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SUBJECT MATTER
1.
2. YU TEK vs GONZALES (29 Phil 384)
FACTS: A written contract was executed between Basilio Gonzalez and Yu Tek and Co., where Gonzales was obligated to
deliver600 piculs of sugar of the 1st and 2nd grade to Yu Tek, within the period of 3 months (1 January-31 March 1912) at any
place within the municipality of Sta. Rosa, which Yu Tek & Co. or its representative may designate; and in case, Gonzales does
not deliver, the contract will be rescinded and Gonzales shall be obligated to return the P3,000 received and also the sum of
P1,200by way of indemnity for loss and damages. No sugar had been delivered to Yu Tek & Co. under this contract nor had it
been able to recover the P3,000. Yu Tek & Co. filed a complaint against Gonzales, and prayed for judgment for the P3,000 and
the additional P1,200. Judgment was rendered for P3,000 only, and from this judgment both parties appealed.
Defendant alleges that the court erred in refusing to permit parol evidence showing that the parties intended that the sugar was
to be secured from the crop which the defendant raised on his plantation, and that he was unable to fulfill the contract by
reason of the almost total failure of his crop.
The second contention of the defendant arises from the first. He assumes that the contract was limited to the sugar he might
raise upon his own plantation; that the contract represented a perfected sale; and that by failure of his crop he was relieved
from complying with his undertaking by loss of the thing due. (Arts. 1452, 1096, and 1182, Civil Code.)
ISSUES: 1) Whether compliance of the obligation to deliver depends upon the production in defendants plantation
2) Whether there is a perfected sale
3) Whether liquidated damages of P1,200 should be awarded to the plaintif
HELD: 1) The case appears to be one to which the rule which excludes parol evidence to add to or vary the terms of a written
contract is decidedly applicable. There is not the slightest intimation in the contract that the sugar was to be raised by the
defendant. Parties are presumed to have reduced to writing all the essential conditions of their contract. While parol evidence is
admissible in a variety of ways to explain the meaning of written contracts, it cannot serve the purpose of incorporating into the
contract additional contemporaneous conditions which are not mentioned at all in the writing, unless there has been fraud or
mistake. It may be true that defendant owned a plantation and expected to raise the sugar himself, but he did not limit his
obligation to his own crop of sugar. Our conclusion is that the condition which the defendant seeks to add to the contract by
parol evidence cannot be considered. The rights of the parties must be determined by the writing itself.

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2) Article 1450 defines a perfected sale as follows: The sale shall be perfected between vendor and vendee and shall be
binding on both of them, if they have agreed upon the thing which is the object of the contract and upon the price, even when
neither has been delivered. Article 1452 provides that the injury to or the profit of the thing sold shall, after the contract has
been perfected, be governed by the provisions of articles 1096 and 1182. There is a perfected sale with regard to the thing
whenever the article of sale has been physically segregated from all other articles
In McCullough vs. Aenlle & Co. (3 Phil 285), a particular tobacco factory with its contents was held sold under a contract which
did not provide for either delivery of the price or of the thing until a future time. In Barretto vs. Santa Marina (26 Phil
200),specified shares of stock in a tobacco factory were held sold by a contract which deferred delivery of both the price and the
stock until the latter had been appraised by an inventory of the entire assets of the company. In Borromeo vs. Franco (5
[Link]., 49) a sale of a specific house was held perfected between the vendor and vendee, although the delivery of the price
was withheld until the necessary documents of ownership were prepared by the vendee. In Tan Leonco vs. Go Inqui (8 Phil.
Rep.,531) the plaintif had delivered a quantity of hemp into the warehouse of the defendant. The defendant drew a bill of
exchange in the sum of P800, representing the price which had been agreed upon for the hemp thus delivered. Prior to the
presentation of the bill for payment, in said case, the hemp was destroyed. Whereupon, the defendant suspended payment of
the bill. It was held that the hemp having been already delivered, the title had passed and the loss was the vendees. It is our
purpose to distinguish the case at bar from all these cases.
The contract in the present case was merely an executory agreement; a promise of sale and not a sale. As there was no
perfected sale, it is clear that articles 1452, 1096, and 1182 are not applicable. The agreement upon the thing which was the
object of the contract was not within the meaning of article 1450. Sugar is one of the staple commodities of this country. For the
purpose of sale its bulk is weighed, the customary unit of weight being denominated a picul.' There was no delivery under the
contract. If called upon to designate the article sold, it is clear that Gonzales could only say that it was sugar. He could only
use this generic name for the thing sold. There was no appropriation of any particular lot of sugar. Neither party could point to
any specific quantity of sugar.
The contract in the present case is diferent from the contracts discussed in the cases referred to. In the McCullough case, for
instance, the tobacco factory which the parties dealt with was specifically pointed out and distinguished from all other tobacco
factories. So, in the Barretto case, the particular shares of stock which the parties desired to transfer were capable of
designation. In the Tan Leonco case, where a quantity of hemp was the subject of the contract, it was shown that quantity had
been deposited in a specific warehouse, and thus set apart and distinguished from all other hemp
The Supreme Court affirmed the judgment appealed from with the modification allowing the recovery of P1,200 under paragraph
4 of the contract, without costs
3. NATONAL GRAINS AUTHORITY vs IAC

