Art. 1475.

The contract of sale is perfected at the moment there is a meeting of

minds upon the thing which is the object of the contract and upon the price.

Art. 1319. Consent is manifested by the meeting of the offer and the acceptance
upon the thing and the cause which are to constitute the contract. The offer must
be certain and the acceptance absolute. A qualified acceptance constitutes a
counter-offer.
Acceptance made by letter or telegram does not bind the offerer except from the
time it came to his knowledge. The contract, in such a case, is presumed to have
been entered into in the place where the offer was made.

Art. 1325. Unless it appears otherwise, business advertisements of things for

sales are not definite offers, but mere invitations to make an offer. (n)

Art. 1326. Advertisements for bidders are simply invitations to make proposals,
and the advertiser is not bound to accept the highest or lowest bidder, unless the
contrary appears.

Art. 1475. The contract of sale is perfected at the moment there is a meeting of
minds upon the thing which is the object of the contract and upon the price.

E2022 SALES TITLE V B4 1

 1. MANILA METAL CORP. vs. PNB
Dec. 20, 2006 | J. Callejo, Sr. | Absolute Acceptance
of a Certain Offer
E. CANCEKO & M. LUCES
PETITIONER: ​Manila Metal Container Corp., Reynaldo Tolentino
RESPONDENT: ​Philippine National Bank, DMCI Developers Inc.
RECIT-READY: ​MMCC obtained a loan of P900,000 from PNB and
executed a real estate mortgage over its lot in Mandaluyong. Upon
default, PNB foreclosed the lot and became the winning bidder during the
public auction. MMCC requested for an extension for the period to
redeem the property and also asked if it could pay in installments.
PNB’s Special Assets Management Department (SAMD) informed
MMCC of the amount of its outstanding obligation which was
P1,574,560, and MMCC remitted P725,000 to PNB as its “deposit to
repurchase.” In line with this, ​SAMD recommended to PNB’s
management that they allow MMCC to repurchase the property for
P1,574,560. But the management rejected the recommendation and said
that MMCC should pay P2,660,000, which was the minimum market
value of the lot. MMCC did not agree. MMCC insisted that it had already
paid P725,000, and it had already agreed that the purchase price was
P1,574,560. So MMCC filed a complaint against PNB.
RTC dismissed the complaint and held that there was no perfected
contract of sale since the parties never agreed on the price. CA affirmed.
ISSUE: ​W/N MMCC and PNB had entered into a perfected contract for
MMCC to repurchase the property from PNB - ​NO
RULING: There was no perfected contract of sale between the
parties. ​When SAMD recommended to PNB’s management that they
allow MMCC to repurchase the lot for P1,574,560, PNB’s management
rejected the recommendation. Instead, they offered a purchase price of
P2,660,000. But MMCC did not agree either. It has been held in previous
cases that a ​definite agreement as to the ​price is an essential element of
a contract of sale. In this case, both parties had different offers. ​To
convert the offer into a contract, the acceptance must be absolute
and must not qualify the terms of the offer; it must be plain,
unequivocal, unconditional and without variance of any sort from
the proposal.
A ​qualified acceptance or one that involves a new proposal constitutes a
counter-offer and a rejection of the original offer. A ​counter-offer is
considered in law, a ​rejection of the original offer
DOCTRINE: ​(syllabus) ​Under Article 1319, the acceptance of an offer
must therefore be unqualified and absolute. In other words, it must be
identical in all respects with that of the offer so as to produce consent or
meeting of the minds. Here, petitioner’s acceptance of the offer was
qualified, which amounts to a rejection of the original offer.
FACTS:
● Manila Metal Container Corp. (MMCC) was the owner of a 8,015
sqm. parcel of land in Mandaluyong (now a City), Metro Manila.
● To secure a P900,000 loan it had obtained from Philippine
National Bank (PNB), MMCC executed a real estate mortgage
over the lot.
● Upon default, PNB filed a petition for extrajudicial foreclosure of
the real estate mortgage and sought to have the property sold at
public auction, where PNB was declared the winning bidder.
● MMCC sent a letter to PNB, requesting that it be granted an
extension of time within which to repurchase the property on
installment basis.
● Meanwhile, PNB’s Special Assets Management Department
(SAMD) prepared a statement of account, and apprised MMCC of
its obligation amounting to P1,574,560. MMCC then remitted
P725,000 to PNB as "deposit to repurchase."
● The SAMD recommended to the management of PNB that MMCC
be allowed to repurchase the property for P1,574,560. The PNB
management informed MMCC that it was rejecting the offer and
E2022 SALES TITLE V B4 2
 the recommendation of the SAMD. It was suggested that MMCC
purchase the property for P2,660,000, its minimum market value.
● MMCC, however, did not agree to PNB's proposal. MMCC
declared that it had already agreed to the SAMD's offer to purchase
for P1,574,560, and that was why it had paid P725,000.
● MMCC filed a complaint against PNB for "Annulment of
Mortgage and Mortgage Foreclosure, Delivery of Title, or Specific
Performance with Damages."
● The trial court rendered judgment that there was no perfected
contract of sale between the parties. CA rendered judgment
affirming the decision of the RTC. ​It declared that MMCC never
agreed to the selling price proposed by PNB since MMCC had
kept on insisting that the selling price should be lowered to
P1,574,560. Clearly therefore, ​there was no meeting of the minds
between the parties as to the price or consideration of the sale.
Thus, petitioner filed the instant petition for review on ​certiorari.​
ISSUES: ​W/N MMCC and PNB had entered into a perfected contract for
MMCC to repurchase the property from PNB - ​NO
RATIO:
● The ruling of the appellate court that there was no perfected
contract of sale between the parties is correct.
● Contracts are perfected by mere consent which is manifested by
the meeting of the offer and the acceptance upon the thing and the
cause which are to constitute the contract.
● In ​Boston Bank of the Philippines v. Manalo:
○ A definite agreement as to the ​price is an essential
element of a binding agreement to sell personal or real
property because it seriously affects the rights and
obligations of the parties. The fixing of the price can
never be left to the decision of one of the contracting
parties. But a price fixed by one of the contracting parties,
if accepted by the other, gives rise to a perfected sale.
● A negotiation is formally initiated by an offer, which, however,
must be certain. At any time prior to the perfection of the contract,
either negotiating party may stop the negotiation. At this stage, the
offer may be withdrawn; the withdrawal is effective immediately
after its manifestation. ​To convert the offer into a contract, the
acceptance must be absolute and must not qualify the terms of
the offer; it must be plain, unequivocal, unconditional and
without variance of any sort from the proposal.
● A ​qualified acceptance or one that involves a new proposal
constitutes a ​counter-offer and a rejection of the original offer. A
counter-offer is considered in law, a ​rejection of the original
offer and an attempt to end the negotiation between the parties on
a different basis.
● First of all, there is no evidence that the SAMD was authorized by
respondent's Board of Directors to accept MMCC’s offer and sell
the property for P1,574,560. ​Any acceptance by the SAMD of
MMCC’s offer would not bind respondent.
● A corporation can only execute its powers and transact its business
through its Board of Directors and through its officers and agents
when authorized by a board resolution or its by-laws.
● SAMD had prepared a recommendation for respondent to accept
MMCC’s offer that MMCC be allowed to redeem the property and
pay P1,574,560 as the purchase price. PNB later approved the
recommendation that the property be sold to MMCC. But instead
of the P1,574,560, PNB set the purchase price at P2,660,000. ​In
fine, PNB’s acceptance of MMCC’s offer was qualified, hence
can be at most considered as a counter-offer.
● Therefore, there was no perfected contract of sale between
petitioner and respondent over the subject property.
IN LIGHT OF ALL THE FOREGOING, the petition is ​DENIED. The
assailed decision is ​AFFIRMED. Costs against petitioner Manila Metal
Container Corporation. ​SO ORDERED.
E2022 SALES TITLE V B4 3
 2. VILLONCO REALTY COMPANY and EDITH PEREZ DE
TAGLE v BORMAHECO INC., FRANCISCO N. CERVANTES &
ROSARIO CERVANTES
July 25, 1975 | AQUINO, J. |When deviation is allowed
T. DELA ROSA &
PETITIONER: ​Cornelia M. Hernandez
RESPONDENT:​ Cecilio F. Hernandez
RECIT-READY:
The Cervantes spouses (Francisco and Rosario) owned 3 lots adjacent to
the property of Villonco Realty Co. Bormaheco Co. (whose president
was Francisco) negotiated the sale of the lots to Villonco. In the offer to
sell (dated February 12, 1964), it was stated that a deposit of P100,000
must be placed as earnest money and that the sale is to be consummated
only after Francisco consummates the purchase of another property
located in Sta. Ana, Manila (the property of NASSCO). It also stated that
final negotiations on both properties can be definitely known after 45
days. Bormaheco won the bid for the NASSCO property on January 17,
1964. On March 4, 1964, Cervantes accepted Villonco’s counter-offer
and he received earnest money worth P100k on the same day. 26 days
later, he returned the money with interest, saying that “despite the lapse
of 45 days from February 12, 1964, there is no certainty yet" regarding
the Sta. Ana property. Villonco sued for specific performance. The RTC
ordered Cervantes spouses and Bormaheco Co. to execute a deed of
conveyance in favor of Villonco, plus damages and attorney’s fees. The
petitioners appealed, stating that no contract of sale was perfected
because Cervantes made a qualified acceptance of the counter-offer and
because the condition that Bormaheco would acquire the Sta. Ana
property within 45 days was not fulfilled.
ISSUE: ​W/N a contract of sale was perfected? YES
RULING: ​SC said that there was a contract of sale. Bormaheco's
acceptance of Villonco Realty Company's offer to purchase the Buendia
Avenue property, as shown in the March 4, 1964 letter, proves that there
was a meeting of minds upon the subject matter and consideration of the
sale. Therefore, on that date the sale was perfected. The controlling fact
is that there was agreement between the parties on the subject matter, the
price and the mode of payment and that part of the price was paid.
"Whenever earnest money is given in a contract of sale, it shall be
considered as part of the price and as proof of the perfection of the
contract". The SC also agreed with the trial court ruling that the
forty-five-day period was merely an estimate or a forecast of how long it
would take Bormaheco, Inc. to acquire the Nassco property and it was
not "a condition or a deadline set for the defendant corporation to decide
whether or not to go through with the sale of its Buendia property".
DOCTRINE:
It is true that an acceptance may contain a request for certain changes in
the terms of the offer and yet be a binding acceptance, so long as it is
clear that the meaning of the acceptance is positively and unequivocally
to accept the offer, whether such request is granted or not, a contract is
formed. Vendor’s change in a phrase of the offer to purchase which do
not essentially change the terms of the offer, does not amount to a
rejection of the offer and the tender or a counter-offer.
FACTS:
● Francisco N. Cervantes and his wife, Rosario P.
Navarra-Cervantes, are the owners of Lots 3, 15 and 16 located at
245 Buendia Avenue, Makati, Rizal with a total area of 3,500 sqm.
○ Cervantes is the president of Bormaheco, Inc. - a dealer
and importer of industrial and agricultural machinery. The
entire three lots are occupied by the building, machinery
and equipment of Bormaheco, Inc. and are adjacent to the
property of Villonco Realty Company situated at 219
Buendia Avenue.
● April 21, 1959 - The lots were mortgaged to the Development
Bank of the Philippines (DBP) as security for a loan of P441,000.
● July 10, 1969 - The mortgage debt was fully paid
E2022 SALES TITLE V B4 4
● Early February 1964 - there were negotiations for the sale of the
said lots and the improvements thereon between Romeo Villonco
of Villonco Realty Company and Bormaheco, Inc., represented by
its president, Francisco N. Cervantes, through the intervention of
Edith Perez de Tagle, a real estate-broker
● During the negotiations, Villonco Realty Company assumed that
the lots belonged to Bormaheco, Inc. and that Cervantes was duly
authorized to sell the same. Cervantes did not disclose to the
broker and to Villonco Realty Company that the lots were conjugal
properties of himself and his wife and that they were mortgaged to
the DBP.
● February 12, 1964 - Bormaheco, Inc., through Cervantes, made a
written offer for the sale of the property (IMPORTANT PARTS):
○ “This is with reference to our telephone conversation this
noon on the matter of the sale of ​our property”​
○ That this sale is to be consummated only after ​I shall have
also consummated my purchase of another property
located at Sta. Ana, Manila
○ if my negotiations with said property will not be
consummated by reason beyond my control, ​I w ​ ill return
to you your deposit of P100,000 and the state of my
