Compiled Sales Round1

8/3/2019 Compiled Sales Round1

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SALES! - A2010 - Prof. Jardeleza Page 2sale of services or labor of a contractor rather than on the saleof articles.

ISSUES1. WON Engg is a CONTRACTOR of air conditioning units(Otherwise, it is a manufacturer in relation to Sec 1941 of the

Tax Code)2. WON Engg should pay 50% surcharge as fraud penalty

HELD1. YESRatio The true test of a contractor would seem to be that herenders service in the course of an independent occupation,representing the will of his employer only as to the result of hiswork, and not as to the means by which it is accomplished.(Luzon Stevedoring Co v Trinidad)Impt! Distinction between a CONTRACT OF SALE and CONTRACTFOR SERVICES, LABOR and MATERIALS -TEST: Whether the thing transferred is one not in existence andwhich never would have existed but for the order of the partydesiring to acquire it, or a thing which would have existed andhas been the subject of sale to some other persons even if theorder had not been givenArt. 1467 of New Civil Code: A contract for the delivery at acertain price of an article which the vendor in the ordinarycourse of his business manufactures or procures for the generalmarket, whether the same is on hand at the time or not, is acontract of sale, but if the goods are to be manufacturedspecially for the customer and upon his special order and not forthe general market, it is a contract for a piece of work.Reasoning- Engg fabricates, assembles, supplies and installs in thebuildings of its various customers the central type airconditioning system; prepares the plans and specificationswhich are distinct and different from each other; airconditioning units and spare parts or accessories thereof usedby petitioner are not the window type of air conditioner whichare manufactured, assembled and produced locally for sale tothe general market; and the imported air conditioning units andspare parts or accessories thereof are supplied and installed bypetitioner upon previous orders of its customersconformably with their needs and requirements. Thus, it

falls within definition of contractor and is subject to contractorstax and notthe advance sales tax imposed on manufacturers.This 30% compensating tax is not a tax on the importation ofgoods but a tax on the use of imported goods not subject tosales tax.* Other evidence and material facts considered were the ff:(a) Engineering Handbook Reference differentiating UNITARYand CENTRAL systems(b) Testimony of a licensed Mechanical and Electrical Engineerwho was allegedly responsible for the preparation of therefrigeration and air conditioning code of Mla(c) Engg advertised itself as Engineering Equipment andSupply Company, Machinery Mechanical Supplies, Engineers,Contractors and NOT as manufacturers(d) Engg paid contractors tax on all the contracts for design andconstruction

(e) Engg did not have ready-made air conditioning units for sale* Similar and applicable case is SM Lawrence Co v McFarland!2. YES

1Section 194. Words and Phrases Defined. (x) "Manufacturer" includes

every person who by physical or chemical process alters the exterior texture or formor inner substance of any raw material or manufactured or partially manufacturedproducts in such manner as to prepare it for a special use or uses to which it could nothave been put in its original condition, or who by any such process alters the qualityof any such material or manufactured or partially manufactured product so as toreduce it to marketable shape, or prepare it for any of the uses of industry, or who byany such process combines any such raw material or manufactured or partiallymanufactured products with other materials or products of the same or of differentkinds and in such manner that the finished product of such process of manufacturecan be put to special use or uses to which such raw material or manufactured orpartially manufactured products in their original condition could not have been put,and who in addition alters such raw material or manufactured or partiallymanufactured products, or combines the same to produce such finished products forthe purpose of their sale or distribution to others and not for his own use orconsumption.

Ratio Whether it is subject to advance sales tax ocompensating tax, it is required by law to truly declare itsimportation in the import entries and internal revenuedeclarations before the importations maybe released fromcustoms custody. The said entries are the very documentwhere the nature, quantity and value of the imported goodsdeclared and where the customs duties, internal revenue taxesand other fees or charges incident to the importation arecomputed.

Reasoning- Engg deliberately and purposely misdeclared its importationsof air conditioning units and spare parts or accessories to evadepayment of tax. Evidence consists of letters written bypetitioner to its foreign suppliers, instructing them on how toinvoice and describe the air conditioning units ordered bypetitioner. Example: No mention of words air conditioningequipment should be made on any shipping documents...Disposition Decision appealed from is affirmed with themodification that Engg is hereby also made liable to pay the50% fraud surcharge.

GONZALO PUYAT & SONS, INC. V ARCOAMUSEMENT CO.

72 PHIL 402

LAUREL; June 20, 1941NATUREPETITION for review on certiorari.

FACTS- Arco Amusement Co., which was engaged in the business ooperating cinematographs, approached Gonzalo Puyat & SonsInc, which was acting as exclusive agents in the Philippines forthe Starr Piano Company of Richmond, Indiana, USA, to equip itscinematographs with sound reproducing devices. After somenegotiations, they agreed that Puyat, in behalf of Arco, wouldorder sound reproducing equipment from Starr Piano Co. andthat Arco would pay defendant, in addition to the price of theequipment, a 10% commission, plus all expenses (freightinsurance, banking charges, cables, etc.). At the expense oArco, Puyat sent a cable to Starr Piano Co. inquiring about theequipment desired and making the said company to quote itsprice without discount. Starr Piano Company sent the list priceof $1,700.- Puyat inforemed Arco the price of $1700 (without showing thecable of inquiry nor reply). Arco, by means of a letter, formallyauthorized the order. Upon delivery and presentation onecessary papers, Arco paid $1700 + 10% commission agreedupon + all expenses and charges.- Arco ordered for another sound reproducing equipment on thesame terms as the first order, which was confirmed by a secondletter. This time the supposed price quoted by the Starr PianoCompany was $1600 so upon delivery of the second order, Arcopaid $1600 + 10% commission + $160 all expenses incurred(not representing actual out-of-pocket expenses paid by thedefendant but mere flat charge and rough estimate made byPuyat which was equivalent to 10% of the price of the

equipment.- Arco found out (after 3 yrs) that the prices quoted to them byPuyat were not the net price but the list price, and that Puyatobtained a discount from Starr Piano Company. They wereconvinced that the prices charged them by Puyat were much toohigh including the charges for out-of-pocket expenses so theysought to obtain a reduction/reimbursement from Puyat, bufailing to do so, they bought action against Puyat.- TC: the contract between the petitioner and the respondentwas one of outright purchase and sale (PUYAT absolved)- CA: the relation between petitioner and respondent was that ofagent and principal, the petitioner acting as agent of therespondent in the purchase of the equipment in question; evenif the contract was of purchase and sale, Puyat was guilty offraud in concealing the true price and hence would still be liable


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SALES! - A2010 - Prof. Jardeleza Page 3to reimburse the respondent for the overpayments made by thelatter

ISSUES1. WON the relation between the petitioner and respondent wasthat of agent and principal2.If so, WON the Puyat was bound to reimburse Arco for anydifference between the cost price and the sales price

HELD1. NO- Sustain the theory of the trial court that the contractbetween the petitioner and the respondent was one ofpurchase and sale, and not one of agency.Ratio. In agency, the agent is exempted from all liability in thedischarge of his commission provided he acts in accordancewith the instructions received from his principal (section 254,Code of Commerce), and the principal must indemnify the agentfor all damages which the latter may incur in carrying out theagency without fault or imprudence on his part (article 1729,Civil Code).Reasoning- First, the contract is the law between the parties andshould include all the things they are supposed to havebeen agreed upon. What does not appear on the face ofthe contract should be regarded merely as "dealer's" or"trader's talk", which can not bind either party. In theletters representing the agreement between them are clear intheir terms and admit of no other interpretation than that Arcoagreed to purchase from Puyat the equipment in question at theprices indicated ($1700 and $1600 respectively) which are fixedand determinate. Whatever unforseen events might have takenplace unfavorable to the Puyat, such as change in prices,mistake in their quotation, loss of the goods not covered byinsurance or failure of the Starr Piano Company to properly fillthe orders as per specifications, Arco would still pay them theprices fixed of $1,700 and $1,600. Even if Puyat was to receive10% commission, this does not necessarily make them an agentof the respondent, as it was only an additional price which Arcobound itself to pay, and which stipulation is not incompatiblewith the contract of purchase and sale.-Second, to hold the petitioner an agent of the respondent in the

purchase of equipment and machinery from the Starr PianoCompany of Richmond, Indiana, is incompatible with theadmitted fact that the petitioner is the exclusive agent ofthe same company in the Philippines. It is out of theordinary for one to be the agent of both the vendor and thepurchaser.2. NO- The petitioner as vendor is not bound to reimburse therespondent as vendee for any difference between thecost price and the sales price which represents the profitrealized by the vendor out of the transaction. This is thevery essence of commerce without which merchants ormiddleman would not exist.Ratio. It is well known that local dealers acting as agents offoreign manufacturers, aside from obtaining a discountfrom the home office, sometimes add to the list price

when they resell to local purchasers.xxx If the respondentlater on discovers itself at the short end of a bad bargain, italone must bear the blame, and it cannot rescind the contract,much less compel a reimbursement of the excess price, on thatground alone.Reasoning- the twenty-five per cent (25% ) discount granted by the StarrPiano Company to the petitioner is available only to the latter asthe former's exclusive agent in the Philippines. The respondentcould not have secured this discount from the Starr PianoCompany and neither was the petitioner willing to waive thatdiscount in favor of the respondent. As a matter of fact, noreason is advanced by the respondent why the petitioner shouldwaive the 25 per cent discount granted it by the Starr PianoCompany in exchange for the 10 per cent commission offeredby the respondent.

