I THE NATURE OF SALE

A. DEFINITION (art. 1458)

CRUZ V. FERNANADO

FACTS: In 1983, Cruz executed a Kasunduan with the Gloriosos for the consideration of
the rear portion of a lot. The Kasunduan provides that the lot will be sold at a P40 per sq
m. That the portion of the lot to be sold is the rear portion of it. That upon selling, the
Cruz will transfer their house from the front portion to the rear portion of the land once it
is bought. That they will have a right of way from the front portion going to the back end
of the lot. The Cruz never gave anything to the Gloriosos for there was an alleged failure
to have the land surveyed. Due to non payment, the Gloriosos instead sold the whole lot
(back and rear portion) to the Fernandos.
In 1994, after repeated demands, the Fernandos filed a case in court for accion
publiciana demanding the Cruz to vacate the lot and to pay a rental of P500.00. The
RTC ruled in favor of the Fernandos. The CA affirmed the RTC ruling.

ISSUE: Whether or not what transpired between the Cruzes and the Gloriosos was a
contract of sale.

HELD: No.
Under Article 1458 of the Civil Code, a contract of sale is a contract by which one
of the contracting parties obligates himself to transfer the ownership and to deliver a
determinate thing, and the other to pay therefor a price certain in money or its
equivalent. Article 1475 of the Code further provides that the contract of sale is perfected
at the moment there is meeting of the minds upon the thing which is the object of the
contract and upon the price. From that moment the parties may reciprocally demand
performance subject to the provisions of the law governing the form of contracts.
In a contract of sale, the title to the property passes to the vendee upon the
delivery of the thing sold, as distinguished from a contract to sell where ownership is, by
agreement, reserved in the vendor and is not to pass to the vendee until full payment of
the purchase price. Otherwise stated, in a contract of sale, the vendor loses ownership
over the property and cannot recover it until and unless the contract is resolved or
rescinded; whereas, in a contract to sell, title is retained by the vendor until full payment
of the price. In the latter contract, payment of the price is a positive suspensive

condition, failure of which is not a breach but an event that prevents the obligation of the
vendor to convey title from becoming effective.
The terms and conditions of the kasunduan show that it is a contract to sell and
not a contract of sale. The absence of a specific manner of payment in the terms and
conditions of the contract makes it a contract to sell. Ownership was never transferred to
the Cruzes. This is because 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. Also,
the Cruzes never transferred their house from the front portion to the rear portion of the
lot. It was evident in the contract that they will transfer the house to the rear portion once
they were able to buy it.

TITONG V. CA
FACTS: Titong asserts that he is the owner of an unregistered parcel of land but private
respondents hired laborers and forcibly entered a portion of his land and began plowing
the same claming ownership. Respondents denied and said that the land formed part of
the 5.5-hectare agricultural land they had purchased from Pablo Espinosa (Titongs
adjoining owner for over 20 years). Respondents alleged that prior to their purchase,
Titong sold his property to Verano but reacquired the same by mutual agreement to
repurchase. The property remained in Titongs hands only for 4 days because he sold it
to Espinosa. It then became a part of the estate of Espinosas wife. Later on, her heirs
executed an Extrajudicial Settlement of Estate with Simultaneous Sale where the 5.5
hectares was sold to Laurio. The court found out that 2 surveys were made of the
property. First survey was made by Titong, while the second was the relocation survey
ordered by the lower court and there, certain discrepancies surfaced. Titongs share
bloated to 2.4 hectares. It then appeared to Laurio that Titong encroached upon his
property and declared it as part of his inheritance. Therefore, private respondents filed
before Bureau of Lands against the 1st survey for alteration of boundaries.
ISSUE: Whether Titong is the rightful owner of the disputed property
RULING: Petitioner sold, transferred and conveyed the 5.5-hectare land to Pablo
Espinosa, his rights of ownership and possession therefore ceased and transferred. In
the same manner, Espinosas rights of ownership over the land ceased and transferred
to private respondent upon its sale to the latter. He has long abdicated his rights over the
land when he sold it to private respondents predecessor-in-interest, Espinosa.
ART. 1458. By the contract of sale one of the contracting parties obligates
himself to transfer the ownership of and to deliver a determinate thing, and the other to
pay therefor a price certain in money or its equivalent.
SANTOS V. CA
FACTS: The spouses Santos owned a house and lot. It was mortgaged with the Rural
Bank of Salinas, Inc., to secure a loan. Rosalinda Santos met Carmen Caseda.

