Dignos vs Jabil

The Dignos Spouses sold executed a Deed of Sale in favor to Jabil relating to a parcel of land for the price
of P28,000 on an installment basis (See Note 1). Jabil was able to construct a Beach Resort on the
property. Later, Dignos resold the same property to the De Cabigas spouses for 35,000, and another
Deed of Sale was issued. Dignos then refused to accept the remainder of the sum payable from Jabil.
Jabil then learned of the 2nd sale to Cabigas, and thus filed a claim against Dignos. The lower courts all
ruled in favor of Jabil, thus declaring the 22 nd sale void, requiring Dignos to return 35,000 to Cabigas plus
expenses, and requiring Dignos to pay the remainder of the purchase price.

Whether Dignos had the right to sell the land to the Cabigas spouses? –NO

Dignos based their alleged right on 2 theories:

1.) The contract entered into with Jabil was a contract to sell and not a contract of sale, thus there
was no transfer of property yet. There were 2 positive condition:
a. The payment of the balance of P4,000.00 on or before September 15,1965
b. the immediate assumption of the mortgage of P12,000.00 with the First Insular Bank of
Cebu
2.) Even if there was a contract of sale, it was already rescinded by the fact that Cabigas defaulted
when they missed the date of payment.

With regard to the contract to sell theory, the court ruled that the contract was neither a contract to sell
nor a conditional sale, but a contract of absolute sale:

“where nowhere in the contract in question is a proviso or stipulation to the effect that title to
the property sold is reserved in the vendor until full payment of the purchase price, nor is there a
stipulation giving the vendor the right to unilaterally rescind the contract the moment the
vendee fails to pay within a fixed period

In this case, there is no such stipulation reserving the title of the property on the vendors nor does it
give them the right to unilaterally rescind the contract upon non-payment of the balance thereof within
a fixed period.

Also, all 3 elements of a contract of sale was present: (1) consent or meeting of the minds; (2)
determinate subject matter; and (3) price certain in money or its equivalent.

With regard to the theory that the contract was rescinded by the time of the 2nd sale, the Court ruled
that there was no valid rescission given that:

1.) They never notified private respondents Jabil by notarial act that they were rescinding the
contract
2.) Neither did they file a suit in court to rescind the sale

Notes

1.) Payable in two installments, with an assumption of indebtedness with the First Insular Bank of
Cebu in the sum of P12,000.00,
2.) and the immediate assumption of the mortgage of P12,000.00 with the First Insular Bank of
Cebu
 3.) Jabil also became the owner of the property/. Article 1477 of the Code provides that "The
ownership of the thing sold shall be transferred to the vendee upon actual or constructive
delivery thereof.". In this case, there was actual delivery of the land, which is why Jabil was able
to construct a beach resort there.
4.) The most that they were able to show is a letter of Cipriano Amistad who, claiming to be an
emissary of Jabil, informed the Dignos spouses not to go to the house of Jabil because the latter
had no money and further advised petitioners to sell the land in litigation to another party
(Record on Appeal, p. 23). As correctly found by the Court of Appeals, there is no showing that
Amistad was properly authorized by Jabil to make such extra-judicial rescission for the latter
who, on the contrary, vigorously denied having sent Amistad to tell petitioners that he was
already waiving his rights to the land in question. Under Article 1358 of the Civil Code, it is
required that acts and contracts which have for their object the extinguishment of real rights
over immovable property must appear in a public document

Artates vs Urbi

The spouses Artates were owners of a plot of Land obtained from the Public Land Law. There was a
judgement wherein the husband Artates became civilly liable to Urbi in the amount of P1,476.35 due to
the infliction of physical injuries. To satisfy the judgement, there was an execution of the land owned by
the spouses Artates through a public bidding wherein Urbi was the only bidder. Urbi then sold the land
to Soliven who was a minor. The spouses filed a motion to declare the public sale to be null and void.
The lower court held that the execution of the land was valid, but the subsequent sale to Soliven was
void as it was simulated.

Whether the execution sale upon the land was void –YES

The Public Land Act provides that land obtained through free patent or homestead provisions cannot be
encumbered or alienated by the beneficiaries for a period of 5 years nor can they be used to satisfy a
debt for the same period (See Note 1). Since the civil obligation arose on March 14 1956 (date of
promulgation of judgement) and the land was issued on Sept 23 1952, less than 5 years has passed at
the time the debt arose. The land therefore should not have been executed. The fact that the sale was
involuntary is immaterial.

Notes

1.) SEC. 118. Except in favor of the Government or any of its branches, units, or institution, or
legally constituted banking corporations, lands acquired under free patent or homestead
provisions shall not be subject to encumbrance or alienation from the date of the approval of
the application and for a term of five years from and after the date of issuance of the patent or
grant, nor shall they become liable to the satisfaction of any debt contracted prior to the
expiration of said period, but the improvements or crops on the land may be mortgaged or
pledged to qualified persons, associations or corporations.

