AINZA VS.

PADUA
This is a case involving family members. In April 1987, Ainza and her daughter Eugenia orally agreed that
Ainza pay P100k in exchange for half of the portion of Eugenias undivided conjugal property (a lot
located in QC). No Deed of Absolute Sale was executed. There was physical delivery of the land through
Concepcions other daughter (Natividad) acting as atty-in-fact. Concepcion thereafter allowed Natividad
and her husband occupy the purchased portion of the land.
In 1994, Antonio caused the division of the lot into three (two were occupied by the spouses), necessarily
displacing Natividad. He also had each subdivision titled. Antonio requested Natividad to vacate the
premises. Antonio averred that his wife only admitted of selling 1/3 of the property to Concepcion for
which a receipt was issued signed by Concepcion. The RTC ruled in favor of Concepcion. The CA
reversed the RTC ruling. CA explained that the property is conjugal hence the sale should have been with
Antonios consent.
ISSUE: Whether or not the contract of sale between Ainza and Eugenia is valid.
HELD: Yes it is valid until annulled (voidable). There was a perfected contract of sale between Eugenia
and Concepcion. The records show that Eugenia offered to sell aportion of the property to Concepcion,
who accepted the offer and agreed to pay P100,000.00 as consideration. The contract of sale was
consummated when both parties fully complied with their respective obligations. Eugenia delivered the
property to Concepcion, who in turn, paid Eugenia the price of P100,000.00, as evidenced by the receipt.
Since the land was undivided when it was sold, Concepcion is entitled to have half of it.
Antonio cannot, however, attack the validity of the sale b/n his wife and his mom-in-law, either under the
Family Code or the Old Civil Code due to prescription. The sale came to his knowledge in 1987. He only
filed the case in 1999. His right prescribed in 1993 (under the FC [5 years]) and 1997 (under OCC [10
years]).

MCCULLOUGH VS BERGER

DICHOSO VS ROXAS
FACTS: Roxas sold to Dichoso and Hernandez a parcel of unregistered coconut land,
subject to the condition that the vendor could repurchase the land within 5 years
from the date of sale. Roxas received from Dichoso several sums of money as initial or
advance payments, with the agreement that Roxas would sell the same property, by absolute sale, to
Dichoso. Out of their remaining balance, they would use P850 to repurchase the property from
Borja and Alanguilan within the period stipulated. Dichoso informed Borja of their readiness

to repurchase and sent Roxas a check. Roxas returned the check with the request
that they indorsed it to Borja and Alanguilan when they make the repurchase. Despite
the repeated demands and representations, Roxas and Borja had deliberately fails to execute the
corresponding deed of absolute sale and deed of resale.
ISSUE:Whether or not there was a double sale.
HELD:No. The contract between the petitioners and Roxas was a mere promise to sell because
Roxas merely promised to execute a deed of absolute sale upon Dichosos completion of
payment. On the date that Roxas could possibly sell or convey in relation to the property in
question was her right to repurchase the same from Borja. The private document executed between
Roxas and Dichoso can be considered as an assignment by Roxas to Dischoso of her right
to repurchase which Roxas only had knowledge thereof when Dichoso attempted to make the
repurchase. Such being its condition, it could not possibly give rise to the case of one and
the same property having been sold to two different purchasers. The sale in favor of Borja
was of the property itself, while the one in favor of Dichoso, if not a mere promise to assign, was at
most an actual assignment of the right to repurchase the same PROPERTY. Art. 1544, par.3 of the
CC do not apply.
LUZON BROKERAGE VS. MARITIME BUILDING
Luzon Brokerage Co. v. Maritime Building Co. (1972)
Plaintiff-appellee: Luzon Brokerage Co.
Defendants: Maritime Building Co and Myers Building Co
Ponente: Reyes, J.B.L., J.
Doctrine: The distinction between contracts of sale and contract to sell with reserved title has been
recognized by this Court in repeated decisions upholding the power of promisors under contracts to sell in
case of failure of the other party to complete payment, to extrajudicially terminate the operation of the
contract, refuse conveyance and retain the sums or installments already received, where such rights are
expressly provided for, as in this case.
Short version: Myers corp sold land to Maritime. In the agreement, they agreed on an installment plan and
that if Maritime missed a payment, the contract will be annulled and the payments already made will be
forfeited. Maritime failed to pay so Myers annulled the contract and did not return payments. SC says
Myers can do this because under contracts to sell, promisors, in case of failure of the other party to
complete payment, can extrajudicially terminate the contract, refuse conveyance, and retain installments
already received, where such rights are provided.
In Manila, Myers owned 3 parcels of land w/ improvements. Myers then entered into a contract called a
Deed of Conditional Sale with Maritime Building.
Myers sold the land for P1million. They agreed on the manner of payment (installment, initial payment
upon execution of contract, interest rate) In the contract it was stipulated that in case of failure of buyer to
pay any of the installments, the contract will be annulled at the option of the seller and all payments made
by the buyer is forfeited.
Later on, the stipulated installment of P10k with 5%interest was amended to the P5k with 5.5% per
annum. Maritime paid the monthly installments but failed to pay the monthly installment of March.

VP of Maritime wrote to Pres of Myers requesting for a moratorium on the monthly payment of the
installments because the company was undergoing financial problems. Myers refused.
For the months of March, April, and May, Maritime failed to pay and did not heed the demand of Myers.
Myers wrote Maritime cancelling the Deed of Conditional Sale Myers demanded return of possession of
properties
Held Maritime liable for use and occupation amounting to P10k per month
In the meantime, Luzon Brokerage was leasing the property from Maritime. Myers demanded from Luzon
the payment of monthly rentals of P10k. Myers also demanded surrender of property. While actions and
crossclaims between Myers and Maritime were happening, the contract between Maritime and Luzon was
extended for 4more years. Turns out, Maritimes suspension of its payments to Myers corp arose from a
previous event: An award of backwages made by the Court of Industrial Relations in favor of Luzon Labor
Union (employees employed by Luzon).
FH Myers was a major stockholder of Luzon Brokerage. FH Myers promised to indemnify Schedler (who
controlled Maritime) when Shedler purchased FH Myerss stock in Luzon Brokerage company. (This
indemnification is for the award of backwages by the CIR)
Schedler claims that after FH Myers estates closed, he was notified that the indemnity on the Labor Union
case will not be honored anymore. And so, Schedler advised Myers corp that Maritime is withholding
payments to Myers corp in order to offset the liability when Myersheirs failed to honor the indemnity
agreement.
TC ruled Maritime in breach of contract.
Issue: Has there been a breach of contract?
Can Myers extrajudicially terminate the contract?
Held: Yes.
Ratio: Failure to pay monthly installments constitute a breach of contract. Default was not made in good
faith. The letter to Myers corp means that the non-payment of installments was deliberately made to
coerce Myers crp into answering for an alleged promise of the dead FH Myers. Whatever obligation FH
Myers had assumed is not an obligation of Myers corp. No proof that board of Myers corp agreed to
assume responsibility to debts of FH Myers and heirs.
Schaedler allowed the estate proceedings of FH Myers to close without providing liability. By the balance
(of payment) in the Deed of Conditional Sale, Maritime was attempting to burden the Myers corp with an
uncollectible debt, since enforcement against FH Myers estate was already barred. Maritime acted in bad
faith.
Maritimes contract with Myers is not the ordinary sale contemplated in NCC 1592 (transferring ownership
simultaneously with delivery).
The distinction between contracts of sale and contract to sell with reserved title has been recognized by
this Court in repeated decisions upholding the power of promisors under contracts to sell in case of failure
of the other party to complete payment, to extrajudicially terminate the operation of the contract, refuse
conveyance and retain the sums or installments already received, where such rights are expressly
provided for, as in this case. Decision affirmed
PORTIC VS. CRISTOBAL