Rosalinda offered to sell the house and lot to Carmen so that former will be able to pay
the loan.
The Casedas gave an initial payment and immediately took possession of the
property, which they then leased out. The Casedas, however, failed to pay the remaining
balance in 1987.
In 1989, the Santoses, seeing that the Casedas lacked the means to pay the
remaining installments and/or amortization of the loan, repossessed the property. The
Santoses then collected the rentals from the tenants.
However, Carmen Caseda approached petitioners and offered to pay the balance
of the purchase price for the house and lot. The parties, however, could not agree, and
the deal could not push through because the Santoses wanted a higher price.
ISSUE: Whether the subject transaction is not a contract of absolute sale but a mere
oral contract to sell in which case judicial demand for rescission
RULING: A contract is what the law defines it to be, taking into consideration its
essential elements, and not what the contracting parties call it. Article 1458 expressly
obliges the vendor to transfer ownership of the thing sold as an essential element of a
contract of sale. This is because the transfer of ownership in exchange for a price paid
or promised is the very essence of a contract of sale.
There was no transfer of ownership simultaneously with the delivery of the
property purportedly sold. The records clearly show that, notwithstanding the fact that
the Casedas first took then lost possession of the disputed house and lot, the title to the
property has remained always in the name of Rosalinda Santos. Although the parties
had agreed that the Casedas would assume the mortgage, all amortization
payments made by Carmen Caseda to the bank were in the name of Rosalinda Santos.
The foregoing circumstances categorically and clearly show that no valid transfer of
ownership was made by the Santoses to the Casedas. Absent this essential element,
their agreement cannot be deemed a contract of sale. It was a contract to sell.
Ownership is reserved by the vendor and is not to pass until full payment of the
purchase price. This we find fully applicable and understandable in this case, given that
the property involved is a titled realty under mortgage to a bank and would require
notarial and other formalities of law before transfer thereof could be validly effected.
LAO V. CA
FACTS: Private Respondent Better Homes Realty and Housing Corporation filed with
the MTC a complaint for unlawful detainer, on the ground that they are the owner of the
premises situated in Quezon City; that herein Petitioner Lao occupied the property
without rent, but on private respondents pure liberality with the understanding that he
would vacate the property upon demand, but despite demand to vacate made by letter,
the petitioner refused to vacate the premises.
In his answer to the private respondent purchased the same from N. Domingo
Realty and Development Corporation but the agreement was actually a loan secured by
mortgage; and that plaintiffs cause of action is for accion publiciana, outside the
jurisdiction of an inferior court.
ISSUE: Whether their transaction was an absolute sale.
RULING: No. The law enumerates when a contract may be presumed to be an
equitable mortgage:

