Sales

Condominium Act; Partition of a Condominium (2009)

No.XVIII. The Ifugao Arms is a condominium project in Baguio City. A strong earthquake occurred which
left huge cracks in the outer walls of the building. As a result, a number of condominium units were
rendered unfit for use. May Edwin, owner of one of the condominium units affected, legally sue for
partition by sale of the whole project? Explain. (4%)

SUGGESTED ANSWER: Yes, Edwin may legally sue for partition by sale of the whole condominium project
under the following conditions: (a) the damage or destruction caused by the earthquake has rendered
one-half (1/2) or more of the units therein untenantable, and (b) that the condominium owners holding
an aggregate of more than thirty percent (30%) interests of the common areas are opposed to the
restoration of the condominium project (Sec 8 [b], Republic Act No. 472 “Condominium Act”).

Mortgage; Equitable Mortgage (2012)

No.VI.

Eulalia was engaged in the business of buying and selling large cattle. In order to secure the financial
capital, she advanced for her employees (biyaheros). She required them to surrender TCT of their
properties and to execute the corresponding Deeds of Sale in her favor. Domeng Bandong was not
required to post any security but when Eulalia discovered that he incurred shortage in cattle
procurement operation, he was required to execute a Deed of Sale over a parcel of land in favor of
Eulalia. She sold the property to her grandneice Jocelyn who thereafter instituted an action for
ejectment against the Spouses Bandong. To assert their right, Spouses Bandong filed an action for
annulment of sale against Eulalia and Jocelyn alleging that there was no sale intended but only equitable
mortgage for the purpose of securing the shortage incurred by Domeng in the amount of P 70, 000.00
while employed as "biyahero" by Eulalia.

Was the Deed of Sale between Domeng and Eulalia a contract of sale or an equitable mortgage? Explain.
(5%)

SUGGESTED ANSWER:

The contract between Domeng Bandong and Eulalia was an equitable mortgage rather than a contract
of sale. The purported deed of sale was actually intended to merely secure the payment of the shortage
incurred by Domeng in the conduct of the cattle-buying operations. Under Art 1602, Civil Code, the
contract shall be presumed to be an equitable mortgage when it may be fairly inferred that the real
intention of the parties is simply to secure the payment of a debt or the performance of any other
obligation. The present transaction was clearly intended to just secure the shortage incurred by Eulalia
because Bandung remained in possession of the property inspite of the execution of the sale.
Option Contract; Liquor & “Pulutan” as Consideration (2013)

No.III.

Sergio is the registered owner of a 500-square meter land. His friend, Marcelo, who has long been
interested in the property, succeeded in persuading Sergio to sell it to him. On June 2, 2012, they agreed
on the purchase price of P600,000 and that Sergio would give Marcelo up to June30, 2012 within which
to raise the amount. Marcelo, in a light tone usual between them, said that they should seal their
agreement through a case of Jack Daniels Black and P5,000 "pulutan" money which he immediately
handed to Sergio and which the latter accepted. The friends then sat down and drank the first bottle
from the case of bourbon. On June 15, 2013, Sergio learned of another buyer, Roberto, who was
offering P800,000 in ready cash for the land. When Roberto confirmed that he could pay in cash as soon
as Sergio could get the documentation ready, Sergio decided to withdraw his offer to Marcelo, hoping to
just explain matters to his friend. Marcelo, however, objected when the withdrawal was communicated
to him, taking the position that they have a firm and binding agreement that Sergio cannot simply walk
away from because he has an option to buy that is duly supported by a duly accepted valuable
consideration. (A) Does Marcelo have a cause of action against Sergio? (5%)

SUGGESTED ANSWER:

Yes. Marcelo has a cause of action against Sergio. Under Art. 1324, when the offerer has allowed the
offeree a certain period to accept, the offer may be withdrawn at any time before acceptance by
communicating such withdrawal, except when the option is founded upon consideration, as something
paid or promised. An accepted unilateral promise to buy or sell a determinate thing for a price certain is
binding upon him if the promise is supported by a consideration distinct from the price (Art. 1479).

Consideration in an option contract may be anything of value,, unlike in sale where it must be the price
certain in money or its equivalent (San Miguel Properties Inc. v. Spouses Huang, G.R. No. 137290, July
31, 2000).

Here, the case of Jack Daniels Black and the P5,000.00 “pulutan” money was a consideration to “seal
their agreement,” an agreement that Marcelo is given until June 30, 2012 to buy the parcel of land.
There is also no showing that such consideration will be considered part of the purchase price. Thus,
Sergio’s unilateral withdrawal of the offer violated the Option Contract between him and Marcelo.

(B) Can Sergio claim that whatever they might have agreed upon cannot be enforced because any
agreement relating to the sale of real property must be supported by evidence in writing and they never
reduced their agreement to writing? (3%)

SUGGESTED ANSWER:

No. Sergio’s claim has no legal basis. The contract at issue in the present case is the option contract, not
the contract of sale for the real property. Therefore, Art. 1403 does not apply The Statute of Frauds
covers an agreement for the sale of real property or of an interest therein. Such agreement is
unenforceable by action, unless the same, or some note or memorandum, thereof, be in writing, (Art.
1403 (e), Civil Code). Here, Marcelo and Sergio merely entered into an Option Contract, which refers to
a unilateral promise to buy or sell, which need not be in writing to be enforceable (Sanchez v. Rigos, G.R.
No. L-25494, June 14, 1972, citing Atkins, Kroll and Co. Inc. v. Cua Hian Tek and Southwestern Sugar &
Molasses Co. v. Atlantic Gulf & Pacific Co.). ALTERNATIVE ANSWER: No. Sergio’s claim has no legal basis.
The contract of sale has already been partially executed which takes it outside the ambit of the Statute
of Frauds is applicable only to executory contracts, not to contracts that are totally or partially
performed (Carbonnel v. Poncio, G.R. No. L-11231, May 12, 1958).

Right of First Refusal; Lessee; Effect (2008)

No.XVI.

Dux leased his house to Iris for a period of 2 years, at the rate of P25,000.00 monthly, payable annually
in advance. The contract stipulated that it may be renewed for another 2-year period upon mutual
agreement of the parties. The contract also granted Iris the right of first refusal to purchase the property
at any time during the lease, if Dux decides to sell the property at the same price that the property is
offered for sale to a third party. Twentythree months after execution of the lease contract, Dux sold
breach of her right of first refusal. Dux said there was no breach because the property was sold to his
mother who is not a third party. Iris filed an action to rescind the sale and to compel Dux to sell the
property to her at the same price. Alternatively, she asked the court to extend the lease for another 2
years on the same terms.

