Case Brief: Olivarez Realty vs Castillo

G.R. No. 196251 July 9, 2014


Castillo was the owner of a parcel of land covered by TCT 19972. The Philippine Tourism Authority allegedly claimed ownership of the same parcel of land based on TCT 18493.

Castillo and Olivarez Realty Corporation, represented by Dr. Pablo Olivarez, entered into a contract of conditional sale over the property.  The details were as follows:

1. Under the deed of conditional sale, Castillo agreed to sell his property to Olivarez Realty; with Olivarez Realty delivering the downpayment and the rest to be paid in 30 equal monthly installments every 8th of the month beginning in the month that the parties would receive a decision voiding the PTA’s title to the property.

2. Under the same deed, Olivarez Realty will file the action against PTA with full assistance of Castillo; and that should the petition be denied, Castillo shall reimburse all the amounts paid by Olivarez Realty.

3. Under the same contract, Olivarez Realty undertook to pay the legitimate tenants of the land disturbance compensation, while Castillo undertook to clear the land of the tenants within 6 months from the signing of the deed; that should Castillo fail to clear the land within 6 months, Olivarez Realty may suspend its monthly downpayment until the tenants vacate the property.

4. The parties agreed that Olivarez Realty Corporation may immediately occupy the property upon signing of the deed. Should the contract be cancelled, Olivarez Realty Corporation agreed to return the property’s possession to Castillo and forfeit all the improvements it may have introduced on the property.

Olivarez Realty failed to comply with the conditions, to wit: a) pay the full purchase price; b) failed to file any action against PTA; c) failed to clear the land of the tenants nor paying them disturbance compensation. For breaching the contract, Castillo prayed for rescission of contract under Art. 1191 of Civil Code, plus damages.

In their defense, Olivarez Realty alleged that Castillo failed to fully assist in filing the action against PTA; that Castillo failed to clear the property of the tenants within 6 months from the signing of the deed. Thus, they had all the legal right to withhold the subsequent payments to fully pay the purchase price.

Both RTC and CA ruled that Olivarez Realty breached the contract and ordered the rescission of the sale plus damages.

Issue #1:
What is the nature of obligations undertaken by both parties?

Held #1:
Olivarez Realty’s obligation to pay the disturbance compensation is a pure obligation, and hence, demandable at once. With respect to Castillo’s obligation to clear the land of the tenants within six months from the signing of the contract, his obligation was an obligation with a resolutory period. The obligation to clear the land of the tenants took effect at once, specifically, upon the parties’ signing of the deed of conditional sale. Castillo had until October 2, 2000, six months from April 5, 2000 when the parties signed the deed of conditional sale, to clear the land of the tenants. Olivarez Realty Corporation, therefore, had no right to withhold payments of the purchase price. As the trial court ruled, Olivarez Realty Corporation “can only claim non-compliance of the obligation to clear the land of the tenants in October 2000.

Issue #2:
Whether or not rescission of the contract is proper.

Held #2: NO.

SC characterized the contract as a contract to sell, not a contract of conditional sale. In a contract of conditional sale, the buyer automatically acquires title to the property upon full payment of the purchase price. This transfer of title is “by operation of law without any further act having to be performed by the seller.” In a contract to sell, transfer of title to the prospective buyer is not automatic. “The prospective seller must convey title to the property through a deed of conditional sale.” The distinction is important to determine the applicable laws and remedies in case a party does not fulfill his or her obligations under the contract. In contracts of conditional sale, our laws on sales under the Civil Code of the Philippines apply. On the other hand, contracts to sell are not governed by our law on sales but by the Civil Code provisions on conditional obligations.

Specifically, Article 1191 of the Civil Code on the right to rescind reciprocal obligations does not apply to contracts to sell. Failure to fully pay the purchase price in contracts to sell is not the breach of contract under Art. 1191. Failure to fully pay the purchase price is merely an event which prevents the seller’s obligation to convey title from acquiring binding force. This is because there can be no rescission of an obligation that is still nonexistent, the suspensive condition (the condition of having the buyer pay the full purchase price) having not happened.

