1. Elena Jane Duarte vs.

Miguel Duran
GR 173038. September 14, 2011

Facts:
February 14, 2002: Respondent Duran offered to sell a laptop for P15k to petitioner Duarte, with Dy's help (common friend).
Duarte was undecided so Duran left the laptop with her for 2 days. Two days later, Duarte told Duran that she was willing to
buy it on installment. Duran agreed, so Duarte gave him P5k as initial payment, promising to pay P3k on Feb 18, then P7k
on Mar 15.

February 18: Duarte gave her second installment of P3k to Dy, who signed the handwritten receipt allegedly made by
Duarte as proof of payment.

March 15: Dy returned to get the remaining balance (P7k), but Duarte offered to pay only P2k, now claiming that the laptop
was worth P10k only.

Duran demanded payment from Duarte. Unheeded, Duran sued her for collection of money with MTCC (Municipal Trual
Court in Cities), Cebu.

Petitioner contends: Duarte denied writing the receipt and denied receiving the demand letter. She claimed there was no
contract of sale. That Dy offered to sell Duran's laptop, but because Duarte wasn't interested in buying it, Dy asked if she
could instead lend Duran P5k. She agreed, and in turn, Dy left the laptop with her. That on Feb. 18, Dy came to get the
laptop but Duarte refused because Duran's loan was not yet paid. That Dy then asked her to lend additional P3k to Duran,
which Duarte agreed, under the agreement that the amounts she lend to Duran would be considered partial payments for the
laptop in case she decides to buy it. That in March, Duarte finally decided not to buy it but Duran refused allegedly to pay
and insisted she buy the laptop instead.

MTCC ruled in Duran's favor: It held that the receipt and Duran's testimonies were sufficient to prove that there was a
contract of sale.

RTC ruling in Duarte's favor: On appeal, RTC reversed MTCC decision. It held that the receipt issued by Dy was a product
of machination and trickery, that Duarte did not conform to the agreed stipulations.

Duran moved for reconsideration. Denied by RTC. He then filed a petition for review with CA.

CA ruling in Duran's favor: It reversed RTC decision and reinstated MTCC decision. It held that RTC erred in not giving
weight to the demand letter by Duran and the receipt.

Duarte filed a motion for reconsideration. CA denied this. Hence, this petition.

Duarte contends: there was no contract of sale. That the laptop was not sold to her but was given as a security for Duran's
debt. That because Duran can't present a written contract of sale, there was indeed no contract of sale. That under the Statute
of Frauds, a contract of sale to be enforceable, must be written. She also claims that the receipt (which she denies having
written) is not an actionable document, so there was no need for her to deny under oath its genuineness and due execution;
that her denial of the receipt of the demand letter shifted the burden upon Duarte to prove that the letter was received by her.

Duran defends: The receipt is an actionable document, thus Duarte's failure to deny under oath its genuineness and due
execution constitutes an admission thereof. That Duarte's denial of the receipt of the demand letter cannot overcome
presumption that it was received in the regular course of mail. That Statute of Frauds does not apply here.

Issue: Whether there was a contract of sale between parties.

Ruling:
Yes.

Absence of a written contract of sale, as what Duarte argues, does not mean that there isn't a contract of sale. A contract of
sale is perfected the moment the parties agree upon the object of the sale, price, and terms of payment. Once perfected,
parties are bound by it, whether the contract is verbal or in writing, because no form is required.

Contrary to Duarte's view, Statute of Frauds does not apply here because it only applies to executory, and not to completed,
executed, or partially executed contracts. In this case, the contract of sale had been partially executed because the laptop's
possession was already transferred to Duarte, and partial payments had already been made by her.

Absence of a written contract is not fatal to Duran's case. Duran need only to show by a preponderance of evidence that
there was an oral contract of sale, which he already deed by submitting in evidence his, and witness' Dy's affidavits, the
receipt, and the demand letter.

Is the receipt an actionable document? Duarte is right: it is not an actionable document, so there was no need for her to deny
its genuineness and due execution under oath. However, CA is still right in giving full weight to it since it corroborates
testimonies of Duran and witness Dy that there was an oral contract of sale.
Also, although Duarte denies receipt of the demand letter, this did not defeat the presumption of regularity that the letter
was delivered and received by addressee in the regular course of mail, considering that Duran has presented the postmaster's
certification stating that said letter was indeed sent to Duarte's address.

Duran's evidence weigh more than Duarte's bare denials. What is even more doubtful is that Duarte, from the time she
allegedly decided not to buy the laptop, up to the time of this case, she did not exert any effort to recover from Duran the
payment of the alleged loan. Her inaction leads to the conclusion that the alleged loan was a mere afterthought on her part.

Therfore, Duarte's petition is denied. There is a contract of sale.

2. CONGREGATION OF THE RELIGIOUS OF THE VIRGIN MARY and/or THE SUPERIOR GENERAL OF
THE RELIGIOUS OF THE VIRGIN MARY, represented by The REVEREND MOTHER MA. CLARITA
BALLEQUE, petitioner, vs. EMILIO Q. OROLA, JOSEPHINE FATIMA LASERNA OROLA, MYRNA
ANGELINE LASERNA OROLA, MANUEL LASERNA OROLA, MARJORIE MELBA LASERNA OROLA &
ANTONIO LASERNA OROLA, respondents

Case Nature: PETITION for review on certiorari of a decision of the Court of Appeals.

SC Decision: the petition is DENIED

Legal Doctrine:
1. A contract of sale carries the correlative duty of the seller to deliver the property and the obligation of the buyer to
pay the agreed price.
2. Damages shall be awarded in either case of fulfillment or rescission of the obligation; Interest may, in the
discretion of the court, be allowed upon damages awarded for breach of contract.

Facts:
Sometime in April 1999, Religious of the Virgin Mary (RVM for brevity), acting through its local unit and specifically
through Sr. Fe Enhenco (Sr. Ehenco), local Superior of the St. Mary’s Academy of Capiz and [respondents “ Orolas”] met
to discuss the sale of the latter’s property adjacent to St. Mary’s Academy. Said property is denominated as Lot 159-B-2 and
was still registered in the name of Orolas’ predecessor-in-interest, Manuel Laserna.

In May of 1999, Josephine Orola went to Manila to see the Mother Superior General of the RVM, in the person of Very
Reverend Mother Ma. Clarita Balleque [VRM Balleque] regarding the sale of the property subject of this instant case.

A contract to sell dated June 2, 1999 made out in the names of RVN and Orolas as parties to the agreement was presented in
evidence pegging the total consideration of the property at P5,555,000.00 with 10% of the total consideration payable upon
the execution of the contract, and which was already signed by the Orolas and Sr. Enhenco as witness.

On June 7, 1999, Josephine Orola and Antonio Orola acknowledged receipt of RCBC Check No. 0005188 dated June 7,
1999 bearing the amount of P555,500.00 as 10% down payment for Lot 159-B-2 from the RVM Congregation (St. Mary’s
Academy of Cadiz [SMAC]) with the "conforme" signed by Sister Fe Enginco (sic), Mother Superior, SMAC.

