SALES – ATTY.
SARONA (2014) | 2 SANCHEZ ROMAN
June 10, 2014 – Algene
Our subject is Sales. This subject is quite confusing because
hindi sunod-sunod ang codal provisions. Our discussions will
be based on the stages of the contract of sale. Make sure you
remember the terms from your obligations and contracts
because those are applicable in Sales.
As introduction and refresher in relation to Sales and
Obligations & Contracts, we have Article 1157 – sources of
obligations.
Art. 1157. Obligations arise from:
(1) Law;
(2) Contracts;
(3) Quasi-contracts;
(4) Acts or omissions punished by law; and
(5) Quasi-delicts.
We’re talking about a contract here, a contract of sale, which
is a source of obligation. Remember, in ObliCon, contract is
defined under Article 1305.
Art. 1305. A contract is a meeting of minds between two
persons whereby one binds himself, with respect to the
other, to give something or to render some service.
Contract of sale is defined under Article 1458, the first
provision under Title VI – Sales.
Art. 1458. By the contract of sale one of the contracting
parties obligates himself to transfer the ownership and to
deliver a determinate thing, and the other to pay therefor a
price certain in money or its equivalent.
A contract of sale may be absolute or conditional.”
We have here a contract, an agreement, a meeting of the
minds between two parties. We have these parties:
1. Vendor or Seller – who obligates himself not only to
deliver a determinate thing but also to transfer the
ownership thereof to another party (buyer or
vendee)
2. Buyer or Vendee – who has the obligation to pay for
a price certain or its equivalent
By looking at Article 1458, we already know the obligations of
the parties there. Again:
1. Seller or Vendor
a. Deliver the thing or transfer possession
of the thing
b. Transfer ownership
2. Buyer or Vendee
a. Pay the price or the equivalent
What are the three types of obligations?
1. To give
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2. To do
3. Not to do
Art. 1156. An obligation is a juridical necessity to give, to do
or not to do. (n)
If the obligation is to give, what kind of obligation is involved?
Real obligation. Remember that contract to sale is a real
obligation, it is an obligation to give.
Why is it important to take note that the contract of sale is a
real obligation? Because the cause of action is for specific
performance. You compare this with personal obligation or
obligation to do. In personal obligation, there is no specific
performance. Otherwise, it would constitute an involuntary
servitude.
The general rule in perfection of the contract is that it is
consensual or by the meeting of the minds.
We have to know when a contract of sale is perfected. Why?
So we can know when the parties are bound to their
respective obligations. Remember, they are bound to comply
with their specific obligations as stipulated in the contract
and all consequences thereof.
You can also relate this with Article 1191 on how to rescind
which is implied in reciprocal contracts. In a contract of sale,
it involves bilateral and reciprocal obligations.
Art. 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.
The injured party may choose between the
fulfilment and the rescission of the obligation, with the
payment of damages in either case. He may also seek
rescission, even after he has chosen fulfilment, if the latter
should become impossible.
The court shall decree the rescission claimed,
unless there be just cause authorizing the fixing of a period.
This is understood to be without prejudice to the
rights of third persons who have acquired the thing, in
accordance with Articles 1385 and 1388 and the Mortgage
Law.
Remember also that in a contract of sale, for civil obligations,
apply chapter on provisions in the Civil Code or apply the
general rules in contracts.
We also have here a positive obligation because the
obligation is to give. In contract of sale, we are also talking of
a determinate thing or subject matter or at the very least,
determinable. We will be discussing this when we reach
Article 1460.
Art. 1460. A thing is determinate when it is particularly
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designated or physical segregated from all other of the same the contract of sale – from negotiation to perfection to
class. consummation.
The requisite that a thing be determinate is
satisfied if at the time the contract is entered into, the thing So the stages are:
is capable of being made determinate without the necessity 1. Negotiation - There is an offer which is unqualified.
of a new or further agreement between the parties. (n) Then there is an acceptance which is absolute. So
just like all other contracts, if there is a counter-
With regard to elements of the contracts, what are these? offer, no contract of sale.
1. Consent – meeting of the minds 2. Perfection – Both parties have agreed. This is the
2. Object – must be certain or determinate shortest state. As long as there is meeting of the
3. Cause or Consideration minds, the contract is perfected.
Ito rin yung elements sa contract of sale. Essential elements. 3. Consummation – Parties perform their respective
obligations.
What is the effect if there is one element lacking?
There is no valid contract of sale. As part of introduction, we will also discuss classifications as
to contracts.
If there is a defect in one of the elements, for example in
consent, the effect is that the contract is voidable. An How is a contract perfected?
example is there is that one of the contracting parties is a 1. Consensual – by mere consent (general rule)
minor or when there is violence or fraud. 2. Real – by delivery
3. Compliance with the formalities required by law: if
We also have natural elements which are inherent. Even if it is required to be in writing, then it must be in
the parties have not agreed to “this type of stipulation,” the writing; otherwise, the contract is invalid
law provides that these elements are deemed to exist in
every contract of sale. We have:
Examples: Warranty against eviction; Warranty against 1. Formal contracts
hidden defects (unless otherwise stipulated by the parties, 2. Solemn contracts
provided they are not contrary to law.)
As to their equivalence:
We also have accidental elements which refer to those 1. Onerous
stipulated by the parties like the conditions imposed, liability 2. Gratuitous – just like a contract of donation
for interests, penalties and etc. 3. Remuneratory

Also remember that under Article 1458, the contract of sale As to dependence with another contract:
may be: 1. Principal contract – independent from any contract
1. Absolute 2. Preparatory contract – example is contract of agency
2. Conditional 3. Accessory contract – example is the contract of
mortgage; you have a loan which is the principal and
What are the two types of condition? the accessory is mortgage (note: accessory contract
1. Suspensive is not valid without a principal contract because its
2. Resolutory existence depends with the validity of a principal
contract)
We can still have a contract of sale even if it is subject to
certain types of conditions. As to the parties obligated:
1. Unilateral contracts
We must also distinguish a contract of sale from a contract to 2. Bilateral contracts
sell. Take note of the distinctions by focusing on the cases
and jurisprudence. Essentially, iba ang two contracts kasi in a As to the name provided by law:
contract to sell, the full payment of the price is the condition 1. Nominate contracts
for the transfer of the ownership. You may have the 2. Innominate contracts
possession as the vendee or the buyer but if you haven’t paid a. Do ut des
yet, then hindi matransfer sayo ang ownership. But such b. Do ut facias
provision must be agreed upon by the parties. c. Facias ut des
d. Facio ut facias
Again, I would like to emphasize that the flow of our
discussion is not numerical. We base it with the perfection of As to the risk of fulfilment:
 SALES – ATTY. SARONA (2014) | 2 SANCHEZ ROMAN
1. Commutative
2. Aleatory
Why am I pointing out these different classifications of the
contract? So you can know where the contract of sale falls.
 A contract of sale is consensual, perfected by the
meeting of the minds.
 A sale is onerous.
 It is principal.
 It also bilateral (there are obligations from both
parties).
 It is nominate. Article 1458 is very clear that it is
called a contract of sale.
 It is commutative. But take note that it is possible
that there is a valid contract of sale even if it is
aleatory.
o What do we mean here by aleatory
contract? Consideration is not equivalent to
what is received. The best example of a
contract of sale with aleatory nature is the
sale of a lotto ticket. Nevertheless, the
contract is valid because the subject of this
type of contract is the hope, hindi yung
kung ano ang mapanalunan mo.
Take note of the important articles from your Obligations and
Contracts before we go to the contract of sale.
June 17, 2014 – Emiko
ACAP vs. CA: Here, there was a deed of sale but it was not
the contract of issue. If you look at the facts of the case, the
said property was registered in the name of Spouses Vasquez.
This property was then inherited by Felixberto, and Felixberto
executed a deed of heirship and a deed of absolute sale in
favor of Pido, which was the basis of Pido to be able to collect
from Acap rentals. Now here comes delos Reyes alleging that
the heirs of Pido executed a document entitled declaration of
heirship and waiver of rights in his favor and therefore he
alleged that is the basis of his right to collect rentals from
Acap. However, the Supreme Court here distinguished
between a deed of sale and a declaration of heirship and
waiver of rights.
Deed of Sale Heirship and Waiver of Rights
Transfer of ownership and Extrajudicial settlement,
deliver a determinate thing which happens only between
and the other party to pay a and among the heirs (thus
price certain delos Reyes could not
acquire the property as he
was not a co-heir)
Similarities
Execution of declaration of heirship can be considered valid if
made in the favor of an heir. It is also a mode of extinction of
ownership
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The Supreme Court also furthered ruled that while the
transaction may be binding on both parties, in this case the
third party Acap was not a party thereto and therefore was
not bound to respect it.
Also last time we discussed the two parties involved in the
said contract, and we emphasized that the contract of sale is
a real obligation: an obligation to give wherein the subject
matter is determinate or at least a determinable subject
matter as mentioned in 1460. Let us have the case of Delpher
vs. CA.
DELPHER vs. CA: I included this case because I want to
emphasize the basic rule: corporations are separate and
distinct from its shareholders. Here, the Supreme Court ruled
that was no transfer of actual ownership by the Pachecos to a
third party as the Pacheco family merely changed their
ownership from one form to another. Basic in law,
corporations have a distinct and separate identity from their
shareholders. So here, there was a transfer of ownership
through the deed of sale. Therefore, there was a violation of
the right of first refusal of Hydropipes.
TOYOTA SHAW vs. CA: No contract of sale according to the
facts of the case. Neither of the agreement or vehicle sales
proposal show obligation to transfer ownership of a
determinate thing and there was no correlative obligation to
pay a price certain as to result to a contract of sale. The
provision of the downpayment made no reference to a sale.
At the very least it could have been a purchase on
installments but nothing was mentioned as to the full
purchase price and the manner in which the installments
would be paid. At the most, what we have here is only the
negotiation stage and it never reached the perfection stage in
the absence of the meeting of the minds between the vendor
and the seller.
In the case of Polytechnic, were all the requisites (meeting of
the mind, subject matter, price certain) for a contract of sale
present?
POLYTECHNIC UNIVERSITY vs. CA: A brief discussion on the
right of first refusal:
The right of first refusal is usually given to a lessee or third
person in which before the vendor or the owner can sell the
property to third persons he must first offer the said property
for sale to whom the said right has been given. If he refuses
to purchase the said property, then that’s the time the
vendor can sell the property to third persons. Otherwise the
vendor will be liable.
In this case Firestone was given a right of first refusal by NDC
regarding the subject property. However there was this
memorandum in which the property was transferred to PUP
in consideration for the cancellation of NDC’s liabilities in
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favor of the government, since PUP is a state university. It is
thus not necessary that the consideration be in the form of
payment. The fact that there was a cancellation of the liability
is a sufficient consideration that will give rise to a valid
contract of sale. Aside from that there was a valid subject
matter, and there was evidence that there was meeting of
the minds between NDC and PUP, because in that
memorandum order there is that whereas clause wherein
PUP has expressed willingness to acquire said properties and
NDC has expressed willingness to sell the property to PUP.
Since there was a valid contract of sale, then there was a
violation of the right of first refusal of Firestone.
MANILA CONTAINER vs. PNB: In this case, there was no
perfected contract of sale as there was no meeting of the
minds as to the price, which, as we have emphasized is an
essential element to the agreement to sell property. A
contract of sale as we have emphasized is consensual in
nature and is perfected upon the meeting of the minds.
What happened in this case was that there was an offer, and
then there was a counter-offer, which means the initial offer
was rejected. There was no meeting of the minds, no
absolute acceptance which would result to a valid contract of
sale. The statement of account cannot be considered as
evidence that there was meeting of the minds. It was just a
statement of account, a computation of the amount which
the petitioner was obliged to pay in case the respondent
would later agree to sell the property.
Had the counter-offer been accepted absolutely, it would
have resulted to a perfected contract of sale. But as per the
facts of the sale, it was rejected. They did not agree with
regard to the price thus there was no sale.
CRUZ vs. FERNANDO: Here you have a kasunduan which the
Supreme Court held could not be considered as a contract of
sale but rather a contract to sell. Going over the terms and
conditions of the kasunduan, it would show that it is a
contract to sell rather than a contract of sale because of the
conspicuous absence of a definite manner of payment of the
purchase price. When we get to discuss price, we’ll get to see
when the manner of payment becomes an important
element. The manner of payment is an essential element
before a valid sale can exist. The kasunduan did not provide
for this.
Petitioners likewise failed to abide by the express condition
that they should relocate to the rear part of the property.
Indeed the kasunduan states that they were selling the rear
portion, and not the front portion of the property.
One of the distinctions between a contract of sale and
contract to sell is that a contract to sell is not subject to
rescission. There can be no rescission of an obligation that is
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non-existent considering that the suspensive condition, which
is the payment of the purchase price, has not yet happened.
VELARDE vs. CA: Here there was a valid contract of sale,
wherein the seller agrees to transfer ownership and deliver a
determinate thing and the buyer agrees to pay the purchase
price. Here, private respondents had already performed their
obligation through the execution of the deed of sale. As we
will get to the stage of consummation, we will know that the
deed of sale, execution thereof is considered as constructive
delivery. Therefore, that would result to an effective transfer
of ownership to petitioner. Petitioner however on the other
hand did not perform their correlative obligation to pay the
purchase price in the manner they agreed upon. Worse, they
included conditions that did not exist at the time they
entered into the contract of sale.
Here, private respondents are given the right to rescind the
obligation on the basis of 1191. Power to rescind is implied in
contracts involving reciprocal obligations, as in a contract of
sale.
Last meeting we already discussed the different stages in the
contract of sale.
SAN MIGUEL vs. SPOUSES HUANG: In the case of San
Miguel, the stages of a contract were discussed.
1. Negotiation stage – covers the period from the time
the prospective parties indicate their interest in the
contract until the time the contract is perfected. So
here we have offers, counter-offers, until there is
perfection.
2. Perfection – takes place upon the meeting of the
minds of the parties and concurrence of all the
essential elements of a sale
3. Consummation – where parties perform the
respective undertakings culminating in the
extinguishment thereof.
Here the parties never got past the consummation stage. The
fact that the 1million was accepted as an earnest deposit
does not indicate that there was a perfected contract of sale.
If there is earnest money, that is already evidence of a
perfected contract of sale. Sort of a downpayment. But here,
the payment could not be considered as the earnest money
contemplated under the law, which is evidence of a perfected
contract of sale. It is not the giving of earnest money that
would give rise to a perfected contract of sale, but rather the
concurrence of all the essential elements. In the absence of
the essential elements, there is only negotiation.
Last meeting we were also able to discuss the essential
characteristics of a contract of sale. It is consensual as
perfected by the meeting of the minds, onerous, principal,
bilateral, nominate and as a general rule commutative in
nature.
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It is nominate because the law clearly gave a particular name
to this type of contract as evidenced by 1458. Its nature and
consequences are governed by the rules of Civil Code
specifically the chapter dealing with Sales.
Also we have emphasized that it is principal in nature because
it can stand on its own. Its existence is not dependent on
another contract. When parties enter into a contract of sale,
their objective is the contract of sale itself. To achieve within
its essence the objective of the transaction, transfer and
delivery of the property in exchange for payment of price,
and simply not in preparation for another contract.
Please take note that in all our discussions regarding
contracts, to determine the real character of the contract, go
beyond the title of the contract. It may be denominated as a
contract of sale, but look at the facts of the case, the
intention of the parties if it is really a contract of sale or some
other form of contracts. The title given by the parties of the
contract is not significant as to its substance. It looks at the
intention of the parties but not the nomenclature thereof.
Contracts are not defined by the parties but by the principles
of law.
As mentioned earlier, a contract of sale is perfected by mere
consent as differentiated from solemn contracts. It is valid
and binding upon the meeting of the minds as to subject
matter and price. Actual delivery of the subject matter and
payment is not necessary for perfection of the contract of
sale. They are not necessary components to establish the
existence of a valid sale.
Non-performance merely becomes the legal basis for
remedies, such as specific performance or rescission with
damages in either case. Obligations arising therefrom have
the force of law between them.
Since a contract of sale is perfected by mere consent, take
note however that there may be modalities that will affect
the consent, but not necessarily the validity of the contract of
sale. An example would be if the contract of sale is subject to
a suspensive term or condition. Remember second paragraph
of 1458, the contract of sale may be absolute or conditional.
Even if it is subject to a condition , it does not mean there is
no meeting of the minds. The meeting of the minds must be
complete. Even as to that condition, whether it be suspensive
or resolutory. Even if there is delivery, there is no agreement
as to the price, there could be no contract of sale. It is
possible that the subject matter has already been delivered
but then there could be no valid contract of sale.
Now even if we say that the contract of sale is consensual,
perfected by mere consent, under the different laws of the
Philippines you will see that there can still be valid contracts
of sale even without the consent of the owner. But it’s not
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because of as an exception to the nature of contracts being
consensual, but rather the law provides for this contract of
sale. One would be expropriation. Even if that is your
property, with sentimental value, once the government
needs that for public use such as widening of roads,
construction of bridges, you have no choice. You have no
choice. The expropriation is still a sale to the government,
since you will have to transfer ownership of that property to
the government in exchange for just compensation.
Also, when you get to discuss civil procedures, we have
ordinary execution sales. We have liability on obligation, and
a complaint was filed against you for a collection of sum of
money. After trial, the trial court ruled you are liable, but
then you refused to pay. The creditor through the sheriff can
look for properties to sell, and will sell it as long as they are
not exempted.
The same thing with foreclosure sales. You borrowed money,
and as a form of security you executed a real estate
mortgage, wherein failure to pay your loan would mean that
the property subject to the mortgage will be sold in a
foreclosure sale and will be sold to the highest favor. Again,
even if you don’t want to sell it, but since you agreed to
subject it to mortgage, it may still be sold.
There are times when you will be reluctant to sell your
property, but that doesn’t mean there is no consent. Iba ang
hesitant ka lang, pero pumayag ka lang eventually, sa pinilit
ka. In the latter, it becomes voidable for lack of consent. In
the former, there is still a valid contract of sale.
Contracts of sale are perfected by mere consent, which is the
general rule according to 1315.
Art. 1315. Contracts are perfected by mere consent, and
from that moment the parties are bound not only to the
fulfillment of what has been expressly stipulated but also to
all the consequences which, according to their nature, may
be in keeping with good faith, usage and law.
From that moment, parties are bound not only to the
fulfilment of what has been expressly stipulated, but also to
the consequences which according to their nature may be in
keeping with good faith, usage and law. But the law may
provide that it is to be perfected with delivery, such as in
1316, which provides that contracts of pledge, deposit and
commodatum, are perfected upon delivery.
QUIJADA vs. CA: Here, what you have is a contract of sale
which is executed at the time wherein the seller is not the
owner thereof. But remember that the parcel of land was
subject to a condition that the land will be used for a
provincial high school. Now since the condition was not
complied with, the ownership of the property was reverted
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back to the original owner, Quijada. Upon reversion, she died,
thus her heirs had the right over the property.
Remember that ownership is not required for the perfection
of a contract of sale. Like we said, a contract of sale is
perfected by the meeting of the minds as to the subject
matter, price, and terms of the payment of the price. What
the law requires is that the seller has the right to transfer
ownership at the time the thing is delivered.
Perfection does not transfer ownership. Perfection is
different from consummation stage. Sa consummation stage,
andun yung obligation to transfer ownership. A perfected
contract of sale cannot be challenged on the ground of non-
ownership on the part of the seller, hence the sale is still
valid. The consummation of the perfected contract is another
matter. It occurs upon the constructive or actual delivery of
the subject matter to the buyer by the seller or her
successors-in-interest subsequently acquires the ownership
thereof. Such circumstance happened in this case when
petitioners became the owners of the subject property upon
reversion of the ownership of the land to them. Ownership
was subsequently transferred to the vendee, Montejar, and
those who claimed the right from him, because 1434 provides
that title passes by operation of law to the buyer. Since may
right na yung nagbenta, si Trinidad in favor fo Montejar, then
pagbalik ng ownership kay Trinidad, magtake effect na yung
contract of sale which is valid. This essentially transferred the
ownership to Montejar and those persons claiming a right
under him by virtue of the delivery.
LAFORTEZA vs. LACHUCA: Here there was a valid contract of
sale. The memorandum of agreement shows that the
transaction is considered sale and lease. It is a lease because
prior to the issuance of the title, which was a condition for
the payment of the balance, the respondent was considered
to be a lessee for six months. There was already an
agreement for the price, which is 630,000; and there was
already payment of 30,000 as earnest money. It was agreed
that the balance was to be paid only upon the issuance of the
new title. There was already meeting of the minds between
the parties in this case, notwithstanding the condition that
the balance will be paid thereafter. Remember, payment of
the price is not necessary for the perfection of the contract of
sale. The issuance of the new title and the execution of the
extrajudicial settlement were not conditions that determined
the perfection of the contract of sale.
As discussed by the Supreme Court, we have to distinguish
conditions imposed upon the perfection of a contract as to
those imposed on the performance of an obligation. The
payment of the balance here is a condition imposed on the
performance of an obligation, wherein failure to comply gives
the party the choice to either refuse to proceed with the sale
or waive the condition. On the other hand, a condition that is
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imposed on the perfection of a contract, the failure thereof
results in the failure of a contract.
Here, there was already a perfected contract. The condition
was to the payment of the balance was merely a condition on
the performance on the obligation.
Also take note that here, earnest money was treated really as
the earnest money contemplated by law. Considering that
there was already a meeting of the mind between the parties,
the earnest money was considered as part of the purchase
parts and proof of the perfection of the contract.
Also as we emphasized earlier, you interpret contracts not in
accordance to the name or nomenclatures used by the
parties but rather their intentions. Although the
memorandum of agreement was also denominated as a
contract to sell, looking at the intention of the parties
through the stipulations therein, it was really a contract of
sale. The mere fact that the obligation of the respondent to
pay the balance of the purchase price was made subject to
the condition that the petitioners first deliver the title of the
house and lot does not make the contract a contract to sell
because such condition is not inconsistent with a contract of
sale. When we go to distinctions, klaro kasi yan, nakalagay
talaga dun na ownership will not be transferred until full
payment of the purchase price.
