COMMISSIONER OF INTERNAL REVENUE VS ARNOLDUS CARPENTRY SHOP AND CTA (CASE No. 3) FACTS: Arnoldus Carpentry Shop, Inc.

(private respondent herein) is a domestic corporation which has for its secondary purpose the "preparing, processing, buying, selling, exporting, importing, manufacturing, trading and dealing in cabinet shop products, wood and metal home and office furniture, cabinets, doors, windows, etc., including their component parts and materials, of any and all nature and description". These furniture, cabinets and other woodwork were sold locally and exported abroad. Sometime in March 1979, the examiners of the petitioner Commissioner of Internal Revenue conducted an investigation of the business tax liabilities of private respondent. Based on such an examination, BIR examiners Honesto A. Vergel de Dios and Voltaire Trinidad made a report to the Commissioner classifying private respondent as an "other independent contractor." As a result, on January 31, 1981, private respondent received a letter/notice of tax deficiency assessment inclusive of charges and interest for the year 1977 in the amount of P108,720.92, representing the 3% imposed on private respondents gross sales as a result of respondents classification as a contractor.

Respondent then filed a protest with the Commissioner of Internal Revenue, maintaining that they are a manufacturer and therefore are entitled to the exemption on export sales. Petitioner maintained their decision to classify respondent as a contractor, to which respondent appealed to the Court of Tax Appeals. On April 22, 1985, respondent Court of Tax Appeals rendered the questioned decision holding that private respondent was a manufacturer thereby reversing the decision of the petitioner. Hence, this petition for review.

ISSUE: Whether respondent is a manufacturer.

HELD: Yes. Petitioner wants to impress upon this Court that under Article 1467, the true test of whether or not the contract is a piece of work (and thus classifying private respondent as a contractor) or a contract of sale (which would classify private respondent as a manufacturer) is the mere existence of the product at the time of the perfection of the contract such that if the thing already exists, the contract is of sale, if not, it is work. This is not the test followed in this jurisdiction. As can be clearly seen from the wordings of Art. 1467, what determines whether the contract is one of work or of sale is whether the thing has been manufactured specially for the customer and upon his special order." Thus, if the thing is specially done at the order of another, this is a contract for a piece of work. If, on the other hand, the thing is manufactured or procured for the general market in the ordinary course of one's business, it is a contract of sale. Arnoldus had a ready stock of its shop products for sale to its foreign and local buyers. As a matter of fact, the purchase orders from its foreign buyers showed that they ordered by referring to the models designed by petitioner. Even purchases by local buyers for television cabinets were by orders for existing models. Hence, it is a manufacturer. Furthermore, it is a contract of sale.

QUIROGA VS PARSONS HARDWARE (CASE No. 4) FACTS: On January 24, 1911, plaintiff Andres Quiroga and J. Parsons (to whose rights and obligations the present defendant Parsons Hardware Co. later subrogated itself) entered into a contract, where it was stated among others that Quiroga grants in favor of Parsons the exclusive rights to sell his beds in the Visayan Islands under some conditions. One of the said conditions provided that Mr. Parsons may sell, or establish branches of his agency for the sale of "Quiroga" beds in all the towns of the Archipelago where there are no exclusive agents, and shall immediately report such action to Mr. Quiroga for his approval while another one passed on to Parsons the obligation to order by the dozen and in no other manner the beds from Quiroga. Alleging that the Parsons was his agent for the sale of his beds in Iloilo, Quiroga filed a complaint against the former for violating the following obligations implied in what he contended to be a contract of commercial agency: not to sell the beds at higher prices than those of the invoices; to have an open establishment in Iloilo; itself to conduct the agency; to keep the beds on public exhibition, and to pay for the advertisement expenses for the same; and to order the beds by the dozen and in no other manner.

ISSUE: Whether the contract executed by plaintiff and defendant partakes the nature of a contract of purchase and sale?

HELD: Yes. The Supreme Court declared that the contract by and between the plaintiff and the defendant was one of purchase and sale, and that the obligations the breach of which is alleged as a cause of action are not imposed upon the defendant, either by agreement or by law. In order to classify a contract, due regard must be given to its essential clauses. In the contract in question, what was essential, as constituting its cause and subject matter, is that the plaintiff was to furnish the defendant with the beds which the latter might order, at the price stipulated, and that the defendant was to pay the price in the manner stipulated. There was the obligation on the part of the plaintiff to supply the beds, and, on the part of the defendant, to pay their price. These features exclude the legal conception of an agency or order to sell whereby the mandatory or agent received the thing to sell it, and does not pay its price, but delivers to the principal the price he obtains from the sale of the thing to a third person, and if he does not succeed in selling it, he returns it. Examining the clauses of this contract, none of them is found that substantially supports the plaintiff's contention. Not a single one of these clauses necessarily conveys the idea of an agency. The words commission on sales used in clause (A) of article 1 mean nothing else, as stated in the contract itself, than a mere discount on the invoice price. The word agency, also used in articles 2 and 3, only expresses that the defendant was the only one that could sell the plaintiff's beds in the Visayan Islands. With regard to the remaining clauses, the least that can be said is that they are not incompatible with the contract of purchase and sale.

GONZALO PUYAT & SONS, INC., vs. ARCO AMUSEMENT COMPANY (formerly known as Teatro Arco) (CASE No.5) FACTS: In the year 1929, the "Teatro Arco was engaged in the business of operating cinematographs. In 1930, its name was changed to Arco Amusement Company. C. S. Salmon was the president, while A. B. Coulette was the business manager. About the same time, Gonzalo Puyat & Sons, Inc., another corporation doing business in the Philippine Islands, with office in Manila, in addition to its other business, was acting as exclusive agents in the Philippines for the Starr Piano Company of Richmond, Indiana, U.S. A. It would seem that this last company dealt in cinematographer equipment and machinery, and the Arco Amusement Company desiring to equipt its cinematograph with sound reproducing devices, approached Gonzalo Puyat & Sons, Inc., thru its then president and acting manager, Gil Puyat, and an employee named Santos. After some negotiations, it was agreed between the parties, that is to say, Salmon and Coulette on one side, representing the plaintiff, and Gil Puyat on the other, representing the defendant, that the latter would, on behalf of the plaintiff, order sound reproducing equipment from the Starr Piano Company and that the plaintiff would pay the defendant, in addition to the price of the equipment, a 10 per cent commission, plus all expenses, such as, freight, insurance, banking charges, cables, etc. At the expense of the plaintiff, the defendant sent a cable, to the Starr Piano Company, inquiring about the equipment desired and making the said company to quote its price without discount. A reply was received by Gonzalo Puyat & Sons, Inc., with the price, evidently the list price of $1,700 f.o.b. factory Richmond, Indiana. The defendant did not show the plaintiff the cable of inquiry nor the reply but merely informed the plaintiff of the price of $1,700. Being agreeable to this price, the plaintiff, by means of which is a letter signed by C. S. Salmon dated November 19, 1929, formally authorized the order. The equipment arrived about the end of the year 1929, and upon delivery of the same to the plaintiff and the presentation of necessary papers, the price of $1.700, plus the 10 per cent commission agreed upon and plus all the expenses and charges, was duly paid by the plaintiff to the defendant. Sometime the following year, and after some negotiations between the same parties, plaintiff and defendants, another order for sound reproducing equipment was placed by the plaintiff with the defendant, on the same terms as the first order. About three years later, in connection with a civil case in Vigan, filed by one Fidel Reyes against the defendant herein Gonzalo Puyat & Sons, Inc., the officials of the Arco Amusement Company discovered that the price quoted to them by the defendant with regard to their two orders mentioned was not the net price but rather the list price, and that the defendants had obtained a discount from the Starr Piano Company. Moreover, by reading reviews and literature on prices of machinery and cinematograph equipment, said officials of the plaintiff were convinced that the prices charged them by the defendant

were much too high including the charges for out-of-pocket expense. For these reasons, they sought to obtain a reduction from the defendant or rather a reimbursement, and failing in this they brought the present action.

ISSUE: Whether Arco Amusement Co. can obtain a reduction or reimbursement from the defendant HELD: The facts and circumstances indicated do not point to anything but plain ordinary transaction where the respondent enters into a contract of purchase and sale with the petitioner, the latter as exclusive agent of the Starr Piano Company in the United States. It follows that the petitioner as vendor is not bound to reimburse the respondent as vendee for any difference between the cost price and the sales price which represents the profit realized by the vendor out of the transaction. This is the very essence of commerce without which merchants or middleman would not exist. The distinction which the respondents seeks to draw between the cost price and the list price we consider to be spacious. It is to be observed that the twenty-five per cent (25%) discount granted by the Starr piano Company to the petitioner is available only to the latter as the former's exclusive agent in the Philippines. The fact that the petitioner obtained more or less profit than the respondent calculated before entering into the contract or reducing the price agreed upon between the petitioner and the respondent. Not every concealment is fraud; and short of fraud, it were better that, within certain limits, business acumen permit of the loosening of the sleeves and of the sharpening of the intellect of men and women in the business world.

ANGEL CLEMENO, JR., MALYN CLEMENO, and NILUS SACRAMENTO vs. ROMEO R. LOBREGAT (CASE No. 8) Contract of Sale vs. Contract to Sell Facts: The Spouses Nilus and Teresita Sacramento were the owners of a parcel of land covered and the house constructed thereon located at No. 68 Madaling Araw Street, Teresa Heights Subdivision, Novaliches, Quezon City. The Spouses Sacramento mortgaged the property with the Social Security System (SSS) as security for their housing loan and, likewise, surrendered the owners and duplicate copies of the certificate of title. In 1980, the spouses executed a Deed of Sale with Assumption of Mortgage in favor of Maria Linda Clemeno and her husband Angel C. Clemeno, Jr., with the conformity of the SSS. In 1987, Clemeno and Romeo Lobregat entered into a verbal contract of sale over the property with the following conditions: (a) the respondent would pay the purchase price of the property in the amount of P270,000.00, inclusive of the balance of the loan of the Petitioners, the Spouses Clemeno with the SSS6 within two years from June 4, 1987;(b) the respondent would pay the monthly amortizations of the vendors loan with the SSS; and (c) upon the payment of the purchase price of the property, the Spouses Clemeno would execute a deed of sale in favor of the respondent. Lobregat paid partial payments with receipts from Clemeno, paid realty taxes on the property, and made partial payment of the SSS loans. Significantly, upon his receipt of the advance payment, Clemeno delivered the possession of the premises to Lobregat who is now the present possessor thereof. The last SSS payment was paid by Clemeno without Lobregats knowledge. Thereafter SSS had executed a Release of Real Estate Mortgage in favor of petitioner Clemeno and released the owners duplicate of title. The respondent offered to pay the balance of the purchase price of the property to petitioner Clemeno and asked the latter to execute the deed of sale over the property and deliver the title over the property under his name, but petitioner Clemeno refused to do so unless the respondent agreed to buy the property at the price prevailing in 1992 (not in 1987 where the verbal contract of sale was perfected), which Lobregat refused. Clemeno interposed the following version: that he never sold the property to the respondent; that he merely tolerated the respondents possession of the property for one year or until 1987, after which the latter offered to buy the property, which offer was rejected; and that he instead consented to lease the property to the respondent, that the respondent failed to exercise the option to buy the property by failure to pay the entire price, and that assuming there was a contract of sale, it would be unenforceable because it was only a verbal agreement. The trial court ruled that since both the sale and lease agreements were not reduced to writing, both contracts were unenforceable under Article 1403(2) of the New Civil Code, and had decided the case based on justice and equity. On appeal, the CA reversed the lower court decision. Hence, this case.

Issues: 1. WON there was a contract of sale or contract to sell 2. WON statute of frauds apply to contracts partially performed Held: 1. We find and so hold that the contract between the parties was a perfected verbal contract of sale, not a contract to sell over the subject property. Sale is a consensual contract and is perfected by mere consent, which is manifested by a meeting of the minds as to the offer and acceptance thereof on three elements: subject matter, price and terms of payment of the price. The evidence shows that upon the payment made by the respondent of the amount of P27,000.00 on June 4, 1987, the petitioners vacated their house and delivered possession thereof to the respondent. Conformably to Article 1477 of the New Civil Code, the ownership of the property was transferred to the respondent upon such delivery. The petitioners cannot re-acquire ownership and recover possession thereof unless the contract is rescinded in accordance with law. The failure of the respondent to complete the payment of the purchase price of the property within the stipulated period merely accorded the petitioners the option to rescind the contract of sale as provided for in Article 1592 of the New Civil Code. Besides, the respondents failure to pay was not because he could not pay, but because petitioner Angel Clemeno told him not to do so. The contract entered into by the parties was not a contract to sell because there was no agreement for the petitioners to retain ownership over the property until after the respondent shall have paid the purchase price in full, nor an agreement reserving to the petitioners the right to unilaterally resolve the contract upon the buyers failure to pay within a fixed period. Unlike in a contract of sale, the payment of the price is a positive suspensive condition in a contract to sell, failure of which is not a breach but an event that prevents the obligation of the vendor to convey the title from becoming effective.

3. The provision on statue of frauds applies only to executory, and not to completed, executed or partially executed contracts. In this case, the contract of sale had been partially executed by the parties, with the transfer of the possession of the property to the respondent and the partial payments made by the latter of the purchase price thereof.

