% cash deposit. (15,500)
● No contract of sale was executed. Instead, in two notices GSIS demanded
from Lopez payment of arrears in rent. Thereafter, GSIS filed a
complaint for ejectment against Lopez with the MeTC.
● MeTC Level: approved the Compromise Agreement entered into by the
parties.
○ Key stipulations in the Compromise Agreement:
■ That Lopez will pay an XX amount (amount not important)
■ In case Lopez fails to comply with any of the terms and
conditions hereof, and the terms and conditions of the lease
contract that will be executed by them, GSIS shall be entitled
to the immediate issuance of a writ of execution without the
prior notice to the Lopez.
● GSIS then wrote to Lopez: If you are willing to buy back the subject
property at its current market value (844,000) plus all rental dues, inform
us immediately. Lopez requested a lower price (155,000) but GSIS did
not act on his request. Instead, it sent a notice of the inclusion of the
subject property in a public auction.
● This prompted Lopez to file with a Complaint for Specific Performance
to enjoin the sale of the subject property and compel GSIS to execute the
necessary contract of sale upon full payment of the purchase price of
P155,000.
● RTC Level: dismissed the case.
○ The trial court agreed with the contention of GSIS that there was no
perfected contract of sale for lack of consent.
○ It is clear from the GSIS letter that the sale shall be "subject to the
approval of the Board of Trustees". No such approval has been
secured. Therefore, despite the payment of P15,500, the transaction
could not be considered a perfected contract of sale.
● CA Level: reversed RTC Decision. There was a perfected contract of
sale.
○ The P15,500 paid by Lopez to GSIS was earnest deposit, which is
only a deposit of what would become earnest money or down
payment should a contract of sale be executed. It merely guarantees
that the seller would not back out of the sale. It was made subject to
refund should the Board of Trustees reject the offer of Lopez.
○ There was tacit acceptance of Lopez's offer to repurchase the
property. Indicative of such decision of the GSIS is its failure to
refund Lopez's deposit.
○ GSIS sought to enforce the terms of the contract to sell. GSIS
sought to collect from Lopez arrears in rent. The arrears in rent
were part of the repurchase price under the contract to sell. In
demanding payment of the arrears in rent, GSIS was in effect
implementing the contract to sell.
W/N GSIS tacitly accepted Lopez's offer to repurchase under the terms and
conditions of GSIS’ letter
NO.
RATIO
● The stages of a contract of sale are:
○ (1) negotiation, starting from the time the prospective contracting
parties indicate interest in the contract to the time the contract is
perfected;
 ○ (2) perfection, which takes place upon the concurrence of the NOTES
essential elements of the sale; ● How about the P15,500 cash deposit? It is not earnest money because
○ (3) consummation, which commences when the parties perform earnest money forms part of the consideration only if the sale is
their respective undertakings under the contract of sale, culminating consummated upon full payment of the purchase price. Instead, partial
in the extinguishment of the contract. legal compensation occurred because Lopez also had arrears to GSIS.
● In the present case, the parties never got past the negotiation stage.
Nothing shows that the parties had agreed on any final arrangement
containing the essential elements of a contract of sale, namely, (1)
consent or the meeting of the minds of the parties; (2) object or subject
matter of the contract ; and (3) price or consideration of the sale.
● The letter of the GSIS cannot be classified as a perfected contract of sale
which binds the parties. The letter was in reply to Lopez's offer to
repurchase the property. Both the trial and appellate courts found that
Lopez's offer to repurchase the property was subject to the approval of
the Board of Trustees of the GSIS, as explicitly stated in its letter to
Lopez. No such approval appears in the records.
● When there is merely an offer by one party without acceptance by
the other, there is no contract of sale. Since there was no acceptance by
GSIS, which can validly act only through its Board of Trustees, of
Lopez's offer to repurchase the property, there was no perfected contract
of sale.
● Moreover, the acts of the GSIS in seeking to evict Lopez from the
property and in demanding payment of arrears in rent emphasize its
ownership of the subject property and clearly negate any form of
approval by GSIS of Lopez's offer to repurchase the property. Likewise,
Lopez's recognition of GSIS' ownership of the property and his status as
a defaulting lessee in the Compromise Agreement, which was entered
into after Lopez's offer to repurchase, undoubtedly refutes his claim of a
perfected contract of sale. If Lopez was under the impression that he had
a perfected contract of sale with GSIS, which meant that Lopez could
compel GSIS to perform its obligations as a seller, then Lopez could have
objected to the Compromise Agreement. However, Lopez assented to the
contents of the Compromise Agreement.

DOCTRINE
● When there is merely an offer by one party without acceptance by
the other, there is no contract of sale.
 Buenaventura v. CA (check syllabus, dalawa doctrine)
G.R. NO. 126376 | November 20, 2003 | CARPIO, J
Keywords:
FACTS
● Defendant spouses Leonardo Joaquin and Feliciana Landrito are the
parents of plaintiffs Consolacion, Nora, Emma and Natividad as well as
of defendants Fidel, Tomas, Artemio, Clarita, Felicitas, Fe, and Gavino,
all surnamed JOAQUIN.
● Sought to be declared null and void ab initio, are certain deeds of sale of
real property executed by defendant parents Leonardo Joaquin and
Feliciana Landrito in favor of their co-defendant children and the
corresponding certificates of title issued in their names.
● Plaintiffs aver that the deeds of sale are simulated because:
○ Firstly, there was no actual valid consideration for the deeds of sale
. . . over the properties in litis;
○ Secondly, assuming that there was consideration in the sums
reflected in the questioned deeds, the properties are more than
three-fold times more valuable than the measly sums appearing
therein;
○ Thirdly, the deeds of sale do not reflect and express the true intent
of the parties
○ Fourthly, the purported sale of the properties in litis was the result
of a deliberate conspiracy designed to unjustly deprive the rest of
the compulsory heirs (plaintiffs herein) of their legitime.
● RTC Level: dismissed the complaint.
○ the testimony of the defendants, particularly that of the . . . father
will show that the Deeds of Sale were all executed for valuable
consideration. This assertion must prevail over the negative
allegation of plaintiffs.
● CA Level: affirmed the RTC Decision.
W/N the Deeds of Sale are void for lack of consideration
NO
● Petitioners assert that their respondent siblings did not actually pay the
prices stated in the Deeds of Sale to their respondent father.
RATIO
● A contract of sale is not a real contract, but a consensual contract. As
a consensual contract, a contract of sale becomes a binding and valid
contract upon the meeting of the minds as to price. If there is a
meeting of the minds of the parties as to the price, the contract of sale is
valid, despite the manner of payment, or even the breach of that manner
of payment. If the real price is not stated in the contract, then the contract
of sale is valid but subject to reformation.
● But if there is no meeting of the minds of the parties as to the price,
because the price stipulated in the contract is simulated, then the contract
is void (Article 1471).
● It is not the act of payment of price that determines the validity of a
contract of sale. Payment of the price has nothing to do with the
perfection of the contract. Payment of the price goes into the
performance of the contract. Failure to pay the consideration is
different from lack of consideration. The former results in a right to
demand the fulfillment or cancellation of the obligation under an existing
valid contract while the latter prevents the existence of a valid contract.
● In this case, Petitioners failed to show that the prices in the Deeds of Sale
were absolutely simulated. To prove simulation, petitioners presented
Valdoz's testimony stating that their father, respondent Leonardo Joaquin,
told her that he would transfer a lot to her through a deed of sale without
need for her payment of the purchase price. The trial court did not find
the allegation of absolute simulation of price credible.
● On the other hand, the Deeds of Sale which petitioners presented as
evidence plainly showed the cost of each lot sold. Not only did
respondents' minds meet as to the purchase price, but the real price was
also stated in the Deeds of Sale.
DOCTRINE
● A contract of sale is not a real contract, but a consensual contract. As a
consensual contract, a contract of sale becomes a binding and valid
contract upon the meeting of the minds as to price.
● Failure to pay the consideration is different from lack of consideration.
NOTES
 Selerio v. Bancasan
G.R. NO. 222442 | June 23, 2020 | CAGUIOA, J
Keywords:
FACTS
● Petitioner Selerio is the claimant, occupant, and possessor of a parcel of
land (subject land). On September 18, 1993, Nieves executed a Deed of
Transfer and Waiver of Rights, Interests and Improvements (Deed) over
the subject land in favor of respondent Bancasan conveying, ceding, and
selling the property including all improvements found thereon.
● Nieves [supposedly] sold the subject property to Bancasan for P200,000
and the former acknowledged to have received 50% of the amount from
the latter.
○ In the Deed, the parties agreed that the 50% balance of the total
consideration shall be paid only when Nieves and her family shall
have vacated the subject premises which shall not go beyond April
30, 1994.
● After the [supposed] conveyance, however, Jose Selerio and Cecilia
Ababo-Selerio filed a case for Partition, Accounting of Property Income
and Attorney's Fees against Nieves, Tregidio and others. They claimed to
be the illegitimate children of Nieves' husband.
○ In that case, the parties executed a Compromise Agreement on
September 2, 1997 duly approved by the RTC wherein the parties
agreed to proceed with the sale over the subject property.
● Bancasan demanded petitioners to vacate the subject property but the
demand remained unheeded. Hence, he filed a Complaint for Recovery
of Possession against Selerio and his daughter-in-law, alleging that he is
entitled to the possession of the property by virtue of the Deed executed
in his favor.
● Selerio countered that based on the Deed itself, there was no absolute
transfer of rights considering that there are conditions set therein; and
that the Deed must be appreciated as similar to a contract to sell rather
than a contract of sale due to the conditions set therein.
○ They also argued that as stipulated in the contract, Nieves and
Alicia had to vacate the property not later than April 30, 1994; and
that since he filed his Complaint only on March 14, 2007, he had
slept on his rights for more than 12 years. (nagprescribe na daw
kasi diba dapat daw 10 years)
● RTC Level: dismissed the case as the action was already barred by
prescription.
○ RTC went so far as to hold that no sale was perfected as petitioner
Selerio never delivered the property and Bancasan never fully paid
the price. (The determination of W/N a sale was perfected is crucial
because it determines when the prescriptive period will start)
● CA Level: reversed the RTC Order and held that the action was filed
within the prescriptive period.
○ The CA held that the parties entered into a contract of sale.
○ CA, interpreting the Deed, said that Selerio already transferred
ownership of the subject property to Bancasan in exchange for the
amount of P200,000.
W/N the parties entered into a contract of sale
YES. The RTC grossly erred in holding that no sale was perfected as petitioner
Nieves never delivered the property and respondent never fully paid the price. It is
elementary that a contract of sale is perfected by mere consent.
RATIO
● As a contract of sale is consensual in nature, the Court, in Buenaventura
v. CA, explained:
○ Payment of the price has nothing to do with the perfection of the
contract. Payment of the price goes into the performance of the
contract. Failure to pay the consideration is different from lack of
consideration.
● Dean CLV likewise explained: (shinout-out sya ng SC)
○ Under Article 1475 of the Civil Code, from the moment of
perfection of the sale, the parties may reciprocally demand
performance, even when the parties have not affixed their
signatures to the written form of such sale, but subject to the
provisions of the law governing the form of contracts.
Consequently, the actual delivery of the subject matter or
payment of the price agreed upon are not necessary
components to establish the existence of a valid sale; and their
non-performance do not also invalidate or render "void" a sale
that has begun to exist as a valid contract at perfection;
non-performance, merely becomes the legal basis for the
remedies of either specific performance or rescission, with
damages in either case.
DOCTRINE
● The actual delivery of the subject matter or payment of the price agreed
upon are not necessary components to establish the existence of a valid
sale; and their non-performance do not also invalidate or render "void" a
sale that has begun to exist as a valid contract at perfection;
non-performance, merely becomes the legal basis for the remedies of
either specific performance or rescission, with damages in either case.

