IV.

SUBJECT MATTER OF THE SALE

A. REQUISITES OF A VALID SUBJECT
MATTER
Article 1459. The thing must be licit and the
vendor must have a right to transfer the
ownership thereof at the time it is delivered.
Must be the owner at the time of the
delivery because? (not at the point of
perfection but at the point of
consummation) At that point in time
is ownership deemed transferred.
Article 1347. All things which are not outside
the commerce of men, including future things,
may be the object of a contract. All rights which
are not intransmissible may also be the object of
contracts.
No contract may be entered into upon future
inheritance except in cases expressly authorized
by law.
All services which are not contrary to law,
morals, good customs, public order or public
policy may likewise be the object of a contract.
Article 1306. The contracting parties may
establish such stipulations, clauses, terms and
conditions as they may deem convenient,
provided they are not contrary to law, morals,
good customs, public order, or public policy.
Article 1409. The following contracts are
inexistent and void from the beginning:
(1) Those whose cause, object or purpose is
contrary to law, morals, good customs, public
order or public policy;
(2) Those which are absolutely simulated or
fictitious;
(3) Those whose cause or object did not exist at
the time of the transaction;
(4) Those whose object is outside the commerce
of men;
(5) Those which contemplate an impossible
service;
(6) Those where the intention of the parties
relative to the principal object of the contract
cannot be ascertained;
(7) Those expressly prohibited or declared void
by law.

These contracts cannot be ratified. Neither can

the right to set up the defense of illegality be
waived.
Article 1411. When the nullity proceeds from
the illegality of the cause or object of the
contract, and the act constitutes a criminal
offense, both parties being in pari delicto, they
shall have no action against each other, and both
shall be prosecuted. Moreover, the provisions of
the Penal Code relative to the disposal of effects
or instruments of a crime shall be applicable to
the things or the price of the contract.
This rule shall be applicable when only one of
the parties is guilty; but the innocent one may
claim what he has given, and shall not be bound
to comply with his promise.
Article 1416. When the agreement is not illegal
per se but is merely prohibited, and the
prohibition by the law is designed for the
protection of the plaintiff, he may, if public
policy is thereby enhanced, recover what he has
paid or delivered.
1. Must be existing, future, or contingent
Article 1347. All things which are not outside
the commerce of men, including future things,
may be the object of a contract. All rights which
are not intransmissible may also be the object of
contracts.
No contract may be entered into upon future
inheritance except in cases expressly authorized
by law.
All services which are not contrary to law,
morals, good customs, public order or public
policy may likewise be the object of a contract.
What are future goods? Art. 1462
Article 1348. Impossible things or services
cannot be the object of contracts.
Article 1462. The goods which form the subject
of a contract of sale may be either existing
goods, owned or possessed by the seller, or
goods to be manufactured, raised, or acquired by
the seller after the perfection of the contract of
sale, in this Title called "future goods."

There may be a contract of sale of goods, whose

acquisition by the seller depends upon a
contingency which may or may not happen.
Example?
Bag
about
to
be
manufactured, sacks of rice.
Example
of
contingent?
Event
happening? If I win the raffle, I will sell
you the car. Conditional contract of sale.
a. Emptio Rei Speratae/Emptio Spei
Article 1461. Things having a potential
existence may be the object of the contract of
sale.
The efficacy of the sale of a mere hope or
expectancy is deemed subject to the condition
that the thing will come into existence.
The sale of a vain hope or expectancy is void.
Expired raffle ticket, or scam pala
Pichel v Alonzo (1982)
Petitioner: Luis Pichel
Respondent: Prudencio Alonzo
Emptio Rei Speratae/Emptio Spei Arts. 1461
& 1347
Note: Emptio rei speratae is a contract of sale of
future things which must be determinate or
specific; it won't apply to things that are generic.
Such a thing becomes enforceable when the
thing in question appears. If it doesn't appear,
the contract either is extinguished when the time
limit expires or it becomes obvious the event
won't happen. The uncertainty is with regard to
the quality and quantity of the thing.
Emptio spei, on the other hand, is the sale of a
mere hope (like buying a lottery ticket.) The sale
is effective even if the thing doesn't appear
unless it's a vain hope. The object is a present
thing which is the hope or expectancy and the
uncertainty is with regard to its existence.
I would classify this case as emptio rei speratae
since the coconut fruits are reasonably certain to
come into existence.
FACTS:
This case originated as an action in the CFI
for the annulment of a "Deed of Sale
involving property awarded to respondent

Alonzo by the Philippine Government

under Republic Act No. 477. The deed of
sale reads as follows:
o That the VENDOR for and in
consideration of the sum of FOUR
THOUSAND
TWO
HUNDRED
PESOS
(P4,200.00),
Philippine
Currency, in hand paid by the
VENDEE to the entire satisfaction of
the VENDOR, the VENDOR hereby
sells transfers, and conveys, by way of
absolute sale, all the coconut fruits of
his coconut land, designated as Lot
No. 21 - Subdivision Plan No. Psd32465,
situated
at
Balactasan
Plantation, Lamitan, Basilan City,
Philippines;
o That for the herein sale of the coconut
fruits are for all the fruits on the
aforementioned parcel
of land
presently found therein as well as for
future fruits to be produced on the said
parcel of land during the years period;
which shall commence to run as of
SEPTEMBER
15,1968;
up
to
JANUARY 1, 1976 (sic);
o That the delivery of the subject matter
of the Deed of Sale shall be from time
to time and at the expense of the
VENDEE who shall do the harvesting
and gathering of the fruits.
Alonzo, then the plaintiff in the CFI, argued
that the deed of sale is the prohibited
encumbrance contemplated in Section 8 of
Republic Act No. 477.
The CFI ruled that the deed of sale is
actually, for all legal intents and purposes, a
contract of lease of the land itself. It
therefore concluded that the deed of sale in
question is an encumbrance prohibited by
Republic Act No. 477 which provides thus:
o Sec. 8. Except in favor of the
Government or any of its branches,
units, or institutions, land acquired
under the provisions of this Act or any
permanent improvements thereon shall
not be thereon and for a term of ten
years from and after the date of
issuance of the certificate of title, nor
shall they become liable to the

satisfaction of any debt contracted

prior to the expiration of such period.
Hence, the CFI declared the deed of sale
void.

ISSUE/S:
WoN the Deed of Sale is a contract of
sale or a contract of lease
o CONTRACT OF SALE. It is a
document evidencing the agreement of
herein parties for the sale of coconut
fruits of Lot No. 21, and not for the
lease of the land itself as found by the
lower Court.
o In clear and express terms, the document
defines the object of the contract thus:
"the herein sale of the coconut fruits are
for an the fruits on the aforementioned
parcel of land during the years ...(from)
SEPTEMBER 15, 1968; up to
JANUARY 1, 1976."
o The subject matter of the contract of
sale in question are the fruits of the
coconut trees on the land during the
years from September 15, 1968 up to
January 1, 1976, which subject matter
is a determinate thing. Under Article
1461 of the New Civil Code, things
having a potential existence may be
the object of the contract of sale.
o In Sibal v. Valdez, the SC held that
pending crops which have potential
existence may be the subject matter of
a sale. A valid sale may be made of a
thing, which though not yet actually
in existence, is reasonably certain to
come into existence as the natural
increment or usual incident of
something already in existence, and
then belonging to the vendor, and the
title will vest in the buyer the moment
the thing comes into existence. Things
of this nature are said to have a
potential existence.
o The essential difference between a
contract of sale and a lease of things is
that the delivery of the thing sold
transfers ownership, while in lease no
such transfer of ownership results as the

rights of the lessee are limited to the use

and enjoyment of the thing leased.
o CFI argued: Because the defendantlessee, in order to enjoy his right under
the contract, actually takes possession of
the land, at least during harvest time, to
gather all of the fruits of the coconut
trees in the land, and gain exclusive use
thereof without the interference or
intervention of the plaintiff-lessor such
that said plaintiff-lessor is excluded in
fact from the land during the period
aforesaid, then the possession and
enjoyment of the coconut trees can be
said to be the possession and enjoyment
of the land itself.
SC: The possession and enjoyment
of the coconut trees cannot be said
to be the possession and enjoyment
of the land itself because these
rights are distinct and separate from
each other, the first pertaining to
the accessory or improvements
(coconut trees) while the second, to
the principal (the land).
A transfer of the accessory or
improvement is not a transfer of the
principal. It is the other way
around, the accessory follows the
principal.
Hence, the sale of the nuts cannot
be interpreted nor construed to be a
lease of the trees, much less
extended further to include the
lease of the land itself.
WoN the Deed of Sale is the prohibited
encumbrance contemplated in Section 8 of
Republic Act No. 477
o NO. The grantee of a parcel of land
under R.A. No. 477 is not prohibited
from alienating or disposing of the
natural and/or industrial fruits of the
land awarded to him.
o What the law expressly disallows is
the encumbrance or alienation of the
land itself or any of the permanent
improvements thereon.
o It could not have been the intention of
the legislature to prohibit the grantee
from selling the natural and industrial

fruits of his land, for otherwise, it

would lead to an absurd situation
wherein the grantee would not be able
to receive and enjoy the fruits of the
property in the real and complete
sense.
b. Subject to a Resolutory Condition
Article 1465. Things subject to a resolutory
condition may be the object of the contract of
sale.
Example to resolutory: sale with right
to repurchase within 3 years kunwari.
Article 1608. The vendor may bring his action
against every possessor whose right is derived
from the vendee, even if in the second contract
no mention should have been made of the right
to repurchase, without prejudice to the
provisions of the Mortgage Law and the Land
Registration Law with respect to third persons.
Arsenal v IAC
- Jan 7 54, Filomeno Palaos acquired
Homestead Lot 81 secured by OCT P290 covering an 87.8k sqm parcel of
land in Bukidnon.
- Sept 10 57, Palaos sold 4 ha of the lot
to Torcuato Suralta for P890, in a
notarized deed of sale. Suralta
immediately took possession & placed
improvements worth P20k
- 64, Remedio & Francisca Arsenal
became tenants of an adjoining land,
separated from Palaos lot by virtue of a
public road. They came to know Suralta
as their neighbor & compadre, and
eventually he learned of their intention
to buy the remaining area of Palaos
land.
- Mar 14 67, Filomeno sold the
remaining portion of his lot (3 ha) to the
Arsenals for P800 in a deed of sale,
without knowing that the deed covered
the ENTIRE lot (including Suraltas 4
ha).
o Such deed was presented to the
Office of the Commission on
National
Integration
for