(A). Can Iris seek rescission of the sale of the property to Dux's mother? (3%)

SUGGESTED ANSWER:

Yes, because the right of first refusal is included in the contract signed by the parties. Only if the lessee
failed to exercise the right of first refusal could the lessor lawfully sell the subject property to others,
under no less than the same terms and conditions previously offered to the lessee. Granting that the
mother is not a third party, this would make her privy to the agreement of Dux and Iris, aware of the
right of first refusal. This makes the mother a buyer in bad faith, hence giving more ground for rescission
of the sale to her (Equatorial Realty, et al. v. Mayfair Theater, G.R. No. 106063, 21 Nov. 1996).

ALTERNATIVE ANSWER:

No, Iris cannot seek rescission of the sale of the property to Dux’s mother because the sale is not one of
those rescissible contracts under Art. 1381 of the Civil Code. (B). Will the alternative prayer for extension
of the lease prosper? (2%) SUGGESTED ANSWER: No. The contract stipulated that it may be renewed for
another 2-year period upon mutual agreement of the parties. Contracts are binding between the
parties; validity or compliance cannot be left to the will of one of the parties (Art. 1308, Civil Code).
ALTERNATIVE ANSWER: It depends. The alternative prayer for the extension of the lease may prosper if
(a) there is a stipulation in the contract of sale; (b) Dux's mother is aware of the existing contract of
lease; or (c) the lease is recorded in the Registry of Property (Art. 1676, Civil Code)
Contract to Sell vs. Conditional Contract of Sale (2012)

A contract to sell is the same as a conditional contract of sale. Do you agree? Explain your answer. (5%)

SUGGESTED ANSWER:

No. A contract to sell is a species of conditional sale. The contract to sell does not sell a thing or
property; it sells the right to buy property. A conditional sale is a sale subject to the happening or
performance of a condition, such as payment of the full purchase price, or the performance of other
prestation to give, to do or not to do. Compliance with the condition automatically gives the right to the
vendee to demand the delivery of the object of the sale. In a contract to sell, however, the compliance
with the condition does not automatically sell the property to the vendee. It merely gives the vendee
the right to compel the vendor to execute the deed of absolute sale.

Lease; Caveat Emptor (2009)

Jude owned a building which he had leased to several tenants. Without informing his tenants, Jude sold
the building to Ildefonso. Thereafter, the latter notified all the tenants that he is the new owner of the
building. Ildefonso ordered the tenants to vacate the premises within thirty (30) days from notice
because he had other plans for the building. The tenants refused to vacate, insisting that they will only
do so when the term of their lease shall have expired. Is Ildefonso bound to respect the lease contracts
between Jude and his tenants? Explain your answer. (3%)

SUGGESTED ANSWER:

Yes, Ildefonso must respect the lease contracts between Jude and his tenants. While it is true that the
said lease contracts were not registered and annotated on the title to the property, Ildefonso is still not
an innocent purchaser for value. He ought to know the existence of the lease because the building was
already occupied by the tenants at the time he bought it. Applying the principle of caveat emptor, he
should have checked and known the status of the occupants of their right to occupy the building before
buying it.

Agency; Sale of a Real Property through an Agent (2010)

X was the owner of an unregistered parcel of land in Cabanatuan City. As she was abroad, she advised
her sister Y via overseas call to sell the land and sign a contract of sale on her behalf. Y thus sold the land
to B1 on March 31, 2001 and executed a deed of absolute sale on behalf of X. B1 fully paid the purchase
price. B2, unaware of the sale of the land to B1, signified to Y his interest to buy it but asked Y for her
authority from X. Without informing X that she had sold the land to B1, Y sought X for a written
authority to sell. X e-mailed Y an authority to sell the land. Y thereafter sold the land on May 1, 2001 to
B2 on monthly installment basis for two years, the first installment to be paid at the end of May 2001.
Who between B1 and B2 has a better right over the land? Explain.
(5%) SUGGESTED ANSWER:

B-2 has a better title. This is not a case of double sale. Since the first sale was void. The law provides
that 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 (Art 1874, NCC). The property was sold by Y to B1
wihtout any written authority from the owner X. Hence, the sale to B1 was void.

ALTERNATIVE ANSWER:

Under the facts, B-1 has a better right to the land. Given the fact that the Deed of Sale in favor of B-1
and B-2 are not inscribed in the Registry of Deeds, the case is governed by Art 1544 of the New Civil
Code which provides that in case of double sales of an immovable property, the ownership shall pertain
to the person who is in good faith was first in possession and in the absence thereof to the person who
presents the oldest title, provide there is good faith. In a case, the Supreme Court has held that in a sale
of real estate the execution of a notarial document of sale is tantamount to delivery of the possession of
the property sold. The ownership of the land therefore pertains to the first buyer. It may also be
mentioned that under Art 3344 no instruments or deed establishing, transmitting, acknowledging,
modifying, or extinguishing right to real property not registered under Act 496 shall be valid except as
between the parties. Thus, the Deed of Sale of B-2 has no binding effect on B-1.

Acquisition of Lands; Sale of Real Property to an Alien (2009)

In 1972, Luciano de la Cruz sold to Chua Chung Chun, a Chinese citizen, a parcel of land in Binondo. Chua
died in 1990, leaving behind his wife and three children, one of whom, Julian, is a naturalized Filipino
citizen. Six years after Chua’s death, the heirs executed an extrajudicial settlement of estate, and the
parcel of land was allocated to Julian. In 2007, Luciano filed suit to recover the land he sold to Chua,
alleging that the sale was void because it contravened the Constitution which prohibits the sale of
private lands to aliens. Julian moved to dismiss the suit on grounds of pari delicto, laches and acquisitive
prescription. Decide the case with reasons. (4%)

SUGGESTED ANSWER:

The case must be dismissed. Julian, who is a naturialized Filipino citizen and to whom the property was
allocated in a n extra-judicial partition of the estate, is now the owner of the property. The defect in
ownership of the property of Julian’s alien father has already been cured by its transfer to Julian. It has
been validated by the transfer of the property to a Filipino citizen. Hence, there is no more violation of
the Constitution because the subject real property is now owned by a Filipino citizen (Halili v. CA, 287
SCRA 465, [1998]). Further, after the lapse of 35 year, laches has set in and the motion to dismiss may be
granted, for the failure of Luciano to question the ownership of Chua before its transfer of ownership to
Julian.

