1. SPOUSES ONNIE SERRANO AND AMPARO HERRERA, PETITIONERS, VS. GODOFREDO CAGUIAT, RESPONDENT. [GRN 139173 February 28, 2007]
Facts: Petitioners are registered owners of a lot located in Las Piñas. On March 23, 1900, respondent offered to buy the lot and petitioners agreed to sell it at 1,500 per₱ square meter. Respondent then gave 100,000 as partial payment.₱
A few days after, respondent, through his counsel, wrote petitioners informing them of his readiness to pay the balance of the contract
price and requesting them to prepare the Deed of Sale. Petitioners, through counsel, informed respondent in a letter that Amparo Herrera would be leaving for abroad on or before April 15, 1990 and they are cancelling the transaction and that respondent may recover the earnest money ( 100,000) anytime. Petitioners also wrote him stating₱ that they already delivered a manager’s check to his counsel in said amount.
Respondent thus filed a complaint for specific performance and damages with the RTC of Makati. The trial court ruled that there was already a perfected contract of sale between the parties and ordered the petitioners to execute a
final deed of sale in favor of respondent. The Court of appeals affirmed said decision. Issue: Whether or not there was a contract of sale.
Ruling: The transaction was a contract to sell. “When petitioners declared in the “Receipt for Partial Payment” that they – “RECEIVED FROM MR. GODOFREDO CAGUIAT THE AMOUNT OF ONE HUNDRED THOUSAND PESOS AS PARTIAL PAYMENT OF OUR LOT SITUATED IN LAS PIÑAS…MR. CAGUIAT PROMISED TO PAY THE BALANCE OF THE PURCHASE PRICE ON OR BEFORE MARCH 23, 1990, AND THAT WE WILL EXECUTE AND SIGN THE FINAL DEED OF SALE ON THIS DATE.” there can be no other interpretation than that they agreed to a conditional contract of sale, consummation of which is subject only to the full payment of the purchase price.
“A contract to sell is akin to a conditional sale where the efficacy or obligatory force of the vendor’s obligation to transfer title is subordinated to the happening of a future and uncertain event, so that if the suspensive condition does not take place, the parties would stand as if the conditional obligation had never existed. The suspensive condition is commonly full payment of the purchase price. “In this case, the “Receipt for Partial Payment” shows that the true agreement between the parties is a contract to sell.
“First, ownership over the property was retained by petitioners and was not to pass to respondent until full payment of the purchase price. Second, the agreement between the parties was not embodied in a deed of sale. The absence of a formal deed of conveyance is a strong indication that the parties did not intend immediate transfer of ownership, but only a transfer after full payment of the purchase price.
Third, petitioners retained possession of the certificate of title of the lot. “It is true that Article 1482 provides that whenever earnest money is given in a contract of sale, it shall be considered as part of the price and proof of the perfection of the contract. However, this article speaks of earnest money given in a contract of sale. In this case, the earnest money was given in a contract to sell. The earnest money forms part of the consideration only if the sale is consummated upon full payment of the purchase price. “Clearly, respondent cannot compel petitioners to transfer ownership of the property to him.”
2. NABUS vs. PACSON , G.R. No. 161318, November 25, 2009 FACTS:
The spouses Bate and Julie Nabus were the owners of parcels of land with a total area of 1,665 square meters, situated in Pico, La Trinidad, Benguet, duly registered in their names under TCT No. T-9697 of the Register of Deeds of the Province of Benguet. The property was mortgaged by the Spouses Nabus to the Philippine National Bank (PNB), La Trinidad Branch, to secure a loan in the amount of P30,000.00.
On February 19, 1977, the Spouses Nabus executed a Deed of Conditional Sale4 covering 1,000 square meters of the 1,665 square meters of land in favor of respondents Spouses Pacson for a consideration of P170,000.00, which was duly notarized on February 21, 1977. Pursuant to the Deed of Conditional Sale, respondents paid PNB the amount of P12,038.86 on February 22, 19776 and P20,744.30 on July 17, 19787 for the full payment of the loan. On December 24, 1977, before the payment of the balance of the mortgage amount with PNB, Bate Nabus died. On August 17, 1978, his surviving spouse, Julie Nabus, and their minor daughter, Michelle Nabus, executed a Deed of Extra Judicial Settlement over the registered land covered by TCT No. 9697. On the basis of the said document, TCT No. T- 177188 was issued on February 17, 1984 in the names of Julie Nabus and Michelle Nabus. Meanwhile, respondents continued paying their balance, not in instalments of P2,000.00 as agreed upon, but in various, often small amounts ranging from as low as P10.009 to as high as P15,566.00,10 spanning a period of almost seven years, from March 9, 197711 to January 17, 1984.12
There was a total of 364 receipts of payment. The receipts showed that the total sum paid by respondents to the Spouses Nabus was P112,455.16,14 leaving a balance of P57,544.84.
During the last week of January 1984, Julie Nabus, accompanied by her second husband, approached Joaquin Pacson to ask for the full payment of the lot. Joaquin Pacson agreed to pay, but told her to return after four days as his daughter, Catalina Pacson, would have to go over the numerous receipts to determine the balance to be paid. When Julie Nabus returned after four days, Joaquin sent her and his daughter, Catalina, to Atty. Elizabeth Rillera for the execution of the deed of absolute sale. Since Julie was a widow with a minor daughter, Atty. Rillera required Julie Nabus to return in four days with the necessary documents, such as the deed of extrajudicial settlement, the transfer certificate of title in the names of Julie Nabus and minor Michelle Nabus, and the guardianship papers of Michelle. However, Julie Nabus did not return.
Getting suspicious, Catalina Pacson went to the Register of Deeds of the Province of Benguet and asked for a copy of the title of the land. She found that it was still in the name of Julie and Michelle Nabus.
After a week, Catalina Pacson heard a rumor that the lot was already sold to petitioner Betty Tolero.
On March 28, 2008, respondents Joaquin and Julia Pacson filed with the Regional Trial Court of La Trinidad, Benguet (trial court) a Complaint for Annulment of Deeds, with damages and prayer for the issuance of a writ of preliminary injunction.
Julie and Michelle Nabus alleged that respondent Joaquin Pacson did not proceed with the conditional sale of the subject property when he learned that there was a pending case over the whole property. Joaquin proposed that he would rather lease the property with a monthly rental of P2,000.00 and apply the sum ofP13,000.00 as rentals, since the amount was already paid to the bank and could no longer be withdrawn. Hence, he did not affix his signature to the second page of a copy of the Deed of Conditional Sale.26 Julie Nabus alleged that in March 1994, due to her own economic needs and those of her minor daughter, she sold the property to Betty Tolero, with authority from the court.
