NARCISO DEGAÑOS vs PEOPLEOctober 14, 2013

Spouses Bordador were engaged in the business of selling jewelries with Narciso Deganos. The usual business practice of Spouses Bordador with Narciso was for the latter to receive the jewelry and gold items after signing the "Kasunduan at Katibayan" receipts and he will pay for the price later on.

In the said “Kasunduan at Katibayan” receipts, Narciso was expressly obligated to sell the jewelries on commission and remit the proceeds thereof or return the unsold jewelries. Said business arrangement went on for quite some time since Narciso had been paying religiously. When the latter defaulted in his payment, spouses Bordador sent demand letters.

Narciso made partial payments but failed to pay completely the whole obligation. Thus, the spouses were forced to file a criminal case of estafa against Narciso who claimed that the business agreement between him and the spouses was one of sale on credit and not a consignment to sell on commission basis and that granting arguendo that it was a contract of agency, his partial payments novated the contract from agency to one of sale thereby, his was only a civil liability and not criminal. Decide.

Suggested Answer:

Transaction was an agency, not a sale on credit. Narciso’s contention is devoid of factual and legal bases. Based on the express terms and tenor of the Kasunduan at Katibayan, Narciso received and accepted the items under the obligation to sell them in behalf of the complainants and he would be compensated with the overprice as his commission. Plainly, the transaction was a consignment under the obligation to account for the proceeds of sale, or to return the unsold items. As such, he was the agent of the complainants in the sale to others of the items.

In contrast, according to Article 1458 of the Civil Code, one of the contracting parties in a contract of sale obligates himself to transfer the ownership of and to deliver a determinate thing, while the other party obligates himself to pay therefor a price certain in money or its equivalent. Contrary to the contention of Narciso, there was no sale on credit to him because the ownership of the items did not pass to him.

The partial payments he made did not equate to a novation of the original contractual relationship of agency to one of sale. The changes he alluded to consists only in the manner of payment. There was really no substitution of debtors since the spouses merely acquiesced to the payment but did not give him consent to enter into a new contract. Although the novation of a contract of agency to make it one of sale may relieve an offender from an incipient criminal liability, that did not happen here, for the partial payments were not at all incompatible with Narciso’s liability under the agency that had already attached. Thus, rather than converting the agency to sale, he even thereby confirmed his liability as the sales agent of the spouses.

ACE FOODS, INC vs MICRO PACIFIC TECH. CO., INCG.R. No. 200602 December 11, 2013

ACE Foods is a domestic corporation engaged in the trading and distribution of consumer goods in wholesale and retail basis while MTCL is engaged in the supply of computer hardware and equipment. MTCL sent a letter-proposal for the delivery and sale of Cisco Routers and Frame relay products to be installed at various offices of ACE Foods. The said proposal provides that the term of payment will be 30 days upon delivery.

ACE Foods accepted the proposal and MTCL issued purchase order for the said products. Thereafter, MTCL delivered the products to ACE foods. The fine print of the invoice states that “title to sold property is reserved in MTCL until full compliance of the terms and conditions and payment of price”. After delivery, the subject products were then installed and configured in ACE Food’s premises.

MTCL demands against ACE Foods to pay the purchase price however remained unheeded. Instead of paying the purchase price ACE Foods returned the subject products to MTCL and demanding for damages. They claimed that MTCL breached its “after delivery services” obligation and likewise claimed that the subject products MTCL delivered are defective and not working. MTCL also contended that they are not liable for the purchase price since the contract is merely a contract to sell as indicated in the fine print of Invoice Receipt. In this relation, it noted that the payment of the price is a positive suspensive condition, the non-payment which prevents the obligation to sell on the part of the seller/vendor from materializing at all.

MTCL maintained that it had duly complied with its obligation to ACE Foods and that the subject products were in good working condition when they were delivered, installed and configured in ACE Food’s premises. MTCL, however, averred that there was actually no agreement as to the purported “after delivery services”. MTCL posited that ACE Foods refused and failed to pay the purchase products despite the latter’s use of the same for a period of 9 months. As such, MTCL compelled ACE foods to pay the purchase price as well as damages related to the transaction. Decide.

Suggested Answer:

ACE Foods is obliged to pay the purchase price as well as damages to MTCL. ACE Food’s contention that the contract between them and MTCL is merely a contract to sell is incorrect. A contract is what the law defines to be taking it consideration its essential elements and not what the contracting parties call it. The real nature of a contract may be determined from the express terms of the written agreement and from contemporaneous and subsequent act of the contracting parties. However, in the construction or interpretation of an instrument, the intention of the parties in their contract is not conclusive of the nature of its contents.

The very essence of a contract of sale is the transfer of ownership in exchange for a price paid or

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promised. Article 1458 of the Civil Code which defines a contract of sale as follows:

Article 1458: By the contract of sale one of the contracting parties obligates himself to transfer the ownership and to deliver a determinate thing and the other to pay therefor a price certain in money or its equivalent.

In contrast, a contract to sell is defined as a bilateral contract whereby the prospective seller, while expressly reserving the ownership of the property despite delivery thereof to the prospective buyer, binds himself to sell the property exclusively to the prospective buyer upon fulfillment of the condition agreed upon, i.e., the full payment of the purchase price.

The agreement between the parties is in the nature of a contract of sale, observing that the said contract had been perfected from the time ACE Foods sent the purchase order to MTCL which in turn delivered the subject products covered by the invoice receipt and subsequently installed and configured them in ACE Food’s premises. Thus, considering that MTCL had already complied with its obligation, ACE foods corresponding obligation arose and was then duty to bind to pay the agreed purchase price within 30 days from the delivery. The refusal of the ACE Foods to pay the purchase price disregards the very essence of reciprocity in a contract of sale.

ROSAROSO vs SORIAG.R. No. 194846

June 19, 2013

Spouses Luis and Honorata, parents of Hospicio, Arturo, Florita, Lucila, Eduardo, Manuel, Cleofe, Antonio and Angela owned several real properties in Cebu. After Honorata’s death, Luis married Lourdes. In 1996, Luis filed a complaint declaration of nullity of documents with damages against his daughter, Lucila and Laila. Due to Luis’ untimely death, an amended complaint was filed by his heirs against Lucila, Laila, Lourdes and Meridian Realty. His heirs alleged that on November 4, 1991, Luis, with the full knowledge and consent of his second wife, Lourdes, executed the Deed of Absolute Sale (First Sale) covering the properties with Transfer Certificate of Title in their favor. However, without their knowledge, Lucila, one of Luis’ daughters obtained a Special Power of Attorney, from her father, who was then sick and of unsound mind, authorizing Laila to sell and convey Lots. On the strength of another SPA, Laila and Ham mortgaged one of the lots to Vital Lending.

A second sale took place when Laila and Lourdes made Luis sign a Deed of Absolute Sale conveying the three lots to Meridian Realty. The heirs alleged that Meridian was in bad faith when it did not inquire as to the real owners and occupants of the properties. They thus prayed that the two special powers of attorney and the deed of absolute sale in favor of Meredian Realty be annulled. Even assuming it was valid, the heirs were estopped from questioning the validity of the Second Sale because they did not make the necessary annotation and transfer of the properties in their name. Meridian averred that Luis was fully aware of the execution of the Deed of

Absolute Sale, as in fact it was witnessed by its officer. Before buying the properties, they conducted a check with the Registry of Deeds, and found out that the First Sale was not registered on the title. Is the Median Realty a possessor in good faith in acquiring the property? Decide.

Suggested Answer:

The Median Realty is a purchaser in bad faith since they were aware that the property is in the actual possession of the buyer.

Article 1154 of the Civil Code provides that the ownership of an immovable property which is the subject of a double sale shall be transferred to the person acquiring it who in good faith first recorded it in the Registry of Property. In case of default thereof, to the person who in good faith was first in possession and in the absence in thereof, to the person who presents the oldest title, provided there is good faith.

Good faith must concur with the registration. When the thing sold twice is an immovable, the one who acquires it and first records it in the Registry of Property, both made in good faith, shall be deemed the owner. Verily, the act of registration must be coupled with good faith. The registrant must have no knowledge of the defect or lack of title of his vendor or must not have been aware of facts which should have put him upon such inquiry and investigation as might be necessary to acquaint him with the defects in the title of his vendor.

When a piece of land is in the actual possession of persons other than the seller, the buyer must be wary and should investigate the rights of those in possession. Without making such inquiry, one cannot claim that he is a buyer in good faith. When a man proposes to buy or deal with realty, his duty is to read the public manuscript, that is, to look and see who is there upon it and what his rights are. A want of caution and diligence, which an honest man of ordinary prudence is accustomed to exercise in making purchases, is in contemplation of law, a want of good faith. The buyer who has failed to know or discover that the land sold to him is in adverse possession of another is a buyer in bad faith. Therefore, Median Realty is a possessor in bad faith.

GOTESCO PROPERTIES, INC (GPI) vs SPOUSES EUGENIO & ANGELINA FAJARDO

G.R. No. 201167 February 27, 2013

On January 24, 1995, Sps. Eugenio and Angelina Fajardo entered into a Contract to Sell with Gotesco Properties, Inc. (GPI) for the purchase of a 100-square meter lot in Evergreen Executive Village, a subdivision project owned and developed by GPI. The contract stated among others that: Sps. Fajardo undertakes to pay the purchase price of P126,000 within a 10-year period, including interest at the rate of 9% per annum; and that upon full payment of the stipulated consideration, GPI will execute a final deed of sale in favor of Sps. Fajardo.

Sps. Fajardo delivered the full payment of the purchase price on January 17, 2000 and subsequently made a demand to GPI to execute the deed of sale and to

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deliver the title and physical possession of the subject lot within a reasonable period. But, GPI failed to do so.

Thus, on May 3, 2006, Sps. Fajardo filed an action for specific performance, or for the rescission of the contract with damages against GPI. They also prayed to be refunded the total payments they made starting January 2000.

GPI, in its defense, contended that its failure to comply with the demand of the SPs. Fajardo was due to the fact that the lot in question was still in litigation and that it is beyond its control. Decide the case.

Suggested Answer:Yes, the action for specific performance or for

the rescission of the contract will prosper.

It is a settled rule that in a contract to sell, the seller’s obligation to deliver the corresponding certificates of title is simultaneous and reciprocal to the buyer’s full payment of the purchase price. In relation to this, Section 25 of PD 957 provides that “the owner or developer shall deliver the title of the lot or unit to the buyer upon full payment of the lot or unit.” Thus, the buyer can demand for specific performance or delivery of the title of the subject lot.

Moreover, Article 1191 of the NCC states that “the power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him.”

In the present case, the seller failed to deliver the title of property despite the fact that the buyers have already fulfilled their corresponding obligation, that of paying the purchase price.

Therefore, the injured party may choose between the fulfilment and the rescission of the obligation, with payment of damages in either case.

SPOUSES FELIX AND ROSITA CHINGKOE VS SPOUSES FAUSTINO AND GLORIA CHINGKOE

G.R. No. 185518 April 17, 2013

The respondents (Spouses Faustino and Gloria Chingkoe) are the registered owners of a real property. They claim that sometime in 1990, out of tolerance and permission, they allowed respondent Faustino’s brother, Felix, and his wife, Rosita, to inhabit the subject property situated at No. 58 Lopez Jaena Street, Ayala Heights, Quezon City. Due to the intercession of their mother, Tan Po Chu, Faustino agreed to sell the property to Felix on condition that the title shall be delivered only after Felix and Rosita’s payment of the full purchase price, and after the respondent’s settlement of their mortgage obligations with the Rizal Commercial Banking Corporation (RCBC). After prodding from their mother, however, and at Felix’s request, Faustino agreed to deliver in advance an incomplete draft of Deed of Absolute Sale, which had not yet been notarized. While respondents themselves drafted the deed, the parties again agreed that the document would only be completed after full payment.

