Sales(Atty Chan)

8/13/2019 Sales(Atty Chan)

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Sps. Onnie and Amparo Herrera vs. Caguiat

Facts: Sps. Onnie and Amparo Herrera are the registered owners of a lot. Godofredo Caguiat offered to

buy the lot. Petitioners agreed to sell it. Respondent

then gave P100,000.00 as partial payment evidenced

by a Receipt for Partial Payment issued to him,

promising to pay the balance of the purchase price on

or before a certain date, and then they will execute

and sign the final deed of sale. On the date of

payment, respondent then wrote petitioners of his

readiness to pay the balance and requesting them to

prepare the final deed of sale. In reply, petitioners

informed through their counsel that they are leaving

for abroad and thus cancelling the transaction.

Petitioners informed them that they can recover theearnest money at any time and even delivered to

respondents counsel a PNB Managers Check worth

P100,000.00 payable to him. Because of the

cancellation, respondent filed a complaint for specific

performance plus damages.

Arguments: Sps. Onnie and Amparo: the Receipt is

not a perfected contract of sale as provided for in

Article 1458 in relation to Article 1475 of the Civil

Code. The delivery to them of P100,000.00 as down

payment cannot be considered as proof of the

perfection of a contract of sale under Article 1482 of

the same Code since there was no clear agreement

between the parties as to the amount of

consideration. Caguiat: As ruled by the trial court,

affirmed by the CA, there was a perfected contract of

sale relying on the earnest money given by

respondent to petitioners, invoking Art 1482 of the CC

.Issue:

WON it is a contract to sell (petitioner) or a contract of

sale (respondent) Alternatively ,

WON the P100,000.00 paid by Caguiat to Sps. Onnie

and Amparo Herrera can be considered as earnest

money contemplated in Art. 1482.

Held: It was a contract to sell. The earnest money

paid was for a contract to sell and not a contract

of sale, thus rendering art.1482 not applicable. It is

true that Article 1482 of the Civil Code provides that

"Whenever earnest money is given in a contract of

sale, it shall be considered as part of the price and

proof of the perfection of the contract."However, this

article speaks of earnest money given in a contract of

sale. In this case, the earnest money was given in a

contract to sell. The earnest money forms part of the

consideration only if the sale is consummated uponfull payment of the purchase price. Now, since the

earnest money was given in a contract to sell, Article

1482, which speaks of a contract of sale, does not

apply. The suspensive condition (payment of the

balance by respondent) did not take place. Clearly,

respondent cannot compel petitioners to transfer

ownership of the property to him.

NABUS vs. PACSON , G.R. No. 161318, November

25, 2009FACTS:

The spouses Bate and Julie Nabus were the owners

of parcels of land with a total area of 1,665 square

meters, situated in Pico, La Trinidad, Benguet, duly

registered in their names under TCT No. T-9697 of

the Register of Deeds of the Province of Benguet.

The property was mortgaged by the Spouses Nabus

to the Philippine National Bank (PNB), LaTrinidad

Branch, to secure a loan in the amount of P30,000.00.

On February 19, 1977, the Spouses Nabus executed

a Deed of Conditional Sale covering 1,000 square

meters of the1,665 square meters of land in favor ofrespondents Spouses Pacson for a consideration of

P170,000.00, which was duly notarized on February

21, 1977. Pursuant to the Deed of Conditional Sale,

respondents paid PNB the amount of P12,038.86 on

February 22, 19776 andP20,744.30 on July 17, 19787

for the full payment of the loan. On December 24,

1977, before the payment of the balance of the

mortgage amount with PNB, Bate Nabus died. On

August 17, 1978, his surviving spouse, Julie Nabus,

and their minor daughter, Michelle Nabus, executed a

Deed of Extra Judicial Settlement over the registered

land covered by TCT No. 9697. On the basis of the

said document, TCTNo. T- 177188 was issued onFebruary 17, 1984 in the names of Julie Nabus and

Michelle Nabus. Meanwhile, respondents continued

paying their balance, not in installments of P2,000.00

as agreed upon, but in various, often small amounts

ranging from as low as P10.009 to as high as

P15,566.00,10 spanning a period of almost seven

years, from March 9, 197711 to January 17, 1984.12

There was a total of 364 receipts of payment. The

receipts showed that the total sum paid by

respondents to the Spouses Nabus was

P112,455.16,14 leaving a balance of P57,544.84.