- the petitioner was not duty bound to reveal the privatearrangement it had with the Starr Piano Company relative tosuch discount to its prospective customers, and the respondenwas not even aware of such an arrangement.- It was apparently to guard against an exhorbitant additionaprice that Arco sought to limit it to 10 per cent, so they areestopped from questioning that additional price (the 25%discount given to Puyat.- ON ALLEGED FRAUD: Not every concealment is fraud; and

short of fraud, it were better that, within certain limits,business acumen permit of the loosening of the sleevesand of the sharpening of the intellect of men and womenin the business world.Disposition The writ of certiorari should be, as it is herebygranted. The decision of the appellate court is accordinglyreversed and the petitioner is absolved from the respondent'scomplaint in G. R. No. 1023, entitled "Arco AmusemenCompany (formerly known as Teatro Arco), plaintiff-appellantvs. Gonzalo Puyat and Sons, Inc., defendant-appellee," withoupronouncement regarding costs.

QUIROGA V PARSONS HARDWARE CO.38 PHIL 501

AVANCEA; August 23, 1918FACTS- On January 24, 1911, a contract was entered into by andbetween the plaintiff and J. for the exclusive sale of quirogabeds in the Visayan Island. The contract provides:- ARTICLE 1. Don Andres Quiroga grants the exclusive right to

sell his beds in the Visayan Islands to J. Parsons under thefollowing conditions:

(A) Mr. Quiroga shall furnish beds of his manufacture to MrParsons for the latter's establishment in Iloilo, and shall invoicethem at the same price he has fixed for sales, in Manila, and, inthe invoices, shall make and allowance of a discount of 25 percent of the invoiced prices, as commission on the sale; and MrParsons shall order the beds by the dozen, whether of the sameor of different styles.

(B) Mr. Parsons binds himself to pay Mr. Quiroga for the bedsreceived, within a period of sixty days from the date of theishipment.

(C) The expenses for transportation and shipment shall beborne by M. Quiroga, and the freight, insurance, and cost ounloading from the vessel at the point where the beds arereceived, shall be paid by Mr. Parsons.

(D) If, before an invoice falls due, Mr. Quiroga should requestits payment, said payment when made shall be considered as aprompt payment, and as such a deduction of 2 per cent shall bemade from the amount of the invoice.

The same discount shall be made on the amount of any invoicewhich Mr. Parsons may deem convenient to pay in cash.

(E) Mr. Quiroga binds himself to give notice at least fifteendays before hand of any alteration in price which he may plan tomake in respect to his beds, and agrees that if on the date whensuch alteration takes effect he should have any order pending to

be served to Mr. Parsons, such order shall enjoy the advantageof the alteration if the price thereby be lowered, but shall not beaffected by said alteration if the price thereby be increased, forin this latter case, Mr. Quiroga assumed the obligation to invoicethe beds at the price at which the order was given.

(F) Mr. Parsons binds himself not to sell any other kind excepthe "Quiroga" beds.- ART. 2. In compensation for the expenses of advertisemen

which, for the benefit of both contracting parties, Mr. Parsonsmay find himself obliged to make, Mr. Quiroga assumes theobligation to offer and give the preference to Mr. Parsons in caseanyone should apply for the exclusive agency for any island notcomprised with the Visayan group.- ART. 3. Mr. Parsons may sell, or establish branches of his

agency for the sale of "Quiroga" beds in all the towns of theArchipelago where there are no exclusive agents, and shal


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SALES! - A2010 - Prof. Jardeleza Page 4immediately report such action to Mr. Quiroga for his approval.xxx

Plaintiff, in his complaint, alleged that the defendantviolated the following obligations: not to sell the beds at higherprices than those of the invoices; to have an open establishmentin Iloilo; itself to conduct the agency; to keep the beds on publicexhibition, and to pay for the advertisement expenses fo thesame; and to order the beds by the dozen and in no othermanner. As may be seen, with the exception of the obligation on

the part of the defendant to order the beds by the dozen and inno other manner, none of the obligations imputed to thedefendant in the two causes of action are expressly set forth inthe contract. But the plaintiff alleged that the defendant was hisagent for the sale of his beds in Iloilo, and that said obligationsare implied in a contract of commercial agency.

ISSUEWON contract between the plaintiff and the defendant is acontract of purchase and sale

HELDYES- In the contract in question, what was essential, as constitutingits cause and subject matter, is that the plaintiff was to furnishthe defendant with the beds which the latter might order, at theprice stipulated, and that the defendant was to pay the price inthe manner stipulated. The price agreed upon was the onedetermined by the plaintiff for the sale of these beds in Manila,with a discount of from 20 to 25 per cent, according to theirclass. Payment was to be made at the end of sixty days, orbefore, at the plaintiff's request, or in cash, if the defendant sopreferred, and in these last two cases an additional discount wasto be allowed for prompt payment. These are precisely theessential features of a contract of purchase and sale. There wasthe obligation on the part of the plaintiff to supply the beds,and, on the part of the defendant, to pay their price. Thesefeatures exclude the legal conception of an agency or order tosell whereby the mandatory or agent received the thing to sellit, and does not pay its price, but delivers to the principal theprice he obtains from the sale of the thing to a third person, andif he does not succeed in selling it, he returns it. By virtue of thecontract between the plaintiff and the defendant, the latter, on

receiving the beds, was necessarily obliged to pay their pricewithin the term fixed, without any other consideration andregardless as to whether he had or had not sold the beds.- It would be enough to hold that the contract by and betweenthe defendant and the plaintiff is one of purchase and sale, inorder to show that it was not one made on the basis of acommission on sales, as the plaintiff claims it was, for thesecontracts are incompatible with each other.- Not a single one of these clauses necessarily conveys the ideaof 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 defendantwas the only one that could sell the plaintiff's beds in theVisayan Islands. With regard to the remaining clauses, the leastthat can be said is that they are not incompatible with the

contract of purchase and sale.- The plaintiff also endeavored to prove that the defendant hadreturned beds that it could not sell; that, without previousnotice, it forwarded to the defendant the beds that it wanted;and that the defendant received its commission for the bedssold by the plaintiff directly to persons in Iloilo. But all this, atthe most only shows that, on the part of both of them, there wasmutual tolerance in the performance of the contract in disregardof its terms; and it gives no right to have the contractconsidered, not as the parties stipulated it, but as theyperformed it. Only the acts of the contracting parties,subsequent to, and in connection with, the execution of thecontract, must be considered for the purpose of interpreting thecontract, when such interpretation is necessary, but not whenits essential agreements are clearly set forth and plainly showthat the contract belongs to a certain kind and not to another.

Furthermore, the return made was of certain brass beds, andwas not effected in exchange for the price paid for them, buwas for other beds of another kind; and requested the plaintiff'sprior consent with respect to said beds, which shows that it wasnot considered that the defendant had a right, by virtue of thecontract, to make this return. As regards the shipment of bedswithout previous notice, it is insinuated in the record that thesebrass beds were precisely the ones so shipped, and that, for thisvery reason, the plaintiff agreed to their return. And with

respect to the so-called commissions, we have said that theymerely constituted a discount on the invoice price, and thereason for applying this benefit to the beds sold directly by theplaintiff to persons in Iloilo was because, as the defendanobligated itself in the contract to incur the expenses oadvertisement of the plaintiff's beds, such sales were to beconsidered as a result of that advertisement.- In respect to the defendant's obligation to order by the dozenthe only one expressly imposed by the contract, the effect of itsbreach would only entitle the plaintiff to disregard the orderswhich the defendant might place under other conditions; but ithe plaintiff consents to fill them, he waives his right and cannocomplain for having acted thus at his own free will.

FULE v CA (CRUZ/BELARMINO)286 SCRA 698

ROMERO; Mar. 23, 1998

NATUREPetition for review on certiorari

FACTS- Fule, a corporate secretary of the Rural Bank of Alaminos (theBank) by profession and jeweler on the side, acquired a 10-hectare property in Rizal. The former owner, Jacobe, hadmortgaged it to the Bank for a loan of 10k but it was laterforeclosed and offered for public auction upon his default.- Petitioner asked Dichoso and Mendoza (the Agents) to look foan interested buyer, and found one in private respondent DrCruz. At the time, petitioner had shown interest in buying a pairof emerald-cut diamond earrings from Dr. Cruz but never cameto an agreed price. Subsequently, negotiations for the barter o

the jewelry and the property ensued; upon the request of DrCruz, it was found by Atty. Belarmino that no barter was feasiblebecause the 1-year period of redemption had not expired. Toget over this legal impediment, petitioner executed a deed ofredemption of behalf of Jacobe.- Petitioner arrived at Belarminos residence with the agents toexecute a deed of absolute sale while Cruz held on to theearrings. Petitioner issued a certification stating the actuaconsideration of the sale was Php200k and not Php80k aindicated in the deed. Since the earrings were appraised at onlyPhp160k, the remaining 40k was to be paid later in cash. Thiswas done apparently to minimize the capital gains tax thapetitioner would have to shoulder. Petitioner headed for thebank to meet up with Cruz and pick up the earrings. Whenasked if the jewelry was ok, petitioner nodded to express hissatisfaction. Petitioner paid the agents $300 and some pieces o

jewelry, but not half of the pair of earrings in question apreviously promised.- Later that evening, petitioner arrived at Belarminos residencecomplaining the earrings were fake as confirmed by a testerPetitioner accused the agents of deceiving him, which theydenied. He nonetheless took back the $300 and jewelry giventhem. After another failed testing, the petitioner reported thematter to the police where the agents also executed their swornstatements.- Petitioner filed a complaint with the RTC to declare thecontract of sale over the property null and void on the ground offraud and deceit. The lower court denied the prayer for a writ ofpreliminary injunction over the deed as they found that thegenuine pair of earrings had been delivered by Cruz. The 2hours before petitioners complaint was consideredunreasonable delay, placing petitioner in estoppel. The Court