Betty Tolero put up the defense that she was a purchaser in good faith and for value. She testified that it was Julie Nabus who went to her house and offered to sell the property consisting of two lots with a combined area of 1,000 square meters. She consulted Atty. Aurelio de Peralta before she agreed to buy the property. She and Julie Nabus brought to Atty. De Peralta the pertinent papers such as TCT No. T-17718 in the names of Julie and Michelle Nabus, the guardianship papers of Michelle Nabus and the blueprint copy of the survey plan showing the two lots. After examining the documents and finding that the title was clean, Atty. De Peralta gave her the go-signal to buy the
property. ISSUES:
1. Whether or not the Deed of Conditional Sale was converted into a contract of lease. 2. Whether the Deed of Conditional Sale was a contract to sell or a contract of sale. RULING:
1. The Deed of Conditional Sale entered into by the Spouses Pacson and the Spouses Nabus was not converted into a contract of lease. The 364 receipts issued to the Spouses Pacson contained either the phrase "as partial payment of lot located in Km. 4" or "cash vale" or "cash vale (partial payment of lot located in Km. 4)," evidencing sale under the contract and not the lease of the property. Further, as found by the trial court, Joaquin Pacson’s non-signing of the second page of a carbon copy of the Deed of Conditional Sale was through sheer inadvertence, since the original
contract and the other copies of the contract were all signed by Joaquin Pacson and the other parties to the contract.
2. The Court holds that the contract entered into by the Spouses Nabus and respondents was a contract to sell, not a contract of sale.
A contract of sale is defined in Article 1458 of the Civil Code, thus:
Art. 1458. By the contract of sale, one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent.
A contract of sale may be absolute or conditional.
Ramos v. Heruela differentiates a contract of absolute sale and a contract of conditional sale as follows:
Article 1458 of the Civil Code provides that a contract of sale may be absolute or conditional. A contract of sale is absolute when title to the property passes to the vendee upon delivery of the thing sold. A deed of sale is absolute when there is no stipulation in the contract that title to the property remains with the seller until full payment of the purchase price. The sale is also absolute if there is no stipulation giving the vendor the right to cancel unilaterally the contract the moment the vendee fails to pay within a fixed period. In a conditional sale, as in a contract to sell, ownership remains with the vendor and does not pass to the vendee until full payment of the purchase price. The full payment of the purchase price partakes of a suspensive condition, and non-fulfilment of the condition prevents the obligation to sell from arising.36
Coronel v. Court of Appeals distinguished a contract to sell from a contract of sale, thus: Sale, by its very nature, is a consensual contract because it is perfected by mere consent. The essential elements of a contract of sale are the following:
a. Consent or meeting of the minds, that is, consent to transfer ownership in exchange for the price;
b. Determinate subject matter; and
c. Price certain in money or its equivalent.
Under this definition, a Contract to Sell may not be considered as a Contract of Sale because the first essential element is lacking. In a contract to sell, the prospective seller explicitly reserves the transfer of title to the prospective buyer, meaning, the prospective seller does not as yet agree or consent to transfer ownership of the property subject of the contract to sell until the happening of an event, which for present purposes we shall take as the full payment of the purchase price. What the seller agrees or obliges himself to do is to fulfil his promise to sell the subject property when the entire amount of the purchase price is delivered to him. In other words, the full payment of the purchase price partakes of a suspensive condition, the non-fulfilment of which prevents the obligation to sell from arising and, thus, ownership is retained by the prospective seller without further remedies by the prospective
buyer.
Stated positively, upon the fulfilment of the suspensive condition which is the full payment of the purchase price, the prospective seller’s obligation to sell the subject property by entering into a contract of sale with the prospective buyer becomes demandable as provided in Article 1479 of the Civil Code which states:
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 promisor if the promise is supported by a consideration distinct from the price.
A contract to sell may thus be defined as 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 said property exclusively to the prospective buyer upon fulfilment of the condition agreed upon, that is, full payment of the purchase price.
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. In this case, the contract entitled
"Deed of Conditional Sale" is actually a contract to sell. The contract stipulated that "as soon as the full consideration of the sale has been paid by the vendee, the corresponding transfer documents shall be executed by the vendor to the vendee for the portion sold."41 Where the vendor promises to execute a deed of absolute sale upon the completion by the vendee of the payment of the price, the contract is only a contract to sell."42 The aforecited stipulation shows that the vendors reserved title to the subject property until full payment of the purchase price.
If respondents paid the Spouses Nabus in accordance with the stipulations in the Deed of Conditional Sale, the consideration would have been fully paid in June 1983. Thus, during the last week of January 1984, Julie Nabus approached Joaquin Pacson to ask for the full payment of the lot. Joaquin Pacson agreed to pay, but told her to return after four days as his daughter, Catalina Pacson, would have to go over the numerous receipts to determine the balance to be paid.
Unfortunately for the Spouses Pacson, since the Deed of Conditional Sale executed in their favor was merely a contract to sell, the obligation of the seller to sell becomes demandable only upon the happening of the suspensive condition. The full payment of the purchase price is the positive suspensive condition, the failure of which is not a breach of contract, but simply an event that prevented the obligation of the vendor to convey title from acquiring binding force. Thus, for its non-fulfilment, there is no contract to speak of, the obligor having failed to perform the suspensive condition which enforces a juridical relation. With this circumstance, there can be no rescission or fulfilment of an obligation that is still non-existent, the suspensive condition not having occurred as yet. Emphasis should be made that the breach contemplated in Article 1191 of the New Civil Code is the obligor’s failure to comply with an obligation already extant, not a failure of a condition to render binding that obligation. Since the contract to sell was without force and effect, Julie Nabus validly conveyed the subject property to another buyer, petitioner Betty Tolero, through a contract of absolute sale, and on the strength thereof, new transfer certificates of title over the subject property were duly issued to Tolero.
The Spouses Pacson, however, have the right to the reimbursement of their payments to the Nabuses, and are entitled to the award of nominal damages.
WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals in CA-G.R. CV No. 44941, dated November 28, 2003, is REVERSED and SET ASIDE. Judgment is hereby rendered upholding the validity of the sale of the subject property made by petitioners Julie Nabus and Michelle Nabus in favor of petitioner Betty Tolero, as well as the validity of Transfer Certificates of Title Nos. T-18650 and T-18651 issued in the name of Betty Tolero. Petitioners Julie Nabus and Michelle Nabus are ordered to reimburse respondents spouses Joaquin and Julia Pacson the sum of One Hundred Twelve Thousand Four Hundred Fifty-Five Pesos and Sixteen Centavos (P112,455.16), and to pay Joaquin and Julia Pacson nominal damages in the amount of Ten Thousand Pesos (P10,000.00), with annual interest of twelve percent (12%) until full payment of the amounts due to Joaquin and Julia Pacson.
