Aguinaldo vs Esteban
On the other hand,
G. R. No. L-27289 April 15, 1985
NHA vs Grace Baptist church
G. R. No. 156437 March 1, 2004
Facts:
Respondent Church applied to purchase lots from a
Resettlement Project in Cavite. Petitioner approved the respondent’s
application. Respondents then proceeded to possess the land and
made improvements. The Respondents received the letter from the
petitioner duly approving the sale of the subject lots but in a price
not declared to them by the NHA Field Office. Petitioner returned
the check stating that the amount was insufficient considering that
the price of the properties had changed. The Church made demands
to the petitioner but the latter refused to accept the payment.
The Church instituted a complaint for specific performance
and the trial court ruled that there was a valid contract of sale
between the parties and ordered that the petitioners reimburse the
respondent Church the overpayment made for the lots. NHA
appealed the case and the appellate court affirmed the trial court’s
decision that there was a valid contract of sale but held that the
petitioner sell the lots at the price approved by the NHA. A motion
for reconsideration was filed but was denied.
Issue: WON there was a valid contract of sale
Ruling: There was no contract at all.
Ratio Decidendi:
The principle of estoppel will not apply in this case
because it does not operate against the Government for the acts or
inaction of its agents. The case will cover the principle of equity
under the law ad will require the determination of the laws that will
govern. Contracts, once perfected, are binding upon the parties and
obligations arising from it have the force of law between them and
should be complied in good faith. However, contracts are not the
only source of law that govern obligations. A contract must not run
in contrary to law, morals, good customs, public order and public
policy.
The offer of the NHA to sell the subject property was not
accepted by the respondent. Thus, the alleged contract involved in
this case should be more accurately denominated as inexistent.
There being no concurrence of the offer and acceptance, it did not
pass the stage of generation to the point of perfection. As such, it is
without force and effect from the very beginning or from its
incipiency, as if it had never been entered into, and hence, cannot be
validated either by lapse of time or ratification. Equity cannot give
validity to a void contract, and this rule should apply with equal
force to inexistent contracts.
The Church, despite knowledge that its intended contract
of sale with the NHA had not been perfected, proceeded to
introduce improvements on the disputed land.
the NHA knowingly granted the Church temporary use of the
subject properties and did not prevent the Church from making
improvements thereon. Thus, the Church and the NHA, who both
acted in bad faith, shall be treated as if they were both in good faith.
The case was remanded back to the trial court to access the value of
the improvements made on the land and fix the terms of the lease if
the parties so agree.
Domingo vs CA
G. R. No. 127540 October 17, 2001
Facts:
Paulina Rigonan owned three parcels of land located at
Batac and Espiritu, Ilocos Norte, including a house and warehouse
on one parcel. She allegedly sold them to Felipe and Concepcion
Rigonan, who claim to be her relatives. Petitioners Domingo,
Mangabat and Capalungan who claim to be Paulina’s closest
surviving relatives, allegedly took possession of the property by
means of stealth, force and intimidation and refused to vacate the
same. Felipe Rigonan filed a complaint for reinvindicacion against
petitioners in the RTC of Batac, Ilocos Norte, alleging their
ownership of the land through the deep of sale executed by Paulina
Rigonan and since then have been in continuous possession of the
properties and introduced permanent improvements thereon.
According to the petitioners, the deed of absolute sale was void for
being spurious since they inherited the three lots and the permanent
improvements as nearest surviving kin within the fifth degree of
consanguinity to Paulina. The RTC ruled in the petitioner’s favor,
declaring them the lawful owners of the contested land. The Court
of Appeals reversed the trial court’s decision and ordered the
petitioners to vacate the subject properties and surrender possession
thereof.
Issues:
(1) Whether or not private respondents sufficiently established the
existence and due execution of the Deed of Absolute and
Irrevocable Sale of Real Property
(2) Whether or not Paulina Rigonan was competent to enter into
said contract
Ruling:
Paulina Rigonan was in continuous possession of the property in
this case, throwing an inverse implication and serious doubt on the
due execution of the deed of sale. The same parcels of land
involved in the alleged sale were still included in the will
subsequently executed by Paulina and notarized by Atty. Tagatag.
These circumstances, taken together, militate against unguarded
acceptance of the due execution and genuineness of the alleged
deed of sale.
At the time of the execution of the alleged contract, Paulina
Rigonan was already of advanced age and senile, attested by the
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testimony that she played with her waste and urinated in bed. She
died an octogenarian barely a year when the deed was allegedly
executed. The general rule is that a person is not incompetent to
contract merely because of advance years or by reason of physical
infirmities. However, when such age or infirmities have impaired
the mental faculties so as to prevent the person from properly,
intelligently and firmly protecting her property rights when she is
undeniably incapacitated.
The decision of the Court of Appeals is reversed and set aside and
the decision of the Batac RTC is reinstated.
Dignos vs CA
G. R. L-59266 February 29, 1988
FACTS:
Spouses Silvestre Dignos and Isabela Lumungsod de Dignos sold
their parcel of land in Opon, Lapu-Lapu to private respondent
Antonio Jabil for the sum of P28,000.00 payable for 2 installments,
with an assumption of indebtedness with the First Insular Bank of
Cebu in the sum of P12,000.00 as was acknowledged by vendors in
the Deed of Absolute Sale (Exh. C), and the next installment to be
paid 3 months after. But the same land was also sold by Spouses
Dignos (Exh. J) which was registered in the Registry of Deeds. This
prompted Jabil to file a civil suit against Spouses Dignos for the 2nd
sale to Spouses Luciano Cabigas and Jovita de Cabigas, who were
then US citizens. CFI of Cebu rendered the 2nd sale to Spouses
Cabigas null and void, directing Spouses Dignos to return the
P35,000.00 to Spouses Cabigas and ordered Jabil to pay the
remaining balance. Spouses Dignos contend that Exh. C is a
contract to sell and as such, anchored their contention on the very
terms of the contract as mentioned in ¶4, that said spouses have
agreed to sell the herein mentioned property to Alilano B. Jabil and
condition in ¶5, in which the spouses agreed to sign a final deed of
absolute sale upon payment of the remaining balance of P4,000.00.
ISSUE:
Is the contract between the parties a contract of sale or a contract to
sell?
HELD:
The contract between the parties is a contract of sale. It has been
held that a deed of sale is absolute in nature although dominated as
a “Deed of Conditional Sale” where nowhere in the contract in
question is a proviso or stipulation to the effect that title to the
property sold is reserved in the vendor until full payment of the
purchase price, nor is there a stipulation giving the vendor the right
to unilaterally rescind the contract the moment the vendee fails to
pay within a fixed period. All the elements of a valid contract of
sale are present in the document and that Spouses Dignos never
notified Jabil by notarial act that they were rescinding the contract,
and neither did they file a suit in court to rescind the sale. There is
no showing that Jabil properly authorized a certain Cipriano
Amistad to tell petitioners that he was already waiving his rights to
the land in question.