The Orolas executed an extrajudicial settlement of the estate of Trinidad Andrada Laserna dated June 21, 1999 adjudicating
unto themselves, in pro indiviso shares, Lot 159-B-2, and which paved the transfer of said lot into their names under
Transfer Certificate of Title No. T-39194 with an entry date of August 13, 1999.4

Thereafter, respondents, armed with an undated Deed of Absolute Sale which they had signed, forthwith scheduled a
meeting with VRM Balleque at the RVM Headquarters in Quezon City to finalize the sale, specifically, to obtain payment
of the remaining balance of the purchase price in the amount of P4,999,500.00. However, VRM Balleque did not meet with
respondents. Succeeding attempts by respondents to schedule an appointment with VRM Balleque in order to conclude the
sale were likewise rebuffed.

In an exchange of correspondence between the parties’ respective counsels, RVM denied respondents’ demand for payment
because: (1) the purported Contract to Sell was merely signed by Sr. Enhenco as witness, and not by VRM Balleque, head
of the corporation sole; and (2) as discussed by counsels in their phone conversations, RVM will only be in a financial
position to pay the balance of the purchase price in 2 years time. Thus, Orolas filed with the RTC a complaint with
alternative causes of action of specific performance or rescission.

RTC ruled that there was indeed a perfected contract of sale between the parties, and granted Orolas’ prayer for rescission
thereof.

Dissatisfied, both parties filed their respective Notices of Appeal. The CA dismissed the respondents’ appeal because of
their failure to file an Appeal Brief. However, RVM’s appeal, where respondents accordingly filed an Appellee’s Brief,
continued. Subsequently, the CA rendered judgment setting aside the RTC Decision. RVM was ordered to pay Orolas
immediately the balance of the total consideration for the subject property in the amount of P4,999,500.00 with interest of 6%
per annum computed from June 7, 2000 or one year from the downpayment of the 10% of the total consideration until such
time when the whole obligation has been fully satisfied.

Although the CA upheld the RTC’s finding of a perfected contract of sale between the parties, the former disagreed with the
latter that fraud and bad faith were attendant in the sale transaction.

Issue:
1. Whether or not there was a perfected contract of sale
2. Whether or not RVM is liable for interest on the balance of the purchase price.

Ruling:
1. Yes. As uniformly found by the lower courts, we likewise find that there was a perfected contract of sale between
the parties. A contract of sale carries the correlative duty of the seller to deliver the property and the obligation of
the buyer to pay the agreed price. As there was already a binding contract of sale between the parties, RVM had the
corresponding obligation to pay the remaining balance of the purchase price upon the issuance of the title in the
 name of respondents. The supposed 2-year period within which to pay the balance did not affect the nature of the
agreement as a perfected contract of sale. In fact, we note that this 2-year period is neither reflected in any of the
drafts to the contract, nor in the acknowledgment receipt of the downpayment executed by respondents Josephine
and Antonio with the conformity of Sr. Enhenco. In any event, we agree with the CA’s observation that the 2-year
period to effect payment has been mooted by the lapse of time.
2. Yes. Article 2210 of the Civil Code is explicit that “interest may, in the discretion of the court, be allowed upon
damages awarded for breach of contract.” The ineluctable conclusion is that the CA correctly imposed interest on
the remaining balance of the purchase price to cover the damages caused the respondents by RVM’s breach.
3. ANDRE T. ALMOCERA, petitioner, vs. JOHNNY ONG, respondent.
G.R. No. 170479 February 18, 2008

LEGAL DOCTRINE:
A contract to sell is akin to a conditional sale where the efficacy or obligatory force of the vendor’s obligation to
transfer title 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.
SC RULING: Petition is denied.
FACTS:
Plaintiff Johnny Ong tried to acquire from the defendants a "townhome" described as Unit No. 4 of Atrium Townhomes in
Cebu City.
As reflected in a Contract to Sell, the selling price of the unit was P3,400,000.00 pesos, for a lot area of eighty-eight (88)
square meters with a three-storey building.
Out of the purchase price, plaintiff was able to pay the amount of P1,060,000.00.
Prior to the full payment of this amount, respondent was not informed by the defendants at the time of the perfection of
their contract the subject townhouse was already mortgaged to LBP.
Said property was foreclosed by LBP and sold at a public auction to a third person.
In trying to recover the amount he paid as down payment for the townhouse unit, respondent Johnny Ong filed a complaint
for Damages before the RTC of Cebu City, against defendants Andre T. Almocera and FBMC.
The RTC ruled in favor of respondent Ong and ordered Petitioner to pay P1,060,000. CA denied the appeal.
ISSUE: Whether the contract entered into by the parties in the instant case is a contract of sale.
RULING:
No. It cannot be disputed that the contract entered into by the parties was a contract to sell. The contract was
denominated as such and it contained the provision that the unit shall be conveyed by way of an Absolute Deed of Sale,
together with the attendant documents of Ownership – the Transfer Certificate of Title and Certificate of Occupancy – and
that the balance of the contract price shall be paid upon the completion and delivery of the unit, as well as the acceptance
thereof by respondent. All these clearly indicate that ownership of the townhouse has not passed to respondent.
A contract to sell is akin to a conditional sale where the efficacy or obligatory force of the vendor’s obligation to transfer
title is subordinated to the happening of a future and uncertain event, so that if the suspensive condition does not take place,
the parties would stand as if the conditional obligation had never existed. The suspensive condition is commonly full
payment of the purchase price.
The differences between a contract to sell and a contract of sale are: in contract of sale title passes to the buyer upon
delivery of the thing sold and a contract to sell ownership is reserved in the seller and is not to pass until the full payment of
the purchase price is made. In the first case, non-payment of the price is a negative resolutory condition; in the second case,
full payment is a positive suspensive condition.
In the first case, the vendor has lost and cannot recover the ownership of the land sold until and unless the contract of sale is
itself resolved and set aside. In the second case, however, the title remains in the vendor if the vendee does not comply with
the condition precedent of making payment at the time specified in the contract.
In the case at bar, the Contract to Sell entered into by the parties contains the following pertinent provisions:
4. TERMS OF PAYMENT:
4a. ONE MILLION PESOS (P1,000,000.00) is hereby acknowledged as Downpayment for the above-mentioned
Contract Price.
4b. The Balance, in the amount of TWO MILLION FOUR HUNDRED PESOS (P2,400,000.00) shall be paid thru
financing Institution facilitated by the SELLER, preferably Landbank of the Philippines (LBP).
Upon completion, delivery and acceptance of the BUYER of the Townhouse Unit, the BUYER shall have paid the
Contract Price in full to the SELLER.
xxxx
6. COMPLETION DATES OF THE TOWNHOUSE UNIT:
The unit shall be completed and conveyed by way of an Absolute Deed of Sale together with the attendant
documents of Ownership in the name of the BUYER – the Transfer Certificate of Title and Certificate of
Occupancy within a period of six (6) months from the signing of Contract to Sell. 12
It is clear that petitioner and FBMC had the obligation to complete the townhouse unit within six months from the signing
of the contract. Upon compliance therewith, the obligation of respondent to pay the balance of P2,400,000.00 arises. Upon
payment thereof, the townhouse shall be delivered and conveyed to respondent upon the execution of the Absolute Deed of
Sale and other relevant documents.
4. DAVID V. PELAYO and LORENZA B. PELAYO, petitioners, vs. MELKI E. PEREZ, respondent.
G.R. No. 141323. June 8, 2005.