During the last week of January 1984, Julie Nabus,

accompanied by her second husband, approached

Joaquin Pacson to ask for the full payment of the lot.

Joaquin Pacson agreed to pay, but told her to return

after four days as his daughter, Catalina Pacson,

would have to go over the numerous receipts to

determine the balance to be paid. When Julie Nabus

returned after four days, Joaquin sent her and his

daughter, Catalina, to Atty. Elizabeth Rillera for the

execution of the deed of absolute sale. Since Julie

was a widow with a minor daughter, Atty. Rillera

http://www.lawphil.net/judjuris/juri2009/nov2009/gr_161318_2009.html#fnt4





required Julie Nabus to return in four days with the

necessary documents, such as the deed of

extrajudicial settlement, the transfer certificate of title

in the names of Julie Nabus and minor Michelle

Nabus, and the guardianship papers of Michelle

.However, Julie Nabus did not return. Getting

suspicious, Catalina Pacson went to the Register ofDeeds of the Province of Benguet and asked for a

copy of the title of the land. She found that it was still

in the name of Julie and Michelle Nabus. After a

week, Catalina Pacson heard a rumor that the lot was

already sold to petitioner Betty Tolero. On March 28,

2008, respondents Joaquin and Julia Pacson filed

with the Regional Trial Court of La Trinidad,

Benguet (trial court) a Complaint for Annulment of

Deeds, with damages and prayer for the issuance of a

writ of preliminary injunction. Julie and Michelle

Nabus alleged that respondent Joaquin Pacson did

not proceed with the conditional sale of the subject

property when he learned that there was a pendingcase over the whole property. Joaquin proposed that

he would rather lease the property with a monthly

rental of P2,000.00 and apply the sum ofP13,000.00

as rentals, since the amount was already paid to the

bank and could no longer be withdrawn. Hence, he

did not affix his signature tothe second page of a copy

of the Deed of Conditional Sale.26 Julie Nabus

alleged that in March 1994, due to her own economic

needs and those of her minor daughter, she sold the

property to Betty Tolero, with authority from the court.

Betty Tolero put up the defense that she was a

purchaser in good faith and for value. She testifiedthat it was Julie Nabus who went to her house and

offered to sell the property consisting of two lots with

a combined area of 1,000square meters. She

consulted Atty. Aurelio de Peralta before she agreed

to buy the property. She and Julie Nabus brought to

Atty. De Peralta the pertinent papers such as TCT No.

T-17718 in the names of Julie and Michelle Nabus,

the guardianship papers of Michelle Nabus and the

blueprint copy of the survey plan showing the two lots.

After examining the documents and finding that the

title was clean, Atty. De Peralta gave her the go-

signal to buy the property.

ISSUES:

1.Whether or not the Deed of Conditional Sale

was converted into a contract of lease.

2.Whether the Deed of Conditional Sale was a

contract to sell or a contract of sale.

RULING:

1.

The Deed of Conditional Sale entered into by the

Spouses Pacson and the Spouses Nabus was not

converted into a contract of lease. The 364 receipts

issued to the Spouses Pacson contained either the

phrase "as partial payment of lot located in Km. 4" or

"cash vale" or "cash vale (partial payment of lot

located in Km. 4)," evidencing sale under the contractand not the lease of the property. Further, as found by

the trial court, Joaquin Pacson’s non -signing of the

second page of a carbon copy of the Deed of

Conditional Sale was through sheer inadvertence,

since the original contract and the other copies of the

contract were all signed by Joaquin Pacson and the

other parties to the contract.2.

The Court holds that the contract entered into by the

Spouses Nabus and respondents was a contract to

sell, not a contract of sale. A contract of sale is

defined in Article 1458 of the Civil

Code,thus: Art. 1458. By the contract of sale, one of t

he contracting parties obligates himself to transfer the

ownership of and to deliver adeterminate thing, and the other to pay therefor a pric

e certain in money or itsequivalent. A contract of sale

may be absolute or conditional.Ramos v. Heruela

differentiates a contract of absolute sale and a

contract of conditional sale as follows:

Article 1458 of the Civil Code provides that a contract

of sale may be absolute or conditional.