In this case, Castillo reserved his title to the property and undertook to execute a deed of absolute sale upon Olivarez Realty Corporation’s full payment of the purchase price. Since Castillo still has to execute a deed of absolute sale to Olivarez Realty Corporation upon full payment of the purchase price, the transfer of title is not automatic. As this case involves a contract to sell, Article 1191 of the Civil Code of the Philippines does not apply. The contract to sell is instead cancelled, and the parties shall stand as if the obligation to sell never existed.

SC cancelled the deed of conditional sale. Olivarez Realty was ordered to return to Castillo the possession of property, together with all improvements that it introduced. Olivarez Realty was also ordered to pay moral damages, exemplary damages, and attorney’s fees to Castillo.


Case Brief: Balatbat vs CA and Spouses Repuyan

G.R. No. 109410 August 28, 1996
CLARA M. BALATBAT, petitioner,


Aurelio Roque field a complaint for partition against his children Corazon, Feliciano, Severa and Osmundo Roque, and Alberto de los Santos before the CFI. The Roque children were declared in default and Aurelio presented evidence ex-parte. Eventually, the trial court rendered a decision in favor of Aurelio; holding that Aurelio and his wife Maria Mesina acquired the lot (TCT 51330) during their conjugal union, as well as the house that was constructed thereon; that when Maria Mesina died, leaving no debt, Aurelio (as surviving spouse) was entitled to ½ share pro-indiviso of the conjugal property (i.e. house and lot) and that Aurelio and his 4 children were entitled to 1/5 share pro-indiviso each of the ½ share pro-indiviso forming the estate of Maria Mesina; ordering the partition of the properties;

On 5 October 1979, the Register of Deeds of Manila issued TCT 135671 (with Aurelio Roque having 6/10 share; and the Roque children with 1/10 share each). On 1 April 1980, Aurelio sold his 6/10 share in TCT 135671 to respondent spouses Repuyan. Repuyan caused the annotation of her affidavit of adverse claim on the TCT 135671, “claiming that she bought 6/10 portion of the property from Aurelio Roque for the amount of P50,000.00 with a downpayment of P5,000.00 and the balance of P45,000.00 to be paid after the partition and subdivision of the property.”

On 20 August 1980, Aurelio Roque filed a complaint for “Rescission of Contract” against spouses Repuyan before the then CFI Manila (Branch IV, Civil Case 134131). The complaint is grounded on spouses Repuyan’s failure to pay the balance of P45,000.00 of the purchase price. On 5 September 1980, spouses Repuyan filed their answer with counterclaim.

In the meantime, the trial court issued an order in Civil Case 109032 (Partition case) dated 2 February 1982,ordering the Deputy Clerk of the court to sign the deed of absolute sale for and in behalf of Roque children, in order to effect the partition of the property involved in the case.  A deed of absolute sale was executed on 4 February 1982 between Aurelio, Corazon, Feliciano, Severa and Osmundo Roque and petitioner Clara Balatbat, married to Alejandro Balatbat. On 14 April 1982, Clara Balatbat filed a motion for the issuance of a writ of possession which was granted by the trial court on 14 September 1982, subject, however, to valid rights and interest of third persons over the same portion thereof, other than vendor or any other person or persons privy to or claiming any rights or interest under it. The corresponding writ of possession was issued on 20 September 1982.

On 20 May 1982, Clara Balatbat filed a motion to intervene in Civil Case 134131 which was granted as per court’s resolution of 21 October 1982. However, Clara Balatbat failed to file her complaint in intervention.

On 15 April 1986, the trial court rendered a decision dismissing the complaint, and declaring the Deed of Absolute Sale dated 1 April 1980 as valid and enforceable and Aurelio is, as he is hereby ordered, to partition and subdivide the land covered by TCT 135671, and to aggregate therefrom a portion equivalent to 6/10 thereof, and cause the same to be titled in the name of spouses Repuyan, and after which, the latter to pay Aurelio the sum of P45,000.00.

