Sales Case Digests #1

DEFINITION OF SALE

Polytechnic University vs. CA (G.R. No. 143513 November 14, 2001) All three (3) essential elements of a valid sale, without which there can be no sale, were attendant in the disposition and transfer of the property from NDC to PUP consent of the parties, determinate subject matter, and consideration therefor. The defendants-appellants interpretation that there was a mere transfer, and not a sale, apart from being specious sophistry and a mere play of words, is too strained and hairsplitting. For it is axiomatic that every sale imposes upon the vendor the obligation to transfer ownership as an essential element of the contract. Transfer of title or an agreement to transfer title for a price paid, or promised to be paid, is the very essence of sale (Kerr & Co. v. Lingad, 38 SCRA 524; Schmid & Oberly, Inc., v. RJL Martinez Fishing Corp., 166 SCRA 493). At whatever legal angle we view it, therefore, the inescapable fact remains that all the requisites of a valid sale were attendant in the transaction between co-defendantsappellants NDC and PUP concerning the realities subject of the present suit. Acap vs. CA (G.R. No. 118114 December 7, 1995)

In a Contract of Sale, one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other party to pay a price certain in money or its equivalent. Under Article 712 of the Civil Code, the modes of acquiring ownership are generally classified into two (2) classes, namely, the original mode (i.e., through occupation, acquisitive prescription, law or intellectual creation) and thederivative mode (i.e., through succession mortis causa or tradition as a result of certain contracts, such as sale, barter, donation, assignment or mutuum). Hence, there is a marked difference between a sale of hereditary rights and a waiver of hereditary rights. The first presumes the existence of a contract or deed of sale between the parties. The second is, technically speaking, a mode of extinction of ownership where there is an abdication or intentional relinquishment of a known right with knowledge of its existence and intention to relinquish it, in favor of other persons who are co-heirs in the succession. Private respondent, being then a stranger to the succession of Cosme Pido, cannot conclusively claim ownership over the subject lot on the sole basis of the waiver document which neither recites the elements of either a sale, or a donation, or any other derivative mode of acquiring ownership. A notice of adverse claim, by its nature, does not however prove private respondents ownership over the tenanted lot. A notice of adverse claim is nothing but a notice of a claim adverse to the registered owner, the validity of which is yet to be established in court at some future date, and is no better than a notice of lis pendens which is a notice of a case already pending in court. Velarde vs. CA (G.R. No. 108346 July 11, 2001)

In a contract of sale, the seller obligates itself to transfer the ownership of and deliver adeterminate things, and the buyer to pay therefor a price certain in money or its equivalent.

Private respondents had already performed their obligation through the execution of the Deed of Sale, which effectively transferred ownership of the property to petitioner through constructive delivery. Prior physical delivery or possession is not legally required, and the execution of the Deed of Sale is deemed equivalent to delivery. Petitioners, on the other hand, did not perform their correlative obligation of paying the contract price in the manner agreed upon. Worse, they wanted private respondents to perform obligations beyond those stipulated in the contract before fulfilling their own obligation to pay the full purchase price. Gomez vs. CA (G.R. No. 120747 September 21, 2000)

Cancellation of the award of Lot 4, Block 1, through the expediency of Resolution No. 01586, was proper. Primarily, it must be stressed that the contract entered into between the City of Manila and awardee Luisa Gomez was not one of sale but a contract to sell, which, under both statutory and case law, has its own attributes, peculiarities and effects. For a contract, like a contract to sell, involves a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service. Contracts, in general, are perfected by mere consent, which is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. The offer must be certain and the acceptance absolute. The provisions of Article 777 of the Civil Code notwithstanding, we hold that the surviving children of awardee Luisa Gomez are not qualified transferees of Lot 4, Block 1 for failure to conform with the prerequisites set by Resolution 16-A, to wit, Filipino citizenship and actual occupancy, which in the present case, are basic criteria for the award of the lot, pursuant to the Land for the Landless Program of the City of Manila. Heirs of San Miguel vs. CA (G.R. No. 136054 September 5, 2001)

True, in contracts of sale, the vendor need not possess title to the thing sold at the perfection of the contract.36 However, the vendor must possess title and must be able to transfer title at the time of delivery. In a contract of sale, title only passes to the vendee upon full payment of the stipulated consideration, or upon delivery of the thing sold. Under the facts of the case, Severinas heirs are not in a position to transfer title. Without passing on the question of who actually owned the land covered by LRC Psu -1312, we note that there is no proof of ownership in favor of Severinas heirs. In fact, it is a certain Emiliano Eugenio, who holds a tax declaration over the said land in his name. Therefore, to insist that Dominador, et al. pay the price under such circumstances would result in Severinas heirs unjust enrichment. Hence, the non-payment of the three hundred thousand pesos (P300,000.00) is not a valid justification for refusal to deliver the certificate of title. ARTICLE 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other to pay a price certain in money or its equivalent. ARTICLE 1459. The thing must be licit and the vendor must have a right to transfer the ownership thereof at the time it is delivered. ARTICLE 1495. The vendor is bound to transfer the ownership of and deliver, as well as warrant the thing which is the object of sale (emphasis ours).

San

Miguel

Properties

vs.

Huang

(G.R.

No.

137290)

It is not the giving of earnest money, but the proof of the concurrence of all the essential elements of the contract of sale which establishes the existence of a perfected sale. Was it an earnest deposit? NO. At the time when petitioner accepted the terms of respondents offer of March 29, 1994, their contract had not yet been perfected. It does not satisfy Article 1482. The stages of a contract of sale are as follows: (1) negotiation, (2) perfection, and (3) consummation. The alleged indubitable evidence of a perfected sale cited by the appellate court was nothing more than offers and counter-offers which did not amount to any final arrangement containing the essential elements of a contract of sale. While the parties already agreed on the real properties which were the objects of the sale and on the purchase price, the fact remains that they failed to arrive at mutually acceptable terms of payment, despite the 45-day extension given by petitioner. There was also failure to agree on the manner of payment. The manner of payment of the purchase price is an essential element before a valid and binding contract of sale can exist. Although the Civil Code does not expressly state that the minds of the parties must also meet on the terms or manner of payment of the price, the same is needed, otherwise there is no sale. Agreement on the manner of payment goes into the price such that a disagreement on the manner of payment is tantamount to a failure to agree on the price. Medrano vs. Court of Appeals (G.R. No. 150678 February 18, 2005)

The respondents are indeed the procuring cause of the sale. If not for the respondents, Lee would not have known about the mango plantation being sold by the petitioners. The sale was consummated. The bank had profited from such transaction. It would certainly be iniquitous if the respondents would not be rewarded their commission pursuant to the letter of authority. Procuring cause = the proximate cause. The term procuring cause, in describing a brokers activity, refers to a cause originating a series of events which, without break in their continuity, result in accomplishment of prime objective of the employment of the broker producing a purchaser ready, willing and able to buy real estate on the owners terms. The evidence on record shows that the respondents were instrumental in the sale of the property to Lee. Without their intervention, no sale could have been consummated. They were the ones who set the sale of the subject land in motion. While the letter-authority issued in favor of the respondents was non-exclusive, no evidence was adduced to show that there were other persons, aside from the respondents, who informed Lee about the property for sale. When there is a close, proximate and causal connection between the brokers efforts and the principals sale of his property, the broker is entitled to a commission. Delpher vs. IAC (G.R. No. L-69259 January 26, 1988)