A contract of sale is absolute when title to the propert

y passes to the vendee upon deliveryof the thing sold. A deed of sale is absolute when there is no stipulatio

n in the contract that title to the propertyremains with t

he seller until full payment of the purchase price. The

sale is also absolute if there is no

stipulationgiving the vendor the right to cancel unilater

ally the contract the moment the vendee fails to pay w

ithin a fixedperiod. In a conditional sale, as in a contra

ct to sell, ownership remains with the vendor and doe

s not pass tothe vendee until full payment of the purch

ase price. The full payment of the purchase

price partakes of asuspensive condition, and non-

fulfillment of the condition prevents the obligation

to sell from arising.36 Coronel v. Court of Appealsdistinguished a contract to sell from a contract of sale,

thus:Sale, by its very nature, is a consensual contract

because it is perfected by mere consent. Theessential

elements of a contract of sale are the following:

a. Consent or meeting of the minds, that is, consent

to transfer ownership in exchange for the price;

b. Determinate subject matter; and



c.Price certain in money or its equivalent. Under

this definition, a Contract to Sell may not

be considered as a Contract of Sale

because the first essential element is lacking. In a con

tract to sell, the prospective seller explicitly reserves the transfer of title to the prospective buyer, meaning, t

he prospective seller does not as yet agree or consen

t to transferownership of the property subject of the co

ntract to sell until the happening of an event, which for

present purposes we shall take as the full payment

of the purchase price. What the seller agrees

or obliges himself to do is to fulfill his promise to sell

the subject property when the entire amount of

thepurchase price is delivered to him. In other words,

the full payment of the purchase price partakes of a

suspensive condition, the non-

fulfilment of which prevents the obligation to sell from

arisingand, thus, ownership is retained by the prospective seller without further remedies by the prospective

buyer. Stated positively, upon the fulfillment of the

suspensive condition which is the full payment of the

purchase price, the prospective seller’s obligation to

sell the subject property by entering into a contract of

sale with the prospective buyer becomes demandable

as provided in Article 1479 of the Civil Code which

states:

Art. 1479. A promise to buy and sell a determinate

thing for a price certain isreciprocally demandable. An accepted unilateral

promise to buy or to sell a determinate thing for a

price certain is binding upon the promissor if the

promise is supported by a consideration distinct from

the price.

A contract to sell may thus be defined as a bilateral

contract whereby the prospective seller, while

expressly reserving the ownership of the subject

property despite delivery thereof to the prospective

buyer, bind shimself to sell the said property

exclusively to the prospective buyer upon fulfillment of

the condition agreed upon, that is, full payment of thepurchase price.

FACTS

Petitioner Mila Reyes owns a three-storey commercial

building in Valenzuela City. Respondent, Victoria

Tuparan leased a space on said building for a

monthly rental of P4, 000. Aside from being a tenant,

respondent also invested in petitioner's financingbusiness. On June 20, 1988, Petitioner borrowed P2

Million from Farmers Savings and Loan Bank (FSL

Bank) and mortgaged the building and lot (subject

real properties). Reyes decided to sell the property for

P6.5 Million to liquidate her loan and finance her

business. Respondent offered to conditionally buy the

real properties for P4.2 Million on installment basis

without interest and to assume the bank loan. The

conditions are the following:

1. Sale will be cancelled if the petitioner can find a

buyer of said properties for the amount of P6.5 Million

within the next three months. All payments made by

the respondent to the petitioner and the bank will be

refunded to Tuparan with an additional 6% monthly

interest.

2. Petitioner Reyes will continue using the space

occupied by her drug store without rentals for the

duration of the installment payments.

3. There will be a lease for 15 years in favor of

Reyes for a monthly rental of P8, 000 after full

payment has been made by the defendant.

4. The defendant will undertake the renewal and

payment of the fire insurance policies of the 2

buildings, following the expiration of the currentpolicies, up to the time the respondent has fully paid

the purchase price.

They presented the proposal for Tuparan to assume

the mortgage to FSL Bank. The bank approved on the

condition that the petitioner would remain as co-

maker of the mortgage obligation.

Petitioner's Contention

Under their Deed of Conditional Sale, the respondent

is obliged to pay a lump sum of P1.2 Million in three

fixed installments. Respondent, however defaulted in

the payment of the installments. To compensate for

her delayed payments, respondent agreed to pay

petitioner monthly interest. But again, respondent

failed to fulfill this obligation. The petitioner further

alleged that despite her success in finding another

buyer according to their conditional sale agreement,

respondent refused to cancel their transaction. The

respondent also neglected to renew the fire insurance

policy of the buildings.

Respondent's Answer

Respondent alleges that the deed of Conditional Sale

of Real Property with Assumption of Mortgage was

actually a pure and absolute contract of sale with a

term period. It could not be considered a conditional

sale because the performance of the obligation

therein did not depend upon a future and uncertain



event. She also averred that she was able to fully pay

the loan and secure the release of the mortgage.