FULE vs. CA: So again, a contract of sale is perfected by the
meeting of the minds. The records of the case is bereft of any
evidence manifesting that private respondents employed
fraud in order to entice petitioners to enter into the contract.
Fraud here, to nullify a contract, must be that fraud which
vitiated consent. In other words, through that fraud, he
entered the contract to sale. Fraud must be duly proven in
court, but in this case there was no evidence to prove that
private respondents employed fraud. Neither is there any
evidence to show that Dr. Cruz induced petitioner to sell his
property in exchange thereof. It even appears that it was
petitioner who induced Dr. Cruz to believe that his property
was worth exchanging with that piece of jewelry.
Ownership over the parcel of land and the pair of diamond
earrings have been transferred to Dr. Cruz and petitioner
respectively, upon delivery thereof. There is thus no legal
basis for the nullification of the contract of sale for failure to
prove that here there was vitiation of consent through fraud.
So it’s not mere allegation, when you say fraud, it must be
duly proven in court.
VDA. DE APE vs. CA: What is missing here is the consent on
the part of Fortunate. Again a contract of sale is consensual.
For a valid consent, the following requisites must be
considered:
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1. Intelligent – wherein the party must have an exact
notion of the matter to which it refers
2. Free
3. Spontaneous
Intelligence in consent is vitiated by error; freedom by
violence, intimidation or undue influence; spontaneity by
fraud.
In this case, and as we emphasized in Fule, he who alleges
fraud or mistake must substantiate his allegation because the
presumption is that a person takes ordinary care for his
concerns and that privately have been entered into fairly and
regularly. Exception here is Article 1332 which you have
discussed under obligations and contracts, wherein when one
of the parties is unable to read, or if the contract is in a
language not understood by him, and mistake or fraud is
alleged, the person enforcing the contract must show that
the terms thereof have been fully explained to the former.
Art. 1332. When one of the parties is unable to read, or if
the contract is in a language not understood by him, and
mistake or fraud is alleged, the person enforcing the
contract must show that the terms thereof have been fully
explained to the former.
It was a fact that Fortunato was illiterate, and therefore
private respondent as the one seeking to enforce the alleged
contract of sale, has the burden to prove that the terms of
agreement were fully explained to Fortunato, but she failed
to do so. While she claimed in her testimony that the
contents of the receipt were made clear to Fortunato, such
allegation was debunked by another witness.
June 24, 2014 – Knizza
Okay so last meeting, we have already discussed a few of the
essential characteristics of contract of sale. We have already
emphasized that a contract of sale is nominate and also
principal in its nature. It is important that a contract of sale is
consensual. In other words, it is perfected by mere consent.
Always remember that payment of the purchase price is not a
requisite for the validity and perfection of the said contract of
sale. Delivery of the subject matter is not necessary in the
perfection in the contract of sale.
Now we go to the remaining essential characteristics of a
contract of sale.
That a contract of sale is Bilateral and Reciprocal.
What do you mean by Bilateral? When you say that the
obligations in the contract of sale are bilateral in nature? Do
we mean that every contract that is bilateral is also
reciprocal? Or is it possible that there are also contracts
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entered into by other parties wherein it is bilateral but not
reciprocal?
If we are talking about reciprocal contracts, we are saying
that the obligations of each of the party is from the same
cause of action. So when we say it's not reciprocal, we say
that there are obligations of the parties but bot arising from
the same transaction. Could you give an example? What
happened in the case of Cortez vs CA?
Do we have a contract of sale here? Yes. So there is no
question as to the existence thereof. Now when is it
important to determine when do we have a reciprocal
obligations? So who is in delay here? When is a person or a
party considered in default or in delay? By judicial or extra-
judicial demand. So in this case, who is in delay? Was there a
demand? What is the rule regarding reciprocal obligations?
CORTEZ vs. CA: So you have here a contract of sale. Again we
know that a sale is a bilateral contract wherein each of the
respective parties have their obligations to perform. Bilateral
nga e—two or more parties have their obligations. Now in a
contract of sale, it is reciprocal because the obligations of the
parties arise from the same cause wherein each of the parties
is a debtor and creditor of each other. So the obligation of the
parties is dependent upon the obligation of the other
wherein since it is reciprocal in nature, it is to be performed
simultaneously.
I previously asked, “Is it possible to have a contract which is
bilateral but not reciprocal?” Or you have an agreement
which is bilateral but not reciprocal in nature? Well, a
contract of sale is not an example obviously. But there could
be an arrangement wherein bilateral—ang both parties are
debtor and creditor of each other—but not arising from the
same cause of action.
An example would be Ms. Munoz would borrow money from
Ms. Andoy. So sya, she has an obligation to pay. But let us say
Ms. Andoy would borrow the book of Ms. Munoz. So as to
each other, they have their respective obligations. Meron
silang bilateral agreement but did not arise from the same
cause of action. Merong contract of loan wherein Ms. Munoz
borrowed money and we also have a contract of
commodatum wherein Ms. Andoy has the obligation to
return the book. That is an instance. So not every contract
which is bilateral in nature—not every agreement which
involves bilateral obligations—is necessarily reciprocal in
nature.
However, it is very clear in the case of Cortez vs CA that it is a
contract of sale. So it involves reciprocal obligations. Again, in
obligations arising from the same cause, each party is a
creditor and a debtor of the other and their obligations have
to be performed simultaneously so that the performance of
one is conditioned upon the simultaneous fulfilment of the
other.
 SALES – ATTY. SARONA (2014) | 2 SANCHEZ ROMAN
So here Cortez admitted that he agreed that the
corporation's full payment of the sum of P2.2M would
depend upon the delivery of the titles. So the execution of
the instruments as appearing in the deed of sale and each
event would arise for the corporation's obligation to pay in
full cannot be construed as referred solely to the signing of
the deed. Obviously here, since Cortez did not perform his
obligation to have the deed notarized and surrender the
same together with the title, the trial court erred in
concluding that he performed his part and that it is the
corporation alone that must release. Remember here we
have the compensatio morae, wherein both parties were in
delay. Considering that their obligation was reciprocal,
performance thereof must be simultaneous. Since both
parties were in delay, that mutual delay cancels out the effect
of the cause. So no one is guilty of delay essentially.
So here, is it subject to rescission? Hindi, kasi may kasalanan
din. So the party asking for rescission was in default. Hence,
rescission is not available therein.
So what are the legal effects of a reciprocal contract? We
have here Article 1191:
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.
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 fulfillment, if the latter
should become impossible.
The court shall decree the rescission claimed, unless
there be just cause authorizing the fixing of a period.
This is understood to be without prejudice to the
rights of third persons who have acquired the thing, in
accordance with articles 1385 and 1388 and the Mortgage
Law. (1124)
So the power to rescind is implied in reciprocal obligations. So
no need to stipulate that parties have the right to rescind. But
of course, take note that the person entitled for such
rescission shall only be the injured party. The party who is in
default or delay cannot demand for rescission like here in the
case of Cortez.
Now neither party incurs in delay if the other party does not
comply or is not ready to comply. I asked a while ago “Is
demand necessary for delay in a reciprocal obligation?” When
one of the parties fullfill his obligation, default by the other
party begins even if there is no demand. So take note of that.
In your readings, you may encounter the word sinelagmatic
contract. That refers to a reciprocal contract as well.
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We also have the case of Almocera vs Ong.
What happened here? Do we have a contract of sale here?
How did the Supreme Court arrive at that notion that what
they have entered into was a contract to sell? Now,
notwithstanding that it was considered as a contract to sell,
how did the Supreme Court discuss the reciprocal obligations
of the parties here? As you have mentioned a while ago,
there was an issue regarding delay. Was there delay here?
ALMOCERA vs. ONG: So again, you have here another case
which distinguished a contract of sale from a contract to sell
again, with regard to the non-payment of the price in a
contract of sale is a negative resolutory condition. Sa contract
to sell, payment is a positive suspensive condition. Again, sa
contract of sale, vendor has lost and cannot recover the
ownership if it has been delivered, unless the contract of sale
is set aside. But in a contract to sell, the title remains with the
vendor if the vendee does not comply with the condition
precedent in making the payment at the time specified.
Here, petitioner and builders failed their obligations. So
respondent has to pay the balance. Respondent does not ask
that ownership has to be transferred to him but merely asked
that the amount of downpayment be returned to him. So
Article 1169 was discussed.
Article 1169. Those obliged to deliver or to do something
incur in delay from the time the obligee judicially or
extrajudicially demands from them the fulfillment of their
obligation.
However, the demand by the creditor shall not be
necessary in order that delay may exist:
(1) When the obligation or the law expressly so
declare; or
(2) When from the nature and the circumstances of
the obligation it appears that the designation of the
time when the thing is to be delivered or the service
is to be rendered was a controlling motive for the
establishment of the contract; or
(3) When demand would be useless, as when the
obligor has rendered it beyond his power to
perform.
In reciprocal obligations, neither party incurs in delay if the
other does not comply or is not ready to comply in a proper
manner with what is incumbent upon him. From the
moment one of the parties fulfills his obligation, delay by
the other begins. (1100a)
Again, this has a relation to the reciprocal obligation. So the
contract subject to this case, even it's a contract to sell, it still
involved reciprocal obligations. Failure to fulfill their
obligations, they incur delay and there is liability for damage.
Take note also here that the SC pointed out that demand is
not necessary in the instant case because of the exception na
 SALES – ATTY. SARONA (2014) | 2 SANCHEZ ROMAN
when demand is considered useless. This is because even if
there was demand, there was an impossibility to comply with
the obligation because of the failure to pay the loan with
Land Bank.
So that is the nature of a contract of sale being bilateral and
reciprocal.
Also, a contract of sale is considered as Onerous. Why?
Because it imposes a valuable consideration as a prestation.
Now since we are talking of onerous contracts, remember to
apply Article 1378 in the interpretation of contracts.
Article 1378. When it is absolutely impossible to settle
doubts by the rules established in the preceding articles,
and the doubts refer to incidental circumstances of a
gratuitous contract, the least transmission of rights and
interests shall prevail. If the contract is onerous, the doubt
shall be settled in favor of the greatest reciprocity of
interests.
If the doubts are cast upon the principal object of
the contract in such a way that it cannot be known what
may have been the intention or will of the parties, the
contract shall be null and void. (1289)
It is wherein greater reciprocity seems sound same in an
onerous contract. Because if it is a gratuitous contract,
remember, least transmission of rights in the interpretation
of the said contract.
Now we have here the case of Gaite vs Fonacier. What
happened here?
Why did the court discuss these characteristics of the
contract of sale being onerous? Why was it important for the
SC that the sale is an onerous contract? There is something of
value. When we say that the contract is onerous, does it
mean that it is commutative at the same time? What's the
difference between onerous and commutative? Or do they
refer to the same thing?
GAITE vs. FONACIER: So in Gaite, the SC ruled that a sale is
essentially onerous. So there must be greater reciprocity of
interest as provided under Article 1378. Contracts of sale are
normally commutative and onerous, not only because the
parties assumed correlative obligations, but each party
anticipates performance from the other registrar.
Now onerous is different from commutative. Onerous, again,
we are talking about a valuable consideration in a contract of
sale. When it is commutative, a thing of value is exchanged
for equal value. But of course, it is not required na exact ang
value. It is sufficient that the parties believe that in all
honesty that he received good value for what he has
transferred. So even if there was a reduction in the amount
or that there is a discount given, that would nevertheless be
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considered as a contract of sale which does not destroy the
commutative nature of a contract of sale.
We have here the case of Buenaventura vs CA. What
happened here?
Do we have a valid contract of sale here? How about the
contentions of the petitioner that there was no valid
consideration? Their first contention was that there was no
actual valid consideration? Why is it that that the petitioners
have the burden to prove that the deeds of sale were
simulated? What was the presumption under the law on
consideration? Under Obligations and Contracts, what was
the presumption on considerations? That it exists, diba? So if
you allege that there was no consideration as the allegation
here of the plaintiffs, then you have the burden of proof to
say that wala talagang consideration and that the deed of
sale was absolutely simulated because of the absence of
consideration. But dito, they failed to do so. Hence, the
presumption still exists.
Now how about their allegation that there was a gross
inadequacy of the price?
BUENAVENTURA vs. CA: So again, no requirement that the
price be equal for a contract of sale to be considered as valid.
All the respondents believe that they received the equal
value of what they paid. So that is what is important. Also,
gross inadequacy of the price does not affect the contract of
sale. We will discuss this further when we get to the price and
consideration.
Also remember, as I've mentioned earlier, consensual
contracts ang contract of sale. It is perfected by mere
consent. It is not perfected by mere act of payment that
determines the validity of the contract as payment of the
price has nothing to do with the perfection thereof. Payment
of the price goes into the performance of the contract—sa
consummation stage na.
There is a difference between failure to pay and lack or
absence of consideration. Failure to pay would not invalidate
a contract of sale. But lack of consideration, there is no
meeting of the minds as to the consideration, would not
therefore give rise to a contract of sale.
So again, of course, even if we say that the contract of sale is
commutative in nature—well, that is the general rule ha
because again as we have discussed, there are certain
instances wherein we have valid contracts of sale even if it is
aleatory in nature. Now even if the price is grossly
inadequate, it must not be so absurd. Or if there are vices of
consent or vitiation of consent, then the sale will be
considered as voidable. If for example, we have a parcel of
land (an agricultural land) and it is 1hec. And it was sold for
 SALES – ATTY. SARONA (2014) | 2 SANCHEZ ROMAN
P1.00, then maybe the intention of the parties there was not
really a contract of sale but a contract of donation.
Now in these instances with regard to the issue on the value
of the property in a contract of sale, if there is no party who
complains or there is no third party who is prejudiced, then
the nature of the contract is not really much of an issue. Yun
lang naman e, kapag may mag-question sa intention ng
parties. Now the test here of course is subjective rather than
objective.
Now the last essential characteristic of a contract of sale,
which we should take note of, is that a sale is a Title and not
a Mode. What do we mean by that?
What do we mean that a sale is a title and not a mode? What
happened in the case of San Lorenzo Development Corp. vs
CA?
SAN LORENZO DEVELOPMENT vs. CA: Do we have a contract
of sale here? How did the SC hold that it was a contract to sell
and not of sale? There was no stipulation that the parties
stipulated that the seller has to register ownership until the
full payment of the price. So why? There was no intention.
What were these acts? Because how do we consider it as a
contract of sale when there was a demand of the execution
of a deed of absolute sale? So why was it important to
determine on whether there was really a contract to sell or
sale between the parties? Was Babasanta considered an
owner of the property? How to you own a thing? Was there
delivery? As between Babasanta and San Lorenzo, who has a
better right? San Lorenzo because there was delivery in their
favor.
The SC here discussed that a sale is not a mode but merely a
title. When we say that it is a mode, it is referred to a legal
means in which dominion or ownership is created,
transferred or destroyed. But title is the only legal basis by
which to affect dominion or ownership. Contracts only
constitute titles or rights to transfer the acquisition of
ownership. In other words, you do not become the owner of
a thing by entering into a contract. For it is delivery or
tradition which is the mode of accomplishing the same—of
you become the owner of the subject matter. Sale itself does
not transfer or affect ownership. The most that sale does is to
create an obligation to transfer ownership. Kaya it is noot a
mode but merely a title.
So here, for Babasanta to have a better right over San
Lorenzo, there should have been a delivery in their favor. But
in this case, wala no? Even on the assumption that there was
a perfected contract of sale, ownership could not have been
passed to Babasanta as there was no delivery as compared to
San Lorenzo.
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What is the difference between a personal and a real right?
What happened in the case of Aznar vs Yapdiangco?
AZNAR vs. YAPDIANGCO: What happened to the car here? It
was subsequently sold to another person. Why is it that
Santos has a better right over Aznar when the thing was
delivered to Aznar? Who has physical possession of the car?
Isn't it that the car was delivered to Morella and eventually to
Aznar? Why is it that even if Aznar has the physical
possession of the said car, it was Santos who was considered
to have a better right to possess the car? In other words,
here, there was no intention to transfer ownership. Although
there was delivery, there was no intention to transfer
ownership.
Now class, remember the concept of personal and real right.
If you enter into a contract of sale, and the sale has been
perfected, what is involved is a personal right pa, diba? Your
right to demand the fulfillment of the obligation as against a
specific person. Of course, you still do not own the subject
matter. Why? Because the thing has not yet been delivered
to you. Now once it has been delivered, you now have a real
right. Diba, remember that under obligations and contracts?
Real right over the subject matter, wherein that right is not
only as against a specific person but your right as an owner is
binding against the whole world.
Now in this case of Aznar vs Yapdiangco, what happened
here? There was a delivery but there was no intention to
transfer ownership. So as to Santos and Aznar, Santos still has
the better right to possess the car because Morella did not
have any title over the property because the same was never
delivered to him with the intention to transfer ownership. So
Morella did not have a real right over the said subject
property. Again, ownership is not transferred on the
perfection of a contract. It is by tradition or delivery with the
intention to transfer ownership. As contracts constitute title
of a right in an acquisition of ownership, while delivery or
tradition is a mode of accomplishing the same. There was no
question that there was a contract of sale that took place. But
as to who has the better right is a different issue because sale
is a title and not a mode.
Another case that we have is the case of Norkis Distributors
Inc. vs CA. What happened here?
Why is it important to determine here as to who owns the
motorcycle? Who bears the loss? The seller as the seller is
still considered as the owner. And this is based on what
principle? Res peruit domino.
NORKIS DISTRIBUTORS INC. vs. CA: So here, remember that
there was already a sales invoice that was issued. But this
does not prove that there was a transfer of ownership as it
was only an evidence of payment. Even if there was already a
registration in the name of private respondent, it did not
 SALES – ATTY. SARONA (2014) | 2 SANCHEZ ROMAN
mean that he was the owner thereof because there was again
no intention to transfer title or ownership of the said
motorcycle in favor of Nepales. Such negotiation was only to
facilitate the execution of a chattel mortgage because you
cannot validly enter into a chattel mortgage if hindi ikaw ang
owner. So here, it is not just delivery but it is a delivery with
the intention to transfer ownership. Since there was no
delivery with the intention to transfer ownership to Nepales,
Norkis remains the owner of the motorcycle which was
destroyed. Norkis has to suffer the loss being the owner
thereof based on the principle of res peruit domino.
Also we have the case of Equitorial Realty vs Mayfair Theater,
Inc. What happened here?
EQUITORIAL REALTY vs. MAYFAIR THEATER: So there was a
violation of the right of First refusal. So the contract of sale in
favor of Equitorial is considered rescinded, correct? Yes. How
about the obligation here of Equitorial? Diba, remember
class, in this Equitorial vs Mayfair case, I think there are three
cases. This is the November 21, 2001 case. Here there was an
issue of rentals. How did the SC decide on the rentals? Kasi
yung first case, that was where the SC said that there was a
violation of the right of first refusal. The SC ordered that the
contract be rescinded. How about in this second case of
Equitorial vs Mayfair as to the rentals and why is it important
to determine who is liable and entitled thereto? What is
missing here?
For there to be a valid transfer of ownership, what should the
subsequent owner have over the propety? Actual possession
and control over the property. So here was there possession
of the property? No. So even if there was an execution of a
public instrument, the SC considered it as constructive
delivery. There is only a prima facie presumption of delivery.
And therefore, meron ba ditong control and possession over
the subject property? Wala. So that transfer of ownership
and also the fact that Mayfair paid rentals to Equitorial does
not mean na merong transfer or delivery of ownership.
Here, no right of ownership was transferred from Carmelo to
Equitorial because of the failure to deliver the property to the
buyer. Now, again, the right of ownership is transferred not
merely by contract but again by tradition or delivery. There is
said to be delivery when? When the subject matter is under
the control and possession of the subsequent buyer or
vendee. Even if we say that the execution of a deed of
absolute sale constitutes constructive delivery, that is only a
prima facie presumption of delivery. For such presumption is
destroyed when the instrument itself when the delivery was
not intended or it can be shown that the delivery was not
effected because the vendee could not exercise control and
possession over the subject property. So take note of that as
well.
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So now, let us try to distinguish a contract of sale from other
types of contracts.
So, remember again, a contract is to be determined as what
the law defines it to be, taking into consideration the
intention of the parties and the essential elements as
provided for under the law. Of course, again, the title given to
it by the parties is not as much significant as its substance.
The transfer of ownership in exchange for a price paid or
promise is the very essence of a contract of sale. Obligations
of the parties are clearly defined in Article 1458.
Article 1458. By the contract of sale one of the contracting
parties obligates himself to transfer the ownership and to
deliver a determinate thing, and the other to pay therefor a
price certain in money or its equivalent.
A contract of sale may be absolute or conditional.
(1445a)
So when you determine the real character of the sale, look or
base it on the intention of the parties—their true aim or
purpose, their conduct, words, actions or deeds prior, during,
and subsequent to the execution or perfection of the
agreement and not as to the title used by the parties to
describe said agreement.
So how is a contract of sale different from a barter or
exchange? Sa barter/exchange, one of the parties binds
himself to give one thing in consideration of the other's
promise to give another thing. Compare it sa sale, one of the
parties binds himself to deliver a thing in consideration of the
other parties undertaking to pay the price in money or its
equivalent.
So you have there when do you consider a contract a sale or a
barter? You have Article 1468:
Article 1468. If the consideration of the contract consists
partly in money, and partly in another thing, the transaction
shall be characterized by the manifest intention of the
parties. If such intention does not clearly appear, it shall be
considered a barter if the value of the thing given as a part
of the consideration exceeds the amount of the money or its
equivalent; otherwise, it is a sale. (1446a)
So that's your guideline when to determine whether it is a
sale or a barter. So an ang una ninyong tingnan? It is the
manifest intention of the parties, as always as in any other
contract. Now, when the manifest intention of the parties is
not clear, then you apply the second sentence in Article 1468.
You consider the value of the thing given. If the value of the
thing given exceeds the value of the money given, that's a
barter. For sale, the value of the thing given is given is
equivalent or less than the money given.
