Romulo Coronel vs Court of Appeals , Conception Alcaraz

BY IAMFREAKGEEK ON DECEMBER 4, 2012

FACTS:
This case is about a sale of land in Roosevelt Avenue, Quezon City by
the vendor Romulo Coronel to the vendees Conception Alcaraz and
her daughter Ramona Patricia Alcaraz with the following conditions:
The Coronels will immediately transfer the certificate of title
in their name upon receipt of the downpayment which is
50,000.
Upon the transfer in their names of the subject property, the
Coronels will execute the deed of absolute sale in favor of
Ramona and then Ramona shall immediately pay the
Coronels the whole balance of 1,190,000.
On January 15, 1985, Conception paid the downpayment of 50,000
and then on February 6, 1985, the property was now registered under
the name of Coronels. By Feb. 18, 1985, the Coronels sold the
property to Catalina B. Mabanag for 1,580,000 after she made a
300,000 downpayment. This is the reason why the Coronels
cancelled and rescind the contract with the Alcaraz by depositing back
the 50,000 to Ramonas bank account.
On Feb. 22, Conception filed a complaint for specific performance
against the Coronels. On April, the Coronels executed a deed of
absolute sale over the subject property to Catalina after which on June
Catalina was issued a new title over the subject property.
ISSUE:
Whether or not the Receipt of Down payment embodied a perfected
contract of sale or just a mere contract to sell?
HELD:

CONTRACT OF SALE- contracting parties obligates himself

to transfer the ownership and to deliver a determinate thing
and the other to pay a price certain in money or its
equivalent.
CONTRACT TO SELL- the prospective seller explicitly
reserves the transfer of the title to the prospective buyer,
meaning the seller does not yet agree or consent to transfer
the ownership of the property until the happening of a
contingent event like full payment of price.

SUPREME COURT RULING:

When the Receipt of Down Payment document was
prepared and signed by Romulo Coronel, the parties had agreed to a
conditional contract of sale the consummation of the contract is subject
only to the successful transfer of the certificate of Title.
According to Supreme Court, the receipt of down payment document
manifests a clear intent of the Coronels to transfer the title to the
buyer, but since the title is still in the name effect the transfer even
though the buyers are able and willing to immediately pay the
purchase price. The agreement as well could not have been a contract
to sell because the seller or the Coronels made no express
reservation of ownership or the title of the land.
On Feb. 6, 1985, the Contract of Sale between the Coronels and the
Alcaraz became obligatory.

Dignos vs CA
FACTS:
The spouses Silvestre and Isabel Dignos were owners of a parcel of
land in Opon, Lapu-Lapu City. On June 7, 1965, appellants, herein
petitioners Dignos spouses sold the said parcel of land to respondent
Atilano J. Jabil for the sum of P28,000.00, payable in two installments,
with an assumption of indebtedness with the First Insular Bank of Cebu
in the sum of P12,000.00, which was paid and acknowledged by the
vendors in the deed of sale executed in favor of plaintiff-appellant, and
the next installment in the sum of P4,000.00 to be paid on or before
September 15, 1965.
On November 25, 1965 the Dignos spouses sold the same land in
favor of defendants spouses, Luciano Cabigas and Jovita L. De
Cabigas, who were then U.S. citizens, for the price of P35,000.00. A
deed of absolute sale was executed by the Dignos spouses in favor of
the Cabigas spouses, and which was registered in the Office of the
Register of Deeds pursuant to the provisions of Act No. 3344.

As the Dignos spouses refused to accept from plaintiff-appellant the

balance of the purchase price of the land, and as plaintiff- appellant
discovered the second sale made by defendants-appellants to the
Cabigas spouses, plaintiff-appellant brought the present suit.
ISSUE:
1 . Whether or not there was an absolute contract of sale.
2. Whether or not the contract of sale was already rescinded when the
Dignos spouses sold the land to Cabigas
HELD:
I. Yes.
That a deed of sale is absolute in nature although denominated as a
Deed of Conditional Sale where nowhere in the contract in question
is a proviso or stipulation to the effect that title to the property sold is
reserved in the vendor until full payment of the purchase price, nor is
there a stipulation giving the vendor the right to unilaterally rescind the
contract the moment the vendee fails to pay within a fixed period.
A careful examination of the contract shows that there is no such
stipulation reserving the title of the property on the vendors nor does it
give them the right to unilaterally rescind the contract upon nonpayment of the balance thereof within a fixed period.
On the contrary, all the elements of a valid contract of sale under
Article 1458 of the Civil Code, are present. While it may be conceded
that there was no constructive delivery of the land sold in the case at
bar, as subject Deed of Sale is a private instrument, it is beyond
question that there was actual delivery thereof. As found by the trial
court, the Dignos spouses delivered the possession of the land in
question to Jabil as early as March 27,1965 so that the latter
constructed thereon Sallys Beach Resort also known as Jabils Beach
Resort in March, 1965; Mactan White Beach Resort on January 15, J
966 and Bevirlyns Beach Resort on September 1, 1965. Such facts
were admitted by petitioner spouses.
2. No.
The contract of sale being absolute in nature is governed by Article
1592 of the Civil Code. It is undisputed that petitioners never notified
private respondents Jabil by notarial act that they were rescinding the
contract, and neither did they file a suit in court to rescind the sale.
There is no showing that Amistad was properly authorized by Jabil to
make such extra-judicial rescission for the latter who, on the contrary,
vigorously denied having sent Amistad to tell petitioners that he was
already waiving his rights to the land in question. Under Article 1358 of
the Civil Code, it is required that acts and contracts which have for
their object extinguishment of real rights over immovable property must
appear in a public document.
Petitioners laid considerable emphasis on the fact that private
respondent Jabil had no money on the stipulated date of payment on
September 15,1965 and was able to raise the necessary amount only
by mid-October 1965. It has been ruled, however, that where time is
not of the essence of the agreement, a slight delay on the part of one
party in the performance of his obligation is not a sufficient ground for
the rescission of the agreement. Considering that private respondent
has only a balance of P4,OOO.00 and was delayed in payment only for
one month, equity and justice mandate as in the aforecited case that
Jabil be given an additional period within which to complete payment of
the purchase price.

LUZON DEVELOPMENT BANK vs. ANGELES CATHERINE

ENRIQUEZ, G.R. No. 168646, January 12, 2011;
DELTA DEVELOPMENT and MANAGEMENT SERVICES, INC. vs.
ANGELES CATHERINE ENRIQUEZ and LUZON DEVELOPMENT
BANK,
G.R. No. 168666, January 12, 2011.

DECISION
DEL CASTILLO, J.:

x x x.
Issues

The following are the issues raised by the two petitions:

1. Whether the Contract to Sell conveys ownership;

2. Whether the dacion en pago extinguished the loan obligation, such

that DELTA has no more obligations to the BANK;
3. Whether the BANK is entitled to damages and attorneys fees for
being compelled to litigate; and
4. What is the effect of Enriquezs failure to appeal the OPs Decision
regarding her obligation to pay the balance on the purchase price.

Our Ruling

contract should Enriquez fail to pay three successive monthly

amortizations.

Since the Contract to Sell did not transfer ownership of Lot 4 to

Enriquez, said ownership remained with DELTA. DELTA could then
validly transfer such ownership (as it did) to another person (the
BANK). However, the transferee BANK is bound by the Contract to Sell
and has to respect Enriquezs rights thereunder. This is because the
Contract to Sell, involving a subdivision lot, is covered and protected
by PD 957. One of the protections afforded by PD 957 to buyers such
as Enriquez is the right to have her contract to sell registered with the
Register of Deeds in order to make it binding on third parties. Thus,
Section 17 of PD 957 provides:

Mortgage contract void

As the HLURB Arbiter and Board of Commissioners both found,

DELTA violated Section 18 of PD 957 in mortgaging the properties in
Delta Homes I (including Lot 4) to the BANK without prior clearance
from the HLURB. This point need not be belabored since the parties
have chosen not to appeal the administrative fine imposed on DELTA
for violation of Section 18.

Section 17. Registration. All contracts to sell, deeds of sale, and other
similar instruments relative to the sale or conveyance of the
subdivision lots and condominium units, whether or not the purchase
price is paid in full, shall be registered by the seller in the Office of the
Register of Deeds of the province or city where the property is situated.

x x x x (Emphasis supplied.)

This violation of Section 18 renders the mortgage executed by DELTA

void. We have held before that a mortgage contract executed in
breach of Section 18 of [PD 957] is null and void.[61] Considering that
PD 957 aims to protect innocent subdivision lot and condominium unit
buyers against fraudulent real estate practices, we have construed
Section 18 thereof as prohibitory and acts committed contrary to it are
void.[62]

Because of the nullity of the mortgage, neither DELTA nor the BANK
could assert any right arising therefrom. The BANKs loan of P8 million
to DELTA has effectively become unsecured due to the nullity of the
mortgage. The said loan, however, was eventually settled by the two
contracting parties via a dation in payment. In the appealed Decision,
the CA invalidated this dation in payment on the ground that DELTA,
by previously entering into a Contract to Sell, had already conveyed its
ownership over Lot 4 to Enriquez and could no longer convey the
same to the BANK. This is error, prescinding from a wrong
understanding of the nature of a contract to sell.

Contract to sell does not transfer ownership

Both parties are correct in arguing that the Contract to Sell executed by
DELTA in favor of Enriquez did not transfer ownership over Lot 4 to
Enriquez. A contract to sell is one where the prospective seller
reserves the transfer of title to the prospective buyer until the
happening of an event, such as full payment of the purchase price.
What the seller obliges himself to do is to sell the subject property only
when the entire amount of the purchase price has already been
delivered to him. In other words, the full payment of the purchase
price partakes of a suspensive condition, the non-fulfillment of which
prevents the obligation to sell from arising and thus, ownership is
retained by the prospective seller without further remedies by the
prospective buyer.[63] It does not, by itself, transfer ownership to the
buyer.[64]

In the instant case, there is nothing in the provisions of the contract

entered into by DELTA and Enriquez that would exempt it from the
general definition of a contract to sell. The terms thereof provide for the
reservation of DELTAs ownership until full payment of the purchase
price; such that DELTA even reserved the right to unilaterally void the

The purpose of registration is to protect the buyers from any future

unscrupulous transactions involving the object of the sale or contract to
sell, whether the purchase price therefor has been fully paid or not.
Registration of the sale or contract to sell makes it binding on third
parties; it serves as a notice to the whole world that the property is
subject to the prior right of the buyer of the property (under a contract
to sell or an absolute sale), and anyone who wishes to deal with the
said property will be held bound by such prior right.

