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SUBJECT MATTER OF SALE 1. MELLIZA vs CITY OF ILOILO (23 SCRA 477) Facts: Juliana Melliza during her lifetime owned, among other properties, 3 parcels of residential land in Iloilo City (OCT 3462).Said parcels of land were known as Lots Nos. 2, 5 and 1214. The total area of Lot 1214 was 29,073 sq. m. On 27 November 1931she donated to the then Municipality of Iloilo, 9,000 sq. m. of Lot 1214, to serve as site for the municipal hall. The donation was however revoked by the parties for the reason that the area donated was found inadequate to meet the requirements of the development plan of the municipality, the so-called Arellano Plan. Subsequently, Lot 1214 was divided by Certeza Surveying Co., Inc. into Lots 1214-A and 1214-B. And still later, Lot 1214-B was further divided into Lots 1214-B-1, Lot 1214-B-2 and Lot1214-B-3. As approved by the Bureau of Lands, Lot 1214B-1, with 4,562 sq. m., became known as Lot 1214-B; Lot 1214-B-2,with 6,653 sq. m., was designated as Lot 1214-C; and Lot 1214-B-3, with 4,135 sq. m., became Lot 1214-D. On 15 November1932, Juliana Melliza executed an instrument without any caption providing for the absolute sale involving all of lot 5, 7669 sq.m. of Lot 2 (sublots 2-B and 2-C), and a portion of 10,788 sq. m. of Lot 1214 (sublots 1214-B2 and 1214-B3) in favor of the Municipal Government of Iloilo for

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the sum of P6,422; these lots and portions being the ones needed by the municipal government for the construction of avenues, parks and City hall site according the Arellano plan. On 14 January 1938, Melliza sold her remaining interest in Lot 1214 to Remedios Sian Villanueva (thereafter TCT 18178). Remedios in turn on 4 November1946 transferred her rights to said portion of land to Pio Sian Melliza (thereafter TCT 2492). Annotated at the back of Pio Sian Mellizas title certificate was the following that a portion of 10,788 sq. m. of Lot 1214 now designated as Lots 1412-B-2 and1214-B-3 of the subdivision plan belongs to the Municipality of Iloilo as per instrument dated 15 November 1932. On 24 August 1949 the City of Iloilo, which succeeded to the Municipality of Iloilo, donated the city hall site together with the building thereon, to the University of the Philippines (Iloilo branch). The site donated consisted of Lots 1214-B, 1214-C and 1214-D, with a total area of 15,350 sq. m., more or less. Sometime in 1952, the University of the Philippines enclosed the site donated with a wire fence. Pio Sian Melliza thereupon made representations, thru his lawyer, with the city authorities for payment of the value of the lot (Lot 1214-B). No recovery was obtained, because as alleged by Pio Sian Melliza, the City did not have funds. The University of the Philippines, meanwhile, obtained Transfer Certificate of Title No. 7152 covering the three lots, Nos. 1214-B,1214-C and 1214-D.On 10 December 1955 Pio Sian Melizza filed an action in the CFI Iloilo against Iloilo City

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and the University of the Philippines for recovery of Lot 1214B or of its value. After stipulation of facts and trial, the CFI rendered its decision on 15 August 1957, dismissing the complaint. Said court ruled that the instrument executed by Juliana Melliza in favor of Iloilo municipality included in the conveyance Lot 1214-B, and thus it held that Iloilo City had the right to donate Lot 1214-B to UP. Pio Sian Melliza appealed to the Court of Appeals. On 19 May 1965, the CA affirmed the interpretation of the CFI that the portion of Lot 1214 sold by Juliana Melliza was not limited to the 10,788 square meters specifically mentioned but included whatever was needed for the construction of avenues, parks and the city hall site. Nonetheless, it ordered the remand of the case for reception of evidence to determine the area actually taken by Iloilo City for the construction of avenues, parks and for city hall site. Hence, the appeal by Pio San Melliza to the Supreme Court. One of his causes of action was that the contract of sale executed between Melliza and the Mun. referred only to lots 1214-C and 1214-D and it is unwarranted to include lot 1214-B as being included under the description therein because that would mean that the object of the contract of sale would be indeterminate. One of the essential requirements for a contract of sale is that it should have for its object a determinate thing.

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HELD: The paramount intention of the parties was to provide Iloilo municipality with lots sufficient or adequate in area for the construction of the Iloilo City hall site, with its avenues and parks. For this matter, a previous donation for this purpose between the same parties was revoked by them, because of inadequacy of the area of the lot donated. Said instrument described 4parcels of land by their lot numbers and area; and then it goes on to further describe, not only those lots already mentioned, but the lots object of the sale, by stating that said lots were the ones needed for the construction of the city hall site, avenues and parks according to the Arellano plan. If the parties intended merely to cover the specified lots (Lots 2, 5, 1214-C and 1214-D), there would scarcely have been any need for the next paragraph, since these lots were already plainly and very clearly described by their respective lot number and areas. Said next paragraph does not really add to the clear description that was already given to them in the previous one. It is therefore the more reasonable interpretation to view it as describing those other portions of land contiguous to the lots that, by reference to the Arellano plan, will be found needed for the purpose at hand, the construction of the city hall site. The requirement of the law that a sale must have for its object a determinate thing, is fulfilled as long as, at the time the contract is entered into, the object of the sale is capable of being made determinate without the necessity of a new or

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further agreement between the parties (Art. 1273, old Civil Code; Art. 1460, New Civil Code). The specific mention of some of the lots plus the statement that the lots object of the sale are the ones needed for city hall site; avenues and parks, according to the Arellano plan, sufficiently provides a basis, as of the time of the execution of the contract, for rendering determinate said lots without the need of a new and further agreement of the parties. The Supreme Court affirmed the decision appealed from insofar as it affirms that of the CFI, and dismissed the complaint; without costs 2. YU TEK vs GONZALES (29 Phil 384) FACTS: A written contract was executed between Basilio Gonzalez and Yu Tek and Co., where Gonzales was obligated to deliver600 piculs of sugar of the 1st and 2nd grade to Yu Tek, within the period of 3 months (1 January-31 March 1912) at any place within the municipality of Sta. Rosa, which Yu Tek & Co. or its representative may designate; and in case, Gonzales does not deliver, the contract will be rescinded and Gonzales shall be obligated to return the P3,000 received and also the sum of P1,200by way of indemnity for loss and damages. No sugar had been delivered to Yu Tek & Co. under this contract nor had it been able to recover the P3,000. Yu Tek & Co. filed a complaint against Gonzales, and prayed for

