Special Cases – SCRA

SALES

GSMBA109
Legal Aspects of Business

Submitted by:
Riangelli Exconde
MBA 2A-R

Submitted to:
Atty. John R. Jacome
Definition

A contract of sale is a contract where one party obligates himself to deliver a determinate thing to another
part, who in turn, obligates himself to the other to pay a sum of money or its equivalent.

Essential Requisites

The contract of sale, being a contract, has the same requisites, namely, consent, object, and cause.
1. Consent - Also called meeting of the minds. mutual agreement, or consensus ad idem. It essentially
refers to a situation where the two parties of the contract has a mutual understanding in the formation of the
contract of sale. This essentially means that there is consent in the part of the seller to transfer ownership
of the determinate thing and in the part of the buyer to pay the equivalent price.
Note that both of the parties must have the legal capacity to give their consent.
2. Object - This is the subject matter of the contract. It must be determinate or capable of being
determinate.
3. Cause - This refers the the price, in terms of money or its equivalent.

Kinds of Contract of Sale

Sales [ GR No. 39590, Feb 06, 1934 ]

VILLA-REAL, J.:
This case involves two appeals, one by Alberta L. Reyes and the other by Gervasio Larraeas, as special
administrator of the intestate estate of Florentina Cordero, from the judgment rendered by the Court of First
Instance of Mindoro, the dispositive part of which reads as follows:
"In view of the foregoing considerations, the court has arrived at the conclusion that the action brought by
the plaintiff is justified.
"Wherefore, the court orders Alberta L. Reyes, and in her capacity as administratrix of the estate of the
deceased Florentina Cordero, to pay to the plaintiff: the sum of P11,985.05, with interest thereon at 12 per
cent per annum until fully paid; 10 per cent of said sum representing expenses and attorney's fees, and the
sum of P26 as fees for the registration of the mortgage deed.
"In case the defendant fails to pay the aforesaid sums within ninety days from the date this judgment shall
have become final, it is hereby ordered that the parcels of land described in Exhibit A be sold at public
auction and the proceeds thereof applied to the payment of said sums, the balance to be turned over to the
defendant Alberta L. Reyes. So ordered."
In support of their appeal, both defendants assign eight identical alleged errors, as committed by the court
a quo in its decision, which errors will be discussed in the body of this decision.
The following pertinent facts, established by a preponderance of the evidence adduced during the trial, are
necessary for the resolution of the questions raised in these appeals, to wit:
On October 11, 1920, Florentina Cordero, now deceased, executed a power of attorney authorizing her
only daughter, the herein defendant-appellant Alberta L. Reyes, to mortgage in her name and
representation all her land situated in the municipality of Pola, Mindoro (Exhibit 9).
On October 22, 1920, the defendant-appellant Alberta L. Reyes, personally and as attorney in fact of her
mother Florentina Cordero, in consideration of the sum of P6,500 received from Enrique Azcona, now
deceased, sold to the latter, with the right of repurchase within the period of four years, five parcels of land
with certificates of title belonging to her and her mother Florentina Cordero. The vendors became lessees
of the property sold, at a yearly rental of P780 (Exhibit 1).
On October 23, 1920, said defendant-appellant Alberta L. Reyes, as attorney in fact of her mother
Florentina Cordero, in consideration of the sum of P5,000 received from Enrique Azcona, sold to the latter,
with the right of repurchase within the period of four years, one parcel of land with certificate of title No. 58
of the registry of deeds of Mindoro, belonging to the principal Florentina Cordero. Florentina Cordero
became the lessee of said property at a yearly rental of P600 (Exhibit 2).
On October 1, 1925, Alberta L. Reyes and her mother Florentina Cordero jointly executed a power of
attorney authorizing Gregorio Venturanza to sell and encumber all their real and personal property
including their cattle (Exhibit 12).
Enrique Azcona died on May 12, 1925, and was succeeded in all his rights by his only son, the plaintiff-
appellee Jesus Azcona, to whom the entire estate of his deceased father, together with the credits
evidenced by the documents Exhibits 1 and 2, was judicially adjudicated.
In as much as neither the defendant-appellant Alberta L. Reyes nor the deceased Florentina Cordero,
during her lifetime, had exercised her right of redemption in accordance with the aforesaid deeds Exhibits 1
and 2 within the period of four years, and inasmuch as they had asked for an extension of time, on
November 29, 1926, Gregorio Venturanza, as attorney in fact of said Alberta L. Reyes and Florentina
Cordero, on one side, and Jesus Azcona, on the other, executed a deed whereby the deeds of sale with
the right of repurchase, Exhibits 1 and 2, dated October 22 and 23, 1920, respectively, were cancelled and
their respective amounts of P6,500 and P5,000, together with the sum of P1,000 representing the unpaid
accrued interest thereon, or a total amount of P12,500, were converted into a mortgage credit. In order to
secure the cancellation of the registration of the alleged sales with the right of repurchase, the parcels of
land described in the respective deeds were resold to the vendors and a mortgage was constituted thereon
to secure the payment of said mortgage credit of P12,500 within the period of two years, extensible to
another two years, with interest at 12 per cent per annum. Under said contract the mortgagors Alberta L.
Reyes and Florentina Cordero were permitted to liquidate said debt by installments in the sum of P2,500
with the interest due, to be paid on December first of every year, beginning December 1, 1927 (Exhibit A).
The mortgagors Alberta L. Reyes and Florentina Cordero, through their said attorney in fact Gregorio
Venturanza, paid by way of amortization and interest as follows: P2,500 on February 15, 1927, leaving a
balance of P10,325: P2,200 on October 17,1927, leaving a balance of P8,964.76; P1,200 on February
9,1929, leaving a balance of P9,199.09; P350 on June 30,1929, leaving a balance of P9,281.44; and P600
on September 20,1929, leaving a balance of P8,935.12. Since the last mentioned date, the mortgagors
failed to pay amortization and interest so that on June 30, 1932, the unpaid balance thereof together with
the unpaid accrued interest amounted to P11,958.05.
The parties admit and the trial court so found that, although Exhibits 1 and 2 are in the form of deeds of
sale with pacto de retro, in reality they represent mortgage loans.
The first question to decide in this appeal is whether or not the deed of resale and mortgage dated
November 29, 1926 (Exhibit A) is legal and valid.
Both appellants contend that inasmuch as the deeds Exhibits 1 and 2, executed by Alberta L. Reyes,
personally and in representation of her mother Florentina Cordero, in favor of Enrique Azcona, are not true
deeds of sale with pacto de retro but of mortgage, the resale of the parcels of land described therein, made
by Jesus Azcona in favor of said Alberta L. Reyes and Florentina Cordero, is null and void on the ground
that, as mere mortgagors, they never ceased to be the owners thereof and that Enrique Azcona, as a mere
mortgagee, never acquired any title of ownership thereto. Such theory is legally correct; in order for a sale
to be valid, it is necessary that the vendor be the owner of the thing sold, inasmuch as it is a principle of law
that nobody can dispose of that which does not belong to him. However, as has been noted, the sales
with pacto de retro evidenced by Exhibits 1 and 2 were fictitious for the reason that the contracts entered
into by Alberta L. Reyes and the deceased Enrique Azcona were really mortgage in their nature. Therefore,
the resale was a mere formality resorted to for the purpose of obtaining the lawful cancellation of the
registration thereof in the registry of deeds and the notation of the mortgage deed Exhibit A.
The defendants-appellants contend that Exhibit A is likewise void as a mortgage deed on the ground that it
lacks consideration or principal obligation which it purports to secure.
There is no question that the defendant-appellant Alberta L. Reyes, personally and as attorney in fact of her
mother Florentina Cordero, received the sum of P6,500 from the deceased Enrique Azcona under Exhibit 1
and that, as attorney in fact of her mother alone, she received the sum of P5,000 from said deceased under