Thereafter, spouses Faustino and Gloria Chingkoe sent a demand letter to Felix and his wife asking them to vacate the premises, which they refused to do so. Subsequently, due to Felix’s refusal, Faustino and his wife filed a complaint for unlawful detainer.

In their answer, spouses Felix and Rosita Chingkoe claimed that they had already paid the property and presented a copy of a completed Deed of Absolute Sale. They also demanded for the surrender of the title to them as buyers and filed an action for specific performance.

Suggested Answer:

The action being prayed for by the spouses Felix and Gloria Chingkoe for specific performance will not prosper. The contract earlier executed by the parties was not one of sale but a document preparatory to an actual sale. In the present case, the petitioners made it appear in the draft of the Deed of Absolute Sale that there was a valid and consummated sale when in truth and in fact, there was none.

The contract entered into between the parties never consummated into a perfected contract of sale. A contract of sale is bilateral; both the contracting parties are bound to fulfill correlative obligations towards each other. When the deed of sale states that the purchase price has been paid, but in fact has never been paid, the deed of sale is null and void for lack of consideration.

RECIO vs ALTAMIROS

Nena Recio leased a parcel of land with improvements from Alejandro, Adelaida, Catalina, Alfredo and Francisco, all surnamed Altamiro (referred to as the Altamiros). Altamiros offered to sell the property to Recio but the sale did not materialize at that time due to the fault of the Altamiros.

Later on, Recio renewed her option to buy the subject property. Alejandro, who introduced himself as representing the other co-owners, conducted a series of negotiations with Recio. After said negotiations, the Altamiros through Alejandro entered into an oral contract of sale with Recio over the subject property.

Recio made partial payments and Alejandro duly received and acknowledged these partial payments through a receipt. Subsequently, Recio offered in many instances to pay the remaining balance of the agreed price of the subject property but Alejandro kept on avoiding her. Because of this, Recio demanded from the Altamiros through Alejandro, the execution of a deed of absolute sale in exchange for the full payment of the agreed price.

Pending the execution of the deed of absolute sale, Recio found out that the subject property has been subsequently sold to Spouses Lajarca. Recio asked for the annulment of the sale between the Altamiros and the Spouses Lajarca and demand for specific performance.

Altamiros refused to comply with the demand and claimed that the sale between Alejandro and Recio did not bind his co-owners because the sale of property

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by one purporting to be an agent of the others without any written authority from the latter is null and void and the sale between Alejandro and Recio only affects the pro indiviso share of Alejandro such that Recio will received only what corresponds to Alejandro’s undivided share in the subject lot. Decide.

Suggested Answer:

Recio may ask for an annulment of sale between Altamiros and Spouses Lajarca with respect only to the part of land corresponds to Alejandro. The oral contract of sale entered into between Alejandro and Recio was valid. A valid contract of sale requires: a) a meeting of minds of the parties to transfer ownership of the thing sold in exchange for a price; b) the subject matter; which must be a possible thing; and c) the price certain in money or its equivalent. All these elements are present in this case.

However, it was only Alejandro who agreed to the sale. There is no evidence showing that the other co-owners consented to Alejandro’s sale transaction with Recio. Absence of the consent of Alejandro’s co-owners holds that the sale between the other Altamiros and Recio is null and void. But the sale between Recio and Alejandro is valid insofar as the aliquot share of Alejandro is concerned. Being a co-owner, Alejandro can validly and legally dispose of his share even without the consent of all the other co-owner.

CADIZ vs NICOLAS

The Government granted a homestead patent to Domingo Cadiz over a piece of land containing an area of 22 hectares for which Original Certificate of Title No. I-4243 was issued on March 20, 1937, pursuant to the provisions of the Public Land Law. On December 26, 1939, Cadiz obtained a loan of P1, 000 from Francisco Nicolas which was evidenced by a public document subject to the condition that should Cadiz fail to pay the loan on February 28, 1942, he shall convey to Nicolas by absolute sale the entire homestead.

On December 8, 1941, the Pacific war broke out and as a result Cadiz and Nicolas failed to see each other until the month of February, 1943. As Cadiz was not then in a position to return the loan, he agreed to have a contract of sale executed. Although in said document it was stated that the consideration of the sale was the sum of P1,000.00, the same however was not actually paid by the vendee because it merely represented the loan which the vendor had previously contracted in December 1939. Nicolas sent the original and one copy of the deed of sale to the Secretary of Agriculture and Natural Resources for his approval as required by law, and after the same had been obtained, the original was brought to the Register of Deeds who issued the corresponding certificate of title in the name of the vendee, Francisco Nicolas.

On January 29, 1951, Domingo Cadiz, claiming that the deed of sale was either fictitious or null and void, commenced an action praying that the new title issued in the name of Francisco Nicolas be cancelled and that he be restored to the ownership and possession of his homestead. Nicolas claimed that there was a valid contract of sale since the deed of sale executed between

them was with consent of both and for a price certain. Decide.

Suggested Answer:

The contract of sale was null and void. Sec. 118 of Commonwealth Act 141 provides: “Except in favor of the Government or any of its branches, units, or institution, lands acquired under free patent or homestead provisions shall not be subject to encumbrance or alienation from the date of the approval of the application and for a term of five years from and after the date of issuance of the patent or grant, nor shall they become liable to the satisfaction of any debt contracted prior to the expiration of said period, but the improvements or crops on the land may be mortgaged or pledged to qualified persons, associations, or corporations.”

It clearly appears that the deed of sale in question comes under this prohibition. In the first contract evidencing the loan taken by Cadiz, it was expressly agreed that if said loan is not paid, Cadiz would be bound to sell the property to Nicolas for the same amount of the loan and true to this agreement, the deed of sale was executed. It also appears that the loan was obtained before the expiration of the 5-year period from the issuance of the patent. It cannot therefore be disputed that the sale was void ab initio regardless of whether all the requisites of a valid contract of sale were complied with since the land was sold to Nicolas practically to satisfy a debt contracted prior to said period which is the very event which the law seeks to prevent.

PHIL TRUST COMPANY vs ROLDAN

Mariano Bernardo, a minor, inherited 17 parcels of land from his deceased father. Respondent, Mariano’s 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. Philippine Trust Company 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. Is 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?

Suggested Answer:

The property sold by Roldan to Dr. Ramos and Emilio which was owned by her ward is null and void.Guardianship is a trust of the highest order, the trustee cannot be allowed to have any inducement to neglect his ward's interest and whenever the guardian acquires the ward's property through an intermediary, he violates the provision of Article 1491 of the Civil Code which states that the guardians cannot acquire by purchase, even at a public auction, either in a person or through the mediation of another the property under his guardianship. Hence, such transaction and subsequent ones emanating therefrom shall be annulled.

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HERNANDEZ vs VILLANUEVA

Francisco Villanueva, an attorney-in-fact of Florencia Anuran bought during the pendency of the case before the Supreme Court, a parcel of the land that was the subject-matter of the litigation he was conducting in consideration of P500 and the value of his professional services.

Sixto Hernandez, a third person filed a case against Atty. Villanueva alleging that the act of the latter is considered a breach of professional ethics and violation of law laid down for the guidance of attorney-at-law. Thus, he must be disbarred.

Villanueva argues that he purchased the interest of his client in good faith and he finally invites attention to the fact that the proceedings have been instituted not by the client, the injured party, but by a third person who has no interest to the sale. Decide.

Suggested Answer:

The contention of Hernandez is tenable. The Civil Code names the person who cannot take by purchase either in person or through the mediation of another. The prohibition is made to include lawyers with respect to any property or rights involved in any litigation in which they may take part by virtue of their professional and office.

A violation of the prohibition constitutes a breach of professional ethics and malpractice for which the lawyer may be reprimanded, suspended or disbarred from the practice of the legal profession. Good faith is not a defense.

Villanueva’s contention that Hernandez is not the injured party but a third person who has no interest to the sale therefore, not the proper party to question the sale is without merit. The proceeding is not in the nature of a civil action to nullify the transaction, but is a charge presented in the public interest in an effort to purge the legal profession of an undesirable member. Any citizen would be sufficient interest to justify him in bringing unprofessional conduct of any character to the attention of the proper authorities.

AQUILINO NIETES vs CA & DR, PABLO C. GARCIA

Petitioner Aquilino Nietes and respondent Dr. Pablo Garcia entered to a “Contract of Lease with Option to Buy” where the latter agreed to lease his Angeles Educational Institute to the former. The parties agreed to a rent of P 5,000.00 per year up to 5 years and that the lessor agrees to give the lessee an option to buy the land and the school building for P 100,000.00 within the period of the Contract of Lease. Instead of paying the lessor in the manner set forth in the agreement, Nietes made a subsequent series of payments. Further, he paid additional sums as advanced partial payment for the purchase of the property.

Thereafter, Dr. Garcia thru his counsel wrote Nietes informing him of his desire to rescind the contract

in view of non-fulfillment of the terms of the contract agreed upon.

On the other hand, Nietes, also thru his counsel, replied and maintained that he has not violated any provision of the contract and reiterated his willingness to pay the balance of the purchase price in accordance with the contract.

Meanwhile, Nietes deposited with the branch office of the Agro-Industrial Bank in Angeles City checks amounting to P 84, 860.50, a payment for the balance of the purchase price but later on withdrew said checks after they were cleared by the bank.

Thereafter, Nietes commenced a present action for specific performance of Dr. Garcia to execute in his favor the deed of absolute sale of the leased property, free from any lien or encumbrance whatsoever.

Dr. Garcia filed an answer admitting some allegations of the complaint and denying other allegations thereof, as well as setting up a counterclaim for damages.

Suggested Answer:

The contract did not provide such stipulation that the non-fulfillment of the terms of payment by the lessee will bar his option to buy the property. Accordingly the provision on reciprocal obligation between the contracting parties governed the contract agreed by both of them, which 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.

Moreover, in contracts of lease with option to buy, the creditor may validly and effectively exercise his right by merely advising the debtor of the former’s decision to buy and expressing his readiness to pay the stipulated price, provided that the same is available and actually delivered to the debtor upon execution and delivery by him of the corresponding deed of sale. In other words, notice of the creditor’s decision to exercise his option to buy need not be coupled with actual payment of the purchase price, so long as this is delivered to the owner of the property upon performance of his part of the agreement.

Thus, Nietes was entitled to exercise his option to buy within the period of the Contract of Lease when Dr. Garcia received the additional payments and issued the receipt indicating “partial payment on the purchase of the property as specified on the original contract of lease with option to buy”.

CRISTINA MARCELO DE BAUTISTA vs BRIGIDA MARCOSG.R. No. L-17072 October 31, 1961

In 1954, Brigida Marcos obtained a loan from Cristina Marcelo De Bautista, and to secure payment thereof, conveyed to the latter, by way of mortgage, a two-hectare portion of an unregistered parcel of land. It

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was provided on the deed of mortgage that it will only last for three years, and that the said mortgage would be released only upon payment of the principal loan without any interest.