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judgment for the P3,000 and the additional P1,200. Judgment was rendered for P3,000 only, and from this judgment both parties appealed. Defendant alleges that the court erred in refusing to permit parol evidence showing that the parties intended that the sugar was to be secured from the crop which the defendant raised on his plantation, and that he was unable to fulfill the contract by reason of the almost total failure of his crop. The second contention of the defendant arises from the first. He assumes that the contract was limited to the sugar he might raise upon his own plantation; that the contract represented a perfected sale; and that by failure of his crop he was relieved from complying with his undertaking by loss of the thing due. (Arts. 1452, 1096, and 1182, Civil Code.) ISSUES: 1) Whether compliance of the obligation to deliver depends upon the production in defendants plantation 2) Whether there is a perfected sale 3) Whether liquidated damages of P1,200 should be awarded to the plaintiff HELD: 1) The case appears to be one to which the rule which excludes parol evidence to add to or vary the terms of a written contract is decidedly applicable. There is not the slightest intimation in the contract that the sugar was to be

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raised by the defendant. Parties are presumed to have reduced to writing all the essential conditions of their contract. While parol evidence is admissible in a variety of ways to explain the meaning of written contracts, it cannot serve the purpose of incorporating into the contract additional contemporaneous conditions which are not mentioned at all in the writing, unless there has been fraud or mistake. It may be true that defendant owned a plantation and expected to raise the sugar himself, but he did not limit his obligation to his own crop of sugar. Our conclusion is that the condition which the defendant seeks to add to the contract by parol evidence cannot be considered. The rights of the parties must be determined by the writing itself. 2) Article 1450 defines a perfected sale as follows: The sale shall be perfected between vendor and vendee and shall be binding on both of them, if they have agreed upon the thing which is the object of the contract and upon the price, even when neither has been delivered. Article 1452 provides that the injury to or the profit of the thing sold shall, after the contract has been perfected, be governed by the provisions of articles 1096 and 1182. There is a perfected sale with regard to the thing whenever the article of sale has been physically segregated from all other articles In McCullough vs. Aenlle & Co. (3 Phil 285), a particular tobacco factory with its contents was held sold under a

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contract which did not provide for either delivery of the price or of the thing until a future time. In Barretto vs. Santa Marina (26 Phil 200),specified shares of stock in a tobacco factory were held sold by a contract which deferred delivery of both the price and the stock until the latter had been appraised by an inventory of the entire assets of the company. In Borromeo vs. Franco (5 Phil.Rep., 49) a sale of a specific house was held perfected between the vendor and vendee, although the delivery of the price was withheld until the necessary documents of ownership were prepared by the vendee. In Tan Leonco vs. Go Inqui (8 Phil. Rep.,531) the plaintiff had delivered a quantity of hemp into the warehouse of the defendant. The defendant drew a bill of exchange in the sum of P800, representing the price which had been agreed upon for the hemp thus delivered. Prior to the presentation of the bill for payment, in said case, the hemp was destroyed. Whereupon, the defendant suspended payment of the bill. It was held that the hemp having been already delivered, the title had passed and the loss was the vendees. It is our purpose to distinguish the case at bar from all these cases. The contract in the present case was merely an executory agreement; a promise of sale and not a sale. As there was no perfected sale, it is clear that articles 1452, 1096, and 1182 are not applicable. The agreement upon the thing which was the object of the contract was not within the meaning of article 1450. Sugar is one of the staple commodities of this

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country. For the purpose of sale its bulk is weighed, the customary unit of weight being denominated a picul.' There was no delivery under the contract. If called upon to designate the article sold, it is clear that Gonzales could only say that it was sugar. He could only use this generic name for the thing sold. There was no appropriation of any particular lot of sugar. Neither party could point to any specific quantity of sugar. The contract in the present case is different from the contracts discussed in the cases referred to. In the McCullough case, for instance, the tobacco factory which the parties dealt with was specifically pointed out and distinguished from all other tobacco factories. So, in the Barretto case, the particular shares of stock which the parties desired to transfer were capable of designation. In the Tan Leonco case, where a quantity of hemp was the subject of the contract, it was shown that quantity had been deposited in a specific warehouse, and thus set apart and distinguished from all other hemp The Supreme Court affirmed the judgment appealed from with the modification allowing the recovery of P1,200 under paragraph 4 of the contract, without costs 3. NATONAL GRAINS AUTHORITY vs IAC FACTS: National Grains Authority (now National Food Authority, NFA) is a government agency created under PD 4.

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One of its incidental functions is the buying of palay grains from qualified farmers. On 23 August 1979, Leon Soriano offered to sell palay grains to the NFA, through the Provincial Manager (William Cabal) of NFA in Tuguegarao, Cagayan. He submitted the documents required by the NFA for prequalifying as a seller, which were processed and accordingly, he was given a quota of 2,640 cavans of palay. The quota noted in the Farmers Information Sheet represented the maximum number of cavans of palay that Soriano may sell to the NFA. On 23 and 24 August 1979, Soriano delivered 630 cavans of palay. The palay delivered were not rebagged, classified and weighed. When Soriano demanded payment of the 630 cavans of palay, he was informed that its payment will beheld in abeyance since Mr. Cabal was still investigating on an information he received that Soriano was not a bona fide farmer and the palay delivered by him was not produced from his farmland but was taken from the warehouse of a rice trader, Ben de Guzman. On 28 August 1979, Cabal wrote Soriano advising him to withdraw from the NFA warehouse the 630 cavans stating that NFA cannot legally accept the said delivery on the basis of the subsequent certification of the BAEX technician (Napoleon Callangan) that Soriano is not a bona fide farmer. Instead of withdrawing the 630 cavans of palay, Soriano insisted that the palay grains delivered be paid. He then filed a complaint for specific performance and/or collection of money

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with damages on 2 November 1979, against the NFA and William Cabal (Civil Case 2754). Meanwhile, by agreement of the parties and upon order of the trial court, the 630 cavans of palay in question were withdrawn from the warehouse of NFA. On 30 September 1982, the trial court found Soriano a bona fide farmer and rendered judgment ordering the NFA, its officers and agents to pay Soriano the amount of P47,250.00 representing the unpaid price of the 630 cavans of palay plus legal interest thereof (12% per annum, from the filing of complaint on 20 November1979 until fully paid). NFA and Cabal filed a motion for reconsideration, which was denied by the court on 6 December 1982.Appeal was filed with the Intermediate Appellate Court. On 23 December 1986, the then IAC upheld the findings of the trialc ourt and affirmed the decision ordering NFA and its officers to pay Soriano the price of the 630 cavans of rice plus interest. Themotion for reconsideration of the appellate courts decision was denied in a resolution dated 17 April 1986. Hence, the present petition for review with the sole issue of whether or not there was a contract of sale in the present case. ISSUE: Whether there was a perfected sale HELD: Soriano initially offered to sell palay grains produced in his farmland to NFA. When the latter accepted the offer by noting in Soriano's Farmer's Information Sheet a quota of 2,640 cavans, there was already a meeting of the minds

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between the parties. The object of the contract, being the palay grains produced in Soriano's farmland and the NFA was to pay the same depending upon its quality. The fact that the exact number of cavans of palay to be delivered has not been determined does not affect the perfection of the contract. Article 1349 of the New Civil Code provides: ".The fact that the quantity is not determinate shall not be an obstacle to the existence of the contract, provided it is possible to determine the same, without the need of a new contract between the parties." In this case, there was no need for NFA and Soriano to enter into a new contract to determine the exact number of cavans of palay to be sold. Soriano can deliver so much of his produce as long as it does not exceed 2,640 cavans. From the moment the contract of sale is perfected, it is incumbent upon the parties to comply with their mutual obligations or "the parties may reciprocally demand performance" thereof. The Supreme Court dismissed the instant petition for review, and affirmed the assailed decision of the then IAC (now Court of Appeals) is affirmed; without costs. 4. SCHUBACK & SONS vs. CA FACTS: In 1981, Ramon San Jose (Philippine SJ Industrial Trading) established contact with Johannes Schuback & Sons Philippine Trading Corporation through the Philippine

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Consulate General in Hamburg, West Germany, because he wanted to purchase MAN bus spare parts from Germany. Schuback communicated with its trading partner, Johannes Schuback and Sohne Handelsgesellschaft m.b.n. & Co. (Schuback Hamburg) regarding the spare parts San Jose wanted to order. On 16 October 1981,San Jose submitted to Schuback a list of the parts he wanted to purchase with specific part numbers and description. Schuback referred the list to Schuback Hamburg for quotations. Upon receipt of the quotations, Schuback sent to San Jose a letter dated25 November 1981 enclosing its offer on the items listed. On 4 December 1981, San Jose informed Schuback that he preferred genuine to replacement parts, and requested that he be given a 15% discount on all items. On 17 December 1981, Schuback submitted its formal offer containing the item number, quantity, part number, description, unit price and total to San Jose. On24 December 1981, San Jose informed Schuback of his desire to avail of the prices of the parts at that time and enclosed its Purchase Order 0101 dated 14 December 1981. On 29 December 1981, San Jose personally submitted the quantities he wanted to Mr. Dieter Reichert, General Manager of Schuback, at the latters residence. The quantities were written in ink by San Jose in the same PO previously submitted. At the bottom of said PO, San Jose wrote in ink above his signature: NOTE: Above PO will include a 3% discount. The above will serve as our initial PO. Schuback

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immediately ordered the items needed by San Jose from Schuback Hamburg. Schuback Hamburg in turn ordered the items from NDK, a supplier of MAN spare parts in West Germany. On 4 January 1982, Schuback Hamburg sent Schuback a proforma invoice to be used by San Jose in applying for a letter of credit. Said invoice required that the letter of credit be opened in favor of Schuback Hamburg. San Jose acknowledged receipt of the invoice. An order confirmation was later sent by Schuback Hamburg to Schuback which was forwarded to and received by San Jose on 3 February 1981. On 16 February 1982, Schuback reminded San Jose to open the letter of credit to avoid delay in shipment and payment of interest. In the meantime, Schuback Hamburg received invoices from NDK for partial deliveries on Order 12204. On 16 February 1984, Schuback Hamburg paid NDK. On 18 October 1982, Schuback again reminded San Jose of his order and advised that the case may be endorsed to its lawyers. San Jose replied that he did not make any valid PO and that there was no definite contract between him and Schuback. Schuback sent a rejoinder explaining that there is a valid PO and suggesting that San Jose either proceed with the order and open a letter of credit or cancel the order and pay the cancellation fee of 30% F.O.B. value, or Schuback will endorse the case to its lawyers. Schuback Hamburg issued a Statement of Account to

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Schuback enclosing therewith Debit Note charging Schuback 30% cancellation fee, storage and interest charges in the total amount of DM 51,917.81. Said amount was deducted from Schubacks account with Schuback Hamburg. Demand letters sent to San Jose by Schubacks counsel dated 22 March 1983 and 9J une 1983 were to no avail. Schuback filed a complaint for recovery of actual or compensatory damages, unearned profits, interest, attorneys fees and costs against San Jose. In its decision dated 13 June 1988, the trial court ruled in favor of Schuback by ordering San Jose to pay it, among others, actual compensatory damages in the amount of DM 51,917.81, unearned profits in the amount of DM14,061.07, or their peso equivalent. San Jose elevated his case before the Court of Appeals. On 18 February 1992, the appellate court reversed the decision of the trial court and dismissed Schubacks complaint. It ruled that there was no perfection of contract since there was no meeting of the minds as to the price between the last week of December 1981 and the first week of January 1982. Hence, the petition for review on certiorari. ISSUE: Whether or not a contract of sale has been perfected between the parties HELD: Article 1319 of the Civil Code states: "Consent is manifested by the meeting of the offer and acceptance upon