approval since Palaos is

illiterate & a minority. The field
officer approved the deed
without inspecting the lot.
Arsenals took possession of the 3 ha part
but never disturbed Suraltas 4 ha
portion. In 67, Francisca Arsenal
caused the tax declaration of the entire
lot to be in her name, and because of
their good relations, Suralta contributed
P10 for his portion over the years 68
73.
On July 11 73, Suralta presented his 57
sales contract in order to register his
deed, but it was refused for being within
the 5 year prohibitive period from the
issue of the patent. To cure the defect, he
made Palaos sign a new sales contract
covering his 4 ha.
In Dec 73, Suralta saw Arsenals 64
Deed of Sale for the first time and asked
Palaos about it. Palaos said he only sold
them 3 ha, but Francisca insisted that the
sale covered the whole lot (what a
bitch). Because of this disagreement, on
Dec 6 73, Francisca registered her deed
and obtained TCT T-7879 over the
whole lot.
All efforts at achieving an amicable
settlement having failed, Suralta sued
Palaos and the Arsenals on Mar 6 74 to
annul TCT T-8789.
o Arsenals assail Suraltas 57
deed, claiming it was (1) within
the 5 year prohibitive period,
and (2) not approved by the
OCNI despite Palaos illiteracy
& belonging to a minority
group.
o Palaos maintains the validity of
his sale to Suralta, claiming they
informed the Arsenals about
their prior sale of 4 ha to him.
They claim the Arsenals took
advantage of their illiteracy to
make them sign the deed of sale
over the entire lot.
RTC ruled for Suralta, imputing bad
faith to the Arsenals, making them
disqualified from availing of the
protection of the CC to innocent

purchasers registering their deed before

another. IAC affirmed. Hence appeal.
Issues:
1. Was Palaos sale to Suralta null and
void from the beginning? YES.
a. The Public Land Act S118 is
clear and explicit: if executed
within the 5y prohibited period,
all contracts which alienate,
transfer, convey, or encumber
any homestead is void.
i. The subsequent contract
signed on 73 is of no
moment a void
contract may not be
confirmed or ratified by
a
subsequent
act.
Besides,
no
consideration supported
this new contract.
b. A third party whose interests are
affected by a void contract may
validly set up its nullity.
2. Do the Arsenals/Suralta have a right
to the entire lot? NO. PALAOS DOES
(AND THE GOVT DOES TOO,
LEL.)
a. The finding of bad faith, while it
does not validate a void
contract, still serves as a
fundamental barrier to the
ownership of the Arsenals over
the 4 ha owned by Suralta, as
their ownership would amount
to unjust enrichment. The
finding of bad faith has been
well substantiated:
i. Unlikely
that
they
would occupy the same
land with Suralta for 4y
and still think he was a
mere mortgagee of the
property.
ii. Unlikely that the entire
lot was sold for only
P800
in
67,
considering in 57, a 4
ha part was sold for
P890
to
Suralta,
especially considering

inflation & increased

land value.
iii. Arsenals
actively
encouraged Suralta to
believe they were coowners in value, as he
even paid part of the tax
declaration over the
land and allowed him to
keep
peaceful
possession thereof.
b. However, equity cannot validate
a void contract. Sorry Suralta.
c. In cases where the homestead
has been the subject of void
conveyances, the law regards
the original owner as the valid
owner subject to escheat
proceedings by the State. This
escheat
proceeding
is
a
consequence of the fact that the
original owner is in pari delicto
with the buyer in alienating the
property
within
the
5y
prohibited period, contrary to
law.
i. Hence, the PALAOSES
are the valid owners,
without prejudice to any
reversion proceedings
initiated by the State.
Held: IAC REVERSED. 57 sale of 4 ha to
Suralta null & void, same portion sale to
Arsenals null & void, OCT over the 4 ha to be
reissued in the name of Palaoses, heirs of
Palaoses to reimburse Suralta P890 (the
improvements are deemed compensated by his
long possession & any fruits he received from
the land).
2. Must be Licit

Art. 1347. All things which are not outside the commerce of m
object of a contract. All rights which are not intransmissible may a
No contract may be entered into upon future inheritance except in

All services which are not contrary to law, morals, good custo
likewise be the object of a contract. (1271a)

Pacific
War.
- On April
17, 1925.thereof
Potenciano
Art. 1459. The thing must be licit and the vendor must have
a right
to transfer
the ownership
at the
Garcia applied for the registration of both
time it is delivered. (n)
parcels of land in his name, and the land
granted the registration over
Art. 1575. The sale of animals suffering from contagious registration
diseases shallcourt
be void
and against the opposition of the Attorneyandfor
thewhich
Director
Forestry.
Pursuant
to
A contract of sale of animals shall also be void if the useGeneral
or service
theyofare
acquired
has been
the (1494a)
Court's decision, original certificate of title
stated in the contract, and they are found to be unfit therefor.
covering said parcels 1 and 2 was issued to the
spouses Potenciano Garcia and Lorenza Sioson.
MARTINEZ V CA
- These parcels of land were subsequently
56 SCRA 647 ESGUERRA; April 29, 1974
bought by Emilio Cruz de Dios. Thereafter, the
ownership of these properties changed hands
NATURE Petition for review by certiorari of the
until eventually they were acquired by the herein
judgment of the CA which reversed the
appellee spouses.
judgment of the CFI Pampanga in the case
instituted to annul the order of November 25,
1958 of respondent Secretary of Public Works &
Communications directing the removal by the
petitioners of the dikes they had constructed,
which order was issued pursuant to the
provisions of RA No. 2056.
FACTS - The spouses Romeo Martinez and
Leonor Suarez are the registered owners of 2
parcels of land in Lubao, Pampanga. Both
parcels of land are fishponds. The property
involved in the instant case is the second parcel.
- The disputed property was originally owned by
one Paulino Montemayor, who secured a "titulo
real" over it way back in 1883. After the death of
Paulino Montemayor the said property passed to
his successors-in-interest, Maria Montemayor
and Donata Montemayor, who in turn, sold it, as
well as the first parcel, to a certain Potenciano
Garcia. - Because Potenciano Garcia was
prevented by the then municipal president of
Lubao, Pedro Beltran, from restoring the dikes
constructed on the contested property, the
former, filed a civil case with the CFI against the
said Pedro Beltran to restrain the latter in his
official capacity from molesting him in the
possession of said second parcel. From June 22,
1914, the dikes around the property in question
remained closed until a portion thereof was
again opened just before the outbreak of the

- To avoid any untoward incident, the disputants

agreed to refer the matter to the Committee on
Rivers and Streams, by then composed of the
Hon. Pedro Tuason, at that time Secretary of
Justice, as chairman, and the Honorable
Salvador Araneta and Vicente Orosa, Secretary
of Agriculture and National Resources and
Secretary of Public Works and Communications,
respectively, as members. The Sub-Committee
submitted its report to the Committee to the
effect that Parcel No. 2 was not a public river
but a private fishpond owned by the herein
spouses. - the Committee on Rivers and Streams
rendered its decision: "Romeo Martinez and
Leonor Suarez should be restored to the
exclusive possession, use and enjoyment of the
creek in question which forms part of their
registered property."
- The municipal officials of Lubao, led by
Acting Mayor Mariano Zagad, apparently
refused to recognize the above decision, because
Romeo Martinez and Leonor Suarez instituted a
civil case against said Mayor Zagad, praying
that the latter be enjoined from molesting them
in their possession of their property and in the
construction of the dikes therein. The writ of
preliminary injunction applied for was issued
against the respondent municipal Mayor, who

immediately elevated the injunction suit for

review to the Supreme Court, which dismissed
Mayor Zagad's petition. With this dismissal
order, the spouses proceeded to construct the
dikes in the disputed parcel of land. - some 4
years later Hon. Florencio Moreno, then
Secretary of Public Works and Communications,
ordered another investigation of the said parcel
of land, directing the appellees herein to remove
the dikes they had constructed, on the strength
of the authority vested in him by Republic Act
No. 2056, entitled "An Act To Prohibit, Remove
and/or Demolish the Construction of Dams.
Dikes, Or Any Other Walls In Public Navigable
Waters, Or Waterways and In Communal
Fishing Grounds, To Regulate Works in Such
Waters or Waterways And In Communal Fishing
Grounds, And To Provide Penalties For Its
Violation, And For Other Purposes.
- The spouses Martinez replied to the order by
commencing the present case, which was
decided in their favor by the lower Court - As
against this judgment respondent officials of the
Department
of
Public
Works
and
Communications took the instant appeal. The
Court of Appeals reversed the judgment and
entered another: [1] upholding the validity of the
decision reached by the respondent officials in
the administrative case; [2] dissolving the
injunction issued by the Court below; and [3]
cancelling the registration of Lot No. 2, the
disputed area, and ordering its reconveyance to
the public domain.
ISSUES 1. WON CA erred in declaring that
parcel no.2 is a public river and ordering the
cancellation of its registration because this
constitutes a collateral attack on a Torrens Title
in violation of the law and the jurisprudence on
the matter
2. WON the CA erred in reopening and relitigating the issue as to WON lot no.2 is a
public river despite the fact that this issue has

long been resolved and settled by the land

registration court and is now res judicata
3. WON the CA erred in ordering the
cancellation of the registration of lot no.2
despite the fact that the Torrens Title covering it
has been vested in the petitioners who are the
7th successive innocent purchasers thereof and
who in purchasing the same relied on the
principle that the persons dealing with registered
land need not go behind the register to determine
the condition of the property
HELD 1 and 2. NO Ratio The Land Registration
Court has no jurisdiction over nonregisterable
properties, such as public navigable rivers which
are parts of the public domain, and cannot
validly adjudge the registration of title in favor
of a private applicant. Hence, the judgment of
the CFI of Pampanga as regards the Lot No. 2
may be attacked at any time, either directly or
collaterally, by the State which is not bound by
any prescriptive period provided for by the
Statute of Limitations. The right of reversion or
reconveyance to the State of the public
properties fraudulently registered and which are
not capable of private appropriation or private
acquisition does not prescribe.
Reasoning
- It is argued that as the decree of registration
issued by the Land Registration Court was not
re-opened through a petition for review filed
within 1 year from the entry of the decree of
title, the certificate of title issued pursuant
thereto in favor of the appellants for the land
covered thereby is no longer open to attack
under Section 38 of the Land Registration Act
(Act 496)2 and the jurisprudence on the matter
established by this Tribunal.3 At the time of the
enactment of Act 496, one right recognized or
existing under the law is that provided for in
Article 339 of the old Civil Code which reads as
follows: Property of public ownership is: 1. That
destined to the public use, such as roads, canals,

