Spec Con Case Digests

1. PUP v CA

Facts:

1. NDC, a GOCC, had in its disposal a ten (10)-hectare property located along Pureza St., Sta. Mesa, Manila.2. In 1965, NDC and FIRESTONE entered into a contract of lease denominated as Contract No. C-30-65 covering a portion

of the property measured at 2.90118 hectares for use as a manufacturing plant for a term of ten (10) years, renewable for another ten (10) years under the same terms and conditions.

3. In 1969, they entered into another lease agreement over NDC’s 4-unit pre-fabricated reparation steel warehouse stored in Davao. FIRESTONE agreed to ship the warehouse to Manila for eventual assembly within the NDC compound.

4. In 1974, another lease agreement for the 6-unit steel warehouse of NDC, expiring in 19785. In 1978, they renewed the lease contract and stipulated granting FIRESTONE the first option to purchase the leased

premises in the event that it decided "to dispose and sell these properties including the lot.6. The relationship of the two went smoothly until NDC stopped responding to the letters of Firestone expressing its

desire to renew the contract of lease. It was also rumored that NDC will seel the property to PUP.7. Firestone filed for an action for specific performance compelling NDC to sell the property in its favor since it is pre-

empting the sale of the property to PUP in violation of their lease contract. It also filed for a writ of prelim injunction to prevent NDC from selling the property pending the resolution of the case

8. Firestone submitted in evidence NDC’s letter to ES Asst. discussing the transfer of property to PUP, and the contract of lease bet NDC and Firestone.

9. PUP moved to intervene arguing that a "purchaser pendente lite of property which is subject of a litigation is entitled to intervene in the proceedings." Motion was granted.

10. Firestone included PUP and ES Macaraeg as party-defendants and moved for the nullfication of Memorandum Order No. 214, saying though it was issued "subject to such liens/leases existing [on the subject property]," PUP disregarded and violated its existing lease by increasing the rental rate at P200,000.00 a month while demanding that it vacated the premises immediately.

11. PUP: Lease has expired long before the complaint and that it covered only the warehouses and not the lots where they stood.

12. RTC: Lease was executed over the lots as well as to the warehouses. PUP was directed to sell the subject property to Firestone at a price of P1,500 per m2, as the admitted prevailing market price of the lots. The contracts of lease executed by the NDC and Firestone are interrelated that one is inseparable of the other, otherwise, the lease which is for the brick manufacturing factory of Firestone, would be rendered useless. Firestone could exercise its right of first refusal.

13. CA affirmed the trial court’s decision.14. PUP moved for reconsideration arguing that hat the enactment of Memorandum Order No. 214 amounted to a

withdrawal of the option to purchase the property granted to FIRESTONE.

Issues:1. W/N the transfer of property to PUP by the NDC of the subject property amounts to a sale considering that the

ownership of the subject property is still with the government of the Republic of the Philippines2. W/N Firestone can exercise its right of first refusal3. It was also raised by PUP that the paramount interest of state to education should be considered by SC in making its

decision

Ruling:

1. All 3 essential elements of a valid sale were attendant in the and transfer of the property from NDC to PUP - consent of the parties, determinate subject matter and consideration therefor.

a. Consent – Prepatory clauses of Memo No. 214: WHEREAS, PUP has expressed its willingness to acquire said NDC properties and NDC has expressed its willingness to sell the properties to PUP (underscoring supplied).

b. Consideration - the cancellation of NDC's liabilities in favor of the National Government in the amount ofP57,193,201.64. Transfer of title or an agreement to transfer title for a price paid, or promised to be paid, is the very essence of sale

c. In the Motion for Intervention filed by PUP, it asserted its interest in the property as a ‘purchaser pendente lite’

2. The right of first refusal is an integral and indivisible part of the contract of lease and is inseparable from the whole contract. The stipulation is part and parcel of the contract of lease making the consideration for the lease the same as that for the option. It is a settled principle in civil law that when a lease contract contains a right of first refusal, the lessor is under a legal duty to the lessee not to sell to anybody at any price until after he has made an offer to sell to the latter at a certain price and the lessee has failed to accept it.