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SALES! - A2010 - Prof. Jardeleza Page 5furthered that all elements of a valid contract were present,namely a meeting of the minds, determinate subject matter,and price certain. As the earrings had been delivered and thecontract of absolute sale executed, the contract of barter or salehad been consummated.- The Court also finds that the plaintiff acted in bad faith inmisrepresenting the price of the property. Damages and attysfees were in order for soiling Dr. Cruz and Belarminos goodnames. A petition with the CA yielded the same result, hence

the instant petition

ISSUE1. WON the TC erred in holding that petitioner received agenuine pair of earrings2. WON the CA erred in upholding the validity of the contract ofbarter or sale3. WON the TC erred in awarding damages

HELD1. NO- As to questions of fact, the Court accords conclusiveness to thelower courts findings. Petitioner goes so far as to accuse the TC

judge of handing in a ready-made 12 page decision due to thelimited time afforded him to write it in a desperate effort todisparage the TCs findings of fact and convince the Court toreview the same. Hence, this Court maintains the lower courtsfindings that Cruz had delivered the genuine pair of earrings.2. NO- It is evident from the facts of the case that there was ameeting of the minds between petitioner and Cruz (Cruz askingif the earrings were ok and petitioners nodding in agreement)hence perfecting the contract. Petitioner contends that thecontract was voidable because consent was vitiated by fraud.However, the facts show no evidence that insidious words ormachinations were employed by Cruz to cajole petitioner toenter into the contract. It was in fact the petitioner who resortedto machinations to wheedle Cruz into the transaction bymisrepresenting his propertys price.- Petitioner also failed to clearly allege mistake as a ground fornullification as he failed to prove the fact that prior to thedelivery of the earrings, private respondents endeavored tosubstitute the earrings with a different or inferior item. On

account of petitioners experience as a jeweler, he cannot beexcused for the alleged mistake himself as he could haveeasily tested the earrings genuineness in the presence of Cruz.As stated in Art 27 CC, there is no mistake if the party allegingit knew the doubt, contingency or risk affecting the object of thecontract. Furthermore, having only complained 2 hours afterthe exchange, petitioner was afforded ample time within whichto examine the earringsin fact, he accepted when asked if hewas satisfied with the jewelry.- There being no legal bases for the nullification of the contract,ownership had been transferred to both parties respectively.While there remained a balance of 40k in cash to be paid topetitioner, this was not sufficient cause to invalidate thecontract and will not incur interest on the part of Cruz.3. NO- The malice with which petitioner filed the case is apparent. As

an experienced jeweler who thoroughly examined the earringshimself and went so far as to sketch them earlier, it is illogicalthat he would fail to exert extra effort to check its genuinenessat the precise moment of the exchange. As an experiencedbusinessman, he was shrewd enough to bloat the propertysprice only a few days after he had purchased it for a far lowervalue. Given this, it would appear that the cause of action of theinstant case was contrived by the petitioner himself in hopes ofobtaining a favorable outcome in his complaint to take the real

jewelry, return a fake, and get back the property, all whiledragging down private respondents. As his guilt in bringingabout the supposed wrongdoing on which he anchored his causeof action is evident, he is answerable for all damages thedefendant suffered from it.

DIsposition the decision of the CA is AFFIRMED. Dr. Cruz,however, is ordered to pay petitioner the balance of thepurchase price of Php40k

Chapter 2: FORMATION OF THE CONTRACT

MEDINA V COLLECTOR OF INTERNAL REVENUE1 SCRA 303

REYES, J.B.L.; January 28, 1961

NATUREPetition to review a decision of the Court of Tax Appealupholding a tax assessment of the Collector of Internal Revenueexcept with respect to the imposition of so-called compromisepenalties, which were set aside.

FACTS- That on or about May 20, 1944, petitioning taxpayer AntonioMedina married Antonia Rodriguez. Before 1946, the spouseshad neither property nor business of their own. Later, howeverpetitioner, acquired forest concessions in the municipalities oSan Mariano and Palanan in the Province of Isabela. From 1946to 1948, the logs cut and removed by the petitioner from hisconcessions were sold to different persons in Manila through his

agent, Mariano Osorio.- Some time in 1949, Antonia R. Medina, petitioner's wifestarted to engage in business as a lumber dealer, and up toaround 1952, petitioner sold to her almost all the logs producedin his San Mariano concession. Mrs. Medina, in turn, sold inManila the logs bought from her husband through the sameagent, Mariano Osorio. The proceeds were, upon instructionsfrom petitioner, either received by Osorio for petitioner odeposited by said agent in petitioner's current account with thePhilippine National Bank.- The Collector considered the sales made by Mrs. Medinaas the petitioner's original sales taxable and NOT the salesmade by the petitioner to his wife. Because of this, thepetitioner protested the assessment, however, respondenCollector insisted on his demand.- According to Medina the sale was valid as he and his wife

executed and recorded a pre-nuptial agreement for a regime ocomplete separation of property but all trace of the documenwas lost on account of the war. before their marriage. Howeverthis claim was not sufficiently proven.

ISSUES1. WON the sales made by the petitioner to his wife could beconsidered as his original taxable sales under the provisions ofSection 186 of the National Internal Revenue Code2. WON the respondent Collector cannot assail the questionedsales, he being a stranger to said transactions

HELD1. NORatio Contracts violative of the provisions of Article 1490 of theCivil Code are null and void (Uy Sui Pin vs. Cantollas, 70 Phil. 55Uy Coque vs. Sioca, 45 Phil. 43). Being void transactions, thesales made by the petitioner to his wife were correctlydisregarded by the Collector in his tax assessments thaconsidered as the taxable sales those made by the wife throughthe spouses' common agent, Mariano Osorio.2. NORatio The government, as correctly pointed out by the TaxCourt, is always an interested party to all matters involvingtaxable transactions and, needless to say, qualified to questiontheir validity or legitimacy whenever necessary to block taxevasion.Disposition Decision appealed from is AFFIRMED

PHILIPPINE TRUST CO. V ROLDAN99 Phil 393


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BENGZON; May 31, 1956

NATUREAs guardian of the property of the minor Mariano L. Bernardo,the Philippine Trust Company filed in the Manila court of firstinstance a complaint to annul two contracts regarding 17parcels of land: (a) sale thereof by Socorro Roldan, as guardianof said minor, to Fidel C. Ramos; and (b) sale thereof by Fidel C.Ramos to Socorro Roldan personally. The complaint likewise

sought to annul a conveyance of four out of the said seventeenparcels by Socorro Roldan to Emilio Cruz.

FACTS- Mariano Bernardo inherited from his father, Marcelo Bernardo,the parcels of land in question. In view of his minority,guardianship proceedings were instituted wherein SocorroRoldan was appointed guardian. She was the surviving spouseof Marcelo Bernardo- Socorro filed in a guardianship proceedings a motion asking forauthority to sell as guardian the 17 parcels for the sum ofP14,700 to Dr. Fidel C. Ramos, to invest the money in aresidential house, which the minor desired to have. The motionwas granted.- Socorro, as guardian, executed the proper deed of sale in favorof her brother-in-law Dr. Fidel C. Ramos and obtained, judicial

confirmation of the sale. A week later, Dr. Fidel C. Ramosexecuted in favor of Socorro, personally, a deed of conveyancecovering the same seventeen parcels, for the sum of P15,000.And later the same year, Socorro sold four parcels out of theseventeen to Emilio Cruz for P3,000, reserving to herself theright to repurchase.- The Philippine Trust Company replaced Socorro as guardian.And this litigation, started two months later, seeks to undo whatthe previous guardian had done. The step-mother in effect, soldto herself, the properties of her ward, contends the plaintiff, andthe sale should be annulled because it violates Article 1459 ofthe Civil Code prohibiting the guardian from purchasing "eitherin person or through the mediation of another" the property ofher ward.- The CFI, following Rodriguez vs. Mactal, held the article wasnot controlling, because there was no proof that Fidel C. Ramoswas a mere intermediary or that the latter had previously

agreed with Socorro Roldan to buy the parcels for her benefit.Even Socorro swore she had repurchased the lands from Dr.Fidel C. Ramos to preserve it and to give her protegeopportunity to redeem - the court rendered judgment upholdingthe contracts but allowing the minor to repurchase all theparcels by paying P15,000, within one year.- CA affirmed judgment.

ISSUEWON the contracts of sale was made were valid

HELDRatio No, the three sales should not be sustained: the first twofor violation of article 1459 of the Civil Code; and the thirdbecause Socorro Roldan could pass no title to Emilio Cruz. Theannulment carries with is (Article 1303 Civil Code) the obligation

of Socorro Roldan to return the 17 parcels together with theirfruits and the duty of the minor, through his guardian to repayP14,700 with legal interest.Reasoning- At first glance the resolutions of both courts accomplishedsubstantial justice: the minor recovers his properties. But if theconveyances are annulled as prayed for, the minor will obtain abetter deal: he receives all the fruits of the lands from the year1947 (Article 1303 Civil Code) and will return P14,700, notP15,000.- When seeking approval of the sale, she represented the priceto be the best obtainable in the market, Socorro was not entirelytruthful. This is one phase to consider. Supposing she knew theparcels were actually worth P17,000; then she agreed to sellthem to Dr. Ramos at P14,700; and knowing the realty's valueshe offered him the next day P15,000 or P15,500, and got it.