rivers, torrents, ports, and bridges constructed by

the State, and banks shores, roadsteads, and that
of a similar character. --they are parts of the
public domain intended for public use, are
outside the commerce of men and, therefore, not
subject to private appropriation.
- the authorities cited by the appellants as to the
conclusiveness and incontestability of a Torrens
certificate of title do not apply here. - When it
comes to registered properties, the jurisdiction
of the Secretary of Public Works &
Communications under Republic Act 2056 to
order the removal or obstruction to navigation
along a public and navigable creek or river
included therein, has been definitely settled and
is no longer open to question 3. NO Ratio The
ruling that a purchaser of a registered property
cannot go beyond the record to make inquiries
as to the legality of the title of the registered
owner, but may rely on the registry to determine
if there is no lien or encumbrances over the
same, cannot be availed of as against the law
and the accepted principle that rivers are parts of
the public domain for public use and not capable
of private appropriation or acquisition by
prescription. Reasoning - Before purchasing a
parcel of land, it cannot be contended that the
appellants who were the vendees did not know
exactly the condition of the land that they were
buying and the obstacles or restrictions thereon
that may be put up by the government in
connection with their project of converting Lot
No. 2 in question into a fishpond. Nevertheless,
they willfully and voluntarily assumed the risks
attendant to the sale of said lot. One who buys
something with knowledge of defect or lack of
title in his vendor cannot claim that he acquired
it in good faith.
Disposition The judgment is hereby affirmed.
3. Must be Determinate or Determinable
Art. 1460. A thing is determinate when it is

particularly designated or physical segregated

from all other of the same class.
The requisite that a thing be determinate is
satisfied if at the time the contract is entered
into, the thing is capable of being made
determinate without the necessity of a new or
further agreement between the parties. (n)
Art. 1349. The object of every contract must be
determinate as to its kind. The fact that the
quantity is not determinate shall not be an
obstacle to the existence of the contract,
provided it is possible to determine the same,
without the need of a new contract between the
parties. (1273)
MELLIZA V CITY OF ILOILO 23 SCRA
477 BENGZON, J.P.; April 30, 1968
NATURE Petition for review by certiorari of
decision of CA FACTS - Juliana Melliza (JM)
owned 3 parcels of land in Iloilo known as Lot
Nos. 2, 5, and 1214 respectively. Lot 1214
covered an area of 29,073 sq. m. - She later
donated to the then Municipality of Iloilo, 9,000
sq. m. of Lot 1214, to serve as site for the
municipal hall but the same was revoked by the
parties for being inadequate to meet the
requirements of the municipality development
plan dubbed as the Arellano Plan.
- Subsequently, Lot 1214 was divided by a
surveying co. into Lots 1214-A and 1214-B. And
still later, 1214-B was further divided into Lots
1214-B1, 1214-B2 and 1214-B3. As approved
by the Bureau of Lands, the Lots later became
known as:
1214-B1----> 1214-B (4,562 sq. m.)
1214-B2----> 1214-C (6,653 sq. m.)
1214-B3----> 1214-D (4,135 sq. m.)

- Nov. 15, 1932, JM executed an instrument

stating: (it is in Spanish, di ko masyadong
maintindihan but i think the 1st paragraph said:
for the price of 6,422 pesos, she is transferring
her rights to Lot Nos. 2 and 5 as well as 10,788
sq. m. of Lot 1214 covering sub lots 1214-B2
and 1214-B3 in favor of the Municipality of
Iloilo... the 2nd paragraph said: the lots object of
the sale are the ones needed for a city hall site;
avenues and parks according the to Arellano
plan). - Jan. 14, 1938: JM sold her remaining
interest in Lot 1214 to Remedios San
Villanueva. Remedios later transferred her rights
to said portion of land to Pio Sian Melliza,
herein petitioner. Annotated at the back of
PSMs title certificate was that a portion of
10,788 sq. m. of Lot 1214 now designated as
1214-B2 and 1214-B3 belongs to the
Municipality of Iloilo. - Aug.24, 1949: City of
Iloilo (which succeeded Mun. of Iloilo), donated
the city hall site together with the bldg. thereon,
to U.P. (Iloilo). The site consisted of Lot Nos.
1214-B, 1214-C and 1214D. - 1952: U.P.
enclosed the site with wire fence. Pio asked the
city authorities for payment of the value of Lot
1214-B but no recovery was made. U.P. later
obtained its Transfer Certificate Title covering
the 3 lots.
- Dec. 10, 1955: Pio filed an action in the CFI
against Iloilo City and U.P. for recovery of Lot
1214-B or its value. Defendants answered that
the said lot was included in the public
instrument executed by JM in favor of Iloilo. The CFI dismissed the complaint. Taking the
2nd paragraph of the instrument to mean that JM
not only sold Lots 1214-C and 1214-D but also
such other portions or lots as were necessary for
the municipal hall site such as Lot 1214-B. - Pio
appealed to the CA, which later affirmed the
interpretation of the CFI. It said that the portion
of Lot 1214 sold by JM was not limited to the
10,788 sq.m. specifically mentioned but
included whatever was needed for the
construction of avenues, parks and the city hall

site. This decision prompted Pio to file this

petition for certiorari. Petitioners claims > The
public instrument is clear that only Lots 1214-C
and 1214D (or 10,788 sq. m. of Lot 1214) were
included in the sale.
- The purpose of 2nd paragraph was only to
better identify the lots sold and none other.
- To follow the interpretation of the CA and the
CFI would render the contract invalid because
the law requires as an essential element of sale, a
determinate object. Respondents claims >
Petitioners appeal raises only questions of fact
(SC disposed of this by saying that since a
contract is in the nature of law between the
parties and their successors in interest,
interpretation of such involves a question of
law)
- The document in question really intended to
include Lot 1214B as shown by the silence of
the vendor after Iloilo City exercised ownership
- Not to include it would have been absurd
because said lot is contiguous to the others
admittedly included in the conveyance.
- That the sales object was determinate, because
it could be ascertained, at the time of the
execution of the contract, what lots were needed
by Iloilo municipality for avenues, parks and
city hall site according to the Arellano Plan.
ISSUE WON the conveyance by Juliana Melliza
to Iloilo municipality included the portion of Lot
1214 known as Lot 1214-B and as a corollary:
the issue of WON the description of said other
lots in the 2nd paragraph of the public
instrument was legally insufficient, the object
not being determinate as required by law HELD
1. YES Ratio The requirement of the law that a
sale must have for its object a determinate thing,
is fulfilled 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.

Reasoning - The specific mention of some of the
lots plus the statement that the lots object of the
sale are the ones needed for city hall site;
avenues and parks, according to the Arellano
plan, sufficiently provides a basis, as of the time
of the execution of the contract, for rendering
determinate said lots without the need of a new
and further agreement of the parties. - Theres no
question that the paramount intention of the
parties was to provide Iloilo municipality with
lots sufficient for the construction of the Iloilo
City hall site, with its avenues and parks. A
previous donation for this purpose between the
same parties was revoked by them, because of
inadequacy of the area of the lot donated. Reading the public instrument in toto with
special reference to the paragraphs describing
the lots included in the sale, shows that said
instrument describes 4 parcels of land by their
lot nos. and area; and then it goes to further
describe, not only those already mentioned, but
the lots object of the sale, by stating that the said
lots are the ones needed for the construction of
the city hall site, avenues and parks according to
the Arellano plan. If the parties intended merely
to cover the specified lots Lots 2, 5, 1214-C
and 1214-D, there would scarcely have been any
need for the next paragraph, since these lots are
already plainly and very clearly described by
their respective lot no. and areas. It is therefore
the more reasonable interpretation to view it as
describing those other portions of land
contiguous to the lots aforementioned that, by
reference to the Arellano plan, will be found
needed for the purpose at hand the construction
of the city hall site.
- The Arellano plan was in existence as early as
1928, and the area needed under that plan for
city hall site was then already known; the
specific mention of some of the lots covered by
the sale in effect fixed the corresponding
location of the city hall site under the plan; that,
therefore, considering the said lots specifically

mentioned in the public instrument and the

projected city hall site, with its area, as then
shown in the Arellano plan, it could be
determined which, and how much of the
portions of land contiguous to those specifically
named, were needed for the construction of the
city hall site. - And moreover, there is no
question either that Lot 1214-B is contiguous to
Lots 1214-C and 1214-D, admittedly covered by
the public instrument. It is stipulated that, after
execution of the contract, the Municipality of
Iloilo possessed it together with the other lots
sold. It sits practically in the heart of the city
hall site. - Furthermore, from the stipulation of
facts, Pio was the notary public of the public
instrument. As such, he was aware of its terms.
Said instrument was also registered with the
Reg. of Deeds and such registration was
annotated at the back of the corresponding title
certificate of JM. From these stipulated facts, it
can be inferred that Pio knew of the aforesaid
terms of the instrument or is chargeable with
knowledge of them; that knowing so, he should
have examined the Arellano plan in relation to
the public instrument; that furthermore, he
should have taken notice of the possession first
by the Mun. of Iloilo, then by the City of Iloilo
and later by U.P. of Lot 1214-B as part of the
city hall site conveyed under that public
instrument, and raised proper objections thereto
if it was his position that the same was not
included in the conveyance. The fact remains
that, instead, for 20 long years, Pio and his
predecessors-ininterest, did not object to said
possession, nor exercise any act of possession
over Lot 1214-B. Applying, therefore, principles
of civil law, as well as laches, estoppel, and
equity, said lot must necessarily be deemed
included in the conveyance in favor of Iloilo
municipality, now Iloilo City.
Disposition Complaint is dismissed; decision
appealed from is affirmed.

Atilano vs Atilano
Atilano I bought from Villanueva Lot
535 of the then municipality of Zamboanga
cadastre. Atilano I had the lot subdivided into
five parts (referred to as Lots A-E from hereon).
He then sold Lot E in favor of his brother,
Atilano II. Lots B-D were sold to other persons.
Atilano I kept Lot A for himself. When he died,
title of the lot passed to Ladislao Atilano.
Atilano II and his children then obtained
the transfer of certificate of title over Lot E in
their names as co-owners. When they decided to
have the land resurveyed, they discovered that
they were actually occupying Lot A and not Lot
E, as referred to in the deed, while the land
which remained in the possession of the vendor
(Atilano I) and which passed to his successor
Ladislao Atilano was Lot E and not Lot A. [They
basically switched around lots without their
knowledge.]
Atilano II passed away. His heirs filed
the present action. They claimed that they had
offered to surrender to Atilano Is heirs
(defendants) the possession of Lot A and
demanded in return Lot E, but that the
defendants had refused to accept the exchange.
(Thats understandable since Lot E is much
bigger than Lot A.) The defendants, on the other
hand, claim that the reference to Lot E in their
deed of sale was an involuntary error and that
the intention of the parties was to convey the lot
correctly identified as Lot A.
o
The trial court held in favor of the
plaintiffs.
Issue: What is binding, the intent of the parties
or the lots named in the deeds?
Held: Intent. Plaintiffs ordered to execute a deed
of conveyance of Lot E in favor of the
defendants, and the latter are ordered to give Lot
A to them.