in 1968, spouses Portic acquired a parcel of land with a 3 door apartment from Sps. Alcantara even though theyre aware that
the land was mortgaged to the SSS. Portic defaulted in paying SSS. The Portics then executed a contract with Cristobal and
the latter agreed to buy the said property for P200k. Cristobals down payment was P45k and she also agreed to pay SSS.
The contract between them states: That while the balance of P155,000.00 has not yet been fully paid the FIRST
PARTYOWNERS shall retain the ownership of the above described parcel of land together with its improvements but the
SECOND PARTY BUYER shall have the right to collect the monthly rentals due on the first door (13-A) of the said apartment;
(payment is due 22May 1985, if Cristobal will not be able to pay Portic will reimburse)A transfer certificate
was executed in favor of Cristobal. Cristobal was not able to pay on the due date. A suit ensued to lift the cloud
on the title.
ISSUE: Who is the rightful owner of the parcel of land?
HELD: The Portics insofar as there was no contract of sale. What transpired between the parties was a contract to sell.
The provision of the contract characterizes the agreement between the parties as a contract to sell, not a contract
of sale. Ownership is retained by the vendors, the Portics; it will not be passed to the vendee, the Cristobals,
until the full payment of the purchase price. Such payment is a positive suspensive condition, and failure
to comply with it is not a breach of obligation; it is merely an event that prevents the effectivity of the
obligation of the vendor to convey the title. In short, until the full price is paid, the vendor retains
ownership.The mere issuance of the Certificate of Title in favor of Cristobal did not vest ownership in her.
Neither did it validate the alleged absolute purchase of the lot. Registration does not vest, but merely serves as evidence
of, title. Our land registration laws do not give the holders any better title than that which they actually have prior
to registration. Under Article 1544 of the Civil Code, mere registration is not enough to acquire a new title.
Good faith must concur. Clearly, Cristobal has not yet fully paid the purchase price. Hence, as long as it remains unpaid, she
cannot feign good faith. She is also precluded from asserting ownership against the Portics. The CAs finding that she had a
valid title to the property must be set aside.
HEIRS OF MASCUNANA VS. CA
Facts: Masunana bought a parcel of land from the Wuthrich siblings. Part of which
Mascunana, he later sold to Sumilhig. The contract price is 4,690 with 3,690 as down
payment. Their agreement says: That the balance of ONE THOUSAND PESOS (P1,000.00)
shall be paid by the VENDEE unto the VENDOR as soon as the above-portions of Lot 124 shall
have been surveyed in the name of the VENDEE and all papers pertinent and necessary to
the issuance of a separate Certificate of Title in the name of the VENDEE shall have been
prepared.
Sumilhig later sold the same lot to Layumas. Years after, Layumas wrote to the heirs of
Mascunana (since Mascunana died already) offering to pay the 1,000 balance of the
purchase price of the property. The addressee, however, refused to receive the mail matter.
Heirs Mascunana then filed a complaint for recovery of possession against Barte ( an
individual whom Layumas allowed to stay on the subject property).

Issue: WON the contract of alienation of the subject lot in favor of Sumilhig was a contract to
sell or a contract of sale
Held:
In this case, there was a meeting of the minds between the vendor and the vendee, when
the vendor undertook to deliver and transfer ownership over the property covered by the
deed of absolute sale to the vendee for the price of P4,690.00 of which P3,690.00 was paid
by the vendee to the vendor as down payment. The
vendor undertook to have the property sold, surveyed and segregated and a separate title
therefor issued in the name of the vendee, upon which the latter would be obliged to pay
the balance of P1,000.00. There was no stipulation in the deed that the title to the property

remained with the vendor, or that the right to unilaterally resolve the contract upon the
buyers failure to pay within a fixed period was given to such vendor. Patently, the contract
executed by the parties is a deed of sale and not a contract to sell.

Applying these principles to this case, it cannot be gainsaid that the contract of sale
between the parties is absolute, not conditional. There is no reservation of ownership nor a
stipulation providing for a unilateral rescission by either party. In fact, the sale was
consummated upon the delivery of the lot to respondent. Thus,
Art. 1477 provides that the ownership of the thing sold shall be transferred to the vendee
upon the actual or constructive delivery thereof.
The condition in the deed that the balance of P1,000.00 shall be paid to the vendor by the
vendee as soon as the property sold shall have been surveyed in the name of the vendee
and all papers pertinent and necessary to the issuance of a separate certificate of title in the
name of the vendee shall have been prepared is not a condition which prevented the
efficacy of the contract of sale. It merely provides the manner by which the total purchase
price of the property is to be paid. The condition did not prevent the contract from being in
full force and effect:
The stipulation that the payment of the full consideration based on a survey shall be due
and payable in five (5) years from the execution of a formal deed of sale is not a condition
which affects the efficacy of the contract of sale. It merely provides the manner by which
the full consideration is to be computed and the time within which the same is to be paid.
But it does not affect in any manner the effectivity of the contract.

In a contract to sell, ownership is retained by a seller and is not to be transferred to the

vendee until full payment of the price. Such payment is a positive suspensive condition, the
failure of which is not a breach of contract but simply an event that prevented the obligation
from acquiring binding force.

It bears stressing that in a contract of sale, the non-payment of the price is a resolutory
condition which extinguishes the transaction that, for a time, existed and discharges the
obligation created under the transaction.
A seller cannot unilaterally and extrajudicially rescind a contract of sale unless there is an
express stipulation authorizing it. In such case, the vendor may file an action for specific
performance or judicial rescission.