Subsequently in 1956, the mortgagor Brigida Marcos filed, on behalf of the heirs of her deceased mother, an application for the issuance of a free patent over the land in question. The land was registered in her name in 1957.

When the loan remained unpaid after three years, Cristina went to court to demand payment thereof, or for the foreclosure of the mortgaged land. In defense, Brigida pointed out that the land in question was covered by a free patent and could not, therefore, be taken within five (5) years according to the Public Land Act. Decide the case.

Suggested Answer:

No, the mortgagee cannot foreclose the land in question.

The right of Cristina to foreclose her mortgage on the land in question depends not so much on whether she could take said land within the prohibitive period of five years from the issuance of Brigida’s patent for the satisfaction of the indebtedness in question, but on whether the deed of mortgage executed was valid and enforceable.

As provided for in Article 2085 of the NCC, the essential requisite for the validity of a mortgage is that the mortgagor must be the absolute owner of the thing mortgaged.

Thus, the mortgage, here in question, is void and ineffective, because at the time that it was constituted, the mortgagor, Brigida Marcos, was not yet the absolute owner of the land mortgaged and could not, for that reason; encumber the same to Cristina Marcelo De Bautista.

Furthermore, the mortgagor could not, by her subsequent acquisition of title over said land through the issuance of a free patent, validate and legalize the deed of mortgage under the doctrine of estoppel.

SPS. PLAZA V. LUSTIVA ET AL.G.R. NO. 172909 MARCH 5, 2014

On September 14, 1999, Vidal’s son and daughter-in-law, the spouses Silvestre O. Plaza and Elena Y. Plaza, sued the heirs of Barbara. They prayed that the said heirs be enjoined from unlawfully and illegally threatening to take possession of the subject property. According to the spouses, they acquired the land from Virginia Tuazon in 1997. Tuazon was the sole bidder and winner in a tax delinquency sale conducted by the City of Butuan on December 27, 1996.

In their answer, they pointed out that they were never delinquent in paying the land taxes and were in fact not aware that their property had been offered for public auction. Moreover, Tuazon, being a government employee, was disqualified to bid in the public auction, as stated in Section 89 of the Local Government Code of

1991. As Tuazon’s participation in the sale was void, she could have not transferred ownership to the petitioners.

Spouses Plaza argued, assuming that Tuazon, the sole bidder, was indeed disqualified from participating in the public auction, Section 18112 of the Local Government Code of 1991 finds application. Applying the law, it is as if there was no bidder, for which the City Government of Butuan was to be considered the purchaser of the land in auction. Therefore, when the petitioners bought the land, they bought it directly from the purchaser - City Government of Butuan - and not from Tuazon, as redeemers. Decide.

Suggested Answer:

The sale is void. Spouses Plaza may not invoke Section 18118 of the Local Government Code of 1991 to validate their alleged title. The law authorizes the local government unit to purchase the auctioned property only in instances where there is no bidder or the highest bid is insufficient. A disqualified bidder is not among the authorized grounds.

The redemption is null because the spouses redeemed the land from Tuazon who had no ownership to confer. By reason that there was no ownership transferred, the former were deemed to have never owned the property. Hence, they have no cause of action to possess the said land.

PEDRO RODRIGUEZ, ET AL., VSTRINIDAD MACTAL

The appellants Pedro, Catalina and Benigno Rodriguez, and the appellee Trinidad Mactal, are all heirs of Mauricia de Guzman. Trinidad Mactal was appointed as administratrix of the intestate estate of Mauricia de Guzman upon her death. Claims against the estate of Mauricia were reported which led Mactal to ask the Court to allow her to sell the property belonging to the estate and to use the proceeds to pay for the said claims. The court allowed her hence the land was sold to Silverio Choco.

More than two years later, Silverio Choco sold the same land to the spouses Pio Villar and Trinidad Mactal.

Appellants alleged that the sale was fictitious; that there was is a collusion between Silverio Choco and Trinidad Mactal. They insist that the administratrix bought the land indirectly through the mediation of Silverio Choco and that both sales should be annulled under the provision of article 1459 of the Civil Code.

The appellants also alleged that the order of the court authorizing the administrator to sell the land in question is null and void due to the fact that the motion of Trinidad Mactal was not accompanied by the written consent of the heirs or their duly authorized guardian under section 714 of the Code of Civil Procedure. Decide.

Suggested Answer:

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The sale is valid. There was no substantial proof to establish an agreement between Silverio Choco and Trinidad Mactal to effect that Choco should buy the property for the benefit of Mactal. The written consent of the parties is not a bar to prevent the court for granting the authority of the administrator to sell the property belonging to the intestate provided that the proceeds are paid for the debts and that it would be beneficial to the persons interested as amended under Act 3882.

According to the law, if there was no such agreement, either express or implied, then the sale cannot be set aside. Section 714 of the Code of Civil Procedure was already amended by Act No. 3882, which states that the court upon application of the administrator, and on written notice to the heirs or guardians, may grant him to sell, mortgage or encumber for the purpose of real estate, if it clearly appears that such encumbrance will be for the benefit of the person interested.

Even if there is no written consent from the heirs of their guardian such consent shall not prevent the court to grant the administrator the authority to sell the land, written notice is sufficient to grant such authority. The last paragraph of the Act states that it shall take effect on its approval and shall be applicable to all testamentary or intestate proceedings pending at the time of its approval, the records of the case shows that the intestate proceedings of Mauricia de Guzman is still pending in the Court hence the act shall apply.

CLAUDINE CHRISTINE A. VICENTE VS. PROBLEM

Antonio Medina and Antonia Rodriguez married in 1944 without any property. Antonio later acquired forest concession in Isabela. In 1949, Antonia engaged in lumber business. From 1949-1952, Antonio sold his logs to Antonia which the latter sold in Manila through an agent.

Upon assessment of their taxes, the collector of internal revenue considered the sale null and void, thus, an additional tax was assessed. The spouses protested the assessment claiming that they had prenuptial agreement of complete separation of properties. Is the contract of sale between Antonio and Antonia valid?

Suggested Answer:

The contract of sale between Antonio and Antonia was null and void. The express prohibition of Article 1490 states that “The husband and the wife cannot sell property to each other, except: First, when a separation of property was agreed upon in the marriage settlements; or second, when there has been a judicial separation of property under Article 191.

The validity of the pre-nuptial agreement of complete separation of property contended by the spouses is untenable. The spouses do not have any property before the marriage which would compel them to enter into the agreement and they did not act in accordance with it. Such material inconsistencies rendered their agreement as null and void.

VILLONCO REALTY COMPANY VS. BORMAHECOG.R. NO L- 26872 JULY 25,1975

James and his wife, Nadine, are the owner of lots 50, 51 and 52 located in Bgy. Punta Verde. James is the president of Jadine, Inc., dealer of mining equipments. The entire lots were occupied by Jadine, Inc. and adjacent to the property is the Kathniel Realty Company. Sometime in 2014 negotiations for the sale of the said lots were made between Daniel of Kathniel Realty Company and Jadine, Inc., represented by its president James, through the intervention of Ms. Pastillas, a real estate broker. James did not disclose that the said lots were conjugal properties of himself and his wife and that they were mortgaged to DBP. During negotiations the parties came into agreement on a P400 per square meter for the lots, a P100, 000 deposit as earnest money on the purchase of property which will become part of the property in the event that the sale is consummated and that the sale is to be consummated only after James have also consummated his purchase of another property located in Bgy. Laging Saklolo, which negotiations shall be known within 45 days. Daniel sent a check for the earnest money which was received by James. However, twenty six days after the signing of the contract of sale, James returned the check and rescinded the contract on the ground that the forty-five day period had already expired and the sale of the Bgy. Laging Saklolo property has not been consummated, but in fact James was aware that the property was already awarded to the Jadine, Inc. pending the signing of the deed of sale which was consummated after fifty-days. Was the contract of sale perfected; hence, both parties should comply with their obligation?

Suggested Answer:

Yes. According to article 1475 of the Civil Code “the contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. From the moment, the parties may reciprocally demand performance, subject to the provisions of the law governing the form of contracts”. Contracts are perfected by mere consent and from that moment the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all the consequences which, according to their nature, may be keeping with good faith, usage of law. Jadine’s acceptance of Kathniel Realty Company’s offer to purchase the lot in Punta Verde indubitably proves that there was a meeting of minds upon the subject matter and consideration of the sale. Therefore, on that date the sale was perfected and the parties should comply with their reciprocal obligations.

PHILIPPINE NATIONAL BANK VS.TERESITA TAN DEE, ANTIPOLO PROPERTIES, INC., AND

AFP- RSBS,INC.

In July 1994, respondent Teresita Tan Dee bought from respondent Prime East Properties Inc. (PEPI) on an instalment basis a residential lot located in Binangonan, Rizal, with an area of 204 square meters. Subsequently, PEPI assigned its rights over a 213,093 sqm. Property on August 1996, to respondent Armed Forces of the Philippines-Retirement and Separation Benefits System,

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Inc. (AFP-RSBS), which included the property purchased by Dee.

On September 10, 1996, PEPI obtained a P205,000,000.00 loan from petitioner Philippine National Bank, secured by a mortgage over several properties, including Dee’s property. The mortgage was cleared by the Housing and Land Use Regulatory Board (HLURB) on September 19, 1996.

After Dee’s full payment of the purchase price, a deed of sale was executed by respondents PEPI and AFP-RSBS on July 1998 in favor of Dee. Consequently Dee sought from the petitioner the delivery of the owner’s duplicate title over the property, to no avail. Thus, she filed with the HLURB a complaint for specific performance to compel the delivery of the title by the petitioner, PEPE and AFP-RSBS, among others.

The petitioner claims that it has a valid mortgage over Dee’s property. Respondent AFP-RSBS contends that it cannot be compelled to pay or settle the obligation under the mortgage contract and that they are not a privy to the mortgage. Decide.

Suggested Answer:

The contract between PEPI and Dee is a contract to sell, which eventually became a contract of sale after Dee’s full payment of the price

In a contract of sale, the parties’ obligation is plain and simple. The law obliges the vendor to transfer ownership of and to deliver the things that is the object of the sale. On the other hand, the obligation of the vendee to pay the full purchase price at the agreed time.

The transaction of PEPI and Dee is a contract to sell, hence upon full payment of the purchase price, PEPI is bound to transfer the ownership of the property to Dee. Although a mortgage exists, the order of the release of the mortgage is simply a consequence of Dee’s full payment of the purchase price.

At the time that PEPI mortgage the property, the contract between PEPI and Dee was still a Contract to Sell as Dee was not yet able to pay the purchase price. PEPI was still acting within its authority to mortgage the property because in a contract to sell ownership is retained. In the case of China Banking Corporation vs. Spouse Lozada, the Court affirmed the right of the owner to mortgage the property when the tile thereto still resides with the owner while waiting for the full payment of the purchase price. The price of the property was paid hence the rights of Dee over the property cannot be prejudiced.

COMPAÑERO V. COLOMAG.R. NO. L-11908 JANUARY 30, 1960

Filemeno Campanero owned a parcel of land by virtue of a Free Patent. Barely two years after the patent was issued, Campanero sold the lot to Ismael who caused the cancellation of the Original Certificate and the issuance of a Transfer of Certificate of Title in his favor. Five years after the sale, Apolonio Coloma bought the said

parcel of land from Asuncion without making any inquiries as to the legitimacy of the title and relied upon it as it appears in the Transfer of Certificate of Title of Asuncion. After the death of Companero, his heirs sued Coloma praying that the parcel of land be surrendered to them.