Melliza v. Iloilo City [G.R. No. L-24732. April 30, 1968.] (Case No. 9) Facts: Juliana Melliza during her lifetime owned, among other properties, 3 parcels of residential land in Iloilo City (OCT 3462). Said parcels of land were known as Lots Nos. 2, 5 and 1214. The total area of Lot 1214 was 29,073 sq. m. On 27 November 1931 she donated to the then Municipality of Iloilo, 9,000 sq. m. of Lot 1214, to serve as site for the municipal hall. The donation was however revoked by the parties for the reason that the area donated was found inadequate to meet the requirements of the development plan of the municipality, the so- called Arellano Plan. Subsequently, Lot 1214 was divided by Certeza Surveying Co., Inc. into Lots 1214-A and 1214-B. And still later, Lot 1214-B was further divided into Lots 1214-B-1, Lot 1214-B-2 and Lot 1214-B-3. As approved by the Bureau of Lands, Lot 1214-B-1, with 4,562 sq. m., became known as Lot 1214-B; Lot 1214-B-2, with 6,653 sq. m., was designated as Lot 1214-C; and Lot 1214-B-3, with 4,135 sq. m., became Lot 1214-D. On 15 November 1932, Juliana Melliza executed an instrument without any caption providing for the absolute sale involving all of lot 5, 7669 sq. m. of Lot 2 (sublots 2-B and 2-C), and a portion of 10,788 sq. m. of Lot 1214 (sublots 1214-B2 and 1214-B3) in favor of the Municipal Government of Iloilo for the sum of P6,422; these lots and portions being the ones needed by the municipal government for the construction of avenues, parks and City hall site according the Arellano plan. On 14 January 1938, Melliza sold her remaining interest in Lot 1214 to Remedios Sian Villanueva (thereafter TCT 18178). Remedios in turn on 4 November 1946 transferred her rights to said portion of land to Pio Sian Melliza (thereafter TCT 2492). Annotated at the back of Pio Sian Mellizas title certificate was the following that a portion of 10,788 sq. m. of Lot 1214 now designated as Lots 1412-B-2 and 1214-B-3 of the subdivision plan belongs to the Municipality of Iloilo as per instrument dated 15 November 1932. On 24 August 1949 the City of Iloilo, which succeeded to the Municipality of Iloilo, donated the city hall site together with the building thereon, to the University of the Philippines (Iloilo branch). The site donated consisted of Lots 1214-B, 1214-C and 1214-D, with a total area of 15,350 sq. m., more or less. Sometime in 1952, the University of the Philippines enclosed the site donated with a wire fence. Pio Sian Melliza thereupon made representations, thru his lawyer, with the city authorities for payment of the value of the lot (Lot 1214-B). No recovery was obtained, because as alleged by Pio Sian Melliza, the City did not have funds. The University of the Philippines, meanwhile, obtained Transfer Certificate of Title No. 7152 covering the three lots, Nos. 1214-B, 1214-C and 1214-D. On 10 December 1955 Pio Sian Melizza filed an action in the CFI Iloilo against Iloilo City and the University of the Philippines for recovery of Lot 1214-B or of its value. After stipulation of facts and trial, the CFI rendered its decision on 15 August 1957, dismissing the complaint. Said court ruled that the instrument executed by Juliana Melliza in favor of Iloilo municipality included in the conveyance Lot 1214-B, and thus it held that Iloilo City had the right to donate Lot 1214-B to UP. Pio Sian Melliza appealed to the Court of Appeals. On 19 May 1965, the CA affirmed the interpretation of the CFI that the portion of Lot 1214 sold by Juliana Melliza was not limited to the 10,788 square meters specifically mentioned but included whatever was needed for the construction of avenues, parks and the city hall site. Nonetheless, it ordered the remand of

the case for reception of evidence to determine the area actually taken by Iloilo City for the construction of avenues, parks and for city hall site. Hence, the appeal by Pio San Melliza to the Supreme Court. The Supreme Court affirmed the decision appealed from insofar as it affirms that of the CFI, and dismissed the complaint; without costs. Held: Requirement, that sale must have a determinate thing as object, is fulfilled if object of sale is capable of being made determinate at the time of the contract The requirement of the law that a sale must have for its object a determinate thing, is fulfilled as long as, at the time the contract is entered into, the object of the sale is capable of being made determinate without the necessity of a new or further agreement between the parties (Art. 1273, old Civil Code; Art. 1460, New Civil Code). The specific mention of some of the lots plus the statement that the lots object of the sale are the ones needed for city hall site; avenues and parks, according to the Arellano plan, sufficiently provides a basis, as of the time of the execution of the contract, for rendering determinate said lots without the need of a new and further agreement of the parties. Almendra vs. IAC Facts: During the two marriages of Aleja, she and her respective husbands acquired parcels of land. The lands from the first marriage were duly partitioned. After the death of her second husband, Aleja sold to her son Roman, and daughter Angeles, parcels of land. Afater Alejas death, her other children filed a complaint against Roman & Angeles for the annulment of the deeds of sale in their favor executed by Aleja; and to partition the properties. Among the questioned sales was the one executed in favor of Angeles which is a half portion of the conjugal property of Aleja and her 2nd husband, the hilly portion was specifically marked in a sketch. Issue: WON Aleja may validly sell a one half portion of a conjugal property, the hilly portion of which had been specifically marked in a sketch. Held: Yes, she may validly sell one-half portion of a lot, the hilly portion of which had been specifically identified/marked in a sketch, but there must be proof that the conjugal property had been partitioned after the death of the 2nd husband. Otherwise, the sale may be considered valid only as Alejas one half interest therein. (CASE No. 10)

Aleja could not have sold particular hilly portion specified in the deed of sale in absence of proof that the conjugal partnership property had been partitioned after the death of Santiago. Before such partition, Aleja could not claim title to any definite portion of the property for all she had was an ideal or abstract quota or proportionate share in the entire property. SPOUSES ISABELO and ERLINDA PAYONGAYONG, petitioners, vs.HON. COURT OF APPEALS, SPOUSES CLEMENTE and ROSALIA SALVADOR, respondents. (CASE No. 11) FACTS Eduardo Mendoza (Mendoza) was the registered owner of a parcel of land situated in Barrio San Bartolome, Caloocan. On April 18, 1985, Mendoza mortgaged the parcel of land to the Meralco Employees Savings and Loan Association (MESALA) to secure a loan in the amount of P81,700.00. On July 11, 1987, Mendoza executed a Deed of Sale with Assumption of Mortgage over the parcel of land together with all the improvements thereon in favor of petitioners in consideration of P50,000.00. Petitioners bound themselves to assume payment of the balance of the mortgage indebtedness of Mendoza to MESALA On December 7, 1987, Mendoza, without the knowledge of petitioners, mortgaged the same property to MESALA for the second time to secure a loan in the amount of P758,000.00. Both mortgages were duly annotated. On November 28, 1991, Mendoza executed a Deed of Absolute Sale9 over still the same property in favor of respondents in consideration of P50,000.00. MESALA issued a cancellation of mortgage after receiving sufficient payment from Mendoza. The respondents then caused the cancellation of Mendoza's title and registration of the same under their name. petitioners filed on July 16, 1993 a complaint for annulment of deed of absolute sale and transfer certificate of title with recovery of possession and damages against Mendoza, his wife Sally Mendoza, and respondents before the Quezon City RTC. both RTC and CA found for the respondents. ISSUE w/n respondents are entitled to the protection accorded to purchasers in good faith

HELD YES. It is a well-established principle that a person dealing with registered land may safely rely on the correctness of the certificate of title issued therefor and the law will in no way oblige him to go behind the certificate to determine the condition of the property.24 He is charged with notice only of such burdens and claims as are annotated on the title.25 He is considered in law as an innocent purchaser for value or one who buys the property of another without notice that some other person has a right to or interest in such property and pays a full and fair price for the same at the time of such purchase or before he has notice of the claim of another person.26 That petitioners did not cause the cancellation of the certificate of title of Mendoza and procure one in their names is not disputed. Nor that they had their claims annotated on the same title. Thus, at the time of the sale of the property to respondents on November 28, 1991, only the mortgages in favor of MESALA appeared on the annotations of encumbrances on Mendozas title. he real purpose of the Torrens system of registration is to quiet title to land and to put a stop to any question of legality of the title except to claims which have been recorded in the certificate of title at the time of registration or which may arise subsequent thereto. Every registered owner and every subsequent purchaser for value in good faith holds the title to the property free from all encumbrances except those noted in the certificate. Hence, a purchaser is not required to explore further what the Torrens title on its face indicates in quest for any hidden defect or inchoate right that may subsequently defeat his right thereto. In respondents case, they did not only rely upon Mendozas title. Rosalia personall y inspected the property and verified with the Registry of Deeds of Quezon City if Mendoza was indeed the registered owner. Given this factual backdrop, respondents did indeed purchase the property in good faith and accordingly acquired valid and indefeasible title thereto. Under Article 1544, preferential right was correctly given to the respondents who had the sale registered. MAPALO V MAPALO (CASE No. 12) Facts Miguel Mapalo and Candida Quiba, simple illiterate farmers, were registered owners, with Torrens title certificate O.C.T. No. 46503, of a 1,635-square-meter residential land in Manaoag, Pangasinan. Said spouses-owners, out of love and affection for Maximo Mapalo a brother of Miguel who was about to get married decided to donate the eastern half of the land to him. O.C.T. No. 46503 was delivered. As a result, however, they were deceived into signing, on October 15, 1936, a deed of absolute sale over the entire land in his favor. Not known to them, meanwhile, Maximo Mapalo, on March 15, 1938, registered the deed of sale in his favor and obtained in his name Transfer Certificate of Title No. 12829 over the entire land. Thirteen years later on October 20, 1951, he sold for P2,500.00 said entire land in favor of Evaristo, Petronila Pacifico and Miguel all surnamed Narciso. The sale to the Narcisos was in turn registered on November 5, 1951 and Transfer Certificate of Title No. 11350 was issued for the whole land in their names.

The Narcisos took possession only of the eastern portion of the land in 1951, after the sale in their favor was made. On February 7, 1952 they filed suit in the Court of First Instance of Pangasinan (Civil Case No. 1191) to be declared owners of the entire land, for possession of its western portion; for damages; and for rentals. It was brought against the Mapalo spouses as well as against Floro Guieb and Rosalia Mapalo Guieb who had a house on the western part of the land with the consent of the spouses Mapalo and Quiba. The Mapalos filed an answer with counterclaim seeking cancellation of the Transfer Certificate of Title of the Narcisos as to the western half of the land, on the grounds that their signatures to the deed of sale of 1936 was procured by fraud and that the Narcisos were buyers in bad faith. They asked for reconveyance to them of the western portion of the land and issuance of a Transfer Certificate of Title in their names as to said portion. they also filed their own complaint asking that the deeds be declared null and void. The CFI declared as donation only the eastern half portion of the land, and as null and void with respect to the western half portion thereof, null and void and without legal force and effect Transfer Certificate of Title No. 12829 issued in favor of Maximo Mapalo as regards the western half portion of the land covered therein. Court of Appeals reversed the judgment of the Court of First Instance, solely on the ground that the consent of the Mapalo spouses to the deed of sale of 1936 having been obtained by fraud, the same was voidable, not void ab initio, and, therefore, the action to annul the same, within four years from notice of the fraud, had long prescribed. It reckoned said notice of the fraud from the date of registration of the sale on March 15, 1938 ISSUE 1. whether a deed which states a consideration that in fact did not exist, is a contract without consideration, and therefore void ab initio, or a contract with a false consideration, and therefore, at least under the Old Civil Code, voidable. 2. whether or not Narcisos are purchasers in good faith HELD 1. Where, as in this case, there was in fact no consideration, the statement of one in the deed will not suffice to bring it under the rule of Article 1276 of the Old Civil Code as stating a false consideration. Therefore, the ruling of this Court in Ocejo, Perez & Co. vs. Flores, 40 Phil. 921, is squarely applicable herein. In that case we ruled that a contract of purchase and sale is null and void and produces no effect whatsoever where the same is without cause or consideration in that the purchase price which appears thereon as paid has in fact never been paid by the purchaser to the vendor. The inexistence of a contract is permanent and incurable and cannot be the subject of prescription.

2. Firstly, it has been positively shown by the undisputed testimony of Candida Quiba that Pacifico Narciso and Evaristo Narciso stayed for some days on the western side (the portion in question) of the above-described land until their house was removed in 1940 by the spouses Mapalo and Quiba; secondly, Pacifica Narciso admitted in his testimony in chief that when they bought the property, Miguel Mapalo was still in the premises in question (western part) which he is occupying and his house is still standing thereon; and thirdly, said Pacifico Narciso when presented as a rebuttal and sub-rebuttal witness categorically declared that before buying the land in question he went to the house of Miguel Mapalo and Candida Quiba and asked them if they will permit their elder brother Maximo to sell the property. The foregoing facts are explicit enough and sufficiently reveal that the Narcisos were aware of the nature and extent of the interest of Maximo Mapalo their vendor, over the above-described land before and at the time the deed of sale in their favor was executed.

LORENZO VELASCO AND SOCORRO J. VELASCO, petitioners, vs. HONORABLE COURT OF APPEALS and MAGDALENA ESTATE, Inc., responsents (CASE No. 13) Facts: Magdalena Estate offered to sell a parcel of land which Lorenzo Velasco agreed to buy for 100,000. Velasco paid a downpayment of 10,000 and when he tendered to the payment of additional 20,000, Magdalena Estate refused to accept it and refused to execute a deed of sale agreed upon. Magdalena Estate contended that the alleged contract was unenforceable under the Statute of Frauds. Magdalena Estate stated that the property was leased to Socorro Velasco who indicated its desire to purchase the lot. ME indicated its willingness to sell the lot at 100k. Socorro offered to pay a downpayment of 10k but since it was short of the agreed upon 30k downpayment, it was accepted as a deposit. Socorro requested that the receipt be in the name of her brother-in-law Lorenzo. Socorro failed to complete the 30k donwpayment and the 70k balance. When she tendered payment of 20k, ME refused to accept because it had considered the offer to sell rescinded on account of failure to complete the downpayment of 30k on the agreed date. Issue: WON the alleged purchase and sale agreement was perfected. Held: No. No contract of sale was perfected because the parties did not meet with regard to the manner of payment. The complaint states that the plaintiff and defendant agreed that the total downpayment shall be 30k and the balance of 70k was to be paid within 10yrs and that the time with which the payment of 30k was not specified by the parties but the defendant was duly compensated during the said time prior to completion of the downpayment of 30k by way of lease rentals on the house existing thereon which was earlier leased by defendant to Socorro. The Velascos themselves admitted that they and Magdalena Estate still had to meet and agree on how and when the downpayment and the installment payments were to be paid. Hence, it cannot be said that a definite and firm sales agreement between the parties had been perfected over the lot in question.

SPS. HENRY CO AND ELIZABETH CO AND MELODY CO, petitioners, vs. COURT OF APPEALS AND MRS. ADORACION CUSTODIO (CASE No. 14) Facts: Adoracion Custodio entered into a verbal contract with Spouses Co (COS) for her purchase of the latters house, for and in consideration of the sum of $100,000.00. One week thereafter, plaintiff paid to the defendants the amounts of $1,000.00 and P40,000.00 as earnest money to be deducted from the total purchase price. The purchase price of $100,000.00 is payable in two payments $40,000.00 on December 4, 1984 and the balance of $60,000.00 on January 5, 1985. On January 25, 1985, plaintiff paid 30,000.00, as partial payment of the purchase price. Defendants counsel wrote a letter to the plaintiff demanding that she pay the balance of $70,000.00 and not receiving any response thereto, said lawyer wrote another letter to plaintiff informing her that she has lost her option to purchase the property subject of this case and offered to sell her another property. Plaintiffs counsel, wrote a letter to defendants lawyer informing him that plaintiff is now ready to pay the remaining balance to complete the sum of $100,000.00, the agreed amount as selling price. The RTC ruled in favor of Custodio and ordered the spouses to refund the amount of $30,000.00 in Custodios favor. Issue: WON could still exercise her option to pay the balance of the purchase price of the property. Held: Yes. The Court held that the parties entered into a perfected contract of sale and not an option contract. All three elements of a contract of sale are present in the transaction between the petitioners and respondent. Custodios offer to purchase the property subject of the sale at a price of $100,000.00 was accepted by the COS. Even the manner of payment of the price was set forth in the letter. Earnest money in the amounts of US$1,000.00 and P40,000.00 was already received by the COS. Under Article 1482 of the Civil Code, earnest money given in a sale transaction is considered part of the purchase price and proof of the perfection of the sale. Despite the fact that Custodios failure to pay the amounts of US$ 40,000.00 and US$ 60,000.00 on or before the agreed upon dates, the COS did not sue for either specific performance or rescission of the contract. The COS were of the mistaken belief that CUSTODIO had lost her option over the property when she failed to pay the remaining balance of $70,000.00. In the absence of an express stipulation authorizing the sellers to extrajudicially rescind the contract of sale, the COS cannot unilaterally and extrajudicially rescind the contract of sale.