property to you will not also be consummated;
○ That final negotiations on both properties can be de nitely
known after 45 days.
● The property mentioned in Bormaheco's letter was the land of the
National Shipyards & Steel Corporation (Nassco), with an area of
twenty thousand square meters, located at Punta, Sta. Ana, Manila
○ At the bidding held on January 17, 1964 that land was
awarded to Bormaheco, Inc., the highest bidder, for the
price of P552,000.
○ On February 18, 1964, The Nassco Board of Directors in
its resolution authorized the General Manager to sign the
necessary contract
○ On February 28, 1964, the Nassco Acting General
Manager wrote a letter to the Economic Coordinator,
requesting approval of that resolution. The Acting
Economic Coordinator approved the resolution on March
24, 1964
● Bormaheco, Inc. and Villonco Realty Company continued their
negotiations for the sale of the Buendia Avenue property.
Cervantes and Teo lo Villonco had a nal conference on February
27, 1964. As a result of that conference Villonco Realty Company,
through Teofilo Villonco, in its letter of March 4, 1964 made a
revised counter-offer
○ Important part: This sale shall be cancelled, only if your
deal with another property in Sta. Ana shall not be
consummated and in such case, the P100,000.00 earnest
money will be returned to us with a 10% interest p.a.
However, if our deal with you is finalized, said
P100,000.00 will become as part payment for the
purchase of your property without interest
● The check for P100,000 (Exh. E) mentioned in the foregoing
letter-contract was delivered by Edith Perez de Tagle to
Bormaheco, Inc. on March 4, 1964 and was received by Cervantes
● In the voucher-receipt evidencing the delivery the broker indicated
in her handwriting that the earnest money was "subject to the terms
and conditions embodied in Bormaheco's letter" of February 12
and Villonco Realty Company's letter of March 4,1964
● Then, unexpectedly, in a letter dated March 30, 1964, or twenty-six
days after the signing of the contract of sale, Cervantes returned
the earnest money, with interest amounting to P694.24
○ cited as an excuse the circumstance that "despite the lapse
of 45 days from February 12, 1964 there is no certainty
yet" for the acquisition of the Punta property
○ Villonco Realty Company refused to accept the letter and
the checks of Bormaheco, Inc. Cervantes sent them by
registered mail. When he rescinded the contract, he was
E2022 SALES TITLE V B4 5
 already aware that the Punta lot had been awarded to
Bormaheco, Inc.
● Cervantes in his letter of April 6, 1964, a reply to Miss Tagle's
letter, alleged that the forty-five day period had already expired
and the sale to Bormaheco, Inc. of the Punta property had not been
consummated. Cervantes said that his letter was a "manifestation
that we are no longer interested to sell" the Buendia Avenue
property to Villonco Realty Company
● In a letter dated April 7, 1964 Villonco Realty Company returned
the two checks to Bormaheco, Inc., stating that the condition for
the cancellation of the contract had not arisen and at the same time
announcing that an action for breach of contract would be filed
against Bormaheco, Inc.
● April 7, 1964 Villonco Realty Company filed the complaint (dated
April 6) for specific performance against Bormaheco, Inc. Also on
that same date, April 7, a notice of lis pendens was annotated on
the titles of the said lots.
● June 2, 1964 or during the pendency of this case, the Nassco
Acting General Manager wrote to Bormaheco, Inc., advising it that
the Board of Directors and the Economic Coordinator had
approved the sale of the Punta lot to Bormaheco, Inc. and
requesting the latter to send its duly authorized representative to
the Nassco for the signing of the deed of sale
○ The deed of sale for the Punta land was executed on June
26, 1964. Bormaheco, Inc. was represented by Cervantes
● In view of the disclosure in Bormaheco's amended answer that the
three lots were registered in the names of the Cervantes spouses
and not in the name of Bormaheco, Inc., Villonco Realty Company
on July 21, 1964 led an amended complaint impleading the said
spouses as defendants.
● RTC: rendered a decision ordering the Cervantes spouses to
execute in favor of Bormaheco, Inc. a deed of conveyance for the
three lots in question and directing Bormaheco, Inc. (a) to convey
the same lots to Villonco Realty Company, (b) to pay the latter, as
consequential damages, the sum of P10,000 monthly from March
24, 1964 up to the consummation of the sale, (c) to pay Edith Perez
de Tagle the sum of P42,000 as broker's commission and (d) to pay
P20,000 as attorney's fees
● Bormaheco and the Cervantes spouses appealed (see relevant
arguments for reason)
RELEVANT ARGUMENTS:
Respondent:
● Bormaheco, Inc. in its answers dated May 5 and 25, 1964 pleaded
the defense that the perfection of the contract of sale was subject to
the conditions (a) "that final acceptance or not shall be made after
45 days" (sic) and (b) that Bormaheco, Inc. "acquires the Sta. Ana
property".
● Their principal contentions are (copied this verbatim from the case;
it’s really a, 2 then 3 lol)
○ (a) that no contract of sale was perfected because
Cervantes made a supposedly qualified acceptance of
the revised offer contained in Exhibit D, which
acceptance amounted to a counter-offer, and because
the condition that Bormaheco, Inc. would acquire the
Punta land within the forty-five-day period was not
fulfilled​;
○ (2) that Bormaheco, Inc. cannot be compelled to sell the
land which belongs to the Cervantes spouses and
○ (3) that Francisco N. Cervantes did not bind the conjugal
partnership and his wife when, as president of
Bormaheco, Inc., he entered into negotiations with
Villonco Realty Company regarding the said land.
● Bormaheco, Inc. and the Cervantes spouses contend that the sale
was not perfected because Cervantes allegedly qualified his
acceptance of Villonco's revised offer and, therefore, his
acceptance amounted to a counter-offer which Villonco Realty
E2022 SALES TITLE V B4 6
 Company should accept but no such acceptance was ever
transmitted to Bormaheco, Inc. which, therefore, could withdraw
its offer.
ISSUES: W/N the appeal has merit? NO
W/N a valid contract of sale was perfected (see respondent’s relevant
argument above)? YES
RATIO:
● Bormaheco's acceptance of Villonco Realty Company's offer to
purchase the Buendia Avenue property, as shown in Teofilo
Villonco's letter dated March 4, 1964 (Exh. D), indubitably proves
that there was a meeting of minds upon the subject matter and
consideration of the sale. Therefore, on that date the sale was
perfected.
● Bormaheco's acceptance of the part payment of one hundred
thousand pesos shows that the sale was conditionally consummated
or partly executed subject to the purchase by Bormaheco, Inc. of
the Punta property. The non consummation of that purchase would
be a negative resolutory condition
● On February 18, 1964 Bormaheco's bid for the Punta property as
already accepted by the Nassco which had authorized its General
Manager to sign the corresponding deed of sale.
○ What was necessary only was the approval of the sale by
the Economic Coordinator and a request for that approval
was already pending in the office of that functionary on
March 4, 1964.
● The fact that Villonco Realty Company allowed its check to be
cashed by Bormaheco, Inc. signifies that the company was in
conformity with the changes made by Cervantes and that
Bormaheco, Inc. was aware of that conformity. Had those
insertions not been binding, then Bormaheco, Inc. would not have
paid interest
○ The truth is that the alleged changes or qualifications in
the revised counter-offer (Exh. D) are not material or are
mere clarifications of what the parties had previously
agreed upon.
● Cervantes allegedly crossed out the word "Nassco" in paragraph 3
of Villonco's revised counter-offer and substituted for it the word
"another" so that the original phrase "Nassco's property in Sta.
Ana", was made to read as "another property in Sta. Ana". That
change is trivial. What Cervantes did was merely to adhere to the
wording of paragraph 3 of Bormaheco's original offer
● Bormaheco, Inc. and Cervantes further contend that Cervantes, in
clarifying in the voucher for the earnest money of P100,000 that
Bormaheco's acceptance thereof was "subject to the terms and
conditions embodied in Bormaheco's letter of February 12, 1964
and your (Villonco's) letter of March 4, 1964" made Bormaheco's
acceptance "qualified and conditional".
○ INCORRECT. There is no incompatibility between
Bormaheco's offer of February 12, 1964 (Exh. B) and
Villonco's counter-offer of March 4, 1964 (Exh. D). The
revised counter-offer merely amplified Bormaheco's
original offer.
● The controlling fact is that there was agreement between the
parties on the subject matter, the price and the mode of payment
and that part of the price was paid. "Whenever earnest money is
given in a contract of sale, it shall be considered as part of the price
and as proof of the perfection of the contract" (Art. 1482, Civil
Code).
● "It is true that an acceptance may contain a request for certain
changes in the terms of the offer and yet be a binding acceptance.
'So long as it is clear that the meaning of the acceptance is
positively and unequivocally to accept the offer, whether such
request is granted or not, a contract is formed.'
● Appellants' next contention is that the contract was not perfected
because the condition that Bormaheco, Inc. would acquire the
E2022 SALES TITLE V B4 7
 Nassco land within forty-five days from February 12, 1964 or on
or before March 28, 1964 was not fulfilled.
○ That contention is predicated on the erroneous assumption
that Bormaheco, Inc. was to acquire the Nassco land
within forty-five days or on or before March 28, 1964.
● The trial court ruled that the forty-five-day period was merely an
estimate or a forecast of how long it would take Bormaheco, Inc. to
acquire the Nassco property and it was not "a condition or a
deadline set for the defendant corporation to decide whether or not
to go through with the sale of its Buendia property"
○ Had it been Cervantes' intention that the forty- ve days
would be the period within which the Nassco land should
be acquired by Bormaheco, then he would have speci ed
that period in paragraph 3 of his offer so that paragraph
would read in this wise: "That this sale is to be
consummated only after I shall have consummated my
purchase of another property located at Sta. Ana, Manila
within forty-five days from the date hereof." No such
specification was made.
● It should be underscored that the condition that Bormaheco, Inc.
should acquire the Nassco property was ful lled. As admitted by
the appellants, the Nassco property was conveyed to Bormaheco,
Inc. on June 26, 1964. As early as January 17, 1964 the property
was awarded to Bormaheco, Inc. as the highest bidder.
● The appellants, in their fifth assignment of error, argue that
Bormaheco, Inc. cannot be required to sell the three lots in
question because they are conjugal properties of the Cervantes
spouses. They aver that Cervantes in dealing with the Villonco
brothers acted as president of Bormaheco, Inc. and not in his
individual capacity and, therefore, he did not bind the conjugal
partnership nor Mrs. Cervantes who was allegedly opposed to the
sale.
○ He did not say that Mrs. Cervantes was opposed to the
sale of the three lots. He did not tell Villonco Realty
Company that he could not bind the conjugal partnership.
● Thus, in Bormaheco's offer of February 12, 1964, Cervantes rst
identified the three lots as "our property" which "we are offering to
sell . . ." (Opening paragraph and par. 1 of Exh. B). Whether the
pronoun "we" refers to himself and his wife or to Bormaheco, Inc.
is not clear. Then, in paragraphs 3 and 4 of the offer, he used the
first person and said: "I shall have consummated my purchase" of
the Nassco property; ". . . my negotiations with said property" and
"I will return to you your deposit". Those expressions conveyed the
impression and generated the belief that the Villoncos did not have
to deal with Mrs. Cervantes nor with any other official of
Bormaheco, Inc.
WHEREFORE, the trial court's decision is modified as follows:
1. Within ten (10) days from the date the defendants-appellants receive
notice from the clerk of the lower court that the records of this case have
been received from this Court, the spouses Francisco N. Cervantes and
Rosario P. Navarra-Cervantes should execute a deed conveying to
Bormaheco, Inc. their three lots covered by Transfer Certi cate of Title Nos.
43530, 43531 and 43532 of the Registry of Deeds of Rizal.
2. Within ve (5) days from the execution of such deed of conveyance,
Bormaheco, Inc. should execute in favor of Villonco Realty Company, V.
R. C. Building, 219 Buendia Avenue, Makati, Rizal a registerable deed of
sale for the said three lots and all the improvements thereon, free from all
lien and encumbrances, at the price of four hundred pesos per square meter,
deducting from the total purchase price the sum of P100,000 previously
paid by Villonco Realty Company to Bormaheco, Inc.
3. Upon the execution of such deed of sale, Villonco Realty Company is
obligated to pay Bormaheco, Inc. the balance of the price in the sum of one
million three hundred thousand pesos (P1,300,000).
4. Bormaheco, Inc. is ordered (a) to pay Villonco Realty Company twenty
thousand pesos (P20,000) as attorney's fees and (b) to pay Edith Perez de
E2022 SALES TITLE V B4 8
Tagle the sum of forty-two thousand pesos (P42,000) as commission. Costs
against the defendants-appellants.
SO ORDERED