Nature of the Case: Petition for review on certiorari seeking the reversal of the Decision1 of the Court of Appeals (CA)
promulgated on April 20, 1999 which reversed the Decision of the Regional Trial Court (RTC) of Panabo, Davao, Branch
34, in Civil Case No. 91-46; and the CA Resolution dated December 17, 1999 denying petitioners’ motion for
reconsideration.

SC Decision: The petition is DENIED and the Decision of the Court of Appeals dated April 20, 1999 and its Resolution
dated December 17, 1999 are hereby AFFIRMED.

Facts:
David Pelayo (Pelayo) sold to Melki Perez (Perez) two parcels of agricultural land (the lots) situated in Panabo, Davao
which are portions of Lot 4192, Cad. 276 covered by OCT P-16873 and executed Deed of Absolute Sale on January 11,
1988.

Loreza Pelayo (Loreza), wife of Pelayo, and another one witnessed the execution of the deed. Loreza, however, signed only
on the third page in the space provided for witnesses which was the reason for the denial of Perez’ application for
registration of the deed with the Office of the Register of Deeds in Tagum, Davao.

Perez thereupon asked Loreza to sign on the first and second pages of the deed but she refused, hence, he instituted on
August 8, 1991 the instant complaint for specific performance against the spouses (defendants).

The defendants moved to dismiss the complaint on the ground that it stated no cause of action, citing Section 6 of RA 6656
(Comprehensive Agrarian Reform Law) which took effect on June 10, 1988 and which provides that contracts executed
prior thereto shall "be valid only when registered with the Register of Deeds within a period of three (3) months after the
effectivity of this Act." The defendants claimed that Perez had at least up to September 10, 1988 within which to register the
same, but as they failed to, it is not valid and, therefore, unenforceable.

The trial court thus dismissed the complaint. On appeal to this Court, the dismissal was set aside and the case was remanded
to the lower court for further proceedings.

In their Answer, the defendants claimed that they and Perez just made it appear in the deed that the lots were sold to the
latter in order to frighten the illegal occupants of the said lot, with the intentional omission of Loreza’s signature so that the
deed could not be registered; and that the deed being simulated and bereft of consideration is void/inexistent.

Perez countered that the lots were given to him by defendant Pelayo in consideration of his services as his attorney-in-fact.

Defendant Pelayo claimed in any event, in his Pre-trial brief filed on March 19, 1996, that the deed was without his wife’s
consent hence, in light of Art. 166 of the Civil Code which provides:

Article 166. Unless the wife has been declared a non compos mentis or a spendthrift, or is under civil interdiction or is
confined in a leprosarium, the husband cannot alienate or encumber any real property of the conjugal partnership without
the wife’s consent.

The trial court declared the deed null and void.

The RTC Decision was appealed by the respondent Perez to the CA. Petitioners failed to file their appellees’ brief. The CA
then promulgated its Decision on April 20, 1999 whereby it ruled that by Lorenza’s signing as witness to the execution of
the deed, she is deemed to have given her consent to the same; that herein petitioners failed to adduce sufficient proof to
overthrow the presumption that there was consideration for the deed, and that petitioner David Pelayo, being a lawyer, is
presumed to have acted with due care and to have signed the deed with full knowledge of its contents and import.

The CA reversed and set aside the RTC Decision, declaring as valid and enforceable the questioned deed of sale and
ordering herein petitioner Lorenza Pelayo to affix her signature on all pages of said document.

Petitioners moved for reconsideration of the decision but the same was denied.

Hence, this petition for review on certiorari.

Issue:
Whether or not the deed of sale executed by the parties was null and void for lack of marital consent
.
Ruling:
No. Petitioner Lorenza, by affixing her signature to the Deed of Sale on the space provided for witnesses, is deemed to have
given her implied consent to the contract of sale.
Sale is a consensual contract that is perfected by mere consent, which may either be express or implied. A wife’s consent to
the husband’s disposition of conjugal property does not always have to be explicit or set forth in any particular document, so
long as it is shown by acts of the wife that such consent or approval was indeed given. In the present case, although it
appears on the face of the deed of sale that Lorenza signed only as an instrumental witness, circumstances leading to the
execution of said document point to the fact that Lorenza was fully aware of the sale of their conjugal property and
consented to the sale.

Petitioners do not deny that Lorenza Pelayo was present during the execution of the deed of sale as her signature appears
thereon. Neither do they claim that Lorenza Pelayo had no knowledge whatsoever about the contents of the subject
document. Thus, it is quite certain that she knew of the sale of their conjugal property between her husband and respondent.
5. CORNELIA MATABUENA vs. PETRONILA CERVANTES
G.R. No. L-28771, March 31, 1971

FACTS:

On February 20, 1956, Felix Matabuena owner of the property in question, executed a Deed of Donation inter
vivos in favor of Petronila Cervantes. The donation was made during their common law relationship as husband and wife,
six years before their marriage on March 28, 1962. Felix died intestate on September 13, 1962.

Petitioner Cornelia Matabuena, the only sister and nearest collateral relative of the deceased, is claiming the
property by virtue of the Affidavit of Self-Adjudication she executed in 1962.

The lower court ruled that a donation under the terms of Article 133 of the Civil Code is void if made between the
spouses during the marriage, and since they were not yet married when the Deed of Donation was executed, the donation is
valid.

ISSUE: Whether or not the donation between common-law spouses is valid.

RULING:

No, it is void. While Art. 133 of the Civil Code considers as void a "donation between the spouses during the
marriage," policy considerations of the most exigent character as well as the dictates of morality require that the same
prohibition should apply to a common-law relationship.

In Buenaventura v. Bautista, (50 O.G. 3679) interpreting a similar provision of the old Civil Code speaks
unequivocally. If the policy of the law is to prohibit donations in favor of the other consort and his descendants because of
fear of undue and improper pressure and influence upon the donor, then there is every reason to apply the same prohibitive
policy to persons living together as husband and wife without benefit of nuptials.

The lack of validity of the donation made by the deceased to defendant Petronila Cervantes does not necessarily
result in plaintiff having exclusive right to the disputed property. Prior to the death of Felix Matabuena, the relationship
between him and the defendant was legitimated by their marriage on March 28. 1962. She is therefore his widow. As
provided in the Civil Code, she is entitled to one-half of the inheritance and the plaintiff, as the surviving sister to the other
half.
6. TAÑEDO vs. CA
G.R. No. 104482 January 22, 1996

NATURE: Petition for review on certiorari of the decision of the Court of Appeals.