By their ownership of the 2,500 no par shares of stock, the Pachecos have control of the corporation. Their equity capital is 55% as against 45% of the other stockholders, who also belong to the same family group. In effect, the Delpher Trades Corporation is a business conduit of the Pachecos. What they really did was to invest their properties and change the nature of their ownership from unincorporated to incorporated form by organizing Delpher

Trades Corporation to take control of their properties and at the same time save on inheritance taxes. The Deed of Exchange of property between the Pachecos and Delpher Trades Corporation cannot be considered a contract of sale. There was no transfer of actual ownership interests by the Pachecos to a third party. The Pacheco family merely changed their ownership from one form to another. The ownership remained in the same hands. Hence, the private respondent has no basis for its claim of a light of first refusal under the lease contract. Toyota Shaw vs. CA (G.R. No. L-116650 May 23, 1995)

Exhibit A or the Agreement is NOT a perfected contract of sale. Nothing was mentioned about the full purchase price and the manner the installments were to be paid. A definite agreement on the manner of payment of the price is an essential element in the formation of a binding and enforceable contract of sale. This is so because the agreement as to the manner of payment goes into the price such that a disagreement on the manner of payment is tantamount to a failure to agree on the price. Definiteness as to the price is an essential element of a binding agreement to sell personal property. Exhibit A may be considered as part of the initial phase of the generation or negotiation stage of a contract of sale. Accordingly, in a sale on installment basis which is financed by a financing company, three parties are thus involved: the buyer who executes a note or notes for the unpaid balance of the price of the thing purchased on installment, the seller who assigns the notes or discounts them with a financing company, and the financing company which is subrogated in the place of the seller, as the creditor of the installment buyer. Since B.A. Finance did not approve Sosas application, there was then no meeting of minds on the sale on installment basis. The Vehicle Sales Proposal was a mere proposal which was aborted in lieu of subsequent events. It follows that the VSP created no demandable right in favor of Sosa for the delivery of the vehicle to him, and its non-delivery did not cause any legally indemnifiable injury. ESSENTIAL Romero vs. CA CHARACTERISTICS (G.R. No. 107207 OF November 23, SALE 1995)

A sale is at once perfected when a person (the seller) obligates himself, for a price certain, to deliver and to transfer ownership of a specified thing or right to another (the buyer) over which the latter agrees. From the moment the contract is perfected, 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. Under the agreement, private respondent is obligated to evict the squatters on the property. The ejectment of the squatters is a condition the operative act of which sets into motion the period of compliance by petitioner of his own obligation, i.e., to pay the balance of the purchase price. Private respondents failure to remove the squatters from the property within the stipulated period gives petitioner the right to either refuse to proceed with the agreement or waive that condition in consonance with Article 1545 of the Civil Code. This option clearly belongs to petitioner and not to private respondent. Santos vs. CA (G.R. No. 120820. August 1, 2000)

A contract is what the law defines it to be, taking into consideration its essential elements,

and not what the contracting parties call it. Article 1458 expressly obliges the vendor to transfer ownership of the thing sold as an essential element of a contract of sale. This is because the transfer of ownership in exchange for a price paid or promised is the very essence of a contract of sale. There was no transfer of ownership simultaneously with the delivery of the property purportedly sold. The records clearly show that, notwithstanding the fact that the Casedas first took then lost possession of the disputed house and lot, the title to the property has remained always in the name of Rosalinda Santos. Although the parties had agreed that the Casedas would assume the mortgage, all amortization payments made by Carmen Caseda to the bank were in the name of Rosalinda Santos. The foregoing circumstances categorically and clearly show that no valid transfer of ownership was made by the Santoses to the Casedas. Absent this essential element, their agreement cannot be deemed a contract of sale. It was a contract to sell. Ownership is reserved by the vendor and is not to pass until full payment of the purchase price. This we find fully applicable and understandable in this case, given that the property involved is a titled realty under mortgage to a bank and would require notarial and other formalities of law before transfer thereof could be validly effected. Caoibes vs. Caoibes-Pantoja (GR No. 162873 July 21, 2006)

This was about 4 siblings who agreed that the land they inherited from their mother be waived and transferred to their sister Corazon, in exchange of her payment of the mortgage of a certain Guillermo Javier in the bank. By then, the land was still undergoing registration proceedings. 18 years later, Corazon wants to be subrogated as the petitioner in the land registration proceedings. Her brothers and sisters oppose. Corazon raises the issue of laches. Issue: WON there is still a need for Corazon to file a motion to subrogate her in the rights of her siblings as the new owner of the lot and the petitioner in land registration proceedings? NO The substitution by respondent of petitioners as applicant in the land registration case over Lot 2 is not even necessary. All respondent has to do is to comply with the requirements under the above-quoted Sec. 22 of the Property Registration Decree. Ergo, it was unnecessary for respondent to file the case for specific performance subject of the present petition against petitioners to honor their agreement allowing her to be substituted in their stead as applicant in the land registration proceeding. The law does not require that the application for registration be amended by substituting the buyer or the person to whom the property has been conveyed for the applicant. Neither does it require that the buyer or the person to whom the property has been conveyed be a party to the case. He may thus be a total stranger to the land registration proceedings. The only requirements of the law are: (1) that the instrument be presented to the court by the interested party together with a motion that the same be considered in relation with the application; and (2) that prior notice be given to the parties to the case. Cavite Development vs. Lim (G.R. No. 131679 February 1, 2000)

Was it an option contract? NO. In the case at bar, the sum of P30,000.00, although denominated in the offer to purchase as option money, is actually in the nature of earnest money or down payment. An option contract is a preparatory contract in which one party grants to the other, for a fixed period and under specified conditions, the power to decide, whether or not to enter into a principal contract, hence only preparatory. After the payment

of the 10% option money, the Offer to Purchase provides for the payment only of the balance of the purchase price, implying that the option money forms part of the purchase price. This is precisely the result of paying earnest money under Art. 1482 of the Civil Code. It is clear then that the parties in this case actually entered into a contract of sale, partially consummated as to the payment of the price. Was the sale null and void? YES, for being an impossible service. CDB never acquired a valid title to the property because the foreclosure sale, by virtue of which, the property had been awarded to CDB as highest bidder, is likewise void since the mortgagor was not the owner of the property foreclosed. 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. The bank was also negligent. There is no evidence that CDB observed its duty of diligence in ascertaining the validity of Rodolfo Guansings title. The alleged ocular inspection report20 by CDBs representative was never formally offered in evidence. Dalion vs. CA (G.R. No. 78903 February 28, 1990)

Dalion allegedly bought the parcel of land from Sabesaje. Sabesaje impugns the contract of sale since his signature was allegedly forged. The court ruled he was not able to substantiate his allegations of forgery by not presenting any witnesses on his affirmative defences. Dalion also said that the contract is of no effect since it is in a private instrument only. Ruling: A contract of sale is a consensual contract, which means that the sale is perfected by mere consent. No particular form is required for its validity. Upon perfection of the contract, the parties may reciprocally demand performance (Art. 1475, NCC), i.e., the vendee may compel transfer of ownership of the object of the sale, and the vendor may require the vendee to pay the thing sold (Art. 1458, NCC). A sale of a real property may be in a private instrument but that contract is valid and binding between the parties upon its perfection. And a party may compel the other party to execute a public instrument embodying their contract affecting real rights once the contract appearing in a private instrument hag been perfected (See Art. 1357). Balatbat vs. CA (G.R. No. 109410 August 28, 1996)