While DELTA, in the instant case, failed to register Enriquezs Contract

to Sell with the Register of Deeds, this failure will not prejudice
Enriquez or relieve the BANK from its obligation to respect Enriquezs
Contract to Sell. Despite the non-registration, the BANK cannot be
considered, under the circumstances, an innocent purchaser for value
of Lot 4 when it accepted the latter (together with other assigned
properties) as payment for DELTAs obligation. The BANK was well
aware that the assigned properties, including Lot 4, were subdivision
lots and therefore within the purview of PD 957. It knew that the loaned
amounts were to be used for the development of DELTAs subdivision
project, for this was indicated in the corresponding promissory notes.
The technical description of Lot 4 indicates its location, which can
easily be determined as included within the subdivision development.
Under these circumstances, the BANK knew or should have known of
the possibility and risk that the assigned properties were already
covered by existing contracts to sell in favor of subdivision lot buyers.
As observed by the Court in another case involving a bank regarding a
subdivision lot that was already subject of a contract to sell with a third
party:

[The Bank] should have considered that it was dealing with a property
subject of a real estate development project. A reasonable person,
particularly a financial institution x x x, should have been aware that, to
finance the project, funds other than those obtained from the loan
could have been used to serve the purpose, albeit partially. Hence,
there was a need to verify whether any part of the property was
already intended to be the subject of any other contract involving
buyers or potential buyers. In granting the loan, [the Bank] should not
have been content merely with a clean title, considering the presence
of circumstances indicating the need for a thorough investigation of the
existence of buyers x x x. Wanting in care and prudence, the [Bank]
cannot be deemed to be an innocent mortgagee. x x x[65]

xxxx
Further, as an entity engaged in the banking business, the BANK is
required to observe more care and prudence when dealing with
registered properties. The Court cannot accept that the BANK was
unaware of the Contract to Sell existing in favor of Enriquez. In Keppel
Bank Philippines, Inc. v. Adao,[66] we held that a bank dealing with a
property that is already subject of a contract to sell and is protected by
the provisions of PD 957, is bound by the contract to sell (even if the
contract to sell in that case was not registered). In the Courts words:

It is true that persons dealing with registered property can rely solely
on the certificate of title and need not go beyond it. However, x x x, this
rule does not apply to banks. Banks are required to exercise more care
and prudence than private individuals in dealing even with registered
properties for their business is affected with public interest. As master
of its business, petitioner should have sent its representatives to check
the assigned properties before signing the compromise agreement and
it would have discovered that respondent was already occupying one
of the condominium units and that a contract to sell existed between
[the vendee] and [the developer]. In our view, petitioner was not a
purchaser in good faith and we are constrained to rule that petitioner is
bound by the contract to sell.[67]

THAT, the ASSIGNOR acknowledges to be justly indebted to the

ASSIGNEE in the sum of ELEVEN MILLION EIGHT HUNDRED
SEVENTY-EIGHT
THOUSAND
EIGHT
HUNDRED
PESOS
(P11,878,800.00), Philippine Currency as of August 25, 1998.
Therefore, by virtue of this instrument, ASSIGNOR hereby ASSIGNS,
TRANSFERS, and CONVEYS AND SETS OVER [TO] the ASSIGNEE
that real estate with the building and improvements existing thereon,
more particularly described as follows:

xxxx

of which the ASSIGNOR is the registered owner being evidenced by

TCT No. x x x issued by the Registry of Deeds of Trece Martires City.

THAT, the ASSIGNEE does hereby accept this ASSIGNMENT IN

PAYMENT OF THE TOTAL OBLIGATION owing to him by the
ASSIGNOR as above-stated;[70]

Bound by the terms of the Contract to Sell, the BANK is obliged to

respect the same and honor the payments already made by Enriquez
for the purchase price of Lot 4. Thus, the BANK can only collect the
balance of the purchase price from Enriquez and has the obligation,
upon full payment, to deliver to Enriquez a clean title over the subject
property.[68]

Dacion en pago extinguished the loan obligation

The BANK then posits that, if title to Lot 4 is ordered delivered to

Enriquez, DELTA has the obligation to pay the BANK the
corresponding value of Lot 4. According to the BANK, the dation in
payment extinguished the loan only to the extent of the value of the
thing delivered. Since Lot 4 would have no value to the BANK if it will
be delivered to Enriquez, DELTA would remain indebted to that extent.

We are not persuaded. Like in all contracts, the intention of the parties
to the dation in payment is paramount and controlling. The contractual
intention determines whether the property subject of the dation will be
considered as the full equivalent of the debt and will therefore serve as
full satisfaction for the debt. The dation in payment extinguishes the
obligation to the extent of the value of the thing delivered, either as
agreed upon by the parties or as may be proved, unless the parties by
agreement, express or implied, or by their silence, consider the thing
as equivalent to the obligation, in which case the obligation is totally
extinguished.[69]

In the case at bar, the Dacion en Pago executed by DELTA and the
BANK indicates a clear intention by the parties that the assigned
properties would serve as full payment for DELTAs entire obligation:

Without any reservation or condition, the Dacion stated that the

assigned properties served as full payment of DELTAs total
obligation to the BANK. The BANK accepted said properties as
equivalent of the loaned amount and as full satisfaction of DELTAs
debt. The BANK cannot complain if, as it turned out, some of those
assigned properties (such as Lot 4) are covered by existing contracts
to sell. As noted earlier, the BANK knew that the assigned properties
were subdivision lots and covered by PD 957. It was aware of the
nature of DELTAs business, of the location of the assigned properties
within DELTAs subdivision development, and the possibility that some
of the properties may be subjects of existing contracts to sell which
enjoy protection under PD 957. Banks dealing with subdivision
properties are expected to conduct a thorough due diligence review to
discover the status of the properties they deal with. It may thus be said
that the BANK, in accepting the assigned properties as full payment of
DELTAs total obligation, has assumed the risk that some of the
assigned properties (such as Lot 4) are covered by contracts to sell
which it is bound to honor under PD 957.

A dacion en pago is governed by the law of sales.[71] Contracts of sale

come with warranties, either express (if explicitly stipulated by the
parties) or implied (under Article 1547 et seq. of the Civil Code). In this
case, however, the BANK does not even point to any breach of
warranty by DELTA in connection with the Dation in Payment. To be
sure, the Dation in Payment has no express warranties relating to
existing contracts to sell over the assigned properties. As to the implied
warranty in case of eviction, it is waivable[72] and cannot be invoked if
the buyer knew of the risks or danger of eviction and assumed its
consequences.[73] As we have noted earlier, the BANK, in accepting
the assigned properties as full payment of DELTAs total obligation,
has assumed the risk that some of the assigned properties are covered
by contracts to sell which must be honored under PD 957.

xxx
KNOW ALL MEN BY THESE PRESENTS:
Balance to be paid by Enriquez
This instrument, made and executed by and between:

As already mentioned, the Contract to Sell in favor of Enriquez must be

respected by the BANK. Upon Enriquezs full payment of the balance
of the purchase price, the BANK is bound to deliver the title over Lot 4
to her. As to the amount of the balance which Enriquez must pay, we
adopt the OPs ruling thereon which sustained the amount stipulated in
the Contract to Sell. We will not review Enriquezs initial claims about
the supposed violation of the price ceiling in BP 220, since this issue
was no longer pursued by the parties, not even by Enriquez, who
chose not to file the required pleadings[76] before the Court. The
parties were informed in the Courts September 5, 2007 Resolution
that issues that are not included in their memoranda shall be deemed
waived or abandoned. Since Enriquez did not file a memorandum in
either petition, she is deemed to have waived the said issue.

WHEREFORE, premises considered, the appealed November 30,

2004 Decision of the Court of Appeals, as well as its June 22, 2005
Resolution in CA-G.R. SP No. 81280 are hereby AFFIRMED with the
MODIFICATIONS that Delta Development and Management Services,
Inc. is NOT LIABLE TO PAY Luzon Development Bank the value of the
subject lot; and respondent Angeles Catherine Enriquez is ordered to
PAY the balance of the purchase price and the interests accruing
thereon, as decreed by the Court of Appeals, to the Luzon
Development Bank, instead of Delta Development and Management
Services, Inc., within thirty (30) days from finality of this Decision. The
Luzon Development Bank is ordered to DELIVER a CLEAN TITLE to
Angeles Catherine Enriquez upon the latters full payment of the
balance of the purchase price and the accrued interests.

KER & CO., LTD. vs. LINGAD

G.R. No. L-20871 April 30, 1971

4. on dates determined by the rubber company, petitioner shall render

a detailed report showing sales during the month
5. the rubber company shall invoice the sales as of the dates of
inventory and sales report (Par. 14); that the rubber company agrees
to keep the consigned goods fully insured under insurance policies
payable to it in case of loss
6. upon request of the rubber company at any time, petitioner shall
render an inventory of the existing stock which may be checked by an
authorized representative of the former
7. upon termination or cancellation of the Agreement, all goods held on
consignment shall be held by petitioner for the account of the rubber
company until their disposition is provided for by the latter.
CONTROLLING TEST (cited CIR vs. Constantino):
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.
Sale vs. Agency
a. In sale, the essence is the transfer of title or agreement to transfer it
for a price paid or promised. In agency, the essence is the delivery to
an agent.
b. In sale, the 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. In agency, the transfer
does not make the property as the agents own, but that of 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.
Besides, The control by the United States Rubber International over
the goods in question is pervasive.