Since she also paid more than the P4.2 Million

purchase price, rescission could not be resorted to

since the parties could no longer be restored to their

original positions.

ISSUE

Can the transaction or obligation be rescinded given

that the conditions were not satisfied?

RULING(S)

RTC

The deed of conditional sale was a contract to sell. It

was of the opinion that although the petitioner was

entitled to a rescission of the contract, it could not be

permitted because her non-payment in full of the

purchase price “may not be considered as substantial

and fundamental breach of the contract as to defeat

the object of the parties in entering into the contract.”

The RTC believed that respondent showed her

sincerity and willingness to settle her obligation.

Hence, it would be more equitable to give respondent

a chance to pay the balance plus interest within a

given period of time. The court ordered the

respondent to pay the petitioner the unpaid balance of

the purchase price.

CA

The CA agreed with the RTC that the remedy of

rescission could not apply because the respondent’s

failure to pay the petitioner the balance of the

purchase price in the total amount of ₱805,000.00

was not a breach of contract, but merely an event that

prevented the seller (petitioner) from conveying title to

the purchaser (respondent). Since respondent had

already paid a substantial amount of the purchase

price, it was but right and just to allow her to pay the

unpaid balance of the purchase price plus interest.

SC

The SC agrees that the conditional sale is a contractto sell. The title and ownership of the subject

properties remains with the petitioner until the

respondent fully pays the balance of the purchase

price and the assumed mortgage obligation. Without

respondent’s full payment, there can be no breach of

contract to speak of because petitioner has no

obligation yet to turn over the title. The court agrees

that a substantial amount of the purchase price has

already been paid. It is only right and just to allow

Tuparan to pay the said unpaid balance of the

purchase price to Reyes. Granting that a rescission

can be permitted under Article 1191, the Court still

cannot allow it for the reason that, considering thecircumstances, there was only a slight or casual

breach in the fulfillment of the obligation. The court

considered fulfillment of 20% of the purchase price is

NOT a substantial breach. Unless the parties

stipulated it, rescission is allowed only when the

breach of the contract is substantial and fundamental

to the fulfillment of the obligation. Whether the breach

is slight or substantial is largely determined by the

attendant circumstance. As for the 6% interest,

petitioner failed to substantiate her claim that the

respondent committed to pay it. Petition is denied.

RELEVANT JURISPRUDENCE

Art. 1458. By the contract of sale, one of the

contracting parties obligates himself to transfer the

ownership of and to deliver a determinate thing, and

the other to pay therefore a price certain in money or

its equivalent. The essential elements of a contract of

sale are the following:

a) Consent or meeting of the minds, that is, consent

to transfer ownership in exchange for the price;

b) Determinate subject matter; and

c) Price certain in money or its equivalent.

In a contract to sell, the seller explicitly reserves the

transfer of title to the prospective buyer. The first

element (in the contract of sale) is missing. There is

no consent yet to the transfer of ownership of the

property. (Nabus v Joaquin). The payment of the price

is a positive suspens ive condition, failure of which

is not a breach but an event that prevents the

obligation of the vendor to convey title from becoming

effective. (Chua v CA)

Art. 1191 does not apply in a contract to sell since the

breach contemplated in said article is an obligor’s

failure to comply with an existing obligation. It doesnot apply in the failure of a condition to make that

obligation arise.



The SC had one again had the occasion to distinguish

the two contracts and said that, in a contract of sale,

the title to the property passes to the vendee upon the

delivery of the thing sold; in a contract to sell,

ownership is, by agreement, reserved in the vendor

and is not to pass to the vendee until full payment of

the purchase price. Otherwise stated, in a contract ofsale, the vendor loses ownership over the property

and cannot recover it until and unless the contract is

resolved or rescinded; whereas, in a contract to sell,

title is retained by the vendor until full payment of the

price. In the latter contract, payment of the price is a

positive suspensive condition, failure of which is not a

breach but an event that prevents the obligation of the

vendor to convey title from becoming effective.

(Salazar v. CA, G.R. No. 118203, July 5, 1996, 258

SCRA 317).