3.) MILA A. REYES vs. VICTORIA T. TUPARAN, G.R. No. 188064, June 1, 2011 Facts:
Petitioner Mila Reyes owns a three‐storey commercial building in Valenzuela City. Respondent, Victoria Tuparan leased a space on said building for a monthly rental of P4, 000. Aside from being a tenant, respondent also invested in petitioner's financing business. On June 20, 1988, Petitioner borrowed P2 Million from Farmers Savings and Loan Bank (FSL Bank) and mortgaged the building and lot (subject real properties). Reyes decided to sell the property for P6.5 Million to liquidate her loan and finance her business. Respondent offered to conditionally buy the real properties for P4.2 Million on instalment basis without interest and to assume the bank loan. The conditions are the following:
1. Sale will be cancelled if the petitioner can find a buyer of said properties for the amount of P6.5 Million within the next three months. All payments made by the respondent to the petitioner and the bank will be refunded to Tuparan with an additional 6% monthly interest.
2. Petitioner Reyes will continue using the space occupied by her drugstore without rentals for the duration of the instalment payments.
3. There will be a lease for 15 years in favor of Reyes for a monthly rental of P8, 000 after full payment has been made by the defendant.
4. The defendant will undertake the renewal and payment of the fire insurance policies of the 2 buildings, following the expiration of the current policies, up to the time the respondent has fully paid the purchase price. They presented the proposal for Tuparan to assume the mortgage to FSL Bank. The bank approved on the condition that the petitioner would remain as co‐ maker of the mortgage obligation.
Petitioner's Contention: Under their Deed of Conditional Sale, the respondent is obliged to pay a lump sum of P1.2 Million in three fixed instalments. Respondent, however defaulted in the payment of the instalments. To compensate for her delayed payments, respondent agreed to pay petitioner monthly interest. But again, respondent failed to fulfil this obligation. The petitioner further alleged that despite her success in finding another buyer according to their conditional sale agreement, respondent refused to cancel their transaction. The respondent also neglected to renew the fire insurance policy of the buildings.
Respondent's Answer: Respondent alleges that the deed of Conditional Sale of Real Property with Assumption of Mortgage was actually a pure and absolute contract of sale with a term period. It could not be considered a conditional sale because the performance of the obligation therein did not depend upon a future and uncertain event. She also averred that she was able to fully pay the loan and secure the release of the mortgage. Since she also paid more than the P4.2 Million purchase price, rescission could not be resorted to since the parties could no longer be restored to their original positions.
Issue: Is the conditional sale at bar a contract of sale or a contract to sell? Can the transaction or obligation be rescinded given that the conditions were not satisfied?
Ruling:
RTC: The deed of conditional sale was a contract to sell. It was of the opinion that although the petitioner was entitled to a rescission of the contract, it could not be permitted because her non‐ payment in full of the purchase price “may not be considered as substantial and fundamental breach of the contract as to defeat the object of the parties in entering into the contract.” The RTC believed that respondent showed her sincerity and willingness to settle her obligation. Hence, it would be more equitable to give respondent a chance to pay the balance plus interest within a given period of time. The court ordered the respondent to pay the petitioner the unpaid balance of the purchase price.
CA: The CA agreed with the RTC that the remedy of rescission could not apply because the respondent’s failure to pay the petitioner the balance of the
purchase price in the total amount of 805,000.00 was not a breach of contract, but merely an₱ event that prevented the seller (petitioner) from conveying title to the purchaser (respondent). Since respondent had already paid a substantial amount of the purchase price, it was but right and just to allow her to pay the unpaid balance of the purchase price plus interest.
SC: The SC agrees that the subject Deed of Conditional Sale with Assumption of Mortgage is a contract to sell and not a contract of sale. The subject contract was correctly classified as a contract to sell based on the following pertinent stipulations:
8. That the title and ownership of the subject real properties shall remain with the First Party until the full payment of the Second Party of the balance of the purchase price and liquidation of the mortgage obligation of 2,000,000.00. Pending payment of the balance of the₱ purchase price and liquidation of the mortgage obligation that was assumed by the Second Party, the Second Party shall not sell, transfer and convey and otherwise encumber the subject real properties without the written consent of the First and Third Party.
9. That upon full payment by the Second Party of the full balance of the purchase price and the assumed mortgage obligation herein mentioned the Third Party shall issue the corresponding Deed of Cancellation of Mortgage and the First Party shall execute the corresponding Deed of Absolute Sale in favor of the Second Party
The title and ownership of the subject properties remains with the petitioner until the respondent fully pays the balance of the purchase price and the assumed mortgage obligation. Without respondent’s full payment, there can be no breach of contract to speak of because petitioner has no obligation yet to turn over the title. The court agrees that a substantial amount of the purchase price has already been paid. It is only right and just to allow Tuparan to pay the said unpaid balance of the purchase price to Reyes. Granting that a rescission can be permitted under Article 1191, the Court still cannot allow it for the reason that, considering the circumstances, there was only a slight or casual breach in the fulfilment of the obligation. The court considered fulfilment of 20% of the purchase price is NOT a substantial breach. Unless the parties stipulated it, rescission is allowed only when the breach of the contract is substantial and fundamental to the fulfilment of the obligation. Whether the breach is slight or substantial is largely determined by the attendant circumstance. As for the 6% interest petitioner failed to substantiate her claim that the respondent committed to pay it. Petition is denied.
4. EMILIO A. SALAZAR and TERESITA DIZON vs. COURT OF APPEALS and JONETTE BORRES, G.R. No. 118203, July 5, 1996
Facts:
That defendant Dr. Salazar is the owner of the two (2) parcels of land with improvements thereon located at 2914 Finlandia Street, Makati, Metro Manila and covered by Transfer Certificate of Title Nos. 31038 and 31039 of the Registry of Deeds of Makati; that Dr. Salazar offered to sell his properties to Jonette Borres for One Million pesos (P1,000,000.00). The initial proposal took place at the Dimsum Restaurant, Makati, whereby it was proposed that the payment of the consideration was to be made within six (6) months but was objected to by Dr. Salazar and he reduced it to a three (3) months period that sometime on [May] 28,1989, Jonette Borres together with a certain Emilio T. Salazar went to see Dr. Salazar at the latter's residence in Bataan bearing a copy of a Deed of Absolute Sale and Deed of Warranty but Dr. Salazar refused to sign because Jonette Borres did not have the money ready then. In said occasion Dr. Salazar further reduced the period within which plaintiff may purchase the lots, to one (1) month or up to June 30, 1989.
Jonette Borres then met again Dr. Salazar on June 2, 1989 at the Ninoy International Airport who was about to leave for the United States of America where he is a resident. Jonette Borres had with her the Deed of Absolute Sale and asked Dr. Salazar to sign said document. Dr. Salazar reluctantly agreed to sign the document provided that Jonette Borres pays one half (1/2) of the consideration or P500,000.00 in "cash" by June 15, 1989 and the balance was payable on June 30, 1989. It was during this occasion that Dr. Salazar again emphasized to Jonette Borres that he needed the money because he was then buying a property in the United States.