Vendor Aurelio Roque sold 6/10 portion of his share in TCT No. 135671 to private respondents Repuyan on April 1, 1980. Subsequently, the same lot was sold again by vendor Aurelio Roque (6/10) and his children (4/10). Balatbat, one of the children, said that she bought the property for value and in good faith. Repuyan was the first one to annotate adverse claim over the property in the Registry of Deeds. Was the sale to Repuyan spouses merely executor and thus does not confer any right? No. The sale was consummated, hence, valid and enforceable. In April 1980, Aurelio filed for rescission of the sale between him and Repuyan but the court denied his petition, it was not appealed so it became final and executory. Roque cannot demand payment of the balance unless and until the property has been subdivided and titled in the name of private respondents. On the contention that there was no delivery to the Repuyan spouses. Ruling: When the sale is made through a public instrument, the execution thereof shall be equivalent to the delivery of the thing which is the object of the contract, if from the deed the contrary does

not appear or cannot be inferred. A contract of sale being consensual, it is perfected by the mere consent of the parties. Delivery of the thing bought or payment of the price is not necessary for the perfection of the contract. On the issue of double sale: Yes there was double sale. But whom shall the right over the property pertain to. Article 1544 provides an answer for this. The ownership shall vests in the person acquiring it who in good faith first recorded it in the Registry of Property. It cannot also be said that Balatbat was in good faith, failing to investigate on the annotation of adverse claim by the Repuyan, which is constructive knowledge already. Coronel vs. CA (G.R. No. 103577 October 7, 1996)

The sale of the subject parcel of land between petitioners and Ramona P. Alcaraz perfected on February 6, 1985 became valid and enforceable, prior to that between petitioners and Catalina B. Mabanag on February 18, 1985. Sale, by its very nature, is a consensual contract because it is perfected by mere consent. The essential elements of a contract of sale are the following: a) Consent; b) Determinate subject matter; and c) Price certain in money or its equivalent. The agreement could not have been a contract to sell because the sellers herein made no express reservation of ownership or title to the subject parcel of land. Moreover, unlike in a contract to sell, petitioners in the case at bar did not merely promise to sell the properly to private respondent upon the fulfillment of the suspensive condition. On the contrary, having already agreed to sell the subject property, they undertook to have the certificate of title changed to their names and immediately thereafter, to execute the written deed of absolute sale. As soon as the new certificate of title is issued in their names, petitioners were committed to immediately execute the deed of absolute sale. Only then will the obligation of the buyer to pay the remainder of the purchase price arise. Was there double sale? YES. In a case of double sale, what finds relevance and materiality is not whether or not the second buyer was a buyer in good faith but whether or not said second buyer registers such second sale in good faith, that is, without knowledge of any defect in the title of the property sold. Laforteza vs. Machuca (G.R. No. 137552 June 16, 2000)

Is Memorandum of Agreement merely a lease agreement with option to purchase? NO. it was a contract of sale, although it was denominated a contract to sell. A contract of sale is a consensual contract and is perfected at the moment there is a meeting of the minds upon the thing which is the object of the contract and upon the price. 10 From that moment the parties may reciprocally demand performance subject to the provisions of the law governing the form of contracts. The elements of a valid contract of sale under Article 1458 of the Civil Code are (1) consent or meeting of the minds; (2) determinate subject matter and (3) price certain money or its equivalent. In the case at bench, there was a perfected agreement between the petitioners and the respondent whereby the petitioners obligated themselves to transfer the ownership of and deliver the house. All the elements of a contract of sale were thus present. However, the balance of the purchase price was to be paid only upon the issuance of the new certificate of title in lieu of the one in the name of the late Francisco Laforteza and upon the execution of an extrajudicial settlement of his estate. This was only a suspensive condition on a conditional contract of sale.

The issuance of the new certificate of title in the name of the late Francisco Laforteza and the execution of an extrajudicial settlement of his estate was not a condition which determined the perfection of the contract of sale. The petitioners fail to distinguish between a condition imposed upon the perfection of the contract and a condition imposed on the performance of an obligation. Failure to comply with the first condition results in the failure of a contract, while the failure to comply with the second condition only gives the other party the option either to refuse to proceed with the sale or to waive the condition. Earnest money is something of value to show that the buyer was really in earnest, and given to the seller to bind the bargain. Whenever earnest money is given in a contract of sale, it is considered as part of the purchase price and proof of the perfection of the contract. Contention: the failure of the respondent to pay the balance of the purchase price was a breach of the contract and was a ground for rescission thereof. CONTENTION WRONG. It is not disputed that the petitioners did not make a judicial or notarial demand for rescission. Besides, that the delay of one month in payment was a mere casual breach that would not entitle the respondents to rescind the contract. Pilipinas Shell vs. Gobonseng (G.R. No. 163562)

A contract of sale, being consensual in nature, becomes valid and binding upon the meeting of the minds of the parties as to the object and the price. If there is a meeting of the minds, the contract is valid despite the manner of payment, or even if the manner of payment was breached. In fine, it is not the act of payment of the contract price that determines the validity of a contract of sale. The manner of payment and the payment itself of the agreed price have nothing to do with the perfection of the contract. Payment of the price goes into the performance of the contract. Failure of a party to effect payment of the contract price results in a right to demand the fulfillment or cancellation of the obligation under an existing valid contract. Is Pilipinas Shell liable for rentals from 1982 to 1991? No. The gasoline station was dealerowned, run by Julio Tan Pastor himself. respondent himself does not dispute the fact that he never demanded rental payments from Tan Pastor from 1982 to 1991. It was only after the criminal case for bouncing checks was dismissed that he claimed entitlement to rentals. Prior thereto, he never demanded for any rental payment, much less instituted any action to enforce the same. What is more, respondent and Tan Pastor had already executed an Agreement whereunder they declared that they had no more further claims against each other, and waived, abandoned, relinquished, any such claim or claims. Hence, he is now stopped from asking for rent. Heirs of Bajenting vs. Banez (GR 166190 Sept 20, 2006)

Are they entitled to repurchase the property? NO. While it is true that the offer to repurchase was made within the statutory period both the trial and appellate courts found as a fact that the petitioners did not really intend to derive their livelihood from it but to resell part of it for a handsome profit. It is now settled that homesteaders should not be allowed to take advantage of the salutary policy behind the Public Land Law to enable them to recover the land in question from vendees only to dispose of it again at much greater profit. Should the heirs be compelled to execute a deed of sale in favour of Banez? YES. We agree with respondents contention that petitioners are obliged to execute a notarized deed of absolute sale over the property upon payment of the P150,000.00 balance of the purchase

price of the property. A contract of sale is a consensual contract. Upon the perfection of the contract, the parties may reciprocally demand performance. The vendee may compel transfer of ownership of the object of the sale, and the vendor may require the vendee to pay the thing sold. In this case, the balance of the purchase price of the property was due on or before December 31, 1993. Jimenez vs. Jordana (GR 152526 November 25, 2004)