FACTS:
3. October 20, 1962: Lazardo Tañedo executed a notarized deed of absolute sale in favor of his eldest brother,
Ricardo Tañedo, and the latter’s wife, Teresita Barera (private respondents) whereby he conveyed for P1,500 one
hectare of his future inheritance from his parents.
4. February 28, 1980: Upon the death of his father Matias, Lazaro made another affidavit to reaffirm the 1962 sale.
5. January 13, 1981: Lazaro acknowledged therein his receipt of P 10,000.00 as consideration for the sale.
6. February 1981: Ricardo learned that Lazaro sold the same property to his children (petitioners) through a deed of
sale dated December 29, 1980
7. On June 7, 1982, Ricardo recorded the Deed of Sale in their favor in the Registry of Deeds

Petitioners filed a complaint for rescission (plus damages) of the deeds of sale executed by Lazaro in favor of Ricardo. They
contend that Lolo Matias desired that whatever inheritance Lazaro would receive from him should be given to his (Lazaro’s)
children.

Ricardo (private respondents) however presented in evidence a “Deed of Revocation of a Deed of Sale” wherein Lazaro
revoked the sale in favor of his children for the reason that it was “simulated or fictitious - without any consideration
whatsoever.”

LAZARO’S VERSION: He executed a sworn statement in favor of his children. BUT he also testified that he sold the
property to Ricardo, and that it was a lawyer who induced him to execute a deed of sale in favor of his children after giving
him five pesos (P5.00) to buy a “drink”. LABO

Trial court ruled in favor of Lazaro’s children. Ca affirmed TC’s decision.

ISSUES:
1. Is the sale of a future inheritance valid? NO
2. Was Ricardo’s registration of the deed of valid? YES

HELD: SC rules in favor of Ricardo.

Pursuant to Art 1347, the contract made in 1962 (sale of future inheritance) is not valid and cannot be the source of any
right nor the creator of any obligation between the parties. (“No contract may be entered into upon a future inheritance
except in cases expressly authorized by law.)

However, Article 1544 governs the preferential rights of vendees in cases of multiple sales. The property in question is land,
an immovable, and ownership shall belong to the buyer who in good faith registers it first in the registry of property. Thus,
although the deed of sale in favor of Ricardo was later than the one in favor of Lazaro’s children, ownership would vest
with Ricardo because of the undisputed fact of registration. On the other hand, petitioners have not registered the sale to
them at all.

Lazaro’s children contend that they were in possession of the property and that Ricardo never took possession thereof. As
between two purchasers, the one who registered the sale in his favor has a preferred right over the other who has not
registered his title, even if the latter is in actual possession of the immovable property.

WHEREFORE, the petition is DENIED and the assailed Decision of the Court of Appeals is AFFIRMED.
7. Miguel Mapalo, et al., vs. Maximo Mapalo, et al.
GR L-21489 and L-21628. May 19, 1966

Facts:
Petitioner spouses Miguel Mapalo and Candida Quiba, simple illiterate farmers, were registered owners (with Torrens title
certificate) of a 1,635 sq/m residential land in Pangasinan. Out of love for respondent Maximo Mapalo (Miguel's brother
about to get married), the spouses decided to donate the eastern half of the land to him. OCT was delivered. However, the
spouses were deceived into signing a deed of absolute sale over the entire land in Maximo's favor. Spouses' signatures were
procured by fraud, i.e., Maximo and the notary public attorney made the spouses believe that the same was a deed of
donation in Maximo's favor covering ½ (the eastern half) of their land. Though the document of sale stated a consideration
of P500, the spouses did not receive anything for the land.

After execution of the said document, the spouses built a permanent fence in the middle of the land segregating the eastern
portion from the western portion. They have always been in continued possession over the western half of the land.

Unknown to them, meanwhile, Maximo registered the deed of sale in his favor and obtained in his name Transfer Certificate
of Title (TCT) over the entire land. 13 years later, he sold the entire land for P2,500 in favor of four persons all surnamed
Narciso. The sale to Narcisos was then registered and TCT was issued for the whole land in Narcisos' names.

Narcisos took possession only of the eastern portion of the land after the sale to them was made. But they filed a suit in CFI
Pangasinan to be declared owners of the entire land, for possession of its western portion, damages, and rentals; brought
against the spouses.

Spouses answered with counterclaim: seeking cancellation of Narcisos' TCT pertaining to the western half of the land on the
ground that their signatures to the deed of sale was procured by fraud and that Narcisos were buyers in bad faith. They
asked for reconveyance to them of the western half of the land, and issuance of TCT in their names over said portion.

Spouses also filed their own complaint in CFI Pangasinan against Narcisos and Maximo, asking that the deeds of sale (1.
Spouses to Maximo; 2. Maximo to Narcisos), be declared null and void as to the western half of the land. CFI tried the two
cases jointly.

CFI ruling in spouses' favor: dismissed Narcisos' complaint, declared the deed by spouses to Maximo only a donation over
the eastern half, and declared that pertaining to the western half null and void; and declared null and void the deed over
western half between Maximo and Narcisos.

Narcisos appealed to CA.

CA ruling in Narcisos' favor: reversed CFI judgment on the ground that spouses' consent to the deed of sale, having been
obtained by fraud, the same was voidable, not void ab initio, and that thus the action to annul it, within 4 years from notice
of the fraud, had long prescribed.

Spouses appealed to the SC. Their contention: document dated 1936 purporting to sell the entire land to Maximo, is void,
not voidable, as to the western half of the land, for being simulated or fictitious.

Issue: Whether the 1936 documents was void or voidable for being simulated or fictitious.

Ruling:
A contract has three essential requisites: (1) consent, (2) object, and (3) cause or consideration. In this case, the element of
consent was present, though it was obtained by fraud. Though defective, it exists. With this, the defect in the consent would
provide a ground for annulment of a voidable contract, not a reason for being void ab initio. Second element (object) was
also present in the deed, i.e., the parcel of land. Regarding the third element, there is no cause or consideration.

Under the Civil Code old and new, contracts without a cause of consideration produce no effect. Under the Old Civil Code,
statement of a false consideration renders the contract voidable, unless it is proven that it is supported by another real and
licit consideration.

Regarding the 1936 deed of sale, governed by the Old Civil Code, was there no consideration, or was there false
consideration? If no consideration, it is void; if false consideration, it is only voidable. In this case, the 1936 deed of sale
stated the consideration of P500, although there really was no such consideration. According to Manresa, a contract that
states a false consideration is one that has a real consideration but the same is not the one stated in the document. Thus,
regarding the 1936 deed of sale, such contract has no consideration. Therefore, the 1936 deed of sale is void ab initio.

Regarding the contention that the action for annulment of a contract on the ground of falsity of consideration shall last 4
years, from the date of the contract's consummation. And that this operates against the spouses.

It is held: a contract of sale is void when it has no cause or consideration, in that the purchase price appearing on it as paid,
has in fact never been paid by buyer to seller. Thus, inexistence of a contract is permanent and incurable, and cannot be the
subject of prescription:

Art. 1410, New Civil Code. "The action or defense for the declaration of the inexistence of a contract does not prescribe."
It is held: mere lapse of time cannot give efficacy to null and void contracts. Therefore, the argued 4 year prescription
against the spouses cannot be given credit. The spouses are not prescribed in declaring the inexistence of the 1936 deed of
sale.

