CIR V.

ENGINEERING EQUIPMENT

FACTS:
1. Engineering Equipment and Supply Company is engaged in the design and installation of central type air
conditioning system, pumping plants and steel fabrications.
2. Upon a letter from a certain Juan dela Cruz denouncing the company for tax evasion and fraud in obtaining its
dollar allocations, BIR, CB and NBI conducted a raid and confiscated voluminous documents from the firm.
3. The Commissioner contends that Engineering is a manufacturer and seller of air conditioning units and parts or
accessories thereof and, therefore, it is subject to the 30% advance sales tax prescribed by Section 185(m) of the
Tax Code, in relation to Section 194 of the same.
4. Engineering claims that it is not a manufacturer and setter of air-conditioning units and spare parts or accessories
thereof subject to tax under Section 185(m) of the Tax Code, but a contractor engaged in the design, supply and
installation of the central type of air-conditioning system subject to the 3% tax imposed by Section 191 of the same
Code, which is essentially a tax on the sale of services or labor of a contractor rather than on the sale of articles
subject to the tax referred to in Sections 184, 185 and 186 of the Code.

ISSUE:

Whether or not Engineering is a manufacturer of air conditioning units under Section 185(m), supra, in relation to
Sections 183(b) and 194 of the Code, or a contractor under Section 191 of the same Code

HELD | ANSWER:

The distinction between a contract of sale and one for work, labor and materials is tested by the inquiry whether
the thing transferred is one not in existence and which never would have existed but for the order of the party desiring to
acquire it, or a thing which would have existed and has been the subject of sale to some other persons even if the order had
not been given. If the article ordered by the purchaser is exactly such as the plaintiff makes and keeps on hand for sale to
anyone, and no change or modification of it is made at defendant's request, it is a contract of sale, even though it may be
entirely made after, and in consequence of, the defendants order for it.
The word "contractor" has come to be used with special reference to a person who, in the pursuit of the
independent business, undertakes to do a specific job or piece of work for other persons, using his own means and methods
without submitting himself to control as to the petty details. The true test of a contractor would seem to be that 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.
Engineering, in a nutshell, fabricates, assembles, supplies and installs in the buildings of its various customers the
central type air conditioning system; prepares the plans and specifications therefor which are distinct and different from
each other; the air conditioning units and spare parts or accessories thereof used by petitioner are not the window type of air
conditioner which are manufactured, assembled and produced locally for sale to the general market; and the imported air
conditioning units and spare parts or accessories thereof are supplied and installed by petitioner upon previous orders of its
customers conformably with their needs and requirements. The facts and circumstances aforequoted support the theory that
Engineering is a contractor rather than a manufacturer.
 HE HEACOCK V. BUNTAL MANUFACTURING

FACTS:
1. Buntal et al rented a machine from Heacock Company for a term of 20 calendar months
2. Parties executed a contract for the lease with option to purchase by Buntal Manufacturing
3. Buntal et al weren't able to return the machine and failed to pay the lease
4. Lower court held that the contract is a contract of lease. It also decided that Buntal Manufacturing should pay
Heacock the rents which they had bound themselves to pay or if not, they have to return to Heacock the said
machines.
5. Heacock chose to return the machines instead of paying the arrears.

ISSUE:
Whether or not the contract between the parties is a contract or purchase and sale on the instruments?

HELD | ANSWER:
Yes. It was stipulated in the contract that “In consideration of the sum of P160 to it in hand paid by the hirer, the
owner hereby grants to the hirer the option to purchase, while the present lease is in force and effectm the property made the
subject of this agreement, at the purchase price of P860...”
The Court finds that the amount P160 Buntal Manufacturing paid was an initial payment for the P860 purchase
price. Moreover, the fact that the proce of the machine was fixed in the contract makes the latter not a lease but of purchase
and sale because in contracts of lease there is no need to mention the price of the thing given in lease in contrast with
purchase contracts.
Court also stated the intention of the parties should be taken into consideration when the contract in question is
unclear. The intention was seen in the contract that they stipulated.
 PCI LEASING AND FINANCE V. GIRAFFE X CREATIVE IMAGING

FACTS:
1. PCI Leasing and Giraffe entered into a Lease Agreement whereby PCI Leasing leased several machineries for a
rent of P116, 878. 21/month for 36months and P181, 362/month for 36 months for a totalof P10, 736, 647.56.
2. Giraffe paid the amount of P3, 120,000 as guaranty deposit. However, after 1 year, Giraffe defaulted in its
monthly-rental payment obligations.
3. After a 3-month default, PCI demanded a formal pay-or-surrender-equipment type but the demand went unheeded
thus PCI instituted the instant case and prayed for the issuance for the writ of replevin.
4. The trial court issued a writ of replevin.
5. Giraffe filed a motion to dismiss arguing that PCI was barred from pursuing any other claim since the seizure of
the 2 leased equipments because the contract was in reality a lease with option to buy, that the Recto law (Art. 1484
and 1485 are applicable.
6. PCI Leasing avers that its contract with Giraffe X is a straight lease without option to buy stipulation hence Art.
1484 and Art. 1485 is not applicable.
7. The RTC rules in favor of Giraffe X, ruling that it was akin to a contract covered by Art. 1485 hence can no longer
pursue its claim. Hence the case at bar.

ISSUE: WON the contract was covered by Art. 1485 and 1484 hence barred PCI from recovering

HELD: YES A financial lease is one where a financing company would, in effect, initially purchase a mobile equipment
and turn around to lease it to a client who gets, in addition, an option to purchase the property at the expiry of the lease
period.
In the case at bar, PCI acquired the office equipments for their subsequent lease to Giraffe, with the latter
undertaking to pay a monthly fixed rental for the whole 36 months. Giraffe made a guaranty deposit. Their agreement was
that in case Giraffe fails to pay any rental due, PCI will have cumulative remedies, such as,to recover all rentals for the
remaining term of the lease and recover all amounts advanced for Giraffe’s account.
When PCI demanded for payment of the balance, it made a demand for either of the choices. Either to pay the
balance hence Giraffe can keep the equipment or surrender them if he cannot. The so-called monthly rentals were in fact
monthly amortizations of the price of the leased office equipment.The imperatives of equity, the contractual stipulations and
the actuations of the parties, the SC has treated a purported financial lease as actually a sale of movable property on
installments and prevented recovery. The Lease Agreement is in reality a lease with an option to purchase the equipment.
This has been made manifest by the actions of PCI itself.
In choosing replevin, PCI waived its right to bring anaction to recover unpaid rentals.
The remedies provided for in article 1484 of the NCC are alternative and not cumulative. The exercise of one bar
the exercise of the other.
 SPS. PARAGAS V. HEIRS OF BALACANO

FACTS:
1. Balancano, married to Lorenza, owned 2 parcels of land. He was already 81 years old, very weak, could barely
talk, and had been battling with liver disease forover a month.
2. On his deathbed, barely a week before he died, he allegedly signed a Deed of Absolute Sale over the lots in favor
of Paragas Spouses, accompanied by Atty. De Guzman who proceeded to notarize the same, alleging that it was a
mere confirmation of a previous sale and that Gregorio had already paid P50,000 as deposit. The Paragas’ driver
was also there to take a picture of Gregorio signing said deed with a ballpen in his hand.
3. There was nothing to show that the contents of the deed were explained to Balacano.
4. Paragas then sold a portion of the disputed lot to Catalino.
5. The grandson of Gregorio, Domingo, sought to annul the sale and the partition. There was no sufficient evidence to
support any prior agreement or its partial execution.

ISSUE: W/N Balacano is incapacitated to enter into acontract of sale

HELD: YES. A person is not rendered incompetent merely because of old age; however, when such age has impaired the
mental faculties as to prevent a person from protecting his rights, then he is undeniably incapacitated. He is clearly at a
disadvantage, and the courts must be vigilant for his protection.
In this case,Balacano’s consent was clearly absent—hence the sale was null and void. The circumstances raise
serious doubts on his capacity to render consent. Considering that the Paragas spouses are not owners of the said properties,
it only follows that the subsequent sale to Catalino—who was not in good faith—is likewise void. Furthermore, the lots
pertained to the conjugal partnership—having been inherited by Balacano during his marriage to Lorenza. Thus, it cannot be
sold withoutt he latter’s consent.
 LABAGALA V. SANTIAGO

FACTS:
1. Jose T. Santiago owned a parcel of land.
2. Alleging that Jose had fraudulently registered it in his name alone, his sisters Nicolasa and Amanda Santiago
(respondents), sued Jose for recovery of 2/3 share of the property.
3. On April 20, 1981, the trial court in that case decided in favor of the sisters, recognizing their right of ownership
over portions of the property.
4. Jose died intestate. Thereafter, the respondents filed an action before the Regional Trial Court of Manila seeking to
recover Jose’s 1/3 share over the property.
5. Respondents claim that Jose’s share in the property ipso jure belongs to them because they are the only legal heirs
of their brother, who died intestate and without issue. They allege that it is highly improbable for petitioner to have
paid the supposed consideration of P150,000 for the sale of the subject property because petitioner was
unemployed and without any visible means of livelihood at the time of the alleged sale.
6. Petitioner Labagala, on the other hand, claims that she is the daughter of Jose and argued that the purported sale of
the property was in fact a donation to her.
7. The RTC held that while there was indeed no consideration for the deed of sale executed by Jose in favor of
petitioner, but said deed constitutes a valid donation.
8. On appeal, the Court of Appeals reversed the decision of the RTC

ISSUE: Whether the purported deed of sale was valid

HELD: There is no valid sale. Clearly, there is no valid sale in this case. Jose did not have the right to transfer ownership of
the entire property to petitioner since 2/3 thereof belonged to his sisters. Petitioner could not have given her consent to the
contract, being a minor at the time. Consent of the contracting parties is among the essential requisites of a contract,
including one of sale, absent which there can be no valid contract. Moreover, petitioner admittedly
did not pay any centavo for the property, which makes the sale void.
Article 1471 of the Civil Code provides:
If the price is simulated, the sale is void, but the act may be shown to have been in reality a donation, or some other
act or contract.
 MANANZALA V. CA

FACTS:
1. Petitioner Fidela Mananzala is the registered owner of a parcel of land located at Bagong Pagasa,Quezon City
under TCT 323314 and had been in actual possession of said land by virtue of a conditional sale made in her favor
by the National Housing Authority.
2. On December 14, 1984, petitioner paid in full the price of the land under the deed of conditional sale and on
January 14, 1985, the NHA executed a deed of sale in her favor.
3. On January 31, 1985, private respondent Corazon Aranez brought an action for specific performance against
petitioner to enforce a deed of sale convering the same lot allegedly entered into between her and petitioner on
March 22, 1960. The contract stipulated that title to the land shall be transferred to private respondent within 30
days after full payment of the purchase price by petitioner to the PHHC. Private respondent alleged that petitioner
refused, despite repeated demands made by her, to comply with the stipulation in their contract.
4. Petitoner denied selling the land and alleged that her signature was secured through fraud and that the deed of sale
was void.
5. The trial court dismissed the complaint. Although finding petitioner's signature on the deed to be genuine, it
nevertheless ruled that there was no perfected contract of sale because petitioner never really intended to sell the
land. Furthermore, the trial court also found the alleged contract to be null and void because, at the time of the sale,
petitioner was not yet the owner thereof.
6. The Court of Appeals reversed the decision. It held that there was a meeting of the minds between the parties as
evidenced by the signature of the petitioner on the deed of sale which the NBI found to be genuine. The
notarization of the deed gave rise to the presumption of its regularity. The Court of Appeals further held that
petitioner could validly sell the land even before the actual award to her pursuant to Art. 1461 of the Civil Code,
which provides that

ISSUE: Whether or not the contract between petitioner and private respondent is validand binding

HELD: Yes.
The SC affirmed the CA’s decision
The petitioner's contention that the sale to private respondent is void because it was made within one year after the
title to the property was issued in the name of petitioner, while raised by petitioner in her answer in the trial court, was not
passed upon and she did not urge it anymore except now. As already noted, the trial court based its decision on its finding
that the sale was void on the ground that there was no meeting of the minds of the parties. When its decision was appealed,
petitioner did not urge her original defenses to uphold the decision in her favor. She merely relied on the ruling of the trial
court.
The appellate court, in reversing the trial court, simply considered the issues raised by the trial court's decision,
namely, whether petitioner's signature on the deed was a forgery, whether there was a meeting of the minds of the parties,
and whether there could be a sale of future property. The question whether the sale was void because it was made within the
one-year period of prohibition to petitioner as awardee was never briefed or in any way argued below. For all intents and
purposes, therefore, petitioner waived this ground and cannot now urge itas ground for reversing the decision of the Court of
Appeals.
 SAN ANDRES V. RODRIGUEZ
FACTS:

