Gaite v.

Fonacier
Facts:
 Fonacier, owner of 11 iron lode mineral claims (Dawahan Group) in Camarines Norte,
constituted a "Deed of Assignment”, and appointed Gaite as his true and lawful attorney-in-fact to enter
into a contract for its exploration and development on a royalty basis.
 Gaite executed a general assignment to the Larap Iron Mines owned solely by him .
 However, Fonacier revoked the agency, which was acceded to by Gaite, subject to certain conditions, one
of which being the transfer of ores extracted from the mineral claims for P75,000, of which P10,000 has
already been paid upon signing of the agreement and the balance to be paid from the first letter of credit
for the first local sale of the iron ores.
 To secure payment, Fonacier delivered a surety agreement with Larap Mines and some of its
stockholders, and another one with Far Eastern Insurance.
 When the second surety agreement expired with no sale being made on the ores, Gaite demanded the
P65,000 balance. Defendants contended that the payment was subject to the condition that the ores will
be sold.
Issue:
(1) Whether the sale is conditional or one with a period
(2) Whether there were insufficient tons of ores

Held:
The shipment or local sale of the iron ore is not a condition precedent (or suspensive) to the payment of
the balance of P65,000.00, but was only a suspensive period or term.
What characterizes a conditional obligation is the fact that its efficacy or obligatory force (as
distinguished from its demandability) is subordinated to the happening of a future and uncertain event; so that
if the suspensive condition does not take place, the parties would stand as if the conditional obligation had
never existed.
A contract of sale is normally commutative and onerous: not only does each one of the parties assume a
correlative obligation (the seller to deliver and transfer ownership of the thing sold and the buyer to pay the price),
but each party anticipates performance by the other from the very start. While in a sale the obligation of one party
can be lawfully subordinated to an uncertain event, so that the other understands that he assumes the risk of
receiving nothing for what he gives (as in the case of a sale of hopes or expectations,  emptio spei), it is not in the
usual course of business to do so; hence, the contingent character of the obligation must clearly appear.
In this case, Nothing is found in the record to evidence that Gaite desired or assumed to run the risk of
losing his right over the ore without getting paid for it, or that Fonacier understood that Gaite assumed any such
risk. This is proved by the fact that Gaite insisted on a bond to guarantee payment of the P65,000.00, and not
only upon a bond by Fonacier, the Larap Mines & Smelting Co., and the company's stockholders, but also on one
by a surety company; and the fact that appellants did put up such bonds indicates that they admitted the
definite existence of their obligation to pay the balance of P65,000.00.
The appellant have forfeited the right court below that the appellants have forfeited the right to compel
Gaite to wait for the sale of the ore before receiving payment of the balance of P65,000.00, because of their failure
to renew the bond of the Far Eastern Surety Company or else replace it with an equivalent guarantee. The
expiration of the bonding company's undertaking on December 8, 1955 substantially reduced the security of the
vendor's rights as creditor for the unpaid P65,000.00, a security that Gaite considered essential and upon which he
had insisted when he executed the deed of sale of the ore to Fonacier.
2. The sale between the parties is a sale of a specific mass or iron ore because no provision was made
in their contract for the measuring or weighing of the ore sold in order to complete or perfect the sale,
nor was the price of P75,000,00 agreed upon by the parties based upon any such measurement.(see
Art. 1480, second par., New Civil Code).
The subject matter of the sale is, therefore, a determinate object, the mass, and not the actual
number of units or tons contained therein, so that all that was required of the seller Gaite was to
deliver in good faith to his buyer all of the ore found in the mass, notwithstanding that the quantity
delivered is less than the amount estimated by them.

Hence, the SC affirmed the decision of the lower court.