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FACTS: National Grains Authority (now National Food Authority, NFA) is a government agency created under PD 4. One of its
incidental functions is the buying of palay grains from qualified farmers. On 23 August 1979, Leon Soriano ofered to sell palay
grains to the NFA, through the Provincial Manager (William Cabal) of NFA in Tuguegarao, Cagayan. He submitted the documents
required by the NFA for pre-qualifying as a seller, which were processed and accordingly, he was given a quota of 2,640 cavans
of palay. The quota noted in the Farmers Information Sheet represented the maximum number of cavans of palay that Soriano
may sell to the NFA. On 23 and 24 August 1979, Soriano delivered 630 cavans of palay. The palay delivered were not rebagged,
classified and weighed. When Soriano demanded payment of the 630 cavans of palay, he was informed that its payment will
beheld in abeyance since Mr. Cabal was still investigating on an information he received that Soriano was not a bona fide farmer
and the palay delivered by him was not produced from his farmland but was taken from the warehouse of a rice trader, Ben de
Guzman. On 28 August 1979, Cabal wrote Soriano advising him to withdraw from the NFA warehouse the 630 cavans stating
that NFA cannot legally accept the said delivery on the basis of the subsequent certification of the BAEX technician (Napoleon
Callangan) that Soriano is not a bona fide farmer.
Instead of withdrawing the 630 cavans of palay, Soriano insisted that the palay grains delivered be paid. He then filed a
complaint for specific performance and/or collection of money with damages on 2 November 1979, against the NFA and William
Cabal (Civil Case 2754). Meanwhile, by agreement of the parties and upon order of the trial court, the 630 cavans of palay in
question were withdrawn from the warehouse of NFA. On 30 September 1982, the trial court found Soriano a bona fide farmer
and rendered judgment ordering the NFA, its officers and agents to pay Soriano the amount of P47,250.00 representing the
unpaid price of the 630 cavans of palay plus legal interest thereof (12% per annum, from the filing of complaint on 20
November1979 until fully paid). NFA and Cabal filed a motion for reconsideration, which was denied by the court on 6 December
[Link] was filed with the Intermediate Appellate Court. On 23 December 1986, the then IAC upheld the findings of the
trialc ourt and affirmed the decision ordering NFA and its officers to pay Soriano the price of the 630 cavans of rice plus interest.
Themotion for reconsideration of the appellate courts decision was denied in a resolution dated 17 April 1986. Hence, the
present petition for review with the sole issue of whether or not there was a contract of sale in the present case.
ISSUE: Whether there was a perfected sale
HELD: Soriano initially ofered to sell palay grains produced in his farmland to NFA. When the latter accepted the ofer by
noting in Soriano's Farmer's Information Sheet a quota of 2,640 cavans, there was already a meeting of the minds between the
parties. The object of the contract, being the palay grains produced in Soriano's farmland and the NFA was to pay the same
depending upon its quality.
The fact that the exact number of cavans of palay to be delivered has not been determined does not afect the perfection of the
contract. Article 1349 of the New Civil Code provides: ".The fact that the quantity is not determinate shall not be an obstacle to
the existence of the contract, provided it is possible to determine the same, without the need of a new contract between the
parties." In this case, there was no need for NFA and Soriano to enter into a new contract to determine the exact number of

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cavans of palay to be sold. Soriano can deliver so much of his produce as long as it does not exceed 2,640 cavans. From the
moment the contract of sale is perfected, it is incumbent upon the parties to comply with their mutual obligations or "the parties
may reciprocally demand performance" thereof.
The Supreme Court dismissed the instant petition for review, and affirmed the assailed decision of the then IAC (now Court of
Appeals) is affirmed; without costs.
4. SCHUBACK & SONS vs. CA
FACTS: In 1981, Ramon San Jose (Philippine SJ Industrial Trading) established contact with Johannes Schuback & Sons Philippine
Trading Corporation through the Philippine Consulate General in Hamburg, West Germany, because he wanted to purchase MAN
bus spare parts from Germany. Schuback communicated with its trading partner, Johannes Schuback and Sohne
Handelsgesellschaft m.b.n. & Co. (Schuback Hamburg) regarding the spare parts San Jose wanted to order. On 16 October
1981,San Jose submitted to Schuback a list of the parts he wanted to purchase with specific part numbers and description.
Schuback referred the list to Schuback Hamburg for quotations. Upon receipt of the quotations, Schuback sent to San Jose a
letter dated25 November 1981 enclosing its ofer on the items listed. On 4 December 1981, San Jose informed Schuback that he
preferred genuine to replacement parts, and requested that he be given a 15% discount on all items. On 17 December 1981,
Schuback submitted its formal ofer containing the item number, quantity, part number, description, unit price and total to San
Jose. On24 December 1981, San Jose informed Schuback of his desire to avail of the prices of the parts at that time and
enclosed its Purchase Order 0101 dated 14 December 1981. On 29 December 1981, San Jose personally submitted the
quantities he wanted to Mr. Dieter Reichert, General Manager of Schuback, at the latters residence. The quantities were written
in ink by San Jose in the same PO previously submitted. At the bottom of said PO, San Jose wrote in ink above his signature:
NOTE: Above PO will include a 3% discount. The above will serve as our initial PO. Schuback immediately ordered the items
needed by San Jose from Schuback Hamburg. Schuback Hamburg in turn ordered the items from NDK, a supplier of MAN spare
parts in West Germany.
On 4 January 1982, Schuback Hamburg sent Schuback a proforma invoice to be used by San Jose in applying for a letter of
credit. Said invoice required that the letter of credit be opened in favor of Schuback Hamburg. San Jose acknowledged receipt of
the invoice. An order confirmation was later sent by Schuback Hamburg to Schuback which was forwarded to and received by
San Jose on 3 February 1981. On 16 February 1982, Schuback reminded San Jose to open the letter of credit to avoid delay in
shipment and payment of interest. In the meantime, Schuback Hamburg received invoices from NDK for partial deliveries on
Order 12204. On 16 February 1984, Schuback Hamburg paid NDK. On 18 October 1982, Schuback again reminded San Jose of
his order and advised that the case may be endorsed to its lawyers. San Jose replied that he did not make any valid PO and that
there was no definite contract between him and Schuback. Schuback sent a rejoinder explaining that there is a valid PO and
suggesting that San Jose either proceed with the order and open a letter of credit or cancel the order and pay the cancellation