 SALES – ATTY. SARONA (2014) | 2 SANCHEZ ROMAN
So let us say, for example, you have a subject matter worth
P60,000.00. Now, what if in exchange for that thing, payment
of P10,000.00 + P50,000.00 worth of another subject matter.
So what do we have here? Is it a contract of sale or a barter?
Barter. Kung hindi klaro, that is when you apply this.
What if the value of the subject matter is P60,000.00 and the
cash given in exchange thereof was P50,000.00 + another
thing worth P10,000.00. So what do we have? This time we
have a sale.
But what if the thing was worth P60,000 and in exchange
thereof will be P30,000.00 cash and a thing of value worth
P30,000.00. What do we have? It is very clear in Article 1468
no na when the value of the thing given as part of the
consideration exceeds the amount of the money or its
equivalent. Otherwise, it is a sale. So kung equal, sale sya. So
please take note of Article 1468.
Again, ang una ninyong tingnan is the manifest intention of
the parties. I think we had a case during basis concepts
wherein kung tingnan mo it is a barter or exchange, but
nevertheless it was considered as a sale because that was the
intention of the parties.
Now under the Civil code, there is a chapter there dealing
with barter or exchange. There are only five (5) provisions
beginning from Article 1468 followed by 1638.
Article 1638. By the contract of barter or exchange one of
the parties binds himself to give one thing in consideration
of the other's promise to give another thing. (1538a)
By the contract of barter or exchange, one of the parties
binds himself to give one thing in consideration of the other's
promised to give other. There is a definition, but take note
that relate it to Article 1468.
Now under Article 1638:
Article 1639. If one of the contracting parties, having
received the thing promised him in barter, should prove that
it did not belong to the person who gave it, he cannot be
compelled to deliver that which he offered in exchange, but
he shall be entitled to damages. (1539a)
Now we also have Article 1640:
Article 1640. One who loses by eviction the thing received in
barter may recover that which he gave in exchange with a
right to damages, or he may only demand an indemnity for
damages. However, he can only make use of the right to
recover the thing which he has delivered while the same
remains in the possession of the other party, and without
prejudice to the rights acquired in good faith in the
meantime by a third person. (1540a)
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So take note of the effect when one of the parties loses by
eviction. Of course, it is without prejudice to those who
acquired the thing in good faith.
Article 1641. As to all matters not specifically provided for in
this Title, barter shall be governed by the provisions of the
preceding Title relating to sales. (1541a)
So what does that mean? It is very clear in Article 1641,
otherwise apply the law on sales. So essentially, the
distinction is merely academic. Barter shall be governed by
the law on sales aside from Article 1639 and 1640. Yung
dalawang articles, yan ang mag-apply sa barter. For other
instances or circumstances in a contract of barter, you apply
the law on sales. Kasi dalawa lang yung separate rules on
barter na specific sa barter, tapos yung iba i-apply mo na
yung sales. Yung isa is the application of the statute of frauds
wherein Article 1403, par. 2 requires that the contracts
indicated therein be in writing otherwise it will be considered
as unenforceable. Doon, klaro na if what is involved is sale of
real property or personal property (P500.00 or more) it must
be in writing. Otherwise, it is unenforceable. Other rules will
apply to barter. Walang provision sa Article 1403, par. 2 na
applicable sa barter.
The other instance is with regard to the right of legal
redemption—which we will discuss towards the end of the
subject—is granted by law to an adjoining land which covers
resale and does not cover exchange of properties.
As to the definition, you have Article 1458 for sale. For barter,
Article 1638.
Now sale, exchange of the thing for a price. In barter,
exchange of a thing with another thing.
Application of the Statute of Frauds, it is applicable sa sale
but not in barter.
In legal redemption, that is Article 1632. It applies in sale, but
does not appli to barter.
Now how about Donation? Of course, donation is an act of
liberality whereby one person disposes gratuitously a thing or
a right in favor of another person who accepts it. So that is
Article 725, also perfected through formalities complied with
as required by law:
Article 725. Donation is an act of liberality whereby a person
disposes gratuitously of a thing or right in favor of another,
who accepts it. (618a)
It is a solemn contract where it requires acceptance for its
perfection and you must comply with the formalities under
Article 745 to 749 of the Civil code.
 SALES – ATTY. SARONA (2014) | 2 SANCHEZ ROMAN
Article 745. The donee must accept the donation personally,
or through an authorized person with a special power for
the purpose, or with a general and sufficient power;
otherwise, the donation shall be void. (630)
Article 746. Acceptance must be made during the lifetime of
the donor and of the donee. (n)
Article 747. Persons who accept donations in representation
of others who may not do so by themselves, shall be obliged
to make the notification and notation of which article 749
speaks. (631)
Article 748. The donation of a movable may be made orally
or in writing.
An oral donation requires the simultaneous delivery
of the thing or of the document representing the right
donated.
If the value of the personal property donated
exceeds five thousand pesos, the donation and the
acceptance shall be made in writing. Otherwise, the
donation shall be void. (632a)
Article 749. In order that the donation of an immovable may
be valid, it must be made in a public document, specifying
therein the property donated and the value of the charges
which the donee must satisfy.
The acceptance may be made in the same deed of
donation or in a separate public document, but it shall not
take effect unless it is done during the lifetime of the donor.
If the acceptance is made in a separate instrument,
the donor shall be notified thereof in an authentic form, and
this step shall be noted in both instruments. (633)”
Sa sale, onerous and perfected by mere consent.
Now take note class na very different ang donation sa sale. In
sale, it is very clear sa civil code. Also in donation, gratuitous
sya. You do not give something in order to receive something
in return. So essentially what happens? If you are a donee in
a donation, in is included in your wealth or asset. Pero sa sale,
you give up something in exchange for another. So in sale, it
is a disposition for a valuable consideration with no
diminution of the estate kasi essentially hindi bumababa ang
valuable assets mo. Pero what happens is merely substitution
of value which is not the case in a donation. Because here,
what happens is that nag-increase yung valuable assets mo.
Unlike in donation, a valid sale cannot have a legal effect of
depriving compulsory heirs of your ___. When you get to
your succession, you can only donate free portion of your
property. So kung magdonate ka more than that free potion,
pwede pa ma-question ang donation and ma-consider sya as
inofficious.
Article 1471 states that:
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Article 1471. If the price is simulated, the sale is void, but
the act may be shown to have been in reality a donation, or
some other act or contract. (n)
If the sale is simulated, the sale maybe void kasi walang
consideration. But the act may be shown to have been in
reality a donation, or some other act or contract. Provided
that there was compliance with the requirements for the
perfection of the donation. For example sa donation, it must
be in writing and there must be acceptance by the donee and
the deed imposes upon the donee a burden which is less than
the value of the thing given in donation, which is under
Article 726 of the Civil code. Therefore, if the burden is more
than the value of the thing given in donation, it will be
considered as onerous. Hence, it will be considered as a
barter or a sale and the governing law is the law on sales.
So sale is defined under Article 1458, while donation is 725.
Very specific chapters on laws governing the law on sales and
donation.
The consideration sa sale: price. Sa donation: liberality of the
donor.
The donation is obviously gratuitous as distinguished in a
contract of sale which is onerous.
As mentioned earlier, sale is perfected by mere consent.
Donation is in a solemn contract.
Sale happens during the lifetime of the parties. Inter vivos
sya. In donation, it can be inter vivos or mortis causa wherein
the donation can take effect during the lifetime of the donor
or mortis causa or upon the death of the donor.
We said that sale is a title. Donation is a mode.
With regard to taxes, when you donate, it is subject to
donor's tax. If there is a sale, if it is a casual sale, there is a
capital gains tax. If ordinary sale, income tax.
Now let us go to a contract of Piece of Work. You have the
definition under Article 1713:
Article 1713. By the contract for a piece of work the
contractor binds himself to execute a piece of work for the
employer, in consideration of a certain price or
compensation. The contractor may either employ only his
labor or skill, or also furnish the material. (1588a)
It is very clear no. A contract for a piece of work is an
obligation as the law has given the name for it. And also
kindly take note Article 1467 which again mentions a contract
for a piece of work.
 SALES – ATTY. SARONA (2014) | 2 SANCHEZ ROMAN
Article 1467. 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. (n)
Take a look at 1467. When do you consider it a contract of
sale and a contract of piece of work? As you have read in the
cases in your outline, it is not that easy because you have to
employ a test to determine whether or not what is agreed
upon by the parties was a contract of sale or a contract for a
piece of work.
What test was employed in the case of Inchausti vs
Cromwell? Test of Existence.
What are the facts in this case? Why was it important to
determine whether or not is was a sale or a piece of work?
INCHAUSTI vs. CROMWELL: So in this case, it is important to
determine whether or not the sale of bale in hemp is
considered to be a contract of sale or a piece of work is
because of the liability for sales tax. If it was deemed to be a
contract of sale, then liable for sales tax. In this case, we have
the test of existence.
Test of existence - the things transferred are one not in
existence and will never have existed but by order. That was
the test applied here in this case. Now, it is clear that the
hemp was in existence in bale form even before the
agreement of sale was made or at least have been in
existence even if none here has been consummated. Naka
bale pa rin sya kahit kanino nabenta. As mentioned, even if
the buyer would not say na dapat naka bale na sya, hindi na
kailangan sabihin kasi pag deliver, ganon na yung customary
pagdeliver ng hemp. Hence, it is essentially a contract of sale
and not a contract for a piece of work.
A contract to make is a contract of sale if the article ordered
is already submitted and is actually in existence at the time of
the order and merely requires alteeration, modification or
redduction to the buyer's wishes or purposes. Now, as
mentioned the test involving contracts for piece of work is in
several jurisprudence. Ang test of existence, yan yung nasa
Inchausti which is a 1911 case.
Subsequently, we have the test of special orders. What do
you mean by this test? What are the facts in the case of
Celestino Co. vs Collector? Do we have a contract of sale or a
piece of work?
CELESTINO CO. vs. COLLECTOR: So again, we have here the
test of special orders which is more of timing than
(specificity?). As mentioned, it habitually made sash,
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windows, and doors. To fulfill the orders, but again, any
person may order and there was a possibility of duplicating or
mass producing their sash, windows, and doors. So here, we
have a contract of sale. It is not of timing or habit but the
nature of work to be performed and products to be made. So
here, the products are not subject to special customers only
or finds services to them alone. That the doors and windows
must meet the desired specifications is neither here or there.
If these specifications have been habitually manufactured by
appellant, special forms ___ will not accept order. Pero hindi
man, diba? Basta bigyan lang ng size, then may sale na. If they
do the transaction, it will be no different from purchasers of
manufactured goods held in stock for sale. They are bought
because they meet the specifications desired by the
purchaser.
So Oriental Sash Factory does nothing more than sell the
goods that it mass produces that are habitually made, cutting
them to sizes as what their customers want and combining
them into form as desired. So the new form does not divest
Oriental Factory as a manufacturer. In other words, it is
engaged in sale. The orders exhibited wre not shown to be
special but merely orders for work. Nothing therein was
considered special as to consider it as contracts for piece of
work.
Another case which applies this test of Special orders is the
case of CIR vs. Arnoldus Carpentry Shop, Inc. What happened
in this case?
When you say manufacturer, what contract is engaged? So
they are engaged in sale of goods as compared to contracts
for a piece of work. So what was the ruling of the Supreme
Court? How did the SC address yung allegation ng petitioner
that Article 1467 is here—mere existence of the product at
the time of the perfection of the contract?
CIR vs. ARNOLDUS CARPENTRY SHOP: So here, we have a
carpentry shop wherein the SC held that Arnoldus Carpentry
Shop is a corporation engaged in manufacturing, applying the
test of special orders as in the case if Celestino. In the instant
case, what may be involved is a carpentry shop, but in the
same vein, there has been showing of habitually of the
production for the general public. As to the sample that the
order would never have come into existence, wala yan gi-
upheld by SC because what happened here is that the right to
choose and the skills for craftsmanship was considered. What
determines when it is one of contract for a piece of work is
whether it was manufactured specially for the customer and
upon his special order which is not the case here. If the thing
was done due to the special order of another, it is a contract
for a piece of work. If the thing is manufactured for the
general public in the ordinary business, it is a contract of sale.
But since habitually for the manufacture of the goods is for
the general public, Arnoldus is considered as a manufacture
engaged in sale.
 SALES – ATTY. SARONA (2014) | 2 SANCHEZ ROMAN
We also have here the test of necessity in relation to the
nature of the object test. The test of necessity actually
confirms the test of special orders as emphasized in Celestino
and Arnoldus cases wherein the nature of the execution of
each orders was considered. If we are going to consider area,
space for specific persons that is actually a contract for a
piece of work. If you cannot mass produce, that is a contract
for a piece of work.
Article 1467, again this was mentioned, it is not strictly what
is indicated there because we have jurisprudence explaining
further the test to be employed in distinguishing whether it
is a contract of sale or a contract for a piece of work. Again, in
celestino, where the nature of the product is involved and it
is possible where the manufacturer or producer has been
able to produce the product ahead of a special order given by
a customer, you will have a contract of sale.
Now another test is a consensuality test as in the case of
Engineering Machinery Corp. vs CA. What happened here?
ENGINEERING MACHINERY CORP. vs. CA: So what do we
have here? Is it a contract of sale or a piece of work? A
contract for piece of work. Why is it considered as such? Isn't
it that they are engaged habitually in the installation of
airconditioning system? How would you differentiate this
case in the case of Celestino? Diba sa Celestino, they are
defining the sizes, but nevertheless the SC said that they were
involved in a contract of sale. But here, mmay airconditioning
system, ang size, area, and yung aircon na iniinstall, the SC
said that it is a contract for a piece of work. So why? What is
the prescriptive period here? The 10 years or the 6months?
Again, take note that when you distinguish contracts, always
go back to the intention of the parties. This was emphasized
by Tolentino, that the contract involved here is a piece of
work. It is in line of business to manufacture airconditioning
system to be sold off the shelf. Yun yung main difference nya
compared to Celestino. Its business and the field of expertise
is the publication and installation of such systems as ordered
by the customers in accordance with a particular
specifications. So the price or compensation for the system
will depend greatly on the plans and specifications agreed
upon with its customers.
If you try to compare to compare it with Celestino, essentially
they just have to fix the price in accordance with the size ng
gamit na ilagay. But that's not the same thing with
airconditioning system. Kasi if you tried it, you would get
sqm. ng anong lalagayan mo ng system. Magdedepende sa
klase ng aircon na gusto ng customer. You also have to
consider how many people will work there. Yung light din i-
consider. And it varies from one client to another. Comparing
it to Celestino, kukunin lang nila yung size, but it was always
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the same. And that's why here the SC said that it is a contract
for a piece of work.
So why was it important for them to determine on what was
involved is a contract of sale or a piece of work? The
prescriptive period. Kasi in contract of sale, the 6-month
prescriptive period. If not a contract of sale, then the normal
10-yr prescriptiove period will apply.
How about in the case of Dino vs CA?
DINO vs. CA: Why was it considered a contract for a piece of
work? What was the nature of the subject matter here? For
example, I want to purchase shoes, and the size was not
available, does it mean that when they order it then it will be
a contract for piece of work? Why was it important to
determine whether it was a contract of sale or contract for a
piece of work? They said that it was a contract for a piece of
work. So what then?
Again, important here is because of the prescriptive period.
Sa contract of sale, you have the 6-month period for filing the
action. But in a contract for a piece of work, you cannot apply
the 6-month period for breach for its defects. It is a contract
for a piece of work because it did not ordinarily manufacture
his products but only upon the order by the petitioners and
the price agreed upon.
You notice that the consistent thing here is that if the essence
is the object irrespective of the party giving or executing it, it
is the contract of sale. But if the essence is the service, the
knowledge, and the reputation of the person manufacturing
the object, it will be considered as a contract for a piece of
work, sale of service or labor wherein the thing is specially
manufactured for you.
I asked if I want to purchase a pair of shoes but myy size is
not available and then they ordered it, it does not mean that
it is a contract for a piece of work. It is not specifically
manufactured for me. But what are instances na it was
specially manufactured? Flat footed ka. They will get
specifications, ang size mo, and ang curves. Then it wil be a
contract for a piece of work.
Now why do we have to distinguish a contract of sale from a
contract for a piece of work? As in the cases diba? In case of
breaches of warranties, in cases of hidden defects. Tax
provisions as clearly pointed out in the cases that we have
discussed. Also if it is a contract of sale, it is subject to specific
performance. But it cannot be for a specific performance if it
is a piece of work.
Now of course, piece of work is nowhere in statute of frauds.
 SALES – ATTY. SARONA (2014) | 2 SANCHEZ ROMAN
So sale as defined in 1458. Contract for a piece of work we
have Article 1467 and of course the different tests that we
have discussed.
Now contract of sale involves real obligations. As compared
to a contract for a piece of work, meron ding real and meron
ding personal obligations.
July 1, 2014 – Karl
Recap: Distinctions between sale and barter
CIR vs. ATENEO:
Q: Is the Ateneo here involved in a contract for a piece of
work? Why? Can it also be considered a contract of sale?
Q: What is the similarity between a contract for POW and a
COS which was emphasized in this case? In both contracts,
what happens to the subject matter?
A: There is transfer of ownership.
Q: If the Ateneo ITC is not involved in a contract of sale or
POW, what is the nature of its services?
A: More of a gift or donation.
What we have here is the work, the research of the Ateneo
wherein they receive funds. The funds they receive are not
technically a ‘fee’ but may be considered as gifts or donation
which may be tax-exempt, considering that Ateneo is an
educational institution. It is not engaged in business and no
proprietary or commercial-purpose research is done. The
Ateneo retains not only the absolute right to publish but also,
ownership of the results of the research conduct by the
Ateneo. The aforementioned circumstances belie the
contention that the Ateneo is a private contractor or is
engaged in business. These transactions cannot deemed
either as a COS or POW because there is no transfer of
ownership. In both contracts a transfer of ownership is
involved and a party necessarily walks away with an object. In
this case, there is no transfer of ownership over the research
data obtained.
AGENCY TO SELL. Contract of agency is defined under Article
1868:
Art. 1868. By the contract of agency a person binds himself
to render some service or to do something in representation
or on behalf of another, with the consent or authority of the
latter.
In relation thereto we have Article 1466:
Art. 1466. In construing a contract containing provisions
characteristic of both the contract of sale and of the
contract of agency to sell, the essential clauses of the whole
instrument shall be considered.
QUIROGA vs. PARSONS:
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Q: What is the contract in this case?
A: Sale.
Q: What is the key consideration here where the SC said that
the contract was a COS, and that there was no contract of
agency.
A: The essential requisites of contract for purchase were
present
Here we have a contract between Quiroga and Parsons for
the exclusive sale of Quiroga beds, and they have several
conditions and apparently, it seems that there were
violations of these conditions. Now, the SC said that there
was a contract of sale in this case as there was an obligation
on the part of the plaintiff to supply the beds – in other words
to deliver the goods and the part of the defendant to pay the
price. These features exclude the legal conception of a
contract of agency because an agent does not pay the price.
He delivers to the principle the price obtained from the sale.
And if he does not succeed in selling the subject matter he
has the obligation to return the unsold subject matters.
Even if here there were the words ‘commissions on sales’ it
could not be considered ‘commission’ in a contract of agency
but it was merely a discount on the invoice price. The word
‘agency’ only expresses that the defendant was the only who
could sell the beds in the Visayan islands.
With regard to the returning of the beds it could not sell, the
SC held that there was only mutual tolerance in the disregard
of the contract’s terms. Again anong tiningnan dito ng SC?
The essential features of a COS were all present: deliver and
payment of price.
Also note: one of the key distinctions from a COS from that of
an agency is that a contract of agency is based on trust and
confidence. It’s a fiduciary relationship in which, since it is
based on trust, the principal can revoke the power he has
granted to the agent. Compare that to a COS, it’s not
unilaterally revocable. Sa agency pwede yan i-revoke on the
part of the principal if nawala na yung trust and confidence.
GONZALO PUYAT vs. ARCO:
Q: What contract is in this case?
A: Sale
Q: How about the fact that… is entitled to a 10% commission?
A: The 10% commission was treated as a discount.
Q: In the ruling of the SC, they stated that ‘it is out of the
ordinary for one to be the agent of both the vendor and the
purchaser’; what did the SC mean?
In this case, the parties stipulated that Gonzalo Puyat & Sons
(GPS) was an ‘exclusive agent’ of Star Piano. Despite the
usage of the term ‘agent,’ the SC held that when GPS sold the
pianos in favor of Arco, it was really in a concept of COS.
There could be no other interpretation that the said
 SALES – ATTY. SARONA (2014) | 2 SANCHEZ ROMAN
arrangement was really a COS. In fact the petitioner agreed to
sell to it the sound equipment and machinery.
Why was it important to distinguish agency from sale?
Remember and agent acts in behalf of the principal; and if
there’s liability on the part of the principal, the agent is
exempted as long as he acted within the scope of authority
granted by the principal. Here, even if there was this 10%
commission, remember this does not necessarily mean that
the petitioner is an agent. More or less similar to Quiroga.
This was a provision for an additional price that respondent
bound itself to pay. To hold GPS as agent is incompatible with
the fact that it is also the exclusive agent of the same
company in the Philippines. Again, it is out of the ordinary for
one to be the agent of both vendor and purchaser. So, not
being an agent, GPS is not bound to reimburse any excess
payment (which was really the purchase price.)
KERR vs. LINGAD:
Q: There is a stipulation “…all goods delivered on
consignment shall remain property of the company;’ What do
you understand by the term ‘consignment’? What if we
remove ‘remain property of the company’? Would it change
the nature of the contract?
A: Ownership remains with the person who consigned
despite delivery.
Q; What contract in this case? Agency.
What were the facts that would point out the agency?
A: Retention of ownership, retention of control on the part of
the principal (US Rubber). What else was taken into
consideration, that there was really no sale?
In Kerr v Lingad since the company retained ownership of the
goods, even as [noise] concession [noise] dealer to customers
, the price and terms of which were subject to the company’s
control, the relationship between the dealer is one of agency.