Will there be any doubt that she was recreant to heguardianship, and that her acquisition should be nullified?- The general doctrine that guardianship is a trust of the highesorder, and the trustee cannot be allowed to have anyinducement to neglect his ward's interest and in line with thecourt's suspicion whenever the guardian acquires the ward'sproperty we have no hesitation to declare that in this case, inthe eyes of the law, Socorro Roldan took by purchase her ward'sparcels thru Dr. Ramos, and that Article 1459 of the Civil Code

applies.- She acted it may be without malice; there may have been noprevious agreement between her and Dr. Ramos. But the factremains that she acquired her protege's properties, through hebrother-in-law. That she planned to get them for herself at thetime of selling them to Dr. Ramos, may be deduced from thevery short time between the two sales (one week). Thetemptation which naturally besets a guardian so circumstancednecessitates the annulment of the transaction, even if no actuacollusion is proved (so hard to prove) between such guardianand the intermediate purchaser. This would uphold a soundprinciple of equity and justice.- Rodriguez vs. Mactal decision does not apply. It merely meantthat the subsequent purchase by Mactal could not be annulledin that particular case because there was no proof of a previousagreement between Chioco and her. The court then consideredsuch proof necessary to establish that the two sales wereactually part of one scheme - guardian getting the ward'sproperty through another person - because two years hadelapsed between the sales. Such period of time was sufficient todispel the natural suspicion of the guardian's motives or actionsIn the case at bar, however, only one week had elapsed. And ifwe were technical, we could say, only one day had elapsed fromthe judicial approval of the sale (August 12), to the purchase bythe guardian (Aug. 13).- Attempting to prove that the transaction was beneficial to theminor, appellee's attorney alleges that the money (P14,700invested in the house on Tindalo Street produced for him rentalsof P2,400 yearly; whereas the parcels of land yielded to his stepmother only an average of P1,522 per year. The argumenwould carry some weight if that house had been built out of thepurchase price of P14,700 only. The calculation does not includethe price of the lot on which the house was erected. Estimating

such lot at P14,700 only, the result is that the price paid for theseventeen parcels gave the minor an income of only P1,200 ayear, whereas the harvest from the seventeen parcels netted histep-mother a yearly profit of P1,522.00. The minor was thus onthe losing end.Disposition Judgment is therefore rendered:a. Annulling the three contracts of sale in question; b. declaringthe minor as the owner of the seventeen parcels of land, withthe obligation to return to Socorro Roldan the price of P14,700with legal interest from August 12, 1947; c. Ordering SocorroRoldan and Emilio Cruz to deliver said parcels of land to theminor; d. Requiring Socorro Roldan to pay him beginning with1947 the fruits, which her attorney admits, amounted to P1,522a year; e. Authorizing the minor to deliver directly to EmilioCruz, out of the price of P14,700 above mentioned, the sum ofP3,000; and f. charging appellees with the costs.

VALERA V VELASCO51 Phil 695

VILLAREAL; March 13, 1928

NATUREThis is an appeal taken by Federico Valera from the judgment othe Court of First Instance of Manila dismissing his complainagainst Miguel Velasco, on the ground that he has nosatisfactorily proven his right of action.

FACTS


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SALES! - A2010 - Prof. Jardeleza Page 7- By virtue of the powers of attorney, Velasco was appointedattorney-in-fact of Valera with autority to manage his property inthe Philippines, consisting of the usufruct of a real propertylocated of Echague Street, City of Manila. Velasco acceptedboth powers of attorney, managed plaintiff's property.However, the 2 had a misunderstanding over the payment ofthe balance due to Attorney Velasco. Atty. Velasco filed suitand he won.- Judgment was rendered in his favor and after the writ of

execution was issued, the sheriff levied upon the plaintiff's rightof usufruct, sold it at public auction and adjudicated it to thedefendant in payment of all of his claim. He then sold his rightof redemption to one Eduardo Hernandez. Hernandez thenconveyed the same right of redemption to Valera. After Valerarecovered his right if redemption, a Salvador Vallejo rendered acivil case against Valera on the ground that the said right ofredemption was sold by the sheriff to him at a public auction.Later, he transferred said right of redemption to the defendantVelasco.

ISSUES1. WON Miguel Velasco was, and at present is, an authorizedrepresentative of the plaintiff Federico Valera2. WON the sale at public auction of the right to repurchase theland in question to Salvador Vallejo and the sale by SalvadorVallejo to defendant Miguel Velasco are null and void

HELD1. NO- The fact that an agent institutes an action against his principalfor the recovery of the balance in his favor and renders and finalaccount of his operations, is equivalent to an expressrenunciation of the agency, and terminates the juridical relationbetween them.- If Miguel Velasco, in adopting a hostile attitude towards hisprincipal, suing him for the collection of the balance in his favor,ceased ipso facto to be the agent of Valera, said agent'spurchase of the aforesaid principal's right of usufruct at publicauction held by virtue of an execution issued upon the judgmentrendered in favor of the former and against the latter, is validand legal.2. NO

- Next, it is deemed unnecessary to discuss the validity of thesale made by Federico Valera to Eduardo Hernandez of his rightof redemption in the sale of his usufructuary right made by thesheriff by virtue of the execution of the judgment in favor ofMiguel Velasco and against the said Federico Valera; and thesame thing is true as to the validity of the resale of the sameright of redemption made by Eduardo Hernandez to FedericoValera; inasmuch as Miguel Velasco's purchase at public auctionheld by virtue of an execution of Federico Valera's usufructuaryright is valid and legal, and as neither the latter nor EduardoHernandez exercised his right of redemption within the legalperiod, the purchaser's title became absolute.- Moreover Miguel Velasco, having acquired Federico Valera'sright of redemption from Salvador Vallejo, who had acquired itat public auction by virtue of a writ of execution issued upon the

judgment obtained by the said Vallejo against the said Valera,

the latter lost all right to said usufruct.- And even supposing that Eduardo Hernandez had been trickedby Miguel Velasco into selling Federico Valera's right ofrepurchase to the latter so that Salvador Vallejo might levy anexecution on it, and even supposing that said resale was null forlack of consideration, yet, inasmuch as Eduardo Hernandez didnot present a third party claim when the right was levied uponfor the execution of the judgment obtained by Vallejo againstFederico Vallera, nor did he file a complaint to recover said rightbefore the period of redemption expired, said EduardoHernandez, and much less Federico Valera, cannot now contestthe validity of said resale, for the reason that the one-yearperiod of redemption has already elapsed.- Neither did the trial court err in not ordering Miguel Velasco torender a liquidation of accounts from March 31, 1923, inasmuchas he had acquired the rights of the plaintiff by purchase at the

execution sale, and as purchaser, he was entitled to receive therents from the date of the sale until the date of the repurchase,considering them as part of the redemption price; but nothaving exercised the right repurchase during the legal period,and the title of the repurchaser having become absolute, thelatter did not have to account for said rents.DispositionBy virtue of the foregoing, and finding no error inthe judgment appealed from, the same is hereby affirmed in allits parts, with costs against the appellant.

NAVAL V ENRIQUEZ3 Phil 695

MAPA; April 12, 1904

FACTS- November 14, 1885, Don Jorge Enriquez, as heir of hisdeceased parents, Antonio Enriquez and Doa CiriacaVillanueva, whose estates were at that time still undistributedby public instrument sold to Don Victoriano Reyes his interest inboth estates, equivalent to a tenth part thereof, for the sum of7,000 pesos.- The deed was executed before Don Enrique Barrera, a notarypublic, who certified in the document that the vendor receivedthe said consideration at the time of the execution of theinstrument.- By another instrument executed April 15, 1886, before thesame notary, Don Enrique Barrera y Caldes, Don VictorianoReyes sold to Doa Carmen de la Cavada this interest which bythe deed had acquired from Don Jorge Enriquez for the sameconsideration of 7,000 pesos.- The purchaser, Doa Carmen, was the wife of Don FranciscoEnriquez, who was the executor and administrator of thetestamentary estate of Don Antonio Enriquez at the dates of theexecution of the two above mentioned.- The plaintiffs demand that these deeds be declared null andvoid, as well as the contracts evidenced thereby, apparentlysolely so far as they refer to the estate of Don Antonio Enriquezno mention being made of the estate of Doa Ciriaca Villanuevain the complaint. This relief is prayed for upon the followinggrounds:(1) Because the said contracts were executed withou

consideration, it being alleged with respect to this matter thatDon Jorge Enriquez did not receive any consideration for thesale made by him in favor of Don Victoriano Reyes, and that thelatter did not receive any sum whatever as a consideration fothe sale in turn executed by him in favor of Doa Carmen de laCavada..(2) Because Don Victoriano Reyes merely acted as anintermediary at the request and instance of Don FranciscoEnriquez for the purpose of subsequently facilitating theacquisition by Doa Carmen de la Cavada of the hereditaryshare of Don Jorge Enriquez, the real acquirer being DonFrancisco Enriquez, the executor and administrator of the estateof Don Antonio Enriquez.