Was there a perfected contract of sale? YES. Prior to the second sale and delivery to petitioners, there was already a perfected sale of the Adelfa property to respondent. Hence, Bunye was duty-bound to execute a deed of sale; and petitioners, to reconvey the property to him. From this hypothesis sprang the CAs conclusion that the suit against petitioners was for recovery of property. The elements of a valid contract of sale under Article 1458 of the Civil Code are the following: (1) the parties consent or meeting of minds, (2) a determinate subject matter, and (3) a price certain in money or its equivalent. Being consensual, a contract of sale is perfected upon the meeting of the minds of the buyer and the seller as to the object of the sale and the cause or consideration.18 From that moment on, the parties may reciprocally demand performance; that is, the vendee may compel the transfer of the ownership of the object of the sale, and the vendor may require the vendee to pay the price of the thing sold. Was the Jimenez spouses in good faith? NO. Petitioners are heavy with allegations of the latters actual notice and knowledge of the previous sale. In fact, Intervenors were officially notified on March 24, 1995 about plaintiffs earlier contract with Madeliene E. Bunye on December 29, 1993 to purchase the same property. Gaite vs. Fonacier (G.R. No. L-11827 July 31, 1961)

The only rational view that can be taken is that the sale of the ore to Fonacier was a sale on credit, and not an aleatory contract where the transferor, Gaite, would assume the risk of not being paid at all; and that the previous sale or shipment of the ore was not a suspensive condition for the payment of the balance of the agreed price, but was intended merely to fix the future date of the payment. A contract of sale is normally commutative and onerous: not only does each one of the parties assume a correlative obligation (the seller to deliver and transfer ownership of the thing sold and the buyer to pay the price),but each party anticipates performance by the other from the very start. While in a sale the obligation of one party can be lawfully subordinated to an uncertain event, so that the other understands that he assumes the risk of receiving nothing for what he gives (as in the case of a sale of hopes or expectations, emptio spei), it is not in the usual course of business to do so; hence, the contingent character of the obligation must clearly appear. Nothing is found in the record to evidence that Gaite desired or assumed to run the risk of losing his right over the ore without getting paid for it, or that Fonacier understood that Gaite assumed any such risk. This is proved by the fact that Gaite insisted on a bond a to guarantee payment of the P65,000.00, an not only upon a bond by Fonacier, the Larap Mines & Smelting Co., and the companys stockholders, but also on one by a surety company; and the fact that appellants did put up such bonds indicates that they admitted the definite existence of their obligation to pay the balance of P65,000.00. Assuming that there could be doubt whether by the wording of the contract the parties indented a suspensive condition or a suspensive period (dies ad quem) for the payment of

the P65,000.00, the rules of interpretation would incline the scales in favor of the greater reciprocity of interests, since sale is essentially onerous. The Civil Code of the Philippines, Article 1378, paragraph 1, in fine, provides: If the contract is onerous, the doubt shall be settled in favor of the greatest reciprocity of interests. There can be no question that greater reciprocity obtains if the buyer obligation is deemed to be actually existing, with only its maturity (due date) postponed or deferred, that if such obligation were viewed as nonexistent or not binding until the ore was sold. Agro Conglomerates vs. CA (GR No. 117660 Dec. 18, 2000)

A contract of sale is a reciprocal transaction. The obligation or promise of each party is the cause or consideration for the obligation or promise by the other. The vendee is obliged to pay the price, while the vendor must deliver actual possession of the land. Subsidiary contract of suretyship had taken effect since petitioners signed the promissory notes as maker and accommodation party for the benefit of Wonderland. Petitioners became liable as accommodation party. An accommodation party is a person who has signed the instrument as maker, acceptor, or indorser, without receiving value therefor, and for the purpose of lending his name to some other person and is liable on the instrument to a holder for value, notwithstanding such holder at the time of taking the instrument knew (the signatory) to be an accommodation party. Was there novation? NO. The first requisite for a valid novation is lacking. There was no novation by substitution of debtor because there was no prior obligation which was substituted by a new contract. The contract of sale between Wonderland and petitioners did not materialize. But it was admitted that petitioners received the proceeds of the promissory notes obtained from respondent bank. Agro should reimburse Wonderland if it shall subsequently settle the debt with the bank. Titong vs. CA (GR No. 111141 March 6, 1998)

The courts below correctly held that when petitioner sold, ceded, transferred and conveyed the 5.5-hectare land in favor of Pablo Espinosa, his rights of ownership and possession pertaining thereto ceased and these were transferred to the latter. In the same manner, Espinosas rights of ownership over the land ceased and were transferred to private respondent upon its sale to the latter. In other words, a sale is a contract transferring dominion and other real rights in the thing sold. In the case at bar, petitioners claim of ownership must of necessary fail because he has long abdicated his rights over the land when he sold it to private respondents predecessor-in-interest. On the evidence of ownership: Survey: A survey under a proprietary title is not a conveyance. It is an instrument sui generis in the nature of a partition; a customary mode in which a proprietor has set off to himself in severalty a part of the common estate. Therefore, a survey, not being a conveyance, is not a mode of acquiring ownership. Tax declaration: It is merely an indicium of a claim of ownership. On quieting of title: The complaint failed to allege that an instrument, record, claim, encumbrance or proceeding beclouded the plaintiffs title over the property involved.

Can Titong acquire the property by acquisitive prescription? NO. He has only occupied it for 21 years. The NCC requires prescription with no title/bad faith at 30 yrs. The good faith of the possessor consists in the reasonable belief that the person from whom he received the thing was the owner thereof, and could transmit his ownership. For purposes of prescription, there is just title when the adverse claimant came into possession of the property through one of the modes recognized by law for the acquisition of ownership or other real rights but the grantor was not the owner or could not transmit any right. ELEMENTS Leabres vs CA (GR No. OF 41847 Dec. 12, SALE 1986)

WON Leabres had to submit his receipt to the probate court in order that his right over the parcel of land in dispute could be recognized valid and binding and conclusive against the Manotok Realty? An examination of the receipt reveals that the same can neither be regarded as a contract of sale or a promise to sell. There was merely an acknowledgment of the sum of One Thousand Pesos (P1,000.00). There was no agreement as to the total purchase price of the land nor to the monthly installment to be paid by the petitioner. The requisites of a valid Contract of Sale namely 1) consent or meeting of the minds of the parties; 2) determinate subject matter; 3) price certain in money or its equivalent-are lacking in said receipt and therefore the sale is not valid nor enforceable Dona Clara Tambunting died on April 22, 1950. Her estate was thereafter under custodia legis of the Probate Court which appointed Don Vicente Legarda as Special Administrator on August 28, 1950. Don Vicente Legarda entered into said sale in his own personal-capacity and without court approval, consequently, said sale cannot bind the estate of Clara Tambunting. Petitioner should have submitted the receipt of alleged sale to the Probate Court for its approval of the transactions. Thus, the respondent Court did not err in holding that the petitioner should have submitted his receipt to the probate court in order that his right over the subject land could be recognized-assuming of course that the receipt could be regarded as sufficient proof. Heirs of San Andres vs. Rodriguez (G.R. No. 135634 May 31, 2000)