Article 1169 of the New Civil Code provides that in reciprocal obligations, neither party
incurs in delay if the other does not comply or is not ready to comply in a proper manner
with what is incumbent upon him; from the moment one of the parties fulfills his obligation,
delay by the other begins. In this case, the vendor (Jesus Mascuana) failed to comply with
his obligation of segregating Lot No. 124-B and the issuance of a Torrens title over the
property in favor of the vendee, or the latters successors-in-interest, the respondents herein.
Worse, petitioner Jose Mascuana was able to secure title over the property under the name
of his deceased father.
URSAL VS. CA

In January 1985, Winifreda Ursal and spouses Jesus and Cristita Moneset entered into a Contract to Sell
Lot & House. The amount agreed upon was P130,000.00. Ursal is to pay P50k as down payment and will
continue to pay P3k monthly starting the next month until the balance is paid off. After 6 months, Ursal
stopped paying the Monesets for the latter failed to give her the transfer of certificate title.
In November 1985, the Monesets executed an absolute deed of sale with one Dr. Canora. In September
1986, the Monesets mortgaged the same property to the Rural Bank of Larena for P100k. The Monesets
failed to pay the P100k hence the bank filed for foreclosure.
Trial ensued and the RTC ruled in favor of Ursal. The trial court ruled that there was fraud on the part of
the Monesets for executing multiple sales contracts. That the bank is not liable for fraud but preference to
redeem should be given to Ursal. The Monesets are ordered to reimburse Ursal plus to pay damages and
fees. Ursal was not satisfied as she believed that the bank was also at fault.
ISSUE: Whether or not the Contract to Sell vested ownership in Ursal.
HELD: No. There should be no special preference granted to Ursal in redeeming the property. What she
had with the Monesets was contract to sell in which case ownership was not transferred to her due the
suspensive condition of full payment. Further, the property was sold to other properties already.
A contract to sell is a bilateral contract whereby the prospective seller, while expressly reserving the
ownership of the subject property despite delivery thereof to the prospective buyer, binds himself to sell
the said property exclusively to the prospective buyer upon fulfillment of the condition agreed upon, that
is, full payment of the purchase price.
In such contract, the prospective seller expressly reserves the transfer of title to the prospective buyer,
until the happening of an event, which in this case is the full payment of the purchase price. What the
seller agrees or obligates himself to do is to fulfill his promise to sell the subject property when the entire
amount of the purchase price is delivered to him. Stated differently, 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.
Since the contract in this case is a contract to sell, the ownership of the property remained with the
Monesets even after petitioner has paid the down payment and took possession of the property.

CARRASCOSO VS. CA
In March 1972, El Dorado Plantation Inc, through board member Lauro Leviste, executed a Deed of Sale with
Carrascoso. The subject of the sale was a 1825 hectare of land. It was agreed that Carrascoso is to pay

P1.8M. P290K would be paid by Carrascoso to PNB to settle the mortgage placed on the said land. P210k
would be paid directly to Leviste. The balance of P1.3M plus 10% interest would be paid over the next 3
years at P519k every 25th of March. Leviste also assured that there were no tenants hence the land does not
fall under the LandReform Code. Leviste allowed Carrascoso to mortgage the land which the latter did.
Carrascoso obtained a total of P1.07M as mortgage and he used the same to pay the downpayment agreed
upon in the contract. Carrascoso defaulted from his obligation which was supposed to be settled on
March 25, 1975. Leviste then sent him letters to make good his end of the contract otherwise he
will be litigated. In 1977, Carrascoso executed a Buy and Sell Contract with PLDT. The subject of the sale was
the same land sold to Carrascoso by Leviste but it was only the 1000 sq m portion thereof.
The land is to be sold at P3M. Part of the terms and conditions agreed upon was that Carrascoso is to
remove all tenants from the land within one year. He is also given a 6 month extension incase hell need
one. Thereafter, PLDT will notify Carrascoso if whether or not PLDt will finalize the sale. PLDT
gained possession of the land. El Dorado filed a civil case against Carrascoso. PLDT intervened
averring that it was a buyer in good faith. The RTC ruled in favor of Carrascoso. CA reversed the RTC
ruling.
ISSUE:What is the nature of each contract?
HELD:The contract executed between El Dorado and Carrascoso was a contract of sale. It was perfected
by their meeting of the minds and was consummated by the delivery of the property to Carrascoso.
However, ElDorado has the right to rescind the contract by reason of Carrascosos failure to
perform his obligation.
A contract of sale is a reciprocal obligation. The seller obligates itself to transfer the
ownership of and deliver a determinate thing, and the buyer obligates itself to pay therefor a price certain
in money or its equivalent. The non-payment of the price by the buyer is a resolutory condition which
extinguishes the transaction that for a time existed, and discharges the obligationsc reated
thereunder. Such failure to pay the price in the manner prescribed by the contract of sale entitles the
unpaid seller to sue for collection or to rescind the contract.T he contract between Carrascoso and PLDT is a
contract to sell. This is evidenced by the terms and conditions that they have agreed upon
that after fulfillment of Carrascosos obligation PLDT has to notify Carrascoso of its decision
whether or not to finalize the sale.Carrascoso also averred that there was a breach on El
Dorados part when it comes to warranty. Carrascoso claimed that there were tenants on the land and
he spent about P2.9Mrelocating them. The SC ruled that Carrascoso merely had a bare claim
without additional proof to support it.
Requisites of Express warranty in a Contract of Sale
(1) the express warranty must be an affirmation of fact or any promise by the seller relating to the subject
matter of the sale;
(2) the natural tendency of such affirmation or promise is to induce the buyer to purchase the thing; and
(3) the buyer purchases the thing relying on such affirmation or promise thereon

SACOBIA HILLS DEVT CRP VS. TY

Facts: Petitioner Sacobia Hills Development Corporation (Sacobia) is the developer of True North Golf and Country
Club which boasts of amenities that include a golf course, clubhouse, sports complex and several vacation villas.
Respondent Allan U. Ty wrote to Sacobia a letter expressing his intention to acquire one Class A share of True North
and accordingly paid the reservation fee of P180,000.00 as evidenced by PCI Bank Check No. 0038053. Sacobia
assured its prospective shareholders that the development of True North was proceeding on schedule; that the golf
course would be playable by October 1999; that the Environmental Clearance Certificate (ECC) by the Department
of Environment and Natural Resources (DENR) as well as the Permit to Sell from the Securities and Exchange
Commission (SEC) should have been released by October 1997; and that their registration deposits remained intact