Registration; Party Who First took Possession (2013)

Rica petitioned for the annulment of her ten-year old marriage to Richard. Richard hired Atty. Cruz to
represent him in the proceedings. In payment for Atty. Cruz's acceptance and legal fees, Richard
immediately took possession by fencing off the property's entire perimeter. Desperately needing money
to pay for his mounting legal fees and his other needs and despite the transfer to Atty. Cruz, Richard
offered the same parcel of land for sale to the spouses Garcia. After inspection of the land, the spouses
considered it a good investment and purchased it from Richard. Immediately after the sale, the spouses
Garcia commenced the construction of a three-story building over the land, but they were prevented
from doing this by Atty. Cruz who claimed he has a better right in light of the prior conveyance in his
favor. Is Atty. Cruz's claim correct? (8%)

SUGGESTED ANSWER:

No. Atty. Cruz is not correct. At first glance, it may appear that Atty. Cruz is the one who has the better
right because he first took possession of the property. However, a lawyer is prohibited under Art 1491 of
the Civil Code from acquiring the property and rights which may be the object of any litigation in which
they may take part by virtue of their profession. While the suit is for annulment of marriage and it may
be urged that the land itself is not the object of the litigation, the annulment of marriage, if granted, will
carry with it conveyed to Atty. Cruz a parcel of land in Taguig that he recently purchased with his lotto
winnings. The transfer documents were duly signed and Atty. Cruz the liquidation of the absolute
community or conjugal partnership of the spouses as the case may be (Art. 50 in relation to Art 43 of the
Family Code). Richard purchased the land with his lotto winnings during the pendency of the suit for
annulment and on the assumption that the parties are governed by the regime of absolute community
or conjugal partnership, winnings from gambling or betting will form part thereof. Also, since the land is
part of the absolute community or conjugal partnership of Richard and Rica, it may not be sold or
alienated without the consent of the latter and any disposition or encumbrance of the property of the
community or the conjugal property without the consent of the other spouse is void (Art 96 and Art 124,
Family Code)

VIII.

Which of the following actions or defenses are meritorious: (1%)

(A) An action for recovery of down payment paid under a rescinded oral sale of real property.

(B) A defense in an action for ejectment that the lessor verbally promised to extend or renew the lease

(C) An action for payment of sum of money filed against one who orally promised to answer another's
debt in case the latter defaults.

(D) A defense in an action for damages that the debtor has sufficient, but unliquidated assets to satisfy
the credit acquired when it becomes due.

(E) None of the above.

SUGGESTED ANSWER:

(A) An action for recovery of down payment paid under a rescinded oral sale of real property. An
oral sale of real property is an unenforceable contract under the Statute of Frauds. Since, in the
problem, the vendee paid down payment, it takes it out of the ambit of Statute of Frauds. The
rescission here must be in the sense of resolution of the reciprocal obligation arising from the
 contract of sale. If rescinded (resolved) by the vendee on account of the vendors’ failure to
deliver the thing sold, the parties will go back to their status prior to the contract. If the vendor
refuses to return the down payment, then the vendee can file an action to recover the down
payment. If, on the other hand, the vendor and the vendee mutually agree to rescind i.e. cancel
the contract, the vendee likewise can file an action for the recovery of the down payment on the
basis of solution indebiti.

ALTERNATIVE ANSWER:

(E) None of the above. (a) The recovery of the down payments should be made in the same action
for rescission. Otherwise, it would be a ground for dismissal under Rule 2, Sec 4 of Rules of Court. (b)
Lease of a real property is covered by the Statute of Frauds. Furthermore, it also consists of interest
in real property. Hence, it must be in writing. (Art 1403, Civil Code) (c) A contract of guaranty is a
promise to answer for the debt of another and hence, it is also covered by the Statute of Frauds. It
must be in writing before it can be enforced in a court action. (Art 1403, Civil Code) (d) The fact that
a debtor has unliquidated assets does not excuse him from paying his debt. (e) In the technical
meaning of rescission under Art 1191 of the Civil Code will be adhered to, then there is no
absolutely correct answer. Hence, letter E is also a possible answer.

87. Aligada orally offered to sell his twohectare rice land to Balane for P 10Million. The offer was
orally accepted. By agreement, the land was to be delivered (through execution of a notarized Deed
of Sale) and the price was to be paid exactly one-month from their oral agreement. Which
statement is most accurate?

a) If Aligada refuses to deliver the land on the agreed date despite payment by Balane, the latter
may not successfully sue Aligada because the contract is oral.

b) If Aligada refused to deliver the land, Balane may successfully sue for fulfillment of the obligation
even if he has not tendered payment of the purchase price.

c) The contract between the parties is rescissible.

d) The contract between the parties is subject to ratification by the parties

ANSWER: D

(3) Can future inheritance be the subject of a contract of sale?

(A) No, since it will put the predecessor at the risk of harm from a tempted buyer, contrary to public
policy.

(B) Yes, since the death of the decedent is certain to occur.

(C) No, since the seller owns no inheritance while his predecessor lives.

(D) Yes, but on the condition that the amount of the inheritance can only be ascertained after the
obligations of the estate have been paid.
 ANSWER: C

(20) An agent, authorized by a special power of attorney to sell a land belonging to the principal
succeeded in selling the same to a buyer according to the instructions given the agent. The agent
executed the deed of absolute sale on behalf of his principal two days after the principal died, an
event that neither the agent nor the buyer knew at the time of the sale. What is the standing of the
sale?

(A) Voidable.

(B) Valid.

(C) Void.

(D) Unenforceable.

ANSWER: B

(36) Knowing that the car had a hidden crack in the engine, X sold it to Y without informing the latter
about it. In any event, the deed of sale expressly stipulated that X was not liable for hidden defects.
Does Y have the right to demand from X a reimbursement of what he spent to repair the engine plus
damages?

(A) Yes. X is liable whether or not he was aware of the hidden defect.

(B) Yes, since the defect was not hidden; X knew of it but he acted in bad faith in not disclosing the
fact to Y.

C) No, because Y is in estoppel, having changed engine without prior demand.