Was the object of the contract determinate/determinable? YES. As shown in the receipt, dated September 29, 1964, the late Juan San Andres received P500.00 from respondent as advance payment for the residential lot adjoining his previously paid lot on three sides excepting on the frontage; the agreed purchase price was P15.00 per square meter; and the full amount of the purchase price was to be based on the results of a survey and would be due and payable in five (5) years from the execution of a deed of sale. Concomitantly, the object of the sale is certain and determinate. Under Article 1460 of the New Civil Code, a thing sold is determinate if at the time the contract is entered into, the thing is capable of being determinate without necessity of a new or further agreement between the parties. Appellees Exhibit A (page 4, Records) affirmingly shows that the original 345 sq. m. portion earlier sold lies at the middle of Lot 1914-B-2 surrounded by the remaining portion of the said Lot 1914-B-2 on three (3) sides, in the east, in the west and in the north. The northern boundary is a 12 meter road. Conclusively, therefore, this is the only remaining 509 sq. m. portion of Lot 1914-B-2 surrounding the 345 sq. m. lot initially purchased by Rodriguez. It is quite difined, determinate and certain. Withal, this is the same portion

adjunctively occupied and possessed by Rodriguez since September 29, 1964, unperturbed by anyone for over twenty (20) years until appellee instituted this suit. Thus, all of the essential elements of a contract of sale are present, i.e., that there was a meeting of the minds between the parties, by virtue of which the late Juan San Andres undertook to transfer ownership of and to deliver a determinate thing for a price certain in money. Republic vs. Phil. Resources Devt Corp. (G.R. No. L-10141 January 31, 1958) Was the price certain? YES. Price . . . is always paid in terms of money and the supposed payment beeing in kind, it is no payment at all, citing Article 1458 of the new Civil Code. However, the same Article provides that the purschaser may pay a price certain in money or its equivalent, which means that they meant of the price need not be in money. Whether the G.I. sheets, black sheets, M. S. Plates, round bars and G. I. pipes claimed by the respondent corporation to belong to it and delivered to the Bureau of Prison by Macario Apostol in payment of his account is sufficient payment therefore, is for the court to pass upon and decide after hearing all the parties in the case. Should the trial court hold that it is as to credit Apostol with the value or price of the materials delivered by him, certainly the herein respondent corporation would be affected adversely if its claim of ownership of such sheets, plates, bars and pipes is true. The conclusion, therefore, is inescapable that the petitioner possesses a legal interest in the matter in litigation and that such interest is of an actual, material, direct and immediate nature as to entitle petitioner to intervene. Jovan Land vs. CA (G.R. No. 125531. February 12, 1997)

Does the annotation of the third letter-offer signed Received original, 9-4-89 constitutes a perfected agreement to sell as respondent can be said to have accepted petitioners payment in the form of a check which was enclosed in the third letter? NO. Such an annotation by Conrado Quesada amounts to neither a written nor an implied acceptance of the offer of Joseph Sy. It is merely a memorandum of the receipt by the former of the latters offer. The requisites of a valid contract of sale are lacking in said receipt and therefore the sale is neither valid nor enforceable. Although there was a series of communications through letter-offers and rejections as evident from the facts of this case, still it is undeniable that no written agreement was reached between petitioner and private respondent with regard to the sale of the realty. Hence, the alleged transaction is unenforceable as the requirements under the Statute of Frauds have not been complied with. Under the said provision, an agreement for the sale of real property or of an interest therein, to be enforceable, must be in writing and subscribed by the party charged or by an agent thereof. Moreover, it is a fundamental principle that before contract of sale can be valid, the following elements must be present, viz: (a) consent or meeting of the minds; (b) determinate subject matter; (3) price certain in money or its equivalent. Until the contract of sale is perfected, it cannot, as an independent source of obligation, serve as a binding juridical relation between the parties. Penalosa vs. Santos (G.R. No. 133749 August 23, 2001)

Ownership of the property has been transferred to petitioner. Article 1477 of the Civil Code states that ownership of the thing sold shall be transferred to the vendee upon the actual or constructive delivery thereof. It is undisputed that the property was placed in the control and possession of petitioner45when he came into material possession thereof after judgment in the ejectment case. Not only was the contract of sale perfected, but also actual delivery of the property effectively consummated the sale. Non-payment of the purchase price is not among the instances where the law declares a contract to be null and void. Although the law allows rescission as a remedy for breach of contract, the same may not be availed of by respondents in this case. To begin with, it was Severino who prevented full payment of the stipulated price when he refused to deliver the owners original duplicate title to Philam Life. His refusal to cooperate was unjustified, because as Severino himself admitted, he signed the deed precisely to enable petitioner to acquire the loan. It should be emphasized that the non-appearance of the parties before the notary public who notarized the deed does not necessarily nullify nor render the parties transaction void ab initio. Article 135834 of the New Civil Code on the necessity of a public document is only for convenience, not for validity or enforceability. Dizon vs. CA (G.R. No. 122544. January 28, 1999)

Was there a perfected contract of sale when Alice Dizon, agent of the lessor, accepted the P300k representing the partial payment of the property? NO. Under Article 1475 of the New Civil Code, the contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. From that moment, the parties may reciprocally demand performance, subject to the provisions of the law governing the form of contracts. Thus, the elements of a contract of sale are consent, object, and price in money or its equivalent. It bears stressing that the absence of any of these essential elements negates the existence of a perfected contract of sale. Sale is a consensual contract and he who alleges it must show its existence by competent proof. There was no valid consent by the petitioners (as co-owners of the leased premises) on the supposed sale entered into by Alice A. Dizon, as petitioners alleged agent, and private respondent. The basis for agency is representation and a person dealing with an agent is put upon inquiry and must discover upon his peril the authority of the agent.[26] As provided in Article 1868 of the New Civil Code,there was no showing that petitioners consented to the act of Alice A. Dizon nor authorized her to act on their behalf with regard to her transaction with private respondent. The most prudent thing private respondent should have done was to ascertain the extent of the authority of Alice A. Dizon. Being negligent in this regard, private respondent cannot seek relief on the basis of a supposed agency. Every person dealing with an agent is put upon inquiry and must discover upon his peril the authority of the agent. If he does not make such inquiry, he is chargeable with knowledge of the agents authority, and his ignorance of that authority will not be any excuse. Roble vs. Arbasa (G.R. No. 130707 July 31, 2001)

Was the subject matter determinate as to its metes and bounds? YES, it was determinate upon the sale of the property (described as 240sq.m. more or less) but since it had acquired area due to reclamation, there is a need to remand the case to the RTC to determine whether the land is a foreshore land or not.

The sale that transpired on January 2, 1976 between vendor Fidela and vendee Adelaida was one of cuerpo cierto or a sale for lump sum. Pursuant to Article 1542, Civil Code of the Philippines, in the sale of real estate, made for a lump sum and not at the rate of a certain sum for a unit of measure or number, there shall be no increase or decrease of the price although there be a greater or lesser area or number than that stated in the contract. Thus, the obligation of the vendor is to deliver everything within the boundaries, inasmuch as it is the entirety thereof that distinguishes the determinate object. However, this rule admits of an exception. A vendee of land, when sold in gross or with the description more or less with reference to its area, does not thereby ipso facto take all risk of quantity in the land. The use of more or less or similar words in designating quantity covers only a reasonable excess or deficiency. An area of 644 square meters more is not reasonable excess or deficiency, to be deemed included in the deed of sale of January 2, 1976. There is a need, therefore, to determine whether the lands subject of the action for quieting of title are foreshore lands. The classification of public lands is a function of the executive branch of government, specifically the director of lands (now the director of the Lands Management Bureau). Due to the dearth of evidence on this particular issue, we cannot arrive at a conclusive classification of the land involved. The instant case has to be remanded to the trial court for that determination. Biona vs. CA (G.R. No. 105647 July 31, 2001)