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fee of 30% F.O.B. value, or Schuback will endorse the case to its lawyers. Schuback Hamburg issued a Statement of Account to
Schuback enclosing therewith Debit Note charging Schuback 30% cancellation fee, storage and interest charges in the total
amount of DM 51,917.81. Said amount was deducted from Schubacks account with Schuback Hamburg. Demand letters sent to
San Jose by Schubacks counsel dated 22 March 1983 and 9J une 1983 were to no avail.
Schuback filed a complaint for recovery of actual or compensatory damages, unearned profits, interest, attorneys fees and
costs against San Jose. In its decision dated 13 June 1988, the trial court ruled in favor of Schuback by ordering San Jose to pay
it, among others, actual compensatory damages in the amount of DM 51,917.81, unearned profits in the amount of
DM14,061.07, or their peso equivalent. San Jose elevated his case before the Court of Appeals. On 18 February 1992, the
appellate court reversed the decision of the trial court and dismissed Schubacks complaint. It ruled that there was no perfection
of contract since there was no meeting of the minds as to the price between the last week of December 1981 and the first week
of January 1982. Hence, the petition for review on certiorari.
ISSUE: Whether or not a contract of sale has been perfected between the parties
HELD: Article 1319 of the Civil Code states: "Consent is manifested by the meeting of the ofer and acceptance upon the thing
and the cause which are to constitute the contract. The ofer must be certain and the acceptance absolute. A qualified
acceptance constitutes a counter ofer." The facts presented to us indicate that consent on both sides has been manifested. The
ofer by petitioner was manifested on December 17, 1981 when petitioner submitted its proposal containing the item number,
quantity, part number, description, the unit price and total to private respondent. On December 24, 1981, private respondent
informed petitioner of his desire to avail of the prices of the parts at that time and simultaneously enclosed its Purchase Order.
At this stage, a meeting of the minds between vendor and vendee has occurred, the object of the contract: being the spare
parts and the consideration, the price stated in petitioner's ofer dated December 17, 1981 and accepted by the respondent on
December 24, 1981.
Although the quantity to be ordered was made determinate only on 29 December 1981, quantity is immaterial in the perfection
of a sales contract. What is of importance is the meeting of the minds as to the object and cause, which from the facts
disclosed, show that as of 24 December 1981, these essential elements had already concurred. Thus, perfection of the contract
took place, not on 29 December 1981, but rather on 24 December 1981.
5. NOOL vs CA
FACTS: One lot formerly owned by Victorio Nool (TCT T-74950) has an area of 1 hectare. Another lot previously owned byF
rancisco Nool (TCT T-100945) has an area of 3.0880 hectares. Both parcels are situated in San Manuel, Isabela. Spouses
Conchita Nool and Gaudencio Almojera (plaintifs) alleged that they are the owners of the subject land as they bought the same

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from Victorio and Francisco Nool, and that as they are in dire need of money, they obtained a loan from the Ilagan Branch of the
DBP (Ilagan, Isabela), secured by a real estate mortgage on said parcels of land, which were still registered in the names of
Victorino and Francisco Nool, at the time, and for the failure of the plaintifs to pay the said loan, including interest and
surcharges, totaling P56,000.00, the mortgage was foreclosed; that within the period of redemption, the plaintifs contacted
Anacleto Nool for the latter to redeem the foreclosed properties from DBP, which the latter did; and as a result, the titles of the2
parcels of land in question were transferred to Anacleto; that as part of their arrangement or understanding, Anacleto agreed to
buy from Conchita the 2 parcels of land under controversy, for a total price of P100,000.00, P30,000.00 of which price was paid
to Conchita, and upon payment of the balance of P14,000.00, the plaintifs were to regain possession of the 2 hectares of land,
which amounts spouses Anacleto Nool and Emilia Nebre (defendants) failed to pay, and the same day the said arrangement was
made; another covenant was entered into by the parties, whereby the defendants agreed to return to plaintifs the lands in
question, at anytime the latter have the necessary amount; that latter asked the defendants to return the same but despite the
intervention of the Barangay Captain of their place, defendants refused to return the said parcels of land to plaintifs; thereby
impelling the plaintifs to come to court for relief. On the other hand, defendants theorized that they acquired the lands in
question from the DBP, through negotiated sale, and were misled by plaintifs when defendant Anacleto Nool signed the private
writing, agreeing to return subject lands when plaintifs have the money to redeem the same; defendant Anacleto having been
made to believe, then, that his sister, Conchita, still had the right to redeem the said properties
It should be stressed that Manuel S. Mallorca, authorized officer of DBP, certified that the 1-year redemption period (from
16March 1982 up to 15 March 1983) and that the mortgagors right of redemption was not exercised within this period. Hence,
DBP became the absolute owner of said parcels of land for which it was issued new certificates of title, both entered on 23
May1983 by the Registry of Deeds for the Province of Isabela. About 2 years thereafter, on 1 April 1985, DBP entered into a
Deed of Conditional Sale involving the same parcels of land with Anacleto Nool as vendee. Subsequently, the latter was issued
new certificates of title on 8 February 1988.
The trial court ruled in favor of the defendants, declaring the private writing to be an option to sell, not binding and considered
validly withdrawn by the defendants for want of consideration; ordering the plaintifs to return to the defendants the sum of
P30,000.00 plus interest thereon at the legal rate, from the time of filing of defendants counterclaim until the same is fully paid;
to deliver peaceful possession of the 2 hectares; and to pay reasonable rents on said 2 hectares at P5,000.00 per annum or at
P2,500.00 per cropping from the time of judicial demand until the said lots shall have been delivered to the defendants; and to
pay the costs. The plaintifs appealed to the Court of Appeals (CA GR CV 36473), which affirmed the appealed judgment intoto
on 20 January 1993. Hence, the petition before the Supreme Court.
ISSUE: Whether the Contract of Repurchase is valid.
HELD: Nono dat quod non habet, No one can give what he does not have; Contract of repurchase inoperative thus
void.