Plaintiff agreed to the above conditions and Dr. Salazar constituted co‐defendant Teresa Dizon as custodian at the Deed of Absolute Sale together with the Titles of the Land in question with the instruction to Teresa Dizon not to surrender said documents to Jonette Borres until upon payment of the full price in "cash".
On June 14, 1989 Jonette Borres informed defendant Dizon that she will be able to pay the full amount of P1,000,000.00 on June 15, 1989 and on the next day, she then went to the house of Teresa Dizon to see and get the documents entrusted to her by Dr. Salazar. The documents not being in Dizon's possession, they agreed to meet at Metro Bank West Avenue Branch to get the documents and then to proceed to Makati to meet the plaintiff's business partner a certain Balao who allegedly gave plaintiff a Far East Bank and Trust Company check for the amount of P1,500,000.00 with which to buy the property. For some reason or another Jonette Borres and defendant Dizon failed to proceed to Makati.
In the meantime or on June 16, 1992, Dr. Salazar made an overseas call to co‐defendant Dizon to inquire if Jonette Borres had already paid the down payment of P500,000.00 and Teresa Dizon replied to Dr. Salazar that Jonette Borres had not paid the down payment. Dr. Salazar then ordered Dizon to stop the sale.
Issue: Whether or not the so‐called Deed of Absolute Sale executed by petitioner Emilio A. Salazar in favor of private respondent Jonette Borres is a perfected contract of sale or a mere contract to sell.
Ruling:
It is a contract to sell not contract of sale. The withholding by Salazar through Dizon of the Deed of Absolute Sale, the certificates of title, and all other documents relative to the lots is an additional indubitable proof that Salazar did not transfer to Borres either by actual or constructive delivery the ownership of the two lots. While generally the execution of a deed of absolute sale constitutes constructive delivery of ownership, the withholding by the vendor of that deed under explicit agreement that it be delivered together with the certificates of titles to the vendee only upon the latter's full payment of the consideration amounts to a suspension of the effectivity of the
deed of sale as a binding contract.
Undoubtedly, Salazar and Borres mutually agreed that despite the Deed of Absolute Sale title to the two lots in question was not to pass to the latter until full payment of the consideration of P1 million. The form of the instrument cannot prevail over the true intent of the parties as
established by the evidence.
Accordingly, since Borres was unable to pay the consideration, which was a suspensive condition, Salazar cannot be compelled to deliver to her the deed of sale, certificates of title, and other documents concerning the two lots. In other words, no right in her favor and no corresponding obligation on the part of Salazar were created.
5. SPOUSES CASTILLO vs. SPOUSES REYES, 539 SCRA 193, G.R. No. 170917, November 28, 2007
Facts:
On November 7, 1997, Emmaliza Bohler and respondents negotiated for the sale of the former’s house and lot located at Poblacion, New Washington, Aklan, to the latter for the consideration of P165,000.00. On the following day, November 8, they signed an Agreement which pertinently reads as follows:
We, the undersigned, agree to the following terms and conditions regarding the sale of the house and lot located at Poblacion, New Washington, Aklan:
1. That the total amount to be paid shall be One Hundred Sixty‐Five Thousand Pesos (P165,000.00) to be paid in full on or before the 15th of December 1997;
2. That a partial payment (sic) a total amount of One Hundred Thirty Thousand Pesos (P130,000.00) shall
be made today, the 8th of November 1997;
3. That the remaining balance in the amount (sic) of Thirty‐Five Thousand Pesos (P35,000.00) shall be made as per #1 above;
4. That the buyers, represented by the Spouses Rudy and Consolacion Reyes (sic) shall be responsible for all the legal and other related documents and procedures regarding this sale;
5. That the seller, represented by Ms. Emmaliza M. Bohler, shall vacate the said house and lot on or (sic) the 31st of January, 1998;
6. That the tenants, represented by the Spouses Romeo and Epifania Vicente, shall vacate the same on or before the 30th of April, 1998; and
7. That all parties concerned shall agree to all the terms and conditions stipulated herein.
Upon the signing of the said contract, respondents handed to Bohler P20,000.00 cash and allegedly a P110,000.00‐check. Bohler nonetheless insisted that the entire partial payment should be in cash as she needed it to redeem the subject property from the bank on the following Monday. She hence demanded for its payment up to midnight on that day otherwise she would cancel the sale.
Because the respondents failed to make good the P110,000.00. Bohler subsequently sold the property to the petitioners.
Having learned of the subsequent sale, the respondents immediately tendered the check, asked the bank for a certification that it was funded and consulted their lawyer who sent a notice of lis pendens (or notice of pending action) to the Register of Deeds and the Provincial Assessor. Civil Case No. 6070 for annulment of sale, specific performance and damages was subsequently filed by the respondents with the Regional Trial Court (RTC) of Kalibo, Aklan against Bohler and the petitioners.
On February 21, 2003, the RTC rendered its Decision declaring the November 8, 1997 Agreement a contract to sell. Considering that no actual sale happened between Bohler and the respondents, the former could validly sell the property to the petitioners. Thus, the trial court dismissed the complaint.
Aggrieved, respondents appealed the case to the CA. In the challenged December 6, 2005 Decision, the appellate court reversed the trial court’s ruling, declared the November 8, 1997 Agreement a contract of sale, and annulled the subsequent sale to the petitioners. The CA ruled, among others, that the wordings of the agreement and the conduct of the parties suggest that they intended to enter into a contract of sale.
Ownership was not reserved by the vendor and non‐payment of the purchase price was not made a condition for the contract’s effectivity. Petitioners, thus, filed the instant petition for review on certiorari imputing the following errors to the CA:
1. The appellate court erred in declaring the contract styled AGREEMENT dated 08 November 1997 as a "contract of sale" and not a contract to sell.
2. The appellate court erred in declaring the petitioners in bad faith when they bought the subject matter house and lot on 02 March 1998 from Emmaliza H. Bohler.
Issue: Whether the transaction between Bohler and the respondents is a perfected contract of sale or a mere contract to sell.
Ruling:
Sale is a consensual contract and is perfected by mere consent, which is manifested by a meeting of the minds as to the offer and acceptance thereof on the subject matter, price and terms of payment of the price.
In the instant case, the November 8, 1997 Agreement clearly indicates that Bohler and the Spouses Reyes had a meeting of the minds on the subject matter of the contract, the house and lot; on the price, P165,000.00; and on the terms of payment, an initial payment of P130,000.00 on the date of execution of the agreement and the remaining balance on or before December 15, 1997. At that precise moment when the consent of both parties was given, the contract of sale was perfected.
The said agreement cannot be considered a contract to sell. In a contract of sale, the title to the property passes to the vendee upon the delivery of the thing sold.