Zambales vs Presyler
The Zambales spouses were homestead patentees of a parcel of land. They filed a suit for damages in
the amount of 48,000 against Nin Bay Mining Corporation (Corporation) as they allegedly removed silica
sand from their land and destroyed the plants and others improvements thereon. They were able to
enter a compromise agreement wherein rent would be paid in lieu of damages( See Note 1). The
Compromise Agreement also included provisions wherein the property was to be sold to the same
Corporation on 1960 (See Note 2) (5 years after the property was granted via free patent to the spouses
Zambales)., and that the Corporation would have power of attorney to dispose of the property on 1960
On 1960, the corporation, as atty in fact of the Zambales spouse sold the property to Preysler. On 1969,
the Zambales spouses filed a petition to annul the sale to Preysler. They allege that it was their lawyer
who prevailed upon them to sign the Compromise Agreement, and that they entered the Compromise
Agreement without understanding it (they were unschooled and couldn’t understand English). The CFI
ruled in favor of Zambales but the CA reversed. Hence this petition.

Should the sale be annulled given the allegation that the spouses did not understand the contents
(fraud or mistake)? –NO

The general rule is that whoever alleges fraud or mistake must substantiate his allegation, since the
presumption is that a person takes ordinary care of his concerns and that private transactions have been
fair and regular. The rule admits of an exception in Article 1332(See note 3) of the Civil Code which shifts
the burden of proof that there was fraud to the one who allegedly committed it if the one who suffered
was unable to read, or if the contract is in a language not understood by him. The person enforcing the
contract must show that the terms thereof have been fully explained to the former.

In this case, it was established by evidence that:

 the notary requested Atty. de los Reyes (counsel of Zambales at the time of entering the
Compromise Agreement) to read and explain each and every provision to the spouses and with
the help of Ricardo Nunala, Atty. de los Reyes did so in their dialect (Cuyuno).
 the parties went to Judge Juan Bocar, who was assured that the spouses Zambales understood
and signed the Compromise Agreement
 Being unschooled odes not mean that they lack intelligence. Their intelligence is evidenced by
the fact that:
o The spouses are political leaders and chief campaigners; they speak in the platform
during political rallies; and they are widely travelled
o They had approached former Sen. Rogelio de la Rosa, no less, the congressman and the
governor.
o They are knowledgeable of the right connections in the government. They had
approached former Sen. Rogelio de la Rosa, no less, the congressman and the governor.
o Even the lawyers they have retained previous to their present counsel are the Padilla
Law Office and the Diokno Law Office, It is common knowledge that these law offices are
among the established law offices in Manila.

Given the evidence he Zambaleses were not misled into signing the Compromise Agreement, however,
there has been violation of the Public Land Act as the properties were sold to the Corporation during the
5 year prohibition period under the Public Land Act. It does not matter that the sale indicated was to be
executed after the 5 year period (executory sale). The law does not distinguish between executory and
consummated sales.

The bilateral promise to buy and sell the homestead lot at a price certain, which was reciprocally
demandable, was entered into within the five-year prohibitory period and is therefore, illegal and void.
Further, the agency to sell the homestead lot to a third party was coupled with an interest inasmuch as a
bilateral contract was dependent on it and was not revocable at will by any of the parties. To all intents
and purposes, therefore, there was an actual executory sale perfected during the period of prohibition
except that it was reciprocally demandable thereafter and the agency to sell to any third party was
deferred until after the expiration of the prohibitory period. That "rentals" were ostensibly to be paid
during the five-year prohibitory period, and the agency to sell made effective only after the lapse of the
said period, was merely a devise to circumvent the prohibition. The agency to sell made effective only
after the lapse of the said period, was merely a devise to circumvent the prohibition.

The bilateral promise to buy and sell, and the agency to sell, entered into within five years from the date
of the homestead patent, was in violation of section 118 of the Public Land Law, although the executed
sale was deferred until after the expiration of the five-year- prohibitory period.

Notes

1.) a rental of TWENTY (P20.00) PESOS per hectare per year from September 9, 1955 to September
30, 1960, or a total rental price of ONE THOUSAND SEVEN HUNDRED EIGHTY-FOUR PESOS AND
SEVENTY- FOUR CENTAVOS (P1,784.74)
2.) fixed selling price of FIVE HUNDRED (P500.00) PESOS per hectare or a total purchase price of
EIGHT THOUSAND NINE HUNDRED TWENTY THREE PESOS and SEVENTY CENTAVOS (P8,923.70)
3.) When one of the parties is unable to read, or if the contract is in a language not understood by
him, and mistake or fraud is alleged, the person enforcing the contract must show that the
terms thereof have been fully explained to the former.

Quiroga vs Parsons

Quiroga entered into a contract with Parson’s Company (Parson’s) wherein Quiroga would sell his
“Quiroga Beds” to Parson’s who would then have exclusive rights to sell these beds in the Visayan
Islands. Quiroga later filed a complaint against Parsons for several violations. Quiroga alleged that the
contract entered into was one of Agency (to sell the beds of Quiroga), and violated certain obligations
both indicated in the contract and those implied in a contract of commercial agency (See Note 2). The
lower court denied the complaint. Hence this petition.