In his defense, Coloma contended that under the rule, a purchaser need not be required to make inquiries as to the legitimacy and legality of the title of the registered owner but may rely upon the title of such owner as it appears in the certificate of title. Is the sale valid?

Suggested Answer:

No. The sale is not valid. The rule cannot defeat the express policy of the State under the Public Land Act which prohibits the alienation of land of within five years from the date of the issuance of its patent. The purpose of the law cannot be contradicted. Landless citizens acquiring land of the public domain would soon revert to their former condition if not for the prohibition.

Companero sold the free patent within the five year prohibition imposed by the said law. Hence, the alienation of Companero was null and void. The alienation being null and void, Asuncion, the first purchaser acquired no title to the land. As he acquired no title thereto, he could not transmit any to Coloma, the second purchaser.

EXTRAORDINARY DEVELOPMENT CORPORATION, V. HERMINIA F. SAMSON-BICO and ELY B. FLESTADO

Apolonio Ballesteros and Maria Membrebe were husband and wife. They begot two (2) children, namely, Juan M. Ballesteros , who married Leonarda Tambongco and Irenea Ballesteros , who married Santiago Samson (Santiago). Juan and Leonarda begot six (6) children while Irenea and Santiago begot two (2) children. During his lifetime, Apolonio owned a parcel of land consisting of 29,748 square meters situated at Barangay Pantok, Binangonan, Rizal covered by Tax Declaration No. BI-030-1509. When Apolonio and Maria died, the property was inherited by Juan and Irenea. When the latter died, the heirs of Juan and Irenea became co-owners of the property.

On 16 April 2002, the heirs of Juan, without the consent of respondents, the heirs of Irenea executed in favor of petitioner EDC a Deed of Absolute Sale covering the subject property for P2,974,800.00. Prior to the sale, respondents claimed that they learned that the property had been the subject of a contract to sell between the heirs of Juan and EDC. On 7 March 2000, respondents wrote to EDC informing it of the existence of co-ownership over the subject property. EDC wrote back that it will look into the matter and asked respondents to further establish the basis of their claims.

EDC was able to cause the registration of the Deed of Absolute Sale and transfer the tax declaration over the subject property in its name. This prompted respondents to file the Complaint for Annulment of Contract and Tax Declaration No. 00-BI-030-3512 and Reconveyance of Possession with Damages.

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In its answer, EDC alleged that it is a buyer in good faith and for value of the subject property because it was of the honest belief that the heirs of Juan are the only heirs of the late Apolonio. On the other hand, the heirs of Juan asserted that respondents were aware of and were parties to the contract to sell entered into by them and EDC. Decide the case.

Suggested Answer:

The execution by appellants Ballesteros of the Deed of Absolute Sale over the subject property which they do not exclusively own but is admittedly co-owned by them together with the respondents, was valid only to the extent of the former’s undivided one-half share thereof, as they had no title or interest to transfer the other one-half portion which pertains to the respondents without the latter’s consent. It is an established principle that no one can give what one does not have – nemo dat quod non habet. Accordingly, one can sell only what one owns or is authorized to sell, and the buyer can acquire no more than what the seller can transfer legally. Thus, since appellant EDC’s rights over the subject property originated from sellers-appellants Ballesteros, said corporation merely stepped into the shoes of its sellers and cannot have a better right than what its sellers have. Indeed, a spring cannot rise higher than its source.

In a contract of sale, it is essential that the seller is the owner of the property he is selling. Under Article 1458 of the Civil Code, the principal obligation of a seller is to transfer the ownership of the property sold. Also, Article 1459 of the Civil Code provides that the thing must be licit and the vendor must have a right to transfer the ownership thereof at the time it is delivered.

EDC’s invocation of it being a buyer in good faith was not considered by the court. EDC knew that respondents were co-owners of the subject property because Herminia informed EDC of such fact through a letter dated 9 March 2000. Also, the subject property is an unregistered land and the defense of having purchased the property in good faith may be availed of only where registered land is involved and the buyer had relied in good faith on the clear title of the registered owner.

RAVVI D. VALLEDOR VS.ASSIGNMENT ON SALES – NOV. 2014

Sometime in 2014 Chito and Neri bought from Mang Kanor and Jill Rose half of lot 6969 and executed an Absolute Deed of Sale. The following month Mang Kanor and Jill Rose mortgaged the remaing half to Chito and Neri via a Real State Mortgage Agreement but later agreed to sell the remaining half of lot 6969 and executed another deed of absolute sale for the whole lot. Out of pity, Chito and Neri allowed Mang Kanor and Jill Rose to retain possession subject to the condition that the latter would deliver half of the produce of the land. However in 2015 Mang Kanor and Jill Rose stopped delivering the produce and claimed ownership of the land averring that they did not sell lot 6969 and explained that they merely mortgaged the same to Chito and Neri after the latter helped them redeem the land from the Prontera National Bank (PNB).Chito and Neri filed a case for recovery of

ownership and possession. Was there an absolute sale or equitable mortgage? Decide with reason.

Suggested Answer:

There is equitable mortgage. According to Article 1602 of the Civil Code “the contract shall be presumed to be an equitable mortgage, in any of the following cases:

1. When the price of a sale with right to repurchase is unusually inadequate;2. When the vendor remains in possession as lessee or otherwise;3. When upon or after the expiration of the right to repurchase another instrument extending the period of redemption or granting a new period is executed;4. When the purchaser retains for himself a part of the purchase price;5. When the vendor binds himself to pay the taxes on the thing sold; 6. In any other case where it may be fairly inferred that the real intention of the parties is that the transaction shall secure the payment of a debt or the performance of any other obligation.

In any of the foregoing cases, any money, fruits, or other benefit to be received by the vendee as rent or otherwise shall be considered as interest which shall be subject to the usury laws." and Article 1604 of the Civil Cod which states that “the provisions of Article 1602 shall also apply to a contract purporting to be an absolute sale”. In the case Mang Kanor and Jill Rose, who were the former owner of the lot, was allowed to remain in possession of the lot and applying the provisions of art. 1602 par. 2 and art. 1604 the transaction between the parties of the present case is actually one of equitable mortgage pursuant to the foregoing provisions of the Civil Code. Hence, ownership should still lie with Mang Kanor and Jill Rose there being only presence of equitable mortgage and not of an absolute sale of lot 6969.

MONASTERIO-PE vs TONGG.R. No. 151369 March 23, 2011

Sps. Romulo Tan and EdithaPe-Tan (Spouses Tan)are occupying the house standing on a parcel of land owned by Jose Juan Tong without any contract of lease nor are they paying any kind of rental.

Tong, in a letter, demanded that respondents vacate the house they were occupying, but despite the receipt of the said letter they failed and refused to vacate the same.

They alleged that Tong is not the real owner of the disputed property, but is only a dummy of a certain alien named Ong Se Fu, who was not qualified to own the said lot and, as such, Tong's ownership is null and void. Petitioners are the true and lawful owners of the property in question and by reason thereof they need not lease nor pay rentals to anybody.

It has been established that petitioner spouses validly executed a deed of sale covering the subject parcels of land in favor of Tong after the latter paid the

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outstanding account of the former with the Philippine Veterans Bank.

They contended, however, that Tong had no cause to recover the possession of the property because there was no delivery of the subject lot after the deed was executed. But the contract did not contain any stipulation to this effect. Decide.

Suggested Answer:

Respondent has no cause of action to recover physical possession of the subject properties on the basis of a contract of sale because the thing sold was never delivered to the latter.

Article 1498 of the Civil Code provides that when the sale is made through a public instrument, the execution thereof shall be equivalent to the delivery of the thing which is the object of the contract, if from the deed the contrary does not appear or cannot clearly be inferred. In the instant case, petitioners failed to present any evidence to show that they had no intention of delivering the subject lots to respondent when they executed the said deed of sale. Hence, petitioners' execution of the deed of sale is tantamount to a delivery of the subject lots to respondent. The fact that petitioners remained in possession of the disputed properties does not prove that there was no delivery, because as found by the lower courts, such possession is only by respondent's mere tolerance.

DOMINGO CARABEO VS SPS. NORBERTO AND SUSAN DINGCO

G.R. No. 190823, April 4, 2011

Domingo Carabeo entered into a contract denominated as “Kasunduan sa Bilihan ng Karapatan sa Lupa” with Spouses Norberto and Susan Dingco whereby the former agreed to sell his rights over a 648 square meter parcel of unregistered land for P38,000.00.

Upon the signing of the contract, Spouses Dingco paid an initial amount of P10,000 and the remaining balance would be paid at a later date. However, when they were about to pay the balance, Carabeo refused to accept the amount due to an on-going dispute over the land. Nevertheless, they occasionally gave Carabeo small sums of money which totaled P9,100. These amounts were allegedly given due to the request of the latter.

Despite Spouses Dingco’s insistence of paying the remaining balance of P19,800, Carabeo remained firm in his refusal. He reasoned that he would register the land first. However, when the dispute was finally settled and the registration of the land was made, the latter still declined to accept the payment.

When the matter reached the court, Carabeo alleged that the sale was void for lack of object certain because the ‘kasunduan’ does not specified the metes and bounds of the land.

In addition to that, he alleged that assuming that the validity of the kasunduan is upheld, Spouses Dingco failed to comply with their reciprocal obligation in paying

the balance of the P28,000 on September 1900. Thus, forcing him to accept the installment payments. Decide on the validity of the sale.

Suggested Answer:

The contract of sale is valid. The requirement that a sale must have for its object a determinate thing is satisfied as long as, at the time the contract is entered into, the object of the sale is capable of being made determinate without the necessity of a new or further agreement between the parties.

In this case, even though the kasunduan did not specify the technical boundaries of the property subject of sale, it did not render the sale a nullity. It is clear in the pertinent portion of the kasunduan, that the object of sale is determinate. Hence, the requirement of law is satisfied.

Therefore, Carabeo must transfer his rights over the land to Spouses Dingco by executing a Deed of Sale thereof after he received the payment for the balances.

DEVELOPMENT BANK OF THE PHILIPPINES vs MEDRANO G.R. No. 167004, February 7, 2011

Petitioner DBP sought to consolidate its ownership in Paragon Paper Industries where Ben Medrano served as president and general manager. Medrano was then instructed to convince the minority stockholders to sell their shares to DBP at P65.00 per share, or 65% of the stock’s par value of P100.

Medrano was able to convince all, except one, to sell their shares. They made proposals to DBP who approved the sale through a resolution, subject to the following terms and conditions: (1) that prior to the implementation of the approval, 57,596 shares of Paragon’s stock issued to the stockholders concerned shall first be surrendered to the DBP; (2) that all the parties concerned shall give their written conformity to the arrangement; and (3) that the transaction shall be implemented within forty-five (45) days from the date of approval; otherwise, the same shall be deemed canceled. Medrano then indorsed and delivered to DBP all his 37,681 shares which had a value of P2,449,265.00.

Thereafter, Medrano demanded that DBP pay the value of his shares, which he had already turned over, and his commission. When DBP did not heed his demand, Medrano filed a complaint for specific performance and damages against DBP.

DBP filed an answer arguing that there was no perfected contract of sale as the three conditions in the DBP resolution were not fulfilled. Likewise, certain minority stockholders owning 17,635 shares refused to sell their shares. Hence, DBP has a legal right to cancel the sale. Will Medrano’s complaint for specific performance and damages against DBP prosper?

Suggested Answer:

No. Medrano’s complaint for specific performance and damages against DBP must fail because there was no perfected contract.

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As a rule, a contract of sale is perfected the moment there is a meeting of the minds on the thing which is the object of the contract and on the price. There is a meeting of the minds when there is a meeting of the offer and the acceptance upon the thing and the cause that constitute the contract. The law also requires that the offer must be certain and the acceptance absolute and unqualified. An acceptance of an offer may be express and implied; a qualified offer constitutes a counter-offer.

A qualified acceptance or one that involves a new proposal constitutes a counter-offer and a rejection of the original offer. A counter-offer is considered in law, a rejection of the original offer and an attempt to end the negotiation between the parties on a different basis.

In the present case, Medrano’s offer to sell the shares of the minority stockholders at the price of 65% of the par value was not absolutely and unconditionally accepted by DBP. DBP imposed several conditions to its acceptance and these conditions are contemplated by law as a counter-offer and a rejection of the original offer. Hence, there was no birth of a perfected contract of sale between the parties.

SPS. MANILA vs SPS. GALLARDOG.R. NO. 163602 September 7, 2011

Ederlinda Gallardo (lessor) leased two parcels of land to Eugolia Manila (lessee) for a period of ten years at monthly rentals of P2,000.00 for the first two years. They also agreed that lessee shall have the option to buy the property within two years from the execution of the contract of lease at a fair market value of P150,000.00.

The contract of lease expired but the lessee continued in possession of the property despite of a formal demand letter to vacate the same and pay the rental average.

Lessee claimed that no rental fee is due because she became the owner of the property at the time she communicated her desire to exercise to buy the said property.

Decide if the contract was perfected by mere communication the desire to exercise such right.

Suggested Answer:

A unilateral promise to buy or sell does not bind the parties even if accepted and may be withdrawn at any time. It is only if the promise is supported by a consideration distinct and separate from the price that its acceptance will give rise to a perfected contract.

BEAUMONT VS PRIETOG.R. No. L-8988 March 30, 1916

Atty. Valdes, in a letter, gave W. Borck an option for three months to buy the property of Benito Legarda for the price of its assessed government valuations. Valdes was Legarda’s attorney-in-fact.

During the three-month period, Borck, in writing, accepted the terms of said offer and even offered to pay the stipulated price. But despite his repeated demands, Valdes refused to execute the deed of sale.

When the matter was brought to court, the respondents claim that they could not be obligated to execute the sale because the agreement with Borck was merely an offer to sell and not an option contract.

It was also alleged that the offer had been withdrawn before Borck made his acceptance. Based on the letter given by Valdes to Borck, the latter has an option for three months to buy the property of Legarda for the price of its assessed government valuation.

Decide whether the agreement was an option contract or an offer or promise to sell and rule on the contentions of the parties.

Suggested Answer:

In the case at bar, it is immaterial whether the letter is considered an option granted by Valdes to Borck or as an offer or promise on the part of the former to sell the estate to the latter.

Referring particularly to the sale of real estate, there is in fact practically no difference between a contract of option to purchase land and an offer or promise to sell it. In both cases, the purchaser has the legit to decide whether he will buy the land, and that right becomes a contract when it is exercised or when use is made of the option or when the offer or promise to sell the property is accepted in conformity with the terms and conditions specified in such option, offer or promise.

Furthermore, the withdrawal of the offer made by Valdes could not annul the acceptance by Borck.The offer or promise to sell contained a specific period of time. As Borck had a right to accept the offer during that period, it was Valdes’ corresponding duty not to withdraw the offer during the same period. Therefore, the withdrawal of the offer claimed to have been made by Valdes was null and void.

ZAYCO VS SERRAG.R. L-18335 January 10, 1923

Lorenzo Zayco and Salvador Serra entered into a contract which gave the former an option to buy the Palma Central Estate from the latter for the sum of P1,000,000.00. It was stipulated in the contract that should Zayco fail to pay the whole price, he would be given a period not exceeding three years within which to make the full payment.

Zayco conveyed his acceptance and tendered P100,000.00 as partial payment for the price of the Palma Central.

However, Serra cancelled the option contract, alleging that it was null and void because it did not specify the part of the price that was to be paid in cash and the part that was to be paid within the three-year period.

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Zayco, on the other hand, contended that his acceptance was legally sufficient to generate a perfect contract. As such, Serra was obligated to sell the property to him. Decide.

Suggested Answer:

The acceptance made by Zayco could not, in itself, convert the offer of Serra into a perfect contract. In order for the acceptance to have this effect, the law requires that it must be absolute and unconditional. A qualified acceptance constitutes a counter-offer which implies the absence of the meeting of minds.

It should be noted that according to the contract in question, part of the purchase price was to be paid in cash. But the amount of this first payment was not determined.

Consequently, when Zayco tendered the sum of P100,000.00 as first payment, his acceptance constituted a proposal that this amount should be the amount of the first payment, because it was not contained in the first offer.

For this reason, Zayco’s acceptance did not imply conformity with the offer of Serra. Hence, it could not convert Serra’s offer into a perfect contract.

SPS.SABITSANA VS. JUANITO MUERTEGUIG.R. No. 181359 August 5, 2013

Alberto Garcia executed an unnotarized Deed of Sale in favor of respondent Juanito Muertegui over a 7,500 sq. meter parcel of covered by a Tax Declaration issued in Garcia's name.Juanito's father Domingo Muertegui, Sr. and brother Domingo Jr. took actual possession of the lot and planted thereon coconut and ipil-ipil trees. They also paid the real property taxes on the lot for eight years.

Garcia subsequently sold the lot to the Muertegui family lawyer, petitioner Atty. ClemencioSabitsana, Jr. through a notarized deed of absolute sale and the sale was registered. When Domingo Sr. passed away, his heirs applied for registration and coverage of the lot under the Public Land Act of Commonwealth Act No.141.

Atty. Sabitsana, on the other hand, claimed that he was the true owner of the lot.

Juanito, through his attorney-in-fact Domingo Jr., then filed a civil case for quieting of title and preliminary injunction ,against herein petitioner Atty. Sabitsana and his wife Rosario,claiming that they bought the land in bad faith. Decide.

Suggested Answer:

Juanito has a better right to the lot. The sale to respondent Juanito was executed via an unnotarizeddeedof sale, while the sale to petitioners was made via a notarized document ten years thereafter. Thus, Juanito who was the first buyer has a better right to

the lot while the subsequent sale to petitioner is null and void, because when it was made, the seller Garcia was no longer the owner of the lot.

The fact that the sale to Juanito was not notarized does not alter anything, since the sale between him and Garcia remains valid nonetheless. Notarization is only for convenience, and not for validity or enforceability.

Nor can petitioner's registration of their purchase have any effect on Juanito's rights. The mere registration of a sale in one's favor does not give him any right over the land if the vendor was no longer the owner of the land. Registration does not vest title; it is merely the evidence of such title.

LUIS ASIAIN vs.BENJAMIN JALANDONI45 Phil 296

Asiain and Jalandoni owned adjacent haciendas in La Carlotta, Negros Occidental. In May 1920, Asiain told Jalandoni that he was willing to sell a portion of his hacienda for Php 55,000. Asiain assured that the land in question contained 25-30 hectares, and that the crop of sugarcane then planted would produce not less than 2,000 piculs of sugar. As Jalandoni remained doubtful about the actual size of the land throughout the negotiations, Asiain repeatedly reassured him.

They entered into a memorandum of agreement for a “Purchase of land…containing 25 hectares more or less of land..”Jalandoni paid 30,000 upon signing. Once in possession of the land, he had the sugarcane ground and the land surveyed. The output was 80 piculs and the land area was 18.5 hectares.

Because the balance remained unpaid, Asiain filed an action either to recover the sum of Php 25,000, or to obtain the certificate of title plus mutual restitution, plus damages. Jalandoni, in an answer and counter-complaint he interposed, asked that he be absolved from the complaint, the contract be annulled, both parties to return whatever they had received and that he recover from the Asiain the sum of Php 3,600.00 annually as damages. Decide.

Suggested Answer:

The agreement between the parties is inoperative and void. It was a sale in gross in which there was a mutual mistake as to the quantity of the land sold and as to the amount of the standing crop.

A vendee of land when it is sold in gross or with the description "more or less" does not thereby ipso facto take all risk of quantity in the land. The use of "more or less" or similar words in designating quantity covers only a reasonable excess or deficiency. Mutual mistake of the contracting parties to sale in regard to the subject-matter of the sale which is so material as to go to the essence of the contract, is a ground for relief and rescission.

In this case, there is cleary gross deficiency. The mistake with reference to the subject matter of the

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contract is such that, at the option of the purchaser, it is rescindable. Without such mistake the agreement would not have been made. It is not exactly a case of over reaching on Asiain's part, or of misrepresentation and deception, or of fraud, but is more nearly akin to a bilateral mistake for which relief should be granted. Specific performance of the contract can therefore not be allowed at the instance of the vendor.

Hence, the agreement is not valid. The ultimate result is to put the parties back in exactly their respective positions before they became involved in the negotiations and before the accomplishment of the agreement. Without prejudice to the right of Asiain to collect the amount of rent from Jalandoni for the period the land is in his possession.

ESTEBAN BARRETTO vs. THE MANILA RAILROAD CO. G.R. No. L- 313 March 29, 1924

The Manila Railroad company, through an agent, Mr J.C. Miller, offered to purchase a house owned by Esteban Barretto for the sum of P3,700.00. The latter accepted the offer.

On day that the deed of sale was executed, he was told to come back to Miller’s office in the afternoon to receive the purchase price.

He left the deed with Miller but when he returned, he was told that the general manager was absent and that the money could not be paid until the latter's return. He made several other unsuccessful attempts to collect the purchase money and finally Miller handed him the deed to keep until arrangements could be made for the payment.

Mr Barretto filed a complaint alleging the refusal to pay the purchase price upon the delivery of the deed to an agent of the Manila Road Company.

Manila Railroad denied the allegations and set up as a special defense that the agreement referred to by the plaintiff was not in writing and therefore is not enforceable under the Statute of Frauds. Decide.

Suggested Answer:

The defense of Manila Railroad Company is tenable because the delivery of the deed of sale by Barreto to an agent is not equivalent to constructive delivery of property thereby taking the oral contract of sale out of the context of the Statute of Frauds.

It is well settled in a long list of jurisprudence that the delivery of the deed to the agent of the vendee, with no intention to part with the title, does not take the case out of the Statute of Frauds.

In the present case it is very clear that there was no delivery of the deed with the intention to part with the title until the purchase price was paid. It is equally clear that there was no final acceptance of the deed as shown by the fact that the deed was returned to the plaintiff and that retained the same.

MIGUEL VS CATALINO

A sold a parcel of land to B for P300.00 in 1928. No formal deed of sale has been executed. But since 1928, or more than 30 years B, had been possession of the land in concept of owner.

In 1962 or 30 years after the sale, the heirs of A filed a suit for the recovery of the said land. Contending that the sale was void for lack of consent of the governor and without their knowledge and consent had unlawfully take the possession of the land.