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A contract of repurchase arising out of a contract of sale where the seller did not have any title to the property sold is not
valid. Since nothing was sold, then there is also nothing to repurchase.
Article 1505 of the Civil Code provides that where goods are sold by a person who is not the owner thereof, and who does not
sell them under authority or with consent of the owner, the buyer acquires no better title to the goods than the seller had,
unless the owner of the goods is by his conduct precluded from denying the sellers authority to sell. Jurisprudence, on the
other hand, teaches us that a person can sell only what he owns or is authorized to sell; the buyer can as a consequence
acquire no more than what the seller can legally transfer. No one can give what he does not have nono dat quod non habet.
In the present case, there is no allegation at all that petitioners were authorized by DBP to sell the property to the private
respondents. Further, the contract of repurchase that the parties entered into presupposes that petitioners could repurchase the
property that they sold to private respondents. As petitioners sold nothing, it follows that they can also repurchase
nothing. In this light, the contract of repurchase is also inoperative and by the same analogy, void.
The Supreme Court denied the petition, and affirmed the assailed decision of the Court of Appeals
6. VILLAFLOR vs CA
FACTS: On 16 January 1940, Cirilo Piencenaves, in a Deed of Absolute Sale, sold to Vicente Villafor, a parcel of agricultural land
(planted to Abaca) containing an area of 50 hectares, more or less. The deed states that the land was sold to Villaflor on 22
June1937, but no formal document was then executed, and since then until the present time, Villaflor has been in possession
and occupation of the same. Before the sale of said property, Piencenaves inherited said property form his parents and was in
adverse possession of such without interruption for more than 50 years. On the same day, Claudio Otero, in a Deed of Absolute
Sale sold to Villaflor a parcel of agricultural land (planted to corn), containing an area of 24 hectares, more or less; Hermogenes
Patete, in a Deed of Absolute Sale sold to Villaflor, a parcel of agricultural land (planted to abaca and corn), containing an area of
20 hectares, more or less. Both deed state the same details or circumstances as that of Piencenaves. On 15 February 1940,
Fermin Bocobo, in a Deed of Absolute Sale sold to Villaflor, a parcel of agricultural land (planted with abaca), containing an area
of 18 hectares, more or less.
On 8 November 1946, Villaflor leased to Nasipit Lumber Co., Inc. a parcel of land, containing an area of 2 hectares, together with
all the improvements existing thereon, for a period of 5 years (from 1 June 1946) at a rental of P200.00 per annum to cover the
annual rental of house and building sites for 33 houses or buildings. The lease agreement allowed the lessee to sublease the
premises to any person, firm or corporation; and to build and construct additional houses with the condition the lessee shall pay
to the lessor the amount of 50 centavos per month for every house and building; provided that said constructions and
improvements become the property of the lessor at the end of the lease without obligation on the part of the latter for expenses
incurred in the construction of the same.