On 9 December 1988, Balatbat and her husband filed a complaint for delivery of the owners duplicate copy of TCT 135671 before the RTC against Jose and Aurora Repuyan. On 27 January 1989, spouses Repuyan filed their answer with affirmative defenses and compulsory counterclaim. On 2 August 1990, the RTC Manila rendered a decision dismissing the complaint, finding that the Balatbats were not able to establish their cause of action against the Repuyans and have no right to the reliefs demanded in the complaint.

Dissatisfied, Balatbat filed an appeal before the Court of Appeals (CA-GR CV 29994) which rendered decision on 12 August 1992, affirming the judgment appealed.


(1) Whether the alleged sale to private respondents was merely executory and not a consummated transaction.

(2) Whether there was double sale as contemplated under Art. 1544 of CC.

(3) Whether petitioner was a buyer in good faith and for value.


(1) NO. Contrary to petitioner’s contention that the sale dated April 1, 1980 in favor of private respondents Repuyan was merely executory for the reason that there was no delivery of the subject property and that consideration/price was not fully paid, SC find the sale as consummated, hence, valid and enforceable. The Court dismissed vendor’s Aurelio Roque complaint for rescission of the deed of sale and declared that the Sale dated April 1, 1980, as valid and enforceable. No appeal having been made, the decision became final and executory.

The execution of the public instrument, without actual delivery of the thing, transfers the ownership from the vendor to the vendee, who may thereafter exercise the rights of an owner over the same. In the instant case, vendor Roque delivered the owner’s certificate of title to herein private respondent. The provision of Article 1358 on the necessity of a public document is only for convenience, not for validity or enforceability. It is not a requirement for the validity of a contract of sale of a parcel of land that this be embodied in a public instrument. A contract of sale being consensual, it is perfected by the mere consent of the parties. Delivery of the thing bought or payment of the price is not necessary for the perfection of the contract; and failure of the vendee to pay the price after the execution of the contract does not make the sale null and void for lack of consideration but results at most in default on the part of the vendee, for which the vendor may exercise his legal remedies.

(2) Article 1544 of the Civil Code provides that in case of double sale of an immovable property, ownership shall be transferred (1) to the person acquiring it who in good faith first recorded it in the Registry of Property; (2) in default thereof, to the person who in good faith was first in possession; and (3) in default thereof, to the person who presents the oldest title, provided there is good faith.

In the case at bar, vendor Aurelio Roque sold 6/10 portion of his share to private respondents Repuyan on April 1, 1980. Subsequently, the same lot was sold again by vendor Aurelio Roque (6/10) and his children (4/10), represented by the Clerk of Court pursuant to Section 10, Rule 39 of the Rules of Court, on February 4, 1982. Undoubtedly, this is a case of double sale contemplated under Article 1544 of the New Civil Code.

Evidently, private respondents Repuyan’s caused the annotation of an adverse claim on the title of the subject property on July 21, 1980. The annotation of the adverse claim in the Registry of Property is sufficient compliance as mandated by law and serves notice to the whole world. On the other hand, petitioner filed a notice of lis pendens only on February 2, 1982. Accordingly, private respondents who first caused the annotation of the adverse claim in good faith shall have a better right over herein petitioner. As between two purchasers, the one who has registered the sale in his favor, has a preferred right over the other who has not registered his title even if the latter is in actual possession of the immovable property. Further, even in default of the first registrant or first in possession, private respondents have presented the oldest title. Thus, private respondents who acquired the subject property in good faith and for valuable consideration established a superior right as against the petitioner.

(3) Petitioner cannot be considered as a buyer in good faith. If petitioner did investigate before buying the land on February 4, 1982, she should have known that there was a pending case and an annotation of adverse claim was made in the title of the property before the Register of Deeds and she could have discovered that the subject property was already sold to the private respondents. It is incumbent upon the vendee of the property to ask for the delivery of the owner’s duplicate copy of the title from the vendor. One who purchases real estate with knowledge of a defect or lack of title in his vendor cannot claim that he has acquired title thereto in good faith as against the true owner of the land or of an interest therein; and the same rule must be applied to one who has knowledge of facts which should have put him upon such inquiry and investigation as might be necessary to acquaint him with the defects in the title of his vendor. Good faith, or the want of it is not a visible, tangible fact that can be seen or touched, but rather a state or condition of mind which can only be judged of by actual or fancied tokens or signs.