AND NOTES

Biñan Steel Corp. v. CA
G.R. NO. 142013 | 15 October 2002 | CORONA, J.
Keywords:
FACTS
● On July 22, 1998, Biñan Steel Corporation (BSC) filed with the RTC of
Manila a complaint against Joenas Metal Corporation and spouses Ng
Ley Huat and Leticia Dy Ng (the spouses Ng) for collection of a sum of
money with damages.
● The trial court issued a Writ of Preliminary Attachment, subsequently,
the sheriff levied on the property registered in the names of the spouses
Ng.
○ This property was in fact mortgaged to the Far East Bank and Trust
Company (FEBTC), now Bank of the Philippine Islands (BPI).
● In the meantime, defendant-spouses Ng sold the property to Mylene and
Myla Garcia by means of a deed of sale dated June 29, 1998.
○ Said transaction was registered only about a month-and-a-half later,
on August 12, 1998, after the mortgagee FEBTC gave its approval
to the sale.
○ Then, the latter caused the transfer of title under their names with
annotation of the preliminary attachment made earlier.
● The Garcias filed a complaint-in-intervention of the Manila RTC,
alleging that they were the registered owners of the property which was
the subject of BSC’s writ of preliminary attachment.
○ Said complaint-in-intervention was denied by the trial court for
lack of merit
● TC level: rendered judgment by default in favor of BSC
○ a Notice of Sale of Execution on Real Property was issued by
respondent sheriff Rufo J. Bernardo.
○ It scheduled the public auction of the property
[Everything after this until the CA Level bullet is Rem related, may be skipped]
● In view of the dismissal of their complaint-in-intervention, the Garcias
filed an action against BSC, sheriff Manuelito P. Viloria, the Register of
Deeds of Quezon City and FEBTC (now BPI) for cancellation of the
notice of levy
○ The Garcias claimed that they were the registered owners of the
property in dispute, having acquired the same on June 29, 1998 by
means of a deed of sale with assumption of mortgage from spouses
Ng Ley Huat and Leticia Dy Ng.
● In said case in the Quezon City RTC, the Garcias were able to secure a
temporary restraining order enjoining sheriff Rufo J. Bernardo or any
person acting in his behalf from continuing with the public auction sale
of the subject property initially scheduled on July 7, 1999. This TRO was
disregarded by the Manila RTC.
● Acting on the ex-parte manifestation with motion to proceed with the
execution sale filed by BSC, Judge Enrico Lanzanas of Branch 7, RTC,
Manila affirmed his previous order and directed the public auction of the
attached property, unless otherwise enjoined by the CA or SC
○ Thereafter, the public auction was rescheduled from July 7, 1999 to
August 6, 1999.
● On August 4, 1999, the Garcias filed another case with the Court of
Appeals for the issuance of a writ of preliminary injunction with prayer
for temporary restraining order which sought to perpetually enjoin Judge
Lanzanas and sheriff Bernardo from proceeding with the public auction
on August 6, 1999. Their petition did not implead BSC as private
Respondent.
● CA Level: In a resolution the Third Division of the Court of Appeals
temporarily restrained public respondents Judge Lanzanas and Bernardo
from proceeding with the public auction of the subject property.
○ Hence, the scheduled public sale on August 6, 1999 did not
transpire.
○ This prompted petitioner BSC to file a motion for intervention on
August 16, 1999, praying that it be allowed to intervene and be
heard in the case as private respondent, and to comment and oppose
the petition filed by the Garcias. Likewise, said motion sought to
oppose the prayer for preliminary injunction with urgent request for
the issuance of the temporary restraining order.
● On October 21, 1999, the First Division of the Court of Appeals, in its
resolution, denied BSC’s motion for intervention on the ground that its
rights could be protected in a separate proceeding, particularly in the
cancellation case filed by the Garcias.
○ BSC’s motion for reconsideration was likewise denied
● Thus this case seeking the annulment of the CA’s Resolution
ISSUES – HELD – RATIO
W/N there was a perfected contract of sale in view of a deed of sale with
assumption of mortgage?
NO
RATIO
● In the instant case, the records reveal that the levy on attachment
covering the subject property was annotated on July 27, 1998.
○ The deed of sale executed on June 29, 1998 in favor of the Garcias
was approved by FEBTC only on August 12, 1998 which was also
the date when the sale was registered.
○ From the foregoing, it can be seen that, when the Garcias purchased
the property in question, it was already under a duly registered
preliminary attachment.
○ In other words, there was already notice to said purchasers
(and the whole world) of the impending acquisition by BSC, as
the judgment creditor, of a legal lien on the title of the Ng
spouses as judgment debtors—in case BSC won its case in the
Manila RTC.
○ The court ruled that but, even if consensual, not all contracts of
sale become automatically and immediately effective.
○ In Ramos vs. Court of Appeals the SC held: In sales with
assumption of mortgage, the assumption of mortgage is a condition
precedent to the seller’s consent and therefore, without approval of
the mortgagee, the sale is not perfected.
● The Garcias claim they acquired the subject property by means of a deed
of sale with assumption of mortgage dated June 29, 1998, meaning, they
purchased the property ahead of the inscription of the levy on attachment
thereon on July 27, 1998.
○ But, even if consensual, not all contracts of sale become
automatically and immediately effective.
○ In Ramos vs. Court of Appeals the SC held: In sales with
assumption of mortgage, the assumption of mortgage is a condition
precedent to the seller’s consent and therefore, without approval of
the mortgagee, the sale is not perfected.
○ Apart therefrom, notwithstanding the approval of the sale by
mortgagee FEBTC (BPI), there was yet another step the Garcias
had to take and it was the registration of the sale from the Ngs to
them. Insofar as third persons are concerned, what validly transfers
or conveys a person’s interest in real property is the registration of
the deed.
● Because of the principle of constructive notice to the whole world,
one who deals with registered property which is the subject of an
annotated levy on attachment cannot invoke the rights of a
purchaser in good faith.
○ As between two purchasers who both registered the respective sales
in their favor, the one who registered his sale ahead of the other
would have better rights than the other who registered later.
● In the instant case, when the disputed property was consequently sold on
execution to BSC, this auction sale retroacted to the date of inscription of
BSC’s notice of attachment on July 27, 1998.
○ The earlier registration thus gave BSC superior and preferential
rights over the attached property as against the Garcias who
registered their purchase of the property at a later date.
○ Notably, the Garcias were not purchasers for value in view of the
fact that they acquired the property in payment of the loan earlier
obtained from them by the spouses Ng.
DOCTRINE AND NOTES
● Perfection Distinguished from Demandability: Not all contracts of sale
become automatically and immediately effective. In sale with assumption
of mortgage, there is a condition precedent to the seller’s consent and
without the approval of the mortgagee, the sale is not perfected (i.e.,
demandable).

Lam v. Kodak Philippines
G.R. NO. 167615 | 11 January 2016 | Leonen, J.
Keywords:
OBLICON case, MCG you the real one!
FACTS
● Lam Spouses and Kodak Philippines, Ltd. entered into an agreement
(Letter Agreement) for the sale of three (3) units of the Kodak Minilab
System 22XL (Minilab Equipment) in the amount of P1,796,000.00 per
unit.
● The parties agreed to the delivery of the equipment to the outlets in Rizal
Avenue (Manila), Tagum (Davao del Norte), and in Cotabato City. The
contract stipulated the following:
○ Minilab Equipment Packages was availed for a 19% discount.
○ No Down Payment
○ The package shall be payable in 48 monthly installments at
P35,000.00 with 24% interest rate for the first 12 months, which
totals P1,796,000.00 per unit.
● Kodak Philippines, Ltd. delivered one (1) unit of the Minilab Equipment
in Tagum, Davao Province.
○ The Lam Spouses issued post dated checks amounting to
P35,000.00 each for 12 months as payment for the first delivered
unit.
● Lam Spouses requested that Kodak Philippines, Ltd. not negotiate the
check dated March 31, 1992 allegedly due to insufficiency of funds.
○ The same request was made for the check due on April 30, 1992.
○ However, both checks were negotiated by Kodak Philippines, Ltd.
and were honored by the depository bank.
○ The 10 other checks were subsequently dishonored after the Lam
Spouses ordered the depository bank to stop payment.
● Kodak Philippines, Ltd. canceled the sale and demanded that the Lam
Spouses return the unit it delivered, while the spouses rescinded the
contract through a letter.
● Regional Trial Court found that Kodak Philippines, Ltd. defaulted in the
performance of its obligation under its Letter Agreement with the Lam
Spouses.
○ Kodak Philippines, Ltd.'s failure to deliver two (2) out of the three
(3) units of the Minilab Equipment caused the Lam Spouses to stop
paying for the rest of the installments.
● Court of Appeals agreed with the trial court's Decision, but extensively
discussed the basis for the modification of the dispositive portion.
○ The Court of Appeals ruled that the Letter Agreement executed by
the parties showed that their obligations were susceptible to partial
performance.
○ The Lam Spouses were ordered to relinquish possession of the
Minilab Equipment unit and its standard accessories, while Kodak
Philippines, Ltd. was ordered to return the amount of P270,000.00,
tendered by the Lam Spouses as partial payment.
ISSUES – HELD – RATIO
W/N the parties are entitled to mutual restitution under Article 1191?
YES,
RATIO
● Petitioner’s Arguments
○ Respondent's failed to comply with its obligation to deliver the two
(2) remaining Minilab Equipment units amounted to a breach.
○ Petitioners claim that the breach entitled them to the remedy of
rescission and damages under Article 1191 of the New Civil Code.
● Court’s Rebuttals
○ The contract between the parties is one of sale, where one party
obligates himself or herself to transfer the ownership and
deliver a determinate thing, while the other pays a certain price
in money or its equivalent.
■ A contract of sale is perfected upon the meeting of minds as
to the object and the price, and the parties may reciprocally
demand the performance of their respective obligations from
that point on.
● Overall Ruling
○ The Court of Appeals correctly ruled that both parties must be
restored to their original situation as far as practicable, as if the
contract was never entered into.
 ○ The Court of Appeals correctly noted that respondent had rescinded
the parties' Letter Agreement through the letter dated October 14,
1992.
○ It likewise noted petitioners' rescission through the letter dated
November 18, 1992.
○ This rescission from both parties is founded on Article 1191 of the
New Civil Code:
■ The power to rescind obligations is implied in reciprocal
ones, in case one of the obligors should not comply with
what is incumbent upon him.
■ The injured party may choose between the fulfilment and the
rescission of the obligation, with the payment of damages in
either case. He may also seek rescission, even after he has
chosen fulfilment, if the latter should become impossible.
■ The court shall decree the rescission claimed, unless there be
just cause authorizing the fixing of a period
○ Rescission under Article 1191 has the effect of mutual
restitution.
■ Petitioners must relinquish possession of the delivered
Minilab Equipment unit and accessories, while respondent
must return the amount tendered by petitioners as partial
payment for the unit received.
■ Further, respondent cannot claim that the two (2) monthly
installments should be offset against the amount awarded by
the Court of Appeals to petitioners because the effect of
rescission under Article 1191 is to bring the parties back to
their original positions before the contract was entered into.
● As discussed earlier, the breach committed by petitioners was the
nonperformance of a reciprocal obligation, not a violation of the
terms and conditions of the mortgage contract.
○ Therefore, the automatic rescission and forfeiture of payment
clauses stipulated in the contract does not apply.
○ Instead, Civil Code provisions shall govern and regulate the
resolution of this controversy.
● Considering that the rescission of the contract is based on Article 1191 of
the Civil Code, mutual restitution is required to bring back the parties to
their original situation prior to the inception of the contract.
○ Accordingly, the initial payment of P800.000 and the corresponding
mortgage payments in the amounts of P27,225, P23.000 and
P23.925 (totaling P874,150.00) advanced by petitioners should be
returned by private respondents, lest the latter unjustly enrich
themselves at the expense of the former.
● When rescission is sought under Article 1191 of the Civil Code, it need
not be judicially invoked because the power to resolve is implied in
reciprocal obligations.
○ The right to resolve allows an injured party to minimize the
damages he or she may suffer on account of the other party's failure
to perform what is incumbent upon him or her.
○ When a party fails to comply with his or her obligation, the other
party's right to resolve the contract is triggered.
○ The resolution immediately produces legal effects if the
non-performing party does not question the resolution.
○ Court intervention only becomes necessary when the party who
allegedly failed to comply with his or her obligation disputes the
resolution of the contract.
○ Since both parties in this case have exercised their right to resolve
under Article 1191, there is no need for a judicial decree before the
resolution produces effects.
DOCTRINE AND NOTES
● When rescission of a contract of sale is sought under Art. 1191, it need
not be judicially invoked because the power to resolve is implied in
reciprocal obligations. The resolution immediately produces legal effect
and court intervention becomes necessary when the party who allegedly
failed to comply with his or her obligation disputes the resolution of the
contract.

Gaite v. Fonacier
G.R. NO. L-11827 | July 31, 1961 | REYES, J.B.L.
Keywords:
FACTS
● Isabelo Fonacier was the owner and/or holder of 11 iron lode mineral
claims, known as the Dawahan Group, situated in the municipality of
Jose Panganiban, province of Camarines Norte.
● By a "Deed of Assignment", Fonacier constituted and appointed
plaintiff-appellee Fernando A. Gaite as his true and lawful
attorney-in-fact to enter into a contract with any individual or juridical
person for the exploration and development of the mining claims
aforementioned on a royalty basis
● Gaite later executed a general assignment, conveying the development
and exploitation of said mining claims unto the Larap Iron Mines, a
single proprietorship owned solely by and belonging to him.
● Thereafter, Fonacier suddenly decided to revoke the authority granted by
him to Gaite to exploit and develop the mining claims in question, and
Gaite assented thereto subject to certain conditions. One of the conditions
stated the following:
The balance of SIXTY-FIVE "THOUSAND PESOS (P65,000) will be paid from
and out of the first letter of credit covering the first shipment of iron ores and or
the first amount derived from the local sale of iron ore made by the Larap Mines
& Smelting Co., Inc., its assigns, administrators, or successors in interests.
● To secure the payment of the said balance of P65,000.00, Fonacier
promised to execute in favor of Gaite a surety bond, which he delivered
to Gaite on the same day the “Revocation of Power of Attorney and
Contract” was executed. However, Fonacier refused to sign said
revocation, unless another bond underwritten by a bonding company was
put up by defendants to secure the payment of the P65,000 balance of the
price of the iron ore in the stockpiles in the mining claims.
● A second bond was executed by the same parties to the first bond an
additional surety and a provision stating that the liability of the surety
company would attach only when there had been an actual sale of iron
ore by the Larap Mines & Smelting Co. for an amount of not less than
P65,000, and that, furthermore, the liability of said surety company
would automatically expire on December 8, 1955.
● However, the deadline passed and no sale of the approximately 24,000
tons of iron ore had been made nor had the 65,000 balance of the price of
said ore been paid to Gaite by Fonacier and his sureties.
● Whereupon, Gaite demanded from Fonacier and his sureties payment of
said amount, on the theory that they had lost every right to make use of
the period given them when their second bond automatically expired.
ISSUES – HELD – RATIO
ISSUE: WON the lower court erred in holding that the obligation of
Fonacier to pay Gaite the P65,000 (balance of the price of the iron ore in
question) is one with a period or term and not one with a suspensive
condition, and that the term expired on December 8, 1955
HELD: NO.
RATIO
● The Court determined that the shipment or local sale of the iron ore is not
a condition precedent to the payment of the balance of P65,000, but was
only a suspensive period or term. That the parties to the contract Exhibit
"A" did not intend any such state of things to prevail is supported by the
following circumstances:
1. The contract provides no contingency in the event the buyer fails to
the balance of P65,000.
2. Nothing is found in the record to evidence that Gaite desired or
assumed to run the risk of losing his rights over the ore without getting
paid for it, or that Fonacier understood that Gaite assumed any such risk.
3. To subordinate the obligation to pay the remaining P65,000 to the sale
or shipment of the ore as a condition precedent, would be tantamount to
leaving the payment at the discretion of the debtor, for the sale or
shipment could not be made unless the appellants took steps to sell the
ore.
4. Assuming that there could be doubt whether by the wording of the
contract the parties intended a suspensive condition or a suspensive
period for the payment of the P65,000, the rules of interpretation would
incline the scales in favor of "the greatest reciprocity of interests", since
sale is essentially onerous, based on Art. 1378 of the Civil Code.
● The Court determined that the sale of the ore to Fonacier was a sale on
credit, and not an aleatory contract where the transferor, Gaite, would
assume the risk of not being paid at all; and that the previous sale or
shipment of the ore was not a suspensive condition for the payment of
 the balance of the agreed price, but was intended merely to fix the future
date of the payment.
● A contract of sale is normally commutative and onerous: not only does
each one of the parties assume a correlative obligation (the seller to
deliver and transfer ownership of the thing sold and the buyer to pay the
price), but each party anticipates performance by the other from the very
start. While in a sale the obligation of one party can be lawfully
subordinated to an uncertain event, so that the other understands that he
assumes the risk of receiving nothing for what he gives (as in the case of
a sale of hopes or expectations, emptio spei), it is not in the usual course
of business to do so; hence, the contingent character of the obligation
must clearly appear.

DOCTRINE AND NOTES


Buenaventura v. CA
G.R. NO. 126376 | November 20, 2003 | CARPIO, J
Keywords:
FACTS
● Defendant spouses Leonardo Joaquin and Feliciana Landrito are the
parents of plaintiffs Consolacion, Nora, Emma and Natividad as well as
of defendants Fidel, Tomas, Artemio, Clarita, Felicitas, Fe, and Gavino,
all surnamed JOAQUIN.
○ Basically, there are children who are plaintiffs, and children who
are defendants. The defendant children were sold land by their
parents. The plaintiff children were those who weren’t sold land
and are challenging the sale
○ Sought to be declared null and void ab initio are certain deeds of
sale of real property executed by defendant parents Leonardo
Joaquin and Feliciana Landrito in favor of their co-defendant
children and the corresponding certificates of title issued in their
names.
● Petitioner’s Arguments
○ Firstly, there was no actual valid consideration for the deeds of sale
. . . over the properties in litis.
○ Secondly, assuming that there was consideration in the sums
reflected in the questioned deeds, the properties are more than
three-fold times more valuable than the measly sums appearing
therein.
○ Thirdly, the deeds of sale do not reflect and express the true intent
of the parties (vendors and vendees)/
○ Fourthly, the purported sale of the properties in litis was the result
of a deliberate conspiracy designed to unjustly deprive the rest of
the compulsory heirs (plaintiffs herein) of their legitime.
● Defendant’s Arguments
○ That plaintiffs do not have a cause of action against them as well as
the requisite standing and interest to assail their titles over the
properties in litis;
○ That the sales were with sufficient considerations and made by
defendants parents voluntarily, in good faith, and with full
knowledge of the consequences of their deeds of sale; and
○ That the certificates of title were issued with sufficient factual and
legal basis.
ISSUES – HELD – RATIO
ISSUE: WON the Deeds of Sale are void for lack of consideration
HELD: NO
RATIO
● A contract of sale is a consensual contract. Hence, a contract of sale
becomes a binding and valid contract upon the meeting of the minds as to
price. If there is a meeting of the minds of the parties as to the price, the
contract of sale is valid, despite the manner of payment, or even the
breach of that manner of payment. Thus, if the real price is not stated in
the contract, the sale is still valid but subject to reformation. However, if
the price stipulated in the contract is simulated, then, according to Article
1471 of the Civil Code, the sale is void. If the price is only simulated,
then there is no meeting of the minds.
● The Court stated that the payment of the price has nothing to do with the
perfection of the contract. Payment of the price goes into the
performance of the contract, not the perfection. Failure to pay the
consideration is different from lack of consideration. The former results
in a right to demand the fulfillment or cancellation of the obligation
under an existing valid contract while the latter prevents the existence of
a valid contract.
● In this case, Petitioners failed to show that the prices in the Deeds of Sale
were absolutely simulated.
● Petitioners only evidence to show a simulation of price is the testimony
that their father told Emma Joaquin (one of the defendants) that he would
transfer a lot to her through a deed of sale without need for her payment
of the purchase price. (The trial court did not find the allegation of
absolute simulation of price credible).
● On the other hand, the Deeds of Sale which petitioners presented as
evidence plainly showed the cost of each lot sold. Not only did
respondents' minds meet as to the purchase price, but the real price was
also stated in the Deeds of Sale. As of the filing of the complaint,
respondent siblings have also fully paid the price to their respondent
father
ISSUE: WON the Deeds of Sale are void for gross inadequacy of price
HELD: NO.

RATIO
● Petitioners ask that assuming that there is consideration, the same is
grossly inadequate as to invalidate the Deeds of Sale.
● According to Article 1355 of the Civil Code: “Except in cases specified
by law, lesion or inadequacy of cause shall not invalidate a contract,
unless there has been fraud, mistake or undue influence.”
● Moreover, Article 1470 of the Civil Code provides: “Gross inadequacy of
price does not affect a contract of sale, except as may indicate a defect in
the consent, or that the parties really intended a donation or some other
act or contract.”
● In this case, Petitioners failed to prove any of the instances mentioned in
Articles 1355 and 1470 of the Civil Code which would invalidate, or
even affect, the Deeds of Sale. Indeed, there is no requirement that the
price be equal to the exact value of the subject matter of sale. All the
respondents believed that they received the commutative value of what
they gave.
● The trial court found that the lots were sold for a valid consideration, and
that the defendant children actually paid the purchase price stipulated in
their respective Deeds of Sale. Actual payment of the purchase price by
the buyer to the seller is a factual finding that is now conclusive upon us

DOCTRINE AND NOTES

● Failure to pay the consideration is different from lack of consideration.
The former results in a right to demand the fulfillment or cancellation of
the obligation under an existing valid contract while the latter prevents
the existence of a valid contract
● Article 1355 of the Civil Code: Except in cases specified by law, lesion
or inadequacy of cause shall not invalidate a contract, unless there has
been fraud, mistake or undue influence.
● Article 1470 of the Civil Code: Gross inadequacy of price does not affect
a contract of sale, except as may indicate a defect in the consent, or that
the parties really intended a donation or some other act or contract