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On 7 July 1948, in an Agreement to Sell Villaflor conveyed to Nasipit Lumber, 2 parcels of land. Parcel 1 contains an area of
112,000 hectares more or less, divided into lots 5412, 5413, 5488, 5490,5491, 5492, 5850, 5849, 5860, 5855, 5851, 5854,
5855, 5859, 5858, 5857, 5853, and 5852; and containing abaca, fruit trees, coconuts and thirty houses of mixed materials
belonging to the Nasipit Lumber Company. Parcel 2 contains an area of 48,000more or less, divided into lots 5411, 5410, 5409,
and 5399, and containing 100 coconut trees, productive, and 300 cacao trees. From said day, the parties agreed that Nasipit
Lumber shall continue to occupy the property not anymore in concept of lessee but as prospective owners.
On 2 December 1948, Villaflor filed Sales Application V-807 with the Bureau of Lands, Manila, to purchase under the provisions
of Chapter V, XI or IX of CA 141 (The Public Lands Act), as amended, the tract of public lands. Paragraph 6 of the Application,
states: I understand that this application conveys no right to occupy the land prior to its approval, and I recognize that the land
covered by the same is of public domain and any and all rights I may have with respect thereto by virtue of continuous
occupation and cultivation are hereby relinquished to the Government.
On 7 December 1948, Villaflor and Nasipit Lumber executed an Agreement, confirming the Agreement to Sell of 7 July 1948,
but with reference to the Sales Application filed with the Bureau of Land. On 31 December 1949, the Report by the public land
inspector (District Land Office, Bureau of Lands, in Butuan) contained an endorsement of the said officer recommending
rejection of the Sales Application of Villaflor for having leased the property to another even before he had acquired transmissible
rights thereto. In a letter of Villaflor dated 23 January1950, addressed to the Bureau of Lands, he informed the Bureau Director
that he was already occupying the property when the Bureaus Agusan River Valley Subdivision Project was inaugurated, that
the property was formerly claimed as private property, and that therefore, the property was segregated or excluded from
disposition because of the claim of private ownership. Likewise, in a letter of Nasipit Lumber dated 22 February 1950 addressed
to the Director of Lands, the corporation informed the Bureau that it recognized Villaflor as the real owner, claimant and
occupant of the land; that since June 1946, Villaflor leased 2hectares inside the land to the company; that it has no other
interest on the land; and that the Sales Application of Villaflor should be given favorable consideration.
On 24 July 1950, the scheduled date of auction of the property covered by the Sales Application, Nasipit Lumber ofered the
highest bid of P41.00 per hectare, but since an applicant under CA 141, is allowed to equal the bid of the highest bidder, Villaflor
tendered an equal bid, deposited the equivalent of 10% of the bid price and then paid the assessment in full.
On 16 August 1950, Villaflor executed a document, denominated as a Deed of Relinquishment of Rights, in favor on Nasipit
Lumber, in consideration of the amount of P5,000 that was to be reimbursed to the former representing part of the purchase
price of the land, the value of the improvements Villaflor introduced thereon, and the expenses incurred in the publication of the
Notice of Sale; in light of his difficulty to develop the same as Villaflor has moved to Manila. Pursuant thereto, on 16 August1950,
Nasipit Lumber filed a Sales Application over the 2 parcels of land, covering an area of 140 hectares, more or less. This
application was also numbered V-807. On 17 August 1950 the Director of Lands issued an Order of Award in favor of Nasipit
Lumber; and its application was entered in the record as Sales Entry [Link] 27 November 1973, Villafor wrote a letter to

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Nasipit Lumber, reminding the latter of their verbal agreement in 1955; but the new set of corporate officers refused to
recognize Villaflors claim.
In a formal protest dated 31 January 1974 which Villaflor filed with the Bureau of Lands, he protested the Sales Application of
Nasipit Lumber, claiming that the company has not paid him P5,000.00 as provided in the Deed of Relinquishment of Rights
dated 16 August 1950. On 8 August 1977, the Director of Lands found that the payment of the amount of P5,000.00 in the Deed
and the consideration in the Agreement to Sell were duly proven, and ordered the dismissal of Villaflors protest.
On 6 July 1978, Villaflor filed a complaint in the trial court for Declaration of Nullity of Contract (Deed of Relinquishment of
Rights), Recovery of Possession (of two parcels of land subject of the contract), and Damages at about the same time that he
appealed the decision of the Minister of Natural Resources to the Office of the President. On 28 January 1983, he died. The trial
court ordered his widow, Lourdes D. Villaflor, to be substituted as petitioner. After trial in due course, the then CFI Agusan del
Norte and Butuan City, Branch III, dismissed the complaint on the grounds that: (1) petitioner admitted the due execution and
genuineness of the contract and was estopped from proving its nullity, (2) the verbal lease agreements were unenforceable
under Article 1403 (2)(e) of the Civil Code, and (3) his causes of action were barred by extinctive prescription and/or laches. It
ruled that there was prescription and/or laches because the alleged verbal lease ended in 1966, but the action was filed only on
6 January 1978. The 6-year period within which to file an action on an oral contract per Article 1145 (1) of the Civil Code expired
in 1972. Nasipit Lumber was declared the lawful owner and actual physical possessor of the 2 parcels of land (containing a total
area of 160 hectares). The Agreements to Sell Real Rights and the Deed of Relinquishment of Rights over the 2 parcels were
likewise declared binding between the parties, their successors and assigns; with double costs against Villaflor. The heirs of
petitioner appealed to the Court of Appeals which, however, rendered judgment against them via the assailed Decision dated 27
September 1990 finding petitioners prayers (1) for the declaration of nullity of the deed of relinquishment, (2) for the eviction
of private respondent from the property and (3) for the declaration of petitioners heirs as owners to be without basis.
Not satisfied, petitioners heirs filed the petition for review dated 7 December 1990. In a Resolution dated 23 June 1991, the
Court denied this petition for being late. On reconsideration, the Court reinstated the petition.
ISSUE: Whether the sale is valid or void for the alleged existence of simulation of contract
HELD: The provision of the law is specific that public lands can only be acquired in the manner provided for therein and not
otherwise(Sec. 11, CA. No. 141, as amended). In his sales application, petitioner expressly admitted that said property was
public land. This is formidable evidence as it amounts to an admission against interest. The records show that Villaflor had
applied for the purchase of lands in question with this Office (Sales Application V-807) on 2 December 948. There is a condition
in the sales application to the efect that he recognizes that the land covered by the same is of public domain and any and all
rights he may have with respect thereto by virtue of continuous occupation and cultivation are relinquished to the Government
of which Villaflor is very much aware. It also appears that Villaflor had paid for the publication fees appurtenant to the sale of