B and his heirs contend that they had the possession of the land for 30 years, that the action to nullify the sale has already prescribe, B and his son invoke laches as a defense.

Suggested Answer:

A sold the land in 1928, but the sale was void lack of governor’s approval. The vendor and his heirs after him, could have instituted an action to annul the sale from that time they knew of the invalidity of the sale, they did not have to wait for 30 years to institute suit.

They cannot claim such land to benefit their own fault delay and inaction knowingly to induce another to spend time, effort and expense in cultivating the land and making improvements thereon for 30 long years only to spring from an ambush claim when possessor’s effort and the rise of land’s value offer an opportunity to make easy profit at his expense.

KEMPIS VS. GONZALEZ

On January 14, 1963, respondent Guillerma Gonzales filed a complaint for specific performance against defendant People's Homesite and Housing Corporation (PHHC). She alleged among others that by virtue of the award by PHHC in her favor of the subject lot in question, she tendered and paid to defendant the sum of NINE HUNDRED AND THIRTY PESOS (P930.00) as a pre-requisite for the sale of said lot in her favor. Respondent prayed that the court order PHHC to execute the corresponding Conditional Contract to Sell.PHHC failed to execute the Conditional Contract to Sell due to the claims of Zorahayda G. Kempis, petitioner herein, and Jose Egobia over the lot in question, to the effect that even before the said lot was awarded to the plaintiff they were already occupying the same as squatters since 1950, having their houses thereon and having introduced therein other improvements.

Petitioners alleged that at the time the respondent applied for the purchase of the lot in question, respondent was a minor, a mere student, without any property or source of income of her own, and as such not qualified to purchase the lot in question. Decide

Suggested Answer:

The award of the lot in question by PHHC to Gonzales does not constitute a perfected contract of sale

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which bestows upon the awardee the incontrovertible right to compel the PHHC to convey the lot to her.

Well settled is the rule that an award of this nature is not in itself a perfected contract of sale, the same being still subject to revocation in case the applicant is found not to possess the necessary qualifications. Since the respondent was still a minor, a mere student and without means of self-support when she was awarded the lot under litigation. She was, therefore, disqualified to acquire the lot.

The spouses Kempis, on the other hand, meet all the qualifications prescribed by the PHHC, being the actual occupants of the lot in question since 1950. The position of petitioner Kempis fits squarely into the pattern of the case of Guardino vs. Encarnacion, where the Court gave preference to the actual occupant as against the applicant-awardee who was not occupying the lot.

PAREDES VS ESPINO22 SCRA 1000, March 13,1968

Jose Espino was the owner of lot No. 67 covered by TCT No. 62 containing an area of one thousand eight hundred twenty six ( 1,826) square meter. On April 27 and April 29, both 1964, Cirilo Paredes, through a letter addressed to Jose Espino, made an offer to buy the Lot No. 67 at P 4.00 a square meter.

On May 18, 1964, Mr. Espino , through a letter signed by him accepted the offer of Paredes at P4.00 a square meter for lot No. 67 which contains one thousand eight hundred twenty six ( 1,826) square meter and on cash basis. It is also stated in the letter that the defendant and his wife are going to Puerto Princesa in order to facilitate the transaction of the sale. The defendant also sent a telegram advising the plaintiff of his arrival by boat about last week of May 1964.

Defendant upon arrival had refused to execute the deed of sale although plaintiff was able and willing to pay the price prompting Paredes to file a complaint praying that Espino be compelled to execute a deed of sale in his favor contending that the defendant had entered into sale and it had been closed by letter and telegram.

Espino filed a motion to dismiss alleging that since the contract was not in writing, it is unenforceable under the Statutes of Frauds. Decide.

Suggested Answer:

The contract is enforceable; Mr. Espino must be compelled to execute the deed of sale.

The Statute of Frauds, embodied in Article 1403 of the Civil Code of the Philippines, does not require that the contract itself be in writing. The plain text of Article 1403, paragraph (2) is clear that a written note or memorandum, embodying the essentials of the contract and signed by the party charged, or his agent, suffices to

make the verbal agreement enforceable, taking it out of the operation of the statute.

The letter and telegram made by the defendant constitute an adequate memorandum of the transaction. They are signed by the defendant; refer to the property sold as a lot in Puerto Princesa, Palawan, covered, by TCT No. 62; give its area as 1826 square meters and the purchase price of four (P4.00) pesos per square meter payable in cash.

All the essential terms of the contract are present satisfying the requirements of the Statute of Frauds. Therefore, the contract is enforceable; Espino should therefore execute the deed of sale in favor of the plaintiff.

STARBRIGHT SALES ENTERPRISES, INC., VS PHILIPPINE REALTY CORPORATION, MSGR. DOMINGO A. CIRILOS,

TROPICANA PROPERTIES AND DEVELOPMENT CORPORATION AND STANDARD REALTY CORPORATION

G.R. NO. 177936 JANUARY 2012

On April 17, 1988 Ramon Licup wrote Msgr. Domingo A. Cirilos, offering to buy three contiguous parcels of land in Paraaque that The Holy See and Philippine Realty Corporation (PRC) owned for P1,240.00 per square meter. Licup accepted the responsibility for removing the illegal settlers on the land and enclosed a check for P100,000.00 to close the transaction. He undertook to pay the balance of the purchase price upon presentation of the title for transfer and once the property has been cleared of its occupants.

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 Licups stop-order payment. 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. SSEs representatives, Mr. and Mrs. Cu, did not sign the letter. On November 29, 1988 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. On January 24, 1989 SSE replied with an updated proposal.It would be willing to comply with Msgr. Cirilos condition provided the purchase price is lowered to P1,150.00 per square meter.

On January 26, 1989 Msgr. Cirilos wrote back, rejecting the updated proposal. He said that other buyers were willing to acquire the property on an as is, where is basis atP1,400.00 per square meter. He gave SSE seven days within which to buy the property at P1,400.00 per square meter, otherwise, Msgr. Cirilos would take it that SSE has lost interest in the same. He enclosed a check for P100,000.00 in his letter as refund of what he earlier received.

On February 4, 1989 SSE wrote Msgr. Cirilos that they already had a perfected contract of sale in the April 17, 1988 letter which he signed and that, consequently, he could no longer impose amendments such as the

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removal of the informal settlers at the buyers expense and the increase in the purchase price.

SSE claimed that it got no reply from Msgr. Cirilos and that the next thing they knew, the land had been sold to Tropicana Properties on March 30, 1989. On May 15, 1989 SSE demanded rescission of that sale. Meanwhile, on August 4, 1989 Tropicana Properties sold the three parcels of land to Standard Realty.

Its demand for rescission unheeded, SSE filed a complaint for annulment of sale and conveyance with damages.

Suggested Answer:

In the present case, the parties’ agreement cannot be constituted a perfected contract of sale. Because there is no meeting of the minds between the parties, which one of the essential elements of a contract to sale. The essential elements of a contract of sale are the following: first is the consent, or meeting of minds between the parties. Second, is an object certain which is the subject matter of the contract; and third, the cause of the obligation which is established. Absence of one of these elements may not constitute a perfected contract to sale.

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.

On April 17, 1988 the letter between Licup and Msgr. Cirilos, the representative of the propertys owners, constituted a perfected contract. When Msgr. Cirilos affixed his signature on that letter, he expressed his conformity to the terms of Licups offer appearing on it. There was meeting of the minds as to the object and consideration of the contract. But the proposed substitution of Licup by SSE opened the negotiation stage for a new contract of sale as between SSE and the owners. The succeeding exchange of letters between SSE and the owners attests to an unfinished negotiation.

On the other hand, regarded SSEs first letter to Msgr. Cirilos as an updated proposal. Which party would undertake to evict the occupants on the property and how much the consideration must be for the property. These are clear indications that there was no meeting of the minds between the parties. As it turned out, the parties reached no consensus regarding these issues. Thus, producing no perfected contract of sale.

With regards to the P100,000.00 that was given to Msgr. Cirilos as deposit cannot be considered as earnest money. Because the parties merely exchanged offers and counter-offers, no contract is perfected since they did not yet give their consent to such offers. Earnest money applies to a perfected sale.

RABAT V. PHILIPPINE NATIONAL BANKG.R. NO. 158755 JUNE 18, 2012

In 1980, the spouses Francisco and Merced Rabat (spouses Rabat) was granted a medium-term loan by the Philippine National Bank (PNB) in the amount of P4M to mature three years from the date of implementation. Subsequently, the spouses Rabat signed a Credit Agreement and executed a Real Estate Mortgage over 12 parcels of land which stipulated that the loan would be subject to interest at the rate of 17% per annum, plus the appropriate service charge and penalty charge of 3% per annum on any amount remaining unpaid or not renewed when due. A few months later, the spouses Rabat executed another document denominated as “Amendment to the Credit Agreement” purposely to increase the interest rate from 17% to 21% per annum, inclusive of service charge and a penalty charge of 3% per annum to be imposed on any amount remaining unpaid or not renewed when due.

They also executed another Real Estate Mortgage over 9 parcels of land as additional security for their medium-term loan of P4 M.

The several availments of the loan accommodation on various dates by the spouses Rabat reached the aggregate amount of P3,517,380, as evidenced by several promissory notes. Spouses RABATs failed to pay their outstanding balance on due date. Thus, the PNB filed a petition for the extrajudicial foreclosure of the real estate mortgage executed by the spouses Rabat.

After due notice and publication, the mortgaged parcels of land were sold at a public auction held on February 1987 and April 1987. The PNB was the lone and highest bidder with a bid of P3,874,800. As the proceeds of the public auction were not enough to satisfy the entire obligation of the spouses Rabat, the PNB sent demand letters. Upon failure of the spouses Rabat to comply with the demand to settle their remaining outstanding obligation which then stood at P14,745,398.25,including interest, penalties and other charges, PNB eventually filed a complaint for a sum of money before a Regional Trial Court.

PNB contended that it is entitled to recover the deficiency from spouses Rabat. Decide.

Suggested Answer:

PNB is entitled to recovery. It is settled that if the proceeds of the sale are insufficient to cover the debt in an extrajudicial foreclosure of the mortgage, the mortgagee is entitled to claim the deficiency from the debtor. For when the legislature intends to deny the right of a creditor to sue for any deficiency resulting from foreclosure of security given to guarantee an obligation it expressly provides as in the case of pledges and in chattel mortgages of a thing sold on installment basis. Act No. 3135, which governs the extrajudicial foreclosure of mortgages, while silent as to the mortgagee’s right to recover, does not, on the other hand, prohibit recovery of deficiency. Accordingly, it has been held that a deficiency claim arising from the extrajudicial foreclosure is allowed. There should be no question that PNB was legally entitled to recover the penalty charge of 3% per annum and attorney’s fees equivalent to 10% of the total amount due.

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The documents relating to the loan and the real estate mortgage showed that the spouses Rabat had expressly conformed to such additional liabilities; hence, they could not now insist otherwise. To be sure, the law authorizes the contracting parties to make any stipulations in their covenants provided the stipulations are not contrary to law, morals, good customs, public order or public policy. Equally axiomatic are that a contract is the law between the contracting parties, and that they have the autonomy to include therein such stipulations, clauses, terms and conditions as they may want to include.

Inasmuch as the spouses Rabat did not challenge the legitimacy and efficacy of the additional liabilities being charged by PNB, they could not now bar PNB from recovering the deficiency representing the additional pecuniary liabilities that the proceeds of the forced sales did not cover all the existing obligations.