in an escrow account. Sacobia then approved the purchase application and membership of Ty for P600,000.00,
subject to certain terms and conditions. The notice of approval provided the following:
Terms and Conditions
1.
Approval of an application to purchase golf/country club shares is subjected to the full payment of the total
purchase price. Should the buyer opt for the deferred payment scheme, approval is subject to our receipt of a down
payment of at least 30% and the balance payable in installments over a maximum of eleven (11) months from the
date of application, and covered by postdated cheques.
2.
Your reserved share shall be considered withdrawn and may be deemed cancelled should you fail to settle
your obligation within fifteen (15) days from due date, or failure to cover the value of the postdated cheques upon
their maturity, or your failure to issue the required postdated cheques. In which case, we shall reserve the right to
offer the said shares to other interested parties. This also means forfeiture of 50% of the total amount you have
already paid.
3.
We will undertake to execute the corresponding sales documents/ Deed of Absolute Sale covering the
reserved shares upon full payment of the total purchase price. The Certificate of Membership shall be issued
thereafter.
However, on January 12, 1998, Ty notified Sacobia that he is rescinding the contract and sought refund of the
payments already made due to the latters failure to complete the project on time as promised (supposedly October
1997). Sacobia wrote him a letter, stating that the DENR had issued the required ECC only on March 5, 1998, and
that the golf course would be ready for use by end of 1998( in fact ahead of promised date which is October 1999).
Sacobia again wrote the respondent advising him that the 18-hole golf course would be fully operational by summer
of 1999. Sacobia also sought to collect from respondent the latters outstanding balance of P190,909.08 which was
covered by five (5) post dated checks. However, Ty notified Sacobia that he had stopped payment on the five (5)
post dated checks and reiterated his demand for the refund of his payments which amounted to P409,090.92.
Sacobia denied his request thus Ty filed a complaint for rescission and damages.
Issue: Whether or not respondent Ty can rescind the contract and demand for damages from Sacobia Hills for breach
of contract
Held:
No, Ty cannot rescind the contract and demand for damages from Sacobia Hills for breach of contract because the
contract to sell between them has not yet been perfected for failure by Ty to pay the full purchase price. The
Supreme Court ruled as follows:
1. The terms of the agreement between Sacobia and Ty can be deduced, not on a formal document like a deed of
sale, but from a series of correspondence and acts signifying the parties intention to enter into a contract. The
absence of a formal deed of conveyance is a strong indication that Sacobia did not intend to transfer title until
respondent shall have completely complied with his correlative obligation of paying the contact price.
2. In a Contract to Sell, the payment of the purchase price is a positive suspensive condition, the failure of which is
not a breach, casual or serious, but a situation that prevents the obligation of the vendor to convey title from
acquiring an obligatory force. It is one where the happening of the event gives rise to an obligation. Thus, for its
non-fulfillment there will be no contract to speak of, the obligor having failed to perform the suspensive condition
which enforces a juridical relation. In fact with this circumstance, there can be no rescission of an obligation that is
still non-existent, the suspensive condition not having occurred as yet. Emphasis should be made that the breach
contemplated in Article 1191 of the New Civil Code is the obligors failure to comply with an obligation already
extant, not a failure of a condition to render binding that obligation.
3. Ty did not pay the full purchase price which is his obligation under the contract to sell, therefore, it cannot be said
that Sacobia breached its obligation. No obligations arose on its part because respondents non-fulfillment of the
suspensive condition rendered the contract to sell ineffective and unperfected. Indeed, there can be no rescission
under Article 1191of the Civil Code because until the happening of the condition, i.e. full payment of the contract
price, Sacobias obligation to deliver the title and object of the sale is not yet extant. A non-existent obligation

cannot be subject of rescission. Article 1191 speaks of obligations already existing, which may be rescinded in case
one of the obligors fails to comply with what is incumbent upon him.
4. In the present case, respondents failure to fulfill this suspensive condition prevented the perfection of the contract
to sell. With an ineffective contract, Ty had not acquired the status of a shareholder but remained, at most, a
prospective investor. In the absence of a juridical tie between the parties, Ty cannot claim the rights and privileges
accorded to Sacobias full-fledged members and shareowners, including the full enjoyment of the amenities being
offered. Unfortunately for Ty, he cannot avail of rescission as envisioned by Article 1191 of the Civil Code.
However, he can withdraw his investment subject to the restrictions under the terms and conditions pertinent to a
reneging investor.
5. Tys complaint for rescission of contract and damages in Civil Case No. 01-99696 is dismissed He is ordered to
pay to Sacobia Hills Development Corporation the amount of Pesos: One Hundred Ninety Thousand Nine Hundred
Nine and Eight Centavos (P190,909.08) without interest within thirty (30) days from finality of this decision;
otherwise, fifty percent (50%) of his total payments shall be forfeited.
KEPPEL BANK VS. ADAO
FACTS: Project Movers Realty and Development Corporation (PMRDC) owe P200M to Keppel Bank
Philippines, Inc. By way of dacion en pago, PMRDC transferred and conveyed to the bank 25 of its
properties consisting of townhouses and condominiums. One of the units transferred was occupied by
Philip Adao.
In February 2000, the Bank demanded Adao to vacate. Adao refused. An ejectment case was filed. Adao
averred that he had a Contract to Sell with PMRDC. He presented an affidavit showing that he made full
payment thereof. The MeTC, RTC and CA ruled in favor of Adao. The lower courts ordered Keppel to
respect the contract to sell between Adao and PMRDC for when the properties were transferred by way
ofdacion en pago, the bank merely stepped into the shoes of PMRDC.
ISSUE: Whether or not Keppel is bound by the contract to sell.
HELD: No. Though Keppel is not a purchaser in good faith for not looking into the tile of the property
(checking if it was infirm and free from other claims),the bank is not bound by it.
The contract to sell does not by itself give Adao the right to possess the property. Unlike in a contract of
sale, here in a contract to sell, there is yet no actual sale nor any transfer of title, until and unless, full
payment is made. The payment of the purchase price is a positive suspensive condition, the failure of
which is not a breach, casual or serious, but a situation that prevents the obligation of the vendor to
convey title from acquiring an obligatory force. Adao must have fully paid the price to acquire title over
the property and the right to retain possession thereof. In cases of non-payment, the unpaid seller can
avail of the remedy of ejectment since he retains ownership of the property.
Adao must also, aside from showing an affidavit, show other proof of full payment made to PMRDC.
Considering that Adao failed to discharge the burden of proving payment, he cannot claim ownership of
the property and his possession thereof was by mere tolerance. His continued possession became
unlawful upon the owners demand to vacate the property.

EDRADA VS. RAMOS

Before a valid and binding contract of sale can exist, the manner of payment of the purchase price must
first be established, as such stands as essential to the validity of the sale. After all, such agreement on
the terms of payment is integral to the element of a price certain, such that a disagreement on the manner
of payment is tantamount to a failure to agree on the price. (Sps. Edrada vs. Sps. Ramos, G.R. No.
154413, August 31, 2005 citing Swedish Match, AB vs. CA, G.R. No. 128120, October 20, 2004, 441
SCRA 1).
GAITE VS. FONACIER
Facts:
Facts: Defendant-appellant Fonacier was the owner/holder of 11 iron lode mineral claims, known as the
Dawahan Group, situated in Camrines Norte.
By Deed of Assignment, Respondent constituted and appointed plaintiff-appellee Gaite as attorney-infact to enter into contract for the exploration and development of the said mining claims on. On March
1954, petitioner executed a general assignment conveying the claims into the Larap Iron Mines, which
owned solely andbelonging to him. Thereafter, he underwent development and the exploitation for the
mining claims which he estimates to be approximately 24 metric tons of iron ore.
However, Fonacier decide to revoke the authority given to Gaite, whereas respondent assented subject to
certain conditions. Consequently a revocation of Power of Attorney and Contract was executed
transferring P20k plus royalties from the mining claims, all rights and interest on the road and other
developments

done,

as

well

as

the

right

to

use

of

the

business

name,

goodwill,

records,documents related to the mines. Furthermore, included in the transfer was the rights and interest
over the 24K+ tons of iron ore that had been extracted. Lastly the balance of P65K was to be paid for
covering the first shipment of iron ores.
To secure the payment of P65k, respondent executed a surety bond with himself as principal, the Larap
Mines and Smelting Co. and its stockholder as sureties. Yet, this was refused by petitioner. Appelle further
required another bond underwritten by a bonding company to secure the payment of the balance. Hence
a second bond was produced with Far Eastern Surety as an additional surety, provided the liability of Far
Eastern would only prosper when there had been an actual sale of the iron ores of not less than the
agreed amount of P65k, moreover, its liability was to automatically expire on December 1955.
On December 1955, the second bond had expired and no sale amounting to the stipulation as prior
agreed nor had the balance been paid to petitioner by respondent. Thus such failure, prompted petitioner
to file a complaint in the CFI of Manila for the payment of the balance and other damages.