PROVINCE OF CEBU VS HEIRS OF MORALES

Facts:

 On September 27, 1961, petitioner Province of Cebu leased in favor of Rufina Morales a 210-
square meter lot which formed part of Lot No. 646-A of the Banilad Estate.
 Subsequently or sometime in 1964, petitioner donated several parcels of land to the City... of
Cebu.
 Roughly a year later, the city sold Lot No. 646-A-3 as well as the other donated lots at public
auction in order to raise money for infrastructure projects. 
 The highest bidder for Lot (No. 646-A-3) was Hever Bascon but Morales was allowed to match
the highest bid since she had a preferential right to the lot as actual occupant thereof.
 Morales thus paid the required deposit and partial payment for the lot.
 In the meantime, petitioner filed an action for reversion of donation against the City of Cebu
 On 1974, petitioner and the City of Cebu entered into a compromise agreement
 The agreement provided for the return of the donated lots to petitioner except those that have
already been utilized by the City of Cebu.
 Quesada, together with the other nieces of Morales namely, respondents Nenita Villanueva and
Erlinda V. Adriano, as well as Morales' sister, Felomina V. Panopio, filed an action for specific
performance and reconveyance of property against the petitioner

Issues:

WON the award at public auction of the lot to Morales was a valid and binding contract

Ruling: YES, The SC found no merit in petitioner's assertion that there was no perfected contract of sale
because no "Contract of Purchase and Sale" was ever executed by the parties.

Subject to the provisions of the Statute of Frauds, a formal document is not necessary for the sale
transaction to acquire binding effect.

The fact that there was an agreed price for the lot proves that a contract of sale was indeed perfected
between the parties.  Failure to pay the balance of the purchase price did not render the sale
inexistent or invalid, but merely gave rise to a right in favor of the vendor to either demand specific
performance... or rescission of the contract of sale.

The City of Cebu was the owner of the lot when it awarded the same to... respondents' predecessor-in-
interest, Morales, who later became its owner before the same was erroneously returned to petitioner
under the compromise judgment.

The award is tantamount to a perfected contract of sale between Morales and the City of Cebu, while
partial payment of the purchase price and actual occupation of the property by Morales and
respondents effectively transferred ownership of the lot to the latter. This is true notwithstanding the
failure of Morales and respondents to pay the balance of the purchase price.
In this case, respondents' predecessor had undoubtedly commenced performing her obligation by
making a down payment on the purchase price.

respondents could still tender payment of the full purchase price as no demand for rescission had been
made upon them, either judicially or through notarial act.

Hence, the SC denied the petition and affirmed the decision of the CA.

Principles:

Whether Morales, as actual occupant and/or lessee of the lot, was qualified and had the right to match
the highest bid is... a foregone matter that could have been questioned when the award was made. 
When the City of Cebu awarded the lot to Morales, it is assumed that she met all qualifications to match
the highest bid.

It does not matter that Morales merely matched the bid of the highest bidder at the said auction... sale.  
The contract of sale was nevertheless perfected as to Morales, since she merely stepped into the shoes
of the highest bidder.

For as long as the essential elements of a contract of... sale are proved to exist in a given transaction, the
contract is deemed perfected regardless of the absence of a formal deed evidencing the same.

The stages of a contract of sale are as follows: (1) negotiation, covering the period from the time the
prospective contracting parties indicate interest in the contract to the time the contract is perfected; (2)
perfection, which takes place upon the concurrence... of the essential elements of the sale which are the
meeting of the minds of the parties as to the object of the contract and upon the price; and (3)
consummation, which begins when the parties perform their respective undertakings under the contract
of sale, culminating... in the extinguishment thereof

Article 1592 allows the vendee to pay as long as no demand for rescission has been made.
Balatbat v. CA

Facts:

