lOMoARcPSD|5550853

Law on Sales CASE Digest

Law On Negotiable Instruments (Far Eastern University)

StuDocu is not sponsored or endorsed by any college or university

Downloaded by accounting student ([email protected])
 lOMoARcPSD|5550853

Andres Quiroga vs. Parsons Hardware Co.

G.R. No. L-11491
August 23, 1918

FACTS:
On January 24, 1911, a contract was entered into by and between the plaintiff and the defendant
for the exclusive sale of Quiroga beds in the Visayan Island. The defendant has violated the
following obligations: not to sell the beds at higher prices than those of the invoices; to have an
open establishment in Iloilo; itself to conduct the agency; to keep the beds on public exhibition,
and to pay for the advertisement expenses for the same; and to order the beds by the dozen and in
no other manner. Aside from the obligation on the part of the defendant to order the beds by the
dozen and in no other manner, none of the obligations imputed to the defendant in two causes of
action are expressly set forth in the contract. But the plaintiff alleged that the defendant was his
agent for the sale of his beds in Iloilo, and that said obligations are implied in a contract of
commercial agency.

ISSUE/S:
Whether the defendant was a purchaser or an agent of the plaintiff for the sale of his beds.

RULING:
The obligation of the plaintiff was to furnish the defendant with the beds which the latter might
order, at the price stipulated, and that the defendant was to pay the price in the manner stipulated.
The price agreed upon was the one determined by the plaintiff for the sale of these beds in
Manila. These are precisely the essential features of a contract of purchase and sale. By virtue of
the contract, the defendant was necessarily obliged to pay their price on receiving the beds within
the terms fixed, without any other consideration and regardless as to whether he had or had not
sold the beds.
The plaintiff also endeavored to prove that the defendant had returned beds that it could not sell;
that it forwarded to the defendant the beds that it wanted; and that the defendant received its
commission for the beds sold by the plaintiff directly to persons in Iloilo. But the return made
was of certain brass beds, and was not affected in exchange for the price paid for them, but was
for other beds of another kind.
The contract between the plaintiff and the defendant was one of purchase and sale, and that the
obligations the breach of which is alleged as a cause of action are not imposed upon the
defendant, either by agreement or by law.

Downloaded by accounting student ([email protected])

 lOMoARcPSD|5550853

Ker & Co., Ltd. vs. Jose B. Lingad

G.R. No. L-20871
April 30, 1971

FACTS:
The then Commissioner of Internal Revenue assessed the petitioner the sum of ₱ 20,272.33 as
the commercial broker’s percentage, surcharge, and compromise penalty for the period from July
1, 1949 to December 31, 1953. The petitioner requested for the assessment to be cancelled, but
his request was turned down. As a result, Ker & Co. filed a petition for review with the Court of
Tax Appeals. The respondent maintained his stand that the petitioner should be taxed in such
amount as a commercial broker. The liability arose from a contract of the petitioner with the
United States Rubber International, where the former was referred to as the distributor and the
latter as the company. The distributor is required to exert every effort to have the shipment of the
products in the maximum quantity and to promote in every way the sale thereof. The prices,
discounts, terms of payment, terms of delivery, and other conditions of sale were subject to
change in the discretion of the company. All specifications for the goods ordered were subject to
acceptance by the company. The distributor is assumed to have full responsibility with reference
to the stock and its safety at all times; and upon request of the company at any time, it was to
render inventory of the existing stock which could be subject to change.

ISSUE/S:
Whether the relationship created is one of vendor and vendee or of broker and principal.

RULING:
Ker & Co., Ltd., an agent of U.S Rubber International, is borne out by the facts that the petitioner
merely receives, accepts and/or holds upon consignment the products, which remains properties
of the company; that sales made by petitioner are subject to approval by the company; and that
the rubber company agrees to keep the consigned goods fully insured under insurance policies
payable to it in case of loss. All these circumstances lead to the conclusion that the relationship
between them is one of brokerage or agency.
In the language of Justice J. B. L. Reyes, who penned the opinion: “Since the company retained
ownership of the goods, even as it delivered possession unto the dealer for resale to customers,
the price and terms of which were subject to the company’s control, the relationship between the
company and the dealer is one of agency.”