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the thing and the cause which are to constitute the contract. The offer must be certain and the acceptance absolute. A qualified acceptance constitutes a counter offer." The facts presented to us indicate that consent on both sides has been manifested. The offer by petitioner was manifested on December 17, 1981 when petitioner submitted its proposal containing the item number, quantity, part number, description, the unit price and total to private respondent. On December 24, 1981, private respondent informed petitioner of his desire to avail of the prices of the parts at that time and simultaneously enclosed its Purchase Order. At this stage, a meeting of the minds between vendor and vendee has occurred, the object of the contract: being the spare parts and the consideration, the price stated in petitioner's offer dated December 17, 1981 and accepted by the respondent on December 24, 1981. Although the quantity to be ordered was made determinate only on 29 December 1981, quantity is immaterial in the perfection of a sales contract. What is of importance is the meeting of the minds as to the object and cause, which from the facts disclosed, show that as of 24 December 1981, these essential elements had already concurred. Thus, perfection of the contract took place, not on 29 December 1981, but rather on 24 December 1981. 5. NOOL vs CA

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FACTS: One lot formerly owned by Victorio Nool (TCT T74950) has an area of 1 hectare. Another lot previously owned byF rancisco Nool (TCT T-100945) has an area of 3.0880 hectares. Both parcels are situated in San Manuel, Isabela. Spouses Conchita Nool and Gaudencio Almojera (plaintiffs) alleged that they are the owners of the subject land as they bought the same from Victorio and Francisco Nool, and that as they are in dire need of money, they obtained a loan from the Ilagan Branch of the DBP (Ilagan, Isabela), secured by a real estate mortgage on said parcels of land, which were still registered in the names of Victorino and Francisco Nool, at the time, and for the failure of the plaintiffs to pay the said loan, including interest and surcharges, totaling P56,000.00, the mortgage was foreclosed; that within the period of redemption, the plaintiffs contacted Anacleto Nool for the latter to redeem the foreclosed properties from DBP, which the latter did; and as a result, the titles of the2 parcels of land in question were transferred to Anacleto; that as part of their arrangement or understanding, Anacleto agreed to buy from Conchita the 2 parcels of land under controversy, for a total price of P100,000.00, P30,000.00 of which price was paid to Conchita, and upon payment of the balance of P14,000.00, the plaintiffs were to regain possession of the 2 hectares of land, which amounts spouses Anacleto Nool and Emilia Nebre (defendants) failed to pay, and the same day the said arrangement was made; another covenant was entered into by the parties, whereby the defendants agreed to return to

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plaintiffs the lands in question, at anytime the latter have the necessary amount; that latter asked the defendants to return the same but despite the intervention of the Barangay Captain of their place, defendants refused to return the said parcels of land to plaintiffs; thereby impelling the plaintiffs to come to court for relief. On the other hand, defendants theorized that they acquired the lands in question from the DBP, through negotiated sale, and were misled by plaintiffs when defendant Anacleto Nool signed the private writing, agreeing to return subject lands when plaintiffs have the money to redeem the same; defendant Anacleto having been made to believe, then, that his sister, Conchita, still had the right to redeem the said properties It should be stressed that Manuel S. Mallorca, authorized officer of DBP, certified that the 1-year redemption period (from 16March 1982 up to 15 March 1983) and that the mortgagors right of redemption was not exercised within this period. Hence, DBP became the absolute owner of said parcels of land for which it was issued new certificates of title, both entered on 23 May1983 by the Registry of Deeds for the Province of Isabela. About 2 years thereafter, on 1 April 1985, DBP entered into a Deed of Conditional Sale involving the same parcels of land with Anacleto Nool as vendee. Subsequently, the latter was issued new certificates of title on 8 February 1988.

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The trial court ruled in favor of the defendants, declaring the private writing to be an option to sell, not binding and considered validly withdrawn by the defendants for want of consideration; ordering the plaintiffs to return to the defendants the sum of P30,000.00 plus interest thereon at the legal rate, from the time of filing of defendants counterclaim until the same is fully paid; to deliver peaceful possession of the 2 hectares; and to pay reasonable rents on said 2 hectares at P5,000.00 per annum or at P2,500.00 per cropping from the time of judicial demand until the said lots shall have been delivered to the defendants; and to pay the costs. The plaintiffs appealed to the Court of Appeals (CA GR CV 36473), which affirmed the appealed judgment intoto on 20 January 1993. Hence, the petition before the Supreme Court. ISSUE: Whether the Contract of Repurchase is valid. HELD: Nono dat quod non habet, No one can give what he does not have; Contract of repurchase inoperative thus void. A contract of repurchase arising out of a contract of sale where the seller did not have any title to the property sold is not valid. Since nothing was sold, then there is also nothing to repurchase. Article 1505 of the Civil Code provides that where goods are sold by a person who is not the owner thereof, and who does not sell them under authority or with consent of the owner,

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the buyer acquires no better title to the goods than the seller had, unless the owner of the goods is by his conduct precluded from denying the sellers authority to sell. Jurisprudence, on the other hand, teaches us that a person can sell only what he owns or is authorized to sell; the buyer can as a consequence acquire no more than what the seller can legally transfer. No one can give what he does not have nono dat quod non habet. In the present case, there is no allegation at all that petitioners were authorized by DBP to sell the property to the private respondents. Further, the contract of repurchase that the parties entered into presupposes that petitioners could repurchase the property that they sold to private respondents. As petitioners sold nothing, it follows that they can also repurchase nothing. In this light, the contract of repurchase is also inoperative and by the same analogy, void. The Supreme Court denied the petition, and affirmed the assailed decision of the Court of Appeals 6. VILLAFLOR vs CA FACTS: On 16 January 1940, Cirilo Piencenaves, in a Deed of Absolute Sale, sold to Vicente Villafor, a parcel of agricultural land (planted to Abaca) containing an area of 50 hectares, more or less. The deed states that the land was sold to Villaflor on 22 June1937, but no formal document was then