3. Paradoxically, our paramount interest in education does not license us, or any party for that matter, to destroy the sanctity of binding obligations. Education may be prioritized for legislative or budgetary purposes, but we doubt if such importance can be used to confiscate private property such as FIRESTONE's right of first refusal. It is elementary that a party to a contract cannot unilaterally withdraw a right of first refusal that stands upon valuable consideration.

2. STARBRIGHT V PHIL REALTYFacts:

1. Ramon Licup wrote Msgr. Domingo A. Cirilos, offering to buy three contiguous parcels of land in Parañaque that The Holy See and Philippine Realty Corporation (PRC) owned for P1,240.00 per square meter.

2. Licup accepted the responsibility for removing the illegal settlers on the land and enclosed a check for P100,000.00 to “close the transaction.”

3. Msgr. Cirilos, representing The Holy See and PRC, signed his name on the conforme portion of the letter and accepted the check. But the check could not be encashed due to Licup’s stop-order payment.

4. Licup wrote Msgr. Cirilos on April 26, 1988, requesting that the titles to the land be instead transferred to petitioner Starbright Sales Enterprises, Inc. (SSE). He enclosed a new check for the same amount. SSE’s representatives, Mr. and Mrs. Cu, did not sign the letter.

5. Msgr. Cirilos wrote SSE, requesting it to remove the occupants on the property and, should it decide not to do this, Msgr. Cirilos would return to it the P100,000.00 that he received.

6. In an updated proposal, SSE said it would be willing to comply with Msgr. Cirilos’ condition provided the purchase price is lowered to P1,150.00 per m2.

7. Msgr. Cirilos rejected the proposal, giving SSE 7 days to buy the property at the agreed price, otherwise, he would take it that SSE has lost interest over the property. He enclosed 100K check in the letter as a refund to what he earlier received.

8. SSE: The contract of sale has already been perfected and Msgr. Cirilos could no longer impose amendments such as the removal of the informal settlers at the buyer’s expense and the increase in the purchase price.

9. Without receiving any response for Msgr. Cirilos, SSE found out that the property was already sold to Tropicana Properties. SSE demanded recission of sale but after a few months, Tropicana sold the property to Standard Realty

10. SSE filed a complaint for annulment of sale and reconveyance with damages against the Holy See, Msgr. Cirilos, Tropicana and Standard Realty

11. Holy See, as a foreign government, was not included in the complaint because it cannot be sued without its consent.12. SSE:

a. Licup’s original letter of April 17, 1988 to Msgr. Cirilos constituted a perfected contract, as he even enclosed a 100K check to “close the transaction”

b. His offer to rid the land of its occupants was a “mere gesture of accommodation if only to expedite the transfer of its title.”

c. In representing The Holy See and PRC, Msgr. Cirilos acted in bad faith when he set the price of the property at P1,400.00 per square meter when in truth, the property was sold to Tropicana Properties for only P760.68 per square meter.

13. Msgr. Cirilos maintained, on the other hand, that based on their exchange of letters, no contract of sale was perfected between SSE and the parties he represented.

14. RTC: Licup’s letter to Msgr. Cirilos = a perfected contract of sale. No agreement was reached between SSE and Cirilos but the aforementioned letter is binding between the parties.

15. CA reversed RTC: Licup’s letter not a perfected contract of sale. SSE-Cirilos correspondence shows they are grappling with the terms of contract. P110K check is an option money secured for SSE

Issue:W/N there is a perfected contract of sale between SSE and Cirilos

Ruling:Three elements are needed to create a perfected contract: 1) the consent of the contracting parties; (2) an object certain which is the subject matter of the contract; and (3) the cause of the obligation which is established. Under the law on sales, a contract of sale is perfected when the seller, obligates himself, for a price certain, to deliver and to transfer ownership of a thing or right to the buyer, over which the latter agrees. From that moment, the parties may demand reciprocal performance.

Licup’s letter to Cirilos is a perfected contract of sale as the latter affixed his signature on the letter expressing conformity to the agreement. There was already a meeting of minds as to the object and the consideration therefor.