VILLANUEVA VS. COURT OF APPEALS (CASE NO. 15) FACTS: Gamaliel Villanueva (petitioner) has been a tenant-occupant of a unit in the 3-door apartment building erected on a parcel of land owned by Jose Dela Cruz and Leonila dela Cruz (private respondents). Villanueva succeeded the occupancy of the said unit from Lolita Santos in 1985. February 1986 Jose dela Cruz offered said parcel of land with the 3-door apartment building for sale. The Villanuevas showed interest in the property. Because said property was in arrears in the payment of the realty taxes, Jose dela Cruz approached Irene Villanueva and asked for a certain amount to pay for the taxes so that the property would be cleared of any encumbrance. o Plaintiff Irene Villanueva gave P10,000.00 on two occasions. It was agreed by them that said P10,000.00 would form part of the sale price of P550,000.00. Jose dela Cruz went to Irene Villanueva bringing with him Mr. Ben Sabio, a tenant of one of the units in the 3-door apartment building located on the subject property, and requested her to allow said Ben Sabio to purchase one-half (1/2) of the property where the unit occupied by him pertained to which the plaintiffs consented, so that they would just purchase the other half portion and would be paying only P265,000.00. Accordingly the property was subdivided and two (2) separate titles were secured by defendants Dela Cruz. o Mr. Ben Sabio immediately made payments by installments. March 1987 Dela Cruz executed in favor of the spouses Guido Pili and Felicitas Pili, a Deed of Assignment of the other one-half portion of the parcel of land wherein plaintiff Villanueva's apartment unit is situated. Thereafter, the Villanuevas came to know of such assignment and transfer and issuance of a new certificate of title in favor of defendants Pili so that plaintiff Villanueva complained to the barangay captain on the ground that there was already an agreement between defendants Dela Cruz and themselves that said portion of the parcel of land owned by defendants Dela Cruz would be sold to them. ISSUE: 1. W/N there is a perfected contract between Villanueva and Dela Cruz.

HELD: 1. NO. The price of the leased land not having been fixed, the essential elements which give life to the contract were lacking. It follows that the lessee cannot compel the lessor to sell the leased land to him. The price must be certain, it must be real, not fictitious. It is not necessary that the certainty of the price be actual or determined at the time of executing the contract. The fact that the exact amount to be paid therefor is not precisely fixed, is no bar to an action to recover such compensation, provided the contract, by its terms, furnishes a basis or measure for ascertaining the amount agreed upon. The price could be made certain by the application of known factors. In the instant case, however, what is dramatically clear from the evidence is that there was no meeting of mind as to the price, expressly or impliedly, directly or indirectly. Sale is a consensual contract. He who alleges it must show its existence by competent proof. Here, the very essential element of price has not been proven. Assuming arguendo that such draft deed of sale existed, it does not necessarily follow that there was already a definite agreement as to the price. If indeed the draft deed of sale was that important to petitioners' cause, they should have shown some effort to procure it. But petitioners made no such effort. Petitioners' claim that they are ready to pay private respondents is immaterial and irrelevant as the latter cannot be forced to accept such payment, there being no perfected contract of sale in the first place. *NOTE: What took place was only a prolonged negotiation to buy and to sell, and at most, an offer and a counter-offer but no definite agreement was reached by the parties. Hence, the rules on perfected contract of sale, statute of frauds and double sale find no relevance nor application.

SWEDISH MATCH, AB (SMAB) VS. COURT OF APPEALS (CASE NO. 16) FACTS: SMAB is a corporation organized under the laws of Sweden not doing business in the Philippines. o Had three subsidiary corporations in the Philippines, all organized under Philippine laws, to wit: Phimco Industries, Inc. (Phimco), Provident Tree Farms, Inc., and OTT/Louie (Phils.), Inc. SMAB was then sold to Swedish Match NV of Netherlands (SMNV). Ed Enriquez was commissioned and granted full powers to negotiate by SMNV, with the resulting transaction, however, made subject to final approval by the board. Enriquez was held under strict instructions that the sale of Phimco shares should be executed on or before 30 June 1990, in view of the tight loan covenants of SMNV. Enriquez came to the Philippines in November 1989 and informed the Philippine financial and business circles that the Phimco shares were for sale.

November 1989 Antonio Litonjua submitted his offer to buy the Phimco shares for P750,000,000 in the form of a letter. SMAB informed Litonjua that the offer was below their expectations but urged the latter to undertake a comprehensive review and analysis of the value and profit potentials of the Phimco shares. May 1990 Litonjua offered to buy the disputed shares, excluding the lighter division for US$30.6 million, which per another letter of the same date was increased to US$36 million. The SMAB informed Litonjua that the deadline of bidding is on June 30, 1990. Litonjua informed the SMAB that he could not submit his bid on the deadline due to some constraints. Two days prior to the deadline for submission of the final bid, Litonjua advised SMAB that he cant submit the bid on the deadline. SMAB informed Litonjua that on 2 July 1990, they signed a conditional contract with a local group for the disposal of Phimco. SMAB told Litonjua that his bid would no longer be considered unless the local group would fail to consummate the transaction on or before 15 September 1990. As a result, Litonjua finalized his bid to 36M dollars. More than two months from receipt of Litonjuas last letter, Enriquez sent a communication to the former, advising him that the proposed sale of SMABs shares in Phimco with local buyers did not materialize. Enriquez then invited Litonjua to resume negotiations with SMAB for the sale of Phimco shares. Enriquez clarified that if the sale would not be completed at the end of the fifteen (15)day period, SMAB would enter into negotiations with other buyers. Litonjua objected. He emphasized that the new offer constituted an attempt to reopen the already perfected contract of sale of the shares in his favor.

ISSUE: 1. W/N the alleged contract of sale is enforceable under the Statute of Frauds. 2. W/N there is a contract of sale between Litonjua and SMAB. HELD: 1. NO. For a note or memorandum to satisfy the Statute, it must be complete in itself and cannot rest partly in writing and partly in parol. The note or memorandum must contain the names of the parties, the terms and conditions of the contract, and a description of the property sufficient to render it capable of identification.28 Such note or memorandum must contain the essential elements of the contract expressed with certainty that may be ascertained from the note or memorandum itself, or some other writing to which it refers or within which it is connected, without resorting to parol evidence. The exchange of correspondence between the parties hardly constitutes the note or memorandum within the context of Article 1403 of the Civil Code. Rossis letter dated 11 June 1990, heavily relied upon by respondents, is not complete in itself. First, it does not indicate at what price the shares were being sold.

2. NO. In the case of a contract of sale, required is the concurrence of three elements, to wit: (a) consent or meeting of the minds, that is, consent to transfer ownership in exchange for the price; (b) determinate subject matter, and (c) price certain in money or its equivalent.35 Such contract is born from the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. A negotiation is formally initiated by an offer. A perfected promise merely tends to insure and pave the way for the celebration of a future contract. An imperfect promise (policitacion), on the other hand, is a mere unaccepted offer.38 Public advertisements or solicitations and the like are ordinarily construed as mere invitations to make offers or only as proposals. At any time prior to the perfection of the contract, either negotiating party may stop the negotiation.39 The offer, at this stage, may be withdrawn; the withdrawal is effective immediately after its manifestation, such as by its mailing and not necessarily when the offeree learns of the withdrawal. Litonjuas letter dated 21 May 1990, proposing the acquisition of the Phimco s hares for US$36 million was merely an offer. This offer, however, in Litonjuas own words, "is understood to be subject to adjustment on the basis of an audit of the assets, liabilities and net worth of Phimco and its subsidiaries and on the final negotiation between ourselves. The manner of payment of the purchase price is an essential element before a valid and binding contract of sale can exist since the agreement on 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. It is dramatically clear that the US$36 million was not the actual price agreed upon but merely a preliminary offer which was subject to adjustment after the conclusion of the audit of the company finances. Respondents failure to submit their final bid on the deadline set by petitioners prevented the perfection of the contract of sale. It was not perfected due to the absence of one essential element which was the price certain in money or its equivalent. *NOTE: The Statute of Frauds is applicable only to contracts which are executory and not to those which have been consummated either totally or partially.

ADELFA PROPERTIES, INC v. COURT OF APPEALS, ROSARIO JIMENEZCASTAEDA and SALUD JIMENEZ (CASE NO. 17) FACTS: Private respondents and their brothers, Jose and Dominador Jimenez, were the registered coowners of a parcel of land in Barrio Culasi, Las Pias, Metro Manila. On July 28, 1988, Jose and Dominador sold their share consisting of one-half of said parcel of land, specifically the eastern portion thereof, to petitioner Adelfa Properties, Inc. pursuant to a "Kasulatan sa Bilihan ng Lupa." Subsequently, a "Confirmatory Extrajudicial Partition Agreement" was executed by the Jimenezes, wherein the eastern portion of the subject lot, with an area of 8,855 square meters was adjudicated to Jose and Dominador Jimenez, while the western portion was allocated to herein private respondents. Petitioner expressed interest in buying the western portion of the property from private respondents. Accordingly, on November 25, 1989, an "Exclusive Option to Purchase" was executed between petitioner and private respondents. It includes stipulation as to the selling price and the payment of P50, 000 as option money. Before petitioner could make payment, it received summons with a copy of a complaint filed by the nephews and nieces of private respondents against the latter, Jose and Dominador Jimenez, and petitioner in the RTC of Makati for annulment of the deed of sale and recovery of ownership of the property. Petitioner informed private respondents that it would hold payment of the full purchase price and suggested that private respondents settle the case with their nephews and nieces. Respondent Salud Jimenez refused to heed the suggestion of petitioner and attributed the suspension of payment of the purchase price to "lack of word of honor." Petitioner caused to be annotated on the title of the lot its option contract with private respondents, and its contract of sale with Jose and Dominador Jimenez. The RTC rendered judgment in favor of the respondents holding that the agreement entered into by the parties was merely an option contract, and declaring that the suspension of payment by herein petitioner constituted a counter-offer which, therefore, was tantamount to a rejection of the option. It likewise ruled that herein petitioner could not validly suspend payment in favor of private respondents on the ground that the vindicatory action filed by the latter's kin did not involve the western portion of the land covered by the contract between petitioner and private respondents, but the eastern portion thereof which was the subject of the sale between petitioner and the brothers Jose and Dominador Jimenez. The trial court then directed the cancellation of the exclusive option to purchase, declared the sale to intervenor Emylene Chua as valid and binding, and ordered petitioner to pay damages and attorney's fees to private respondents, with costs. On appeal, respondent Court of appeals affirmed in toto the decision of the RTC and held that the failure of petitioner to pay the purchase price within the period agreed upon was tantamount to an election by petitioner not to buy the property; that the suspension of payment constituted an imposition of a condition which was actually a counter-offer amounting to a rejection of the option; and that Article 1590 of the Civil Code on suspension of payments applies only to a contract of sale or a contract to sell, but not to an option contract which it opined was the nature of the document subject of the case at bar.

ISSUES: (1) whether or not the "Exclusive Option to Purchase" executed between petitioner Adelfa Properties, Inc. and private respondents Rosario Jimenez-Castaeda and Salud Jimenez is an option contract; and (2) whether or not there was a valid suspension of payment of the purchase price by said petitioner, and the legal effects thereof on the contractual relations of the parties. HELD: 1. NO, the SC did not conform to the findings of RTC and CA that there is an option contract. The payment of P50, 000 stipulated in the contract is not option money but an earnest money. It was not distinct from the cause or consideration for the sale of the property, but was itself a part thereof. Private respondents failed to show that the payment of the balance of the purchase price was only a condition precedent to the acceptance of the offer or to the exercise of the right to buy. On the contrary, it has been sufficiently established that such payment was but an element of the performance of petitioner's obligation under the contract to sell. It is a statutory rule that 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. It constitutes an advance payment and must, therefore, be deducted from the total price. Also, earnest money is given by the buyer to the seller to bind the bargain. *Clear distinctions between earnest money and option money, viz.: (a) earnest money is part of the purchase price, while option money ids 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. 2. YES. Petitioner was justified in suspending payment of the balance of the purchase price by reason of the aforesaid vindicatory action filed against it. The assurance made by private respondents that petitioner did not have to worry about the case because it was pure and simple harassment 42 is not the kind of guaranty contemplated under the exceptive clause in Article 1590 wherein the vendor is bound to make payment even with the existence of a vindicatory action if the vendee should give a security for the return of the price. The validity of the suspension of payment notwithstanding, we find and hold that private respondents may no longer be compelled to sell and deliver the subject property to petitioner for two reasons, that is, petitioner's failure to duly effect the consignation of the purchase price after the disturbance had ceased; and, secondarily, the fact that the contract to sell had been validly rescinded by private respondents. Petitioner was duly furnished and did receive a written notice of rescission which specified the grounds therefore, it failed to reply thereto or protest against it. Its silence thereon suggests an admission of the veracity and validity of private respondents' claim. 53 Furthermore, the initiative of instituting suit was transferred from the rescinder to the defaulter by virtue of the automatic rescission clause in the contract. 54

But then, the records bear out the fact that aside from the lackadaisical manner with which petitioner treated private respondents' latter of cancellation, it utterly failed to seriously seek redress from the court for the enforcement of its alleged rights under the contract. If private respondents had not taken the initiative of filing Civil Case No. 7532, evidently petitioner had no intention to take any legal action to compel specific performance from the former. By such cavalier disregard, it has been effectively estopped from seeking the affirmative relief it now desires but which it had theretofore disdained.