The Trial Court ruled in favor of plaintiff ordering defendant to pay the balance of P65k with interest.
Afterwards an appeal was affected by the respondent where several motions were presented for
resolution: a motion for contempt; two motions to dismiss the appeal for becoming moot and academic;
motion for a new trial, filed by appellee Gaite. The motion for contempt was held unmeritorious, while the
rest of the motions were held unnecessary to resolve
Issue: Whether or not the Lower Court erred in holding the obligation of appellant Fonacier to pay appelle
Gaite the balance of P65k, as one with a period or term and not one with a suspensive condition; and that
the term expired on December 1955
Held: No error was found, affirming the decision of the lower court. Gaite acted within his rights in
demanding payment and instituting this action one year from and after the contract was executed, either
because the appellant debtors had impaired the securities originally given and thereby forfeited any
further time within which to pay; or because the term of payment was originally of no more than one year,
and the balance of P65k, became due and payable thereafter.
The Lower Court was legally correct in holding the shipment or sale of the iron ore is not a condition or
suspensive to the payment of the balance of P65k, but was only a suspensive period or term. What
characterizes a conditional obligation is the fact that its efficacy or obligatory force as distinguished from
its demandability, is subordinated to the happening of a future and uncertain event; so that if the
suspensive condition does not take place, the parties would stand as if the conditional obligation had
never existed.
The sale of the ore to Fonacier was a sale on credit, and not an aleatory contract where the transferor,
Gaite, would assume the risk of not being paid at all; and that the previous sale or shipment of the ore
was not a suspensive condition for the payment of the balance of the agreed price, but was intended
merely to fix the future date of the payment.
While as to the right of Fonacier to insist that Gaite should wait for the sale or shipment of the ore before
receiving payment; or, in other words, whether or not they are entitled to take full advantage of the period
granted them for making the payment. The appellant had indeed have forfeited the right to compel Gaite
to wait for the sale of the ore before receiving payment of the balance of P65,000.00, because of their
failure to renew the bond of the Far Eastern Surety Company or else replace it with an equivalent
guarantee. The expiration of the bonding company's undertaking on December 8, 1955 substantially
reduced the security of the vendor's rights as creditor for the unpaid P65,000.00, a security that Gaite
considered essential and upon which he had insisted when he executed the deed of sale of the ore to
Fonacier (first bond).
Under paragraphs 2 and 3 of Article 1198 of the Civil Code of thePhilippines: ART. 1198. The debtor shall
lose every right to make use of the period: (2) When he does not furnish to the creditor the guaranties or
securities which he has promised. (3) When by his own acts he has impaired said guaranties or securities

after their establishment, and when through fortuitous event they disappear, unless he immediately gives
new ones equally satisfactory.
Appellants' failure to renew or extend the surety company's bond upon its expiration plainly impaired the
securities given to the creditor (appellee Gaite), unless immediately renewed or replaced.
Nevertheless, there is no merit in appellants' argument that Gaite'sacceptance of the surety company's
bond with full knowledge that on its face it would automatically expire within one year was a waiver of
its renewal after the expiration date. No such waiver could have been intended, for Gaite stood to lose
and had nothing to gain barely; and if there was any, it could be rationally explained only if the appellants
had agreed to sell the ore and pay Gaite before the surety company's bond expired on December 8,
1955. But in the latter case the defendants-appellants' obligation to pay became absolute after one year
from the transfer of the ore to Fonacier by virtue of the deed, first bond.
BUENAVENTURA VS. CA
Facts: Sought to be declared null and void ab initio are certain deeds of sale of real property executed by
defendant parents Leonardo Joaquin and Feliciana Landrito in favor of their co-defendant children. The
petitioners contend that there was no actual valid consideration and that assuming that there
was considerationin the sums reflected the properties are more than three-fold times more valuable than
the small sums appearing therein. The RTC ruled in favor of the defendants and dismissed the case.
RTCs ruling was affirmed by CA. Hence the appeal.
Issue:Whether

or

not

there

was

valid consideration in

the

deeds

of

sale

Held: If there is a meeting of the minds of the parties as to the price, the contract of sale is valid, despite
the manner of payment, or even the breach of that manner of payment. If the real price is not stated in the
contract,

then

the contract

of

sale is

valid

but

subject

to

reformation.

Art. 1355. Except in cases specified by law, lesion or inadequacy of cause shall not invalidate a contract,
unless

there

has

been

fraud,

mistake

or

undue

influence.

Article 1470 of the Civil Code further provides:Gross inadequacy of price does not affect a contract of
sale, except as may indicate a defect in the consent, or that the parties really intended a donation or
some

other

act

or

contract.

Petitioners failed to prove any of the instances mentioned in Articles 1355 and 1470 of the Civil Code
which would invalidate, or even affect, the Deeds of Sale. Indeed, there is no requirement that the price
be equal to the exact value of the subject matter of sale. All the respondents believed that they received
the commutative value of what they gave.
CELESTINO VS. CIR