When one sells or buys real property,

one sells or buys the property as he sees it, in its
actual setting and by its physical metes and
bounds, and not by the mere lot number
assigned to it in the certificate of title. In this
case, the portion correctly referred to as Lot A
was already in the possession of the vendee,
Atilano II, even before the sale in his favor. In
like manner, Atinalo I had his house on Lot E.
The two brothers continued in possession of the
respective portions for the rest of their lives,
obviously ignorant of the initial mistake.
The real issue here is not adverse
possession, but the real intention of the parties to
that sale. From all the facts and circumstances, it
shows that the object was that portion where the
vendee was already residing, and where his heirs
continued to reside thereafter; namely, Lot A,
and that its designation as Lot E in the deed of
sale was a simple mistake.
The Civil Code provides a remember for such a
situation by means of reformation of the
instrument. In this case, the deed of sale
executed need no longer be reformed. The
parties have retained possession of their
respective properties and all they should do is to
execute mutual deeds of conveyance.
B. Particular Kinds
1. Generic Things
PETITIONER: Yu Tek & Co.
RESPONDENT: Basilio Gonzales
SUMMARY: Yu Tek & Co. and Gonzales
entered into a written contract, where Gonzales
was obliged to deliver 600 piculs of sugar to Yu
Tek. Gonzales defaulted in his obligation.
Gonzales contends that he should be relieved
from complying with his obligation due to his
crop's failure, stating that the subject of the
contract was sugar specifically harvested from
his plantation. SC held that there was no such
specification in the contract, and only indicated

the subject as "sugar" because neither party

could point to a specific quantity of sugar and
say that that particular sugar was the subject of
the contract.

The contract represented a perfected sale

Because of Gonzales' crop failure, he

was relieved from complying with the contract
because of "loss of the thing due".

FACTS:
1. Petitioner Yu Tek & Co. and Respondent
Gonzales entered into a written contract, which
states the ff.:

ISSUE: WON a specific kind of sugar was

specified in the contract? - NO

Gonzales received P3k from Yu Tek, and

in consideration of the sum, he obligates himsef
to deliver 600 piculs of sugar of the first and
second grade to Yu Tek within 3 months from
Jan 1, 1912 to March 31, 1912

RULING: Petition granted. Judgment modified,

allowing the recovery of P1.2k in addition to the
P3k awarded to Yu Tek. Judgment affirmed
without costs.

That Gonzales obligates himself to

deliver the 600 piculs of sugar at any place
within the municipality of Sta. Rosa

RATIO:

That if Gonzales doesn't deliver to Yu

Tek the 600 piculs of sugar within the given
period, the contract will be rescinded and
Gonzales will be obligated to return the P3k plus
P1.2k for loss and damages
2. Yu Tek proved that Gonzales failed to deliver
the sugar, nor have they recovered the P3k and
the P1.2k under the terms of the contract. The
CFI rendered judgment for P3k only in favor of
Yu Tek. Both Gonzales and Yu Tek appealed
their case.
3. Gonzales' arguments:

Court erred in refusing to permit parol

evidence that the parties intended that the sugar
in the contract was to be secured from the crop
which Gonzales raised on his plantation, and he
was unable to fulfill the contract because of the
almost total failure of his crop. Gonzales wanted
to show that the sugar was to be obtained
exclusively from the crop he raised.

The contract was limited to the sugar

Gonzales raised on his own plantation

1. There is no clause in the written contract

which even remotely suggests such a condition.
The defendant undertook to deliver a specified
quantity of sugar within a specified time. The
contract placed no restriction upon the defendant
in the matter of obtaining the sugar. He was
equally at liberty to purchase it on the market or
raise it himself. It may be true that defendant
owned a plantation and expected to raise the
sugar himself, but he did not limit his obligation
to his own crop of sugar. Our conclusion is that
the condition which the defendant seeks to add
to the contract by parol evidence cannot be
considered. The rights of the parties must be
determined by the writing itself.
2. [Old] Civil Code 1450: The sale shall be
perfected between the vendor and vendee and
shall be binding on both of them, if they have
agreed upon the thing which is the object of the
contract and upon the price, even when neither
has been delivered.
[Old] Civil Code 1452: The injury to or the
profit of the thing sold shall, after the contract

has been perfeted, be governed by the provisions

of Arts. 1096 and 1182.

The sale of a vain hope or expectancy is void.

(n)

3. There is a perfected sale with regard to the

"thing" whenever the article of sale has been
physically segregated from all other article.

Art. 1462. The goods which form the subject of

a contract of sale may be either existing goods,
owned or possessed by the seller, or goods to be
manufactured, raised, or acquired by the seller
after the perfection of the contract of sale, in this
Title called "future goods."

4.In the case at bar the undertaking of the

defendant was to sell to the plaintiff 600 piculs
of sugar of the first and second classes. Was this
an agreement upon the "thing" which was the
object of the contract within the meaning of
article 1450, supra? Sugar is one of the staple
commodities of this country. For the purpose of
sale its bulk is weighed, the customary unit of
weight being denominated a "picul." There was
no delivery under the contract. Now, if called
upon to designate the article sold, it is clear that
the defendant could only say that it was "sugar."
He could only use this generic name for the
thing sold. There was no "appropriation" of any
particular lot of sugar. Neither party could point
to any specific quantity of sugar and say: "This
is the article which was the subject of our
contract."
5. We conclude that the contract in the case at
bar was merely an executory agreement; a
promise of sale and not a sale. At there was no
perfected sale, it is clear that articles 1452, 1096,
and 1182 are not applicable. The defendant
having defaulted in his engagement, the plaintiff
is entitled to recover the P3,000 which it
advanced to the defendant, and this portion of
the judgment appealed from must therefore be
affirmed.
2. Future Goods
Art. 1461. Things having a potential existence
may be the object of the contract of sale.
The efficacy of the sale of a mere hope or
expectancy is deemed subject to the condition
that the thing will come into existence.

There may be a contract of sale of goods, whose

acquisition by the seller depends upon a
contingency which may or may not happen. (n)

3. Undivided Interest/Share
Art. 1463. The sole owner of a thing may sell an
undivided interest therein. (n)
Art. 1464. In the case of fungible goods, there
may be a sale of an undivided share of a specific
mass, though the seller purports to sell and the
buyer to buy a definite number, weight or
measure of the goods in the mass, and though
the number, weight or measure of the goods in
the mass is undetermined. By such a sale the
buyer becomes owner in common of such a
share of the mass as the number, weight or
measure bought bears to the number, weight or
measure of the mass. If the mass contains less
than the number, weight or measure bought, the
buyer becomes the owner of the whole mass and
the seller is bound to make good the deficiency
from goods of the same kind and quality, unless
a contrary intent appears. (n)
Art. 493. Each co-owner shall have the full
ownership of his part and of the fruits and
benefits pertaining thereto, and he may therefore
alienate, assign or mortgage it, and even
substitute another person in its enjoyment,

except when personal rights are involved. But

the effect of the alienation or the mortgage, with
respect to the co-owners, shall be limited to the
portion which may be alloted to him in the
division upon the termination of the coownership. (399)
Yturralde v CA

Francisco Yturralde and wife Margarita

owned a parcel of agricultural land
located in Guilinan, Zamboanga del Sur
containing an area of 14.1079 hectares
Francisco died intestate survived by his
wife and 9 children
Margarita contracted a second marriage
with Franciscos brother, Damaso
Damaso and Margarita executed a deed
of sale with a right of repurchase in
favour of Isabelo Rebollos for P1,715
The spouses failed to exercise right of
repurchase within the 3-year period
agreed upon
Margarita died
Rebollos
filed
a
petition
for
consolidation of ownership naming as
respondents the children (of Margarita)
and Damaso
Summons were served on all
respondents but 3 of the children
Josefina, Zosima and Ramon
The respondents were declared in
default and Rebollos filed a motion to
order Montano (one of the children) to
deliver and surrender the owners
duplicate of the OCT
o Montano was arrested for
failure to comply but this was
lifted
A writ of execution was issued and
subsequently, Respondent Judge ordered
the demolition of all buildings not
belonging to Rebollos found in the
premises

Petitioners
instituted
present
proceedings with the Court of Appeals
and a writ of preliminary injuction was
issued
However before judgement with the CA,
Rebollos issued a new TCT in favour of
vendee Pilar Reyes
CA concluded that the thing sought to be
restrained has already been done and the
title cannot be collaterally attacked.
Thus, this petition.

WN the action for consolidation shall be

granted? NO

It should be brought against all

indispensible parties and they must be
properly summoned. In the case at bar, 3
children, were not.
o As the petition of private
respondent Rebollos sought to
divest all of them of their
undivided interest in the entire
agricultural
land,
which
undivided interest was never
alienated by them to Rebollos,
herein
petitioners
became
indispensable parties.
If anyone of the party defendants, who
are all indispensable parties is not
properly summoned, the court acquires
no jurisdiction over the entire case and
its decision and orders therein are null
and void.
The pacto de retro sale executed by
Margarita de los Reyes "casada en
segundas
nuptias
con
Damaso
Yturralde," expressly stipulates that she
only sold all her rights, interests and
participation in the lot covered by
O.C.T. No. 2356.
Margarita could not, for she had no right
to, sell the entire lot, which is registered
under O.C.T. No. 2356 "inthe name of
Francisco
Yturralde
married
to

Margarita de los Reyes." Said lot is

acknowledge by herein petitioners as the
conjugal property of Francisco and
Margarita
What she validly disposed of under the
aforesaid pacto de retro sale of 1952 was
only her conjugal share in the lot plus
her successional right as heir in the
conjugal share of her deceased husband
Francisco.
The 3 children, Josefina, Zosima and
Ramon, are essential parties, without
whom no valid judgment may be
rendered, is further underscored by the
fact that the agricultural land in question
was owned by them in common and pro
indiviso with their mother and their
brothers and sisters and was not then as
now physically partitioned among them.

Gaite v Fonacier
Summary:
Conditional
obligations
are
characterized its efficacy of obligatory force is
subordinated to the happening of a future and
uncertain event; so that if the suspensive
condition does not take place, the parties would
stand as of the conditional obligation had never
existed,
Facts

Isabelo Fonacier was the owner and/or

holder of 11 iron lode mineral claims (Dawahan
Group), situated in Jose Panganiban, Camarines
Norte

By a Deed of Assignment dated 29

September 1952, Fonacier constituted and
appointed Fernando A. Gaite as his true and
lawful attorney-in-fact to enter into a contract
with any individual or juridical person for the
exploration and development of the mining
claims on aroyalty basis of not less than P0.50
per ton of ore that might be extracted therefrom.

