ELEMENTS OF CONTRACT OF SALE 18. Angel Clemeno Jr., et. al. vs.

Romeo Lobregat We find and so hold that the contract between the parties was a perfected verbal contract of sale, not a contract to sell over the subject property, with the petitioner as vendor and the respondent as vendee. Sale is a consensual contract and is perfected by mere consent, which is manifested by a meeting of the minds as to the offer and acceptance thereof on three elements: subject matter, price and terms of payment of the price.[37] The petitioners sold their property to the respondent for P270,000.00, payable on installments, and upon the payment of the purchase price thereof, the petitioners were bound to execute a deed of sale in favor of the respondent and deliver to him the certificate of title over the property in his name. The parties later agreed for the respondent to assume the payment of the petitioners loan amortization to the SSS, which payments formed part of the purchase price of the property. The evidence shows that upon the payment made by the respondent of the amount of P27,000.00 on June 4, 1987, the petitioners vacated their house and delivered possession thereof to the respondent. Conformably to Article 1477 of the New Civil Code, the ownership of the property was transferred to the respondent upon such delivery. The petitioners cannot re-acquire ownership and recover possession thereof unless the contract is rescinded in accordance with law.[38] The failure of the respondent to complete the payment of the purchase price of the property within the stipulated period merely accorded the petitioners the option to rescind the contract of sale as provided for in Article 1592 of the New Civil Code.[39] The contract entered into by the parties was not a contract to sell because there was no agreement for the petitioners to retain ownership over the property until after the respondent shall have paid the purchase price in full, nor an agreement reserving to the petitioners the right to unilaterally resolve the contract upon the buyers failure to pay within a fixed period. [40] Unlike in a contract of sale, the payment of the price is a positive suspensive condition in a contract to sell, failure of which is not a breach but an event that prevents the obligation of the vendor to convey the title from becoming effective.[41] 19. Atkins Kroll & Co., Inc. vs. B. Cua Hian Tek FACTS: On September 13, 1951, petitioner Atkins Kroll & Co. (Atkins) sent a letter to respondent B. Cu Hian Tek (Hian Tek) offering (a) 400 cartons of Luneta brand Sardines in Tomato Sauce 48 / 15-oz. Ovals at $8.25 per carton, (b) 300 cartons of Luneta brand Sardines Natural 48/15 oz. talls at $6.25 per carton, and (c) 300 cartons of Luneta brand Sardines in Tomato Sauce 100/5-oz. talls at $7.48 per carton, with all of the offers subject to reply by September 23, 1951. Hian Tek unconditionally accepted the said offer through a letter delivered on September 21, 1951, but Atkins failed to deliver the commodities due to the shortage of catch of sardines by the packers in California.

Hian Tek, therefore, filed an action for damages in the CFI of Manila which granted the same in his favor. Upon Atkins appeal, the Court of Appeals affirmed said decision but reduced the damages to P3,240.15 representing unrealized profits. Atkins herein contends that there was no such contract of sale but only an option to buy, which was not enforceable for lack of consideration because it is provided under the 2nd paragraph of Article 1479 of the New Civil Code that "an accepted unilatateral promise to buy or to sell a determinate thing for a price certain is binding upon the promisor if the promise is supported by a consideration distinct from the price. Atkins also insisted that the offer was a mere offer of option, because the "firm offer" was a continuing offer to sell until September 23. Was there a contract of sale between the parties or only a unilateral promise to buy? COURT RULING: The Supreme Court held that there was a contract of sale between the parties. Petitioners argument assumed that only a unilateral promise arose when the respondent accepted the offer, which is incorrect because a bilateral contract to sell and to buy was created upon respondents acceptance. Had B. Cua Hian Tek backed out after accepting, by refusing to get the sardines and / or to pay for their price, he could also be sued. But his letterreply to Atkins indicated that he accepted "the firm offer for the sale" and that "the undersigned buyer has immediately filed an application for import license. After accepting the promise and before he exercises his option, the holder of the option is not bound to buy. In this case at bar, however, upon respondents acceptance of herein petitioner's offer, a bilateral promise to sell and to buy ensued, and the respondent had immediately assumed the obligations of a purchaser. Additional notes: In the case of Atkins, Kroll and Co., Inc. v. Cua Hian Tek, the Court saw no distinction between Articles 1324 and 1479 of the Civil Code and applied the former where a unilateral promise to sell similar to the one sued upon here was involved, treating such promise as an option which, although not binding as a contract in itself for lack of a separate consideration, nevertheless generated a bilateral contract of purchase and sale upon acceptance. "If the option is given without a consideration, it is a mere offer of a contract of sale, which is not binding until accepted."