Exhibit 2, both sums representing the purchase price of certain parcels of land described in said
documents, which were sold with the right of repurchase. Both parties admit that said documents are really
mere contracts of loan secured by mortgage. As above stated, the sum of P12,500 which constitutes the
cause or consideration of the deed of resale and mortgage Exhibit A is the total of the sums of P6,500 and
P5,000 which Alberta L. Reyes, personally and as attorney in fact of her mother Florentina Cordero,
received from Enrique Azcona, together with the sum of P1,000 representing the unpaid credits passed by
inheritance to the plaintiff-appellee Jesus Azcona, as the only son of Enrique Azcona. Therefore, it cannot
be said that the mortgage Exhibit A, executed by Gregorio Venturanza, as attorney in fact of Alberta L.
Reyes and Florentina Cordero, in favor of Jesus Azcona, lacks consideration or principal obligation for the
fulfillment of which said instrument was executed as security.
The defendants-appellants, however, impugn the validity of Exhibits 1 and 2 with regard to Florentina
Cordero, alleging that they were not executed in such form as to bind the principal, having been signed only
with the name Alberta L. Reyes.
Upon examination of said documents, it will be noted that Alberta L. Reyes made it appear in Exhibit 1 that
she acted as Florentina Cordero's attorney in fact under a power of attorney issued to her by attaching a
copy of said power of attorney to the deed in question, and in Exhibit 2 she likewise inserted the entire
power of attorney. In the case of Orden de Dominicos vs. De Coster (50 Phil., 115), this court held that
such form is valid and sufficient under the law.
Considered as mere contracts of mortgage loans, the deeds Exhibits 1 and 2 dated October 22 and 23,
1920, respectively, are binding upon Florentina Cordero, and compliance with the obligations contracted
thereunder may be demanded in her intestate proceedings either as credit in favor of the intestate estate of
Enrique Azcona or as credit in favor of the plaintiff-appellee Jesus Azcona against said Florentina Cordero
under the mortgage deed Exhibit A.
In regard to the question of usury raised by the defendants-appellants in their respective briefs, although it
is true that failure to file a sworn answer to a cross-complaint for the recovery of usurious interest paid
implies an admission of the existence of a usurious rate of interest (Lo Bun Chay vs. Paulino, 54 Phil,, 144,
cited with approval in the case of Ramirez and Polido vs. Bergado, 56 Phil., 810), however, the
counterclaim and cross-complaint filed in this case failed to state facts constituting the alleged usury but
merely allege that in payment of a debt of P9,500 the plaintiff and his predecessor in interest received the
amount of P20,130. Such statement does not in itself constitute an allegation of usury and failure to file a
reply thereto implies denial of such allegation (sec. 104, Act No. 190).
Neither has the existence of usurious interest been proven during the trial inasmuch as in both Exhibits 1
and 2 it is stipulated that the vendors, as lessees, would have to pay the sum of P1,380 as yearly rental.
Such sum, computed on the basis of a capital of P11,500 gives a rate of interest of only 12 per cent per
annum, which is allowed by law (Robinson vs. Sackermann and Postal Savings Bank, 46 Phil., 539).
Furthermore, in the deed of resale and mortgage loan Exhibit A, interest at the rate of only 12 per cent per
annum is stipulated. The existence of a stipulation to the effect that accrued interest shall bear interest
does not imply that the loans in question are usurious inasmuch as it is permitted to charge compound
interest (sec. 5, Act No. 2655, as amended by sec. 3 of Act No. 3291; Cu Unjieng e Hijosvs. Mabalacat
Sugar Co., 54 Phil., 976).
With respect to the true state of the accounts of the mortgagor Alberta L. Reyes and the deceased
Florentina Cordero with the mortgagee Jesus Azcona, the evidence presented to that effect has been
examined and this court has found that the conclusions arrived at by the court a quo are supported thereby.
Wherefore, not finding any error in the judgment appealed from, it is hereby affirmed in toto, with the costs
against the appellants. So ordered.
Malcolm, Hull, Imperial, and Goddard, JJ., concur.