Downloaded by accounting student ([email protected])

 lOMoARcPSD|5550853

Southern Motors, Inc. vs. Angelo Moscoso

G.R. No. L-14475
May 30, 1961

FACTS:
On June 6, 1957, the plaintiff sold to the defendant one Chevrolet truck, on installment basis, for
₱ 6,445.00. Upon making a down payment, the defendant executed a promissory note for the
sum of ₱ 4,915.00 for the unpaid balance of the purchase price. To secure the payment of which,
a chattel mortgage was constituted on the truck in favor of the plaintiff. The defendant failed to
pay 3 installments on the balance of the purchase price. The plaintiff filed a complaint against
the defendant to recover the unpaid balance of the promissory note. Upon plaintiff’s petition, a
writ of attachment was issued by the lower court on the properties of the defendant. Pursuant
thereto, the said Chevrolet truck, and a house and lot belonging to defendant were attached
where the defendant was residing, and said truck was brought to the plaintiff’s compound for
safe keeping. After attachment and before the trial of the case for the immediate sale of the
mortgaged truck, the provincial sheriff sold the truck at public auction in which plaintiff itself
was the only bidder for ₱ 1,000.00. On March 27, 1958, the trial court condemned the defendant
to pay the plaintiff the amount of ₱ 4,475.00 with interest at the rate of 12%.

ISSUE/S:
1. Whether or not the trial court erred in not finding that the attachment caused to be levied
on the truck and its immediate sale at public auction was tantamount to the foreclosure of
the chattel mortgage on said truck.
2. Whether or not the trial court erred in rendering judgment in favor of the plaintiff.

RULING:
Article 1484 of the Civil Code provides that in a contract of sale of personal property the price of
which is payable in installments, the vendor may exercise any of the following remedies: (1)
exact fulfillment of the obligation, should the vendee fail to pay; (2) cancel the sale, should the
vendee’s failure to pay cover two or more installments; (3) foreclose the chattel mortgage on the
thing sold, if one has been constituted, should the vendee’s failure to pay cover two or more
installments. In this case, he shall have no further action against the purchaser to recover any
unpaid balance of the price. Manifestly, the plaintiff had chosen the first remedy. The complaint
is an ordinary civil action for recovery of the remaining unpaid balance due on the promissory
note. Sine herein plaintiff has chosen to exact the fulfillment of the defendant’s obligation, it
may enforce execution of the judgment that may be favorably rendered hereon, on all personal
and real properties of the latter not exempt from execution sufficient to satisfy such judgment.

Downloaded by accounting student ([email protected])

 lOMoARcPSD|5550853

Ruperto G. Cruz, et al. vs. Filipinas Investment and Finance Corporation

G.R. No. L-24772
May 27, 1968

FACTS:
On July 15, 1963, the plaintiff purchased on installments, from Far East Motor Corporation, one
unit of Isuzu Diesel Bus for ₱ 44,616.24, and executed and delivered a negotiable promissory
note. To secure the payment of the promissory note, the plaintiff executed a chattel mortgage in
favor of the seller. As no down payment was made by the plaintiff, the seller required him to
give additional security for his obligation besides the chattel mortgage, and that said additional
security was given by plaintiff Felicidad Vda. de Reyes in the form of second mortgage on a
parcel of land owned by her, together with the building. The seller indorsed the promissory note
and assigned all its rights and interest in the deeds of chattel mortgage and in the deed of real
estate mortgage to the defendant, with due notice of such assignment to the plaintiffs. The
plaintiff defaulted in the payment of the promissory note and made no payment on any of the
installments stipulated in the promissory note. The defendant took steps to foreclose the chattel
mortgage on the bus and that said vehicle had been damaged while in the possession of the
plaintiff. At the foreclosure sale by the sheriff, the defendant was the highest bidder and the
proceeds of sale were not sufficient to discharge fully the indebtedness of plaintiff to defendant.

ISSUE/S:
1. Whether defendant, which has already extra judicially foreclosed the chattel mortgage
executed by the buyer may also extra judicially foreclose the real estate mortgage
constituted by plaintiff Reyes for the payment of the unpaid balance
2. Whether or not the contending parties are entitled to attorney’s fees

RULING:
Article 1484 of the Civil Code is clear and simple: should the vendee or purchaser of a personal
property default in the payment of two or more of the agreed installments, the vendor has the
option to avail of any of these three remedies – either to exact fulfillment of the obligation, or to
cancel the sale, or to foreclose the chattel mortgage on the thing sold, if one has been constituted.
These remedies have been recognized as alternative, not cumulative, that the exercise of one
would bar the exercise of the others.
The provision of law and jurisprudence on the matter being explicit, so that this litigation could
have been avoided, the award by the lower court of attorney’s fees to the plaintiffs in the sum of
₱ 200.00 is reasonable and in order.