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the land. He participated in the public auction where he was declared the successful bidder. He had fully paid the purchase price
thereof. It would be a height of absurdity for Villaflor to be buying that which is owned by him if his claim of private ownership
thereof is to be believed. The area in dispute is not the private property of the petitioner.
It is a basic assumption of public policy that lands of whatever classification belong to the state. Unless alienated in accordance
with law, it retains its rights over the same as dominus. No public land can be acquired by private persons without any grant,
express or implied from the government. It is indispensable then that there be showing of title from the state or any other mode
of acquisition recognized by law. s such sales applicant manifestly acknowledged that he does not own the land and that the
same is a public land under the administration of the Bureau of Lands, to which the application was submitted, all of its acts
prior thereof, including its real estate tax declarations, characterized its possessions of the land as that of a sales applicant.
And consequently, as one who expects to buy it, but has not as yet done so, and is not, therefore, its owner.
The rule on the interpretation of contracts (Article 1371) is used in affirming, not negating, their validity. Article 1373, which is a
conjunct of Article 1371, provides that, if the instrument is susceptible of two or more interpretations, the interpretation which
will make it valid and efectual should be adopted. In this light, it is not difficult to understand that the legal basis urged by
petitioner does not support his allegation that the contracts to sell and the deed of relinquishment are simulated and fictitious.
Simulation occurs when an apparent contract is a declaration of a fictitious will, deliberately made by agreement of the parties,
in order to produce, for the purpose of deception, the appearance of a juridical act which does not exist or is diferent from that
which was really executed. Such an intention is not apparent in the agreements. The intent to sell, on the other hand, is as clear
as daylight. The fact, that the agreement to sell (7 December 1948) did not absolutely transfer ownership of the land to private
respondent, does not show that the agreement was simulated. Petitioners delivery of the Certificate of Ownership and
execution of the deed of absolute sale were suspensive conditions, which gave rise to a corresponding obligation on the part of
the private respondent, i.e., the payment of the last installment of the consideration mentioned in the Agreement. Such
conditions did not afect the perfection of the contract or prove simulation
Nonpayment, at most, gives the vendor only the right to sue for collection. Generally, in a contract of sale, payment of the price
is a resolutory condition and the remedy of the seller is to exact fulfillment or, in case of a substantial breach, to rescind the
contract under Article 1191 of the Civil Code. However, failure to pay is not even a breach, but merely an event which prevents
the vendors obligation to convey title from acquiring binding force.
T he requirements for a sales application under the Public Land Act are: (1) the possession of the qualifications required by said
Act (under Section 29) and (2) the lack of the disqualifications mentioned therein (under Sections 121, 122, and 123).
Section121 of the Act pertains to acquisitions of public land by a corporation from a grantee: The private respondent, not the
petitioner, was the direct grantee of the disputed land. Sections 122 and 123 disqualify corporations, which are not authorized

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by their charter, from acquiring public land; the records do not show that private respondent was not so authorized under its
charter
The Supreme Court dismissed the petition.
PRICE
7. LOYOLA vs CA
FACTS: A parcel of land (Lot 115-A-1 of subdivision plan [LRC] Psd-32117, a portion of Lot 115-A described on Plan Psd-55228,
LRC[GLRO] Record 8374, located in Poblacion, Binan, Laguna, and containing 753 sq.m., TCT T-32007) was originally owned in
common by the siblings Mariano and Gaudencia Zarraga, who inherited it from their father. Mariano predeceased his sister who
died single, without ofspring on 5 August 1983, at the age of 97. Victorina Zarraga vda. de Loyola and Cecilia Zarraga, are
sisters of Gaudencia and Mariano. The property was subject of Civil Case B-1094 before the then CFI Laguna (Branch 1, Spouses
Romualdo Zarraga, et al. v .Gaudencia Zarraga, et al.). Romualdo Zarraga was the plaintif in Civil Case B-1094. The defendants
were his siblings: Nieves, Romana, Guillermo, Purificacion, Angeles, Roberto, Estrella, and Jose, all surnamed Zarraga, as well as
his aunt, Gaudencia. The trial court decided Civil Case B-1094 in favor of the defendants. Gaudencia was adjudged owner of the
1/2 portion of Lot 115-A-1. Romualdo elevated the decision to the Court of Appeals and later the Supreme Court. The petition
(GR 59529) was denied by the Court on 17 March [Link] 24 August 1980, nearly 3 years before the death of Gaudencia while
GR 59529 was still pending before the Supreme Court.
On said date, Gaudencia allegedly sold to the children of Mariano Zarraga (Nieves, Romana, Romualdo, Guillermo, Lucia,
Purificacion, Angeles, Roberto, Estrella Zarraga) and the heirs of Jose Zarraga Aurora, Marita, Jose, Ronaldo, Victor, Lauriano,and
Ariel Zarraga; first cousins of the Loyolas) her share in Lot 115-A- 1 for P34,000.00. The sale was evidenced by a
notarizeddocument denominated as Bilihang Tuluyan ng Kalahati (1/2) ng Isang Lagay na Lupa. Romualdo, the petitioner in GR
59529, was among the [Link] decision in Civil Case B-1094 became final. The children of Mariano Zarraga and the heirs of
Jose Zarraga (privaterespondents) filed a motion for execution.
On 16 February 1984, the sherif executed the corresponding deed of reconveyance to Gaudencia. On 23 July 1984, however,
the Register of Deeds of Laguna, Calamba Branch, issued in favor of private respondents, TCT T-116067, on the basis of the sale
on 24 August 1980 by Gaudencia to them. On 31 January 1985, Victorina and Cecilia filed a complaint, docketed as Civil Case B2194, with the RTC of Bian, Laguna, for the purpose of annulling the sale and the TCT. Victorina died on 18 October 1989, while
Civil Case B-2194 was pending with the trial court. Cecilia died on 4 August 1990, unmarried and childless. Victorina and Cecilia
were substituted by Ruben, Candelaria,Lorenzo, Flora, Nicadro, Rosario, Teresita and Vicente Loyola as plaintifs. The trial court
rendered judgment in favor of complainants; declaring the simulated deed of absolute sale as well as the issuance of the
corresponding TCT null and void, ordering the Register of Deeds of Laguna to cancel TCT T-116087 and to issue another one in