E2022 SALES TITLE V B4 9


Art. 1476. In the case of a sale by auction:
(1) Where goods are put up for sale by auction in lots, each lot
is the subject of a separate contract of sale.
(2) A sale by auction is perfected when the auctioneer
announces its perfection by the fall of the hammer, or in other
customary manner. Until such announcement is made, any
bidder may retract his bid; and the auctioneer may withdraw
the goods from the sale unless the auction has been announced
to be without reserve.
(3) A right to bid may be reserved expressly by or on behalf of
the seller, unless otherwise provided by law or by stipulation.
(4) Where notice has not been given that a sale by auction is
subject to a right to bid on behalf of the seller, it shall not be
lawful for the seller to bid himself or to employ or induce any
person to bid at such sale on his behalf or for the auctioneer, to
employ or induce any person to bid at such sale on behalf of
the seller or knowingly to take any bid from the seller or any
person employed by him. Any sale contravening this rule may
be treated as fraudulent by the buyer. (n)
Art. 1403(2) (d).
ARTICLE 1403. The following contracts are unenforceable, unless
they are ratified:
xxx
(2) Those that do not comply with the Statute of Frauds as set forth
in this number. In the following cases an agreement hereafter made
shall be unenforceable by action, unless the same, or some note or
memorandum, thereof, be in writing, and subscribed by the party
charged, or by his agent; evidence, therefore, of the agreement
cannot be received without the writing, or a secondary evidence of its
contents:
xxxx
(d) An agreement for the sale of goods, chattels or things in action,
at a price not less than five hundred pesos, unless the buyer accept
and receive part of such goods and chattels, or the evidences, or some
of them, of such things in action, or pay at the time some part of the
purchase money; but when a sale is made by auction and entry is
made by the auctioneer in his sales book, at the time of the sale, of
the amount and kind of property sold, terms of sale, price, names of
the purchasers and person on whose account the sale is made, it is a
sufficient memorandum;
Art. 1326 . Advertisements for bidders are simply invitations to make
proposals, and the advertiser is not bound to accept the highest or
lowest bidder, unless the contrary appears. (n)
Art 1482. Whenever earnest money is given in a contract of sale, it
shall be considered as part of the price and as proof of the perfection
of the contract. (1454a)
E2022 SALES TITLE V B4 10
 3. RACELIS v. SPOUSES JAVIER
January 29, 2019 | Leonen, J. | Earnest Money
J. PANGANIBAN & CHECKER
PETITIONER: ​VICTORIA N. RACELIS
RESPONDENT: ​SPOUSES GERMIL JAVIER and REBECCA
JAVIER
RECIT-READY: ​Racelis was the appointed administrator of the
properties of her father, Pedro Nacu, Sr., which included a residential
house and lot in Marikina City. In August 2001, Spouses Javier offered to
purchase the said property. However, in view of their inability to pay the
full purchase price of P3.5M, the Spouses offered to rent the same while
they raise enough money for the purchase. Racelis reluctantly agreed and
the Spouses rented the place for P10,000 monthly, which was later
increased to P11,000. In July the following year, Racelis inquired
whether the Spouses were still interested to purchase the property. The
Spouses reassured her of their intention and promised to pay P100,000 to
buy more time within which to pay the purchase price. However, the
Spouses was only able to pay P78,000 by the end of the year. A few
months later, the Spouses failed to pay their monthly rental obligations.
In March 2003, Racelis wrote the Spouses that she is terminating their
lease agreement with them to offer the property to other interested
buyers, and that she was forfeiting the P78,000 they paid as earnest
money. The Spouses refused to vacate the premises and insisted that the
P78,000 was advanced rent and proposed that the amount be deducted
from their obligations.
ISSUE:
● Whether the P78,000 paid by Spouses Javier constituted
advanced rent or earnest money? - EARNEST MONEY
RULING:
The SC ruled that the P78,000 was not advanced rent but earnest money.
As shown by the records of the case, the amount was paid by the Spouses
to buy more time in which to pay the full amount. Further, petitioner’s
indication in her letter that she will return the money to the Spouses after
selling the property to another buyer does not amount to a waiver of the
earnest money, as this was even refused by the respondents. The Spouses
were ordered to pay their remaining rent balance to Racelis.
DOCTRINE:
Earnest money, therefore, is paid for the seller's benefit. It is part of the
purchase price while at the same time proof of commitment by the
potential buyer. Absent proof of a clear agreement to the contrary, it is
intended to be forfeited if the sale does not happen without the seller's
fault.
FACTS:
● Before his death, the late Pedro Nacu, Sr. (Nacu) appointed his
daughter, Racelis, to administer his properties, among which
was a residential house and lot located in Marikina City.
● In August 2001, the Spouses Javier offered to purchase the
Marikina property. However, they could not afford to pay the
price of P3,500,000.00. They offered instead to lease the
property while they raise enough money.
● The parties agreed on a month-to-month lease and rent of
₱10,000.00 per month, which was later increased to
₱11,000.00. The Spouses Javier used the property as their
residence and as the site of their tutorial school, the Niño
Good Shepherd Tutorial Center.
● Sometime in July 2002, Racelis inquired whether the Spouses
Javier were still interested to purchase the property. The
Spouses Javier reassured her of their commitment and even
promised to pay ₱100,000.00 to buy them more time within
which to pay the purchase price.
● On July 26, 2002, the Spouses Javier tendered the sum of
₱65,000.00 representing "initial payment or goodwill money."
However, they were unable to pay the entire amount of
E2022 SALES TITLE V B4 11
 P100,000 so that by the end of 2003, they only delivered a
total of ₱78,000.00.
● Meanwhile, they continued to lease the property. They
consistently paid rent but started to fall behind by February
2004 .
● Realizing that the Spouses Javier had no genuine intention of
purchasing the property, Racelis wrote to inform them that her
family had decided to terminate the lease agreement and to
offer the property to other interested buyers. In the same letter,
Racelis demanded that they vacate the property by May 30,
2004. Racelis also stated that:
“It is a common practice that earnest money will be forfeited in
favor of the seller if the buyer fails to consummate [the] sale after
the lapse of a specified period for any reason so that we have the
legal right to forfeit your ₱78,000 on account of your failure to
pursue the purchase of the property you are leasing. However, as a
consideration to you, we undertake to return to you the said
amount after we have sold the property and received the purchase
price from [the] prospective buyer.”
● The Spouses Javier refused to vacate due to the ongoing
operation of their tutorial business. They informed Racelis that
they were unable to purchase the property at P3.5M since Mrs.
Rebecca Javier’s plan to work abroad did not materialize and
that they already purchased a more affordable lot at
Greenheights Subdivision.
● They insisted that the sum of ₱78,000.00 was advanced rent
and proposed that this amount be applied to their outstanding
liability until they vacate the premises.
● Racelis filed a complaint to compel the Spouses Javier to
vacate the premises and to pay their unsettled rent payments.
● Both the MTC and the RTC characterized the P78,000 as
earnest money. The MTC, however, ordered Racelis to return
the P78,000 to the Spouses in view of the waiver in her letter,
The RTC, in its decision, declared that the Spouses may
recover the amount in a separate proceeding.
● The CA ruled that Racelis was bound to return the P78,000 in
view of her waiver. The CA, by way of compensation, reduced
the liability of the Spouses Javier by their advanced rent and
the sum of ₱78,000.00. Accordingly, Racelis was ordered to
reimburse the amount of ₱24,000.00 to the Spouses Javier.
ISSUES:
● Whether the P78,000 paid by Spouses Javier constituted
advanced rent or earnest money? - EARNEST MONEY
RELEVANT ARGUMENTS (if any):
● Petitioner: Racelis alleged that she agreed to lease the property
to the Spouses Javier based on the understanding that they
would eventually purchase it.
● Respondent: The Spouses Javier averred that they never
agreed to purchase the property from Racelis because they
found a more affordable property at Greenheights Subdivision
in Marikina City. They claimed that the amount of ₱78,000.00
was actually advanced rent
RATIO:
● The ₱78,000.00 initial payment cannot be characterized as advanced
rent. First, records show that respondents continued to pay monthly
rent until February 2004 despite having delivered the ₱78,000.00 to
petitioner on separate dates in 2003. Second, as observed by the
Metropolitan Trial Court, respondents indicated in the receipt that
the ₱78,000.00 was initial payment or goodwill money. They could
have easily stated in the receipt that the ₱78,000.00 was advanced
rent instead of denominating it as "initial payment or goodwill
money." Respondents even proposed that the initial payment be
used to offset their accrued rent.
● Based on the evidence on record, petitioner and respondents
executed a contract to sell, not a contract of sale. Petitioner reserved
ownership of the property and deferred the execution of a deed of
sale until receipt of the full purchase price.
E2022 SALES TITLE V B4 12
● In this case, since respondents failed to deliver the purchase price at rejected by respondents, who proposed that the earnest money be
the end of 2003, the contract to sell was deemed cancelled. The applied instead to their unpaid rent.
contract's cancellation entitles petitioner to retain the earnest money ● Therefore, respondents' unpaid rent amounting to ₱84,000.00 cannot
given by respondents. be offset by the earnest money. However, it should be reduced by
● Earnest money, under Article 1482 of the Civil Code, is ordinarily respondents' advanced deposit of ₱30,000.00. As found by the
given in a perfected contract of sale. However, earnest money may Regional Trial Court, petitioner failed to establish that respondents'
also be given in a contract to sell. advanced deposit had already been consumed or deducted from
● In a contract to sell, ​earnest money is generally intended to respondents' unpaid rent
compensate the seller for the opportunity cost of not looking for
any other buyers. It is a show of commitment on the part of the WHEREFORE, the Petition for Review is GRANTED. The January
party who intimates his or her willingness to go through with the 13, 2009 Decision and September 17, 2009 Resolution of the Court of
sale after a specified period or upon compliance with the conditions Appeals in CA-G.R. SP No. 98928 are REVERSED and SET ASIDE.
stated in the contract to sell. Respondents Spouses Germil and Rebecca Javier are ordered to pay
● Opportunity cost is defined as "the cost of the foregone alternative." petitioner Vanessa N. Racelis the sum of ₱54,000.00, representing
In a potential sale, the seller reserves the property for a potential accrued rentals, with interest at the rate of six percent (6%) per
buyer and foregoes the alternative of searching for other offers. This annum from the date of the finality of this judgment until fully paid.
Court in ​Philippine National Bank v. Court of Appeals c​ onstrued
earnest money given in a contract to sell as "consideration for
[seller's] promise to reserve the subject property for [the buyer]."
The seller, "in excluding all other prospective buyers from bidding
for the subject property ... [has given] up what may have been more
lucrative offers or better deals."
● Earnest money, therefore, is paid for the seller's benefit. It is part of
the purchase price while at the same time proof of commitment by
the potential buyer. Absent proof of a clear agreement to the
contrary, it is intended to be forfeited if the sale does not happen
without the seller's fault. The potential buyer bears the burden of
proving that the earnest money was intended other than as part of
the purchase price and to be forfeited if the sale does not occur
without the fault of the seller. Respondents were unable to discharge
this burden.
● Although petitioner offered to return the earnest money to
respondents, it was conditioned upon the sale of the property to
another buyer. Petitioner cannot be said to have expressly waived
her right to retain the earnest money. Petitioner's offer was even