Quiroga vs Parsons
38 PHIL 501 1918
FACTS:
A contract was entered into between Andres Quiroga and J. Parsons,
who were both merchants, which granted the exclusive right to sell
his beds in the Visayan Islands to Parsons under the following
conditions: 1) There be a discount of 2.5% as commission for the
sale; 2) Parsons shall order the beds by the dozen, whether of the
same or of different styles; 3) Expenses for transportation and
shipment shall be borne by Quiroga; 4) Parsons is bound to pay
Quiroga for the beds received within 60 days from the date of their
shipment; 5) If Quiroga should request payment before the invoice
falls due, it shall be considered as prompt payment with 2%
deduction; 6) 15-day notice must at least be given by Quiroga
before any alteration in price of beds; and 7) Parsons binds himself
to only sell Quiroga beds. Quiroga alleged that Parsons breached its
contract by selling the beds at a higher price, not having an open
establishment in Iloilo, not maintaining a public exhibition, and for
not ordering the beds by the dozen. Only the last imputation was
provided for by the contract, the others were not stipulated. Quiroga
argued that since there was a contract of agency between them, such
obligations were necessarily implied.
ISSUE:
Is the contract between them one of agency, not of sale?
HELD:
No. The agreement between Quiroga and Parsons was that of a
simple purchase and sale — not an agency. Quiroga supplied the
beds, while Parsons had the obligation to pay their purchase price.
These features exclude the legal conception of an agency or order to
sell whereby the mandatory or agent received the thing to sell it,
and does not pay its price, but delivers to the principal the price he
obtains from the sale of the thing to a third person, and if he does
not succeed in selling it, he returns it. By virtue of the contract
between the plaintiff and the defendant, the latter, on receiving the
beds, was necessarily obliged to pay their price within the term
fixed, without any other consideration and regardless as to whether
he had or had not sold the beds. There was mutual tolerance in the
performance of the contract in disregard of its terms; and it gives no
right to have the contract considered, not as the parties stipulated it,
but as they performed it. Only the acts of the contracting parties,
subsequent to, and in connection with, the execution of the contract,
must be considered for the purpose of interpreting the contract,
when such interpretation is necessary.
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Ker & Co. vs Lingad
38 SCRA 524 1971
FACTS:
1. The Commissioner of Internal Revenue assessed the Petitioner to
pay P20,272 as commercial broker’s percentage tax.
2. Petitioner requested for its cancellation but was denied and
deemed liable as an agent of United States Rubber International
(Company).
3. Petitioner was the Company’s distributor. Their contract provides
that Petitioner, as distributor, cannot dispose of the products for
shipment in places other than those designated, unless written
consent was first obtained from the Company. However, the prices,
discounts, terms of payment, terms of delivery and other conditions
of sale were subject to the discretion of the Company. Likewise, the
crucial stipulations state that (1) the consignment remains property
of the Company until sold by the distributor and (2) “the distributor
is not constituted as an agent of the Company by this contract for
any purpose whatsoever.”
ISSUE: Whether the relationship between the Company and the
Distributor is one of vendor and vendee, or of broker and principal
HELD: The relationship is one of brokerage or agency. The decisive
test is the retention of the ownership of the goods delivered to the
possession of the dealer, like herein Petitioner, for resale to
customers; the price and terms remaining subject to the control of
the firm consigning such goods.
RATIO:
1. Upon analysis of the contract, as a whole, together with the actual
conduct of the parties in respect thereto, we have arrived at the
conclusion that the relationship between them is one of brokerage
or agency.
2.  According to the National Internal Revenue Code, a commercial
broker "includes all persons, other than importers, manufacturers,
producers, or bona fide employees, who, for compensation or profit,
sell or bring about sales or purchases of merchandise for other
persons or bring proposed buyers and sellers together, or negotiate
freights or other business for owners of vessels or other means of
transportation, or for the shippers, or consignors or consignees of
freight carried by vessels or other means of transportation. The term
includes commission merchants."
3. Since the company retained ownership of the goods, even as it
delivered possession unto the dealer for resale to customers, the
price and terms of which were subject to the company's control, the
relationship between the company and the dealer is one of agency.
4. If the transfer of title puts the transferee in the attitude or position
of an owner and makes him liable to the transferor as a debtor for
the agreed price, and not merely as an agent who must account for
the proceeds of a resale, it is a sale; while the essence of an agency
to sell is the delivery to an agent, not as his property, but as the
property of the principal, who remains the owner and has the right
to control sales, fix the price and terms demand and receive the
proceeds less the agent’s commission upon sales made.
 
5. Mere disclaimer in a contract that an entity like Petitioner is not
“the agent or legal representative for any purpose whatsoever” does
not suffice to yield the conclusion that it is an independent merchant
if the control over the goods for resale of the goods consigned is
pervasive in character.
DOCTRINE
The decisive test, as therein set forth, is the retention of the
ownership of the goods delivered to the possession of the dealer,
like herein petitioner, for resale to customers, the price and terms
remaining subject to the control of the firm consigning such goods.
Inchausti vs Cromwell
20 PHIL 34 1911
Facts:
Inchausti is engaged in the business of buying and selling wholesale
hemp on commission. It is customary to sell hemp in bales which
are made by compressing the loose fiber by means of presses,
covering two sides of the bale with matting, and fastening it by
means of strips of rattan; that the operation of bailing hemp is
designated among merchants by the word “prensaje.” In all sales of
hemp by Inchausti, the price is quoted to the buyer at so much per
picul, no mention being made of bailing. It is with the tacit
understanding that the hemp will be delivered in bales. The amount
depends under the denomination of “prensaje” or the baled hemp.
CIR made demand in writing upon Inchausti for the payment of the
sum of P1,370.68 as a tax of one third of one per cent on the sums
of money mentioned as aggreagate sum collected as prensaje or the
baled hemp. Inchausti paid upon protest, contending that the
collected amount is illegal upon the ground that the said charge
does not constitute a part of the selling price of the hemp, but is a
charge made for the service of baling the hemp.
Issue:
Whether or not the baled hemp constitutes a contract of sale
Ruling:
Yes, the baled hemp constitutes a contract of sale. In the case at bar,
the baled form before the agreement of sale were made and would
have been in existence even if none of the individual sales in
question had been consummated. The hemp, even if sold to
someone else, will be sold in bales. When a person stipulates for the
future sale of articles which he is habitually making, and which at
the time are not made or finished, it is essentially a contract of sale
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and not a contract for piece of work. It is otherwise when the article
is made pursuant to agreement. If the article ordered by the
purchaser is exactly such as the plaintiff makes and keeps on hand
for sale to anyone, and no change or modification of it is made at
the defendant’s request, it is a contract of sale, even though it may
be entirely made after, and in consequence of, the defendant’s order
for it.
Del Monte Phils. vs Aragones
G. R. No. 153033 June 23, 2005
A contract for the delivery at a certain price of an article which the
vendor in the ordinary course of his business manufactures or
procures for the general market, whether the same is on hand at the
time or not, is a contract of sale, but if the goods are to be
manufactured specially for the customer and upon his special order,
and not for the general market, it is a contract for a piece of work.
Del Monte Philippines Inc. (DMPI) entered into an agreement with
Mega-Engineering Services in joint venture with WAFF
Construction System Corporation (MEGA-WAFF) represented by
Edilberto Garcia (Garcia), wherein Garcia will supply the
installation of modular pavement in DMPI‘s warehouse. In this
regard, Garcia as a contractor entered into a supply agreement with
Dynablock Enterprises represented by respondent Aragones, to
supply labor, materials, equipment and the like.
Thereafter, Argones started to do his obligation. The deadline
however was not met. After the installation, Aragones failed to
collect the payment from Garcia. Then, Aragones sent a letter to
DMPI saying that instead of paying Garcia, DMPI should directly
pay him. But this did not happen. Hence Aragones filed a complaint
for sum of money with damages against Garcia and DMPI before
RTC.
RTC ruled in favor of Aragones, it held that DMPI and Garcia are
jointly and severally liable. DMPI appealed to Court of Appeal
(CA). However at CA, the court affirmed RTC‘s decision. Hence,
DMPI filed this petition. It contends that the supply agreement
between Garcia and Aragones is a contract of sale to which DMPI
was not privy, hence DMPI cannot be held liable.
ISSUE:
Whether or not Supply Agreement between Aragones and Garcia is
a contract of sale
HELD:
Contrary to DMPI‘s claim that ―save for the shape, there was no
consideration of any special needs or requirements of DMPI taken
into account in the design or manufacture of the concrete paving
blocks,‖ the ―Supply Agreement‖ is replete with specifications,
terms or conditions showing that it was one for a piece of work.
As reflected in the highlighted and underscored above-quoted
provisions of the ―Supply Agreement,‖ as well as other evidence
on record, the machines Aragones was obliged to fabricate were
those for casting the concrete blocks specified by Garcia. Aragones
did not have those kind of machines in his usual business, hence,
the special order.
Under Article 1467 then of the Civil Code, a contract for the
delivery at a certain price of an article which the vendor in the
ordinary course of his business manufactures or procures for the
general market, whether the same is on hand at the time or not, is a
contract of sale, but if the goods are to be manufactured specially
for the customer and upon his special order, and not for the general
market, it is a contract for a piece of work. The ―Supply
Agreement‖ was decidedly a contract for a piece of work.
Following Art. 1729 of the Civil Code which provides that those
who put their labor upon or furnish materials for a piece of work
undertaken by the contractor have an action against the owner up to
the amount owing from the latter to the contractor at the time the
claim is made.
Aragones having specially fabricated three casting machines and
furnished some materials for the production of the concrete blocks
specially ordered and specified by MEGA-WAFF which were to be
and indeed they were for the exclusive use of MEGA-WAFF, he has
a cause of action upon DMPI up to the amount it owed MEGA-
WAFF at the time Aragones made his claim to DMPI.
Co v. Coll. Of Internal Revenue
99 Phil. 841 (1956)
Facts:
Celestino is the owner of Oriental Sash Factory. It paid 7% on the
gross sales of their sales. In 1952, they began to pay only 3% tax.
Petitioner claims that it does not manufacture ready-made doors,
sash and windows for the public, but only upon special orders from
the customers, hence, it is not engaged in manufacturing under sec
186, but only in sales of services covered by sec 191. Having failed
to convince BIR, petitioner went to the Court of Tax Appeal where
it also failed. CTA, in its decision, holds that the “petitioner has
chosen for its tradename and has offered itself to the public as a
“Factory”, which means it is out to do business, in its chosen lines
on a big scale. As a general rule, sash factories receive orders for
doors and windows of special design only in particular cases but the
bulk of their sales is derived from a ready-made doors and windows
of standard sizes for the average home.
Issue:
Whether the petitioner company provides special services or is
engaged in manufacturing.
Ruling:
The Oriental Sash Factory is engaged in manufacturing. The
company habitually makes sash, windows and doors as it has been
represented to the public.The fact that windows and doors are made
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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. 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.
Comm. Of Int. Rev. v. Eng’g Equipment
64 SCRA 590 (1975)
CIR V ENGINEERING EQUIPMENT AND SUPPLY COMPANY
FACTS:
Engineering Equipment & Supply (EES) was engaged in the
business of designing and installing central air-conditioning
systems. It was assessed by the Commissioner of Internal Revenue
for 30% advanced sales tax, among other penalties pursuant to an
anonymous complaint filed before the BIR. EES vehemently
objected and argued that they are contractors and not manufacturers
and should be liable only for the 3% tax on sales of services or
pieces of work.
The commissioner demanded upon Engineering the payment of the
assessed tax and suggested that Engineering pay P10k as
compromise for Engineering’s penal liability for violation of the
Tax Code.
ISSUE:
W/N EES is a contractor for a piece of work thus only liable for 3%
tax
HELD:
Contractor – a person who, in the pursuit of the independent
business, undertakes to do a specific job or piece of work for other
persons, using his own means and methods without submitting
himself to control as to the petty details.
True test of contractor – he renders service in the course of an
independent occupation representing the will of his employer only
as to the result of his work, and not as to the means by which it is
accomplished.
The SC found that EES was not a manufacturer of air-conditioning
units. While it imported such items, they were not for sale to the
general public and were used as mere components for the design of
the centralized air-conditioning system, the designs and
specifications of w/c are different for every client. Various technical
factors must be considered and it can be argued that no two plants
are the same; all are engineered separately and distinctly. Each
project requires careful planning and meticulous layout. Such
central air-conditioning systems and their designs would not have
existed were it not for the special order of the party desiring to
acquire it. EES is thus not liable for the sales tax.
In comparison with Celestino case:
Engineering advertised itself as Engineering Equipment and Supply
Company, Machinery Mechanical Supplies, Engineers, Contractors
while Oriental used “Oriental Sash Factory”. It also paid the
contractors tax on all the contracts for design and construction of
central system unlike Oriental who did not pay contractors tax.
Engineering did not have ready-made air conditioning units for sale
unlike oriental whose bulk of their sale came from ready-made
doors and windows
As for their liability for violation of Tax Code, they should pay the
whole amount not the one suggested by the commissioner.
Puyat & Sons v. Arco Amusement
72 Phil 402 (1941)
FACTS:
Arco Amusement was engaged in the business of operating
cinematographs while Gonzalo Puyat & Sons (GPS) was the
exclusive agent in the Philippines for the Starr Piano Company
(SPC). Desiring to equip its cinematograph with sound reproducing
devices, Arco approached GPS, through its president, Gil Puyat, and
an employee named Santos. After some negotiations, it was agreed
between the parties that GPS would order sound reproducing
equipment from SPC and that Arco would pay GPS, in addition to
the price of the equipment, a 10% commission, plus all expenses
such as freight, insurance, etc. When GPS inquired SPC the price
(without discount) of the equipment, the latter quoted such at
$1,700.00 FOB Indiana. Being agreeable to the price, Arco formally
authorized the order. The following year, both parties agreed for
another order of sound reproducing equipment on the same terms as
the first at $1,600.00 plus 10% plus all other expenses. 3 years later,
Arco discovered that the prices quoted to them by GPS with regard
to their first 2 orders mentioned, were not the net prices but rather
the latter has obtained a discount from SPC thus, equipment is
deemed overpriced and GPS had to reimburse the excess amount.
ISSUE:
Is there a contract of agency?
HELD:
No. The contract between the petitioner and the respondent was one
of purchase and sale. The letters, Exhibits 1 and 2, by which the
respondent accepted the prices of $1,700.00 and $1,600.00,
respectively, for the sound reproducing equipment subject of its
contract with petitioner, are clear in their terms and admit no other
interpretation that the respondent in question at the prices indicated
which are fixed and determinate. The respondent admitted in its
complaint with the CFI of Manila that the petitioner agreed to sell
to it the first sound reproducing equipment. To hold the petitioner an
agent of the respondent in the purchase of equipment and
machinery from the SPC of Richmond, Indiana, is incompatible
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with the admitted fact that the petitioner is the exclusive agent of
the same company in the Philippines. It is out of the ordinary for
one to be the agent of both the vendor and the purchaser.
Fule V. CA
286 SCRA 698 (1998)
FACTS:
Petitioner Gregorio Fule, a banker by profession and a jeweler,
acquired a 10-hectare property in Tanay, Rizal. In 1984,   he   met
private respondent Dr. Ninevetch Cruz who was interested on the
said lot. It so happened that at the time, petitioner had also shown
interest in buying a pair of emerald-cut diamond earrings owned by
Dr. Cruz.
Subsequently, an agreement for the barter of the jewelry and the
Tanay property ensued. Petitioner prepare the documents of
the deed of absolute sale while Dr. Cruz attended to the safekeeping
of the jewelry. Dr. Cruz got the earrings from her safety deposit box
and handed it to petitioner, who, when asked if those were alright,
nodded and took the earrings. Two hours after,   petitioner Fule
alleged that the earrings he received were fake. He filed a complaint
to declare the sale of property null and void on the ground of fraud
and deceit on the part of the respondent.
ISSUE:
Whether the contract of sale should be nullified on the ground of
fraud.
HELD:
There is fraud when, through the insidious words or machinations
of one of the contracting parties, the other is induced to enter into a
contract which, without them, he would not have agreed to.
The records, however, are bare of any evidence manifesting that
private respondents employed such insidious words or machinations
to entice petitioner into entering the contract of barter. Neither is
there any evidence showing that Dr. Cruz induced petitioner to sell
his Tanay property or that she cajoled him to take the earrings in
exchange for said property. On the contrary, Dr. Cruz did not
initially accede to petitioner’s proposal to buy the said jewelry. It
was in fact petitioner who resorted to machinations to convince Dr.
Cruz to exchange her jewelry for the lot. On account of   the
petitioner’s work as a banker-jeweler, it can be rightfully assumed
that he was an expert on matters regarding gems. He had the
intellectual capacity and the business acumen as a banker to take
precautionary measures to avert such a mistake, considering the
value of both the jewelry and his land; that the finger of suspicion of
switching the genuine jewelry for a fake inevitably points to him.
There were no legal bases for the nullification of the contract of
sale. Ownership over the parcel of land and the pair of emerald-cut
diamond earrings had been transferred to Dr. Cruz and petitioner,
respectively, upon the actual and constructive delivery thereof.
PNB v. Pineda
197 SCRA 1 (1991)
FACTS:
                      In 1963, the Arroyo Spouses, obtained a loan of
P580,000.00 from petitioner bank to purchase 60% of the
subscribed capital stock and thereby acquire the controlling interest
of private respondent Tayabas Cement Company, Inc. (TCC). As
security for said loan, the spouses Arroyo executed a real estate
mortgage over a parcel of land known as the La Vista property.
            TCC filed with petitioner bank an application and agreement
for the establishment of an eight (8) year deferred letter of credit (L/
C) for $7,000,000.00 in favor of Toyo Menka Kaisha, Ltd. of
Tokyo, Japan, to cover the importation of a cement plant machinery
and equipment. Upon approval of said application, the Arroyo
spouses executed a Surety Agreement dated August 5, 1964 3 and
Covenant dated August 6, 1964 to secure the loan.
                      The imported cement plant machinery and equipment
arrived from Japan and were released to TCC under a trust receipt
agreement. Subsequently, Toyo Menka Kaisha, Ltd. made the
corresponding drawings against the L/C as scheduled, but TCC
failed to remit and/or pay the corresponding amount covered by the
drawings. Thus, pursuant to the agreement, PNB repossessed the
imported machinery and equipment for failure of TCC to settle its
obligations under the L/C.
            On July 18, 1975, PNB filed a petition for extra-judicial
foreclosure of the real estate mortgage over the La Vista property as
well as the mortgaged properties located at Isabela, Negros
Occidental and covered by OCT No. RT 1615. 
At the auction sale, PNB was the highest bidder with a bid price of
P1,000,001.00. However, when said property was about to be
awarded to PNB, the representative of the mortgagor-spouses
objected and demanded from the PNB the difference between the
bid price of P1,000,001.00 and the indebtedness of P499,060.25 of
the Arroyo spouses on their personal account. It was the contention
of the spouses Arroyo's representative that the foreclosure
proceedings referred only to the personal account of the mortgagor
spouses without reference to the account of TCC.  
ISSUE:
Was TCC's liability extinguished by the repossession of PNB of the
imported cement plant machinery and equipment?
HELD:
No. PNB's possession of the subject machinery and
equipment being precisely as a form of security for the advances
given to TCC under the Letter of Credit, said possession by itself
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cannot be considered payment of the secured loan. Payment would
legally result only after PNB had foreclosed on said securities, sold
the same, and applied the proceeds thereof to TCC's loan obligation.
Mere possession does not amount to foreclosure for foreclosure
denotes the procedure adopted by the mortgagee to terminate the
rights of the mortgagor on the property and includes the sale itself.  G.R. No. L-11668;       April 1, 1918
Neither can said repossession amount to dacion en pago. Dation in
payment takes place when property is alienated to the creditor in
satisfaction of a debt in money and the same is governed by sales.  Parties entered into a “contract of option” which involves a
Dation in payment is the delivery and transmission of ownership of
a thing by the debtor to the creditor as an accepted equivalent of the
performance of the obligation.  As aforesaid, the repossession of the
machinery and equipment in question was merely to secure the
payment of TCC's loan obligation and not for the purpose of
transferring ownership thereof to PNB in satisfaction of said loan.
Thus, no dacion en pago was ever accomplished.  (P40,000), Philippine currency, at six per cent interest per annum.
Phil. Lawin Bus v. CA
374 SCRA 322 (2002)
Facts:
- Lawin initially loaned from Advance Capital Corp. (ACC) Php
8M payable w/in 1 yr and guaranteed by a chattel mortgage of
Lawin’s 9 buses. Lawin was in default in its payments and was able
to pay only Php 1.8M.
- Lawin obtained its second loan of 2M payable in one month under
a promissory note. Lawin was in default again hence it asked ACC
for a restructuring of the loan despite this Lawin was still not able to
pay. The buses for foreclosed and it was sold for 2M.
- ACC sent Lawin demand letters to settle its indebtedness
amounting to hp 16,484,992.42 then subsequently filed a suit for
sum of money against Lawin. Lawin in its defense said that there
was already an arrangement to settle the obligation
A. Sale of 9 buses and its proceeds will cover for the full payment;
OR
B. ACC will shoulder the rehabilitation of the buses and the
earnings of  the operation will be then applied to the loan
Issue/Held:
W/N there was a dacion en pago bet. the parties? NO
Ratio:
- Dacion en Pago is a special mode of payment, the debtor offers
another thing to the creditor who accepts it as equivalent of
payment of the outstanding obligation. It partakes the nature of a
sale whose essential elements are a) consent b)object certain and c)
cause and the contract is perfected at the moment of the meeting of
the minds of the parties.
- In this case there was no meeting of the minds between Lawin and
ACC that the obligation would be extinguished by dacion en pago.
The receipts shows that the delivery of the 2 buses to ACC didn’t
transfer the ownership of the bus to ACC rather they were deemed
to be only as Lawin’s agent in the sale of the bus whereby the
proceeds are then to be applied as payment for the loan
De La Cavada v. Diaz
FACTS:
hacienda at Pitogo consisting of 100 and odd hectares, owned by
respondent. The said contract stipulated how the price of the
property will be paid; for which the petitioner herein may pay him
either the sum of thirty thousand pesos (P30,000), Philippine
currency, in cash, or within the period of six (6) years, beginning
with the date of the purchase, the sum of forty thousand pesos
After the execution of the contract, defendant filed a
petition with the Court of Land Registration in order to obtain the
registration of a part of the hacienda, which was granted.
Later, and pretending to comply with the terms of said
contract, the defendant offered to transfer to the plaintiff one of said
parcels only, which was a part of said "hacienda." The plaintiff
refused to accept said certificate for a part only of said "hacienda"
upon the ground (a) that it was only a part of the "Hacienda de
Pitogo," and (b) under the contract (Exhibits A and B) he was
entitled to a transfer to him all said "hacienda."
The theory of the defendant is that the contract of sale of
said "Hacienda de Pitogo" included only 100 hectares, more or less,
of said "hacienda," and that by offering to convey to the plaintiff a
portion of said "hacienda" composed of "100 hectares, more or
less," he thereby complied with the terms of the contract. Lower
Court ruled in favor of Petitioner.
ISSUE:
Whether or not the defendant was obliged to convey to the plaintiff
all of said "hacienda."
HELD:
A promise made by one party, if made in accordance with
the forms required by the law, may be a good consideration (causa)
for a promise made by another party. (Art. 1274, Civil Code.) In
other words, the consideration (causa) need not pass from one to the
other at the time the contract is entered into.
The said contract (Exhibits A and B) was not, in fact, an
"optional contract" as that phrase is generally used. Reading the
said contract from its four corners it is clearly as absolute promise
to sell a definite parcel of land for a fixed price upon definite
conditions. The defendant promised to convey to the plaintiff the
land in question as soon as the same was registered under the
Torrens system, and the plaintiff promised to pay to the defendant
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the sum of P70,000, under the conditions named, upon the
happening of that event. The contract was not, in fact, what is
generally known as a "contract of option."
An optional contract is a privilege existing in one person,
for which he had paid a consideration, which gives him the right to
buy, for example, certain merchandise of certain specified property,
from another person, if he chooses, at any time within the agreed
period, at a fixed price. The contract of option is a separate and
distinct contract from the contract which the parties may enter into
upon the consummation of the option.
A contract of option is a contract by virtue of the terms of which the
parties thereto promise and obligate themselves to enter into
contract at a future time, upon the happening of certain events, or
the fulfillment of certain conditions.
Rivera Filipina, Inc. v. CA
380 SCRA 245 (2002)
Facts:
Respondent Reyes executed a ten year renewable Contract of Lease
with Riviera involving a 1,018 square meter parcel of land which
was a subject of a Real Estate Mortgage executed by Reyes in favor
of Prudential Bank. But the loan with Prudential Bank remained
unpaid upon maturity so the bank foreclosed the mortgage thereon
and emerged as the highest bidder at the public auction sale. Reyes
decided to sell the property offered it to Reviera. After seven
months, Riviera offered to buy the property but Reyes denied it and
increased the price of the property. Reyes’ counsel informed Riviera
that he is selling the property for P6,000 per square meter and to
confirm their conversation, Riviera sent a letter stating his interest
in buying the property for the fixed and final price of P5,000 per
square meters but Reyes did not accede to said price.
Then Reyes confided to Traballo and the latter expressed interest in
buying the said property for P5,300 per square meter but he did not
have enough amount so he looked for a partner. Despite of the
impending expiration of the redemption period of the foreclosed
mortgaged property and the deal between Reyes and Traballo was
not yet formally concluded, Reyes decided to approach Riviera and
requested Atty. Alinea to approach Angeles and find out if the latter
was still interested in buying the subject property and ask him to
raise his offer for the purchase of the said property a little higher but
Riviera said that his offer is P5,000 per square meter so Reyes did
not agree.
Cypress and Trading Corporation, were able to come up with the
amount sufficient to cover the redemption money, with which Reyes
paid to the Prudential Bank to redeem the subject property and
Reyes executed a Deed of Absolute Sale covering the subject
property. Cypress and Cornhill mortgaged the subject property to
Urban Development Bank. Riviera sought from Reyes, Cypress and
Cornhill a resale of the subject property to it claiming that its right
of first refusal under the lease contract was violated but his attempts
were unsuccessful. Riviera filed the suit to compel Reyes, Cypress,
Cornhill and Urban Development Bank to transfer the disputed title
to the land in favor of Riviera upon its payment of the price paid by
Cypress and Cornhill.
Issue:
Whether or not petitioner can still exercise his “right of first
refusal”.
Held:
No. The held that in order to have full compliance with the
contractual right granting petitioner the first option to purchase, the
sale of the properties for the price for which they were finally sold
to a third person should have likewise been first offered to the
former. Further, there should be identity of terms and conditions to
be offered to the buyer holding a right of first refusal if such right is
not to be rendered illusory. Lastly, 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. Thus, the prevailing doctrine is
that a right of first refusal means identity of terms and conditions to
be offered to the lessee and all other prospective buyers and a
contract of sale entered into in violation of a right of first refusal of
another person, while valid, is rescissible.
Valenzuela v. Kalayaan Dev. Corp.
G.R. 163244 June 22, 2009
Facts: Kalayaan Development & Industrial Corporation discovered
that Spouses Jose and Gloria Valenzuela had occupied and built a
house on a parcel of land it owned, and demanded that they vacate
said property. Upon negotiation, however, petitioners and Kalayaan
entered a Contract to Sell wherein the petitioners would purchase
236 square meters of the subject property for P1,416,000 in twelve
equal monthly installments. The contract further stated that upon
failure to pay any of said installments, petitioners would be liable
for liquidated penalty at 3% a month compounded monthly until
fully paid. Kalayaan would also execute the deed of absolute sale
only upon full payment.
Petitioners were only able to pay monthly installments amounting to
a total of P208, 000.00. They then requested Kalayaan to issue a
deed of sale for 118 square meters of the lot where their house
stood, arguing that since they had paid half the purchase price, or a
total of P708,000.00 representing 118 square meters of the property.
Kalayaan, on the other hand, sent two demand letters asking
petitioners to pay their outstanding obligation including agreed
penalties.  
Gloria Valenzuela’s sister, Juliet Giron, assumed the remaining
balance for the 118 square meters of the subject property at
P10,000.00 per month to Kalayaan, which the latter accepted for
and in behalf of Gloria. Thereafter, Kalayaan demanded that
8 of 13
petitioners pay their outstanding obligation, but were unheeded.
Kalyaan then filed a Complaint fot the Rescission of Contract and
Damages against petitioners. The RTC of Caloocan rendered a
Decision in favor of Kalayaan, rescinding the contract between the
parties and ordering petitioners to vacate the premises.
Petitioners sought recourse from the CA. They aver that the CA
failed to see that the original contract between petitioners and
Kalayaan was altered, changed, modified and restricted as a
consequence of the change in the person of the principal debtor
(Sps. Valenzuela to Juliet). When Kalayaan agreed to a monthly
amortization of P10,000.00 per month the original contract was
changed, and that the same recognized Juliet’s capacity to pay and
her designation as the new debtor. Nevertheless, the CA affirmed
the RTC ruling.
Issue: If the original contract was novated and the principal
obligation to pay for the remaining half of the subject property was
transferred from petitioners to Juliet.
Held: No. Novation is never presumed. Novation is the
extinguishment of an obligation by the substitution or change of the
obligation by a subsequent one which extinguishes or modifies the
first, either by changing the object or principal conditions, or by
substituting another in place of the debtor, or by subrogating a third
person in the rights of the creditor. Parties to a contract must
expressly agree that they are abrogating their old contract in favor
of a new one. In absence of an express agreement, novation takes
place only when the old and new obligations are incompatible on
every point.
These are the indispensable requisites of novation:
1) There must be a previous valid obligation;
2) There must be an agreement of the parties concerned to a new
contract;
3) There must be the extinguishment of the old contract; and
4) There must be the validity of the new contract.
In the instant case, none of the aforementioned requisites are
present, as Kalayaan never agreed to the creation of a new contract
between them or Juliet. Kalayaan’s acceptance of the late payments
made by Juliet is, at best, an act of tolerance on part of Kalayaan
that could not have modified the contract.
The non-fulfillment by petitioners of their obligation to pay, which
is a suspensive condition for the obligation of Kalayaan to sell and
deliver the title to the property, rendered the Contract to Sell
ineffective and without force and effect. The parties stand as if the
conditional obligation had never existed; Kalayaan cannot be
compelled to transfer ownership of the property to petitioners.  fulfillment, if the latter should become impossible. The Civil Code
Visayan Sawmill Co., Inc. v. CA
219 SCRA 381 (1993)
FACTS:
On May 1, 1983, RJH Trading and Visayan Sawmill Company
(VSC) entered into a sale involving scrap iron located at VSC’s
stockyard at Negros Oriental, subject to the condition that RJH will
open a Letter of Credit (LOC) of P250,000 in favor of VSC on or
before May 15, 1983. This is evidenced by a contract entitled
`Purchase and Sale of Scrap Iron’ duly signed by both parties. On
May 17, 1983, RJH through his men started to dig and gather and
scrap iron at the VSC’s premises, proceeding until May 30 when
VSC allegedly directed RJH’s men to desist from pursuing the work
in view of an alleged case filed against RJH by Alberto Pursuelo.
VSC denied this, alleging that on May 23, 1983, they sent a
telegram to RJH cancelling the contract of sale because of the
failure of the latter to comply with the conditions thereof. On May
24, 1983, RJH informed VSC that the LOC was opened May 12,
1983 at BPI main office in Ayala, but then the transmittal was
delayed.
On May 26, 1983, VSC received a letter advice from BPI
Dumaguete stating that an irrevocable domestic LOC P250,000 was
opened in favor of Ang Tay c/o VSC on account of Armaco-
Armsteel Alloy Corporation. On July 19, 1983, RJH Trading sent a
series of telegrams stating that the case filed against him by
Pursuelo had been dismissed and demanding that VSC comply with
the deed of sale, otherwise a case will be filed against them. On July
20, 1983, VSC informed RJH that they were unwilling to continue
with the sale due to RJH’s failure to comply with essential pre-
conditions of the contract. On July 29, 1983, RJH filed the
complaint, praying for judgment ordering VSC to comply with the
contract by delivering to him the scrap iron subject thereof. VSC
insisted that the cancellation of the contract was justified because of
RJH’s noncompliance with essential pre-conditions. The RTC ruled
in RJH’s favor. The CA affirmed. Hence, this appeal.
ISSUE:
Whether or not the reasons or grounds for cancelling the contract
valid and justified.
RULING:
Yes. The reasons or grounds for cancelling the contract are
valid and justified. Both the trial court and the public respondent
erred in the appreciation of the nature of the transaction between the
petitioner corporation and the private respondent. To this Court’s
mind, what obtains in the case at bar is a mere contract to sell or
promise to sell, and not a contract of sale.
The injured party may choose between the fulfillment and
the rescission of the obligation, with the payment of damages in
either case. He may also seek rescission, even after he has chosen
provides:
Article 1593. With respect to movable property, the
rescission 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,
9 of 13
having appeared, he should not have tendered the price at the same
time, unless a longer period has been stipulated for its payment.
Article 1191. The power to rescind obligations is implied
in reciprocal ones, in case one of the obligors should not comply
with what is incumbent upon him.
In this case, there was to be no actual sale until the
opening, making or indorsing of the irrevocable and unconditional
LOC. Since what obtains here is a mere promise to sell, RJH’s
failure to comply with the positive suspensive condition cannot
even be considered a breach casual or serious but simply an event
that prevented the obligation of petitioner corporation to convey
title from acquiring binding force. Consequently, the obligation of
the petitioner corporation to sell did not arise; it therefore cannot be
compelled by specific performance to comply with its prestation. In
short, Article 1191 of the Civil Code does not apply; on the
contrary, pursuant to Article 1597 of the Civil Code, the petitioner
corporation may totally rescind, as it did in this case, the contract.
Pp’s Homesite & Housing Corp. v. CA
133 SCRA 777
FACTS:
In February 1960, herein petitioner People’s Homesite & Housing
Corporation (PHHC) passed a resolution, subject to the approval of
the Court Court Council of the PHHC’s consolidation subdivision
plan, awarding Lot 4 with an area of 4,182.2 square meters located
at Diliman, Court City to respondents Rizalino and Adelaida
Mendoza (spouses Mendoza) at a price of twenty-one pesos
(P21.00) per square meter. The Court Court Council disapproved
the consolidation subdivision plan in August 1960 but approved in
February 1964 its revised version where Lot 4 was reduced to an
area of 2,608.7 square meters. Then in October 1965, the PHHC
withdrew the tentative award of Lot 4 to the spouses Mendoza for
the latter’s failure neither to pay its price nor to make a 20% initial
deposit, and re-awarded said lot jointly and in equal shares to
Miguela Sto. Domingo, Enrique Esteban, Virgilio Pinzon, Leonardo
Redublo and Jose Fernandez, all of whom made the initial deposit.
The subdivision of Lot 4 into five lots was later approved by the
Court council and the Bureau of Lands.
The spouses Mendoza asked for reconsideration and for the
withdrawal of the said 2nd award to Sto. Domingo and four others,
and at the same time filed an action for specific performance plus
damages. The trial court sustained the award but the Court of
Appeals reversed the said decision, declared void the re-award to
Sto. Domingo and four others, and ordered the PHHC to sell Lot 4
with an area of 2,608.7 square meters at P21.00 per square meter to
spouses Mendoza.
ISSUE:
Was there a perfected sale of Lot 4, with its reduced area, between
the parties?
COURT RULING:
The Supreme Court found that there was no perfected sale of Lot 4
because the said lot was conditionally or contingently awarded to
the Mendozas subject to the approval by the Court council of the
proposed consolidation subdivision plan and the approval of the
award by the valuation committee and higher authorities.
When the plan with the area of Lot 4 reduced to 2,608.7 square
meters was approved in 1964, the spouses Court 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. Article 1475 of the Civil Court says
“[t]he 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 law governing the form of contracts.”
Indeed, there was a no meeting of the minds between the parties on
the purchase of Lot 4 with an area of 2,608.7 square meters at P21 a
square meter and the PHHC board of directors acted within its
rights in withdrawing the tentative award.
Coronel, et al. v. CA
G.R. 103577 Oct. 7, 1996
FACTS:
Coronel et al. consummated the sale of his property located in
Quezon City to respondent Alcaraz. Since the title of the property
was still in the name of the deceased father of the Coronels, they
agreed to transfer its title to their name upon payment of the down
payment of 50K. and thereafter an absolute deed of sale will be
executed.
Alcaraz’s mother paid the down payment in behalf of her daughter
and as such, Coronel made the transfer of title to their name.
Notwithstanding this fact, Coronel sold the property to petitioner
Mabanag and rescinded its prior contract with Alcaraz.
ISSUE:
WON the rescission of the first contract between Coronel and
Alcaraz is valid.
HELD:
The case is a contract of sale subject to a suspensive condition in
which consummation is subject only to the successful transfer of the
certificate of title from the name of petitioners' father, to their
names. Thus, the contract of sale became obligatory.
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With regard to double sale, the rule that the first in time, stronger in
right should apply. The contention of the petitioner that she was a
buyer in good faith because the notice of lis pendens in the title was
annotated after she bought the property is of no merit. In case of
double sale, what finds relevance and materiality is not whether or
not the second buyer was a buyer in good faith but whether 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.
The ruling should be in favor of Alcaraz because Mabanag
registered the property two months after the notice of lis pendens
was annotated in the title and hence, she cannot be a buyer in good
faith.
Tan v. Benolirao
G.R. 153820 Oct. 16, 2009
Facts: A 689 sq.m. parcel of land in Tagaytay City with TCT №.
26432, co-owned by respondent spouses Lamberto and Erlinda
Benolirao and spouses Reynaldo and Norma Taningco, was the
subject of a Deed of Conditional Sale in favor of petitioner Delfin
Tan for P 1,378,000. Pursuant to the deed, petitioner paid the P
200,000 downpayment. Then, Lamberto Benolirao died and an
extrajudicial settlement of his estate was executed which caused the
issuance of a new certificate of title over the property (TCT №.
27355) with a corresponding annotation in accordance with Section
4, Rule 74 of the Rules of Court. Despite a second extension,
petitioner failed to comply with his obligation to pay the remaining
balance due. In response to the demand letter subsequently sent by
the vendors, petitioner demanded the return of his downpayment,
contending that the annotation on the title was an encumberance on
the property that would prevent the vendors from delivering a clear
title to him. When the vendors refused, petitioner filed a complaint
for specific performance and caused the annotation of a notice of lis
pendens on the title. Respondents filed a motion for cancellation of
the notice of lis pendens and was granted. The lower court, after
due proceedings, ruled that the forfeiture was proper while the
Court of Appeals affirmed in toto hence, the present petition.
Issue: WON an annotation made pursuant to Section 3, Rule 74 of
the ROC on a COT conveying real property considered an
encumberance on the property?
Held: Court ruled in the affirmative. The litigation subject of a
notice of lis pendens must directly involve a specific property which
is necessarily affected by the judgment. While the deed does have
real property for its object, petitioner’s complaint is an in personam
action since it asks the court to compel the respondent to do
something — either to rescind or reform the contract — and enforces
his personal rights against the respondent, not against the property
subject of the deed.
The contract between the parties was merely a contract to sell
where the vendor retained title and ownership to the property until
petitioner has fully paid the purchase price. Since he had no claim
of ownership or title yet, he had no right to ask for the annotation of
a lis pendens notice on the title of the property.
Jurisprudence has established that where the seller promises to
execute a deed of absolute sale upon the completion by the buyer of
the payment of the price, contract is only a contract to sell.
An annotation is placed on new certificates of title issued pursuant
to the distribution and partition of a decedent’s real properties to
warn third persons on the possible interests of excluded heirs or
unpaid creditors in these properties. The annotation, therefore,
creates a legal encumbrance or lien on the real property in
favor of the excluded heirs or creditors. Where a buyer
purchases the real property despite the annotation, he must be
ready for the possibility that the title could be subject to the
rights of excluded parties.
The remedy of rescission under Art. 1191 cannot apply to mere
contracts to sell. In a contract to sell, the vendor remains the owner
for as long as the vendee has not complied fully with the condition
of paying the purchase price. If the vendor should eject vendee for
failure to meet the condition precedent, he is enforcing the contract
and not rescinding it. (Termination is the proper remedy.)
Unless time is of the essence to the contract, slight delay is not a
ground for rescission.
Olivarez Realty v. Castillo
G.R. 196251; July 9, 2014
Benjamin Castillo was the registered owner of a parcel of land
located in Laurel, Batangas, covered by Transfer Certificate of Title
No. T-19972. The Philippine Tourism Authority allegedly claimed
ownership of the same parcel of land based on Transfer Certificate
of Title No. T-18493. On April 5, 2000, Castillo and Olivarez
Realty Corporation, represented by Dr. Pablo R. Olivarez, entered
into a contract of conditional sale over the property. Under the deed
of conditional sale, Castillo agreed to sell his property to Olivarez
Realty Corporation for P19,080,490.00 and Olivarez Realty
Corporation assumes the responsibility of taking necessary legal
action thru Court to have the claim/title TCT T-18493 of Philippine
Tourism Authority over the above-described property be nullified
and voided with the full assistance of Castillo.
On September 2, 2004, Castillo filed a complaint for action for
rescission against Olivarez Realty Corporation and Dr. Olivarez
with the Regional Trial Court of Tanauan City, Batangas. Castillo
alleged that Dr. Olivarez convinced him into selling his property to
Olivarez Realty Corporation on the representation that the
corporation shall be responsible in clearing the property of the
tenants and in paying them disturbance compensation. However, the
corporation only paid 2,500,000.00 of the purchase price and failed
11 of 13
to comply the terms of the conditional sale. Despite demand,
Olivarez Realty Corporation refused to fully pay the purchase price.
In their answer, Olivarez Realty Corporation and Dr. Olivarez
admitted that the corporation only paid P2,500,000.00 of the
purchase price. In their defense, defendants alleged that Castillo
failed to "fully assist" the corporation in filing an action against the
Philippine Tourism Authority. Neither did Castillo clear the
property of the tenants within six months from the signing of the
deed of conditional sale.
On March 8, 2006, Castillo filed a motion for summary judgment
and/or judgment on the pleadings. He argued that Olivarez Realty
Corporation and Dr. Olivarez "substantially admitted the material
allegations of his complaint." Should judgment on the pleadings be
improper, Castillo argued that summary judgment may still be
rendered as there is no genuine issue as to any material fact.
The trial court found that Olivarez Realty Corporation and Dr.
Olivarez’s answer "substantially admitted the material allegations of
Castillo’s complaint and did not raise any genuine issue as to any
material fact." Olivarez Realty Corporation and Dr. Olivarez
appealed to the Court of Appeals which affirmed in toto the trial
court’s decision. Hence, this petition for review on certiorari.
ISSUE:
Is summary judgment rendered the Regional Trial Court correct?
RULING:
The summary judgment is correct. An issue of material fact exists if
the answer or responsive pleading filed specifically denies the
material allegations of fact set forth in the complaint or pleading. If
the issue of fact "requires the presentation of evidence, it is a
genuine issue of fact." However, if the issue "could be resolved
judiciously by plain resort" to the pleadings, affidavits, depositions,
and other paperson file, the issue of fact raised is sham, and the trial
court may resolve the action through summary judgment.