Atkins Kroll & Co. vs. Cu Hian Tek (CASE NO. 18) FACTS: On September 13, 1951, petitioner Atkins Kroll & Co. (Atkins) sent a letter to respondent B. Cu Hian Tek (Hian Tek) offering (a) 400 cartons of Luneta brand Sardines in Tomato Sauce 48 / 15-oz. Ovals at $8.25 per carton, (b) 300 cartons of Luneta brand Sardines Natural (c) 300 cartons of Luneta brand Sardines in Tomato Sauce 100/5-oz. talls at $7.48 per carton, with all of the offers subject to reply by September 23, 1951. Hian Tek unconditionally accepted the said offer through a letter delivered on September 21, 1951, but Atkins failed to deliver the commodities due to the shortage of catch of sardines by the packers in California. Hian Tek, therefore, filed an action for damages in the CFI of Manila which granted the same in his favor. Upon Atkins appeal, the Court of Appeals affirmed said decision but reduced the damages to P3,240.15 representing unrealized profits. Atkins herein contends that there was no such contract of sale but only an option to buy, which was not enforceable for lack of consideration because it is provided under the 2nd paragraph of Article 1479 of the New Civil Code that "an accepted unilatateral promise to buy or to sell a determinate thing for a price certain is binding upon the promisor if the promise is supported by a consideration distinct from the price. Atkins also insisted that the offer was a mere offer of option, because the "firm offer" was a continuing offer to sell until September 23. ISSUE: Was there a contract of sale between the parties or only a unilateral promise to buy? HELD: The Supreme Court held that there was a contract of sale between the parties. Petitioners argument assumed that only a unilateral promise arose when the respondent accepted the offer, which is incorrect because a bilateral contract to sell and to buy was created upon respondents acceptance. Had Cua Hian Tek backed out after accepting, by refusing to get the sardines and / or to pay for their price, he could also be sued. But his letter-reply to Atkins indicated that he accepted "the firm offer for the sale" and that "the undersigned buyer has immediately filed an application for import license. After accepting the promise and before he exercises his option, the holder of the option is not bound to buy. In this case at bar, however, upon respondents acceptance of herein petitioner's offer, a bilateral promise to sell and to buy ensued, and the respondent had immediately assumed the obligations of a purchaser.

Sanchez vs. Rigos (CASE No. 19)

FACTS: In an instrument entitled "Option to Purchase," executed on April 3, 1961, defendant-appellant Severina Rigos "agreed, promised and committed ... to sell" to plaintiff-appellee Nicolas Sanchez for the sum of P1,510.00 within two (2) years from said date, a parcel of land situated in the barrios of Abar and Sibot, San Jose, Nueva Ecija. It was agreed that said option shall be deemed "terminated and elapsed," if Sanchez shall fail to exercise his right to buy the property" within the stipulated period. On March 12, 1963, Sanchez deposited the sum of Pl,510.00 with the CFI of Nueva Ecija and filed an action for specific performance and damages against Rigos for the latters refusal to accept several tenders of payment that Sanchez made to purchase the subject land.

Defendant Rigos contended that the contract between them was only a unilateral promise to sell, and the same being unsupported by any valuable consideration, by force of the New Civil Code, is null and void." Plaintiff Sanchez, on the other hand, alleged in his compliant that, by virtue of the option under consideration, "defendant agreed and committed to sell" and "the plaintiff agreed and committed to buy" the land described in the option. The lower court rendered judgment in favor of Sanchez and ordered Rigos to accept the sum Sanchez judicially consigned, and to execute in his favor the requisite deed of conveyance. The Court of Appeals certified the case at bar to the Supreme Court for it involves a question purely of law. ISSUE: Was there a contract to buy and sell between the parties or only a unilateral promise to sell? COURT RULING: The Supreme Court affirmed the lower courts decision. The instrument executed in 1961 is not a "contract to buy and sell," but merely granted plaintiff an "option" to buy, as indicated by its own title "Option to Purchase." The option did not impose upon plaintiff Sanchez the obligation to purchase defendant Rigos' property. Rigos "agreed, promised and committed" herself to sell the land to Sanchez for P1,510.00, but there is nothing in the contract to indicate that her aforementioned agreement, promise and undertaking is supported by a consideration "distinct from the price" stipulated for the sale of the land. The lower court relied upon Article 1354 of the Civil Code when it presumed the existence of said consideration, but the said Article only applies to contracts in general.

However, it is not Article 1354 but the Article 1479 of the same Code which is controlling in the case at bar because the latters 2nd paragraph refers to "sales" in particular, and, more specifically, to "an accepted unilateral promise to buy or to sell." Since there may be no valid contract without a cause or consideration, the promisor is not bound by his promise and may, accordingly, withdraw it. Pending notice of its withdrawal, his accepted promise partakes, however, of the nature of an offer to sell which, if accepted, results in a perfected contract of sale. Upon mature deliberation, the Court reiterates the doctrine laid down in the Atkins case and deemed abandoned or modified the view adhered to in the Southwestern Company case. Ang Yu Asuncion vs. CA (CASE No. 20)

FACTS On July 29, 1987, a Second Amended Complaint forSpecific Performance was filed by Ang Yu Asuncion and Keh Tiong, et al., against Bobby Cu Unjieng and Jose Tan before the Regional Trial Court of Manila. The plaintiffs were tenants or lessees of residential and commercial spaces owned by defendants in Binondo, Manila. On several conditions defendants informed the plaintiffs that they are offering to sell the premises and are giving them priority to acquire the same. During negotiations, Bobby Cu Unjieng offered a price of P6- million while plaintiffs made a counter of offer of P5- million. Plaintiff thereafter asked the defendants to put their offer in writing to which the defendants acceded. In reply to defendants letter, plaintiffs wrote, asking that they specify the terms and conditions of the offer to sell. When the plaintiffs did not receive any reply, they sent another letter with the same request.Since defendants failed to specify the terms and conditions of the offer to sell and because of information received that the defendants were about to sell the property, plaintiffs were compelled to file the complaint to compel defendants to sell the property to them. The court dismissed the complaint on the ground that the parties did not agree upon the terms and conditions of the proposed sale, hence, there was no contact of sale at all. On November 15, 1990, the Cu Unjieng spouses executed a Deed of Sale transferring the property in question to Buen Realty and Development Corporation. Buen Realty, as the new owner of the subject property, wrote to the lessees demanding the latter to vacate the premises. In its reply, it stated that Buen Realty and Development Corporation brought the property subject tothe notice of lis pendens. ISSUE Can Buen Realty be bound by the writ of execution by virtue of the notice of lis pendens?

RULING No. An obligation is a juridical necessity to give, to do or not to do (Art. 1156, Civil Code). The obligation is upon the concurrence of the essential elements thereof, viz: (a) the vinculum juris or juridical tie which is the efficient cause established by the various sources of obligations; (b) the object which is the prestation or conduct, required to observed; and (c) the subject-persons who, viewed demandability of the obligation are the active (oblige) and the passive (obligor) subjects. Among the sources of an obligation is a contract (Art. 1157), which is a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service. A contract undergoes various stages that include its negotiation or preparation, its perfection and, finally, its consummation. Until the contract is perfected, it cannot, as an independent source of obligation, serve as a binding juridical relation. In sales, particularly, to which the case at bench belongs, the contract is perfected when a person, called the seller, obligates himself, for a price certain, to deliver and to transfer ownership of a thing or right to another, called the buyer, over which the latter agrees. The registration of lis pendens must be independently addressed in appropriate proceedings.Therefore, Buen Realty cannot be held subject to the writ of execution issued by the respondent Judge, let alone ousted from the ownership and possession of the property, without first being duly afforded its day in court.

EQUATORIAL REALTY DEVELOPMENT, INC. & CARMELO & BAUERMANN, INC., petitioners, vs. MAYFAIR THEATER, INC., respondent. (CASE NO. 23) Facts: Carmelo owned a parcel of land, together with two 2-storey buildings constructed thereon located at Claro M Recto Avenue, Manila, and covered by TCT No. 18529 issued in its name by the Register of Deeds of Manila. On June 1, 1967 Carmelo entered into a contract of lease with Mayfair for the latter's lease of a portion of Carmelo's property for use by Mayfair as a motion picture theater and for a term of twenty (20) years. Mayfair thereafter constructed on the leased property a movie house known as "Maxim Theatre." Two years later, on March 31, 1969, Mayfair entered into a second contract of lease with Carmelo for the lease of another portion of Carmelo's property for similar use as a movie theater and for a similar term of twenty (20) years. Mayfair put up another movie house known as "Miramar Theatre" on this leased property. Both contracts of lease provides (sic) identically worded paragraph 8, which reads: That if the LESSOR should desire to sell the leased premises, the LESSEE shall be given 30-days exclusive option to purchase the same. In the event, however, that the leased premises is sold to someone other than the LESSEE, the LESSOR is bound and obligated, as it hereby binds and obligates itself, to stipulate in the Deed of Sale hereof that the purchaser shall recognize this lease and be bound by all the terms and conditions thereof.

Sometime in August 1974, Mr. Henry Pascal of Carmelo informed Mr. Henry Yang, President of Mayfair, through a telephone conversation that Carmelo was desirous of selling the entire Claro M. Recto property. Mr. Pascal told Mr. Yang that a certain Jose Araneta was offering to buy the whole property for US Dollars 1,200,000, and Mr. Pascal asked Mr. Yang if the latter was willing to buy the property for Six to Seven Million Pesos. Mr. Yang replied that he would let Mr. Pascal know of his decision. On September 18, 1974, Mayfair sent another letter to Carmelo purporting to express interest in acquiring not only the leased premises but "the entire building and other improvements if the price is reasonable. However, both Carmelo and Equatorial questioned the authenticity of the second letter. Four years later, on July 30, 1978, Carmelo sold its entire C.M. Recto Avenue land and building, which included the leased premises housing the "Maxim" and "Miramar" theatres, to Equatorial by virtue of a Deed of Absolute Sale, for the total sum of P11,300,000.00. In September 1978, Mayfair instituted the action a quo for specific performance and annulment of the sale of the leased premises to Equatorial. In its Answer, Carmelo alleged as special and affirmative defense (a) that it had informed Mayfair of its desire to sell the entire C.M. Recto Avenue property and offered the same to Mayfair, but the latter answered that it was interested only in buying the areas under lease, which was impossible since the property was not a condominium; and (b) that the option to purchase invoked by Mayfair is null and void for lack of consideration. Equatorial, in its Answer, pleaded as special and affirmative defense that the option is void for lack of consideration and is unenforceable by reason of its impossibility of performance because the leased premises could not be sold separately from the other portions of the land and building. Issue: whether or not the contract between the parties is an option contract Held: We agree with the respondent Court of Appeals that the aforecited contractual stipulation provides for a right of first refusal in favor of Mayfair. It is not an option clause or an option contract. It is a contract of a right of first refusal. The rule so early established in this jurisdiction is that the deed of option or the option clause in a contract, in order to be valid and enforceable, must, among other things, indicate the definite price at which the person granting the option, is willing to sell. Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent. An unconditional mutual promise to buy and sell, as long as the object is made determinate and the price is fixed, can be obligatory on the parties, and compliance therewith may accordingly be exacted. An accepted unilateral promise which specifies the thing to be sold and the price to be paid, when coupled with a valuable consideration distinct and separate from the price, is what may properly be termed a perfected contract of option. This contract is legally binding, and in sales, it conforms with the second paragraph of Article 1479 of the Civil Code.

Observe, however, that the option is not the contract of sale itself. The optionee has the right, but not the obligation, to buy. Once the option is exercised timely, i.e., the offer is accepted before a breach of the option, a bilateral promise to sell and to buy ensues and both parties are then reciprocally bound to comply with their respective undertakings. In the light of the foregoing disquisition and in view of the wording of the questioned provision in the two lease contracts involved in the instant case, we so hold that no option to purchase in contemplation of the second paragraph of Article 1479 of the Civil Code, has been granted to Mayfair under the said lease contracts. Respondent Court of Appeals correctly ruled that the said paragraph 8 grants the right of first refusal to Mayfair and is not an option contract. It also correctly reasoned that as such, the requirement of a separate consideration for the option, has no applicability in the instant case. There is nothing in the identical Paragraphs "8" of the June 1, 1967 and March 31, 1969 contracts which would bring them into the ambit of the usual offer or option requiring an independent consideration. An option is a contract granting a privilege to buy or sell within an agreed time and at a determined price. It is a separate and distinct contract from that which the parties may enter into upon the consummation of the option. It must be supported by consideration. 22 In the instant case, the right of first refusal is an integral part of the contracts of lease. The consideration is built into the reciprocal obligations of the parties. To rule that a contractual stipulation such as that found in paragraph 8 of the contracts is governed by Article 1324 on withdrawal of the offer or Article 1479 on promise to buy and sell would render in effectual or "inutile" the provisions on right of first refusal so commonly inserted in leases of real estate nowadays. The Court of Appeals is correct in stating that Paragraph 8 was incorporated into the contracts of lease for the benefit of Mayfair which wanted to be assured that it shall be given the first crack or the first option to buy the property at the price which Carmelo is willing to accept. It is not also correct to say that there is no consideration in an agreement of right of first refusal. The stipulation is part and parcel of the entire contract of lease. The consideration for the lease includes the consideration for the right of first refusal. Thus, Mayfair is in effect stating that it consents to lease the premises and to pay the price agreed upon provided the lessor also consents that, should it sell the leased property, then, Mayfair shall be given the right to match the offered purchase price and to buy the property at that price. What Carmelo and Mayfair agreed to, by executing the two lease contracts, was that Mayfair will have the right of first refusal in the event Carmelo sells the leased premises. It is undisputed that Carmelo did recognize this right of Mayfair, for it informed the latter of its intention to sell the said property in 1974. There was an exchange of letters evidencing the offer and counteroffers made by both parties. Carmelo, however, did not pursue the exercise to its logical end. While it initially recognized Mayfair's right of first refusal, Carmelo violated such right when without affording its negotiations with Mayfair the full process to ripen to at least an interface of a definite offer and a possible corresponding acceptance within the "30-day exclusive option" time granted Mayfair, Carmelo abandoned negotiations, kept a low profile for some time, and then sold, without prior notice to Mayfair, the entire Claro M Recto property to Equatorial. Since Mayfair has a right of first refusal, it can exercise the right only if the fraudulent sale is first set aside or rescinded. All of these matters are now before us and so there should be no