Castillo vs. Reyes

Sales; Sale is a consensual contract and is perfected

by mere consent, which is manifested by the meeting

of the minds as to the offer and acceptance thereof on

the subject matter, price and terms of payment.—Sale

is a consensual contract and is perfected by mere

consent, which is manifested by a meeting of the

minds as to the offer and acceptance thereof on the

subject matter, price and terms of payment of the

price. In the instant case, the November 8, 1997

Agreement clearly indicates that Bohler and the

Spouses Reyes had a meeting of the minds on thesubject matter of the contract, the house and lot; on

the price, P165,000.00; and on the terms of payment,

an initial payment of P130,000.00 on the date of

execution of the agreement and the remaining

balance on or before December 15, 1997. At that

precise moment when the consent of both parties was

given, the contract of sale was perfected.

Same; Contracts to Sell; Contracts of Sale; Words

and Phrases; In a contract of sale, the title to the

property passes to the vendee upon the delivery of

the thing sold, while in a contract to sell, ownership is,

by agreement, reserved to the vendor and is not

passed until full payment of the purchase price.—The

said agreement cannot be considered a contract to

sell. In a contract of sale, the title to the property

passes to the vendee upon the delivery of the thing

sold; in a contract to sell, ownership is, by agreement,reserved in the vendor and is not to pass to the

vendee until full payment of the purchase price.

Otherwise stated, in a contract of sale, the vendor

loses ownership over the property and cannot recover

it until and unless the contract is resolved or

rescinded; whereas, in a contract to sell, title is

retained by the vendor until full payment of the price.

In the latter contract, payment of the price is a positive

suspensive condition, failure of which is not a breach

but an event that prevents the obligation of the vendor

to convey title from becoming effective. The

November 8, 1997 Agreement herein cannot be

characterized as a

contract to sell because the seller made no express

reservation of ownership or title to the subject house

and lot. Instead, the Agreement contains all the

requisites of a contract of sale. [Castillo vs. Reyes,

539 SCRA 193(2007)]

United Muslim and Christian Urban Poor Association,

Inc. vs. BRYC-V Development Corporation

Civil Law; Contracts; Sales; The parties in the case

executed a Letter of Intent, which is neither a contract

to sell nor a conditional contract of sale. —In the

instant case, however, the parties executed a Letter

of Intent, which is neither a contract to sell nor a

conditional contract of sale. As found by the RTC, and

upheld by the CA, the Letter of Intent was executed to

accommodate UMCUPAI and facilitate its loan

application with NHMF.

Same; Same; Same; The Letter of Intent to Buy and

Sell is just that—a manifestation of Sea Foods

Corporation’s (SFC) intention to sell the property and

United Muslim and Christian Urban Poor Association,

Inc.’s (UMCUPAI) intention to acquire the same.—

Nowhere in the Letter of Intent does it state that SFC

relinquishes its title over the subject property, subjectonly to the condition of complete payment of the

purchase price; nor, at the least, that SFC, although

expressly retaining ownership thereof, binds itself to

sell the property exclusively to UMCUPAI. The Letter

of Intent to Buy and Sell is just that —a manifestation

of SFC’s intention to sell the property and UMCUPAI’s

intention to acquire the same. This is quite obvious

from the reference to the execution of an Absolute

Deed of Sale in paragraph three of the Letter of

Intent. [United Muslim and Christian Urban Poor

Association, Inc. vs. BRYC-V Development

Corporation, 594 SCRA 724(2009)]

People’s Homesite vs. Court of Appeals, and

Mendoza

133 SCRA 777

December 1984

FACTS:

In February 1960, herein petitioner People’s Homesite

& Housing Corporation (PHHC) passed a resolution,

subject to the approval of the Court Court Council of

the PHHC’s consolidation subdivision plan, awarding

Lot 4 with an area of 4,182.2 square meters located atDiliman, Court City to respondents Rizalino and

Adelaida Mendoza (spouses Mendoza) at a price of

twenty-one pesos (P21.00) per square meter. The

Court Court Council disapproved the consolidation

subdivision plan in August 1960 but approved in

February 1964 its revised version where Lot 4 was

reduced to an area of 2,608.7 square meters. Then in

October 1965, the PHHC withdrew the tentative

award of Lot 4 to the spouses Mendoza for the latter’s

failure neither to pay its price nor to make a 20%

initial deposit, and re-awarded said lot jointly and in



equal shares to Miguela Sto. Domingo, Enrique

Esteban, Virgilio Pinzon, Leonardo Redublo and Jose

Fernandez, all of whom made the initial deposit. The

subdivision of Lot 4 into five lots was later approved

by the Court council and the Bureau of Lands.