Were the Narcisos purchasers in good faith? No. The Narcisos were aware of the nature and extent of Maximo's interest
over the property before and at the time the deed of sale in their favor was executed. They did not only have prior
knowledge of the spouses' ownership over the western half of the land; they also recognized said ownership. They are not
purchasers in good faith.

Thus, this petition is granted. CA decision is set aside; CFI decision is affirmed in toto.

Regarding the eastern half of the land, the spouses are not claiming the same, it being their stand that they had donated and
freely given it to Maximo. They did not appeal from the trial court decision ruling there was a valid and effective donation
of the eastern half, so it is not an issue in this case.
8. IMELDA ONG, ET AL., petitioners, vs. ALFREDO ONG, ET AL., respondents.

Case Nature : PETITION for certiorari to review the decision of the Intermediate Appellate Court.
SC Decision: the appealed decision of the Intermediate Appellate Court should be, as it is hereby AFFIRMED
Legal Doctrines:
8. Conveyance of property for P1.00 consideration and other valuable considerations, valid.
9. Bad faith and inadequacy of monetary consideration do not render a conveyance inexistent, as the assignor's
liability may be sufficient cause for a valid contract.

Facts:
On February 25, 1976 Imelda Ong, for and in consideration of One (P1.00) Peso and other valuable considerations,
executed in favor of private respondent Sandra Maruzzo, then a minor, a Quitclaim Deed whereby she transferred, released,
assigned and forever quit-claimed to Sandra Maruzzo, her heirs and assigns, all her rights, title, interest and participation in
the ONE-HALF (½) undivided portion of the parcel of land (Lot 10-B of the subdivision plan (LRC) Psd 157841, being a
portion of Lot 10, Block 18, Psd-13288, LRC (GLRC) Record No. 2029, situated in the Municipality of Makati, Province of
Rizal, Island of Luzon ... containing an area of ONE HUNDRED AND TWENTY FIVE (125) SQUARE METERS, more
or less.

On November 19, 1980, Imelda Ong revoked the aforesaid Deed of Quitclaim and, thereafter, on January 20, 1982 donated
the whole property described above to her son, Rex Ong-Jimenez.

On June 20, 1983, Sandra Maruzzo, through her guardian (ad litem) Alfredo Ong, filed with the Regional Trial Court of
Makati, Metro Manila an action against petitioners, for the recovery of ownership/possession and nullification of the Deed
of Donation over the portion belonging to her and for Accounting.

In their responsive pleading, petitioners claimed that the Quitclaim Deed is null and void inasmuch as it is equivalent to a
Deed of Donation, acceptance of which by the donee is necessary to give it validity. Further, it is averred that the donee,
Sandra Maruzzo, being a minor, had no legal personality and therefore incapable of accepting the donation.

On December 12, 1983, the trial court rendered judgment in favor of respondent Maruzzo and held that the Quitclaim Deed
is equivalent to a Deed of Sale and, hence, there was a valid conveyance in favor of the latter.

On Appeal, petitioners contended that the One (P1.00) Peso consideration is not a consideration at all to sustain the ruling
that the Deed of Quitclaim is equivalent to a sale. However, Intermediate Appellate Court promulgated its Decision
affirming the appealed judgment and held that the Quitclaim Deed is a conveyance of property with a valid cause or
consideration.

Issue:
Whether or not the conveyance of property for P1.00 consideration and other valuable considerations is valid.

Ruling:
Yes. The subject deed reveals that the conveyance of the one-half (½) undivided portion of the above-described property
was for and in consideration of the One (P1.00) Peso and the OTHER VALUABLE CONSIDERATIONS paid by private
respondent Sandra Maruzzo, through her representative, Alfredo Ong, to petitioner Imelda Ong. Stated differently, the cause
or consideration is not the One (P1.00) Peso alone but also the other valuable considerations.

lt 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 (Article 1350, Civil Code), 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, as in the case at bar.
9. ALEXANDER and JEAN J. BACUNGAN, petitioners, vs. COURT OF APPEALS and SPS. NAPOLEON and
VICTORIA VELO, respondents.
G.R. No. 170282 December 18, 2008

LEGAL DOCTRINE:
An arrangement, where the ownership of the land is supposedly transferred to the buyer who provides for the funds
to redeem the property from the bank but nonetheless allows the seller to later on buy back the properties, is in the nature of
an equitable mortgage governed by Articles 1602 and 1604 of the Civil Code.

FACTS:
Respondents Napoleon and Victoria Velo had earlier executed several real estate mortgages over the properties to secure the
payment of the total amount of P350,000.00.

Respondents defaulted on the payments, prompting the bank to foreclose the properties.

Respondents and petitioners Bacungan devised a plan in which they agreed that in exchange for the apparent transfer of
ownership of the parcels of land to petitioners, the latter would provide for the funds for the redemption of the properties
from the bank in addition to the loan that petitioners would obtain from the bank.

Thus, respondents were able to redeem the properties for the amount of P369,000.00 that was advanced by way of mortgage
to them by petitioners.

The amount approximates the total loans in the amount of P350,000.00 secured by the properties subject of the real estate
mortgages executed by respondents.
Thereafter, respondents executed several deeds of sale purporting to transfer the 18 parcels of lands for a total consideration
of P232,000.00.

The parties further agreed that upon the transfer of the properties in the name of petitioners, the latter would obtain another
loan from the bank using the properties as collateral.

Petitioners were supposed to remit the loan proceeds to respondents after deducting the amount of P369,000.00 lent by
petitioners to respondents and, thereafter, allow respondents to buy back the properties.

However, respondents claimed that after petitioners had obtained the new titles, they never applied for a loan with the bank.

Respondents Napoleon and Victoria Velo instituted an action for reconveyance with damages against petitioners Alexander
and Jean Jimeno Bacungan before the RTC of Rosales, Pangasinan alleging that they were the registered owners of 18
parcels of land situated in Rosales, Pangasinan.

DECISION OF THE TRIAL COUT

RTC dismissed the complaint for lack of merit. It gave evidentiary weight on the notarized deeds of sale, the presumed
validity and its due execution. The RTC held that respondents admitted to have voluntarily consented to the simulation of
the contracts, thus, the principle of in pari delicto must prevail and both parties were at fault and should be left at where the
law finds them.

APPEAL BEFORE CA
Respondents elevated the matter to the CA via a petition for review, arguing that the contracts between respondents and
petitioners were simulated.

CA reversed the decision of the trial court declaring the Deeds of Sale simulated and ordered petitioners to reconvey the
properties to the respondents.
Among the indicators pointed out by the appellate court in support of its conclusion were the gross inadequacy of prices,
respondents’ failure to receive any part of the purchase price stated in the deeds of sale.

ISSUE: Whether or not the contract entered into by the parties in the case at bar is a contract of sale.