But when Licup ordered a stop-payment on his deposit and proposed in his April 26, 1988 letter to Msgr. Cirilos that the property be instead transferred to SSE, a subjective novation took place. Subj Novation = substitution of the debtor or third person to the rights of the creditor. First debtor must be extinguished of his obligation and the new debtor assumes his place. Purposes: a. to extinguish an existing obligation,

b. the other to substitute a new one in its placeRequisites: a. a previous valid obligation;

b. an agreement of all parties concerned to a new contractc. the extinguishment of the old obligation; and d. the birth of a valid new obligation

No agreement can be found between Cirilos and SSE. Correspondence between them did not succeed negotiation. As to the updated proposal, there was no meeting of the minds on the issues of who will evict the informal settlers and what is the amount of consideration.

P100K deposit not an earnest money since there was no perfected sale prior to giving of the 100K check. Earnest money applies only to a perfected sale.

Under the principle of relativity of contracts, contracts can only bind the parties who entered into it. It cannot favor or prejudice a third person. SSE cannot impose the terms Licup stated in his letter.

3. CORONEL V CAFacts:

1. Started with a pet for specific performance to consummate the sale of a Roosevelt QC land and its improvements demanded from petitioners. Contract was entered into in 1985 for P1.2M

2. Pet Coronel executed a ‘Receipt of DP’ in favor of resp Alcaraz. DP was 50K, total amt is 1.2M, binding Coronel to transfer in their names the property of their father upon receipt of the DP

3. They also bound themselves to execute a deed of sale to Alcaraz who shall immediately pay the balance of 1.19 M4. Conditions of the sale:

a. Alcaraz will pay DP upon execution of Receipt of DPb. Upon receipt of DP, Coronels will transfer title to their names from fatherc. Upon transfer of title, they will execute a deed of sale in Alcaraz’s favor and the latter will pay the balance

5. After the transfer of title to their names and before Alcaraz could pay the balance, pets sold the property to Mabanag for 1.5M afgter DP of 300K

6. They rescinded the contract with Alcaraz and deposited her DP to the bank for Alcaraz7. Concepcion et al filed a complaint for specific performance vs the Coronels and caused the annotation of lis pendens

at Coronel’s title8. Mabanag caused the annotation of adverse claim to the same property9. Coronels executed an absolute deed of sale in favor of Mabanag and the title was issued under her name10. Documentary evidence presented11. RTC: ruled in favor of Concepcion ordering Coronels to execute an abso deed of sale to Concepcions over the suject

property free from all liens and encumbrances and that the latter pay the entire amount to Coronels. All others who claim interest over the property were ordered to vacate the premises.

12. Motion for reconsideration denied after Judge’s findings that the decision was supported by substantial evidence. CA affirmed

Issue:W/N a contract of sale was consummated between the parties

Ruling:Contract to Sell may not be considered as a Contract of Sale because the first essential element is lacking, the consent of the seller to transfer ownership of and deliver the thing. In a contract to sell, the prospective seller explicity reserves the transfer of title to the prospective buyer, meaning, the prospective seller does not as yet agree or consent to transfer ownership of the property subject of the contract to sell until the happening of an event, which for present purposes we shall take as the full payment of the purchase price.In a contract to sell, there being no previous sale of the property, a third person buying such property despite the fulfillment of the suspensive condition such as the full payment of the purchase price, for instance, cannot be deemed a buyer in bad faith and the prospective buyer cannot seek the relief of reconveyance of the property. There is no double sale in such case. In a conditional contract of sale, however, upon the fulfillment of the suspensive condition, the sale becomes absolute and this will definitely affect the seller's title thereto.The agreement could not have been a contract to sell because the sellers herein made no express reservation of ownership or title to the subject parcel of land. Furthermore, the circumstance which prevented the parties from entering into an absolute contract of sale pertained to the sellers themselves (the certificate of title was not in their names) and not the full payment of the purchase price. Pets did not merely promise to sell the prop but agreed to sell it even changing the cert of title to their names, showing complete willingness to transfer the prop to respSince the condition contemplated by the parties which is the issuance of a certificate of title in petitioners' names was fulfilled on February 6, 1985, the respective obligations of the parties under the contract of sale became mutually demandable.Art. 1181. In conditional obligations, the acquisition of rights, as well as the extinguishment or loss of those already acquired, shall depend upon the happening of the event which constitutes the condition.

Prop of pet’s father was transferred to pet’s the moment the father died.

Art. 774. Succession is a mode of acquisition by virtue of which the property, rights and obligations to be extent and value of the inheritance of a person are transmitted through his death to another or others by his will or by operation of law.

Ramona’s absence cannot be invoked by pet’s as an event rendering the condition impossible to fulfill since they’ve been dealing with her mother who is authorized to contract for Ramona. In fact, Ramona has not been in delay in fulfilling her obligation to pay the full amount of the prop since the same has not become due and demandable. Pets have not shown intention to fulfill their own obligation to execute a deed of absolute sale

Art 1169: 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 fulfill his obligation, delay by the other begins.

4. MANILA METAL VS PNBFacts:

1. Pet Mla Metal is is the owner of an 8k m2 lot in Mandaluyong which it mortgaged to resp PNB for the loan amounting to 900K (real estate MG)

2. Pet was granted another credit accom amounting to 1M and another for 600K. 3. Resp amended its RE MG on the prop4. In 1982, PNB filed for EJ foreclosure of the prop to be sold at pub auction for 900K, outstanding obli of pet to PNB5. Sold to PNB for 1M; title issued to PNB; right of redemp to last till 19846. Pet requested for extension of time for repurchase. No reply was made in several months until the period of

redemption ended and resp informed pet that it does not grant partial repurchase7. Prop titled to resp8. June 1984, pet gave 700k to resp as deposit to repurchase9. PNB refused the repurchase offer, selling to pet the same prop for almost 3M, gave pet till Dec 1984, otherwise, it will

be sold to other buyers and deposit to be returned10. Pet argued that it already agreed to Special Assets Management Department’s proposal to buy the prop11. PNB agreed to sell at 1.9M but pet said PNB cannot increase the price sinc e iut has already received the deposited

amount of 700K and that pet in fact agreed to buy it at 1.512. Pet filed a complaint against respondent PNB for "Annulment of Mortgage and Mortgage Foreclosure, Delivery of

Title, or Specific Performance with Damages."13. RTC: resp PNB should return the 700K deposit. No contract of sale was perfected 14. Appeal to CA. While case was pending, PNB transferred the prop to Bayani Gabriel who assigned his rights to Reynaldo

Tolentino15. CA declared that petitioner obviously never agreed to the selling price proposed by respondent PNB (P1,931,389.53)

since petitioner had kept on insisting that the selling price should be lowered to P1,574,560.47. Clearly therefore, there was no meeting of the minds between the parties as to the price or consideration of the sale.

16. Pet maintained that PNB has already accepted its offer to sell the prop, acceptance was made in a letter. recepit of 700K as DP

17. Resp: never graduated form the nego stageIssue:

W/N PNB entered into a perfected contract of sale with pet

Ruling:At any time prior to the perfection of the contract, either negotiating party may stop the negotiation. At this stage, the offer may

be withdrawn; the withdrawal is effective immediately after its manifestation. To convert the offer into a contract, the acceptance must be absolute and must not qualify the terms of the offer; it must be plain, unequivocal, unconditional and without variance of any sort from the proposal. There is no evidence that the SAMD was authorized by respondent's Board of Directors to accept petitioner's offer and sell the property for P1.5M. Thus, a corporation can only execute its powers and transact its business through its Board of Directors.We do not agree with petitioner's contention that the P725,000.00 it had remitted to respondent was "earnest money" which could be considered as proof of the perfection of a contract of sale. The deposit of P725,000 was accepted by PNB on the condition

that the purchase price is still subject to the approval of the PNB Board. It appears that although respondent requested petitioner to conform to its amended counter-offer, petitioner refused and instead requested respondent to reconsider its amended counter-offer. Petitioner's request was ultimately rejected and respondent offered to refund its P725,000.00 deposit. No perfected sale.