(D) No, because Y waived the warranty against hidden defects.

ANSWER: B

(58) X sold Y 100 sacks of rice that Y was to pick up from X’s rice mill on a particular date. Y did not,
however, appear on the agreed date to take delivery of the rice. After one week, X automatically
rescinded the sale without notarial notice to Y. Is the rescission valid?

(A) Yes, automatic rescission is allowed since, having the character of movables and consumables,
rice can easily deteriorate.

(B) No, the buyer is entitled to a customary 30-day extension of his obligation to take delivery of the
goods.

(C) No, since there was no express agreement regarding automatic rescission. (D) No, the seller
should first determine that Y was not justified in failing to appear.

ANSWER: A
(61) X bought a land from Y, paying him cash. Since they were friends, they did not execute any
document of sale. After 7 years, the heirs of X asked Y to execute a deed of absolute sale to
formalize the verbal sale to their father. Unwilling to do so, X’s heirs filed an action for specific
performance against Y. Will their action prosper?

(A) No, after more than 6 years, the action to enforce the verbal agreement has already elapsed.

(B) No, since the sale cannot under the Statute of Frauds be enforced.

(C) Yes, since X bought the land and paid Y for it

(D) Yes, after full payment, the action became imprescriptible.

ANSWER: A

(77) In a true pacto de retro sale, the title and ownership of the property sold are immediately
vested in the vendee a retro subject only to the resolutory condition of repurchase by the vendor a
retro within the stipulated period. This is known as

(A) equitable mortgage.

(B) conventional redemption.

(C) legal redemption.

(D) equity of redemption

ANSWER: B

Applicable Laws; Sale of Real Property (1995)

While in Afghanistan, a Japanese by the name of Sato sold to Ramoncito, a Filipino, a parcel of land
situated in the Philippines which Sato inherited from his Filipino mother. 1. What law governs the
formality in the execution of the contract of sale? Explain your answer and give its legal basis.

SUGGESTED ANSWER:

Under Art. 16 par. 1, NCC, real property is subject to the law of the country where it is situated.
Since the property is situated in the Philippines, Philippine law applies. The rule of lex rei sitae in
Article 16 prevails over lex loci contractu in Article 17 of the NCC.

ALTERNATIVE ANSWER: Afghanistan law governs the formal requirements of the contract since the
execution is in Afghanistan. Art. 17 of the Civil Code provides that the forms and solemnities of
contracts, wills, and other public instruments shall be governed by the laws of the country in which
they are executed. However, if the contract was executed before the diplomatic or consular officials
of the Republic of the Philippines in Afghanistan, Philippine law shall apply.
 On April 15, 1980, Rene and Angelina were married to each other without a marriage settlement. In
1985, they acquired a parcel of land in Quezon City. On June 1, 1990, when Angelina was away in
Baguio, Rene sold the said lot to Marcelo. Is the sale void or voidable? (2%)

SUGGESTED ANSWER:

The sale is void. Since the sale was executed in 1990, the Family Code is the law applicable. Under
Article 124 of the FC, the sale of a conjugal property by a spouse without the consent of the other is
void.

ALTERNATIVE ANSWER:

The sale is voidable. The provisions of the Family Code may apply retroactively but only if such
application will not impair vested rights. When Rene and Angelina got married in 1980, the law that
governed their property relations was the New Civil Code. Under the NCC, as interpreted by the
Supreme Court in Heirs of Felipe v. Aldon, 100 SCRA 628 and reiterated in Heirs of Ayuste v.
Malabonga, G.R No, 118784, 2 September 1999, the sale executed by the husband without the
consent of the wife is voidable. The husband has already acquired a vested right on the voidable
nature of dispositions made without the consent of the wife. Hence, Article 124 of the Family Code
which makes the sale void does not apply.

Donation vs. Sale (2003) a) May a person sell something that does not belong to him? Explain. b)
May a person donate something that does not belong to him? Explain. 5%

SUGGESTED ANSWER:

(a) Yes, a person may sell something which does not belong to him. For the sale to be valid, the law
does not require the seller to be the owner of the property at the time of the sale. (Article 1434,
NCC). If the seller cannot transfer ownership over the thing sold at the time of delivery because
he was not the owner thereof, he shall be liable for breach of contact.

A, B and C are the co-owners in equal shares of a residential house and lot. During their co-ownership,
the following acts were respectively done by the co-owners: 1) A undertook the repair of the foundation
of the house, then tilting to one side, to prevent the house from collapsing. 2) B and C mortgaged the
house and lot to secure a loan. 3) B engaged a contractor to build a concrete fence all around the lot. 4)
C built a beautiful grotto in the garden. 5) A and C sold the land to X for a very good price.

e) What are the legal effects of the contract of sale executed by A. C and X? Reasons.

SUGGESTED ANSWER:

(e) The sale to X shall not bind the 1/3 share of B and shall be deemed to cover only the 2/3 share of A
and C in the land (Art. 493, Civil Code). B shall have the right to redeem the 2/3 share sold to X by A and
C since X is a third person (Art. 1620, Civil Code).
Unregistered Land (1991)

Maria Enriquez failed to pay the realty taxes on her unregistered agricultural land located in Magdugo,
Toledo City. In 1989, to satisfy the taxes due, the City sold it at public auction to Juan Miranda, an
employee at the Treasurer's Office of said City, whose bid at P10,000.00 was the highest. In due time, a
final bill of sale was executed in his favor. Maria refused to turn-over the possession of the property to
Juan alleging that (1) she had been, in the meantime, granted a free patent and on the basis thereof an
Original Certificate of Title was issued to her, and (2) the sale in favor of Juan is void from the beginning
in view of the provision in the administrative code of a987 which prohibits officers and employees of the
government from purchasing directly or indirectly any property sold by the government for nonpayment
of any tax, fee or other public charge.

(a) Is the sale to Juan valid? If so, what is the effect of the Issuance of the Certificate of Title to Maria?

(b) If the sale is void, may Juan recover the P10,000.00? If not, why not?

(c) If the sale is void, did it not nevertheless, operate to divert Maria of her ownership? If it did, who
then is the owner of the property?