The spouses Mendoza asked for reconsideration andfor the withdrawal of the said 2nd award to Sto.

Domingo and four others, and at the same time filed

an action for specific performance plus damages. The

trial court sustained the award but the Court of

Appeals reversed the said decision, declared void the

re-award to Sto. Domingo and four others, and

ordered the PHHC to sell Lot 4 with an area of

2,608.7 square meters at P21.00 per square meter to

spouses Mendoza.

ISSUE:

Was there a perfected sale of Lot 4, with its reducedarea, between the parties?

COURT RULING:

The Supreme Court found that there was no perfected

sale of Lot 4 because the said lot was conditionally or

contingently awarded to the Mendozas subject to the

approval by the Court council of the proposed

consolidation subdivision plan and the approval of the

award by the valuation committee and higher

authorities.

When the plan with the area of Lot 4 reduced to2,608.7 square meters was approved in 1964, the

spouses Court should have manifested in writing their

acceptance of the award for the purchase of Lot 4 just

to show that they were still interested in its purchase

although the area was reduced. Article 1475 of the

Civil Court says “[t]he contract of sale is perfected at

the moment there is a meeting of minds upon the

thing which is the object of the contract and upon the

price. From that moment, the parties may reciprocally

demand performance, subject to the law governing

the form of contracts.” Indeed, there was a no

meeting of the minds between the parties on the

purchase of Lot 4 with an area of 2,608.7 square

meters at P21 a square meter and the PHHC board of

directors acted within its rights in withdrawing the

tentative award.

PINGOL V. COURT OF APPEALS A vendee in an oral contract to convey land who hadmade part payment thereof, entered upon the landand had made valuable improvements thereon isentitled to bring suit to clear his title against thevendor who had refused to transfer the title to him. Itis not necessary that the vendee should have anabsolute title, an equitable title being sufficient toclothe him with personality to bring an action to quiettitle.

FACTS:In 1969, Pingol, the owner of a lot (Lot No. 3223) in

Caloocan City, executed a DEED OF ABSOLUTESALE OF ONE-HALF OF AN UNDIVIDED PORTIONOF [his] PARCEL OF LAND in favor of Donasco(private respondent), payable in 6 years.

In 1984, Donasco died and was only able to payP8,369 plus P2,000 downpayment, leaving a balanceof P10,161. The heirs of Donasco remained inpossession of such lot and offered to settle thebalance with Pingol. However, Pingol refused toaccept the offer and demanded a larger amount.Thus, the heirs of Donasco filed an action for specificperformance (with Prayer for Writ of Prelim.Injunction, because Pingol were encroaching uponDonasco’s lot). Pingol averred that the sale and

transfer of title was conditional upon the full paymentof Donasco (contract to sell, not contract of sale).With Donasco’s breach of the contract in 1976 anddeath in 1984, the sale was deemed cancelled, andthe heirs’ continuous occupancy was only beingtolerated by Pingol.

ISSUES:(1) Whether or not Pingol can refuse to transfer title toDonasco(2) Whether or not Donasco has the right to quiet title

RULING:

(1) No. The contract between Pingol and Donasco isa contract of sale and not a contract to sell. The actsof the parties, contemporaneous and subsequent tothe contract, clearly show that the parties intended anabsolute deed of sale; the ownership of the lot wastransferred to the Donasco upon its actual (uponDonasco’s possession and construction of the house)

and constructive delivery (upon execution of thecontract). The delivery of the lot divested Pingol of hisownership and he cannot recover the title unless thecontract is resolved or rescinded under Art. 1592 ofNCC. It states that the vendee may pay even after theexpiration of the period stipulated as long as nodemand for rescission has been made upon himeither judicially or by notarial act. Pingol neither didso. Hence, Donasco has equitable title over theproperty.

(2) Although the complaint filed by the Donascos wasan action for specific performance, it was actually anaction to quiet title. A cloud has been cast on the title,since despite the fact that the title had been

transferred to them by the execution of the deed ofsale and the delivery of the object of the contract,Pingol adamantly refused to accept the payment byDonascos and insisted that they no longer had theobligation to transfer the title.

Donasco, who had made partial payments andimprovements upon the property, is entitled to bringsuit to clear his title against Pingol who refused totransfer title to him. It is not necessary that Donascoshould have an absolute title, an equitable title beingsufficient to clothe him with personality to bring anaction to quiet title

Fule v. CA

Facts:

Gregorio Fule, a banker and a jeweller, offered to sell

his parcel of land to Dr. Cruz in exchange for P40,000

and a diamond earring owned by the latter. A deed of

absolute sale was prepared by Atty. Belarmino, and

on the same day Fule went to the bank with Dichoso

and Mendoza, and Dr. Cruz arrived shortly thereafter.

