Contract to Sell; Partial Payments; Reasonable Compensation

  TOPICS:

1. Contract to sell; effects of its cancellation
2. Treatment of partial payments received by the seller in a contract to sell
3. The concept of "full possession"
4. Computation of the reasonable compensation available to the seller for the use of the property by the buyer; prevailing standard in computing reasonable rentals 

 Spouses Rene Luis Godinez and Shemayne Godinez vs. Spouses Andrew Norman and Janet Norman 

FACTS:

In August 2006, Spouses Godinez agreed to sell (in an oral contract) their house in Subic Bay Freeport Zone to Spouses Norman for US $175,000.00.

On August 3, 2006, Spouses Norman paid $10,000 to Spouses Godinez as partial payment. The remaining balance would be paid within 30 days thereafter. After this initial payment, the Spouses Norman moved their furniture and appliances into the house. They also assigned a caretaker to act as a housekeeper. 

Thirty days from the initial payment, Spouses Norman requested an extension of time to pay the remaining balance. However, they only paid $30,000.00 on December 1, 2006.  

Sometime in 2007, Spouses Norman learned that the property had been sold to another buyer. So, Spouses Norman requested the return of their payments from the Spouses Godinez, amounting to $40,000.00. Spouses Norman only possessed the property for about four (4) months.

The RTC ordered the return of the partial payments made by Spouses Norman. The RTC ruled that there was a contract of sale and the $40,000.00 were in the form of an earnest money, which formed part of the purchase price. Absent of any stipulations that the money should be forfeited in favor of the seller in case of any substantial breach, then the partial payments should have been returned to the buyers in a rescission of the contract of sale.

The CA affirmed the decision of the RTC ordering the return of the partial payments made by Spouses Norman. However, the CA found that the contract was not a contract of sale, but a contract to sell. The nonpayment of the obligation to pay the full amount of the purchase price was not a breach of contract, but rather an unfulfilled suspensive condition, which prevented the seller from conveying the title to the buyer. Thus, failure to pay would render the contract to sell ineffective. 

ISSUE:

Whether or not the buyers, Spouses Norman, are entitled to the return of their payments of $40,000.00 made to the seller, Spouses Godinez, in the event of the buyers’ failure to pay the purchase price in a contract to sell.

RULING: 

No, the Spouses Norman are not entitled to the return of the total amount of $40,000.00 used as partial payment to Spouses Godinez in a contract to sell. 

Jurisprudence dictates that partial payments on a failed contract to sell may be retained by the seller as reasonable compensation for use of the property, provided that possession thereof was turned over to the buyers.

In this case, Spouses Godinez turned over the possession to Spouses Norman after the latter made an initial payment of $10,000.00. Spouses Norman even moved their furniture into the house and hired a caretaker to watch over the house. 

Therefore, Spouses Norman are not entitled to the return of the total amount of $40,000.00 partial payment made to Spouses Godinez in a failed contract to sell.

However, in a similar case decided by the Supreme Court, reasonable compensation is the payment of reasonable rentals, which is not meant to punish the illegality of the buyers’ actions, but to compensate the sellers’ inability to enjoy or use their own property. Although there is no definitive legal standard for computing reasonable rentals, the latest jurisprudence provides it to be 13.1% of the property’s total purchase price. 

In this case, the Court noted that the US$40,000.00 amounts to 22.9%, or over a fifth, of the total purchase price of the housing unit of Spouses Godinez, which is not commensurate to the value that Spouses Norman may have derived from their four (4)-month possession of the property. Thus, reasonable compensation may be set at 13.1% of the US$175,000.00 total purchase price, or US$22,925.00. 

Therefore, Spouses Godinez may retain US$22,925.00 of the US$40,000.00 partially paid to them, but must return the remaining US$17,075.00 to Spouses Norman.

*Note: The SC in the Olivarez case (2014) and Gomez case (2000) ruled that the total amount of the partial payments be totally forfeited in favor of the seller, considering that the buyers in these cases took possession of the property for 14 years and 8 years, respectively. 

Full text here. 

Errors in literary contests, beauty contests, and similar competitions; Damnum Absque Injuria

 TOPICS:

1. "Damnum absque injuria” or “damage without injury.” 
2. Error and wrong do not mean the same thing. "Wrong" as used in the aforesaid legal principle is the deprivation or violation of a right. 
3. Fraud or malice should be proven to overcome the legal principle of "damnum absque injuria."

 Ramon Felipe, Sr. vs. Hon. Jose Leuterio, Emma Imperial, and Southern Luzon College 

FACTS:

In 1950, an inter-collegiate oratorical contest was held in Naga City. 8 contestants participated, among them was the respondent, Emma Imperial. There were 5 judges, and Petitioner Ramon Felipe, Sr. was the Chair. 

Imperial received the 2nd prize. Four days later, Imperial filed a protest alleging that one of the judges, Delfin Rodriguez, made a mistake. The Board of Judges refused to amend the results; hence, Imperial filed a complaint before the Regional Trial Court (formerly Court of First Instance).

During the trial, it was proven that Rodriguez made an error in adding Imperial’s scores and that she should have been declared as the 1st placer. However, despite that mistake for Imperial’s scores, Rodriguez also mistakingly added up the score of another contestant, Luis General, Jr. (who was ranked 4th in the final tally), showing his decision to give General an edge over Imperial. 

ISSUES:

Whether or not the Court can reverse the decision of the Board of Judges in an inter-collegiate oratorical contest.

RULING: 

No. The judiciary has no power to reverse the award of the board of judges of an oratorical contest, absent fraud or malice (for that matter, the court would also not interfere in literary contests, beauty contests, and similar competitions). 

Under the legal principle of “damnum absque injuria” or “damage without injury,” one may suffer loss or injury, but there is no violation of a legal right.

In this case, Imperial may have suffered some loss or injury, but she cannot assert a violation of her right. Error and wrong do not mean the same thing. "Wrong" as used in the aforesaid legal principle is the deprivation or violation of a right. A contestant has no right to the prize unless and until he or she is declared the winner by the board of judges. No rights to the prizes may be asserted by the contestants, because their's was merely the privilege to compete for the prize, and that privilege did not ripen into a demandable right. 

Moreover, it is an unwritten law in such contests that the board's decision is final and unappealable. However, it would have been settled differently had she proven fraud or malice, and that action should be directed against the individual judge who fraudulently or maliciously injured her. Not against the other judges.

Therefore, the final results of the oratorical contest, as officially announced, were upheld. 

Full text here. 

Second Placer Rule vs. Rule of Succession; Three Classifications of Domicile; Requisites of Domicile by Choice

TOPICS:

1. Second Placer Rule has no legal basis, thus, the Rule on Succession shall govern when a permanent vacancy is created after the winning candidate is disqualified from the office to which he was elected. 
2. The three classifications of domicile are domicile of origin, domicile of choice, and domicile by operation of law. 
3. In order to acquire a domicile by choice, the following must concur: residence or bodily presence in the new locality; the intention to remain there for an indefinite period of time; and the intention to abandon the old domicile. The last two requisites were not complied with by Datu Pax Ali Mangudadatu. 

Datu Pax Ali Mangudadatu vs. COMELEC, et al. 

FACTS:

Datu Pax Ali Mangudadatu was the Mayor of the Municipality of Datu Abdullah Sangki (DAS), Magunidanao, after winning the May 2019 elections. While being a resident of DAS, Maguindanao, Pax Ali filed his Certificate of Candidacy for Provincial Governor of Sultan Kudarat on October 7, 2021. Subsequently, Pax Ali resigned as Mayor of DAS, Maguindanao on November 15, 2021, and won during the May 2022 elections. 

Pax Ali’s opponent, Sharifa Akeel Mangudadatu, filed a Petition to Deny Due Course or Cancel his COC on the ground that he misrepresented in his COC that he had been residing in Sultan Kudarat for at least one year immediately preceding the May 9, 2022 elections, when in fact he was still a resident of DAS, Maguindanao, being their municipal mayor. 

Pax Ali argued that his domicile of origin was at Sultan Kudarat. However, he temporarily transferred to DAS, Maguindanao, in compliance with his residency requirement for the position of Mayor. He further argued that despite this, he always had the inherent intention to return to his roots in Sultan Kudarat. 

Both the COMELEC First Division and the COMELEC en banc ruled that Pax Ali committed a material misrepresentation as regards his residence in Sultan Kudarat.

ISSUES: 

1. Whether or not Pax Ali committed a false misrepresentation in his COC when he ran for the position of Governor in Sultan Kudarat
2. If so, whether or not the second placer rule or the rule of succession will govern in determining the new governor of Sultan Kudarat.

RULING: 

I. 

Yes, Pax Ali committed a false misrepresentation in his COC. 

The Local Government Code provides that a governor must be a resident of the province where he intends to be elected for at least one year immediately preceding the day of the election. 

In this case, Pax Ali stated in his COC that he has been a resident of Sultan Kudarat for 1 year and 8 months before the May 9, 2022 elections. However, it was only on November 15, 2021, when Pax Ali resigned as the Mayor of DAS. Counting from said date, he has been a resident of Sultan Kudarat for only 5 months and 22 days immediately preceding the May 9, 2022 elections. This shows that Pax Ali’s resignation as Mayor and acquisition of a new domicile in Sultan Kudarat were done too late.  

Therefore, Pax Ali committed a false misrepresentation in his COC. 

II.

The rule of succession shall govern in determining the new governor of Sultan Kudarat. 

The Local Government Code provides that with respect to vacancies in the Office of the Governor, the Vice Governor shall become the Governor.  A permanent vacancy is created when the winning candidate is not qualified and cannot qualify for the office to which he was elected. 

Therefore, the above concern calls for the application of the rule on succession.

DISCUSSIONS:

Residence, for election purposes, is used synonymously with domicile. Domicile denotes a fixed permanent residence to which, when absent, one has the intention of returning. There are three classifications of domicile: 

1. Domicile of origin, which is acquired by every person at birth; 
2. Domicile of choice, which is acquired upon abandonment of the domicile of origin; and
1. In order to acquire a domicile by choice, the following must concur: residence or bodily presence in the new locality; an intention to remain there (not met by Pax Ali); and an intention to abandon the old domicile (not met by Pax Ali).
1. The purpose to remain in or at the domicile of choice must be for an indefinite period of time; the change of residence must be voluntary; and the residence at the place chosen for the new domicile must be actual.
3. Domicile by operation of law, which the law attributes to a person, independently of his residence or intention

Apart from Pax Ali's failure to effect a change of domicile from DAS Maguindanao to Sultan Kudarat, one year immediately preceding the May 9, 2022 elections, Pax Ali’s intention to remain in Sultan Kudarat for an indefinite period and to abandon DAS, Maguindanao are missing. 

Pax Ali’s intention to maintain a residence in Sultan Kudarat and to abandon DAS, Maguindanao became manifest only when he resigned as Mayor of DAS on November 15, 2021 – a mere afterthought. Clinging to his position as Mayor in DAS Maguindanao when Pax Ali filed his COC as Governor in Sultan Kudarat earlier on October 7, 2021 meant that he must comply with the continuing requirement of remaining a resident of DAS, Maguindanao during his entire tenure. Jurisprudence dictates that qualifications for public office, whether elective or not, are continuing requirements. These qualifications must be possessed not only at the time of appointment or election, or of assumption of office, but during the officer's entire tenure. This renders questionable Pax Ali's bona fide intent to remain at Lutayan, Sultan Kudarat for an indefinite period of time.

Moreover, since Pax Ali failed to show that he had established a new domicile at the time of the filing of his COC, his residency in DAS continues. He remained a resident of DAS, Maguindanao as of October 7, 2021.

The quantum of proof necessary to establish a change in domicile in election cases is substantial evidence or such relevant evidence as a reasonable mind will accept as adequate to support a conclusion.

Full text here. 

ALLOCATION OF SEATS FOR PARTY-LIST REPRESENTATIVES IN THE PHILIPPINES

The following are the steps to determine the winners under the party-list system in the Philippines. These steps have been updated based on the 1987 Constitution and the recent Supreme Court jurisprudence. 

Step 1: The parties, organizations, and coalitions shall be ranked from the highest to the lowest based on the number of votes they garnered during the elections. 

Step 2: The parties, organizations, and coalitions receiving at least two percent (2%) of the total votes cast for the party-list system shall be entitled to one seat each. This is called the Guaranteed Seat. 

• Example: AKBAYAN garnered 2,750,864 votes, representing 6.71% of the total votes cast for the party-list system as of 12:00 AM of May 14, 2025. Having surpassed the 2% threshold, it is entitled to one guaranteed seat in Congress, to be occupied by its first nominee.

Step 3: Those garnering more than two percent (2%) of the votes shall be entitled to Additional Seats in proportion to their total number of votes.

• To determine the additional seats, compute first for the maximum seats reserved under the party-lists, that is, Total No. of Legislative Districts / 0.80 x 0.20 = Maximum Seats
• Example: 254 legislative districts for the May 12, 2025 elections / 0.80 x 0.20 = 63 maximum seats reserved under the party-list system
• After determining the maximum seats, compute for the additional seats, that is, Votes Garnered over Total Votes for Party List, in % x Remaining Seats (maximum seats – guaranteed seats) = Additional Seats
• Example: AKBAYAN garnered 2,750,864 votes or 6.71% of the Total Votes for Party List. Therefore, the computation should be 6.71% x (63 maximum seats - 6 guaranteed seats for party-lists who surpassed the 2% threshold as of 12:00 AM of May 14, 2025) = 3.8 additional seats

Step 4: Add the Guaranteed Seats and the whole integer of the Additional Seats. 

• Only the whole integer of the above product of the votes garnered over total votes for party list, in % and of the remaining seats corresponds to a party’s share in the remaining available seats 
• Example: AKBAYAN's computed 3.8 additional seats entitle it to 3 more congressional representatives, in addition to its 1 guaranteed seat. This brings its total to 4 seats in the House of Representatives for the 20th Congress.
• Assign one party-list seat to each of the parties next in rank until all available seats are completely distributed

Step 5: We apply the Three-Seat Cap to determine the number of seats each qualified party-list candidate is entitled.

• Example: Although AKBAYAN is projected to earn a total of 4 seats based on the number of votes it received, it can only occupy a maximum of 3 seats in the House of Representatives due to the three-seat cap rule applied to all party-list groups.

For more details, refer to the formula and computations found here: Allocation of Seats for Party-List Representatives or you may refer to the spreadsheet format for application of the above rules. 

Mother Goose Special School System, Inc. vs. Spouses Samuel Palaganas and Villa Palaganas

TOPICS: Distinction between culpa contractual and culpa aquiliana; Contractual obligation between the school and the student; Negligence 

FACTS

In 2007, Noel, a grade school student of Mother Goose Special School System, Inc., lost his mechanical pencil. He found out that it was Rhys who found his pencil and brought it home. After a few days, Noel asked Rhys to return his pencil, but Rhys failed to bring it, and instead told Noel that he would return it next time. After a while, Mark, who was seated next to Rhys, punched Rhys six times, while Noel also punched Rhys five times.

At the time of the incident, their teacher, Mr. Gerald Gomez, was inside the comfort room. Thus, Rhys reported it to their HEKASI teacher, Mr. Gallardo, who did nothing about the matter. Rhys’s classmates then reported it to their class adviser, who called Noel and Mark. Both pupils admitted to punching Rhys. 

Rhys’s parents, Spouses Palaganas, went to the school to complain. His father, Samuel, requested for an investigation. Unfortunately, the investigation report absolved Mark from bullying, despite his prior admission to their class adviser. After a reinvestigation, the bullying incident was only downplayed by the school as teasing or rough play. Subsequently, the Spouses Palaganas filed a Complaint for Damages against Noel’s father, Mark’s father, the school, and a few teachers. 

The RTC found the School and the teacher-in-charge, Mr. Gomez, solidarily liable to the Spouses Palaganas because the incident happened during class hours. The School and Mr. Gomez were exercising parental authority and had the obligation to protect Rhys from harm. The RTC also mentioned that the school was negligent as it failed to take necessary steps to prevent the punching. 

The CA affirmed the RTC’s decision, but ruled that Mr. Gomez was not negligent as he was at the comfort room at the time of the incident. The CA also classified the incident as a form of bullying under the Anti-Bullying Act of 2013. 