Facts:
CIR assessed the sum of P20,272.33 as the commercial brokers
percentage tax, surcharge, and compromise penalty against Ker & Co.
There was a request on the part of petitioner for the cancellation of
such assessment, which request was turned down. As a result, it filed
a petition for review with the Court of Tax Appeals. CTA ruled that that
Ker & Co is liable as a commercial broker under Section 194 (t) of the
National Internal Revenue Code.

Co & Company vs. CIR

11
07
2010
CELESTINO CO & COMPANY vs. COLLECTOR OF INTERNAL
REVENUE
G.R. No. L-8506 August 31, 1956
Facts:

Ker & Co signed a contract with the United States Rubber

International, the former being referred to as the Distributor and the
latter specifically designated as the Company. The shipments would
cover products for consumption in Cebu, Bohol, Leyte, Samar, Jolo,
Negros Oriental, and Mindanao except [the] province of Davao. Ker &
Co, as Distributor, was precluded from disposing such products
elsewhere than in the above places unless written consent would first
be obtained from the Company. It was required to exert every effort to
have the shipment of the products in the maximum quantity and to
promote in every way the sale thereof. The prices, discounts, terms of
payment, terms of delivery and other conditions of sale were subject to
change in the discretion of the Company.
Issue:
WON the relationship Ker & Co and US Rubber was that of a vendorvendee or principal-broker? PRINCIPAL- BROKER, hence liable under
Section 194 (t) of the NIRC.
Held:
The relationship between them is one of brokerage or agency. That the
petitioner Ker & Co., Ltd. is, by contractual stipulation, an agent of U.S.
Rubber International is borne out by the facts that:
1. petitioner can dispose of the products of the Company only to
certain persons or entities and within stipulated limits, unless excepted
by the contract or by the Rubber Company;
2. it merely receives, accepts and/or holds upon consignment the
products, which remain properties of the latter company
3. every effort shall be made by petitioner to promote in every way the
sale of the products (Par. 3); that sales made by petitioner are subject
to approval by the company

Celestino Co & Company is a duly registered general copartnership

doing business under the trade name of Oriental Sash Factory.
From 1946 to 1951 it paid percentage taxes of 7% on the gross
receipts of its sash, door and window factory. However in 1952 it
began to claim liability only to the contractors 3 per cent tax (instead of
7 per cent) under section 191 of the same Code. It alleges primarily
that it is an ordinary contractor, presenting as evidence letters,
sketches and price quotations sent by the manager to four customers
who allegedly made special orders to doors and window from the said
factory. It contended that it does not manufacture ready-made doors,
sash and windows for the public but only upon special order of its
select customers.
Issue:
1) WON Co & Co. is a manufacturer or contractor? MANUFACTURER,
hence still liable for 7% tax.
2) WON Is Co & Co.s business a matter of contract of sale or contract
of piece of work? SALE.
Held:
1)
The important thing to remember is that Celestino Co & Company
habitually makes sash, windows and doors, as it has represented in its
stationery and advertisements to the public. That it manufactures the
same is practically admitted by appellant itself. The fact that windows
and doors are made by it only when customers place their orders, does
not alter the nature of the establishment, for it is obvious that it only

accepted such orders as called for the employment of such materialmoulding, frames, panels-as it ordinarily manufactured or was in a
position habitually to manufacture. The Oriental Sash Factory does
nothing more than sell the goods that it mass-produces or habitually
makes; sash, panels, mouldings, frames, cutting them to such sizes
and combining them in such forms as its customers may desire.

ART. 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.

2)

the Supply Agreement was decidedly a contract for a piece of work.

Art. 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 contract for a piece of work.

Following Art. 1729 of the Civil Code which provides:

ART. 1729. Those who put their labor upon or furnish materials for a
piece of work undertaken by the contractor have an action against the
owner up to the amount owing from the latter to the contractor at the
time the claim is made.

When it 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.

Nool vs. Court of Appeals

Oriental Sash Factory did not merely sell its services to Teodoro & Co.
It sold materials ordinarily manufactured by it sash, panels,
mouldings to Teodoro & Co., although in such form or combination
as suited the fancy of the purchaser. Such new form does not divest
the Oriental Sash Factory of its character as manufacturer. Neither
does it take the transaction out of the category of sales under Article
1467 above quoted, because although the Factory does not, in the
ordinary course of its business, manufacture and keep on stock doors
of the kind sold to Teodoro, it could stock and/or probably had in stock
the sash, mouldings and panels it used therefor.
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.

DEL MONTE PHILIPPINES, INC. VS. NAPOLEON N. ARAGONES

G.R. NO. 153033, June 23, 2005
FACTS:
Del Monte Philippines Inc. (DMPI) entered into an Agreement with
MEGA-WAFF, represented by Managing Principal Edilberto Garcia
(Garcia), whereby the latter undertook the supply and installation of
modular pavement at DMPIs condiments warehouse within 60
calendar days from signing of the agreement.
To source its supply of concrete blocks to be installed on the pavement
of the DMPI warehouse, MEGA-WAFF, as CONTRACTOR
represented by Garcia, entered into a Supply Agreement with
Dynablock Enterprises, represented by herein respondent Aragones,
as SUPPLIER.
After the installation of the pavement in the warehouse, Aragones later
on demand from MEGA-WAFF the full payment of the concrete blocks,
on which he failed to collect.
Aragones later failed to collect from MEGA-WAFF the full payment of
the concrete blocks. He thus sent DMPI a letter dated March 10, 1989,
received by the latter on March 13, 1989, advising it of MEGA-WAFFs
unpaid obligation and requesting it to earmark and withhold the amount
of P188,652.65 from [MEGA-WAFFs] billing to be paid directly to him
[l]est Garcia collects and fails to pay [him].

ISSUE:
Whether it was one of sale or for a piece of work.
HELD:
Under Art. 1467 then of the Civil Code which provides:

Conchita Nool owned a lot which was mortgaged to DBP when she
secured a loan. Upon non-payment of loan it was foreclosed by DBP.
Within the time of redemption Conchita contacted Anacleto Nool to
redeem the foreclosed property which the latter did. The titles were
transferred to Anacleto but it was agreed that Conchita can get back
the property soon when she has money. Conchita asked the Anacleto
for the return of the property but the latter refused even after the
intervention of the barangay. The case was filed.
Anacleto theorized that the lands were acquired by them from DBP
through negotiated sale. He argued that he was made to believe that
the property was still owned by Conchita when they agreed of
redemption.
RTC said it was DBP who was the owner of the property when the sale
to Anacleto was made. DBP became the absolute owner of the
property after the redemption period of the foreclosed property had
lapsed. RTC denied the action by Conchita. It was affirmed by CA.
SC: The contract of repurchase entered by Conchita and Anacleto was
void there being no subject to speak of. It is clear that Conchita was no
longer the owner of the property when such agreement was made with
Anacleto. It is likewise clear that the seller can no longer deliver the
object of the sale to the buyer, as the buyer had already acquired the
title from the rightful owner. Jurisprudence teaches us that a person
can only sell what he owns or is authorized to sell ; the buyer can
acquire no more that what the seller can legally transfer.
The right to repurchase presupposes a valid contract of sale between
the same parties. CA is decision AFFIRMED. Petition is DENIED.

DEVELOPMENT BANK OF THE PHILIPPINES, petitioner, vs. COURT

OF APPEALS and EMERALD RESORT HOTEL CORPORATION,
respondents.
Facts: Private respondent Emerald Resort Hotel Corporation (ERHC)
obtained a loan from petitioner Development Bank of the Philippines
(DBP). To secure the loan, ERHC mortgaged its personal and real
properties to DBP.
On 5 June 1986, alleging that ERHC failed to pay its loan, DBP filed
with the Office of the Sheriff, Regional Trial Court of Iriga City, an
Application for Extra-judicial Foreclosure of Real Estate and Chattel
Mortgages.
Sheriffs issued the required notices of public auction sale of the
personal and real properties. However, they failed to execute the
corresponding certificates of posting of the notices.
The Office of the Sheriff scheduled on 12 August 1986 the public
auction sale of the real properties. The first scheduled public auction
was publish. However, the Office of the Sheriff postponed the auction
sale on 12 August 1986 to 11 September 1986 at the request of
ERHC. DBP did not republish the notice of the rescheduled auction
sale because DBP and ERHC signed an agreement to postpone the
12 August 1986 auction sale.

Issue: WON the extrajudicial foreclosre of real and chattel mortgage

are valid.
Held: Valid as to chattel mortgage. Void as to real estate mortgage.
There is no question that DBP published the notice of auction sale
scheduled on 12 August 1986. However, no auction sale took place on
12 August 1986 because DBP, at the instance of ERHC, agreed to
postpone the same to 11 September 1986.
Publication, therefore, is required to give the foreclosure sale a
reasonably wide publicity such that those interested might attend the
public sale. To allow the parties to waive this jurisdictional requirement
would result in converting into a private sale what ought to be a public
auction.
DBP, however, complied with the mandatory posting of the notices of
the auction sale of the personal properties. Under the Chattel
Mortgage Law, the only requirement is posting of the notice of auction
sale. There was no postponement of the auction sale of the personal
properties and the foreclosure took place as scheduled. Thus, the
extrajudicial foreclosure of the chattel mortgage in the instant case
suffers from no procedural infirmity.
WHEREFORE, the Joint Decision of the Court of Appeals in CA-G.R.
CV Nos. 38569 and 38604 is AFFIRMED with MODIFICATION. The
extrajudicial foreclosure of the chattel mortgage is valid whereas the
extrajudicial foreclosure of the real estate mortgage is void. The award
of moral damages is deleted for lack of basis. No costs.