Case Brief: Republic vs Philippine Resources Development Corporation

G.R. No. L-10141  January 31, 1958


Apostol, allegedly acting for the Philippine Resources Development Corp. (PRDC), contracted with the Bureau of Prison for the purchase of 100 tons of designated logs, but only a small payment of the purchase price was made. In lieu of the balance of the purchase price, he caused to be delivered goods of the PRDC to the Bureau of Prison as payment for the outstanding price. The Republic brought an action against Apostol for the collection of sums owing to it for his purchase of Palawan Almaciga and other logs. His total debt amounted to some P34,000. PRDC intervened claiming that Apostol, as President of the company, without prior authority, took goods (steel sheets, pipes, bars, etc) from PRDC warehouse and appropriated them to settle his personal debts in favor of the government. The Republic opposed the intervention of PRDC, arguing that price is always paid in money and that payment in kind is no payment at all; hence, money and not the goods of PRDC are under dispute.

The Government asserted that the subject matter of its litigation with Apostol was a sum of money allegedly due to the Bureau of Prison from Apostol and not the goods reportedly turned over by Apostol in payment of his private debt to the Bureau of Prison and the recovery of which was sought by PRDC; and for this reason, PRDC had no legal interest in the very subject matter in litigation as to entitle it to intervene. The Government argued that the goods which belonged to PRDC were not connected with the sale because “Price … is always paid in terms of money and the supposed payment being in kind, it is no payment at all.”


(1) Whether or not payment in kind is equivalent to price paid in money.

(2) Whether PRDC had the right to intervene in the sales transaction executed between Apostol and the Bureau of Prisons and in the suit brought by the Government to enforce such sale.


(1) YES. Price may be paid in money or ITS EQUIVALENT—in this case, the goods. Payment need not be in the form of money. The prices for the goods have, in fact, been assessed and determined.

Republic is not at all authority to say that under Article 1458, as it defines a contract of sale and the obligation of the buyer to “pay the price certain in money or its equivalent”, the term “equivalent” of price can cover other than money or other media of exchange, since Republic covers not the perfection stage of a contract of sale, but rather the consummation stage where the price agreed upon (which ideally should be in money or its equivalent) can be paid under the mutual arrangements agreed upon by the parties to the contract of sale, even by dation in payment.

(2) Yes, PRDC thus has a substantial interest in the case and must be permitted to intervene—its goods paid out without authority being under dispute in this case. The Court held that the Government’s contentions were untenable, ruling that Article 1458 provides that the purchaser may pay “a price certain in money or its equivalent,” which means payment of the price need not be in money. Whether the goods claimed by PRDC belong to it and delivered to the Bureau of Prison by Apostol in payment of his account is sufficient payment therefor, is for the court to pass upon and decide after hearing all the parties in the case. PRDC therefore had a positive right to intervene in the case because should the trial court credit Apostol with the value price of the materials delivered by him, certainly PRDC would be affected adversely if its claim of ownership to such goods were upheld.

Case Brief: Gonzalo Puyat & Sons vs. Arco Amusement

G.R. No. L-47538 June 20, 1941
GONZALO PUYAT & SONS, INC., petitioner,
ARCO AMUSEMENT COMPANY (formerly known as Teatro Arco), respondent.


Arco Amusement Company is a business engaged in operating cinematographs. Gonzalo Puyat & Sons, Inc, was acting as exclusive agents in the Philippines for Starr Piano Company of Indiana, USA, and dealt with cinematographer equipment and company.
Arco Amusement approached Gonzalo Puyat & Sons entered into an agreement wherein Gonzalo Puyat will, on behalf of Arco Amusement, order sound reproducing equipment from Starr Piano Company and that Arco Amusement will pay Gonzalo Puyat, in addition to the price of equipment, a 10% commission plus all expenses. Starr Piano quoted the list price of equipment as $1700 without discount to Gonzalo Puyat, which then told Arco Amusement about it. Being agreeable, the two formalized the transaction and Arco Amusement duly paid $1700 to Gonzalo Puyat.