Facts: Celestino is the owner of Oriental Sash Factory. It paid 7% on the gross sales of their
sales. In 1952, they began to pay only 3% tax. Petitioner claims that it does not manufacture
ready-made doors, sash and windows for the public, but only upon special orders from the
customers, hence, it is not engaged in manufacturing under sec 186, but only in sales of
services covered by sec 191. Having failed to convince BIR, petitioner went to the Court of
Tax Appeal where it also failed. CTA, in its decision, holds that the petitioner has chosen for
its tradename and has offered itself to the public as a Factory, which means it is out to do
business, in its chosen lines on a big scale. As a general rule, sash factories receive orders
for doors and windows of special design only in particular cases but the bulk of their sales is
derived from a ready-made doors and windows of standard sizes for the average home.
Issue: Whether the petitioner company provides special services or is engaged in
manufacturing.
Ruling: The Oriental Sash Factory is engaged in manufacturing. The company habitually
makes sash, windows and doors as it has been represented to the public. The fact that
windows and doors are made by it only when customers place their orders, does not alter
the nature of the establishment, for it is obvious that it only accepted such orders as called
for the employment of such material-moulding, frames, panels-as it ordinarily manufactured
or was in a position habitually to manufacture. The Oriental Sash Factory does nothing more
than sell the goods that it mass-produces or habitually makes; sash, panels, mouldings,
frames, cutting them to such sizes and combining them in such forms as its customers may
desire.
CIR VS ENGINEERING EQUPMENT & SUPPLY CO.
Facts:
Engineering Equipment and Supply Co., an engineering and machinery firm, is engaged in
the design and installation of central type air conditioning system, pumping plants and steel
fabrications.
CIR received an anonymous letter denouncing Engineering for tax evasion by misdeclaring
its imported articles and failing to pay the correct percentage taxes due thereon in
connivance with its foreign suppliers. Engineering was likewise denounced to the Central
Bank (CB) for alleged fraud in obtaining its dollar allocations. So, NBI and Central Bank
conducted a raid and search on which occasion voluminous records of the firm were seized
and confiscated. CIR also reported about deficiency advance sales tax. CIR assessed against
the Company payment of the increased amount and suggested that P10,000 be paid as
compromise in extrajudicial settlement of the Companys penal liability for violation of the
Tax Code. The firm, however, contested the tax assessment and requested that it be
furnished with the details and particulars of the Commissioners assessment.Engineering
appealed the case to the Court of Tax Appeals. During the pendency of the case the

investigating revenue examiners reduced the Companys deficiency tax. CTA declared that
Engineering is a contractor and is exempt from deficiency manufacturers sales tax. The
Commissioner, not satisfied with the decision of the CTA, appealed to the Supreme Court.
Issue:
1) WON Engineering Equipment is a manufacturer or contractor? CONTRACTOR.
2) Corrollarily WON the installation of a centralized air-conditioning system a contact of sale
or a contract for piece of work? CONTRACT FOR PIECE OF WORK.
3) Is Celestino Co vs. CIR case applicable in this case? NO.
Held:
1)
The word contractor has come to be used with special reference to a person who, in the
pursuit of the independent business, undertakes to do a specific job or piece of work for
other persons, using his own means and methods without submitting himself to control as to
the petty details. The true test of a contractor is that when he renders service in the course
of an independent occupation, representing the will of his employer only as to the result of
his work, and not as to the means by which it is accomplished.
Engineering did not manufacture air conditioning units for sale to the general public, but
imported some items (as refrigeration compressors in complete set, heat exchangers or
coils) which were used in executing contracts entered into by it. Engineering undertook
negotiations and execution of individual contracts for the design, supply and installation of
air conditioning units of the central type taking into consideration in the process such factors
as the area of the space to be air conditioned; the number of persons occupying or would be
occupying the premises; the purpose for which the various air conditioning areas are to be
used; and the sources of heat gain or cooling load on the plant such as sun load, lighting,
and other electrical appliances which are or may be in the plan. Relative to the installation of
air conditioning system, Engineering designed and engineered complete each particular
plant and that no two plants were identical but each had to be engineered separately.
2)
NATURE OF OBJECT TEST:

The distinction between a contract of sale and one for work, labor and materials is tested by
the inquiry whether the thing transferred is one NOT in existence and which never would
have existed but for the order of the party desiring to acquire it, or a thing which would have
existed and has been the subject of sale to some other persons even if the order had not
been given. If the article ordered by the purchaser is exactly such as the plaintiff makes and
keeps on hand for sale to anyone, and no change or modification of it is made at defendants
request, it is a contract of sale, even though it may be entirely made after, and in
consequence of, the defendants order for it.
The air conditioning units installed in a central type of air conditioning system would not
have existed but for the order of the party desiring to acquire it and if it existed without the
special order of Engineerings customer, the said air conditioning units were not intended for
sale to the general public. Hence, it is a contract for a piece of work.
3)
Celestino Co compared to Engineering Equipment:
Points of discussion:
1) Advertisement as manufacturer/contractor
2) Ready-made materials
In Celestino Co, the Court held the taxpayer to be a manufacturer rather than a contractor of
sash, doors and windows manufactured in its factory. From the very start, Celestino Co
intended itself to be a manufacturer of doors, windows, sashes etc. as it did register a
special trade name for its sash business and ordered company stationery carrying the bold
print ORIENTAL SASH FACTORY. As a general rule, sash factories receive orders for doors
and windows of special design only in particular cases, but the bulk of their sales is derived
from ready-made doors and windows of standard sizes for the average home, which sales
were reflected in their books of accounts totalling P118,754.69 for the period of only nine (9)
months. The Court found said sum difficult to have been derived from its few customers who
placed special orders for these items.
In the present case, the company advertised itself as Engineering Equipment and Supply
Company, Machinery Mechanical Supplies, Engineers, Contractors and not as manufacturers.
It likewise paid the contractors tax on all the contracts for the design and construction of
central system. Similarly, it did not have ready-made air conditioning units for sale.

QUIROGA VS. PARSONS

Facts: On Jan 24, 1911, plaintiff and the respondent entered into a contract making the latter an agent of the
former. The contract stipulates that Don Andres Quiroga, here in petitioner, grants exclusive rights to sell his beds in
the Visayan region to J. Parsons. The contract only stipulates that J.Parsons should pay Quiroga within 6 months
upon the delivery of beds.
Quiroga files a case against Parsons for allegedly violating the following stipulations: not to sell the beds at higher
prices than those of the invoices; to have an open establishment in Iloilo; itself to conduct the agency; to keep the
beds on public exhibition, and to pay for the advertisement expenses for the same; and to order the beds by the
dozen and in no other manner. With the exception of the obligation on the part of the defendant to order the beds by
the dozen and in no other manner, none of the obligations imputed to the defendant in the two causes of action are
expressly set forth in the contract. But the plaintiff alleged that the defendant was his agent for the sale of his beds in
Iloilo, and that said obligations are implied in a contract of commercial agency. The whole question, therefore,
reduced itself to a determination as to whether the defendant, by reason of the contract hereinbefore transcribed, was
a purchaser or an agent of the plaintiff for the sale of his beds.
Issue: Whether the contract is a contract of agency or of sale.
Held: In order to classify a contract, due attention must be given to its essential clauses. In the contract in question,
what was essential, as constituting its cause and subject matter, is that the plaintiff was to furnish the defendant with
the beds which the latter might order, at the price stipulated, and that the defendant was to pay the price in the
manner stipulated. Payment was to be made at the end of sixty days, or before, at the plaintiffs request, or in cash, if
the defendant so preferred, and in these last two cases an additional discount was to be allowed for prompt payment.
These are precisely the essential features of a contract of purchase and sale. There was the obligation on the part of
the plaintiff to supply the beds, and, on the part of the defendant, to pay their price. These features exclude the legal
conception of an agency or order to sell whereby the mandatory or agent received the thing to sell it, and does not
pay its price, but delivers to the principal the price he obtains from the sale of the thing to a third person, and if he
does not succeed in selling it, he returns it. By virtue of the contract between the plaintiff and the defendant, the
latter, on receiving the beds, was necessarily obliged to pay their price within the term fixed, without any other
consideration and regardless as to whether he had or had not sold the beds.
In respect to the defendants obligation to order by the dozen, the only one expressly imposed by the contract, the
effect of its breach would only entitle the plaintiff to disregard the orders which the defendant might place under
other conditions; but if the plaintiff consents to fill them, he waives his right and cannot complain for having acted
thus at his own free will.
For the foregoing reasons, we are of opinion that the contract by and between the plaintiff and the defendant was one
of purchase and sale, and that the obligations the breach of which is alleged as a cause of action are not imposed
upon the defendant, either by agreement or by law.