ISSUES1. WON there was no consideration for the sales referred to in

the complaint.2. WON Article 1459 of the Civil Code applies incapacitates DonFrancisco Enriquez as executor of the will of Don AntonioEnriquez, to acquire by purchase the hereditary right of JorgeEnriquez.HELD1. NO- Victoriano Reyes testified that he paid nothing to Don JorgeEnriquez, and received nothing from Carmen de la Cavada asconsideration for either of the sales. But against this statementis the testimony of the notary, Don Enrique Barrera y Caldesbefore whom both contracts were executed, and that of thedefendants Francisco Enriquez and Doa Carmen de la Cavadawho expressly affirm the contrary; and more especially thestatement is contrary to the recitals of the deeds themselveswhich confirm the statements of the witnesses last referred to.


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SALES! - A2010 - Prof. Jardeleza Page 8- These instruments having been executed with all theformalities prescribed by the law, they are admissible asevidence against the contracting parties and their successorswith respect to recitals made therein by the former (Art. 1218,Civil Code.) Their evidentiary force can not be overcome exceptby other evidence of greater weight, sufficient to overcome thelegal presumption of the regularity of acts and contractscelebrated with all the legal requisites under the safeguard of anotarial certificate.

- It is beyond comprehension, and we can not believe that JorgeEnriquez, who according to the plaintiffs was absolutely withoutmeans of support for himself and his family, would convey toanother his large interest in the estate without receiving anyconsideration therefor, and that to do this he would commit thegrave crime of falsification. To justify this conclusion it would benecessary to suppose that Jorge Enriquez was absolutely devoidof intelligence or that he was the victim or error, violence,intimidation, or fraud. But these are circumstances whichcounsel for the plaintiffs have not demonstrated or even soughtto demonstrate.- The contract of sale is consummated by the delivery of thepurchase money and of the thing sold. "When the sale is madeby public instrument the execution of the instrument isequivalent to the delivery of the thing which is the object of thecontract, unless from the instrument itself the contrary intentionclearly appears." (Art. 1462, par. 2, Civil Code.) And article 1464provides that "With respect to incorporeal property [to whichclass the hereditary right which was the object of the contractsin question pertains], the provisions of paragraph 2 of article1462 shall govern."- The delivery of the things sold was effected by the mereexecution of the deed of sale; and it appearing from the deeditself that the consideration was delivered to the vendor at thetime, and the contrary not having been sufficiently proven, theconclusion follows that the sale was consummated them andthere, and that from that time the period of four years fixed bylaw for the prescription of the action of nullity must be countedin this case.2. NO- The thing sold in the two contracts of sale mentioned in thecomplained was the hereditary right of Don Jorge Enriquez,which evidently was not in charge of the executor, Don

Francisco Enriquez.- Executors, even in those cases in which they administer theproperty pertaining to the estate, do not administer thehereditary rights of any heir. This right is vested entirely in theheirs, who retain it or transmit it in whole or in part, as they maydeem convenient, to some other person absolutely independentof the executor, whose authority, whatever powers the testatormay have desired to confer upon him, do not and can not underany circumstances in the slightest degree limit the power of theheirs to dispose of the said right at will. That right does not formpart of the property delivered to the executor for administration.- The prohibition which paragraph 3 of that article imposes uponexecutors refers to the property confided to their care, and doesnot extend, therefore, to property not falling within this class.Legal provisions of a prohibitive character must be strictlyconstrued, and should not be extended to cases not expressly

comprised within their text.- Even upon the supposition that the executor, Don FranciscoEnriquez, was the person who really acquired the hereditaryrights of Jorge Enriquez, the sale in question would not for thatreason be invalid, the executor, Don Francisco Enriquez, notbeing legally incapable of acquiring the hereditary right inquestion as the plaintiffs erroneously suppose.

GAN TINGCO V PABINQUIT35 Phil 81 (1916)

ARELLANO; October 17, 1916NATUREAppeal from a judgment of the Negros Oriental CFI

FACTS- Candida Acabo, on June 12, 1911, sold her six parcels of landto one Gan Tingco for Pesos 500.00. The buyer, however, couldnot take possession of the property since they were inpossession of one Silvino Pabinquit who claimed that theproperty was sold to him by one Faustino Abad for Pesos 375Abad, on the other hand, claimed that he bought the propertyfrom Henry Gardner who in turn claimed that he bought theproperty in a public auction held in the Barrio of Martelo on

March 20, 1907.- As it turned out, the parcels of land of Acabo were in fact soldat a public auction allegedly by virtue of a writ of executionissued by the justice of the peace of Gujulngan based on acomplaint filed by a Silvestre Basaltos. The justice of the peacewho ordered the execution was none other than Henry Gardner

The writ, however, only mentioned that should Acabo fail to payher obligation to Basaltos, the Sheriff should put a levy on herfixtures and other chattels. There was no mention of the reaproperty of Acabo in the writ.- The trial court ruled in favor of Gan Tingco based on the factthat Henry Gardner, justice of the peace who issued the writwas the buyer of the property during the auction. The judge inthis case ruled that the purchase by Gardner was in violation ofArticle 1459 (5) of the civil code which prohibits judges fromacquiring by purchase even at public or judicial sale, either inperson or by an agent, any property or rights litigated in thecourt in the jurisdiction or territory within which they exercisetheir respective duties

ISSUEWON the court erred in ruling that the purchase by Gardner wasillegal

HELDNO- The law prohibited participation of judges in any auction by

judicial decree is rooted in the laws intention to avoid impropeinterference with and interest of a judge in a thing levied uponand sold by his order. Under the law, Gardner was prohibitedfrom acquiring the ownership of Acabos land. Since saidpurchase was illegal, Gardner could not have passed on the titleto Faustino Abad. The transfer by Abad to Pabinquit is also void.

MUNICIPAL COUNCIL OF ILOILO VEVANGELISTA

55 PHIL 290VILLA-REAL; November 17, 1930

NATUREAppeal from a judgment of the CFI of Iloilo

FACTS- March 20, 1924 Tan Ong Sze Vda. de Tan Toco sought torecover form the municipality of Iloilo the value of a strip of landbelonging to her taken by the Municipality to widen a publicstreet; the judgment entitled Vda to recover P42,966.40, thevalue of the strip of land, from the Municipality.

- when the judgment, became final and executory, Atty. JoseEvangelista, in his own behalf and as counsel for theadministratrix of Jose Ma. Arroyo's intestate estate, filed a claimin the same case for professional services rendered by himwhich the court, acting with the consent of the appellant widowfixed at 15 % of the amount of the judgment- claimants and PNB prayed that the amount of the judgment beturned over to it because the land taken over had beenmortgaged to it. Antero Soriano also appeared claiming theamount of the judgment as it had been assigned to him, and byhim, in turn, assigned to Mauricio Cruz & Co., Inc.- March 29, 1928, the municipal treasurer of Iloilo, paid the lateAntero Soriano the amount of P6,000 in part payment of the

judgment mentioned above, assigned to him by Tan Boon Tiongacting as attorney-in-fact of Tan Ong Sze Vda. de Tan Toco.


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SALES! - A2010 - Prof. Jardeleza Page 9- December 18, 1928, municipal treasurer deposited with theclerk the P6,000 on account of the judgment and recorded 15%attys lien in favor of Atty. Evangelista which also amounted toP6,000- having a total of P12,000, the judgment for P42,966.44 againstthe municipality of Iloilo was reduced to P30,966.40- Vda de Tan Toco contends:1. the assignment was not made in consideration ofprofessional services by Attorney Antero Soriano, for they had

already been satisfied before the execution of said deed ofassignment, but in order to facilitate the collection of theamount of said judgment in favor of the appellant, for thereason that, being Chinese, she had encountered manydifficulties in trying to collect2. payments admitted by the court in its judgment, as made by

Tan Toco's widow to Attorney Antero Soriano for professionalservices rendered to her and to her coheirs, amounting toP2,900, must be added to the P700,3. A glance at these receipts shows that those amounts werereceived by Attorney Antero Soriano for the firm of Soriano &Arroyo, which is borne out by the stamp on said receiptsreading, "Bufete Soriano & Arroyo," and the manner in whichsaid attorney receipted for them, "Soriano & Arroyo, by A.Soriano."

ISSUE

WON the assignment made by Tan Boon Tiong, as attorney-in-fact of the appellant Tan Ong Sze Viuda de Tan Toco, toAttorney Antero Soriano, of all the credits, rights and interestsbelonging to Tan Ong Sze Viuda de Tan Toco by virtue of the

judgment of CFI Iloilo was valid

HELDYES** in short all this time, the Vda had two attorneys Tan Boonand Soriano; Vda did not want to pay Soriano anymore thinkingshe already paid Tan Boon and in turn Tan Boon assigned toSoriano the credits due him. Vda was even saying that TanBoons assignment of the credits was not valid under A1459because the credits that will come from the judgment cannot bethe object of transfer since Soriano is her lawyer and it fallssquarely in the prohibition. But, as mentioned in the case,

Soriano has been handling her cases for a long period of timealready and some of the cases were worth hundreds ofthousands. And the approximately P10,000 she had alreadysomehow paid is an inadequate amount to compensate Soriano.And besides, Vda has been continually using Soriano as herlawyer even after the said assignment controversy.- "ART. 1459. The following persons cannot take by purchase,even at a public or judicial auction, either in person or throughthe mediation of another:* * * * * * *

"5. Justices, judges, members of the department of publicprosecution, clerks of superior and inferior courts, and otherofficers of such courts, the property and rights in litigationbefore the court within whose jurisdiction or territory theyperform their respective duties. This prohibition shall include theacquisition of such property by assignment.