Subsequently, Arco Amusement made another order again to Gonzalo Puyat for the equipment on the same terms as the first order. The order stated that Gonzalo Puyat would pay for the equipment the amount of $1600 which was supposed to be the exact price quoted by Starr Piano plus 10% commission and expenses. Arco Amusement duly paid $1600 plus 10% commission plus $160 for the expenses; the $160 does not represent actual out-of-pocket expenses but a mere flat charge and rough estimate made by Arco Amusement equivalent to 10% of the $1,600 price.

Arco Amusement subsequently discovered that the price quoted to them with regard to their previous orders were not the net price but rather the list price, and that the Gonzalo Puyat had obtained a discount from the Starr Piano Company. Moreover, by reading reviews and literature on prices of machinery and cinematograph equipment, Arco Amusement was convinced that the prices charged them were much too high. For these reasons, they sought to obtain a reduction from Gonzalo Puyat rather than a reimbursement, and failing in this they filed the complaint.

RTC: Contract between Arco Amusement and Gonzalo Puyat was one of outright purchase and sale.

CA: Reversed RTC’s ruling; the relation between the two was that of agent and principal, Gonzalo Puyat acting as agent of Arco Amusement, and sentenced Gonzalo Puyat to pay the alleged overpayments.


Whether or not the contract between Arco Amusement and Gonzalo Puyat was one of purchase and sale, and not agency.


Yes. There was a contract of sale between the two.

In the first place, the contract is the law between the parties and should include all the things they are supposed to have been agreed upon. What does not appear on the face of the contract should be regarded merely as “dealer’s” or “trader’s talk”, which can not bind either party. The letters showing that Arco Amusement accepted the prices of $1700 and $1600 for the sound reproducing equipment subject of its contract with the petitioner, are clear in their terms and admit no other interpretation that the respondent in question at the prices indicated which are fixed and determinate.

Whatever unforseen events might have taken place unfavorable to Arco Amusement, such as change in prices, mistake in their quotation, loss of the goods not covered by insurance or failure of the Starr Piano Company to properly fill the orders as per specifications, Gonzalo Puyat might still legally hold Arco Amusement to the prices fixed. This is incompatible with the pretended relation of agency between the petitioner and the respondent, because in agency, the agent is exempted from all liability in the discharge of his commission provided he acts in accordance with the instructions received from his principal (section 254, Code of Commerce), and the principal must indemnify the agent for all damages which the latter may incur in carrying out the agency without fault or imprudence on his part (article 1729, Civil Code).

The orders which state that the petitioner was to receive ten per cent (10%) commission does not necessarily make Gonzalo Puyat an agent of Arco Amusement as this provision is only an additional price which Arco Amusement bound itself to pay, and which stipulation is not incompatible with the contract of purchase and sale.


Case Brief: Uy and Roxas vs. CA

WILLIAM UY and RODEL ROXAS, petitioners,
G.R. No. 120465. September 9, 1999


William Uy and Rodel Roxas are agents authorized to sell 8 parcels of land by the owners thereof. By virtue of such authority, they offered to sell the lands, located in Benguet to National Housing Authority (NHA) to be utilized and developed as a housing project. On 14 February 1989, the NHA Board passed Resolution 1632 approving the acquisition of said lands, with an area of 31.8231 hectares, at the cost of P23.867 million, pursuant to which the parties executed a series of Deeds of Absolute Sale covering the subject lands. Of the 8 parcels of land, however, only 5 were paid for by the NHA because of the report it received from the Land Geosciences Bureau of the Department of Environment and Natural Resources (DENR) that the remaining area is located at an active landslide area and therefore, not suitable for development into a housing project. On 22 November 1991, the NHA issued Resolution 2352 cancelling the sale over the 3 parcels of land. The NHA, through Resolution 2394, subsequently offered the amount of P1.225 million to the landowners as daños perjuicios.