Dr. Cruz got the earrings from her safety deposit box

and handed it to Fule who, when asked if those were



alright, nodded and took the earrings. Two hours

after, Fule complained that the earrings were fake. He

files a complaint to declare the sale null and void on

the ground of fraud and deceit.

Issue:

Whether the sale should be nullified on the ground of

fraud

Held:

A contract of sale is perfected at the moment there is

a meeting of the minds upon the thing which is the

object of the contract and upon the price . Being

consensual, a contract of sale has the force of law

between the contracting parties and they are

expected to abide in good faith by their respective

contractual commitments. It is evident from the facts

of the case that there was a meeting of the mindsbetween petitioner and Dr. Cruz. As such, they are

bound by the contract unless there are reasons or

circumstances that warrant its nullification.

Contracts that are voidable or annullable, even

though there may have been no damage to the

contracting parties are: (1) those where one of the

parties is incapable of giving consent to a contract;

and (2) those where the consent is vitiated by

mistake, violence, intimidation, undue influence or

fraud. The records, however, are bare of any

evidence manifesting that private respondents

employed such insidious words or machinations to

entice petitioner into entering the contract of barter. It

was in fact petitioner who resorted to machinations to

convince Dr. Cruz to exchange her jewelry for the

Tanay property.

Furthermore, petitioner was afforded the reasonable

opportunity required in Article 1584 of the Civil Code

within which to examine the jewelry as he in fact

accepted them when asked by Dr. Cruz if he was

satisfied with the same. By taking the jewelry outside

the bank, petitioner executed an act which was more

consistent with his exercise of ownership over it. This

gains credence when it is borne in mind that he

himself had earlier delivered the Tanay property to Dr.

Cruz by affixing his signature to the contract of sale.

That after two hours he later claimed that the jewelrywas not the one he intended in exchange for his

Tanay property, could not sever the juridical tie that

now bound him and Dr. Cruz. The nature and value of

the thing he had taken preclude its return after that

supervening period within which anything could have

happened, not excluding the alteration of the jewelry

or its being switched with an inferior kind.

Ownership over the parcel of land and the pair of

emerald-cut diamond earrings had been transferred to

Dr. Cruz and petitioner, respectively, upon the actual

and constructive delivery thereof. Said contract of

sale being absolute in nature, title passed to thevendee upon delivery of the thing sold since there

was no stipulation in the contract that title to the

property sold has been reserved in the seller until full

payment of the price or that the vendor has the right

to unilaterally resolve the contract the moment the

buyer fails to pay within a fixed period.

While it is true that the amount of P40,000.00 forming

part of the consideration was still payable to

petitioner, its nonpayment by Dr. Cruz is not a

sufficient cause to invalidate the contract or bar the

transfer of ownership and possession of the things

exchanged considering the fact that their contract issilent as to when it becomes due and demandable.



ELISCO TOOL MFG CORP vs. CA

GR # 109966, May31, 1999

FACTS: Private respondent Rolando Lantan entered

into an agreement with his employer, herein

petitioner, leasing unto the former a Colt lancer fro a

period of 5 years. The contract also provided that at

the end of the 5 year period, Lantan may exercise the

option to purchase price of the car and he should just

pay the remaining balance. Said option is limited to

the employee. It also provided that upon Lantan’s

failure to pay 3 accumulated monthly rentals, the

petitioner will have the option to lease said vehicle to

another. Lantan also has to return the car in case he

resigns or is dismissed. He was laid off after

petitioner ceased operations in 1981. At that time, he

has paid P61, 070.94. Petitioner then filed a replevin

case against Lantan and his wife, alleging that they

have failed to pay the monthly rentals despite

repeated demands. HELD: Although the agreement

provides for the payment by Lantan of monthly

rentals”, the 5th paragraph thereof gives them the

option to purchase the motor vehicle at the end of the

5th year or upon payment of the 60thmonthly rental

when “all monthly rentals shall be applied to the

payment of the full purchase price of the car.” Clearly,

the transaction is a lease in name only. The so-called

monthly rentals are in truth monthly amortizations on

the car’s price. Being a contract of sale on

installment, A.1484 &1485 apply. As such, the

case should be considered as one for specific

performance pursuant to A.1484(1). The prayer for

a writ of replevin is only for the purpose of ensuring

specific performance by private

respondents. However, the private respondents could

no longer be held liable for the payment of interest on

unpaid monthly rentals since it was entered into in

pursuance of a car plan adopted by petitioner for the

benefit of its deserving employees. Further, private

respondents’ default in payment was due to the

cessation of operations of petitioner’s sister company.