San Lorenzo Dev. Corp. v. CA
G.R. NO. 124242 | Jan 21, 2005 | TINGA, J.
Keywords: Sale is a title, not a mode
Petitioner: San Lorenzo Development Corporation (SLDC)
Respondents: Pablo Babasanta and Miguel and Pacita Lu (Sps. Lu)
FACTS
● Respondents Sps. Lu owned 2 parcels of land situated in Sta. Rosa,
Laguna, both measuring 15,808 sqm or a total of 3.1616 hectares.
● On 20 August 1986, Sps. Lu purportedly sold the 2 parcels of land to
respondent Pablo Babasanta for the price of P15 per square meter.
○ Babasanta made a downpayment of P50,000, evidenced by a
memorandum receipt issued by Pacita Lu of the same date.
○ Babasanta made other payments totaling P200,000.
● In May 1989, Babasanta wrote a letter to Pacita to demand the execution
of a final deed of sale in his favor so that he could effect full payment of
the purchase price.
○ In the same letter, Babasanta notified Sps. Lu about having
received information that the spouses sold the same property to
another without his knowledge and consent.
○ He demanded that the second sale be cancelled and that a final
deed of sale be issued in his favor.
● Pacita wrote a letter to Babasanta wherein she acknowledged having
agreed to sell the property to him at P15.00 per sqm, but reminded
Babasanta that when the balance of the purchase price became due, he
requested for a reduction of the price and when she refused,
Babasanta backed out of the sale.
○ Pacita added that she returned the sum of P50,000 to Babasanta.
● Babasanta, filed a Complaint for Specific Performance and Damages
before the RTC against Sps. Lu.
● Sps. Lu’s arguments
○ Pacita obtained loans from Babasanta. When the total advances of
Pacita reached P50,000, Pacita and Babasanta, without the
knowledge and consent of Miguel, verbally agreed to transform the
transaction into a contract to sell the two parcels of land to
Babasanta. The P50,000 would be considered as the downpayment
for the property. Balance to be paid on Dec 31, 1987
○ As of Nov 1987, Babasanta paid only P200,000 and he allegedly
failed to pay the balance of P260,000 despite repeated demands.
○ Babasanta had asked Pacita for a reduction of the price from P15 to
P12 per sqm. When Sps. Lu refused to grant Babasanta's request, he
rescinded the contract to sell and declared that the original loan
transaction just be carried out in that Sps. Lu would be indebted to
him in the amount of P200,000.
● Petitioner San Lorenzo Development Corporation (SLDC) filed a
Motion for Intervention, alleging that on 3 May 1989, the 2 parcels of
land involved, had been sold to it in a Deed of Absolute Sale with
Mortgage.
○ It alleged that it was a buyer in good faith and for value and
therefore it had a better right over the property in litigation.
● The trial court allowed SLDC to intervene.
● SLDC alleged that on 11 February 1989, the Sps. Lu executed in its favor
an Option to Buy the subject lots.
○ It paid option money in the amount of P316,160 out of the total
consideration for the purchase of the two lots of P1,264,640.
○ After the Sps. Lu received a total amount of P632,320, they
executed on 3 May 1989 a Deed of Absolute Sale with Mortgage in
its favor.
○ The certificates of title over the property were delivered to it by the
spouses clean and free from any adverse claims and/or notice of lis
pendens.
○ Claiming that it was a buyer in good faith, SLDC argued that it had
no obligation to look beyond the titles submitted to it by the Sps.
Lu particularly because Babasanta's claims were not annotated on
the certificates of title at the time the lands were sold to it.
● The RTC upheld the sale of the property to SLDC.
○ Applying Article 1544 of the Civil Code, the trial court ruled that
since both Babasanta and SLDC did not register the respective sales
in their favor, ownership of the property should pertain to the buyer
who first acquired possession of the property.
○ The trial court equated the execution of a public instrument in favor
of SLDC as sufficient delivery of the property to it.
 ○ Symbolic possession could be considered to have been first ● The receipt signed by Pacita Lu should legally be considered as a
transferred to SLDC and consequently ownership of the property perfected contract to sell.
pertained to SLDC who purchased the property in good faith. ● The distinction between a contract to sell and a contract of sale is quite
● The CA set aside the judgment of the trial court. germane.
○ The sale between Babasanta and Sps. Lu was valid and subsisting.
Contract of Sale Contract to Sell
○ The Absolute Deed of Sale with Mortgage in favor of SLDC was
null and void on the ground that SLDC was a purchaser in bad
Title passes to the vendee upon The ownership is reserved in the
faith.
the delivery of the thing sold. vendor and is not to pass until the
full payment of the price.
ISSUES – HELD – RATIO
The vendor has lost and cannot Title is retained by the vendor
W/N SLDC has a better right over the two parcels of land in view of the recover ownership until and until the full payment of the
successive transactions executed by Sps. Lu. unless the contract is resolved or price, such payment being a
YES. rescinded positive suspensive condition and
failure of which is not a breach
RATIO but an event that prevents the
● [Review lang] Contracts, in general, are perfected by mere consent, obligation of the vendor to
which is manifested by the meeting of the offer and the acceptance upon convey title from becoming
the thing which are to constitute the contract. The offer must be certain effective.
and the acceptance absolute. Moreover, contracts shall be obligatory in
whatever form they may have been entered into, provided all the ● The perfected contract to sell imposed upon Babasanta the
essential requisites for their validity are present. obligation to pay the balance of the purchase price.
● The receipt signed by Pacita Lu merely states that she accepted the sum ○ There being an obligation to pay the price, Babasanta should have
of P50,000 from Babasanta as partial payment of 3.6 hectares of farm lot. made the proper tender of payment and consignation of the
● While there is no stipulation that the seller reserves the ownership of price in court as required by law.
the property until full payment of the price which is a distinguishing ● Mere sending of a letter by the vendee expressing the intention to
feature of a contract to sell, the subsequent acts of the parties pay without the accompanying payment is not considered a valid
convince us that the Sps. Lu never intended to transfer ownership to tender of payment.
Babasanta except upon full payment of the purchase price. ○ Consignation of the amounts due in court is essential in order to
● Babasanta's letter to Pacita was quite telling. extinguish Babasanta's obligation to pay the balance of the
○ He stated therein that despite his repeated requests for the execution purchase price.
of the final deed of sale in his favor so that he could effect full ● Glaringly absent from the records is any indication that Babasanta
payment of the price, Pacita Lu allegedly refused to do so. even attempted to make the proper consignation of the amounts due,
○ In effect, Babasanta himself recognized that ownership of the thus, the obligation on the part of the sellers to convey title never
property would not be transferred to him until such time as he acquired obligatory force.
shall have effected full payment of the price.
○ Had the sellers intended to transfer title, they could have easily On the assumption that the transaction between the parties is a contract of sale
executed the document of sale in its required form simultaneously and not a contract to sell, Babasanta's claim of ownership should nevertheless fail.
with their acceptance of the partial payment, but they did not.
● Sale, being a consensual contract, is perfected by mere consent and from
that moment, the parties may reciprocally demand performance.
● The essential elements of a contract of sale, to wit:
○ (1) consent or meeting of the minds, that is, to transfer ownership in
exchange for the price;
○ (2) object certain which is the subject matter of the contract;
○ (3) cause of the obligation which is established.
● The perfection of a contract of sale should not, however, be confused
with its consummation.
● [Syllabus topic] It should be noted that sale is not a mode, but merely
a title.
○ A mode is the legal means by which dominion or ownership is
created, transferred or destroyed, but title is only the legal basis by
which to affect dominion or ownership.
○ Article 712 of the Civil Code: Ownership and other real rights over
property are acquired and transmitted by law, by donation, by
testate and intestate succession, and in consequence of certain
contracts, by tradition.
● Contracts only constitute titles or rights to the transfer or acquisition
of ownership, while delivery or tradition is the mode of
accomplishing the same.
● Sale by itself does not transfer or affect ownership; the most that sale
does is to create the obligation to transfer ownership. It is tradition
or delivery, as a consequence of sale, that actually transfers
ownership.
● Explicitly, the law provides that the ownership of the thing sold is
acquired by the vendee from the moment it is delivered to him in any
of the ways specified in Article 1497 to 1501.
● The word "delivered" should not be taken restrictively to mean transfer
of actual physical possession of the property. The law recognizes two
principal modes of delivery.
○ Actual delivery: Consists in placing the thing sold in the control
and possession of the vendee.
○ Legal or constructive delivery: May be had through any of the
following ways:
■ Execution of a public instrument evidencing the sale;
■ Symbolical tradition such as the delivery of the keys of the
place where the movable sold is being kept;
■ Taditio longa manu or by mere consent or agreement if the
movable sold cannot yet be transferred to the possession of
the buyer at the time of the sale;
■ Traditio brevi manu if the buyer already had possession of
the object even before the sale; and
■ Traditio constitutum possessorium, where the seller remains
in possession of the property in a different capacity.
● Following the above disquisition, Babasanta did not acquire
ownership by the mere execution of the receipt by Pacita Lu
acknowledging receipt of partial payment for the property.
○ The agreement between Babasanta and Sps. Lu, though valid, was
not embodied in a public instrument. Hence, no constructive
delivery of the lands could have been effected.
○ Babasanta had not taken possession of the property at any time
after the perfection of the sale in his favor or exercised acts of
dominion over it despite his assertions that he was the rightful
owner of the lands.
● There was no delivery to Babasanta, whether actual or constructive,
which is essential to transfer ownership of the property.
● Even on the assumption that the perfected contract between the parties
was a sale, ownership could not have passed to Babasanta in the absence
of delivery, since in a contract of sale ownership is transferred to the
vendee only upon the delivery of the thing sold.
Other sales-related topics. Feel free to skip because they aren’t part of
Chapter 1 sa book hehe.
Rules on Double Sales (This discussion would be purely academic for the contract
between Babasanta and Sps. Lu is not a contract of sale but a contract to sell.)
● The juridical relationship between the parties in a double sale is primarily
governed by Article 1544 which lays down the rules of preference
between the two purchasers of the same property.
Art. 1544. If the same thing should have been sold to different vendees, the
ownership shall be transferred to the person who may have first taken
possession thereof in good faith, if it should be movable property.
Should it be immovable property, the ownership shall belong to the person
acquiring it who in good faith first recorded it in the Registry of Property.
 price of P1,264,640, Sps. Lu subsequently executed on 3 May 1989 a
Deed of Absolute Sale in favor or SLDC.
Should there be no inscription, the ownership shall pertain to the person who in
● At the time both deeds were executed, SLDC had no knowledge of the
good faith was first in the possession; and, in the absence thereof, to the person
prior transaction of the Spouses Lu with Babasanta.
who presents the oldest title, provided there is good faith.
● The principle of primus tempore, potior jure (first in time, stronger in W/N SLDC is a buyer in good faith.
right) gains greater significance in case of double sale of immovable YES. SLDC qualifies as a buyer in good faith since there is no evidence extant in
property. the records that it had knowledge of the prior transaction in favor of Babasanta. At
● When the thing sold twice is an immovable, the one who acquires it and the time of the sale of the property to SLDC, the vendors were still the registered
first records it in the Registry of Property, both made in good faith, shall owners of the property and were in fact in possession of the lands.
be deemed the owner.
○ The act of registration must be coupled with good faith' that is, the Property na toh di ko na ilalagay ratio kjsdksdjak
registrant must have no knowledge of the defect or lack of title of
his vendor or must not have been aware of facts which should have DOCTRINE AND NOTES
put him upon such inquiry and investigation as might be necessary ● Sale is not a mode, but merely a title. Contracts only constitute titles or
to acquaint him with the defects in the title of his vendor. rights to the transfer or acquisition of ownership, while delivery or
● Admittedly, SLDC registered the sale with the Registry of Deeds tradition is the mode of accomplishing the same.
after it had acquired knowledge of Babasanta's claim. Babasanta,
however, strongly argues that the registration of the sale by SLDC
was not sufficient to confer upon the latter any title to the property Contract of Sale Contract to Sell
since the registration was attended by bad faith.
○ He points out that at the time SLDC registered the sale on 30 June Title passes to the vendee upon The ownership is reserved in the
1990, there was already a notice of lis pendens on the file with the the delivery of the thing sold. vendor and is not to pass until the
Register of Deeds, the same having been filed one year before on 2 full payment of the price.
June 1989.
The vendor has lost and cannot Title is retained by the vendor
recover ownership until and until the full payment of the
W/N the registration of the sale after the annotation of the notice of lis
unless the contract is resolved or price, such payment being a
pendens obliterated the effects of delivery and possession in good faith which
rescinded positive suspensive condition and
admittedly had occurred prior to SLDC's knowledge of the transaction in
failure of which is not a breach
favor of Babasanta.
but an event that prevents the
NO. From the time of execution of the first deed up to the moment of transfer and
obligation of the vendor to
delivery of possession of the lands to SLDC, it had acted in good faith and the
convey title from becoming
subsequent annotation of lis pendens has no effect at all on the consummated sale
effective.
between SLDC and Sps. Lu.

● As early as 11 February 1989, the Spouses Lu executed the Option to

Buy in favor of SLDC upon receiving P316,160 as option money from
SLDC. After SLDC had paid more than one half of the agreed purchase