1. Juan San Andres sold a portion of his land to respondent Vicente Rodriguez evidenced by a Deed of Sale.
2. Upon the death of Juan, Ramon San Andres was appointed judicial administrator of his estate.
3. Ramon engaged the serviced of geodetic engineers to survey the lot. From such survey, they discovered that the
respondent had enlarged the area which he purchased from the late Juan.
4. Ramon then send a letter demanding the respondent to vacate the portion allegedly encroached by him.
5. However, respondent refused to do so claiming that he purchased the same from the late Juan, in his re-amended
answer, respondent alleged that apart from the 345 sq.m lot sold to him by Juan, the latter also sold to him the
following day the remaining lot with both parties treating the two lots as one who parcel of land. Respondent
further alleged that the full payment of the additional lot would be effected within five (5) years from the execution
of the deed of sale after a survey is conducted over said property.
6. Respondent attached to his answer a receipt signed by the late Juan as proof of the purchase as well as a letter of
judicial administrator Ramon asking payment for the balance of the purchase price. Respondent thereafter
deposited in the court the balance of the purchase price.
7. While the case is pending, Ramon died and was replaced by son Ricardo. Vicente also died and was substituted by
his heirs.
8. Petitioner presented two witnesses, an engineer which testified based on his survey which indicated that respondent
indeed enlarged the area he purchased and another witness which testified that respondent had not filed any claim
before the Special Proceedings.
9. The trial court rendered judgement in favor of the petitioner and ruled that there was no contract of sale because
there is no valid object because there is no sufficient indication to identify the proper subject sale. Respondent
Court of Appeals reversed the decision rendered by the Trial Court and held that the object of the contract was
determinable and that there was a conditional sale with the balance of the purchase price payable within 5 tears
after the execution of the contract.

ISSUES:
Whether the Court erred in holding that there is a valid contract of sale?

Whether the Court erred in holding that the consignation is valid?

Whether the amount of consignation is untenable?

Whether the respondent is barred by prescription and laches from enforcing the contract?

HELD:
1. There is a valid Contract of Sale because all the essential elements are present (Art. 1458 NCC). In herein case,
petitioner’s contention that there is no determinate object is without merit. (Art. 1349 and Art. 1460, NCC) The
receipt described the lot as “previously paid lot”. Since the lot subsequently sold to respondent is said to adjoin the
“previously paid lot” on three sides thereof, the subject lot is capable of being determined without the need of any
new contract. The contract of Sale can be gainsaid to be absolute because there is no reservation of ownership. The
stipulation “payment of full consideration based on a survey shall be due and payable in five (5) years from the
execution of deed of sale” is not a condition which affects the efficacy of the contract. It merely provides for the
manner of computation of payment..
2. Consignation is proper only in cases where an existing obligation is due. In herein case since there is no deed of
sale yet thus the period when the purchase price should be paid has not commenced yet which makes it not yet due
and demandable. The court is not erroneous because it thereafter ordered the execution of deed and the acceptance
of the deposit.
3. The amount is based on the agreement which is the law between the parties. Thus, it is binding and the court can
only give force and effect to the intentions of the parties.
4. Since there was no Deed of Sale yet and the respondent wants to pay the purchase price, he deemed it proper to
deposit it in the Court. Thus, Prescription does not apply.
 MELLIZA V. CITY OF ILOILO

FACTS:
1. Meliza owned Lot 1214, 9,000 sqm of which she donated to the Mun. of Iloilo for the use of the site of
the Mun. Hall.
2. However, the donation was revoked because the area donated was inadequate to meet the requirements of the
Arellano Plan.
3. Lot 1214 was later divided into 4 lots.
4. Meliza then sold Lots C and D to the Municipality; Lot B was not mentioned in the sale. However, the
contract stipulated that the area to be sold to the Municipality would include such areas needed for the
construction of the City Hall according the Arellano Plan.
5. She then sold the remaining portions of the lots to Villanueva, who then sold the same to Pio. The sale was for
such lots not included in the sale to the Mun. of Iloilo.
6. The City of Iloilo, assuming that Lot B has been sold in its favor pursuant to the Arellano Plan, then
donated Lot B, C and D to UP. UP then enclosed the site donated with a wire fence.
7. Pio thereupon asked the city authorities for the payment of the value of the lot. However no recovery was
obtained.
8. UP meanwhile obtained TCTs covering the three lots.
9. Pio objected and sought to recover the lots stating that Lot B was not included in the initial sale made by Meliza
to the Municipality and that the subject matter of sale should be a determinate thing. That the public instrument
is clear that only Lots C and D were included in the sale and that the purpose of the second paragraph was only to
better identify the lots sold.
10. Appellees contends that the parties to the document in question really intended to include Lot B as shown by the
silence of the vendor after Mun. IloIlo exercised ownership after; that not to include Lot B in the sale would be
absurd because said lot is contiguous to the other lots included in the sale (nasa gitna si Lot B) and finally that the
sale was determinate because it could be ascertained at the time of the execution of the contract what lots are
needed in the Arellano Plan.
11. RTC And CFI held that Melliza sold not only Lots C and D but also other portions of lots necessary for the
municipal hall site which includes Lot B.