Downloaded by accounting student ([email protected])

 lOMoARcPSD|5550853

Carmelita Leaño vs. Court of Appeals and Hermogenes Fernando

G.R. No. L-129018
November 15, 2001

FACTS:
On November 13, 1985, Hermogenes Fernando, as vendor and Carmelita Leaño, as vendee
executed a contract to sell involving a piece of land. In the contract, Leaño bound herself to pay
Fernando the sum of ₱ 10,775.00 as down payment and the balance of ₱ 96,975.00 shall be paid
within ten years. The contract also provided a grace period of one month within which to make
payments. Should the month of grace expire without the installments for both months being
satisfied, an 18% interest per annum will be charged on the unpaid installments. Should the
period of ninety days elapse from the expiration of the grace period without the overdue and
unpaid installments having been paid with the corresponding interests up to that date, the
respondent was authorized to declare the contract cancelled and to dispose the parcel of land.

ISSUE/S:
1. Whether the transaction between the parties is an absolute sale or a conditional sale.
2. Whether there was a proper cancellation of the contract to sell.
3. Whether petitioner was in delay in the payment of the monthly amortizations.

RULING:
The transaction between the parties was a conditional sale. The intention of the parties was to
reserve the ownership of the land in the seller until the buyer has paid the total price. The
possession of the property was the one transferred not the ownership. In a contract to sell real
property on installments, the full payment of the purchase price is a suspensive condition, the
failure of which is not considered a breach, but simply an event that prevented the obligation of
the vendor to convey title from acquiring any obligatory force.
As the petitioner was not given then cash surrender value of the payments that she made, there
was still no actual cancellation of the contract. Consequently, the petitioner may still reinstate the
contract by updating the account during the grace period and before actual cancellation.
Article 1169 of the Civil Code provides that in reciprocal obligations, neither party incurs in
delay if the other does not comply or is not ready to comply in a proper manner with what is
incumbent upon him. From the moment one of the parties fulfills his obligation, delay by the
other begins. The respondent performed his obligation by allowing petitioner to continue in
possession and use of the property so the non-payment of petitioner makes her in delay and liable
for damages.

Downloaded by accounting student ([email protected])

 lOMoARcPSD|5550853

Domingo D. Rubias vs. Isaias Batiller

G.R. No. L-35702

May 29, 1973

FACTS:

The plaintiff, a lawyer, filed a suit to recover the ownership and possession of certain portions of
lot in Iloilo which he bought from his father-in-law, Francisco Militante, against its present
occupant defendant, Isaias Batiller, who illegally entered said portions of the lot on two
occasions. Plaintiff prayed also for damages and attorney’s fees. In his answer with counter-
claim defendant claims the complaint of the plaintiff does not state a cause of action, the truth of
the matter being that he and his predecessors-in-interest have always been in actual, open and
continuous possession since time immemorial under claim of ownership of the portions of the lot
in question and for the alleged malicious institution of the complaint he claims he has suffered
moral damages.

ISSUE/S:

Whether or not the contract of sale between plaintiff and his father-in-law over the property was
void because it was made when plaintiff was counsel of his father-in-law in a land registration
case involving the property in dispute.

RULING:

The purchase by a lawyer of the property in litigation from his client is categorically prohibited
by Article 1491, paragraph (5) of the Civil Code, and that consequently, plaintiff’s purchase of
the property in litigation from his client was void and could produce no legal effect, by virtue of
Article 1409, paragraph (7) of Civil Code which provides that contracts “expressly prohibited or
declared void by law are inexistent and that these contracts cannot be ratified.” Article 1409
declaring such prohibited contracts as “inexistent and void from the beginning.”

Article 1491 of our Civil Code prohibits in its six paragraph certain persons, by reason of the
relation of trust or their peculiar control over the property, from acquiring such property in their
trust or control either directly, or indirectly and “even at a public or judicial auction,” as follows:
(1) guardians; (2) agents; (3) administrators; (4) public officers and employees; judicial officers
and employees, prosecuting attorneys, and lawyers; and (6) others especially disqualified by law.