On 19 March 1954, Gaite in turn

executed a general assignment conveying the
development and exploitation of said mining
claims unto the Larap Iron Mines, owned solely
by him.

Thereafter Gaite embarked upon the

development and exploitation of the mining
claims, opening and paving roads within and
outside their boundaries, making other
improvements and installing facilities therein for
use in the development of the mines, and in time
extracted therefrom what he claimed and
estimated to be approximately 24,000 metric
tons of iron ore.

For some reason or another, Isabelo

Fonacier decided to revoke the authority granted
by him to Gaite, and Gaite assented thereto
subject to certain conditions.
o
As a result, a document entitled
Revocation of Power of Attorney and Contract
was executed on 8 December 1954, wherein
Gaite transferred to Fonacier, for the
consideration of P20,000, plus 10% of the
royalties that Fonacier would receive from the
mining claims, all his rights and interests on all
the roads, improvements, and facilities in or
outside said claims, the right to use the business
name Larap Iron Mines and its goodwill, and
all the records and documents relative to the
mines.
o
In the same document, Gaite transferred
to Fonacier all his rights and interests over the
24,000 tons of iron ore, more or less that the
former had already extracted from the mineral
claims, in consideration of the sum of P75,000,
P10,000, of which was paid upon the signing of
the agreement, and the balance to be paid out of
the first letter of credit covering the first
shipment of iron ores or the first amount derived
from the local sale of iron ore made by the Larap
Mines & Smelting Co.

o
To secure the payment of the balance,
Fonacier promised to execute in favor of Gaite a
surety bond; delivered on 8 December 1954 with
Fonacier as principal and the Larap Mines and
Smelting Co. and its stockholders as sureties.
o
A second bond was executed by the
parties to the first bond, on the same day, with
the Far Eastern Surety and Insurance Co. as
additional surety, but it provided that the liability
of the surety company would attach only when
there had been an actual sale of iron ore by the
Larap Mines & Smelting Co. for an amount of
not less than P65,000.
o
Both bond were attached and made
integral parts of the Revocation of Power of
Attorney and Contract.
o
On the same day that Fonacier revoked
the power of attorney, Fonacier entered into a
Contract of Mining Operation with Larap
Mines and Smelting Co., Inc. to grant it the right
to develop, exploit, and explore the mining
claims, together with the improvements therein
and the use of the name Larap Iron Mines and
its goodwill, in consideration of certain
royalties.
o
Fonacier likewise transferred, in the
same document, the complete title to the
approximately 24,000 tons of iron ore which he
acquired from Gaite, to the Larap Mines &
Smelting Co., in consideration for the signing by
the company and its stockholders of the surety
bonds delivered by Fonacier to Gaite.
o
On 8 December 1955, the bond with
respect to the Far Eastern Surety and Insurance
Company expired with no sale of the
approximately 24,000 tons of iron ore, nor had
the 65,000 balance of the price of said ore been
paid to Gaite by Fonacier and his sureties.
Whereupon, Gaite demanded from Fonacier and
his sureties payment of said amount.

o
When Fonacier and his sureties failed to
pay as demanded by Gaite, the latter filed a
complaint against them in the CFI Manila (Civil
Case 29310) for the payment of the P65,000
balance of the price of the ore, consequential
damages, and attorneys fees. Judgment was,
accordingly, rendered in favor of plaintiff Gaite
ordering defendants to pay him, jointly and
severally, P65,000 with interest at 6% per annum
from 9 December 1955 until full payment, plus
costs. From this judgment, defendants jointly
appealed to the Supreme Court as the claims
involved aggregate to more than P200,000.

Issue: Whether or not the Lower Court erred in

holding the obligation of appellant Fonacier to
pay appelle Gaite the balance of P65k, as one
with a period or term and not one with a
suspensive condition; and that the term expired
on December 1955 - NO
RATIO:

No error was found, affirming the

decision of the lower court. Gaite acted within
his rights in demanding payment and instituting
this action one year from and after the contract
was executed, either because the appellant
debtors had impaired the securities originally
given and thereby forfeited any further time
within which to pay; or because the term of
payment was originally of no more than one
year, and the balance of P65k, became due and
payable thereafter.

The Lower Court was legally correct in

holding the shipment or sale of the iron ore is
not a condition or suspensive to the payment of
the balance of P65k, but was only a suspensive
period or term. What characterizes a conditional
obligation is the fact that its efficacy or
obligatory force as distinguished from its

demandability, is subordinated to the happening

of a future and uncertain event; so that if the
suspensive condition does not take place, the
parties would stand as if the conditional
obligation had never existed.

he has promised. (3) When by his own acts he

has impaired said guaranties or securities after
their establishment, and when through fortuitous
event they disappear, unless he immediately
gives new ones equally satisfactory.

The sale of the ore to Fonacier was a

sale on credit, and not an aleatory contract where
the transferor, Gaite, would assume the risk of
not being paid at all; and that the previous sale
or shipment of the ore was not a suspensive
condition for the payment of the balance of the
agreed price, but was intended merely to fix the
future date of the payment.

Appellants' failure to renew or extend

the surety company's bond upon its expiration
plainly impaired the securities given to the
creditor (appellee Gaite), unless immediately
renewed or replaced.

While as to the right of Fonacier to

insist that Gaite should wait for the sale or
shipment of the ore before receiving payment;
or, in other words, whether or not they are
entitled to take full advantage of the period
granted them for making the payment. The
appellant had indeed have forfeited the right to
compel Gaite to wait for the sale of the ore
before receiving payment of the balance of
P65,000.00, because of their failure to renew the
bond of the Far Eastern Surety Company or else
replace it with an equivalent guarantee. The
expiration of
the
bonding company's
undertaking on December 8, 1955 substantially
reduced the security of the vendor's rights as
creditor for the unpaid P65,000.00, a security
that Gaite considered essential and upon which
he had insisted when he executed the deed of
sale of the ore to Fonacier (first bond).

Under paragraphs 2 and 3 of Article

1198 of the Civil Code of the Philippines: ART.
1198. The debtor shall lose every right to make
use of the period: (2) When he does not furnish
to the creditor the guaranties or securities which

Nevertheless, there is no merit in

appellants' argument that Gaite's acceptance of
the surety company's bond with full knowledge
that on its face it would automatically expire
within one year was a waiver of its renewal after
the expiration date. No such waiver could have
been intended, for Gaite stood to lose and had
nothing to gain barely; and if there was any, it
could be rationally explained only if the
appellants had agreed to sell the ore and pay
Gaite before the surety company's bond expired
on December 8, 1955. But in the latter case the
defendants-appellants' obligation to pay became
absolute after one year from the transfer of the
ore to Fonacier by virtue of the deed, first bond.

4. Things in Litigation
Art. 1381. The following contracts are
rescissible:
(4) Those which refer to things under litigation
if they have been entered into by the defendant
without the knowledge and approval of the
litigants or of competent judicial authority;

Art. 1385. 2. Neither shall rescission take place

when the things which are the object of the
contract are legally in the possession of third
persons who did not act in bad faith.
Rule 13. Section 14. ROC.
Notice of lis pendens. In an action affecting
the title or the right of possession of real
property, the plaintiff and the defendant, when
affirmative relief is claimed in his answer, may
record in the office of the registry of deeds of
the province in which the property is situated
notice of the pendency of the action. Said notice
shall contain the names of the parties and the
object of the action or defense, and a description
of the property in that province affected thereby.
Only from the time of filing such notice for
record shall a purchaser, or encumbrancer of the
property affected thereby, be deemed to have
constructive notice of the pendency of the
action, and only of its pendency against the
parties designated by their real names.
The notice of lis pendens hereinabove
mentioned may be cancelled only upon order of
the court, after proper showing that the notice is
for the purpose of molesting the adverse party,
or that it is not necessary to protect the rights of
the rights of the party who caused it to be
recorded. (24a, R-14)

Respondents: Santiago Domingo

Things in Litigation
Street, J.
FACTS:

Atkins Kroll & Co. v Domingo (1924)

Petitioners: Atkins, Kroll & Company, Inc.

June 24, 1912: Court of Land

Registration of Zamboanga adjudicated
the three lots Nos. 36, 38, 55 to
Buenaventura Domingo. No mention
was made in the decision of the
improvements on the said lots.
When the registration decrees were
issued, however, the words "with all the
improvements existing thereon" were
inserted. These also appeared in the
respective certificates of title resulting in
Domingo owning not only the lots but
also the improvements thereon.
Domingo died intestate on Oct. 21,
1912. One of his sons Santiago qualified
as administratior of his estate. He
submitted a project of partition to the
court for the lots. No mention was made
of improvements of any kind with the
exception of a small house of strong
materials on Lot 38.
The court dully approved the project of
partition and no objection appears to
have been made by any interested
person.
The share of Santiago in his fathers
estate as pertains to Lot 36 and 55
remained undisturbed, however, he sold
his entire interest in Lot 38 with all the
improvements existing thereon by
contract of sale with pacto de retro to a
certain Ong Kong on Feb. 17, 1922.
However, no redemption occurred
within one year and the property was
consolidated in Ong Kong. He later sold
his entire interest in the lot and
improvements to petitioners Atkins,
Kroll & Co. After various transactions
which led to changes in the ownership

of the three lots, it appears that

petitioner is the owner of of Lot 36 +
improvements, whole of Lot 38 +
improvements, and of Lot 55
excluding improvements.
Santiago Domingo is now in possession
of the property and has at all times been
in possession since petitioner acquired
its interest therein, enjoying the use of
all the lots with the incoming derived
from its buildings.
With reference to the buildings, they
were erected in 1912 and 1913 which
Santiago claims were built using his
own money and with his fathers
consent. Therefore, he claims exclusive
ownership of the buildings.
It also appeared that Santiago filed with
the register of deeds a notice of lis
pendens to claim ownership of the
improvements which was noted on the
back of the corresponding certificates of
title.
Santiago also denied Atkins claim as
co-owner which resulted in the latter
filing suit in the CFI for the purpose of
recovering possession of Lot 38 and to
secure a partition of Lot 36 and 55.
CFI: recognized rights of Atkins as
tenant in common with Santiago with
respect to the lands and ordered for a
division thereof, but held that the
buildings on Lot 36 and 38 belong
exclusively to Santiago.

ISSUE/S:

WoN Santiago has a right to claim the

improvements by the filing of a lis
pendens: NO
o By the time of the filing of the
lis pendends, petitioner had
alrady acquired a mortgage
upon the interest of Santiagos
neice in the estate of her

grandfather.
With
the
foreclosure of that mortgage, all
her interest in Lots 36 and 38
became vested in Atkins as
purchaser.
The
remaining
interests were acquired after the
notice was filed.
While Santiago intended that his
filing of a lis pendens was to
give notice of his claim of
ownership, his efforts in the
proceedings over the state of his
father Buenaventura failed. For
this reason, lis pendens lots its
efficacy.
The effect of notice by lis
pendens is, of course, to
charge the stranger with
notice of the particular
litigation referred to in the
notice, and, if the notice is
effective, the stranger who
acquires the property affected
by
the lis
pendens takes
subject to the eventuality of
the litigation. But when the
adverse right fails in such
litigation, the lis
pendens
becomes innocuous.
Santiago is also estopped from
claiming any interest in the
improvements on Lot 38 since
he sold his interest thereon to
Ong Kong.