Was the sale valid? YES, with regards only to Soledads share (7/12). But since the daughters of Biona failed to assert their rights and allowed defendant Hilajos to occupy the land in peace for more than 30 years, they are now stopped due to laches. We agree with the private respondent that all the requisites for a valid contract of sale are present in the instant case. For a valuable consideration of P4,500.00, Soledad Biona agreed to sell and actually conveyed the subject property to private respondent. The fact that the deed of sale was not notarized does not render the agreement null and void and without any effect. The provision of Article 1358 of the Civil Code9 on the necessity of a public document is only for convenience, and not for validity or enforceability.10 The observance of which is only necessary to insure its efficacy, so that after the existence of said contract had been admitted, the party bound may be compelled to execute the proper document.11 Undeniably, a contract has been entered into by Soledad Biona and the private respondent. Regardless of its form, it was valid, binding and enforceable between the parties. Under Art. 1356 of the Civil Code, contracts shall be obligatory in whatever form they may have been entered into provided all the essential requisites for their necessary elements for a valid contract of sale were met when Soledad Biona agreed to sell and actually conveyed Lot 177 to defendant-appellant who paid the amount of P4,500.00 therefore. The deed of sale (Exh. 2) is not made ineffective merely because it is not notarized or does not appear in a public document. Vda. De Ape vs. CA (G.R. No. 133638 April 15, 2005)

Was there consent on the part of Fortunato when he signed the receipt of P30 stipulating the transfer of land to Lumayno? NO, his consent was vitiated. Fortunato is illiterate and Lumayno was not able to prove that prior to the signing of the receipt, the contents thereof were fully explained to him. To be valid, consent must meet the following requisites: (a) it should be intelligent, or with an exact notion of the matter to which it refers; (b) it should be free and (c) it should be

spontaneous. Intelligence in consent is vitiated by error; freedom by violence, intimidation or undue influence; spontaneity by fraud.55 The general rule is that he who alleges fraud or mistake in a transaction must substantiate his allegation as the presumption is that a person takes ordinary care for his concerns and that private dealings have been entered into fairly and regularly.56The exception to this rule is provided for under Article 1332 of the Civil Code which provides that [w]hen 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. In this case, as private respondent is the one seeking to enforce the claimed contract of sale, she bears the burden of proving that the terms of the agreement were fully explained to Fortunato Ape who was an illiterate. This she failed to do. While she claimed in her testimony that the contents of the receipt were made clear to Fortunato, such allegation was debunked by Andres Flores himself when the latter took the witness stand. Escueta vs. Lim (G.R. No. 137162 January 24, 2007)

Was there a perfected contract of sale between Virginia (agent of Patricia Llamas, who is the agent of petitioner Rubio)? YES. [A]ll the elements of a valid contract of sale under Article 1458 of the Civil Code are present, such as: (1) consent or meeting of the minds; (2) determinate subject matter; and (3) price certain in money or its equivalent.26 Ignacio Rubio, the Baloloys, and their coheirs sold their hereditary shares for a price certain to which respondent agreed to buy and pay for the subject properties. The offer and the acceptance are concurrent, since the minds of the contracting parties meet in the terms of the agreement. In fact, earnest money has been given by respondent. [I]t shall be considered as part of the price and as proof of the perfection of the contract.28 It constitutes an advance payment to be deducted from the total price.29 Article 1477 of the same Code also states that [t]he ownership of the thing sold shall be transferred to the vendee upon actual or constructive delivery thereof.30 In the present case, there is actual delivery as manifested by acts simultaneous with and subsequent to the contract of sale when respondent not only took possession of the subject properties but also allowed their use as parking terminal for jeepneys and buses. Moreover, the execution itself of the contract of sale is constructive delivery. Consequently, Ignacio Rubio could no longer sell the subject properties to Corazon Escueta, after having sold them to respondent. [I]n a contract of sale, the vendor loses ownership over the property and cannot recover it until and unless the contract is resolved or rescinded x x x. On the authority of Virginia as sub-agent: By authorizing Virginia Lim to sell the subject properties, Patricia merely acted within the limits of the authority given by her father, but she will have to be responsible for the acts of the sub-agent, among which is precisely the sale of the subject properties in favor of respondent. SALE vs. OTHER CONTRACTS Delpher vs. IAC (G.R. No. L-69259 January 26, 1988) SALE vs. BARTER

There is a sale when ownership is transferred for a price certain in money or its equivalent (Art. 1468, Civil Code) while there is a barter or exchange when one thing is given in consideration of another thing (Art. 1638, Civil Code). Under Article 712 of the Civil Code, the modes of acquiring ownership are generally classified into two (2) classes, namely, the original mode (i.e., through occupation, acquisitive prescription, law or intellectual creation) and the derivative mode (i.e., through succession mortis causa or tradition as a result of certain contracts, such as sale, barter, donation, assignment or mutuum). CIR vs. Arnoldus Carpentry (GR 71122)

Sales vs. Contract for piece of work 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. TRUE: The distinction between a contract of sale and one for work, labor and materials is tested by the inquiry whether the thing transferred is one not in existence andwhich never would have existed but for the order of the party desiring to acquire it, or a thing which would have existed and has been the subject of sale to some other persons even if the order had not been given. FALSE: The true test of whether or not the contract is a piece of work or a contract of is the mere existence of the product at the time of the perfection of the contract such that if the thing already exists, the contract is of sale, if not, it is work. He is a manufacturer. One who has ready for the sale to the general public finished furniture is a manufacturer, and the mere fact that he did not have on hand a particular piece or pieces of furniture ordered does not make him a contractor only. When the vendor enters into a contract for the delivery of an article which in the ordinary course of his business he manufactures or procures for the general market at a price certain (Art. 1458) such contract is one of sale even if at the time of contracting he may not have such article on hand. Such articles fall within the meaning of future goods mentioned in Art. 1462, par. 1. CIR vs. CA and ADMU (GR 115349)

Is the acceptance of research projects by the IPC of ADMU a contract of sale or a contract for a piece of work? NEITHER. Transactions of Ateneos Institute of Philippine Culture cannot be deemed either as a contract of sale or a contract of a piece of work. By the contract of sale, one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent. By its very nature, a contract of sale requires a transfer of ownership. Transfer of ownership is the primary purpose of sale. The delivery of the thing does not mean a mere physical transfer, but is a means of transmitting ownership. Transfer of title or an agreement to transfer it for a price paid or promised to be paid is the essence of sale.