'"Actions between co-heirs concerning the hereditary property,assignments in payment of debts, or to secure the property ofsuch persons, shall be excluded from this rule."The Prohibition contained in this paragraph shall includelawyers and solicitors with respect to any property or rightsinvolved in any litigation in which they may take part by virtueof their profession and office."- For the foregoing considerations, the court is of opinion and soholds: (1) That an agent or attorney-in-fact empowered to paythe debts of the principal, and to employ lawyers to defend thelatter's interests, is impliedly empowered to pay the lawyer'sfees for services rendered in the interests of said principal, andmay satisfy, them by an assignment of a judgment rendered infavor of said principal; (2) that when a person appoints twoattorneys-in-fact independently, the consent of the one will notbe required to validate the acts of the other unless that appears

positively to have been the principal's intention; and (3). thathe assignment of the amount of a judgment made by a personto his attorney, who has not taken any part in the case whereinsaid judgment was rendered, made in payment of professionaservices, in other cases, does not contravene the prohibition ofarticle 1459, case 5, of the Civil Code.Disposition Judgment affirmed

RUBIAS V BATILLER51 SCRA 120TEEHANKEE; May 29, 1973

FACTS- On August 31, 1964, plaintiff Domingo D. Rubias, a lawyerfiled a suit to recover the ownership and possession of certainportions of lot located in Barotac Viejo, Iloilo which he boughtfrom his father-in-law, Francisco Militante in 1956 against itspresent occupant defendant, Isaias Batiller, who illegallyentered said portions of the lot on two occasions in 1945 andin 1959. In his answer with counter-claim defendant claims thathe and his predecessors-in-interest have always been in actualopen and continuous possession since time immemorial undeclaim of ownership of the portions of the lot in questionUnfortunately, his title

- Francisco Militante claimed ownership of a parcel of landlocated in the Barrio of General Luna, municipality of BarotacViejo province of Iloilo, which he caused to be surveyed on July18-31, 1934- Before WWII, Francisco Militante filed with the Court of FirsInstance of Iloilo an application for the registration of the title othe land but was opposed by the Director of Lands, the Directoof Forestry and other oppositors. During WWII, the record of thecase was lost. After the war, Francisco Militante petitioned thiscourt to reconstitute the record of the case but in the end, theregistration was denied.- He appealed but pending the decision (which was denied in theend), Francisco Militante sold to the plaintiff, Domingo Rubiasthe land, and was registered in the Registry of Deeds- Soon after, both Rubias and Militante were declaring the landfor taxation purposes- On April 22, 1960, the plaintiff filed forcible Entry and Detainecase against Isaias Batiller in the Justice of the Peace Court oBarotac Viejo Province of Iloilo- During the trial of this case on the merit, the plaintiff will proveby competent evidence the following:

> That the land he purchased from Francisco Militanteunder Exh. "A" was formerly owned and possessed byLiberato Demontao but that on September 6, 1919 theland was sold at public auction by virtue of a judgment in aCivil Case entitled "Edw J. Pflieder plaintiff vs. LiberatoDemontao Francisco Balladeros and Gregorio Yulodefendants", of which Yap Pongco was the purchaser (Exh"1-3"). The sale was registered in the Office of the Registerof Deeds of Iloilo on August 4, 1920, under Primary EntryNo. 69 (Exh. "1"), and a definite Deed of Sale was executedby Constantino A. Canto, provincial Sheriff of Iloilo, on Jan19, 1934 in favor of Yap Pongco (Exh. "I"), the sale having

been registered in the Office of the Register of Deeds oIloilo on February 10, 1934 (Exh. "1-1").> On September 22, 1934, Yap Pongco sold this land toFrancisco Militante as evidenced by a notarial deed (Exh"J") which was registered in the Registry of Deeds on May13, 1940 (Exh. "J-1").

- Defendants, on the other hand will prove by competenevidence during the trial of this case the following facts:

> That lot No. 2 of the Psu-1552 it (Exh. '5') was originallyowned and possessed by Felipe Batiller, grandfather of thedefendant Basilio Batiller, on the death of the former in1920, as his sole heir. Isaias Batiller succeeded his father Basilio Batiller, in the ownership and possession of the landin the year 1930, and since then up to the present, the landremains in the possession of the defendant, his possessionbeing actual, open, public, peaceful and continuous in the


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SALES! - A2010 - Prof. Jardeleza Page 10concept of an owner, exclusive of any other rights andadverse to all other claimants.> That the alleged predecessors in interest of the plaintiffhave never been in the actual possession of the land andthat they never had any title thereto.> That Lot No. 2, Psu 155241, the subject of Free Patentapplication of the defendant has been approved.

- On August 17, 1965, defendant's counsel manifested in opencourt that before any trial on the merit of the case could

proceed he would file a motion to dismiss plaintiff's complaintwhich he did, alleging that plaintiff does not have cause ofaction against him because the property in dispute which he(plaintiff) allegedly bought from his father-in-law, FranciscoMilitante was the subject matter of LRC No. 695 filed in the CFIof Iloilo, which case was brought on appeal to this Court anddocketed as CA-G.R. No. 13497-R in which aforesaid caseplaintiff was the counsel on record of his father-in-law, FranciscoMilitante.- Invoking Arts. 1409 and 1491 of the Civil Code which reads:

> Art. 1409. The following contracts are inexistent and voidfrom the beginning: (7) Those expressly prohibited by law.> ART. 1491. The following persons cannot acquire anypurchase, even at a public auction, either in person ofthrough the mediation of another: .

+ (5) Justices, judges, prosecuting attorneys, clerks ofsuperior and inferior courts, and other officers andemployees connected with the administration of

justice, the property and rights of in litigation or leviedupon an execution before the court within whose

jurisdiction or territory they exercise their respectivefunctions; this prohibition includes the act of acquiringan assignment and shall apply to lawyers, with respectto the property and rights which may be the object ofany litigation in which they may take part by virtue oftheir profession.

- Defendant claims that plaintiff could not have acquired anyinterest in the property in dispute as the contract he (plaintiff)had with Francisco Militante was inexistent and void. (See pp.22-31, Record on Appeal). Plaintiff strongly opposed defendant'smotion to dismiss claiming that defendant can not invokeArticles 1409 and 1491 of the Civil Code as Article 1422 of thesame Code provides that 'The defense of illegality of contracts is

not available to third persons whose interests are not directlyaffected' (See pp. 32-35 Record on Appeal).- On October 18, 1965, the lower court issued an orderdisclaiming plaintiffs complaint (pp. 42-49, Record on Appeal.) Inthe aforesaid order of dismissal the lower court practicallyagreed with defendant's contention that the contract (Exh. A)between plaintiff and Francism Militante was null and void.

ISSUEWON the contract of sale between appellant and his father-in-law, the late Francisco Militante over the property subject ofPlan Psu-99791 was void because it was made when plaintiffwas counsel of his father-in-law in a land registration caseinvolving the property in dispute

HELD

YES- The purchase by a lawyer of the property in litigation from hisclient is categorically prohibited by Article 1491 paragraph (5) ofthe Philippine Civil Code, reproduced supra; 6 and thatconsequently, plaintiff's purchase of the property in litigationfrom his client (assuming that his client could sell the samesince as already shown above, his client's claim to the propertywas defeated and rejected) was void and could produce no legaleffect, by virtue of Article 1409, paragraph (7) of our Civil Codewhich provides that contracts "expressly prohibited or declaredvoid by law' are "inexistent and that "(T)hese contracts cannotbe ratified. Neither can the right to set up the defense ofillegality be waived."- In a case, the Court ordered the issuance of a writ ofpossession for the return of the land by the lawyer to theadverse parties without reimbursement of the price paid by him

and other expenses, and ruled that counsel is a lawyer and ispresumed to know the law. He must, therefore, from thebeginning, have been well aware of the defect in his title and isconsequently, a possessor in bad faith."- Article 1491 of our Civil Code (like Article 1459 of the SpanishCivil Code) prohibits in its six paragraphs certain persons, byreason of the relation of trust or their peculiar control over theproperty, from acquiring such property in their trust or controeither directly or indirectly and "even at a public or judicia

auction," as follows: (1) guardians; (2) agents; (3administrators; (4) public officers and employees; judiciaofficers and employees, prosecuting attorneys, and lawyers; and(6) others especially disqualified by law.- New Civil Code recognizes absolute nullity of contracts "whosecause, object, or purpose is contrary to law, morals, goodcustoms, public order or public policy" or which are "expresslyprohibited or declared void by law" and declares such contracts"inexistent and void from the beginning."- nullity of such prohibited contracts is definite and permanenand cannot be cured by ratification. The public interest andpublic policy remain paramount and do not permit ocompromise or ratification. In his aspect, the permanendisqualification of public and judicial officers and lawyersgrounded on public policy differs from the first three cases ofguardians, agents and administrators (Article 1491, Civil Code)as to whose transactions it had been opined that they may be"ratified" by means of and in "the form of a new contact, inwhich cases its validity shall be determined only by thecircumstances at the time the execution of such new contract

The causes of nullity which have ceased to exist cannot impairthe validity of the new contract. Thus, the object which wasillegal at the time of the first contract, may have alreadybecome lawful at the time of the ratification or second contractor the service which was impossible may have become possibleor the intention which could not be ascertained may have beenclarified by the parties. The ratification or second contract wouldthen be valid from its execution; however, it does not retroact tothe date of the first contract."- As applied to the case at bar, the lower court thereforeproperly acted upon defendant-appellant's motion to dismiss onthe ground of nullity of plaintiff's alleged purchase of the landsince its juridical effects and plaintiff's alleged cause of action

founded thereon were being asserted against defendantappellant.