piecemeal determination of this case and leave festering sores to deteriorate into endless litigation. The facts of the case and considerations of justice and equity require that we order rescission here and now. Rescission is a relief allowed for the protection of one of the contracting parties and even third persons from all injury and damage the contract may cause or to protect some incompatible and preferred right by the contract. 26 The sale of the subject real property by Carmelo to Equatorial should now be rescinded considering that Mayfair, which had substantial interest over the subject property, was prejudiced by the sale of the subject property to Equatorial without Carmelo conferring to Mayfair every opportunity to negotiate within the 30-day stipulated period. 27 BIBLE BAPTIST CHURCH and PASTOR REUBEN BELMONTE, petitioners, vs. COURT OF APPEALS and MR. & MRS. ELMER TITO MEDINA VILLANUEVA, respondents. (CASE No. 24) Facts: On June 7, 1985, the Bible Baptist Church (petitioner Baptist Church) entered into a contract of lease4 with Mr. & Mrs. Elmer Tito Medina Villanueva (respondent spouses Villanueva). The latter are the registered owners of a property located at No. 2436 (formerly 2424) Leon Guinto St., Malate, Manila. The pertinent stipulations in the lease contract were: 1. That the LESSOR lets and leases to the LESSEE a store space known as 2424 Leon Guinto Sr. St., Malate, Manila, of which property the LESSOR is the registered owner in accordance with the Land Registration Act; 2. That the lease shall take effect on June 7, 1985 and shall be for the period of Fifteen (15) years.; 3. That LESSEE shall pay the LESSOR within five (5) days of each calendar month, beginning Twelve (12) months from the date of this agreement, a monthly rental of Ten Thousand Pesos (P10,000.00) Philippine Currency, plus 10% escalation clause per year starting on June 7, 1988; 4. That upon signing of the LEASE AGREEMENT, the LESSEE shall pay the sum of Eighty Four Thousand Pesos (P84,000.00) Philippine Currency. Said sum is to be paid directly to the Rural Bank, Valenzuela, Bulacan for the purpose of redemption of said property which is mortgaged by the LESSOR; 5. That the title will remain in the safe keeping of the Bible Baptist Church, Malate, Metro Manila until the expiration of the lease agreement or the leased premises be purchased by the LESSEE, whichever comes first. In the event that the said title will be lost or destroyed while in the possession of the LESSEE, the LESSEE agrees to pay all costs involved for the re-issuance of the title; 6. That the leased premises may be renovated by the LESSEE, to the satisfaction of the LESSEE to be fit and usable as a Church; 7. That the LESSOR will remove all other tenants from the leased premises no later than March 15, 1986. It is further agreed that if those tenants are not vacated by June 1, 1986, the rental will be lowered by the sum of Three Thousand Pesos (P3,000.00) per month until said tenants have left the leased premises; 8. That the LESSEE has the option to buy the leased premises during the Fifteen (15) years of the lease. If the LESSEE decides to purchase the premises the terms will be: A) A selling Price of One Million Eight Hundred Thousand Pesos (P1.8 million), Philippine Currency. B) A down payment agreed upon by both parties. C) The balance of the selling price may be paid at the rate of One Hundred Twenty Thousand Pesos (P120,000.00), Philippine Currency, per year

The foregoing stipulations of the lease contract are the subject of the present controversy. Although the same lease contract resulted in several cases6 filed between the same parties herein, petitioner submits, for this Court's review several errors. Issue: 1) Whether or not the option to buy given to the Baptist Church is founded upon a consideration; Held: Article 1479 (2) of the Civil Code provides: An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor if the promise is supported by a consideration distinct from the price. The second paragraph of Article 1479 provides for the definition and consequent rights and obligations under an option contract. For an option contract to be valid and enforceable against the promissor, there must be a separate and distinct consideration that supports it. To summarize the rules, an option contract needs to be supported by a separate consideration. The consideration need not be monetary but could consist of other things or undertakings. However, if the consideration is not monetary, these must be things or undertakings of value, in view of the onerous nature of the contract of option. Furthermore, when a consideration for an option contract is not monetary, said consideration must be clearly specified as such in the option contract or clause. In the petition, the Baptist Church states that "[t]rue, the Baptist Church did not pay a separate and specific sum of money to cover the option alone. But the P84,000 it paid the Villanuevas in advance should be deemed consideration for the one contract they entered into the lease with option to buy."9 This Court finds no merit in these contentions. First, petitioners cannot insist that the P84,000 they paid in order to release the Villanuevas' property from the mortgage should be deemed the separate consideration to support the contract of option. It must be pointed out that said amount was in fact apportioned into monthly rentals spread over a period of one year, at P7,000 per month. Thus, for the entire period of June 1985 to May 1986, petitioner Baptist Church's monthly rent had already been paid for, such that it only again commenced paying the rentals in June 1986. This is shown by the testimony of petitioner Pastor Belmonte where he states that the P84,000 was advance rental equivalent to monthly rent of P7,000 for one year, such that for the entire year from 1985 to 1986 the Baptist Church did not pay monthly rent. This Court agrees with respondents that the amount of P84,000 has been fully exhausted and utilized by their occupation of the premises and there is no separate consideration to speak of which could support the option. This Court also notes that in the present case both the Regional Trial Court and the Court of Appeals agree that the option was not founded upon a separate and distinct consideration and that, hence, respondents Villanuevas cannot be compelled to sell their property to petitioner Baptist Church. Having found that the option to buy granted to the petitioner Baptist Church was not founded upon a separate consideration, and hence, not enforceable against respondents, this Court finds no need to discuss whether a price certain had been fixed as the purchase price.

Limson v. Court of Appeals (CASE No. 25) Facts: Spouses Lorenzo de Vera and Asuncion Santos-de Vera, through their agent Marcosa Sanchez, offered to sell to petitioner a parcel of land in Paranaque to Lourdes Limson. The respondent spouses informed her that they were the owners of the subject property. Limson agreed to buy the property at the price of P34.00 per square meter and gave the sum of P20,000.00 to respondent spouses as "earnest money;" that respondent spouses signed a receipt therefor and gave her a 10-day option period to purchase the property;respondent Lorenzo de Vera then informed her that the subject property was mortgaged to Emilio Ramos and Isidro Ramos; that respondent Lorenzo de Vera asked her to pay the balance of the purchase price to enable him and his wife to settle their obligation with the Ramoses. Petitioner agreed to meet respondent spouses and the Ramoses on 5 August 1978 at the Office of the Registry of Deeds of Makati, Metro Manila, to consummate the transaction but due to the failure of respondent Asuncion Santos-de Vera and the Ramoses to appear, no transaction was formalized. In a second meeting scheduled on 11 August 1978 she claimed that she was willing and ready to pay the balance of the purchase price but the transaction again did not materialize as respondent spouses failed to pay the back taxes of subject property. Subsequently, on 23 August 1978 petitioner allegedly gave respondent Lorenzo de Vera three (3) checks in the total amount of P36,170.00 for the settlement of the back taxes of the property and for the payment of the quitclaims of the three (3) tenants of subject land. The amount was purportedly considered part of the purchase price and respondent Lorenzo de Vera signed the receipts therefor. Later on, Limson found out that the said property was then sold to SUNVAR REALTY. She contends that she should be given priority to buy the land because she has already given 20,000 pesos as earnest money. ISSUE: Whether or not the amount given by Limson constitutes earnest money HELD The consideration of P20,000.00 paid by petitioner to respondent spouses was referred to as "earnest money." However, a careful examination of the words used indicates that the money is not earnest money but option 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.

There is nothing in the Receipt which indicates that the P20,000.00 was part of the purchase price. Moreover, it was not shown that there was a perfected sale between the parties where earnest money was given. Finally, when petitioner gave the "earnest money," the Receipt did not reveal that she was bound to pay the balance of the purchase price. In fact, she could even forfeit the money given if the terms of the option were not met. Thus, the P20,000.00 could only be money given as consideration for the option contract. That the contract between the parties is one of option is buttressed by the provision therein that should the transaction of the property not materialize without fault of petitioner as buyer, respondent Lorenzo de Vera obligates himself to return the full amount of P20,000.00 "earnest money" with option to buy or forfeit the same on the fault of petitioner. It is further bolstered by the provision therein that guarantees petitioner that she or her representative would be notified in case the subject property was sold or encumbered to a third person. Finally, the Receipt provided for a period within which the option to buy was to be exercised, i.e., "within ten (10) days" from 31 July 1978. Doubtless, the agreement between respondent spouses and petitioner was an "option contract" or what is sometimes called an "unaccepted offer." During the option period the agreement was not converted into a bilateral promise to sell and to buy where both respondent spouses and petitioner were then reciprocally bound to comply with their respective undertakings as petitioner did not timely, affirmatively and clearly accept the offer of respondent spouses. San Miguel Properties vs. Sps. Huang (CASE No. 26) Facts: San Miguel Properties is engaged in the purchase and sale of real properties, of which include two parcels of land. These properties were offered for sale at P52,140,000.00. Such offer was made to Atty. Dauz on behalf of Sps. Huang. Atty. Dauz wrote San Miguel informing the respondents interest to buy the property and enclosed therein a check (P1,000,000.00) as earnest deposit subject to certain conditions, to wit: (1) that they be given the exclusive option to purchase the property within 30 days from acceptance of the offer; (2) that during the option period, the parties would negotiate the terms and conditions of the purchase; and (3) petitioner would secure the necessary approvals while respondents would handle the documentation. Sobrecarey, San Miguel Properties VP indicated his conformity to the offer; signed the letter; and accepted the earnest deposit. By agreement of the parties, they agreed that respondents will be given 6 months within which to pay. Upon failure of respondents to pay despite the extension of time given, petitioner through its Pres& CEO Gonzales, wrote Atty. Dauz, that they are returning the earnest deposit. Respondent spouses through counsel, wrote petitioner demanding the execution of a deed of conveyance in their favor. They attempted to return the earnest deposit but was refused by San Miguel.

WON the earnest deposit could have been given as earnest money contemplated in Art. 1482, and thus there was a perfected contract of sale HELD: No, hence, there was no perfected contract of sale. In the present case, the P1 million "earnestdeposit" could not have been given as earnest money as contemplated in Art. 1482. Because when petitioner accepted the terms of respondents offer, their contract had not yet been perfected. The first condition for an option period of 30 days sufficiently shows that a sale was never perfected. Such option giving respondents the exclusive right to buy the properties within the period agreed upon is separate and distinct from the contract of sale which the parties may enter. Sabio vs The International Corporate Bank, INC. (CASE No. 33) Facts: On May 25, 1973, spouses Ledonio assigned to the spouses Sabio all their rights, interests, title and participation over a contiguous portion of the subject property measuring 119,429 square meters. For this purpose, a deed of assignment with assumption of mortgage was later executed by the Ledonio couple in favor of the Sabio couple. Similarly, while the subject property was still the object of several pending cases, the International Corporate Bank, Inc. (or Interbank) acquired from the Trans-Resource Management and Development Corporation all of the latters rights to the subject property by virtue of a deed of assignment executed between them. Sometime thereafter, the Sabios and Interbank settled their opposing claims by entering into a MOA whereby the Sabios assigned, conveyed and transferred all their rights over the parcel of land to Interbank, with the express exception of a 58,000 square meter contiguous portion of said lot. The MOA also granted Interbank the right to assign all its rights and interests, provided that all the obligations of Interbank specified shall also bind all of its assigns, heirs and successors. Subsequently, Interbank transferred all its rights and interests over the parcel of land, excluding the 58,000 square meter contiguous portion, to the Las Pias Ventures, Incorporated (or LPVI). Subsequently, the lots were acquired by the Ayala Group from the LPVI. Consequently, the land title was then transferred first to LPVI, then to the Ayala Group. Thereafter, the Sabios filed a complaint claiming that Interbank failed to comply with its obligation, which is to transfer ownership and title over the contiguous portion to the plaintiffs. In its answer, Interbank averred that fulfillment of its obligation under the MOA became impossible due to the plaintiff spouses own acts. Interbank posited that they were ready to deliver the title to the 58,000 square meter parcel and had, in fact, prepared the Deed of Conveyance required by the Register of Deeds, but the plaintiffs themselves refused to sign the said deed unless the subject property was cleared of all squatters and other illegal occupants. It nevertheless repudiated plaintiffs claim that they were obligated to clear the said property of all squatters and occupants, much less to fence the said property, arguing that no such obligation was imposed in the MOA.

However, plaintiffs contended that the presence of illegal occupants and the existence of unauthorized improvements on the subject parcel negates respondents claim that it could have possibly completed and perfected their ownership and title over said property. The fact that the subject parcel is possessed and occupied by squatters is a clear indication that the respondents were never in possession, and any transfer and conveyance would be meaningless, illusory and impracticable. Plaintiffs claim that there must first be removal of the illegal occupants and unauthorized structures, and the subject parcel should be walled-in before said property could be transferred by Interbank to them by the execution of deed of conveyance. Issue: WON the mere execution of the deed of conveyance is sufficient to assign, convey and transfer ownership and title over the contiguous portion in favor of the plaintiffs. Held: The SC ruled in the affirmative and held that when the sale is made through a public instrument, the execution thereof shall be equivalent to the delivery of the object of the contract, if from the deed the contrary does not appear or cannot be inferred (Art. 1498, CC). Possession is also transferred, along with ownership thereof, to the plaintiffs by virtue of the deed of conveyance. Plaintiffs contention that respondents "never acquired ownership over the subject property since the latter was never in possession of the subject property nor was the property ever delivered" is totally without merit. Under the aforementioned Article 1498, the mere execution of the deed of conveyance in a public document is equivalent to the delivery of the property. Since the execution of the deed of conveyance is deemed equivalent to delivery, prior physical delivery or possession is not legally required. It is well-established that ownership and possession are two entirely different legal concepts. Just as possession is not a definite proof of ownership, neither is non-possession inconsistent with ownership. Thus, it is of no legal consequence that respondents were never in actual possession or occupation of the subject property. They, nevertheless, perfected and completed ownership and title to the subject property. Notwithstanding the presence of illegal occupants on the subject property, transfer of ownership by symbolic delivery under Article 1498 can still be effected through the execution of the deed of conveyance. The key word is control, not possession, of the subject property. Considering that the deed of conveyance proposed by respondents did not stipulate or infer that plaintiffs could not exercise control over said property, delivery can be effected through the mere execution of said deed. Plaintiffs, as owners, have several options. Among these, they could file ejectment suits against the occupants, or to amicably secure the latters evacuation of the premises. Whatever mode petitioners choose, it signifies their control and their intention as owners "to obtain for themselves and to terminate said occupants actual possession thereof." It is sufficient that there are no legal impediments to prevent petitioners from gaining physical possession of the subject property. As stated above, prior physical delivery or possession is not legally required and the execution of the deed of sale or conveyance is deemed equivalent to delivery. This deed operates as a formal or symbolic delivery of the property sold and authorizes the buyer or transferee to use the document as proof of ownership. Nothing more is required. Petitioners cannot deny that the deed of conveyance can effectively transfer ownership as it constitutes symbolic or constructive delivery of the subject property.