PUYAT VS. ARCO AMUSEMENT CO.

Facts: Respondent is engaged in operating cinematographs, while petitioner is acting as an agent for
Starr Piano Company of Richmond. Respondent negotiated with petitioner and agreed that petitioner
would order sound reproducing equipment on its behalf, and respondent would pay 10% commission and
out-of-pocket expenses in addition to the selling price. Transactions for 2 orders transpired. After 3 years,
respondent discovered that that price quoted to them by petitioner was not the net price but the list price.
They sought to obtain reimbursement from the petitioner, and failing on this, filed the instant case.
Issue: Whether the contract between petitioner and respondent is that of agency where agent is bound to
indemnify the principal for damages, or a mere contract of sales
Held: The letters, by which the respondent accepted the prices for the sound reproducing equipment
subject of its contract with the petitioner, are clear in their terms and admit no other interpretation that
the respondent in question at the prices indicated which are fixed and determinate. The respondent
admitted in its complaint filed with the Court of First Instance of Manila that the petitioner agreed
to sell to it the first sound reproducing equipment and machinery.
We agree with the trial judge that "whatever unforseen events might have taken place unfavorable to the
defendant (petitioner), such as change in prices, mistake in their quotation, loss of the goods not covered
by insurance or failure of the Starr Piano Company to properly fill the orders as per specifications, the
plaintiff (respondent) might still legally hold the defendant (petitioner) to the prices fixed of $1,700 and
$1,600." This is incompatible with the pretended relation of agency between the petitioner and the
respondent, because in agency, the agent is exempted from all liability in the discharge of his commission
provided he acts in accordance with the instructions received from his principal (section 254, Code of
Commerce), and the principal must indemnify the agent for all damages which the latter may incur in
carrying out the agency without fault or imprudence on his part (article 1729, Civil Code).
While the letters state that the petitioner was to receive ten per cent (10%) commission, this does not
necessarily make the petitioner an agent of the respondent, as this provision is only an additional price
which the respondent bound itself to pay, and which stipulation is not incompatible with the contract of
purchase and sale.
In the second place, to hold the petitioner an agent of the respondent in the purchase of equipment and
machinery from the Starr Piano Company of Richmond, Indiana, is incompatible with the admitted fact
that the petitioner is the exclusive agent of the same company in the Philippines. It is out of the ordinary
for one to be the agent of both the vendor and the purchaser. The facts and circumstances indicated do
not point to anything but plain ordinary transaction where the respondent enters into a contract of

purchase and sale with the petitioner, the latter as exclusive agent of the Starr Piano Company in the
United States.
It follows that the petitioner as vendor is not bound to reimburse the respondent as vendee for any
difference between the cost price and the sales price which represents the profit realized by the vendor out
of the transaction. This is the very essence of commerce without which merchants or middleman would
not exist.
LO VS. KJS ECO-FORMWORK SYSTEM PHIL. INC.
FACTS: Respondent KJS Eco-Framework System is a corporation engaged in the sale of steel
scaffoldings, while petitioner Sonny Lo, doing business under the name of Sans Enterprises,
is a building contractor.
1. In February 1990, petitioner ordered scaffolding equipments from the respondent
amounting to P540, 425.80. He paid a down payment of P150,000 and the balance was to be
paid in 10 monthly installments
2. However, Lo was only able to pay the first 2 monthly installments due to financial
difficulties despite demands from the respondent
3. In October 1990, petitioner and respondent executed a deed of assignment whereby
petitioner assigned to respondent his receivables of P335,462.14 from Jomero Realty Corp
4. But when respondent tried to collect the said credit from Jomero Realty Corp, the latter
refused to honor the deed of assignment because it claimed that the petitioner was also
indebted to it. As such, KJS sent Lo a demand letter but the latter refused to pay, claiming
that his obligation had been extinguished when they executed the deed of assignment
5. Subsequently, respondent filed an action for recovery of sum of money against
petitioner.
6. Petitioner argued that his obligation was extinguished with the execution of the deed of
assignment of credit. Respondent alleged that Jomero Realty Corp refused to honor the deed
of assignment because it claimed that the petitioner had outstanding indebtedness to it
7. The trial court dismissed the complaint on the ground that the assignment of credit
extinguished the bligation
8.

Upon appeal, CA reversed the trial court decision and held in favor of KJS. CA held that

a.

Petitioner failed to comply with his warranty under the deed

b. The object of the deed did not exist at the time of the transaction, rendering it void
under Art 1409 NCC
c. Petitioner violated the terms of the deed of assignment when he failed to execute and do
all acts necessary to effectually enable the respondent to recover the collectibles

ISSUE: WON the deed of assignment extinguished the petitioners obligation

HELD: No, the petitioners obligation was not extinguished with the execution of the deed of
assignment.

An assignment of credit is an agreement by virtue of which the owner of a credit, known as

the assignor, by a legal cause, such as sale, dacion en pago, exchange or donation, and
without the consent of the debtor, transfers his credit and accessory rights to another,
known as the assignee, who acquires the power to enforce it to the same extent as the
assignor could enforce it against the debtor.

In dacion en pago, as a special mode of payment, the debtor offers another thing to the
creditor who accepts it as equivalent of payment of an outstanding debt. In order that there
be a valid dation in payment, the following are the requisites: (1) There must be the
performance of the prestation in lieu of payment (animo solvendi) which may consist in the
delivery of a corporeal thing or a real right or a credit against the third person; (2) There
must be some difference between the prestation due and that which is given in substitution
(aliud pro alio); (3) There must be an agreement between the creditor and debtor that the
obligation is immediately extinguished by reason of the performance of a prestation different
from that due. The undertaking really partakes in one sense of the nature of sale, that is, the
creditor is really buying the thing or property of the debtor, payment for which is to be
charged against the debtors debt. As such, the vendor in good faith shall be responsible,
for the existence and legality of the credit at the time of the sale but not for the solvency of
the debtor, in specified circumstances.