UNION BANK OF THE PHILIPPINES VS. MAUNLAD HOMES, INC.

G.R. NO. 190071 AUGUST 15, 2012

Union Bank is the owner of a commercial complex. Sometime in August 2002, Union Bank, as seller, and Maunlad Homes, Inc. (Maunlad Homes), as buyer, entered into a contract to sell involving the Maunlad Shopping Mall. The contract set the purchase price at P151 million, P2.4 million of which was to be paid by Maunlad Homes as down payment payable on or before July 5, 2002, with the balance to be amortized over the succeeding 180-month period.Under the contract, Union Bank authorized Maunlad Homes to take possession of the property. In the event of rescission due to failure to pay or to comply with the terms of the contract, Maunlad Homes will be required to immediately vacate the property and must voluntarily turn possession over to Union Bank.

When Maunlad Homes failed to pay the installments at the stipulated time, Union Bank sent the former a notice demanding payment of the installments and requiring that the subject property be vacated and its possession turned over to the bank as well as the rescission of the contract.

Maunlad Homes refused to vacate the property by claiming, among others, that it is the owner of the property as Union Bank did not reserve ownership of the property under the terms of the contract. By virtue of its ownership, Maunlad Homes claimed that it has the right to possess the property.

The Union Bank filed a complaint to claim ownership and possession of said property. Union Bank claimed that it never lost ownership over the property despite the execution of the contract, since only the right to possess was conceded to Maunlad Homes under the contract; Union Bank never transferred ownership of the property to Maunlad Homes. Because of Maunlad Homes’ failure to comply with the terms of the contract, Union Bank believes that it rightfully rescinded the sale, which rescission terminated Maunlad Homes’ right to possess the subject property. Decide.

Suggested Answer:

Maunlad Homes has to return the possession of said property to Union Bank.

Maunlad Homes acquired possession of the property based on its contract with Union Bank. While admitting that it suspended payment of the installments, Maunlad Homes contended that the suspension of payment did not affect its right to possess the property because its contract with Union Bank was one of sale and not to sell; hence, ownership of the property has been transferred to it, allowing it to retain possession notwithstanding nonpayment of installments. The terms of the contract, however, do not support this conclusion.

Jurisprudence has established that where the seller promises to execute a deed of absolute sale upon the completion by the buyer of the payment of the price, the contract is only a contract to sell.” The presence of this provision generally identifies the contract as being a mere contract to sell. After reviewing the terms of the contract between Union Bank and Maunlad Homes, we find no reasonable ground to exempt the present case from the general rule; the contract between Union Bank and Maunlad Homes is a contract to sell.

In a contract to sell, the full payment of the purchase price is a positive suspensive condition whose non-fulfillment is not a breach of contract, but merely an event that prevents the seller from conveying title to the purchaser. “The non-payment of the purchase price renders the contract to sell ineffective and without force and effect.” Maunlad Homes’ act of withholding the installment payments rendered the contract ineffective and without force and effect, and ultimately deprived itself of the right to continue possessing Maunlad Shopping Mall.

FILINVEST LAND, INC. VS ABDUL BACKY, ET ALG.R. NO. 174715

OCTOBER 11, 2012

The Ngilays, Andongs, Esquevels and Bantangans were grantees of agricultural public lands located in Tambler, General Santos City through Homestead and Fee patents sometime in 1986 and 1991.

Negotiations for the sale of the properties covered by the patents were made by Filinvest with the Ngilays sometime in 1995. Eventually, a Deed of Conditional Sale of the properties in favor of Filinvest was executed.

Upon its execution, the Ngilays were asked to deliver to Filinvest the original owner's duplicate copy of the certificates of title of their respective properties. The Ngilays received the downpayment for the properties on October 28, 1995.

A few days after the execution of the aforestated deeds and the delivery of the corresponding documents to Filinvest, the Ngilays came to know that the sale of their properties was null and void, because it was done within the period that they were not allowed to do so and that the sale did not have the approval of the Secretary of the Department of Environment and Natural Resources (DENR) prompting them to file a case for the declaration

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of nullity of the deeds of conditional and absolute sale of the questioned properties.

Filinvest claims that it has only advanced the down payment with the understanding that Filinvest could demand anytime the return of the advance payment should the Ngilays not be able to comply with the conditions of the sale. Filinvest further contends that the correct formulation of the validity of the sale is not whether there was a perfected contract between the parties during the period of prohibition, but whether by such deed of conditional sale there was "alienation or encumbrance" within the contemplation of the law. Decide the case.

Suggested Answer:

The Deed of Conditional Sale of the properties must be declared as null and void.

The five-year prohibitory period following the issuance of the homestead patent is provided under Section 118 of Commonwealth Act No. 141, as amended by Commonwealth Act No. 456, otherwise known as the Public Land Act. The law was enacted to give the homesteader or patentee every chance to preserve for himself and his family the land that the State had gratuitously given to him as a reward for his labour in cleaning and cultivating it. Its basic objective is to promote public policy, that is to provide home and decent living for destitute, aimed at providing a class of independent small landholders which is the bulwark of peace and order. Hence, any act which would have the effect of removing the property subject of the patent from the hands of a grantee will be struck down for being violative of the law.

In the present case, the negotiations for the purchase of the properties covered by the patents issued in 1991 were made in 1995 and, eventually, an undated Deed of Conditional Sale was executed. On October 28, 1995, the Ngilays received the down payment for the properties covered by the patents issued in 1991. Applying the five-year prohibition, the properties covered by the patent issued on November 24, 1991 could only be alienated after November 24, 1996. Therefore, the sale, having been consummated on October 28, 1995, or within the five-year prohibition, is void.

To argue that the correct formulation of the issue is not whether there was a perfected contract between the parties during the period of prohibition, but whether by such deed of conditional sale there was "alienation or encumbrance" within the contemplation of the law is wrong. The prohibition does not distinguish between consummated and executory sale. The conditional sale entered into by the parties is still a conveyance of the homestead patent.

And, even assuming that the disputed sale was not yet perfected or consummated, still, the transaction cannot be validated. The prohibition of the law on the sale or encumbrance of the homestead within five years after the grant is MANDATORY. Where the sale of a homestead was perfected within the prohibitory period of five years, the fact that the formal deed of sale was executed after the expiration of the said period DID NOT and COULD NOT

legalize a contract that was void from its inception. To hold valid such arrangement would be to throw the door open to all possible fraudulent subterfuges and schemes which persons interested in the land given to a homesteader may devise in circumventing and defeating the legal provisions prohibiting their alienation within five years from the issuance of the patent.

Nevertheless, the down payment given by Filinvest must be returned as a consequence of the sale having been declared void. The rule is settled that the declaration of nullity of a contract which is void ab initio operates to restore things to the state and condition in which they were found before the execution thereof. This is to prevent unjust enrichment on any of the parties to a contract.

VALENZUELA VS. MANO, JR.

Petitioner Federico Valenzuela is the son of Andres Valenzuela who was the owner and possessor of a parcel of land with an area of 938 square meters, more or less, located at Dampol 1st, Pulilan, Bulacan. Andres died, and the possession of said property was transferred to the petitioner.

Meanwhile, a Deed of Conditional Sale was executed between Feliciano Geronimo and herein respondent Jose Mano, Jr., wherein the former agreed to sell to the latter a 2,056-square meter parcel of land located at Dampol 1st, Pulilan, Bulacan. The corresponding Deed of Sale was subsequently executed in March 1991.

On March 4, 1992, Jose applied for a Free Patent and on April 10, 1992, Original Certificate of Title was issued in his name. This time, the property was indicated as covering an area of 2,739 square meters. Subsequently, Jose sold a portion of the land covered by OCT No. P-351 to Roberto S. Balingcongan. On January 8, 1998, Transfer Certificate of Title (TCT) No. T-112865 was issued in the name of Balingcongan covering 2,292 square meters. On the same date, TCT No. T-112864 was also issued in the name of Jose covering 447 square meters.

Petitioner transferred his residence to Malabon and so he left the care of the property to his nephew, Vicente Joson. Sometime in 1999, he instructed Vicente to construct a perimeter fence on his property but he was prevented by Jose, claiming that the 447 square meters was his property as reflected in his TCT No. T-112864. On the other hand, petitioner is claiming it as part of the property he inherited from his father, Andres. Decide

Suggested Answer:

Petitioner’s claim should prevail. The Deed of Conditional Sale clearly states that the area subject of sale was only 2,056-square meters and not 2,739-square meters. Settled is the rule that a person, whose certificate of title included by mistake or oversight the land owned by another, does not become the owner of such land by virtue of the certificate alone.

The Torrens System is intended to guarantee the integrity and conclusiveness of the certificate of

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registration but is not intended to perpetrate fraud against the real owner of the land. The certificate of title cannot be used to protect a usurper from the true owner.

Jose committed fraud in obtaining title to the disputed property. Having ruled that Jose committed fraud in obtaining title to the disputed property then he should be liable for both moral and exemplary damages. Likewise, since petitioners were compelled to litigate to protect their rights and having proved that Jose acted in bad faith, attorney’s fees should likewise be awarded.

ORDUA, ET AL. v. FUENTEBELLA, ET AL.G.R. No. 176841 June 29, 2010

Antonita Orduña purchased a residential lot from Gabriel Sr. payable in installments but no deed of sales was executed. The installments were paid to Gabriel Sr. and later to Gabriel Jr. after the death of the former. Improvements were thereafter introduced by petitioner and he even paid its real property tax since 1979.

Unknown to Orduña, the property has been subject to further alienations until it was ceded to respondent, Fuentebilla, Jr. After Fuentebilla demanded that he vacate the disputed land, Orduña filed a Complaint for Annulment of Sale, Title and Reconveyance with damages with a prayer to acquire ownership over the subject lot upon payment of their remaining balance.

Fuentebilla alleged that the verbal sale between Gabriel Sr. and Orduña was unenforceable under the Statute of Frauds. Decide.

Suggested Answer:

The verbal sale between Gabrile and Orduna does not come within the purview of the Statute of Frauds.

It is a well-settled rule that the Statute of Frauds as expressed in Article 1403, par. 2 of the Civil Code is applicable only to purely executory contracts and not to contracts which have already been executed either totally or partially.

In this case, the verbal contract of sale has been partially executed through the partial payments made by Orduña duly received by both Gabriel Jr. and his father. The purpose of the Statute of Fraud is prevention fraud and perjury in the enforcement of obligations depending for their evidence on the unassisted memory of witnesses, by requiring some contracts and transactions to be evidenced by a writing signed by the party to be charged.

Since there is already ratification of the verbal contract through the acceptance of benefits through the partial payments, it is, thus, withdrawn from the purview of the Statute of Frauds.

JOSE C. TONGSON and CARMEN S. TONGSON VS. DANILO R. NAPALA

G.R. No. 167874

Sps. JOSE C. TONGSON and CARMEN S. TONGSON were the owner of the 364-square meter parcel of land, situated in Davao City and covered by Transfer Certificate of Title (TCT) No. 143020. In May 1992, Danilo Napala offered to purchase from the Spouses Tongson abovementioned property for P3,000,000.Finding the offer acceptable, the Spouses Tongson executed with Napala a Memorandum of Agreement.