On 9 March 1992, petitioners Uy and Roxas filed before the RTC Quezon City a Complaint for Damages against NHA and its General Manager Robert Balao. After trial, the RTC rendered a decision declaring the cancellation of the contract to be justified. The trial court nevertheless awarded damages to plaintiffs in the sum of P1.255 million, the same amount initially offered by NHA to petitioners as damages.

Upon appeal by petitioners, the Court of Appeals reversed the decision of the trial court and entered a new one dismissing the complaint. It held that since there was “sufficient justifiable basis” in cancelling the sale, “it saw no reason” for the award of damages. The Court of Appeals also noted that petitioners were mere attorneys-in-fact and, therefore, not the real parties-in-interest in the action before the trial court. Their motion for reconsideration having been denied, petitioners seek relief from the Supreme Court.

1. Whether or not there was legal basis for rescinding the sale.
2. Whether or not the respondent CA erred in dimissing the subject complaint, finding that the petitioners failed to join as indispensable party plaintiff the selling lot-owners.


1) Yes. The right of rescission or, more accurately, resolution, of a party to an obligation under Article 1191 is predicated on breach of faith by the other party that violates the reciprocity between them. The power to rescind, therefore, is given to the injured party. Article 1191 states that “the power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him. The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible.” In the present case, the NHA did not rescind the contract. Indeed, it did not have the right to do so for the other parties to the contract, the vendors did not commit any breach, much less a substantial breach, of their obligation. Their obligation was merely to deliver the parcels of land to the NHA, an obligation that they fulfilled. The NHA did not suffer any injury by the performance thereof the cancellation was not a rescission under Article 1191. Rather, the cancellation was based on the negation of the cause arising from the realization that the lands, which were the object of the sale, were not suitable for housing.

Cause is the essential reason which moves the contracting parties to enter into it. In other words, the cause is the immediate, direct and proximate reason which justifies the creation of an obligation through the will of the contracting parties. Cause, which is the essential reason for the contract, should be distinguished from motive, which is the particular reason of a contracting party which does not affect the other party. Ordinarily, a party’s motives for entering into the contract donor affect the contract. However, when the motive predetermines the cause, the motive may be regarded as the cause.

In this case, it is clear, and petitioners do not dispute, that NHA would not have entered into the contract were the lands not suitable for housing. In other words, the quality of the land was an implied condition for the NHA to enter into the contract. On the part of the NHA, therefore, the motive was the cause for its being a party to the sale. SC held that the NHA was justified in canceling the contract. The realization of the mistake as regards the quality of the land resulted in the negation of the motive/cause thus rendering the contract inexistent. The Supreme Court denied the petition.

2) No. Section 2, Rule 3 of the Rules of Court requires that every action must be prosecuted and defended in the name of the real party-in-interest. The real party-in-interest is the party who stands to be benefited or injured by the judgment or the party entitled to the avails of the suit. “Interest,” within the meaning of the rule, means material interest, an interest in the issue and to be affected by the decree, as distinguished from mere interest in the question involved, or a mere incidental interest. Cases construing the real party-in-interest provision can be more easily understood if it is borne in mind that the true meaning of real party-in-interest may be summarized as follows: An action shall be prosecuted in the name of the party who, by the substantive law, has the right sought to be enforced. Where the action is brought by an attorney-in-fact of a landowner in his name, (as in our present action) and not in the name of his principal, the action was properly dismissed because the rule is that every action must be prosecuted in the name of the real parties-in-interest (Section 2, Rule 3, Rules of Court).

Petitioners claim that they lodged the complaint not in behalf of their principals but in their own name as agents directly damaged by the termination of the contract. Petitioners in this case purportedly brought the action for damages in their own name and in their own behalf. An action shall be prosecuted in the name of the party who, by the substantive law, has the right sought to be enforced. Petitioners are not parties to the contract of sale between their principals and NHA. They are mere agents of the owners of the land subject of the sale. As agents, they only render some service or do something in representation or on behalf of their principals. The rendering of such service did not make them parties to the contracts of sale executed in behalf of the latter. Since a contract may be violated only by the parties thereto as against each other, the real parties-in-interest, either as plaintiff or defendant, in inaction upon that contract must, generally, either be parties to said contract. Petitioners have not shown that they are assignees of their principals to the subject contracts. While they alleged that they made advances and that they suffered loss of commissions, they have not established any agreement granting them “the right to receive payment and out of the proceeds to reimburse themselves for advances and commissions before turning the balance over to the principals.