In the case of a 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. . . . If the contractor agrees to produce the work from materials furnished by him, he shall deliver the thing produced to the employer and transfer dominion over the thing, . . . Whether the contract be one of sale or one for a piece of work, a transfer of ownership is involved and a party necessarily walks away with an object. In the case at bench, it is clear from the evidence on record that there was no sale either of objects or services because, as adverted to earlier, there was no transfer of ownership over the research data obtained or the results of research projects undertaken by the Institute of Philippine Culture. Co & Co. vs. CIR (GR L-8506) Is Co & Co. a manufacturer or contractor? MANUFACTURER. That Celestino Co & Company habitually makes sash, windows and doors, as it has represented in its stationery and advertisements to the public. That it manufactures the same is practically admitted by appellant itself. It also named itseld factory. Is Co & Co.s business a matter of contract of sale or contract of piece of work? SALE. In our opinion when this Factory accepts a job that requires the use of extraordinary or additional equipment, or involves services not generally performed by it-it thereby contracts for a piece of work filing special orders within the meaning of Article 1467. The orders herein exhibited were not shown to be special. They were merely orders for work nothing is shown to call them special requiring extraordinary service of the factory. The thought occurs to us that if, as alleged-all the work of appellant is only to fill orders previously made, such orders should not be called special work, but regular work. Would a factory do business performing only special, extraordinary or peculiar merchandise? Supposing for the moment that the transactions were not sales, they were neither lease of services nor contract jobs by a contractor. But as the doors and windows had been admittedly manufactured by the Oriental Sash Factory, such transactions could be, and should be taxed as transfers thereof under section 186 of the National Revenue Code. CIR vs. Engineering Equipment (G.R. No. L-27044 June 30, 1975)

Is the installation of a centralized air-conditioning system a contact of sale or a contract for piece of work? CONTRACT FOR PIECE OF WORK. The air conditioning units installed in a central type of air conditioning system would not have existed but for the order of the party desiring to acquire it and if it existed without the special order of Engineerings customer, the said air conditioning units were not intended for sale to the general public. The distinction between a contract of sale and one for work, labor and materials is tested by the inquiry whether the thing transferred is one not in existence and which never would have existed but for the order of the party desiring to acquire it, or a thing which would have existed and has been the subject of sale to some other persons even if the order had not been given. If the article ordered by the purchaser is exactly such as the plaintiff makes and keeps on hand for sale to anyone, and no change or modification of it is made at defendants request, it is a contract of sale, even though it may be entirely made after, and in consequence of, the defendants order for it.

Engineering did not manufacture air conditioning units for sale to the general public, but imported some items (as refrigeration compressors in complete set, heat exchangers or coils, which were used in executing contracts entered into by it. Engineering, therefore, undertook negotiations and execution of individual contracts for the design, supply and installation of air conditioning units of the central, taking into consideration in the process such factors as the area of the space to be air conditioned; the number of persons occupying or would be occupying the premises; the purpose for which the various air conditioning areas are to be used; and the sources of heat gain or cooling load on the plant such as sun load, lighting, and other electrical appliances which are or may be in the plan. Contractor or manufacturer? Engineering is a contractor rather than a manufacturer, subject to the contractors tax prescribed by Section 191 of the Code and not to the advance sales tax imposed by Section 185(m) in relation to Section 194 of the same Code. Engineering and Machinery Corp. vs. CA (G.R. No. 52267 January 24, 1996) Is a contract for the fabrication and installation of a central air-conditioning system in a building, one of sale or for a piece of work? CONTRACT FOR PIECE OF WORK. It is not petitioners line of business to manufacture air-conditioning systems to be sold offthe-shelf. Its business and particular field of expertise is the fabrication and installation of such systems as ordered by customers and in accordance with the particular plans and specifications provided by the customers. Naturally, the price or compensation for the system manufactured and installed will depend greatly on the particular plans and specifications agreed upon with the customers. 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 (Art. 1467, Civil Code). The mere fact alone that certain articles are made upon previous orders of customers will not argue against the imposition of the sales tax if such articles are ordinarily manufactured by the taxpayer for sale to the public. A contract for a piece of work, labor and materials may be distinguished from a contract of sale by the inquiry as to whether the thing transferred is one not in existence and which would never have existed but for the order, of the person desiring it . In such case, the contract is one for a piece of work, not a sale. On the other hand, if the thing subject of the contract would have existed and been the subject of a sale to some other person even if the order had not been given, then the contract is one of sale. What is the prescriptive period for filing actions for breach of the terms of such contract? What is the proper remedy rescission, or enforcement warranty for hidden defect or damages for breach of contract? BREACH OF CONTRACT. 10 years prescription period in relation to Art. 1144. In the installation of the air conditioning system did not comply with the specifications provided in the written agreement between the parties, and an evaluation of the airconditioning system as installed by the defendant showed the following defects and violations of the specifications of the agreement. Schmid & Oberly vs. RJL Martinez Corp. (G.R. No. 75198 October 18, 1988) Was it a contract of sale or indent transaction? INDENT TRANSACTION.

Webster defines an indent as a purchase order for goods especially when sent from a foreign country. It would appear that there are three parties to an indent transaction, namely, the buyer, the indentor, and the supplier who is usually a non-resident manufacturer residing in the country where the goods are to be bought. An indentor may therefore be best described as one who, for compensation, acts as a middleman in bringing about a purchase and sale of goods between a foreign supplier and a local purchaser. An indentor is a middlemen in the same class as commercial brokers and commission merchants. It has been said that the essence of the contract of sale is transfer of title or agreement to transfer it for a price paid or promised. If such transfer puts the transferee in the attitude or position of an owner and makes him liable to the transferor as a debtor for the agreed price, and not merely as an agent who must account for the proceeds of a resale, the transaction is, a sale. Thus, the chief feature of a commercial broker and a commercial merchant is that in effecting a sale, they are merely intermediaries or middle-men, and act in a certain sense as the agent of both parties to the transaction. Not being the vendor, SCHMID cannot be held liable for the implied warranty for hidden defects under the Civil Code. Ker and Co. Ltd. vs. Lingad (G.R. No. L-20871 April 30, 1971)

Was it a contract of agency or a contract of sale? CONTRACT OF AGENCY or BROKERAGE. Since the company retained ownership of the goods, even as it delivered possession unto the dealer for resale to customers, the price and terms of which were subject to the companys control, the relationship between the company and the dealer is one of agency, . The difficulty in distinguishing between contracts of sale and the creation of an agency to sell has led to the establishment of rules by the application of which this difficulty may be solved. The decisions say the transfer of title or agreement to transfer it for a price paid or promised is the essence of sale. If such transfer puts the transferee in the attitude or position of an owner and makes him liable to the transferor as a debtor for the agreed price, and not merely as an agent who must account for the proceeds of a resale, the transaction is a sale; while the essence of an agency to sell is the delivery to an agent, not as his property, but as the property of the principal, who remains the owner and has the right to control sales, fix the price, and terms, demand and receive the proceeds less the agents commission upon sales made. Quiroga vs. Parsons Hardware (G.R. No. L-11491 August 23, 1918)

Was it a contract of agency or a contract of sale? CONTRACT OF SALE. Payment was to be made at the end of sixty days, or before, at the plaintiffs request, or in cash, if the defendant so preferred, and in these last two cases an additional discount was to be allowed for prompt payment. These are precisely the essential features of a contract of purchase and sale. There was the obligation on the part of the plaintiff to supply the beds, and, on the part of the defendant, to pay their price. These features exclude the legal conception of an agency or order to sell whereby the mandatory or agent received the thing to sell it, and does not pay its price, but delivers to the principal the price he obtains from the sale of the thing to a third person, and if he does not succeed in selling it, he returns it. By virtue of the contract between the plaintiff and the defendant, the latter, on receiving the beds, was necessarily obliged to pay their price within the term fixed, without any other consideration and regardless as to whether he had or had not sold the beds.

