2nd Set – Cases on Sales by Atty Glenn Mangaoil

Sales

Sales

San Miguel Properties Philippines , Inc vs Huang, 336 SCRA 737, July 31, 2000

Amount given not as a part of the purchase price and as proof of the perfection of the contract of sale but only as a guarantee that respondents would not back out of the sale.—With regard to the alleged payment and acceptance of earnest money, the Court holds that respondents did not give the P1 million as “earnest money” as provided by Art. 1482 of the Civil Code. They presented the amount merely as a deposit of what would eventually become the earnest money or downpayment should a contract of sale be made by them. The amount was thus given not as a part of the purchase price and as proof of the perfection of the contract of sale but only as a guarantee that respondents would not back out of the sale. Respondents in fact described the amount as an “earnest-deposit.”

Option giving respondents the exclusive right to buy the properties within the period agreed upon is separate and distinct from the contract of sale which the parties may enter.—The first condition for an option period of 30 days sufficiently shows that a sale was never perfected. As petitioner correctly points out, acceptance of this condition did not give rise to a perfected sale but merely to an option or an accepted unilateral promise on the part of respondents to buy the subject properties within 30 days from the date of acceptance of the offer. Such option giving respondents the exclusive right to buy the properties within the period agreed upon is separate and distinct from the contract of sale which the parties may enter. All that respondents had was just the option to buy the properties which privilege was not, however, exercised by them because there was a failure to agree on the terms of payment. No contract of sale may thus be enforced by respondents.

Option secured by respondents from petitioner was fatally defective; Consideration in an option contract may be anything of value, unlike in sale where it must be the price certain in money or its equivalent.—Even the option secured by respondents from petitioner was fatally defective. Under the second paragraph of Art. 1479, an accepted unilateral promise to buy or sell a determinate thing for a price certain is binding upon the promisor only if the promise is supported by a distinct consideration. Consideration in an option contract may be anything of value, unlike in sale where it must be the price certain in money or its equivalent. There is no showing here of any consideration for the option. Lacking any proof of such consideration, the option is unenforceable.

The manner of payment of the purchase price is an essential element before a valid and binding contract of sale can exist.—The appellate court opined that the failure to agree on the terms of payment was no bar to the perfection of the sale because Art. 1475 only requires agreement by the parties as to the price of the object. This is error. In Navarro v. Sugar Producers Cooperative Marketing Association, Inc., we laid down the rule that the manner of payment of the purchase price is an essential element before a valid and binding contract of sale can exist. Although the Civil Code does not expressly state that the minds of the parties must also meet on the terms or manner of payment of the price, the same is needed, otherwise there is no sale. As held in Toyota Shaw, Inc. v. Court of Appeals, agreement on the manner of payment goes into the price such that a disagreement on the manner of payment is tantamount to a failure to agree on the price.

It is not the giving of earnest money, but the proof of the concurrence of all the essential elements of the contract of sale which establishes the existence of a perfected sale.—It is not the giving of earnest money, but the proof of the concurrence of all the essential elements of the contract of sale which establishes the existence of a perfected sale.

In a later case (Sanchez vs. Rigos, 45 SCRA 368 [1972], infra.), the Supreme Court abandoned the view adhered to in Southwestern Sugar (supra.) which holds that an option to sell can still be withdrawn, even if accepted, if the same is not supported by any consideration, and reaffirmed the doctrine in Atkins, Kroll & Co., Inc. vs. Cua Hian Tek (102 Phil. 948 [1958], infra.), holding that it ould no longer be withdrawn after acceptance. In other words, 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.20 Be that as it may, the offerer cannot revoke, before the period has expired, in an arbitrary or capricious manner the offer without being liable for damages which the offeree may suffer under Article 19 of the Civil Code.

The doctrine laid down in the Atkins case (supra.) is reaffirmed, and, insofar as inconsistent therewith, the view adhered to in Southwestern case should be deemed abandoned or modified. 21 (Sanchez vs. Rigos, supra.)