Hence, it may well be that the assignment of credit, which is in the nature of a sale
of personal property, produced the effects of a dation in payment which may
extinguish the obligation. However, as in any other contract of sale, the vendor or
assignor is bound by certain warranties. More specifically, the first paragraph of Article
1628 of the Civil Code provides:
The vendor in good faith shall be responsible for the existence and legality of the credit at
the time of the sale, unless it should have been sold as doubtful; but not for the solvency of
the debtor, unless it has been so expressly stipulated or unless the insolvency was prior to
the sale and of common knowledge.

From the above provision, petitioner, as vendor or assignor, is bound to warrant the
existence and legality of the credit at the time of the sale or assignment. When Jomero
claimed that it was no longer indebted to petitioner since the latter also had an unpaid
obligation to it, it essentially meant that its obligation to petitioner has been extinguished by
compensation. In other words, respondent alleged the non-existence of the credit and

asserted its claim to petitioners warranty under the assignment. Therefore, it necessary for
the petitioner to make good its warranty and pay the obligation.

Furthermore, the petitioner breached his obligation under the Deed of Assignment,
to execute and do all such further acts and deeds as shall be reasonably necessary to
effectually enable said ASSIGNEE to recover whatever collectibles said ASSIGNOR has in
accordance with the true intent and meaning of these presents.

Indeed, by warranting the existence of the credit, petitioner should be deemed to have
ensured the performance thereof in case the same is later found to be inexistent. He should
be held liable to pay to respondent the amount of his indebtedness.
PARAGAS VS. HEIRS OF BALACANO
FACTS: Gregorio Balacano, married to Lorenza, owned 2 parcels of land. He was already 81 years
old, very weak, could barely talk, and had been battling w/ liver disease for over a month. On his
deathbed, barely a week before he died, he allegedly signed a Deed of Absolute Sale over the lots
in favor of the Paragas Spouses, accompanied by Atty. De Guzman who proceeded to notarize the
same, alleging that it was a mere confirmation of a previous sale and that Gregorio had already paid
a P 50,000.00 deposit. The Paragas driver was also there to take a picture of Gregorio signing
the said deed, w/ a ballpen in his hand. There was nothing to show that the contents of the deed
were explained to Gregorio. Paragas then sold a portion of the disputed lot to Catalino. The
grandson of Gregorio, Domingo, sought to annul the sale and partition. There was no sufficient
evidence to support any prior agreement or partial execution thereof.
ISSUE:W/N Balacano is incapacitated to enter into a contract of sale
HELD:A person is not rendered incompetent merely because of old age; however, when such age has
impaired the mental faculties as to prevent a person from protecting his rights, then he is
undeniably incapacitated. He is clearly at a disadvantage, and the courts must be vigilant for his
protection. In this case, Gregorios consent was clearly absent hence the sale was null and
void. The dubious circumstances raise serious doubts on his capacity to render consent. Considering
that the Paragas Spouses are not owners of the said properties, it only follows that the subsequent
sale thereof to Catalino who was not in good faith is likewise void. Further, the lots pertained to
the conjugal partnership having been inherited by Gregorio during his marriage to Lorenza. It
cannot thus be sold w/o the latters consent.
CALIMILIM-CANULLAS VS. FORTUN

Facts: Petitioner Mercedes Calimlim-Canullas and Fernando Canullas were

married in 1962, with 5 children, and were living on a house situated on a land
inherited by the latter. In 1978, Fernando abandoned his family and lived with
Corazon Daguines. In 1980, Fernando sold the house and lot to Daguines, who

initiated a complaint for quieting of title. Mercedes resisted, claiming that the
house and lot were conjugal properties, and the sale was null nad void for she
had not consented thereto.
Issues:
(1) Whether or not the construction of a conjugal house on the exclusive
property of the husband ipso facto gave the land the character of conjugal
property
(2) Whether or not the sale of the lot together with the house and
improvements thereon was valid under the circumstances surrounding the
transaction
Held:
(1) Both the land and the building belong to the conjugal partnership but the
conjugal partnership is indebted to the husband for the value of the land. The
spouse owning the lot becomes a creditor of the conjugal partnership for the
value of the lot, which value would be reimbursed at the liquidation of the
conjugal partnership. FERNANDO could not have alienated the house and lot
to DAGUINES since MERCEDES had not given her consent to said sale.
(2) The contract of sale was null and void for being contrary to morals and
public policy. The sale was made by a husband in favor of a concubine after he
had abandoned his family and left the conjugal home where his wife and
children lived and from whence they derived their support. That sale was
subversive of the stability of the family, a basic social institution which public
policy cherishes and protects. The law emphatically prohibits the spouses
from selling property to each other subject to certain exceptions. Similarly,
donations between spouses during marriage are prohibited. And this is so
because if transfers or con conveyances between spouses were allowed during
marriage, that would destroy the system of conjugal partnership, a basic policy
in civil law. It was also designed to prevent the exercise of undue influence by
one spouse over the other, as well as to protect the institution of marriage,
which is the cornerstone of family law. The prohibitions apply to a couple
living as husband and wife without benefit of marriage, otherwise, "the
condition of those who incurred guilt would turn out to be better than those in
legal union." Those provisions are dictated by public interest and their
criterion must be imposed upon the wig of the parties.

PHILIPPINE TRUST CO. VS. ROLDAN

Facts:
Mariano Bernardo, a minor, inherited 17 parcels of land from his deceased
father. Respondent, Marianos step-mother, was appointed his guardian. As
guardian, she sold the 17 parcels to Dr. Ramos, her brother-in-law, for
P14,700. After a week, Dr. Ramos sold the lands to her for P15,000.
Subsequently, she sold 4 out of 17 parcels to Emilio Cruz. Petitioner replaced
Roldan as guardian, and two months thereafter, this litigation sought to
declare as null and void the sale to Dr. Ramos, and the sale to Emilio Cruz.
Issue:
Whether the sale of the land by the guardian is null and void for being
violative of the prohibition for a guardian to purchase either in person or
through the mediation of another the property of her ward
Held:
Remembering the general doctrine that guardianship is a trust of the highest
order, and the trustee cannot be allowed to have any inducement to neglect his
wards interest, and in line with the courts suspicion whenever the guardian
acquires wards property we have no hesitation to declare that in this case, in
the eyes of the law, Socorro Roldan took by purchase her wards parcels thru
Dr. Ramos, and that Article 1459 of the Civil Code applies.
RUBIAS VS. 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.
Issue:

Whether or not the contract of sale between appellant and his father-in-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
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, 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."
FABILLO VS. IAC

FACTS: Florencio
Fabillo contracted
the services of
Atty.Murillo to revive
a lost case over his
inheritance from

hisdeceased sister
Justinia. He sought
to acquire the
SanSalvador and
Pugahanay
Properties that his
sister leftbehind

against the latters

husband. They
entered into
acontract where a
contingent fee in
favor of Atty.
Murilloin case the

case won was

agreed upon. The
fee was 40%of the
value of whatever
benefit Florencio
may derivefrom the
suitsuch as if the

properties were
sold,rented, or
mortgaged. It was
vague, however,
regardingthe fee in
case Florencio or his

heirs decide to
occupy