So when you consign the goods, you deliver the good, for the
purpose that such goods would be sold, there is no transfer
of ownership. Te dealer would have to return the unsold
goods to the principal and remit whatever proceeds from the
sales as to the subject matter. The transfer of such title or
agreement to transfer it for a price paid or promise is essence
of sale. Dito, walang ganun. In such transfer of goods, the
transferee in the attitude or position of an owner makes him
liable to the transferor as the debtor to the agreed price and
not merely as an agent he must account for the proceeds of
every sale, the transaction is a sale. The essence of an agency
to sell, the delivery to an agent, NOT as his property but as
the property of the principal who remains the owner.
You have to know the risk assumed by an agent. Kasi nga,
when you transfer the ownership by virtue of a contract of
sale, the buyer bears the risk being the owner thereof. But
only if there is a delivery in favor of the agent, there is no
transfer of ownership; therefore, unless the agent is negligent
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or at fault, he could not bear the loss, the principal bears the
risk.
Assumption of the agent of the risk pertaining to the cost or
price of the subject matters makes the relationship that of a
buyer-seller, which is not in this case, for the agent does not
assume the risk with respect to the price or property subject
of the relationship. Again the retention of the ownership of
the goods delivered … means that it is a contract of agency.
Take note, insurable interest here remained with the US
Rubber Company, which clearly ownership of the goods was
never transferred to Kerr and Co.
SCHMIDT vs. RJL:
Q: What do you mean by indentor? Does that mean that an
indentor is similar to an agent as defined in 1868?
A: No as an indentor acts on behalf of both vendor and
vendee, while agent as defined in 1868 acts in behalf of only
one person.
Student: What is being invoked here is the protection against
hidden defects which applies to contracts of sale.
Q: Was Schmidt and O considered liable for breach of
warranty?
A: No.
So what we have here is a specific term, “indentor.” Now the
SC said that Schmidt is not vendor but an indentor. Again,
wala dito yung essence ng COS. What we have here is an
indentor, a middleman, in the same class as commercial
brokers and commission mechants. Broker are defined as
those engaged for others on a commission negotiating
contracts and property the custody of which is not in his
concern. He is the mediator between the other parties, never
acting in his own name but in the name of those who
employed him. He is strictly a middleman, but take note, for
some purpose the agent of both parties.
That’s why I asked if Schmidt was an agent as defined in Art.
1868… When you’re an agent you’re acting in behalf of a
specific principal, but in this case, Schmidt was the
middleman between RGL and Nagata. Of course, acting as an
agent, you act in behalf of and in the benefit of a principal.
But if you’re acting as an agent for two parties, who have
contraditory rights and obligations, then what happens to
your role as an agent, diba? If you look at the definition, it
seems like that. So hindi strictly the same ang concept ng
agency in 1868 as compared to an indentor in this case. Again
an indentor is one who, for compensation, acts as a
middleman, bringing about the purchase and sale of goods
between a foreign supplier and a local purchaser. Acting sya
on behalf of two persons, “eto yung sabi sa kabila” sasabihin
nya sa kabila tapos yung sasabihn ng other party
icocommunicate din nya.
Also even if Schmidt responded to the complaint, it did not
mean that Schmidt was a seller. As a prudent indentor, of
 SALES – ATTY. SARONA (2014) | 2 SANCHEZ ROMAN
course he would want to maintain his business, and kung ano
yung kaya nyang gawin toward his clients. Considering here
that Schmidt was not a vendor he could not be held liable for
breach for implied warranty for hidden defects.
VICTORIA MILLING vs. CA: Contract contained stipulation
‘acting for an in our behalf’ but it was still ruled as a sale.
So in this case, what was pointed out was that one factor
which most clearly distinguishes an agency from other legal
concepts including sale is control. One person, the agent,
agrees to act under the control and direction of another
person (principal). Why is it important to take note as
whether CSC was really an agent of SCM? Aside from the fact
that it was really a sale, of course CSC would be entitled to its
claim, where it can demand specific performance from DMC.
Aside from that, if there is really a contract of agency, it
means that CSC could not file a case without joining STM as
the principal. Since there was valid sale or transfer, plaintiff-
appellee has the capacity to sue in its own name without
joining his principal. Again, CSC was a buyer of SLDR Corp and
not an agent of SCM. CSC was not subject of SCM’s control,
and as we have emphasized, despite the fact that the
contract contained ‘for and in our behalf’ the intention of the
parties as gathered from the whole scope of the language
shall be employed to determine the nature of a contract.
In fact with the SLDR we have the term there ‘sold and
endorsed’ in other words, there really was a contract of sale.
Distinction between SALE and DACION EN PAGO
This should not be new to you because you have discussed
this in your Obligations and Contracts. What is dacion en
pago?
Art. 1245. Dation in payment, whereby property is alienated
to the creditor in satisfaction of a debt in money, shall be
governed by the law of sales.
PNB vs. PINEDA:
Q: Who was in possession of the properties in this case?
A: PNB was in possession.
Q: So there was no dacion en pago even though the property
was in the possession of the property?
A: No dacion; PNB’s repossession was a form of security to
secure the obligation.
Dacion en pago is under 1245:
If you remember Dacion is considered as a special form of
payment whereby property is alienated in favor of the
creditor in satisfaction of a debt in money. In this case, there
is no dacion even if PNB was in possession of the subject
matter. Mere possession does not mean there is a delivery to
transfer ownership. In dacion there is also the intention to
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transfer ownership so as to extinguish the obligation. Here
the possession in itself cannot be considered as payment of
the loans thereby. Payment would only legally result after
PNB had foreclosed the securities, in other words – sold the
properties and applied the proceeds to the loan obligation.
Mere possession does not amount to foreclosure.
Neither can said repossession amount to dacion en pago.
Again, there must be that intent to extinguish an obligation.
Possession here was merely to secure payment of PCC’s loan
obligation and not for the purpose of transferring ownership.
Remember under 1245, with regard to dacion it shall be
governed by the law on sales. Dacion is a special mode of
payment. It is not a separate contract as compared to a COS.
Dacion is actually an arrangement by the parties to extinguish
an existing obligation. However, like in other contracts there
must be meeting of the minds that they agree that this
property will be delivered and transferred to the ownership
of the creditor with the intent of extinguishing ang obligation.
Now do not confuse dacion en pago from pactum
commissorium where there is automatic appropriation
because again, when does dacion en pagp take place? At the
time the obligation is due. Ang original na obligation is
money. And at the time of the maturity of the obligation, for
example, ayaw na magbayad ng money ni debtor or wala
syang cash to pay, so he offers property in exchange. Now if
such offer is accepted by the creditor, and subsequently the
property is transferred, then there is dacion en pago which
would extinguish the obligation. Sa pactum commissorium
kasi automatic appropriation of property upon default.
LO vs. KJS:
Q: What is the nature of this assignment? What happens
when parties execute a deed of assignment? Was there a
valid assignment of credit? Was the obligation here
extinguished by virtue of that deed of assignment?
A: Even though there was a valid assignment, Lo failed to
warrant the same.
What do we mean by an assignment of credit? As we can see
in this case there is an agreement between the parties (Lo
and KJS) by virtue of which the owner of the credit (known as
the assignor), by a legal cause such as sale, dacion en pago,
exchange or donation and without consent of the debtor,
transfers his credit and accessory right to another. That is the
nature of an assignment… and in which the assignee acquires
the power to enforce those rights to the same extent that the
assigner could have enforced it as against the debtor.
In this case it was pointed out that dacion en pago as a
special mode of payment has three requisites:
1. animo solvendi - there must be the performance of
the prestation in lieu of payment which may consist
 SALES – ATTY. SARONA (2014) | 2 SANCHEZ ROMAN
in the delivery of a corporeal thing or a real right or a
credit against the third person;
2. aliud pro alio - There must be some difference
between the prestation due and that which is given
in substitution
3. There must be an agreement between the creditor
and debtor that the obligation is immediately
extinguished by reason of the performance of a
prestation different from that due.
The undertaking really partakes the nature of a sale wherein
the creditor is buying the thing or property of the debtor,
payment for which is to be charged against the debtors debts,
so instead of paying the price, cancelled na yung obligation.
As such, the vendor in good faith shall be responsible for the
existence and legality of the credit at the time of the sale
but not from the solvency of the debtor except as in
specified circumstances. So it might well be that the
assignment of credit is in the nature of a sale of personal
property to produce the effect of dacion en pago.
However, as in contracts of sale, the vendor/assignor is
subject to certain warranties wherein we have Article 1628:
Art. 1628. The vendor in good faith shall be responsible for
the existence and legality of the credit at the time of the
sale, unless it should have been sold as doubtful;; but not
for the solvency of the debtor, unless it has been so
expressly stipulated or unless the insolvency was prior to
the sale and of common knowledge.
Even in these cases he shall only be liable for the
price received and for the expenses specified in No. 1 of
article 1616.
The vendor in bad faith shall always be answerable
for the payment of all expenses, and for damages. (1529)
Here, Lo as vendor/assignor is bound to warrant the
existence and legality of the credit at the time of the sale or
assignment. Now if there is a claim that is no longer indebted
to the [Lo] – since the latter also had an unpaid obligation to
[Jomero], in other words, compensation, diba – it is
essentially meant that its obligation had been extinguished by
compensation. There was no agreement obviously…what kind
of compensation took place here?
There are three kinds of compensation:
1. Legal
2. Judicial
3. Voluntary
What kind of compensation took place here? Legal, there
may be no agreement between the parties, pero automatic
sya. That’s what happened here.
SSS vs. ATLANTIC GULF:
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Q: Why do we have the issue of the effectivity of the dacion
en pago in this case? Why is it important to determine WON
there was dacion en pago?
A: So that Atlantic will not have to pay the other costs which
‘ballooned;’ and also to determine jurisdiction
Q: What is the nature of the complaint filed before SSS?
A: Complaint for specific performance, the dacion was the
defense.
Take note here the action was for specific performance. Now
under the law, the action is considered ‘incapable of
pecuniary estimation.’ Now why is it important to determine
WON there was dacion en pago? To determine jurisdiction. If
the action is incapable of pecniary estimation, the action
must be filed with the RTC. In other words, the action should
not have been filed with the SSS because SSS does not have
jurisdiction for actions for specific performance. The SC
emphasized the nature of dacion and pointed out that it is an
objective novation of the obligation where the thing offered
as an equivalent to the performance of the obligsation is
considered as the object of a contract of sale; and the debt is
considered as the purchase price. There must still be common
consent.
The controversy here lies in the non-implementation of the
approved dacion en pago on the part of SSS. What we have
here is an action for specific performance incapable fo
pecuniary estimation; SSS has no jurisdiction, that’s why it
was remanded to the RTC.
AQUINTEY vs. TIBONG:
Q: Was there dacion en pago? What is the effect as to the
obligation?
Q: If the obligation is extinguished, what is the right of
Agrifina here? Can she still collect from the spouses Tibong?
Q: How is this different from Lo v KJS, because in that case
there was also a valid assignment of credit. Why is it that in
Lo there is still liability, but here there is none? Isn’t this the
same right present in Lo v KJS? What is the difference?
Q: What is not present in Aquintey?
A: There is no legality of the credit existing at the time of
dacion unlike that in the case of Lo, kuha?
In Lo, when Jomero claimed that it was no longer indebted to
Lo, it means that there was already compensation. Again
there must be existing of legality of credit at the time of the
sale or assignment. In the case of Lo, wala nang credit na nag-
iexist because of legal compensation. Compare that here, the
obligations were valid and existing at the time the deed of
assignment was executed. It just turned out that the debtor
became insolvent which is not part of the parties. [Maam
reads Article 1628]… unless there is express stipulation, here
there is no express stipulation that if debtors of the assignors
would turn out to be insolvent, the creditor can proceed
against the debtor. Take note why the rulings are different in
these cases, even if there were valid assignments.
 SALES – ATTY. SARONA (2014) | 2 SANCHEZ ROMAN
Again all requisites for a valid dacion is present. The
contention that the consent of the debtors must be present
for the perfection of such assignment is not essential. The
knowledge thereof or lack of it affects only the
efficaciousness or inefficaciousness of any payment that may
have been made. So remember the concept in Oblicon, if you
pay to the creditor without knowledge that it has been
assigned to a third person, kung ikaw di mo alam, then your
payment to the original creditor extinguishes the obligation.
Yun lang yung effects sa consent, pero hindi sya mag-aaffect
sa validity ng assignment.
YUSON vs. VITAN:
Q: Was there a perfected COS here? Diba meron namang
execution of deeds of absolute sale?
A: There were two deeds of sale, the first was to make it
appear that Atty. Vitan paid his obligation by way of dacion
en pago.
Q: Was there dacion en pago in this case?
A: No, the SC held that the intention of the parties in
executing the ‘sale’ was not to extinguish the obligation of
Atty. Vitan but only to make it appear that there was dacion
in favor of Yuson.
Q: Why was it not considered dacion en pago despite the
execution of the first sale and for that purpose? What were
other considerations that pointed out that there was no
dacion en pago?
A: Records show that Atty. Vitan did not really intend to
relinquish ownership over his property notwithstanding the
execution of the DOAS in favor of Yuson. The second DOAS
which reconveyed the property to Vitan proves that he had
no such intention.
No dacion in this case. The true intention was to use that
property to facilitate payment and to make it appear that the
title had been transferred to allow them to mortgage the
property. Any proceeds from the sale would then be used to
pay the obligation. Now in addition to that, the execution of
nd
the 2 deed of sale was proof that Vitan had no such intent
nd
to relinquish the property. The 2 deed of sale was
considered the ‘safety net;’ there really was no true sale in
favor of complainant.
FILINVEST vs. PHILACETYLENE:
Q: What is the purpose of the return of the motor vehicle?
A: For FILINVEST to sell the vehicle, but it was not sold
because it had issues regarding the chattel tax.
Q: What requisite is missing here?
A: The third: intent of the parties to extinguish the obligation
upon the dacion.
The mere return of the motor vehicle by the mortgagor to the
mortgagee does not constitute dacion en pago in the absence
of express or implied true intention of the parties. Evidence
fails to show that the mortgagee consented or at least
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intended that the mere delivery to and acceptance by him of
the mortgaged vehicle be construed as actual payment, or
dacion.
In the absence of the clear consent, there can be no transfer
of ownership of the vehicle. In fact the Voluntary Surrender
with SPA revealed that such possession of the vehicle was
voluntarily surrendered and authorized the appellee to look
for a buyer and sell the vehicle in behalf of the appellant who
retains ownership. In other words – no transfer of ownership,
no dacion en pago – obligation is not extinguished.
Take note that with sale and dacion en pago, the distinction
are merely academic because it is clear that under Article
1245 the law on sale should apply.
CESSION
Now as to cession which is another form of special payment,
defined under Article 1255:
Art. 1255. The debtor may cede or assign his property to his
creditors in payment of his debts. This cession, unless there
is stipulation to the contrary, shall only release the debtor
from responsibility for the net proceeds of the thing
assigned. The agreements which, on the effect of the
cession, are made between the debtor and his creditors
shall be governed by special laws.
If you remember under cession, there is no transfer
of ownership of the properties of the debtors in favor of the
creditors. It’s merely assigning to the creditors the right to
sell the properties, the proceeds thereof to be applied to the
debts with the creditors. Cession involves ALL properties of
the debtor diba, but there is no transfer of ownership unlike
in a COS, unless of course yung creditor mismo ang magbili,
hindi na yun cession. That would be a contract of sale.
LEASE
Art. 1643. In the lease of things, one of the parties binds
himself to give to another the enjoyment or use of a thing
for a price certain, and for a period which may be definite or
indefinite. However, no lease for more than ninety-nine
years shall be valid.
FILINVEST CREDIT CORPORATION vs. CA:
Q: Why is the contract considered a sale and not a lease
when the spouses were paying rentals?
A: The intent of the parties showed that they intended it to
be a contract of sale by installments.
Q: Why was it important to determine WON this was a sale or
lease; why would it matter?
Q: Why do we apply Article 1484?
 SALES – ATTY. SARONA (2014) | 2 SANCHEZ ROMAN
What we have here is a COS by installments. As we have
emphasized, it is the true intentions of the parties which
should prevail and not the nomenclature used by the
parties. So even if the parties called it a lease, the true intent
was a sale on installments.
Now being a sale on installments, we have to apply 1484
which is the law applied to sale on installments of personal
property, wherein the vendor has remedies available:
1. Exact fulfillment or specific performance
2. Cancellation of sale
3. Foreclosure of the mortgage
Now these remedies are alternative. Notice that in the facts
of the case, the petitioner extra-judicially foreclosed, there
was already a foreclosure of the mortgage. So what
happened here, he cannot demand for the unpaid purchase
price.
Take note of that provision which is also known as the Recto
Law as we will discuss that later. Pero kasi 1485 is very clear:
Art. 1485. The preceding article shall be applied to contracts
purporting to be leases of personal property with option to
buy, when the lessor has deprived the lessee of the
possession or enjoyment of the thing.
Article 1486. In the case referred to in the two preceding
articles, a stipulation that the installments or rents paid
shall not be returned to the vendee or lessee shall be valid
insofar as the same may not be unconscionable under the
circumstances. (n)
Now it’s possible that you have a conditional sale in the form
of a lease with an option to buy, but it would still be
considered as sale of personal property on installments. This
is to avoid circumvention of Article 1484, that you’ll have only
one remedy available. It may be stipulated that the lessee has
the option to buy the leased property for a small
consideration at the end of the term of the lease, provided
that the rent has been duly paid, or if the rent throughout the
term had been paid, title shall vest with the lessee. So as to
the intent of the parties these will be considered as contracts
of sale. They will be lessees in name only.
So what’s the distinction between sale of lease? Of course
sale is the obligation to transfer the title of ownership of the
thing subject thereof. Sa lease, allow to use the thing in
exchange for a price but you have the obligation to return the
same upon the expiration of period agreed upon.
OVERVIEW: SALE V AGENCY
1. Sale is defined under 1458, agency 1868.
2. Sale is not unilaterally revocable but agency can be
essentially revoked as it is fiduciary in nature.
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3. Buyer pays the price for the object in sale, but an
agent is not obliged to pay the price. What he does is
to deliver the price he has received to the principal.
4. In sale the buyer becomes the owner after delivery;
in agency, no transfer of ownership after delivery.
5. In Puyat, the seller is liable for breaches of
warranties. In agency, an agent assumes no personal
liability because he only acts for and in behalf of the
principal; and as long as he acts within the authority
and scope given to him
6. Sale is principal in nature while a contract of agency
is preparatory.
7. In sale there are two parties; in agency, you have the
principal, the agent and kung sino man yung ka-
transact ng agent
8. Only one contract in sale; in agency since it is
preparatory it begins with one contract and
subsequently the agent may enter into other
subsequent contracts in behalf of the principal
9. Sale is onerous; agency is presumed to be onerous
10. Sale is uneforceable under the Statute of Frauds but
in agency it is valid and enforceable in any form as a
general rule.
Why do we need to distinguish sale from agency?
1. Applicability of Statute of frauds
2. In agency there is a requirement that if what it is to
be sold by the agent is a land or real property, the
authority must be in writing
OVERVIEW: SALE V DACION
Dacion en pago – the distinction is academic since the same
law is applied but nonetheless:
1. in dacion en pago there is a pre-existing credit; sale
has none
2. Sale gives rise to an obligation while dacion is a
means of extinguishing it
3. In sale the consideration is price, in dacion the cause
is the extinguishment of the obligation
4. In sale there is greater freedom in determining the
price, in dacion there is less freedom as it is based on
a pre-existing obligation.
5. In sale, the giving of the price may end the
obligation, in dacion the giving of the object may
extinguish the obligation partially or totally.
OVERVIEW: LETTERS OF CREDIT
So in the case of Schmidt, we have there RJL who executed a
letter of credit in favor of Nakata (Japanese). A letter of
credit is usually entered into in international transactions.
Example you have an international supplier and a local buyer.
Essentially, RJL cannot purchase directly from Nakata because
Nakata does not know RJL. On the part of Nakata it will not
 SALES – ATTY. SARONA (2014) | 2 SANCHEZ ROMAN
release goods until paid by RJL. On RJL’s part, it will not pay
unless it will receive the goods.
So in this case there was a LOC issued in favor of Nakata
wherein you have Schmidt acting – where the goods will be
delivered in favor of Schmidt and Schmidt will pay Nakata. Si
RJL ang bayaran nya, si Schmidt. In this case Nakata would
enter into the transaction because kilala nila ang Schmidt (it’s
their agent in that country so there is already familiarity
between the two).
Common din ang LOC when it comes to banking transactions.
Most common sya sa banks, for example a local purchaser
and a foreign supplier. They would not contact directly so the
purchaser would have a bank (BDO) and BDO will transact
with another bank (HSBC). So in this case the LOC will be in
the form of a bank-to-bank transaction. So the goods will be
delivered by supplier to HSBC, HSBC to BDO. Ang BDO,
babayaran nya ang HSBC, ang HSBC ang magbabayad sa
supplier. This is just an overview of LOCs.
July 8, 2014 – Joni
We’re down to the last distinction – distinction between
contract to sell and contract of sale. We’ve already discussed
that in a contract of sale, title passes upon delivery unless
otherwise stipulated by the party. As distinguished from
contract to sell – ownership is retained by the seller until full
payment of the price even if the SM has already been
delivered. In contract of sale, non-payment is a negative
resolutory condition, while payment in full is the suspensive
positive condition in a contract to sell.
Now, Art. 1191 is applicable to a contract of sale. Ownership
is lost after delivery and cannot be recovered unless contract
is rescinded as provided in 1191. In contract to sell – the
seller can oust the buyer due to nonpayment.
ALMIRA vs. CA:
Q: Who were the registered owners of the title at the time of
the execution of the Sale?
Q: What do we have here? Contract of Sale or Contract to
Sell?
A: Contract of Sale
Q: Why was it considered as such?
Q: How about the condition regarding the title? What was the
condition there (for the full payment of the price)?
Q: Was the refusal to pay here valid?
Q: Why was it necessary to distinguish Sale and Contract to
Sell here?
Q: Is rescission available in Contract to Sell?
A: No.
Q: Then, what is the remedy available?