Cherry Amor ChaoCase Digest Sales and Lease 2B Atty. Casino

Beaumont v. Prieto41 Phil 670Araullo, J:Facts:Benito Legarda owns a
parcel of land known as the Nagtajan Hacienda which he wantedto sell
through his agent Benito Valdez; who is also his attorney in fact.
Negotiations asto the purchase of land has been had between Benito
Valdez and W. Borck. However, the parties eventually had a
misunderstanding as to the three (3) month period which theagent
Benito Valdez gave to Borck. It is an option period to buy the
property.Issue:Whether the agreement between the parties constitutes
a mere offer to sell or an actualcontract of option?Held:There was not
contract because there was no concurrence of the offer and
acceptance of the thing and the cause which are to constitute a
contract.An option is an accepted offer. It states the terms and
conditions on which the owner iswilling to sell or lease his land, if the
holder elects to accept them within the time limited.As there can be no
contract without the concurrence of the requisites of consent of the
parties and cause of consideration of the obligation created, in order
that a proposition or offer for sale may acquire the character of a
contract it is necessary that there appear theexpression of the will of
the offeror and that of the offeree and the consent of both as wellas the
fact that there was a cause or consideration for the obligation which is
the object of what was agreed upon.Promises being binding when and
so long as they are accepted in the exact terms inwhich they are made
it not being legally proper to modify the conditions imposed bythe
promisor without his consent then in order that the acceptance of a
proposition or offer may be efficacious and the option be perfect and
binding upon the parties thereto, itis necessary that such acceptance
should be unequivocal and unconditional and theacceptance and
proposition shall be without any variation whatsoever, so that whatever
modifications or deviation from the terms of the offer annuls the latter
and frees theofferor

G.R. No. L-9871

January 31, 1958
ATKINS, KROLL and CO., INC.,
vs.
B. CUA HIAN TEK
FACTS:
Atkins Kroll & Co. sent a letter to B. Cu HianTek on September 13,
1951, offering cartons of Luneta brand Sardines subject to reply by
September 23, 1951. HianTek unconditionally accepted the said offer
through a letter delivered on September 21, 1951, but Atkins failed to

deliver the commodities due to the shortage of catch of sardines by the

packers in California.
HianTek, therefore, filed an action for damages in the CFI of Manila
which granted the same in his favor.
Atkins herein contends that there was no such contract of sale but only
an option to buy, which was not enforceable for lack of consideration
because it is provided under the 2nd paragraph of Article 1479 of the
New Civil Code that "an accepted unilatateral promise to buy or to sell
a determinate thing for a price certain is binding upon the promisor if
the promise is supported by a consideration distinct from the price.
Atkins also insisted that the offer was a mere offer of option, because
the "firm offer" was a continuing offer to sell until September 23.
ISSUE:
Whether a contract of sale was constituted between the parties or only
a unilateral promise to buy.
COURT RULING:
SC held that there was a contract of sale between the parties. ATKINs
argument assumed that only a unilateral promise arose when the
respondent accepted the offer is incorrect because a bilateral contract
to sell and to buy was created upon HIAN TEKs acceptance.
B. CuaHianTeks letter-reply to Atkins indicated that he accepted "the
firm offer for the sale. After accepting the promise and before he
exercises his option, the holder of the option is not bound to buy. In
this case at bar, however, upon TEKs acceptance of herein ATKIN's
offer, a bilateral promise to sell and to buy ensued, and the respondent
had immediately assumed the obligations of a purchaser.

Southwestern Sugar & Molasses Co. vs. Atlantic Gulf & Pacific
Company
Southwestern Sugar & Molasses Co. vs. Atlantic Gulf & Pacific
Company
97 Phil 247
June 1955
FACTS:
On March 24, 1953, defendant-appellant Atlantic granted plaintiffappellee Southwestern an option period of ninety days to buy the
formers barge No. 10 for the sum of P30,000. On May 11 of the same
year, Southwestern Company communicated its acceptance of the
option to Atlantic through a letter, to which the latter replied that their
understanding was that the "offer of option" is to be a cash transaction
and to be effected "at the time the lighter is available." On June 25,
Atlantic advised the Southwestern Company that since there is still
further work for it, the barge could not be turned over to the latter
company.
On June 27, 1953, the Southwestern Company filed this action to
compel Atlantic to sell the barge in line with the option, depositing with
the court a check covering the sum of P30,000, but said check was
later withdrawn with the approval of the court. On June 29, the Atlantic
withdrew its "offer of option" with due notices to Southwestern
Company stating that the option was granted merely as a favor. The
Atlantic contended that the option to sell it made to Southwestern
Company is null and void because said option to sell is not supported
by any consideration.
The trial court granted herein plaintiff-appellee Southwestern
Companys action for specific performance and ordered herein
defendant-appellant Atlantic to pay damages equivalent to 6 per
centum per annum on the sum of P30,000 from the date of the filing of
the complaint.
ISSUE:
Is Atlantic liable for specific performance and to pay damages in favor
of Southwestern Company?
COURT RULING:
The Supreme Court reversed the trial courts decision applying Article
1479 of the new Civil Code. The Court reiterated that "an accepted

unilateral promise" can only have a binding effect if supported by a

consideration, which means that the option can still be withdrawn, even
if accepted, if said option is not supported by any consideration. The
option that Atlantic had provided was without consideration, hence, can
be withdrawn notwithstanding Southwestern Companys acceptance of
said option.

G.R. No. L-25494 June 14, 1972

NICOLAS SANCHEZ
vs.
SEVERINA RIGOS
FACTS:
Nicolas Sanchez and SeverinaRigos executed an instrument entitled
"Option to Purchase," whereby Mrs. Rigos agreed, promised and
committed to sell to Sanchez a parcel of land within two (2) years from
said date with the understanding that said option shall be deemed
terminated and elapsed if Sanchez shall fail to exercise his right to buy
the property within the stipulated period. Inasmuch as several tenders
of payment made by Sanchez within said period, were rejected by Mrs.
Rigos, on March 12, 1963, the former deposited said amount with the
Court of First Instance of Nueva Ecija and commenced against the
latter the present action, for specific performance and damages.
Rigos contended that the contract between them was only aunilateral
promise to sell, and the same being unsupported by any valuable
consideration, by force of the New Civil Code, is null and void.
Sanchez alleged in his compliant that, by virtue of the option under
consideration, "defendant agreed and committed to sell" and "the
plaintiff agreed and committed to buy" the land described in the option.
The lower court rendered judgment in favor of Sanchez and ordered
Rigos to accept the sum Sanchez judicially consigned, and to execute
in his favor the requisite deed of conveyance.
ISSUE:
Whether there was a contract to buy and sell between the parties or
only a unilateral promise to sell.
COURT RULING:
The Supreme Court affirmed the lower courts decision.
The instrument executed in 1961 is not a "contract to buy and sell,"
but merely granted SANCHEZ an option to buy, as indicated by its own
title "Option to Purchase." The option did not impose upon Sanchez
the obligation to purchase Rigos' property. Rigos "agreed, promised
and committed" herself to sell the land to Sanchez, but there is nothing
in the contract to indicate that her aforementioned agreement, promise
and undertaking is supported by a consideration "distinct from the
price" stipulated for the sale of the land.
Article 1479 refers to "an accepted unilateral promise to buy or to sell."
Since there may be no valid contract without a cause or consideration,
the promisor is not bound by his promise and may, accordingly,
withdraw it. Pending notice of its withdrawal, his accepted promise
partakes, however, of the nature of an offer to sell which, if accepted,
results in a perfected contract of sale.

NIETES V. CA (August 18, 1972)

FACTS:
Petitioner Aquilino Nietes and respondent Dr.Pablo Garcia entered a
Contract of Lease and Option to Buy where the latter agreed to lease
his Angeles Educational Institute to the former.
The rent is set to P5000 per year up to 5 years and that the LESSOR
agrees to give the LESSEE an option to buy the land and the school
building, for P100,000 within the period of the Contract of Lease.
Nietes paid Garcia P2200 on Dec.16, 1962 for partial payment on the
purchase of the property. Through their lawyers, Garcia decided to
rescind the contract while Nietes expresses his intention to buy the
property.
Nietes also deposited 84K to a bank corresponding to the balance for
the purchase of the property.
ISSUE:
WON Nietes can aval of his option to buy the property.

HELD:
Nietes can avail of the option to buy because he already express his
intention to buy the property before the termination of the contract. The
contention of the respondent that the full price of the property should
first be paid before the option could be exercised is of no merit.
The contract doesnt provide such stipulation and as such, the
provision of reciprocal obligations in oblicon should prevail. Notice of
the creditor's decision to exercise his option to buy need not be
coupled with actual payment of the price, so long as this is delivered to
the owner of the property upon performance of his part of the
agreement.
Nietes had validly and effectively exercised his option to buy the
property of Dr. Garcia, at least, on December 13, 1962, when he
acknowledged receipt from Mrs. Nietes of the sum of P2,200 then
delivered by her "in partial payment on the purchase of the property"
described in the "Contract of Lease with Option to Buy"

University of the Philippines vs Philab Industries, Inc.