 A parcel of land was acquired by plaintiff Aurelio Roque and Maria Mesina during
their conjugal union.
 Maria died on August 28, 1966.
 On June 15, 1977, Aurelio filed a case for partition.
 The trial court held that Aurelio is entitled to the half portion of his share in the conjugal
property, and 1/5 of the other half which formed part of Maria’s estate, divided equally
among him at his 4 children.
 The decision having become final and executory, the Register of Deeds of Manila
issued a transfer certificate of title on October 5, 1979 according to the ruling of
the court.
 On April 1, 1980, Aurelio sold his 6/10 share to spouses Aurora Tuazon-Repuyan
and Jose Repuyan, as evidenced by a deed of absolute sale.
 On June 21, 1980, Aurora caused the annotation of her affidavit of adverse claim.
 On August 20, 1980, Aurelio filed a complaint for rescission of contract grounded on the
buyers’ failure to pay the balance of the purchase price.
 On February 4, 1982, another deed of absolute sale was executed between Aurelio and
his children, and herein petitioner Clara Balatbat, involving the entire lot.
 Balatbat filed a motion for the issuance of writ of possession, which was granted
by the court on September 20, 1982, subject to valid rights and interests of third
persons.
 Balatbat filed a motion to intervene in the rescission case, but did not file her complaint
in intervention. The court ruled that the sale between Aurelio and Aurora is valid.

Issues:

(1) Whether the alleged sale to private respondents was merely executory

(2) Whether there was double sale

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

Held:

Whether the alleged sale to private respondents was merely executory

(1) 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, we 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.

Whether there was double sale

(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.

Whether petitioner is a buyer in good faith and for value

(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.

Hence, the SC denied the petion for lack of merit.

San Lorenzo Development Corp. v. Court of Appeals

G.R. No. 124242, 21 January 2005, 449 SCRA 99

FACTS:

 Respondents Spouses Miguel Lu and Pacita Zavalla Lu, owned 2 parcels of land
situated in Sta. Rosa, Laguna.
 On 20 August 1986, the Spouses Lu purportedly sold the two parcels of land to
respondent Pablo Babasanta, Babasanta made a downpayment of P50,000.00 as
evidenced by a memorandum receipt issued by Pacita Lu of the same date.
 Several other payments totaling P200,000.00 were made by Babasanta.
 Sometime in May 1989, Babasanta wrote a letter to Pacita Lu to demand the execution
of a final deed of sale in his favor so that he could effect full payment of the purchase
price. In the same letter, Babasanta notified the spouses about having received
information that the spouses sold the same property to another without his knowledge
and consent.
 He demanded that the second sale be cancelled and that a final deed of sale be issued
in his favor.

 In response, Pacita Lu wrote a letter to Babasanta wherein she acknowledged having

agreed to sell the property to him at P15.00 per square meter.
 She, however, reminded Babasanta that when the balance of the purchase price
became due, he requested for a reduction of the price and when she refused, Babasanta
backed out of the sale.
 Pacita added that she returned the sum of P50,000.00 to Babasanta through Eugenio
Oya.

 On 2 June 1989, respondent Babasanta, as plaintiff, filed before the Regional Trial
Court, of San Pedro, Laguna, a Complaint for Specific Performance and Damages
against his co-respondents herein, the Spouses Lu. Babasanta alleged that the lands
had been sold to him by the spouses that Despite his repeated demands for the
execution of a final deed of sale in his favor, respondents allegedly refused.

 On 19 January 1990, herein petitioner San Lorenzo Development Corporation (SLDC)

filed a Motion for Intervention before the trial court. SLDC alleged that it had legal
interest in the subject matter under litigation because on 3 May 1989, the two parcels of
land involved, had been sold to it in a Deed of Absolute Sale with Mortgage. It alleged
that it was a buyer in good faith and for value and therefore it had a better right over the
property in litigation.

After a protracted trial, the RTC rendered its Decision on 30 July 1993 upholding the sale of the
property to SLDC.