In a contract to sell, ownership is, by agreement, reserved in the vendor and is not to pass to the vendee until full payment of the purchase price. Otherwise stated, in a contract of sale, the vendor loses ownership over the property and cannot recover it until and unless the contract is resolved or rescinded; whereas, in a contract to sell, title is retained by the vendor until full payment of the price.
In the latter contract, payment of the price is a positive suspensive condition, failure of which is not a breach but an event that prevents the obligation of the vendor to convey title from becoming effective.
The November 8, 1997 Agreement herein cannot be characterized as a contract to sell because the seller made no express reservation of ownership or title to the subject house and lot. Instead, the Agreement contains all the requisites of a contract of sale.
WHEREFORE, premises considered, the petition for review on certiorari is DENIED DUE COURSE.
6. UNITED MUSLIM AND CHRISTIAN URBAN POOR ASSOCIATION, INC. vs. BRYC‐V DEVELOPMENT CORPORATION
G.R. No. 179653, July 31, 2009 Facts:
This petition for review on certiorari seeks to set aside the Decision1 of the Court of Appeals (CA) in CA G.R. CV No. 62557 which affirmed in toto the Decision2 of the Regional Trial Court (RTC), Branch 16, Zamboanga City in Civil Case No. 467(4544).
• Respondent Sea Foods Corporation (SFC) is the registered owner of Lot No. 300 located in Lower Calainan, Zamboanga City and covered by Transfer Certificate of Title (TCT) No. 3182 (T‐576).
• Petitioner United Muslim and Christian Urban Poor Association, Inc. (UMCUPAI), an organization of squatters occupying Lot No. 300, through its President, Carmen T. Diola,
initiated negotiations with SFC for the purchase thereof. UMCUPAI expressed its intention to buy the subject property using the proceeds of its pending loan application with National Home Mortgage Finance Corporation (NHMF). Thereafter, the parties executed a Letter of Intent to Sell by [SFC] and Letter of Intent to Purchase by UMCUPAI
• However, the intended sale was derailed due to UMCUPAI’s inability to secure the loan from NHMF as not all its members occupying Lot No. 300 were willing to join the undertaking. Intent on buying the subject property, UMCUPAI, in a series of conferences with SFC, proposed the subdivision of Lot No. 300 to allow the squatter‐occupants to purchase a smaller portion thereof.
• Consequently, sometime in December 1994, Lot No. 300 was subdivided into three (3) parts covered by separate titles: Lot 300‐A, Lot 300‐B, Lot 300‐C, respectively.
• On January 11, 1995, UMCUPAI purchased Lot No. 300‐A for P4,350,801.58. In turn, Lot No. 300‐B was constituted as road right of way and donated by SFC to the local government.
• UMCUPAI failed to acquire Lot No. 300‐C for lack of funds. On March 5, 1995, UMCUPAI negotiated anew with SFC and was given by the latter another three months to purchase Lot No. 300‐C. However, despite the extension, the three‐month period lapsed with the sale not consummated because UMCUPAI still failed to obtain a loan from NHMF. Thus, on July 20, 1995, SFC sold Lot No. 300‐C for P2,547,585.00 to respondent BRYC‐V Development Corporation (BRYC).
• A year later, UMCUPAI filed with the RTC a complaint against respondents SFC and BRYC seeking to annul the sale of Lot No. 300‐C, and the cancellation of TCT No. T‐121,523. UMCUPAI alleged that the sale between the respondents violated its valid and subsisting agreement with SFC embodied in the Letter of Intent. According to UMCUPAI, the Letter of Intent granted it a prior, better, and preferred right over BRYC in the purchase of Lot No. 300‐C.
• SFC countered that the Letter of Intent dated October 4, 1991 is not, and cannot be considered, a valid and subsisting contract of sale. On the contrary, SFC averred that the document was drawn and executed merely to accommodate UMCUPAI and enable it to comply with the loan documentation requirements of NHMF. In all, SFC maintained that the Letter of Intent dated October 4, 1991 was subject to a condition i.e., payment of the acquisition price, which UMCUPAI failed to do when it did not obtain the loan from NHMF. • After trial, the RTC dismissed UMCUPAI’s complaint. The lower court found that the Letter of Intent was executed to facilitate the approval of UMCUPAI’s loan from NHMF for its intended purchase of Lot No. 300. According to the RTC, the Letter of Intent was simply SFC’s declaration of intention to sell, and not a promise to sell, the subject lot. On the whole, the RTC concluded that the Letter of Intent was neither a promise, nor an option contract, nor an offer contemplated under Article 1319 of the Civil Code, or a bilateral contract to sell and buy.
Issue: WON the Letter of Intent to Sell and Letter of Intent to Buy is a bilateral reciprocal contract within the meaning or contemplation of Article 1479 (1) of the Civil Code of the Philippines.
Ruling:
The petition deserves scant consideration.
UMCUPAI appears to labor under a cloud of confusion. The first paragraph of Article 1479 contemplates the bilateral relationship of a contract to sell as distinguished from a contract of sale which may be absolute or conditional under Article 1458 of the same code. It reads:
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 promisor if the promise is supported by a consideration distinct from the price.
The case of Coronel v. Court of Appeals is illuminating and explains the distinction between a conditional contract of sale under Article 1458 of the Civil Code and a bilateral contract to sell under Article 1479 of the same code:
A contract to sell may thus be defined as 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 said property exclusively to the prospective buyer upon fulfillment of the condition agreed upon, that is, full payment of the purchase price.
A contract to sell as defined hereinabove, may not even be considered as a conditional contract of sale where the seller may likewise reserve title to the property subject of the sale until the fulfillment of a suspensive condition, because in a conditional contract of sale, the first element of consent is present, although it is conditioned upon the happening of a contingent event which may or may not occur. If the suspensive condition is not fulfilled, the perfection of the contract of sale is completely abated. However, if the suspensive condition is fulfilled, the contract of sale is thereby perfected, such that if there had already been previous delivery of the property subject of the sale to the buyer, ownership thereto automatically transfers to the buyer by operation of law without any further act having to be performed by the seller.
In a contract to sell, upon the fulfillment of the suspensive condition which is the full payment of the purchase price, ownership will not automatically transfer to the buyer although the property may have been previously delivered to him. The prospective seller still has to convey title to the prospective buyer by entering into a contract of absolute sale.
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 the case at bench. In a contract to sell, there being no previous sale of the property, a third person buying such 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 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.
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, 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 buyer, the first buyer may seek reconveyance of the property subject of the sale. In the instant case, however, the parties executed a Letter of Intent, which is neither a contract to sell nor a conditional contract of sale. As found by the RTC, and upheld by the CA, the Letter of Intent was executed to accommodate UMCUPAI and facilitate its loan application with NHMF. The Letter of Intent to Buy and Sell is just that a manifestation of SFC’s intention to sell the property and UMCUPAI’s intention to acquire the same.