Heirs of Villeza v. Aliangan
G.R. NO. 244667-69 | December 2, 2020 | CAGUIOA, J.
Keywords: Liability of Heirs
Petitioners: Heirs of Corazon Villeza
Respondents: Elizabeth Aliangan and Rosalina Aliangan
FACTS
● In controversy are 3 parcels of land with improvements located at
Angadanan, Isabela all registered under the name of Corazon Villeza.
● It is alleged that Corazon, during her lifetime, sold the subject properties
to sisters Elizabeth and Rosalina Aliangan.
○ Elizabeth was a long-time neighbor and friend.
● On August 3, 2009, however, Corazon died without executing any deed
of conveyance in respondents' favor.
● Respondents Aliangan thus filed 3 separate Amended Complaints
for "Specific Performance and Damages to compel the petitioners,
Heirs of Corazon, to execute the subject deeds.
CASE 1: Centro I Property (CV Br. 20-3009)
● Elizabeth and Rosalina (buyers) and Corazon and Rosario Agpaoa
(sellers) entered into a Deed of Conditional Sale for the sale of a
residential house and an undivided parcel of land for a purchase price
of P450,000.
● Elizabeth and Rosalina went back to Toronto, Canada where they sent
monthly remittances of P10,000 to Rosario as partial payments for the
Centro I property.
● Rosario also acknowledged receiving a total amount of P184,233, duly
witnessed and signed by Corazon, for the Centro I property.
○ Respondents averred that they continued sending monthly
remittances to Rosario.
● Corazon and Rosario died without transferring ownership of the TCT in
respondents' favor.
● Alleging full payment of the Centro I property, respondents entreated
petitioners, as heirs of Corazon, to honor the Deed of Conditional Sale
dated January 10, 2006. Petitioners did not accede to such request.
CASE 2: Bunay property (CV Br. 20-3010)
● Corazon orally offered for sale the Bunay property to Elizabeth for
P250,000.
● Elizabeth, while in Toronto, Canada, sent 2 remittances each worth
P125,000 addressed to Corazon as payment for the Bunay property.
○ These remittances were received by Corazon herself.
● Due to Corazon's untimely demise without transferring ownership of the
Bunay property, Elizabeth went back to the Philippines to attend her
wake and show petitioners, heirs of Corazon, proof of purchase of the
Bunay property. Petitioners however refused to honor the same.
CASE 3: Poblacion property (CV Br. 20-3011)
● Corazon orally offered for sale the Poblacion property including the
house erected thereon to Rosalina.
● Rosalina, while in Toronto, Canada, sent several remittances (allegedly
as payment of the Poblacion property) to Corazon amounting to
P307,020.52.
● On February 11, 2005, Corazon acknowledged receipt of P85,000
representing payment in full of the Poblacion property.
● Due to Corazon's untimely demise, ownership of the Poblacion property
was not transferred to Rosalina. When shown evidence of Rosalina's
purchase of the Poblacion property, petitioners repudiated the same.
● The RTC rendered 3 separate Decisions to obviate confusion, but all
were rendered in favor of respondents Elizabeth and Rosalina.
● The CA affirmed the RTC’s decisions.
○ Respondents having fully paid the respective purchase prices
for the Centro I, Bunay and Poblacion properties, petitioners
may be compelled to execute the necessary documents
transferring ownership of the Centro I property to Elizabeth
and Rosalina, the Bunay property to Elizabeth and the
Poblacion property to Rosalina.
ISSUES – HELD – RATIO
This is not the main topic under the syllabus, the next one is.
W/N there is a perfected agreement of sale between respondents and
Corazon.
YES. The Deed of Conditional Sale over the Centro I Property and the oral
contracts of sale covering the Bunay and Poblacion Properties are valid and
enforceable.
Syllabus issue:
W/N the heirs of the sellers may be compelled to comply with the obligations
of the deceased sellers and to execute the necessary public documents for
their registration with the proper Registry of Deeds.
YES. A contract of sale or a contract to sell with land or immovable property as its
object certainly involves patrimonial rights and obligations, which by their nature
are essentially transmissible or transferable.
Since the obligations of the sellers in the DCS and the two oral contracts of sale
were transmitted upon the death of Corazon and Rosario to petitioners and the
other defendants, the latter are bound to comply with the obligations to deliver and
transfer ownership of the Centro I property to respondents, the Bunay property to
Elizabeth, and the Poblacion property to Rosario.
Since a public document is required to be registered with the Registry of Deeds to
effect the transfer of the certificates of title covering the said properties to the
buyers, petitioners and the other defendants can be compelled and are obligated to
execute the necessary public documents for that purpose pursuant to Article 1357.
RATIO
● Heirs of Corazon claim that they are not bound by contracts entered into
by Corazon because they are not privies thereto and there is no
stipulation pour autrui in the DCS in their favor, citing Article 1311 of
the Civil Code (See Notes).
● Petitioners' invocation of stipulation pour autrui is preposterous.
● It is apparent from the DCS that petitioners are not privies or parties
thereto and there is no stipulation pour autrui in their favor, which the
contracting parties clearly and deliberately conferred upon them.
○ Such stipulation creates a right in favor of the third person upon
whom the stipulation is conferred, which he can enforce against
the contracting parties even if he is not a party to the contract.
● With respect to the DCS, no such stipulation exists in favor of
petitioners. Rather, petitioners are being made liable to comply with
the obligations of Corazon, and respondents who are parties to the
DCS are the ones enforcing the contract.
● The first paragraph of Article 1311 expresses the doctrine of the relative
and personal character of contracts.
○ Under relativity of contracts, it is a general principle of law that
a contract can only bind the parties who had entered into it or
their successors or heirs who have assumed their personality or
juridical possession, and that, as a consequence, such contract
cannot favor or prejudice a third person.
● To better understand Article 1311 insofar as heirs are concerned, it
must be construed in relation to Article 776, which provides: "The
inheritance includes all the property, rights and obligations of a
person which are not extinguished by his death."
● In determining which rights are intransmissible (extinguished by a
person's death) or transmissible (not extinguished by his death), the
following general rules have been laid down:
○ 1. That rights which are purely personal, not in the inaccurate
equivalent of this term in contractual obligations, but in its
proper sense, are, by their nature and purpose, intransmissible,
for they are extinguished by death; examples, those relating to
civil personality, to family rights, and to the discharge of public
office.
○ 2. That rights which are patrimonial or relating to property are,
as a general rule, not extinguished by death and properly
constitute part of the inheritance, except those expressly
provided by law or by the will of the testator, such as usufruct
and those known as personal servitudes.
○ 3. That rights of obligation are by nature transmissible and may
constitute part of the inheritance, both with respect to the rights
of the creditor and as regards the obligations of the debtor.
● The third rule stated above has three exceptions, especially with respect
to the obligations of the debtor. They are:
○ (1) those which are personal, in the sense that the personal
qualifications and circumstances of the debtor have been taken
into account in the creation of the obligation,
○ (2) those that are intransmissible by express agreement or by
will of the testator, and
○ (3) those that are intransmissible by express provision of law,
such as life pensions given under contract.
 ● With respect to "obligations," similar to "rights", patrimonial
obligations or those pertaining to property are by nature generally If a contract should contain some stipulation in favor of a third person, he may
transmissible and not extinguished by death. demand its fulfillment provided he communicated his acceptance to the obligor
● Patrimonial obligations form part of the inheritance of the decedent, before its revocation. A mere incidental benefit or interest of a person is not
which are transmitted to or acquired by the heirs upon the sufficient. The contracting parties must have clearly and deliberately conferred a
decedent's death. favor upon a third person.
○ This is pursuant to Article 774 which recognizes succession as a
mode of acquisition whereby the property, rights and obligations
to the extent of the value of the inheritance of a person are
transmitted through his death to another or others either by his
will or by operation of law, and Article 777 which provides the
transmission of the rights to the inheritance at the precise
moment of the death of the decedent.
● A contract of sale or a contract to sell with land or immovable property
as its object certainly involves patrimonial rights and obligations, which
by their nature are essentially transmissible or transferable.
● Thus, the heirs of the seller and the buyer are bound thereby and the
former cannot be deemed as "third persons" or non-privies to the contract
of sale or contract to sell.
● Consequently, Article 1311, upon which petitioners rely to negate their
liability, is itself the very basis of the obligation that respondents are
exacting from them.
● Since the obligations of the sellers in the DCS and the two oral contracts
of sale were transmitted upon the death of Corazon and Rosario to
petitioners and the other defendants, the latter are bound to comply with
the obligations to deliver and transfer ownership of the Centro I property
to respondents, the Bunay property to Elizabeth, and the Poblacion
property to Rosario.
● Likewise, since a public document is required to be registered with the
Registry of Deeds to effect the transfer of the certificates of title covering
the said properties to the buyers, petitioners and the other defendants can
be compelled and are obligated to execute the necessary public
documents for that purpose pursuant to Article 1357 of the Civil Code.

DOCTRINE AND NOTES

ART. 1311. Contracts take effect only between the parties, their assigns and heirs,
except in case where the rights and obligations arising from the contract are not
transmissible by their nature, or by stipulation or by provision of law. The heir is
not liable beyond the value of the property he received from the decedent.

De Ocampo v. Ollero
G.R. NO. 231062 | November 25, 2020 | Inting J.
Keywords: Donated land
FACTS
● The subject matter of the case is a parcel of land in the name of the
late Francisco Alban (Francisco) with Napoleon De Ocampo (Napoleon)
as its named administrator.
● Francisco adopted Susana Felipa Carmen de Ocampo (Carmen), the
sister by blood of Napoleon. Consequently, Carmen adopted the family
name "Alban" until she married Marcos Ollero.
● Later on, Francisco donated the subject property to Carmen as evidenced
by a deed of donation.
● Carmen died. Thereafter, her children, Jose, Genoveva, and Concepcion,
all surnamed Ollero (respondents) discovered that Napoleon appropriated
to himself the subject property through an affidavit of adjudication.
● Napoleon claimed that he was the sole legal heir of the late Francisco.
● Claiming that they were deprived of title over the subject property,
respondents filed a case for recovery of ownership, reconveyance and
damages against the heirs of the late Napoleon and Jorge (petitioners).
● Petitioners countered Napoleon married Rosario Suguitan (Rosario).
During the occasion, Carmen told Napoleon and Rosario to occupy the
subject land. Resultantly, the latter built their home on the property.
● Petitioners stressed that respondents never resided in the subject property.
They declared that when Carmen got married, she resided in Malate,
Manila with respondents.
● Petitioners insisted Carmen executed a deed of conveyance over her real
property in favor of Napoleon and Rosario.
ISSUES – HELD – RATIO
DOCTRINE AND NOTES
ISSUE: W/N THE DEED OF CONVEYANCE EXECUTED BY CARMEN
IS A DONATION
HELD:NO.
RATIO
● Here, the face of the deed of conveyance does not embody any of the
effective modes of transferring ownership to Napoleon and Rosario
which, in turn would vest title to petitioners, their successors-in-interest.
● The deed failed to show any intention on the part of Carmen to sell
or even to donate the property in dispute to Napoleon and Rosario.
● The stipulations in the deed of conveyance do not amount to a sale.
● In a contract of sale, one of the parties obligates himself or herself to
transfer the ownership of and to deliver a determinate thing while
the other party binds his or herself to pay a price certain in money
or its equivalent.
● While petitioners claimed that the supposed sale was for a price of
US$1,000.00, the deed did not indicate this circumstance.
● Additionally, the mere inclusion of the phrase "for a valuable
consideration" does not by itself provide for the purported agreed price
for the property.
● There is no showing of clear intent to sell and of price certain. Petitioners
also failed to prove that payment was made for the subject property.
● The Court does not find that the deed of conveyance embodied a
donation.
● The subject deed only stated that Carmen "grant" to Napoleon and
Rosario "as joint tenants" a property.
● It is a general statement without indication of any intention to donate on
the part of Carmen, aside from the fact that Napoleon and Rosario did
not manifest any acceptance and no witnesses signed the supposed deed
of donation.
● In fine, in the absence of the elements of any of the effective mode of
transferring ownership, the Court cannot sustain the argument that
Carmen transferred her title over the subject property.
● Petitioners cannot acquire the subject property by mere occupation.
● In a contract of sale, one of the parties obligates himself or herself to
transfer the ownership of and to deliver a determinate thing while the
other party binds his or herself to pay a price certain in money or its
equivalent.
 Celestino & Co. v. Collector
G.R. NO. L-8506 | August 31, 1956 | Bengzon J.
Keywords: Manufacturers
FACTS
● Celestino Co doing business under the name of “Oriental Sash Factory”.
From 1956-1951 it paid percentage tax of 7% (National Revenue Code
sec. 186) on the gross receipts of its sash, door, and window factory.
However, on 1952 it began to claim liability only to contractor’s 3%
tax (Instead of 7%) under sec. 191.
● Celestino claims that they do not manufacture ready-made doors,
sash, and windows for the public and that they are contractors. He
claims that they only do Special Orders for customers, thus, contending
they are not manufacturers. This did not convince the BIR and the Court
of Tax Appeals.
● CTA said that their tradename gives an impression they do engage in
manufacturing and their records suggest that their huge earnings (P188,
754.69) cannot be from special orders from ther few customers, but
because it was from ready made products. They also offered themselves
as a “factory” to the public.
● Petitioners now assail the decision of the CTA
ISSUES – HELD – RATIO
ISSUE:WoN EO petitioner is a manufacturer?
HELD:YES.
RATIO
● Appellant invokes Article 1467 of the New Civil Code to bolster its
contention that in filing orders for windows and doors according to
specifications, it did not sell, but merely contracted for pieces of work or
"merely sold its services".
● Said article reads as follows: “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.”
● The company habitually makes Sash, windows, and doors as it has been
represented to the public. The fact that the windows and doors are made
only when customers place their orders, does not alter the nature of the
establishment, for it is obvious 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.
● When this Factory accepts a job that requires the use of extraordinary or
additional equipment, or involves services not generally performed by
it-it thereby contracts for a piece of work — filing special orders within
the meaning of Article 1467. The orders herein exhibited were not shown
to be special. They were merely orders for work — nothing is shown to
call them especially requiring extraordinary service of the factory.
● 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.
DOCTRINE AND NOTES
The orders herein exhibited were not shown to be special. Nothing is shown
to call them especially requiring extraordinary service of the factory, it does
not fall under Art. 1467 as a contract piece of work.

CIR v. Engineering Equipment
G.Rs. NO. L-27044 and L-27452 | June 30, 1975 | Esguerra, J.
Keywords: Air conditioners; contract of sale vs. contract of work; tax case ewan
The premise is related to taxation but don’t focus on that too much.
FACTS
● Engineering Equipment and Supply Co. (Engineering), a domestic
corporation, is an engineering and machinery firm
● One Juan de la Cruz the Commissioner of Internal Revenue (CIR)
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 Central Bank, (CB), National Bureau of
Investigation (NBI) and Bureau of Internal Revenue (BIR) agents
on which occasion voluminous records of the firm were seized and
confiscated
● The Commissioner assessed against, and demanded upon, Engineering
payment of the increased amount and suggested that P10,000 be paid as
compromise in extrajudicial settlement of Engineering's penal liability
for violation of the Tax Code.
○ 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 from P916,362.65 to P740,587.86
● CTA Decision: Declared exempt from the deficiency manufacturers sales
tax; BUT Engineering must pay PHP174,141.62
○ The Commissioner, not satisfied with the decision of the Court of
Tax Appeals, appealed to the SC
○ On the other hand, Engineering filed with the Court of Tax Appeals
a motion for reconsideration of the decision above mentioned.
● Contentions before the Supreme Court:
○ Petitioner CIR
■ Engineering is a manufacturer
■ -> Thus it is subject to the 30% advance sales tax in the Tax
Code (thus need to pay a higher tax)
○ Respondent Engineering
■ Engineering is a contractor
■ -> Thus, it shouldn’t be subject to said tax, and should be
taxed differently (thus would pay a lower tax as compared to
the assessment of CIR)
ISSUES – HELD – RATIO
ISSUE: Is Engineering a manufacturer or a contractor?
HELD: Engineering is a CONTRACTOR.
RATIO
● The distinction between a contract of sale and one for work, labor and
materials is tested by the inquiry whether:
○ 1. 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
○ 2. 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.
○ -> It is a contract of sale if the article ordered by the purchaser is
kept on hand for sale to anyone, and no change or modification
of it is made, even though it may be entirely made after, and in
consequence of, the defendants order for it.
● Art. 1467, NCC
○ 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 a contract for a piece of work
● Who is a “contractor?”
○ One 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 true test of a contractor:
 ■ If one renders service in the course of an independent
occupation, representing the will of his employer only as to
the result of his work, and not as to the means by which it is
accomplished.
● Given the definition of a contractor, the SC ruled that Engineering is not
a manufacturer, and is a contractor
○ 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 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.
○ 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
○ -> THEREFORE, its contracts with customers are NOT
contracts of sale, but contracts of work