Comment on the case:

This case is an example of a discussion under right of vendor to transfer ownership that one can sell only
what he owns. It is essential in order for a sale to be valid that the vendor must be able to transfer
ownership according to Article 1458 that states that By the contract of sale 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. And therefore, he must be the owner or at least must be
authorized by the owner of the thing sold. It is a well-known principle of law that nobody can dispose of that
which he does not have.

EN BANC
G.R. No. L-4402 July 28, 1952
CANUTO MARTIN, petitioner,
vs.
MARIA REYES and PEDRO REVILLA, respondents.
Delgado and Flores for petitioner.
Ramon Diokono and Jose W. Diokno for respondents.

BENGSON, J.:

Coming from the Court of Appeals for revision, this litigation presents two principal question: the price at
which the respondents were entitled to repurchase the property, and the exercise of such right within the
period of redemption. Apparently issues of fact, they really depend upon legal points, as will presently be
seen.
According to the Court of Appeals, the respondents Pedro Revilla and Maria Reyes obtained from the La
Previsora Filipina sometime before November 18, 1939 a loan of P6,500; and with the money, they the
price of a lot, with improvements, which they paid had previously purchased from the Archibishop of Manila.
And they mortgaged the property to La Previsora for the purpose of guaranteeing repayment of the debt in
installments with interest at 12 per cent per annum.
It turned out later that Monte de Piedad y Caja de Ahorros had obtained a judgment against Pedro Revilla
for the sum of P45,000 and had levied execution therefor upon the property and its rentals. Apprised of this
development, the La Previsora started foreclosure proceedings, alleging non-payment of its credit by the
mortgagors. The conflicting interests were later the object of amicable settlement among the parties, as a
result of which the herein respondents notarized the deed Exhibit E whereby in satisfaction of their
obligations to La Previsora (then amounting to P8,204.60) they ceded the property to the said institutions,
reserving the right to repurchase for P8,204.60 within sixty days. The deed was acknowledged on
November 3, 1941.
It seems that La Previsora at the same time, or immediately thereafter conveyed the property by Exhibit C
to petitioner Canuto Martin, who then executed the document Exhibit D undertaking to allow respondents to
repurchase the property within sixty days from October 31, 1941, but at the price of P14,000. This
document Exhibit D was signed by Maria Reyes signifying her assent. At the trial she pleaded that the
document, without embodying their true agreement, had been obtained thru deceit and abuse of
confidence. However, her assertions were not credited by the Court of Appeals. Nevertheless, that court
declared the document void (Exhibit D) for the only reasons that it had been signed by Canuto Martin
before acquiring ownership of the property by the cession of Maria Reyes and Pedro Revilla to the La
Previsora, and from the latter to them. The Court noted that whereas Exhibit E was acknowledged before
the notary on November 3, 1941, Exhibit Dbore the date October 30, 1941, a few days before.
Wherefore the Court of Appeals held that the respondent's right to repurchase was to be found in Exhibit E,
and that they had seasonably exercised such right.
The validity of Exhibit D is the subject-matter of Martin's principal attack on the appellate court's judgment.
The documents Exhibits C, D and E were undoubtedly part of the same amicable settlement.
Acknowledgment of the document Exhibit E was delayed on account of the necessity of securing the
approval of the Monte de Piedad y Caja de Ahorros. For that reason it bears the date November 3. The
arrangements were obviously: (a) transfer to La Previsora with right to repurchase at P8,204.60; (b)
transfer by La Previsora to Canuto Martin and (c) option to repurchase from Martin at P14,000.
Why at P14,00, when it is admitted that Martin got the property at P7,000 from La Previsora the claims of
Monte de Piedad arising from the attachment heretofore described.
The Court of Appeals pronounced Exhibit D invalid because at the time of its execution, Martin had no title
over the property. This is rather too technical a viewpoint. Remembering that Exhibit D constituted a part of
the whole friendly settlement and could be considered as simultaneous with the other documents, specially
the documents of transfer from Maria Reyes and La Previsora, the disparity of dates should imply no
annulling consequences. At any rate, Exhibit D may be placed in the same category as a promise to
convey land not yet owned by the vendor, obligation which may be enforced, according to the authorities:
Property or goods which, at the time of the sale, are not owned by the seller, but which are thereafter to be
acquired by him, cannot be the subject of an executed sale, but may be the subject of a contract for the
future sale and delivery thereof, and it has been held that even though the contract is in the form of the
present sale it will not pass the title, after the goods have been acquired, until the seller has done some act
appropriating them to the contract. Such a contract of the future sale and delivery of goods, which the seller
has not in possession but which he intends to acquire by producing, manufacturing, or purchasing before
the day of delivery, is valid as an executory contract to be fulfilled by acquiring and delivering the goods