RULING:
No. This kind of arrangement, where the ownership of the land is supposedly transferred to the buyer who provides for the
funds to redeem the property from the bank but nonetheless allows the seller to later on buy back the properties, is in the
nature of an equitable mortgage governed by Articles 1602 and 1604 of the Civil Code, which provide:
Article 1602. The contract shall be presumed to be an equitable mortgage, in any of the following cases:
(1) When the price of a sale with right to repurchase is unusually inadequate;
(2) When the vendor remains in possession as lessee or otherwise;
(3) When upon or after the expiration of the right to repurchase another instrument extending the period of
redemption or granting a new period is executed;
(4) When the purchaser retains for himself a part of the purchase price;
(5) When the vendor binds himself to pay the taxes on the thing sold;
(6) In any case where it may be fairly inferred that the real intention of the parties is that the transaction shall
secure the payment of a debt or the performance of any other obligation.
In any of the foregoing cases, any money, fruits, or other benefit to be received by the vendee as rent or otherwise
shall be considered as interest which shall be subject to the usury laws.
 Art. 1604. The provisions of Article 1602 shall also apply to a contract purporting to be an absolute sale.

Two requisites of an equitable mortgage are: that the parties entered into a contract denominated as a contract of sale and
that their intention was to secure an existing debt by way of mortgage.

Under Art. 1604 of the Civil Code, a contract purporting to be an absolute sale shall be presumed to be an equitable
mortgage should any of the conditions in Art. 1602 be present. The existence of any of the circumstances therein, not a
concurrence or an overwhelming number of such circumstances, suffices to give rise to the presumption that the contract is
an equitable mortgage.

In the instant case, three telling circumstances indicating that an equitable mortgage exists are present. First, as established
by the CA, the price of each of the properties was grossly inadequate. Second, petitioners retained part of the "purchase
price" when they failed to turn over to the respondents the loan that they were supposed to secure from the bank. Third,
petitioners insisted that part of the consideration of the sale consisted of amounts previously borrowed by respondents from
them, indicating that petitioners were using the properties as "security" for the payment of respondents’ other loans from
them.

Gross inadequacy of price by itself will not result in a void contract. Gross inadequacy of price does not even affect the
validity of a contract of sale, unless it signifies a defect in the consent or that the parties actually intended a donation or
some other contract. Inadequacy of cause will not invalidate a contract unless there has been fraud, mistake or undue
influence
The consideration for the transaction in the instant case was to secure the payment of respondents’ loan to petitioners.

Petition is partly granted. Deeds of Absolute Sale were declared Equitable Mortgages and petitioners were ordered to
reconvey the properties to the respondents upon payment of P369,000.
10. NICOLAS SANCHEZ, plaintiff-appellee, vs. SEVERINA RIGOS, defendant-appellant
G.R. No. L-25494 June 14, 1972

Nature of the case: Appeal from a decision of the Court of First Instance of Nueva Ecija to the Court of Appeals, which
certified the case to Us, upon the ground that it involves a question purely of law.

SC Decision: The decision appealed from is affirmed, with costs against defendant-appellant Severina Rigos. It is so
ordered.

Facts:
On April 3, 1961, Sanchez and Rigos executed an instrument entitled "Option to Purchase," whereby Rigos "agreed,
promised and committed ... to sell" to Sanchez for P1,510.00, a parcel of land situated in the barrios of Abar and Sibot,
municipality of San Jose, province of Nueva Ecija Transfer Certificate of Title No. NT-12528, within two (2) years from
said date with the understanding that said option shall be deemed "terminated and elapsed," if "Sanchez shall fail to exercise
his right to buy the property" within the stipulated period.

Several tenders of payment of the sum of P1,510.00, made by Sanchez within said period but were rejected by Rigos. On
March 12, 1963, the Sanchez deposited said amount with the Court of First Instance of Nueva Ecija and commenced against
the latter the present action, for specific performance and damages.

Rigos, in her answer claimed that the contract between them "is a unilateral promise to sell, and the same being unsupported
by any valuable consideration, by force of the New Civil Code, is null and void”.

On February 28, 1964, the lower court rendered judgment in favor of Sanchez, ordering Mrs. Rigos to accept the sum
judicially consigned by him and to execute, in his favor, the requisite deed of conveyance. Mrs. Rigos was, likewise,
sentenced to pay P200.00, as attorney's fees, and other costs.

Hence, this appeal by Mrs. Rigos.

Issue: Whether or not there was a contract to buy and sell between the parties.

Ruling:
No. The option did not impose upon plaintiff the obligation to purchase defendant's property. The instrument executed is not
a "contract to buy and sell." It merely granted plaintiff an "option" to buy. And both parties so understood it, as indicated by
the caption, "Option to Purchase," given by them to said instrument. Under the provisions thereof, the defendant "agreed,
promised and committed" herself to sell the land therein described to the plaintiff for P1,510.00, but there is nothing in the
contract to indicate that her aforementioned agreement, promise and undertaking is supported by a consideration "distinct
from the price" stipulated for the sale of the land.

In order that said unilateral promise may be "binding upon the promisor, Article 1479 requires the concurrence of a
condition, namely, that the promise be "supported by a consideration distinct from the price." Accordingly, the promisee can
not compel the promisor to comply with the promise, unless the former establishes the existence of said distinct
consideration. In other words, the promisee has the burden of proving such consideration. Plaintiff herein has not even
alleged the existence thereof in his complaint.

Since there may be no valid contract without a cause or consideration, the promisor is not bound by his promise and may,
accordingly, withdraw it. Pending notice of its withdrawal, his accepted promise partakes, however, of the nature of an offer
to sell which, if accepted, results in a perfected contract of sale.
11. JOSE RAMON CARCELLER vs. COURT OF APPEALS and STATE INVESTMENT HOUSES, INC.
G.R. No. 124791, FEBRUARY 10, 1999

LEGAL DOCTRINE:
An option is a preparatory contract in which one party grants to the other, for a fixed period and under specified
conditions, the power to decide, whether or not to enter into a principal contract. It binds the party who has given the option,
not to enter into the principal contract with any other person during the period designated, and, within that period, to enter
into such contract with the one to whom the option was granted, if the latter should decide to use the option.

FACTS:

State Investment Houses, Inc. (SIHI) is the owner of two parcels of land located in Bulacao, Cebu City, with a total
area of 9,774 sq. meters.

On January 10, 1985, SIHI and petitioner Ramon Carceller entered into a lease of contract with option to purchase
the property for P1,800,000.00. The monthly rental was P10,000 for a period of 18 months, beginning August 1, 1984 to
January 30, 1986. As part of the agreement, the option to purchase shall be exercised by a written notice to the lessor at any
time within the option period. On January 7, 1986, SIHI notified Carceller of the impending termination of lease agreement
and requested him to advise them of his decision on the option, on or before January 20, 1986.

Petitioner, in his letter dated January 15, 1986, requested for a six-month extension of the lease of contract for him
to have an ample time to raise funds. On February 14, 1986, SIHI notified petitioner that his request was disapproved and
offered to lease the same property at the rate of P30,000 per month for one year. It further informed him that the property
will be offered for sale to the general public.

On February 18, 1986, petitioner notified SIHI of his decision to exercise the option to purchase the property and
he made arrangements for the payment of P360,000.00. But SIHI asked the petitioner to vacate the property as the option
period had already lapsed.