(1) When the price of a sale with right to repurchase is unusually inadequate;
(2) When the vendor remains in possession as lessee or otherwise;
(3) When upon or after the expiration of the right to repurchase another instrument
extending the period of redemption or granting a new period is executed;
(4) When the purchaser retains for himself a part of the purchase price;
(5) When the vendor binds himself to pay the taxes on the thing sold;
(6) In any other case where it may be fairly inferred that the real intention of the parties is
that the transaction shall secure the payment of a debt or the performance of any other
obligation.
Applying the preceding principles to the factual milieu of this case, we find the
agreement between the private respondent and the petitioner manifestly one of equitable
mortgage. First, possession of the property in the controversy remained with Petitioner
Lao who was the beneficial owner of the property, before, during and after the alleged
sale. Second, the option given to Lao to purchase the property in controversy had been
extended twice. Third, unquestionably, Lao and his brother were in such dire need of
money that they mortgaged their townhouse units registered under the name of N.
Domingo Realty Corporation, the family corporation put up by their parents, to Private
Respondent Better Homes Realty & Housing Corporation.
Based on the conduct of the petitioner and private respondent and even the
terminology of the second option to purchase, we rule that the intent and agreement
between them was undoubtedly one of equitable mortgage and not of sale.
1. REQUISITES OF SALE
CORONEL V. CA
FACTS: Petitioners executed a Receipt of Down Payment of P50,000 in favor of
Ramona Alcaraz, binding themselves to transfer the ownership of the land in their name
from their deceased father, after which the balance of P1,190,000 shall be paid in full by
Alcaraz. Indeed, the title was transferred. But later, Coronel sold the property to Catalina
B. Mabanag for 1,580,000 after she made a 300,000 downpayment. He then
cancelled and rescind the contract with Alcaraz by depositing back the 50,000 to
Ramona.
HELD: CONTRACT OF SALE- contracting parties obligates himself to transfer the
ownership and to deliver a determinate thing and the other to pay a price certain in
money or its equivalent.
CONTRACT TO SELL- the prospective seller explicitly reserves the transfer of the title to
the prospective buyer, meaning the seller does not yet agree or consent to transfer the
ownership of the property until the happening of a contingent event like full payment of
price.
Upon the fulfillment of the suspensive condition, the sale becomes absolute and
this will affect the seller's title. In fact, if there had been previous delivery of the subject
property, the seller's ownership or title to the property is automatically transferred to the
buyer such that, the seller will no longer have any title to transfer to any third person.
Such second buyer of the property who may have had actual or constructive knowledge
of such defect in the seller's title, or at least was charged with the obligation to discover

such defect, cannot be a registrant in good faith. Such second buyer cannot defeat the
first buyer's title. In case a title is issued to the second buyer, the first buyer may seek
reconveyance of the property subject of the sale.
The agreement could not have been a contract to sell because the sellers herein
made no express reservation of ownership or title to the subject parcel of land.
Contract of Sale between the Coronels and the Alcaraz became obligatory.
2. ELEMENTS OF SALE
NAVARRA V. PLANTERS BANK
FACTS: Navarras loaned 1.2m from Planters Bank mortgaging 5 lots but failed to pay so
properties were foreclosed and sold them by 1.3m to highest bidder with 1-year
redemption but the couple failed to redeem. RRC Development Corporation on the other
hand, a real estate company owned by the parents of Carmelita, obtained a loan with the
same bank. Same fate, were sold to third persons whose payments were directly made
to the Bank, were in excess by P300,000.00 for the redemption price.
Jorge went to see the Head with a letter requesting that the excess payment
ofP300,000.00 in connection with the redemption made by the RRRC be applied as
down payment for the Navarras repurchase of their foreclosed properties but because
the amount of P300,000.00 was sourced from a different transaction between RRRC
and Planters Bank and involved different debtors, the Bank required Navarra to submit a
board resolution from RRRC authorizing him to negotiate for and its behalf and
empowering him to use the amount. Navarra claimed having already delivered copies of
the required board resolution to the Bank. The Bank, however, did not receive said
copies.
Navarras filed their complaint for Specific Performance against bank. Planters
Bank asserted however that there was no perfected contract of sale because the terms
and conditions for the repurchase have not yet been agreed upon. RTC ruled in favor of
Navarras, CA reserves the decision.
ISSUE: WON there was perfected Contract of Sale
HELD: Navarras assert that the following exchange of correspondence between them
and Planters Bank constitutes the offer and acceptance. The July 1985 letter being the
offer from Navarra and the Aug 1985 letter-reply from the Bank the acceptance. BUT
SUCH WERE NOT CERTAIN OFFER and ABSOLUTE ACCEPTANCE.
The 300k downpayment agreed upon is not conclusive to its perfection. Before a
valid contract of sale can exist, the manner of payment of the purchase price must first
be established since a disagreement on the manner of payment is tantamount to a
failure to agree on the price.
Navarras letter failed to specify the amount of the price for the repurchase of the
properties. Merely stated that the "purchase price will be based on the redemption value
plus accrued interest at the prevailing rate up to the date of the sales contract, which is
ambiguous for it leaves much rooms for such questions. Also the exact number of years,
the absence of a stipulated period within which the repurchase price shall be paid all the
more adds to the indefiniteness of the offer.
Lastly, statement in the Banks letter clearly manifests lack of agreement between
the parties as to the terms of the purported contract of sale/repurchase, particularly the
mode of payment of the purchase price and the period for its payment. The law requires
acceptance to be absolute and unqualified.

