**Facts:**
1. **Initial Sale (1981)**: Ignacia Reynes owned a lot in Mabolo, Cebu City, and sold 185 square meters of it to Spouses Redemptor and Elisa Abucay, who then built a house on it.
2. **Disputed Sale (March 1, 1984)**: Reynes, who is illiterate, signed a deed of sale for the Mabolo lot in favor of Rido Montecillo. Montecillo promised to pay the P47,000.00 purchase price within one month. The deed falsely stated that the purchase price had already been paid.
3. **Non-Payment**: Montecillo failed to pay the purchase price within the agreed period. Instead, he paid P50,000 to Cebu Ice and Cold Storage Corporation to release a chattel mortgage on the house of one Bienvenido Jayag, which was located on the Mabolo lot.
4. **Revocation and Subsequent Sale (May 23, 1984)**: Reynes unilaterally revoked the deed with Montecillo and executed a new deed of sale for the entire Mabolo lot in favor of the Abucay spouses, confirming the previous partial sale.
5. **Issuance of Title**: Despite the revocation, Montecillo secured the issuance of Transfer Certificate of Title No. 90805 in his name.
6. **Complaint Filed (June 20, 1984)**: Reynes and the Abucay spouses filed a complaint for declaration of nullity and quieting of title against Montecillo.
7. **Trial Court Decision (March 24, 1993)**: The Regional Trial Court declared Montecillo’s deed of sale void ab initio due to lack of consideration and ordered cancellation of his title.
8. **Appeals**: Montecillo appealed to the Court of Appeals, which affirmed the trial court’s decision on July 16, 1998, and denied Montecillo’s motion for reconsideration on February 11, 1999.
9. **Petition to Supreme Court**: Montecillo filed for a review on certiorari with the Supreme Court.
**Issues:**
1. Whether there was an agreement between Reynes and Montecillo on the purchase price being paid to Cebu Ice and Cold Storage.
2. Whether the deed of sale was void from the beginning for lack of consideration or merely rescissible due to failure to pay.
**Court’s Decision:**
1. **First Issue**: The Supreme Court found no evidence of any agreement by Reynes that the P47,000.00 purchase price should be paid to Cebu Ice Storage. Under the Civil Code, payment should have been made directly to Reynes, the vendor. Thus, Montecillo’s payment to Cebu Ice Storage did not extinguish his obligation to Reynes.
2. **Second Issue**: The Supreme Court held that the deed of sale was null and void ab initio due to lack of consideration. The trial court’s findings showed Montecillo had not paid any part of the P47,000.00 purchase price stated in the deed. According to established doctrine, where there is no consideration, the supposed sale is null and void from the start—not merely rescissible.
The Court reiterated fundamental contract principles, including the requirement of consent, a certain object, and consideration. The absence of consideration invalidated the entire agreement, leaving no valid contract to be rescinded or enforced.
**Doctrine:**
– **Nullity of Sale for Lack of Consideration**: When a deed of sale falsely states that the purchase price has been paid but in reality, no such payment has been made, the deed is null and void ab initio for lack of consideration (Ocejo Perez & Co. v. Flores, 1920).
– **Contractual Requirements under Civil Law**: For a contract to exist, it must have consent of the parties, a certain object, and a lawful cause or consideration. Without cause, the contract has no effect whatsoever (Art. 1352, Civil Code).
**Class Notes:**
1. **Elements of a Valid Contract**:
– Consent of the parties (meeting of minds)
– Definitive object
– Consideration
2. **Payment Principle**:
– Payment must be made to the benefitted party or their authorized representative (Art. 1240, Civil Code).
3. **Remedies for Non-Payment**:
– Differentiate between non-payment of purchase price (rescission/cancellation of contract) and lack of consideration (nullity of contract).
**Historical Background:**
This case exemplifies the legal principles governing sales transactions and the enforcement of contracts in the context of property sales in the Philippines. It also illustrates the legal protections afforded to parties in property transactions, ensuring that purported sales are supported by genuine considerations and that illiterate individuals are not taken advantage of by sophisticated buyers. The decision underscores the importance of full and truthful adherence to contractual obligations and the severe consequences of misrepresentations in legal documents.
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