A: Specific Performance
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Even if the parties here named their contract as Kasunduan
(like a contract to sell), the SC said that it was not a contract
to sell but a contract of sale. The SC emphasized the
distinction between these two types of contract.
Nonpayment by the vendee in a contract of sale entitles the
vendor to demand specific performance or rescission with
damages under Art. 1191.
The Kasunduan reveals that it is a contract of sale. A deed of
sale is absolute in nature in the absence of any stipulation
reserving title to the vendor until full payment of the
purchase price. There is nothing in their Kasunduan which
expressly provides that the petitioners retain title of
ownership of the property until full payment. The absence of
such stipulation coupled with the fact that the respondent
took possession of the property upon a petition indicates that
the parties contemplated a contract of absolute of sale. We
have a determinate object; we have a price certain.
As to the condition, the delivery of a separate title in the
name of Julio Garcia was the condition imposed for
respondent’s obligation to pay the balance of the purchase
price. In other words, that condition did not affect the
perfection of the contract of sale. The allegation here that
what they were trying to deliver was a title (sic) but it was not
yet in the name of Julio Garcia.
The power to rescind is given only to the injured party. Here,
the petitioners were not ready, willing, and able to comply
with their obligation to deliver the separate title in the name
of Julio Garcia. They alleged that they already delivered it. But
what was actually delivered was the mother title from the
original heirs. Mother pa ni Julio Garcia. Wala pa na-partition
ang portion ni Julio Garcia. Therefore, they were not in the
position to ask for rescission.
Moreover, respondent’s obligation to pay the balance of the
purchase price was still subject to delivery by petitioners.
Failure to comply with the condition imposed upon the
performance gives the other party the option to refuse to
proceed to the sale or to waive that condition. Take note,
with regard to rescission, that is only available in a contract of
sale. If rescission is not available, then you only have specific
performance.
SERRANO vs. CAGUIAT:
Q: What do we have here? Contract of Sale or Contract to
Sell?
A: Contract to Sell
Q: How did the SC arrive with the conclusion that it was a
Contract to Sell?
Q: How about the fact that they referred to the partial
payment as earnest money? How did the SC address that
part?
Q: Why would rescission be necessary?
 SALES – ATTY. SARONA (2014) | 2 SANCHEZ ROMAN
In this case, the SC held that a Contract to Sell is akin to a
Conditional Sale. The efficacy or the obligatory force of the
vendor’s obligation to transfer title is subordinate to the
happening of a future or uncertain event. The suspensive
condition is commonly the full payment of the purchase
price.
Now, contract to sell, contract of sale (sic) their effecting law
cannot be identified. In contract of sale, when there has been
delivery, the vendor has lost and cannot recover the
ownership of the land sold until and unless the contract of
sale is resolved and set aside. You must ask for rescission so
that ownership will be transferred back to you. Otherwise, as
is lang yung contract because there is a valid contract of sale.
In contract to sell, the title remains to the vendor and if the
vendee does not comply with the condition precedent of
making payment at the time specified in the contract.
The receipt of partial payment showed that what was entered
was a contract to sell. First, first ownership of the property
was retained by the petitioners and was not to pass until full
payment of the purchase price. Second, the agreement was
not embodied in a deed of sale. Third, the petitioners
retained possession of the certificate of title of the lot.
The parties referred to the payment as earnest money. But
this is considered as earnest money in contract to sell and not
that of a contract of sale. Since the earnest money is given to
a contract to sell, Art. 1482 which deals with earnest money
in a contract of sale is not applicable.
NABUS vs. PACSON:
Q: Is a Conditional Sale similar to Contract to Sell?
A: No.
Q: What do we have here?
A: Contract to Sell.
Q: What is the difference between a Conditional Sale and a
Contract to Sell?
When you say conditional sale, that happening of that
condition will either give rise or extinguish the contract of
sale depending whether it is a suspensive or resolutory
condition.
Look at Art. 1458 second paragraph. Sale may be absolute or
conditional. So, what would be an instance of a conditional
sale that is not a contract to sell? I’m asking for an example.
The SC, in this case, held that the contract entered into was a
contract to sell, not a contract of sale. Again, a contract of
sale is absolute. In conditional sale as in a contract to sell,
ownership remains with the vendor and does not pass to the
vendee upon full payment of the price.
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Here the SC did not say that conditional sale and contract to
sell are the same. In fact, the SC held that a contract to sell
may not even be considered a conditional contract of sale
where the seller may likewise reserve title to the property
subject of the sale until fulfillment of the suspensive
condition.
Example of conditional contract of sale: I will sell to you my
parcel of land if you pass this subject. That is a condition, not
a period. That is a condition that may or may not happen.
In a conditional contract of sale, there is of course consent
between the parties. But there is a condition - the happening
of a contingent event which may or may not happen. If the
suspensive condition is not fulfilled, then the perfection of
the contract of sale is abated. If the suspensive condition is
fulfilled, then the contract of sale is perfected such that if
there is previous delivery of the property subject of the sale,
ownership automatically passes to the buyer by operation of
law.
In a contract to sell, upon fulfillment of the suspensive
condition (which is the full payment of the purchase price),
ownership will not automatically transfer to the buyer
although there already has been a previous delivery. The
prospective seller still has to convey title to the prospective
buyer by entering into a contract of absolute sale.
Notice the distinction. Although we say that a contract to sell
is somewhat a conditional sale, but it’s specific in a sense that
the condition there is subject to the full payment of the price
or the transfer of ownership. Plus, you have to execute a
deed of absolute sale pa.
But in conditional contract of sale, the happening of the
condition will give rise to the respective obligations of the
parties.
Reiteration:
Absolute Contract of Sale:
 title passes to the vendee upon delivery
 vendor loses ownership over the property and
cannot recover until the contract is resolved or
rescinded
Contract to Sell:
 ownership is reserved to the vendor until full
payment of the price
 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 being effective.
REYES vs. TUPARAN:
Q: Contract to Sell or Contract of Sale?
 SALES – ATTY. SARONA (2014) | 2 SANCHEZ ROMAN
A: Contract to Sell
Q: If you look at the contract that they signed, it was a Deed
of Conditional Sale with Assumption of Mortgaged. Why was
it considered as a Contract to Sell?
Q: Assuming that this was a Contract of Sale, is Rescission an
available remedy?
A: No.
Q: Why? In this case, was there a substantial breach?
A: No.
Even if the contract executed by the parties is one deemed as
a Conditional Sale with Assumption of Mortgage, the SC ruled
that it was a contract to sell based on the following:
1. Title and ownership remained with the first party
until full payment of the balance price. In fact the
second party cannot sell, transfer convey or
otherwise encumber the subject property.
2. Upon payment by the second party of the full
balance of the purchase price and assumption of
mortgage, there will be an execution of deed of
cancellation of mortgage and the first party shall
execute a deed of absolute sale.
Again, title and ownership remains with the petitioner-owner
and therefore, it is still a contract to sell. Without
respondent’s full payment, there can be no breach of
contract to speak of because the petitioner has no obligation
yet to turn over the title. Respondent’s failure to pay in full
the purchase price is not a breach of contract contemplated
in Art. 1191. Rather, it is just an event that prevents
petitioner from being bound to convey title to the
respondents.
There can be no rescission when there is only a slight or
casual breach in the fulfillment of the obligation. Rescission is
allowed only when the breach of contract is substantial.
In this case, there is only a slight breach there can be no
rescission. The remaining balance is only 805,000 pesos and
the respondent has already paid 3.4 million. In fact, the
respondent showed her sincerity and willingness to comply
with her obligation when she offered to pay the petitioner
the amount of 751,000.
CONSENT: PARTIES
1. Minors, Insane or Demented Persons, Deaf-Mutes
2. Sale By and Between Spouses
1. CONSENT : Parties
Consent deals with the capacity of a party to enter into a
contract.
The capacity of such party means the power to do acts with
legal effects and power to obligate himself.
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Article 1489. All persons who are authorized in this Code to
obligate themselves may enter into a contract of sale, saving
the modifications contained in the following articles.
Where necessaries are sold and delivered to a
minor or other person without capacity to act, he must pay
a reasonable price therefor. Necessaries are those referred
to in Article 290 (which is now Article 194 of the FC).
When we deal of parties to a contract of sale, we talk about
persons. When we talk about natural persons, at least 18
years of age. Juridical persons can also enter into a COS,
whether as seller or as a buyer. You can have a partnership or
corporation.
Juridical person can enter into COS, they have the capacity to
enter into a COS by operation of law.
Which laws are we referring to? Article 44 of the NCC
provides:
Article 44. The following are juridical persons:
(1) The State and its political subdivisions;
(2) Other corporations, institutions and entities for
public interest or purpose, created by law;
their personality begins as soon as they have
been constituted according to law;
(3) Corporations, partnerships and associations for
private interest or purpose to which the law
grants a juridical personality, separate and
distinct from that of each shareholder, partner
or member.
In relation thereto, we have Article 46:
Article 46. Juridical persons may acquire and possess
property of all kinds, as well as incur obligations and bring
civil or criminal actions, in conformity with the laws and
regulations of their organization.
Now, when it comes to the capacity of the parties, we have
two kinds:
1. Absolutely Incapacitated
Regardless of the person with whom they are dealing with,
they are considered incapacitated as provided by law.
This refers to 1327 of the CC:
Article 1327. The following cannot give consent to a
contract:
(1) Unemancipated minors;
(2) Insane or demented persons, and deaf-mutes
who do not know how to write.
2. Relatively incapacitated
 SALES – ATTY. SARONA (2014) | 2 SANCHEZ ROMAN
They are only incapacitated when they are dealing with
specific situations or types of persons.
LABAGALA vs. SANTIAGO:
Q: What is the presumption under the law with regard to
consideration in a contract?
A: Consideration is presumed
Q: Why was this presumption not applied?
Q: Why was the sale not valid?
A: Consent is absent.
Q: How about the allegation that it was a donation?
A: There is no donation.
With regard to the capacity of the parties in a contract of
sale, it may be absolute or relative. Absolutely incapacitated
are those persons being referred to under Art. 1327 of the
Civil Code. They cannot give consent to a contract
(unemancipated minors, insane or demented persons, and
deaf-mutes who do not know how to write).
In relation thereto, we have Art. 234 of the Family Code
which provides that emancipation takes place upon the
attainment of majority (18 y.o. unless otherwise provided).
We also have Art. 1390 (voidable contracts, even though
there may have been no damage to the contracting parties).
Art. 1390. The following contracts are voidable or
annullable, even though there may have been no
damage to the contracting parties:
1. Those where one of the parties is incapable of
giving consent to a contract (nasa Art. 1327);
2. Those where the consent is vitiated by mistake,
violence, intimidation, undue influence or fraud.
These contracts are binding kasi nga valid until annulled. As
mentioned, these contracts are susceptible of ratification.
So in this case, it was emphasized that a minor cannot be
deemed to have given her consent to a contract of sale.
Consent is among the essential elements of a contract,
absence of which, there can be no valid contract. Take note
that minority of one of the parties makes the contract
voidable. Although nakalagay diyan “void,” they just declared
it “void” at that time.
However, even if one of the parties is a minor, the sale will
nevertheless be considered as valid under the exception
wherein the subject matter involves necessaries. These are
the same with those being referred to as support under Art.
194 of the FC.
Art. 194. Support comprises everything
indispensable for sustenance, dwelling, clothing,
medical attendance, education and transportation,
in keeping with the financial capacity of the family.
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Also, take note of the principle of estoppel. Even if one of the
parties is a minor… but the minor was asked by the other
party if he is of legal age and the minor acknowledges that he
is indeed of legal age… the other party cannot later on ask for
the nullity of the sale based on the principle of estoppel.
Insane, Demented Persons, Absolutely Incapacitated. In
relation thereto, we have already discussed Art. 1328 in your
obligations and contracts.
Art. 1328. Contracts entered into during a lucid interval are
valid. Contracts agreed to in a state of drunkenness or
during a hypnotic spell are voidable.
Ratification as mentioned, we have Art. 1393.
Art. 1393. Ratification may be effected expressly or tacitly. It
is understood that there is tacit ratification if, with
knowledge of the reason which renders the contract
voidable and such reason having ceased, the person who
has a right to invoke it should execute an act which
necessarily implies an intention to waive his right.
PARAGAS vs. HEIRS OF DOMINADOR BALACANO:
Q: Can the status of the contract be questioned just because
one of the parties is dying or already of age?
Q: What do you mean by infirmity?
Q: What would make the contract void?
Q: What is the missing element here?
A: Consent
Q: What is the status of the subsequent contract of sale from
Paragas to Catalino?
Ownership is NOT required at the time the contract is
perfected. If you look at the facts of this case, the SC need not
say that the subsequent contract between Paragas and
Catalino was void. What is deemed not valid is the TRANSFER
of property because Paragas could not have transferred
something that he did not own in the first place.
With regard to Gregorio, his consent was considered absent,
not because of his age or infirmity but because of the
impairment of his mental faculties that prevented him from
properly, intelligently and firmly understanding what he
entered into. The spouses Paragas could not have made the
subsequent transfer of property to Catalino as nobody can
dispose anything that which does not belong to him. But
notice that as to the subsequent sale, the SC did not say that
it was void. In other words, in this case, there was a breach of
contract. Accordingly, Catalino could demand for damages
from Paragas.
In ruled in Paragas, the general rule is that a person is not
incompetent to contract merely because of advanced years
or by reason of physical infirmities. However, when such age
 SALES – ATTY. SARONA (2014) | 2 SANCHEZ ROMAN
or infirmities have impaired the mental faculties so as to
prevent the person from properly, intelligently, and firmly
protecting her property rights then he is undeniably
incapacitated. Thus, in such case, there can be no valid
contract.
Also take note of Art. 1332.
Art. 1332. When one of the parties is unable to read, or if
the contract is in a language not understood by him, and
mistake or fraud is alleged, the person enforcing the
contract must show that the terms thereof have been fully
explained to the former.
FRANCISCO vs. HERRERA:
Q: Who can question the status of a voidable sale?
Q: Was there a valid ratification?
A: Yes.
Q: Was the contract of sale deemed voidable by reason of his
senile dementia?
A: Yes
In the present case, it was established that the vendor Eligio,
Sr. entered into an agreement with petitioner, but that the
former’s capacity to consent was vitiated by senile dementia.
The assailed contracts are not void or inexistent per se;
rather, these are contracts that are valid and binding unless
annulled through a proper action filed in court.
An annullable contract may be rendered perfectly valid by
ratification, which can be express or implied. Implied
ratification may take the form of accepting and retaining the
benefits of a contract. This is what happened in this case.
Respondent’s contention that he merely received payments
on behalf of his father merely to avoid their misuse and that
he did not intend to concur with the contracts is
unconvincing.
If he was not agreeable with the contracts, he could have
prevented petitioner from delivering the payments, or if this
was impossible, he could have immediately instituted the
action for reconveyance and have the payments consigned
with the court.
Remember here that it was only when respondent failed to
convince petitioner to increase the price that the former
instituted the complaint for reconveyance of the properties.
In this case, there is ratification. One cannot negotiate for an
increase in the price in one breath and in the same breath
contend that the contract of sale is void.
In relation to voidable contracts, also take note of Art. 1397
and 1399.
Art. 1397. The action for the annulment of contracts may be
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instituted by all who are thereby obliged principally or
subsidiarily. However, persons who are capable cannot
allege the incapacity of those with whom they contracted;
nor can those who exerted intimidation, violence, or undue
influence, or employed fraud, or caused mistake base their
action upon these flaws of contract.
Art. 1399. When the defect of the contract consists in the
incapacity of one of the parties, the incapacitated person is
not obliged to make any restitution except insofar as he has
been benefited by the thing or price received by him.
So, in relation to the concept of necessaries. With regard to
these incapacitated parties, the general rule is that contracts
entered into by minors, insane, demented persons, deaf-
mutes are voidable. Voidable contract cannot be avoided by a
capacitated party (sic). So, those parties are absolutely
incapacitated, of course, subject to some exceptions.
Relative Incapacity
This involves parties who are incapacitated to enter into a
valid contract or transaction with regards to specific person
and in relation to a specific subject matter.
First, sale by and between spouses. We have to take note of
this arrangement. Sale by spouses with third parties. Here,
we can apply what you have learned and mastered under
Persons and Family Relations.
Under Art. 73.
Art. 73. Either spouse may exercise any legitimate
profession, occupation, business or activity without the
consent of the other. The latter may object only on valid,
serious, and moral grounds.
In case of disagreement, the court shall decide whether or
not:
(1) The objection is proper, and
(2) Benefit has occurred to the family prior to the
objection or thereafter. If the benefit accrued prior
to the objection, the resulting obligation shall be
enforced against the separate property of the
spouse who has not obtained consent.
The foregoing provisions shall not prejudice the
rights of creditors who acted in good faith.
In relation to sales, take note of Art. 96 and 124 of the FC
Ownership, Administrative, Enjoyment and
Disposition of the Community Property
Art. 96. The administration and enjoyment of the
community property shall belong to both spouses jointly. In
case of disagreement, the husband's decision shall prevail,
subject to recourse to the court by the wife for proper
 SALES – ATTY. SARONA (2014) | 2 SANCHEZ ROMAN
remedy, which must be availed of within five years from the
date of the contract implementing such decision.
In the event that one spouse is incapacitated or
otherwise unable to participate in the administration of the
common properties, the other spouse may assume sole
powers of administration. These powers do not include
disposition or encumbrance without authority of the court
or the written consent of the other spouse. In the absence
of such authority or consent, the disposition or
encumbrance shall be void. However, the transaction shall
be construed as a continuing offer on the part of the
consenting spouse and the third person, and may be
perfected as a binding contract upon the acceptance by the
other spouse or authorization by the court before the offer
is withdrawn by either or both offerors.
Administration of the Conjugal Partnership
Property
Art. 124. The administration and enjoyment of the conjugal
partnership shall belong to both spouses jointly. In case of
disagreement, the husband's decision shall prevail, subject
to recourse to the court by the wife for proper remedy,
which must be availed of within five years from the date of
the contract implementing such decision.
In the event that one spouse is incapacitated or
otherwise unable to participate in the administration of the
conjugal properties, the other spouse may assume sole
powers of administration. These powers do not include
disposition or encumbrance without authority of the court
or the written consent of the other spouse. In the absence
of such authority or consent, the disposition or
encumbrance shall be void. However, the transaction shall
be construed as a continuing offer on the part of the
consenting spouse and the third person, and may be
perfected as a binding contract upon the acceptance by the
other spouse or authorization by the court before the offer
is withdrawn by either or both offerors.
Essentially, they have the same premise.
GUIANG vs. CA:
Q: When did the husband sell the subject property?
Q: Why do you think why it is important to know when the
sale took place?
Q: Why was Art. 124 of FC applied here?
Q: When did the FC take effect?
A: August 3, 1988
st nd
Q: What the issue here? The 1 sale or the 2 sale?
nd
A: 2 sale which happened in 1990
Q: Thus the applicable law is?
A: Art. 124 of the FC.
Q: So the sale is?
A: Void.
Q: What about the amicable settlement?
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A: It cannot be treated as ratification. A void sale cannot be
ratified.
st
In this case, the 1 sale was executed on April 22, 1988
wherein the spouses sold ½ portion of their lot to the
defendant spouses Guiang. There is no issue with regard to
the sale which happened before the effectivity of the Family
Code. The sale that was at issue was the subsequent sale as
to the remaining ½ portion. In the absence of his wife, the
husband pushed through with the sale which happened on
March 1990. In other words, at that time, the FC was already
in effect. Therefore, you apply Art. 124 where in the absence
of such authority or consent, the disposition or encumbrance
shall be void.
Furthermore, it must be noted that the fraud and the
intimidation referred to by petitioners were perpetrated in
the execution of the document embodying the amicable
settlement. Now remember here that a void contract cannot
be ratified. The deed of transfer of rights… it cannot be
ratified even with the amicable settlement.
The participation by some barangay authorities in the
"amicable settlement" cannot otherwise validate an invalid
act. It is a direct offshoot of the Deed of Transfer of Rights
which is void. As provided in Art. 1422 –
Art. 1422. A contract which is the direct result of a previous
illegal contract, is also void and inexistent.
In summation therefore, both the Deed of transfer of Rights
and the "amicable settlement" are null and void. Doctrinally
and clearly, a void contract cannot be ratified.
Now, distinguish the FC and the NCC. In the FC, the contract is
deemed void but is considered as a continuing offer. But in
the NCC (before the effectivity of the FC), the contract was
deemed as voidable and the law has provided that the
offended wife may –
Art. 173. The wife may, during the marriage, and within ten
years from the transaction questioned, ask the courts for
the annulment of any contract of the husband entered into
without her consent… xxx
In other words, the two elements must be present in order to
question the status of the sale (this was before the effectivity
of the FC). Again, you have to take note of date of the sale in
order to know what the applicable law is.
HEIRS OF REYES vs. MIJARES:
Q: Were the 2 requisites present namely ‘during the
marriage’ and ‘within 10 years from the transaction’?
A: Yes.
Q: What was the status of the sale?
A: Voidable
 SALES – ATTY. SARONA (2014) | 2 SANCHEZ ROMAN
In this case, the sale took place when the civil code was still in
effect. Here, the absence of the consent of the wife resulted
to a voidable contract of sale.
Take note that the SC held that such contract must be
annulled in its entirety. The plain meaning attached to the
plain language of the law is that the contract, in its entirety,
executed by the husband without the wife's consent, may be
annulled by the wife. Had Congress intended to limit such
annulment in so far as the contract shall "prejudice" the wife,
such limitation should have been spelled out in the statute.
Also take note of the governing laws at the time of the sale.
(Sale was contracted in 1983)
Article 166. Unless the wife has been declared a non compos
mentis or a spendthrift, or is under civil interdiction or is
confined in a leprosarium, the husband cannot alienate or
encumber any real property of the conjugal partnership
without the wife's consent. If she refuses unreasonably to
give her consent, the court may compel her to grant the
same.
Article 173. The wife may, during the marriage, and within
ten years from the transaction questioned, ask the courts
for the annulment of any contract of the husband entered
into without her consent, when such consent is required, or
any act or contract of the husband which tends to defraud
her or impair her interest in the conjugal partnership
property. Should the wife fail to exercise this right, she or
her heirs, after the dissolution of the marriage, may demand
the value of property fraudulently alienated by the
husband.