Neither can they negate the fact that as owners, they can exercise control over the said property. Respondents are not obligated to remove the occupants before conveying the subject property to petitioners. There is also no truth to petitioners allegation that the deed of conveyance merely transferred to the Sabios all the rights and participation of respondents over the subject property. The Deed of Conveyance clearly states that "the FIRST PARTY (respondent Ayala Corporation) Transfers, Assigns, Cedes and Conveys unto the SECOND PARTY (Sabios) the said 58,000 square-meter portion of Lot 6-B, Psd-13-008573, covered by TCT No. T-5331 of Las Pias Registry of Deeds and described in the above fourth WHEREAS clause." Thus, the deed of conveyance complied with par. 2.b of the MOA, which provided that the said property shall be assigned and conveyed after Interbank and its successors-in-interest shall complete and perfect ownership and title to said property. Philippine Suburban Dev Corp vs Auditor General (CASE No. 34) G.R. No. L-19545 Facts: On June 8, 1960, at a meeting with the Cabinet, the President of the Philippines, acting on the reports of the Committee created to survey suitable lots for relocating squatters in Manila and suburbs, approved in principle the acquisition by the Peoples Homesite and Housing Corporation of the unoccupied portion of the Sapang Palay Estate in Sta. Maria, Bulacan and of another area either in Las Pias or Paraaque, Rizal, or Bacoor, Cavite for those who desire to settle south of Manila. On June 10, 1960, the Board of Directors of the PHHC passed Resolution No. 700 (Annex C) authorizing the purchase of the unoccupied portion of the Sapang Palay Estate at P0.45 per square meter subject to the following conditions precedent: 3. That the President of the Philippines shall first provide the PHHC with the necessary funds to effect the purchase and development of this property from the proposed P4.5 million bond issue to be absorbed by the GSIS. 4. 4. That the contract of sale shall first be approved by the Auditor General pursuant to Executive Order dated February 3, 1959. On July 13, 1960, the President authorized the floating of bonds under Republic Act Nos. 1000 and 1322 in the amount of P7,500,000.00 to be absorbed by the GSIS, in order to finance the acquisition by the PHHC of the entire Sapang Palay Estate at a price not to exceed P0.45 per sq. meter. On December 29,1960, Petitioner Philippine Suburban Development Corporation, as owner of the unoccupied portion of the Sapang Palay Estate and the Peoples Homesite and Housing Corporation, entered into a contract embodied in a public instrument entitled Deed of Absolute Sale whereby the former conveyed unto the latter the two parcels of land abovementioned. This was not registered in the Office of the Register of Deeds until March 14, 1961, due to the fact, petitioner claims, that the PHHC could not at once advance the money needed for registration expenses.

In the meantime, the Auditor General, to whom a copy of the contract had been submitted for approval in conformity with Executive Order No. 290, expressed objections thereto and requested a re-examination of the contract, in view of the fact that from 1948 to December 20, 1960, the entire hacienda was assessed at P131,590.00, and reassessed beginning December 21, 1960 in the greatly increased amount of P4,898,110.00. It appears that as early as the first week of June, 1960, prior to the signing of the deed by the parties, the PHHC acquired possession of the property, with the consent of petitioner, to enable the said PHHC to proceed immediately with the construction of roads in the new settlement and to resettle the squatters and flood victims in Manila who were rendered homeless by the floods or ejected from the lots which they were then occupying. On April 12, 1961, the Provincial Treasurer of Bulacan requested the PHHC to withhold the amount of P30,099.79 from the purchase price to be paid by it to the Philippine Suburban Development Corporation. Said amount represented the realty tax due on the property involved for the calendar year 1961. Petitioner, through the PHHC, paid under protest the abovementioned amount to the Provincial Treasurer of Bulacan and thereafter, or on June 13, 1961, by letter, requested then Secretary of Finance Dominador Aytona to order a refund of the amount so paid. Upon recommendation of the Provincial Treasurer of Bulacan, said request was denied by the Secretary of Finance in a letter-decision dated August 22, 1961. **Petitioner claimed that it ceased to be the owner of the land in question upon the execution of the Deed of Absolute Sale on December 29, 1960. It is now claimed in this appeal that the Auditor General erred in disallowing the refund of the real estate tax in the amount of P30,460.90 because aside from the presumptive delivery of the property by the execution of the deed of sale on December 29, 1960, the possession of the property was actually delivered to the vendee prior to the sale, and, therefore, by the transmission of ownership to the vendee, petitioner has ceased to be the owner of the property involved, and, consequently, under no obligation to pay the real property tax for the year 1961. **Respondent, however, argues that the presumptive delivery of the property under Article 1498 of the Civil Code does not apply because of the requirement in the contract that the sale shall first be approved by the Auditor General, pursuant to the Executive Order. ISSUE: WON there was already a valid transfer of ownership between the parties.

HELD: Considering the aforementioned approval and authorization by the President of the Philippines of the specific transaction in question, the prior approval by the Auditor General envisioned by Administrative Order would therefore, not be necessary. Under the civil law, delivery (tradition) as a mode of transmission of ownership maybe actual (real tradition) or constructive (constructive tradition). When the sale of real property is made in a public instrument, the execution thereof is equivalent to the delivery of the thing object of the contract, if from the deed the contrary does not appear or cannot clearly be inferred. In other words, there is symbolic delivery of the property subject of the sale by the execution of the public instrument, unless from the express terms of the instrument, or by clear inference therefrom, this was not the intention of the parties. Such would be the case, for instance, when a certain date is fixed for the purchaser to take possession of the property subject of the conveyance, or where, in case of sale by installments, it is stipulated that until the last installment is made, the title to the property should remain with the vendor, or when the vendor reserves the right to use and enjoy the properties until the gathering of the pending crops, or where the vendor has no control over the thing sold at the moment of the sale, and, therefore, its material delivery could not have been made. In the case at bar, there is no question that the vendor had actually placed the vendee in possession and control over the thing sold, even before the date of the sale. The condition that petitioner should first register the deed of sale and secure a new title in the name of the vendee before the latter shall pay the balance of the purchase price, did not preclude the transmission of ownership. In the absence of an express stipulation to the contrary, the payment of the purchase price of the good is not a condition, precedent to the transfer of title to the buyer, but title passes by the delivery of the goods.

ROMEO F. EDU, in his capacity as Commissioner of Land Transportation, EDUARDO DOMINGO, CARLOS RODRIGUEZ and PATRICIO YAMBAO in their capacity as ANCAR Agents VS. HONORABLE AMADOR E. GOMEZ, in his capacity as Judge of the Court of First Instance of Manila, Branch 1, THE SHERIFF of Quezon City, and LUCILA ABELLO. (CASE No. 35)

FACTS: The 1968 model Volkswagen, bantam car, allegedly owned by Lt. Walter A. Bala under whose name it was originally registered, was reported to the Office of the Commission on Land Transportation as stolen on June 29, 1970 from the residence of Lt. Bala. Upon receipt of such information the agents of Anti-Carnapping Unit (ANCAR) of the Philippine Constabulary, on detail with the Land Transportation Commission recognized subject car on 2 February 1971 in the possession of LUCILA ABELLO and immediately seized and impounded the car as stolen property. Romeo F. Edu, then Commissioner of Land Transportation, seized the car pursuant to Section 60 of Republic Act 4136 which empowers him to seize the motor vehicle for delinquent registration aside from his implicit power deducible from Sec. 4(5), Sec. 5 and 31 of said Code, "to seize motor vehicles fraudulently or otherwise not properly registered. Lucia Abello filed a complaint for replevin with damages in the Court of First Instance of Manila. CFI ruled in facor of ABELLO. Respondent Court of First Instance Judge found that the car in question was acquired by Lucila Abello by purchase from its registered owner, Marcelino Guansing, for the valuable consideration of P9,000.00, under the notarial deed of absolute sale, dated August 11, 1970; that she has been in possession thereof since then until February 3, 1971 when the car was seized from her by the petitioners who acted in the belief that it is the car which was originally registered in the name of Lt. Walter A. Bala and from whom it was allegedly stolen sometime in June 1970. ISSUE: Whether or not the seizure of the car by the officials are valid. RULING: NO. The acquirer or the purchaser in good faith of a chattel of movable property is entitled to be respected and protected in his possession as if he were the true owner thereof until a competent court rules otherwise. In the meantime, as the true owner, the possessor in good faith cannot be compelled to surrender possession nor to be required to institute an action for the recovery of the chattel, whether or not an indemnity bond is issued in his favor. The filing of an information charging that the chattel was illegally obtained through estafa from its true owner by the transferor of the bona fide possessor does not warrant disturbing the possession of the chattel against the will of the possessor. Finally, the claim of petitioners that the Commission has the right to seize and impound the car under Section 60 of Republic Act 4136 which reads:

Sec. 60. The lien upon motor vehicles. Any balance of fees for registration, re-registration or delinquent registration of a motor vehicle, remaining unpaid and all fines imposed upon any vehicle owner, shall constitute a first lien upon the motor vehicle concerned. is untenable. it is clear from the provision of said Section 60 of Republic Act 4136 that the Commissioner's right to seize and impound subject property is only good for the proper enforcement of lien upon motor vehicles. The Land Transportation Commission may issue a warrant of constructive or actual distraint against motor vehicle for collection of unpaid fees for registration, re-registration or delinquent registration of vehicles.

DURAN vs IAC, ERLINDA B. MARCELO TIANGCO and RESTITUTO TIANGCO (CASE No. 36) FACTS: The antecedent facts showed that petitioner Circe S. Duran owned two (2) parcels of land (Lots 5 and 6, Block A, Psd 32780) covered by Transfer Certificate of Title No. 1647 of the Register of Deeds of Caloocan City which she had purchased from the Moja Estate. She left the Philippines in June 1954 and returned in May 1966. On May 13, 1963, a Deed of Sale of the two lots mentioned above was made in favor of Circe's mother, Fe S. Duran who, on December 3, 1965, mortgaged the same property to private respondent Erlinda B. Marcelo-Tiangco. When petitioner Circe S. Duran came to know about the mortgage made by her mother, she wrote the Register of Deeds of Caloocan City informing the latter that she had not given her mother any authority to sell or mortgage any of her properties in the Philippines. Failing to get an answer from the registrar, she returned to the Philippines. Meanwhile, when her mother, Fe S. Duran, failed to redeem the mortgage properties, foreclosure proceedings were initiated by private respondent Erlinda B. Marcelo Tiangco and, ultimately, the sale by the sheriff and the issuance of Certificate of Sale in favor of the latter. Petitioner Circe S. Duran claims that the Deed of Sale in favor of her mother Fe S. Duran is a forgery, saying that at the time of its execution in 1963 she was in the United States. On the other hand, the adverse party alleges that the signatures of Circe S. Duran in the said Deed are genuine and, consequently, the mortgage made by Fe S. Duran in favor of private respondent is valid. Respondent Court ruled that there is a presumption of regularity in the case of a public document.

ISSUE: 1. Whether or not the mortgage is valid 2. Whether or not private respondent was a buyer in good faith and for value

RULING: 1. It is valid. Even if the signatures were a forgery, and the sale would be regarded as void, still it is Our opinion that the Deed of Mortgage is VALID, with respect to the mortgagees, the defendants-appellants. It is essential that the mortgagor be the absolute owner of the property mortgaged, and while as between the daughter and the mother, it was the daughter who still owned the lots, STILL insofar as innocent third persons are concerned the owner was already the mother (Fe S. Duran) inasmuch as she had already become the registered owner). The mortgagee had the right to rely upon what appeared in the certificate of title, and did not have to inquire further. The rule is simple: the fraudulent and forged document of sale may become the root of a valid title if the certificate has already been transferred from the name of the true owner to the name indicated by the forger. 2. Good faith consists in the possessor's belief that the person from whom he received the thing was the owner of the same and could convey his title.Good faith, while it is always to be presumed in the absence of proof to the contrary, requires a well-founded belief that the person from whom title was received was himself the owner of the land, with the right to convey it. Private respondents, in good faith relied on the certificate of title in the name of Fe S. Duran and as aptly stated by respondent appellate court "[e]ven on the supposition that the sale was void, the general rule that the direct result of a previous illegal contract cannot be valid (on the theory that the spring cannot rise higher than its source) cannot apply here for We are confronted with the functionings of the Torrens System of Registration. The doctrine to follow is simple enough: a fraudulent or forged document of sale may become the ROOT of a valid title if the certificate of title has already been transferred from the name of the true owner to the name of the forger or the name indicated by the forger. The fact that at the time of the foreclosure sale proceedings (1970-72) the mortgagees may have already known of the plaintiffs' claim is immaterial. What is important is that at the time the mortgage was executed, the mortgagees in good faith actually believed Fe S. Duran to be the owner, as evidenced by the registration of the property in the name of said Fe S. Duran.

A. A. ADDISON vs. MARCIANA FELIX and BALBINO TIOCO(CASE NO. 37)

FACTS: By a public instrument Addison sold to the Marciana Felix, with the consent of her husband, the Balbino Tioco, four parcels of land, described in the instrument. The defendant Felix paid, at the time of the execution of the deed, the sum of P3,000 on account of the purchase price, and bound herself to pay the remainder in installments. It was also covenanted that "within one year from the date of the certificate of title in favor of Marciana Felix, this latter may rescind the present contract of purchase and sale, in which case Marciana Felix shall be obliged to return to me, A. A. Addison, the net value of all the products of the four parcels sold, and I shall obliged to return to her, Marciana Felix, all the sums that she may have paid me, together with interest at the rate of 10 per cent per annum." Addison, filed suit to compel Marciana Felix to make payment of the first installment of P2,000. The defendant alleged that the plaintiff had absolutely failed to deliver to the defendant the lands that were the subject matter of the sale, notwithstanding the demands made. After the execution of the deed of the sale Addison, at the request of the Marciana Felix, went to Lucena, accompanied by a representative of the latter, for the purpose of designating and delivering the lands sold. He was able to designate only two of the four parcels, and more than two-thirds of these two were found to be in the possession of one Juan Villafuerte, who claimed to be the owner of the parts so occupied by him. The record shows that the plaintiff did not deliver the thing sold. With respect to two of the parcels of land, he was not even able to show them to the purchaser; and as regards the other two, more than two-thirds of their area was in the hostile and adverse possession of a third person. ISSUE: Whether there was delivery of the thing sold. HELD: The thing is considered to be delivered when it is placed "in the hands and possession of the vendee." It is true that the same article declares that the execution of a public instrument is equivalent to the delivery of the thing which is the object of the contract, but, in order that this symbolic delivery may produce the effect of tradition, it is necessary that the vendor shall have had such control over the thing sold that, at the moment of the sale, its material delivery could have been made. Symbolic delivery through the execution of a public instrument is sufficient when there is no impediment whatever to prevent the thing sold passing into the tenancy of the purchaser by the sole will of the vendor. But if, notwithstanding the execution of the instrument, the purchaser cannot have the enjoyment and material tenancy of the thing and make use of it himself or through another in his name, because such are opposed by a third persons will, then the delivery has not been effected. In the case at bar, therefore, it is evident, that the mere execution of the instrument was not a fulfillment of the vendor's obligation to deliver the thing sold, and that from such non-fulfillment arises the purchaser's right to demand, as she has demanded, the rescission of the sale and the return of the price.