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executed, and since then until the present time, Villaflor has been in possession and occupation of the same. Before the sale of said property, Piencenaves inherited said property form his parents and was in adverse possession of such without interruption for more than 50 years. On the same day, Claudio Otero, in a Deed of Absolute Sale sold to Villaflor a parcel of agricultural land (planted to corn), containing an area of 24 hectares, more or less; Hermogenes Patete, in a Deed of Absolute Sale sold to Villaflor, a parcel of agricultural land (planted to abaca and corn), containing an area of 20 hectares, more or less. Both deed state the same details or circumstances as that of Piencenaves. On 15 February 1940, Fermin Bocobo, in a Deed of Absolute Sale sold to Villaflor, a parcel of agricultural land (planted with abaca), containing an area of 18 hectares, more or less. On 8 November 1946, Villaflor leased to Nasipit Lumber Co., Inc. a parcel of land, containing an area of 2 hectares, together with all the improvements existing thereon, for a period of 5 years (from 1 June 1946) at a rental of P200.00 per annum to cover the annual rental of house and building sites for 33 houses or buildings. The lease agreement allowed the lessee to sublease the premises to any person, firm or corporation; and to build and construct additional houses with the condition the lessee shall pay to the lessor the amount of 50 centavos per month for every house and building; provided that said constructions and improvements become the property of the lessor at the end of the lease without

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obligation on the part of the latter for expenses incurred in the construction of the same. On 7 July 1948, in an Agreement to Sell Villaflor conveyed to Nasipit Lumber, 2 parcels of land. Parcel 1 contains an area of 112,000 hectares more or less, divided into lots 5412, 5413, 5488, 5490,5491, 5492, 5850, 5849, 5860, 5855, 5851, 5854, 5855, 5859, 5858, 5857, 5853, and 5852; and containing abaca, fruit trees, coconuts and thirty houses of mixed materials belonging to the Nasipit Lumber Company. Parcel 2 contains an area of 48,000more or less, divided into lots 5411, 5410, 5409, and 5399, and containing 100 coconut trees, productive, and 300 cacao trees. From said day, the parties agreed that Nasipit Lumber shall continue to occupy the property not anymore in concept of lessee but as prospective owners. On 2 December 1948, Villaflor filed Sales Application V-807 with the Bureau of Lands, Manila, to purchase under the provisions of Chapter V, XI or IX of CA 141 (The Public Lands Act), as amended, the tract of public lands. Paragraph 6 of the Application, states: I understand that this application conveys no right to occupy the land prior to its approval, and I recognize that the land covered by the same is of public domain and any and all rights I may have with respect thereto

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by virtue of continuous occupation and cultivation are hereby relinquished to the Government. On 7 December 1948, Villaflor and Nasipit Lumber executed an Agreement, confirming the Agreement to Sell of 7 July 1948, but with reference to the Sales Application filed with the Bureau of Land. On 31 December 1949, the Report by the public land inspector (District Land Office, Bureau of Lands, in Butuan) contained an endorsement of the said officer recommending rejection of the Sales Application of Villaflor for having leased the property to another even before he had acquired transmissible rights thereto. In a letter of Villaflor dated 23 January1950, addressed to the Bureau of Lands, he informed the Bureau Director that he was already occupying the property when the Bureaus Agusan River Valley Subdivision Project was inaugurated, that the property was formerly claimed as private property, and that therefore, the property was segregated or excluded from disposition because of the claim of private ownership. Likewise, in a letter of Nasipit Lumber dated 22 February 1950 addressed to the Director of Lands, the corporation informed the Bureau that it recognized Villaflor as the real owner, claimant and occupant of the land; that since June 1946, Villaflor leased 2hectares inside the land to the company; that it has no other interest on the land; and that the Sales Application of Villaflor should be given favorable consideration.

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On 24 July 1950, the scheduled date of auction of the property covered by the Sales Application, Nasipit Lumber offered the highest bid of P41.00 per hectare, but since an applicant under CA 141, is allowed to equal the bid of the highest bidder, Villaflor tendered an equal bid, deposited the equivalent of 10% of the bid price and then paid the assessment in full. On 16 August 1950, Villaflor executed a document, denominated as a Deed of Relinquishment of Rights, in favor on Nasipit Lumber, in consideration of the amount of P5,000 that was to be reimbursed to the former representing part of the purchase price of the land, the value of the improvements Villaflor introduced thereon, and the expenses incurred in the publication of the Notice of Sale; in light of his difficulty to develop the same as Villaflor has moved to Manila. Pursuant thereto, on 16 August1950, Nasipit Lumber filed a Sales Application over the 2 parcels of land, covering an area of 140 hectares, more or less. This application was also numbered V807. On 17 August 1950 the Director of Lands issued an Order of Award in favor of Nasipit Lumber; and its application was entered in the record as Sales Entry V-407.On 27 November 1973, Villafor wrote a letter to Nasipit Lumber, reminding the latter of their verbal agreement in 1955; but the new set of corporate officers refused to recognize Villaflors claim.

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In a formal protest dated 31 January 1974 which Villaflor filed with the Bureau of Lands, he protested the Sales Application of Nasipit Lumber, claiming that the company has not paid him P5,000.00 as provided in the Deed of Relinquishment of Rights dated 16 August 1950. On 8 August 1977, the Director of Lands found that the payment of the amount of P5,000.00 in the Deed and the consideration in the Agreement to Sell were duly proven, and ordered the dismissal of Villaflors protest. On 6 July 1978, Villaflor filed a complaint in the trial court for Declaration of Nullity of Contract (Deed of Relinquishment of Rights), Recovery of Possession (of two parcels of land subject of the contract), and Damages at about the same time that he appealed the decision of the Minister of Natural Resources to the Office of the President. On 28 January 1983, he died. The trial court ordered his widow, Lourdes D. Villaflor, to be substituted as petitioner. After trial in due course, the then CFI Agusan del Norte and Butuan City, Branch III, dismissed the complaint on the grounds that: (1) petitioner admitted the due execution and genuineness of the contract and was estopped from proving its nullity, (2) the verbal lease agreements were unenforceable under Article 1403 (2)(e) of the Civil Code, and (3) his causes of action were barred by extinctive prescription and/or laches. It ruled that there was prescription and/or laches because the alleged verbal lease ended in 1966, but the action was filed only on 6 January 1978. The 6-year period