Petitioner filed a complaint for specific performance and damages before the Regional Trial Court of Cebu City.
The RTC ruled in favor of the petitioner and ordered SIHI to execute a Deed of Sale. The Court of Appeals affirmed the
trial court’s judgment.

ISSUE:
Whether or not the petitioner should be allowed to exercise the option to purchase the leased property, despite the
alleged delay in giving the required notice to private respondent.

RULING:

Yes. An option is a preparatory contract in which one party grants to the other, for a fixed period and under
specified conditions, the power to decide, whether or not to enter into a principal contract. It binds the party who has given
the option, not to enter into the principal contract with any other person during the period designated, and, within that period,
to enter into such contract with the one to whom the option was granted, if the latter should decide to use the option.

In this case, the petitioner’s letter to SIHI dated January 15, 1986 was a fair notice of intent to exercise the option
to purchase the property. Petitioner was requesting for an extension of the lease contract to allow them to generate
sufficient funds in order to exercise the option. The petitioner acted with honesty and good faith and SIHI will not be
prejudiced. Petitioner's determination to purchase said property is indubitable. He introduced permanent improvements on
the leased property, demonstrating his intent to acquire dominion in a year's time. To increase his chances of acquiring the
property, he secured an P8 Million loan from the Technology Resources Center (TRC), thereby augmenting his capital. He
averred that he applied for a loan since he planned to pay the purchase price in one single payment, instead of paying in
installment, which would entail the payment of additional interest at the rate of 24% per annum, compared to 73/4% per
annum interest for the TRC loan. His letter earlier requesting extension was premised, in fact, on his need for time to secure
the needed financing through a TRC loan.

In contractual relations, the law allows the parties reasonable leeway on the terms of their agreement, which is the
law between them. In private SIHI’s view, there was already a delay of 18 days, fatal to petitioner's cause. But CA found the
delay neither "substantial" nor "fundamental" and did not amount to a breach that would defeat the intention of the parties
when they executed the lease contract with option to purchase.

In Tuason, Jr., etc. vs. De Asis, Supreme Court ruled that "in a contract of lease, if the lessor makes an offer to the
lessee to purchase the property on or before the termination of the lease, and the lessee fails to accept or make the purchase
on time, the lessee losses the right to buy the property later on the terms and conditions set in the offer." Thus, on one hand,
petitioner herein could not insist on buying the said property based on the price agreed upon in the lease agreement, even if
his option to purchase it is recognized. On the other hand, SIHI could not take advantage of the situation to increase the
selling price of said property by nearly 90% of the original price. Such leap in the price quoted would show an opportunistic
intent to exploit the situation as SIHI knew for a fact that petitioner badly needed the property for his business and that he
could afford to pay such higher amount after having secured an P8 Million loan from the TRC.
12. Equatorial Realty v Mayfair Theater
G.R. No. 106063. November 21, 1996

NATURE: Petition for review on certiorari of the decision of the Court of Appeals.

FACTS: Carmelo & Bauermann, Inc (Carmelo), owned a parcel of land and the 2-storey building constructed thereon
located at Claro M. Recto Avenue. In 1967, he entered into a contract of lease with Mayfair for the use of the building’s
second floor and mezzanine as a motion picture theater for a term of twenty years.
Two years later, Mayfair entered into another contract of lease, for the lease of another portion of Carmelo’s property for
similar use as movie theater for a term of twenty years.

Both contracts of lease provided that in the case that the Lessor (Carmelo) should desire to sell the leased premises, the
lessee (Mayfair) shall be given a 30-day exclusive option to purchase the same, and in the event that the lessor sells the
leased premises to someone other than the lessee, the lessor is bound and obligated to stipulate in the deed of sale that the
purchaser shall recognize the lease and be bound to all the terms and conditions thereof.

In 1974, Henry Pascal of Carmelo informed the president of Mayfair (Mr. Henry Yang), through a telephone call that
Carmelo wants to sell the entire Claro M. Recto property and said that a Jose Araneta had offered to buy the whole property
for $1.2M. Mr. Pascal asked Mr. Yang if he was willing to buy the property for P6M-P7M.

Mayfair sent a letter to Carmelo, to which it did not respond. A month later, Mayfair sent another expressing interest in
acquiring not only the leased portions of the property, but the entire property if the price is reasonable.

However, four years later, in 1978, Carmelo sold its entire Claro M. Recto property to Equatorial Realty. Mayfair instituted
an action for specific performance and annulment of the sale of the leased premises to Equatorial.

Carmelo alleged that it informed Mayfair of its desire to sell the property but the latter was only interested in buying the
areas under lease which was impossible since the property wasn’t a condominium; that the option to purchase invoked by
Mayfair is null and void for lack of consideration. Equatorial alleged the same and counterclaimed for cancellation of the
contracts of lease and for increase of rental due to the devaluation of the currency.

The trial court found for the Carmelo and Equatorial, adjudging paragraph 8 in both contracts of lease as an option clause,
which can’t be deemed to be binding on Carmelo for lack of consideration.

The Court of Appeals reversed the trial court’s decision, saying that since paragraph 8 doesn’t state the fixed price for
purchase of the lease premises, which is essential in a perfect contract of sale, that the clause must be a right of first refusal
and not an option contract.

The Court of Appeals also concludes that if the option is valid and effective, it would be impossible for performance
because it only covered the leased premises and the entire property, while Carmelo’s offer is that for the sale of the entire
property.

ISSUE: What is the true nature of paragraph 8 in the contract of lease between Carmelo and Mayfair?

HELD: It is a right of first refusal.

The rule so early established in this jurisdiction is that the deed of option or the option clause in a contract, in order to be
valid and enforceable, must, among other things, indicate the definite price at which the person granting the option, is
willing to sell.

An option is a contract granting a privilege to buy or sell within an agreed time and at a determined price. It is a separate
and distinct contract from that which the parties may enter into upon the consummation of the option. It must be supported
by consideration. In the instant case, the right of first refusal is an integral part of the contracts of lease. The consideration is
built into the reciprocal obligations of the parties.

The Court of Appeals is correct in stating that Paragraph 8 was incorporated into the contracts of lease for the benefit of
Mayfair which wanted to be assured that it shall be given the first crack or the first option to buy the property at the price
which Carmelo is willing to accept. It is not also correct to say that there is no consideration in an agreement of right of first
refusal. The stipulation is part and parcel of the entire contract of lease. The consideration for the lease includes the
consideration for the right of first refusal.

Thus, Mayfair is in effect stating that it consents to lease the premises and to pay the price agreed upon provided the lessor
also consents that, should it sell the leased property, then, Mayfair shall be given the right to match the offered purchase
price and to buy the property at that price. As stated in Vda. De Quirino vs.Palarca, in a reciprocal contract, the obligation
or promise of each party is the consideration for that of the other.

Petition is denied, and the contract between Carmelo and Equatorial is deemed rescinded.
13. Rizalino, substituted by heirs Josefina, Rolando, and Fernando, Ernesto, Leonora, Bibiano, Jr., Librado, and
Enriquetta, all surnamed Oesmer
vs. Paraiso Development Corporation.
GR 157493. February 5, 2007

Facts:
Petitioner heirs (all surnamed Oesmer), together with Adolfo and Jesus Oesmer, are brothers and sisters, and co-owners of
undivided shares of 2 parcels of agricultural and tenanted land in Carmona, Cavite: Lot 720 with 40,507 sq/m, and Lot 834
with 14,769 sq/m, totalling 55,276 sq/m. Both lands are unregistered and originally owned by their parents Bibiano and
Encarnacion. When these parents died, the heirs acquired the lots as heirs by right of succession.

Respondents Paraiso Devt Corp. is engaged in real estate business.

In March 1989, Paular, resident and former municipal secretary of Carmona, Cavite, brought along Ernesto Oesmer to meet
with Sotero Lee, president of Paraiso Devt. They discussed on the sale of heirs' properties to Paraiso.

A contract to sell was drafted. Heirs Ernesto and Enriqueta signed such contract to sell. A P100k check was issued by
Paraiso, payable to Ernesto, and was given as option money. Afterwards, heirs Rizalino, Leonora, Bibiano Jr., and Librado,
also signed said contract to sell. But, two of the heirs, Adolfo and Jesus, did not sign it.

In a November 1989 letter, heirs informed Paraiso that they wanted to rescind the contract to sell and to return P100k given
by Paraiso as option money.

Paraiso did not respond to the letter. May 1991: heirs, with Adolfo and Jesus, filed a complaint for declaration of nullity or
for annulment of option agreement or contract to sell, before RTC Bacoor, Cavite.

During trial, Rizalino Oesmer died, substituted by spouse Josefina and children.

RTC decision favoring Paraiso: the contract to sell is valid and binding only to the undivided proportionate share of the
signatory of the document (heirs). RTC ordered Ernesto Oesmer to execute the contract of absolute sale concerning his 1/8
share over the subject property in Paraiso's favor.

Unsatisfied, Paraiso appealed to CA.

CA decision favoring Paraiso: it modified RTC decision, stating that the contract to sell is valid and binding with respect to
the undivided proportionate shares of the 6 signatories of the document (Ernesto, Enriqueta, Librado, Rizalino, Bibiano Jr.,
and Leonora), ordering them to execute deed of absolute sale pertaining to their 6/8 share over the 2 parcels of land in
Paraiso's favor.

Aggrieved, heirs moved for reconsideration. CA maintained its decision, with modification that Paraiso tender payment to
heirs P3,216,560 representing the balance of the purchase price of the subject land. Hence, this petition.

Heirs contend: the contract to sell does not bind petitioner Ernesto Oesmer's co-owners (petitioners Enriqueta, Librado,
Rizalino, Bibiano Jr., Leonora) because said 5 heirs' authority were not given to Ernesto as agent to sell their respective
shares in the properties, and that their signatures do not signify their consent to sell their shares because said 5 heirs were
low in intelligence; that the contract to sell is void because Paraiso Devt did not sign it as to indicate its consent to be bound
by its terms. And that the contract is really a unilateral promise to sell without consideration distinct from the price, and
hence, void.

Issue: Whether or not the contract to sell is valid.

Ruling:
Yes.

Regarding the issue of conferring authority through an agent to sell an immovable, Art. 1874 states: “When a sale of a piece
of land or any interest therein is through an agent, the authority of the latter shall be in writing; otherwise, the sale shall be
void.”

Heirs argue that the contract to sell is void, because a written authority authorizing an agent to sell immovable, is lacking.
However, the heirs' signatures are found in the contract to sell. It is silent on the establishment of any principal-agent
relationship between the 5 petitioners and their brother and co-petitioner Ernesto as to the sale of the parcels of land. Thus,
despite Ernesto's lack of written authority from the 5 petitioners to sell their shares, the contract to sell remains valid and
binding upon the latter.

It is the 5 petitioners themselves who affixed their signatures on the contract. Thus a written authority is no longer necessary
to sell their shares in the subject land, because, by affixing their signatures on the contract to sell, they were not selling their
shares through an agent, but rather, they were selling it directly in their own right.

Petitioner heirs then contend: the signatures of the 5 petitioners do not signify their consent to sell their shares since they did
not understand the importance and consequences of their action because of their low degree of education and that the
contents of the contract were not read nor explained to them.
This contention cannot stand. First, the contract to sell is couched in simple language, and is easy to read and understand.
Second, witness testimonies indicate that petitioners do not have a low degree of education so as to make them not
understand the contract to sell that they entered into.

It is held: one who signs a contract is presumed to know its contents. This even applies to contracts of illiterate persons, on
the ground that if they are not unable to read, they are negligent if they fail to have the contract read to them. It is his duty to
procure a reliable person to read and explain the contents to him, before he signs it. Failure to obtain a reading and
explanation of it is gross negligence, and will estop him from claiming ignorance.

Petitioner heirs contend again: assuming the signatures of the 5 petitioners indicate consent, such consent was merely
conditional and that the effectivity of the alleged contract to sell was subject to the suspensive condition that the sale be
approved by all the co-owners.

This contention cannot stand. In this case, the contract to sell is clear enough. It is held: if the terms of a contract are clear
and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulation shall control. The terms
of said contract did not mention a condition that before it can become valid and binding, a unanimous consent of all the
heirs is necessary.

Furthermore, petitioners, being owners of their respective undivided shares in the subject land, can dispose their shares even
without the consent of all the co-heirs. Art. 493 of the Civil Code states: “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 allotted to him in the division upon
the termination of the co-ownership.”

Thus, even without the consent of co-heirs Adolfo and Jesus, the contract to sell is still valid and binding with respect to the
6/8 proportionate shares of the petitioners.

Petitioner heirs finally contend: the contract to sell is void because respondent Paraiso Devt did not sign it as to indicate its
consent to be bound by its terms; and that said contract is really a unilateral promise to sell without consideration distinct
from the price, and hence, again, void.

Such contentions must fail. The contract to sell is valid despite the absence of Paraiso's signature on it. On the other hand,
Paraiso's consent to be bound by the terms of the contract is shown in the facts which established that there was partial
performance by Paraiso of its obligation in said contract, when it tendered the amount of P100k to form part of the purchase
price, which was accepted and acknowledged expressly by petitioner heris.

Said contract is not a unilateral promise to sell merely because it used the word “option money” when it referred to the
P100k, which also form part of the purchase price. It is held: in the interpretation of contracts, to ascertain the parties'
intention, we should look to the words they used to project that intention in their contract. In this case, the P100k paid by
Paraiso to heirs was referred to as option money. However, a careful examination of the words in the contract indicates that
it is not option money, but earnest money.

Earnest money and option money are distinguished: (a) earnest money is part of the purchase price, option money is given
as a distinct consideration for an option contract; (b) earnest money is given only where there is already a sale, option
money applies to a sale not yet perfected; and (c) when earnest money is given, the buyer is bound to pay the balance, while
when the would-be buyer gives option money, he is not required to buy, but may even forfeit it depending on the terms of
the option.

In this case, P100k was part of the purchase price. Though called “option money” in the contract, it is actually earnest
money or down payment.

Thus, the agreement is not a mere unilateral promise to sell, but a contract to sell. Petition is denied.