20. Pameca Wood Treatment Plant, Inc., et al vs. Court of Appeals Facts: Pameca obtained a loan from DBP. By virtue of this loan, Pameca executed a promissory notefor the amount obtained, promising to pay the loan by installment. As security for said loan, a chattelmortgage was executed over

Pamecas properties in Dumaguete. Upon Pamecas failure to pay, DBPextrajudicially foreclosed the chattel mortgage, and as sole bidder in the public auction, purchasedthe same. DBP then filed a complaint for the collection of the balance. Trial court rendered decisionin favor of DBP, affirmed by CA. Pameca submits that Art. 1484 of the CC be applied in analogy to preclude the recovery of adeficiency claim. Issue:WON Art 1484, CC, can be applied in the case, hence, precludes DBP from collecting the balance. Held: NO. The said article applies clearly and solely to the sale of personal property the price of which ispayable in installments. Although Article 1484, paragraph (3) expressly bars any further actionagainst the purchaser to recover an unpaid balance of the price, where the vendor opts to foreclose the chattel mortgage on the thing sold, should the vendees failure to pay cover two or more installments, this provision is specifically applicable to a sale on installments. To accommodate petitioners prayer even on the basis of equity would be to expand the application of the provisions of Article 1484 to situations beyond its specific purview, and ignore the language and intent of the Chattel Mortgage Law. Equity, which has been aptly described as justice outside legality, is applied only in the absence of, and never against, statutory law or judicial rules of procedure. ACCEPTANCE 1. Beaumont vs. Prieto As early as 1916, in the case of Beaumont vs. Prieto, unequivocal wasour characterization of an option contract as one necessarily invokingthe choice granted to another for a distinct and separate considerationas to whether or not to purchase a determinate thing at apredetermined fixed price. T he deed of option or option clause in acontract, in order to be valid and enforceable, must, among otherthings, indicate the definite price at which the person granting theoption, is willing to sell.

Other source: An offer to sell real property, in the form of an option allowing three months in which to buy at a certain price, is not accepted by an offer to purchase at that price conditioned to be paid on a date specified (beyond the three months) or "before and with delivery" of clear title. Id. The opportunity to accept a continuing offer is lost by making a counter-offer. 2. Cronico vs. J.M. Tuazon & Co.

Facts: JM Tuason was the registered owner of Lot 22. Florencio Cronico offered to buy the lot from JM Tuason with the help of Mary Venturanza. Cronico was required to present proofs of her rights to the lot, and indeed presented certain documents showing her priority rights to buy the lot. Claudio Ramirez also learned that said lot was being sold. Both Cronico and Ramirez then sent individual letters to JM Tuason expressing their desire to purchase the land and requested information concerning the area, the price, and other terms and conditions of the contract to sell. JM Tuason sent separate reply letters to the prospective buyers. Cronico was able to obtain the letter the next day and thus presented the letter to the Head of the Real Estate Department of JM Tuason; and requested Venturanza to issue a check as down payment, but the same was refused. Ramirez, on the other hand, received the letter two days after it was sent stating that the lot was available for sale under the conditions set forth and that said lot was being offered for sale on a first come first serve basis. He then immediately verbally accepted such, followed by a letter to JM Tuason confirming the verbal acceptance, the next day. Counsel of Ramirez then wrote JM Tuason for the early execution of the Contract to Sell with a check as down payment (Mar 31). Counsel of Cronico, however, also wrote JM Tuason requesting that the lot be sold to him (Mar 27). Subsequently, JM Tuason and Ramirez executed a Contract to Sell, which resulted an instant suit. Arguments: Cronico: That the promise to sell is supported by a consideration as to her because she had established her link as successor of Gregorio Venturanza who bought the lot from Juan Ramos who in turn acquired said lot from Pedro Deudor. JM Tuason: As ruled by the CA, the records do not show that JM Tuasons letter-offer or unilateral promise to sell was supported by a consideration other than the selling price. Issue: WON JM Tuasons promise to sell the lot to Cronico has a consideration separate from the selling price of said lot and thus binding upon the promissory to comply with such promise. Held: No, the promise of the respondent company to sell the lot in question to the petitioner, Florencia Cronico has no consideration separate from the selling price of said lot. It appears that the Compromise Agreement upon which Cronico predicates her right to buy the lot in question has been rescinded and set aside. (1) In order that a unilateral promise may be binding upon the promisor, Article 1479, Civil Code of the Philippines, requires the concurrence of the condition that the promise be supported by a consideration distinct from the price. Accordingly, the promisee can not compel the promisor to comply with the promise, unless the