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within which to file an action on an oral contract per Article 1145 (1) of the Civil Code expired in 1972. Nasipit Lumber was declared the lawful owner and actual physical possessor of the 2 parcels of land (containing a total area of 160 hectares). The Agreements to Sell Real Rights and the Deed of Relinquishment of Rights over the 2 parcels were likewise declared binding between the parties, their successors and assigns; with double costs against Villaflor. The heirs of petitioner appealed to the Court of Appeals which, however, rendered judgment against them via the assailed Decision dated 27 September 1990 finding petitioners prayers (1) for the declaration of nullity of the deed of relinquishment, (2) for the eviction of private respondent from the property and (3) for the declaration of petitioners heirs as owners to be without basis. Not satisfied, petitioners heirs filed the petition for review dated 7 December 1990. In a Resolution dated 23 June 1991, the Court denied this petition for being late. On reconsideration, the Court reinstated the petition. ISSUE: Whether the sale is valid or void for the alleged existence of simulation of contract HELD: The provision of the law is specific that public lands can only be acquired in the manner provided for therein and not otherwise(Sec. 11, CA. No. 141, as amended). In his sales

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application, petitioner expressly admitted that said property was public land. This is formidable evidence as it amounts to an admission against interest. The records show that Villaflor had applied for the purchase of lands in question with this Office (Sales Application V-807) on 2 December 948. There is a condition in the sales application to the effect that he recognizes that the land covered by the same is of public domain and any and all rights he may have with respect thereto by virtue of continuous occupation and cultivation are relinquished to the Government of which Villaflor is very much aware. It also appears that Villaflor had paid for the publication fees appurtenant to the sale of the land. He participated in the public auction where he was declared the successful bidder. He had fully paid the purchase price thereof. It would be a height of absurdity for Villaflor to be buying that which is owned by him if his claim of private ownership thereof is to be believed. The area in dispute is not the private property of the petitioner. It is a basic assumption of public policy that lands of whatever classification belong to the state. Unless alienated in accordance with law, it retains its rights over the same as dominus. No public land can be acquired by private persons without any grant, express or implied from the government. It is indispensable then that there be showing of title from the state or any other mode of acquisition recognized by law. s such sales applicant manifestly acknowledged that he does

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not own the land and that the same is a public land under the administration of the Bureau of Lands, to which the application was submitted, all of its acts prior thereof, including its real estate tax declarations, characterized its possessions of the land as that of a sales applicant. And consequently, as one who expects to buy it, but has not as yet done so, and is not, therefore, its owner. The rule on the interpretation of contracts (Article 1371) is used in affirming, not negating, their validity. Article 1373, which is a conjunct of Article 1371, provides that, if the instrument is susceptible of two or more interpretations, the interpretation which will make it valid and effectual should be adopted. In this light, it is not difficult to understand that the legal basis urged by petitioner does not support his allegation that the contracts to sell and the deed of relinquishment are simulated and fictitious. Simulation occurs when an apparent contract is a declaration of a fictitious will, deliberately made by agreement of the parties, in order to produce, for the purpose of deception, the appearance of a juridical act which does not exist or is different from that which was really executed. Such an intention is not apparent in the agreements. The intent to sell, on the other hand, is as clear as daylight. The fact, that the agreement to sell (7 December 1948) did not absolutely transfer ownership of the land to private respondent, does not

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show that the agreement was simulated. Petitioners delivery of the Certificate of Ownership and execution of the deed of absolute sale were suspensive conditions, which gave rise to a corresponding obligation on the part of the private respondent, i.e., the payment of the last installment of the consideration mentioned in the Agreement. Such conditions did not affect the perfection of the contract or prove simulation Nonpayment, at most, gives the vendor only the right to sue for collection. Generally, in a contract of sale, payment of the price is a resolutory condition and the remedy of the seller is to exact fulfillment or, in case of a substantial breach, to rescind the contract under Article 1191 of the Civil Code. However, failure to pay is not even a breach, but merely an event which prevents the vendors obligation to convey title from acquiring binding force. T he requirements for a sales application under the Public Land Act are: (1) the possession of the qualifications required by said Act (under Section 29) and (2) the lack of the disqualifications mentioned therein (under Sections 121, 122, and 123). Section121 of the Act pertains to acquisitions of public land by a corporation from a grantee: The private respondent, not the petitioner, was the direct grantee of the disputed land. Sections 122 and 123 disqualify corporations, which are not authorized by their charter, from acquiring

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public land; the records do not show that private respondent was not so authorized under its charter The Supreme Court dismissed the petition. PRICE 7. LOYOLA vs CA FACTS: A parcel of land (Lot 115-A-1 of subdivision plan [LRC] Psd-32117, a portion of Lot 115-A described on Plan Psd-55228, LRC[GLRO] Record 8374, located in Poblacion, Binan, Laguna, and containing 753 sq.m., TCT T-32007) was originally owned in common by the siblings Mariano and Gaudencia Zarraga, who inherited it from their father. Mariano predeceased his sister who died single, without offspring on 5 August 1983, at the age of 97. Victorina Zarraga vda. de Loyola and Cecilia Zarraga, are sisters of Gaudencia and Mariano. The property was subject of Civil Case B-1094 before the then CFI Laguna (Branch 1, Spouses Romualdo Zarraga, et al. v .Gaudencia Zarraga, et al.). Romualdo Zarraga was the plaintiff in Civil Case B-1094. The defendants were his siblings: Nieves, Romana, Guillermo, Purificacion, Angeles, Roberto, Estrella, and Jose, all surnamed Zarraga, as well as his aunt, Gaudencia. The trial court decided Civil Case B-1094 in favor of the defendants. Gaudencia was adjudged owner of the 1/2 portion of Lot 115-A-1. Romualdo elevated the decision to the Court of Appeals and later the Supreme Court.