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favor of the plaintifs and the defendants as co-owners and legal heirs of the late Gaudencia, ordering the defendants to
reconvey and deliver the possession of the shares of the plaintif on the subject property, ordering the defendants to pay
P20,000 as attorneys fees and cost of suit, dismissing the petitioners claim for moral and exemplary damages, and dismissing
the defendants counterclaim for lack of merit. On appeal, and on 31 August 1993, the appellate court reversed the trial court
(CA-GR CV 36090). On September 15, 1993, the petitioners (as substitute parties for Victorina and Cecilia, the original plaintifs)
filed a motion for reconsideration, which was denied on 6 June 1994. Hence, the petition for review on certiorari.
ISSUE: Whether the alleged sale between Gaudencia and respondents is valid
HELD: Petitioners vigorously assail the validity of the execution of the deed of absolute sale suggesting that since the notary
public who prepared and acknowledged the questioned Bilihan did not personally know Gaudencia, the execution of the deed
was suspect. The rule is that a notarized document carries the evidentiary weight conferred upon it with respect to its due
execution, and documents acknowledged before a notary public have in their favor the presumption of regularity. By their failure
to overcome this presumption, with clear and convincing evidence, petitioners are estopped from questioning the regularity of
the execution of the deed.
Petitioners suggest that all the circumstances lead to the conclusion that the deed of sale was simulated. Simulation is "the
declaration of a fictitious will, deliberately made by agreement of the parties, in order to produce, for the purposes of deception,
the appearances of a juridical act which does not exist or is diferent what that which was really executed." Characteristic of
simulation is that the apparent contract is not really desired or intended to produce legal efect or in any way alter the juridical
situation of the parties. Perusal of the questioned deed will show that the sale of the property would convert the co-owners to
vendors and vendees, a clear alteration of the juridical relationships. This is contrary to the requisite of simulation that the
apparent contract was not really meant to produce any legal efect. Also in a simulated contract, the parties have no intention to
be bound by the contract. But in this case, the parties clearly intended to be bound by the contract of sale, an intention they did
not deny. The requisites for simulation are: (a) an outward declaration of will diferent from the will of the parties; (b) the false
appearance must have been intended by mutual agreement; and (c) the purpose is to deceive third persons. None of these are
present in the assailed transaction.
Contracts are binding only upon the parties who execute them. Article 1311 of the Civil Code clearly covers this situation. In the
present case Romualdo had no knowledge of the sale, and thus, he was a stranger and not a party to it. Even if curiously
Romualdo, one of those included as buyer in the deed of sale, was the one who questioned Gaudencias ownership in Civil Case
B-1094, Romana testified that Romualdo really had no knowledge of the transaction and he was included as a buyer of the land
only because he was a brother.
Petitioners fault the Court of Appeals for not considering that at the time of the sale in 1980, Gaudencia was already 94 years
old; that she was already weak; that she was living with private respondent Romana; and was dependent upon the latter for her

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daily needs, such that under these circumstances, fraud or undue influence was exercised by Romana to obtain Gaudencia's
consent to the sale. The rule on fraud is that it is never presumed, but must be both alleged and proved. For a contract to be
annulled on the ground of fraud, it must be shown that the vendor never gave consent to its execution. If a competent person
has assented to a contract freely and fairly, said person is bound. There also is a disputable presumption, that private
transactions have been fair and regular. Applied to contracts, the presumption is in favor of validity and regularity. In this case,
the allegation of fraud was unsupported, and the presumption stands that the contract Gaudencia entered into was fair and
regular.
Petitioners also claim that since Gaudencia was old and senile, she was incapable of independent and clear judgment. However,
a person is not incapacitated to contract merely because of advanced years or by reason of physical infirmities. Only when such
age or infirmities impair his mental faculties to such extent as to prevent him from properly, intelligently, and fairly protecting
his property rights, is he considered incapacitated. Petitioners show no proof that Gaudencia had lost control of her mental
faculties at the time of the sale. The notary public who interviewed her, testified that when he talked to Gaudencia before
preparing the deed of sale, she answered correctly and he was convinced that Gaudencia was mentally fit and knew what she
was doing.
Petitioners seem to be unsure whether they are assailing the sale of Lot 115-A-1 for being absolutely simulated or for
inadequacy of the price. These two grounds are irreconcilable. If there exists an actual consideration for transfer evidenced by
the alleged act of sale, no matter how inadequate it be, the transaction could not be a simulated sale. No reversible error was
thus committed by the Court of Appeals in refusing to annul the questioned sale for alleged inadequacy of the price
The Supreme Court denied the petition, and affirmed the assailed decision of the Court of Appeals; with costs against petitioners
8. UY vs CA
FACTS: William Uy and Rodel Roxas are agents authorized to sell 8 parcels of land by the owners thereof. By virtue of such
authority, they ofered to sell the lands, located in Tuba, Tadiangan, Benguet to National Housing Authority (NHA) to be utilized
and developed as a housing project. On 14 February 1989, the NHA Board passed Resolution 1632 approving the acquisition of
said lands, with an area of 31.8231 hectares, at the cost of P23.867 million, pursuant to which the parties executed a series of
Deeds of Absolute Sale covering the subject lands. Of the 8 parcels of land, however, only 5 were paid for by the NHA because
of the report it received from the Land Geosciences Bureau of the Department of Environment and Natural Resources
(DENR)that the remaining area is located at an active landslide area and therefore, not suitable for development into a housing
project.
On 22 November 1991, the NHA issued Resolution 2352 cancelling the sale over the 3 parcels of land. The NHA, through
Resolution 2394, subsequently ofered the amount of P1.225 million to the landowners as daos perjuicios. On 9 March 1992,