HELD: CFI ruling REVERSED. Remanded for

further proceedings.
LAROZA v GUIA
Plaintiffs: Timoteo Laroza and Conchita Uri
Defendant: Donaldo Guia
Topic: Things in Litigation
FACTS:

Timotea Laroza and Conchita Uri filed

an action to quiet title in the CFI of
Laguna versus Donaldo Guia over a
parcel of land. They alleged that they
bought the property in good faith for
valuable considerations from Francisco
Guia after they had seen the documents
of ownership of Francisco.
They were in continuous possession
until Donaldo Guia intruded upon the
said peaceful possession by attempting
to survey the property and to partition
the same by virtue of a decision of the
Honorable Court dated December 29,
1966 in Civil Case No. SP-488.
Guia filed a motion to dismiss the
complaint alleging, among others, "that
the land subject matter of the complaint
has already been the subject of a final
and executory judgment in Civil Case
No. SP-488, hence, plaintiffs have no
cause of action, or if there be any, the
same is barred by a prior judgment."
The lower court sided with Guia. They
held that Laroza and Uri are the
supposed purchasers of the property
from Francisco Guia, defendant in SP488. A judgment against a party binds
his successors in interest. A sale or
similar transmission of right does not
disturb the identity of party for purposes
of res judicata.

ISSUE:
1

W/N the case is already barred by

previous judgment? YES
a Records show that long before
appellants had acquired subject
property, a notice of lis pendens
(Civil Case No. SP 488) had
already been registered with the
Office of the Register of Deeds
of San Pablo City affecting the
property. Lis pendens is a notice
of pending litigation; a warning
to the whole world that one who

buys the property so annotated

does so at his own risk.
Despite the notice, Laroza and
Uri still bought the land from
Francisco. Having purchased
the property with notice of lis
pendens, appellants took the risk
of losing it in case the decision
in the said civil case, as what
actually happened, is adverse to
their
predecessor-in-interest,
Francisco Guia.
Appellants argue that there is no
res judicata because there is no
odentity of causes of action
since the case at bar is an action
to quiet title, whereas, Civil
Case No. SP-488 is one of
filiation and partition.
i The Court held that in
both cases, the question
boils
down
to
ownership of the land.
Thus, there is identity of
causes of action res
judicata applies.

5. Things Subject to Conditions

Art. 1465. Things subject to a resolutory
condition may be the object of the contract of
sale. (n)
Art. 1608. The vendor may bring his action
against every possessor whose right is derived
from the vendee, even if in the second contract
no mention should have been made of the right
to repurchase, without prejudice to the
provisions of the Mortgage Law and the Land
Registration Law with respect to third persons.
(1510)
Arsenal v IAC
-

Jan 7 54, Filomeno Palaos acquired

Homestead Lot 81 secured by OCT P-

290 covering an 87.8k sqm parcel of

land in Bukidnon.
Sept 10 57, Palaos sold 4 ha of the lot
to Torcuato Suralta for P890, in a
notarized deed of sale. Suralta
immediately took possession & placed
improvements worth P20k
64, Remedio & Francisca Arsenal
became tenants of an adjoining land,
separated from Palaos lot by virtue of a
public road. They came to know Suralta
as their neighbor & compadre, and
eventually he learned of their intention
to buy the remaining area of Palaos
land.
Mar 14 67, Filomeno sold the
remaining portion of his lot (3 ha) to the
Arsenals for P800 in a deed of sale,
without knowing that the deed covered
the ENTIRE lot (including Suraltas 4
ha).
o Such deed was presented to the
Office of the Commission on
National
Integration
for
approval since Palaos is
illiterate & a minority. The field
officer approved the deed
without inspecting the lot.
Arsenals took possession of the 3 ha part
but never disturbed Suraltas 4 ha
portion. In 67, Francisca Arsenal
caused the tax declaration of the entire
lot to be in her name, and because of
their good relations, Suralta contributed
P10 for his portion over the years 68
73.
On July 11 73, Suralta presented his 57
sales contract in order to register his
deed, but it was refused for being within
the 5 year prohibitive period from the
issue of the patent. To cure the defect, he
made Palaos sign a new sales contract
covering his 4 ha.
In Dec 73, Suralta saw Arsenals 64
Deed of Sale for the first time and asked
Palaos about it. Palaos said he only sold
them 3 ha, but Francisca insisted that the

sale covered the whole lot (what a

bitch). Because of this disagreement, on
Dec 6 73, Francisca registered her deed
and obtained TCT T-7879 over the
whole lot.
All efforts at achieving an amicable
settlement having failed, Suralta sued
Palaos and the Arsenals on Mar 6 74 to
annul TCT T-8789.
o Arsenals assail Suraltas 57
deed, claiming it was (1) within
the 5 year prohibitive period,
and (2) not approved by the
OCNI despite Palaos illiteracy
& belonging to a minority
group.
o Palaos maintains the validity of
his sale to Suralta, claiming they
informed the Arsenals about
their prior sale of 4 ha to him.
They claim the Arsenals took
advantage of their illiteracy to
make them sign the deed of sale
over the entire lot.
RTC ruled for Suralta, imputing bad
faith to the Arsenals, making them
disqualified from availing of the
protection of the CC to innocent
purchasers registering their deed before
another. IAC affirmed. Hence appeal.

Issues:
3. Was Palaos sale to Suralta null and void
from the beginning? YES.
a. The Public Land Act S118 is
clear and explicit: if executed
within the 5y prohibited period,
all contracts which alienate,
transfer, convey, or encumber
any homestead is void.
i. The subsequent contract
signed on 73 is of no
moment a void
contract may not be
confirmed or ratified by
a
subsequent
act.
Besides,
no

consideration supported
this new contract.
b. A third party whose interests are
affected by a void contract may
validly set up its nullity.
4. Do the Arsenals/Suralta have a right to
the entire lot? NO. PALAOS DOES
(AND THE GOVT DOES TOO, LEL.)
a. The finding of bad faith, while it
does not validate a void
contract, still serves as a
fundamental barrier to the
ownership of the Arsenals over
the 4 ha owned by Suralta, as
their ownership would amount
to unjust enrichment. The
finding of bad faith has been
well substantiated:
i. Unlikely
that
they
would occupy the same
land with Suralta for 4y
and still think he was a
mere mortgagee of the
property.
ii. Unlikely that the entire
lot was sold for only
P800
in
67,
considering in 57, a 4
ha part was sold for
P890
to
Suralta,
especially considering
inflation & increased
land value.
iii. Arsenals
actively
encouraged Suralta to
believe they were coowners in value, as he
even paid part of the tax
declaration over the
land and allowed him to
keep
peaceful
possession thereof.
b. However, equity cannot validate
a void contract. Sorry Suralta.
c. In cases where the homestead
has been the subject of void
conveyances, the law regards
the original owner as the valid

owner subject to escheat

proceedings by the State. This
escheat
proceeding
is
a
consequence of the fact that the
original owner is in pari delicto
with the buyer in alienating the
property
within
the
5y
prohibited period, contrary to
law.
i. Hence, the PALAOSES
are the valid owners,
without prejudice to any
reversion proceedings
initiated by the State.
Held: IAC REVERSED. 57 sale of 4 ha to
Suralta null & void, same portion sale to
Arsenals null & void, OCT over the 4 ha to be
reissued in the name of Palaoses, heirs of
Palaoses to reimburse Suralta P890 (the
improvements are deemed compensated by his
long possession & any fruits he received from
the land).
V. Price or Consideration
Art. 1469. In order that the price may be
considered certain, it shall be sufficient that it be
so with reference to another thing certain, or that
the determination thereof be left to the judgment
of a special person or persons.
Should such person or persons be unable or
unwilling to fix it, the contract shall be
inefficacious, unless the parties subsequently
agree upon the price.
If the third person or persons acted in bad faith
or by mistake, the courts may fix the price.
Where such third person or persons are
prevented from fixing the price or terms by fault
of the seller or the buyer, the party not in fault
may have such remedies against the party in
fault as are allowed the seller or the buyer, as the
case may be. (1447a)

Art. 1470. Gross inadequacy of price does not

affect a contract of sale, except as it may
indicate a defect in the consent, or that the
parties really intended a donation or some other
act or contract. (n)
Art. 1471. If the price is simulated, the sale is
void, but the act may be shown to have been in
reality a donation, or some other act or contract.
(n)
Art. 1472. The price of securities, grain, liquids,
and other things shall also be considered certain,
when the price fixed is that which the thing sold
would have on a definite day, or in a particular
exchange or market, or when an amount is fixed
above or below the price on such day, or in such
exchange or market, provided said amount be
certain. (1448)
Art. 1473. The fixing of the price can never be
left to the discretion of one of the contracting
parties. However, if the price fixed by one of the
parties is accepted by the other, the sale is
perfected. (1449a)
Art. 1474. Where the price cannot be determined
in accordance with the preceding articles, or in
any other manner, the contract is inefficacious.
However, if the thing or any part thereof has
been delivered to and appropriated by the buyer
he must pay a reasonable price therefor. What is
a reasonable price is a question of fact
dependent on the circumstances of each
particular case. (n)
Art. 1350. In onerous contracts the cause is
understood to be, for each contracting party, the
prestation or promise of a thing or service by the
other; in remuneratory ones, the service or
benefit which is remunerated; and in contracts of
pure beneficence, the mere liberality of the
benefactor. (1274)

Art. 1351. The particular motives of the parties

in entering into a contract are different from the
cause thereof. (n)
Art. 1352. Contracts without cause, or with
unlawful cause, produce no effect whatever. The
cause is unlawful if it is contrary to law, morals,
good customs, public order or public policy.
(1275a)
Art. 1353. The statement of a false cause in
contracts shall render them void, if it should not
be proved that they were founded upon another
cause which is true and lawful. (1276)
Art. 1354. Although the cause is not stated in the
contract, it is presumed that it exists and is
lawful, unless the debtor proves the contrary.
(1277)
Art. 1355. Except in cases specified by law,
lesion or inadequacy of cause shall not
invalidate a contract, unless there has been
fraud, mistake or undue influence. (n)
A. Must be Real
Art. 1471. If the price is simulated, the sale is
void, but the act may be shown to have been in
reality a donation, or some other act or contract.
(n)
1. Adequacy of Price
Art. 1355. Except in cases specified by law,
lesion or inadequacy of cause shall not
invalidate a contract, unless there has been
fraud, mistake or undue influence. (n)
Art. 1470. Gross inadequacy of price does not
affect a contract of sale, except as it may
indicate a defect in the consent, or that the
parties really intended a donation or some other
act or contract. (n)

Bagnas v. CA (1989)
Petitioners: Isaac Bagnas, Encarnacion Bagnas,
Silvestre Bagnas Maximina Bagnas, Sixto
Bagnas and Agatona Encarnacion

Respondents: Hon. Court Of Appeals, Rosa L.