The Letter of Intent/Agreement between SFC and UMCUPAI is merely a written preliminary understanding of the parties wherein they declared their intention to enter into a contract of sale. It is subject to the condition that UMCUPAI will "apply with the Home Mortgage and Finance Corporation for a loan to pay the acquisition price of said land."
The Letter of Intent to Sell fell short of an "offer" contemplated in Article 1319 of the Civil Code because it is not a certain and definite proposal to make a contract but merely a declaration of SFC’s intention to enter into a contract. UMCUPAI’s declaration of intention to buy is also not certain and definite as it is subject to the condition that UMCUPAI shall endeavor to raise funds to acquire subject land. The acceptance of the offer must be absolute; it must be plain and unconditional. Moreover, the Letter of Intent/Agreement does not contain a promise or commitment to enter into a contract of sale as it merely declared the intention of the parties to enter into a contract of sale upon fulfillment of a condition that UMCUPAI could secure a loan to pay for the price of a land. The Letter of Intent/Agreement is not an "option contract" because aside from the fact that it is merely a declaration of intention to sell and to buy subject to the condition that UMCUPAI shall raise the necessary funds to pay the price of the land, and does not contain a binding promise to sell and buy, it is not supported by a distinct consideration distinct from the price of the land intended to be sold and to be bought x x x No option was granted to UMCUPAI under the Letter of Intent/Agreement to buy subject land to the exclusion of all others within a fixed period nor was SFC bound under said Agreement to Sell exclusively to UMCUPAI only the said land within the fixed period.
Neither can the Letter of Intent/Agreement be considered a bilateral reciprocal contract to sell and to buy contemplated under Article 1479 of the Civil Code which is reciprocally demandable. The Letter of Intent/Agreement does not contain a PROMISE to sell and to buy subject property.
There was no promise or commitment on the part of SFC to sell subject land to UMCUPAI, but merely a declaration of its intention to buy the land, subject to the condition that UMCUPAI could raise the necessary funds to acquire the same at the price of P105.00 per square meter x x x
WHEREFORE, premises considered, the petition is hereby DENIED. The Decision of the Court of Appeals in CA G.R. CV No. 62557 and the Regional Trial Court in Civil Case No. 467(4544) are AFFIRMED. Costs against the petitioner.
7. PEOPLE'S HOMESITE & HOUSING CORPORATION vs. COURT OF APPEALS, RIZALINO L. MENDOZA and ADELAIDA R. MENDOZA,
133 SCRA 777, G.R. No. L‐ 61623, December 26, 1984 Facts:
On Feb. 18, 1960, the PHHC board of directors passed Resolution No. 513 wherein it stated that subject to the approval of the Quezon City Council of the Consolidation Subdivision Plan, Lot 4 containing 4,182.2 square meters be awarded to Spouses Rizalino and Adelaida Mendoza, at a price of twenty‐one pesos (P21.00) per square meter and that this award shall be subject to the approval of the OEC (PHHC) Valuation Committee and higher authorities.
However, the city council disapproved the proposed consolidation subdivision plan of which the spouses were advised through registered mail. Another subdivision plan was prepared which included Lot 4, with a reduced area of 2,608.7, and was approved by the city council on Feb. 25, 1964. On April 26, 1965, the PHHC board of directors, however, passed a resolution recalling all awards of lots to persons who failed to pay the deposit or down payment for the lots awarded to them. The Mendozas never paid the price of the lot nor made the 20% initial deposit. On October 18, 1955,the PHHC board of directors passed Resolution No. 218, withdrawing the tentative award of Lot 4 to the Mendoza spouses and re‐awarding said lot jointly and in equal shares to Miguela Sto. Domingo, Enrique Esteban, Virgilio Pinzon, Leonardo Redubloand Jose Fernandez who were able to make the required 20% of the net selling price as deposit and thereafter, the corresponding deeds of sale were executed in their favor. The subdivision of Lot 4 into five lots was approved by the city council and the Bureau of Lands. The Mendoza spouses asked for reconsideration of the withdrawal of the previous award to them of Lot 4 and for the cancellation of the re‐award of said lot to Sto. Domingo and four others. Before the request could be acted upon, the spouses filed the instant action for specific performance and damages. The trial court sustained the withdrawal of the award which was appealed by the Mendozas. The Appellate Court reversed that decision and declared void the re‐award of Lot 4 and the deeds of sale and directed the PHHC to sell to the Mendozas Lot 4 with an area of 2,603.7 square meters at P21 a square meter and pay to them P4,000 as attorney's fees and litigation expenses. The PHHC appealed to this Court.
Issue: Whether or not there was a perfected sale of the Lot 4, with the reduced area, to the Mendozas which they can enforce against the PHHC by an action for specific performance.
Ruling: The SC hold that there was no pertected sale of Lot 4. It was conditionally or contingently awarded to the Mendozas subject to the approval by the city council of the proposed consolidation subdivision plan and the approval of the award by the valuation committee and higher authorities. When thecity council disapproved the subdivision plan, the Mendozas were advised through registered mail. In 1964, when the revised plan was approved, the Mendozas should have manifested in writing their acceptance of the award for the purchase of Lot 4 just to show that they were still interested in its purchase although the area was reduced and to obviate ally doubt on the matter. They did not do so.
The PHHC board of directors acted within its rights in withdrawing the tentative award. The contract of sale is perfect at the moment there is meeting of the 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 law governing the form of contracts (Art. 1475, Civil). Under the facts of this case, we cannot say there was a meeting of minds on the purchase of Lot 4 with an area of 2,608.7square meters at P21 a square meter.
8. Sps. ENRIQUE and CONSUELO LIM vs. THE HONORABLE COURT OF APPEALS, 182 SCRA 564, G.R. No. 85733, February 23, 1990
Facts: The subject of this controversy is a parcel of land originally owned by Felix, Manuel and MariaConcepcion Orlino, who mortgaged it to the Progressive Commercial Bank as security for a P100,000.00 loan on July 1, 1965 consisting of 1,101 square meters and located in Diliman, Quezon City. The loan not having been paid, the mortgage was foreclosed and the bank acquired the property as the highest bidder at the auction sale on March 28, 1969. The mortgagee thereafter transferred all its assets, including the said land, to the Pacific Banking Corporation (PBC).
On May 22, 1975, the Orlinos, and their respective spouses, who had remained in possession of the land, made a written offer to PBC to repurchase the property. In response, the bank, confirms the agreement through a letter dated November 9, 1977 under the following conditions: a) The cash consideration shall be P160,000.00 payable in full upon signing of the Deed of Absolute Sale;
b) The additional consideration shall consist of your client's conveyance to us of their share of 2,901.15 square meters on the property situated at Camarin, Caloocan City.