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petitioners Uy and Roxas filed before the RTC Quezon City a Complaint for Damages against NHA and its General Manager
Robert Balao. After trial, the RTC rendered a decision declaring the cancellation of the contract to be justified. The trial court
nevertheless awarded damages to plaintifs in the sum of P1.255 million, the same amount initially ofered by NHA to petitioners
as damages.
Upon appeal by petitioners, the Court of Appeals reversed the decision of the trial court and entered a new one dismissing the
complaint. It held that since there was sufficient justifiable basis in cancelling the sale, it saw no reason for the award of
damages. The Court of Appeals also noted that petitioners were mere attorneys-in-fact and, therefore, not the real parties-ininterest in the action before the trial court. Their motion for reconsideration having been denied, petitioners seek relief from the
Supreme Court.
ISSUES: 1) Whether the petitioners are real parties in interest
2) Whether the cancellation is justified

HELD: 1) Section 2, Rule 3 of the Rules of Court requires that every action must be prosecuted and defended in the name of
the real party-in-interest. The real party-in-interest is the party who stands to be benefited or injured by the judgment or the
party entitled to the avails of the suit. Interest, within the meaning of the rule, means material interest, an interest in the issue
and to be afected by the decree, as distinguished from mere interest in the question involved, or a mere incidental interest.
Cases construing the real party-in-interest provision can be more easily understood if it is borne in mind that the true meaning
of real party-in-interest may be summarized as follows: An action shall be prosecuted in the name of the party who, by the
substantive law, has the right sought to be enforced.
Where the action is brought by an attorney-in-fact of a land owner in his name, (as in our present action) and not in the name of
his principal, the action was properly dismissed because the rule is that every action must be prosecuted in the name of the real
parties-in-interest (Section 2, Rule 3, Rules of Court)
Petitioners claim that they lodged the complaint not in behalf of their principals but in their own name as agents directly
damaged by the termination of the contract. Petitioners in this case purportedly brought the action for damages in their own
name and in their own behalf. An action shall be prosecuted in the name of the party who, by the substantive law, has the right
sought to be enforced. Petitioners are not parties to the contract of sale between their principals and NHA. They are mere
agents of the owners of the land subject of the sale. As agents, they only render some service or do something in representation
or on behalf of their principals. The rendering of such service did not make them parties to the contracts of sale executed in
behalf of the latter. Since a contract may be violated only by the parties thereto as against each other, the real parties-ininterest, either as plaintif or defendant, in an action upon that contract must, generally, either be parties to said contract.

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Petitioners have not shown that they are assignees of their principals to the subject contracts. While they alleged that they
made advances and that they sufered loss of commissions, they have not established any agreement granting them "the right
to receive payment and out of the proceeds to reimburse [themselves] for advances and commissions before turning the
balance over to the principal[s]."
2) The right of rescission or, more accurately, resolution, of a party to an obligation under Article 1191 is predicated on a breach
of faith by the other party that violates the reciprocity between them. The power to rescind, therefore, is given to the injured
party. Article 1191 states that the power to rescind obligations is implied in reciprocal ones, in case one of the obligors should
not comply with what is incumbent upon him. The injured party may choose between the fulfillment and the rescission of the
obligation, with the payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the
latter should become impossible. In the present case, the NHA did not rescind the contract. Indeed, it did not have the right to
do so for the other parties to the contract, the vendors, did not commit any breach, much less a substantial breach, of their
obligation. Their obligation was merely to deliver the parcels of land to the NHA, an obligation that they fulfilled. The NHA did
not sufer any injury by the performance thereof
The cancellation was not a rescission under Article 1191. Rather, the cancellation was based on the negation of the cause
arising from the realization that the lands, which were the object of the sale, were not suitable for housing. Cause is the
essential reason which moves the contracting parties to enter into it. In other words, the cause is the immediate, direct and
proximate reason which justifies the creation of an obligation through the will of the contracting parties. Cause, which is the
essential reason for the contract, should be distinguished from motive, which is the particular reason of a contracting party
which does not afect the other party. Ordinarily, a party's motives for entering into the contract do not afect the contract.
However, when the motive predetermines the cause, the motive may be regarded as the cause. In this case, it is clear, and
petitioners do not dispute, that NHA would not have entered into the contract were the lands not suitable for housing. In other
words, the quality of the land was an implied condition for the NHA to enter into the contract. On the part of the NHA, therefore,
the motive was the cause for its being a party to the sale. We hold that the NHA was justified in canceling the contract. The
realization of the mistake as regards the quality of the land resulted in the negation of the motive/cause thus rendering the
contract inexistent.
The Supreme Court denied the petition

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