Retonil Teofilo Encarnacion, and Jose B.
Nambayan
Price or Consideration Adequacy of Price
(Arts. 1355 and 1470)
FACTS:

Hilario Mateum died and was survived

only by collateral relatives, of whom
petitioners herein, his first cousins, were
the nearest.
Private respondents are also collateral
relatives of Mateum though more
remote in degree than the petitioners.
They registered with the Registry of
Deeds two deeds of sale in their favor
covering ten parcels of land, which were
purportedly executed by Mateum before
his death. Each deed of sale recited the
consideration of the sale to be "the sum
of ONE PESO, x x x and services
rendered, being rendered and to be
rendered for my benefit. On the
strength of the deeds of sale, the
respondents were able to secure title in
their favor over three of the ten parcels
of land.
Of the ten parcels, nine were assessed
for purposes of taxation at values
aggregating P10,500.00. The record
does not disclose the assessed value of
the tenth parcel, which has an area of
1,443 square meters.
Petitioners commenced suit against the
respondents seeking annulment of the
deeds of sale as fictitious, fraudulent or

falsified, or, alternatively, as donations

void for want of acceptance embodied in
a public instrument.
Respondents defense:
o The sales are not fictitious or
fraudulent in character. They
were made for good and
valuable consideration.
o While the sales may have the
effect
of
donations,
the
formalities and solemnities of
donation are not required for
their validity and effectivity.
o Respondents had done many
good things for Mateum,
nursing him in his last illness,
which services constituted the
bulk of the consideration of the
sales.
o Petitioners could not question or
seek annulment of the sales
because they were mere
collateral relatives of the
deceased vendor and were not
bound,
principally
or
subsidiarily, thereby.
The TC dismissed the complaint,
holding (a) on the authority of Armentia
vs. Patriarca, that the plaintiffs, as mere
collateral relatives, not forced heirs, of
Hilario Mateum, could not question the
disposition, regardless of whether said
dispositions were valid or not; and (b)
that the plaintiffs evidence of alleged
fraud was insufficient, the fact that the
deeds of sale each stated a consideration
of only P1.00 not being in itself
evidence of fraud or simulation.
The CA affirmed.
The issue here is whether or not the
deeds of sale were void or merely
voidable. If they were only voidable,
then the petitioners would have no have
no actionable right to question those
transfers, since the vendor Mateum had

no forced heirs whose legitimes may

have been impaired. But if said deeds
were void ab initio, then the heirs, even
if collateral relatives, may impugn their
validity.
ISSUE/S:

WoN the deeds of sale were void or

merely voidable
o VOID. Contracts with a false
cause, or which are absolutely
simulated or fictitious, are not
merely voidable, but void unless
it is shown that they are
supported by another true and
lawful cause or consideration.
o In Armentia the
Court
determined that the conveyance
questioned
was
merely
annullable and not void ab
initio, and that the plaintiffs
action was based on fraud
vitiating
said
conveyance.
There, the Court said:
The sale is merely
voidable.
Marta
Armentia executed the
document, and this is
not controverted by
plaintiff. Besides, the
fact that the vendees
were minors, makes the
contract,
at
worst,
annullable by them,
Then again, inadequacy
of consideration does
not imply total want of
consideration. Without
more, the acts of Marta
Armentia after the sale
did not indicate that the
said sale was void from
the being.

The sum total of all

these is that, in essence,
plaintiffs
case
is
bottomed on fraud,
which
renders
the
contract voidable.
Armentia only
ruled
that
transfers made by a decedent in
his lifetime, which are voidable
for having been fraudulently
made or obtained, cannot be
posthumously impugned by
collateral relatives succeeding to
his estate who are not
principally or subsidiarily bound
by such transfers. That ruling is
not extendible to transfers
which are void ab initio for lack
or falsity of consideration.
The apparent gross, not to say
enormous,
disproportion
between the stipulated price of
P1.00 plus unspecified and
unquantified services and the
undisputably valuable real estate
allegedly sold (worth at least
P10,500.00 going only by
assessments for tax purposes
which, it is well-known, are
notoriously low indicators of
actual value) plainly and
unquestionably
demonstrates
that they state a false and
fictitious consideration. Since
no other true and lawful cause
was shown, both deeds are
void ab initio.
The
validity
of
said
conveyances
cannot
be
defended on the theory that their
true causa is the liberality of the
transferor and they may be
considered
in
reality
donations because the law also

prescribes that donations of

immovable property, to be valid,
must be made and accepted in a
public instrument. There has
been no such acceptance.
Respondents might have saved
the validity of the conveyances
by presenting proof of the
character and value of the
services, past, present, and
future, which constituted the
consideration therefor. This was
an affirmative defense and
hence the onus of proof rested
on them. However, they failed
to present evidence and merely
relied upon the thesis that
petitioners,
being
mere
collateral relatives of the
deceased, were without right to
the conveyances in question.

Vda de Gordon v CA
-

Restituta de Gordon owned 2 parcels of

land which were sold at public auction
to satisfy the taxes and penalties due
from it (which hadnt been paid for 9
years).
During the public sale on Dec 3 64, the
lots were sold to Rosario Duazo for
P10,500, representing the unpaid taxes
& penalties, with the Deed of Sale
registered on Dec 28 64.
Given the failure of Restituta to redeem
the lot within 1 year, the City Treasurer
executed a final deed of sale on Jan 4
66, which was registered on Jan 18.
Restituta assails the public sale,
claiming that she should be allowed to
redeem her lots because the price paid
thereon was grossly inadequate.
o In 61, the lot was assessed @
P16.8k and the house @
P45,580

The CA held against Restituta, ruling

that mere inadequacy of the price is not
sufficient ground to annul a public sale.

Issue:
1. Should the period of redemption be 2
years, and not 1? NO.
a. The applicable law is the charter
of QC, CA 502, and S31
provides for a 1 year period, and
NOT RA 1275 because RA
1275 is a general law, over
which CA 502, a specific law,
must prevail.
b. Even if the 2 year period is
applied, it was 10 years before
she filed the case (and 17 years
when it reached the SC) and in
all that time, she hasnt made
any good faith payments.
2. Should the gross inadequacy of the
price void the sale? NO.
a. The lower price should make it
even easier for her to redeem
the property. Hence, the fact that
the property was sold at a low
price is immaterial to the
validity of the public sale and
does not prejudice the right to
redeem (in fact, it makes it
easier) [Velasquez v Coronel].
Held: CA Affirmed.
2. False Consideration
Art. 1353. The statement of a false cause in
contracts shall render them void, if it should not
be proved that they were founded upon another
cause which is true and lawful. (1276)
Art. 1354. Although the cause is not stated in the
contract, it is presumed that it exists and is
lawful, unless the debtor proves the contrary.
(1277)
Art. 1471. If the price is simulated, the sale is

void, but the act may be shown to have been in

reality a donation, or some other act or contract.
Ong v Ong
October 8, 1985 | Relova, J.

FACTS:
1. Feb 25, 1976: Imelda Ong executed a
quit claim in favor of Sandra Maruzzo,
her heirs and assigns, all her rights, title,
interest and participation in the
undivided portion of a parcel of land in
Makati (125 sq m) for P1.00 and other
valuable considerations.
2. Nov 19, 1980: Imelda Ong revoked the
Quitclaim and she donated the whole
property to her son Rex Ong Jimenez.
3. June 20, 1983: Sandra Maruzzo, through
her guardian ad litem Alfredo Ong, filed
for
the
recovery
of
ownership/possession and nullification
of the Deed of Donation over the portion
belonging to her and for Accounting.
4. Imelda et al claimed that the Quitclaim
Deed is null and void.
a. It is equivalent to a Deed of
Donation and acceptance by the
donee (Sandra) is necessary to
give it validity.
b. Since the donee, Sandra, is a
minor she had no legal
personality and was incapable
of accepting the donation.
5. Trial Court: judgment in favor of
Maruzzo
a. Quitclaim Deed is equivalent to
a Deed of Sale. There was a
valid conveyance.
6. Imelda appealed stating that the P1.00 is
not consideration at all.
7. IAC: affirmed Trial Court
a. There was a valid cause or
consideration. It is the usual
practice in deeds of conveyance
to place a nominal amount

although there is a more

valuable consideration given.
8. Mar 15, 1985: Sandra, through her
guardian ad litem Alfredo Ong, filed an
Omnibus Motion informing the SC that
she has reached the age of majority as
evidenced by her Birth Certificate and
she prays that she be substituted as
private respondent in place of her
guardian ad litem Alfredo Ong. SC
granted.
ISSUE: WON there was a valid cause or
consideration YES

HELD: IAC decision affirmed.

RATIO:
1. The cause or consideration is not just the
P1.00 alone but also the other valuable
considerations.
2. Art 1354 CC "x x x although the cause
is not stated in the contract it is
presumed that it is existing unless the
debtor proves the contrary.
3. Sec 5r, Rule 131 Rules of Court: One of
the disputable presumptions is that there
is a sufficient cause of the contract.
4. The presumption cannot be overcome by
a simple assertion of lack of
consideration especially when the
contract itself states that consideration
was given, and the same has been
reduced into a public instrument with all
due formalities and solemnities. Only
preponderance of evidence may
overcome this.
5. The execution of a deed purporting to
convey ownership of a realty is in itself
prima facie evidence of the existence of
a valuable consideration, the party
alleging lack of consideration has the
burden of proving such allegation.
6. As applied in this case: Even granting
that the Quitclaim deed in question is a

donation, Art 741 CC provides that the

requirement of the acceptance of the
donation in favor of minor by parents of
legal representatives applies only to
onerous and conditional donations
where the donation may have to assume
certain charges or burdens (Article 726,
Civil Code).
7. Morales Development Co., Inc. vs. CA:
It is not unusual, however, in deeds of
conveyance adhering to the AngloSaxon practice of stating that the
consideration given is the sum of P1.00,
although the actual consideration may
have been much more. Moreover,
assuming that said consideration of
P1.00 is suspicious, this circumstance,
alone, does not necessarily justify the
inference that Reyes and the Abellas
were not purchasers in good faith and
for value. Neither does this inference
warrant the conclusion that the sales
were null and void ab initio.
Indeed, bad faith and inadequacy of the
monetary consideration do not render a
conveyance inexistent, for the assignor's
liberality may be sufficient cause for a
valid contract (Art 1350 CC) whereas
fraud or bad faith may render either
rescissible or voidable, although valid
until annulled, a contract concerning an
object certain entered into with a cause
and with the consent of the contracting
parties.