(3) Offer to sell had been accepted. — “In the instant case, the option offered by private respondents had been accepted by the petitioner, the promisee, in the same document. The acceptance of an order to sell for a price certain created a bilateral contract to sell and buy and upon acceptance, the offeree ipso facto assumes obligations of a vendee. (see Atkins, Kroll & Co.vs. Cua Hian Tek, 102 Phil. 948 [1958].) Deman dability may be exercised at any time after the execution of the deed. In Sanchez vs. Rigos (45 SCRA 368 [1972].), We held: ‘In other words, since there may be no valid contract without a cause of consideration, the promissor is not bound by this promise and may accordingly withdraw it. Pending notice of its withdrawal, his accepted promise partakes, however, of the nature of an offer to sell which, if accepted, results in a perfected contract of sale.”

Promissor withdrew an option to sell which is not supported by any consideration, after its acceptance by promisee.

Facts: S wrote B making a “firm offer for the sale” at a definite price of a determinate quantity of sardines. B accepted the offer unconditionally.

Issue: Is there a perfected contract of sale?

Held: Yes, as the promise is bilateral, i.e., a promise to buy and sell. Before accepting the promise of S and before exercising his option, B is not bound to buy. Upon accepting S’s offer, a bilateral promise to sell and to buy ensues; B assumes ipso facto the obligations of a purchaser, and not merely the right

(3) When earnest money is given, the buyer is bound to pay the balance, while the would-be buyer who gives option money is not required to buy. (Adelfa Properties, Inc. vs. Court of Appeals, 58 SCAD 962, 240 SCRA 565 [1995] and Limson vs. Court 23In this article, it is declared that “When earnest money or a pledge had been given to bind a contract of purchase and sale, the contract may be rescinded if the vendee should be willing to forfeit the earnest money or pledge or the vendor to return double the amount.” of Appeals, 357 SCRA 209 [2001], quoting De Leon, Comments and Cases on Sales, 1986 rev. ed., p. 67.) But option money may become earnest money if the parties so agree.

The option period having expired and acceptance was not effectively made by petitioner, the purchase of subject property by respondent SUNVAR was perfectly valid and entered into in good faith.” (Limson vs. Court of Appeals, 147 SCAD 887, 357 SCRA 209 [2001].)

On the other hand, the fact that a deed of sale is a notarized document does not necessarily justify the conclusion that the said sale is a true conveyance to which the parties thereto are irrevocably bound. Though its notarization vests in its favor the presumption of regularity and due execution (Manzano vs. Perez, 152 SCAD 473, 362 SCRA 430 [2001].), it is not the function of the notary public to validate and make binding an instrument never intended by the parties to have any binding legal effect upon them. The intention of the parties still and always is the primary consideration in determining the true nature of the contract. (Suntay vs. Court of Appeals, 66 SCAD 711, 251 SCRA 430 [1995]; Nazareno vs. Court of Appeals, 343 SCRA 637 [2000].) Where the vendor did not personally appear before the notary public, such fact raises doubt regarding the vendor’s consent to the sale notwithstanding that the deed states the contrary. (Tan vs. Mandap, 429 SCRA 711 [2004].)

An invalidly notarized deed of sale must be considered merely as a private document. Even if validly notarized, the deed would still be classified as a private document if it is merely subscribed and sworn to by way of jurat but was not properly acknowledged. (Tigno vs. Aquino, 444 SCRA 61 [2004].)

The Statute of Frauds is applicable only to executory contracts (where no performance, i.e., delivery and payment, has as yet been made by both parties) and not to contracts which are totally (consummated) or partially performed. (see Vda. de Espiritu vs. CFI of Cavite, 47 SCRA 354 [1972].) It does not forbid oral evidence to prove a consummated sale. (Diama vs. Macalebo, 74 Phil. 70 [1942].)

Applicability of Article 1484.

The law is aimed at those sales of personal property where the price is payable in several installments.

(1) Sale of personal property not payable in installments. — Article 1484 does not apply to a sale of personal property on straight term or partly in cash and partly in term. Where the balance, after payment of the initial sum, should be paid in its totality at thetime specified, the transaction is not by installment as contemplated in Article 1484. (Levi Hermanos, Inc. vs. Gervacio, 69 Phil. 52 [1939].)