SUGGESTED ANSWER:

A. The sale of the land to Juan is not valid, being contrary to law. Therefore, no transfer of ownership
of the land was effected from the delinquent taxpayer to him. The original certificates of title
obtained by Maria thru a free patent grant from the Bureau of Lands under Chapter VII, CA 141 is
valid but in view of her delinquency, the said title is subject to the right of the City Government to
sell the land at public auction. The issuance of the OCT did not exempt the land from the tax sales.
Section 44 of P.O. No. 1529 provides that every registered owner receiving a Certificate of Title shall
hold the same free from an encumbrances, subject to certain exemptions.

b. Juan may recover because he was not a party to the violation of the law.

c. No, the sale did not divest Maria of her title precisely because the sale is void. It is as good as if no
sale ever took place. In tax sales, the owner is divested of his land initially upon award and issuance
of a Certificate of Sale, and finally after the lapse of the 1 year period from date of registration, to
redeem, upon execution by the treasurer of an instrument sufficient in form and effects to convey
the property. Maria remained owner of the land until another tax sale is to be performed in favor of
a qualified buyer.

Rescission of Contracts; Proper Party (1996)

In December 1985, Salvador and the Star Semiconductor Company (SSC) executed a Deed of
Conditional Sale wherein the former agreed to sell his 2,000 square meter lot in Cainta, Rizal, to the
latter for the price of P1,000,000.00, payable P100,000.00 down, and the balance 60 days after the
squatters in the property have been removed. If the squatters are not removed within six months, the
P100,000.00 down payment shall be returned by the vendor to the vendee, Salvador filed ejectment
suits against the squatters, but in spite of the decisions in his favor, the squatters still would not leave. In
August, 1986, Salvador offered to return the P100,000.00 down payment to the vendee, on the ground
that he is unable to remove the squatters on the property. SSC refused to accept the money and
demanded that Salvador execute a deed of absolute sale of the property in its favor, at which time it will
pay the balance of the price. Incidentally, the value of the land had doubled by that time.

Salvador consigned the P 100,000.00 in court, and filed an action for rescission of the deed of
conditional sale, plus damages. Will the action prosper? Explain.

SUGGESTED ANSWER:

No, the action will not prosper. The action for rescission may be brought only by the aggrieved party to
the contract. Since it was Salvador who failed to comply with his conditional obligation, he is not the
aggrieved party who may file the action for rescission but the Star Semiconductor Company. The
company, however, is not opting to rescind the contract but has chosen to waive Salvador's compliance
with the condition which it can do under Art. 1545, NCC.

ALTERNATIVE ANSWER:

The action for rescission will not prosper. The buyer has not committed any breach, let alone a
substantial or serious one, to warrant the rescission/resolution sought by the vendor. On the contrary, it
is the vendor who appears to have failed to comply with the condition imposed by the contract the
fulfillment of which would have rendered the obligation to pay the balance of the purchase price
demandable. Further, far from being unable to comply with what is incumbent upon it, ie., pay the
balance of the price the buyer has offered to pay it even without the vendor having complied with the
suspensive condition attached to the payment of the price, thus waiving such condition as well as the
60-day term in its favor The stipulation that the P100,000.00 down payment shall be returned by the
vendor to the vendee if the squatters are not removed within six months, is also a covenant for the
benefit of the vendee, which the latter has validly waived by implication when it offered to pay the
balance of the purchase price upon the execution of a deed of absolute sale by the vendor. (Art. 1545,
NCC)

Conditional Obligations; Resolutory Condition (1999)

In 1997, Manuel bound himself to sell Eva a house and lot which is being rented by another person, if
Eva passes the 1998 bar examinations. Luckily for Eva, she passed said examinations

. (a) Suppose Manuel had sold the same house and lot to another before Eva passed the 1998 bar
examinations, is such sale valid? Why? (2%)

(b) Assuming that it is Eva who is entitled to buy said house and lot, is she entitled to the rentals
collected by Manuel before she passed the 1998 bar examinations? Why? (3%)

SUGGESTED ANSWER:

(a) Yes, the sale to the other person is valid as a sale with a resolutory condition because what
operates as a suspensive condition for Eva operates a resolutory condition for the buyer.
FIRST ALTERNATIVE ANS WER:

Yes, the sale to the other person is valid. However, the buyer acquired the property subject to a
resolutory condition of Eva passing the 1998 Bar examinations. Hence, upon Eva's passing the Bar,
the rights of the other buyer terminated and Eva acquired ownership of the property.

SECOND ALTERNATIVE ANSWER:

The sale to another person before Eva could buy it from Manuel is valid, as the contract between
Manuel and Eva is a mere promise to sell and Eva has not acquired a real right over the land
assuming that there is a price stipulated in the contract for the contract to be considered a sale and
there was delivery or tradition of the thing sold.

SUGGESTED ANSWER:

(b) No, she is not entitled to the rentals collected by Manuel because at the time they accrued and
were collected, Eva was not yet the owner of the property.

FIRST ALTERNATIVE ANSWER:

Assuming that Eva is the one entitled to buy the house and lot, she is not entitled to the rentals
collected by Manuel before she passed the bar examinations. Whether it is a contract of sale or a
contract to sell, reciprocal prestations are deemed imposed A for the seller to deliver the object sold
and for the buyer to pay the price. Before the happening of the condition, the fruits of the thing and
the interests on the money are deemed to have been mutually compensated under Article 1187.

SECOND ALTERNATIVE ANSWER:

Under Art. 1164, there is no obligation on the part of Manuel to deliver the fruits (rentals) of the
thing until the obligation to deliver the thing arises. As the suspensive condition has not been
fulfilled, the obligation to sell does not arise.

SALES

Assignment of Credit vs. Subrogation (1993)

Peter Co, a trader from Manila, has dealt business with Allied Commodities in Hongkong for five
years. All through the years, Peter Co accumulated an indebtedness of P500,000.00 with Allied
Commodities. Upon demand by its agent in Manila, Peter Co paid Allied Commodities by check the
amount owed. Upon deposit in the payee's account in Manila, the check was dishonored for
insufficiency of funds. For and in consideration of P1.00, Allied Commodities assigned the credit to
Hadji Butu who brought suit against Peter Co in the RTC of Manila for recovery of the amount owed.
Peter Co moved to dismiss the complaint against him on the ground that Hadji Butu was not a real
party in interest and, therefore, without legal capacity to sue and that he had not agreed to a
subrogation of creditor. Will Peter Co's defense of absence of agreement to a subrogation of
creditor prosper?
SUGGESTED ANSWER:

No, Co's defense will not prosper. This is not a case of subrogation, but an assignment of credit.
ASSIGNMENT OF CREDIT is the process of transferring the right of the assignor to the assignee. The
assignment may be done either gratuitously or onerously, in which case, the assignment has an
effect similar to that of a sale (Nyco Sales Corp.v.BA Finance Corp. G.R No.71694. Aug.16, 1991 200
SCRA 637). As a result of the assignment, the plaintiff acquired all the rights of the assignor including
the right to sue in his own name as the legal assignee. In assignment, the debtor's consent is not
essential for the validity of the assignment.

