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SALES AND LEASECase Doctrines Part 3

1. Sections 1475 – 1488, NCC 2. Realty Installment Buyer Protection Act (R. A. 6552)3. Cases: 1. Pacific Oxygen v.

Central Bank L-23391 (Feb. 27, 1971)

It is well-settled in our law that a contract of sale exists from the moment "one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other to pay therefore a price certain in money or its equivalent." There is a perfection of such a contract "at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price" from which moment, "the parties may reciprocally demand performance, subject to the provisions of the law governing the form of contracts." It is a fair restatement of the prevailing principle in American law that an agreement by one party to sell and deliver, and by the other to purchase at a mentioned price and terms certain personal property on or before specified future date is a contract of sale and not an option.

2. Toyota Shaw Inc. v. CA 244 SCRA 320 (1995)

It is not a contract of sale. No obligation on the part of Toyota to transfer ownership of a determinate thing to Sosa and no correlative obligation on the part of the latter to pay therefor a price certain appears therein. The provision on the downpayment of P100,000.00 made no specific reference to a sale of a vehicle. If it was intended for a contract of sale, it could only refer to a sale on installment basis, as the Vehicle Sales Proposal executed the following day confirmed. But nothing was mentioned about the full purchase price and the manner the installments were to be paid. The VSP shows the absence of a meeting of minds between Toyota and Sosa. For one thing, Sosa did not even sign it.At the most, the VSP may be considered as part of the initial phase of the generation or negotiation stage of a contract of sale. There are three stages in the contract of sale, namely: (a) preparation, conception, or generation, which is the period of negotiation and bargaining, ending at the moment of agreement of the parties; (b) perfection or birth of the contract, which is the moment when the parties come to agree on the terms of the contract; and (c) consummation or death, which is the fulfillment or performance of the terms agreed upon in the contract. The second phase of the generation or negotiation stage in this case was the execution of the VSP. It must be emphasized that thereunder, the downpayment of the purchase price was P53,148.00 while the balance to be paid on installment should be financed by B.A. Finance Corporation. It is, of course, to be assumed that B.A. Finance Corp. was acceptable to Toyota, otherwise it should not have mentioned B.A. Finance in the VSP.

3. Johannes Schuback & Sons v. CA 227 SCRA 717(1993)

Article 1319 of the Civil Code states: "Consent is manifested by the meeting of the offer and acceptance upon the thing and the cause which are to constitute the contract. The offer must be certain and the acceptance absolute. A qualified acceptance constitutes a counter offer." The facts presented to us indicate that consent on both sides has been manifested. The offer by petitioner was manifested on December 17, 1981 when petitioner submitted its proposal containing the item number, quantity, part number, description, the unit price and total to private respondent. On December 24, 1981, private respondent informed petitioner of his desire to avail of the prices of the parts at that time and simultaneously enclosed its Purchase Order. At this stage, a meeting of the minds between vendor and vendee has occurred, the object of the contract: being the spare parts and the consideration, the price stated in petitioner's offer dated December 17, 1981 and accepted by the respondent on December 24, 1981

4. Paredes v. Espino L-23351 (March 13, 1968)

The Statute of Frauds, embodied in Article 1403, Civil Code of the Philippines, does not require that the contract itself be in writing. The plain text of Art. 1403, paragraph (2) is clear that a written note or memorandum, embodying the essentials of the contract and signed by the party charged, or his agent, suffices to make the verbal agreement

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enforceable, taking it out of the operation of the statute.The letter, sent by defendant-appellee , constitute an adequate memorandum of the transaction. They are signed by the defendant-appellee; give its area as 1026 square meters and the purchase price of four (P4) pesos per square meter payable in cash. We have in them, therefore, all the essential terms of the contract, and they satisfy the requirements of the Statute of Frauds. We have ruled that a sufficient memorandum may be contained in two or more documents.

5. Facturan et al v. Sabanal81 Phil 512

The statute of frauds" is not applicable in actions which are neither for a violation of contract nor for the performance thereof," and "is applicable only to executory contracts" The statute of frauds is not applicable to executed contracts such as the contract of sale of the property in question to the spouses during their marriage, testified to by the witnesses.

6. Leoquinco v.Postal Savings Bank47 Phil 772

The owner of property which is offered for sale, either at public or private auction, has the right to prescribe the manner, conditions, and terms of such sale. He may provide that all of the purchase price should be paid at the time of the sale, or any portion thereof, or that time will be given for the payment, or that any and all bids may be rejected. The conditions of a public sale announced by an auctioneer or by the owner of the property at the time and place of the sale, are binding upon all bidders, whether they knew of such conditions or not. By taking part in the auction and offering his bid, the buyer-appellant voluntarily submitted to the terms and conditions of the auction sale, announced in the notice, and clearly acknowledged the right so reserved to the appellees. The seller-appellees, making use of that right, rejected his offer.

7. Sampaguita Pictures v. Jalwindor Manuf.93 SCRA 420 (1979)

When a property levied upon by the sheriff pursuant to a writ of execution is claimed by a third person in a sworn statement of ownership thereof, as prescribed by the rules, an entirely different matter calling for a new adjudication arises. The items in question were illegally levied upon since they do not belong to the judgment debtor. The power of the Court in execution of judgment extends only to properties unquestionably belonging to the judgment debtor. The fact that Capitol failed to pay Jalwindor the purchase price of the items levied upon did not prevent the transfer of ownership to Capitol and, later, to Sampaguita by virtue of the agreement in their lease contract. Therefore, the complaint of Sampaguita to nullify the Sheriff's sale is well founded, and should prosper.

8. Atkins, Kroll & Co. v. Cua Hian Tek L- 9871 (Jan. 31, 1958)

Upon accepting the offer, a bilateral promise to sell and to buy ensues; the buyer assumes ipso facto the obligations of a purchaser, and not merely the right subsequently to buy or not to buy. The concurrence of both acts – the offer and the acceptance – generates a binding contract of sale.

9. Sanchez v. Rigos45 SCRA 368 (1972)

If acceptance is made before withdrawal, it constitutes a binding contract of sale although the option is given without consideration. Before acceptance, the offer may be withdrawn as a matter of right. Be that as it may, the offerer cannot revoke, before the period has expired, in an arbitrary manner the offer without being liable for damages which the offeree may suffer under Article 19 f the Civil Code.This view has the advantage of avoiding a conflict between Article 1324 and Article 1479, in line with the cardinal rule of statutory construction that, in construing different provisions of one and the same law or code, such interpretation should be favored as will reconcile or hamonize said provisions and avoid a conflict between the same. The decision in Soutwestern case considers Article 1479 as an exception to Article 1324, and exceptions are not favored unless the intention to the contrary is clear, and it is not so insofar as said two articles are concerned.(The doctrine laid down in the Atkins case is reaffirmed, and, insofar as inconsistent therewith, the view adhered to in Southwestern case should be deemed abandoned or modified.)

10. Riviera Filipina, Inc. v. CA380 SCRA 245 (2002)

As clearly shown by the records and transcripts of the case, the actions of the parties to the contract of lease, Reyes and Riviera, shaped their understanding and interpretation of the lease provision "right of first refusal" to mean simply that should the lessor Reyes decide to sell the leased property during the term of the lease, such sale should first be

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offered to the lessee Riviera. And that is what exactly ensued between Reyes and Riviera, a series of negotiations on the price per square meter of the subject property with neither party, especially Riviera, unwilling to budge from his offer, as evidenced by the exchange of letters between the two contenders. It can clearly be discerned from Riviera's letters dated December 2, 1988 and February 4, 1989 that Riviera was so intractable in its position and took obvious advantage of the knowledge of the time element in its negotiations with Reyes as the redemption period of the subject foreclosed property drew near. Riviera strongly exhibited a "take-it or leave-it" attitude in its negotiations with Reyes. It quoted its "fixed and final" price as Five Thousand Pesos (P5,000.00) and not any peso more. It voiced out that it had other properties to consider so Reyes should decide and make known its decision "within fifteen days." Riviera, in its letter dated February 4, 1989, admittedly, even downgraded its offer when Reyes offered anew the property to it, such that whatever amount Reyes initially receives from Riviera would absolutely be insufficient to pay off the redemption price of the subject property. Naturally, Reyes had to disagree with Riviera's highly disadvantageous offer.Nary a howl of protest or shout of defiance spewed forth from Riviera's lips, as it was, but a seemingly whimper of acceptance when the counsel of Reyes strongly expressed in a letter dated December 5, 1989 that Riviera had lost its right of first refusal. Riviera cannot now be heard that had it been informed of the offer of Five Thousand Three Hundred Pesos (P5,300.00) of Cypress and Cornhill it would have matched said price. Its stubborn approach in its negotiations with Reyes showed crystal-clear that there was never any need to disclose such information and doing so would be just a futile effort on the part of Reyes. Reyes was under no obligation to disclose the same. Pursuant to Article 1339 of the New Civil Code, silence or concealment, by itself, does not constitute fraud unless there is a special duty to disclose certain facts, or unless according to good faith and the usages of commerce the communication should be made. We apply the general rule in the case at bar since Riviera failed to convincingly show that either of the exceptions are relevant to the case at bar.

11. Roman v. Grimalt6 Phil. 96 (1906)

The provision contained in article 1278 of the Civil Code to the effect that a contract shall be considered binding whatever may be the form in which it was executed if it complies with the essential conditions and circumstances attending each particular contract and the nature of the proof required to establish its existence.No contract shall be considered valid and binding which does not contain the essential elements prescribed in article 1261 of the Civil Code, the consent of the parties being the first such elements. When there is no proof that parties have agreed as to the thing should be the subject of the contract and that one has accepted the terms propose by the other, it can not be said that the contracting parties have given their mutual consent as to the consideration of the contract.Where no valid contract of sale exists it create no mutual rights or obligations by between the alleged purchaser and seller, nor any label relation legal relation binding upon them.The disapperance or loss of property which the owner intended or attempted to sell can only interest the owner, who should suffer the loss, and not a third party who has acquired no rights nor incurred any liability with respect thereto.

12. Yu Tek v. Gonzales29 Phil 384 (1915)

Gozales obligates himself to deliver a generic thing. Any sugar of the quantity stipulated regardless of origin or however acquired (lawfully) would be obligatory on the part of Yu tek to receive and would discharge the obligation. It seems, therefore, plain that the sugar to be sold not having been segregated, the sale was not perfected and the loss of the crop even through force majeure, did not extinguish Gonzales’ obligation to deliver the sugar. Flood, like other catastrophes, was a contingency, a collateral incident, which Gonzales should have provided for by proper stipulations. Genus nunquam perit (genus never perishes)

13. Alliance Tobacco v. Phil. Virginia Tobacco 179 SCRA 336 (1989)

The Civil Code provides that ownership of the thing sold shall be transferred to the vendee upon the actual or constructive delivery thereof. There is delivery when the thing sold is placed in the control and

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possession of the vendee.In tobacco trading, actual delivery plays a pivotal role. The peculiar procedure undergone in trading, which procedure was set out at length in both the Santiago and the PVTA vs. De los Angeles cases, reveals that delivery seals the contract of sale because the trader loses not only possession but also control over the shipment. Outlined by the PVTA pursuant to its power "to take over and assume, and therefore exclusively direct, supervise and control, all functions and operations with respect to the processing, warehousing, and trading of Virginia tobacco, the provisions of any existing law to the contrary notwithstanding," the procedure is observed by everyone involved in the trade.The tobacco trading procedure conceived and formulated by the PVTA is akin to a contract of adhesion wherein only one party has a hand in the determination of the terms. But observance of the procedure more often than not renders a trader at a disadvantage. The moment the shipment is placed in the hands of the PVTA or its representative and it is lost, the trader is left empty-handed. While the flaw may not really be in the procedure itself, the same may be found in the persons charged with the implementation of the procedure. Some personnel mishandle the shipment to the detriment of the trader. Some demand grease money to facilitate the trading process. Sadly, this is what happened in this case.Hence, while under an ideal situation, we would have found merit in respondent PVTA's contention that the contract of sale could not have been perfected pursuant to Article 1475 of the Civil Code because to determine the price of the tobacco traded, the shipment should first be inspected, graded and weighed, we find said contention misplaced herein. A strict interpretation of the provision of Article 1475 may result in adverse effects to small planters who would not be paid for the lost products of their toil. Such situation was what the ruling in PVTA vs. De los Angeles sought to avoid. Equity and fair dealing, the anchor of said case, must once more prevail. Since PVTA had virtual control over the lost tobacco bales, delivery thereof to the FVTR should also be considered effective delivery to the PVTA.

14. Pacific Comm’l Co. v. Ermita Market55 Phil. 617 (1931)

If the bulk of the goods delivered do not correspond with the description, the contract may be rescinded. However, if the thing delivered is as described, the fact that the buyer cannot use the thing sold for the purpose for which it was intended without the seller’s fault does not exempt the buyer from paying the purchase price agreed upon.

15. Manila MetaL Container Corp. v. PNB511 SCRA 444 (2006)

Whenever earnest money is given in a contract of sale, it shall be considered as part of the price and as proof of the perfection of the contract. The deposit of P725,000 was accepted by PNB on the condition that the purchase price is still subject to the approval of the PNB Board. Absent proof of the concurrence of all the essential elements of a contract of sale, the giving of earnest money cannot establish the existence of a perfected contract of sale.

16. Bucton v. Gabar 55 SCRA 499 (1976)

That sale, although not consigned in a public instrument or formal writing, is nevertheless valid and binding between petitioners and private respondents, for the time-honored rule is that even a verbal contract of sale or real estate produces legal effects between the parties. Although at the time said petitioner paid P1,000.00 as part payment of the purchase price on January 19, 1946, private respondents were not yet the owners of the lot, they became such owners on January 24, 1947, when a deed of sale was executed in their favor by the Villarin spouses. In the premises, Article 1434 of the Civil Code, which provides that "[w]hen a person who is not the owner of a thing sells or alienates and delivers it, and later the seller or grantor acquires title thereto, such title passes by operation of law to the buyer or grantee," is applicable. Thus, the payment by petitioner Nicanora Gabar Bucton of P1,000.00 on January 19, 1946, her second payment of P400.00 on May 2, 1948, and the compensation, up to the amount of P100.00 (out of the P1,000.00-loan obtained by private respondents from petitioners on July 30, 1951), resulted in the full payment of the purchase price and the consequential acquisition by petitioners of ownership over one-half of the lot. Petitioners therefore became owners of the one-half portion of the lot in question by virtue of a

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sale which, though not evidenced by a formal deed, was nevertheless proved by both documentary and parole evidence.

17. Tajanlangit v.Southern MotorsL-107 89 (1957)

In a contract of sale of personal property the price of which is payable in installments, secured by a mortgage on the goods sold, the vendor who chooses to exact fulfillment of the obligation to pay is not limited to the proceeds of the sale, on execution, of the mortgaged goods. The vendor may still recover from the purchaser the unpaid balance of the price, if any.

18. Macondray & Co. v. Eustaquio64 Phil 446 (1937)

The plaintiff contends that, even granting that Act No. 4122 is valid, the court should have ordered the defendant to pay at least the stipulated interest, attorney's fees, and the costs. This question involves the interpretation of the pertinent portion of the law, reading: "However, if the vendor has chosen to foreclose the mortgage he shall have no further action against the purchaser for the recovery of any unpaid balance owing by the same, and any agreement to the contrary shall be null and void." This paragraph, as its language shows, refers to the mortgage contract executed by the parties, whereby the purchaser mortgages the chattel sold to him on the installment basis in order to guarantee the payment of its price, and the words "any unpaid balance" should be interpreted as having reference to the deficiency judgment to which the mortgagee may be entitled where, after the mortgaged chattel is sold at public auction, the proceeds obtained therefrom are insufficient to cover the full amount of the secured obligations which, in the case at bar as shown by the note and by the mortgage deed, include interest on the principal, attorney's fees, expenses of collection, and the costs. The fundamental rule which should govern the interpretation of laws is to ascertain the intention and meaning of the Legislature and to give effect thereto.

19. Bachrach Motot Corp. v. Milan61 Phil 409 (1935)

The sole question before us is whether or not plaintiff-appellant is barred from foreclosing the real estate mortgage after it has elected to sue and obtain a personal judgment against the defendant-appellee on the promissory note for the payment of which the mortgage was constituted as a security.We hold, therefore, that, in the absence of express statutory provisions, a mortgage creditor may institute against the mortgage debtor either a personal action for debt or a real action to foreclose the mortgage. In other words he may pursue either of the two remedies, but not both. By such election, his cause of action can by no means be impaired, for each of the two remedies is complete in itself. Thus, an election to bring a personal action will leave open to him all the properties of the debtor for attachment and execution, even including the mortgaged property itself. And, if he waives such personal action and pursues his remedy against the mortgaged property, an unsatisfied judgment thereon would still give him the right to sue for a deficiency judgment, in which case, all the properties of the defendant, other than the mortgaged property, are again open to him for the satisfaction of the deficiency. In either case, his remedy is complete, his cause of action undiminished, and any advantages attendant to the pursuit of one or the other remedy are purely accidental and are all under his right of election. On the other hand, a rule that would authorize the plaintiff to bring a personal action against the debtor and simultaneously or successively another action against the mortgaged property, would result not only in multiplicity of suits so offensive to justice and obnoxious to law and equity, but also in subjecting the defendant to the vexation of being sued in the place of his residence or of the residence of the plaintiff, and then again in the place where the property lies.

20. Industrial Finance Corp. v. Tobias78 SCRA 28(1977)

Here, petitioner has not cancelled the sale, nor has it exercised the remedy of foreclosure. Foreclosure, judicial or extra-judicial, presupposes something more than a mere demand to surrender possession of the object of the mortgage. Since the petitioner has not availed itself of the remedy of cancelling the sale of the truck in question or of foreclosing the chattel mortgage on said truck, petitioner is still free to avail of the remedy of exacting fulfillment ' of the obligation of respondent Tobias, the vendee of the truck in question. Said the Court:

“The contract being a sale of machinery payable in installments, the

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applicable provision of law is Article 1484 of the Civil Code, which gives the vendor the option to exercise any one of the alternative remedies therein mentioned: exact fulfillment of the obligation, cancel the sale, or foreclose the chattel mortgage. But the vendor- mortgagor in the present case desisted, on its own initiative, from consummating the auction sale, without gaining any advantage or benefit, and without causing any disadvantage, or harm to the vendees-mortgagees. The least that could be said is that such desistance of the plaintiff from proceeding with auction sale was a timely disavowal that cancelled and rendered useless its previous choice to foreclose; its acts, being extra-judicial, brought no trouble upon any court, and were harmless to the defendants. For this reason, the plaintiff cannot be considered as having "exercised" (the Code uses the word "exercise") the remedy of foreclosure because of its incomplete implementation, and, therefore, the plaintiff is not barred from suing on the unpaid account”

21. U.S. Commercial Co. v. Halili93 Phil 271(1953)

In a contract of lease of personal property with option to purchase, the contract is subject to the provision of law that when the lessor has chosen to deprive the lessee of the enjoyment of such personal property, he shall have no further action against the lessee for the recovery of any unpaid balance owing by the latter, any agreement to the contrary being null and void. In choosing the alternative remedy of depriving the lessee of the enjoyment of the leased property, the lessor in such case waives his right to bring an action for unpaid rentals.Even where the lessee voluntarily delivers the property to the lessor, the case is not taken out of the purview of article 1454-A if he does so in obedience to the lessor's demand. The article does not require that the deprivation of the enjoyment of the property be brought about through court action. Specially, where the contract specifically authorizes the lessor to repossess the property whenever the lessee defaults in the payment of rent, court action for such purpose is not essential.

22. Fabrigas v. San Francisco del Monte476 SCRA 247 (2005)

Petitioners defaulted in all monthly installments. They may be credited only with the amount of P30,000.00 paid upon the execution of Contract to Sell No. 2482-V, which should be deemed equivalent to less than two (2) years' installments. Given the nature of the contract between petitioners and Del Monte, the applicable legal provision on the mode of cancellation of Contract to Sell No. 2482-V is Section 4 and not Section 3 of R.A. 6552. Section 4 is applicable to instances where less than two years installments were paid. It reads: "SECTION 4. In case where less than two years of installments were paid, the seller shall give the buyer a grace period of not less than sixty days from the date the installment became due. If the buyer fails to pay the installments due at the expiration of the grace period, the seller may cancel the contract after thirty days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act." Thus, the cancellation of the contract under Section 4 is a two-step process. First, the seller should extend the buyer a grace period of at least sixty (60) days from the due date of the installment. Second, at the end of the grace period, the seller shall furnish the buyer with a notice of cancellation or demand for rescission through a notarial act, effective thirty (30) days from the buyer's receipt thereof. It is worth mentioning, of course, that a mere notice or letter, short of a notarial act, would not suffice.

23. Union Motor Corp vs CA – 361 SCRA 506

In all forms of delivery, it is necessary that the act of delivery, whether actual or constructive, should be coupled with the intention of delivering the thing sold. The act without the intention is insufficient; there is no tradition.

24. Addison vs Felix It is the duty of the vendor to deliver the thing sold. It is not enough to confer upon the purchaser the ownership and the right of possession. The thing sold must be placed in his control. 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, symbolic delivery through the execution of the public instrument is sufficient. 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 tenancy and enjoyment are opposed by

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the interposition of another will, then fiction yields to reality – the delivery has not been effected.If the vendor fails to deliver the thing sold the vendee may elect to rescind the contract.