CALIXTO PASAGUI VS. ESTER VILLABLANCA (CASE No. 38)

FACTS: Plaintiffs-appellants Calixto Pasagui and Fausta Mosar bought from defendants Eustaquia Bocar and Catalina Bocar the parcel of land in question for the amount of P2,800.00; that a deed of sale was executed, notarized and registered;that "during this first week of February, 1963, defendants Ester T. Villablanca and her husband, Zosimo Villablanca, illegally and without any right whatsoever, took possession of the above described property, harvesting coconuts from the coconut plantation therein, thus depriving of its possession herein plaintiffs, and causing them damages; that for the purpose of enforcing the vendors' warranty in case of eviction, Eustaquia Bocar and Catalina Bocar were also included as defendants; and, therefore, plaintiffs-appellants pray that a decision be rendered, ordering (a) defendants Ester T. Villablanca and her husband, Zosimo Villablanca, "to surrender the possession of the above described property to said plaintiffs"; (b) defendants Ester T. Villablanca and her husband, Zosimo Villablanca, "to pay to said plaintiffs the amount of EIGHT HUNDRED PESOS (P800.00) as damages for the usurpation by them of said property"; and (c) defendants Eustaquia Bocar and Catalina Bocar "to pay the plaintiffs the amount of P2,800.00, plus incidental expenses, as provided for by Art. 1555 of the Civil Code, in case of eviction or loss of ownership to said above described property on the part of plaintiffs."

ISSUE: Whether there was delivery of the thing sold.

HELD: It is true that the execution of the deed of absolute sale in a public instrument is equivalent to delivery of the land subject of the sale. 2 This presumptive delivery only holds true when there is no impediment that may prevent the passing of the property from the hands of the vendor into those of the vendee. It can be negated by the reality that the vendees actually failed to obtain material possession of the land subject of the sale.. 3 It appears from the records of the case at bar that plaintiffs-appellants had not acquired physical possession of the land since its purchase on November 12, 1962. As a matter of fact, their purpose in filing the complaint in Civil Case No. 3285 is precisely to "get the possession of the property." 4 In order that an action may be considered as one for forcible entry, it is not only necessary that the plaintiff should allege his prior physical possession of the property but also that he was deprived of his possession by any of the means provided in section 1, Rule 70 of the Revised Rules of Court, namely: force, intimidation, threats, strategy and stealth. For, if the dispossession did not take place by any of these means, the courts of first instance, not the municipal courts, have jurisdictions.. 5 The bare allegation in the complaint that the plaintiff has been "deprived" of the land of which he is and has been the legal owner for a long period has been held to be insufficient. 6

It is true that the mere act of a trespasser in unlawfully entering the land, planting himself on the ground and excluding therefrom the prior possessor would imply the use of force. In the case at bar, no such inference could be made as plaintiffs-appellants had not claimed that they were in actual physical possession of the property prior to the entry of the Villablancas. Moreover, it is evident that plaintiffs-appellants are not only seeking to get the possession of the property, but as an alternative cause of action, they seek the return of the price and payment of damages by the vendors "in case of eviction or loss of ownership" of the said property. It is, therefore, not the summary action of forcible entry within the context of the Rules.

AMIGO VS. TEVES (CASE NO. 39) G.R. No. L-6389 November 29, 1954

FACTS: On August 11, 1937, Macario Amigo and Anacleto Cagalitan executed in favor of their son, Marcelino Amigo, a power of attorney granting to the latter, among others, the power "to lease, let, bargain, transfer, convey and sell, remise, release, mortgage and hypothecate, part or any of the properties . . . upon such terms and conditions, and under such covenants as he shall think fit." On October 30, 1938, Marcelino Amigo, in his capacity as attorney-in-fact, executed a deed of sale of a parcel of land for a price of P3,000 in favor of Serafin Teves stipulating therein that the vendors could repurchase the land within a period of 18 months from the date of the sale. In the same document, it was also stipulated that vendors would remain in possession of the land as lessees for a period of 18 months subject to the following terms and conditions: (a) the lessees shall pay P180 as rent every six months from the date of the agreement; (b) the period of the lease shall terminate on April 30, 1940; (c) in case of litigation, the lessees shall pay P100 as attorney's fees; and (d) in case of failure to pay any rental as agreed upon, the lease shall automatically terminate and the right of ownership of vendee shall become absolute. On July 20, 1939, the spouses Macario Amigo and Anacleta Cagalitan donated to their sons Justino Amigo and Pastor Amigo several parcels of land including their right to repurchase the land in litigation. The deed of donation was made in a public instrument, was duly accepted by the donees, and was registered in the Office of the Register of Deeds. The vendors-lessees paid the rental corresponding to the first six months, but not the rental for the subsequent semester, and so on January 8, 1940, Serafin Teves, the vendee-lessor, executed an "Affidavit of Consolidation of Title" in view of the failure of the lessees to pay the rentals as

agreed upon, and registered said affidavit in the Office of the Register of Deeds who issued to Serafin Teves the corresponding transfer of title over the land in question. On March 9, 1940, Justino Amigo and Pastor Amigo, as donees of the right to repurchase the land in question, offered to repurchase the land from Serafin Teves by tendering to him the payment of the redemption price but the latter refused on the ground that the ownership had already been consolidated in him as purchaser a retro. ISSUES: Whether or not the lease covenant contained in the deed of sale with pacto de retro executed by Marcelino Amigo as attorney-in-fact in favor of Serafin Teves is not germane to, nor within the purview of, the powers granted to said attorney-in-fact and, therefore, is ultra vires and null and void DECISION: No. The lease covenant contained in the deed of sale with pacto de retro executed by Marcelino Amigo as attorney-in-fact in favor of Serafin Teves is not germane to, nor within the purview of, the powers granted to said attorney-in-fact and, therefore, is not ultra vires and is valid. RATIO: The power granted to the agent is so broad that it practically covers the celebration of any contract and the conclusion of any covenant or stipulation. Among the powers granted are: to bargain, contract, agree for, purchase, receive, and keep lands, tenements, hereditaments, and accept the seizing and possessing of all lands," or "to lease, let, bargain, transfer, convey and sell, remise, release, mortgage and hypothecate . . . upon such terms and conditions, and under such covenants as he shall think fit." When the power of attorney says that the agent can enter into any contract concerning the land, or can sell the land under any term or condition and covenant he may think fit, means that he can act in the same manner and with the same breath and latitude as the principal could concerning the property. The fact that the agent has acted in accordance with the wish of his principals can be inferred from their attitude in donating to the herein petitioners the right to redeem the land under the terms and conditions appearing in the deed of sale executed by their agent. The lease covenant embodied in the deed of sale is common in contracts involving sales of land with pacto de retro. The lease that a vendor executes on the property may be considered as a means of delivery or tradition by constitutum possessorium. Where the vendor a retro continues to occupy the land as lessee, by fiction of law, the possession is deemed to be constituted in the vendee by virtue of this mode of tradition. It can be said that the covenant regarding the lease of the land sold is germane to the contract of sale with pacto de retro.

Banzon v. Cruz (CASE NO. 40) G.R. No. L-31789 June 29, 1972 Facts: Sometime in 1952, Maximo Sta. Maria (Sta. Maria) obtained a crop loan from the Philippine National Bank (PNB), with Associated Insurance & Surety Co., Inc., (Associated) acting as surety for Sta. Maria and Antonio Banzon (Banzon) and Emilio Naval (Naval) as inseminators for Associated. When Sta. Maria failed to pay PNB the amount of the loan , PNB demanded payment from Associated who, instead of paying PNB, filed a complaint against Sta.Maria, Banzon and Naval. In 1957, the Court of First Instance of Manila (CFI of Manila) granted the petition of Associated, and ordered therein defendants to pay Associated jointy and severally. Associated then levied Banzons two lots in Caloocan to satisfy the judgment of CFI Manila. As it was the highest bidder (P41,000.00) at the execution sale conducted by the Sheriff of Rizal, the latter issued a certificate of sale in favor of the former. Associated then demanded from Banzon the delivery of the latters owners duplicate of certificate of title, to which Banzon refused, prompting Associated to file a complaint with the Court of First Instance of Rizal (CFI of Rizal) for an order directing Banzon to present said certificated for cancellation and for another order directing the Register of Deeds of Rizal to cancel the certificated and to issue new transfer certificates in the name of Associated. The trial court ruled in favor of Associated. However, it was then discovered that Associated never discharged its liability with PNB. PNB then filed a complaint against Sta. Maria, his six brothers and sisters, and Associated. After the trial court ruled in favor of PNB, Sta. Maria began paying his outstanding loan with the former, which then amounted to only of the amount earlier awarded to Associated to be paid to PNB. In other words, PNB collected directly from its debtor Sta. Maria the amounts owing to it, with Associated never having to put in one centavo. After collecting from Sta. Maria, PNB released Associated from its obligation as surety. This should have put an end to the matter and Banzons two lots therefore restored fully to his ownership, but it was then discovered that Associated has allowed and permitted one Pedro Cardenas (Cardenas) to execute and levy one of Banzons two parcel of land being held by Associated as trustee, which then resulted to the issuance of a new title in the name of Cardenas. On March 13, 1970, having learned of PNBs release of Associated as of February 20, 1970, filed a complaint for reconveyance of their two parcels of land, one of which is under Cadenass name and the other, while still under Banzons name, was held by Associated. Issue: Whether or not Banzon has the right to ask for reconveyance of his two lots in question.

Held: Yes, he has. When Associated nevertheless prematurely and contary to the intent and condition of the basic 1957 judgment levied in execution on the two Caloocan City lots of Banzon the interest it acquired was clearly impressed with a trust character. Such acquisition of Banzon's properties by Associated was effected, if not through fraud on Associated's part, certainly through mistake and there Associated was "by force of law, considered a trustee of implied trust for the benefit of the person from whom the property comes" by virtue of Article 1456 of the Code since Associated not having paid nor having been compelled to pay the bank had no right in law or equity to so execute the judgment against Banzon as indemnitor. Had there been no fraudulent concealment or suppression of the fact of such non-payment by Associated or a mistaken notion just assumed without factual basis that Associted had paid the bank and was thus entitled to enforce its judgement against Banzon as indemnitor, the writ for execution of the judgment against Banzon's properties would not been issued. Associated therefore stands legally bound by force of law to now discharge its implied trust and return Banzon's properties to him as their true and rightful owner. As Cardenas in levying in turn for satisfaction of judgment against Associated on one of Banzon's lots acquired only whatever interest Associated had in the lot, and with the knowledge that Associated's basic 1957 judgment against Banzon was "for the benefit of the Philippine National Bank" and hence Associated's interest in the Banzon properties was impressed with a trust character, subject to the obligation of Associated as implied trustee to return the properties to Banzon, the trust character of the lot titled by Cardenas necessarily passed to him. Cardenas could not claim actual or absolute ownership of the lot so titled but could only hold the same as trustee, like Associated as his causante or predecessor.

EDCA Publishing & Distributing Corp. vs Santos (CASE NO. 41)

Facts: Spouses Gerardo and Leonor Santos, who are engage in the business of buying and selling books and often deal with hard-up sellers who urgently have to put with their books at reduced price and reselling it for a profit, bought 120 books from Tomas dela Pena on October 7, 1981 because of the latters financial need. Prior to the sale to the Santoses, it was found out that Tomas represented himself as a dean of De La Salle and placed an order with EDCA for 406 books, payable on delivery. EDCA delivered 406 books and Tomas issued a personal check amounting to Php 8, 995.65 as its purchase price. Later on, EDCA found out that Tomas was not affiliated with De La Salle and that Tomas had no more account with Phil. Amanah Bank. The police arrested Tomas. Subsequently, with the help of the police, EDCA seized the 120 books (part of the 406 books first delivered to Tomas), without any warrant given by the court, from the Santoses. Respondents claim that pursuant to Art. 599 of the Civil Code, they have acquired the books in good faith and that its delivery to them is equivalent to a title. On the other hand, EDCA argued that there was no contract of sale as the payment check bounced for lack of funds nullifying the contract of sale because of failure of consideration. CA affirmed lower courts decision ordering EDCA to return the books.

Issue: Whether there was a valid contract of sale between EDCA and Tomas

Held: Yes. Consideration is not lacking. Purchase price of Php 8K constitute a valid consideration. The fact that Tomas non-payment to EDCA was a matter between him and EDCA and it did not impair the title acquired by spouses Santos. Non-payment only creates a right to demand payment or to rescind the contract, or to criminal prosecution in the case of bouncing checks. The delivery having been made to Cruz gave him ownership over the 406 books and can in turn transfer it to another. The Santoses acted in good faith and with proper care when they bought the books from Tomas. EDCAs remedy is not against the respondents but against Tomas who caused all this trouble.

Alliance Tobacco Corporation, Inc. vs Phil. Virginia Tobacco Administration (CASE NO. 42)

Facts: Petitioner ALLIANCE shipped to Farmers Virginia Tobacco Redrying Company Inc. (FVTR), a contractee of Phil. Virginia Tobacoo Admin. (PVTA), 96 bales of tobacco covered by Guia no. 1 and 167 bales covered by Guia No. 2. Said Guia 1 and 2 were shipped to redrying plant in Bauang, La Union and were listed in the Log Book together with the submission of documents i.e BIR clearance, clearance from Regional Tobacco inspector. After several days, grading took place but only 89 bales from Guia 2 were graded, weighed and accepted and none from Guia 1. Plaintiff the asked that the ungraded and un-weighed tobacco be withdrawn from the Redrying Plant but defendants FVTR and PVTA refused because according to them the tobacco were subject of a merchandising loan and owned by PVTA. Unfortunately, the remaining ungraded and un-weighed 174 bales were lost while they were in the possession of FVTR. Alliance demanded for the value of lost bales amounting to Php 28, 382.00 and apply the same its merchandising loan with PVTA but the latter refused to do so. Respondent PVTA alleges that without having been weighed and graded, the shipment of tobacco could not have been deemed to have been accepted by FVTR. Moreover, PVTAs contention that the delivery was not valid and binding on it considering that, not having been weighed and graded, it had not duly accepted the shipments so as to perfect the contract of sale.