AINZA vs. SPOUSES PADUA:
Q: When was the sale executed?
A: 1987
Q: Was it in writing?
A: No. Oral.
Q: But is it considered as valid?
A: It is voidable.
Q: Is it enforceable?
Q: Will this fall under the statute of frauds?
Q: Was the contract here already consummated?
A: Yes.
Q: So?
A: There is already delivery.
Q: So will the statute of frauds apply?
A: No. It only applies to executory contracts.
There is no question as to the fact that the sale was only
verbally entered into. There is no question as to its
enforceability because this is not subject to the statute of
frauds since said contract is not anymore executory.
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Q: Why did the SC rule that this was a voidable contract?
Q: How about the requisite of the 10 year period? Which
would prevail the 10-year prescription period or the 6-year
prescriptive period?
Q: What is the nature of the Civil Code? Both the 10 yr. and 6
yr. prescriptive period are provided by the CC. Correct. But in
case of conflict, how will you construe it here?
Q: What will you apply? 6 years or 10 years?
Q: What is general? What is special?
Remember, if the contract of sale was executed at the time
when the civil code was still in effect prior to the FC, the
contract of sale is still voidable.
In this case, the SC held that the contract of sale between
Eugenia and Concepcion being an oral contract, the action to
annul the same must be commenced within six years from
the time the right of action accrued. Eugenia sold the
property in April 1987 hence Antonio should have asked the
courts to annul the sale on or before April 1993. No action
was commenced by Antonio to annul the sale, hence his right
to seek its annulment was extinguished by prescription.
Even assuming that the ten (10)-year prescriptive period
under Art. 173 should apply, Antonio is still barred from
instituting an action to annul the sale because since April
1987, more than ten (10) years had already lapsed without
any such action being filed.
Actually here, the SC did not say which is really superior
between the two. But, again the 10-year period is much more
specific with regard to the transaction.
Also take note that the contract entered into was an oral
contract of sale but it did not affect the status of the sale
being voidable. The verbal contract also did not violate the
Statute of Frauds as the contract has already been
consummated in this case. Remember that the Statute of
Frauds apply only to executory agreements.
SPOUSES FUENTES vs. ROCA:
Q: When was the sale executed?
A: January 11, 1989
Q: What will apply?
A: FC
Q: What is then the status of the sale?
A: Void. No consent of wife.
Q: When you say void, what is then the effect as to the
agreement as between the parties?
A: Contract cannot be ratified.
Q: Following this, what is then the respective rights of the
parties?
A: Restitution.
Here, the applicable law is the FC, not the NCC. Remember, it
is not the date of the marriage that should be taken into
 SALES – ATTY. SARONA (2014) | 2 SANCHEZ ROMAN
consideration. Rather, take into consideration the date of the
execution of the sale.
Take note that under Art. 124, the Family code does not
provide a period within which the wife who gave no consent
may assail her husband’s sale of the real property. It simply
provides that without the other spouse’s written consent or a
court order allowing the sale, the same would be void. Thus,
it has no force and effect from the very beginning.
Compare this with the CC, you have the 10-year prescriptive
period. Although a void contract has no legal effects even if
no action is taken to set it aside, when any of its terms have
been performed, an action to declare its inexistence is
necessary to allow restitution of what has been given under
it. This action, according to Article 1410 of the Civil Code does
not prescribe
Art. 1410. The action or defense for the declaration of the
inexistence of a contract does not prescribe.
Here, the Rocas filed an action against the Fuentes spouses in
1997 for annulment of sale and reconveyance of the real
property that Tarciano sold without their mother’s (his wife’s)
written consent. The passage of time did not erode the right
to bring such an action.
Since the sale was void, the land remained the property of
Tarciano and Rosario despite that sale. When the two died,
they passed on the ownership of the property to their heirs,
namely, the Rocas. As lawful owners, the Rocas had the right,
under Article 429 of the Civil Code, to exclude any person
from its enjoyment and disposal.
In fairness to the Fuentes spouses, however, they should be
entitled, among other things, to recover from Tarciano’s
heirs, the Rocas, the P200,000.00 that they paid him, with
legal interest until fully paid, chargeable against his estate.
July 15, 2014 – Arjan
Ok so we are now dealing with relative incapacity: sale by
spouses, we have discussed the cases already. Remember to
distinguish the applicable law on the sale, if it was effected
prior the effectivity of the FC we apply the Civil Code, which
the sale would be voidable and that the spouse whose
consent is not given, he or she has ten years to assail the
validity.
PELAYO vs. PEREZ: When was the sale effected? Prior the
Family Code. So the sale is considered voidable? Aside from
the fact she signed as a witness, what additional factor or
factors considered by the Supreme Court in saying that there
was an implied consent by the wife? Who filed the initial
complaint here? Perez.
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Because if the wife was really questioning the validity of the
sale, she should have been the one who filed the annulment
of the sale.
So what we have here is a sale that happened during the
effectivity of the Civil Code. In this case, there was implied
consent on the part of the wife despite their allegations as
she has affixed here signature in the document. Aside from
that, Lorenza, despite the lapse of three and a half years, did
absolutely nothing to have the contract nullified. It was
actually the buyer who filed for the execution of the contract.
ABALOS vs. MACATANGAY: What law is applied here? The
Family Code. The Special Power of Attorney was executed in
June 2, 1988 but that is merely an authority. Regarding the
questioned transaction, it was entered into August 1989, so
there was lack of consent in the transaction, what is the
effect?
Even if it is a contract of sale, would it be valid? No. Can you
say that since the husband was the one who executed the
MoA, the sale is invalid as much as his share?
It was the SPA that was executed in 1988. But the questioned
transaction is already in 1989 but without the consent of the
wife. At first glance, there was only a contract to sell but
assuming it is a contract of sale, the sale would be void by the
lack of the wife’s consent. The nullity of the RMOA as a
contract of sale emanates not only from lack of Esther’s
consent thereto but also from want of consideration and
absence of respondent’s signature thereon. Such nullity
cannot be obliterated by Esther’s subsequent confirmation of
the putative transaction as expressed in the Contract to Sell.
Under the law, a void contract cannot be ratified and the
action or defense for the declaration of the inexistence of a
contract does not prescribe. A void contract produces no
effect either against or in favor of anyone–it cannot create,
modify or extinguish the juridical relation to which it refers.
The congruence of the wills of the spouses is essential for the
valid disposition of conjugal property. Where the conveyance
is contained in the same document which bears the
conformity of both husband and wife, there could be no
question on the validity of the transaction.
SO take note of the cases we have discussed. Again those are
contracts of sale by spouses to third persons. But how about
sales between husband and wife? You have Article 1490 of
the Civil Code.
Art. 1490. The husband and the wife cannot sell property to
each other, except:
(1) When a separation of property was agreed upon
in the marriage settlements; or
(2) When there has been a judicial separation or
property under Article 191.
 SALES – ATTY. SARONA (2014) | 2 SANCHEZ ROMAN
What is the reason behind this prohibition on the sales
between spouses? What would happen if the sale between
spouses be allowed? First is to prevent commission of fraud
or prejudice to third person. What would happen if this
provision is not present? The husband has incurred debts
and he might transfer it to his wife to defraud creditors.
Second is to prevent undue advantage of the spouse to
another. For example, hiwalayan kita pag di mu binenta sa
akin ang bahay at lupa. Third is to prevent indirect donations
between husband and wife. There is this prohibition in the
Civil Code against donations and allowing spouses to sell to
each other may circumvent the prohibition on sales. Diba the
husband can only give/donate to the wife on special
occasions? Also take note of 1492.
Art. 1492. The prohibitions in the two preceding articles are
applicable to sales in legal redemption, compromises and
renunciations.
CALIMLIM versus FORTUN: Is 1490 applicable? But isn’t it
1490 is applicable to husband and wife? The prohibition still
applies. The sale was made by a husband in favor of a
concubine after he had abandoned his family and left the
conjugal home where his wife and children lived and from
whence they derived their support. That sale was subversive
of the stability of the family, a basic social institution which
public policy cherishes and protects.
Additionally, the law emphatically prohibits the spouses from
selling property to each other subject to certain exceptions.
Similarly, donations between spouses during marriage are
prohibited. And this is so because if transfers or con
conveyances between spouses were allowed during marriage,
that would destroy the system of conjugal partnership, a
basic policy in civil law. It was also designed to prevent the
exercise of undue influence by one spouse over the other, as
well as to protect the institution of marriage, which is the
cornerstone of family law.
So again: Art. 1490. The husband and the wife
cannot sell property to each other, except:
(1) When a separation of property was agreed upon
in the marriage settlements; or
(2) When there has been a judicial separation or
property under Article 191.
General rule, no sale between spouses, exception: separation
of property in the marriage settlements. The settlement
should be prior to the marriage. Another instance is when
there is judicial separation: when the spouse is sentenced
with a penalty with carries with it civil interdiction or when
one spouse is declared absent or when there is legal
separation. Now remember that if the spouses are separated
only in fact, they still cannot sell to each other. The marriage
should be annulled.
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In a sale between husband and wife, only the following have
standing or have the right to question the sale:
1. heirs of both spouses
2. prior creditors
3. state
State is usually concerned in these instances in relation to
taxes. Prohibition can only be taken advantage of third
persons who are in such relationship with the spouses whose
interests and rights may be prejudiced by the transaction of
the spouses. They have locus standi. Take note that creditors
AFTER the transaction are not considered prejudiced.
We also have a provision on the relative incapacity Article
1491.
Article 1491. The following persons cannot acquire by
purchase, even at a public or judicial auction, either in
person or through the mediation of another:
(1) The guardian, the property of the person or
persons who may be under his guardianship;
(2) Agents, the property whose administration or
sale may have been entrusted to them, unless the consent
of the principal has been given;
(3) Executors and administrators, the property of
the estate under administration;
(4) Public officers and employees, the property of
the State or of any subdivision thereof, or of any
government-owned or controlled corporation, or institution,
the administration of which has been intrusted to them; this
provision shall apply to judges and government experts
who, in any manner whatsoever, take part in the sale;
(5) Justices, judges, prosecuting attorneys, clerks of
superior and inferior courts, and other officers and
employees connected with the administration of justice, the
property and rights in litigation or levied upon an execution
before the court within whose jurisdiction or territory they
exercise their respective functions; this prohibition includes
the act of acquiring by assignment and shall apply to
lawyers, with respect to the property and rights which may
be the object of any litigation in which they may take part
by virtue of their profession;
(6) Any others specially disqualified by law.
So what we have here in 1491 are persons relative
disqualified from the sale of properties involving specific
kinds of properties in relation to specific class of persons. Sale
made in prohibition of 1491 are void and thus cannot be
ratified. Why do we have this provision? It is because of the
fiduciary relationship between the two parties involved and
this provision prevents the other from taking advantage of
such relationship. So in number one, we have there the
guardian in relation to the property of his ward.
 SALES – ATTY. SARONA (2014) | 2 SANCHEZ ROMAN
PHILTRUST vs. ROLDAN: Who purchased the property here?
Ramos. Was there any evidence that Ramos acted as a
conduit in connivance with the guardian? NO. If there was
proof that the sale benefitted the ward, can the sale be
considered valid? NO.
Can you use the defense that the ward is benefitted to
counter Paragraph 1 of Article 1491? Does the law provide an
exception?
In this case, again if you look at the circumstances, the sale
was actually judicially approved. But never the less, the
subsequent sale is considered void. What was taken into
consideration was the time of the first sale between the
guardian and Ramos then the subsequent sale to Ramos to
Roldan. Guardianship is a trust of the highest order. Even
though assuming benefits may have been acquired by the
ward through the sale, such sale would nevertheless be void,
in violation with Article 1491. Good faith is not a defense.
Even though there is no evidence that Dr. Ramos acted as a
conduit, but it remains that she acquired the ward’s
properties. Both on legal and equitable standpoints these
sales should not be sustained.
Actual collusion involving third persons would be hard to
prove. What was considered in this case is the short time
between the sales and the relationship of Ramos and Roldan.
No need to comply with the requirements that the third party
was a conduit. The presumption remains that the sale was
done in violation of Article 1491. Even walang proof nang
fraud no? Kahit may court approval pa yun. Ito nga may court
approval, pero di pa rin valid. Even if it is for the benefit of
the ward, such is not allowed to prevent abuse.
Under Paragraph 2, we have agents. Unlike the other
paragraphs may exception na dito no: “unless the consent of
the principal has been given”. Here valid and binding with the
consent of the principal. Sa other paragraphs, even if may
approval pa ng ward, the sale is still void. Remember we
discussed the difference between agents and brokers? Take
note that the prohibition here in 1491 is not applicable to
brokers or indentors. A broker is merely a middleman
between the buyer and the seller. He is not acting for and
behalf of the principal. So here, if a sale is made in favor of
the broker or indentor, the provision does not apply. He is
merely a middleman or a go-between.
Other instances in 1491, the consent of the person sought to
be protected by the does not validate the contract. In other
words, the contract is void from the very beginning.
Paragraph 3, administrators and executors in relation to the
properties under administration.
DISTAJO vs. CA: What is applicable here paragraph 2 or
paragraph 3? With regard to number 3, what does the terms
executor and administrator refer to? Bakit hindi
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administrator under number 3 was applied here? What does
the word administrator refer to? How is an agent different
from an administrator? So what was the status of the sale in
favor of Distajo? How was the consent proven in this case?
So here, the ability of the agent to sell property is not
absolute. It requires that the principal must give his consent.
Thus, the prohibition does not apply when consent was given
by the principal to a sale made in the hands of the
administrator. The document signed by Illuminada showed
she gave consent and there was no sign of forgery. If you
allege fraud or machination, you must also prove it. Absent
any proof , you must uphold the contract.
What is the difference with Paragraph 2 and Paragraph 3 in
terms of administrator?
CUI vs. CUI: What is the contract that was in issue here?
Executed by who? In favor of? Why was the contract being
questioned? How did the Supreme Court address the
allegations? Why is it important to establish the state of mind
of Don Mariano in relation to consent?
In relation to 1491, is it applicable? Particularly, what
Paragraph? In Paragraph 2, Article 1491, the provision says
that “Agents, the property whose administration or sale may
have been entrusted to them” the term administration here
is different from that of Paragraph 3.
Because the term administrator in Paragraph 3 refers to the
persons who manage the estate of the deceased persons. So
in other words, if you’re an administrator, you cannot sell the
estate that is under your station. On the other hand,
Paragraph 2 refers to agents with respect to principal. You
have to make the distinction, kasi sa number 2, you have the
consent of the principal which validates the contract.
In Cui versus Cui, they allege that Don Mariano is old, sickly
and forgetful. But as we have discussed before, weakness of
mind alone is insufficient to invalidate a contract. It must be
shown that the person at the time of signing did not
reasonably understand the contents and effects of the
contract he is engaging. Here there was no evidence that Don
Mariano did not understand. In fact, there were evidences
that prove Don Mariano had a sound mind and had full grasp
of his mental faculties. Therefore, the sale made were upheld
to be valid between him and Antonio (agent).
Take note that in this case, it happened before the effectivity
of the New Civil Code. The Supreme Court emphasized the
same may be given retroactive effect provided that no vested
or acquired right is impaired.
With regard to sale by guardians, agents and administrators,
these are all void, with the exception of paragraph 2 of Article
1491. If you try to read the discussions, meron dyang
 SALES – ATTY. SARONA (2014) | 2 SANCHEZ ROMAN
nakasabi na you can ratify the contract. If you understand
ratification it means that you validate a previous contract. So
even if may nakalagay jan na ratify, be careful ha kasi it says
there that you can ratify by a new contract. So yung luma na
contract void pa rin sya,kasi you cannot ratify a void contract,
its just that you execute a new contract. Don’t get confused
sa terms na ratify a new contract. You can still execute a new
contract because the previous void contract contains only a
private wrong.
Who can invalidate the contract? Any person. Unlike dun sa
sale between spouses, yung affected lang a pwedeng mag
invalidate.
Next paragraph is:
(4) Public officers and employees, the property of the State or
of any subdivision thereof, or of any government-owned or
controlled corporation, or institution, the administration of
which has been intrusted to them; this provision shall apply
to judges and government experts who, in any manner
whatsoever, take part in the sale;
Now this provision is not only for the purpose of preventing
fraud, but also to surround the public officers with the
prestige necessary to carry out their functions by freeing
them of any suspicion, which although unfounded, tends to
discredit the institution by discrediting the honor of said
public officers. Under paragraph 5 we have there several
officers. This applies to lawyers in relation to any property
under litigation in which may breach their obligations. Again
ha applicable din ang prohibition sa sales in legal redemption,
compromises and renunciations. Again why do we have this
prohibition. The client-lawyer relationship is fiduciary in
nature and such prohibition will prevent any undue influence
on the part of any lawyer on account of this confidential
relation. Violation constitutes a breach of judicial ethics.
DIRECTOR OF LANDS vs. ABABA: What do you mean by that
arrangement; that “contingent fee”?
Article 1491 prohibits only the transfer between the client
and the lawyer of the property subject to litigation. It does
not apply to cases of transfer after litigation. Thus. a contract
of contingent fee is not prohibited because the transfer
happens only after litigation on the finality of a favorable
judgment. Usually, in a contingent fee, the lawyer does not
receive attorney’s fees. What happens is that judgment in
favor of the client entitles the attorney of his fees. But take
not in legal ethics, such contingent fee must still be
reasonable. And of course, if the judgment is not in favor of
the client, then the lawyer does not receive anything.
VALENCIA vs. CABANTING: Was there only one contract of
sale? In the first contract of sale who was the seller and the
buyer? What were the statuses of these contracts? Why?
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Public policy prohibits the transaction given the fiduciary
relationship. Here there was already a judgment by the lower
court but there was already a petition for certiorari was filed.
So in other words, wala pang finality of judgment. A case is
not only deemed in litigation when it is involved in a contest
in acourt but also when it becomes subject to review. So the
purchase done was in violation with 1491. But with regard to
the sale done by Jovellanos, there was no actual client and
lawyer relationship between Serapia and Jovellanos.
Jovellanos is indeed a lawyer but he was not the counsel for
Serapia.
DAROY vs. ABECIA: Was the sale in violation of 1491? Why,
wasn’t there a sale in favor of an attorney?
Can we not say that the sale was a circumvention of the
prohibition in 1491? Is it applicable? So the subsequent
transfer to Abecia, valid or not valid? Why?
1491 is not applicable. Bakit? A property can be acquired by a
client may be acquired by his attorney for as long as the
property is not subject to litigation. Yun yung nangyari sa
property dito. Distinguish lawyers from judges and
prosecuting attorneys. For judges and prosecuting attorneys,
they are prohibited from acquiring properties pending
litigation AND levied upon execution. The prohibition for
attorneys extends only to the properties and rights object of
litigation, in which they may take part in virtue of their
profession. So here the parties thought that the transfer of
properties to Abecia was prohibited. That is why they entered
into a fictitious sale until maka.reach kay Abecia. So even if
the original sale is void, the real intent of the parties was to
convey it to Abecia, that is why the sale is valid. And no
violation sa 1491.
RAMOS vs. NGASEO: So the Supreme Court held that the
contract entered into is void? What is the nature of the case?
This is a disbarment case.
An administrative proceeding. SO even if it is in violation of
1491, even of the Supreme Court ruled that the sale is void,
the Supreme Court cannot annul the sale in the same
proceeding because this is for disbarment.
In all cases falling under 1491, the actual transfer of the
property must be consummated in order for there to be
violation of the prohibition. Actual transfer involves delivery.
There was no violation of the prohibition in this case because
there was only a demand but the property was not delivered
yet. Letter of demand to deliver does not cause a transfer of
ownership. But nevertheless, the attorney is liable under
violation of judicial ethics.
What are the requirements in order to apply this prohibition
on sale between client and lawyers?
 SALES – ATTY. SARONA (2014) | 2 SANCHEZ ROMAN
1.) The attorney-client relationship. Kasi naga yung
basis for the prohibition is the fiduciary relationship.
2.) The property is subject matter under litigation
3.) xxx
HEIRS of UY EK LIONG vs. CASTILLO: What is the issue here?
What is the nature of that Kasunduan? What are the two
contracts taken into consideration here?
So why is there an issue in 1491? What was the stipulation in
the first contract? What was the ruling of the court? Valid or
void? In violation ba of 1491?
Essentially, what is the arrangement under the contract?
The prohibitions applies only during the pendency of the suit.
Here the prohibition does not cover contingent fees. When
we talk about judges, the prohibition does not require that
the subject property must have been tried by the judge. If
your taking about Supreme Court Justices or CA Justices, their
incapacity extends to properties within their territorial
jurisdiction. If your take about MTC and RTC, pending outside
their territorial jurisdiction. Prohibition extends upon their
jurisdiction with their respective functions. (note: double
check daw)
MACARIOLA vs. ASUNCION: Was there a violation of Article
1491? Was the judge considered liable? What is the legal
basis of the reprimand of the Judge?
So again 1491 prohibition applies to sale or assignment of
property while litigation is taking place. Here the decision was
already final. The lot in question was already subject to final
judgment. Also, the judge did not directly buy from the party
who was involved in the litigation, but he bought it from Dr.
Galapon after the finality. He bought it one year after
litigation. So no violation of 1491. However, it was improper
for him to acquire the same form the Canons of Judicial
Ethics. A judge's official conduct should be free from the
appearance of impropriety, and his personal behavior, not
only upon the bench and in the performance of judicial
duties, but also in his everyday life, should be beyond
reproach. So no violation of 1491 but nevertheless he was
reprimanded.
GAN TINGCO vs. PABINGUIT: Is there a violation of 1491? So
valid or not valid?
Gardner was a judge, did he purchase the subject property?
Is there a violation when he acquired it in an auction sale?
When did he purchase the property? At what stage of the
case?
What is the nature of the case? Why was the sale in favor of
Gardner being questioned? So here did the judge take part in
the sale? Why would you say it is invalid? Why?