Whether the contract was that of agency? –NO, the court is of the opinion that it is of purchase and
sale.

It appears that the contract was one of sale as it provided that Quiroga was to furnish beds which
Quiroga might order at the price stipulated. The price agreed upon was the one determined by the
plaintiff for the sale of these beds in Manila, with a discount of from 20 to 25 per cent, according to their
class. It is not agency as it entails that the agent merely receives the things without paying its price, and
then selling them on a commission basis.
Quiroga also presented a witness, Ernesto Vida, a former VP of Parsons, who allegedly drafted the
contract, who testified that the purpose of the contract was so that Parsons would be an agent. The
Court , however, ruled that a contract is what the law defines it to be, and not what it is called by the
contracting parties. In this scenario, the court finds that the terms of the contract depict it to be one of
sale and purchase.

The fact that Parsons returned their beds they could not sell does not convert the contract to one of
agency. A contract should be determined by how it was stipulated and not how it was ultimately
performed. At most, there was only mutual tolerance on the part of both parties by accepting
performance of the contract not in line with its terms.

The only violation committed by Parsons violative of the contract was that it did not “order by the
dozen”. The Court finds that the fact that the fact that Quiroga sold the beds anyway meant that he
waives his right and cannot complain of the violation.

Notes

1.) Isnt this a “Contract to Sell” and not a “Contract of Sale” as found by the Court? There is no
determinable object? How many beds were to be sold? What was the total price?
2.) Violated Obligations:
a. not to sell the beds at higher prices than those of the invoices;
b. to have an open establishment in Iloilo; itself to conduct the agency;
c. to keep the beds on public exhibition,
d. to pay for the advertisement expenses for the same; and to order the beds by the dozen
e. and in no other manner.

Concrete Aggregate vs CTA

Concrete Aggregate was a corporation which produced ready-mixed concrete and plant-mixed hot
asphalt. The Commissioner of Internal Revenue assessed the tax liabilities of Concrete Aggregate based
on the belief that a manufacturer subject to the 7% sales tax under Section 186 of the National Internal
Revenue Code (NIRC) . Thus, the assessed tax liabilities amounted to P244,002.76. Concrete Aggregate
contested the assessment as it alleged that it was not a manufacturer subject to 7% sales tax, but a
contractor subject only to 3% contractor's tax under Section 191 (now Section 205)) of the NIRC. The
Court of Tax Appeals denied petitioner’s appeal. Hence this petition.

Whether Concrete Aggregate was a contractor subject to contractor’s tax or a manufacturer subject to
sales tax? –HE IS A MANUFCTURER SUBJECT TO SALES TAX

The theory of the petitioner was that if the subject of sale is one which is not ready for delivery, as it is
yet to be manufactured according to the order, the seller thereof is a contractor. However, if the article
subject of the sale is one which is ready for delivery when the order therefor is placed, the seller is a
manufacturer. This is erroneous.

The true test of whether one is a contractor is if he renders service in the course of an independent
occupation, representing the will of his employer only as to the result of his work, and not as to the
means by which it is accomplished. In this case, as correctly found by the lower court, Concrete
Aggregate does not render service, but manufactures and sells a product. He is a manufacturer as
defined by Section 194(x) (now Section 187(x)) (See Note 1) of the Tax Code.

Concrete Aggregate tried to apply the ruling in the case of “CIR vs. CTA, et al.” too his case which applied
Sec 1467 of the NCC (See Note 2). The Court, however, ruled that the circumstances are different. In the
cited cases, the parts furnished were very specific, and had to be specially engineered to fit the needs of
an individual plant. This is as opposed to the case at bar, wherein the product of the petitioner is
manufactured for the general market although it may require slight modifications

Important Doctrine: The contract to make is a contract of sale if the article is already substantially in
existence at the time of the order and merely requires some alteration, modification or adaptation to
the buyer's wishes or purposes.

Notes

1.) Sec. 1 94. Words and phrases defined. — In applying the provisions of this Title words and
phrases shall be taken in the sense and extension indicated below:
a. (x) "Manufacturer" includes every person who by physical or chemical process alters the
exterior texture or form or inner substance of any raw material or manufactured or
partially manufactured product in such manner as to prepare it for a special use or uses
to which it could not have been put in its original condition, or who by any such process
alters the quality of any such raw material or manufactured or partially manufactured
product so as to reduce it to marketable shape or prepare it for any of the uses of
industry, or who by any such process combines any such raw material or manufactured
or partially manufactured products with other materials or products of the same or
different kinds and in such manner that the finished product of such process or
manufacture can be put to a special use or uses to which such raw material or
manufactured or partially manufactured products, in their original condition could not
have been put, and who in addition alters such raw material or manufactured or
partially manufactured products, or combines the same to produce such finished
products for the purpose of their sale or distribution to others and not for his own use
or consumption.
2.) Art. 1467. A contract for the delivery at a certain price of an article which the vendor in the
ordinary course of his business manufactures or procures for the general market, whether the
same is on hand at the time or not, is a contract of sale but if the goods are to be manufactured
specially for the customer and upon his special order, and not for the general market, it is a
contract for a piece of work.