Respondent Babasanta appealed the trial court’s decision to the Court of Appeals. On 4
October 1995, the Court of Appeals rendered its Decision which set aside the judgment of the
trial court. It declared that the sale between Babasanta and the Spouses Lu was valid and
subsisting and ordered the spouses to execute the necessary deed of conveyance in favor of
Babasanta. The appellate court ruled that the Absolute Deed of Sale with Mortgage in favor of
SLDC was null and void on the ground that SLDC was a purchaser in bad faith.

Hence, this petition.

ISSUE:

The core issue presented for resolution in the instant petition is who between SLDC and
Babasanta has a better right over the two parcels of land subject of the instant case in view of
the successive transactions executed by the Spouses Lu.

RULING:

An analysis of the facts obtaining in this case, as well as the evidence presented by the parties,
irresistibly leads to the conclusion that the agreement between Babasanta and the Spouses Lu
is a contract to sell and not a contract of sale.

The receipt signed by Pacita Lu merely states that she accepted the sum of fifty thousand pesos
(P50,000.00) from Babasanta as partial payment of 3.6 hectares of farm lot situated in Sta.
Rosa, Laguna. While there is no stipulation that the seller reserves the ownership of the
property until full payment of the price which is a distinguishing feature of a contract to sell, the
subsequent acts of the parties convince us that the Spouses Lu never intended to transfer
ownership to Babasanta except upon full payment of the purchase price. Doubtlessly, the
receipt signed by Pacita Lu should legally be considered as a perfected contract to sell.

The perfected contract to sell imposed upon Babasanta the obligation to pay the balance of the
purchase price. There being an obligation to pay the price, Babasanta should have made the
proper tender of payment and consignation of the price in court as required by law. Respondent
Babasanta did not acquire ownership by the mere execution of the receipt by Pacita Lu
acknowledging receipt of partial payment for the property. For one, the agreement between
Babasanta and the Spouses Lu, though valid, was not embodied in a public instrument. Hence,
no constructive delivery of the lands could have been effected.

On the part of petitioner, SLDC registered the sale with the Registry of Deeds after it had
acquired knowledge of Babasanta’s claim. Babasanta, however, strongly argues that the
registration of the sale by SLDC was not sufficient to confer upon the latter any title to the
property since the registration was attended by bad faith. Specifically, he points out that at the
time SLDC registered the sale on 30 June 1990, there was already a notice of lis pendens on
the file with the Register of Deeds, the same having been filed one year before on 2 June 1989.

Did the registration of the sale after the annotation of the notice of lis pendens obliterate the
effects of delivery and possession in good faith which admittedly had occurred prior to SLDC’s
knowledge of the transaction in favor of Babasanta?

It must be stressed that as early as 11 February 1989, the Spouses Lu executed the Option to
Buy in favor of SLDC upon receiving P316,160.00 as option money from SLDC. After SLDC had
paid more than one half of the agreed purchase price of P1,264,640.00, the Spouses Lu
subsequently executed on 3 May 1989 a Deed of Absolute Sale in favor or SLDC. At the time
both deeds were executed, SLDC had no knowledge of the prior transaction of the Spouses Lu
with Babasanta. Simply stated, from the time of execution of the first deed up to the moment of
transfer and delivery of possession of the lands to SLDC, it had acted in good faith and the
subsequent annotation of lis pendens has no effect at all on the consummated sale between
SLDC and the Spouses Lu.

A purchaser in good faith is one who buys property of another without notice that some
other person has a right to, or interest in, such property and pays a full and fair price for
the same at the time of such purchase, or before he has notice of the claim or interest of
some other person in the property. Following the foregoing definition, we rule that SLDC
qualifies as a buyer in good faith since there is no evidence extant in the records that it had
knowledge of the prior transaction in favor of Babasanta. At the time of the sale of the property
to SLDC, the vendors were still the registered owners of the property and were in fact in
possession of the lands.

Since SLDC acquired possession of the property in good faith in contrast to Babasanta, who
neither registered nor possessed the property at any time, SLDC’s right is definitely superior to
that of Babasanta’s.