Downloaded by accounting student ([email protected])

 lOMoARcPSD|5550853

Artemio Katigbak vs. Court of Appeals, Daniel Evangelista and V. K. Lundberg

G.R. No. L-16480

January 31, 1962

FACTS:

Katigbak upon reading an advertisement of the sale of the winch went to see Lundberg, owner
and operator of the International Tractor and Equipment Co., Ltd., and inspected the equipment.
It was agreed that Katigbak was to purchase the winch for ₱ 12,000.00, payable at ₱ 5,000.00
upon delivery and the balance of ₱ 7,000.00 within 60 days. The condition of the sale was that
the winch would be delivered in good condition but Katigbak was apprised that the winch
needed some repairs. It was then stipulated that the amount necessary for the repairs will be
advanced by Katigbak but deductible from the initial payment. The repairs were undertaken and
the total of ₱ 2,029.85 for spare parts was advanced by Katigbak for the purpose. The sale was
not consummated and Katigbak sued Evangelista, Lundberg, and the latter’s company, for the
refund of such amount. Lundberg alleged non-liability for the amount since the same was purely
a personal account between Evangelista and petitioner. Evangelista claimed that while there was
an agreement between him and Katigbak for the purchase and sale of the winch, the latter
refused to comply with his contract to purchase the same; that as a result of such refusal
Evangelista was forced to sell the same to a third person.

ISSUE/S:

Whether or not the petitioner is entitled to a refund of the repairs undertaken.

RULING:

Notwithstanding the breach of contract committed by Katigbak, appellee has right to a refund of
the sum of ₱ 2,029.85, but equally undeniable is appellant’s right to recover from him his loss of
₱ 2,000.00, which is the difference between the contract price for the sale of the winch between
him and appellee and the actual price for which it was sold after the latter had refused to carry
out his agreement. As held in the case of Hanlon, if the purchaser fails to take delivery and pay
the purchase price of the subject matter of the contract, the vendor, without the need of first
rescinding the contract judicially, is entitled to resell the same, and if he is obliged to sell it for
less than the contract price, the buyer is liable for the difference. Lundberg was merely an agent
of his co-appellant, it is obvious that he cannot be held liable to appellee in connection with the
refund of the sum advanced by the latter.

Downloaded by accounting student ([email protected])

 lOMoARcPSD|5550853

Sps. Gil Torrecampo & Brenda Torrecampo vs. Dennis Alindogan, Sr. & Heide Alindogan

G.R. No. 156405

February 28, 2007

FACTS:

Spouses Jose and Lina Belmes executed a deed of sale in favor of the respondents over a house
and lot located in Legazpi City. Lina Belmes wrote respondents wherein she delivered the
constructive possession of the house and lot to them. However, before they could take actual
possession of the property, the petitioners and spouses Jonathan Lozares and Jocelyn
Torrecampo entered and occupied the premises. Despite respondents’ repeated demands,
petitioners failed and refused to vacate the property. Thus, respondents filed a complaint for
recovery of ownership, possession, and damages against petitioners.

In their answer to the complaint, petitioners claimed that spouses Belmes received from them
₱ 73,000.00 as advance payment for the sale of the house and lot. Petitioners and spouses
Belmes executed a “contract to buy and sell” covering the same property. To complete the
agreed partial payment of ₱ 220,000.00 mentioned in the contract, petitioners paid spouses
Belmes ₱ 130,000.00, but the latter refused to accept the amount. Thus, petitioners filed a
complaint for specific performance against spouses Belmes.

ISSUE/S:

Whether or not the trial court erred in rendering a decision in favor of the respondents

RULING:

The trial court held the transaction between petitioners and spouses Belmes is a mere contract to
sell. Thus, the latter did not transfer ownership of the house and lot to petitioners. The
transaction between the defendants and spouses Belmes was not a contract of sale, as defined by
Article 1458 of the Civil Code.

Indeed, the true agreement between petitioners and spouses Belmes is a contract to sell. Not only
did the parties denominate their contract as “contract to buy and sell,” but also specified therein
that the balance of the purchase price in the amount of ₱ 130,000.00 is to be paid by petitioners
upon the issuance of a certificate of title. Spouses Belmes have in their possession the certificate
of title indicates that ownership of the subject property did not pass to petitioners.

Downloaded by accounting student ([email protected])