Not a single one of these clauses necessarily conveys the idea of an agency. The words commission on sales used in clause (A) of article 1 mean nothing else, as stated in the contract itself, than a mere discount on the invoice price. The word agency, also used in articles 2 and 3, only expresses that the defendant was the only one that could sell the plaintiffs beds in the Visayan Islands. With regard to the remaining clauses, the least that can be said is that they are not incompatible with the contract of purchase and sale. Puyat and Sons vs. Arco Amusement (G.R. No. L-47538 June 20, 1941)

Was the contract a contract of sale or contract of agency to sell? CONTRACT OF SALE. The contract is the law between the parties and should include all the things they are supposed to have been agreed upon. What does not appear on the face of the contract should be regarded merely as dealers or traders talk, which can not bind either party. While Exhibits 1 and 2, state that the petitioner was to receive ten per cent (10%) commission, this does not necessarily make the petitioner an agent of the respondent, as this provision is only an additional price which the respondent bound itself to pay, and which stipulation is not incompatible with the contract of purchase and sale. Puyat and Sons is the exclusive agent of the same company in the Philippines. It is out of the ordinary for one to be the agent of both the vendor and the purchaser. The facts and circumstances indicated do not point to anything but plain ordinary transaction where the respondent enters into a contract of purchase and sale with the petitioner, the latter as exclusive agent of the Starr Piano Company in the United States. The respondent, therefore, could not have offered to pay a 10 per cent commission to the petitioner provided it was given the benefit of the 25 per cent discount enjoyed by the petitioner. It is well known that local dealers acting as agents of foreign manufacturers, aside from obtaining a discount from the home office, sometimes add to the list price when they resell to local purchasers. It was apparently to guard against an exhorbitant additional price that the respondent sought to limit it to 10 per cent, and the respondent is estopped from questioning that additional price. If the respondent later on discovers itself at the short end of a bad bargain, it alone must bear the blame, and it cannot rescind the contract, much less compel a reimbursement of the excess price, on that ground alone. Lim vs. CA (G.R. No. 102784 February 28, 1996)

Was is a contract of sale or contract of agency to sell? CONTRACT OF AGENCY. Rosa Lims signature indeed appears on the upper portion of the receipt immediately below the description of the items taken: We find that this fact does not have the effect of altering the terms of the transaction from a contract of agency to sell on commission basis to a contract of sale. Neither does it indicate absence or vitiation of consent thereto on the part of Rosa Lim which would make the contract void or voidable. The moment she affixed her signature thereon, petitioner became bound by all the terms stipulated in the receipt. She, thus, opened herself to all the legal obligations that may arise from their breach. It is of no moment that the signature was found in the upper portion of the receipt. Contracts shall be obligatory in whatever form they may have been entered into, provided all the essential requisites for their validity are present. A contract of agency to sell on commission basis does not need the formalities of the location of the signature unlike notarial wills, hence it is valid and enforceable in whatever form it may be entered into.

Rosa Lim could not have turned over or entrusted the ring to Aurelia Nadera because the latter is also heavily indebted to Suarez, such that the entrustment will cause her a lot of risk. It does not prove much of the absence of a contract of agency. PNB vs. PINEDA (G.R. No. L-46658 May 13, 1991)

Was the possession by PNB of machinery tantamount to dation in payment? NO. Contrary to the allegation of the Pineda, PNB did not become the real owner of the goods. It was merely the holder of a security title for the advances it had made to Pineda. The goods the Pineda had purchased through PNB financing remain their own property and they hold it at their own risk. The trust receipt arrangement did not convert the PNB into an investor; the latter remained a lender and creditor. Payment would legally result only after PNB had foreclosed on said securities, sold the same and applied the proceeds thereof to TCCs loan obligation. Mere possession does not amount to foreclosure for foreclosure denotes the procedure adopted by the mortgagee to terminate the rights of the mortgagor on the property and includes the sale itself. Dation in payment takes place when property is alienated to the creditor in satisfaction of a debt in money and the same is governed by sales. Dation in payment is the delivery and transmission of ownership of a thing by the debtor to the creditor as an accepted equivalent of the performance of the obligation. As aforesaid, the repossession of the machinery and equipment in question was merely to secure the payment of TCCs loan obligation and not for the purpose of transferring ownership thereof to PNB in satisfaction of said loan. Thus, no dacion en pago was ever accomplished. Filinvest Credit vs. Phil. Acetylene Corp. (G.R. No. L-50449 January 30, 1982) Did the return of the mortgaged motor vehicle to the mortgagee by virtue of mortagagors voluntary surrender totally extinguished its money debt obligation to Filinvest? (Was there dation in payment?) NO. The mere return of the mortgaged motor vehicle by the mortgagor, the herein appellant, to the mortgagee, the herein appellee, does not constitute dation in payment or dacion en pago in the absence, express or implied of the true intention of the parties. Dacion en pago, according to Manresa, is the transmission of the ownership of a thing by the debtor to the creditor as an accepted equivalent of the performance of obligation. In dacion en pago, as a special mode of payment, the debtor offers another thing to the creditor who accepts it as equivalent of payment of an outstanding debt. The undertaking really partakes in one sense of the nature of sale, that is, the creditor is really buying the thing or property of the debtor, payment for which is to be charged against the debtors debt. As such, the essential elements of a contract of sale, namely, consent, object certain, and cause or consideration must be present. In its modern concept, what actually takes place in dacion en pago is an objective novation of the obligation where the thing offered as an accepted equivalent of the performance of an obligation is considered as the object of the contract of sale, while the debt is considered as the purchase price. In any case, common consent is an essential prerequisite, be it sale or innovation to have the effect of totally extinguishing the debt or obligation. In the absence of clear consent of appellee to the proferred special mode of payment, there can be no transfer of ownership of the mortgaged motor vehicle from appellant to appellee.

If at all, only transfer of possession of the mortgaged motor vehicle took place, for it is quite possible that appellee, as mortgagee, merely wanted to secure possession to forestall the loss, destruction, fraudulent transfer of the vehicle to third persons, or its being rendered valueless if left in the hands of the appellant. Filinvest Credit vs. CA and Sy Bang (G.R. No. 82508 September 29, 1989) Was is a contract of sale or contract of lease? CONTRACT OF SALE. Ergo, the respondent is entitled to warranty against defects. The real intention of the parties should prevail. The nomenclature of the agreement cannot change its true essence, i.e., a sale on installments. It is basic that a contract is what the law defines it and the parties intend it to be, not what it is called by the parties. 13 It is apparent here thatthe intent of the parties to the subject contract is for the so-called rentals to be the installment payments. Upon the completion of the payments, then the rock crusher, subject matter of the contract, would become the property of the private respondents. This form of agreement has been criticized as a lease only in name. The device contract of lease with option to buy is at times resorted to as a means to circumvent Article 1484, particularly paragraph (3) thereof. Through the set-up, the vendor, by retaining ownership over the property in the guise of being the lessor, retains, likewise, the right to repossess the same, without going through the process of foreclosure, in the event the vendee-lessee defaults in the payment of the installments. There arises therefore no need to constitute a chattel mortgage over the movable sold. More important, the vendor, after repossessing the property and, in effect, canceling the contract of sale, gets to keep all the installments-cum-rentals already paid. Is Filinvest liable for warranty against defect? NO. It was the private respondents who chose, inspected, and tested the subject machinery. It was only after they had inspected and tested the machine, and found it to their satisfaction, that the private respondents sought financial aid from the petitioner. Common sense dictates that a buyer inspects a product before purchasing it (under the principle of caveat emptor or buyer beware) and does not return it for defects discovered later on, particularly if the return of the product is not covered by or stipulated in a contract or warranty. Besides, there was a waiver of the warranty signed by Sy Bang.