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The Justice of Peace who ordered the execution was Gardner
himself. And in the public auction, Gardner was the one who
appeared as the highest bidder. Even if the property was
acquired by public auction, it was still in violation of Article
1491, previously 1489 of the Old Civil Code. The purchaser
was the Justice of Peace himself. The property has been
subject to his court. So if Gardner is prohibited for the
transfer, he could not have transferred it to Abad. So take
note of this case, even if this is an old case. He was the judge
in the litigation of the property involved and he was the
highest bidder at the same time, so covered pa rin.
For number 6 in 1491, what may be referred here are those
aliens who are prohibited from acquiring properties. Or for
example in the Constitution, Article XII, Section 3 of the
Constitution:
Section 3. Lands of the public domain are classified
into agricultural, forest or timber, mineral lands and national
parks. Agricultural lands of the public domain may be further
classified by law according to the uses to which they may be
devoted. Alienable lands of the public domain shall be limited
to agricultural lands. Private corporations or associations may
not hold such alienable lands of the public domain except by
lease, for a period not exceeding twenty-five years, renewable
for not more than twenty-five years, and not to exceed one
thousand hectares in area. Citizens of the Philippines may
lease not more than five hundred hectares, or acquire not
more than twelve hectares thereof, by purchase, homestead,
or grant.
Taking into account the requirements of
conservation, ecology, and development, and subject to the
requirements of agrarian reform, the Congress shall
determine, by law, the size of lands of the public domain
which may be acquired, developed, held, or leased and the
conditions therefore.
With respect to aliens, they can only acquire by hereditary
succession, under Article XII, Section 7:
Section 7. Save in cases of hereditary succession, no
private lands shall be transferred or conveyed except to
individuals, corporations, or associations qualified to acquire
or hold lands of the public domain.
In relation to your Property, we have the Condominium Act.
Foreigners are allowed to have shares in a condominium
corporation for as long as it does not exceed 40%. (Filipino
owned stock must be at least 60%) Sa condominiums, ang
condominium corporation ang owner ng land tapos ang
condominium unit is owned by the shareholder of the
corporation. As long as 60% is composed of Filipinos, the rest
can already be foreigners.
July 22, 2014 – Alyssa
 SALES – ATTY. SARONA (2014) | 2 SANCHEZ ROMAN
Second Essential element: Subject Matter
Remember as we have seen in the cases that the transfer of
title or an agreement to transfer as something paid or
promised is the essence of sale. so in the case of Polytechnic,
the SC stated the provision in the civil code as to the contract
of sale, defining a contract of sale, is a catch-all provision
which effectively brings its class into a whole gamut of
transfers or by ownership over a thing is ceded for a
consideration. Now with regard to the validity of a subject-
matter so that there is perfected contract of sale
ELEMENTS:
1.) The Subject-matter must be existing, future or
subject to a resolutory condition; in other words it must refer
to a possible thing. in this element, we are talking about a
subject matter that must be within the commerce of man and
must not be impossible. Now, impossible by nature or by law,
impossibility however is not mere difficulty.
2.) The subject matter must be licit.
3.) The subject matter must be determinate or at
least determinable.
Remember that the subject matter is an essential element of
a sale, so absence of a subject matter, walang contract of sale
or void contract of sale. There is no valid contract of sale,
obviously, any of the parties or neither of the parties, can
seek specific performance. There would be no breach of
contract of sale kasi walang contract. but of course, the
parties injured can recover otherwise, there would be unjust
enrichment. so in relation to this essential element of subject
matter, again for being licit, we have Art. 1459 and for being
determinate, Art. 1460 but before we proceed to those
elements of subject matter, the first thing we should take
note of is that the subject-matter must be existing, future and
contingent, so it must refer to a possible thing, not
impossible, it must come into existence so in relation to, we
have article 1462,
Article 1462. The goods which form the subject of a contract
of sale may be either existing goods, owned or possessed by
the seller, or goods to be manufactured, raised, or acquired
by the seller after the perfection of the contract of sale, in
this Title called "future goods."
There may be a contract of sale of goods, whose acquisition
by the seller depends upon a contingency which may or may
not happen
Alright, we have Article 1462 which refers to a subject matter
yet to be manufactured, raised or acquired, nevertheless, it
can still be considered as a valid subject matter. Future
goods, existing goods can be a valid subject matter in a
contract of sale. Now also, we have Article 1461.
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Art. 1461. Things having a potential existence may be the
object of the contract of sale.
The efficacy of the sale of a mere hope or expectancy is
deemed subject to the condition that the thing will come into
existence.
The sale of a vain hope or expectancy is void.
Alright, under Article 1461 we have the concept of empio rae
speratae, we have to distinguish from the latin term, empio
spei. now these two refers to valid contracts of sale.
Empio Rae Speratae - it refers to a contract of sale wherein
the subject matter has potential existence, there is
uncertainty but such uncertainty could not affect the validity
of the sale because the uncertainty lies or refers to the
quantity or quality of the thing. if the thing comes into
existence, then, there would be a valid contract wherein the
parties could demand obligations arising therefrom.
Empio Spei - refers to sale of a hope or expectancy, the sale
of hope itself, remember what we discussed in the
characteristics of a contract of sale, be commutative in
nature, it emphasized that it is only a general characteristic
because it is possible that we will have a contract of sale
which is xxx in nature, this is empio spei, what is the subject
matter is the sale of hope.
Example: lotto ticket.
Alright, in that instance, empio spei, that is a valid sale. what
is the subject matter? the sale of hope or expectancy, that
the thing will come into existence. if you will compare it to
empio rae speratae, it is a sale of a expected thing. now both
of these contracts of sale are valid.
Empio rae speratae is subject to the condition that the thing
will exists but a sale of hope or empio spei, sale produces
effect even if the thing does not come into existence. like for
example, un lotto ticket and you found out that you did not
win, can you annul the contract of sale or declare it as void
kasi hindi ka nanalo? NO because the subject matter there is
the hope that you will win, if you will not win, you cannot
demand back the price. you cannot recover what you have
paid for the ticket because you did not win because the
subject matter in empio spei, is the hope to win, but if you
would not win, the sale is valid nevertheless.
In Empio spei, the uncertainty is with regard to the existence
of the thing. In Empio rae speratae, the uncertainty is with
regard to the quality or the quantity of the thing.
Essentially, in empio rae speratae, sale of a future thing but
when we are talking about empio spei, the object is a present
thing, that hope, that you will win the lotto. Notice however
 SALES – ATTY. SARONA (2014) | 2 SANCHEZ ROMAN
in Article 1461, sale of vain hope is void. Sale of mere hope is
valid.
Sale of vain hope, void. what will be an example? you
purchase a lotto ticket, the draw is yesterday, you bought it
today. d ka na tlaga manalo nyan. vain hope talaga yung hope
mo na manalo ka, so that is what is being referred to as void
sale. Now, we have cases here dealing with future goods.
SIBAL vs. VALDEZ:
What is the subject matter in the case of sibal? Who is the
vendor and the vendee in the subject matter or the pending
crops? Why was there an issue here regarding the subject
matter? Do we have a valid contract of sale? do we have
empio rae speratae here?
Pending crop would be covered under the concept of emptio
rei speratae, so valid subject matter in the form of pending
crops, valid sale although not yet actually in existence during
the time the parties entered into a contract but is reasonably
certain to come into existence, reasonably come into
existence, why? Because the crops were already planted and
they expected that it would grow and eventually be
harvested. Title vests to the buyer from the moment the
thing comes into existence, things of this nature is said to
have a potential existence. Several examples, valid sale of
wine in the vineyard, the milk that the cow will produce, etc.
however, take note that the things sold must be specific and
identified. In this case, it was identified; it is not just pending
crops, the pending crops from a specific parcel of land. Of
course, they must be owned at the time of the delivery by the
vendor.
The SC held that pending crops have the potential existence
and maybe a valid subject matter of sale and may be dealt
separately from which they grow. Just take note however
that in this case of Sibal, there was an issue regarding
redemption. Now, there was a valid exercise of that
redemption but redemption applies only to real estate
property. Personal property there is no concept of
redemption even if there is already contract of sale and you
will subsequently redeem it.
PICHEL vs. ALONZO: What is the subject matter in this case?
Why was the validity of the sale an issue? Was the sale valid?
How about the subject matter? Considering that the sale is
valid, is it covered by the prohibition in R.A. 477 apply?
So here we have a valid contract of sale, the subject matter of
that contract or the fruits of the trees on the land within a
specific period wherein the subject matter is considered as a
valid subject matter having a potential existence covered
under 1461 and also determinate thing. Now, the essential
difference here is that the sale of the fruits is different from
the sale of the real estate property.
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The grantee of a parcel of land under R.A. 477 is not
prohibited from alienating, disposing the natural or industrial
fruits of the land afforded therein. What the law expressly
disallows the encumbrance or the alienation of the land itself
or any of the permanent improvements therein. Coconuts are
natural or industrial fruits for them to be gathered from the
trees to be used, enjoyed, sold or otherwise disposed by the
owner of the land. So again take note, it must be existing or
at least future or contingent. In relation thereto, we have also
Article 1465.
Art. 1465. Things subject to a resolutory condition may be
the object of the contract of sale.
Thing subject to a resolutory condition or subject to a
contingency may be a valid subject matter. when we are
talking about future things having potential existence, we are
not talking about merely the physical existence of ownership,
it would refer to its existence that it would be made to exists.
it could be manufactured, for example, through science.
You cannot enter into a contract of sale wherein the subject
matter would be, for example, water from the fountain of
youth, but again it is not possible within the concept of
science. take note also that between empio rae speratae and
empio spei, the presumption is in favor of empio rae
speratae, that certainty is with regard to the quantity or
quality of the thing, now future goods as we have seen in the
cases, in relation to Article 1462, those that are still going to
be manufactured based or acquired by the seller up to the
perfection of the contract or things which would depend
upon contingency which may or may not happen.
Take note that when we are talking about future goods that
are still to be manufactured, do not confuse it with a contract
for a piece of work from a contract of sale.
Remember the distinction. sale of things in litigation, it may
be a valid subject of the sale in relation thereto you have
provisions under contracts, 1381 paragraph 4 with regard to
rescissible contracts: goods which refer to things under
litigation if they have been entered into by the defendant
without the knowledge or approval of the litigants or
competent judicial authority, the status of the contract of
sale is rescissible.
In addition we also have Article 1385 par 2: “Neither
rescission shall take place, when the things which is the
object of the contract are legally in the possession of third
persons who did not act in bad faith.”
As we have mentioned earlier, things subject to a resolutory
condition as provided for in Art 1465 can be a valid object of
a contract of sale.
 SALES – ATTY. SARONA (2014) | 2 SANCHEZ ROMAN
What would be the instances wherein the subject matter is
subject to a resolutory condition? Redemption, legal or
conventional redemption. the property there is subject to a
resolutory condition. (Resourve Rongcal?? - concept under
succession.. sabi lng ni mam na it can be a valid subject
matter in a resolutory condition)
Essentially, the subject matter must be existing, future thing
or subject to a contingency, when you say its future, without
reference to whether its physical, its existence or to its non-
existence is whether science or technology will allow the
subject matter to come into existence. By the way class, it is
possible that there may be discussion or annotations na
kapag sinabing empio spei, sale of a vain hope.
JUST TAKE NOTE, empio spei refers to a mere hope not a vain
hope, so empio spei is a valid contract of sale.
Second element for a valid subject matter is that it must be
LICIT.
Licit meaning within the commerce of man, or something can
be sold or which can object of a contract. In relation thereto,
you have Article 1347 in contracts:
Art. 1347. All things which are not outside the commerce of
men, including future things, may be the object of a
contract. All rights which are not intransmissible may also
be the object of contracts.
No contract may be entered into upon future
inheritance except in cases expressly authorized by law.
All services which are not contrary to law, morals, good
customs, public order or public policy may likewise be the
object of a contract.
So what do we have here? a licit subject matter, it must be
transmissible by nature, in other words it is not personal in
nature.
For example, you will not have a subject matter sa sale, the
right to vote, that is a personal right. the contract of sale
there in your right to vote ,aside from being illegal, it is not
really valid because the right there is personal in nature.
things would also be intansmissible, by agreement or by
stipulation of the parties and also instransmissible by reason
of the provision of law ex. contracts of agency or partnership.
If you are a partner in a partnership, your right as a partner,
you cannot sell that to other person without the consent of
the other partners because partnership is based on trust and
confidence, fiduciary in nature. The third person, to whom it
will sell from a partner, will not have the confidence of the
other partners. That's the same thing in a contract of agency,
your rights as an agent cannot be sold to a third person
because the principal entered into a contract of agency
because he trusts that agent
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If that agent will sell such right, then that would happen?
nawala ung consent being fiduciary in nature. so subject
matter must be licit and within the commerce of man and it
includes such rights which are transmissible.
TANEDO vs. CA: What is the subject-matter in this case? His
right to future inheritance is the subject matter of the sale.
Was the sale valid? But isn't it that there is an affidavit of
conformity affirming the previous sale that was executed to
them? What was the effect of that affidavit? at the time such
affidavit was executed, was the father already dead? When
was the sale entered into? What was the subject matter that
time? Why was it considered as void? If there was really an
intention to sell the land from Lazaro to Ricardo, what should
have these parties done?
Now in relation thereto, under the rules of succession, upon
the death of the ascendant, your right as an heir comes into
play, open na yung succession at the time of death. you have
heard extrajudicial settlement.
No need for you to execute extrajudicial settlement to assert
your right over the property of the deceased. At the time of
death, magkaron ka na ng right, you will be considered as co-
owners of such parcel of land so that's why, what was
considered as not valid, the sale of future inheritance but
upon death, no need to execute actually after death,
extrajudicial settlement as to partition the property among
the heirs but at the time of death, you have already the right
along with the other heirs.
Now in this case, at the time the deed of sale was executed in
1962, the subject matter was the future inheritance of Lazaro
Tanedo, very clear in 1347, that it could not be a valid
contract of sale. When Lazaro subsequently executed an
affidavit of conformity after the death of his father,
remember that the first contract that was entered into was
void and you cannot ratify a void contract of sale.
Contract that was entered into in 1962 is not valid and cannot
be the source of any right nor create an obligation between
the parties , the affidavit of conformity insofar as it sought to
validate the 1962 sale is also useless and suffers from the
same infirmity. Again, you cannot ratify a void sale.
What could have they've done? They could have executed
another deed of absolute sale after the death of his father
and the rights of the parties, personal right, will begin from
the perfection of that valid contract of sale. As to the first
sale, no personal right or no rights will arise therefrom.
Remember to distinguish this case from the case of ACAP,
remember what is the subject matter in ACAP? Waiver of
hereditary rights, it was not a sale of future inheritance
because in that case, namatay na eh and then they wanted to
 SALES – ATTY. SARONA (2014) | 2 SANCHEZ ROMAN
settle it. Waiver of hereditary rights, waiver of your right in
favor of another heir but since the ascendant is already dead
during that time, hindi cya sale of future inheritance. Now,
why is this sale of future inheritance deemed as void under
the law? Because it is contrary to public policy.
We all know that we need not be the owner at the time of
the perfection of the sale but once we have a future
inheritance, what would be the tendency? You would assert
your right that is not yet yours. Remember it is possible na
mauna ka pa mamatay sa ascendant. so you could not have
any right over the subject matter. Also it discourages "sana
mamatay ka na", para magkaron ka ng right over the
property. that's the premise under this prohibition or future
inheritance being considered as not a valid subject matter.
Other instances where you will have a void sale due to an
illicit subject matter. sale of animals suffering contagious
diseases under Art. 1575.
Art. 1575. The sale of animals suffering from contagious
diseases shall be void.
A contract of sale of animals shall also be void if the
use or service for which they are acquired has been stated in
the contract, and they are found to be unfit therefor.
The law provides that in those instances that the contract of
sale is void. What else? 1347 under sale of future inheritance.
Remember that in Article 1459, it's very clear that the thing
must be licit and the vendor must have the right to transfer
ownership thereof, at the time it is delivered.
Again, we emphasize that ownership over the thing is not a
requirement or not element for the perfection of a contract
of sale. Very clear in Article 1459 that the right to transfer
ownership is important to exists at the time of delivery. So
essentially, what can be the objects of contracts? all these
which are not outside the commerce of man, so here,
including future things, they may be made, raised or acquired
by the obligor after the perfection of the contract, subject to
the condition, subject to the coming of the existence of the
thing or it can also be aleatory as we discussed in the sale of
hope.
Remember things: (cannot be a valid subject-matter of a
sale)
1.) Outside the commerce of man, not valid
contracts of sale.
2.) All kinds of things or interest whose alienation or
free exchange is restricted by law or stipulation which the
parties cannot modify or repeal.
3.) Services, invalid absolute submission and those
who render them, sacrificing the liberty, independence or
disregarding the dignity of the person. Sale of service which
results into involuntary servitude, not valid subject matter of
service.
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4.) Personal right, as we have discussed, not valid
subject matter, even if your parents are tired of you, they
cannot sell their rights as parents. Public office, you cannot
sell your right as being a public servant to others, as well as
your right to suffrage.
5.) Property while they pertain to Public dominion.
not valid subject matter. those belonging to the state or its
political subdivisions intended for public use or for public
service or for the development of national wealth. In
property, if the property of the public dominion is no longer
needed for public use or for public service, the property will
form part of the patrimonial property of the state.
6.) Of course, you cannot also sell air, wind, sunlight.
7.) What else? objects of contracts, valid object of
contracts of rights which are not intransmissible, services not
(I think this should be contrary?? instead of not
contrary)contrary to law, morals, customs public order or
public policy.
8.) Things prohibited by law cannot be a valid
subject matter. Dangerous drugs, wild birds or mammals rare
wildlife protected by law.
9.) Poisonous Plants or fruits prohibited by law.
10.) Gun Powder, exclusive blasting supplies
prohibited by law, of course, there are exceptions as long as
you comply with the requirements of law.
So again, not objects of contracts, again, they contrary to law,
morals, customs, public order and public policy, also if they
are indeterminable as to their time, outside the commerce of
man, intransmissible rights, future inheritance, not valid
object.
MARTINEZ vs. CA: How about the fact that there was a title
by the registry of deeds? What is the effect of that issuance
of such title over the subject property which includes that
public river? Could good faith be a defense to......with regard
to a valid subject matter?
Remember that properties of public ownership are used for
public use, roads, canals, rivers.. in this case, the properties
are properties of public domain intended for public use and
therefore, outside the commerce of man.. and therefore
cannot be the subject of a valid appropriation. so therefore,
the sale was not valid. here, take note, land registration
already issued a title, but that will not detract from the fact
that the sale or the transfer of property was not valid
because it is outside the commerce of man or the subject
matter was outside the commerce of man, a simple
possession of a certificate of title under the Torrens system
does not necessarily make the possessor the true owner of
property described therein.
If a person obtained a title under the Torrens system, which
includes by mistake or oversight, lands which cannot be
registered under the Torrens system, it does not by virtue of
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that certificate alone, become the owner of the land legally
included.
The land registration has no jurisdiction over non-registrable
properties such as public rivers which are part of the public
domain. The property is a river of a public domain, not
capable of private appropriation and cannot be acquired by
prescription.
So Good Faith not a defense, lack of knowledge or awareness
that such property was for public use is not a defense.
Adverse possession cannot be acquired by prescription.
HEIRS OF REYES vs. BELTRAN: What is the subject-matter
here? Was it a contract to sell or a conditional sale? What's
the condition? Is that conditional sale valid? so valid or void?
Why void? Isn’t it that we said earlier that things having
potential existence may be a valid subject-matter? Is the
subject-matter here a future inheritance? Who is the
registered owner of the property? At the time, was she alive
or dead? What is the provision there in the conditional sale?
Not a sale of future inheritance because the thing here or the
subject matter is the property subject to the condition that
Miguel will inherit that specific portion. Remember here that
as I explained a while ago that succession opens upon the
death of the ascendant. so here, Miguel being one of the
heirs of Constancia, already has a right over the property or
the estate of the deceased. But as to whether or not he will
inherit THAT SPECIFIC PORTION, that is the condition.
So here, although the issue here is who has the better right. I
will just like to point out, taking into consideration first as to
the nature of sale, remember the contract was denominated
as a contract to sell but actually a conditional sale. it was
stated in the contract "One of the co-heirs of the estate of
Constancia and I will inherit such portion over the lot" it is
clear that both parties at the time was not the owner of the
subject property and were merely expecting as to his share.
This could not be contemplated as a future inheritance
because here as I’ve said, Constancia already died, as to his
right, meron nang right si Miguel sa estate ni Constancia pero
as to the specific portion that he could get, not yet but he is
expected to inherit his portion. It must be clear in the
contract itself that Miguel's conveyance to the buyer was a
conditional sale.
It is never apparent the sale was conditioned upon the event
that Miguel will actually inherit and become the owner of the
said property. Under Article 1459, the thing must be licit and
the vendor must have the right to transfer ownership at the
time it is delivered. So required, vendor must have ownership
of the property at the time it is delivered.
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Here, the petitioner claim that the subject property was
constructively delivered in 1954 by virtue of that contract but
however, as already pointed out by the court, it was explicit
in the contract, at the time it was executed, that Miguel was
not yet the owner of the property and was only expecting it.
So he could not have yet transferred ownership by virtue of
the execution of that contract of sale. Now here, take note,
although it was stated that there was no valid sale from his
ownership could have transferred from Miguel, it does not
mean that the sale was not valid it is only that the execution
of that deed of sale could not have transferred the property
to the buyer, in this case, Arturo Reyes.
FRENZEL vs. CATITO: Who was the buyer in the said sale? The
sale was named under Ederlina. So who filed the initial
complaint here? Frenzel, for recovery of properties. So did
the Court rule in his favor? No. The sale was in violation of
the Constitutional that aliens cannot acquire properties in the
Philippines.
Isn’t it that Frenzel raised Article 1416 as to contracts which
are illegal per se? It does not apply in this case, as in 1416 this
applies only in cases where the sale is merely prohibited (for
the protection of the plaintiff) and not void ab initio.
Can Frenzel’s claim be granted under the principle of unjust
enrichment? No. What is the in pari delicto doctrine?
