“Again, Do take Note” (2nd Exam) Sales – Atty.
SARONA 1
SECOND EXAM COV ERAGE:
So now we move on t o PRICE. This element is
discussed in Art 1458 and Art 1471 of the Civil
Code. So why is there a nec essity for a price in
a contract of sale? Aside from the fact that it is
mentioned in Art 1458, remember the
characteristic of a contract of sale being
onerous. So there is an exchange of a different
valuable consideration. In the case of Inchausti
vs Cromwell, recall that it was discussed that the
“PRICE ” signifies the sum stipulated as the
equivalent of the thing sold and also every
incident taken into consideration for the fixing of
the price, put to the debit of the vendee and
agreed by him.
Now recall again Art 1458…
Art. 1458. By the contract of sale one of the
contracting parties obligates him self to
transfer the ownership and to deliver a
determinate thing, and the other to pay
therefor a price certain in money or its
equivalent.
A contract of sale may be absolute or
conditional. (1445a)
So it says “price or its equivalent”, so this means
na hindi lang money. “Or its equivalent”, this
means that there is certainty as to the price, but
it is possible that the payment may be as object
as equivalent to money.
The elements of a valid pric e are:
1. The price must be real, not simulated
2. The price must be in money or its
equivalent
3. It must be certain or ascertainable at the
time of perfection, and
4. Jurisprudence likewise states that
manner of payment must be agreed
upon. With regard to manner of
payment, you will see when this is
required.
Take note again as we have discussed in your
contracts and in some of the cas es that we have
discussed, mere inadequacy of price will not
affect an ordinary conrtract of sale. But of cours e
if there is no price at all, then there is no valid
contract of sale for lack of consideration.
So price must be REA L.
Article 1471. If the price is simulated, the sale
is void, but the act may be shown to have
been in reality a donation or some other act
or contract.
So when we say that the requirement is that the
price must be real, there must be a legal
intention on the part of the buy er to pay the pric e
and there must be legal expectation to receive
such price as he obligates himself to deliver the
subject matter. Again, distinguish it from
contracts that are not onerous, like a gratuitous
contracts. There is no payment for a pric e
certain, like for example a donation.
So when do you consider a price as simulated?
Diba ang sabi if it is simulated, the same is void.
It is simulated when neither party to the deed of
sale had any intention whatsoe ver that the
amount will be paid, and therefore the sale is
void. However A rt 1471 provides that it may be
shown to be in reality a donation, or some other
act or contract. So again, you look at the
intention of the parties.
Now how about ung Art 1353?
Art. 1353. The statement of a false cause in
contracts shall render them void, if it should
not be proved that they were founded upon
another cause which is true and lawful.
(1276)
So the “false cause” referred to here is similar t o
a simulated price mentioned in Art 1471, whic h
renders the contract void. Tak e note that if it is
simulated, wherein the parties repres ented that
the sale has been made but was not in fact paid.
Because there was no int ention to pay at all nor
was there any legal expectation on the part of
the seller. DO NOT confuse this with failure t o
pay. Because in failure to pay, you agreed upon
on a consideration. Di lang bumayad si buyer.
Again if the price is simulated, the contract is
void bec ause the third essential element of pric e
is lacking.
So what happened in the case of MAPALO?
MAPALO VS. MAPALO
FACTS: The spouses Miguel Mapalo and
Candida Quiba were the registered owners of a
residential land located in Pangasinan. (1,635
sq. m.) The spouses donated the eastern half of
the land to Miguel’s brother – Maximo Mapalo
who was about to get married.
However, they were dec eived int o signing, on
October 15, 1936, a deed of absolute sale over
the entire land in Maximo’s favor. Their
signatures were procured by fraud because they
were made t o believe by Maximo and the lawyer
who acted as notary public who "translated" the
document, that the same was a deed of donation
in Maximo's favor covering one-half of their land.
(It must be noted that the spouses are illiterat e
farmers). Although the document of sale stated a
consideration of Five Hundred (P500.00) Pesos,
the aforesaid spouses did not receive anything
of value for the land.
In 1938, Maximo Mapalo, without the consent of
the spous e, registered the sale in his favor. After
thirteen years (1951), he s old the land to the
Narcisos. (E varisto, Petronila Pacifico and
Miguel) who thereafter registered the sale and
obtained a title in their favor.
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
In 1952, the Narcisos filed a complaint with the
CFI to be declared owners of the entire land, for
possession of its western portion; for damages;
and for rentals. The Mapalo spouses filed a
counterclaim seeking cancellation of the
Narcisos’ titles as to the western half of the land.
They said that their signatures to the deed of
sale of 1936 was procured by fraud and that the
Narcisos were buyers in bad faith.
They also filed another complaint wherein they
asked the court to declare deeds of sale of 1936
and of 1951 over the land in question be
declared null and void as to the western half of
said land.
CFI ruled in favor of the Mapalo spouses. Upon
appeal filed by Narcisos, CA reversed the lower
court’s ruling solely on the ground that the
consent of the Mapalo spouses to the deed of
sale of 1936 having been obtained by fraud, the
same was voidable, not void ab initio, and,
therefore, the action to annul the same, within
four years from notice of the fraud, had long
prescribed. (From March 15, 1938). Hence, this
appeal.
ISSUES:
1. Whether or not the deed of sale executed in
1936 was null and void. YES
2. Whether or not the Narcisos were purchasers
in good faith. NO
HELD:
1.) YES, the sale was void. The Civil Code
governs the trans action because it was executed
in 1936. Accordingly, since the deed of sale of
1936 is governed by the Old Civil Code, it should
be asked whether its case is one wherein there
is no consideration, or one with a statement of a
false consideration. If the former, it is void and
inexistent; if the latter, only voidable, under the
Old Civil Code.
There is lack of consideration
As observed earlier, the deed of sale of 1936
stated that it had for its consideration Five
Hundred (P 500.00) Pesos. In fact, however, said
consideration was totally absent. The problem,
therefore, is whet her a deed which states a
consideration that in fact did not exist, is a
contract without consideration, and therefore
void ab initio, or a contract with a fals e
consideration, and therefore, at least under the
Old Civil Code, voidable.
When there is no consideration, the contract is
null and void
According to Manresa, what is meant by a
contract that states a false consideration is one
that has in fact a real consideration but the same
is not the one stated in the document.
In our view, therefore, the ruling of this Court in
Ocejo, Perez & Co. vs. Flores, 40 Phil. 921, is
squarely applicable herein. In that case we ruled
that a cont ract of purchas e and sale is null and
void and produc es no effect whatsoever where
2
the same is without cause or consideration in
that the purchase price which appears thereon
as paid has in fact never been paid by the
purchaser to the vendor.
2.) No, they were no purchasers in good faith.
Aside from the fact that all the parties in thes e
cases are neighbors, except Maximo Mapalo the
foregoing facts are explicit enough and
sufficiently reveal that the Narcisos were aware
of the nature and extent of the interest of
Maximo Mapalo their vendor, over the above -
described land before and at the time the deed
of sale in their favor was executed.
The Narcisos were purchaser-in-value but not
purchasers in good faith
What was the necessity, purpose and reason of
Pacifico Narciso in still going to the spouses
Mapalo and asked them to permit their brother
Maximo to dispose of the above-described land?
To this question it is safe to state that this act of
Pacifico Narciso is a conclusive manifestation
that they (the Narcisos) did not only have prior
knowledge of the ownership of said spouses
over the western half portion in question but that
they also have recognized said ownership. It
also conclusively shows their prior knowledge of
the want of dominion on the part of their vendor
Maximo Mapalo over the whole land and also of
the flaw of his title thereto. Under this situation,
the Narcisos may be considered purchasers in
value but certainly not as purchasers in good
faith.
Q: How about the term “false consideration”, is
that the same as simulated under Art 1471?
A: No. In this case, when you say “fals e
consideration”, it is one that has a real
consideration, but the same was not stated in
the document. In cases of false consideration,
there is an intention to pay the purchase price,
although there is only a discrepancy with
regards to what is stipulat ed in the contract.
However in a simulated consideration, there is
no consideration at all.
So here the sale as to the western portion, the
sale was considered void. Why is it void and not
voidable? It was considered void because there
was no consideration at all. Again it was
discussed that a contract that is voidable by
virtue of fraud, said consent, although defective,
may exist.
Again contracts without a cause or consideration
produce no effect whatsoever. Here there was
no consideration at all as to be distinguished in
the old Civil Code in the use of the term “no
consideration”. If there is no consideration, or in
other words simulated under Art 1471, the
contract is void and inexistent. But if there is a
“false consideration” under the old Civil Code, it
is only voidable.
Again take note because the use of the term
“false cause” in Art 1533 of the NCC, it is the
same as “simulated” in Art 1471. So do
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
remember that you have to be very careful in
understanding and using the term “fals e
consideration”. You take into consideration, like
in this case in the Old Civil Code, or if it is a
“false cause” as defined in Art 1353.
What is meant by a contract that has a “false
consideration” in the OLD CIV IL CODE is one
that has a real consideration, but the same is not
stated in the contract. A contract of purchas e
and sale is null and void and produces no effect
whatsoever where the same is without cause
and consideration. So in this case, there was no
consideration and therefore there is no valid
contract of sale.
When two aged individuals, who are not well
versed in English, signed a deed of sale in
representation (??? )that it was merely to
evidence t he lending of money, it constitutes
more than just fraud and vitiation of consent to
give rise to a voidable contract. Since there was
no intention at all to enter into a sale, there was
no consent and more import antly, there was no
consideration agreed upon, which makes the
contract void ab initio.
MODINA VS. CA
FACTS: This case involves parcels of land
registered under the name of Ramon Chiang.
Chiang theoriz ed that the subject properties
were sold to him by his wife, Merlinda Plana
Chiang as evidenced by a Deed of Sale and
were subsequently sold by Chiang to the
petitioner Serafin Modina. (Dates of sale: August
3, 1979 and August 24, 1979, respectively.)
Modina brought a Complaint for Reco very of
Possession with Damages against the privat e
respondents before the RTC. Upon learning the
institution of the said case, Merlinda presented a
Complaint-in-intervention, seeking the
declaration of nullity of the Deed of Sale
between her husband and M ODINA on the
ground that the titles of the parcels of land in
dispute were never legally transferred to her
husband. She contended that fraudulent acts
were allegedly employed by her husband to
obtain a Torrens Title in his favor. However, she
confirmed the validity of the lease contracts with
the other private respondents.
MERLINDA also admitted t hat the said parcels
of land were those ordered sold by the CFI of
Iloilo in “Intestate Estate of Nelson Plana” where
she was appointed as the administratix, being
the widow of the dec eased, her first husband.
An Authority to Sell was issued by the said
Probate Court for the sale of the same
properties.
RTC ruled in favor of the wife Merlinda declaring
the two sales in August 1979 as void and
inexistent. Upon appeal, the CA affirmed in tot o
the RTC ruling.
ISSUES:
3
1. Whether or not the sale of subject lots should
be nullified. YES
2. Whether or not petitioner Modina was a
purchaser in good faith. NO
HELD:
1.)The sale of the subject lots should be nullified.
Prohibition of sale between spouses
Art. 1490. The husband and the wife cannot sell
property to each other, except:
(1) when a separation of property was agreed
upon in the marriage settlements; or
(2) when there has been a judicial separation of
property under Art. 191.
The sale bet ween Chiang spouses was null and
void. The owners hip of the lot did not transfer to
Ramon Chiang. Hence, the sale to Modina was
null and void. The exception to the rule laid
down in A rt. 1490 of the New Civil Code not
having existed with respect to the property
relations of Ramon Chiang and Merlinda Plana
Chiang, the sale by the latter in favor of the
former of the properties in question is invalid for
being prohibited by law. Not being the owner of
subject properties, Ramon Chiang could not
have validly sold the same to plaintiff Serafin
Modina. The sale by Ramon Chiang in favor of
Serafin Modina is, likewise, void and inexistent.
Serafin Modina is, likewise, void and inexistent.
A contract of sale without consideration is a void
contract
Under Article 1409 of the New Civil Code,
enumerating void contracts, a contract without
consideration is one such void contract. One of
the characteristics of a void or inexistent contract
is that it produces no effect. So also, inexistent
contracts can be invoked by any person
whenever juridical effects founded thereon are
asserted against him. A transferor can recover
the object of such contract by accion
reivindicatoria and any possessor may refuse to
deliver it to the transferee, who cannot enforc e
the trans fer.
Thus, Modina’s insistence that Merlinda cannot
attack subject contract of sale as she was a
guilty party thereto is equally unavailing.
Merlinda can recover the property
Since one of the characteristics of a void or
inexistent contract is that it does not produc e
any effect, MERLINDA can recover the property
from petitioner who never acquired title
thereover.
Records show that in the complaint-in-
intervention of MERLINDA, she did not aver the
same as a ground to nullify subject Deed of
Sale. In fact, she denied t he existence of the
Deed of Sale in favor of her husband. In the
said Complaint, her allegations referred to the
want of consideration of such Deed of Sale. She
did not put up the defense under Article 1490, to
nullify her sale to her husband CHIA NG becaus e
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
such a defense would be inconsistent with her
claim that the same sale was inexistent.
2.) Modina was not a purchaser in good faith
There are circumstances which are indicia of
bad faith on Mondina’s part:
(1) He asked his nephew, Placido Matta, to
investigate the origin of the property and the
latter learned that the same formed part of the
properties of ME RLINDA’s first husband;
(2) that the said sale was between the spouses;
(3) that when t he property was inspected,
MODINA met all the lessees who informed that
subject lands belong to MERLINDA and they
had no knowledge that the same lots were sold
to the husband.
It is a well-settled rule that a purchaser cannot
close his eyes to facts which would put a
reasonable man upon his guard to make the
necessary inquiries, and then claim that he
acted in good fait h. His mere refusal to believe
that such defect exists, or his wilful closing of his
eyes to the possibility of the existence of a
defect in his vendor’s title, will not make him an
innocent purchaser for value, if it aft erwards
develops that the title was in fact defective, and
it appears that he had such notice of the defect
as would have led to its discovery had he acted
with that measure of precaution which may
reasonably be required of a prudent man in a
like situation.
In this case, when it comes to pari delicto, it
applies only where the nullity arises from the
illegality of the consideration. In this case, there
was no allegation on the illegality of the
consideration. What was alleged here was there
was no consideration at all and therefore there
could have been no valid sale.
VDA. DE CATI NDIG VS. HEIRS OF ROQUE
FACTS: The subject property in this case is a
fishpond which was part of the Malol os Cadastre
and has an area of more than thirteen hectares.
As shown in Original Certificate of Title, it is co-
owned or registered in the names of the different
persons. (note: there are 16/16 shares)
The co-owners of the fishpond leased it to Mrs.
Catindig for a term of ten years counted from
October 1, 1941 for a t otal rental of six thousand
pesos. After the termination of the lease on
September 30, 1951, Mrs. Catindig remained in
possession of the fishpond because she was
negotiating with the co-owners for the purchas e
thereof. She wanted to buy it for P52,000.
On October 18, 1960 German Ramirez, one of
the co-owners, executed a deed wherein he sold
his 2/16 share t o Mrs. Catindig for P 6,500 The
sale was annot ated on the title on October 19,
1960. Two weeks later, P edro Villanueva, one of
the co-owners, learned of the sale executed by
German Ramirez. That sale retroacted to April
4
13, 1950. In 1960 the respondents filed this
action against Mrs. Catindig to compel her to
allow them to redeem the portion sold by
German Ramirez. The respondents amended
their complaint by including a prayer for the
recovery of the possession of the fishpond.
The RTC declared void certain documents of
sale regarding portions of the fishpond in
litigation. It ordered Mrs. Catindig to deliver to
the respondents (except German Ramirez ) the
possession of the said fishpond and to allow the
respondents to redeem from Mrs. Catindig the
2/16 portion of the fishpond which German
Ramirez had sold to her. CA affirmed in toto the
RTC ruling. CA said that Mrs. Catindig did not
pay P52,000 (the projected s ale) and that it the
contract was simulated. Hence, this appeal.
ISSUE: Whether or not the sale by German
Ramizer to Mrs. Catindig was null and void.
HELD: YES. The alleged sales were null and
void. The c onclusive factual finding of the
Appellate Court that the alleged sales on April
13 or 14, 1950 of respondents' shares are
simulated and void ab initio renders untenable
appellant Catindig's cont entions that the
remedies available to the respondents, such as
an action for annulment, rescission or
reformation, are barred by prescription or laches.
The alleged sales were absolutely simulated,
fictitious or inexistent contracts (Arts. 1346 and
1409(2)). " The action or defens e for the
declaration of the inexistence of a contract does
not prescribe" (Art. 1410). Mere lapse of time
cannot give efficacy to a void contract.
The CA’s finding that the price was not paid or
that the statement in the supposed contracts of
sale as to the payment of the price was
simulated fortifies the view t hat the alleged sales
were void. "If the price is simulated, the sale is
void..." (Art. 1471, Civil Code).
A contract of sale with no consideration is void
A contract of sale is void and produces no effect
whatsoever where the price, which appears
thereon as paid, has in fact never been paid by
the purchaser to the vendor. Such a sale is non-
existent or cannot be considered consummated.
Mrs. Catindig cannot demand
Mrs. Catindig is not entitled to demand the
execution of a notarized deed of sale for the
14/16 pro indivis o portion of the fishpond. She is
not entitled becaus e, as already held, the
alleged sales in her favor are void.
Reas onable value of the use and occupation of
the fishpond should be limited
We hold that, as a matter of fairness and equity
or to avoid unjust enrichment, the liability of Mrs.
Catindig for the reasonable value of the use and
occupation of the fishpond should be limited to
the period from October 1, 1951 up to the time in
January, 1964 when she turned over the
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
fishpond to the receiver, namely, the deputy
clerk of court of the Court of First Instance of
Bulacan, Malolos Branc h I.
From the compensation of P6, 000 per annum
which Mrs. Catindig is obligated to pay to the
respondents, should be deducted the 2/16
portion of said compensation, corresponding t o
the share of German Ramirez, from October 1,
1951 to January, 1964. Thereafter, Mrs. Catindig
is entitled to demand the 2/ 16 share in the net
fruits or earnings of the fishpond from the
receiver until the said share is redeemed by the
respondents.
Ruling by the Supreme Court:
- The receiver (not Asuncion Meneses Vda. de
Catindig) should deliver the possession of the
fishpond to the respondents or their duly
authorized representative, together with 14/16 of
the net earnings of the fishpond from January
15, 1964 up to the time the possession is
delivered to the respondents.
The rec eiver should deliver to Mrs. Catindig a
2/16 share of the net earnings of the fishpond,
corresponding to the share of German Ramirez,
from January 15, 1964 up to the time the said
share is redeemed from her.
Q: How about the lapse of time, will prescription
apply here?
A: No. Art 1410 provides “Actions to assail the
validity of the contract on the ground that it is
void is imprescriptible.”
The alleged contracts of sale here were
absolutely simulated, fictitious or inexistent.
Therefore the action for the declaration of
inexistence of a contract does not prescribe.
Mere lapse of time cannot give efficacy to a voi d
contract. The finding that the price was not paid
or that the statement in the supposed c ontracts
of sale as to the payment of the price was
simulated fortifies the view t hat the alleged sales
are void. If the price is simulated, the s ale is
void.
We have here a contract and allegedly the price
was received by the seller, but actually walang
nareceive ang seller. But again do not stop
there, so as not to confuse that with failure to
pay the consideration. In failure to pay, it will not
invalidate a contract. In this case, they showed
that there was consideration received, but look
at the intention of the parties. Was there an
agreement to the consideration? Was there
intent to enter into a contract and to trans fer
ownership of the property in exchange for a
price? There was none.
So the sale is void and produces no effect
whatsoever. Where the price appears fak e and
was never paid by the purchaser to t he vendor.
This shows the intention that the parties did not
agree or t here was no meeting of the minds as
to the consideration. Such a sale is non-existent
and cannot be considered as consummated.
5
SPOUS ES LEQUI N VS. SPS. VIZCONDE
SUNDAY, AUGUST 24, 2014
FACTS: In 1995, spous es Ramon and Virginia
Lequin, residents bought the subject lot
consisting of 10,115 sq. m. from one Carlito de
Leon. The s ale was negotiated by respondent
Raymundo Vizconde.
In 1997, spouses Vizconde represent ed to
spouses Lequin that they had also bought from
Carlit o de Leon a 1,012 sq. m. lot adjacent to the
Lequins and built a house thereon.
As later confirmed by de Leon, however, the
1,012 sq. m. lot claimed by the Vizcondes is part
of the 10,115 sq. m. lot Lequin bought from him.
With the consent of the Vizcondes, spouses
Lequin then constructed their house on the 500 -
square met er half-portion of t he lot claimed by
respondents, as this was near the road.
Given this situation where the house of Lequins
stood on a portion of the lot allegedly owned by
Vizcondes, the former consult ed a lawyer, who
advis ed them that the 1, 012 sq. m. lot be
segregated from the subject lot whose title they
own and to mak e it appear that they are selling
to respondents 512 square meters thereof.
This sale was embodied in the February 12,
2000 Kasulatan where it was made to appear
that the Vizcondes paid PhP 15,000 for the
purchase of the 512-square meter portion of the
subject lot.
In July 2000, petitioners tried to develop the
dried up canal located between their 500 -square
meter lot and the public road. However, the
respondents objected, claiming ownership of
said dried up canal or sapang patay.
This prompted the Liquins to look into the
ownership of the dried up canal and the lot
claimed by the respondents Carlito de Leon told
petitioners that what he had sold to respondents
was the dried up canal or sapang patay and that
the 1,012-square meter lot claimed by
respondents really belongs to petitioners. In
2001, petitioners filed a complaint praying for the
Kasulatan to be declared as null and void ab
initio.
The RTC found the Kasulatan allegedly
conveying 512 square meters to respondents to
be null and void due to: (1) the vitiated consent
of petitioners in the execution of the simulated
contract of sale; and (2) lack of consideration,
since it was shown that while petitioners were
ostensibly conveying to respondents 512 square
meters of their property, yet the consideration of
PhP 15,000 was not paid to them and, in
fact,they were the ones who paid respondents
PhP 50,000.
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
Upon appeal by the respondent-s pouses, CA
reversed the ruling.
ISSUE: WON the Kasulatan was null and void.
But tak e note, on the issue of consent, the SC
said that the Kasulatan was merely voidable. But
on the issue of consideration, it was void. Final
ruling - void.
HELD: YES
Re: Lack of Consideration
The contract of sale or Kasulatan states that
respondents paid petitioners PhP 15,000 for the
512-square meter portion. On its face, the above
contract of sale appears to be supported by a
valuable consideration. We, however, agree wit h
the trial court’s finding that this is a simulated
sale and unsupport ed by any consideration, for
respondents never paid the PhP 15,000
purported purchase price.
The kasulatan did not express the true intent of
the parties
Lack of consideration was proved by petitioners’
evidence aliunde showing that the Kasulatan did
not express the true intent and agreement of the
parties. As explained above, said sale contract
was fraudulently entered into through the
misrepresent ations of respondents causing
petitioners’ vitiated consent.
There can be no doubt that the c ontract of sale
or Kasulatan lacked the essential element of
consideration.
It is a well-entrenched rule t hat 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. Moreover, Art. 1471 of the Civil
Code, which provides that “if the price is
simulated, the sale is void,” also applies to the
instant case, since the price purportedly paid as
indicated in the c ontract of sale was simulated
for no payment was actually made.
The contract is void ab intio
Consideration and consent are essential
elements in a cont ract of sale. Where a party’s
consent to a contract of sale is vitiated or where
there is lack of consideration due to a simulated
price, the contract is null and void ab initio.
The PhP 50,000 paid by petitioners to
respondents as consideration for the transfer of
the 500-square met er lot to petitioners must be
restored to the latter.
Otherwise, an unjust enric hment situation
ensues. The facts clearly show that the 500 -
square meter lot is legally owned by petitioners
as shown by the testimony of de Leon; therefore,
they have no legal obligation to pay PhP 50,000
therefor.
Considering that the 512 square-meter lot on
which respondents’ house is located is clearly
6
owned by petitioners, then the Court declares
petitioners’ legal ownership over said 512
square-meter lot. The amount of P hP 50,000
should only earn interest at the legal rat e of 6%
per annum from the date of filing of complaint up
to finality of judgment and not 12% since such
payment is neither a loan nor a forbearance of
credit. After finality of decision, the amount of
PhP 50,000 shall earn interest of 12% per
annum until fully paid.
There was vitiated consent on the part of
Spouses Lequin.
There was fraud in the execution of the contract
used on petitioners which affected their
consent. Petitioners’ reliance and belief on the
wrongful claim by respondents operat ed as a
concealment of a material fact in their agreeing
to and in readily executing the contract of sale,
as advised and proposed by a notary public.
Believing that Carlito de Leon indeed s old a
1,012-square meter portion of the subject
property to respondents, petitioners signed the
contract of sale based on respondents’
representations. Had petitioners known, as they
eventually would sometime in late 2000 or early
2001 when they made the necessary inquiry
from Carlito de Leon, they would not have
entered or signed the contract of sale, much less
pay PhP 50,000 for a portion of the subject lot
which they fully own. Thus, petitioners’ consent
was vitiated by fraud or fraudulent machinations
of Raymundo. In t he ey es of the law, petitioners
are the right ful and legal owners of the subject
512 square-meter lot anchored on their
purchase thereof from de Leon. This right must
be upheld and protected.
Again Art 1471 states that when the price is
simulated, the sale is void. In the instant case,
the price was purported or shown t o be paid as
indicated in the contract however it was
considered as simulat ed for no payment was
actually paid. Respondents never paid the 15k,
even if it was stated that it was received. Where
the deed of sale states that the purchase pric e
has been paid but in fact has never been paid,
the deed of sale is void ab initio for lack of
consideration.
Again, this shows the intent that there was no
intention or meeting of the minds to ent er into a
contract of sale. While it is true that the consent
was vitiated by fraud, it was the lack of
consideration which made the contract of sale
void. Where an individual’s consent to a contract
of sale is vitiated or where there is lack
consideration due to a simulated price, the
contract is null and void ab initio.
HEIRS OF INTAC VS. CA
TUESDAY, AUGUST 19, 2014
FACTS: Ireneo Mendoz a, married to Salvacion
Fermin, was the owner of the subject property
located in Quezon city which he purc hased in
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
1954. (TCT No. 242655). Ireneo had two
children: respondents Josefina and Martina
(respondents), Salvacion being their stepmother.
When he was still alive, Ireneo, also took care of
his niece, Angelina, since she was three years
old until she got married.
On October 25, 1977, Ireneo, with the cons ent of
Salvacion, executed a deed of absolute sale of
the property in favor of A ngelina and her
husband, Mario (Spouses Intac). Despite the
sale, Ireneo and his family, including the
respondents, continued staying in the premises
and paying the realty taxes. After Ireneo died
intestate in 1982, his widow and the respondents
remained in the premises. After Salvacion died,
respondents still maintained their residenc e
there. Up to the present, they are in the
premises, paying the real estate taxes thereon,
leasing out portions of the property, and
collecting the rentals.
The controversy arose when respondents
sought the cancellation of TCT No. 242655,
claiming that the sale was only simulated and,
therefore, void. The heirs of Ireneo, the
respondents in this case, alleged that:
1. When Ireneo was still alive, Spouses Intac
borrowed the title of the property (TCT No.
106530) from him t o be used as collateral for a
loan from a financing institution;
2. They objected because the title would be
placed in the names of said spouses and it
would then appear that the couple owned the
property; that Ireneo, however, tried to appeas e
them, telling them not to worry because Angelina
would not take advantage of the situation
considering that he took care of her for a very
long time; that during his lifetime, he informed
them that the s ubject property would be equally
divided among them after his death; and
3. That respondents were the ones paying the
real estate taxes over said property.
Spouses Intac countered, among others, that the
subject property had been transferred to them
based on a valid deed of absolute sale and for a
valuable consideration; that the action to annul
the deed of absolute sale had already
prescribed; that the stay of respondents in the
subject premises was only by tolerance during
Ireneo’s lifetime because they were not yet in
need of it at that time; and that despite
respondents’ knowledge about the s ale that took
place on October 25, 1977, respondents still
filed an action against them.
RTC ruled in favor of the respondents saying
that the sale to the spouses Intac was null and
void. The CA also ruled that there was no
consideration in the sale to the spouses Intac
and that the contract was one for equitable
mortgage.
ISSUES:
7
WON the Deed of Absolute Sale was a
simulated contract or a valid agreement.
WON the Deed of Absolute Sale, dated October
25, 1977, involving the subject real property in
Pagasa, Quezon City, was a simulat ed contract
or a valid agreement.
HELD: The deed of sale executed by Ireneo and
Salvacion was absolutely simulated for lack of
consideration and cause and, therefore, void.
Articles 1345 and 1346 of the Civil Code
provide:
Art. 1345. Simulation of a contract may be
absolute or relative. The former takes plac e
when the parties do not intend to be bound at all;
the latter, when the parties conceal their true
agreement.
Art. 1346. An absolutely simulated or fictitious
contract is void. A relative simulation, when it
does not prejudice a third person and is not
intended for any purpose contrary to law,
morals, good customs, public order or public
policy binds the parties to their real agreement.
Relatively simulated agreement vs. Absolute
simulation
If the parties state a false cause in t he contract
to conceal their real agreement, the contract is
only relatively simulated and t he parties are still
bound by their real agreement. Hence, where
the essential requisites of a contract are present
and the simulation refers only to the content or
terms of the contract, the agreement is
absolutely binding and enforc eable between the
parties and their successors in interest
In absolute simulation, there is a colorable
contract but it has no substance as the parties
have no intention to be bound by it. "The main
characteristic of an absolute 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." "As a
result, an absolutely simulated or fictitious
contract is void, and the parties may recover
from each other what they may have given
under the contract."
No valid sale took place between Ireneo and
Spouses Intac
In the case at bench, the Court is one with the
courts below that no valid sale of the subject
property actually took place between the alleged
vendors, Ireneo and Salvacion; and the alleged
vendees, Spouses Intac. There was simply no
consideration and no intent to sell it.
E vidences to prove that there was no absolut e
deed of sale bet ween the parties
Critical is the testimony of Marietto, a witness to
the execution of the subject absolut e deed of
sale. He testified that Ireneo pers onally told him
that he was going to execute a document of sale
because S pouses Intac needed to borrow the
title to the property and use it as collateral for
their loan application. Ireneo and Salvacion
never intended to sell or permanently trans fer
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
the full ownership of the subject property to
Spouses Intac. Marietto was characterized by
the RTC as a credible witness.
Aside from their plain denial, the heirs of Intac
failed to present any concrete evidence to
disprove Marietto’s testimony. They claimed that
they actually paid P150,000.00 for the subject
property. They, however, failed to adduce proof,
even by circumstantial evidence, that they did, in
fact, pay it. Even for the consideration of
P60,000.00 as stated in the contract, petitioners
could not show any tangible evidence of any
payment therefor. Their failure to prove their
payment only strengthened Marietto’s story that
there was no payment made because Ireneo
had no intention to sell the subject property.
Angelina’s story, except on the consideration,
was consistent with that of Marietto. Angelina
testified that she and her husband mortgaged
the subject property sometime in July 1978 to
finance the construction of a small hospital in
Sta. Cruz, Laguna. Angelina claimed that Ireneo
offered the property as he was in deep financial
need.
The contract of sale was only for the purpose of
lending the title of the property to Spouses Intac
to enable them to secure a loan.
Their arrangement was only temporary and
could not give rise to a valid sale. Where there is
no consideration, the sale is null and void ab
initio. The case of Lequin vs. VIzconde was cited
in this case.
The fact that Ireneo was still in physical
possession of the subject property after the sale
is a strong evidence to prove that there was no
valid sale between the parties.
More importantly, Ireneo and his family
continued to be in physical possession of the
subject property after the sale in 1977 and up to
the present. They even went as far as leasing
the same and collecting rentals. If Spouses Intac
really purchased the subject property and
claimed to be its true owners, why did they not
assert their ownership immediately after the
alleged sale took place? Why did they have t o
assert their ownership of it only after the death of
Ireneo and Salvacion? One of the most striking
badges of absolute simulation is the complet e
absence of any attempt on the part of a vendee
to assert his right of dominion over the property.
As heretofore shown, the contemporaneous and
subsequent acts of both parties in this case,
point to the fact that the intention of Ireneo was
just to lend the title to the Spouses Intac to
enable them to borrow money and put up a
hospital in Sta. Cruz, Laguna. Clearly, the
subject contract was absolutely simulated and,
therefore, void.
The Spouses Intac never became the owners of
the property despite its registration in their
names.
8
It is also of no moment that TCT No. 106530
covering the subject property was cancelled and
a new TCT (TCT No. 242655)21 was issued in
their names. Aft er all, registration does not vest
title. As a logical consequence, petitioners did
not become the owners of the subject property
even after a TCT had been issued in their
names.
On Absolute Simulation:
If the parties state a false cause in t he contract
to conceal their real agreement, the contract is
only relatively simulated and t he parties are still
bound by their real agreement. Hence, where
the essential requisites of a contract are present
and the simulation refers only to the content or
terms of the contract, the agreement is
absolutely binding and enforc eable between the
parties and their successors in interest.
In absolute simulation, there is a colorable
contract but it has no substance as the parties
have no intention to be bound by it. "The main
characteristic of an absolute 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." "As a
result, an absolutely simulated or fictitious
contract is void, and the parties may recover
from each other what they may have given
under the contract."
BUENAV ENTURA VS. CA
TUESDAY, JULY 1, 2014
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. (Note: So there are two
sets of children here.)
Sought to be declared null and void ab initio are
certain deeds of sale of real property executed
by Leonardo Joaquin and Feliciana Landrito in
favor of their co-defendant children and the
corresponding certificates of title issued in their
names. The plaintiffs in this case sought for the
declaration of nullity of the six deeds of sale and
certificates of title in favor of the defendants.
They alleged that certain deed of sale were null
and void ab initio because they are simulat ed.
They said that:
a. Firstly, there was no actual valid consideration
for the deeds of sale xxx over the properties in
litis;
b. 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;
c. Thirdly, the deeds of sale do not reflect and
express the true intent of the parties (vendors
and vendees); and
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
d. Fourthly, the purported s ale of t he 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.
Defendants, on the other hand aver:
(1) 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;
(2) 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
(3) That the certificates of title were issued wit h
sufficient factual and legal basis.
RTC ruled in favor of the defendants
(respondents in this case) and dismissed the
complaint. Upon appeal, the CA upheld RTC’s
ruling.
ISSUES:
1. Whether the Deeds of Sale are void for lack of
consideration. NO
2. Whether the Deeds of Sale are void for gross
inadequacy of price. NO
HELD:
1st i ssue: There was a consideration.
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. If there is no meeting of the minds
of the parties as to the price, because the pric e
stipulated in the contract is simulated, then the
contract is void. Article 1471 of the Civil Code
states that if the price in a contract of sale is
simulated, the sale is void.
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 cont ract. Payment of the pric e
goes into t he 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.
Petitioners failed to show that the prices in the
Deeds of Sale were absolut ely simulated.
To prove simulation, petitioners pres ented
Emma Joaquin Valdoz’s testimony stating that
their father, respondent Leonardo Joaquin, told
her that he would trans fer 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 absolut e simulation of pric e
credible.
9
Petitioners’ failure to prove absolute simulation
of price is magnified by their lack of knowledge
of their respondent siblings’ financial capacity to
buy the questioned lots. 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 als o
fully paid the pric e to their respondent father.
2nd i ssue: The general rule is that
inadequacy of consideration shall not
invalidate a contract.
Articles 1355 of the Civil Code states:
Art. 1355. 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. (Emphasis
supplied)
Article 1470 of the Civil Code further provides:
Art. 1470. 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. (Emphasis supplied)
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.
Ruling: In the instant case, the trial court found
that the lots were sold for a valid c onsideration,
and that the defendant children actually paid the
purchase price stipulated in their respective
Deeds of Sale. Actual payment of the purchas e
price by the buyer to the seller is a factual
finding that is now conclusive upon us.
WHEREFORE, we AFFIRM the decision of the
Court of Appeals in toto.
Was there a valid consideration? Yes.
Is simulated consideration the same with failure
to pay the price? It is not the act of payment of
price that determines the validity of a contract of
sale. Payment of the pric e has nothing to do wit h
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.
If absolut ely simulated, void. If nonperformance,
still valid.
Price must be real.
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
a. Price is “False”
What do you mean by “false”
Price is “false” when there is a real price upon
which the minds of t he parties had met, but not
declared, and what is stated in the covering
deed is not the one intended to be paid. If the
price indicated in the covering instrument is
false, the contract of sale is valid, but the
underlying deed is subject to reformation to
indicate the real price upon which the minds of
the parties have met.
In one case, when the parties intended to be
bound by the contract except that it did not
reflect the actual purc hase pric e of the property,
the Court ruled that there was only a relative
simulation of the contract which remained valid
and enforceable, but subject to reformation.
In anot her cas e, the Court held that “if the
parties state a false cause in the contract to
conceal their real agreement, such a contract is
relatively simulated ... the parties’ real
agreement binds them.”
Nevertheless, the parties may be held bound by
the false price indicated in the instrument under
estoppel principle, especially when the interest
of the Government or third parties would be
adversely affected by the reformation of the
instrument.
MACAP AGAL vs. CATALINA O. REMORIN,
CORAZON CALUZA BAMRUNGCHEEP, and
LAURELIA CALUZA-V ALENCI ANO
FACTS: Lots 24 and 25 were registered in the
name of Candido Caluza under Trans fer
Certificate of Title (TCT) No. 160544.
Purificacion Arce-Caluza (Purificacion) is his
second wife. Corazon Caluza-Bamrungcheep
(Corazon) is his legally adopted daught er during
his first marriage. After Candido died in 1981,
Corazon and Purificacion execut ed a Deed of
Extrajudicial Settlement adjudicating between
themselves the properties of Candido, as the
latter's surviving heirs.
Lots 24 and 25, together with Lot 23, which was
registered in Candido's name, were adjudicated
to Corazon. Purificacion got Candido's land in
Bulacan. However, administration of Lots 23, 24
and 25 were entrusted to P urificacion by
Corazon as she had to leave for Thailand after
her marriage to a Thai.
Unknown to Corazon, Purificacion executed an
Affidavit of Loss alleging that the TCTs of Lots
No 23, 24 and 25 were lost and could no longer
be found. She filed a petition for the issuance of
new owner's duplicates of title alleging that she
was her deceased husband's sole heir. The
petition was granted and new TCTs were issued
in Purificacion's name. Purificacion then sold the
lots to Catalina Remorin (Catalina) and Catalina
10
mortgaged Lots 24 and 25 to L & R Lending
Corp.
Corazon filed a complaint for reconveyanc e and
damages against Purificacion and Catalina upon
discovery of sale. Plaintiff alleged that the two
defendants connived with each other in
transferring the three lots in their names through
simulated sales. Corazon likewise filed a
criminal complaint for falsification and perjury
against the two.
Catalina exec uted a Deed of Trans fer, signed by
Purificacion as witness, admitting the wrong they
did in illegally trans ferring the lots in their names
and acknowledging Corazon t o be the rightful
owner under the Deed of Extrajudicial
Settlement. Corazon presented the Deed of
Trans fer before t he Register of Deeds of
Quezon City and Catalina's TCT over Lots 24
and 25 was cancelled and a TCT was issued in
Corazon's name.
Prior thereto, however, Cat alina mortgaged Lots
24 and 25 to res pondent Laurelia Caluza -
Valenciano (Laurelia) to pay off her mortgage
indebtedness to L & R Lending Corporation. The
inscription of the mort gage in favor of Laurelia
was carried over to Corazon's TCT.
-Corazon, Purificacion, Catalina, and Laurelia
executed a Memorandum of Agreement to settle
Civil Case. It stipulated that Corazon cedes and
grants unto and in favor of Purificacion full
ownership and other real rights over the
southernmost apartment as well as the portion of
the lot occupied thereby subject to the condition
that Purificacion shall assume satisfaction of the
mortgage debt contracted by Catalina in favor of
Laurelia and shall cause transfer of said
annotation to the title to be issued in her
(Purificacion's) name; and furthermore that any
and all expenses for segregation survey, re -
titling and annotation of said mortgage shall be
shouldered by said Purificacion Arce-Caluza;
Before the agreement could be implemented,
Purificacion died. Cons equently, another
compromise agreement was executed stating
that Corazon and Cat alina agreed that title to the
southernmost apartment as well as the portion of
the lot occupied thereby shall be transferred
direct to its interested buyer with defendant
Catalina assuming and paying (from the
proceeds of the sale) her mortgage obligation
with Laurelia; any and all expenses for
segregation survey, re-titling, capital gains taxes
and those connected with the annotation and/or
release of said mort gage should now be
shouldered by defendant Catalina O. Remorin.
Corazon then sold the subject Lot to Laurelia by
virtue of a deed entitled "Sale of Unsegregated
Portion of Land." However, Cat alina also sol d
the same lot to Macapagal claiming to be
authorized under the Compromise Agreement.
Macapagal sought to nullify the sale executed by
Corazon in favor of Laurelia and to declare valid
the one executed by Catalina in her favor.
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
RTC rendered judgment in favor of
petitioner. Corazon and Laurelia appealed to the
Court of Appeals, which reversed the decision of
the trial court.
Macapagal’s contention: the sale executed by
Catalina in her favor should prevail over the one
executed by Coraz on in favor of Laur elia, as
Catalina was the one authorized to sell the
disputed property under the Compromis e
Agreement
Respondent’s contention: Corazon, the
registered owner of the disput ed property, did
not give Cat alina aut hority to sell t he lot. It was
provided in the Agreement that Catalina shall
pay off her mortgage obligation and incident al
expenses from the proceeds of the sale only to
reassure Catalina that her obligation would be
paid in the event that Coraz on sells the property.
ISSUE: WON Catalina was authorized to sell the
land as provided by their Compromis e
Agreement.
RULI NG: The Compromise Agreement dated
September 9, 1988 cannot be taken as a waiver
of Corazon's authority to sell and grant thereof to
Catalina considering that the A greement merely
provided that Catalina pay off her mortgage
obligation and incidental ex penses from the
proceeds of the s ale. Although it was imperative,
as part of the compromise, that the money come
from the proceeds of the sale, it was not
expressly stated, nor did it necessarily mean,
that Catalina herself be the one to directly sell
the property. Authority to sell must be couched
in clear and unmistakable language.
Moreover, intent to give Catalina authority to sell
may not be easily attributed to Corazon
considering that the latter had to file the
reconvey ance case as a result of Purificacion's
and Catalina's acts of transferring the disputed
lot in their names.
In contract interpretation, analysis is not to be
limited to the words used in t he cont ract, as they
may not accurately reflect the parties' true intent.
If the words of the contract appear to be contrary
to the evident intention as revealed by the
circumstances, the latter shall prevail over the
former.
The fact that the deed of sale between
respondents Corazon and Laurelia did not
accurately reflect the true consideration thereof
is not cause for declaration of its nullity. When
the parties intended to be bound by the contract
except that it did not reflect the actual purchas e
price of the property, there is only a relative
simulation of the cont ract whic h remains valid
and enforceable. It cannot be declared null and
void since it does not fall under the category of
an absolutely simulated or fictitious contract. The
contract of sale is valid but subject to
reformation. Petition denied.
11
b. Non-Payment of Price
Effect of non-payment? Give rise to action by the
parties – Specific Performance and Rescission
CLARA M. BALATBAT vs CA, SPS.
REPUYAN
G.R. No. 109410, August 28, 1996
FACTS: A parcel of land was acquired by
plaintiff A urelio Roque and Maria Mesina during
their conjugal union. Maria died on A ugust 28,
1966.
On June 15, 1977, Aurelio filed a case for
partition. The trial court in that case for partition,
held that Aurelio is entitled to the ½ portion of his
share in the conjugal property, and the other half
which formed part of the estate of Maria Mesina,
will be divided equally among him and their 4
children receiving 1/5 eac h. The decision having
become final and exec utory, the Register of
Deeds of Manila issued a transfer certificate of
title on October 5, 1979 according to the ruling of
the court.
On April 1, 1980, Aurelio sold his 6/10 share t o
spouses Aurora Tuazon-Repuyan and Jos e
Repuyan, as evidenced by a deed of absolut e
sale. On June 21, 1980, Aurora caused the
annotation of her affidavit of adverse claim.
However, on August 20, 1980, Aurelio filed a
complaint for rescission of cont ract grounded on
the buyers’ failure to pay the balance of the
purchase price.
Subsequently, on February 4, 1982, another
deed of abs olute sale was executed between
Aurelio and his children, and herein petitioner
Clara Balatbat, involving the entire lot. Balatbat
filed a motion for the issuance of writ of
possession, which was granted by the court on
September 20, 1982, subject to valid rights and
interests of third persons. Balatbat filed a motion
to intervene in the rescission case, but did not
file her complaint in intervention. The court ruled
that the sale between Aurelio and Aurora is
valid. On March 3, 1987 however, Balatbat filed
a notice of lis pendens before the Register of
Deeds regarding the subject property.
ISSUE: W/N the alleged sale to Spouse s
Repuyan was merely executor
HELD: No. The sale was consummated, hence,
valid and enforceable.
Cont rary to petitioner's contention that the sale
dated A pril 1, 1980 in favor of S pous es Repuyan
was merely executory for the reason that there
was no delivery of the subject property and that
consideration/price was not fully paid, the Court
finds the sale as consummat ed, hence, valid and
enforceable. The Court dismissed vendor's
Aurelio Roque complaint for rescission of the
deed of sale and declared that the S ale dated
April 1, 1980, as valid and enforc eable. No
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
appeal having been made, the decision became
final and executory.
Examining the terms and conditions of the
"Deed of Sale" dated April 1, 1980, the
P45,000.00 balance is payable only "after the
property covered by T.C. T. No. 135671 has
been partitioned and subdivided, and title issued
in the name of the BUYER" hence, vendor
Roque cannot demand payment of the balanc e
unless and until the property has been
subdivided and titled in the name of privat e
respondents. Devoid of any stipulation that
“ownership in the thing shall not pass to the
purchaser until he has fully pai d the price, ”
ownership of the thing shall pass from the
vendor to the vendee upon actual or constructive
delivery of the thing sold even if the purchas e
price has not yet been fully paid. The failure of
the buyer to make good t he price does not, in
law, cause ownership to evert to the seller
unless the bilateral contract of sale is first
rescinded or res olved pursuant to Article 1191 of
the New Civil Code.
Non-payment only creates a right to demand the
fulfillment of the obligation or to rescind the
contract.
With respect to the non-delivery of the
possession of the subject property to the privat e
respondent, suffice it to say that ownership of
the thing sold is acquired only from the time of
delivery thereof, actual or constructive.
A contract of sale being consensual, it is
perfected by the mere consent of the parties.
Delivery of the thing bought or payment of the
price is not necessary for the perfection of the
contract; and failure of the vendee to pay to
price after the execution of the c ontract does not
make the sale null and void for lack of
consideration but results at most in default on
the part of the vendee, for which the vendor may
exercise his legal remedies.
The Court reiterated the rule that the non -
payment of the price does not render void nor
reverse the effects of the perfection of the
contract of sale, thus —
. . . Devoid of any stipulation that “ownership in
the thing shall not pass to the purchaser until he
has fully paid the price” [citing Art. 1478, New
Civil Code], ownership in the thing shall pass
from the vendor to the vendee upon actual or
constructive delivery of the thing sold even if the
purchase price has not yet been fully paid. The
failure of the buyer to make good the price does
not, in law, cause the ownership to revest to the
seller unless the bilateral contract of sale is first
rescinded or res olved pursuant to Article 1191 of
the New Civil Code. Non-payment only creat es a
right to demand the fulfillment of the obligation or
to rescind the contract.
A contract of sale being consensual, it is
perfected by the mere consent of the parties.
Delivery of the thing brought or payment of the
12
price is not necessary for the perfection of the
contract; and failure of the vendee to pay the
price after the execution of the c ontract does not
make the sale null and void for lack of
consideration but results at most in default on
the part of the vendee, for which the vendor may
exercise his legal remedies.
Basis of rescission under the Civil Code? Power
to rescind is implied in reciprocal contract. Art
1191
3. Must be in Money or its Equivalent
Art. 1458. By the contract of sale one of the
contracting parties obligates him self to
transfer the ownership and to deliver a
determinate thing, and the other to pay
therefor a price certain in money or its
equivalent.
ISAAC BAGNAS ET AL. vs. CA
G.R. No. L-38498, August 10, 1989
FACTS: Hilario Mateum died without a will and
was survived only by collateral relatives. Bagnas
et al., the petitioners, were his nearest kin. The
respondents Retonil et al. on the other hand
were relatives to a farther extent.
Retonil et al. claims owners hip of 10 parcels of
land from the estate of Hilarion which they
contend were sold by Hilario through two deeds
of sale where the consideration for the lands
was one (1.00) P eso and services rendered,
being rendered and to be rendered.
Bagnas et al. filed a case against respondents
seeking annulment of the deeds of sale as
fictitious, fraudulent or falsified, or alternatively,
as donations void for want of acceptanc e
embodied in a public instrument. In answer to
the complaint, the respondents denied the
alleged fictitious or fraudulent character of the
sales in their favor, asserting that the said sales
were made for good and valuable consideration.
ISSUE: W/N the said consideration is valid.
HELD: The Court ruled that the deeds of sale
are void and are of no force and effect.
Upon the consideration alone that the apparent
gross, not to say enormous, disproportion
between the stipulat ed price (in each deed) of P
l.00 plus unspecified and unquantified services
and the undisputably valuable real estate
allegedly sold wort h at least P10,500.00 going
only by assessments for tax purpos es which, it is
well-k nown, are notoriously low indicators of
actual value plainly and unquestionably
demonstrates that they state a false and
fictitious consideration, and no other true and
lawful cause having been shown, the Court finds
both said deeds, insofar as they purport to be
sales, not merely voidable, but void ab initio.
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
The transfers in question being void, it follows as
a nec essary consequence that the properties
purportedly conveyed remained part of the
estate of Hilario Mateum, said transfers
notwithstanding, recoverable by his intestate
heirs, the petitioners herein, whose status as
such is not challenged.
E ven if the “cont ract of sale” would be shown as
a donation (apparently, this was the intent of the
donor), failure to conform to the requirements
would not make it a valid donation.
There is no Contract of Sale for lack of
consideration. Likewis e, there is also no valid
deed of donation for failure to conform to the
requirements of donation.
Consideration: Php 1.00 and services.
Status of sale: Void for GROSS inadequacy
Without necessarily according all thes e
assertions its full conc urrence, but upon the
consideration alone that the apparent gross, not
to say enormous, disproportion between the
stipulated price (in each deed) of P l.00 plus
unspecified and unquantified servic es and the
undisputably valuable real estate allegedly sold
wort h at least P10,500.00 going only by
assessments for tax purposes which, it is well-
known, are notoriously low indicators of actual
value plainly and unquestionably demonstrates
that they state a false and fictitious
consideration, and no other true and lawful
cause having been shown, the Court finds bot h
said deeds, insofar as they purport to be sales,
not merely voidable, but void ab initio.
Neither can the validity of said conveyances be
defended on the theory that their true causa is
the liberality of the transferor and they may be
considered in reality donations because the
law also prescribes that donations of immovable
property, to be valid, must be made and
accepted in a public instrument, and it is not
denied by the respondents that there has been
no such acceptance which they claim is not
required.
Services are not the equivalent of money insofar
as said requirement is concerned and that a
contract is not a true sale where the price
consists of services or prestations.
IMELDA ONG, ET AL. vs ALFREDO ON ET
AL.
G.R. No. L-67888, October 8, 1985
FACTS: On February 25, 1976, Imelda Ong for
and in consideration of One (1.00) Peso and
other valuable considerations, executed in favor
of Sandra Maruzzo, then a minor, a Quitclaim
Deed whereby she trans ferred, released, and
assigned all her rights and title over a parcel of
land in Makati.
13
However, on November 19, 1980, Imelda Ong
revoked the aforesaid Quitclaim and donated the
property to her son Rex.
Subsequently, Sandra Maruzzo on June 20,
1983, through here guardian ad litem Alfredo
Ong, filed with t he RTC an action for the
recovery of ownership/possession and
nullification of the Deed of Donation in favor of
Rex.
Petitioners claimed that the Quitclaim Deed is
null and void inasmuch as it is equivalent to a
Deed of Donation, acceptance of which by the
donee is necessary to give it validity. Further, it
is averred that the donee, Sandra Maruzzo,
being a minor, had no legal personality and
therefore inc apable of accepting the donation.
The trial court ruled in favor of Maruzzo and held
that the Quitclaim Deed is equivalent to a Deed
of Sale and, hence, there was a valid
conveyance in favor of the latter.
Appealing t o the IAC, petitioners additionally
contends that the One (1.00) Peso conside ration
is not a consideration at all to sustain t he ruling
that the Quitclaim Deed is equivalent to a sale.
The IA C however affirmed the TC.
ISSUE: W/N the quitclaim is equivalent to a
deed of sale or to a deed of donation
HELD: The Quitclaim Deed is equivalent to a
deed of sale. A careful perusal of the subject
deed reveals that the conveyance of the one -
half (½) undivided portion of the above -
described property was for and in consideration
of the One (P 1.00) Peso and the other valuable
considerations (emphasis supplied) paid by
private respondent Sandra Maruzzo through her
representative, Alfredo Ong, to petitioner Imelda
Ong. Stated differently, the cause or
consideration is not the One (P1.00) Peso alone
but also the other valuable considerations.
Although the cause is not stated in the contract it
is presumed that it is existing unless the debtor
proves the contrary (Article 1354 of the Civil
Code). One of the disputable presumptions is
that there is a sufficient cause of the contract. It
is a legal presumption of sufficient cause or
consideration supporting a contract even if such
cause is not stated therein (A rticle 1354, New
Civil Code of t he Philippines.) This pres umption
cannot be overcome by a simple assertion of
lack of consideration especially when the
contract itself states that consideration was
given, and the same has been reduced into a
public instrument with all due formalities and
solemnities. To overcome the presumption of
consideration the alleged lack of consideration
must be shown by preponderance of evidence in
a proper action.
The execution of a deed purporting to convey
ownership of a realty is in itself prima facie
evidence of the existence of a valuable
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
consideration, the party alleging lack of
consideration has the burden of proving such
allegation.
E ven granting that the Quitclaim deed in
question is a donation, Article 741 of the Civil
Code provides that the requirement of the
acceptance of the donation in favor of minor by
parents of legal representatives applies only to
onerous and conditional donations where the
donation may have to assume certain charges or
burdens. Donation to an incapacitated donee
does not need the acceptance by the lawful
representative if said donation does not contain
any condition. In simple and pure donation, the
formal acceptance is not important for the donor
requires no right to be protected and the donee
neither undertak es to do anything nor assumes
any obligation. The Quitclaim now in question
does not impose any condition.
Consideration: Php1.00 and other valuable
considerations
Status of sale: Valid.
The cause or consideration is not the One
(P1.00) Peso alone but also the other valuable
considerations. Although the cause is not stated
in the contract it is presumed that it is existing
unless the debt or proves the contrary (Article
1354 of the Civil Code). One of the disputable
presumptions is that there is a sufficient cause of
the contract (Section 5, (r), Rule 131, Rules of
Court). It is a legal presumption of sufficient
cause or consideration supporting a contract
even if such cause is not stated therein (Article
1354, New Civil Code of the Philippines.) This
presumption cannot be overcome by a simple
assertion of lack of consideration especially
when the contract itself states that consideration
was given, and the same has been reduced into
a public instrument with all due formalities and
solemnities. To overcome the presumption of
consideration the alleged lack of consideration
must be shown by preponderance of evidence in
a proper action.
Indeed, bad faith and inadequacy of the
monetary consideration do not render a
conveyance inexistent, for the assignor's
liberality may be sufficient cause for a valid
contract (Article 1350, Civil Code), whereas
fraud or bad faith may render either rescissible
or voidable, although valid until annulled, a
contract concerning an object certain entered
into with a cause and with the cons ent of the
contracting parties, as in the case at bar.
REPUBLIC vs P RDC and CA
G.R. No. L-10141, January 31, 1958
FACTS: The Republic brought an action against
Apostol for the collection of sums owing to it for
his purchase of Palawan Almaciga and other
logs. His total debt amounted to some P34,000.
PRDC intervened claiming that Apostol, as
President of the c ompany, without prior
authority, took goods (steel sheets, pipes, bars,
14
etc) from PRDC warehouse and appropriated
them to settle his personal debts in favor of the
government. The Republic opposed the
intervention of PRDC, arguing that price is
always paid in money and that payment in kind
is no payment at all; hence, money and not the
goods of PRDC are under dispute.
ISSUE: W/N payment in kind i s equivalent to
price paid in money.
HELD: Yes. The Government argues that "Price
. . . is always paid in terms of money and the
supposed payment being in kind, it is no
payment at all, "citing Article 1458 of the new
Civil Code. However, the same Article provides
that the purchaser may pay "a price certain in
money or its equivalent," which means that they
meant of the price need not be in money.
Whether the G.I. sheets, black sheets, M. S.
Plates, round bars and G. I. pipes claimed by the
respondent corporation to belong to it and
delivered to the Bureau of Prison by Macario
Apostol in payment of his account is sufficient
payment therefore, is for the court to pass upon
and decide aft er hearing all the parties in the
case. Should the trial court hold that it is as to
credit Apostol with the value or price of the
materials delivered by him, certainly the herein
respondent corporation would be affected
adversely if its claim of ownership of suc h
sheets, plates, bars and pipes were true.
Consideration: Goods consisting of construction
materials.
Argument of Government: Price must always be
in terms of money hence the goods constitute no
payment at all.
Article 1458 provides that the purchaser may
pay "a price cert ain in money or its equivalent,"
which means that they meant of the price need
not be in money. Whether the G. I. sheets, black
sheets, M. S. Plates, round bars and G. I. pipes
claimed by the respondent corporation to belong
to it and delivered to the Bureau of Prison by
Macario Apostol in payment of his account is
sufficient payment therefore, is for the court to
pass upon and decide after hearing all the
parties in the case. Should the trial court hold
that it is as to credit Apostol with the value or
price of the materials delivered by him, certainly
the herein respondent corporation would be
affected adversely if its claim of ownership of
such sheets, plates, bars and pipes is true.
SALES 08-11-15
(DI KO NA SINALI YUNG QUESTIONS SINCE
GINA YAWYAW MAN DIN NYA LAHAT NG
ANSW ERS SA KANYANG DISCUSSION. )
In the case of BAGNAS, the gross disproportion
between the consideration stipulated and the
value of the property would show that the price
has a false and fictitious consideration and no
other true and lawful cause having been shown.
E ven though a consideration is real in the sense
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
that it was agreed upon and there is every
intention of the parties to pay and receive such
price, it would still be considered fictitious and
render the sale void if it is a mere nominal price,
wherein such nominal price would show that
there was really no intention to pay any indicated
valuable consideration.
Although, as we have mentioned, i n this case,
that non-performance of service will not affect
the validity, nevertheless, it would not have a
valid contract of sale. E vidence was adduced to
indicate that there was no real intention to pay
any indicated valuable consideration.
Differentiate this with ONG VS ONG, the
consideration was P1 and other valuable
considerations. This time the SC held that that
was a valid consideration. No evidence was
adduced to show that the consideration stated in
the deed was not paid or simulated. So therefor e
it is presumed to exist applying Art 1354 of the
NCC. It is not an unusual practice of stating of a
nominal consideration although consideration
may have been much more, provided, there was
indeed a valuable consideration agreed upon by
the parties.
Art. 1354. Although the cause is not stated in
the contract, it is presumed that it exists and
is lawful, unless the debtor proves the
contrary. (1277)
So again consideration - money or its equivalent,
it may comprise additional consideration as in
the case of Ong.
Now how about in the case of REP UBLI C vs
PRDC and CA? The consideration there is with
regard to those construction materials. And the
SC held that that can be a valid consideration in
a contract of sale. So y ou could apply this
scenario, if X sells a car to Y for 250k and Y
would pay 100k cash plus parcel of land or
house, land here can be considered as a valid
price together with the 100k and that can still be
a valid consideration in a contract of sale.
Will it not be considered as a barter?
Recall our discussion sa barter, you only have 4
st
provisions in barter. The 1 one talks about
definition sa barter, rules specific sa barter and it
is the law on sales that will be applied to
contracts of barter. If for example, can it not be
considered that those supplies were delivered as
payment of the obligation and therefore dation
en pago in Art 1245? Yes it may be considered
as dation en pago, but still you apply the law on
sales.
So in REPUBLIC vs P RDC and CA, in lieu of
the balance, what was caused to be delivered
were goods of the corporation as payment. So
again this can be considered as a valid
consideration. Now recall the case as well yung
POLYTECHNI C wherein there was a subsequently agree upon the price.
cancellation of the obligation in exchange for a
15
property. Again that was considered as a sale,
which was a violation of the right of first refusal.
Nevertheless, it is clear that the cancellation of
the debt is considered as a consideration. And
again even if it was dation en pago, we would
still apply the law on Sales. However, in the case
of Bagnas, if one is to be paid his services, then
it is clear that it is not a valid price. It MAY be a
valid contract but it cannot be considered as a
valid cont ract of sale. At the most, it can be
considered as an innominate contract, I give that
you may do, -- do ut facias. So in that case
siguro ganun but again it could not be
considered as a cont ract of sale. So, so far, what
we have discussed, of course, if there is no
price, then there is no valid contract; void
contract for lack of cause or consideration. If the
price is simulated, wherein there is no intention
that the amount will be paid, again the sale is
void. However it may be a donation or other act
valid as such. In other words if sa donation,
there must be acceptance and compliance wit h
other requirements provided by law.
If it is a false price – “FALSE ” price, bakit.. may
quotation? So false price distinguished from a
simulated price.
False price - in the sense that the real price was
not declared by the parties. What was stated or
declared was not their intention. Nevertheless
the contract of sale is valid, the remedy is
reformation to indicate the real price. Of course if
there is no meeting of minds as to the price,
there is no valid pric e, contract is void. You
already have cases wherein the price is grossly
disproportionate to the value of the subject
matter; there must be proof that there was really
a valuable consideration, ot herwise it would
show that the parties never intended to enter
into a contract of sale and therefore there was
no valid sale at all.
However in the case of CLARA M. BALATBAT
vs CA, SPS. REPUYAN, failure to pay the pric e
will not affect the validity of a contract of sale, as
it goes in the consummation stage and not the
perfection stage.
rd
Now the 3 element for a valid price. Price must
be certain or ascert ainable at perfection. When
we say certain here, the price must be
expressed or agreed in terms of specific pesos
or in centavos. We have here Art 1469 as our
guide.
Art. 1469. In order that the price may be
considered certain, it shall be sufficient that
it be so with reference to another thing
certain, or that the determination thereof be
left to the judgment of a special person or
persons.
Should such person or persons be unable or
unwilling to fix it, the contract shall be
inefficacious, unless the parties
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
If the third person or persons acted in bad
faith or by mi stake, the courts may fix the
price.
Where such third person or persons are
prevented from fixing the price or term s by
fault of the seller or the buyer, the party not
in fault may have such remedies against the
party in fault as are allowed the seller or the
buyer, as the case may be. (1447a)
So 1469, price considered certain, it can be with
reference to another thing cert ain, and in fact the
rd
price can be det ermined by a 3 person as
agreed between the parties. Now take note here
that the price is still certain or ascertainable even
rd
if it set by a 3 person who is appointed at the
time of perfection by both parties. So there is still
meeting of the minds; that Juan will fix the price,
and they are bound by the price fixed by Juan or
rd
a 3 person.
You distinguish it from the subject matter,
because as to the subject matter, it can never be
rd
left to the discretion of a 3 person, even if the
seller and buyer would agree.
“Okay I will give 10k and we will have X who will
determine the subject matter.” Di yun pwede.
PERO SA PRI CE PWEDE.
We have the subject matter and the price, …
rd
determined by a judgment of a specified 3
person. Now also under Art 1469, the price is
nevertheless ascertainable when it is set by the
courts. However tak e note of the instances when
can the court fix the price –
rd
 3 person appointed by the parties acts
in BF or
 when there is a mistake
rd
Now how about the instance when such 3
person is prevented from fixing the price or
terms by fault of the buyer or seller? The party
not in fault will have such remedies as allowed
by the buyer or seller as the case may be. Now
rd
in relation to this, when the 3 party appointed
by the seller and buy er was prevented to fix the
price by one party, you can apply here the
PRINCIPLE OF CONSTRUCTIVE
FULFILLMENT in 1186.
Art. 1186. The condition shall be deemed
fulfilled when the obligor volunta rily prevents
its fulfillment. (1119)
Remember there is a suspensive condition, the
happening of which was prevented by the debtor
through his act and his act was voluntary. So
pwede yun sya ma apply dito. Now take note as
well that we also have Art. 1472 wherein you
could still have a price by reference to a definit e
thing, particular exchange, or market.
Art. 1472. The price of securities, grain,
liquids, and other things shall also be
16
considered certain, when the price fixed is
that which the thing sold would have on a
definite day, or in a particular exchange or
market, or when an amount is fixed above or
below the price on such day, or in such
exchange or market, provided said amount
be certain. (1448)
So you could have like for example, I will sell to
you my shares of stocks, the price is 5 pesos
then the price of the current stock market closing
today (??). So pwede yun, because there is
reference to something that is also cert ain -- on
a definit e day, particular exchange or market or
when an amount is fixed above or below the
price on such day, or in such exchange or
market, provided said amount be certain. We
could say here that price is definite if it is in
reference as provided in 1472. And in fact it
could also be considered as certain or
ascertainable if it be so with referenc e to another
thing that is certain.
VILLANUEVA VS. CA
267 SCRA 89; G.R. NO. 107624
JANUARY 28, 1997
FACTS: Petitioner Gamaliel Villanueva has
been a tenant-occupant of a unit in an apartment
building erected on a parcel of land owned by
private res pondents dela Cruz. In 1986, Jos e
dela Cruz offered said land with the apartment
building for sale and petitioners (Gamaliel and
Irene) showed interest in the property.
As initial step, Jose gave Irene a letter of
authority for her to inspect the property. Since
the property was in arrears for payment of realty
taxes, Jose approached Irene and asked for a
certain amount to pay for the taxes so that the
property would be cleared of any encumbrance.
Irene gave 10k (5k on 2 occasions). It was
agreed by them t hat the 10k would form part of
the sale price of 550k.
Thereafter, Jos e went to Irene, bringing with him
Mr. Sabio, requesting her to allow S abio t o
purchase ½ of the property, to which they
consented, so they would just purchase the
other half (265k, having paid the 10k). Dela Cruz
executed in favor of their co-defendants (Guido
and Felicitas Pile) a Deed of Assignment of the
other ½ portion of the land, wherein Gamaliel’s
apartment unit is situated. This was purportedly
as full payment and satisfaction of an
indebtedness obtained from t he Piles. TCT was
later issued in the name of the Piles.
Soon, Gamaliel learned about the assignment
and issuance of new TCT. Petitioners elevated
their complaint to the Court (specific
performance). They contend that a contract of
sale has been perfected and that the 10k formed
part of the purchase price (nec essarily then,
there must have been an agreement as to the
price). They cite Art 1482: Whenever earnest
money is given in a contract of sale, it shall be
considered as part of t he price and proof of
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
perfection of the contract. On the other hand,
private respondents claim that what was agreed
upon was that the 10k be primarily intended as
payment for realty tax, and was going to for part
of the consideration of the sale if the transaction
would finally be consummated. They insist that
there was no clear agreement as to the true
amount of consideration.
ISSUE: Was there a perfected cont ract of sale?
NO
HELD: After a review of the evidence, SC found
that there was no agreement as to the price
(based on the testimonies). To settle the
conflicting claims, petitioners could have
presented the contract of sale. However, it was
not presented in evidence. Petitioners aver that
even if the (unsigned) deed was not produced,
Jose “admitted preparing said deed in
accordance with their agreement”.
We do not agree with petitioners. Assuming
arguendo that such draft deed existed, it
does not necessarily follow that there was
already a definite agreement as to the price. If
there was, why then did privat e res pondent Jos e
de la Cruz not sign it? If indeed the draft deed of
sale was that important to petitioners' cause,
they should have shown some effort to procure
it. They could have secured it through a
subpoena ducestecum or thru the us e of one of
the modes of discovery. But petitioners made no
such effort. And even if produc ed, it would not
have commanded any probative value as it was
not signed.
The price of the leased land not having been
fixed, the essential elements which give life to
the contract were lacking. It follows that the
lessee cannot compel the lessor to sell the
leased land to him.
The price must be certain; it must be real, not
fictitious. It is not necessary that the certainty of
the price be actual or determined at the time of
executing the contract. The fact that the exact
amount to be paid therefor is not precisely fixed,
is no bar to an action to recover such
compens ation, provided the contract, by its
terms, furnishes a basis or measure for
ascertaining the amount agreed upon. The pric e
could be made certain by the application of
known factors. A contract of sale is not void for
uncertainty when the price, though not directly
stated in terms of pesos and centavos, can b e
made certain by reference to existing invoices
identified in the agreement.
In the instant case, however, what is
dramatically clear from the evidence is that there
was no meeting of mind as to the price,
expressly or impliedly, directly or indirectly.
QUES TIONS NI MAAM:
 What element is at issue here? Element of
COS? – Consideration
 Do we have a valid consideration? SC held
no
17
 Isn’t that you mentioned that there was the
sale price of 550k?
 Now for a price to be considered certain or
ascertainable, is it necessary that the parties
agree as to the price? Indicate how muc h
the purchase price?
 What other instances wherein you still have
a valid price even if t he parties did not agree
to a definite price expressed in pesos or
centavos?
DIS CUSSION:
There was a 10k given. Take note this was not
an earnest money because there was no
perfected contract of sale, considering that there
was no valid consideration bet ween the parties.
His testimony during the cross-examination
negated any price agreement becaus e he
quoted 575k and did not agree to reduce it to
550k. The pric e of the leas ed land not having
been fix ed, essential elements, which give ris e
to a contract, are lacking. Remember the pric e
must be certain; it must be real and not fictitious.
It is not necessary that the certainty of the pric e
be actual or determined at the time of executing
the contract. That is why the requisite here is
that it must be certain or ascertainable. The fact
that the ex act amount to be paid therefor is not
precisely fixed, is no bar to an action to recover
such compensation, provided the contract, by its
terms, furnishes a basis or measure for
ascertaining the amount agreed upon. Like for
example we have in article 1472, referenc e to a
definite thing, particular exchange or market, or
essential reference to another thing. Yun nga,
reference to existing invoices in an agreement.
The price could be made cert ain by the
application of known factors; where, in a sale of
coal, a basic price was fixed, but subject to
modification "in proportion to variations in
calories and ash content, and not otherwise," the
price was held c ertain. A contract of s ale is not
void for uncertainty when the price, though not
directly stated in terms of pesos and centavos,
can be made certain by reference to existing
invoic es identified in the agreement. In this
respect, the contract of sale is perfected. The
price must be certain; otherwise there is no true
consent between the parties. A contract of sale
is not void for uncertainty when the price, though
not directly stated in terms of pesos and
centavos, can be made certain by reference to
existing invoices identified in the agreement. In
that case contract of sale is perfected. However,
in the pres ent case, there was no meeting of the
minds as to the price, expressly or impliedly,
directly or indirectly.
MORENO, JR. VS. PRIVATE MANAGEMENT
OFFICE
507 SCRA 63; G.R. NO. 159373
NOV EMBER 16, 2006
FACTS: The subject-matter in the civil case is
the J. Moreno Building (formerly known as the
Nort h Davao Mining Building) – or more
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
specifically, the 2nd, 3rd, 4t h, 5th and 6th floors
of the building.
Moreno is the owner of the Ground Floor, the 7t h
Floor and the penthouse of t he J. Moreno
Building and the lot on which it stands.
Privat e Management Offic e (formerly, Asset
Privatization Trust or AP T) on the ot her hand, is
the owner of the 2nd, 3rd, 4t h, 5th and 6th floors
of the building, the subject-matter of this suit.
On February 13, 1993, AP T called for a
conference for the purpose of discussing
Moreno’s right of first refusal over the floors of
the building owned by APT. At said meeting,
APT informed Moreno that the proposed
purchase price for said floors was P21 Million.
In a letter dated February 22, 1993, APT,
informed Moreno that the Board of Trustees
(BOT) of AP T "is in agreement that Mr. Jos e
Moreno, Jr. has the right of first refusal" and
requested Moreno to deposit 10% of the
"suggested indicative price" of P21 million on or
before February 26, 1993.
Moreno paid the P21 million on February 26,
1993. APT issued an OR for the said payment.
But later, APT wrote Moreno that its Legal
Department has questioned the basis for the
computation of the indicative price for the said
floors. Thus, on April 2, 1993, APT wrot e
Moreno that the APT BOT has "tentatively
agreed on a settlement price of P42,274,702.17"
for the said floors.
RTC ruled in favor of Moreno, declared that
there was a perfected cont ract of sale and
ordered AP T to sell the subject floors at P21M.
CA reversed, hence the petition.
ISSUE: WON there was a perfected cont ract of
sale over the subject floors at the price of 21
Million. NO
HELD: A contract of sale is perfected at the
moment there is a meeting of minds upon the
thing which is the object of the contract and
upon the price. Consent is manifested by the
meeting of the offer and the acceptance upon
the thing and the caus e, which are t o constitute
the contract. The offer must be certain and the
acceptance absolute.
To reach that moment of perfection, the parties
must agree on the same thing in the same
sense, so that their minds meet as to all the
terms. They must have a distinct intention
common to both and without doubt or difference;
until all understand alike, there can be no
assent, and therefore no contract. The minds of
parties must meet at every point; nothing can be
left open for further arrangement
18
So long as there is any uncertainty or
indefiniteness, or future negotiations or
considerations to be had between the parties,
there is not a completed contract, and in fact,
there is no contract at all.
Once there is concurrence of the offer and
acceptance of the object and cause, the stage of
negotiation is finished. This situation does not
obtain in the case at bar. The letter of February
22, 1993 and the surrounding circumstances
clearly show that the parties are not past the
stage of negotiation, hence there could not have
been a perfected contract of sale.
The letter is clear evidence that APT did not
intend to sell the subject floors at the pric e
certain of P21M, viz.:
(This letter was addressed to Moreno’s Atty.)
xxx We are pleased to inform you that the
Board is in agreement that Mr. Jose Moreno,
Jr. has the right of first refusal. This will be
confirmed by our Board during the next board
meeting on February 26, 1993. In the meantime,
please advise Mr. Moreno that the suggested
indicative price for APT’s five (5) floors of the
building in question is P21 Million.
If Mr. Moreno is in agreement, he should deposit
with APT the amount of P2.1 Million equivalent
to 10% of the price on or before February 26,
1993. The balance will be due within fifteen (15)
days after Mr. Moreno receives the formal notice
of approval of the indicative price. xxx
The letter clearly states that P21M is merely a
"suggested indicative price" of the subject floors
as it was yet to be approved by the BOT.
Before the Board could confirm the suggested
indicative price, the Committee on Privatization
must first approve the terms o f the sale or
disposition. The imposition of this suspensive
condition finds basis under Proclamation No.
5022 which vests in the Committee the power to
approve the sale of government assets,
including the price of the asset to be sold
(apparently government pala itong AP T, and
may procedure na sinusunod sa law).
Other discussions that may be relevant:
On Moreno’s argument that the "suggested
indicative price" of P21M is not a proposed
price, but the selling price indicative of the value
at which AP T was willing to sell.
The trial court relied upon the definition of the
word "indicative" under the Webster
Comprehensive Dictionary, International Edition.
According to Webster, "to indicate" is to point
out; direct attention; to indicate the correct page.
"Indicative" is merely the adjective of the verb to
indicate. xxx
Under the Rules of Court, the terms are
presumed t o have been used in their primary
and general acceptation, but evidence is
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
admissible to show that they have a local,
technical, or otherwise peculiar signification, and
were so used and understood in the particular
instance, in which c ase the agreement must be
construed accordingly.
The reliance of the trial court in the Webster
definition of the term "indicative," as also
adopted by Moreno, is misplaced. The
transaction at bar involves the sale of an asset
under a privatization scheme which attaches a
peculiar meaning or signification to the term
"indicative price." Under No. 6.1 of the General
Bidding Procedures and Rules of respondent,
"an indicative price is a ballpark figure and
[respondent] supplies such a fig ure purely to
define the ball -park." The plain contention of
Moreno that the transaction involves an
"ordinary arms-lengt h sale of property" is
unsubstantiated and leaves much to be desired.
This case sprung from a case of specific
performance initiated by Moreno who has the
burden to prove that the case should be spared
from the application of the technical terms in the
sale and disposition of assets under
privatization.
He failed to discharge the burden.
It appears in the case at bar that Moreno’s
construction of the letter of February 22, 1993 –
that his assent to the "suggested indicative
price" of P21M converted it as the price certain,
thus giving rise to a perfected contract of sale–
is his own s ubjective understanding. As such, it
is not shared by APT. Under American
jurisprudence, mutual assent is judged by an
objective standard, looking to the express words
the parties used in the contract. Under the
objective theory of contract, understandings and
beliefs are effective only if shared. Based on the
objective manifestations of the parties in the
case at bar, there was no meeting of the minds.
So here you have the term “suggested indicative
price” which is indicated in the letter, and that
21M suggested indicative price must still be
approved by the Board of Trustees and therefore
there was still no meeting of the minds between
the parties here as to the consideration. The
terms of a writing are presumed to have been
used in their primary and general accept ation, so
statutory construction, but evidence is
admissible to show that they have a local,
technical, or otherwise peculiar signification.
Here the transaction at bar involves the sale of
an asset under a privatization scheme whic h
attaches a peculiar meaning or signification to
the term "indicative price." Under No. 6.1 of the
General Bidding P rocedures and Rules of
respondent, "an indicative price is a ball -park
figure, so it is just a mere estimate. So therefore
it is not certain, and t herefore the price is not a
valid consideration and supplies such a figure
purely to define the ball-park.” So here it was
merely an estimate. It was indicated in the letter
that it was a suggested indicative price, from that
very term it would show that there was yet no
19
approval from the Board, there was yet no
meeting of the minds. Again a contract of sale is
perfected at the moment there is meeting of the
minds upon the thing which is the object of the
contract and upon the price. There must be first
an offer, which must be certain and of course the
acceptance m ust be absolute. But in t his case
what happened, the parties are not yet past the
stage of negotiation. There was an offer but
there was no absolute acceptance and therefore
there could not have been a perfected COS.
Now also tak e note, as to sale, there must be
meeting of the minds, so therefore the price can
never be set by one or both parties.
Take a look at article 1473.
Art. 1473. The fixing of the price can never be
left to the discretion of one of the contracting
parties. However, if the price fixe d by one of
the parties is accepted by the other, the sale
is perfected. (1449a)
So what do y ou mean by that? If the seller and
buyer agreed that this parcel of land be sold,
and t hen they say “O sige ikaw buyer ang mag
fix sa price. ” “O sige mag estimate ako.” Then
after a few days the buyer comes out with a
price of “1M” then the seller would say “Ah
mababa yan masyado. ” Can the buyer say “hindi
ka na pwede mag change ng mind kasi you
agreed that I will fix the price.” Can he do so?
NO. According to 1473, it can never be left to the
discretion of one of the contracting parties.
However if the s eller would say “ok ay 1M” then
there is already the meeting of the minds as to
the consideration. And all other elements
present, then you have a valid contract of sale.
Now what is the effect if the price is
unascert ainable? Look at 1469, you have the
term there inefficacious. What does that mean?
“The inability to produce the effect wanted;
inability to get things done.” S o what is the effect
in a contract of sale? Obligation on the part of
the seller to transfer owners hip and deliver the
possession, and on the part of the buyer to pay
the purchase price. But in this case, if the pric e
is indeed uncertain as provided under 1469, for
rd
example, the 3 person refuses to fix the price,
or rather unable or unwilling t o fix the price, then
the contract is deemed inefficacious. If you look
at that paragraph in 1469, it does not state that
rd
the same is void; again, appointing a 3 party to
fix the price is valid.
rd
But what if that 3 party is unable or unwilling,
and in this instance take note, WITHOUT the
fault of any of the parties. So di nyo maapply
yung regress before the courts, then the contract
is inefficacious. It is not void becaus e there is an
implied acknowledgment that the existence of
the formula allowed by law at the point of
perfection has actually rendered the contract
albeit conditional. (The use of the word
“inefficacious” does not exclude void sale
contracts when the price is neither certain or
ascertainable. In other words, the use of the
term “inefficacious” was not meant to exclude
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
void sales, but more to be able to include valid
conditional contracts of sale (which have
become inefficacious) in the same group as void
contracts, from the focal point of price. – book)
So if you take a look at that part in 1469, the
parties are really at stand still. At the very least
what they could do is:
#1, sila nalang magsabot. “O sige meeting of the
minds, lets change our contract since Mr. X is
not willing or unable to fix the pric e then we will
set the price bet ween ourselves.” Okay lang yun.
Pero what if they are not willing to do that, and
there has already been delivery of the thing t o
the buyer wherein the buyer appropriates the
object? So we have article 1474. (#2)
Art. 1474. Where the price cannot be
determined in accordance with the preceding
articles, or in any other manner, the contract
is ineffi cacious. However, if the thing or any
part thereof has been delivered to and
appropriated by the buyer he must pay a
reasonable price therefor. What is a
reasonable price is a question of fact
dependent on the circumstance s of each
particular case. (n)
If it falls within the “preceding articles” stated in
Art 1474, again the contract is inefficacious. But
of course if the part of subject matter has
already been delivered or appropriated by the
buyer, it is just fair that he must pay a
reasonable price. Again when you say
reasonable it always depends on the
circumstances of each case.
So when it comes to price being certain we have
articles 1469 until 1474. Price is certain of
course if it is expressed in t erms of specific
amounts of money but under article 1469, pric e
is fixed in reference to another thing certain or
left to a third-party’s determination) and in
addition, article 1472, (price of securities, grain,
liquids based on a trading price).
Now we also have here manner of payment of
price essential. Please take not e that that is not
an additional essential element, because the
manner of payment goes into the essence of
what makes a price cert ain or ascert ainable. In
other words, it is in relation to the element that
the price must be certain or ascertainable for
you to have a valid price and valid cont ract of
sale.
NAV ARRA VS. PLANTERS
527 SCRA 561; G. R. NO. 172674
JULY 12, 2007
FACTS: The Navarras obtained a loan of
P1,200,000.00 from Planters Bank and, by way
of security therefor, executed a deed of
mortgage over their five (5) parcels of land.
Unfortunately, the couple failed to pay their loan
obligation. Hence, Planters Bank foreclosed on
20
the mortgage. The one year redemption period
expired wit hout the Navarras having redeemed
the foreclosed properties.
On the other hand, co-petitioner RRRC
Development Corporation (RRRC) is a real
estate company owned by the parents of
Carmelita Bernardo Navarra. RRRC itself
obtained a loan from Planters Bank secured by a
mortgage over another set of properties owned
by RRRC. The loan having been likewis e
unpaid, Planters Bank similarly foreclosed the
mortgaged assets of RRRC.
Unlike the Navarras, however, RRRC was able
to negotiate with the Bank for the redemption
of its foreclosed properties by way of a
concession whereby the Bank allowed RRRC to
refer to it would-be buyers of the foreclosed
RRRC properties who would remit their
payments directly to the Bank, which payments
would then be considered as redemption pric e
for RRRC. E ventually, the foreclos ed properties
of RRRC were sold to third persons whos e
payments therefor, directly made to the B ank,
were in excess by P300,000.00 for the
redemption price.
In the meantime, Jorge Navarra sent a letter
{*contents of the letters are found in the
ruling*} to Planters Bank, proposing to
repurchase the five (5) lots earlier auctioned to
the Bank, with a request that he be given until
August 31, 1985 to pay the down payment of
P300,000.00. In response, Planters Bank, thru
its Vice-President Ma. Flordeliza Aguenza, wrot e
back Navarra via a letter dated August 16, 1985.
Then, on January 21, 1987, Plant ers Bank sent
a letter to Jorge Navarra informing him that it
could not proc eed with the doc umentation of the
proposed repurchase of the foreclosed
properties on account of his non-complianc e
with the Bank’s request for the submission of the
needed board resolution of RRRC, thus,
demanding that they surrender and vac ate the
properties in question for their failure to exercise
their right of redemption.
The Navarras filed their complaint for Specific
Performance with Injunction against Planters
Bank, alleging that a perfected contract of sale
was made between t hem and Planters Bank
whereby they would repurchas e the subject
properties for P1,800,000.00 with a down
payment of P300,000.00. In its Answer, Planters
Bank asserted that there was no perfected
contract of sale because the terms and
conditions for the repurchase have not yet been
agreed upon.
The RTC ruled that there was a perfected
contract of sale between the Navarras and
Planters Bank. The CA reversed the decision
citing Article 1319 as basis, declaring that the
acceptance of the offer was not absolute.
ISSUES:
WON there was a perfected contract to
repurchase the foreclosed properties between
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
the petitioners and the private respondent
Planters Development Bank. NO
WON the parties never got past the negotiation
stage. YES
HELD: In general, contracts undergo three
distinct stages: negotiation, perfection or birth,
and consummation. Negotiation begins from
the time the prospective contracting parties
manifest their interest in the contract and ends
at the moment of their agreement. Perfection or
birth of the contract takes place when the
parties agree upon the essential elements of
the contract, i.e., consent, object and price.
Cons ummation occurs when the parties fulfill
or perform the terms agreed upon in the
contract, culminating in the extinguishment
thereof.
A negotiation is formally initiated by an offer
which should be certain with respect to bot h
the object and the cause or consideration of
the envisioned contract. In order to produc e a
contract, here must be acceptance, which may
be express or implied, but it must not qualify the
terms of the offer. In ot her words, it must be
identical in all respects with that of the offer so
as to produce consent or meeting of the minds.
Here, the Navarras assert that the following
exchange of correspondence bet ween them and
Planters Bank constitutes the offer and
acceptance, thus:
Letter dated July 18, 1985 of Jorge Navarra:
This will formalize my request for your k ind
consideration in allowing my brother and me to
buy back my house and lot and my restaurant
building and lot together with the adjacent road
lot. Since my brother, who is work ing in Saudi
Arabia, has accepted this arrangement only
recently as a result of my urgent offer to him,
perhaps it will be safe for us to set August 31,
1985 as the last day for the payment of a
P300,000.00 down payment. I hope you will
grant us the opportunity to raise the funds within
this period, which includes an allowance for
delays.
The purchase price, I understand, will be
based on the redemption value plus accrued
interest at the prevailing rate up to the dat e of
our sales contract.
Maybe you can give us a long term payment
scheme on the basis of my brother’s annual
savings of roughly US$30,000.00 everytime he
comes home for his home leave. I realize that
this is not a regular transaction but I am
seek ing your favor to give me a chanc e to
reserve whatever values I can still recover from
the properties and to avoid any legal
complications that may arise as a consequenc e
of the total loss of the Balangay lot. I hope that
you will extend to me your favorable action
on this grave matter.
Letter dated August 16, 1985 of Planters Bank:
21
Regarding your letter dated July 18, 1985,
requesting that we give up to August 31, 1985 t o
buy back your house and lot and restaurant and
building subject to a P300,000.00 downpayment
on the purchase price, please be advised that
the Collection Committee has agreed to your
request. Please see Mr. Rene Castillo, Head,
Acquired Assets Unit, as soon as possible for
the details of the transaction so that they may
work on the necessary documentation.
Given the above, the basic question that
comes to mind is: Was the offer certain and
the acceptance absolut e enough so as t o
engender a meeting of the minds between
the parties? Definitely not.
While the foregoing letters indicate the
amount of P300,000.00 as down payment, they
are, however, completely silent as to how the
succeeding instalment payments shall be made.
At most, the letters merely acknowledge that the
down payment of P300,000.00 was agreed upon
by the parties. However, this fact cannot lead
to the conclusion that a cont ract of sale had
been perfected. Quite recently, this Court held
that before a valid and binding contract of sale
can exist, the manner of payment of the
purchase price must first be established since
the agreement on the manner of payment
goes int o the price suc h that a disagreement on
the manner of payment is tantamount to a
failure to agree on the price.
The Navarras’ letter/offer failed to specify a
definite amount of the purchase price for the
sale/repurchase of the subject properties. It
merely stated that the " purc hase price will be
based on the redemption value plus accrued
interest at the prevailing rate up to the date of
the sales contract."
The ambiguity of this statement only bolsters
the unc ertainty of the Navarras’ so-called " offer"
for it leaves much rooms for such questions,
as: what is the redemption value? What
prevailing rate of interest shall be followed: is it
the rate stipulat ed in the loan agreement or the
legal rate? When will the date of the contract of
sale be based, shall it be upon the time of the
execution of the deed of sale or upon the time
when the last installment payment shall have
been made? To our mind, these questions need
first to be addressed, discussed and negotiated
upon by the parties before a definit e purchas e
price can be arrived at. Significantly, the
Navarras wrote in the same letter the following:
Maybe you can give us a long-term payment
scheme on the basis of my brother’s annual
savings of roughly US$30,000.00 every time he
comes home for his home leave.
Again, the offer was not clear insofar as
concerned the ex act number of years that will
comprise the long-term payment scheme. As we
see it, the absence of a stipulated period within
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
which the repurchase price shall be paid all the
more adds to the indefiniteness of the Navarras’
offer. Clearly, then, the lack of a definite offer on
the part of the spouses could not possibly serve
as the basis of their claim that the
sale/repurchase of their foreclosed properties
was perfected. The reason is obvious: one
essential element of a contract of sale is
wanting: the price certain. Here, what is
dramatically clear is that there was no meeting
of minds vis-a-vis the price, expressly or
impliedly, directly or indirectly.
Further, the tenor of Planters Bank’s letter reply
negates the contention of t he Navarras that the
Bank fully accept ed their offer. The letter
specifically stated that there is a need t o
negotiate on the other details of the transaction
before the sale may be formalized.
Such statement in the Bank’s letter clearly
manifests lack of agreement bet ween the parties
as to the terms of the purported contract of
sale/repurchase, particularly the mode of
payment of the purchase price and the period for
its payment. The law requires acceptance to be
absolute and unqualified.
As it is, the Bank’s letter is not the kind whic h
would constitute acceptance as contemplated by
law for it does not evince any categorical and
unequivocal undertaking on the part of the Bank
to sell the subject properties to the Navarras.
The Navarras’ attempt to prove the existence of
a perfected cont ract of sale all the more
becomes futile in the light of the evidence that
there was in the first place no acceptance of
their offer. It should be noted that aside from
their first letter dated July 18, 1985, the Navarras
wrot e another letter dated August 20, 1985, this
time requesting the Bank that the down payment
of P300,000.00 be instead taken from the
excess payment made by the RRRC in
redeeming its own foreclosed properties.
The very circumstance that the Navarras had to
make this new request is a clear indication that
no definite agreement has yet been reached at
that point. As we see it, this request constitutes
a new offer on the part of the Navarras, whic h
offer was again conditionally accepted by the
Bank as in fact it even required the Navarras to
submit a board resolution of RRRC before it
could proceed with the proposed
sale/repurchase.
The eventual failure of the spouses to submit the
required board resolution precludes the
perfection of a cont ract of sale/repurchas e
between the parties.
E vidently, what transpired between the pa rties
was only a prolonged negotiation to buy and to
sell, and, at the most, an offer and a counter
offer with no definite agreement having been
reached by them. With the hard reality that no
perfected contract of sale/repurc hase exists in
22
this case, any independent transaction
between the Plant ers Bank and a third-party,
like the one involving the Gatchalian Realty,
cannot be affected.
So there was no perfected contract of sale.
While the foregoing letters indicat e the amount
of P300,000.00 as down payment, they are,
however, completely silent as to how the
succeeding installment payments shall be made.
At most, the letters merely acknowledge that the
down payment of P300,000.00 was agreed upon
by the parties. However, this fact cannot lea d to
the conclusion that a contract of sale had been
perfected. Quite rec ently, this Court held that
before a valid and binding contract of sale can
exist, the manner of payment of the purchas e
price must first be established since the
agreement on the manner of payment goes into
the price such that a disagreement on the
manner of payment is tantamount to a failure to
agree on the price. Here too, the Navarras
letter/offer failed to specify a definite amount of
the purchase price for the sale/repurc hase of the
subject properties. It merely stated that the
purchase price will be based on the redemption
value plus accrued interest at the prevailing rat e
up to the dat e of the sales contract.
If you look at that statement, it is already not
certain. The ambiguity of this statement only
bolsters the uncertainty of the Navarras so-
called offer for it leaves much rooms for such
questions, as: what is the redemption value?
What prevailing rate of int erest shall be followed:
is it the rate stipulated in the loan agreement or
the legal rate? When will the date of t he contract
of sale be based, shall it be upon the time of the
execution of the deed of sale or upon the time
when the last installment payment shall have
been made?
So these were indications that would point out
that there was no meeting of the minds as to the
price. So in other words the price was not
certain. Again, the offer was not clear insofar as
concerned the ex act number of years that will
comprise the long-term payment scheme.
There is a need to negotiate on the other details
of the transaction before the sale may be
formalized and this is clear in the letter given. So
remember for a perfected contract there must be
an offer and the acceptance must be absolute
and unqualified. In this case what transpired
between the parties was only a prolonged
negotiation to buy and to s ell, and, at the most,
an offer and a count er-offer wit h no definit e
agreement having been reached by them.
AMADO VS. SALV ADOR
G.R. NO. 171401 DECEMBER 13, 2007
FACTS: Judge Amado is the owner of a lot, a
portion of which is the subject of the present
litigation. It was alleged that sometime in 1979,
Judge Amado and Salvador agreed that the
latter would sell the lot in favor of Salvador
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
at P60/sqm. The payment was to be made in
cash or construction material, whichever the
Judge preferred and to whomever the latter
wished during his lifetime. The terms of
payment, though, were not stipulated.
Thereafter, Salvador undertook and the location
of the squatters in said land and eventually built
several structures thereon for his business.
Salvador claims that by October 1980, he had
already given Judge Amado total cash advances
of P30,310.93 and delivered construction
materials amounting to P36,904.45, the total of
which exceeded the agreed price for the subject
property.
Petitioner heirs averred that Judge Amado and
Salvador were co-borrowers from a bank. A loan
agreement was executed by them with Capit ol
City Dev’t bank as lender and the Lot of Judge
Amado was used as collateral. The loaned
amount was releas ed to Salvador and Judge
Amado’s share was paid to him in several
instalments. Salvador failed t o pay his share in
the amortization of the lot so that Judge Amado
had to pay the loan to avoid foreclosure.
Thereafter, Judge Amado demanded Salvador
to leave the premises and an ejectment case
was filed to that effect. Salvador filed a cas e
for specific performance contending that a
balance of P4,040.62 was not paid to Judge
Amado because of the latter’s failure to execut e
the deed of sale. Salvador present ed several
documentary evidence.
RTC dismissed the complaint becaus e
Salvador’s evidence does not show that the
money and construction materials were intended
as payment for the subject property. CA
reversed the decision on the finding that the
construction materials delivered were not paid
for.
ISSUE: WON there was a perfected cont ract of
sale. NO
HELD: No Convincing Proof as to Manner of
Payment
In the present case, Salvador fails to allege
the manner of payment of the purc hase pric e
on which the parties should have agreed. No
period was set within which the payment must
be made. Of t he purchase price of P66,360.00,
which the parties purportedly agreed upon, the
amount which should be paid in cash and the
amount for construction materials was not
determined. This means that the parties had no
exact notion of the consideration for the contract
to which they suppos edly gave their consent.
Thus, such failure is fatal to Salvador’s claim
that a sale had been agreed upon by the parties.
Furthermore, after carefully examining the
records, serious doubts became apparent as to
whet her cash advances and deliveries of
construction materials evidenc ed by numerous
23
statements of accounts and delivery receipts
were actually intended as payment for the land.
First of all, the statements of accounts and the
delivery rec eipts do not indicat e that the
construction materials or the cash advances
were made in connection with the sale of th e
subject property. Any doubt as to the real
meaning of the cont ract must be resolved
against the person who drafted the instrument
and is responsible for the ambiguity thereof.
Since Salvador prepared t hese statements of
accounts and therefore caused the ambiguity, he
cannot benefit from the resulting ambiguity.
Salvador is hardly an ignorant and illiterat e
person; rather, he is a businessman engaged
in manufacturing and distributing construction
materials and operat es no less than two
branches. It should have been noted in the
statement of accounts, or even in another
document, that the cash advances and
deliveries of construction materials were made in
connection with a transaction as import ant as a
sale of land. As they are, the statements of
accounts and especially the straight forward
delivery receipts are insufficient proof that Judge
Amado sold his property to Salvador.
Secondly, one of the delivery receipts pres ented
by Salvador was partially paid. If Judge Amado
had already agreed that the construction
materials were payment for the subject property,
the act of partially paying for construction
materials would be incongruous to such
intention.
Thirdly, Salvador himself gave conflicting
statements on whether he has completed
payment. Other proofs presented gave no
weight to respondent’s allegations. The
testimony of the witness presented by Salvador
was not given credence. Finally, the act of
Salvador in relocating the s quatters is not
substantial proof of ownership.
Now actually before you go to the issue as to the
manner of payment here, you try to consider all
facts to show that there was really no meeting of
the minds. So dun pa lang wala nang meeting of
the minds bet ween the party. No positive proof
was adduced that Judge Amado had fully
accepted S alvador’s sketchy proposal. In fact,
Amado even sent a demand letter for Salvador
to vacate the premises. While he …(??).. There
was already an intention or there was a contract
of sale. At the very least, he could have
demanded the balance of the purchas e price if
indeed there was really a perfected contract of
sale. Now assuming there was consent, how
about consideration?
Supposedly there was a sum of 66,360 pesos
payable in cash or construction materials. If you
take a look at that, it would seem that is a valid
consideration relating to our discussion, pric e
certain or ascertainable. But what is the defect
here? The manner of payment.
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
A definite agreement on the manner of payment
of the price is an essential element in the
formation of a binding and enforc eable contract
of sale. The agreement as to the manner of
payment goes into the price such that a
disagreement on the manner of payment is
tantamount to a failure to agree on the price or
consideration. Here, Salvador fails to allege the
manner of payment of the purchase price on
which the parties should have agreed. No period
was set within which the payment must be
made. Of the purchas e price of P66,360.00,
which the parties purportedly agreed upon, the
amount which should be paid in cash and the
amount for construction materials was not
determined. This means that the parties had no
exact notion of the consideration for the contract
to which they suppos edly gave their consent.
Moreover, doubts in this case were present,
there was an allegation in the ans wer n the
counter claim that there was payment of 62k,
balance of 4k nalang, but in the proceedings
before the court it was claimed that there was
already full payment in cash and construction
materials. There were receipts of construction
materials that were presented as evidence. Why
would it be indicated as paid or partially paid if
those construction mat erials would be used as
the consideration for the sale? (In truth, the
inconsistent statements made by Salvador
regarding the amount paid to Judge Amado, the
date when he was suppos ed to have completed
the payment, and the dissimilarity bet ween the
price allegedly agreed upon and the amount
supposedly paid show the absenc e of a uniform
intention to apply thes e cash advances and
construction materials as payment for the
purchase of the subject property. – Sa case, di
ko gets si Ma’am eh.)
And then you also have here the handwritten
note wherein in the same note, Judge Amado
informed Salvador that he had not yet signed an
unidentified document, which he promised to
sign after his plan to divide a certain parcel of
land was completed. This note is not conclusive
proof of the existence of a perfected sale. What
this note proves is that Judge Amado was
hesitant to sign the unidentified document and
was still waiting for the completion of his plan to
divide the land referred to in t he note. In the
present case, the terms of payment have not
even been alleged. No positive proof was
adduced that Judge Amado had fully accepted
Salvador’s sketchy proposal.
BANK OF COMMERCE VS MANALO
FACTS: The Xavierville Estate, Inc. was the
owner of parcels of land in Quezon City, known
as the Xavierville Estate Subdivision, with an
area of 42 hectares. XEI caused the subdivision
of the property into residential lots, which was
then offered for sale to individual lot buyers.
Sometime in 1972, then XE I president Emerit o
Ramos, Jr. contracted the servic es of Engr.
Carlos Manalo, Jr. who was in business of
24
drilling deep water wells and installing pumps
under the business name Hurricane
Commercial, Inc. For P34,887.66, Manalo, Jr.
installed a water pump at Ramos residence at
the corner of Aurora Boulevard and Katipunan
A venue, Quezon City. Manalo, Jr. then proposed
to XE I, through Ramos, to purchase a lot in the
Xavierville subdivision, and offered as part of the
downpayment the P 34,887.66 Ramos owed him.
XE I, through Ramos, agreed. In a letter dated
February 8, 1972, Ramos requested Manalo, Jr.
to choose which lots he wanted to buy so that
the price of the lots and the terms of payment
could be fixed and incorporated in the
conditional sale. Manalo, Jr. met with Ramos
and informed him that he and his wife Perla had
chosen Lots 1 and 2 of Block 2 with a total area
of 1,740.3 square meters.
In a letter dated August 22, 1972 to Perla
Manalo, Ramos confirmed the reservation of the
lots. He also pegged the price of the lots at
P200.00 per square meter, or a total of
P348,060.00, with a 20% down payment of the
purchase price amounting to P69, 612. 00 less
the P34,887.66 owing from Ramos, payable on
or before December 31, 1972; the corresponding
Cont ract of Conditional Sale would then be
signed on or before the same date, but if the
selling operations of XE I resumed after
December 31, 1972, the balance of the
downpayment would fall due then, and the
spouses would sign the aforesaid cont ract within
5 days from receipt of the notice of res umption
of such selling operations. It was also stated in
the letter that, in the meantime, the spouses may
introduce improvements thereon subject to the
rules and regulations imposed by XEI in the
subdivision. Perla Manalo conformed to the
letter agreement.
The spouses Manalo took possession of the
property on September 2, 1972, constructed a
house thereon, and installed a fence around the
perimeter of the lots.
The spouses Manalo were notified of the
resumption of the selling operations of XE I.
However, they did not pay the balance of the
downpayment on the lots because Ramos failed
to prepare a contract of conditional sale and
transmit the same to Manalo for their signature.
On August 14, 1973, Perla Manalo went to the
XE I office and requested that the payment of the
amount representing the balance of the
downpayment be deferred, which, however, XE I
rejected. On August 10, 1973, XE I furnished her
with a statement of their account as of July 31,
1973, showing that they had a balance of
P34,724.34 on the downpayment of the two lots
after deducting the account of Ramos, plus
P3,819.68 interest thereon from September 1,
1972 to July 31, 1973, and that the interests on
the unpaid balance of the purchase price of
P278,448.00 from September 1, 1972 to July 31,
1973 amounted to P30,629.28. The spouses
were informed that they were being billed for
said unpaid interests.
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
Subsequently, XE I turned over its selling
operations to OBM, including the receivables for
lots already contracted and those yet to be sold.
Subsequently, the Commercial Bank of Manila
(CBM) acquired the Xavierville Estate from
OBM.
In a letter dated August 5, 1986, the CBM
requested Perla Manalo to stop any on-going
construction on the property since it (CBM) was
the owner of the lot and she had no permission
for such construction. She agreed to have a
conference meeting with CBM officers where
she informed t hem that her hus band had a
contract with OBM, through XE I, to purchase the
property. When asked to prove her claim, she
promised to send the documents to CBM.
However, she failed to do so. On September 5,
1986, CBM reiterated its demand that it be
furnished with the documents promised, but
Perla Manalo did not respond.
On July 27, 1987, CBM filed a complaint for
unlawful detainer against the spouses with the
MTC Court of Quezon City.
In the meantime, the CBM was renamed the
Boston Bank of the P hilippines. Aft er CBM filed
its complaint against the spouses Manalo, the
latter filed a complaint for specific performanc e
and damages against the bank before the RTC
of Quezon City.
Boston Bank, now petitioner, maint ains that, as
held by the CA, the records do not reflect any
schedule of payment of the 80% balance of the
purchase price, or P278,448.00. Petitioner
insists that unless the parties had agreed on the
manner of payment of the principal amount,
including the other t erms and conditions of the
contract, there would be no existing contract of
sale or contract to sell.
ISSUE: WON the manner of payment has been
agreed upon and WON it is essential for there t o
be an existing contract of sale or contract to sell
RULI NG: No, it was not agreed upon thus, there
was no contract to sell. The Court agrees wit h
petitioners contention t hat, for a perfected
contract of sale or contract to sell to exist in law,
there must be an agreement of the parties, not
only on the price of the property sold, but also on
the manner the price is to be paid by the
vendee.
Under A rticle 1458 of the New Civil Code, in a
contract of sale, whet her abs olute or conditional,
one of the contracting parties obliges himself t o
transfer the ownership of and deliver a
determinate thing, and the other to pay therefo r
a price certain in money or its equivalent. A
contract of sale is perfected at the moment there
is a meeting of the minds upon the thing which is
the object of the contract and the price. From the
averment of perfection, the parties are bound,
not only to the fulfillment of what has been
25
expressly stipulated, but also to all the
consequences which, according to their nature,
may be in keeping with good faith, usage and
law. On t he other hand, when the contract of
sale or to sell is not perfected, it cannot, as an
independent source of obligation, serve as a
binding juridical relation between the parties.
A definite agreement as to the price is an
essential element of a binding agreement to sell
personal or real property because it seriously
affects the rights and obligations of the parties.
Price is an essential element in the formation of
a binding and enforceable contract of sale. The
fixing of t he price can never be left to the
decision of one of the contracting parties. But a
price fixed by one of the contracting parties, if
accepted by the other, gives rise to a perfected
sale.
It is not enough for the parties to agree on the
price of the property. The parties must also
agree on the manner of payment of the pric e of
the property to give rise to a binding and
enforceable contract of sale or contract to sell.
This is so because the agreement as to the
manner of payment goes into the price, such
that a disagreement on the manner of payment
is tantamount to a failure to agree on the price.
In a contract to sell property by installments, it is
not enough that the parties agree on the price as
well as the amount of downpayment. The parties
must, likewise, agree on the manner of payment
of the balance of the purchase price and on the
other terms and conditions relative to the sale.
E ven if the buyer makes a downpayment or
portion thereof, such payment cannot be
considered as sufficient proof of the perfection of
any purc hase and sale between the parties.
There is no showing, in the records, of the
schedule of payment of the balance of the
purchase price on the property amounting t o
P278,448.00. The said parties confined
themselves to agreeing on the price of the
property (P348,060.00), the 20% downpayment
of the purchase price (P 69,612.00), and credited
respondents for the P34,887.00 owing from
Ramos as part of the 20% downpayment. The
determination of the terms of payment of the
P278,448.00 had yet to be agreed upon on or
before December 31, 1972, or even afterwards,
when the parties sign the corresponding contract
of conditional sale.
Jurisprudence is that if a material element of a
contemplated cont ract is left for future
negotiations, the same is too indefinite to be
enforceable. And when an essential element of a
contract is reserved for fut ure agreement of the
parties, no legal obligation arises until such
future agreement is concluded.
Indeed, the parties are in agreement that there
had been no contract of conditional sale ever
executed by XE I, OBM or petitioner, as vendor,
and the respondents, as vendees.
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
Respondents failed to allege and prove, in the
trial court, that, as a matter of business usage,
habit or pattern of conduct, XE I granted all lot
buyers the right to pay the balance of the
purchase price in installments of 120 months of
fixed amounts with pre-computed interests, and
that XEI and the respondents had intended to
adopt such terms of payment relative to the sale
of the two lots in question. Habit, custom, usage
or pattern of conduct must be proved like any
other facts.
As a consequence, res pondents and XE I (or
OBM for that matter) failed to forge a perfected
contract to sell the two lots; hence, respondents
have no cause of action for specific performanc e
against petitioner.
There is no showing, in the records, of the
schedule of payment of the balance of the
purchase price on the property amounting t o
P278,448.00. Based on these two letters, the
determination of the terms of payment of the
P278,448.00 had yet to be agreed upon on or
before December 31, 1972, or even afterwards,
when the parties sign the corresponding contract
of conditional sale. There is no evidence on
record to prove that XE I or OBM and the
respondents had agreed, after December 31,
1972, on the terms of payment of the balance of
the purchase price of the property and the other
substantial terms and conditions relative to the
sale. Indeed, the parties are in agreement that
there had been no contract of conditional sale
ever executed. The bare fact that other lot
buyers were allowed to pay the balance of the
purchase price of lots purchased by them in 120
or 180 monthly installments does not constitute
evidence that XE I also agreed to give the
respondents the same mode and timeline of
payment of the P278,448.00.
August 17, 2015
So we discussed the cases in relation to the
requirement of manner of payment of price. We
emphasized that it is essential. As it goes int o
the essence that price is certain or
ascertainable. Not really another element of a
CoS. Not really an additional requirement for
valid price. We emphasized last time, to have
valid price, the elements are it must be real, in
money or its equivalent, certain or ascertainable.
The requirement that the manner of payment be
included in the perfection of CoS goes int o
makes what price certain or ascertainable. Why
would this be important? Try value of money,
usually in the cas es, usually there was
installment paid, but there was no agreement as
to the balance, its period or for how long. How
much is the installment price and how is it going
to be paid, monthly or yearly. So that is what is
really taken into consideration.
Notice the cases we have discussed in relation
to the manner of payment. In the case of Bank of
Commerce, the agreement as to the manner of
payment goes into the price, such that a
26
disagreement on the manner of payment is
tantamount to a failure t o agree on t he price.
That is the same thing that was emphasized in
Amado vs Salvador wherein they agreed on
cash and construction materials. Again,
agreement as to the manner of payment goes
into price such as a disagreement into the
manner of payment is tantamount to a failure to
agree on the price or consideration. Again, als o
the same discussion in the case of Navarra vs
Planters.
Again, what do I like to point out? Remember
that a CoS is a contract involving reciproc al
obligations. Does it necessarily mean that for
example we enter into a CoS, I will buy your car
for PhP200,000, agree? Since we did not
stipulate as to the manner of payment, does it
necessarily mean that there is no perfected
contract of sale? Remember a Sale is a contract
with reciprocal obligations. Go back to basics in
Obligations and Cont racts. When do you
demand delivery of the subject matter? As a
General Rule, upon the perfection of the
contract. Immediately demandable at once. Of
course, you cannot demand the performance of
the other party if you yourself is not ready to
perform your obligations. Kung ikaw yung buyer,
you pay the price, you expect that the seller
deliver t he subject matter. If the seller refuses or
fails to deliver, then there is already delay. Can
you say that there is no perfected contract
because there was no manner of payment? Not
necessarily. Notice the cases we discussed, you
will see this also in the other cases. Usually what
happens? Merong downpayment na binigay.
E ven if there was an agreement as to the
payment of the full purchase price, there was no
agreement as to the manner, how, when as to
the payment of the remaining balance. And the
manner of payment therefore becomes
essential.
Now how about in the case of Amado, the
agreement was cash and construction materials.
However, ano man yung allegation dun? Tingi -
tingi yung pagbay ad. So allegedly, if the
construction materials form part of the
consideration, hanggang kelan magdeliver? And
how about with regard to the fact that cash and
construction materials? Just because that was
the agreement, does it necessarily mean that it
was not valid? Compare it to our case before,
Ong, 1 peso and other valuable consideration.
That is valid. Now, by itself, yung cash and other
construction mat erials is not necessarily invalid
but because of the circumstances of each case,
what was the ruling of each of t he case t hat I
emphasized? The agreement as to the manner
goes into the price such that a disagreement on
the manner of payment is tantamount to a failure
to agree on the price. The issue is on how they
will be able to pay the remaining balance. Like
cash and construction mat erials. Ilan ang cash?
Walang meeting of t he minds as to the manner
of payment. There’s no problem, sometimes in
sale, or most often than not, ang sale kaliwaan
man yan diba? You deliver the goods and the
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
buyer t o pay the price. That’s why in a Deed of
Sale, naka-acknowledge na dun yung receipt of
payment and the execution of that deed of sale,
most often than not is considered as
constructive delivery. So, they already
performed their respective obligations. In the
instances in the cases where manner of
payment becomes essential, because we have
there an agreement other than immediat e
payment. Ok? Other than immediate payment,
wherein there is a disagreement as to how the
remaining balance of purchase price will be paid.
Otherwise, you apply the general rule that the
obligation of the respective parties are
demandable at once.
Now let’s go to INADEQUACY OF PRICE.
Recall we have A rticle 1355.
Art. 1355. Except in ca ses specified by law,
lesion or inadequacy of cause shall not
invalidate a contract, unless there has been
fraud, mistake or undue influence. (n)
The corresponding article whic h is specifically
applicable to a CoS, we have Article 1470.
Art. 1470. Gross inadequacy of price does
not affect a contract of sale, except as it may
indicate a defect in the consent, or that the
parties really intended a donation or some
other act or contract. (n)
Ok, so i t’ s very clear. Not just mere
inadequacy even gross inadequacy on the
price need not affect the perfection of a CoS.
Exception, defective consent, so vitiated
consent a s what is also provided in 1355. Or
the intention of the parties if it was intended
to be a donation or some other act or
contract.
Now, in relation to price, recall the
characteristics of a CoS. It is onerous and
commutative. There’s no requirement that
the price be exactly the value of the subject
matter delivered. Being onerous in nature,
what is required is that there is a valuable
consideration and when you say
commutative, honest belief that the partie s
received good value for what they have given
up in exchange.
Q: Now, what is the difference between
simulation of contract and gross
inadequacy?
A: In simulation of contract Ma’am, there is
really no agreement between the parties. But
when we say gross inadequacy of price,
there is mutual consent between the parties
Ma’am.
Q: So if a Contract is simulated, do you have
a valid sale.
A: No.
Q: How about you have a gross inadequate
price?
A: There is still a sale.
What happened in the case of Bravo -
Guerrero v. Guerrero?
27
BRAVO-GUERRERO vs. EDWARD P. BRAVO
FACTS: Spous es Mauricio and Simona Bravo
owned 2 parcels of land measuring 287 and 291
square meters and located in Makati City, Metro
Manila. The Properties are registered under TCT
Nos. 58999 and 59000 issued by the Register of
Deeds of Rizal on 23 May 1958. The Properties
contain a large residential dwelling, a smaller
house and ot her improvements.
Mauricio and Simona had three children -
Roland, Cesar and Lily, all surnamed Bravo.
Cesar died without issue. Lily Bravo married
David Diaz, and had a son, David B. Diaz, Jr.
("David Jr."). Roland had six children, namely,
Elizabeth Bravo-Guerrero, Edward, Roland,
Senia, Benjamin, and their half-sister, Ofelia.
Simona executed a General Power of Attorney
("GPA") on 17 June 1966 appointing Mauricio as
her attorney-in-fact. In the GPA, Simona
authorized Mauricio to "mortgage o r otherwis e
hypothec ate, sell, assign and dispose of any and
all of my property, real, personal or mixed, of
any kind whatsoever and wheresoever situated,
or any interest therein." Mauricio subs equently
mortgaged the Properties to the PNB and DBP
for P10,000 and P5,000, respectively.