Ladanga v CA
3. Must be in Money or its Equivalent
Art. 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.
A contract of sale may be absolute or
conditional. (1445a)

Art. 1468. If the consideration of the contract

consists partly in money, and partly in another
thing, the transaction shall be characterized by
the manifest intention of the parties. If such
intention does not clearly appear, it shall be
considered a barter if the value of the thing
given as a part of the consideration exceeds the
amount of the money or its equivalent;
otherwise, it is a sale. (1446a)
Republic v. Phil Resources Dev Corp
Topic: Price or its equivalent must be in money
or its equivalent
Ratio: Payment of the price need not be in
money
FACTS:
- Macario Apostol won bids for the
purchase of Palawan Almaciga and logs
from the Bureau of Prisons. He obtained
the items but he failed to pay the full
purchase price, leaving a balance of P34
015.06.
- The Republic of the Philippines, in
behalf of the Bureau of Prisons,
instituted a case against Apostol and
Empire Insurance Co. Empire was
included for having executed a
performance bond.
- The Philippine Resources Development
Corporation sought to intervene. It
alleged that its president, Apostol,
caused some of its goods to be delivered
to the Bureau of Prisons in an attempt to
settle his personal debts to the latter.
They sought to have the goods returned
but the Bureau of Prisons refused. The
trial court denied the motion for
intervention.
- CA: Reversed trial court and allowed
intervention.
- Government claims that the intervenor
has no legal interest because the action
is for the collection of a sum of money.

ISSUES: W/N Phil Resources Dev Corps

motion to intervene must be allowed YES

litigation, the usual individual to initiate

actions to protect the interest of the
corporation cannot do so. Thus, a single
stockholder may sue in behalf of the
corporation.

RATIO:
-

CA stated that the materials given by

Apostol have been assessed for their
price. They have been assigned by
Apostol as tokens of payment of his
private debt. Thus, in the event that the
judge credits Apostol with the value of
the goods, the corporation stands to be
adversely affected. Thus, the corporation
possesses an actual, material, direct and
immediate interest to the matter in
litigation.
The Government argues that according
to Art. 1458 of the NCC, price is always
paid in terms of money and payment in
kind is no payment at all. However, the
same article provides that the purchaser
may pay a price certain in money or its
equivalent, which means that payment
of the price need not be in money. Thus,
W/N the materials are sufficient
payment is an issue for the Court to
decide. Should the materials be credited
into Apostols account, the corporation
would be adversely affected.

OTHERS:
-

Government argued that the counsel

appearing for the corporation does not
have authority to represent it since the
President is involved in the litigation. It
was ruled that the power of the
corporation to sue and be sued is lodged
in the board of directors, not the
President. The complaint states that the
counsel is representing the intervenor
corporation. His authority was never
questioned in the lower courts, which
presumes his authority. Granting that he
was no authorized, the counsel is the
secretary-treasurer and a member of the
board. He is also a stockholder. At this
instance, the President being involved in

4. Must be Certain or Ascertainable at the Time

of Perfection
Art. 1469. In order that the price may be
considered certain, it shall be sufficient that it be
so with reference to another thing certain, or that
the determination thereof be left to the judgment
of a special person or persons.
Should such person or persons be unable or
unwilling to fix it, the contract shall be
inefficacious, unless the parties subsequently
agree upon the price.
If the third person or persons acted in bad faith
or by mistake, the courts may fix the price.
Where such third person or persons are
prevented from fixing the price or terms by fault
of the seller or the buyer, the party not in fault
may have such remedies against the party in
fault as are allowed the seller or the buyer, as the
case may be. (1447a)
VELASCO V CA

Lorenzo Velasco & Magdalena Estate,

Inc. entered into a contract of sale
involving a lot in New Manila for
P100,000.
o Agreements was that a down
payment of P10,000 (as
evidenced by a receipt) to be
followed by P20,000 (time w/in
which to make full down
payment was not specified) and
the balance of P70,000 would
be paid in installments, the

equal monthly amortization to

be determined as soon as the
30K had been paid.
Lorenzo paid the 10K but when he
tendered payment for 20K, Magdalena
refused to accept & refused to execute a
formal deed of sale. Velasco filed a
complaint for damages.
Magdalena
denied
having
any
dealings/contractual
relations
w/
Lorenzo.
o It contends that a portion of the
property was being leased by
Lorenzos sister-in-law, Socorro
Velasco who went to their office
& they agreed to the sale of the
property (30K down payment,
70K
on
installments+9%
interest).
o Since Socorro was only able to
pay 10K, it was merely accepted
as deposit & on her request, the
receipt was made in the name of
Lorenzo. Socorro failed to
complete the down payment &
neither has she paid the 70K. It
was only 2 years after that she
tendered payment for 20K & by
then, Magdalena considered
their offer to sell rescinded.
LORENZO: Because he does not
understand English, he had requested
Socorro to make the necessary contracts
& he had authorized her to make
negotiations w/ Magdalena on her own
name. But he alleges that he always
accompanies her in meetings.
o He also uses as evidence the
receipt to prove that there
already had been a perfected
contract to sell as the
annotations therein indicated
that earnest money for 10K had
been received & also the agreed
price appears thereon.

To further prove that it was w/

him & not w/ Socorro that
Magdalena dealt with, he
showed 5 checks drawn by him
for payment of the lease of the
property.

WN there was a perfected contract? NO

Petitioners themselves admit that they

and the respondent still had to meet and
agree on how and when the downpayment and the installment payments
were to be paid. It cannot be said that a
definite and firm sales agreement
between the parties had been perfected
over the lot in question.
A definite agreement on the manner of
payment of the purchase price is an
essential element in the formation of a
binding and unforceable contract of sale.
That the petitioners delivered to the
respondent the sum of P10,000 as part
of the down-payment that they had to
pay cannot be considered as sufficient
proof of the perfection of any purchase
and sale agreement between the parties
herein under article 1482 of the new
Civil Code, as the petitioners themselves
admit that some essential matter the
terms of payment still had to be
mutually covenanted.

TOYOTA SHAW V CA
FACTS

June of 1989: Luna L. Sosa wanted to

purchase a Toyota Lite Ace
Sosa had difficulty finding a dealer with
an available unit for sale.
o Contacted Toyota Shaw, Inc., he
was told that there was an
available unit

14 June: Sosa and his son, Gilbert, went

to the Toyota Shaw where they met
Popong Bernardo, a sales representative
of Toyota.
Sosa emphasized to Bernardo that he
needed the Lite Ace not later than June
17 because he had some family
members to entertain
Bernardo assured Sosa that a unit would
be ready for pick up at 10:00 a.m. on 17
June
o Bernardo then signed the
"Agreements Between Mr. Sosa
& Popong Bernardo of Toyota
Shaw, Inc."
The parties agreed that the balance of
the purchase price would be paid by
credit financing through B.A. Finance
o Gilbert, on behalf of his father,
signed the documents of Toyota
and B.A. Finance pertaining to
the application for financing.
The next day, Sosa and Gilbert went to
Toyota to deliver the downpayment of
P100,000.00
o They met Bernardo who then
accomplished a printed Vehicle
Sales Proposal (VSP)
June 17 around 9:30 a.m: Bernardo
called Gilbert to inform him that the
vehicle would not be ready for pick up
at 10:00 a.m.
o At 2:00 p.m., Sosa and Gilbert
met Bernardo at the latter's
office.
o After waiting for about an hour,
Bernardo told them that the car
could not be delivered because
"nasulot ang unit ng ibang
malakas."
Toyota contends that the vehicle because
of the disapproval by B.A. Finance of
the credit financing application of Sosa.
o Further alleged that a particular
unit had already been reserved
and earmarked for Sosa but
could not be released due to the
uncertainty of payment of the
balance of the purchase price.

Toyota then gave Sosa the

option to purchase the unit by
paying the full purchase price in
cash but Sosa refused.
After it became clear that the Lite Ace
would not be delivered to him, Sosa
asked that his downpayment be
refunded. Toyota did so
The full amount of P100,000.00 the
receipt of which was shown by a check
voucher of Toyota
o Sosa signed this with the
reservation, "without prejudice
to our future claims for
damages."
Thereafter, Sosa sent Toyota two letters:
o First: Asking for the refund of
his down payment including the
interest from the time he paid
with damages, that should
Toyota fail to do so, he would
be forced to take legal action
o Second: A letter signed by
Sosas counsel demanding 1M
for the damages he suffered
with another warning for legal
action
Toyota did not pay. Hence, Sosa filed in
the RTC
o

WoN there was a perfected contract of sale

between
Toyota
(through
its
sales
representative) and Sosa?- NO
Toyota alleged

No sale was entered into between it and

Sosa, that Bernardo had no authority to
sign on behalf of Toyota
Sosa failed to complete the necessary
documents which were required by the
finance company as a matter of policy
and no release shall be made prior to full
compliance
The 100k downpayment was returned to
Sosa

RTC- ruled in favor of Sosa, that there was a

perfected contract between the parties
CA affirmed
SC

It is not a contract of sale.

No obligation on the part of Toyota to
transfer ownership of a determinate
thing to Sosa and no correlative
obligation on the part of the latter to pay
therefor a price certain appears therein.
The provision on the down payment of
P100,000.00 made no specific reference
to a sale of a vehicle.
o If it was intended for a contract
of sale, it could only refer to a
sale on installment basis, as the
VSP executed the following day
confirmed.
o Nothing was mentioned about
the full purchase price and the
manner the installments were to
be paid.
A definite agreement on the manner of
payment of the price is an essential
element in the formation of a binding
and enforceable contract of sale.
o The agreement as to the manner
of payment goes into the price

such that a disagreement on the

manner
of
payment
is
tantamount to a failure to agree
on the price.
o Definiteness as to the price is
an essential element of a
binding agreement to sell
personal property
Absence of a meeting of minds between
Toyota and Sosa.
o
For one thing, Sosa did not
even sign it.
That when Sosa signed the agreement
with Bernardo, the former knew that he
was not dealing with Toyota but rather
their sales agent
The agreement between Sosa and
Bernardo was just an initial phase of the
negotiation stage of the contract
The VSP was a mere proposal which
was aborted in lieu of subsequent
events.
It follows that the VSP created no
demandable right in favor of Sosa for
the delivery of the vehicle to him, and
its non-delivery did not cause any
legally indemnifiable injury.