Here, the in pari delicto doctrine was applicable. Remember
under our Constitution that aliens, __individuals and
corporations are disqualified from acquiring lands of public
domain.
In this case, the sale in favor of Ederlina using the money of
Frenzel is considered null and void ab initio because these
contracts of sale were in violation of the Constitution. One
who loses his money or property by knowingly engaging in
transactions which involves his own moral turpitude may
make an action for his losses. The petitioner cannot claim
ignorance of the Constitutional prohibition, he was fully
aware that he was disqualified from owning public lands, that
why it was under the name of Ederlina.
Also take note, that even if he was unaware of the
prohibition, it would still not be a defense available to him.
1416 of the Civil Code was raised by the petitioner, the SC
said it cannot be applied when the agreement is not illegal
per se but is merely prohibited and the prohibition is
designed by the law for the protection of the plaintiff, he may
as public policy demands, recover what he has paid or
delivered. This is not applicable to the petitioner because
such provision applies only to contracts which are merely
prohibited in order to benefit private interests. It does not
apply to contracts void ab initio. The sale of the 3 parcels of
land in favor of petitioner was illegal per se. They were void
ab initio as they were entered in violation of the Constituion.
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Unjust enrichment cannot be used by Frenzel so that he can
be entitled to his claims. While it is true that no personal shall
be unjustly enriched at the expense of another, in this case an
action for recovery does not apply because here the contract
was prohibited by the Constitution. The in pari delicto
doctrine is applicable; both parties being at fault, the Court
will leave them as they are.
Third element for a valid subject matter: DETERMINATE or
DETERMINABLE
Article 1460. A thing is determinate when it is particularly
designated or physical segregated from all others of the
same class.
The requisite that a thing be determinate is
satisfied if at the time the contract is entered into, the thing
is capable of being made determinate without the necessity
of a new or further agreement between the parties.
We are not saying that generic things cannot be an object of
a contract of sale. They can still be a valid object kasi pwede
sila mahulog doon sa determinable element, that at least the
subject matter is determinable.
We also have the undivided interest of the sole owner under
Article 1463. The sole owner of a thing may sell an undivided
interest therein.
Example: You own a parcel of land and you sell your 50%
interest to another person. So what happens? If A sells 50%
of the parcel of land in favor of B. What is the effect? A and B
will now be co-owners. In 1463, you are selling your
undivided interest, not a specific portion of the property.
Undivided share of specific mass
Article 1464. In the case of fungible goods, there may be a
sale of an undivided share of a specific mass, though the
seller purports to sell and the buyer to buy a definite
number, weight or measure of the goods in the mass, and
though the number, weight or measure of the goods in the
mass, and though the number, weight or measure of the
goods in the mass is undetermined. By such a sale the buyer
becomes owner in common of such a share of the mass as
the number, weight or measure bought bears to the
number, weight or measure of the mass. If the mass
contains less than the number, weight or measure bought,
the buyer becomes the owner of the whole mass and the
seller is bound to make good the deficiency from goods of
the same kind and quality, unless a contrary intent appears.
Here, the seller sells 100 sacks of rice in favor of the buyer.
The sacks of rice were stored in a warehouse. If at the time of
the sale, there are 1000 sacks of rice and by virtue of that
sale, the buyer becomes a co-owner of those 100 sacks of rice
or 10% of that undivided share in mass.
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Why is this important? For example, there was flood and the
sacks of rice at the bottom were damaged. The buyer cannot
say na ah, yan lang yung sayo yung nasa baba. Pwede ba yon?
Hindi.
1464 provides that they are co-owners of the undivided share
of mass. For example 100 were sold out of that 1000, he still
owns 10%. So 10% sa nadamage, he would have to suffer or
bear the loss, the remaining sacks of rice in good condition,
meron pa din syang 10% for the said fungible goods.
But of course if the subject matter was 1000 sacks of rice and
only 1000 sacks of rice are stored in the warehouse. What is
the effect? All of those are owned by the buyer.
So, subject matter is easy if it is determinate—particularly
designated or physically segregated. Determinable—generic
object not yet physically segregated or particularly
designated at the time of perfection. This requirement is met
at the time of perfection when the parties need not enter
into a new agreement as to subject matter. This requirement
that the subject matter be determinate or at least
determinable is met when at the time of perfection the
agreement between the parties included a formula which can
be used by the courts to establish the subject matter to which
the obligation to deliver can be enforced without needing to
get back to the parties as to their intention.
MELIZA vs. CITY OF ILOILO: Why was there an issue in the
first place? What was the raised provision that was the
contention that made it difficult to determine whether or not
there was a determinate object? Why was it considered
determinate? Was the Arellano plan already existing at the
time of the sale? Yes.
So here, by virtue of the statement in the Arellano plan there
would have been no need for the execution of another
instrument as to determine the portion referred to in the said
contract. The requirement of the law that sale must have for
its object a determinate thing is fulfilled as long as at the time
the contract was entered into, the object is capable of being
made determinate without the necessity of a new or further
agreement. The fact that they referred to a previously
existing Arellano plan makes the subject matter
determinable.
HEIRS OF SAN ANDRES vs. RODRIGUEZ: What was this survey
needed? What was their agreement in relation to this survey?
A survey was required so that the deed of sale will be
executed. The land was already delivered to him. In fact
Rodriguez even consigned the payment because he wanted
to fulfill his side of the obligation.
The test applied here was the “No further agreement test”.
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Now here, the lots sold to respondent were said to adjoin the
previous lots, the subject lot is capable of being determined
without the need of a further agreement. Now here while the
petitioner argued that the survey is needed, the SC said there
is no dispute and that the respondent purchased an area of
300sq.m. located in the middle of lot 194-2. Notice here that
there was a perfected contract of sale, there was a meeting
of the minds between the parties upon the object and the
price.
ATILANO vs. ATILANO: If there was a mistake, could it not be
considered as a voidable contract? No, all the elements of a
contract of sale were present. Annulment of the contract was
not necessary.
How did the SC address the issue that in the deed of sale it
was clearly indicated that what should be transferred to
Atilano II was lot 535 E and not A. How did the SC reached to
the conclusion that nevertheless there was a mistake? SC said
that the parties intended that the specific portion that Atilano
II is to occupy is the portion of lot that is to be sold to him.
Again, always go back to the intention of the parties. The
deed of sale clearly indicated that the lot covered was lot
535-E in favor of Atilano II. The SC said here that what you
have here is a mistake and that there was no vitiation of
consent to make the contract voidable. I think what
happened here is mali yung dinig ng A and E, siguro bisaya. So
most probably ganun ang nangyari. Remember that the
remedy available here is not to annul but only reformation
since there was already a meeting of the minds. Of the
parties.
What you have here is a simple mistake, there was no
vitiation of the consent when the contract was entered into.
The intention of the parties was already clear as between
them but it was not clear in the instrument, therefore
reformation is the remedy. The parties here already retained
possession of their properties in conformity with the portions
allotted to them in the sale.
YU TEK vs. GONZALES: How did the SC address here as
regards to the subject matter? Determinable or determinate
subject matter? Determinable.
How did SC reach to the conclusion that there was no
contract of sale but only an executory agreement? What is
the arrangement of the parties? What is involved here is a
contract of right.
There was really no definite occupation to deliver. When you
say I am going to get goods from you, I am going to get sugar
from you but as to the quantity for delivery it is not specific.
Sometimes, they would agree to a minimum or maximum
within a month or sometimes sayo nalang ako magkuha, and
then kung nag order na ako sayo, deliver mo sa akin, then
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babayaran ko—yun yung contract of sale. One thing why it
was considered as an executory agreement since it was a
mere promise of sale.
First, considering that there was merely an executory
agreement in promise of sale and no perfected contract of
sale, the contract may not be rescinded since there is no
contract of sale to speak of.
Second, they cannot demand specific performance because
again there was no contract of sale. But considering that
there was already a payment of 3000 pesos as advance
payment, and then it can be recovered
August 5, 2014 - Algene
In the case of San Andres vs. Rodriguez, we have there a
determinate or at least determinable subject matter where
the subject lot is said to be adjoining with the previously paid
lot. The subject lot is capable of being determined without
the need of any new contract.
In the case of Atilano, this is the case where nagkabalikdad
ang A and E. Wrong designation of the lot does not vitiate the
sale because the parties to the contract have xxx. In this case,
there was already a deed of sale and a title. Again, what is
important is the meeting of the minds of the parties.
Take note that even if the subject matter is generic, it does
not mean that you do not have a valid contract of sale
because you have “determinable subject matter.” However,
take note of the effect if you have a generic subject matter as
compared to a specific or determinate subject matter.
If there is a fortuitous event and the thing is lost:
1. If it’s a determinate or specific subject matter –
obligation to deliver is lost.
2. If you have a generic subject matter – the obligation
is not extinguished.
Just a quick review of the provisions under your Obligations
and Contract governing determinate and determinable
objects… Of course, you can compel delivery or specific
performance under Article 1165.
Art. 1165. When what is to be delivered is a determinate
thing, the creditor, in addition to the right granted him by
Article 1170, may compel the debtor to make the delivery.
If the thing is indeterminate or generic, he may ask
that the obligation be complied with at the expense of the
debtor.
If the obligor delays, or has promised to deliver the
same thing to two or more persons who do not have the
same interest, he shall be responsible for any fortuitous
event until he has effected the delivery. (1096)
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Art. 1166. The obligation to give a determinate thing
includes that of delivering all its accessions and accessories,
even though they may not have been mentioned. (1097a)
Art. 1170. Those who in the performance of their obligations
are guilty of fraud, negligence, or delay, and those who in
any manner contravene the tenor thereof, are liable for
damages. (1101)
Will the quantity of the subject matter affect the perfection
or validity of a contract of sale?
NGA vs. IAC: Which contention was upheld by the Supreme
Court? Soriano. So there was a contract of sale. What was the
basis of NGA in saying that there was no contract of sale?
The fact that the quantity is not determinate shall not be an
obstacle in the existence of a contract of sale. Provided, it is
possible to determine the same without the need of a further
document.
In this case, the subject matter is the rice harvested in
Soriano’s farm land. The specific quantity of a subject matter
is not important when it is still possible to determine the
quantity without the need of a new contract between the
parties.
Under the facts of the case, may nakalagay na “quota of xxx
cavans.” The fact that the exact number of cavans of palay to
be delivered has not been determined does not affect the
perfection of the contract. Why? Because under Article 1349,
it is still possible to determine the same without the need of a
new contract.
Art. 1349. The object of every contract must be determinate
as to its kind. The fact that the quantity is not determinate
shall not be an obstacle to the existence of the contract,
provided it is possible to determine the same, without the
need of a new contract between the parties.
Soriano can deliver so much of his produce as long as it does
not exceed 2,640 cavans.
SCHUBACK & SONS vs. CA: The SC held that where seller
offered the thing with the item number, quantity, part
number, description, unit price and the xxx xxx without
indicating the quantity ordered, there was already a
perfected contract of sale even when required letter of credit
has not been open by the buyer.
In this case, the contract of sale was actually perfected not on
December 29 but on December 24. Quantity is immaterial in
the perfection of a sales contract. What is important is the
meeting of the minds as to the object and cause.
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With regard to the opening of the letter of credit, it is only as
regards the mode of payment. There was never an
agreement between the parties that the opening of the letter
of credit would be considered as a suspensive condition, the
happening of which will give rise to the respective obligations
of the parties in the contract of sale. As a mode of payment, it
is not among the essential requirements to the perfection of
the contract of sale.
In the agreement entered on December 24, there was no
specification (quantities)… But the seller bound himself to
submit the xxx quantities about a week after. The contract of
sale was perfected upon the issuance of a the purchase order
kasi andun na yung meeting of the minds and not upon the
confirmation of the parties.
If you compare this with NGA case, there is no maximum
quanity. Even when exact quantity of the subject matter in
the contract of sale has not been agreed upon… when parties
come into an agreement as to the price and the term, then
that would constitute a valid and binding contract.
MENDOZA vs. DAVID: What is the difference between sale by
description and sale by sample? Neither. If none of the two,
then what type of contract do we have here? A contract for a
piece of work. Would the distinction between contract of sale
and the contract of piece of work relevant to this case? What
is the cause of action here of Mendoza? Breach of contract.
There is a sale by sample when a small quantity is exhibited
by the seller as a fair specimen of the bulk, which is not
present and there is no opportunity to inspect or examine the
same. To constitute a sale by sample, it must appear that the
parties treated the sample as the standard of quality and that
they contracted with reference to the sample with the
understanding that the product to be delivered would
correspond with the sample. There is an implied warranty
that the goods shall be free from any defect which is not
apparent on reasonable examination of the sample and which
would render the goods unmerchantable.
There is a sale of goods by description where “a seller sells
things as being of a particular kind, the buyer not knowing
whether the seller’s representations are true or false, but
relying on them as true; or as otherwise stated, where the
buyer has not seen the article sold and relies on the
description given to him by the seller, or has seen the goods,
but the want of identity is not apparent on inspection.”
We can also have a sale by sample and description wherein
the seller will show the design and also describe the thing.
But under the facts of the case, it could not have been a sale
by sample nor a sale by description.
The SC said here that the transaction in this case was actually
a “made to order agreement.” It is undisputed that there was
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a perfected contract of sale of furniture between Mendoza
and David… There is a contract for a piece of work wherein
the furnitures were specially manufactured and made upon
the special order by Mendoza.
Would the nature of a contract being a piece of work or sale
matter with regard to the issue here? Not really. If you
remember, when is the distinction important when we
discussed these topics?
1. If there is a breach of warranty, it is only applicable
to a contract of sale and not with a contract for a
piece of work.
2. Also tax provisions. There are different rates for
contractors and manufacturers.
3. If the action is one for specific performance, it is only
available in a contract of sale. It is not available for
the C for PW because it would constitute involuntary
servitude.
4. For the applicability of the Statute of Frauds. (SF is
only for CoS)
In this case, Mendoza wants to get the payments already
made. However, she failed to prove her allegations.
The last topic under subject matter is the obligation to
transfer title to the buyer. We have emphasizes from the very
beginning that the seller’s ownership is NOT a requisite for a
valid perfection of a contract of sale.
“Ownership at the time of delivery.” This is what is important.
However, in relation to this, we have Article 1505.
Art. 1505. Subject to the provisions of this Title, where
goods are sold by a person who is not the owner thereof,
and who does not sell them under authority or with the
consent of the owner, the buyer acquires no better title to
the goods than the seller had, unless the owner of the goods
is by his conduct precluded from denying the seller's
authority to sell.
Nothing in this Title, however, shall affect:
(1) The provisions of any factors' act, recording
laws, or any other provision of law enabling the
apparent owner of goods to dispose of them as if
he were the true owner thereof;
(2) The validity of any contract of sale under
statutory power of sale or under the order of a
court of competent jurisdiction;
(3) Purchases made in a merchant's store, or in
fairs, or markets, in accordance with the Code of
Commerce and special laws. (n)
Under this article, it’s clear that the seller could sell
something he does not own but take note of this: the buyer
acquires no better title to the goods than the seller had.
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Take note of the exception: unless the owner of the goods is
by his conduct precluded from denying the seller's authority
to sell. Applied here is the principle of estoppel.
We also have three exceptions under Article 1505. Note:
Registration of motor vehicles are done only for the purpose
of registration. It is not done to establish conclusive
ownership over the vehicles. Take note also of the validity og
any contract of sale under statutory power.
Remember that ownership is required at the time of delivery.
Even if there has been delivery but the seller was not the
owner at that time, there could be no transfer of ownership.
Remember no one can alienate what he doesn’t have.
Art. 1434. When a person who is not the owner of a thing
sells or alienates and delivers it, and later the seller or
grantor acquires title thereto, such title passes by operation
of law to the buyer or grantee.
In that scenario, at the time of the delivery, the seller was not
yet the owner. However, subsequent thereto, the owner
becomes the owner thereof, then there is automatic
transfer… by operation of law, ownership is passed on to the
buyer.
In relation to the principle of estoppel, it can be applied. It’s
an exception wherein it is possible where ownership is
transfer because the true owner allows another to appear as
an owner or has the authority to transfer ownership and third
persons are misled into dealing into such apparent owner or
agent… in this case, the third party may be protected.
If a person acts as agent of the principal… remember that he
must enter into the contract for and in behalf of the principal
and acts within the scope given by the principal. If he exceeds
the scope given by the principal, then principal is not bound
by the actions of the agent unless he ratifies the latter’s acts.
Art. 1911. Even when the agent has exceeded his authority,
the principal is solidarily liable with the agent if the former
allowed the latter to act as though he had full powers. (n)
However, if the other party is aware of the scope or limit of
the authority given to such agent but he still enters into the
contract, there could be no valid contract of sale and no valid
transfer of ownership.
In relation thereto, we also apply Article 559.
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Art. 559. The possession of movable property acquired in
good faith is equivalent to a title. Nevertheless, one who has
lost any movable or has been unlawfully deprived thereof
may recover it from the person in possession of the same.
If the possessor of a movable lost or which the
owner has been unlawfully deprived, has acquired it in good
faith at a public sale, the owner cannot obtain its return
without reimbursing the price paid therefor. (464a)
What if you have a voidable sale? What is the effect of
delivery? We have Article 1506.
Art. 1506. Where the seller of goods has a voidable title
thereto, but his title has not been avoided at the time of the
sale, the buyer acquires a good title to the goods, provided
he buys them in good faith, for value, and without notice of
the seller's defect of title. (n)
What are the rights of the third person who acquired the
thing/s from a seller who acquired it through a voidable
contract? Would delivery transfer ownership to him? IT
DEPENDS if he is in good faith or in bad faith.
 If purchaser for value – the buyer acquires title
(buyer acquires a good title to the goods, provided
he buys them in good faith, for value, and without
notice of the seller's defect of title) this is before the
contract is annulled
Take note:
 Ownership not required at the time of perfection but
rather at the time of delivery
 The seller need not be the owner of the thing at the
time of perfection
NOOL vs. CA: What is the source of the right to repurchase?
Was the sale valid? If you look at the ruling of the SC here, it
said that the sale is valid even if the seller was not the owner
at the time of the perfection provided he acquires ownership
after.
Article 1409 of the Civil Code: “Those which contemplate an
impossible service.” Why has it become impossible in this
case? There could have been no possibility that the seller in
this case would become the owner of the property and then
deliver it.
The SC did not contradict what is provided in the Civil Code.
Sabi lang dito na: “a sale is possible even if the seller was not
the owner at the time of sale, provided he acquires title to
the property later on.”
In the present case however, it is likewise clear that the
sellers can no longer deliver the object of the sale to the
buyers, as the buyers themselves have already acquired title
and delivery thereof from the rightful owner, the DBP.
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Thus, such contract may be deemed to be inoperative and
may thus fall, by analogy, under item no. 5 of Article 1409 of
the Civil Code: “Those which contemplate an impossible
service.” Article 1459 of the Civil Code provides that “the
vendor must have a right to transfer the ownership thereof
[object of the sale] at the time it is delivered.” Here, delivery
of ownership is no longer possible. It has become impossible.
The SC in this case also emphasized this: No one can give
what he does not have – neno dat quod non habet.
ALCANTARA-DAUS vs. DE LEON: How could the forgery affect
the contract of sale? The COS was perfected but there was no
transfer of ownership?
Here, we have a perfected contract of sale. Ownership is not
required at the time of perfection. If there is a valid sale, it
creates an obligation on the part of the seller to transfer
ownership and deliver the subject of the contract to the
buyer. It is during the delivery that the law requires the seller
to have the right to transfer ownership of the thing sold.
In general, a perfected contract of sale cannot be challenged
on the ground of the seller’s non-ownership of the thing sold
at the time of the perfection of the contract. At the time of
the sale, Rodolfo de Leon was not the owner of the land he
delivered to petitioner.
Also remember that in this case, the SC said since a certificate
of registration covers the land, then it land cannot be
acquired by prescription regardless of petitioner’s good faith.
NOEL vs. CA: Don’t get confused with regard the ruling here
that there could be a valid alienation or sale regarding the ½
undivided interest of the spouse.
Again, in a contract of sale, it is essential that the seller is the
owner of the property he is selling. The principal obligation of
a seller is "to transfer the ownership of" the property sold.
This law stems from the principle that nobody can dispose of
that which does not belong to him
HEIRS OF SAN MIGUEL vs. CA: Can the impossibility of service
to consider the sale void applicable in this case?
The court ruled here that the non-payment of P300,000 was
not a valid justification for the refusal to deliver the
certificate of title. In this case, we could not say that there
was really a perfected contract of sale. Remember, if it’s a
contract of sale, there are reciprocal obligations.
BUT here, the condition in the Kasunduan was void and
ineffective because it contemplates an impossible service.
True, in contracts of sale, the vendor need not possess title to
the thing sold at the perfection of the contract. However, the
 SALES – ATTY. SARONA (2014) | 2 SANCHEZ ROMAN 44
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Coverage for the 1 Exam (Basic Concepts – Subject Matter)
vendor must possess title and must be able to transfer title at
the time of delivery.

Under the facts of the case, Severina’s heirs are not in a

position to transfer title. Without passing on the question of
who actually owned the land covered, the SC note that there
is no proof of ownership in favor of Severina’s heirs. In fact, it
is a certain Emiliano Eugenio, who holds a tax declaration
over the said land in his name.

The Supreme Court emphasized that the essence of a sale is

the transfer of title or an agreement to transfer it for a price
actually paid or promised.

Citing Nool vs. CA, the SC said if the sellers cannot deliver the
object of the sale to the buyers, such contract may be
deemed to be inoperative.

Article 1405. The following contracts are inexistent and void

from the beginning: xxx
(5) Those which contemplate an impossible service.

Note:
 Future things can be valid subject matter.
 If there is a voidable contract and the subject matter
thereto is subsequently alienated, take note
whether the buyer is purchaser for value or not.

--- END OF FIRST EXAM ---

The reason most people never reach their

goals is that they don’t define them,
or ever seriously consider them as believable or achievable.
Winners can tell you where they are going,
what they plan to do along the way,
and who will be sharing the adventure with them.
– Denis Watiley