E2022 SALES TITLE V B4 13

 4. RIZALINO, substituted by his heirs, JOSEFINA, ROLANDO and
FERNANDO, ERNESTO, LEONORA, BIBIANO, JR., LIBRADO
and ENRIQUETA, all surnamed OESMER, vs. PARAISO
DEVELOPMENT CORPORATION
February 5, 2007 | Chico-Nazario, J.|Earnest Money v Option Money
Carillo, J.
PETITIONER: RIZALINO, substituted by his heirs, JOSEFINA,
ROLANDO and FERNANDO, ERNESTO, LEONORA,
BIBIANO, JR., LIBRADO and ENRIQUETA, all surnamed
OESMER,
RESPONDENT: PARAISO DEVELOPMENT CORPORATION
RECIT-READY:
Petitioners Rizalino, Ernesto, Leonora, Bibiano, Jr., Librado, and
Enriqueta, all surnamed Oesmer, together with Adolfo Oesmer
(Adolfo) and Jesus Oesmer (Jesus), are brothers and sisters, and the
co-owners of undivided shares of two parcels of agricultural and
tenanted land. Sometime in March 1989, Rogelio Paular, a resident and
former Municipal Secretary of Carmona, Cavite, brought along
petitioner Ernesto to meet with a certain Sotero Lee, President
of respondent Paraiso Development Corporation, at Otani Hotel in
Manila Pursuant to the said meeting, a Contract to Sell was drafted by
the Executive Assistant of Sotero Lee, Inocencia Almo. On 1 April
1989, petitioners Ernesto and Enriqueta signed the aforesaid Contract
to Sell. A check in the amount of P100,000.00, payable to Ernesto, was
given as option Money. Sometime thereafter, Rizalino, Leonora,
Bibiano, Jr., and Librado also signed the said Contract to Sell.
However, two of the brothers, Adolfo and Jesus, did not sign the
document. In a letter, petitioners informed the former of their intention
to rescind the Contract to Sell and to return the amount of P100,000.00
given by respondent as option money. Respondent did not respond to
the aforesaid letter. Herein petitioners, together with Adolfo and Jesus,
filed a Complaint for Declaration of Nullity or for Annulment of
Option Agreement or Contract to Sell with Damages before the
Regional Trial Court (RTC) of Bacoor, Cavite.
ISSUE:
Whether there is a perfected contract to sell ​(YES)
Whether the 100,000 pesos paid by respondent is an option money or
an earnest money ​(Earnest Money)
RULING:
The Contract to Sell entered into by the parties is not a unilateral
promise to sell merely because it used the word option money when it
referred to the amount of P100,000.00, which also form part of the
purchase price Although the same was denominated as "option
money," it is actually in the nature of earnest money or down
payment when considered with the other terms of the contract.
DOCTRINE:
It said that earnest money and option money are not the same but
distinguished thus:
(a) earnest money is part of the purchase price, while option money is
the money given as a distinct consideration for an option contract; (b)
earnest money is given only where there is already a sale, while 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.
E2022 SALES TITLE V B4 14
FACTS:
● Petitioners Rizalino, Ernesto, Leonora, Bibiano, Jr., Librado, and Enriqueta,
all surnamed Oesmer, together with Adolfo Oesmer (Adolfo) and Jesus
Oesmer (Jesus), are brothers and sisters, and the co-owners of undivided
shares of two parcels of agricultural and tenanted land situated in Barangay
Ulong Tubig, Carmona, Cavite.
● It’s an Identified as Lot 720 with an area of 40,507 square meters (sq. m.)
and Lot 834 containing an area of 14,769 sq. m., or a total land area of
55,276 sq. m. Both lots are unregistered and originally owned by their
parents, Bibiano Oesmer and Encarnacion Durumpili.
● When the spouses Oesmer died, petitioners, together with Adolfo and Jesus,
acquired the lots as heirs of the former by right of succession.
● Respondent Paraiso Development Corporation is known to be engaged in
the real estate business.
● Rogelio Paular, a resident and former Municipal Secretary of Carmona,
Cavite, brought along petitioner Ernesto to meet with a certain Sotero Lee,
President of respondent Paraiso Development Corporation, at Otani Hotel in
Manila.
● The said meeting was for the purpose of brokering the sale of petitioners’
properties to respondent corporation.
● Pursuant to the said meeting, a Contract to Sell ​was drafted by the Executive
Assistant of Sotero Lee, Inocencia Almo.
● Ernesto and Enriqueta signed the aforesaid Contract to Sell. A check in the
amount of ₱100,000.00, payable to Ernesto, was given as ​option money.
● Petitioners informed the former of their intention to rescind the Contract to
Sell and to return the amount of ₱100,000.00 given by respondent as option
money. Respondent did not respond.
● Petitioners, together with Adolfo and Jesus, filed a Complaint ​for
Declaration of Nullity or for Annulment of Option Agreement or Contract
to Sell with Damages before the Regional Trial Court (RTC) of Bacoor,
Cavite.
● Lower court rendered a Decision​ ​in favor of the respondent.
● Unsatisfied, respondent appealed the said Decision before the Court of
Appeals. The appellate court rendered a Decision modifying the Decision of
the court a quo by declaring that the Contract to Sell is valid and binding
with respect to the undivided proportionate shares of the six signatories of
the said document, herein petitioners, namely: Ernesto, Enriqueta, Librado,
Rizalino, Bibiano, Jr., and Leonora (all surnamed Oesmer).
Petitioner's arguments:
● Petitioners assert that the signatures of five of them namely: Enriqueta,
Librado, Rizalino, Bibiano, Jr., and Leonora, on the margins of the
supposed Contract to Sell did not confer authority on petitioner Ernesto as
agent to sell their respective shares in the questioned properties, and hence,
for lack of written authority from the above-named petitioners to sell their
respective shares in the subject parcels of land, the supposed Contract to
Sell is void as to them.
● Neither do their signatures signify their consent to directly sell their shares
in the questioned properties. Assuming that the signatures indicate consent,
such consent was merely conditional.
● The effectivity of the alleged Contract to Sell was subject to a suspensive
condition, which is the approval of the sale by all the co-owners.
● Petitioners also assert that the supposed Contract to Sell contrary to the
findings of the Court of Appeals, is not couched in simple language.
● They further claim that the supposed Contract to Sell does not bind the
respondent because the latter did not sign the said contract as to indicate its
consent to be bound by its terms.
● They maintain that the supposed Contract to Sell is really a unilateral
promise to sell and the option money does not bind petitioners for lack of
cause or consideration distinct from the purchase price.
Issue:
Whether there is a perfected contract to sell ​(YES)
Whether the 100,000 pesos paid by respondent is an option money or an earnest
money ​(Earnest Money)
Ruling:
● It is true that the signatures of the five petitioners, namely: Enriqueta,
Librado, Rizalino, Bibiano, Jr., and Leonora, on the Contract to Sell did not
confer authority on petitioner Ernesto as agent authorized to sell their
respective shares in the questioned properties because of Article 1874 of the
Civil Code, which expressly provides that:
E2022 SALES TITLE V B4 15
Art. 1874. 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.
● The law itself explicitly requires a written authority before an agent can sell
an immovable. The conferment of such an authority should be in writing, in
as clear and precise terms as possible. It is worth noting that petitioners’
signatures are found in the Contract to Sell.
● Thus, the Contract to Sell, although signed on the margin by the five
petitioners, is not sufficient to confer authority on petitioner Ernesto to act
as their agent in selling their shares in the properties in question.
● However, despite petitioner Ernesto’s lack of written authority from the five
petitioners to sell their shares in the subject parcels of land, the supposed
Contract to Sell remains valid and binding upon the latter.
● As can be clearly gleaned from the contract itself, it is not only petitioner
Ernesto who signed the said Contract to Sell; the other five petitioners also
personally affixed their signatures thereon. Therefore, a written authority is
no longer necessary in order to sell their shares in the subject parcels of 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 the same
directly and in their own right.
● Petitioners Ernesto and Enriqueta concurrently signed the Contract to Sell.
As the Court of Appeals mentioned in its Decision, ​the records of the case
speak of the fact that petitioner Ernesto, together with petitioner Enriqueta,
met with the representatives of the respondent in order to finalize the terms
and conditions of the Contract to Sell. Enriqueta affixed her signature on the
said contract when the same was drafted.
● She even admitted that she understood the undertaking that she and
petitioner Ernesto made in connection with the contract. She likewise
disclosed that pursuant to the terms embodied in the Contract to Sell, she
updated the payment of the real property taxes and transferred the Tax
Declarations of the questioned properties in her name.
● Hence, it cannot be gainsaid that she merely signed the Contract to Sell as a
witness because she did not only actively participate in the negotiation and
execution of the same, but her subsequent actions also reveal an attempt to
comply with the conditions in the said contract.
● With respect to the other petitioners’ assertion that they did not understand
the importance and consequences of their action because of their low degree
of education and because the contents of the aforesaid contract were not
read nor explained to them, the same cannot be sustained.
● The Contract to Sell is couched in such a simple language which is
undoubtedly easy to read and understand. The terms of the Contract,
specifically the amount of ₱100,000.00 representing the option money paid
by [respondent] corporation, the purchase price of ₱60.00 per square meter
or the total amount of ₱3,316,560.00 and a brief description of the subject
properties are well-indicated thereon that any prudent and mature man
would have known the nature and extent of the transaction encapsulated in
the document that he was signing.
● That the petitioners really had the intention to dispose of their shares in the
subject parcels of land, irrespective of whether or not all of the heirs
consented to the said Contract to Sell, was unveiled by Adolfo’s testimony .
● The final arguments of petitioners state that the Contract to Sell is void
altogether considering that respondent itself did not sign it as to indicate its
consent to be bound by its terms; and moreover, the Contract to Sell is
really a unilateral promise to sell without consideration distinct from the
price, and hence, again, void. Said arguments must necessarily fail.
● The Contract to Sell is not void merely because it does not bear the
signature of the respondent corporation. Respondent corporation’s consent
to be bound by the terms of the contract is shown in the uncontroverted
facts which established that there was partial performance by respondent of
its obligation in the said Contract to Sell when it tendered the amount of
₱100,000.00 to form part of the purchase price, which was accepted and
acknowledged expressly by petitioners.
(connected sa topic)
● As a final point, the Contract to Sell entered into by the parties is not a
unilateral promise to sell merely because it used the word option money
E2022 SALES TITLE V B4 16
 when it referred to the amount of ₱100,000.00, which also form part of the
purchase price.

● In the instant case, the consideration of ₱100,000.00 paid by respondent to

petitioners was referred to as "option money." However, a careful
examination of the words used in the contract indicates that the money is
not option money but ​earnest money​.

● "Earnest money" and "option money" are not the same but distinguished
thus: (a) earnest money is part of the purchase price, while option money is
the money given as a distinct consideration for an option contract; (b)
earnest money is given only where there is already a sale, while 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.

● The sum of ₱100,000.00 was part of the purchase price. Although the same
was denominated as "option money," it is actually in the nature of earnest
money or down payment when considered with the other terms of the
contract. Doubtless, the agreement is not a mere unilateral promise to sell,
but, indeed, it is a Contract to Sell as both the trial court and the appellate
court declared in their Decisions.