DOCTRINE AND NOTES

● Difference between a contract of sale vs. a contract of work:
○ Contract of sale
■ Involves items sold that are manufactured or procured
for the general market in the ordinary course of
business
■ Example from the case: manufacturing air conditioenrs
○ Contract of work
■ Involves a service wherein a a thing is specially done
only upon the specific order of another
■ Example from the case: creating air conditioners that
are uniquely made based on the specifications of a
client

Engineering & Machinery Corp. v. Court of Appeals
G.R. No. 52267 | January 24, 1996 | PANGANIBAN, J
Keywords: Aircon / Piece of Work
FACTS
● Petitioner/s: Engineering & Machinery Corp. (EMC)
● Respondent/s: Ponciano Almeda (Almeda /private respondent)
● On Sept. 10, 1962, Engineering & Machinery Corp. (EMC) and
Ponciano Almeda entered into a contract wherein EMC undertook to
fabricate, furnish and install the air-conditioning system in the Almeda’s
building in consideration of P210,000.00.
● The system was completed and accepted by Almeda, who paid in full the
contract price.
● On September 2, 1965, Almeda sold the building to the National
Investment and Development Corporation (NIDC). The latter took
possession of the building but due to NIDC's noncompliance with the
terms and conditions of the deed of sale, Almeda was able to secure
judicial rescission. .
● The ownership of the building having been decreed back to Almeda. It
was then that he learned from some NIDC employees of the defects of
the air-conditioning system of the building.
● Acting on this information, Almeda commissioned an engineer to render
a technical evaluation of the system in relation to the contract with EMC.
○ In his report, the engineer found defects in the system and
concluded that it was "not capable of maintaining the desired room
temperature
● Almeda then filed an action for damages against petitioner EMC with the
Court of First Instance of Rizal
○ The complaint alleged that the air-conditioning system installed by
petitioner EMC did not comply with the agreed plans and
specifications.
● Petitioner EMC moved to dismiss the complaint, alleging that the
prescriptive period of six months had set in pursuant to Articles 1566 and
1567, in relation to Article 1571 of the Civil Code, regarding the
responsibility of a vendor for any hidden faults or defects in the thing
sold.
● Almeda countered that the contract dated September 10, 1962 was not a
contract of sale but a contract for a piece of work under Article 1713 of
the Civil Code. Thus, in accordance with Article 1144 (1) of the same
Code, the complaint was timely brought within the ten-year prescriptive
period.
● Petitioner EMC argued that Article 1571 of the Civil Code providing for
a six-month prescriptive period is applicable to a contract for a piece of
work by virtue of Article 1714, which provides that what governs are the
pertinent provisions on warranty of title and against hidden defects and
the payment of price in a contract of sale.
● In its answer to the complaint, petitioner EMC reiterated that
○ Its claim of prescription as an affirmative defense.
○ That whatever defects might have been discovered in the
air-conditioning system could have been caused by a variety of
factors, including ordinary wear and tear and lack of proper and
regular maintenance.
○ That during the one-year period that the Almeda the private
respondent withheld final payment, the system was subjected to
"very rigid inspection and testing and corrections or modifications
effected" by EMC petitioner.
● Thereafter, private respondent filed an ex-parte motion for preliminary
attachment on the strength of petitioner's own statement to the effect that
it had sold its business and was no longer doing business in Manila.
● The Trial court decided in favor of private respondent Almeda.
○ The TC stated that petitioner EMC failed to install certain parts and
accessories called for by the contract, and deviated from the plans
of the system, thus reducing its operational effectiveness to the
extent that 35 window-type units had to be installed in the building
to achieve a fairly desirable room temperature.
○ The TC ruled that the complaint was filed within the ten-year
prescriptive period although the contract was one for a piece of
work, because it involved the "installation of an air-conditioning
system which the defendant itself manufactured, fabricated,
designed and installed."
● Petitioner appealed to the CA, CA affirmed decision of TC
● Hence, it instituted the instant petition.
● Petitioner raised three issues.
 ○ First, it contended that private respondent's acceptance of the work
and his payment of the contract price extinguished any liability
with respect to the defects in the airconditioning system.
○ Second, it claimed that the Court of Appeals erred when it held that
the defects in the installation were not apparent at the time of
delivery and acceptance of the work considering that private
respondent was not an expert who could recognize such defects.
○ Third, assuming arguendo that there were indeed hidden defects,
private respondent's complaint was barred by prescription under
Article 1571 of the Civil Code, which provides for a six-month
prescriptive period.
● Private respondent, on the other hand, averred that the issues raised by
petitioner involve questions of fact which have been passed upon by the
appellate court
ISSUES – HELD – RATIO
ISSUE: W/N the nature of the contract that EMC and Almeda entered into
was one of Sale or for a Piece of Work?
HELD: A piece of work.
ISSUE: W/N the action has prescribed?
HELD: No. Looking at the complaint filed in the trial court, it is a complaint for
breach of contract, not for the enforcement of warranties.
RATIO
● The first two issues will not be resolved as they raise questions of fact.
Thus, the only question left to be resolved is that of prescription. The
parties argued on the nature of the contract entered into by them (whether
it was one of sale or for a piece of work)
● Article 1713 of the Civil Code defines a contract for a piece of work
thus:
○ Art. 1713: "By the contract for a piece of work the contractor binds
himself to execute a piece of work for the employer, in
consideration of a certain price or compensation. The contractor
may either employ only his labor or skill, or also furnish the
material."
● A contract for a piece of work, labor and materials may be distinguished
from a contract of sale by the inquiry as to whether the thing transferred
is one not in existence and which would never have existed but for the
order of the person desiring it. In such a case, the contract is one for a
piece of work, not a sale.
● On the other hand, if the thing subject of the contract would have existed
and been the subject of a sale to some other person even if the order had
not been given, then the contract is one of sale. Thus, Mr. Justice Vitug
explains that —
○ "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 a contract for a piece of work
(Art. 1467, Civil Code). The mere fact alone that certain articles
are made upon previous orders of customers will not argue against
the imposition of the sales tax if such articles are ordinarily
manufactured by the taxpayer for sale to the public (Celestino Co
vs. Collector, 99 Phil. 8411)."
● The distinction between the two contracts depends on the intention of the
parties.
○ Thus, if the parties intended that at some future date an object has
to be delivered, without considering the work or labor of the party
bound to deliver, the contract is one of sale.
○ But if one of the parties accepts the undertaking on the basis of
some plan, taking into account the work he will employ personally
or through another, there is a contract for a piece of work.
● Clearly, the contract in question is one for a piece of work. It is not
the petitioner's line of business to manufacture air-conditioning systems
to be sold "off-the-shelf." Its business and particular field of expertise is
the fabrication and installation of such systems as ordered by customers
and in accordance with the particular plans and specifications provided
by the customers.
● The obligations of a contractor for a piece of work are set forth in
Articles 1714 and 1715 of the Civil Code, which provide: (see doctrine
and notes)
● In Villostas vs. Court of Appeals, we held that, "while it is true that
Article 1571 of the Civil Code provides for a prescriptive period of six
 months for a redhibitory action, a cursory reading will reveal that said work be not of such quality, the employer may require that the contractor
rule may be applied only in case of implied warranties"; and where there remove the defect or execute another work. If the contractor fails or
is an express warranty in the contract, as in the case at bench, the refuses to comply with this obligation, the employer may have the defect
prescriptive period is the one specified in the express warranty, and in the removed or another work executed, at the contractor's cost."
absence of such period, "the general rule on rescission of contract, which ● "Art. 1561. The vendor shall be responsible for warranty against the
is four years (Article 1389, Civil Code) shall apply". hidden defects which the thing sold may have, should they render it unfit
● It would appear that this suit is barred by prescription because the for the use for which it is intended, or should they diminish its fitness for
complaint was filed more than four years after the execution of the such use to such an extent that, had the vendee been aware thereof, he
contract and the completion of the air-conditioning system. However, a would not have acquired it or would have given a lower price for it; but
close scrutiny of the complaint filed in the trial court reveals that the said vendor shall not be answerable for patent defects or those which
original action is not really for enforcement of the warranties against may be visible, or for those which are not visible if the vendee is an
hidden defects, but one for breach of the contract itself. It alleged that expert who, by reason of his trade or profession, should have known
the petitioner, "in the installation of the air-conditioning system did not them."
comply with the specifications provided" in the written agreement
between the parties, "and an evaluation of the air-conditioning system as
installed by the defendant showed the following defects and violations of
the specifications of the agreement.
● Having concluded that the original complaint is one for damages
arising from breach of a written contract — and not a suit to enforce
warranties against hidden defects — we herewith declare that the
governing law is Article 1715. However, inasmuch as this provision
does not contain a specific prescriptive period, the general law on
prescription, which is Article 1144 of the Civil Code, will apply. Said
provision states that actions "upon a written contract" prescribe in ten
(10) years. Since the governing contract was executed on September
10, 1962 and the complaint was filed on May 8, 1971, it is clear that
the action has not prescribed.

DOCTRINE AND NOTES

● "Art. 1714. If the contractor agrees to produce the work from material
furnished by him, he shall deliver the thing produced to the employer and
transfer dominion over the thing. This contract shall be governed by the
following articles as well as by the pertinent provisions on warranty of
title and against hidden defects and the payment of price in a contract of
sale."
● "Art. 1715. The contractor shall execute the work in such a manner that
it has the qualities agreed upon and has no defects which destroy or
lessen its value or fitness for its ordinary or stipulated use. Should the

Diño v. CA
G.R. NO. | DATE | PONENTE
Keywords:
FACTS
● Petitioners spouses Dino, doing business under the trade name "Candy
Claire Fashion Garment" are engaged in the business of manufacturing
and selling shirts.
● Respondent Sio is part owner and general manager of a manufacturing
corporation doing business under the trade name "Universal Toy Master
Manufacturing."
● Petitioners Diño and respondent Sio entered into a contract whereby
Diño would manufacture for the petitioners 20,000 pieces of vinyl frogs
and 20,000 pieces of vinyl mooseheads
○ These frogs and mooseheads were to be attached to the shirts
petitioners would manufacture and sell.
● Respondent Sio delivered in several installments the 40,000 pieces of
frogs and mooseheads. Petitioner fully paid
● Subsequently, petitioners returned to respondent 29,772 pieces of frogs
and mooseheads for failing to comply with the approved sample. The
return was made on different dates:
○ the initial one on December 12, 1988 consisting of 1,720 pieces,
○ the second on January 11, 1989, 7 and;
○ the last on January 17, 1989.
● Petitioners then demanded from the respondent a refund of the purchase
price of the returned goods in the amount of P208,404.00.
● As respondent Sio refused to pay, petitioners filed on July 24, 1989 an
action for collection of a sum of money in the Regional Trial Court
● The RTC ruled in favor of petitioners Diño
● Respondent Sio appealed to the CA but CA affirmed the ruling of RTC
● Respondent Sio filed an MR alleging therein that the petitioners' action
for collection of sum of money based on a breach of warranty had
already prescribed
● The Court of Appeals reversed its decision and dismissed the petitioner’s
complaint.
● Hence, this petition
○ Petitioners claim that the Complaint they filed in the trial court was
one for the collection of a sum of money.
○ Respondent contends that it was an action for breach of warranty as
the sum of money petitioners sought to collect was actually a
refund of the purchase price they paid for the alleged defective
goods they bought from the respondent
ISSUES – HELD – RATIO
ISSUE: W/N the action has been prescribed?
HELD: Yes
RATIO
● We agree with the respondent.
● As this Court ruled in Engineering & Machinery Corporation v. Court of
Appeals, et al. (the previous case before this), "a contract for a piece of
work, labor and materials may be distinguished from a contract of sale by
the inquiry as to whether the thing transferred is one not in existence and
which would never have existed but for the order of the person desiring
it. In such case, the contract is one for a piece of work, not a sale. On the
other hand, if the thing subject of the contract would have existed and
been the subject of a sale to some other person even if the order had not
been given then the contract is one of sale."
● The contract between the petitioners and respondent stipulated that
respondent would manufacture upon order of the petitioners 20,000
pieces of vinyl frogs and 20,000 pieces of vinyl mooseheads according to
the samples specified and approved by the petitioners. Respondent Sio
did not ordinarily manufacture these products, but only upon order of the
petitioners and at the price agreed upon.
● Clearly, the contract executed by and between the petitioners and the
respondent was a contract for a piece of work. At any rate, whether the
agreement between the parties was one of a contract of sale or a piece of
work, the provisions on warranty of title against hidden defects in a
contract of sale apply to the case at bar (see notes for Art. 1714 and
1561)
● In Aldovino, et al. v. Alunan, et al., the Court en banc reiterated the
Garcia v. Mathis doctrine cited in the Gicano case states that when the
plaintiff's own complaint shows clearly that the action has been
 prescribed, the action may be dismissed even if the defense of
prescription was not invoked by the defendant.
● It is apparent in the records that respondent made the last delivery of
vinyl products to the petitioners on September 28, 1988. Petitioners
admit to this
● It is also apparent in the Complaint that petitioners instituted their action
on July 24, 1989.
● Following the Gicano doctrine that allows dismissal of an action on the
ground of prescription even after judgment on the merits, or even if the
defense was not raised at all so long as the relevant dates are clear on the
record, we rule that the action filed by the petitioners has prescribed.
● The dates of delivery and institution of the action are undisputed. There
are no new issues of fact arising in connection with the question of
prescription, thus carving out the case at bar as an exception from the
general rule that prescription if not impleaded in the answer is deemed
waived.
● Even if the defense of prescription was raised for the first time on appeal
this does not militate against the due process right of the petitioners.
● Petition is DENIED.