ISSUE: W/N there was a determinate/determinable subject matter?

HELD: YES. The requirement for the subject matter to be determinate is satisfied in this case. The requirement of
the law that a sale must have for its object a determinate thing is fulfilled as long as the contract entered into, the object of
the sale is capable of being made determinate without the necessity of a new or further agreement between the parties (Art
1460, NCC).
Simple reference to the Arellano Plan would indicate that it could determine what portions of the
contiguous land (lot B) were needed for the construction of the City Hall. There was no need for a further
agreement to establish the lots covered by the sale; thus, the sale is valid. Besides, the portions of Lot B covered by
the sale were practically at the heart of the City Hall site.

PAULMITAN V. CA
FACTS:
1. When Agatona died, she was succeeded by 2 sons: Pascual and Donato. She left 2 parcels of land.
Pascual died leaving 7 heirs. The titles remained in the name of Agatona and the lots were never
partitioned.
2. Donato, thereafter, executed an affidavit of Declaration of Heirship unilaterally adjudicating one of the lots
(Lot 757) to himself. He thereafter sold the Lot 1091 to his daughter Juliana.
3. For the failure to pay taxes, the lot was forfeited and sold at a public auction, but Juliana later
redeemed the property.
4. The Heirs of Pascual then surfaced and sought to partition the property.
5. Petitioners setup the defense of presciption contending that the complaint was filed 11 years after the issuance of
a transfer certificate to Donato. Also Juliana claimed that she acquired exclusive ownership not only by means of
the deed of sale executed in her favor by his father but also by way of redemption from th provincial government
of Negros Occidental.
6. With respect to lot 757, RTC dismissed the complaint and its order became final after respondents failed to
appeal.
7. Trial proceeded for Lot 1091, and RTC decided in favor of respondents. According to court, respondents as
descendants if Agatona were entitled to ½ of Lot 1091 and that the sale of Donato in favor of Juliana of the saod
lot did not prejudice their rights, even the repurchase of Juliana of the land did not vest to Juliana exclusive
ownership over the entire land but only gave her the right to reimburse.
8. CA affirmed TC decision.

ISSUE: WON Juliana became the owner of the entire lot upon her redemption of the property?

HELD: NO. From the moment of Agatona's death, her heirs, Pascual and Donato, became co-owners of the
undivided lot. When Donato died, his pro-indiviso share transferred to his heirs. That being the case, when Donato
sold the entire property to his daughter, he was merely co-owner thereof and transferred only his undivided share.
If a co-owner alienates the entire property without the consent of the other co-owners, the sale will affect only
his share. Thus, the sale of Donato of the land to Kuliana does not give her ownership over the entire property bu tmerely
transferred to her the ½ undivided share of her father, making her a co-owner of the land in question with the respondents,
her first cousins
The fact that Juliana redeemed the property does not operate to terminate the co-ownership. It merely entitles
her to reimbursement from the other co-owners redemption being a necessary expense. Until reimbursement, Juliana
holds a lien upon the lot for the amount due to her. However, a partition is in order.

CITY OF MANILA V. BUGSUK

ISSUE: WON Bugsuk is liable for the additional taxes

HELD: NO. A dealer buys to sell again; Bugsuk produced its own lumber from Palawan. Thus, it is not a dealer. Its
Manila office is not a store as well. A store is a place where goods are kept for sale whether for retail or wholesale.
The Manila office only processed the orders and payments; it did not keep goods therein or act as a dealer or
intermediary between the field office and the customers. Thus, it is not liable for the said taxes.