MANILA METAL CORP. V. PNB

FACTS: MMC executed a real estate mortgage as a security for loan from PNB of 900K,
later on 1m and 653k. PNB filed a petition for extrajudicial foreclosure for the property to
be sold at a public auction 911,532.21 (outstanding as of June 30) + interest + attorney's
fees, and won the public auction at 1m. Certificate of Sale was issued and registered at
the Registry of Deeds. Petitioner requested 1-year extension but was rejected by PNB
saying it is their policy not to accept partial redemption. Special Assets Management
Department (SAMD) had prepared a statement of account amounting to 1.5m. Petitioner
deposited 725,000 php as deposit to repurchase and was issued an O.R. PNB
management rejected the recommendation of SAMD and demanded that petitioner pay
the market value of 2.6m. PNB informed petitioner that its B.O.D had agreed to accept
its offer to purchase but at 1.9m less the 725,000 php. Later, PNB President did not
conform to the letter but merely indicated that he has received it. Petitioner rejected this
since PNB has already accepted its down payment so it can no longer increase the price
however, subject to the approval of the president. PNB also rejected petitioners
payment for the balance.
Petitioner filed a complaint against PNB for Annulment of Mortgage and
Mortgage Foreclosure, Delivery of Title, or Specific Performance with Damages. CA
affirmed RTC: Favored PNB and demanded that it refund the 725,000 php (no sale
because no meeting of the minds in terms of price). Lot was later transferred to PNB
President Bayani Gabriel. Petitioner filed a petition for certiorari.
ISSUE: W/N the earnest money, 750k deposited as downpayment, established the
contract of sale between them.
HELD: NO. ART. 1482. 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 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.
HEIRS OF ERNESTO BIONA V. CA
FACTS: Biona spouses was awarded Homestead Patent over the property subject of
this suit, a parcel of agricultural land. Ernesto and his wife obtained a loan from the
Development Bank of the Philippines and put up as collateral the subject property
leaving as his heirs herein plaintiffs-appellees.
Plaintiff-appellee wife obtained a loan from defendant-appellant and as security
therefore, the subject property was mortgaged. It was further agreed upon by the
contracting parties that for a period of two years until the debt is paid, defendantappellant shall occupy the land in dispute and enjoy the usufruct thereof.
The two-year period elapsed but Soledad Biona was not able to pay her
indebtedness. Defendant-appellant continued occupying and cultivating the subject
property without protest from plaintiffs-appellees.
Later on, defendant-appellant paid the DBP to cancel the mortgage previously
constituted by the Biona spouses

Thereafter, and for a period of not less than 25 years, defendant-appellant

continued his peaceful and public occupation of the property, declaring it in his name for
taxation purposes and causing the same to be tenanted.
Now, plaintiffs-appellees, filed a complaint for recovery of ownership, possession,
accounting and damages.
ISSUE: Whether there was a valid contract of sale.
HELD: We agree with the private respondent that all the requisites for a valid contract of
sale are present in the instant case. For a valuable consideration of P4,500.00, Soledad
Biona agreed to sell and actually conveyed the subject property to private respondent.
The fact that the deed of sale was not notarized does not render the agreement null and
void and without any effect. The provision of Article 1358 of the Civil Code on the
necessity of a public document is only for convenience, and not for validity or
enforceability. The observance of which is only necessary to insure its efficacy, so that
after the existence of said contract had been admitted, the party bound may be
compelled to execute the proper document. Undeniably, a contract has been entered
into by Soledad Biona and the private respondent. Regardless of its form, it was valid,
binding and enforceable between the parties.
SALONGA V. FARRALES
FACTS:
ISSUE:
HELD: