Sales Digest
Sales Digest
Sales Digest
7. Masongsong vs Estimo 404 SCRA 683 FACTS: Jose Hemedes executed a document entitled
“Donation Inter Vivos With Resolutory Conditions”
FACTS: Allegedly, AgatonaGuevarra (“Guevarra”) conveying ownership a parcel of land, together with all
inherited a property from Justina Navarro, which is now its improvements, in favor of his third wife, Justa
under possession of the heirs of Guevarra. Guevarra Kauapin, subject to the resolutory condition that upon
the latter’s death or remarriage, the title to the ISSUE: W/N the donation in favor of Enrique Hemedes
property donated shall revert to any of the children, or was valid?
heirs, of the DONOR expressly designated by the
DONEE. HELD: NO. Enrique D. Hemedes and his transferee,
Dominium, did not acquire any rights over the subject
Pursuant to said condition, Justa Kausapin executed a property. Justa Kausapin sought to transfer to her
“Deed of Conveyance of Unregistered Real Property by stepson exactly what she had earlier transferred to
Reversion” conveying to Maxima Hemedes the subject Maxima Hemedes – the ownership of the subject
property. property pursuant to the first condition stipulated in the
deed of donation executed by her husband. Thus, the
Maxima Hemedes and her husband Raul Rodriguez donation in favor of Enrique D. Hemedes is null and void
constituted a real estate mortgage over the subject for the purported object thereof did not exist at the
property in favor of R & B Insurance to serve as security time of the transfer, having already been transferred to
for a loan which they obtained. his sister. Similarly, the sale of the subject property by
R & B Insurance extrajudicially foreclosed the mortgage Enrique D. Hemedes to Dominium is also a nullity for
since Maxima Hemedes failed to pay the loan even. The the latter cannot acquire more rights than its
land was sold at a public auction with R & B Insurance predecessor-in-interest and is definitely not an innocent
as the highest bidder. A new title was subsequently purchaser for value since Enrique D. Hemedes did not
issued in favor the R&B. The annotation of usufruct in present any certificate of title upon which it relied.
favor of Justa Kausapin was maintained in the new title. The declarations of real property by Enrique D.
Despite the earlier conveyance of the subject land in Hemedes, his payment of realty taxes, and his being
favor of Maxima Hemedes, Justa Kausapin executed a designated as owner of the subject property in the
“Kasunduan” whereby she transferred the same land to cadastral survey of Cabuyao, Laguna and in the records
her stepson Enrique D. Hemedes, pursuant to the of the Ministry of Agrarian Reform office in Calamba,
resolutory condition in the deed of donation executed Laguna cannot defeat a certificate of title, which is an
in her favor by her late husband Jose Hemedes. Enrique absolute and indefeasible evidence of ownership of the
D. Hemedes obtained two declarations of real property, property in favor of the person whose name appears
when the assessed value of the property was raised. therein. Particularly, with regard to tax declarations and
Also, he has been paying the realty taxes on the tax receipts, this Court has held on several occasions
property from the time Justa Kausapin conveyed the that the same do not by themselves conclusively prove
property to him. In the cadastral survey, the property title to land.
was assigned in the name of Enrique Hemedes. Enrique 9. Commissioner of Internal Revenue vs CA and
Hemedes is also the named owner of the property in Ateneo de Manila University
the records of the Ministry of Agrarian Reform office at
Calamba, Laguna. 271 SCRA 605
Enriques D. Hemedes sold the property to Dominium Facts: Ateneo de Manila University, is a non-stock, non-
Realty and Construction Corporation (Dominium). profit educational institution with auxiliary units and
branches all over the Philippines. One auxiliary unit is
Dominium leased the property to its sister corporation the Institute of Philippine Culture (IPC), which has no
Asia Brewery, Inc. (Asia Brewery) who made legal personality separate and distinct from that of
constructions therein. Upon learning of Asia Brewery’s private respondent. The IPC is a Philippine unit engaged
constructions, R & B Insurance sent it a letter informing in social science studies of Philippine society and
the former of its ownership of the property. A culture. Occasionally, it accepts sponsorships for its
conference was held between R & B Insurance and Asia research activities from international organizations,
Brewery but they failed to arrive at an amicable private foundations and government agencies. On 8 July
settlement. 1983, private respondent received from Commissioner
Maxima Hemedes also wrote a letter addressed to Asia of Internal Revenue (CIR) a demand letter dated 3 June
Brewery asserting that she is the rightful owner of the 1983, assessing private respondent the sum of
subject property and denying the execution of any real P174,043.97 for alleged deficiency contractor’s tax, and
estate mortgage in favor of R&B. an assessment dated 27 June 1983 in the sum of
P1,141,837 for alleged deficiency income tax, both for
Dominium and Enrique D. Hemedes filed a complaint the fiscal year ended 31 March 1978. Denying said tax
with the CFI for the annulment of TCT issued in favor of liabilities, private respondent sent petitioner a letter-
R & B Insurance and/or the reconveyance to Dominium protest and subsequently filed with the latter a
of the subject property alleging that Dominion was the memorandum contesting the validity of the
absolute owner of the land. assessments. On 17 March 1988, petitioner rendered a
letter-decision cancelling the assessment for deficiency
The trial court ruled in favor of Dominium and Enrique
income tax but modifying the assessment for deficiency
Hemedes.
contractor’s tax by increasing the amount due to
P193,475.55. Unsatisfied, private respondent requested The Supreme Court denied the petition and affirmed
for a reconsideration or reinvestigation of the modified the assailed Decision of the Court of Appeals. The Court
assessment. ruled that the private respondent is not a contractor
selling its services for a fee but an academic institution
At the same time, it filed in the respondent court a
conducting these researches pursuant to its
petition for review of the said letter-decision of the commitments to education and, ultimately, to public
petitioner. While the petition was pending before the service. For the institute to have tenaciously continued
respondent court, petitioner issued a final decision operating for so long despite its accumulation of
dated 3 August 1988 reducing the assessment for significant losses, we can only agree with both the Court
deficiency contractor’s tax from P193,475.55 to of Tax Appeals and the Court of Appeals that “education
P46,516.41, exclusive of surcharge and interest. On 12 and not profit is motive for undertaking the research
July 1993, the respondent court set aside respondent’s
projects.
decision, and cancelling the deficiency contractor’s tax
assessment in the amount of P46,516.41 exclusive of 10. Engineering and Machinery Corp vs CA 252 SCRA
surcharge and interest for the fiscal year ended 31 156
March 1978. No pronouncement as to cost. On 27 April
1994, Court of Appeals, in CA-GR SP 31790, affirmed the Engineering and Machinery Corporation v. CA
decision of the Court of Tax Appeals. Not in accord with Facts: Pursuant to a contract, petitioner undertook to
said decision, petitioner came to Supreme Court via a install air conditioning system in private respondent’s
petition for review. building. The building was later sold to the National
Issue: Whether the private respondent is taxable as an Investment and Development Corporation which took
independent contractor. possession of it. Upon NIDC’s failure to comply with
certain conditions, the sale was rescinded. NIDC
Held: The Commissioner erred in applying the principles reported to respondent that there were certain defects
of tax exemption without first applying the well-settled in the air conditioning system. Respondent filed a
doctrine of strict interpretation in the imposition of complaint against petitioner for non-compliance with
taxes. It is obviously both illogical and impractical to the agreed plans and specifications. Petitioner moved to
determine who are exempted without first determining dismiss the complaint on the ground of the 6-month
who are covered by the aforesaid provision. The prescription of warranty against hidden defects. Private
Commissioner should have determined first if private respondent averred that the contract was not of sale
respondent was covered by Section 205, applying the but for a piece of work, the action for damages of which
rule of strict interpretation of laws imposing taxes and prescribes after 10 years.
other burdens on the populace, before asking Ateneo to
prove its exemption therefrom, following the rule of Issue: Is a contract for the fabrication and installation
construction where “the tax exemptions are to be of a central air-conditioning system in a building, one of
strictly construed against the taxpayer”. "sale" or "for a piece of work"?
The doctrine in the interpretation of tax laws is that a Held: A contract for a piece of work, labor and
statute will not be construed as imposing a tax unless it materials may be distinguished from a contract of sale
does so clearly, expressly, and unambiguously. Tax by the inquiry as to whether the thing transferred is one
cannot be imposed without clear and express words for not in existence and which would never have existed
that purpose. Accordingly, the general rule of requiring but for the order, of the person desiring it. In such case,
adherence to the letter in construing statutes applies the contract is one for a piece of work, not a sale. On
with peculiar strictness to tax laws and the provisions of the other hand, if the thing subject of the contract
a taxing act are not to be extended by implication.” In would have existed and been the subject of a sale to
case of doubt, such statutes are to be construed most some other person even if the order had not been
strongly against the government and in favor of the given, then the contract is one of sale. The distinction
subjects or citizens because burdens are not to be between the two contracts depends on the intention of
imposed nor presumed to be imposed beyond what the parties. Thus, if the parties intended that at some
statutes expressly and clearly import. In the present future date an object has to be delivered, without
case, Ateneo’s Institute of Philippine Culture never sold considering the work or labor of the party bound to
its services for a fee to anyone or was ever engaged in a deliver, the contract is one of sale. But if one of the
parties accepts the undertaking on the basis of some
business apart from and independently of the academic
purposes of the university. Funds received by the plan, taking into account the work he will employ
Ateneo de Manila University are technically not a fee. personally or through another, there is a contract for a
They may however fall as gifts or donations which are piece of work.
“tax-exempt” as shown by private respondent’s Clearly, the contract in question is one for a piece of
compliance with the requirement of Section 123 of the work. It is not petitioner's line of business to
National Internal Revenue Code providing for the manufacture air-conditioning systems to be sold "off-
exemption of such gifts to an educational institution. the-shelf." Its business and particular field of expertise
is the fabrication and installation of such systems as the company. Ker & Co., as Distributor, is required to
ordered by customers and in accordance with the exert every effort to have the shipment of the products
particular plans and specifications provided by the in the maximum quantity and to promote in every way
customers. Naturally, the price or compensation for the the sale thereof. The prices, discounts, terms of
system manufactured and installed will depend greatly payment, terms of delivery and other conditions of sale
on the particular plans and specifications agreed upon were subject to change in the discretion of United
with the customers. The remedy against violations of States Rubber International. All specifications for the
the warranty against hidden defects is either to goods ordered were subject to acceptance of United
withdraw from the contract (redhibitory action) or to States Rubber International and required to accept such
demand a proportionate reduction of the price (accion goods shipped as well as to clear the same through
quanti manoris), with damages in either case. customs and to arrange for delivery in its warehouse in
Cebu City.
While it is true that Article 1571 of the Civil Code
provides for a prescriptive period of six months for a ISSUE: Whether or not the relationship created
redhibitory action, a cursory reading of the ten between Ker & Co. and United States Rubber
preceding articles to which it refers will reveal that said International is one of vendor and vendee or broker and
rule may be applied only in case of implied warranties; principal.
and where there is an express warranty in the contract,
as in the case at bench, the prescriptive period is the RULING: The relationship between Ker & Co. is one of
one specified in the express warranty, and in the brokerage or agency. According to the National Internal
absence of such period, "the general rule on rescission Revenue Code, a commercial broker “includes all
of contract, which is four years (Article 1389, Civil Code) persons, other than importers, manufacturers,
shall apply". It would appear that this suit is barred by producers, or bona fide employees, who, for
prescription because the complaint was filed more than compensation or profit, sell or bring about sales or
four years after the execution of the contract and the purchases of merchandise for other persons or bring
completion of the air-conditioning system. However, a proposed buyers and sellers together, or negotiate
close scrutiny of the complaint filed in the trial court freights or other business for owners of vessels or other
reveals that the original action is not really for means of transportation, or for the shippers, or
enforcement of the warranties against hidden defects, consignors or consignees of freight carried by vessels or
but one for breach of the contract itself. The governing other means of transportation. The term includes
law is Article 1715. However, inasmuch as this provision commission merchants.” In the language of Justice J. B.
does not contain a specific prescriptive period, the L. Reyes, who penned the opinion: “Since the company
general law on prescription, which is Article 1144 of the retained ownership of the goods, even as it delivered
Civil Code, will apply. Said provision states, inter alia, possession unto the dealer for resale to customers, the
that actions "upon a written contract" prescribe in ten price and terms of which were subject to the company’s
(10) years. Since the governing contract was executed control, the relationship between the company and the
on September 10, 1962 and the complaint was filed on dealer is one of agency.” The relationship between Ker
May 8, 1971, it is clear that the action has not & Co. and United States Rubber International was not
prescribed. The mere fact that the private respondent one of seller and purchaser, if that was the intention,
accepted the work does not, ipso facto, relieve the then it would not have included covenants which in
petitioner from liability for deviations from and their totality would negate the concept of a firm
violations of the written contract, as the law gives him acquiring as vendee goods from another. Instead, the
ten (10) years within which to file an action based on stipulations were so worded as to lead to no other
conclusion than that the control by the United States
breach thereof.
Rubber International over the goods in question is, in
11. Ker & Co , Ltd.vs Lingad 38 SCRA 524 the language of the Constantino opinion, “pervasive”.
FACTS: Melecio R. Domingo, then Commissioner of 12. Yuson vs Vitan 496 SCRA 540
Internal Revenue assessed Ker & Co. and found the sum
of P20,272.33 as the commercial broker’s percentage FACTS: In October 2002, Mar Yuson who was a taxi
tax, surcharge, and compromise penalty for the period driver and had 8 children, received a sum of money by
from July 1, 1949 to December 31, 1953. Ker & Co way of inheritance. He and his wife intended to use the
petitioned that the request be cancelled, but the money for several purposes.
petitioned was turned down. Kr & Co. then filed a When they were able to purchase a secondhand taxi,
petition for review with the Court of Tax Appeals. and Atty. Vitan helped him with legal matters regarding
Commissioner Domingo maintained his stand that the the purchase. Unfortunately, Yuson’s other plans were
petitioner should be taxed in such amount as a put on hold when Atty. Vitan borrowed P100, 000 from
commercial broker. The liability arose from a contract them in December 2002. To guarantee payment, Atty.
that Ker & Co. had with the United States Rubber Vitan executed in favor of Yuson several postdated
International, where Ker & Co. was designated as the checks to over the loaned amount, but however, these
distributor and United States Rubber International as turned out to be worthless.
Yuson maintained that he had repeatedly tried to and asserted his ownership over the property despite
recover the debt, but was unsuccessful every time. having allegedly sold it. Thus, he fails to convince us
When no payment was still made pursuant to the that there was a bona fide dation in payment or sale
administrative case against Atty. Vitan, Yuson that took place between the parties; that is, that there
demanded a collateral to secure the loan. Thus, in his was an extinguishment of obligation.
favor, Atty. Vitan executed a document denominated as
a Deed of Absolute Sale, covering Atty. Vitan’s parcel of It appears that the true intention of the parties was to
land located in Sta. Maria, Bulacan. According to Yuson, use the Bulacan property to facilitate payment. They
their intention was to transfer the title of the property only made it appear that the title had been transferred
to him temporarily, so that he could either sell or to complainant to authorize him to sell or mortgage the
mortgage the said land. Further, if it was mortgaged, property.Atty. Vitan himself admitted in his letter dated
Atty. Vitan would redeem it as partial or full payment of July 30, 2004, that their intention was to convert the
the loan. Allegedly, the parties executed another Deed property into cash, so that payment could be obtained
of Absolute Sale in favor of Atty. Vitan wherein Yuson by complainant and the excess returned to respondent.
was vendor. The purpose for this was not explained by The records, however, do not show that the proceeds
either party. derived were sufficient to discharge the obligation of
the lawyer fully; thus, he is still liable to the extent of
Yuson was able to mortgage the property for P30,000 the deficiency.
but contrary to their earlier agreement, Atty. Vita did
not redeem it from the mortgage, sent a letter instead, 13. Filinvest Credit Corp vs CA 176 SCRA vs 188
promising Yuson to pay on or before July 12, 2004. Facts: Spouses Sy Bang were engaged in the sale of
In the IBP-NCLA, Atty. Vitan averred that he had settled gravel produced from crushed rocks and used for
his obligation through a Deed of Absolute Sale over his construction purposes. In order to increase their
residential property. The purpose of such was for Yuson production, they looked for a rock crusher which Rizal
to use, mortgage, or sell the property and return to him Consolidated Corporation then had for sale. A brother
the excess of the proceeds after obtaining his money. of Sy Bang, went to inspect the machine at the Rizal
Consolidated’s plant site. Apparently satisfied with the
Additionally, he called the second document as a
Counter Deed of Sale, executed to be sort of a machine, the private respondents signified their intent
collateral/security for the account of his liaison officer to purchase the same.
Estur, whom he alleged that she was the one who Since he does not have the financing capability, Sy Bang
incurred said debts. applied for financial assistance from Filinvest Credit
ISSUE: W/N Atty. Vitan’s obligation was extinguished by Corporation. Filinvest agreed to extend financial aid on
virtue of the first Deed of Absolute Sale the following conditions: (1) that the machinery be
purchased in the petitioner’s name; (2) that it be leased
HELD: NO. Atty. Vitan contends that his obligation was with option to purchase upon the termination of the
already extinguished, because he had allegedly sold his lease period; and (3) that Sy Bang execute a real estate
Bulacan property to complainant. Basically, he is mortgage as security for the amount advanced by
asserting that what had transpired was a dation in Filinvest. A contract of lease of machinery (with option
payment. Governed by the law on sales, it is a to purchase) was entered into by the parties whereby
transaction that takes place when a piece of property is they to lease from the petitioner the rock crusher for
alienated to the creditor in satisfaction of a debt in two years. The contract likewise stipulated that at the
money. It involves delivery and transmission of end of the two-year period, the machine would be
ownership of a thing -- by the debtor to the creditor -- owned by Sy Bang.
as an accepted equivalent of the performance of the
3 months from the date of delivery, Sy Bang claiming
obligation.
that they had only tested the machine that month, sent
However, the records reveal that he did not really a letter-complaint to the petitioner, alleging that
intend to sell and relinquish ownership over his contrary to the 20 to 40 tons per hour capacity of the
property in Sta. Maria, Bulacan, notwithstanding the machine as stated in the lease contract, the machine
execution of a Deed of Absolute Sale in favor of Yuson. could only process 5 tons of rocks and stones per hour.
The second Deed of Absolute Sale, which reconveyed They then demanded that the petitioner make good the
the property to respondent, is proof that he had no stipulation in the lease contract. Sy Bang stopped
such intention. This second Deed, which he referred to payment on the remaining checks they had issued to
as his "safety net," betrays his intention to counteract the petitioner.
the effects of the first one.Ergo, Atty. Vitan was taking
back with his right hand what he had given with his left. As a consequence of the non-payment, Filinvest
The second Deed of Absolute Sale returned the parties extrajudicially foreclosed the real estate mortgage.
right back where they started, as if there were no sale in Issue: WON the real transaction was lease or sale?
favor of complainant to begin with. In effect, on the SALE ON INSTALLMENTS.
basis of the second Deed of Sale, respondent took back
Held: The real intention of the parties should prevail.
The nomenclature of the agreement cannot change its
true essence, i.e., a sale on installments. It is basic that a
contract is what the law defines it and the parties
intend it to be, not what it is called by the parties. It is
apparent here that the intent of the parties to the
subject contract is for the so-called rentals to be the
installment payments. Upon the completion of the
payments, then the rock crusher, subject matter of the
contract, would become the property of the private
respondents. This form of agreement has been criticized
as a lease only in name.