Meanwhile, respondent’s lawyer prepared a Deed of Absolute Sale indicating the consideration as only P400,000. When Carmen Tongson noticed that the consideration was very low, she complained and called the attention of Napala but the latter told her not to worry as he would be the one to pay for the taxes and she would receive the net amount ofP3,000,000.

Because of assurance given by Napala, spouses Tongson signed the deed of sale prepared by respondent’s lawyer which led to the cancellation of their title in favor of EPBI. Upon signing, Napala paid P200,000 in cash to the Spouses Tongson and issued a postdated Philippine National Bank check in the amount of P2,800,000.

However, when the check was presented for payment, the PNB check was dishonored for the reason Drawn against Insufficient Funds.

Feeling defrauded, the spouses filed a complaint praying for the annulment of contract. Respondent, on the other hand, insists that there was no fraud attended the execution of the sales contract. Decide.

Suggested Answer:

The contract should be rescinded upon the ground of fraud in relation to article 1191 of the Civil Code.

It is true that there was no fraud upon the execution of the contract of sale; it exists when Napala issued the worthless check to the Spouses Tongson, which is definitely not during the negotiation and perfection stages of the sale. Rather, the fraud existed in the consummation stage of the sale when the parties are in the process of performing their respective obligations under the perfected contract of sale.

In Swedish Match, AB v. Court of Appeals, the Court explained the three stages of a contract, thus: “Consummation occurs when the parties fulfill or perform the terms agreed upon in the contract, culminating in the extinguishment thereof.”

Indisputably, the sellers had already performed their obligation of executing the Deed of Sale, which led to the cancellation of their title in favour of EPBI. Respondent as the buyer, on the other hand, failed to perform the obligation incumbent upon him of paying the full amount of the contract price. The law grants this relief to the aggrieved party, Art. 1191 of the Civil Code provides: The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him.

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Because of the presence of fraud which was surfaced when Napala inveigled the Spouses Tongson to accept the postdated PNB check on the representation that the check would be sufficiently funded at its maturity and based on the provisions Article 1191 of the Civil Code which give the right to rescind a contract in case of failure on the part of the obligor to perform the obligation imposed upon him; It can be therefore conclude that the contract of sale may be rescinded.

MIGUEL VS CATALINO

In 1988, Torciano sold a 358 square meter conjugal lot to Manuel and Leticia Fuentes. Eight years later in 1997, the children of Torciano and Rosario filed an action for annulment of the sale and reconveyance of the land against the Fuentes spouse. They alleged that the sale was void since Torciano’s wife, Rosario did not give her consent to it.

The Fuentes spouse denied the Roca’s allegation. They contend that the four year prescriptive period for nullifying the sale on the ground of fraud had already lapsed. Was the sale made by Torciano to Fuentes spouses valid?

Suggested Answer:

No. the sale made by Torciano was void. Sale of conjugal property without the consent of other spouse is void ab initio. Under Article 124 of the family code which states:

In the event that one spouse is incapacitated or otherwise unable to participate in the administration of the conjugal properties, the other spouse may assume sole powers of administration. These powers do not include the powers of disposition or encumbrance which must have the authority of the court or the written consent of the other spouse. In the absence of such authority or consent, the disposition or encumbrance shall be void. Article 124, provides only the power to administer the property to the husband it does not provide the power to alienate nor to dispose a property without the consent of the spouse or the authority of the court.

The sale was void from the beginning. Consequently, the land remained the property of Torciano and Rosario despite that sale. When the two died, they passed on the ownership of the property to their heirs, namely, the Rocas.

THE DIRECTOR OF LANDS v THE COURT OF APPEALSG.R. No. L-29575 April 30, 1971

On June 16, 1950, Mariano B. Raymundo filed in the Court of First Instance of Laguna an application for registration of his imperfect or incomplete title over five parcels of land situated in Mabitac, Laguna, allegedly acquired by actual, open, adverse and continuous occupation of the properties, by himself and by his

predecessors-in-interest since time immemorial. The application for registration was opposed by several parties, specifically, by the Director of Lands, on the ground of applicant's lack of registerable title; and by Adriano Carpio, Martin Aguilar and Pedro Aguilar, as regards the northern portion of the lot, for the reason that they were the actual possessors thereof and had filed homestead applications therefor since 1935.

Raymundo's claim over the whole lot is anchored on an unsigned deed of sale involving around 80 hectares, allegedly executed by Mariano Castro on 18 September 1929. To explain the presentation of the unsigned deed of sale in lieu of the original, Raymundo claimed that the document was entrusted by him to his lawyer, Judge Mariano C. Melendres, sometime before the war, in connection with registration proceedings over the said parcels of land. Unfortunately, these documents were burned during the last World War and no official copy could be obtained from the Register of Deeds of Mabitac, Laguna.

The testimony of Raymundo was corroborated by Judge Melendres on the witness stand when he declared that he was, indeed, entrusted with the custody of these papers and that upon his appointment to the Judiciary, he turned over all these papers to a certain Atty. Facundo San Agustin, who was killed by the Japanese during the war, and no trace of the aforesaid documents have been found. The Director of Lands and oppositors, Adriano Carpio, Martin Aguilar and Pedro Aguilar allege that the statements of Raymundo and Judge Melendres do not comply with the requisites of the law before secondary evidence may be admissible in Court. Decide the Case.

Suggested Answer:

Raymundo was not able to prove his registerable title over the property because his testimony and the testimony of Judge Melendres did not meet the requisites of the law for the unsigned deed of sale to be admissible as secondary evidence of the alleged original deed of sale in Court.

It is a well-settled rule that the sale of real property can be proved only by the very instrument reciting the transaction, duly subscribed by the proper party or his authorized agent, or else by secondary evidence of the contents of such document. However, before the terms of a transaction in realty may be established by secondary evidence, it is necessary that the due execution and subsequent loss of the original instrument evidencing the transaction be proved. It is the due execution, and loss thereafter, of the document that would warrant or constitute basis for the introduction of secondary evidence to prove the contents of such document.

The due execution of the document should be proved through the testimony of (1) the person or persons who executed it; (2) the person before whom its execution was acknowledged; or (3) any person who was present and saw it executed and delivered, or who, after its execution and delivery, saw it and recognized the signatures, or by a person to whom the parties to the

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instruments had previously confessed the execution thereof.

In the present case, the declaration of applicant Raymundo's former counsel, Mariano C. Melendres, did not state that he was present when the deed of sale was supposedly executed by Mariano Castro, or that the fact of its execution was acknowledged or admitted to him by the latter. It appears simply that the deed, perhaps then already accomplished, was delivered to him by applicant, together with other papers. Thus, the testimony of Judge Melendres did not meet any of the requisites of the law on proof of due execution of the document.

Even assuming, that Judge Melendres could have read the contents of the document, yet if it is considered that there is no showing that he knew and recognized the signatures affixed thereon, such knowledge of the terms would not qualify him to testify on the due execution of the document.

Proof of Raymundo’s registerable title cannot, thus, be anchored on the unsigned deed of sale for due execution of the original deed of sale was not proved by the testimonies of Raymundo and Judge Melendres.

RUBIAS VS. BATILLER (1973)

Francisco Militante claimed that he owned a parcel of land located in Iloilo. He filed with the CFI of Iloilo an application for the registration of title of the land. However, during the Japanese Regime, his records were lost beyond recovery. After the war, Militante sought to register the land. This was opposed by the Director of Lands, the Director of Forestry, and other concerned government agencies. The case was docked as a land case, and after trial, the court dismissed the application for registration. Militante appealed to the Court of Appeals.

Pending the appeal, Militante sold to Rubias, his son-in-law, the aforementioned property. At the time of the proceedings, Rubias is the counsel of Militante.

Subsequently, Rubias filed a case for Forcible Entry against Batiller. The latter averred that he and his family had been in adverse, open and continuous occupation of the subject property and that Rubias has no cause of action because the property in dispute which Rubias bought from Militante was a subject matter of a land case during the time of purchase, in which Rubias was the counsel on record of Militante. Therefore, the case violated the provisions of Article 1491 of the Civil Code. Decide.

Suggested answer:

The sale violated the law for the same falls under the prohibition set forth in Article 1491 of the Civil Code, therefore, making it null and void and cannot be ratified. It is generally accepted that a parcel of land under litigation cannot be an object of the sale, subject to the permission of the parties in the litigation. However, even if the parties may permit such sale, the same cannot apply to the present case because the buyer of the said parcel

of land is the counsel of the person claiming ownership thereto. Conflict of interest is evident.

Article 1491 says that “The following persons cannot acquire any purchase, even at a public or judicial auction, either in person or through the

Mediation of another…. (5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other officers and employees connected with the administration of justice, the property and rights in litigation or levied upon an execution before the court within whose jurisdiction or territory they exercise their respective functions; this prohibition includes the act of acquiring by assignment and shall apply to lawyers, with respect to the property and rights which may be the object of any litigation in which they may take part by virtue of their profession.” The present case clearly falls under this, especially since the case was still pending appeal when the sale was made.

The civil code does recognize the absolute nullity of contracts “whose cause, object or purpose is contract to law, morals, good customs, public order or public policy” or which are “expressly prohibited or declared void by law” and declares such contracts “inexistent and void from the beginning.” 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 this 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 (under Art 1491). As to their transactions, it has been opined that they may be “ratified” by means of and in “the form of a new contract, in which case its validity shall be determined only by the circumstances at the time of execution of such new contract.” In those cases, 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 intent, or the service which was impossible. The ratification or second contract would then be valid from its execution; however, it does not retroact to the date of the first contract.

TINGCO VS PABINGUIT

Candida Acabo sold her six parcels of land to Gan Tingco but the latter was unable to take possession of the said lots because such land was in possession of Silvino Pabinguit.

Tingco filed a case against Pabinguit with a prayer that he be declared as the rightful owner of said land.Pabinguit contended that he bought said lots to one Faustino Abad and the latter claimed that he acquired said lots through Henry Gardner, a justice of peace, and Gardner alleged that he bought said lands from public auction where said lots were subject to an auction.

Tingco alleged that such sale was null void due to the fact that Gardner who is a justice of peace acquired said property in auction where the law prohibits a judge from acquiring property in litigation or levied upon on

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execution before the court within whose jurisdiction or territory they exercise their respective functions.Gardner defended that upon knowing that he was forbidden from doing such act he sold what he had purchased to Abad. Decide.

Suggested Answer:

The purchase of Gardner of said lots is null and void. Article 1459, No. 5, of the Civil Code says: "Judges cannot acquire by purchase, even at public or judicial auction, neither in person nor by an agent, the property and rights in litigation before the court in the jurisdiction or territory over which they exercise their respective duties ". For the proper understanding of this prohibition, it is not required that some contest or litigation over the property should have been tried by the said judge. Such property is in litigation from the moment that it became subject to the judicial action of the judge who afterwards purchased it, thereby depriving its lawful owner of his right of ownership or of possession therein, in manifest violation of law.

If under the law Gardner was prohibited from acquiring the ownership of Acabo's lands, then he could not have transmitted to Faustino Abad the right of ownership that he did not possess; nor could Abad, to whom this alleged ownership had not been transmitte, have conveyed the same to Pabinguit. What Gardner should have done in view of the fact that the sale, as he finally acknowledged, was void, was to claim the price that had been deposited in court, and the justice of the peace should have declared the auction void and have ordered a new sale to be held, besides correcting the errors that had been committed in the proceedings.

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