former establishes the existence of said distinct consideration. The promisee has the burden of proving such consideration. (Sanchez vs. Rigos, 45 SCRA 368, 372-373)The petitioner, Florencia Cronies, has not established the existence of a consideration distinct from the price of the lot in question. (2) The petitioner cannot claim that she had accepted the promise before it was withdrawn because she had violated the condition of first, come, first served basis. (3) It was only on March 27, 1962 that the respondent company received a letter from counsel of the petitioner requesting that the lot subject of this litigation be sold to her. The respondent, Claudio R. Ramirez, had on March 23, 1962, confirmed in writing his verbal acceptance of the terms and conditions of the sale of the lot in question. 3. Natino vs. IAC

Facts: On 12 October 1970 petitioners executed a real estate mortgage in favor of respondent bank as security for a loan of P2,000.00. Petitioners failed to pay the loan on due date. The bank applied for the extrajudicial foreclosure of the mortgage. At the foreclosure sale on 11 December 1974 the respondent bank was the highest and winning bidder with a bid of P2,945.11. A certificate of sale was executed in its favor by the sheriff and the same was registered with the Office of the Register of Deeds on 29 January 1975. The certificate of sale, a copy of which was furnished the petitioners by registered mail, expressly provided that the redemption period shall be two years from the registration thereof. Since no redemption was made by petitioners within the two-year period, which expired on 29 January 1977, the sheriff issued a Final Deed of Sale on 15 February 1977. Petitioners, however, claimed that they were granted by respondent bank an extension of the redemption period; but the latter denied it. On 22 November 1979 respondent bank file a petition for a writ of possession, which petitioners later opposed on the ground that they had consigned the redemption money of P4,000.00 on 12 December 1979. The court rejected the opposition and issued the writ of possession. However, to prevent its execution, petitioners instituted with the then Court of First Instance of Pangasinan a complaint against respondent bank and the Ex-Officio Provincial Sheriff for the annulment of the aforementioned final deed of sale and for the issuance of a writ of preliminary injunction. The case was docketed as Civil Case No. 15573 which was raffled to Branch

II thereof. In their complaint petitioners alleged that the final deed of sale was prematurely issued since they were granted an extension of time to redeem the property. Held:In respect to the alleged assurance given by Mrs. Brodeth, the President and
Manager of the Bank, sometime in May of 1978 to the effect that petitioners can redeem the property as soon as they have the money, it is obvious that this took place after the expiration of the redemption period. As correctly pointed out by the respondent IAC, this could only relate to the matter of resale of the property, not redemption. Furthermore, even assuming for the sake of argument that Mrs. Brodeth gave the assurance, the same could bind the bank only if its Board of Directors approved or ratified it. No evidence was offered to prove such action by the Board. Moreover, Mrs. Brodeth denied that during that meeting in May 1978 she made the assurance; according to her petitioner Epifanio neither mentioned the loan nor offered to redeem, although earlier he was told that to 'redeem" the property he should pay P30,000.00. The latter statement supports the conclusion of respondent IAC that this was the Bank's offer for the re-sell (not redemption of the property), which, logically took place after the expiration of the redemption period. Even if Mrs. Brodeth is to be understood to have promised to allow the petitioners to buy the property at any time they have the money, the Bank was not bound by the promise not only because it was not approved or ratified by the Board of Directors but also because, and more decisively, it was a promise unsupported by a consideration distinct from the re-purchase price. The second paragraph of Article 1479 of the Civil Code expressly provides: xxx xxx xxx An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissory if the promise is supported by a consideration distinct from the price.
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Thus in Rural Bank of Paraaque Inc. vs. Remolado, et al., 8 a commitment by the bank to resell a property, within a specified period, although accepted by the party in whose favor it was made, was considered an option not supported by a consideration distinct from the price and, therefore, not binding upon the promissor. Pursuant to Southwestern Sugar and Molasses Co. vs. Atlantic Gulf and Pacific Company, 9 it was void.
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FORM 1. Ker & Co. vs. Lingad CIR assessed the sum of P20,272.33 as the commercial brokers percentage tax, surcharge, and compromise penalty against Ker & Co. There was a request on the part of petitioner for the cancellation of such assessment, which request was turned down. As a result, it filed a petition for review with the Court of Tax Appeals. CTA ruled that that Ker & Co is liable as a commercial broker under Section 194 (t) of the National Internal Revenue Code. Ker & Co signed a contract with the United States Rubber International, the former being referred to as the Distributor and the latter specifically designated as the Company. The shipments would