On 25 October 1970, Mauricio executed a Deed
of Sale wit h Assumption of Real Estate
Mortgage conveying the Properties to vendees
Roland A. Bravo, Ofelia A. Bravo and Elizabet h
Bravo-Guerrero.” The sale was conditioned on
the payment of P1,000 and on the assumption
by the vendees of the PNB and DBP mort gages
over the Properties.
As certified by the Clerk of Court of the Regional
Trial Court of Manila, the Deed of Sale was
notarized by Atty. Victorio Q. Guzman on 28
October 1970 and ent ered in his Notarial
Register. However, the Deed of Sale was not
annotated on TCT Nos. 58999 and 59000.
Neither was it presented to P NB and DBP. The
mortage loans and the receipts for loan
payments issued by PNB and DBP continued to
be in Mauricio’s name even after his death on 20
November 1973. Simona died in 1977.
On 23 June 1997, Edward, represented by his
wife, Fatima B ravo, filed an action for the judicial
partition of the Properties. Edward claimed that
he and the other grandchildren of Mauricio and
Simona are co-owners of the Properties by
succession. Despite this, petitioners refused to
share with him the possession and rental income
of the Properties. Edward later amended his
complaint to include a pray er to annul the Deed
of Sale, which he claimed was merely simulated
to prejudice the other heirs.
The trial court upheld Mauricio’s sale of the
Properties to the vendees. The trial court ruled
that the sale did not prejudice the compulsory
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
heirs, as the Properties were conveyed for
valuable consideration.
Citing Article 166 of the Civil Code, the Court of
Appeals reversed trial court’s decision and
declared the Deed of Sale void for lack of
Simona’s consent. It also found that there was
insufficient proof that the vendees made the
mortgage payments on the Properties, since the
PNB and DBP rec eipts were issued in Mauricio’s
name. The appellate court opined that the rent al
income of the Properties, which the vendees
never shared wit h respondents, was sufficient to
cover the mortgage payments to PNB and DBP.
ISSUE: WON the sale of the properties was
simulated or void for gross inadequacy of price
RULI NG: No, the sale of the properties is not
void either for being simulated or for inadequacy
of price.
Respondents, however, contend that the sale of
the Properties was merely simulated. As proof,
respondents point to the consideration of P 1,000
in the Deed of Sale, which respondents claim is
grossly inadequate compared to the actual value
of the Properties.
Simulation of contract and gross inadequ acy of
price are distinct legal concepts, with different
effects. When the parties to an alleged contract
do not really intend to be bound by it, the
contract is simulated and void. A simulated or
fictitious contract has no legal effect whatsoever
because t here is no real agreement bet ween the
parties.
In contrast, a contract with inadequat e
consideration may nevertheless embody a true
agreement between the parties. A contract of
sale is a consensual contract, which becomes
valid and binding upon the meeting of minds of
the parties on the price and the object of the
sale. The concept of a simulated sale is thus
incompatible with inadequacy of price. When the
parties agree on a price as the actual
consideration, the sale is not simulated despit e
the inadequacy of the price.
Gross inadequacy of price by itself will not result
in a void contract. Gross inadequacy of price
does not even affect the validity of a contract of
sale, unless it signifies a defect in the consent or
that the parties actually intended a donation or
some other contract. Inadequacy of cause will
not invalidate a cont ract unless there has been
fraud, mistake or undue influenc e. In this case,
respondents have not proved any of the
instances that would invalidate the Deed of Sale.
Respondents even failed to establish that the
consideration paid by the vendees for the
Properties was grossly inadequate. As the trial
court pointed out, the Deed of Sale stipulates
that, in addition t o the payment of P1,000, the
vendees should assume the mortgage loans
from PNB and DBP. The consideration for the
28
sale of the Properties was thus P1,000 in cash
and the assumption of the P15,000 mortgage.
Respondents argue that P16, 000 is still far
below the actual value of the Properties The tax
declarations placed the assessed value of bot h
Properties at P16,160. Compared to this, the
price of P16,000 cannot be considered grossly
inadequate, much less so shocking to the
conscience as to justify the setting aside of the
Deed of Sale.
Q: And how about the value of the property?
A: The value of the property was PhP16,000.00.
Q: Was there really gross inadequacy there?
A: Yes.
Q: What is the effect thereof?
A: Even if there is a gross inadequacy, there is
still a valid sale. As it was stated, sale is a
consensual contract and gross inadequacy of
price by itself will not res ult to a void contract.
Gross inadequacy of price does not even affect
a valid contract of sale unless it signifies a defect
in the consent of the parties. Inadequacy of
cause will not invalidate a cont ract unless there
has been fraud, mistake or undue influence. And
in this case, there has already been meeting of
minds.
Q: Aside from the PhP1,000, what was the
other possible consideration noted by the
Supreme Court that should support the
contention that there was really a valid sale?
A: With the assumption of mortgage, it was also
considered by the Court as consideration in the
sale.
BRAVO-GUERRERO vs GUERRERO: So
again, distinguish simulation of contract from
gross inadequacy of price. In a simulated
contract, parties do not really intend to be bound
by the contract, therefore there is no valid CoS.
A simulated cont ract has no legal effect
whatsoever because again, there was no real
agreement bet ween the parties. But in a contract
with inadequate consideration, even if it is
grossly inadequate, may nevertheless embody
the true agreement between the parties and
therefore you have a perfected CoS. The
concept of a simulated sale is incompatible wit h
inadequacy of price. As in a simulated sale, no
valid contract. Inadequacy of price, even if
grossly inadequate will not result into a void
contract. Gross inadequacy of price doe s not
even affect the validity of a contract of sale,
unless i t signifie s a defect in the consent or
that the parties actually intended a donation
or some other contract. In this case there was
no proof of that defect or some other intention.
Inadequacy of cause will not invalidate a
contract unless there is fraud, mistake, or undue
influence. In this case, the respondents failed to
establish that the consideration paid by the
vendees for the properties was grossly
inadequate. The Deed of Sale stipulates that in
addition to the PhP1,000, the vendees also
assumed the mortgage from PNB and DBP and
therefore that is considered as a consideration.
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
Q: Now, what is the effect of a grossl y
inadequate price in a judicial sale?
A: In a judicial sale, if there is a gross
inadequacy of price which shocks the
conscience of the Court, the sale can be
declared void.
Q: When do we consider a judicial sale void?
A: If it shocks the conscience of the Court.
What happened in the case of Director of
Lands vs Abarca?
THE DIRECTOR OF LANDS, vs. ABARCA, ET
AL
FACTS: About fourteen years, the lot now in
question was the subject of litigation between
Datu Bualan and his co-claimants, on the one
hand, and Ciriaco Lizada, on the ot her. Juan A.
Sarenas and Domingo Braganza were the
attorneys for Datu Bualan and his co-claimants
in that suit, wherein a judgment was rendered
declaring Datu Bualan and his co-claimants the
owners of the land involved in the litigation.
Subsequently, a controversy arose bet ween the
Bagobos and their attorneys as to the amount of
fees due the latter, whereupon the attorneys
took possession of the property now in question.
Action was brought by the Bagobos against their
former attorneys for the rec overy of the land. In
this action judgment was rendered ordering the
attorneys to return the property seized by them,
and requiring the Bagobos to pay their former
attorneys the sum of P6,000 as fees. As a result
of this judgment Datu Bualan and his co-
claimants paid Sarenas and Braganza the sum
of P5,126.13. They also paid to the municipal
treasurer of Davao in the name of Sarenas and
Braganza, for tax es and penalties due on the
property in the year 1926, while t he same was in
the possession of the latter, the sum of
P1,035.87. The B agobos assumed that, by
these payments which amounted in all to
P6,162, the judgment rendered against them for
P6,000 together with int erests due thereon, was
fully satisfied.
Claiming that the sum paid to the municipal
treasurer of Davao should not be credited on the
amount of the judgment obt ained by them,
Sarenas and Braganz a caused the clerk of the
court to issue a writ of execution on the said
judgment. By reason of t he writ of execution s o
issued, the sheriff levied on the property here in
question and sold it to Sarenas and Braganz a
for the sum of P877.25. Upon the failure of the
Bagobos to redeem the property, they filed their
claim in the present cadastral case, alleging that
they were the absolute owners of the lot in
question.
In view of the evidence presented by the parties,
the lower court dismissed the claim of Sarenas
and B raganza, and ordered the registration of
the lot now in question in the names of Dat u
Bualan and his co-claimants, subject, however,
to a lien in favor of Sarenas and Braganza for
29
the sum of P877.25, with interest at the rate of
12 per cent per annum from April 27, 1927.
In dismissing the claim of Sarenas and
Braganza, the lower court held that the sale by
the sheriff of the property in question in favor of
said claimants was null and void, because the
amount of P877.25 paid by Sarenas and
Braganza was absolutely inadequate.
ISSUE: WON a judicial sale of real property will
be set aside when price is adequate
RULI NG: Yes if the price is so inadequate as to
shock the conscience of the court.
The lower court was right in declaring the
sheriff's sale null and void on the ground of the
inadequacy of the pric e paid. It appears that in
1927 the assessed value of the contested
property was more than P60,000. A judicial sale
of real property will be set aside when the pric e
is so inadequate as to shock the conscience of
the court. (National Bank vs. Gonzalez, 45 Phil.,
693.)
In the instant case there is another important
consideration. In fairness and equity, which after
all are the true aims of the law, the amount paid
by Datu Bualan and his co-claimants for taxes
and penalties due on the contested property
should be credited on the judgment obtained by
Sarenas and Braganz a. Such taxes and
penalties accrued while the property was in that
possession under a claim of ownership. It
follows that the error assigned by Datu Bualan
and his co-claimants against the judgment
below, to the effect that the lower court erred in
subjecting the property sought to be registered
to a lien in favor of Sarenas and Braganza for
P877.25 with interests, must be sustained.
Q: How much was the price?
A: PhP877.25.
Q: How much was the alleged value of the
property?
A: It was in the year 1927 and so the alleged
value was PhP60,000.
Q: So were you shocked (O_O) with the
price? What is the effect of that gross
inadequacy of price?
A: The Court declared that the transaction was
void.
DIRECTOR OF LANDS vs ABARCA: Now,
please take note of t his one. Gross inadequacy
of a price may avoid a judicial sale, a sale that is
ordered by the Court as what happened in this
case. Now, the purchase price in the execution
sale or judicial sale was PhP 877 but the value of
the property was PhP60,000, shocking to the
conscience of men. And therefore, the sale is
considered void. Because here, it can readily be
shown that in the event of a resale, it is very
obvious that e better price can be obtained.
Now, compare this with a voluntary contract of
sale. Gross inadequacy of price, in the earlier
case the purc hase price was PhP 1,000 even if
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
there is no assumption of mortgage, mere gross
inadequacy of the price is very clear in 1470, will
not affect a CoS. But the same does not apply to
a judicial sale and therefore, the Courts as what
happened in Abarca can set aside that sale
where there is gross inadequacy. Again, it is
shocking to the conscience of men. So that is
the exception, judicial sale.
However, there is an exception to that exception.
What? If there is a right of redemption. When
there is a right of redemption, even if the price is
grossly inadequat e, even if it was a judicial sale,
the Courts would more often than not still uphold
the validity of the sale. Why? Because the gross
inadequacy of price is in favor of the
redemptioner, the original owner. So again,
general rule, 1470. Exception, judicial sale,
when the price not mere inadequacy, but where
the price is shocking to the conscience of men
and there is a showing that in the event of a
resale, a better price may be obt ained.
Exception to the exception, there is a right of
redemption in which case, the proper remedy is
not to question the validity of the sale but rather
to redeem the property kasi in favor man sa iyo
as redemptioner yung lower na price. However,
there is one case, the case of Cometa vs CA a
2001 case, by way of extraordinary
circumstances perceived, we have under the
facts of that case a judicial sale where there is a
right of redemption. But the right of redemption
has been lost and that the inadequacy of the
price was found purely shocking to the
conscience such that the mind revolts at it and
such that a reasonable man would neither
directly or indirectly be likely to consent to it, the
same will be set aside. Very peculiar ang
circumstances of the case, again it was
emphasized that extraordinary circumstances:
judicial sale, inadequacy of price purely shocking
to the conscience, there is a right of redemption
which has been lost, nevertheless, the Supreme
Court set aside t he sale. S o we have a general
rule, exception and an exception to that
exception and an exceptional case as well. Well,
that’s the law diba?
So again, when you have the circumstances,
again take note whether or not the price affects
the validity take into consideration the
circumstances of each case.
Now, lesion, recall under Art. 1381 of ObliCon,
lesion as to wards and guardians of not more
than ¼ yung na s uffer. Lesion of more than ¼ of
the value of the thing makes rescissible unless
approved by the court. This is also in relation to
Art. 1386. This is also another instance where
you can question the validity of the sale becaus e
of the inadequacy of the pric e. Pero very specific
siya. So if you see that the price was
PhP750, 000 and the value of the property was
deemed to be PhP1M, is the sale valid or not ?
Valid. It’s not more than ¼ , it’s just equivalent to
¼ yung lesion diba? For lesion to take place for
the contract to be rescissible, it must be more
than ¼.
30
Art. 1381. The following contracts are
resci ssible:
(1) Those which are entered into by
guardians whenever the wards whom they
represent suffer lesion by more than one -
fourth of the value of the things which are
the object thereof; XXX
Art. 1386. Resci ssion referred to in Nos. 1
and 2 of Article 1381 shall not take place with
respect to contracts approved by the courts.
Other provisions in relation to gross inadequacy
of the price, when we go to redemption,
extinguishment of a CoS, we have Art. 1602, the
concept of equitable mortgage. Gross
inadequacy of the price may raise the
presumption of an equitable mortgage wherein
it’s a mortgage, however it lacks the formalities
required under the law. You have a Deed of Sale
or ang gi-represent is a collateral, security or
prenda. And anong nakalagay dun na price?
Yung amount na pera na hiniram which is less
than the value of the property. So in that case,
there is gross inadequacy. A presumption of an
equitable mortgage may arise so walang valid
sale. Now, sale wit h right to repurc hase, or
absolute sale, the gross inadequacy will give ris e
to equitable mortgage wherein the contract will
be reformed to a mortgage contract.
Now also take note with regard to a CoS,
differentiate cause from motive. The same thing
in ObliCon. Cause, proximate cause. Motive,
again. It does not affect the validity of the CoS
unless it predetermines the cause.
So, we’re already done with the three essential
elements. Consent, Subject Matter and Price.
Now, let’s go to formation of a Contract of Sale.
PART III: FORMATION OF A CONTRACT OF
SALE
Recall our discussions on the stages of a sale.
1. Negotiation stage- covers the period
from the time the prospective
contracting parties indicate interest in
the contract until the contract is
perfected wherein now we go into the
second stage;
2. Perfection stage- wherein there is the
concurrence of the essential elements
and is actually the shortest stage among
the three;
3. Cons ummation stage- fulfillment of the
contract.
I. POLICITACION
Now, you have policitacion. Ito yun g nas a
negotiation stage. It covers the doctrine of
freedom of contract which signifies or implies the
right to choose with whome to contract. A
property owner is free to offer his property for
sale to any int erested person and actually, in the
absence of any agreement, is not bound to sell
the property in favor of the lessee or the
occupant thereof. Remember sa policitacion
stage, it is initiated by an offer which is certain,
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
prior to perfection either party may stop the
negotiation. In other words, i-withdraw ang offer.
The withdrawal is effective immediately after its
manifestation. Of course it can be withdrawn as
long as there is no acceptance yet. To convert it
into a contract or to give rise to a perfected
contract of sale, there must be an acceptanc e
which must be absolut e and unqualified. It must
be free, unequivocal, unconditional and without
variance of any sort from the proposal. An
unaccept ed unilateral promise prior to
acceptance does not give rise to any obligations
or a right and where an offer is given with a
stated time for its acceptance, the offer is
terminat ed at the expiration of that time.
So now we have here the concept of an option
contract.
Q: What is an option contract?
A: An option contract is one where an owner of a
property gives the other party the exclusive right
to buy the property within a fixed time in a
certain period.
What happened in the case of Tayag vs
Lacson?
TAYAG vs. LACSON
FACTS: Respondents Angelica Tiotuyco Vda.
de Lacson, and her children were the registered
owners of t hree parcels of land locat ed in
Mabalacat, Pampanga. The properties were
tenant ed agricultural lands.
On March 17, 1996, a group of original
farmers/tillers, Tiamson, et al., individually
executed in favor of the petitioner separat e
Deeds of Assignment in which the assignees
assigned to the petitioner their respective rights
as tenants/tillers of the landholdings possessed
and tilled by them for and in consideration of
P50.00 per square meter. The said amount was
made payable "when the legal impediments to
the sale of the property to the petitioner no
longer existed." The petitioner was also granted
the exclusive right to buy the property if and
when the respondents, with the concurrence of
the defendants-tenants, agreed to sell the
property. In the interim, the petitioner gave
varied sums of money to the tenants as partial
payments, and the latter issued receipts for the
said amounts.
On July 24, 1996, the petitioner called a meeting
of the defendants-tenants to work out the
implementation of the terms of their separat e
agreements.
However, on A ugust 8, 1996, the defendants-
tenants, through Joven Mariano, wrot e the
petitioner stating that they were not attending the
meeting and instead gave notice of their
collective decision to sell all their rights and
interests, as tenants/lessees, over the
landholding to the respondents Lacson.
31
On August 19, 1996, the petitioner filed a
complaint against the defendants-tenants, as
well as the respondents, for the court to fix a
period within which to pay the agreed purchas e
price of P50.00 per square meter to the
defendants, as provided for in the Deeds of
Assignment.
Respondents as defendants asserted that they
never induc ed the defendants Tiamson to violat e
their contracts with the petitioner; and, being
merely tenants-tillers, the defendants-tenants
had no right to ent er into any transactions
involving their properties wit hout their knowledge
and consent. They also averred that the
transfers or assignments of leasehold rights
made by the defendants-tenants to the petitioner
is contrary to Presidential Decree (P.D. ) No. 27
and Republic Act No. 6657, the Comprehensive
Agrarian Reform Program (CA RP).
The defendants-tenants Tiamson, et al., alleged
in their answer with counterclaim for damages,
that the money each of them received from the
petitioner were in the form of loans, and that
they were deceived into signing the deeds of
assignment. What they knew was that they were
made to sign a document that will serve as a
receipt for the loan granted to them by the
plaintiff.
ISSUE: WON the Deeds of Assignment are
perfected option contracts
RULI NG: No, there is no perfected option
contract.
The Court does not agree with the contention of
the petitioner that the deeds of assignment
executed by the defendants-tenants are
perfected option cont racts. An option is a
contract by which the owner of the property
agrees with anot her person that he shall have
the right to buy his property at a fixed pric e
within a cert ain time. It is a condition offered or
contract by which the owner stipulates wit h
another that the latter shall have the right to buy
the property at a fixed pric e within a certain time,
or under, or in compliance with certain terms and
conditions, or which gives to the owner of the
property the right to sell or demand a sale. It
imposes no binding obligation on the person
holding the option, aside from the consideration
for the offer. Until accepted, it is not, properly
speaking, treated as a contract. The second
party gets not lands, not an agreement that he
shall have the lands, but the right to call for and
receive lands if he elects. An option cont ract is a
separate and distinct contract from which the
parties may enter into upon the conjunction of
the option.
In this case, the defendants-tenants-subtenants,
under the deeds of assignment, grant ed to the
petitioner not only an option but the exclusive
right to buy the landholding. But the grantors
were merely the defendants-tenants, and not the
respondents, the registered owners of the
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
property. Not being the registered owners of the
property, the defendants-tenants could not
legally grant to the petitioner the option, much
less the "exclusive right" to buy the property. As
the Latin saying goes, "NEMO DA T QUOD NON
HABET."
Q: So do we have a valid option contract or
valid option contracts here?
A: The Supreme Court said no, there was no
valid option contract.
Q: What i s the missing element? Isn’t it that
you mentioned that Tayag was given the
exclusive right to buy the property and in
fact they have agreed as to the purcha se
price of PhP50.00 per sq/m.
A: The S C said that the tenants here were not
the real owners of the land, they did not have the
right to give the petitioner the option to buy since
they are not the registered owners of the
property.
Q: So again, what element is missing? In the
definition you cited, what was missing for the
Supreme Court to rule that there was no
perfected option contract? Who were the
ones who gave the option?
A: The tenants. They don’t have the right to give
the option to the buyer.
TAYAG vs LACS ON: No perfected option
contract. An option is a contract by which the
owner of the property agrees with another
person that he shall have the right to buy his
property at a fixed price within a cert ain time. It
is a condition offered or contract by which the
owner stipulates with another that the latter shall
have the right to buy the property at a fixed pric e
within a certain time. So in t his case, the tenants
granted to the petitioner the exclusive right to
buy the land but they were merely defendant’s
tenants and not the respondents. Not being the
registered owners of the property, they do not
legally grant to petitioner the option much less
the exclusive right to buy the property.
Remember what was the prayer here of Tayag,
that a period be fixed for said option to be
exercised. But the Court cannot fix the period
because in the first place, the defendant-tenants
who gave the exclusive right to buy, in the first
place, they do not have the right to sell the
property. So take note in this case, while it is
true that ownership is not required for the
perfection of a sale, when we talk of an option
contract, giving another person the right to buy
the property, there could be no perfected option
contract if t he person who gave that right has no
right in the first place to sell or grant said option.
Now, also take note here it was emphasized that
for a valid option contract you have the
definition, and likewise an option contract
imposes no binding obligation to the person
holding the option aside from the consideration
for the offer, until accepted it is not treated as a
sale. As in this case, tenants not being the
registered owners cannot grant an option to the
land much less to grant an exclusive right to buy
32
the property with the saying Nemo dat quod non
habet.
Q: What is the difference between an option
contract and a contract of sale?
A: In an option contract, the seller gives the right
to the would-be buyer to purchase his property.
But in a CoS, there is already an agreement or
meeting of the minds bet ween the two.
Q: So, there’s meeting of the minds as to the
option contract? What’ s the difference?
What happened in the case of Adelfa
Properties vs CA?
ADELFA PROP ERTI ES VS. CA
[G.R. NO. 111238. JANUARY 25, 1995.]
PARTI ES: Roa srio and Salud Jimenez –
Seller
Adelfa Properties – Buyer
Subject:: western portion of a parcel of land
8855 sq. m s. Covered by TCT 309773 situated
in Barrio Culasi, Las Pinas, Metro Manila
FACTS: Rosario Jimenez-Castaneda, Salud
Jimenez and their brothers, Jose and Dominador
Jimenez, were t he registered co -owners of a
parcel of land consisting of 17,710 sq. ms
(TCT 309773) situated in Barrio Culasi, Las
Piñas, Metro Manila. On 28 July 1988, Jose and
Dominador Jimenez sold their share consisting
of 1/2 of said parc el of land, specifically the
eastern portion thereof, to Adelfa Properties
pursuant to a “K asulatan sa Bilihan ng Lupa. ”
Subsequently, a “Confirmatory Extrajudicial
Partition Agreement ” was ex ecuted by the
Jimenezes, wherein the eastern portion of the
subject lot, with an area of 8,855 sq. ms. was
ADJUDICATED TO JOS E AND DOMINADOR
JIMENEZ, WHILE THE WESTERN PORTION
WAS ALLOCATED TO ROSARIO AND SALUD
Jimenez.
Thereafter, Adelfa Properties expressed interest
in buying the western portion of the property
from Rosario and Salud. Accordingly, on 25
November 1989, an “Exclusive Option to
Purchase” was executed between the parties,
with the condition that the selling price shall be
P2,856,150, that the option money of P50,000
shall be credited as partial payment upon the
consummation of sale, that the balance is to be
paid on or before 30 November 1989, and that in
case of default by Adelfa Properties to pay the
balance, the option is cancelled and 50% of the
option money shall be forfeited and the other
50% refunded upon the sale of the property to a
third party.
Before A delfa P roperties could make payment, it
received summons on 29 November 1989,
together with a copy of a complaint filed by the
nephews and nieces of Rosario and S alud
against the latter, Jose and Dominador Jimenez,
and A delfa P roperties in t he RTC Makati (Civil
Case 89-5541), for annulment of the deed of
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
sale in favor of Household Corporation and
recovery of ownership of the property covered
by TCT 309773.
As a consequence, in a letter dated 29
November 1989, Adelfa Properties informed
Rosario and Salud that it would hold payment of
the full purchase price and suggested that the
latter settle the case with their nephews and
nieces. . Salud Jimenez refused to heed the
suggestion of Adelfa Properties and attributed
the suspension of payment of the purchase pric e
to “lack of word of honor.”
On 14 December 1989, Rosario and Salud sent
Francisca Jimenez to see Atty. Bernardo, in his
capacity as Adelfa P roperties’ counsel, and to
inform the latter that they were cancelling the
transaction. In turn, Atty. Bernardo offered to pay
the purchase price provided that P500, 000. 00 be
deducted therefrom for the settlement of the civil
case. This was rejected by Rosario and Salud.
On 22 December 1989, Atty. Bernardo wrot e
Rosario and Salud on the same matter but this
time reducing the amount from P500,000.00 t o
P300,000.00, and this was also rejected by the
latter. On 23 February 1990, the RTC dismissed
Civil Case 89-5541.
On 16 April 1990, Atty. Bernardo wrote Rosario
and Salud informing the latter that in view of the
dismissal of the case against them, Adelfa
Properties was willing to pay the purchase price,
and he requested that the corresponding deed of
absolute sale be ex ecuted. This was ignored by
Rosario and Salud. On 27 July 1990, Jimenez’
counsel sent a letter to Adelfa Properties
enclosing t herein a check for P 25,000.00
representing the refund of 50% of the option
money paid under the exclusive option to
purchase. Rosario and Salud then requested
Adelfa Properties to return the owner’s duplicat e
copy of the certificate of title of Salud Jimenez.
Adelfa Properties failed to surrender the
certificate of title.
Rosario and Salud Jimenez filed Civil Case 7532
in the RTC Pasay City (Branc h 113) for
annulment of contract with damages, praying,
among others, that the exclusive option to
purchase be declared null and void; that Adelfa
Properties be ordered to return the owner’s
duplicate certificate of title; and that the
annotation of the option contract on TCT 309773
be cancelled.
RTC: On 5 September 1991, the t rial court
rendered judgment holding that the agreement
entered into by the parties was merely an option
contract, and declaring that the suspension of
payment by Adelfa Properties constituted a
counter-offer which, therefore, was tantamount
to a rejection of the option. It likewise ruled that
Adelfa Properties could not validly suspend
payment in favor of Rosario and Salud on the
ground that the vindicatory action filed by the
latter’s kin did not involve the western portion of
the land covered by the contract between the
33
parties, but the eastern portion thereof whic h
was the subject of the sale bet ween Adelfa
Properties and the brothers Jose and Dominado r
Jimenez. The trial court then directed the
cancellation of the exclusive option to purchas e.
On appeal,
RTC: the Court of appeals affirmed in toto the
decision of the court a quo. That Article 1590 of
the Civil Code on suspension of payments
applies only to a contract of sale or a contract to
sell, but not to an option cont ract which it opined
was the nature of the document subject of the
case at bar.
Henc e, the petition for review on certiorari.
Adelfa properties posits that the contract is a
Cont ract of Sale and not an Option Contract or
Cont ract to Sell, making the suspension of
payment applicable in the case.
ISSUE: Whether or not the contract is a Contract
of Sale , Option Contract or Contract to Sell.
SC: The Supreme Court affirmed the assaile d
judgment of the Court of A ppeals in CA-GR CV
34767, with modificatory premises.
Agreement between parties a contract to sell
and not an option contract or a contract of
sale
The alleged option contract is a contract to sell,
rather than a contract of sale. The distinction
between the t wo is important for in contract of
sale, the title passes to the vendee upon the
delivery of the thing sold; whereas in a contract
to sell, by agreement the ownership is reserved
in the vendor and is not to pass until the full
payment of the price. In a contract of sale, the
vendor has lost and cannot recover ownership
until and unless the contract is resolved or
rescinded; whereas in a contract to sell, title is
retained by the vendor until the full payment of
the price Thus, a deed of sale is considered
absolute in nature where there is neither a
stipulation in the deed that title to the property
sold is reserved in the seller until the full
payment of the pric e, nor one giving the vendor
the right to unilaterally resolve the contract the
moment the buyer fails to pay within a fixed
period.
That the parties really intended to execute a
contract to sell is bolstered by the fact that the
deed of absolute sale would have been issued
only upon the payment of the balance of the
purchase price, as may be gleaned from Adelfa
Properties’ letter dated 16 April 1990 wherein it
informed the vendors that it “is now ready and
willing to pay you simultaneously with the
execution of the corresponding deed of absolut e
sale.”
Contract interpreted to ascertain intent of
parties; Title not controlling if text show s
otherwise. The important task in contract
interpretation is always the ascertainment of the
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
intention of the contracting parties and that task
is to be discharged by looking to the words they
used to project that intention in their contract, all
the words not just a particular word or two, and
words in context not words standing alone.
Moreover, judging from the subsequent acts of
the parties which will hereinafter be discussed, it
is undeniable that the intention of the parties
was to enter int o a contract to sell. In addition,
the title of a contract does not necessarily
determine its true nature. Hence, the fact that
the document under discussion is entitled
“Exclusive Option to Purchase” is not controlling
where the text thereof shows that it is a contract
to sell.
Test to determine contract as a “contract of
sale or purchase” or mere “option”. The test
in determining whether a contract is a “contract
of sale or purchase” or a mere “option” is
whet her or not the agreement could be
specifically enforced. There is no doubt that
Adelfa’s obligation to pay the purchase price is
specific, definite and certain, and cons equently
binding and enforceable. Had the Jimenezes
chosen to enforce the contract, they could have
specifically compelled Adelfa to pay the balanc e
of P2,806,150.00. This is distinctly made
manifest in the contract itself as an integral
stipulation, compliance with which could legally
and definitely be demanded from petitioner as a
consequence.
Adelfa Properties justi fied in suspending
payment of balance by reason of vindicatory
action filed against it. In Civil Case 89-5541, it
is easily discernible that, although the complaint
prayed for the annulment only of the contract of
sale executed between A delfa Properties and
the Jimenez brothers, the same likewise prayed
for the recovery of therein Jimenez’ share in that
parcel of land specific ally covered by TCT
309773. In other words, the Jimenezes were
claiming to be c o-owners of the entire parcel of
land described in TCT 309773, and not only of a
portion thereof nor did their claim pertain
exclusively to the eastern half adjudicated to the
Jimenez brot hers. Therefore, Adelfa Properties
was justified in sus pending payment of the
balance of the purchase price by reas on of the
aforesaid vindicatory action filed against it. The
assuranc e made by the Jimenezes that Adelfa
Properties did not have t o worry about the case
because it was pure and simple harassment is
not the kind of guaranty contemplat ed under the
exceptive clause in Article 1590 wherein the
vendor is bound to make payment even with the
existence of a vindicatory action if the vendee
should give a security for the return of the price.
Jimenezes may no longer be compelled to
sell and deliver subject property. Be that as it
may, and the validity of t he suspension of
payment notwithstanding, the Jimenezes may no
longer be compelled to sell and deliver the
subject property to Adelfa Properties for two
reasons, that is, Adelfa’s failure to duly effect the
consignation of the purchase price after the
34
disturbance had ceased; and, secondarily, the
fact that the contract to sell had been validly
rescinded by the Jimenezes.
Resci ssion in a contract to sell. Article 1592 of
the Civil Code which requires rescission either
by judicial action or notarial act is not applicable
to a contract to sell. Furthermore, judicial action
for rescission of a contract is not necessary
where the contract provides for automatic
rescission in case of breach, as in the contract
involved in t he present controversy. By Adelfa’s
failure to comply with its obligation, the
Jimenezes elected to resort to and did announc e
the rescission of the contract through its letter to
Adelfa dated 27 July 1990. That written notice of
rescission is deemed sufficient under the
circumstances.
WHEREFORE, on the foregoing modificatory
premises, and considering that the same result
has been reached by respondent Court of
Appeals with respect to the relief awarded to
private respondents by the court a quo which we
find to be correct, its assailed judgment in CA -
G.R. CV No. 34767 is hereby AFFIRME D.
Q: First, going back to my earlier question,
what is the distinction between an option
contract and a contract of sale?
A: An option is a continuing offer or a contract
where t he owner stipulates that the latter shall
have the right to buy the property at a fixed pric e
within a certain time. It is considered as an
unaccept ed offer.
Q: How is that different from sale? What do
you have here?
A: No option contract. It was a contract to sell.
Q: Why was it considered a Contract to Sell?
What is in a Contract to Sell?
A: In a contract of sale, ownership passes to the
vendee upon delivery of the property.
Q: In a contract to sell? How is it different?
A: In a contract to sell, ownership to the property
is reserved to the vendor until payment of the
purchase price.
Q: How about the money denominated as
option money?
A: It was ruled by the court as earnest money. It
was stipulated that it shall be credited as partial
payment of the sale.
But remember it was an earnest money in a
contract to sell. Not earnest money in a CoS.
ADELFA PROP ERTI ES vs CA: So here you
have a CtS, again the Supreme Court
distinguished a CoS from a CtS. You should
already know the distinctions by heart. Here, the
exclusive option to purc hase, although it
provided for automatic rescission and partial
forfeiture, it does not mention that petitioner is
obliged to return possession or ownership. In
other words, there was no intention to trans fer
ownership. So it is not a CoS. It may be legally
inferred that the parties never int ended t o
transfer ownership to the petitioner, completion
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
of the payment of the purchase price. The Deed
of Abs olute Sale would have been issued o nly
upon the payment of the balance of the
purchase price which is the nature of a CtS. The
exclusive option to purchase is not contained in
a public instrument. The execution of whic h
would have been delivery.
Title of a contract again does not determine the
nature, even if it is denominated an exclusive
option to purchase, it’s not also considered as
an option contract. An option is a continuing
offer or cont ract by which the owner stipulates
with another that the latter shall have the right to
buy the property at a fixed price within a certain
time, or under, or in compliance with, certain
terms and conditions, or which gives to the
owners of the property the right to sell or
demand a sale. It is also sometimes called an
“unaccepted offer.” But there was already
meeting of the minds in the sense that you give
the right to the possible buyer time to think over.
Wherein during that time, you will not offer the
property to other persons. But of course, there
must be a consideration. It secures the privilege
to buy. It is not a sale of property, but a sale of
the right to purchase. It is simply a contract by
which the owner of property agrees with another
person that he shall have the right to buy his
property at a fixed price wit hin a c ertain time. He
does not sell his land; he does not agree to sell
it; but he does sell something, that it is, the right
or privilege to buy at the election or option of the
other party. Its distinguishing characteristic is
that it imposes no binding obligation on the
person holding the option, aside from the
consideration for the offer. Until acceptance, it is
not, properly speaking, a contract, and does not
vest, trans fer, or agree to t rans fer, any title to, or
any interest or right in the subject matter, but is
merely a contract by which the owner of property
gives the optionee the right or privilege of
accepting the offer and buying the property on
certain terms.
The distinction between an "option" and a
contract of sale is that an option is an
unaccept ed offer. It states the terms and
conditions on which the owner is willing to sell
the land, if the holder elects to accept them
within the time limited. If the holder does so
elect, he must give notice to the other party, and
the accepted offer thereupon becomes a valid
and binding contract. If an accept ance is not
made within the time fixed, the owner is no
longer bound by his offer, and the option is at an
end. A contract of sale, on the other hand, fixes
definitely the relative rights and obligations of
both parties at the time of its execution. The
offer and the acceptanc e are concurrent, since
the minds of the contracting parties meet in the
terms of the agreement.
The test here is whether or not the agreement
can be specific ally enforced. In an option
contract, you cannot demand the other party, the
one who holds the option to pay the price,
because he has not yet accepted the proposal.
35
You are only giving him time to think it over. On
the part of the seller, you cannot enforce the
seller to deliver the property unless you have
already notified that you have ex ercised the
option in that contract of sale. An agreement is
only an "option" when no obligation rests on the
party to make any payment except such as may
be agreed on bet ween the parties as
consideration to support the option until he has
made up his mind within the time specified. That
is what we refer to as option money whic h
should be distinguished from option money.
In this case, the PhP50,000 was not option
money but rat her an earnest money in a CtS.
Not a CoS since it was already established that
you do not have a sale here but a CtS.
There are clear distinctions between earnest
money and option money, viz.: (a) earnest
money is part of the purchase price, while option
money is the money given as a distinct
consideration for an option c ontract; (b) earnest
money is given only where there is already a
sale, while option money applies to a sale not
yet perfected; and (c) when earnest money is
given, the buyer is bound to pay the balance,
while when the would-be buyer gives option
money, he is not required to buy.
However in this case, it is an earnest money in a
CtS. Now why the distinctions here? Why is it
relevant? Here, tender of payment would be
sufficient to preserve the right or privilege. This
is because the provisions on consignation are
not applicable when there is no obligation to pay.
A contract to sell, as in the case before us,
involves the performance of an obligation, not
merely the exercise of a privilege of a right.
Cons equently, performance or payment may be
effected not by tender of payment alone but by
both tender and consignation.
With that we could say that an option contract
has the following characteristics:
1. It is onerous. There must be separat e
consideration referred to as option
money and therefore valuable;
2. It is also consensual as there must be
meeting of the minds as to the subject
matter, the price even if not paid;
3. Unilat eral since the optioner is obliged
under the option contract;
4. The subject matter is not the thing itself
but the option to purchase the subject
matter. So what do you have here is an
intangible subject matter or right.
5. An option contract is not covered by the
Statue of Frauds;
6. An option cont ract we could say is a
principal contract and a preparatory
contract.
If you have an option contract, what are the
obligations of the offeror?
1. The offeror has the personal obligation
not to offer to any third party the sale of
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
the object of the option contract during
the option period;
2. Also the personal obligation not to
withdraw the offer during t he option
period; and
3. The obligation to hold the subject matter
of sale to the offeree in the event the
offeree exercises his option during the
option period.
So we now go to inadequacy of price. You very
well know from obligations and contracts, Art.
1355:
Art. 1355. Except in ca ses specified by law,
lesion or inadequacy of cause shall not
invalidate a contract, unless there has been
fraud, mistake or undue influence.
The same principle or concept is emphasized in
a contract of sale, and we have Art. 1470.
Art. 1470. Gross inadequacy of price does
not affect a contract of sale, except as it may
indicate a defect in the consent, or that the
parties really intended a donation or some
other act or contract.
All right, so defect in cons ent is the same as that
emphasized in 1355. S o again take note, gross
inadequacy of the price does not affect a
contract of sale. What is important is that it still
conforms to the requirements of a cont ract of
sale – deemed onerous and commutative at the
same time. There is no requirement that the
price given should be exactly the value of the
subject matter delivered.
Because when we say that the contract of sale is
onerous, what is required is that there is a
valuable consideration. And when we say that it
is commutative in nature, as long as the parties
honestly believe that they receive good value for
what they have given up in exchange, then you
have a valid contract of sale, even if the price is
grossly inadequate.
However, differentiate gross inad equacy from
simulated price. What is difference?
BRAVO-GUERRERO vs. EDWARD P. BRAVO
FACTS: Spouses Mauricio and Simona Bravo
owned 2 parcels of land measuring 287 and 291
square meters and located in Makati City, Metro
Manila. The Properties are registered under TCT
Nos. 58999 and 59000 issued by the Register of
Deeds of Rizal on 23 May 1958. The Properties
contain a large residential dwelling, a smaller
house and ot her improvements.
Mauricio and Simona had three children -
Roland, Cesar and Lily, all surnamed Bravo.
Cesar died without issue. Lily Bravo married
David Diaz, and had a son, David B. Diaz, Jr.
("David Jr."). Roland had six children, namely,
36
Elizabeth Bravo-Guerrero, Edward, Roland,
Senia, Benjamin, and their half-sister, Ofelia.
Simona executed a General Power of Attorney
("GPA") on 17 June 1966 appointing Mauricio as
her attorney-in-fact. In the GPA, Simona
authorized Mauricio to "mortgage or otherwis e
hypothec ate, sell, assign and dispose of any and
all of my property, real, personal or mixed, of
any kind whatsoever and wheresoever situated,
or any interest therein." Mauricio subs equently
mortgaged the Properties to the PNB and DBP
for P10,000 and P5,000, respectively.
On 25 October 1970, Mauricio executed a Deed
of Sale wit h Assumption of Real Estate
Mortgage conveying the Properties to vendees
Roland A. Bravo, Ofelia A. Bravo and Elizabet h
Bravo-Guerrero.” The sale was conditioned on
the payment of P1,000 and on the assumption
by the vendees of the PNB and DBP mort gages
over the Properties.
As certified by the Clerk of Court of the Regional
Trial Court of Manila, the Deed of Sale was
notarized by Atty. Victorio Q. Guzman on 28
October 1970 and ent ered in his Notarial
Register. However, the Deed of Sale was not
annotated on TCT Nos. 58999 and 59000.
Neither was it presented to P NB and DBP. The
mortage loans and the receipts for loan
payments issued by PNB and DBP continued to
be in Mauricio’s name even after his death on 20
November 1973. Simona died in 1977.
On 23 June 1997, Edward, represented by his
wife, Fatima B ravo, filed an action for the judicial
partition of the Properties. Edward claimed that
he and the other grandchildren of Mauricio and
Simona are co-owners of the Properties by
succession. Despite this, petitioners refused to
share with him the possession and rental income
of the Properties. Edward later amended his
complaint to include a pray er to annul the Deed
of Sale, which he claimed was merely simulated
to prejudice the other heirs.
The trial court upheld Mauricio’s sale of the
Properties to the vendees. The trial court ruled
that the sale did not prejudice the compulsory
heirs, as the Properties were conveyed for
valuable consideration.
Citing Article 166 of the Civil Code, the Court of
Appeals reversed trial court’s decision and
declared the Deed of Sale void for lack of
Simona’s consent. It also found that there was
insufficient proof that the vendees made the
mortgage payments on the Properties, since the
PNB and DBP rec eipts were issued in Mauricio’s
name. The appellate court opined that the rent al
income of the Properties, which the vendees
never shared wit h respondents, was sufficient to
cover the mortgage payments to PNB and DBP.
ISSUE: WON the sale of the properties was
simulated or void for gross inadequacy of price
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
RULI NG: No, the sale of the properties is not
void either for being simulated or for inadequacy
of price.
Respondents, however, contend that the sale of
the Properties was merely simulated. As proof,
respondents point to the consideration of P 1,000
in the Deed of Sale, which respondents claim is
grossly inadequate compared to the actual value
of the Properties.
Simulation of contract and gross inadequacy of
price are distinct legal concepts, with different
effects. When the parties to an alleged contract
do not really intend to be bound by it, the
contract is simulated and void. A simulated or
fictitious contract has no legal effect whatsoever
because t here is no real agreement bet ween the
parties.
In contrast, a contract with inadequat e
consideration may nevertheless embody a true
agreement between the parties. A contract of
sale is a consensual contract, which becomes
valid and binding upon the meeting of minds of
the parties on the price and the object of the
sale. The concept of a simulated sale is thus
incompatible with inadequacy of price. When the
parties agree on a price as the actual
consideration, the sale is not simulated despit e
the inadequacy of the price.
Gross inadequacy of price by itself will not result
in a void contract. Gross inadequacy of price
does not even affect the validity of a contract of
sale, unless it signifies a defect in the consent or
that the parties actually intended a donation or
some other contract. Inadequacy of cause will
not invalidate a cont ract unless there has been
fraud, mistake or undue influenc e. In this case,
respondents have not proved any of the
instances that would invalidate the Deed of Sale.
Respondents even failed to establish that the
consideration paid by the vendees for the
Properties was grossly inadequate. As the trial
court pointed out, the Deed of Sale stipulates
that, in addition t o the payment of P1,000, the
vendees should assume the mortgage loans
from PNB and DBP. The consideration for the
sale of the Properties was thus P1,000 in cash
and the assumption of the P15,000 mortgage.
Respondents argue that P16, 000 is still far
below the actual value of the Properties The tax
declarations placed the assessed value of bot h
Properties at P16,160. Compared to this, the
price of P16,000 cannot be considered grossly
inadequate, much less so shocking to the
conscience as to justify the setting aside of the
Deed of Sale.
So here, the SC emphasized the distinction
between simulation of contract and gross
inadequacy. They are distinct legal concepts
with have different effects.
When the parties enter into a contract with no
intention to be bound, the contract is simulated
37
and therefore void. Simulated or fictitious
contract has no legal effect whatsoever becaus e
again there was no legal (??) between the
parties.
However, a contract with inadequat e
consideration will nevertheless --- int o
agreement bet ween the parties.
The conc ept of simulated sale is incompatible
with inadequacy of price. Gross inadequacy of
price in itself will not result to a void contract,
and does not even affect the validity of a
contract of sale unless it signifies a defect in the
consent --in this case there was no proof of the
defect -- or that the parties actually intended a
donation or some other cont ract.
There was no allegation that there was other
intention.
Inadequacy of cause will not invalidate a
contract unless there is fraud, mistake, or undue
influence. Here, the consideration provided in
the deed of sale was P1,000.00 but in addition to
that, the vendees would also assume the
mortgage loans.
E ven assuming that there was no assumption of
mortgage, the consideration of mere 1,000, even
if it would be found as grossly inadequate, will
not invalidate the sale in the absence of any
evidence that the consent was vitiated, or the
parties intended to enter into some other
contract.
So that’s the general rule: gross inadequacy of
price will not affect the contract of sale. How
about judicial s ale? What the effect of a gross
inadequacy of price?
It is shocking to the morals of man. So what ?
What is the effect?
THE DIRECTOR OF LANDS, vs. ABARCA, ET
AL
FACTS: About fourteen years, the lot now in
question was the subject of litigation between
Datu Bualan and his co-claimants, on the one
hand, and Ciriaco Lizada, on the ot her. Juan A.
Sarenas and Domingo Braganza were the
attorneys for Datu Bualan and his co-claimants
in that suit, wherein a judgment was rendered
declaring Datu Bualan and his co-claimants the
owners of the land involved in the litigation.
Subsequently, a controversy arose bet ween the
Bagobos and their attorneys as to the amount of
fees due the latter, whereupon the attorneys
took possession of the property now in question.
Action was brought by the Bagobos against their
former attorneys for the rec overy of the land. In
this action judgment was rendered ordering the
attorneys to return the property seized by them,
and requiring the Bagobos to pay their former
attorneys the sum of P6,000 as fees. As a result
of this judgment Datu Bualan and his co-
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
claimants paid Sarenas and Braganza the sum
of P5,126.13. They also paid to the municipal
treasurer of Davao in the name of Sarenas and
Braganza, for tax es and penalties due on the
property in the year 1926, while t he same was in
the possession of the latter, th e sum of
P1,035.87. The B agobos assumed that, by
these payments which amounted in all to
P6,162, the judgment rendered against them for
P6,000 together with int erests due thereon, was
fully satisfied.
Claiming that the sum paid to the municipal
treasurer of Davao should not be credited on the
amount of the judgment obt ained by them,
Sarenas and Braganz a caused the clerk of the
court to issue a writ of execution on the said
judgment. By reason of t he writ of execution s o
issued, the sheriff levied on the property here in
question and sold it to Sarenas and Braganz a
for the sum of P877.25. Upon the failure of the
Bagobos to redeem the property, they filed their
claim in the present cadastral case, alleging that
they were the absolute owners of the lot in
question.
In view of the evidence presented by the parties,
the lower court dismissed the claim of Sarenas
and B raganza, and ordered the registration of
the lot now in question in the names of Dat u
Bualan and his co-claimants, subject, however,
to a lien in favor of Sarenas and Braganza for
the sum of P877.25, with interest at the rate of
12 per cent per annum from April 27, 1927.
In dismissing the claim of Sarenas and
Braganza, the lower court held that the sale by
the sheriff of the property in question in favor of
said claimants was null and void, because the
amount of P877.25 paid by Sarenas and
Braganza was absolutely inadequate.
ISSUE: WON a judicial sale of real property will
be set aside when price is adequate
RULI NG: Yes if the price is so inadequate as to
shock the conscience of the court.
The lower court was right in declaring the
sheriff's sale null and void on the ground of the
inadequacy of the pric e paid. It appears that in
1927 the assessed value of the contested
property was more than P60,000. A judicial sale
of real property will be set aside when the pric e
is so inadequate as to shock the conscience of
the court. (National Bank vs. Gonzalez, 45 Phil.,
693.)
In the instant case there is another important
consideration. In fairness and equity, which after
all are the true aims of the law, the amount paid
by Datu Bualan and his co-claimants for taxes
and penalties due on the contested property
should be credited on the judgment obtained by
Sarenas and Braganz a. Such taxes and
penalties accrued while the property was in that
possession under a claim of ownership. It
follows that the error assigned by Datu Bualan
38
and his co-claimants against the judgment
below, to the effect that the lower court erred in
subjecting the property sought to be registered
to a lien in favor of Sarenas and Braganza for
P877.25 with interests, must be sustained
So again, while it is the general rule that gross
inadequacy of the price will not invalidate the
sale, take note: if it is a Judicial sale, if the price
is so inadequate as to shock the conscience of
the court, then the judicial sale of real property
will be set aside.
So in other words, what can we deduc e from this
one? Gross inadequacy of price does not affect
a contract of sale – that would generally apply to
all kinds of contracts EXCEP T when the sale
involved is a judicial sale or sale by the order of
the court wherein the price is NOT JUS T grossly
inadequate, but if its inadequacy is shocking to
the conscience of man and there is a showing
that in the event of a sale, a better price can be
obtained, that judicial sale can be set aside.
In other words, it can be considered as null and
void. However take not, there is an
E XCEP TION TO THE E XCEP TION:
When there is a judicial sale, but there is a right
of redemption given to the owner.
In that instance, lower purchase price would be
favorable to the redemptioner. The proper
remedy in that instance is not to question the
sale, but to REDEEM it. Diba? Because it is
favorable to you as the owner or redemptioner.
If there a right to redeem in a foreclosure sale,
inadequacy of the pric e is not material, becaus e
the lesser the price, the easier it would be for the
owner to effect the redemption.
So, we have the general rule, then we have the
exception, then the exception to the exception.
But, we also have this case of Cuneta v. CA, it’s
a 2001 case. In that case, there is a right of
redemption. So it is a judicial sale, but what was
the ruling of the court? By way of extraordinary
circumstances perceived, when in a judicial sale,
the right of redemption has been lost, where the
inadequacy of the price is purely shocking to the
conscience such that a reasonable man would
neither directly or indirectly be likely to consent
it, the same will be set aside.
Here, it is an example of a case na may
extraordinary circumstance in the sense that,
even if it was a judicial sale with right of
redemption, the SC held that the sale should be
set aside because of the extraordinary
circumstances in that case. But then again, that
is the exception to the exception to the
exception. So t hat is normal in our
jurisprudence.
But again just take note of the rules involving
gross inadequacy of price. Take int o
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
consideration the nature of the sale, as well as
the other circumstances therein.
Now, we can also relate it to what you have
discussed in obligations and contracts – lesion
or inadequacy.
We have Art. 1381
Art. 1381. The following contracts are
resci ssible:
(1) Those which are entered into by
guardians whenever the wards whom they
represent suffer lesion by more than one -
fourth of the value of the things which are
the object thereof;
(2) Those agreed upon in representation of
absentees, if the latter suffer the lesion
stated in the preceding number;
(3) Those undertaken in fraud of creditors
when the latter cannot in any other manner
collect the claims due them;
(4) Those which refer to things under
litigation if they have been entered into by
the defendant without the knowledge and
approval of the litigants or of compete nt
judicial authority;
(5) All other contracts specially declared by
law to be subject to re sci ssion.
What is the status of that contract? It makes it
rescissible – valid but can be rescinded, unless
the sale was approved by the court under Art.
1386.
Take note: lesion must be MORE THA N ¼ of the
value of the property.
Also in addition to gross inadequacy of the price,
we have Art. 1602 – the concept of equitable
mortgage, wherein it is a mortgage however it
lacks the formalities required under the law. But
the intention of the parties is to have that
property as a security or a collateral for a
principal obligation.
Now one of the instances wherein the
presumption of equitable mortgage will arise is
gross inadequacy of the price. Whether it’s an
absolute sale or sale with right to repurchase,
gross inadequacy will give rise to equitable
mortgage and the parties may seek for the
reformation of the contract. From sale to a
mortgage c ontract, to show the true intention of
the parties.
Also take note that when it comes to cause or
consideration, differentiate it from MOTIVE.
Consideration must be the one required for the
validity of the cont ract of sale, REGA RDLESS of
the motive, UNLESS the motive is in relation t o
the cause or consideration.
So we’re done with price.
39
Now we’ll go to the CONS UMMATION of the
contract of sale.
Remember the stages of a contract of sale. The
NEGOTIA TION, PERFECTION, and
CONSUMMA TION.
What happens in Policitacion? There is an offer.
Remember it is a preparatory stage, there is a
unilateral promise to buy or sell, but there is still
no obligation imposed upon the parties for the
offer given may be withdrawn. Or it may be
accepted. When it is accepted and the
acceptance is absolute, there is a meeting of the
minds which would give rise now to a perfected
contract of sale.
Another scenario: there is an offer, but the offer
was rejected. Or there could be a counter-offer
or re-negotiation until there could be a meeting
of the minds.
Also in an offer, there may be a period given in
that offer. When the period expires, wala na
yung offer. Or the offer may be subjected to the
fulfillment of a resolutory condition; or the non -
happening of a suspensive condition; or the offer
may be withdrawn by the offeror, but of course,
this must be before acceptance.
In relation to t his Policitacion, we also have t o
consider that in this stage, it covers the doctrine
of freedom of contract. It signifies the right to
choose to enter into a cont ract, a property owner
is free to offer his property for sale to an
interested person, and he is not bound to sell the
same to the occupant thereof absent any prior
agreement vesting the occupant the right of first
priority. In policitacion, negotiation is formally
initiated by an offer which we all know must be
CERTA IN. At any time prior to perfection, either
negotiating party may stop the negotiation. At
this stage, the offer may be withdrawn, and the
withdrawal is effective immediately after its
manifestation. To convert the offer into a
contract, remember there must be acceptance,
which must be ABSOLUTE and must not qualify
the terms of the offer. It must be clear,
unequivocal, unconditional, and without varianc e
of any sort from the proposal.
During the policitacion stage, we also have this
OPTION CONTRA CT. What is an option
contract? What happened in the case of Tayag?
TAYAG vs. LACSON
FACTS: Respondents Angelica Tiotuyco Vda.
de Lacson, and her children were the registered
owners of t hree parcels of land locat ed in
Mabalacat, Pampanga. The properties were
tenant ed agricultural lands.
On March 17, 1996, a group of original
farmers/tillers, Tiamson, et al., individually
executed in favor of the petitioner separat e
Deeds of Assignment in which the assignees
assigned to the petitioner their respective rights
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
as tenants/tillers of the landholdings possessed
and tilled by them for and in consideration of
P50.00 per square meter. The said amount was
made payable "when the legal impediments to
the sale of the property to the petitioner no
longer existed." The petitioner was also granted
the exclusive right to buy the property if and
when the respondents, with the concurrence of
the defendants-tenants, agreed to sell the
property. In the interim, the petitioner gave
varied sums of money to the tenants as partial
payments, and the latter issued receipts for the
said amounts.
On July 24, 1996, the petitioner called a meeting
of the defendants-tenants to work out the
implementation of the terms of their separat e
agreements.
However, on A ugust 8, 1996, the defenda nts-
tenants, through Joven Mariano, wrot e the
petitioner stating that they were not attending the
meeting and instead gave notice of their
collective decision to sell all their rights and
interests, as tenants/lessees, over the
landholding to the respondents Lacson.
On August 19, 1996, the petitioner filed a
complaint against the defendants-tenants, as
well as the respondents, for the court to fix a
period within which to pay the agreed purchas e
price of P50.00 per square meter to the
defendants, as provided for in the Deeds of
Assignment.
Respondents as defendants asserted that they
never induc ed the defendants Tiamson to violat e
their contracts with the petitioner; and, being
merely tenants-tillers, the defendants-tenants
had no right to ent er into any transactions
involving their properties wit hout their knowledge
and consent. They also averred that the
transfers or assignments of leasehold rights
made by the defendants-tenants to the petitioner
is contrary to Presidential Decree (P.D. ) No. 27
and Republic Act No. 6657, the Comprehensive
Agrarian Reform Program (CA RP).
The defendants-tenants Tiamson, et al., alleged
in their answer with counterclaim for damages,
that the money each of them received from the
petitioner were in the form of loans, and that
they were deceived into signing the deeds of
assignment. What they knew was that they were
made to sign a document that will serve as a
receipt for the loan granted to them by the
plaintiff.
ISSUE: WON the Deeds of Assignment are
perfected option contracts
RULI NG: No, there is no perfected option
contract.
The Court does not agree with the contention of
the petitioner that the deeds of assignment
executed by the defendants-tenants are
perfected option cont racts. An option is a
contract by which the owner of the property
agrees with anot her person that he shall have
the right to buy his property at a fixed pric e
40
within a cert ain time. It is a condition offered or
contract by which the owner stipulates wit h
another that the latter shall have the right to buy
the property at a fixed pric e within a certain time,
or under, or in compliance with certain terms and
conditions, or which gives to the owner of the
property the right to sell or demand a sale. It
imposes no binding obligation on the person
holding the option, aside from the consideration
for the offer. Until accepted, it is not, properly
speaking, treated as a contract. The second
party gets not lands, not an agreement that he
shall have the lands, but the right to call for and
receive lands if he elects. An option cont ract is a
separate and distinct contract from which the
parties may enter into upon the conjunction of
the option.
In this case, the defendants-tenants-subtenants,
under the deeds of assignment, grant ed to the
petitioner not only an option but the exclusive
right to buy the landholding. But the grantors
were merely the defendants-tenants, and not the
respondents, the registered owners of the
property. Not being the registered owners of the
property, the defendants-tenants could not
legally grant to the petitioner the option, much
less the "exclusive right" to buy the property. As
the Latin saying goes, "NEMO DA T QUOD NON
HABET."
All right, in this case, the S C defined: an
OPTION is a contract in which the owner of the
property agrees with another person that he
shall have the right to buy his (owner) property
at a fixed price and at a certain time. It is a
condition offered or contract in which the owner
stipulates with another person where the latter
shall have the right to buy the property under
certain terms and conditions, or which gives the
owner of the property a right to sell or demand a
sale. It imposes no binding obligation on the
person holding the option aside from the
consideration for the offer. Until accepted, it is
not, properly speaking, treat ed as a contract of
sale. But that option contract is already a
contract in itself, even if it imposes no binding
obligation.
Now in this case, the tenants, not being the
registered owners, cannot grant an option on the
land, much less any exclusive right to buy the
property.
Take not e of the characteristics of an option
contract:
1. ONE ROUS – there must be a separat e
consideration which must also be
valuable. But how do we distinguish this
from a contract of sale?
ADELFA PROP ERTI ES VS. CA
[G.R. NO. 111238. JANUARY 25, 1995.]
PARTI ES: Roa srio and Salud Jimenez –
Seller
Adelfa Properties – Buyer
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
Subject: western portion of a parcel of land
8855 sq. m s. Covered by TCT 309773 situated
in Barrio Culasi, Las Pinas, Metro Manila
FACTS: Rosario Jimenez-Castaneda, Salud
Jimenez and their brothers, Jose and Dominador
Jimenez, were t he registered co -owners of a
parcel of land consisting of 17,710 sq. ms (TCT
309773) situated in Barrio Culasi, Las Piñas,
Metro Manila. On 28 July 1988, Jose and
Dominador Jimenez sold their share consisting
of 1/2 of said parc el of land, specifically the
eastern portion thereof, to Adelfa Properties
pursuant to a “K asulatan sa Bilihan ng Lupa. ”
Subsequently, a “Confirmatory Extrajudicial
Partition Agreement ” was ex ecuted by the
Jimenezes, wherein the eastern portion of the
subject lot, with an area of 8,855 sq. ms. was
ADJUDICATED TO JOS E AND DOMINADOR
JIMENEZ, WHILE THE WESTERN PORTION
WAS ALLOCATED TO ROSARIO AND SALUD
Jimenez.
Thereafter, Adelfa Properties expressed interest
in buying the western portion of the property
from Rosario and Salud. Accordingly, on 25
November 1989, an “Exclusive Option to
Purchase” was executed between the parties,
with the condition that the selling price shall be
P2,856,150, that the option money of P50,000
shall be credited as partial payment upon the
consummation of sale, that the balance is to be
paid on or before 30 November 1989, and that in
case of default by Adelfa Properties to pay the
balance, the option is cancelled and 50% of the
option money shall be forfeited and the other
50% refunded upon the sale of the property to a
third party.
Before A delfa P roperties could make payment, it
received summons on 29 November 1989,
together with a copy of a complaint filed by the
nephews and nieces of Rosario and S alud
against the latter, Jose and Dominador Jimenez,
and A delfa P roperties in t he RTC Makati (Civil
Case 89-5541), for annulment of the deed of
sale in favor of Household Corporation and
recovery of ownership of the property covered
by TCT 309773.
As a consequence, in a letter dated 29
November 1989, Adelfa Properties informed
Rosario and Salud that it would hold payment of
the full purchase price and suggested that the
latter settle the case with their nephews and
nieces. . Salud Jimenez refused to heed the
suggestion of Adelfa Properties and attributed
the suspension of payment of the purchase pric e
to “lack of word of honor.”
On 14 December 1989, Rosario and Salud sent
Francisca Jimenez to see Atty. Bernardo, in his
capacity as Adelfa P roperties’ counsel, and to
inform the latter that they were cancelling the
transaction. In turn, Atty. Bernardo offered to pay
the purchase price provided that P500, 000. 00 be
deducted therefrom for the settlement of the civil
case. This was rejected by Rosario and Salud.
On 22 December 1989, Atty. Bernardo wrot e
Rosario and Salud on the same matter but this
41
time reducing the amount from P500,000.00 t o
P300,000.00, and this was also rejected by the
latter. On 23 February 1990, the RTC dismissed
Civil Case 89-5541.
On 16 April 1990, Atty. Bernardo wrote Rosario
and Salud informing the latter that in view of the
dismissal of the case against them, Adelfa
Properties was willing to pay the purchase price,
and he requested that the corresponding deed of
absolute sale be ex ecuted. This was ignored by
Rosario and Salud. On 27 July 1990, Jimenez’
counsel sent a letter to Adelfa Properties
enclosing t herein a check for P 25,000.00
representing the refund of 50% of the option
money paid under the exclusive option to
purchase. Rosario and Salud then requested
Adelfa Properties to return the owner’s duplicat e
copy of the certificate of title of Salud Jimenez.
Adelfa Properties failed to surrender the
certificate of title.
Rosario and Salud Jimenez filed Civil Case 7532
in the RTC Pasay City (Branc h 113) for
annulment of contract with damages, praying,
among others, that the exclusive option to
purchase be declared null and void; that Adelfa
Properties be ordered to return the owner’s
duplicate certificate of title; and that the
annotation of the option contract on TCT 309773
be cancelled.
RTC: On 5 S eptember 1991, the t rial court
rendered judgment holding that the agreement
entered into by the parties was merely an option
contract, and declaring that the suspension of
payment by Adelfa Properties constituted a
counter-offer which, therefore, was tantamount
to a rejection of the option. It likewise ruled that
Adelfa Properties could not validly suspend
payment in favor of Rosario and Salud on the
ground that the vindicatory action filed by the
latter’s kin did not involve the western portion of
the land covered by the contract between the
parties, but the eastern portion thereof whic h
was the subject of the sale bet ween Adelfa
Properties and the brothers Jose and Dominador
Jimenez. The trial court then directed the
cancellation of the exclusive option to purchas e.
On appeal,
RTC: the Court of appeals affirmed in toto the
decision of the court a quo. That Article 1590 of
the Civil Code on suspension of payments
applies only to a contract of sale or a contract to
sell, but not to an option cont ract which it opined
was the nature of the document subject of the
case at bar.
Henc e, the petition for review on certiorari.
Adelfa properties posits that the contract is a
Cont ract of Sale and not an Option Contract or
Cont ract to Sell, making the suspension of
payment applicable in the case.
ISSUE: Whether or not the contract is a Contract
of Sale, Option Cont ract or Contract to Sell.
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
SC: The Supreme Court affirmed the assailed
judgment of the Court of A ppeals in CA-GR CV
34767, with modificatory premises.
Agreement between parties a contract to sell
and not an option contract or a contract of
sale
The alleged option contract is a contract to sell,
rather than a contract of sale. The distinction
between the t wo is important for in contract of
sale, the title passes to the vendee upon the
delivery of the thing sold; whereas in a contract
to sell, by agreement the ownership is reserved
in the vendor and is not to pass until the full
payment of the price. In a contract of sale, the
vendor has lost and cannot recover ownership
until and unless the contract is resolved or
rescinded; whereas in a contract to sell, title is
retained by the vendor until the full payment of
the pric e. Thus, a deed of sale is considered
absolute in nature where there is neither a
stipulation in the deed that title to the property
sold is reserved in the seller until the full
payment of the pric e, nor one giving the vendor
the right to unilaterally resolve the contract the
moment the buyer fails to pay within a fixed
period.
That the parties really intended to execute a
contract to sell is bolstered by the fact that the
deed of absolute sale would have been issued
only upon the payment of the balance of the
purchase price, as may be gleaned from Adelfa
Properties’ letter dated 16 April 1990 wherein it
informed the vendors that it “is now ready and
willing to pay you simultaneously with the
execution of the corresponding deed of absolut e
sale.”
Contract interpreted to ascertain intent of
parties; Title not controlling if text show s
otherwise. The important task in contract
interpretation is always the ascertainment of the
intention of the contracting parties and that task
is to be discharged by looking to the words they
used to project that intention in their contract, all
the words not just a particular word or two, and
words in context not words standing alone.
Moreover, judging from the subsequent acts of
the parties which will hereinafter be discussed, it
is undeniable that the intention of the parties
was to enter int o a contract to sell. In addition,
the title of a contract does not necessarily
determine its true nature. Hence, the fact that
the document under discussion is entitled
“Exclusive Option to Purchase” is not controlling
where the text thereof shows that it is a contract
to sell.
Test to determine contract as a “contract of
sale or purchase” or mere “option”. The test
in determining whether a contract is a “contract
of sale or purchase” or a mere “option” is
whet her or not the agreement could be
specifically enforced. There is no doubt that
Adelfa’s obligation to pay the purchase price is
specific, definite and certain, and cons equently
42
binding and enforceable. Had the Ji menezes
chosen to enforce the contract, they could have
specifically compelled Adelfa to pay the balanc e
of P2,806,150.00. This is distinctly made
manifest in the contract itself as an integral
stipulation, compliance with which could legally
and definitely be demanded from petitioner as a
consequence.
Adelfa Properties justi fied in suspending
payment of balance by reason of vindicatory
action filed against it. In Civil Case 89-5541, it
is easily discernible that, although the complaint
prayed for the annulment only of the contract of
sale executed between A delfa Properties and
the Jimenez brothers, the same likewise prayed
for the recovery of therein Jimenez’ share in that
parcel of land specific ally covered by TCT
309773. In other words, the Jimenezes were
claiming to be c o-owners of the entire parcel of
land described in TCT 309773, and not only of a
portion thereof nor did their claim pertain
exclusively to the eastern half adjudicated to the
Jimenez brot hers. Therefore, Adelfa Properties
was justified in sus pending payment of the
balance of the purchase price by reas on of the
aforesaid vindicatory action filed against it. The
assuranc e made by the Jimenezes that Adelfa
Properties did not have t o worry about the case
because it was pure and simple harassment is
not the kind of guaranty contemplat ed under the
exceptive clause in Article 1590 wherein the
vendor is bound to make payment even with the
existence of a vindicatory action if the vendee
should give a security for the return of the price.
Jimenezes may no longer be compelled to
sell and deliver subject property. Be that as it
may, and the validity of t he suspension of
payment notwithstanding, the Jimenezes may no
longer be compelled to sell and deliver the
subject property to Adelfa Properties for two
reasons, that is, Adelfa’s failure to duly effect the
consignation of the purchase price after the
disturbance had ceased; and, secondarily, the
fact that the contract to sell had been validly
rescinded by the Jimenezes.
Resci ssion in a contract to sell. Article 1592 of
the Civil Code which requires rescission either
by judicial action or notarial act is not applicable
to a contract to sell. Furthermore, judicial action
for rescission of a contract is not necessary
where the contract provides for automatic
rescission in case of breach, as in the contract
involved in t he present controversy. By Adelfa’s
failure to comply with its obligation, the
Jimenezes elected to resort to and did announc e
the rescission of the contract through its letter to
Adelfa dated 27 July 1990. That written notice of
rescission is deemed sufficient under the
circumstances.
WHEREFORE, on the foregoing modificatory
premises, and considering that the same result
has been reached by respondent Court of
Appeals with respect to the relief awarded to
private respondents by the court a quo which we
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
find to be correct, its assailed judgment in CA -
G.R. CV No. 34767 is hereby AFFIRME D.
So here, it was not an option contract, not a
contract of sale, but rather a Contract to Sell.
Again the S C pointed out the distinctions
between a contract of sale and a contract to sell.
Here the exclusive option t o purchase does not
mention that petitioner is obliged to return
possession or ownership. It may therefore be
inferred that the parties never int ended t o
transfer ownership to the petitioner until
completion of the purchas e price. The Deed of
Sale would have been issued only upon
payment of the balance of the purchase price.
So that shows their intent that there is no
transfer of ownership until there is full payment
of the price.
It has not been shown that there has been
delivery whet her actual or constructive. The
exclusive option to purchase was not contained
in a public instrument to be considered as
constructive delivery. E ven if the contr act was
denominated or entitled as “Exclusive Option t o
Purchase”, such is not controlling where the text
shows that it is a contract to sell.
Again the S C discussed an option contract being
a continuing offer wherein the owner stipulated
with another that the latter has the right to buy
the property at a fixed price and at a certain
time, or under or upon compliance with certain
conditions, or which gives to the owner of the
property the right to sell or demand a sale.
It is sometimes called an unaccepted offer and
secures the privilege to buy. It is not a sale of
property, but a sale of a right to repurchase. The
distinguishing characteristic of an option is that it
imposes no binding obligation on the person
holding the option. Until acceptance, it is not
properly speaking a contract, and does not vest
transfer or agree to transfer a title to or any
interest or right to the subject matter.
An option is an Unaccepted offer, it states the
terms and conditions in which the owner is
willing to sell the land, if the holder elects to
accept them within the time limited. If the holder
does so elect, he must give notice to the other
party, and the accepted offer thereby becomes a
valid and binding contract. If an acceptanc e is
not made within the time fixed, the owner is no
longer bound by his offer, and the option is
ended.
The test in determining whether a cont ract is a
sale or option is whether or not the agreement
would be specifically enforced. An agreement is
only an option when no obligation rests on the
party to make any payment, except as such may
be agreed between the parties as consideration
to support the option until he has made up his
mind within the time specified.
43
The alleged 50,000 is actually an Earnest
money, but it is an earnest money in a co ntract
to sell, not a contract of sale.
Also take note here of t he discussion of the
court. The rule is different in an option contract,
or in legal redemption, or in a sale with right to
repurchase, wherein consignation is NOT
necessary because these cases involve the
exercise of a right or privilege. Tender of
payment would be sufficient to serve the right or
privilege.
A contract to sell involves the performance of an
obligation, not merely the exercise of a right or
privilege. Consequently, performance or
payment may be effected NOT by tender of
payment alone, but also of consignation.
So that’s the reason why it is important to
determine the nature of the contract here. So
since here it was a contract to sell, there must
be tender of payment plus consignation. If it was
an option contract, consignation would not have
been required.
Take note of the distinctions of Contract of Sale
and Option Cont ract:
 Both contracts are ONEROUS, however in
an option contract, there must be a separat e
consideration, separate from the purchas e
price.
 Both contracts are perfected by mere
consent, they are CONSENS UAL. However
a contract of sale is covered by the Statute
of Frauds, but an option contract is not.
 A contract of sale is BILATERA L and
RECIPROCA L, however an option contract
is UNILA TERA L, as it is only the optioner
who is obliged under it.
 A contract of sale is a P RINCIPA L contract,
the same with option contract, as it is not
dependent upon the existence of another
contract. However, an option contracts is
ALSO a PREPARA TORY cont ract at the
same time because it is really in preparation
of a cont ract of sale.
 The subject matter in a contract of sale is
determinate or determinable thing, but in an
option contract, the subject matter is the
OPTION to purchase the subject matter.
The subject matter in an option contract is a
RIGHT, a P RIV ILE GE, it is an intangible.
 In a contract of sale, price certain in money
or its equivalent; in an option contract, the
consideration must be separate and distinct.
Take note als o of the obligations of the offeror.
rd
He has the obligation not to offer to any 3 party
the sale of the object of the option, DURING the
option period.
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
He has also t he obligation not to withdraw the
offer during the option period, and to hold the
subject matter for sale to the offeree in t he event
that the offeree exercises his option during the
option period.
August 25, 2015
So we have already discussed what we mean by
separate consideration in an option cont ract –
what do we mean by this option money. We
have emphasized that this is not the same; the
consideration in an option contract is not the
same sa consideration in a contract of sale. The
separate consideration in an option contract is
not necessarily cash or its equivalent as long as
it is anything of value as emphasized in the cas e
of Villamor vs. Ca.
So again, take note of our discussion on the
effect of separat e consideration or the absenc e
thereof. The case of sanchez vs. Rigos is very
clear that without consideration for the option
there can be no valid option contract. Without
consideration, it is a void option contract but it
can still constitute a valid offer. If the option is
exercised prior to its withdrawal, even in the
absence of a consideration, it will be equivalent
to an offer being accepted prior to the
withdrawal, and therefore if could give rise to a
perfected contract of sale, provided that all the
essential elements of a contract of sale are
present.
So again, recall the case of Sanchez vs. Rigos,
wherein the Supreme Court affirmed the lower
court’s decision although the promise to sell is
not supported by a consideration distinct from
the price. Sanchez, the promis ee accepted the
option to buy before Rigos, the promisor,
withdrew the same. Under such circumstances
the option to purc hase was converted into a
bilateral contract of sale, which bound bot h
parties. As we have emphasized last time, the
case of Sanchez vs. Rigos was very clear in
modifying or abandoning the discussion in
southwestern molasses, wherein it made a
distinction between 1354 and 1479. Wherein the
case sanchez vs. Rigos, the SC emphasized
that there is no difference there is not distinction.
Both of these provisions intend to enforce or
implement the same principle.
Likewise, in the absence of consideration, even
if it was accepted, can still be withdrawn, again
that was also whatever was inconsistent with
southwestern Molasses as to that with Sanchez
vs. Rigos abandoned. So be very careful wit h
cases citing southwestern molasses becaus e
eof this case of sanchez vs. Rigos. Remember
this case referred to the case of Atk ins which
was a 1958 case, where it has the same ruling
with Sanchez vs. Rigos. Compared t o
Southwestern Molasses case, which was a 1955
case. Take note of the discussion of sanc hez vs.
Rigos and how they were able to relate it wit h
44
other case as in the case of Diamante and Bible
Baptist.
Now in the case of Navotas, recall, he was not
the owner, so the same as in the case of Tayag
vs. Lacson.
Now, we have here the case of Vazquez vs. CA.
VAZQUEZ VS. CA
FACTS: A certain property in Himamaylan,
Negros Occidental was registered in the name of
Spouse V allejera. On October 1959, they leased
the property to the Spouses Vasquez. After the
execution of the lease, the Vasquez’ took
possession of the lot and devot ed the same to
the cultivation of sugar.
On September 21, 1964, the spouses Vallejera
sold the lot the spouses Vasquez for t he amount
of 9 T. On t he same day and along with the
execution of the Deed of Sale, a separat e
instrument, denominated as “Right to
Repurchase” was executed by the parties
granting the Vallejeras the right to repurchas e
the lot for 12 T.
By virtue of the Deed of S ale the spouses
Vasquez secured a title in their name. However,
on January 2, 1969, the Vallejeras sold the lot to
Benito Derrama after s ecuring the spous e
Vasquez’ title for 12 T. Upon the protestation of
the spouses Vasquez the sale was cancelled
after payment of 12 T to Derrama.
The spouses Vasquez resisted the action for
redemption on the premise that the deed of
“Right to Repurchase” is just an option to buy
since it is not embodied in the same document
of sale but in a separate document and since
such option is not supported by a consideration
distinct from the price, said deed is not binding
upon them.
The spouses Vazquez insist that they can not be
compelled to res ell the subject property for the
nature of the sale over the said lot between them
and the Vallejeras can only be either an option
to buy or a mere promise on their part to resell
the property. Spouses Vasquez opined that
since the “Right to Repurchase” was not
supported by any consideration distinct from the
purchase price it is not valid and binding upon
the spouses Vasquez pursuant to Article 1479.
ISSUE: Whether or not the spouse Vallejera has
a right to repurchase under the contract.
HELD: No. The Court made reference to the
earlier case of Sanc hez vs. Rigos (Sanchez
doctrine), stating that an option contract without
a separate consideration from the purchas e
price is void, as a contract, but would still
constitute as a valid offer; so that if the option is
exercised prior to its withdrawal, that is
equivalent to an offer being accepted prior to
withdrawal and would give rise to a valid and
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
binding sale.
The Sanchez doctrine also dictates that the
burden of proof to show that the option contract
was supported by a separate consideration is
with the party seeking to show it. No relianc e
can be placed upon the provisions of A rticle
1354 which presumes the existence of a
consideration in every contract, since in the case
of an option contract, Article 1479 being the
specific provision, requires such separat e
consideration for an option to be valid.
In an option contract, the offeree has the burden
of proving that the option is supported by a
separate consideration, it also held that the
Sanchez doctrine (That upon the option contract
not supported by a separate consideration; is
void as contract, but valid as an offer), can only
apply if t he option has been accepted and suc h
acceptance is communicated to the offeror. It
held that not even the annotation of the option
contract on the title of the property can be
considered a proper acceptanc e of the option.
Neither can the signature of the spouses
Vasquez in t he document called "right to
repurchase" signify acceptance of the right to
repurchase. The Vallejeras did not sign the offer.
Acceptance should be made by the promisee, in
this case, the Vallejeras and not the promises,
spouses Vasquez herein. It would be absurd to
require the promisor of an option to buy to
accept his own offer instead of the promisee to
whom the option to buy is given.
What case was cited here?
Was there really a right of repurchase?
Was it correctly termed as Right of repurchase?
What was their intention?
Was there a valid option?
Was there a separat e consideration?
No redemption. No conventional redemption. No
right of repurchase. No valid option contract. It
could not have result ed in a valid contract of sale
because there was no acceptance.
Now, how do you exercise this option contract?
Remember the nat ure of an option cont ract, it is
with a s eparate consideration wherein the
promisee is given a certain period to accept the
contract. In the exercise of an option, it must be
timely and affirmative, in a clear acceptance of
an offer. Second, the optionee must clearly
advis e the optioner of his acceptance and his
readiness to pay the price. However, advic e
need not be coupled with the actual payment of
the price, so long as payment is actually made
when the sale was event ually consummated. As
long as he has shown accept ance and ready to
make payment upon consummation stage of the
sale.
What is the effect of this option when this option
is exercised? The option will then ripen into a
contract of sale. Generally, the option money or
the consideration in an option contract is a
45
separate consideration from the purc hase price.
Wherein if the promise does not decide of does
not accept the said offer, then the option money
cannot be returned back to the promisee. In
other words it is like forfeited. Now there are
several instances, however, that if there is
acceptance from the promisee, the option
money can be deducted. But it is not always the
case. It depends upon the agreement between
the parties. Because again, the nature of option
money is separat e from the purchase price in a
contract of sale.
Another effect, once the seller/optioner delivers
the property or executes the required deed
evidencing the sale, reciprocal obligation, the
buyer/ optionee is now required to pay the price.
Again take not e of the distinctions bet ween a
contract of sale and an option contract.
An accepted unilateral promise to buy and sell a
determinate thing which is supported by a
consideration distinct from the price is the
essence of an option contract. If there is an
option contract with a separate consideration,
and the promisor sold the said property to a third
person, a buyer in good faith, the action is not
for specific performance because there was yet
no perfected contract of sale. There was no
acceptance yet on the art of the promisee.
However, it may give rise to damages.
Option c ontract must have consideration
separate and distinct from the price. Otherwise,
the option cont ract is void. We are not saying
that the sale is void because if there is no
consideration, while the option contract may be
void, the offer can still be accepted until it is
withdrawn and once it is accepted it could give
rise to a perfected contract of sale.
RIGHT OF FIRST REFUS AL
PUP VS. GOLDEN
(This is case related to the case of PUP vs. CA
and Firestone Ceramics)
FACTS: National Development Corp. (NDC) had
in its disposal a 10-hectare property located at
Sta. Mesa, Manila. The estate was popularly
known as NDC Compound.
On September 7, 1977 NDC entered into a
Cont ract of Lease with Golden Horizon Realty
Corp. (GHRC) over a portion of the property with
an area of 2,407 sq. m. for a period of 10 years,
renewable for another 10 years with mutual
consent of the parties.
On May 4, 1978, a second Contract of Leas e
was executed by NDC and GHRC covering
3,222 sq. m., also renewable upon the mutual
consent aft er the expiration of the 10-year leas e
period. In addition, GHRC was granted the
“option to purchas e the area leased, the price to
be negotiated and determined at the time the
option to purchase is exercised.
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
On June 13, 1988, before the expiration of the
10-year period under the second contract,
GHRC wrote a letter to NDC indicating its
exercise of the option to renew the leas e for
another 10 years. NDC gave no response to the
said letter.
In September of the same year, GHRC
discovered that NDC had decided to secretly
dispose the property to a third party, PUP. This
led to the filing of cases before the trial court.
In the meantime President Aquino issued Memo.
Order No. 214 dat ed January 6, 1989 ordering
the transfer of the whole NDC Compound to the
National Government, which in turn would
convey the said property in favor of PUP at
acquisition cost.
PUP then cont ended that GHRC’s right to
exercise the option to purchase had ex pired wit h
the termination of the original contract of leas e
and was not carried over to the subsequent
implied new lease between GHRC and NDC.
Moreover, the contracts clearly state that GHRC
is granted the option to “renew for another 10
years with mutual consent of both parties.” As
regards the continued receipt of rent als by NDC
and possession by GHRC of the leased
premises, the impliedly renewed lease was only
month-to-month and not 10 years since the
rentals are being paid on mont hly basis.
ISSUE: Whether or not GHRC’s right of first
refusal was violated.
HELD: Yes. The pertinent portion of the second
contract of lease provides that: Lessee shall als o
have the option to purchase the area leased, the
price to be negotiated and determined at the
time the option to purchase is exercised.
An option is a contract by whic h the owner of the
property agrees wit h another person that the
latter shall have the right to buy the former’s
property at a fixed price within a cert ain time. It
is a condition offered or contract by which the
owner stipulates with another that the latter shall
have the right to buy the property at a fixed pric e
within a certain time, or under, or in complianc e
with certain terms and conditions; or which gives
to the owner of the property the right to sell or
demand a sale. It binds the party, who has given
the option, not to ent er int o the principal contract
with any other person during the period
designated, and, within that period, to enter int o
such contract with the one to whom the option
was granted, if the latter should decide to use
the option.
Upon the other hand, a right of first refusal is a
contractual grant, not of the sale of a property,
but of the first priority to buy the property in the
event the owner sells the same. As distinguished
from an option contract, in a right of first refusal,
while the object might be made determinate, the
exercise of the right of first refusal would be
46
dependent not only on the owner’s eventual
intention to enter into a binding juridical relation
with another but also on terms, including the
price, that are yet to be firmed up.
When a lease contract contains a right of first
refusal, the lessor has the legal duty to the
lessee not to sell the leased property to anyone
at any price until after the lessor has made an
offer to sell the property to the lessee and the
lessee had failed to accept it. Only after the
lessee has failed to exercise his right of first
priority could the lessor sell the property to other
buyers under the same terms and conditions
offered to the lessee, or under terms and
conditions more favorable to the lessor.
NDC contended that the ruling of the Court in
PUP vs CA and Firestone cannot be applied in
this case because the lease contract of firestone
had not yet expired while in this case GHRC’s
lease cont ract have already expired. This is
untenable. The reckoning point of the offer of
sale to a third party was not the issuance of
Memorandum Order No. 214 on January 6, 1989
but the c ommencement of such negotiations as
early as July 1988 when GHRC’s right of first
refusal was still subsisting and the lease
contracts still in force. NDC did not bother t o
respond to GHRC’s letter of June 13, 1988
informing it of GHRC’s exercise of t he option t o
renew and requesting to discuss further the
matter with NDC, nor to the subsequent letter of
August 12, 1988 reiterating the request for
renewing the lease for another ten (10) years
and also the exercise of the option to purchas e
under the lease contract. NDC had dismissed
these letters as "mere informative in nature, and
a request at its best."
GHRC is similarly situated with Firestone suc h
that it was also prejudiced by NDC’s sale to
PUP. Therefore, GHRC is entitled to exercise its
option to purchas e until October 1988 in as
much as the May 4, 1978 contract embodied the
option to renew the lease contract for another 10
years upon mutual consent and giving GHRC
the option to purchase the leased premises for a
price to be negotiated and determined at the
time such option was exercised by GHRC. It to
be noted that MO 214 itself declared that the
transfer is “subject to such liens/leases existing
on the subject property.”
What is a Right of First Refusal?
How is different from an option contract?
What do we have here?
Is there a violation of this right?
When is the violation of the right considered?
In this case, the SC defined an option contract
and distinguished it from a right of first refusal. In
the case of Polytechnic, it was defined as a
contractual grant, not of the sale (so it is not a
perfected contract of sale) but of the first priority
to buy in the event the owner sells the same. In
right of first refusal, the object might be made
determinate, which is similar to an option
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
contract. But in the right of first refus al depends
upon the owner’s eventual intention to enter into
a binding juridical relation. In other words, intent
to sell the property, as well as dependent upon
the terms, including the prices that are yet to
be firmed up. In option cont ract, the promisor
already has a definit e subject matter and pric e
as to the prospective contract of sale. The
promisee now, has just to decide whether to
accept such offer. The offer must again be
certain. He has just to accept within the time
stipulated by the parties. If the promisee refuses
to accept or does not say anything to the seller
and t he option period has already expired, the
promisor can already sell the property or offer to
sell the property to other third person. In the right
of first refusal, one who has been granted suc h
right has to wait for the seller’s decision to sell
the property and if the seller decides to sell the
property, they still have t o consider the price.
There is still negotiation. I am offering this
property for 1 million, then there is counter offer.
But in the option contract, acceptance nalang
yung hint ayin on the part of the promisee.
Now in this case, there was a violation of the
right of first refusal, which was contained in the
lease contract. Respondent timely exercised its
option on August 12, 1988. However, NDC had
already been negotiating the sale of the property
in favor of PUP without first offering it to the
respondent. This is the essence of the right of
first refusal, if you decide to sell the property,
offer it first to the one who is granted such right.
NDC violated the respondent’s right of first
refusal. The reckoning point of the offer of sale
to a third party was not the issuance of the
memorandum order, but the commencement of
such negotiation, as early as July 28, 1988,
wherein respondent’s right of first refusal was
still subsisting and the lease contract still in
force. Here, NDC did not bother to respond to
respondent’s letter informing it of its exercise to
renew the lease and request to discuss further
matter wit h NDC. NDC just dismissed this letters
as "mere informative in nature, and a request at
its best.
ANG YU VS. CA
FACTS: Ang Yu Asuncion and Keh
Tiong, et al., are tenants or lessees of residential
and commercial spaces owned by Cu Unjieng,
Rose Cu Unjieng and Jose Tan. They have
occupied said spaces since 1935 and have been
religiously paying the rent al and complying wit h
all the conditions of the lease contract. On
several occasions before October 9, 1986, the
owners informed Ang Yu’s party that they are
offering to sell the premises and are giving them
priority to acquire the same. During the
negotiations, Bobby Cu Unjieng offered a pric e
of P6-million while Asuncion and K eh Tiong
made a counter offer of P5-million. They
thereafter asked the owners to put their offer in
writing to which request they acceded; that in
reply to defendant 's letter, plaintiffs wrote them
on October 24, 1986 asking that they specify the
47
terms and conditions of the offer to sell; that
when Asuncion did not receive any reply, they
sent another letter dated January 28, 1987 wit h
the same request. Since the owners failed to
specify the terms and conditions of the offer to
sell and becaus e of information received that the
owners were about to sell the property, Ang Y u
Asuncion and Keh Tiong were compelled to file
the complaint to compel defendants to sell the
property to them.
The trial court found that Cu Unjieng, Rose Cu
Unjieng and Jose Tan offer to sell was never
accepted by the Ang Yu Asuncion and Keh
Tiong, et al., for the reason that the parties did
not agree upon the terms and conditions of the
proposed sale, hence, there was no contract of
sale at all. Nonetheless, the lower court ruled
that should the defendants subsequently offer
their property for sale at a price of P11-million or
below, plaintiffs will have the right of first refusal.
Aggrieved by the decision that there was no
contract of sale at all, the lessees brought a
petition for review on certiorari to the S upreme
Court. The Supreme Court denied the appeal on
May 6, 1991.
On November 15, 1990, while the cas e filed by
the lessees was pending consideration, the Cu
Unjieng spouses executed a Deed of Sale,
transferring the property in question to Buen
Realty and Development Corporation for 15M.
As a consequence of the sale, TCT No.
105254/T-881 in the name of the Cu Unjieng
spouses was cancelled and, in lieu thereof, TCT
No. 195816 was issued in the name of petitioner
on December 3, 1990.
On July 1, 1991, petitioner as the new owner of
the subject property wrote a letter to the lessees
demanding that the latter vacat e the premises.
The decision that should the t he owners decide
to offer the property for sale for a price of P11
Million or lower, and considering the mercurial
and uncertain forces in our market economy
today, the same right of first refusal to herein
plaintiffs/appellants in the event that the subject
property is sold for a price in excess of Eleven
Million pesos or more had become final to the
effect.
The owners were ordered to execute the
necessary Deed of Sale of the property in
litigation in favor of plaintiffs Ang Yu Asuncion,
Keh Tiong and Arthur Go for the consideration of
P15 Million pesos in recognition of plaintiffs ' right
of first refusal and that a new Transfer Certificat e
of Title be issued in favor of the buyer. All
previous transactions involving the same
property notwithstanding the issuance of another
title to Buen Realty Corporation, is hereby set
aside as having been execut ed in bad faith.
A writ of execution was subsequently issued.
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
ISSUE: Whether or not a Writ of Execution may
be decreed on a judgment recognizing the right
of first refusal.
HELD: NO. Writ of Execution is not a remedy.
In the law on sales, the so-called "right of first
refusal" is an innovative juridical relation.
Needless to point out, it cannot be deemed a
perfected contract of sale under Article 1458 of
the Civil Code. Neither can the right of first
refusal, understood in its normal concept, per
se be brought within the purview of an option
under the second paragraph of Article 1479,
aforequoted, or possibly of an offer under Article
9
1319 of the same Code. An option or an offer
10
would require, among other things, a clear
certainty on both the object and the cause or
consideration of the envisioned contract. In a
right of first refusal, while the object might be
made determinate, the exercise of the right,
however, would be dependent not only on the
grantor's eventual intention to enter into a
binding juridic al relation with another but also on
terms, including the price, that obviously are yet
to be later firmed up. Prior thereto, it can at best
be so described as merely belonging t o a class
of preparatory juridical relations governed not by
contracts (since the essential elements to
establish the vinculum juris would still be
indefinite and inc onclusive) but by, among other
laws of general application, the pertinent
scattered provisions of the Civil Code on human
conduct.
E ven on the premise that such right of first
refusal has been decreed under a final
judgment, like here, its breach cannot justify
correspondingly an issuance of a writ of
execution under a judgment that merely
recognizes its existence, nor would it sanction
an action for specific performance without
thereby negating the indispensable element of
11
consensuality in the perfection of contracts. It
is not to say, however, that the right of first
refusal would be inconsequential for, such as
already intimated above, an unjustified disregard
thereof, given, for instance, the circumstances
12
expressed in Article 19 of the Civil Code, can
warrant a recovery for damages.
The final judgment in Civil Case No. 87-41058, it
must be stressed, has merely accorded a "right
of first refusal" in favor of petitioners. The
consequence of such a declaration entails no
more than what has heretofore been said. In
fine, if, as it is here so conveyed to us,
petitioners are aggrieved by the failure of privat e
respondents to honor the right of first refus al, the
remedy is not a writ of execution on the
judgment, since there is none to execute, but an
action for damages in a proper forum for the
purpose.
Furthermore, whether privat e respondent Buen
Realty Development Corporation, the alleged
purchaser of the property, has acted in good
faith or bad faith and whether or not it should, in
48
any case, be considered bound to respect the
registration of the lis pendens in Civil Case No.
87-41058 are matters that must be
independently addressed in appropriat e
proceedings. Buen Realty, not having been
impleaded in Civil Case No. 87-41058, cannot
be held subject to the writ of ex ecution issued by
respondent Judge, let alone ousted from the
ownership and possession of the property,
without first being duly afforded its day in court.
Do you have a Right of First Refusal?
Was it in writing?
What is the issue of the right of first refus al to
the issue of Writ of execution in this case?
What was the basis of the Writ of Execution?
Was the issuance of the writ of execution
proper?
What is the remedy of the person who was
granted this right of first refusal but whose right
was not honored?
In this case, the SC distinguished the right of
first refusal from an option contract as well as
from a contract to sell. A contract to sell being
conditional, the ownership of the thing s old is
retained until the fulfillment of a positive
suspensive condition (normally, the full payment
of the purchase price); an option contract not the
contract of sale itself, he optionee has the right,
but not the obligation, to buy; and then you have
the right of first refusal. It cannot be deemed a
perfected contract of sale. Neither can the right
of first refusal, be brought within the purview of
an option under the second paragraph of Article
1479. An option or an offer would require,
among other things, a clear certainty on both the
object and the cause or consideration of the
envisioned contract. In a right of first refusal,
while the object might be made determinate, the
exercise of the right, however, would be
dependent not only on the grant or's eventual
intention to enter into a binding juridical relation
(in other words, intention to sell) with another but
also on terms, including the price, that obviously
are yet to be later firmed up.
The breach of a right of first refusal cannot justify
the issuance of a writ of execution. The Lower
Court here rec ognizes its existence of the right
of first refusal. But it should not sanction an
action for specific performance because there is
no perfected contract of sale to demand the
obligation arising from the said cont ract. An
unjustified disregard of such right can warrant a
recovery for damages. The remedy is not a writ
of execution on the judgment, since there is
none to execute, but an action for damages.
PARAÑAQUE KI NGS vs. COURT OF
APPEALS
FACTS: Catalina L. Santos is the owner of eight
(8) parcels of land located at Parañaque, Metro
Manila. On November 28, 1977, a cert ain
Frederick Chua leased the property from
defendant Catalina L. Santos. Subsequently,
Chua assigned all his rights and interest and
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
participation in the leased property to Lee Ching
Bing, by virtue of a deed of assignment and with
the conformity of defendant Santos, the said
assignment was also registered.
Ching Bing also assigned all his rights and
interest in the leased property to Parañaque
Kings Enterprises, Incorporated by virtue of a
deed of assignment and with the conformity of
defendant Santos.
Paragraph 9 of the assigned leas ed contract
provides among others that:
"9. That in case the properties subject of the
lease agreement are sold or encumbered,
Lessors shall impose as a c ondition that the
buyer or mortgagee thereof shall recognize and
be bound by all the terms and conditions of this
lease agreement and shall respect this Contract
of Lease as if they are the LESSORS thereof
and in case of sale, LESSEE shall have the first
option or priority to buy the properties subject of
the lease;"
On September 21, 1988, defendant Santos sold
the eight parcels of land subject of the lease t o
defendant David Raymundo for a consideration
of FIVE MILLION PESOS. The said sale was in
contravention of the contract of lease, for the
first option or priority to buy was not offered by
defendant Santos to Parañaque Kings
Enterprises, Incorporated (plaintiff).
Upon learning of this fact plaintiff's
representative wrote a letter to defendant
Santos, requesting her to rectify the error and
consequently realizing the error, she had it
reconvey ed to her for the same consideration of
FIVE MILLION (P5,000,000.00) PESOS.
Subsequently the property was offered for sale
to plaintiff by the defendant for t he sum of
FIFTEE N MILLION (P 15,000,000.00) PESOS.
Plaintiff was given ten (10) days to make good of
the offer.
On May 8, 1989, before the period given in the
letter offering t he properties for s ale expired,
plaintiff's counsel wrote counsel of defendant
Santos offering to buy the properties for FIVE
MILLION PESOS.
On May 15, 1989, before they replied to the offer
to purchase, another deed of sale was executed
by defendant Santos (in favor of) defendant
Raymundo for a consideration of NINE MILLION
PESOS.
Defendant Santos violated again paragraph 9 of
the contract of lease by executing a second
deed of sale to defendant Raymundo.
ISSUE: Whether or not there is a violation on the
right of first refusal.
HELD. Yes. In order to have full compliance wit h
the contractual right granting petitioner the first
49
option to purc hase, the sale of the properties for
the amount of P9 million, the price for whic h they
were finally sold t o res pondent Raymundo,
should have likewise been first offered to
petitioner.
The basis of the right of first refusal* must be
the current offer to sell of the seller or offer to
purchase of any prospective buyer. Only after
the optionee fails to exercise its right of first
priority under the same terms and within the
period contemplat ed, could the owner validly
offer to sell the property to a third person, again,
under the same terms as offered to the optionee.
Deed of Assignment include the option to
purchase
On the contention of respondent Santos that the
assignment of the leas e contract to petitioner did
not include the option to purchase. The
provisions of the deeds of assignment wit h
regard to matters assigned were very clear.
Under the first assignment between Frederick
Chua as assignor and Lee Ching Bing as
assignee, it was expressly stated that:
. . . . the ASSIGNOR hereby CEDES,
TRANSFE RS and ASSIGNS to herein
ASSIGNEE, all his rights, interest and
participation over said premises afore-described,
....
And under the subsequent assignment executed
between Lee Ching Bing as assignor and the
petitioner, represented by its Vice President
Vicenta Lo Chiong, as assignee, it was likewis e
expressly stipulated that;
. . . . the ASSIGNOR hereby sells, transfers and
assigns all his rights, interest and participation
over said leased premises, . . . .
One of such rights included in the contract of
lease and, therefore, in the assignments of rights
was the lessee's right of first option or priority to
buy the properties subject of the lease, as
provided in paragraph 9 of the assigned leas e
contract. The deed of assignment need not be
very specific as to which rights and obligations
were passed on to the assignee. It is understood
in the general provision aforequot ed that all
specific rights and obligations contained in the
contract of lease are those referred to as being
assigned. Needless to state, respondent Santos
gave her unqualified conformity to both
assignments of rights.
Why was there a violation given the fact that
there was already an offer but it was rejected?
If you look at this case, there was an issue here
whet her the breach of right of first refusal states
a valid cause of action. The SC held here that
there was a right of first refusal and there was a
violation of that right of first refusal. In fact, it was
sold to Raymundo without first making an offer
to Paranaque Kings. Upon realizing the error,
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
they repurchased the property. It was them
offered to Paranaque Kings for 15million, but
Paranaque Kings made a counter offer of 5
million stating that 15 million was ridiculous. That
is the time when the property was sold to
Raymundo but it was only for 9 million.
This case emphasizes the requisites for a valid
right of first refusal. The basis of t he right of first
refusal must be the current offer to sell of the
seller or offer to purchase of any prospective
buyer. In other words, hindi lang basta i-offer mo
duon sa may right of first refusal. That offer must
rd
be the same offer that you would do to 3
persons who would be interested t o purchas e
the same property. This means that if it is
offered for 15million to Paranaque Kings, then it
rd
must be of the s ame price or consideration to 3
persons in case Paranaque Kings refus es to
purchase the property. 15 million, counter offer,
5 million and the seller did not agree with the 5
million, so there was no perfected sale. When it
was subsequently offered to Raymundo, it must
still be 15 million. The fact that it entered into a
contract of sale with a 9 million-purchase pric e
shows that there is a violation of this right.
Again, the same price. Not only the same price,
it must also be the same mode of payment.
What do we mean by that? B ecause it is
possible that, here, the purchase price is 15
million with a counter offer of 5 million which was
rd
rejected. The seller offered the property to 3
person, still, for 15 million but on installment. It
must still be considered. The offer here is
different. It is not just for the same price but als o
for the manner of payment.
So there was a valid action for breach of right of
first refusal in this case of Paranaque Kings and
therefore, the complaint should not have been
dismissed.
ROS ENCOR VS. INQUI NG
FACTS: This is a petition for review on certiorari
under Rule 45 of the Rules of Court seeking
1
reversal of the Decision of the Court of Appeals
dated June 25, 1999 in CA-G. R. CV No. 53963.
The Court of Appeals decision reversed and set
2
aside the Decision dated May 13, 1996 of
Branch 217 of the Regional Trial Court of
Quezon City in Civil Case No. Q-93-18582.
The case was originally filed on December 10,
1993 by Paterno Inquing, Irene Guillermo and
Federico Bantugan, herein respondents, against
Rosencor Development Corporation (hereinafter
"Rosencor"), Rene Joaquin, and Eufrocina de
Leon. Originally, the complaint was one for
annulment of absolute deed of sale but was later
amended to one for rescission of abs olute deed
of sale. A complaint-for intervention was
thereafter filed by respondents Fernando
Magbanua and Danna Lizza Tiangco. The
complaint -in-intervention was admitted by the
trial court in an Order dated May 4, 1994.
The facts of the c ase, as stated by the trial court
50
and adopted by the appellate court, are as
follows:
"This action was originally for the annulment of
the Deed of Absolute Sale dated Sept ember 4,
1990 bet ween defendants Ros encor and
Eufrocina de Leon but later amended (sic)
praying for the rescission of the deed of sale.
Paterno Inquing, Irene Guillermo and Federic o
Bantugan averred that they are the lessees
since 1971 of a t wo-story residential apartment
owned by spouses Faustino and Cresencia
Tiangco. The lease was not covered by any
contract. The lessees were renting the premises
then for P150.00 a month and were allegedly
verbally granted by the lessors the pre-emptive
right to purchase the property if ever they decide
to sell the same.
Upon the death of the spouses Tiangcos in
1975, the management of the property was
adjudicated to their heirs who were repres ented
by Eufrocina de Leon. The lessees were
allegedly promised the same pre-emptive right
by the heirs of Tiangcos since the latter had
knowledge that this right was extended to the
former by the late spous es Tiangcos.
In June 1990, the lessees received a letter from
Atty. Erlinda Aguila demanding that they vacat e
the premises so that the demolition of the
building be undertak en. They refused to leave
the premises. In that same month, de Leon
refused to accept the lessees’ rental payment
claiming that they have run out of receipts and
that a new collector has been assigned to
receive the payments. Thereafter, they received
a letter from Eufrocina de Leon offering to sell t o
them the property they were leasing for
P2,000,000.00. xxx.
The lessees offered to buy the property from de
Leon for the amount of P1,000, 000. 00. De Leon
told them that she will be submitting the offer to
the other heirs. Since then, no answer was given
by de Leon as to their offer to buy the property.
However, in November 1990, Rene Joaquin
came to the leased premises introducing himself
as its new owner.
In January 1991, the lessees again received
another letter from Atty. Aguila demanding that
they vacate the premises. A month thereafter,
the lessees received a letter from de Leon
advising them that the heirs of the late spouses
Tiangcos have already sold the property to
Rosencor. The following month Atty. Aguila
wrot e them another letter demanding the rent al
payment and introducing herself as counsel for
Rosencor/Rene Joaquin, the new owners of the
premises.
The lessees requested from de Leon why she
had disregarded the pre-emptive right she and
the late Tiangcos have promised them. They
also asked for a copy of the deed of sale
between her and the new owners thereof but
she refused to heed their request. In the same
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
manner, when they asked Rene Joaquin a copy
of the deed of sale, the latter turned down their
request and instead Atty. Aguila wrote them
several letters demanding that they vac ate the
premises. The lessees offered to tender their
rental payment to de Leon but she refused to
accept the same.
In April 1992 before the demolition can be
undertaken by the Building Official. It was at this
instance that the lessees were furnished with a
copy of the Deed of Sale and discovered that
they were deceived by de Leon since t he sal e
between her and Rene Joaquin/Rosencor took
place in S eptember 4, 1990 while de Leon made
the offer to them only in October 1990 or after
the sale with Rosencor had been consummated.
The lessees also noted that the property was
sold only for P726,000.00.
The lessees offered to reimburse de Leon the
selling price of P726,000.00 plus an additional
P274,000.00 to complete their P1,000.000.00
earlier offer. When their offer was refused, they
filed the pres ent action praying for the following:
a) rescission of the Deed of Absolute Sale
between de Leon and Rosenc or dated
September 4, 1990; b) the defendants
Rosencor/Rene Joaquin be ordered to reconvey
the property to de Leon; and c) de Leon be
ordered to reimburse the plaintiffs for the repairs
of the property, or apply the said amount as part
of the price for the purchase of the property in
the sum of P100,000.00.”
The trial court held that the right of redemption
on which the complaint was based was merely
an oral one and as such, is unenforceable under
the law.
ISSUE: Whether or not a right of first refusal is
indeed covered by the provisions of the New
Civil Code on the statute of frauds.
RULI NG: NO. It is not covered by the statute of
frauds.
A right of first refusal is not among those listed
as unenforceable under the statute of frauds.
Furthermore, the application of Article 1403, par.
2(e) of the New Civil Code presupposes the
existence of a perfected, albeit unwritten,
contract of sale. A right of first refusal, such as
the one involved in the instant case, is not by
any means a perfected contract of sale of real
property. At best, it is a contractual grant, not of
the sale of the real property involved, but of the
right of first refusal over the property sought to
be sold.
It is thus evident that the statute of frauds does
not contemplat e cases involving a right of first
refusal. As such, a right of first refusal need not
be written to be enforceable and may be proven
by oral evidence.
The next question to be ascertained is whether
or not respondents have satisfactorily proven
51
their right of first refusal over the property
subject of the Deed of Absolute Sale dated
September 4, 1990 between petitioner Rosencor
and Eufrocina de Leon.
Respondents have adequately proven the
existence of their right of first refusal. Federic o
Bantugan, Irene Guillermo, and Paterno Inquing
uniformly testified t hat they were promised by
the late spous es Faustino and Crescencia
Tiangco and, later on, by their heirs a right of
first refusal over the property they were currently
leasing should they decide to sell the same.
Moreover, respondents presented a letter20
dated October 9, 1990 where Eufrocina de Leon,
the repres entative of the heirs of the spouses
Tiangco, informed them that they had received
an offer to buy the disput ed property for
P2,000,000.00 and offered to sell the same to
the respondents at the same price if they were
interested. Verily, if Eufrocina de Leon did not
recognize respondents’ right of first refusal over
the property they were leasing, then she woul d
not have bothered to offer the property for sale
to the respondents. It must be noted that
petitioners did not present evidence before the
trial court contradicting the existence of the right
of first refusal of res pondents over the disputed
property.
The final question to be resolved is May a
contract of sale entered into in violation of a third
party’s right of first refusal be rescinded in order
that such third party can exercise said right?
The prevailing doctrine, as enunciated in some
cited cases, is that a contract of sale entered
into in violation of a right of first refusal of
another person, while valid, is rescissible.
There is, however, a circumstance which
prevents the application of this doctrine in the
case at bench. In some cases, the Court ordered
the rescission of s ales made in violation of a
right of first refusal precisely because the
vendees therein did not act in good faith as they
were aware or should have been aware of the
right of first refusal granted to another person by
the vendors therein.
In the instant case was an oral one given to
respondents by the deceased spouses Tiangc o
and subs equently recognized by their heirs. As
such, in order to hold that petitioners were in bad
faith, there must be clear and convincing proof
that petitioners were made aware of the said
right of first refusal either by the respondents or
by the heirs of t he spouses Tiangco. It is
axiomatic that good faith is always presumed
unless contrary evidenc e is adduced.
On this point, we hold that the evidence on
record fails to show that petitioners acted in bad
faith in entering int o the deed of sale over the
disputed property with the heirs of the spouses
Tiangco. Respondents failed to present any
evidence that prior to the sale of the property on
September 4, 1990, petitioners were aware or
had notice of the oral right of first refusal.
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
Was there a violation of the right of first refusal?
What was the remedy being sought here?
What is being sought to be rescinded here?
Can it be availed of here?
How about specific performanc e?
What’s the remaining remedy for the heirs?
One of the distinctions between a right of first
refusal and a contract of sale is that contracts of
sale shall require in order for it to be
enforceable. In right of first refusal it is perfected
by consent and there is no requirement that it
must be in writing for it to be enforceable. It is
not among those listed as unenforceable under
the Statutes of Frauds. The Statute of Frauds
presupposes the existence of a perfected, albeit
unwritten, contract of sale. In the right of first
refusal, there is no contract of sale yet. It is not
by any means a perfected contract of sale of real
property. At best, it is a contractual grant, not of
the sale of the real property involved, but of the
right of first refusal over the property sought to
be sold. It need not be written to be enforceable
and may be proven by oral evidence, which, in
this case was actually proven. There were
testimonies here of several persons as well as
the letter which would show that indeed the heirs
respected the right of first refusal.
Now, here, the SC held that a contract of sale in
violation of a right of first refusal may be
rescissible. However, the rescission cannot be
the case here because it shall only take place if
the person who has bought the property did not
act in bad faith. Here, Rosenc or could not be
considered in bad faith because they had no
knowledge of the right of first refusal because it
was not in writing, it was not annotated in the
title. Rescission shall not take place "when the
things which are the object of the contract are
legally in the possession of third persons who
did not act in bad faith." (1385). The rule on
constructive notice would be inapplicable as it is
undisputed that the right of fi rst refusal was an
oral one and that the same was never reduced
to writing, much less registered with the Registry
of Deeds. In fact, even the lease contract by
which res pondents derive their right to possess
the property involved was an oral one. Evidenc e
on record fails to show that petitioners acted in
bad faith in entering into the deed of sale over
the disputed property.
There is no specific performance in the deed of
sale. Rescission, not available. Damages here,
are available, but of course the ones who are
liable, not Rosencor, because it is in good faith,
but rather the owners and the heirs Tiancos.
VAZQUEZ vs. AYALA CORPORATION
FACTS: On April 23, 1981, spouses Daniel
Vasquez and Ma. Luisa M. Vasquez (hereafter,
Vasquez spouses) entered into a Memorandum
of Agreement (MOA) with Ayala Corporation
(hereafter, AYALA) with AYALA buying from the
Vazquez spouses, all of t he latter's shares of
52
stock in Conduit Development, Inc. (hereafter,
Conduit). The main asset of Conduit was a 49. 9
hectare property in Ayala Alabang, Muntinlupa,
which was then being developed by Conduit
under a development plan where the land was
divided into Villages 1, 2 and 3 of the " Don
Vicente Village." The development was then
being undertaken for Conduit by G.P.
Construction and Development Corp.
Under t he MOA, Ayala was to develop the entire
property, less what was defined as the
"Retained A rea" consisting of 18,736 square
meters. This "Retained Area" was to be retained
by the Vazquez spouses. The area to be
developed by Ayala was called the "Remaining
Area". In this "Remaining A rea" were 4 lots
adjacent to the "Retained Area" and Ayala
agreed to offer these lots for sale to the Vazquez
spouses at the prevailing price at the time of
purchase. Among the relevant provisions of the
MOA on this point is:
5.15. The BUYE R agrees to give the SE LLE RS
a first option to purchase four developed lots
next to the "Retained Area" at the prevailing
market price at the time of the purc hase."
Taking the position that Ayala was obligated to
sell the 4 lots adjacent to the "Retained Area"
within 3 years from the date of the MOA, the
Vasquez spouses sent several "reminder" letters
of the approaching so-called deadline. However,
no demand aft er April 23, 1984, was ever made
by the Vasquez spouses for Ayala to sell the 4
lots. On the contrary, one of the letters signed by
their authorized agent, Engr. Eduardo Turla,
categoric ally stated that they expected
"development of P hase 1 to be completed by
February 19, 1990, three years from the
settlement of the legal problems with the
previous contractor."
By early 1990 Ayala finished the development of
the vicinity of the 4 lots to be offered for sale.
The four lots were then offered to be sold to the
Vasquez spouses at the prevailing price in 1990.
This was rejected by the Vasquez spouses who
want ed to pay at 1984 prices, thereby leading to
a suit.
The court ordered Ayala to sell to the Vazquez
the relevant lots described in the Complaint in
the Ayala Alabang Village at the price of
P460.00 per square meter amounting to
P1,349,540.00.
In its decision, the court a quo concluded that
the option to purc hase the 4 lots is valid becaus e
it was supported by consideration as the option
is incorporat ed in the MOA where the parties
had prestations to each other.
ISSUE: Whether or not paragraph 5.15 of the
MOA can properly be construed as an option
contract or a right of first refusal.
HELD: Paragraph 5.15 of the MOA is a mere
right of first refusal.
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
The Court has clearly distinguis hed between an
option contract and a right of first refusal. A n
option is a preparatory contract in which one
party grants to another, for a fixed period and at
a determined pric e, the privilege to buy or sell, or
to decide whether or not to enter into a principal
contract. It binds the party who has given the
option not to enter int o the principal contract with
any other person during the period designated,
and within that period, to ent er into such contract
with the one to whom the option was granted, if
the latter should decide to use the option. It is a
separate and distinct contract from that whic h
the parties may enter into upon the
consummation of the option. It must be
supported by consideration.
In a right of first refusal, on the other hand, while
the object might be made determinate, the
exercise of the right would be dependent not
only on the grantor's eventual intention to enter
into a binding juridical relation with another but
also on terms, including the price, that are yet to
be firmed up.
Applied to the instant case, paragraph 5.15 is
obviously a mere right of first refusal and not an
option contract. Although the paragraph has a
definite object, i.e., the sale of subject lots, the
period within which they will be offered for sale
to petitioners and, necessarily, the price for
which the subject lots will be sold are not
specified. The phrase "at the prevailing market
price at the time of the purchase" connotes that
there is no definite period within which Ayala
Corporation is bound t o reserve the subject lots
for petitioners to exercise their privilege to
purchase. Neither is there a fixed or
determinable price at which the subject lots will
be offered for sale. The price is considered
certain if it may be det ermined with reference to
another thing certain or if the determination
thereof is left to the judgment of a specified
person or persons.
Further, paragraph 5.15 was inserted into the
MOA to give petitioners the first crack to buy the
subject lots at the price which Ayala Corporation
would be willing to accept when it offers the
subject lots for sale. It is not supported by an
independent consideration. As such it is not
governed by Articles 1324 and 1479 of the Civil
Code, viz:
Art. 1324. When t he offeror has allowed the
offeree a certain period to accept, the offer may
be withdrawn at any time before acceptance by
communicating such withdrawal, except when
the option is founded upon a consideration, as
something paid or promised.