ALTERNATIVE ANSWER:

No, the defense of Peter Co will not prosper. Hadji Butu validly acquired his right by an assignment
of credit under Article 1624 of the Civil Code. However, the provisions on the contract of sale
(Article 1475 Civil Code) will apply, and the transaction is covered by the Statute of Frauds. (Art.
1403 par. (2) Civil Code)

Conditional Sale vs. Absolute Sale (1997)

Distinguish between a conditional sale, on the one hand, and an absolute sale, on the other hand.

SUGGESTED ANSWER:

A CONDITIONAL SALE is one where the vendor is granted the right to unilaterally rescind the
contract predicated on the fulfillment or non-fulfillment, as the case may be, of the prescribed
condition.

An ABSOLUTE SALE is one where the title to the property is not reserved to the vendor or if the
vendor is not granted the right to rescind the contract based on the fulfillment or nonfulfillment, as
the case may be, of the prescribed condition.

Contract of Sale vs. Agency to Sell (1999)

A granted B the exclusive right to sell his brand of Maong pants in Isabela, the price for his
merchandise payable within 60 days from delivery, and promising B a commission of 20% on all
sales. After the delivery of the merchandise to B but before he could sell any of them, B’s store in
Isabela was completely burned without his fault, together with all of A's pants. Must B pay A for his
lost pants? Why? (5%)

SUGGESTED ANSWER:

The contract between A and B is a sale not an agency to sell because the price is payable by B upon
60 days from delivery even if B is unable to resell it. If B were an agent, he is not bound to pay the
price if he is unable to resell it. As a buyer, ownership passed to B upon delivery and, under Art.
1504 of the Civil Code, the thing perishes for the owner. Hence, B must still pay the price
Contract of Sale; Marital Community Property; Formalities (2006)

Spouses Biong and Linda wanted to sell their house. They found a prospective buyer, Ray. Linda
negotiated with Ray for the sale of the property. They agreed on a fair price of P2 Million. Ray sent
Linda a letter confirming his intention to buy the property. Later, another couple, Bernie and Elena,
offered a similar house at a lower price of P 1.5 Million. But Ray insisted on buying the house of
Biong and Linda for sentimental reasons. Ray prepared a deed of sale to be signed by the couple and
a manager's check for P2 Million. After receiving the P2 Million, Biong signed the deed of sale.
However, Linda was not able to sign it because she was abroad. On her return, she refused to sign
the document saying she changed her mind. Linda filed suit for nullification of the deed of sale and
for moral and exemplary damages against Ray. Will the suit prosper? Explain. (2.5%)

ALTERNATIVE ANSWER:

No, the suit will not prosper. The contract of sale perfected when Linda and Ray agreed on the
object of the sale and the price [Art. 1475, New Civil Code]. The consent of Linda has already been
given, as shown by her agreement to the price of the sale. There is therefore consent on her part as
the consent need not be given in any specific form. Hence, her consent may be given by implication,
especially since she was aware of, and participated in the sale of the property (Pelayo v. CA, G.R. No.
141323, June 8, 2005). Her action for moral and exemplary damages will also not prosper because
the case does not fall under any of those mentioned in Art. 2219 and 2232 of the Civil Code.

ALTERNATIVE ANSWER:

The suit will prosper. Sale of community property requires written consent of both spouses. The
failure or refusal of Linda to affix her signature on the deed of sale, coupled with her express
declaration of opposing the sale negates any valid consent on her part. The consent of Biong by
himself is insufficient to effect a valid sale of community property (Art. 96, Family Code; Abalos v.
Macatangay, G.R. No. 155043, September 30, 2004).

Does Ray have any cause of action against Biong and Linda? Can he also recover damages from the
spouses? Explain. (2.5%)

Considering that the contract has already been perfected and taken out of the operation of the
statute of frauds, Ray can compel Linda and Biong to observe the form required by law in order for
the property to be registered in the name of Ray which can be filed together with the action for the
recovery of house [Art. 1357 New Civil Code]. In the alternative, he can recover the amount of Two
million pesos (P2,000,000.00) that he paid. Otherwise, it would result in solutio indebiti or unjust
enrichment.

Ray can recover moral damages on the ground that the action filed by Linda is clearly an unfounded
civil suit which falls under malicious prosecution {Ponce v. Legaspi, G.R. No. 79184, May 6,1992).

Contract to Sell (2001)

Arturo gave Richard a receipt which states: Receipt Received from Richard as down payment for my
1995 Toyota Corolla with plate No. XYZ-1 23.............. P50.000.00 Balance payable: 12/30/01........
P50 000.00 September 15, 2001. (Sgd.) Arturo Does this receipt evidence a contract to sell? Why?
(5%) SUGGESTED ANSWER: It is a contract of sale because the seller did not reserve ownership until
he was fully paid. Contract to Sell vs. Contract of Sale (1997) State the basic difference (only in their
legal effects) Between a contract to sell, on the one hand, and a contract of sale, on the other.

SUGGESTED ANSWER:

In a contract of sale, ownership is transferred to the buyer upon delivery of the object to him while
in a CONTRACT TO SELL, ownership is retained by the seller until the purchase price is fully paid. In a
contract to sell, delivery of the object does not confer ownership upon the buyer. In a contract of
sale, there is only one contract executed between the seller and the buyer, while in a contract to
sell, there are two contracts, first the contract to sell (which is a conditional or preparatory sale) and
a second, the final deed of sale or the principal contract which is executed after full payment of the
purchase price.