Elizalde Steel Company. That petitioner accepted

payments from Lantan more than 2 years after the

latter’s employment have been terminated constitutes

a waiver of petitioner’s right to collect interest upon

delayed payment. What private respondents paid

should be considered the payment in full.

FILINVEST CREDIT CORPORATION vs. COURT OF

APPEALS

G.R. No. 82508 September 29, 1989

Facts:

Spouses Sy Bang were engaged in the sale of gravel

produced from crushed rocks and used for

construction purposes. In order to increase their

production, they looked for a rock crusher which Rizal

Consolidated Corporation then had for sale. A brother

of Sy Bang, went to inspect the machine at the Rizal

Consolidated’s plant site. Apparently satisfied with the

machine, the private respondents signified their intent

to purchase the same.

Since he does not have the financing capability, Sy

Bang applied for financial assistance from Filinvest

Credit Corporation. Filinvest agreed to extend

financial aid on the following conditions: (1) that the

machinery be purchased in the petitioner’s name; (2)

that it be leased with option to purchase upon the

termination of the lease period; and (3) that Sy Bang

execute a real estate mortgage as security for the

amount advanced by Filinvest. A contract of lease of

machinery (with option to purchase) was entered into

by the parties whereby they to lease from the

petitioner the rock crusher for two years. The contract

likewise stipulated that at the end of the two-year

period, the machine would be owned by Sy Bang.

3 months from the date of delivery, Sy Bang claiming

that they had only tested the machine that month,

sent a letter-complaint to the petitioner, alleging that

contrary to the 20 to 40 tons per hour capacity of the

machine as stated in the lease contract, the machine

could only process 5 tons of rocks and stones per



hour. They then demanded that the petitioner make

good the stipulation in the lease contract. Sy Bang

stopped payment on the remaining checks they had

issued to the petitioner.

As a consequence of the non-payment, Filinvest

extrajudicially foreclosed the real estate mortgage.

Issue:

WON the real transaction was lease or sale? SALE

ON INSTALLMENTS.

Held:

The real intention of the parties should prevail. The

nomenclature of the agreement cannot change its

true essence, i.e., a sale on installments. It is basic

that a contract is what the law defines it and the

parties intend it to be, not what it is called by the

parties. It is apparent here that the intent of the

parties to the subject contract is for the so-called

rentals to be the installment payments. Upon the

completion of the payments, then the rock crusher,

subject matter of the contract, would become the

property of the private respondents. This form of

agreement has been criticized as a lease only in

name.

Sellers desirous of making conditional sales of their

goods, but who do not wish openly to make a bargain

in that form, for one reason or another, have

frequently resorted to the device of making contracts

in the form of leases either with options to the buyer

to purchase for a small consideration at the end of

term, provided the so-called rent has been duly paid,

or with stipulations that if the rent throughout the term

is paid, title shall thereupon vest in the lessee. It is

obvious that such transactions are leases only in

name. The so-called rent must necessarily be

regarded as payment of the price in installments since

the due payment of the agreed amount results, by the

terms of bargain, in the transfer of title to the lessee.

Indubitably, the device contract of lease with option to

buy is at times resorted to as a means to circumvent

Article 1484, particularly paragraph (3)

thereof.Through the set-up, the vendor, by retaining

ownership over the property in the guise of being the

lessor, retains, likewise, the right to repossess the

same, without going through the process of

foreclosure, in the event the vendee-lessee defaults in

the payment of the installments. There arises

therefore no need to constitute a chattel mortgage

over the movable sold. More important, the vendor,

after repossessing the property and, in effect,

canceling the contract of sale, gets to keep all the

installments-cum-rentals already paid.

Even if there was a contract of sale, Filinvest is still

not liable because Sy Bang is presumed to be more

knowledgeable, if not experts, on the machinery

subject of the contract, they should not therefore be

heard now to complain of any alleged deficiency of

the said machinery. It was Sy Bang who was

negligent, not Filinvest. Further, Sy Bang is precluded

to complain because he signed a Waiver of Warranty.

Sales(Atty Chan)

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