Chester Cabalza recommends his visitors to please read the original &
full text of the case cited. Xie xie!
University of the Philippines vs Philab Industries, Inc.
G.R. No. 152411
September 29, 2004
Facts:
This case is a petition for review on certiorari of the Decision of the
Court of Appeals.
In 1979, the University of the Philippines (UP) decided to construct an
integrated system of research organization known as the Research
Complex. As part of the project, laboratory equipment and furniture
were purchased for the National Institute of Biotechnology and Applied
Microbiology (BIOTECH) at the UP Los Baos. Providentially, the
Ferdinand E. Marcos Foundation (FEMF) came forward and agreed to
fund the acquisition of the laboratory furniture, including the fabrication
thereof.
Renato E. Lirio, the Executive Assistant of the FEMF, gave the gosignal to BIOTECH to contact a corporation to accomplish the project.
On July 23, 1982, Dr. William Padolina, the Executive Deputy Director
of BIOTECH, arranged for Philippine Laboratory Industries, Inc.
(PHILAB), to fabricate the laboratory furniture and deliver the same to
BIOTECH for the BIOTECH Building Project, for the account of the
FEMF.
On July 13, 1982, Padolina wrote Lirio and requested for the issuance
of the purchase order and downpayment for the office and laboratory
furniture for the project, thus: 1) Supply and Installation of Laboratory
furniture for the BIOTECH Building Project, and 2) Fabrication and
Supply of office furniture for the BIOTECH Building Project, and paying
the downpayment of 50% or P286,687.50
Ten days after, Padolina informed Hector Navasero, the President of
PHILAB, to proceed with the fabrication of the laboratory furniture, per
the directive of FEMF Executive Assistant Lirio. Subsequently, PHILAB
made partial deliveries of office and laboratory furniture to BIOTECH
after having been duly inspected by their representatives and FEMF
Executive Assistant Lirio.
On August 24, 1982, FEMF remitted P600,000 to PHILAB as
downpayment for the laboratory furniture for the BIOTECH project, for
which PHILAB issued Official Receipt No. 253 to FEMF. On October
22, 1982, FEMF made another partial payment of P800,000 to
PHILAB, for which the latter issued Official Receipt No. 256 to FEMF.
The remittances were in the form of checks drawn by FEMF and
delivered to PHILAB, through Padolina.
On October 16, 1982, UP, through Emil Q. Javier, the Chancellor of
UP Los Baos and FEMF, represented by its Executive Officer,
Rolando Gapud, executed a Memorandum of Agreement (MOA) in
which FEMF agreed to grant financial support and donate sums of

money to UP for the construction of buildings, installation of laboratory

and other capitalization for the project, not to exceed P29,000,000.00.
The Board of Regents of the UP approved the MOA with Philab on
November 25, 1982.
Later, President Marcos was ousted from office during the February
1986 EDSA Revolution. On April 22, 1986, PHILAB wrote President
Corazon C. Aquino asking her help to secure the payment of the
amount due from the FEMF. In the meantime, the PCGG wrote UP
requesting for a copy of the relevant contract and the MOA for its
perusal.
PHILAB filed a complaint for sum of money and damages against UP.
In the complaint, PHILAB prayed that it be paid the following: (1)
P702,939.40 plus an additional amount (as shall be determined during
the hearing) to cover the actual cost of money which at the time of
transaction the value of the peso was eleven to a dollar (P11.00:$1)
and twenty seven (27%) percent interest on the total amount from
August 1982 until fully paid; (2) P50,000.00 as and for attorneys fees;
and (3) Cost of suit.
In its answer, UP denied liability and alleged that PHILAB had no
cause of action against it because it was merely the donee/beneficiary
of the laboratory furniture in the BIOTECH; and that the FEMF, which
funded the project, was liable to the PHILAB for the purchase price of
the laboratory furniture. UP specifically denied obliging itself to pay for
the laboratory furniture supplied by PHILAB.
Issue:
Whether or not the Court of Appeals erred in applying the legal
principle of unjust enrichment when it held that UP and not FEMF, is
liable to Philab?
Held:
There is no dispute that the respondent is not privy to the MOA
executed by the petitioner and FEMF; hence, it is not bound by the
said agreement. Contracts take effect only between the parties and
their assigns. A contract cannot be binding upon and cannot be
enforced against one who is not a party to it, even if he is aware of
such contract and has acted with knowledge thereof. Likewise
admitted by the parties, is the fact that there was no written contract
executed by the petitioner, the respondent and FEMF relating to the
fabrication and delivery of office and laboratory furniture to the
BIOTECH. Even the CA failed to specifically declare that the petitioner
and the respondent entered into a contract of sale over the said
laboratory furniture.
The Court of Appeals agreed with the petitioner that, based on the
records, an implied-in-fact contract of sale was entered into between
the Philab and FEMF.
Unjust enrichment is a term used to depict result or effect of failure to
make remuneration of or for property or benefits received under
circumstances that give rise to legal or equitable obligation to account
for them; to be entitled to remuneration, one must confer benefit by
mistake, fraud, coercion, or request. Unjust enrichment is not itself a
theory of reconvey. Rather, it is a prerequisite for the enforcement of
the doctrine of restitution.
The essential requisites for the application of Article 22 of the New Civil
Code do not obtain in this case. The respondent had a remedy against
the FEMF via an action based on an implied-in-fact contract with the
FEMF for the payment of its claim. The petitioner legally acquired the
laboratory furniture under the MOA with FEMF; hence, it is entitled to
keep the laboratory furniture.
The petition is granted. The assailed Decision of the Court of Appeals
is reversed and set aside. The Decision of the Regional Trial Court,
Makati City, Branch 150, is reinstated with no costs.

Spouses Doromal, Sr. and Salas vs. Court of Appeals, No. L-3608, 66
SCRA 575 , September 05, 1975
G.R. No. L-3608
August 7, 1907
THE UNITED STATES, plaintiff-appellee,
vs.

ESTANISLAO FLOIRENDO, defendant-appellant.

M. Barateta for appellant.
Attorney-General Araneta for appellee.
TORRES, J.:
On June 13, 1906, the provincial fiscal of Ilocos Sur filed a complaint in
the court, reading as follows:
The undersigned accuses Estanislao Floirendo of the crime of
falsification of marks, defined and punished in article 275 of the Penal
Code, which crime was committed as follows:
That the said Estanislao Floirendo, in or about the months of April and
May of this year, in the barrio of Rugsuanan in the municipality of
Vigan, Ilocos Sur, intentionally, criminally, and maliciously stamped a
mark of this form on a calf under two years, simulating the mark used
by the municipality of Vigan to indemnify large cattle, the said mark
being forged all contrary to law.
In the suit brought upon the above complaint, it appears that the
accused sold a calf to Pantaleon Andallo in Vigan, Ilocos Sur, which
calf bore on its body the mark of the municipality of Vigan as well as
the owner's mark. According the former delivered to the latter the
document exhibited (folio 18 of the record), which appears as issued
on February 15, 1905, in favor of the accused, Floirendo, by Alfredo
Eizmendi, municipal treasurer, and Mariano Arce, secretary of the
same municipality. The document refers to a cow (calf), dark chestnut
colored, with two locks of hair on its cervix and one on its back,
showing the mark of the municipality of Vigan and that of the owner. In
view of the fact that the mark stamped on the left side of the said
animal is larger than the official mark of the municipality (the latter is 2
inches long, while the one printed on the cow is 6 or 7 inches, unequal
and thick, whereas the mark of the municipality is uniform in its whole
extent), it was inferred by the clerk, by the actual treasurer of the
municipality, Pedro Alagar, and by Rafael Aurellado, an employee of
the municipality, that it is impossible that the mark on the animal could
be that of the municipality, the former being too large, and therefore
that the said mark had been falsified and had not been impressed with
the stamp of the municipality. Moreover the document exhibit shows
some particulars which do not agree with those appearing on the
animal. although, as stated by the said treasurer, the above document
may be a legitimate one because it bears the mark of the alleged
owner, Estanislao Floirendo, and it was therefore stated, upon the
petition of the attorney for the defendant in agreement with the fiscal,
that the accused is the true owner of the cow bought by Pantaleon
Andallo.
We conclude from the foregoing statement that the crime is alleged to
be constituted by the fact that the accused, as owner of the calf sold to
Pantaleon Andallo, placed and stamped on the same a mark different
from the official mark of the municipality, although with some
resemblance to the latter, not having complied with the regulations
which provide that each head of cattle should bear the official mark of
the municipality besides the owner's mark.
Article 275 of the Penal Code says:
The falsification of the seals, marks, and countersigns which are
employed in the offices of the estate in order to identify some object or
to insure the payment of taxes shall be punished with the penalties of
presidio correccional in its minimum and medium degrees and a fine of
from 375 to 3,750 pesetas.
The legitimate mark of the municipality was presented at the trial, and
from the confrontation made between the same and that which
appears stamped on the animal, which was also shown, it was
concluded that the mark is not that of the municipality but another
falsified or simulated; but the truth is that this forged stamped has not
been exhibited, nor could it be ascertained how and in what manner
the branding or marking was simulated, or whether the apparatus used
for the purpose by the accused is really difference from the legitimate
one.
Taking into account the fact that the said calf might have been marked
while it was young in such a way that its growing up may have caused
some enlargement or extensions of the mark legitimately stamped, and
the fact that it has not been proved that the document delivered by the
seller (reputed to have been the legitimate owner of the calf) was false
not that the signatures of the secretary and treasurer authorizing
such document were false or counterfeited (inasmuch as the provincial
fiscal was satisfied with the exhibition of the said document by the
attorney for the defendant in the trial, accepting the same as a genuine
and legitimate document, which for the rest is reputed as the property
of the accused, nobody having impugned its legitimate origin) all
these facts and the other merits of the cause produce in the mind at
least a reasonable doubt as to the guilt of the accused, against which
the presumption of his innocence prevails. And this is true

notwithstanding the fact that in the other suit for theft he was
sentenced to the penalty of six months of arresto mayor and the
accessory penalties.
Basing our decision upon the foregoing reasons, we are therefore of
opinion that with the reversal of the judgment appealed from the
defendant must be acquitted with the costs of both instance de oficio,
and the calf must be returned to its present owner, who acquired the
same from the accused, and the latter to be set at liberty. So ordered.
Arellano, C.J., Johnson, Willard, and Tracey, JJ., concur.