5. SANCHEZ V MAPALAD REALTYFacts:

1. Respondent Mapalad was the registered owner of four (4) parcels of land located along Roxas Boulevard, Baclaran, Parañaque

2. Jose Y. Campos executed an affidavit admitting that Mapalad was one of the companies he held in trust Marcos.3. Campos turned over all assets, properties, records and documents pertaining to Mapalad to the Aquino admin4. PCGG issued writs of sequestration for Mapalad and all its properties. They found out that 4 TCTs were missing5. PCGG was informed that a former employee of Mapalad took the TCTs6. Nordelak Devt Corp filed a notice of adverse claim over the prop saying it was conveyed to him before by Mapalad officials7. Mapalad sought cancellation of Nordelak’s claim8. It was informed by RD that its title to the prop was cancelled in 1992 and transferred to Nordelak9. It was found out that 2 deeds of abso sale were existing indicating different purchase price10. PCGG sought for cancellation of Nordelak’s titles11. Mapalad filed with RTC the annulment of Nordelak’s deeds of abso sale alleging that the deeds were forged and falsified, seeking

the conveyance of the prop back to Mapalad12. RTC: No positive proof of forgery presented by Mapalad13. CA: declared the titles null and void: Miguel A. Magsaysay was no longer appellant Mapalad’s President and Chairman of the Board

when the subject deed of absolute sale was executed; no consideration for the sale as testified by Rolando Josef. No checks presented by Nordelak to prove purchase; Fraudulent sale, Nordelak has no title to prop; Sanchez, transfereee not a buyer in GF since it bought the property despite lis pendens

Issues:1. Vailidty of sale between Nordelak and Mapalad2. W/N Sanchez acquired valid title over the properties as innocent purchaser for value despite a defect in Nordelak’s title.

Ruling:1. No sale was perfected: VOID AB INITIO

a. Signature of Magsaysay was forged since he attested that he was not with Mapalad when the alleged deed of sale was contracted with Nordelak. On this score, the contract of sale may be annulled for lack of consent on the part of Mapalad.

b. There was no payment effected by Nordelak for this transaction. Josef testified that no funds were infused into Mapalad’s coffers on account of this transaction.

2. As We have said, Nordelak did not acquire ownership or title over the four properties subject of this case because the contract of sale between Mapalad and Nordelak was not only voidable but also void ab inito. Not having any title to the property, Nordelak had nothing to transfer to petitioner Sanchez.

6. RP V FLORENDODoctrine: The delivery of clean titles was not a condition imposed on the perfection of the contract of sale but a condition imposed on petitioner's obligation to pay the purchase price of these lots. In Jardine Davies Inc. v. CA, we distinguished between a condition imposed on the perfection of a contract and a condition imposed merely on the performance of an obligation. While failure to comply with the first condition results in the failure of a contract, non-compliance with the second merely gives the other party options and/or remedies to protect its interests.

Facts:1. Export Processing Zone Authority, predessecor of PEZA filed an complaint for expropriation of 7 parcels of land owned

by resp Florendo (Cebu) to establish and develop an export processing zone in the area.2. RTC ruled for the expropriation with just compensatioon at the amount of P1,500 per m2 and with 12% interest per

annum from the time pet PEZA took possession until full payment3. Pet filed an appeal in CA questioning the valuation.4. Pending appeal, pet and resp reached a compromise agreement that the value fixed by the RTC will be sustained but

resp waives the interest and that the payment be made upon presentation by the resp of clean titles for the lands5. The parties executed a deed of absolute sale and transfer of ownership of one of the seven lots while deed of sale for

the remaining six lots will be executed upon presentation by the resp of clean titles on the land6. Of the six remaining lots, pet paid for three which were subsequently transferred to it7. Pet filed a motion to dismiss the expropriation case but resp refused to sign bec of the remaining three lots that were

not paid8. Resp proposed a partial compromise agreement since they could not clear the remaining lots of encumbrances due to

third party claims9. While the parties were still deciding w/n to pursue the partial compromise agreement, CA rendered a decision on the

appeal earlier filed by pet, affirming the decision of RTC with modification on the valuation of the land which was set to 1,000 per m2

10. Parties did not inform CA of their compromise agreement so its decision attained finality11. Resp filed a motion for execution of the final judgment which was granted. Notices of garnishment were also served

on the LBP12. RTC denied the motion to quash the wri of exec ruling that the court’s ruling cannot be mooted by the deed of

absolute sale executed by the parties which were not approved by the CA

Issues:1. W/N the compromise agreement constituted res judicata

Ruling:1. A. The compromise agreement was upheld. When it complies with the requisites and principles of contracts, it

becomes a valid agreement which has the force of law between the parties. It has the effect and authority of res judicata once entered into, even without judicial approval.