ISSUE

Whether or not the School may be held liable

RULING

Yes, Mother Goose Special School System, Inc. is liable for breach of its contractual obligation with its student, Rhys. 

Under the rule on contracts, an educational institution has a contractual obligation to provide and maintain a safe learning environment for its students. 

In this case, Rhys, who was enrolled in Mother Goose Special School System, Inc., became a victim of a bullying incident within the school’s premises. Despite the school’s obligation to provide and maintain a safe learning environment for Rhys, its teacher ignored the student’s complaints. The School failed to inform Rhys’s parents about the incident, as they only became aware from the offender’s mother. The School also did not have a protocol for handling the situation, and the investigation only came upon the request of Rhys’s father. Finally, the investigation report was replete with inaccurate information, such as when no disciplinary action was taken against Mark despite his admission that he punched Rhys. 

Therefore, the School is liable for breach of its contractual obligations to Rhys when it failed to provide and maintain a safe learning environment for him. 

DISCUSSION

Distinction between culpa contractual from culpa aquiliana

Culpa Contractual

• Definition: It is the fault or negligence in the performance of a pre-existing obligation. 
• Article: Articles 1170 to 1174 of the Civil Code
• Negligence: Negligence is merely incidental to the performance of a pre-existing contractual obligation 
• Defense: The school should have exercised the required diligence to avoid the happening of incident and to address the incident after it happened. The defense of being a good of a family is not a defense. 
• Presumption: There is a presumption of negligence so long as it can be proved that there was a breach of the contract. 
• Burden: The burden is on the defendant to prove that there was no negligence in carrying out the terms of the contract.

Culpa Aquiliana 

• Definition: It is the wrongful or negligent act or omission which creates a vinculum juris and gives rise to an obligation between two persons not formally bound by any other obligation (there is no pre-existing obligation)
• Article: Article 2176 of the Civil Code
• Negligence: Negligence is direct, substantive, and independent
• Defense: The defense of a “good father of a family” in the selection and supervision of employees is a complete defense available to employers
• Presumption: There is no presumption of negligence. 
• Burden: It is the burden of the injured party to prove the negligence of the defendant

Application of culpa contractual:

1. There is a pre-existing obligation – When the academic institution accepts students for enrollment, there is an established contract between them, resulting in bilateral obligations. The school undertakes to provide the student with an education, while the student covenants to abide by the school’s academic requirements and observe its rules and regulations. In particular, the “built-in” obligations of the school are:
1. To provide the students with a conducive atmosphere for learning
2. To ensure that there are no constant threats to the life and limbs of the students
3. To maintain peace and order within the campus. However, this extends to out-of-school premises where the school conducts official activities. Ex.: Cabiao Community Clinic of St. Luke’s College of Medicine in Nueva Ecija - a fire broke out, which resulted in the death of a female medical student, making the school liable.  
2. Negligence – It is the omission of that diligence which is required by the nature of the obligation and corresponds with the circumstances of the persons, of the time, and of the place. In the absence of a stipulated standard of diligence, the diligence of a good father of a family must be observed. It becomes gross negligence when there is a want of even slight care and diligence. Ex: In this case, the School failed to exercise the required diligence to avoid the happening of bullying and to address the incident after it happened. The School has not conducted training or awareness seminars or training to enable its teachers-personnel to cope with the situation. The School lacked the capacity to detect, prevent, and address the bullying incident.  
3. Presumption and Burden - A mere proof of the existence of the contract and the failure of its compliance justifies, prima facie, a corresponding right of relief. Ex.: Far Eastern University failed to discharge the burden of proving that they exercised due diligence in providing a safe learning environment when they failed to prove that the guards assigned to the campus met the requirements (qualifications set) in the Security Services Agreement.

Award for Damages

1. Moral damages may be awarded for breach of contract where the Defendant acted in bad faith. 
2. Exemplary damages may be awarded in contracts where the Defendant acted in a wanton, reckless, oppressive, or malevolent manner, by way of example or correction for the public good. 
3. Attorney’s fees may be awarded when exemplary damages are awarded.
   

Full text here as originally published by the Philippine Supreme Court Public Information Office.