P.J. SALAS RODRIGUEZ, plaintiff-appellant,

vs.
MARIANO P. LEUTERIO, defendant-appellee.
The appellant in his own behalf.
No appearance for appellee.
, J.:
On September 24, 1920, the parties to this action entered into a
contract by which the defendant agreed to sell, and the plaintiff to buy,
seven thousand square meters of land in the barrio of Tuliahan,
municipality of Caloocan, Rizal, for the consideration of P5,600, which
was paid by the plaintiff in the act of transfer. At the time of this sale
the particular lots contemplated as the subject of the sale had not been
segregated, but the seller agreed to establish the lots with a special
frontage on a principal thoroughfare as soon as the streets should be
laid out in a projected new subdivision of the city. As time passed the
seller was unable to comply with this part of the agreement and was
therefore unable to place the purchaser in possession. The present
action was accordingly instituted by the purchaser in the Court of First
Instance of the Province of Rizal for the resolution (in the complaint
improperly denominated rescission) of the contract and a return of
double the amount delivered to the defendant as the purchase price of
the land. The trial court decreed a rescission (properly resolution) of
the contract and ordered the defense to return to the plaintiff the
amount received, or the sum of P5,600, with legal interest from the
date of the filing of the complaint. From this judgment the plaintiff
appealed.
As no transcript of the evidence has been brought to this court, our
revision of the case is confined to the questions of law involved, which
are two in number, namely, first, whether the plaintiff is entitled to
recover double the amount paid out by him as the purchase price of
the land; and, secondly, whether he is entitled to interest from the date
upon which the money was paid to the defendant, instead of from the
date of the filing of the complaint only.
As suggested by the trial judge in the appealed decision the provisions
of the Civil Code applicable to the case are found in articles 1451 and
1124. By the latter of these articles a person prejudiced by the
nonfulfillment of a contract may demand its resolution, with indemnity
for damages and payment of interest. Article 1454 of the Civil Code is
relied upon by plaintiff-appellant as authority for claiming double the
amount paid out by him. In this article it is declared that when earnest
money or pledge is given to bind a contract of purchase and sale, the
contract may be rescinded if the vendee should be willing to forfeit the
earnest money or pledge or the vendor to return double the amount.
This provision is clearly not pertinent to the case, for the reason that
where the purchase price is paid in whole or in part, the payment
cannot be considered to be either earnest money or pledge. In this
connection the commentator Manresa observes that the delivery of
part of the purchase should not be understood as constituting earnest
money unless it be shown that such was the intention of the parties.
(Manresa, Commentaries on the Civ. Code, 2nd., vol. 10, p. 85.)
In the case before us there is nothing to indicate that the parties
intended that the cash price paid by the purchaser should be treated
merely as earnest money; and such could not possibly have been their
intention. The evident purpose was that said payment should be taken
as a fulfillment of the contract on the part of the purchaser.
The contention of the plaintiff-appellant with respect to interest is, we
think, meritorious. In case of the resolution of a contract of sale under
article 1124, the purchaser is declared to be entitled to indemnity for
damages and payment of interest. As pointed out by Manresa interest

in here conceded in lieu of damages. (Manresa, Commentaries on the

Spanish Civil Code, 3rd ed., vol. 8, p. 157); and it is familiar doctrine
that interest at the legal rate is the accepted measure of damages for
the detention of money. Moreover, as the resolution of a contract has
the effect of dissolving the obligation ab initio, it follows that interest
should be allowed on the purchase money during the entire period that
the defendant has had it in his possession, that is, in this case from the
date of the contract. If the plaintiff had had possession of the land
during this period, he would be entitled to no damages, and hence to
no interest. It will not escape notice that a similar provision with respect
to interest is found in article 1295 of the Civil Code, which deals with
rescission, properly so called, and in article 1303, which deals with
annulment of contracts.
The judgment appealed from will be modified by giving interest at the
legal rate on the amount awarded by the trial court from September 24,
1920, until paid.
As thus modified the judgment will be affirmed, and it is so ordered,
without special pronouncement as to costs.
Avancea, C.J., Malcolm, Villamor, Ostrand, Johns, Romualdez, and
Villa-Real, JJ., concur.
Johnson, J., dissents.

Mercado and Mercado vs Espiritu

Facts: The plaintiffs alleged that as the sole heirs, along with their two
sisters, to a 48 hectare tract of land which belonged to their mother the
sister of the defendant. The defendant cajoled, induced, and
fraudulently succeeded in getting the plaintiffs to sell their land for a
sum of P400 as opposed to its original value. The plaintiffs demand
the annulment of the sale, the return of the land, and the remuneration
of the thing benefited by the defendant.
According to the Defendant, the plaintiffs mother had sold a portion of
the original land to the defendant for a sum. (instrument exhibit 1)The
plaintiffs father subsequently, mortgaged the remaining parcel to the
defendant for a sum to cover his childrens welfare after his wifes
death. (Pacto de retro; instrument exhibit 2) The plaintiffs had alleged
themselves of legal age and ratified the absolute and perpetual sale of
the land in consideration of the P400 (instrument exhibit 3). Crosscomplaint filed for damages due to the malicious and unfounded
complaint by the plaintiffs.

MERCADO v ESPIRITU
FACTS:
This case is about the signing of a deed of sale in which two of the four
parties were minors with age 18, and 19. On the date of sale, these
minors presented themselves that they were of legal age at the time
they signed it, and they made the same manifestation before the
notary public.
ISSUE:
Whether or not the deed of sale is valid when the minors presented
themselves that they were of legal age.
RATIO:
The courts laid down that such sale of real estate was still valid since it
was executed by minors, who have passed the ages of puberty and
adolescence, and are near the adult age, and that the minors
pretended that they had already reached their majority.
Article 38. Minority, insanity or imbecility, the state of being a deafmute, prodigality and civil-interdiction are mere restrictions on the
capacity to act, and do not exempt the incapacitated person from
certain obligations, as when the latter arise from his acts or from
property relations, such as easements.
Also, these minors cannot be permitted afterwards to excuse
themselves from compliance with the obligation assumed by them or

seek their annulment. This is in accordance with the provisions of the

law on estoppels.
This is in accordance with the provisions of the law on estoppel.
Art 1431 of Civil Code. Through estoppel, an admission or
representation is rendered conclusive upon the person making it, and
cannot be denied or disproved as against the person relying thereon.
This is also in accordance with the provisions of Rule 123, Sec 68, Par.
A
Rule 123, sec 68, Par. A...Whenever a party has, by his own
declaration, act or omission, intentionally and deliberately led another
to believe a particular thing to be true, and to act upon such belief, he
cannot, in any litigation arising out of such declaration, act or omission,
cannot be permitted to falsify it.

Sia Suan and Gaw Chiao vs. Ramon Alcantara, March 4, 1950
Facts:

On August 3, 1931, a deed of sale was executed by Rufino

Alcantara and his sons Damaso Alcantara and Ramon Alcantara
conveying to Sia Suan five parcels of land to petitioner Sia Suan

On August 27, 1931, Gaw Chiao (husband of Sia Suan) received

a letter from Francisco Alfonso, attorney of Ramon Alcantara,
informing him that Ramon Alcantara was a minor and accordingly
disavowing the contract.

After Gaw Chiao responded to the letter, Ramon Alcantara went

to the office of Gaw Chiaos counsel ratifying the sale.

Ramon Alcantara received from Gaw Chiao the sum of P500 as

payment for the sold parcels of land.

On August 8, 1940, an action was instituted by Ramon Alcantara

in the Court of First Instance of Laguna for the annulment of the deed
of sale on the ground of his minority at the time of sale. Action was
denied and Sia Suan, Gaw Chiao, Ramons father and brother,
Nicolas and Antonio Azores were absolved

Ramon brought the case to CA; CFI decision reversed.

Sia Suan and Gaw Chiao filed a petition for certiorari to the
Supreme Court.
Issue:

Whether or not Ramon Alcantaras execution of the deed of sale

is valid despite being a minor at the time of its execution.
Held:
Ramon Alcantara in his minority may not be allowed to execute the
deed of sale but his act of ratification, the contract was given a binding
effect.

Conjugal partnership; presumption of conjugal nature; need for marital

consent. The Civil Code of the Philippines, the law in force at the time
of the celebration of the marriage between Martha and Manuel in 1957,
provides all property of the marriage is presumed to belong to the
conjugal partnership, unless it be proved that it pertains exclusively to
the husband or to the wife. This includes property which is acquired by
onerous title during the marriage at the expense of the common fund,
whether the acquisition be for the partnership, or for only one of the
spouses. The court is not persuaded by Titans arguments that the
property was Marthas exclusive property because Manuel failed to
present before the RTC any proof of his income in 1970, hence he
could not have had the financial capacity to contribute to the purchase
of the property in 1970; and that Manuel admitted that it was Martha
who concluded the original purchase of the property. In consonance
with its ruling in Spouses Castro v. Miat, Manuel was not required to
prove that the property was acquired with funds of the partnership.
Rather, the presumption applies even when the manner in which the
property was acquired does not appear. Here, we find that Titan failed
to overturn the presumption that the property, purchased during the
spouses marriage, was part of the conjugal partnership. Since the
property was undoubtedly part of the conjugal partnership, the sale to
Titan required the consent of both spouses. Article 165 of the Civil
Code expressly provides that the husband is the administrator of the
conjugal partnership. Likewise, Article 172 of the Civil Code ordains
that (t)he wife cannot bind the conjugal partnership without the
husbands consent, except in cases provided by law. Titan
Construction Corporation Vs. Manuel A. David, Sr. and Martha S.
David, G.R. No. 169548, March 15, 2010.

G.R. No. 165803

September 1, 2010
SPOUSES REX AND CONCEPCION AGGABAO, Petitioners,
vs.
DIONISIO Z. PARULAN, JR. and MA. ELENA PARULAN,
Respondents.
BERSAMIN, J.:
FACTS:
Subject of this case are 2 parcels of land located, BF Homes,
Paraaque City and registered under TCT No. 633763 and TCT No.
633774 in the name of respondents Spouses Maria Elena A. Parulan
(Ma. Elena) and Dionisio Z. Parulan, Jr. (Dionisio), who have been
estranged from one another.
Real estate broker Marta K. Atanacio (Atanacio) offered the property to
the petitioners, who initially did not show interest due to the rundown
condition of the improvements, but Atanacios persistence prevailed.
On February 2, 1991, they and Atanacio met with Ma. Elena at the site
of the property thelatter showed to them the following documents: (a)
the owners original copy of TCT No. 63376; (b) a certified true copy of
TCT No. 63377; (c) three tax declarations; and (d) a copy of the SPA
dated January 7, 1991 executed by Dionisio authorizing Ma. Elena to
sell the property.On the same day, they paid P20,000.00 as earnest
money, Ma. Elena then executed a handwritten Receipt of Earnest
Money, and stipulated that: (a) they would pay an additional payment
of P130,000.00 on February 4, 1991; (b) they would pay the balance of
the bank loan of the respondents amounting to P650,000.00 on or
before February 15, 1991; and (c) they would make the final payment
of P700,000.00 once Ma. Elena turned over the property on March 31,
1991.
On February 4, 1991, the petitioners went to the Office of the Register
of Deeds and the Assessors Office to verify the TCTs in the company
of Atanacio and her husband (also a licensed broker). There, they
discovered that the lot under TCT No. 63376 had been encumbered to
Banco Filipino in 1983 or 1984, but that the encumbrance had already
been cancelled due to the full payment of the obligation. They noticed
that the Banco Filipino loan had been effected through an SPA
executed by Dionisio in favor of Ma. Elena. They found on TCT No.
63377 the annotation of an existing mortgage in favor of the Los Baos
Rural Bank, also effected through an SPA executed by Dionisio in
favor of Ma. Elena, coupled with a copy of a court order authorizing
Ma. Elena to mortgage the lot to secure a loan of P500,000.00.
The petitioners and Atanacio next inquired about the mortgage and the
court order annotated on TCT No. 63377 at the Los Baos Rural Bank.
There, they met with Atty. Noel Zarate, the banks legal counsel, who
related that the bank had asked for the court order because the lot
involved was conjugal property.
Following their verification, the petitioners delivered P130,000.00 as
additional down payment on February 4, 1991; and P650,000.00 to
the Los Baos Rural Bank on February 12, 1991, which then released
the owners duplicate copy of TCT No. 63377 to them.
On March 18, 1991, the petitioners delivered the final amount of
P700,000.00 to Ma. Elena, who executed a deed of absolute sale in
their favor.However, Ma. Elena did not turn over the owners duplicate
copy of TCT No. 63376, claiming that said copy was in the possession
of a relative who was then in Hongkong. She assured them that the
owners duplicate copy of TCT No. 63376 would be turned over after a
week. On March 19, 1991, TCT No. 63377 was cancelled and a new
one was issued in the name of the petitioners.
Ma. Elena did not turn over the duplicate owners copy of TCT No.
63376 as promised. In due time, the petitioners learned that the
duplicate owners copy of TCT No. 63376 had been all along in the
custody of Atty. Jeremy Z. Parulan, who appeared to hold an SPA
executed by his brother Dionisio authorizing him to sell both lots.
At Atanacios instance, the petitioners met on March 25, 1991 with
Atty. Parulan, they were also accompanied by one Atty. Olandesca.
They recalled that Atty. Parulan smugly demanded P800,000.00 in
exchange for the duplicate owners copy of TCT No. 63376, because
Atty. Parulan represented the current value of the property to be P1.5
million. As a counter-offer, however, they tendered P250,000.00, which
Atty. Parulan declined, giving them only until April 5, 1991 to decide.
Hearing nothing more from the petitioners, Atty. Parulan decided to call
them on April 5, 1991, but they informed him that they had already fully
paid to Ma. Elena. Thus, on April 15, 1991, Dionisio, through Atty.
Parulan, commenced an action praying for the declaration of the nullity
of the deed of absolute sale executed by Ma. Elena, and the
cancellation of the title issued to the petitioners by virtue thereof.In
turn, the petitioners filed on July 12, 1991 their own action for specific

performance with damages against the respondents.Both cases were

consolidated for trial and judgment in the RTC.
RTC ruled in favour of Plaintiff Parulan and declared the sale covered
by TCT 63376 and 63377 as null and void. RTC declared that the SPA
in the hands of Ma. Elena was a forgery, based on its finding that
Dionisio had been out of the country at the time of the execution of the
SPA; that NBI Sr. Document Examiner Rhoda B. Flores had certified
that the signature appearing on the SPA purporting to be that of
Dionisio and the set of standard sample signatures of Dionisio had not
been written by one and the same person;22 and that Record Officer
III Eliseo O. Terenco and Clerk of Court Jesus P. Maningas of the
Manila RTC had issued a certification to the effect that Atty. Alfred
Datingaling, the Notary Public who had notarized the SPA, had not
been included in the list of Notaries Public in Manila for the year 19901991. CA affirmed the decision of the RTC.Hence, the instant petition.
Issues
1)
Which between Article 173 of the Civil Code and Article 124
of the Family Code should apply to the sale of the conjugal property
executed without the consent of Dionisio?
2)
whether or not they had diligently inquired into the authority
of Ma. Elena to convey the property, not whether or not the TCT had
been valid and authentic, as to which there was no doubt.
Held:
The petition has no merit. We sustain the CA.
Article 124, Family Code, applies to sale of conjugal
properties made after the effectivity of the Family Code
The sale was made on March 18, 1991, or after August 3, 1988, the
effectivity of the Family Code. The proper law to apply is, therefore,
Article 124 of the Family Code, for it is settled that any alienation or
encumbrance of conjugal property made during the effectivity of the
Family Code is governed by Article 124 of the Family Code.
Article 124 of the Family Code provides:
Article 124. The administration and enjoyment of the conjugal
partnership property shall belong to both spouses jointly. In case of
disagreement, the husbands 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.
The power of administration does not include acts of disposition or
encumbrance, which are acts of strict ownership. As such, an authority
to dispose cannot proceed from an authority to administer, and vice
versa, for the two powers may only be exercised by an agent by
following the provisions on agency of the Civil Code (from Article 1876
to Article 1878). Specifically, the apparent authority of Atty. Parulan,
being a special agency, was limited to the sale of the property in
question, and did not include or extend to the power to administer the
property.
The petitioners insistence that Atty. Parulans making of a counteroffer during the March 25, 1991 meeting ratified the sale merits no
consideration. Under Article 124 of the Family Code, the transaction
executed sans the written consent of Dionisio or the proper court order
was void; hence, ratification did not occur, for a void contract could not
be ratified. The void sale was a continuing offer from the petitioners
and Ma. Elena that Dionisio had the option of accepting or rejecting
before the offer was withdrawn by either or both Ma. Elena and the
petitioners. The last sentence of the second paragraph of Article 124 of
the Family Code makes this clear, stating that in the absence of the
other spouses consent, the transaction should 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 upon authorization by the court
before the offer is withdrawn by either or both offerors.
Due diligence required in verifying not only vendors title,
but also agents authority to sell the property
Article 124 of the Family Code categorically requires the consent of
both spouses before the conjugal property may be disposed of by sale,
mortgage, or other modes of disposition. In Bautista v. Silva,the Court

erected a standard to determine the good faith of the buyers dealing

with
A seller who had title to and possession of the land but whose capacity
to sell was restricted, in that the consent of the other spouse was
required before the conveyance, declaring that in order to prove good
faith in such a situation, the buyers must show that they inquired not
only into the title of the seller but also into the sellers capacity to sell.
Thus, the buyers of conjugal property must observe two kinds of
requisite diligence, namely: (a) the diligence in verifying the validity of
the title covering the property; and (b) the diligence in inquiring into the
authority of the transacting spouse to sell conjugal property in behalf of
the other spouse.
It is true that a buyer of registered land needs only to show that he has
relied on the face of the certificate of title to the property, for he is not
required to explore beyond what the certificate indicates on its face.In
this respect, the petitioners sufficiently proved that they had checked
on the authenticity of TCT No. 63376 and TCT No. 63377 with the
Office of the Register of Deeds in Pasay City as the custodian of the
land records; and that they had also gone to the Los Baos Rural Bank
to inquire about the mortgage annotated on TCT No. 63377. Thereby,
the petitioners observed the requisite diligence in examining the
validity of the TCTs concerned.
Yet, it ought to be plain enough to the petitioners that the issue was
whether or not they had diligently inquired into the authority of Ma.
Elena to convey the property, not whether or not the TCT had been
valid and authentic, as to which there was no doubt. Thus, we cannot
side with them.
Firstly, the petitioners knew fully well that the law demanded the written
consent of Dionisio to the sale, but yet they did not present evidence to
show that they had made inquiries into the circumstances behind the
execution of the SPA purportedly executed by Dionisio in favor of Ma.
Elena. Had they made the appropriate inquiries, and not simply
accepted the SPA for what it represented on its face, they would have
uncovered soon enough that the respondents had been estranged
from each other and were under de facto separation, and that they
probably held conflicting interests that would negate the existence of
an agency between them. To lift this doubt, they must, of necessity,
further inquire into the SPA of Ma. Elena. Indeed, an unquestioning
reliance by the petitioners on Ma. Elenas SPA without first taking
precautions to verify its authenticity was not a prudent buyers move.40
They should have done everything within their means and power to
ascertain whether the SPA had been genuine and authentic. If they did
not investigate on the relations of the respondents vis--vis each other,
they could have done other things towards the same end, like
attempting to locate the notary public who had notarized the SPA, or
checked with the RTC in Manila to confirm the authority of Notary
Public Atty. Datingaling. It turned out that Atty. Datingaling was not
authorized to act as a Notary Public for Manila during the period 19901991, which was a fact that they could easily discover with a modicum
of zeal.
Secondly, the final payment of P700,000.00 even without the owners
duplicate copy of the TCT No. 63376 being handed to them by Ma.
Elena indicated a revealing lack of precaution on the part of the
petitioners. It is true that she promised to produce and deliver the
owners copy within a week because her relative having custody of it
had gone to Hongkong, but their passivity in such an essential matter
was puzzling light of their earlier alacrity in immediately and diligently
validating the TCTs to the extent of inquiring at the Los Baos Rural
Bank about the annotated mortgage. Yet, they could have rightly
withheld the final payment of the balance. That they did not do so
reflected their lack of due care in dealing with Ma. Elena.
Lastly, another reason rendered the petitioners good faith incredible.
They did not take immediate action against Ma. Elena upon
discovering that the owners original copy of TCT No. 63376 was in the
possession of Atty. Parulan, contrary to Elenas representation. Human
experience would have impelled them to exert every effort to proceed
against Ma. Elena, including demanding the return of the substantial
amounts paid to her. But they seemed not to mind her inability to
produce the TCT, and, instead, they contented themselves with
meeting with Atty. Parulan to negotiate for the possible turnover of the
TCT to them.

Succession; extra-judicial settlement of estate; grounds for nullity.