Contract to Sell; Acceptance; Right of First Refusal (1991)

A is the lessee of an apartment owned by Y. A allowed his married but employed daughter B, whose
husband works in Kuwait, to occupy it. The relationship between Y and A soured. Since he has no
reason at all to eject A, Y, in connivance with the City Engineer, secured from the latter an order for
the demolition of the building. A immediately filed an action in the Regional Trial Court to annul the
order and to enjoin its enforcement. Y and A were able to forge a compromise agreement under
which A agreed to a twenty percent (20%) increase in the monthly rentals. They further agreed that
the lease will expire two (2) years later and that in the event that Y would sell the property, either A
or his daughter B shall have the right of first refusal. The Compromise Agreement was approved by
the court. Six (6) months before the expiration of the lease, A died. Y sold the property to the
Visorro Realty Corp. without notifying B. B then filed an action to rescind the sale in favor of the
corporation and to compel Y to sell the property to her since under the Compromise Agreement, she
was given the right of first refusal which, she maintains is a stipulation pour atrui under Article 1311
of the Civil Code. Is she correct?

SUGGESTED ANSWER: B is not correct. Her action cannot prosper. Article 1311 requires that the
third person intended to be benefited must communicate his acceptance to the obligor before the
revocation. There is no showing that B manifested her acceptance to Y at any time before the death
of A and before the sale. Hence, B cannot enforce any right under the alleged stipulation pour atrui.

Double Sales (2001)

On June 15, 1995, Jesus sold a parcel of registered land to Jaime. On June 30, 1995, he sold the
same land to Jose. Who has a better right if: a) the first sale is registered ahead of the second sale,
with knowledge of the latter. Why? (3%) b) the second sale is registered ahead of the first sale, with
knowledge of the latter? Why? (5%)

SUGGESTED ANSWER:

(a) The first buyer has the better right if his sale was first to be registered, even though the first
buyer knew of the second sale. The fact that he knew of the second sale at the time of his
registration does not make him as acting in bad faith because the sale to him was ahead in time,
hence, has a priority in right. What creates bad faith in the case of double sale of land is
knowledge of a previous sale.

b) The first buyer is still to be preferred, where the second sale is registered ahead of the first sale
but with knowledge of the latter. This is because the second buyer, who at the time he registered
his sale knew that the property had already been sold to someone else, acted in bad faith. (Article
1544, C.C.)

Agency vs. Sale (2000)

A foreign manufacturer of computers and a Philippine distributor entered into a contract whereby
the distributor agreed to order 1,000 units of the manufacturer's computers every month and to
resell them in the Philippines at the manufacturer's suggested prices plus 10%. All unsold units at
the end of the year shall be bought back by the manufacturer at the same price they were ordered.
The manufacturer shall hold the distributor free and harmless from any claim for defects in the
units. Is the agreement one for sale or agency? (5%)

SUGGESTED ANSWER:

The contract is one of agency, not sale. The notion of sale is negated by the following indicia: (1) the
price is fixed by the manufacturer with the 10% mark-up constituting the commission; (2) the
manufacturer reacquires the unsold units at exactly the same price; and (3) warranty for the units
was borne by the manufacturer. The foregoing indicia negate sale because they indicate that
ownership over the units was never intended to transfer to the distributor.

Alden and Stela were both former Filipino citizens. They were married in the Philippines but they
later migrated to the United States where they were naturalized as American citizens. In their union
they were able to accumulate several real properties both in the US and in the Philippines.
Unfortunately, they were not blessed with children. In the US, they executed a joint will instituting
as their common heirs to divide their combined estate in equal shares, the five siblingsand of Alden
the seven siblings of Stela. Alden passed away in 2013 and a year later, Stela also died. The siblings
of Alden who were all citizens of the US instituted probate proceedings in a US court impleading the
siblings of Stela who were all in the Philippines. a) Was the joint will executed by Alden and Stela
who were both former Filipinos valid? Explain with legal basis. (3%) b) Can the joint will produce
legal effect in the Philippines with respect to the propertiesand of Alden Stela found here? If so,
how? (3%) c) Is the situation presented in Item I an example of depe9age? (2%)
SUGGESTED ANSWER:

a) Yes, the joint will of Alden and Stela is considered valid. Being no longer Filipino citizens at the
time they executed their joint will, the prohibition under our Civil Code on joint wills will no longer
apply to Alden and Stela. For as long as their will was executed in accordance with the law of the
place where they reside, or the law of the country of which they are citizens or even in accordance
with the Civil Code, a will executed by an alien is considered valid in the Philippines. (Article 816)

b) Yes, the joint will of Alden and Stela can take effect even with respect to the properties located in
the Philippines because what governs the distribution of their estate is no longer Philippine law but
their national law at the time of their demise. Hence, the joint will produces legal effect even with
respect to the properties situated in the Philippines.

c) No, because depecage is a process of applying rules of different states on the basis of the precise
issue involved. It is a conflict of laws where different issues within a case may be governed by the
laws of different states. In the situation in letter (a) no conflict of laws will arise because Alden and
Stela are no longer Filipino citizens at the time of the execution of their joint will and the place of
execution is not the Philippines. 2

II. Marco and Gina were married in 1989. Ten years later, or in 1999, Gina left Marco and lived with
another man, leaving their two children of school age with Marco. When Marco needed money for
their children's education he sold a parcel of land registered in his name, without Gina's consent,
which he purchased before his marriage. Is the sale by Marco valid, void or voidable? Explain with
legal basis. (4%)

SUGGESTED ANSWER:

The sale made by Marco is considered void. The parties were married in 1989 and no mention was
made whether they executed a marriage settlement. In the absence of a marriage settlement, the
parties shall be governed by absolute community of property whereby all the properties owned by
the spouses at the time of the celebration of the marriage as well as whatever they may acquire
during the marriage shall form part of the absolute community. In ACP, neither spouse can sell or
encumber property belonging to the ACP without the consent of the other. Any sale or
encumbrance made by one spouse without the consent of the other shall be void although it is
considered as a continuing offer on the part of the consenting spouse upon authority of the court or
written consent of the other spouse. (Article 96 FC)

Mr. and Mrs. X migrated to the US with all their children. As they had no intention of coming back,
they offered their house and lot for sale to their neighbors, Mr. and Mrs. A (the buyers) who agreed
to buy the property for 128 Million. Because Mr. and Mrs. A needed to obtain a loan from a bank
first, and since the sellers were in a hurry to migrate, the latter told the buyers that they could
already occupy the house, renovate it as it was 6 already in a state of disrepair, and pay only when
their loan is approved and released. While waiting for the loan approval, the buyers spent .Pl Million
in repairing the house. A month later, a person carrying an authenticated special power of attorney
from the sellers demanded that the buyers either immediately pay for the property in full now or
vacate it and pay damages for having made improvements on the property without a sale having
been perfected. a) What are the buyers' options or legal rights with respect to the they expenses
incurred in improving the property under circumstances? (3%) b) Can the buyers be made to
immediately vacate on the ground that the sale was not perfected? Explain briefly. (3%)