specified in the contract, even though the acquisition of the goods by the seller depends upon a
contingency which may or may not happen. (55 Corpus Juris, 65). (Emphasis ours)
It is not unusual for persons to agree to convey by a certain time, notwithstanding they have no title to the
land at the time of the contract, and the validity of such agreement is upheld. In such cases, the vendor
assume the risk of acquiring the title and making the conveyance, or responding in damages for the
vendee's loss of his bargain, One having an option to purchase real estate has a legal right to enter into an
executory contract to sell the property. A fortiori, it is not necessary that the vendor be the absolute owner
of the property at the time he enters into agreement of sale because the owner of the land, is as much the
subject of sale as is the land itself, and whenever one is so suited with reference to a tract of land that he
can acquire the title thereto, either by the voluntary act of the parties holding the title, or by proceeding at
law or in equity, he is in a position to make a valid agreement for the sale thereof, without disclosing the
nature of his title. (55 American Jurisprudence, 480). (Emphasis ours)
The above principles express the same the ideas in articles 1462 and 1459 of the New Civil Code.
Therefore erroneous is the ruling that, because executed before Canuto Martin became the owner, Exhibit
D, was null and void. Consequently, as Reyes voluntarily agreed under Exhibit D, to repurchase at
P14,000, she should not repurchase at any other price.
Now, have the respondents properly exercised their right to repurchase?
The Court of Appeals stated that in December 1941, Maria Reyes accompanied by Marcela Mota de
Malonso went to the office of La Previsora, not for the purpose of repurchasing the property, but to ask for
extension of the period. Nevertheless, that Court opined that inasmuch as the complaint to compel
repurchase had been filed on January 2, 1952 within the sixty-day period mentioned in Exhibit E, the
vendors had preserved their redemption option. Upon a move to reconsider, the Court of Appeals amplified
its decision saying,
In view of the refusal of Atty. Pete A. Revilla who was acting in behalf of appellee Canuto Martin, to receive
any amount less than P14,000, nor to accept in behalf of the La Previsora Filipina, claiming that the latter's
right were already ceded to appellee Canuto Martin, we hold that the question to the efficiency of the
amount offered at the time is not as vital to the issue as the necessity of making one. . . . We find that the
plaintiff Maria Reyes, accompanied to one Marcela Mota de Malonso did make an offer to redeem the
property in the property days of December, 1941. Whether or not the amount they had on that occasion
was sufficient to redeem the property at P8,204.60 or P10,204.60 is not vital to the preservation of the
rights of the plaintiff's in view of the refusal to accept any amount less than P14,000.
Having declared that Exhibit E was valid and that the repurchase had to be made at P14,000, we must
necessarily conclude that under the above findings of the Court of Appeals the right to repurchase had not
been preserved.
Nevertheless, let us suppose for the moment that the rights of Revilla and Reyes are governed by Exhibit E
only-not by Exhibit D.
From the findings of the Court of Appeals it is to be deduced that in December Maria Reyes offered to
redeem for less than P8,204.60. The decision of the court of first instance says "all the money she had at
that time was P7,000."
Now then: the repurchase price was P8,204.60 (on the supposition that Exhibit E governs the parties'
rights); Maria Reyes offered to repay in December P7,000 only. The fact that she was told Canuto Martin
wanted P14,000, does not excuse her obligation to offer, within the time stipulated, the full price for the
repurchase: P8,204.60. If it was her theory and position that she had a right to redeem from La Previsora in
accordance with Exhibit E, she would have acted in accordance therewith by offering P8,204.60 to La
Previsora entirely disregarding the demands of any other individual. Undoubtedly, she failed to offer that
amount.
Furthermore, there is no evidence—and the Court of Appeals did not find—that Pedro Revilla was actually
authorized by La Previsora to refuse to repurchase at P8,204.60.
Needless to add, the date of filing of the complaint is immaterial, so long as it is filed within the period of
limitations, its purpose being to enforce a right which must be established within the time to repurchase.
Wherefore with the declaration that option to repurchase, whether under Exhibit E or under Exhibit D, had
not been asserted to the proper time, we hereby absolve the petitioner Canuto Martin from the complaint.
Costs against respondents.
Pablo, Padilla, Tuason, Montemayor, Bautista Angelo, and Labrador, JJ., concur.

Comments on this case:

This case tackles the Sale of future goods. A sale of future goods even though the contract is in the form of
a present sale is valid only as an executory contract to be fulfilled by the acquisition and delivery of the goods
specified. In other words, “property or goods which at the time of the sale are not owned by the seller but
which thereafter are to be acquired by him cannot be the subject of an executed sake but may be the subject
of a contract for the future sale and delivery thereof,” even though the acquisition of the goods depends upon
a contingency which may or may not happen. Upon acquisition of the goods, either party acquires the right
to demand the execution of the contract of sale.