4. Chattel mortgage covers not only the personal property sold on installment payments but other personal property of the vendee mortgagor.

Facts: B purchased from S two Ford sedans payable in installments. B executed a promissory note and a deed of chattel mortgage covering not only the two new cars but also an old car and his certificate of public convenience for the operation of a taxicab fleet. With the conformity of B, S assigned its rights to the note and the mortgage to F. Due to the failure of B to pay the installments, F foreclosed the chattel mortgage extra- judicially. At the public auction, F was the purchaser. Another auction sale was held because B’s obligation was not fully satisfied by the sale of the vehicles. At the second sale, the franchise to operate the taxicab service was sold to F. B filed an action for annulment of the contract of mortgage. The trial court held the chattel mortgage was null and void insofar as the taxicab franchise and the old car were concerned.

Issue: Is the chattel mortgage valid insofar as the franchise and the subsequent sale thereof are concerned?

Held: The resolution of said issue is unquestionably governed by the provisions of Article 1484 of the Civil Code. Under the article, the vendor of personal property the purchase price of which is payable in installments, has the right, should the vendee default in the payment of two or more of the agreed installments, to exact fulfillment by the purchaser of the obligation, or to cancel the sale, or to foreclose the mortgage on the purchased personal property, if one was constituted. Whichever right the vendor elects, he cannot avail of the other, these remedies being alternative, not cumulative. Furthermore, if the vendor avails himself of the right to foreclose his mortgage, the law prohibits him from further bringing an action against the vendee for the purpose of recovering whatever balance of the debt secured not satisfied by the foreclosure sale.

Consequently, the lower court rightly declared the nullity of the chattel mortgage in question insofar as the taxicab franchise and the used car of B are concerned. F has to content himself with the proceeds of the sale at the public auction of the two cars which were sold on installment and mortgaged to S, his assignor. To allow the sale of other properties would be equivalent to obtaining a writ of execution against B concerning said properties which are separate and distinct from those which were sold on installment. This would be contrary to public policy and the very spirit and purpose of the law limiting the vendor’s right to foreclose the chattel mortgage only on the thing sold. (Ridad vs. Filipinas Investment and Finance Corp., 120 SCRA 246 [1983]; see Levi Hermanos, Inc. vs. Pacific Commercial, 71 Phil. 587 [1941].)

Remedies alternative.

These remedies are alternative and are not to be exercised cumulatively or successively and the election of one is a waiver of the right to resort to the others. (Pacific Commercial Co. vs. De la Rama, 62 Phil. 380 [1935]; Erlanger & Galinger, Inc. vs. Flor, [C.A.] 57 O.G. 482; Cruz vs. Filipinas Invest. & Finance Corp., 23 SCRA 791 [1968]; Filipinas Invest. & Finance Corp. vs. Ridad, 30 SCRA 564 [1969]; Industrial Finance Corp. vs. Tobias, 78 SCRA 28 [1977]; Nonato vs. Intermediate Appellate Court, 140 SCRA 255 [1985].)

(2) Remedy of cancellation. — If the vendor chooses rescission or cancellation of the contract upon the vendee’s failure to pay two or more installments, the latter can demand the return of payments already made unless there is a stipulation about forfeiture. (see Art. 1486.) In a case, for failure of the buyer to pay two or more installments, the vendor-mortgagee (or his assignee) repossessed the car. The receipt issued by the vendor’s assignee to the vendee when it took possession of the vehicle states that the vehicle could be redeemed within 15 days, meaning that should the vendee fail to redeem within the said period by paying the balance of the purchase price, the assignee would retain permanent possession of the vehicle as it did in fact. It was held that by this act, the vendor exercised its option to cancel the contract of sale, barring it from exacting payment of the balance of the purchase price. “It cannot have its cake and eat it too.” (Nonato vs. Intermediate Appellate Court, 140 SCRA 255 [1985]

(3) Remedy of foreclosure. — If the vendor has chosen the third remedy of foreclosure of the chattel mortgage if one has been given on the property, he is not obliged to return to the vendee the amount of the installments already paid should there be an agreement to that effect. (Ibid.) But he shall have no further action against the vendee for the recovery of any unpaid balance of the price remaining after the foreclosure and actual sale of the mortgaged chattel, and any agreement to the contrary is void. (Zayas,Jr. vs. Luneta Motor Company, 117 SCRA 726 [1982]; PAMECA Wood Treatment Plant, Inc. vs. Court of Appeals, 310 SCRA 281 [1999].)