Case Brief: Schuback & Sons Philippine Trading Corporation vs. CA

THE HON. COURT OF APPEALS, RAMON SAN JOSE, JR., doing business under the name and style “PHILIPPINE SJ INDUSTRIAL TRADING,” respondents.
G.R. No. 105387 November 11, 1993


Sometime in 1981, the defendant established a contract with plaintiff through the Philippine Consulate General in Hamburg, West Germany, because he wanted to purchase MAN bus spare parts from Germany. Plaintiff communicated with its trading partner, JOHANNES SCHUBACK & SONS PHILIPPINE TRADING CORPORATION (Schuback Hamburg) regarding the spare parts defendant wanted to order. Defendant submitted to plaintiff a list of the parts he wanted to purchase with specific part numbers and description. Plaintiff sent to defendant a letter dated 25 November, 1981, enclosing its offer on the items listed by defendant.

Plaintiff submitted its formal offer containing the item number, quantity, part number, description, unit price and total to defendant. On December, 24, 1981, defendant informed plaintiff of his desire to avail of the prices of the parts at that time.

Plaintiff immediately ordered the items needed by defendant from Schuback Hamburg to enable defendant to avail of the old prices. Schuback Hamburg in turn ordered the items from NDK, a supplier of MAN spare parts in West Germany. On January 4, 1982, Schuback Hamburg sent plaintiff a proforma invoice to be used by defendant in applying for a letter of credit. Said invoice required that the letter of credit be opened in favor of Schuback Hamburg.

On October 18, 1982, Plaintiff again reminded defendant of his order and advised that the case may be endorsed to its lawyers. Defendant replied that he did not make any valid Purchase Order and that there was no definite contract between him and plaintiff. Plaintiff sent a rejoinder explaining that there is a valid Purchase Order and suggesting that defendant either proceed with the order and open a letter of credit or cancel the order and pay the cancellation fee of 30% of F.O.B. value, or plaintiff will endorse the case to its lawyers.

Consequently, petitioner filed a complaint for recovery of actual or compensatory damages, unearned profits, interest, attorney’s fees and costs against private respondent.

In its decision dated June 13, 1988, the trial court ruled in favor of petitioner by ordering private respondent to pay petitioner, among others, actual compensatory damages in the amount of DM 51,917.81, unearned profits in the amount of DM 14,061.07, or their peso equivalent.

Thereafter, private respondent elevated his case before the Court of Appeals. On February 18, 1992, the appellate court reversed the decision of the trial court and dismissed the complaint of petitioner. It ruled that there was no perfection of contract since there was no meeting of the minds as to the price between the last week of December 1981 and the first week of January 1982.


Whether or not a contract of sale has been perfected between the parties


The Supreme Court reversed the decision of the Court of Appeals and reinstated the decision of the trial court. It bears emphasizing that a “contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price.”

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 No. 0l01 dated December 14, 1981. 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.

When petitioner forwarded its purchase order to NDK, the price was still pegged at the old one. Thus, the pronouncement of the Court Appeals that there as no confirmed price on or about the last week of December 1981 and/or the first week of January 1982 was erroneous.

On the part of the buyer, the situation reveals that private respondent failed to open an irrevocable letter of credit without recourse in favor of Johannes Schuback of Hamburg, Germany. This omission, however, does not prevent the perfection of the contract between the parties.

The opening of a letter of credit in favor of a vendor is only a mode of payment. It is not among the essential requirements of a contract of sale enumerated in Article 1305 and 1474 of the Civil Code, the absence of any of which will prevent the perfection of the contract from taking place.

To adopt the Court of Appeals’ ruling that the contract of sale was dependent on the opening of a letter of credit would be untenable from a pragmatic point of view because private respondent would not be able to avail of the old prices which were open to him only for a limited period of time.