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The petition (GR 59529) was denied by the Court on 17 March 1982.On 24 August 1980, nearly 3 years before the death of Gaudencia while GR 59529 was still pending before the Supreme Court. On said date, Gaudencia allegedly sold to the children of Mariano Zarraga (Nieves, Romana, Romualdo, Guillermo, Lucia, Purificacion, Angeles, Roberto, Estrella Zarraga) and the heirs of Jose Zarraga Aurora, Marita, Jose, Ronaldo, Victor, Lauriano,and Ariel Zarraga; first cousins of the Loyolas) her share in Lot 115-A- 1 for P34,000.00. The sale was evidenced by a notarizeddocument denominated as Bilihang Tuluyan ng Kalahati (1/2) ng Isang Lagay na Lupa. Romualdo, the petitioner in GR 59529, was among the vendees.The decision in Civil Case B-1094 became final. The children of Mariano Zarraga and the heirs of Jose Zarraga (privaterespondents) filed a motion for execution. On 16 February 1984, the sheriff executed the corresponding deed of reconveyance to Gaudencia. On 23 July 1984, however, the Register of Deeds of Laguna, Calamba Branch, issued in favor of private respondents, TCT T-116067, on the basis of the sale on 24 August 1980 by Gaudencia to them. On 31 January 1985, Victorina and Cecilia filed a complaint, docketed as Civil Case B-2194, with the RTC of Bian, Laguna, for the purpose of annulling the sale and the TCT. Victorina died on 18 October 1989, while Civil Case B-2194 was

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pending with the trial court. Cecilia died on 4 August 1990, unmarried and childless. Victorina and Cecilia were substituted by Ruben, Candelaria,Lorenzo, Flora, Nicadro, Rosario, Teresita and Vicente Loyola as plaintiffs. The trial court rendered judgment in favor of complainants; declaring the simulated deed of absolute sale as well as the issuance of the corresponding TCT null and void, ordering the Register of Deeds of Laguna to cancel TCT T-116087 and to issue another one in favor of the plaintiffs and the defendants as co-owners and legal heirs of the late Gaudencia, ordering the defendants to reconvey and deliver the possession of the shares of the plaintiff on the subject property, ordering the defendants to pay P20,000 as attorneys fees and cost of suit, dismissing the petitioners claim for moral and exemplary damages, and dismissing the defendants counterclaim for lack of merit. On appeal, and on 31 August 1993, the appellate court reversed the trial court (CA-GR CV 36090). On September 15, 1993, the petitioners (as substitute parties for Victorina and Cecilia, the original plaintiffs) filed a motion for reconsideration, which was denied on 6 June 1994. Hence, the petition for review on certiorari. ISSUE: Whether the alleged sale between Gaudencia and respondents is valid HELD: Petitioners vigorously assail the validity of the execution of the deed of absolute sale suggesting that since the notary

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public who prepared and acknowledged the questioned Bilihan did not personally know Gaudencia, the execution of the deed was suspect. The rule is that a notarized document carries the evidentiary weight conferred upon it with respect to its due execution, and documents acknowledged before a notary public have in their favor the presumption of regularity. By their failure to overcome this presumption, with clear and convincing evidence, petitioners are estopped from questioning the regularity of the execution of the deed. Petitioners suggest that all the circumstances lead to the conclusion that the deed of sale was simulated. Simulation is "the declaration of a fictitious will, deliberately made by agreement of the parties, in order to produce, for the purposes of deception, the appearances of a juridical act which does not exist or is different what that which was really executed." Characteristic of simulation is that the apparent contract is not really desired or intended to produce legal effect or in any way alter the juridical situation of the parties. Perusal of the questioned deed will show that the sale of the property would convert the co-owners to vendors and vendees, a clear alteration of the juridical relationships. This is contrary to the requisite of simulation that the apparent contract was not really meant to produce any legal effect. Also in a simulated contract, the parties have no intention to be bound by the contract. But in this case, the parties clearly intended to be bound by the contract of sale, an intention they

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did not deny. The requisites for simulation are: (a) an outward declaration of will different from the will of the parties; (b) the false appearance must have been intended by mutual agreement; and (c) the purpose is to deceive third persons. None of these are present in the assailed transaction. Contracts are binding only upon the parties who execute them. Article 1311 of the Civil Code clearly covers this situation. In the present case Romualdo had no knowledge of the sale, and thus, he was a stranger and not a party to it. Even if curiously Romualdo, one of those included as buyer in the deed of sale, was the one who questioned Gaudencias ownership in Civil Case B-1094, Romana testified that Romualdo really had no knowledge of the transaction and he was included as a buyer of the land only because he was a brother. Petitioners fault the Court of Appeals for not considering that at the time of the sale in 1980, Gaudencia was already 94 years old; that she was already weak; that she was living with private respondent Romana; and was dependent upon the latter for her daily needs, such that under these circumstances, fraud or undue influence was exercised by Romana to obtain Gaudencia's consent to the sale. The rule on fraud is that it is never presumed, but must be both alleged and proved. For a contract to be annulled on the ground of fraud, it must be shown that the vendor never gave consent to

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its execution. If a competent person has assented to a contract freely and fairly, said person is bound. There also is a disputable presumption, that private transactions have been fair and regular. Applied to contracts, the presumption is in favor of validity and regularity. In this case, the allegation of fraud was unsupported, and the presumption stands that the contract Gaudencia entered into was fair and regular. Petitioners also claim that since Gaudencia was old and senile, she was incapable of independent and clear judgment. However, a person is not incapacitated to contract merely because of advanced years or by reason of physical infirmities. Only when such age or infirmities impair his mental faculties to such extent as to prevent him from properly, intelligently, and fairly protecting his property rights, is he considered incapacitated. Petitioners show no proof that Gaudencia had lost control of her mental faculties at the time of the sale. The notary public who interviewed her, testified that when he talked to Gaudencia before preparing the deed of sale, she answered correctly and he was convinced that Gaudencia was mentally fit and knew what she was doing. Petitioners seem to be unsure whether they are assailing the sale of Lot 115-A-1 for being absolutely simulated or for inadequacy of the price. These two grounds are irreconcilable. If there exists an actual consideration for transfer evidenced by the alleged act of sale, no matter how inadequate it be, the