ZAYCO V SERRA44 Phil 326

NATUREAppeal to the decision of the lower court holding the contractnull and void for lack of considerationFACTS- On November 7, 1918, the plaintiff, Lorenzo Zayco, and thedefendant, Salvador Serra, entered into a contract, the pertinenclauses of which are following:1. That the party of the first part shall give the party of thesecond part an option to buy the Palma Central for the sum oone million pesos (P1,000,000).

4. That in the case the purchase of the Palma Central ismade and the party of the second part cannot pay thewhole price in cash, then he will be given a period notexceeding three years within which to make the fullpayment, computed from the day of the execution of thecontract of sale, provided that the party of the second partgives a security or bond to the satisfaction of the party ofthe first part to guarantee the payment of the balance ofthe purchase price, with interest thereon at a reasonablerate. 6. That this option of the party of the second part topurchase the Palma Central, or to become a partner of, or

join, the party of the first, expires on the 30th of June, 1919


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SALES! - A2010 - Prof. Jardeleza Page 11 7. That hereafter, in case of the sale of the Palma Central,or the formation of a partnership to operate the same, theparty of the second part shall have preference to makesuch sale, or become a partner, over any other personsdesiring to purchase the central or enter into partnership.

- Under date of June 28, 1919, the plaintiff, Lorenzo Zayco,through his attorney, wrote a letter (Exhibit A) to the defendant,Salvador Serra, accepting the foregoing contract and placing athis disposal a cash order of the Bank of the Philippine Islands of

Iloilo in the amount of P100,000, in part payment of the price ofthe Palma Central and Estate. Serra refused to accept suchoffer.- On the same day, June 30, 1919, Zayco brought suit againstSerra to compel him to execute the deed of sale andconveyance of the Palma Central and Estate and to pay, inaddition, P500,000 as damages.- The plaintiff also filed a supplemental complaint in which PhilipWhitaker, Venancio Concepcion, and Eusebio R. de Luzuriagawere included as defendants, and it was alleged that, withoutthe knowledge of the plaintiff Zayco, the defendant Serra soldthe Palma Central and Estate to said Messrs. Philip Whitaker,Venancio Concepcion, and Eusebio R. de Luzuriaga on January29, 1920, for the sum of P1,500,000 on the terms and conditionsspecified in said contract.- By the terms of the contract of November 7, 1918, Zayco wasgranted the right: (a) To purchase the Palma Central and Estateuntil June 30, 1919, and (b) have preference, after that date,over any other purchaser making the same terms.- The lower court held that this contract of November 7, 1918,has no consideration and is, for this reason, null and void. Thisconclusion, however, is not supported by the evidence

ISSUES1. WON there was valid consideration for the Contract2. WON Serra has the obligation to accept the counter offer ofZayco

HELD1. YES- It is true that the contract does not state any consideration onthe part of Serra, but it is presumed that there is a considerationin all contracts (art. 1277, Civ. Code). Besides, a consideration

can be proved and, in this case, there is evidence showing itsexistence.- The Palma Central was in competition with the Bearin Centralof Lizarraga Hermanos and both were doing their best to gainthe greater number of supporters, which, as is well-known,constitutes the basis and measures of their development. Zaycoowned an estate containing 350 hectares used for cultivatingcane, situated between both centrals is such a way as toconstitute an opening to them from the adjacent estates. Owingto this circumstance, Zayco has been the subject of solicitationsof both centrals, each making the most favorable offers to winhim. Lizarraga Hermanos went so far as to offer to remit hisdebt, amounting to P40,000, if he became a supporter of theircentral. Serra, in turn, offered to give him 60 per cent of thesugar of his cane milled in the Palma Central instead of 55 percent, as allowed by the other centrals, and besides, they

promised to assist him in acquiring this central. Zayco, at last,decided to become, as he in fact became, a supporter of thePalma Central.- All this, which preceded and led to the execution of thecontract of November 7, 1918, is evidently a sufficientconsideration to give life to the contract. It meant, on the part ofZayco, the waiver of positive benefits which he would haveobtained from Lizarraga Hermanos. It meant at the same time,on the part of Serra, an expansion of his central and theconsequent increase in his production and profit. Under suchcircumstance Zayco's support to the Palma Central was aprestation of thing or service which positively benefited Serra.2. NOIt is a counter offer, different from the original contract of Nov.17, 1918. Zayco's acceptance, as his letter of June 28, 1919,indicates, could not, in itself, convert the offer of sale made by

Serra in the document of November 7, 1918, into a perfectcontract. In order for the acceptance to have this effect, it mustbe plain and unconditional, and it will not be so if it involves anynew proposal, for in that case it would not mean conformity withthe offer, which is what gives rise to the generation of thecontract. The letter of acceptance of Zayco lacks theserequisites. When Zayco accepted the offer, tendering the sum ofP100,000 as first payment, his acceptance involved a proposal,not contained in the offer, that this precisely, and not any other,

should be the amount of the first payment. This proposal, inturn, required acceptance on the part of Serra. For this reason,Zayco's acceptance did not imply conformity with the offer ofSerra, but only when the latter shall, in turn, have accepted hisproposal that the amount to be paid in cash was P100,000. Notonly was this not accepted by Serra, but Serra cancelled hisoffer on July 15, 1919.- Our conclusion is that the acceptance made by Zayco ofSerra's offer was not sufficient to give life to a contract and is noground for compelling Serra to execute the sale offered.

ASIAIN V JALANDONI45 Phil 296

MALCOLM; October 23, 1923

FACTS

- Luis Asiain is the owner of the hacienda known as "Mariasituated in the municipality of La Carlota, Province of OccidentaNegros, containing about 106 hectares. Benjamin Jalandoni, thedefendant-appellee, is the owner of another hacienda adjoiningthat of Asiain. Asiain said to Jalandoni that he was willing to sela portion of his hacienda for the sum of P55,000. With a wave ofhis hand, Asiain indicated the tract of land in question, affirmingthat it contained between 25 and 30 hectares, and that the cropof sugar cane then planted would produce not less than 2,000piculs of sugar. But as Jalandoni remained doubtful as to theextent of the land and as to the amount of the crop on it, Asiainwrote Jalandoni a letter assuring the latter of the accuracy of hisassessment of the area and the amount of sugar it couldproduce and that in case it turned out to be inaccurate, hewould be willing to compensate for it.- Sometime later, in July of the same year, Asiain and Jalandon

having met at Iloilo, they prepared and signed thememorandum-agreement where Asiain spouses promised to selto Jalandoni parcels of land containing 25 hectares more oless and producing an estimated crop of 2000 piculs. During alof the period of negotiations, Jalandoni remained a doubting

Thomas and was continually suggesting that, in his opinion, theamount of the land and of the crop was overestimated. Asiain onhis part always gave assurances in conformity with the lettewhich he had written intended to convince Jalandoni that thelatter was in error in his opinion. As a result, the partiesexecuted the another agreement reaffirming their previouagreement and that in case the vendor should withdraw fromthe contract and desist from signing the document of final salethe purchaser shall have the right to collect from said vendor alsuch amount as may have been advanced on account of thissale, with an indemnity of P15,000 as penalty. In case it is thepurchaser who should withdraw from the contract of sale, thenhe will lose all such amount as may have been paid in advanceon account of, this transaction.- Once in possession of the land, Jalandoni did two things. Hehad the sugar cane ground in La Carlota Sugar Central with theresult that it gave an output of 800 piculs and 28 cates ofcentrifugal sugar. When opportunity offered, he secured thecertificate of title of Asiain and procured a surveyor to surveythe land. According to this survey, the parcel in questioncontained an area of 18 hectares, 54 ares, and 22 centiares.- Of the purchase price of P55,000, Jalandoni had paid P30,000leaving a balance unpaid of P25,000. To recover the sum ofP25,000 from Jalandoni or to obtain the certificate of title andthe rent from him, action was begun by Asiain in the Court oFirst Instance of Occidental Negros. To the complaint, an answeand a counter-complaint were interposed by the defendant, by


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SALES! - A2010 - Prof. Jardeleza Page 12which it was asked that he be absolved from the complaint, thatthe contract be annulled, both parties to return whatever theyhad received, and that he recover from the plaintiff the sum ofP3,600 annually as damages. In a well-reasoned decision, theHonorable Eduardo Gutierrez David, Judge of First Instance,declared null the document of purchase and its relatedmemorandum; absolved Jalandoni from the payment of P25,000;ordered the Asiain to return to the defendant the sum ofP30,000 with legal interest from July 12, 1920; ordered the

Jalandoni to turn over to the plaintiff the tract of land and thecertificate of title No. 468, and absolved the Asiain from thecounter-complaint, without special finding as to the costs. It isfrom said judgment that the plaintiff has appealed.- The plaintiff contends that in the case of Irureta Goyena vs.

Tambunting ([1902], 1 Phil., 490), the rule announced in thesyllabus is: "An agreement to purchase a certain specified lot ofland at a certain specified price is obligatory and enforceableregardless of the fact that its area is less than that mentioned inthe contract."