WHEREFORE, the petition is GRANTED and the decision of the trial court dated June 13, 1988 is REINSTATED with modification.

Case Brief: Mate vs. CA and Tan




G.R. No. 120724-25; May 21, 1998


Josie Rey with Inocencio Tan went to the residence of Fernando Mate and solicited assistance to stave off her and her family’s prosecution for violation of B.P. 22 with the amount of 4,432,067.00. Josie even requested Fernando Mate to cede three lots that he owns to Inocencio in order to placate him. Fernando refused to accept the proposal of Josie and even contended that he owes Inocencio nothing to convey to him his properties and his lots were not for sale. However, Josie persisted and informed Fernando that she will redeem those lots through her own money. After a long discussion, they have agreed and even executed a fictitious deed of sale with right to repurchase. For assurance that Josie will redeem the lots, she issued two postdated checks to Fernando. After such act, the Deed of Sale with Right to repurchase was notarized and was given to Inocencio together with the titles of the properties. The transaction was not registered to the Registry of Deeds. Fernando deposited the checks to his account few days after the date in the checks but both of them were dishonored due to a closed account. From then on, Josie could no longer be found.

LOWER COURT’S RULING: The Regional Trial Court, during the trial the RTC court asked private respondent to file an action for consolidation of ownership of the properties subject of the sale and pursuant thereto he filed Civil Case No. 7587 that was consolidated with the case he filed earlier which were later decided jointly by the trial court in favor of private respondent.

APPELLATE COURT’S RULING: The Deed of Sale with Right of Repurchase executed October 6, 1986 valid and binding between plaintiff and defendant (as vendor and vendee-a-retro respectively); that as the period to redeem has expired, ownership thereof was consolidated by operation of law, and the Register of Deeds is hereby ordered to REGISTER this decision consolidating the defendant’s ownership over the properties covered by Transfer Certificate of Title No. T-90-71, covering Lot 8; Original Certificate of Title No. N-311 covering Lot 5370, all of the Tacloban Cadastre, and issuing to defendant Inocencio Tan his titles after cancellation of the titles presently registered in plaintiff Fernando T. Mate’s name and that of his wife. The plaintiff Fernando Mate is further ordered to pay defendant the sum of ONE HUNDRED FORTY THOUSAND (P140,000.00) PESOS, for and as attorney’s fees.


Whether the Deed of Sale with Right to repurchase is valid.


The Supreme Court affirmed the decision of the Court of Appeals. The Court stated that as admitted by petitioner, by virtue of the sale with pacto de retro, Josie Rey gave him, as vendor-a-retro, a postdated check in the amount of P1.4 Million, which represented the repurchase price of the two (2) lots. Aside from the P1.4 Million check, Josie gave another postdated check to petitioner in the amount of P420,000.00, ostensibly as interest for six (6) months but which apparently was his fee for having executed the pacto de retro document. Josie thus assumed the responsibility of paying the repurchase price on behalf of petitioner to private respondent. Unfortunately, the two checks issued by Josie Rey were worthless. Both were dishonored upon presentment by petitioner with the drawee banks. However, there is absolutely no basis for petitioner to file a complaint against private respondent Tan and Josie Rey to annul the pacto de retro sale on the ground of lack of consideration, invoking his failure to encash the two checks. Petitioner’s cause of action was to file criminal actions against Josie Rey under B.P. 22, which he did. The filing of the criminal cases was a tacit admission by petitioner that there was a consideration of the pacto de retro sale. Further, Petitioner then postulates that “it is not only illegal but immoral to require him to repurchase his own properties with his own money when he did not derive any benefit from the transaction.” Thus, he invokes the case of Singson vs. Isabela Sawmill, 88 SCRA 633, 643, where the Court said that “where one or two innocent persons must suffer, that person who gave occasion for the damages to be caused must bear consequences.” Petitioner’s reliance on this doctrine is misplaced. He is not an innocent person. As a matter of fact, he gave occasion for the damage caused by virtue of the deed of sale with right to repurchase which he prepared and signed. Thus, there is the equitable maxim that between two innocent parties, the one who made it possible for the wrong to be done should be the one to bear the resulting loss.