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transaction could not be a simulated sale. No reversible error was thus committed by the Court of Appeals in refusing to annul the questioned sale for alleged inadequacy of the price The Supreme Court denied the petition, and affirmed the assailed decision of the Court of Appeals; with costs against petitioners 8. UY vs CA FACTS: William Uy and Rodel Roxas are agents authorized to sell 8 parcels of land by the owners thereof. By virtue of such authority, they offered to sell the lands, located in Tuba, Tadiangan, Benguet to National Housing Authority (NHA) to be utilized and developed as a housing project. On 14 February 1989, the NHA Board passed Resolution 1632 approving the acquisition of said lands, with an area of 31.8231 hectares, at the cost of P23.867 million, pursuant to which the parties executed a series of Deeds of Absolute Sale covering the subject lands. Of the 8 parcels of land, however, only 5 were paid for by the NHA because of the report it received from the Land Geosciences Bureau of the Department of Environment and Natural Resources (DENR)that the remaining area is located at an active landslide area and therefore, not suitable for development into a housing project. On 22 November 1991, the NHA issued Resolution 2352 cancelling the sale over the 3 parcels of land. The NHA,

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through Resolution 2394, subsequently offered the amount of P1.225 million to the landowners as daos perjuicios. On 9 March 1992, petitioners Uy and Roxas filed before the RTC Quezon City a Complaint for Damages against NHA and its General Manager Robert Balao. After trial, the RTC rendered a decision declaring the cancellation of the contract to be justified. The trial court nevertheless awarded damages to plaintiffs in the sum of P1.255 million, the same amount initially offered by NHA to petitioners as damages. Upon appeal by petitioners, the Court of Appeals reversed the decision of the trial court and entered a new one dismissing the complaint. It held that since there was sufficient justifiable basis in cancelling the sale, it saw no reason for the award of damages. The Court of Appeals also noted that petitioners were mere attorneys-in-fact and, therefore, not the real parties-in-interest in the action before the trial court. Their motion for reconsideration having been denied, petitioners seek relief from the Supreme Court. ISSUES: 1) Whether the petitioners are real parties in interest 2) Whether the cancellation is justified

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party who stands to be benefited or injured by the judgment or the party entitled to the avails of the suit. Interest, within the meaning of the rule, means material interest, an interest in the issue and to be affected by the decree, as distinguished from mere interest in the question involved, or a mere incidental interest. Cases construing the real party-in-interest provision can be more easily understood if it is borne in mind that the true meaning of real party-in-interest may be summarized as follows: An action shall be prosecuted in the name of the party who, by the substantive law, has the right sought to be enforced. Where the action is brought by an attorney-in-fact of a land owner in his name, (as in our present action) and not in the name of his principal, the action was properly dismissed because the rule is that every action must be prosecuted in the name of the real parties-in-interest (Section 2, Rule 3, Rules of Court) Petitioners claim that they lodged the complaint not in behalf of their principals but in their own name as agents directly damaged by the termination of the contract. Petitioners in this case purportedly brought the action for damages in their own name and in their own behalf. An action shall be prosecuted in the name of the party who, by the substantive law, has the right sought to be enforced. Petitioners are not parties to the contract of sale between their principals and NHA. They are

HELD: 1) Section 2, Rule 3 of the Rules of Court requires that every action must be prosecuted and defended in the name of the real party-in-interest. The real party-in-interest is the

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mere agents of the owners of the land subject of the sale. As agents, they only render some service or do something in representation or on behalf of their principals. The rendering of such service did not make them parties to the contracts of sale executed in behalf of the latter. Since a contract may be violated only by the parties thereto as against each other, the real parties-in-interest, either as plaintiff or defendant, in an action upon that contract must, generally, either be parties to said contract. Petitioners have not shown that they are assignees of their principals to the subject contracts. While they alleged that they made advances and that they suffered loss of commissions, they have not established any agreement granting them "the right to receive payment and out of the proceeds to reimburse [themselves] for advances and commissions before turning the balance over to the principal[s]." 2) The right of rescission or, more accurately, resolution, of a party to an obligation under Article 1191 is predicated on a breach of faith by the other party that violates the reciprocity between them. The power to rescind, therefore, is given to the injured party. Article 1191 states that 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 fulfillment and the rescission of the obligation, with the payment of damages in either case. He may also seek rescission, even after he has

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chosen fulfillment, if the latter should become impossible. In the present case, the NHA did not rescind the contract. Indeed, it did not have the right to do so for the other parties to the contract, the vendors, did not commit any breach, much less a substantial breach, of their obligation. Their obligation was merely to deliver the parcels of land to the NHA, an obligation that they fulfilled. The NHA did not suffer any injury by the performance thereof The cancellation was not a rescission under Article 1191. Rather, the cancellation was based on the negation of the cause arising from the realization that the lands, which were the object of the sale, were not suitable for housing. Cause is the essential reason which moves the contracting parties to enter into it. In other words, the cause is the immediate, direct and proximate reason which justifies the creation of an obligation through the will of the contracting parties. Cause, which is the essential reason for the contract, should be distinguished from motive, which is the particular reason of a contracting party which does not affect the other party. Ordinarily, a party's motives for entering into the contract do not affect the contract. However, when the motive predetermines the cause, the motive may be regarded as the cause. In this case, it is clear, and petitioners do not dispute, that NHA would not have entered into the contract were the lands not suitable for housing. In other words, the quality of the land was an implied condition for the NHA to enter into

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the contract. On the part of the NHA, therefore, the motive was the cause for its being a party to the sale. We hold that the NHA was justified in canceling the contract. The realization of the mistake as regards the quality of the land resulted in the negation of the motive/cause thus rendering the contract inexistent. The Supreme Court denied the petition

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