DOCTRINE AND NOTES

● Art. 1714. If the contractor agrees to produce the work from material
furnished by him, he shall deliver the thing produced to the employer and
transfer dominion over the thing. This contract shall be governed by the
following articles as well as by the pertinent provisions on warranty of
title and against hidden defects and the payment of price in a contract of
sale.
● Art. 1561. The vendor shall be responsible for warranty against the
hidden defects which the thing sold may have, should they render it unfit
for the use for which it is intended, or should they diminish its fitness for
such use to such an extent that, had the vendee been aware thereof, he
would not have acquired it or would have given a lower price for it; but
said vendor shall not be answerable for patent defects or those which
may be visible, or for those which are not visible if the vendee is an
expert who, by reason of his trade or profession, should have known
them.
 Ker & Co. v. Lingad
G.R. NO. | DATE | PONENTE
Keywords:
FACTS
● Petitioner (AKA distributor) had a contract with the United States
Rubber International (AKA the company).
● The following are what is laid down in the contract
○ The products will be consigned to the Distributor
○ All goods on consignment shall remain the property of the
Company until sold by the Distributor to the purchaser or
purchasers, but all sales made by the Distributor shall be in his
name
○ This agreement does not constitute Distributor the agent or legal
representative of the Company for any purpose whatsoever.
Distributor is NOT granted any right or authority to assume or to
create any obligation or responsibility, express or implied, in behalf
of or in the name of the Company, or to bind the Company in any
manner or thing whatsoever
● Petitioner was assessed by the then Commissioner of Internal Revenue
Melecio R. Domingo the sum of P20,272.33 as the commercial broker's
percentage tax, surcharge, and compromise penalty
● There was a request on the part of the petitioner for the cancellation of
such assessment. The request was turned down.
● Petitioner filed a petition for review with the Court of Tax Appeals.
● In its answer, the then Commissioner Domingo maintained his stand that
petitioner should be taxed in such amount as a commercial broker.
● The Court of Tax Appeals held the petitioner taxable except as to the
compromise penalty of P500.00, the amount due from it being fixed at
P19,772.33.
● Petitioner assails the ruling of the Court of Tax Appeals
● NOT one of seller and purchaser. Instead, the stipulations were so
ISSUES – HELD – RATIO
ISSUE:W/N this is an agency to sell, not a contract of sale.
HELD: Yes. This is an agency to sell because there is no seller-purchaser
relationship, rather, a broker-principal relationship.
RATIO
● According to the National Internal Revenue Code, a commercial broker
○ "includes all persons, other than importers, manufacturers,
producers, or bona fide employees, who, for compensation or
profit, sell or bring about sales or purchases of merchandise for
other persons or bring proposed buyers and sellers together, or
negotiate freights or other business for owners of vessels or other
means of transportation, or for the shippers, or consignors or
consignees of freight carried by vessels or other means of
transportation. The term includes commission merchants."
● The controlling decision as to the test to be followed as to who falls
within the above definition of a commercial broker is that of
Commissioner of Internal Revenue v. Constantino.
○ "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”
● Salisbury v. Brooks cited in support of such a view follows:" '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.'"
● A reading thereof discloses that the relationship arising therefrom was
worded as to lead to no other conclusion than that the control by the
United States Rubber International over the goods in question is
"pervasive".
DOCTRINE AND NOTES

Quiroga v. Parsons
G.R. NO. 11491 | August 23, 1918 | AVANCEÑA, J.
Keywords:
FACTS
● Parties in the case
○ Quiroga (Petitioner) - Bed manufacturer; shall furnish beds to
Parsons
○ Parsons (Respondent) - Bed merchant; shall purchase beds from
Quiroga
● Pertinent provisions: “Contract Executed by and between Quiroga
and Parsons for the Exclusive Sale of Quiroga Beds in the Visayan
Islands”
○ Art. 1. Quiroga grants the exclusive right to sell his beds in the
Visayan Islands to Parsons
■ A. Quiroga shall furnish beds of his manufacture to
Parsons…and shall invoice them at the same price he has
fixed for sales in Manila and in the invoices
■ B. Parsons binds himself to pay Quiroga for the beds
received
○ Art. 2. …Parsons may find himself obliged to make Quiroga
assume the obligation to offer and give the preference to Parsons in
case anyone should apply for the exclusive agency for any island
not comprised within the Visayan group
○ Art. 3. Parsons may sell, or establish branches of his agency for the
sale of “Quiroga” beds in all the towns of the Archipelago where
there are no exclusive agents…
● Parsons violated the contract:
○ He sold the beds at higher prices that those of the invoices;
○ To have an open establishment in Iloilo;
○ To keep the beds on public exhibition;
○ Etc.
● However, Quirogra alleged that the Parsons was his agent for the sale
of his beds in Iloilo
○ Said obligations are implied in a contract of commercial agency
ISSUES – HELD – RATIO
ISSUE: Is the contract between Quiroga and Parsons a contract of agency or
a contract of sale?
HELD: CONTRACT OF SALE.
RATIO
● In order to classify a contract, due regard must be given to its essential
clauses.
○ In the contract in question, what was essential, as constituting its
cause and subject matter, is that:
■ 1. The plaintiff was to furnish the defendant with the beds
which the latter might order, at the price stipulated and
■ 2. That the defendant was to pay the price in the manner
stipulated.
○ The price agreed upon was the one determined by the plaintiff for
the sale of these beds in Manila, with a discount of from 20 to 25
per cent, according to their class.
○ 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,
● These are precisely the essential features of a contract of purchase and
sale.
○ There was the obligation on the part of Quiroga to supply the beds,
and, on the part of Parsons, 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.
● What about the words “commission on sales” and “agency” in the
contract?
○ The words commission on sales used in clause (A) of article 1
mean nothing else, as stated in the contract itself, than a mere
discount on the invoice price.
○ The word agency. also used in articles 2 and 3, only expresses that
Parsons was the only one that could sell the plaintiff's beds in the
Visayan Islands.
 ● However, Quiroga pointed out the testimony of Ernesto Vidal, former VP
of Parsons, who stated that he drafted the contract and that its purpose
was to be an agent for Quiroga’s beds and to collect a commission on
sales
○ But, even supposing that Ernesto Vidal has stated the truth, his
statement as to what was his idea in contracting with the plaintiff is
of no importance, inasmuch as the agreements contained in the
contract which he claims to have drafted, constitute, as we have
said, a contract of purchase and sale, and not one of commercial
agency.
● Quiroga also endeavored to prove that the defendant had returned beds
that it could not sell; that, without previous notice, it forwarded to the
defendant the beds that it wanted; and that the defendant received its
commission for the beds sold by the plaintiff directly to persons in Iloilo.
○ But all this, at the most only shows that, on the part of both of
them, there was mutual tolerance in the performance of the contract
in disregard of its terms; and it gives no right to have the contract
considered, not as the parties stipulated it, but as they performed it.

DOCTRINE AND NOTES


Puyat v. Arco Amusement Co.
G.R. NO. 47538 | June 20, 1941 | Laurel, J.
Keywords:
FACTS
● Parties in the case:
○ Petitioner
■ Gonzalo Puyat & Sons Inc. (Puyat) - acting as exclusive
agents in the Philippines of the Starr Piano Company of
Richmond, Indiana, U.S.A.
○ Respondent
■ Arco Amusement Company (Arco) - was engaged in the
business of operating cinematographs
● Arco approached Puyat and it was agreed that:
○ 1. Arco would order sound reproducing equipment from the Star
Piano Company and
○ 2. That Arco would pay Puyat, in addition to the price of the
equipment, a 10 per cent commission, plus all expenses, such as,
freight, insurance, banking charges, cables, etc.
● Puyat sent a cable (confidential text message) to the Starr Piano
Company, inquiring about the equipment desired and making the said
company to quote its price of $1,700
○ Puyat did not show the Arco the cable of inquiry nor the reply but
merely informed the Arco of the price of $1,700.
● Being agreeable to this price, Arco formally authorized the order
○ The equipment arrived and upon delivery of the same to Arco and
the presentation of necessary papers, the price of $1,700, plus the
10 per cent commission agreed upon the plus all the expenses and
charges, was duly paid by the Arco to Puyat
● Another order for sound reproducing equipment was placed by Arco
with Puyat, on the same terms as the first order.
○ Arco would pay for the equipment the amount of $1,600, which
was supposed to be the price quoted by the Starr Piano Company,
plus 10 per cent commission, plus all expenses incurred.
○ The equipment under the second order arrived in due time, and
Puyat was duly paid the price of $1,600 with its 10 per cent
commission, and $160, for all expenses and charges.
● The officials of the Arco discovered that the price quoted to them by
Puyat with regard to their two orders was not the net price but
rather the list price, and that Puyat had obtained a discount from the
Starr Piano Company.
○ Basically, Puyat as the “middle-man” in the transaction obtained
the equipment for a cheaper price
○ Thus, from learning this, Arco was convinced that the prices
charged them by Puyat were much too high including the charges
for out-of-pocket expenses.
○ For this reasons, they sought to obtain a reduction from the
defendant or rather a reimbursement, and failing in this they
brought the present action.
● Trial Court level: Ruled against Arco
○ The trial court held that the contract between Puyat and Arco
was one of outright purchase and sale, and absolved Puyat from
the complaint.
● CA level: Ruled against Puyat
○ CA held that held that the relation between Puyat and Arco was
that of agent and principal, Puyat acting as agent of Arcoin the
purchase of the equipment
○ The appellate court further argued that even if the contract between
the petitioner and the respondent was one of the purchase and sale,
the petitioner was guilty of fraud in concealing the true price and
hence would still be liable to reimburse the respondent for the
overpayments made by the latter.
ISSUES – HELD – RATIO
ISSUE: Is the contract between Puyat and Arco one of agency or one of sale?
HELD: CONTRACT OF SALE
RATIO
● In the first place, the contract is the law between the parties and should
include all the things they are supposed to have been agreed upon.
○ What does not appear on the face of the contract should be
regarded merely as "dealer's" or "trader's talk", which can not
bind either party.
■ The letters, where Arco accepted the prices of $1,700 and
$1,600, respectively, for the sound reproducing equipment
 subject of its contract with Puyat, are clear in their terms
and admit of no other interpretation than that Puyat
agreed to purchase from the petitioner the equipment in
question at the prices indicated which are fixed and
determinate.
○ Arco, however, can still hold Puyat liable – but not because their
contract was that of agency
■ Whatever unforeseen events might have taken place
unfavorable to Puyat, such as change in prices, mistake in
their quotation, loss of the goods not covered by insurance or
failure of the Starr Piano Company to properly fill the orders
as per specifications, Arco might still legally hold Puyat to
the prices fixed of $1,700 and $1,600."
■ This is incompatible with the pretended relation of agency
between Puyat and Arco, because in agency, the agent is
exempted from all liability in the discharge of his
commission provided he acts in accordance with the
instructions received from his principal
○ While the letters, state that the petitioner was to receive ten per cent
(10%) commission, this does not necessarily make the petitioner an
agent of the respondent, as this provision is only an additional price
which the respondent bound itself to pay, and which stipulation is
not incompatible with the contract of purchase and sale.
● In the second place, to hold Puyat an agent of Arco in the purchase of
equipment and machinery from the Starr Piano Company of Richmond,
Indiana, is incompatible with the admitted fact that Puyat is the
exclusive agent of the same company in the Philippines.
○ It is out of the ordinary for one to be the agent of both the vendor
and the purchaser.
○ Arco contends that it merely agreed to pay the cost price as
distinguished from the list price, plus ten per cent (10%)
commission and all out-of-pocket expenses incurred by Puyat
■ It is to be observed that the twenty-five per cent (25%)
discount granted by the Starr Piano Company to the
petitioner is available only to the latter as the former's
exclusive agent in the Philippines.