(2) Prohibition not affected by assignment by vendor of his rights. — The assignment by the vendor of his rights to the sale of personal property on installment basis covered by Article 1484 of the Civil Code does not change the nature of the transaction between the parties — the vendor and the vendee. It remains the same. Hence, the assignee can have no better rights than the assignor. Accordingly, where the obligation of the vendee had already been discharged by sale at public auction of the property subject of the chattel mortgage, no deficiency amount can be recovered by the assignee. To rule otherwise would pave the way for subverting the policy underlying Article 1484 on the foreclosure of chattel mortgages over personal property sold on installment basis. (Zayas, Jr. vs. Luneta Motor Company, 117 SCRA 726 [1982].)

Execution of a public instrument or document.

(1) Possession transferred to buyer by notarized deed of conveyance. — The execution of a public instrument (i.e., an instrument or document attested and certified by a public officer authorized to administer oath, such as a notary public) as a manner of delivery applies to movable as well as immovable property since the law does not make any distinction and it can be clearly inferred by the use of the word “also” in paragraph 2 of Article 1498. This manner of delivery is symbolic. The buyer may use the document as proof of his ownership of the property sold (Florendo vs. Foz, 20 Phil. 388 [1911]; Municipality of Victorias vs. Court of Appeals, 149 SCRA 32 [1987]; see Dy, Jr. vs. Court of Appeals, 198 SCRA 826 [1991].), for purposes, for example, of mortgaging the same. (Garcia vs. Court of Appeals, 312 SCRA 180 [1999].) Under Article 1498, possession is transferred to the vendee (or lessee) by virtue of the notarized deed of conveyance (Ong Ching Po vs. Court of Appeals, 57 SCAD 619, 239 SCRA 341 [1994].) (o  lease) including the incorporeal rights appurtenant thereto, e.g., right to eject tenants or squatters from the property in question. Since the execution of the deed of conveyance is deemed equivalent to delivery, prior physical delivery or possession is not legally required. Thus, notwithstanding the presence of illegal occupants on the subject property, transfer of ownership by symbolic delivery under Article 1498 can still be effected through the execution of the deed of conveyance. The key word is “control,’’ not possession, of the property. (Sabio vs. International Corporate Bank, 154 SCAD 377, 364 SCRA 385 [2001].)

(5) Option to renew given to lessor. — In Cruz and Koh (supra.), the option to renew the lease was given to the lessee. If the option is given to the lessor, the lessee cannot renew the lease against the former’s refusal. (Ong Ching vs. Ramolete, 51 SCRA 13 [1973].) The lease is deemed terminated. (De Leon Vda. de Roxas vs. Court of Appeals, 63 SCRA 762 [1975]; Tuason, Jr. vs. De Asis, 107 Phil. 131 [1960].)

Sancho vs. Abella, 58 Phil. 728 , November 13, 1933

WILLS; PROBATE; CAPACITY TO MAKE A WILL.—Neither senile debility, nor deafness, nor blindness, nor poor memory, is by itself sufficient to establish the presumption that the person suffering therefrom is not in the full enjoyment of his mental faculties, when there is sufficient evidence of his mental sanity at the time of the execution of the will.

Neither the fact of her being given accommodations in a convent, nor the presence of the parish priest, nor a priest acting as a witness, constitutes undue influence sufficient to justify the annulment of a legacy in favor of a bishop of a diocese, made in her will by a testatrix 88 years of age, suffering from defective eyesight and hearing, while she is stopping in a convent within the aforestated diocese. [Sancho vs. Abella, 58 Phil. 728(1933)]

Source: Original text from Supreme Court and Comments and Cases on Sales and Lease by De Leon, De Leon. Jr.

2 responses to “2nd Set – Cases on Sales by Atty Glenn Mangaoil

  1. Pingback: Property in Relation to the Person to Whom it Belongs | Legal Notes·

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