B. The compromise agreement the parties executed was in the form of a contract of sale. The elements of a valid contract of sale are: (a) consent or meeting of the minds; (b) determinate subject matter and (c) price certain in money or its equivalent. All the elements are present here.

C. It does not matter that the CA decision lapsed into finality when neither party questioned it. A compromise agreement is still valid even if there is already a final and executory judgment

7. SANTOS V CADoctrine: In a contract to sell, title remains with the vendor and does not pass on to the vendee until the purchase price is paid in full. In a contract of sale, the vendor has lost ownership of the thing sold and cannot recover it, unless the contract of sale is rescinded and set aside. In a contract to sell, however, the vendor remains the owner for as long as the vendee has not complied fully with the condition of paying the purchase.

Facts:1. Santoses executed a deed of sale in favor of Casadas with the condition that the full price be paid on a certain date.2. Casadas took possession of the property upon perfection of the contract but later failed to pay the full purchase price3. Santoses repossessed the property and refused to pursue the earlier contract of sale with the Casadas

Issues:1. W/N the contract bet parties was a contract to sell or an absolute contract of sale

a. W/N judicial recission is required before the Santoses repossess the property

Ruling:1. It was a contract to sell because Santoses retained ownership until the payment of the purchase price which was not

done by the Casadasa. Jud recission is not required because there was no perfected contract of sale to rescind. Payment of the price

is a positive suspensive condition. Without its performance, the subject property will never be transferred to the Casadas.

8. Del Prado v CaballeroDoctrine: In a contract to sell, title remains with the vendor and does not pass on to the vendee until the purchase price is paid in full. In a contract of sale, the vendor has lost ownership of the thing sold and cannot recover it, unless the contract of sale is rescinded and set aside. In a contract to sell, however, the vendor remains the owner for as long as the vendee has not complied fully with the condition of paying the purchase.Facts:

1. Resp sold to pet a certain lot in Cebu. They executed a deed of sale indicating the title of the lot which is the subject matter of the sale and the price fixed at 40,000 to be paid by pet. They indicated in the sale the boundaries of the lot and its approximate size at 4000 m2 more or less.

2. Pet filed for the issuance of a certificate title of the land in her name covering the whole lot named in the deed although it was assessed to be 10K plus m2. Pet asserts that since the deed purports a lump sum sale, they are entitled to the whole area under Art 1542 od the Civil Code: Art. 1542. In the sale of real estate, made for a lump sum and not at the rate of a certain sum for a unit of measure or number, there shall be no increase or decrease of the price, although there be a greater or less area or number than that stated in the contract.

3. RTC ruled in favor of pet but CA reversed the decision

Issues:1. W/N the sale was for a unit price or a lump sum sale under 15422. W/N pet is entitled to the whole lot

Ruling:1. The rule laid down in Article 1542 is not hard and fast and admits of an exception: The use of "more or less" or similar

words in designating quantity covers only a reasonable excess or deficiency. Clearly, the discrepancy of 10,475 sq m is not a reasonable excess or deficiency that should be deemed included in the deed of sale.What really defines a piece of ground is not the area, calculated with more or less certainty, mentioned in its description, but the boundaries therein laid down, as enclosing the land and indicating its limits. It is sufficient if its extent is objectively indicated with sufficient precision to enable one to identify it. Thus, the obligation of the vendor is to deliver everything within the boundaries, inasmuch as it is the entirety thereof that distinguishes the determinate object.In the instant case, the deed of sale is not one of a unit price contract. The parties agreed on the purchase price of P40,000.00 for a predetermined area of 4,000 sq m, more or less with boundaries set on the deed. In a contract of sale of land in a mass, the specific boundaries stated in the contract must control over any other statement, with respect to the area contained within its boundaries.