Art. 1479. A promise to buy and sell a
determinate thing for a price certain is
reciprocally demandable.
An accepted unilateral promise to buy or to sell a
determinate thing for a price certain is binding
upon the promissor if the promise is supported
53
by a consideration distinct from the price.
Cons equently, the "offer" may be withdrawn
anytime by communicating the withdrawal to the
other party.
In this case, Ayala Corporation offered the
subject lots for sale to petitioners at the price of
P6,500.00/square meter, the prevailing market
price for the property when the offer was made
on June 18, 1990. Insisting on paying for the lots
at the prevailing mark et price in 1984 of
P460.00/square meter, petitioners rejected the
offer. Ayala Corporation reduced the price t o
P5,000.00/square meter but again, petitioners
rejected the offer and instead made a counter-
offer in the amount of P2,000.00/square
meter. Ayala Corporation rejected petitioners '
counter-offer. With this rejection, petitioners lost
their right to purc hase the subject lots.
It cannot, therefore, be said that Ayala
Corporation breached petitioners ' right of first
refusal and should be compelled by an action for
specific performance to sell the subject lots to
petitioners at the prevailing market pric e in 1984.
Provision 5.15, is it an option contract or a right
of first refusal? Why?
The paragraph 5.15, although it has a definit e
object the period within which they are offered
for sale to the petitioners the price however
period within which they will be offered for sale
and necessarily the price are not specified.
Again in an option contract, the who was given,
or the promisee/ optionee in an option contract
originally knows the purc hase price. All he has to
do is whether to accept that offer. But in the right
of first refusal, there is no price yet. The phras e
at the prevailing market price at the time of the
purchase connotes that there is no definit e
period within which Ayala Corporation is bound
to reserve the subject lots for petitioners to
exercise their privilege to purchas e. Neither is
there a fixed or determinable price at which the
subject lots will be offered for sale. The price is
considered cert ain if it may be determined wit h
reference to another thing certain or if the
determination thereof is left to the judgment of a
specified pers on or persons, but the same was
not applicable to what they have agreed upon.
Also, here, the right that was given herein was
not supported by an independent consideration
so there could be no valid option contract.
Now whether or not there was a violation of this
right of first refusal. There was no violation.
There was an offer for P6,500.00/square meter,
however they insisted on the previous prevailing
market price of of P460. 00/square meter;
counter offer, P5,000.00/square met er but
again, petitioners rejected the offer and instead
made a counter-offer in the amount
of P2,000.00/square meter. Ayala Corporation
rejected petitioners counter-offer. With this
rejection, petitioners lost their right to purchas e
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
the subject lots but without violation to the right
of first refusal.
Take not e that in an option cont ract: In a
consideration, the burden of proof is upon the
optionee to show that there is a separat e
consideration for an option cont ract. This is an
exception to the general rule that you have
under contracts. Kasi nga diba “contracts are
presumed to have a consideration.” It is not even
required that it has to be stated in the contract.
But here, when it comes to an option contract,
you have to show proof that indeed there was a
separate consideration.
TANAY RECREATION CENTER AND
DEVELOPMENT CORP. vs. CATALINA
MATIENZO FAUSTO
G.R. No. 140182. April 12, 2005
FACTS: Petitioner Tanay Recreation Center and
Development Corp. (TRCDC) is the lessee of a
3,090-square meter property located in Sitio
Gayas, Tanay, Rizal, owned by Catalina
Matienzo Fausto, under a Contract of Lease. On
this property stands the Tanay Coliseum Cockpit
operated by petitioner. The lease contract
provided for a 20-year term, subject to renewal
within sixty days prior to its expiration. The
contract also provided that should Fausto decide
to sell the property, petitioner shall have the
“priority right ” to purchase the same.
On June 17, 1991, petitioner wrote Fausto
informing her of its intention to renew the lease.
However, it was Fausto’s daughter, respondent
Anunciacion F. Pacunayen, who replied, asking
that petitioner remove the improvements built
thereon, as she is now the absolute owner of the
property. It appears that Fausto had earlier sold
the property to Pacunayen and title has already
been trans ferred in her name. Petitioner filed an
Amended Complaint for Annulment of Deed of
Sale, Specific Performance with Damages, and
Injunction.
In her A nswer, res pondent claimed that
petitioner is estopped from assailing the validity
of the deed of sale as the latter acknowledged
her ownership when it merely asked for a
renewal of the lease. According to respondent,
when they met to discuss the matter, petitioner
did not demand for the exercise of its option to
purchase the property, and it even asked for
grace period to vacate the premises.
ISSUE: The contention in this case refers to
petitioner’s priority right to purchas e, also
referred to as the right of first refusal.
HELD: When a lease contract contains a right of
first refus al, the lessor is under a legal duty to
the lessee not to sell to anybody at any price
until after he has made an offer to sell to the
latter at a certain price and the lessee has failed
to accept it. The lessee has a right that the
lessor's first offer shall be in his favor.
Petitioner’s right of first refusal is an integral and
indivisible part of the contract of lease and is
54
inseparable from the whole contract. The
consideration for the lease includes the
consideration for the right of first refus al and is
built into the reciprocal obligations of the
parties.
It was erroneous for the CA to rule that the right
of first refusal does not apply when the property
is sold to Fausto’s relative. When the terms of an
agreement have been reduced to writing, it is
considered as containing all the terms agreed
upon. As such, there can be, between the
parties and their successors in int erest, no
evidence of such terms other than the contents
of the written agreement, except when it fails to
express the true intent and agreement of the
parties. In this case, the wording of the
stipulation giving petitioner the right of first
refusal is plain and unambiguous, and leaves no
room for interpretation. It simply means that
should Fausto decide to sell the leased property
during the term of the lease, suc h sale should
first be offered to petitioner. The stipulation does
not provide for the qualification that such right
may be exercised only when the sale is made to
strangers or persons other than Fausto’s kin.
Thus, under the terms of petitioner’s right of first
refusal, Fausto has the legal duty to petitioner
not to sell the property to anybody, even her
relatives, at any price until after she has made
an offer to sell to petitioner at a certain price and
said offer was rejected by petitioner.
Q: Was it established that there was really a
right of first refusal in favor of Tanay?
A: Yes. Even if Fausto died pending litigation,
this does not end the right of first refusal to
Tanay. In fact, the death of Fausto transmitted
the rights and obligations with regard to the
contract of sale, and that includes the right of
first refusal.
Q: What was the remedy here?
A: The SC held in c ase the contract of sale is
executed in violation of a right of first refusal, it is
actually valid but it is RESCISSIB LE and it may
also be subject to specific performance.
Q: But in order for the subsequent sale to be
rescinded, it is required that the subsequent
buyer must be in bad faith? Was there bad fait h
here?
A: No. But the contract of sale may still be
rescinded based on (??? Kindly read the case.
Reporter was unable to ans wer)
Q: Can Tanay here be not considered in
estoppel in recognizing the sale made in favor of
the daughter?
A: The estoppel must be intentional and
unequivocal and the facts of this case show
Tanay here still made assertions and recognized
that the property was still owned by Fausto.
Q: Can there be specific performance for the
heirs to sell the same property in favor of
Tanay?
A: Yes, but the SC ruled that the offer should be
different than that which is given to the daught er.
Q: Why?
A: As a general rule, in ordinary cases the basis
for the amount of the offer should be the same
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
as to what is offered to prospective buyers.
However in this case, the Court took into
consideration that this is not an ordinary case
because this involves a sale bet ween a mother
and daughter and thus the pric e of the sale was
only for a measly sum of 10,000. So t he court
held that this is highly unequitable and therefore
this should not be the same offer given to Tanay.
So in this case, there was as right of first refus al
and the sale in favor of the daughter was
deemed to be in violation. Because in the right of
first refusal agreement, there was no exception
that it will not cover any sale in favor of a
relative. So it did not provide for a qualification
that such right may be exercised only when the
sale is made to strangers. So therefore there
was a violation of the right of first refusal.
Take note that the subsequent sale made in
violation of a right of first refusal is VALID
however it may be RESCINDE D or as in this
case, it may be the subject of an action for
specific performance for the execution of a deed
of sale in favor of the one who is given a right of
first refusal. In this case, the daughter is deemed
to be covered by the contract because the lease
contract with the right first of refusal was not
personal in character. It involves right and
obligations transmissible to the heirs and in fact
respondent was also aware right to the priority of
the sale.
However take note an offer under identical terms
and conditions, while that is the rule in a right of
first refusal, in this case it would be highly
inequitable. The property was sold in 1990 and
for 10, 000. Obviously it is a small amount
because the sale made between a mother a nd a
daughter. So here, the offer to be made to
petitioner should be under reasonable terms and
conditions, taking into account the fair market
value of the property at the time it was sold to
the respondents.
ESTATE OF LLENADO VS EDUARDO
LLENADO ET AL
MARCH 4, 2009
G.R. No. 145736
FACTS: The subject of this controversy is a
parcel of land denominated as Lot 249-D-1
(subject lot) registered in the names of Eduardo
and Jorge Llenado. The subject lot once formed
part of Lot 249-D owned by and registered in the
name of their father, Cornelio Llenado.
Cornelio leased Lot 249-D-1 to his nephew,
Romeo. On March 31, 1978, Cornelio, Romeo
and the latter’s cousin Orlando executed an
Agreement whereby Romeo assigned all his
rights to Orlando. The parties further agreed
that Orlando shall have the option to renew the
lease contract and that during the period that the
agreement is enforced, the property cannot be
sold, transferred, alienat ed or conveyed in
what ever manner to any third party. Orlando
died and his wife, Wenifreda, took over the
55
operation of the gasoline station. Cornelio sold
Lot 249-D to his children t hrough a deed of sale,
denominated as “Kasulat an sa Ganap Na
Bilihan,” for the sum of P160k. Lot 249 -D-1 was
sold to Eduardo and Jorge.
Eduardo informed Wenifreda of his desire to
take over the subject lot, but the latter refused t o
vacate the premises despite repeated demands.
Thus, Eduardo filed a complaint for unlawful
detainer against Wenifreda. After Eduardo
instituted the unlawful detainer case, Wenifreda
instituted a complaint for annulment of deed of
conveyance, title and damages against Eduardo
and Jorge.
Petitioner alleged that the transfer and
conveyance of the subject lot was fraudulent and
in bad faith c onsidering that the subject lot was
transferred and conveyed to his sons when the
lease was in full force and effect making the sale
null and void; that Cornelio verbally promised
Orlando that Orlando or his heirs shall have first
priority or option to buy the subject lot.
Respondents claimed that they bought the
subject lot from their father for value and in good
faith.
ISSUE: Whether or not the sale of the subject lot
by Cornelio to his sons is invalid for (1) violating
the prohibitory clause in the lease agreement
between Cornelio, as lessor-owner, and
Orlando, as lessee; and (2) contravening the
right of first refusal of Orlando over the subject
lot.
HELD: No. Sale was valid. Under Article 1311 of
the Civil Code, the heirs are bound by the
contracts entered into by their predecessors-in-
interest except when the rights and obligations
therein are not transmissible by their nature, by
stipulation or by provision of law. A contract of
lease is generally transmissible to the heirs of
the lessor or lessee. It involves a property right
and the death of a party does not excuse non -
performance of the contract. The rights and
obligations pass to the heirs of the deceased
and the heir is bound to respect the period of the
lease.
The parties expressly stipulated in the March 31,
1978 Agreement that Romeo, as lessee, shall
transfer all his rights and interests under the
lease contract with option to renew “in favor of
the party of Orlando, the latter’s heirs,
successors and assigns” indicating the clear
intent to allow the t ransmissibility of all the rights
and interests of Orlando under the leas e
contract unto his heirs, successors or assigns.
The rights and obligations under the leas e
contract with option to renew were transmitted
from Orlando t o his heirs upon his death. It does
not follow, however, that the lease subsisted at
the time of the sale of the subject.
The election of the option to renew the lease in
this case cannot be inferred from petitioner
Wenifreda’s continued possession of the subject
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
lot. It was incumbent upon Wenifreda wit h the
burden of proof during the trial below to establish
by some positive act that Orlando or his heirs
exercised the option to renew the lease. S C
held that there was no evidence pres ented
before the trial court to prove that Orlando or his
heirs exercised the option to renew prior to or at
the time of the expiration of the leas e. As a
result, there was no obstacle to the sale of the
subject lot by Cornelio to respondents Eduardo
and Jorge as the prohibitory clause under the
lease contract was no longer in force.
On the issue on the right of first refusal of
Orlando and his heirs, SC held that no
testimonial evidence was presented to prove the
existence of said right. The claims based on this
alleged right of first refusal cannot be s ustained
for its existence has not been duly established.
Q: Was it established that there was a right of
first refusal?
A: No. Winifreda was unable to establish by
evidence t hat there was a verbal grant by
Cornelio.
Q: But didn’t we already discuss that an oral
grant of a right of first refusal is valid?
A: Yes. In this case, the SC pointed out the
ruling in Rosencor that while an oral agreement
as to a right of first refusal is not covered by the
Statute of Frauds. However in this case, the SC
was unable to find any evidence showing proof
of the existence of the said oral agreement.
In this case, just take note that there was a
mention here of a special law with regard to
expropriation of property wherein the tenants
therein are given the right of first refusal or the
preferential right to buy the leased premises. But
that is a special law wherein there must be
approval of the court, which is absent in this
case. And in fact this issue was raised when the
case already reached the SC.
Nevertheless, the SC still held that there was no
right of first refusal under the facts of this case.
While it is true that a right of first refusal may be
entered into orally (in other words, for it to be
enforceable, it need not be in writing), the SC
ruled here that there was no evidence to prove
the existence of said right, as compared to the
case of Rosencor wherein there were several
witnesses who established t he existence of suc h
right and the fact that there was the letter of one
of the heirs offering the property for sale to the
tenants before it was sold to other third persons,
again establishing the existence of the right of
first refusal.
In this case, there was no evidence and neither
was it established that respondents were aware
of such promise prior to or at the time of the
sale. On the contrary, respondents denied the
existence of s aid promise for lack of knowledge
therefore. Petitioner’s claim based on the
alleged right of first refusal cannot be s ustained
for its existence was not established.
56
So that’s the right of first refusal. It’s an
innovative juridic al relation. It cannot be deemed
a contract of sale neither can it be brought in
option contracts nor can it be deemed an offer
because there is no clear certainty of the object,
cause or consideration. It can be considered a
clash of preparatory juridical relations governed
by scattered provisions under the law, among
other laws of general application.
An integral part usually of contracts of lease of
real estate, it has no separate consideration as
the consideration therefor is built into the
reciprocal obligations of the parties. So the basis
of this is the current offer by the lessor and the
offer purchase by any prospective buy er. No
separation consi deration is needed unlike in
option contracts si nce such stipulation i s
part and parcel of a contract of lease.
Now we go on to the next topic…
PERFECTION STAGE
Article 1475. The contract of sale is perfected
at the moment there is a meeting of minds
upon the thing which is the object of the
contract and upon the price.
From that moment, the parties may
reciprocally demand performance, subject to
the provi sions of the law governing the form
of contracts. (1450a)
Article 1305. A contract i s a meeting of minds
between two persons whereby one binds
himself, with respect to the other, to give
something or to render some service.
Article 1458. By the contract of sale one of
the contracting parties obligate s him self to
transfer the ownership and to deliver a
determinate thing, and the other to pay
therefor a price certain in money or its
equivalent.
A contract of sale may be absolute or
conditional.
Notice that this is the same, more or less, with
the general law with regard to contracts under
Article 1305. However Article 1475 and Article
1458 are more specific when it comes to
contracts of sale.
We know that a sale is perfected from the
moment there is a meeting of the minds upon
the thing which is the object of the cont ract and
upon the price. From that moment, the parties
may reciprocally demand performance subject to
the law governing obligations and contracts.
Cons ent is a state of mind. Its existence may
only be inferred upon the congruence of two acts
of the parties. An offer must be certain as to the
object and the consideration and the acceptanc e
of the offer must be absolute. It must refer to the
exact object and consideration mentioned in the
said offer. Cons ent must be given intelligently
and spontaneously. There must be consent as to
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
the subject matter as well from the contracting
parties who are legally capacitated to enter int o
a contract.
Take note of the elements of a valid offer:
 It must be complete
 Definite as to the c ertainty of price and
identity of the object
 It must be intentional
A qualified accept ance or one t hat involves a
new proposal constitutes a counter -offer and
does not result to a perfected contract of sale
but rat her, it is a rejection of the original offer.
The acceptanc e must be identical in all respect
with that of the offer in order to produc e consent
or meeting of the minds.
So we have here the case of…
HEIRS OF IGNACIO VS. HOME BANKERS
SAVINGS AND TRUST CO.
G.R. NO. 177783 , JANUARY 23, 2013
FACTS: The case sprang from a real estate
mortgage of two parcels of land in August 1981.
Fausto C. Ignacio mort gaged the properties to
Home Bankers Savings and Trust Company
(Bank) as security for a loan extended by the
Bank. After Ignacio defaulted in the payment of
the loan, the property was foreclosed and
subsequently sold to the Bank in a public
auction.Ignacio offered to repurchase the
property. Universal Properties Inc. (UP I), the
bank’s collecting agent sent Ignacio a letter on
March 22, 1984 whic h contained the terms of the
repurchase. However, Ignacio annotated in the
letter new terms and conditions. He claimed that
these were verbal agreements bet ween himself
and the Bank’s collection agent, UPI.No
repurchase agreement was finalized between
Ignacio and t he Bank. Thereafter the Bank sold
the property to third parties. Ignacio then filed an
action for specific performanc e against the Bank
for the reconveyance of the properties after
payment of the balance of the purchase price.
He argued that there was implied acceptance of
the counter-offer of the sale through the receipt
of the terms by representatives of UP I. The Bank
denied that it gave its consent to the counter-
offer of Ignacio. It countered that it did not
approve the unilateral amendments placed by
Ignacio.
ISSUE: Whether or not the negotiations between
Ignacio and UP I is binding on the Bank.
HELD: 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 acceptanc e of the other, there is no
contract. When the contract of sale is not
perfected, it cannot, as an independent sourc e
of obligation, serve as a binding juridical relation
between the parties.
A contract of sale is perfected only when there is
consent validly given. There is no consent when
57
a party merely negotiates a qualified acceptanc e
or a counter-offer. An acceptance must reflect all
aspects of the offer to amount to a meeting of
the minds between the parties. In this case,
while it is apparent that Ignacio proposed new
terms and conditions to the repurchas e
agreement, there was no showing that the Bank
approved the modified offer.
In the absence of conformity or acceptanc e by
properly authorized bank officers of petitioner's
counter-proposal, no perfected repurchas e
contract was born out of the talks or negotiations
between petitioner and Mr. Lazaro and Mr.
Fajardo. Petitioner therefore had no l egal right to
compel respondent bank to accept the P 600,000
being tendered by him as payment for the
supposed balance of repurchas e price.
The negotiations between Ignacio and UP I, the
collection agent, were merely preparatory to the
repurchase agreement and, therefore, was not
binding on the B ank. Ignacio could not compel
the Bank to accede to the repurc hase of the
property.
A corporation may only give valid acceptance of
an offer of sale through its authorized officers or
agents. Specifically, a counter-offer to
repurchase a property will not bind a corporation
by mere acceptance of an agent in the absenc e
of evidence of authority from the corporation’s
board of directors.
Q: Was there a definite offer?
A: There was an offer made by UP I however this
offer was annotated on by Ignacio. Thes e
annotations made by Ignacio constituted a
counter offer to the initial proposal of UP I.
Q: When you say annotation, why would it mean
that there was a rejection of the offer on the part
of the bank?
A: Because he changed the agreed upon
purchase price and presented a new purchas e
price. Because of this change in the purchas e
price, there was a counter offer and this counter
offer had to be accepted by the bank’s
representatives in order for it to constitute a
perfected contract of repurchase. In this case,
even if the annotations were made in the
presence of the representatives, thes e
representatives were not the ones who were
authorized to accept the counter propos al.
Again, the offer must be definite and the
acceptance must be absolute to give rise to a
perfected contract of sale. While it is true that
there is a proposal to repurchase and this
proposal was deemed to be a definite offer on
the part of the bank, it appears that Ignacio did
not absolutely accept the said offer as he made
an annot ation on the said letter wherein he
changed the purchase price to 900k plus the
down payment and in fact, there was a condition
that such will depend on his financial position.
Clearly, there was no absolute acceptance on
the part of Ignacio.
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
With that counter-offer, there must have been an
acceptance on the part of the bank to give rise to
a perfected contract of sale. In this case there
was none. The qualified acceptance by the
petitioner as his counterproposal was not
accepted by the bank. There is no evidenc e
showing the bank officers conformity with the
bank’s officers with the said counter-proposal.
Again, take note, parties who ent er into a
contract of sale must be legally capacitated.
When it comes to corporations, the persons
entering int o a contract of sale must be legally
capacitated. When it comes corporations
entering into a contract of sale, it must be
entered into by a person duly aut horized by the
corporation. In this case, no evidence was
shown that the persons who were present when
Ignacio made the notations were authorized by
the bank or the Board of Directors to accept the
counter-proposal to repurchase the foreclosed
property.
No perfected repurchase contract was born out
of the talks or negotiations bet ween the
petitioner and Fajardo. There were no evidenc e
that he was authorized by the bank. Therefore
he had no legal right to compel the bank to
accept the 600k for the balance of the purchas e
price.
Again a contract of sale is consensual in nature
but when there is only offer by one party without
acceptance of the other, there is no contract and
if the contract is not perfected, it cannot be an
independent source of obligation.
VILLONCO REALTY COMPANY vs
BORMAHECO, INC., FRANCISCO N.
CERV ANTES and ROS ARIO N. CERVANTES
G.R. No. L-26872 July 25, 1975
FACTS: Cervantes and his wife owned 3 parcels
of land along Buendia where he buildings of
Bormaheco Inc were situated. Beside their
property were lots owned by Villonco Realty.
Cervantes entered into several negotiations with
Villonco for sale of the B uendia property.
Cervantes made a written offer of P400/sqm wit h
a downpayment of P 100,000 to serve as earnest
money. The offer also made the consummation
of the sale dependent upon the acquisition by
Bormaheco of a Sta. Ana property. Villonco
made a counter-offer stating t hat the earnest
money was to earn 10% interest p.a. The check
was enclosed with the reply letter. Cervantes
accepted and cashed the check. The Sta. Ana
Property was awarded to Bormaheco; the
transfer was also duly approved. However,
Cervantes sent the check back to Villonco with
the interest thereon—stating that he was no
longer interested in selling the property. He also
claims that no contract was perfected; Villonc o
sues for specific performance.
ISSUE: W/N there was a perfected cont ract of
sale
58
HELD: YES. There was a perfected contract of
sale. The contract of sale is perfected at the
moment there is a meeting of minds upon the
thing which is the object of the contract and
upon the price. From that moment, the parties
may reciprocally demand performance, subject
to the provisions of the law governing the form of
contracts.” (Art. 1475 Ibid).
Cons ent is manifested by the meeting of the
offer and the acceptance upon the thing and the
cause which are to constitute the contract. The
offer must be certain and the acceptanc e
absolute. A qualified acceptance constitutes a
counter-offer” (A rt. 1319, Civil Code). “A n
acceptance may be express or implied” (Art.
1320, Civil Code).
A contract is formed if offer is accepted, whether
request for changes in terms is granted or not;
Change does not amount to rejection of offer or
a counter-offer. An accept ance may contain a
request for certain changes in the terms of the
offer and yet be a binding acceptanc e. So long
as it is clear that the meaning of the acceptanc e
is positively and unequivocally to accept the
offer, whether such request is granted or not, a
contract is formed.
The vendor’s change in a phrase of the offer t o
purchase, which change does not essentially
change the terms of the offer, does not amount
to a rejection of the offer and the tender or a
counter-offer.” (The alleged changes made in
the count er-offer are immaterial and are mere
clarifications. The changes of the words “Sta.
Ana property” to another property as well as the
insertion of the number “12” in the date, and the
words “per annum” in the interest are trivial.
There is no incompatibility in the offer and
counter-offer. Cervantes assented to the interest
and he, in fact, paid the same. Also, earnest
money constitutes prood of the perfection of the
contract of sale and forms part of the
consideration. The condition regarding the
acquisition of t he Sta. Ana property was likewis e
fulfilled; there is thus no ground for the refusal of
Cervantes to consummate the sale.
Q: But isn’t it that there were qualifications and
conditions that were imposed that would change
the previous offer that was given?
A: Yes. However the corrections or modifications
were not substantial enough.
Q: What were these corrections?
A: The 10% interest per annum basis.
Q: How about the earnest money?
A: The earnest money was considered as
earnest money since it was already accepted by
Bormaheco. It was also cashed without
opposition.
The mere fact of the acceptance of the earnest
money was not the reason of t he perfection of
the contract of sale. It just supported the fact that
there was a meeting of the minds. There was an
acceptance of the offer to purchase the property
and therefore, there was a meeting of the minds.
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
The vendor’s acceptanc e of the partial payment
shows that the sale was conditionally
consummated. They were able to show that
there was already meeting of the minds and the
acceptance of t he earnest money showed or
supported such finding.
Changes or qualifications here were not material
but were merely clarifications of what the parties
agreed upon and such changes would not
prevent the perfection of the contract. As to the
interest, nilagyan lang nila ng per annum
“payee” after the word “interest”, therefore there
is no substantial change. The vendor’s change
in the phrase of the offer to purchase does not
essentially change the terms of the offer and did
not amount to the rejection of the offer or be
considered as a counter-offer.
The 45-day term was not part of the condition
that the other property should be acquired. The
statement cannot and should not be that the
vendor should acquire the other property within
the 45-day period. This simply means that after
45 days, it would be known whether the vendor
would be able to acquire the other property and
whet her it would be able to sell the property
subject of the sale. In this case, you have a
perfected contract of sale.
Now we go to S ALE BY AUCTION, we go to Art
1476 of the Civil Code
Art. 1476. In the case of a sale by auction:
(1) Where goods are put up for sale by
auction in lots, each lot is the subject of a
separate contract of sale.
(2) A sale by auction i s perfected when the
auctioneer announces its perfection by the
fall of the hammer, or in other customary
manner. Until such announcement is made,
any bidder may retract his bid; and the
auctioneer may withdraw the goods from the
sale unless the auction has been announced
to be without reserve.
(3) A right to bid may be reserved expressl y
by or on behalf of the seller, unless
otherwise provided by law or by stipulation.
(4) Where notice has not been given that a
sale by auction is subject to a right to bid on
behalf of the seller, it shall not be lawful for
the seller to bid himself or to employ or
induce any person to bid at such sale on his
behalf or for the auctioneer, to employ or
induce any person to bid at such sale on
behalf of the seller or knowingly to take any
bid from the seller or any person employed
by him. Any sale contravening thi s rule may
be treated as fraudulent by the buyer. (n)
So you have the guidelines with regard to sale
by auction. It is perfected when the auctioneer
announces the auction by the fall of the hammer
or in any other customary manner.
In relation to 1476, you have 1403, paragraph
2(d).
59
Article 1403. The following contracts are
unenforceable, unless they are ratified:
xxxxx
(2) Those that do not comply with the Statute
of Frauds as set forth in this number. In the
following case s an agreement hereafter
made shall be unenforceable by action,
unless the same, or some note or
memorandum, thereof, be in writing, and
subscribed by the party charged, or by his
agent; evidence, therefore, of the agreement
cannot be received without the writing, or a
secondary evidence of its contents:
xxxxx
(d) An agreement for the sale of goods,
chattels or things in action, at a price not
less than fi ve hundred pesos, unless the
buyer accept and receive part of such goods
and chattels, or the evidences, or some of
them, of such thing s in action or pay at the
time some part of the purcha se money; but
when a sale is made by auction and entry i s
made by the auctioneer in his sales book, at
the time of the sale, of the amount and kind
of property sold, term s of sale, price, names
of the purcha sers and person on whose
account the sale is made, it is a sufficient
memorandum;
We also have Art 1326
Article 1326. Adverti sements for bidders are
simply invitations to make proposal s, and
the advertiser i s not bound to accept the
highest or lowest bidder, unless the contrary
appears.
In Art 1476, the bidder may ret ract his bid and
the auctioneer may withdraw the goods unless
the auction has been announc ed to be “without
reserve. ” What do you mean by the term
“without reserve?” The goods cannot be
withdrawn from the sale aft er a bid is made. The
seller as a general rule is not allowed to
participat e in the bidding to avoid popping of the
price. Pag auction ka di ba you offer 100, then
may magsabi 150.
If you have a seller therein, this would be just to
pop up the price. The reason for this prohibition
is that secret employment of poppers, whether
the seller himself or some other person, as a
conduit for the purpose of enhancing the pric e
renders the sale fraudulent. However the seller
may be allowed to participate upon notice of
such fact because here the other bidders will not
be prejudic ed. They are aware that somebody
acts for and in behalf of the seller, probably to
count the price. Another exception is when
provided by law or stipulation.
4. EARNEST MONEY
Art. 1482. Whenever earnest money is given
in a contract of sale, it shall be considered as
part of the price and as proof of the
perfection of the contract. (1454a)
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
In S errano v. Caguiat, it was held that the
presumption under A rticle 1482 does not apply
when earnest money is given in a contract to
sell.
Villonco v. Bormaheco, held that even when the
sale is subject to a condition, the acceptanc e of
the earnest money would prove that the sale is
conditionally consummated or partly executed
subject to the fulfillment of the condition, the
nonfulfillment of which would be a negative
resolutory condition.
5. DIFFERENCE BETW EEN EARNES T
MONEY AND OPTION MONEY
Adelfa Properties, Inc. v. Court of Appeals,
enumerates the distinctions between earnest
money and option money, viz.:
(a) Earnest money is part of the purchas e
price, while option money is the money given as
a distinct consideration for an option contract;
(b) Earnest money is given only where there is
already a sale, while option money applies to a
sale not yet perfected; and
(c) When earnest money is given, the buyer is
bound to pay the balance, while when the would -
be buyer gives option money, he is not required
to buy, but may even forfeit it depending on the
terms of the option.
OESMER VS. PARAISO
FACTS: Petitioners Rizalino, Ernesto, Leonora,
Bibiano, Jr., Librado, Enriqueta, Adolfo, and
Jesus, all surnamed Oesmer toget her wit h
Adolfo Oesmer (Adolfo) and Jesus Oesmer
(Jesus), are brothers and sisters, and t he co -
owners of undivided shares of two parcels of
agricultural and tenant ed land. Both lots are
unregistered and originally owned by their
parents, Bibiano Oesmer and E ncarnacion
Durumpili. When the spouses Oesmer died,
petitioners, together with Adolfo and Jesus,
acquired the lots as heirs of the former by right
of succession.
Respondent Paraiso Development Corporation
is engaged in the real estate business. In March
1989, one Rogelio Paular, brought along
petitioner Ernesto to meet with a certain S otero
Lee, President of respondent Parais o
Development Corporation. The said meeting
was for the purpose of brokering the sale of
petitioners’ properties to Respondent
Corporation.
Pursuant to the said meeting, a Contract to Sell
was drafted by the Executive Assistant of Lee.
On 1 April 1989, petitioners Ernesto and
Enriqueta signed the aforesaid Contract to Sell.
A check in the amount of P100,000.00, payable
to Ernesto, was given as option money.
Sometime thereaft er, Rizalino, Leonora, Bibiano,
Jr., and Librado also signed the said Contract to
Sell. However, two of the brothers, Adolfo and
Jesus, did not sign the document.
60
Petitioners, through a letter, informed the
respondent company of their intention to rescind
the Contract to Sell and to return the amount of
P100,000.00 gi ven by respondent as option
money. Respondent did not respond to the
aforesaid letter. Subsequently, the petitioners,
together with Adolfo and Jesus, filed a
Complaint for Declaration of Nullity or for
Annulment of Option Agreement or Contract to
Sell with Damages.
ISSUE:
(1) WON the supposed Contract to Sell is really
a unilateral promise to sell without consideration
distinct from the price, and hence, void. (NO, it is
indeed a Cont ract to Sell.)
(2) WON the consideration of P 100K paid is an
option money. (It is an earnest money.)
HELD: In the instant case, the consideration of
P100,000.00 paid by respondent to petitioners
was referred to as "option money." However, a
careful examination of the words used in the
contract indicat es that the money is not option
money but earnest money.
"Earnest money" and "option money" are not the
same but distinguished thus: (a) earnest money
is part of the purchase price, while option money
is the money given as a distinct consideration for
an option contract; (b) earnest money is given
only where there is already a sale, while option
money applies to a sale not yet perfected; and,
(c) when earnest money is given, the buyer is
bound to pay the balance, while when the would -
be buyer gives option money, he is not required
to buy, but may even forfeit it depending on the
terms of the option. The sum of P100,000.00
was part of the purchase price. Although the
same was denominated as "option money," it is
actually in the nature of earnest money or down
payment when considered with the other terms
of the contract. Doubtless, the agreement is not
a mere unilat eral promise to sell, but, indeed, it
is a Contract to Sell as both the trial court and
the appellate court declared in their Decisions.
Although the same was denominated as "option
money," it is actually in the nature of earnest
money or down payment when considered wit h
the other terms of the contract.
Sale Deemed Perfected Where Offer Was
Made
FORMAL REQUI REMENTS OF S ALE
1. Form not Important for Validity of Sale
DALION VS. CA
FACTS: This is a petition to annul and set aside
the decision of the Court of A ppeals rendered on
May 26, 1987, upholding the validity of the sale
of a parcel of land by petitioner Segundo Dalion
(hereafter, "Dalion") in favor of privat e
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
respondent Ruperto Sabesaje, Jr. (hereafter,
"Sabesaje" ).
On May 28, 1973, Sabesaje sued to recover
ownership of a parcel of land, based on a privat e
document of absolute sale, dated July 1, 1965,
allegedly executed by Dalion, who, however
denied the fact of sale, contending that the
document sued upon is fictitious, his signature
thereon, a forgery, and that subject land is
conjugal property, which he and his wife
acquired in 1960 from Saturnina Sabesaje as
evidenced by the "Escritura de V enta Absoluta".
The spouses denied claims of S abesaje that
after executing a deed of sale over the parcel of
land, they had pleaded with Sabesaje, their
relative, to be allowed to administer the land
because Dalion did not have any means of
livelihood. They admitted, however,
administering sinc e 1958, five (5) parcels of land
in Sogod, Southern Leyte, which belonged to
Leonardo Sabesaje, grandfather of Sabesaje,
who died in 1956.
They never received their agreed 10% and 15%
commission on the sales of copra and abaca,
respectively. Sabesaje's suit, they countered,
was intended merely to harass, preempt and
forestall Dalion's threat to sue for these unpaid
commissions. Dalion nonet heless still impugns
the validity of the sale on the ground that the
same is embodied in a private document, and
did not thus convey title or right to the lot in
question since "acts and contracts which have
for their object the creation, transmission,
modification or extinction of real rights over
immovable property must appear in a public
instrument."
ISSUE: Whether or not the sale is valid?
HELD: Yes. The provision of A rt. 1358 on the
necessity of a public document is only for
convenience, not for validity or enforceability. It
is not a requirement for the validity of a contract
of sale of a parcel of land that this be embodied
in a public instrument. A contract of sale is a
consensual contract, which means that the sale
is perfected by mere consent. No particular form
is required for its validity. Upon perfection of the
contract, the parties may reciprocally demand
performance (Art. 1475, NCC), i.e., the vendee
may compel transfer of ownership of the object
of the sale, and the vendor may require the
vendee to pay the thing sold (A rt. 1458, NCC).
The trial court thus rightly and legally ordered
Dalion to deliver to Sabesaje the parcel of land
and to execute corresponding formal deed of
conveyance in a public document. Under Art.
1498, NCC, when the sale is made through a
public instrument, the exec ution thereof is
equivalent to the delivery of the thing. Delivery
may either be actual (real) or constructive. Thus
delivery of a parcel of land may be done by
placing the vendee in control and possession of
the land (real) or by embodying the sale in a
public instrument (constructive).
61
What is the difference between private and
public instrument?
Private – agreement made by the parties
and not notarized
Public – notarized agreement
Is it required that sale of real property be in
public document ? NO.
Indeed Article 1358 of the Civil Code provides
that “acts and contracts which have for their
object the creation, transmission, modification or
extinguishment of real rights over immovable
property” must appear in a public document;
however, it specifically provides that “sales of
real property or an interest therein are governed
by Articles 1403, No. 2, and 1405.” The same
article also provides that all other contracts not
enumerated therein where the amount involved
exceeds 5,000.00 must appear in writing, even a
private one, “but sales of goods, chattels or
things in action are governed by Articles 1403,
No. 2 and 1405.”
Despite the seemingly mandatory provisions of
Article 1358, Dalion v. Court of A ppeals held that
the provisions thereof on the necessity of public
document are for purpose s of convenience,
not for validity or enforceability. Thus, even
documents enumerated under Article 1358
which are not found in a public instrument are
still valid and enforceable, and that the
article merely grants a cause of action to the
party to the contract in a suit to sue to
compel the other party to have the document
covering the contract, acknowledged before
a notary public. Both Articles 1357 and 1406 of
the Civil Code refer to Article 1358, and provide
that when a cont ract is enforceable under the
Statute of Frauds, and a public document is
necessary for its registration in the Registry of
Deeds, the parties may avail themselves of the
right and remedy to compel the other party to
observe such form, and such remedy may be
exercised simultaneously with t he action upon
the contract.
Why Art. 1358 requires public instrument? To
rd
affect 3 pers ons.
Take note A rt 1358 is not for validity but merely
for convenience. TAKE NOTE HA.
Art. 1357. If the law requires a document or
other special form, as in the acts and
contracts enumerated in the following article,
the contracting partie s may compel each
other to observe that form, once the contract
has been perfected. This right may be
exercised simultaneously with the action
upon the contract. (1279a)
Art. 1358. The following must appear in a
public document:
(1) Acts and contracts which have for their
object the creation, transmi ssion,
modification or extinguishment of real rights
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
over immovable property; sales of real
property or of an interest therein a governed
by Articles 1403, No. 2, and 1405;
(2) The ce ssion, repudiation or renunciation
of hereditary rights or of those of the
conjugal partnership of gains;
(3) The power to administer property, or any
other power which has for its object an act
appearing or which should appear in a public
document, or should prejudice a third
person;
(4) The ce ssion of actions or rights
proceeding from an act appearing in a public
document.
All other contracts where the amount
involved exceeds five hundred pesos must
appear in writing, even a private one. But
sales of goods, chattel s or things in action
are governed by Articles, 1403, No. 2 and
1405. (1280a)
NARANJA VS. CA
FACTS: Roque Naranja was the registered
owner of a parcel of land, Bacolod. Roque was
also a co-owner of an adjacent lot (Lot No. 2)
which he co-owned with his brothers, Gabino
and Placido Naranja.
When Placido died, his one-t hird s hare was
inherited by his children, Nenita, Nazareto,
Nilda, Naida and Neolanda, all surnamed
Naranja, herein petitioners. The adjacent lot is
covered by TCT No. T-18762 in the names of
Roque, Gabino and the said children of Placido.
TCT No. T-18762 remained even after Gabino
died. The other petitioners — Serafin Naranja,
Raul Naranja, and Amelia Naranja-Rubinos —
are the children of Gabino.
The two lots were being leased by Esso
Standard Eastern, Inc. for 30 years from 1962 -
1992. For his properties, Roque was being
paid P200.00 per month by the company.
Roque had no other source of income except for
the P200. 00 monthly rental of his two properties.
To show his gratitude to Belardo, Roque sold Lot
No. 4 and his one-third share in Lot No. 2 to
Belardo on August 21, 1981, through a Deed of
Sale of Real Property which was duly notarized
by Atty. Eugenio Sanicas.
Roque’s copies of TCT No. T-18764 and TCT
No. T-18762 were entrusted to Atty. Sanicas for
registration of the deed of sale and transfer of
the titles to Belardo. B ut the deed of sale could
not be registered because Belardo did not have
the money to pay for the registration fees.
Belardo’s only source of inc ome was her store
and coffee shop. Sometimes, her children would
give her money to help with the household
expenses, including the expenses incurred for
Roque’s support. At times, she would also
borrow money from Margarita Dema-ala, a
neighbor. When the amount of her loan
62
reached P15,000.00, Dema-ala required a
security.
Roque executed a deed of sale in favor of
Dema-ala, covering his two properties in
consideration of the P15,000.00 outstanding
loan and an additional P15, 000. 00, for a total
ofP30,000.00. Dema-ala explained that she
want ed Roque to execute the deed of sale
himself since the properties were still in his
name. Belardo merely acted as a witness. The
titles to the properties were given to Dema -ala
for safek eeping.
Three days later, Roque died of influenza. The
proceeds of the loan were used for his treatment
while the rest was spent for his burial.
In 1985, Belardo fully paid the loan secured by
the second deed of sale. Dema-ala returned the
certificates of title to Belardo, who, in turn, gave
them back to Atty. Sanicas.
Unknown to Belardo, petitioners, the children of
Placido and Gabino Naranja, executed an
Extrajudicial Settlement Among Heirs on
October 11, 1985, adjudicating among
themselves Lot No. 4. On February 19, 1986,
petitioner Amelia Naranja-Rubinos,
accompanied by Belardo, borrowed the two
TCTs, together with the lease agreement wit h
Esso Standard Eastern, Inc., from Atty. Sanicas
on account of the loan being proposed by
Belardo to her. Thereaft er, petitioners had the
Extrajudicial Settlement Among Heirs notarized
on February 25, 1986. With Roque’s copy of
TCT No. T-18764 in their possession, they
succeeded in having it cancelled and a new
certificate of title, TCT No. T-140184, issued in
their names.
In 1987, Belardo decided to register the Deed of
Sale dated August 21, 1981. With no title in
hand, she was compelled to file a petition wit h
the RTC to direct the Register of Deeds to
annotate the deed of sale even without a copy of
the TCTs. In an Order dat ed June 18, 1987, the
RTC granted the petition. But she only
succeeded in registering the deed of sale in TCT
No. T-18762 because TCT No. T-18764 had
already been cancelled.
On December 11, 1989, Atty. Sanicas prepared
a certificate of authorization, giving Belardo’s
daughter, Jennelyn P. Vargas, the authority to
collect the payments from Esso Standard
Eastern, Inc. But it appeared from the
company’s Advice of Fixed Payment that
payment of the lease rental had already been
transferred from Belardo to Amelia Naranja-
Rubinos because of the Extrajudicial Settlement
Among Heirs.
On June 23, 1992, Belardo, through her
daughter and attorney-in-fact, Rebecca Cordero,
instituted a suit for reconveyanc e with damages.
The complaint prayed that judgment be rendered
declaring Belardo as the sole legal owner of Lot
No. 4, declaring null and void the Extrajudicial
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
Settlement Among Heirs, and TCT No. T-
140184, and ordering petitioners to reconvey t o
her the subject property and to pay damages.
Subsequently, petitioners also filed a case
against respondent for annulment of sale and
quieting of title with damages, praying, among
others, that judgment be rendered nullifying the
Deed of Sale, and ordering the Register of
Deeds of Bacolod City to cancel the annotation
of the Deed of Sale on TCT No. T-18762.
The RTC rendered a Decision in the
consolidated cases in favor of petitioners. The
trial court not ed that the Deed of Sale was
defective in form since it did not cont ain a
technical description of the subject properties
but merely indicated that they were Lot No. 4,
covered by TCT No. T-18764 consisting of 136
square meters, and one-third portion of Lot No. 2
covered by TCT No. T-18762.
The trial court held that, being defective in form,
the Deed of Sale did not vest title in privat e
respondent. Full and abs olute ownership did not
pass to private respondent because she failed t o
register the Deed of Sale. She was not a
purchaser in good faith since s he acted as a
witness to the second sale of the property
knowing that she had already purchased the
property from Roque. Whatever rights privat e
respondent had over the properties could not be
superior t o the rights of petitioners, who are now
the registered owners of the parcels of land
The CA reversed the RTC Decision. The CA
held that the unregisterability of a deed of sale
will not undermine its validity and efficacy in
transferring ownership of t he properties to
private respondent. The CA not ed that the
records were devoid of any proof evidencing the
alleged vitiation of Roque’s consent to the sale;
hence, there is no reason to invalidate the sale.
Registration is only necessary to bind third
parties, which petitioners, being the heirs of
Roque Naranja, are not. The trial court erred in
applying Article 1544 of t he Civil Code to the
case at bar since petitioners are not purchasers
of the said properties. Hence, it is not significant
that private respondent failed to register the
deed of sale before the extrajudicial settlement
among the heir.
ISSUE: Whether or not the deed of sale must
contain a technical description of the subject
property in order to be valid
HELD: The Court does not agree wit h
petitioners’ contention that a deed of sale must
contain a technical description of the subject
property in order to be valid. Petitioners anchor
their theory on Section 127 of Act No.
496, which provides a sample form of a deed of
sale that includes, in particular, a technical
description of the subject property.
To be valid, a contract of sale need not contain a
technical description of the subject property.
63
Cont racts of sale of real property have no
prescribed form for their validity; they follow the
general rule on contracts that they may be
entered into in what ever form, provided all the
essential requisites for their validity are
present. The requisites of a valid contract of sale
under Article 1458 of the Civil Code are: (1)
consent or meeting of the minds; (2) determinat e
subject matter; and (3) price certain in money or
its equivalent.
The failure of the parties to specify with absolut e
clarity the object of a cont ract by including its
technical description is of no moment. What is
important is that there is, in fact, an object that is
determinate or at least determinable, as subject
of the contract of sale. The form of a deed of
sale provided in Section 127 of Act No. 496 is
only a suggested form. It is not a mandatory
form that must be strictly followed by the parties
to a contract.
In the instant case, the deed of sale clearly
identifies the subject properties by indicating
their respective lot numbers, lot areas, and the
certificate of title covering them. Resort can
always be made to the technical description as
stated in the certificat es of title covering the two
properties.
What is Act 496? (Long Pause, probably
natulog na ta ani. :P) Subject nyo yan ngayon.
In the absence of technical description i s i t
proof that there is no sale at all because the
subject i s not determinate or determinable?
The Court does not agree with petitioners
contention that a deed of sale must contain a
technical description of the subject property in
order to be valid. Petitioners anchor their theory
on Section 127 of Act No. 496, which provides a
sample form of a deed of sale that includes, in
particular, a technical description of the subject
property.
To be valid, a contract of sale need not contain a
technical description of the subject property.
Cont racts of sale of real property have no
prescribed form for their validity; they follow the
general rule on contracts that they may be
entered into in what ever form, provided all the
essential requisites for their validity are present.
The requisites of a valid contract of sale under
Article 1458 of the Civil Code are: (1) consent or
meeting of the minds; (2) determinate subject
matter; and (3) price certain in money or its
equivalent.
The failure of the parties to specify with absolut e
clarity the object of a cont ract by including its
technical description is of no moment. What is
important is that there is, in fact, an object that is
determinate or at least determinable, as subject
of the contract of sale. The form of a deed of
sale provided in Section 127 of Act No. 496 is
only a suggested form. It is not a mandatory
form that must be strictly followed by the parties
to a contract.
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
What is the effect of notarization of the Deed
of Sale?
Such deed became public document. Take not e
ha.
And what i s the effect if it i s a public
document?
“Deed of A bsolute S ale” t hat is a public
document has in its favor the presumption of
regularity, and to contradict the same, there
must be evidence that is clear, convincing and
more than merely preponderant; otherwise, the
document should be upheld. In addition, a
notarized Deed of Absolut e Sale carries the
evidentiary weight conferred upon it with respect
to its execution. Likewise, between bare
allegations and the notarized deed of absolut e
sale, the latter, which is a public doc uments,
prevails for being prima facie evidence.
On the other hand, when a deed of sale is
merely subscribed and sworn t o by way o f jurat
(as contrasted from a notarial acknowledgment),
it would not be a public document because it
was invalidly notarized; it remains a privat e
document, subject to the requirements of proof
under Section 20, Rule 132 of the Rules of
Court, as to its due execution and authenticity.
As to Roque’ s capacity to enter into a
contract?
Petitioners adduced no proof that Roque had
lost control of his mental faculties at the time of
the sale. Undue influence is not to be inferred
from age, sickness, or debility of body, if
sufficient intelligence remains. The evidenc e
presented pertained more to Roques physical
condition rather than his ment al condition. On
the contrary, Atty. Sanicas, the notary public,
attested that Roque was very healthy and
mentally sound and sharp at the time of the
execution of the deed of sale. Atty. Sanicas said
that Roque also told him that he was a Law
graduate.
Again take note of the effect of notarization.
Okay.
HEIRS OF BIONA VS. CA
FACTS: On October 23, 1953, the late Ernesto
Biona, married to plaintiff-appellee Soledad
Biona, was awarded Homestead P atent over the
property subject of this suit, a parcel of
agricultural land, located in Bo. 3, Banga,
Cotabato,
On June 3, 1954, Ernesto and Soledad Biona
obtained a loan from the then Rehabilitation
Finance Corporation (now the Development
Bank of the Philippines) and put up as collateral
the subject property. On June 12, 1956, Ernesto
Biona died leaving as his heirs herein plaintiffs -
appellees, namely, his wife, Soledad Estrobillo
Vda. De Biona, and five daughters, Editha B.
Blancaflor, Marianita B. de Jesus, Vilma B.
64
Blancaflor, Elsie B. Ramos and Perlita B.
Carmen.
On March 1, 1960, plaintiff-appellee Soledad
Biona obtained a loan from defendant-appellant
in the amount of P1,000 and as security
therefore, the subject property was mortgaged. It
was further agreed upon by the contracting
parties that for a period of two years until the
debt is paid, defendant-appellant shall occupy
the land in dispute and enjoy the usufruct
thereof.
The two-year period elapsed but Soledad Biona
was not able to pay her
indebtedness. Defendant-appellant continued
occupying and cultivating the subject property
without protest from plaintiffs-appellees.
On July 3, 1962, defendant-appellant paid the
sum of P 1,400. 00 to the Development Bank of
the Philippines to cancel t he mortgage
previously constituted by the Biona spouses on
June 3, 1953.
Thereafter, and for a period of not less than
twenty-five years, defendant-appellant continued
his peaceful and public occupation of the
property, declaring it in his name for taxation
purposes, paying real estate property taxes
thereon, and causing the same to be tenanted.
On June 19, 1985, plaintiffs-appellees, filed a
complaint for recovery of ownership, possession,
accounting and damages, with a prayer for a writ
of preliminary mandatory injunction and/ or
restraining order against defendant-appellant
alleging, among ot hers, that the latter had
unlawfully been depriving them of the use,
possession and enjoyment of the subject
property; that the entire parcel of land, whic h
was devoted and highly suited to palay and corn,
was yielding three harvests annually, with an
average of one hundred t wenty (120) sacks of
corn and eighty cavans of rice per hectare; that
plaintiffs-appellees were deprived of its total
produce amounting to P150,000.00.
One of the claims of defendant-appellant was
that by virtue of his continuous and peaceful
occupation of the property from the time of its
sale and for more than twenty- five years
thereafter, defendant possesses a better right
theret o subject only to the rights of the tenants
whom he had allowed to c ultivate t he land under
the Land Reform Program of the government;
and that plaintiffs alleged right, if any, is barred
by the statutes of fraud.
ISSUE: Whether or not the deed of sale was
valid and if it effectively convey ed to the privat e
respondents the subject property
HELD: YES but with regard only to Soledad’s
share (7/12). But since the daughters of Biona
failed to assert their rights and allowed
defendant Hilajos to occupy the land in peace for
more than 30 years, they are now stopped due
to laches.
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
All the requisites for a valid contract of sale are
present in the instant case. For a valuable
consideration of P4,500.00, Soledad Biona
agreed to sell and actually conveyed the subject
property to private respondent. The fact that the
deed of sale was not not arized does not render
the agreement null and void and without any
effect. The provision of Article 1358 of the Civil
Code9 on the necessity of a public document is
only for convenience, and not for validity or
enforceability.10 The observance of which is
only necessary to insure its efficacy, so that after
the existence of said cont ract had been
admitted, the party bound may be compelled t o
execute the proper doc ument.11 Undeniably, a
contract has been entered into by Soledad Biona
and the private respondent. Regardless of its
form, it was valid, binding and enforceable
between the parties.
Under Art. 1356 of the Civil Code, contracts shall
be obligatory in whatever form they may have
been entered into provided all the essential
requisites for their nec essary elements for a
valid contract of sale were met when Soledad
Biona agreed to sell and actually conveyed Lot
177 to defendant-appellant who paid t he amount
of P4,500.00 therefore. The deed of sale (Exh.
2) is not made ineffective merely because it is
not notarized or does not appear in a public
document.
Remedy:
The fact that the deed of sale was not notarized
does not render the agreement null and void and
without any effect. The provision of Article 1358
of the Civil Code on the necessity of a public
document is only for convenience, and not for
validity or enforceability. The observance of
which is only necessary to insure its efficacy, so
that after the existence of said contract had been
admitted, the party bound may be compelled t o
execute the proper document.
Pursuant to Art. 1357, plaintiffs-appellees may
be compelled by defendant-appellant to execute
a public document to embody their valid and
enforceable contract and for the purpose of
registering the property in the latter's name.
Regardless of its form, it was valid, binding and
enforceable bet ween the parties.
As to Lache s:
The principle of laches was properly applied
against petitioner. Laches has been defined as
the failure or neglect, for an unreasonable and
unexplained length of time, to do that which by
exercising due diligence could or should have
been done earlier, it is negligence or omission t o
assert a right within a reasonable time,
warranting a presumption that the party entitled
to assert it has either abandoned it or declined to
assert it. Even when the five daughters of the
deceased Ernesto Biona were way past the age
of majority, when they could have already
asserted their right to their share, no sale in
65
defendant-appellant's favor was ever brought or
any other action was taken by them to recover
their share. Instead, they allowed defendant -
appellant to peacefully occupy the property
without protest.
Take note that even if the deed is notarized, it
does not mean that the sale is valid.
Salonga v. Concepcion, summarized the
principles involved when it held that not arization
of the document does not guarantee its validity
nor those of its contents, because it is not the
function of the not ary public to validate an
instrument that was never intended by the
parties to have any binding legal effect, and
neither is the notarization of a document
conclusive of the nature of the transaction
conferred by the said doc ument, nor is it
conclusive of the true agreement of the parties
theret o.
2. Instance s where form is important in sale
But not for its validity but for some other
purpose. Recall again in 1358, for convenience.
Art. 1403 …
(2) Those that do not comply with the Statute
of Frauds as set forth in this number. In the
following case s an agreement hereafter
made shall be unenforceable by action,
unless the same, or some note or
memorandum, thereof, be in writing, and
subscribed by the party charged, or by his
agent; evidence, therefore, of the agreement
cannot be received without the writing, or a
secondary evidence of its contents:
(a) An agreement that by its term s i s not to
be performed within a year from the making
thereof;
(b) A special promise to answer for the debt,
default, or miscarriage of another;
(c) An agreement made in consideration of
marriage, other than a mutual promise to
marry;
(d) An agreement for the sale of goods,
chattels or things in action, at a price not
less than fi ve hundred pesos, unless the
buyer accept and receive part of such goods
and chattels, or the evidences, or some of
them, of such things in action or pay at the
time some part of the purcha se money; but
when a sale is made by auction and entry i s
made by the auctioneer in his sales book, at
the time of the sale, of the amount and kind
of property sold, term s of sale, price, names
of the purcha sers and person on whose
account the sale is made, it is a sufficient
memorandum;
(e) An agreement of the leasing for a longer
period than one year, or for the sale of real
property or of an interest therein;
(f) A repre sentation as to the credit of a third
person.
Purpose of the Statute of Frauds?
The term “Statute of Frauds” is descriptive of the
statutes which require certain classes of
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
contracts, such as agreements for the sale of
real property, to be in writing, the purpose being
to prevent fraud and perjury in the enforcement
of obligations depending for their evidence on
the unassisted memory of witnesses by requiring
certain enumerated contracts and transactions
to be evidenced by a writing signed by the party
to be charged. The written note or
memorandum, as contemplated by Article 1403
of the Civil Code, should embody the essentials
of the contract.
The purpose of the Statute is to prevent fraud
and perjury in the enforcement of obligations
depending for their evidence upon the
unassisted memory of witnesses. Statute of
Frauds was precisely devis ed to prot ect the
parties in a cont ract of sale of real property so
that no such contract is enforceable unless
certain requisites, for purposes of proof, are met.
CLAUDEL VS CA and HEIRS OF MACARIO
(GR No 85240 July 12, 1991)
FACTS: As early as December 28, 1922, Basilio
also known as "Cecilio" Claudel, acquired from
the Bureau of Lands, Lot No. 1230 of the
Muntinlupa Estate Subdivision; he secured
Trans fer Certificate of Title (TCT) No. 7471
issued by the Registry of Deeds for the Provinc e
of Rizal in 1923; he also declared the lot in his
name. He dutifully paid the real estate taxes
thereon until his death in 1937. Thereafter, his
widow "Basilia" and later, her son Jose, one of
the herein petitioners, paid the taxes. The same
piece of land purchased by Cecilio would,
however, become the subject of protracted
litigation thirty-nine years aft er his death.
Two branches of Cecilio's family contested the
ownership over the land-on one hand the
children of Cecilio, namely, Modesto, Loreta,
Jose, et al. and on the other, the brother and
sisters of Cecilio, namely, Macario, Esperidiona,
Raymunda, and Celestina et. al. In 1972, the
HEIRS OF CECILIO partitioned this lot among
themselves.