One year later, on November 2, 1978, PBC advised the private respondents that if the transaction was not finalized within 30 days, it would consider the offer of other buyers. The record does not show any further development until June 8, 1979, when the private respondents requested PBC to allow them to secure a certified true copy of its Torrens certificate over the land for purposes of its survey and partition among them preparatory to the actual transfer of title to them. PBC granted the request subject to the condition that title would remain with it until the execution of the necessary deed of conveyance.
On April 8, 1980, or two years later, PBC reminded the private respondents of its letter of November 2, 1978, but again no action was taken to deliver to it the stipulated consideration for
the sale. Finally, on May 14, 1980, PBC executed a deed of sale over the land in favor of the herein petitioners, the spouses Enrique and Consuelo Lim, for the sum of P300,000.00.
On September 30, 1980, the private respondents filed a complaint in the Regional Trial Court of Quezon City against the petitioners and PBC for the annulment of the deed of sale on the ground that the subject land had been earlier sold to them. In its judgment for the plaintiffs, the court held that both PBC and the spouses Lim had acted in bad faith when they concluded the sale knowing that "there was a cloud in the status of the property in question." The decision was affirmed in toto by the respondent court, and the petitioners are now before us, urging reversal.
Issue: Whether or not the execution of the deed of sale in favor of the petitioners are valid. Ruling: In the case at bar, the private respondents obligated themselves to deliver to the bank the sum of P160,000.00 and their share of 2,901.15 square meters on a property situated in Caloocan City. In the letter of PBC dated November 9, 1977, they were requested to "expedite the loan (they were negotiating for this purpose) so we can consummate the transaction as soon as possible". That was in 1977. In 1978, they were reminded of their obligation and asked to comply within thirty days. They did not. On April 8, 1980, they were reminded of that letter of November 2, 1978, and again asked to comply; but again they did not. Surely, the bank could not be required to wait for them forever, especially so since they remained in possession of the property and there is no record that they were paying rentals. Under the circumstances, PBC had the right to consider the contract to sell between them terminated for non‐payment of the stipulated consideration. We hereby confirm that rescission. Having arrived at these conclusions, the Court no longer finds it necessary to determine if the petitioners acted in bad faith when they purchased the subject property. The private respondents lost all legal interest in the land when their contract to sell was rescinded by PBC for their non‐compliance with its provisions. As that contract was no longer effective when the land was sold by PBC to the petitioners, the private respondents had no legal standing to assail that subsequent transaction. The deed of sale between PBC and the petitioners must therefore be sustained.
9. SPOUSES VICENTE and LOURDES PINGOL vs. HON. COURT OF APPEALS 226 SCRA 118, G.R. No. 102909, September 6,1993
A vendee in an oral contract to convey land who had made part payment thereof, entered upon the land and had made valuable improvements thereon is entitled to bring suit to clear his title against the vendor who had refused to transfer the title to him. It is not necessary that the vendee should have an absolute title, an equitable title being sufficient to clothe him with personality to bring an action to quiet title.
Facts:
In 1969, Pingol, the owner of a lot (Lot No. 3223) in Caloocan City, executed a DEED OF ABSOLUTE SALE OF ONE‐HALF OF AN UNDIVIDED PORTION OF [his] PARCEL OF LAND in favor of Donasco (private respondent), payable in 6 years.
In 1984, Donasco died and was only able to pay P8,369 plus P2,000 downpayment, leaving a balance of P10,161. The heirs of Donasco remained in possession of such lot and offered to settle the balance with Pingol. However, Pingol refused to accept the offer and demanded a larger amount. Thus, the heirs of Donasco filed an action for specific performance (with Prayer for Writ of Preliminary Injunction, because Pingol were encroaching upon Donasco’s lot). Pingol averred that the sale and transfer of title was conditional upon the full payment of Donasco (contract to sell, not contract of sale). With Donasco’s breach of the contract in 1976 and death in 1984, the sale was deemed cancelled, and the heirs’ continuous occupancy was only being tolerated by Pingol.
Issues:
(1) Whether or not Pingol can refuse to transfer title to Donasco. (2) Whether or not Donasco has the right to quiet title.
Ruling:
(1) No. The contract between Pingol and Donasco is a contract of sale and not a contract to sell. The acts of the parties, contemporaneous and subsequent to the contract, clearly show that the parties intended an absolute deed of sale; the ownership of the lot was transferred to the Donasco upon its actual (upon Donasco’s possession and construction of the house) and constructive delivery (upon execution of the contract). The delivery of the lot divested Pingol of his ownership and he cannot recover the title unless the contract is resolved or rescinded under Art. 1592 of NCC. It states that the vendee may pay even after the expiration of the period stipulated as long as no demand for rescission has been made upon him either judicially or by notarial act. Pingol neither did so. Hence, Donasco has equitable title over the property.
(2) Although the complaint filed by the Donascos was an action for specific performance, it was actually an action to quiet title. A cloud has been cast on the title, since despite the fact that the title had been transferred to them by the execution of the deed of sale and the delivery of the object of the contract, Pingol adamantly refused to accept the payment by Donascos and insisted that they no longer had the obligation to transfer the title.
Donasco, who had made partial payments and improvements upon the property, is entitled to bring suit to clear his title against Pingol who refused to transfer title to him. It is not necessary that Donasco should have an absolute title, an equitable title being sufficient to clothe him with personality to bring an action to quiet title.
Prescription cannot also be invoked against the Donascos because an action to quiet title to property in ONE’s POSSESSION is imprescriptible.
10. FULE v CA (CRUZ/BELARMINO) 286 SCRA 698 Mar. 23, 1998 NATURE Petition for review on certiorari
FACTS
- Fule, a corporate secretary of the Rural Bank of Alaminos (the Bank) by profession and jeweler on the side, acquired a 10-hectare property in Rizal. The former owner, Jacobe, had mortgaged
it to the Bank for a loan of 10k but it was later foreclosed and offered for public auction upon his default.
- Petitioner asked Dichoso and Mendoza (the Agents) to look for an interested buyer, and found one in private respondent Dr. Cruz. At the time, petitioner had shown interest in buying a pair of emerald-cut diamond earrings from Dr. Cruz but never came to an agreed price. Subsequently, negotiations for the barter of the jewelry and the property ensued; upon the request of Dr. Cruz, it was found by Atty. Belarmino that no barter was feasible because the 1-year period of redemption had not expired. To get over this legal impediment, petitioner executed a deed of redemption of behalf of Jacobe.
- Petitioner arrived at Belarmino’s residence with the agents to execute a deed of absolute sale while Cruz held on to the earrings. Petitioner issued a certification stating the actual consideration of the sale was Php200k and not Php80k as indicated in the deed. Since the earrings were appraised at only Php160k, the remaining 40k was to be paid later in cash. This was done apparently to minimize the capital gains tax that petitioner would have to shoulder. Petitioner headed for the bank to meet up with Cruz and pick up the earrings. When asked if the jewelry was ok, petitioner nodded to express his satisfaction. Petitioner paid the agents $300 and some pieces of jewelry, but not half of the pair of earrings in question as previously promised.