ISSUES1. WON the lower court erred in nullifying the document ofpurchase and its related memorandum on the ground of mutualmistake under the Civil Code and thereafter restoring theparties to their original position2. WON the stipulation more or less saves the contract frombeing declared null and void

HELD1. NORatio Mutual mistake of the contracting parties to a sale inregard to the subject-matter of the sale which is so material asto go to the essence of the contract, is a ground for relief andrescission.Reasoning- A comparative study of the American authorities throwsconsiderable light on the situation. In volume 39 Cyc., page1250, under the subject "Vendor and Purchaser," is found thefollowing:"If, in a contract of sale the quantity of the realty to beconveyed is indicated by a unit of area, as by the acre, amarked excess or deficiency in the quantity stipulated for is a

ground for avoiding the contract. Since it is very difficult, if notimpossible, to ascertain the quantity of a tract with perfectaccuracy, a slight excess or deficiency does not affect thevalidity of the contract.- "Where, however, the contract is not for the sale of a specificquantity of land, but for the sale of a particular tract, ordesignated lot or parcel, by name or description, fix a sum ingross, and the transaction is bona fide, a mutual mistake as toquantity, but not as to boundaries, will not generally entitle thepurchaser to compensation, and is not ground for rescission. Butit is well settled that a purchaser of land, when it is sold in gross,or with the description, 'more-or less,' or 'about,' does notthereby ipso-facto take all risk of quantity in the tract. If thedifference between the real and the represented quantity isvery great, both parties act obviously under a mistake which itis the duty of a court of equity to correct.' And relief will be

granted when the mistake is so material that if the truth hadbeen known to the parties the sale would not have been made."- A mutual mistake as to the quantity of the land sold may affordground for equitable relief. As has been said, if, through grossand palpable mistake, more or less land should be conveyedthan was in the contemplation of the seller to part with or thepurchaser to receive, the injured party would be entitled to reliefin like manner as he would be for an injury produced by asimilar cause in a contract of any other species. And when it isevident that there has been a gross mistake as to quantity, andthe complaining party has not been guilty of any fraud orculpable negligence, nor has he otherwise impaired the equityresulting from the mistake, he may be entitled to relief from thetechnical or legal effect of his contract, whether it be executedor only executory. It has also been held that where there is avery great difference between the actual and the estimated

quantity of acres of land sold in gross, relief may be granted onthe ground of gross mistake.- EXCEPTION TO MUTUAL MISTAKE. Relief, however, will not begranted as a general rule where it appears that the partiesintended a contract of hazard, as where the sale is a sale ingross and not by acreage or quantity as a basis for the priceand it has been held that a mistake on the part of the vendor ofa town lot sold by description as to number on the plat, as to itsarea or dimensions, inducing a sale thereof at a smaller price

than he would, have asked had he been cognizant of its size, notin any way occasioned or concealed by conduct of thepurchaser, constitutes no ground for the rescission of thecontract. The apparent conflict and discrepancies in theadjudicated eases involving mistakes as to quantity arise nofrom a denial of or a failure to recognize the general principlebut from the difficulty of its practical application in particulaeases in determining the questions whether the contract wasone of hazard as to quantity or not and whether the variance isunreasonable. The relative extent of the surplus or defici-cannot furnish, per se, an infallible criterion in each caw for itsdetermination, but each case must be considered with referencenot only to that but its other peculiar circumstances. Theconduct of the parties, the value, extent, and locality of theland, the date of the contract, the price, and other namelesscircumstances, are always important, and generally decisive. Inother words, each case must depend on its own peculiacircumstances and surroundings.- "The rule denying relief in ease of a deficit or an excess isfrequently applied in equity as well as at law, but a court oequity will not interfere on account of either a surplus or adeficiency where it is clear that the parties intend a contract ofhazard, and it is said that although this general rule may notcarry into effect the real intention of the parties. It is calculatedto prevent litigation. From an early date courts of equity undetheir general jurisdiction to grant relief on the ground of mistakehave in case of a mistake in the estimation of the acreage in thetract sold and conveyed interposed their aid to grant relief tothe vendor where there was a large surplus over the estimatedacreage, and to the purchaser where there was, a large deficitFor the purpose of determining whether relief shall be grantedthe courts have divided the cases into two general classes: (1Where the sale is of a specific quantity which is usually

denominated a sale by the acre; (2) where the sale is of aspecific tract by name or description, which is usually called asale in gross. * * ""Sales in gross for the purpose of equitable relief may be dividedinto various subordinate classifications;(1) sales strictly and essentially by the tract, without referencein the negotiation or in the consideration to any designated orestimated quantity of acres;(2) sales of the like in which, though a supposed quantity byestimation is mentioned or referred to in the contract, thereference was made only for the purpose of description, andunder such circumstances or in such a manner as to show thatthe parties intended to risk the contingency of quantitywhatever it might be, or how much it might exceed or fall shortof that which was mentioned in the contract;(3) sales in which it is evident, from extraneous circumstances

of locality, value, price, time, and the conduct and conversationsof the parties, that they did not contemplate or intend to riskmore than the usual rates of excess or deficit in similar cases, othan such as might reasonably be calculated on as within therange of ordinary contingency;(4) sales which, though technically deemed and denominatedsales in gross, are in fact sales by the acre, and so understoodby the parties. Contracts belonging to either of the two firstmentioned classes, whether executed or executory, should nobe modified by the chancellor when there has been no fraudBut in sales of either the third or fourth kind, an unreasonablesurplus or deficit may entitle the injured party to equitablerelief, unless he has, by his conduct, waived or forfeited hisequity. * * * "- Coordinating more closely the law and the facts in the instantcase, we reach the following conclusions: This was not a


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SALES! - A2010 - Prof. Jardeleza Page 13contract of hazard. It was a sale in gross in which there was amutual mistake as to the quantity of land sold and as to theamount of the standing crop. The mistake of fact as disclosednot alone by the terms of the contract but by the attendantcircumstances, which it is proper to consider in order to throwlight upon the intention of the parties, is, as it is sometimesexpressed, the efficient cause of the concoction. The mistakewith reference to the subject-matter of the contract is such that,at the option of the purchaser, it is rescindable. Without such

mistake the agreement would not have been made and sincethis is true, the agreement is inoperative and void. It is notexactly a case of over reaching on the plaintiff's part, or ofmisrepresentation and deception, or of fraud, but is more nearlyakin to a bilateral mistake for which relief should be granted.Specific performance of the contract can therefore not beallowed at the instance of the vendor.2. NO.RatioThe use of "more or less" or similar, words in designatingquantity covers only a reasonable excess or deficiency and thatwhen a vendee of land enters into a contract of sale with thevendor with the description "more or less," he does not therebyipso facto take all risk of quantity in the land.Reasoning- The memorandum-agreement between Asiain and Jalandonicontains the phrase "more or less." It is the general view thatthis phrase or others of like import, added to a statement ofquantity, can only be considered as covering inconsiderable orsmall differences one way or the other, and do not inthemselves determine the character of the sale as one in grossor by the acre. The use of this phrase in designating quantitycovers only a reasonable excess or deficiency. Such words mayindeed relieve from exactness but not from gross deficiency.- The apparent conflict and discrepancies in the adjudicatedcases arise not from a denial of or a failure Ito recognize thegeneral principles. These principles, as commonly agreed to,may be summarized as follows:A vendee of land when it is soldin gross or with the description "more or less" does not therebyipso facto take all risk of quantity in the land. The use of "moreor less" or similar, words in designating quantity covers only areasonable excess or deficiency.Disposition The ultimate result is to put the parties back inexactly their respective positions before they became involved

in the negotiations and before accomplishment of theagreement. This was the decision of the trial judge and we thinkthat decision conforms to the facts, the law, and the principlesof equity. Judgment is affirmed, without prejudice to the right ofthe plaintiff to establish in this action in the lower court theamount of the rent of the land pursuant to the terms of thecomplaint during the time the land was in the possession of thedefendant, and to obtain judgment against the defendant forthat amount, with costs against the appellant.

PAREDES V ESPINO22 SCRA 1000

REYES; March 13, 1968

NATURE

Appeal from order of CFI Palawan (granting motion to dismiss)FACTS- Paredes filed an action for specific performance (to execute adeed of sale) and damages against Espino. It appears thatEspino had agreed to sell to Paredes a piece of land in PuertoPrincesa, upon his arrival in said city. There was no writtencontract, and Espino filed a motion to dismiss for lack of causeof action. Paredes, to oppose motion to dismiss, submitted asevidence Espinos letter, which said in part:So far I received two letters from you, xxx. In reply thereto,please be informed that after consulting with my wife, we bothdecided to accept your last offer of P4/sq.m of the lot whichcontains 1826 sq.m and on cash basis.- In order that we can facilitate the transaction of the sale inquestion, we (Mrs. Espino and I) are going there (Puerto

Princesa, Pal.) to be there during the last week of the monthMay. I will send you a telegram, as per your request, when I wilreach Manila before taking the boat for Pto. Princesa. As it isnow, there is no schedule yet of the boats plying betweenManila and Pto. Princesa for next week."- CFI dismissed the case, on the ground that there was no causeof action. It said that since there was no written contractalthough was valid in itself, it was unenforceable by virtue of theStatute of Frauds (Art. 1403, NCC).

ISSUEWON the enforcement of the contract of sale was barred by theStatute of Frauds

HELDNORatio The Statute of Frauds, embodied in Art. 1403 NCC, doesnot require that the contract itself be in writing. The plain text oArt. 1403, par(2) is clear that a written note or memorandumembodying the essentials of the contract and signed by theparty charged, or his agent, suffices to make the verbaagreement enforceable, taking it out of th

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