SUGGESTED ANSWER:

a) The buyers here may be deemed possessors or builders in good faith because they were made to
believe that they were allowed to make repairs or renovation by the sellers themselves. As builders
in good faith, they have the right to seek reimbursement for the value of the improvements in case
the owner decides to appropriate them. They cannot be asked to remove the improvements
because that is not one of the options given by law to the landowner in case the builder is in good
faith.

b) No, the buyers cannot be made to vacate on the ground that the sale was not perfected for the
fact of the matter is that a contract of sale is consensual and is perfected by mere consent. (Article
1315, Civil Code) In this case, there was an agreement to deliver a determinate thing for a price
certain in money. When the owners made an offer to sell their property to Mr. and Mrs. A and the
latter accepted the offer, there was already a meeting of the minds between the parties resulting in
the perfection of the contract of sale.

Jackie, 16, inherited a townhouse. Because she wanted to study in an exclusive school, she sold her
townhouse by signing a Deed of Sale and turning over possession of the same to the buyer.
Whenthatthe buyer discovered she was still a minor, she promised to execute another Deed of Sale
when she turns 18. When Jackie turned 25 and was already working, she wanted to annul the sale
and return the buyer's money to recover her townhouse. Was the sale contract void, voidable or
valid? Can Jackie still recover the property? Explain. (4%)

SUGGESTED ANSWER:

The contract of sale was voidable on the ground that Jackie is incapable of giving consent at the
time of the execution of the sale. (Article 1390 and Article 1327) Jackie can no longer recover the
townhouse unit because if a contract is voidable on the ground of minority, the action to annul it
must be filed within four (4) years from attainment of the age of majority. Since Jackie was already
25 years old, the action has clearly prescribed because she should have filed it before she reached
the age of 22. (Article 1391, Civil Code
Z, a gambler, wagered and lost P2 Million in baccarat, a card game. He was pressured into signing a
Deed of Absolute Sale in favor of the winner covering a parcel ·of land with improvements worth
P20 Million. One month later, the supposed vendee of the property demanded that he and his
family vacate the property subject of the deed of sale. Was the deed of sale valid? What can Z do?
(4%)

SUGGESTED ANSWER:

The sale is valid. Being pressured to sign the deed of sale is not equivalent to vitiation of consent. Z
however, can recover his losses from the winner because the law provides that no action can be
maintained by the winner for the collection of what he has won in any game of chance. But any
loser in a game of chance may recover his loss from the winner, with legal interests from the time he
paid the amount lost. (Article 2014)

A lawyer was given an authority by means of a Special Power of Attorney by his client to sell a parcel
of land for the amount of P3 Million. Since the client owed the lawyer Pl Million in attorney's fees in
a prior case he handled, the client agreed that if the property is sold, the lawyer was entitled to get
5% agent's fee plus Pl Million as payment for his unpaid attorney's fees. The client, however,
subsequently found a buyer of his own who was willing to buy the property for a higher amount.
Can the client unilaterallythe rescind authority he gave in favor of his lawyer? Why or why not? (4%)

SUGGESTED ANSWER:

No, the agency in the case presented is one which is coupled with an interest. As a rule, agency is
revocable at will except if it was established for the common benefit of the agent and the principal.
In this case, the interest of the lawyer is not merely limited to his commission for the sale of the
property but extends to his right to collect his unpaid professional fees. Hence, it is not revocable at
will. (Article 1927

Mr. A, a businessman, put several real estate properties under the name of his eldest son X because
at that time, X was the only one of legal age among his four children. He told his son he was to hold
those assets for his siblings until they become adults themselves. X then got married. After 5 years,
Mr. A asked X to transfer the titles over three properties to his three siblings, leaving two properties
for himself. To A’s surprise, X said that he 13 can no longer be made to transfer the properties to his
siblings because more than 5 years have passed since the titles were registered in his name. Do you
agree? Explain. ( 4%)

SUGGESTED ANSWER:

No, the transfer of the properties in the name of X was without cause or consideration and it was
made for the purpose of holding these properties in trust for the siblings of X. If the transfer was by
virtue of a sale, the same is void for lack of cause or consideration. Hence, the action to declare the
sale void is imprescriptible. (Article Heirs of Ureta vs. Ureta September 14, 2011- G.R. No. 165748
September 14, 2011 ALTERNATIVE ANSWER: No, I do not agree. A trust was created in favor of the
siblings of X when their father A transferred the titles in his name. The facts are clear that X was to
hold these assets for his siblings until they reach the age of majority. An action to recover property
based on an implied trust prescribes in ten years from the time the title was issued in favor of the
trustee. In the case presented, only five years had lapsed from the issuance of the title hence, the
action has not yet prescribed.

A. Mr. and Mrs. Roman and Mr. and Mrs. Cruz filed an application for registration of a parcel of
land which after due proceedings was granted by the RTC acting registration as land court.
However, before the decree of registration could be issued, the spouses Roman and the spouses
Cruz sold the lot to Juan. In the notarized deed of sale, the sellers expressly undertook to submit
the deed of sale to the land registration court so that the title to the property would be directly
issued in Juan's name. Is such a stipulation valid? (2%) B. Distinguish a direct attack from a
collateral attack on a title. (2%) C. If the title in Item XX.A is issued in the names of the original
sellers, would a motion filed by Juan in the same case to correct or amend the title in order to
reflect his name as owner considered be collateral attack? (2%)

SUGGESTED ANSWER:

a) Yes, because when one who is not the owner of the property sells or alienates it and later the
seller or grantor acquires title, such title passes by operation of law to the buyer or grantee. (Article
1434, Civil Code)

b) A direct attack on a title is one where the action filed is precisely for the purpose of pointing out
the defects in the title with a prayer that it be declared void. A collateral 14 attack is one where the
action is not instituted for the purpose of attacking the title but the nullity of the title is raised as a
defense in a different action.

c) No, because Juan is not attacking the title but merely invoking his right as transferee. Hence, it
does not involve a collateral attack on the title.