Four years later, on December 7, 1976, privat e
respondents SIBLINGS OF CE CILIO, filed Civil
Case No. 5276-P as already adverted to at the
outset, with the then Court of First Instance of
Rizal, a "Complaint for Cancellation of Titles and
Reconveyance wit h Damages," alleging that 46
years earlier, or sometime in 1930, their parents
had purchased from the late Cecilio Claudel
several portions of Lot No. 1230 for the sum of
P30.00. They admitted that the transaction was
verbal. However, as proof of the sale, the
SIBLINGS OF CECILIO presented a subdivision
plan of the said land, dated March 25, 1930,
indicating the portions allegedly sold to the
SIBLINGS OF CE CILIO. The Lower Court
dismissed the case. The Court of A ppeals
reversed the decision of the trial court 7.
Henc e, this petition
66
ISSUE: Whet her or not a contract of sale of land
may be proven orally. (NO)
HELD: The rule of thumb is that a sale of land,
once consummated, is valid regardless of the
form it may have been entered into. For nowhere
does law or jurisprudence prescribe that the
contract of sale be put in writing before suc h
contract can validly cede or transmit rights over
a certain real property between the parties
themselves.
However, in the event that a third party, as in
this case, disputes the ownership of the
property, the pers on against whom that claim is
brought cannot present any proof of such sale
and hence has no means to enforce the
contract. Thus the Statute of Frauds was
precisely devised to prot ect the parties in a
contract of sale of real property so that no suc h
contract is enforc eable unless certain requisites,
for purposes of proof, are met. The provisions of
the Statute of Frauds pertinent to the present
controversy, state:
Art. 1403 (Civil Code). The following contracts
are unenforceable, unless they are ratified:
xxx xxx xxx
2) Those that do not comply with the Statute of
Frauds as set fort h in this number. In the
following cases, an agreement hereafter made
shall be unenforceable by action unless the
same, or some not e or memorandum thereof, be
in writing, and subscribed by the party charged,
or by his agent; evidence, therefore, of the
agreement cannot be received without the
writing, or a secondary evidence of its contents:
xxx xxx xxx
e) An agreement for the leasing for a longer
period than one year, or for the sale of real
property or of an interest therein;
xxx xxx xxx
(Emphasis supplied. )
The purpose of the Statute of Frauds is to
prevent fraud and perjury in the enforc ement of
obligations depending for their evidence upon
the unassisted memory of witnesses by requiring
certain enumerated contracts and transactions
to be evidenced in Writing.
The provisions of the Statute of Frauds originally
appeared under the old Rules of E vidence.
However when the Civil Code was re-written in
1949 (to take effect in 1950), the provisions of
the Statute of Frauds were taken out of the
Rules of E vidence in order to be included under
the title on Unenforceable Contracts in the Civil
Code. The trans fer was not only a matter of style
but to show that the Statute of Frauds is also a
substantive law.
Therefore, except under the conditions provided
by the Statute of Frauds, the existence of the
contract of sale made by Cecilio with his siblings
13 cannot be proved.
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
YUVIENGCO VS HON. DACUYCUY AND
DELY RODRIGUEZ, FELIPE CRUZ,
CONSTANCIA NOGAR, ET AL. (GR NO. L-
55048 MAY 27, 1981)
FACTS: Petitioners own a property in Tacloban
City which they intend to sell for 6. 5M. They
gave the privat e respondents the right to
purchase the property only until July 31, 1978.
Privat e respondents replied that they agree to
buy the property and they will negotiate for
details. Petitioner sent another telegram
informing respondents that their proposal is
accepted and a cont ract will be prepared.
Lawy er of t he petitioners, Mr.Gamboa, arrived
bringing a cont act with an altered mode of
payment which says that the balance payment
should be paid within 30 days instead of the
former 90 days. The original terms of the parties
was: respondents will pay 2M upon execution,
and the remaining 4.5m after 90 days.
In essence, the theory of petitioners is that while
it is true that they did express willingness to sell
to private respondents the s ubject property (land
and building) for P6,500,000.00 provided the
latter made known their own decision to buy it
not later than July 31, 1978, the res pondents'
reply that they were agreeable was not absolute,
so much so that when ultimately petitioners '
representative went to Cebu City with a
prepared and duly signed contract for the
purpose of perfecting and consummating the
transaction, respondents and said representative
found variance between the terms of payment
stipulated in the prepared document and what
respondents had in mind, henc e the bank draft
which respondents were delivering to the
representative was returned and the document
remained unsigned by respondents.
Henc e, the action for specific performance filed
by the private respondents. However, the
respondents, in their c omplaint, contended
―That on August 1, 1978 Pedro Gamboa
arrived Tacloban City bringing with him the
prepared contract to purchase and to sell
referred to in his telegram dated July 27, 1978
for the purpose of closing the transactions
referred to in paragraphs 8 and 9 hereof,
however, to the complete surprise of privat e
respondents, the petitioner without giving notice
to plaintiffs, changed the mode of payment wit h
respect to the balance of P4,500,000.00 by
imposing upon the private respondents to pay
same amount within thirty (30) days from
execution of the contract instead of the former
term of ninety (90) days.
Ruling of the lower court and the respondent
judge: The statute does not require a formal
contract drawn up with technical exactness for
the language of Par. 2 of Art. 1403 of the
Philippine Civil Code is '... an agreement...or
some note or memorandum thereof,' thus
recognizing a difference between the contract
itself and the written evidence which the statute
67
require. ... The c ontract of sale sued upon in this
case is supported by letters and telegrams
annexed to the complaint. The privat e
respondents having alleged that the contract is
backed up by letters and telegrams, and the
same being sufficient memorandum, the
complaint states a cause of action and they
should be given their day in court and allowed t o
substantiate their allegations.
ISSUES: Whether or not there is a perfected
contract of sale between the parties. (NO) and
Whether or not the claim for specific
performance of respondents is enforceable
under the Statute of Frauds. (NO)
HELD: 1st issue: There was no perfected
contract of sale yet because both parties are still
under negotiation and hence, no meeting of the
minds. Mr. Gamboa even went to the privat e
respondents to negotiate for the sale. E ven
though there was an agreement on the terms of
payment, there was no absolute acceptanc e
because respondents still insisted on further
details.
nd
2 issue: The conclusion is inescapable that the
claim of private respondents that petitioners
have unjustifiably refused to proceed with the
sale to them of the property in question is
unenforceable under the Statute of Frauds.
It is nowhere alleged in said paragraphs 8 to 12
of the complaint that there is any writing or
memorandum, much less a duly signed
agreement to the effect that the price of
P6,500,000 fixed by petitioners for the real
property herein involved was agreed to be paid
not in cash but in installments as alleged by
respondents.
The only documented indication of the non -
wholly -cash payment extant in the record is that
stipulated, the deeds already signed by the
petitioners and taken to Tacloban by Atty.
Gamboa for the signatures of the respondents.
In other words, the 90-day term for the balanc e
of P4.5 M insisted upon by respondents choices
not appear in any note, writing or memorandum
signed by either the petitioners or any of them,
not even by Atty. Gamboa. Hence, looking at the
pose of private respondents that there was a
perfected agreement of purchase and sale
between them and petitioners under which they
would pay in installments of P2 M down and
P4.5 M within 90 days afterwards, it is evident
that such oral contract involving the "sale of real
property" comes squarely under the Statute of
Frauds.
Respondent judge assumed that the
requirement of perfection of such kind of
contract under Article 1475 of the Civil Code
which provides that "the contract of sale is
perfected at the moment there is a meeting of
the minds upon the thing which is the object of
the contract and upon the price", the Statute
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
would no longer apply as long as the total pric e
or consideration is mentioned in some note or
memorandum and there is no need of any
indication of the manner in which such total pric e
is to be paid.
Thus, the SC held that in any sale of real
property on installments, the Statut e of Frauds
read together with the perfection requirements of
Article 1475 of the Civil Code must be
understood and applied in the sense that the
idea of payment on installments must be in the
requisite of a note or memorandum therein
contemplated. Stated otherwise, the inessential
elements" relied upon by respondent judge must
be deemed to include the requirement just
discussed when it comes to installment sales.
For the essence and thrust of the said
monograph refers only to the form of the note or
memorandum which would comply with the
Statute, and no doubt, while such note or
memorandum need not be in one single
document or writing and it can be in just
sufficiently implicit tenor, imperatively the
separate notes must, when put toget her', contain
all the requisites of a perfected contract of sale.
To put it the other way, under the Statute of
Frauds, the contents of the note or
memorandum, whether in one writing or in
separate ones merely indicative for an adequat e
understanding of all the essential elements of
the entire agreement, may be said to be the
contract itself, except as to the form.
Was there a valid contract of sale? No
They did not pass the negotiation stage.
Statute of Frauds:
It is not enough that “the total pric e or
consideration is mentioned in some note or
memorandum and there is no need of any
indication of the manner in which such total pric e
is to be paid;” that the manner by whic h the pric e
is to be paid has to be found in the or
memorandum, thus —
... In the reality of the economic world and the
exacting demands of business interest
monetary in character, payment or installments
or staggered payment of the total price is
entirely a different matter from cash payment,
considering the unpredictable trends in the
sudden fluctuation of the rate of interest. In
other words, it is indisputable that the value of
money varies from day to day, hence the
indispensability of providing in any sale of the
terms of payment when not expressly or
impliedly intended to be in cash.
Yuvienco thus held that “in any sale of real
property on installment, the Statute of Frauds
read together with the perfection requirements of
Article 1475 of the Civil Code must be
understood and applied in the sense that the
idea of payment on installments must be in the
requisite of a note or memorandum therein
contemplated.”
68
In spite of the Yuvienco ruling, the Court held in
David v. Tiongson, that the sale of real property
on installments even when the receipt or
memorandum evidencing the same does not
provide for the stated installments, when there
has already been partial payment, the Statute of
Frauds is not applicable because it only applies
to executory and not to completed, executed, or
partially executed contracts.
SEPT 8 SALES
We are now with the instances when form is
important in a contract of sale. Again we have
emphasized that there is no form required for the
validity of a contract of sale. However we have
instances as provided under the law, that form is
important not for the validity but for
rd
1. to bind 3 parties. We had that in the case
of Dalion vs CA.
Art 1358. Take note, requires embodiment of
certain contracts in a public instrument but only
for convenience. Not for validity. And the
rd
registration thereof only affects 3 parties.
Art. 1358. The following must appear in a
public document:
(1) Acts and contracts which have for their
object the creation, transmi ssion,
modification or extinguishment of real rights
over immovable property; sales of real
property or of an interest therein a governed
by Articles 1403, No. 2, and 1405;
(2) The ce ssion, repudiation or renunciation
of hereditary rights or of those of the
conjugal partnership of gains;
(3) The power to administer property, or any
other power which has for its object an act
appearing or which should appear in a public
document, or should prejudice a third
person;
(4) The ce ssion of actions or rights
proceeding from an act appearing in a public
document
rd
Formal requirements are for t he benefit of 3
parties and non-compliance must not adversely
affect the validity of the cont ract nor the
contractual rights and obligations of the parties
thereunder.
2. Also under the Statute of Frauds, Art 1403
par 2.
Art. 1403. The following contracts are
unenforceable, unless they are ratified:
2) Those that do not comply with the Statute
of Frauds as set forth in this number. In the
following case s an agreement hereafter
made shall be unenforceable by action,
unless the same, or some note or
memorandum, thereof, be in writing, and
subscribed by the party charged, or by his
agent; evidence, therefore, of the agreement
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
cannot be received without the writing, or a
secondary evidence of its contents:
(a) An agreement that by its term s i s not to
be performed within a year from the making
thereof;
(b) A special promise to answer for the debt,
default, or miscarriage of another;
(c) An agreement made in consideration of
marriage, other than a mutual promise to
marry;
(d) An agreement for the sale of goods,
chattels or things in action, at a price not
less than fi ve hundred pesos, unless the
buyer accept and receive part of such goods
and chattels, or the evidences, or some of
them, of such things in action or pay at the
time some part of the purcha se money; but
when a sale is made by auction and entry i s
made by the auctioneer in his sales book, at
the time of the sale, of the amount and kind
of property sold, term s of sale, price, names
of the purcha sers and person on whose
account the sale is made, it is a sufficient
memorandum;
(e) An agreement of the leasing for a longer
period than one year, or for the sale of real
property or of an interest therein;
(f) A repre sentation as to the credit of a third
person.
You have the following contracts of sale, which
must be in writing otherwise, it would be
unenforceable. Sale agreement which must not
be performed within 1 year from the making of
agreement, agreement for sale of goods,
chattels, or movables value of 500 or more, and
sale of real property or any interest therein.
Again take note of the purpose of the Statute of
Frauds, recall again, this is already discussed in
your Oblicon. Statute of Frauds will also again
be discussed when you have your evidence.
So the purpose is to prevent fraud and perjury in
the enforcement of obligations, depending for
their evidence on the unassisted memory of
witnesses, by requiring certain enumerated
contracts and trans actions to be evidenced by
the writing signed by the party in charge.
However take note that the application of the
Statute of Frauds presupposes the existence of
a perfected contract. Because when we say that
it is covered by the Statut e of Frauds, it is valid
but unenforceable. When records show that
there was no perfected contract of sale, then
there would be no basis for the application of the
Statute of Frauds.
SPOUS ES ALFREDO vs SPOUS ES BORRAS
(GR No 144225 June 17, 2003)
FACTS: The Alfredo Spouses mortgaged the
subject land situated in Brgy. Culis, Mabiga,
Hermosa, Bataan, to the DBP for P7,000.00,
and in order to pay their debt, the Alfredo
Spouses sold the s ubject land to the B orras
Spouses for P15,000.00. The Borras paid the
69
loan and its interest and the balance is to be
paid by the Alfredos, and t hey (Alfredos )
delivered the Owner's Duplicate Copy of OCT
No. 284 to them (Borras).
Later, Borras discovered that the Alfredos had
re-sold portiions of the land to several persons.
Borras filed an adverse claim with the Register
of Deeds of B ataan, and lat er they fou nd out that
the Alfredos had secured a duplicat e copy of
OCT No. 284, the tax declaration and the
receipts of the realty. The Alfredos filed a
complaint for Specific Performance, they
claimed that the sale, not being in writing, is
unenforceable under the Statute of Frauds.
ISSUE: W/N the contract of sale is
unenforceable under the Statute of Frauds. (NO)
HELD: NO. The Statute of Frauds provides that
a contract for the sale of real property shall be
unenforceable unless the contract or some not e
or memorandum of the sale is in writing and
subscribed by the party charged or his agent.
The existence of the receipt dated 11 Marc h
1970, which is a memorandum of the sale,
removes the transaction from t he provisions of
the Statute of Frauds.
The Statute of Frauds applies only to executory
contracts and not to contracts either partially or
totally performed. Thus, where one party has
performed one‘s obligation, oral evidenc e will be
admitted to prove the agreement. In the instant
case, the parties have consummat ed the sale of
the Subject Land, with both sellers and buyers
performing their respective obligations under the
contract of sale. In addition, a contract that
violat es the Statute of Frauds is ratified by the
acceptance of benefits under the contract.
Alfredo spouses benefited from the contract
because they paid their DBP loan and secured
the cancellation of their mortgage using the
money given by Borras. Alfredo also accepted
payment of the balance of the purchase price.
Alfredo spouses cannot invok e the Statute of
Frauds to deny the existence of the verbal
contract of sale becaus e they have performed
their obligations, and have accepted benefits,
under the verbal contract. The B orras spouses
have also performed their obligations under the
verbal cont ract. Clearly, both the sellers and the
buyers have consummated the verbal contract of
sale of the Subject Land. The Statute of Frauds
was enacted to prevent fraud. This law c annot
be used to advance the very evil the law seeks
to prevent.
So again, recall that you already discussed
under your obligations and cont racts under first
year, the Statute of Frauds; the contracts
covered therein are not enforceable unless they
are in writing. The intention is of course in
resurrecting the execution of the obligation
arising from the contract, whether partial or full
performance.
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
Statute of Frauds applies only to executory
contracts and not to contracts either partially or
totally performed.
In the instant case, the parties have
consummated the sale of the Subject Land, with
both sellers and buyers performing their
respective obligations under the contract of sale.
. There was delivery and there was already
payment of the purchase price. In addition, a
contract that violates the Statute of Frauds is
ratified by the acceptance of benefits under the
contract. Godofredo and Carmen benefited from
the contract because they paid their DBP loan
and sec ured the c ancellation of their mortgage
using the money given by Armando and Adelia.
Godofredo and Carmen also accepted payment
of the balance of the purchase price.
Also take note here the discussion as to the
absence of consent of the hus band; the sale
took effect before the effectivity of t he FC so it is
voidable and therefore susceptible of ratification.
Godofredo ratified the sale when he introduced
Armando and Adelia to his tenants as the new
owners of the Subject Land. The trial court noted
that Godofredo failed to deny categorically on
the witness stand the claim of t he complainants
witnesses that Godofredo int roduced A rmando
and Adelia as the new landlords of the tenants.
Of course, we have also get to discussed double
sales; this was also discussed in t he case of
Borras. So do take not of that as well.
In our discussion sa right of first refusal, recall
that while a contract of sale under 1403 par 2
are covered by the Statue of Frauds, as to right
of first refusal, it is not covered by the Statute of
Frauds and therefore the absence of the right of
first refusal in writing will not mean that there
was no grant of such right. You already
discussed that in the case of ROS ENCOR.
Also take note t hat, this is in relation to your
evidence later on, you also have RA 8792 –
Electronic Documents under the E-
commerce Act:
Section 6. Legal Recognition of Electroni c
Data Messages - Information shall not be
denied legal effect, validity or enforceability
solely on the grounds that it is in the data
message purporting to give rise to such legal
effect, or that it is merely referred to in that
electronic data message.
So in other words, as long as it is an electronic
data message, it is sufficient compliance with the
requirement under t he Statute of Frauds for the
contract to be in writing. So it is functional and is
equivalent to what is required under Statute of
Frauds.
3. For validit y, we already have mentioned this,
Art. 1874.
70
Art. 1874. 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. (n)
So just take note of that as well, we already
emphasized that when we discussed cons ent.
CONSUMMATION STAGE
Now we go to the last stage, the
CONSUMMATION STAGE IN A CONTRACT
OF SALE. So under the consummation stage,
the performance of t he respective obligations of
the seller and the buyer take place.
Cons ummation stage we have Arts. 1493 -1506
as well as Art. 1536-1544 and then 1582-1590 of
the NCC.
Art. 1493. If at the time the contract of sale is
perfected, the thing which is the object of the
contract has been entirely lost, the contract
shall be without any effect.
But if the thing should have been lost in part
only, the vendee may choose between
withdrawing from the contract and
demanding the remaining part, paying its
price in proportion to the total sum agreed
upon. (1460a)
Art. 1494. Where the parties purport a sale of
specific goods, and the goods without the
knowledge of the seller have perished in part
or have wholly or in a material part so
deteriorated in quality as to be substantially
changed in character, the buyer may at his
option treat the sale:
(1) As avoided; or
(2) As valid in all of the existing goods or in
so much thereof as have not deteriorated,
and as binding the buyer to pay the agreed
price for the goods in which the ownership
will pass, if the sale was divi sible. (n)
Art. 1495. The vendor i s bound to transfer the
ownership of and deliver, as well as warrant
the thing which i s the object of the sale.
(1461a)
Art. 1496. The ownership of the thing sold i s
acquired by the vendee from the moment it is
delivered to him in any of the ways specified
in Article s 1497 to 1501, or in any other
manner signifying an agreement that the
posse ssion i s transferred from the vendor to
the vendee. (n)
Art. 1497. The thing sold shall be understood
as delivered, when it is placed in the control
and posse ssion of the vendee. (1462a)
Art. 1498. When the sale is made through a
public instrument, the execution thereof shall
be equivalent to the delivery of the thing
which is the object of the contract, if from the
deed the contrary does not appear or cannot
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
clearly be inferred.
With regard to movable property, its delivery
may also be made by the delivery of the keys
of the place or depository where it is stored
or kept. (1463a)
Art. 1499. The delivery of movable property
may likewise be made by the mere consent
or agreement of the contracting partie s, if the
thing sold cannot be transferred to the
posse ssion of the vendee at the time of the
sale, or if the latter already had it in his
posse ssion for any other reason. (1463a)
Art. 1500. There may also be tradition
constitutum possessorium. (n)
Art. 1501. With re spect to incorporeal
property, the provi sions of the first
paragraph of article 1498 shall govern. In any
other case wherein said provisions are not
applicable, the placing of the titles of
ownership in the posse ssion of the vendee
or the use by the vendee of his rights, with
the vendor's consent, shall be understood a s
a delivery. (1464)
Art. 1502. When goods are delivered to the
buyer "on sal e or return" to give the buyer an
option to return the goods instead of paying
the price, the ownership pa sse s to the buyer
of delivery, but he may revest the ownership
in the seller by returning or tendering the
goods within the time fixed in the contract,
or, if no time has been fixed, within a
reasonable time. (n)
When goods are delivered to the buyer on
approval or on trial or on satisfaction, or
other similar terms, the ownership therein
passe s to the buyer:
(1) When he signifies hi s approval or
acceptance to the seller or does any other
act adopting the transaction;
(2) I f he doe s not signify hi s approval or
acceptance to the seller, but retains the
goods without giving notice of rejection, then
if a time has been fixed for the return of the
goods, on the expiration of such time, and, if
no time has been fixed, on the expiration of a
reasonable time. What is a reasonable time is
a question of fact. (n)
Art. 1503. When there is a contract of sale of
specific goods, the seller may, by the terms
of the contract, re serve the right of
posse ssion or ownership in the goods until
certain conditions have been fulfilled. The
right of posse ssion or ownership may be
thus re served notwithstanding the delivery of
the goods to the buyer or to a carrier or other
bailee for the purpose of transmi ssi on to the
buyer.
Where goods are shipped, and by the bill of
lading the goods are deliverable to the seller
or hi s agent, or to the order of the seller or of
his agent, the seller thereby reserves the
ownership in the goods. But, if except for the
71
form of the bill of lading, the ownership
would have passed to the buyer on shipment
of the goods, the seller's property in the
goods shall be deemed to be only for the
purpose of securing performance by the
buyer of hi s obligations under the contract.
Where goods are shipped, and by the bill of
lading the goods are deliverable to order of
the buyer or of hi s agent, but posse ssion of
the bill of lading is retained by the seller or
his agent, the seller thereby reserves a right
to the posse ssion of the goods a s against
the buyer.
Where the seller of goods draws on the
buyer for the price and transmits the bill of
exchange and bill of lading together to the
buyer to se cure acceptance or payment of
the bill of exchange, the buyer is bound to
return the bill of lading if he does not honor
the bill of exchange, and if he wrongfully
retains the bill of lading he acquires no
added right thereby. If, however, the bill of
lading provides that the goods are
deliverable to the buyer or to the order of the
buyer, or is indorsed in blank, or to the buyer
by the consignee named therein, one who
purcha se s in good faith, for value, the bill of
lading, or goods from the buyer will obtain
the ownership in the goods, although the bill
of exchange has not been honored, provided
that such purcha ser has received delivery of
the bill of lading indorsed by the consignee
named therein, or of the goods, without
notice of the facts making the transfer
wrongful. (n)
Art. 1504. Unless otherwise agreed, the
goods remain at the seller's ri sk until the
ownership therein is transferred to the buyer,
but when the ownership therein is
transferred to the buyer the goods are at the
buyer's ri sk whether actual delivery has been
made or not, except that:
(1) Where delivery of the goods ha s been
made to the buyer or to a bailee for the
buyer, in pursuance of the contract and the
ownership in the goods ha s been retained by
the seller merely to secure performance by
the buyer of hi s obligations under the
contract, the goods are at the buyer's ri sk
from the time of such delivery;
(2) Where actual delivery has been delayed
through the fault of either the buyer or seller
the goods are at the risk of the party in fault.
(n)
Art. 1505. Subject to the provi sions of thi s
Title, where goods are sold by a person who
is not the owner thereof, and who does not
sell them under authority or with the consent
of the owner, the buyer acquires no better
title to the goods than the seller had, unless
the owner of the goods i s by his conduct
precluded from denying the seller's authority
to sell.
Nothing in thi s Title, however, shall affect:
(1) The provi sions of any factors' act,
recording laws, or any other provision of law
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
enabling the apparent owner of goods to
dispose of them as if he were the true owner
thereof;
(2) The validity of any contract of sale under
statutory power of sale or under the order of
a court of competent juri sdiction;
(3) Purcha se s made in a merchant's store, or
in fairs, or markets, in accordance with the
Code of Commerce and special laws. (n)
Art. 1506. Where the seller of goods has a
voidable title thereto, but his title has not
been avoided at the time of the sale, the
buyer acquires a good ti tle to the goods,
provided he buys them in good faith, for
value, and without notice of the seller's
defect of title. (n)
Art. 1536. The vendor is not bound to deliver
the thing sold in case the vendee should lose
the right to make use of the terms a s
provided in Article 1198. (1467a)
Art. 1537. The vendor is bound to deliver the
thing sold and its acce ssi ons and
accessories in the condition in which they
were upon the perfection of the contract.
All the fruits shall pertain to the vendee from
the day on which the contract was perfected.
(1468a)
Art. 1538. In case of loss, deterioration or
improvement of the thing before its delivery,
the rules in Article 1189 shall be observed,
the vendor being considered the debtor. (n)
Art. 1539. The obligation to deliver the thing
sold include s that of placing in the control of
the vendee all that is mentioned in the
contract, in conformity with the following
rules:
If the sale of real estate should be made with
a statement of its area, at the rate of a certain
price for a unit of measure or number, the
vendor shall be obliged to deliver to the
vendee, if the latter should demand it, all that
may have been stated in the contract; but,
should thi s be not possible, the vendee may
choose between a proportional reduction of
the price and the resci ssion of the contract,
provided that, in the latter case, the lack in
the area be not less than one-tenth of that
stated.
The same shall be done, even when the area
is the same, if any part of the immovable is
not of the quality specified in the contract.
The resci ssi on, in thi s ca se, shall only take
place at the will of the vendee, when the
inferior value of the thing sold exceeds one -
tenth of the price agreed upon.
Nevertheless, if the vendee would not have
bought the immovable had he known of its
smaller area of inferior quality, he may
rescind the sale. (1469a)
Art. 1540. If, in the case of the preceding
article, there is a greater area or number in
72
the immovable than that stated in the
contract, the vendee may accept the area
included in the contract and reject the re st. I f
he accepts the whole area, he must pay for
the same at the contract rate. (1470a)
Art. 1541. The provisions of the two
preceding articles shall apply to judicial
sales. (n)
Art. 1542. In the sale of real estate, made for
a lump sum and not at the rate of a certain
sum for a unit of measure or number, there
shall be no increase or decrease of the price,
although there be a greater or less area or
number than that stated in the contract.
The same rule shall be applied when two or
more immovables as sold for a single price;
but if, beside s mentioning the boundaries,
which is indispensable in every conveyance
of real estate, its area or number should be
designated in the contract, the vendor shall
be bound to deliver all that is included within
said boundaries, even when it exceeds the
area or number specified in the contract;
and, should he not be able to do so, he shall
suffer a reduction in the price, in proportion
to what is lacking in the area or number,
unless the contract is rescinded because the
vendee does not accede to the failure to
deliver what has been stipulated. (1471)
Art. 1543. The actions ari sing from Article s
1539 and 1542 shall prescribe in six months,
counted from the day of delivery. (1472a)
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 posse ssion 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.
Should there be no inscription, the
ownership shall pertain to the person who in
good faith was first in the posse ssion; and,
in the absence thereof, to the person who
presents the oldest ti tle, provided there is
good faith. (1473)
Art. 1582. The vendee is bound to accept
delivery and to pay the price of the thing sold
at the time and place stipulated in the
contract.
If the time and place should not have been
stipulated, the payment must be made at the
time and place of the delivery of the thing
sold. (1500a)
Art. 1583. Unless otherwise agreed, the buyer
of goods is not bound to accept delivery
thereof by installments.
Where there is a contract of sale of goods to
be delivered by stated installments, which
are to be separately paid for, and the seller
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
makes defective deliveries in respect of one
or more installments, or the buyer neglects
or refuse s without just cause to take delivery
of or pay for one more installments, it
depends in each ca se on the term s of the
contract and the circumstance s of the case,
whether the breach of contract is so material
as to justify the injured party in refusing to
proceed further and suing for damages for
breach of the entire contract, or whether the
breach is severable, giving rise to a claim for
compensation but not to a right to treat the
whole contract as broken. (n)
Art. 1584. Where goods are delivered to the
buyer, which he has not previousl y
examined, he is not deemed to have
accepted them unless and until he has had a
reasonable opportunity of examining them
for the purpose of a scertaining whether they
are in conformity with the contract if there is
no stipulation to the contrary.
Unless otherwise agreed, when the seller
tenders delivery of goods to the buyer, he is
bound, on request, to afford the buyer a
reasonable opportunity of examining the
goods for the purpose of ascertaining
whether they are in conformity with the
contract.
Where goods are delivered to a carrier by the
seller, in accordance with an order from or
agreement with the buyer, upon the terms
that the goods shall not be delivered by the
carrier to the buyer until he has paid the
price, whether such term s are indicated by
marking the goods with the words "collect
on delivery," or otherwise, the buyer is not
entitled to examine the goods before the
payment of the price, in the absence of
agreement or usage of trade permitting such
examination. (n)
Art. 1585. The buyer is deemed to have
accepted the goods when he intimates to the
seller that he has accepted them, or when the
goods have been delivered to him, and he
does any act in relation to them which is
inconsi stent with the ownership of the seller,
or when, after the lapse of a reasonable time,
he retains the goods without intimating to
the seller that he has rejected them. (n)
Art. 1586. In the absence of express or
implied agreement of the parties, acceptance
of the goods by the buyer shall not di scharge
the seller from liability in damages or other
legal remedy for breach of any promi se or
warranty in the contract of sale. But, if, after
acceptance of the goods, the buyer fails to
give notice to the seller of the breach in any
promise of warranty within a reasonable time
after the buyer know s, or ought to know of
such breach, the seller shall not be liable
therefor. (n)
Art. 1587. Unle ss otherwise agreed, where
goods are delivered to the buyer, and he
73
refuses to accept them, having the right so to
do, he is not bound to return them to the
seller, but it is sufficient if he notifies the
seller that he refuse s to accept them. If he
voluntarily constitu te s him self a deposi tary
thereof, he shall be liable as such. (n)
Art. 1588. If there is no stipulation a s
specified in the first paragraph of article
1523, when the buyer's refusal to accept the
goods i s without just cause, the title thereto
passe s to him from the moment they are
placed at his di sposal. (n)
Art. 1589. The vendee shall owe interest for
the period between the delivery of the thing
and the payment of the price, in the following
three cases:
(1) Should it have been so stipulated;
(2) Should the thing sold and delivered
produce fruits or income;
(3) Should he be in default, from the time of
judicial or extrajudicial demand for the
payment of the price. (1501a)
Art. 1590. Should the vendee be disturbed in
the posse ssi on or ownership of the thing
acquired, or should he have reasonable
grounds to fear such di sturbance, by a
vindicatory action or a foreclosure of
mortgage, he may suspend the payment of
the price until the vendor has caused the
disturbance or danger to cease, unless the
latter gives security for the return of the price
in a proper case, or it has been stipulated
that, notwithstanding any such contingency,
the vendee shall be bound to make the
payment. A mere act of trespa ss shall not
authorize the suspension of the payment of
the price. (1502a)
Now what are the GE NE RAL OBLIGA TIONS OF
THE SELLER? Of course he has the obligation
to preserve the subject matter. Recall Art 1163.
Art. 1163. Every person obliged to give
something i s also obliged to take care of it
with the proper diligence of a good father of
a family, unless the law or the stipulation of
the parties requires another standard of care.
(1094a)
Again, DE TE RMINA TE THING otherwise you
have to suffer the consequenc es if there is loss.
Now when we talk about preserving the subject
matter here, this takes place before the delivery.
So before delivery, before ownership is
transferred. And therefore, if t here is loss of the
thing due of the subject matter before there is
delivery, take note it is the seller who bears the
loss as a general rule, based on the principle
Res Perit Domino.
Another obligation on the part of the seller is the
obligation to deliver the subject matter together
with the fruits and accessories. Again recall Art.
1164, you have fruits and 1166, accessions and
accessories.
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
Art. 1164. The creditor has a right to the
fruits of the thing from the time the
obligation to deliver it arises. However, he
shall acquire no real right over it until the
same has been delivered to him. (1095)
Art. 1166. The obligation to give a
determinate thing includes that of delivering
all its accessi ons and accessorie s, even
though they may not have been mentioned.
(1097a)
And then the obligation to deliver the subject
matter, which of course, with the delivery of the
subject matter, there is transfer of ownership.
This is in relation t o our discussion – the
characteristic of a sale being a title and not a
mode. Sale itself does not transfer ownership, it
creates the obligation on the part of the seller to
deliver the subject matter and transfer the
ownership to the buy er.
And then another obligation of the seller - to
warrant the subject matter.
And then you also have the obligation of seller
as a general rule, to bear expenses of the
execution and registration in the contract of sale.
Now if you take a look at Art 1458, the main
obligation really of the seller is to transfer
ownership and deliver the subject matter of the
said contract of sale. So very clear ito sa
definition ng sale.
Art. 1458. By the contract of sale one of the
contracting parties obligates him self to
transfer the ownership and to deliver a
determinate thing, and the other to pay
therefor a price certain in money or its
equivalent.
A contract of sale may be absolute or
conditional. (1445a
Under Art 1477, ownership is transferred to the
buyer upon actual or constructive delivery.
Art. 1477. The ownership of the thing sold
shall be transferred to the vendee upon the
actual or constructive delivery thereof. (n)
Art 1496, ownership of subject matter is
acquired by the vendee from the moment it is
delivered to him in any of the ways specified in
the articles 1497-1501.
Art. 1496. The ownership of the thing sold i s
acquired by the vendee from the moment it is
delivered to him in any of the ways specified
in Article s 1497 to 1501, or in any other
manner signifying an agreement that the
posse ssion i s transferred from the vendor to
the vendee. (n)
Art. 1497. The thing sold shall be understood
as delivered, when it is placed in the control
74
and posse ssion of the vendee. (1462a)
Art. 1498. When the sale is made through a
public instrument, the execution thereof shall
be equivalent to the delivery of the thing
which is the object of the contract, if from the
deed the contrary does not appear or cannot
clearly be inferred.
With regard to movable property, its delivery
may also be made by the delivery of the keys
of the place or depository where it is stored
or kept. (1463a)
Art. 1499. The delivery of movable property
may likewise be made by the mere consent
or agreement of the contracting partie s, if the
thing sold cannot be transferred to the
posse ssion of the vendee at the time of the
sale, or if the latter already had it in his
posse ssion for any other reason. (1463a)
Art. 1500. There may also be tradition
constitutum possessorium. (n)
Art. 1501. With re spect to incorporeal
property, the provi sions of the first
paragraph of article 1498 shall govern. In any
other case wherein said provisions are not
applicable, the placing of the titles of
ownership in the posse ssion of the vendee
or the use by the vendee of his rights, with
the vendor's consent, shall be understood a s
a delivery. (1464)
Now there are 3 types of delivery:
 Actual or physical delivery
 Execution of legal forms and
solemnities -1498
 Traditio Symbolica – 1498
 Traditio longa manu – 1499
 Traditio brevii manu – 1499
 Traditio c onstitutum possesorium –
1500
 Constructive or implied
 Quasi -tradition – 1501, which sometimes is
also considered as a constructive delivery.
If there is no perfected contract of sale, when a
sale is void or fictitious, even if there is delivery,
no valid title over the subject matter can be
transferred to the buyer. Also, if there was
delivery and the seller was not the owner of the
subject matter at the time of delivery, then no
title can pass in favor of the buyer. We have
several cases discussing the principle of Nemo
Dat Quod Non Habet.
Now, general doctrines on tradition:
Under 1478, recall:
Art. 1478. The parties may stipulate that
ownership in the thing shall not pass to the
purcha ser until he has fully paid the price. (n)
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
It may be stipulated that ownership of the thing
shall not pass to the buy er until he has fully paid
the price. We already discussed this in a
contract to sell. However in the absenc e of such
stipulation, tradition or delivery produces its
natural effects in law. Most important is which
being the conveyance of ownership, of cours e
without prejudice to t he right of the seller t o
claim payment of the price.
Delivery contemplates the absolute giving out of
the control and custody of the property on the
part of the vendor and the assumption of the
same by the vendee. There is said to be delivery
if and when the thing sold is placed in the control
and possession of the vendee.
Again, take note, failure of the buyer to pay the
price does not cause the ownership to regress
back to the seller, unless the contract of sale is
first rescinded or resolved pursuant to Art. 1191.
We have A rt 1497 with regard to physical
delivery. In fact, delivery, control and possession
were discussed in the case of BORRAS.
It is not necessary that the seller himself deliver
the title of the property to the buyer because the
thing sold is understood as delivered when it is
placed in the control and possession of the
vendee. To repeat, Godofredo and Carmen
themselves introduced the Natanawans, their
tenants, to Armando and Adelia as the new
owners of the S ubject Land. From then on,
Armando and Adelia acted as the landlords of
the Natanawans. Obviously, Godofredo and
Carmen t hemselves placed control and
possession of the Subject Land in the hands of
Armando and A delia. Thus there was delivery
that transferred title to the buyer.
Now we also have Art 1498.
Art. 1498. When the sale is made through a
public instrument, the execution thereof shall
be equivalent to the delivery of the thing
which is the object of the contract, if from the
deed the contrary does not appear or cannot
clearly be inferred.
With regard to movable property, its delivery
may also be made by the delivery of the keys
of the place or depository where it is stored
or kept. (1463a)
Execution of a public instrument, a deed of sale
that is notarized = equivalent to delivery of the
property being a constructive delivery.
SANTOS VS SANTOS (GR No 133895
October 2, 2001)
FACTS: Petitioner Zenaida M. Santos is the
widow of Salvador Santos. Salvador Santos is a
brother of private respondents Calixto, Alberto,
Antonio, and Rosa Santos-Carreon. The
spouses Jes us and Rosalia Santos are the
parents of the 5 siblings.
They owned a parcel of land registered under
TCT No. 27571 with an area of 154 square
75
meters, located at Sta. Cruz Manila. On it was a
four-door apartment administered by Rosalia
who rented them out. The spouses had five
children, Salvador, Calixto, Alberto, Antonio and
Rosa.
On January 19, 1959 Jesus and Rosalia
executed a deed of sale of the properties in
favor of their children Salvador and Rosa. TCT
No. 27571 became TCT No. 60819.
On November 20, 1973 Rosa in turn sold her
share to S alvador which res ulted in t he issuanc e
of a new TCT No. 113221. Despite the trans fer
of the property to Salvador, Rosalia, their
mother, continued t o lease and receive rentals
from the apartment units.
November 1, 1979, Jesus died. January 9, 1985,
Salvador died. After a month (Feb 1985),
Rosalia died.
Shortly aft er, petitioner Zenaida, claiming to be
Salvador's heir (specifically, as Salvador’s
widow), demanded the rent from Antonio
Hombrebueno, a tenant of Rosalia. When the
latter refus ed to pay, Zenaida filed and
ejectment suit against him with the Metropolitan
Trial Court of Manila, Branch 24, whic h
eventually decided in Zenaida's favor.
On January 5, 1989 - private respondents
instituted an action for reconveyance of property
with preliminary injunction against petitioner in
RTC of Manila, where they alleged that the two
deeds of sale ex ecuted on January 19, 1959 and
November 20, 1973 were simulat ed for lack of
consideration. They were execut ed to
accommodate Salvador in generation funds for
his business and providing him with greater
business flexibility.
Zenaida argued that Salvador was the registered
owner of the property, which could only be
subjected to encumbrances or liens annotated
on the title; that the respondents' right to
reconvey ance was already barred by
prescription and laches; and that the complaint
state no cause of action.
Ruling of the lower court: RTC decided in favour
of private res pondents:
a) Declaring the deed of sale executed by
Rosalia S antos and Jesus Santos on January
19, 1959, as entirely null and void for being
fictitious or stimulated and inexistent
b) Declaringthe deed of sale executed by Rosa
Santos in favor of Salvador Sant os on
November 20, 1973, also as entirely null and
void for being likewis e fictitious or stimulated and
inexistent
c) Directing ROD of Manila to canc el
TCT#113221 registered in t he name of Salvador
Santos, as well as, TCT# 60819 in the names of
Salvador Santos, Rosa Santos and the Trans fer
Certificate of Title No. T-27571 registered in the
name of Rosalia A. Santos, married to Jesus
Santos, the same to be partitioned by the heirs
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
of the said registered owners in accordance wit h
law.
The trial court reasoned that notwithstanding the
deeds of sale trans ferring the property to
Salvador, the spouses Rosalia and Jesus
continued to possess the property and to
exercise rights of ownership not only by
receiving the mont hly rentals, but also by paying
the realty taxes. Also, Rosalia kept the owner's
duplicate copy of the title even after it was
already in the name of Salvador. Further, the
spouses had no compelling reason in 1959 to
sell the property and Salvador was not
financially capable to purchase it. The deeds of
sale were therefore fictitious. Henc e, the action
to assail the same does not prescribe.
The CA affirmed the decision of the RTC. It held
that in order for t he exec ution of a public
instrument to effect tradition, as provided in
Article 1498 of the Civil Code, the vendor shall
have had control over the thing sold, at the
moment of sale. It was not enough to confer
upon the purc haser the ownership and the right
of possession. The thing sold must be placed in
his control. The subject deeds of sale did not
confer upon Salvador the owners hip over the
subject property, because even after the sale,
the original vendors remained in dominion,
control, and possession thereof.
ISSUE: WON there was DELIVE RY by the
Seller
HELD: There’s CONSTRUCTIVE DELIVERY
but it was NOT EFFECTED.
Petitioner in her memorandum invokes Article
1477 of the Civil Code which provides that
ownership of the thing sold is trans ferred to the
vendee upon its actual or constructive delivery.
Article 1498, in turn, provides that when the sale
is made through a public instrument, its
execution is equivalent to the delivery of the
thing subject of the contract. Petitioner avers
that applying said provisions to the case,
Salvador became the owner of the subject
property by virtue of the two deeds of sale
executed in his favor.
Nowhere in the Civil Code, however, does it
provide that execution of a deed of sale is a
conclusive presumption of delivery of
possession. The Code merely said that the
execution shall be equivalent to delivery. The
presumption can be rebutted by clear and
convincing evidence. Presumptive delivery can
be negated by the failure of the vendee to tak e
actual possession of the land sold.
In Danguilan vs. IAC, 168 S CRA 22, 32 (1988),
we held that for the execution of a public
instrument to effect tradition, the purc haser must
be plac ed in cont rol of the thing sold. When
there is no impediment to prevent the thing sold
from converting to tenancy of the purchaser by
the sole will of the vendor, symbolic delivery
76
through the execution of a public instrument is
sufficient. But if, notwithstanding the execution of
the instrument, the purchaser cannot have the
enjoyment and material tenancy nor make use of
it himself or through another in his name, then
delivery has not been effected.
Salvador was never placed in control of the
property. The original sellers retained their
control and possession. Therefore, there was no
real transfer of ownership.
In Norkis Distributors, Inc. vs. CA, the SC held
that the critical factor in the different modes of
effecting delivery, whic h gives legal effect to the
act is the actual intention of the vendor to
deliver, and its acceptance by the vendee.
Without that intention, there is no tradition. In the
instant case, although the spouses Jesus and
Rosalia exec uted a deed of sale, they did not
deliver the possession and ownership of the
property to Salvador and Rosa. They agreed t o
execute a deed of sale merely to accommodat e
Salvador to enable him to generate funds for his
business venture.
While we have art 1498, take not e it is not a
conclusive presumption. The execution of a
deed of sale is not a conclusive presumption of
the delivery of possession. It is merely provided
that the execution shall be equivalent to delivery.
The presumption can be rebutted by clear and
convincing evidence; presumptive delivery can
be negated by the failure of the vendee to tak e
actual possession of the land sold.
Here, vendor’s continued possession of the
property makes dubious the contract of sale
between the parties. Salvador was never placed
in control of the property. The original sellers
retained their control and possession. Therefore,
there was no real transfer of ownership. The
deeds of sale were in fact simulated and
fictitious and Rosa and Salvador did not exercise
any ownership over the subject property.
So again, Art. 1498 with regard to the execution
of a public instrument is not a conclusive
presumption. It can be negated by the failure of
the vendee to take actual possession of the
land, as it would show that they had no intention
to enter into a contract of sale.
DY, JR. V. CA, GELAC TRADING INC., AND
ANTONI O V. GONZALES
FACTS: Wilfredo Dy purchased a truck and a
farm tractor through LIBRA which was also
mortgaged with the latter, as a security to the
loan.
Petitioner, expresses his desire to purchase his
brother’s tractor in a letter to LIBRA which also
includes his intention to shoulder its mortgaged.
LIB RA approved the request. At the time that
Wilfredo Dy executed a deed of absolute sale in
favor of petitioner, the tractor and truck were in
the possession of LIBRA for his failure to pay the
amortization.
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
When petitioner finally fulfilled its obligation t o
pay the tractor, LIBRA would only release the
same only if he would also pay for the truck. In
order to fulfill LIBRA’s condition, petitioner
convinced his sister to pay for the remaining
truck, to which she released a check amounting
to P22, 000. LIB RA however, insisted that the
check must be first cleared before it delivers the
truck and tractor.
Meanwhile, anot her case penned “Gelac Trading
Inc vs. Wilfredo Dy” was pending in Cebu as a
case to recover for a sum of money (P12,
269.80). By a writ of execution the court in Cebu
ordered to seize and levy the tractor which was
in the premise of LIB RA, it was sold in a public
auction to which it was purchased by GELAC.
The latter then sold the tractor to Antonio
Gonzales.
RTC rendered in favor of petitioner. CA
dismissed the case, alleging that it still belongs
to Wilfredo Dy.
ISSUE: Whether or not there was a
consummated sale between Petitioner and
LIB RA?
HELD: NO. The payment of the check was
actually intended to extinguish the mortgage
obligation so that the tractor could be released to
the petitioner. It was never intended nor could it
be considered as payment of the purchase pric e
because the relationship bet ween Libra and the
petitioner is not one of sale but still a mortgage.
The clearing or encashment of the c heck whic h
produced the effect of payment det ermined the
full payment of the money obligation and the
release of the chattel mort gage. It was not
determinative of the consummation of the sale.
The transaction bet ween the brothers is distinct
and apart from the transaction between Libra
and the petitioner. The contention, therefore,
that the consummation of the sale depended
upon the enc ashment of the check is untenable.
Take note, here t he subject matter is a tractor
and at the time of the sale between t he brothers,
the tractor was still subject to a mortgage
wherein Wilfredo was the mortgagor, and Libra
was the mortgagee. Now take note in a
mortgage, there is no transfer of ownership. The
mortgagor who gave the property as security
under a chattel mortgage did not part with the
ownership over the same. So the sale between
the brothers was valid and binding.
Was there delivery to trans fer ownership in favor
of Perfecto? In the instant case, actual delivery
of the subject tractor could not be made, coz it
was still in the possession of Libra. However,
there was constructive delivery already upon the
execution of the public instrument pursuant to
Article 1498 and upon the cons ent or agreement
of the parties when the thing sold cannot be
immediat ely transferred to the possession of the
vendee. (Art. 1498, 1499)
77
While it is true that for this presumption,
execution equivalent to delivery, the vendor
must first have control and possession of the
thing. While it is true that Wilfredo Dy was not in
actual possession and control of the subject
tractor, his right of ownership was not divested
from him upon his default. Again, there was no
transfer of owners hip in favor of the mortgagee.
Neither could it be said that Libra was the owne r
of the subject tractor because the mortgagee
can not become the owner of or convert and
appropriate to himself the property mortgaged.
(Article 2088, Civil Code) Said property
continues to belong to the mortgagor.
Undeniably, Libra gave its consent to the sale of
the subject tractor to the petitioner. It was aware
of the transfer of rights to the petitioner.
Now, how about as to t he issue of the checks?
The payment of the check was actually intended
to extinguish the mortgage obligation. However
the contention, therefore, that the consummation
of the sale depended upon the enc ashment of
the check is untenable. The sale of the subject
tractor was consummated upon the execution of
the public instrument on September 4, 1979. At
this time constructive delivery was already
effected. Hence, the subject tractor was no
longer owned by Wilfredo Dy when it was levied
upon by the sheriff in December, 1979.
Now do take note in 1498 and 1499, you have
therein, constructive delivery. In 1498, delivery
of the keys or depository where it is stored or
kept. Example, you sell sacks of rice or some
other subject matter, which are kept in a
warehouse. But instead of delivery of the subject
matter physically to the buyer, you instead give
him the keys. Or ang car, ibigay mo ang susi sa
buyer. So that is what you c all TRADITIO
SYMBOLICA.
Again, traditio, Latin term for delivery. Also,
under A rt. 1499, delivery by cons ent of the
parties if the subject cannot be transferred to
buyer at the time of the sale or the buyer already
had possession before the sale. Here, by
consent or agreement; so you could have here
TRADITIO LONGA MANU. Para bang you are
pointing to the s ubject matter bec ause you
cannot yet deliver it to the buyer. But there is
constructive delivery, which is equivalent to the
transfer of ownership.
Now also take note, may nakalagay dyan sa
1499, when the buyer already had possession
before the sale. Here you have TRADITIO
BREVI MANU. This is NOT the opposite of
LONGA MA NU. Kasi sa LONGA MA NU, by
consent or agreement, pointing noh or extending
your arm, pointing the subject matter to the
buyer.
But in LONGA MA NU, the buy er is already in
possession of the property. For example, he was
previously in possession of a parcel of land by
being a lessee, then subsequently, he entered
into a contract of sale, so ano kelangan pa niy a
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
ibalik tapos mag alis sya tapos mag pasok
nanaman ulit, so hindi na. There is already
possession by the buyer before the sale and
then continuous possession after the sale but
the possession after the sale, this time he is
already considered as the owner.
Now, the OPPOSITE of TRA DITIO BREV I
MANU, is TRADITIO CONSTITUTUM
POSSESSORIUM. Wherein the owner or the
vendor was initially in possession of the property
before the sale, subsequent to the sale, there is
continuous possession of the property but not in
the concept of owner anymore. In possession
before the sale, sells the property to the buyer,
then subsequently they enter into a contract of
lease, wherein the buyer now is the lessor and
the original owner, previously the seller becomes
the lessee; retains possession but not in the
concept of owner anymore.
Now also when we go to documents of title, we
will get to discuss, as to pers ons to whom
negotiable documents of title must be
negotiated, acquires the right of the person to
whom delivery shall be made by the terms of the
documents. That would be A rt. 1513.
Art. 1513. A person to whom a negotiable
document of title has been duly negotiated
acquires thereby:
(1) Such ti tle to the goods a s the person
negotiating the document to him had or had
ability to convey to a purchaser in good faith
for value and also such title to the goods a s
the person to whose order the goods were to
be delivered by the terms of the document
had or had ability to convey to a purcha ser in
good faith for value; and
(2) The direct obligation of the bailee issuing
the document to hold posse ssion of the
goods for him according to the terms of the
document as fully a s if such bailee had
contracted directly with him. (n)
ADDISON V. FELIX
FACTS: The defendants-appellees spouses
Maciana Felix and Balbino Tioc o purchased
from plaintiff-appellant A.A. Addison four parcels
of land to which Felix paid, at the time of the
execution of the deed, the sum of P 3,000 on
account of the purchase price. She likewis e
bound herself to the remainder in installments,
the first of P,2000 on July 15, 1914, the second
of P5,000 thirty days after the issuance to her of
a certificate of title under the Land Registration
Act, and further, within ten years from the date of
such title, P10 for each cocoanut tree in bearing
and P5 for each such tree not in bearing that
might be growing on said parcels of land on the
date of the issuance of title to her, with the
condition that the total price should not exceed
P85,000. It was further stipulated that Felix was
to deliver to the Addison 25% of the value of the
products that she might obtain from the four
parcels "from the moment she takes possession
78
of them until the Torrens certificate of title be
issued in her favor," and that within 1 year from
the date of t he certificate of title in her favor,
Marciana Felix may rescind the cont ract of
purchase and sale.
In January 1915, Addison, filed suit in the CFI of
Manila to compel Felix to pay the first installment
of P2,000, demandable, in accordance wit h the
terms of the contract of sale. The defendants
Felix and her husband Tioco contended that
Addison had absolutely failed to deliver the
lands that were t he subject matter of the sale,
notwithstanding the demands they made upon
him for this purpose. The evidence adduced
shows Addison was able to designate only two
of the four parcels, and more than t wo -thirds of
these two were found to be in the possession of
one Juan Villafuerte, who claimed to be the
owner of the parts he so occupied. The trial
court held the contract of sale to be rescinded
and ordered Addis on to ret urn to Felix the
P3,000 paid on account of the price, together
with interest thereon at the rate of 10% per
annum.
ISSUE: Was there a delivery made and,
therefore, a trans fer of ownership of the thing
sold?
HELD: The S upreme Court affirmed the decision
of the lower court, with modification that the
interest thereon will be at the rate of 6% (instead
of 10%) per annum from the dat e of the filing of
the complaint until payment.
The thing is considered to be delivered when it is
placed "in the hands and possession of the
vendee." It is true that the same article declares
that the execution of a public instrument is
equivalent to the delivery of the thing which is
the object of the contract, but, in order that this
symbolic delivery may produce the effect of
tradition, it is necessary that the vendor shall
have had such control over the thing sold that, at
the moment of t he sale, its material delive ry
could have been made. Symbolic delivery
through the execution of a public instrument is
sufficient when there is no impediment whatever
to prevent the thing sold passing into the
tenancy of the purchaser by the sole will of the
vendor. But if, notwithstanding the execution of
the instrument, the purchaser cannot have the
enjoyment and material tenancy of the thing and
make use of it himself or through another in his
name, because such are opposed by a third
person’s will, then the delivery has not been
effected. In the case at bar, therefore, it is
evident, that the mere execution of the
instrument was not a fulfillment of the vendor's
obligation to deliver the thing sold, and that from
such non-fulfillment arises the purchaser's right
to demand, as she has demanded, the
rescission of the sale and the return of the price.
Here, there was no valid delivery to trans fer
possession. The civil code imposes upon the
vendor the obligation to deliver the thing sold.
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
The thing is considered to be delivered when it is
placed "in the hands and possession of the
vendee." It is true that the same article declares
that the execution of a public instrument is
equivalent to the delivery of the thing which is
the object of the contract, but, in order that this
symbolic delivery may produce the effect of
tradition, it is necessary that the vendor shall
have had such control over the thing sold that, at
the moment of t he sale, its material delivery
could have been made.
There was also the emphasizing of the case of
Dy. However the difference in Dy, is that in the
case of Dy, there was no impediment to prevent
the thing sold passing the title to the vendee by
the sole will of the vendor. Therefore in the case
of Dy, even if the tractor was in the possession
of the mortgagee Libra, it was not an
impediment because there was no transfer of
ownership. Libra was not asserting ownership
over the t ractor. It acknowledges that it was in
possession thereof as a mere security and in
fact gave its consent to the sale.
But here you have persons in possession of the
property. There is an impediment and therefore
the execution of the public instrument is not
sufficient to transfer ownership. The purchaser
here cannot have the enjoyment and material
tenancy of the thing and make use of it himself
or through another in his name, because suc h
are opposed by a third person’s will, then the
delivery has not been effected. In the case at
bar, therefore, it is evident, that the mere
execution of the instrument was not a fulfillment
of the vendor's obligation to deliver the thing
sold, and that from such non -fulfillment arises
the purchaser's right to demand, as she has
demanded, the rescission of the sale and the
return of the pric e.
SPOUS ES SANTOS V. CA
FACTS: Spouses Sant os owned the house and
lot in Better Living Subdivision, Paranaque,
Metro Manila. The land together with the house,
was mortgaged with the Rural Bank of Salinas,
Inc., to secure a loan of P150K. The bank sent
Rosalinda Santos a letter demanding payment of
P16K in unpaid int erest and other charges.
Since the Santos couple had no funds,
Rosalinda offered to sell the house and lot to
Carmen Caseda. After inspecting the real
property, Carmen and her husband agreed.
Carmen and Rosalinda signed a document,
involving the sale of the house – P350K as full
amount, P54K as downpayment. Among other
condition set is that Caseda will pay the balanc e
of the mortgage in the bank, real estate taxes
and the electric and water bills.
The Casedas complied with the bank mortgage
and the bills. The Santoses, seeing that the
Casedas lacked t he means to pay the remaining
installments and/ or amortization of the loan,
repossessed the property. The Santoses then
collected the rentals from the t enants. Carmen
79
approached petitioners and offered to pay the
balance of the purchase price for the house and
lot. The parties, however, could not agree, and
the deal could not push through because the
Santoses wanted a higher price.
Carmen is now praying that the Santoses
execute the final deed of conveyance over the
property.
ISSUE: WON there was a perfected cont ract of
sale? NO
HELD: A contract is what the law defines it to
be, taking into consideration its essential
elements, and not what the contracting parties
call it. Article 1458 expressly obliges the vendor
to transfer ownership of the thing sold as an
essential element of a contract of s ale. This is
because the trans fer of owners hip in exchange
for a price paid or promised is the very essence
of a cont ract of sale.
There was no trans fer of ownership
simultaneously with the delivery of the property
purportedly sold. The records clearly show that,
notwithstanding the fact that the Casedas first
took then lost possession of the disputed hous e
and lot, the title to the property has remained
always in the name of Rosalinda Santos.
Although the parties had agreed that the
Casedas would assume the mortgage, all
amortization payments made by Carmen
Caseda to the bank were in the name of
Rosalinda S antos. The foregoing circumstances
categoric ally and clearly show that no valid
transfer of ownership was made by the Santoses
to the Casedas. Absent this essential element,
their agreement cannot be deemed a contract of
sale.
It was a contract to sell. Ownership is reserved
by the vendor and is not to pass until full
payment of t he purchase price. This we find fully
applicable and understandable in this case,
given that the property involved is a titled realty
under mortgage to a bank and would require
notarial and other formalities of law before
transfer thereof could be validly effected.
The CA cannot order rescission. If the vendor
should eject the vendee for failure to meet the
condition precedent, he is enforcing the contract
and not rescinding it. When the petitioners in the
instant case repossessed the disputed hous e
and lot for failure of private respondents to pay
the purchase price in full, they were merely
enforcing the contract and not rescinding it.
So here, not withstanding the fact that the
Casedas first took then lost possession of the
disputed house and lot, the title to the property
has remained always in the name of Rosalinda
Santos. No valid transfer of ownership was
made by the Santoses to the Casedas. Absent
this essential element, their agreement cannot
be deemed a contract of sale. Remember sa
contract to sell, there may be delivery but as
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
long as it was stiuplated or intended by the
parties as evidenced by their conduct, to show
that there was no intention to transfer ownership
despite the delivery until full payment of the
price, then what you have is a contract to sell
and not a contract of sale. The agreement here
was a contract to sell. Ownership is reserved by
the vendor and is not to pass until full payment
of the purchase price. No transfer of ownership
to the Casedas, the title remained in the name of
Santos; payments were made in the name of
Santos. So therefore since it was a contract to
sell, rescission is not a remedy since there is
nothing to rescind. No recission to speak of in
the first place. In a contract to sell, title remains
in the vendor and does not pass to the vendee
until the payment of the purchase price in full.
Also it was emphasized here, if the vendor
should eject the vendee for failure to meet the
condition precedent, he is enforcing the contract
and not rescinding it. When the petitioners in the
instant case repossessed the disputed hous e
and lot for failure of private respondents to pay
the purchase price in full, they were merely
enforcing the contract and not rescinding it.
Again, 1191, the power to rescind is only
applicable to a contract of sale.
September 8, 2015 (Part 2)
So how about in the case of Spouse s Villamor?
SPOUS ES SANTIAGO V. VILLAMOR
FACTS: Spouses Domingo Villamor, Sr. and
Trinidad Villamor (spouses Villamor, Sr. )
executed a deed of sale covering a parcel of
land in favor of petitioners Spouses Erosto and
Nelsie Santiago (spouses Santiago). The land in
dispute was occupied by spouses Villamor, Sr.s
children, herein respondents Mancer Villamor,
Carlos Villamor, and Domingo Villamor, Jr.
(Villamor children)
Spouses Santiago demanded the Villamor
children to vacate the property but the latter
refused t o do so. Villamor children argued that
they are the lawful owners of the land since they
acquired the same from San Jacint o Bank. Thus,
spouses Santiago filed an action for quieting of
title before the RTC. The RTC ruled in favor of
spouses Santiago. On appeal, the CA reversed
the RTCs decision on the ground that spouses
Santiago failed to prove their legal or equitable
title to the land.
ISSUE: Whether or not the action to quiet title
filed by Spouses Santiago should prosper?
HELD: The petition lacks merit.
CIV IL LAW: quieting of title; constructive
delivery; buyer in good faith
Quieting of title is a common law remedy for the
removal of any cloud, doubt or uncertainty
affecting title to real property. The plaintiffs must
show not only that there is a cloud or contrary
interest over the subject real property, but that
they have a valid title to it.
80
Article 1477 of the Civil Code recognizes that the
"ownership of the thing sold shall be transferred
to the vendee upon the actual or constructive
delivery thereof." Related to this article is Article
1497 which provides that "the t hing sold shall be
understood as delivered, when it is placed in the
control and possession of the vendee."
With respect to incorporeal property, Article
1498 of the Civil Code lays down the general
rule: the execution of a public instrument "shall
be equivalent to the delivery of the thing which is
the object of the contract, if from the deed the
contrary does not appear or cannot clearly be
inferred." However, the execution of a public
instrument gives rise only to a prima facie
presumption of delivery, which is negated by the
failure of the vendee to take actual possession
of the land sold. A person who does not have
actual possession of the thing sold cannot
transfer c onstructive possession by the
execution and delivery of a public instrument.
In this case, no constructive delivery of the land
transpired upon the execution of the deed of
sale since it was not the spouses Villamor, Sr.
but the respondents who had actual possession
of the land. The presumption of constructive
delivery is inapplicable and must yield to the
reality that the petitioners were not placed in
possession and control of the land.
A purchas er in good faith is one who buys
property without notice that some other person
has a right to or interest in such property and
pays its fair price before he has notice of the
adverse claims and interest of another person in
the same property. However, where the land
sold is in the possession of a person other than
the vendor, the purchaser must be wary and
must investigate the rights of the actual
possessor; without such inquiry, the buyer
cannot be said to be in good faith and c annot
have any right over the property.
Q: Who executed the deed of sale in favor of
Spouse s Santiago?
A: The bank. Des pite the fact that the payment is
made by the children.
Q: But i sn’t i t that it was al so alleged by the
bank that there was repurchase by the
parents of the children, the heirs of Villamor?
A: Such contention was refuted by the CA,
wherein it said that there was really no
repurchase because the purchas e of the
children was separate and distinct of that of the
parents. At the time of the purchase, the time to
repurchase has already expired.
Q: So at any point, could we say that the
bank own the subject property?
A: Yes ma’am.
Q: How was the ownership transferred in
favor of the children?
A: By virtue of the decision of the CA, it was
never appealed, wherein it attained finality.
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
SPOUS ES SANTI AGO vs VILLAMOR: Now
here, again, while it is true that the execution of
a public instrument is equivalent to the delivery
of the thing as the object of the contract, there
could be no delivery if again, if it failed t o
conform with the three requisites mentioned in
this case. At the time of the execution of the
public instrument:
1.) Seller must have control over the thing;
2.) By virtue of the execution of the sale,
buyer must be put in control over the
subject matter;
3.) That the intention of such delivery is for
the purpose of transferring ownership
Now, when the deed of sale was executed in
favor of Spouses Santiago, not all of thes e
elements were present because in truth and in
fact the children of Villamor continued to be in
possession of subject property. In other words
the seller, the bank, did not have control over the
subject matter. The execution of a public
instrument only gives rise of a prima facie
presumption of delivery which is negated by the
failure of the vendee to take actual possession
of the land sold. A person who does not have
actual possession of the thing sold cannot
transfer c onstructive possession by the
execution and delivery of a public instrument. In
this case, no constructive delivery of the land
transpired upon the execution of the deed of
sale since it was not the S pous es Villamor S r.
but the respondents had actual possession of
the land. The presumption of constructive
delivery is inapplicable and must yield to the
reality that the purchasers were not plac ed in the
control and possession of the land. Also tak e
note, the burden of proving of the status of a
purchaser in good faith lies upon the party
asserting that status and cannot be discharged
by reliance on the legal presumption of good
faith. So here, petitioners failed to discharge this
burden.
And then we have the case of La Fuerza.
LA FUERZA, INC., vs. THE HON. COURT OF
APPEALS
FACTS: The plaintiff (Associated Engineering,
Co., Inc.) is a corporation engaged in the
manufacture and installation of flat belt
conveyors. The defendant (La Fuerza, Inc.) is
also a corporation engaged in the manufacture
of wines.
Sometime in the month of January, 1960,
Antonio Co, the manager of the plaintiff
corporation called the office of the defendant
and offered his services to manufacture and
install a conveyor system which, according to
him, would increase production and efficiency of
his business.
The president of the defendant corporation then
expressed his conformity to the offer made in
Exhibit A by writing at the foot thereof under the
word "confirmation" his signature. He caused,
81
however, to be added to this offer at the foot a
note which reads: "All specifications shall be in
strict accordance with the approved plan made
part of this agreement hereof."
A few days later, Antonio Co made the demand
for the down payment of P5,000.00 which was
readily delivered by the defendant in the form of
a check for the said amount. After that
agreement, the plaintiff started to prepare the
premises for the installations of the conveyor
system . It seems that the work was completed
during the month of May, 1960. Trial runs were
made in the presence of the president and
general manager of the defendant corporation,
Antonio Co, the technical manager of the
plaintiff, and some other people.
As a result of this trial or experimental runs, it
was discovered, according to the defendant's
general manager, that the conveyor system did
not function to their satisfaction as repres ented
by the technical manager of the plaintiff A ntonio
Co for the reason that, when operated several
bottles collided with eac h other, some jumping
off the conveyor belt and were broken, causing
considerable damage.
After the last trial run made in the month of July
and defects indicated by the said president and
general manager of the defendant had not been
remedied wit h the result that when the plaintiff
billed the defendant for the balance of the
contract price, the latter refused t o pay for the
reason that according to the defendant the
conveyor system installed by the plaintiff did not
serve the purpose for which the same was
manufactured and installed at such a heavy
expense.
On March 22, 1961, the contractor commenced
the present action to recover the sums of
P8,250, balance of the stipulated price of the
aforementioned conveyors, and P2,000, as
attorney's fees, in addition to the costs.
La Fuerza maintains that plaintiff is deemed not
to have delivered the convey ors, within the
purview of Art. 1571, until it shall have complied
with the conditions or requirements of the
contract between them — that is to say, until the
conveyors shall meet La Fuerza's "need of a
conveyor system that would mechanically
transport empty bottles from the storage room t o
the bottle workers in the production room thus
increasing the production and efficiency" of its
business-and La Fuerza had accepted said
conveyors.
ISSUE: WON there was delivery. YES
RULI NG: Upon the completion of the installation
of the conveyors, in May, 1960, particularly after
the last trial run, in July 1960, La Fuerza was in
a position to decide whether or not it was
satisfied with said conveyors, and, hence, to
state whether the same were a accepted or
rejected. The failure of La Fuerza to express
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
categoric ally whether they accepted or rejected
the conveyors does not detract from the fact that
the same were actually in its possession and
control; that, accordingly, the conveyors had
already been delivered by the plaintiff; and that,
the period prescribed in said Art. 1571 had
begun to run.
With respect to the second point raised by La
Fuerz a, Art. 1571 of the Civil Code provides:
Actions arising from the provisions of the
preceding ten articles shall be barred after six
months, from the delivery of the thing sold.
Xx
Among the "ten articles" referred to in this
provision, are Articles 1566 and 1567, reading:
Art. 1566. The vendor is res ponsible to the
vendee for any hidden faults or defects in the
thing sold, even though he was not aware
thereof. ."This provision shall not apply if the
contrary has been stipulated, and the vendor
was not aware of the hidden faults or defects in
the thing sold.
Art. 1567. In the cases of articles 1561, 1562,
1564, 1565 and 1566, the vendee may elect
between withdrawing from the contract and
demanding a proportionate reduction of the
price, with damages in either case.
xxx xxx xxx
Pursuant to these two (2) articles, if the thing
sold has hidden faults or defects — as the
conveyors are claimed to have — the vendor —
in the case at bar, the plaintiff — shall be
responsible therefor and the vendee — or La
Fuerz a, in the present case — "may elect
between withdrawing from the contract and
demanding a proportional reduction of the price,
with damages in either case."
In the exercise of this right of election, La Fuerz a
had chosen to withdraw from the contract, by
praying for its rescission; but the action therefor
— in the language of Art. 1571 — "shall be
barred after six months, from the delivery of the
thing sold." The period of four (4) years,
provided in Art. 1389 of said Code, for "the
action to claim rescission," applies to contracts,
in general , and must yields, in the instant case,
to said Art. 1571, which refers to sales in
particular.
Indeed, in contracts of the latter type, especially
when goods, merchandise, machinery or parts
or equipment thereof are involved, it is obviously
wise to require t he parties to define their
position, in relation thereto, within the shortest
possible time.
Public interest demands that the status of the
relations bet ween the vendor and the vendee be
not left in a condition of uncertainty for an
unreasonable length of time, which would be the
82
case, if the lifetime of the vendee's right of
rescission were four (4) years.
Q: But was it determined here that
posse ssion and control was actually
transferred?
A: Upon the completion of the installation of the
conveyors in May 1960, La Fuerza already had
the decision whether to accept or reject the
conveyor belts. However, it categorically failed to
express whet her it accepted or rejected the
conveyor belts. This fact does not actually _____
that it was in possession of the conveyor belts.
The period cited by _____ already begun upon
the time of the installation.
Q: As to the issue on prescription, has the
action prescribed?
A: Yes. The action has already prescribed
because the Supreme Court said that the 6
month period in 1571 refers to sales specifically.
However in 1389, it applies to contracts in
general so therefore this must yield to the
specific provision in 1571.
Q: When do you start counting the 6 month
prescriptive period?
A: The 6 month period starts to run from the time
that the thing sold has been delivered which in
this case was in 1960. So it was over 10 mo nths
that La Fuerza answered the complaint.
LA FUERZA vs CA: So here, the issue was
actually the breach of warranty against hidden
defects wherein the law provides that the action
must be filed within 6 mont hs from the time of
delivery. So we have to determine whether or
not there was delivery for the 6 month period to
begin to run. S o here, the failure of La Fuerza t o
express categorically whether to accept or reject
the conveyors does not detract from the fact that
it was actually in its possession. So t here was
delivery and accordingly, the period had already
begun to run. So with that, 6 months had already
lapsed by the time they filed an action and what
is to be applied is the specific provision in
contracts of sale and not the 4 year period
applicable to contracts in general.
So, just take note of t he concept of when do you
start counting the prescriptive period when it
comes to breac h of warranty against hidden
defects. You have to take note when is there
delivery. Delivery is different from accepta nce. It
does not mean that if you refused to accept,
then there is no delivery on the part of t he seller.
Or just becaus e you have accepted the delivery
that you do not have any cause of action for any
breach or liability against the seller.
So again those are the obligations of t he seller.
Again the main thing that you have to consider
here is whether or not there was delivery to
transfer ownership of the subject matter. Again
take not, actual or constructive in a contract of
sale, sale is a title and not a mode. Registration
of a title is separat e from the execution of a
public instrument. The recording of the sale wit h
the registry of deeds and the transfer of the
certificate of title in the name of the buyer are
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
necessary only to bind third parties. What do we
mean by that? As long as you have already
executed the deed of sale duly notarized, we
could say that there is already a disputable
presumption of trans fer of ownership. E ven wit h
the absence of the registration of the sale wit h
the ROD or that the title of the owner vendor is
cancelled and a new one is issued or registered
to the buyer that is only to bind third parties. As
with the seller and the buyer, the trans fer of
ownership takes effect upon the execution of the
public instrument or delivery of the same. Again
take note of t he three requisites
abovementioned.
Now, movable or immovable properties, very
easy to determine if you have actual delivery
and constructive delivery. But what about
incorporeal properties? We have Articles 1498
and 1501 as well.
Art. 1498. When the sale is made through a
public instrument, the execution thereof shall
be equivalent to the delivery of the thing
which is the object of the contract, if from the
deed the contrary does not appear or cannot
clearly be inferred.
With regard to movable property, its delivery
may also be made by the delivery of the keys
of the place or depository where it is stored
or kept. (1463a)
Art. 1501. With re spect to incorporeal
property, the provi sions of the first
paragraph of article 1498 shall govern. In any
other case wherein said provisions are not
applicable, the placing of the titles of
ownership in the posse ssion of the vendee
or the use by the vendee of his rights, with
the vendor's consent, shall be understood a s
a delivery. (1464)
What do you mean by incorporeal? We are
talking of rights or privileges which do not have a
physical existence. So example, your right as a
stockholder? What do you see? Stock certificate.
But that is only an evidence of your right. If you
will lose that, it doesn’t mean you already lost
your right as a stockholder. So how do you sell
such incorporeal right or property? Again, you
could have the exec ution of a public instrument
or transfer physical possession of documents
evidencing your right. However take note, mere
delivery is not sufficient. What is also required is
that there must also be an intention to trans fer
ownership thereof. A provision in the deed of
sale granting the seller a right to lease the
subject matter is valid and by virtue of that you
could have a valid c onstitutum possesorium or
valid trans fer of ownership as well. Then we als o
have traditio brevi manu.
B. DELIVERY/SPECIAL RULES
Madali lang sabihin yung delivery to buyer or
vendor, transfer of ownership, actual or
constructive. But what if you delivered goods to
a carrier? What is the rule? When is there
83
transfer of ownership? As a general rule:
delivery to the carrier is delivery to the buyer.
However, there are instances depending upon
the intention as evidenced by the stipulation
between the parties that delivery to the buyer
does not necessarily mean delivery to the
carrier. Now why would that be important? Why
do we need to consider when delivery transfers
ownership? B ecause who bears the loss?
Owner. If there has been delivery to the carrier,
and we apply the general rule that ownership is
transferred to the buyer, then any loss during
travel or voyage, then who bears the loss? It’s
already the buyer because of the principle, res
perit domino.
But again that is only the general rule subject to
stipulation by the parties. Some of whic h
wherein you have rules on delivery to carrier
such as the agreement for FAS (Free Along
Side) sales wherein the seller pays all charges
and the seller will be the one subject to risk until
the goods are placed alongside the vessel.
And we also have FOB (Free On Board) sales.
Seller shall bear all the expens es until the goods
are delivered in accordance as to where the
goods are to be delivered, FOB at the point of
shipment or at the point of destination,
determines when ownership passes.
Like for example, you will order goods in Manila
to be trans ferred to Davao and it could be
through a carrier. Agreement: FOB. So let us
say this is the ship (*Ma’am draws a ship on the
board.  ) But for example, as a general rule,
delivery to the carrier is delivery to the buyer in
Davao. So if anything happens during the
voyage, loss due to fortuitous event, it’s already
the buyer who bears the loss. But again, it can
be modified by the agreement of the parties.
What if you have here FOB in shipping point ? So
the shipping point is in Manila. So what would
happen here? Freight will be paid by the seller
however since it is shipping point, ownership will
already be transferred from Manila. So there is
already trans fer of the goods at the time the
goods were delivered at shipping point. But if it
is an FOB at destination, so pagdating pa ng
goods sa Davao, dun pa may trans fer of
ownership. Wherein it could mean that if it is
FOB Destination, during voyage then there is no
transfer of owners hip, any loss due to fortuitous
event will be borne by the seller. Applying the
principle of res perit domino.
Now we have here the case of Behn Meyer.
BEHN MEYER VS. YANGCO
FACTS: A sale of 80 drums of caustic soda was
agreed bet ween B ehn, Meyer & Co. and
Teodoro Yanco. The merchandise was shipped
from New York to Manila.
However, the s hip carrying the cargo was
detained at Penang and the 71 of the 80 drums
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
were removed. Respondent Yangco also refused
to accept the 9 remaining and also refused to
accept the offer of Behn Meyer to have the
products substituted with other merc handise,
which however were different from what was
ordered.
It must be not ed that the contract provided for
"c.i.f. Manila, pagadero against delivery of
documents."
Yanco filed an action seeking for damages for
alleged breac h of contract.
ISSUE: WON Behn, Meyer & Co. should bear
the burden of the loss of the merchandise? YES
RULI NG: Rule as to delivery of goods by a
vendor via a common carrier (If contract i s
silent – delivery of seller to common carrier
transfer ownership to buyer).
Determination of the place of delivery always
resolves itself into a question of act. If the
contract be silent as to the person or mode by
which the goods are to be s ent, delivery by the
vendor to a common carrier, in the usual and
ordinary course of business, transfers the
property to the vendee.
Payment of freight by the buyer = acquires
ownership at the point of shipment.
A specification in a contact relative to the
payment of freight can be taken to indicate the
intention of the parties in regard to the place of
delivery. If the buyer is to pay the freight, it is
reasonable to suppose that he does so because
the goods become his at the point of shipment.
Payment of freight by the seller = title of
property does not pass until the goods have
reached their destination.
On the other hand, if the seller is to pay the
freight, the inference is equally so strong that the
duty of the seller is to have the goods
transported to their ultimate destination and that
title to property does not pass until the goods
have reached their destination.
c.i.f. means Cost, Insurance and Freight =
CIF i s paid by the seller.
The letters "c.i.f." found in British contracts stand
for cost, insurance, and freight. They signify that
the price fixed covers not only the cost of the
goods, but the expens e of freight and insuranc e
to be paid by the seller.
F.O.B. stands for Free on Board = seller bear
all expenses until goods are delivered.
In this case, in addition to the letters "c.i.f.," has
the word following, "Manila." In mercantile
contracts of American origin the letters "F.O.B."
standing for the words "Free on Board," are
frequently used. The meaning is that the seller
shall bear all expenses until the goods are
delivered where they are to be "F.O.B."
According as to whether the goods are to be
delivered "F.O.B." at the point of shipment or at
84
the point of destination determines the time
when property passes. However, both the terms
"c.i.f." and "F.O.B." merely make rules of
presumption which yield to proof of contrary
intention.
Delivery was to be made at Manila.
Henc e, we believe that the word Manila in
conjunction with the letters "c.i.f." must mean
that the contract price, covering costs,
insurance, and freight, signifies that delivery was
to made at Manila. If petitioner Behn Meyer has
seriously thought that the place of delivery was
New York and Not Manila, it would not have
gone to the trouble of making fruitless attempts
to substitute goods for the merchandise named
in the contract, but would have permitted the
entire loss of the shipment to fall upon the
defendant.
Behn Meyer failed to prove that it performed
its part in the contract.
In this case, the place of delivery was Manila
and plaintiff (Behn Meyer) has not legally
excused default in delivery of the specified
merchandise at that place. In resume, we find
that the plaintiff has not proved the performanc e
on its part of the conditions precedent in the
contract.
For breach of warranty, the buyer (Yanco)
may demand resci ssion of the contract of
sale.
The warranty — the material promise — of the
seller to the buyer has not been complied with.
The buyer may therefore rescind the contract of
sale because of a breach in substantial
particulars going to the essence of the contract.
As contemplated by article 1451 of the Civil
Code, the vendee can demand fulfillment of the
contract, and this being shown to be impossible,
is relieved of his obligation. There thus being
sufficient ground for rescission, the defendant is
not liable.
Q: What do you mean by that? CIF?
A: Cost, Insurance and Freight.
Q: So what now if it is CIF?
A: The price of the goods is not only the pric e
itself but also for the insuranc e of the freight
which is to be paid by the seller. And it will be
charged on the purchas e price by the buyer.
Q: Why do we need to address the issue of
transfer of ownership here?
A: It would determine if Behn Meyer was already
in default of its obligation because when
ownership has already transferred to Yangco,
then he shall bear the loss.
Q: So in thi s ca se, who shall bear the loss?
A: In this case it would be Behn Meyer due to
the stipulation in the contract that it would be CIF
Manila.
BEHN MEYER vs YANGCO: So another
agreement that may be agreed upon by the
parties is this arrangement of CIF. In this case,
the contract provided for CIF Manila whic h
means that the contract price covers its cost,
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
insurance and freight and that delivery was to be
made in Manila. The inference is that the duty of
the seller is that the goods be transported to
their ultimat e destination which in this case is
Manila. And that title to the property does not
pass unless the goods have reached its
destination. Since the goods were confiscated
before reaching the destination, Manila, then it is
obvious that Behn Meyer should suffer any loss.
Therefore, Yangco should not be held liable. If
the plaintiff company had seriously thought that
the place of delivery was New York and not
Manila, it could not have gone through the
trouble of making fruitless attempts of substitute
goods for the merchandise but it could not have
permitted the loss of the shipment to fall upon
the defendants. So here, the buyer may rescind
the sale because of a breac h which is
substantial or particular, going into the essence
of the contract.
Now, another arrangement that you could als o
take note of is Sale of approval, trial or
satisfaction. We have Article 1502.
Art. 1502. When goods are delivered to the
buyer “on sale or return” to give the buyer an
option to return the goods instead of paying
the price, the ownership pa sse s to the buyer
of delivery, but he may revest ownership in
the seller by returning or tendering the
goods within the time fixed in the contract,
or, if no time has been fixed, within a
reasonable time. (n)
When goods are delivered to the buyer on
approval or on trial or on satisfaction, or
other similar terms, the ownership therein
passe s to the buyer:
(1.) When he signifies hi s approval or
acceptance to the seller or does any other
act adopting the transaction;
(2.) If he does not signify hi s approval
or acceptance to the seller, but retains the
goods without giving notice of rejection, then
if a time has been fixed for the return of the
goods, on the expiration of such time, and, if
no time has been fixed, on the expiration of a
reasonable time. What is a reasonable time is
a question of fact.
Alright, sale or return on one hand and sale or
approval on the other hand also known as Sale
on Approval, Sale on Acceptance, Sale on Trial
and S ale on Satisfaction. Please take note the
distinctions between these contracts. In sale or
return, ownership passes to the buyer upon
delivery pursuant to a perfected CoS. The
subsequent ret urn of the goods reverts
ownership back to the seller. So here, delivery,
as a mode of acquiring owners hip, it must be in
consequence of a contract. In other words, let us
say you want to purchase goods, the goods
were delivered to you and the agreement is sale
or return. Upon delivery, ownership is
transferred to you and therefore you will bear the
loss. However, you are given t he right to return
the goods if it is not upon your satisfaction within
a fixed time as agreed upon by the parties like
85
you can return it to me after 1 week from the
time of delivery. After 1 week if you did not
return the goods then you cannot return it
thereafter. Or within a reasonable time, like for
example t he agreement was sale or return but
you did not stipulate as to when the buyer can
deliver the goods back to you if he finds it
unsatisfactory. Nevertheless, take into
consideration if the goods has been used
already or did he exercise rights and ownership
over the goods. Then that would mean that there
is already absolute ownership on the part of the
buyer. What happens in sale or return is that
upon return, ownership is revested back to the
seller.
How about in sale on approval? On sale on
approval, there is delivery but since the parties
agreed that there is sale on approval, such
delivery did not trans fer ownership to the buyer
because the delivery was not for the purpose of
transferring ownership since the prestation t o
effect a meeting of the minds was to give rise to
a valid contract is incumbent on the buyer. Now,
here what would happen? The seller would wait
for the buyer’s approval as to the goods if it is to
his liking or satisfaction. If he says that this is
satisfactory then he retains it then that is the
time when ownership is transferred to said
buyer, upon his approval, upon his acceptance.
However, there would be instances that this is
the agreement: sale on approval, sale on trial
but within a period of time, the buyer did not give
any notice that he rejects the goods or that he
did not give any notice if he has accepted the
goods. Now take into the consideration that the
absence of notice of rejection would mean that
he has already accepted the goods and that
there is trans fer of ownership. Again, we will als o
take into consideration whether the parties have
agreed if fixed time. If in 1 week yo u try the
goods and you find the goods unsatis factory,
you can ret urn it. Ret urn in the sense that ibalik
lang yung goods but there was no trans fer of
ownership upon the first delivery. However for
example within a reasonable time nag-lapse na
or wala pa binalik or if for example the buyer has
already exercised rights of ownership, then we
could already say that there has been approval
of the sale.
Now take note that in order for sale on return or
sale on approval, there must be a clear
agreement to either of such effect. The parties
clearly agreed na sale on return or sale on
approval yun. Otherwise, we would not apply
1502.
I missed this case DAVID vs MISAMIS
OCCIDENTAL.
DAVI D VS MISAMIS OCCIDENTAL
FACTS: Petitioner Virgilio S. David (David) was
the owner or propriet or of VSD Electric Sales, a
company engaged in the business of supplying
electrical hardware including transformers for
rural electric cooperatives like respondent
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
Misamis Occidental II Electric Cooperative, Inc.
(MOELCI), with principal office located in
Ozamis City.
To solve its problem of power shortage affecting
some areas within its coverage, MOELCI
expressed its intention to purchase a 10 MVA
power transformer from David. For this reason,
its General Manager, Engr. Reynaldo Rada
(Engr. Rada), went to meet David in the latter’s
office in Quezon City. David agreed to supply the
power trans former provided that MOELCI would
secure a board resolution because the item
would still have to be imported.
The board resolution was thereafter attached t o
the proposal. As stated in the proposal, the
subject transformer, toget her with the basic
accessories, was valued at P5,200, 000. 00. It
was also stipulated therein that 50% of the
purchase price should be paid as downpayment
and the remaining balance to be paid upon
delivery. Freight handling, insurance, customs
duties, and incidental expenses were for the
account of the buyer.
The Board Resolution, on the other hand, stated
that the purchase of the said transformer was to
be financed through a loan from the National
Electrification Administration (NEA ). As there
was no immediate action on the loan application,
Engr. Rada returned to Manila in early
December 1992 and requested David to deliver
the trans former to them even wit hout the
required downpayment. David granted the
request provided that MOE LCI would pay
interest at 24% per annum. Engr. Rada
acquiesced to the condition. On Dec ember 17,
1992, the goods were shipped to Ozamiz City
via William Lines. In the Bill of Lading, a sales
invoic e was included which stated the agreed
interest rate of 24% per annum.
When no payment was made after several
months, Medina was constrained to send a
demand letter, dated Sept ember 15, 1993, whic h
MOELCI duly received. Engr. Rada replied in
writing that the goods were still in the warehous e
of William Lines again reiterating that the loan
had not been approved by NEA. This prompted
Medina to head back to Ozamiz City where he
found out that the goods had already been
released to MOELCI evidenced by the shipping
company’s copy of the Bill of Lading which was
stamped "Released," and with the notation that
the arrastre charges in the amount of P5,095.60
had been paid. This was supported by a receipt
of payment with the corresponding cargo
delivery receipt issued by the Integrated Port
Services of Ozamiz, Inc.
On February 17, 1994, David filed a c omplaint
for specific performance with damages with the
RTC. In res pons e, MOECLI moved for its
dismissal on the ground that there was lack of
cause of action as there was no contract of sale,
to begin wit h, or in the alternative, the said
contract was unenforceable under the Statute of
86
Frauds. MOELCI argued that the quotation letter
could not be considered a binding contract
because t here was not hing in the s aid document
from which consent, on its part, to the terms and
conditions proposed by David could be inferred.
David knew that MOELCI’s assent could only be
obtained upon the issuance of a purchase order
in favor of the bidder chosen by the Canvass
and A wards Committee.
ISSUE:
Whether or not there was a perfected cont ract of
sale.
Whether or not there was a delivery that
consummated the contract.
RULI NG: The Court finds merit in the petition.
First i ssue: The elements of a contract of sale
are, to wit: a) Consent or meeting of the minds,
that is, consent to transfer ownership in
exchange for the price; b) Det erminate subject
matter; and c) Price certain in money or its
equivalent.9 It is the absence of the first element
which distinguishes a contract of sale from that
of a cont ract to sell.
An examination of the alleged contract to sell,
"Exhibit A," despite its unconventional form,
would show that said document, with all the
stipulations therein and with the attendant
circumstances surrounding it, was actually a
Cont ract of Sale. The rule is that it is not the title
of the contract, but its express terms or
stipulations that determine the kind of contract
entered into by the parties.12 First, there was
meeting of minds as to the transfer of ownership
of the subject matter. The letter (Exhibit A),
though appearing to be a mere pric e
quotation/proposal, was not what it seemed. It
contained terms and conditions, so that, by the
fact that Jimenez, Chairman of the Committee
on Management, and Engr. Rada, General
Manager of MOE LCI, had signed t heir names
under the word " CONFORME," they, in effect,
agreed with the terms and conditions wit h
respect to the purchase of the subject 10 MVA
Power Transformer. As correctly argued by
David, if their purpose was merely to
acknowledge the receipt of the proposal, they
would not have signed their name under the
word "CONFORME."
Besides, the uncontroverted attending
circumstances bolster the fact that there was
consent or meeting of minds in the transfer of
ownership. To begin with, a board resolution was
issued authorizing the purchase of the subject
power transformer. Next, armed with the said
resolution, top officials of MOE LCI visited
David’s office in Quez on City three times to
discuss the terms of the purchase. Then, when
the loan that MOELCI was relying upon to
finance the purc hase was not forthcoming,
MOELCI, through Engr. Rada, convinc ed David
to do away with t he 50% downpayment and
deliver the unit so that it could already address
its acute power shortage predicament, to which
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
David acceded when it made the delivery,
through the carrier William Lines, as evidenced
by a bill of lading.
Second, the document specified a determinat e
subject matter which was one (1) Unit of 10 MVA
Power Trans former with corres ponding KV Line
Accessories. And third, the document stated
categoric ally the price certain in money whic h
was P5,200,000.00 for one (1) unit of 10 MVA
Power Transformer and P 2,169,500.00 for the
KV Line Accessories.
In sum, since there was a meeting of the minds,
there was consent on the part of David to
transfer ownership of the power transformer t o
MOELCI in exchange for the price, thereby
complying with the first element. Thus, the said
document cannot just be considered a contract
to sell but rather a perfected contract of sale.
Second issue: MOE LCI, in denying that the
power transformer was delivered to it, argued
that the Bill of Lading which David was relying
upon was not conclusive. It argued that although
the bill of lading was stamped "Released," there
was nothing in it that indicated that said power
transformer was indeed released to it or
delivered to its possession. For this reason, it is
its position that it is not liable t o pay the
purchase price of the 10 MVA power
transformer.
To begin with, among the terms and conditions
of the proposal to which MOELCI agreed stated:
2. Delivery – Ninety (90) working days upon
receipt of your purchase order and
downpayment.
C&F Manila, freight, handling, insurance, custom
duties and incidental expenses shall be for the
account of MOELCI II. 13 (Emphasis supplied)
On this score, it is clear that MOELCI agreed
that the power transformer would be delivered
and that the freight, handling, insuranc e, custom
duties, and incidental expenses shall be
shouldered by it.
On the basis of this express agreement, Article
1523 of the Civil Code becomes
applicable.1âwphi1 It provides:
Where, in pursuance of a cont ract of sale, the
seller is authorized or required to send the
goods to the buyer delivery of the goods to a
carrier, whether named by the buyer or not, for
the purpose of transmission to the buyer is
deemed to be a delivery of the goods to the
buyer, except in the cases provided for in Article
1503, first, second and third paragraphs, or
unless a contrary intent appears. (Emphasis
supplied)
Thus, the delivery made by David to William
Lines, Inc., as evidenced by the Bill of Lading,
was deemed to be a delivery to MOELCI. David
87
was authorized to send the power trans former t o
the buyer pursuant to their agreement. When
David sent the item through the carrier, it
amounted to a delivery to MOELCI.
Furthermore, in the case of B ehn, Meyer & Co.
(Ltd.) v. Yangco, 14 it was pointed out that a
specification in a contract relative to the payment
of freight can be taken to indicate the intention of
the parties with regard to the place of delivery.
So that, if the buyer is to pay the freight, as in
this case, it is reasonable to suppose that the
subject of the sale is trans ferred to the buyer at
the point of shipment. In other words, the title to
the goods transfers to the buyer upon s hipment
or delivery to the carrier.
Of course, Article 1523 provides a mere
presumption and in order to overcome said
presumption, MOELCI should have pres ented
evidence to t he cont rary. The burden of proof
was shifted to MOELCI, who had to show that
the rule under Article 1523 was not applicable. In
this regard, however, MOELCI failed.
There being delivery and release, said fact
constitutes partial performance whic h takes the
case out of the protection of the Statute of
Frauds. It is elementary that the partial execution
of a contract of sale takes the transaction out of
the provisions of the Statute of Frauds so long
as the essential requisites of consent of the
contracting parties, object and cause of the
obligation concur and are clearly established to
be present.
Q: Why was there an issue with regard to the
perfection of the sale?
A: Misamis contends that proposal did not
contain all the elements of the sale. However,
the SC said t hat it did because it manifested all
the elements which are consent (signing of
conforme), subject matter (electrical hardware
requested) and consideration (P5.2M). And it
also provided for the terms of payment.
DAVI D vs MISAMIC OCCI DENTAL: Take not e
that this also as to agreements bet ween the
parties, apply the general rule that delivery to
carrier is delivery to the buyer. Also, the
arrangement between the parties as to who will
shoulder the expens es. Again, the special rules
as to delivery was taken int o consideration.
Now, we have already discussed sale on
approval, trial or satisfaction under 1502. We will
also have sale by description and or sample
under 1481.
Art. 1481. In the contract of sale of goods by
description or by sample, the contract may
be rescinded if the bulk of the goods
delivered do not correspond with the
description or the sample, and if the contract
be by sample as well as description, it is not
suffi cient that the bulk of goods corre spond
with the sample if they do not also
corre spond with the description.
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
The buyer shall have a reasonable
opportunity of comparing the bulk with the
description or the sample. (n)
Alright, 3 kinds of sale are discussed under
1481. Sale by description, sale by sample, and
sale by description and sample. 1481 is very to
understand. Sale was by description, description
made by the seller, you rely on that. If what was
delivered is different from what has been
described then the seller could be held liable. If
the sale was made through a sample and the
sample was different from what has been
delivered, again that would constitute breach. If
the sale was by description and sample, then it
must conform to the description made by the
seller as well as to the sample that was
presented to the buyer. Otherwise the seller
would be held liable. There is a sale by sample
when a small quantity is exhibited as a fair
specimen of the bulk which is not present and
there is no opportunity on the part of the buyer to
inspect or examine the whole. The parties
treated the sample as the standard for quality
and they contracted with reference to the sample
with the understanding that the product that
would be delivered would be correspondent to
the sample that was presented.
We also have here with regard to delivery of
movables, Article 1522.
Art. 1522. Where the seller delivers to the
buyer a quantity of goods less than he
contracted to sell, the buyer may reject them,
but if the buyer accepts or retains the goods
so delivered, knowing that the seller is not
going to perform the contract in full, he must
pay for them at the contract rate. If, however,
the buyer ha s used or di sposed of the goods
delivered before he knows that the seller is
not going to perform hi s contract in full, the
buyer shall not be liable for more than the
fair value to him of the goods so received.
Where the seller delivers to the buyer a
quantity of goods larger than he contracted
to sell, the buyer may accept the goods
included in the contract and reject the re st. I f
the buyer accepts the whole of the goods so
delivered he must pay for them at the
contract rate.
Where the seller delivers to the buyer the
goods he contracted to sell mixed with
goods of a different description not included
in the contract, the buyer may accept the
goods which are in accordance with the
contract and reject the rest.
In the preceding two paragraphs, if the
subject matter is indivisible, the buyer may
reject the whole of the goods.
The provi sions of thi s article are subject to
any usage of trade, special agreement, or
course of dealing between the parties. (n)
So again, subject matter is movables. If what
has been delivered is less than what has been
agreed upon, the buyer can reject the whole or
accept what has been delivered even if it is less
than of what has been agreed upon, at a
88
contract rate knowing that what has been
delivered was not in full.
However, if what has been delivered is less than
what agreed upon but was used by the buyer
before knowledge that there was no full delivery
or performance, the buyer would be liable for the
fair value of the goods received.
If what has been delivered is larger than what
was agreed upon, the buyer can accept what
was agreed upon and reject the rest or he can
accept all what has been delivered but he has to
pay the corresponding price especially with
regard to the excess.
However, if the subject matter is indivisible, the
buyer has the right to reject even if what has
been larger or more than what was agreed upon.
Now, if what has been delivered is different from
what has been agreed upon, again accept those
which conform to their agreement and/or reject
the rest. Or if he decides to accept them, he
would be liable for the corresponding price. Now
again if it is indivisible, he has the right to reject
what has been delivered for failure to conform
with what was agreed upon.
Now buy er’s right to inspect before acceptance,
this is also mentioned in 1481 and 1484.
Art. 1481. In the contract of sale of goods by
description or by sample, the contract may
be rescinded if the bulk of the goods
delivered do not correspond with the
description or the sample, and if the contract
be by sample as well as description, it is not
suffi cient that the bulk of goods corre spond
with the sample if they do not also
corre spond with the description.
The buyer shall have a reasonable
opportunity of comparing the bulk with the
description or the sample. (n)
Art. 1484. In a contract of sale of personal
property the price of which is payable in
installments, the vendor may exercise any of
the following remedies:
(1) Exact fulfillment of the obligation, should
the vendee fail to pay;
(2) Cancel the sale, should the vendee's
failure to pay cover two or more installments;
(3) Foreclose the chattel mortgage on the
thing sold, if one has been constituted,
should the vendee's failure to pay cover two
or more installments. In this ca se, he shall
have no further action against the purcha ser
to recover any unpaid balance of the price.
Any agreement to the contrary shall be void.
(1454-A-a)
The buyer has the right to inspect the goods
before accepting it but such acceptance is not
an abs olute right. In other words, it must be
raised or ascertained by the buyer. And if the
buyer asserts such right to inspect the goods
before acceptance then the seller as well as the
carrier has the obligation t o allow the buyer t o
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
inspect the goods. However, if the goods have
been delivered and the buyer did not raise his
right to inspect the goods before he accepts it,
then he is deemed to have waived such right.
However there is an exception, when the carrier
delivers COD. Cas h on delivery. When the
agreement is cash on delivery, that is under
1584, the buyer has no absolute right to inspect
the goods. In other words, the only condition
here is that delivery will be made upon payment
of the price as agreed upon. But it does not
mean that the buyer has accepted the goods
without inspecting it because it was COD or
without inspecting it becaus e he failed t o rais e
his right, it does not mean that you c annot go
after the seller for any breach. For delivery of
goods which turn out to be defective or different
from what was agreed upon. Again, such
acceptance does not negate the right for the
buyer to go against the seller for any breach. But
of course, the demand for liability for reas on of
breach for failing to deliver goods which are
different from that agreed upon must be made
within a reasonable time so as not to prejudic e
the seller.
Now in case of immovable for sale of goods we
have 1539 and 1540.
Art. 1539. The obligation to deliver the thing
sold include s that of placing in the control of
the vendee all that is mentioned in the
contract, in conformity with the following
rules:
If the sale of real estate should be made with
a statement of its area, at the rate of a certain
price for a unit of measure or number, the
vendor shall be obliged to deliver to the
vendee, if the latter should demand it, all that
may have been stated in the contract; but,
should thi s be not possible, the vendee may
choose between a proportional reduction of
the price and the resci ssion of the contract,
provided that, in the latter case, the lack in
the area be not less than one -tenth of that
stated.
The same shall be done, even when the area
is the same, if any part of the immovable is
not of the quality specified in the contract.
The resci ssi on, in thi s ca se, shall only take
place at the will of the vendee, when the
inferior value of the thing sold exceeds one -
tenth of the price agreed upon.
Nevertheless, if the vendee would not have
bought the immovable had he known of its
smaller area of inferior quality, he may
rescind the sale. (1469a)
Art. 1540. If, in the case of the preceding
article, there is a greater area or number in
the immovable than that stated in the
contract, the vendee may accept the area
included in the contract and reject the re st. I f
he accepts the whole area, he must pay for
the same at the contract rate. (1470a)
Do take note of that. Because when it comes to
an immovable, you have to distinguis h whether
89
the sale was made per unit or number. Like for
example, 1000/sq.m. I will sell to you this parcel
of land for 1000/sq.m. And there are also
instances when the immovable will be sold for a
lump sum regardless of the square meters of a
property, I sell to you this property covered by
TCT No. 12345 for PhP 500,000.
So for sale of real property per unit or per
number, you have 1538 and 1540. In a unit pric e
sale, the statement of the area of t he immovable
is not conclusive and the price may be reduced
or increased depending on the area actually
delivered. If the representation for example 100
sq.m. at 1000/sq.m., upon delivery hindi naman
pala 100 sq.m. It was only 90, magkano
obligation ni seller? 90 at 1000 per square
meter. If the vendor delivers less than agreed
upon, the vendee may obliged the vendor to
deliver all that has been stated in the contract or
demand for the proportionate reduction of the
purchase price if delivery is not possible. If the
vendor delivers more than what is stated in the
contract, the vendee has the option to accept
only the amount agreed upon or to accept the
whole area provided he pays for the additional
area at the contract rate.
However in this instance also take note the
remedy of rescission is not applicable if the
differenc e is not more than 1/10 of what has
been agreed upon.
Also, you have there sale for a lump sum under
1542.
Art. 1542. In the sale of real estate, made for
a lump sum and not at the rate of a certain
sum for a unit of measure or number, there
shall be no increase or decrease of the price,
although there be a greater or less area or
number than that stated in the contract.
The same rule shall be applied when two or
more immovables as sold for a single price;
but if, beside s mentioning the boundaries,
which is indispensable in every conveyance
of real estate, its area or number should be
designated in the contract, the vendor shall
be bound to deliver all that is included within
said boundaries, even when it exceeds the
area or number specified in the contract;
and, should he not be able to do so, he shall
suffer a reduction in the price, in proportion
to what is lacking in the area or number,
unless the contract is rescinded because the
vendee does not accede to the failure to
deliver what has been stipulated. (1471)
In a lump sum s ale, when the land delivered t o
the buyer is exactly as that described in the
deed and covered within the boundaries
designated, the differenc e in the actual area as a
general rule, will not aut horize t he buyer t o
rescind the contract because the seller has
complied wit h delivery of the subject as agreed
upon. Usually you would see this, I sell this
parcel of land covered by this title, 200 square
meters more or less. More or less, it’s just
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
describing the property. If it turns out that it is a
little less than or more than 200 square meters,
you have to take note whether the sale was for a
lump sum. This property covered by this title for
PhP500, 000 containing an area of 200 sq.m.
more or less, if what was delivered is only 190
sq.m., you cannot just ask for a reduction of the
price becaus e what was sold to you was the
property itself covered by this title. The intention
here was for the whole property. Unlike in sale
per unit or number, if what was delivered is less
than or more than, the buyer has remedies
available under the law.
So again 1542. This is applicable when evidenc e
shows that the parties never gave import ance to
the area of the land in fixing the price. However
take note of an exception. A buyer of land when
sold in gross or with description more or less or
similar words in designating quantity covers only
a reasonable excess of deficiency. Again what is
reasonable or excess or deficiency depends
upon the circumstances of each c ase. If you say
200 sq.m. more or less, siguro sabihin natin
kulang ng 10, pwede pa yan. Pero kung 100
sq.m. na lang ang nadeliver sayo, it would not
be unreasonable to ask for the reduction of the
price.
And then you also have the rules with place of
delivery under 1521.
Art. 1521. Whether it is for the buyer to take
posse ssion of the goods or of the seller to
send them to the buyer is a question
depending in each case on the contract,
express or implied, between the parties.
Apart from any such contract, express or
implied, or usage of trade to the contrary, the
place of delivery is the seller's pla ce of
business i f he has one, and if not his
residence; but in ca se of a contract of sale of
specific goods, which to the knowledge of
the parties when the contract or the sale was
made were in some other place, then that
place is the place of delivery.
Where by a contract of sale the seller is
bound to send the goods to the buyer, but no
time for sending them i s fixed, the seller is
bound to send them within a reasonable
time.
Where the goods at the time of sale are in the
posse ssion of a third person, the seller has
not ful filled his obligation to deliver to the
buyer unless and until such third person
acknowledges to the buyer that he holds the
goods on the buyer's behalf.
Demand or tender of delivery may be treated
as ineffectual unless made at a reasona ble
hour. What is a reasonable hour is a question
of fact.
Unless otherwise agreed, the expense s of
and incidental to putting the goods into a
deliverable state must be borne by the seller.
(n)
Alright, under 1521 you have there who bears
the expenses with regard to delivery. Also
90
delivery must be made within a reasonable hour
depending upon t he circumstances of the case.
Also 1521, the plac e of delivery. Looking at this
provision, it would be already familiar to you wit h
what you have there under obligations and
contracts. I think it’s article 1251.
Art. 1251. Payment shall be made in the place
designated in the obligation.
There being no express stipulation and if the
undertaking is to deliver a determinate thing,
the payment shall be made wherever the
thing might be at the moment the obligation
was consti tuted.
In any other case the place of payment shall
be the domicile of the debtor.
If the debtor change s hi s domicile in bad
faith or after he has incurred in delay, the
additional expense s shall be borne by him.
These provi sions are without prejudice to
venue under the Rules of Court. (1171a)
Place of delivery, first is stipulation of the parties.
In the absence of stipulation, you have here
seller’s place of business. If there is no place of
business, his residenc e. However, in the
absence of stipulation and the subject matter be
specific goods, then the place at the time of its
perfection. So just take note of the rules
provided in 1521.
So take note of the different types of
constructive delivery.
1. Traditio Symbolica
2. Traditio Longa Manu
3. Traditio B revi Manu
4. Constitutum Possessorium
5. Quasi-traditio
You have Quasi-traditio with regard to
incorporeal property; for example, rights of
stockholders. When is there delivery thru quasi -
traditio? Execution of a public instrument.
Now we go to Double Sale.
Essentially what happens in a double sale? We
have a subject matter which is sold by one
vendor to t wo or more vendees who do not
represent the same interest.
So we very well know by now that owners hip is
not required at the time of the perfection of the
contract of sale. So you still have a valid sale
even if you were not the owner thereof, even if
you do not yet deliver it at the time of perfection.
But what is the effect if we have one seller of the
same subject property to the 2 different
persons? Who has the better right?
So the rule on double sale will give us the
answer.
Art. 1544. If the same thing should have been
sold to different vendees, the ownership
shall be transferred to the person who may
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
have first taken posse ssion 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.
Should there be no inscription, the
ownership shall pertain to the person who in
good faith was first in the posse ssion; and,
in the absence thereof, to the person who
presents the oldest ti tle, provided there is
good faith.
But before we apply Art. 1544, we have to know
WHEN is there a double sale?
SPOUS ES ROQUE vs. AGUADO, et.al.
G.R. No. 193787 April 7, 2014
PONENTE: Perlas-Bernabe, J.
TOPIC: Contract of conditional sale, contract to
sell, double sale
FACTS: On July 21, 1977, petitioners-spouses
Roque and the original owners of the then
unregistered Lot 18089 – namely, Rivero, et al.
executed the 1977 Deed of Conditional Sale
over a 1,231-sq. m. portion of Lot 18089 for a
consideration of P30,775.00. The parties agreed
that Sps. Roque shall make an initial payment of
P15,387.50 upon signing, while the remaining
balance of the purchase price shall be payable
upon the registration of Lot 18089, as well as the
segregation and the conc omitant issuance of a
separate title over the subject portion in their
names. After the deed’s execution, Sps. Roque
took possession and introduced improvements
on the subject portion which they utilized as a
balut factory.
Pertinent provision of the 1977 Deed of
Conditional Sale:
DEED OF CONDITIONAL SA LE OF REA L
PROPERTY
KNOW ALL MEN BY THESE PRESE NTS:
xxx
That for and in consideration of the sum of
THIRTY THOUSAND SEVEN HUNDRE D
SEVENTY FIVE PESOS (P30,775.00),
Philippine Currency, payable in the manner
hereinbelow specified, the VENDORS do hereby
sell, transfer and convey unto the VENDEE, or
their heirs, executors, administrat ors, or
assignors, that unsegregat ed portion of the
above lot, x x x.
That the aforesaid amount shall be paid in two
installments, the first installment which is in the
amount of __________ (P15, 387. 50) and the
balance in the amount of __________
(P15,387.50), shall be paid as soon as the
described portion of the property shall have
been registered under the Land Registration Act
and a Certificate of Title issued accordingly;
That as soon as the total amount of the property
has been paid and the Certific ate of Title has
91
been issued, an absolute deed of sale shall be
executed accordingly;
xxx
On August 12, 1991, Sabug, Jr, applied for a
free patent over t he entire Lot 18089 and was
eventually issued OCT No. M-59558 in his name
on October 21, 1991. On June 24, 1993, S abug,
Jr. and Rivero, in her personal capacity and in
representation of Rivero, et al., execut ed the
1993 Joint A ffidavit, acknowledging that the
subject portion belongs to Sps. Roque and
expressed their willingness to segregate the
same from the entire area of Lot 18089.
On December 8, 1999, however, Sabug, Jr.,
through the 1999 Deed of Absolute Sale, sold
Lot 18089 to Aguado for P2,500,000.00, who, in
turn, caused the cancellation of OCT No. M-
5955 and the issuance of TCT No. M-96692
dated December 17, 199911 in her name.
Thereafter, Aguado obtained an P8,000,000.00
loan from the Land B ank secured by a mortgage
over Lot 18089. When she failed to pay her loan
obligation, Land Bank commenced extra-judicial
foreclosure proceedings and eventually tendered
the highest bid in the auction s ale. Upon
Aguado’s failure to redeem the subject property,
Land Bank consolidated its ownership, and TCT
No. M-11589513 was issued in its name on July
21, 2003.
On June 16, 2003, Sps. Roque filed a complaint
for reconveyance, annulment of sale, deed of
real estate mortgage, foreclosure, and c ertificat e
of sale, and damages before the RTC.
Aguado: innocent purchaser for value
Landbank: no knowledge of Sps. Claim. At the
time when the loan was taken out, Lot 18089
was registered in Aguado’s name and no lien
was annotated on COT.
RTC: dismissed complaint of spous es roque and
NCCP.
CA: affirmed RTC ruling.
ISSUE: Whether or not the 1977 Deed of
Conditional Sale is a conditional contract of sale
or a contract to sell.
HELD: It is a CONTRACT TO S ELL. The Court
held that where the seller promis es to execute a
deed of absolute sale upon the completion by
the buyer of the payment of the purc hase price,
the contract is only a cont ract to sell even if their
agreement is denominat ed as a Deed of
Conditional Sale, as in this case. This treatment
stems from the legal characterization of a
contract to sell, that is, a bilateral contract
whereby the prospective seller, while expressly
reserving the ownership of the subject property
despite delivery thereof to the prospective buyer,
binds himself to sell the subject property
exclusively to the prospective buyer upon
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
fulfillment of the condition agreed upon, such as,
the full payment of the purchase price. Elsewise
stated, in a contract to sell, ownership is retained
by the vendor and is not to pass to the vendee
until full payment of the purchase price.
In contracts to sell the obligation of the seller to
sell becomes demandable only upon the
happening of the suspensive c ondition, that is,
the full payment of the purchase price by the
buyer. It is only upon the existence of the
contract of sale t hat the s eller becomes
obligated to transfer the ownership of the thing
sold to the buyer. Prior to the existence of the
contract of sale, the seller is not obligated to
transfer the ownership to the buyer, even if there
is a contract to sell between them.
Final installment not paid thus no perfected
contract of sale
Here, it is undisputed that Sps. Roque have not
paid the final installment of the purchase price.
As such, the condition which would have
triggered the parties’ obligation to enter into and
thereby perfect a contract of sale in order to
effectively transfer the ownership of the subject
portion from the sellers (i.e., Rivero et al.) to the
buyers (Sps. Roque) cannot be deemed to have
been fulfilled. Cons equently, the latter c annot
validly claim ownership over the subject portion
even if they had made an initial payment and
even took possession of the same.
Conditional contract of sale and contract to
sell in relation to double sale
It is essential to distinguish between a contract
to sell and a conditional contract of sale specially
in cases where the subject property is sold by
the owner not to the party the seller contracted
with, but to a third person, as in t he case at
bench.
In a contract to sell, there being no previous
sale of the property, a third person buying
such property despite the ful fillment of the
suspensive condition such as the full
payment of the purchase pri ce, for instance,
cannot be deemed a buyer in bad faith and
the prospective buyer cannot seek the relief
of reconveyance of the property.
There is no double sale in such case. Title to the
property will transfer to the buyer after
registration because there is no defect in the
owner-seller’s title per se, but the latter, of
course, may be sued for damages by the
intending buyer.
On the matter of double sales, suffice it to state
64 65
that Sps. Roque’s reliance on Article 1544 of
the Civil Code has been misplaced since the
contract they base their claim of owners hip on is,
as earlier stated, a c ontract to sell, and not one
66
of sale. In Cheng v. Genato, the Court stated
the circumstances which must concur in order t o
determine t he applicability of A rticle 1544, none
of which are obt aining in this case, viz.:
92
(a) The t wo (or more) sales transactions in issue
must pertain to exactly the same subject matter,
and must be valid sales transactions;
(b) The two (or more) buyers at odds over the
right ful ownership of t he subject matter must
each represent conflicting interests; and
(c) The t wo (or more) buyers at odds over the
right ful ownership of t he subject matter must
each have bought from the same seller.
The action for reconveyance shall fail.
How was it determined that the contract here
was actually a Contract to Sell and not a
Conditional Sale despite the nomenclature given
by the parties ?
We have the provision that “as soon as the total
amount of the property has been paid, and the
certificate of title has been issued, an absolut e
deed of sale shall be ex ecuted accordingly.”
So here the deed of conditional sale is actually
in the nature of a cont ract to sell, and not of sale.
Again, where the seller promises to execute a
deed of sale upon completion of the buyer of the
payment of the purchase price, the contract is
only a contract to sell, even if denominated as a
conditional sale.
Here, the spouses Roque have not paid t he final
installment of the purchase price, so the
condition that would have triggered the parties’
obligation to enter into and thereby perfect a
contract of sale in order to effectively trans fer
ownership, cannot be deemed to have been
fulfilled. So the latter cannot claim valid
ownership over the subject portion even if they
have made initial payments and even thru
possession thereof.
Take note of the requisites mentioned by the S C
in order to apply 1544. If y ou look at it, there are
only 3 requisites enumerated. But try to dissect
the first requisite:
The two (or more) sales transactions in issue
must pertain to exactly the same subject matter,
AND must be valid sales transactions.
So the requisites actually are:
(a) The two (or more) sales transactions in
issue must pertain to exactly the same
subject matter;
(b) Must be valid sales transactions;
(c) The two (or more) buyers at odds over
the rightful ownership of the subject
matter must each represent conflicting
interests; and
(d) The buyers must each have bought from
the same seller.
In (c), why would that be relevant ? Because you
may have 2 different buyers, but the other buyer
may only have acted as a representative of the
other; principal and agent. So if principal and
agent yung dalawang buy ers, no need to apply
the rule on Double Sale.
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
In (d), it may be that the sellers are different
persons but the other seller might only be an
agent of the other. So in that instance, you can
apply the rule on Double Sale.
Again, two different buyers with conflicting
interests, SAME seller. If you have 2 sellers but
one is a principal and the ot her is an agent, you
can apply 1544. But if you have 2 different
personalities acting a seller, then 1544 is not
applicable.
So once all these requisites are present, then
you apply the rule on Double Sale.
IF you try to look at Art. 1544, it would seem
easy to determine the rules when there is a
double sale.
So when it comes to movable or personal
property, the buyer who has a better right is one
who has taken possession, take note, IN GOOD
FAITH. In other words, when we say good faith,
he had no knowledge of any defect in the title of
the seller, had no knowledge of any prior buyer
with regard to the same property.
For example, you have your laptop; you will sell
it to Juan. The sale is perfected by mere
consent, even if you have not yet delivered the
subject property. So you told your friend, “I will
just give it to you the next day.” But the next day,
you sell it to another pers on, and this time you
delivered the ex act same subject matter, the
laptop. So as to those 2 persons, the second
buyer has the better right over the subject matter
because he first took possession, as long as in
good faith.
Again take not e; these two contracts of sale are
VALID contracts because a sale is a consensual
contract perfected by mere consent.
Art. 1544 is applicable because all the requisites
mentioned earlier are present. Then what is the
nature of the subject matter? Since the subject
matter is a movable property, then better right
belong to the person who first took possession
of the subject matter in good faith.
Now, how about if it’s a real or immovable
property? If you look at 1544, better right
belongs to the buyer who first registers the sale
in good faith.
Registration here means actual recording or
subjecting the property under the Torrens
System; you have the Deed of S ale duly
annotated before the Register of Deeds. A deed
of sale is considered registered at the moment it
is entered or rec orded in the entry or ___ book
of the Register of Deeds.
What if none of t he buyers registered the sale?
In the abs ence of registration, take into
consideration who first took possession of the
subject property, again, IN GOOD FA ITH.
93
Possession here will only apply in the absenc e
of registration.
In the abs ence of registration AND possession,
then we take into consideration the pers on who
presents the oldest title, provided again there is
good faith. So title here is one as a result of a
sale, and not any other title or mode of acquiring
property. Take note, we are talking about a sale
here, so you have t o have a buyer who is a
purchaser in good faith to fall within the
requirements under 1544.
A purchaser in good faith is one who buys the
property of another without notice that some
other person has a right to or interest in such
property, and pays a full and fair price for the
same at the time of such purchase or before he
has notice of the claim or int erest of some other
person in the property.
However when you have businesses who are
involved in real estate development, banks o r
financial institutions, the diligence required for
them to be considered in good faith are higher
because of the nature of their transactions.
With regard to sale, take note of the principle of
CAV EAT EMPTOR – buyer beware. Caveat
emptor requires the buyer to be aware of the
supposed title of the seller, and he who buys
without checking the s eller’s title takes all the
risks and losses consequent to such failure.
CORONEL vs CA
FACTS: The petition involves a complaint for
specific performance to compel petitioners to
consummate the sale of a parcel of land with its
improvements locat ed along Roosevelt A venue
in Quez on City entered into by the parties
sometime in January 1985 for the pric e of
P1,240,000.00.
On January 19, 1985, defendants-appellants
Romulo Coronel, et al. (Coronels) execut ed a
document entitled "Receipt of Down Payment" in
favor of plaintiff Ramona Patricia Alcaraz
(hereinafter referred to as Ramona)
Clearly, the conditions appurtenant to the sale
are the following: 1. Ramona will make a down
payment P50, 000. 00 upon execution of the
document aforestated; 2. The Coronels will
cause the transfer in their names of the title of
the property registered in the name of their
deceased father upon receipt of the P 50,000.00
down payment; 3. Upon the trans fer in their
names of the subject property, the Coronels will
execute the deed of absolute sale in favor of
Ramona and the latter will pay the former the
whole balance of P1,190,000.00.
On the same date (January 15, 1985),
Conc epcion D. Alcaraz (Concepcion), mother of
Ramona, paid the down payment of P50,000.00.
On February 6, 1985, the property originally
registered in the name of the Coronels' father
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
was transferred in their names under TCT No.
327043.
On February 18, 1985, the Coronels sold the
property covered by TCT No. 327043 to
intervenor-appellant Catalina B. Mabanag
(Cat alina) for P1,580,000.00 after the latter has
paid P 300, 000. 00. For this reason, Coronels
canceled and rescinded the contract wit h
Ramona by depositing the down payment paid
by Concepcion in the bank in trust for Ramona
Patricia Alcaraz .
On February 22, 1985, Concepcion, et al., filed a
complaint for specific performance against the
Coronels and caused the annotation of a notice
of lis pendens at the back of TCT No. 327403.
On April 2, 1985, Catalina caused the annotation
of a notice of adverse claim covering the same
property with the Registry of Deeds of Quezon
City (Exh. "F"; Exh. "6").
On April 25, 1985, the Coronels executed a
Deed of Absolute Sale over the subject property
in favor of Catalina to which a new title over the
subject property was issued in her name.
ISSUE: WON the "Receipt of Down Payment"
embodied a perfected contract of sale, whic h
perforce, they seek to enforce by means of an
action for specific performance or signified only
a mere executory contract to sell, subject to
certain suspensive conditions/ WON double sale
applies.
RULI NG: The parties (Coronel and Alcaraz) had
agreed to a conditional contract of sale,
consummation of which is subject only to the
successful trans fer of the certific ate of title from
the name of petitioners' father, Constancio P.
Coronel, to their names.
It is essential to distinguish between a contract
to sell and a conditional contract of sale specially
in cases where the subject property is sold by
the owner not to the party the seller contracted
with, but to a third person, as in t he case at
bench. In a contract to sell, there being no
previous sale of the property, a third person
buying s uch property despite the fulfillment of
the suspensive condition such as the full
payment of the purchase price, for instance,
cannot be deemed a buyer in bad fait h and the
prospective buyer cannot seek the relief of
reconvey ance of the property. There is no
double sale in such case. Title to the property
will transfer to the buyer aft er registration
because there is no defect in the owner-s eller's
title per se, but the latter, of course, may be
used for damages by the intending buyer.
In a conditional contract of sale, however, upon
the fulfillment of the suspensive condition, the
sale becomes absolute and this will definitely
affect the seller's title thereto. In fact, if there had
been previous delivery of the subject property,
the seller's ownership or title to the property is
automatically transferred to the buyer such that,
94
the seller will no longer have any title to transfer
to any third person. Applying Article 1544 of the
Civil Code, such second buyer of the property
who may have had actual or constructive
knowledge of such defect in the seller's title, or
at least was charged with the obligation to
discover such defect, cannot be a registrant in
good faith. Such second buyer cannot defeat the
first buyer's title. In case a title is issued to the
second buy er, the first buyer may seek
reconvey ance of the property subject of the sale.
The agreement could not have been a contract
to sell because the sellers herein made no
express reservation of ownership or title to the
subject parcel of land . Furthermore, the
circumstance which prevented the parties from
entering into an absolute cont ract of sale
pertained to the sellers themselves (the
certificate of title was not in t heir names) and not
the full payment of the purchase pric e. Under the
established facts and circumstances of the case,
the Court may safely presume that, had the
certificate of title been in the names of
petitioners-sellers at that time, there would have
been no reason why an absolute contract of sale
could not have been executed and
consummated right there and then.
Thus, the parties did not merely enter int o a
contract to sell where the sellers, after
compliance by the buyer with certain terms and
conditions, promised to sell the property to the
latter. What may be perceived from the
respective undertakings of the parties to the
contract is that petitioners had already agreed t o
sell the house and lot they inherited from their
father, completely willing to transfer full
ownership of the subject house and lot to the
buyer if the documents were then in order. It just
happened, however, that the transfer certificat e
of title was then still in the name of their father. It
was more expedient to first effect the change in
the certific ate of title so as to bear their names.
That is why they undertook to cause the
issuance of a new transfer of the certificate of
title in their names upon receipt of the down
payment in the amount of P50, 000. 00. As soon
as the new certificat e of title is issued in their
names, petitioners were committed to
immediat ely execute the deed of absolute sale.
Only then will the obligation of the buyer to pay
the remainder of the purchase price arise.
What is clearly established by the plain language
of the subject document is that when the said
"Receipt of Down P ayment" was prepared and
signed by petitioners Romeo A. Coronel, et al.,
the parties had agreed to a conditional contract
of sale, consummation of which is subject only to
the successful transfer of the certificate of title
from the name of petitioners' father, Constancio
P. Coronel, to their names.
The Court significantly notes this suspensive
condition was, in fact, fulfilled on February 6,
1985 (Exh. "D"; Exh. "4"). Thus, on said date,
the conditional contract of sale between
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
petitioners and private respondent Ramona P.
Alcaraz became obligatory, the only act required
for the consummation thereof being the delivery
of the property by means of the execution of the
deed of absolute sale in a public instrument,
which petitioners unequivoc ally committed
themselves to do as evidenced by the "Receipt
of Down Payment."
With the foregoing conclusions, the sale to the
other petitioner, Cat alina B. Mabanag, gave ris e
to a case of double sale where Article 1544 of
the Civil Code will apply, to wit:
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 if be
immovable property, the ownership shall belong
to the person acquiri ng it who in good faith first
recorded it in Registry of Property. Should there
be no inscription, the ownershipshall pertain t o
the person who in good faith was first in the
possession; and, in the absenc e thereof to the
person who presents the oldest title, provided
there is good faith.
The above-cited provision on double sale
presumes title or ownership to pass to the first
buyer, the exceptions being: (a) when the
second buyer, in good faith, registers the sale
ahead of the first buyer, and (b) should there be
no inscription by eit her of the two buyers, when
the second buyer, in good faith, acquires
possession of the property ahead of the first
buyer. Unless, the second buyer satisfies thes e
requirements, title or ownership will not transfer
to him to the prejudice of the first buyer.
Petitioner point out that the notice of lis pendens
in the case at bar was annoted on the title of the
subject property only on February 22, 1985,
whereas, the second sale between petitioners
Coronels and petitioner Mabanag was
supposedly perfected prior thereto or on
February 18, 1985. The idea conveyed is that at
the time petitioner Mabanag, the second buyer,
bought the property under a clean title, she was
unaware of any advers e claim or previous sale,
for which reason she is buyer in good faith.
We are not persuaded by such argument.
In a case of double sale, what finds relevanc e
and materiality is not whether or not the second
buyer was a buyer in good faith but whet her or
not said second buyer registers such second
sale in good faith, that is, without knowledge of
any defect in the title of the property sold.
As clearly borne out by the evidence in this
case, petitioner Mabanag could not have in good
faith, registered the sale entered into on
February 18, 1985 because as early as February
22, 1985, a notice of lis pendens had been
annotated on the transfer certificate of title in the
names of petitioners, whereas petitioner
95
Mabanag registered the said sale sometime in
April, 1985. At the time of registration, therefore,
petitioner Mabanag knew that the same property
had already been previously sold to privat e
respondents, or, at least, she was charged wit h
knowledge that a previous buyer is claiming title
to the same property. Petitioner Mabanag
cannot close her eyes to the defect in
petitioners' title to the property at the time of the
registration of the property.
Thus, the sale of the subject parcel of land
between petitioners and Ramona P. Alcaraz,
perfected on February 6, 1985, prior to that
between petitioners and Cat alina B. Mabanag on
February 18, 1985, was correctly upheld by bot h
the courts below.
So you really have to master the concept of a
Cont ract to Sell, and how it is different from a
sale and a conditional sale.
This was again emphasized here. In a
Conditional Contract of Sale, the first element of
consent is present although it is conditioned
upon the happening of a contingent event whic h
may or may not occur. If the suspensive
condition is not fulfilled, the perfection of the
contract of sale is completely abated.
Here, even if the parties stipulated that the
Coronels will execute the Deed of S ale upon the
transfer in their names of the subject property,
this does not necessarily mean that what they
entered into was a Contract to Sell. The
agreement could not have been a cont ract to
sell, because the sellers here made no express
made no reservation of ownership or title to the
subject parcel of land.
In fact, the condition here was the transfer of the
title, not the full payment of the purchase price,
which is the condition that exists in a contract to
sell.
So what is involved here is a Conditional
Cont ract to Sell; then we could apply Art. 1544.
Remember, in the last paragraph of Art. 1458: a
sale may be absolute or conditional. So valid
sale pa rin even if it is conditional.
Here, what is involved? Immovable property. So,
we take into consideration the second
paragraph. Was there registration? Petitioner
Mabanag registered the same.
Was she in good faith so that she would have a
better right ? Mabanag could not have, in good
faith, registered the sale entered into on
February 18, 1985 because a notice of lis
pendens had been annotated on the trans fer
certificate of title in the names of petitioners.
Mabanag registered the said sale sometime in
April, 1985. At the time of registration, therefore,
petitioner Mabanag knew that the same property
had already been previously sold to privat e
respondents, or, at least, she was charged wit h
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
knowledge that a previous buyer is claiming title
to the same property.
Take not e, even if Mabanag would not have
personally seen the annotation on the sale, such
registration or inscription or annotation is
deemed constructive knowledge.
So Mabanag cannot close her eyes to the defect
in petitioners' title to the property at the time of
the registration of the property.
If a vendee in a double sale registers the
property AFTER he has acquired knowledge that
there was a previous sale to a third person, or
that another person claim said property in a
previous sale, the registration may constitute
bad faith and do not confer upon him any right.
So in the absence of registration, what’s the next
rule? Possession in good faith. In this case,
Mabanag could not have been considered as a
buyer in good faith.
Take note here that the sale was perfected,
even if what he only had was a receipt of
downpayment with conditions indic ated therein.
Now we already know that even if you are not
the owner of the property, you could sell.
Ownership is not yet required in perfection. So
walang problema dito. The property was also not
a fut ure inheritance because their father was
already deceased. The only condition here is
that hindi nila matransfer yung title bec ause the
title was still in the name of their deceased
father. They still have t o process it so that the
title will be trans ferred upon the heirs.
Does it mean that hindi na talaga tay o
makabenta ng property na naka register na sa
ibang tao? Not necessarily. Because title is only
an evidence, but not a conclusive evidence that
the person is the owner thereof.
If that person dies, we know that succession
opens the rights of the heirs to the property. So
hindi na yan fut ure inheritance, pwede na nila
ibenta ang kanilang interests and rights over the
said property.
So the transaction here is actually valid, but for
practical purposes in the future, what could be
possible done? Y ou can execut e an
extrajudicial s ettlement of the dec eased W ITH
deed of sale. Intention of the parties, para isa
nalang. Kaya siguro ditto, naniguro lang din
yung parties na ‘hintayin natin ma -transfer sa
inyo‘, and then saka nila i-process yung Deed of
Absolute Sale.
What would happen here is that hindi na nila
hintayin na ma-transfer ang title sa heirs. So
pagpunta sila sa BIR, sa Register of Deeds, they
just have to present the Extrajudicial Settlement
with Sale. Actually makabawas siya ng gasto
with regard sa processing fees sa ROD.
96
We also have this case:
SAN LORENZO DEV ELOPMENT
CORPORATION VS. CA
G.R. NO. 124242, January 21, 2005
FACTS: On 20 August 1986, the Spouses Lu
purportedly sold the two parcels of land to
respondent Pablo Babas anta for the price of P15
per s quare meter. The latter made a
downpayment of P50,000.00 as evidenced by a
memorandum receipt issued by Pacita Lu of the
same dat e. Several other payments totaling
P200,000.00 were made by Babasanta.
Babasanta demanded the execution of a Final
Deed of Sale in his favor so he may effect full
payment of the purchase pric e and notified the
spouses about having received information that
the spouses sold the same property to another
without his knowledge and cons ent. He
demanded that the second sale be cancelled
and that a final deed of sale be issued in his
favor.
In response, Pacita Lu wrote a letter to
Babasanta wherein s he acknowledged having
agreed to sell the property, 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 P50,000.00 to Babasant a
through E ugenio Oya. Thus, Babasanta filed a
case for Specific Performance and Damages.
On 19 January 1990, herein petitioner San
Lorenzo Development Corporation (S LDC) filed
a Motion for Intervention and alleged that it had
legal interest in the subject matter under
litigation because on 3 May 1989, the two
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.
Respondent Babasanta argued that the latter
had no legal interest in the case because the
two parcels of land involved had already been
conveyed to him by the Spouses Lu and hence,
the vendors were without legal capacity to
transfer or dispose of the two parc els of land t o
the intervenor.
ISSUES:
1. Who bet ween SLDC and Babasant a has a
better right over the two parcels of land
subject of the instant case in view of the
successive t ransactions executed by the
Spouses Lu. - SLDC
2. Whether or not t he agreement between
Babasanta and Spouses Lu was a contract
to sell or a contract of sale. - Contract to
Sell
3. Whether or not t here was a double sale. -
No double sale
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
HELD: An analysis of the facts obtaining in this
case, as well as the evidence pres ented by the
parties, irresistibly leads to the conclusion that
the agreement between Babasanta and the
Spouses Lu is a contract to sell and not a
contract of sale.
The receipt signed by Pacita Lu merely states
that she accepted the sum of fifty thousand
pesos (P50,000.00) from B abasanta as partial
payment of 3.6 hectares of farm lot. While there
is no stipulation that the seller reserves the
ownership of the property until full payment of
the price which is a distinguishing feature of a
contract to sell, the subsequent acts of the
parties convinc e us that the Spouses Lu never
intended to t rans fer ownership to Babasant a
except upon full payment of the purchase price.
Babasanta’s letter dated 22 May 1989 was quite
telling. He stated therein that despite his
repeated requests for the execution of the final
deed of sale in his favor so that he could effect
full payment of the price, Pacita Lu allegedly
refused to do so. In effect, Babasanta himself
recognized that ownership of the property would
not be transferred to him until such time as he
shall have effected full payment of the price.
Doubtlessly, the receipt signed by Pacita Lu
should legally be considered as a perfected
contract to sell.
The perfected contract to sell imposed upon
Babasanta the obligation to pay the balance of
the purchase price. There being an obligation to
pay the price, Babasanta should have made the
proper tender of payment and consignation of
the price in court as required by law. Glaringly
absent from the records is any indication that
Babasanta even attempt ed to mak e the proper
consignation of the amounts due, thus, the
obligation on the part of the sellers to convey
title never acquired obligatory force.
There was no double sale in this case becaus e
the contract in favor of Babasanta was a mere
contract to sell; hence, Art. 1544 is not
applicable. There was neither actual nor
constructive delivery as his title is based on a
mere receipt. Based on this alone, the right of
SLDC must be preferred.
The SC held that the contract in favor of
Babasanta was only a Cont ract to Sell, as the
parties never intended t o trans fer ownership t o
Babasanta except upon full payment of the
purchase price.
On the assumption that it was a contract of sale,
nevertheless Babasanta’s claim should fall.
Remember what is under A rt. 1544? Ownership
shall belong to the person who has in good fait h
first recorded, first in possession, or oldest title.
So you still have there the concept of ownership.
So for there to be transfer of ownership, there
must be delivery. Under the facts of this case,
assuming there was a contract of sale, there
was no delivery in favor of Babasanta.
Babasanta did not acquire owners hip by mere
97
execution of the acknowledgement receipt of
partial payment for t he property. No actual or
constructive delivery, so ownership could not
have passed to Babasanta in the absence of
such.
As to San Lorenzo, please take note of this.
Here the SC noted that SLDC registered the
sale after it had ac quired knowledge of
Babasanta’s claim. Despite thereof, SLDC was
considered to be a buyer in good faith of the SC
since there’s no evidence in the records that he
had knowledge of the prior transaction in favor of
Babasanta.
At the time the deeds were executed, SLDC had
no knowledge of the transaction of the spouses
with Babasanta.
Compare this with the facts in the case of
Coronel, as well as that of the Spouses Roque.
Isn’t it that if at the time of registration there was
a notice of lis pendens, the buy er who registered
it would not be considered in good fait h
anymore? S o be very careful with this one.
Because in all other cases, the SC has been
consistent. The good faith must be from the time
of purchase until the registration of the sale.
Assuming that the registration here of San
Lorenzo is considered in bad faith, nevertheless,
San Lorenzo would still have a better right over
the property, even if we assume that the contract
between Babasanta and spouses Lu is a
contract of s ale. Why? In the absence of
registration, possession in good fait h. Under the
facts of t his case, San Lorenzo came int o
possession of the subject property in good faith.
Here, at the time of sale, vendors were still the
registered owners, and were in fact in
possession of the lands. Then when S LDC was
in possession thereof, it had no knowledge of
the contract in favor of Babasant a. So in the
end, SLDC would still have a better right over
the subject property.
Now we also have the case of:
PAGADUAN VS. SPOUS ES OCUMA
G.R. 176308, May 8, 2009
FACTS: The subject lot used to be part of a big
parcel of land that originally belonged to Nicolas
Cleto. The big parcel of land was the subject of
two separate lines of dispositions. The first line
of disposition: Cleto sold land to Antonio Ceres o
on May 11, 1925. Cereso in turn sold t he land t o
the siblings with the surname Antipolo on
September 23, 1943. The Antipolos sold the
property to Agaton Pagaduan, father of
petitioners, on March 24, 1961. All the
dispositions in this line were not registered and
did not result in the issuance of new certificates
of title in the name of the purchasers.
The second line of disposition: started on
January 30, 1954, after Clet o’s death, when his
widow Rupert a Asuncion as his sole heir and
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
new owner of the entire tract, sold the same to
Eugenia Reyes. This resulted in the issuance
Trans fer Certificat e of Title (TCT) No. T-1221 in
the name of E ugenia Reyes in lieu of TCT No. T-
1220 in the name of Ruperta Asuncion.
On November 26, 1961, Eugenia Reyes
executed a unilateral deed of sale where she
sold the northern portion with an area of 32,325
square meters to res pondents for P1,500.00 and
the southern portion consisting of 8,754 square
meters to Agat on Pagaduan for P500.00.
(FIRS T SALE)
Later, on June 5, 1962, Eugenia executed
another deed of sale, this time conveying the
entire parcel of land, including the southern
portion, in respondent’s favor (SE COND SALE).
Thus, TCT No. T-1221 was cancelled and in lieu
thereof TCT No. T-5425 was issued in t he name
of respondents. On June 27, 1989, respondents
subdivided the land into two lots.
On July 26, 1989, petitioners instituted a
complaint for reconveyance of the southern
portion with an area of 8,754 square meters,
with damages, against respondents before the
RTC of Olongapo City.
RTC decided in petitioners’ favor; a constructive
trust over the property was created in petitioners’
favor.
CA revers ed decision; while the registration of
the southern portion in the name of respondents
had created an implied trust in favor of Agaton
Pagaduan, petitioners, however, failed to show
that they had taken possession of the said
portion.
ISSUE: Whether or not there was a double sale.
HELD: In this case, there was a double sale.
Article 1544 should apply.
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
possession thereof in good faith, if it should be
movable property.
Should it be immovable propert y, the ownership
shall belong to the person acquiring it who in
good faith first recorded it in the Registry of
Property.
Should there be no inscription, the ownership
shall pertain to t he person who in good faith was
first in possession; and, in the absence thereof;
to the person who presents the oldest title,
provided there is good faith.
Where it is an immovable property that is the
subject of a double sale, ownership shall be
transferred: (1) to the pers on acquiring it who in
good faith first recorded it in the Registry of
Property; (2) in default thereof, to the person
who in good faith was first in possession; and (3)
98
in default thereof, to the person who presents
the oldest title, provided there is good faith. The
requirement of the law then is two-fold:
acquisition in good faith and registration in good
faith.
DOUBLE SALE: first sale by Eugenia Reyes to
Agaton Pagaduan and a second sale by
Eugenia Reyes to the respondents.
For a second buyer like the respondents to
successfully invoke t he second paragraph,
Article 1544 of the Civil Code, it must possess
goodvfait h from the time of the sale in its favor
until the registration of the same. Respondents
sorely failed to meet this requirement of good
faith since they had actual knowledge of
Eugenia’s prior sale of the southern portion
property to the petitioners, a fact antithetical to
good faith. This cannot be denied by
respondents since in the same deed of sale that
Eugenia sold them the northern portion to the
respondents for P1,500.00, Eugenia also sold
the southern portion of the land to A gaton
Pagaduan for P500.00.
It is to be emphasized that the Agat on Pagaduan
never parted with the ownership and possession
of that portion of Lot No. 785 which he had
purchased from Eugenia Sant os. Hence, the
registration of the deed of sale by respondents
was ineffectual and vested upon them no
preferential rights to the property in derogation of
the rights of the petitioners.
Knowledge gained by respondents of the first
sale defeats their rights even if they were first to
register the second sale. Knowledge of the first
sale blackens this prior registration with bad
faith. Good faith must concur with the
registration. Therefore, because the registration
by the respondents was in bad faith, it amounted
to no registration at all. As the respondents
gained no rights over the land, it is petitioners
who are the rightful owners, having established
that their successor-in-int erest. Agaton
Pagaduan had purchas ed the property from
Eugenia Reyes on November 26, 1961 and in
fact took possession of the said property.
So here you have 2 valid contracts of sale, and
therefore Art. 1544 is applicable. Again, the
requirement of the law is two-fold: (1) Acquisition
in good faith; and (2) registration in good faith.
For the second buyer to successfully invoke the
second paragraph – registration in good faith in
1544 – it must possess good faith from the time
of the sale in its favor until the registration of the
same.
However, here respondents have actual
knowledge of the prior sale of the southern
portion of the property to the petitioners, as this
cannot be denied by the respondents becaus e
the same deed of sale that Eugenia sold t o
them, the northern portion, Eugenia also sold the
southern portion to Pagaduan.
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
Pagaduan never parted wit h ownership and
possession, so the registration of the sale by
respondents was ineffectual, vested upon them
no preferential right, in derogation of the rights of
the petitioners.
So it was as if there was no registration at all
that took plac e. So in the absence of registration
in good faith, then you apply the next parag raph:
who first took possession in good fait h. In this
case, it was Pagaduan.
And then we have the case of:
CARBONELL VS. CA
TUESDAY, SEPTEMBER 9, 2014
FACTS: Respondent Jose Poncio was the
owner of the parcel of land locat ed in Rizal.
(Area – more or less 195 sq. m.) The said lot
was subject to mortgage in favor of the Republic
Savings Bank for the sum of P1,500.00.
Carbonell and respondent Emma Infante offered
to buy the said lot from P oncio. Poncio offered to
sell his lot to Carbonell excluding the house on
which he and his family stayed. Carbonell
accepted the offer and proposed the price of
P9.50/sq. m.. Poncio accepted the price on the
condition that from the purchase pric would
come the money to be paid to the bank.
January 27, 1995: The parties executed a
document in the Batanes dialect which is
translated as: CONTRACT FOR ONE HALF
LOT WHICH I (P oncio) BOUGHT FROM.
Carbonell asked a lawyer t o prepare the deed of
sale and delivered the document, together wit h
the balance of P400, to Jose Poncio. (Note:
Carbonell already paid P200 for the mortgage
debt of P oncio + obligated herself to pay the
remaining installments.) However, when she
went to P oncio, the latter informed her t hat he
could no longer proc eed with the sale as the lot
was already sold to Emma Infante and that he
could not withdraw with the sale. Poncio
admitted that on January 30, 1995, Mrs. Infant e
improved her offer and he agreed to sell the land
and its improvements to her for P3,535.00.
In a private memorandum agreement, Poncio
bound to sell to Infante the lot for the sum of
P2,357.52, with Infante still assuming the
mortgage debt of P1,177.48. (Note: The full
amount of mortgage debt was already paid by
the Infantes)
February 2, 1995: A deed of sale was executed
between Poncio and Infante.
February 8, 1995: Knowing that the sale t o
Infante has not been registered, Carbonell filed
an adverse claim.
99
February 12, 1995: The deed of sale was
registered but it has an annotation of the
adverse claim of Carbonell.
Thereafter, Emma Infante took possession of the
lot, built a house and introduced some
improvements.
In June 1995, Carbonell filed a complaint
praying that she be declared the lawful owner of
the land, that the subsequent sale to spouses
Infante be declared null and void, an d that Jos e
Poncio be ordered to execute the corresponding
deed of conveyance of said land in her favor.
RTC ruled that the sale to spouses Infante was
null and void. A fter re-t rial, it reversed its ruling.
CA ruled in favor of Carbonell but after an MfR, it
reversed its ruling and ruled in favor of the
Infantes.
ISSUE: WON Carbonell has a superior right
over Emma Infante. YES
HELD: Article 1544 provides that for double sale
of an immovable property, the ownership shall
belong to the person who first acquired it in good
faith and recorded it in the Registry of Property
Article 1544, New Civil Code, which is decisive
of this case, recites:
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 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.
Should there be no inscription, the ownership
shall pertain to t he person who in good faith was
first in the possession; and, in the absenc e
thereof, to the person who presents the oldest
title, provided there is good faith.
The buyer must act in good faith in registering
the deed of sale
It is essential that the buyer of realty must act in
good faith in registering his deed of sale to merit
the protection of t he second paragraph of said
Article 1544.
Unlike the first and third paragraphs of said
Article 1544, which accord preferenc e to the one
who first takes possession in good faith of
personal or real property, the second paragraph
directs that ownership of immovable property
should be recognized in favor of one "who in
good faith first recorded" his right. Under the first
and third paragraph, good faith must
characterize the act of anterior registration.
Rule when there is inscription or not
If there is no inscription, what is decisive is prior
possession in good faith. If there is inscription,
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
as in the case at bar, prior registration in good
faith is a pre-condition to superior title.
Carbonell was in good faith when she bought the
lot
When Carbonell bought the lot from Poncio on
January 27, 1955, she was the only buyer
thereof and the title of P oncio was still in his
name solely encumbered by bank mortgage duly
annotated thereon. Carbonell was not aware —
and she could not have been aware — of any
sale of Infante as there was no such sale to
Infante then.
Henc e, Carbonell's prior purchase of the land
was made in good faith. Her good faith subsisted
and continued to exist when she recorded her
adverse claim four (4) days prior to the
registration of Infantes 's deed of sale.
Carbonell’s good fait h did not cease when she
was informed by Poncio about the sale to Emma
Infante
After learning about the second sale, Carbonell
tried to talk to the Infantes but the latter refused.
(Exact words of the SC: With an aristocratic
disdain unworthy of the good breeding of a good
Christian and good neighbor, Infante snubbed
Carbonell like a leper and refused to see her.)
So Carbonell did the next best thing to protect
her right — she registered her adversed claim
on February 8, 1955. Under the circumstances,
this recording of her adverse claim should be
deemed to have been done in good faith and
should emphasize Infante's bad faith when she
registered her deed of sale four (4) days later on
February 12, 1955.
The Infantes were in bad fait h (5 indications of
bad faith listed below)
Bad fait h arising from previous knowledge by
Infante of the prior sale to Carbonell is shown by
the following facts:
1. Mrs. Infante refused to see Carbonell.
Her refusal to talk to Carbonell could only mean
that she did not want to listen to Carbonell's
story that she (Carbonell) had previously bought
the lot from Poncio.
2. Carbonell was already in possession of
mortgage passbook and copy of the mortgage
contract. (Not Poncio’s saving deposit
passbook.)
Infante naturally must have demanded from
Poncio the delivery to her of his mortgage
passbook and mortgage contract so that the fact
of full payment of his bank mortgage will be
entered therein; and Poncio, as well as the bank,
must have inevitably informed her that said
mortgage passbook could not be given to her
because it was already delivered to Carbonell.
3. Emma Infante did not inquire why Poncio was
no longer in possession of the mortgage
passbook and why it was in Carbonell’s
possession.
100
The fact that Poncio was no longer in
possession of his mortgage passbook and that
the said mortgage passbook was already in
possession of Carbonell, should have compelled
Infante to inquire from Poncio why he was no
longer in possession of the mortgage passbook
and from Carbonell why she was in possession
of the same.
4. Emma Infant e registered the sale under her
name after Carbonell filed an adverse claim 4
days earlier.
Here she was again on notice of the prior sale t o
Carbonell. Such registration of adverse claim is
valid and effective.
5. Infante failed to inquire to Poncio WON he
had already sold the property to Carbonell
especially that it can be shown t hat he was
aware of the offer made by Carbonell.
Poncio alleged in his answer that Mrs. Infant e
and Mrs. Carbonell offered t o buy the lot at
P15/sq. m. which offers he rejected as he
believed that his lot is worth at least P20. 00/sq.
m. It is therefore logical to presume that Infant e
was told by Poncio and consequently knew of
the offer of Carbonell which fact likewise should
have put her on her guard and should have
compelled her to inquire from Poncio whether or
not he had already sold the property to
Carbonell
The existence of prior sale to Carbonell was duly
established
From the terms of the memorandum, it tends to
show that the sale of the property in favor of
Carbonell is already an accomplished act. As
found by the trial court, to repeat the said
memorandum states "that P oncio is allowed t o
stay in the property which he had sold to the
plaintiff ..., it tends to show that the sale of the
property in favor of the plaintiff is already an
accomplished act..."
There was an adequate consideration or pric e
for the sale in favor of Carbonell
Poncio agreed to sell the same to Carbonell at
P9.50 per square meter, on condition that
Carbonell:
1. Should pay (a) the amount of P400.00 to
Poncio and the arrears in the amount of P247.26
to the bank
2. Should assume his mortgage indebtedness.
The bank president agreed to the said sale wit h
assumption of mortgage in favor of Carbonell an
Carbonell accordingly paid the arrears of
P247.26.
It is evident therefore that there was ample
consideration, and not merely the sum of
P200.00, for the sale of Poncio to Carbonell of
the lot in question.
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
The subject property was identified and
described
The court has arrived at the conclusion that
there is sufficient description of the lot referred to
in Exh. As none other than the parcel of lot
occupied by the defendant Poncio and where he
has his improvements erected. The Identity of
the parc el of land involved herein is sufficiently
established by the contents of the note Exh. 'A '.
So here, Carbonell was the only buyer on
January 27, 1995, and the title of POnsio was
still in his name solely encumbered by a bank
mortgage. Carbonell was not and could not have
been aware of the sale to Infante as there was
no sale to Infante then. Carbonell’s prior
purchase of the land was made in good faith,
which good faith subsisted and continued to
exist when she recorded her adverse claim
based on the sale, 4 days prior to the
registration of Infante’s deed of sale.
Carbonell’s good faith did not cease after Poncio
told her in January 31, 1995 of the second sale,
as Carbonell did the next best thing to protect
her right: register her adverse claim.
So with that, just to summarize:
Let us say A sold the property to B, entered into
a contract of sale, deed of absolut e sale was
duly notarized let us say on August 1, 2015.
Now subsequent thereto, A sold the same
subject property on August 31, 2015 to C. Let us
that C registered the sale on Sept. 5, 2015.
Between B and C, who will have a better right
over the property?
C, provided that he is in good faith. In the
absence of good faith in the registration of C, we
take into consideration who first possessed the
property in good faith.
Now what if C registered the sale on Sept. 5, but
he had already knowledge of the sale in favor of
B. Would C still have a better right over the
property? NO. Unless he first took possession in
good faith. Because again, the registration in
bad faith would mean that there is no registration
nd
at all, so we take into consideration the 2 rule.
What if A sold to B on Aug.1, then sold to C on
Aug. 31. Then B discovered of the subsequent
sale to C. So what did B do? He then registered
the sale on Sept. 5. Would B be considered in
bad fait h? NO. Take note, in this case, B was
considered the first purchaser. Applying the case
of Carbonell, knowledge of the first buyer of the
second sale does not amount to registration in
nd
favor of the 2 buyer. Because as we have
pointed out in that case, the first buyer merely
protected her right being the first purchaser of
the subject property.
It’s a different thing if the one who registered is
nd rd
the subsequent purchaser. Whether 2 , 3 or
th
4 . Kasi, with that registration of the subsequent
purchasers, we will consider whether the
registration was made in good faith. Registration
101
made in good faith by subs equent buyer will
always preempt possession in good faith.
However, if the registration was made by the first
buyer having knowledge of the subsequent sale,
the law would still favor the first purchaser. At
the time of t he registration, that would merely be
and act protecting her right as the first
purchaser.
September 15
Last night we have discussed the rule as to
double sale. Again, take note of the requisites
before you apply Article 1544. The following
must be present: you must have two or more
valid contracts of sale; these two or more
contracts of sale must pertain to exactly the
same subject matter; the buyers must each
represent conflicting interests; and the buyers
must have bought from the same seller. If all of
those requisites are present, you can take int o
consideration what is provided under 1544 -
when the subject matter is a personal property
better right belongs to the buyer who first takes
possession in good faith. If you have an
immovable property, better right as to the buyer
who first registers the same in good faith. In the
absence of registration, first possession in good
faith. If in the absence of registration and
possession, then, oldest title in good faith.
Again, as a general rule, registration in good
faith will preempt possession in good faith.
However, when it comes to the first buyer,
knowledge of the first buyer of the second sale
does not amount to registration in bad faith.
Obligations of the buyer (Arts. 1582-1593)
What are the main obligations of the buyer? He
has the obligation to accept delivery. This
applies to the thing sold, as well as the
expenses of the delivery. Mere sending of a
letter by the buyer expressing intention to pay
without accompanying payment is not
considered valid tender of payment. As a
general rule, to extinguish and obligation, tender
of payment must be with consignation of the
amount due in order to extinguish the obligation.
Article 1582. The vendee is bound to accept
delivery and to pay the price of the thing sold
at the time and place stipulated in the
contract.
If the time and place should not have been
stipulated, the payment must be made at the
time and place of the delivery of the thing
sold.
This refers to the obligation referred t o in 1458,
to pay the price certain in money or its
equivalent. As to the delivery, the vendor is not
required to deliver the subject matter until the
price is paid, nor the vendee to pay the pric e
before the subject matter is delivered to him in
the absence of a contrary agreement. This is
based on the characteristic of sale being a
reciprocal in nature. Take int o consideration
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
Article 1524 - The vendor shall not be bound to
deliver the thing sold, if the vendee has not paid
him the price, or if no period for the payment has
been fixed in the contract.
What if there is a stipulation for the place of
delivery and the time for payment? With such
stipulation, the vendee is bound to accept
delivery and it applies to the time and plac e
designated. If there is no stipulation for the time
and place of payment, the vendee is bound t o
pay at the time and place of delivery. In the
absence of stipulation as to the place of delivery,
in 1251, first, take into consideration the express
stipulation of t he parties. In the absence of
stipulation, if the subject matter is a determinat e
thing, the payment shall be made wherever the
thing might be at the time the contract is
perfected. In any other case, it shall be the
domicile of the vendor.
If only the time of delivery has been fixed, the
vendee is required to pay even before the thing
is delivered to him. For example, you have a
contract to sell, so even before delivery, you
have already stipulated the period for the
payment of the price, then that should be
complied by the parties even in the absence of
delivery. If only the time for the payment of the
price has been fixed, the vendee in entitled to
delivery even before the price was paid by him,
for example, if the sale is on credit.
Article 1583. Unless otherwise agreed, the
buyer of goods is not bound to accept
delivery thereof by installments.
Where there is a contract of sale of goods to
be delivered by stated instalments, which are
to be separately paid for, and the seller
makes defective deliveries in respect of one
or more instalments, or the buyer neglects or
refuses without just cause to take delivery of
or pay for one or more instalments, it
depends in each ca se on the term s of the
contract and the circumstance s of the case,
whether the breach of contract is so material
as to justify the injured party in refusing to
proceed further and suing for damages for
breach of the entire contract, or whether the
breach is severable, giving rise to a claim for
compensation but not to a right to treat the
whole contract as broken.
So the general rule under Obligations and
Cont racts, you cannot compel the creditor t o
accept partial payments, and on the part of the
creditor he cannot compel partial performanc e
on the part of the debtor. More or less, it is the
same thing here. It is both an obligation and a
right of the vendee receive delivery of the
subject matter in full. In the same manner, the
buyer has no right to pay the price in installment,
nor can he be required to give partial payments.
As an exception, if they have agreed as to
delivery or payment in installment.
102
What if there is a defective delivery and the
obligation to deliver is in installment? If the
breach of the contract only affects one defective
delivery out of all the other installment deliveries,
then it will not affect the contract. If breach will
affect the whole contract, the remedy available is
to rescind the whole contract plus damages.
What if the buyer neglects or refuses, without
just cause to pay for one or more installments?
Compens ation for the installment which was not
paid, but no right to treat the whole contract as
broken, unless the parties have stipulated.
Remember acceleration clause– failure to pay
one installment will consider the whole due.
Article 1584. Where goods are delivered to
the buyer, which he has not previousl y
examined, he is not deemed to have
accepted them unless and until he has had a
reasonable opportunity of examining them
for the purpose of a scertaining whether they
are in conformity with the contract if there is
no stipulation to the contrary.
Unless otherwise agreed, when the seller
tenders delivery of goods to the buyer, he is
bound, on request, to afford the buyer a
reasonable opportunity of examining the
goods for the purpose of ascertaining
whether they are in conformity with the
contract.
Where goods are delivered to a carrier by the
seller, in accordance with an order from or
agreement with the buyer, upon the terms
that the goods shall not be delivered by the
carrier to the buyer until he has paid the
price, whether such term s are indicated by
marking the goods with the words "collect
on delivery," or otherwise, the buyer is not
entitled to examine the goods before the
payment of the price, in the absence of
agreement or usage of trade permitting such
examination.
You have here acceptance. The obligation on
the part of the vendee to accept delivery of the
subject matter. Acceptance, to become owner of
the specific goods when delivery is offered to the
buyer. It is different from delivery becaus e
delivery, obligation on the part of the seller, while
acceptance is an obligation on the part of the
buyer.
If the subject matter was previously examined by
the buyer and duly accepts it, then there is
transfer of ownership. If the subject matter was
not previously examined by the buyer, the buyer
must be given the reasonable opportunity to
examine them to determine what has been
delivered is in conformity with the contract.
Rather examination or inspection is a condition
precedent to the transfer of ownership. If the
buyer is denied such right, the ownership shall
not pass to the buyer and can refuse to accept.
The refusal here must be bas ed on a valid
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
reason. Without transfer of ownership, the seller
bears the loss.
However, when we are talking about the right to
examine, the right to examine on the part of the
buyer is not an absolute right in the sense that it
can be waived by the buyer. In other words,
delivery was made and the buyer acknowledges
receipt of the said goods without inspecting
them, then that is waiver on his part -waiver in
the sense that there is a valid delivery and
acceptance which results into trans fer of
ownership. It does not mean that just becaus e
the buyer has already accepted the goods
delivered, cannot go after the selle r for any
breach of the cont ract because acceptance does
not mean that he also waives his right to go after
the seller for any breach of their agreement.
Seller is authorized or required to send the
goods to the buy er, again, the general rule, the
delivery of the goods to the carrier is equivalent
to the delivery of the goods to the buyer.
However, take note of the terms agreed upon by
the parties, because this may still be borne by
the seller if there is already delivery to the carrier
depending on the agreement.
Collect on delivery – buyer is not entitled t o
examine t he goods before payment of pric e
because of the terms – COD- in the absence of
an agreement. In COD the buyer is denied the
right to examine. Ownership passes to the
buyer. B uyer bears the loss. If what was
delivered was different from what was agreed
upon, the buyer can go after the seller for breac h
of contract.
Right to examine is not an absolute right. What
is important is the seller should afford to the
buyer t he reasonable opportunity to examine the
goods on request. If the buyer accepts without
examination, then it means he has waived his
right to examine the goods but then he can still
go after the seller for any breach. Reasonable
opportunity to examine goods must be availed of
with a reasonable time. What is reasonable will
depend upon the circumstances of eac h case.
Article 1585. The buyer is deemed to have
accepted the goods when he intimates to the
seller that he has accepted them, or when the
goods have been delivered to him, and he
does any act in relation to them which is
inconsi stent with the ownership of the seller,
or when, after the lapse of a reasonable time,
he retains the goods without intimating to
the seller that he has rejected them.
Acceptance may be expressed or implied.
Expressed, verbal or implied through the
conduct of the buy er consistent with the
ownership of the seller. For example, if he tries
to sell it to another person, he now uses it in the
concept of an owner, then there is an implied
acceptance.
Article 1586. In the absence of express or
103
implied agreement of the parties, acceptance
of the goods by the buyer shall not di scharge
the seller from liability in damages or other
legal remedy for breach of any promi se or
warranty in the contract of sale. But, if, after
acceptance of the goods, the buyer fails to
give notice to the seller of the breach in any
promise of warranty within a reasonable time
after the buyer know s, or ought to know of
such breach, the seller shall not be liable
therefor.
Despite accept ance, that acceptance by the
buyer will not discharge the seller from liability in
case of breach. However, it is important to know
that the buyer must give notice to the seller of
any breach of the contract. For example, if what
has been delivered is different from what was
agreed upon. The general rule, acceptance by
the buyer does not discharge the seller from
liability in damages or other legal remedy for
breach of promise. Exception, there is inaction
on the part of the buyer for a considerable lengt h
of time, also taking into consideration the
prescriptive period provided by law. Recall the
case of La Fuerza.
Article 1587. Unless otherwise agreed, where
goods are delivered to the buyer, and he
refuses to accept them, having the right so to
do, he is not bound to return them to the
seller, but it is sufficient if he notifies the
seller that he refuse s to accept them. If he
voluntarily constitute s him self a deposi tary
thereof, he shall be liable as such.
Here, the buyer refuses to accept the goods but
there is a valid ground. The vendee here is not
bound to ret urn the goods to the seller. He has
only to notify the seller that he refuses to accept
them. It is the seller who should take t he steps,
whet her t o he himself will get the goods from the
buyer, or look for anot her to get the goods from
the buyer, or he will request the buyer to ship the
goods back to him at his expanse. However the
buyer can also constitute himself as a depositary
of goods delivered for the purpose of
safekeeping. As a depositary, then it is the law
on contracts of deposit, which will be applied.
Article 1588. If there is no stipulation a s
specified in the first paragraph of article
1523, when the buyer's refusal to accept the
goods i s without just cause, the title thereto
passe s to him from the moment they are
placed at his di sposal.
So article 1523 – provision on delivery to carrier
is equivalent to delivery to the buyer. Refus al
without just cause would mean that delivery to
the buyer would also mean that ownership has
been trans ferred to the buyer.
Article 1589. The vendee shall owe interest
for the period between the delivery of the
thing and the payment of the price, in the
following three case s:
(1) Should it have been so stipulated;
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
(2) Should the thing sold and
delivered produce fruits or income;
(3) Should he be in default, from the
time of judicial or extrajudicial
demand for the payment of the price.
When is the vendee liable for interest? This is
from the time of delivery until the full payment of
the price. In the absence of any contrary
agreement, the vendee shall be liable for interest
stipulated should the thing sold produce goods
or income. In items 1 and 2, demand is not
necessary. In 3, since it talks about default, then
demand, whether judicial or extrajudicial is
required for the vendee to be liable for interest.
Article 1590. Should the vendee be disturbed
in the posse ssion or ownership of the thing
acquired, or should he have reasonable
grounds to fear such di sturbance, by a
vindicatory action or a foreclosure of
mortgage, he may suspend the payment of
the price until the vendor has caused the
disturbance or danger to cease, unless the
latter gives security for the return of the price
in a proper case, or it has been stipulated
that, notwithstanding any such contingency,
the vendee shall be bound to make the
payment. A mere act of trespa ss shall not
authorize the suspension of the payment of
the price.
The general rule wit h regard to the right of the
vendee to suspend the payment of the price, h e
is not excused from paying the price, but his
obligation to pay is merely suspended based on
the reason that if he is disturbed in the
possession or ownership of the thing acquired,
or should he have reasonable grounds to fear
such disturbance, by a vindicatory action or a
foreclosure of mort gage. For example, hindi pa
sya fully paid kay vendor but he has already
rd
taken possession of t he property. There is a 3
person who asserts his right as the alleged
owner of the property. Pending suc h action by
rd
this 3 person, the vendee can suspend the
payment of the price to the vendor. However, the
exception, unless the vendor gives security for
the return of the pric e in a proper case, or it has
been stipulated that, notwithstanding any such
contingency, the vendee shall be bound to mak e
the payment. Mere act of trespass is not a
ground for the vendee to suspend the payment
of the price.
1590 is suspension on the part of the vendee. In
1591, it is on the part of the vendor.
Article 1591. Should the vendor have
reasonable grounds to fear the loss of
immovable property sold and its price, he
may immediately sue for the resci ssion of
the sale.
Should such ground not exist, the provi sions
of article 1191 shall be observed.
104
The property now is in the possession of the
vendee, for example, agricultural land sya.
Sinunog nya yung lupa, nadamage yung lupa
pero hindi pa fully paid si vendee. The vendor
here can s ue for the rescission of the contract. If
such ground does not exist, yung fear of the loss
of an immovable property, then 1191 shall be
observed that would be the action for rescission.
Article 1592. In the sale of immovable
property, even though it may have been
stipulated that upon failure to pay the price
at the time agreed upon the resci ssion of the
contract shall of right take place, the vendee
may pay, even after the expiration of the
period, as long as no demand for re sci ssion
of the contract has been made upon him
either judicially or by a notarial act. After the
demand, the court may not grant him a new
term.
Apply this provision on s ale of immovable
property. It is a contract of sale. It will not apply
in a contract to sell. We also have here the sale
of an immovable property; therefore it will not
apply to personal or movable properties. This
provision does not also apply on sale of
immovable property on installment, because a
different law is applicable for that – the Recto
Law. This provision is for absolute sale of
immovable properties – contract of sale of
immovable properties, not on installment.
It states here no automatic rescission. It means
(example) “vendee and vendor agrees for the
sale of an immovable property wherein the
vendee must pay the purchase price of 500k not
later than September 15, 1015”. This is an
example where 1592 is applicable. If the parties
stipulate “if vendee fail to pay on September 30,
2015, the contract is deemed rescinded”. That
stipulation is not binding. E ven if stipulated at the
time agreed upon, the vendee can still pay. The
deadline was September 30, even with that
stipulation of automatic rescission, that
stipulation is void, if let us say, the vendee pays
to the vendor on October 10, the vendor can be
compelled to accept the payment as long a no
demand for rescission of the contract has been
made either judicially or demand for rescission
that is duly notarized. After the demand was
made, whether judicial or through a notarial act,
the court may not grant the vendee a new term.
Article 1593. With respect to movable
property, the resci ssion of the sale shall of
right take place in the interest of the vendor,
if the vendee, upon the expiration of the
period fixed for the delivery of the thing,
should not have appeared to receive it, or,
having appeared, he should not have
tendered the price at the same time, unless a
longer period has been stipulated for its
payment.
1592 is sale of immovable property. 1593 is sale
of movable property. In 1593, rescission can be
automatic. No need for a demand whether
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA
judicial or a notarial act. The reason for the
rescission is, if the vendee, upon the expiration
of the period fixed for the delivery of the thing,
should not have appeared to receive it, or,
having appeared, he should not have tendered
the price at the same time, unless a longer
period has been stipulated for its payment. So
again in a movable property, no need for a
demand to have the contract rescinded.
There is a difference between the two because a
movable property, and prices nya most probably
magfluctuate. In other words, kung hintayin pa
nila na may dem and baka mag change the yung
price unlike sa immovable property, mas fixed
sya. If ever magchange sya, masmatagal.
DOCUMENTS OF TITLE
What are these documents of title? We have
article 1636 - " Document of title to goods"
includes any bill of lading, dock warrant,
"quedan," or warehouse receipt or order for the
delivery of goods, or any other document used in
the ordinary course of business in the sale or
transfer of goods, as proof of the possession or
control of the goods, or authorizing or purporting
to authorize the possessor of the document to
transfer or receive, either by endorsement or by
delivery, goods represent ed by such document.
"Goods" includes all chattels personal but not
things in action or money of legal tender in the
Philippines. The term includes growing fruits or
crops.
"Order" relating to documents of title means an
order by endorsement on the documents.
"Quality of goods" includes their state or
condition.
"Specific goods" means goods identified and
agreed upon at the time a contract of sale is
made.
An antecedent or pre-existing claim, whet her for
money or not, constitutes " value" where goods
or documents of title are taken either in
satisfaction thereof or as security therefor.
A person is insolvent within the meaning of this
Title who either has ceased to pay his debts in
the ordinary cours e of business or cannot pay
his debts as they become due, whether
insolvency proceedings have been commenced
or not.
What is the purpos e of documents of title?
E vidence of control and possession or control of
goods described in the said document of title. It
is a medium of trans ferring possession and
control of goods described without having to
undertake actual delivery.
It is a medium of transferring possession and
control of goods described without having to
undertake actual delivery. The goods are stored
in a warehouse. The warehouse man issued a
warehouse receipt indicating the goods you
105
have kept therein. We have documents of title
considered as either negotiable of non-
negotiable. These documents of title are
different from your instruments. Like negotiable
instruments. Negotiable instruments are different
because what you have there are bills of
exchange and promissory notes. Sa Documents
of Titles, what you have are bill of lading, dock
warrant, "quedan," or warehouse receipt. Ang
subject is goods which are kept in these
warehouse, docks or sugar warehouse.
Nevertheless, the same with instruments, meron
ding negotiable and non-negotiable.
Negotiable Document of title states that the
goods will be delivered to the bearer. Yung may
hawak ng document of title. If the document is
negotiated by mere delivery or to the order of
one person, a negotiable document by
endorsement plus delivery.
When we talk about document of title, it is very
different from negotiable instruments because it
is probable that document is stamped “non -
negotiable” pero as long meron doon yung
terms of negotiability, either bearer or order,
then it would still be considered as a negotiable
document of title.
What do you mean be negotiable? Example, we
have goods kept in a warehouse, warehous e
receipt was issued in your name. If it is a Bearer
of the negotiabl e document of title, you can
negotiate that warehouse receipt. So kunwari,
binenta mo y ung s ugar na nandon s a
warehouse, instead na i-pull-out mo yung sugar,
and the ideliver dun sa dinentahan mo, what you
would do is you negotiate the document of title
through delivery. And being a bearer document
of title, yung nakabili ng sugar, all he has to do is
present the warehouse receipt to the warehous e
man and then the warehouse man is obligated to
release the sugar in favor of that person who is
in possession of the bearer negotiable document
of title.
Another type is an order document of title.
Here, what is required is not only the delivery of
the document of title but there must be
endorsement. Example, to be delivered to juan
or order, so juan can negotiate that with perdro
after affixing his signature in the same document
of title and then deliver it to pedro. Hindi lang
delivery – endorsement plus delivery. Then
perdro will now try to claim the goods from the
warehouse, ang tingnan dyan ng warehous e
man, yung endors ement ni juan. And of course,
there is already delivery because the document
is already in the possession of his pers on.
He can also have non-negotiable document of
title. Hindi sya bearer hindi sya order. What was
stated there? Goods to be delivered to juan only.
No other person. No negotiable terms – terms of
negotiability. Walang bearer or holder. So if non-
negotiable, it does not state that the goods
referred to therein will be delivered to the bearer
or to the order of any person.
 “Again, Do take Note” (2nd Exam) Sales – Atty. SARONA 106

Also take note that with regard to documents of

Validity of the negotiability of a negotiable title, also taken in consideration under article
document is not impaired by the fact that the 1523 which provides that delivery of goods to
negotiation was done in breach of duty, or that the carrier is deemed a delivery of goods to the
the owner of the document was deprived of the buyer unless otherwise stipulated by the parties.
same by loss, theft, accident, fraud, or mistake if
the person to whom the document is delivered is
in good fait h and without notice of the said
irregularities.

Importance: Negotiation of document gives a

better right to a transferee than an assignment
where the assignee merely steps into the shoes James 1:12 “Blessed is the man who
of an assignor. So kung ano yung rights na perseveres under trial, because when he
meron ang assignor, yan lang ang meron ang has stood the test, he will receive the
assignee. But when you talk about negotiation, crown of life that God has promised to
whet her what you have here is a document of those who love him.”
title or a negotiable instrument, the subsequent
transferee can have better right than the
transferor. Meaning, going back to our example
on warehouse receipt na bearer negotiable
document of title, can be negotiated by delivery.

What if nawala to ni Juan. Nakita ni Pedro.

Pedro, knowing that what he has in his
possession is a negotiable document of title,
negotiated t he instrument to maria. Binding ang
delivery, because it is a bearer document of title.
Maria, in good faith accepts the negotiation of
the said document of title, goes to the
warehouseman. The warehouseman in good
faith is obligated, kay gipresent man Maria yung
warehouse receipt, he is obligated to release the
goods in favor of the person in possession of
that negotiable document of title. Maria here,
has the right to such goods because she is in
possession of the documents of title in good fait h
even if she t ook it from a person who actually
had no right over the said document.

It will be a different scenario if si Juan nawala

niya ang warehouse receipt, and he informed
the warehouseman that he lost the warehous e
receipt. So even if it is in the possession of
Maria, then maria tries claim the goods, the
warehouseman has no obligation to release it to
her because of the information that he has
received.

Negotiation is better than assignment for in the

assignment, the assignee merely takes the
document with defects of the assignor as
assignee mere steps into the shoes of the
assignor.

Warranties on negotiation. When you go to

negotiable instruments law, merong warranties
doon, which is different when it comes to
documents of title. One of these, sa negotiation,
if a document of title is negotiated to you, the
one who negotiated it warranties that the
document is genuine; that he has the legal right
to negotiate of transfer it; that he has knowledge
of no fact that would impair the validity or wort h
of the document; and that he has the a right to
transfer title to goods and the goods are
merchantable or fit.