WHEREFORE, premises considered, the Petition is DENIED, and the Decision and
Resolution of the Court of Appeals dated 26 April 2002 and 4 March 2003,
respectively, are ​AFFIRMED​, thus, (a) the Contract to Sell is ​DECLARED ​valid
and binding with respect to the undivided proportionate shares in the subject parcels
of land of the six signatories of the said document, herein petitioners Ernesto,
Enriqueta, Librado, Rizalino, Bibiano, Jr., and Leonora (all surnamed Oesmer); (b)
respondent is ​ORDERED ​to tender payment to petitioners in the amount of
₱3,216,560.00 representing the balance of the purchase price for the latter’s shares in
the subject parcels of land; and (c) petitioners are further ​ORDERED ​to execute in
favor of respondent the Deed of Absolute Sale covering their shares in the subject
parcels of land after receipt of the balance of the purchase price, and to pay
respondent attorney’s fees plus costs of the suit. Costs against petitioners.
SO ORDERED.

E2022 SALES TITLE V B4 17

Art. 1319
Consent is manifested by the meeting of the offer and the acceptance upon
the thing and the cause which are to constitute the contract. The offer must
be certain and the acceptance absolute. A qualified acceptance constitutes a
counter-offer.

Art. 1357. If the law requires a document or other special form, as in the acts
and contracts enumerated in the following article, the contracting parties
may compel each other to observe that form, once the contract has been
perfected. This right may be exercised simultaneously with the action upon
the contract.

Art. 1358. The following must appear in a public document:

(1) Acts and contracts which have for their object the creation, transmission,
modification or extinguishment of real rights over immovable property; sales
of real property or of an interest therein a governed by Articles 1403, No. 2,
and 1405;

Art. 1406. When a contract is enforceable under the Statute of Frauds, and a
public document is necessary for its registration in the Registry of Deeds, the
parties may avail themselves of the right under Article 1357.

Art. 1483. Subject to the provisions of the Statute of Frauds and of any other
applicable statute, a contract of sale may be made in writing, or by word of
mouth, or partly in writing and partly by word of mouth, or may be inferred
from the conduct of the parties.

E2022 SALES TITLE V B4 18

 5. DALION v. COURT OF APPEALS
February 28, 1990 | MEDIALDEA |
J.ROY & CHECKER
PETITIONER: ​SPS. SEGUNDO DALION AND EPIFANIA
SABESAJE-DALION
RESPONDENT: ​THE HONORABLE COURT OF APPEALS
AND RUPERTO SABESAJE, JR.,
RECIT-READY: ​Sabesaje sued to recover ownership of a parcel of
land, based on a private document of absolute sale, dated July 1, 1965
(Exhibit "A"), allegedly executed by Dalion. Dalion however denied
the fact of sale, contending that the document sued upon is fictitious,
his signature thereon, a forgery, and that subject land is conjugal
property, which he and his wife acquired in 1960 from Saturnina
Sabesaje. The spouses denied claims of Sabesaje that after executing a
deed of sale over the parcel of land, they had pleaded with Sabesaje,
their relative, to be allowed to administer the land because Dalion did
not have any means of livelihood. They admitted, however,
administering since 1958, five (5) parcels of land in Sogod, Southern
Leyte, which belonged to Leonardo Sabesaje, grandfather of Sabesaje,
who died in 1956. They never received their agreed 10% and 15%
commission on the sales of copra and abaca, respectively. Sabesaje's
suit, they countered, was intended merely to harass, preempt and
forestall Dalion's threat to sue for these unpaid commissions.
ISSUE: ​a) the validity of the contract of sale of a parcel of land and
b) the necessity of a public document for transfer of ownership
thereto.
RULING: ​A contract of sale is a consensual contract, which
means that the sale is perfected by mere consent. No particular
form is required for its validity. Upon perfection of the contract,
the parties may reciprocally demand performance (Art. 1475,
NCC), i.e., the vendee may compel transfer of ownership of the
object of the sale, and the vendor may require the vendee to pay
the thing sold (Art. 1458, NCC).
DOCTRINE:
The provision of Art. 1358 on the necessity of a public
document is only for convenience, not for validity or
enforceability. It is not a requirement for the validity of a
contract of sale of a parcel of land that this be embodied in a
public instrument.
FACTS:
● On May 28, 1973, Sabesaje sued to recover ownership of a parcel of land,
based on a private document of absolute sale, dated July 1, 1965 (Exhibit
"A"), allegedly executed by Dalion.
● Dalion however denied the fact of sale, contending that the document sued
upon is fictitious, his signature thereon, a forgery, and that subject land is
conjugal property, which he and his wife acquired in 1960 from Saturnina
Sabesaje as evidenced by the "Escritura de Venta Absoluta" (Exhibit "B").
● The spouses denied claims of Sabesaje that after executing a deed of sale
over the parcel of land, they had pleaded with Sabesaje, their relative, to be
allowed to administer the land because Dalion did not have any means of
livelihood. They admitted, however, administering since 1958, five (5)
parcels of land in Sogod, Southern Leyte, which belonged to Leonardo
Sabesaje, grandfather of Sabesaje, who died in 1956.
● They never received their agreed 10% and 15% commission on the sales of
copra and abaca, respectively. Sabesaje's suit, they countered, was
intended merely to harass, preempt and forestall Dalion's threat to sue for
these unpaid commissions.
ISSUES: ​The issues in this case may thus be limited to: a) the validity of the
contract of sale of a parcel of land and b) the necessity of a public document for
transfer of ownership thereto.
RATIO:
E2022 SALES TITLE V B4 19
 ● As found by the Trial Court, people who witnessed the execution of
subject deed positively testified on the authenticity thereof. They stated
that it had been executed and signed by the signatories thereto. In fact, one
of such witnesses, Gerardo M. Ogsoc, declared on the witness stand that he
was the one who prepared said deed of sale and had copied parts thereof
from the "Escritura De Venta Absoluta" (Exhibit B) by which one
Saturnina Sabesaje sold the same parcel of land to appellant Segundo
Dalion. Ogsoc copied the bounderies thereof and the name of appellant
Segundo Dalion's wife, erroneously written as "Esmenia" in Exhibit "A"
and "Esmenia" in Exhibit "B".
● Against defendant's mere denial that he signed the document, the positive
testimonies of the instrumental Witnesses Ogsoc and Espina, aside from
the testimony of the plaintiff, must prevail. The defense should have come
forward with clear and convincing evidence to show that plaintiff
committed forgery or caused said forgery to be committed, to overcome
the presumption of innocence.

● Assuming authenticity of his signature and the genuineness of the

document, Dalion nonetheless still impugns the validity of the sale on the
ground that the same is embodied in a private document, and did not thus
convey title or right to the lot in question since "acts and contracts which
have for their object the creation, transmission, modification or extinction
of real rights over immovable property must appear in a public instrument"
(Art. 1358, par 1, NCC).
● The provision of Art. 1358 on the necessity of a public document is
only for convenience, not for validity or enforceability. It is not a
requirement for the validity of a contract of sale of a parcel of land
that this be embodied in a public instrument.

ACCORDINGLY, the petition is DENIED and the decision of the Court of

Appeals upholding the ruling of the trial court is hereby AFFIRMED. No
costs.
SO ORDERED

E2022 SALES TITLE V B4 20

 evidence to prove the same, or by the acceptance of benefit under them.

Art 1403. The following contracts are unenforceable, unless they are ratified:

1. Those entered into in the name of another person by one who has
been given no authority or legal representation, or who has acted
beyond his powers;
2. Those that do not comply with the Statute of Frauds as set forth in
this number. In the following cases an agreement hereafter made
shall be unenforceable by action, unless the same, or some note or
memorandum, thereof, be in writing, and subscribed by the party
charged, or by his agent; evidence, therefore, of the agreement
cannot be received without the writing, or a secondary evidence of its
contents:
a. An agreement that by its terms is not to be performed within
a year from the making thereof;
b. A special promise to answer for the debt, default, or
miscarriage of another;
c. An agreement made in consideration of marriage, other
than a mutual promise to marry;
d. An agreement for the sale of goods, chattels or things in
action, at a price not less than five hundred pesos, unless the
buyer accept and receive part of such goods and chattels, or
the evidences, or some of them, of such things in action or
pay at the time some part of the purchase money; but when
a sale is made by auction and entry is made by the
auctioneer in his sales book, at the time of the sale, of the
amount and kind of property sold, terms of sale, price,
names of the purchasers and person on whose account the
sale is made, it is a sufficient memorandum;
e. An agreement for the leasing for a longer period than one
year, or for the sale of real property or of an interest
therein;
f. A representation as to the credit of a third person.
3. Those where both parties are incapable of giving consent to a
contract.

Art 1405. Contracts infringing the Statute of Frauds, referred to in No. 2 of

article 1403, are ratified by the failure to object to the presentation of oral
E2022 SALES TITLE V B4 21
 6. YUVIENCO V DACUYCUY
May 27, 1981 |BARREDO, ​J.​ | STATUTE OF FRAUDS
SERRANO
PETITIONER: SUGA SOTTO YUVIENCO, BRITANIA
SOTTO, and MARCELINO SOTTO,
RESPONDENT: HON. AUXENCIO C. DACUYCUY, Judge
of the CFI of Leyte, DELY RODRIGUEZ, FELIPE ANG
CRUZ, CONSTANCIA NOGAR, MANUEL GO,
INOCENTES DIME, WILLY JULIO, JAIME YU, OSCAR
DY, DY CHIU SENG, BENITO YOUNG, FERNANDO YU,
SEBASTIAN YU, CARLOS UY, HOC CHUAN and
MANUEL DY,
RECIT-READY:
Petitioner-sellers Yuvienco et al were selling a property in
Tacloban which they offered to sell to respondent-buyers. The
deal did not push through because of disagreement on the terms
of payment. Private respondent-buyers Rodriguez et al filed a
complaint for specific performance. Petitioner-sellers filed a
motion to dismiss contending that the sale was unenforceable
under the Statute of Frauds. Respondent Judge Dacuycuy denied
the motion hence this petition.
ISSUE:
● Whether the contract of sale of the subject property is
enforceable (NO)
RULING:
● RELEVANT CIVIL CODE PROVISION:
ARTICLE 1403. The following contracts are
unenforceable, unless they are ratified:
(2) Those that do not comply with the Statute of Frauds as
set forth in this number. In the following cases an
agreement hereafter made shall be unenforceable by
action, unless the same, or some note or memorandum,
thereof, be in writing, and subscribed by the party
charged, or by his agent; evidence, therefore, of the
agreement cannot be received without the writing, or a
secondary evidence of its contents:
...(e) An agreement of the leasing for a longer
period than one year, or for the sale of real property or of
an interest therein;
● To take a contract for the sale of land out of the Statute
of Frauds a mere note or memorandum in writing
subscribed by the vendor or his agent containing the
name of the parties and a summary statement of the
terms of the sale either expressly or by reference to
something else is all that is required. The statute does
not require a formal contract drawn up with technical
exactness for the language of Par. 2 of Art. 1403 of the
Philippine Civil Code) is' ... an agreement ... or some
note or memorandum thereof,' thus recognizing a
difference between the contract itself and the written
evidence which the statute requires
● It is nowhere alleged in said paragraphs 8 to 12 of the
complaint that there is any writing or memorandum, much less
a duly signed agreement to the effect that the price of
P6,500,000 fixed by petitioners for the real property herein
involved was agreed to be paid not in cash but in installments
as alleged by respondents. The only documented indication of
the non-wholly-cash payment extant in the record is that
stipulated in Annexes 9 and 10 above-referred to, the deeds
already signed by the petitioners and taken to Tacloban by
Atty. Gamboa for the signatures of the respondents.
● In other words, the 90-day term for the balance of P4.5 M
insisted upon by respondents choices not appear in any note,
writing or memorandum signed by either the petitioners or any
of them, not even by Atty. Gamboa. Hence, looking at the pose
E2022 SALES TITLE V B4 22
 ● On July 12, 1978, petitioners, thru a certain Pedro C. Gamboa, sent to
of respondents that there was a perfected agreement of
respondents the following letter:
purchase and sale between them and petitioners under which
they would pay in installments of P2 M down and P4.5 M Mr. Yao King Ong
within ninety 90) days afterwards it is evident that such oral
contract involving the "sale of real property" comes squarely Life Bakery
under the Statute of Frauds (Article 1403, No. 2(e), Civil Code.
Tacloban City
and thus sale/purchase is unenforceable.
Dear Mr. Yao:

DOCTRINE:
● To take a contract for the sale of land out of the Statute of
Frauds a mere note or memorandum in writing subscribed by
the vendor or his agent containing the name of the parties
and a summary statement of the terms of the sale either
expressly or by reference to something else is all that is
required. The statute does not require a formal contract
drawn up with technical exactness for the language of Par. 2
This refers to the Sotto property (land and building) situated at Tacloban City. My clients are
willing to sell them at a total price of P6,500,000.00.
While there are other parties who are interested to buy the property, I am giving you and the
other occupants the preference, but such priority has to be exercised within a given number of
days as I do not want to lose the opportunity if you are not interested. I am therefore gluing
you and the rest of the occupants until July 31, 1978 within it which to decide whether you
want to buy the property. If I do not hear from you by July 31, I will offer or close the deal with
the other interested buyer.
Pedro C. Gamboa

of Art. 1403 of the Philippine Civil Code is' ... an agreement

● Reacting to the foregoing letter, the following telegram was sent by "Yao
... or some note or memorandum thereof,' thus recognizing a
King Ong & tenants" to Atty. Pedro Gamboa in Cebu City:
difference between the contract itself and the written
evidence which the statute requires Atty. Pedro Gamboa

Room 314, Maria Cristina Bldg.

FACTS:
Osmeña Boulevard, Cebu City

● Petition for certiorari a​ nd prohibition to declare void for being in grave Reurlet dated July 12 inform Dra. Yuvienco we agree to buy property proceed Tacloban to
abuse of discretion the orders of respondent judge Dacuycuy dated negotiate details
November 2, 1978 and August 29, 1980, in Civil Case No. 5759 of the
Court of First Instance of Leyte, which denied the motion filed by Yao King Ong & tenants

petitioners to dismiss the complaint of private respondents for specific

● Likewise uncontroverted is the fact that under date of July 27, 1978, Atty.
performance of an alleged agreement of sale of real property, the said
Gamboa wired Yao King Ong in Tacloban City as follows:
motion being based on the grounds that the respondents' complaint states no
cause of action and/or that the claim alleged therein is unenforceable under YAO KING ONG
the Statute of Frauds.
● Petitioners herein, Yuvienco et al are selling a property located in Tacloban LIFE BAKERY
to herein private respondents Rodriguez et al.

E2022 SALES TITLE V B4 23

 TACLOBAN CITY
PROPOSAL ACCEPTED ARRIVING TUESDAY MORNING WITH CONTRACT PREPARE
PAYMENT BANK DRAFT
ATTY. GAMBOA
● Now, Paragraph 10 of the complaint below of respondents alleges:
ISSUES:
That on August 1, 1978, defendant Pedro Gamboa arrived Tacloban City bringing with him the
prepared contract to purchase and to sell referred to in his telegram dated July 27, 1978
(Annex 'D' hereof) for the purpose of closing the transactions referred to in paragraphs 8 and
9 hereof, however, to the complete surprise of plaintiffs, the defendant (except def. Tacloban
City Ice Plant, Inc.) without giving notice to plaintiffs, changed the mode of payment with
respect to the balance of P4,500,000.00 by imposing upon plaintiffs to pay same amount within
thirty (30) days from execution of the contract instead of the former term of ninety (90) days as
stated in paragraph 8 hereof.
● Additionally and to reenforce their position, respondents alleged further in
their complaint:
That on July 12, 1978, defendants (except defendant Tacloban City Ice Plant, Inc.)
finally sent a telegram letter to plaintiffs- tenants, through same Mr. Yao King Ong, notifying
them that defendants are willing to sell the properties (lands and building) at a total price of
P6,500,000.00, which herein plaintiffs-tenants have agreed to buy the said properties for said
price; a copy of which letter is hereto attached as integral part hereof and marked as Annex
'C', and plaintiffs accepted the offer through a telegram dated July 25, 1978, sent to defendants
(through defendant Pedro C. Gamboa), a copy of which telegram is hereto attached as integral
part hereof and marked as Annex C-1 and as a consequence hereof. plaintiffs except plaintiff
Tacloban - merchants' Realty Development Corporation) and defendants (except defendant
Tacloban City Ice Plant. Inc.) agreed to the following terms and conditions respecting the
payment of said purchase price, to wit:
P2,000,000.00 to be paid in full on the date of the execution of the contract; and the balance of
P4,500,000.00 shall be fully paid within ninety (90) days thereafter;
● That on July 27, 1978, defendants sent a telegram to plaintiff- tenants,
through the latter's representative Mr. Yao King Ong, reiterating their
acceptance to the agreement referred to in the next preceding paragraph
hereof and notifying plaintiffs-tenants to prepare payment by bank drafts;
which the latter readily complied with
● Contending a perfected contract of sale that petitioner-sellers allegedly
breached, respondent-buyers instituted an action for specific performance
● Petitioner-sellers filed a motion to dismiss contending that said claim is
unenforceable under the statute of frauds
● Respondent Judge Dacuycuy denied the motion
● Whether the contract of sale of the subject property is enforceable (NO)
RATIO:
● RELEVANT CIVIL CODE PROVISION:
ARTICLE 1403. The following contracts are unenforceable, unless they
are ratified:
(2) Those that do not comply with the Statute of Frauds as set forth in
this number. In the following cases an agreement hereafter made shall
be unenforceable by action, unless the same, or some note or
memorandum, thereof, be in writing, and subscribed by the party
charged, or by his agent; evidence, therefore, of the agreement cannot
be received without the writing, or a secondary evidence of its contents:
...(e) An agreement of the leasing for a longer period than one
year, or for the sale of real property or of an interest therein;
● To take a contract for the sale of land out of the Statute of Frauds a mere
note or memorandum in writing subscribed by the vendor or his agent
containing the name of the parties and a summary statement of the terms of
the sale either expressly or by reference to something else is all that is
required. The statute does not require a formal contract drawn up with
technical exactness for the language of Par. 2 of Art. 1403 of the
Philippine Civil Code is' ... an agreement ... or some note or memorandum
thereof,' thus recognizing a difference between the contract itself and the
written evidence which the statute requires
● It is nowhere alleged in said paragraphs 8 to 12 of the complaint that there is
any writing or memorandum, much less a duly signed agreement to the effect
that the price of P6,500,000 fixed by petitioners for the real property herein
E2022 SALES TITLE V B4 24
 involved was agreed to be paid not in cash but in installments as alleged by
respondents. The only documented indication of the non-wholly-cash
payment extant in the record is that stipulated in Annexes 9 and 10
above-referred to, the deeds already signed by the petitioners and taken to
Tacloban by Atty. Gamboa for the signatures of the respondents.
● In other words, the 90-day term for the balance of P4.5 M insisted upon by
respondents choices not appear in any note, writing or memorandum signed
by either the petitioners or any of them, not even by Atty. Gamboa. Hence,
looking at the pose of respondents that there was a perfected agreement of
purchase and sale between them and petitioners under which they would pay
in installments of P2 M down and P4.5 M within ninety 90) days afterwards
it is evident that such oral contract involving the "sale of real property"
comes squarely under the Statute of Frauds (Article 1403, No. 2(e), Civil
Code. and is thus unenforceable.
● The disquisition of respondent judge misses at least two (2) juridical
substantive aspects of the Statute of Frauds insofar as sale of real
property is concerned.
● First, His Honor assumed that the requirement of perfection of such kind of
contract under Article 1475 of the Civil Code which provides that "(t)he
contract of sale is perfected at the moment there is a meeting of the minds
upon the thing which is the object of the contract and upon the price", the
Statute would no longer apply as long as the total price or consideration is
mentioned in some note or memorandum and there is no need of any
indication of the manner in which such total price is to be paid.
● We cannot agree. In the reality of the economic world and the exacting
demands of business interests monetary in character, payment on
installments or staggered payment of the total price is entirely a different
matter from cash payment, considering the unpredictable trends in the
sudden fluctuation of the rate of interest. In other words, it is indisputable
that the value of money - varies from day to day, hence the indispensability
of providing in any sale of the terms of payment when not expressly or
impliedly intended to be in cash.
● Thus, We hold that in any sale of real property on installments, the Statute of
Frauds read together with the perfection requirements of Article 1475 of the
Civil Code must be understood and applied in the sense that the idea of
payment on installments must be in the requisite of a note or memorandum
therein contemplated.
● Secondly, We are of the considered opinion that under the rules on proper
pleading, the ruling of the trial court that, even if the allegation of the
existence of a sale of real property in a complaint is challenged as barred
from enforceability by the Statute of Frauds, the plaintiff may simply say
there are documents, notes or memoranda without either quoting them in or
annexing them to the complaint, as if holding an ace in the sleeves is not
correct.
● To go directly to the point, for Us to sanction such a procedure is to tolerate
and even encourage undue delay in litigation, for the simple reason that to
await the stage of trial for the showing or presentation of the requisite
documentary proof when it already exists and is asked to be produced by the
adverse party would amount to unnecessarily postponing, with the
concomitant waste of time and the prolongation of the proceedings,
something that can immediately be evidenced and thereby determinable with
decisiveness and precision by the court without further delay.
ACCORDINGLY, the impugned orders of respondent judge of November 2, 1978
and August 29, 1980 are hereby set aside and private respondents' amended
complaint, Annex A of the petition, is hereby ordered dismissed and the restraining
order heretofore issued by this Court on October 7, 1980 is declared permanent.
Costs against respondents.
E2022 SALES TITLE V B4 25
 7. ORTEGA v LEONARDO
May 28, 1958 | Bengzon, J. | How Form is important in Contracts of
Sale; For Enforceability Between the Parties: Statute of Frauds
G. SALUD & CHECKER
PETITIONER: ​Marta C. Ortega
RESPONDENT: ​Daniel​ ​Leonardo
RECIT-READY: ​Ortega owns Lot I located in Malate, Manila, which
she reoccupied after the liberation of Manila. When the gov’t took over
the administration and disposition of Lot I, Ortega asserted her right
thereto as occupant for purposes of purchase. ​Leonardo also asserted a
similar right alleging occupancy of a portion of the land subsequent to
Ortega’s. He asked Ortega to desist from pressing her claim and
promised that if he gets the title to Lot I, he would sell a portion to her at
P25/sqm, provided she pay for the surveying and subdivision of the Lot
and that she pay monthly rentals of P10. Ortega accepted Leonardo’s
offer. When Leonardo finally acquired title to Lot I, Ortega caused the
survey and segregation of the portion which Leonardo promised to sell,
and incurred expenses in doing so. She also paid the monthly rental of
P10. After the plans of subdivision and segregation of Lot I had been
approved by the Bureau of Lands, Ortega paid to Leonardo the purchase
price, which the latter refused to accept, without cause or reason. Thus,
Ortega filed a complaint in CFI and sought to compel Leonardo to
comply with their oral contract of sale. CFI dismissed the complaint
applying the GR in the Statute of Frauds precluding enforcement of oral
contracts for the sale of lands.
ISSUE:
● W/N the oral contract of sale is binding upon the parties. ​YES​;
we follow the exception to the GR
RULING: ​The ​making of valuable permanent improvements on the
land by the purchaser​, in pursuance of the agreement and with the
knowledge of the vendor, has been said to be the ​strongest and most
unequivocal act of part performance by which a verbal contract to sell
land is taken out of the statute of frauds​, and is ordinarily an important
element in such part performance.
The complaint in this case described several circumstances indicating
partial performance: ​relinquishment of rights, continued possession,
building of improvements, tender of payment plus the surveying of
the lot at Ortega's expense and the payment of rentals​.
Such circumstances areas enough to hold that the combination of all of
them amounted to partial performance. This is based on the doctrine: that
it would be a ​fraud upon the Ortega if the Leonardo were permitted to
oppose performance of his part after he has allowed or induced the
former to perform in reliance upon the agreement.
DOCTRINE:
While, as a general rule, an oral agreement to sell a piece of land is not
provable, however, where there is partial performance of the sale
contract, the principle excluding evidence of parol contracts for the sale
of realty will not apply.
FACTS:
● Long before and until her house had been completely destroyed
during the liberation of the City of Manila, Ortega occupied a
parcel of land (Lot 1), located at San Andres Street, Malate, Manila
○ After liberation she reoccupied it
○ When the administration and disposition of the said Lot I
(together with other lots in the Ana Sarmiento Estate)
were assigned by the Gov’t. to the Rural Progress
Administration, Ortega asserted her right thereto (as
occupant) for purposes of purchase;
● Leonardo also asserted a similar right, alleging occupancy of a
portion of the land subsequent to Ortega’s
● Leonardo asked Ortega to desist from pressing her claim and
promised that if and when he succeeded in getting title to Lot I, ​he
would sell to her a portion thereof (55.60 sqm) at the rate of
P25 per sqm,
E2022 SALES TITLE V B4 26
 ○ Provided she paid for the surveying and subdivision of
the Lot, and
○ Provided further that after he acquired title, she could
continue holding the lot as tenant by paying a monthly
rental of P10 until said portion shall have been segregated
and the purchase price fully paid;
● Ortega accepted Leonardo's offer, and desisted from further
claiming Lot I
● Leonardo finally acquired title thereto, and relying upon their
agreement,
○ Ortega caused the survey and segregation of the portion
which Leonardo had promised to sell, incurring expenses
therefor — said portion (now Lot I-B) in a duly prepared
and approved subdivision plan
○ In remodelling her son's house constructed on a lot
adjoining Lot I, she extended it over Lot I-B
○ After Leonardo had acquired Lot I, Ortega regularly paid
him the monthly rental of P10
● After the plans of subdivision and segregation of the lot had been
approved by the Bureau of Lands, Ortega tendered to Leonardo the
purchase price which the ​latter refused to accept, without cause
or reason.
● Ortega sought to compel Leonardo to comply with their oral
contract of sale of a parcel of land.
○ Upon a motion to dismiss, CFI of Manila ordered
dismissal following the general rule in the Statute of
Frauds precluding enforcement of oral contracts for the
sale of land.
ISSUE: ​W/N the oral contract of sale is binding upon the parties. YES; we
follow the exception to the GR
RELEVANT ARGUMENTS (if any):
● Petitioner: The contract in question, although verbal, was partially
performed because Ortega desisted from claiming the portion of lot
I in question due to the promise of Leonardo to transfer said
portion to her after the issuance of title to Leonardo.
● Respondent: Even granting that Ortega really desisted to claim the
portion of Lot I based on the oral promise to sell made by
Leonardo, the oral promise to sell cannot be enforced. The
desistance to claim is not a part of the contract of sale of the land.
Only in essential part of the executory contract will, if it has
already been performed, make the verbal contract enforceable,
payment of price being an essential part of the contract of sale.
RATIO:
● Well known is the general rule in the Statute of Frauds precluding
enforcement of oral contracts for the sale of land. Not so well
known is the ​exception concerning partially executed contracts.
● Continued possession under an oral contract of sale, by one already
in possession as a tenant, has been held a sufficient part
performance, where, accompanied by other acts which characterize
the continued possession and refer it to the contract of purchase.
○ Especially is this true where the circumstances of the case
include the making of substantial, permanent, and
valuable improvements.
● The ​making of valuable permanent improvements on the land
by the purchaser​, in pursuance of the agreement and with the
knowledge of the vendor, has been said to be the ​strongest and
most unequivocal act of part performance by which a verbal
contract to sell land is taken out of the statute of frauds​, and is
ordinarily an important element in such part performance.
● The complaint in this case described several circumstances
indicating partial performance: ​relinquishment of rights,
continued possession, building of improvements, tender of
payment plus the surveying of the lot at Ortega's expense and
the payment of rentals.
E2022 SALES TITLE V B4 27
 ● Enough to hold that the combination of all of them amounted to
partial performance
○ This is based on the doctrine: that it would be a fraud
upon the Ortega if the Leonardo were permitted to oppose
performance of his part after he has allowed or induced
the former to perform in reliance upon the agreement.
○ Such doctrine will serve as our comment on the appellee's
quotations from American Jurisprudence itself to the
effect that "relinquishment" is not part performance, and
that neither "surveying the land" nor tender of payment is
sufficient.
○ Granting that none of the 3 circumstances indicated by
him, (relinquishment, survey, tender) would separately
suffice, ​still the ​combination of the 3 with the others
already mentioned​, amounts to more than enough.
● Hence, as there was partial performance, the principle
excluding parol contracts for the sale of realty, does not
apply.