- Later that evening, petitioner arrived at Belarmino’s residence complaining the earrings were fake as confirmed by a tester. Petitioner accused the agents of deceiving him, which they denied. He nonetheless took back the $300 and jewelry given them. After another failed testing, the petitioner reported the matter to the police where the agents also executed their sworn statements.
- Petitioner filed a complaint with the RTC to declare the contract of sale over the property null and void on the ground of fraud and deceit. The lower court denied the prayer for a writ of preliminary injunction over the deed as they found that the genuine pair of earrings had been delivered by Cruz. The 2 hours before petitioner’s complaint was considered unreasonable delay, placing petitioner in estoppel. The Court furthered that all elements of a valid contract were present, namely a meeting of the minds, determinate subject matter, and price certain. As the earrings had been delivered and the contract of absolute sale executed, the contract of barter or sale had been consummated.
- The Court also finds that the plaintiff acted in bad faith in misrepresenting the price of the property. Damages and atty’s fees were in order for soiling Dr. Cruz and Belarmino’s good names. A petition with the CA yielded the same result, hence the instant petition
ISSUES:
1. WON the TC erred in holding that petitioner received a genuine pair of earrings 2. WON the CA erred in upholding the validity of the contract of barter or sale 3. WON the TC erred in awarding damages
HELD:
1. NO - As to questions of fact, the Court accords conclusiveness to the lower court’s findings. Petitioner goes so far as to accuse the TC judge of handing in a “ready-made” 12 page decision due to the limited time afforded him to write it in a desperate effort to disparage the TC’s findings
of fact and convince the Court to review the same. Hence, this Court maintains the lower court’s findings that Cruz had delivered the genuine pair of earrings.
2. NO - It is evident from the facts of the case that there was a meeting of the minds between petitioner and Cruz (Cruz’ asking if the earrings were ok and petitioner’s nodding in agreement) hence perfecting the contract. Petitioner contends that the contract was voidable because consent was vitiated by fraud. However, the facts show no evidence that insidious words or machinations were employed by Cruz to cajole petitioner to enter into the contract. It was in fact the petitioner who resorted to machinations to wheedle Cruz into the transaction by misrepresenting his property’s price.
- Petitioner also failed to clearly allege mistake as a ground for nullification as he failed to prove the fact that prior to the delivery of the earrings, private respondents endeavored to substitute the earrings with a different or inferior item. On account of petitioner’s experience as a jeweler, he cannot be excused for the alleged “mistake” himself as he could have easily tested the earrings’ genuineness in the presence of Cruz. As stated in Art 27 CC, “there is no mistake if the party alleging it knew the doubt, contingency or risk affecting the object of the contract.” Furthermore, having only complained 2 hours after the exchange, petitioner was afforded ample time within which to examine the earrings—in fact, he accepted when asked if he was satisfied with the jewelry.
- There being no legal bases for the nullification of the contract, ownership had been transferred to both parties respectively. While there remained a balance of 40k in cash to be paid to petitioner, this was not sufficient cause to invalidate the contract and will not incur interest on the part of Cruz.
3. NO - The malice with which petitioner filed the case is apparent. As an experienced jeweler who thoroughly examined the earrings himself and went so far as to sketch them earlier, it is illogical that he would fail to exert extra effort to check its genuineness at the precise moment of the exchange. As an experienced businessman, he was shrewd enough to bloat the property’s price only a few days after he had purchased it for a far lower value. Given this, it would appear that the cause of action of the instant case was contrived by the petitioner himself in hopes of obtaining a favorable outcome in his complaint to take the real jewelry, return a fake, and get back the property, all while dragging down private respondents. As his guilt in bringing about the supposed wrongdoing on which he anchored his cause of action is evident, he is answerable for all damages the defendant suffered from it.
DIsposition the decision of the CA is AFFIRMED. Dr. Cruz, however, is ordered to pay petitioner the balance of the purchase price of Php40k
11. CELESTINO CO & CO. V COLLECTOR OF INTERNAL REVENUE 99 PHIL 841 August 31, 1956
NATURE Petition for review by certiorari of a decision of the Court of Tax Appeals FACTS:
- Celestino Co & Company is a duly registered general co-partnership doing business under the trade name of "Oriental Sash Factory"
- From 1946 to 1951 it paid percentage taxes of 7% on the gross receipts of its sash, door and window factory, in accordance with section 186 of the National Revenue Code imposing taxes on sale of manufactured articles
- In 1952 it began to claim liability only to the contractor's 3% tax under section 191 of the same Code
- Petitioner failed to convince the Bureau of Internal Revenue
- It brought the matter to the Court of Tax Appeals, where it also failed
ISSUE: WON Celestino Co & Company is liable only for contractor's 3% tax under section 191 of the National Revenue Code
HELD: NO - The important thing to remember is that Celestino Co & Company habitually makes sash, windows and doors, as it has represented in its stationery and advertisements to the public. That it "manufactures" the same is practically admitted by appellant itself. The fact that windows and doors are made by it only when customers place their orders, does not alter the nature of the establishment, for it is obvious that it only accepted such orders as called for the employment of such material-moulding, frames, panels-as it ordinarily manufactured or was in a position habitually to manufacture.
- Petitioner contends that it manufacturers sash, windows and doors only for special customers and upon their special orders and in accordance with the desired specifications of the persons ordering the same and not for the general market: since the doors ordered by Don Toribio Teodoro & Sons, Inc., for instance, are not in existence and which never would have existed but for the order of the party desiring it; and since petitioner's contractual relation with his customers is that of a contract for a piece of work or since petitioner is engaged in the sale of services, it follows that the petitioner should be taxed under section 191 of the Tax Code and NOT under section 186 of the same Code
- The argument rests on a false foundation. Any builder or homeowner, with sufficient money, may order windows or doors of the kind manufactured by this appellant. Therefore it is not true that it serves special customers only or confines its services to them alone.
- The Oriental Sash Factory does nothing more than sell the goods that it mass-produces or habitually makes; sash, panels, mouldings, frames, cutting them to such sizes and combining them in such forms as its customers may desire.
- Appellant invokes Article 1467 of the New Civil Code to bolster its contention that in filling orders for windows and doors according to specifications, it did not sell, but merely contracted for particular pieces of work or "merely sold its services".
- Said article reads as follows:
A contract for the delivery at a certain price of an article which the vendor in the ordinary course of his business manufactures or procures for the general market, whether the same is on hand at the time or not, is a contract of sale, but if the goods are to be manufactured specially for the customer and upon his special order, and not for the general market, it is contract for a piece of work.