cover products for consumption in Cebu, Bohol, Leyte, Samar, Jolo, Negros Oriental, and Mindanao except [the] province of Davao. Ker & Co, as Distributor, was precluded from disposing such products elsewhere than in the above places unless written consent would first be obtained from the Company. It was required to exert every effort to have the shipment of the products in the maximum quantity and to promote in every way the sale thereof. The prices, discounts, terms of payment, terms of delivery and other conditions of sale were subject to change in the discretion of the Company. Issue: WON the relationship Ker & Co and US Rubber was that of a vendorvendee or principal-broker? PRINCIPAL- BROKER, hence liable under Section 194 (t) of the NIRC. Held: The relationship between them is one of brokerage or agency. That the petitioner Ker & Co., Ltd. is, by contractual stipulation, an agent of U.S. Rubber International is borne out by the facts that: 1. petitioner can dispose of the products of the Company only to certain persons or entities and within stipulated limits, unless excepted by the contract or by the Rubber Company; 2. it merely receives, accepts and/or holds upon consignment the products, which remain properties of the latter company 3. every effort shall be made by petitioner to promote in every way the sale of the products (Par. 3); that sales made by petitioner are subject to approval by the company 4. on dates determined by the rubber company, petitioner shall render a detailed report showing sales during the month 5. the rubber company shall invoice the sales as of the dates of inventory and sales report (Par. 14); that the rubber company agrees to keep the consigned goods fully insured under insurance policies payable to it in case of loss 6. upon request of the rubber company at any time, petitioner shall render an inventory of the existing stock which may be checked by an authorized representative of the former 7. upon termination or cancellation of the Agreement, all goods held on consignment shall be held by petitioner for the account of the rubber company until their disposition is provided for by the latter. CONTROLLING TEST (cited CIR vs. Constantino): Since the company retained ownership of the goods, even as it delivered possession unto the dealer for resale to customers, the price and terms of which were subject to the companys control, the relationship between the company and the dealer is one of agency. Sale vs. Agency a. In sale, the essence is the transfer of title or agreement to transfer it for a price paid or promised. In agency, the essence is the delivery to an agent. b. In sale, the transfer puts the transferee in the attitude or position of an owner and makes him liable to the transferor as a debtor for the agreed price, and not merely as an agent who must account for the

proceeds of a resale, the transaction is a sale. In agency, the transfer does not make the property as the agents own, but that of principal, who remains the owner and has the right to control sales, fix the price, and terms, demand and receive the proceeds less the agents commission upon sales made. Besides, The control by the United States Rubber International over the goods in question is pervasive. Other source: Was it a contract of agency or a contract of sale? CONTRACT OF AGENCY or BROKERAGE. Since the company retained ownership of the goods, even as it delivered possession unto the dealer for resale to customers, the price and terms of which were subject to the companys control, the relationship between the company and the dealer is one of agency, . The difficulty in distinguishing between contracts of sale and the creation of an agency to sell has led to the establishment of rules by the application of which this difficulty may be solved. The decisions say the transfer of title or agreement to transfer it for a price paid or promised is the essence of sale. If such transfer puts the transferee in the attitude or position of an owner and makes him liable to the transferor as a debtor for the agreed price, and not merely as an agent who must account for the proceeds of a resale, the transaction is a sale; while the essence of an agency to sell is the delivery to an agent, not as his property, but as the property of the principal, who remains the owner and has the right to control sales, fix the price, and terms, demand and receive the proceeds less the agents commission upon sales made.