The judgment will accordingly be reversed and the record

remanded for further proceedings. With costs against appellee

E2022 SALES TITLE V B4 28

 8. CLAUDEL V. COURT OF APPEALS
July 12, 1991 | Sarmiento, J. | Statute of Frauds
C. SO & SORIANO
evidencing the sale would preclude the admission of oral testimony
(Statute of Frauds).”
PETITIONER: ​Heirs of Cecilio (also known as Basilio)
CLAUDEL, namely, Modesta Claudel, Loreta Herrera, Jose The Court of Appeals reversed the decision of the trial court, saying
Claudel, Benjamin Clauden, Pacita Claudel, Carmelita Claudel, that: “The Statute of Frauds applies only to executory contracts and not
Mario Claudel, Roberto Claudel, Leonardo Claudel, Arsenia to consummated sales as in the case at bar where oral evidence may be
Villalon, Perpetua Claudel and Felisa Claudel.
admitted.”
RESPONDENT: ​Hon. Court of Appeals, Heirs of Macario,
Esperidiona, Raymunda and Celestina, all surnamed Claudel. ISSUE: ​Whether or not a contract of sale of land may be
proven orally. NO
RECIT-READY: ​Two branches of Cecilio's family contested
the ownership over the land acquired by the deceased Cecilio RULING: ​The rule of thumb is that a sale of land, once
Claudel. On one hand are the HEIRS OF CECILIO, who are his consummated, is valid regardless of the form it may have been
children, and on the other are the SIBLINGS OF CECILIO. entered into. For nowhere does law or jurisprudence prescribe
that the contract of sale be put in writing before such contract
The HEIRS OF CECILIO partitioned this land among themselves and can validly cede or transmit rights over a certain real property
between the parties themselves.
obtained Transfer Certificates of Title on their shares.
However, in the event that a third party, as in this case, disputes
Four years later, private respondents SIBLINGS OF CECILIO, filed a
the ownership of the property, the person against whom that claim
"Complaint for Cancellation of Titles and Reconveyance with
is brought can not present any proof of such sale and hence has no
Damages," alleging that 46 years earlier, or sometime in 1930, their
means to enforce the contract. Thus the Statute of Frauds was
parents had purchased from the late Cecilio Claudel several portions of
precisely devised to protect the parties in a contract of sale of real
Lot No. 1230 for the sum of P30.00. ​They admitted that the
property so that no such contract is enforceable unless certain
transaction was verbal. ​However, as proof of the sale, the SIBLINGS
requisites, for purposes of proof, are met.
OF CECILIO presented a subdivision plan of the said land, dated
March 25, 1930, indicating the portions allegedly sold to the
Therefore, except under the conditions provided by the Statute of
SIBLINGS OF CECILIO.
Frauds, the existence of the contract of sale made by Cecilio with his
siblings can not be proved.
The Court of First Instance of Rizal, Branch CXI, dismissed the
complaint, saying that: “Considering that the subject matter of the
supposed sale is a real property the absence of any document

E2022 SALES TITLE V B4 29


The SC finds that the appellate court committed a reversible error in
denigrating the transfer certificates of title of the petitioners to the
survey or subdivision plan proffered by the private respondents.
DOCTRINE:
The rule of thumb is that a sale of land, once consummated, is
valid regardless of the form it may have been entered into. For
nowhere does law or jurisprudence prescribe that the contract of
sale be put in writing before such contract can validly cede or
transmit rights over a certain real property between the parties
themselves.
However, in the event that a third party disputes the ownership of the
property, the person against whom that claim is brought can not present
any proof of such sale and hence has ​no means to enforce the
contract. Thus the Statute of Frauds was precisely devised to protect
the parties in a contract of sale of real property so that no such contract
is enforceable unless certain requisites, for purposes of proof, are met
FACTS:
● On December 28, 1922, Basilio also known as "Cecilio" Claudel, acquired
from the Bureau of Lands, Lot No. 1230 of the Muntinlupa Estate
Subdivision, located in the poblacion of Muntinlupa, Rizal.
● He secured Transfer Certificate of Title (TCT) No. 7471 issued by the
Registry of Deeds for the Province of Rizal in 1923; he also declared the lot
in his name, the latest Tax Declaration being No. 5795. He dutifully paid
the real estate taxes thereon until his death in 1937.3 Thereafter, his widow
"Basilia" and later, her son Jose, one of the herein petitioners, paid the
taxes.
● Two branches of Cecilio's family contested the ownership over the land-on
one hand the children of Cecilio, namely, Modesto, Loreta, Jose, Benjamin,
Pacita, Carmelita, Roberto, Mario, Leonardo, Nenita, Arsenia Villalon, and
Felisa Claudel, and their children and descendants, now the herein
petitioners (hereinafter referred to as HEIRS OF CECILIO), and on the
other, the brother and sisters of Cecilio, namely, Macario, Esperidiona,
Raymunda, and Celestina and their children and descendants, now the
herein private respondents (hereinafter referred to as SIBLINGS OF
CECILIO).
● In 1972, the HEIRS OF CECILIO partitioned this lot among themselves and
obtained Transfer Certificates of Title on their shares.
● Four years later, on December 7, 1976, SIBLINGS OF CECILIO, filed a
"Complaint for Cancellation of Titles and Reconveyance with Damages,"
alleging that 46 years earlier, or sometime in 1930, their parents had
purchased from the late Cecilio Claudel several portions of Lot No. 1230
for the sum of P30.00. They admitted that the transaction was verbal.
However, as proof of the sale, the SIBLINGS OF CECILIO presented a
subdivision plan of the said land, dated March 25, 1930, indicating the
portions allegedly sold to the SIBLINGS OF CECILIO.
● Court of First Instance of Rizal, Branch CXI, dismissed the complaint,
saying that: “Considering that the subject matter of the supposed sale is a
real property the absence of any document evidencing the sale would
preclude the admission of oral testimony (Statute of Frauds).”
● The Court of Appeals reversed the decision of the trial court, saying that:
“The Statute of Frauds applies only to executory contracts and not to
consummated sales as in the case at bar where oral evidence may be
admitted.”
● Thus, the CA ordered the cancellation of the Transfer Certificates of Title
Nos. 395391, 395392, 395393, and 395394 of the Register of Deeds of
Rizal issued in the names of the HEIRS OF CECILIO and corollarily
ordered the execution of the following deeds of reconveyance:
○ To Celestina Claudel, Lot 1230-A with an area of 705 sq. m.
○ To Raymunda Claudel, Lot 1230-B with an area of 599 sq. m.
○ To Esperidiona Claudel, Lot 1230-C with an area of 597 sq. m.
○ To Macario Claudel, Lot 1230-D, with an area of 596 sq. m.
ISSUES:
● Whether or not a contract of sale of land may be proven orally.
NO
RATIO:
● The rule of thumb is that a sale of land, once consummated, is valid
regardless of the form it may have been entered into. For nowhere does law
or jurisprudence prescribe that the contract of sale be put in writing before
E2022 SALES TITLE V B4 30
 such contract can validly cede or transmit rights over a certain real property Cancellation of Titles and Reconveyance with Damages filed by the Heirs of
between the parties themselves. Macario, Esperidiona Raymunda, and Celestina, all surnamed CLAUDEL.
● However, in the event that a third party, as in this case, disputes the Costs against the private respondents.
ownership of the property, the person against whom that claim is
brought can not present any proof of such sale and hence has no means
to enforce the contract. Thus the Statute of Frauds was precisely
devised to protect the parties in a contract of sale of real property so
that no such contract is enforceable unless certain requisites, for
purposes of proof, are met.
● Art. 1403 (Civil Code). The following contracts are unenforceable, unless
they are ratified:
xxx xxx xxx
2) Those that do not comply with the Statute of Frauds as set forth in this
number. In the following cases, an agreement hereafter made shall be
unenforceable by action unless the same, or some note or memorandum
thereof, be in writing, and subscribed by the party charged, or by his agent;
evidence, therefore, of the agreement cannot be received without the
writing, or a secondary evidence of its contents:
xxx xxx xxx
e) An agreement for the leasing for a longer period than one year, or for the
sale of real property or of an interest therein;
xxx xxx xxx
● The purpose of the Statute of Frauds is to prevent fraud and perjury in the
enforcement of obligations depending for their evidence upon the unassisted
memory of witnesses by requiring certain enumerated contracts and
transactions to be evidenced in writing.
● Therefore, except under the conditions provided by the Statute of Frauds,
the existence of the contract of sale made by Cecilio with his siblings can
not be proved.
● The SC finds that the appellate court committed a reversible error in
denigrating the transfer certificates of title of the petitioners to the survey or
subdivision plan proffered by the private respondents.

WHEREFORE, the petition is GRANTED We REVERSE and SET ASIDE the

decision rendered in CA-G.R. CV No. 04429, and we hereby REINSTATE the
decision of the then Court of First Instance of Rizal (Branch 28, Pasay City) in
Civil Case No. M-5276-P which ruled for the dismissal of the Complaint for

E2022 SALES TITLE V B4 31

 9. TOYOTA SHAW INC. v. CA
GR No. 116650 | May 23, 1995 | J. Davide, Jr. |
HOW FORM IS IMPORTANT IN CONTRACTS OF SALE
SABBAN & REALUBIN
PETITIONER: Toyota Shaw Inc.
RESPONDENT: CA and Luna Sosa
RECIT-READY: ​Sosa wanted to purchase a Toyota Lite Ace. The only dealer
with an available unit was Toyota Shaw, so he and his son Gilbert went there and
met with a Toyota sales representative (Bernardo). Sosa said he absolutely needed
the van by the June 17 for a trip to his hometown on his birthday. Bernardo
assured Sosa that he would get the van by that time. Later on, Sosa and Gilbert
paid 100k as downpayment. Bernardo accomplished a VEHICLE SALES
PROPOSAL (VSP) and Gilbert signed as conforme. This was approved by the
sales supervisor. However, on June 17, Sosa was not able to get the van. He
alleges that Toyota gave it to someone more powerful, while Toyota contends that
there was no contract of sale and they are not bound to deliver, and that the
financing for the installment payment was denied so in effect, they cannot release
the van.
ISSUE: Whether there was a perfected contract? (NO)
RULING: The agreement (VSP) between Sosa and Bernardo was not a
contract of sale. ​There was no obligation on the part of Toyota to transfer
ownership of a determinate thing to Sosa and no correlative obligation on the part
of Sosa to pay a price certain appears in the VSP. The P100,000 stipulation for the
downpayment made no specific reference to the van, and there was no mention
about the full purchase price and the manner the installments were to be paid.
The VSP also showed that there was no meeting of the minds. Sosa did not sign
the VSP and he the bold title of the document showed that it was an agreement
between Sosa and Bernardo, not Sosa and Toyota. The Court said that he should
have checked the extent of Bernardo’s authority. Further, if it were really a sale, it
would have been a sale on an installment basis -- this involves three parties,
including the financing company, since it acts as the creditor of the buyer.
Because the financing company did not agree, there was no meeting of the minds
in this regard as well. In the end, the Court believed Toyota’s story to be more
plausible, granted the petition, and held that Sosa was not entitled to any kind of
damages or attorney’s fees
DOCTRINE: ​In itself, the absence of receipts, or any proof of consideration,
would not be conclusive of the inexistence of a sale since consideration is always
presumed; but a receipt proves payment which takes the sale out of the Statute of
Frauds.
FACTS:
● Sometime in June 1989, Luna L. Sosa wanted to purchase a Toyota Lite
Ace. It was then a seller's market and Sosa had difficulty finding a dealer
with an available unit for sale. But upon contracting Toyota Shaw, Inc., he
was told that there was an available unit. So on 14 June 1989, Sosa and his
son, Gilbert, went to the Toyota Shaw Boulevard, Pasig. There they met
Popong Bernardo, a sales representative of Toyota.
● Sosa emphasized to Bernardo that he needed the Lite Ace not later than 17
June 1989 because his family, and a balikbayan guest would use it to go to
Marinduque. He also said that if he did not come home with the new car, he
would become a “laughing stock.”
● Bernardo assured Sosa that a unit would be ready for pick up on said date.
Bernardo then signed the "​Agreements Between Mr. Sosa & Popong
Bernardo of Toyota Shaw, Inc.​" It was also agreed upon by the parties
that the balance of the purchase price would be paid by credit financing
through B.A. Finance, and for this Gilbert, on behalf of his father, signed
the documents of Toyota and B.A. Finance pertaining to the application for
financing.
● Sosa and Gilbert then went to Toyota and paid the downpayment of P100k.
They met Bernardo who then accomplished a printed ​Vehicle Sales
Proposal (VSP) on which Gilbert signed under the subheading
CONFORME.
● On June 17, Bernardo called Gilbert to inform him that the vehicle would
not be ready for pick up at 10am as previously agreed upon but at 2pm that
same day. According to Sosa, Bernardo informed them that the Lite Ace
was being readied for delivery. But after waiting for an hour, Bernardo told
them that the car could not be delivered because "​nasulot ang unit ng ibang
malakas.”​
● Toyota contends that the Lite Ace was not delivered because the credit
financing application of Sosa was disapproved by B.A. Finance. They claim
that a particular unit had already been reserved for Sosa but could not be
E2022 SALES TITLE V B4 32
 released due to the uncertainty of payment of the balance. Toyota then gave
Sosa the option to purchase the unit by paying the full purchase price in
cash but Sosa refused.
● Sosa then asked that his downpayment be refunded. Toyota did so and
issued a FEBTC check for the amount of P100k. Sosa signed the receipt
with reservation, "without prejudice to our future claims for damages."
● Later on, Sosa sent 2 letters to Toyota: the first, demanding a refund and the
second, demanding P1M worth of interest and damages, both with warning
to take legal action.
● Toyota's counsel answered through a letter refusing to accede to the
demands of Sosa. Sosa then filed a complaint with the RTC of Marinduque
for damages under Articles 19 and 21 of the Civil Code in the total amount
of P1,230,000.00.
● RTC: Ruled in favor of Sosa; CA: Affirmed.
ISSUES:
● Whether there was a perfected contract of sale? (NO)
POINT OF CONTENTION:
Sosa: ​Due to Toyota’s failure to deliver the vehicle to Sosa, Sosa suffered
embarrassment, humiliation, ridicule, mental anguish and sleepless nights because:
(i) he and his family were constrained to take the public transportation from Manila
to Lucena City on their way to Marinduque; (ii) his balikbayan-guest cancelled his
scheduled first visit to Marinduque in order to avoid inconvenience of taking public
transportation; and (iii) his relative, friends, neighbors and other provincemates,
continuously irked him about "his Brand-New Toyota Lite Ace — that never was."
TOYOTA: Alleged that no sale was entered into between Toyota and Sosa because
Bernardo had no authority to sign agreement on behalf of company. Bernardo signed
such in his personal capacity.
RATIO:
● The agreement (VSP) between Sosa and Bernardo was not a contract of
sale
○ Article 1458 of the Civil Code defines a contract of sale as follows:
By the contract of the sale one of the contracting parties obligates
himself to transfer the ownership of 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​.
○ ART. 1475. The contract of sale is perfected at the moment there is
a meeting of minds upon the thing which is the object of the
contract and upon the price. From that moment, the parties may
reciprocally demand performance, subject to the provisions of the
law governing the form of contracts.
○ 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 a price certain.
■ The provision on the downpayment of P100,000.00 made
no specific reference to a sale.
■ It could only refer to a sale on installment basis, as the
VSP executed the following day confirmed. But ​nothing
was mentioned about the full purchase price and the
manner the installments were to be paid.
○ This Court had already ruled that ​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. 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. ​Definiteness as to the price is an
essential element of a binding agreement to sell personal
property.
○ The VSP shows the absence of a meeting of minds between Toyota
and Sosa for the ff. Reasons:
■ Sosa did not even sign it.
■ Sosa was well aware from its title, written in bold letters,
viz., ​AGREEMENTS BETWEEN MR. SOSA &
POPONG BERNARDO OF TOYOTA SHAW, INC.
This clearly shows ​that he was not dealing with Toyota
but with Popong Bernardo and that the latter did not
misrepresent that he had the authority to sell any
Toyota vehicle. ​He knew that Bernardo was only a
sales representative of Toyota and a mere agent.
■ It was incumbent upon Sosa to act with ordinary prudence
and reasonable diligence to know the extent of Bernardo's
E2022 SALES TITLE V B4 33
 authority as an agent in respect of contracts to sell
Toyota's vehicles. A person dealing with an agent is put
upon inquiry and must discover upon his peril the
authority of the agent.
○ At most, the execution of the VSP may be considered as part of the
initial phase of the negotiation stage of a contract of sale.
○ In a sale on installment basis, financed by a financing company,
three parties are involved:
a. the ​buyer who executes a note or notes for the unpaid
balance of the price of the thing purchased on installment,
b. the ​seller who assigns the notes or discounts them with a
financing company
c. the ​financing company which is subrogated in the place
of the seller, as the creditor of the installment buyer.
● Since B.A. Finance did not approve Sosa's application, there
was then no meeting of minds on the sale on installment basis.
● The VSP was a mere proposal which was aborted because of the
events that followed. 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.
● The award of moral and exemplary damages and attorney's fees
and costs of suit is without legal basis. The only ground upon
which Sosa claimed moral damages is that since it was known to
his friends, townmates, and relatives that he was buying a Toyota
Lite Ace which they expected to see on his birthday, he suffered
humiliation. He should not have announced his plans of buying it if
he could not pay for it in full. LOL.

WHEREFORE, the instant petition is GRANTED. The challenged decision of

the Court of Appeals in CA-G.R. CV No. 40043 as well as that of Branch 38 of
the Regional Trial Court of Marinduque in Civil Case No. 89-14 are
REVERSED and SET ASIDE and the complaint in Civil Case No. 89-14 is
DISMISSED. The counterclaim therein is likewise DISMISSED. No
pronouncement as to costs. SO ORDERED.

E2022 SALES TITLE V B4 34

Art. 1874. ​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. (n)
Art. 1581. ​The form of sale of large cattle shall be governed by special laws. (n​)
SECTION 529. Registration necessary to validity of transfer. – ​No transfer of
large cattle shall be valid unless the same is registered and a certificate of transfer
obtained as herein provided; but large cattle under two years of age may be
registered and branded gratis for the purpose of effecting a valid transfer, if the
registration and transfer are made at the same time.
E2022 SALES TITLE V B4 35