Issue: WOR there petitioners delivery of 174 bales of tobacco to FVTR perfected the contract of sale between petitioner and PVTA so as to hold the latter liable for the loss of said bales while in the possession of FVTR.

Held: YES. It was established by the lower court that there was indeed a delivery of a total of 263 bales of tobacco, 89 of which were even weighed and graded. Even if the remaining unaccepted bales were not graded and weighed, still there was delivery as to satisfy the Civil Code which provides that ownership of the thing sold shall be transferred to the vendee upon actual or constructive delivery thereof. There is delivery when the thing sold is placed in the control of the vendee.

In tobacco trading procedure, the delivery seals the contract of sale and that is observed by everyone in the trade. But the observance of the procedure more often than not renders a trader at a disadvantage because the moment the shipment is placed at the hand of PVTA, the trader is left empty-handed. The Supreme Court ruled that this procedure is flawed and that the ideal situation would still be pursuant to Art. 1475. Equity and fair dealing must once prevail. Since PVTA had virtual control over lost tobacco bales, delivery thereof to the FVTR should also be considered effective delivery to PVTA. Wherefore, decision of CA and lower court directing PVTA to pay ALLIANCE is affirmed.

STA.ANA V. HERNANDEZ (January 17, 1966) (CASE NO. 43)

FACTS:

Spouses Jose Santa Ana, Jr. and Lourdes Sto. Domingo sold a land in Bulacan to respondent Rosa Hernandez for P11,000 lump sum. (there were two other previous sales to different vendees of other portions of the land) The boundaries of the land were stated in the deed of sale and its approximate land area. Petitioners-spouses caused the preparation of the subdivision plan but Hernandez didnt agree to the partition. As such, petitioners-spouses filed a case alleging that Hernandez is occupying in excess of 17000 square meter of the land sold. Hernandez claims that the excess area is part of the land she bought. ISSUE: WON the excess area occupied by Hernandez is part of the land sold. HELD: The sale involves a definite and identified tract, a corpus certum, that obligated the vendors to deliver to the buyer all the land within the boundaries, irrespective of whether its real area should be greater or smaller than what is recited in the deed. To hold the buyer to no more than the area recited on the deed, it must be made clear therein that the sale was made by unit of measure at a definite price for each unit. The sale in this case only involves the definite boundaries but only approximate land areas. As such, Art 1542 concerning the sale for lump sum must be considered.

SEMIRA V. CA (CASE NO. 44)

FACTS: Gutierrez was the owner of a parcel of land. This parcel was sold to Buenaventura An. He entered the premises based on the boundaries stated in the deed of sale. He then bought two additional parcels of land. On a relevant date, he sold the first parcel to his nephew who also entered the premises based on the boundaries stated in the deed. The deed also stated the same boundaries and area of the lot, which was larger in actuality. This nephew then sold the land to petitioner. The deed this time reflected a different area, the actual area of the land. The land was found to be larger than what was stated in the previous documents. Semira entered then the premises based on the boundaries and began construction of a rice mill. Buenaventura then filed an action for forcible entry against Semira, alleging that latter illegally encroached on the other parcel of land previously bought by the former and that the land that was supposed to be occupied by the latter was smaller than the land he was actually occupying.

HELD: In the case at bar, the issue of possession cannot be decided independently of the question of ownership. Private respondent claimed constructive possession of the parcel of land he alleged to be encroached by Semira. Likewise, Semira based his occupancy of the land by virtue of the Ramirezs sale of the land to him. The question of prior possession may only be resolved in answering the question of who is the real owner of the disputed portion. Where land is sold for a lump sum and not so much per unit of measure, the boundaries of the land stated in the contract determines the effects and scope of the sale, not the area thereof. The vendor is thus obligated to deliver the land included within the boundaries regardless of whether the land is greater or lesser than the area stipulated in the sale.

Paylogo vs Jarabe (CASE NO. 47) Petitioners: Romeo Paylogo & Rosario Dimaandal Respondents: Ines Pastrana Jarabe and The Honorable Court of Appeals Facts: 1. Land involved in this suit was originally covered by Homestead Patent issued on June 7, 1920 under Act No. 926 and later under OCT No. 251 issued on June 22, 1920 in the name of Anselmo Lacatan. Anselmo Lacatan died on May 17, 1948. 2. After Anselmos death, OCT No. 251 was cancelled and TCT No. T-728 was issued in the name of his two sons and heirs, Vidal and Florentino Lacatan. 3. Vidal died leaving his 3 children as heirs. Vidals heirs then executed a deed of sale on March 23, 1953 in favor of plaintiffs- petitioners (Paylogo Spouses & Dimaandal) over a portion of lot under TCT No. T-728 containing an area of 3. 9500 hectares. 4. Florentino also died leaving his widow and three children as heirs. Florentinos heirs executed a deed of sale on December 31, 1953 in favor of petitioners over another portion of lot under TCT No. T-728 with an area of 2.8408 hectares. 5. By virtue of the registration of the two deeds of sale, TCT No. T-728 was cancelled and TCT No. T-4208 covering total area of 6.7908 hectares was issued in favor of plaintiff-petitioners, Paylogo Spouses. 6. A subsequent subdivision survey for the purpose of segregating the two aforementioned portions of land described in the deeds as well as the new TCT No. T-728 disclosed that a portion (one half hectare) of the total area purchased by plaintiff-petitioners was being occupied by defendandant-respondent, Pastrana Jarabe. Hence an action to recover possession and ownership of the said portion. 7. The trial court and court of appeals found that: on November 27, 1938, the said portion of land was purchased by Hilario Jarabe, late husband of defendant-respondent, from one Apolonio Lacatan, which sale is evidenced by an unregistered deed of sale (Exh. 6); that Apolonio Lacatan, in turn, bought the same in 1936 from Anselmo Lacatan, the original registered owner in whose favor OCT No. 251 and later TCT No. T-4208 were issued; that the first deed of sale, also unregistered, executed by Anselmo Lacatan in favor of Apolonio Lacatan was lost during the Japanese occupation; that the herein defendant-respondent has been in possession of the said portion continuously, publicly, peacefully and adversely as owner thereof from 1938 up to the present; and, that the herein plaintiffs-petitioners knew, nay, admitted in a deed of lease, paragraph 3 (Exh. 4), that defendant-respondent has been in possession of the premises since 1945. 8. Lower court upheld Jarabe and ruled that plaintiff-petitioners were not purchaser in good faith; Court of Appeals affirmed in toto.

Issue: Who has a better right in case of double sale of real property, the registered buyer or the prior but unregistered purchaser? Held. The unregistered purchaser, Jarabe has a better right in the instant case. This Court has formulated in no uncertain terms the general principle governing the matter: as between two purchasers, the one who has registered the sale in his favor, in good faith, has a preferred right over the other who has not registered his title, even if the latter is in the actual possession of the immovable property (. Indeed, the foregoing principle finds concrete bases in the pertinent provisions of the New Civil Code, Article 1544, providing that if the same immovable property should have been sold to different vendees, "the ownership shall belong to the person acquiring it who in good faith first recorded it in the registry of property." But there is more than meets the eye in the case at bar. While plaintiffs-petitioners have a registered title, it cannot be denied that their acquisition and subsequent registration were tainted with the vitiating element of bad faith. Both Courts below found that petitioners knew beforehand that the parcel of land in question was owned by defendant-respondent. In its decision the Court of Appeals declared that "plaintiffs herein were aware of that peaceful, continuous and adverse possession of defendant since 1945, because this fact is admitted by said plaintiffs in a deed of lease, paragraph 3 (Exhibit 4) covering a portion of the entire lot, and situated just across the road from the land in question." Considering that the boundaries of the lands that the petitioners Paylago purchased in 1953 and 1954 were well defined, they must have known that the portion occupied by the defendantrespondent under claim of ownership and leased to them by the latter was included in the description. And coupled with their knowledge that defendant-respondent purchased the same from Apolonio Lacatan, plaintiffs-petitioners should have inquired and made an investigation as to the possible defects of the title of the Lacatan heirs over the entire lot sold to them, granting that the latter's certificate of title was clear. This, they failed to do. They cannot now claim complete ignorance of defendant-respondent's claim over the property. As was well stated in one case, "a purchaser who has knowledge of facts which should put him upon inquiry and investigation as to possible defects of the title of the vendor and fails to make such inquiry and investigation, cannot claim that he is a purchaser in good faith and has acquired a valid title thereto".

The fundamental premise of the preferential rights established by Article 1544 of the New Civil Code is good faith. To be entitled to the priority, the second vendee must not only show prior recording of his deed of conveyance or possession of the property sold, but must, above all, have acted in good faith, that is to say, without knowledge of the existence of another alienation by his vendor to a stranger. Short of this qualifying circumstance, the mantle of legal protection and the consequential guarantee of indefeasibility of title to the registered property will not in any way shelter the recording purchaser against known and just claims of a prior though unregistered buyer. Verily, it is now settled jurisprudence that knowledge of a prior transfer of a registered property by a subsequent purchaser makes him a purchaser in bad faith and his knowledge of such transfer vitiates his title acquired by virtue of the later instrument of conveyance which was registered in the Registry of Deeds. The registration of the later instrument creates no right as against the first purchaser. For the rights secured under the provisions of Article 1544 of the New Civil Code to the one of the two purchasers of the same real estate, who has secured and inscribed his title thereto in the Registry of Deeds, do not accrue, as already mentioned, unless such inscription is done in good faith (Leung Yee v. F.L. Strong Machinery Co., et al., op. cit.). To hold otherwise would reduce the Torrens system to a shield for the commission of fraud Hanopol vs Pilapil (CASE NO. 48) Facts: This is a case of double sale of the same unregistered land. Hanopol claims ownership of the land by virtue of a series of purchases effected in 1938 by means of a private instrument executed by the former owners (all surnamed Siapo). In addition, Hanopol invokes in his favor a decision render by the Court of First Instance of Leyte, on a complaint he filed on June 16, 1948 against the same vendors, who, according to him, took possession of the said property in December 1945 through fraud, threat and intimidation, pretending falsely to be the owners thereof and ejecting Hanopols tenants thereon, and since then had continued to possess the land. On September 21, 1958 the CFI in the reivindicatory case declared him the exclusive owner of the land in question and ordering defendants (vendors) to deliver possession. On the other hand, appellee Pilapil asserts title to the property on the strength of a duly notarized deed of sale executed in his favor by the same owners on December 3, 1945, which deed of sale was registered in the Registry of Deeds of Leyte on August 20, 1948 under the provisions of Act No. 3344. Appellant Hanopol argues under the second issue raised by him that the registration of Pilapil's notarized deed of sale in 1948 under Act No. 3344 "shall be understood to be without prejudice to a third party with a better right". He contends that since at the time the Siapos sold the land in question in 1945 to Pilapil, the former were no longer the owners as they had already sold the same to appellant since 1938, the first sale to him is a better right which cannot be prejudiced by the registration of the second sale.

Issue: whether or not Hanopol can be considered as a third person with a better right under Act No 3344. Held No. Hanopol cant be considered as a third person with a better right under Act No. 3344. The "better right" referred to in Act No. 3344 is much more than the mere prior deed of sale in favor of the first vendee. In the Lichauco case just mentioned, it was the prescriptive right that had supervened. Or, as also suggested in that case, other facts and circumstances exist which, in addition to his deed of sale, the first vendee can be said to have better right than the second purchaser. In the case at bar, there appears to be no clear evidence of Hanopol's possession of the land in controversy. In fact, in his complaint against the vendors, Hanopol alleged that the Siapos took possession of the same land under claim of ownership in 1945 and continued and were in such possession at the time of the filing of the complaint against them in 1948. Consequently, since the Siapos were in actual occupancy of the property under claim of ownership, when they sold the said land to appellee Pilapil on December 3, 1945, such possession was transmitted to the latter, at least constructively, with the execution of the notarial deed of sale, if not actually and physically as claimed by Pilapil in his answer filed in the present case. Thus, even on this score, Hanopol cannot have a better right than appellee Pilapil who, according to the trial court, "was not shown to be a purchaser in bad faith". Notes: An example of what could be a better right that is protected against the inscription of a subsequent sale is given in the case of Lichauco v. Berenguer (39 Phil. 643). The facts in that case are succinctly stated in the syllabus thereof as follows: .... In 1882 B sold to S a piece of land. After the sale B continued in the possession of the land in the capacity of lessee of S through payment of rent, and continued as such until his death when he was substituted by the administrator of his property. In 1889 B sold again the same piece of land to L who leased it to B himself under certain conditions. Both sales were executed in a public instrument, the one executed in favor of L being registered only in 1907. Thus, S and L acquired possession of the land through the same vendor upon the latter's ceasing to be the owner and becoming the lessee of said S and L, respectively. HELD: (1) That, with reference to the time prior to 1907, the preference should be in favor of the purchaser who first took possession of the land, because this possession, according to the law in force prior to the promulgation of the Civil Code, constituted the consummation of the contract, and also because afterwards the Civil Code expressly establishes that possession in such cases transfers the ownership of the thing sold. (2) That, when a person buys a piece of land and, instead of taking possession of it, leases it to the vendor, possession by the latter after the sale is possession by the vendee, and such possession, in case of a double sale,

determines the preference in favor of the one who first took possession of it, in the absence of inscription, in accordance with the provision of article 1473 of the Civil Code, notwithstanding the material and personal possession by the second vendee. (Bautista vs. Sioson, 39 Phil. Rep., 615) .... Because L had to receive his possession from B who was a mere lessee of S and as such had no possession to give, inasmuch as his possession was not for himself but in representation of S, it follows that L never possessed the land.. .... The effect which the law gives to the inscription of a sale against the efficacy of the sale which was not registered is not extended to other titles which the other vendee was able to acquire independently as, in this case, the title by prescription.

We do not think the quoted proviso in Act No. 3344 justifies appellant's contention. If his theory is correct, then the second paragraph of Article 1544 of the New Civil Code would have no application at all except to lands or real estate registered under the Spanish Mortgage Law or the Land Registration Act. Such a theory would thus limit the scope of that codal provision. But even if we adopt this latter view, that is, that Article 1544 (formerly Article 1473) only applies to registered land, still we cannot agree with the appellant that by the mere fact of his having a previous title or deed of sale, he has acquired thereby what is referred to in Act No. 3344 as the "better right" that would be unaffected by the registration of a second deed of sale under the same law. Under such theory, there would never be a case of double sale of the same unregistered property.