DOCTRINE AND NOTES


Lo v. KJS Eco-Formwork System Phil
Keywords:
FACTS
● Respondent KJS ECO-FORMWORK System Phil., Inc. is a corporation
engaged in the sale of steel scaffoldings, while petitioner Sonny L. Lo,
doing business under the name and style San’s Enterprises, is a building
contractor.
○ On February 22, 1990, petitioner ordered scaffolding equipment
from respondent worth P540,425.80.
■ He paid a downpayment in the amount of P150,000.00. The
balance was made payable in ten monthly installments
● Respondent delivered the scaffoldings to petitioner. Petitioner was able to
pay the first two monthly installments.
○ His business, however, encountered financial difficulties and he
was unable to settle his obligation to respondent despite oral and
written demands made against him.
● On October 11, 1990, petitioner and respondent executed a Deed of
Assignment, whereby petitioner assigned to respondent his receivables
in the amount of P335,462.14 from Jomero Realty Corporation.
● However, when respondent tried to collect the said credit from Jomero
Realty Corporation, the latter refused to honor the Deed of Assignment
because it claimed that petitioner was also indebted to it.
○ On November 26, 1990, respondent sent a letter to petitioner
demanding payment of his obligation, but petitioner refused to pay
claiming that his obligation had been extinguished when they
executed the Deed of Assignment.
● Obviously, respondent filed an action for recovery of a sum of money
before the RTC.
○ During the trial, petitioner argued that his obligation was
extinguished with the execution of the Deed of Assignment of
credit.
○ Respondent, for its part, presented the testimony of its
employee, Almeda Bañaga, who testified that Jomero Realty
refused to honor the assignment of credit because it claimed that
petitioner had an outstanding indebtedness to it.
● RTC level: Dismissed the complaint because the assignment
extinguished the obligation.
● CA level: Reversed the RTC decision (because DUH!)
○ (1) petitioner failed to comply with his warranty under the Deed;
○ (2) the object of the Deed did not exist at the time of the
transaction, rendering it void pursuant to Article 1409 of the Civil
Code; and
○ (3) petitioner violated the terms of the Deed of Assignment when
he failed to execute and do all acts and deeds as shall be necessary
to effectually enable the respondent to recover the collectibles.
● Petitioner now runs to the Supreme Court.
W/N the obligation was rightfully extinguished
NO, obviously not.
RATIO
● An assignment of credit is an agreement by virtue of which the owner
of a credit, known as the assignor, by a legal cause, such as sale, dacion
en pago, exchange or donation, and without the consent of the debtor,
transfers his credit and accessory rights to another, known as the
assignee, who acquires the power to enforce it to the same extent as the
assignor could enforce it against the debtor.
○ Corollary thereto, in dacion en pago, as a special mode of payment,
the debtor offers another thing to the creditor who accepts it as
equivalent of payment of an outstanding debt.
● In order that there be a valid dation in payment, the following are the
requisites:
○ (1) There must be the performance of the prestation in lieu of
payment (animo solvendi) which may consist in the delivery of a
corporeal thing or a real right or a credit against the third person;
○ (2) There must be some difference between the prestation due and
that which is given in substitution (aliud pro alio);
○ (3) There must be an agreement between the creditor and debtor
that the obligation is immediately extinguished by reason of the
performance of a prestation different from that due.
● The undertaking really partakes in one sense of the nature of sale,
that is, the creditor is really buying the thing or property of the debtor,
payment for which is to be charged against the debtor’s debt.
 ○ As such, the vendor in good faith shall be responsible, for the ○ Agreement between the creditor and debtor that the obligation is
existence and legality of the credit at the time of the sale but not for immediately extinguished by reason of the performance of a
the solvency of the debtor, in specified circumstances. prestation different from that due”.
● As in any other contract of sale, however, the vendor or assignor is
bound by certain warranties.
○ Article 1628 of the Civil Code provides:
■ The vendor in good faith shall be responsible for the
existence: and legality of the credit at the time of the sale,
unless it should have been sold as doubtful; but not for the
solvency of the debtor, unless it has been so expressly
stipulated or unless the insolvency was prior to the sale and
of common knowledge.
● From this codal provision, Petitioner, as vendor or assignor, is bound to
warrant the existence and legality of the credit at the time of the sale or
assignment.
○ When Jomero claimed that it was no longer indebted to petitioner
since the latter also had an unpaid obligation to it, it essentially
meant that its obligation to petitioner has been extinguished by
compensation.
○ In other words, respondent alleged the non-existence of the credit
and asserted its claim to petitioner’s warranty under the assignment.
■ Therefore, it behooved on petitioner to make good its
warranty and paid the obligation.
● Indeed, by warranting the existence of the credit, petitioner should be
deemed to have ensured the performance thereof in case the same is later
found to be inexistent. He should be held liable to pay to respondent the
amount of his indebtedness.

DOCTRINE AND NOTES

● Elements of Dacion en Pago (taken from PattyG’s syllabus that’s really

just a reviewer).
○ Performance of the prestation in lieu of payment (animo
solvendi) which may consist in the delivery of a corporeal thing
or a real right or a credit against the third person;
○ Some difference between the prestation due and that which is
given in substitution (aliud pro alio); and

Desiderio Dalisay Investments v. SSS
Keywords:
FACTS
● Involved in this case is a parcel of land and a building erected upon it in
Davao City.
● Sometime in 1976, respondent SSS filed a case before the Social
Security Commission (SSC) against the Dalisay Group of Companies
(DGC) for the collection of unremitted SSS premium contributions of the
latter's employees.
○ Desiderio Dalisay, then President of Desiderio Dalisay Investments,
Inc. (DDII), sent a Letter to SSS offering the subject land and
building to offset DGC's liabilities. The parties, however, failed to
arrive at an agreement as to the appraised value thereof. Thus, no
negotiation took place.
● Dalisay sent another Letter seeking further negotiation with SSS by
recommending that the appraisal be done by Joson, Capili and
Associates, to which SSC agreed.
○ Joson, Capili and Associates informed Dalisay that the total value
of the lots is P1,955,000.
■ This Appraisal Report was then indorsed to the SSC.
● During a meeting (1982 Meeting) of the SSS' Committee on Buildings,
Supplies and Equipment and DGC, DC’s counsel explained that the
DGC is in financial distress and is in no way capable of settling its
obligation in cash.
○ When asked what the DGC's offer is, DGC stated that the authority
to offer the recently appraised properties would be their way of
settling their obligation.
○ Atty. Cabarroguis (representing Dalisay) stated that properties
offered amounted to P2 million and will be sold to SSS free from
liens and encumbrances, as the properties were mortgaged with the
PNB at the time.
■ NOTE: DDII’s total liabilities with SSS amounted to around
P4.4 million.
● SSC issued a Resolution accepting DDII's proposed dacion en pago
pegged at the appraised value of P2,000,000.
○ The SSC informed DDII of its acceptance of the proposed dation in
payment by a letter of acceptance which listed the following
conditions:
■ The P2 million consideration in this transaction shall be
applied first to the premium contribution in arrears which
amounts to P1.5 million, more or less, and whatever amount
in excess of the P2 million after premium contribution shall
then be applied to the payment of penalties.
■ Part of the P2 million shall also be applied to its outstanding
education/salary loan obligations.
■ The criminal cases against the Dalisay Group of Companies
shall not be withdrawn as the penalties have not as yet been
valid in full and it is up to them to make the necessary
representations with the Fiscal's Office.
● Thereafter, the acting president of Dalisay Investment [Dalisay-Tirol]
informed SSS that they were already preparing the property for turnover
and that an Affidavit of Consent for the Sale of Real Property was
already executed by the surviving heirs of the late Regina Dalisay.
Unfortunately, Desiderio Dalisay passed away.
○ The company's total obligations is now P15,689,684.93.
● Eddie Jara, assistant vice-president of SSS, executed an affidavit of
adverse claim over the subject properties stating that DDII failed to turn
over the certificates of title to SSS.
○ Jara sent a demand letter to Dalisay-Tirol over the properties
subject to the dacion, stating that DDII violated the express terms in
the dation in payment that “DGC should deliver the titles after the
release of the mortgage with the PNB."
● Dalisay-Tirol replied, stating that DDII could not at that time give due
course to and act on the matter because:
○ (1) the properties are being claimed by the estate of Desiderio
Dalisay and included in the inventory already filed by the
executrix, where the corporation's stockholders are contesting said
inclusion
○ and (2) the SSS' pending petition covering the properties where the
accuracy and propriety of the amount of P15,605,079.25 contained
therein has yet to be substantiated and verified.
● DDII issued a Letter to SSS proposing the "offset of SSS obligations
with back rentals on occupied land and building of the obligor."
 ○ It alleged that SSS is bound to pay back rentals of P34,217,988.19
for its use of the subject property and likewise demanded for the
return of the said property.
● DDII then filed a complaint for quieting of title, recovery of
possession and damages against the SSS.
○ DDII argued that there was no perfected dation since:
■ (1) SSS only agreed to accept P2M when the offered was
P3.5M for the appraised property to be offset against DDII
liability to SSS, and
■ (2) negotiations were still ongoing. DDII also insisted that
Atty. Cabarroguis' alleged acceptance of the proposals of
SSS is invalid because it was not covered by any Board
Resolution or Affidavit of Consent.
● Thus, there was no dation in payment to speak of.
○ On the other hand, SSS argued that it accepted the dation, so it
should be considered perfected.
● RTC level: Ruled in favor of DDII, ordering SSS to to turn over the
possession and occupation of the properties to [DDII], there being no
perfected dation in payment or dacion en pago;
○ The memorandum executed earlier by the SSC agreeing to sale was
not actually an acceptance but a mere counter-offer because it
contains modification of the terms and conditions.
■ There was no proof that Dalisay accepted such counter-offer.
○ Further, turnover of properties in SSS’s favor does not indicate a
perfected dation in payment.
○ SSS has no legal personality to own, possess, and occupy the
property.
● CA level: Reversed the RTC ruling.
○ The records established that DGC has an outstanding obligation in
favor of SSS and that it proposed to pay the amount via dacion en
pago, so said offer was categorically accepted by SSS, and the
agreement was consummated by DDII's delivery of the property to
SSS.
■ Thus, all the requisites for a valid dation are present.
W/N there was a perfected and valid dacion en pago, thereby vesting unto
SSS a legitimate title and interest over the properties in question.
YES, there was.
RATIO
● In dación en pago, property is alienated to the creditor in satisfaction of a
debt in money. The debtor delivers and transmits to the creditor the
former's ownership over a thing as an accepted equivalent of the payment
or performance of an outstanding debt.
○ In such cases, Article 1245 provides that the law on sales shall
apply, since the undertaking really partakes — in one sense — of
the nature of sale; that is, the creditor is really buying the thing or
property of the debtor, the payment for which is to be charged
against the debtor's obligation.
● As a mode of payment, dación en pago extinguishes the obligation to the
extent of the value of the thing delivered
○ Unless, of course, the parties by agreement (express or implied)
consider the thing as equivalent to the obligation, in which case
the obligation is totally extinguished.
● There is no dation in payment when there is no transfer of ownership
in the creditor's favor, as when the possession of the thing is merely
given to the creditor by way of security.
● The Court reviewed the events that transpired during the three stages of
a contract of sale (Negotiation, Perfection, Consummation).
● First Stage (Negotiation): Offer was validly reduced.
○ No one questioned Atty. Cabarroguis' representations and authority
after the conclusion of the negotiations. In fact, a few days after the
said meeting, the company immediately arranged for the property's
turnover and eventually delivered possession thereof to SSS.
■ What makes matters worse for DDII is that it was well aware
of what transpired during the meeting and the agreements
reached.
○ If it were true that Atty. Cabarroguis did not possess the requisite
authority to represent the company in said meeting, then it could
have opposed that the corporation is reducing its offer to from P3.5
million to P2 million.
● Second Stage (Perfection): Acceptance was absolute and unqualified.
○ The SSC Resolution constitutes an absolute and unequivocal
acceptance which perfected the offered dacion.
■ Thus, when possession of the subject property was delivered
to SSS, this signified a transfer of ownership thereon,
consistent with the supposedly perfected agreement with
Atty. Cabarroguis.
 ○ Even after the offer was reduced, Atty. Cabarroguis still accepted
the counter-offer. Thus, the dacion was perfected.
● Third Stage (Consummation): The transfer of possession to SSS is
tantamount to delivery
○ The agreement on dacion en pago was consummated by DDII's
delivery of the property to SSS.
○ What was only left to be done was for the corporation to surrender
the certificates of title over the properties, free from all liens and
encumbrances as promised during the 1982 meeting, so as to
facilitate its transfer in SSS' name.

DOCTRINE AND NOTES

“To determine whether or not there was indeed a perfected or even consummated
dation in payment—it is necessary to review and assess the evidence and events
that transpired and see whether these correspond to the three stages of a contract
of sale.

This is so since, as previously mentioned, dacion en pago agreements are

governed, among others, by the law on sales”. (PattyG reviewer/syllabus).