A summary judgment is usually distinguished from a judgment on
the pleadings. Under Rule 34 of the 1997 Rules of Civil Procedure,
trial may likewise be dispensed with and a case decided through
judgment on the pleadings if the answer filed fails to tender an issue
or otherwise admits the material allegations of the claimant’s
pleading.
Judgment on the pleadings is proper when the answer filed fails to
tender any issue, or otherwise admits the material allegations in the
complaint. On the other hand, in a summary judgment, the answer
filed tenders issues as specific denials and affirmative defenses are
pleaded, but the issues raised are sham, fictitious, or otherwise not
genuine.
In this case, Olivarez Realty Corporation admitted that it did not
fully pay the purchase price as agreed upon in the deed of
conditional sale. As to why it withheld payments from Castillo, it
set up the following affirmative defenses: First, Castillo did not file
a case to void the Philippine Tourism Authority’s title to the
property; second, Castillo did not clear the land of the tenants; third,
Castillo allegedly sold the property to a third person, and the
subsequent sale is currently being litigated beforea Quezon City
court.
Considering that Olivarez Realty Corporation and Dr. Olivarez’s
answer tendered an issue, Castillo properly availed himself of a
motion for summary judgment. However, the issues tendered by
Olivarez Realty Corporation and Dr. Olivarez’s answer are not
genuine issues of material fact. These are issues that can be
resolved judiciously by plain resort to the pleadings, affidavits,
depositions, and other papers on file; otherwise, these issues are
sham, fictitious, or patently unsubstantial.
Castillo’s alleged failure to "fully assist" the corporation in filing
the case is not a defense. As the trial court said, "how can Castillo
assist the corporation when the latter did not file the action in the
first place?"
Neither can Olivarez Realty Corporation argue that it refused to
fully pay the purchase price due to the Philippine Tourism
Authority’s adverse claim on the property. The corporation knew of
this adverse claim when it entered into a contract of conditional
sale. It even obligated itself under the deed of conditional sale to
sue the Philippine Tourism Authority. This defense, therefore, is
sham.
As demonstrated, there are no genuine issues of material fact in this
case. These are issues that can be resolved judiciously by plain
resort to the pleadings, affidavits, depositions, and other papers on
file. As the trial court found, Olivarez Realty Corporation illegally
withheld payments of the purchase price. The trial court did not err
in rendering summary judgment.
Romero v. CA
250 SCRA 223
Summary: A seller of a property invokes the right to rescind
the contract citing as a ground her own failure to comply with a
condition in the agreement to eject the squatters occupying the
property.
Rule of Law: Under the law on contracts, the power to rescind is
given to the injured party.
Facts: Buyer Virgilio Romero (P) together with his foreign partners
decided to put up a central warehouse in Metro Manila. They
contacted several real estate brokers and thereafter, were contacted
by Alfonso Flores and spouse to offer a parcel of land of the seller
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Enriqueta Ongsiong (D). Romero (P) found the property suitable for
a warehouse, except for the presence of squatters in the area.
A Deed of Conditional Sale was executed between Romero (P) and
Ongsiong (D) where they agreed that the seller has the obligation to
remove the squatters from the property. While Ongsiong (D) got a
favorable judgment on her eviction case against the squatters, she
did so at a much later date than the agreed upon 60-day period in
the contract. She offered to return the down payment to Romero (P),
but he refused to accept and instead offer to underwrite the
expenses for the execution of the writ.
On the expiry of the grace period, Romero (P) reminded Onsiong
(D) of her obligation to which Ongsiong (D) responded that the
Deed of Conditional Sale had been rendered null and void by virtue
of her failure to evict the squatters from the premises.
Romero (P) responded that the contract of sale between the parties
was perfected from the very moment that there was a meeting of the
minds upon the subject lot and the price. The contract had already
been partially fulfilled and executed upon receipt of the down
payment. Ongsiong (D) is precluded from rejecting its binding
effects relying upon her inability to eject the squatters from the
premises of subject property during the agreed period. Furthermore,
the provisions in the contract do not grant Ongsiong (D) the option
or prerogative to rescind and retain the property should she fail to
comply with the obligation she has assumed under the contract. The
contract clearly shows that the right to rescind and to demand the
return/reimbursement of the down payment is granted to Romero
(P) for his protection.
Instead of availing of the power to rescind the contract and demand
the return of the down payment, Romero (P) had opted to assume
the ejectment of the squatters from the premises. And he pointed out
that it is basic under the law on contracts that the power to rescind
is given to the injured party.
Finally, Romero (P) told Ongsiong (D) that she has not complied
with her obligation under their contract in good faith. It is
undeniable that she deliberately refused to exert efforts to eject the
squatters and retain the property because of the sudden increase in
the value of properties in the surrounding areas.
The lower court held that Ongsiong (D) had no right to rescind the
contract since it was she who "violated her obligation to eject the
squatters from the subject property" and that Romero (P), being the
injured party, was the party who could, under Article 1191 of the
Civil Code, rescind the agreement. The court further ruled that the
provision calling for the reimbursement of the down payment
amounted to a "penalty clause".
But the decision was reversed on appeal where the court decided
that the agreement was a contract with a resolutory condition.
Issues: May the vendor demand the rescission of a contract for the
sale of a parcel of land for a cause traceable to his/her own failure?
Ruling: No. Ongsiong's (D) action for rescission is not warranted
because she is not the injured party. The right of resolution of a
party to an obligation under Article 1191 of the Civil Code is
predicated on a breach of faith by the other party that violates the
reciprocity between them. It is Ongsiong (D) who has failed in her
obligation under the contract.
A perfected contract of sale may either be absolute or conditional
depending on whether the agreement is devoid of, or subject to, any
condition imposed on the passing of title of the thing to be
conveyed or on the obligation of a party thereto. When ownership is
retained until the fulfillment of a positive condition the breach of
the condition will simply prevent the duty to convey title from
acquiring an obligatory force. If the condition is imposed on an
obligation of a party which is not complied with, the other party
may either refuse to proceed or waive said condition (Article 1545,
Civil Code). Where, of course, the condition is imposed upon the
perfection of the contract itself, the failure of such condition would
prevent the juridical relation itself from coming into existence.
—Asuncion vs. Court of Appeals, 238 SCRA 602.
In determining the real character of the contract, the title given to it
by the parties is not as much significant as its substance. For
example, a deed of sale, although denominated as a deed of
conditional sale, may be treated as absolute in nature, if title to the
property sold is not reserved in the vendor or if the vendor is not
granted the right to unilaterally rescind the contract predicated on
the fulfillment or non-fulfillment, as the case may be, of the
prescribed condition.
—Dignos v. Court of Appeals, GR L-59266, February 29, 1988, 158
SCRA 375.
The term "condition" in a perfected contract of sale pertains to the
compliance to a prestation by one party and upon fulfillment, the
demand of the reciprocal prestation by the other party. The
reciprocal obligations referred to would normally be, in the case of
Romero (P), the payment of the agreed purchase price and, in the
case of the Ongsiong (D), the fulfillment of certain express
warranties (which, in this case, is the timely eviction of the
squatters on the property).
It is futile to challenge the agreement here as not being a duly
perfected contract. A sale is at once perfected when a person (the
seller) obligates himself, for a price certain, to deliver and to
transfer ownership of a specified thing or right to another (the
buyer) over which the latter agrees.
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