Upon the death of Anunciacion, her children and Enrique acquired their
respective inheritances, entitling them to their pro indiviso shares in her
whole estate. In the execution of the Extra-Judicial Settlement of the

Estate with Absolute Deed of Sale in favor of spouses Uy, all the heirs
of Anunciacion should have participated. Considering that Eutropia and
Victoria were admittedly excluded and that then minors Rosa and
Douglas were not properly represented therein, the settlement was not
valid and binding upon them and consequently, a total nullity.
However, while the settlement of the estate is null and void, the
subsequent sale of the subject properties made by Enrique and his
children, Napoleon, Alicia and Visminda, in favor of the respondents is
valid but only with respect to their proportionate shares. With respect to
Rosa and Douglas who were minors at the time of the execution of the
settlement and sale, their natural guardian and father, Enrique,
represented them in the transaction. However, on the basis of the laws
prevailing at that time, Enrique was merely clothed with powers of
administration and bereft of any authority to dispose of their 2/16
shares in the estate of their mother, Anunciacion.
A father or mother, as the natural guardian of the minor under parental
authority, does not have the power to dispose or encumber the
property of the latter. Such power is granted by law only to a judicial
guardian of the wards property and even then only with courts prior
approval. Napoleon D. Neri, et al. vs Heirs of Hadji Yusop Uy and
Julpha Ibrahim Uy. G.R. No. 194366. October 10, 2012

Civil Code), as to whose transactions it had been opined that they may
be "ratified" by means of and in "the form of a new contact, in which
cases its validity shall be determined only by the circumstances at the
time the execution of such new contract. The causes of nullity which
have ceased to exist cannot impair the validity of the new contract.
Thus, the object which was illegal at the time of the first contract, may
have already become lawful at the time of the ratification or second
contract; or the service which was impossible may have become
possible; or the intention which could not be ascertained may have
been clarified by the parties. The ratification or second contract would
then be valid from its execution; however, it does not retroact to the
date of the first contract."

JACOBUS BERNHARD HULST,

G.R. No. 156364
Petitioner,

Present:

Rubias v. Batiller
Facts:
Before the war with Japan, Francisco Militante filed an application for
registration of the parcel of land in question. After the war, the petition
was heard and denied. Pending appeal, Militante sold the land to
petitioner, his son-in-law. Plaintiff filed an action for forcible entry
against respondent. Defendant claims the complaint of the plaintiff
does not state a cause of action, the truth of the matter being that he
and his predecessors-in-interest have always been in actual, open and
continuous possession since time immemorial under claim of
ownership of the portions of the lot in question.

YNARES-SANTIAGO, J.,

Chairperson,
- versus AUSTRIA-MARTINEZ,

CHICO-NAZARIO,
Issue:
Whether or not the contract of sale between appellant and his fatherin-law was void because it was made when plaintiff was counsel of his
father-in-law in a land registration case involving the property in
dispute

NACHURA, and

REYES, JJ.

Held:
The stipulated facts and exhibits of record indisputably established
plaintiff's lack of cause of action and justified the outright dismissal of
the complaint. Plaintiff's claim of ownership to the land in question was
predicated on the sale thereof made by his father-in- law in his favor, at
a time when Militante's application for registration thereof had already
been dismissed by the Iloilo land registration court and was pending
appeal in the Court of Appeals.
Article 1491 of our Civil Code (like Article 1459 of the Spanish Civil
Code) prohibits in its six paragraphs certain persons, by reason of the
relation of trust or their peculiar control over the property, from
acquiring such property in their trust or control either directly or
indirectly and "even at a public or judicial auction," as follows: (1)
guardians; (2) agents; (3) administrators; (4) public officers and
employees; judicial officers and employees, prosecuting attorneys, and
lawyers; and (6) others especially disqualified by law.
Fundamental consideration of public policy render void and inexistent
such expressly prohibited purchase (e.g. by public officers and
employees of government property intrusted to them and by justices,
judges, fiscals and lawyers of property and rights in litigation and
submitted to or handled by them, under Article 1491, paragraphs (4)
and (5) of our Civil Code) has been adopted in a new article of our Civil
Code, viz, Article 1409 declaring such prohibited contracts as
"inexistent and void from the beginning."
Indeed, the nullity of such prohibited contracts is definite and
permanent and cannot be cured by ratification. The public interest and
public policy remain paramount and do not permit of compromise or
ratification. In his aspect, the permanent disqualification of public and
judicial officers and lawyers grounded on public policy differs from the
first three cases of guardians, agents and administrators (Article 1491,

PR BUILDERS, INC.,
Promulgated:
Respondent.
September 25, 2008
x---------------------------------------------------------x

RESOLUTION

AUSTRIA-MARTINEZ, J.:
This resolves petitioner's Motion for Partial Reconsideration.
On September 3, 2007, the Court rendered a Decision[1] in the present
case, the dispositive portion of which reads:
WHEREFORE, the instant petition is GRANTED. The Decision dated
October 30, 2002 of the Court of Appeals in CA-G.R. SP No. 60981 is
REVERSED and SET ASIDE. The Order dated August 28, 2000 of
HLURB Arbiter Ma. Perpetua Y. Aquino and Director Belen G. Ceniza
in HLRB Case No. IV6-071196-0618 is declared NULL and VOID.
HLURB Arbiter Aquino and Director Ceniza are directed to issue the
corresponding certificates of sale in favor of the winning bidder, Holly
Properties Realty Corporation. Petitioner is ordered to return to
respondent the amount of P2,125,540.00, without interest, in excess of
the proceeds of the auction sale delivered to petitioner. After the finality

of herein judgment, the amount of P2,125,540.00 shall earn 6%

interest until fully paid.
SO ORDERED.[2] (Emphasis supplied)

Petitioner filed the present Motion for Partial Reconsideration[3] insofar

as he was ordered to return to respondent the amount of
P2,125,540.00 in excess of the proceeds of the auction sale delivered
to petitioner. Petitioner contends that the Contract to Sell between
petitioner and respondent involved a condominium unit and did not
violate the Constitutional proscription against ownership of land by
aliens. He argues that the contract to sell will not transfer to the buyer
ownership of the land on which the unit is situated; thus, the buyer will
not get a transfer certificate of title but merely a Condominium
Certificate of Title as evidence of ownership; a perusal of the contract
will show that what the buyer acquires is the seller's title and rights to
and interests in the unit and the common areas.
Despite receipt of this Courts Resolution dated February 6, 2008,
respondent failed to file a comment on the subject motion.
The Motion for Partial Reconsideration is impressed with merit.
The Contract to Sell between petitioner and respondent provides
as follows:
Section 3. TITLE AND OWNERSHIP OF UNIT
a.
Upon full payment by the BUYER of the purchase price
stipulated in Section 2 hereof, x x x, the SELLER shall deliver to the
BUYER the Deed of Absolute Sale conveying its rights, interests and
title to the UNIT and to the common areas appurtenant to such UNIT,
and the corresponding Condominium Certificate of Title in the
SELLER's name; x x x
b.
The Seller shall register with the proper Registry of Deeds, the
Master Deed with the Declaration of Restrictions and other documents
and shall immediately comply with all requirements of Republic Act No.
4726 (The Condominium Act) and Presidential Decree No. 957
(Regulating the Sale of Subdivision Lots and Condominiums, Providing
Penalties for Violations Thereof). It is hereby understood that all title,
rights and interest so conveyed shall be subject to the provisions of the
Condominium Act, the Master Deed with Declaration of Restrictions,
the Articles of Incorporation and By-Laws and the Rules and
Regulations of the Condominium Corporation, zoning regulations and
such other restrictions on the use of the property as annotated on the
title or may be imposed by any government agency or instrumentality
having jurisdiction thereon.[4] (Emphasis supplied)
Under Republic Act (R.A.) No. 4726, otherwise known as the
Condominium Act, foreign nationals can own Philippine real estate
through the purchase of condominium units or townhouses constituted
under the Condominium principle with Condominium Certificates of
Title. Section 5 of R.A. No. 4726 states:
SECTION 5. Any transfer or conveyance of a unit or an apartment,
office or store or other space therein, shall include the transfer or
conveyance of the undivided interest in the common areas or, in a
proper case, the membership or shareholdings in the condominium
corporation; Provided, however, That where the common areas in the
condominium project are held by the owners of separate units as coowners thereof, no condominium unit therein shall be conveyed or
transferred to persons other than Filipino citizens or corporations at
least 60% of the capital stock of which belong to Filipino citizens,
except in cases of hereditary succession. Where the common areas in
a condominium project are held by a corporation, no transfer or
conveyance of a unit shall be valid if the concomitant transfer of the
appurtenant membership or stockholding in the corporation will cause
the alien interest in such corporation to exceed the limits imposed by
existing laws. (Emphasis supplied)
The law provides that no condominium unit can be sold without
at the same time selling the corresponding amount of rights, shares or
other interests in the condominium management body, the
Condominium Corporation; and no one can buy shares in a
Condominium Corporation without at the same time buying a
condominium unit. It expressly allows foreigners to acquire

condominium units and shares in condominium corporations up to not

more than 40% of the total and outstanding capital stock of a Filipinoowned or controlled corporation. Under this set up, the ownership of
the land is legally separated from the unit itself. The land is owned by a
Condominium Corporation and the unit owner is simply a member in
this Condominium Corporation.[5] As long as 60% of the members of
this Condominium Corporation are Filipino, the remaining members
can be foreigners.
Considering that the rights and liabilities of the parties under the
Contract to Sell is covered by the Condominium Act wherein petitioner
as unit owner was simply a member of the Condominium Corporation
and the land remained owned by respondent, then the constitutional
proscription against aliens owning real property does not apply to the
present case. There being no circumvention of the constitutional
prohibition, the Court's pronouncements on the invalidity of the
Contract of Sale should be set aside.

WHEREFORE, the Motion for Partial Reconsideration is GRANTED.

Accordingly, the Decision dated September 3, 2007 of the Court is
MODIFIED by deleting the order to petitioner to return to respondent
the amount of P2,125,540.00 in excess of the proceeds of the auction
sale delivered to petitioner.